<PAGE>
FORM 1O-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _________ to ___________
Commission file number 0-19732
CORVAS INTERNATIONAL, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 33-0238812
(State or other jurisdiction (I .R.S. Employer
of incorporation or organization) Identification No.)
3030 SCIENCE PARK ROAD
SAN DIEGO, CALIFORNIA 92121
(Address of principal executive offices and zip code)
(619) 455-9800
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.001 par value
(Title of class)
Indicate by check mark whether the Registrant (l) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes /x/ No
------ ------
At July 31, 1998, there were 15,085,575 shares of Common Stock, $0.001
par value, of the Registrant issued and outstanding.
<PAGE>
CORVAS INTERNATIONAL, INC.
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C>
PART I FINANCIAL INFORMATION
Item 1 Financial Statements
Condensed Balance Sheets as of June 30, 1998 (unaudited)
and December 31, 1997 1
Unaudited Condensed Statements of Operations for the Three
and Six Months Ended June 30, 1998 and 1997 2
Unaudited Condensed Statements of Cash Flows for the
Six Months Ended June 30, 1998 and 1997 3
Notes to Condensed Financial Statements 4
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations 5
Item 3 Quantitative and Qualitative Disclosures About Market Risk 9
PART II OTHER INFORMATION
Item 1 Legal Proceedings 10
Item 2 Changes in Securities 10
None
Item 3 Defaults Upon Senior Securities 10
None
Item 4 Submission of Matters to a Vote of Security Holders 10
Item 5 Other Information 11
None
Item 6 Exhibits and Reports on Form 8-K
(a) Exhibits 11
(b) Reports on Form 8-K 11
None
SIGNATURES 12
</TABLE>
<PAGE>
PART I -- FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
CORVAS INTERNATIONAL, INC.
CONDENSED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
JUNE 30, 1998 DECEMBER 31, 1997
------------- -----------------
(unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 3,541 $ 2,044
Short-term debt securities held to maturity
and time deposits, partially restricted 16,933 24,076
Receivables 258 289
Notes receivable from related parties 153 153
Other current assets 354 340
-------- --------
Total current assets 21,239 26,902
Property and equipment, net 1,662 1,312
-------- --------
$ 22,901 $ 28,214
-------- --------
-------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 483 $ 299
Accrued expenses 1,151 623
Accrued vacation 237 191
Deferred revenue 2,000 4,656
-------- --------
Total current liabilities 3,871 5,769
-------- --------
Stockholders' equity:
Preferred stock - Series A 1 1
Preferred stock - Series B - -
Common stock 14 14
Additional paid-in capital 92,521 92,179
Accumulated deficit (73,506) (69,749)
-------- --------
Total stockholders' equity 19,030 22,445
-------- --------
Commitments and contingencies $ 22,901 $ 28,214
-------- --------
-------- --------
</TABLE>
See accompanying notes to condensed financial statements.
1
<PAGE>
CORVAS INTERNATIONAL, INC.
CONDENSED STATEMENTS OF OPERATIONS
In thousands, except per share amounts (unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
---------------------- ---------------------
1998 1997 1998 1997
--------- -------- -------- ---------
<S> <C> <C> <C> <C>
REVENUES:
Revenue from collaborative agreements $ 1,746 $ 1,244 $ 3,493 $ 2,319
License fees and milestones 1,000 250 2,000 4,100
Net product sales 10 153 44 163
Royalties 53 21 95 57
-------- -------- -------- --------
Total revenues 2,809 1,668 5,632 6,639
-------- -------- -------- --------
COSTS AND EXPENSES:
Research and development 4,098 2,693 7,682 5,042
General and administrative 1,400 1,391 2,266 2,239
Cost of products sold 1 74 18 78
-------- -------- -------- --------
Total costs and expenses 5,499 4,158 9,966 7,359
-------- -------- -------- --------
Loss from operations (2,690) (2,490) (4,334) (720)
OTHER INCOME:
Interest income, net 245 327 572 715
Other income 5 0 5 _
-------- -------- -------- --------
250 327 577 715
-------- -------- -------- --------
Net loss $ (2,440) $ (2,163) $ (3,757) $ (5)
-------- -------- -------- --------
-------- -------- -------- --------
Basic and diluted net loss
per share $ (0.18) $ (0.15) $ (0.27) $ (0.00)
-------- -------- -------- --------
-------- -------- -------- --------
Shares used in calculation of
net loss per share 14,038 13,850 14,005 13,832
-------- -------- -------- --------
-------- -------- -------- --------
</TABLE>
See accompanying notes to condensed financial statements.
2
<PAGE>
CORVAS INTERNATIONAL, INC.
CONDENSED STATEMENTS OF CASH FLOWS
IN THOUSANDS (UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
-------------------------
1998 1997
---------- --------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (3,757) $ (5)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 303 311
Amortization of premiums and discounts
on investments (460) 26
Loss on sale of property and equipment 81 0
Stock compensation expense 104 6
Change in assets and liabilities:
Decrease in receivables 31 202
Increase in other current assets (14) (416)
Increase in accounts payable, accrued
expenses and accrued vacation 758 426
Decrease in deferred revenue (2,656) (556)
------- -------
Net cash used in operating activities (5,610) (6)
------- -------
Cash flows from investing activities:
Purchases of investments held to maturity (19,693) (27,329)
Proceeds from maturity of investments
held to maturity 27,295 26,485
Purchases of property and equipment (733) (803)
------- -------
Net cash provided by (used in)
investing activities 6,869 (1,647)
------- -------
Cash flows from financing activities:
Principal payments under capital lease
obligation 0 (20)
Net proceeds from issuance of common stock 238 332
------- -------
Net cash provided by financing activities 238 312
------- -------
Net increase (decrease) in cash and cash
equivalents 1,497 (1,341)
Cash and cash equivalents at beginning of period 2,044 2,202
------- -------
Cash and cash equivalents at end of period $ 3,541 $ 861
-------- -------
-------- -------
</TABLE>
See accompanying notes to condensed financial statements.
3
<PAGE>
CORVAS INTERNATIONAL, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
(1) THE COMPANY
Corvas International, Inc. (the "Company") was incorporated on March 27,
1987 under the laws of the State of California. In July 1993, the Company
reincorporated in the State of Delaware. The Company is engaged in the design
and development of a new generation of therapeutic agents in the fields of blood
clot formation (thrombosis), inflammation, cancer and other diseases.
(2) BASIS OF PRESENTATION
The interim financial information contained herein is unaudited but, in
management's opinion, includes all adjustments, consisting only of normal
recurring adjustments, necessary for a fair presentation. The financial
statements should be read in conjunction with the Company's audited financial
statements and notes thereto for the year ended December 31, 1997. Results for
the interim periods are not necessarily indicative of results for other interim
periods or for the full year.
(3) NET LOSS PER SHARE
Net loss per share for the three and six months ended June 30, 1998 and
1997 is computed using the weighted average number of common share equivalents
outstanding. Common equivalent shares are not included in the per share
calculation since the effect of their inclusion would be anti-dilutive.
(4) COMPREHENSIVE INCOME
As of January 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income" ("SFAS 130").
SFAS 130 established standards for reporting and display of comprehensive income
and its components in a full set of general-purpose financial statements. The
adoption of SFAS 130 did not have a significant impact since the Company's net
loss approximates comprehensive loss for the six month periods ended June 30,
1998 and 1997.
(5) SUBSEQUENT EVENTS
On July 21, 1998, the Company issued a total of 1,025,000 shares of common
stock pursuant to the exercise of warrants by a select group of institutional
investors, resulting in estimated net proceeds of $3,646,000.
4
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
EXCEPT FOR THE HISTORICAL INFORMATION CONTAINED HEREIN, THE FOLLOWING
DISCUSSION CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND
UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY FROM
THOSE PROJECTED IN THE FORWARD-LOOKING STATEMENTS. FACTORS THAT COULD CAUSE
OR CONTRIBUTE TO SUCH DIFFERENCES INCLUDE, BUT ARE NOT LIMITED TO, THOSE
DISCUSSED IN THE COMPANY'S ANNUAL REPORT ON FORM 10-K.
OVERVIEW
Formed in 1987, Corvas International, Inc. (the "Company") is a
biopharmaceutical firm engaged in the design and development of a new
generation of therapeutic agents in the fields of blood clot formation
(thrombosis), inflammation, cancer and other diseases. To date, the Company
has not generated significant revenues from product sales. The Company has
not been profitable on an annual basis since inception and expects to incur
substantial additional operating losses on an annual basis over the next
several years as the Company expands its research and development programs.
There is no assurance that the Company will successfully develop,
commercialize, manufacture or market its products or generate sufficient
revenues to become profitable on a sustained basis or at all. At June 30,
1998, the Company had an accumulated deficit of $73,506,000.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1998 AND 1997
Operating revenues increased from $1,668,000 for the quarter ended June
30, 1997 to $2,809,000 in the corresponding period in 1998. This increase
is primarily the result of a $1,000,000 milestone received from Schering
Corporation ("Schering-Plough") upon the commencement of a Phase I trial of
an oral antithrombotic drug candidate discovered by Corvas. Also
contributing to this increase is $240,000 of revenue from collaborative
agreements recognized pursuant to the Company's research and development
agreement with Vascular Genomics Inc. ("VGI") covering a novel vascular
targeting technology. These increases were partially offset by a decrease
in net product sales. The Company has discontinued its manufacturing
activities related to recombinant tissue factor and expects to complete the
transfer of these activities to Ortho-Clinical Diagnostics Inc. ("Ortho"), a
Johnson & Johnson company, during the third quarter of 1998.
Total costs and expenses increased from $4,158,000 in the three months
ended June 30, 1997 to $5,499,000 in the same period of 1998. Research and
development expenses accounted for the majority of this increase, increasing
from $2,693,000 in the second quarter of 1997 to $4,098,000 in the same
quarter one year later. This increase is primarily due to increased costs
associated with three clinical studies of NAPc2 and clinical supplies
manufacturing of NAP5. General and administrative costs increased only
slightly comparing these periods. These increases were partially offset by a
$73,000 decrease in cost of goods sold resulting from the Company's
discontinuation of all manufacturing activities.
Other income decreased from $327,000 in the three month period ended June
30, 1997 to $250,000 in the corresponding period of 1998 due to a reduction in
interest income earned, primarily as a result of a decrease in investment
securities.
5
<PAGE>
SIX MONTHS ENDED JUNE 30, 1998 AND 1997
Comparing the six month periods ended June 30, operating revenues
decreased by $1,007,000 from $6,639,000 in 1997 to $5,632,000 in 1998. This
decrease is primarily the result of a $3,000,000 milestone earned in the
oral thrombin inhibitor program with Schering-Plough in the first half of
1997, compared to a $1,000,000 milestone earned in the first half of 1998.
Net product sales also decreased comparing these periods, from $163,000 to
$44,000, due to discontinuing the manufacturing of recombinant tissue factor.
These decreases were partially offset by an increase of $1,174,000 in
revenue from collaborative agreements. The increase in this line item is
mainly the result of revenue recognized pursuant to a third collaboration
with Schering-Plough, covering oral inhibitors of a key protease necessary
for hepatitis C virus replication, and the research and development agreement
with VGI, both of which were entered into in mid-1997.
Total costs and expenses increased by $2,607,000 comparing the first
half of 1997 to 1998, from $7,359,000 in the 1997 period to $9,966,000 in the
1998 period. Research and development expenses associated with the NAPc2 and
NAP5 programs accounted for the majority of this increase, increasing from
$5,042,000 to $7,682,000, while general and administrative expenses increased
by a modest $27,000. A $60,000 decrease in cost of goods sold related to the
discontinuation of recombinant tissue factor manufacturing offset a portion
of this increase in expenses.
Total other income decreased from $715,000 in the first six months of
1997 to $577,000 in the same period one year later, primarily as a result of
decreased cash balances available for investment which caused interest income
to decrease by $143,000.
Subject to the availability of additional capital, the Company expects
its expenses to increase over the next several years as the Company's
research and development programs progress. The Company also expects both
its expenses and losses to fluctuate from quarter to quarter and anticipates
that such fluctuations may, at times, be substantial.
LIQUIDITY AND CAPITAL RESOURCES
Since inception, the Company's operations have been funded primarily
through public offerings and private placements of equity securities,
revenues and milestones from collaborative agreements, license fees and
research grants, and interest income earned on cash and investment balances.
The Company's principal sources of liquidity are its cash and cash
equivalents, time deposits and debt securities which, net of a restricted
time deposit, totaled $20,414,000 as of June 30, 1998. Working capital at
June 30, 1998 was $17,368,000. Subsequent to June 30, 1998, the Company
raised estimated net proceeds of $3,646,000 from the exercise of certain
warrants. Available cash is invested in accordance with an investment policy
set by the Board of Directors, which has the objectives to preserve
principal, maintain adequate liquidity and maximize income. The policy
provides guidelines concerning the quality, term and liquidity of
investments. The Company presently invests its excess cash in
interest-bearing, investment-grade securities.
Net cash used in operations in the six months ended June 30, 1998 was
$5,610,000, compared to $6,000 for the same period one year earlier. This
was due to increased cash usage as the Company continues its efforts in the
clinical development of NAPc2 and NAP5, as well as a decrease in 1998
operating revenues, mainly as a result of the $3,000,000 milestone payment
received from Schering-Plough in the first quarter of 1997. In the six
months ended June 30, 1998, net cash of $6,869,000 was provided by investing
activities, compared to net cash of $1,647,000 used in investing activities
in the corresponding period of 1997. This reflects the usage of proceeds from
investment maturities to fund 1998 operating activities. Net cash provided
by financing activities decreased slightly to $238,000 from $312,000 in the
same period one year earlier due to the exercise of fewer stock options in
1998.
6
<PAGE>
The Company expects to incur substantial additional costs in the
foreseeable future, including costs related to clinical and preclinical
studies and expanding its research and development activities. The Company
expects such costs to continue to increase and, as a result, expects to
experience substantial additional operating losses and negative cash flows
from operations over the next several years. In particular, increased costs
are anticipated as the clinical development of NAPc2 progresses, including a
Phase II trial planned to commence in late 1998. The Company also expects
revenues in 1999 to decrease from the current levels due to reaching the end
of the two-year term in the Factor Xa research program with Schering-Plough.
The Company believes its existing capital resources and interest earned
thereon should be sufficient to satisfy its anticipated funding requirements
for at least the next 12 months. In addition, the Company may also receive
additional funds through milestone payments and royalties on sales of
products in connection with its alliances. However, there is no assurance
that the Company will receive any additional amounts under existing or any
future alliances.
Strategic collaborations with Schering-Plough and Pfizer provide for
payments to the Company if and when certain milestones are met. However,
there is no assurance that any future milestones will be achieved. In the
quarter ended June 30, 1998, Schering-Plough initiated a clinical trial in
the oral thrombin inhibitor program which triggered a $1,000,000 milestone
payment. The next milestone payment expected, in another of the Company's
collaborations with Schering-Plough, is $500,000 upon the identification of
an initial lead compound in the program covering inhibitors of the hepatitis
C virus. In addition, the Company may also receive additional milestone
payments and royalties on sales of products in connection with its existing
alliances, as well as from any future alliances. If all of the milestones on
all of the Company's existing collaborations are met, Corvas could receive a
maximum of $94,431,000 in future milestone payments and research and
development funding over the next several years. There is no assurance that
the Company's existing collaborations will be successful, that the Company
will receive any further milestones or other payments pursuant to
collaborative agreements, that the collaborations will continue since the
existing collaborative agreements are terminable at the option of the
collaborator upon certain events or that the existing collaborations will be
commercially successful.
In June 1997, the Company entered into an option agreement with VGI
pursuant to which the Company has the option through June 2000 to acquire all of
the stock of VGI in exchange for Corvas Common Stock or, in certain
circumstances at the option of the Company, a combination of cash and 633,600
shares of Common Stock. The aggregate acquisition price, which is based on the
timing of option exercise, ranges from a minimum of $14,863,000 as of June 30,
1998 to a maximum of $19,960,000. If this option is exercised, the Company
expects a noncash charge to earnings for in-process research and development.
If Corvas elects not to exercise its option, VGI may require the Company to
purchase 19.9% of its outstanding stock for $3,960,000 in Corvas Common Stock.
During the option period, Corvas will make monthly option payments of
approximately $83,000 to VGI. In addition, under a research and development
agreement, VGI is required to make monthly payments of $80,000 to Corvas to be
applied to research and development covering the VGI technology. Although the
net impact of these payments is not material, the Company may incur substantial
additional costs to develop this technology. Corvas may enter into one or more
collaborative relationships to develop and commercialize this technology.
However, there is no assurance that the Company will be able to establish such
relationships on satisfactory terms, that such relationships will successfully
reduce the costs associated with research and development of this technology,
that the option will be exercised or that this technology will prove to be
effective.
7
<PAGE>
Future capital requirements of the Company will depend on many factors,
including, but not limited to, the following: the continued scientific
progress in its drug discovery programs; the magnitude of such programs; the
progress and results of preclinical testing and clinical trials; the costs
involved in complying with the regulatory process; the costs involved in
filing, prosecuting, maintaining and enforcing patent claims; the competing
technological and market developments; the changes in its existing research
relationships; the ability of the Company to establish and maintain
collaborative or licensing arrangements; the cost of manufacturing scale-up;
and the effectiveness of activities and arrangements of the Company or its
collaborative partners to commercialize the Company's products. The Company
leases its laboratory and office facilities under an operating lease which
will expire in September 1999. The Company is presently in the process of
evaluating its alternatives with respect to its facilities, including the
possibility of expanding its existing space.
To continue its long-term product development efforts, the Company must
raise substantial additional funding either through collaborative
arrangements or through public or private financings. The Company's ability
to raise additional funds through such sales of securities depends in part on
investors' perceptions of the biotechnology industry, in general, and of the
Company, in particular. The market prices for securities of biotechnology
companies, including Corvas, have historically been highly volatile and,
accordingly, there is no assurance that additional funding will be available,
or, if available, that it will be available on acceptable terms. If
additional funds are raised by issuing securities, further dilution, possibly
substantial, to existing stockholders will likely result. The Company may
enter into additional collaborative relationships to develop and
commercialize certain of its current or future technologies or products.
There is no assurance that the Company will be able to establish such
relationships on satisfactory terms, if at all, or that agreements with
collaborators will successfully reduce the Company's funding requirements.
In addition, the Company has not attempted to establish bank financing
arrangements, and there is no assurance that it would be able to establish
such arrangements on satisfactory terms, if at all. If adequate funds are
not available, the Company may be required to delay, scale back or
discontinue one or more of its drug discovery programs, clinical trials or
other aspects of its operations, or obtain funds through arrangements with
collaborative partners or others that may require the Company to relinquish
rights to certain of its technologies, product candidates or products that
the Company would not otherwise relinquish or at prices below that at which
the Company would otherwise choose to relinquish such rights.
Many of the world's computer systems currently record years in a
two-digit format. Such systems will be unable to properly interpret dates
beyond the end of 1999, which could lead to business disruptions commonly
referred to as the "Year 2000" issue.
As of June 30, 1998, the Company has only conducted a preliminary review
of its internal operations and thus has not completed the assessment of its
Year 2000 issues. At the present time, the Company is unable to estimate
what costs may be incurred, but does not expect the costs of this project to
be material to the Company.
Although the Company has made a preliminary assessment of its Year 2000
issues, there is no assurance that a complete review of the Company's operations
will not identify additional efforts and costs that will be required which may
have a material adverse effect on the Company. Furthermore, the Year 2000 issue
is complex and there is no assurance that the Company will be able to address
any problems that may arise from the Year 2000 issue without incurring a
material adverse effect on the Company's business, financial condition or
results of operations.
8
<PAGE>
In addition, the Company's operations are dependent upon certain third
parties with which it conducts business, including, but not limited to, its
corporate partners, suppliers and vendors, as well as certain agencies and
regulatory organizations. Although the Company has not yet assessed the Year
2000 readiness of certain of its key vendors, a team has developed a plan to
assess such readiness. There is no assurance that the systems of third
parties on which the Company relies will be Year 2000 ready or that any such
failure of a third party would not have a material adverse effect on the
Company.
The Company does not yet have a contingency plan to deal with the risks
related to the Year 2000 issue. However, the Company anticipates having such
a plan in place by the end of 1998 to deal with both the risks associated
with its own Year 2000 issues, as well as those that may be encountered by
certain third parties with whom the Company conducts business.
In 1993, the U.S. Patent and Trademark Office (the "USPTO") declared an
interference to determine the priority of invention between a patent for
which some rights are licensed to the Company (the "Licensed Patent") and a
patent application for which rights are held by other parties (the "First
Patent Application"). In 1996, the USPTO added a second patent application
to the proceeding (the "Second Patent Application") and redeclared the
interference. Rights to the Second Patent Application are held by other
parties, at least some of which also hold rights in the First Patent
Application. The subject matter of the patent and these applications is
recombinant tissue factor, which is used by Ortho to determine the blood
clotting abilities of patients. The Company is contesting the other parties'
claims of prior invention; however, there can be no assurance that the
Licensed Patent will be upheld.
NEW ACCOUNTING STANDARDS
In February 1998, Statement of Financial Accounting Standards No. 132,
"Employers' Disclosures about Pension and Other Retirement Benefits" ("SFAS
No. 132"), was issued, effective for fiscal years beginning after December
15, 1997. SFAS 132 standardizes disclosure requirements for pensions and
other post retirement benefits. It does not change the measurement or
recognition provisions for those benefit plans.
In June 1998, Statement of Financial Accounting Standards No. 133,
"Accounting for Derivative Instruments and Hedging Activities" ("SFAS 133"),
was issued, effective for all fiscal quarters of fiscal years beginning after
June 15, 1999. SFAS 133 establishes accounting and reporting standards for
derivative instruments and hedging activities.
The Company anticipates that the adoption of SFAS Nos. 132 and 133 will
not have a significant effect on the financial position, results of
operations or liquidity of the Company.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable
9
<PAGE>
PART II -- OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
In 1993, the U.S. Patent and Trademark Office (the "USPTO") declared an
interference to determine the priority of invention between a patent for
which some rights are licensed to the Company (the "Licensed Patent") and a
patent application for which rights are held by other parties (the "First
Patent Application"). In 1996, the USPTO added a second patent application
to the proceeding (the "Second Patent Application") and redeclared the
interference. Rights to the Second Patent Application are held by other
parties, at least some of which also hold rights in the First Patent
Application. The subject matter of the patent and these applications is
recombinant tissue factor, which is used by Ortho-Clinical Diagnostics Inc.
("Ortho"), a Johnson & Johnson company, to determine the blood clotting
abilities of patients. The Company is contesting the other parties' claims
of prior invention; however, there can be no assurance that the Licensed
Patent will be upheld.
Item 2. CHANGES IN SECURITIES
None
Item 3. DEFAULTS UPON SENIOR SECURITIES
None
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The annual meeting of stockholders of the Company was held on May 28,
1998. The matters described below were submitted to a vote of stockholders.
The Company had 14,014,347 shares of common stock, 1,000,000 shares of Series
A convertible preferred stock and 250,000 shares of Series B convertible
preferred stock outstanding as of March 31, 1998, the record date for the
annual meeting. At the annual meeting, holders of a total of 12,236,542
shares of common and preferred stock were present in person or represented by
proxy.
a. Election of Class III Directors for a three-year term expiring at the 2001
annual meeting:
Name Shares voting for Shares withheld
---- ----------------- ---------------
M. Blake Ingle, Ph.D. 12,208,462 28,080
Randall E. Woods 12,210,650 25,892
R. Douglas Norby 12,207,264 29,278
Class I Directors continuing in office until the 1999 annual meeting:
Gerard Van Acker
W. Leigh Thompson, Jr., M.D., Ph.D.
Class II Directors continuing in office until the 2000 annual meeting:
John H. Fried, Ph.D.
Michael Sorell, M.D.
Nicole Vitullo
10
<PAGE>
b. A proposal to ratify the appointment of KPMG Peat Marwick LLP as
independent auditors for the Company for the fiscal year ending
December 31, 1998.
For 12,212,603
Against 7,707
Abstain 16,232
Item 5. OTHER INFORMATION
Pursuant to the Company's bylaws, stockholders who wish to bring
matters or propose nominees for director at the Company's 1999 annual meeting
of stockholders must provide a notice with specific information to the
Company and such notice must be delivered to or mailed and received at the
principal executive offices of the Company no later than the close of
business on December 16, 1998, which is the 120th day prior to the first
anniversary of the date specified in the Company's proxy statement released
in connection with the 1998 annual meeting of stockholders (unless such
matters are included in the Company's proxy statement pursuant to Rule 14a-8
under the Securities Exchange Act of 1934, as amended).
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits
Exhibit Number Description
-------------- -----------
10.65 Offer to Amend Warrants to Purchase Shares
of Common Stock of the Company, dated
as of June 5, 1998, with certain exhibits
thereto.
27.1 Financial Data Schedule.
b. Reports on Form 8-K
There were no reports on Form 8-K filed for the quarter ended June 30,
1998.
11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
CORVAS INTERNATIONAL, INC.
Date: August 12, 1998 By: /s/ RANDALL E. WOODS
-------------------------------------
Randall E. Woods
President and Chief Executive Officer
Date: August 12, 1998 By: /s/ CAROLYN M. FELZER
-------------------------------------
Carolyn M. Felzer
Senior Director of Finance
Principal Financial Officer
12
<PAGE>
OFFER TO AMEND
WARRANTS TO
PURCHASE SHARES OF COMMON STOCK OF
CORVAS INTERNATIONAL, INC.
--------------
THIS OFFER WILL EXPIRE
AT 12:00 MIDNIGHT,
CALIFORNIA TIME, ON
JULY 20, 1998, UNLESS EXTENDED.
--------------
THIS OFFER TO AMEND WARRANTS (THE "OFFER") IS MADE TO HOLDERS (THE
"HOLDERS") AS OF JUNE 5, 1998, OF WARRANTS ISSUED PURSUANT TO THAT CERTAIN
COMMON STOCK AND WARRANT PURCHASE AGREEMENT DATED FEBRUARY 2, 1996 AMONG
CORVAS INTERNATIONAL, INC. (THE "COMPANY") AND THE PARTIES SET FORTH ON THE
SCHEDULE OF PURCHASERS THERETO. THE OFFER IS SUBJECT TO CERTAIN TERMS AND
CONDITIONS CONTAINED IN THIS MEMORANDUM AND WARRANT EXERCISE AGREEMENT
ATTACHED HERETO.
--------------
IMPORTANT
ANY HOLDER DESIRING TO ACCEPT THIS OFFER SHOULD COMPLETE AND RETURN THE
FOLLOWING FOR DELIVERY NO LATER THAN JULY 19, 1998:
1. A duly completed and executed copy of the Warrant Exercise
Agreement attached hereto or a facsimile thereof in accordance with the
instructions in the Warrant Exercise Agreement; and
2. A cashier's check in the amount equal to the aggregate Amended
Stock Purchase Price for all shares subject to your fully exercised Warrant.
ANY HOLDER WISHING TO ACCEPT THE OFFER SHOULD RETURN THE DOCUMENTS
DESCRIBED ABOVE TO THE ATTENTION OF CAROLYN FELZER AT 3030 SCIENCE PARK ROAD,
SAN DIEGO, CALIFORNIA 92121 PRIOR TO THE EXPIRATION DATE. QUESTIONS AND
REQUESTS FOR ASSISTANCE MAY BE DIRECTED TO CAROLYN FELZER AT THE COMPANY AT
(619) 455-9800.
This Offer is conditioned upon the Company's receipt of warrant
exercises for a minimum of 1,900,000 of the 3,000,000 shares of Common Stock
subject to the outstanding Warrants ("Minimum Warrant Exercises"). If the
Company does not receive the Minimum Warrant Exercises prior to the
Expiration Date, then the Company will return the Warrant Exercise Agreements
and checks and the Warrants will not be amended in accordance with the Offer.
---------------
DATED: JUNE 5, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <S>
SUMMARY OF TERMS OF OFFER TO AMEND WARRANTS. . . . . . . . . . . . . . . . 1
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1. Terms of the Offer . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2. Procedure for Accepting Offer and Exercise of Warrant. . . . . . . . . . 4
3. Withdrawal Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
4. Additional Information . . . . . . . . . . . . . . . . . . . . . . . . . 6
Schedule I -- Schedule of Warrant Holders
Exhibit A -- Warrant Exercise Agreement
Exhibit B -- Annual Report on Form 10-K Dated March 31, 1998
Exhibit C -- Quarterly Report on Form 10-Q Dated May 14, 1998
Exhibit D -- Description of Common Stock
</TABLE>
i
<PAGE>
SUMMARY OF TERMS
OF
OFFER TO AMEND WARRANTS
OF
OFFER TO AMEND WARRANTS;
The following Summary of Terms is qualified in its entirety by the
more detailed statements in this Offer and attachments hereto.
THE COMPANY Corvas International, Inc., a Delaware
corporation.
AMENDMENT OF WARRANTS The Company offers to decrease the Stock
Purchase Price (as defined in the
Warrants) to $3.59 per share (as
amended, the "Amended Stock Purchase
Price") for those Warrants that are
fully exercised prior to the Expiration
Date, upon the terms and subject to the
conditions set forth below.
CONDITIONS (1) The Stock Purchase Price will only
be amended as to Warrants that are
exercised in their entirety.
(2) The Holder of the Warrant may
transfer all or any portion of the
Warrant as permitted by the Stock
and Warrant Purchase Agreement to
only one transferee who must fully
exercise the transferred Warrant in
order to be entitled to the Amended
Stock Purchase Price.
(3) Unless waived by the Company, the
Company shall have received prior
the Expiration Date (i) duly
completed and executed Warrant
Exercise Agreements covering in the
aggregate at least 1,900,000 shares
of the Company's Common Stock and
(ii) payment in full of the Amended
Stock Purchase Price for such
shares.
(4) The Post-Effective Amendment to the
Registration Statement on Form S-3
registering for resale the shares
acquired upon the exercise of the
amended Warrants must have been
declared effective by the Securities
and Exchange Commission ("SEC") by
no later than the Expiration Date.
EXPIRATION DATE 12:00 Midnight, California Time, on
July 20, 1998, unless extended by the
Company in accordance with this Offer.
1
<PAGE>
ACCEPTANCE PROCEDURE: To accept the Offer you must, prior to
the Expiration Date:
(1) complete, execute and return to the
Company the Warrant Exercise
Agreement; and
(2) remit to the Company a cashier's
check in the amount of the aggregate
Amended Stock Purchase Price for all
of the shares of Common Stock
subject to the exercised Warrant.
2
<PAGE>
INTRODUCTION
To induce the Holders of the Warrants to exercise such Warrants in full,
the Company hereby offers to reduce the Stock Purchase Price (as defined in
the Warrants) from $6.00 per share to $3.59 per share for each Warrant that
is fully exercised prior to the Expiration Date, upon the terms and subject
to the conditions set forth in this Offer and in the Warrant Exercise
Agreement. This Offer is conditioned upon the aggregate exercise of Warrants
to purchase at least 1,900,000 shares of Common Stock prior to the Expiration
Date unless the Company waives this condition. The Offer will be kept open
until July 20, 1998, unless extended by the Company. The Company will use
the proceeds from such exercises for working capital and general corporate
purposes. Attached hereto as Schedule I is a list of the Holders as well as
the number of shares of the Company's Common Stock subject to each such
Holder's Warrant. The Company has not obtained commitments from any Holders
to exercise the Warrants prior to making this Offer.
While the Board of Directors has voted to approve the Offer, each Holder
must make its own decision whether to accept the Offer and to purchase the
Shares subject to such Warrant. Information about the Company is contained
in the Company's Annual Report on Form 10-K attached hereto as Exhibit B
("Form 10-K") and in the Company's Quarterly Report on Form 10-Q attached
hereto as Exhibit C ("Form 10-Q"). A description of the Common Stock of the
Company is attached as Exhibit D hereto.
The Company's Common Stock is quoted and traded on the Nasdaq National
Market under the symbol CVAS. On June 4, 1998, the last reported sales price
of the Common Stock on Nasdaq was $4 3/16. No public market exists for the
Warrants and the Warrants are subject to restrictions on transfer. The
shares of Common Stock issuable upon exercise of the Warrants ("Shares") will
be restricted securities. However, the Company has registered on Form S-3
the resale by the Warrant Holders of the Shares and, as a condition to the
Offer and the exercise of the Warrants, the Company will file a
post-effective amendment to the Registration Statement to update the
prospectus contained therein.
THIS OFFER AND THE ATTACHMENTS HERETO CONTAIN IMPORTANT INFORMATION,
WHICH SHOULD BE READ BEFORE ANY DECISION IS MADE WITH RESPECT TO THE OFFER
AND ANY PURCHASE OF THE SHARES. FOR DETAILED DISCUSSION OF THE RISKS
ASSOCIATED WITH AN INVESTMENT IN THE SHARES, SEE FORM 10-K - RISK FACTORS.
3
<PAGE>
1. TERMS OF THE OFFER.
Subject to the terms set forth below, the Company will reduce the Stock
Purchase Price from $6.00 per share to $3.59 per share as to those Warrants
that are exercised in full prior to the Expiration Date ("Amended Warrant").
An Amended Warrant must be exercised in full by (i) the Holder, (ii) by no
more than one valid transferee of the Warrant provided that the transfer was
made pursuant to the terms of the Warrant (a "Transferee") OR (iii) by a
combination of the original Holder and one Transferee of each such Warrant.
The Offer is expressly conditioned on the Company's receipt prior to the
Expiration Date of completed and executed Warrant Exercise Agreements by all
parties exercising Warrants covering at least 1,900,000 Shares of Common
Stock, unless waived by the Company, and payment in full therefor, on the
terms set forth herein. Any Warrant that is not exercised by the Expiration
Date pursuant to the terms hereof shall remain unamended and continue in full
force and effect in accordance with its original terms.
Prior to the Expiration Date, the Company shall file a post-effective
amendment to the Registration Statement on Form S-3 dated February 28, 1996
covering the resale of shares of Common Stock acquired upon the exercise of
Warrants and cause the Post-Effective Amendment to be declared effective by
the SEC. In the event the Post-Effective Amendment to the Registration
Statement is not declared effective by the Expiration Date or any extension
thereof by the Company, the Offer shall be terminated and the Company shall
return all payments received by the Company.
The Company reserves the right, at any time or from time to time, to
extend the Expiration Date for the purpose of (i) extending the period for
which payment may be made for fully exercised Warrants, (ii) causing the
Post-Effective Amendment to the Registration Statement to be declared
effective or (iii) for any other reason by giving written notice of such
extension to all Holders.
2. PROCEDURE FOR ACCEPTING OFFER AND EXERCISE OF WARRANT.
ACCEPTANCE BY HOLDERS/TRANSFEREES. For you to validly accept this
Offer, you (and/or your Transferee) must:
(1) complete and execute the Warrant Exercise Agreement as to all Shares
covered by your Amended Warrant;
(2) remit a cashier's check for the aggregate Amended Stock Purchase Price
for all Shares covered by your exercised Amended Warrant;
(3) deliver the completed Warrant Exercise Agreement and payment to the
Company at its address set forth on page (i) of this Offer PRIOR TO
THE EXPIRATION DATE.
In the event that you transfer your Warrant pursuant to this Offer, you must
also deliver to the Company prior to the Expiration Date:
(4) copies of the duly executed document(s) effecting such transfer; and
(5) Items (1) through (3) from the Transferee fully executing the
transferred Amended Warrant or portion thereof.
No alternative, conditional or contingent responses will be accepted.
THE METHOD OF DELIVERY OF THE WARRANT EXERCISE AGREEMENT, CASHIER'S CHECK
FOR THE PAYMENT FOR THE SHARES AND ALL OTHER REQUIRED DOCUMENTS, IS AT THE
OPTION AND RISK OF THE ACCEPTING HOLDER.
4
<PAGE>
ACCEPTANCE BY COMPANY. Subject to the terms and satisfaction or waiver
of the conditions hereof, the Company will be deemed to have accepted your
exercise of the Amended Warrant, if and when (i) the Company gives you
written notice of the Company's acceptance of such payment OR (ii) the
Company cashes your check and receives the funds therefrom. Promptly after
the acceptance by the Company, and after the Expiration Date, the Company
will issue certificates representing the Shares pursuant to the Warrant
Exercise Agreements.
In the event that the Company does not accept your subscription to the
Amended Warrant and exercise thereof for any reason including without
limitation termination or nonoccurrence of a condition to the Offer, the
Company shall promptly return your payment with a notice stating that your
Warrant Exercise Agreement was not accepted and that your Warrant was not
amended.
DETERMINATIONS OF VALIDITY. All questions as to the form of documents
and the validity, eligibility (including time of receipt) and acceptance of
payment for Shares will be determined by the Company, in its sole discretion,
and its determination will be final and binding on all parties. The Company
reserves the absolute right to reject any or all Warrant Exercise Agreements
or payments for Shares that are determined by it not to be in proper form.
The Company also reserves the absolute right to waive any of the conditions
of the Offer, including, without limitation minimum subscription, mode and
timing of payment, or any defect or irregularity in any Warrant Exercise
Agreement delivered to the Company or payment for Shares. In the event the
Company, on the Expiration Date, waives any condition of the Offer, it shall
extend the Expiration Date for at least two days for the purpose of allowing
you to consider the Offer in light of such waiver; provided, however, that in
the event that the Company at any time waives the Minimum Warrant Exercise
the Company shall notice the Holders of such waiver and extend the Expiration
Date, if necessary, to the date that is 10 business days following the date
that such notice is first sent to Holders. The Company's interpretation of
the terms and conditions of the Offer (including the Warrant Exercise
Agreement) will be final and binding on all parties. No Warrant Exercise
Agreement or payment for Shares will be deemed to have been validly made
until all defects and irregularities have been cured or waived. The Company
or any other person will not be under any duty to notify you of any defects
or irregularities in compliance with the acceptance procedures of this Offer
or incur any liability for failure to give any such notice.
3. WITHDRAWAL RIGHTS.
You may withdraw your acceptance of this Offer at any time prior to the
Expiration Date.
For a withdrawal to be effective, a written, telegraphic, telex or
facsimile transmission notice of withdrawal must be timely received by the
Company at its address set forth on page (i) of this Offer. Any notice of
withdrawal must specify the name of the person who delivered a completed
Warrant Exercise Agreement and the amount of payment and number of Shares to
be withdrawn.
Any exercises of Amended Warrants properly withdrawn will be deemed not
validly accepted and the subject Warrant shall not be deemed to be amended,
but may be accepted and exercised at any subsequent time prior to the
Expiration Date by following the procedures described in Section 2.
Except as otherwise provided in this Section 3, your acceptance of the
Offer, including the exercise of your Amended Warrant is irrevocable.
5
<PAGE>
4. ADDITIONAL INFORMATION.
The Board of Directors has approved the Offer but has not made any
recommendation as to whether the Offer should be accepted and the Amended
Warrants exercised. Each Holder must make its own decision whether to accept
this Offer and purchase the Shares subject to the Amended Warrants. Each
Holder is recommended to read this Offer and its attachments in their
entirety.
No person has been authorized to give any information or to make any
representations in connection with the Offer other than those contained
herein. If given or made, such recommendation and such information and
representations must not be relied upon as having been authorized by the
Company.
Holders of Warrants who beneficially own or who would beneficially own
upon acceptance of the Offer and exercise of the amended Warrants more than
10% of the Common Stock of the Company are subject to additional restrictions
on the resale of Shares acquired upon exercise of the Amended Warrants. The
exercise of the Amended Warrant will constitute a purchase under Section 16
of the Securities and Exchange Act of 1934, as amended, and will preclude any
Holder who is or would be subject to Section 16 from selling any Common Stock
of the Company for six months following the date of exercise of the Amended
Warrant. Any Holder who is subject to Section 16 and who has sold any
securities of the Company during the last six months may be subject to
liability under Section 16 if such Holder exercises the Amended Warrant. A
Holder should consult with its own advisors to determine whether the exercise
of the Amended Warrant would subject the Holder to any liability.
6
<PAGE>
SCHEDULE I
SCHEDULE OF WARRANT HOLDERS
<TABLE>
<CAPTION>
HOLDER COMMON STOCK AGGREGATE EXERCISE
ISSUABLE UPON PRICE
EXERCISE
<S> <C> <C>
International Biotechnology Trust, plc 1,400,000 $5,026,000
5 Arrows House
St. Swithin's Lane
London EC4N 8NR
England
Attn: Jeremy L. Curnock Cook
+44-171-623-1000
+44-171-623-6261 (fax)
Copy to:
Rothschild Asset Management, Ltd.
One Palmer Square, #515
Princeton, NJ 08542
Attn: Nicole Vitullo
(609) 683-8009
(609) 683-4581 (fax)
AKKAD 800,000 $2,872,000
c/o State Street Bank & Trust
225 Franklin Street
Boston, MA 02110
Attn: Anna Barnes
(617) 786-3000
Copy to:
Wanger Asset Management LP
227 West Monroe, Ste. 3000
Chicago, IL 60606-5016
Attn: John H. Park
(312) 634-9226
(312) 634 1904 (fax)
WPG Institutional Life Sciences Fund, L.P. 120,000 $430,800
WPG Life Sciences Fund, L.P. 80,000 $287,200
One New York Plaza, 30th Floor
New York, NY 10004-1950
Attn: Mike Singer
(212) 908-9548
(212) 908-0195 (fax)
S-1
<PAGE>
Clarion Capital Corporation 80,000 $287,200
Clarion Partners, L.P. 20,000 $71,800
1801 East "9th" Street, Ste. 510
Cleveland, OH 44114
Attn: Morton Cohen
(216) 687-8940
(216) 694-3545 (fax)
Framlington Unit-Management - 85,000 $305,150
A/C Health Fund
155 Bishopsgate
London EC2M3XJ
England
Attn: Antony Milford
44+171-374-4100
44+171-330-6648 (fax)
Copy to:
C.O. Nominees Limited
(Registered Owner)
c/o Antony Milford
155 Bishopsgate
London EC2M3XJ
England
44+171-374-4100
44+171-330-6648 (fax)
Deliver Stock Certificates and
Warrants to:
Brown Brothers Harriman
59 Wall Street
New York, NY 10006
Attn: Maureen Keenan
(201) 418-6413
(201) 418-6464 (fax)
Framlington Investment-Management - 40,000 $143,600
A/C Selection Sante
155 Bishopsgate
London EC2M3XJ
England
Attn: Antony Milford
44+171-374-4100
44+171-330-6648 (fax)
Copy to:
Sigler & Co. (Registered Owner)
4 New York Plaza
c/o Chemical Bank
New York, NY 10004
Attn: Jerry Reilly
(212) 623-6274
(212) 623-1322 (fax)
A-2
<PAGE>
Deliver Stock Certificates and
Warrants to:
Chemical Bank
4 New York Plaza
New York, NY 10004
Reference Acct. No. BS6373318
Attn: Jerry Reilly
(212) 623-6274
(212) 623-1322 (fax)
SE Banken Fonder AB 300,000 $1,077,000
Regeringsgaten 45
ST R2
S-106 40 Stockholm
Sweden
Attn: Anders Klintorph
+46-8-676-9101
+46-8-676-9148 (fax)
SE Banken Luxembourg S.A. 75,000 $269,250
c/o SE Banken Fonder AB
Regeringsgaten 45
ST R2
S-106 40 Stockholm
Sweden
Attn: Anders Klintorph
+46-8-676-9101
+46-8-676-9148 (fax)
</TABLE>
A-3
<PAGE>
EXHIBIT A
WARRANT EXERCISE AGREEMENT
A-1
<PAGE>
CORVAS INTERNATIONAL, INC.
WARRANT EXERCISE AGREEMENT
FOR EXERCISE OF
WARRANTS TO PURCHASE COMMON STOCK
IF AND WHEN ACCEPTED BY CORVAS INTERNATIONAL, INC. ("COMPANY"), THIS WARRANT
EXERCISE AGREEMENT, WHEN EXECUTED BELOW, SHALL CONSTITUTE AN ACCEPTANCE OF
THE WARRANT AMENDMENT AND AN EXERCISE IN FULL OF THE WARRANT. EACH PART OF
THIS WARRANT EXERCISE AGREEMENT MUST BE COMPLETED BY THE UNDERSIGNED AND, BY
THE UNDERSIGNED'S EXECUTION BELOW, THE UNDERSIGNED ACKNOWLEDGES THAT IT
UNDERSTANDS THAT THE COMPANY IS RELYING UPON THE ACCURACY AND COMPLETENESS
HEREOF IN COMPLYING WITH ITS OBLIGATIONS UNDER FEDERAL AND STATE SECURITIES
LAWS.
THE SHARES OF COMMON STOCK OF THE COMPANY TO BE ISSUED UPON THE EXERCISE OF
THE WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY STATE SECURITIES LAWS. SUCH SHARES CANNOT BE SOLD,
TRANSFERRED, ASSIGNED OR OTHERWISE DISPOSED OF EXCEPT IN COMPLIANCE WITH THE
RESTRICTIONS ON TRANSFERABILITY UNDER APPLICABLE FEDERAL AND STATE SECURITIES
LAWS AND WILL NOT BE TRANSFERRED OR RECORDED EXCEPT IN COMPLIANCE WITH SUCH
LAWS.
(1) SUBSCRIPTION. Subject to the terms and conditions hereof and the
provisions of the Warrant to Purchase Common Stock of the Company issued
pursuant to the Common Stock and Warrant Purchase Agreement dated February
2, 1996 as amended by the Offer to Amend Warrants dated June 5, 1998 (the
"Warrant"), the undersigned hereby elects to accept the Offer and to
exercise the Amended Warrant and purchase thereunder _______ shares of
Common Stock of the Company (the "Shares") at a purchase price of U.S.
Dollars $3.59 per share and tenders this warrant exercise, together with
payment by cashier's check in the aggregate amount of $_____________.
(2) OFFER TO AMEND WARRANTS. The undersigned's execution of this
Warrant Exercise Agreement also constitutes acceptance by the undersigned
of the Offer to Amend Warrants dated June 5, 1998 (the "Offer"). The
completion of the Offer is subject to certain additional terms and
conditions as set forth therein.
(3) REPRESENTATIONS AND WARRANTIES OF THE UNDERSIGNED. The
undersigned hereby represents and warrants to the Company as follows:
(a) AUTHORIZATION. It has the requisite corporate power to
enter into this Agreement, to accept the Offer to carry out and perform its
obligations under the terms of this Warrant Exercise Agreement and to
purchase the Shares.
(b) DUE EXECUTION. This Warrant Exercise Agreement has been
duly authorized, executed and delivered by it, and is a valid and binding
agreement of the undersigned, enforceable in accordance with its terms,
except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights
generally or by equitable principles.
A-2
<PAGE>
(c) INVESTMENT REPRESENTATIONS.
(i) It is acquiring the Shares for its own account, not as nominee
or agent, for investment and not with a view to, or for resale in connection
with, any distribution or public offering thereof within the meaning of the
Securities Act, except as contemplated herein. By executing this Warrant
Exercise Agreement, it further represents that it does not have any contract,
undertaking, agreement or arrangement with any person to sell, transfer or
grant participation to such person or to any third person, with respect to
any of the Shares.
(ii) It understands that (i) the Shares have not been registered
under the Securities Act by reason of a specific exemption therefrom, that
such securities must be held by it indefinitely and that the undersigned
must, therefore, bear the economic risk of such investment indefinitely,
unless a subsequent disposition thereof is registered under the Securities
Act or is exempt from such registration; (ii) each certificate representing
the Shares and the Shares will be endorsed with the following legends:
(1) THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
AS TO THE SECURITIES UNDER SAID ACT OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
(2) Any legend required to be placed thereon under applicable
state securities laws;
and (iii) the Company will instruct any transfer agent not to register the
transfer of the Shares (or any portion thereof) unless the conditions
specified in the foregoing legends are satisfied, until such time as a
transfer is made, pursuant to the terms of this Agreement, and in compliance
with Rule 144 or pursuant to a registration statement or, if the opinion of
counsel referred to above is to the further effect that such legend is not
required in order to establish compliance with any provisions of the
Securities Act or this Agreement.
(iii) It has been furnished with all information it considers
necessary or appropriate for deciding whether to purchase the Shares. It has
been afforded the opportunity to ask questions and receive answers from the
Company regarding the terms and conditions of the Offer to Amend and the
exercise of its Warrant.
(iv) It is an investor in securities of companies in the development
stage and acknowledges that it can bear the economic risk of its investment
and has such knowledge and experience in financial or business matters that
it is capable of evaluating the merits and risks of the investment in the
Shares.
(v) It is an "accredited investor" as such term is defined in Rule
501 of the Securities Act of 1933, as amended, and it was not formed for the
specific purpose of acquiring the Shares.
(4) INDEMNIFICATION. The Investor acknowledges that it understands
the meaning and legal consequences of the representations and warranties
contained in Section 3 hereof, and the undersigned hereby agrees to
indemnify and defend the Company and each director, officer, agent,
employee, representative and stockholders thereof against and hold them
harmless from any and all loss, damage or liability due to or arising out
of a breach of any such representation or warranty.
A-3
<PAGE>
IN WITNESS WHEREOF, subject to the acceptance by the Company, the
undersigned has completed this Warrant Exercise Agreement to evidence its
acceptance of the Offer and the exercise of the Amended Warrant.
-------------------------------------
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
Dated:
------------------------------
A-4
<PAGE>
EXHIBIT D
DESCRIPTION OF COMMON STOCK
The Company is authorized to issue 50,000,000 shares of Common Stock,
$.001 par value per share, and 10,000,000 shares of undesignated Preferred
Stock, $.001 par value per share.
As of May 31, 1998, there were 14,039,493 outstanding shares of the
Company's Common Stock. Holders of Common Stock are entitled to one vote for
each share held of record on all matters submitted to a vote of stockholders.
Subject to preferences that may be applicable to any outstanding shares of
Preferred Stock, holders of Common Stock are entitled to receive ratably such
dividends, if any, as may be declared by the Board of Directors out of funds
legally available for the payment of dividends. The Company has never paid
any cash dividends on its Common Stock. In the event of a liquidation,
dissolution or winding up of the Company, holders of Common Stock are
entitled to share ratably in all assets remaining after payment of
liabilities and liquidation preferences of any outstanding shares of
Preferred Stock. Holders of Common Stock have no preemptive rights or rights
to convert their Common Stock into any other securities. There are no
redemption or sinking fund provisions applicable to the Common Stock. All
outstanding shares of Common Stock are validly issued, fully paid and
nonassessable. All shares of Common Stock issuable upon conversion of the
outstanding shares of Preferred Stock will be validly issued, fully paid and
nonassessable upon such conversion.
In September 1997 the Company's Board of Directors adopted a Stockholder
Rights Plan and subsequently distributed one Preferred Stock purchase right
(a "Right") for each outstanding share of the Company's Common Stock. Each
Right entitles the registered holder to purchase from the Company one
one-hundredth of a share of the Company's Series C Junior Participating
Preferred Stock, par value $.001 per share (the "Series C Junior Preferred
Stock") at a purchase price of $50.00 per one one-hundredth of a share of
Series C Junior Preferred Stock (subject to customary anti-dilution
adjustments) (the "Purchase Price"). The Rights become exercisable if a
person or group acquires, in a transaction not approved by the Company's
Board of Directors, 20% or more of the Company's Common Stock or announces a
tender offer for 20% or more of the Company's Common Stock.
If the right becomes exercisable, each Right (other than Rights held by
the acquiring person or group which become void) will entitle the holder to
acquire, in lieu of purchasing Preferred Stock, upon exercise, a number of
shares of Company Common Stock having a market value of two times the
Purchase Price of the Right. If the Company is acquired in a transaction not
approved by the Board of Directors, each Right may be exercised for common
shares of the acquiring company having a market value of twice the Right's
exercise price. The Company may redeem the Rights at $.001 per Right, subject
to certain conditions. The Rights expire on September 18, 2007.
D-1
<PAGE>
The Series C Junior Preferred Stock is not redeemable by the Company.
Each share of Series C Junior Preferred Stock is entitled to a minimum
preferential quarterly dividend payment of $1.00 per share but is entitled to
an aggregate dividend of 100 times the amount of any dividend declared per
share on the Common Stock. In the event of liquidation, the holders of the
Series C Junior Preferred Stock will be entitled to a minimum preferential
liquidation payment of $1.00 per share but will be entitled to an aggregate
payment of 100 times the payment made per outstanding share of Common Stock.
Each share of Series C Junior Preferred Stock will have 100 votes, voting
together with the outstanding shares of Common Stock (and any other series or
classes entitled to vote therewith) as a single class on all matters
submitted for a stockholder vote. In the event of any merger, consolidation
or other transaction in which shares of Common Stock are exchanged, each
share of Series C Junior Preferred Stock will be entitled to receive 100
times the amount received per outstanding share of Common Stock. These
rights are protected by customary anti-dilution provisions. As of May 31,
1998, no shares of Series C Junior Preferred Stock were issued and
outstanding, although the Company had reserved for issuance 500,000 shares of
its Series C Junior Preferred Stock.
D-2
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<PAGE>
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<CIK> 0000882100
<NAME> CORVAS INTERNATIONAL, INC.
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<S> <C>
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0
1
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<EPS-PRIMARY> (.27)
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</TABLE>
