<PAGE>
As filed with the Securities and Exchange Commission on March 31, 2000
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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TELIK, INC.
(Exact name of registrant as specified in its charter)
Delaware 8731 93-0987903
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Identification No.)
incorporation or Classification Code
organization) Number)
750 Gateway Boulevard
South San Francisco, California 94080
(650) 244-9303
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
----------------
Michael M. Wick, MD, PhD
Chairman and Chief Executive Officer
Telik, Inc.
750 Gateway Boulevard
South San Francisco, California 94080
(650) 244-9303
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
----------------
Copies to:
Deborah A. Marshall, Esq. Edwin D. Williamson, Esq.
Gregory B. Abbott, Esq. Sullivan & Cromwell
Cooley Godward LLP 1701 Pennsylvania Avenue
One Maritime Plaza Washington, D.C. 20006
20th Floor (202) 956-7500
San Francisco, CA 94111-3580
(415) 693-2000
----------------
Approximate date of proposed sale to the public: As soon as practicable after
the registration statement becomes effective.
If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 (the "Securities Act"), check the following box. [_]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration 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,
check the following box. [_]
----------------
CALCULATION OF REGISTRATION FEE
<TABLE>
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<CAPTION>
Proposed Proposed
Amount Maximum Maximum
Title Of Securities To To Be Offering Price Aggregate Amount Of
Be Registered Registered Per Share(1) Offering Price(1) Registration Fee
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value
$.01.................. $75,000,000 $19,800
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- -------------------------------------------------------------------------------------
</TABLE>
(1) Estimated solely for the purpose of calculating the amount of the
registration fee in accordance with Rule 457 under the Securities Act of
1933.
----------------
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be changed. We may +
+not sell these securities until the registration statement filed with the +
+Securities and Exchange Commission is effective. This prospectus is not an +
+offer to sell these securities and we are not soliciting offers to buy these +
+securities in any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
PRELIMINARY PROSPECTUS Subject to completion, dated March 31, 2000
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Shares
[LOGO OF TELIK]
TELIK, INC.
Common Stock
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This is an initial public offering of shares of our common stock. We are
offering shares. No public market currently exists for our common stock.
We expect the public offering price to be between $ and $ per share.
We applied to have our common stock listed on the Nasdaq National Market under
the symbol "TELK."
Before buying any shares you should read the discussion of material risks of
investing in our common stock in "Risk factors" beginning on page 5.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus is truthful or complete. Any representation to the contrary is
a criminal offense.
<TABLE>
<CAPTION>
Per
Share Total
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<S> <C> <C>
Public offering price $ $
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Underwriting discount and commissions $ $
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Proceeds, before expenses, to Telik $ $
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</TABLE>
The underwriters may also purchase up to shares of common stock from us at
the public offering price, less the underwriting discounts and commissions,
within 30 days from the date of this prospectus. This option may be exercised
only to cover over-allotments, if any. If the option is exercised in full, the
total underwriting discounts and commissions will be $ , and the total
proceeds, before expenses, to us will be $ .
The underwriters are offering the common stock as described under
"Underwriting." Delivery of the shares will be made on or about , 2000.
Warburg Dillon Read LLC
Chase H & Q
Legg Mason Wood Walker
Incorporated
<PAGE>
Inside Front Cover Graphic
Title: Working to discover, develop and commercialize small molecule
therapeutics to treat major diseases including cancer and diabetes.
Legend: Product Pipeline. We discovered all of our drug candidates using
TRAP, our proprietary Target-Related Affinity Profiling technology.
Graphic Description: This graphic shows Telik's product pipeline and the
stage of development of Telik's product candidates. In the background is a C-
shaped figure containing the words TRAP technology spanning the graphic from
left to right to indicate that all of our product candidates have been
discovered using TRAP. Extending from lower left to upper right are four
rectangles. The rectangle at the lower left, labeled Inhibitors of Caspase-3,
IGF-1, MIP-1 and MCP-1, is aligned with the label Research to indicate that
these programs are at the research stage. Moving right, the next rectangle,
labeled insulin receptor activator, is aligned with the label Preclinical to
indicate that these programs are at the preclinical stage of development. The
third rectangle in the sequence, labeled TLK199 bone marrow stimulant, is
aligned with the label Pre-IND to indicate that the product candidate TLK199 is
at the pre-IND stage of development. The final rectangle at the upper right,
labeled TLK286 tumor activated chemotherapeutic drug, is aligned with the label
Phase I to indicate that the product candidate TLK286 is in phase I clinical
trials.
<PAGE>
Gatefold Graphic
Title: TLK286 A targeted chemotherapeutic drug for the treatment of
chemotherapy-resistant cancers.
Legend: The elevated levels of the enzyme GST P1-1 in cancer cells lead to
selective activation of TLK286 and cancer cell death.
Graphic Description: This is a depiction of a cancer cell, which shows how
TLK286 enters the cell. Inside the cell, TLK286 is activated by GST P1-1, which
is represented by a pair of scissors. The activated cytotoxic drug is shown
moving into the nucleus of the cell where it causes cell death.
Title: TLK199 A small molecule bone marrow stimulant for treating the
neutropenia associated with cancer chemotherapy.
Legend: TLK199 stimulates white blood cell production by activating the same
cellular signaling pathway activated by natural white blood cell stimulating
factors such as G-CSF.
Graphic Description: This is a depiction of a bone marrow cell and shows how
TLK199 enters the cell and interacts with a signaling pathway that is also
stimulated by G-CSF, leading to the replication and differentiation of white
blood cells.
<PAGE>
Until , 2000 (25 days after the date of this prospectus), all dealers
selling shares of our common stock, whether or not participating in this
offering, may be required to deliver a prospectus. This delivery requirement is
in addition to the obligation of dealers to deliver a prospectus when acting as
underwriters and with respect to their unsold allotments or subscriptions.
TABLE OF CONTENTS
<TABLE>
<S> <C>
Prospectus summary.................. 1
The offering........................ 3
Summary financial data.............. 4
Risk factors........................ 5
Forward-looking information......... 16
Use of proceeds..................... 17
Dividend policy..................... 17
Capitalization...................... 18
Dilution............................ 19
Selected financial data............. 20
Management's discussion and analysis
of financial condition and results
of operations...................... 21
</TABLE>
<TABLE>
<S> <C>
Business............................. 24
Management........................... 40
Related party transactions........... 50
Principal stockholders............... 51
Description of capital stock......... 53
Shares eligible for future sale...... 56
Underwriting......................... 57
Validity of the shares............... 58
Experts.............................. 59
Where you can find more information.. 59
Index to financial statements........ F-1
</TABLE>
ABOUT THIS PROSPECTUS
You should rely only on the information contained in this prospectus. We have
not authorized anyone to provide you with information different from that
contained in this prospectus. This prospectus is not an offer to sell or a
solicitation of an offer to buy our common stock in any jurisdiction where it
is unlawful. The information contained in this prospectus is accurate only as
of the date of this prospectus, regardless of the time of delivery of this
prospectus or of any sale of common stock. This preliminary prospectus is
subject to completion prior to this offering.
"Telik" and the Telik logo are trademarks of Telik, Inc. Other trademarks and
trade names appearing in this prospectus are the property of their holders.
<PAGE>
PROSPECTUS SUMMARY
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This summary highlights information contained elsewhere in this prospectus.
You should read the entire prospectus carefully, especially the risks of
investing in our common stock discussed under "Risk factors." Our principal
executive offices are located at 750 Gateway Boulevard, South San Francisco, CA
94080. Our telephone number is (650) 244-9303. Our web site is
http://www.telik.com. We do not intend the information found on our web site to
be a part of this prospectus.
Telik, Inc.
Telik is a biopharmaceutical company working to discover, develop and
commercialize drugs to treat serious diseases for which there is significant
demand for new therapies. Our most advanced product development programs are
for the treatment of cancer and diabetes. Our first product candidate, TLK286,
entered human clinical trials in January 2000. TLK286 is for the treatment of
major cancers that have resisted standard treatments. We expect to advance our
second product candidate, TLK199, into human clinical trials later this year.
TLK199 is for the treatment of the depletion of infection-fighting white blood
cells, which is a toxic side effect of cancer therapy. By the end of this year,
we intend to select for development a product candidate from a proprietary
family of insulin receptor activators for the treatment of Type 2 diabetes.
All of our product candidates are small molecules. Small molecule drugs offer
advantages in ease of manufacturing and administration, the potential for oral
dosing and applicability to a wider range of disease targets, including those
inside the cell. We discovered all of our product candidates using our
proprietary technology known as Target-Related Affinity Profiling, or TRAP,
which enables the rapid and efficient discovery of small molecule product
candidates. TRAP exploits a fundamental property of all drugs, which is their
interaction with molecules in the body called proteins. By developing a profile
of how a protein disease target interacts with small molecules, we are able to
select product candidates for development much faster than with alternative
technologies, such as ultra high-throughput screening, or UHTS. We continuously
protect the intellectual property surrounding our product candidates and our
technology platform. In the United States, we hold 36 patents protecting our
discoveries, and more than 16 applications are pending. In addition, outside
the United States, we hold 56 patents, and more than 79 patent applications are
pending.
Cancer Product Candidates
TLK286 is a small molecule product candidate we are developing for the
treatment of chemotherapy resistant cancers. TLK286 binds to a protein known as
glutathione S-transferase, or GST. GST plays an important role in the
development of resistance to standard chemotherapy drugs by breaking these
drugs down and removing them from the body before they can kill cancer cells.
GST P1-1 is a type of GST that is elevated in many cancers. When TLK286 binds
to GST P1-1, it releases a compound with a proven mechanism for killing cancer
cells. In this way, TLK286 kills cancer cells by utilizing the same mechanism
that normally deactivates chemotherapeutic drugs. In preclinical studies,
TLK286 is effective in killing human cancer cells that are resistant to
standard chemotherapeutic drugs. We began clinical trials for TLK286 in January
of this year.
TLK199 is our product candidate for the treatment of the decrease in the
number of white blood cells, or neutropenia, that occurs as a toxic side effect
of cancer chemotherapy. As a small molecule drug, TLK199 may represent an
alternative to the pharmaceutical protein version of granulocyte colony
stimulating factor, or G-CSF, known as Neupogen. TLK199 activates the same
signaling
1
<PAGE>
pathway that is activated by G-CSF, causing the stimulation of white blood cell
production. TLK199 accelerates the recovery from chemotherapy-induced
neutropenia in animals, similar to the results observed following treatment
with G-CSF. TLK199 and G-CSF also produce similar increases in the number of
circulating white blood cells in normal animals. We are conducting preclinical
development studies of TLK199 and intend to file an Investigational New Drug
application, or IND, with the FDA, for the initiation of clinical trials in the
second half of 2000.
We have retained rights for the worldwide commercialization of TLK286 and
TLK199.
Diabetes Product Candidates
We have discovered and are developing proprietary orally active small
molecule insulin receptor activators for the treatment of Type 2 diabetes.
These product candidates bind to the insulin receptor and, like insulin,
activates the receptor which initiates a sequence of events called insulin
signaling. Insulin signaling lowers sugar levels in the blood by facilitating
the entry of sugar into muscle and liver cells where the sugar is metabolized.
Results from animal models of diabetes suggest that these compounds produce
more sensitive and effective control of blood sugar levels. We anticipate
selecting a clinical candidate from the family of insulin receptor activators
by the end of 2000. We will then initiate the necessary preclinical testing to
permit filing of an IND with the FDA and advancement into phase I clinical
testing. Our leading product candidate in this group is TLK17411.
TRAP--Our Proprietary Drug Discovery Technology
Our success in identifying product candidates has resulted from the use of
TRAP, our proprietary drug discovery technology. We have used TRAP to rapidly
and efficiently identify active small molecule product candidates relevant to a
variety of disease states. In addition to generating our current product
portfolio, TRAP has allowed us to build our research pipeline with product
candidates targeting cancer, diabetes, inflammatory disease and stroke. We have
also entered into TRAP-based technology collaborations with third parties.
TRAP offers solutions to the two major challenges facing drug discovery--the
explosive growth in the number of new protein targets generated by advances in
genomics and the intrinsic limitations of the UHTS approach. TRAP reduces the
need for large libraries of compounds, automation, assay technology and target
licensing required by UHTS.
Strategy
Key elements of our strategy are to:
. develop small molecule drugs for major disease areas, such as
cancer, diabetes, inflammatory diseases and stroke;
. retain significant commercialization rights to our product
candidates;
. select targets where we believe we can show efficacy early and where
we believe there is a shorter path to regulatory approval;
. use TRAP to sustain a pipeline of product candidates; and
. leverage and expand the use of TRAP by entering into additional
collaborations.
2
<PAGE>
The offering
The following information assumes that the underwriters do not exercise the
over-allotment option we granted to them to purchase additional shares in the
offering.
<TABLE>
<S> <C>
Common stock we are offering..................... shares
Common stock to be outstanding after the shares
offering........................................
Proposed Nasdaq National Market symbol........... TELK
Use of proceeds.................................. Research and development and
general corporate purposes
</TABLE>
The number of shares of common stock to be outstanding after this offering is
based on the number of shares of common stock outstanding as of December 31,
1999, after giving effect to:
. the issuance on March 31, 2000 of 1,166,667 shares of Series K
convertible preferred stock at a price equivalent to $6.00 per share of
common stock and the conversion of those shares upon the closing of this
offering;
. the exercise prior to the closing of this offering of outstanding
warrants to purchase 34,559 shares at a weighted average exercise price
of $5.28 per share; and
. the automatic conversion upon the closing of this offering of all
convertible preferred stock outstanding as of December 31, 1999 into
12,640,035 shares of common stock.
Shares to be outstanding excludes:
. 2,991,787 shares of common stock underlying options outstanding as of
December 31, 1999 with a weighted average exercise price of $1.40 per
share;
. 289,672 shares of common stock underlying options granted since December
31, 1999 under our 1996 Stock Option Plan with a weighted average
exercise price of $2.00 per share; and
. 2,000,000 shares available for issuance or future grant under our 2000
Equity Incentive Plan stock option plans, 250,000 shares available for
issuance under our 2000 Employee Stock Purchase Plan and 300,000 shares
available for issuance under our 2000 Non-Employee Directors' Stock
Option Plan.
No additional options may be granted under our 1996 Stock Option Plan.
3
<PAGE>
Summary financial data
The following tables summarize our financial data. The pro forma information
contained in the statement of operations data gives effect to the conversion of
preferred stock and exercise of warrants outstanding on December 31, 1999. The
pro forma balance sheet data gives effect to the conversion of preferred stock
and exercise of warrants referred to in the first paragraph following the table
under "The offering." The pro forma as adjusted column of the balance sheet
data gives effect to that conversion of preferred stock and exercise of
warrants, and to the sale of shares of our common stock at an assumed
initial public offering price of $ per share, after deducting the estimated
underwriting discounts, commissions and offering expenses payable by us.
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------
1997 1998 1999
------- ------- -------
(In thousands, except
per share data)
<S> <C> <C> <C>
Statement of operations data
Contract revenues from collaborations.............. $ 1,652 $ 3,194 $ 4,237
Total operating expenses........................... 10,560 10,101 11,699
Net loss........................................... (8,618) (6,579) (7,064)
Net loss per share, basic and diluted.............. $ (3.95) $ (3.00) $ (3.21)
======= ======= =======
Weighted average shares used in computing net loss
per share, basic and diluted...................... 2,184 2,194 2,204
Pro forma net loss per share, basic and diluted.... $ (0.47)
=======
Weighted average shares used in computing pro forma
net loss per share, basic and diluted............. 14,879
</TABLE>
<TABLE>
<CAPTION>
December 31, 1999
--------------------------------
Pro Forma
Actual Pro Forma as adjusted
-------- --------- -----------
(In thousands)
<S> <C> <C> <C>
Balance sheet data
Cash, cash equivalents and short-term
investments................................. $ 7,556 $ 9,688 $
Working capital.............................. 3,936 6,068
Total assets................................. 9,170 11,484
Capital lease obligations, less current
portion..................................... 25 25 25
Deferred stock compensation.................. (260) (260) (260)
Accumulated deficit.......................... (51,384) (51,384) (51,384)
Total stockholders' equity................... $ 5,130 $ 7,262 $
</TABLE>
4
<PAGE>
RISK FACTORS
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You should carefully consider the risks described below together with all of
the other information included in this prospectus before making an investment
decision. If any of the following risks actually occurs, our business,
financial condition or results of operations could be harmed. In that case, the
trading price of our common stock could decline, and you may lose all or part
of your investment.
Risks Related To Our Business
We have a limited operating history, a history of operating losses and uncer-
tainty of future profitability.
Due to the significant research and development expenditures required to
develop our TRAP technology and identify new product candidates and the lack of
any products to generate revenue, we have not been profitable and have
generated operating losses since we were incorporated in 1988. We will never be
profitable unless we develop, and obtain regulatory approval and market
acceptance of, our product candidates. Currently, our revenues are generated
solely from research payments from our collaboration agreements and licenses
and are insufficient to generate profitable operations. As of December 31,
1999, we had an accumulated deficit of approximately $51.4 million. We expect
to incur losses for at least the next several years and expect that these
losses will actually increase as we expand our research and development
activities and incur significant clinical testing costs. If the time required
to generate revenues and achieve profitability is longer than anticipated, or
if we are unable to obtain necessary capital, we may not be able to continue
our operations. Our ability to maintain revenues in the near term depends on
our ability to enter into additional collaborative agreements with third
parties. To date, substantially all of our revenue has been from project
initiation fees and research reimbursement paid pursuant to existing
collaborative agreements with third parties. We cannot assure you when we will
receive any product revenue. We are unable to predict when, or if, we will
become profitable and even if we are able to achieve profitability at any point
in time, we cannot assure you that our operations will be able to maintain
profitability during any future periods.
Our leading cancer product candidate, TLK286, may fail in clinical trials or
its development may be delayed.
We only recently started a phase I clinical trial of TLK286 and to date have
only limited data on safety and no data demonstrating efficacy in humans. We
cannot assure you that the results from clinical trials will be favorable or
even be completed. We cannot assure you that we will be able to obtain FDA
approval required for us to proceed into more advanced clinical trials, even if
the early results are favorable. If the results show lack of safety or lack of
efficacy in humans, we may be forced to discontinue development of TLK286. Our
clinical trials involve patients who failed to respond to conventional cancer
treatments and have advanced disease. During the course of the trials, these
patients may die or suffer adverse medical effects for reasons that may not be
related to TLK286. These events may affect the interpretation of our clinical
trial results.
Our second product candidate, TLK199, may fail in its development or may be de-
layed and will need to compete successfully with well-established existing
products.
We are in the process of conducting the necessary work to support the filing
of an IND application for TLK199. Even if we file an IND, the FDA may not
accept it. The FDA may require
5
<PAGE>
us to run more preclinical tests, which would be expensive and time-consuming.
As a result, we may not begin clinical trials of TLK199 as planned. In order to
obtain regulatory approval, TLK199 needs to be at least as safe and effective
as existing drug therapies. In order to gain market share, TLK199 needs to
offer advantages over existing treatments.
Identification of a clinical product candidate in our diabetes research program
may be delayed.
Our success depends, in part, on our ability to begin preclinical development
of our potential diabetes product candidates and take them through early
clinical trials. At this time, we do not have a clinical product candidate and
we are dependent on ongoing research to identify a compound suitable for
further development. Given the uncertainty inherent in a research stage
program, we may not be able to identify a suitable clinical candidate within
the anticipated schedule, if at all, resulting in a delay of our development
program in the area of diabetes.
The future performance of TRAP, our proprietary drug discovery technology, is
uncertain.
Our proprietary TRAP technology is a relatively new drug discovery method and
we do not know if this method will lead to the successful identification and
development of additional product candidates and, ultimately, the sale of
commercially viable small molecule therapeutics. Ongoing research efforts are
needed in order to maintain a pipeline of potential product candidates. If we
are unable to identify new product candidates using our TRAP technology, either
internally or through external collaborations, we may not be able to maintain
our product pipeline and develop commercially viable drugs.
We selected our protein panel of approximately 20 proteins for their distinct
patterns of recognizing small molecules. Our panel may be lacking essential
types of interactions that we have not yet identified, which may result in our
inability to identify active compounds against our and our collaborators'
protein targets.
We protect our drug discovery technology by a combination of patents and
trade secrets. If the identity of specific proteins or other elements of our
technology become known, our competitive advantage in drug discovery could be
reduced.
The progress and results of our preclinical testing and clinical trials are un-
certain.
Preclinical testing and clinical development are long, expensive and
uncertain processes. It may take us or our collaborators several years to
complete this testing, and failure can occur at any stage of the process.
Interim results of trials do not necessarily predict final results, and
acceptable results in early trials may not be repeated in later trials. Success
in preclinical testing and early clinical trials does not ensure that later
clinical trials will be successful. A number of companies in the pharmaceutical
industry, including biotechnology companies, have suffered significant setbacks
in advanced clinical trials, even after promising results in earlier trials.
Commercialization of our product candidates depends upon successful completion
of clinical trials.
Even if we are able to achieve success in our preclinical testing, we, or our
collaborators, must provide the FDA and foreign regulatory authorities with
clinical data that demonstrates the safety and efficacy of our products in
humans before they can be approved for commercial sale. Only one of the product
candidates, TLK286, has advanced to the stage of human testing designed to
determine safety, known as phase I clinical trials. We do not know whether any
of our clinical trials will demonstrate sufficient safety and efficacy
necessary to obtain the requisite regulatory approvals or
6
<PAGE>
will result in marketable products. Our failure, or the failure of our
collaborators, to adequately demonstrate the safety and efficacy of our
products under development would prevent receipt of FDA approval and,
ultimately, commercialization of our products.
Any clinical trial may fail to produce results satisfactory to the FDA.
Preclinical and clinical data can be interpreted in different ways, which could
delay, limit or prevent regulatory approval. Negative or inconclusive results
or adverse medical events during a clinical trial could cause a clinical trial
to be repeated or a program to be terminated or could delay getting approval.
We typically rely on third party clinical investigators to conduct our clinical
trials and other third party organizations to perform data collection and
analysis and, as a result, we may face additional delaying factors outside our
control.
If our competitors develop and market products that are more effective than
ours, or obtain marketing approval before we do, our commercial opportunity
will be reduced or eliminated.
The biotechnology and pharmaceutical industries are intensely competitive and
subject to rapid and significant technological change. Many of the drugs that
we are attempting to develop, for example TLK199, will be competing with
existing therapies. In addition, a number of companies are pursuing the
development of pharmaceuticals that target the same diseases and conditions
that we are targeting. We face competition from pharmaceutical and
biotechnology companies in the United States and abroad. Our competitors may
develop new screening technologies and may utilize discovery techniques or
partner with collaborators in order to develop products more rapidly or
successfully than we or our collaborators are able to do. Many of our
competitors, particularly large pharmaceutical companies, have substantially
greater financial, technical and human resources than we do. In addition,
academic institutions, government agencies and other public and private
organizations conducting research may seek patent protection with respect to
potentially competing products or technologies and may establish exclusive
collaborative or licensing relationships with our competitors.
We believe that our ability to compete is dependent, in part, upon our
ability to continue to advance and leverage our TRAP technology and upon our
and our collaborators' ability to develop and commercialize pharmaceutical
products discovered using our technology. In addition, we will depend upon our
ability to attract and retain qualified personnel, obtain patent protection or
otherwise develop proprietary technology or processes and secure sufficient
capital resources for the expected substantial time period between
technological conception and commercial sales of products based upon our
technology. The failure by us or any of our collaborators in any of those areas
may prevent the successful commercialization of our potential product
candidates.
Our competitors may succeed in developing technologies and drugs that are
more effective or less costly than any which are being developed by us or which
would render our technology and potential drugs obsolete and noncompetitive. In
addition, our competitors may succeed in obtaining FDA or other regulatory
approvals for product candidates more rapidly than we or our collaborators. We
cannot assure you that drugs resulting from our research and development
efforts, or from our joint efforts with our existing or future collaborative
partners, will be able to compete successfully with competitors' existing
products or products under development or that they will obtain regulatory
approval in the United States or elsewhere.
We will need additional capital in the future to sufficiently fund our opera-
tions and research.
The process of carrying out the development of our own unpartnered products
to later stages of development and our research programs for our corporate
partners will require significant additional
7
<PAGE>
expenditures, including preclinical testing, clinical trials and obtaining
regulatory approval. As a result, we will require additional financing to fund
our operations. We do not know whether additional financing will be available
when needed, or that, if available, we will obtain financing on terms favorable
to our stockholders. We have expended substantial amounts of cash to date and
expect capital outlays and operating expenditures to increase over the next
several years as we expand our research and development activities.
We believe that the net proceeds from this offering, existing cash and
investment securities and anticipated cash flow from existing and future
collaborations, if any, will be sufficient to support our current operating
plan through at least the next 18 months; however, we have based this estimate
on assumptions that may prove to be wrong. Our future funding requirements will
depend on many factors, including, but not limited to:
. the progress and success of preclinical and clinical trials of our
product candidates;
. the progress and number of research programs in development;
. the costs and timing of obtaining regulatory approvals;
. our ability to establish, and the scope of, new collaborations;
. our ability to meet the milestones identified in our collaborative
agreements which trigger payments; and
. the costs and timing of obtaining, enforcing and defending our patent and
intellectual property rights.
To the extent we raise additional capital by issuing equity securities, our
stockholders may experience substantial dilution. To the extent that we raise
additional funds through collaboration and licensing arrangements, we may be
required to relinquish some rights to our technologies or product candidates,
or grant licenses on terms that are not favorable to us. If adequate funds are
not available, we will not be able to continue developing our products.
Because regulatory approval must be obtained to market products in the United
States and foreign countries, we cannot predict whether or when we, or our
collaborators, will be permitted to commercialize our product candidates.
The pharmaceutical industry is subject to stringent regulation by a wide
range of authorities. We cannot predict whether regulatory clearance will be
obtained for any product that we are developing or hope to develop. A
pharmaceutical product cannot be marketed in the United States until it has
completed rigorous preclinical testing and clinical trials and an extensive
regulatory clearance process implemented by the FDA. Satisfaction of regulatory
requirements typically takes many years, is dependent upon the type, complexity
and novelty of the product and requires the expenditure of substantial
resources. Of particular significance are the requirements covering research
and development, testing, manufacturing, quality control, labeling and
promotion of drugs for human use.
Before commencing clinical trials in humans, we, or our collaborators, must
submit and receive approval from the FDA of an IND application. We must comply
with FDA "Good Laboratory Practices" regulations in our preclinical studies.
Clinical trials are subject to oversight by institutional review boards and the
FDA and:
. must be conducted in conformance with the FDA's IND regulations;
. must meet requirements for institutional review board oversight;
. must meet requirements for informed consent;
. must meet requirements for Good Clinical Practices;
8
<PAGE>
. are subject to continuing FDA oversight;
. may require large numbers of participants; and
. may be suspended by us, our collaborators or the FDA at any time if it is
believed that the subjects participating in these trials are being
exposed to unacceptable health risks or if the FDA finds deficiencies in
the IND application or the conduct of these trials.
Before receiving FDA clearance to market a product, we or our collaborators
must demonstrate that the product is safe and effective in the patient
population that will be treated. Data obtained from preclinical and clinical
activities are susceptible to varying interpretations that could delay, limit
or prevent regulatory clearances. In addition, delays or rejections may be
encountered based upon additional government regulation from future legislation
or administrative action or changes in FDA policy or interpretation during the
period of product development, clinical trials and FDA regulatory review.
Failure to comply with applicable FDA or other applicable regulatory
requirements may result in criminal prosecution, civil penalties, recall or
seizure of products, total or partial suspension of production or injunction,
as well as other regulatory action. We have limited experience in conducting
and managing the clinical trials necessary to obtain regulatory approval.
If regulatory clearance of a product is granted, this clearance will be
limited to those disease states and conditions for which the product is
demonstrated through clinical trials to be safe and efficacious. We cannot
ensure that any compound developed by us, alone or with others, will prove to
be safe and efficacious in clinical trials and will meet all of the applicable
regulatory requirements needed to receive marketing clearance.
Outside the United States, the ability to market a product is contingent upon
receiving a marketing authorization from the appropriate regulatory
authorities. This foreign regulatory approval process typically includes all of
the risks associated with FDA clearance described above and may include
additional risks.
Our product candidates, even if approved by the FDA or foreign regulatory agen-
cies, may not be accepted by physicians, insurers or patients.
If any of our products, after receiving FDA or other foreign regulatory
approval, fails to achieve market acceptance, our ability to become profitable
in the future will be adversely affected. We believe that market acceptance
will depend on our ability to provide acceptable evidence of safety, efficacy
and cost effectiveness. In addition, we believe market acceptance depends on
the effectiveness of our marketing strategy and the pricing of our products.
Our success is dependent on intellectual property rights held by us and third
parties and such rights are difficult and costly to protect.
Our success will depend to a large part on our own, our licensees' and our
licensors' ability to obtain and defend patents for each party's respective
technologies and the compounds and other products, if any, resulting from the
application of these technologies. The patent positions of pharmaceutical and
biotechnology companies can be highly uncertain and involve complex legal and
factual questions. Accordingly, we cannot predict the breadth of claims allowed
in our or other companies' patents.
Our success will also depend, in part, on our ability to operate without
infringing the intellectual property rights of others. We cannot assure you
that our activities will not infringe patents owned by others. We could incur
substantial costs in defending ourselves in suits brought against us, our
9
<PAGE>
collaborators, or any licensor or licensee and we cannot predict whether we or
our collaborators would be able to prevail in any such actions. If our products
or technologies are found to infringe patents issued to third parties, the
manufacture, use and sale of our products could be enjoined, and we could be
required to pay substantial damages. In addition, we may be required to obtain
licenses to patents or other proprietary rights of third parties. No assurance
can be given that any licenses required under any such patents or proprietary
rights would be made available on terms acceptable to us, if at all. Failure to
obtain such licenses could negatively affect our business.
The degree of future protection for our proprietary rights is uncertain and
we cannot assure you that:
. we were the first to make the inventions covered by each of our pending
patent applications;
. we were the first to file patent applications for these inventions;
. others will not independently develop similar or alternative technologies
or duplicate any of our technologies;
. any of our pending patent applications will result in issued patents;
. any patents issued to us or our collaborators will provide a basis for
commercially viable products, will provide us with any competitive
advantages or will not be challenged by third parties;
. we will develop additional proprietary technologies that are patentable;
or
. the patents of others will not have an adverse effect on our ability to
do business.
In addition, we could incur substantial costs in litigation if we are
required to defend against patent suits brought by third parties or if we
initiate these suits.
Others may have filed and in the future may file patent applications covering
small molecules or therapeutic products that are similar to ours. We cannot
assure you that any patent application filed by someone else will not have
priority over patent applications filed by us. Any legal action against our
collaborators or us claiming damages and seeking to enjoin commercial
activities relating to the affected products and processes could, in addition
to subjecting us to potential liability for damages, require our collaborators
or us to obtain a license to continue to manufacture or market the affected
products and processes. We cannot predict whether we or our collaborators would
prevail in any of these actions or that any license required under any of these
patents would be made available on commercially acceptable terms, if at all. We
believe that there may be significant litigation in the industry regarding
patent and other intellectual property rights. If we become involved in
litigation, it could consume a substantial portion of our managerial and
financial resources and we may not be successful in any such litigation.
We also rely on trade secrets to protect technology, including our TRAP
technology, where we believe patent protection is not appropriate or
obtainable. However, trade secrets are difficult to protect. While we require
employees, academic collaborators and consultants to enter into confidentiality
agreements, we may not be able to adequately protect our trade secrets or other
proprietary information in the event of any unauthorized use or disclosure or
the lawful development by others of such information.
We will be dependent upon collaborative arrangements to complete the develop-
ment and commercialization of some of our product candidates.
We expect to enter into collaborative arrangements with third parties for
clinical trials, manufacturing, regulatory approvals or commercialization of
some of our products, particularly
10
<PAGE>
outside North America, or in disease areas requiring larger and longer clinical
trials, such as diabetes. These collaborative arrangements may require us to
relinquish important rights or may otherwise not be on terms favorable to us.
Dependence on collaborative arrangements will subject us to a number of risks.
We may not be able to control the amount and timing of resources our
collaborative partners may devote to the product candidates. Should a
collaborative partner fail to develop or commercialize a compound or product to
which it has rights from us, we may not receive any future milestone payments
and will not receive any royalties associated with this compound or product.
Business combinations or significant changes in a collaborative partner's
business strategy may also adversely affect a partner's willingness or ability
to complete its obligations under the arrangement. Failure to enter into
additional collaborative agreements on favorable terms could have a material
adverse effect on our business, financial condition and results of operations.
Some of our collaborations are for early stage programs and allow partners
significant discretion in electing whether to pursue any of the planned
activities. We do not anticipate significant revenues to result from these
relationships until the collaborator has advanced products into clinical
testing, which will not occur for several years, if at all. Such arrangements
are subject to numerous risks, including the right of the collaboration partner
to control the timing of the research and development efforts, discretion to
advance lead candidates to clinical testing and commercialization of the
product. In addition, a collaborative partner could independently move forward
with a competing lead candidate developed either independently or in
collaboration with others, including our competitors.
If we are unable to contract with third parties to manufacture our products in
sufficient quantities and at an acceptable cost, we may be unable to meet
demand for our products and lose potential revenue.
We do not currently operate manufacturing facilities for clinical or
commercial production of our products under development. We currently lack the
resources or capability to manufacture any of our products on a clinical or
commercial scale. As a result, we will be dependent on corporate partners,
licensees or other third parties for the manufacturing of clinical and
commercial scale quantities of our products. Our products may be in competition
with other products for access to these facilities. For this and other reasons,
our collaborators or third parties may not be able to manufacture these
products in a cost effective or timely manner. If not performed in a timely
manner, the clinical trial development of our product candidates or their
submission for regulatory approval could be delayed, and our ability to deliver
products on a timely basis could be impaired or precluded. We are currently
dependent upon a sole source of supply for clinical quantities of TLK286 and
are attempting to identify alternative suppliers. If our primary supplier fails
to perform, our clinical trials or commercialization of TLK286 would be
delayed. We may not be able to enter into any necessary third-party
manufacturing arrangements on acceptable terms, if at all. Our current
dependence upon others for the manufacture of our products may adversely affect
our future profit margin and our ability to commercialize products on a timely
and competitive basis.
If we are unable to create sales, marketing and distribution capabilities or
enter into agreements with third parties to perform these functions, we will
not be able to commercialize products.
We currently have no sales, marketing or distribution capabilities. In order
to commercialize any products, we must internally develop sales, marketing and
distribution capabilities, or establish collaborations or other arrangements
with third parties to perform these services. We intend to market some products
directly in North America and rely on relationships with one or more
pharmaceutical companies with established distribution systems and direct sales
forces to market other products and
11
<PAGE>
address other markets. We may not be able to establish in house sales and
distribution capabilities or relationships with third parties. To the extent
that we enter into co-promotion or other licensing arrangements, our product
revenues are likely to be lower than if we directly marketed and sold our
products, and any revenues we receive will depend upon the efforts of third
parties, whose efforts may not be successful.
Our ability to generate revenues will be diminished if we or our collaborators
fail to obtain acceptable prices or an adequate level of reimbursement for
products from third-party payors.
The drugs we are developing and hope to develop may be rejected by the
marketplace or have limited acceptance due to many factors, including cost. Our
ability to commercially exploit a drug may be limited due to the continuing
efforts of government and third-party payors to contain or reduce the costs of
health care through various means. For example, in some foreign markets,
pricing and profitability of prescription pharmaceuticals are subject to
government control. In the United States, we expect that there will continue to
be a number of federal and state proposals to implement similar government
control. In addition, increasing emphasis on managed care in the United States
will continue to put pressure on the pricing of pharmaceutical products. Cost
control initiatives could decrease the price that any of our collaborators
would receive for any products in the future. Further, cost control initiatives
could adversely affect our collaborators' ability to commercialize our products
and our ability to realize royalties from this commercialization.
Our ability to commercialize pharmaceutical products with collaborators may
depend, in part, on the extent to which reimbursement for the products will be
available from:
. government and health administration authorities;
. private health insurers; and
. other third-party payors.
Significant uncertainty exists as to the reimbursement status of newly
approved health care products. Third-party payors, including Medicare, are
challenging the prices charged for medical products and services. Government
and other third-party payors increasingly are attempting to contain health care
costs by limiting both coverage and the level of reimbursement for new drugs
and by refusing, in some cases, to provide coverage for uses of approved
products for disease indications for which the FDA has not granted labeling
approval. Third-party insurance coverage may not be available to patients for
any products we discover and develop, alone or with collaborators. If
government and other third-party payors do not provide adequate coverage and
reimbursement levels for our products, the market acceptance of these products
may be reduced.
If product liability lawsuits are successfully brought against us, we may incur
substantial liabilities and may be required to limit commercialization of our
products.
The testing and marketing of medical products entail an inherent risk of
product liability. If we cannot successfully defend ourselves against product
liability claims, we may incur substantial liabilities or be required to limit
commercialization of our products. Our inability to obtain sufficient product
liability insurance at an acceptable cost to protect against potential product
liability claims could prevent or inhibit the commercialization of
pharmaceutical products we develop, alone or with corporate collaborators. Our
corporate collaborators or we may not be able to obtain insurance at a
reasonable cost, if at all. While under various circumstances we are entitled
to be indemnified against losses by our corporate collaborators,
indemnification may not be available or adequate should any claim arise.
12
<PAGE>
If we use biological and hazardous materials in a manner that causes injury or
violates laws, we may be liable for damages.
Our research and development activities involve the controlled use of
potentially harmful biological materials as well as hazardous materials,
chemicals and various radioactive compounds. We cannot completely eliminate the
risk of accidental contamination or injury from the use, storage, handling or
disposal of these materials. In the event of contamination or injury, we could
be held liable for damages that result, and any liability could exceed our
resources. We are subject to federal, state and local laws and regulations
governing the use, storage, handling and disposal of these materials and
specified waste products. The cost of compliance with these laws and
regulations could be significant.
Our research and development efforts will be seriously jeopardized if we are
unable to attract and retain key personnel.
As a small company with approximately 36 employees, our success depends on
the continued contributions of our principal management and scientific
personnel and on our ability to develop and maintain important relationships
with leading academic institutions, scientists and companies in the face of
intense competition for such personnel. In particular, our research programs
depend on our ability to attract and retain highly skilled chemists and other
scientists. If we lose the services of Dr. Michael Wick or any of our other key
personnel, our research and development efforts could be seriously and
adversely affected. We may encounter increasing difficulty in attracting
qualified personnel as our operations expand and the demand for these
professionals increases, and this difficulty could significantly impede the
achievement of our research and development objectives.
We depend on our scientific advisors for the success and continuation of our
research efforts.
We are dependent on our scientific and clinical advisors who conduct research
and provide us with access to technology developed by them. The potential
success of our drug discovery programs depends in part on continued
collaborations with these advisors. We and various members of our management
and research staff rely on these advisors for expertise in research and
development. Our scientific advisors are not our employees and may have
commitments to, or consulting or advisory contracts with, other entities that
may limit their availability to us. As a result, we have limited control over
their activities and, except as otherwise required by the consulting
agreements, can expect only limited amounts of their time to be dedicated to
our activities. All of these advisors have entered into scientific advisor
agreements with us. These agreements provide for specified terms of service and
are terminable at any time by written notice by either party. Some of the
advisors also have entered into separate consulting agreements with us. We
cannot assure you that we will be able to maintain these consulting agreements
or that our scientific advisors will not enter into consulting arrangements,
exclusive or otherwise, with competing pharmaceutical or biotechnology
companies, any of which could have a detrimental impact on our research
objectives and could have a material adverse effect on our business, financial
condition and results of operations.
13
<PAGE>
Risks Related To The Offering
There may not be an active, liquid trading market for our common stock.
Prior to this offering, there has been no public market for the common stock
and we cannot assure you that an active trading market for our common stock
will develop following this offering. You may not be able to sell your shares
quickly or at the market price if trading in our stock is not active. The
initial public offering price will be determined by negotiations between us and
the representatives of the underwriters based upon a number of factors. The
initial public offering price may not be indicative of prices that will prevail
in the trading market.
Our stock price may be volatile, and your investment in our stock could decline
in value.
The market prices for securities of biotechnology companies in general have
been highly volatile and may continue to be highly volatile in the future. The
following factors, in addition to other risk factors described in this section,
may have a significant impact on the market price of our common stock:
. announcements of technological innovations or new commercial products by
our competitors or us;
. developments concerning proprietary rights, including patents;
. developments concerning our collaborations;
. publicity regarding actual or potential medical results relating to
products under development by our competitors or us;
. regulatory developments in the United States and foreign countries;
. litigation;
. economic and other external factors or other disaster or crisis; or
. period-to-period fluctuations in financial results.
If our stockholders sell substantial amounts of our common stock after the of-
fering, the market price of our common stock may fall.
If our stockholders sell substantial amounts of our common stock, including
shares issued upon the exercise of outstanding options and warrants, the market
price of our common stock may fall. These sales also might make it more
difficult for us to sell equity or equity-related securities in the future at a
time and price that we deem appropriate. Substantially all of our outstanding
shares are subject to a lock up for 180 days after the completion of this
offering. After the lock up expires, at least 4,944,669 shares of our common
stock will become freely tradable and an additional 9,937,206 shares will be
tradable subject to Rule 144.
We intend to file a registration statement on Form S-8 covering shares
issuable upon exercise of options to purchase common stock and common stock
reserved for issuance under our stock plans.
14
<PAGE>
Anti-takeover provisions in our charter documents and under Delaware law may
make an acquisition of us, which may be beneficial to our stockholders, more
difficult.
Provisions of our amended and restated certificate of incorporation and
bylaws, as well as provisions of Delaware law, could make it more difficult for
a third party to acquire us, even if doing so would benefit our stockholders.
These provisions:
. authorize a classified board of directors;
. establish that members of the board of directors may be removed for cause
only upon the affirmative vote of stockholders owning at least a majority
of our capital stock;
. authorize the issuance of "blank check" preferred stock that could be
issued by our board of directors to increase the number of outstanding
shares and thwart a takeover attempt;
. limit who may call a special meeting of stockholders;
. prohibit stockholder action by written consent, thereby requiring all
stockholder actions to be taken at a meeting of our stockholders; and
. establish advance notice requirements for nominations for election to the
board of directors or for proposing matters that can be acted upon at
stockholder meetings.
In addition, Section 203 of the Delaware General Corporation Law may
discourage, delay or prevent a third party from acquiring us.
15
<PAGE>
FORWARD LOOKING INFORMATION
- --------------------------------------------------------------------------------
You should not rely on forward-looking statements in this prospectus. You can
usually 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: the
development of TLK286, TLK199 or insulin receptor activators to treat cancer
and diabetes, our intention to file INDs for clinical testing for our product
candidates, the timing of the advancement of our product candidates into
preclinical and clinical trials, the design, goals and expansion of those
clinical trials, the selection of a product candidate from our proprietary
family of insulin receptor activators, our partnering with third parties to
share the costs of developing product candidates for diabetes and other
diseases that require larger and longer clinical trials, the use of TRAP to
select product candidates much faster than with alternative technologies, the
ability to address the U.S. hospital-based cancer market with a limited sales
and marketing presence, our entry into collaborations to assist in
commercializing our product candidates, our ability to apply our drug discovery
technology to virtually any protein target, our development of product
candidates with a clear path to regulatory approval and the potential to show
early evidence of clinical efficacy, our use of TRAP to provide a stream of
promising future development candidates, our selection of additional partners
for additional TRAP collaborations, the advantages of TLK199 over a therapeutic
protein, the effect of certain members of the TLK17411 family on more sensitive
control of blood sugar and on the delayed need for injected insulin, the
ability of our panel of proteins to simulate most of the significant
interactions between a small molecule and a protein, the use of TRAP to create
a small molecule library with a greater likelihood of containing a compound
that interacts with any specified protein and a higher probability of
generating drug candidates, the impact of our collaborations on our ability to
identify new product development and commercialization opportunities, the
financing sources for our future cash needs, our investment of the proceeds of
this offering, our use of third parties for materials production, the relations
with our employees and the adequacy of our existing facilities. Factors that
may cause actual results to differ materially from the results expressed or
implied by these forward-looking statements are set forth under "Risk factors."
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. We do not intend to update any of the
forward-looking statements after the date of this prospectus or to conform
these statements to actual results.
16
<PAGE>
USE OF PROCEEDS
- --------------------------------------------------------------------------------
The net proceeds to us from the sale of the shares of common stock in the
offering are estimated to be $ ($ if the underwriters' over-allotment
option is exercised in full), assuming an initial public offering price of $
per share and after deducting the estimated underwriting discount and offering
expenses. We intend to use the net proceeds for research and development and
general corporate purposes. We may also use a portion of the net proceeds to
acquire or invest in products and technologies that are complementary to our
own, although no acquisitions are planned or being negotiated as of the date of
this prospectus, and no portion of the net proceeds has been allocated for any
specific acquisition. Pending these uses, the net proceeds will be invested in
investment-grade interest-bearing securities.
The principal purposes of this offering are to increase our capitalization
and financial flexibility, to provide a public market for our common stock and
to facilitate access to public equity markets. As of the date of this
prospectus, we cannot specify with certainty all of the particular uses for the
net proceeds we will have upon completion of the offering. Accordingly, our
management will have broad discretion in the application of net proceeds.
DIVIDEND POLICY
- --------------------------------------------------------------------------------
We have never declared or paid any cash dividends on our capital stock. We
currently intend to retain earnings, if any, to support the development of our
business and do not anticipate paying cash dividends for the foreseeable
future.
17
<PAGE>
CAPITALIZATION
- --------------------------------------------------------------------------------
The following table shows our capitalization as of December 31, 1999:
. on an actual basis;
. on a pro forma basis to give effect to the conversion of preferred stock
and exercise of warrants referred to in the first paragraph following the
table under "The offering"; and
. on a pro forma as adjusted basis to give effect to the conversion of
preferred stock and exercise of warrants referred to in the first
paragraph following the table under "The offering" and the sale of
shares of common stock by us in a public offering at an assumed price of
$ per share, less the estimated underwriting discounts, commissions
and offering expenses.
This table should be read with "Management's discussion and analysis of
financial condition and results of operations" and our financial statements and
notes appearing elsewhere in this prospectus.
<TABLE>
<CAPTION>
Pro Forma as
Actual Pro Forma adjusted
-------- --------- ------------
(In thousands)
<S> <C> <C> <C>
Capital lease and equipment loan obligations,
including current portion.................... $ 272 $ 272 $ 272
Stockholders' equity:
Convertible preferred stock, $0.01 par
value; authorized-- 1,023,799 shares
actual, 3,023,799 shares pro forma and
5,000,000 shares pro forma as adjusted;
issued and outstanding--1,020,150 shares
actual, none pro forma and pro forma as
adjusted................................... 10
Common stock, $0.01 par value; authorized--
23,000,000 shares, 100,000,000 pro forma
and pro forma as adjusted, issued and
outstanding--2,207,281 shares actual,
16,048,542 shares, pro forma and shares
pro forma as adjusted...................... 22 44
Deferred compensation......................... (260) (260) (260)
Additional paid-in capital.................... 56,742 63,862
Short-term note receivable for Series K
convertible preferred stock due April 10,
2000......................................... -- (5,000) --
Accumulated deficit........................... (51,384) (51,384) (51,384)
-------- -------- --------
Total stockholders' equity.................. 5,130 7,262
-------- -------- --------
$ 5,402 $ 7,534 $
======== ======== ========
</TABLE>
Issued and outstanding shares exclude the 5,831,459 shares issuable upon
exercise of the options outstanding and available for future issuance referred
to in the second paragraph following the table under "The offering."
18
<PAGE>
DILUTION
- --------------------------------------------------------------------------------
The pro forma net tangible book value of our common stock on December 31,
1999, after giving effect to the conversion of preferred stock and exercise of
warrants referred to in the first paragraph following the table under "The
offering" was approximately $5.3 million, or $0.36 per share. Pro forma net
tangible book value, giving effect to the sale of Series K preferred stock
subsequent to December 31, 1999, was approximately $7.3 million, or
approximately $0.45 per share. Pro forma net tangible book value per share
represents the amount of our total tangible assets less total liabilities
divided by the pro forma number of shares of common stock outstanding. Dilution
in pro forma net tangible book value per share represents the difference
between the amount per share paid by purchasers of shares of common stock in
this offering and the net tangible book value per share of our common stock
immediately afterwards. After giving effect to the sale of shares of common
stock offered by this prospectus at an assumed initial public offering price of
$ per share, less the estimated underwriting discounts, commissions and
estimated offering expenses, our pro forma net tangible book value at December
31, 1999 would have been approximately $ million or $ per share. This
represents an immediate decrease in net tangible book value of $ per share
to new investors purchasing shares of common stock in this offering. The
following table illustrates this dilution on a per share basis:
<TABLE>
<S> <C> <C>
Assumed initial public offering price............................. $ $--
Pro forma net tangible book value per share at December 31,
1999........................................................... .36
Increase per share attributable to pro forma activities
subsequent to December 31, 1999................................ --
Increase per share attributable to new investors................ --
---
Pro forma net tangible book value per share after this offering... --
----
Dilution per share to new investors............................... $--
====
</TABLE>
The following table summarizes, on a pro forma basis as of December 31, 1999,
after giving effect to the conversion of preferred stock and exercise of
warrants referred to in the first paragraph following the table under "The
offering", the differences between the number of shares purchased from us, the
total consideration paid and the average price per share paid by (a) the
existing stockholders and (b) the new investors. We have assumed an initial
public offering price of $ per share and have not deducted estimated
underwriting discounts, commissions and estimated offering expenses in our
calculations.
<TABLE>
<CAPTION>
Shares Purchased Total Consideration Average
------------------ --------------------- Price
Number Percent Amount Percent Per Share
---------- ------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Existing investors..... 14,881,875 0.0% $ -- 0.0% $
New investors.......... $
---------- ----- --------- ----------
Total................ 100.0% $ 100.0%
========== ===== ========= ==========
</TABLE>
The foregoing table excludes the 3,281,459 shares issuable upon exercise of
the options granted through March 30, 2000, referred in the second paragraph
following the table under "The offering." Assuming the exercise of such options
and the underwriters' over-allotment option, the number of shares purchased by
existing stockholders would be shares, or %, and the total consideration
paid by existing stockholders would be $ , or %, for an average price per
share of $ .
19
<PAGE>
SELECTED FINANCIAL DATA
- --------------------------------------------------------------------------------
This section presents our historical financial data. You should read
carefully the financial statements included in this prospectus, including the
notes to the financial statements and "Management's discussion and analysis of
financial condition and results of operations." The selected data in this
section is not intended to replace the financial statements.
The statement of operations data for the years ended December 31, 1995, 1996,
1997, 1998 and 1999 and the balance sheet data at December 31, 1995, 1996,
1997, 1998 and 1999 have been derived from our financial statements which have
been audited by Ernst & Young LLP, our independent auditors. The financial
statements at December 31, 1998 and 1999 and for each of the three years in the
period ended December 31, 1999 are included elsewhere in this prospectus.
Historical results are not necessarily indications of future results. Contract
revenue from collaborations includes $1.3 million, $1.5 million, $1.8 million
and $2.0 million from a related party in 1996, 1997, 1998 and 1999,
respectively. See notes to the financial statements for an explanation of the
method used to determine the number of shares used in computing pro forma basic
and diluted loss per share.
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------
1995 1996 1997 1998 1999
------- ------- ------- ------- -------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Statement of operations data
Contract revenue from
collaborations................... $ 358 $ 1,350 $ 1,652 $ 3,194 $ 4,237
Costs and expenses:
Research and development........ 5,784 8,688 8,090 7,952 9,547
General and administrative...... 1,428 1,880 2,470 2,149 2,152
------- ------- ------- ------- -------
Loss from operations.............. (6,854) (9,218) (8,908) (6,907) (7,462)
Interest income, net.............. 164 320 290 328 398
------- ------- ------- ------- -------
Net loss.......................... $(6,690) $(8,898) $(8,618) $(6,579) $(7,064)
======= ======= ======= ======= =======
Net loss per share, basic and
diluted.......................... $ (3.39) $ (4.41) $ (3.95) $ (3.00) $ (3.21)
======= ======= ======= ======= =======
Weighted average shares used in
computing net loss per share,
basic and diluted................ 1,974 2,019 2,184 2,194 2,204
Pro forma net loss per share,
basic and diluted................ $ (0.47)
=======
Weighted average shares used in
computing pro forma net loss per
share, basic and diluted......... 14,879
</TABLE>
<TABLE>
<CAPTION>
December 31,
------------------------------------------------
1995 1996 1997 1998 1999
-------- -------- -------- -------- --------
(in thousands)
<S> <C> <C> <C> <C> <C>
Balance sheet data
Cash, cash equivalents and
short-term investments..... $ 13,504 $ 11,179 $ 10,692 $ 14,402 $ 7,556
Working capital............. 13,072 8,429 7,250 10,915 3,936
Total assets................ 15,469 14,071 12,902 16,586 9,170
Total long-term
liabilities................ 594 1,231 797 425 83
Deferred compensation....... -- -- -- -- (260)
Accumulated deficit......... (20,225) (29,123) (37,741) (44,320) (51,384)
Total stockholders' equity.. 14,171 9,942 8,438 12,177 5,130
</TABLE>
20
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
- --------------------------------------------------------------------------------
The following discussion and analysis should be read with "Selected financial
data" and our financial statements and notes included elsewhere in this
prospectus. The discussion in this prospectus contains forward-looking
statements that involve risks and uncertainties, such as statements of our
plans, objectives, expectations and intentions. The cautionary statements made
in this prospectus should be read as applying to all related forward-looking
statements wherever they appear in this prospectus. Our actual results could
differ materially from those discussed here. Factors that could cause or
contribute to these differences include those discussed in "Risk factors," as
well as those discussed elsewhere.
Overview
Telik is engaged in the discovery, development and commercialization of small
molecule therapeutics. We have incurred net losses since inception and expect
to incur substantial and increasing losses for the next several years as we
expand our research and development activities and move our product candidates
into later stages of development. The process of carrying out the development
of our own unpartnered products to later stages of development and our research
programs for our corporate partners may require significant additional research
and development expenditures including preclinical testing and clinical trials,
as well as for obtaining regulatory approval. To date, we have funded our
operations primarily through the sale of equity securities, non-equity payments
from collaborators and capital asset lease financings. We received our first
funding from our collaborative partners in November 1996. Including both
research funding and the issuance of equity investments, we received an
aggregate of $13.7 million in 1998, of which $10.5 million was equity and $3.2
million was funded research, and an aggregate payment of $4.5 million for
funded research in 1999. As of December 31, 1999, our accumulated deficit was
approximately $51.4 million.
Deferred compensation
During the year ended December 31, 1999, in connection with the grant of
stock options to employees, we recorded deferred stock compensation totaling
$0.3 million, representing the difference between the deemed fair value of our
common stock for financial reporting purposes on the date these options were
granted and the exercise price. This amount is included as a reduction of
stockholders' equity and is being amortized over the vesting period of the
individual options, generally four years, using the straight line method.
Because stock options subject to deferred compensation were primarily granted
in the second half of 1999, the amortization of deferred stock compensation was
not material for the year ended December 31, 1999. We anticipate that
additional deferred compensation will be recorded for options granted after
December 31, 1999 and expect to record an amount of approximately for stock
options granted from January 1, 2000 to March 31, 2000.
21
<PAGE>
Results of Operations
Years Ended December 31, 1999, 1998 and 1997
Revenues
Contract revenue from collaborations were $4.2 million in 1999, $3.2 million
in 1998 and $1.7 million in 1997. The increase in 1999 was primarily due to the
initiation of our Sankyo collaboration signed in March 1999. The increase in
1998 revenue was primarily due to the initiation of a development agreement
with Taiho Pharmaceuticals in late 1997, substantially all of which was earned
in 1998. Contract revenue recognized related mainly to collaboration revenues
earned from Sanwa, Sankyo and Taiho in 1999 and Sanwa and Taiho in 1998 and
1997. Contract revenues from Sanwa, a related party, were $1.5 million, $1.8
million and $2.0 million in 1999, 1998 and 1997 respectively. We expect
contract revenue from collaborations to constitute substantially all of our
total revenues for the foreseeable future. For details of the Company's revenue
recognition policy, refer to Note 1 to the financial statements.
Research and development expenses
Research and development expenses were $9.5 million in 1999, $8.0 million in
1998 and $8.1 million in 1997. The 1999 increase was primarily attributable to
increased costs associated with the filing of an IND for TLK286, a small
molecule product candidate being developed for the treatment of chemotherapy-
resistant cancers. We expect research and development expenses to increase with
the advancement of our unpartnered product candidates into later stages of
development.
General and administrative expenses
General and administrative expenses, which consist primarily of salaries,
consulting services and rent, were $2.2 million in 1999, $2.1 million in 1998
and $2.5 million in 1997. This decrease of $0.4 million from 1997 to 1998 was
primarily attributable to a reduction in the number of employees. We expect
that general and administrative expenses will increase in the future to support
the continued growth of our research and development efforts and to accommodate
operating as a public company.
Net interest income
Net interest income was $0.4 million in 1999, $0.3 million in 1998 and $0.3
million in 1997. Interest income results from our interest on short-term
investments, while interest expense is associated with capital lease
obligations and other long-term liabilities.
Liquidity and capital resources
Cash, cash equivalents and short-term investments totaled $7.6 million at
December 31, 1999. We have financed our operations from inception primarily
through the private placement of equity securities, revenue from collaborative
agreements, interest earned on short-term investments and equipment lease line
financings. As of December 31, 1999, we had raised $56.7 million from the sale
of equity securities, including $11.0 million from collaborators, and received
$11.1 million in non-equity payments from collaborators. In 1998, we received
net proceeds of $10.3 million from private financing activities. In 1997, we
received net proceeds of $7.1 million from private financing activities.
As of December 31, 1999, $0.2 million in equipment loans were secured by our
equipment. The loans bear interest at 8% and are due in 2000.
22
<PAGE>
Net cash used in operating activities in 1999 was $5.9 million. Net cash used
in operating activities in 1998 was $5.8 million. Our collaborators paid us a
total of $4.5 million in 1999, of which $2.3 million was deferred as of
December 31, 1999.
Net cash provided by investing activities in 1999 was $6.3 million and net
cash used in investing activities was $2.6 million in 1998. Net cash used in
financing activities in 1999 was $0.6 million and net cash provided by
financing activities in 1998 was $9.8 million.
We believe our existing cash resources, plus the proceeds of this offering
and anticipated proceeds from corporate collaborations, will be sufficient to
satisfy our anticipated cash requirements through at least 18 months. For the
next several years, we do not expect the cash generated from our operations to
generate the amounts of cash required by our future cash needs. We expect to
finance our future cash needs through the sale of equity securities, strategic
collaborations and possibly debt financing. Our future capital uses and
requirements depend on numerous factors, including the following:
. the progress and success of preclinical and clinical trials of our
product candidates;
. the progress and number of research programs in development;
. the costs and timing of obtaining regulatory approvals;
. our ability to establish, and the scope of, our new collaborations;
. our ability to meet the milestones identified in our collaborative
agreements which trigger payments; and
. the costs and timing of obtaining, enforcing and defending our patent and
intellectual property rights.
Disclosure About Market Risk
The primary objective of our investment activities is to preserve principal
and at the same time maximize income we receive from our investments without
significantly increasing risk. We maintain our portfolio of cash equivalents
and short-term investments in a variety of securities, including commercial
paper, money market funds, government and non-government debt securities. In
1998 and 1999, we maintained an investment portfolio primarily in depository
accounts. Due to the short-term nature of these investments, we have concluded
that there is no material market risk exposure. In the future, we may invest
the proceeds of this offering in financial instruments with longer maturities.
We have operated primarily in the United States and all funding activities
with our collaborators to date have been made in U.S. dollars. Accordingly, we
do not have any exposure to foreign currency rate fluctuations.
23
<PAGE>
BUSINESS
- --------------------------------------------------------------------------------
Overview
Telik is a biopharmaceutical company working to discover, develop and
commercialize small molecule therapeutics to treat diseases for which there is
significant demand for new therapies. Our most advanced product candidates are
for the treatment of cancer and diabetes. All of our product candidates were
discovered using our proprietary technology called Target-Related Affinity
Profiling, or TRAP, which enables us to discover product candidates faster and
more efficiently than with alternative technologies such as ultra high-
throughput screening, or UHTS.
Our most advanced product candidate, TLK286, is a chemotherapeutic drug for
the treatment of cancers, such as breast, colon, ovarian and lung, that have
shown resistance to standard cancer drugs. TLK286 entered clinical trials in
January 2000. Our second cancer product candidate, TLK199, is for the treatment
of the depletion of white blood cells, or neutropenia, which is a toxic side
effect of cancer treatment. TLK199 appears to act by the same cellular
mechanism as G-CSF, the current standard therapy, but has the advantages of
being a small molecule drug. TLK199 is expected to enter clinical testing in
the second half of 2000. We have retained rights for the worldwide
commercialization of TLK286 and TLK199.
Our third product development program has identified a proprietary class of
insulin receptor activators for the treatment of Type 2, or adult onset,
diabetes. These product candidates activate insulin signaling and lower blood
sugar by a mechanism that is different from that of currently available
diabetes drugs. The first of our insulin receptor activators, TLK17411, is in
preclinical development. We granted commercialization rights to a partner for
most of Asia and have retained these rights for the rest of the world.
We have also developed a portfolio of preclinical programs in the areas of
cancer, diabetes, inflammatory diseases and stroke. In each of these programs,
we have used our TRAP technology to identify pharmaceutically active small
molecules. The most advanced of the active compounds from these programs have
shown efficacy in animal models of their respective disease targets.
Our success in identifying product candidates has resulted from the use of
TRAP, our proprietary drug discovery technology. We have used TRAP to rapidly
and efficiently identify active small molecules relevant to a variety of
disease states. Since TRAP reduces the need for conventional high-throughput
screening and the associated need for large libraries of compounds, automation,
assay technology and target licensing, TRAP offers a solution to the current
bottleneck in drug discovery caused by the increased number of new targets that
has resulted from advances in genomics and related fields. In addition to using
TRAP for our internal drug discovery programs, we have entered into TRAP-based
technology collaborations with third parties.
Telik Strategy
Key elements of our strategy are to:
Develop small molecule drugs for major disease areas. We intend to develop
small molecule drugs to address unmet needs in the areas of cancer, diabetes,
inflammatory disease and stroke. The number of patients with these diseases has
been increasing due primarily to the aging population. This has led to a
growing demand for new drugs that offer competitive advantages over existing
products, such as improved effectiveness and reduced side effects. The
advantages of small molecule drugs over therapeutic proteins include the ease
of manufacturing and administration, the potential for oral dosing and
applicability to a wider range of disease targets, including those inside the
cell. Small molecule drugs comprise more than 95% of the pharmaceutical market.
24
<PAGE>
Retain significant commercial rights to our product candidates. We will seek
to retain significant commercial rights to our product candidates by conducting
clinical development activities at least through initial proof of efficacy in
humans. Since the development process for cancer drugs is relatively efficient
and well defined, the cost and time required to bring new drugs to market is
significantly less than that required for other therapeutic categories,
permitting us to retain significant commercialization rights through completion
of clinical trials. In disease areas that require larger and longer clinical
trials, such as diabetes, we will share the risks and costs of development by
partnering these programs before completion of pivotal trials, which will
require granting significant commercialization rights to our collaborators.
Our goal is to develop and commercialize our cancer product candidates in
North America. We believe that the hospital-based cancer market in the United
States is readily accessible by a limited sales and marketing presence due to
the concentrated market of prescribing physicians coupled with the substantial
unmet therapeutic needs. As appropriate, we will establish collaborations with
multinational pharmaceutical companies to assist in the commercialization of
our product candidates.
Select targets strategically. We believe that we can apply our drug discovery
technology to virtually any protein target. We regularly review the progress of
scientific and clinical research in important disease areas to identify targets
with commercial promise. By careful selection of targets, we intend to develop
product candidates with a clear path to regulatory approval and the potential
to show early evidence of clinical efficacy. This strategy will allow us to
reduce the risk inherent in drug discovery and accelerate the commercialization
of our drug candidates.
Use TRAP to sustain a pipeline of drug candidates. Because our TRAP platform
technology allows us to rapidly and efficiently identify small molecules active
against potential disease targets, we have the capacity to examine a large
number of targets in order to select those with therapeutic promise. We will
seek to use this platform to provide a stream of promising future development
candidates.
Leverage and expand the use of TRAP. We may seek selected additional partners
for TRAP collaborations. These collaborations will not limit our internal
efforts and may strengthen our TRAP technology by providing information on the
performance of our panel proteins. Any significant revenues from these
collaborations are more likely to be in the form of milestone and royalty
payments, rather than up front payments or funded research.
25
<PAGE>
Product Candidates
Our efforts are concentrated in four major diseases: cancer, diabetes,
inflammatory diseases and stroke. Our two most advanced product candidates are
for cancer treatment. TLK286, which entered clinical trials in January 2000, is
being developed for the treatment of chemotherapy-resistant cancers. TLK199, a
small molecule that accelerates recovery from chemotherapy-induced depletion of
white blood cells, or neutropenia, represents a promising new adjunctive
therapy. We have discovered novel insulin receptor activators for the treatment
of Type 2 diabetes.
Application of our TRAP technology has led to a pipeline of both potential
product candidates and earlier stage research programs. The following table
summarizes key information about these programs.
<TABLE>
<CAPTION>
Product Clinical Development Commercialization
Candidate Indication Status Rights
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cancer
TLK286 Chemotherapy-resistant Phase I Worldwide
Targeted cancers, including . phase I clinical
chemotherapeutic drug breast, lung, ovarian, trial commenced
colon and sarcoma 1/00
TLK199 Chemotherapy-induced low Pre-IND Worldwide
Bone marrow stimulant white blood cell count, . IND-enabling
or neutropenia studies initiated
6/99
. clinical grade material
prepared 1/00
IGF-1 inhibitor Prostate cancer Lead optimization Worldwide
. small
molecule
inhibitors
discovered
- ---------------------------------------------------------------------------------------------------
Diabetes
Insulin-independent Type 2 diabetes Candidate nomination/lead Worldwide except
insulin receptor optimization Japan and most other
Asian countries
activators . oral activity in animal
models
. preclinical and safety
assessment initiated
Insulin-dependent Type 2 diabetes Candidate nomination/lead Worldwide except
insulin receptor optimization Japan and most other
activators Asian countries
. activity in animal models
. preclinical and safety
assessment initiated
- ---------------------------------------------------------------------------------------------------
Inflammatory disease
MCP-1 antagonist Rheumatoid arthritis, Lead optimization North and South
asthma atherosclerosis, . small America and jointly
multiple sclerosis molecule in Europe
inhibitors
discovered
. activity in animal models
MIP-1 alpha inhibitor Rheumatoid arthritis, Lead optimization Worldwide
multiple sclerosis . small
molecule
inhibitors
discovered
IL-8 inhibitor Rheumatoid arthritis, Lead optimization Worldwide
nephritis, psoriasis . small
molecule
inhibitors
discovered
- ---------------------------------------------------------------------------------------------------
Stroke
Caspase-3 inhibitor Stroke Lead optimization Worldwide
. small
molecule
inhibitors
discovered
</TABLE>
26
<PAGE>
Product Development Programs
Cancer
Our two most advanced product candidates, TLK286 and TLK199, are being
developed to treat serious cancers for which there is significant demand for
new therapies. Cancer is the second leading cause of death in the United
States. It is estimated that 1.2 million people will be diagnosed with cancer
in the United States this year and more than 555,000 of these people will die
of their disease. The five-year survival rates for patients with cancers that
have spread from their original site are poor. For example, after spread of the
cancer, only 13% of patients with colorectal cancer survive, only 12% with lung
cancer and only 21% with breast cancer. These poor survival rates reflect the
limitations of current treatments and the development of resistance to
available treatments. In addition, current treatments are often associated with
severe toxic side effects.
TLK286, a small molecule product candidate to treat chemotherapy resistant
cancers, entered phase I clinical trials in January 2000. Our second cancer
product candidate, TLK199, is being developed for the treatment of the
depletion of white blood cells, or neutropenia, a toxic side effect of
chemotherapy. TLK199 is scheduled to enter phase I clinical trials at the end
of 2000.
TLK286--tumor-activated chemotherapeutic drug
Overview
TLK286 is a small molecule product candidate we are developing for the
treatment of cancers that have resisted standard chemotherapeutic drugs. TLK286
binds to glutathione S-transferase, or GST, a protein known to play an
important role in the development of resistance to commonly used
chemotherapeutic drugs. GST initiates a series of events in a cell responsible
for the inactivation of a variety of drugs and toxins and their subsequent
removal from the body. In a person with a cancer, GST also functions to break
down chemotherapeutic drugs administered for treatment. If a person's cancer
has increased GST levels either initially or following exposure to
chemotherapeutic drugs, GST will limit the effectiveness of treatment by
breaking down the chemotherapeutic drug before it can kill cancer cells.
GST P1-1 is a type of GST that is elevated in many cancers and is often
further elevated by treatment with standard chemotherapeutic drugs. When TLK286
binds to GST P1-1, it releases a compound with a proven mechanism of killing
cancer cells. Thus, in contrast to the usual situation where GST is involved in
the destruction of chemotherapeutic drugs, GST activates TLK286 when it reaches
its cellular target. In this way, TLK286 kills cancer cells by utilizing the
same mechanism that normally deactivates chemotherapeutic drugs.
Preclinical Studies
Preclinical studies suggest that TLK286 may have a more favorable safety and
efficacy profile than that of standard chemotherapeutic drugs. We attribute
this to its mechanism of activation. Since GST P1-1 activity is often increased
in tumor tissues compared to normal tissues, TLK286 activation is further
enhanced in tumors than in normal tissues. TLK286 activation is further
enhanced in resistant tumors in which GST P1-1 activity is further elevated.
Thus, activated TLK286 concentrates in parts of the body where cancer is
present.
TLK286 reduced the growth of human cancer cell lines and biopsy specimens
derived from tumors of the breast, colon, lung, ovary and bone marrow and from
melanomas and, in mouse models of human cancer, suppressed tumor growth. The
efficacy of TLK286 against tumor cell lines
27
<PAGE>
was enhanced in those cell lines selected for drug resistance and exhibiting
increased levels of human GST P1-1. For example, TLK286 showed an improved
therapeutic effect in mouse models of human colon cancer cells that had been
made resistant to a common chemotherapeutic drug called doxorubicin and have
elevated levels of GST P1-1.
Development Strategy
In December 1999, we filed an IND with the FDA for permission to test TLK286
in advanced cancer patients. In January 2000, we initiated a phase I clinical
trial of TLK286 in 36 patients with advanced solid tumors or non-Hodgkin's
lymphoma which are unresponsive or for which no standard therapy is available.
The purpose of this phase I clinical trial is to determine the safety of
TLK286 by finding the maximum tolerated dose and principal toxic side effects.
In addition, we will also collect information on the relationship of GST P1-1
activity levels and tumor response. Patient responses will be assessed after
two cycles of treatment, or six weeks. Patients showing an objective clinical
benefit may continue to receive TLK286 until the cancer progresses or
unacceptable toxicity occurs. We intend to complete this study in the second
half of 2000.
Following completion of the phase I clinical trial, we intend to conduct
phase II clinical trials in up to 50 patients to confirm the safety and study
the antitumor activity of several doses and schedules of administration of
TLK286. If successful, we intend to begin confirmatory phase III clinical
trials which are expected to compare TLK286 to standard therapies in those
chosen cancer types.
Cancer types under consideration include those which are not responsive, or
are refractory, to standard therapy. These cancers include ovarian, colon,
lung, breast and sarcoma, as well as refractory non-Hodgkin's lymphoma. We have
chosen these cancer types because they have high levels of GST P1-1 and
generally require smaller and shorter trials. These cancers may also be
candidates for accelerated regulatory review, because no effective alternative
therapies are available. If we obtain approval in these refractory indications,
we will expand the development program to study TLK286 in earlier stages of
these diseases as well as in additional cancer types.
We have retained worldwide commercial rights to TLK286 and intend to
commercialize TLK286 in the North American market. At the appropriate time, we
will select a collaborator in other territories with capabilities in
manufacturing, sales and marketing.
TLK199--Bone marrow stimulant as an adjunct for cancer therapy
Overview
TLK199 is a small molecule product candidate that is designed to increase
white blood cell counts in cancer patients undergoing chemotherapy. In addition
to killing cancer cells, chemotherapeutic drugs kill rapidly dividing normal
cells. These include normal cells found in bone marrow that may eventually
become white blood cells capable of fighting infection. Lowered levels of a
type of white blood cells, called neutrophils, cause a condition called
neutropenia. Neutropenia renders the already weakened cancer patient
susceptible to life-threatening infections. Granulocyte colony stimulating
factor, or G-CSF, is the current standard therapy for the treatment of
neutropenia, since it accelerates the recovery of white blood cells to a normal
level.
G-CSF acts by binding to a receptor protein on the surface of the cell and
activating a signaling pathway within the cell. This signal causes white blood
cells in the bone marrow to divide and mature, increasing the number of white
cells in the blood capable of fighting infection. TLK199 acts upon the same
signaling pathway that is activated by G-CSF.
28
<PAGE>
Preclinical Studies
TLK199 reduced the duration of neutropenia in animals treated with a standard
cancer drug. The reduction was similar in degree and duration to that seen with
G-CSF. In normal animals, TLK199 also increased the number of white cells in
the blood to an extent similar to that produced by G-CSF. In experiments using
human bone marrow, TLK199 caused white blood cells to divide and mature.
Development Strategy
TLK199 is undergoing preclinical testing to support initiation of clinical
trials. We intend to file an IND with the FDA for TLK199 in the second half of
2000. In the phase I clinical trial, we intend to determine the safety and
blood levels, or pharmacokinetics, of TLK199 in healthy volunteers. We will
also measure the enhancing effects of TLK199 on the white blood cell response.
Our phase II program will be designed to confirm the white blood cell
elevating effects of TLK199 in patients receiving cancer chemotherapeutic drugs
that cause severe neutropenia. In this study, we will look at the ability of
TLK199 to reduce the duration and intensity of neutropenia, which is correlated
with the risk of infectious complications. We expect to conduct this study with
75 patients undergoing a variety of standard chemotherapy regimens. Phase III
clinical trials will be designed to compare the efficacy of TLK199 with Amgen's
therapeutic protein version of G-CSF, known as Neupogen. We also intend to
study additional diseases that are known to benefit from the stimulation of
white blood cell production.
TLK199 is expected to offer the advantages of a small molecule drug over a
therapeutic protein, including ease of manufacturing and the potential for oral
administration. Although Amgen reported worldwide sales of Neupogen of over
$1.3 billion in 1999, we believe its broader use is limited by its expense and
lack of oral administration. The low cost of production and potential oral
availability of TLK199 may allow us to offer a product that is attractive to
the current market for drugs that stimulate the production of white blood
cells. We have retained worldwide commercial rights to TLK199 and intend to
commercialize TLK199 in the North American market. At the appropriate time, we
will select collaborators in other territories with capabilities in
development, sales and marketing.
Diabetes
We have discovered and are developing proprietary orally active small
molecule insulin receptor activators for the treatment of Type 2 diabetes,
which represents 90-95% of all cases of diabetes. Diabetes is a major health
problem with over 170 million people estimated to be afflicted worldwide.
Diabetes is the leading cause of serious coronary disease, adult blindness,
lower limb amputations and serious kidney disease. Diabetes results from the
inability of insulin, a hormone produced by the pancreas, to regulate blood
sugar levels. In Type 2 diabetes, the loss of blood sugar regulation is caused
by a decreased ability of insulin to activate its protein receptor combined
with a relative insulin deficiency.
Two large international clinical studies, the Diabetes Control and
Complications Trial and the United Kingdom Prospective Diabetes Study, have
confirmed that blood sugar control is a key factor in the prevention of the
long-term complications of diabetes, including eye and kidney disease. As a
result of these studies, doctors are aggressively treating patients' blood
sugar levels with a variety of oral drugs. This situation has increased the
demand for more effective drugs to treat diabetes.
29
<PAGE>
TLK17411--Insulin receptor activators
Overview
Using our TRAP technology, we have discovered a proprietary family of small
molecule product candidates that bind to the insulin receptor and, like
insulin, cause the receptor to activate and initiate a sequence of events
called insulin signaling that lowers sugar levels in the blood by facilitating
the entry of sugar into muscle and liver cells where it is metabolized. Results
from animal models of diabetes suggest that these compounds may allow more
sensitive control of blood sugar levels and may delay the need for insulin
treatment. Our leading product candidate in this group is TLK17411.
[GRAPHIC]
Preclinical Studies
Preclinical studies have provided evidence that TLK17411 can initiate or
facilitate insulin signaling. In laboratory experiments and in four animal
models of diabetes, we have shown that TLK17411 enhances insulin signaling. In
one animal model, treatment with a single oral dose of TLK17411 lowered blood
sugar by more than 25% and kept it suppressed for 24 hours. Its effectiveness
was maintained for a longer period of time with single daily doses. We have
shown that TLK17411 does not activate similar receptors or other signaling
pathways in these cells, a positive property that suggests that TLK17411 may
not have significant side effects.
Some members of the TLK17411 family of compounds show activity only in the
presence of insulin while others activate the glucose receptor in the absence
of insulin. Each profile has potential advantages for the treatment of Type 2
diabetes. The insulin-dependent profile could produce more sensitive control of
blood sugar levels, since the drug would be most active when blood sugar
levels, and therefore insulin levels, are increased. The second profile may be
more advantageous in later stage Type 2 diabetes, when insulin release is more
severely impaired and insulin injections are required. A drug with this profile
of activity could delay the need for injected insulin.
30
<PAGE>
We have shown that members of the TLK17411 group are sufficiently potent to
allow oral administration. Furthermore, they do not cause genetic mutations in
standard tests, which is a prerequisite for a product candidate to proceed for
further development.
Development Strategy
We anticipate selecting a product candidate from the family of insulin
receptor activators by the end of 2000 and initiating the necessary preclinical
testing to support the filing of an IND with the FDA and advancement into phase
I clinical testing.
In the phase I clinical trial, we intend to evaluate the safety,
pharmacokinetics and blood sugar lowering effects of the product candidate in
healthy volunteers. In a second phase I clinical trial, we intend to evaluate
the effects of multiple doses of the drug in patients with Type 2 diabetes.
Our collaborator, Sanwa, has commercialization rights in Japan and most other
Asian countries. We have retained those rights in the rest of the world. We
intend to retain commercial rights in North America, and we will seek a
collaborator to lead the commercial development program in the remaining
territories.
Research Discovery Programs
In addition to generating our current product portfolio, TRAP has allowed us
to build our research pipeline with product candidates against targets in
cancer, diabetes, inflammatory diseases and stroke. We have chosen to pursue
those protein targets that have engendered a high level of interest in the drug
discovery community, address important unmet clinical needs and whose
modulation will have a beneficial effect in treating a given disease.
IGF-1 receptor inhibitor for cancer
Insulin-like growth factor-1, or IGF-1, is an important protein target for
cancer therapy. Blood levels of IGF-1 are increased in prostate cancer patients
and represent a significant risk factor for the development of prostate cancer
in healthy males. Increases in the amount of the IGF-1 receptor predict a poor
prognosis in breast cancer. Using TRAP technology, we have identified two
families of small molecules that inhibit the interaction of IGF-1 with its
receptor. Compounds from each family have been shown to inhibit the growth of
cancer cells.
Chemokine antagonists for inflammatory diseases
Inflammation is an important response of the body to injury and infection. If
the inflammation becomes excessive or prolonged, it can lead to pathological
conditions, including asthma, inflammatory bowel disease, multiple sclerosis,
psoriasis, rheumatoid arthritis and septic shock. An early step in the
inflammatory response is the attraction of white blood cells, or leukocytes,
from the circulatory system to damaged or infected tissue by messenger
molecules called chemokines.
Our research has identified inhibitors selective for three important
chemokine mediators of the inflammatory response: MCP-1, MIP-1(alpha) and IL-8.
These inhibitors block the interaction of each chemokine with its protein
receptor and, in the most advanced of these programs, are active in an animal
model of inflammatory disease.
Caspase-3 inhibitors for stroke
The major cause of stroke is lack of blood flow, or ischemia, in a region of
the brain. Loss of blood flow is directly responsible for the loss of brain
cells. An additional loss of cells occurs over
31
<PAGE>
the next few hours to days, through a process initiated by the cells
themselves, called apoptosis. This secondary loss of cells increases the
disability produced by the stroke. Apoptosis is carried out by specialized
proteins in the cell, called caspases, and particularly, caspase-3. We have
identified small molecules that selectively inhibit caspase-3 and prevent
apoptosis in cells.
TRAP Technology
Our TRAP technology is designed to rapidly and efficiently identify small
molecule drug candidates that act on disease related protein targets.
Background
Small Molecule Drugs, Protein Targets and Disease. All drugs interact with
molecules in the body called proteins. Disease results from the abnormal
production and function of proteins. Drugs restore normal protein production or
function, either by acting directly on disease-related proteins or by acting on
other proteins in a compensatory manner. Small molecule drugs are a class of
drugs that remain the preferred treatment for most diseases, because they may
be administered orally and, unlike the protein class of drugs, act on targets
both external and internal to the cell. Small molecule drugs are particularly
appropriate for the treatment of chronic diseases that require the daily
administration of medications over many years. Historically, the opportunity to
commercialize small molecule drugs has been limited by the difficulty in
discovering safe and effective small molecules.
The Explosive Growth of New Protein Targets. The entire content of human DNA,
known as the human genome, contains an estimated 100,000 genes, each of which
contains genetic instructions for producing a unique protein. Because proteins
are drug targets and genes contain the instructions for making proteins, a
massive government and private effort was undertaken in the 1980s to sequence
the human genome with the hope that the comprehensive knowledge of the human
genome would reveal the molecular cause for all diseases. The sequencing of the
human genome is now nearing completion. Since most diseases involve complex
interactions between proteins, we believe the number of potential protein
targets for disease treatment is very large and will overwhelm the ability of
current technologies to identify small molecule drugs.
Drug Discovery Challenges Created by the Explosive Growth of New Protein
Targets. Ultra high-throughput screening, or UHTS, is the dominant technology
used to identify compounds active against protein targets. UHTS allows a large
number of compounds, up to millions, to be screened against tens to hundreds of
targets per year. The rate-limiting step in UHTS is usually developing the
test, or assay, that will provide analytical information about the activity of
compounds against the protein target. The effort and expense required for assay
development, combined with the resource outlay necessary to execute millions of
assays, tend to limit the application of UHTS to targets for which involvement
in disease has been confirmed. The biological systems used in UHTS assays are
highly simplified and may not give an accurate representation of how the target
functions in an animal. Furthermore, the size of the library of compounds
necessary to represent an adequate sampling of the compounds that could be
synthesized for screening might exceed the screening capacity of even UHTS. The
limitations of UHTS potentially create a critical bottleneck, since both
validating a disease related protein target and initiating the process of drug
discovery begins with the identification of a small molecule with an affinity
for the protein target.
The TRAP solution
Our proprietary Target-Related Affinity Profiling, or TRAP, technology offers
solutions to the two major challenges facing drug discovery: the explosive
growth in the number of new protein
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<PAGE>
targets generated by the advances in genomics and the intrinsic limitations of
the UHTS approach. TRAP offers several competitive advantages over UHTS,
because it is able to accommodate thousands, rather than hundreds, of targets,
is sufficiently efficient to screen unproven targets for the purpose of
validation and avoids the use of highly simplified assays.
We have discovered that there are a limited number of ways that proteins
interact with small molecules and that these interactions can be simulated
using a carefully selected panel of diverse proteins. TRAP takes advantage of
this discovery to profile the interactions of small molecules with proteins
using a panel of less than 20 proteins selected for their distinct patterns of
interacting with small molecules. We believe that our panel of proteins
simulates, either individually or in combination, most of the significant
interactions between a small molecule and a protein. Furthermore, TRAP measures
the diversity of compounds in a way that cannot be explained on the basis of
chemical structure alone. Compounds that are structurally similar can have very
different affinities for proteins and other biological properties, and,
conversely, compounds that are structurally diverse may have similar affinities
for proteins and other biological properties.
By comparing the relative strengths of the interaction of a small molecule
with each panel protein, a protein affinity profile, or fingerprint, is
produced for the small molecule. One type of assay we use, called a binding
assay, measures the interaction of a panel protein with a specially designed
binding partner, or ligand, in the presence of a small molecule. If the small
molecule has affinity for the same site on the panel protein as the ligand, the
amount of ligand that binds will be reduced. This decrease in the amount of the
ligand that binds is part of the small molecule's fingerprint.
Using these fingerprints, we select a small subset of compounds, which we
call the training set, that is sufficiently diverse in its protein recognition
characteristics to represent our entire collection, or library, of small
molecules. We screen this training set against the target of interest and use
the resulting data to predict the type of small molecule-protein interactions
present in the target. A model of small molecule interactions with the target
is generated by mathematically combining the individual interactions of TRAP
panel proteins, where the panel proteins to be included in the model are
determined by the affinities of the initial subset of compounds for the target.
We can then select from the library for assay those compounds that prefer these
types of interactions. We have developed a set of computational tools, in the
form of chemoinformatics algorithms, which are used to scan the library for
patterns of protein affinity, since these patterns appear to correlate best
with biological activity. The majority of active compounds in our library can
be identified after screening as few as 200 compounds.
We have used TRAP to assemble our library of small molecules, which is
enriched by compounds that interact with proteins in a selective fashion and
contains multiple compounds that can undergo each mode of protein interaction.
We believe that this process creates a small molecule library with a greater
likelihood of containing a compound that interacts with any specified protein,
thus having a higher probability of generating drug candidates than a
conventionally or randomly assembled library. As a consequence, TRAP identifies
those small molecules with a higher probability of being drug candidates from
within the universe of possible compounds, allowing their assembly into a
manageable drug discovery library, by using their protein interaction
characteristics. All of the known drugs that we have examined lie within the
bounds of the library defined by TRAP.
The ability of TRAP to identify active compounds after screening only a few
hundred samples overcomes many of the limitations of UHTS. TRAP does not
require assays capable of screening millions of compounds, thereby decreasing
the time and resources necessary for assay development. TRAP permits the
selection of a given target of interest from a much wider universe of targets
by reducing the need to acquire targets and assay technologies and allows more
physiologically relevant assay systems to be used. In addition, TRAP eliminates
the need for large compound collections and
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<PAGE>
sophisticated and expensive automation to support them, further lowering the
financial barrier to screening and permitting its application to emerging
biopharmaceutical companies. Finally, the overall efficiency and economy of
TRAP allow multiple targets to be pursued simultaneously and permit the
screening of higher risk, but potentially more valuable, targets.
In summary, TRAP technology:
. models protein targets to identify drug candidates faster and more
efficiently;
. creates a more drug-like small molecule library;
. provides a search engine for identifying active compounds;
. permits the use of more complex and physiologically relevant assays;
. operates on numerous targets simultaneously;
. gives access to a broader universe of targets;
. allows the pursuit of riskier, but potentially more valuable, targets;
. lowers the financial barrier for screening; and
. accommodates thousands rather than hundreds of targets.
Collaborative Relationships
We have established a number of joint discovery programs with other
pharmaceutical, biotechnology and genomics companies. These collaborations
exploit our TRAP technology platform and have the potential to identify new
product development and commercialization opportunities either independently or
pursuant to expanded collaborations. In addition, these collaborations have
provided funding for our internal research and development programs.
These collaborations include the following:
Sanwa
Diabetes Collaboration Agreement
In December 1996, we entered into a collaboration agreement with Sanwa
establishing a program to discover and commercialize compounds that act on the
insulin signal transduction pathway and are useful for the treatment of
diabetes and insulin resistance. In exchange for Sanwa's payment of an initial
fee and provision of research funding, we are employing our compound library,
TRAP technology, and other drug discovery technologies to identify and optimize
drug development candidates. The research portion of the collaboration will
terminate on December 20, 2000.
Under the collaboration agreement and a related license agreement, Sanwa has
an exclusive, royalty-bearing license to commercialize human therapeutic
products arising from the collaboration in Japan, Korea, Taiwan and China.
Sanwa will make payments to us upon the achievement of specified milestones and
will share its development data with us. In all other countries, we have rights
to commercialize products containing compounds identified in the research
collaboration, subject to obligations to Sanwa to share preclinical and
clinical data. We also have an option to acquire from Sanwa a royalty-bearing
license to develop and commercialize, outside the Sanwa territory, other
products identified by Sanwa arising from the collaboration.
Screening Services Agreement
In December 1996, in addition to the diabetes collaboration agreement, we
entered into a screening services agreement with Sanwa in which we agreed to
employ our proprietary TRAP
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<PAGE>
technology to identify compounds that are active against biological targets
identified as disease related by Sanwa. In September 1997, and October 1998,
this agreement was amended to increase the number of targets, extend the term
of the agreement and include the optimization of two lead compounds, each for a
period of two years. We are currently conducting the first optimization of a
lead compound identified through the use of our TRAP technology. We are
obligated to continue optimization of this or substitute active compounds
through June 2001. Under the agreement, Sanwa has exclusive rights in Japan,
Korea, Taiwan and China to commercialize the active compounds and inventions
relating to these compounds. We have equivalent exclusive rights in North and
South America. Elsewhere in the world, we will share with Sanwa all revenues
arising from the active compounds and related inventions. The agreement will
terminate on December 20, 2006.
Equity Investment
In connection with these agreements, Sanwa has invested an aggregate of $11.0
million in Telik, as more specifically described in the "Related party
transactions" section.
Sankyo
In March 1999, we entered into an agreement with Sankyo. In exchange for
Sankyo's payment of a series of upfront fees, we are using our TRAP technology
to identify compounds that are active against any of up to ten targets selected
by Sankyo. Under the agreement Sankyo has an option to acquire an exclusive,
worldwide license to commercialize products incorporating either compounds from
our library with activity against the disease target or derivatives of these
compounds. If Sankyo exercises the option, we are obligated to negotiate a
separate royalty-bearing license agreement with Sankyo. If Sankyo does not
exercise its option with respect to a particular target or if we are unable to
reach agreement on the license during the specified period, Sankyo's exclusive
rights with respect to such target will terminate and we will be free to pursue
research and development with respect to the target on our own or with third
parties. The agreement will terminate on the later of March 24, 2002 or the end
of the period for entering into license agreements.
COR Therapeutics
In January 1999, we entered into an agreement with COR to discover active
molecules for up to five disease targets. In January 2000, we extended the term
through at least January 12, 2001 at which time the agreement will terminate,
unless COR selects a disease target for continued research and development. We
are using our TRAP technology to identify compounds that are active against the
disease targets selected by COR.
Under the agreement, COR has an exclusive license to develop, make and
commercialize worldwide, other than Japan, China, Taiwan, Korea and certain
other Asian countries, products incorporating compounds derived from our
library that have activity against those disease targets that COR selects for
continued research and development. We have both an exclusive license to
commercialize products outside the COR territory and an exclusive, worldwide
license to commercialize products incorporating compounds derived from the
Telik library with activity against those disease targets that COR does not
select. Each party may develop and commercialize these products independently
or with a third party, and each party will pay the other party royalties on
such products. In addition, COR will pay us a license fee and additional fees
upon achievement of specified development milestones.
Scios
In February 1999, we entered into an agreement with Scios to employ our TRAP
technology to discover small molecules that display activity against a disease
target, chosen by Scios.
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Under the agreement, Scios has an option to acquire an exclusive, royalty-
bearing license to commercialize worldwide, other than Japan, China, Taiwan,
Korea and certain other Asian countries, products incorporating compounds
derived from the Telik library with activity against the disease target. If
Scios exercises the option, we will receive a licensing fee, and potential
milestone and royalty payments and an exclusive, royalty-free license to
commercialize these products outside the Scios territory. The parties will
share data arising from their development of these products, and we may perform
development or compound optimization work on behalf of Scios. We will retain
all rights with respect to compounds for which Scios does not exercise its
option and, in the event that Scios does not satisfy certain diligence
requirements, we will receive an exclusive, worldwide, royalty-free license to
develop, make and commercialize the relevant products.
Genaissance Pharmaceuticals
In February 1998, we entered into a research agreement with Genaissance
Pharmaceuticals. We amended this agreement in February 1999 to extend the term
of the agreement. Under the terms of the agreement, we are using our TRAP
technology to validate novel variants of the estrogen receptor through the
identification of compounds from our library that exhibit selective
pharmacological activity. We will jointly own the compounds or other
intellectual property rights arising from the collaboration and have agreed to
jointly seek a third party for a corporate partner to continue development of
these compounds. We will share research funding proportionate to our research
commitments and will share equally the other revenues received from any
resulting license agreements. The agreement will terminate if we have not
entered into a third party license agreement or otherwise agreed to a joint
development program by August 11, 2000. Upon termination, the parties are
obligated to consult with each other before independently developing the
jointly owned compounds and other intellectual property rights.
Patents and Proprietary Information
Our success depends on our ability and the ability of our collaborators to
obtain patents for compounds, technologies and products resulting from the
application of these technologies, to defend patents once obtained, and to
maintain trade secrets both in the United States and foreign countries.
Accordingly, patents and other proprietary rights are an essential element of
our business. As of January 1, 2000, 36 patents based on our discoveries have
been granted in the United States and 56 abroad. In addition, more than 16
applications are pending in the United States and more than 79 abroad. Our
policy is to aggressively file patent applications to protect new chemical
entities, technology, other inventions and improvements to inventions that are
commercially important to the development of our business. Applications
pertaining to our core technology cover new chemical compounds, uses of
compounds, pharmaceutical compositions, formulations, methods of compound
preparation, methods of chemical classification, protein profiles of compounds
and computational methods to analyze these protein profiles.
We also rely on trade secret information, technical know-how and innovation
to continuously expand our proprietary position. We require our employees and
consultants to execute non-disclosure and assignment of invention agreements on
commencement of their employment or engagement.
Competition
Competition in the pharmaceutical and biotechnology industries is intense.
Many pharmaceutical or biotechnology companies have products on the market and
are actively engaged in the research and development of products that are
competitive with our potential products. Many of these companies and
institutions, either alone or together with their collaborative partners, have
substantially greater financial, manufacturing, sales, distribution and
technical resources and more experience in research and development, clinical
trials and regulatory matters, than we do.
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Regulatory Considerations
The manufacturing and marketing of our potential products and our ongoing
research and development activities are subject to extensive regulation by
numerous governmental authorities in the United States and other countries. In
the United States, pharmaceutical products are subject to rigorous review by
the FDA under the Federal Food, Drug and Cosmetic Act, the Public Health
Service Act and other federal statutes and regulations. Non-compliance with
applicable requirements can result in fines, recall or seizure of products,
total or partial suspension of production, refusal of the government to approve
marketing applications or allow us to enter into supply contracts and criminal
prosecution. The FDA also has the authority to revoke previously granted
marketing authorizations.
Securing FDA approval requires the submission of extensive preclinical and
clinical data and supporting information to the FDA for each indication to
establish a product candidate's safety and efficacy. The approval process takes
many years, requires the expenditure of substantial resources, involves post-
marketing surveillance and may involve ongoing requirements for post-marketing
studies. The FDA may also require post-marketing testing and surveillance to
monitor the effects of approved products or place conditions on any approvals
that could restrict the commercial applications of these products. Product
approvals may be withdrawn if compliance with regulatory standards is not
maintained or if problems occur following initial marketing. With respect to
patented products or technologies, delays imposed by the governmental approval
process may materially reduce the period during which we will have exclusive
rights to exploit them.
Preclinical studies involve laboratory evaluation of product characteristics
and animal studies to assess the initial efficacy and safety of the product.
The FDA under its Good Laboratory Practices regulations regulates preclinical
studies. Violations of these regulations can, in some cases, lead to
invalidation of the studies, requiring these studies to be replicated. The
results of the preclinical tests together with manufacturing information and
analytical data are submitted to the FDA as part of an Investigational New Drug
application, or an IND, which must be approved by the FDA before we can
commence clinical investigations in humans. Unless the FDA objects to an IND,
the IND will become effective 30 days following its receipt by the FDA.
Clinical trials involve the administration of the investigational product to
humans under the supervision of a qualified principal investigator. Clinical
trials must be conducted in accordance with Good Clinical Practice, or GCP,
under protocols submitted to the FDA as part of the IND. In addition, each
clinical trial must be approved and conducted under the auspices of an
Investigational Review Board, or IRB, and with patient informed consent. The
IRB will consider, among other things, ethical factors, the safety of human
subjects and the possibility of liability of the institution conducting the
trial.
Clinical trials are conducted in three sequential phases but the phases may
overlap. Phase I clinical trials may be performed in healthy human subjects or,
depending on the disease, in patients. The goal of the phase I clinical trial
is to establish initial data about the safety and tolerance of the product in
humans. In phase II clinical trials, in addition to safety, the efficacy of the
product is evaluated in limited patients with the target disease. Phase III
trials typically involve additional testing for safety and clinical efficacy in
expanded, large-scale, multi-center studies of patients with the target
disease.
All of our contract manufacturers and we are required to comply with the
applicable FDA current good manufacturing practice regulations. Good
manufacturing practice regulations include requirements relating to quality
control and quality assurance as well as the corresponding maintenance of
records and documentation. Manufacturing facilities are subject to inspection
by the FDA. These facilities must be approved before we can use them in
commercial manufacturing of our products.
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Outside the United States, our ability to market a product is contingent upon
receiving marketing authorization from the appropriate regulatory authorities.
The requirements governing the conduct of clinical trials, marketing
authorization, pricing and reimbursement vary widely from country to country.
At present, foreign marketing authorizations are applied for at a national
level, although within the European Union registration procedures are available
to companies wishing to market a product in more than one EU member state. If
the regulatory authority is satisfied that adequate evidence of safety, quality
and efficacy has been presented, a marketing authorization will be granted.
Manufacturing
We are using third party manufacturers to produce clinical supplies of TLK286
under the FDA's current Good Manufacturing Practices, or cGMP, regulations. We
are evaluating potential drug manufacturers to produce clinical supplies of
TLK199. In the insulin receptor activator program, we have developed
preparative routes to our lead compounds that would be suitable for their
commercial production.
We intend to continue to use third-party contract manufacturers or corporate
collaborators for the production of material for use in preclinical studies,
clinical trials, manufacture of future products and commercialization. The
manufacture of our potential products for preclinical and clinical trials and
commercial purposes is subject to cGMP regulations promulgated by the FDA and
to other applicable domestic and foreign regulations.
Employees
As of March 30, 2000, we had a workforce of 36 full-time employees, 12 of
whom hold PhD or MD degrees, or both, and eight of whom hold other advanced
degrees. Of our total workforce, 27 are engaged in research and development and
nine are engaged in business development, finance and administration. None of
our employees are represented by a collective bargaining agreement, nor have we
experienced work stoppages. We believe that our relations with our employees
are good.
Facilities
Our facilities consist of approximately 20,680 square feet of research and
office space located at 750 Gateway Boulevard in South San Francisco,
California, that is leased to us until December 31, 2002. We have the option to
renew this lease for one additional period of five years. We believe our
existing facilities are adequate to meet our requirements through the year
2005.
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Scientific and Clinical Advisors
We utilize scientists and physicians to advise us on scientific and medical
matters including medicinal and computational chemistry, biochemistry,
immunology, enzymology, molecular and cell biology, pharmacology and clinical
trials.
The following table lists our Scientific and Clinical Advisors:
<TABLE>
<CAPTION>
Name Title/Affiliation
---- -----------------
<C> <S>
Joseph R. Bertino, MD ........... Chairman, Molecular Pharmacology and
Therapeutics Program, Sloan-Kettering
Institute for Cancer Research, Memorial
Sloan-Kettering Cancer Center, New York
Perry J. Blackshear, MD, PhD..... Clinical Director, Office of Clinical
Research, National Institute of
Environmental Health Sciences, North
Carolina
Ronald H. Blum, MD............... Director, Cancer Center and Programs, Beth
Israel Medical Center, New York
Richard F. Borch, MD, PhD........ Eli Lilly Distinguished Professor of
Medicine, Head, Department of Medicinal
Chemistry and Molecular Pharmacology,
Lafayette Center for Medical Education,
Purdue University, Indiana
Michael J. Buchmeier, PhD........ Professor and Director, Emerging Virus
Research Center, Scripps Research Institute,
California
Fritz R. Buhler, Prof. Dr. Med... Vice-Chairman, International Biomedicine
Management Partners, Inc., Director,
European Center for Pharmaceutical Medicine,
University of Basel, Switzerland
M. Sheila Donnelly, MD........... Instructor of Medicine, Harvard Medical
School and Clinical Associate, Dana Farber
Cancer Center, Massachusetts
Jurgen Drews, Prof. Med. ........ Chairman, International Biomedicine
Partners, Inc., Switzerland
Peter D. Eisenberg, MD .......... Medical Director, Marin Cancer Institute,
San Rafael, California
Ira D. Goldfine, MD ............. Professor, University of California at San
Francisco, Director, Division of Diabetes
and Endocrine Research, Mount Zion Medical
Center of the University of California at
San Francisco
Jordan U. Gutterman, MD ......... Professor and Chairman, Department of
Clinical Immunology and Biological Therapy,
The University of Texas M.D. Anderson Cancer
Center
W. David Henner, MD PhD.......... Professor of Medicine and Pharmacology,
Oregon Health Sciences University
Lawrence M. Kauvar, PhD.......... Founder and President, Trellis
Bioinformatics, Inc.
Bengt Mannervik, PhD............. Professor, Department of Biochemistry,
Uppsala University, Sweden
Daria Mochly-Rosen, PhD.......... Associate Professor, Department of Molecular
Pharmacology, Stanford University School of
Medicine, California
John W. Sedat, PhD............... Professor of Biochemistry, Department of
Biochemistry and Biophysics, University of
California at San Francisco
David Sidransky, MD ............. Professor of Otolaryngology, Oncology,
Pathology and Cellular and Molecular
Medicine, Director, Head and Neck Cancer
Research Division, Johns Hopkins University,
Maryland
John A. Tainer, PhD.............. Member and Professor, Department of
Molecular Biology, Scripps Research
Institute, California
Kenneth D. Tew, PhD.............. Chairman of Pharmacology Department, Fox
Chase Cancer Center, Adjunct Professor
Pharmacology, University of Pennsylvania
Sabina K. Wallach, MD ........... Physician, Scripps Memorial Hospital,
California
Harel Weinstein, DSc ............ Professor and Chairman, Department of
Physiology and Biophysics, Mount Sinai
School of Medicine, Director, Institute for
Computational Biomedicine, Mount Sinai
School of Medicine
</TABLE>
Legal Proceedings
We are currently not a party to any legal proceedings.
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MANAGEMENT
- --------------------------------------------------------------------------------
Executive Officers, Directors and Key Personnel
The following table sets forth information regarding our executive officers,
directors and key personnel.
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
Executive Officers and
Directors
Michael M. Wick, MD, PhD.. 54 President, Chief Executive Officer and Chairman
Cynthia M. Butitta........ 45 Chief Financial Officer
Reinaldo F. Gomez, PhD.... 54 Vice-President, Corporate Alliances
David R. Bethune.......... 59 Director
Jean Deleage, PhD......... 59 Director
Jerrold L. Glick.......... 57 Director
David W. Martin, Jr., MD.. 59 Director
Stefan Ryser, PhD......... 40 Director
Key Personnel
Michael R. Kozlowski,
PhD...................... 46 Vice President, Biology Research
Steven R. Schow, PhD...... 50 Vice President, Chemistry Research
Hugo O. Villar, PhD....... 41 Vice President, Discovery Technologies
</TABLE>
Michael M. Wick, MD, PhD has served as our Chairman of the board of directors
since January 2000, as our Chief Executive Officer since July 1999 and as our
President since June 1998. Dr. Wick served as our Chief Operating Officer from
December 1997 until June 1998, and as our Executive Vice President, Research
and Development, from December 1997 until June 1998. He has been one of our
directors since December 1997. Prior to joining us in December 1997, Dr. Wick
was Senior Vice President of Research for CV Therapeutics, a public
biotechnology company, from May 1995 until May 1997 and continued as a
consultant until December 1997. Dr. Wick served as Executive Director of
oncology/immunology and clinical research at Lederle Laboratories, a division
of American Cyanamid, a pharmaceutical company, from September 1990 until May
1995, and also directed the Cynamid/Immunex joint oncology research program.
Dr. Wick began his career at Harvard Medical School, where he served as an
Associate Professor from July 1981 until June 1994 and Chief of the Melanoma
Clinic and Laboratory of Molecular Dermatological Oncology at the Dana Farber
Cancer Institute from September 1980 until September 1992. Dr. Wick holds a PhD
degree in chemistry from Harvard University and an MD degree from Harvard
Medical School.
Cynthia M. Butitta has served as our Chief Financial Officer since August
1998. Ms. Butitta also provides financial consulting services as a Partner in
Altair Capital Associates LLC, which she co-founded in November 1998, and
Butitta Consulting Services LLC, which she founded in September 1997. From
December 1995 until September 1997, Ms. Butitta was Vice President of Finance
and Administration and Chief Financial Officer for Connetics, Inc., a
biotechnology company. From June 1994 until December 1995, she was Vice
President of Finance and Administration and Chief Financial Officer for InSite
Vision, Inc., a biotechnology company. Ms. Butitta holds a BS degree in
business and accounting from Edgewood College in Madison, Wisconsin, and an MBA
degree in finance from the University of Wisconsin, Madison.
Reinaldo F. Gomez, PhD has served as our Vice President, Corporate Alliances
since January 1998. He served as our Vice President, Research and Development
from September 1996 until December 1997. From August 1995 to September 1996,
Dr. Gomez served as our Vice President, Project Management. Dr. Gomez served as
our Chief Executive Officer from July 1992 to August 1995. He served as our
President from May 1991 until August 1995 and as one of our directors from
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May 1991 until January 1997. Over a ten-year period prior to that, Dr. Gomez
held various research positions at Genentech, Inc., a biotechnology company,
including that of Vice President of Discovery Research. During his tenure at
Genentech, Dr. Gomez directed that company's major drug development effort for
tissue plasminogen activator (t-PA), which led to the filing of the application
for FDA marketing approval in 1986. He previously served on the faculty of the
Massachusetts Institute of Technology (MIT) as Associate Professor in Nutrition
and Food Science. Dr. Gomez received his BS and MS degrees in food science from
the University of Florida and his PhD in nutrition and food science from MIT.
David R. Bethune has served as one of our directors since December 1999. Mr.
Bethune has 34 years of experience in the pharmaceutical and biopharmaceutical
industries. Since February 2000, he has served as Chairman and Chief Executive
Officer of Atrix Laboratories, a pharmaceutical company, and became acting
Chief Executive Officer of Atrix in August 1999. He has also served as a
director of Atrix since April 1995. From July 1997 until October 1998, Mr.
Bethune was President and Chief Operating Officer of IVAX Corporation, a
pharmaceutical company. From March 1995 until June 1997, he served as President
and Chief Executive Officer for Aesgen, Inc., a pharmaceutical company. Mr.
Bethune has held various positions at American Cyanamid Company, a
pharmaceutical company, from February 1988 until February 1995. Mr. Bethune
also served as President of Operations and Vice President and General Manager
of U.S. Pharmaceuticals for G. D. Searle & Co., a pharmaceutical company, from
June 1984 until January 1988. Mr. Bethune is a director of St. Charles
Pharmaceutical Co., a pharmaceutical company, and the Female Health Company, a
company that sells female health products. Mr. Bethune holds an AB degree in
Accounting and Finance from Lenoir-Rhyne College and a masters degree in
Executive Management from Columbia University.
Jean Deleage, PhD has served as one of our directors since August 1994. Dr.
Deleage is a founder and Managing General Partner of Alta Partners, a venture
capital partnership investing in information technologies and life science
companies. From 1979 to 1996, Dr. Deleage was a Managing Partner of Burr, Egan,
Deleage & Co., a venture capital firm. Dr. Deleage was a founder of Sofinnova,
a venture capital organization in France, and Sofinnova, Inc., a U.S.
subsidiary of Sofinnova. Dr. Deleage is a director of Flamel Technologies S.A.,
a polymer engineering company and Aclara Biosciences, Inc., a biotechnology
company. In 1993, he was awarded the Ordre National du Merite and the Legion of
Honor from the French government. Dr. Deleage received a Baccalaureate in
France, an MS degree in electrical engineering from Ecole Superieure
d'Eletricite and a PhD in economics from the Sorbonne.
Jerrold L. Glick has served as one of our directors since 1988, as our
Chairman of the board from 1988 until November 1995, and as our Secretary from
December 1988 until November 1990. Mr. Glick has been a General Partner of
Columbia Group Limited, LLP, a real estate development company, since 1972. In
1991, Mr. Glick founded QualiCenters, Inc., a multi-state provider of dialysis
services and served as its secretary and director until 1997. He is a director
of Urban Ventures LLC, a real estate development company; director, Secretary
and Vice President of AML/APL, Inc., a clinical laboratory services company;
director and Secretary of RV Management Corp., a multi-state provider of
dialysis services; and director of Republic Financial Corporation, a financial
services company. Mr. Glick received a BS degree in finance from the University
of Southern California.
David W. Martin, Jr., MD has served as one of our directors since August
1997. In July 1997, Dr. Martin co-founded Eos Biotechnology, Inc., a
biotechnology company, and has been its President and Chief Executive Officer
since July 1997. From May 1995 until November 1996, he served as President and
Chief Executive Officer of Lynx Therapeutics, a company that develops
technology for measuring gene activities. From January 1994 until April 1995,
Dr. Martin held various positions at Chiron Therapeutics, a biotechnology
company. He was Executive Vice President of Research and
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<PAGE>
Development at The DuPont Merck Pharmaceutical Co., a pharmaceutical company,
from January 1991 until January 1994. From January 1983 until September 1990,
Dr. Martin served as the first Vice President of Research and Development of
Genentech, a biotechnology company. Dr. Martin is a director of Varian Medical
Systems, Inc., a spin-off of Varian Associates, Inc., a company that develops
and markets radiation equipment and software, and Cubist Pharmaceuticals, Inc.,
a company that discovers and develops anti-infective drugs. Dr. Martin holds an
MD degree from Duke University.
Stefan Ryser, PhD has served as one of our directors since September 1998.
Dr. Ryser has served as Chief Executive Officer, member and delegate of the
board of International Biomedicine Management Partners Inc., a company that
manages investments in biotechnology companies on behalf of International BM
Biomedicine Holdings Inc., since January 1998. From January 1989 until December
1997, Dr. Ryser held various positions at F. Hoffmann-La Roche Ltd. (Roche), a
pharmaceutical company, including Scientific Assistant to the President of
Global Research and Development, and was responsible for maintaining the
scientific liaison between Roche and Genentech. From January 1991 until
December 1997, Dr. Ryser served as a member of the Brussels-based senior
advisory group of EuropaBio, a European biotechnology organization. Dr. Ryser
is a director of Genaissance Pharmaceuticals, Inc., a genomics company; Arena
Pharmaceuticals, a biotechnology company, and Cytokinetics, Inc., a
biotechnology company. Dr. Ryser received a PhD degree in molecular biology
from the University of Basel.
Michael R. Kozlowski, PhD has served as our Vice President of Biology
Research since March 2000. He served as our Senior Director of Discovery
Biology from June 1998, and as our Director of Pharmacology since March 1998.
Prior to joining us, Dr. Kozlowski served as a Program Director and Director of
Assay Development and Screening at Geron Corporation, a biotechnology company,
from January 1994 until March 1998. Dr. Kozlowski was a Senior
Scientist/Principle Scientist at Bristol-Myers Squibb Co., a pharmaceutical
company, from June 1987 until December 1993. Dr. Kozlowski earned his BS in
biology from The California Institute of Technology in June 1976 and his PhD in
biology in March 1983 from the University of California at Irvine.
Steven R. Schow, PhD has served as our Vice President of Chemistry Research
since March 2000. He served as our Senior Director of Medicinal Chemistry from
March 1998 until March 2000. Prior to joining us, Dr. Schow served as a
Director of Medicinal Chemistry at CV Therapeutics, a biotechnology company,
from May 1995 to March 1998. He served as a Senior Group Leader at Lederle
Laboratories, a division of American Cyanamid, a pharmaceutical company, from
November 1991 until May 1995. Dr. Schow earned his PhD degree in organic
chemistry in October 1977 from the University of California at Los Angeles.
Hugo O. Villar, PhD has served as our Vice President, Discovery Technologies
since February 1998. Dr. Villar previously served as our Director of Chemistry
from May 1995 until February 1998, and as a Senior Scientist from October 1992
to May 1995. Prior to joining us, Dr. Villar served as a director of
computational pharmacology at Molecular Research Institute, a not-for-profit
research organization, from July 1989 until October 1992. He was also a
computational chemist at SRI International, a not-for-profit research
organization, from May 1988 until June 1989. Dr. Villar earned an MS degree in
December 1981 and PhD degree in December 1985 in chemistry from the Universidad
Nacional de La Plata, Argentina.
Our executive officers are appointed by our board of directors and serve
until their successors are elected or appointed. There are no family
relationships among any of our directors or executive officers. No director has
a contractual right to serve as a member of our board of directors.
42
<PAGE>
Board Committees
Audit Committee. Our audit committee, consisting of Dr. Martin and Messrs.
Bethune and Glick, reviews our internal accounting procedures and the services
provided by our independent auditors.
Compensation Committee. Our compensation committee reviews and recommends to
our board of directors the compensation and benefits of all our officers and
establishes and reviews general policies relating to compensation and benefits
of our employees. Our compensation committee currently consists of Drs. Deleage
and Ryser and Mr. Bethune. Mr. Glick served on our compensation committee from
November 1992 until March 2000. Mr. James Gower served on our compensation
committee from November 1992 until December 1999, when he retired from the
board.
Compensation of Directors
We do not provide cash compensation to members of our board of directors for
serving on our board of directors or for attendance at committee meetings.
Members of our board of directors are reimbursed for some expenses in
connection with attendance at board and committee meetings. In consideration
for services as directors, on December 17, 1999, we granted an option to
purchase 5,000 shares of common stock to Mr. Bethune and 2,500 shares of common
stock to each of Drs. Deleage, Martin and Ryser and Mr. Glick at an exercise
price of $1.60 per share. The $1.60 per share exercise price for these options
was equal to the fair market value of the common stock on the date of grant as
determined by our board of directors. Twenty-five percent of these options vest
immediately upon grant and the remaining shares vest in equal installments over
the next forty-eight months.
Executive Compensation
The following table sets forth information concerning the compensation that
we paid during 1999 to our Chief Executive Officer and each of the three other
executive officers during 1999. There were no other executive officers during
this period. All option grants were made under our 1996 Stock Option Plan.
Summary compensation
<TABLE>
<CAPTION>
Long Term
Annual Compensation
Compensation Securities
-------------- Underlying All Other
Name and Principal Position Salary Bonus Options Compensation
--------------------------- -------- ----- ------------ ------------
<S> <C> <C> <C> <C>
Michael M. Wick....................... $270,000 $-- 150,000 --
President, Chief Executive Officer
and Chairman(1)
Clifford Orent........................ 229,450 -- -- --
Vice-Chairman(2)
Reinaldo F. Gomez..................... 209,467 -- -- --
Vice-President, Corporate Alliances
Cynthia M. Butitta.................... 120,000 -- -- --
Chief Financial Officer
</TABLE>
- -----------------
(1) Dr. Wick was promoted to Chief Executive Officer in July 1999 and Chairman
in January 2000.
(2) Mr. Orent served as Chairman and Chief Executive Officer through June 1999
and Chairman through December 1999. Mr. Orent retired from Telik in March
2000.
43
<PAGE>
The following table sets forth summary information regarding the option
grants made to our Chief Executive Officer and each of our three other
executive officers during 1999. Options granted to purchase shares of our
common stock under our 1996 Stock Option Plan generally vest over a four-year
period. Twenty-five percent of the initial option grant vests on the one year
anniversary of employment and the remainder vests in a series of equal monthly
installments beginning on the one year anniversary of employment and continuing
over the next three years of service. Subsequent options granted generally vest
according to the same schedule. The exercise price per share is equal to the
fair market value of our common stock on the date of grant as determined by our
board of directors. The percentage of total options was calculated based on
options to purchase an aggregate of 246,050 shares of common stock granted to
employees under our stock option plan in 1999. The potential realizable value
was calculated based on the ten-year term of the options and assumed rates of
stock appreciation of 5% and 10%, compounded annually from the date the options
were granted to their expiration date based on the fair market value of the
common stock on the date of grant.
Option grants in 1999
<TABLE>
<CAPTION>
Individual grants
--------------------------------------------
Potential
Realizable
Value at
Assumed Annual
Rates of Stock
Number of Percentage of Price
Securities Total Options Appreciation
Underlying Granted to for Option Term
Options Employees in Exercise Expiration ---------------
Granted Fiscal Year Price Date 5% ($) 10% ($)
---------- ------------- -------- ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Michael M. Wick......... 150,000 61.0% $1.60 07/30/09 150,935 444,748
President, Chief
Executive Officer and
Chairman
Clifford Orent.......... -- -- -- -- -- --
Vice-Chairman(1)
Reinaldo F. Gomez....... -- -- -- -- -- --
Vice-President,
Corporate Alliances
Cynthia M. Butitta...... -- -- -- -- -- --
Chief Financial Officer
</TABLE>
- -----------------
(1) Mr. Orent served as Chairman and Chief Executive Officer through June 1999
and Chairman through December 1999. Mr. Orent retired from Telik in March
2000.
44
<PAGE>
The following table sets forth summary information regarding the number and
value of options held as of December 31, 1999 by our Chief Executive Officer
and each of our three executive officers. These executive officers did not
exercise any options in 1999. Amounts shown in the value of unexercised in-the-
money options at December 31, 1999 column are based on an initial public
offering price of $ per share without taking into account any taxes that may
be payable in connection with the transaction, multiplied by the number of
shares underlying the option, less the aggregate exercise price payable for
these shares.
1999 Option Values
<TABLE>
<CAPTION>
Value of
Unexercised
Number of In-The-Money
Securities Underlying Options at
Unexercised Options at December 31,
December 31, 1999 1999
---------------------- ---------------
Name Vested Unvested Vested Unvested
---- ---------- ----------- ------ --------
<S> <C> <C> <C> <C>
Michael M. Wick ........................ 220,875 478,125
President, Chief Executive Officer and
Chairman
Clifford Orent.......................... 403,803 202,447
Vice-Chairman(1)
Reinaldo F. Gomez ...................... 142,396 88,021
Vice President, Corporate Alliances
Cynthia M. Butitta...................... 96,000 --
Chief Financial Officer
</TABLE>
- -----------------
(1) Mr. Orent served as Chairman and Chief Executive Officer through June 1999
and Chairman through December 1999. Mr. Orent retired from Telik in March
2000.
Benefit Plans
2000 Equity Incentive Plan
We adopted our 2000 Equity Incentive Plan in March 2000 to replace our 1988
Stock Option Plan and our 1996 Stock Option Plan.
Share Reserve. We have reserved a total of 2,000,000 shares of our common
stock for issuance under the incentive plan. On each January 1, starting with
January 1, 2001 continuing through and including January 1, 2010, the share
reserve automatically will be increased by a number of shares equal to the
least of:
. 5% of our then outstanding shares of common stock;
. 1,500,000 shares; or
. a number determined by our board.
If the recipient of a stock award does not purchase the shares subject to
such stock award before the stock award expires or otherwise terminates, the
shares that are not purchased will again become available for issuance under
the incentive plan.
Administration. The board administers the incentive plan unless it delegates
administration to a committee. The board has the authority to construe,
interpret and amend the incentive plan as well as to determine:
. who will receive awards under the incentive plan;
45
<PAGE>
. the dates on which such awards will be granted;
. the number of shares subject to the awards;
. the vesting and exercisability of the awards;
. the exercise price of the awards;
. the type of consideration that may be used to satisfy the exercise price;
and
. the other terms of the awards.
Eligibility. The board may grant incentive stock options that qualify under
Section 422 of the Internal Revenue Code to our employees and to the employees
of our affiliates. The board also may grant nonstatutory stock options, stock
bonuses and restricted stock purchase awards to our employees, directors and
consultants as well as to the employees, directors and consultants of our
affiliates.
Limits on Option Grants. There are limits on the number of shares that the
board may grant under an option. No employee may receive incentive stock
options that exceed the $100,000 per year limitation set forth in Section
422(d) of the Internal Revenue Code. For this purpose, the value of incentive
stock options is determined based upon the fair market value of the common
stock underlying such options on the date of grant.
Option Terms. The board may grant incentive stock options with an exercise
price of 100% or more of the fair market value of a share of our common stock
on the grant date. The board may grant nonstatutory stock options with an
exercise price as low as 85% of the fair market value of a share on the grant
date. Options may have a term of up to 10 years. Options may, but need not,
vest in installments according to a schedule established on the grant date. The
board, however, may accelerate the vesting of such options.
Terms of Other Stock Awards. The board determines the purchase price of other
stock awards, which may not be less than 85% of the fair market value of our
common stock on the grant date. However, the board may award stock bonuses in
consideration of past services without a cash purchase price. Shares that we
sell or award under the incentive plan may, but need not be, restricted and
subject to a repurchase option in our favor in accordance with a vesting
schedule that the board determines. The board, however, may accelerate the
vesting of such awards.
Stock Awards Granted. No stock options or other awards have been issued under
the incentive plan.
Plan Termination. The incentive plan will terminate in March 2010 unless the
board terminates it prior to that time.
1988 Stock Option Plan and 1996 Stock Option Plan
Our 1988 and 1996 Stock Option Plans will terminate as of the effective date
of this offering, though the termination will have no effect on the options
that are outstanding under these plans. No new stock options will be granted
under these plans after the completion of this offering. Generally, the
exercise price of the options granted under these plans is equal to the fair
market value on the date of grant as determined by the board.
As of March 23, 2000, we have granted incentive stock options and
nonstatutory stock options to purchase an aggregate of 4,648,182 shares under
the 1988 and 1996 Stock Option Plans and outside the plans; issued an aggregate
of 281,842 shares upon the exercise of options; and options to purchase
3,096,518 shares at a weighted average exercise price of $1.40 were
outstanding.
46
<PAGE>
2000 Non-Employee Directors' Stock Option Plan
We adopted the 2000 Non-Employee Directors' Stock Option Plan in March 2000.
The Directors' Plan will become effective on the effective date of this
offering. The Directors' Plan provides for the automatic grant to our non-
employee directors of options to purchase shares of our common stock.
Share Reserve. We have reserved a total of 300,000 shares of our common stock
for issuance under the Directors' Plan. If an optionholder does not purchase
the shares subject to such option before the option expires or otherwise
terminates, the shares that are not purchased again become available for
issuance under the Directors' Plan.
Administration. The board administers the Directors' Plan unless it delegates
administration to a committee. The board has the authority to construe,
interpret and amend the Directors' Plan, but the Directors' Plan specifies the
essential terms of the options, including:
. who will receive options under the directors' plan;
. the dates on which such options will be granted;
. the number of shares subject to the options;
. the vesting schedule applicable to the options;
. the exercise price of the options; and
. the type of consideration that may be used to satisfy the exercise price.
Eligibility. Each non-employee director who is serving on the effective date
of this offering will automatically be granted an option to purchase 20,000
shares of common stock. Each person who is elected or appointed to be a non-
employee director for the first time after the effective date of this offering
will be granted an option to purchase 20,000 shares of common stock upon such
election or appointment. In addition, each non-employee director who continues
to serve as a non-employee director automatically will be granted an option to
purchase 5,000 shares of common stock on the day following each annual meeting
of our stockholders. The number of shares subject to the grants to be made
following each annual meeting will be pro-rated for any non-employee director
who has not continuously served as a director for the entire 12-month period
prior to the date of grant. Twenty-five percent of the shares subject to the
options will vest on the first anniversary of the grant date and the remainder
of shares will vest in equal monthly installments over the next three years.
The vesting of each option will cease on the date the non-employee director
holding such option ceases to provide services (whether as a director, employee
or consultant) to us or one of our affiliates.
Option Terms. Options granted under the Directors' Plan will have an exercise
price equal to 100% of the fair market value of the common stock on the grant
date and a term of 10 years. As long as a non-employee director continues to
serve with us or with one of our affiliates, whether in the capacity of a
director, an employee or a consultant, the non-employee director's option will
continue. Options will terminate three months after the non-employee director's
service with the company and its affiliates terminates. However, if such
termination is due to the non-employee director's disability, the exercise
period will be extended to 12 months. If such termination is due to the non-
employee director's death or if the non-employee director dies within three
months after his or her service terminates, the exercise period will be
extended to 18 months following death.
Options Issued. Each of our directors will receive an option to purchase
20,000 shares of common stock at the initial public offering price.
Plan Termination. The Directors' Plan will terminate in March 2010 unless the
board terminates it prior to that time.
47
<PAGE>
2000 Employee Stock Purchase Plan
We adopted the 2000 Employee Stock Purchase Plan in March 2000.
Share Reserve. We have authorized the issuance of 250,000 shares of our
common stock pursuant to purchase rights granted to eligible employees under
the Purchase Plan. On each January 1, starting with January 1, 2001 and
continuing through January 1, 2010, the share reserve will automatically be
increased by a number of shares equal to the lesser of:
. 1% of our then outstanding shares of common stock;
. 150,000 shares; or
. a number determined by our board of directors.
Eligibility. The Purchase Plan is intended to qualify as an employee stock
purchase plan within the meaning of Section 423 of the Internal Revenue Code.
The Purchase Plan provides a means by which eligible employees may purchase our
common stock through payroll deductions. We implement the Purchase Plan by
offerings of purchase rights to eligible employees. Generally, all of our full-
time employees and full-time employees of our affiliates incorporated in the
United States may participate in offerings under the Purchase Plan.
Administration. Under the Purchase Plan, the board may specify offerings of
up to 27 months. Unless the board otherwise determines, common stock will be
purchased for accounts of participating employees at a price per share equal to
the lower of:
. 85% of the fair market value of a share on the first day of the offering;
or
. 85% of the fair market value of a share on the purchase date.
The first offering under this plan will begin on the effective date of this
offering. The fair market value of the shares on the first date of the first
offering under this plan will be the initial public offering price.
The board may provide that employees who become eligible to participate after
the offering period begins nevertheless may enroll in the offering. These
employees will purchase our stock at the lower of:
. 85% of the fair market value of a share on the day they began
participating in the purchase plan; or
. 85% of the fair market value of a share on the purchase date.
If authorized by the board, participating employees may authorize payroll
deductions of up to 15% of their base compensation for the purchase of stock
under the Purchase Plan.
Other Provisions. The board may grant eligible employees purchase rights
under the Purchase Plan only if the purchase rights, together with any other
purchase rights granted under other employee stock purchase plans established
by us or by our affiliates, if any, do not permit the employee's rights to
purchase our stock to accrue at a rate which exceeds $25,000 of fair market
value of our stock for each calendar year in which the purchase rights are
outstanding.
Description of 401(k) Plan
We maintain a retirement and deferred savings plan for our employees. The
retirement and deferred savings plan is intended to qualify as a tax-qualified
plan under Section 401 of the Internal Revenue Code. The retirement and
deferred savings plan provides that each participant may contribute up to 20%
of his or her pre-tax compensation (up to a statutory limit, which is $10,500
in
48
<PAGE>
calendar year 2000). Under the plan, each employee is fully vested in his or
her deferred salary contributions. Employee contributions are held and invested
by the plan's trustee. The retirement and deferred savings plan also permits us
to make discretionary contributions, subject to established limits and a
vesting schedule. To date, we have not made any discretionary contributions to
the retirement and deferred savings plan on behalf of participating employees.
Employment Agreements and Termination of Employment Agreements
We entered into an employment agreement with Michael M. Wick in August 1999
upon his promotion to the position of Chief Executive Officer. In December
1999, Dr. Wick was elected Chairman of the board which became effective in
January 2000. Either Telik or Dr. Wick may terminate his employment at any time
for any reason. In the event that Dr. Wick is terminated without cause, he is
entitled to receive as severance, continued payment of his base salary and
health care benefits for twelve months. The monthly vesting of stock options
will also continue for the same twelve months.
We entered into an employment agreement with Reinaldo F. Gomez in September
1999. His agreement with us terminates on August 31, 2000, unless extended by
mutual agreement. In the event that Dr. Gomez is terminated without cause any
time before August 31, 2000, he will be entitled to severance equal to the
amount of his base salary and continue to receive health care benefits up to a
three-month period. Either Telik or Dr. Gomez may terminate his employment at
any time for any reason.
In July 1998, we entered into an employment agreement with Cynthia M.
Butitta, our Chief Financial Officer. Ms. Butitta serves us in a part-time
capacity. Ms. Butitta is paid an annual base salary of $120,000 and was granted
an option to purchase 96,000 shares of our common stock at an exercise price of
$1.60 per share. As of November 1999, all such options were fully vested.
Either Telik or Ms. Butitta may terminate her employment at any time. There are
no severance provisions.
49
<PAGE>
RELATED PARTY TRANSACTIONS
- --------------------------------------------------------------------------------
Sale of Securities
Since January 1997 through March 31, 2000, we have issued and sold the
following securities in private placement transactions:
. 107,498 shares of Series I preferred stock for an aggregate price of
$5,374,900 in September 1997;
. 210,000 shares of Series J preferred stock for an aggregate price of
$10,500,000 in September 1998 and October 1998; and
. 1,166,667 shares of Series K preferred stock for an aggregate price of
$7,000,000 in March 2000.
The following table sets forth the shares of common stock issuable upon
conversion of preferred stock purchased by the holders of more than 5% of our
outstanding stock and their affiliates. No executive officer or director
purchased any shares, except Drs. Deleage and Ryser, who are affiliated with
Alta V Management Partners, L.P. and International BM Biomedicine Holdings AG,
respectively.
<TABLE>
<CAPTION>
Shares of common stock
issuable upon conversion of:
-----------------------------
Series I Series J Series K
Executive officers, directors and Preferred Preferred Preferred Total
5% Stockholders Stock Stock Stock Consideration
- --------------------------------- --------- --------- --------- -------------
<S> <C> <C> <C> <C>
Sanwa Kagaku Kenkyusho Co., Ltd... 714,285 1,190,476 $8,000,000
Entities Affiliated with Alta V
Management Partners, L.P......... 149,999 833,333 $5,630,000
Entities Affiliated with Alpha
Venture Partners III............. 23,809 $ 100,000
Entities Affiliated with Delphi
Management Partners II, L.P...... 107,142 $ 450,000
Entities Affiliated with Weiss,
Peck & Greer Venture Partners II,
L.P.............................. 135,714 $ 570,000
Entities Affiliated with Oxford
Bioscience Management Corp....... 114,285 $ 480,000
Entities Affiliated with Advent
International Corporation........ 164,285 $ 690,000
International BM Biomedicine
Holdings AG...................... 1,309,523 166,667 $6,500,000
</TABLE>
We have entered into an amended and restated registration rights agreement
with each of the purchasers of preferred stock set forth above, pursuant to
which these and other stockholders will have registration rights with respect
to their shares of common stock issuable upon conversion of their preferred
stock following this offering.
For a description of our collaboration agreements with Sanwa please refer to
"Business--Collaborative relationships" section. In addition to the purchases
of preferred stock noted in the above table, in December 1996, Sanwa purchased
60,000 shares of Series H preferred stock at the purchase price of $50 per
share, convertible into 540,540 shares of common stock.
Since October 1998, Dr. Gail L. Brown has served as a consultant to us on
matters involving the clinical development of our products. Dr. Brown is the
spouse of Dr. Wick, our President, Chief Executive Officer and Chairman. From
January 1, 1999 through December 31, 1999, we have paid Dr. Brown an aggregate
of $107,875 for professional services to Telik and reimbursed her $10,309 for
expenses.
We have entered into indemnification agreements with our directors and
certain officers for the indemnification and advancement of expenses to these
persons to the fullest extent permitted by law. We also intend to enter into
those agreements with our future directors and officers.
50
<PAGE>
PRINCIPAL STOCKHOLDERS
- --------------------------------------------------------------------------------
The following table sets forth information with respect to the beneficial
ownership of our common stock as of December 31, 1999 by:
. each person or group of affiliated persons who is known by us to own
beneficially 5% or more of our common stock;
. each of our directors and executive officers; and
. all of our directors and executive officers as a group.
Unless otherwise indicated, the persons listed below have sole voting and
investment power with respect to shares of our common stock shown as
beneficially owned by them, subject to community property laws where
applicable. Percentage of beneficial ownership prior to the offering is based
on 16,048,542 shares of common stock outstanding as of December 31, 1999, after
giving effect to issuances, exercises and conversions referred to in the first
paragraph following the table on "The offering". In accordance with the rules
of the SEC, the amounts assume the exercise or conversion of all options that
are exercisable within 60 days after December 31, 1999. The percentages of
beneficial ownership assume no exercise of the underwriters' over-allotment
option. Except as otherwise noted, the address of each person listed is c/o
Telik, Inc., 750 Gateway Boulevard, South San Francisco, CA 94080.
<TABLE>
<CAPTION>
Percent
Beneficially
Number of Owned
Shares -----------------
Beneficially Before After
Name and Address of Beneficial Owner Owned Offering Offering
- ------------------------------------ ------------ -------- --------
<S> <C> <C> <C>
Five percent stockholders
Sanwa Kagaku Kenkyusho Co., Ltd. ......... 2,445,301 15.2%
International Division
35 Higashi-ku
Nagoya 461
Japan
International BM Biomedicine Holdings 1,476,190 9.2
AG(1) ...................................
Bank Julius Baer & Co., Ltd.
c/o Brown Brothers Harriman & Co.
59 Wall Street
New York, NY 10005
Alta V Management Partners, L.P.(2) ...... 2,027,773 12.6
One Embarcadero Center
Suite 170
San Francisco, CA 94111
Advent International Corporation(3)....... 1,199,555 7.5
101 Federal Street
Boston, MA 20110
Weiss, Peck & Greer Venture Partners II, 1,089,020 6.8
L.P.(4)..................................
555 California Street
San Francisco, CA 94104
Delphi Management Partners II, L.P.(5) ... 874,996 5.4
3000 Sand Hill Road
Building 1, Suite 135
Menlo Park, CA 94025
</TABLE>
51
<PAGE>
<TABLE>
<CAPTION>
Percent Beneficially
Number of Owned
Shares ------------------------
Beneficially Before After
Name and Address of Beneficial Owner Owned Offering Offering
- ------------------------------------ ------------ ---------- ----------
<S> <C> <C> <C>
Oxford Bioscience Management Corp.(6).. 867,814 5.4%
650 Town Center Drive
Suite 810
Costa Mesa, CA 92626
Alpha Venture Partners III............. 769,840 4.8
545 Middlefield Road
Suite 170
Menlo Park, CA 94025
Directors and executive officers
Michael M. Wick(7)..................... 244,792 1.5
Stefan Ryser (1)....................... 1,476,190 9.2
Jean Deleage (2)....................... 2,038,462 12.7
Jerrold L. Glick (8)................... 129,027 *
David W. Martin, Jr.(9)................ 7,474 *
David Bethune (9)...................... 1,406 *
Reinaldo Gomez (10).................... 263,592 1.6
Cynthia M. Butitta (9)................. 96,000 *
All directors and officers as a group
(11) (8 persons)...................... 4,256,943 25.7
</TABLE>
- -----------------
* Represents beneficial ownership of less than 1%.
(1) Stefan Ryser, PhD, a Telik director, possesses voting and investment power
with respect to the shares shown as beneficially owned by International BM
Biomedicine Holdings. Shares shown as beneficially owned by Dr. Ryser
include these shares. Dr. Ryser disclaims beneficial ownership of these
shares.
(2) Shares shown as beneficially owned by Alta V Management Partners are held
by entities of which it is the general partner and are also included in
the shares shown as beneficially owned by Jean Deleage, a Telik director
and a general partner of Alta V Management Partners. Dr. Deleage disclaims
beneficial ownership of these shares, except for the portion of these
shares attributable to his partnership interest. Shares shown as
beneficially owned by Dr. Deleage also include 10,689 shares issuable to
him upon exercise of options exercisable within 60 days of December 31,
1999.
(3) Held by entities managed by Advent International. Includes 7,500 shares
issuable upon exercise of options exercisable within 60 days of December
31, 1999.
(4) Held by entities of which Weiss, Peck and Greer Ventures Partners is the
general partner or adviser. Includes 20,772 shares issuable upon exercise
of options exercisable within 60 days of December 31, 1999.
(5) Held by entities of which Delphi Management Partners is the general
partner.
(6) Held by Oxford Bioscience Management or entities of which it is the
general partner. Includes 5,000 shares issuable to it upon exercise of
options exercisable within 60 days of December 31, 1999.
(7) Includes 244,792 shares issuable to Dr. Wick pursuant to options
exercisable within 60 days of December 31, 1999.
(8) Held by Mr. Glick, who is a Telik director, entities which he may be
deemed to control and members of his family. Includes 17,591 shares
issuable to Mr. Glick upon exercise of options exercisable within 60 days
of December 31, 1999.
(9) Represents shares issuable upon exercise of options exercisable within 60
days of December 31, 1999.
(10) Held by Dr. Gomez, who is Vice President, Corporate Alliances of Telik, by
him and his spouse as trustees of a family trust and his minor child who
resides with him. Includes 151,510 shares issuable to Dr. Gomez upon
exercise of options exercisable within 60 days of December 31, 1999.
(11) Includes 517,773 shares issuable pursuant to options exercisable within 60
days of December 31, 1999.
52
<PAGE>
DESCRIPTION OF CAPITAL STOCK
- --------------------------------------------------------------------------------
Upon the closing of this offering and the filing of our amended and restated
certificate of incorporation, our authorized capital stock will consist of
100,000,000 shares of common stock, $0.01 par value, and 5,000,000 shares of
preferred stock, $0.01 par value.
Common Stock
As of March 31, 2000, there were 16,013,983 shares of common stock
outstanding that were held of record by approximately 190 stockholders, after
giving effect to the conversion of our then outstanding preferred stock into
common stock which will occur at the closing of this offering. There will be
shares of common stock outstanding after this offering. This amount excludes
shares issuable upon exercise of the options described in the second paragraph
after the table under "The offering."
The holders of common stock are entitled to one vote per share on all matters
submitted to a vote of our stockholders and do not have cumulative voting
rights. Accordingly, holders of a majority of the shares of common stock
entitled to vote in any election of directors may elect all of the directors
standing for election. Subject to preferences that may be applicable to any
preferred stock outstanding at the time, the holders of outstanding shares of
common stock are entitled to receive ratably any dividends out of assets
legally available as our board of directors may from time to time determine.
Upon liquidation, dissolution or winding up of Telik, holders of our common
stock are entitled to share ratably in all assets remaining after payment of
liabilities and the liquidation preference of any then outstanding shares of
preferred stock. Holders of common stock have no preemptive or conversion
rights or other subscription rights. There are no redemption or sinking fund
provisions applicable to the common stock. All outstanding shares of common
stock are fully paid and nonassessable.
Preferred Stock
Pursuant to our amended and restated certificate of incorporation, our board
of directors will have the authority, without further action by the
stockholders, to issue up to 5,000,000 shares of preferred stock, in one or
more series. Our board shall determine the rights, preferences, privileges and
restrictions of the preferred stock, including dividend rights, conversion
rights, voting rights, terms of redemption, liquidation preferences, sinking
fund terms and the number of shares constituting any series or the designation
of any series. The issuance of preferred stock could adversely affect the
voting power of holders of common stock, and the likelihood that holders of
preferred stock will receive dividend payments and payments upon liquidation
may have the effect of delaying, deferring or preventing a change in control of
Telik, which could depress the market price of our common stock. We have no
present plan to issue any shares of preferred stock.
Warrants
We have outstanding warrants for the purchase of preferred stock which is
convertible into an aggregate of 34,559 shares of common stock at an effective
weighted average purchase price of $5.28 per share of common stock. These
warrants will expire, unless exercised, prior to the closing of this offering.
Registration Rights of Stockholders
Under the terms of an agreement with some of our stockholders, after the
closing of this offering the holders of 13,305,117 shares of common stock will
be entitled to demand that we
53
<PAGE>
register their shares under the Securities Act. At any time beginning six
months after the closing of this offering, and on no more than two occasions,
the holders of at least 50% of these shares can demand that we file a
registration statement covering their shares. Also, if we propose to register
any shares of common stock, these stockholders are entitled to include their
shares in the registration. At any time after we become eligible to file a
registration statement on Form S-3, the holders of these shares can demand that
we file a registration statement on Form S-3 covering their shares. The
agreement contains some limitations, including the right of the underwriters of
an offering to limit the number of shares of these stockholders to be included
in the registration.
Anti-Takeover Provisions of Delaware Law and Our Charter
We are subject to Section 203 of the Delaware General Corporation Law. In
general, the statute prohibits a publicly held Delaware corporation from
engaging in any business combination with any interested stockholder for a
period of three years following the date that the stockholder became an
interested stockholder unless:
. prior to the date, our board of directors approved either the business
combination or the transaction that resulted in the stockholder becoming
an interested stockholder;
. upon consummation of the transaction that resulted in the stockholder's
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 those shares owned by persons who
are directors and also officers, and by employee stock plans in which
shares held subject to the plan will be tendered in a tender or exchange
offer; or
. on or subsequent to this date, the business combination is approved by
our 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 two-thirds of the outstanding voting stock that is not owned by the
interested stockholder.
In general, Section 203 defines an interested stockholder as any entity or
person beneficially owning 15% or more of the outstanding voting stock of the
corporation and any entity or person affiliated with or controlling or
controlled by the entity or person.
Our amended and restated certificate of incorporation requires that upon
completion of the offering, any action required or permitted to be taken by our
stockholders must be effected at a duly called annual or special meeting of
stockholders and may not be effected by a consent in writing. Additionally, our
certificate of incorporation:
. substantially limits the use of cumulative voting in the election of
directors;
. provides that the authorized number of directors may be changed only by
resolution of our board of directors; and
. authorizes our board of directors to issue blank check preferred stock to
increase the amount of outstanding shares.
Our amended and restated bylaws provide that candidates for director may be
nominated only by our board of directors or by a stockholder who gives written
notice to us no later than 60 days prior nor earlier than 90 days prior to the
first anniversary of the last annual meeting of stockholders. The authorized
number of directors is fixed in accordance with our certificate of
incorporation. Our board of directors currently consists of six members who
will be elected at each annual meeting of our stockholders. Our board of
directors may appoint new directors to fill vacancies or newly created
directorships. Our bylaws also limit who may call a special meeting of
stockholders.
54
<PAGE>
Delaware law and these charter provisions may have the effect of deterring
hostile takeovers or delaying changes in control of our management, which could
depress the market price of our common stock.
Transfer Agent and Registrar
The transfer agent and registrar for the common stock is Norwest Bank
Minnesota, N.A.
55
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
- --------------------------------------------------------------------------------
Prior to this offering, there has been no public market for our common stock.
Future sales of substantial amounts of our common stock in the public market
could adversely affect prevailing market prices. Furthermore, since no shares
will be available for sale shortly after this offering because of contractual
and legal restrictions on resale as described below, sales of substantial
amounts of our common stock in the public market after these restrictions lapse
could adversely affect the prevailing market price and our ability to raise
equity capital in the future.
Upon completion of this offering, we will have outstanding an aggregate of
shares of common stock. The shares sold in this offering will be freely
tradable, unless these shares are purchased by affiliates. Substantially all of
the remaining shares are subject to a lock up agreement prohibiting their sale,
without the consent of Warburg Dillon Read LLC, until 180 days after completion
of this offering. After the lock up expires all of these shares will be freely
tradable except for 9,937,206 shares owned by affiliates and 1,166,667 shares
that will be restricted and not eligible for sale until March 31, 2001. The
shares owned by affiliates, and after March 31, 2001 the remaining restricted
shares, may be sold subject to volume limitations and other restrictions
contained in Rule 144. Under Rule 144 an affiliate or a holder of restricted
shares is entitled to sell within any three-month period a number of shares
that does not exceed the greater of:
. 1% of the number of shares of our common stock then outstanding, which
will equal approximately shares immediately after this offering; or
. the average weekly trading volume of our common stock on the Nasdaq
National Market during the four calendar weeks preceding the filing of a
notice on Form 144 with respect to the sale.
Stock Options
Under Rule 701 of the Securities Act as currently in effect, any of our
employees, consultants or advisors, other than affiliates, who purchases or
receives shares from us in connection with a compensatory stock purchase plan
or option plan or other written agreement will be eligible to resell their
shares beginning 90 days after the date of this prospectus, subject only to the
manner of sale provisions of Rule 144, and by affiliates under Rule 144 without
compliance with its holding period requirements. Following this offering, we
intend to file a registration statement on Form S-8 under the Securities Act
covering 5,646,518 shares of common stock subject to outstanding options and
reserved for issuance under our 2000 Equity Incentive Plan, 2000 Employee Stock
Purchase Plan and 2000 Non-Employee Directors' Stock Option Plan that will
become effective upon filing. Accordingly, shares registered under that
registration statement will, subject to Rule 144 volume limitations applicable
to affiliates, be available for sale in the open market after the filing,
except those shares subject to the lock up agreements.
56
<PAGE>
UNDERWRITING
- --------------------------------------------------------------------------------
Telik and the underwriters for the offering have entered into an underwriting
agreement concerning the shares being offered. Subject to conditions, each
underwriter has severally agreed to purchase the number of shares indicated in
the following table. Warburg Dillon Read LLC, Chase Securities Inc. and Legg
Mason Wood Walker, Incorporated are the representatives of the underwriters.
<TABLE>
<CAPTION>
Number
of
Underwriters Shares
------------ ------
<S> <C>
Warburg Dillon Read LLC..................................................
Chase Securities Inc.....................................................
Legg Mason Wood Walker, Incorporated.....................................
----
Total..................................................................
====
</TABLE>
If the underwriters sell more shares than the total number set forth in the
table above, the underwriters have a 30-day option to buy from us up to an
additional shares at the initial public offering price less the
underwriting discounts and commissions to cover these sales. 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 we will pay to the underwriters. These amounts are shown assuming
both no exercise and full exercise of the underwriters' option to purchase up
to an additional shares.
<TABLE>
<CAPTION>
No exercise Full exercise
----------- -------------
<S> <C> <C>
Per share............................................. $ $
Total............................................... $ $
</TABLE>
We estimate that the total expenses of the offering payable by us, excluding
underwriting discounts and commissions, will be approximately $ .
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 representative may change the offering price and the
other selling terms.
The underwriters have informed us that they do not expect discretionary sales
to exceed % of the shares of common stock to be offered.
The underwriters have reserved for sale, at the initial public offering
price, up to shares of our common stock being offered for sale to our
customers and business partners. At the discretion of our management, other
parties, including our employees, may participate in the reserved share
program. The number of shares available for sale to the general public in the
offering will be reduced to the extent these persons purchase reserved shares.
Any reserved shares not so purchased will be offered by the underwriters to the
general public on the same terms as the other shares.
57
<PAGE>
Telik, its directors, officers, stockholders and optionholders have agreed
with the underwriters not to offer, sell, contract to sell, hedge or otherwise
dispose of, directly or indirectly, or file with the SEC, a registration
statement under the Securities Act relating to any of its 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, without the prior written consent of
Warburg Dillon Read LLC.
Prior to this offering, there has been no public market for our common stock.
The initial public offering price will be negotiated by us and the
representatives. The principal factors to be considered in determining the
initial public offering price include:
. the information set forth in this prospectus and otherwise available to
the representatives;
. the history and the prospects for the industry in which we compete;
. the ability of our management;
. our prospects for future earnings, the present state of our development
and our current financial position;
. the general condition of the securities markets at the time of this
offering; and
. the recent market prices of, and the demand for, publicly traded common
stock of generally comparable companies.
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 also may 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 that underwriter in stabilizing or short covering
transactions.
These activities by the underwriters may stabilize, maintain or otherwise
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.
We have agreed to indemnify the several underwriters against some
liabilities, including liabilities under the Securities Act of 1933 and to
contribute to payments that the underwriters may be required to make in respect
thereof.
VALIDITY OF THE SHARES
- --------------------------------------------------------------------------------
The validity of the shares of common stock in this offering will be passed
upon for us by Cooley Godward LLP, San Francisco, California, and for the
underwriters by Sullivan & Cromwell, Washington, D.C.
58
<PAGE>
EXPERTS
- --------------------------------------------------------------------------------
Ernst & Young LLP, independent auditors, have audited our financial
statements at December 31, 1998 and 1999, and for each of the three years in
the period ended December 31, 1999, as set forth in their report. We have
included our financial statements in this prospectus and elsewhere in the
registration statement in reliance on Ernst & Young LLP's report, given on
their authority as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
- --------------------------------------------------------------------------------
We have filed with the Securities and Exchange Commission (the "SEC") a
registration statement on Form S-1 under the Securities Act with respect to the
shares of common stock offered under this prospectus. This prospectus does not
contain all of the information in the registration statement and the exhibits
and schedule to the registration statement. For further information with
respect to us and our common stock, we refer you to the registration statement
and to the exhibits and schedule to registration statement. Statements
contained in this prospectus as to the contents of any contract or any other
document referred to are not necessarily complete, and in each instance, we
refer you to the copy of the contract or other document filed as an exhibit to
the registration statement. Each of these statements is qualified in all
respects by this reference. You may inspect a copy of the registration
statement without charge at the SEC's principal office in Washington, D.C., and
copies of all or any part of the registration statement may be obtained from
the Public Reference Room of the SEC, 450 Fifth Street, N.W., Washington, D.C.
20549, upon payment of fees prescribed by the SEC. The public may obtain
information on the operation of the Public Reference Room by calling the SEC at
1-800-SEC-0330. The SEC maintains an Internet site that contains reports, proxy
and information statements and other information regarding issuers that file
electronically with the SEC. The address of the Internet site is
http://www.sec.gov.
Upon completion of this offering, we will be subject to the information
reporting requirements of the Securities Exchange Act of 1934, as amended, and
we will file reports, proxy statements and other information with the SEC.
We intend to furnish our stockholders with annual reports containing
financial statements audited by our independent public accountants and
quarterly reports for the first three fiscal quarters of each fiscal year
containing unaudited interim financial information. Our telephone number is
(650) 244-9303.
59
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Ernst & Young LLP, Independent Auditors........................ F-2
Balance Sheets as of December 31, 1998 and 1999.......................... F-3
Statements of Operations for the years ending December 31, 1997, 1998 and
1999.................................................................... F-4
Statement of Stockholders' Equity for the years ending December 31, 1997,
1998 and 1999........................................................... F-5
Statements of Cash Flows for the years ending December 31, 1997, 1998 and
1999.................................................................... 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
Telik, Inc.
We have audited the accompanying balance sheets of Telik, Inc. as of December
31, 1998 and 1999, and the related statements of operations, stockholders'
equity, and cash flows for each of the three years in the period ended December
31, 1999. 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 auditing standards generally
accepted in the United States. 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 Telik, Inc. at December 31,
1998 and 1999, and the results of its operations and its cash flows for each of
the three years in the period ended December 31, 1999, in conformity with
accounting principles generally accepted in the United States.
/s/ ERNST & YOUNG LLP
Palo Alto, California
February 25, 2000
F-2
<PAGE>
TELIK, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
Unaudited
pro forma
stockholders'
December 31, equity at
------------------ December 31,
1998 1999 1999
-------- -------- -------------
(In thousands, except share
and per share data)
<S> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents................... $ 2,196 $ 1,950
Short-term investments...................... 12,206 5,606
Prepaid expenses and other current assets... 497 337
-------- --------
Total current assets....................... 14,899 7,893
Property and equipment, net.................. 1,566 1,197
Other assets................................. 121 80
-------- --------
$ 16,586 $ 9,170
======== ========
Liabilities and stockholders' equity
Current liabilities:
Accounts payable............................ $ 548 $ 780
Accrued contracts and other liabilities..... 688 680
Deferred revenue............................ 2,118 2,250
Current portion of capital lease obligations
and equipment loans........................ 630 247
-------- --------
Total current liabilities.................. 3,984 3,957
Noncurrent portion of capital lease
obligations and equipment loans............. 272 25
Other long-term liabilities.................. 153 58
Commitments
Stockholders' equity:
Convertible preferred stock, $0.01 par
value, issuable in series, 1,023,799 shares
authorized in 1998 and 1999 (none pro
forma), 1,020,150 shares issued and
outstanding in 1998 and 1999 (none pro
forma) (aggregate liquidation preference of
$50,408 at December 31, 1998 and 1999)..... 10 10 $ --
Common stock; $0.01 par value, 23,000,000
shares authorized in 1998 and 1999
(35,674,594 shares pro forma), 2,196,038
and 2,207,281 shares issued and outstanding
in 1998 and 1999, respectively (14,881,875
shares pro forma).......................... 22 22 32
Additional paid-in capital.................. 56,465 56,742 56,924
Deferred stock compensation................. -- (260) (260)
Accumulated deficit......................... (44,320) (51,384) (51,384)
-------- -------- --------
Total stockholders' equity................. 12,177 5,130 $ 5,312
======== ======== ========
Total liabilities and stockholders'
equity.................................... $ 16,586 $ 9,170
======== ========
</TABLE>
F-3
<PAGE>
TELIK, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Years ended December 31,
----------------------------------------
1997 1998 1999
------------ ------------ ------------
(in thousands, except per share data)
<S> <C> <C> <C>
Contract revenue from collaborations
(including $1,500, $1,750 and $2,000
from a related party in 1997, 1998
and 1999, respectively)............. $ 1,652 $ 3,194 $ 4,237
Costs and expenses:
Research and development............ 8,090 7,952 9,547
General and administrative.......... 2,470 2,149 2,152
------------ ------------ ------------
10,560 10,101 11,699
------------ ------------ ------------
Loss from operations................. (8,908) (6,907) (7,462)
Interest income, net................. 290 328 398
------------ ------------ ------------
Net loss............................. $ (8,618) $ (6,579) $ (7,064)
============ ============ ============
Net loss per share, basic and
diluted............................. $ (3.95) $ (3.00) $ (3.21)
============ ============ ============
Weighted average shares used in
computing net loss per share, basic
and diluted......................... 2,184 2,194 2,204
Pro forma net loss per share, basic
and diluted (unaudited)............. $ (0.47)
============
Weighted average shares used in
computing pro forma net loss per
share, basic and diluted
(unaudited)......................... 14,879
</TABLE>
F-4
<PAGE>
TELIK, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
(In thousands, except share and per share data)
<TABLE>
<CAPTION>
Convertible
Preferred Stock Common Stock Additional Deferred Total
---------------- ---------------- Paid-In Stock Accumulated Stockholders'
Shares Amount Shares Amount Capital Compensation Deficit Equity
--------- ------ --------- ------ ---------- ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1996................... 667,150 $ 7 2,173,462 $22 $39,036 $ $(29,123) $9,942
Issuance of Series I
preferred stock in
September and November
1997 at $50 per share,
net of issuance costs.. 143,000 1 -- -- 7,092 -- 7,093
Exercise of options to
purchase common stock.. -- -- 19,026 -- 21 -- 21
Net loss and
comprehensive loss..... -- -- -- -- -- (8,618) (8,618)
--------- --- --------- --- ------- ----- -------- ------
Balance at December 31,
1997................... 810,150 8 2,192,488 22 46,149 (37,741) 8,438
Issuance of Series J
preferred stock in
September and October
1998 at $50 per share,
net of issuance costs.. 210,000 2 -- -- 10,286 -- 10,288
Exercise of options to
purchase common stock.. -- -- 3,550 -- 30 -- 30
Net loss and
comprehensive loss..... -- -- -- -- -- (6,579) (6,579)
--------- --- --------- --- ------- ----- -------- ------
Balance at December 31,
1998................... 1,020,150 10 2,196,038 22 56,465 (44,320) 12,177
Exercise of options to
purchase common stock.. -- -- 11,243 -- 17 -- 17
Deferred stock
compensation........... 260 (260)
Net loss and
comprehensive loss..... -- -- -- -- -- (7,064) (7,064)
--------- --- --------- --- ------- ----- -------- ------
Balance at December 31,
1999................... 1,020,150 $10 2,207,281 $22 $56,742 $(260) $(51,384) $5,130
========= === ========= === ======= ===== ======== ======
</TABLE>
F-5
<PAGE>
TELIK, INC.
STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Years Ended December 31,
----------------------------
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
Operating activities
Net loss........................................ $ (8,618) $ (6,579) $ (7,064)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization.................. 1,175 892 609
Forgiveness of notes receivable from related
parties....................................... 43 -- --
Amortization of discount on investments........ (172) (272) 99
Short-term lease deposits...................... -- -- (49)
Changes in operating assets and liabilities:
Prepaid expenses and other current assets..... (77) (272) 160
Other assets.................................. 51 -- 41
Accounts payable.............................. (197) 435 232
Accrued contracts and other liabilities....... 450 (285) (8)
Deferred revenue.............................. 498 120 132
Other long-term liabilities................... -- 153 (95)
-------- -------- --------
Net cash used in operating activities........... (6,847) (5,808) (5,943)
-------- -------- --------
Investing activities
Maturities of short-term investments............ 8,500 12,200 11,008
Sales of short-term investments................. 3,360 2,786 5,880
Purchases of short-term investments............. (18,262) (17,032) (10,387)
Purchase of property and equipment.............. (510) (530) (240)
Proceeds from disposal of property and
equipment...................................... -- 14 --
-------- -------- --------
Net cash (used in) provided by investing
activities..................................... (6,912) (2,562) 6,261
-------- -------- --------
Financing activities
Proceeds from equipment loans................... 210 -- --
Principal payments under capital lease
obligations and equipment loans................ (626) (557) (581)
Net proceeds from issuance of convertible
preferred stock................................ 7,093 10,288 --
Net proceeds from issuance of common stock and
warrants....................................... 21 30 17
-------- -------- --------
Net cash provided by (used in) financing
activities..................................... 6,698 9,761 (564)
-------- -------- --------
Increase (decrease) in cash and cash
equivalents.................................... (7,061) 1,391 (246)
Cash and cash equivalents at beginning of
period......................................... 7,866 805 2,196
-------- -------- --------
Cash and cash equivalents at end of period...... $ 805 $ 2,196 $ 1,950
======== ======== ========
Schedule of non cash transactions
======== ======== ========
Cash paid for interest.......................... $ 245 $ 122 $ 58
======== ======== ========
Deferred stock compensation..................... $ -- $ -- $ 260
======== ======== ========
</TABLE>
F-6
<PAGE>
TELIK, INC.
NOTES TO FINANCIAL STATEMENTS
1. Summary of significant accounting policies
Nature of operations and basis of presentation
Telik, Inc. (the "Company") was incorporated in the state of Delaware in
October 1988 as Terrapin Diagnostics, Inc. which changed its name in June 1989
to Terrapin Technologies, Inc. ("Terrapin"). In May 1998, Terrapin changed its
name to Telik, Inc. The Company is engaged in the discovery and development of
small molecule drug candidates.
The Company matured from its development stage to an operating company in
1999. As such, its financial statements are no longer prepared on a
development stage basis. The Company expects continuing losses over the next
several years. The Company plans to obtain its capital requirements through
public or private equity or debt financing, capital lease financing and
collaborative arrangements with corporate partners. 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.
Use of estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results may differ from those
estimates.
Unaudited pro forma information
If Telik's initial public offering as described in Note 8 is consummated,
all of the preferred stock and warrants outstanding will automatically be
converted into common stock. The unaudited pro forma convertible preferred
stock and stockholders' equity at December 31, 1999 has been adjusted for the
assumed conversion of preferred stock and assumed exercised warrants based on
the shares of preferred stock and warrants outstanding at December 31, 1999.
Cash equivalents and short-term investments
The Company considers all highly liquid investments with an original
maturity of 90 days or less when purchased, to be cash equivalents. For the
periods presented, cash equivalents consist of money market funds and
corporate debt securities. The Company's short-term investments include
obligations of governmental agencies and corporate debt securities with
original maturities ranging between 3 and 12 months. The Company limits
concentration of credit risk by diversifying its investments among a variety
of high credit-quality issuers.
All cash equivalents and short-term investments are classified as available-
for-sale. Available-for-sale securities are carried at estimated fair value,
based on available market information, with unrealized gains and losses, if
any, reported as a component of stockholders' equity. The cost of securities
sold is based on the specific identification method. As of December 31, 1998
and 1999, there were no material differences between amortized cost and fair
value of available-for-sale securities. Realized gains and losses on sales of
available-for-sale investments are not material.
Fair value of financial instruments
Financial instruments, including cash and cash equivalents, accounts
payable, accrued liabilities and accrued compensation are carried at cost,
which management believes approximates fair value.
F-7
<PAGE>
TELIK, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
Property and equipment
Property and equipment are stated at cost. Depreciation is calculated using
the straight-line method over the estimated useful lives of the assets, which
range from three to seven years. Furniture and equipment leased under capital
leases are amortized using the straight-line method over the estimated useful
lives of the respective assets or the lease term, whichever is shorter.
Revenue Recognition
Contract revenue consists of revenue from research and development
collaboration agreements. The Company's research and development collaboration
agreements provide for periodic payments in support of the Company's research
activities. The Company recognizes contract revenue from these agreements as
earned based upon the performance requirements of the agreements and payments
for up-front technology access fees are recognized ratably over the period of
the research program. Payments received, which are related to future
performance, are deferred and recognized as revenue when earned over future
performance periods.
Stock-based compensation
As permitted by the Financial Accounting Standards Board Statement No. 123,
"Accounting for Stock-Based Compensation" ("FASB 123"), the Company accounts
for grants of stock options to employees in accordance with Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" and
related interpretations ("APB No. 25"). Accordingly, the Company does not
recognize compensation expense for stock options granted to employees with
exercise prices equal to the fair value of the Company's common stock on the
date of grant. Options granted to consultants are accounted for using the
Black-Scholes method prescribed by FASB 123 and in accordance with Emerging
Issues Task Force Consensus No. 96-18 ("EITF 96-18"), and such options are
subject to periodic revaluation over their vesting term.
Research and development
Research and development expenditures, including direct and allocated
expenses, are charged to expense as incurred. Collaboration agreements
generally specify minimum levels of research effort required to be performed by
the Company.
Segment reporting
Statement of Financial Accounting Standards No. 131, "Disclosure about
Segments of an Enterprise and Related Information" ("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 SFAS 131 had no impact on the Company's
financial statements.
Comprehensive loss
Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive
Income" ("SFAS 130"), requires components of other comprehensive income,
including gains and losses on available-for-sale investments, to be included as
part of total comprehensive income. For all periods
F-8
<PAGE>
TELIK, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
presented, the comprehensive loss is equal to the net loss and has been
disclosed in the statement of stockholders' equity.
Impairment of long-lived assets
In accordance with the provisions of Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of" ("SFAS 121"), the Company reviews long-
lived assets, including property and equipment, for impairment whenever events
or changes in business circumstances indicate that the carrying amount of the
assets may not be fully recoverable. Under SFAS 121, an impairment loss would
be recognized when estimated undiscounted future cash flows expected to result
from the use of the asset and its eventual disposition is less than its
carrying amount. Impairment, if any, is assessed using discounted cash flows.
Through December 31, 1999, there have been no such losses.
Net loss per share
Net loss per share has been computed according to the Financial Accounting
Standards Board Statement No. 128, "Earnings Per Share," which requires
disclosure of basic and diluted earnings per share. Basic earnings per share
excludes any dilutive effects of options, shares subject to repurchase,
warrants and convertible securities. Diluted earnings per share includes the
impact of potentially dilutive securities. Following the guidance given by the
Securities and Exchange Commission Staff Accounting Bulletin No. 98, common
stock and 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.
Pro forma net loss per share includes shares issuable upon the conversion of
outstanding shares of preferred stock and warrants (using the as-if-converted
method) from the original date of issuance.
A reconciliation of shares used in the calculations is as follows (in
thousands):
<TABLE>
<CAPTION>
Years ended December 31,
------------------------
1997 1998 1999
------------------------
<S> <C> <C> <C>
Basic and diluted:
Weighted average shares of common stock
outstanding...................................... 2,184 2,194 2,204
======= =======
Adjustment to reflect weighted average effect of
assumed conversions of preferred stock and
warrants......................................... 12,675
--------
Weighted average shares used in pro forma net loss
per share, basic and diluted..................... 14,879
========
</TABLE>
F-9
<PAGE>
TELIK, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
During all periods presented, the Company had securities outstanding which
could potentially dilute basic earnings per share in the future, but were
excluded from the computation of diluted net loss per share, as their effect
would have been antidilutive. These outstanding securities consist of the
following (in thousands) common stock equivalents:
<TABLE>
<CAPTION>
Years ended December 31,
--------------------------------
1997 1998 1999
---------- ---------- ----------
<S> <C> <C> <C>
Convertible preferred stock................. 10,140,035 12,640,035 12,640,035
Outstanding options......................... 2,135,686 2,996,376 2,991,787
Preferred stock warrants.................... 34,559 34,559 34,559
</TABLE>
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" ("SFAS 133"), which provides a
comprehensive and consistent standard for the recognition and measurement of
derivatives and hedging activities. SFAS 133 is effective for fiscal years
beginning after June 15, 2000 and is not anticipated to have an impact on the
Company's results of operations or financial condition when adopted as the
Company holds no derivative financial instruments and does not currently engage
in hedging activities.
2. Cash equivalents and short-term investments
The following is a summary of cash equivalents and short-term investments:
<TABLE>
<CAPTION>
Estimated Cost and
Fair Value
December 31,
-------------------
1998 1999
--------- ---------
(In thousands)
<S> <C> <C>
Cash equivalents:
Money market fund....................................... $ 223 $ 107
Corporate notes......................................... 1,973 1,843
--------- --------
$ 2,196 $ 1,950
========= ========
Short-term investments:
U.S. Government notes................................... $ 5,266 $ 996
Corporate notes......................................... 1,006 4,610
Commercial paper........................................ 4,934 --
Certificate of deposit.................................. 1,000 --
--------- --------
$ 12,206 $ 5,606
========= ========
</TABLE>
These are no unrealized gains or losses for the years ended December 31, 1999
and 1998.
F-10
<PAGE>
TELIK, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
3. Property and equipment
Property and equipment consist of the following:
<TABLE>
<CAPTION>
December 31,
----------------
1998 1999
------- -------
(In thousands)
<S> <C> <C>
Laboratory furniture and equipment......................... $ 3,914 $ 4,137
Office furniture and equipment............................. 383 400
Leasehold improvements..................................... 1,099 1,099
------- -------
5,396 5,636
Less accumulated depreciation and amortization............. (3,830) (4,439)
------- -------
Property and equipment, net................................ $ 1,566 $ 1,197
======= =======
</TABLE>
Property and equipment includes assets under capitalized leases at December
31, 1998 and 1999 of approximately $525,000 and $53,000, respectively.
Accumulated amortization related to leased assets was approximately $366,000
and $20,000 at December 31, 1998 and 1999, respectively.
4. Lease obligations and equipment loans
In September 1996, the Company entered into an equipment loan agreement with
a finance company under which the Company can borrow up to $1,500,000.
Equipment borrowings under this agreement totaled $688,000 and $237,000 at
December 31, 1998 and 1999, respectively. The borrowings bear interest at 8%
and the remaining principal balance of $237,000 is due in November 2000.
The Company also has acquired certain equipment and furniture pursuant to
capital lease arrangements. At December 31, 1999, the future minimum capital
lease obligations are not significant.
The Company occupies its facilities under an operating lease which expires in
December 2002. Rent expense under operating leases totaled $387,000, $466,000
and $497,000 for the years ended December 31, 1997, 1998 and 1999,
respectively. The Company has the option to renew the lease upon expiration for
an additional term of five years.
At December 31, 1999, noncancelable future minimum lease payments under the
Company's operating leases are as follows (in thousands):
<TABLE>
<S> <C>
Years ending December 31,
2000............................................................... $ 514
2001............................................................... 535
2002............................................................... 557
2003............................................................... 1
------
$1,607
======
</TABLE>
F-11
<PAGE>
TELIK, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
5. Stockholders' equity
Preferred stock
In accordance with the provisions of the respective preferred stock
agreements, Series A, C and D preferred stock were converted into common stock
at the specified conversion price of $6.00 per share for Series A and C and
$3.00 per share for Series D.
Series B, E, F, G, H, I and J preferred stock are convertible into common
stock at the option of the holder at conversion prices of $3.56, $3.00, $3.60,
$4.20, $5.55, $4.20 and $4.20 per share, respectively. These conversion prices
are subject to price-based antidilution adjustments for future stock issuances.
Series B, E, F, G, H, I and J preferred shares will automatically convert into
common stock at the earlier of (i) the closing of the Company's initial
underwritten public offering, or (ii) a vote or written consent of 2/3 of the
shares of all series of preferred stock then outstanding, voting together as a
single class or, in the case of Series J preferred stock, a vote or written
consent of 2/3 of the shares of Series J preferred stock then outstanding. All
preferred shares have voting rights equal to common stock on an as-if-converted
basis.
The holders of Series B, E, F, G, H, I and J preferred stock are entitled to
receive noncumulative dividends, if declared, prior to and in preference to the
payment of dividends to holders of common stock. No dividends have been
declared through December 31, 1999.
In the event of a liquidation or winding up of the Company, holders of Series
B convertible preferred stock shall have a liquidation preference of $20 and
the holders of Series E, F, G, H, I and J convertible preferred stock shall
each have a liquidation preference of $50 per share, together with any declared
but unpaid dividends, over holders of common shares.
Preferred stock is issuable in series, with rights and preferences designated
by series. The shares designated, issued and outstanding at December 31, 1998
and 1999 are as follows:
<TABLE>
<CAPTION>
Shares Aggregate
Shares Issued and Liquidation
Authorized Outstanding Preference
---------- ----------- -----------
(In thousands)
<S> <C> <C> <C>
Series B convertible...................... 20,000 20,000 $ 400
Series E convertible...................... 114,720 114,500 5,725
Series F convertible...................... 169,600 169,600 8,480
Series G convertible...................... 273,050 273,050 13,653
Series H convertible...................... 93,429 90,000 4,500
Series I convertible...................... 143,000 143,000 7,150
Series J convertible...................... 210,000 210,000 10,500
--------- --------- -------
1,023,799 1,020,150 $50,408
========= ========= =======
</TABLE>
Preferred stock warrants
In connection with the negotiation of a secured note payable in December
1992, the Company issued warrants to purchase 220 shares of Series E preferred
stock at an exercise price of $50.00 per share. These warrants expire on the
earlier of December 31, 2002, the day preceding the closing date of the
Company's initial public offering or the day preceding the effective date of
any consolidation or merger of the Company, whichever is earlier. The value of
these warrants was determined to be immaterial.
F-12
<PAGE>
TELIK, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
In September 1996, in conjunction with a loan agreement for the purchase of
property and equipment, the Company issued warrants that entitle the holder to
purchase 3,429 shares of Series H preferred stock at an exercise price of
$50.00 per share. These warrants are exercisable through August 31, 2003, the
day preceding the closing date of the Company's initial public offering or the
day preceding the effective date of any consolidation or merger of the Company,
whichever is earlier.
1988 Stock option plan
The 1988 Stock Option Plan (the "1988 Plan") was adopted in February 1989.
Options granted under the 1988 Plan may be either incentive stock options
("ISOs") or nonstatutory stock options ("NSOs"). At December 31, 1999, the
Company had authorized 905,017 shares of common stock for issuance under the
1988 Plan. Options granted under the 1988 Plan expire no later than 10 years
from the date of grant. For ISOs and NSOs, the option price shall be at least
100% and 85%, respectively, of the closing price of the Company's common stock
on the date of the grant, or in the event there is no public market for the
common stock, of the fair value on the date of the grant, as determined by the
board of directors. If, at any time the Company grants an option, and the
optionee directly or by attribution owns stock possessing more than 10% of the
total combined voting power of all classes of stock of the Company, the option
price shall be at least 110% of the fair value and shall not be exercisable
more than five years after the date of grant. Options generally vest over a
period of four years from the date of grant.
1996 Stock Option Plan
The 1996 Stock Option Plan (the "1996 Plan") was adopted in April 1996 with
terms similar to the 1988 Plan. At December 31, 1999, the Company had
authorized 2,238,816 shares of common stock for issuance under the 1996 Plan.
Additional options were granted prior to the adoption of the 1988 and 1996
Plans, of which 22,768 are outstanding at December 31, 1999 and have expiration
dates ranging from June 2000 to June 2001.
F-13
<PAGE>
TELIK, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
Stock option plans
A summary of activity under the Company's stock option plans through December
31, 1999 is as follows:
<TABLE>
<CAPTION>
Options Outstanding
-------------------------- Weighted-
Number Exercise Price Average
of Options Per Share Exercise Price
---------- -------------- --------------
<S> <C> <C> <C>
Balance at December 31,
1996.................... 1,967,850 $1.00-$1.60 $1.10
Options granted......... 735,505 $ 1.60 $1.60
Options exercised....... (19,207) $1.00-$1.60 $1.40
Options forfeited....... (548,462) $1.00-$1.60 $1.13
---------
Balance at December 31,
1997.................... 2,135,686 $1.00-$1.60 $1.27
Options granted......... 1,070,905 $ 1.60 $1.60
Options exercised....... (3,550) $ 1.60 $1.60
Options forfeited....... (206,665) $1.00-$1.60 $1.40
---------
Balance at December 31,
1998.................... 2,996,376 $1.00-$1.60 $1.40
Options granted......... 281,050 $ 1.60 $1.60
Options exercised....... (11,243) $1.00-$1.60 $1.04
Options forfeited....... (274,396) $1.00-$1.60 $1.32
---------
Balance at December 31,
1999.................... 2,991,787 $1.40
=========
Exercisable at December
31, 1997................ 696,250 $1.00-$1.60 $1.08
Exercisable at December
31, 1998................ 1,143,771 $1.00-$1.60 $1.19
Exercisable at December
31, 1999................ 1,757,992 $1.00-$1.60 $1.30
</TABLE>
At December 31, 1999, the Company has 174,814 shares available for grant
under its option plans. At December 31, 1999, the remaining outstanding options
expire at various dates through 2009 and have a weighted-average contractual
life of 7.42 years.
The weighted average fair value of options granted during 1997, 1998 and 1999
was $0.44, $0.42 and $1.35, respectively.
Pro forma information regarding net loss is required by FASB 123, and has
been determined as if the Company had accounted for its employee stock options
under the fair value method of that Statement. The fair value for these options
was estimated at the date of grant using the minimum value method using the
following weighted-average assumptions for years ended December 31, 1997, 1998
and 1999: risk-free interest rate of 6.23%, 6.23% and 6.53%, respectively; an
expected life of 5 years; and no dividends.
F-14
<PAGE>
TELIK, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the vesting period of the options. The
Company's pro forma information follows (in thousands, except per share
amounts):
<TABLE>
<CAPTION>
Years ended December 31,
----------------------------
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
Net loss:
As reported.................................. $ (8,618) $ (6,579) $ (7,064)
Pro forma.................................... $ (8,728) $ (6,779) $ (7,346)
Basic and diluted net loss per share:
As reported................................... $ (3.95) $ (3.00) $ (3.21)
Pro forma..................................... $ (4.00) $ (3.09) $ (3.33)
</TABLE>
The effects of applying SFAS 123 for pro forma disclosures are not likely to
be representative of the effects as reported net loss for future years.
During 1998 and 1999, the Company issued 41,500 and 20,000 options,
respectively, to consultants in exchange for services performed for the
Company. For these option grants, the Company recognized an expense equal to
the estimated fair market value of the granted options on the date of the
grant. This amount was equal to $26,000 for 1998 and was immaterial for 1999.
In accordance with SFAS 123 and EITF 96-18, options granted to consultants are
periodically revalued as they vest.
The Company has recorded deferred stock compensation with respect to options
granted to employees of approximately $260,000 in the year ended December 31,
1999, representing the difference between the exercise price of the options and
the deemed fair value of the common stock. These amounts are being amortized to
operations over the vesting periods of the options on a straight line basis.
The amortization expense was not material for the year ended December 31, 1999.
Common stock reserved
At December 31, 1999, the Company has 15,841,195 reserved shares of common
stock for future issuance as follows:
<TABLE>
<CAPTION>
December 31,
1999
------------
<S> <C>
Preferred stock warrants........................................ 34,559
Incentive stock plan............................................ 3,166,601
Convertible preferred stock..................................... 12,640,035
----------
15,841,195
==========
</TABLE>
6. Collaborative agreements
In December 1996, the Company entered into a collaboration and license
agreement with a Japanese pharmaceutical company focusing on diabetes. Under
the agreement, the Company granted an exclusive license to the Japanese
pharmaceutical company to manufacture, use and sell products based on the
Company's Target Related Affinity Profile (TRAP) technology within certain
countries in Asia. The Company will receive payments for certain research and
development activities, for achievement of specified development milestones and
for royalties on product sales, if any, in Asia. In December 1996, September
1997 and October 1998, the Japanese pharmaceutical company purchased 60,000
shares of Series H preferred stock ($3,000,000), 60,000 shares of Series I
preferred stock ($3,000,000) and 100,000 shares of Series J preferred stock
($5,000,000), respectively.
F-15
<PAGE>
TELIK, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
7. Income taxes
As of December 31, 1999, the Company had federal and state net operating loss
carryforwards of approximately $46,100,000 and $3,700,000, respectively. The
Company also had federal research and development tax credit carryforwards of
approximately $1,400,000. The net operating loss and credit carryforwards will
expire at various dates beginning in the year 2005 through 2019, respectively
if not utilized.
Utilization of the net operating loss and credit carryforwards 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 replace 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 are as follows (in thousands):
<TABLE>
<CAPTION>
December 31,
------------------
1998 1999
-------- --------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards...................... $ 14,800 $ 16,000
Capitalized research and development expenses......... 1,700 1,700
Research credit carryforwards......................... 2,100 2,100
Manufacturing and research equipment credit
carryforward......................................... 100 --
Other, net............................................ 400 1,500
-------- --------
Total deferred tax assets.............................. 19,100 21,300
Valuation allowance.................................... (19,100) (21,300)
-------- --------
Net deferred taxes..................................... $ -- $ --
======== ========
</TABLE>
Due to the Company's lack of earnings history, the net deferred tax assets
have been fully offset by a valuation allowance. The valuation allowance
increased by $14,100,000, $5,000,000 and $2,200,000 during the years ended
December 31, 1997, 1998 and 1999, respectively.
8. Subsequent events (unaudited)
Initial public offering
In January 2000, the board of directors authorized the filing of a
registration statement with the Securities and Exchange Commission to register
shares of its common stock in connection with a proposed initial public
offering. If the offering contemplated by this prospectus is consummated, the
preferred stock outstanding as of the closing date will automatically be
converted into shares of the Company's common stock. The pro forma stockholders
equity and the accompanying balance sheet as of December 31, 1999 reflects
conversion of the outstanding preferred stock and warrants into 14,881,875
shares of common stock.
Additional deferred compensation
In March 2000, options to purchase 289,672 common shares were granted to
employees pursuant to the 1996 Stock Option Plan with an exercise price of
$2.00 per share. The company
F-16
<PAGE>
TELIK, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
estimates that additional deferred compensation of approximately $000,000 will
be recorded as a result of these options and amortized to compensation expense
in accordance with Telik's policy.
2000 Employee Stock Purchase Plan
In March 2000, subject to stockholder approval, the Company adopted its 2000
Employee Stock Purchase Plan (the "Purchase Plan"). A total of 250,000 shares
of the Company's common stock have 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 each
anniversary date of the effective date of the offering. The number of shares
reserved automatically is equal to the lesser of 150,000 shares, 1% of the
outstanding shares on the date of the annual increase or such amount as may be
determined by the Board. The Purchase plan permits eligible employees to
purchase common stock at a discount through payroll deductions during defined
offering periods. The price at which the stock is purchased is equal to the
lower of 85% of the fair market value of the common stock on the first day of
the offering or 85% of the fair market value of the Company's common stock on
the purchase date. The initial offering period will commence on the effective
date of the offering.
2000 Non-Employee Directors' Stock Option Plan
In March 2000, subject to stockholder approval, the Company adopted the 2000
Non-Employee Directors' Stock Option Plan and reserved a total of 300,000
shares of common stock for issuance thereunder. Each non-employee director at
the IPO date will automatically be granted an option to purchase 20,000 shares
of common stock, and each non-employee director who subsequently 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 2000 Annual Stockholders Meeting, each non-employee director will
automatically be granted a nonstatutory option to purchase 5,000 shares of
common stock or prorated for the part of the year served as non-employee
director. The exercise price of options under the Directors' 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 Directors' Plan is ten years. All grants
under the Directors' Plan will vest over a period of four years from date of
grant, one fourth vesting one year after the date of the grant and thereafter
the balance vesting monthly. The Directors' Plan will terminate in March 2010
unless terminated earlier in accordance with the provisions of the Directors'
Plan.
2000 Equity Inventive Plan
Subject to stockholder approval, the Company adopted the 2000 Equity
Incentive Plan and reserved 2,000,000 shares of the Company's common stock. In
addition the Incentive Plan provides for annual increases in the number of
shares available for issuance under the Incentive Plan.
Series K Financing
On March 31, 2000, the Company closed a private placement in which it sold
1,166,667 shares of Series K convertible preferred stock at $6.00 per share for
net proceeds of approximately $1,950,000 and a short-term note receivable of
$5,000,000. The note receivable bears interest at 6.28% and is due April 10,
2000. Series K preferred stock is convertible to common stock at any time on a
one-for-one basis and conversion is automatic if the IPO is consumated.
F-17
<PAGE>
Inside Back Cover Graphic
Title: Our proprietary TRAP technology accelerates drug discovery
Title: TRAP measures the interactions of small molecules with proteins
Legend: TRAP produces a profile, or fingerprint, that measures a property of
small molecules we believe is most relevant to drug discovery, their ability to
bind to proteins. Fingerprints are used to classify small molecules by their
type of interaction with a protein target.
Graphic Description: On the left-hand side is a representation of a chemical
compound. An arrow leads from this to a panel of four proteins indicated by
vertical bars and labeled P1, P2, P3 and P4. A series of three dots to the
right of P4 indicates that the panel actually contains additional proteins.
Each vertical bar has a distinctively shaped notch with a complementary shape
attached, which is labeled L1, L2, L3 and L4, and represents a ligand. An arrow
points right from these proteins to a vertical bar divided horizontally into
many sections, each colored a different shade of gray. Each section of the bar
represents the affinity of the compound for one of the proteins in the panel.
This bar is called the fingerprint of the compound.
Title: TRAP models the preferences of disease-related proteins for small
molecules
Legend: Modeling a new protein target begins by assaying a small set of
compounds with diverse affinity profiles for TRAP panel proteins, called a
training set. The TRAP panel proteins preferred by those compounds with
affinity for the new protein target are mathematically combined to simulate the
new protein target.
Graphic Description: On the left-hand side of the diagram, represented by a
gray colored vertical bar, is a new protein target. This target has a notch in
the center into which a complementary shape, representing a compound from our
library, or training set, is shown to be bound. An arrow points from the target
to a panel of four representative proteins, indicated by vertical bars, labeled
P1, P2, P3 and P4, whose notches contain elements of the notch in the target
protein. A series of three dots to the right of P4 indicates that the panel
actually contains additional proteins. The fingerprint for the compound, as
described in the picture above, is shown above the arrow. A second arrow points
from the panel of four proteins to a vertical bar representing a model and
containing in its center elements of the notches from the panel of proteins.
Above the arrow is a representation of a computer. A shape, complementary to
these elements, with the label hit, is bound to the notch. A third arrow points
from the model to a target. This target is identical to the model bar. In the
notch of this bar is a complementary shape that fits the notch better than the
previous hit shape and is labeled drug candidate. Above the arrow is another
representation of a fingerprint.
Black and White Picture in Text
Title: Insulin Receptor Activators
Legend: Telik's insulin receptor activators work within the cell to promote the
activation of the insulin receptor and initiate the series of events that leads
to the entry of sugar from the blood.
Graphic Description: This is a depiction of a fat, liver or muscle cell and
shows how the Telik insulin receptor activators enter the cell, bind to and
activate the insulin receptor. Insulin acting outside the cell causes a similar
activation. This stimulates a signaling pathway indicated by an arrow and
labeled, Signal. This signaling pathway leads to blood sugar entering the cell.
<PAGE>
[TELIK, INC. LOGO]
<PAGE>
PART II
Information Not Required in Prospectus
Item 13. Other Expenses of Issuance and Distribution
The following table sets forth the costs and expenses, other than the
underwriting discounts payable by us, in connection with the sale of common
stock being registered. All amounts are estimates except the SEC registration
fee, the NASD filing fee and the Nasdaq National Market listing fee.
<TABLE>
<S> <C>
SEC registration fee................................................ $19,800
NASD filing fee..................................................... *
Nasdaq National Market listing fee.................................. *
Blue Sky fees and expenses.......................................... *
Transfer agent and registrar fees................................... *
Accounting fees and expenses........................................ *
Legal fees and expenses............................................. *
Printing and engraving costs........................................ *
Miscellaneous expenses.............................................. *
-------
Total............................................................. $19,800
=======
</TABLE>
- -----------------
* To be filed by Amendment.
Item 14. Indemnification of Directors and Officers
As permitted by Delaware law, our amended and restated certificate of
incorporation provides that no director of ours will be personally liable to us
or our stockholders for monetary damages for breach of fiduciary duty as a
director, except for liability:
. for any breach of duty of loyalty to us or to our stockholders;
. for acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law;
. for unlawful payment of dividends or unlawful stock repurchases or
redemptions under Section 174 of the Delaware General Corporation Law; or
. for any transaction from which the director derived an improper personal
benefit.
Our amended and restated certificate of incorporation further provides that
we must indemnify our directors and executive officers and may indemnify our
other officers and employees and agents to the fullest extent permitted by
Delaware law. We believe that indemnification under our amended and restated
certificate of incorporation covers negligence and gross negligence on the part
of indemnified parties.
We have entered into indemnification agreements with each of our directors
and certain officers. These agreements, among other things, require us to
indemnify each director and officer 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 Telik,
arising out of the person's services as our director or officer, any subsidiary
of ours or any other company or enterprise to which the person provides
services at our request.
The underwriting agreement (Exhibit 1.1) will provide for indemnification by
our underwriters of Telik, our directors, our officers who sign the
registration statement and our controlling persons for some liabilities,
including liabilities arising under the Securities Act.
II-1
<PAGE>
Item 15. Recent Sales of Unregistered Securities
Since January 1, 1997, we have sold and issued unregistered securities to a
limited number of persons, as described below. None of these transactions
involved any underwriters, underwriting discounts or commissions, or any public
offering, and we believe that each transaction is exempt from the registration
requirements of the Securities Act by virtue of Section 4(2) thereof,
Regulation D promulgated thereunder or Rule 701 pursuant to compensatory
benefit plans and contracts relating to compensation as provided under Rule
701. 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 instruments issued in such
transactions. We believe that all recipients had adequate access to information
about us, through their relationships with us.
Since January 1, 1997, we have sold and issued the following unregistered
securities:
(1) From January 1, 1988 to March 23, 2000, we granted incentive stock
options and nonstatutory stock options to purchase an aggregate of 4,648,182
shares of our common stock at exercise prices ranging from $1.00 to $2.00 per
share to employees, directors and consultants under the 1988 and 1996 Stock
Option Plans and outside of the plans and issued an aggregate of 281,842 shares
upon the exercise of these options. Options to purchase 1,269,822 shares of
common stock have been canceled, and 159,140 of these options have lapsed
without being exercised.
(2) From September 24, 1997 to November 13, 1997, we sold an aggregate of
143,000 shares of our Series I preferred stock to 21 purchasers at a purchase
price of $50.00 per share.
(3) From September 30, 1998 to October 29, 1998, we sold an aggregate of
210,000 shares of our Series J preferred stock to two purchasers at a purchase
price of $50.00 per share.
(4) On March 31, 2000 we sold an aggregate of 1,166,667 shares of our Series
K preferred stock to three purchasers at a purchase price of $6.00 per share.
II-2
<PAGE>
Item 16. Exhibits and Financial Statement Schedules
<TABLE>
<C> <S>
1.1* Form of Underwriting Agreement.
3.1 Form of Amended and Restated Certificate of Incorporation of Registrant
to be effective upon the closing of the offering made pursuant to this
Registration Statement.
3.2 Amended and Restated Bylaws of Registrant to be effective upon the
closing of the offering made pursuant to this Registration Statement.
3.3 Amended and Restated Certificate of Incorporation, as amended.
4.1* Specimen Common Stock Certificate.
4.2 Amended and Restated Registration Rights Agreement, dated March 31,
2000, between Registrant and holders of Registrant's Series B, Series
E, Series F, Series G, Series H, Series I, Series J and Series K
preferred stock.
4.3 Warrant issued to Steven M. Costella, Trustee under the Steven M.
Costella Trust, for purchase of shares of Series E preferred stock.
4.4 Warrant issued to William Kirsch for purchase of shares of Series E
preferred stock.
4.5 Warrant issued to Glen McLaughlin for purchase of shares of Series E
preferred stock.
4.6 Warrant issued to Venture Lending and Leasing, Inc. for purchase of
shares of Series H preferred stock.
5.1* Opinion of Cooley Godward llp.
10.1 Form of Indemnity Agreement.
10.2 2000 Equity Incentive Plan and related documents.
10.3 2000 Employee Stock Purchase Plan and Offering.
10.4 2000 Non-Employee Directors' Stock Option Plan and Agreement.
10.5++ Collaborative Research Agreement between Registrant and Sankyo Company,
Ltd., dated March 24, 1999, as amended.
10.6++ Collaboration Agreement between Registrant and Sanwa Kagaku Kenkyusho
Co., Ltd., dated December 20, 1996, as amended.
10.7++ License Agreement between Registrant and Sanwa Kagaku Kenkyusho Co.,
Ltd., dated September 24, 1997, as amended.
10.8++ Screening Services Agreement between Registrant and Sanwa Kagaku
Kenkyusho Co., Ltd., dated December 20, 1996, as amended.
10.9 Consulting Agreement for Individual Consultants between Gail L. Brown,
MD and Registrant, dated October 20, 1998, as amended.
10.10 Employment Agreement between Cynthia M. Butitta and Registrant, dated
July 1, 1998.
10.11 Employment Agreement between Reinaldo F. Gomez, PhD and Registrant,
dated April 18, 1991, as amended.
10.12 Employment Agreement between Michael M. Wick, MD, PhD and Registrant,
dated December 10, 1997, as amended.
10.13 Lease between Registrant and Chamberlin Associates--Oyster Point Phase
I L.P., dated July 25, 1997, as amended.
23.1 Consent of Ernst & Young llp, Independent Auditors.
23.2* Consent of Cooley Godward llp (included in Exhibit 5.1).
24.1 Power of Attorney (contained on signature page).
27.1 Financial Data Schedule.
</TABLE>
- -----------------
* To be filed by amendment.
++ Confidential treatment requested as to specific portions, which portions are
omitted and filed separately with the Securities and Exchange Commission.
II-3
<PAGE>
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 Securities and Exchange Commission such indemnification
is against public policy as expressed in the Securities Act, and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred or
paid by a director, officer, or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered 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.
(2) For the purpose of determining any liability under the Securities Act,
each post-effective amendment that contains a form of Prospectus shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of South San
Francisco, State of California, on the day of March 31, 2000.
Telik, Inc.
/s/ Michael M. Wick, MD, PhD
By:
__________________________________
Michael M. Wick, MD, PhD
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints Michael M. Wick and Cynthia M. Butitta,
and each of them, his or her true and lawful agent, proxy and attorney-in-fact,
with full power of substitution and resubstitution, for him or her and in his
or her name, place and stead, in any and all capacities, to (i) act on, sign
and file with the Securities and Exchange Commission any and all amendments
(including post-effective amendments) to this registration statement together
with all schedules and exhibits thereto and any subsequent registration
statement filed pursuant to Rule 462(b) under the Securities Act of 1933, as
amended, together with all schedules and exhibits thereto, (ii) act on, sign
and file such certificates, instruments, agreements and other documents as may
be necessary or appropriate in connection therewith, (iii) act on and file any
supplement to any prospectus included in this registration statement or any
such amendment or any subsequent registration statement filed pursuant to Rule
462(b) under the Securities Act of 1933, as amended, and (iv) take any and all
actions which may be necessary or appropriate to be done, as fully for all
intents and purposes as he or she might or could do in person, hereby
approving, ratifying and confirming all that such agent, proxy and attorney-in-
fact or any of his substitutes may lawfully do or cause to be done by virtue
thereof.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/ Michael M. Wick, MD, PhD President, Chief Executive March 31, 2000
______________________________________ Officer and Director
Michael M. Wick, MD, PhD (Principal Executive Officer)
/s/ Cynthia M. Butitta Chief Financial Officer March 31, 2000
______________________________________ (Principal Finance and
Cynthia M. Butitta Accounting Officer)
/s/ Jean Deleage, PhD Director March 31, 2000
______________________________________
Jean Deleage, PhD
/s/ David R. Bethune Director March 31, 2000
______________________________________
David R. Bethune
/s/ David W. Martin, Jr., MD Director March 31, 2000
______________________________________
David W. Martin, Jr., MD
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/ Stefan Ryser, PhD Director March 31, 2000
______________________________________
Stefan Ryser, PhD
/s/ Jerrold L. Glick Director March 31, 2000
______________________________________
</TABLE> Jerrold L. Glick
II-6
<PAGE>
EXHIBIT INDEX
<TABLE>
<C> <S>
1.1* Form of Underwriting Agreement.
3.1 Form of Amended and Restated Certificate of Incorporation of Registrant
to be effective upon the closing of the offering made pursuant to this
Registration Statement.
3.2 Amended and Restated Bylaws of Registrant to be effective upon the
closing of the offering made pursuant to this Registration Statement.
3.3 Amended and Restated Certificate of Incorporation, as amended.
4.1* Specimen Common Stock Certificate.
4.2 Amended and Restated Registration Rights Agreement, dated March 31,
2000, between Registrant and holders of Registrant's Series B, Series
E, Series F, Series G, Series H, Series I, Series J and Series K
preferred stock.
4.3 Warrant issued to Steven M. Costella, Trustee under the Steven M.
Costella Trust, for purchase of shares of Series E preferred stock.
4.4 Warrant issued to William Kirsch for purchase of shares of Series E
preferred stock.
4.5 Warrant issued to Glen McLaughlin for purchase of shares of Series E
preferred stock.
4.6 Warrant issued to Venture Lending and Leasing, Inc. for purchase of
shares of Series H preferred stock.
5.1* Opinion of Cooley Godward llp.
10.1 Form of Indemnity Agreement.
10.2 2000 Equity Incentive Plan and related documents.
10.3 2000 Employee Stock Purchase Plan and Offering.
10.4 2000 Non-Employee Directors' Stock Option Plan and Agreement.
10.5++ Collaborative Research Agreement between Registrant and Sankyo Company,
Ltd., dated March 24, 1999, as amended.
10.6++ Collaboration Agreement between Registrant and Sanwa Kagaku Kenkyusho
Co., Ltd., dated December 20, 1996, as amended.
10.7++ License Agreement between Registrant and Sanwa Kagaku Kenkyusho Co.,
Ltd., dated September 24, 1997, as amended.
10.8++ Screening Services Agreement between Registrant and Sanwa Kagaku
Kenkyusho Co., Ltd., dated December 20, 1996, as amended.
10.9 Consulting Agreement for Individual Consultants between Gail L. Brown,
MD and Registrant, dated October 20, 1998, as amended.
10.10 Employment Agreement between Cynthia M. Butitta and Registrant, dated
July 1, 1998.
10.11 Employment Agreement between Reinaldo F. Gomez, PhD and Registrant,
dated April 18, 1991, as amended.
10.12 Employment Agreement between Michael M. Wick, MD, PhD and Registrant,
dated December 10, 1997, as amended.
10.13 Lease between Registrant and Chamberlin Associates--Oyster Point Phase
I L.P., dated July 25, 1997, as amended.
23.1 Consent of Ernst & Young llp, Independent Auditors.
23.2* Consent of Cooley Godward llp (included in Exhibit 5.1).
24.1 Power of Attorney (contained on signature page).
27.1 Financial Data Schedule.
</TABLE>
- -----------------
* To be filed by amendment.
++ Confidential treatment requested as to specific portions, which portions are
omitted and filed separately with the Securities and Exchange Commission.
<PAGE>
EXHIBIT 3.1
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
TELIK, INC.
Telik, Inc., a corporation organized and existing under and by virtue of
the General Corporation Law of the State of Delaware (the "Company"), DOES
HEREBY CERTIFY:
First: The original name of this Company is Terrapin Diagnostics, Inc. and
the date of filing of its original Certificate of Incorporation with the
Secretary of State of the State of Delaware was on October 20, 1988.
Second: The Certificate of Amendment of the Certificate of Incorporation
of the Company changing its name from Terrapin Diagnostics, Inc. to Terrapin
Technologies, Inc. was filed with the Secretary of State of the State of
Delaware on July 6, 1989.
Third: The Certificate of Amendment of the Certificate of Incorporation of
the Company was filed with the Secretary of State of the State of Delaware on
August 25, 1992.
Fourth: The Restated Certificate of Incorporation of the Company was filed
with the Secretary of State of the State of Delaware on November 25, 1992.
Fifth: The Restated Certificate of Incorporation of the Company was filed
with the Secretary of State of the State of Delaware on November 21, 1994.
Sixth: The Restated Certificate of Incorporation of the Company was filed
with the Secretary of State of the State of Delaware on November 3, 1995.
Seventh: The Certificate of Amendment of the Amended and Restated
Certificate of Incorporation of the Company was filed with the Secretary of
State of the State of Delaware on January 6, 1997.
Eighth: The Amended and Restated Certificate of Incorporation of the
Company was filed with the Secretary of State of the State of Delaware on
September 23, 1997.
Ninth: The Certificate of Amendment of Certificate of Incorporation of the
Company changing its name from Terrapin Technologies, Inc. to Telik, Inc. was
filed with the Secretary of State of the State of Delaware on May 4, 1998.
1.
<PAGE>
Tenth: The Amended and Restated Certificate of Incorporation of the
Company was filed with the Secretary of State of the State of Delaware on
September 13, 1998.
Eleventh: The Amended and Restated Certificate of Incorporation of the
Company, in the form attached hereto as Exhibit A, has been duly adopted in
accordance with the provisions of Sections 245 and 242 of the General
Corporation Law of the State of Delaware by the directors and stockholders of
the Company.
Twelfth: The Amended and Restated Certificate of Incorporation of the
Company, in the form attached hereto as Exhibit A, has been duly adopted in
accordance with the provisions of Sections 245 and 228 of the General
Corporation Law of the State of Delaware by the directors and stockholders of
the Company, and prompt written notice was duly given pursuant to Section 228 of
the General Corporation Law of the State of Delaware to those stockholders who
did not approve the Amended and Restated Certificate of Incorporation, as so
amended, by written consent.
Thirteenth: The Amended and Restated Certificate of Incorporation so
adopted reads in full as set forth in Exhibit A attached hereto and is hereby
incorporated herein by this reference.
In Witness Whereof, the Company has caused this Amended and Restated
Certificate of Incorporation to be signed by the President, Chief Executive
Officer and Chairman and the Secretary this ____ day of March, 2000.
Telik, Inc.
By:_________________________________________
Michael M. Wick, M.D., Ph.D.
President, Chief Executive Officer and
Chairman
Attest:
By:________________________________
Deborah A. Marshall, Secretary
2.
<PAGE>
Exhibit A
I.
The name of this corporation is Telik, Inc.
II.
The address of the registered office of the corporation in the State of
Delaware is 1013 Centre Road, City of Wilmington, County of New Castle, and the
name of the registered agent of the corporation in the State of Delaware at such
address is The Prentice-Hall Corporation System, Inc.
III.
The purpose of this corporation is to engage in any lawful act or activity
for which a corporation may be organized under the General Corporation Law of
the State of Delaware.
IV.
A. This corporation is authorized to issue two classes of stock to be
designated, respectively, "Common Stock" and "Preferred Stock." The total
number of shares which the corporation is authorized to issue is one hundred
five million (105,000,000) shares. One hundred million (100,000,000) shares
shall be Common Stock, each having a par value of one cent ($0.01). Five
million (5,000,000) shares shall be Preferred Stock, each having a par value of
one cent ($0.01).
B. The Preferred Stock may be issued from time to time in one or more
series. The Board of Directors is hereby authorized, by filing a certificate (a
"Preferred Stock Designation") pursuant to the Delaware General Corporation Law
("DGCL"), to fix or alter from time to time the designation, powers, preferences
and rights of the shares of each such series and the qualifications, limitations
or restrictions of any wholly unissued series of Preferred Stock, and to
establish from time to time the number of shares constituting any such series or
any of them; and to increase or decrease the number of shares of any series
subsequent to the issuance of shares of that series, but not below the number of
shares of such series then outstanding. In case the number of shares of any
series shall be decreased in accordance with the foregoing sentence, the shares
constituting such decrease shall resume the status that they had prior to the
adoption of the resolution originally fixing the number of shares of such
series.
V.
For the management of the business and for the conduct of the affairs of
the corporation, and in further definition, limitation and regulation of the
powers of the corporation, of its directors and of its stockholders or any class
thereof, as the case may be, it is further provided that:
3.
<PAGE>
A.
1. The management of the business and the conduct of the affairs of
the corporation shall be vested in its Board of Directors. The number of
directors which shall constitute the whole Board of Directors shall be fixed
exclusively by one or more resolutions adopted by the Board of Directors.
2. Board of Directors. Subject to the rights of the holders of any
series of Preferred Stock to elect additional directors under specified
circumstances, following the closing of the initial public offering pursuant to
an effective registration statement under the Securities Act of 1933, as amended
(the "1933 Act"), covering the offer and sale of Common Stock to the public (the
"Initial Public Offering"), the directors shall be divided into three classes
designated as Class I, Class II and Class III, respectively. Directors shall be
assigned to each class in accordance with a resolution or resolutions adopted by
the Board of Directors. At the first annual meeting of stockholders following
the closing of the Initial Public Offering, the term of office of the Class I
directors shall expire and Class I directors shall be elected for a full term of
three years. At the second annual meeting of stockholders following the closing
of the Initial Public Offering, the term of office of the Class II directors
shall expire and Class II directors shall be elected for a full term of three
years. At the third annual meeting of stockholders following the closing of the
Initial Public Offering, the term of office of the Class III directors shall
expire and Class III directors shall be elected for a full term of three years.
At each succeeding annual meeting of stockholders, directors shall be elected
for a full term of three years to succeed the directors of the class whose terms
expire at such annual meeting.
Notwithstanding the foregoing provisions of this section, each director
shall serve until his successor is duly elected and qualified or until his
death, resignation or removal. No decrease in the number of directors
constituting the Board of Directors shall shorten the term of any incumbent
director.
3. Removal of Directors.
a. Neither the Board of Directors nor any individual director
may be removed without cause.
b. Subject to any limitation imposed by law, any individual
director or directors may be removed with cause by the holders of a majority of
the voting power of the corporation entitled to vote at an election of
directors.
4. Vacancies.
a. Subject to the rights of the holders of any series of
Preferred Stock, any vacancies on the Board of Directors resulting from death,
resignation, disqualification, removal or other causes and any newly created
directorships resulting from any increase in the number of directors, shall,
unless the Board of Directors determines by resolution that any such vacancies
or newly created directorships shall be filled by the stockholders, except as
otherwise provided by law, be filled only by the affirmative vote of a majority
of the directors then in office,
4.
<PAGE>
even though less than a quorum of the Board of Directors, and not by the
stockholders. Any director elected in accordance with the preceding sentence
shall hold office for the remainder of the full term of the director for which
the vacancy was created or occurred and until such director's successor shall
have been elected and qualified.
b. 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
Delaware Court of Chancery may, upon application of any stockholder or
stockholders holding at least ten percent (10%) 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 offices as aforesaid, which election shall be governed by Section 211 of the
DGCL.
B.
1. Subject to paragraph (h) of Section 43 of the Bylaws, the Bylaws
may be altered or amended or new Bylaws adopted by the affirmative vote of at
least sixty-six and two-thirds percent (66-2/3%) of the voting power of all of
the then-outstanding shares of the voting stock of the corporation entitled to
vote. The Board of Directors shall also have the power to adopt, amend or repeal
Bylaws.
2. The directors of the corporation need not be elected by written
ballot unless the Bylaws so provide.
3. No action shall be taken by the stockholders of the corporation
except at an annual or special meeting of stockholders called in accordance with
the Bylaws or by written consent of stockholders in accordance with the Bylaws
prior to the closing of the Initial Public Offering and following the closing of
the Initial Public Offering no action shall be taken by the stockholders by
written consent.
4. Advance notice of stockholder nominations for the election of
directors and of business to be brought by stockholders before any meeting of
the stockholders of the corporation shall be given in the manner provided in the
Bylaws of the corporation.
VI.
A. The liability of the directors for monetary damages shall be
eliminated to the fullest extent under applicable law.
B. Any repeal or modification of this Article VI shall be prospective and
shall not affect the rights under this Article VI in effect at the time of the
alleged occurrence of any act or omission to act giving rise to liability or
indemnification.
5.
<PAGE>
VII.
A. The corporation reserves the right to amend, alter, change or repeal
any provision contained in this Certificate of Incorporation, in the manner now
or hereafter prescribed by statute, except as provided in paragraph B. of this
Article VII, and all rights conferred upon the stockholders herein are granted
subject to this reservation.
B. Notwithstanding any other provision of this Certificate of
Incorporation or any provision of law which might otherwise permit a lesser vote
or no vote, but in addition to any affirmative vote of the holders of any
particular class or series of the voting stock required by law, this Certificate
of Incorporation or any Preferred Stock Designation, the affirmative vote of the
holders of at least sixty-six and two-thirds percent (66-2/3%) of the voting
power of all of the then-outstanding shares of the voting stock, voting together
as a single class, shall be required to alter, amend or repeal Articles V, VI
and VII.
6.
<PAGE>
EXHIBIT 3.2
AMENDED AND RESTATED BYLAWS
OF
TELIK, INC.
(A DELAWARE CORPORATION)
ARTICLE I
OFFICES
Section 1. Registered Office. The registered office of the corporation in
the State of Delaware shall be in the City of Wilmington, County of New Castle.
Section 2. Other Offices. The corporation shall also have and maintain an
office or principal place of business at such place as may be fixed by the Board
of Directors, and may also have offices at such other places, both within and
without the State of Delaware as the Board of Directors may from time to time
determine or the business of the corporation may require.
ARTICLE II
CORPORATE SEAL
Section 3. Corporate Seal. The corporate seal shall consist of a die
bearing the name of the corporation and the inscription, "Corporate Seal-
Delaware." Said seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.
ARTICLE III
STOCKHOLDERS' MEETINGS
Section 4. Place Of Meetings. Meetings of the stockholders of the
corporation shall be held at such place, either within or without the State of
Delaware, as may be designated from time to time by the Board of Directors, or,
if not so designated, then at the office of the corporation required to be
maintained pursuant to Section 2 hereof.
Section 5. Annual Meetings.
(a) The annual meeting of the stockholders of the corporation, for
the purpose of election of directors and for such other business as may lawfully
come before it, shall be held on such date and at such time as may be designated
from time to time by the Board of Directors. 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:
(i) pursuant to the corporation's notice of meeting of stockholders; (ii) by or
at the direction of the Board of Directors; or (iii) by any stockholder of the
corporation who was a
1
<PAGE>
stockholder of record at the time of giving of notice provided for in the
following paragraph, who is entitled to vote at the meeting and who complied
with the notice procedures set forth in Section 5.
(b) At an annual meeting of the stockholders, only such business
shall be conducted as shall have been properly brought before the meeting. For
nominations or other business to be properly brought before an annual meeting by
a stockholder pursuant to clause (iii) of Section 5(a) of these Bylaws, (i) the
stockholder must have given timely notice thereof in writing to the Secretary of
the corporation, (ii) such other business must be a proper matter for
stockholder action under the Delaware General Corporation Law ("DGCL"), (iii) if
the stockholder, or the beneficial owner on whose behalf any such proposal or
nomination is made, has provided the corporation with a Solicitation Notice (as
defined in this Section 5(b)), such stockholder or beneficial owner must, in the
case of a proposal, have delivered a proxy statement and form of proxy to
holders of at least the percentage of the corporation's voting shares required
under applicable law to carry any such proposal, or, in the case of a nomination
or nominations, have delivered a proxy statement and form of proxy to holders of
a percentage of the corporation's voting shares reasonably believed by such
stockholder or beneficial owner to be sufficient to elect the nominee or
nominees proposed to be nominated by such stockholder, and must, in either case,
have included in such materials the Solicitation Notice, and (iv) if no
Solicitation Notice relating thereto has been timely provided pursuant to this
section, the stockholder or beneficial owner proposing such business or
nomination must not have solicited a number of proxies sufficient to have
required the delivery of such a Solicitation Notice under this Section 5. To be
timely, a stockholder's notice shall be delivered to the Secretary at the
principal executive offices of the Corporation not later than the close of
business on the ninetieth (90/th/) day nor earlier than the close of business on
the one hundred twentieth (120/th/) day 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 more than thirty (30) days prior to or
delayed by more than thirty (30) days after the anniversary of the preceding
year's annual meeting, notice by the stockholder to be timely must be so
delivered not earlier than the close of business on the one hundred twentieth
(120/th/) day prior to such annual meeting and not later than the close of
business on the later of the ninetieth (90/th/) day prior to such annual meeting
or the tenth (10/th/) day following the day on which public announcement of the
date of such meeting is first made. In no event shall the public announcement of
an adjournment of an annual meeting commence a new time period for the giving of
a stockholder's notice as described above. Such stockholder's notice shall set
forth: (A) as to each person whom the stockholder proposed 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 in an election contest, or is otherwise required, in each case
pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended
(the "1934 Act") and Rule 14a-11 thereunder (including such person's written
consent to being named in the proxy statement as a nominee and to 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,
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and of such beneficial owner, (ii) the class and number of shares of the
corporation which are owned beneficially and of record by such stockholder and
such beneficial owner, and (iii) whether either such stockholder or beneficial
owner intends to deliver a proxy statement and form of proxy to holders of, in
the case of the proposal, at least the percentage of the corporation's voting
shares required under applicable law to carry the proposal or, in the case of a
nomination or nominations, a sufficient number of holders of the corporation's
voting shares to elect such nominee or nominees (an affirmative statement of
such intent, a "Solicitation Notice").
(c) Notwithstanding anything in the second sentence of Section
5(b) of these Bylaws 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 one hundred (100) days prior to the first anniversary of the preceding
year's annual meeting, a stockholder's notice required by this Section 5 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 tenth (10/th/) day following the day on which such public
announcement is first made by the corporation.
(d) Only such persons who are nominated in accordance with the
procedures set forth in this Section 5 shall be eligible to serve as directors
and only such business shall be conducted at a meeting of stockholders as shall
have been brought before the meeting in accordance with the procedures set forth
in this Section 5. Except as otherwise provided by law, 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, or proposed, as the
case may be, in accordance with the procedures set forth in these Bylaws and, if
any proposed nomination or business is not in compliance with these Bylaws, to
declare that such defective proposal or nomination shall not be presented for
stockholder action at the meeting and shall be disregarded.
(e) Notwithstanding the foregoing provisions of this Section 5, in
order to include information with respect to a stockholder proposal in the proxy
statement and form of proxy for a stockholders' meeting, stockholders must
provide notice as required by the regulations promulgated under the 1934 Act.
Nothing in these Bylaws shall be deemed to affect any rights of stockholders to
request inclusion of proposals in the corporation proxy statement pursuant to
Rule 14a-8 under the 1934 Act.
(f) For purposes of this Section 5, "public announcement" shall
mean disclosure in a press release reported by the Dow Jones News Service,
Associated Press or comparable national news service or in a document publicly
filed by the corporation with the Securities and Exchange Commission pursuant to
Section 13, 14 or 15(d) of the 1934 Act.
Section 6. Special Meetings.
(a) Special meetings of the stockholders of the corporation may be
called, for any purpose or purposes, by (i) the Chairman of the Board of
Directors, (ii) the Chief Executive
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Officer, or (iii) the Board of Directors pursuant to a resolution adopted by a
majority of the total number of authorized directors (whether or not there exist
any vacancies in previously authorized directorships at the time any such
resolution is presented to the Board of Directors for adoption).
(b) If a special meeting is properly called by any person or
persons other than the Board of Directors, the request shall be in writing,
specifying the general nature of the business proposed to be transacted, and
shall be delivered personally or sent by registered mail or by telegraphic or
other facsimile transmission to the Chairman of the Board of Directors, the
Chief Executive Officer, or the Secretary of the corporation. No business may be
transacted at such special meeting otherwise than specified in such notice. The
Board of Directors shall determine the time and place of such special meeting,
which shall be held not less than thirty-five (35) nor more than one hundred
twenty (120) days after the date of the receipt of the request. Upon
determination of the time and place of the meeting, the officer receiving the
request shall cause notice to be given to the stockholders entitled to vote, in
accordance with the provisions of Section 7 of these Bylaws. If the notice is
not given within one hundred (100) days after the receipt of the request, the
person or persons properly requesting the meeting may set the time and place of
the meeting and give the notice. Nothing contained in this paragraph (b) shall
be construed as limiting, fixing, or affecting the time when a meeting of
stockholders called by action of the Board of Directors may be held.
(c) Nominations of persons for election to the Board of Directors
may be made at a special meeting of stockholders at which directors are to be
elected pursuant to the corporation's notice of meeting (i) by or at the
direction of the Board of Directors or (ii) by any stockholder of the
corporation who is a stockholder of record at the time of giving notice provided
for in these Bylaws who shall be entitled to vote at the meeting and who
complies with the notice procedures set forth in this Section 6(c). In the event
the corporation calls a special meeting of stockholders for the purpose of
electing one or more directors to the Board of Directors, any such stockholder
may nominate a person or persons (as the case may be), for election to such
position(s) as specified in the corporation's notice of meeting, if the
stockholder's notice required by Section 5(b) of these Bylaws shall be delivered
to the Secretary at the principal executive offices of the corporation not
earlier than the close of business on the one hundred twentieth (120/th/) day
prior to such special meeting and not later than the close of business on the
later of the ninetieth (90/th/) day prior to such meeting or the tenth (10/th/)
day following the day on which public announcement is first made of the date of
the special meeting and of the nominees proposed by the Board of Directors to be
elected at such meeting. In no event shall the public announcement of an
adjournment of a special meeting commence a new time period for the giving of a
stockholder's notice as described above.
Section 7. Notice Of Meetings. Except as otherwise provided by law or
the Certificate of Incorporation, written notice of each meeting of stockholders
shall be given not less than ten (10) nor more than sixty (60) days before the
date of the meeting to each stockholder entitled to vote at such meeting, such
notice to specify the place, date and hour and purpose or meeting. Notice of the
time, place and purpose of any meeting of stockholders may be waived in writing,
signed by the person entitled to notice thereof, either before or after such
meeting, and will be waived by any stockholder by his attendance thereat in
person or by proxy, except when the stockholder attends a meeting for the
express purpose of
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objecting, at the beginning of the meeting, to the transaction of any business
because the meeting is not lawfully called or convened. Any stockholder so
waiving notice of such meeting shall be bound by the proceedings of any such
meeting in all respects as if due notice thereof had been given.
Section 8. Quorum. At all meetings of stockholders, except where
otherwise provided by statute or by the Certificate of Incorporation, or by
these Bylaws, the presence, in person or by proxy duly authorized, of the
holders of a majority of the outstanding shares of stock entitled to vote shall
constitute a quorum for the transaction of business. In the absence of a quorum,
any meeting of stockholders may be adjourned, from time to time, either by the
chairman of the meeting or by vote of the holders of a majority of the shares
represented thereat, but no other business shall be transacted at such meeting.
The stockholders present at a duly called or convened meeting, at which a quorum
is present, may continue to transact business until adjournment, notwithstanding
the withdrawal of enough stockholders to leave less than a quorum. Except as
otherwise provided by statute, the Certificate of Incorporation or these Bylaws,
in all matters other than the election of directors, the affirmative vote of the
majority of shares present in person or represented by proxy at the meeting and
entitled to vote on the subject matter shall be the act of the stockholders.
Except as otherwise provided by statute, the Certificate of Incorporation or
these Bylaws, directors shall be elected by a plurality of the votes of the
shares present in person or represented by proxy at the meeting and entitled to
vote on the election of directors. Where a separate vote by a class or classes
or series is required, except where otherwise provided by the statute or by the
Certificate of Incorporation or these Bylaws, a majority of the outstanding
shares of such class or classes or series, present in person or represented by
proxy, shall constitute a quorum entitled to take action with respect to that
vote on that matter and, except where otherwise provided by the statute or by
the Certificate of Incorporation or these Bylaws, the affirmative vote of the
majority (plurality, in the case of the election of directors) of the votes cast
by the holders of shares of such class or classes or series shall be the act of
such class or classes or series.
Section 9. Adjournment And Notice Of Adjourned Meetings. Any meeting of
stockholders, whether annual or special, may be adjourned from time to time
either by the chairman of the meeting or by the vote of a majority of the shares
casting votes. When a meeting is adjourned to another time or place, notice
need not be given of the adjourned meeting if the time and place thereof are
announced at the meeting at which the adjournment is taken. At the adjourned
meeting, the corporation may transact any business which might have been
transacted at the original meeting. If the adjournment is for more than thirty
(30) days or if after the adjournment a new record date is fixed for the
adjourned meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting.
Section 10. Voting Rights. For the purpose of determining those
stockholders entitled to vote at any meeting of the stockholders, except as
otherwise provided by law, only persons in whose names shares stand on the stock
records of the corporation on the record date, as provided in Section 12 of
these Bylaws, shall be entitled to vote at any meeting of stockholders. Every
person entitled to vote or execute consents shall have the right to do so either
in person or by an agent or agents authorized by a proxy granted in accordance
with
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Delaware law. An agent so appointed need not be a stockholder. No proxy shall be
voted after three (3) years from its date of creation unless the proxy provides
for a longer period.
Section 11. Joint Owners Of Stock. If shares or other securities having
voting power stand of record in the names of two (2) or more persons, whether
fiduciaries, members of a partnership, joint tenants, tenants in common, tenants
by the entirety, or otherwise, or if two (2) or more persons have the same
fiduciary relationship respecting the same shares, unless the Secretary is given
written notice to the contrary and is furnished with a copy of the instrument or
order appointing them or creating the relationship wherein it is so provided,
their acts with respect to voting shall have the following effect: (a) if only
one (1) votes, his act binds all; (b) if more than one (1) votes, the act of the
majority so voting binds all; (c) if more than one (1) votes, but the vote is
evenly split on any particular matter, each faction may vote the securities in
question proportionally, or may apply to the Delaware Court of Chancery for
relief as provided in the DGCL, Section 217(b). If the instrument filed with
the Secretary shows that any such tenancy is held in unequal interests, a
majority or even-split for the purpose of subsection (c) shall be a majority or
even-split in interest.
Section 12. List Of Stockholders. The Secretary shall prepare and make,
at least ten (10) days before every meeting of stockholders, a complete list of
the stockholders entitled to vote at said meeting, arranged in alphabetical
order, showing the address of each stockholder and the number of shares
registered in the name of each stockholder. Such list shall be open to the
examination of any stockholder, for any purpose germane to the meeting, during
ordinary business hours, for a period of at least ten (10) days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not
specified, at the place where the meeting is to be held. The list shall be
produced and kept at the time and place of meeting during the whole time thereof
and may be inspected by any stockholder who is present.
Section 13. Action Without Meeting.
(a) Unless otherwise provided in the Certificate of Incorporation,
any action required by statute to be taken at any annual or special meeting of
the stockholders, or any action which may be taken at any annual or special
meeting of the stockholders, may be taken without a meeting, without prior
notice and without a vote, if a consent in writing, setting forth the action so
taken, shall be signed by the holders of outstanding stock having not less than
the minimum number of votes that would be necessary to authorize or take such
action at a meeting at which all shares entitled to vote thereon were present
and voted.
(b) Every written consent shall bear the date of signature of each
stockholder who signs the consent, and no written consent shall be effective to
take the corporate action referred to therein unless, within sixty (60) days of
the earliest dated consent delivered to the corporation in the manner herein
required, written consents signed by a sufficient number of stockholders to take
action are delivered to the corporation by delivery to its registered office in
the State of Delaware, its principal place of business or an officer or agent of
the corporation having custody of the book in which proceedings of meetings of
stockholders are recorded.
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Delivery made to a corporation's registered office shall be by hand or by
certified or registered mail, return receipt requested.
(c) Prompt notice of the taking of the corporate action without a
meeting by less than unanimous written consent shall be given to those
stockholders who have not consented in writing and who, if the action had been
taken at a meeting, would have been entitled to notice of the meeting if the
record date for such meeting had been the date that written consents signed by a
sufficient number of stockholders to take action were delivered to the
corporation as provided in Section 228(c) of the DGCL. If the action which is
consented to is such as would have required the filing of a certificate under
any section of the DGCL if such action had been voted on by stockholders at a
meeting thereof, then the certificate filed under such section shall state, in
lieu of any statement required by such section concerning any vote of
stockholders, that written consent has been given in accordance with Section 228
of the DGCL.
(d) Notwithstanding the foregoing, no such action by written
consent may be taken following the closing of the initial public offering
pursuant to an effective registration statement under the Securities Act of
1933, as amended (the "1933 Act"), covering the offer and sale of Common Stock
of the corporation (the "Initial Public Offering").
Section 14. Organization.
(a) At every meeting of stockholders, the Chairman of the Board of
Directors, or, if a Chairman has not been appointed or is absent, the President,
or, if the President is absent, a chairman of the meeting chosen by a majority
in interest of the stockholders entitled to vote, present in person or by proxy,
shall act as chairman. The Secretary, or, in his absence, an Assistant
Secretary directed to do so by the President, shall act as secretary of the
meeting.
(b) The Board of Directors of the corporation shall be entitled to
make such rules or regulations for the conduct of meetings of stockholders as it
shall deem necessary, appropriate or convenient. Subject to such rules and
regulations of the Board of Directors, if any, the chairman of the meeting shall
have the right and authority to prescribe such rules, regulations and procedures
and to do all such acts as, in the judgment of such chairman, are necessary,
appropriate or convenient for the proper conduct of the meeting, including,
without limitation, establishing an agenda or order of business for the meeting,
rules and procedures for maintaining order at the meeting and the safety of
those present, limitations on participation in such meeting to stockholders of
record of the corporation and their duly authorized and constituted proxies and
such other persons as the chairman shall permit, restrictions on entry to the
meeting after the time fixed for the commencement thereof, limitations on the
time allotted to questions or comments by participants and regulation of the
opening and closing of the polls for balloting on matters which are to be voted
on by ballot. Unless and to the extent determined by the Board of Directors or
the chairman of the meeting, meetings of stockholders shall not be required to
be held in accordance with rules of parliamentary procedure.
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ARTICLE IV
DIRECTORS
Section 15. Number And Term Of Office. The authorized number of directors
of the corporation shall be fixed in accordance with the Certificate of
Incorporation. Directors need not be stockholders unless so required by the
Certificate of Incorporation. If for any cause, the directors shall not have
been elected at an annual meeting, they may be elected as soon thereafter as
convenient at a special meeting of the stockholders called for that purpose in
the manner provided in these Bylaws.
Section 16. Powers. The powers of the corporation shall be exercised, its
business conducted and its property controlled by the Board of Directors, except
as may be otherwise provided by statute or by the Certificate of Incorporation.
Section 17. Classes of Directors. Subject to the rights of the holders of
any series of Preferred Stock to elect additional directors under specified
circumstances, following the closing of the Initial Public Offering, the
directors shall be divided into three classes designated as Class I, Class II
and Class III, respectively. Directors shall be assigned to each class in
accordance with a resolution or resolutions adopted by the Board of Directors.
At the first annual meeting of stockholders following the closing of the Initial
Public Offering, the term of office of the Class I directors shall expire and
Class I directors shall be elected for a full term of three years. At the
second annual meeting of stockholders following the closing of the Initial
Public Offering, the term of office of the Class II directors shall expire and
Class II directors shall be elected for a full term of three years. At the
third annual meeting of stockholders following the closing of the Initial Public
Offering, the term of office of the Class III directors shall expire and Class
III directors shall be elected for a full term of three years. At each
succeeding annual meeting of stockholders, directors shall be elected for a full
term of three years to succeed the directors of the class whose terms expire at
such annual meeting.
Notwithstanding the foregoing provisions of this section, each director
shall serve until his successor is duly elected and qualified or until his
death, resignation or removal. No decrease in the number of directors
constituting the Board of Directors shall shorten the term of any incumbent
director.
Section 18. Vacancies.
(a) Unless otherwise provided in the Certificate of Incorporation,
any vacancies on the Board of Directors resulting from death, resignation,
disqualification, removal or other causes and any newly created directorships
resulting from any increase in the number of directors shall, unless the Board
of Directors determines by resolution that any such vacancies or newly created
directorships shall be filled by stockholders, be filled only by the affirmative
vote of a majority of the directors then in office, even though less than a
quorum of the Board of Directors. Any director elected in accordance with the
preceding sentence shall hold office for the remainder of the full term of the
director for which the vacancy was created or occurred and until such director's
successor shall have been elected and qualified. A vacancy in the Board of
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Directors shall be deemed to exist under this Section 18 in the case of the
death, removal or resignation of any director.
(b) 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
Delaware Court of Chancery may, upon application of any stockholder or
stockholders holding at least ten percent (10%) 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 offices as aforesaid, which election shall be governed by Section 211 of the
DGCL.
Section 19. Resignation. Any director may resign at any time by
delivering his written resignation to the Secretary, such resignation to specify
whether it will be effective at a particular time, upon receipt by the Secretary
or at the pleasure of the Board of Directors. If no such specification is made,
it shall be deemed effective at the pleasure of the Board of Directors. When one
or more directors shall resign from the Board of Directors, effective at a
future date, a majority of the directors then in office, including those who
have so resigned, shall have power to fill such vacancy or vacancies, the vote
thereon to take effect when such resignation or resignations shall become
effective, and each Director so chosen shall hold office for the unexpired
portion of the term of the Director whose place shall be vacated and until his
successor shall have been duly elected and qualified.
Section 20. Removal.
(a) Neither the Board of Directors nor any individual director may
be removed without cause.
(b) Subject to any limitation imposed by law, any individual
director or directors may be removed with cause by the affirmative vote of a
majority of the voting power of the corporation entitled to vote at an election
of directors.
Section 21. Meetings.
(a) Annual Meetings. The annual meeting of the Board of Directors
shall be held immediately before or after the annual meeting of stockholders and
at the place where such meeting is held. No notice of an annual meeting of the
Board of Directors shall be necessary and such meeting shall be held for the
purpose of electing officers and transacting such other business as may lawfully
come before it.
(b) Regular Meetings. Unless otherwise restricted by the
Certificate of Incorporation, regular meetings of the Board of Directors may be
held at any time or date and at any place within or without the State of
Delaware which has been designated by the Board of Directors and publicized
among all directors. No formal notice shall be required for regular meetings of
the Board of Directors.
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(c) Special Meetings. Unless otherwise restricted by the
Certificate of Incorporation, special meetings of the Board of Directors may be
held at any time and place within or without the State of Delaware whenever
called by the Chairman of the Board, the President or any two of the directors.
(d) Telephone Meetings. Any member of the Board of Directors, or
of any committee thereof, may participate in a meeting by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and participation in a meeting
by such means shall constitute presence in person at such meeting.
(e) Notice of Meetings. Notice of the time and place of all
meetings of the Board of Directors shall be orally or in writing, by telephone,
including a voice messaging system or other system or technology designed to
record and communicate messages, facsimile, telegraph or telex, or by electronic
mail or other electronic means, during normal business hours, at least twenty-
four (24) hours before the date and time of the meeting, or sent in writing to
each director by first class mail, charges prepaid, at least three (3) days
before the date of the meeting. Notice of any meeting may be waived in writing
at any time before or after the meeting and will be waived by any director by
attendance thereat, except when the director attends the meeting for the express
purpose of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened.
(f) Waiver of Notice. The transaction of all business at any
meeting of the Board of Directors, or any committee thereof, however called or
noticed, or wherever held, shall be as valid as though had at a meeting duly
held after regular call and notice, if a quorum be present and if, either before
or after the meeting, each of the directors not present shall sign a written
waiver of notice. All such waivers shall be filed with the corporate records or
made a part of the minutes of the meeting.
Section 22. Quorum And Voting.
(a) Unless the Certificate of Incorporation requires a greater
number and except with respect to indemnification questions arising under
Section 43 hereof, for which a quorum shall be one-third of the exact number of
directors fixed from time to time in accordance with the Certificate of
Incorporation, a quorum of the Board of Directors shall consist of a majority of
the exact number of directors fixed from time to time by the Board of Directors
in accordance with the Certificate of Incorporation; provided, however, at any
meeting whether a quorum be present or otherwise, a majority of the directors
present may adjourn from time to time until the time fixed for the next regular
meeting of the Board of Directors, without notice other than by announcement at
the meeting.
(b) At each meeting of the Board of Directors at which a quorum is
present, all questions and business shall be determined by the affirmative vote
of a majority of the directors present, unless a different vote be required by
law, the Certificate of Incorporation or these Bylaws.
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Section 23. Action Without Meeting. Unless otherwise restricted by the
Certificate of Incorporation or these Bylaws, any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting, if all members of the Board of Directors or
committee, as the case may be, consent thereto in writing, and such writing or
writings are filed with the minutes of proceedings of the Board of Directors or
committee.
Section 24. Fees And Compensation. Directors shall be entitled to such
compensation for their services as may be approved by the Board of Directors,
including, if so approved, by resolution of the Board of Directors, a fixed sum
and expenses of attendance, if any, for attendance at each regular or special
meeting of the Board of Directors and at any meeting of a committee of the Board
of Directors. Nothing herein contained shall be construed to preclude any
director from serving the corporation in any other capacity as an officer,
agent, employee, or otherwise and receiving compensation therefor.
Section 25. Committees.
(a) Executive Committee. The Board of Directors may appoint an Executive
Committee to consist of one (1) or more members of the Board of Directors. The
Executive Committee, to the extent permitted by law and provided in the
resolution of the Board of Directors shall have and may exercise all the powers
and authority of the Board of Directors in the management of the business and
affairs of the corporation, 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 (i) approving or adopting, or recommending to
the stockholders, any action or matter expressly required by the DGCL to be
submitted to stockholders for approval, or (ii) adopting, amending or repealing
any bylaw of the corporation.
(b) Other Committees. The Board of Directors may, from time to time,
appoint such other committees as may be permitted by law. Such other committees
appointed by the Board of Directors shall consist of one (1) or more members of
the Board of Directors and shall have such powers and perform such duties as may
be prescribed by the resolution or resolutions creating such committees, but in
no event shall any such committee have the powers denied to the Executive
Committee in these Bylaws.
(c) Term. Each member of a committee of the Board of Directors shall serve
a term on the committee coexistent with such member's term on the Board of
Directors. The Board of Directors, subject to any requirements of any
outstanding series of Preferred Stock and the provisions of subsections (a) or
(b) of this Bylaw, may at any time increase or decrease the number of members of
a committee or terminate the existence of a committee. The membership of a
committee member shall terminate on the date of his death or voluntary
resignation from the committee or from the Board of Directors. The Board of
Directors may at any time for any reason remove any individual committee member
and the Board of Directors may fill any committee vacancy created by death,
resignation, removal or increase in the number of members of the committee. The
Board of Directors may designate one or more directors as alternate members of
any committee, who may replace any absent or disqualified member at any meeting
of the committee, and, in addition, in the absence or disqualification of any
member of a
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committee, the member or members thereof present at any meeting and not
disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any such absent or disqualified member.
(d) Meetings. Unless the Board of Directors shall otherwise provide,
regular meetings of the Executive Committee or any other committee appointed
pursuant to this Section 25 shall be held at such times and places as are
determined by the Board of Directors, or by any such committee, and when notice
thereof has been given to each member of such committee, no further notice of
such regular meetings need be given thereafter. Special meetings of any such
committee may be held at any place which has been determined from time to time
by such committee, and may be called by any director who is a member of such
committee, upon written notice to the members of such committee of the time and
place of such special meeting given in the manner provided for the giving of
written notice to members of the Board of Directors of the time and place of
special meetings of the Board of Directors. Notice of any special meeting of
any committee may be waived in writing at any time before or after the meeting
and will be waived by any director by attendance thereat, except when the
director attends such special meeting for the express purpose of objecting, at
the beginning of the meeting, to the transaction of any business because the
meeting is not lawfully called or convened. A majority of the authorized number
of members of any such committee shall constitute a quorum for the transaction
of business, and the act of a majority of those present at any meeting at which
a quorum is present shall be the act of such committee.
Section 26. Organization. At every meeting of the directors, the Chairman of
the Board of Directors, or, if a Chairman has not been appointed or is absent,
the President (if a director), or if the President is absent, the most senior
Vice President (if a director), or, in the absence of any such person, a
chairman of the meeting chosen by a majority of the directors present, shall
preside over the meeting. The Secretary, or in his absence, any Assistant
Secretary directed to do so by the President, shall act as secretary of the
meeting.
ARTICLE V
OFFICERS
Section 27. Officers Designated. The officers of the corporation shall
include, if and when designated by the Board of Directors, the Chairman of the
Board of Directors, the Chief Executive Officer, the President, one or more Vice
Presidents, the Secretary, the Chief Financial Officer, the Treasurer and the
Controller, all of whom shall be elected at the annual organizational meeting of
the Board of Directors. The Board of Directors may also appoint one or more
Assistant Secretaries, Assistant Treasurers, Assistant Controllers and such
other officers and agents with such powers and duties as it shall deem
necessary. The Board of Directors may assign such additional titles to one or
more of the officers as it shall deem appropriate. Any one person may hold any
number of offices of the corporation at any one time unless specifically
prohibited therefrom by law. The salaries and other compensation of the
officers of the corporation shall be fixed by or in the manner designated by the
Board of Directors.
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Section 28. Tenure And Duties Of Officers.
(a) General. All officers shall hold office at the pleasure of the Board
of Directors and until their successors shall have been duly elected and
qualified, unless sooner removed. Any officer elected or appointed by the Board
of Directors may be removed at any time by the Board of Directors. If the
office of any officer becomes vacant for any reason, the vacancy may be filled
by the Board of Directors.
(b) Duties of Chairman of the Board of Directors. The Chairman of the
Board of Directors, when present, shall preside at all meetings of the
stockholders and the Board of Directors. The Chairman of the Board of Directors
shall perform other duties commonly incident to his office and shall also
perform such other duties and have such other powers, as the Board of Directors
shall designate from time to time. If there is no President, then the Chairman
of the Board of Directors shall also serve as the Chief Executive Officer of the
corporation and shall have the powers and duties prescribed in paragraph (c) of
this Section 28.
(c) Duties of President. The President shall preside at all meetings of
the stockholders and at all meetings of the Board of Directors, unless the
Chairman of the Board of Directors has been appointed and is present. Unless
some other officer has been elected Chief Executive Officer of the corporation,
the President shall be the chief executive officer of the corporation and shall,
subject to the control of the Board of Directors, have general supervision,
direction and control of the business and officers of the corporation. The
President shall perform other duties commonly incident to his office and shall
also perform such other duties and have such other powers, as the Board of
Directors shall designate from time to time.
(d) Duties of Vice Presidents. The Vice Presidents may assume and perform
the duties of the President in the absence or disability of the President or
whenever the office of President is vacant. The Vice Presidents shall perform
other duties commonly incident to their office and shall also perform such other
duties and have such other powers as the Board of Directors or the President
shall designate from time to time.
(e) Duties of Secretary. The Secretary shall attend all meetings of the
stockholders and of the Board of Directors and shall record all acts and
proceedings thereof in the minute book of the corporation. The Secretary shall
give notice in conformity with these Bylaws of all meetings of the stockholders
and of all meetings of the Board of Directors and any committee thereof
requiring notice. The Secretary shall perform all other duties given him in
these Bylaws and other duties commonly incident to his office and shall also
perform such other duties and have such other powers, as the Board of Directors
shall designate from time to time. The President may direct any Assistant
Secretary to assume and perform the duties of the Secretary in the absence or
disability of the Secretary, and each Assistant Secretary shall perform other
duties commonly incident to his office and shall also perform such other duties
and have such other powers as the Board of Directors or the President shall
designate from time to time.
(f) Duties of Chief Financial Officer. The Chief Financial Officer shall
keep or cause to be kept the books of account of the corporation in a thorough
and proper manner and shall render statements of the financial affairs of the
corporation in such form and as often as
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required by the Board of Directors or the President. The Chief Financial
Officer, subject to the order of the Board of Directors, shall have the custody
of all funds and securities of the corporation. The Chief Financial Officer
shall perform other duties commonly incident to his office and shall also
perform such other duties and have such other powers as the Board of Directors
or the President shall designate from time to time. The President may direct the
Treasurer or any Assistant Treasurer, or the Controller or any Assistant
Controller to assume and perform the duties of the Chief Financial Officer in
the absence or disability of the Chief Financial Officer, and each Treasurer and
Assistant Treasurer and each Controller and Assistant Controller shall perform
other duties commonly incident to his office and shall also perform such other
duties and have such other powers as the Board of Directors or the President
shall designate from time to time.
Section 29. Delegation Of Authority. The Board of Directors may from time to
time delegate the powers or duties of any officer to any other officer or agent,
notwithstanding any provision hereof.
Section 30. Resignations. Any officer may resign at any time by giving
written notice to the Board of Directors or to the President or to the
Secretary. Any such resignation shall be effective when received by the person
or persons to whom such notice is given, unless a later time is specified
therein, in which event the resignation shall become effective at such later
time. Unless otherwise specified in such notice, the acceptance of any such
resignation shall not be necessary to make it effective. Any resignation shall
be without prejudice to the rights, if any, of the corporation under any
contract with the resigning officer.
Section 31. Removal. Any officer may be removed from office at any time,
either with or without cause, by the affirmative vote of a majority of the
directors in office at the time, or by the unanimous written consent of the
directors in office at the time, or by any committee or superior officers upon
whom such power of removal may have been conferred by the Board of Directors.
ARTICLE VI
EXECUTION OF CORPORATE INSTRUMENTS AND VOTING OF SECURITIES OWNED BY THE
CORPORATION
Section 32. Execution Of Corporate Instruments. The Board of Directors may,
in its discretion, determine the method and designate the signatory officer or
officers, or other person or persons, to execute on behalf of the corporation
any corporate instrument or document, or to sign on behalf of the corporation
the corporate name without limitation, or to enter into contracts on behalf of
the corporation, except where otherwise provided by law or these Bylaws, and
such execution or signature shall be binding upon the corporation.
All checks and drafts drawn on banks or other depositaries on funds to the
credit of the corporation or in special accounts of the corporation shall be
signed by such person or persons as the Board of Directors shall authorize so to
do.
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Unless authorized or ratified by the Board of Directors or within the agency
power of an officer, no officer, agent or employee shall have any power or
authority to bind the corporation by any contract or engagement or to pledge its
credit or to render it liable for any purpose or for any amount.
Section 33. Voting Of Securities Owned By The Corporation. All stock and
other securities of other corporations owned or held by the corporation for
itself, or for other parties in any capacity, shall be voted, and all proxies
with respect thereto shall be executed, by the person authorized so to do by
resolution of the Board of Directors, or, in the absence of such authorization,
by the Chairman of the Board of Directors, the Chief Executive Officer, the
President, or any Vice President.
ARTICLE VII
SHARES OF STOCK
Section 34. Form And Execution Of Certificates. Certificates for the shares
of stock of the corporation shall be in such form as is consistent with the
Certificate of Incorporation and applicable law. Every holder of stock in the
corporation shall be entitled to have a certificate signed by or in the name of
the corporation by the Chairman of the Board of Directors, or the President or
any Vice President and by the Treasurer or Assistant Treasurer or the Secretary
or Assistant Secretary, certifying the number of shares owned by him in the
corporation. Any or all of the signatures on the certificate may be facsimiles.
In case any officer, transfer agent, or registrar who has signed or whose
facsimile signature has been placed upon a certificate shall have ceased to be
such officer, transfer agent, or registrar before such certificate is issued, it
may be issued with the same effect as if he were such officer, transfer agent,
or registrar at the date of issue. Each certificate shall state upon the face
or back thereof, in full or in summary, all of the powers, designations,
preferences, and rights, and the limitations or restrictions of the shares
authorized to be issued or shall, except as otherwise required by law, set forth
on the face or back a statement that the corporation will furnish without charge
to each stockholder who so requests the powers, designations, preferences and
relative, participating, optional, or other special rights of each class of
stock or series thereof and the qualifications, limitations or restrictions of
such preferences and/or rights. Within a reasonable time after the issuance or
transfer of uncertificated stock, the corporation shall send to the registered
owner thereof a written notice containing the information required to be set
forth or stated on certificates pursuant to this section or otherwise required
by law or with respect to this section a statement that the corporation will
furnish without charge to each stockholder who so requests the powers,
designations, preferences and relative participating, optional or other special
rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights. Except as
otherwise expressly provided by law, the rights and obligations of the holders
of certificates representing stock of the same class and series shall be
identical.
Section 35. Lost Certificates. A new certificate or certificates shall be
issued in place of any certificate or certificates theretofore issued by the
corporation alleged to have been lost, stolen, or destroyed, upon the making of
an affidavit of that fact by the person claiming the certificate of stock to be
lost, stolen, or destroyed. The corporation may require, as a condition
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precedent to the issuance of a new certificate or certificates, the owner of
such lost, stolen, or destroyed certificate or certificates, or his legal
representative, to agree to indemnify the corporation in such manner as it shall
require or to give the corporation a surety bond in such form and amount as it
may direct as indemnity against any claim that may be made against the
corporation with respect to the certificate alleged to have been lost, stolen,
or destroyed.
Section 36. Transfers.
(a) Transfers of record of shares of stock of the corporation shall be made
only upon its books by the holders thereof, in person or by attorney duly
authorized, and upon the surrender of a properly endorsed certificate or
certificates for a like number of shares.
(b) The corporation shall have power to enter into and perform any
agreement with any number of stockholders of any one or more classes of stock of
the corporation to restrict the transfer of shares of stock of the corporation
of any one or more classes owned by such stockholders in any manner not
prohibited by the DGCL.
Section 37. Fixing Record Dates.
(a) In order that the corporation may determine the stockholders entitled
to notice of or to vote at any meeting of stockholders or any adjournment
thereof, the Board of Directors may fix, in advance, a record date, which record
date shall not precede the date upon which the resolution fixing the record date
is adopted by the Board of Directors, and which record date shall, subject to
applicable law, not be more than sixty (60) nor less than ten (10) days before
the date of such meeting. If no record date is fixed by the Board of Directors,
the record date for determining stockholders entitled to notice of or to vote at
a meeting of stockholders shall be at the close of business on the day next
preceding the day on which notice is given, or if notice is waived, at the close
of business on the day next preceding the day on which the meeting is held. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting; provided,
however, that the Board of Directors may fix a new record date for the adjourned
meeting.
(b) Prior to the Initial Public Offering, in order that the corporation may
determine the stockholders entitled to consent to corporate action in writing
without a meeting, the Board of Directors may fix a record date, which record
date shall not precede the date upon which the resolution fixing the record date
is adopted by the Board of Directors, and which date shall not be more than ten
(10) days after the date upon which the resolution fixing the record date is
adopted by the Board of Directors. Any stockholder of record seeking to have
the stockholders authorize or take corporate action by written consent shall, by
written notice to the Secretary, request the Board of Directors to fix a record
date. The Board of Directors shall promptly, but in all events within ten (10)
days after the date on which such a request is received, adopt a resolution
fixing the record date. If no record date has been fixed by the Board of
Directors within ten (10) days of the date on which such a request is received,
the record date for determining stockholders entitled to consent to corporate
action in writing without a meeting, when no prior action by the Board of
Directors is required by applicable law, shall be the first date on which a
signed written consent setting forth the action taken or proposed to be taken is
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delivered to the corporation by delivery to its registered office in the State
of Delaware, its principal place of business or an officer or agent of the
corporation having custody of the book in which proceedings of meetings of
stockholders are recorded. Delivery made to the corporation's registered office
shall be by hand or by certified or registered mail, return receipt requested.
If no record date has been fixed by the Board of Directors and prior action by
the Board of Directors is required by law, the record date for determining
stockholders entitled to consent to corporate action in writing without a
meeting shall be at the close of business on the day on which the Board of
Directors adopts the resolution taking such prior action.
(c) In order that the corporation may determine the stockholders entitled
to receive payment of any dividend or other distribution or allotment of any
rights or the stockholders entitled to exercise any rights in respect of any
change, conversion or exchange of stock, or for the purpose of any other lawful
action, the Board of Directors may fix, in advance, a record date, which record
date shall not precede the date upon which the resolution fixing the record date
is adopted, and which record date shall be not more than sixty (60) days prior
to such action. If no record date is fixed, the record date for determining
stockholders for any such purpose shall be at the close of business on the day
on which the Board of Directors adopts the resolution relating thereto.
Section 38. Registered Stockholders. The corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner, and shall not be
bound to recognize any equitable or other claim to or interest in such share or
shares on the part of any other person whether or not it shall have express or
other notice thereof, except as otherwise provided by the laws of Delaware.
ARTICLE VIII
OTHER SECURITIES OF THE CORPORATION
Section 39. Execution Of Other Securities. All bonds, debentures and other
corporate securities of the corporation, other than stock certificates (covered
in Section 34), may be signed by the Chairman of the Board of Directors, the
President or any Vice President, or such other person as may be authorized by
the Board of Directors, and the corporate seal impressed thereon or a facsimile
of such seal imprinted thereon and attested by the signature of the Secretary or
an Assistant Secretary, or the Chief Financial Officer or Treasurer or an
Assistant Treasurer; provided, however, that where any such bond, debenture or
other corporate security shall be authenticated by the manual signature, or
where permissible facsimile signature, of a trustee under an indenture pursuant
to which such bond, debenture or other corporate security shall be issued, the
signatures of the persons signing and attesting the corporate seal on such bond,
debenture or other corporate security may be the imprinted facsimile of the
signatures of such persons. Interest coupons appertaining to any such bond,
debenture or other corporate security, authenticated by a trustee as aforesaid,
shall be signed by the Treasurer or an Assistant Treasurer of the corporation or
such other person as may be authorized by the Board of Directors, or bear
imprinted thereon the facsimile signature of such person. In case any officer
who shall have signed or attested any bond, debenture or other corporate
security, or whose facsimile signature shall appear thereon or on any such
interest coupon, shall have ceased to be
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such officer before the bond, debenture or other corporate security so signed or
attested shall have been delivered, such bond, debenture or other corporate
security nevertheless may be adopted by the corporation and issued and delivered
as though the person who signed the same or whose facsimile signature shall have
been used thereon had not ceased to be such officer of the corporation.
ARTICLE IX
DIVIDENDS
Section 40. Declaration Of Dividends. Dividends upon the capital stock of
the corporation, subject to the provisions of the Certificate of Incorporation
and applicable law, if any, may be declared by the Board of Directors pursuant
to law at any regular or special meeting. Dividends may be paid in cash, in
property, or in shares of the capital stock, subject to the provisions of the
Certificate of Incorporation and applicable law.
Section 41. Dividend Reserve. Before payment of any dividend, there may be
set aside out of any funds of the corporation available for dividends such sum
or sums as the Board of Directors from time to time, in their absolute
discretion, think proper as a reserve or reserves to meet contingencies, or for
equalizing dividends, or for repairing or maintaining any property of the
corporation, or for such other purpose as the Board of Directors shall think
conducive to the interests of the corporation, and the Board of Directors may
modify or abolish any such reserve in the manner in which it was created.
ARTICLE X
FISCAL YEAR
Section 42. Fiscal Year. The fiscal year of the corporation shall be fixed
by resolution of the Board of Directors.
ARTICLE XI
INDEMNIFICATION
Section 43. Indemnification Of Directors, Executive Officers, Other Officers,
Employees And Other Agents.
(a) Directors And Executive Officers. The corporation shall indemnify its
directors and executive officers (for the purposes of this Article XI,
"executive officers" shall have the meaning defined in Rule 3b-7 promulgated
under the 1934 Act) to the fullest extent not prohibited by the DGCL or any
other applicable law; provided, however, that the corporation may modify the
extent of such indemnification by individual contracts with its directors and
executive officers; and, provided, further, that the corporation shall not be
required to indemnify any director or executive officer in connection with any
proceeding (or part thereof) initiated by such person unless (i) such
indemnification is expressly required to be made by law, (ii) the proceeding was
authorized by the Board of Directors of the corporation, (iii) such
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indemnification is provided by the corporation, in its sole discretion, pursuant
to the powers vested in the corporation under the DGCL or any other applicable
law or (iv) such indemnification is required to be made under subsection (d).
(b) Other Officers, Employees and Other Agents. The corporation shall have
power to indemnify its other officers, employees and other agents as set forth
in the DGCL or any other applicable law. The Board of Directors shall have the
power to delegate the determination of whether indemnification shall be given to
any such person except executive officers to such officers or other persons as
the Board of Directors shall determine.
(c) Expenses. The corporation shall advance to any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that he is or was a director or executive
officer, of the corporation, or is or was serving at the request of the
corporation as a director or executive officer of another corporation,
partnership, joint venture, trust or other enterprise, prior to the final
disposition of the proceeding, promptly following request therefor, all expenses
incurred by any director in connection with such proceeding upon receipt of an
undertaking by or on behalf of such person to repay said amounts if it should be
determined ultimately that such person is not entitled to be indemnified under
this Section 43 or otherwise.
Notwithstanding the foregoing, unless otherwise determined pursuant to
paragraph (e) of this Section 43, no advance shall be made by the corporation to
an executive officer of the corporation (except by reason of the fact that such
executive officer is or was a director of the corporation in which event this
paragraph shall not apply) in any action, suit or proceeding, whether civil,
criminal, administrative or investigative, if a determination is reasonably and
promptly made (i) by the Board of Directors by a majority vote of a quorum
consisting of directors who were not parties to the proceeding, or (ii) if such
quorum is not obtainable, or, even if obtainable, a quorum of disinterested
directors so directs, by independent legal counsel in a written opinion, that
the facts known to the decision-making party at the time such determination is
made demonstrate clearly and convincingly that such person acted in bad faith or
in a manner that such person did not believe to be in or not opposed to the best
interests of the corporation.
(d) Enforcement. Without the necessity of entering into an express contract,
all rights to indemnification and advances to directors and executive officers
under this Bylaw shall be deemed to be contractual rights and be effective to
the same extent and as if provided for in a contract between the corporation and
the director or executive officer Any right to indemnification or advances
granted by this Section 43 to a director or executive officer shall be
enforceable by or on behalf of the person holding such right in any court of
competent jurisdiction if (i) the claim for indemnification or advances is
denied, in whole or in part, or (ii) no disposition of such claim is made within
ninety (90) days of request therefor. The claimant in such enforcement action,
if successful in whole or in part, shall be entitled to be paid also the expense
of prosecuting his claim. In connection with any claim for indemnification, the
corporation shall be entitled to raise as a defense to any such action that the
claimant has not met the standards of conduct that make it permissible under the
DGCL or any other applicable law for the corporation to indemnify the claimant
for the amount claimed. In connection with any
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claim by an executive officer of the corporation (except in any action, suit or
proceeding, whether civil, criminal, administrative or investigative, by reason
of the fact that such executive officer is or was a director of the corporation)
for advances, the corporation shall be entitled to raise a defense as to any
such action clear and convincing evidence that such person acted in bad faith or
in a manner that such person did not believe to be in or not opposed to the best
interests of the corporation, or with respect to any criminal action or
proceeding that such person acted without reasonable cause to believe that his
conduct was lawful. Neither the failure of the corporation (including its Board
of Directors, independent legal counsel or its stockholders) to have made a
determination prior to the commencement of such action that indemnification of
the claimant is proper in the circumstances because he has met the applicable
standard of conduct set forth in the DGCL or any other applicable 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. In
any suit brought by a director or executive officer to enforce a right to
indemnification or to an advancement of expenses hereunder, the burden of
proving that the director or executive officer is not entitled to be
indemnified, or to such advancement of expenses, under this Section 43 or
otherwise shall be on the corporation.
(e) Non-Exclusivity of Rights. The rights conferred on any person by this
Bylaw shall not be exclusive of any other right which such person may have or
hereafter acquire under any applicable statute, provision of the Certificate of
Incorporation, Bylaws, agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in his official capacity and as to
action in another capacity while holding office. The corporation is
specifically authorized to enter into individual contracts with any or all of
its directors, officers, employees or agents respecting indemnification and
advances, to the fullest extent not prohibited by the Delaware General
Corporation Law, or by any other applicable law.
(f) Survival of Rights. The rights conferred on any person by this Bylaw shall
continue as to a person who has ceased to be a director, officer, employee or
other agent and shall inure to the benefit of the heirs, executors and
administrators of such a person.
(g) Insurance. To the fullest extent permitted by the DGCL or any other
applicable law, the corporation, upon approval by the Board of Directors, may
purchase insurance on behalf of any person required or permitted to be
indemnified pursuant to this Section 43.
(h) Amendments. Any repeal or modification of this Section 43 shall only be
prospective and shall not affect the rights under this Bylaw in effect at the
time of the alleged occurrence of any action or omission to act that is the
cause of any proceeding against any agent of the corporation.
(i) Saving Clause. If this Bylaw or any portion hereof shall be invalidated
on any ground by any court of competent jurisdiction, then the corporation shall
nevertheless indemnify each director and executive officer to the full extent
not prohibited by any applicable portion of this Section 43 that shall not have
been invalidated, or by any other applicable law. If
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this Section 43 shall be invalid due to the application of the indemnification
provisions of another jurisdiction, then the corporation shall indemnify each
director and executive officer to the full extent under any other applicable
law.
(j) Certain Definitions. For the purposes of this Bylaw, the following
definitions shall apply:
(1) The term "proceeding" shall be broadly construed and shall include,
without limitation, the investigation, preparation, prosecution, defense,
settlement, arbitration and appeal of, and the giving of testimony in, any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative.
(2) The term "expenses" shall be broadly construed and shall include,
without limitation, court costs, attorneys' fees, witness fees, fines, amounts
paid in settlement or judgment and any other costs and expenses of any nature or
kind incurred in connection with any proceeding.
(3) The term the "corporation" shall include, in addition to the resulting
corporation, any constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors, officers, and employees or agents, so that any person who is or was a
director, officer, employee or agent of such constituent corporation, or is or
was serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, shall stand in the same position under the provisions
of this Section 43 with respect to the resulting or surviving corporation as he
would have with respect to such constituent corporation if its separate
existence had continued.
(4) References to a "director," "executive officer," "officer,"
"employee," or "agent" of the corporation shall include, without limitation,
situations where such person is serving at the request of the corporation as,
respectively, a director, executive officer, officer, employee, trustee or agent
of another corporation, partnership, joint venture, trust or other enterprise.
(5) References to "other enterprises" shall include employee benefit
plans; references to "fines" shall include any excise taxes assessed on a person
with respect to an employee benefit plan; and references to "serving at the
request of the corporation" shall include any service as a director, officer,
employee or agent of the corporation which imposes duties on, or involves
services by, such director, officer, employee, or agent with respect to an
employee benefit plan, its participants, or beneficiaries; and a person who
acted in good faith and in a manner he reasonably believed to be in the interest
of the participants and beneficiaries of an employee benefit plan shall be
deemed to have acted in a manner "not opposed to the best interests of the
corporation" as referred to in this Section 43.
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ARTICLE XII
NOTICES
Section 44. Notices.
(a) Notice To Stockholders. Whenever, under any provisions of these
Bylaws, notice is required to be given to any stockholder, it shall be given in
writing, timely and duly deposited in the United States mail, postage prepaid,
and addressed to his last known post office address as shown by the stock record
of the corporation or its transfer agent.
(b) Notice To Directors. Any notice required to be given to any director
may be given by the method stated in subsection (a), or by overnight delivery
service, facsimile, telex or telegram, except that such notice other than one
which is delivered personally shall be sent to such address as such director
shall have filed in writing with the Secretary, or, in the absence of such
filing, to the last known post office address of such director.
(c) Affidavit Of Mailing. An affidavit of mailing, executed by a duly
authorized and competent employee of the corporation or its transfer agent
appointed with respect to the class of stock affected, specifying the name and
address or the names and addresses of the stockholder or stockholders, or
director or directors, to whom any such notice or notices was or were given, and
the time and method of giving the same, shall in the absence of fraud, be prima
facie evidence of the facts therein contained.
(d) Time Notices Deemed Given. All notices given by mail or by overnight
delivery service, as above provided, shall be deemed to have been given as at
the time of mailing, and all notices given by facsimile, telex or telegram shall
be deemed to have been given as of the sending time recorded at time of
transmission.
(e) Methods of Notice. It shall not be necessary that the same method of
giving notice be employed in respect of all directors, but one permissible
method may be employed in respect of any one or more, and any other permissible
method or methods may be employed in respect of any other or others.
(f) Failure To Receive Notice. The period or limitation of time within
which any stockholder may exercise any option or right, or enjoy any privilege
or benefit, or be required to act, or within which any director may exercise any
power or right, or enjoy any privilege, pursuant to any notice sent him in the
manner above provided, shall not be affected or extended in any manner by the
failure of such stockholder or such director to receive such notice.
(g) Notice To Person With Whom Communication Is Unlawful. Whenever notice
is required to be given, under any provision of law or of the Certificate of
Incorporation or Bylaws of the corporation, to any person with whom
communication is unlawful, the giving of such notice to such person shall not be
required and there shall be no duty to apply to any governmental authority or
agency for a license or permit to give such notice to such person. Any action
or meeting which shall be taken or held without notice to any such person with
whom communication is unlawful shall have the same force and effect as if such
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notice had been duly given. In the event that the action taken by the
corporation is such as to require the filing of a certificate under any
provision of the DGCL, the certificate shall state, if such is the fact and if
notice is required, that notice was given to all persons entitled to receive
notice except such persons with whom communication is unlawful.
(h) Notice To Person With Undeliverable Address. Whenever notice is
required to be given, under any provision of law or the Certificate of
Incorporation or Bylaws of the corporation, to any stockholder to whom (i)
notice of two consecutive annual meetings, and all notices of meetings or of the
taking of action by written consent without a meeting to such person during the
period between such two consecutive annual meetings, or (ii) all, and at least
two, payments (if sent by first class mail) of dividends or interest on
securities during a twelve-month period, have been mailed addressed to such
person at his address as shown on the records of the corporation and have been
returned undeliverable, the giving of such notice to such person shall not be
required. Any action or meeting which shall be taken or held without notice to
such person shall have the same force and effect as if such notice had been duly
given. If any such person shall deliver to the corporation a written notice
setting forth his then current address, the requirement that notice be given to
such person shall be reinstated. In the event that the action taken by the
corporation is such as to require the filing of a certificate under any
provision of the DGCL, the certificate need not state that notice was not given
to persons to whom notice was not required to be given pursuant to this
paragraph.)
ARTICLE XIII
AMENDMENTS
Section 45. Amendments. Subject to paragraph (h) of Section 43 of the Bylaws,
the Bylaws may be altered or amended or new Bylaws adopted by the affirmative
vote of at least sixty-six and two-thirds percent (66-2/3%) of the voting power
of all of the then-outstanding shares of the voting stock of the corporation
entitled to vote. The Board of Directors shall also have the power to adopt,
amend, or repeal Bylaws.
ARTICLE XIV
LOANS TO OFFICERS
Section 46. Loans To Officers. The corporation may lend money to, or
guarantee any obligation of, or otherwise assist any officer or other employee
of the corporation or of its subsidiaries, including any officer or employee who
is a Director of the corporation or its subsidiaries, whenever, in the judgment
of the Board of Directors, such loan, guarantee or assistance may reasonably be
expected to benefit the corporation. The loan, guarantee or other assistance
may be with or without interest and may be unsecured, or secured in such manner
as the Board of Directors shall approve, including, without limitation, a pledge
of shares of stock of the corporation. Nothing in these Bylaws shall be deemed
to deny, limit or restrict the powers of guaranty or warranty of the corporation
at common law or under any statute.
23
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<S> <C>
ARTICLE I OFFICES.......................................................... 1
Section 1. Registered Office............................................. 1
Section 2. Other Offices................................................. 1
ARTICLE II CORPORATE SEAL................................................... 1
Section 3. Corporate Seal................................................ 1
ARTICLE III STOCKHOLDERS' MEETINGS........................................... 1
Section 4. Place Of Meetings............................................. 1
Section 5. Annual Meetings............................................... 1
Section 6. Special Meetings.............................................. 3
Section 7. Notice Of Meetings............................................ 4
Section 8. Quorum........................................................ 5
Section 9. Adjournment And Notice Of Adjourned Meetings.................. 5
Section 10. Voting Rights................................................. 5
Section 11. Joint Owners Of Stock......................................... 6
Section 12. List Of Stockholders.......................................... 6
Section 13. Action Without Meeting........................................ 6
Section 14. Organization.................................................. 7
ARTICLE IV DIRECTORS........................................................ 8
Section 15. Number And Term Of Office..................................... 8
Section 16. Powers........................................................ 8
Section 17. Classes of Directors.......................................... 8
Section 18. Vacancies..................................................... 8
Section 19. Resignation................................................... 9
Section 20. Removal....................................................... 9
Section 21. Meetings...................................................... 9
Section 22. Quorum And Voting............................................. 10
Section 23. Action Without Meeting........................................ 11
Section 24. Fees And Compensation......................................... 11
Section 25. Committees.................................................... 11
Section 26. Organization.................................................. 12
</TABLE>
i.
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(Continued)
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ARTICLE V OFFICERS......................................................... 12
Section 27. Officers Designated........................................... 12
Section 28. Tenure And Duties Of Officers................................. 13
Section 29. Delegation Of Authority....................................... 14
Section 30. Resignations.................................................. 14
Section 31. Removal....................................................... 14
ARTICLE VI EXECUTION OF CORPORATE INSTRUMENTS AND VOTING
OF SECURITIES OWNED BY THE CORPORATION........................... 14
Section 32. Execution Of Corporate Instruments............................ 14
Section 33. Voting Of Securities Owned By The Corporation................. 15
ARTICLE VII SHARES OF STOCK.................................................. 15
Section 34. Form And Execution Of Certificates............................ 15
Section 35. Lost Certificates............................................. 15
Section 36. Transfers..................................................... 16
Section 37. Fixing Record Dates........................................... 16
Section 38. Registered Stockholders....................................... 17
ARTICLE VIII OTHER SECURITIES OF THE CORPORATION.............................. 17
Section 39. Execution Of Other Securities................................. 17
ARTICLE IX DIVIDENDS........................................................ 18
Section 40. Declaration Of Dividends...................................... 18
Section 41. Dividend Reserve.............................................. 18
ARTICLE X FISCAL YEAR...................................................... 18
Section 42. Fiscal Year................................................... 18
ARTICLE XI INDEMNIFICATION.................................................. 18
Section 43. Indemnification Of Directors, Executive Officers, Other
Officers, Employees And Other Agents.......................... 18
ARTICLE XII NOTICES.......................................................... 22
Section 44. Notices....................................................... 22
ARTICLE XIII AMENDMENTS....................................................... 23
Section 45. Amendments.................................................... 23
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ARTICLE XIV LOANS TO OFFICERS................................................ 23
Section 46. Loans To Officers............................................. 23
</TABLE>
iii.
<PAGE>
An extra section break has been inserted above this paragraph. Do not delete
this section break if you plan to add text after the Table of
Contents/Authorities. Deleting this break will cause Table of
Contents/Authorities headers and footers to appear on any pages following the
Table of Contents/Authorities.
1.
<PAGE>
EXHIBIT 3.3
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
TELIK, INC.
Telik, Inc., a corporation organized and existing under the General
Corporation Law of the State of Delaware does hereby certify:
First: The original Certificate of Incorporation was filed with the
Secretary of State of Delaware on October 20, 1988, under the name "Terrapin
Diagnostics, Inc."
Second: The Amended and Restated Certificate of Incorporation of Telik,
Inc. in the form attached hereto as Exhibit A has been duly adopted in
accordance with the provisions of Sections 228, 245 and 242 of the General
Corporation Law of the State of Delaware by the directors and stockholders of
the Corporation. Written consent and written notice have been given in
accordance with such Section 228.
Third: The Amended and Restated Certificate of Incorporation so adopted
reads in full as set forth in Exhibit A attached hereto and is hereby
incorporated herein by this reference.
In Witness Whereof, Telik, Inc. has caused this Certificate to be signed by
the Chairman & Chief Executive Officer and the Secretary on this ____ day of
September, 1998.
Telik, Inc.
By:___________________________________
Clifford Orent, Chairman & Chief
Executive Officer
Attest:
By:__________________________________
Robert L. Jones, Secretary
<PAGE>
EXHIBIT A
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
TELIK, INC.
First: The name of the corporation is Telik, Inc. (the "Corporation").
Second: The address of the registered office of the Corporation is 1013
Centre Road, Wilmington, Delaware, New Castle County and the name of the
registered agent is The Prentice-Hall Corporation System, Inc.
Third: The purpose of this Corporation 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: A. The Corporation is authorized to issue two classes of shares
to be designated Common Stock ("Common Stock") and Preferred Stock ("Preferred
Stock"), respectively. The total number of shares of stock which the
Corporation shall have authority to issue is Twenty Four Million Twenty Three
Thousand Seven Hundred Ninety Nine (24,023,799) of which Twenty Three Million
(23,000,000) shares are Common Stock and One Million Twenty Three Thousand Seven
Hundred Ninety Nine (1,023,799) shares are Preferred Stock, and the par value of
each share is One Cent ($0.01).
B. The Preferred Stock shall be divided into series. The first series
shall consist of 20,000 shares and is designated "Series B Preferred Stock."
The second series shall consist of 114,720 shares and is designated "Series E
Preferred Stock." The third series shall consist of 169,600 shares and is
designated "Series F Preferred Stock." The fourth series shall consist of
273,050 shares and is designated "Series G Preferred Stock." The fifth series
shall consists of 93,429 shares and is designated "Series H Preferred Stock."
The sixth series shall consist of 143,000 shares and is designated "Series I
Preferred Stock." The seventh series shall consist of 210,000 shares and is
designated "Series J Preferred Stock."
C. The powers, preferences, rights, restrictions and other matters
relating to the Preferred Stock are as follows:
1. Dividend Provisions. Subject to the rights of series of Preferred
Stock which may from time to time come into existence, the holders of shares of
Series B Preferred Stock, Series E Preferred Stock, Series F Preferred Stock,
Series G Preferred Stock, Series H Preferred Stock, Series I Preferred Stock and
Series J Preferred Stock shall be entitled to receive dividends, pari passu, out
of any assets legally available therefor, prior and in preference to any
declaration or payment of any dividend (payable other than in Common Stock or
other securities and rights convertible into or entitling the holder thereof to
receive, directly or indirectly, additional shares of Common Stock of the
Corporation) on the Common Stock of the Corporation and no dividends shall be
paid on any share of Common Stock unless a dividend is paid with respect to all
outstanding shares of Series F Preferred Stock, Series G Preferred Stock, Series
H Preferred Stock, Series I Preferred Stock and Series J Preferred Stock in an
amount for each such share of
1.
<PAGE>
Series F Preferred Stock, Series G Preferred Stock, Series H Preferred Stock,
Series I Preferred Stock or Series J Preferred Stock or equal to or greater than
the aggregate amount of such dividends for all shares of Common Stock into which
such share of Series F Preferred Stock, Series G Preferred Stock, Series H
Preferred Stock, Series I Preferred Stock or Series J Preferred Stock could then
be converted. Such dividends shall be payable only when, as and if declared by
the Board of Directors and shall be non-cumulative.
2. Liquidation Preference.
(a) In the event of any liquidation, dissolution or winding up of the
Corporation, either voluntary or involuntary, subject to the rights of series of
Preferred Stock which may from time to time come into existence, the holders of
each share of Series B Preferred Stock, Series E Preferred Stock, Series F
Preferred Stock, Series G Preferred Stock, Series H Preferred Stock, Series I
Preferred Stock and Series J Preferred Stock shall be entitled to receive, pari
passu and prior and in preference to any distribution of any of the assets of
the Corporation to the holders of Common Stock by reason of their ownership
thereof, an amount per share equal to $20.00 for each outstanding share of
Series B Preferred Stock (the "Original Series B Issue Price"), $50.00 for each
outstanding share of Series E Preferred Stock (the "Original Series E Issue
Price"), $50.00 for each outstanding share of Series F Preferred Stock (the
"Original Series F Issue Price"), $50.00 for each outstanding share of Series G
Preferred Stock (the "Original Series G Issue Price"), $50.00 for each
outstanding shares of Series H Preferred Stock (the "Original Series H Issue
Price"), $50.00 for each outstanding share of Series I Preferred Stock (the
"Original Series I Issue Price") and $50.00 for each outstanding share of Series
J Preferred Stock (the "Original Series J Issue Price") plus all accrued or
declared but unpaid dividends for each share of Series B Preferred Stock, each
share of Series E Preferred Stock, each share of Series F Preferred Stock, each
share of Series G Preferred Stock, each share of Series H Preferred Stock, each
share of Series I Preferred Stock and each share of Series J Preferred Stock
then held by them. If upon the occurrence of such event, the assets and funds
distributed among the holders of the Preferred Stock shall be insufficient to
permit the payment to such holders of the full preferential amounts set forth
above, then, subject to the rights of series of Preferred Stock which may from
time to time come into existence, the entire assets and funds of the Corporation
legally available for distribution shall be distributed ratably among the
holders of the Preferred Stock in proportion to the amount of such stock owned
by each such holder.
(b) Subject to the rights of series of Preferred Stock which may from
time to time come into existence in the event of any liquidation, dissolution or
winding up of the Corporation, either voluntary or involuntary, and subject to
the payment in full of the liquidation preferences with respect to the Series B
Preferred Stock, Series E Preferred Stock, Series F Preferred Stock, Series G
Preferred Stock, Series H Preferred Stock, Series I Preferred Stock and Series J
Preferred Stock as provided in subparagraph (a) of this Section 2, the holders
of the Common Stock shall be entitled to receive, prior and in preference to any
further distribution of any of the assets or surplus funds of the Corporation to
the holders of the Series B Preferred Stock, Series E Preferred Stock, Series F
Preferred Stock, Series G Preferred Stock, Series H Preferred Stock, Series I
Preferred Stock and Series J Preferred Stock, by reason of their ownership
thereof, the amount of $3.00 per share (as adjusted for any stock dividends,
combinations or splits with respect to such shares) for each share of Common
Stock then held by
2.
<PAGE>
them and no more. Subject to the payment in full of the liquidation preferences
with respect to the Series B Preferred Stock, Series E Preferred Stock, Series F
Preferred Stock, Series G Preferred Stock, Series H Preferred Stock, Series I
Preferred Stock and Series J Preferred Stock as provided in subparagraph (a) of
this Section 2, and subject to the rights of series of Preferred Stock which may
from time to time come into existence, if upon the occurrence of such event, the
assets and funds thus distributed among the holders of the Common Stock shall be
insufficient to permit the payment to such holders of the full aforesaid
preferential amount, then the entire remaining assets and funds of the
Corporation legally available for distribution shall be distributed among the
holders of the Common Stock in proportion to the shares of Common Stock then
held by them.
(c) Subject to the rights of series of Preferred Stock which may from
time to time come into existence, after payment to the holders of the Common
Stock and the Series B Preferred Stock, Series E Preferred Stock, Series F
Preferred Stock, Series G Preferred Stock, Series H Preferred Stock, Series I
Preferred Stock and Series J Preferred Stock of the amounts set forth in Section
2(a) and (b) above, the entire remaining assets and funds of the Corporation
legally available for distribution, if any, shall be distributed among the
holders of the Common Stock, Series E Preferred Stock, Series F Preferred Stock,
Series G Preferred Stock, Series H Preferred Stock, Series I Preferred Stock and
Series J Preferred Stock in proportion to the shares of Common Stock then held
by them and the shares of Common Stock which they then have the right to acquire
upon conversion of the shares of the Series E Preferred Stock, Series F
Preferred Stock, Series G Preferred Stock, Series H Preferred Stock, Series I
Preferred Stock and Series J Preferred Stock then held by them.
(d) A consolidation or merger of the Corporation with or into any
other corporation or corporations, or a sale, conveyance or disposition of all
or substantially all of the assets of the Corporation shall be deemed to be a
liquidation, dissolution or winding up within the meaning of this Section 2.
3. Conversion. The holders of the Preferred Stock shall have conversion
rights as follows (the "Conversion Rights"):
(a) Right to Convert. Each share of Series B Preferred Stock shall be
convertible, at the option of the holder thereof, at any time after the date of
issuance of such share, at the office of the Corporation or any transfer agent
for the Series B Preferred Stock, into such number of fully paid and
nonassessable shares of Common Stock as is determined by dividing the Original
Series B Issue Price by the Series B Conversion Price (as defined below) at the
time in effect for such share. The price at which shares of Common Stock shall
be deliverable upon conversion of shares of Series B Preferred Stock (the
"Series B Conversion Price") shall initially be $3.56 per share of Common Stock;
provided, however, that the Series B Conversion Price shall be subject to
adjustment as set forth in this Section 3. Each share of Series E Preferred
Stock shall be convertible, at the option of the holder thereof, at any time
after the date of issuance of such share, at the office of the Corporation or
any transfer agent for the Series E Preferred Stock, into such number of fully
paid and nonassessable shares of Common Stock as is determined by dividing the
Original Series E Issue Price by the Series E Conversion Price (as defined
below), determined as hereinafter provided, in effect at the time of conversion.
The price at which shares of Common Stock shall be deliverable upon conversion
of shares of
3.
<PAGE>
Series E Preferred Stock (the "Series E Conversion Price") shall initially be
$3.00 per share of Common Stock; provided, however, that the Series E Conversion
Price shall be subject to adjustment as set forth in this Section 3. Each share
of Series F Preferred Stock shall be convertible, at the option of the holder
thereof, at any time after the date of issuance of such share, at the office of
the Corporation or any transfer agent for the Series F Preferred Stock, into
such number of fully paid and nonassessable shares of Common Stock as is
determined by dividing the Original Series F Issue Price by the Series F
Conversion Price (as defined below) at the time in effect for such share. The
price at which shares of Common Stock shall be deliverable upon conversion of
shares of Series F Preferred Stock (the "Series F Conversion Price") shall be
$3.60 per share of Common Stock; provided, however, that the Series F Conversion
Price shall be subject to adjustment as set forth in this Section 3. Each share
of Series G Preferred Stock shall be convertible, at the option of the holder
thereof, at any time after the date of issuance of such share, at the office of
the Corporation or any transfer agent for the Series G Preferred Stock, into
such number of fully paid and nonassessable shares of Common Stock as is
determined by dividing the Original Series G Issue Price by the Series G
Conversion Price (as defined below) at the time in effect for such share. The
price at which shares of Common Stock shall be deliverable upon conversion of
shares of Series G Preferred Stock (the "Series G Conversion Price") shall be
$4.20 per share of Common Stock; provided, however, that the Series G Conversion
Price shall be subject to adjustment as set forth in this Section 3. Each share
of Series H Preferred Stock shall be convertible, at the option of the holder
thereof, at any time after the date of issuance of such share, at the office of
the Corporation or any transfer agent for the Series H Preferred Stock, into
such number of fully paid and nonassessable shares of Common Stock as is
determined by dividing the Original Series H Issue Price by the Series H
Conversion Price (as defined below) at the time in effect for such share. The
price at which shares of Common Stock shall be deliverable upon conversion of
shares of Series H Preferred Stock (the "Series H Conversion Price") shall be
$5.78 per share of Common Stock; provided, however, that the Series H Conversion
Price shall be subject to adjustment as set forth in this Section 3. Each share
of Series I Preferred Stock shall be convertible, at the option of the holder
thereof, at any time after the date of issuance of such share, at the office of
the Corporation or any transfer agent for the Series I Preferred Stock, into
such number of fully paid and nonassessable shares of Common Stock as is
determined by dividing the Original Series I Issue Price by the Series I
Conversion Price (as defined below) at the time in effect for such share. The
price at which shares of Common Stock shall be deliverable upon conversion of
shares of Series I Preferred Stock (the "Series I Conversion Price") shall be
$4.20 per share of Common Stock; provided, however, that the Series I Conversion
Price shall be subject to adjustment as set forth in this Section 3. Each share
of Series J Preferred Stock shall be convertible, at the option of the holder
thereof, at any time after the date of issuance of such share, at the office of
the Corporation or any transfer agent for the Series J Preferred Stock, into
such number of fully paid and nonassessable shares of Common Stock as is
determined by dividing the Original Series J Issue Price by the Series J
Conversion Price (as defined below) at the time in effect for such share. The
price at which shares of Common Stock shall be deliverable upon conversion of
shares of Series J Preferred Stock (the "Series J Conversion Price") shall be
$4.20 per share of Common Stock; provided, however, that the Series J Conversion
Price shall be subject to adjustment as set forth in this Section 3.
(b) Mandatory Conversion. Each share of Series B Preferred Stock,
Series E Preferred Stock, Series F Preferred Stock, Series G Preferred Stock,
Series H Preferred Stock,
4.
<PAGE>
Series I Preferred Stock and Series J Preferred Stock shall automatically be
converted into shares of Common Stock at the applicable Series B Conversion
Price, Series E Conversion Price, Series F Conversion Price, Series G Conversion
Price, Series H Conversion Price, Series I Conversion Price or Series J
Conversion Price then in effect pursuant to Section 3(a) hereof upon the earlier
of (i) immediately upon the closing of a firmly underwritten registered public
offering of Common Stock of the Corporation pursuant to the Securities Act of
1933 (other than a registration relating solely to a transaction under Rule 145
under such Act (or any successor thereto) or to an employee benefit plan), at an
offering price per share of at least $12.00 per share of Common Stock (as
adjusted for stock splits, stock dividends, recapitalizations and the like) and
resulting in the receipt by the Corporation of at least ten million dollars
($10,000,000) of gross proceeds (before applicable discounts, commissions and
expenses), or (ii) upon the date specified by a vote or written consent or
agreement of holders of at least two-thirds (2/3) of the shares of Series B
Preferred Stock, Series E Preferred Stock, Series F Preferred Stock, Series G
Preferred Stock, Series H Preferred Stock, Series I Preferred Stock and Series J
Preferred Stock then outstanding, voting together as a single class. Each share
of Series J Preferred Stock shall automatically be converted into shares of
Common Stock at the applicable Series J Conversion Price, then in effect
pursuant to Section 3(a) hereof upon the date specified by a vote or written
consent or agreement of holders of at least two-thirds (2/3) of the shares of
Series J Preferred Stock.
(c) Mechanics of Conversion. Before any holder of Preferred Stock
shall be entitled to convert the same into shares of Common Stock pursuant to
Section 3(a) hereof, and before the Corporation shall be obligated to issue
certificates for shares of Common Stock upon the automatic conversion of the
Preferred Stock pursuant to Section 3(b) hereof, such holder shall surrender the
certificate or certificates therefor, duly endorsed, at the office of the
Corporation or of any transfer agent for the Preferred Stock, and shall give
written notice by mail, postage prepaid, to the Corporation at its principal
corporate office, of the election to convert the same and shall state therein
the name or names in which the certificate or certificates for shares of Common
Stock are to be issued (except that no such written notice of intent to convert
shall be necessary in the event of an automatic conversion upon a public
offering pursuant to Section 3(b) hereof). The Corporation shall, as soon as
practicable thereafter, issue and deliver at such office to such holder of
Series B Preferred Stock, Series E Preferred Stock, Series F Preferred Stock,
Series G Preferred Stock, Series H Preferred Stock, Series I Preferred Stock or
Series J Preferred Stock or to the nominee or nominees of such holder, a
certificate or certificates for the number of shares of Common Stock to which
such holder shall be entitled as aforesaid. Such conversion shall be deemed to
have been made immediately prior to the close of business on the date of such
surrender of the shares of Series B Preferred Stock, Series E Preferred Stock,
Series F Preferred Stock, Series G Preferred Stock, Series H Preferred Stock,
Series I Preferred Stock or Series J Preferred Stock to be converted, and the
person or persons entitled to receive the shares of Common Stock issuable upon
such conversion shall be treated for all purposes as the record holder or
holders of such shares of Common Stock as of such date. On the date fixed for
any mandatory conversion pursuant to Section 3(b) above, all rights under this
Restated Certificate of Incorporation with respect to the Series B Preferred
Stock, Series E Preferred Stock, Series F Preferred Stock, Series G Preferred
Stock, Series H Preferred Stock, Series I Preferred Stock or Series J Preferred
Stock will terminate (except the right upon the surrender of the certificates to
receive certificates for the number of shares of Common Stock into which such
shares have been converted).
5.
<PAGE>
(d) Adjustments to Conversion Price for Diluting Issues:
(i) Special Definitions. For purposes of this subparagraph 5(d),
the following definitions shall apply:
(A) "Option" shall mean rights, options or warrants to
subscribe for, purchase or otherwise acquire either Common Stock or Convertible
Securities, other than those shares excluded from the definition of Additional
Shares of Common Stock.
(B) "Convertible Securities" shall mean any evidence of
indebtedness, shares (other than Common Stock) or other securities directly or
indirectly convertible into or exchangeable for Common Stock, other than those
shares excluded from the definition of Additional Shares of Common Stock.
(C) "Additional Shares of Common Stock" shall mean all
shares of Common Stock issued (or, pursuant to subparagraph 3(d)(ii), deemed to
be issued) by the Corporation after the Original Issue Date (as defined in
section D below), other than:
(I) shares of Common Stock issued or issuable upon
conversion of shares of Preferred Stock; or
(II) shares of Common Stock issuable to officers,
directors and employees of, and consultants to, the Corporation and its
subsidiaries pursuant to stock purchase or option plans or arrangements or other
officer, director, employee or consultant stock incentive or benefit plans or
arrangements (collectively, the "Plans") approved by the Board of Directors; or
(III) shares of Common Stock issued or issuable as a
dividend or distribution on Preferred Stock; or
(IV) shares of Common Stock issued or issuable for
which adjustment of the Series B Conversion Price, Series E Conversion Price,
Series F Conversion Price, Series G Conversion Price, Series H Conversion Price,
Series I Conversion Price or Series J Conversion Price is made pursuant to
Section 3(e) herein.
(D) "Original Issue Date" shall mean the date on which a
share of Series J Preferred Stock was first issued.
(ii) Issue of Securities Deemed Issue of Additional Shares of
Common Stock. In the event the Corporation at any time or from time to time
after the Original Issue Date shall issue any Options or Convertible Securities
or shall fix a record date for the determination of holders of any class of
securities entitled to receive any such Options or Convertible Securities, then
the maximum number of shares (as set forth in the instrument relating thereto
without regard to any provisions contained therein for a subsequent adjustment
of such number) of Common Stock issuable upon the exercise of such Options or,
in the case of Convertible Securities and Options therefore, the conversion or
exchange of such Convertible Securities, shall be deemed to be Additional Shares
of Common Stock issued as of the time of such issue or, in the case such a
record date shall have been fixed, as of the close of business on
6.
<PAGE>
such record date; provided that in any such case in which Additional Shares of
Common Stock are deemed to be issued:
(A) no further adjustment in the Series B Conversion Price,
Series E Conversion Price, Series F Conversion Price, Series G Conversion Price,
Series H Conversion Price, Series I Conversion Price or Series J Conversion
Price shall be made upon the subsequent issue of Convertible Securities or
shares of Common Stock upon the exercise of such Options or conversion or
exchange of such Convertible Securities;
(B) if such Options or Convertible Securities by their
terms provide, with the passage of time or otherwise, for any increase in the
consideration payable to the Corporation, or decrease in the number of shares of
Common Stock issuable, upon the exercise, conversion or exchange thereof, the
Series B Conversion Price, Series E Conversion Price, Series F Conversion Price,
Series G Conversion Price, Series H Conversion Price, Series I Conversion Price
or Series J Conversion Price computed upon the original issue thereof (or upon
the occurrence of a record date with respect thereto), and any subsequent
adjustments based thereon, shall, upon any such increase or decrease becoming
effective, be recomputed to reflect such increase or decrease insofar as it
affects such Options or the rights of conversion or exchange under such
Convertible Securities;
(C) upon the expiration of any such Options or any rights
of conversion or exchange under such Convertible Securities which shall not have
been exercised, the Series B Conversion Price, Series E Conversion Price, Series
F Conversion Price, Series G Conversion Price, Series H Conversion Price, Series
I Conversion Price or Series J Conversion Price computed upon the original issue
thereof (or upon the occurrence of a record date with respect thereto), and any
subsequent adjustments based thereon, shall, upon such expiration, be recomputed
as if:
(I) in the case of Convertible Securities or Options
for Common Stock the only Additional Shares of Common Stock issued were the
shares of Common Stock, if any, actually issued upon the exercise of such
Options or the conversion or exchange of such Convertible Securities and the
consideration received therefor was the consideration actually received by the
Corporation for the issue of all such Options, whether or not exercised, plus
the consideration actually received by the Corporation upon such exercise, or
for the issue of all such Convertible Securities which were actually converted,
if any, actually received by the Corporation upon such conversion or exchange,
and
(II) in the case of Options for Convertible
Securities, only the Convertible Securities, if any, actually issued upon the
exercise thereof were issued at the time of issue of such Options, and the
consideration received by the Corporation for the Additional Shares of Common
Stock deemed to have been then issued was the consideration actually received by
the Corporation for the issue of all such Options, whether or not exercised,
plus the consideration deemed to have been received the Corporation (determined
pursuant to subparagraph 3(c)(iv)) upon the issue of the Convertible Securities
with respect to which such Options were actually exercised;
7.
<PAGE>
(III) in the case of any Options which expire by their
terms not more than thirty (30) days after the date of issue thereof, no
adjustment of the Series B Conversion Price, Series E Conversion Price, Series F
Conversion Price, Series G Conversion Price, Series H Conversion Price, Series I
Conversion Price or Series J Conversion Price shall be made until the expiration
or exercise of all such Options, whereupon such adjustment shall be made in the
same manner provided in clause (II) above; and
(IV) if such record date shall have been fixed and
such Options or Convertible Securities are not issued on the date fixed thereof,
the adjustment previously made in the Series B Conversion Price, Series E
Conversion Price, Series F Conversion Price, Series G Conversion Price, Series H
Conversion Price, Series I Conversion Price or Series J Conversion Price which
became effective on such record date shall be canceled as of the close of
business on such record date, and thereafter the Series B Conversion Price,
Series E Conversion Price, Series F Conversion Price, Series G Conversion Price,
Series H Conversion Price, Series I Conversion Price or Series J Conversion
Price shall be adjusted pursuant to this subparagraph as of the actual date of
issuance of such Options or Convertible Securities.
(iii) Adjustment of Conversion Price upon Issuance of
Additional Shares of Common Stock. In the event this Corporation shall issue
Additional Shares of Common Stock (including Additional Shares of Common Stock
deemed to be issued pursuant to subparagraph 3(d)(ii)) at any time on or after
the Original Issue Date (including the issuance of Series J) without
consideration or for a consideration per share less than the Series B Conversion
Price, Series E Conversion Price, Series F Conversion Price, Series G Conversion
Price, Series H Conversion Price, Series I Conversion Price or Series J
Conversion Price in effect on the date of and immediately prior to such issue
(any such series in respect of which such issuance or deemed issuance occurs
being referred to herein as an "Affected Series"), then and in such event, the
Conversion Price of any Affected Series shall be reduced, concurrently with such
issue, to a price (calculated to the nearest cent) determined by multiplying
such Conversion Price by a fraction, the numerator of which shall be the number
of shares of Common Stock outstanding immediately prior to such issue plus the
number of shares of Common Stock which 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 the denominator of which
shall be the number of shares of Common Stock outstanding immediately prior to
such issue plus the number of such Additional Shares of Common Stock so issued;
and provided further that, for the purposes of this subparagraph 3(d)(iii), all
shares of Common Stock issuable upon conversion of outstanding Options and
Preferred Stock shall be deemed to be outstanding, and immediately after any
Additional Shares of Common Stock are deemed issued pursuant to subparagraph
3(d)(ii), such Additional Shares of Common Stock shall be deemed to be
outstanding. The Series B Conversion Price, Series E Conversion Price, Series F
Conversion Price, Series G Conversion Price, Series H Conversion Price, Series I
Conversion Price and Series J Conversion Price shall not be increased except as
set forth in subparagraph 3(d)(ii)(B) and in paragraph 3(f).
(iv) Determination of Consideration. For purposes of this
subparagraph 3(d)(iv), the consideration received by the Corporation for the
issue of any Additional Shares of Common Stock shall be computed as follows:
8.
<PAGE>
(A) Cash and Property. Such consideration shall:
(I) insofar as it consists of cash, be computed at
the aggregate amount of cash received by the Corporation excluding amounts paid
or payable for accrued interest or accrued dividends;
(II) insofar as it consists of property other than
cash, be computed at the fair value thereof at the time of such issue, as
determined in good faith by the Board of Directors; and
(III) in the event Additional Shares of Common Stock
are issued together with other shares or securities or other assets of the
Corporation for consideration which covers both, be the proportion of such
consideration so received, computed as provided in clauses (I) and (II) above,
as determined in good faith by the Board of Directors.
(B) Options and Convertible Securities. The consideration
per share received by the Corporation for Additional Shares of Common Stock
deemed to have been issued pursuant to subparagraph 3(d)(ii), relating to
Options and Convertible Securities, shall be determined by dividing:
(I) the total amount, if any, received or receivable
by the Corporation as consideration for the issue of such Options or Convertible
Securities, plus the minimum aggregate amount of additional consideration (as
set forth in the instruments relating thereto, without regard to any provision
contained therein for a subsequent adjustment of such consideration) payable to
the Corporation upon the exercise of such Options or the conversion or exchange
of such Convertible Securities, or in the case of Options for Convertible
Securities, the exercise of such Options for Convertible Securities and the
conversion or exchange of such Convertible Securities, by
(II) the maximum number of shares of Common Stock (as
set forth in the instruments relating thereto, without regard to any provision
contained therein for a subsequent adjustment of such number) issuable upon the
exercise of such Options or the conversion or exchange of such Convertible
Securities.
(e) Adjustments for Dividends and Distributions. In the event the
Corporation should at any time or from time to time fix a record date for the
effectuation of a split or subdivision of the outstanding shares of Common Stock
or the determination of holders of Common Stock entitled to receive a dividend
or other distribution payable in additional shares of Common Stock or other
securities or rights convertible into, or entitling the holder thereof to
receive directly or indirectly, additional shares of Common Stock (hereinafter
referred to as "Common Stock Equivalents") without payment of any consideration
by such holder for the additional shares of Common Stock or the Common Stock
Equivalents (including the additional shares of Common Stock issuable upon
conversion or exercise thereof), then, as of such record date (or the date of
such dividend distribution, split or subdivision if no record date is fixed),
the applicable Conversion Price for a series of Preferred Stock shall be
appropriately decreased so that the number of shares of Common Stock issuable on
conversion of each share of such series
9.
<PAGE>
shall be increased in proportion to such increase of the aggregate of shares of
Common Stock outstanding and those issuable with respect to such Common Stock
Equivalents.
(f) Adjustments for Combinations. If the number of shares of Common
Stock outstanding at any time after the Original Issue Date is decreased by a
combination of the outstanding shares of Common Stock, then, following the
record date of such combination, the Conversion Price for the Preferred Stock
shall be appropriately increased so that the number of shares of Common Stock
issuable on conversion of each share of such series shall be decreased in
proportion to such decrease in outstanding shares.
(g) Other Distributions. In the event the Corporation shall declare a
distribution payable in securities of other persons, evidences of indebtedness
issued by the Corporation or other persons, assets (excluding cash dividends) or
options or rights not referred to in subsection 3(e), then, in each such case
for the purpose of this subsection 3(g), the holders of the Preferred Stock
shall be entitled to a proportionate share of any such distribution as though
they were the holders of the number of shares of Common Stock of the Corporation
into which their shares of Preferred Stock are convertible as of the record date
fixed for the determination of the holders of Common Stock of the Corporation
entitled to receive such distribution.
(h) Recapitalizations. If at any time or from time to time there
shall be a recapitalization of the Common Stock (other than a subdivision or
combination provided for elsewhere in this Section 3) provision shall be made so
that the holders of the Preferred Stock shall thereafter be entitled to receive
upon conversion of the Preferred Stock the number of shares of stock or other
securities or property of the Company or otherwise, to which a holder of Common
Stock deliverable upon conversion would have been entitled on such
recapitalization. In any such case, appropriate adjustment shall be made in the
application of the provisions of this Section 3 with respect to the rights of
the holders of the Preferred Stock after the recapitalization to the end that
the provisions of this Section 3 (including adjustment of the Conversion Price
then in effect and the number of shares purchasable upon conversion of the
Series B Preferred Stock, Series E Preferred Stock, Series F Preferred Stock,
Series G Preferred Stock, Series H Preferred Stock, Series I Preferred Stock or
Series J Preferred Stock) shall be applicable after that event as nearly
equivalent as may be practicable.
(i) No Impairment. The Corporation will not, by amendment of this
Amended and Restated Certificate of Incorporation or through any reorganization,
recapitalization, transfer of assets, consolidation, merger, dissolution, issue
or sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by the Corporation, but will at all times in good faith assist in the
carrying out of all the provisions of this Section 3 and in the taking of all
such action as may be necessary or appropriate in order to protect the
Conversion Rights of the holders of the Series B Preferred Stock, Series E
Preferred Stock, Series F Preferred Stock, Series G Preferred Stock, Series H
Preferred Stock, Series I Preferred Stock and Series J Preferred Stock against
impairment.
10.
<PAGE>
(j) No Fractional Shares and Certificate as to Adjustments.
(A) No fractional shares shall be issued upon conversion of
the Series B Preferred Stock, Series E Preferred Stock, Series F Preferred
Stock, Series G Preferred Stock, Series H Preferred Stock, Series I Preferred
Stock or Series J Preferred Stock and the number of shares of Common Stock to be
issued shall be rounded to the nearest whole share. All shares of Common Stock
(including fractions thereof) issuable upon conversion of more than one share of
Series B Preferred Stock, Series E Preferred Stock, Series F Preferred Stock,
Series G Preferred Stock, Series H Preferred Stock, Series I Preferred Stock or
Series J Preferred Stock by a holder thereof shall be aggregated for the
purposes of determining whether the conversion would result in the issuance of
any fractional share. If the conversion would result in the issuance of a
fraction of a share of Common Stock, the Corporation shall, in lieu of issuing
any fractional share, pay the holder otherwise entitled to such fraction a sum
in cash equal to the fair market value of such fraction on the date of
conversion (as determined in good faith by the Board of Directors of the
Corporation).
(B) Upon the occurrence of each adjustment or readjustment
of the Conversion Price of Series B Preferred Stock, Series E Preferred Stock,
Series F Preferred Stock, Series G Preferred Stock, Series H Preferred Stock,
Series I Preferred Stock or Series J Preferred Stock pursuant to this Section 3,
the Corporation, at its expense, shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and prepare and furnish to each
holder of Series B Preferred Stock, Series E Preferred Stock, Series F Preferred
Stock, Series G Preferred Stock, Series H Preferred Stock, Series I Preferred
Stock or Series J Preferred Stock a certificate setting forth such adjustment or
readjustment and showing in detail the facts upon which such adjustment or
readjustment is based. The Corporation shall, upon the written request at any
time of any holder of Series B Preferred Stock, Series E Preferred Stock, Series
F Preferred Stock, Series G Preferred Stock, Series H Preferred Stock, Series I
Preferred Stock or Series J Preferred Stock furnish or cause to be furnished to
such holder a like certificate setting forth (A) such adjustment and
readjustment, (B) the Conversion Price at the time in effect, and (C) the number
of shares of Common Stock and the amount, if any, of other property which at the
time would be received upon the conversion of a share of Series B Preferred
Stock, Series E Preferred Stock, Series F Preferred Stock, Series G Preferred
Stock, Series H Preferred Stock, Series I Preferred Stock or Series J Preferred
Stock.
(k) Notices of Record Date. In the event of any taking by the
Corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend) or other distribution, any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, the Corporation
shall mail to each holder of Series B Preferred Stock, Series E Preferred Stock,
Series F Preferred Stock, Series G Preferred Stock, Series H Preferred Stock,
Series I Preferred Stock or Series J Preferred Stock, at least 20 days prior to
the date specified therein, a notice specifying the date on which any such
record is to be taken for the purpose of such dividend, distribution or right,
and the amount and character of such dividend, distribution or right.
(l) 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
11.
<PAGE>
Stock solely for the purpose of effecting the conversion of the shares of the
Series B Preferred Stock, Series E Preferred Stock, Series F Preferred Stock,
Series G Preferred Stock, Series H Preferred Stock, Series I Preferred Stock and
Series J Preferred Stock such number of its shares of Common Stock as shall from
time to time be sufficient to effect the conversion of all outstanding shares of
the Series B Preferred Stock, Series E Preferred Stock, Series F Preferred
Stock, Series G Preferred Stock, Series H Preferred Stock, Series I Preferred
Stock and Series J Preferred Stock; and if at any time the number of authorized
but unissued shares of Common Stock shall not be sufficient to effect the
conversion of all then outstanding shares of the Series B Preferred Stock,
Series E Preferred Stock, Series F Preferred Stock, Series G Preferred Stock,
Series H Preferred Stock, Series I Preferred Stock and Series J Preferred Stock
in addition to such other remedies as shall be available to the holder of such
Preferred Stock, the Corporation will take such corporate action as may, in the
opinion of its counsel, be necessary to increase its authorized but unissued
shares of Common Stock to such number of shares as shall be sufficient for such
purposes.
(m) Notices. Any notice required by the provision of this Section 3
to be given to the holders of shares of Series B Preferred Stock, Series E
Preferred Stock, Series F Preferred Stock, Series G Preferred Stock, Series H
Preferred Stock, Series I Preferred Stock or Series J Preferred Stock shall be
deemed given if deposited in the United States mail, postage prepaid, and
addressed to each holder of record at his address appearing on the books of the
Corporation.
4. Voting Rights.
(a) The holder of each share of Series B Preferred Stock, Series E
Preferred Stock, Series F Preferred Stock, Series G Preferred Stock, Series H
Preferred Stock, Series I Preferred Stock or Series J Preferred Stock shall have
the right to one vote for each share of Common Stock into which such share of
Series B Preferred Stock, Series E Preferred Stock, Series F Preferred Stock,
Series G Preferred Stock, Series H Preferred Stock, Series I Preferred Stock or
Series J Preferred Stock could then be converted (with any fractional share
determined on an aggregate conversion basis being rounded to the nearest whole
share), and with respect to such vote, such holder shall have full voting rights
and powers equal to the voting rights and powers of the holders of Common Stock
(except as otherwise expressly provided herein or as required by law, voting
together with the Common Stock as a single class), and shall be entitled,
notwithstanding any provision hereof, to notice of any stockholders' meeting in
accordance with the Bylaws of the Corporation.
(b) So long as 20,000 shares of Series F Preferred Stock remain
outstanding, the holders of the Series F Preferred Stock shall be entitled,
voting as a separate class, to elect three (3) directors of the Corporation at
each annual election of directors. So long as 50,000 shares of Series E
Preferred Stock remain outstanding, the holders of the Series E Preferred Stock
shall be entitled, voting as a separate class, to elect two (2) directors of the
Corporation at each annual election of directors. So long as 60,000 shares of
Series H Preferred Stock remain outstanding, the holders of the Series H
Preferred Stock shall be entitled, voting as a separate class, to elect one (1)
director of the Corporation at each annual election of directors. So long as
110,000 shares of Series J Preferred Stock remain outstanding, the holders of
the Series J Preferred Stock shall be entitled, voting as a separate class, to
elect one (1) director of the
12.
<PAGE>
Corporation at each annual election of directors. Subject to the rights of
series of Preferred Stock which may from time to time come into existence, any
remaining directors shall be elected by the holders of the Series B Preferred
Stock, Series G Preferred Stock, Series H Preferred Stock, Series I Preferred
Stock and Series J Preferred Stock and Common Stock, voting together as a single
class, at each annual election of directors. In the case of any vacancy (other
than a vacancy caused by removal) in the office of a director occurring among
the directors elected by the holders of a class or series of stock pursuant to
this Section 4(b), the remaining directors so elected by that class or series
may by affirmative vote of a majority thereof (or the remaining director so
elected if there be but one, of if there are no such directors remaining, by the
affirmative vote of the holders of a majority of the shares of that class or
series), elect a successor or successors to hold office for the unexpired term
of the director or directors whose place or places shall be vacant. Any director
who shall have been elected by the holders of a class or series of stock or by
any directors so elected as provided in the immediately preceding sentence
hereof may be removed during the aforesaid term of office, either with or
without cause, by, and only by, the affirmative vote of the holders of the
shares of the class or series of stock entitled to elect such director or
directors, given either at a special meeting of such shareholders duly called
for that purpose or pursuant to a written consent of shareholders, and any
vacancy thereby created may be filled by the holders of that class of stock
represented at the meeting or pursuant to unanimous written consent.
(c) So long as 20,000 shares of Series F Preferred Stock remain
outstanding, the number of the authorized directors of the Corporation shall not
exceed twelve (12) directors without the consent of a majority of the directors
elected by the Series F Preferred Stock. So long as 20,000 shares of Series F
Preferred Stock remain outstanding, without the consent of a majority of the
directors selected by the holders of the Series F Preferred Stock then in
office, the Corporation shall not reduce the number of directors that the
holders of Series F Preferred Stock are entitled to elect.
5. Covenants.
(a) In addition to any other rights provided by law, so long as
50,000 shares of Series E Preferred Stock shall be outstanding, the Corporation
shall not, without first obtaining the affirmative vote or written consent of a
majority in interest of the outstanding shares of Series E Preferred Stock,
voting separately as a series, amend or repeal any provision of, or add any
provision to, this Amended and Restated Certificate of Incorporation or the
Corporation's Bylaws so as to alter, materially and adversely, the rights,
preferences or privileges of the Series E Preferred Stock.
(b) In addition to any other rights provided by law, so long as any
shares of Series F Preferred Stock shall be outstanding, the Corporation shall
not, without first obtaining the affirmative vote or written consent of a
majority in interest of the outstanding shares of Series F Preferred Stock,
voting separately as a series, amend or repeal any provision of, or add any
provision to, this Amended and Restated Certificate of Incorporation or the
Corporation's Bylaws so as to alter, materially and adversely, the rights,
preferences or privileges of the Series F Preferred Stock.
13.
<PAGE>
(c) In addition to any other rights provided by law, so long as any
shares of Series G Preferred Stock shall be outstanding, the Corporation shall
not, without first obtaining the affirmative vote or written consent of a
majority in interest of the outstanding shares of Series G Preferred Stock,
voting separately as a series, amend or repeal any provision of, or add any
provision to, this Amended and Restated Certificate of Incorporation or the
Corporation's Bylaws so as to alter, materially and adversely, the rights,
preferences or privileges of the Series G Preferred Stock.
(d) In addition to any other rights provided by law, so long as any
shares of Series H Preferred Stock shall be outstanding, the Corporation shall
not, without first obtaining the affirmative vote or written consent of a
majority in interest of the outstanding shares of Series H Preferred Stock,
voting separately as a series, amend or repeal any provision of, or add any
provision to the Amended and Restated Certificate of Incorporation or the
Corporation's Bylaws so as to alter, materially and adversely, the rights,
preferences or privileges of the Series H Preferred Stock.
(e) In addition to any other rights provided by law, so long as any
shares of Series I Preferred Stock shall be outstanding, the Corporation shall
not, without first obtaining the affirmative vote or written consent of a
majority in interest of the outstanding shares of Series I Preferred Stock,
voting separately as a series, amend or repeal any provision of, or add any
provision to, this Amended and Restated Certificate of Incorporation or the
Corporation's Bylaws so as to alter, materially and adversely, the rights,
preferences or privileges of the Series I Preferred Stock.
(f) In addition to any other rights provided by law, so long as any
shares of Series J Preferred Stock shall be outstanding, the Corporation shall
not, without first obtaining the affirmative vote or written consent of a
majority in interest of the outstanding shares of Series J Preferred Stock,
voting separately as a series, amend or repeal any provision of, or add any
provision to, this Amended and Restated Certificate of Incorporation or the
Corporation's Bylaws so as to alter, materially and adversely, the rights,
preferences or privileges of the Series J Preferred Stock.
(g) In addition to any other rights provided by law, so long as
50,000 shares of Preferred Stock shall be outstanding, the Corporation shall
not, without first obtaining the affirmative vote or written consent of a
majority in interest of the outstanding shares of Preferred Stock, voting
together as a single class: (a) create any new class or series of shares which
has a preference over or is on a parity with the Preferred Stock; (b) effect any
liquidation, dissolution, consolidation, acquisition or merger of the
Corporation, with, by or into any other corporation or corporations or a sale of
the assets of the Corporation (other than a merger in which the shareholders of
the Corporation immediately prior to the merger own a majority of the shares of
the surviving corporation immediately after such merger); or (c) take any action
which results in a taxable event to the holders of Preferred Stock under Section
305 of the Internal Revenue Code of 1986, as amended.
6. Status of Converted Stock. In the event any shares of Series B
Preferred Stock, Series E Preferred Stock, Series F Preferred Stock, Series G
Preferred Stock, Series H Preferred Stock, Series I Preferred Stock or Series J
Preferred Stock shall be converted pursuant to Section
14.
<PAGE>
3, the shares so converted shall be retired and shall resume the status of
authorized and unissued shares of Preferred Stock.
Fifth: In furtherance and not in limitation of the powers conferred by
statute, the Board of Directors shall have the power, subject to the provisions
of Section C.5 of Article Fourth, both before and after receipt of any payment
for any of the Corporation's capital stock, to adopt, amend, repeal or otherwise
alter the Bylaws of the Corporation without any action on the part of the
stockholders; provided, however that the grant of such power to the Board of
Directors shall not divest the stockholders of nor limit their power, subject to
the provisions of Section C.5, Article Fourth, to adopt, amend, repeal or
otherwise alter the Bylaws.
Sixth: Elections of directors need not be by written ballot unless the
Bylaws of the Corporation shall so provide.
Seventh: The Corporation reserves the right to adopt, repeal, rescind or
amend in any respect any provisions contained in this Restated Certificate of
Incorporation in the manner now or hereafter prescribed by applicable law, and
all rights conferred on stockholders herein are granted subject to this
reservation.
Eighth: A Director of the Corporation shall, to the full extent permitted
by the Delaware General Corporation Law as it now exists or as it may hereafter
be amended, not be liable to the Corporation or its stockholders for monetary
damages for breach of fiduciary duty as a director. Neither any amendment nor
repeal of this Article Eighth, nor the adoption of any provision of this
Restated Certificate of Incorporation inconsistent with this Article Eighth,
shall eliminate or reduce the effect of this Article Eighth in respect of any
matter occurring, or any cause of action, suit or claim that, but for this
Article Eighth, would accrue or arise, prior to such amendment, repeal or
adoption of an inconsistent provision.
15.
<PAGE>
Certificate Of Amendment
Of
Amended and Restated Certificate Of Incorporation
Of
Telik, Inc.
Telik, Inc., a corporation organized and existing under the laws of the
State of Delaware (the "Corporation") hereby certifies that:
1. The name of the Corporation is Telik, Inc. The name under which this
Corporation was originally incorporated is Terrapin Diagnostics, Inc.
2. The date of filing of the Corporation's original Certificate of
Incorporation with the Secretary of State of the State of Delaware was
October 20, 1988.
3. The following amendment of the Amended and Restated Certificate of
Incorporation was duly adopted in accordance with the provisions of
Section 242 of the Delaware General Corporation Law by resolution duly
adopted by the Board of Directors of this Corporation and was approved
by the stockholders of the Corporation in accordance with the
provisions of Section 228 of the Delaware General Corporation Law.
4. Article Fourth, Section C(3)(b) of the Amended and Restated
Certificate of Incorporation is hereby amended to read in its entirety
as follows:
"Article Fourth
(b) Mandatory Conversion. Each share of Series B Preferred Stock,
Series E Preferred Stock, Series F Preferred Stock, Series G Preferred
Stock, Series H Preferred Stock, Series I Preferred Stock and Series J
Preferred Stock shall automatically be converted into shares of Common
Stock at the applicable Series B Conversion Price, Series E Conversion
Price, Series F Conversion Price, Series G Conversion Price, Series H
Conversion Price, Series I Conversion Price or Series J Conversion
Price then in effect pursuant to Section 3(a) hereof upon the earlier
of (i) immediately upon the closing of a firmly underwritten
registered public offering of Common Stock of the Corporation pursuant
to the Securities Act of 1933 (other than a registration relating
solely to a transaction under Rule 145 under such Act (or any
successor thereto) or to an employee benefit plan), resulting in the
receipt by the Corporation of at least ten million dollars
($10,000,000) of gross proceeds (before applicable discounts,
commissions and expenses), or (ii) upon the date specified by a vote
or written consent or agreement of holders of at least two-thirds
(2/3) of the shares of Series B Preferred Stock, Series E Preferred
Stock, Series F Preferred Stock, Series G Preferred Stock, Series H
Preferred Stock, Series I Preferred Stock and Series J Preferred Stock
then outstanding, voting together as a single class. Each share of
Series J Preferred Stock shall automatically be converted into shares
of Common Stock at the applicable Series J Conversion Price, then in
effect pursuant to Section 3(a) hereof upon the date specified by a
vote or written consent or agreement of holders of at least two-thirds
(2/3) of the shares of Series J Preferred Stock."
<PAGE>
5. All other provisions of the Amended and Restated Certificate of
Incorporation shall remain in full force and effect.
In Witness Whereof, Telik, Inc. has caused this certificate to be signed
by its Chairman, President and Chief Executive Officer, Michael M. Wick, M.D.,
Ph.D. and attested by its Secretary, Deborah A. Marshall, this ___ day of March,
2000.
Telik, Inc.
_________________________________________________
Michael M. Wick, M.D., Ph.D.
President, Chief Executive Officer and Chairman
Attest:
___________________________________
Deborah A. Marshall
Secretary
<PAGE>
Certificate Of Amendment
Of
Amended and Restated Certificate Of Incorporation
Of
Telik, Inc.
Telik, Inc., a corporation organized and existing under the laws of the
State of Delaware (the "Corporation") hereby certifies that:
1. The name of the Corporation is Telik, Inc. The name under which this
Corporation was originally incorporated is Terrapin Diagnostics, Inc.
6. The date of filing of the Corporation's original Certificate of
Incorporation with the Secretary of State of the State of Delaware was
October 20, 1988.
7. The following amendment of the Amended and Restated Certificate of
Incorporation was duly adopted in accordance with the provisions of
Section 242 of the Delaware General Corporation Law by resolution duly
adopted by the Board of Directors of this Corporation and was approved
by the stockholders of the Corporation in accordance with the
provisions of Section 228 of the Delaware General Corporation Law.
8. Article Fourth, Section (A) of the Amended and Restated Certificate of
Incorporation is hereby amended to read in its entirety as follows:
"Article Fourth
A. The Corporation is authorized to issue two classes of shares to
be designated Common Stock ("Common Stock") and Preferred Stock
("Preferred Stock"), respectively. The total number of shares of
stock which the Corporation shall have the authority to issue is
Fifty Million (50,000,000) of which Forty Six Million Nine
Hundred Seventy Six Two Hundred One (46,976,201) Shares are
Common Stock and Three Million Twenty Three Thousand Seven
Hundred Ninety Nine (3,023,799) shares are Preferred Stock, and
the par value of each share is One Cent ($0.01).
The Two Million (2,000,000) shares of Preferred Stock may be
issued from time to time in one or more series. The Board of
Directors is hereby authorized, by filing a certificate pursuant
to the Delaware General Corporation Law, to fix or alter from
time to time the designation, powers, preferences and rights of
the shares of each such series and the qualifications,
limitations or restrictions of any wholly unissued series of
Preferred Stock, and to establish from time to time the number of
shares constituting any such series or any of them; and to
increase or decrease the number of shares of any series
subsequent to the issuance of shares of that series, but not
below the number of shares of such series then outstanding. In
case the number of shares of any series shall be decreased in
accordance with the foregoing sentence, the shares constituting
such decrease shall resume the status that they had prior to the
adoption of the resolution originally fixing the number of shares
of such series."
<PAGE>
9. All other provisions of the Amended and Restated Certificate of
Incorporation shall remain in full force and effect.
<PAGE>
In Witness Whereof, Telik, Inc. has caused this certificate to be signed by
its President, Chief Executive Officer and Chairman, Michael M. Wick, M.D.,
Ph.D. and attested by its Secretary, Deborah A. Marshall, this ___ day of March,
2000.
Telik, Inc.
_________________________________________________
Michael M. Wick, M.D., Ph.D.
President, Chief Executive Officer and Chairman
Attest:
___________________________________
Deborah A. Marshall
Secretary
<PAGE>
TELIK, INC.
CERTIFICATE OF DESIGNATION
OF
SERIES K PREFERRED STOCK
(Pursuant to Section 151 of the General Corporation
Law of the State of Delaware)
__________________________
Telik, Inc. Delaware corporation (the "Company"), in accordance with the
provisions of Section 103 of the General Corporation Law of the State of
Delaware (the "DGCL") DOES HEREBY CERTIFY:
That pursuant to authority vested in the Board of Directors of the Company
by the Amended and Restated Certificate of Incorporation of the Company, as
amended, the Board of Directors of the Company, at a meeting duly called and
held on March 22, 2000, adopted a resolution providing for the creation of a
series of the Company's Preferred Stock, $.01 par value, which series is
designated "Series K Preferred Stock," which resolution is as follows:
Resolved, that pursuant to authority vested in the Board of Directors of
the Company by the Amended and Restated Certificate of Incorporation, as
amended, the Board of Directors does hereby provide for the creation of a series
of the Preferred Stock, $.01 par value, of the Company, and to the extent that
the voting powers and the designations, preferences and relative, participating,
optional or other special rights thereof and the qualifications, limitations or
restrictions of such rights have not been set forth in the Amended and Restated
Certificate of Incorporation of the Company, as amended, does hereby fix the
same as follows:
SERIES K PREFERRED STOCK
A. Designation. The shares of such series shall be designated as "Series
K Preferred Stock" (the "Series K Preferred Stock").
B. Amount. The number of shares constituting such series of Series K
Preferred Stock shall be Two Million (2,000,000).
C. Rank. The Series K Preferred Stock shall rank (i) senior to the
Common Stock, par value $.01 per share (the "Common Stock"), of the Company, now
or hereafter issued, as to payment of dividends and distribution of assets upon
liquidation, dissolution, or winding up of the Company, whether voluntary or
involuntary, and (ii) on a parity with any currently outstanding series of
preferred stock, both as to payment of dividends and as to distributions of
assets upon liquidation, dissolution, or winding up of the Company, whether
voluntary or involuntary.
The rights, preferences, privileges, restrictions and other matters
relating to the Series K Preferred Stock are as follows:
1.
<PAGE>
7. Dividend Provisions. The holders of shares of Series K Preferred Stock
shall be entitled to receive dividends, pari passu with any other series of
Preferred Stock then outstanding, out of any assets legally available therefor,
prior and in preference to any declaration or payment of any dividend (payable
other than in Common Stock or other securities and rights convertible into or
entitling the holder thereof to receive, directly or indirectly, additional
shares of Common Stock of the Corporation) on the Common Stock of the
Corporation and no dividends shall be paid on any share of Common Stock unless a
dividend is paid with respect to all outstanding shares of Series K Preferred
Stock equal to or greater than the aggregate amount of such dividends for all
shares of Common Stock into which such share of Series K Preferred Stock could
then be converted. Such dividends shall be payable only when, as and if declared
by the Board of Directors and shall be non-cumulative.
8. Liquidation Preference.
(a) In the event of any liquidation, dissolution or winding up of the
Corporation, either voluntary or involuntary, the holders of each share of
Series K Preferred Stock shall be entitled to receive, pari passu with any other
series of Preferred Stock then outstanding, and prior and in preference to any
distribution of any of the assets of the Corporation to the holders of Common
Stock by reason of their ownership thereof, an amount per share equal to $6.00
for each outstanding share of Series K Preferred Stock (the "Original Series K
Issue Price") plus all accrued or declared but unpaid dividends for each share
of Series K Preferred Stock then held by them. If upon the occurrence of such
event, the assets and funds distributed among the holders of the Preferred Stock
shall be insufficient to permit the payment to such holders of the full
preferential amounts set forth above, then the entire assets and funds of the
Corporation legally available for distribution shall be distributed ratably
among the holders of the Preferred Stock in proportion to the amount of such
stock owned by each such holder.
(b) In the event of any liquidation, dissolution or winding up of the
Corporation, either voluntary or involuntary, and subject to the payment in full
of the liquidation preferences, as provided in subparagraph (a) of this Section
2, the holders of the Common Stock shall be entitled to receive, prior and in
preference to any further distribution of any of the assets or surplus funds of
the Corporation to the holders of the Series K Preferred Stock and, by reason of
their ownership thereof, the amount of $3.00 per share (as adjusted for any
stock dividends, combinations or splits with respect to such shares) for each
share of Common Stock then held by them and no more. Subject to the payment in
full of the liquidation preferences as provided in subparagraph (a) of this
Section 2, if upon the occurrence of such event, the assets and funds thus
distributed among the holders of the Common Stock shall be insufficient to
permit the payment to such holders of the full aforesaid preferential amount,
then the entire remaining assets and funds of the Corporation legally available
for distribution shall be distributed among the holders of the Common Stock in
proportion to the shares of Common Stock then held by them.
(c) After payment to the holders of the Common Stock and Preferred
Stock of the amounts set forth in Section 2(a) and (b) above, the entire
remaining assets and funds of the Corporation legally available for
distribution, if any, shall be distributed among the holders of the Common Stock
and Preferred Stock in proportion to the shares of Common Stock then held
2.
<PAGE>
by them and the shares of Common Stock which they then have the right to acquire
upon conversion of the shares of the Preferred Stock then held by them.
(d) A consolidation or merger of the Corporation with or into any
other corporation or corporations, or a sale, conveyance or disposition of all
or substantially all of the assets of the Corporation shall be deemed to be a
liquidation, dissolution or winding up within the meaning of this Section 2.
9. Conversion. The holders of the Series K Preferred Stock shall have
conversion rights as follows (the "Conversion Rights"):
(a) Right to Convert. Each share of Series K Preferred Stock shall be
convertible, at the option of the holder thereof, at any time after the date of
issuance of such share, at the office of the Corporation or any transfer agent
for the Series K Preferred Stock, into such number of fully paid and
nonassessable shares of Common Stock as is determined by dividing the Original
Series K Issue Price by the Series K Conversion Price (as defined below) at the
time in effect for such share. The price at which shares of Common Stock shall
be deliverable upon conversion of shares of Series K Preferred Stock (the
"Series K Conversion Price") shall initially be $6.00 per share of Common Stock;
provided, however, that the Series K Conversion Price shall be subject to
adjustment as set forth in this Section 3.
(b) Mandatory Conversion. Each share of Series K Preferred Stock
shall automatically be converted into shares of Common Stock at the applicable
Series K Conversion Price then in effect pursuant to Section 3(a) hereof upon
the earlier of (i) immediately upon the closing of a firmly underwritten
registered public offering of Common Stock of the Corporation pursuant to the
Securities Act of 1933 (other than a registration relating solely to a
transaction under Rule 145 under such Act (or any successor thereto) or to an
employee benefit plan resulting in the receipt by the Corporation of at least
ten million dollars ($10,000,000) of gross proceeds (before applicable
discounts, commissions and expenses), or (ii) upon the date specified by a vote
or written consent or agreement of holders of at least two-thirds (2/3) of the
shares of Series K Preferred Stock then outstanding.
(c) Mechanics of Conversion. Before any holder of Series K Preferred
Stock shall be entitled to convert the same into shares of Common Stock pursuant
to Section 3(a) hereof, and before the Corporation shall be obligated to issue
certificates for shares of Common Stock upon the automatic conversion of the
Series K Preferred Stock pursuant to Section 3(b) hereof, such holder shall
surrender the certificate or certificates therefor, duly endorsed, at the office
of the Corporation or of any transfer agent for the Series K Preferred Stock,
and shall give written notice by mail, postage prepaid, to the Corporation at
its principal corporate office, of the election to convert the same and shall
state therein the name or names in which the certificate or certificates for
shares of Common Stock are to be issued (except that no such written notice of
intent to convert shall be necessary in the event of an automatic conversion
upon a public offering pursuant to Section 3(b) hereof). The Corporation shall,
as soon as practicable thereafter, issue and deliver at such office to such
holder of Series K Preferred Stock or to the nominee or nominees of such holder,
a certificate or certificates for the number of shares of Common Stock to which
such holder shall be entitled as aforesaid. Such conversion shall be
3.
<PAGE>
deemed to have been made immediately prior to the close of business on the date
of such surrender of the shares of Series K Preferred Stock to be converted, and
the person or persons entitled to receive the shares of Common Stock issuable
upon such conversion shall be treated for all purposes as the record holder or
holders of such shares of Common Stock as of such date. On the date fixed for
any mandatory conversion pursuant to Section 3(b) above, all rights under this
Certificate of Designation with respect to the Series K Preferred Stock will
terminate (except the right upon the surrender of the certificates to receive
certificates for the number of shares of Common Stock into which such shares
have been converted).
(d) Adjustments to Conversion Price for Diluting Issues:
(i) Special Definitions. For purposes of this subparagraph 5(d),
the following definitions shall apply:
(A) "Option" shall mean rights, options or warrants to
subscribe for, purchase or otherwise acquire either Common Stock or Convertible
Securities, other than those shares excluded from the definition of Additional
Shares of Common Stock.
(B) "Convertible Securities" shall mean any evidence of
indebtedness, shares (other than Common Stock) or other securities directly or
indirectly convertible into or exchangeable for Common Stock, other than those
shares excluded from the definition of Additional Shares of Common Stock.
(C) "Additional Shares of Common Stock" shall mean all
shares of Common Stock issued (or, pursuant to subparagraph 3(d)(ii), deemed to
be issued) by the Corporation after the Original Issue Date (as defined in
section D below), other than:
(I) shares of Common Stock issued or issuable upon
conversion of shares of Preferred Stock; or
(II) shares of Common Stock issuable to officers,
directors and employees of, and consultants to, the Corporation and its
subsidiaries pursuant to stock purchase or option plans or arrangements or other
officer, director, employee or consultant stock incentive or benefit plans or
arrangements (collectively, the "Plans") approved by the Board of Directors; or
(III) shares of Common Stock issued or issuable as a
dividend or distribution on Preferred Stock; or
(IV) shares of Common Stock issued or issuable for
which adjustment of the Series K Conversion Price is made pursuant to Section
3(e) herein.
(D) "Original Issue Date" shall mean the date on which a
share of Series K Preferred Stock was first issued.
(ii) Issue of Securities Deemed Issue of Additional Shares of
Common Stock. In the event the Corporation at any time or from time to time
after the Original
4.
<PAGE>
Issue Date shall issue any Options or Convertible Securities or shall fix a
record date for the determination of holders of any class of securities entitled
to receive any such Options or Convertible Securities, then the maximum number
of shares (as set forth in the instrument relating thereto without regard to any
provisions contained therein for a subsequent adjustment of such number) of
Common Stock issuable upon the exercise of such Options or, in the case of
Convertible Securities and Options therefore, the conversion or exchange of such
Convertible Securities, shall be deemed to be Additional Shares of Common Stock
issued as of the time of such issue or, in the case such a record date shall
have been fixed, as of the close of business on such record date; provided that
in any such case in which Additional Shares of Common Stock are deemed to be
issued:
(A) no further adjustment in the Series K Conversion Price
shall be made upon the subsequent issue of Convertible Securities or shares of
Common Stock upon the exercise of such Options or conversion or exchange of such
Convertible Securities;
(B) if such Options or Convertible Securities by their
terms provide, with the passage of time or otherwise, for any increase in the
consideration payable to the Corporation, or decrease in the number of shares of
Common Stock issuable, upon the exercise, conversion or exchange thereof, the
Series K Conversion computed upon the original issue thereof (or upon the
occurrence of a record date with respect thereto), and any subsequent
adjustments based thereon, shall, upon any such increase or decrease becoming
effective, be recomputed to reflect such increase or decrease insofar as it
affects such Options or the rights of conversion or exchange under such
Convertible Securities;
(C) upon the expiration of any such Options or any rights
of conversion or exchange under such Convertible Securities which shall not have
been exercised, the Series K Conversion Price computed upon the original issue
thereof (or upon the occurrence of a record date with respect thereto), and any
subsequent adjustments based thereon, shall, upon such expiration, be recomputed
as if:
(I) in the case of Convertible Securities or Options
for Common Stock the only Additional Shares of Common Stock issued were the
shares of Common Stock, if any, actually issued upon the exercise of such
Options or the conversion or exchange of such Convertible Securities and the
consideration received therefor was the consideration actually received by the
Corporation for the issue of all such Options, whether or not exercised, plus
the consideration actually received by the Corporation upon such exercise, or
for the issue of all such Convertible Securities which were actually converted,
if any, actually received by the Corporation upon such conversion or exchange,
and
(II) in the case of Options for Convertible Securities,
only the Convertible Securities, if any, actually issued upon the exercise
thereof were issued at the time of issue of such Options, and the consideration
received by the Corporation for the Additional Shares of Common Stock deemed to
have been then issued was the consideration actually received by the Corporation
for the issue of all such Options, whether or not exercised, plus the
consideration deemed to have been received the Corporation (determined pursuant
to
5.
<PAGE>
subparagraph 3(c)(iv)) upon the issue of the Convertible Securities with respect
to which such Options were actually exercised;
(III) in the case of any Options which expire by their
terms not more than thirty (30) days after the date of issue thereof, no
adjustment of the Series K Conversion Price shall be made until the expiration
or exercise of all such Options, whereupon such adjustment shall be made in the
same manner provided in clause (II) above; and
(IV) if such record date shall have been fixed and
such Options or Convertible Securities are not issued on the date fixed thereof,
the adjustment previously made in the Series K Conversion Price which became
effective on such record date shall be canceled as of the close of business on
such record date, and thereafter the Series K Conversion Price shall be adjusted
pursuant to this subparagraph as of the actual date of issuance of such Options
or Convertible Securities.
(iii) Adjustment of Conversion Price upon Issuance of Additional
Shares of Common Stock. In the event this Corporation shall issue Additional
Shares of Common Stock (including Additional Shares of Common Stock deemed to be
issued pursuant to subparagraph 3(d)(ii)) at any time on or after the Original
Issue Date (including the issuance of Series K Preferred Stock) without
consideration or for a consideration per share less than the Series K Preferred
Stock Conversion Price in effect on the date of and immediately prior to such
issue (any such series in respect of which such issuance or deemed issuance
occurs being referred to herein as an "Affected Series"), then and in such
event, the Conversion Price of any Affected Series shall be reduced,
concurrently with such issue, to a price (calculated to the nearest cent)
determined by multiplying such Conversion Price by a fraction, the numerator of
which shall be the number of shares of Common Stock outstanding immediately
prior to such issue plus the number of shares of Common Stock which 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 the denominator of which shall be the number of shares of Common
Stock outstanding immediately prior to such issue plus the number of such
Additional Shares of Common Stock so issued; and provided further that, for the
purposes of this subparagraph 3(d)(iii), all shares of Common Stock issuable
upon conversion of outstanding Options and Preferred Stock shall be deemed to be
outstanding, and immediately after any Additional Shares of Common Stock are
deemed issued pursuant to subparagraph 3(d)(ii), such Additional Shares of
Common Stock shall be deemed to be outstanding. The Series K Conversion Price
shall not be increased except as set forth in subparagraph 3(d)(ii)(B) and in
paragraph 3(f).
Notwithstanding the foregoing, until the second anniversary of the Original
Issue Date for the Series K Preferred Stock, in the event this Corporation shall
issue Additional Shares of Common Stock (including Additional Shares of Common
Stock deemed to be issued pursuant to subparagraph 3(d)(ii)) at any time on or
after the Original Issue Date of Series K Preferred Stock without consideration
or for a consideration per share less than the Series K Conversion Price in
effect on the date of and immediately prior to such issue, then and in such
event, the Conversion Price of the Series K Preferred Stock shall be reduced,
concurrently with such issue, to a price equal to the issue price for such
Additional Shares of Common Stock.
(iv) Determination of Consideration. For purposes of this
subparagraph 3(d)(iv), the consideration received by the Corporation for the
issue of any Additional Shares of Common Stock shall be computed as follows:
(A) Cash and Property. Such consideration shall:
(I) insofar as it consists of cash, be computed at the
aggregate amount of cash received by the Corporation excluding amounts paid or
payable for accrued interest or accrued dividends;
6.
<PAGE>
(II) insofar as it consists of property other than
cash, be computed at the fair value thereof at the time of such issue, as
determined in good faith by the Board of Directors; and
(III) in the event Additional Shares of Common Stock
are issued together with other shares or securities or other assets of the
Corporation for consideration which covers both, be the proportion of such
consideration so received, computed as provided in clauses (I) and (II) above,
as determined in good faith by the Board of Directors.
(B) Options and Convertible Securities. The consideration
per share received by the Corporation for Additional Shares of Common Stock
deemed to have been issued pursuant to subparagraph 3(d)(ii), relating to
Options and Convertible Securities, shall be determined by dividing:
(I) the total amount, if any, received or receivable
by the Corporation as consideration for the issue of such Options or Convertible
Securities, plus the minimum aggregate amount of additional consideration (as
set forth in the instruments relating thereto, without regard to any provision
contained therein for a subsequent adjustment of such consideration) payable to
the Corporation upon the exercise of such Options or the conversion or exchange
of such Convertible Securities, or in the case of Options for Convertible
Securities, the exercise of such Options for Convertible Securities and the
conversion or exchange of such Convertible Securities, by
(II) the maximum number of shares of Common Stock (as
set forth in the instruments relating thereto, without regard to any provision
contained therein for a subsequent adjustment of such number) issuable upon the
exercise of such Options or the conversion or exchange of such Convertible
Securities.
(e) Adjustments for Dividends and Distributions. In the event the
Corporation should at any time or from time to time fix a record date for the
effectuation of a split or subdivision of the outstanding shares of Common Stock
or the determination of holders of Common Stock entitled to receive a dividend
or other distribution payable in additional shares of Common Stock or other
securities or rights convertible into, or entitling the holder thereof to
receive directly or indirectly, additional shares of Common Stock (hereinafter
referred to as "Common Stock Equivalents") without payment of any consideration
by such holder for the additional shares of Common Stock or the Common Stock
Equivalents (including the additional shares of Common Stock issuable upon
conversion or exercise thereof), then, as of such record date (or the date of
such dividend distribution, split or subdivision if no record date is fixed),
the applicable Conversion Price for a series of Series K Preferred Stock shall
be appropriately decreased so that the number of shares of Common Stock issuable
on conversion of each share of Series K Preferred Stock shall be increased in
proportion to such increase of the aggregate of shares of Common Stock
outstanding and those issuable with respect to such Common Stock Equivalents.
(f) Adjustments for Combinations. If the number of shares of Common
Stock outstanding at any time after the Original Issue Date is decreased by a
combination of the outstanding shares of Common Stock, then, following the
record date of such combination, the
7.
<PAGE>
Conversion Price for the Series K Preferred Stock shall be appropriately
increased so that the number of shares of Common Stock issuable on conversion of
each share of Series K Preferred shall be decreased in proportion to such
decrease in outstanding shares.
(g) Other Distributions. In the event the Corporation shall declare a
distribution payable in securities of other persons, evidences of indebtedness
issued by the Corporation or other persons, assets (excluding cash dividends) or
options or rights not referred to in subsection 3(e), then, in each such case
for the purpose of this subsection 3(g), the holders of the Series K Preferred
Stock shall be entitled to a proportionate share of any such distribution as
though they were the holders of the number of shares of Common Stock of the
Corporation into which their shares of Series K Preferred Stock are convertible
as of the record date fixed for the determination of the holders of Common Stock
of the Corporation entitled to receive such distribution.
(h) Recapitalizations. If at any time or from time to time there
shall be a recapitalization of the Common Stock (other than a subdivision or
combination provided for elsewhere in this Section 3) provision shall be made so
that the holders of the Series K Preferred Stock shall thereafter be entitled to
receive upon conversion of the Series K Preferred Stock the number of shares of
stock or other securities or property of the Company or otherwise, to which a
holder of Common Stock deliverable upon conversion would have been entitled on
such recapitalization. In any such case, appropriate adjustment shall be made in
the application of the provisions of this Section 3 with respect to the rights
of the holders of the Series K Preferred Stock after the recapitalization to the
end that the provisions of this Section 3 (including adjustment of the
Conversion Price then in effect and the number of shares purchasable upon
conversion of the Series K Preferred Stock) shall be applicable after that event
as nearly equivalent as may be practicable.
(i) No Impairment. The Corporation will not, by amendment of this
Certificate of Designation or through any reorganization, recapitalization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms to be observed or performed hereunder by the
Corporation, but will at all times in good faith assist in the carrying out of
all the provisions of this Section 3 and in the taking of all such action as may
be necessary or appropriate in order to protect the Conversion Rights of the
holders of the Series K Preferred Stock against impairment.
(j) No Fractional Shares and Certificate as to Adjustments.
(A) No fractional shares shall be issued upon conversion of
the Series K Preferred Stock and the number of shares of Common Stock to be
issued shall be rounded to the nearest whole share. All shares of Common Stock
(including fractions thereof) issuable upon conversion of more than one share of
Series K Preferred Stock by a holder thereof shall be aggregated for the
purposes of determining whether the conversion would result in the issuance of
any fractional share. If the conversion would result in the issuance of a
fraction of a share of Common Stock, the Corporation shall, in lieu of issuing
any fractional share, pay the holder otherwise entitled to such fraction a sum
in cash equal to the fair market value of such
8.
<PAGE>
fraction on the date of conversion (as determined in good faith by the Board of
Directors of the Corporation).
(B) Upon the occurrence of each adjustment or readjustment
of the Conversion Price of Series K Preferred Stock pursuant to this Section 3,
the Corporation, at its expense, shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and prepare and furnish to each
holder of Series K Preferred Stock a certificate setting forth such adjustment
or readjustment and showing in detail the facts upon which such adjustment or
readjustment is based. The Corporation shall, upon the written request at any
time of any holder of Series K Preferred Stock furnish or cause to be furnished
to such holder a like certificate setting forth (A) such adjustment and
readjustment, (B) the Conversion Price at the time in effect, and (C) the number
of shares of Common Stock and the amount, if any, of other property which at the
time would be received upon the conversion of a share of Series K Preferred
Stock.
(k) Notices of Record Date. In the event of any taking by the
Corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend) or other distribution, any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, the Corporation
shall mail to each holder of Series K Preferred Stock, at least 20 days prior to
the date specified therein, a notice specifying the date on which any such
record is to be taken for the purpose of such dividend, distribution or right,
and the amount and character of such dividend, distribution or right.
(l) 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 K Preferred Stock such number of its shares of Common Stock
as shall from time to time be sufficient to effect the conversion of all
outstanding shares of the Series K Preferred Stock; and if at any time the
number of authorized but unissued shares of Common Stock shall not be sufficient
to effect the conversion of all then outstanding shares of the Series K
Preferred Stock in addition to such other remedies as shall be available to the
holder of Series K Preferred Stock, the Corporation will take such corporate
action as may, in the opinion of its counsel, be necessary to increase its
authorized but unissued shares of Common Stock to such number of shares as shall
be sufficient for such purposes.
(m) Notices. Any notice required by the provision of this Section 3
to be given to the holders of shares of Series K Preferred Stock shall be deemed
given if deposited in the United States mail, postage prepaid, and addressed to
each holder of record at his address appearing on the books of the Corporation.
10. Voting Rights.
The holder of each share of Series K Preferred Stock shall have the right
to one vote for each share of Common Stock into which such share of Series K
Preferred Stock could then be converted (with any fractional share determined on
an aggregate conversion basis being rounded
9.
<PAGE>
to the nearest whole share), and with respect to such vote, such holder shall
have full voting rights and powers equal to the voting rights and powers of the
holders of Common Stock (except as otherwise expressly provided herein or as
required by law, voting together with the Common Stock as a single class), and
shall be entitled, notwithstanding any provision hereof, to notice of any
stockholders' meeting in accordance with the Bylaws of the Corporation.
11. Covenants.
(a) In addition to any other rights provided by law, so long as any
shares of Series K Preferred Stock shall be outstanding, the Corporation shall
not, without first obtaining the affirmative vote or written consent of a
majority in interest of the outstanding shares of Series K Preferred Stock,
voting separately as a series, amend or repeal any provision of, or add any
provision to, this Certificate of Designation or the Amended and Restated
Certificate of Incorporation or the Corporation's Bylaws so as to alter,
materially and adversely, the rights, preferences or privileges of the Series K
Preferred Stock.
(b) In addition to any other rights provided by law, so long as
50,000 shares of Preferred Stock shall be outstanding, the Corporation shall
not, without first obtaining the affirmative vote or written consent of a
majority in interest of the outstanding shares of Preferred Stock, voting
together as a single class: (a) create any new class or series of shares which
has a preference over or is on a parity with the Preferred Stock; (b) effect any
liquidation, dissolution, consolidation, acquisition or merger of the
Corporation, with, by or into any other corporation or corporations or a sale of
the assets of the Corporation (other than a merger in which the shareholders of
the Corporation immediately prior to the merger own a majority of the shares of
the surviving corporation immediately after such merger); or (c) take any action
which results in a taxable event to the holders of Preferred Stock under Section
305 of the Internal Revenue Code of 1986, as amended.
12. Status of Converted Stock. In the event any shares of Series K
Preferred Stock shall be converted pursuant to Section 3, the shares so
converted shall be retired and shall resume the status of authorized and
unissued shares of Preferred Stock.
10.
<PAGE>
In Witness Whereof, Telik, Inc. has caused this Certificate of Designation
to be signed by the Chairman & Chief Executive Officer and the Secretary on this
31st day of March, 2000.
Telik, Inc.
By: /s/ Michael M. Wick
-------------------------------------
Michael M. Wick,
Chairman & Chief Executive Officer
Attest:
By: /s/ Deborah A. Marshall
----------------------------
Deborah A. Marshall, Secretary
11.
<PAGE>
EXHIBIT 4.2
NINTH AMENDED AND RESTATED
INVESTOR RIGHTS AGREEMENT
MARCH 31, 2000
<PAGE>
Table Of Contents
<TABLE>
<CAPTION>
Page
<S> <C>
SECTION 1 REGISTRATION RIGHTS.......................................... 2
1.1 Definitions...................................................... 2
1.2 Demand Registration.............................................. 3
1.3 Company Registration............................................. 5
1.4 Expenses of Registration......................................... 6
1.5 Obligations of the Company....................................... 6
1.6 Indemnification.................................................. 7
1.7 Information by Holder............................................ 9
1.8 Transfer of Registration Rights.................................. 9
1.9 Form S-3......................................................... 9
1.10 Delay of Registration............................................ 10
1.11 Limitations on Subsequent Registration Rights.................... 10
1.12 Rule 144 Reporting............................................... 10
1.13 "Market Stand-Off" Agreement..................................... 11
1.14 Amendment of Registration Rights................................. 11
1.15 Termination of Registration Rights............................... 12
SECTION 2 COMPANY COVENANTS............................................ 12
2.1 Annual and Quarterly Financial Information....................... 12
2.2 Inspection....................................................... 13
2.3 Transfer of Rights............................................... 13
SECTION 3 RIGHT OF FIRST REFUSAL....................................... 13
3.1 Pro Rata Right................................................... 13
3.2 New Securities................................................... 14
3.3 Required Notices................................................. 14
3.4 Company's Right to Sell.......................................... 14
3.5 Expiration of Right.............................................. 14
3.6 Assignment....................................................... 15
SECTION 4 MISCELLANEOUS................................................ 15
4.1 Governing Law.................................................... 15
4.2 Successors and Assigns........................................... 15
</TABLE>
i.
<PAGE>
Table Of Contents
(continued)
<TABLE>
<CAPTION>
Page
<S> <C>
4.3 Entire Agreement................................................. 15
4.4 Severability..................................................... 15
4.5 Amendment and Waiver............................................. 15
4.6 Delays or Omissions.............................................. 16
4.7 Notices, etc..................................................... 16
4.8 Titles and Subtitles............................................. 16
4.9 Counterparts..................................................... 16
</TABLE>
ii.
<PAGE>
TELIK , INC.
NINTH AMENDED AND RESTATED
INVESTOR RIGHTS AGREEMENT
This Ninth Amended and Restated Investor Rights Agreement (the "Agreement")
is entered into as of this 31st day of March, 2000, by and among Telik, Inc.,
a Delaware corporation (the "Company"), with its principal office at 750-H
Gateway Boulevard, South San Francisco, California 94080, and those holders of
the Company's Series B Preferred Stock, Series E Preferred Stock, Series F
Preferred Stock, Series G Preferred Stock, Series H Preferred Stock, Series I
Preferred Stock, Series J Preferred Stock and Series K Preferred Stock
(collectively, the "Preferred Stock") listed on Exhibit A attached hereto
(collectively, the "Investors" and each individually, an "Investor").
RECITALS
Whereas, the Company and certain of the Investors (the "Existing
Investors") are parties to that certain Eighth Amended and Restated Investor
Rights Agreement, dated as of September 30, 1998 (the "Prior Rights Agreement"),
pursuant to which the Company granted certain registration and information
rights to such Existing Investors; and
Whereas, such Existing Investors desire to supersede and replace such
rights with the rights granted herein; and
Whereas, certain of the undersigned Investors (the "New Investors") are
parties to that certain Series K Preferred Stock Purchase Agreement (the "Series
J Agreement") dated as of March 31, 2000, by and between the Company and such
New Investors, the Company's and such New Investors' obligations under which are
conditioned upon the execution and delivery by sufficient Investors and the
Company of this Agreement; and
Whereas, in connection with the Company's issuance of Series K Preferred
Stock pursuant to the Series K Agreement, the Company desires to grant the
registration and information rights set forth in this Agreement;
Now, Therefore, in consideration of the mutual agreements, covenants, and
conditions set forth herein, the Company and each of the Investors hereby agree
that effective upon the first closing of the Company's issuance and sale of
Series K Preferred Stock to the New Investors pursuant to the Series K
Agreement, all of the provisions of the Prior Rights Agreement shall be null and
void and superseded by the rights and obligations set forth in this Agreement.
This Agreement constitutes the full and entire understanding and agreement
between the parties with regard to the subject matter hereof, and no party shall
be liable or bound to any party in any manner by any warranties, representations
or covenants relating to such subject matter, except as specifically set forth
herein.
1.
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SECTION 1
REGISTRATION RIGHTS
The Company hereby grants to each of the Holders (as hereinafter defined)
the registration rights set forth in this Section 1, with respect to the
Registrable Securities (as hereinafter defined) owned by such Holders. The
Company and the Holders agree that the registration rights granted hereunder set
forth the sole and entire agreement between the Company and the Holders with
respect to registration rights of the Company's capital stock.
1.1 Definitions. As used in this Section 1:
(a) The terms "register," "registered" and "registration" refer to a
registration effected by filing with the Securities and Exchange Commission (the
"SEC") a registration statement (the "Registration Statement") in compliance
with the Securities Act of 1933, as amended (the "1933 Act"), and the
declaration or ordering by the SEC of the effectiveness of such Registration
Statement.
(b) The term "Registrable Securities" means (i) Common Stock of the
Company (the "Common Stock") issued or issuable upon conversion of the shares of
Series B Preferred Stock, Series E Preferred Stock, Series F Preferred Stock,
Series G Preferred Stock, Series H Preferred Stock, Series I Preferred Stock,
Series J Preferred Stock and Series K Preferred Stock, as set forth on Exhibit
A; and (ii) any Common Stock issued as (or issuable upon the conversion or
exercise of any warrant, right, or other security that is issued as) a dividend
or other distribution with respect to, or in exchange or in replacement of, such
Registrable Securities or such Preferred Stock; provided, however, that Common
Stock or other securities shall be treated as Registrable Securities only if and
so long as (A) they have not been sold to or through a broker or dealer or
underwriter in a public distribution or a public securities transaction, (B)
they have not been sold in a transaction exempt from the registration and
prospectus delivery requirements of the 1933 Act under Section 4(1) thereof so
that all transfer restrictions and restrictive legends with respect thereto are
removed upon the consummation of such sale, and (C) the registration rights
associated with such securities have not been terminated pursuant to Section
1.15 hereof.
(c) The term "Registration Expenses" shall mean all expenses incurred
by the Company in complying with Sections 1.2 and 1.3 hereof, including, without
limitation, all registration, qualification and filing fees, printing expenses,
escrow fees, fees and disbursements of counsel for the Company and one special
counsel for the participant Holders (up to a maximum of $15,000.00 for such
special counsel), blue sky fees and expenses, and the expenses of any regular or
special audits incident to or required by any such registration (but excluding
the compensation of regular employees of the Company which shall be paid in any
event by the Company).
(d) The term "Holder" (collectively, "Holders") means any Investor
(and any transferee as permitted by Section 1.8 hereof) holding Registrable
Securities, securities exercisable or convertible into Registrable Securities or
securities exercisable into securities convertible into Registrable Securities.
2.
<PAGE>
(e) The term "Initiating Holders" means any Holder or Holders of at
least fifty percent (50%) of the Registrable Securities then outstanding and not
registered at the time of any request for registration pursuant to Section 1.2
of this Agreement.
(f) The term "Selling Expenses" means all underwriting discounts and
selling commissions applicable to the sale of Registrable Securities.
1.2 Demand Registration.
(a) Demand for Registration. If the Company shall receive from
Initiating Holders a written demand (a "Demand Registration") that the Company
effect any registration of at least fifty percent (50%) of the Registrable
Securities then outstanding, or any lesser percentage if the anticipated
aggregate offering price (before deduction for underwriter commissions and
offering expenses) would exceed $5,000,000.00 (other than a registration on Form
S-3 or any related form of registration statement, such a request being provided
for under Section 1.9 hereof), the Company will:
(i) promptly (but in any event within ten (10) days) give
written notice of the proposed registration to all other Holders; and
(ii) use its best efforts to effect such registration as soon as
practicable and as will permit or facilitate the sale and distribution of all or
such portion of such Initiating Holders' Registrable Securities as are specified
in such demand, together with all or such portion of the Registrable Securities
of any Holder or Holders joining in such demand as are specified in a written
demand received by the Company within twenty (20) days after such written notice
is given, provided that the Company shall not be obligated to take any action to
effect any such registration, pursuant to this Section 1.2:
(A) In any particular jurisdiction in which the Company
would be required to execute a general consent to service of process in
effecting such registration, qualification or compliance unless the Company is
already subject to service in such jurisdiction and except as may be required by
the 1933 Act;
(B) After the Company has effected two such registrations
pursuant to this Section 1.2 where such registrations have been declared or
ordered effective (and pursuant to which securities have been sold);
(C) If the Company shall furnish to such Holders a
certificate signed by the President of the Company, stating that in the good
faith judgment of the Board of Directors of the Company it would be seriously
detrimental to the Company and its stockholders for such Registration Statement
to be filed at the date filing would be required, in which case the Company
shall have an additional period of not more than sixty (60) days within which to
file such Registration Statement; provided, however, that the Company shall not
use this right more than once in any 12-month period;
3.
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(D) Prior to the earlier of (1) one hundred eighty (180)
days following the date the initial underwritten public offering of the
Company's securities is declared effective by the SEC or December 31, 2000;
(E) During the period starting with the date sixty (60) days
prior to the Company's estimated date of filing of, and ending on the date one
hundred eighty (180) days immediately following, the effective date of any
registration statement pertaining to securities of the Company (other than a
registration of securities in a Rule 145 transaction or with respect to an
employee benefit plan), provided that the Company is actively employing in good
faith all reasonable efforts to cause such registration statement to become
effective and that the Company's estimate of the date of filing such
registration statement is made in good faith;
(F) If the Company shall furnish to such Holders a written
notice within thirty (30) days of any written demand for registration specifying
the Company's intent to register its securities pursuant to Section 1.3 below
within thirty (30) days of providing such notice to Holders.
(b) Underwriting. If the Initiating Holders intend to distribute the
Registrable Securities covered by their demand by means of an underwriting, they
shall so advise the Company as part of their demand made pursuant to this
Section 1.2; and the Company shall include such information in the written
notice referred to in Section 1.2(a)(i). In such event, the right of any Holder
to registration pursuant to this Section 1.2 shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting to the extent provided herein.
The Company shall, together with all Holders proposing to distribute their
securities through such underwriting, enter into an underwriting agreement in
customary form with the underwriter or underwriters selected by a majority in
interest of the Initiating Holders and reasonably satisfactory to the Company.
Notwithstanding any other provision of this Section 1.2, if the underwriter
shall advise the Company in writing that marketing factors (including, without
limitation, an adverse effect on the per share offering price) require a
limitation of the number of shares to be underwritten, then the Company shall so
advise all Holders of Registrable Securities that would otherwise be registered
and underwritten pursuant hereto, and the number of shares of Registrable
Securities that may be included in the registration and underwriting shall be
allocated pro rata among such Holders thereof in proportion, as nearly as
practicable, to the respective amounts of Registrable Securities held by such
Holders at the time of filing the Registration Statement. No Registrable
Securities excluded from the underwriting by reason of the underwriter's
marketing limitation shall be included in such registration.
If any Holder disapproves of the terms of the underwriting, such Holder may
elect to withdraw therefrom by written notice to the Company, the underwriter
and the Initiating Holders. The Registrable Securities so withdrawn shall also
be withdrawn from registration.
If the underwriter has not limited the number of Registrable Securities to
be underwritten, the Company may include securities for its own account (or for
the account of other stockholders) in such registration if the underwriter so
agrees and if the number of Registrable
4.
<PAGE>
Securities that would otherwise have been included in such registration and
underwriting will not thereby be limited.
1.3 Company Registration.
(a) If at any time or from time to time the Company shall determine
to register any of its securities, either for its own account or for the account
of security holders, other than (i) a registration relating solely to employee
benefit plans, (ii) a registration on Form S-4 relating solely to an SEC Rule
145 transaction or (iii) a registration pursuant to Section 1.2 hereof, the
Company will:
(i) promptly give to each Holder written notice thereof (which
shall include a list of the jurisdictions in which the Company intends to
attempt to qualify such securities under applicable blue sky or other state
securities laws); and
(ii) include in such registration (and any related qualification
under blue sky laws or other compliance), and in any underwriting involved
therein, all the Registrable Securities specified in a written request or
requests, made within twenty (20) days after receipt of such written notice from
the Company, by any Holder or Holders, except as set forth in Section 1.3(b)
below.
(b) Underwriting. If the registration of which the Company gives
notice is for a registered public offering involving an underwriting, the
Company shall so advise the Holders as a part of the written notice given
pursuant to Section 1.3(a)(i). In such event the right of any Holder to
registration pursuant to this Section 1.3 shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting to the extent provided herein.
All Holders proposing to distribute their securities through such
underwriting shall, together with the Company and the other parties distributing
their securities through such underwriting, enter into an underwriting agreement
in customary form with the underwriter or underwriters selected for such
underwriting by the Company. Notwithstanding any other provision of this
Section 1.3 (except for the last sentence of this paragraph), if the underwriter
determines that marketing factors require a limitation of the number of shares
to be underwritten, the underwriter may limit the number of Registrable
Securities to be included in the registration and underwriting, or may exclude
Registrable Securities entirely from such registration and underwriting subject
to the terms of this Section 1.3; provided, however, that after the first public
offering of the Company's securities, the number of Registrable Securities to be
sold in any such registration shall not be reduced to below 25% of the total
amount of securities included in such offering. The Company shall so advise all
Holders of the Company's securities that would otherwise be registered and
underwritten pursuant hereto, and the number of shares of such securities,
including Registrable Securities, that may be included in the registration and
underwriting shall be allocated in the following manner: shares, other than
Registrable Securities, requested to be included in such registration by
stockholders shall be excluded, and if a limitation on the number of shares is
still required, the number of Registrable Securities that may be included shall
be allocated among the Holders thereof in proportion, as nearly as practicable,
to the respective amounts of Registrable Securities held by each such Holder at
the
5.
<PAGE>
time of filing the Registration Statement. No securities excluded from the
underwriting by reason of the underwriter's marketing limitation shall be
included in such registration.
If any Holder disapproves of the terms of the underwriting, it may elect to
withdraw therefrom by written notice to the Company and the underwriter. The
Registrable Securities so withdrawn shall also be withdrawn from registration.
If by the withdrawal of such securities a greater number of securities held by
other Holders may be included in such registration (up to the maximum of any
limitation imposed by the underwriters), then the Company shall offer to all
Holders who have included securities in the registration the right to include
additional securities in the same proportion used in determining the underwriter
limitation in this Section 1.3(b).
(c) Right to Terminate Registration. The Company shall have the right
to terminate or withdraw any registration initiated by it under this Section 1.3
prior to the effectiveness of such registration whether or not any Holder has
elected to include securities in such registration.
1.4 Expenses of Registration. All Registration Expenses incurred in
connection with the first two (2) registrations effected pursuant to Section
1.2, the first two (2) registrations effected pursuant to Section 1.9, and all
registrations effected pursuant to Section 1.3 shall be borne by the Company.
Unless otherwise stated, all Selling Expenses relating to securities registered
on behalf of the Holders and all other Registration Expenses shall be borne by
the Holders holding such securities pro rata on the basis of the number of
shares so registered. The Company shall not be required to pay stock transfer
taxes or underwriters' discounts or selling commissions relating to Registrable
Securities. Notwithstanding anything to the contrary above, the Company shall
not be required to pay for any Registration Expenses of any registration
proceeding under Section 1.2 if the registration request is subsequently
withdrawn at the request of the Holders of a majority of the Registrable
Securities to have been registered, unless such Holders agree to forfeit their
right to a demand registration pursuant to Section 1.2 (in which event such
right shall be forfeited by all Holders). In the absence of such an agreement
to forfeit, the Holders of Registrable Securities to have been registered shall
bear all such expenses pro rata on the basis of the Registrable Securities to
have been registered. Notwithstanding the preceding sentence, however, if at
the time of the withdrawal, the Holders have learned of a material adverse
change in the condition, business or prospects of the Company from that known to
the Holders at the time of their request (and known by the Company at the time
of such request), then the Holders shall not be required to pay any of said
expenses and shall retain their rights pursuant to Section 1.2.
1.5 Obligations of the Company. Whenever required under this Section 1 to
effect the registration of any Registrable Securities, the Company shall, as
expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use its diligent best efforts to
cause such registration statement to become effective, and keep such
registration statement effective for up to one hundred eighty (180) days or
until the distribution described in the Registration Statement has been
completed.
6.
<PAGE>
(b) Prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
1933 Act with respect to the disposition of all securities covered by such
registration statement.
(c) Furnish to the Holders such numbers of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
1933 Act, and such other documents as they may reasonably request in order to
facilitate the disposition of Registrable Securities owned by them.
(d) Use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or blue sky
laws of such jurisdictions as shall be reasonably requested by the Holders,
provided that the Company shall not be required in connection therewith or as a
condition thereto to qualify to do business or to file a general consent to
service of process in any such states or jurisdictions.
(e) In the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual and customary
form, with the managing underwriter of such offering. Each Holder participating
in such underwriting shall also enter into and perform its obligations under
such an agreement.
(f) Notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the 1933 Act of the happening of any event as a
result of which the prospectus included in such registration statement, as then
in effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing.
(g) Deliver any documents customarily prepared in connection with any
registrations, including an opinion of counsel to the Company covering legal
matters relating to the registration and, to the extent practical a letter from
the Company's independent certified public accountants as to matters relating to
financial information contained in the registration statement.
1.6 Indemnification.
(a) The Company will, and does hereby undertake to, indemnify and hold
harmless each Holder of Registrable Securities, each of such Holder's directors,
officers, partners and agents, and each person controlling such Holder, with
respect to any registration, qualification or compliance effected pursuant to
this Section 1, and each underwriter, if any, and each person who controls any
underwriter, of the Registrable Securities held by or issuable to such Holder,
against all claims, losses, damages and liabilities (or actions in respect
thereto) to which they may become subject under the 1933 Act, the Securities
Exchange Act of 1934, as amended (the "1934 Act"), or other federal or state law
arising out of or based on (i) any untrue statement (or alleged untrue
statement) of a material fact contained in any prospectus, offering circular or
other similar document (including any related Registration Statement,
notification, or the like) incident to any such registration, qualification or
compliance, or based on any omission
7.
<PAGE>
(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 which they were made, or (ii) any violation by the Company
of any federal, state or common law rule or regulation applicable to the Company
in connection with any such registration, qualification or compliance, and will
reimburse each such Holder, and each such Holder's directors, officers,
partners, agents and controlling persons, and each such underwriter and such
underwriter's controlling person, for any legal and any other expenses
reasonably incurred in connection with investigating or defending any such
claim, loss, damage, liability or action; provided that the Company will not be
liable in any such case to the extent that any such claim, loss, damage,
liability or action arises out of or is based on any untrue statement or
omission based upon written information furnished to the Company by an
instrument duly executed by such Holder or underwriter and stated to be
specifically for use therein.
(b) Each Holder will, and if Registrable Securities held by or
issuable to such Holder are included in such registration, qualification or
compliance, does hereby undertake to indemnify and hold harmless the Company,
each of its directors and officers, and each person controlling the Company,
each underwriter, if any, and each person who controls any underwriter, of the
Company's securities covered by such a Registration Statement, and each other
Holder, each of such other Holder's directors, officers, partners, and agents
and each person controlling such other Holder, against all claims, losses,
damages and liabilities (or actions in respect thereof) arising out of or based
on any untrue statement (or alleged untrue statement) of a material fact
contained in any such Registration Statement, prospectus, offering circular or
other document, or any 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 which they were made,
and will reimburse the Company, each of its directors, officers and controlling
persons, each such underwriter and such underwriter's controlling person, and
each such other Holder, and each such other Holder's directors, officers,
partners, agents and controlling persons, for any legal or any other expenses
reasonably incurred in connection with investigating or defending any such
claim, loss, damage, liability or action, 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,
prospectus, offering circular or other document, in reliance upon and in
conformity with written information furnished to the Company by an instrument
duly executed by such Holder and stated to be specifically for use therein;
provided, however, that the liability of each Holder hereunder shall be limited
to the net proceeds received by such Holder from the sale of securities under
such Registration Statement.
(c) Each party entitled to indemnification under this Section 1.6 (the
"Indemnified Party") shall give notice to the party required to provide such
indemnification (the "Indemnifying Party") of any claim as to which
indemnification may be sought promptly after such Indemnified Party has actual
knowledge thereof, and shall permit the Indemnifying Party to assume the defense
of any such claim or any litigation resulting therefrom; provided that counsel
for the Indemnifying Party, who shall conduct the defense of such claim or
litigation, shall be subject to approval by the Indemnified Party (whose
approval shall not be unreasonably withheld) and the Indemnified Party may
participate in such defense at the Indemnifying Party's expense if
representation of such Indemnified Party would be inappropriate due to actual or
8.
<PAGE>
potential differing interests between such Indemnified Party and any other party
represented by such counsel in such proceeding; and provided further that the
failure of any Indemnified Party to give notice as provided herein shall not
relieve the Indemnifying Party of its obligations under this Section 1, except
to the extent that such failure to give notice shall materially adversely affect
the Indemnifying Party in the defense of any such claim or any such litigation.
No Indemnifying Party, in the defense of any such claim or litigation, shall,
except with the consent of each Indemnified Party, consent to entry of any
judgment or enter into any settlement that does not include as an unconditional
term thereof the giving by the claimant or plaintiff therein, to such
Indemnified Party, of a release from all liability in respect to such claim or
litigation.
1.7 Information by Holder. The Holder or Holders of Registrable Securities
included in any registration shall furnish to the Company such information
regarding such Holder or Holders and the distribution proposed by such Holder or
Holders as the Company may reasonably request in writing and as shall be
required in connection with any registration, qualification or compliance
referred to in this Section 1.
1.8 Transfer of Registration Rights. The rights, contained in Sections
1.2, 1.3 and 1.9 hereof, to cause the Company to register the Registrable
Securities, may be assigned or otherwise conveyed to a transferee or assignee of
Registrable Securities, who shall be considered a "Holder" for purposes of this
Section 1, provided that, (a) such transferee or assignee (i) receives such
securities as a partner in connection with distributions by a Holder which is a
partnership or (ii) acquires at least fifty percent (50%) of the shares of
Registrable Securities originally held by such Holder or all of the Registrable
Securities then held by such Holder, and (b) the Company is given written notice
by such Holder at the time of or within a reasonable time after said transfer,
stating the name and address of said transferee or assignee and identifying the
securities with respect to which such registration rights are being assigned and
(c) such transfer is otherwise effected in accordance with applicable federal
and state securities laws.
1.9 Form S-3. If the Company's stock becomes publicly traded, the Company
shall use its best efforts to qualify for registration on Form S-3 and to that
end the Company shall register (whether or not required by law to do so) the
Common Stock under the 1934 Act within six (6) months following the effective
date of the first registration of any securities of the Company on Form S-1.
After the Company has qualified for the use of Form S-3, the Holders of
Registrable Securities shall have the right to request registrations on Form S-3
thereafter under this Section 1.9. The Company shall give notice to all Holders
of Registrable Securities of the receipt of a request for registration pursuant
to this Section 1.9 and shall provide a reasonable opportunity for other Holders
to participate in the registration.
Subject to the foregoing, the Company will use its best efforts to effect
as soon as practicable the registration of all shares of Registrable Securities
on Form S-3 to the extent requested by the Holder or Holders thereof for
purposes of disposition; provided, however, that the Company shall not be
obligated to effect any such registration (i) if the Holders, together with the
holders of any other securities of the Company entitled to inclusion in such
registration, propose to sell Registrable Securities and such other securities
(if any) at an aggregate price to the public of less than $500,000.00, (ii) if
the Company shall furnish to such Holders a certificate signed by the President
of the Company, stating that in the good faith judgment of the Board of
Directors of the Company it would be seriously detrimental to the Company and
its stockholders
9.
<PAGE>
for such Registration Statement to be filed at the date filing would be
required, in which case the Company shall have an additional period of not more
than sixty (60) days within which to file such Registration Statement, provided
further, however, that the Company shall not use this right more than once in
any 12-month period, (iii) in any particular jurisdiction in which the Company
would be required to execute a general consent to service of process in
effecting such registration, qualification or compliance unless the Company is
already subject to service in such jurisdiction and except as may be required by
the 1933 Act, or (iv) during the period starting with the date sixty (60) days
prior to the Company's estimated date of filing of, and ending on the date three
(3) months immediately following the effective date of, any registration
statement pertaining to securities of the Company (other than a registration of
securities in a Rule 145 transaction or with respect to an employee benefit
plan), provided that the Company is actively employing in good faith all
reasonable efforts to cause such registration statement to become effective and
that the Company's estimate of the date of filing such registration statement is
made in good faith. Notwithstanding the foregoing, nothing herein shall
restrict, prohibit or limit in any way a Holder's ability to exercise its
registration rights under Section 1.3 hereof. The Company shall not be required
to effect more than two (2) registrations pursuant to this Section 1.9 in any
12-month period.
1.10 Delay of Registration. No Holder shall have any right to obtain or
seek an injunction restraining or otherwise delaying any such registration as
the result of any controversy that might arise with respect to the
interpretation or implementation of this Section 1.
1.11 Limitations on Subsequent Registration Rights. From and after the date
of this Agreement, the Company shall not, without the prior written consent of
the Holders of at least fifty percent (50%) of the Registrable Securities then
outstanding and not registered, enter into any agreement with any holder or
prospective holder of any securities of the Company which would allow such
holder or prospective holder to (i) require the Company to effect a registration
or (ii) include any securities in any registration filed under Section 1.2 or
1.3 hereof, unless, under the terms of such agreement, such holder or
prospective holder may include such securities in any such registration only to
the extent that the inclusion of such securities will not diminish the amount of
Registrable Securities which are included in such registration and includes the
equivalent of Section 1.13 as a term.
1.12 Rule 144 Reporting. With a view to making available to the Holders the
benefits of certain rules and regulations of the SEC which may permit the sale
of the Registrable Securities to the public without registration, the Company
agrees to use its best efforts to:
(a) Make and keep public information available, as those terms are
understood and defined in SEC Rule 144 or any similar or analogous rule
promulgated under the 1933 Act, at all times after it has become subject to the
reporting requirements of the 1934 Act;
(b) File with the SEC, in a timely manner, all reports and other
documents required of the Company under the 1933 Act and 1934 Act (after it has
become subject to such reporting requirements);
(c) So long as a Holder owns any Registrable Securities, furnish to
such Holder forthwith upon request: a written statement by the Company as to its
compliance with
10.
<PAGE>
the reporting requirements of said Rule 144 (at any time commencing ninety (90)
days after the effective date of the first registration filed by the Company for
an offering of its securities to the general public), the 1933 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 as a Holder may reasonably request in availing
itself of any rule or regulation of the SEC allowing it to sell any such
securities without registration.
1.13 "Market Stand-Off" Agreement. Each Holder hereby agrees that (a) for
the Designated Period (as hereafter defined) following the effective date of the
first registration statement of the Company covering Common Stock (or other
securities) to be sold on its behalf in an underwritten public offering and (b)
during the seven (7) days prior to, and during the Designated Period following
the effective date of a registration statement of the Company filed under the
1933 Act under which a Holder includes securities of the Company, it shall not,
to the extent requested by the Company and any underwriter, sell, pledge,
transfer, make any short sale of, loan, grant any option for the purchase of, or
otherwise transfer or dispose of (other than to donees who agree to be similarly
bound) any Common Stock held by it at any time during such period except Common
Stock included in such registration; provided, that all officers and directors
of the Company and all other persons with registration rights (whether or not
pursuant to this Agreement) enter into similar agreements, and provided further
that each Holder of Registrable Securities shall be subject to the same
Designated Period and that the same terms and conditions imposed during each
Designated Period shall apply equally to each Holder of Registrable Securities.
In order to enforce the foregoing covenant, the Company may impose stop-
transfer instructions with respect to the Registrable Securities of each Holder
(and the shares or securities of every other person subject to the foregoing
restriction) until the end of such period.
As used in this Section 1.13, "Designated Period" shall mean a period of
time determined by the Board of Directors after consultation with the
underwriters, if any. As used herein, the Designated Period may be more than
one period of time, if a specific portion of the shares subject to this Section
1.13, as determined by the Board of Directors, is assigned one period of time
and one or more other portions of the shares subject to this Section 1.13 are
assigned other periods of time.
1.14 Amendment of Registration Rights. Any provision of this Section 1 may
be amended and the observance thereof may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with the
written consent of the Company and the Holders of not less than fifty percent
(50%) of the Registrable Securities then outstanding and not registered. Any
amendment or waiver effected in accordance with this Section shall be binding
upon each Holder, each future Holder of Registrable Securities and the Company.
Notwithstanding the foregoing, the written consent of the Holders of a majority
of the Series B Preferred, Series E Preferred, Series F Preferred, Series G
Preferred, Series H Preferred Stock, Series I Preferred Stock, Series J
Preferred Stock or Series K Preferred Stock, as the case may be, shall be
required for any amendment which adversely affects the Holders of any such
series in a manner different from the Holders of any other series.
11.
<PAGE>
1.15 Termination of Registration Rights. The rights of any particular
Holder to request registration or inclusion in any registration pursuant to this
Section 1 shall terminate on the date which is five (5) years after the date of
the initial underwritten public offering of the Company, and shall also
terminate as to any Holder who holds less than two percent (2%) of the
outstanding Common Stock determined in accordance with SEC Rule 144 (or any
similar or analogous rule promulgated under the 1933 Act) at such time as such
Holder is able to dispose of all of its Registrable Securities in any 90-day
period pursuant to SEC Rule 144.
SECTION 2
COMPANY COVENANTS
Until the earlier of (i) such time as the Company shall first become
subject to the periodic reporting requirements of Sections 13 or 15(d) of the
1934 Act, or any successor statute and any applicable rules promulgated
thereunder by the SEC or (ii) the closing date of the Company's initial
underwritten public offering, the Company hereby covenants and agrees as
follows:
2.1 Annual and Quarterly Financial Information. The Company shall provide
each Investor (together with any subsidiary, affiliate or partner of such
Investor), which originally held at least twenty percent (20%) of the
outstanding shares of the Series B Preferred Stock, Series E Preferred Stock,
Series F Preferred Stock, Series G Preferred Stock, Series H Preferred Stock,
Series I Preferred Stock, Series J Preferred Stock or Series K Preferred Stock
(including any shares of Common Stock issued upon conversion thereof) at the
time of its initial purchase, the following reports:
(a) As soon as practicable after the end of each fiscal year, and in
any event within 120 days thereafter, an audited consolidated balance sheet of
the Company and its subsidiaries, if any, as at the end of such fiscal year, and
audited consolidated statements of income, retained earnings and cash flows of
the Company and its subsidiaries, if any, for such fiscal year, prepared in
accordance with generally accepted accounting principles and setting forth in
each case in comparative form the figures for the previous fiscal year, if any,
all in reasonable detail and accompanied by a report and opinion thereon by
independent certified public accountants of national standing selected by the
Company's Board of Directors; and
(b) As soon as practicable after the end of each of the first three
quarters of the fiscal year, but in any event within sixty (60) days after the
end of each such quarter, the Company's unaudited consolidated balance sheet as
of the end of such quarter, and its unaudited consolidated statements of income,
retained earnings and cash flows for such quarter, all in reasonable detail and,
insofar as practicable, prepared in accordance with generally accepted
accounting principles and certified by the principal financial or accounting
officer of the Company.
In addition to any other events upon which the rights set forth in
this Section 2.1 may terminate, the rights set forth in this Section 2.1 shall
terminate, as to any such Investor, at such time as it no longer owns at least
twenty percent (20%) of the shares of Series B Preferred Stock, Series E
Preferred Stock, Series F Preferred Stock, Series G Preferred Stock, Series H
Preferred Stock, Series I Preferred Stock, Series J Preferred Stock or Series K
Preferred Stock
12.
<PAGE>
originally held by such Investor, including any shares of Common Stock issued
upon conversion thereof, as set forth opposite such Investor's name on Exhibit A
attached hereto.
2.2 Inspection. The Company shall permit each Investor which (together
with any subsidiary, affiliate, or partner of such Investor) originally held at
least twenty percent (20%) of the outstanding Series B Preferred Stock, Series E
Preferred Stock, Series F Preferred Stock, Series G Preferred Stock, Series H
Preferred Stock, Series I Preferred Stock, Series J Preferred Stock or Series K
Preferred Stock (including any Common Stock issued on conversion thereof) at the
time of its initial purchase, its attorney or its other representative to visit
and inspect the Company's properties, to examine the Company's books of account
and other records, to make copies or extracts therefrom and to discuss the
Company's affairs, finances and accounts with its officers, management employees
and independent accountants, all at such reasonable times and as often as such
Investor may reasonably request. In addition to any other events upon which the
rights set forth in this Section 2.2 may terminate, the rights set forth in this
Section 2.2 shall terminate, as to any such Investor, at such time as it no
longer owns at least twenty percent (20%) of the shares of Series B Preferred
Stock, Series E Preferred Stock, Series F Preferred Stock, Series G Preferred
Stock, Series H Preferred Stock, Series I Preferred Stock, Series J Preferred
Stock or Series K Preferred Stock originally held by such Investor, including
any shares of Common Stock issued upon conversion thereof, as set forth opposite
such Investor's name on Exhibit A attached hereto.
2.3 Transfer of Rights. The rights granted pursuant to this Section 2 may
not be assigned or otherwise conveyed by any Investor or by any subsequent
transferee of any such rights without the written consent of the Company, which
consent shall not be unreasonably withheld; provided that (a) the Company may
refuse such written consent if the proposed transferee is reasonably believed by
the Company to be a competitor of the Company; (b) no such written consent shall
be required if the transfer is in connection with a transfer of at least twenty
percent (20%) of the then outstanding Series B Preferred Stock, Series E
Preferred Stock, Series F Preferred Stock, Series G Preferred Stock, Series H
Preferred Stock, Series I Preferred Stock, Series J Preferred Stock or Series K
Preferred Stock (including any Common Stock issued on conversion thereof); (c)
the Company is given timely written notice of such transfer of rights and (d)
the Company shall not be obliged to consent to the transfer of the rights set
forth in Section 2.2 unless the transferee is the holder of at least twenty
percent (20%) of the then outstanding Series B Preferred Stock, Series E
Preferred Stock, Series F Preferred Stock, Series G Preferred Stock, Series H
Preferred Stock, Series I Preferred Stock, Series J Preferred Stock or Series K
Preferred Stock (including any Common Stock issued on conversion thereof).
SECTION 3
RIGHT OF FIRST REFUSAL
3.1 Pro Rata Right. The Company hereby grants to each Investor the right
of first refusal to purchase up to its pro rata share of all (or any part of)
New Securities (as defined in Section 3.2 hereof) which the Company may, from
time to time, propose to sell and issue. An Investor's pro rata share, for
purposes of this right of first refusal, is the ratio (A) the numerator of which
is the number of shares of Common Stock then held by such Investor plus the
number of shares of Common Stock issuable to such Investor upon the conversion
of shares of Preferred
13.
<PAGE>
Stock then held by such Investor on the date of the Company's written notice
pursuant to Section 3.3 hereof and (B) the denominator of which is the number of
shares of Common Stock outstanding on such date (on an as-converted basis). This
right of first refusal shall furthermore be subject to the following provisions
of this Section 3.
3.2 New Securities. "New Securities" shall mean any capital stock of the
Company, whether now authorized or not, and rights, options or warrants to
purchase capital stock, and securities of any type whatsoever that are, or may
become, convertible into capital stock; provided that the term "New Securities"
does not include (i) securities issuable upon conversion of or with respect to
currently outstanding Preferred Stock or the shares issued or issuable pursuant
to the Series K Agreement or upon exercise of any currently outstanding warrants
to purchase capital stock; (ii) securities issued pursuant to the acquisition of
another corporation by the Company by merger, purchase of substantially all the
assets or other reorganization whereby the Company owns more than fifty percent
(50%) of the voting power of such corporation; (iii) Common Stock (including
options to purchase Common Stock) issued to employees, consultants or directors
of the Company pursuant to any stock option plan or stock purchase or stock
bonus agreement or arrangement approved by the Board of Directors of the
Company; (iv) securities issued in connection with business relationships with
equipment lessors, vendors or customers (not to exceed 25,000 shares of Common
Stock (as presently constituted)); (v) securities issued pursuant to any stock
dividend, stock split, combination, recapitalization or other reclassification
by the Company of any of its capital stock; (vi) the issuance of shares pursuant
to the Series K Agreement.
3.3 Required Notices. In the event the Company proposes to undertake an
issuance of New Securities, it shall give each Investor written notice of its
intention, describing the type of New Securities, the price and the general
terms upon which the Company proposes to issue the same. Each Investor shall
have twenty (20) days from the date of receipt of any such notice to agree to
purchase the Investor's pro rata share of such New Securities for the price and
upon the general terms specified in the notice by giving written notice to the
Company and stating therein the quantity of New Securities to be purchased.
3.4 Company's Right to Sell. In the event the Investors fail to exercise
within said twenty-day period the right of first refusal as to all New
Securities offered in such notice, the Company shall have 120 days thereafter to
sell all such New Securities not elected to be purchased by the Investors, at a
price and upon general terms no more favorable in any material respect to the
purchasers thereof than specified in the Company's notice. In the event the
Company has not sold all such New Securities within said 120-day period, the
Company shall not thereafter issue or sell any New Securities, without first
offering such securities to the Investors in the manner provided herein.
3.5 Expiration of Right. The right of first refusal granted under this
Section 3 shall not apply to, and shall expire upon, the closing of the sale of
shares of Common Stock in a firm commitment underwritten public offering
registered under the 1933 Act (other than a registration relating solely to a
transaction under Rule 145 under the 1933 Act or any successor rule thereto)
(hereinafter, a "Qualified Public Offering").
14.
<PAGE>
3.6 Assignment. The right of first refusal set forth in this Section 3 is
nonassignable, except that (a) such right is assignable by each Investor to any
wholly owned subsidiary or parent of, or to any corporation, entity or other
person which is, within the meaning of the 1933 Act, controlling, controlled by
or under common control with, such Investor, (b) upon the death of any
individual Investor, such right shall pass to the beneficiaries under the
deceased Investor's last will and testament or to the distributees of the
deceased Investor's estate, and (c) such right is assignable by a partnership to
its partners in connection with distributions to the partners and if so assigned
all such partners will be treated as one Investor for purposes of this Section
3.
SECTION 4
MISCELLANEOUS
4.1 Governing Law. This Agreement shall be governed by and construed
under the laws of the State of California as applied to agreements among
California residents made and to be performed entirely with the State of
California.
4.2 Successors and Assigns. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors and administrators of the
parties hereto.
4.3 Entire Agreement. This Agreement constitutes the full and entire
understanding and agreement among the parties with regard to the subjects
hereof. Nothing in this Agreement, express or implied, is intended to confer
upon any party, other than the parties hereto and their respective successors
and assigns, any rights, remedies, obligations or liabilities under or by reason
of this Agreement, except as expressly provided herein.
4.4 Severability. Any invalidity, illegality or limitation of the
enforceability with respect to any Investor of any one or more of the provisions
of this Agreement, or any part thereof, whether arising by reason of the law of
any such person's domicile or otherwise, shall in no way affect or impair the
validity, legality or enforceability of this Agreement with respect to other
Investors. In case any provision of this Agreement shall be invalid, illegal or
unenforceable, it shall to the extent practicable, be modified so as to make it
valid, legal and enforceable and to retain as nearly as practicable the intent
of the parties, and the validity, legality, and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
4.5 Amendment and Waiver. Except as otherwise expressly provided herein,
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, either
retroactively or prospectively, and either for a specified period of time or
indefinitely) with the written consent of the Company and Investors (or their
transferees) holding at least fifty percent (50%) of the shares of the Series B
Preferred Stock, the Series E Preferred Stock, the Series F Preferred Stock, the
Series G Preferred Stock, the Series H Preferred Stock, Series I Preferred
Stock, Series J Preferred Stock and Series K Preferred Stock, voting together as
a single group (treated as if converted at the conversion rate then in effect
and including, for such purposes, any shares of Common Stock into which any
shares of Preferred Stock have been converted, which shares of Common Stock
15.
<PAGE>
have not been sold to the public). Notwithstanding the foregoing, the written
consent of the Holders of a majority of the Series B Preferred, Series E
Preferred, Series F Preferred, Series G Preferred, Series H Preferred, the
Series I Preferred Stock, Series J Preferred Stock or Series K Preferred Stock,
as the case may be, shall be required for any amendment which adversely affects
the Holders of any such series in a manner different from the Holders of any
other series. Any amendment or waiver effected in accordance with this Section
4.5 shall be binding upon each Investor and each of their future transferees.
Upon the effectuation of each such amendment or waiver, the Company shall
promptly give written notice thereof to those Investors who have not previously
consented thereto in writing.
4.6 Delays or Omissions. No delay or omission to exercise any right,
power or remedy accruing to the Company or to any Investor or any of their
transferees upon any breach, default or noncompliance of any Investor, or any
transferee or the Company under this Agreement, shall impair any such right,
power or remedy, nor shall it be construed to be a waiver of any such breach,
default or noncompliance, or any acquiescence therein, or of any similar breach,
default or noncompliance thereafter occurring. It is further agreed that any
waiver, permit, consent or approval of any kind or character on the part of the
Company, the Investors of any breach, default or noncompliance under this
Agreement or any waiver on the Company's or the Investors' part of any
provisions or conditions of this Agreement must be in writing and shall be
effective only to the extent specifically set forth in such writing and that all
remedies, either under this Agreement, by law, or otherwise afforded to the
Company and the Investors shall be cumulative and not alternative.
4.7 Notices, etc. All notices and other communications required or
permitted hereunder shall be in writing and shall be deemed effectively given
upon personal delivery or upon confirmed delivery by facsimile or telecopy, or
on the fifth day (or the tenth day if to a party with a foreign address)
following mailing by registered or certified mail, return receipt requested,
postage prepaid, addressed: (a) if to an Investor, at such Investor's address as
set forth on the schedule attached hereto, or at such other address as such
Investor shall have furnished to the Company in writing, or (b) if to the
Company, at its address first above written, or at such other address as the
Company shall have furnished to the Investors in writing (with a copy to Cooley
Godward Castro llp, One Maritime Plaza, 20/th/ Floor, San Francisco, CA 94111,
Attention: Deborah A. Marshall).
4.8 Titles and Subtitles. The titles of the sections and subsections of
this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
4.9 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one instrument.
16.
<PAGE>
Investor Rights Agreement
In Witness Whereof, this Agreement has been duly executed and delivered by
the parties as of the date first above written.
TELIK, INC. INVESTORS:
ALTA V LIMITED PARTNERSHIP
BY: ALTA V MANAGEMENT PARTNERS, L.P.
By:______________________________
Michael M. Wick, M.D., Ph.D.
President, Chief Executive
Officer and Chairman By:______________________________________
General Partner
CUSTOMS HOUSE PARTNERS
By:______________________________________
General Partner
DELPHI VENTURES II, L.P.
BY: DELPHI MANAGEMENT PARTNERS II, L.P.
GENERAL PARTNER
By:______________________________________
General Partner
DELPHI INVESTMENTS II, L.P.
By: DELPHI MANAGEMENT PARTNERS II, L.P.
GENERAL PARTNER
By:______________________________________
General Partner
17.
<PAGE>
WPG ENTERPRISE FUND, L.P.
BY: WPG VENTURE PARTNERS II, L.P.,
GENERAL PARTNER
By:_______________________________________
General Partner
WEISS, PECK & GREER VENTURE
ASSOCIATES II, L.P.
BY: WPG VENTURE PARTNERS II, L.P.,
GENERAL PARTNER
By:______________________________________
General Partner
WEISS, PECK & GREER VENTURE
ASSOCIATES II (OVERSEAS), LTD.
By:_______________________________________
Title:____________________________________
CV SOFINNOVA VENTURES PARTNERS II
By:_______________________________________
General Partner
ALPHA VENTURE PARTNERS III
By:______________________________________
General Partner
Entity Affilated with Palladin Group
By:______________________________________
Entity Affiliated with Alta V Limited
Partnership
By:______________________________________
18.
<PAGE>
GC&H INVESTMENTS
By:_______________________________________
Executive Partner
WS INVESTMENTS
By:_______________________________________
General Partner
G&G DIAGNOSTICS
LIMITED PARTNERSHIP II
By:_______________________________________
General Partner
SWANSON FAMILY FUND, LTD.
By:_______________________________________
General Partner
OXFORD BIOSCIENCE PARTNERS L.P.
BY: OBP MANAGEMENT L.P.
GENERAL PARTNER
By:_______________________________________
Edmund M. Olivier
General Partner
19.
<PAGE>
OXFORD BIOSCIENCE PARTNERS
(Bermuda) LIMITED PARTNERSHIP
BY: OBP MANAGEMENT (Bermuda)
LIMITED PARTNERSHIP
GENERAL PARTNER
By:_______________________________________
Edmund M. Olivier
General Partner
OXFORD BIOSCIENCE PARTNERS
(Adjunct) L.P.
BY: OBP MANAGEMENT L.P.
GENERAL PARTNER
By:_______________________________________
Edmund M. Olivier
General Partner
ROVENT II LIMITED PARTNERSHIP
By: ADVENT INTERNATIONAL LIMITED
PARTNERSHIP, GENERAL PARTNER
By: ADVENT INTERNATIONAL CORPORATION,
GENERAL PARTNER
By:_______________________________________
Jason Fisherman
GOLDEN GATE DEVELOPMENT AND INVESTMENT
LIMITED PARTNERSHIP
By: ADVENT INTERNATIONAL LIMITED
PARTNERSHIP, GENERAL PARTNER
By: ADVENT INTERNATIONAL CORPORATION,
GENERAL PARTNER
By:_______________________________________
Jason Fisherman
20.
<PAGE>
GLOBAL PRIVATE EQUITY II
LIMITED PARTNERSHIP
By: ADVENT INTERNATIONAL LIMITED
PARTNERSHIP, GENERAL PARTNER
By: ADVENT INTERNATIONAL CORPORATION,
GENERAL PARTNER
By:_______________________________________
Jason Fisherman
ADVENT INTERNATIONAL INVESTORS II
LIMITED PARTNERSHIP
By: ADVENT INTERNATIONAL CORPORATION,
GENERAL PARTNER
By:_______________________________________
Jason Fisherman
H&Q LIFE SCIENCES INVESTORS
BY: H&Q LIFE SCIENCES INVESTORS
BY:_______________________________________
PIPER M. EVANS REVOCABLE TRUST
__________________________________________
Piper M. Evans, Trustee
__________________________________________
David Gibbons
__________________________________________
Dennis Puorro and Elizabeth Gibbons
21.
<PAGE>
_________________________________________
Bruce Kirschner
__________________________________________
Peter L. Evans
__________________________________________
Francisco A. Garcia
__________________________________________
Mary Gibbons
__________________________________________
Burr Heneman
__________________________________________
Robert McCready
__________________________________________
Kingsley Murphy
__________________________________________
Matthew Pemberton
__________________________________________
Joel M. Skidmore
__________________________________________
James F. Zucherman
__________________________________________
Sam Nelson
22.
<PAGE>
__________________________________________
Guy Saperstein
__________________________________________
Alan B. Slifka
ZUCKERMAN FAMILY TRUST
__________________________________________
David S. Zuckerman, Trustee
__________________________________________
Annette Bianchi
__________________________________________
Alex Zaffaroni
S.R. ONE LIMITED
By:_______________________________________
Title:____________________________________
N.V. GIMV
By:_______________________________________
Title:____________________________________
H&Q HEALTHCARE INVESTORS
By:_______________________________________
Title:____________________________________
23.
<PAGE>
ADVENT PERFORMANCE MATERIALS LIMITED
PARTNERSHIP
By:_______________________________________
Title:____________________________________
MURPHY FAMILY REVOCABLE TRUST
By:_______________________________________
Title:____________________________________
RADIAL EQUIPMENT CO.
By:_______________________________________
Title:____________________________________
CLEMENT E. GALANTE, TRUSTEE U/T/A DATED
OCTOBER 23, 1990
By:_______________________________________
Title:____________________________________
__________________________________________
Richard F. Borch
__________________________________________
Eugene D. Brody
24.
<PAGE>
_______________________________________
Timothy J. Brodnik
The Health Care and Biotechnology
Venture Fund
By:____________________________________
Title:_________________________________
James A. Delaney III Declaration of Trust
Dated June 9, 1993
By:____________________________________
James A. Delaney, Trustee
_______________________________________
Virginia B. Slifka
David J.B. Slifka
By:____________________________________
Alan B. Slifka
Alan B. Slifka Trust
By:____________________________________
Alan B. Slifka, Trustee
Sanwa Kagaku Kenkyusho Co., Ltd.
By:____________________________________
Name:__________________________________
25.
<PAGE>
Title:____________________________________
FEI Biomedicine Private Equity Holding,
Inc.
By: International Biomedicine
Management Partners, Inc.
By:_______________________________________
General Partner
Delphi BioInvestments II, L.P.
By: Delphi Management Partners II, L.P.
General Partner
By:_______________________________________
General Partner
Fujigin Capital Company
By:_______________________________________
Name:_____________________________________
Title:____________________________________
__________________________________________
Jerrold L Glick
Margaret S. Polly Finder and Kenneth A.
Finder
__________________________________________
__________________________________________
26.
<PAGE>
John William Polley and Kimberly Ann
Polley
___________________________________________
___________________________________________
___________________________________________
Barry J. Schieber
27.
<PAGE>
Exhibit A
SCHEDULE OF INVESTORS
Number of Shares of Preferred
Name and Address Stock
- ---------------------------------------- -----------------------------
Series B Investor
G & G Diagnostics Limited Partnership II 20,000
90 Oak Street
Newton, MA 02164
Attention: Irwin Gruverman
Series B Total: 20,000
Series E Investors:
Alta V Limited Partnership 29,688
c/o Burr Egan Deleage & Co.
One Embarcadero Center, Suite 4050
San Francisco, CA 94111
Attention: Mr. Jean Deleage
Customs House Partners 312
c/o Burr Egan Deleage & Co.
One Embarcadero Center, Suite 4050
San Francisco, CA 94111
Attention: Mr. Jean Deleage
Delphi Ventures II, L.P. 24,860
3000 Sand Hill Road
Building 1, Suite 135
Menlo Park, CA 94025
Attention: Ms. Erin Alley
Delphi Investments II, L.P. 140
3000 Sand Hill Road
Building 1, Suite 135
Menlo Park, CA 94025
Attention: Ms. Erin Alley
1.
<PAGE>
Number of Shares of Preferred
Name and Address Stock
- ---------------------------------------- -----------------------------
Series E Investors:
WPG Enterprise Fund, L.P. 13,290
c/o Weiss, Peck & Greer
555 California Street, Suite 4760
San Francisco, CA 94104
Attention: Ms. Annette M. Bianchi
Weiss, Peck & Greer Venture 9,605
Associates II, L.P.
555 California Street, Suite 4760
San Francisco, CA 94104
Attention: Ms. Annette M. Bianchi
Weiss, Peck & Greer Venture 2,105
Associates II (Overseas), L.P.
c/o BankAmerica Trust & Banking Corporation
(Cayman) Limited
P.O. Box 1092
Anchorage Center, Harbour Drive
Grand Cayman, B.W.I.
Attention: Mr. Patrick Keating
CV Sofinnova Venture Partners II 10,000
c/o Sofinnova Inc.
One Market Plaza
Stewart Tower, Suite 2630
San Francisco, CA 94105
Attention: Dr. Michael Powell
Alpha Venture Partners III 20,000
545 Middlefield Road
Suite 170
Menlo Park, CA 94025
Attention: Mr. Sam Urcis
GC&H Investments 1,000
Cooley Godward LLP
One Maritime Plaza, 20th Floor
San Francisco, CA 94111-3580
Attention: Ms. Jeanne Meyer
2.
<PAGE>
Number of Shares of Preferred
Name and Address Stock
- ---------------------------------------- -----------------------------
WS Investments 300
Wilson, Sonsini, Goodrich & Rosati
650 Page Mill Road
Palo Alto, CA 94304
Attention: Frank Currie, Esq.
Annette Bianchi 200
1535 Seneca Lane
San Mateo, CA 94402
Swanson Family Fund, Ltd. 2,000
222 Sutter Street - 8th Floor
San Francisco, CA 94108
Attention: Robert Swanson
Alejandro Zaffaroni 1,000
c/o Gonzalo Silveira
Interhealth
40909 Miranda Avenue
Suite 275
Palo Alto, CA 94304
Series E Total: 114,500
Series F Investors:
Alta V Limited Partnership 19,792
c/o Burr Egan Deleage & Co.
One Embarcadero Center, Suite 4050
San Francisco, CA 94111
Attention: Mr. Jean Deleage
Customs House Partners 208
c/o Burr Egan Deleage & Co.
One Embarcadero Center, Suite 4050
San Francisco, CA 94111
Attention: Mr. Jean Deleage
3.
<PAGE>
Number of Shares of Preferred
Name and Address Stock
- ------------------------------------ -----------------------------
Delphi Ventures II, L.P. 14,924
3000 Sand Hill Road
Building 1, Suite 135
Menlo Park, CA 94025
Attention: Ms. Erin Alley
Delphi Investments II, L.P. 76
3000 Sand Hill Road
Building 1, Suite 135
Menlo Park, CA 94025
Attention: Ms. Erin Alley
WPG Enterprise Fund, L.P. 10,632
c/o Weiss, Peck & Greer
555 California Street, Suite 4760
San Francisco, CA 94104
Attention: Ms. Annette M. Bianchi
Weiss, Peck & Greer Venture 7,684
Associates II, L.P.
555 California Street, Suite 4760
San Francisco, CA 94104
Attention: Ms. Annette M. Bianchi
Weiss, Peck & Greer Venture 1,684
Associates II (Overseas), Ltd.
c/o BankAmerica Trust & Banking Corporation
(Cayman) Limited
P.O. Box 1092
Anchorage Center, Harbour Drive
Grand Cayman, B.W.I.
Attention: Mr. Patrick Keating
CV Sofinnova Venture Partners II 8,000
c/o Sofinnova Inc.
One Market Plaza
Stewart Tower, Suite 2630
San Francisco, CA 94105
Attention: Dr. Michael Powell
4.
<PAGE>
Number of Shares of Preferred
Name and Address Stock
- ------------------------------------ -----------------------------
Alpha Venture Partners III 16,000
545 Middlefield Road, Suite 170
Menlo Park, CA 94025
Attention: Mr. Sam Urcis
GC&H Investments 500
Cooley Godward llp
One Maritime Plaza, 20th Floor
San Francisco, CA 94111-3580
Attention: Ms. Jeanne Meyer
Oxford Bioscience Partners L.P. 25,050
650 Town Center Drive, Suite 810
Costa Mesa, CA 92626
Attention: Mr. Edmund M. Olivier
Oxford Bioscience Partners (Bermuda) 6,950
Limited Partnership
650 Town Center Drive, Suite 810
Costa Mesa, CA 92626
Attention: Mr. Edmund M. Olivier
Oxford Bioscience Partners (Adjunct) L.P. 8,000
650 Town Center Drive, Suite 810
Costa Mesa, CA 92626
Attention: Mr. Edmund M. Olivier
Rovent II Limited Partnership 13,800
c/o Advent International Corporation
101 Federal Street
Boston, MA 02110
Attention: Jason Fisherman
Golden Gate Development and 8,000
Investment Limited Partnership
c/o Advent International Corporation
101 Federal Street
Boston, MA 02110
Attention: Jason Fisherman
5.
<PAGE>
Number of Shares of Preferred
Name and Address Stock
- ------------------------------------ -----------------------------
Global Private Equity II 28,000
Limited Partnership
c/o Advent International Corporation
101 Federal Street
Boston, MA 02110
Attention: Jason Fisherman
Advent International Investors II 200
Limited Partnership
c/o Advent International Corporation
Attention: Jason Fisherman
101 Federal Street
Boston, MA 02110
Annette Bianchi 100
1535 Seneca Lane
San Mateo, CA 94402
Series F Total: 169,600
Series G Investors:
H&Q Life Sciences Investors 22,500
50 Rowes Wharf, 4th Floor
Boston, MA 02110
Attention: Alan Carr
H&Q Healthcare Investors 27,500
50 Rowes Wharf, 4/th/ Floor
Boston, MA 02110
Attention: Alan Carr
Alta V Limited Partnership 22,167
c/o Burr Egan Deleage & Co.
One Embarcadero Center, Suite 4050
San Francisco, CA 94111
Attention: Mr. Jean Deleage
6.
<PAGE>
Number of Shares of Preferred
Name and Address Stock
- ------------------------------------ -----------------------------
Customs House Partners 233
c/o Burr Egan Deleage & Co.
One Embarcadero Center, Suite 4050
San Francisco, CA 94111
Attention: Mr. Jean Deleage
Delphi Ventures II, L.P. 11,939
3000 Sand Hill Road
Building 1, Suite 135
Menlo Park, CA 94025
Attention: Ms. Erin Alley
Delphi Investments II, L.P. 61
3000 Sand Hill Road
Building 1, Suite 135
Menlo Park, CA 94025
Attention: Ms. Erin Alley
WPG Enterprise Fund, L.P. 10,632
c/o Weiss, Peck & Greer
555 California Street, Suite 4760
San Francisco, CA 94104
Attention: Ms. Annette M. Bianchi
Weiss, Peck & Greer Venture 7,684
Associates II, L.P.
555 California Street, Suite 4760
San Francisco, CA 94104
Attention: Ms. Annette M. Bianchi
Weiss, Peck & Greer Venture 1,684
Associates II (Overseas), Ltd.
c/o BankAmerica Trust & Banking Corporation
(Cayman) Limited
P.O. Box 1092
Anchorage Center, Harbour Drive
Grand Cayman, B.W.I.
Attention: Mr. Patrick Keating
7.
<PAGE>
Number of Shares of Preferred
Name and Address Stock
- ------------------------------------ -----------------------------
CV Sofinnova Venture Partners II 2,000
c/o Sofinnova Inc.
One Market Plaza
Stewart Tower, Suite 2630
San Francisco, CA 94105
Attention: Dr. Michael Powell
Alpha Venture Partners III 16,000
545 Middlefield Road, Suite 170
Menlo Park, CA 94025
Attention: Mr. Sam Urcis
Oxford Bioscience Partners L.P. 10,020
650 Town Center Drive, Suite 810
Costa Mesa, CA 92626
Attention: Mr. Edmund M. Olivier
Oxford Bioscience Partners (Bermuda) 2,780
Limited Partnership
650 Town Center Drive, Suite 810
Costa Mesa, CA 92626
Attention: Mr. Edmund M. Olivier
Oxford Bioscience Partners (Adjunct) L.P. 3,200
650 Town Center Drive, Suite 810
Costa Mesa, CA 92626
Attention: Mr. Edmund M. Olivier
Rovent II Limited Partnership 6,072
c/o Advent International Corporation
101 Federal Street
Boston, MA 02110
Attention: Jason Fisherman
Golden Gate Development and 3,520
Investment Limited Partnership
c/o Advent International Corporation
101 Federal Street
Boston, MA 02110
Attention: Jason Fisherman
8.
<PAGE>
Number of Shares of Preferred
Name and Address Stock
- ------------------------------------ -----------------------------
Global Private Equity II 12,320
Limited Partnership
c/o Advent International Corporation
101 Federal Street
Boston, MA 02110
Attention: Jason Fisherman
Advent International Investors II 88
Limited Partnership
c/o Advent International Corporation
101 Federal Street
Boston, MA 02110
Attention: Jason Fisherman
Advent Performance Materials Limited Partnership 6,000
c/o Advent International Corporation
101 Federal Street
Boston, MA 02110
Attention: Jason Fisherman
Annette Bianchi 60
1535 Seneca Lane
San Mateo, CA 94402
Peter L. Evans Revocable Trust 21,000
5530 Moraga Avenue
Oakland, CA 94611
Attention: Peter L. Evans, Trustee
Piper M. Evans Revocable Trust 1,000
2312 Washington Street
San Francisco, CA 94115
Attention: Piper M. Evans, Trustee
Francisco A. Garcia 2,040
881 Ocean Drive, Apt. 20F
Key Biscayne, FL 33149
David Gibbons 2,000
44 East Third Street
New York, NY 10003
9.
<PAGE>
Number of Shares of Preferred
Name and Address Stock
- ------------------------------------ -----------------------------
Mary Weitzel Gibbons Revocable Trust 4,000
449 Parker Avenue
San Francisco, CA 94118
Attention: Mary Weitzel Gibbons, Trustee
Gibbons/Puorro Family Revocable Trust 3,700
449 Park Avenue
San Francisco, CA 94118
Attention: Dennis Puorro and Elizabeth
Gibbons, Co-trustees
Burr Heneman 1,000
35 Horseshoe Hill, Star Route
Bolinas, CA 94924
Bruce Irwin Kirschner 1,000
1828 El Camino Real, Suite 404
Burlingame, CA 94010
McCready Family Revocable Trust 2,000
144 Cassidy Road
Sequim, WA 98382
Attention: Robert McCready, Trustee
Kingsley H. Murphy IV Trust 1,000
60 Fairway Drive
San Rafael, CA 94901
Attention: Kingsley Murphy, Trustee
Kingsley H. Murphy, III and Cynthia B. Murphy, 2,400
as Co-Trustees of the
Murphy Family Revocable Trust
60 Fairway Drive
San Rafael, CA 94901
Attention: Kingsley Murphy, Trustee
Sam Nelson and Paula Polley Nelson 2,000
4276 Rockridge Place
West Vancouver, British Columbia
V7W2Y4 CANADA
10.
<PAGE>
Number of Shares of Preferred
Name and Address Stock
- ---------------------------------------------- -----------------------------
Matthew A. and Suzan L. Pemberton 2,000
One Sansome Street, Suite 1700
San Francisco, CA 94104
Guy Saperstein 12,600
52 Glen Alpine Road
Piedmont, CA 94611
Skidmore Family Revocable Trust 2,000
202 Edgewood Avenue
San Francisco, CA 94117
Attention: Joel M. Skidmore, Trustee
James F. Zucherman 1,000
#1 Shrader Street
San Francisco, CA 94117
Zuckerman Family Trust 6,800
Zuckerman & McQuillar
Four Embarcadero Center, Suite 3610
San Francisco, CA 94111
Attention: David S. Zuckerman, Trustee
N.V. GIMV 15,000
Karel Oomsstraat 37
2018 Antwerpen
BELGIUM
Attn: Mr. Patrick Van Beneden
Radial Equipment Co. 2,000
1600 Wynkoop Street, Suite 200
Denver, CO 80202
Attn: Mr. Jerrold L. Glick
Trust: Clement E. Galante, Trustee 1,050
Under Trust Agreement
Dated October 23, 1990
8 Sea Cliff Avenue
San Francisco, CA 94121
Attn: Mr. Clement E. Galante, Trustee
11.
<PAGE>
Number of Shares of Preferred
Name and Address Stock
- ---------------------------------------------- -----------------------------
Richard F. Borch 1,000
4 Bromley Road
Pittsford, NY 14534
Eugene D. Brody 1,000
119 E. 79th Street
New York, NY 10021
Timothy J. Brodnik 1,000
2014 Hunter Mill Road
Vienna, VA 22181
The Health Care and 10,000
Biotechnology Venture Fund
c/o MDS Health Ventures Capital Corp.
100 International Boulevard
Etobicoke, Ontario M9W 6J6
CANADA
Attn: Mr. Michael J. Callaghan
Vice President
James A. Delaney III 1,000
Declaration of Trust
Dated 6/9/93
633 Ardsley Road
Winnetka, IL 60093
Alan B. Slifka 2,000
911 Park Avenue, Apt. 11B
New York, NY 10021
Alan B. Slifka 1,000
c/f David J.B. Slifka, a minor
477 Madison Avenue
New York, NY 10022
Virginia B. Slifka 2,000
911 Park Avenue, Apt. 11B
New York, NY 10021
12.
<PAGE>
Number of Shares of Preferred
Name and Address Stock
- ---------------------------------------------- -----------------------------
Alan B. Slifka Trust 2,000
477 Madison Avenue
New York, NY 10022
Series G Total: 273,050
Series H Investors
S.R. One Limited 30,000
SmithKline Beecham
200 North 16th Street
Philadelphia, PA 19102
Sanwa Kagaku Kenkyusho Co., Ltd. 60,000
35 Higashi Sotobori-cho
Higashi-ku, Nagoya 461
JAPAN
Series H Total: 90,000
Series I Investors
Sanwa Kagaku Kenkyusho Co., Ltd. 60,000
35 Higashi Sotobori-cho
Higashi-ku, Nagoya 461
JAPAN
Global Private Equity II Limited Partnership 6,072
c/o Advent International Corporation
101 Federal Street
Boston, CA 02110
Attn: Jason Fisherman
Rovent II Limited Partnership 2,898
c/o Advent International Corporation
101 Federal Street
Boston, CA 02110
Attn: Jason Fisherman
13.
<PAGE>
Number of Shares of Preferred
Name and Address Stock
- ---------------------------------------------- -----------------------------
Advent Performance Materials Limited Partnership 3,036
c/o Advent International Corporation
101 Federal Street
Boston, CA 02110
Attn: Jason Fisherman
Golden Gate Development and Investment 1,794
Limited Partnership
c/o Advent International Corporation
101 Federal Street
Boston, CA 02110
Attn: Jason Fisherman
Alta V Limited Partners 12,469
c/o Burr Egan Deleage & Co.
One Embarcadero Center, Suite 4050
San Francisco, CA 94111
Attention: Mr. Jean Deleage
Customs House Partners 131
c/o Burr Egan Deleage & Co.
One Embarcadero Center, Suite 4050
San Francisco, CA 94111
Attention: Mr. Jean Deleage
Delphi Ventures II, L.P. 8,954
3000 Sand Hill Road
Building 1, Suite 135
Menlo Park, CA 94025
Attention: Ms. Erin Alley
Delphi BioInvestments II, L.P. 46
3000 Sand Hill Road
Building 1, Suite 135
Menlo Park, CA 94025
Attention: Ms. Erin Alley
Oxford Bioscience Partners (Bermuda) 1,668
Limited Partnership
650 Town Center Drive, Suite 810
Costa Mesa, CA 92626
Attn: Edmund Olivier
14.
<PAGE>
Number of Shares of Preferred
Name and Address Stock
- ---------------------------------------------- -----------------------------
Oxford Bioscience Partners L.P. 6,012
650 Town Center Drive, Suite 810
Costa Mesa, CA 92626
Attn: Edmund Olivier
Oxford Bioscience Partners (Adjunct) L.P. 1,920
650 Town Center Drive, Suite 810
Costa Mesa, CA 92626
Attn: Edmund Olivier
CV Sofinnova Ventures Partners II 3,600
c/o Sofinnova Inc.
One Market Plaza
Stewart Tower, Suite 2630
San Francisco, CA 94105
Attention: Dr. Michael Powell
WPG Enterprise Fund, L.P. 6,060
c/o Weiss, Peck & Greer
555 California Street, Suite 4760
San Francisco, CA 94104
Attention: Ms. Annette M. Bianchi
Weiss, Peck & Greer Venture 4,380
Associates II, L.P.
555 California Street, Suite 4760
San Francisco, CA 94104
Attention: Ms. Annette M. Bianchi
Weiss, Peck & Greer Venture 960
Associates II (Overseas) L.P.
c/o BankAmerica Trust & Banking Corporation
(Cayman) Limited
P.O. Box 1092
Anchorage Center, Harbour Drive
Grand Cayman, B.W.I.
Attention: Mr. Patrick Keating
Alpha Partners III 2,000
545 Middlefield Road, Suite 170
Menlo Park, CA 94025
Attention: Mr. Sam Urcis
15.
<PAGE>
Number of Shares of Preferred
Name and Address Stock
- ---------------------------------------------- -----------------------------
Fujigin Capital Company 10,000
Central Plaza Building
Fourth Floor
1-1, Kaguragashi, Shinjuku-ku
Tokyo, Japan
Att: Kazuo Murata, General Manager
H&Q Healthcare Investors 3,600
50 Rowes Wharf, 4/th/ Floor
Boston, MA 02110
Attn: Kim Carroll
H&Q Life Sciences Investors 2,400
50 Rowes Wharf, 4/th/ Floor
Boston, MA 02110
Attn: Kim Carroll
N.V. GIMV 5,000
Karel Oomsstraat 37
2018 Antwerpen
Belgium
Attn: Mr. Patrick Van Beneden
Series I Total: 143,000
Series J Investors:
FEI Biomedicine Private Equity Holding, Inc. 110,000
c/o International Biomedicine Management Partners, Inc.
House of Commerce
Aeschenplatz 7
PO Box 136
4010 Basel Switzerland
Attn: Mr. Stefan Ryser
Sanwa Kagaku Kenkyusho Co., Ltd. 100,000
35 Higashi Sotobori-cho
Higashi-ku, Nagoya 461
JAPAN
Series J Total: 210,000
16.
<PAGE>
Number of Shares of Preferred
Name and Address Stock
- ---------------------------------------------- -----------------------------
Series K Investors:
[Name/address] ___________
[Name/address] ___________
Series K Total: ___________
17.
<PAGE>
An extra section break has been inserted above this paragraph. Do not delete
this section break if you plan to add text after the Table of
Contents/Authorities. Deleting this break will cause Table of
Contents/Authorities headers and footers to appear on any pages following the
Table of Contents/Authorities.
1.
<PAGE>
EXHIBIT 4.3
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED,
SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND
UNTIL REGISTERED UNDER THE ACT OR, IN THE OPINION OF COUNSEL IN FORM
AND SUBSTANCE SATISFACTORY TO THE COMPANY, SUCH OFFER, SALE OR
TRANSFER, PLEDGE OR HYPOTHECATION IS IN COMPLIANCE THEREWITH.
SERIES E PREFERRED STOCK WARRANT
of
TERRAPIN TECHNOLOGIES, INC.
THIS CERTIFIES THAT STEVEN M. COSTELLA, TRUSTEE, OR THE SUCCESSOR
TRUSTEE, UNDER THE STEVEN M. COSTELLA TRUST, DATED MAY 8, 1989
("Warrantholder") is entitled to subscribe for and purchase from TERRAPIN
TECHNOLOGIES, INC., a Delaware corporation (the "Company") 22 fully-paid
and non-assessable shares of the Company's Series E Preferred Stock (the
"Preferred), at a price of $50.00 per share (the "Warrant Price"), such
price and such number of shares being subject to adjustment upon the
occurrence of the contingencies set forth in this Warrant. As of the date
hereof, each share of Series E Preferred is convertible into 66-2/3 shares
of Common stock. This Warrant is granted in connection with the extension
of a loan against certain equipment pursuant to that certain Master Loan
Agreement by and between the Company and Venture Leasing Associates dated
December 31, 1992.
Upon delivery of this Warrant, together with payment of the Warrant
Price of the shares of the Preferred thereby purchased, at the principal
office of the Company or at such other office or agency as the Company may
designate by notice in writing to the holder hereof, the holder of this
Warrant shall be entitled to receive a certificate or certificates for the
shares of Preferred so purchased. The date at which the Company receives
(i) the Warrant and (ii) payment for the shares of Preferred, either by
payment in cash or by check, or by notice of the Warrantholder's intent to
use the proceeds from the sale of shares at a Public Offering (as defined
below), if any, or notice of intent to use shares of Preferred as payment,
both as described in Section 1 below, or such later date as such notice
shall specify, shall be referred to herein as the "Exercise Date." All
shares of Preferred which may be issued upon the exercise of this Warrant
will, upon issuance, be fully paid and non-assessable and free from all
taxes, liens and charges with respect to the issue thereof.
This Warrant is subject to the following terms and conditions:
1. Exercise of Warrant: This Warrant may be exercised in whole or in
-------------------
part, at any time on or before the earlier of (i) December 31, 2002, (ii)
consolidation or merger of the Company in which the shareholders of the
Company do not own a majority of the combined voting power of the surviving
corporation or its parent after such consolidation or merger, and (iii) the
closing of an underwritten public offering (a "Public Offering") of the
Company's equity securities pursuant
<PAGE>
to a registration statement under the Securities Act of 1933, as amended
(the "Act"), by the surrender of this Warrant at the principal office of
the Company and by the payment to the Company, in the manner provided for
in the following paragraph, of the Warrant Price for all of the Preferred
purchased. The Company shall, within 20 days after such delivery, prepare a
certificate for the shares of Preferred purchased in the name of the holder
of this Warrant, or as such holder may direct (subject to the restrictions
upon transfer contained herein and upon payment by such holder hereof of
any applicable transfer taxes).
This Warrant may be exercised by the payment to the Company, by cash
or check, or from the proceeds of the sale of shares of Common Stock issued
upon conversion of shares of Preferred issued upon exercise of this Warrant
sold by the Warrantholder pursuant to a Public Offering of an amount equal
to the aggregate Warrant Price of the shares being purchased, if the
Warrantholder shall so participate in a Public Offering. The rights of the
Warrantholder, to so participate, shall be governed by the Registration
Rights Agreement (as hereinafter defined) and not this Warrant. In lieu of
exercising this Warrant as described above, the Warrantholder may elect to
receive shares equal to the value (as determined below) of this Warrant (or
the portion thereof being cancelled,' by surrender of this Warrant at the
principal office of the Company together with notice of such election
(which notice shall include the number of shares being exercised
hereunder), in which event the Company shall issue to the Warrantholder a
number of shares of Preferred equal to the quotient obtained by dividing
(x) the value of the shares of Preferred being exercised (the "Exercised
Shares") on the Exercise Date, which value shall be determined by
subtracting (A) the aggregate Warrant Price of the Exercised Shares
immediately prior to the exercise of the Warrant from (B) the aggregate
fair market value of the Exercised Shares on the Exercise Date by (y) the
fair market value of one share of Preferred (or Common Stock if the
Preferred has been converted into Common Stock) as of the Exercise Date. No
fractional shares shall be issuable upon exercise of this Warrant, and if
the number of shares to be issued determined in accordance with the
foregoing formula is other than a whole number, the Company shall pay to
the Warrantholder an amount in cash equal to the fair market value of the
resulting fractional share on the Exercise Date.
The exercise of this Warrant may be made contingent upon (i) the
closing of a Public Offering, (ii) the closing of any consolidation or
merger which would trigger termination of the Warrant under clause (ii) of
the first paragraph of this section 1, or (iii) the sale of all or
substantially all of the assets of the Company. The Company shall notify
the holder if an event or transaction of the kind described in this section
is proposed at least fifteen days prior to the closing of such event or
transaction; such notice shall also contain such details of the proposed
event or transaction as are reasonable in the circumstances and notice that
this Warrant shall expire upon the closing thereof. The information
contained in such notice shall be kept confidential by the Warrantholder
until a public announcement of such information has occurred.
Certificates for the shares issuable upon exercise of this Warrant
and, if applicable, a new warrant evidencing the balance of the shares
remaining subject to this Warrant shall be issued as of the Exercise Date
and shall be delivered to the holder within thirty days following the
Exercise Date.
For purposes of this Section 1, the fair market value of the Preferred
shall be determined as follows:
(i) If this Warrant is exercised in connection with and contingent
upon a Public Offering, and if the Company's registration statement relating to
such Public Offering has been declared effective by the Securities and Exchange
Commission, then the fair market value shall be the initial "Price to Public"
specified in the final prospectus with respect to such offering.
<PAGE>
(ii) If this Warrant is not exercised in connection with and
contingent upon a Public Offering, then the fair market value shall be
determined in good faith by the Company's Board of Directors.
2. Transfer of Warrant. Except in accordance with the conditions
-------------------
contained in Section 3 hereof, this Warrant and all rights hereunder are not
transferable.
3. Condition of Transfer or Exercise of Warrant. It shall be a condition
--------------------------------------------
contained any transfer or exercise of this Warrant that the Company shall have
received, at the time of such transfer or exercise, a representation in writing
that this Warrant (or portion hereof transferred) or the shares of Preferred
being issued upon such exercise, as the case may be, are being acquired for
investment not with a view to any sale or distribution thereof, or a statement
of the pertinent facts covering any proposed distribution thereof. It shall be a
further condition to any transfer of this Warrant or of any or all of the shares
of Preferred issued upon exercise of this Warrant, or Common Stock issued upon
conversion of the Preferred, other than a transfer registered under the Act,
that the Company shall have received a legal opinion, in form and substance
satisfactory to the Company and its counsel, reciting the pertinent
circumstances surrounding the proposed transfer and stating that such transfer
is exempt from the prospectus and the registration requirements of the Act. The
requirement of a legal opinion shall not apply to the transfer of this Warrant
or any part thereof to a partnership of which the Warrantholder is a partner or
to the beneficial owners of such partnership without further consideration, so
long as such transfer is in compliance with applicable securities laws. Each
certificate evidencing the shares of Preferred issued upon exercise of this
Warrant, or Common Stock issued upon conversion of the Preferred, or upon any
transfer of such shares (other than a transfer registered under the Act or any
subsequent transfer or shares so registered) shall, at the option of the
Company, contain a legend, in form and substance satisfactory to the Company and
its counsel, restricting the transfer of such shares to sales or other
dispositions exempt from the requirements of the Act.
It shall be a further condition to each such transfer that the
transferee shall receive and accept a Warrant, of like tenor and date, executed
by the Company.
4. Adjustment of Warrant Price and Number of Shares Purchasable
------------------------------------------------------------
Hereunder. The Warrant Price and the number of shares purchasable hereunder
- ---------
shall be subject to adjustment from time to time in accordance with the
following provisions, provided, however, that no such adjustment shall be made
if a corresponding adjustment is made to the "Conversion Price" of the Preferred
in the Company's Certificate of Incorporation, as amended:
(a) Subdivisions. In case the Company shall at any time subdivide the
------------
outstanding shares of its Preferred Stock, the Warrant Price in effect
immediately prior to such subdivision shall be proportionately decreased, and in
case the Company shall at any time combine the outstanding shares of its
Preferred Stock, the Warrant Price in effect immediately prior to such
combination shall be proportionately increased, effective at the close of
business on the date of such subdivision or combination, as the case may be.
(b) Stock Dividends. In case the Company shall at any time pay a
---------------
dividend with respect to Preferred payable in Preferred, then the Warrant Price
in effect immediately prior to the record date for distribution of such dividend
shall be adjusted to that price determined by multiplying the Warrant Price in
effect immediately prior to such record date by a fraction (i) the numerator of
which shall be the total number of shares of Preferred outstanding immediately
prior to such dividend and (ii) the denominator of which shall be the total
number of shares of Preferred outstanding immediately after such dividend.
(c) Number of Shares. Upon each adjustment pursuant to subdivisions
----------------
(a) or (b) of this Section 4, the registered holder of this Warrant shall
thereafter (until another such adjustment) be entitled to purchase, at the
adjusted Warrant Price, the number of shares of Preferred, calculated to the
nearest full share, obtained by multiplying the number of shares of Preferred
purchasable hereunder immediately prior to such adjustment by the Warrant Price
in effect prior to such adjustment and dividing the product so obtained by the
adjusted Warrant price.
5
<PAGE>
(d) Reclassification or Merger. In case of any reclassification,
--------------------------
change or conversion of securities of the class or series issuable upon exercise
of this Warrant (other than as a result of a subdivision or combination
described above), the Company, or such successor or purchasing corporation, as
the case may be, shall duly execute and deliver to the Warrantholder a new
warrant so that the Warrantholder shall have the right to receive, at a total
purchase price not to exceed that payable upon the exercise of the unexercised
portion of this Warrant, and in lieu of the shares of Preferred theretofore
issuable upon exercise of this Warrant, the kind and amount of shares of stock,
other securities, money and property receivable upon such reclassification,
change or merger by a holder of the number of shares of Preferred then
purchasable under this Warrant. Such new warrant shall provide for adjustments
that shall be as nearly equivalent as may be practicable to the adjustments
provided for in this Section 4. The provisions of this subparagraph (d) shall
similarly apply to successive reclassifications, changes, and mergers.
(e) Antidilution Rights. The other antidilution rights applicable to
-------------------
the Preferred and the Common Stock of the Company are set forth in the
Certificate of Incorporation (the "Certificate"), as amended from time to time,
a true and complete copy in its current form which is attached hereto as Exhibit
A. The Company shall promptly provide the Warrantholder hereof with any
restatement, amendment or modification to the Certificate promptly after the
same has been made.
5. Notices.
-------
(a) Upon any adjustment of the Warrant Price and any increase or
decrease in the number of shares of Preferred purchasable upon the exercise of
this Warrant, then, and in each such case, the Company, within thirty (30) days
thereafter, shall give written notice thereof to the registered holder of this
Warrant at the address of such holder as shown on the books of the Company which
notice shall state the Warrant Price as adjusted and the increased or decreased
number of shares purchasable upon the exercise of this Warrant, setting forth in
reasonable detail the method of calculation of each.
(b) In the event that the Company shall propose at any time to effect
a public offering of the Company's Common Stock pursuant to an effective
registration statement under the Act, the Company shall send to the
Warrantholder at least twenty days' prior written notice of the date when the
same is anticipated to take place; provided, however, that the failure to give
such notice shall not give the Warrantholder the right to delay or otherwise
restrain or affect the Public Offering. Such written notice shall be given by
first class mail, postage prepaid, addressed to the Warrantholder at the address
as shown on the books of the Company for the Warrantholder.
6. Registration. The Warrantholder shall be a "Holder" and the shares of
------------
Common Stock issuable upon conversion of the Preferred issuable upon exercise of
this Warrant shall be "Registrable Securities" under that certain Investor
Rights Agreement by and among the Company and the other parties thereto dated as
of December 3, 1992 (the "Registration Rights Agreement"). Waiver, termination,
and amendment of the Registration Rights Agreement shall be controlled by the
provisions thereof, without regard to this Warrant.
7. Representations of Warrantholder. Concurrently with the receipt of
--------------------------------
this Warrant, the Warrantholder shall have executed the Investment
Representation Statement in the form attached hereto as Exhibit B.
8. Representations and Warranties of the Company.
---------------------------------------------
The Company represents and warrants to the Warrantholder as follows:
(a) This Warrant has been duly authorized and executed by the Company
and is a valid and binding obligation of the Company, enforceable in accordance
with its terms except as to (i) the effect of applicable bankruptcy and similar
laws affecting the rights of creditors, and (ii) the effect of rules of law
5
<PAGE>
governing specific performance, injunctive relief and other equitable remedies.
(b) The Preferred has been duly authorized and reserved for issuance
by the Company and, when issued in accordance with the terms hereof, will be
validly issued, fully paid and non-assessable, and free from all taxes, liens
and changes with respect to the issues of such shares.
(c) The rights, preference, privileges and restrictions granted to or
imposed upon the Preferred and the holders thereof are as set forth in the
Company's Certificate of as Incorporation, amended, a true and complete copy of
which has been delivered to the Warrantholder.
(d) The execution and delivery of this Warrant is not, and the
issuance of the Preferred upon exercise of this Warrant in accordance with the
terms hereof is not inconsistent with the Company's Certificate of Incorporation
or Bylaws, does not contravene any law, governmental rule or regulation,
judgment or order applicable to the Company, and does not conflict with or
contravene any provision of, or constitute a default under, any indenture,
mortgage, contract or other instrument of which the Company is a party or by
which it is bound or require the consent or approval of, the giving of notice
to, the registration or filing with or the taking of any action in respect of or
by, any federal, state or local government authority or agency or other person,
other than state or federal securities law filings.
(e) During the period within which this Warrant may be exercised, the
Company will at all times have authorized and reserved for the purpose of the
issue upon exercise of this Warrant a sufficient number of shares of its
Preferred to provide for the exercise of this Warrant and a sufficient number of
shares of its Common Stock to provide for the conversion of the Preferred into
Common Stock.
9. Miscellaneous.
-------------
(a) The terms of this Warrant shall be binding upon and shall inure to
the benefit of any successors or assigns of the Company and of the holder or
holders hereof and of the Preferred issued or issuable upon the exercise hereof,
and all of the obligations of the Company relating to the Preferred issuable
upon exercise of this Warrant shall survive the exercise of this Warrant.
(b) No holder of this Warrant, as such, shall be entitled to vote or
receive dividends or be deemed to be a shareholder of the Company for any
purpose, nor shall anything contained in this Warrant be construed to confer
upon the holder of this Warrant, as such, any rights of a shareholder of the
Company or any right to vote, give or withhold consent to any corporate action,
receive notice of meetings, receive dividends or subscription rights, or
otherwise.
(c) Receipt of this Warrant by the holder hereof shall constitute
acceptance of and agreement to the foregoing terms and conditions.
(d) The Company will not, by amendment of its Certificate of
Incorporation or through any other means, avoid or seek to avoid the observance
or performance of any of the terms of this Warrant, but will at all times in
good faith assist in the carrying out of all such terms and in the taking of all
such action as may be necessary or appropriate in order to protect the rights of
the holder of this Warrant against impairment.
(e) Upon receipt of evidence reasonably satisfactory to the Company of
the loss, theft, destruction or mutilation of this Warrant and, in the case of
any such loss, theft or destruction, upon delivery of an indemnity agreement
reasonably satisfactory in form and amount to the Company, or in the case of any
such mutilation, upon surrender and cancellation of such Warrant, the Company
will execute and deliver, in lieu thereof, a new Warrant of like date and tenor.
5
<PAGE>
(f) This Warrant shall be governed by, construed and enforced in
accordance with the laws of the State of California, as applied to agreements
made and performed in California by residents of the State of California.
(g) So long as this Warrant has not terminated, the Warrantholder
shall be entitled to receive unaudited quarterly and audited annual financial
statements.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its
duly authorized officer.
Signature: /s/ Reinaldo Gomez Dated: 12/22/97
TERRAPIN TECHNOLOGIES, INC.
Accepted: WARRANTHOLDER
Signature: /s/ Steven M. Costella, Trustee
<PAGE>
EXHIBIT 4.4
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT")
AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED,
PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE
ACT OR, IN THE OPINION OF COUNSEL IN FORM AND SUBSTANCE
SATISFACTORY TO THE COMPANY, SUCH OFFER, SALE OR TRANSFER,
PLEDGE OR HYPOTHECATION IS IN COMPLIANCE THEREWITH.
SERIES E PREFERRED STOCK WARRANT
of
TERRAPIN TECHNOLOGIES, INC.
THIS CERTIFIES THAT WILLIAM KIRSCH ("Warrantholder") is entitled to
subscribe for and purchase from TERRAPIN TECHNOLOGIES, INC., a Delaware
corporation (the "Company") 22 fully-paid and non-assessable shares of the
Company's Series E Preferred Stock (the "Preferred), at a price of $50.00 per
share (the "Warrant Price"), such price and such number of shares being subject
to adjustment upon the occurrence of the contingencies set forth in this
Warrant. As of the date hereof, each share of Series E Preferred is convertible
into 66-2/3 shares of Common stock. This Warrant is granted in connection with
the extension of a loan against certain equipment pursuant to that certain
Master Loan Agreement by and between the Company and Venture Leasing Associates
dated December 31, 1992.
Upon delivery of this Warrant, together with payment of the Warrant Price of
the shares of the Preferred thereby purchased, at the principal office of the
Company or at such other office or agency as the Company may designate by notice
in writing to the holder hereof, the holder of this Warrant shall be entitled to
receive a certificate or certificates for the shares of Preferred so purchased.
The date at which the Company receives (i) the Warrant and (ii) payment for the
shares of Preferred, either by payment in cash or by check, or by notice of the
Warrantholder's intent to use the proceeds from the sale of shares at a Public
Offering (as defined below), if any, or notice of intent to use shares of
Preferred as payment, both as described in Section 1 below, or such later date
as such notice shall specify, shall be referred to herein as the "Exercise
Date." All shares of Preferred which may be issued upon the exercise of this
Warrant will, upon issuance, be fully paid and non-assessable and free from all
taxes, liens and charges with respect to the issue thereof.
This Warrant is subject to the following terms and conditions:
1. Exercise of Warrant: This Warrant may be exercised in whole or in part,
-------------------
at any time on or before the earlier of (i) December 31, 2002, (ii)
consolidation or merger of the Company in which the shareholders of the Company
do not own a majority of the combined voting power of the surviving corporation
or its parent after such consolidation or merger, and (iii) the closing of an
underwritten public offering (a "Public Offering") of the Company's equity
securities pursuant to a registration statement under the Securities Act of
1933, as amended (the "Act"), by the surrender of this Warrant at the principal
office of the Company
<PAGE>
and by the payment to the Company, in the manner provided for in the following
paragraph, of the Warrant Price for all of the Preferred purchased. The Company
shall, within 20 days after such delivery, prepare a certificate for the shares
of Preferred purchased in the name of the holder of this Warrant, or as such
holder may direct (subject to the restrictions upon transfer contained herein
and upon payment by such holder hereof of any applicable transfer taxes).
This Warrant may be exercised by the payment to the Company, by cash or
check, or from the proceeds of the sale of shares of Common Stock issued upon
conversion of shares of Preferred issued upon exercise of this Warrant sold by
the Warrantholder pursuant to a Public Offering of an amount equal to the
aggregate Warrant Price of the shares being purchased, if the Warrantholder
shall so participate in a Public Offering. The rights of the Warrantholder, to
so participate, shall be governed by the Registration Rights Agreement (as
hereinafter defined) and not this Warrant. In lieu of exercising this Warrant
as described above, the Warrantholder may elect to receive shares equal to the
value (as determined below) of this Warrant (or the portion thereof being
cancelled) by surrender of this Warrant at the principal office of the Company
together with notice of such election (which notice shall include the number of
shares being exercised hereunder), in which event the Company shall issue to the
Warrantholder a number of shares of Preferred equal to the quotient obtained by
dividing (x) the value of the shares of Preferred being exercised (the
"Exercised Shares") on the Exercise Date, which value shall be determined by
subtracting (A) the aggregate Warrant Price of the Exercised Shares immediately
prior to the exercise of the Warrant from (B) the aggregate fair market value of
the Exercised Shares on the Exercise Date by (y) the fair market value of one
share of Preferred (or Common Stock if the Preferred has been converted into
Common Stock) as of the Exercise Date. No fractional shares shall be issuable
upon exercise of this Warrant, and if the number of shares to be issued
determined in accordance with the foregoing formula is other than a whole
number, the Company shall pay to the Warrantholder an amount in cash equal to
the fair market value of the resulting fractional share on the Exercise Date.
The exercise of this Warrant may be made contingent upon (i) the closing
of a Public Offering, (ii) the closing of any consolidation or merger which
would trigger termination of the Warrant under clause (ii) of the first
paragraph of this section 1, or (iii) the sale of all or substantially all of
the assets of the Company. The Company shall notify the holder if an event or
transaction of the kind described in this section is proposed at least fifteen
days prior to the closing of such event or transaction; such notice shall also
contain such details of the proposed event or transaction as are reasonable in
the circumstances and notice that this Warrant shall expire upon the closing
thereof. The information contained in such notice shall be kept confidential by
the Warrantholder until a public announcement of such information has occurred.
Certificates for the shares issuable upon exercise of this Warrant and,
if applicable, a new warrant evidencing the balance of the shares remaining
subject to this Warrant shall be issued as of the Exercise Date and shall be
delivered to the holder within thirty days following the Exercise Date.
For purposes of this Section 1, the fair market value of the Preferred
shall be determined as follows:
2
<PAGE>
(i) If this Warrant is exercised in connection with and contingent
upon a Public Offering, and if the Company's registration statement relating to
such Public Offering has been declared effective by the Securities and Exchange
Commission, then the fair market value shall be the initial "Price to Public"
specified in the final prospectus with respect to such offering.
(ii) If this Warrant is not exercised in connection with and contingent
upon a Public Offering, then the fair market value shall be determined in good
faith by the Company's Board of Directors.
2. Transfer of Warrant. Except in accordance with the conditions contained
-------------------
in Section 3 hereof, this Warrant and all rights hereunder are not transferable.
3. Condition of Transfer or Exercise of Warrant. It shall be a condition to
--------------------------------------------
any transfer or exercise of this Warrant that the Company shall have received,
at the time of such transfer or exercise, a representation in writing that this
Warrant (or portion hereof transferred) or the shares of Preferred being issued
upon such exercise, as the case may be, are being acquired for investment not
with a view to any sale or distribution thereof, or a statement of the pertinent
facts covering any proposed distribution thereof. It shall be a further
condition to any transfer of this Warrant or of any or all of the shares of
Preferred issued upon exercise of this Warrant, or Common Stock issued upon
conversion of the Preferred, other than a transfer registered under the Act,
that the Company shall have received a legal opinion, in form and substance
satisfactory to the Company and its counsel, reciting the pertinent
circumstances surrounding the proposed transfer and stating that such transfer
is exempt from the prospectus and the registration requirements of the Act. The
requirement of a legal opinion shall not apply to the transfer of this Warrant
or any part thereof to a partnership of which the Warrantholder is a partner or
to the beneficial owners of such partnership without further consideration, so
long as such transfer is in compliance with applicable securities laws. Each
certificate evidencing the shares of Preferred issued upon exercise of this
Warrant, or Common Stock issued upon conversion of the Preferred, or upon any
transfer of such shares (other than a transfer registered under the Act or any
subsequent transfer or shares so registered) shall, at the option of the
Company, contain a legend, in form and substance satisfactory to the Company and
its counsel, restricting the transfer of such shares to sales or other
dispositions exempt from the requirements of the Act.
It shall be a further condition to each such transfer that the
transferee shall receive and accept a Warrant, of like tenor and date, executed
by the Company.
4. Adjustment of Warrant Price and Number of Shares Purchasable Hereunder.
----------------------------------------------------------------------
The Warrant Price and the number of shares purchasable hereunder shall be
subject to adjustment from time to time in accordance with the following
provisions, provided, however, that no such adjustment shall be made if a
corresponding adjustment is made to the "Conversion Price" of the Preferred in
the Company's Certificate of Incorporation, as amended:
(a) Subdivisions. In case the Company shall at any time subdivide the
------------
outstanding shares of its Preferred Stock, the Warrant Price in effect
immediately prior to such subdivision shall be proportionately decreased, and in
case the Company shall at any time combine the outstanding shares of its
Preferred Stock, the Warrant Price in effect immediately
2
<PAGE>
prior to such combination shall be proportionately increased, effective at the
close of business on the date of such subdivision or combination, as the case
may be.
(b) Stock Dividends. In case the Company shall at any time pay a
---------------
dividend with respect to Preferred payable in Preferred, then the Warrant Price
in effect immediately prior to the record date for distribution of such dividend
shall be adjusted to that price determined by multiplying the Warrant Price in
effect immediately prior to such record date by a fraction (i) the numerator of
which shall be the total number of shares of Preferred outstanding immediately
prior to such dividend and (ii) the denominator of which shall be the total
number of shares of Preferred outstanding immediately after such dividend.
(c) Number of Shares. Upon each adjustment pursuant to subdivisions (a)
----------------
or (b) of this Section 4, the registered holder of this Warrant shall thereafter
(until another such adjustment) be entitled to purchase, at the adjusted Warrant
Price, the number of shares of Preferred, calculated to the nearest full share,
obtained by multiplying the number of shares of Preferred purchasable hereunder
immediately prior to such adjustment by the Warrant Price in effect prior to
such adjustment and dividing the product so obtained by the adjusted Warrant
price.
(d) Reclassification or Merger. In case of any reclassification, change
--------------------------
or conversion of securities of the class or series issuable upon exercise of
this Warrant (other than as a result of a subdivision or combination described
above), the Company, or such successor or purchasing corporation, as the case
may be, shall duly execute and deliver to the Warrantholder a new warrant so
that the Warrantholder shall have the right to receive, at a total purchase
price not to exceed that payable upon the exercise of the unexercised portion of
this Warrant, and in lieu of the shares of Preferred theretofore issuable upon
exercise of this Warrant, the kind and amount of shares of stock, other
securities, money and property receivable upon such reclassification, change or
merger by a holder of the number of shares of Preferred then purchasable under
this Warrant. Such new warrant shall provide for adjustments that shall be as
nearly equivalent as may be practicable to the adjustments provided for in this
Section 4. The provisions of this subparagraph (d) shall similarly apply to
successive reclassifications, changes, and mergers.
(e) Antidilution Rights. The other antidilution rights applicable to the
-------------------
Preferred and the Common Stock of the Company are set forth in the Certificate
of Incorporation (the "Certificate"), as amended from time to time, a true and
complete copy in its current form which is attached hereto as Exhibit A: The
Company shall promptly provide the Warrantholder hereof with any restatement,
amendment or modification to the Certificate promptly after the same has been
made.
5. Notices.
-------
(a) Upon any adjustment of the Warrant Price and any increase or
decrease in the number of shares of Preferred purchasable upon the exercise of
this Warrant, then, and in each such case, the Company, within thirty (30) days
thereafter, shall give written notice thereof to the registered holder of this
Warrant at the address of such holder as shown on the books of the Company which
notice shall state the Warrant Price as adjusted and the
3
<PAGE>
increased or decreased number of shares purchasable upon the exercise of this
Warrant, setting forth in reasonable detail the method of calculation of each.
(b) In the event that the Company shall propose at any time to effect a
public offering of the Company's Common Stock pursuant to an effective
registration statement under the Act, the Company shall send to the
Warrantholder at least twenty days' prior written notice of the date when the
same is anticipated to take place; provided, however, that the failure to give
such notice shall not give the Warrantholder the right to delay or otherwise
restrain or affect the Public Offering. Such written notice shall be given by
first class mail, postage prepaid, addressed to the Warrantholder at the address
as shown on the books of the Company for the Warrantholder.
6. Registration. The Warrantholder shall be a "Holder" and the shares of
------------
Common Stock issuable upon conversion of the Preferred issuable upon exercise of
this Warrant shall be "Registrable Securities" under that certain Investor
Rights Agreement by and among the Company and the other parties thereto dated as
of December 3, 1992 (the "Registration Rights Agreement"). Waiver, termination,
and amendment of the Registration Rights Agreement shall be controlled by the
provisions thereof, without regard to this Warrant.
7. Representations of Warrantholder. Concurrently with the receipt of this
--------------------------------
Warrant, the Warrantholder shall have executed the Investment Representation
Statement in the form attached hereto as Exhibit B.
8. Representations and Warranties of the Company.
---------------------------------------------
The Company represents and warrants to the Warrantholder as follows:
(a) This Warrant has been duly authorized and executed by the Company
and is a valid and binding obligation of the Company, enforceable in accordance
with its terms except as to (i) the effect of applicable bankruptcy and similar
laws affecting the rights of creditors, and (ii) the effect of rules of law
governing specific performance, injunctive relief and other equitable remedies.
(b) The Preferred has been duly authorized and reserved for issuance by
the Company and, when issued in accordance with the terms hereof, will be
validly issued, fully paid and non-assessable, and free from all taxes, liens
and changes with respect to the issues of such shares.
(c) The rights, preference, privileges and restrictions granted to or
imposed upon the Preferred and the holders thereof are as set forth in the
Company's Certificate of as Incorporation, as amended, a true and complete copy
of which has been delivered to the Warrantholder.
(d) The execution and delivery of this Warrant is not, and the issuance
of the Preferred upon exercise of this Warrant in accordance with the terms
hereof is not, inconsistent with the Company's Certificate of Incorporation or
Bylaws, does not contravene any law, governmental rule or regulation, judgment
or order applicable to the Company, and does not conflict with or contravene any
provision of, or constitute a default under, any indenture, mortgage, contract
or other instrument of which the Company is a party or by which it is bound or
require the consent or approval of, the giving of notice to, the registration or
filing with
4
<PAGE>
or the taking of any action in respect of or by, any federal, state or local
government authority or agency or other person, other than state or federal
securities law filings.
(e) During the period within which this Warrant may be exercised, the
Company will at all times have authorized and reserved for the purpose of the
issue upon exercise of this Warrant a sufficient number of shares of its
Preferred to provide for the exercise of this Warrant and a sufficient number of
shares of its Common Stock to provide for the conversion of the Preferred into
Common Stock.
9. Miscellaneous.
-------------
(a) The terms of this Warrant shall be binding upon and shall inure to
the benefit of any successors or assigns of the Company and of the holder or
holders hereof and of the Preferred issued or issuable upon the exercise hereof,
and all of the obligations of the Company relating to the Preferred issuable
upon exercise of this Warrant shall survive the exercise of this Warrant.
(b) No holder of this Warrant, as such, shall be entitled to vote or
receive dividends or be deemed to be a shareholder of the Company for any
purpose, nor shall anything contained in this Warrant be construed to confer
upon the holder of this Warrant, as such, any rights of a shareholder of the
Company or any right to vote, give or withhold consent to any corporate action,
receive notice of meetings, receive dividends or subscription rights, or
otherwise.
(c) Receipt of this Warrant by the holder hereof shall constitute
acceptance of and agreement to the foregoing terms and conditions.
(d) The Company will not, by amendment of its Certificate of
Incorporation or through any other means, avoid or seek to avoid the observance
or performance of any of the terms of this Warrant, but will at all times in
good faith assist in the carrying out of all such terms and in the taking of all
such action as may be necessary or appropriate in order to protect the rights of
the holder of this Warrant against impairment.
(e) Upon receipt of evidence reasonably satisfactory to the Company of
the loss, theft, destruction or mutilation of this Warrant and, in the case of
any such loss, theft or destruction, upon delivery of an indemnity agreement
reasonably satisfactory in form and amount to the Company, or in the case of any
such mutilation, upon surrender and cancellation of such Warrant, the Company
will execute and deliver, in lieu thereof, a new Warrant of like date and tenor.
(f) This Warrant shall be governed by, construed and enforced in
accordance with the laws of the State of California, as applied to agreements
made and performed in California by residents of the State of California.
5
<PAGE>
(g) So long as this Warrant has not terminated, the Warrantholder shall
be entitled to receive unaudited quarterly and audited annual financial
statements.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its
duly authorized officer.
Signature: /s/ Reinaldo Gomez Dated: 12/22/92
COMPANY: TERRAPIN TECHNOLOGIES, INC.
Accepted: WARRANTHOLDER
Signature: /s/ William E. Kirsch
Print Name: William E. Kirsch
5
<PAGE>
EXHIBIT 4.5
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED, SOLD
OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL
REGISTERED UNDER THE ACT OR, IN THE OPINION OF COUNSEL IN FORM AND
SUBSTANCE SATISFACTORY TO THE COMPANY, SUCH OFFER, SALE OR TRANSFER, PLEDGE
OR HYPOTHECATION IS IN COMPLIANCE THEREWITH.
SERIES E PREFERRED STOCK WARRANT
of
TERRAPIN TECHNOLOGIES, INC.
THIS CERTIFIES THAT GLEN McLAUGHLIN ("Warrantholder") is entitled to
subscribe for and purchase from TERRAPIN TECHNOLOGIES, INC., a Delaware
corporation (the "Company") 176 fully-paid and non-assessable shares of the
Company's Series E Preferred Stock (the "Preferred"), at a price of $50.00 per
share (the "Warrant Price"), such price and such number of shares being subject
to adjustment upon the occurrence of the contingencies set forth in this
Warrant. As of the date hereof, each share of Series E Preferred is convertible
into 66-2/3 shares of Common stock. This Warrant is granted in connection with
the extension of a loan against certain equipment pursuant to that certain
Master Loan Agreement by and between the Company and Venture Leasing Associates
dated December 31, 1992.
Upon delivery of this Warrant, together with payment of the Warrant Price of
the shares of the Preferred thereby purchased, at the principal office of the
Company or at such other office or agency as the Company may designate by notice
in writing to the holder hereof, the holder of this Warrant shall be entitled to
receive a certificate or certificates for the shares of Preferred so purchased.
The date at which the Company receives (i) the Warrant and (ii) payment for the
shares of Preferred, either by payment in cash or by check, or by notice of the
Warrantholder's intent to use the proceeds from the sale of shares at a Public
Offering (as defined below), if any, or notice of intent to use shares of
Preferred as payment, both as described in Section 1 below, or such later date
as such notice shall specify, shall be referred to herein as the "Exercise
Date." All shares of Preferred which may be issued upon the exercise of this
Warrant will, upon issuance, be fully paid and non-assessable and free from all
taxes, liens and charges with respect to the issue thereof.
This Warrant is subject to the following terms and conditions:
1. Exercise of Warrant: This Warrant may be exercised in whole or in part,
-------------------
at any time on or before the earlier of (i) December 31, 2002, (ii)
consolidation or merger of the Company in which the shareholders of the Company
do not own a majority of the combined voting power of the surviving corporation
or its parent after such consolidation or merger, and (iii) the closing of an
underwritten public offering (a "Public Offering") of the Company's equity
securities pursuant to a registration statement under the Securities Act of
1933, as amended (the "Act"), by the surrender of this Warrant at the principal
office of the Company and by the payment to the Company, in the manner provided
for in the following paragraph, of the Warrant Price for all of the Preferred
purchased. The Company shall, within 20 days after such delivery, prepare a
certificate for the shares of Preferred purchased in the name of the holder of
this Warrant, or as such holder may direct (subject to the restrictions upon
transfer contained herein and upon payment by such holder
<PAGE>
hereof of any applicable transfer taxes).
This Warrant may be exercised by the payment to the Company, by cash or
check, or from the proceeds of the sale of shares of Common Stock issued upon
conversion of shares of Preferred issued upon exercise of this Warrant sold by
the Warrantholder pursuant to a Public Offering of an amount equal to the
aggregate Warrant Price of the shares being purchased, if the Warrantholder
shall so participate in a Public Offering. The rights of the Warrantholder, to
so participate, shall be governed by the Registration Rights Agreement (as
hereinafter defined) and not this Warrant. In lieu of exercising this Warrant
as described above, the Warrantholder may elect to receive shares equal to the
value (as determined below) of this Warrant (or the portion thereof being
cancelled) by surrender of this Warrant at the principal office of the Company
together with notice of such election (which notice shall include the number of
shares being exercised hereunder), in which event the Company shall issue to the
Warrantholder a number of shares of Preferred equal to the quotient obtained by
dividing (x) the value of the shares of Preferred being exercised (the
"Exercised Shares") on the Exercise Date, which value shall be determined by
subtracting (A) the aggregate Warrant Price of the Exercised Shares immediately
prior to the exercise of the Warrant from (B) the aggregate fair market value of
the Exercised Shares on the Exercise Date by (y) the fair market value of one
share of Preferred (or Common Stock if the Preferred has been converted into
Common Stock) as of the Exercise Date. No fractional shares shall be issuable
upon exercise of this Warrant, and if the number of shares to be issued
determined in accordance with the foregoing formula is other than a whole
number, the Company shall pay to the Warrantholder an amount in cash equal to
the fair market value of the resulting fractional share on the Exercise Date.
The exercise of this Warrant may be made contingent upon (i) the closing
of a Public Offering, (ii) the closing of any consolidation or merger which
would trigger termination of the Warrant under clause (ii) of the first
paragraph of this section 1, or (iii) the sale of all or substantially all of
the assets of the Company. The Company shall notify the holder if an event or
transaction of the kind described in this section is proposed at least fifteen
days prior to the closing of such event or transaction; such notice shall also
contain such details of the proposed event or transaction as are reasonable in
the circumstances and notice that this Warrant shall expire upon the closing
thereof. The information contained in such notice shall be kept confidential by
the Warrantholder until a public announcement of such information has occurred.
Certificates for the shares issuable upon exercise of this Warrant and,
if applicable, a new warrant evidencing the balance of the shares remaining
subject to this Warrant shall be issued as of the Exercise Date and shall be
delivered to the holder within thirty days following the Exercise Date.
For purposes of this Section 1, the fair market value of the Preferred
shall be determined as follows:
(i) If this Warrant is exercised in connection with and contingent
upon a Public Offering, and if the Company's registration statement relating to
such Public Offering has been declared effective by the Securities and Exchange
Commission, then the fair market value shall be the initial "Price to Public"
specified in the final prospectus with respect to such offering.
(ii) If this Warrant is not exercised in connection with and contingent
upon a Public Offering, then the fair market value shall be determined in good
faith by the Company's Board of Directors.
2. Transfer of Warrant. Except in accordance with the conditions contained
-------------------
in Section 3 hereof, this Warrant and all rights hereunder are not transferable.
3. Condition of Transfer or Exercise of Warrant. It shall be a condition to
--------------------------------------------
any transfer or exercise
<PAGE>
of this Warrant that the Company shall have received, at the time of such
transfer or exercise, a representation in writing that this Warrant (or portion
hereof transferred) or the shares of Preferred being issued upon such exercise,
as the case may be, are being acquired for investment not with a view to any
sale or distribution thereof, or a statement of the pertinent facts covering any
proposed distribution thereof. It shall be a further condition to any transfer
of this Warrant or of any or all of the shares of Preferred issued upon exercise
of this Warrant, or Common Stock issued upon conversion of the Preferred, other
than a transfer registered under the Act, that the Company shall have received a
legal opinion, in form and substance satisfactory to the Company and its
counsel, reciting the pertinent circumstances surrounding the proposed transfer
and stating that such transfer is exempt from the prospectus and the
registration requirements of the Act. The requirement of a legal opinion shall
not apply to the transfer of this Warrant or any part thereof to a partnership
of which the Warrantholder is a partner or to the beneficial owners of such
partnership without further consideration, so long as such transfer is in
compliance with applicable securities laws. Each certificate evidencing the
shares of Preferred issued upon exercise of this Warrant, or Common Stock issued
upon conversion of the Preferred, or upon any transfer of such shares (other
than a transfer registered under the Act or any subsequent transfer or shares so
registered) shall, at the option of the Company, contain a legend, in form and
substance satisfactory to the Company and its counsel, restricting the transfer
of such shares to sales or other dispositions exempt from the requirements of
the Act.
It shall be a further condition to each such transfer that the
transferee shall receive and accept a Warrant, of like tenor and date, executed
by the Company.
4. Adjustment of Warrant Price and Number of Shares Purchasable Hereunder.
----------------------------------------------------------------------
The Warrant Price and the number of shares purchasable hereunder shall be
subject to adjustment from time to time in accordance with the following
provisions, provided, however, that no such adjustment shall be made if a
corresponding adjustment is made to the "Conversion Price" of the Preferred in
the Company's Certificate of Incorporation, as amended:
(a) Subdivisions. In case the Company shall at any time subdivide the
------------
outstanding shares of its Preferred Stock, the Warrant Price in effect
immediately prior to such subdivision shall be proportionately decreased, and in
case the Company shall at any time combine the outstanding shares of its
Preferred Stock, the Warrant Price in effect immediately prior to such
combination shall be proportionately increased, effective at the close of
business on the date of such subdivision or combination, as the case may be.
(b) Stock Dividends. In case the Company shall at any time pay a
---------------
dividend with respect to Preferred payable in Preferred, then the Warrant Price
in effect immediately prior to the record date for distribution of such dividend
shall be adjusted to that price determined by multiplying the Warrant Price in
effect immediately prior to such record date by a fraction (i) the numerator of
which shall be the total number of shares of Preferred outstanding immediately
prior to such dividend and (ii) the denominator of which shall be the total
number of shares of Preferred outstanding immediately after such dividend.
(c) Number of Shares. Upon each adjustment pursuant to subdivisions (a)
----------------
or (b) of this Section 4, the registered holder of this Warrant shall thereafter
(until another such adjustment) be entitled to purchase, at the adjusted Warrant
Price, the number of shares of Preferred, calculated to the nearest full share,
obtained by multiplying the number of shares of Preferred purchasable hereunder
immediately prior to such adjustment by the Warrant Price in effect prior to
such adjustment and dividing the product so obtained by the adjusted Warrant
price.
(d) Reclassification or Merger. In case of any reclassification, change
--------------------------
or conversion of securities of the class or series issuable upon exercise of
this Warrant (other than as a result of a subdivision or combination described
above), the Company, or such successor or purchasing corporation,
2
<PAGE>
as the case may be, shall duly execute and deliver to the Warrantholder a new
warrant so that the Warrantholder shall have the right to receive, at a total
purchase price not to exceed that payable upon the exercise of the unexercised
portion of this Warrant, and in lieu of the shares of Preferred theretofore
issuable upon exercise of this Warrant, the kind and amount of shares of stock,
other securities, money and property receivable upon such reclassification,
change or merger by a holder of the number of shares of Preferred then
purchasable under this Warrant. Such new warrant shall provide for adjustments
that shall be as nearly equivalent as may be practicable to the adjustments
provided for in this Section 4. The provisions of this subparagraph (d) shall
similarly apply to successive reclassifications, changes, and mergers.
(e) Antidilution Rights. The other antidilution rights applicable to the
-------------------
Preferred and the Common Stock of the Company are set forth in the Certificate
of Incorporation (the "Certificate"), as amended from time to time, a true and
complete copy in its current form which is attached hereto as Exhibit A. The
Company shall promptly provide the Warrantholder hereof with any restatement,
amendment or modification to the Certificate promptly after the same has been
made.
5. Notices.
-------
(a) Upon any adjustment of the Warrant Price and any increase or
decrease in the number of shares of Preferred purchasable upon the exercise of
this Warrant, then, and in each such case, the Company, within thirty (30) days
thereafter, shall give written notice thereof to the registered holder of this
Warrant at the address of such holder as shown on the books of the Company which
notice shall state the Warrant Price as adjusted and the
<PAGE>
increased or decreased number of shares purchasable upon the exercise of this
Warrant, setting forth in reasonable detail the method of calculation of each.
(b) In the event that the Company shall propose at any time to effect: a
public offering of the Company's Common Stock pursuant to an effective
registration statement under the Act, the Company shall send to the
Warrantholder at least twenty days' prior written notice of the date when the
same is anticipated to take place; provided, however, that the failure to give
such notice shall not give the Warrantholder the right to delay or otherwise
restrain or affect the Public Offering. Such written notice shall be given by
first class mail, postage prepaid, addressed to the Warrantholder at the address
as shown on the books of the Company for the Warrantholder.
6. Registration. The Warrantholder shall be a "Holder" and the shares of
------------
Common Stock issuable upon conversion of the Preferred issuable upon exercise of
this Warrant shall be Registrable Securities" under that certain Investor Rights
Agreement by and among the Company and the other parties thereto dated as of
December 3, 1992 (the "Registration Rights Agreement"). Waiver, termination,
and amendment of the Registration Rights Agreement shall be controlled by the
provisions thereof, without regard to this Warrant.
7. Representations of Warrantholder. Concurrently with the receipt of this
--------------------------------
Warrant, the Warrantholder shall have executed the Investment Representation
Statement in the form attached hereto as Exhibit B.
8. Representations and Warranties of the Company.
---------------------------------------------
The Company represents and warrants to the Warrantholder as follows:
(a) This Warrant has been duly authorized and executed by the Company
and is a valid and binding obligation of the Company, enforceable in accordance
with its terms except as to (i) the effect of applicable bankruptcy and similar
laws affecting the rights of creditors, and (ii) the effect of rules of law
governing specific performance, injunctive relief and other equitable remedies.
(b) The Preferred has been duly authorized and reserved for issuance by
the Company and, when issued in accordance with the terms hereof, will be
validly issued, fully paid and non-assessable, and free from all taxes, liens
and changes with respect to the issues of such shares.
(c) The rights, preference, privileges and restrictions granted to or
imposed upon the Preferred and the holders thereof are as set forth in the
Company's Certificate of Incorporation as amended, a true and complete copy of
which has been delivered to the Warrantholder.
(d) The execution and delivery of this Warrant is not, and the issuance
of the Preferred upon exercise of this Warrant in accordance with the terms
hereof is not, inconsistent with the Company's Certificate of Incorporation or
Bylaws, does not contravene any law, governmental rule or regulation, judgment
or order applicable to the Company, and does not conflict with or contravene any
provision of, or constitute a default under, any indenture, mortgage, contract
or other instrument of which the Company is a party or by which it is bound or
require the consent or approval of, the giving of notice to, the registration or
filing with or the taking of any action in respect of or by, any federal, state
or local government authority or agency or other person, other than state or
federal securities law filings.
<PAGE>
(e) During the period within which this Warrant may be exercised, the
Company will at all times have authorized and reserved for the purpose of the
issue upon exercise of this Warrant a sufficient number of shares of its
Preferred to provide for the exercise of this Warrant and a sufficient number of
shares of its Common Stock to provide for the conversion of the Preferred into
Common Stock.
9. Miscellaneous.
-------------
(a) The terms of this Warrant shall be binding upon and shall inure to
the benefit of any successors or assigns of the Company and of the holder or
holders hereof and of the Preferred issued or issuable upon the exercise hereof,
and all of the obligations of the Company relating to the Preferred issuable
upon exercise of this Warrant shall survive the exercise of this Warrant.
(b) No holder of this Warrant, as such, shall be entitled to vote or
receive dividends or be deemed to be a shareholder of the Company for any
purpose, nor shall anything contained in this Warrant be construed to confer
upon the holder of this Warrant, as such, any rights of a shareholder of the
Company or any right to vote, give or withhold consent to any corporate action,
receive notice of meetings, receive dividends or subscription rights, or
otherwise.
(c) Receipt of this Warrant by the holder hereof shall constitute
acceptance of and agreement to the foregoing terms and conditions.
(d) The Company will not, by amendment of its Certificate of
Incorporation or through any other means, avoid or seek to avoid the observance
or performance of any of the terms of this Warrant, but will at all times in
good faith assist in the carrying out of all such terms and in the taking of all
such action as may be necessary or appropriate in order to protect the rights of
the holder of this Warrant against impairment.
(e) Upon receipt of evidence reasonably satisfactory to the Company of
the loss, theft, destruction or mutilation of this Warrant and, in the case of
any such loss, theft or destruction, upon delivery of an indemnity agreement
reasonably satisfactory in form and amount to the Company, or in the case of any
such mutilation, upon surrender and cancellation of such Warrant, the Company
will execute and deliver, in lieu thereof, a new Warrant of like date and tenor.
(f) This Warrant shall be governed by, construed and enforced in
accordance with the laws of the State of California, as applied to agreements
made and performed in California by residents of the State of California.
(g) So long as this Warrant has not terminated, the Warrantholder shall
be entitled to receive unaudited quarterly and audited annual financial
statements.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its
duly authorized officer.
Signature: /s/ Reinaldo F. Gomez Dated: 12/22/92
COMPANY: TERRAPIN TECHNOLOGIES, INC.
<PAGE>
Accepted: WARRANTHOLDER
Signature: /s/ Glen McLaughlin
Print Name: Glen McLaughlin
<PAGE>
the undersigned further represents that it does not have any contract,
undertaking, agreement or arrangement with any person to sell, transfer, or
grant participations to such person or to any third person, with respect to any
Securities issuable upon exercise of the Warrant.
(b) The undersigned understands that the Securities issuable upon exercise
of the Warrant at the time of issuance may not be registered under the
Securities Act of 1933, as amended (the "Act"), and applicable state securities
laws, on the ground that the issuance of such securities is exempt pursuant to
Section 4(2) of the Act and state law exemptions relating to offers and sales
not by means of a public offering, and that the Company's reliance on such
exemptions is predicated on the undersigned's representations set forth herein.
The undersigned is an "Accredited Investor" as such term is defined in Rule 501
of the Securities and Exchange Commission.
(c) The undersigned agrees that in no event will it make a disposition of
any Securities acquired upon the exercise of the Warrant unless and until (i) it
shall have notified the Company of the proposed disposition and shall have
furnished the Company with a statement of the circumstances surrounding the
proposed disposition, and (ii) it shall have furnished the Company with an
opinion of counsel satisfactory to the Company and the Company's counsel to the
effect that (a) appropriate action necessary for compliance with the Act and any
applicable state securities laws has been taken or an exemption from the
registration requirements of the Act and such laws is available, and (B) that
the proposed transfer will not violate any of said laws.
(d) The undersigned represents that it is able to fend for itself in the
transactions contemplated by this Statement, has such knowledge and experience
in financial and business matters as to be capable of evaluating the merits and
risks of its investments, and has the ability to bear the economic risks
(including the risk of a total loss) of its investment. The undersigned
represents that it has had the opportunity to ask questions of the Company
concerning the Company's business and assets and to obtain any additional
information which it considered necessary to verify the accuracy of or to
amplify the Company's disclosures, and has had all questions which have been
asked by it satisfactorily answered by the Company.
(e) The undersigned acknowledges that the Securities issuable upon exercise
of the Warrant must be held indefinitely unless subsequently registered under
the Act or an exemption from such registration is available. The undersigned is
aware of the provisions of Rule 144 promulgated under the Act which permit
limited resale of shares purchased in a private placement subject to the
satisfaction of certain conditions, including, among other things, the existence
of a public market for the shares, the availability of certain current public
information about the Company, the resale occurring not less than two years
after a party has purchased and paid for the security to be sold, the sale being
through a "broker's transaction" or in transactions directly with a "market
maker" (as provided by Rule 144(f)) and the number of shares being sold during
any three-month period not exceeding specified limitations. The undersigned is
aware that the conditions for resale set forth in Rule 144 have not been
satisfied.
Dated: December 31, 1992
/s/ Glen McLaughlin
(signature)
GLEN McLAUGHLIN
(Typed or Printed Name)
(Title)
<PAGE>
EXHIBIT 4.6
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 OR ANY STATE SECURITIES LAWS. SUCH SECURITIES MAY NOT BE SOLD OR
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION
THEREFROM UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS.
WARRANT TO PURCHASE A MAXIMUM OF
3,429 SHARES OF SERIES H PREFERRED STOCK OF
TERRAPIN TECHNOLOGIES, INC.
(Void after September 19, 2003)
This certifies that VENTURE LENDING & LEASING, INC., a Maryland
corporation, or assigns (the "Holder"), for value received, is entitled to
purchase from TERRAPIN TECHNOLOGIES, INC., a Delaware corporation (the
"Company"), 3,429 fully paid and nonassessable shares of the Company's Series H
Preferred Stock ("Preferred Stock") for cash at a price of $50.00 per share (the
"Stock Purchase Price") at any time or from time to time up to and including
5:00 p.m. (Pacific time) on the earliest of (i) the business day immediately
prior to the date of closing of the initial public offering of the Company's
Common Stock, (ii) the business day immediately prior to the effective date of
any consolidation or merger of the Company with or into another corporation
other than a Control Merger (as defined in Section 4.3 hereof) or (iii) August
31, 2003 (such earliest date being referred to in this Warrant as (the
"Expiration Date"), upon surrender to the Company at its principal office at 750
Gateway Blvd., Suite H, South San Francisco, CA 94080 (or at such other
location as the Company may advise Holder in writing) of this Warrant properly
endorsed with the Form of Subscription attached hereto duly filled in and signed
and upon payment in cash or by check of the aggregate Stock Purchase Price for
the number of shares for which this Warrant is being exercised determined in
accordance with the provisions hereof. The Stock Purchase Price and the number
of shares purchasable hereunder are subject to adjustment as provided in Section
4 of this Warrant.
This Warrant is subject to the following terms and conditions:
1. Exercise; Issuance of Certificates; Payment for Shares
------------------------------------------------------
(a) Unless an election is made pursuant to clause (b) of this
Section 1, this Warrant shall be exercisable at the option of the
Holder, at any time or from time to time, on or before the Expiration
Date for all or any portion of
<PAGE>
the shares of Preferred Stock (but not for a fraction of a share) which may be
purchased hereunder for the Stock Purchase Price multiplied by the number of
shares to be purchased. In the event, however, that pursuant to the Company's
Certificate of Incorporation, as amended, an event causing automatic conversion
of the Company's Preferred Stock shall have occurred prior to the exercise of
this Warrant, in whole or in part, then this Warrant shall be exercisable for
the number of shares of Common Stock of the Company into which the Preferred
Stock not purchased upon any prior exercise of the Warrant would have been so
converted (and, where the context requires, reference to "Preferred Stock" shall
be deemed to include such Common Stock). The Company agrees that the shares of
Preferred Stock purchased under this Warrant shall be and are deemed to be
issued to the holder hereof as the record owner of such shares as of the close
of business on the date on which this Warrant shall have been surrendered and
payment made for such shares. Subject to the provisions of Section 2,
certificates for the shares of Preferred Stock so purchased, together with any
other securities or property to which the Holder hereof is entitled upon such
exercise, shall be delivered to the Holder hereof by the Company at the
Company's expense within a reasonable time after the rights represented by this
Warrant have been so exercised. Except as provided in clause (b) of this
Section 1, in case of a purchase of less than all the shares which may be
purchased under this Warrant, the Company shall cancel this Warrant and execute
and deliver a new Warrant or Warrants of like tenor for the balance of the
shares purchasable under the Warrant surrendered upon such purchase to the
Holder hereof within a reasonable time. Each stock certificate so delivered
shall be in such denominations of Preferred Stock as may be requested by the
Holder hereof and shall be registered in the name of such Holder or such other
name as shall be designated by such Holder, subject to the limitations contained
in Section 2.
(b) The Holder, in lieu of exercising this Warrant by the payment of
the Stock Purchase Price pursuant to clause (a) of this Section 1, may elect, at
any time on or before the Expiration Date, to receive that number of shares of
Preferred Stock equal to the quotient of: (i) the difference between (A) the Per
Share Price (as hereinafter defined) of the Preferred Stock, less (B) the Stock
Purchase Price then in effect, multiplied by the number of shares of Preferred
Stock the Holder would otherwise have been entitled to purchase hereunder
pursuant to clause (a) of this Section 1 (or such lesser number of shares as the
Holder may designate in the case of a partial exercise of this Warrant) ; over
(ii) the Per Share Price.
(c) For purposes of clause (b) of this Section 1, "Per Share Price"
means the product of: (A) the closing sale price of the Company's Common Stock
as quoted by NASDAQ or listed on any exchange, whichever is applicable, as
published in the Western Edition of The Wall Street Journal for the five (5)
trading days prior to the date of the Holder's election hereunder or, (B) if
exercised in connection with a registered public offering the gross sales price
of one share of the Company's Common Stock pursuant to a registered public
offering or if exercised in connection with a merger, reorganization or sale of
assets that amount which shareholders of the Company will receive for each share
of Common Stock pursuant to a merger, reorganization or sale of assets; and that
number of shares of Common Stock into which each share of Preferred Stock is
convertible or has been converted, as the case may be. If the Company's Common
Stock is not quoted by NASDAQ or listed on an exchange, the Per Share Price of
the Preferred Stock (or the equivalent number of shares of Common Stock into
which such Preferred Stock is convertible or has been converted, as the case may
be) shall be determined by the Board of Directors of the Company in its
reasonable good faith judgment. The foregoing notwithstanding, if Holder advises
the Board of Directors in writing that Holder disagrees with such determination,
then the Company and Holder shall promptly agree upon a reputable investment
banking firm to undertake such valuation. If the valuation of such investment
banking firm is more than ten percent (10%) greater than that determined by the
Board of Directors, then all fees and expenses of such investment banking firm
shall be paid by the Company. In all other circumstances, such fees
<PAGE>
FORM OF SUBSCRIPTION
--------------------
and expenses shall be paid by Holder.
2. Limitation on Transfer.
----------------------
(a) The Warrant and the Preferred Stock shall not be transferable
except upon the conditions specified in this Section 2, which conditions are
intended to insure compliance with the provisions of the Securities Act. Each
holder of this Warrant or the Preferred Stock issuable hereunder will cause any
proposed transferee of the Warrant or Preferred Stock to agree to take and hold
such securities subject to the provisions and upon the conditions specified in
this Section 2.
(b) Each certificate representing (i) this Warrant, (ii) the Preferred
Stock, (iii) shares of the Company's Common Stock issued upon conversion of the
Preferred Stock and (iv) any other securities issued in respect of the Preferred
Stock or Common Stock issued upon conversion of the Preferred Stock upon any
stock split, stock dividend, recapitalization, merger, consolidation or similar
event, shall (unless otherwise permitted by the provisions of this Section 2 or
unless such securities have been registered under the Securities Act or sold
under Rule 144) be stamped or otherwise imprinted with a legend substantially in
the following form (in addition to any legend required under applicable state
securities laws):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE
BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY
STATE SECURITIES LAWS. SUCH SECURITIES MAY NOT BE SOLD
OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR
AN EXEMPTION THEREFROM UNDER SAID ACT AND ANY
APPLICABLE STATE SECURITIES LAWS.
(c) The Holder of this Warrant and each person to whom this Warrant is
subsequently transferred makes the representations and warranties set forth in
Section 17 hereof and further represents and warrants to the Company (by
acceptance of such transfer) that it will not transfer the Warrant (or
securities issuable upon exercise hereof unless a registration statement under
the Securities Act was in effect with respect to such securities at the time of
issuance thereof) except pursuant to (i) an effective registration statement
under the Securities Act, (ii) Rule 144 under the Securities Act (or any other
rule under the Securities Act relating to the disposition of securities), or
(iii) an opinion of counsel, reasonably satisfactory to counsel for the Company,
that an exemption from such registration is available. The Company shall not be
obligated to process any transfer without documentation to the satisfaction of
the Company evidencing compliance with clauses (ii) or (iii) above.
3. Shares to be Fully Paid; Reservation of Shares. The Company covenants
----------------------------------------------
and agrees that all shares of Preferred Stock which may be issued upon the
exercise of the rights represented by this Warrant will, upon issuance, be duly
authorized, validly issued, fully paid and nonassessable and free from all
preemptive rights of any shareholder and free of all taxes, liens and charges
with respect to the issue thereof. The Company further covenants and agrees
that during the period within which the rights represented by this Warrant may
be exercised, the Company will at all times have authorized and reserved, for
the purpose of issue or transfer upon exercise of the subscription rights
evidenced by this Warrant, a sufficient number of shares of authorized but
unissued Preferred Stock, or other securities and property, when and as required
to provide for the exercise of the rights represented by this Warrant. The
Company will take all such action as may be necessary to assure that such shares
of Preferred Stock may be issued as provided herein without violation of any
applicable law or regulation, or of any requirements of any domestic securities
exchange upon which the Preferred Stock may be listed. The Company will not
take any action which would result in any adjustment of the Stock Purchase Price
(as defined in Section 4 hereof) (i) if the total number of shares of Preferred
Stock issuable after such action upon exercise of all outstanding
<PAGE>
warrants, together with all shares of Preferred Stock then outstanding and all
shares of Preferred Stock then issuable upon exercise of all options and upon
the conversion of all convertible securities then outstanding, would exceed the
total number of shares of Preferred Stock then authorized by the Company's
Articles of Incorporation, or (ii) if the total number of shares of Common Stock
issuable after such action upon the conversion of all such shares of Preferred
Stock together with all shares of Common Stock then outstanding and then
issuable upon exercise of all options and upon the conversion of all convertible
securities then outstanding would exceed the total number of shares of Common
Stock then authorized by the Company's Certificate of Incorporation.
4. Adjustment of Stock Purchase Price Number of Shares. The Stock
---------------------------------------------------
Purchase Price and the number of shares purchasable upon the exercise of this
Warrant shall be subject to adjustment from time to time upon the occurrence of
certain events described in this Section 4. Upon each adjustment of the Stock
Purchase Price the Holder of this Warrant shall thereafter be entitled to
purchase at the Stock Purchase Price resulting from such adjustment, the
number of shares obtained by multiplying the Stock Purchase Price in effect
immediately prior to such adjustment by the number of shares purchasable
pursuant hereto immediately prior to such adjustment, and dividing the product
thereof by the Stock Purchase Price resulting from such adjustment.
4.1 Subdivision or Combination of Stock. In case the Company shall
-----------------------------------
at any time subdivide its outstanding shares of Preferred Stock into a greater
number of shares, the Stock Purchase Price in effect immediately prior to such
subdivision shall be proportionately reduced, and conversely, in case the
outstanding shares of Preferred Stock of the Company shall be combined into a
smaller number of shares, the Stock Purchase Price in effect immediately prior
to such combination shall be proportionately increased.
4.2 Dividends in Preferred Stock. Other Stock. Property,
----------------------------------------------------
Reclassification. If at any time or from
- ----------------
time to time the holders of Preferred Stock (or any shares of stock or other
securities at the time receivable upon the exercise of this Warrant) shall have
received or become entitled to receive, without payment therefor,
(a) Preferred Stock, or any shares of stock or other securities
whether or not such securities are at any time directly or indirectly
convertible into or exchangeable for Preferred Stock, or any rights or options
to subscribe for, purchase or otherwise acquire any of the foregoing by way of
dividend or other distribution, or (b) any cash paid or payable otherwise than
as a cash dividend, or
(c) Preferred Stock or other or additional stock or other
securities or property (including cash) by way of spinoff, split-up,
reclassification, combination of shares or similar corporate rearrangement,
(other than shares of Preferred Stock issued as a stock split, adjustments in
respect of which shall be covered by the terms of Section 4.1 above)
then and in each such case, the Holder hereof shall, upon the exercise of this
Warrant, be entitled to receive, in addition to the number of shares of
Preferred Stock receivable thereupon, and without payment of any additional
consideration therefore, the amount of stock and other securities and property
(including cash in the cases referred to in clauses (b) and (c) above) which
such Holder would hold on the date of such exercise had he been the holder of
record of such Preferred Stock as of the date on which holders of Preferred
Stock received or became entitled to receive such shares and/or all other
additional stock and other securities and property.
4.3 Adjustment for Reclassifications. In case, at any time prior to
--------------------------------
the Expiration Date of this Warrant, the Company undertakes a capital
reorganization (other than a consolidation or merger), reclassification of its
capital stock or the consolidation or merger of the Company with or into another
corporation in which the stockholders (or former stockholders) of the Company
hold, immediately after the
<PAGE>
consummation of such merger or consolidation, a majority of the voting power of
the outstanding capital stock of the surviving corporation or any parent (a
"Control Merger") this Warrant shall, after such reorganization,
reclassification, consolidation or merger (a "Reclassification"), be exercisable
so that upon exercise the Holder shall procure, in lieu of each share of
Preferred stock, the kind and amount of shares of stock, other securities, money
or property receivable upon such Reclassification by the holder of one share
issuable upon exercise of this Warrant had this Warrant been exercised
immediately prior to such Reclassification at the price that would have been
effective prior to such Reclassification. The provisions of this Section 4.3
shall similarly apply to successive Reclassifications.
4.4 Notice of Adjustment. Upon any adjustment of the Stock Purchase
--------------------
Price, and/or any increase or decrease in the number of shares purchasable upon
the exercise of this Warrant the Company shall give written notice thereof, by
first class mail, postage prepaid, addressed to the registered holder of this
Warrant at the address of such holder as shown on the books of the Company. The
notice shall be signed by the Company's chief financial officer and shall state
the Stock Purchase Price resulting from such adjustment and the increase or
decrease, if any, in the number of shares purchasable at such price upon the
exercise of this Warrant, setting forth in reasonable detail the method of
calculation and the facts upon which such calculation is based.
4.5 Other Notices. If at any time:
(a) the Company shall declare any cash dividend upon its
Preferred Stock;
(b) the Company shall declare any dividend upon its Preferred
Stock payable in stock or make any special dividend or other distribution to the
holders of its Preferred Stock;
(c) the Company shall offer for subscription pro rata to the
holders of its Preferred Stock any additional shares of stock of any class or
other rights;
(d) there shall be any capital reorganization or reclassification
of the capital stock of the Company, or consolidation or merger of the Company
with, or sale of all or substantially all of its assets to, another corporation;
(e) there shall be a voluntary or involuntary dissolution,
liquidation or winding-up of the Company; or
(f) the Company shall take or propose to take any other action,
notice of which is actually provided to holders of the Preferred Stock;
then, in any one or more of said cases, the Company shall give, by first class
mail, postage prepaid, addressed to the holder of this Warrant at the address of
such holder as shown on the books of the Company, (i) at least 20 day's prior
written notice of the date on which the books of the Company shall close or a
record shall be taken for such dividend, distribution or subscription rights
(ii) in the case of any such reorganization, reclassification, consolidation,
merger, sale, dissolution, liquidation or winding- up, or other action, at least
20 day's written notice of the date when the same shall take place. Any notice
given in accordance with the foregoing clause (i) shall also specify, in the
case of any such dividend, distribution or subscription rights, the date on
which the holders of Preferred Stock shall be entitled thereto.
<PAGE>
5. Issue Tax. The issuance of certificates for shares of Preferred
---------
Stock upon the exercise of the Warrant shall be made without charge to the
Holder of the Warrant for any issue tax in respect thereof; provided, however,
that the Company shall not be required to pay any tax which may be payable in
respect of any transfer involved in the issuance and delivery of any certificate
in a name other than that of the then Holder of the Warrant being exercised.
6. Closing of Books. The Company will at no time close its transfer
----------------
books against the transfer of any Warrant or of any shares of Preferred Stock
issued or issuable upon the exercise of any warrant in any manner which
interferes with the timely exercise of this Warrant.
7 No Voting or Dividend Rights; Limitation of Liability. Nothing
-----------------------------------------------------
contained in this Warrant shall be construed as conferring upon the Holder
hereof the right to vote or to consent as a shareholder in respect of meetings
of shareholders for the election of directors of the Company or any other
matters or any rights whatsoever as a shareholder of the Company. No dividends
or interest shall be payable or accrued in respect of this Warrant or the
interest represented hereby or the shares purchasable hereunder until, and only
to the extent that, this Warrant shall have been exercised. No provisions
hereof, in the absence of affirmative action by the holder to purchase shares of
Preferred Stock, and no mere enumeration herein of the rights or privileges of
the Holder hereof, shall give rise to any liability of such Holder for the Stock
Purchase Price or as a shareholder of the Company, whether such liability is
asserted by the Company or by its creditors.
8. Intentionally Deleted.
9. Registration Rights. The Holder hereof shall be entitled, with respect
-------------------
to the shares of Preferred Stock issued upon exercise hereof or the shares of
Common Stock or other securities issued upon conversion of such Preferred Stock
as the case may be, to all of the registration rights set forth in the Investor
Rights Agreement dated as of May 6, 1996 to the same extent and on the same
terms and conditions as possessed by the Investors. The Company shall take such
action as may be reasonably necessary to assure that the granting of such
registration rights to the Holder does not violate the provisions of such
agreement or any of the Company's charter documents or rights of prior Grantees
of registration rights.
10. Rights and Obligations Survive Exercise of Warrant. The rights and
obligations of the Company, of the Holder of this Warrant and of the holder of
shares of Preferred Stock issued upon exercise of this Warrant, contained in
Sections 6 and 9 shall survive the exercise of this Warrant.
11. Modification and Waiver. This Warrant and any provision hereof may be
-----------------------
changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of the same is sought.
12. Notices. Any notice, request or other document required or permitted
-------
to be given or delivered to the holder hereof or the Company shall be deemed to
have been given (i) upon receipt if delivered personally or by courier (ii) upon
confirmation of receipt if by telecopy or (iii) three business days after
deposit in the US mail, with postage prepaid and certified or registered, to
each such holder at its address as shown on the books of the Company or to the
Company at the address indicated therefor in the first paragraph of this
Warrant.
13. Binding Effect on Successors. This Warrant shall be binding upon
----------------------------
2
<PAGE>
any corporation succeeding the Company in a Control Merger, consolidation or
acquisition of all or substantially all of the Company's assets. All of the
obligations of the Company relating to the Preferred Stock issuable upon the
exercise of this Warrant shall survive the exercise and termination of this
Warrant. All of the covenants and agreements of the Company shall inure to the
benefit of the successors and assign of the holder hereof. The Company will, at
the time of the exercise of this Warrant, in whole or in part, upon request of
the Holder hereof but at the Company's expense, acknowledge in writing its
continuing obligation to the Holder hereof in respect of any rights (including,
without limitation, any right to registration of the shares of Common Stock) to
which the holder hereof shall continue to be entitled after such exercise in
accordance with this Warrant; provided, that the failure of the holder hereof to
make any such request shall not affect the continuing obligation of the Company
to the Holder hereof in respect of such rights.
14. Descriptive Headings and Governing Law. The descriptive headings of
--------------------------------------
the several sections and paragraphs of this Warrant are inserted for convenience
only and do not constitute a part of this Warrant. This Warrant shall be
construed and enforced in accordance with, and the rights of the parties shall
be governed by, the laws of the State of California.
15. Lost Warrants or Stock Certificates. The company represents and
-----------------------------------
warrants to the Holder hereof that upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction, or mutilation of
any Warrant or stock certificate and, in the case of any such loss, theft or
destruction, upon receipt of an indemnity reasonably satisfactory to the
Company, or in the case of any such mutilation upon surrender and cancellation
of such Warrant or stock certificate, the Company at the expense of Holder will
make and deliver a new Warrant or stock certificate, of like tenor, in lieu of
the lost, stolen, destroyed or mutilated Warrant or stock certificate.
16. Fractional Shares. No fractional shares shall be issued upon exercise
-----------------
of this Warrant. The Company shall in lieu of issuing any fractional share, pay
the holder entitled to such fraction a sum in cash equal to such fraction
multiplied by the then effective Stock Purchase Price.
17. Representations of Holder. With respect to this Warrant, Holder
-------------------------
represents and warrants to the Company as follows:
17.1 Experience: It is experienced in evaluating and investing in
----------
companies engaged in businesses similar to that of the Company; it understands
that investment in the Warrant involves substantial risks; it has made detailed
inquiries concerning the Company, its business and services, its officers and
its personnel; the officers of the Company have made available to Holder any and
all written information it has requested; the officers of the Company have
answered to Holder's satisfaction all inquiries made by it; in making this
investment it has relied upon information made available to it by the Company;
and it has such knowledge and experience in financial and business matters that
it is capable of evaluating the merits and risks of investment in the Company
and it is able to bear the economic risk of that investment.
17.2 Investment. It is acquiring the Warrant for investment for its
----------
own account and not with a view to, or for resale in connection with, any
distribution thereof. It understands that the Warrant, the shares of Preferred
Stock issuable upon exercise thereof and the shares of Common Stock issuable
upon conversion of the Preferred Stock, have not been registered under the
Securities Act of 1933, as amended, nor qualified under applicable state
securities laws.
17.3 Rule 144. It acknowledges that the Warrant, the Preferred Stock
--------
and the Common Stock must be held indefinitely unless they are subsequently
registered under the Securities Act or an exemption from such registration is
available. It has been advised or is aware of the provisions of
<PAGE>
Rule 144 promulgated under the Securities Act.
17.4 Access to Data. It has had an opportunity to discuss the
--------------
Company's business, management and financial affairs with the Company's
management and has had the opportunity to inspect the Company's facilities.
18. Additional representations and Covenants of the Company. The Company
-------------------------------------------------------
hereby represents, warrants and agrees as follows:
18.1 Corporate Power. The Company has all requisite corporate power
---------------
and corporate authority to issue this Warrant and to carry out and perform its
obligations hereunder.
18.2 Authorization. All corporate action on the part of the Company,
-------------
its directors and shareholders necessary for the authorization, execution,
delivery and performance by the Company of this has been taken. This Warrant is
a valid and binding obligation of the Company, enforceable in accordance with
its terms.
18.3 Offering. Subject in part to the truth and accuracy of Holder's
--------
representations set forth in Section 17 hereof, the offer, issuance and sale of
the Warrant is, and the issuance of Preferred Stock upon exercise of the Warrant
and the issuance of Common Stock upon conversion of the Preferred Stock will be
exempt from the registration requirements of the Securities Act, and are exempt
from the qualification requirements of any applicable state securities laws; and
neither the Company nor anyone acting on its behalf will take any action
hereafter that would cause the loss of such exemptions.
18.4 Stock Issuance. Upon exercise of the Warrant, the Company will
--------------
use its best efforts to cause stock certificates representing the shares of
Preferred Stock purchased pursuant to the exercise to be issued in the
individual names of Holder, its nominees or assignees, as appropriate at the
time of such exercise. Upon conversion of the shares of Preferred Stock to
shares of Common Stock, the Company will issue the Common Stock in the
individual names of Holder, its nominees or assignees, as appropriate.
18.5 Articles and By-Laws. The Company has, or upon request will,
--------------------
provide Holder with true and complete copies of the Company's Certificate of
Incorporation, By-Laws, and each Certificate of Determination or other charter
document setting, forth any rights, preferences and privileges of Company's
capital stock, each as amended and in effect on the date of issuance of this
Warrant.
18.6 Conversion of Preferred Stock. As of the date hereof, each
-----------------------------
share of the Preferred Stock is convertible into one share of the Common Stock.
18.7 Financial and Other Reports. From time to time up to the
---------------------------
earlier of the Expiration Date or the complete exercise of this Warrant, the
Company shall furnish to Holder (i) within 120 days after the close of each
fiscal year of the Company an audited balance sheet and statement of changes in
financial position at and as of the end of such fiscal year, together with an
audited statement of income for such fiscal year; (ii) within 45 days after the
close of each fiscal quarter of the Company, an unaudited balance sheet and
statement of cash flows at and as of the end of such quarter, together with an
unaudited statement of income for such quarter; and (iii) promptly after
sending, making available, or filing, copies of all reports, proxy statements,
and financial statements that the Company sends or makes available to its
shareholders and all registration statements and reports that the Company files
with the SEC or any other governmental or regulatory authority.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed by its officers, thereunto duly authorized this 23 day of September,
1996.
TERRAPIN TECHNOLOGIES, INC.
By: /s/ Sharon Tetlow
Title: /s/ Chief Financial Officer
Accepted and Agreed:
By: /s/ Salvador O. Gutierrez
Title: /s/ President
<PAGE>
EXHIBIT 10.1
INDEMNITY AGREEMENT
This Agreement is made and entered into this ___ day of __________, 2000 by
and between Telik, Inc., a Delaware corporation (the "Corporation"), and
__________ ("Agent").
Recitals
Whereas, Agent performs a valuable service to the Corporation in __________
capacity as __________ of the Corporation;
Whereas, the stockholders of the Corporation have adopted bylaws (the
"Bylaws") providing for the indemnification of the directors, officers,
employees and other agents of the Corporation, including persons serving at the
request of the Corporation in such capacities with other corporations or
enterprises, as authorized by the Delaware General Corporation Law, as amended
(the "Code");
Whereas, the Bylaws and the Code, by their non-exclusive nature, permit
contracts between the Corporation and its agents, officers, employees and other
agents with respect to indemnification of such persons; and
Whereas, in order to induce Agent to continue to serve as __________ of the
Corporation, the Corporation has determined and agreed to enter into this
Agreement with Agent.
Now, Therefore, in consideration of Agent's continued service as __________
after the date hereof, the parties hereto agree as follows:
Agreement
1. Services to the Corporation. Agent will serve, at the will of the
Corporation or under separate contract, if any such contract exists, as
__________ of the Corporation or as a director, officer or other fiduciary of an
affiliate of the Corporation (including any employee benefit plan of the
Corporation) faithfully and to the best of [his] ability so long as [he] is duly
elected and qualified in accordance with the provisions of the Bylaws or other
applicable charter documents of the Corporation or such affiliate; provided,
however, that Agent may at any time and for any reason resign from such position
(subject to any contractual obligation that Agent may have assumed apart from
this Agreement) and that the Corporation or any affiliate shall have no
obligation under this Agreement to continue Agent in any such position.
2. Indemnity of Agent. The Corporation hereby agrees to hold harmless
and indemnify Agent to the fullest extent authorized or permitted by the
provisions of the Bylaws and the Code, as the same may be amended from time to
time (but, only to the extent that such amendment permits the Corporation to
provide broader indemnification rights than the Bylaws or the Code permitted
prior to adoption of such amendment).
1.
<PAGE>
3. Additional Indemnity. In addition to and not in limitation of the
indemnification otherwise provided for herein, and subject only to the
exclusions set forth in Section 4 hereof, the Corporation hereby further agrees
to hold harmless and indemnify Agent:
(a) against any and all expenses (including attorneys' fees), witness
fees, damages, judgments, fines and amounts paid in settlement and any other
amounts that Agent becomes legally obligated to pay because of any claim or
claims made against or by him in connection with any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, arbitrational,
administrative or investigative (including an action by or in the right of the
Corporation) to which Agent is, was or at any time becomes a party, or is
threatened to be made a party, by reason of the fact that Agent is, was or at
any time becomes a director, officer, employee or other agent of Corporation, or
is or was serving or at any time serves at the request of the Corporation as a
director, officer, employee or other agent of another corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise; and
(b) otherwise to the fullest extent as may be provided to Agent by
the Corporation under the non-exclusivity provisions of the Code and Section 42
of the Bylaws.
4. Limitations on Additional Indemnity. No indemnity pursuant to Section
3 hereof shall be paid by the Corporation:
(a) on account of any claim against Agent solely for an accounting of
profits made from the purchase or sale by Agent of securities of the Corporation
pursuant to the provisions of Section 16(b) of the Securities Exchange Act of
1934 and amendments thereto or similar provisions of any federal, state or local
statutory law;
(b) on account of Agent's conduct that is established by a final
judgment as knowingly fraudulent or deliberately dishonest or that constituted
willful misconduct;
(c) on account of Agent's conduct that is established by a final
judgment as constituting a breach of Agent's duty of loyalty to the Corporation
or resulting in any personal profit or advantage to which Agent was not legally
entitled;
(d) for which payment is actually made to Agent under a valid and
collectible insurance policy or under a valid and enforceable indemnity clause,
bylaw or agreement, except in respect of any excess beyond payment under such
insurance, clause, bylaw or agreement;
(e) if indemnification is not lawful (and, in this respect, both the
Corporation and Agent have been advised that the Securities and Exchange
Commission believes that indemnification for liabilities arising under the
federal securities laws is against public policy and is, therefore,
unenforceable and that claims for indemnification should be submitted to
appropriate courts for adjudication); or
(f) in connection with any proceeding (or part thereof) initiated by
Agent, or any proceeding by Agent against the Corporation or its directors,
officers, employees or other agents, unless (i) such indemnification is
expressly required to be made by law, (ii) the proceeding
2.
<PAGE>
was authorized by the Board of Directors of the Corporation, (iii) such
indemnification is provided by the Corporation, in its sole discretion, pursuant
to the powers vested in the Corporation under the Code, or (iv) the proceeding
is initiated pursuant to Section 9 hereof.
5. Continuation of Indemnity. All agreements and obligations of the
Corporation contained herein shall continue during the period Agent is a
director, officer, employee or other agent of the Corporation (or is or was
serving at the request of the Corporation as a director, officer, employee or
other agent of another corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise) and shall continue thereafter so long as Agent
shall be subject to any possible claim or threatened, pending or completed
action, suit or proceeding, whether civil, criminal, arbitrational,
administrative or investigative, by reason of the fact that Agent was serving in
the capacity referred to herein.
6. Partial Indemnification. Agent shall be entitled under this Agreement
to indemnification by the Corporation for a portion of the expenses (including
attorneys' fees), witness fees, damages, judgments, fines and amounts paid in
settlement and any other amounts that Agent becomes legally obligated to pay in
connection with any action, suit or proceeding referred to in Section 3 hereof
even if not entitled hereunder to indemnification for the total amount thereof,
and the Corporation shall indemnify Agent for the portion thereof to which Agent
is entitled.
7. Notification and Defense of Claim. Not later than thirty (30) days
after receipt by Agent of notice of the commencement of any action, suit or
proceeding, Agent will, if a claim in respect thereof is to be made against the
Corporation under this Agreement, notify the Corporation of the commencement
thereof; but the omission so to notify the Corporation will not relieve it from
any liability which it may have to Agent otherwise than under this Agreement.
With respect to any such action, suit or proceeding as to which Agent notifies
the Corporation of the commencement thereof:
(a) the Corporation will be entitled to participate therein at its
own expense;
(b) except as otherwise provided below, the Corporation may, at its
option and jointly with any other indemnifying party similarly notified and
electing to assume such defense, assume the defense thereof, with counsel
reasonably satisfactory to Agent. After notice from the Corporation to Agent of
its election to assume the defense thereof, the Corporation will not be liable
to Agent under this Agreement for any legal or other expenses subsequently
incurred by Agent in connection with the defense thereof except for reasonable
costs of investigation or otherwise as provided below. Agent shall have the
right to employ separate counsel in such action, suit or proceeding but the fees
and expenses of such counsel incurred after notice from the Corporation of its
assumption of the defense thereof shall be at the expense of Agent unless (i)
the employment of counsel by Agent has been authorized by the Corporation, (ii)
Agent shall have reasonably concluded, and so notified the Corporation, that
there is an actual conflict of interest between the Corporation and Agent in the
conduct of the defense of such action or (iii) the Corporation shall not in fact
have employed counsel to assume the defense of such action, in each of which
cases the fees and expenses of Agent's separate counsel shall be at the expense
of the Corporation. The Corporation shall not be entitled to assume the defense
of any action, suit or
3.
<PAGE>
proceeding brought by or on behalf of the Corporation or as to which Agent shall
have made the conclusion provided for in clause (ii) above; and
(c) the Corporation shall not be liable to indemnify Agent under this
Agreement for any amounts paid in settlement of any action or claim effected
without its written consent, which shall not be unreasonably withheld. The
Corporation shall be permitted to settle any action except that it shall not
settle any action or claim in any manner which would impose any penalty or
limitation on Agent without Agent's written consent, which may be given or
withheld in Agent's sole discretion.
8. Expenses. The Corporation shall advance, prior to the final
disposition of any proceeding, promptly following request therefor, all expenses
incurred by Agent in connection with such proceeding upon receipt of an
undertaking by or on behalf of Agent to repay said amounts if it shall be
determined ultimately that Agent is not entitled to be indemnified under the
provisions of this Agreement, the Bylaws, the Code or otherwise.
9. Enforcement. Any right to indemnification or advances granted by this
Agreement to Agent shall be enforceable by or on behalf of Agent in any court of
competent jurisdiction if (i) the claim for indemnification or advances is
denied, in whole or in part, or (ii) no disposition of such claim is made within
ninety (90) days of request therefor. Agent, in such enforcement action, if
successful in whole or in part, shall be entitled to be paid also the expense of
prosecuting his claim. It shall be a defense to any action for which a claim
for indemnification is made under Section 3 hereof (other than an action brought
to enforce a claim for expenses pursuant to Section 8 hereof, provided that the
required undertaking has been tendered to the Corporation) that Agent is not
entitled to indemnification because of the limitations set forth in Section 4
hereof. Neither the failure of the Corporation (including its Board of
Directors or its stockholders) to have made a determination prior to the
commencement of such enforcement action that indemnification of Agent is proper
in the circumstances, nor an actual determination by the Corporation (including
its Board of Directors or its stockholders) that such indemnification is
improper shall be a defense to the action or create a presumption that Agent is
not entitled to indemnification under this Agreement or otherwise.
10. Subrogation. In the event of payment under this Agreement, the
Corporation shall be subrogated to the extent of such payment to all of the
rights of recovery of Agent, who shall execute all documents required and shall
do all acts that may be necessary to secure such rights and to enable the
Corporation effectively to bring suit to enforce such rights.
11. Non-Exclusivity of Rights. The rights conferred on Agent by this
Agreement shall not be exclusive of any other right which Agent may have or
hereafter acquire under any statute, provision of the Corporation's Certificate
of Incorporation or Bylaws, agreement, vote of stockholders or directors, or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding office.
4.
<PAGE>
12. Survival of Rights.
(a) The rights conferred on Agent by this Agreement shall continue
after Agent has ceased to be a director, officer, employee or other agent of the
Corporation or to serve at the request of the Corporation as a director,
officer, employee or other agent of another corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise and shall inure to the
benefit of Agent's heirs, executors and administrators.
(b) The Corporation shall require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business or assets of the Corporation, expressly to
assume and agree to perform this Agreement in the same manner and to the same
extent that the Corporation would be required to perform if no such succession
had taken place.
13. Separability. Each of the provisions of this Agreement is a separate
and distinct agreement and independent of the others, so that if any provision
hereof shall be held to be invalid for any reason, such invalidity or
unenforceability shall not affect the validity or enforceability of the other
provisions hereof. Furthermore, if this Agreement shall be invalidated in its
entirety on any ground, then the Corporation shall nevertheless indemnify Agent
to the fullest extent provided by the Bylaws, the Code or any other applicable
law.
14. Governing Law. This Agreement shall be interpreted and enforced in
accordance with the laws of the State of Delaware.
15. Amendment and Termination. No amendment, modification, termination or
cancellation of this Agreement shall be effective unless in writing signed by
both parties hereto.
16. Identical Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall for all purposes be deemed to be an original
but all of which together shall constitute but one and the same Agreement. Only
one such counterpart need be produced to evidence the existence of this
Agreement.
17. Headings. The headings of the sections of this Agreement are inserted
for convenience only and shall not be deemed to constitute part of this
Agreement or to affect the construction hereof.
18. Notices. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given (i)
upon delivery if delivered by hand to the party to whom such communication was
directed or (ii) upon the third business day after the date on which such
communication was mailed if mailed by certified or registered mail with postage
prepaid:
(a) If to Agent, at the address indicated on the signature page
hereof.
5.
<PAGE>
(b) If to the Corporation, to:
Telik, Inc.
750 Gateway Blvd.
South San Francisco, CA 94080
Attn: Chief Financial Officer
or to such other address as may have been furnished to Agent by the Corporation.
In Witness Whereof, the parties hereto have executed this Agreement on and
as of the day and year first above written.
Telik, Inc.
By:________________________________
Title:_____________________________
Agent
___________________________________
Print Name:________________________
Address:
___________________________________
___________________________________
6.
<PAGE>
EXHIBIT 10.2
TELIK, INC. CORPORATION
2000 EQUITY INCENTIVE PLAN
Adopted March ____, 2000
Approved By Stockholders _______________, 20__
Termination Date: _______________, 20__
1. Purposes.
(a) Eligible Stock Award Recipients. The persons eligible to receive
Stock Awards are the Employees, Directors and Consultants of the Company and its
Affiliates.
(b) Available Stock Awards. The purpose of the Plan is to provide a
means by which eligible recipients of Stock Awards may be given an opportunity
to benefit from increases in value of the Common Stock through the granting of
the following Stock Awards: (i) Incentive Stock Options, (ii) Nonstatutory
Stock Options, (iii) stock bonuses and (iv) rights to acquire restricted stock.
(c) General Purpose. The Company, by means of the Plan, seeks to retain
the services of the group of persons eligible to receive Stock Awards, to secure
and retain the services of new members of this group and to provide incentives
for such persons to exert maximum efforts for the success of the Company and its
Affiliates.
2. Definitions.
(a) "Affiliate" means any parent corporation or subsidiary corporation
of the Company, whether now or hereafter existing, as those terms are defined in
Sections 424(e) and (f), respectively, of the Code.
(b) "Board" means the Board of Directors of the Company.
(c) "Code" means the Internal Revenue Code of 1986, as amended.
(d) "Committee" means a committee of one or more members of the Board
appointed by the Board in accordance with subsection 3(c).
(e) "Common Stock" means the common stock of the Company.
(f) "Company" means Telik, Inc., a Delaware corporation.
(g) "Consultant" means any person, including an advisor, (i) engaged by
the Company or an Affiliate to render consulting or advisory services and who is
compensated for such services or (ii) who is a member of the Board of Directors
of an Affiliate. However, the term "Consultant" shall not include either
Directors who are not compensated by the Company
1.
<PAGE>
for their services as Directors or Directors who are merely paid a director's
fee by the Company for their services as Directors.
(h) "Continuous Service" means that the Participant's service with the
Company or an Affiliate, whether as an Employee, Director or Consultant, is not
interrupted or terminated. The Participant's Continuous Service shall not be
deemed to have terminated merely because of a change in the capacity in which
the Participant renders service to the Company or an Affiliate as an Employee,
Consultant or Director or a change in the entity for which the Participant
renders such service, provided that there is no interruption or termination of
the Participant's service to the Company or an Affiliate. For example, a change
in status from an Employee of the Company to a Consultant of an Affiliate or a
Director will not constitute an interruption of Continuous Service. The Board
or the chief executive officer of the Company, in that party's sole discretion,
may determine whether Continuous Service shall be considered interrupted in the
case of any leave of absence approved by that party, including sick leave,
military leave or any other personal leave.
(i) "Covered Employee" means the chief executive officer and the four
(4) other highest compensated officers of the Company for whom total
compensation is required to be reported to stockholders under the Exchange Act,
as determined for purposes of Section 162(m) of the Code.
(j) "Director" means a member of the Board of Directors of the Company.
(k) "Disability" means the permanent and total disability of a person
within the meaning of Section 22(e)(3) of the Code.
(l) "Employee" means any person employed by the Company or an Affiliate.
Mere service as a Director or payment of a director's fee by the Company or an
Affiliate shall not be sufficient to constitute "employment" by the Company or
an Affiliate.
(m) "Exchange Act" means the Securities Exchange Act of 1934, as amended.
(n) "Fair Market Value" means, as of any date, the value of the Common
Stock determined as follows:
(i) If the Common Stock is listed on any established stock exchange
or traded on the Nasdaq National Market or the Nasdaq SmallCap Market, the Fair
Market Value of a share of Common Stock shall be the closing sales price for
such stock (or the closing bid, if no sales were reported) as quoted on such
exchange or market (or the exchange or market with the greatest volume of
trading in the Common Stock) on the last market trading day prior to the day of
determination, as reported in The Wall Street Journal or such other source as
the Board deems reliable.
(ii) In the absence of such markets for the Common Stock, the Fair
Market Value shall be determined in good faith by the Board.
2.
<PAGE>
(o) "Incentive Stock Option" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.
(p) "Non-Employee Director" means a Director who either (i) is not a
current Employee or Officer of the Company or its parent or a subsidiary, does
not receive compensation (directly or indirectly) from the Company or its parent
or a subsidiary for services rendered as a consultant or in any capacity other
than as a Director (except for an amount as to which disclosure would not be
required under Item 404(a) of Regulation S-K promulgated pursuant to the
Securities Act ("Regulation S-K")), does not possess an interest in any other
transaction as to which disclosure would be required under Item 404(a) of
Regulation S-K and is not engaged in a business relationship as to which
disclosure would be required under Item 404(b) of Regulation S-K; or (ii) is
otherwise considered a "non-employee director" for purposes of Rule 16b-3.
(q) "Nonstatutory Stock Option" means an Option not intended to qualify
as an Incentive Stock Option.
(r) "Officer" means a person who is an officer of the Company within the
meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
(s) "Option" means an Incentive Stock Option or a Nonstatutory Stock
Option granted pursuant to the Plan.
(t) "Option Agreement" means a written agreement between the Company and
an Optionholder evidencing the terms and conditions of an individual Option
grant. Each Option Agreement shall be subject to the terms and conditions of
the Plan.
(u) "Optionholder" means a person to whom an Option is granted pursuant
to the Plan or, if applicable, such other person who holds an outstanding
Option.
(v) "Outside Director" means a Director who either (i) is not a current
employee of the Company or an "affiliated corporation" (within the meaning of
Treasury Regulations promulgated under Section 162(m) of the Code), is not a
former employee of the Company or an "affiliated corporation" receiving
compensation for prior services (other than benefits under a tax qualified
pension plan), was not an officer of the Company or an "affiliated corporation"
at any time and is not currently receiving direct or indirect remuneration from
the Company or an "affiliated corporation" for services in any capacity other
than as a Director or (ii) is otherwise considered an "outside director" for
purposes of Section 162(m) of the Code.
(w) "Participant" means a person to whom a Stock Award is granted
pursuant to the Plan or, if applicable, such other person who holds an
outstanding Stock Award.
(x) "Plan" means this Telik, Inc. Corporation 2000 Equity Incentive Plan.
(y) "Rule 16b-3" means Rule 16b-3 promulgated under the Exchange Act or
any successor to Rule 16b-3, as in effect from time to time.
(z) "Securities Act" means the Securities Act of 1933, as amended.
3.
<PAGE>
(aa) "Stock Award" means any right granted under the Plan, including an
Option, a stock bonus and a right to acquire restricted stock.
(bb) "Stock Award Agreement" means a written agreement between the
Company and a holder of a Stock Award evidencing the terms and conditions of an
individual Stock Award grant. Each Stock Award Agreement shall be subject to
the terms and conditions of this Plan.
(cc) "Ten Percent Stockholder" means a person who owns (or is deemed to
own pursuant to Section 424(d) of the Code) stock possessing more than ten
percent (10%) of the total combined voting power of all classes of stock of the
Company or of any of its Affiliates.
3. Administration.
(a) Administration by Board. The Board shall administer the Plan unless
and until the Board delegates administration to a Committee, as provided in
subsection 3(c).
(b) Powers of Board. The Board shall have the power, subject to, and
within the limitations of, the express provisions of the Plan:
(i) To determine from time to time which of the persons eligible
under the Plan shall be granted Stock Awards; when and how each Stock Award
shall be granted; what type or combination of types of Stock Award shall be
granted; the provisions of each Stock Award granted (which need not be
identical), including the time or times when a person shall be permitted to
receive Common Stock pursuant to a Stock Award; and the number of shares of
Common Stock with respect to which a Stock Award shall be granted to each such
person.
(ii) To construe and interpret the Plan and Stock Awards granted
under it, and to establish, amend and revoke rules and regulations for its
administration. The Board, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan or in any Stock Award Agreement,
in a manner and to the extent it shall deem necessary or expedient to make the
Plan fully effective.
(iii) To amend the Plan or a Stock Award as provided in Section 13.
(iv) Generally, to exercise such powers and to perform such acts as
the Board deems necessary or expedient to promote the best interests of the
Company which are not in conflict with the provisions of the Plan.
(c) Delegation to Committee.
(i) General. The Board may delegate administration of the Plan to a
Committee or Committees of one (1) or more members of the Board, and the term
"Committee" shall apply to any person or persons to whom such authority has been
delegated. If administration is delegated to a Committee, the Committee shall
have, in connection with the administration of the Plan, the powers theretofore
possessed by the Board, including the power to delegate to a subcommittee any of
the administrative powers the Committee is authorized to exercise (and
references in this Plan to the Board shall thereafter be to the Committee or
subcommittee), subject, however, to such resolutions, not inconsistent with the
provisions of the
4.
<PAGE>
Plan, as may be adopted from time to time by the Board. The Board may abolish
the Committee at any time and revest in the Board the administration of the
Plan.
(ii) Committee Composition when Common Stock is Publicly Traded. At
such time as the Common Stock is publicly traded, in the discretion of the
Board, a Committee may consist solely of two or more Outside Directors, in
accordance with Section 162(m) of the Code, and/or solely of two or more Non-
Employee Directors, in accordance with Rule 16b-3. Within the scope of such
authority, the Board or the Committee may (1) delegate to a committee of one or
more members of the Board who are not Outside Directors the authority to grant
Stock Awards to eligible persons who are either (a) not then Covered Employees
and are not expected to be Covered Employees at the time of recognition of
income resulting from such Stock Award or (b) not persons with respect to whom
the Company wishes to comply with Section 162(m) of the Code and/or) (2)
delegate to a committee of one or more members of the Board who are not Non-
Employee Directors the authority to grant Stock Awards to eligible persons who
are not then subject to Section 16 of the Exchange Act.
(d) Effect of Board's Decision. All determinations, interpretations and
constructions made by the Board in good faith shall not be subject to review by
any person and shall be final, binding and conclusive on all persons.
4. Shares Subject to the Plan.
(a) Share Reserve. Subject to the provisions of Section 12 relating to
adjustments upon changes in Common Stock, the Common Stock that may be issued
pursuant to Stock Awards shall not exceed in the aggregate two million
(2,000,000) shares of Common Stock (the "Reserved Shares"). As of each January
1, beginning on January 1, 2001, and continuing through and including January 1,
2010, the number of Reserved Shares will be increased automatically by the least
of (i) five percent (5%) of the total number of shares of Common Stock
outstanding on such date, (ii) one million five hundred thousand (1,500,000)
shares or (iii) a number of shares determined by the Board prior to each January
1, which number shall be less than (i) and (ii) above.
(b) Reversion of Shares to the Share Reserve. If any Stock Award shall for
any reason expire or otherwise terminate, in whole or in part, without having
been exercised in full, the shares of Common Stock not acquired under such Stock
Award shall revert to and again become available for issuance under the Plan.
(c) Source of Shares. The shares of Common Stock subject to the Plan may
be unissued shares or reacquired shares, bought on the market or otherwise.
5. Eligibility.
(a) Eligibility for Specific Stock Awards. Incentive Stock Options may
be granted only to Employees. Stock Awards other than Incentive Stock Options
may be granted to Employees, Directors and Consultants.
(b) Ten Percent Stockholders. A Ten Percent Stockholder shall not be
granted an Incentive Stock Option unless the exercise price of such Option is at
least one hundred ten
5.
<PAGE>
percent (110%) of the Fair Market Value of the Common Stock at the date of grant
and the Option is not exercisable after the expiration of five (5) years from
the date of grant.
(c) Section 162(m) Limitation. Subject to the provisions of Section 12
relating to adjustments upon changes in the shares of Common Stock, no Employee
shall be eligible to be granted Options covering more than one million
(1,000,000) shares of Common Stock during any calendar year.
(d) Consultants.
(i) A Consultant shall not be eligible for the grant of a Stock Award
if, at the time of grant, a Form S-8 Registration Statement under the Securities
Act ("Form S-8") is not available to register either the offer or the sale of
the Company's securities to such Consultant because of the nature of the
services that the Consultant is providing to the Company, or because the
Consultant is not a natural person, or as otherwise provided by the rules
governing the use of Form S-8, unless the Company determines both (i) that such
grant (A) shall be registered in another manner under the Securities Act (e.g.,
on a Form S-3 Registration Statement) or (B) does not require registration under
the Securities Act in order to comply with the requirements of the Securities
Act, if applicable, and (ii) that such grant complies with the securities laws
of all other relevant jurisdictions.
(ii) Form S-8 generally is available to consultants and advisors only
if (i) they are natural persons; (ii) they provide bona fide services to the
issuer, its parents, its majority-owned subsidiaries or majority-owned
subsidiaries of the issuer's parent; and (iii) the services are not in
connection with the offer or sale of securities in a capital-raising
transaction, and do not directly or indirectly promote or maintain a market for
the issuer's securities.
6. Option Provisions.
Each Option shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate. All Options shall be separately
designated Incentive Stock Options or Nonstatutory Stock Options at the time of
grant, and, if certificates are issued, a separate certificate or certificates
will be issued for shares of Common Stock purchased on exercise of each type of
Option. The provisions of separate Options need not be identical, but each
Option shall include (through incorporation of provisions hereof by reference in
the Option or otherwise) the substance of each of the following provisions:
(a) Term. Subject to the provisions of subsection 5(b) regarding Ten
Percent Stockholders, no Incentive Stock Option shall be exercisable after the
expiration of ten (10) years from the date it was granted.
(b) Exercise Price of an Incentive Stock Option. Subject to the provisions
of subsection 5(b) regarding Ten Percent Stockholders, the exercise price of
each Incentive Stock Option shall be not less than one hundred percent (100%) of
the Fair Market Value of the Common Stock subject to the Option on the date the
Option is granted. Notwithstanding the foregoing, an Incentive Stock Option may
be granted with an exercise price lower than that set forth in the preceding
sentence if such Option is granted pursuant to an assumption or
6.
<PAGE>
substitution for another option in a manner satisfying the provisions of Section
424(a) of the Code.
(c) Exercise Price of a Nonstatutory Stock Option. The exercise price of
each Nonstatutory Stock Option shall be not less than eighty-five percent (85%)
of the Fair Market Value of the Common Stock subject to the Option on the date
the Option is granted. Notwithstanding the foregoing, a Nonstatutory Stock
Option may be granted with an exercise price lower than that set forth in the
preceding sentence if such Option is granted pursuant to an assumption or
substitution for another option in a manner satisfying the provisions of Section
424(a) of the Code.
(d) Consideration. The purchase price of Common Stock acquired pursuant
to an Option shall be paid, to the extent permitted by applicable statutes and
regulations, either (i) in cash at the time the Option is exercised or (ii) at
the discretion of the Board at the time of the grant of the Option (or
subsequently in the case of a Nonstatutory Stock Option) (1) by delivery to the
Company of other Common Stock, (2) according to a deferred payment or other
similar arrangement with the Optionholder or (3) in any other form of legal
consideration that may be acceptable to the Board. Unless otherwise
specifically provided in the Option, the purchase price of Common Stock acquired
pursuant to an Option that is paid by delivery to the Company of other Common
Stock acquired, directly or indirectly from the Company, shall be paid only by
shares of the Common Stock of the Company that have been held for more than six
(6) months (or such longer or shorter period of time required to avoid a charge
to earnings for financial accounting purposes). At any time that the Company is
incorporated in Delaware, payment of the Common Stock's "par value," as defined
in the Delaware General Corporation Law, shall not be made by deferred payment.
In the case of any deferred payment arrangement, interest shall be
compounded at least annually and shall be charged at the minimum rate of
interest necessary to avoid the treatment as interest, under any applicable
provisions of the Code, of any amounts other than amounts stated to be interest
under the deferred payment arrangement.
(e) Transferability of an Incentive Stock Option. An Incentive Stock
Option shall not be transferable except by will or by the laws of descent and
distribution and shall be exercisable during the lifetime of the Optionholder
only by the Optionholder. Notwithstanding the foregoing, the Optionholder may,
by delivering written notice to the Company, in a form satisfactory to the
Company, designate a third party who, in the event of the death of the
Optionholder, shall thereafter be entitled to exercise the Option.
(f) Transferability of a Nonstatutory Stock Option. A Nonstatutory Stock
Option shall be transferable to the extent provided in the Option Agreement. If
the Nonstatutory Stock Option does not provide for transferability, then the
Nonstatutory Stock Option shall not be transferable except by will or by the
laws of descent and distribution and shall be exercisable during the lifetime of
the Optionholder only by the Optionholder. Notwithstanding the foregoing, the
Optionholder may, by delivering written notice to the Company, in a form
satisfactory to the Company, designate a third party who, in the event of the
death of the Optionholder, shall thereafter be entitled to exercise the Option.
7.
<PAGE>
(g) Vesting Generally. The total number of shares of Common Stock subject
to an Option may, but need not, vest and therefore become exercisable in
periodic installments that may, but need not, be equal. The Option may be
subject to such other terms and conditions on the time or times when it may be
exercised (which may be based on performance or other criteria) as the Board may
deem appropriate. The vesting provisions of individual Options may vary. The
provisions of this subsection 6(g) are subject to any Option provisions
governing the minimum number of shares of Common Stock as to which an Option may
be exercised.
(h) Termination of Continuous Service. In the event an Optionholder's
Continuous Service terminates (other than upon the Optionholder's death or
Disability), the Optionholder may exercise his or her Option (to the extent that
the Optionholder was entitled to exercise such Option as of the date of
termination) but only within such period of time ending on the earlier of (i)
the date three (3) months following the termination of the Optionholder's
Continuous Service (or such longer or shorter period specified in the Option
Agreement), or (ii) the expiration of the term of the Option as set forth in the
Option Agreement. If, after termination, the Optionholder does not exercise his
or her Option within the time specified in the Option Agreement, the Option
shall terminate.
(i) Extension of Termination Date. An Optionholder's Option Agreement may
also provide that if the exercise of the Option following the termination of the
Optionholder's Continuous Service (other than upon the Optionholder's death or
Disability) would be prohibited at any time solely because the issuance of
shares of Common Stock would violate the registration requirements under the
Securities Act, then the Option shall terminate on the earlier of (i) the
expiration of the term of the Option set forth in subsection 6(a) or (ii) the
expiration of a period of three (3) months after the termination of the
Optionholder's Continuous Service during which the exercise of the Option would
not be in violation of such registration requirements.
(j) Disability of Optionholder. In the event that an Optionholder's
Continuous Service terminates as a result of the Optionholder's Disability, the
Optionholder may exercise his or her Option (to the extent that the Optionholder
was entitled to exercise such Option as of the date of termination), but only
within such period of time ending on the earlier of (i) the date twelve (12)
months following such termination (or such longer or shorter period specified in
the Option Agreement) or (ii) the expiration of the term of the Option as set
forth in the Option Agreement. If, after termination, the Optionholder does not
exercise his or her Option within the time specified herein, the Option shall
terminate.
(k) Death of Optionholder. In the event (i) an Optionholder's Continuous
Service terminates as a result of the Optionholder's death or (ii) the
Optionholder dies within the period (if any) specified in the Option Agreement
after the termination of the Optionholder's Continuous Service for a reason
other than death, then the Option may be exercised (to the extent the
Optionholder was entitled to exercise such Option as of the date of death) by
the Optionholder's estate, by a person who acquired the right to exercise the
Option by bequest or inheritance or by a person designated to exercise the
Option upon the Optionholder's death pursuant to subsection 6(e) or 6(f), but
only within the period ending on the earlier of (1) the date twelve (12) months
following the date of death (or such longer or shorter period specified in the
Option Agreement) or (2) the expiration of the term of such Option as set forth
in the Option
8.
<PAGE>
Agreement. If, after death, the Option is not exercised within the time
specified herein, the Option shall terminate.
(l) Early Exercise. The Option may, but need not, include a provision
whereby the Optionholder may elect at any time before the Optionholder's
Continuous Service terminates to exercise the Option as to any part or all of
the shares of Common Stock subject to the Option prior to the full vesting of
the Option. Any unvested shares of Common Stock so purchased may be subject to a
repurchase option in favor of the Company or to any other restriction the Board
determines to be appropriate. The Company will not exercise its repurchase
option until at least six (6) months (or such longer or shorter period of time
required to avoid a charge to earnings for financial accounting purposes) have
elapsed following exercise of the Option unless the Board otherwise specifically
provides in the Option.
7. Provisions of Stock Awards other than Options.
(a) Stock Bonus Awards. Each stock bonus agreement shall be in such form
and shall contain such terms and conditions as the Board shall deem appropriate.
The terms and conditions of stock bonus agreements may change from time to time,
and the terms and conditions of separate stock bonus agreements need not be
identical, but each stock bonus agreement shall include (through incorporation
of provisions hereof by reference in the agreement or otherwise) the substance
of each of the following provisions:
(i) Consideration. A stock bonus may be awarded in consideration for
past services actually rendered to the Company or an Affiliate for its benefit.
(ii) Vesting. Shares of Common Stock awarded under the stock bonus
agreement may, but need not, be subject to a share repurchase option in favor of
the Company in accordance with a vesting schedule to be determined by the Board.
(iii) Termination of Participant's Continuous Service. In the event a
Participant's Continuous Service terminates, the Company may reacquire any or
all of the shares of Common Stock held by the Participant which have not vested
as of the date of termination under the terms of the stock bonus agreement.
(iv) Transferability. Rights to acquire shares of Common Stock under
the stock bonus agreement shall be transferable by the Participant only upon
such terms and conditions as are set forth in the stock bonus agreement, as the
Board shall determine in its discretion, so long as Common Stock awarded under
the stock bonus agreement remains subject to the terms of the stock bonus
agreement.
(b) Restricted Stock Awards. Each restricted stock purchase agreement
shall be in such form and shall contain such terms and conditions as the Board
shall deem appropriate. The terms and conditions of the restricted stock
purchase agreements may change from time to time, and the terms and conditions
of separate restricted stock purchase agreements need not be identical, but each
restricted stock purchase agreement shall include (through incorporation of
provisions hereof by reference in the agreement or otherwise) the substance of
each of the following provisions:
9.
<PAGE>
(i) Purchase Price. The purchase price under each restricted stock
purchase agreement shall be such amount as the Board shall determine and
designate in such restricted stock purchase agreement. The purchase price shall
not be less than eighty-five percent (85%) of the Common Stock's Fair Market
Value on the date such award is made or at the time the purchase is consummated.
(ii) Consideration. The purchase price of Common Stock acquired
pursuant to the restricted stock purchase agreement shall be paid either: (i) in
cash at the time of purchase; (ii) at the discretion of the Board, according to
a deferred payment or other similar arrangement with the Participant; or (iii)
in any other form of legal consideration that may be acceptable to the Board in
its discretion; provided, however, that at any time that the Company is
incorporated in Delaware, then payment of the Common Stock's "par value," as
defined in the Delaware General Corporation Law, shall not be made by deferred
payment.
(iii) Vesting. Shares of Common Stock acquired under the restricted
stock purchase agreement may, but need not, be subject to a share repurchase
option in favor of the Company in accordance with a vesting schedule to be
determined by the Board.
(iv) Termination of Participant's Continuous Service. In the event a
Participant's Continuous Service terminates, the Company may repurchase or
otherwise reacquire any or all of the shares of Common Stock held by the
Participant which have not vested as of the date of termination under the terms
of the restricted stock purchase agreement.
(v) Transferability. Rights to acquire shares of Common Stock under
the restricted stock purchase agreement shall be transferable by the Participant
only upon such terms and conditions as are set forth in the restricted stock
purchase agreement, as the Board shall determine in its discretion, so long as
Common Stock awarded under the restricted stock purchase agreement remains
subject to the terms of the restricted stock purchase agreement.
8. Covenants of the Company.
(a) Availability of Shares. During the terms of the Stock Awards, the
Company shall keep available at all times the number of shares of Common Stock
required to satisfy such Stock Awards.
(b) Securities Law Compliance. The Company shall seek to obtain from
each regulatory commission or agency having jurisdiction over the Plan such
authority as may be required to grant Stock Awards and to issue and sell shares
of Common Stock upon exercise of the Stock Awards; provided, however, that this
undertaking shall not require the Company to register under the Securities Act
the Plan, any Stock Award or any Common Stock issued or issuable pursuant to any
such Stock Award. If, after reasonable efforts, the Company is unable to obtain
from any such regulatory commission or agency the authority which counsel for
the Company deems necessary for the lawful issuance and sale of Common Stock
under the Plan, the Company shall be relieved from any liability for failure to
issue and sell Common Stock upon exercise of such Stock Awards unless and until
such authority is obtained.
10.
<PAGE>
9. Use of Proceeds from Stock.
Proceeds from the sale of Common Stock pursuant to Stock Awards shall
constitute general funds of the Company.
10. Miscellaneous.
(a) Acceleration of Exercisability and Vesting. The Board shall have the
power to accelerate the time at which a Stock Award may first be exercised or
the time during which a Stock Award or any part thereof will vest in accordance
with the Plan, notwithstanding the provisions in the Stock Award stating the
time at which it may first be exercised or the time during which it will vest.
(b) Stockholder Rights. No Participant shall be deemed to be the holder
of, or to have any of the rights of a holder with respect to, any shares of
Common Stock subject to such Stock Award unless and until such Participant has
satisfied all requirements for exercise of the Stock Award pursuant to its
terms.
(c) No Employment or Other Service Rights. Nothing in the Plan or any
instrument executed or Stock Award granted pursuant thereto shall confer upon
any Participant any right to continue to serve the Company or an Affiliate in
the capacity in effect at the time the Stock Award was granted or shall affect
the right of the Company or an Affiliate to terminate (i) the employment of an
Employee with or without notice and with or without cause, (ii) the service of a
Consultant pursuant to the terms of such Consultant's agreement with the Company
or an Affiliate or (iii) the service of a Director pursuant to the Bylaws of the
Company or an Affiliate, as applicable, and any applicable provisions of the
corporate law of the state in which the Company or the Affiliate is
incorporated, as the case may be.
(d) Incentive Stock Option $100,000 Limitation. To the extent that the
aggregate Fair Market Value (determined at the time of grant) of Common Stock
with respect to which Incentive Stock Options are exercisable for the first time
by any Optionholder during any calendar year (under all plans of the Company and
its Affiliates) exceeds one hundred thousand dollars ($100,000), the Options or
portions thereof which exceed such limit (according to the order in which they
were granted) shall be treated as Nonstatutory Stock Options.
(e) Investment Assurances. The Company may require a Participant, as a
condition of exercising or acquiring Common Stock under any Stock Award, (i) to
give written assurances satisfactory to the Company as to the Participant's
knowledge and experience in financial and business matters and/or to employ a
purchaser representative reasonably satisfactory to the Company who is
knowledgeable and experienced in financial and business matters and that he or
she is capable of evaluating, alone or together with the purchaser
representative, the merits and risks of exercising the Stock Award; and (ii) to
give written assurances satisfactory to the Company stating that the Participant
is acquiring Common Stock subject to the Stock Award for the Participant's own
account and not with any present intention of selling or otherwise distributing
the Common Stock. The foregoing requirements, and any assurances given pursuant
to such requirements, shall be inoperative if (1) the issuance of the shares of
Common Stock upon the exercise or acquisition of Common Stock under the Stock
Award has been registered
11.
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under a then currently effective registration statement under the Securities Act
or (2) as to any particular requirement, a determination is made by counsel for
the Company that such requirement need not be met in the circumstances under the
then applicable securities laws. The Company may, upon advice of counsel to the
Company, place legends on stock certificates issued under the Plan as such
counsel deems necessary or appropriate in order to comply with applicable
securities laws, including, but not limited to, legends restricting the transfer
of the Common Stock.
(f) Withholding Obligations. To the extent provided by the terms of a
Stock Award Agreement, the Participant may satisfy any federal, state or local
tax withholding obligation relating to the exercise or acquisition of Common
Stock under a Stock Award by any of the following means (in addition to the
Company's right to withhold from any compensation paid to the Participant by the
Company) or by a combination of such means: (i) tendering a cash payment; (ii)
authorizing the Company to withhold shares of Common Stock from the shares of
Common Stock otherwise issuable to the Participant as a result of the exercise
or acquisition of Common Stock under the Stock Award, provided, however, that no
shares of Common Stock are withheld with a value exceeding the minimum amount of
tax required to be withheld by law; or (iii) delivering to the Company owned and
unencumbered shares of Common Stock.
11. Adjustments upon Changes in Stock.
(a) Capitalization Adjustments. If any change is made in the Common Stock
subject to the Plan, or subject to any Stock Award, without the receipt of
consideration by the Company (through merger, consolidation, reorganization,
recapitalization, reincorporation, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange of
shares, change in corporate structure or other transaction not involving the
receipt of consideration by the Company), the Plan will be appropriately
adjusted in the class(es) and maximum number of securities subject to the Plan
pursuant to subsection 4(a) and the maximum number of securities subject to
award to any person pursuant to subsection 5(c), and the outstanding Stock
Awards will be appropriately adjusted in the class(es) and number of securities
and price per share of Common Stock subject to such outstanding Stock Awards.
The Board shall make such adjustments, and its determination shall be final,
binding and conclusive. (The conversion of any convertible securities of the
Company shall not be treated as a transaction "without receipt of consideration"
by the Company.)
(b) Dissolution or Liquidation. In the event of a dissolution or
liquidation of the Company, then all outstanding Stock Awards shall terminate
immediately prior to such event.
(c) Change in Control. In the event of a Change in Control, any surviving
corporation or acquiring corporation may assume any Stock Awards outstanding
under the Plan or substitute similar stock awards (including awards to acquire
the same consideration paid to the stockholders pursuant to the Change in
Control) for those outstanding under the Plan. In the event any surviving
corporation or acquiring corporation does not assume such Stock Awards or
substitute similar stock awards for those outstanding under the Plan, then with
respect to Stock Awards held by Participants whose Continuous Service has not
terminated, the vesting of such Stock Awards (and, if applicable, the time
during which such Stock Awards may be exercised) shall be accelerated in full,
and the Stock Awards shall terminate if not exercised (if applicable)
12.
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at or prior to such event. With respect to any other Stock Awards outstanding
under the Plan, such Stock Awards shall terminate if not exercised (if
applicable) prior to such event.
For purposes of the Plan, "Change in Control" means (i) a sale, lease or
other disposition of all or substantially all of the securities or assets of the
Company, (ii) a merger or consolidation following which the Company is not the
surviving corporation or (iii) a reverse merger in which the Company is the
surviving corporation but the Common Stock outstanding immediately preceding the
merger is converted by virtue of the merger into other property, whether in the
form of securities, cash or otherwise.
12. Amendment of the Plan and Stock Awards.
(a) Amendment of Plan. The Board at any time, and from time to time, may
amend the Plan. However, except as provided in Section 12 relating to
adjustments upon changes in Common Stock, no amendment shall be effective unless
approved by the stockholders of the Company to the extent stockholder approval
is necessary to satisfy the requirements of Section 422 of the Code, Rule 16b-3
or any Nasdaq or securities exchange listing requirements.
(b) Stockholder Approval. The Board may, in its sole discretion, submit
any other amendment to the Plan for stockholder approval, including, but not
limited to, amendments to the Plan intended to satisfy the requirements of
Section 162(m) of the Code and the regulations thereunder regarding the
exclusion of performance-based compensation from the limit on corporate
deductibility of compensation paid to certain executive officers.
(c) Contemplated Amendments. It is expressly contemplated that the Board
may amend the Plan in any respect the Board deems necessary or advisable to
provide eligible Employees with the maximum benefits provided or to be provided
under the provisions of the Code and the regulations promulgated thereunder
relating to Incentive Stock Options and/or to bring the Plan and/or Incentive
Stock Options granted under it into compliance therewith.
(d) No Impairment of Rights. Rights under any Stock Award granted before
amendment of the Plan shall not be impaired by any amendment of the Plan unless
(i) the Company requests the consent of the Participant and (ii) the Participant
consents in writing.
(e) Amendment of Stock Awards. The Board at any time, and from time to
time, may amend the terms of any one or more Stock Awards; provided, however,
that the rights under any Stock Award shall not be impaired by any such
amendment unless (i) the Company requests the consent of the Participant and
(ii) the Participant consents in writing.
13. Termination or Suspension of the Plan.
(a) Plan Term. The Board may suspend or terminate the Plan at any time.
Unless sooner terminated, the Plan shall terminate on the day before the tenth
(10th) anniversary of the date the Plan is adopted by the Board or approved by
the stockholders of the Company, whichever is earlier. No Stock Awards may be
granted under the Plan while the Plan is suspended or after it is terminated.
13.
<PAGE>
(b) No Impairment of Rights. Suspension or termination of the Plan shall
not impair rights and obligations under any Stock Award granted while the Plan
is in effect except with the written consent of the Participant.
14. Effective Date of Plan.
The Plan shall become effective as determined by the Board, but no Stock
Award shall be exercised (or, in the case of a stock bonus, shall be granted)
unless and until the Plan has been approved by the stockholders of the Company,
which approval shall be within twelve (12) months before or after the date the
Plan is adopted by the Board.
15. Choice of Law.
The law of the State of Delaware shall govern all questions concerning the
construction, validity and interpretation of this Plan, without regard to such
state's conflict of laws rules.
14.
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TELIK, INC.
2000 EQUITY INCENTIVE PLAN
STOCK OPTION AGREEMENT
(INCENTIVE AND NONSTATUTORY STOCK OPTIONS)
Pursuant to your Stock Option Grant Notice ("Grant Notice") and this Stock
Option Agreement, Telik, Inc. (the "Company") has granted you an option under
its 2000 Equity Incentive Plan (the "Plan") to purchase the number of shares of
the Company's Common Stock indicated in your Grant Notice at the exercise price
indicated in your Grant Notice. Defined terms not explicitly defined in this
Stock Option Agreement but defined in the Plan shall have the same definitions
as in the Plan.
The details of your option are as follows:
1. Vesting. Subject to the limitations contained herein, your option
will vest as provided in your Grant Notice, provided that vesting will cease
upon the termination of your Continuous Service.
2. Number of Shares and Exercise Price. The number of shares of Common
Stock subject to your option and your exercise price per share referenced in
your Grant Notice may be adjusted from time to time for capitalization
adjustments, as described in Section 11(a) of the Plan.
3. Exercise prior to Vesting ("Early Exercise"). If permitted in your
Grant Notice (i.e., the "Exercise Schedule" indicates that "Early Exercise" of
your option is permitted) and subject to the provisions of your option, you may
elect at any time that is both (i) during the period of your Continuous Service
and (ii) during the term of your option, to exercise all or part of your option,
including the nonvested portion of your option; provided, however, that:
(a) a partial exercise of your option shall be deemed to cover first
vested shares of Common Stock and then the earliest vesting installment of
unvested shares of Common Stock;
(b) any shares of Common Stock so purchased from installments that
have not vested as of the date of exercise shall be subject to the purchase
option in favor of the Company as described in the Company's form of Early
Exercise Stock Purchase Agreement;
(c) you shall enter into the Company's form of Early Exercise
Stock Purchase Agreement with a vesting schedule that will result in the same
vesting as if no early exercise had occurred; and
(d) if your option is an incentive stock option, then, as provided in
the Plan, to the extent that the aggregate Fair Market Value (determined at the
time of grant) of the shares of Common Stock with respect to which your option
plus all other incentive stock options you hold are exercisable for the first
time by you during any calendar year (under all plans of the
1.
<PAGE>
Company and its Affiliates) exceeds one hundred thousand dollars ($100,000),
your option(s) or portions thereof that exceed such limit (according to the
order in which they were granted) shall be treated as nonstatutory stock
options.
4. Method of Payment. Payment of the exercise price is due in full upon
exercise of all or any part of your option. You may elect to make payment of the
exercise price in cash or by check or in any other manner permitted by your
Grant Notice, which may include one or more of the following:
(a) In the Company's sole discretion at the time your option is
exercised and provided that at the time of exercise the Common Stock is publicly
traded and quoted regularly in The Wall Street Journal, pursuant to a program
developed under Regulation T as promulgated by the Federal Reserve Board that,
prior to the issuance of Common Stock, results in either the receipt of cash (or
check) by the Company or the receipt of irrevocable instructions to pay the
aggregate exercise price to the Company from the sales proceeds.
(b) Provided that at the time of exercise the Common Stock is
publicly traded and quoted regularly in The Wall Street Journal, by delivery of
already-owned shares of Common Stock either that you have held for the period
required to avoid a charge to the Company's reported earnings (generally six
months) or that you did not acquire, directly or indirectly from the Company,
that are owned free and clear of any liens, claims, encumbrances or security
interests, and that are valued at Fair Market Value on the date of exercise.
"Delivery" for these purposes, in the sole discretion of the Company at the time
you exercise your option, shall include delivery to the Company of your
attestation of ownership of such shares of Common Stock in a form approved by
the Company. Notwithstanding the foregoing, you may not exercise your option by
tender to the Company of Common Stock to the extent such tender would violate
the provisions of any law, regulation or agreement restricting the redemption of
the Company's stock.
5. Whole Shares. You may exercise your option only for whole shares of
Common Stock.
6. Securities Law Compliance. Notwithstanding anything to the contrary
contained herein, you may not exercise your option unless the shares of Common
Stock issuable upon such exercise are then registered under the Securities Act
or, if such shares of Common Stock are not then so registered, the Company has
determined that such exercise and issuance would be exempt from the registration
requirements of the Securities Act. The exercise of your option must also comply
with other applicable laws and regulations governing your option, and you may
not exercise your option if the Company determines that such exercise would not
be in material compliance with such laws and regulations.
7. Term. You may not exercise your option before the commencement of its
term or after its term expires. The term of your option commences on the Date of
Grant and expires upon the earliest of the following:
(a) immediately upon the termination of your Continuous Service for
Cause;
2.
<PAGE>
(b) three (3) months after the termination of your Continuous Service
for any reason other than Cause, Disability or death, provided that if during
any part of such three- (3) month period you may not exercise your option solely
because of the condition set forth in the preceding paragraph relating to
"Securities Law Compliance," your option shall not expire until the earlier of
the Expiration Date or until it shall have been exercisable for an aggregate
period of three (3) months after the termination of your Continuous Service;
(c) twelve (12) months after the termination of your Continuous
Service due to your Disability;
(d) twelve (12) months after your death if you die either during your
Continuous Service or within three (3) months after your Continuous Service
terminates for reason other than Cause;
(e) the Expiration Date indicated in your Grant Notice; or
(f) the day before the tenth (10th) anniversary of the Date of Grant.
For purposes of your option, "Cause" means your misconduct, including but
not limited to: (i) your conviction of any felony or any crime involving moral
turpitude or dishonesty, (ii) your participation in a fraud or act of dishonesty
against the Company, (iii) your conduct that, based upon a good faith and
reasonable factual investigation and determination by the Board, demonstrates
your gross unfitness to serve, or (iv) your intentional, material violation of
any contract between the Company and you or any statutory duty of yours to the
Company that you do not correct within thirty (30) days after written notice to
you thereof. Your physical or mental disability shall not constitute "Cause."
If your option is an incentive stock option, note that, to obtain the
federal income tax advantages associated with an "incentive stock option," the
Code requires that at all times beginning on the date of grant of your option
and ending on the day three (3) months before the date of your option's
exercise, you must be an employee of the Company or an Affiliate, except in the
event of your death or Disability. The Company has provided for extended
exercisability of your option under certain circumstances for your benefit but
cannot guarantee that your option will necessarily be treated as an "incentive
stock option" if you continue to provide services to the Company or an Affiliate
as a Consultant or Director after your employment terminates or if you otherwise
exercise your option more than three (3) months after the date your employment
terminates.
8. Exercise.
(a) You may exercise the vested portion of your option (and the
unvested portion of your option if your Grant Notice so permits) during its term
by delivering a Notice of Exercise (in a form designated by the Company)
together with the exercise price to the Secretary of the Company, or to such
other person as the Company may designate, during regular business hours,
together with such additional documents as the Company may then require.
(b) By exercising your option you agree that, as a condition to any
exercise of your option, the Company may require you to enter into an
arrangement providing for the
3.
<PAGE>
payment by you to the Company of any tax withholding obligation of the Company
arising by reason of (1) the exercise of your option, (2) the lapse of any
substantial risk of forfeiture to which the shares of Common Stock are subject
at the time of exercise, or (3) the disposition of shares of Common Stock
acquired upon such exercise.
(c) If your option is an incentive stock option, by exercising your
option you agree that you will notify the Company in writing within fifteen (15)
days after the date of any disposition of any of the shares of the Common Stock
issued upon exercise of your option that occurs within two (2) years after the
date of your option grant or within one (1) year after such shares of Common
Stock are transferred upon exercise of your option.
9. Transferability. Your option is not transferable, except by will or by
the laws of descent and distribution, and is exercisable during your life only
by you. Notwithstanding the foregoing, by delivering written notice to the
Company, in a form satisfactory to the Company, you may designate a third party
who, in the event of your death, shall thereafter be entitled to exercise your
option.
10. Right of First Refusal. Shares of Common Stock that you acquire upon
exercise of your option are subject to any right of first refusal that may be
described in the Company's bylaws in effect at such time the Company elects to
exercise its right. The Company's right of first refusal shall expire on the
Listing Date.
11. Right of Repurchase. To the extent provided in the Company's bylaws
as amended from time to time, the Company shall have the right to repurchase all
or any part of the shares of Common Stock you acquire pursuant to the exercise
of your option.
12. Option not a Service Contract. Your option is not an employment or
service contract, and nothing in your option shall be deemed to create in any
way whatsoever any obligation on your part to continue in the employ of the
Company or an Affiliate, or of the Company or an Affiliate to continue your
employment. In addition, nothing in your option shall obligate the Company or an
Affiliate, their respective shareholders, Boards of Directors, Officers or
Employees to continue any relationship that you might have as a Director or
Consultant for the Company or an Affiliate.
13. Withholding Obligations.
(a) At the time you exercise your option, in whole or in part, or at
any time thereafter as requested by the Company, you hereby authorize
withholding from payroll and any other amounts payable to you, and otherwise
agree to make adequate provision for (including by means of a "cashless
exercise" pursuant to a program developed under Regulation T as promulgated by
the Federal Reserve Board to the extent permitted by the Company), any sums
required to satisfy the federal, state, local and foreign tax withholding
obligations of the Company or an Affiliate, if any, which arise in connection
with your option.
(b) Upon your request and subject to approval by the Company, in its
sole discretion, and compliance with any applicable conditions or restrictions
of law, the Company may withhold from fully vested shares of Common Stock
otherwise issuable to you upon the exercise of your option a number of whole
shares of Common Stock having a Fair Market Value,
4.
<PAGE>
determined by the Company as of the date of exercise, not in excess of the
minimum amount of tax required to be withheld by law. If the date of
determination of any tax withholding obligation is deferred to a date later than
the date of exercise of your option, share withholding pursuant to the preceding
sentence shall not be permitted unless you make a proper and timely election
under Section 83(b) of the Code, covering the aggregate number of shares of
Common Stock acquired upon such exercise with respect to which such
determination is otherwise deferred, to accelerate the determination of such tax
withholding obligation to the date of exercise of your option. Notwithstanding
the filing of such election, shares of Common Stock shall be withheld solely
from fully vested shares of Common Stock determined as of the date of exercise
of your option that are otherwise issuable to you upon such exercise. Any
adverse consequences to you arising in connection with such share withholding
procedure shall be your sole responsibility.
(c) You may not exercise your option unless the tax withholding
obligations of the Company and/or any Affiliate are satisfied. Accordingly, you
may not be able to exercise your option when desired even though your option is
vested, and the Company shall have no obligation to issue a certificate for such
shares of Common Stock or release such shares of Common Stock from any escrow
provided for herein.
14. Notices. Any notices provided for in your option or the Plan shall be
given in writing and shall be deemed effectively given upon receipt or, in the
case of notices delivered by mail by the Company to you, five (5) days after
deposit in the United States mail, postage prepaid, addressed to you at the last
address you provided to the Company.
15. Governing Plan Document. Your option is subject to all the provisions
of the Plan, the provisions of which are hereby made a part of your option, and
is further subject to all interpretations, amendments, rules and regulations
which may from time to time be promulgated and adopted pursuant to the Plan. In
the event of any conflict between the provisions of your option and those of the
Plan, the provisions of the Plan shall control.
5.
<PAGE>
TELIK, INC.
STOCK OPTION GRANT NOTICE
(2000 EQUITY INCENTIVE PLAN)
Telik, Inc. (the "Company"), pursuant to its 2000 Equity Incentive Plan (the
"Plan"), hereby grants to Optionholder an option to purchase the number of
shares of the Company's Common Stock set forth below. This option is subject to
all of the terms and conditions as set forth herein and in the Stock Option
Agreement, the Plan and the Notice of Exercise, all of which are attached hereto
and incorporated herein in their entirety.
Optionholder: ______________________________
Date of Grant: ______________________________
Vesting Commencement Date: ______________________________
Number of Shares Subject to Option: ______________________________
Exercise Price (Per Share): ______________________________
Total Exercise Price: ______________________________
Expiration Date: ______________________________
Type of Grant: [_] Incentive Stock Option [_] Nonstatutory Stock Option
Exercise Schedule: [_] Same as Vesting Schedule [_] Early Exercise Permitted
Vesting Schedule: 1/4/th/ of the shares vest one year after the Vesting
Commencement Date.
1/48/th/ of the shares vest monthly thereafter over the
next three years.
Payment: By one or a combination of the following items (described
in the Stock Option Agreement):
By cash or check
Pursuant to a Regulation T Program if the Shares
are publicly traded
By delivery of already-owned shares if the Shares
are publicly traded
Additional Terms/Acknowledgements: The undersigned Optionholder acknowledges
receipt of, and understands and agrees to, this Grant Notice, the Stock Option
Agreement and the Plan. Optionholder further acknowledges that as of the Date of
Grant, this Grant Notice, the Stock Option Agreement and the Plan set forth the
entire understanding between Optionholder and the Company regarding the
acquisition of stock in the Company and supersede all prior oral and written
agreements on that subject with the exception of (i) options previously granted
and delivered to Optionholder under the Plan, and (ii) the following agreements
only:
Other Agreements: ________________________________________
________________________________________
Telik, Inc. Optionholder
By:__________________________________ ___________________________________
Signature Signature
Title:_______________________________ Date:______________________________
Date:________________________________
Attachments: Stock Option Agreement, 2000 Equity Incentive Plan and Notice of
Exercise
<PAGE>
Attachment I
STOCK OPTION AGREEMENT
<PAGE>
Attachment II
2000 EQUITY INCENTIVE PLAN
<PAGE>
Attachment III
NOTICE OF EXERCISE
<PAGE>
NOTICE OF EXERCISE
Telik, Inc.
750 Gateway Blvd.
South San Francisco, CA 94080
Attn: Chief Financial Officer Date of Exercise: _______________
Ladies and Gentlemen:
This constitutes notice under my stock option that I elect to purchase the
number of shares for the price set forth below.
<TABLE>
<CAPTION>
Type of option (check one): Incentive [_] Nonstatutory [_]
<S> <C> <C>
Stock option dated: _______________
Number of shares as
to which option is
exercised: _______________
Certificates to be
issued in name of: _______________
Total exercise price: $______________
Cash payment delivered
herewith: $______________
Value of ________ shares of
Telik, Inc. common
stock delivered herewith/1/: $______________
</TABLE>
By this exercise, I agree (i) to provide such additional documents as you
may require pursuant to the terms of the 2000 Equity Incentive Plan, (ii) to
provide for the payment by me to you (in the manner designated by you) of your
withholding obligation, if any, relating to the exercise of this option, and
(iii) if this exercise relates to an incentive stock option, to notify you in
writing within fifteen (15) days after the date of any disposition of any of the
shares of Common Stock issued upon exercise of this option that occurs within
two (2) years after the date
_____________________
/1/ Shares must meet the public trading requirements set forth in the option.
Shares must be valued in accordance with the terms of the option being
exercised, must have been owned for the minimum period required in the option,
and must be owned free and clear of any liens, claims, encumbrances or security
interests. Certificates must be endorsed or accompanied by an executed
assignment separate from certificate.
1
<PAGE>
of grant of this option or within one (1) year after such shares of Common Stock
are issued upon exercise of this option.
Very truly yours,
_______________________________
2.
<PAGE>
EXHIBIT 10.3
Telik, Inc.
2000 Employee Stock Purchase Plan
Adopted by Board of Directors March ____ , 2000
Approved by Stockholders _______________ , 2000
Termination Date: None
1. Purpose.
(a) The purpose of the Plan is to provide a means by which Employees of the
Company and certain designated Affiliates may be given an opportunity to
purchase common stock of the Company (the "Common Stock").
(b) The Company, by means of the Plan, seeks to retain the services of such
Employees, to secure and retain the services of new Employees and to provide
incentives for such persons to exert maximum efforts for the success of the
Company and its Affiliates.
(c) The Company intends that the Rights to purchase Common Stock granted
under the Plan be considered options issued under an "employee stock purchase
plan," as that term is defined in Section 423(b) of the Code.
2. Definitions.
(a) "Affiliate" means any parent corporation or subsidiary corporation,
whether now or hereafter existing, as those terms are defined in Sections 424(e)
and (f), respectively, of the Code.
(b) "Board" means the Board of Directors of the Company.
(c) "Code" means the United States Internal Revenue Code of 1986, as
amended.
(d) "Committee" means a Committee appointed by the Board in accordance with
subparagraph 3(c) of the Plan.
(e) "Company" means Telik, Inc., a Delaware corporation.
(f) "Director" means a member of the Board.
(g) "Eligible Employee" means an Employee who meets the requirements set
forth in the Offering for eligibility to participate in the Offering.
(h) "Employee" means any person, including Officers and Directors, employed
by the Company or an Affiliate of the Company. Neither service as a Director nor
payment of a director's fee shall be sufficient to constitute "employment" by
the Company or the Affiliate.
1.
<PAGE>
(i) "Employee Stock Purchase Plan" means a plan that grants rights intended to
be options issued under an "employee stock purchase plan," as that term is
defined in Section 423(b) of the Code.
(j) "Exchange Act" means the United States Securities Exchange Act of 1934, as
amended.
(k) "Fair Market Value" means the value of a security, as determined in good
faith by the Board. If the security is listed on any established stock exchange
or traded on the Nasdaq National Market or the Nasdaq SmallCap Market, then,
except as otherwise provided in the Offering, the Fair Market Value of the
security shall be the closing sales price (rounded up where necessary to the
nearest whole cent) for such security (or the closing bid, if no sales were
reported) as quoted on such exchange or market (or the exchange or market with
the greatest volume of trading in the relevant security of the Company) on the
trading day prior to the relevant determination date, as reported in The Wall
Street Journal or such other source as the Board deems reliable.
(l) "Non-Employee Director" means a Director who either (i) is not a current
Employee or Officer of the Company or its parent or subsidiary, does not receive
compensation (directly or indirectly) from the Company or its parent or
subsidiary for services rendered as a consultant or in any capacity other than
as a Director (except for an amount as to which disclosure would not be required
under Item 404(a) of Regulation S-K promulgated pursuant to the Securities Act
("Regulation S-K")), does not possess an interest in any other transaction as to
which disclosure would be required under Item 404(a) of Regulation S-K, and is
not engaged in a business relationship as to which disclosure would be required
under Item 404(b) of Regulation S-K; or (ii) is otherwise considered a "non-
employee director" for purposes of Rule 16b-3.
(m) "Offering" means the grant of Rights to purchase Common Stock under the
Plan to Eligible Employees.
(n) "Offering Date" means a date selected by the Board for an Offering to
commence.
(o) "Outside Director" means a Director who either (i) is not a current
employee of the Company or an "affiliated corporation" (within the meaning of
the Treasury regulations promulgated under Section 162(m) of the Code), is not a
former employee of the Company or an "affiliated corporation" receiving
compensation for prior services (other than benefits under a tax qualified
pension plan), was not an officer of the Company or an "affiliated corporation"
at any time, and is not currently receiving direct or indirect remuneration from
the Company or an "affiliated corporation" for services in any capacity other
than as a Director, or (ii) is otherwise considered an "outside director" for
purposes of Section 162(m) of the Code.
(p) "Participant" means an Eligible Employee who holds an outstanding Right
granted pursuant to the Plan or, if applicable, such other person who holds an
outstanding Right granted under the Plan.
(q) "Plan" means this 2000 Employee Stock Purchase Plan.
2.
<PAGE>
(r) "Purchase Date" means one or more dates established by the Board during
an Offering on which Rights granted under the Plan shall be exercised and
purchases of Common Stock carried out in accordance with such Offering.
(s) "Right" means an option to purchase Common Stock granted pursuant to
the Plan.
(t) "Rule 16b-3" means Rule 16b-3 of the Exchange Act or any successor to
Rule 16b-3 as in effect with respect to the Company at the time discretion is
being exercised regarding the Plan.
(u) "Securities Act" means the United States Securities Act of 1933, as
amended.
3. Administration.
(a) The Board shall administer the Plan unless and until the Board
delegates administration to a Committee, as provided in subparagraph 3(c).
Whether or not the Board has delegated administration, the Board shall have the
final power to determine all questions of policy and expediency that may arise
in the administration of the Plan.
(b) The Board (or the Committee) shall have the power, subject to, and
within the limitations of, the express provisions of the Plan:
(i) To determine when and how Rights to purchase Common Stock shall
be granted and the provisions of each Offering of such Rights (which need not be
identical).
(ii) To designate from time to time which Affiliates of the Company
shall be eligible to participate in the Plan.
(iii) To construe and interpret the Plan and Rights granted under it,
and to establish, amend and revoke rules and regulations for its administration.
The Board, in the exercise of this power, may correct any defect, omission or
inconsistency in the Plan, in a manner and to the extent it shall deem necessary
or expedient to make the Plan fully effective.
(iv) To amend the Plan as provided in paragraph 14.
(v) To terminate or suspend the Plan as provided in paragraph 16.
(vi) Generally, to exercise such powers and to perform such acts as
it deems necessary or expedient to promote the best interests of the Company and
its Affiliates and to carry out the intent that the Plan be treated as an
Employee Stock Purchase Plan.
(c) The Board may delegate administration of the Plan to a Committee of the
Board composed of two (2) or more members, all of the members of which Committee
may be, in the discretion of the Board, Non-Employee Directors and/or Outside
Directors. If administration is delegated to a Committee, the Committee shall
have, in connection with the administration of the Plan, the powers theretofore
possessed by the Board, including the power to delegate to a subcommittee of two
(2) or more Outside Directors any of the administrative powers the
3.
<PAGE>
Committee is authorized to exercise (and references in this Plan to the Board
shall thereafter be to the Committee or such a subcommittee), subject, however,
to such resolutions, not inconsistent with the provisions of the Plan, as may be
adopted from time to time by the Board. The Board may abolish the Committee at
any time and revest in the Board the administration of the Plan.
4. Common Stock Subject to the Plan.
(a) Subject to the provisions of paragraph 13 relating to adjustments upon
changes in securities, the Common Stock that may be sold pursuant to Rights
granted under the Plan shall not exceed in the aggregate two hundred fifty
thousand (250,000) shares (the "Reserved Shares"). As of each January 1,
starting with January 1, 2001 and continuing through and including January 1,
2010, the number of Reserved Shares will be automatically increased by the least
of (i) one percent (1%) of the total number of shares of Common Stock
outstanding on such date, (ii) one hundred fifty thousand (150,000) shares or
(iii) a number determined by the Board. If any Right granted under the Plan
shall for any reason terminate without having been exercised, the Common Stock
not purchased under such Right shall again become available for the Plan.
(b) The Common Stock subject to the Plan may be unissued shares or shares
that have been bought on the open market at prevailing market prices or
otherwise.
5. Grant of Rights; Offering.
(a) The Board may from time to time grant or provide for the grant of
Rights to purchase Common Stock of the Company under the Plan to Eligible
Employees in an Offering on an Offering Date or Dates selected by the Board.
Each Offering shall be in such form and shall contain such terms and conditions
as the Board shall deem appropriate, which shall comply with the requirements of
Section 423(b)(5) of the Code that all Employees granted Rights to purchase
Common Stock under the Plan shall have the same rights and privileges. The terms
and conditions of an Offering shall be incorporated by reference into the Plan
and treated as part of the Plan. The provisions of separate Offerings need not
be identical, but each Offering shall include (through incorporation of the
provisions of this Plan by reference in the document comprising the Offering or
otherwise) the period during which the Offering shall be effective, which period
shall not exceed twenty-seven (27) months beginning with the Offering Date, and
the substance of the provisions contained in paragraphs 6 through 9, inclusive.
(b) If a Participant has more than one Right outstanding under the Plan,
unless he or she otherwise indicates in agreements or notices delivered
hereunder: (i) each agreement or notice delivered by that Participant will be
deemed to apply to all of his or her Rights under the Plan, and (ii) an earlier-
granted Right (or a Right with a lower exercise price, if two Rights have
identical grant dates) will be exercised to the fullest possible extent before a
later-granted Right (or a Right with a higher exercise price if two Rights have
identical grant dates) will be exercised.
6. Eligibility.
(a) Rights may be granted only to Employees of the Company or, as the Board
may designated as provided in subparagraph 3(b), to Employees of an Affiliate.
4.
<PAGE>
(i) Except as provided in subparagraph 6(b), an Employee shall not
be eligible to be granted Rights under the Plan unless, on the Offering Date,
such Employee has been in the employ of the Company or the Affiliate, as the
case may be, for such continuous period preceding such grant as the Board may
require in the Offering, but in no event shall the required period of continuous
employment be equal to or greater than two (2) years.
(ii) The Board may provide in an Offering that Employees whose
customary employment is twenty (20) hours or less per week shall not be eligible
to participate.
(iii) The Board may provide in an Offering that Employees whose
customary employment is for not more than five (5) months in any calendar year
shall not be eligible to participate.
(iv) The Board may provide in an Offering that Employees who are
highly compensated Employees within the meaning of Section 423(b)(4)(D) of the
Code shall not be eligible to participate.
(b) The Board may provide that each person who, during the course of an
Offering, first becomes an Eligible Employee will, on a date or dates specified
in the Offering which coincides with the day on which such person becomes an
Eligible Employee or which occurs thereafter, receive a Right under that
Offering, which Right shall thereafter be deemed to be a part of that Offering.
Such Right shall have the same characteristics as any Rights originally granted
under that Offering, as described herein, except that:
(i) the date on which such Right is granted shall be the "Offering
Date" of such Right for all purposes, including determination of the exercise
price of such Right;
(ii) the period of the Offering with respect to such Right shall
begin on its Offering Date and end coincident with the end of such Offering; and
(iii) the Board may provide that if such person first becomes an
Eligible Employee within a specified period of time before the end of the
Offering, he or she will not receive any Right under that Offering.
(c) No Employee shall be eligible for the grant of any Rights under the
Plan if, immediately after any such Rights are granted, such Employee owns stock
possessing five percent (5%) or more of the total combined voting power or value
of all classes of stock of the Company or of any Affiliate. For purposes of this
subparagraph 6(c), the rules of Section 424(d) of the Code shall apply in
determining the stock ownership of any Employee, and stock which such Employee
may purchase under all outstanding rights and options shall be treated as stock
owned by such Employee.
(d) An Eligible Employee may be granted Rights under the Plan only if such
Rights, together with any other Rights granted under all Employee Stock Purchase
Plans of the Company and any Affiliates, as specified by Section 423(b)(8) of
the Code, do not permit such Eligible Employee's rights to purchase common stock
of the Company or any Affiliate to accrue at a rate which exceeds twenty five
thousand dollars ($25,000) of the fair market value of such common
5.
<PAGE>
stock (determined at the time such Rights are granted) for each calendar year in
which such Rights are outstanding at any time.
7. Rights; Purchase Price.
(a) On each Offering Date, each Eligible Employee, pursuant to an Offering
made under the Plan, shall be granted the Right to purchase up to the number of
Shares purchasable either:
(i) with a percentage designated by the Board not exceeding fifteen
percent (15%) of such Employee's Earnings (as defined by the Board in each
Offering) during the period which begins on the Offering Date (or such later
date as the Board determines for a particular Offering) and ends on the date
stated in the Offering, which date shall be no later than the end of the
Offering; or
(ii) with a maximum dollar amount designated by the Board that, as
the Board determines for a particular Offering, (1) shall be withheld, in whole
or in part, from such Employee's Earnings (as defined by the Board in each
Offering) during the period which begins on the Offering Date (or such later
date as the Board determines for a particular Offering) and ends on the date
stated in the Offering, which date shall be no later than the end of the
Offering and/or (2) shall be contributed, in whole or in part, by such Employee
during such period.
(b) The Board shall establish one or more Purchase Dates during an Offering
on which Rights granted under the Plan shall be exercised and purchases of
Common Stock carried out in accordance with such Offering.
(c) In connection with each Offering made under the Plan, the Board may
specify a maximum number of shares of Common Stock that may be purchased by any
Participant as well as a maximum aggregate number of shares of Common Stock that
may be purchased by all Participants pursuant to such Offering. In addition, in
connection with each Offering that contains more than one Purchase Date, the
Board may specify a maximum aggregate number of shares of Common Stock that may
be purchased by all Participants on any given Purchase Date under the Offering.
If the aggregate purchase of Common Stock upon exercise of Rights granted under
the Offering would exceed any such maximum aggregate amount, the Board shall
make a pro rata allocation of the Common Stock available in as nearly a uniform
manner as shall be practicable and as it shall deem to be equitable.
(d) The purchase price of Common Stock acquired pursuant to Rights granted
under the Plan shall be not less than the lesser of:
(i) an amount equal to eighty-five percent (85%) of the fair market
value of the Common Stock on the Offering Date; or
(ii) an amount equal to eighty-five percent (85%) of the fair market
value of the Common Stock on the Purchase Date.
6.
<PAGE>
8. Participation; Withdrawal; Termination.
(a) An Eligible Employee may become a Participant in the Plan pursuant to
an Offering by delivering a participation agreement to the Company within the
time specified in the Offering, in such form as the Company provides. Each such
agreement shall authorize payroll deductions of up to the maximum percentage
specified by the Board of such Employee's Earnings during the Offering (as
defined in each Offering). The payroll deductions made for each Participant
shall be credited to a bookkeeping account for such Participant under the Plan
and either may be deposited with the general funds of the Company or may be
deposited in a separate account in the name of, and for the benefit of, such
Participant with a financial institution designated by the Company. To the
extent provided in the Offering, a Participant may reduce (including to zero) or
increase such payroll deductions. To the extent provided in the Offering, a
Participant may begin such payroll deductions after the beginning of the
Offering. A Participant may make additional payments into his or her account
only if specifically provided for in the Offering and only if the Participant
has not already had the maximum permitted amount withheld during the Offering.
(b) At any time during an Offering, a Participant may terminate his or her
payroll deductions under the Plan and withdraw from the Offering by delivering
to the Company a notice of withdrawal in such form as the Company provides.
Such withdrawal may be elected at any time prior to the end of the Offering
except as provided by the Board in the Offering. Upon such withdrawal from the
Offering by a Participant, the Company shall distribute to such Participant all
of his or her accumulated payroll deductions (reduced to the extent, if any,
such deductions have been used to acquire Common Stock for the Participant)
under the Offering, without interest unless otherwise specified in the Offering,
and such Participant's interest in that Offering shall be automatically
terminated. A Participant's withdrawal from an Offering will have no effect
upon such Participant's eligibility to participate in any other Offerings under
the Plan but such Participant will be required to deliver a new participation
agreement in order to participate in subsequent Offerings under the Plan.
(c) Rights granted pursuant to any Offering under the Plan shall terminate
immediately upon cessation of any participating Employee's employment with the
Company or a designated Affiliate for any reason (subject to any post-employment
participation period required by law) or other lack of eligibility. The Company
shall distribute to such terminated Employee all of his or her accumulated
payroll deductions (reduced to the extent, if any, such deductions have been
used to acquire Common Stock for the terminated Employee) under the Offering,
without interest unless otherwise specified in the Offering. If the accumulated
payroll deductions have been deposited with the Company's general funds, then
the distribution shall be made from the general funds of the Company, without
interest. If the accumulated payroll deductions have been deposited in a
separate account with a financial institution as provided in subparagraph 8(a),
then the distribution shall be made from the separate account, without interest
unless otherwise specified in the Offering.
(d) Rights granted under the Plan shall not be transferable by a
Participant otherwise than by will or the laws of descent and distribution, or
by a beneficiary designation as provided in paragraph 15 and, otherwise during
his or her lifetime, shall be exercisable only by the person to whom such Rights
are granted.
7.
<PAGE>
9. Exercise.
(a) On each Purchase Date specified therefor in the relevant Offering, each
Participant's accumulated payroll deductions and other additional payments
specifically provided for in the Offering (without any increase for interest)
will be applied to the purchase of Common Stock up to the maximum number of
shares permitted pursuant to the terms of the Plan and the applicable Offering,
at the purchase price specified in the Offering. No fractional shares shall be
issued upon the exercise of Rights granted under the Plan unless specifically
provided for in the Offering.
(b) Unless otherwise specifically provided in the Offering, the amount, if
any, of accumulated payroll deductions remaining in any Participant's account
after the purchase of Common Stock that is equal to the amount required to
purchase one or more whole shares on the final Purchase Date of the Offering
shall be distributed in full to the Participant at the end of the Offering,
without interest. If the accumulated payroll deductions have been deposited with
the Company's general funds, then the distribution shall be made from the
general funds of the Company, without interest. If the accumulated payroll
deductions have been deposited in a separate account with a financial
institution as provided in subparagraph 8(a), then the distribution shall be
made from the separate account, without interest unless otherwise specified in
the Offering.
(c) No Rights granted under the Plan may be exercised to any extent unless
the Common Stock to be issued upon such exercise under the Plan (including
Rights granted thereunder) are covered by an effective registration statement
pursuant to the Securities Act and the Plan is in material compliance with all
applicable state, foreign and other securities and other laws applicable to the
Plan. If on a Purchase Date in any Offering hereunder the Plan is not so
registered or in such compliance, no Rights granted under the Plan or any
Offering shall be exercised on such Purchase Date, and the Purchase Date shall
be delayed until the Plan is subject to such an effective registration statement
and such compliance, except that the Purchase Date shall not be delayed more
than twelve (12) months and the Purchase Date shall in no event be more than
twenty-seven (27) months from the Offering Date. If, on the Purchase Date of any
Offering hereunder, as delayed to the maximum extent permissible, the Plan is
not registered and in such compliance, no Rights granted under the Plan or any
Offering shall be exercised and all payroll deductions accumulated during the
Offering (reduced to the extent, if any, such deductions have been used to
acquire Common Stock) shall be distributed to the Participants, without interest
unless otherwise specified in the Offering. If the accumulated payroll
deductions have been deposited with the Company's general funds, then the
distribution shall be made from the general funds of the Company, without
interest. If the accumulated payroll deductions have been deposited in a
separate account with a financial institution as provided in subparagraph 8(a),
then the distribution shall be made from the separate account, without interest
unless otherwise specified in the Offering.
10. Covenants of the Company.
(a) During the terms of the Rights granted under the Plan, the Company
shall ensure that the number of shares of Common Stock required to satisfy such
Rights are available.
8.
<PAGE>
(b) The Company shall seek to obtain from each federal, state, foreign or
other regulatory commission or agency having jurisdiction over the Plan such
authority as may be required to issue and sell Common Stock upon exercise of the
Rights granted under the Plan. If, after reasonable efforts, the Company is
unable to obtain from any such regulatory commission or agency the authority
which counsel for the Company deems necessary for the lawful issuance and sale
of Common Stock under the Plan, the Company shall be relieved from any liability
for failure to issue and sell Common Stock upon exercise of such Rights unless
and until such authority is obtained.
11. Use of Proceeds from Common Stock.
Proceeds from the sale of Common Stock pursuant to Rights granted under the
Plan shall constitute general funds of the Company.
12. Rights as a Stockholder.
A Participant shall not be deemed to be the holder of, or to have any of
the rights of a holder with respect to, Common Stock subject to Rights granted
under the Plan unless and until the Participant's Common Stock acquired upon
exercise of Rights under the Plan are recorded in the books of the Company.
13. Adjustments upon Changes in Securities.
(a) If any change is made in the Common Stock subject to the Plan, or
subject to any Right, without the receipt of consideration by the Company
(through merger, consolidation, reorganization, recapitalization,
reincorporation, stock dividend, dividend in property other than cash, stock
split, liquidating dividend, combination of shares, exchange of shares, change
in corporate structure or other transaction not involving the receipt of
consideration by the Company), the Plan will be appropriately adjusted in the
class(es) and maximum number of shares of Common Stock subject to the Plan
pursuant to subparagraph 4(a), and the outstanding Rights will be appropriately
adjusted in the class(es), number of shares of Common Stock and purchase limits
of such outstanding Rights. The Board shall make such adjustments, and its
determination shall be final, binding and conclusive. (The conversion of any
convertible securities of the Company shall not be treated as a transaction that
does not involve the receipt of consideration by the Company.)
(b) In the event of: (i) a dissolution, liquidation or sale of all or
substantially all of the securities or assets of the Company, (ii) a merger or
consolidation in which the Company is not the surviving corporation or (iii) a
reverse merger in which the Company is the surviving corporation but the Common
Stock outstanding immediately preceding the merger is converted by virtue of the
merger into other property, whether in the form of securities, cash or
otherwise, then any surviving corporation may assume outstanding Rights or
substitute similar rights for those outstanding under the Plan. In the event
that no surviving corporation assumes outstanding Rights or substitutes similar
rights therefor, participants' accumulated payroll deductions shall be used to
purchase Common Stock immediately prior to the transaction described above and
the participants' Rights under the ongoing Offering shall terminate immediately
following such purchase.
9.
<PAGE>
14. Amendment of the Plan.
(a) The Board at any time, and from time to time, may amend the Plan.
However, except as provided in paragraph 13 relating to adjustments upon changes
in securities and except as to minor amendments to benefit the administration of
the Plan, to take account of a change in legislation or to obtain or maintain
favorable tax, exchange control or regulatory treatment for Participants or the
Company or any Affiliate, no amendment shall be effective unless approved by the
stockholders of the Company to the extent stockholder approval is necessary for
the Plan to satisfy the requirements of Section 423 of the Code, Rule 16b-3
under the Exchange Act and any Nasdaq or other securities exchange listing
requirements. Currently under the Code, stockholder approval within twelve (12)
months before or after the adoption of the amendment is required where the
amendment will:
(i) Increase the number of shares of Common Stock reserved for
Rights under the Plan;
(ii) Modify the provisions as to eligibility for participation in the
Plan to the extent such modification requires stockholder approval in order for
the Plan to obtain employee stock purchase plan treatment under Section 423 of
the Code or to comply with the requirements of Rule 16b-3; or
(iii) Modify the Plan in any other way if such modification requires
stockholder approval in order for the Plan to obtain employee stock purchase
plan treatment under Section 423 of the Code or to comply with the requirements
of Rule 16b-3.
(b) It is expressly contemplated that the Board may amend the Plan in any
respect the Board deems necessary or advisable to provide Employees with the
maximum benefits provided or to be provided under the provisions of the Code and
the regulations promulgated thereunder relating to Employee Stock Purchase Plans
and/or to bring the Plan and/or Rights granted under it into compliance
therewith.
(c) Rights and obligations under any Rights granted before amendment of the
Plan shall not be impaired by any amendment of the Plan, except with the consent
of the person to whom such Rights were granted, or except as necessary to comply
with any laws or governmental regulations, or except as necessary to ensure that
the Plan and/or Rights granted under the Plan comply with the requirements of
Section 423 of the Code.
15. Designation of Beneficiary.
(a) A Participant may file a written designation of a beneficiary who is to
receive any Common Stock and/or cash, if any, from the Participant's account
under the Plan in the event of such Participant's death subsequent to the end of
an Offering but prior to delivery to the Participant of such Common Stock and
cash. In addition, a Participant may file a written designation of a
beneficiary who is to receive any cash from the Participant's account under the
Plan in the event of such Participant's death during an Offering.
(b) The Participant may change such designation of beneficiary at any time
by written notice. In the event of the death of a Participant and in the absence
of a beneficiary validly
10.
<PAGE>
designated under the Plan who is living at the time of such Participant's death,
the Company shall deliver such Common Stock and/or cash to the executor or
administrator of the estate of the Participant, or if no such executor or
administrator has been appointed (to the knowledge of the Company), the Company,
in its sole discretion, may deliver such Common Stock and/or cash to the spouse
or to any one or more dependents or relatives of the Participant, or if no
spouse, dependent or relative is known to the Company, then to such other person
as the Company may designate.
16. Termination or Suspension of the Plan.
(a) The Board in its discretion may suspend or terminate the Plan at any
time. No Rights may be granted under the Plan while the Plan is suspended or
after it is terminated.
(b) Rights and obligations under any Rights granted while the Plan is in
effect shall not be impaired by suspension or termination of the Plan, except as
expressly provided in the Plan or with the consent of the person to whom such
Rights were granted, or except as necessary to comply with any laws or
governmental regulation, or except as necessary to ensure that the Plan and/or
Rights granted under the Plan comply with the requirements of Section 423 of the
Code.
17. Effective Date of Plan.
The Plan shall become effective as determined by the Board, but no Rights
granted under the Plan shall be exercised unless and until the Plan has been
approved by the stockholders of the Company within twelve (12) months before or
after the date the Plan is adopted by the Board, which date may be prior to the
effective date set by the Board.
11.
<PAGE>
Telik, Inc.
2000 Employee Stock Purchase Plan
Offering
Adopted March ____, 2000
1. Grant of Rights.
(a) The Board of Directors ("Board") of Telik, Inc., a Delaware
corporation (the "Company"), pursuant to the Company's 2000 Employee Stock
Purchase Plan (the "Plan"), hereby authorizes the grant of Rights to purchase
the common stock of the Company (the "Common Stock") to all Eligible Employees
(an "Offering"). Defined terms not explicitly defined in this Offering but
defined in the Plan shall have the same definitions as in the Plan. In the event
of any conflict between the provisions of an Offering and those of the Plan
(including interpretations, amendments, rules and regulations that may from time
to time be promulgated and adopted pursuant to the Plan), the provisions of the
Plan shall control.
(b) An "Offering Date" is the first day of an Offering. An Offering may
consist of one purchase period or may be divided into shorter purchase periods
("Purchase Periods"). A "Purchase Date" is the last day of a Purchase Period or
the Offering, as the case may be.
(c) Except as otherwise provided, each Offering hereunder shall be twenty-
four (24) months long and shall be divided into four (4) shorter Purchase
Periods approximately six (6) months in length. Offerings shall be consecutive.
A new Offering shall begin the day after the immediately preceding Offering
ends.
(d) The first Offering shall begin simultaneously with the effectiveness
of the Company's registration statement under the Securities Act of 1933 with
respect to the initial public offering of the Common Stock and end on June 30,
2002 (the "Initial Offering"). The Initial Offering will be divided into four
(4) shorter Purchase Periods of approximately six (6) months in duration, with
the initial Purchase Period ending on December 31, 2000, the second Purchase
Period ending on June 30, 2001, the third Purchase Period ending on December 31,
2001 and the fourth Purchase Period ending on June 30, 2002.
(e) Thereafter, new Offerings shall begin on each July 1, beginning with
July 1, 2002, and each such Offering shall end on the day prior to the second
anniversary of its Offering Date.
(f) Notwithstanding anything to the contrary, in the event that the fair
market value of a share of Common Stock on any Purchase Date during an Offering
is less than the fair market value of a share of Common Stock on the Offering
Date of such Offering, then following the purchase of Common Stock on such
Purchase Date: (i) the Offering shall terminate and (ii) all participants in the
just-terminated Offering shall automatically be enrolled in a new Offering that
shall commence on the day following the Purchase Date on the same terms on which
such participants were enrolled in the terminated Offering. Such new Offering
shall end on the day prior to the second anniversary of its Offering Date.
<PAGE>
(g) Prior to the commencement of any Offering, the Board may change any or
all terms of such Offering and any subsequent Offerings. The granting of Rights
pursuant to each Offering hereunder shall occur on each respective Offering Date
unless, prior to such date (i) the Board (or such Committee) determines that
such Offering shall not occur, or (ii) no shares of Common Stock remain
available for issuance under the Plan in connection with the Offering.
2. Eligible Employees.
(a) All employees of the Company and each of its Affiliates incorporated
in the United States shall be granted Rights to purchase Common Stock under each
Offering on the Offering Date of such Offering, provided that each such employee
otherwise meets the employment requirements of subparagraph 6(a) of the Plan and
has been continuously employed for at least ten (10) days on the Offering Date
of such Offering (an "Eligible Employee"); however, the ten- (10-) day
eligibility requirement shall be waived with respect to the Initial Offering
only.
(b) Notwithstanding the foregoing, the following employees shall not be
Eligible Employees or be granted Rights under an Offering: (i) part-time or
seasonal employees whose customary employment is twenty (20) hours or less per
week or five (5) months or less per calendar year or (ii) 5% stockholders
(including ownership through unexercised options) described in subparagraph 6(c)
of the Plan.
(c) Notwithstanding the foregoing, each person who first becomes an
Eligible Employee during any Offering will, on the next January 1 or July 1
during that Offering, receive a Right under such Offering, which Right shall
thereafter be deemed to be a part of the Offering. Such Right shall have the
same characteristics as any Rights originally granted under the Offering except
that:
(i) the date on which such Right is granted shall be the "Offering
Date" of such Right for all purposes, including determination of the exercise
price of such Right; and
(ii) the Offering for such Right shall begin on its Offering Date
and end coincident with the end of the ongoing Offering.
3. Rights.
(a) Subject to the limitations contained herein and in the Plan, on each
Offering Date each Eligible Employee shall be granted the Right to purchase the
number of shares of Common Stock purchasable with up to fifteen percent (15%) of
such Eligible Employee's Earnings paid during such Offering after the Eligible
Employee first commences participation; provided, however, that:
(i) no employee may purchase Common Stock on a particular Purchase
Date that would result in more than fifteen percent (15%) of such employee's
Earnings in the period from the Offering Date to such Purchase Date having been
applied to purchase Common Stock under all ongoing Offerings under the Plan and
all other Company plans intended to qualify as "employee stock purchase plans"
under Section 423 of the Internal Revenue Code of 1986, as amended (the "Code");
2.
<PAGE>
(ii) no employee may purchase more than five thousand (5,000) shares
of Common Stock on any Purchase Date;
(iii) no Eligible Employee shall be granted any Right under the Plan
which permits such Eligible Employee's Right to purchase Common Stock under this
Plan and all other employee stock purchase plans (described in Section 423 of
the Code) of the Company to accrue at a rate which exceeds twenty-five thousand
dollars ($25,000) of fair market value of such Common Stock (determined at the
time such Right is granted) for each calendar year in which such Right is
outstanding at any time; and
(iv) the maximum aggregate number of shares of Common Stock
available to be purchased by all Eligible Employees under an Offering shall be
the number of shares remaining available under the Plan on the Offering Date. If
the aggregate purchase of shares of Common Stock upon exercise of Rights granted
under the Offering would exceed the maximum aggregate number of shares of Common
Stock available, the Board shall make a pro rata allocation of the shares of
Common Stock available in a uniform and equitable manner.
(b) For this Offering, "Earnings" means the total compensation paid to an
employee, including all salary, wages (including amounts elected to be deferred
by the employee, that would otherwise have been paid, under any cash or deferred
arrangement established by the Company), overtime pay, commissions, bonuses, and
other remuneration paid directly to the employee, but excluding profit sharing,
the cost of employee benefits paid for by the Company, education or tuition
reimbursements, imputed income arising under any Company group insurance or
benefit program, traveling expenses, business and moving expense reimbursements,
income received in connection with stock options, contributions made by the
Company under any employee benefit plan, and similar items of compensation.
4. Purchase Price.
(a) The purchase price of the Common Stock under the Offering shall be the
lesser of eighty-five percent (85%) of the fair market value of the Common Stock
on the Offering Date or eighty-five percent (85%) of the fair market value of
the Common Stock on the Purchase Date, in each case rounded up to the nearest
whole cent per Share.
(b) For the Initial Offering, the fair market value of the Common Stock at
the time when the Offering commences shall be the price per Share at which
Common Stock is first sold to the public in the Company's initial public
offering as specified in the final prospectus with respect to that offering.
5. Participation.
(a) An Eligible Employee may elect to participate in an Offering only at
the beginning of the Offering or such later date specified in subparagraph 2(c).
(b) A Participant who is enrolled in an Offering automatically will be
enrolled in the next Offering that commences after the current Offering ends.
3.
<PAGE>
(c) An Eligible Employee shall become a Participant in an Offering by
delivering an agreement authorizing payroll deductions. Such deductions must be
in whole percentages, with a minimum percentage of one percent (1%) and a
maximum percentage of fifteen percent (15%) of Earnings. A Participant may not
make additional payments into his or her account. The agreement shall be made on
such enrollment form as the Company provides, and must be delivered to the
Company at least ten (10) days before the Offering Date, or before such later
date specified in subparagraph 2(c), in advance of the date of participation to
be effective, unless a later time for filing the enrollment form is set by the
Board for all Eligible Employees with respect to a given Offering Date. For the
Initial Offering, the time for filing an enrollment form and commencing
participation for individuals who are Eligible Employees on the Offering Date
for the Initial Offering may be after the Offering Date, as determined by the
Company and communicated to such Eligible Employees.
(d) If the agreement authorizing payroll deductions is required to be
delivered to the Company or designated Affiliate a specified number of days
before the Offering Date to be effective, then an employee who becomes eligible
during the required delivery period shall not be considered to be an Eligible
Employee at the beginning of the Offering but may elect to participate during
the Offering as provided in subparagraph 2(c).
6. Changing Participation Level during Offering; Withdrawal from Offering.
(a) A Participant may not increase his or her deductions during the course
of a Purchase Period. A Participant may increase or decrease his or her
deductions prior to the beginning of a new Purchase Period or a new Offering, to
be effective at the beginning of such new Purchase Period or new Offering. A
Participant shall make a change in his or her participation level by delivering
a notice to the Company in such form as the Company provides and up to ten (10)
days before the start of such new Purchase Period or new Offering (or such
shorter period of time determined by the Company and communicated to
Participants).
(b) A Participant may reduce (including to zero) his or her deductions
once (and only once) during a Purchase Period, effective as soon as
administratively practicable. A Participant shall make a change in his or her
participation level by delivering a notice to the Company in such form as the
Company provides up to ten (10) days before the end of such Purchase Period (or
such shorter period of time determined by the Company and communicated to
Participants).
(c) Except as otherwise specifically provided herein, a Participant may
not increase or decrease his or her participation level during the course of an
Offering.
(d) Notwithstanding the foregoing, a Participant may withdraw from an
Offering and receive his or her accumulated payroll deductions from the Offering
(reduced to the extent, if any, such deductions have been used to acquire Common
Stock for the Participant on any prior Purchase Dates), without interest, or
reduce his or her participation percentage to zero (0), at any time prior to the
end of the Offering, excluding only each ten (10) day period immediately
preceding a Purchase Date (or such shorter period of time determined by the
Company and communicated to Participants) by delivering a withdrawal notice to
the Company in such form as the Company provides.
4.
<PAGE>
7. Purchases.
Subject to the limitations contained herein, on each Purchase Date, each
Participant's accumulated payroll deductions (without any increase for interest)
shall be applied to the purchase of whole shares of Common Stock, up to the
maximum number of shares permitted under the Plan and the Offering.
8. Notices and Agreements.
Any notices or agreements provided for in an Offering or the Plan shall be
given in writing, in a form provided by the Company, and unless specifically
provided for in the Plan or this Offering shall be deemed effectively given upon
receipt or, in the case of notices and agreements delivered by the Company, five
(5) days after deposit in the United States mail, postage prepaid.
9. Exercise Contingent on Stockholder Approval.
The Rights granted under an Offering are subject to the approval of the
Plan by the stockholders as required for the Plan to obtain treatment as a tax-
qualified employee stock purchase plan under Section 423 of the Code or to
comply with the requirements of Rule 16b promulgated under the Securities
Exchange Act of 1934, as amended.
10. Offering Subject to Plan.
Each Offering is subject to all the provisions of the Plan, and its
provisions are hereby made a part of the Offering, and is further subject to all
interpretations, amendments, rules and regulations which may from time to time
be promulgated and adopted pursuant to the Plan.
5.
<PAGE>
EXHIBIT 10.4
TELIK, INC.
2000 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
Adopted _______________, 2000
Approved By Shareholders _______________, 20__
Effective Date: _______________, 2000
Termination Date: March __, 2010
1. Purposes.
(a) Eligible Option Recipients. The persons eligible to receive Options
are the Non-Employee Directors of the Company.
(b) Available Options. The purpose of the Plan is to provide a means by
which Non-Employee Directors may be given an opportunity to benefit from
increases in value of the Common Stock through the granting of Nonstatutory
Stock Options.
(c) General Purpose. The Company, by means of the Plan, seeks to retain
the services of its Non-Employee Directors, to secure and retain the services of
new Non-Employee Directors and to provide incentives for such persons to exert
maximum efforts for the success of the Company and its Affiliates.
2. Definitions.
(a) "Affiliate" means any parent corporation or subsidiary corporation of
the Company, whether now or hereafter existing, as those terms are defined in
Sections 424(e) and (f), respectively, of the Code.
(b) "Annual Grant" means an Option granted annually to all Non-Employee
Directors who meet the specified criteria specified in subsection 6(b) of the
Plan.
(c) "Annual Meeting" means the annual meeting of the stockholders of the
Company.
(d) "Board" means the Board of Directors of the Company.
(e) "Code" means the Internal Revenue Code of 1986, as amended.
(f) "Common Stock" means the common stock of the Company.
(g) "Company" means Telik, Inc., a Delaware corporation.
(h) "Consultant" means any person, including an advisor, (i) engaged by
the Company or an Affiliate to render consulting or advisory services and who is
compensated for such services or (ii) who is a member of the Board of Directors
of an Affiliate. However, the
1.
<PAGE>
term "Consultant" shall not include either Directors of the Company who are not
compensated by the Company for their services as Directors or Directors of the
Company who are merely paid a director's fee by the Company for their services
as Directors.
(i) "Continuous Service" means that the Optionholder's service with the
Company or an Affiliate, whether as an Employee, Director or Consultant, is not
interrupted or terminated. The Optionholder's Continuous Service shall not be
deemed to have terminated merely because of a change in the capacity in which
the Optionholder renders service to the Company or an Affiliate as an Employee,
Consultant or Director or a change in the entity for which the Optionholder
renders such service, provided that there is no interruption or termination of
the Optionholder's Continuous Service. For example, a change in status from a
Non-Employee Director of the Company to a Consultant of an Affiliate or an
Employee of the Company will not constitute an interruption of Continuous
Service. The Board or the Chief Executive Officer of the Company, in that
party's sole discretion, may determine whether Continuous Service shall be
considered interrupted in the case of any leave of absence approved by that
party, including sick leave, military leave or any other personal leave.
(j) "Director" means a member of the Board of Directors of the Company.
(k) "Disability" means the permanent and total disability of a person
within the meaning of Section 22(e)(3) of the Code.
(l) "Employee" means any person employed by the Company or an Affiliate.
Mere service as a Director or payment of a director's fee by the Company or an
Affiliate shall not be sufficient to constitute "employment" by the Company or
an Affiliate.
(m) "Exchange Act" means the Securities Exchange Act of 1934, as amended.
(n) "Fair Market Value" means, as of any date, the value of the Common
Stock determined as follows:
(i) If the Common Stock is listed on any established stock exchange
or traded on the Nasdaq National Market or the Nasdaq SmallCap Market, the Fair
Market Value of a share of Common Stock shall be the closing sales price for
such stock (or the closing bid, if no sales were reported) as quoted on such
exchange or market (or the exchange or market with the greatest volume of
trading in the Common Stock) on the last market trading day prior to the day of
determination, as reported in The Wall Street Journal or such other source as
the Board deems reliable.
(ii) In the absence of such markets for the Common Stock, the Fair
Market Value shall be determined in good faith by the Board.
(o) "Initial Grant" means an Option granted to a Non-Employee Director who
meets the criteria specified in subsection 6(a) of the Plan.
(p) "IPO Date" means the date the registration statement for the initial
public offering of the Company becomes effective.
2.
<PAGE>
(q) "Non-Employee Director" means a Director who is not an Employee.
(r) "Nonstatutory Stock Option" means an Option not intended to qualify as
an incentive stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.
(s) "Officer" means a person who is an officer of the Company within the
meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
(t) "Option" means a Nonstatutory Stock Option granted pursuant to the
Plan.
(u) "Option Agreement" means a written agreement between the Company and
an Optionholder evidencing the terms and conditions of an individual Option
grant. Each Option Agreement shall be subject to the terms and conditions of the
Plan.
(v) "Optionholder" means a person to whom an Option is granted pursuant to
the Plan or, if applicable, such other person who holds an outstanding Option.
(w) "Plan" means this Telik, Inc. 2000 Non-Employee Directors' Stock
Option Plan.
(x) "Rule 16b-3" means Rule 16b-3 promulgated under the Exchange Act or
any successor to Rule 16b-3, as in effect from time to time.
(Y) "Securities Act" means the Securities Act of 1933, as amended.
3. Administration.
(a) Administration by Board. The Board shall administer the Plan. The
Board may not delegate administration of the Plan to a committee.
(b) Powers of Board. The Board shall have the power, subject to, and
within the limitations of, the express provisions of the Plan:
(i) To determine the provisions of each Option to the extent not
specified in the Plan.
(ii) To construe and interpret the Plan and Options granted under
it, and to establish, amend and revoke rules and regulations for its
administration. The Board, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan or in any Option Agreement, in a
manner and to the extent it shall deem necessary or expedient to make the Plan
fully effective.
(iii) To amend the Plan or an Option as provided in Section 12.
(iv) Generally, to exercise such powers and to perform such acts as
the Board deems necessary or expedient to promote the best interests of the
Company that are not in conflict with the provisions of the Plan.
3.
<PAGE>
(c) Effect of Board's Decision. All determinations, interpretations and
constructions made by the Board in good faith shall not be subject to review by
any person and shall be final, binding and conclusive on all persons.
4. Shares Subject to the Plan.
(A) Share Reserve. Subject to the provisions of Section 11 relating to
adjustments upon changes in the Common Stock, the Common Stock that may be
issued pursuant to Options shall not exceed in the aggregate three hundred
thousand (300,000) shares of Common Stock.
(B) Reversion of Shares to the Share Reserve. If any Option shall for any
reason expire or otherwise terminate, in whole or in part, without having
been exercised in full, the shares of Common Stock not acquired under such
Option shall revert to and again become available for issuance under the
Plan.
(C) Source of Shares. The shares of Common Stock subject to the Plan may be
unissued shares or reacquired shares, bought on the market or otherwise.
5. Eligibility.
The Options as set forth in section 6 automatically shall be granted under
the Plan to all Non-Employee Directors.
6. Non-Discretionary Grants.
(a) Initial Grants. Without any further action of the Board, each Non-
Employee Director shall be granted an Initial Grant as follows:
(i) On the IPO Date, each person who is then a Non-Employee
Director automatically shall be granted an Initial Grant to purchase twenty
thousand (20,000) shares of Common Stock on the terms and conditions set forth
herein.
(ii) After the IPO Date, each person who is elected or appointed for
the first time to be a Non-Employee Director automatically shall, upon the date
of his or her initial election or appointment to be a Non-Employee Director by
the Board or stockholders of the Company, be granted an Initial Grant to
purchase twenty thousand (20,000) shares of Common Stock on the terms and
conditions set forth herein.
(b) Annual Grants. Without any further action of the Board, on the day
following each Annual Meeting commencing with the first Annual Meeting following
the IPO Date, each person who is then a Non-Employee Director automatically
shall be granted an Annual Grant to purchase five thousand (5,000) shares of
Common Stock on the terms and conditions set forth herein; provided, however,
that if the person has not been serving as a Non-Employee Director for the
entire period since the preceding Annual Meeting, then the number of shares
subject to the Annual Grant shall be reduced pro rata for each full quarter
prior to the date of grant during which such person did not serve as a Non-
Employee Director.
4.
<PAGE>
7. Option Provisions.
Each Option shall be in such form and shall contain such terms and
conditions as required by the Plan. Each Option shall contain such additional
terms and conditions, not inconsistent with the Plan, as the Board shall deem
appropriate. Each Option shall include (through incorporation of provisions
hereof by reference in the Option or otherwise) the substance of each of the
following provisions:
(a) Term. No Option shall be exercisable after the expiration of ten (10)
years from the date it was granted.
(b) Exercise Price. The exercise price of each Option shall be one
hundred percent (100%) of the Fair Market Value of the stock subject to the
Option on the date the Option is granted. Notwithstanding the foregoing, an
Option may be granted with an exercise price lower than that set forth in the
preceding sentence if such Option is granted pursuant to an assumption or
substitution for another option in a manner satisfying the provisions of Section
424(a) of the Code.
(c) Consideration. The purchase price of stock acquired pursuant to an
Option may be paid, to the extent permitted by applicable statutes and
regulations, in any combination of the following methods:
(i) By cash or check.
(ii) Provided that at the time of exercise the Common Stock is
publicly traded and quoted regularly in The Wall Street Journal, by delivery of
already-owned shares of Common Stock either that the Optionholder has held for
the period required to avoid a charge to the Company's reported earnings
(generally six months) or that the Optionholder did not acquire, directly or
indirectly from the Company, that are owned free and clear of any liens, claims,
encumbrances or security interests, and that are valued at Fair Market Value on
the date of exercise. "Delivery" for these purposes shall include delivery to
the Company of the Optionholder's attestation of ownership of such shares of
Common Stock in a form approved by the Company. Notwithstanding the foregoing,
the Optionholder may not exercise the Option by tender to the Company of Common
Stock to the extent such tender would violate the provisions of any law,
regulation or agreement restricting the redemption of the Company's stock.
(iii) Provided that at the time of exercise the Common Stock is
publicly traded and quoted regularly in The Wall Street Journal, pursuant to a
program developed under Regulation T as promulgated by the Federal Reserve Board
that, prior to the issuance of Common Stock, results in either the receipt of
cash (or check) by the Company or the receipt of irrevocable instructions to pay
the aggregate exercise price to the Company from the sales proceeds.
(d) Transferability. Each Option shall be transferable by will or by the
laws of descent and distribution and, during the lifetime of the Optionholder,
only as described in the Option Agreement. However, the Optionholder may, by
delivering written notice to the Company, in a form satisfactory to the Company,
designate a third party who, in the event of the death of the Optionholder,
shall thereafter be entitled to exercise the Option.
5.
<PAGE>
(e) Exercise Schedule. The Option shall be exercisable as the shares of
Common Stock subject to the Option vest.
(f) Vesting Schedule. Options shall vest as follows: (i) one fourth
(1/4th) of the shares of Common Stock subject to the Option shall vest one year
after the date of the grant of the Option, and (ii) one forty-eighth (1/48th) of
the shares of Common Stock subject to the Option shall vest monthly thereafter
over a period of three (3) years.
(g) Termination of Continuous Service. In the event an Optionholder's
Continuous Service terminates (other than upon the Optionholder's death or
Disability), the Optionholder may exercise his or her Option (to the extent that
the Optionholder was entitled to exercise it as of the date of termination) but
only within such period of time ending on the earlier of (i) the date three (3)
months following the termination of the Optionholder's Continuous Service or
(ii) the expiration of the term of the Option as set forth in the Option
Agreement. If, after termination, the Optionholder does not exercise his or her
Option within the time specified in the Option Agreement, the Option shall
terminate.
(h) Extension of Termination Date. If the exercise of the Option following
the termination of the Optionholder's Continuous Service (other than upon the
Optionholder's death or Disability) would be prohibited at any time solely
because the issuance of shares would violate the registration requirements under
the Securities Act, then the Option shall terminate on the earlier of (i) the
expiration of the term of the Option set forth in subsection 7(a) or (ii) the
expiration of a period of three (3) months after the termination of the
Optionholder's Continuous Service during which the exercise of the Option would
not be in violation of such registration requirements.
(i) Disability of Optionholder. In the event an Optionholder's Continuous
Service terminates as a result of the Optionholder's Disability, the
Optionholder may exercise his or her Option (to the extent that the Optionholder
was entitled to exercise it as of the date of termination), but only within such
period of time ending on the earlier of (i) the date twelve (12) months
following such termination or (ii) the expiration of the term of the Option as
set forth in the Option Agreement. If, after termination, the Optionholder does
not exercise his or her Option within the time specified herein, the Option
shall terminate.
(j) Death of Optionholder. In the event (i) an Optionholder's Continuous
Service terminates as a result of the Optionholder's death or (ii) the
Optionholder dies within the three-month period after the termination of the
Optionholder's Continuous Service for a reason other than death, then the Option
may be exercised (to the extent the Optionholder was entitled to exercise the
Option as of the date of death) by the Optionholder's estate, by a person who
acquired the right to exercise the Option by bequest or inheritance or by a
person designated to exercise the Option upon the Optionholder's death, but only
within the period ending on the earlier of (1) the date eighteen (18) months
following the date of death or (2) the expiration of the term of such Option as
set forth in the Option Agreement. If, after death, the Option is not exercised
within the time specified herein, the Option shall terminate.
6.
<PAGE>
8. Covenants of the Company.
(a) Availability of Shares. During the terms of the Options, the Company
shall keep available at all times the number of shares of Common Stock required
to satisfy such Options.
(b) Securities Law Compliance. The Company shall seek to obtain from each
regulatory commission or agency having jurisdiction over the Plan such authority
as may be required to grant Options and to issue and sell shares of Common Stock
upon exercise of the Options; provided, however, that this undertaking shall not
require the Company to register under the Securities Act the Plan, any Option or
any stock issued or issuable pursuant to any such Option. If, after reasonable
efforts, the Company is unable to obtain from any such regulatory commission or
agency the authority which counsel for the Company deems necessary for the
lawful issuance and sale of stock under the Plan, the Company shall be relieved
from any liability for failure to issue and sell stock upon exercise of such
Options unless and until such authority is obtained.
9. Use of Proceeds from Stock.
Proceeds from the sale of stock pursuant to Options shall constitute
general funds of the Company.
10. Miscellaneous.
(a) Shareholder Rights. No Optionholder shall be deemed to be the holder
of, or to have any of the rights of a holder with respect to, any shares subject
to such Option unless and until such Optionholder has satisfied all requirements
for exercise of the Option pursuant to its terms.
(b) No Service Rights. Nothing in the Plan or any instrument executed or
Option granted pursuant thereto shall confer upon any Optionholder any right to
continue to serve the Company as a Non-Employee Director or shall affect the
right of the Company or an Affiliate to terminate (i) the employment of an
Employee with or without notice and with or without cause, (ii) the service of a
Consultant pursuant to the terms of such Consultant's agreement with the Company
or an Affiliate or (iii) the service of a Director pursuant to the Bylaws of the
Company or an Affiliate, and any applicable provisions of the corporate law of
the state in which the Company or the Affiliate is incorporated, as the case may
be.
(c) Investment Assurances. The Company may require an Optionholder, as a
condition of exercising or acquiring stock under any Option, (i) to give written
assurances satisfactory to the Company as to the Optionholder's knowledge and
experience in financial and business matters and/or to employ a purchaser
representative reasonably satisfactory to the Company who is knowledgeable and
experienced in financial and business matters and that he or she is capable of
evaluating, alone or together with the purchaser representative, the merits and
risks of exercising the Option; and (ii) to give written assurances satisfactory
to the Company stating that the Optionholder is acquiring the stock subject to
the Option for the Optionholder's own account and not with any present intention
of selling or otherwise distributing the stock. The foregoing requirements, and
any assurances given pursuant to such requirements, shall be inoperative if
(iii) the issuance of the shares upon the exercise or acquisition of stock under
the
7.
<PAGE>
Option has been registered under a then currently effective registration
statement under the Securities Act or (iv) as to any particular requirement, a
determination is made by counsel for the Company that such requirement need not
be met in the circumstances under the then applicable securities laws. The
Company may, upon advice of counsel to the Company, place legends on stock
certificates issued under the Plan as such counsel deems necessary or
appropriate in order to comply with applicable securities laws, including, but
not limited to, legends restricting the transfer of the stock.
(d) Withholding Obligations. The Optionholder may satisfy any federal,
state or local tax withholding obligation relating to the exercise or
acquisition of stock under an Option by any of the following means (in addition
to the Company's right to withhold from any compensation paid to the
Optionholder by the Company) or by a combination of such means: (i) tendering a
cash payment; (ii) authorizing the Company to withhold shares from the shares of
the Common Stock otherwise issuable to the Optionholder as a result of the
exercise or acquisition of stock under the Option, provided, however, that no
shares of Common Stock are withheld with a value exceeding the minimum amount of
tax required to be withheld by law; or (iii) delivering to the Company owned and
unencumbered shares of the Common Stock.
11. Adjustments upon Changes in Stock.
(a) Capitalization Adjustments. If any change is made in the stock subject
to the Plan, or subject to any Option, without the receipt of consideration by
the Company (through merger, consolidation, reorganization, recapitalization,
reincorporation, stock dividend, dividend in property other than cash, stock
split, liquidating dividend, combination of shares, exchange of shares, change
in corporate structure or other transaction not involving the receipt of
consideration by the Company), the Plan will be appropriately adjusted in the
class(es) and maximum number of securities subject both to the Plan pursuant to
subsection 4(a) and to the nondiscretionary Options specified in Section 5, and
the outstanding Options will be appropriately adjusted in the class(es) and
number of securities and price per share of stock subject to such outstanding
Options. The Board shall make such adjustments, and its determination shall be
final, binding and conclusive. (The conversion of any convertible securities of
the Company shall not be treated as a transaction "without receipt of
consideration" by the Company.)
(b) Dissolution or Liquidation. In the event of a dissolution or
liquidation of the Company, then all outstanding Options shall terminate
immediately prior to such event.
(c) Change in Control. In the event of (i) a sale, lease or other
disposition of all or substantially all of the securities or assets of the
Company, (ii) a merger or consolidation in which the Company is not the
surviving corporation or (iii) a reverse merger in which the Company is the
surviving corporation but the shares of Common Stock outstanding immediately
preceding the merger are converted by virtue of the merger into other property,
whether in the form of securities, cash or otherwise, then any surviving
corporation or acquiring corporation may assume any Options outstanding under
the Plan or substitute similar Options (including an option to acquire the same
consideration paid to the stockholders in the transaction described in this
subsection 11(c)) for those outstanding under the Plan. In the event any
surviving corporation or acquiring corporation does not assume such Options or
substitute similar Options
8.
<PAGE>
for those outstanding under the Plan, then with respect to Options held by
Optionholders whose Continuous Service has not terminated, the vesting of such
Options (and the time during which such Options may be exercised) shall be
accelerated in full, and the Options shall terminate if not exercised at or
prior to such event. With respect to any other Options outstanding under the
Plan, such Options shall terminate if not exercised prior to such event.
12. Amendment of the Plan and Options.
(a) Amendment of Plan. The Board at any time, and from time to time, may
amend the Plan. However, except as provided in Section 11 relating to
adjustments upon changes in stock, no amendment shall be effective unless
approved by the stockholders of the Company to the extent stockholder approval
is necessary to satisfy the requirements of Rule 16b-3 or any Nasdaq or
securities exchange listing requirements.
(b) Shareholder Approval. The Board may, in its sole discretion, submit
any other amendment to the Plan for stockholder approval.
(c) No Impairment of Rights. Rights under any Option granted before
amendment of the Plan shall not be impaired by any amendment of the Plan unless
(i) the Company requests the consent of the Optionholder and (ii) the
Optionholder consents in writing.
(d) Amendment of Options. The Board at any time, and from time to time,
may amend the terms of any one or more Options; provided, however, that the
rights under any Option shall not be impaired by any such amendment unless (i)
the Company requests the consent of the Optionholder and (ii) the Optionholder
consents in writing.
13. Termination or Suspension of the Plan.
(a) Plan Term. The Board may suspend or terminate the Plan at any time.
Unless sooner terminated, the Plan shall terminate on the day before the tenth
(10th) anniversary of its adoption by the Board. No Options may be granted under
the Plan while the Plan is suspended or after it is terminated.
(b) No Impairment of Rights. Suspension or termination of the Plan shall
not impair rights and obligations under any Option granted while the Plan is in
effect except with the written consent of the Optionholder.
14. Effective Date of Plan.
The Plan shall become effective on the IPO Date, but no Option shall be
exercised unless and until the Plan has been approved by the stockholders of the
Company, which approval shall be within twelve (12) months before or after the
date the Plan is adopted by the Board.
15. Choice of Law.
All questions concerning the construction, validity and interpretation of
this Plan shall be governed by the law of the State of Delaware, without regard
to such state's conflict of laws rules.
9.
<PAGE>
TELIK, INC.
NONSTATUTORY STOCK OPTION
(2000 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN)
__________, Optionholder:
Telik, Inc. (the "Company"), pursuant to its 2000 Non-Employee Directors'
Stock Option Plan (the "Plan"), has on __________, 20__ granted to you, the
optionholder named above, an option to purchase shares of the common stock of
the Company ("Common Stock"). This option is not intended to qualify and will
not be treated as an "incentive stock option" within the meaning of Section 422
of the Internal Revenue Code of 1986, as amended (the "Code").
The grant hereunder is in connection with and in furtherance of the
Company's compensatory benefit plan for participation of the Company's Non-
Employee Directors (as defined in the Plan).
The details of your option are as follows:
1. The total number of shares of Common Stock subject to this option is
__________ (__________). Subject to the limitations contained herein, this
option shall be exercisable in accordance with the Plan.
2. The exercise price of this option is __________ ($__________) per
share, being the Fair Market Value (as defined in the Plan) of the Common Stock
on the date of grant of this option.
3. (a) This option may be exercised, to the extent specified in the
Plan, by delivering a notice of exercise (in a form designated by the Company)
together with the exercise price to the Secretary of the Company, or to such
other person as the Company may designate, during regular business hours,
together with such additional documents as the Company may then require. This
option may not be exercised for any number of shares which would require the
issuance of anything other than whole shares.
(b) By exercising this option you agree that the Company may require
you to enter an arrangement providing for the cash payment by you to the Company
of any tax withholding obligation of the Company arising by reason of the
exercise of this option or the lapse of any substantial risk of forfeiture to
which the shares are subject at the time of exercise.
(c) This option is not transferable, except (i) by will or by the laws
of descent and distribution, (ii) with the prior written approval of the
Company, by instrument to an inter vivos or testamentary trust, in a form
accepted by the Company, in which the option is to be passed to beneficiaries
upon the death of the trustor (settlor) and (iii) with the prior written
approval of the Company, by gift, in a form accepted by the Company, to your
"immediate family" as that term is defined in 17 C.F.R. 240.16a-1(e). The term
"immediate family" is
1.
<PAGE>
defined in 17 C.F.R. 240.16a-1(e) to mean any child, stepchild, grandchild,
parent, stepparent, grandparent, spouse, sibling, mother-in-law, father-in-law,
son-in-law, daughter-in-law, brother-in-law, or sister-in-law, and includes
adoptive relationships. Your option is exercisable during your life only by you
or a transferee satisfying the above-stated conditions. The right of a
transferee to exercise the transferred portion of your option after termination
of your Continuous Service shall terminate in accordance with your right to
exercise your option as specified in your option. In the event that your
Continuous Service terminates due to your death, your transferee will be treated
as a person who acquired the right to exercise your option by bequest or
inheritance. In addition to the foregoing, the Company may require, as a
condition of the transfer of your option to a trust or by gift, that your
transferee enter into an option transfer agreement provided by, or acceptable
to, the Company. The terms of your option shall be binding upon your
transferees, executors, administrators, heirs, successors, and assigns.
Notwithstanding the foregoing, by delivering written notice to the Company, in a
form satisfactory to the Company, you may designate a third party who, in the
event of your death, shall thereafter be entitled to exercise your option.
4. Any notices provided for in this option or the Plan shall be given in
writing and shall be deemed effectively given upon receipt or, in the case of
notices delivered by the Company to you, five (5) days after deposit in the
United States mail, postage prepaid, addressed to you at the address specified
below or at such other address as you hereafter designate by written notice to
the Company.
5. This option is subject to all the provisions of the Plan, a copy of
which is attached hereto, and its provisions are hereby made a part of this
option, including without limitation the provisions of Section 7 of the Plan
relating to option provisions, and is further subject to all interpretations,
amendments, rules and regulations which may from time to time be promulgated and
adopted pursuant to the Plan. In the event of any conflict between the
provisions of this option and those of the Plan, the provisions of the Plan
shall control.
Dated the __________ day of __________, 20__.
Very truly yours,
Telik, Inc.
By: _________________________________
Duly authorized on behalf
of the Board of Directors
Attachments:
2000 Non-Employee Directors' Stock Option Plan
2.
<PAGE>
The undersigned:
(a) Acknowledges receipt of the foregoing option and the attachments
referenced therein and understands that all rights and liabilities with respect
to this option are set forth in the option and the Plan;
(b) Acknowledges that as of the date of grant of this option, it sets
forth the entire understanding between the undersigned optionholder and the
Company and its affiliates regarding the acquisition of stock in the Company and
supersedes all prior oral and written agreements on that subject with the
exception of (i) the options previously granted and delivered to the undersigned
under stock options plans of the Company, and (ii) the following agreements
only:
None _____________________________________
(Initial)
Other ____________________________________
____________________________________
____________________________________
____________________________________
Optionholder
____________________________________
Address
____________________________________
____________________________________
3.
<PAGE>
EXHIBIT 10.5
COLLABORATIVE RESEARCH AGREEMENT
This Collaborative Research Agreement (the "Agreement") is made as of the
24th day of March, 1999 ("Effective Date"), by and between Telik, Inc., a
Delaware corporation having a place of business at 750 Gateway Boulevard, South
San Francisco, California 94080, U.S.A. ("Telik") and Sankyo Company, Ltd., a
Japanese corporation having a place of business at 5-1, Nihonbashi Honcho 3-
chome, Chuo-ku, Tokyo 103-8426, Japan ("Sankyo"). Telik and Sankyo shall be
referred to herein individually as a "Party" and collectively as the "Parties."
Recitals
Whereas, Telik possesses a library of compounds ("Telik Library") and
proprietary technology which enables it to classify and search compounds
according to their protein-binding capabilities ("TRAP Technology");
Whereas, Sankyo has certain biological targets ("Sankyo Targets") for which
it desires to find activity-modulating compounds; and
Whereas, Sankyo wishes to evaluate the ability of the Telik Library and
TRAP Technology to identify compounds that affect Sankyo Targets and that may
lead to candidates for pharmaceutical development;
Now, Therefore, in consideration of the foregoing premises and the
covenants set forth below, the parties hereby agree as follows:
1. [ * ] Fee.
1.1 Payment of Fee. Sankyo shall pay Telik a [*] [*] in [*] [*],
and [*]. Telik shall send invoices to Sankyo [*] to the [*]. The
installment payments shall be made in U.S. dollars by wire transfer to a bank
account to be specified by Telik.
1.2 Taxes. Sample Supply Fee payments shall be made without deduction
other than such amount (if any) Sankyo is required by law to deduct or withhold.
If the Sample Supply Fee is subject to such deductions or other withholdings, it
shall be increased by an amount which shall equal, as nearly as possible, the
amount required to be deducted or withheld.
2. Screening Activity.
2.1 Screening Term. The term during which Sankyo may perform the
screening activities set forth in this Article 2 (the "Screening Term") shall
begin on the Effective Date and
[*] CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE sECURITIES ACT OF 1933, AS
AMENDED.
1
<PAGE>
expire [ * ] later, provided however, that if Sankyo elects to choose Substitute
Selected Targets as provided in Section 2.4(a)(i), the Screening Term shall be
extended as described therein.
2.2 Target Selection. During the first [ * ] of the Screening Term,
Sankyo may notify Telik in writing of Sankyo Targets against which Sankyo wishes
to screen compounds provided by Telik ("Proposed Targets"). Sankyo's
notification must provide the molecular identity of the Proposed Targets and
such other information as Telik may reasonably request to permit Telik to
confirm that none of such Proposed Targets is identical to, overlapping or
otherwise in conflict with (i) targets included in, or subject to any then-
existing restriction resulting from, any research collaboration between Telik
and a third party or (ii) targets that Telik was already actively pursuing prior
to receipt of Sankyo's notice (collectively, "Reserved Targets"). Telik shall
notify Sankyo in writing whether or not each Proposed Target is a Reserved
Target. If a Proposed Target is not a Reserved Target, then the Proposed Target
will be deemed a "Selected Target" upon dispatch of Telik's notification. Telik
shall list all Proposed Targets in the Appendix to this Agreement and shall
update such Appendix, as necessary, to indicate whether a Proposed Target
becomes a Selected Target and to delete all Reserved Targets. Sankyo may
designate no more than ten (10) Selected Targets.
2.3 Active Molecule Criteria. Prior to the initiation of compound
screening against each Selected Target, the Parties will agree on the screening
results required for a compound provided by Telik as set forth in Section 2.4 to
be classified as an "Active Molecule."
2.4 Screening Activity and Data Collection.
(a) Within [ * ] of the later of (i) the date that a Proposed Target
is deemed a Selected Target or (ii) the Parties' agreement regarding the Active
Molecule criteria for that Selected Target, Telik shall, based upon its
knowledge of the Telik Library and using the TRAP Technology, select and provide
to Sankyo approximately [ * ] compounds ("Initial Compounds") from the Telik
Library that Telik believes, in its sole discretion, represent maximum chemical
compound diversity in the Telik Library. Telik shall provide such Initial
Compounds in quantities of approximately [ * ] per Initial Compound, per
Selected Target. Sankyo shall screen each Initial Compound for activity in
relation to the Selected Target and provide all data (including but not limited
to the concentration at which a compound elicits a response which is 50% of the
maximum response in the assay being applied (the "EC\50\") for each Initial
Compound) resulting therefrom ("Initial Results") to Telik within [ * ] of
Sankyo's receipt of the Initial Compounds. Sankyo hereby covenants that it will
not use the Initial Compounds for any purpose other than that set forth in this
Section 2.4(a), it will cease using the Initial Compounds after completion of
testing as set forth in this Section 2.4(a), and it will store and return unused
Initial Compounds as set forth in Section 2.4(f).
(i) If none of the Initial Compounds has an EC\50\ equal to or
less than [ * ] or the Initial Results otherwise contain insufficient useful
information for Telik to select Secondary Compounds pursuant to Section 2.4(b),
then Telik will provide Sankyo with another set of Initial Compounds (the
"Substitute Initial Compounds"), in quantities of approximately [ * ] per
Substitute Initial Compound, per Selected Target. The Substitute Initial
Compounds shall be treated by both Parties as if they were Initial Compounds;
provided, however, that if none of
[*] CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE sECURITIES ACT OF 1933, AS
AMENDED.
2
<PAGE>
the Substitute Initial Compounds has an EC\50\ equal to or less than [ * ] or
the Initial Results from the Substitute Initial Compounds otherwise contain
insufficient useful information for Telik to select Secondary Compounds, then
(1) Telik shall not be obligated to provide any additional
Compounds to Sankyo with respect to the relevant Selected Target, and Telik's
obligations under Article 5 with respect to such Selected Target shall
terminate; and
(2) Sankyo may, at its election, not later than [ * ] after
Telik's receipt of the Initial Results for the Substitute Initial Compounds for
a particular Selected Target, choose a new target in substitution for such
Selected Target ("Substitute Selected Target"), not to exceed ten (10)
Substitute Selected Targets in the aggregate. The Substitute Selected Targets
shall be treated by both Parties as if they were Selected Targets. If Sankyo
exercises its right to choose a Substitute Selected Target, the Screening Term
shall be extended as necessary to complete the screening process for such
Substitute Selected Target within the schedule described in this Article 2, but
in no event shall the Screening Term be extended by more than [ * ].
(b) Within [ * ] after receipt of the Initial Results, Telik shall,
based upon the Initial Results and using the TRAP Technology or any other search
technology available to Telik, select and provide to Sankyo an appropriate
number of additional compounds ("Secondary Compounds") from the Telik Library
that Telik believes, in its sole discretion, will exhibit the greatest
likelihood of activity in relation to the Selected Target. Sankyo shall screen
each Secondary Compound for selected activity in relation to the Selected Target
and provide all data (including but not limited to the EC\50\ for each Secondary
Compound) resulting therefrom ("Secondary Results") to Telik within [ * ] of
Sankyo's receipt of the Secondary Compounds. Sankyo hereby covenants that it
will not use the Secondary Compounds for any purpose other than that set forth
in this Section 2.4(b), it will cease using the Secondary Compounds after
completion of testing as set forth in this Section 2.4(b), and it will store and
return unused Secondary Compounds as set forth in Section 2.4(f).
(c) Within [ * ] after receipt of the Secondary Results, Telik shall,
based upon the Secondary Results and using the TRAP Technology or any other
search technology available to Telik, select and provide to Sankyo [ * ]
additional compounds ("Tertiary Compounds") from the Telik Library that Telik
believes, in its sole discretion, will exhibit the greatest likelihood of
activity in relation to the Selected Target. Sankyo shall screen each Tertiary
Compound for selected activity in relation to the Selected Target and provide
all data (including but not limited to the EC\50\ for each Tertiary Compound)
resulting therefrom ("Tertiary Results") to Telik within [ * ] of Sankyo's
receipt of the Tertiary Compounds. Sankyo hereby covenants that it will not use
the Tertiary Compounds for any purpose other than that set forth in this Section
2.4(c), it will cease using the Tertiary Compounds after completion of testing
as set forth in this Section 2.4(c), and it will store and return unused
Tertiary Compounds as set forth in Section 2.4(f).
(d) If Sankyo and Telik jointly determine that further screening
activity is necessary, then based upon the Tertiary Results and using the TRAP
Technology or any other search technology available to Telik, Telik shall select
and provide to Sankyo [ * ] additional compounds ("Quaternary Compounds") from
the Telik Library that Telik believes, in its sole
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
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AMENDED.
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discretion, will exhibit the greatest likelihood of assay activity in relation
to the Selected Target. Sankyo will screen each Quaternary Compound for selected
activity in relation to the Selected Target and provide Telik all data
(including but not limited to the EC\50\ for each Quaternary Compound) resulting
therefrom ("Quaternary Results") to Telik within [ * ] of Sankyo's receipt of
the Quaternary Compounds. Sankyo hereby covenants that it will not use the
Quaternary Compounds for any purpose other than that set forth in this Section
2.4(d), it will cease using the Quaternary Compounds after completion of testing
as set forth in this Section 2.4(d), and it will store and return unused
Quaternary Compounds as set forth in Section 2.4(f).
(e) The total number of Initial Compounds, Secondary Compounds,
Tertiary Compounds and Quaternary Compounds provided by Telik pursuant to this
Section 2.4 (collectively, the "Provided Compounds") shall be in the range of
approximately [ * ] to approximately [ * ] Provided Compounds per Selected
Target. Telik shall provide to Sankyo any information Telik may have in its
possession regarding appropriate usage and handling of the Provided Compounds
concurrent with the delivery to Sankyo of such Provided Compounds.
(f) Beginning with receipt by Sankyo and continuing through the
completion of testing under Section 2.4(a), 2.4(b), 2.4(c) or 2.4(d), Sankyo
shall store any unused Initial Compounds, Secondary Compounds, Tertiary
Compounds or Quaternary Compounds, as applicable, in a secure location. Within
[ * ] of the completion of screening against a Selected Target, Sankyo will
return to Telik all unused Provided Compounds for that Selected Target unless
specifically authorized by Telik, in writing, to do otherwise.
3. Identification and Disclosure of Chemical Structures.
3.1 Not later than [ * ] after sending the Tertiary Results or, if
applicable, the Quaternary Results to Telik, Sankyo shall provide Telik with a
written list of the Provided Compounds in which Sankyo has an interest. Telik
shall determine which of these Provided Compounds qualify as Active Molecules
and shall provide to Sankyo the two dimensional representations of the chemical
structures of the Active Molecules on Sankyo's list (the "Disclosed Active
Molecules"). In addition, to provide Sankyo with additional information for
evaluating the potential of the Disclosed Active Molecules, Telik may also
provide the two dimensional representations of the chemical structures of
certain other Provided Compounds, selected by Telik in its sole discretion, that
did not qualify as Active Molecules. Sankyo will use the structural information
provided by Telik solely to evaluate whether it wishes to exercise its option,
set forth in Section 4.1, for a license to develop and commercialize such
Disclosed Active Molecules. Sankyo hereby covenants that it will not use the
structural information for any other purpose. If Sankyo does not submit to
Telik a written list of the Provided Compounds in which Sankyo has an interest
within the time permitted under this Section 3.1, Telik's obligations under
Article 5 with respect to the relevant Selected Target shall terminate.
3.2 The parties anticipate that Telik will be conducting research
collaborations with third parties during the Screening Term with respect to
targets other than Selected Targets. Telik will not provide to Sankyo under
Section 2.4 compounds as to which a third party has exercised an option to
obtain or has obtained license rights, or which has otherwise been reserved by a
third party ("Reserved Compound"). Nonetheless, the parties acknowledge that
the compounds provided to Sankyo under this Agreement may include compounds
provided to third parties
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE sECURITIES ACT OF 1933, AS
AMENDED.
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under research collaborations or similar arrangements with such third parties.
Accordingly, a third party may, while Sankyo is screening a particular compound,
designate that compound a Reserved Compound. In such event, Telik will promptly
inform Sankyo that such compound has become a Reserved Compound, and all of
Sankyo's rights regarding that Reserved Compound, including those rights set
forth in Articles 2, 3 and 4, shall terminate. In no event will Telik provide
Sankyo with the chemical structure of such Reserved Compound. In the event that
a third party terminates or otherwise waives its rights to a Reserved Compound
that Sankyo has screened and which qualifies as an Active Molecule, Telik will
notify Sankyo that such compound is no longer a Reserved Compound and Sankyo may
elect, in its discretion and by written notice to Telik, to receive the two
dimensional representation of its chemical structure from Telik. Such compound
shall thereafter be deemed a Disclosed Active Molecule subject to Section 3.1
and Article 4.
4. Option for Development and Commercialization License.
4.1 License Option. Effective upon Telik's delivery to Sankyo of the
structures of all of the Disclosed Active Molecules for a particular Selected
Target (the "Option Effective Date"), Telik hereby grants to Sankyo an option to
acquire an exclusive, worldwide license to develop and commercialize any or all
Disclosed Active Molecules for such Selected Target (the "License Option"). The
term of such option shall commence on the Option Effective Date and expire [ * ]
thereafter (the "Option Term").
4.2 Exercise of License Option. Sankyo shall exercise the License Option
described in Section 4.1 by (i) providing written notice to Telik, prior to the
expiration of the Option Term, identifying each Disclosed Active Molecule to
which Sankyo desires to procure a license (a "Sankyo-Reserved Molecule") and
(ii) negotiating and entering into a mutually agreed license agreement (the
"License Agreement") as set forth in Section 4.4 within [ * ] of the Option
Effective Date.
4.3 Consolidation of Licensing Negotiations. To facilitate the execution
of a single License Agreement covering Sankyo-Reserved Molecules related to more
than one Selected Target, Telik may, in its sole discretion, agree to extend the
negotiation period for a Selected Target if Sankyo provides, during the
negotiation period for that Selected Target, timely written notification of its
desire to procure a license for Disclosed Active Molecules related to one or
more additional Selected Targets. As a result of such an extension, the parties
will have until [ * ] after the Option Effective Date for the last Selected
Target as to which Sankyo has provided timely notification under Section 4.2 to
negotiate and execute a License Agreement covering all such Selected Targets.
4.4 License Agreement. If Sankyo exercises the License Option, Telik
intends to provide Sankyo with exclusive, worldwide rights to all know-how and
under all patents, patent applications and patent claims owned by Telik to the
extent necessary or useful to the development and commercialization of products
that, in the course of their discovery, development or production, utilize or
incorporate the relevant Licensed Active Molecule (as defined below) or a
derivative thereof. To this end, in the License Agreement Telik shall grant to
Sankyo an exclusive, worldwide license (with the right to sublicense) to make,
have made, use, import, offer for sale and sell such products. The License
Agreement shall contain such other
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE sECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE sECURITIES ACT OF 1933, AS
AMENDED.
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terms as are consistent with terms then-applied to products of similar market
potential arising out of or developed in the biopharmaceutical industry,
provided however that (i) the royalty rate payable to Telik on net sales of
products to be developed and commercialized under such license shall not exceed
[ * ]; and (ii) except for any patents or patent applications assigned to Sankyo
under such a License Agreement, in the event that any inventions arise out of
the development and commercialization of products incorporating the relevant
Licensed Active Molecule or a derivative thereof, inventions made by either
party shall be owned by the party that made such inventions and inventions made
jointly by the parties shall be owned jointly by the parties. Upon the execution
of a License Agreement, any Sankyo-Reserved Molecule that is subject to the
License Agreement shall become a "Licensed Active Molecule." If Sankyo prefers
the assignment by Telik of certain patent application(s) or patent(s) in lieu of
an exclusive license for such applications or patents, Telik is willing to
consider such a request during the negotiation of the License Agreement.
5. Exclusivity.
5.1 [ * ]. Commencing [ * ], Telik shall not thereafter perform [ * ]
other than that [ * ] which is within the scope of this Agreement, until the
earlier of (i) [ * ], (ii) [ * ], (iii) [ * ] of the [ * ] a [ * ] as described
in Sections [ * ], (iv) [ * ]; or (v) [ * ].
5.2 Sankyo-Reserved Molecules. Upon receipt of Sankyo's notice pursuant to
Section 4.2, Telik shall remove each Sankyo-Reserved Molecule identified in such
notice from the Telik Library, and shall not conduct or permit to be conducted,
or grant any third party the right to conduct, any research, development or
commercialization of such Sankyo-Reserved Molecules, provided that:
(a) Telik's obligations under this Article 5 with respect to any
Sankyo-Reserved Molecule not then the subject of an executed License Agreement
shall terminate [ * ] after the Option Effective Date for the relevant Selected
Target (or, if Telik grants an extension pursuant to Section 4.3, [ * ] after
the Option Effective Date for the last Selected Target as to which Sankyo
provided timely notification under Section 4.2). Telik shall thereafter be free
to conduct or grant any third party the right to conduct research, development
and commercialization activities with respect to such Sankyo-Reserved Molecules.
(b) Telik's obligations under this Article 5 with respect to any
Selected Target for which no Sankyo-Reserved Molecule is then the subject of an
executed License Agreement shall terminate [ * ] after the Option Effective Date
for such Selected Target (or, if Telik grants an extension pursuant to Section
4.3, [ * ] after the Option Effective Date for the last Selected Target as to
which Sankyo provided timely notification under Section 4.2). Telik shall
thereafter be free to conduct or grant any third party the right to conduct
research, development and commercialization activities with respect to such
Selected Target, and Sankyo shall be free to conduct or grant any third party
the right to conduct research, development and commercialization activities with
respect to such Selected Target.
6. Ownership of Data and Intellectual Property.
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
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6.1 Data Ownership. Prior to the expiration of the License Option for all
Disclosed Active Molecules for a Selected Target, the Initial Results, Secondary
Results, Tertiary Results, and Quaternary Results, if applicable, (the "Combined
Screening Results") pertaining to those Disclosed Active Molecules shall be
jointly owned by the Parties. Upon the execution of a License Agreement
pursuant to Article 4, Telik shall grant to Sankyo the exclusive right to use
Telik's interest in the Combined Screening Results pertaining to the relevant
Licensed Active Molecules in the manufacture, use and sale of products
incorporating or based upon such Licensed Active Molecules, including analogues,
derivatives, or formulations thereof, and in the manufacture, use and sale of
products incorporating compounds identified via analysis of structure-activity
information gathered from the Combined Screening Results. Upon the later of (i)
the expiration of the License Option for a Disclosed Active Molecule or (ii) the
passing of [ * ] from the Option Effective Date for a Sankyo-Reserved Molecule
(or, if Telik grants an extension pursuant to Section 4.3, [ * ] after the
Option Effective Date for the last Selected Target as to which Sankyo provided
timely notification under Section 4.2) for which no License Agreement was
executed, the Combined Screening Results pertaining to the Disclosed Active
Molecule or Sankyo-Reserved Molecule shall be solely owned by Telik; Telik
shall have the right to use such Combined Screening Results for any purpose, and
Sankyo shall not have any right to use such Combined Screening Results.
6.2 Ownership of Telik Library, Provided Compounds and TRAP Technology.
All right, title and interest in and to the Telik Library, Provided Compounds,
TRAP Technology, and any know-how, patents, or patent applications controlled by
Telik and pertaining to the above items shall remain exclusively with Telik,
subject only to the rights granted to Sankyo under Sections 2.4, 4.1, 4.4 and
5.2. Sankyo agrees not to obtain or attempt to obtain patents on the Telik
Library, Provided Compounds, TRAP Technology, or use thereof without the express
written consent of Telik.
6.3 Inventions. Notwithstanding the ownership of data set forth in Section
6.1, any inventions or discoveries (whether patentable or not) pertaining to,
and all information resulting directly from the activities of either party
pursuant to Articles 2 and 3 (the "Inventions"), will be solely owned by Telik.
Sankyo shall promptly disclose to Telik any Invention resulting from the
activities of Sankyo, its employees, agents or affiliates. Sankyo agrees not to
obtain or attempt to obtain patents on the Inventions without the express
written consent of Telik.
(a) Prior to the execution of a License Agreement pursuant to Article
4, Telik shall have the sole right to file, prosecute, maintain, enforce and
defend all patent applications and patents for Inventions and shall pay all
costs and fees incurred with respect to such activities. Sankyo shall provide
Telik, at Telik's expense, any assistance reasonably requested by Telik for the
filing, prosecution, maintenance, enforcement or defense of such patents or
patent applications. If Telik decides not to file a patent application for an
Invention and Sankyo so requests in writing, Telik shall file and prosecute such
a patent application and maintain any patent arising therefrom for so long as
Sankyo promptly pays all costs and fees incurred with respect to such activities
(including any costs associated with assistance provided by Sankyo at Telik's
request). Telik shall not be obligated to file, prosecute or maintain any
patent application or patent for an Invention other than that for which Sankyo
has complied with the requirements set forth in the preceding sentence. In no
event shall Telik be obligated to enforce or defend such
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
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patent application or patent for Inventions. Within [ * ] after the filing of a
patent application for an Invention, Telik shall provide Sankyo with written
notification that such filing has been made.
(b) Upon the execution of a License Agreement pursuant to Article 4,
Sankyo shall reimburse Telik for all patent filing, prosecution and maintenance
costs (including attorneys' fees) incurred by Telik as of the effective date of
such License Agreement regarding any patent or patent application for Inventions
licensed to Sankyo thereunder. Thereafter, Sankyo shall promptly pay all patent
filing, prosecution and maintenance expenses for any patent or patent
application for Inventions licensed to Sankyo under the License Agreement.
7. Representations and Warranties.
7.1 Each Party represents and warrants to the other that:
(a) It will exercise due care in performing its obligations under the
Agreement.
(b) All documentation and other information conveyed by one Party to
another hereunder or in connection herewith, was, at the time it was conveyed or
provided, accurate and complete in light of the purposes for which it was
intended.
7.2 THE PROVIDED COMPOUNDS ARE BEING SUPPLIED TO SANKYO ON AN "AS IS"
BASIS WITH NO WARRANTIES OF ANY KIND, EXPRESS OR IMPLIED, INCLUDING ANY WARRANTY
OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR THAT THEY ARE FREE
FROM THE RIGHTFUL CLAIM OF ANY THIRD PARTY, BY WAY OF INFRINGEMENT OR THE LIKE.
TELIK MAKES NO REPRESENTATIONS THAT USE OF THE PROVIDED COMPOUNDS WILL NOT
INFRINGE ANY PATENT OR OTHER PROPRIETARY RIGHTS OF ANY THIRD PARTIES.
8. Acknowledgments and Covenants by Sankyo.
8.1 Sankyo acknowledges and agrees that the Provided Compounds may have
biological and/or chemical properties that are unpredictable and unknown at the
time of transfer. Sankyo hereby covenants that it will use the Provided
Compounds with caution and prudence and it will not use the Provided Compounds
for testing in or treatment of humans or in any other test not part of the
Appendix.
8.2 Sankyo covenants that it will maintain reasonable security measures,
no less strict than it maintains to protect its own valuable tangible property,
against loss, theft or destruction of the Provided Compounds.
8.3 Sankyo covenants that it shall not attempt to reverse engineer or
ascertain, by any means, the chemical structure or any other information
concerning any Provided Compound unless and until Telik has provided the
chemical structure to Sankyo.
9. Confidentiality.
[*] CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES aCT OF 1933, AS
AMENDED.
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9.1 Definition of Confidential Information. "Confidential Information"
shall mean any and all knowledge, know-how, Proposed Targets, Selected Targets,
Combined Screening Results, structures of Provided Compounds, practices,
processes, or other information received by one Party from the other Party
pursuant to this Agreement.
9.2 Nondisclosure of Confidential Information. Except to the extent
expressly authorized by this Agreement or otherwise agreed in writing by the
Parties, the Parties agree that, for the term of this Agreement and for [ * ]
after its expiration or termination, the receiving Party shall keep confidential
and shall not publish or otherwise disclose and shall not use for any purpose
other than as provided for in this Agreement any Confidential Information,
hereinafter defined, furnished to it by the other Party pursuant to this
Agreement unless the receiving Party can demonstrate by competent written proof
that such Confidential Information:
(a) was already known to the receiving Party, other than under an
obligation of confidentiality, at the time of disclosure by the other Party;
(b) was generally available to the public or otherwise part of the
public domain at the time of its disclosure to the receiving Party;
(c) became generally available to the public or otherwise part of the
public domain after its disclosure and other than through any act or omission of
the receiving Party in breach of such Agreements;
(d) was disclosed to the receiving Party, other than under an
obligation of confidentiality to a third party, by a third party who had no
obligation to the disclosing Party not to disclose such information to others;
or
(e) was independently discovered or developed by the receiving Party
without the use of Confidential Information belonging to the disclosing Party.
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
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9.3 Authorized Disclosure. Each Party may disclose Confidential
Information belonging to the other Party to the extent such disclosure is
reasonably necessary in the following instances:
(a) Filing or prosecuting patents relating to Inventions or licensed
products;
(b) Regulatory filings;
(c) Prosecuting or defending litigation;
(d) Complying with applicable governmental regulations;
(e) Disclosure to Affiliates, sublicensees, employees, consultants,
or agents, each of whom prior to disclosure must be bound by similar obligations
of confidentiality and non-use at least equivalent in scope to those set forth
in this Article 9;
(f) Disclosure to investment bankers, investors, and potential
investors of information relevant to their assessment of the disclosing company,
such as the existence of the Agreement, the general nature of the diseases for
which targets have been selected, the number (but not the identity) of targets
selected and the status of the project on a per target basis (without
identifying the target); and
(g) Disclosure by Telik, more than [ * ] after the expiration of a
deadline applicable to Sankyo as set forth in Sections 4.1, 4.2 or 4.3 without
appropriate action or response by Sankyo, of the Combined Screening Results
against the relevant, identified Selected Target for a Disclosed Active
Molecule, to third parties interested in pursuing such Selected Target or
Disclosed Active Molecule, provided however, that Telik will not disclose to
such third party that Sankyo selected such Selected Target.
In any event, the Parties agree to take all reasonable action to avoid
disclosure of Confidential Information except as permitted hereunder.
[*] CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE sECURITIES ACT OF 1933, AS
AMENDED.
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9.4 Publicity. Any publication, news release or other public announcement
relating to this Agreement or to the performance hereunder, shall be first
reviewed and approved by both Parties, which approval shall not be unreasonably
withheld.
10. Term; Termination.
10.1 Term. This Agreement shall become effective as of the Effective Date
and unless earlier terminated as provided in this Article 10, shall expire on
the later of (i) the expiration of the time to enter all License Agreements
under Section 4.2, or (ii) thirty-six (36) months after the Effective Date.
10.2 Termination for Default. In the event that either party to this
Agreement shall be in default of any of its material obligations hereunder and
shall fail to remedy such default within [ * ] after receipt of written notice
thereof, the party not in default shall have the option of terminating this
Agreement by giving written notice thereof, notwithstanding anything to the
contrary contained in this Agreement.
10.3 Effect of Termination.
(a) In General. Termination of this Agreement shall not relieve the
Parties of any obligations accruing prior to such termination. In the event of
termination by Telik pursuant to Section 10.2 as a result of Sankyo's default of
a material obligation, Sankyo shall pay Telik any Sample Supply Fee accrued at
the time of termination but not yet paid. Except to the extent necessary to
allow the Parties to exploit their respective rights pursuant to Section 6,
promptly after termination of this Agreement each Party shall return or dispose
of any know-how of the other in accordance with the instructions of the other,
including without limitation any compounds, assays or other biological or
chemical materials.
(b) Default by Telik. Following Sankyo's termination of this
Agreement pursuant to Section 10.2 as a result of Telik's default of a material
obligation, [ * ]. If, as of the date of termination, Sankyo has not made
payments to Telik equal to or greater than [ * ], Sankyo shall make such
additional payment to Telik within [ * ] of the effective date of termination.
If, as of the date of termination, Sankyo's payments total an amount greater
than [ * ], Telik shall refund to Sankyo any excess amounts within [ * ] of the
effective date of termination. Telik shall (i) disclose to Sankyo the
structures for the Provided Compounds that have been tested by Sankyo and
qualify as Active Molecules as of the date of Sankyo's termination and (ii)
grant to Sankyo a nonexclusive, royalty-free, perpetual worldwide license (with
the right to sublicense) to develop and commercialize products that, in the
course of their discovery, development or production, utilize or incorporate
such Disclosed Active Molecules.
10.4 Surviving Obligations. The terms of Articles 6 and 9 and Section 12.9
of this Agreement shall survive expiration or termination of this Agreement.
11. Governing Law; Dispute Resolution.
11.1 Governing Law. This Agreement shall be governed by and construed in
accordance with the domestic laws of the State of California, (i) without giving
effect to any choice or conflict of law provision or rule that would cause the
application of the laws of any
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AMENDED.
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jurisdiction other than the State of California, and (ii) except that the rights
of the parties to resolve by arbitration any dispute arising between them
regarding the subject matter of this Agreement shall not be governed by the
California arbitration act or international arbitration act (Cal. Code of Civ.
Proc. (S) 1280 et seq. and 1297.11 et seq.) but rather by the United States
Arbitration Act (9 U.S.C. (S)(S) 1-14, 201-208).
11.2 Dispute Resolution. In the event of any controversy or claim arising
out of, relating to or in connection with any provision of this Agreement, the
Parties shall try to settle their differences amicably and in good faith between
themselves first, by referring the disputed matter to the respective heads of
research of each Party and, if not resolved by the research heads, by referring
the disputed matter to the respective Chief Executive Officer of each Party. In
the event such executives are unable to resolve such dispute within such thirty
(30) day period, either Party may invoke the provisions of Section 11.3.
11.3 Arbitration. Upon failure to resolve any controversy or claim
arising out of, relating to or in connection with any provision of this
Agreement using the dispute resolution procedure described in Section 11.2, and
except as provided in Section 11.3(c) below, any dispute, controversy or claim
arising out of or relating to the validity, construction, enforceability or
performance of this Agreement, including disputes relating to alleged breach or
to termination of this Agreement, other than disputes which are expressly
prohibited herein from being resolved by this mechanism, shall be settled by
binding Alternative Dispute Resolution ("ADR") in the manner described below:
(a) If a party intends to begin an ADR to resolve a dispute, such
party shall provide written notice (the "ADR Request") to counsel for the other
party informing such other party of such intention and the issues to be
resolved. From the date of the ADR Request and until such time as any matter
has been finally settled by ADR, the running of the time periods contained in
Article 10 as to which a party must cure a breach of this Agreement shall be
suspended as to the subject matter of the dispute.
(b) Within ten (10) business days after the receipt of the ADR
Request, the other party may, by written notice to the counsel for the party
initiating ADR, add additional issues to be resolved.
(c) Any dispute regarding the validity or enforceability of a patent
or trademark applicable to a product shall be submitted to a court of competent
jurisdiction in the country in which such patent or trademark right exists.
[*] CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
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11.4 Procedure. The ADR shall be conducted pursuant to JAMS/ENDISPUTE
Rules A and C then in effect. Notwithstanding those rules, the following
provisions shall apply to the ADR hereunder.
(a) Arbitrator. The arbitration shall be conducted by a panel of
three arbitrators ("the Arbitrators"). The Arbitrators shall be selected from a
pool of retired independent federal judges to be presented to the parties by
JAMS/ENDISPUTE. Neither party shall engage in ex parte contact with the
arbitrator.
(b) Proceedings. The time periods set forth in the JAMS/ENDISPUTE
rules shall be followed, unless a party can demonstrate to the Arbitrator that
the complexity of the issues or other reasons warrant the extension of one or
more of the time tables. The Arbitrator shall not award punitive damages to
either party and the parties shall be deemed to have waived any right to such
damages. The Arbitrator shall apply the Federal Rules of Evidence to the
hearing. The proceeding shall take place in Honolulu, Hawaii in the English
language. The fees of the Arbitrators and JAMS/ENDISPUTE shall be paid by the
losing party, which shall be designated by the Arbitrator. If the Arbitrator is
unable to designate a losing party, it shall so state and the fees shall be
split equally between the parties.
(c) Award. The Arbitrator is empowered to award any remedy allowed
by law, including money damages, prejudgment interest and attorneys' fees, and
to grant final, complete, interim, or interlocutory relief, including injunctive
relief but excluding punitive damages.
11.5 Confidentiality. The ADR proceeding, the existence of any dispute
submitted to ADR, and the award shall be confidential and the Panel shall issue
appropriate protective orders to safeguard each party's Confidential
Information. Except as required by law or in connection with the enforcement of
an award hereunder, no party shall disclose (or instruct the Panel to disclose)
such Confidential Information without prior written consent of each other party.
11.6 Judicial Enforcement. The parties agree that judgment on any
arbitral award issued pursuant to this Article 11 shall be entered in the United
States District Court for the Northern District of California or, in the event
such court does not have subject matter jurisdiction over the dispute in
question, such judgment shall be entered in the Superior Court of the State of
California, in the County of San Mateo.
12. Miscellaneous.
12.1 Notices. All notices required or permitted to be given under this
Agreement shall be in writing and shall be mailed by registered or certified
mail, postage prepaid, addressed to the signatory to whom such notice is
required or permitted to be given and transmitted by facsimile to the number
indicated below. All notices shall be deemed to have been given when mailed, as
evidenced by the postmark at the point of mailing, or transmitted by facsimile.
All notices to Sankyo shall be addressed as follows:
Sankyo Company, Ltd.
[*] CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE sECURITIES ACT OF 1933, AS
AMENDED.
13
<PAGE>
2-58, Hiromachi 1-chome
Shinagawa-ku
Tokyo 140-8710
JAPAN
Attention: Dr. Hiroshi Fukumi
Fax: 81-3-5436-8569
with a copy to:
Sankyo Company, Ltd.
2-58, Hiromachi 1-chome
Shinagawa-ku
Tokyo 140-8710
JAPAN
Attention: Dr. Hidenori Shimotsu
Fax: 81-3-5436-8561
All notices to Telik shall be addressed as follows:
Telik, Inc.
750 Gateway Boulevard
South San Francisco, California 94080
U.S.A.
Attention: President
Fax: (650) 244-9388
with a copy to:
Cooley Godward LLP
Five Palo Alto Square
3000 El Camino Real
Palo Alto, California 94306
U.S.A.
Attention: Robert L. Jones, Esq.
Fax: (650) 857-0663
Any Party may, by written notice to the other, designate a new addressee,
address or facsimile number to which notices to the Party giving the notice
shall thereafter be mailed or faxed.
12.2 Force Majeure. No Party shall be liable for any delay or failure of
performance to the extent such delay or failure is caused by circumstances
beyond its reasonable control and that by the exercise of due diligence it is
unable to prevent, provided that the Party claiming excuse uses its best efforts
to overcome the same.
12.3 Entirety Of Agreement. This Agreement embodies the entire, final and
complete agreement and understanding between the Parties and replaces and
supersedes all prior
[*] CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE sECURITIES ACT OF 1933, AS
AMENDED.
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discussions and agreements between them with respect to its subject matter
except as expressly stated herein. No modification or waiver of any terms or
conditions hereof shall be effective unless made in writing and signed by a duly
authorized officer of each Party.
12.4 Non-Waiver. The failure of a Party in any one or more instances to
insist upon strict performance of any of the terms and conditions of this
Agreement shall not constitute a waiver or relinquishment, to any extent, of the
right to assert or rely upon any such terms or conditions on any future
occasion.
12.5 Disclaimer Of Agency. Neither Party is, or will be deemed to be, the
legal representative or agent of the other, nor shall either Party have the
right or authority to assume, create, or incur any third party liability or
obligation of any kind, express or implied, against or in the name of or on
behalf of another except as expressly set forth in this Agreement.
12.6 Severability. If a court of competent jurisdiction declares any
provision of this Agreement invalid or unenforceable, or if any government or
other agency having jurisdiction over either Telik or Sankyo deems any provision
to be contrary to any laws, then that provision shall be severed and the
remainder of the Agreement shall continue in full force and effect. To the
extent possible, the Parties shall revise such invalidated provision in a manner
that will render such provision valid without impairing the Parties' original
interest.
12.7 Affiliates; Assignment. Except as otherwise provided in this Section
12.7, neither Party may assign its rights or obligations under this Agreement
without the prior written consent of the other Party, such consent not to be
unreasonably withheld, except that a Party may assign its rights or obligations
to a third party in connection with the merger, consolidation, reorganization or
acquisition of stock or assets affecting substantially all of the assets or
actual voting control of the assigning Party. This Agreement shall be binding
upon the successors and permitted assigns of the Parties. Any attempted
delegation or assignment not in accordance with this Section 12.7 shall be of no
force or effect.
12.8 Headings. The headings contained in this Agreement have been added
for convenience only and shall not be construed as limiting.
12.9 Limitation Of Liability and Indemnification. No Party shall be
liable to another for indirect, incidental, consequential or special damages,
including but not limited to lost profits, arising from or relating to any
breach of this Agreement, regardless of any notice of the possibility of such
damages. In no event shall Telik be liable for any use by Sankyo of the
Provided Compounds. Sankyo hereby agrees to indemnify, defend and hold Telik
harmless from damages for any loss, claim, injury or liability or whatsoever
kind or nature, which may arise from Sankyo's use, handling or storage of the
Provided Compounds.
12.10 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be an original and all of which shall
constitute together the same document.
12.11 English Language. This Agreement has been prepared in the English
language and shall be construed in the English language.
[*] CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
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12.12 Further Assurances. Each party hereby agrees to execute, acknowledge
and deliver such further instruments, and to do all such other acts, as may be
necessary or appropriate in order to carry out the purposes and intent of this
Agreement.
IN WITNESS WHEREOF, the parties have by duly authorized persons, executed
this Agreement, as of the date first above written.
<TABLE>
<CAPTION>
Sankyo Company, Ltd. Telik, Inc.
<S> <C> <C>
By: /s/ Tetsuo Hiraoka By: /s/ Reinaldo A. Gomez
---------------------------- ----------------------------------
Title: Director, Research Institute Title: Vice President Corporate Alliances
---------------------------- ----------------------------------
Date: March 23, 1999 Date: March 24, 1999
---------------------------- ----------------------------------
</TABLE>
[*] CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
16
<PAGE>
APPENDIX
SELECTED TARGETS AND ASSAYS
[*] CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
17
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APPENDIX
Targets, Assays and Criteria of Active Molecules
5/13/99
[*]
[*] CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
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September 30, 1999
Dr. Yoshiki Matsui
Vice Director, Research Planning Department
and
Dr. Hidenori Shimotsu
Research Planning Department
Sankyo Co., Ltd.
2-58, Hiromachi 1-chome
Shinagawa-ku, Tokyo 140
Japan
Dear Dr. Matsui and Dr. Shimotsu:
Reference is made to that certain Agreement dated as of March 24, 1999
between Sankyo Company, Ltd. and Telik, Inc. (the "Agreement"; capitalized
terms used and not otherwise defined herein shall have the meanings
ascribed to such terms in the Agreement). Subject to your agreement
herewith, as of the date indicated below, the notices provided to Sankyo
stated in Article 12.1 of the Agreement shall be addressed as follows:
Sankyo Company, Ltd.
2-58, Hiromachi 1-chome
Shinagawa-ku
Tokyo 140
JAPAN
Attention: Dr. Hidenori Shimotsu
Fax: 81-3-5436-8561
with a copy to:
Sankyo Company, Ltd.
2-58, Hiromachi 1-chome
Shinagawa-ku
Tokyo 140
JAPAN
Attention: Dr. Yoshiki Matsui
Fax: 81-3-5436-8561
Page 2
September 30, 1999
[*] CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
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If you are in agreement with the foregoing, please execute this letter
agreement where indicated below whereupon it will become an agreement between us
on the terms indicated above.
Sincerely,
TELIK, INC.
By: /s/ Reinaldo F. Gomez
----------------------------
Name: Reinaldo F. Gomez
----------------------------
Title: VP Corporate Alliance
----------------------------
Accepted and Agreed to
this ____ of October, 1999.
SANKYO COMPANY, LTD.
By: /s/ Yukio Sughnura
----------------------------
Name: Yukio Sughnura, Ph.D.
----------------------------
Title: Senior Director
----------------------------
Research Planning Department
----------------------------
Sankyo Co., Ltd.
----------------------------
[*] CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
20
<PAGE>
APPENDIX
Targets, Assays and Criteria of Active Molecules
Ammended 2/16/00
Selected Targets
- ----------------
[*]
Substitute Selected Targets
- ---------------------------
[*]
[*] CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE sECURITIES ACT OF 1933, AS
AMENDED.
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Certain confidential information contained in this document, marked by brackets,
has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
EXHIBIT 10.6
COLLABORATION AGREEMENT
This Collaboration Agreement (the "Agreement") is entered into as of the
20th day of December, 1996 (the "Effective Date") by and between Sanwa Kagaku
Kenkyusho Co., Ltd., a Japanese corporation with its offices at 35 Higashi
Sotobori-cho, Higashi-ku Nagoya, 461, Japan ("Sanwa") and Terrapin Technologies,
Inc., a Delaware corporation with its offices at 750 Gateway Boulevard, South
San Francisco, California 94080, U.S.A. ("Terrapin"). Sanwa and Terrapin are
sometimes referenced in this Agreement individually as a "Party" and
collectively as the "Parties."
Recitals
Whereas, Terrapin has knowledge of a novel target in the insulin signal
transduction pathway and compounds that activate the insulin receptor; and
Whereas, Terrapin possesses a library of compounds and is able to determine
the affinity of each compound versus Terrapin's reference proteins employed in
Terrapin's proprietary TRAP (TM) technology; and
Whereas, Sanwa is engaged in the research, development, marketing,
manufacture and distribution of therapeutic pharmaceutical products; and
Whereas, Terrapin and Sanwa desire to enter into a collaborative program to
research and discover compounds that act through activation of the insulin
signal transduction pathway for purposes of the treatment of diabetes mellitus
or insulin resistance; and
Whereas, Terrapin and Sanwa have entered into a binding letter of intent,
dated November 6, 1996, setting forth their intent to enter into a definitive
agreement with respect to such collaborative program; and
Whereas, Terrapin and Sanwa will enter into a separate agreement under
which Terrapin shall utilize its proprietary TRAP (TM) technology to evaluate
certain of Sanwa's drug targets for the purpose of identifying compounds for
pharmaceutical development.
Now, Therefore, in consideration of the foregoing and the covenants and
premises contained in this Agreement, the Parties agree as follows:
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Article 1
Definitions
As used herein, the following terms shall have the following meanings:
1.1 "Affiliate" shall mean any company or entity controlled by,
controlling, or under common control with a Party hereto and shall include
without limitation any company fifty percent (50%) or more of whose voting stock
or participating profit interest is owned or controlled, directly or indirectly,
by a Party, and any company which owns or controls, directly or indirectly,
fifty percent (50%) or more of the voting stock of a Party.
1.2 "Clinical Candidate" shall mean any compound identified under the
Research Program which the RMC determines may be useful in the Field.
1.3 "Confidential Information" shall mean all information, inventions,
know-how or data of either Party disclosed pursuant to, or in contemplation of,
this Agreement in written, graphic or electronic form if marked as confidential
or in oral form if designated as confidential and confirmed in writing promptly
after oral disclosure, including, without limitation, (i) information regarding
the Research Program, Clinical Candidates, Licensed Products, and other matters
material to this Agreement or the business of the disclosing Party, including
manufacturing, marketing, financial, personnel, scientific and other business
information and plans, and (ii) the material terms of this Agreement.
1.4 "Control" shall mean possession of the ability to grant the licenses
as provided for herein without violating the terms of any agreement or
arrangement with a third party.
1.5 "FDA" shall mean the United States Food and Drug Administration.
1.6 "Field" shall mean compounds that act through activation of the
insulin signal transduction pathway for the treatment of diabetes mellitus or
insulin resistance in humans.
1.7 "IND" shall mean an Investigational New Drug Application as defined in
the FDA regulations, as such regulations may be amended from time to time.
1.8 "Letter of Intent" shall mean that Letter of Intent between the
Parties dated November 6, 1996.
1.9 "License Agreement" shall mean the license agreement referenced in
Article 3.
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
2
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1.10 "Licensed Product" shall have the meaning assigned to it in the
License Agreement.
1.11 "NDA" shall mean a New Drug Application as defined in the United
States Federal Food, Drug and Cosmetic Act and applicable regulations
thereunder, as amended from time to time.
1.12 "Phase I" shall mean the clinical trials which are the equivalent in
the relevant country of the Sanwa Territory to that phase of clinical
development of pharmaceutical products defined as "Phase I" in FDA regulations
as amended from time to time.
1.13 "Phase II" shall mean the clinical trials which are the equivalent in
the relevant country of the Sanwa Territory to that phase of clinical
development of pharmaceutical products defined as "Phase II" in FDA regulations
as amended from time to time.
1.14 "Phase III" shall mean the clinical trials which are the equivalent
in the relevant country of the Sanwa Territory to that phase of clinical
development of pharmaceutical products defined as "Phase III" in FDA regulations
as amended from time to time.
1.15 "Research Plan" shall have the meaning set forth in Section 2.1.
1.16 "Research Program" shall have the meaning set forth in Section 2.1.
1.17 "Research Term" shall have the meaning set forth in Section 2.1.
1.18 "RMC" shall mean the Research Management Committee established by the
Parties pursuant to Section 2.2.
1.19 "Sanwa Technology" shall mean all technology, inventions,
information, data, know-how, patents and patent applications (including any
divisions, continuations, continuations-in-part, reissues, extensions, renewals,
supplementary protection certificates and foreign counterparts thereof) that are
useful in the Field and which Sanwa owns or Controls during the term of this
Agreement.
1.20 "Sanwa Territory" shall mean Japan, Korea, Taiwan and the People's
Republic of China.
1.21 "Terrapin Technology" shall mean all technology, inventions,
information, data, know-how, patents and patent applications (including any
divisions, continuations, continuations-in-part, reissues, extensions, renewals,
supplementary
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
3
<PAGE>
protection certificates and foreign counterparts thereof) that are useful in the
Field and which Terrapin owns or Controls during the term of this Agreement.
Article 2
Research Program Scope and Governance
2.1 Research Program; Research Plan. The Parties will participate in a
collaborative program (the "Research Program") to research and discover novel
compounds for use in the Field. The Research Program shall commence on the
Effective Date and continue until the [ * ] unless earlier terminated pursuant
to Section 9.2 and 9.3 or extended by mutual written agreement of the Parties.
The period of time during which the Research Program is in effect shall be the
"Research Term." The Research Program shall be conducted pursuant to a detailed
research plan attached hereto as Exhibit A, which may be modified from time to
time by the RMC (the "Research Plan"). Terrapin shall commence the Research
Program promptly upon execution of this Agreement. Each Party shall devote
commercially reasonable efforts to its obligations under the Research Program,
consistent with the efforts it devotes to its own research programs of
comparable market potential.
2.2 Research Management Committee Formation and Procedure. Within [ * ]
of the Effective Date, the Parties will form a Research Management Committee
(the "RMC") having the functions and powers described in Section 2.3. The RMC
will be comprised of [ * ] from each of Terrapin and Sanwa. All decisions of
the RMC must be unanimously approved by the members of the RMC. The RMC shall
agree, in good faith, upon the chairperson of the RMC, the time and place of
meetings of the RMC, substitutions for RMC members, qualifications of RMC
members, and other similar matters. Within [ * ] days after each meeting, the
RMC will provide the Parties with a written report describing the status of the
Research Program, issues requiring resolution and resolutions of previously
reported issues, all in reasonable detail. In the event the RMC is unable to
reach a decision concerning the designation of a Clinical Candidate, such
matters will be resolved in accordance with the provisions of Section 11.2.
2.3 Research Management Committee Functions and Powers. The RMC shall:
(i) encourage and facilitate ongoing cooperation between the Parties, (ii)
periodically review the progress of the Research Program, including all
screening results and other work done and new developments in the Field, and
propose changes to the Research Plan based upon such review, (iii) designate
compounds as Clinical Candidates from time to time based upon the results of the
Research Program, (iv) allocate tasks and coordinate activities required to
perform the Research Program, (v) monitor progress of the Research Program and
the Parties' diligence in carrying out their responsibilities
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
4
<PAGE>
thereunder, and (vi) carry out any other duties and responsibilities described
for it in this Agreement.
2.4 Research Liaison. Each Party shall appoint a qualified representative
(each a "Research Liaison") to be the liaison to the other Party and to the RMC.
The Research Liaisons shall serve as the principal point of communication
between the parties and shall confer together at least monthly concerning the
details of the Research Program.
2.5 Basic Responsibilities of Terrapin
2.5.1 Terrapin will be responsible for providing all infrastructure
[*] necessary for conducting [ * ] Phase 1 of the Research Plan, relating to
identification and selection of advanced lead compounds and Phase 2 of the
Research Plan, relating to identification and selection of Clinical Candidates.
If Terrapin shall choose to develop or have developed the same Clinical
Candidate outside the Sanwa Territory, then Terrapin will also be responsible
for providing all infrastructure [ * ] necessary for and conducting [ * ], Phase
3 of the Research Plan, relating to all IND enabling work for Clinical
Candidates, except that portion of Phase 3 work identified therein as uniquely
required for an IND application in Japan.
2.5.2 All research and development work to be performed by Terrapin
pursuant to this Agreement shall be performed in a timely manner and meet all
FDA quality standard requirements. In performing such work and without limiting
the obligations set forth in this Section 2.5, Terrapin shall provide [ * ] a
sufficient number of full-time, trained, experienced researchers, chemists,
pharmacologists, biologists and technicians and other specialists competent and
qualified to perform the work to be performed pursuant to this Agreement.
2.6 Use of Third Parties by Terrapin. During the term of this Agreement,
Terrapin may utilize the services of outside consultants or third parties in
connection with performing its research and development work provided that
Terrapin assumes full responsibility and liability for such third parties.
2.7 Basic responsibilities of Sanwa. Sanwa will be responsible for
providing all infrastructure [ * ] necessary for and conducting [ * ] that
portion of Phase 3 of the Research Plan identified therein as uniquely required
for an IND application in Japan with respect to Clinical Candidates for which
Sanwa has sent or plans to send a Development and Commercialization Notice to
Terrapin and which Terrapin chooses not to develop or have developed outside of
Japan.
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
5
<PAGE>
2.8 Cooperation; Reports; Reciprocal Sharing of Data.
2.8.1 Each Party will cooperate with each other in conducting the
Research Program.
2.8.2 The Parties shall make available and disclose to one another,
on a quarterly basis through the RMC, all results of the work conducted pursuant
to Phase 1 and Phase 2 of the Research Program.
2.8.3 Terrapin shall make available and disclose to Sanwa, on a [ * ]
basis through the RMC, all work related to Phase 3 of the Research Program for
which Terrapin is responsible pursuant to Section 2.5. Terrapin shall also make
available to Sanwa data within the Field relevant to the Research Program
arising from arrangements between Terrapin and third parties similar to this
Agreement but only to the extent, and upon such terms, as such third party shall
agree including, if necessary, an agreement by Sanwa to provide similar
information to such third party upon a reciprocal basis. Without limiting the
generality of the foregoing, Terrapin agrees to use its reasonable efforts in
good faith to cause any third party having rights to Clinical Candidates outside
the Sanwa Territory to provide the results of tests and other work corresponding
to Phase 3 of the Research Plan to Sanwa for such Clinical Candidates.
2.8.4 Sanwa shall disclose all Phase 3 work relating to Clinical
Candidates to Terrapin. Terrapin may use such information solely for the
purposes of the Research Program and shall not use it for any other purpose or
disclose it to any third party unless Sanwa agrees to the terms of such use or
disclosure (which may include cost reimbursement for all or a portion of the
Phase 3 work conducted by Sanwa or on Sanwa's behalf by a third party).
2.9 Supply of Preclinical and Clinical Material. Terrapin will provide
Sanwa [ * ] of Clinical Candidate requested by Sanwa. Such materials will be
produced using a process to be developed by Terrapin which complies with then
current good manufacturing processes in accordance with the requirements of the
FDA; provided, however, that the parties may hereafter agree that Sanwa will
produce some or all of the Clinical Candidate material. Sanwa will notify
Terrapin of the quantities and delivery dates of the material needed and pay
Terrapin [ * ] for such material, all according to such reasonable procedures as
the parties shall hereafter agree.
Article 3
Election to Pursue Further Development and Commercialization
3.1 Development and Commercialization Notice. At any time during the
Research Term or within [ * ] thereafter, Sanwa may provide written notice (the
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
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<PAGE>
"Development and Commercialization Notice") to Terrapin of its intention to
develop a Clinical Candidate for use in the Field and, if results of the human
clinical studies justify, to prepare and file the Japanese equivalent of an NDA
on such Clinical Candidate for use in the Field. Such notice shall be in the
form attached hereto as Exhibit B and shall be made prior to the filing of the
Japanese equivalent of an IND by Sanwa for such Clinical Candidate. Upon
Terrapin's receipt of the first Development and Commercialization Notice,
Terrapin and Sanwa shall promptly enter into a license agreement with respect to
the Clinical Candidate described in such Development and Commercialization
Notice, upon substantially the terms set forth in the form of License Agreement
set forth in Exhibit C attached hereto. For each subsequent Clinical Candidate
which Sanwa elects to develop and commercialize as set forth in this Article 3,
Sanwa shall provide a new Development and Commercialization Notice to Terrapin
and, upon Terrapin's receipt of such Development and Commercialization Notice,
such Clinical Candidate(s) shall be added to Exhibit 1 to the License Agreement
and shall be regarded as a Licensed Product for all purposes of the License
Agreement.
3.2 Discussion Concerning Third Party Program in Territories. In the
event Sanwa shall not deliver a Development and Commercialization Notice as
provided in Section 3.1 with respect to at least [ * ] after the termination of
this Agreement Terrapin shall be free to enter into an agreement with a third
party in the Sanwa Territory pertaining to the Field without any obligation or
liability to Sanwa other than as provided in this Section 3.2; provided,
however, that at least [ * ] prior to entering into any such agreement, Terrapin
shall notify Sanwa of its intention to do so and discuss with Sanwa in good
faith during such period any proposal Sanwa may make concerning a further
arrangement relating to the Field and Sanwa Territory. Terrapin's obligation to
provide such notice to Sanwa and to discuss any such proposal with Sanwa shall
survive the termination of this Agreement for a period of [ * ]
3.3 Rights with Respect to Clinical Candidates Not Selected. With respect
to a Clinical Candidate which enters Phase 3 of the Research Program but for
which Sanwa did not give a Development and Commercialization Notice as provided
in Section 3.1 prior to [ * ] if, at any time during the first [ * ] thereafter,
Terrapin determines it wishes to grant rights outside the Field to such Clinical
Candidate to a third party, then, provided Sanwa has entered into the License
Agreement with respect to at least one Clinical Candidate, Terrapin will first
provide notice of its intention to Sanwa. If within [ * ] of receipt of
Terrapin's notice, Sanwa provides Terrapin a Development and Commercialization
Notice with respect to such Clinical Candidate, then such Clinical Candidate
shall be added to Exhibit I to the License Agreement and shall be regarded as a
Licensed Product for all purposes of the License Agreement. If, at or before
the end of such period, Sanwa does not provide a Development and
Commercialization Notice with respect to such Clinical Candidate, then Terrapin
shall have no further obligation or
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
7
<PAGE>
liability to Sanwa with respect to such Clinical Candidate and shall be free to
enter into one or more transactions with third parties with respect thereto.
3.4 Royalty Rates in Certain Countries. The parties intend that the Sanwa
Territory shall include Korea, Taiwan and the People's Republic of China, in
addition to Japan, but have not as of the Effective Date of this Agreement
agreed to royalty rates for such countries. As soon as practicable after the
Effective Date of this Agreement but not later than the Effective Date of the
License Agreement, the parties shall meet and agree on the royalty rates for
such countries. Upon such agreement each such country and agreed rate shall be
included in Appendix 2 to the License Agreement. In the event, however, that
the parties shall fail to agree on the royalty rate for one or more of such
countries, then such country shall not be included in Appendix 2 to the License
Agreement and Sanwa shall have no rights hereunder or under the License
Agreement with respect to such country.
Article 4
License Grants
4.1 Grant by Terrapin. Terrapin hereby grants to Sanwa, during the
Research Term, a non-exclusive, worldwide, royalty-free license under the
Terrapin Technology for the sole purpose of allowing Sanwa to carry out its
responsibilities under the Research Program. Sanwa may grant a sublicense under
the foregoing license. In the event Sanwa grants a sublicense under the
preceding sentence, it shall provide prior written notice to Terrapin of the
name of the sublicensee and the purposes for such sublicense.
4.2 Grant by Sanwa. Sanwa hereby grants to Terrapin, during the Research
Term, a non-exclusive, worldwide, royalty-free license under the Sanwa
Technology for the sole purpose of allowing Terrapin to carry out its
responsibilities under the Research Program. Terrapin may grant a sublicense
under the foregoing license. In the event Terrapin grants a sublicense under
the preceding sentence, it shall provide prior written notice to Sanwa of the
name of the sublicensee and the purposes for such sublicense.
4.3 Documentation of License Rights. To the extent necessary to permit a
party to carry out its responsibilities under the Research Program, the licensor
of technology under Sections 4.1 or 4.2 above, promptly after request by the
licensee, shall provide a complete and organized set of written materials
embodying the requested technology. The licensor providing those materials may
provide them in their original language. The licensee may from time to time
convey questions to the licensor regarding the subject of the technology, and
the licensor shall cause its technical personnel to respond promptly and fully
to those questions without additional charge to the licensee.
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
8
<PAGE>
4.4 Exclusive Collaboration. Each party to this Agreement covenants and
agrees that the Research Program shall be its sole and exclusive activity within
the Field in the Sanwa Territory during the term of this Agreement. Terrapin
covenants and agrees that during the term of this Agreement, it will not license
compounds to third parties in the Sanwa Territory where the development of such
compounds is directed toward the Field.
Article 5
Financial Provisions
5.1 Collaboration Agreement Signing Fee. Within five (5) business days
after the Effective Date, Sanwa shall make a nonrefundable payment to Terrapin
of [ * ]
5.2 Equity Investment in Terrapin.
5.2.1 Stock Purchase Agreement. Simultaneous with the execution of
this Agreement, the Parties are entering into a Stock Purchase Agreement, in the
form attached hereto as Exhibit D ("Stock Purchase Agreement").
5.2.2 [ * ]
5.3 Research Payments. In support of Terrapin's activities under the
Research Program, Sanwa shall pay Terrapin (i) [ * ] within five (5) business
days after the [ * ] (ii) [ * ] within five (5) business days after the [ * ]
and (iii) [ * ] within five (5) business days after the [ * ] In the event this
Agreement shall be terminated within a [ * ] period following any of the
foregoing payment dates, then Terrapin shall [ * ] under this Section 5.3 in
respect of such payment date. Such [ * ] shall equal [ * ] where X equals [ * ]
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
9
<PAGE>
5.4 Milestone Payments to Terrapin. Sanwa shall make the following
nonrefundable payments to Terrapin, within [ * ] after the occurrence of the
following events:
==================================================================
MILESTONE EVENT AMOUNT OF PAYMENT
- ------------------------------------------------------------------
(1) [ * ] [ * ]
- ------------------------------------------------------------------
(2) [ * ] [ * ]
- ------------------------------------------------------------------
(3) [ * ] [ * ]
- ------------------------------------------------------------------
(4) [ * ] [ * ]
- ------------------------------------------------------------------
(5) [ * ] [ * ]
- ------------------------------------------------------------------
(6) [ * ] [ * ]
==================================================================
Each of the foregoing payments shall be made only once regardless of the number
of products licensed to Sanwa.
5.5 Japan Withholding Taxes.
5.5.1 Payments under Section 5.1 and Section 5.3. Any withholding
taxes to be levied on the payments to Terrapin under Section 5.1 and Section 5.3
by any tax authority in Japan shall be borne by [ * ] Terrapin agrees to make
reasonable good faith efforts to assist Sanwa in the characterization of the
payments under Section 5.3 as research expenses.
5.5.2 Other Payments. Except as set forth in Section 5.5.1, any
income, withholding or other taxes to be levied on the income of Terrapin by any
tax authority by reason of the execution of, or any performance under, this
Agreement, other than as provided in Section 5.5.1, shall be borne by Terrapin.
In the event that Sanwa deducts such tax from the amount of the income to be
remitted to Terrapin in order to pay such tax authority on behalf of Terrapin,
Sanwa shall send to Terrapin, in due course, reasonable evidence showing the
payment of such tax.
5.6 Payments. All payments to be made by either Party to the other Party
hereunder, except as otherwise provided herein, shall be remitted by wire
transfer to the
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
10
<PAGE>
account of the other Party with such bank as may be designated by the other
Party, and shall be made in U.S. dollars.
Article 6
Intellectual Property
6.1 Ownership Of Pre-Existing Technology And Technology Developed Outside
Of The Research Program. Each Party shall remain the sole owner of all of its
respective technology, compounds, discoveries and inventions which are either
(i) in existence as of the Effective Date or (ii) made outside of the Research
Program, subject to the license grants set forth in Article 4 and any license
granted under the License Agreement.
6.2 Ownership Of Research Program Technology. Inventions or discoveries
made, and materials and information created solely by one Party in the course of
the Research Program shall be owned solely by such Party, subject to the license
grants set forth in Article 4 and any license granted under the License
Agreement. Inventions or discoveries made, and materials and information
created jointly by the Parties in the course of the Research Program shall be
owned jointly by the Parties. In all cases, inventorship under the Research
Program shall be determined in accordance with the United States patent laws.
6.3 Patent Prosecution.
6.3.1 Under the Research Program. The RMC shall consider and
recommend to each party from time to time which inventions arising from the
Research Program shall be the basis of patent applications and which shall be
maintained as trade secrets. Patent applications and patents for inventions
arising under the Research Program which are owned by one Party pursuant to
Section 6.2 shall be prosecuted and maintained by the Party owning such
invention, at such Party's option and its own expense. Terrapin shall be
responsible, on a worldwide basis, for filing and prosecuting patent
applications for, and maintaining patents on, jointly owned inventions arising
under the Research Program pursuant to Section 6.2 (the "Joint Research Program
Patents"), using counsel of its choice, and at its own expense. Terrapin shall
confer with Sanwa on the content of all filings with the United States Patent
and Trademark Office (or the foreign equivalent), and, taking into account
Sanwa's knowledge and expertise with respect to filing and maintaining patents
in the Sanwa Territory, shall provide Sanwa with the opportunity to review the
content of such filings prior to their submission to such authorities and give
due consideration to its recommendations thereto.
6.3.2 Under the License Agreement. In the event that Sanwa provides
a Development and Commercialization Notice to Terrapin regarding a Clinical
Candidate
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
11
<PAGE>
and the Parties enter into a License Agreement with respect to the Clinical
Candidate described in such Notice, Sanwa shall, at its own expense, assume
responsibility for filing and prosecuting in the Sanwa Territory patent
applications for, and maintaining patents on, such Clinical Candidate and/or
Licensed Products containing such Clinical Compound or derived therefrom. In
such event, Terrapin shall transmit to Sanwa all information reasonable and
appropriate then in its possession relating to such patent application or patent
and execute all consents or other filings reasonably necessary to permit Sanwa
to assume such responsibility.
6.3.3 Back-up Prosecution. In the event that a Party decides not to
proceed with prosecuting a patent application for, or maintaining a patent on,
an invention for which it is responsible under this Section 6.3 in any country
of the Sanwa Territory, it shall give the other Party sixty (60) days notice
before any relevant deadline and transmit all information reasonable and
appropriate relating to such patent application or patent, and such other Party
shall have the right to pursue, at its own expense, prosecution of such
application for, or maintenance of, such patent.
6.4 Infringement. The License Agreement shall provide for enforcement of
Licensed Patents (as defined in the License Agreement) and defense against third
party claims of infringement, and such matters will be governed thereby. If any
patent infringement matters arise prior to execution of the License Agreement,
the Parties will discuss in good faith the manner in which they will proceed to
address such issues, in accordance with the provisions set forth in Section 5.3
of the License Agreement attached hereto as Exhibit C.
6.5 Disclosure Of Inventions. Terrapin and Sanwa will disclose promptly
to each other all discoveries or inventions made pursuant to the Research
Program, including discoveries or inventions made by consultants or contractors
of Terrapin and Sanwa pursuant to the Research Program, prior to any public
disclosure or filing of patent applications and allowing sufficient time for
comment and review by the other Party; provided, however, review and comment
shall be subject to the time limitations necessitated as a practical matter by
Japan's first to file patent system.
Article 7
Representations and Warranties
7.1 Representations And Warranties.
7.1.1 Both Parties. Each Party represents and warrants to the other
that:
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
12
<PAGE>
(a) Corporate Power. It is duly organized and validly existing
under the laws of its state or country of incorporation, and has full corporate
power and authority to enter into this Agreement and to carry out the provisions
hereof.
(b) Due Authorization. It is duly authorized to execute and
deliver this Agreement and to perform its obligations hereunder, and the person
executing this Agreement on its behalf has been duly authorized to do so by all
requisite corporate action.
(c) Binding Agreement. This Agreement is legally binding upon
it and enforceable in accordance with its terms. The execution, delivery and
performance of this Agreement by it does not conflict with any agreement,
instrument or understanding, oral or written, to which it is a party or by which
it may be bound, nor violate any material law or regulation of any court,
governmental body or administrative or other agency having jurisdiction over it.
(d) Grant of Rights; Maintenance of Agreements. It has not, and
will not during the term of this Agreement, grant any right to any third party
which would conflict with the rights granted to the other Party hereunder. It
has (or will have at the time performance is due) maintained and will maintain
and keep in full force and effect all agreements necessary to perform its
obligations hereunder.
(e) Validity. It is aware of no action, suit or inquiry or
investigation instituted by any governmental agency which questions or threatens
the validity of this Agreement.
(f) [ * ] To the best of its knowledge, it has all right, power
and authority to perform its obligations under, and [ * ] To the best of its
knowledge, there are [ * ]
(g) Accuracy of Information. All documentation and other
information conveyed by one Party to another hereunder or in connection
herewith, was, at the time it was conveyed or provided, accurate and complete in
light of the purposes for which it was intended.
7.1.2 By Terrapin. The compounds identified by Terrapin for use in
the Research Program and described by Terrapin to Sanwa act at least in part
through activation of the insulin signal transduction pathway.
7.2 Disclaimer Concerning Technology. EXCEPT AS SET FORTH IN SECTION 7.1
ABOVE, THE TECHNOLOGY PROVIDED BY EACH PARTY HEREUNDER IS PROVIDED "AS IS" AND
EACH PARTY EXPRESSLY DISCLAIMS ANY AND ALL WARRANTIES OF ANY KIND, EXPRESS OR
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
13
<PAGE>
IMPLIED, INCLUDING WITHOUT LIMITATION THE WARRANTIES OF DESIGN, MERCHANTABILITY,
FITNESS FOR A PARTICULAR PURPOSE, NONINFRINGEMENT OF THE INTELLECTUAL PROPERTY
RIGHTS OF THIRD PARTIES OR ARISING FROM A COURSE OF DEALING, USAGE OR TRADE
PRACTICES, IN ALL CASES WITH RESPECT THERETO. Without limiting the generality
of the foregoing, each Party expressly does not warrant (i) the success of any
study or test commenced under the Research Program or (ii) the safety or
usefulness for any purpose of the technology it provides hereunder.
7.3 Disclaimer Concerning Compounds. EXCEPT AS SET FORTH IN SECTION 7.1
ABOVE, THE COMPOUNDS PROVIDED BY EACH PARTY PURSUANT TO THE RESEARCH PROGRAM ARE
PROVIDED BY EACH PARTY "AS IS" AND EACH PARTY EXPRESSLY DISCLAIMS ANY AND ALL
WARRANTIES OF ANY KIND, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION THE
WARRANTIES OF DESIGN, MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NON-
INFRINGEMENT OF THE INTELLECTUAL PROPERTY RIGHTS OF THIRD PARTIES OR ARISING
FROM A COURSE OF DEALING, USAGE OR TRADE PRACTICES, IN ALL CASES WITH RESPECT
THERETO. Without limiting the generality of the foregoing, each Party expressly
does not warrant (i) that any compound it provides hereunder is free from any
third party rights or (ii) the safety or usefulness for any purpose of any
compound it provides hereunder.
7.4 Terrapin Grant of Rights. Terrapin has not, and will not during the
term of this Agreement, grant any right to any third party which would conflict
with the rights granted to Sanwa hereunder. It has (or will have at the time
performance is due) maintained and will maintain and keep in full force and
effect all agreements necessary to perform its obligations hereunder.
Article 8
Confidentiality; Publication
8.1 Confidentiality. Except to the extent expressly authorized by this
Agreement or otherwise agreed in writing by the Parties, the Parties agree that,
for the term of this Agreement and for [ * ] after its expiration or
termination, the receiving Party shall keep confidential and shall not publish
or otherwise disclose and shall not use for any purpose other than as provided
for in this Agreement any Confidential Information furnished to it by the other
Party pursuant to this Agreement or the Letter of Intent unless the receiving
Party can demonstrate by competent written proof that such Confidential
Information:
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
14
<PAGE>
(a) was already known to the receiving Party, other than under an
obligation of confidentiality, at the time of disclosure by the other Party;
(b) was generally available to the public or otherwise part of the
public domain at the time of its disclosure to the receiving Party;
(c) became generally available to the public or otherwise part of the
public domain after its disclosure and other than through any act or omission of
the receiving Party in breach of such Agreements;
(d) was disclosed to the receiving Party, other than under an
obligation of confidentiality to a third party, by a third party who had no
obligation to the disclosing Party not to disclose such information to others;
or
(e) was independently discovered or developed by the receiving Party
without the use of Confidential Information belonging to the disclosing Party.
8.2 Authorized Disclosure. Each Party may disclose Confidential
Information belonging to the other Party to the extent such disclosure is
reasonably necessary in the following instances:
(a) filing or prosecuting patents relating to Clinical Candidates or
Licensed Products;
(b) regulatory filings;
(c) prosecuting or defending litigation;
(d) complying with applicable governmental regulations;
(e) conducting preclinical or clinical trials of Clinical Candidates;
(f) disclosure to Affiliates, sublicensees, employees, consultants,
or agents each of whom prior to disclosure must be bound by similar obligations
of confidentiality and non-use at least equivalent in scope to those set forth
in this Article 8; and,
(g) disclosure to investment bankers; provided, however, that no such
disclosure shall be made of Sanwa Confidential Information without its written
consent, which consent shall not be unreasonably withheld.
Notwithstanding the foregoing, in the event a Party is required to make a
disclosure of the other Party's Confidential Information pursuant to this
Section 8.2 it will, except where impracticable, give reasonable advance notice
to the other Party of such disclosure and use best efforts to secure
confidential treatment of such information. In any event, the
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
15
<PAGE>
Parties agree to take all reasonable action to avoid disclosure of Confidential
Information hereunder.
Article 9
Term and Termination
9.1 Term Of The Agreement. This Agreement shall become effective upon the
Effective Date. Unless earlier terminated pursuant to Sections 9.2, 9.3 or 9.4,
this Agreement shall continue in effect until the expiration or termination of
the License Agreement or, if no License Agreement has been entered into by the
one year anniversary of the end of the Research Term this Agreement shall
terminate on the one year anniversary of the end of the Research Term. The term
of this Agreement may be extended by mutual written agreement of the Parties.
9.2 Termination For Material Breach. Each Party shall have the right to
terminate this Agreement after [ * ] prior written notice to the other that the
other Party has committed a material breach of the Agreement, unless the other
Party cures (to the extent practicable) the material breach within such period
of time. In the event of such termination by Sanwa due to Terrapin's material
breach, Sanwa may, for a period of [ * ] after such written notice of
termination, provide a Notice of Development and Commercialization with respect
to one or more Clinical Candidates. Terrapin and Sanwa shall thereafter enter
into a License Agreement for any such Clinical Candidates or add any such
Clinical Candidate to any existing License Agreement as provided under Section
3.1 above; provided, however, that Sanwa shall, at its own expense, develop such
Clinical Candidates as set forth under Section 3.1.
9.3 Termination Upon Bankruptcy. Each Party shall have the right to
terminate this Agreement if the other Party (the "Bankrupt Party") becomes
insolvent or a petition in bankruptcy or for corporate reorganization or for any
similar relief is filed by or against such other Party or a receiver is
appointed with respect to any of the assets of such other Party or a liquidation
proceeding is commenced by or against such other Party.
9.4 Accrued Rights; Surviving Obligations. Termination of this Agreement
shall not affect any accrued rights of either Party. The terms of Articles 3
(other than Section 3.4), 6, 8 and 10 of this Agreement shall survive
termination of this Agreement. Except as set forth in the License Agreement,
promptly after termination of this Agreement each Party shall return or dispose
of any know-how of the other in accordance with the instructions of the other,
including without limitation any compounds, assays or other biological or
chemical materials.
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
16
<PAGE>
Article 10
Indemnity
10.1 Indemnification. Each Party hereby agrees to save, defend and hold
the other Party and its directors, officers, employees, and agents harmless from
and against any and all claims, suits, actions, demands, liabilities, expenses
and/or loss, including reasonable legal expense and attorneys' fees
(collectively, "Claims") for damage to persons or property resulting directly or
indirectly from actions in connection with the Research Program by the
indemnifying Party, its Affiliates, agents or sublicensees, but only to the
extent such Claims result from the gross negligence or willful misconduct of the
indemnifying Party or its Affiliates, agents or sublicensees and do not result
from the negligence of the Party seeking indemnification.
10.2 Control Of Defense. Any entity entitled to indemnification under
this Article shall give notice to the indemnifying Party of any Claims that may
be subject to indemnification, promptly after learning of such Claim, and the
indemnifying Party shall assume the defense of such Claims with counsel
reasonably satisfactory to the indemnified Party. If such defense is assumed by
the indemnifying Party with counsel so selected, the indemnifying Party will not
be subject to any liability for any settlement of such Claims made by the
indemnified Party without its consent (but such consent will not be unreasonably
withheld or delayed), and will not be obligated to pay the fees and expenses of
any separate counsel retained by the indemnified Party with respect to such
Claims.
Article 11
Governing Law; Dispute Resolution
11.1 Governing Law. This Agreement shall be governed by and construed in
accordance with the domestic laws of the State of California, (i) without giving
effect to any choice or conflict of law provision or rule that would cause the
application of the laws of any jurisdiction other than the State of California,
and (ii) except that the rights of the parties to resolve by arbitration any
dispute arising between them regarding the subject matter of this Agreement
shall not be governed by the California arbitration act or international
arbitration act (Cal. Code of Civ. Proc. (S) 1280 et seq. and 1297.11 et seq.)
but rather by the United States Arbitration Act (9 U.S.C. (S)(S) 1-14, 201-208).
11.2 Dispute Resolution. In the event of any controversy or claim arising
out of, relating to or in connection with any provision of this Agreement, the
Parties shall try to settle their differences amicably and in good faith between
themselves first, by referring the disputed matter to the respective heads of
research of each Party and, if not resolved by the research heads, by referring
the disputed matter to the respective Chief
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
17
<PAGE>
Executive Officers of each Party. In the event such executives are unable to
resolve such dispute within such thirty (30) day period, either Party may invoke
the provisions of Section 11.3.
11.3 Arbitration. Upon failure to resolve any controversy or claim
arising out of, relating to or in connection with any provision of this
Agreement using the dispute resolution procedure described in Section 11.2, such
controversy or claim shall be finally settled by arbitration. Arbitration shall
be held in Honolulu, Hawaii in the English language and conducted in accordance
with the Commercial Arbitration Rules of the American Arbitration Association.
The decision of such arbitration shall be conclusive and binding upon both
Parties. If a Party commences any action or proceeding against the other Party
to enforce this Agreement or any rights related thereto, the prevailing Party in
such action shall be entitled to recover from the other Party the reasonable
attorneys' fees and other reasonable costs and expenses incurred by that
prevailing Party in connection with such action or proceeding and in connection
with enforcing any judgment, award or order thereby obtained.
Article 12
General Provisions
12.1 Notices. All notices required or permitted to be given under this
Agreement shall be in writing and shall be mailed by registered or certified
mail, postage prepaid, addressed to the signatory to whom such notice is
required or permitted to be given and transmitted by facsimile to the number
indicated below. All notices shall be deemed to have been given when mailed, as
evidenced by the postmark at the point of mailing, or transmitted by facsimile.
All notices to Sanwa shall be addressed as follows:
Sanwa Kagaku Kenkyusho Co., Ltd.
35 Higashi Sotobori-cho
Higashi-ku Nagoya, 461
Japan
Attention: President
Fax: 011-81-52-9571067
With a copy to:
Graham & James, L.L.P.
One Maritime Plaza, Suite 300
San Francisco, California 94111
`
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
18
<PAGE>
U.S.A.
Attention: Michael R. Moyle, Esq.
Fax: (415) 391-2493
All notices to Terrapin shall be addressed as follows:
Terrapin Technologies, Inc.
750 Gateway Boulevard
South San Francisco, California 94080
U.S.A.
Attention: President
Fax: (415) 244-9388
with a copy to:
Cooley Godward LLP
Five Palo Alto Square
3000 El Camino Real
Palo Alto, California 94306
Attention: Brian C. Cunningham, Esq.
Fax: (415) 857 0663
Any Party may, by written notice to the other, designate a new addressee,
address or facsimile number to which notices to the Party giving the notice
shall thereafter be mailed or faxed.
12.2 Force Majeure. No Party shall be liable for any delay or failure of
performance to the extent such delay or failure is caused by circumstances
beyond its reasonable control and that by the exercise of due diligence it is
unable to prevent, provided that the Party claiming excuse uses its best efforts
to overcome the same.
12.3 Entirety Of Agreement. This Agreement embodies the entire, final and
complete agreement and understanding between the Parties and replaces and
supersedes all prior discussions and agreements between them with respect to its
subject matter, including the Letter of Intent, except as expressly stated
herein. No modification or waiver of any terms or conditions hereof shall be
effective unless made in writing and signed by a duly authorized officer of each
Party.
12.4 Non-Waiver. The failure of a Party in any one or more instances to
insist upon strict performance of any of the terms and conditions of this
Agreement shall not constitute a waiver or relinquishment, to any extent, of the
right to assert or rely upon any such terms or conditions on any future
occasion.
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
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<PAGE>
12.5 Disclaimer Of Agency. Neither Party is, or will be deemed to be, the
legal representative or agent of the other, nor shall either Party have the
right or authority to assume, create, or incur any third party liability or
obligation of any kind, express or implied, against or in the name of or on
behalf of another except as expressly set forth in this Agreement.
12.6 Severability. If a court of competent jurisdiction declares any
provision of this Agreement invalid or unenforceable, or if any government or
other agency having jurisdiction over either Terrapin or Sanwa deems any
provision to be contrary to any laws, then that provision shall be severed and
the remainder of the Agreement shall continue in full force and effect. To the
extent possible, the Parties shall revise such invalidated provision in a manner
that will render such provision valid without impairing the Parties' original
interest.
12.7 Affiliates; Assignment. Except as otherwise provided in this Section
12.7, neither Party may assign its rights or obligations under this Agreement
without the prior written consent of the other Party, except that a Party may
assign its rights or obligations to a third party in connection with the merger,
consolidation, reorganization or acquisition of stock or assets affecting
substantially all of the assets or actual voting control of the assigning Party.
This Agreement shall be binding upon the successors and permitted assigns of the
Parties. Any attempted delegation or assignment not in accordance with this
Section 12.7 shall be of no force or effect.
12.8 Headings. The headings contained in this Agreement have been added
for convenience only and shall not be construed as limiting.
12.9 Limitation Of Liability. No Party shall be liable to another for
indirect, incidental, consequential or special damages, including but not
limited to lost profits, arising from or relating to any breach of this
Agreement, regardless of any notice of the possibility of such damages. Nothing
in this Section is intended to limit or restrict the indemnification rights or
obligations of any Party.
12.10 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be an original and all of which shall
constitute together the same document.
12.11 English Language. This Agreement has been prepared in the English
language and shall be construed in the English language.
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
20
<PAGE>
IN WITNESS WHEREOF, the Parties hereto have duly executed this Agreement.
TERRAPIN TECHNOLOGIES, INC. SANWA KAGAKU
KENKYUSHO CO., LTD.
By: /s/ Clifford Orent By: /s/ Keiji Tanimoto
----------------------------- ---------------------------------
Name: Clifford Orent Name: Keiji Tanimoto
Title: Chairman, President and Chief Title: President and Chief Executive
Executive Officer Officer
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
21
<PAGE>
EXHIBIT A
TO
COLLABORATION AGREEMENT
RESEARCH PLAN
[*]
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
22
<PAGE>
EXHIBIT B
TO
COLLABORATION AGREEMENT
DEVELOPMENT AND COMMERCIALIZATION NOTICE
This Development and Commercialization Notice is provided by Sanwa Kagaku
Kenkyusho Co., Ltd. ("Sanwa") to Terrapin Technologies, Inc. ("Terrapin"),
pursuant to Article 3 of the Collaboration Agreement between Sanwa and Terrapin,
dated as of December 20, 1996 (the "Collaboration Agreement"). All capitalized
terms contained in this notice but not defined herein will have the meaning set
forth in the Collaboration Agreement.
Sanwa hereby notifies Terrapin of its intention to develop the following
Clinical Candidate for use in the Field and, if results of the human clinical
studies justify, to prepare and file the Japanese equivalent of an NDA on such
Clinical Candidate for use in the Field:
______________________________________________
[Chemical Name of Clinical Candidate]
Such Clinical Candidate shall be included on Exhibit 1 to the License Agreement.
Sanwa Kagaku Kenkyusho Co., Ltd.
By:_______________________________
Printed Name:_____________________
Title:____________________________
Date:_____________________________
The undersigned has received the foregoing notice:
Terrapin Technologies, Inc.
By:_______________________________
Printed Name:_____________________
Title:____________________________
Date:_____________________________
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
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<PAGE>
Exhibit C
LICENSE AGREEMENT
The License Agreement has been filed with the SEC by Telik, Inc. as Exhibit 10.7
to this Telik Registration Statement Form S-1, filed March 31, 2000, which is
titled "License Agreement by and between Registrant and Sanwa Kagaku Kenkyusho
Co., Ltd., dated September 24, 1997, as amended," and is hereby incorporated by
reference.
[*]=CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
<PAGE>
FIRST AMENDMENT TO COLLABORATION AGREEMENT
This First Amendment to Collaboration Agreement (this "First Amendment") is
made and dated September 24, 1997 (the "First Amendment Effective Date"), by and
between Sanwa Kagaku Kenkyusho Co., Ltd., a Japanese corporation ("Sanwa") and
Terrapin Technologies, inc., a Delaware corporation ("Terrapin").
RECITALS
A. The Parties are parties to that Collaboration Agreement dated as of
December 20, 1996 (the "Collaboration Agreement') pursuant to which the parties
have jointly engaged in research to identify one or more compounds which
activate the insulin signal transduction pathway and appear to be useful for
treatment of diabetes mellitus or insulin resistance in humans.
B. The Parties are entering into a Series 1 Stock Purchase Agreement of
even date herewith (the `Stock Purchase Agreement") in connection with which, as
one of the conditions to Sanwa consummating the transactions contemplated by the
Stock Purchase Agreement, the parties have agreed to execute and deliver this
First Amendment, the License Agreement attached hereto as Exhibit A and a First
Amendment to Screening Services Agreement.
NOW, THEREFORE, in consideration of the above recitals and for other good
and valuable consideration, the adequacy and receipt of which are hereby
acknowledged, the parties hereby agree as follows:
AGREEMENT
1. Amendments. The Collaboration Agreement is hereby amended as
follows:
(a) In Section 2.7 to the Collaboration Agreement, delete the
following phrase: "for which Sanwa has sent or plans to send a Development and
Commercialization Notice to Terrapin and"
(b) Revise Section 2.8.2 to the Collaboration Agreement to provide in
its entirety as follows:
2.8.2 The Parties shall make available and disclose to one another,
on a quarterly basis through the RMC, all results of the work
conducted pursuant to Phase 1 and Phase 2 of the Research Program.
Further, upon the reasonable request of Sanwa and notice to Terrapin,
Terrapin shall disclose to Sanwa all results of Terrapin's work
conducted
[ * ] - Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
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pursuant to the Research Program since the last date Terrapin
disclosed such results to Sanwa.
(c) Add a new Section 2.10 to provide in its entirety as follows:
2.10 Research Budget. Within fifteen (15) business days after the
First Amendment Effective Date, the parties shall agree and finalize a
detailed budget ("Budget"), which shall be incorporated by reference
herein in its entirety, and attached to this Agreement as Exhibit E.
To the best of its present knowledge, Terrapin represents and warrants
that [ * ]. Terrapin shall ensure at all times that it [ * ] and
shall not [ * ] without the prior written consent of Sanwa, which
consent shall not be unreasonably withheld.
(d) Article 3 shall be revised to read "License Agreement," and
Article 3 shall be revised in its entirety to read as follows:
Article 3. License Agreement. As of the First Amendment Effective
Date, the Parties are entering into a License Agreement, in the form
attached hereto as Exhibit A, pursuant to which Terrapin is granting
to Sanwa an exclusive license to all technology developed to date and
technology to be developed under this Collaboration Agreement, such
license to be in the Field and in the Sanwa Territory (as defined in
such License Agreement to include Japan, Korea, Taiwan and the
People's Republic of China). At any time during the term of this
Agreement, Sanwa shall provide written notice (the "Development and
Commercialization Notice") to Terrapin of its intention to develop a
Licensed Product for use in the Field and, if results of the human
clinical studies justify, to prepare and file the Japanese equivalent
of NDA on such Licensed Product for use in the Field. Such notice
shall be in the form attached hereto as Exhibit B and shall be made
prior to the filing of the Japanese equivalent of an IND by Sanwa for
such Licensed Product. For each Licensed Product which Sanwa elects
to develop and commercialize as set forth in this Article 3, Sanwa
shall provide a new Development and Commercialization Notice to
Terrapin.
(e) Delete Sections 3,1, 3.2, 3.3 and 3.4 in their entirety.
(f) Delete Section 5.2.2 in its entirety.
(g) Revise Section 6.3.2 to provide in its entirety as follows:
6.3.2 Under the License Agreement. Sanwa shall, at its own expense,
assume responsibility for filing and prosecuting in the Sanwa
Territory
[ * ] - Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
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patent applications for, and maintaining patents on, Licensed
Products. Upon the request of Sanwa, Terrapin shall transmit to Sanwa
all information reasonable and appropriate in its possession relating
to such patent application or patent and execute all consents or other
filings reasonably necessary to permit Sanwa to assume such
responsibility.
(h) Delete the last two sentences of Section 9.2.
(i) Revise Section 12.7 to provide in its entirety as follows:
12.7 Assignment.
12.7.1 General. Except as otherwise provided in Section 12.7.2 or
12.7.3, neither party may assign its rights or obligations under this
Agreement without the prior written consent of the other party. This
Agreement shall be binding upon the permitted successors and permitted
assigns of the Parties. Any attempted delegation or assignment not in
accordance with this Section 12.7 shall be of no force and effect.
12.7.2 Permitted Assignment by Sanwa. Sanwa may assign its rights
or obligations under this Agreement to a third party in connection
with the merger, consolidation, reorganization or acquisition of stock
or assets affecting substantially all of the assets or actual voting
control of Sanwa.
12.7.3 Permitted Assignment by Terrapin. Upon the written consent of
Sanwa, such consent not to be unreasonably withheld or delayed,
Terrapin may assign its rights or obligations under this Agreement to
a third party in connection with the merger, consolidation,
reorganization or acquisition of stock or assets affecting
substantially all of the assets or actual voting control of Terrapin.
Sanwa may only withhold its consent under the preceding sentence if
(a) such third party [ * ] according to the terms of this Agreement or
(b) such third party [ * ].
2. Defined Terms: Incorporation. Unless otherwise expressly provided
herein, defined terms used in this First Amendment shall have the same meaning
as set forth in the Collaboration Agreement, and all terms herein shall be
incorporated into the Collaboration Agreement. From and after the First
Amendment Effective Date, all reference to the "Collaboration Agreement" in all
other documents delivered in connection with the Collaboration Agreement shall
refer to the Collaboration Agreement, as amended hereby.
3. Counterparts: Facsimile. This First Amendment may be executed in
counterparts and by facsimile.
[ * ] - Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
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IN WITNESS WHEREOF, the Parties have executed this First Amendment
effective as of the date first set forth above.
TERRAPIN TECHNOLOGIES, INC. SANWA KAGAKU KENKYUSHO, CO. LTD.
/s/ Clifford Orent /s/ Keiji Tanimoto
- ------------------ ------------------------------
By: By: Keiji Tanimoto
Its: Its: President and CEO
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
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SECOND AMENDMENT TO COLLABORATION AGREEMENT
This Second Amendment to Collaboration Agreement (this "Second Amendment")
is made and dated October 29, 1998 (the "Second Amendment Effective Date"), by
and between Sanwa Kagaku Kenkyusho Co., Ltd., a Japanese corporation ("Sanwa")
and Telik, Inc. (formerly Terrapin Technologies, Inc.), a Delaware corporation
("Telik").
RECITALS
A. Sanwa and Telik are parties to that Collaboration Agreement dated as
of December 20, 1996, as amended by that certain First Amendment to
Collaboration Agreement dated September 24, 1997 (the "Collaboration Agreement")
pursuant to which the Parties have jointly engaged in research to identify one
or more compounds which activate the insulin signal transduction pathway and
appear to be useful for treatment of diabetes mellitus or insulin resistance in
humans.
B. Sanwa and Telik are entering into a Series J Preferred Stock Purchase
Agreement of even date herewith (the "Stock Purchase Agreement") in connection
with which, as one of the conditions to Sanwa consummating the transactions
contemplated by the Stock Purchase Agreement, the parties have agreed to execute
and deliver this Second Amendment.
NOW, THEREFORE, in consideration of the above recitals and for other good
and valuable consideration, the adequacy and receipt of which are hereby
acknowledged, the parties hereby agree as follows:
AGREEMENT
4. Amendments. The Collaboration Agreement is hereby amended as follows:
(a) Each reference in the Collaboration Agreement to "Terrapin
Technologies, Inc." is amended and replaced by "Telik, Inc." Each reference in
the Collaboration Agreement to "Terrapin" is amended and replaced by "Telik."
(b) Section 2.1 is amended in its entirety as follows:
The Parties will participate in a collaborative program (the
"Research Program") to research and discover novel compounds for
use in the Field. The Research Program shall commence on the
Effective Date and continue until the [ * ], unless (i) earlier
terminated pursuant to Sections 9.2 and 9.3, (ii) extended
pursuant to Section 2.10, or (iii) extended by mutual written
agreement of the Parties. The period of time during which the
Research Program is in effect shall be the "Research Term." The
Research Program shall be
[ * ] - Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
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conducted pursuant to a detailed research plan attached hereto as
Exhibit A, which may be modified from time to time by the RMC
(the "Research Plan"). Telik shall commence the Research Program
promptly upon execution of this Agreement. Each Party shall
devote commercially reasonable efforts to its obligations under
the Research Program, consistent with the efforts it devotes to
its own research programs of comparable market potential.
(c) Section 2.5.1 is amended in its entirety as follows:
Telik will be responsible for providing [ * ] (the [ * ] all
infrastructure [ * ] necessary for conducting [ * ] Phase 1 of
the Research Plan, relating to identification and selection of
advanced lead compounds and Phase 2 of the Research Plan,
relating to identification and selection of Clinical Candidates.
Telik, [ * ] will also be responsible for providing all
infrastructure [ * ] necessary for and conducting [ * ], Phase 3
of the Research Plan, relating to all IND enabling work for
Clinical Candidates, except that portion of Phase 3 work
identified in the Research Plan as uniquely required for an IND
application in Japan, for:
(i) The first Clinical Candidate; and
(ii) Subsequent Clinical Candidates if Telik shall choose by
written notice to Sanwa, to develop or have developed the same Clinical
Candidate(s) outside the Sanwa Territory.
If, as of the date Telik provides notice to Sanwa pursuant to
Section 2.5.l(ii), Sanwa has commenced work on that portion of
Phase 3 of the Research Plan for which Telik would be responsible
as a result of providing such notice using protocols for such
Phase 3 work as may be recommended by the RMC, then Telik shall
promptly [ * ] such portion of Phase 3 of the Research Plan and
Telik shall take over and complete or have such work completed.
(d) Section 2.10 is amended by renumbering the existing Section 2.10
as Section 2.10 "(a)" and by adding the following at the end of that section:
(b) At each of the RMC meetings, the RMC will discuss whether it
would be scientifically advisable to extend the Research Term for
an additional [ * ] period. By no later than [ * ] ("Cut-Off
Date"), the RMC shall make a final recommendation to the Parties
of whether to extend the Research Term for an additional [ * ]
period.
[ * ] - Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
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If at any RMC meeting the RMC recommends to extend the Research
Term for an additional [ * ] period, the Research Term shall be
extended until the [ * ]. If by the Cut-Off Date the RMC has not
made a final recommendation to extend the Research Term for an
additional [ * ] period or if the RMC has recommended not to
extend the Research Term for an additional [ * ] period, Sanwa
may, at its option exercisable no later than [ * ] after the Cut-
Off Date upon written notice to Telik, extend the Research Term
for an additional [ * ]. Upon Sanwa's exercise of its option to
extend the Research Term, the Research Term shall be extended
until the [ * ].
(c) Sanwa agrees that if the Research Term is extended for an
additional [ * ] period pursuant to Section 2.10 (b), then Sanwa
will make an additional research payment to Telik of [ * ] within
[ * ] after the [ * ], subject to the conditions set forth in the
last two sentences in Section 5.3.
(d) Telik shall be fully responsible for performing all work [ *
] (the [ * ] during any extensions to the Research Term and
ensuring that at all times Telik [ * ] during any such extensions
to the Research Term.
(e) Section 5.4 is amended by adding the following clause to the
end of that section:
Furthermore, the amount of each of the foregoing payments shall
be [ * ] at the time the Milestone Events occur as follows:
(i) [ * ]
(ii) [ * ]; and
(iii) [ * ].
5. Defined Terms; Incorporation. Unless otherwise expressly provided
herein, defined terms used in this Second Amendment shall have the same meaning
as set forth in the Collaboration Agreement, and all terms herein shall be
incorporated into the Collaboration Agreement. From and after the Second
Amendment Effective Date, all references to the "Collaboration Agreement" in all
other documents delivered in connection with the Collaboration Agreement shall
refer to the Collaboration Agreement, as amended hereby.
6. Counterparts; Facsimile. This Second Amendment may be executed in
counterparts and by facsimile.
[ * ] - Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
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<PAGE>
IN WITNESS WHEREOF, the Parties have executed this Second Amendment
effective as of the date first set forth above.
TELIK, INC. SANWA KAGAKU KENKYUSHO, CO. LTD.
/s/ Clifford Orent /s/ Keiji Tanimoto
- ----------------------------- -----------------------------------
By: Clifford Orent By: Keiji Tanimoto
Its: Chairman and Chief Its: President and Chief Executive
Executive Officer Officer
<PAGE>
Certain confidential information contained in this document, marked by brackets,
has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the securities Act of 1933, as amended.
EXHIBIT 10.7
LICENSE AGREEMENT
This License Agreement (the "Agreement") is entered into as of the 24th day
of September 1997 (the "Effective Date") by and between Terrapin Technologies,
Inc., a Delaware corporation ("Terrapin") and Sanwa Kagaku Kenkyusho co., Ltd.,
a Japanese corporation ("Sanwa"). Sanwa and Terrapin are sometimes referenced
in this Agreement individually as a "Party" and collectively as the "Parties."
Recitals
Whereas, Terrapin and Sanwa have entered into a Collaboration Agreement
dated as of December 20, 1996, as amended by the First Amendment to
Collaboration Agreement dated September 24, 1997, (the "Collaboration
Agreement"); and
Whereas, pursuant to the Collaboration Agreement, the Parties have jointly
engaged in research to identify one or more compounds which activate the insulin
signal transduction pathway and appear to be useful for treatment of diabetes
mellitus or insulin resistance in humans.
Now, Therefore, in consideration of the foregoing and the covenants and
premises contained herein, the Parties agree as follows:
ARTICLE 1
DEFINITIONS
Capitalized terms used but not defined herein will have the meaning set
forth in the Collaboration Agreement. In addition, as used herein, the
following terms shall have the following meanings:
1.1 Collaboration Agreement shall have the meaning assigned in the first
recital above.
1.2 Confidential Information shall mean all information, inventions, know-
how or data of either Party disclosed pursuant to this Agreement, whether in
oral, written, graphic or electronic form, including, without limitation, (i)
information regarding the Licensed Product and all other matters material to
this Agreement or the business of the disclosing Party, including manning,
marketing, financial, personnel, scientific and other business information and
plans, and (ii) the material terms of this Agreement.
1.3 Licensed Field shall mean all human pharmaceutical uses.
1.4 Licensed Know-How shall mean any know-how and other information which
(i) is necessary or useful to the manufacture, use, sale, offer for sale or
import of the Licensed
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Products in the Licensed Field in the Sanwa Territory and (ii) is owned or
Controlled by Terrapin.
1.5 Licensed Patent Rights shall mean all of (i) Terrapin's interest in
any patents and patent applications (including any divisions, continuations-in-
part, reissues, extensions, renewals, supplementary protection certificates and
foreign counterparts thereof) covering inventions made in the course of the
Research Program (the "Research Program Patents") and (ii) other patents and
patent applications (including any divisions, continuations-in-part, reissues,
extensions, renewals, supplementary protection certificates and foreign
counterparts thereof) owned or Controlled by Terrapin, but only to the extent
such other patents and patent applications are necessary or useful for Sanwa for
the manufacture, use, sale, offer for sale or import of Licensed Products which
are covered by the Research Program Patents.
1.6 Licensed Product shall mean:
(i) any Clinical Candidate (as defined in the Collaboration
Agreement);
(ii) any compound (a) which is identified, developed or discovered by
Sanwa using Licensed Technology and (b) which acts through activation of the
insulin signal transduction pathway for the treatment of diabetes mellitus or
insulin resistance in humans; and
(iii) any compound which is an analog, homolog or chemical
modification of a compound described in clause (i) or (ii) and which acts
through activation of the insulin signal transduction pathway for the treatment
of diabetes mellitus or insulin resistance in humans.
1.7 Licensed Technology shall mean the Licensed Patent Rights and the
Licensed Know-How.
1.8 Net Sales shall mean the gross sales price of the Licensed Product in
finished product form realized or invoiced by Sanwa, its Affiliates and
sublicensees from sales to arm's-length third party purchasers, less, to the
extent such amounts are included in the invoiced sales price, taxes, shipping
costs (including freight and insurance), and duties and other governmental
charges paid for. Additional allowances will be permitted for (i) cash, trade
and/or quantity discounts actually allowed; (ii) amounts repaid or credited by
means of rejection or return of goods; (iii) discounts mandated by or granted in
response to law. Net Sales shall not be reduced for [ * ]. A sale of a
Licensed Product is deemed to occur upon the earliest of invoicing or transfer
of title in the Licensed Product to an arm's-length third party purchaser.
1.9 Regulatory Approval shall mean any approval, licenses, registrations,
or authorizations, other than pricing approvals, of any national, regional or
local regulatory agency, department, bureau or other government entity,
necessary for the manufacture, use, storage, import, transport or sale of
Licensed Product in a country within the Sanwa Territory.
1.10 Sanwa Territory shall mean Japan and the other countries listed on
Exhibit 2 hereto.
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE sECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
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1.11 Valid Claim shall mean a claim in an issued, unexpired patent that
has not been held invalid or unenforceable in an unappealed and unappealable
judgment of a court of competent jurisdiction.
ARTICLE 2
INTELLECTUAL PROPERTY; DILIGENCE
2.1 License to Sanwa. Subject to the other provisions of this License
Agreement, Terrapin hereby grants to Sanwa, under the Licensed Technology, an
exclusive, royalty-bearing license, with the right to grant sublicenses, to
develop, have developed, make, have made, use, sell, offer for sale and import
Licensed Products within the Licensed Field in the Sanwa Territory.
2.2 Trademarks. Sanwa shall be free to use such trademarks in connection
with the sale of Licensed Products as it may choose; provided, however, neither
Party hereby grants the other Party any right or license to use its name or any
of its trademarks nor shall the other Party use such name or trademarks without
prior written consent.
2.3 Diligence. Sanwa is responsible for [ * ] the preclinical and
clinical development plan for the Licensed Products in the Sanwa Territory.
Sanwa shall use [ * ] efforts to develop and market the Licensed Products,
consistent with the efforts it expends on products of its own research have
comparable market potential, unless and until Sanwa terminates this Agreement.
If Sanwa fails to use such efforts with respect to a particular Licensed Product
in a country of the Sanwa Territory, Terrapin may give notice to Sanwa
describing such failure. Within [ * ] after receipt of such notice (the "First [
* ]"), Sanwa shall either remedy such failure or propose to Terrapin a written
plan reasonably designed to correct such failure. If Sanwa does not correct such
failure within the First [ * ] or propose a plan within the First [ * ] and
carry out such plan within an additional [ * ], Terrapin may, at any time
thereafter upon written notice to Sanwa, convert the license granted to Sanwa in
Section 2.1 of this Agreement to a nonexclusive license for the Licensed Product
and country of the Sanwa Territory for which Sanwa has not satisfied its
obligations pursuant to the preceding clause of this sentence. In the event the
Parties disagree on whether Sanwa's actions are [ * ] or on whether Sanwa's plan
is [ * ], the Parties shall submit the dispute to arbitration as described in
Section 11.3.
2.4 Obligation to Inform and Share Data. Sanwa agrees to keep Terrapin
fully informed on a reasonable basis of the development and commercialization of
all Licensed Products for which [ * ], including but not limited to providing
periodic written updates on the progress of each filing for Regulatory Approval
in the Sanwa Territory. In addition to the foregoing, Sanwa will make available
to Terrapin any preclinical and clinical data it creates or obtains with respect
to the Licensed Products for which [ * ]. Terrapin may make such data available
to each of its licensees of the Licensed Product outside of the Sanwa Territory
(each, an "Other Licensee"), but only to the extent such Other Licensee agrees
to make its preclinical and clinical data relating to the Licensed Product
available to Sanwa (either directly or through Terrapin) on a reciprocal basis.
It is understood by the Parties that neither Sanwa's commitment to exchange such
data, nor the actual exchange of such data implies [ * ].
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE sECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
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2.5 Complaints and Adverse Reactions. Sanwa shall advise Terrapin of any
adverse reactions, safety issues or toxicity issues relating to the Licensed
Products for which [ * ] of which it becomes aware, in the manner mandated by
FDA regulations.
2.6 Data Sharing for Certain Licensed Products. With respect to any
Licensed Products for which [ * ], Sanwa agrees to keep Terrapin informed on a
reasonable basis of the development and commercialization of such Licensed
Products, to the extent reasonably necessary for Terrapin to evaluate whether
Terrapin is interested in developing and commercializing such Licensed Products
in the Field outside the Sanwa Territory. Terrapin shall maintain the
confidentiality of all information received from Sanwa regarding such Licensed
Products, and Terrapin shall use all such information solely for the purpose of
evaluating whether Terrapin is interested in developing and commercializing such
Licensed Products in the Field outside the Sanwa Territory. Sanwa shall advise
Terrapin of any adverse reactions, safety issues or toxicity issues relating to
the Licensed Products, to the extent and in the manner mandated by FDA
regulations. Terrapin shall reimburse Sanwa, upon receipt of invoice therefor,
for reasonable copying and mailing costs of the information transmitted to
Terrapin pursuant to this Section 2.6.
2.7 Negotiation for License Outside the Sanwa Territory. In the event
Sanwa decides to develop and commercialize a product described in clause (ii) or
(iii) of the definition of Licensed Product (a "Sanwa-Identified Licensed
Product"), and Terrapin is interested in developing and commercializing such a
Sanwa-Identified Licensed Product in the Field outside the Sanwa Territory,
Terrapin shall notify Sanwa of such interest and the Parties shall thereafter
enter into good faith negotiations for Sanwa to grant Terrapin a royalty-bearing
license to make, have made, use, offer for sale, sell and import such Sanwa-
Identified Licensed Product in the Field outside the Sanwa Territory, upon terms
mutually acceptable to the Parties.
ARTICLE 3
ROYALTIES
3.1 Royalty Rate. Sanwa shall pay Terrapin a royalty on Net Sales in Japan
and the other countries of the Sanwa Territory at the rates which are set forth
in Exhibit 2 hereto; provided, however, that the royalty rate in a country shall
be [ * ] for so long as [ * ] in such country during a calendar year shall have
been [ * ] as compared to the previous calendar year due to [ * ]. In the event
of [ * ] during the first year of the sale of Licensed Product by Sanwa in such
country, the royalty rate in such country shall be [ * ] of Sanwa's Net Sales of
Licensed Product in that country for that year. As soon as is practicable after
the Effective Date of this Agreement, the parties shall meet and agree on the
royalty rates for Taiwan, Korea, and the People's Republic of China. Upon such
agreement, each such agreed rate shall be included in Appendix 2 hereto. For
purposes of this Section 3.1, the phrase [ * ] shall be determined by reference
to [ * ] or another comparable source.
3.2 Period of Royalty Obligation. The royalty obligation under Section 3.1
shall commence on the date of first commercial sale or a Licensed Product in a
country and shall expire, on a product-by-product and country-by country basis,
upon the later of: (a) the last to expire patent containing a composition of
matter patent claim that covers such Licensed Product
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE sECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
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(corresponding to a claim of a bushitsu tokkyo in Japan) in a country or (b) the
date that is [ * ] after the date of first commercial sale of such Licensed
Product in such country.
ARTICLE 4
PAYMENT; RECORDS; AUDIT
4.1 Payments; Reports. All amounts payable to Terrapin under this
Agreement shall be paid in U.S. dollars. Payments made to Terrapin under this
Agreement shall be paid within [ * ] after the end of each calendar quarter.
Each payment of royalties and amounts due to Terrapin under Section 3.1 shall be
accompanied by a statement of the amount of Net Sales during such period on a
product-by-product and country-by-country basis, and all other information
necessary to determine the appropriate amount of such payments.
4.2 Exchange Rate. The rate of exchange to be used in computing the amount
of currency equivalent in United States dollars due Terrapin shall be the
average of the closing spot rate quoted by the Tokai Bank, Nagoya Head Office,
on the last business day of each month of the quarterly royalty period in
question.
4.3 Records and Audit. During the term of this Agreement and for a period
of three (3) years thereafter, Sanwa shall keep complete and accurate records
pertaining to the sale or other disposition of the Licensed Products
commercialized by it, in sufficient detail to permit Terrapin to confirm the
accuracy of all payments due hereunder. Terrapin shall have the right to cause
an independent, certified public accountant to audit such records to confirm
Sanwa's Net Sales and royalty payments; provided, however, that such auditor
shall not disclose Sanwa's Confidential Information to Terrapin, except to the
extent such disclosure is necessary to verify the amount of royalties and
reimbursement due under this Agreement. Such audits may be exercised once a
year, within three (3) years after the royalty period to which such records
relate, upon notice to Sanwa and during normal business hours. Terrapin shall
bear the full cost of such audit unless such audit discloses a variance of more
than [ * ] from the royalties and reimbursement previously paid for such year.
In such case, Sanwa shall bear the full cost of such audit. The terms of this
Section shall survive any termination or expiration of this Agreement for a
period of three (3) years.
4.4 Withholding of Taxes. Any withholding of taxes levied by tax
authorities outside the United States on the payments hereunder shall be borne
by [ * ]. At least [ * ] prior to the date Sanwa intends to make payment of any
such withholding tax, notice of such intent to be given to Terrapin at least [ *
] prior to such date, Terrapin shall provide to Sanwa such documents as may be
required by Japanese law and as are identified by Sanwa so as to permit Sanwa to
make application to the Japanese tax authorities pursuant to the U.S.- Japan
treaty regarding relief from income tax on royalty payments. Sanwa agrees to
cooperate with Terrapin in the event [ * ] under any double taxation or other
similar treaty or agreement from time to time in force, such cooperation to
consist of [ * ] reasonably available to Sanwa. If in the opinion of either
Party the provisions of this Section become extremely burdensome, the Parties
agree to meet and discuss such other options as may be available to them.
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE sECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
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4.5 Non-Monetary Consideration. In the event Sanwa receives any non-
monetary consideration in connection with the sale of Licensed Products, Sanwa's
royalty and, if applicable, reimbursement obligations to Terrapin under Article
3 shall be based on the monetary value of such other consideration. In such
case, Sanwa shall disclose the terms of such arrangement to Terrapin and the
Parties shall endeavor in good faith to agree on such monetary value.
ARTICLE 5
OWNERSHIP; PATENTS
5.1 Ownership. Sanwa acknowledges and agrees that Sanwa has rights to the
Licensed Technology only as set forth in this Agreement and the Collaboration
Agreement.
5.2 Patents. Provision is made in the Collaboration Agreement for the
ownership, filing, prosecution and maintenance of patents on inventions arising
under the Research Program and such matters shall be governed thereby.
5.3 Infringement of Licensed Patent Rights by Third Parties.
(a) Notice. Each Party shall promptly notify the other in writing of
any alleged or threatened infringement of the Licensed Patent Rights which may
adversely impact the rights of the Parties hereunder, of which it becomes aware.
(b) Enforcement Action. In the event that the Parties become aware of
any alleged or threatened infringement of the Licensed Patent Rights, Sanwa
shall have the right, but not the obligation, to take appropriate action against
any person or entity directly or contributorily infringing such Licensed Patent
Rights in the Sanwa Territory. In the event Sanwa fails to institute an
infringement suit or take other reasonable action in response to such
infringement within [ * ], Terrapin shall have the right, but not the obligation
upon [ * ] notice to Sanwa, to institute such suit or take other appropriate
action in its own name, Sanwa's name or both names. Regardless of which Party
brings such enforcement action, the other Party hereby agrees to cooperate
reasonably in any such effort, including, if required, bringing a legal action
or furnishing a power of attorney. The Party not bringing the action shall have
the right to participate in such action at its own expense with its own counsel
and any recovery obtained by settlement or otherwise shall be disbursed as
follows: Each Party shall first recover any reasonable expenses incurred in such
action (including counsel fees). Thereafter, the Parties shall share any
remaining recovery in accordance with their economic interests as directly
related to the profitability of the product.
5.4 Infringement of Third Party Patent Rights.
(a) Joint Strategy. In the event that the use or sale of a Licensed
Product becomes the subject of a claim of infringement or a patent, copyright or
other proprietary right anywhere in the Sanwa Territory, and without regard to
which Party is charged with said infringement, and the venue of such claim, the
Parties shall promptly confer to discuss the claim.
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE sECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
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(b) Defense. Unless the Parties otherwise agree, Sanwa shall assume
the primary responsibility for the conduct of the defense of any such claim
brought in the Sanwa Territory. Terrapin shall have the right, but not the
obligation, to participate in any such suit at its sole option and at its own
expense. Each Party shall reasonably cooperate with the Party conducting the
defense of the claim. Neither Party shall enter into any settlement that affects
the other Party's rights or interests without such other Party's written
consent, not to be unreasonably withheld. If Sanwa and Terrapin agree that
payment must be made to a third party (the "Third Party Payment") to avoid
infringement of such third party's patent, Sanwa may offset [ * ] of any Third
Party Payment against royalties due Terrapin under Section 3.1; provided,
however, that in no event shall the royalties under Section 3.1 otherwise due
Terrapin in any quarter be reduced by more than [ * ]. Unused credits may be [ *
].
(c) Patent Marking. Sanwa shall mark, if necessary, all products
manufactured, used or sold under the terms of this Agreement, or their
containers, in accordance with the applicable patent marking laws, as required.
ARTICLE 6
DOCUMENTATION OF LICENSE RIGHTS; CONFIDENTIALITY
6.1 Documentation of License Rights. From time to time, upon the
reasonable request of Sanwa and notice to Terrapin, Terrapin shall disclose to
Sanwa a complete and organized report of written materials embodying the
Licensed Technology and additions or changes to such Licensed Technology.
Terrapin shall provide such written materials in English. From time to time,
Sanwa may request, orally or in writing, that Terrapin provide further
explanations or supplements to the written materials, and Terrapin shall cause
its technical personnel to respond promptly and fully to Sanwa's requests
without additional charge to Sanwa. All disclosure from Terrapin to Sanwa under
this Section 6.1 shall be deemed Confidential Information of Terrapin.
6.2 Confidentiality. Except to the extent expressly authorized by this
Agreement or otherwise agreed in writing by the Parties, the Parties agree that,
for the term of this Agreement and for [ * ] after its expiration or
termination, the receiving Party shall keep confidential and shall not publish
or otherwise disclose and shall not use for any purpose other than as provided
for in this Agreement any Confidential Information furnished to it by the other
Party pursuant to this Agreement unless the receiving Party can demonstrate by
competent written proof that such Confidential Information:
(a) was already known to the receiving Party, other than under an
obligation of confidentiality, at the time of disclosure by the other Party;
(b) was generally available to the public or otherwise part of the
public domain at the time of its disclosure to the receiving Party;
(c) became generally available to the public or otherwise part of the
public domain after its disclosure and other than through any act or omission of
the receiving Party in breach of such Agreements;
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE sECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
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(d) was disclosed to the receiving Party, other than under an
obligation of confidentiality to a third party, by a third party who had no
obligation to the disclosing Party not to disclose such information to others;
or
(e) was independently discovered or developed by the receiving Party
without the use of Confidential Information belonging to the disclosing Party.
6.3 Authorized Disclosure. Each Party may disclose Confidential
Information belonging to the other Party to the extent such disclosure is
reasonably necessary in the following:
(a) filing or prosecuting patents relating to Licensed Products;
(b) regulatory filings;
(c) prosecuting or defending litigation;
(d) complying with applicable governmental regulations;
(e) conducting preclinical or clinical trials of Licensed Products;
(f) disclosure to Affiliates, sublicensees, employees, consultants,
or agents each of whom prior to disclosure must be bound by similar obligations
of confidentiality and non-use at least equivalent in scope to those set forth
in this Article 6; and
(g) disclosure to investment bankers; provided, however, that no
disclosure shall be made of Sanwa Confidential Information without its written
consent, which consent shall not be unreasonably withheld.
Notwithstanding the foregoing, in the event a Party is required to make a
disclosure of the other Party's Confidential Information pursuant to this
Section 6.2 it will, except where impracticable, give reasonable advance notice
to the other Party of such disclosure and use [ * ] to secure confidential
treatment of such information. In any event, the Parties agree to take all
reasonable action to avoid disclosure of confidential information hereunder.
ARTICLE 7
REPRESENTATIONS AND WARRANTIES
7.1 Representations and Warranties.
(a) Both Parties. Each Party represents and warrants to the other
that:
(i) Corporate Power. It is duly organized and validly
existing under the laws of its state or country of incorporation and has full
corporate power and authority to enter into this Agreement and to carry out the
provisions hereof.
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE sECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
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(ii) Due Authorization. It is duly authorized to execute
and deliver this Agreement and to perform its obligations hereunder, and
the person executing this Agreement on its behalf has been duly authorized
to do so by all requisite corporate action.
(iii) Binding Agreement. This Agreement is legally binding
upon it and enforceable in accordance with its terms. The execution, delivery
and performance of this Agreement by it does not conflict with any agreement,
instrument or understanding, oral or written, to which it is a Party or by which
it may be bound, nor violate any material law or regulation of any court,
governmental body or administrative or other agency having jurisdiction over it.
(iv) Validity. It is aware of no action, suit or inquiry
or investigation instituted by any governmental agency which questions or
threatens the validity of this Agreement.
(v) [ * ]. To the best of its knowledge, it has all
right, power and authority to perform its obligations under, and [ * ]. To the
best of its knowledge, there are [ * ].
(vi) Accuracy of Information. All documentation and other
information conveyed by one Party to another hereunder or in connection
herewith, was, at the time it was conveyed or provided, accurate and complete in
light of the purposes for which it was intended.
(b) By Terrapin.
(i) Grant of Rights; Maintenance of Agreements. It has
not, and will not during this Agreement, grant any right to any third party
which would conflict with the rights granted to the other Party hereunder. It
has (or will have at the time performance is due) maintained and will maintain
and keep in full force and effect all agreements necessary to perform its
obligations hereunder.
(ii) The compounds identified by Terrapin for use in the
Research Program and described by Terrapin to Sanwa act at least in part through
activation of the insulin signal transduction pathway.
7.2 Terrapin Disclaimer. EXCEPT AS SET FORTH IN SECTION 7.1 ABOVE, THE
LICENSED TECHNOLOGY IS PROVIDED "AS IS" AND TERRAPIN EXPRESSLY DISCLAIMS ANY AND
ALL WARRANTIES OF ANY KIND, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION THE
WARRANTIES OF DESIGN, MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE,
NONINFRINGEMENT OF THE INTELLECTUAL PROPERTY RIGHTS OF THIRD PARTIES OR ARISING
FROM A COURSE OF DEALING, USAGE OK TRADE PRACTICES, IN ALL CASES WITH RESPECT
THERETO. Without limiting the generality of the foregoing, Terrapin expressly
does not warrant (i) the success of any study or test commenced by Sanwa under
this Agreement or (ii) the safety or usefulness for any purpose of the Licensed
Technology.
7.3 Terrapin Grant of Rights. Terrapin has not, and will not during the
term of this Agreement, grant any right to any third party which would conflict
with the rights granted to
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE sECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
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Sanwa hereunder. It has (or will have at the time performance is due) maintained
and will maintain and keep in full force and effect all agreements necessary to
perform its obligations hereunder.
ARTICLE 8
INDEMNIFICATION
8.1 Indemnification. Each Party hereby agrees to save, defend and hold the
other Party and its agents and employees harmless from and against any and all
suits, claims, actions, demands, liabilities, expenses and/or loss, including
reasonable legal expense and attorneys' fees, other than claims for infringement
as provided in Section 5.4, (collectively, "Claims") resulting directly or
indirectly from actions by the indemnifying Party, its Affiliates, agents or
sublicensees in connection with the manufacture, use or sale of Licensed
Products, but only to the extent such Claims result from the gross negligence or
willful misconduct of the indemnifying Party or its employees and agents and
only to the extent such Claims do not result from the negligence of the Party
seeking indemnification.
8.2 Control of Defense. Any entity entitled to indemnification under this
Article shall give written notice to the indemnifying Party of any Claims that
may be subject to indemnification, promptly after learning of such Claim, and
the indemnifying Parry shall assume the defense of such Claims with counsel
reasonably satisfactory to the indemnified Party. If such defense is assumed by
the indemnifying Party with counsel so selected, the indemnifying Party will not
be subject to any liability for any settlement of such Claims made by the
indemnified Party without its consent (but such consent will not be unreasonably
withheld or delayed), and will not be obligated to pay the fees and expenses of
any separate counsel renamed by the indemnified Party with respect to such
Claims.
ARTICLE 9
COMPLIANCE WITH LAWS
9.1 Compliance with Laws. Sanwa and Terrapin shall review in good faith
and cooperate in taking actions to ensure the compliance of this Agreement with
all applicable laws. Sanwa and Terrapin shall each provide the other Party with
such reasonable assistance as may be required for the Party requesting such
assistance to comply with all laws, ordinances, rules, regulations and the like
of all governmental units or agencies having jurisdiction pertaining to this
Agreement, including without limitation, obtaining all import, export and other
permits, certificates, licenses or the like required by such laws, ordinances,
rules, regulations and the like, necessary to permit the Parties to perform
hereunder and to exercise their respective rights hereunder.
ARTICLE 10
TERM AND TERMINATION OF AGREEMENT
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE sECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
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10.1 Term. Except as provided under Section 10.2 below, the term of this
Agreement shall commence upon the Effective Date and shall expire, on a country-
by-country basis, on the expiration date of the last to expire royalty
obligation contained herein in such country. Upon expiration of this Agreement
with respect to a given country in the Sanwa Territory, Sanwa shall have a fully
paid, non-exclusive license, under the Licensed Technology, to develop, have
developed, make, have made, use, sell, offer for sale, and import the Licensed
Product in such country.
10.2 Termination for Material Breach. Each Party shall have the right to
terminate this Agreement after [ * ] prior written notice to the other that the
other Party has committed a material breach of the Agreement unless the other
Party cures (to the extent practicable) the material breach within such period
of time.
10.3 Accrued Rights; Surviving Obligations. Termination of this Agreement
shall not affect any accrued rights of either Party. The terms of Articles 6
and 8 of this Agreement shall survive termination of this Agreement. The terms
of Article 4 shall survive as pertains to any accrued obligations owed by Sanwa
at the time termination. Promptly after termination of this Agreement each
Party shall return or dispose of any know how of the other in the accordance
with the instructions of the other, including without limitation any compounds,
assays or other biological or chemical materials.
ARTICLE 11
Governing LAW; DiSpUTE rESOLUTION
11.1 Governing Law. This Agreement shall be governed by and construed in
accordance with the domestic laws of the State of California, (i) without giving
effect to any choice or conflict of law provision or rule that would cause the
application of the laws of any jurisdiction other than the State of California,
and (ii) except that the rights of the parties to resolve by arbitration any
dispute arising between them regarding the subject matter of this Agreement
shall not be governed by the California arbitration act or international
arbitration act (Cal. Code of Civ. Proc. (S) 1280 et seq. and 1297.11 et seq.)
but rather by the United States Arbitration Act (9 U.S.C. (S)(S) 1-14, 201-208).
11.2 Dispute Resolution. In the event of any controversy or claim arising
out of, relating to or in connection with any provision of this Agreement, the
Parties shall try to settle their differences amicably and in good faith between
themselves first, by referring the disputed matter to the respective heads of
research of each Party and, if not resolved by the research heads, by referring
the disputed matter to the respective Chief Executive Officers of each Party. In
the event such executives are unable to resolve such dispute within such thirty
(30) day period, either Party may invoke the provisions of Section 11.3.
11.3 Arbitration. Upon failure to resolve any controversy or claim arising
out of, relating to or in connection with any provision of this Agreement using
the dispute resolution procedure described in Section 11.2, such controversy or
claim shall be finally settled by arbitration. Arbitration shall be held in
Honolulu, Hawaii in the English language and conducted in accordance with the
Commercial Arbitration Rules of the American Arbitration Association.
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE sECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
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The decision of such arbitration shall be conclusive and binding upon both
Parties. If a Party commences any action or proceeding against the other Party
to enforce this Agreement or any rights related thereto, the prevailing Party in
such action shall be entitled to recover from the other Party the reasonable
attorneys' fees and other reasonable costs and expenses incurred by that
prevailing Party in connection with such action or proceeding and in connection
with enforcing any judgment, award or order thereby obtained.
ARTICLE 12
GENERAL PROVISIONS
12.1 Notices. All notices required or permitted to be given under this
Agreement shall be in writing and shall be mailed by registered or certified
mail, postage prepaid, addressed to the signatory to whom such notice is
required or pertained to be given and transmitted by facsimile to the number
indicated below. All notices shall be deemed to have been given when mailed, as
evidenced by the postmark at the point of mailing, or faxed.
All notices to Sanwa shall be addressed as follows:
Sanwa Kagaku Kenkyusho Co., Ltd.
35 Higashi Sotobori-cho
Higashi-ku Nagoya, 461
Japan
Attention: President
Fax: 011-81-52-9571067
Graham & James LLP
One Maritime Plaza
San Francisco, California 94111
U.S.A.
Attention: Michael R. Moyle, Esq.
Facsimile: (650) 391-2493
All notices to Terrapin shall be addressed as follows:
Terrapin Technologies, Inc.
750 Gateway Boulevard
South San Francisco, California 94080
U.S.A.
Attention: President
Fax: (650) 244- 9388
with a copy to:
Cooley Godward LLP
Five Palo Alto Square
3000 El Camino Real
Palo Alto, California 94306
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE sECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
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Attn.: Brian C. Cunningham, Esq.
Fax: (650) 857 0663
Any Party may, by written notice to the other, designate a new addressee,
address or facsimile number to which notices to the Party giving the notice
shall thereafter be mailed or faxed.
12.2 Notices. Force Majeure. No Party shall be liable for any delay or
failure of performance to the extent such delay or failure is caused by
circumstances beyond its reasonable control and that by the exercise of due
diligence it is unable to prevent, provided that the Party claiming excuse uses
its best efforts to overcome the same.
12.3 Entirety of Agreement. This Agreement embodies the entire, final and
complete agreement and understanding between the Parties and replaces and
supersedes all prior discussions and agreements between them with respect to its
subject matter. No modification or waiver of any terms or conditions hereof
shall be effective unless made in writing and signed by a duly authorized
officer of each Party.
12.4 Non-Waiver. The failure of a Party in any one or more instances to
insist upon strict performance of any of the terms and conditions of this
Agreement shall not constitute a waiver or relinquishment, to any extent, of the
right to assert or rely upon any such terms or conditions on any future
occasion.
12.5 Disclaimer of Agency. Neither Party is, nor will be deemed to be, the
legal representative or agent of the other, nor shall either Party have the
right or authority to assume, create, or incur any third party liability or
obligation of any kind, express or implied, against or in the name of or on
behalf of another except as expressly set forth in this Agreement.
12.6 Severability. If a court of competent jurisdiction declares any
provision of this Agreement invalid or unenforceable, or if any government or
other agency having jurisdiction over either Terrapin or Sanwa deems any
provision to be contrary to any laws, then that provision shall be severed and
the remainder of the Agreement shall continue in full force and effect. To the
extent possible, the Parties shall revise such invalidated provision in a manner
that will render such provision valid without impairing the Parties' original
interest.
12.7 Assignment
12.7.1 General. Except as otherwise provided in Section 12.7.2 or
12.7.3, neither party may assign its rights or obligations under this Agreement
without the prior written consent of the other party. This Agreement shall be
binding upon the permitted successors and permitted assigns of the Parties. Any
attempted delegation or assignment not in accordance with this Section 12.7
shall be of no force and effect.
12.7.2 Permitted Assignment by Sanwa. Sanwa may assign its rights or
obligations under this Agreement to a third party in connection with the merger,
consolidation, reorganization or acquisition of stock or assets affecting
substantially all of the assets or actual voting control of Sanwa.
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE sECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
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12.7.3 Permitted Assignment by Terrapin. Upon the written consent of
Sanwa, such consent not to be unreasonably withheld or delayed, Terrapin may
assign its rights or obligations under this Agreement to a third party in
connection with the merger, consolidation, reorganization or acquisition of
stock or assets affecting substantially all of the assets or actual voting
control of Terrapin. Sanwa may only withhold its consent under the preceding
sentence if (a) such third party is [ * ] according to the terms of the
Collaboration Agreement or (b) such third party is [ * ].
12.8 Headings. The headings contained in this Agreement have been added
for convenience only and shall not be construed as limiting.
12.9 Limitation of Liability. No Party shall be liable to another for
indirect, incidental, consequential or special damages, including but not
limited to lost profits, arising from or relating to any breach of this
Agreement, regardless of any notice of the possibility of such damages. Nothing
in this Section is intended to limit or restrict the indemnification rights or
obligations of any Party.
12.10 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be an original and all of which shall
constitute together the same document.
12.11 English Language. This Agreement has been prepared in the English
language and shall be construed in the English language.
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE sECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
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IN WITNESS WHEREOF, the Parties hereto have duly executed this Agreement.
<TABLE>
<CAPTION>
<S> <C>
TERRAPIN TECHNOLOGIES, INC. SANWA KAGAKU KENKYUSHO CO., LTD.
By: /s/ Clifford Orent By: /s/ Keiji Tanimoto
------------------ ------------------
Name: Clifford Orent Name: Keiji Tanimoto
Title: Chairman, President and Chief Title: President and Chief Executive Officer
Executive Officer
</TABLE>
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE sECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
[SIGNATURE PAGE]
<PAGE>
EXHIBIT 1
TO
LICENSE AGREEMENT
CLINICAL CANDIDATES
[INTENTIONALLY LEFT BLANK]
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE sECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
E-1
<PAGE>
EXHIBIT 2
TO
LICENSE AGREEMENT
ADDITIONAL COUNTRIES AND ROYALTY RATES
FOR
SANWA TERRITORY
With respect to any Licensed Product, Sanwa shall pay royalty to Terrapin
as follows:
COUNTRY ROYALTY RATE
Japan [ * ]
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE sECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
E-2.
<PAGE>
FIRST AMENDMENT TO LICENSE AGREEMENT
This First Amendment to License Agreement (this "First Amendment") is made
and dated October 29, 1998 (the "First Amendment Effective Date"), by and
between Sanwa Kagaku Kenkyosho Co., Ltd., a Japanese corporation ("Sanwa") and
Telik, Inc. (formerly Terrapin Technologies, Inc.), a Delaware corporation.
Recitals
--------
A. Sanwa and Telik are parties to that License Agreement dated as of
September 24, 1997 (the "License Agreement") pursuant to which Telik granted
Sanwa a license in relation to the Licensed Products (as defined therein).
B. Sanwa and Telik are entering into a Series J Preferred Stock Purchase
Agreement of even date herewith (the "Stock Purchase Agreement") in connection
with which, as one of the conditions to Sanwa consummating the transactions
contemplated by the Stock Purchase Agreement, the parties have agreed to execute
and deliver this First Amendment.
NOW, THEREFORE, in consideration of the above recitals and for other good
and valuable consideration, the adequacy and receipt of which are hereby
acknowledged, the parties hereby agree as follows:
AGREEMENT
---------
1. Amendments. The License Agreement is hereby amended as follows:
----------
(a) Each reference in the License Agreement to "Terrapin Technologies,
Inc." is amended and replaced by "Telik, Inc." Each reference in the License
Agreement to "Terrapin" is amended and replaced by "Telik".
(b) Section 2.3 is amended in its entirety as follows:
Sanwa is responsible for [ * ] the preclinical and clinical development
plan for the Licensed Products in the Sanwa Territory.
(c) Section 2.4 is amended in its entirety as follows:
2.4 Obligation to inform and Share Data; Collaborative Development.
(a) Obligation to Inform and Share Data. Sanwa agrees to keep Telik
fully informed on a reasonable basis of the development and
commercialization of all Licensed Products for which [ * ], including
but not limited to providing [ * ] in the Sanwa Territory. In addition
to the foregoing, Sanwa will make available to Telik any preclinical
and clinical data it creates or obtains with respect to the Licensed
Products for which [ * ]. Telik may make such data available to a Third
Party Licensee (as defined below) outside of the Sanwa Territory [ * ]
to the [ * ] pursuant to the [ * ].
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE sECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
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(b) Collaborative Development [ * ]. Telik covenants that [ * ]
or a [ * ] to [ * ], in countries outside the Sanwa Territory any
Clinical Candidates (as such term is defined in the Collaboration
Agreement) [ * ] into a [ * ] or [ * ] which would [ * ] that [ * ]
will (i) [ * ] and [ * ] for such Clinical Candidates, (ii) [ * ]
covering such Clinical Candidates, (iii) [ * ] with respect to the
Clinical Candidates [ * ] unless otherwise [ * ] and (iv) [ * ] an
appropriate [ * ]"). Telik further agrees to use all reasonable
efforts to facilitate and assist [ * ] and [ * ]. If after good faith
efforts, Telik has been unable to [ * ] containing the [ * ] enter
into [ * ] then Sanwa and Telik shall meet and jointly decide how to
proceed. If Sanwa transfers all or substantially all control, [ * ]
Sanwa's rights to develop Clinical Candidates for commercialization in
Japan to a third party, Telik [ * ] with the [ * ]. For purposes of
the preceding sentence, Sanwa shall not be deemed to have transferred
control of Sanwa's rights to develop Clinical Candidates for
commercialization by entering into any joint [ * ] or similar
arrangement.
(c) Sanwa's Collaborative Development [ * ]. Given continuing
developments concerning the harmonization of regulatory approval
processes within the Sanwa Territory [ * ] the parties recognize that
it may be in the parties', [ * ] best interest for certain pre-
clinical and/or clinical studies to be [ * ], then:
(i) if Sanwa desires to conduct any such study [ * ] to [ * ] or
[ * ] Clinical Candidates [ * ] then any such study shall be [ *
], and the RMC shall be responsible for [ * ] any protocols for
such studies as well as [ * ] shall be [ * ] and
(ii) if Sanwa desires to conduct any such study [ * ] to [ * ] or
[ * ] Clinical Candidates [ * ] then any such study shall be [ *
] to the [ * ] and [ * ].
2. Defined Terms; Incorporation. Unless otherwise expressly provided herein,
----------------------------
defined terms used in this First Amendment shall have the same meaning as set
forth in the License Agreement, and all terms herein shall be incorporated into
the License Agreement. From and after the First Amendment Effective Date, all
reference to the "License Agreement" in all other documents delivered in
connection with the License Agreement shall refer to the License Agreement, as
amended hereby.
3. Counterparts: Facsimile. This First Amendment may be executed in
-----------------------
counterparts and by facsimile.
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE sECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
2.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this First Amendment
effective as of the date first set forth above.
TELIK, INC. SANWA KAGAKU KENKYUSHO CO., LTD.
By: /s/ Clifford Orent By: /s/ Keiji Tanimoto
------------------ --------------------------------------
By: Clifford Orent By: Keiji Tanimoto
Its: Chairman and Its: President and Chief Executive Officer
Chief Executive Officer
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE sECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
3
<PAGE>
Certain confidential information contained in this document, marked by brackets,
has been omitted and filed separately with the Securities and Exchange
Commission pursuant to rule 406 of the Securities Act of 1933, as amended.
Exhibit 10.8
SCREENING SERVICES AGREEMENT
This Screening Services Agreement (the "Agreement") is made as of the 20th
day of December, 1996 ("Effective Date"), by and between Terrapin Technologies,
Inc., a Delaware corporation ("Terrapin") and Sanwa Kagaku Kenkyusho Co., Ltd.,
a Japanese corporation ("Sanwa").
Recitals
Whereas, Terrapin possesses a library of compounds ("Terrapin Library") and
is able to determine the affinity of each compound in relation to Terrapin's
reference proteins employed in Terrapin's proprietary TRAPTM technology ("TRAP
Technology"); and
Whereas, Sanwa has certain biological targets ("Sanwa Targets") that it
desires Terrapin to evaluate using its TRAPTM Technology; and
Whereas, Terrapin desires to apply the TRAP Technology and Terrapin Library
to the Sanwa Targets in order to identify and evaluate compounds that may lead
to candidates for pharmaceutical development;
Now, Therefore, in consideration of the foregoing premises and the
covenants set forth below, the parties hereby agree as follows:
1. Screening Activity.
1.1 Sanwa's Targets.' From time to time during the term of this
Agreement, Sanwa may notify Terrapin of a Sanwa Target which Sanwa wishes to use
in screening ("Selected Target") compounds provided by Terrapin; provided,
however, Sanwa may not submit more than [ * ] Sanwa Targets per year, unless
Terrapin agrees otherwise upon consultation with Sanwa.
1.2 Screening.
(a) Within [ * ] of receipt of a notice from Sanwa in accordance
with Subsection 1.1, subject to Subsection 1.3 below, Terrapin shall, based upon
its knowledge of the Terrapin Library and using the TRAPTM Technology, select
and provide to Sanwa [ * ] compounds ("Initial Compounds") from the Terrapin
Library that Terrapin believes, in its sole discretion, represent maximum
chemical compound diversity in the Terrapin
1.
<PAGE>
Library. Sanwa shall screen each Initial Compound for selected activity in
relation to the Selected Target and provide Terrapin the data resulting
therefrom ("Initial Results").
(b) Promptly after receipt of the Initial Results Terrapin shall,
based upon the Initial Results and using the TRAP Technology or any other search
technology available to Terrapin, select and provide to Sanwa [ * ] compounds
("Secondary Compounds") from the Terrapin Library that Terrapin believes, in its
sole discretion, will exhibit the greatest likelihood of activity in relation to
the Selected Target. Sanwa shall screen each Secondary Compound for selected
activity in relation to the Selected Target and provide Terrapin the data
resulting therefrom ("Secondary Results").
(c) If [ * ] that further screening activity is necessary, then
based upon the Initial Results and Secondary Results and using the TRAPTM
Technology or any other search technology available to Terrapin, Terrapin shall
select and provide to Sanwa [ * ] compounds ("Tertiary Compounds") from the
Terrapin Library that Terrapin believes, in its sole discretion, will exhibit
the greatest likelihood of additional assay activity in relation to the Selected
Target. Sanwa will screen each Tertiary Compound for selected activity in
relation to the Selected Target and provide Terrapin the data resulting
therefrom ("Tertiary Results").
1.3 Excluded Targets. Notwithstanding anything herein to the contrary
Terrapin shall not be obligated to perform any of the services described in
subsection 1.2 with respect to any Sanwa Targets that Terrapin determines are
identical to or in conflict with targets included in any research collaboration
between Terrapin and a third party corporate entity or any other Targets which
Terrapin is already actively pursuing, prior to receipt of a notice pursuant to
Subsection 1.1 identifying such Sanwa Compound ("Excluded Targets"). Terrapin
shall notify Sanwa if a Sanwa Target is an Excluded Target promptly after
receipt of Sanwa's' notice under Subsection 1.1 relating thereto.
2. Information Provided By Terrapin to Sanwa.
2.1 Categorization and List of Active Compounds. Each Secondary and
Tertiary Compound shall be classified as an "Active Compound" if it exhibits
activity with respect to the Selected Target at concentrations [ * ]. Promptly
after receipt of the Tertiary Results, or the Secondary Results if no Tertiary
Compounds are screened, Terrapin shall provide Sanwa a list of Active Compounds
based upon the Initial, Secondary and Tertiary Results with respect to each
Selected Target, together with the two dimensional representation of the
chemical structure thereof.
3. Payment.
3.1 [ * ] Certain Replacement Compounds. [ * ] shall be [ * ] for the
services and activities performed by the other in accordance with this
Agreement; provided,
[*] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and
Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as
amended.
2.
<PAGE>
however, that if in the course of Terrapin using the TRAPTM Technology on
Sanwa's behalf, it becomes necessary to replace rare, expensive compounds in the
Terrapin Library because such compounds have become depleted due to such
activity hereunder, Sanwa shall reimburse Terrapin for the cost of replacing
such depleted compounds. In that event, Terrapin shall consult with Sanwa
regarding such payment. In any event, prior to providing Sanwa with such
compounds, Terrapin shall inform Sanwa of the costs of such compounds in
writing.
3.2 Additional Services. If during the term of this Agreement Sanwa
requests and Terrapin agrees to perform services in addition to those described
in Sections 1 and 2 above, including but not limited to medicinal chemistry or
development of in vitro or cell-based or animal assays, Sanwa shall pay Terrapin
for such additional services an amount [ * ] In any event, prior to providing
Sanwa with such compounds, Terrapin shall inform Sanwa of the lists of such
compounds in writing.
4. Ownership of Property.
4.1 Joint Inventions. Any inventions or discoveries (whether patentable
or not) (the "Joint Inventions") pertaining to, and all information concerning
Active Compounds, resulting directly from the activities of either party
pursuant to Sections 1 and 2, will be jointly owned by Terrapin and Sanwa.
Terrapin shall have the right and the obligation to file, prosecute and maintain
all patent applications and patents for Joint Inventions and shall pay all costs
and fees incurred with relation to the filing, prosecution and maintenance of
such applications and patents. Terrapin shall confer with Sanwa on the content
of all filings with the United States Patent and Trademark Office (and the
foreign equivalent) and shall provide Sanwa with the opportunity to review the
prosecution strategy and the content of such filings prior to their submission
to such authorities.
4.2 Sanwa will have the exclusive rights to exploit the Joint Inventions
and information concerning Active Compounds in the Sanwa Territory. For
purposes of this Section, "Sanwa Territory" shall mean Japan, Korea, Taiwan, and
the People's Republic of China.
4.3 Terrapin will have exclusive rights to exploit the Joint Inventions
and information concerning Active Compounds in North America and South America.
4.4 Sanwa and Terrapin will [ * ] revenues from the exploitation of the
Joint Inventions and information concerning Active Compounds in the rest of the
world, will consult with one another prior to entering into any agreement
theretofore and will take appropriate measures to assure such sharing in each
case.
[*] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and
Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as
amended.
3.
<PAGE>
5. Representations and Warranties. Each party represents and warrants to the
other that:
5.1 It will exercise due care in performing its obligations under the
Agreement.
5.2 All documentation and other information conveyed by one Party to
another hereunder or in connection herewith, was, at the time it was conveyed or
provided, accurate and complete in light of the purposes for which it was
intended.
6. Confidential Information.
6.1 Confidentiality. Except to the extent expressly authorized by this
Agreement or otherwise agreed in writing by the Parties, the Parties agree that,
for the term of this Agreement and for [ * ] after its expiration or
termination, the receiving Party shall keep confidential and shall not publish
or otherwise disclose and shall not use for any purpose other than as provided
for in this Agreement any Confidential Information, hereinafter defined,
furnished to it by the other Party pursuant to this Agreement unless the
receiving Party can demonstrate by competent written proof that such
Confidential Information:
(a) was already known to the receiving Party, other than under an
obligation of confidentiality, at the time of disclosure by the other Party;
(b) was generally available to the public or otherwise part of the
public domain at the time of its disclosure to the receiving Party;
(c) became generally available to the public or otherwise part of
the public domain after its disclosure and other than through any act or
omission of the receiving Party in breach of such Agreements;
(d) was disclosed to the receiving Party, other than under an
obligation of confidentiality to a third party, by a third party who had no
obligation to the disclosing Party not to disclose such information to others;
or
(e) was independently discovered or developed by the receiving Party
without the use of Confidential Information belonging to the disclosing Party.
6.2 Authorized Disclosure. Each Party may disclose Confidential
Information belonging to the other Party to the extent such disclosure is
reasonably necessary in the following instances:
(a) filing or prosecuting patents relating to Clinical Candidates or
Licensed Products;
[*] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and
Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as
amended.
4.
<PAGE>
(b) regulatory filings;
(c) prosecuting or defending litigation;
(d) complying with applicable governmental regulations;
(e) conducting preclinical or clinical trials of Clinical
Candidates;
(f) disclosure to Affiliates, sublicensees, employees, consultants,
or agents each of whom prior to disclosure must be bound by similar obligations
of confidentiality and non-use at least equivalent in scope to those set forth
in this Section 6; and,
(g) disclosure to investment bankers; provided, however, that no
such disclosure shall be made of Sanwa Confidential Information without its
written consent, which consent shall not be unreasonably withheld.
Notwithstanding the foregoing, in the event a Party is required to make a
disclosure of the other Party's Confidential Information pursuant to this
Section 6.2 it will, except where impracticable, give reasonable advance notice
to the other Party of such disclosure and use best efforts to secure
confidential treatment of such information. In any event, the Parties agree to
take all reasonable action to avoid disclosure of Confidential Information
hereunder.
6.3 Confidential Information. Confidential Information shall mean any and
all knowledge, know-how, screening results, compound structures, practices,
processes, or other information received by one party to this Agreement from the
other party to this Agreement pursuant to this Agreement.
7. Term; Termination.
7.1 Term. This Agreement shall become effective as of the date first
hereinabove written and unless earlier terminated as hereinafter provided, shall
continue in force for a period of three (3) years after the same. This Agreement
may be extended from time to time by mutual agreement of the parties hereto.
7.2 Termination for Default. In the event that either party to this
Agreement shall be in default of any of its material obligations hereunder and
shall fail to remedy such default within [ * ] after receipt of written notice
thereof, the party not in default shall have the option of terminating this
Agreement by giving written notice thereof, notwithstanding anything to the
contrary contained in this Agreement.
[*] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and
Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as
amended.
5.
<PAGE>
8. Accrued Rights; Surviving Obligations.
8.1 Termination of this Agreement shall not affect any accrued rights of
either Party. The terms of Sections 4 and 6 of this Agreement shall survive
termination of this Agreement. Except to the extent necessary to allow the
Parties to exploit their respective rights pursuant to Section 4, promptly after
termination of this Agreement each Party shall return or dispose of any know-how
of the other in accordance with the instructions of the other, including without
limitation any compounds, assays or other biological or chemical materials.
9. Governing Law; Dispute Resolution
9.1 Governing Law. This Agreement shall be governed by and construed in
accordance with the domestic laws of the State of California, (i) without giving
effect to any choice or conflict of law provision or rule that would cause the
application of the laws of any jurisdiction other than the State of California,
and (ii) except that the rights of the parties to resolve by arbitration any
dispute arising between them regarding the subject matter of this Agreement
shall not be governed by the California arbitration act or international
arbitration act (Cal. Code of Civ. Proc. (S) 1280 et seq.and 1297.11 et seq.)
but rather by the United States Arbitration Act (9 U.S.C. (S)(S) 1-14, 201-208).
9.2 Dispute Resolution. In the event of any controversy or claim arising
out of, relating to or in connection with any provision of this Agreement, the
Parties shall try to settle their differences amicably and in good faith between
themselves first, by referring the disputed matter to the respective heads of
research of each Party and, if not resolved by the research heads, by referring
the disputed matter to the respective Chief Executive Officers of each Party.
In the event such executives are unable to resolve such dispute within such
thirty (30) day period, either Party may invoke the provisions of Section 9.3.
9.3 Arbitration. Upon failure to resolve any controversy or claim arising
out of, relating to or in connection with any provision of this Agreement using
the dispute resolution procedure described in Section 9.2, such controversy or
claim shall be finally settled by arbitration. Arbitration shall be held in
Honolulu, Hawaii in the English language and conducted accordance with the
Commercial Arbitration Rules of the American Arbitration Association. The
decision of such arbitration shall be conclusive and binding upon both Parties.
If a Party commences any action or proceeding against the other Party to enforce
this Agreement or any rights related thereto, the prevailing Party in such
action shall be entitled to recover from the other Party the reasonable
attorneys' fees and other reasonable costs and expenses incurred by that
prevailing Party in connection with such action or proceeding and in connection
with enforcing any judgment, award or order thereby obtained.
[*] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and
Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as
amended.
6.
<PAGE>
10. Miscellaneous.
10.1 Notices. All notices required or permitted to be given under this
Agreement shall be in writing and shall be mailed by registered or certified
mail, postage prepaid, addressed to the signatory to whom such notice is
required or permitted to be given and transmitted by facsimile to the number
indicated below. All notices shall be deemed to have been given when mailed, as
evidenced by the postmark at the point of mailing, or transmitted by facsimile.
All notices to Sanwa shall be addressed as follows:
Sanwa Kagaku Kenkyusho Co., Ltd.
35 Higashi Sotobori-cho
Higashi-ku Nagoya, 461
Japan
Attention: President
Fax: 011-81-52-9571067
With a copy to:
Graham & James, L.L.P.
One Maritime Plaza
San Francisco, California 94111
U.S.A.
Attention: Michael R. Moyle, Esq.
Facsimile: (415) 391-2493
All notices to Terrapin shall be addressed as follows:
Terrapin Technologies, Inc.
750 Gateway Boulevard
South San Francisco, California 94080
U.S.A.
Attention: President
Fax: (415) 244-9388
[*] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and
Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as
amended.
7.
<PAGE>
with a copy to:
Cooley Godward LLP
Five Palo Alto Square
3000 El Camino Real
Palo Alto, California 94306
Attention: Brian C. Cunningham, Esq.
Fax: (415) 857 0663
Any Party may, by written notice to the other, designate a new addressee,
address or facsimile number to which notices to the Party giving the notice
shall thereafter be mailed or faxed.
10.2 Force Majeure. No Party shall be liable for any delay or failure of
performance to the extent such delay or failure is caused by circumstances
beyond its reasonable control and that by the exercise of due diligence it is
unable to prevent, provided that the Party claiming excuse uses its best efforts
to overcome the same.
10.3 Entirety Of Agreement. This Agreement embodies the entire, final and
complete agreement and understanding between the Parties and replaces and
supersedes all prior discussions and agreements between them with respect to its
subject matter except as expressly stated herein. No modification or waiver of
any terms or conditions hereof shall be effective unless made in writing and
signed by a duly authorized officer of each Party.
10.4 Non-Waiver. The failure of a Party in any one or more instances to
insist upon strict performance of any of the terms and conditions of this
Agreement shall not constitute a waiver or relinquishment, to any extent, of the
right to assert or rely upon any such terms or conditions on any future
occasion.
10.5 Disclaimer Of Agency. Neither Party is, or will be deemed to be, the
legal representative or agent of the other, nor shall either Party have the
right or authority to assume, create, or incur any third party liability or
obligation of any kind, express or implied, against or in the name of or on
behalf of another except as expressly set forth in this Agreement.
10.6 Severability. If a court of competent jurisdiction declares any
provision of this Agreement invalid or unenforceable, or if any government or
other agency having jurisdiction over either Terrapin or Sanwa deems any
provision to be contrary to any laws, then that provision shall be severed and
the remainder of the Agreement shall continue in full force and effect. To the
extent possible, the Parties shall revise such invalidated provision in a manner
that will render such provision valid without impairing the Parties' original
interest.
[*] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and
Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as
amended.
8.
<PAGE>
10.7 Affiliates; Assignment. Except as otherwise provided in this Section
10.7, neither Party may assign its rights or obligations under this Agreement
without the prior written consent of the other Party, such consent not to be
unreasonably withheld, except that a Party may assign its rights or obligations
to a third party in connection with the merger, consolidation, reorganization or
acquisition of stock or assets affecting substantially all of the assets or
actual voting control of the assigning Party. This Agreement shall be binding
upon the successors and permitted assigns of the Parties. Any attempted
delegation or assignment not in accordance with this Section 10.7 shall be of no
force or effect.
10.8 Headings. The headings contained in this Agreement have been added
for convenience only and shall not be construed as limiting.
10.9 Limitation Of Liability. No Party shall be liable to another for
indirect, incidental, consequential or special damages, including but not
limited to lost profits, arising from or relating to any breach of this
Agreement, regardless of any notice of the possibility of such damages. Nothing
in this Section is intended to limit or restrict the indemnification rights or
obligations of any Party.
10.10 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be an original and all of which shall
constitute together the same document.
10.11 English Language. This Agreement has been prepared in the English
language and shall be construed in the English language.
In Witness Whereof, the parties have by duly authorized persons, executed
this Agreement, as of the date first above written.
Sanwa Kagaku Kenkyusho Co., Ltd. Terrapin Technologies, Inc.
By: /s/ Keiji Tanimoto By: /s/ Clifford Orent
------------------- -------------------
Title: President and Title: President and
------------- -------------
Chief Executive Officer Chief Executive Officer
----------------------- -----------------------
Date: December 26, 1996 Date: December 26, 1996
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and
Exchange Commission pursuant to rule 406 of the Securities Act of 1933, as
amended.
[*] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and
Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as
amended.
9.
<PAGE>
FIRST AMENDMENT TO SCREENING SERVICES AGREEMENT
This First Amendment to Screening Services Agreement (this "First
Amendment") is made and dated September 24, 1997, by and between Sanwa Kagaku
Kenkyusho Co., Ltd., a Japanese corporation ("Sanwa") and Terrapin Technologies,
Inc., a Delaware corporation (`Terrapin").
R E C I T A L S
---------------
A. The Parties are parties to that Screening Services Agreement dated as
of December 20, 1996 (the `TRAP Agreement").
B. The Parties are entering into a Series I Stock Purchase Agreement of
even date herewith (the `Stock Purchase Agreement") in connection with which, as
one of the conditions to Sanwa consummating the transactions contemplated by the
Stock Purchase Agreement, the parties have agreed to execute and deliver this
First Amendment.
NOW, THEREFORE, in consideration of the above recitals and for other good
and valuable consideration, the adequacy and receipt of which are hereby
acknowledged, the parties hereby agree as follows:
A G R E E M E N T
-----------------
1. Amendments. The TRAP Agreement is hereby amended as follows:
----------
(a) Section 1.1 of the TRAP Agreement shall be revised in its entirety to
read as follows:
1.1 Sanwa's Targets. From time to time during the term of this
Agreement, Sanwa may notify Terrapin of a Sanwa Target which
Sanwa wishes to use in screening (`Selected Target") compounds
provided by Terrapin; provided, however, Sanwa may not submit
more than [ * ] Sanwa targets during the term of this Agreement
as set forth in Section 7.1 hereof.
(b) In the third line of Section 7.1, the words "three (3) years" shall be
revised to "six (6) years."
(c) Section 10.7 of the TRAP Agreement shall be revised in its entirety to
read as follows:
10.7 Assignment.
10.7.1 General. Except as otherwise provided in Section 10.7.2 or
10.7.3, neither party may assign its rights or obligations under this
Agreement
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and
Exchange Commission pursuant to rule 406 of the Securities Act of 1933, as
amended.
[*] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and
Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as
amended.
1.
<PAGE>
without the prior written consent of the other party. This Agreement
shall be binding upon the permitted successors and permitted assigns
of the Parties. Any attempted delegation or assignment not in
accordance with this Section 10.7 shall be of no force and effect.
10.7.2 Permitted Assignment by Sanwa. Sanwa may assign its rights or
obligations under this Agreement to a third party in connection with
the merger, consolidation, reorganization or acquisition of stock or
assets affecting substantially all of the assets or actual voting
control of Sanwa.
10.7.3 Permitted Assignment by Terrapin. Upon the written consent of
Sanwa, such consent not to be unreasonably withheld or delayed,
Terrapin may assign its rights or obligations under this Agreement to
a third party in connection with the merger, consolidation,
reorganization or acquisition of stock or assets affecting
substantially all of the assets or actual voting control of Terrapin.
Sanwa may only withhold its consent under the preceding sentence if
(a) such third party is [ * ] according to the terms of this Agreement
or (b) such third party is [ * ]
2. Defined Terms; Incorporation. Unless otherwise expressly provided
----------------------------
herein, defined terms used in this First Amendment shall have the same meaning
as set forth in the TRAP Agreement, and all terms herein shall be incorporated
into the TRAP Agreement. From and after the effective date of this First
Amendment, all reference to the "TRAP Agreement" in all other documents
delivered in connection with the TRAP Agreement shall refer to the TRAP
Agreement, as amended hereby.
3. Counterparts: Facsimile. This First Amendment may be executed in
-----------------------
counterparts and by facsimile.
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and
Exchange Commission pursuant to rule 406 of the Securities Act of 1933, as
amended.
[*] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and
Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as
amended.
2.
<PAGE>
IN WITNESS WHEREOF, the Parties have executed this First Amendment
effective as of the date first set forth above.
TERRAPIN TECHNOLOGIES, INC. SANWA KAGAKU KENKYUSHO CO., LTD
/s/ Clifford Orent /s/ Keiji Tanimoto
- -------------------------------- --------------------------------
By: Clifford Orent By: Keiji Tanimoto
Its: Chairman Its: President
and Chief Executive Officer and Chief Executive Officer
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and
Exchange Commission pursuant to rule 406 of the Securities Act of 1933, as
amended.
[*] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and
Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as
amended.
3.
<PAGE>
SECOND AMENDMENT TO
SCREENING SERVICES AGREEMENT
This Second Amendment to Screening Services Agreement (this "Second Amendment")
is made and dated October 29, 1998, (the "Second Amendment Effective Date"), by
and between Sanwa Kagaku Kenkyusho Co., Ltd., a Japanese corporation ("Sanwa")
and Telik, Inc. (formerly Terrapin Technologies, Inc.), a Delaware corporation
("Telik").
RECITALS
--------
A. Sanwa and Telik are parties to that Screening Services Agreement dated
as of December 20, 1996 as amended by that First Amendment to Screening Services
Agreement (the "TRAP Agreement").
B. Sanwa and Telik are entering into a Series J Preferred Stock Purchase
Agreement of even date herewith (the "Stock Purchase Agreement") in connection
with which, as one of the conditions to Sanwa consummating the transactions
contemplated by the Stock Purchase Agreement, the parties have agreed to execute
and deliver this Second Amendment.
NOW, THEREFORE, in consideration of the above recitals and for other good and
valuable consideration, the adequacy and receipt of which are hereby
acknowledged, the parties hereby agree as follows:
AGREEMENT
---------
1. Amendments. The TRAP Agreement is hereby amended as follows:
----------
(a) Each reference in the TRAP Agreement to "Terrapin Technologies, Inc."
is amended and replaced by "Telik, Inc." Each reference in the TRAP Agreement to
"Terrapin" is amended and replaced by "Telik."
(b) A new Section 1.4 is hereby added to the TRAP Agreement as follows:
1.4 Lead Optimization
Telik shall diligently undertake a maximum of [ * ] Lead Optimization
Projects (as defined below) simultaneously at any given time, each
with respect to a Family of Compounds (as defined below) as Sanwa
shall select taking into account the scientific advice of the "RMC,"
as such term is defined in the Collaboration Agreement between Telik
and Sanwa dated December 20, 1996, as amended ("Collaboration
Agreement"), by providing written notice to Telik. For a period of
two years, commencing on the date of written notice from Sanwa
identifying the Family of Compounds for a Lead Optimization Project,
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and
Exchange Commission pursuant to rule 406 of the Securities Act of 1933, as
amended.
1.
<PAGE>
Telik shall undertake, [ * ] such Lead Optimization Project. If Telik
completes such Lead Optimization Project in less than two (2) years,
or if Sanwa notifies Telik that, taking into account the scientific
advice of the RMC, it wishes to substitute another Lead Optimization
Project in place of a previously selected Lead Optimization Project,
Telik shall undertake such new or substitute Lead Optimization Project
as Sanwa may select, taking into account the scientific advice of the
RMC, by providing written notice to Telik, until the expiration of the
above two (2) year period [ * ] If Telik undertakes a [ * ] Lead
Optimization Project as selected by Sanwa, or continues with the Lead
Optimization Project after the expiration of the two (2) year period
described above, both after taking into account the scientific advice
of the RMC, Sanwa shall pay Telik [ * ], working through the RMC.
Telik shall ensure [ * ] and to [ * ] that Telik shall undertake for
Sanwa pursuant to this Section 1.4.
For purposes of this Agreement, the term "Family of Compounds" shall
mean Active Compounds that [ * ], and that can be starting candidates
for Lead Optimization Projects.
For purposes of this Agreement, "Lead Optimization Project" shall mean
a series of studies which the RMC shall agree upon and which, by way
of example, includes identification and selection of Advanced Lead
Compounds as set forth in Phase 1 of the Research Plan (as defined in
the Collaboration Agreement), and Selection of Clinical Candidates as
set forth in Phase 2 of the Research Plan (as defined in the
Collaboration Agreement), and encompasses all of the [ * ] that are
required until one or more Active Compounds are discovered which Sanwa
determines may be suitable for use in clinical studies.
(c) Section 3.2 is amended by adding the following words at the beginning
of that Section: "Except as provided in Section 1.4 in relation to Lead
Optimization Projects,".
(d) Section 4.3 is amended in its entirety to read as follows:
Telik will have exclusive rights to exploit the Joint Inventions and
information concerning Active Compounds in North America and South
America ("Telik Territory").
(e) In the third line of Section 7.1 the words "six (6) years" shall be
revised to "ten (10) years."
2. Further Discussions. The parties agree to meet in [ * ] or otherwise [ * ]
-------------------
to discuss in good faith additional amendments to the TRAP Agreement relating to
sharing of data, collaborative development efforts, including coordination of
pre-clinical and clinical studies, joint development agreements with third
parties and such other matters as the parties may agree.
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and
Exchange Commission pursuant to rule 406 of the Securities Act of 1933, as
amended.
2.
<PAGE>
3. Defined Terms; Incorporation. Unless otherwise expressly provided herein,
----------------------------
defined terms used in this Second Amendment shall have the same meaning as set
forth in the TRAP Agreement, and all terms herein shall be incorporated into the
TRAP Agreement. From and after the Second Amendment Effective Date all reference
to the "TRAP Agreement" in all other documents delivered in connection with the
TRAP Agreement shall refer to the TRAP Agreement, as amended hereby.
4. Counterparts: Facsimile. This Second Amendment may be executed in
-----------------------
counterparts and by facsimile.
IN WITNESS WHEREOF, the parties have executed this Second Amendment
effective as of the date first set forth above.
TELIK, INC. SANWA KAGAKU KENKYUSHO CO., LTD.
/s/ Clifford Orent /s/ Keiji Tanimoto
- ---------------------------- --------------------------------------------
By: Clifford Orent By: Keiji Tanimoto
Its: Chairman and Its: President and Chief Executive Officer
Chief Executive Officer
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and
Exchange Commission pursuant to rule 406 of the Securities Act of 1933, as
amended.
3.
<PAGE>
EXHIBIT 10.9
March 3, 2000
Gail L. Brown, M.D.
108 Portola Road. Suite 130
Portola Valley, CA 94028-7899
Re: Amended Consulting Agreement
Dear Gail,
Please accept this letter as written notification of the extension of the
consulting agreement between you and Telik, Inc. dated October 20, 1998, to
December 31, 2000. All other terms and conditions of the agreement remain the
same.
Do not hesitate to contact me at 650-238-3325 if you have any questions.
Sincerely yours,
Jan Braun
Senior Director, Human Resources
Accepted and Agreed:
/s/ Gail Brown
- -----------------------------
Gail Brown, M.D.
- -----------------------------
Date
<PAGE>
TELIK, INC.
CONSULTING AGREEMENT FOR INDIVIDUAL CONSULTANTS
This Agreement is made by TELIK, INC., its successors and its subsidiaries
worldwide ("Telik") and Gail L. Brown, M.D. whose mailing address is 108 Portola
Valley Road, Suite 130, Portola Valley, CA 94028-7899, ("Consultant"), effective
this 20th day of October 1998, for the purpose of setting forth the exclusive
terms and conditions by which Telik will acquire Consultant's services on a
temporary basis.
In consideration of the mutual obligations specified in this Agreement and any
compensation paid to Consultant for his or her services, the parties agree to
the following:
1. Work and Payment. Attached to this Agreement as Exhibit A hereto is a
statement of the work performed or to be performed by Consultant, the type of
payment or Consultant's rate of payment for such work, the types of any expenses
to be paid in connection with such work, and such other terms and conditions as
shall be deemed appropriate or necessary for the performance of the work.
2. Nondisclosure and Trade Secrets. During the term of this Agreement and in
the course of Consultant's performance hereunder, Consultant may receive and
otherwise be exposed to confidential and proprietary information relating to
Telik's business practices, strategies and technologies. Such confidential and
proprietary information may include, but not be limited to, confidential and
proprietary information supplied to Consultant with the legend "Telik
Confidential and Proprietary," or equivalent, Telik's research, development and
marketing strategies, Telik's financial information, including sales, costs,
profits and pricing methods, Telik's internal organization, employee information
and customer lists, Telik's technology, including discoveries, inventions,
research and development efforts, processes, designs, formulas, methods, product
know-how and show-how, and all derivatives, improvements and enhancements to any
of the above which are created or developed by Consultant under this Agreement
and information of third parties as to which Telik has an obligation of
confidentiality (collectively referred to as "Information").
Consultant acknowledges the confidential and secret character of the
Information, and agrees that the Information is the sole, exclusive and
extremely valuable property of Telik. Accordingly, Consultant agrees not to
reproduce any of the Information without the applicable prior written consent of
Telik, not to use the Information except in the performance of this Agreement,
and not to disclose all or any part of the Information in any form to any third
party, either during or after the term of this Agreement. Upon termination of
this Agreement for any reason, including expiration of the term of this
Agreement, Consultant agrees to cease using and to return to Telik all whole and
partial copies and derivatives of the Information, whether in Consultant's
possession or under Consultant's direct or indirect control. Consultant may
retain one copy for legal purposes.
1
<PAGE>
Consultant shall not disclose or otherwise make available to Telik in any manner
any confidential information of Consultant or received by Consultant from third
parties.
This Section 2 shall survive the termination of this Agreement for any reason,
including expiration of the term of this Agreement.
3. Ownership of Work Product. Consultant shall specifically describe and
identify in Exhibit A to this Agreement any and all technology (a) which
Consultant intends to use in performing under this Agreement (b) which is either
owned solely by Consultant or licensed to Consultant with a right to sublicense,
and (c) which is in existence in the form of a writing or working prototype
prior to the effective date of this Agreement ("Background Technology").
Consultant agrees that any and all ideas, improvements, inventions and works of
authorship conceived, written, created or first reduced to practice in the
performance of work under this Agreement shall be the sole and exclusive
property of Telik and hereby assigns to Telik all its right, title and interest
in and to any and all such ideas, improvements, inventions and works of
authorship.
Consultant further agrees that, except for Consultant's rights in any Background
Technology, Telik is and shall be vested with all right, title and interest,
including patent, copyright, trade secret and trademark rights, in all of
Consultant's work product under this Agreement. Consultant hereby grants to
Telik a non-exclusive, royalty free and worldwide right to use and sublicense
the use of any Background Technology for the purpose of developing and marketing
any Background Technology separate from Telik products.
Consultant further agrees to execute all papers, including patent applications,
invention assignments, and otherwise shall assist Telik as reasonably required
to perfect in Telik all right, title and interest in Consultant's work product
expressly granted to Telik under this Agreement. Costs related to such
assistance, if required, shall be paid by Telik.
This Section 3 shall survive the termination of this Agreement for any reason,
including expiration of the term of this Agreement.
4. Indemnification and Release. Consultant shall indemnify Company and hold it
harmless from and against all claims, damages, losses and expenses including
reasonable attorney's fees which arise out of or result from performance of the
services provided by Consultant and are caused by any grossly negligent act or
willful omission or willful conduct of Consultant or any willful violation of
any statute, ordinance or regulation.
Company agrees to indemnify, defend and hold Consultant harmless from and
against all loss, damages, costs and expenses (including reasonable attorney's
fees) or claims or suits resulting from injury or death alleged to have been
caused by or attributable to the drug, device, or biologic or other services
which are subject of this Agreement and to reimburse
2
<PAGE>
Consultant for all losses, damages, costs and expenses including reasonable
attorney's fees arising from Company's breach of any provision of this
Agreement.
5. Termination. Either Telik or Consultant may terminate this Agreement upon
written notice in the event of a material breach of the Agreement. Material
breaches include, but are not limited to, the filing of bankruptcy papers or
other similar arrangements due to insolvency. This Agreement may not be waived,
modified, amended or assigned unless mutually agreed upon in writing by both
parties
Either party may terminate this Agreement at any time by thirty (30) days
advance written notice of termination to the other, but Consultant shall in all
events be entitled to payment in accordance with the terms of this Agreement for
all services rendered and expenses incurred through the date this Agreement is
terminated.
6. Compliance with Applicable Laws. Consultant warrants that all material
supplied and work performed under this Agreement complies with or will comply
with all applicable laws and regulations.
7. Independent Consultant. Consultant is an independent consultant, is not an
agent or employee of Telik and is not authorized to act on behalf of Telik.
Consultant will not be eligible for any employee benefits, nor will Telik make
deductions from any amounts payable to Consultant for taxes if Consultant is a
California resident. Taxes shall be the sole responsibility of Consultant.
8. Legal and Equitable Remedies. Consultant hereby acknowledges and agrees
that in the event of any breach of this Agreement by Consultant, including,
without limitation, the actual or threatened disclosure of Information without
the prior express written consent of Telik, Telik will suffer and irreparable
injury, such that no remedy at law will afford it adequate protection against,
or appropriate compensation for, such injury. Accordingly, Consultant hereby
agrees that Telik shall be entitled to specific performance of Consultant's
obligations under this Agreement, as well as such further relief as may be
granted by a court of competent jurisdiction.
9. General. The parties' rights and obligations under this Agreement will bind
and inure to the benefit of their respective successors, heirs, executors, and
administrators and permitted assigns, except that Consultant may not delegate
any of his or her duties under this Agreement without Telik's prior written
consent. This Agreement and Exhibit A attached hereto and hereby incorporated
herein constitute the parties' final, exclusive and complete understanding and
agreement with respect to the subject matter hereof, and supersede all prior and
contemporaneous understandings and agreements relating to its subject matter.
This Agreement may not be waived, modified, amended or assigned unless mutually
agreed upon in writing by both parties. In the event any provision of this
Agreement is found to be legally unenforceable, such unenforceability shall not
prevent enforcement of any other provision of the Agreement. This Agreement
shall be governed by the laws of the State of California, excluding its
conflicts of laws principles. Any notices required or permitted hereunder shall
be given to the appropriate party at the
3
<PAGE>
address specified below or at such address as the party shall specify in
writing. Such notice shall be deemed given upon personal delivery, or sent by
certified or registered mail, postage prepaid, three (3) days after the date of
mailing.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first set forth above.
TELIK, INC. CONSULTANT
By: ____________________________ By: _____________________________
Clifford Orent Gail L. Brown, M.D.
Chief Executive Officer Consultant
4
<PAGE>
EXHIBIT A
Work to be performed:
Assistance with the clinical development of TER286
Type of rate of payment:
$250 per hour ($2000 per day) for a maximum of 5 days/month, unless Telik
requests more than five days in any given month and Consultant agrees
Timing of payment(s):
Consultant shall invoice Telik monthly for services rendered, and Telik shall
pay such invoices in full no later than 30 days after receipt of the invoice.
Term of Agreement:
This agreement will have a maximum term of six months from the date of execution
unless extended by mutual agreement of the parties in writing.
Types of Expenses to be paid:
Customary expenses associated with this agreement shall be reimbursed, upon
approval by Telik.
5
<PAGE>
EXHIBIT 10.10
July 1, 1998
Cynthia M. Butitta
117 Madera Court
Los Gatos, CA 95032
Dear Cindy:
Telik, Inc. is pleased to offer you the part time position of Chief Financial
Officer, reporting to Dr. Michael Wick. Your salary will be $10,000 per month
for the first six months of your employment, at which time it will be subject to
review.
We are also pleased to offer you an option to purchase 96,000 shares of Telik
stock subject to the formal approval by the Board of Directors of the Company,
at a price to be established at the next Board of Directors meeting following
your date of hire. The vesting of the Option will provide that 6,000 shares
will vest on a monthly basis over the following 16 months. The total option
term will be ten years from the date of your grant. The other provisions of the
Plan will be contained in the Stock Option Agreement to be entered into after
the Option is approved by the Board.
Telik offers company sponsored health, dental, vision, long-term disability, and
life/accidental death & dismemberment insurance. The cost to you for this
insurance is $5 per month for you alone, and $100 per month for you and
spouse/dependent coverage. You will be eligible for these benefits on the first
day of the month following your date of hire. You will be covered for worker's
compensation insurance effective your first day of employment. You will also be
eligible to participate in our 401(k) retirement program beginning the first day
of the month following your hire date. Telik offers 12 paid holidays per year.
Vacation for corporate officers is accrued at the rate of 15 days per year.
This offer is conditioned upon the execution of the enclosed Confidentiality
Agreement. If you accept this offer, the terms described in this letter shall
be the terms of your employment. The terms described in this letter do not
imply an employment contract for a specified period of time. Employment at
Telik, Inc. is at will. Either you or the Company may terminate your employment
at any time. This letter shall be governed by the laws of California without
giving effect to conflicts of law principles. This offer is also conditioned
upon your ability to present evidence of identity and employment eligibility as
mandated by U.S. law.
<PAGE>
Cynthia M. Butitta
July 1, 1998
Page 2
It is agreed that during your tenure at Telik you may continue to secure
projects through AFO Capital Advisors L.L.C. which are not in direct conflict
with your responsibilities as Chief Financial Officer at Telik.
We appreciate your interest in Telik, Inc. and look forward to your joining us
on (date). Please sign and return the original copy of this letter and the
Confidentiality Agreement to indicate your acceptance of our offer.
If you have any questions, please feel free to call me at (650) 238-3325.
Sincerely,
Janice L. Braun
Senior Director, Human Resources
ACKNOWLEDGMENT
I have read, understand, and accept the foregoing terms and conditions of
employment. I further understand that while my salary, benefits, job title, and
job duties may change from time to time without a written modification of this
Agreement, such changes will not affect the validity of this Agreement or my
right or the Company's right to terminate my employment.
/s/ Cynthia Butitta
- ------------------------------- ---------------------
Signature Date
- --------------------------------
Printed Name
<PAGE>
Exhibit 10.11
April 18, 1991
By DHL Express
Dr. Reinaldo Gomez
124 Woodbridge Circle
San Mateo, CA 94403
Dear Rey:
This letter, together with the attached Proprietary Information and Inventions
Agreement and the Stock Option Agreement (together referred to as "Letters")
sets forth the terms of your employment with Terrapin Technologies, Inc.
("Company").
1. Employment. You will be employed as President of the Company beginning May
1, 1991, or earlier if your schedule permits. At the next Board Meeting you
will be nominated for the Board of Directors to serve until the next Annual
Meeting of Shareholders, at which point the existing Board will stand for
re-election.
2. Base Salary. Your initial base salary will be $185,000 per year, payable
semi- monthly. When we have completed objective "D", referred to in
paragraph 3 below, your base salary will be increased by the Board to bring
you to the level that is consistent with the base salary paid by your
present employer, i.e. a range of $210,000 to $215,000 per annum.
3. Bonus. You will be eligible for consideration for an annual bonus of up to
$40,000 in stock grants, to be determined by the Board of Directors, based
on your performance during the year. The principal, although not exclusive,
factors and weighting which will be considered are as follows:
Objective Percent of
Bonus
A. Development of the GST assay described in the Business Plan 50%
within the first year of your employment.
B. Management of the laboratory within the total head counts and 20%
amounts as agreed in the operating budget, to be finalized after
your arrival.
C. Expansion of the Science Advisory Board. This expansion will 15%
include the addition of world-leaders in the field of cancer
research, and this objective will be met by the addition of
at least one excellent oncologist to the Science Advisory
Board within the first year of your employment.
1.
<PAGE>
D. Assisting the Board of Directors in raising capital. This 15%
objective will be achieved if the Company is able to raise at
least $4 million from all sources within one year from the
date of your employment.
These are the first year objectives, the bonus amount, and the proposed
percentages to apply to the bonus. Prior to the beginning of the second and
subsequent years, we will agree individual goals, objectives, the percentages,
and the bonus objective amount for that year.
The bonus will be paid in Common Stock of the Company. The value to be
utilized for the stock will be the current market price at the time the bonus is
due, and the bonus will be paid within 30 days after the end of the first
anniversary of your employment. Achievement of an individual objective will
provide a basis for consideration of a bonus, even though less than all
objectives are met.
4. Stock Option. I will recommend to the Board at the next meeting that you be
granted a Stock Option to purchase 250,000 shares of Common Stock of the Company
at $1.50 per share. Each of the Board Members has informally indicated their
willingness to approve this Option. That Option Agreement is attached to this
Agreement and it sets forth the terms of the Stock Option Grant, the vesting
schedule, and other particulars. Please separately execute both copies of that
document, and return one to me.
5. Fringe Benefits. You will be entitled to all of the usual employee fringe
benefits available at Terrapin including group insurance. The Company has a
policy of paying the employee's cost of the insurance, with the employee paying
one-half of the dependent coverage. A copy of the group insurance pamphlet is
enclosed.
6. Proprietary Information and Inventions Agreement. You agree to abide by the
terms and conditions of the Proprietary Information and Inventions Agreement
which is attached to this letter and made a part hereof. Please separately
execute that document.
7. Termination. You may terminate this agreement at any time upon 60 days
prior notice to the Company. In that case all compensation and other benefits
shall terminate as of the date of termination. The Company may terminate this
agreement at any time upon 60 days prior notice for cause or for performance
which is determined by the Company's Board of Directors to be unsatisfactory. If
this agreement is terminated by the Company for cause or unsatisfactory
performance, then (a) your base salary and group insurance as in effect at that
time will be continued until the sooner of the expiration of four months from
the date of termination or the date you accept other employment and (b) in the
case of termination within the first 12 months of your employment with the
Company, a portion of the stock option described in paragraph 4 above will
automatically vest as of the date of termination, such portion to equal 50,000
shares if there has been a change of control of the Board during that 12 month
period or 30,000 shares otherwise.
8. General. This Letter shall be governed by California law. If any provision
of this Letter or the application thereof to any situation or circumstance shall
be invalid or unenforceable, the remainder of the provisions of this Letter or
the application of such provisions to situations or
2.
<PAGE>
circumstances other than those as to which it is invalid or unenforceable shall
not be affected, and each provision of this Letter shall be valid and
enforceable to the fullest extent permitted by applicable law. The parties agree
to negotiate in good faith to substitute for any such invalid or unenforceable
provision a valid and enforceable provision which most nearly effects the
parties' original intent in entering into this Letter.
Rey, we are all very enthusiastic about your joining Terrapin. I believe
that it's one of the most important decisions we have made, and I look forward
to working together.
If you agree to the arrangement set forth in this Letter, please sign in
the space provided below, and return one copy to me.
Very truly yours,
Terrapin Technologies, Inc.
By: /s/ Jerrold L. Glick
----------------------------
Jerrold L. Glick, Chairman
Accepted and agreed to:
/s/ Reinaldo Gomez
- --------------------------------
Reinaldo Gomez, Ph.D.
3.
<PAGE>
ADDENDUM TO EMPLOYMENT AGREEMENT OF REINALDO F. GOMEZ
The employment agreement between Terrapin Technologies, Inc. ("the
Company") and Reinaldo F. Gomez, Ph.D. is hereby amended as follows:
"In the event that the employment of Dr. Gomez is terminated by the Company
without cause, Dr. Gomez shall continue to receive, as severance, continued
payment of his base salary and health care benefits for nine (9) months, or
until such time as Dr. Gomez obtains other employment, whichever occurs
first."
Terrapin Technologies, Inc.
/s/ Clifford Orent
- -------------------------------
Dated: March 4, 1997
Accepted and Agreed:
/s/ Reinaldo Gomez
- -------------------------------
Reinaldo F. Gomez, Ph.D.
Dated: March 4, 1997
4.
<PAGE>
SECOND ADDENDUM TO EMPLOYMENT AGREEMENT
The employment agreement between Telik, Inc. (the "Company") and Reinaldo
Gomez, Ph.D, effective September 1, 1999 (the "Effective Date") is hereby
amended as follows:
Paragraph 1 - Employment - You will have the title of Vice President, Corporate
Alliances, with the duties and responsibilities customarily afforded such a
position, and as more specifically set forth on Exhibit A.
Paragraph 2 - Base Salary - Your base salary, as of the Effective Date, shall be
$12,500 per month, less payroll deductions and withholdings, payable in semi-
monthly in arrears.
Paragraph 7 - Termination - shall be amended to read in its entirety as follows:
"Term; Termination." This Agreement will automatically terminate on August
31, 2000 unless earlier terminated pursuant to the terms of this Agreement, but
in no instance with less than three months' notice. This Agreement may be
extended by mutual agreement of the parties. As an employee of the Company you
may terminate your employment at any time for any reason whatsoever, with or
without cause. This at-will employment relationship cannot be changed except in
writing signed by the Chief Executive Office of the Company.
Paragraph 8 - General - shall be retitled Paragraph 9 and a new paragraph
8, entitled "Severance Benefits" shall be added to read as follows:
If your employment is terminated by the Company without cause, you will receive,
as severance, continued payment of your base salary and health care benefits
until August 31, 2000 or date which allows no less than three months from date
of notice, or until such time as you obtain other employment, whichever occurs
first. In the event of such termination, you will not be entitled to any
additional compensation or benefits beyond what is provided in this paragraph.
If you resign or your employment is terminated for cause, all compensation and
benefits will cease immediately, and you will receive no severance benefits.
For purposes of this Agreement, "cause" shall mean misconduct, including: (i)
conviction of any felony or any crime involving moral turpitude or dishonesty;
(ii) participation in a fraud or act of dishonesty against the Company; (iii)
willful breach of the Company's policies; (iv) intentional damage to the
Company's property; (v) material breach of this Agreement or your Proprietary
Information and Inventions Agreement; or (vi) conduct by you which in the good
faith and reasonable determination of the Company's Board of Directors
demonstrates gross unfitness to serve. Physical or mental disability shall not
constitute "cause". Except as expressly provided herein, you will not be
entitled to any other compensation, severance, pay-in-lieu of notice or any
other such compensation. This severance provision does not affect the "at-will"
nature of your employment.
TELIK, INC. /s/ Michael M. Wick
----------------------------------- ------------------
Michael M. Wick, President and CEO Date
Accepted and agreed: /s/ Reinaldo Gomez
----------------------------------- ------------------
Reinaldo Gomez, Ph.D. Date
1.
<PAGE>
Exhibit A
Job Description
. Manage all established external partnerships and collaborations with U.S.
and Japanese pharmaceutical companies.
. Guide the Director of Corporate Alliances in the management of product
development activities.
. Participate in the negotiation of new business arrangements.
. Advise the Chairman and CEO on strategic business and scientific matters.
. Manage interactions with the Scientific Advisory Board and assist the
Director of Corporate Alliances with the Clinical Advisory Board.
2.
<PAGE>
EXHIBIT 10.12
August 1, 1999
Dr. Michael Wick
135 Hardwick Road
Woodside, CA 94062
Re: Employment Agreement
Dear Michael:
On July 30, 1999, the Board of Directors of Telik, Inc. (the "Company")
appointed you to the additional position of Chief Executive Officer of the
Company. The purpose of this agreement (the "Agreement") is to set forth the
terms of your employment as the President and Chief Executive Officer of the
Company on the terms set forth below:
1. Duties. As the President and Chief Executive Officer, you will perform
the duties customarily associated with this position and such duties as may be
assigned to you by the Board of Directors. You will report to the Board of
Directors.
2. Compensation and Benefits. As compensation for your services and for
your covenants and promises in this Agreement, the Company agrees to provide you
with the following:
(a) Base Salary. A base salary of twenty-two thousand, five hundred
dollars ($22,500) per month, less payroll deductions and withholdings, payable
semi-monthly in arrears.
(b) Stock Options. In recognition of your role, the Company's Board of
Directors, has granted you an additional option to purchase one hundred fifty
thousand (150,000) shares of Telik Common Stock at an exercise price equal to
one dollar and sixty cents ($1.60) per share. These options shall vest as
follows: twenty-five percent (25%) on July 30, 2000, and then monthly pro-rata
over the next thirty-six (36) month period beginning on July 30, 2000.
(c) Benefits. The Company will provide you with health, dental and
life insurance consistent with Company practice for exempt employees. Details
about these benefits are provided in the employee handbook and summary plan
descriptions available for your review. Of course, the Company reserves the
right to modify your compensation and benefits from time to time, as it deems
necessary.
2. Company Policies and Proprietary Information Agreement. As an employee
of the Company, you will be expected to abide by all of the Company's policies
and procedures, and hereby acknowledge that you have received and read the
Company's employee
1
<PAGE>
handbook. As a condition of your employment, you also agree to sign and comply
with the Company's Proprietary Information and Inventions Agreement (attached
hereto as Exhibit A).
3. Other Agreements. By accepting this offer, you represent and warrant
that your performance of your duties for the Company will not violate any
agreements, obligations or understandings that you may have with any third party
or prior employer. You agree not to make any unauthorized disclosure or use, on
behalf of the Company, of any confidential information belonging to any of your
former employers. You also represent that you are not in unauthorized possession
of any materials containing a third party's confidential and proprietary
information. Of course, during your employment with the Company, you may make
use of information generally known and used by persons with training and
experience comparable to your own, and information which is common knowledge in
the industry or is otherwise legally available in the public domain.
4. Duty of Loyalty. While employed by the Company, you will not engage in
any business activity in competition with the Company nor make preparations to
do so, and you will not engage in any new outside employment or consulting
without written authorization from the Board of Directors.
5. Termination. As an employee of the Company you may terminate your
employment at any time and for any reason whatsoever simply by notifying the
Company. Similarly, the Company may terminate your employment at any time and
for any reason whatsoever, with or without cause. This at-will employment
relationship cannot be changed except in writing signed by a duly authorized
officer of the Company.
6. Severance Benefits. If your employment is terminated by the Company
without cause, you will receive, as severance, continued payment of your base
salary and health care benefits for twelve (12) months. The monthly vesting of
stock options will also continue for the same twelve (12) months. In the event
of such termination, you will not be entitled to any additional compensation or
benefits beyond what is provided in this paragraph. If you resign or your
employment is terminated for cause, all compensation and benefits will cease
immediately, and you will receive no severance benefits. For purposes of this
Agreement, "cause" shall mean misconduct, including: (i) conviction of any
felony or any crime involving moral turpitude or dishonesty; (ii) participation
in a fraud or act of dishonesty against the Company; (iii) willful breach of the
Company's policies; (iv) intentional damage to the Company's property; (v)
material breach of this Agreement or your Proprietary Information and Inventions
Agreement; or (vi) conduct by you which in the good faith and reasonable
determination of the Company's Board of Directors demonstrates gross unfitness
to serve. Physical or mental disability shall not constitute "cause". Except as
expressly provided herein, you will not be entitled to any other compensation,
severance, pay-in-lieu of notice or any other such compensation. This severance
provision does not affect the "at-will" nature of your employment.
7. Return of Materials. At the termination of your relationship with the
Company, you will promptly return to the Company, and will not take with you or
use, all items of any nature that belong to the Company, and all materials (in
any form, format, or medium) containing information relating to the Company's
business.
2
<PAGE>
8. Termination of Prior Agreement. If you accept this offer and sign this
letter below, you agree that in consideration of the compensation and benefits
to be provided pursuant to this letter all prior agreements between you and the
Company shall be terminated and be superceded by this Agreement. You further
acknowledge and agree that all stock and other compensation owed to you as of
the date first set forth above (the "Transition Date") have been satisfied in
full
9. Nonsolicitation. For one (1) year following the termination of your
employment, you will not, either directly or through others, through the use of
confidential company information, solicit or attempt to solicit: any employee,
consultant or independent contractor of the Company to terminate his or her
relationship with the Company in order to become an employee, consultant or
independent contractor to or for any other person or business entity; or the
business of any customer, vendor or distributor of the Company which, within one
(1) year immediately prior to the termination, thereto, was a customer, vendor
or distributor of the Company, if to do so would involve the use of the
Company's proprietary information.
10. Entire Agreement. This Agreement, including Exhibit A, constitutes the
complete, final and exclusive embodiment of the entire agreement between you and
the Company with respect to the terms and conditions of your employment. If you
enter into this Agreement you are doing so voluntarily, and without reliance
upon any promise, warranty or representation, written or oral, other than those
expressly contained herein. This Agreement supersedes any other such promises,
warranties, representations or agreements. This Agreement may not be amended or
modified except by a written instrument signed by you and a duly authorized
officer of the Company.
11. Enforceability. If any provision of this Agreement is determined to be
invalid or unenforceable, in whole or in part, this determination will not
affect any other provision of this Agreement, and the Agreement, including the
invalid or unenforceable provisions, should be enforced insofar as possible to
achieve the intent of the parties.
12. Binding Nature. This Agreement will be binding upon and inure to the
benefit of the personal representatives and successors of the respective parties
hereto.
13. Governing Law. This Agreement will be governed by and construed in
accordance with the laws of the State of California.
14. Dispute Resolution/Attorneys' Fees. Unless otherwise prohibited by law
or specified below, all disputes, claims, and causes of action (including but
not limited to any claims of statutory discrimination of any type), in law or
equity, arising from or relating to this Agreement or its enforcement,
performance, breach, or interpretation shall be resolved solely and exclusively
by final, binding and confidential arbitration through Judicial Arbitration &
Mediation Services/Endispute, Inc. ("JAMS") under the then existing JAMS
arbitration rules. This arbitration shall be held in the San Francisco Bay Area.
Nothing in this section is intended to prevent either party from obtaining
injunctive relief in court to prevent irreparable harm pending the conclusion of
any such arbitration.
3
<PAGE>
We look forward to continuing a productive and enjoyable work relationship.
Very truly yours,
Telik, Inc.
Jean Deleage
Board Member
Accepted and Agreed:
/s/ Michael Wick
- ----------------------------------
Dr. Michael Wick
- ----------------------------------
Date
4
<PAGE>
Exhibit A
PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT
5
<PAGE>
First Addendum to Employment Agreement
In accordance with the resolutions passed by the Telik Board of Directors on
December 17, 1999, your employment agreement dated August 1, 1999 is hereby
amended as follows effective January 1, 2000:
1. Paragraph 1. - Duties - The title "President and Chief Executive Officer"
is changed to "Chairman, President and Chief Executive Officer."
2. Paragraph 2, Section a(1). - Base Salary - is changed to a base salary of
$25,000 per month, less payroll deductions and withholdings, payable in
semi-monthly in arrears.
Telik, Inc.
By:_____________________________
Title:__________________________
Accepted and Agreed:
________________________________
Michael Wick
Dated:__________________________
<PAGE>
December 10, 1997
Michael M. Wick, M.D., Ph.D.
108 Portola Road, Suite 130
Portola Valley, CA 94028-7899
Dear Mike:
You have made an extremely positive impression on the team at Terrapin
Technologies, Inc. (Terrapin) during the course of our discussions. It is with
great personal pleasure that I am writing to formally offer you the position of
Executive Vice President, Research and Development and Chief Operating Office,
reporting to me. Additionally, at the December 9 meeting of Terrapin's Board of
Directors (Board), you have been elected as a Board member effective on you
acceptance of this offer. Your starting salary will be the equivalent of
$250,000 per annum and you will receive a one-time signing bonus of $20,000.
Your start date will be December 15, 1997.
We are also pleased to offer you an option to purchase 250,000 shares of
Terrapin stock subject to the formal approval by the Board, at a price to be
established at the next Board meeting following your date of hire. The vesting
of the Option will provide that no shares will be vested during the first twelve
months of your employment, at which time 25% will vest and the balance will be
vested on a monthly basis over the following three years. The total option term
will be ten years from the date of your grant. The other provisions of the Plan
will be contained in the Stock Option Agreement to be entered into after the
Board approves the Option.
Terrapin offers company sponsored health, dental, vision, long-term disability,
and life/accidental death & dismemberment insurance. The current cost to you
for this insurance is $5 per month for you and $100 per month for
spouse/dependent coverage. You will be eligible for these benefits on the first
day of the month following your date of hire. You will be covered for short-
term disability and worker's compensation insurance effective your first day of
employment. You will also be eligible to participate in our 401(k) retirement
program beginning the first day of the month following your hire date. Terrapin
also offers 12 paid holidays per year. Vacation for corporate officers is
accrued at the rate of 15 days per year.
This offer is conditioned upon the execution of the enclosed Confidentiality
Agreement. If you accept this offer, the terms described in this letter shall
be the terms of your employment. The terms described in this letter do not
imply an employment contract for a specified period of time. Employment at
Terrapin is at will. Either you or Terrapin may terminate your employment
<PAGE>
at any time. This letter shall be governed by the laws of California without
giving effect to conflicts of law principles. This letter and the
Confidentiality Agreement constitute the entire understanding of Terrapin and
you with respect to your employment and supersede all prior oral or written
representations, understanding, and agreements. This letter cannot be amended
or modified, nor can any term hereof for the benefit of Terrapin be waived,
except in a writing duly executed by an authorized officer of Terrapin.
Additionally, the Board has agreed that your performance will initially be
evaluated in six months, at which time the Board will review a possible change
in title to President and Chief Operating Officer. Please be aware, however,
that any such change in title will be made at the total discretion of the Board,
and may be influenced by factors other than your individual performance.
Please sign and return one copy of this letter and the Confidentiality Agreement
to indicate your acceptance of our offer. Mike, my colleagues and I are excited
to have you as the newest member of the Terrapin team. We are confident that
your background and skills will enable you to make significant contributions to
the success of the company and I personally very much look forward to a close
working relationship with you.
If you have any questions, please feel free to call me at (650) 244-9303, ext.
317.
Sincerely,
Clifford Orent
Chairman, President and Chief Executive Officer
ACKNOWLEDGMENT
I have read, understand, and accept the foregoing terms and conditions of
employment. I further understand that while my salary, benefits, job title, and
job duties may change from time to time without a written modification of this
Agreement, such changes will not affect the validity of this Agreement or my
right or the Company's right to terminate my employment.
/s/ Michael M. Wick
- ------------------------------- ------------------
Signature Date
- -------------------------------
Printed Name
<PAGE>
EXHIBIT 10.13
ADDENDUM TO LEASE
THIS ADDENDUM TO LEASE is made to that lease dated as of July 25, 1997
(the "Lease") by and between Chamberlin Associates - Oyster Point Phase I
Limited Partnership ("Landlord") and Terrapin Technologies, Inc.
('/T/Tenant/1/'). The defined terms in the Lease shall have the same meaning in
this Addendum unless specifically provided to the contrary , and the terms
hereof shall for all purposes be deemed incorporated in the Lease, and shall
supersede any inconsistent provisions in the printed form Lease.
RECITALS
A. Landlord's predecessor in interest, Rouse & Associates - Oyster Point
Phase I Limited Partnership, and Tenant entered into two leases respectively
dated March 12, 1992 and February 18, 1993 (the 'Existing Leases") pursuant to
which Tenant leases from Landlord premises consisting of 20,680 square feet
located at 750 Gateway Boulevard, Building B, Suites H and R, South San
Francisco (the"Premises").
B. This Lease of the combined Premises shall commence January 1, 1998
(the "Commencement Date"). Upon the commencement of this Lease, the Existing
Leases shall be deemed terminated and of no further force and effect.
The Lease is amended and supplemented as follows:
2.2 Improvements. Section 2.2 shall be deleted in its entirety and
------------
replaced by the following: "Tenant shall lease the Premises in its currently
existing, 'as is' condition."
3.1 Period; Commencement. The second sentence of Section 3.1 is deleted.
--------------------
4.3. Restricted Activities. The first sentence of Section 4.3 is amended by
---------------------
adding at the end thereof "in violation of any Environmental Law."
"Environmental Law" shall mean any and all present and future federal, state and
local laws (whether under common law, statute, rule, regulation or otherwise),
requirements under permits issued pursuant to these laws, and other requirements
of governmental authorities relating to the environment, to any hazardous
substance or material or to any activity involving hazardous substances or
materials, and shall include, without limitation, the Comprehensive
Environmental Response, Compensation, and Liability Act (42 U.S.C. Section 9601
et seq.), the Federal Resource Conservation and Recovery Act (42 U.S.C. Section
- --
6901 et seq.), and all other applicable provisions of federal, state and local
--
laws related to the environment.
<PAGE>
5.2 Adjustments. Section 5.2 shall be deleted in its entirety and replaced by
-----------
the following:
"Commencing with the Commencement Date, the
Minimum Monthly Rent shall be paid in accordance with
the following schedule:
<TABLE>
<CAPTION>
Months Minimum Monthly Rent
------ --------------------
<S> <C>
Commencement Date to 3/31/98 $26,884.00
4/1/1998 - 12/31/1998 $31,020.00
1/1/1999 - 12/31/1999 $32,260.80
1/1/2000 - 12/31/2000 $33,551.23
1/1/2001 - 12/31/2001 $34,893.28
1/1/2002 - 12/31/2002 $36,289.01
</TABLE>
6.1 Payment. Section 6.1 of the Lease is revised by deleting the phrase
-------
in the first sentence "set forth in Section 1.8." The following is added at the
end of Section 6.1 of the Lease: "The parties acknowledge that the Property
and/or the area of the Property under common management may from time to time be
expanded or contracted; provided, however, that in such case Tenant's pro rata
share of common area expenses shall be proportionately adjusted."
6.4.1 Landlord's Expense. Section 6.4.1 of the Lease is amended by
------------------
inserting "and bearing walls" following "columns and girders."
6.4.3 Operating Expenses. Notwithstanding the provisions of Section 6 of
------------------
this Lease, Tenant shall not be required to pay increases in operating expenses
to the extent such increases exceed five percent (/50//a) in any Lease year over
the previous year's expenses; provided, however, that such limitation on
increases in operating expenses shall not apply to those operating expenses
described in Sections 6.2 and 6.3 of the Lease, or to the cost of water service
and refuse removal. The following sentence is inserted at the end of Section
6.4.3: "Landlord shall advise Tenant of the initial amount of Tenant's monthly
pro rata share prior to the commencement of the Lease." In the event that the
real property taxes on the Property are increased in any year due to a sale or
disposition of the Property, there shall be deducted from Tenant's pro rata
share of real estate taxes 50% of the amount of such increase
<PAGE>
attributable to such sale for the remainder of the lease term. In addition,
operating expenses shall not include:
(1) To the extent that Landlord is reimbursed by insurance or
condemnation proceeds or by tenants or other third persons, the cost of repairs
or other work occasioned by (i) fire, windstorm, or other casualty of the type
which Landlord has insured or is required to insure pursuant to the terms of
this lease, or for which Landlord is entitled to reimbursement, or (ii) the
exercise of the right of eminent domain;
(2) Leasing commissions, attorneys' fees, costs, and disbursements
and other expenses incurred in connection with negotiations or disputes with
tenants, other occupants, prospective tenants or other occupant, or the sale or
refinancing of the Building, or legal fees incurred in connection with this
Lease;
(3) Expenses, including permits, license and inspection costs,
incurred in tenant build-out, renovating or otherwise improving or decorating,
painting or redecorating space for other new tenants of the Building;
(4) Landlord's costs of electricity and other services sold or
provided to tenants in the Building and for which Landlord is entitled to be
reimbursed, other than through the operating expense pass-through provisions of
such tenants' leases, whether or not collected, by such tenants as a separate
additional charge or rental over and above the basic rent or escalation payment
payable under the lease with such tenant;
(5) Expenses in connection with non-Building standard services or
benefits of a type which are not provided to Tenant but which are provided to
other tenants or occupants of the Building;
(6) Costs incurred due to violation ~y Landlord or any tenant of the
terms and conditions of any lease or other rental arrangement covering space in
the Building;
(7) Amounts paid to subsidiaries or other affiliates of Landlord
(i.e., persons or companies controlled by, under common control with, or which
control, Landlord) for services on or to the Property, the Building or the
Premises (or any portion thereof), to the extent only that the costs of such
services exceed competitive costs of such services were they not so rendered by
a subsidiary or other affiliate of Landlord;
(8) Rental payments under any ground or underlying lease or leases;
<PAGE>
(9) Any compensation paid to clerks, attendants, or other persons in
commercial concessions operated by Landlord;
(10) All items and services the entire cost of which Tenant is
obligated to and pays directly to third parties or for which tenants reimburse
Landlord;
(11) Advertising and promotional expenditures, and costs of signs in
or on the Building identifying the owner of the Building or any other tenant of
the Building;
(12) Costs for installing sculpture, paintings, or other art;
(13) Any costs of damages and repairs necessitated by or resulting
from the negligence of Landlord, its agents, employees and/or independent
contractors;
(14) Costs of installing, operating, and maintaining any specialty
services operated by Landlord, including, without limiting any of the foregoing,
any luncheon club, athletic facility, or retail facility, or costs of providing
off-site parking, where such services are not made available to Tenant; and
(15) Depreciation;
(16) Payments of principal, interest and fees on debt encumbering the
Property; and
(17) Expenses and costs not normally included by landlords of
comparable industrial buildings in the area of the Premises.
Section 6.4.3 of the Lease is not to be construed to permit Landlord to
make significant capital improvements to the Building or Property which are
financed by the inclusion of the cost thereof in operating expenses.
Section 6.4.5 Changes. The second and third sentences of Section 6.4.5
---------------------
are deleted.
14.1 Assignment and Subletting: Limitation. Notwithstanding anything to
-------------------------------------
the contrary in Section 14.1, Tenant shall have the right to assign this Lease
or sublet all or part of the Premises, without Landlord's consent, but with
prior notice to Landlord, to: any parent, subsidiary or affiliate of Tenant; or
a corporation with which Tenant merges or consolidates; and/or any party which
acquires all or substantially all the assets or stock of Tenant. (Any such
permitted assignment or subletting shall be referred to herein as a "Permitted
Transfer" and any such
<PAGE>
permitted assignee or sublessee shall be referred to as a "Permitted
Transferee.") Any other assignment or subletting shall require Landlord's prior
written consent, which shall not be unreasonably withheld; provided further that
as a condition to any proposed assignment or sublease, whether to a parent,
subsidiary, affiliate, third party or other entity, Tenant shall provide
Landlord with acceptable documents and information, as requested by Landlord,
demonstrating that the proposed assignee or subtenant shall be sufficiently
financially responsible to perform its obligations in connection with the
proposed assignment or sublease of this Lease. Upon any Permitted Transfer, all
of the terms and conditions of the Lease, including those pertaining to use of
the premises, shall continue in full force and effect and shall remain binding
upon Tenant and any such Permitted Transferee.
14.2 Offer to Landlord. The last sentence of Section 14.2 is amended by
-----------------
deleting the words "until the term of such sublease expires or is terminated."
14.3 Contributions. The following is added at the beginning of Section
-------------
14.3(a): "Except as provided in Section 4.2 above,".
The following shall be added to the end of subsection 14.3(b) of the
Lease: "Notwithstanding the above, Tenant shall be entitled to deduct from such
excess consideration its reasonable expenses associated with such sublease or
assignment (e.g., leasing commissions and cost of alterations, attorneys' fees,
architectural fees, engineering fees and all other similar costs normally
associated with subletting or assigning), together with a reasonable return on
all amounts actually contributed by Tenant to the purchase and/or installation
of tenant improvements in the Premises, whether prior to or after the date of
this Lease. Furniture and equipment paid for and installed in the Premises by
Tenant shall be subject to such reasonable return to the extent such furniture
and equipment remains with the Premises as part of such sublease or assignment.
Items of repair, replacement, or maintenance which Tenant is required to perform
by law or under the terms of this Lease and items for which Tenant is in some
other manner reimbursed or compensated, shall not be subject to such return.
Tenant's return shall be an annualized rate of return of eight percent (8%) of
all amounts so contributed by Tenant ("Tenant's Return"). Tenant's Return may be
retained by Tenant at any time amounts in excess of applicable Minimum Monthly
Rent, operating expenses and any and all other amounts payable to Landlord by
Tenant hereunder ("Excess Consideration") are paid by subtenant or assignee.
Tenant's deductions shall be supported by documentation provided to Landlord
upon Landlord's request, such as invoices, purchase orders, receipts and
construction contracts, detailing the amounts actually paid by Tenant for those
improvements as to which Tenant seeks to deduct such rate of return.
Notwithstanding anything to the contrary set forth above, (i) Tenant's Return
shall accrue continuously from the date of commencement of any permitted
sublease or assignment, (ii) Tenant shall be entitled to receive 100% of all
Excess Consideration until it is reimbursed the full
4
<PAGE>
amount of its subleasing or assignment expenses as described above and has
received 100% of Tenant's Return. Thereafter, Landlord shall be entitled to 100%
of all Excess Consideration."
22.1 Security Deposit. In lieu of the cash payment required under
----------------
Section 22.1 of the Lease, Tenant has delivered to Landlord an irrevocable
letter of credit in the amount specified in Section 1.9 of the Lease and shall
continue to maintain and renew such letter of credit in form and substance and
issued by a financial institution reasonably satisfactory to Landlord, which
shall be payable to Landlord on Landlord's delivery to the issuer of Landlord's
written statement that Tenant has failed to pay rent or other charges due
hereunder, or has otherwise defaulted with respect to any provision of this
Lease. The issuer of the letter of credit shall be under no obligation to
investigate Landlord's statement. Such letter of credit shall be held and
applied by Landlord as the Security Deposit, and shall be in all respects
subject to the terms and conditions of Section 22.1 of the Lease. Such letter of
credit shall be maintained in effect and irrevocable for the full term of this
Lease, and any extensions hereof, provided, however, that such letter of credit
may be for an initial term of at least twelve (12) months. If the letter of
credit is for a term less than the lease term plus extensions, it shall be
renewed annually during the term of this Lease, and any extensions thereof, at
least thirty (30) days prior to its expiration, and if Tenant fails to so renew
the letter of credit, Landlord may exercise its rights under the letter of
credit and hold the cash so received as the Security Deposit, subject to the
terms and conditions of Section 22.1 of the Lease.
23. Signage. Tenant may display its corporate name on the building
-------
signage soffit and may display a logo on its front entry door to the Premises,
provided that all such signage must comply with the established sign criteria
for Gateway Business Park, and shall be subject to all governmental approvals,
which (if any are required) Tenant shall obtain at its sole cost. The cost of
the sign, its installation, maintenance and removal expense, shall be at
Tenant's sole expense.
24. Parking. Tenant shall be provided on a non-exclusive basis and at no
-------
additional cost 3.33 parking spaces, in the parking facilities located on the
Property, for every 1,000 square feet rented.
25. Indemnity. Subject to Section 6.3.4 of the Lease, Landlord shall
---------
hold harmless, indemnify, protect, and defend Tenant against all claims,
actions, damages, liability and expense (including, without limitation, fees of
attorneys, investigators and experts) in connection with loss of life, personal
injury or damage to property occasioned wholly or in part by any release caused
by Landlord or any of its employees, or agents (but not Landlord's other tenants
in the project, its contractors, or invitees) whether or not negligent or
wrongful, on the Premises or any portion of the Property affecting the Premises
of any toxic or hazardous materials or substances including, without limitation,
materials or substances
<PAGE>
defined by applicable law as hazardous or toxic materials or substances, and
PCBs.
26. Right of First Notice.
---------------------
(a) 750 Gateway, Building B, Suites A and C. Upon Landlord's receipt
---------------------------------------
of notice of the termination or expiration of any third party lease (including
renewal options contained therein) for Suites A and C in the 750 Gateway
Boulevard Building B, as shown on Exhibit "D~ attached hereto, during the term
of this Lease, Landlord, before it offers such space for rent to anyone other
than the existing tenant of such space, shall give notice to Tenant that such
space will become available for lease. For a period of ten (10) days after
receipt of Landlord's notice, Tenant shall have, on a one-time basis, the right
to lease such space upon such terms and conditions applicable to the leasing of
such space, including the extension of this Lease described below as to the
entire Premises (including Suites A and C), that are mutually agreeable to both
Landlord and Tenant. Should Landlord and Tenant fail to reach an agreement for
the lease of such space, with neither party having the obligation to reach such
an agreement, and should Landlord and Tenant fail to enter into such an
amendment to this Lease within such ten (10) day period, Landlord shall be under
no obligation to lease the space to Tenant and may thereafter offer the space
for lease to the public. If Tenant leases Suites A and C, as provided herein,
then the amendment of this Lease shall incorporate Suites A and C into the
Premises hereunder, and the term of this Lease shall be extended for an
additional twelve (12) months.
(b) 750 Gateway. Building B. Suites F and G. RPR Gencell has elected
---------------------------------------
to vacate 750 Gateway, Building B, Suites F and C, as shown on Exhibit "E"
attached hereto. Landlord has offered that space for lease to Tenant and Tenant
has declined to lease that space at this time. If, however, Landlord hereafter
enters into a lease for such space with a new tenant and that new lease
terminates or expires during the term of this Lease, Landlord, before it offers
such space to any third party other than the existing tenant of such space,
shall give notice to Tenant that such space will become available for lease. For
a period of ten (10) days after receipt of Landlord's notice, Tenant shall have,
on a one-time basis, the right to lease such space upon such terms and
conditions applicable to the leasing of such space, including the extension of
this Lease, as described below, as to the entire Premises (including Suites F
and G), that are mutually agreeable to both Landlord and Tenant. Should Landlord
and Tenant fail to reach an agreement for the lease of such space\\1\\ with
neither party having the obligation to reach such an agreement, and should
Landlord and Tenant fail to enter into such an amendment to this Lease within
such ten (10) day period, Landlord shall be under no obligation to lease the
space to Tenant and may thereafter offer the space for lease to the public. In
the event Tenant leases Suites F and C as provided herein, the amendment of this
Lease incorporating Suites F and C into the Premises hereunder shall provide
that the
<PAGE>
remaining term of this Lease shall be a minimum of 60 months and, if the then
remaining term should be less than 60 months, then the amendment shall specify
that the term is thereby extended to provide for a remaining term of 60 months
following execution of the amendment. The rights described in this Section 26
are: conditioned upon Tenant not being in default in the payment of any rent,
additional rent or other sums due under this Lease and not committing such a
default at any time from the time it purports to exercise its rights under this
paragraph through the consummation of a lease amendment as provided herein;
shall be personal to Tenant and may not be exercised or be assigned voluntarily
or involuntarily by or to any person or entity other than the original Tenant or
in connection with a Permitted Transfer under this Lease; and shall be
exercisable by Tenant only if the original Tenant under this Lease or a
Permitted Transferee is then in occupancy of the Premises described herein and
the Lease is then in full force and effect.
27. Renewal Option. Landlord hereby grants to Tenant one (1) option to
--------------
renew the term of this Lease for an additional term of five (5) years, upon the
then prevailing fair market value rent terms, provided that Tenant is not in
default beyond any applicable cure period specified herein under this Lease at
the time that the option is exercised, and at any time from Tenant's exercise of
the option to the commencement date of the renewal term. This option must be
exercised by written notice to Landlord no later than two hundred seventy (270)
days prior to the expiration of the original Lease term. Landlord shall, on
written request of Tenant, advise Tenant in writing no later than 240 days prior
to expiration of the Lease term, of the then prevailing market value and the
terms and conditions operative under this paragraph. The option granted in this
paragraph shall be terminated and of no further force and effect if, at any time
provided herein for exercise of the option by Tenant, any federal, state, or
local law or regulation invalidates or modifies any provision of the option. The
renewal option described in this Section 27 is: conditioned upon Tenant not
being in default in the payment of any rent, additional rent or other sums due
under this Lease and not committing such a default which remains uncured beyond
any applicable cure period specified herein at any time from the time it
purports to exercise its right under this paragraph through the commencement of
the renewal period; shall be personal to Tenant and may not be exercised or be
assigned voluntarily or involuntarily by or to any person or entity other than
the original Tenant or in connection with a Permitted Transfer under this Lease;
and shall be exercisable by Tenant only if the original Tenant under this Lease
or a Permitted Transferee is then in occupancy of the Premises described herein
and the Lease is then in full force and effect.
28. Improvements. Tenant shall lease the Premises in their existing "as
------------
is" condition. Landlord has no obligation to provide any improvements or
alterations to or for the Premises. Tenant shall have the right, subject to the
terms hereof, to make improvements to the Premises, subject to Landlord's
consent, which shall not
<PAGE>
be unreasonably withheld; provided, however, that Landlord may withhold its
consent in its sole discretion if the proposed alterations (i) would be visible
from the exterior of the Premises or Building, or (ii) would affect any
structural component or portion of the Premises. Any alterations shall be
performed at Tenant's sole cost. Notwithstanding anything to the contrary
contained in the Lease, upon the expiration or earlier termination of the Lease
and any extension option, if exercised by Tenant, Tenant shall have the right
to, and, in any case, if required by Landlord, shall remove from the Premises
its lab benches, fume hoods, cold rooms and other equipment which shall have
been purchased and installed by Tenant, whether prior to or after the date of
this Lease; provided, however, that Tenant shall repair all damage to the
Premises resulting from such removal. Tenant shall have the right to choose the
contractor to conduct its tenant improvement work, subject to Landlord's
reasonable approval. The following additional provisions shall apply to any
tenant improvement work done by Tenant or its contractors:
(a) Any items or work to be performed by Tenant or for which Tenant
contracts separately (hereinafter /t/"Tenant's Work/t/"), shall be coordinated
with Landlord so as not to interfere with Landlord's work in the Premises or on
the Property. Work involving the sprinkler, plumbing, mechanical, electrical
power, lighting or fire safety systems of the Building shall be performed by
subcontractors approved by Landlord in its sole discretion.
(b) Tenant shall prepare and submit to Landlord final plans and
specifications showing the architectural design of the Premises, including the
basic mechanical system and electrical system within the Premises, plumbing,
partitions and doors, complete fixturing information, and material selections
and finishes, which shall be subject to Landlord's written approval. Tenant
shall also submit all proposed change orders which require an expense greater
than $5,000.00 in writing (with sufficient detail to enable Landlord to
understand the nature of the proposed change) to Landlord for Landlord's prior
written approval, which shall not be unreasonably refused or delayed.
(c) Tenant shall complete all work in accordance with the final plans
and specifications approved by Landlord. Tenant shall make no alterations,
additions, or reinforcements to the structure of the building except as
specifically approved by Landlord in such final plans and specifications. Tenant
agrees that all work done by Tenant and its contractors and subcontractors shall
be performed in full compliance with all laws, rules, orders, permits,
ordinances, directions, regulations and requirements of all governmental
agencies, offices, and departments having jurisdiction, including without
limitation applicable provisions pertaining to use of hazardous or toxic
materials and the Americans with Disabilities Act, and in full compliance with
rules, orders, directions, regulations and requirements of the Insurance Service
Offices (ISO) or any other organization performing a similar function.
8
<PAGE>
(d) At least fourteen (14) days before commencement of construction,
Tenant shall submit to Landlord the names and addresses of the general,
mechanical, and electrical contractors which Tenant intends to engage for
construction of Tenant's improvements, the commencement date of construction,
and the estimated date of completion of construction. Landlord shall have the
right to enter the Premises at any time to post any notice of nonresponsibility
or other notice on the Premises during Tenant's construction. All contractors
and subcontractors retained by Tenant shall be subject to the approval of
Landlord, which shall not be unreasonably refused or delayed. All contractors
retained by Tenant shall be licensed contractors, possessing good labor
relations and capable of performing quality workmanship.
(e) Tenant's Work shall be completed with reasonable diligence and in
such a manner as not to unreasonably interfere with the use or enjoyment of
other portions of the building or common areas by Landlord or other tenants.
Tenant's contractors shall provide and pay for all temporary power, water, and
other utility facilities as required in connection with the construction of
Tenant's improvements. Tenant's contractors shall provide their own dumpster for
collection and disposition of construction debris, which shall be located at a
location reasonably suggested by Landlord, and all construction debris from
Tenant's construction shall be disposed of in Tenant's contractor's dumpster and
not in trash facilities for the Project. Tenant's contractor's construction
material, tools, equipment, and debris shall be stored only within the Premises,
or in areas designated for that purpose by Landlord. Work space exterior to the
Premises shall be available only in the reasonable discretion of Landlord.
Tenant's Work shall be subject to the inspection of Landlord and Landlord's
architect and/or other representative.
(f) Tenant shall indemnify and hold harmless Landlord for any and all
claims arising from Tenant's work as provided in Paragraph 11.1 of the Lease.
Tenant shall pay for all damage to the Building, the Project, or appurtenant
areas or equipment, as well as all damage to tenants or occupants thereof or
their property caused by Tenant, its agents, employees, contractors, licensees,
or invitees. Tenant shall comply with all of the terms of the Lease respecting
installation of improvements, including, without limitation, Article 8 thereof.
(g) Tenant shall be solely responsible for the adequacy in all
respects of the plans and specifications, including without limitation
compliance with all governmental requirements, compatibility with the building
shell, and any special requirements of Tenant's proposed equipment or machines
with respect to ambient temperatures, electrical use or current, or water
availability. Tenant acknowledges that in connection with obtaining Landlord's
approval of the plans and specifications, Tenant may provide Landlord with
certain information regarding its
<PAGE>
specific needs relating to the Premises and that Tenant may provide some of its
own equipment for installation in the Premises. Tenant further acknowledges that
Landlord will make no independent review of any such information and that
Landlord does not warrant, either expressly or impliedly, the adequacy of the
plans and specifications for the said improvements, the adequacy of the Tenant
Improvements or Tenant's equipment for Tenant's intended purpose.
(h) Not less than fifteen (15) days prior to the date Tenant desires
to commence Tenant's Work, it shall give a written notice to Landlord setting
forth or accompanied by all of the following:
(1) A description and schedule for the work to be performed;
(2) The names and addresses of all contractors and
subcontractors who, as of the date of such notice, will perform Tenant's
Work;
(3) A complete set of all plans, specifications, and
calculations developed by or for Tenant, including all plans which are
required by the City of South San Francisco and the County of San Mateo for
the issuance of any permits or approvals or for the commencement of any of
Tenant's Work;
(4) Tenant further agrees that it shall provide Landlord with
copies of all licenses and permits which are required in connection with
the performance of Tenant's Work within five (5) days of Tenant's receipt
of such permits and licenses; and
(5) All of Tenant's contractors and subcontractors shall carry
workers compensation insurance covering all of their respective workers,
and shall also carry comprehensive general liability insurance, including
property damage, all with limits, in form and with companies as are
required to be carried by Tenant as set forth in Sections 6.3.2 and 6.3.3
of the Lease. Certificates for all insurance carried pursuant to this
paragraph shall be delivered to Landlord before the commencement of
construction of any Tenant's Work and before any contractor's equipment is
moved onto the Property. All policies of insurance shall name Landlord as
an additional insured, and shall contain a provision that the insurance
company writing said policy will give Landlord 30 days' prior written
notice of any cancellation, modification or lapse or reduction in the
amounts of such insurance.
(i) If any contractor or worker performing Tenant's Work performs any
work which does impair, or threatens to impair the quality, integrity or
performance of any portion of the Building, Landlord shall give notice to Tenant
and immediately thereafter, Tenant shall cause such contractor or worker
<PAGE>
immediately to remove all of its tools, equipment and materials and to cease
working in the Building. As additional rent under the Lease, Tenant shall
reimburse Landlord for any damages, costs and expenses, and for any repairs or
corrections of any portion of the Building caused by or resulting from the
actions or omissions of anyone performing Tenant's Work. Upon completion of
Tenant's Work, Tenant shall provide Landlord a complete set of as-built drawings
covering all of Tenant's Work.
29. Rules and Regulations. The first sentence of Rule 5 is amended by
---------------------
deleting the phrase "the maintenance of office equipment" and inserting in lieu
thereof: "the operation of Tenant's business at the Premises, as permitted by
this Lease, strictly in accordance with this Lease, including, without
limitation, Article 4 hereof." The second sentence of Rule 5 is amended by
inserting after the word "substance" the phrase "except as permitted by this
Lease, strictly in accordance with this Lease, including, without limitation,
Article 4 hereof."
Initialed for Initialed for
Landlord: ___ Tenant: __
11
<PAGE>
<TABLE>
<S> <C>
1.0 SUMMARY OF TERMS
1.1 DATE This lease is dated for reference purposes only: July 25, 1997
7/25/1997
1.2 PARTIES AND NOTICE LANDLORD: Chamberlin Associates-Oyster Point Phase I L.P.
ADDRESSES 5880 West Las Positas Boulevard, Suite 51
(Section 2.1) Pleasanton, CA 94588-8552
TENANT: Terrapin Technologies, Inc.
d.b.a.:
ADDRESS: 750-R Gateway Boulevard
CITY: South San Francisco STATE: CA ZIP:
After the Commencement Date, Tenant's address shall be the Premises.
1.3 PREMISES APPROXIMATE RENTABLE SQUARE FEET: 20,680
(Section 2.1) SUITE: H & R
1.4 BUILDING B
(Section 2.1) 750 Gateway Blvd., South San Francisco, CA 94080
1.5 (a) COMMENCEMENT DATE January 1, 1998
(Section 3.1) 1/1/1998
(b) EXPIRATION DATE December 31, 2002
12/31/2002
1.6 TERM (Section 3.1) 60 Months: Sixty
1.7 RENT
(a) MINIMUM MONTHLY $26,884.00
RENT (Section 5.1) Twenty Six Thousand Eight Hundred Eighty Four and 00/100 Dollars
(b) RENT ADJUSTMENT Each anniversary date of lease commencement
DATES (Section 5.2)
(c) ADJUSTMENT BASIS see addendum to lease
(d) ADVANCE RENT None
1.8 OPERATING EXPENSE $7,248.34
PAYMENT / MONTH Seven Thousand Two Hundred Forty Eight and 34/100 Dollars
(Section 6.1)
1.9 SECURITY DEPOSIT $56,622.40
(Section 22) Fifty Six Thousand Six Hundred Twenty Two and 40/100 Dollars
1.10 USE Premises used solely for: Office, Lab R&D, Process R&D
(Section 4.1) and Production
1.11 TENANT'S PRO RATA % 9.0500% (Ratio of rentable square footage in the Premises to
rentable area
(Section 6.1) in the property)
PRO RATA BASIS Based upon rentable area of 228,627 square feet.
1.12 CONTENTS This lease consists of pages 1 through: 12
Sections 1 through: 22
Addendum: One, Sections 5.2 - 28
Exhibits: A thru E
LANDLORD: TENANT:
Chamberlin Associates-Oyster Point Phase I L.P. Terrapin Technologies, Inc.
By: Chamberlin Associates, Inc., its General Partner 750-R Gateway Boulevard
5880 West Las Positas Boulevard, Suite 51 South San Francisco, CA 94080
Pleasanton, CA 94588-8552
BY: BY:
Scott W. Graeser
(Print Name)
</TABLE>
<PAGE>
2.0 PREMISES
2.1 Description. Landlord hereby leases to Tenant, and Tenant hereby
leases from Landlord, the Premises (the agreed Premises are defined in Section
1.3 and Exhibit A), together with the right, in common with other occupants of
the Building (Section 1.4), to use the common areas (Section 6.4.3). The
Premises and the Building are located on the Property (Exhibit A).
2.2 Improvements. The Premises shall be completed in a good and
workmanlike manner in accordance with the Plans (Exhibit B).
3.0 TERM
3.1 Period; Commencement. The Term of this Lease shall commence on the
date specified in Section 1.5, and shall be for the Term specified in Section
1.6, plus any partial month at the commencement of the term. If the date of
substantial completion of the Premises is delayed as a result of changes
requested by Tenant, the Term of the Lease shall commence as if the Premises
were substantially complete on the originally scheduled date. If the Premises
are not delivered to Tenant by the Commencement Date due to a delay caused by
Landlord or its contractor, this Lease shall not be void or voidable, nor shall
Landlord be liable for any loss or damage resulting therefrom, and the
Commencement Date shall be delayed until Landlord can deliver possession.
4.0 USE
4.1 Authorized. The Premises may be used and occupied only for the
purposes specified in Section 1.10 hereof. and for no other purpose or purposes.
4.2 Compliance. Tenant accepts the Premises by its occupancy and subject
to all applicable laws, ordinances, rules, regulations, orders, restrictions of
record, and requirements in effect during the Term regulating the Premises, with
which Tenant shall comply at its sole cost as they relate to Tenant's use of the
Premises or to improvements, alterations or installations made to the Premises
by or for Tenant, or to the operation of Tenant's business. Landlord makes no
warranty that Tenant's use of the Premises complies with the zoning applicable
to the Premises.
4.3 Restricted Activities. Tenant shall not cause or permit the escape,
disposal or release of any biologically or chemically active or other hazardous
substances or materials. Tenant shall not allow the storage or use of such
substances or materials in any manner not sanctioned by law or by the highest
standards prevailing in the industry for the storage and use of such substances.
The term "hazardous substances and materials" shall include, without limitation,
those described in or regulated by any federal, state or local laws, regulations
or authorities. If any lender or governmental agency shall ever require testing
to ascertain whether or not there has been any release of hazardous substances
or materials, then the reasonable costs thereof shall be reimbursed by Tenant to
Landlord upon demand as additional rent if such requirement applies to the
Premises and/or the Property and such release was caused or permitted by Tenant.
In addition, Tenant shall execute affidavits, certificates and the like from
time to time at Landlord's request concerning Tenant's best knowledge and belief
regarding the presence of hazardous substances or materials on the Premises. In
all events, Tenant shall indemnify Landlord in the manner provided in Section
11.1 of this Lease from any release of hazardous substances and/or materials on
the Premises occurring while Tenant is in possession, or occurring upon the
common areas or elsewhere, if caused by Tenant or persons acting under Tenant.
If at any time during or after the Term of this Lease, as it may be extended,
Tenant becomes aware of any inquiry, investigation, or proceeding by any
governmental agency related to hazardous materials on or about the Premises or
the Property, Tenant shall within five (5) days after first learning of such
inquiry, investigation or proceeding give Landlord written notice of same. This
section shall survive the expiration or earlier termination of the Lease.
5.0 RENTS
5.1 Amount; Payment. Tenant shall pay to Landlord at the place designated
in Section 1.2, or at such place as Landlord may otherwise designate, without
deduction, offset, counterclaim, prior notice or demand, as Minimum Monthly Rent
for the Premises, the amount specified in Section 1.7. All such Rent payments
shall be payable in advance on the first day of each month during the Lease
Term.
5.2 Adjustment. The Minimum Monthly Rent in effect immediately prior to
the Adjustment Date(s) specified in Section 1.7 shall be adjusted at each
Adjustment Date as provided in Section 1.7. If Section 1.7 specifies adjustments
with reference to the CPI, then the Minimum Monthly Rent shall be adjusted at
each Adjustment Date specified in Section 1.7 in the same percentage proportion
that the United States Bureau of Labor Statistics Consumer Price Index (All
Urban Consumers, All Items, San Francisco Bay Area) last published sixty days
prior to each such Adjustment Date has increased over the Index last published
sixty days prior to the later of the commencement of the Lease Term or the last
Adjustment Date. In no event shall the rent be less than that in effect prior to
any such adjustment. If the Index is discontinued or revised, such other
government index will be substituted in order to obtain substantially the same
result as would be obtained using the original index.
6.0 OPERATING EXPENSES
6.1 Payment. Tenant shall pay as additional rent the amount set forth in
Section 1.8 (which may be revised from time to time) which is Tenant's monthly
pro rata share of the estimated operating expenses (Sections 6.2 - 6.5) for the
Property from the date of occupancy or from the commencement of this Lease,
whichever date shall first occur. Landlord shall provide Tenant with a statement
of the actual amount of such expenses within 120 days following the end of each
calendar year. Tenant shall pay to Landlord the amount by which Tenant's share
of the actual expenses exceeds Tenant's operating expense payments for such year
and any excess amounts paid by Tenant shall be credited to reduce Tenant's
payments for the next ensuing period, or paid to Tenant if the Lease Term has
expired.
<PAGE>
6.2 Taxes. Tenant shall pay its pro rata share of all taxes, which shall
include any form of assessment, license, fee, commercial rental tax, levy,
penalty or tax (other than net income, franchise, inheritance or estate taxes)
imposed by any authority having the power to tax or levy assessments on the
Property and the reasonable cost of contesting any tax assessment, whether such
tax is (i) upon any legal or equitable interest of Landlord in the Building or
Property; (ii) upon this Lease, the rent payable hereunder or the value thereof;
(iii) with respect to any right to occupancy, use, leasing, operation,
management, maintenance, alteration, or repair of the Premises, the Building, or
the Property; or (iv) imposed in substitution for, or in addition to, existing
or additional taxes against any part of the Property whether or not now
customary or within the contemplation of the patties. If it shall not be lawful
for Tenant to reimburse Landlord for any of the taxes covered by this Article,
the Minimum Monthly Rent payable to Landlord under the terms of this Lease shall
be increased by the amount of the portion allocable to Tenant so as to net to
Landlord the amount which would have been received by Landlord if such tax had
not been imposed. Tenant shall pay prior to delinquency all taxes assessed
against and levied upon its trade fixtures, furnishings, equipment, and other
personal property, and any increase in real property taxes resulting from any
alterations or tenant improvements placed in the Premises.
6.3 Insurance
6.3.1 Property. Tenant shall pay its pro rata share of the cost of
"all risk" property insurance (including, at Landlord's option, earthquake and
Hood coverage, inflation endorsement, and sprinkler leakage endorsement)
covering the full replacement cost of the Building and the Premises, excluding
coverage of all Tenant's personal property on or in the Premises, but including
any tenant improvements. Such insurance shall include a lender's loss payable
endorsement in favor of Landlord's lender. Tenant agrees not to do anything or
fail to do anything which will increase the cost of such insurance or which will
prevent Landlord from procuring policies satisfactory to Landlord. Tenant shall
pay any increases in insurance premiums resulting from the nature of Tenant's
occupancy or any act or omission of Tenant.
6.3.2 Tenant's Obligation. Tenant shall maintain in full force and
effect at all times during the term of the Lease, at its own expense, for the
protection of Tenant and Landlord, as their interests may appear, "all risk"
property insurance on Tenant's personal property located in, and any alterations
to, the Premises in the amount of the replacement Cost thereof, and
comprehensive general liability insurance in an amount not less than $1,000,000
combined single limit for both bodily injury and property damage, insuring
Landlord and Tenant against any liability arising out of the ownership, use,
occupancy or maintenance of the Premises and all areas appurtenant thereto. The
limits of said insurance shall not, however, limit the liability of Tenant
hereunder.
6.3.3 Terms. All insurance policies required to be carried by Tenant
hereunder shall conform to the following requirements: (a) each policy, at
Landlord's request, shall carry a lender's loss payee endorsement in favor of
Landlord's lender; (b) an executed copy of each insurance policy, including
renewals. or a certificate thereof, shall be delivered to Landlord; (c) each
policy shall require that Landlord be notified in writing by the insurer at
least thirty (30) days prior to any cancellation or expiration of such policy,
or any reduction in the amounts of insurance carried; (d) each policy shall be
primary, not contributing with any insurance which Landlord may carry; (e) all
liability insurance shall state that Landlord is entitled to recovery for the
negligence of Tenant even though Landlord is an additional insured.
6.3.4 Waiver. Each of the parties hereto hereby releases the other,
to the extent of the releasing party's insurance coverage, from any and all
liability for any loss or damage covered by such insurance which may be
inflicted upon the property of such party even if such loss or damage shall be
brought about by the fault or negligence of the other party, its agents or
employees; provided, however, that this release shall be effective only with
respect to loss or damage occurring during such time as the appropriate policy
of insurance shall contain a clause to the effect that this release shall not
affect said policy or the right of the insured to recover thereunder. If any
policy does not permit such a waiver, and if the party to benefit therefrom
requests that such a waiver be obtained, the other party agrees to obtain an
endorsement to its insurance policies permitting such waiver of subrogation if
it is available. If an additional premium is charged for such waiver, the party
benefiting therefrom agrees to pay the amount of such additional premium
promptly upon being billed therefor.
6.4 Repairs and Maintenance; Common Areas; Building Management.
6.4.1 Landlord's Expense. Landlord, at its sole expense, shall make
all necessary repairs to the footings, foundations, structural steel columns and
girders forming a part of the Premises upon receipt of written notice of the
need for such repair.
6.4.2 Tenant's Expense. Landlord, at Tenant's sole expense, shall
maintain the HVAC systems appurtenant to the Premises, which maintenance shall
be performed in accordance with manufacturer's recommendations.
6.4.3 Operating Expense. Landlord, as an operating expense of which
Tenant shall pay its pro rata share, shall make all necessary repairs to the
roof, walls, exterior portions of the Premises and the Building, utility lines,
equipment and other facilities in the Building which serve more than one tenant,
and to any common areas upon receipt of written notice of the need for such
repair. "Common areas" means all areas and facilities outside the Premises,
within the Property, that are provided by Landlord for the use of tenants in the
Property, including, without limitation, driveways, parking areas, sidewalks,
and landscaped areas. Landlord shall keep and maintain all common areas of the
Property and any paved areas adjoining the Property in a clean and orderly
condition. Landlord reserves the right to make alterations thereto from time to
time. Operating expenses shall include (i) all sums expended by Landlord for the
supervision, maintenance, repair, replacement and operation of the common areas,
and a reasonable management and administrative fee, and (ii) any costs of
capital improvements made by Landlord to the Building for the purpose of
reducing operating expenses or that are required by any governmental authority
after the original construction of the Building. The portion of such capital
costs to be included each year as an operating expense ',;hall be that fraction
allocable to the year in question calculated by amortizing over the reasonable
useful life of such improvement, as determined by Landlord, with interest on the
unamortized balance at the rate paid by Landlord for funds borrowed for the
purpose of constructing such improvements, but in no event to exceed the highest
rate permissible by law. Operating expenses for any year during which the
Building is not substantially fully occupied shall be calculated by projection
as if the Building were so occupied during the entire year.
<PAGE>
6.4.4 Tenant's Obligation. Tenant. at its sole expense, shall
maintain the Premises in good order and condition, promptly make all repairs
necessary to maintain such condition, and repair any damage to the Premises and
the Property caused by Tenant or its Agents, except as specifically otherwise
provided above. All repairs made by Tenant shall utilize materials and equipment
which are comparable to those originally used in constructing the Premises.
Because this Lease contains the entire agreement of the parties for maintenance
of the Premises, the parties agree that statutory provisions pertaining to
maintenance of leased property shall not be applicable to this Lease, and
Landlord and Tenant waive their rights under such provisions. Tenant accepts all
existing phone and communications cable in its existing, 'as is" condition, and
Tenant shall be responsible at its sole cost for the installation, maintenance
and repair of any phone, data or other communications cable from the Building
phone room (or, for multiple Building properties, from the demarcation point
supplied by the local regulated public utility) to and within the Premises. Any
alterations, installations or modifications of such cable shall be subject to
the provisions of this Lease, including Articles 7 and 8.
6.4.5 Changes. Landlord shall have the right to close temporarily,
and make changes to, any of the common areas. If Landlord determines that the
efficient leasing or operation of the Building or the Property requires
relocation of Tenant's premises to another part of the Building or Property,
Landlord shall have the right upon no less than sixty days notice to Tenant, to
so relocate Tenant, provided that such substitute premises shall be
substantially comparable to the Premises. Landlord shall pay Tenant's reasonable
relocation expenses, and the terms of this Lease shall otherwise remain
unchanged.
6.5 Utilities. Tenant shall pay for water, gas, heat, sewer, power,
telephone services and any other utility supplied to or consumed in or on the
Premises. If any utility services are not separately metered, Tenant shall pay
its pro rata share of the cost of such service. Landlord shall not be
responsible or liable for any interruption in utility service, nor shall such
interruption affect the continuation or validity of this Lease.
7.0 ALTERATIONS, ADDITIONS AND FIXTURES
7.1 Installation and Removal. Subject to Article 8, Tenant shall have the
right to install its trade fixtures in the Premises during the term of this
Lease; provided, however, that no such installation or removal thereof shall
affect the structural portion of the Premises and that Tenant shall repair any
damage to the Premises or the Property caused by the installation, use or
removal of any of Tenant's furniture, fixtures, equipment or other property.
7.2 Tenant's Rights. Except for nonstructural changes which do not exceed
$5,000, Tenant shall not make or permit to be made any alterations or
improvements to the Premises without Landlord's prior written consent. In making
any alterations or improvements of any magnitude or cost whatsoever, Tenant
shall comply with Article S and shall not disturb other occupants of the
Building or the Property. Further, Tenant at its sole cost shall comply with all
laws, codes and regulations (including the Americans with Disabilities Act and
all other accessibility laws and regulations) relating to any alterations or
improvements, including obtaining any necessary permits, and, upon completion,
shall provide Landlord with as-built plans detailing such alterations and
improvements, together with a certificate of occupancy or the comparable
municipal approval (such as a signed-off building permit) issued upon completion
and approval of alterations and improvements in the municipality. All
alterations and improvements to the Premises which are made by Tenant shall be
the property of Tenant until the expiration or earlier termination of this
Lease; at that time all such alterations and improvements shall remain on the
Premises and become the property of Landlord without payment therefor, unless
Landlord gives written notice to Tenant to remove the same, in which event
Tenant shall remove such alterations and improvements and repair any damage
resulting therefrom. Tenant's removable trade fixtures shall be and remain
Tenant's property, and shall be removed by Tenant from the Premises, at Tenant's
sole cost, on or before the expiration or earlier termination of this Lease.
8.0 MECHANIC'S LIENS
8.1 Tenants Obligations. Tenant shall give Landlord ten (10) days written
notice prior to the commencement of work in the Premises so that Landlord may
post notices of non-responsibility. Such notice shall include a copy of Tenant's
plans and specifications and any necessary permits for the work. Tenant shall
keep the Premises and the Property free and clear of any liens arising out of
work done by or for Tenant. Should any such lien or notice of lien be filed,
Tenant shall bond against or discharge the same within fifteen (15) days after
such filing.
9.0 ENTRY BY LANDLORD
9.1 Landlord's Rights. Tenant shall permit Landlord, its lenders, and
their Agents to enter the Premises at all reasonable times for the purpose of
inspection, maintenance, making repairs, alterations or additions to any portion
of the Building, conducting environmental audits (including review of Tenant's
records relating to hazardous materials), serving or posting notices as well as
to exhibit the Premises for sale, mortgage or lease, and, during the last one
hundred eighty (180) days prior to the expiration of this Lease, placing "For
Lease" signs, without any rebate of Rent and without any liability to Tenant for
any loss of occupation or quiet enjoyment thereby occasioned. Landlord shall
make reasonable efforts to minimize any inconvenience to Tenant in exercising
the foregoing rights. This Section in no way affects the patties' maintenance
obligations.
10.0 DAMAGE BY FIRE OR OTHER CASUALTY
10.1 Repair; Landlord's Right to Terminate. If the Premises or Building
shall be damaged or destroyed by fire or other casualty, Tenant shall promptly
notify Landlord, and Landlord, subject to any mortgagee's consent and to the
conditions set forth in this Article 10, shall repair such damage and restore
the Premises to substantially the same condition in which they were immediately
prior to such damage or destruction. Landlord's restoration shall not include
the repair, restoration or replacement of Tenant's fixtures, improvements,
alterations, furniture or any other of its property. All statutory or common law
rights of termination with respect to the destruction of leased premises shall
not be applicable to this Lease. If a casualty occurs during the last 12 months
of the Term or any extension thereof, Landlord may cancel this Lease unless
Tenant has the right to extend the term for at least three more years and does
so within 30 days after the date of the casualty. If in Landlord's opinion the
net insurance proceeds will not be adequate to complete such restoration.
Landlord may terminate this Lease by giving Tenant written notice which
specifies a termination date no less than ten (10) days after its transmission.
<PAGE>
10.2 Tenant's Right to Terminate. Landlord within thirty (30) days after
the date of destruction shall notify Tenant if the Premises cannot be fully
repaired within one hundred fifty (150) days after the date of destruction. In
such event Tenant may terminate this Lease as of the 40th day after the date of
destruction by giving Landlord written notice within ten (10) days after
Tenant's receipt of Landlord's notice.
10.3 Rent Abatement. The Minimum Monthly Rent shall abate during any
period when there is substantial interference with Tenant's use of the Premises
(in proportion to the unusable area), commencing with the damage or destruction
and ending upon substantial completion by Landlord of the repair or
reconstruction of the Premises. Tenant shall not be entitled to any compensation
or damages from Landlord for loss of use of the Premises, damage to Tenant's
personal property or any inconvenience occasioned by such damage, repair or
restoration.
11.0 INDEMNIFICATION OF LANDLORD
11.1 Tenant's Obligations. Subject to Paragraph 6.3.4 above, Tenant shall
hold harmless, indemnify, and defend Landlord against all claims, actions,
damages, liability and expense (including, without limitation, fees of
attorneys, investigators and experts) in connection with loss of life, personal
injury or damage to property in or about the Premises or arising out of the
occupancy or use by Tenant of the Premises or occasioned wholly or in part by
any act or omission of Tenant or its employees, agents, contractors, licensees,
or invitees ("Agents"), unless such loss, injury or damage was caused by the
negligence of Landlord or its agents. Without limiting the foregoing, Tenant
will forever release and hold Landlord and its Agents harmless from all claims
arising out of damage to Tenant's property unless such damage occurs as a result
of Landlord's failure to make repairs after having received written notice of
the need for such repair. In no event shall Landlord be liable to Tenant for any
indirect or consequential damages, including without limitation any claims for
lost profits or business opportunities, arising from any cause whatsoever,
including without limitation any negligence of Landlord.
12.0 CONDEMNATION
12.1 Permanent Taking. If (I) all of the Premises are covered by a
condemnation, (ii) any pant of the Premises is covered by a condemnation and the
remainder thereof is insufficient for the reasonable operation therein of
Tenant's business, or (iii) any of the Property is covered by a condemnation
and, in Landlord's opinion, it would be impractical to restore the remainder
thereof, then this Lease shall terminate and all obligations hereunder shall
cease as of the date upon which possession is taken by the condemnor. If there
is a condemnation and this Lease has not been terminated pursuant to this
Section, the obligations of Landlord and Tenant shall be unaffected by such
condemnation except that Rent shall abate in proportion to the area, if any, of
the Premises covered by such condemnation. Statutory provisions with respect to
termination upon a partial taking of leased premises shall not be applicable to
this Lease.
12.2 Award. In the event of a condemnation affecting Tenant, Tenant shall
have the right to make a separate claim against the condemnor to the extent that
such claim does not reduce the sums otherwise payable by the condemnor to
Landlord. Except as aforesaid, Tenant hereby assigns to Landlord all other
claims against the condemnor.
12.3 Temporary Taking. No temporary taking of the Premises shall terminate
this Lease or give Tenant any right to any abatement of Rent. Any award made to
Tenant by reason of such temporary taking shall belong entirely to Tenant and
the Landlord shall not be entitled to share therein.
13.0 QUIET ENJOYMENT
13.1 Tenant's Rights. Landlord covenants that Tenant, upon performing the
terms, conditions and covenants of this Lease shall have quiet and peaceful
possession of the Premises as against any person claiming the same by, through
or under Landlord, subject, however, to the exceptions, reservations and
conditions of this Lease.
14.0 ASSIGNMENT AND SUBLETTING
14.1 Limitation. Tenant shall not transfer this Lease, voluntarily or by
operation of law, without the prior written consent of Landlord, which consent
shall not be unreasonably withheld. "Transfer" shall include any sublease,
assignment, license or concession agreement, change in ownership of Tenant,
mortgage or hypothecation of this Lease or Tenant's interest therein or in all
or a portion of the Premises. Notwithstanding the above, Landlord shall not
consent to any transfer which provides for a rental or other payment based in
whole or in part on the net income or profits derived by the user or occupant of
the Premises from its use or occupancy of the Premises (other than an amount
based on a fixed percentage or percentages of receipts or sales). A consent to
one transfer shall not be deemed to be a consent to any subsequent transfer. Any
transfer without Landlord's consent shall be void at the option of Landlord, and
Landlord may exercise any or all of its rights under Article 17 hereof.
14.2 Offer to Landlord. Tenant acknowledges that the terms of this Lease,
including Rent, have been based on the understanding that Tenant shall
physically occupy the Premises for the entire Term. Therefore, upon Tenant's
request to transfer all or a portion of the Premises, Landlord shall be entitled
to sublease from Tenant for Landlord's own account the portion of the Premises
proposed to be transferred by Tenant, upon the same terms as those proposed but
otherwise upon the form of this Lease. If Landlord so subleases for its own
account, Landlord shall have the further right to transfer the Premises to any
person, including without limitation other tenants in the Building, and Tenant
shall be relieved of any liability with respect to such portion of the Premises
so subleased by Landlord until the term of such sublease expires or is
terminated.
14.3 Conditions. Notwithstanding the above, the following shall apply to
any proposed transfer:
(a) No transfer shall relieve Tenant of its obligation to pay Rent
and to perform all other obligations to be performed by Tenant hereunder. The
acceptance of rent by Landlord from any person shall not be deemed to be a
waiver by Landlord of any provision of this Lease or to be a consent to any
transfer.
<PAGE>
(b) Any consideration received by Tenant as a result of a sublease or
assignment which exceeds the total sums which Tenant is obligated to pay
Landlord under this Lease, or the prorated portion thereof if only a portion of
the Premises is transferred, shall be payable to Landlord as additional rent
under this Lease without affecting or reducing any other obligation of the
Tenant hereunder.
(c) Each transfer to which Landlord has consented shall be by an
instrument in writing in a form satisfactory to Landlord, and shall be executed
by Tenant and the transferee. Tenant shall reimburse Landlord for Landlord's
reasonable costs and attorneys' fees incurred in conjunction with the processing
and documentation of any such requested transfer.
15.0 SUBORDINATION; ESTOPPEL CERTIFICATES
15.1 Subordination. This Lease shall, unless otherwise elected by
Landlord's first mortgagee, lender, or ground lessor, be subordinate to any
ground lease, mortgage, deed of trust, or any other hypothecation for security
(collectively, a 'Security Instrument") now or hereafter placed upon the
Property and to any and all advances made on the security thereof and to all
modifications, replacements and extensions thereof. Notwithstanding any such
subordination, Landlord shall exercise reasonable efforts to preserve Tenant's
right to quiet possession of the Premises so long as Tenant is not in default
under this Lease, unless this Lease is otherwise terminated pursuant to its
terms. This Lease shall, at the election of Landlord's first mortgagee, lender
or ground lessor, be superior to any such Security Instrument. In any event,
Tenant shall execute any documents required to effectuate the subordination of
this Lease or any Security Instrument within ten (10) days after written
request. Tenant shall attorn to any purchaser at any foreclosure sale, or to any
grantee or transferee designated in any deed given in lieu of foreclosure.
15.2 Condition of Lease. Within ten (10) days after request therefor by
Landlord, Tenant shall provide a written statement acknowledging the
commencement and termination dates of this Lease, that it is in full force and
effect, has not been modified (or if it has, stating such modifications), and
providing any other pertinent information as Landlord reasonably requests.
15.3 Tenant's Failure. If Tenant fails to execute any of the above
referenced documents within the time required, then Tenant hereby irrevocably
appoints Landlord as Tenant's attorney in fact to execute such documents on
Tenant's behalf, and all statements made in such documents shall be deemed true
and binding upon Tenant. Tenant understands that its failure to execute such
documents may cause Landlord serious financial damage by causing the failure of
a financing or sale transaction. Failure to comply with this Article shall be a
material breach of this Lease by Tenant, giving Landlord the right to recover
damages in addition to the remedies set forth in Article 17.
15.4 Financial Statements. If Landlord desires to finance, refinance or
sell the Premises, or any part thereof, or the Building. Tenant hereby agrees to
deliver to the person designated by Landlord such financial statements of Tenant
as may be reasonably required by such person.
16.0 SURRENDER AND HOLDOVER
16.1 Condition at End of Term. Subject to the terms of Articles 7 and 10,
at the expiration or earlier termination of the Term, Tenant shall promptly
yield up, in the same condition, order and repair in which they are required to
be kept during the Term, the Premises and all alterations thereto, and all
fixtures and equipment servicing the Building, ordinary wear and tear excepted.
16.2 Holdover Terms. If Tenant, or any person claiming through Tenant,
shall continue to occupy the Premises after the expiration or earlier
termination of the Term or any renewal thereof, such occupancy shall be deemed
to be under a month-to-month tenancy under the same terms set forth in this
Lease; except that the Minimum Monthly Rent during such continued occupancy
shall be any amount which Landlord may specify in a written notice to Tenant.
Notwithstanding the above, any holding over by Tenant without Landlord's prior
written consent shall constitute a default hereunder and shall be subject to all
the remedies set forth in Article 17.
17.0 DEFAULT AND REMEDIES UPON DEFAULT
17.1 Events. The occurrence of any of the following shall constitute a
material default and breach of this lease by Tenant:
(a) Any failure by Tenant to pay Rent or to make any other payment
required to be made by Tenant hereunder when due; provided, however, that
Landlord shall exercise no remedies provided in Sections 17.2 and 17.3 unless
Tenant falls to cure such default within three days after Landlord gives Tenant
written notice of such default;
(b) The abandonment of the Premises by Tenant, which shall be
conclusively presumed if the Premises remain unoccupied for more than ten (10)
consecutive days, or the removal of Tenant's property therefrom other than in
the ordinary course of business;
(c) A failure by Tenant to observe and perform any other provision of
this Lease, where such failure continues for ten (10) days after written notice
thereof by Landlord to Tenant; provided, however, that if the default cannot
reasonably be cured within ten (10) days, Tenant shall not be deemed to be in
default if Tenant shall, within such ten (10) day period, commence to cure and
thereafter diligently prosecute the same to completion;
(d) Either (1) the appointment of a receiver (except a receiver
appointed at Landlord's request) to take possession of all or substantially all
of the assets of Tenant, or (2) a general assignment by Tenant for the benefit
of creditors, or (3) any action taken by Tenant or by any other person against
Tenant under any insolvency or bankruptcy act. In such event, Landlord may, at
its option, declare this Lease terminated and forfeited by Tenant in a written
notice to Tenant, and Landlord shall be entitled to immediate possession of the
Premises.
<PAGE>
Tenant agrees that any notice given by Landlord pursuant to this Section which
is served in compliance with Article 21 of this Lease shall be adequate notice
for the purpose of Landlord's exercise of the remedies specified in Section 17.2
or any other remedies provided by law. Therefore, any statutory provision
relating to the manner of giving notice shall not be applicable to this Lease
17.2 Landlord's Rights. In the event of any default by Tenant, Landlord.
in addition to all other remedies provided by law or in equity, shall have the
immediate option to terminate this Lease and all rights of Tenant hereunder by
giving written notice of such intention to terminate. If Landlord shall elect to
so terminate this Lease, Landlord may recover from Tenant all damages suffered
by Landlord as a result of Tenant's default, including, but not limited to, the
worth at the time of award (computed in accordance with paragraph (3) of
Subdivision (a) of Section 1951.2 of the California Civil Code) of the amount by
which the unpaid Rent for the balance of the Term after the time of award
exceeds the amount of such Rent loss that Tenant proves could be reasonably
avoided. If Landlord does not elect to terminate this Lease, Landlord may from
time to time, without terminating this Lease, either recover all Rent as it
becomes due or rent the Premises or any part thereof for such term and at such
rent and upon such other terms and conditions as Landlord in its sole discretion
may deem advisable with the right to make alterations and repairs to the
Premises. Any rent received by Landlord from a reletting shall be applied to the
payment of (a) any indebtedness other than Rent due hereunder (b) the cost of
such reletting; (c) the cost of any alterations and repairs to the Premises; (d)
Rent due and unpaid hereunder; and (e) the residue, if any, shall be held by
Landlord and applied in payment of future Rent as the same may become due and
payable hereunder. If the rent received from such reletting is less than the
Rent payable by Tenant, then Tenant shall pay such deficiency to Landlord
immediately upon demand therefore by Landlord. Such delinquency shall be
calculated and paid monthly. Tenant shall also pay to Landlord as soon as
ascertained, any expenses incurred by Landlord which are not covered by the rent
received from such reletting.
17.3 Late Charge. Tenant shall pay a late payment penalty equal to the
greater of $100 or five percent (5%) of any amount owed to Landlord pursuant to
this Lease which is not paid within five days after the date when due. After the
second late payment by Tenant, Landlord may require Tenant to make advance
payments of Rent on a quarterly basis or by certified check.
17.4 Termination. No re-entry or taking possession of the Premises or any
other action under this Section shall be construed as an election to terminate
this Lease unless a written notice of such intention be given to Tenant or
unless the termination thereof be decreed by a Court of competent jurisdiction.
Notwithstanding any reletting without termination by Landlord because of any
default by Tenant, Landlord may at any time after such reletting elect to
terminate this Lease for any such default.
17.5 No Waiver. No waiver by Landlord of any breach by Tenant shall be a
waiver of any subsequent breach, nor shall any forbearance by Landlord to seek a
remedy for any breach by Tenant be a waiver by Landlord of any rights and
remedies with respect to such or any subsequent breach. Efforts by Landlord to
mitigate the damages caused by Tenant's default in this Lease shall not
constitute a waiver of Landlord's right to recover damages hereunder.
17.6 Landlord's Cure of Tenant's Default. Should Tenant fail to perform
any obligation imposed by this Lease, Landlord may perform or contract for the
performance of Tenant's obligation after having given Tenant reasonable notice
of the failure(s) and a reasonable opportunity which in no case shall exceed ten
(10) days to remedy the failure, and Tenant shall pay Landlord for all costs
incurred in connection therewith. The exercise of one right or remedy by
Landlord shall not in any way impair its right to any other right or remedy.
Should Tenant consist of more than one person or entity, they shall be jointly
and severally liable on this Lease.
17.7 Waiver. Tenant waives (for itself and all persons claiming under
Tenant) any right of redemption or reinstatement of Tenant under any present or
future case law or statutory provision (including Code of Civil Procedure
Sections 473 and 1179 and Civil Code Section 3275) in the event Tenant is
dispossessed from the Premises for any reason.
18.0 LIABILITY OF LANDLORD
18.1 Landlord/1/s Right to Cure; Limitations on Liability. In the event of
any actual or alleged failure, breach or default by Landlord hereunder
pertaining to the Premises, the Building or the Property, Tenant shall give
Landlord written notice thereof and Landlord shall not be deemed in default
unless it fails to diligently commence to cure such default within 15 days after
its receipt of such notice. Landlord's (which term includes Landlord's partners,
co-venturers, co-tenants, officers, directors, employees, agents (including any
property manager for the Property), or representatives, all of whom have the
authority to act on Landlord's behalf) liability to Tenant for any such default
shall be limited to its ownership interest in the Premises (or the Building, if
applicable) or the proceeds of a public sale of such interest pursuant to
foreclosure of a judgment against Landlord, plus any insurance proceeds actually
received by Landlord with reference to the Property and not expended on the
Property or to pay claims covered by such proceeds. Landlord shall not be liable
for any deficiency beyond its interest in the Property and the amount of such
insurance proceeds.
18.2 Release or Transfer; Successor Liability. If Landlord shall transfer
its interest in the Building or the Premises, then from and after the effective
date of the transfer, Landlord shall be released from all obligations under this
Lease, except those already accrued. If Landlord transfers the Security Deposit
to the transferee, Landlord shall be discharged from any further liability in
reference thereto. Tenant acknowledges that any successor to Landlord's interest
in the Property pursuant to sale or foreclosure under any deed of trust or
mortgage shall not be bound by any agreement between Landlord and Tenant which
has not been approved by the holder of such instrument, including without
limitation any advance rents or security deposits paid by Tenant in excess of an
amount equal to two month's Rent.
19.0 ATTORNEYS' FEES; JURY TRIAL
19.1 Right to Recover. If either party commences an action against the
other party for a breach of this Lease, the prevailing party shall be entitled
to recover from the losing party, costs of suit and reasonable attorneys' fees.
<PAGE>
19.2 Waiver of Jury Trial. Landlord and Tenant hereby waive their
respective right to trial by jury of any cause of action. claim, counterclaim or
cross-complaint in any action, proceeding and/or hearing brought by either party
on any matter arising out of, or 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 law, statute, or
regulation now or hereafter in effect.
20.0 INTERPRETATION
20.1 Captions. The captions in this Lease are for convenience only and are
not a part of this Lease and do not in any way define, limit, describe or
amplify the terms and provisions of this Lease or the scope or intent thereof.
20.2 Entire Agreement. This Lease represents the entire agreement between
the panties hereto and there are no collateral or oral agreements or
understandings between Landlord and Tenant with respect to the Premises or the
Property. No right. casements or licenses are acquired in the Property or any
land adjacent to the Property by Tenant by implication or otherwise except as
expressly set forth in the provisions of this Lease. Tenant agrees to make such
changes to this Lease as are required by any mortgagee, provided such changes do
not substantially affect Tenant's rights and obligations hereunder. This Lease
shall not be modified in any manner except by an instrument in writing executed
by the panties. The masculine (or neuter) pronoun, singular number, shall
include the masculine, feminine and neuter genders and the singular and plural
number.
20.3 Exhibits. Each writing or plan referred to herein as being attached
hereto as an Exhibit or otherwise designated herein as an Exhibit hereto is
hereby made a part hereof.
20.4 Severability; Governing Law. If any provision of this Lease shall be
declared unenforceable in any respect, such unenforceability shall not affect
any other provision of this Lease, and each such provision shall be deemed to be
modified, if possible, in such a manner as to render it enforceable and to
preserve to the extent possible the intent of the patties as set forth herein.
This Lease shall be construed and enforced in accordance with the laws of the
State of California.
20.5 Authority. If Tenant is a corporation, partnership or any other form
of business association or entity, each individual executing this Lease on
behalf of Tenant represents and warrants that he is duly authorized to execute
and deliver this Lease on behalf of said entity in accordance with its corporate
bylaws, statement of partnership, certificate of limited partnership or other
appropriate organizational documents, as the case may be, and that this Lease is
binding upon said entity in accordance with its terms. At the time of execution
of this Lease, Tenant shall provide Landlord with corporate resolutions or other
appropriate written authorization, in a form acceptable to Landlord, authorizing
the execution, delivery and performance of this Lease. The failure of Tenant to
deliver the same to Landlord within five (5) days of Landlord's request therefor
shall be deemed a default under this Lease. (If more than one party comprises
Tenant, then the obligations of such parties hereunder shall be joint and
several.)
21.0 NOTICES
21.1 Methods. Any notice or other communication under this Lease by either
party to the other shall be in writing and shall be deemed received if delivered
personally or by private messenger service or if sent by certified mail, return
receipt requested, postage prepaid, and addressed to the panties at the
addresses specified in Section 1.2 hereof, or to such other places as Landlord
and Tenant may from time to time designate by written notice to the other party.
22.0 SECURITY DEPOSIT
22.1 Terms. Tenant shall pay Landlord a Security Deposit in the amount
specified in Section 1.9, which shall remain the sole and separate property of
Landlord until actually repaid to Tenant (or at Landlord's option the last
assignee, if any, of Tenant's interest), said amount not being earned by Tenant
until all conditions precedent for its payment to Tenant have been fulfilled.
Landlord shall not be required to keep said deposit separate from its general
accounts, or pay interest, or other increment for its use. If Tenant fails to
pay Rent or other charges when due hereunder, or otherwise defaults with respect
to any provision of this Lease, Tenant shall not have earned the right to
repayment of the Security Deposit to the extent Landlord has used all or a
portion thereof for the payment of any amount in default or to compensate
Landlord for any loss or damage which it may suffer by reason of Tenant's
default. If Landlord uses all or any portion of the Security Deposit as provided
above, Tenant shall within ten (10) days after written demand therefor pay
Landlord an amount equal to that portion of the Security Deposit used by
Landlord. This Security Deposit is not to be characterized as Rent until so
applied in respect of a default by Tenant.
IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease as of the
22nd day of October, 1997.
- ---- -------
LANDLORD: Chamberlin Assoc. _____ TENANT: Terrapin Technologies, Inc.
----------------- ---------------------------
Oyster Point Phase I
--------------------
By: /s/ Stephen W. Chamberlin By: /s/ Clifford Orent
Stephen W. Chamberlin Clifford Orent
<PAGE>
Exhibit 23.1
Consent of Ernst & Young LLP, Independent Auditors
We consent to the references to our firm under the captions "Selected Financial
Data" and "Experts" and to the use of our report dated February 25, 2000, in
the Registration Statement (Form S-1) and related Prospectus of Telik, Inc. for
the registration of shares of its common stock.
/s/ Ernst & Young LLP
Palo Alto, California
March 30, 2000
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