<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[ X ] Quarterly Report Under Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended June 30, 1997
OR
[ ] Transition Report Under Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from _______________ to _____________
Commission file number 1-12968
LXR BIOTECHNOLOGY INC.
----------------------
(Exact name of small business issuer as specified in its charter)
Delaware 68-0282856
-------- -----------
(State or other jurisdiction of ( I.R.S. Employer
incorporation or organization) Identification No.)
1401 Marina Way South, Richmond, California 94804
(Address of principal executive offices)
(510) 412-9100
--------------
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act during the past 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, 1997 the number of outstanding shares of the Registrant's Common
Stock, par value $0.0001, was 21,781,175.
Transitional Small Business Disclosure Format (check one): Yes [ ] No [X].
1
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LXR BIOTECHNOLOGY INC.
(A DEVELOPMENT STAGE ENTERPRISE)
QUARTERLY REPORT ON FORM 10-QSB
FOR THE SIX MONTHS ENDED JUNE 30, 1997
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION Page No.
--------
<S> <C> <C> <C>
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of
June 30, 1997 and December 31, 1996 3
Condensed Consolidated Statements of Operations for
the three and six months ended June 30, 1997 and 1996 and for
the period from April 20, 1992 (date of incorporation) to June
30, 1997 4
Condensed Consolidated Statements of Cash Flows for the six
months ended June 30, 1997 and 1996 and for the period from
April 20, 1992 (date of incorporation) to
June 30, 1997 5
Notes to Condensed Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 12
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 19
Item 2. Changes in Securities 19
Item 4. Submission of Matters to a Vote of Security Holders 19
Item 6. Exhibits and Reports on Form 8-K 19
SIGNATURES 21
</TABLE>
2
<PAGE> 3
Part I Financial Information
Item I Financial Statements
LXR BIOTECHNOLOGY INC. AND SUBSIDIARY
(A Development Stage Enterprise)
Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
------------ ------------
(unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 6,674,730 $ 10,217,203
Prepaid expenses 324,942 98,881
Private placement receivable - 1,278,700
Other receivables 41,577 39,500
------------ ------------
Total current assets 7,041,249 11,634,284
Equipment and leasehold improvements, net 1,063,568 592,093
Notes receivable from related parties 190,000 160,000
Deposits and other assets 46,204 32,315
------------ ------------
Total assets $ 8,341,021 $ 12,418,692
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 139,173 $ 324,606
Accrued expenses 354,347 584,049
Deferred rent obligation 276,833 259,975
Short-term portion of note payable 82,048 -
------------ ------------
Total current liabilities 852,401 1,168,630
Note payable, excluding short-term portion 222,243 -
------------ ------------
Total liabilities 1,074,644 1,168,630
------------ ------------
Commitments and contingencies (notes 2, 5, 6 and 8)
Stockholders' equity:
Preferred stock, $0.01 par value; 5,000,000 shares
authorized; none issued or outstanding - -
Common stock, $0.0001 par value; 45,000,000
shares authorized; 21,963,187 and 21,924,687
shares issued and outstanding at June 30, 1997
and December 31, 1996, respectively 2,167 2,163
Common stock subscribed; 187,500 shares at
June 30, 1997 and December 31, 1996 19 19
Additional paid-in capital 34,933,072 34,778,774
Deficit accumulated during the development stage (27,653,706) (23,515,719)
Treasury stock, at cost; 182,012 shares at June 30,
1997 and December 31, 1996 (15,175) (15,175)
------------ ------------
Total stockholders' equity 7,266,377 11,250,062
------------ ------------
Total liabilities and stockholders' equity $ 8,341,021 $ 12,418,692
============ ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
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LXR BIOTECHNOLOGY INC. AND SUBSIDIARY
(A Development Stage Enterprise)
Condensed Consolidated Statements of Operations
(unaudited)
<TABLE>
<CAPTION>
April 20, 1992
Three Months Six Months (Date of
Ended Ended Incorporation)
---------------------------- ---------------------------- to
June 30, June 30, June 30, June 30, June 30,
1997 1996 1997 1996 1997
------------ ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C> <C>
Revenues
Grant revenue $ 17,785 $ 59,702 $ 39,982 $ 70,246 $ 154,378
Funded research 68,211 - 68,211 - 68,211
License fee revenue - - - - 300,000
------------ ------------ ------------ ------------ -------------
Total revenues 85,996 59,702 108,193 70,246 522,589
------------ ------------ ------------ ------------ -------------
Expenses incurred in the development stage
Research and development 1,673,666 1,122,624 2,979,480 2,332,865 19,888,187
General and administrative 807,722 649,715 1,505,019 1,162,422 8,772,463
------------ ------------ ------------ ------------ -------------
Total expenses incurred in the development
stage 2,481,388 1,772,339 4,484,499 3,495,287 28,660,650
------------ ------------ ------------ ------------ -------------
Loss from operations (2,395,392) (1,712,637) (4,376,306) (3,425,041) (28,138,061)
Interest income, net
Interest income 108,489 69,684 239,119 150,868 844,577
Interest expense - (12,882) - (33,139) (354,617)
------------ ------------ ------------ ------------ -------------
Total interest income, net 108,489 56,802 239,119 117,729 489,960
------------ ------------ ------------ ------------ -------------
Loss before income taxes (2,286,903) (1,655,835) (4,137,187) (3,307,312) (27,648,101)
Income taxes 400 4,300 800 8,600 5,600
------------ ------------ ------------ ------------ -------------
Net loss $ (2,287,303) $ (1,660,135) $ (4,137,987) $ (3,315,912) $(27,653,701)
============ ============ ============ ============ ============
Net loss per share $ (0.10) $ (0.11) $ (0.19) $ (0.22)
============ ============ ============ ============
Weighted average shares used to compute
net loss per share 22,006,097 15,684,128 22,002,733 15,121,566
============ ============ ============ ============
</TABLE>
4
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LXR BIOTECHNOLOGY INC. AND SUBSIDIARY
(A Development Stage Enterprise)
Condensed Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
April 20, 1992
(Date of
Incorporation)
through
Six Months Ended June 30, June 30,
1997 1996 1997
------------ ------------ ------------
<S> <C> <C> <C>
Cash flows from operating activities $ (4,584,585) $ (3,738,299) $(24,733,567)
------------ ------------ ------------
Cash flows from investing activities:
Purchase of investments - - (3,910,150)
Purchase of equipment and leasehold improvements (662,442) (126,903) (2,113,476)
Proceeds from maturity of investments - - 4,000,000
Loans to related parties (30,000) - (190,000)
------------ ------------ ------------
Net cash used in investing activities (692,442) (126,903) (2,213,626)
------------ ------------ ------------
Cash flows from financing activities:
Net proceeds from sale of common stock 150,000 8,630,967 29,303,508
Receipt of Private Placement proceeds 1,278,700 - 1,278,700
Proceeds from notes payable to related parties - - 4,694,500
Proceeds from line of credit - - 375,000
Proceeds from note payable 304,291 - 304,291
Repayment of notes payable and line of credit - (600,000) (1,581,111)
Principal payments for obligations under
capital lease - (105,989) (776,513)
Payments received for notes receivable from
stockholders - - 2,147
Repurchase of common stock - (1,510) (1,510)
Net proceeds from exercise of warrants - - 19,505
Net proceeds from exercise of stock options 1,563 1,424 3,406
------------ ------------ ------------
Net cash provided by financing activities 1,734,554 7,924,892 33,621,923
------------ ------------ ------------
Net increase (decrease) in cash and cash equivalents (3,542,473) 4,059,690 6,674,730
Cash and cash equivalents at beginning of period 10,217,203 68,245 -
------------ ------------ ------------
Cash and cash equivalents at end of period $ 6,674,730 $ 4,127,935 $ 6,674,730
============ =========== ============
</TABLE>
(Continued)
5
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LXR BIOTECHNOLOGY INC. AND SUBSIDIARY
(A Development Stage Enterprise)
Condensed Consolidated Statements of Cash Flows (Continued)
(Unaudited)
<TABLE>
<CAPTION>
April 20, 1992
(Date of
Incorporation)
through
Six Months Ended June 30, June 30,
1997 1996 1997
-------------- ------------ ----------
<S> <C> <C> <C>
Supplemental cash flow information:
Cash paid for income taxes $ 1,600 $ 5,500 $ 5,800
============== ============ ==========
Cash paid for interest $ - $ 38,114 $ 355,139
============== ============ ==========
Noncash financing activities:
Common stock issued in exchange for notes
receivable from stockholders $ - $ - $ 107,385
============== ============ ==========
Equipment purchased under capital
lease obligation $ - $ - $ 855,022
============== ============ ==========
Stock dividend $ - $ - $ 5
============== ============ ==========
Common stock issued in exchange for note
payable to David Blech and others $ - $ - $3,594,500
============== ============ ==========
Repurchase of common stock in exchange for notes
receivable from stockholders $ - $ 3,500 $ 13,665
============== ============ ==========
Receivable for common stock issued in
Private Placement $ - $ - $1,278,700
============== ============ ==========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
6
<PAGE> 7
LXR BIOTECHNOLOGY INC. AND SUBSIDIARY
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
June 30, 1997
(1) BASIS OF PRESENTATION
In the opinion of management, the accompanying unaudited condensed
consolidated financial statements contain all adjustments (consisting of
normal recurring adjustments) necessary to present fairly the Company's
financial position as of June 30, 1997 and December 31, 1996, and results
of operations for the three months and six months ended June 30, 1997 and
1996 and for the period from April 20, 1992 (date of incorporation) to
June 30, 1997, and changes in cash flows for the six months ended June 30,
1997 and 1996, and for the period from April 20, 1992 (date of
incorporation) to June 30, 1997.
These condensed consolidated statements should be read in conjunction with
the Company's audited consolidated financial statements for the years
ended December 31, 1996 and 1995, which are included as part of the
Company's Annual Report on Form 10-KSB for the year ended December 31,
1996.
The Company's condensed consolidated financial statements include the
accounts and results of operations of the Company and its wholly owned
subsidiary, Optical Analytic, Inc. (OAI). All significant intercompany
balances and transactions have been eliminated in consolidation.
Certain items have been reclassified to conform with current financial
statement presentation.
(2) NOTE PAYABLE
In May 1997, the Company entered into an agreement providing for a loan of
$200,000 secured by existing equipment and a loan of up to $500,000 for
the purchase of new equipment ("Equipment Loan"). In accordance with the
Equipment Loan, loan payments will be made monthly over a three year term
with a final balloon payment equal to 10% of the original loan. As of June
30, 1997, there was $304,291 outstanding under the Equipment Loan at an
effective interest rate of approximately 15.6%. In connection with the
Equipment Loan, the Company issued warrants to purchase 27,000 shares of
the Company's common stock at $2.1875 per share. The warrants expire in
May 2004.
The Equipment Loan is secured by furniture and equipment with a net book
value of $625,038 at June 30, 1997.
Future minimum principal payments under the Equipment Loan as of June 30,
1997 are as follows:
<TABLE>
<CAPTION>
Year ending
December 31
-----------
<S> <C>
1997 $ 38,522
1998 90,335
1999 104,476
2000 70,958
--------
$304,291
========
</TABLE>
(3) CAPITAL STOCK
In January 1997, the Company issued 37,500 shares of the Company's common
stock in connection with the Cardiosol Acquisition. At December 31, 1996
these shares were included in common stock subscribed.
In January 1997, the Company received $150,000 from Boehringer Mannheim
Corporation ("Boehringer") for the purchase of 37,500 shares of the
Company's common stock at a price of $4.00 per share pursuant to a binding
obligation to purchase such shares in accordance with a letter of intent
for a research collaboration with Boehringer related to Maspin (the
"Boehringer Letter of Intent"). As of June 30, 1997, these shares have
not been issued and are included in common stock subscribed.
7
<PAGE> 8
LXR BIOTECHNOLOGY INC. AND SUBSIDIARY
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
June 30, 1997
(4) STOCK OPTION PLANS
1993 Stock Option Plan
The fair value of each stock option grant is estimated using the
Black-Scholes option-pricing model with the following weighted-average
assumptions used for grants in 1997: expected dividend yield 0.0%;
expected volatility of 1.032%; risk-free interest rate of 6.53%; and an
expected life of 7 years.
In June 1997, the Company's shareholders approved the proposal to amend
the Company's 1993 Stock Option Plan to increase the number of shares of
common stock authorized and reserved for issuance from 1,049,850 shares to
1,849,850.
As of June 30, 1997, options to purchase 333,773 shares were exercisable
under the option plan at the weighted average exercise price of $1.44.
During 1997, the Company had the following activity under the 1993 Stock
Option Plan:
<TABLE>
<CAPTION>
Stock Options Outstanding
-------------------------
Weighted-average
Number of exercise
shares price per share
------ ---------------
<S> <C> <C>
Balance as of December 31, 1996 953,140 $1.84
Options granted 72,750 2.27
Options canceled or expired (17,970) 1.86
Options exercised (1,000) 1.56
---------
Balance as of June 30, 1997 1,006,920 $1.90
=========
</TABLE>
The weighted average fair value of options granted during 1997 was $1.96.
The following table summarizes information about stock options outstanding
at June 30, 1997:
<TABLE>
<CAPTION>
Options outstanding Options exercisable
--------------------------------------------- -------------------------
Weighted Weighted Weighted
Range of average average average
exercise Number remaining years exercise Number exercise
prices outstanding to expiration price exercisable price
------ ----------- ------------- ----- ----------- -----
<S> <C> <C> <C> <C> <C>
$0.03 29,124 5.70 $0.03 24,186 $0.03
1.00 to 1.50 208,334 6.18 1.29 198,701 1.28
1.56 to 2.44 870,378(1) 8.65 2.06 108,864 1.98
2.50 to 4.81 47,250 9.40 2.42 1,122 3.55
5.25 to 6.19 1,834 7.70 5.76 900 5.55
--------- -------
1,156,920(1) 8.34 $1.90 333,773 $1.44
========= =======
</TABLE>
(1) Includes 150,000 options issued outside of the 1993 Stock Option
Plan, which have the same terms as options granted under the 1993
Stock Option Plan.
8
<PAGE> 9
LXR BIOTECHNOLOGY INC. AND SUBSIDIARY
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
June 30, 1997
(4) STOCK OPTION PLANS (CONTINUED)
Directors Stock Option Plan
There was no activity under the Directors Stock Option Plan during 1997.
As of June 30, 1997, options to purchase 11,664 shares were exercisable
under the Directors Option Plan at the weighted-average exercise price of
$1.57.
The following table summarizes information on stock options outstanding at
June 30, 1997:
<TABLE>
<CAPTION>
Options outstanding Options exercisable
--------------------------------------------- -----------------------
Weighted Weighted Weighted
Range of average average average
exercise Number remaining years exercise Number exercise
prices outstanding to expiration price exercisable price
------ ----------- ------------- ----- ----------- -----
<S> <C> <C> <C> <C> <C>
1.00 to 1.38 10,000 7.25 $1.38 5,332 .38
1.56 to 1.88 20,000 8.33 1.72 6,332 1.73
2.19 10,000 9.25 2.19 -- --
------ -------
40,000 8.29 $1.75 11,664 $1.57
====== ======
</TABLE>
Pro Forma Disclosure
The Company applies APB Opinion No. 25 in accounting for its stock option
plans and, accordingly, no compensation cost has been recognized for its
stock options in the financial statements. Had the Company determined
compensation cost based on the fair value at the grant date for its stock
options under SFAS No. 123, the Company's net loss and net loss per share
would have been increased to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
June 30, 1997
-------------
<S> <C> <C>
Net loss As reported $(4,137,987)
Pro forma $(4,375,796)
Net loss per share As reported $ (0.19)
Pro forma $ (0.20)
</TABLE>
Pro forma net loss reflects only options granted in 1997, 1996 and 1995.
Therefore, the full impact of calculating compensation cost for stock
options under SFAS No. 123 is not reflected in the pro forma net income
amounts presented above because compensation cost is reflected over the
options' vesting period of four to five years and compensation cost for
options granted prior to January 1, 1995 is not considered.
9
<PAGE> 10
LXR BIOTECHNOLOGY INC. AND SUBSIDIARY
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
June 30, 1997
(5) LITIGATION
The Company and five of its past or present directors and/or officers are
named as defendants in Katz vs. Blech, 95 Civ. 7215 (S.D.N.Y ("Katz") and
Degulis vs. LXR Biotechnology Inc., et al., 95 Civ. 4204 (S.D.N.Y)
("Degulis"). In addition, one of the five, Mark Germain, is named as a
defendant in the above two cases and also in In re Blech Securities
Litigation, ("In re Blech"). The Company was previously named as a
defendant in In re Blech but was dismissed by the Court on June 6, 1996.
All three cases are brought on behalf of classes of persons purchasing
common shares of the Company prior to September 21, 1994, and assert
claims arising out of the Company's Initial Public Offering and subsequent
trading of those shares. The suits allege violations of Sections 11 and 12
of the Securities Act of 1933 and Sections 10(b) and 20 of the Securities
and Exchange Act of 1934, including misrepresentations and omissions in
connection with the Initial Public Offering and manipulation of share
prices. The suits also allege common law claims for fraud and deceit and
seek punitive damages. The complaints allege that defendants, including
the Company and the defendant directors and officers, failed to disclose
in securities filings connected with the Initial Public Offering, the
leveraged financial condition of the Company's underwriter, D. Blech and
Company Incorporated ("D. Blech & Co.") and its principal David Blech. The
suits further allege that defendants failed to disclose that D. Blech &
Co. would act as principal market maker for the Company's shares following
the Initial Public Offering, and that D. Blech & Co.'s extended financial
commitments would affect its ability to maintain a market for the
Company's shares. The suits also allege that defendants assisted or
acquiesced in a post-offering scheme to manipulate the market for the
Company's shares and artificially inflate share prices.
The Company has agreed to indemnify and/or advance defense costs to each
of the current or former officers and directors who are named as
defendants in the litigation. A demand by the independent underwriter for
contractual indemnity has been denied. Such denial is subject to contest
by the underwriter. The Company and the underwriter have entered into a
tolling agreement whereby the Company agreed that the running of any
statute of limitations applicable to claims of the underwriter against the
Company would be tolled until the earlier of June 30, 1998 and the
termination of the tolling agreement.
The Company's primary level directors and officers liability insurance
carrier has tentatively agreed to provide coverage, subject to the terms
and conditions of the policy, for the current and former directors and/or
officers. There is no insurance coverage for the Company itself. The
extent to which costs of defending the litigation will ultimately be
covered by insurance is not yet known. The extent to which insurance would
cover any settlement or judgment has not been determined and may not be
determined until the litigation is completed.
The Company denies any wrongdoing and is defending the above cases
vigorously. While an adverse judgment or settlement could have a material
adverse financial impact on the Company, the early stage of litigation,
uncertainty as to whether any material judgment or settlement will result,
and the possibility that some portion of any settlement or judgment may be
covered by insurance make it impossible to predict at this time whether
the litigation will have a material adverse financial impact on the
Company.
(6) LICENSE AND COLLABORATIVE RESEARCH AGREEMENTS
University of Tennessee
In January 1997, the Company entered into an exclusive license and
three-year research agreement with the University of Tennessee and the
University of Tennessee Research Corporation related to certain patent
applications and technology. As consideration for the agreement, the
Company agreed to fund research in the amount of $70,000 per year for
three years, with the third year's funding contingent upon meeting certain
milestones.
10
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LXR BIOTECHNOLOGY INC. AND SUBSIDIARY
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
June 30, 1997
(6) LICENSE AND COLLABORATIVE RESEARCH AGREEMENTS (CONTINUED)
Oxford Asymmetry, Limited
In April 1997, the Company entered into a research collaboration agreement
with Oxford Asymmetry, Limited ("Oxford") for the purpose of discovering
small molecule drug candidates that target specific apoptosis pathways. In
exchange for the services to be provided by Oxford, the Company has agreed
to make payments totaling $650,000 through February, 1998 and is obligated
to make certain future royalty payments on any products the Company may
develop under the agreement. As of June 30, 1997, the Company has made
payments of $162,500 related to the Oxford agreement of which
approximately $127,000 is included in research and development expense for
the six months ended June 30, 1997.
Boehringer Mannheim
As of June 30, 1997, the Company has received approximately $68,000 from
Boehringer to fund its research of Maspin for the treatment of cancer.
The amount received has been recorded as revenue as of June 30, 1997. In
addition, the Company has received $150,000 for the purchase of 37,500
shares of the Company's common stock. (Note 3)
Other Agreements
The Company has committed to fund up to $435,000 under various other
research and collaborative agreements and up to $490,000 under a clinical
service agreement. In most cases, the Company's obligations under these
agreements can be terminated upon 30 days notice.
(7) RECENT ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board recently issued Statement of
Financial Accounting Standards No. 128 ("SFAS No. 128"), "Earnings Per
Share". SFAS No. 128 requires the presentation of basic earnings per share
("EPS") and, for companies with complex capital structures or potentially
dilutive securities, such as convertible debt, options and warrants,
diluted EPS. SFAS No. 128 is effective for annual and interim periods
ending after December 31, 1997. The Company does not expect its net loss
per share presentation will be affected by SFAS No. 128.
(8) SUBSEQUENT EVENTS
Notes Payable
In July 1997, the Company drew down approximately $206,000 in funds under
the Equipment Loan, resulting in a remaining amount of approximately
$164,000 available under the Equipment Loan. (Note 2)
Stock Options
In August, 1997, pursuant to the 1993 Stock Option Plan, the Company
granted to employees options to purchase approximately 330,300 shares of
Company's common stock at an exercise price of $1.875 per share. These
options vest 25% after one year and as to 2.083% of the shares each month
thereafter.
11
<PAGE> 12
Item 2
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following analysis contains forward looking statements regarding,
among other things, product development plans, product efficacy and
safety, corporate partnering, capital and other expenditures, timing of
FDA filings, FDA approval thereof and clinical trial progress, sufficiency
of cash resources and the ability of the Company to raise additional
funding. These forward looking statements concern matters that involve
risks and uncertainties that could cause actual results to differ
materially from those projected in the forward looking statements. Words
such as "believe," "expects," "likely," "may" and "plans" are intended to
identify forward looking statements, although not all forward looking
statements contain these words. The following discussion and analysis
should be read in conjunction with the Company's financial statements and
accompanying notes included herein, the Company's Annual Report on Form
10-KSB for the year ended December 31, 1996, the Company's Form 10-QSB for
the quarter ended March 31, 1997 and "Factors Affecting Future Results"
below.
PLAN OF OPERATIONS
The Company's resources are currently focused on the research and
development programs for Cardiosol, Elirex, Maspin, SLDI, and Lexirin, on
possible clinical trials of HK-Cardiosol and CP-Cardiosol, and on limited
research in areas such as BAK, Fas(DELTA)TM, and SARP. The Company will
also conduct limited research on new technology which may permit the sex
of a fetus to be determined as early as six weeks after conception, based
on an analysis of DNA in the mother's urine. The Company believes this
technology may also have applications in cancer detection and diagnosis.
In addition, the Company has entered into an agreement with Oxford
Asymmetry, Limited ("Oxford") for the purpose of discovering small
molecule drug candidates that target specific apoptosis pathways.
The Company is focusing its research and development efforts relating to
the suppression of apoptosis in the heart on the Cardiosol technology. The
Company plans to file an Investigational Drug Exemption ("IDE") with the
FDA to begin clinical studies of HK-Cardiosol for heart preservation in
transplant patients by the third quarter of 1997. The Company also plans
to file an Investigational New Drug ("IND") application with the FDA to
begin clinical studies of CP-Cardiosol as a cardioplegic solution by the
end of 1997.
The Company currently is conducting preclinical studies of Elirex in
animals for ischemic heart attack, stroke and liver transplantation
applications. Based on the results to date of the preclinical studies for
Elirex, the Company expects to pursue a collaborative partnership for
further research and development of Elirex, and to consider filing an IND
to commence clinical studies within the next nine to twelve months.
Pursuant to the Boehringer Letter of Intent, the Company and Boehringer
are currently conducting preclinical studies to assess the efficacy and
toxicity of Maspin. Based on the results of the studies, which are
expected in the third quarter of 1997, the Company and Boehringer will
determine whether to proceed with further research and development
efforts. However, Boehringer has no obligation to proceed with the
project.
The Company expects to continue to support the efforts of the Perkin-Elmer
Corporation ("Perkin-Elmer") to develop the Company's scanning laser
digital imaging ("SLDI") technology.
The Company completed its Phase I trials for Lexirin and preliminary
results indicated it was tolerated in AIDS patients and that no adverse
reactions were encountered. However, in light of the growing use of triple
drug therapy for HIV infection and concomitant decrease in side effects
suffered by patients infected with HIV, LXR has decided to reallocate its
resources to the development of its candidate systems to preserve and
protect organ function, including HK-Cardiosol, CP-Cardiosol and Elirex,
for which the Company believes there are larger markets and more pressing
needs. The Company intends to continue to analyze the market for AIDS
related diarrhea therapy outside the U.S. and to evaluate Lexirin for
potential applications in other markets, including cancer chemotherapy and
radiotherapy.
The Company plans to seek additional corporate partners for its research
and development activities. However, there can be no assurance that the
Company will be able to secure any new corporate partner relationships. In
addition to the studies mentioned above, the Company is funding research
at the University of Tennessee during 1997, and may enter into research
relationships with other universities and research institutions. The
Company also regularly evaluates the possibility of licensing or otherwise
acquiring technologies from third parties.
12
<PAGE> 13
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
PLAN OF OPERATIONS (CONTINUED)
As of June 30, 1997, the Company employed 62 employees, including 58
full-time employees. Over the next 12 months, the Company expects to
increase its number of employees to approximately 72 to support the
Company's increased research and development efforts and expanding
manufacturing and clinical trial activities. Further increases in
employees may occur as the Company increases its spending efforts to
undertake clinical studies.
In 1996, the Company amended the terms of its laboratory and office lease
to extend the term and add approximately 4,100 square feet of space. The
additional space is being used for the Company's expanding clinical trial
activities and new pilot GMP manufacturing facility for producing
materials for clinical trials.
The Company's capital expenditures for the first half of 1997 were
approximately $660,000. The Company expects that capital expenditures for
1997 will continue to increase as a result of the pilot manufacturing
facility which is currently under construction. The Company estimates the
total cost of constructing and equipping the new GMP manufacturing
facility will be approximately $800,000 to $1,000,000, of which
approximately $420,000 has been incurred as of June 30, 1997. The Company
has secured the Equipment Loan of $700,000 to finance capital expenditures
for 1997. Total capital expenditures, including amounts remaining for the
manufacturing facility are expected to be approximately $600,000 over the
next twelve months. In addition, the Company expects to receive
approximately $400,000 in contributed equipment under the Perkin-Elmer
License Agreement (as defined below).
RESULTS OF OPERATIONS
Six Months Ended June 30, 1997 compared to the Six Months Ended June 30,
1996
The Company had revenues of $85,996 and $108,193 for the three and six
months ended June 30, 1997 compared to revenues of $59,702 and $70,246 for
the three and six months ended June 30, 1996. The increase in revenue was
primarily due to a $68,211 payment for funded research provided by
Boehringer in the second quarter of 1997, partially offset by reduced
grant revenues. The Company's remaining sources of revenues for 1997
include grant revenues related to Maspin of approximately $17,000,
potential research revenue of up to $182,000 under the Boehringer Letter
of Intent and license fee revenue under a license agreement with the
Perkin-Elmer relating to SLDI technology (the "Perkin-Elmer License
Agreement"). The Company believes it has met a milestone under the
Perkin-Elmer License Agreement and expects to receive $300,000 in cash
milestone payments and $400,000 in equipment during the third quarter of
1997. The Company does not have any commercially available products (other
than the Company's Scanning Laser Digital Imager, being marketed by
Perkin-Elmer) and does not anticipate generating any significant revenues
for at least the next several years.
13
<PAGE> 14
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS (CONTINUED)
The Company's research and development expenses were $1,673,666 and
$2,979,480 for the three and six months ended June 30, 1997 compared to
$1,122,624 and $2,332,865 for the three and six months ended June 30,
1996. These expenses included salaries and related benefits, laboratory
supplies, depreciation of equipment, facility costs, consulting fees,
research collaboration expenses, toxicology study costs, clinical trial
costs, legal fees for patents and other research related expenditures.
Research and development costs increased primarily due to increased salary
and benefits costs resulting from an increase in the number of research
personnel, increased research collaboration costs resulting from the new
agreement with Oxford and increases in clinical trial and toxicology study
costs. The increase in research and development expenses was partially
offset by a decrease in patent legal fees, depreciation expense and
certain collaboration expenses resulting from the termination of research
agreements with the University of Kentucky and the Dana Farber Cancer
Institute.
The Company expects research and development expenses to continue to
increase over the next twelve months in order to continue the Company's
research and development programs for Cardiosol, Elirex, Maspin, SLDI and
Lexirin; to fund possible clinical trials of HK-Cardiosol and
CP-Cardiosol; and to support limited research in areas such as Bak, SARP,
Fas(DELTA)TM and certain new technology based upon the detection of DNA in
urine. See "Plan of Operations" above.
Additionally, in April 1997, the Company entered into a research
collaboration agreement with Oxford for the purpose of discovering small
molecule drug candidates that target specific apoptosis pathways. As of
June 30, 1997, the Company has paid $162,500 under the Oxford Agreement
and is committed to $487,500 in payments through February 1998.
Although the Company plans for research and development spending to
continue to increase substantially over the next several years as the
Company expands its research and development efforts and undertakes
clinical studies with respect to certain of its projects, such expansion
of operations remain contingent upon the Company's ability to obtain
additional amounts of capital resources. Unless and until such funds are
received, research and development activities will be limited to the
Company's available resources. See "Liquidity and Capital Resources"
below.
General and administrative expenses were $807,722 and $1,505,019 for the
three and six months ended June 30, 1997 compared to $649,715 and
$1,162,422 for the three and six months ended June 30, 1996. This increase
is primarily due to increased personnel costs, increased legal costs
related to litigation, and an increase in facility costs due to a larger
facility. Future general and administrative expenses are anticipated to
increase to support the Company's expansion of research and development
activities and possibly due to increased legal expenses resulting from the
securities lawsuits currently pending against the Company and certain of
its past and present officers and directors.
Interest income, net of interest expense, increased to $108,489 and
$239,119 for the three and six months ended June 30, 1997 from $56,802 and
$117,729 for the three and six months ended June 30, 1996. The increase in
net interest income was due to interest earned on a larger average
investment balance in the first half of 1997 as compared to the first half
of 1996, as well as a decrease in interest expense in 1997. The Company
expects interest expense to increase as a result of borrowings under the
Equipment Loan. Further increases are expected as the Company borrows the
remaining amount available under the Equipment Loan. See "Liquidity and
Capital Resources" below.
The Company's net loss increased to $2,287,303 and $4,137,987 for the
three and six months ended June 30, 1997 compared to $1,660,135 and
$3,315,912 for the three and six months ended June 30, 1996, reflecting
the Company's increased expenses in 1997. As of June 30, 1997, the Company
had an accumulated deficit of $27,653,706. The Company expects to continue
to incur substantial losses over the next several years as it expands its
research and development efforts and continues to undertake preclinical
and clinical studies.
14
<PAGE> 15
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
In January 1997, the Company received $150,000 from Boehringer for the
purchase of 37,500 shares of the Company's common stock at a price of
$4.00 per share in accordance with the Boehringer Letter of Intent. In
addition, the Company received $1,278,700 in cash for the Private
Placement receivable and approximately $330,000 in funds borrowed under
the Company's Equipment Loan. As of June 30, 1997, the Company's sources
of capital consisted of approximately (i) $6.7 million in cash and cash
equivalents, (ii) interest from investments, (iii) $17,000 in currently
committed grant revenues related to Maspin, (iv) potential research
revenue of up to $182,000 under the Boehringer Letter of Intent, (v)
approximately $300,000 in license fee revenue under the Perkin-Elmer
License Agreement and (vi) approximately $400,000 of equipment to be
contributed under the Perkin-Elmer License Agreement. In addition, during
1997, the Company secured financing of approximately $700,000 in
connection with the construction of the Company's pilot manufacturing
facility, of which approximately $370,000 remains available under the
Equipment Loan at June 30, 1997. The Company believes these resources are
sufficient to fund the Company's operations through 1997. However, there
can be no assurance that unanticipated events affecting the Company's
resources will not result in the Company depleting its funds before that
time.
The Company does not have any committed sources of future equity or debt
funding other than noted above. Accordingly, the Company will need to
raise substantial additional capital to fund its operations, including the
development of its lead compounds, beyond 1997. Although the Company is
currently expending significant efforts to obtain the additional funding
necessary to fund the Company's operations beyond 1997, there can be no
assurance that additional funding will be available on favorable terms, if
at all. Failure to raise additional funds in the relatively near future
will have a material adverse effect on the Company.
FACTORS AFFECTING FUTURE RESULTS
Future Capital Needs; Uncertainty of Additional Funding
The Company will require substantial additional capital to fund its
operations, including its research and development programs and
preclinical and clinical testing of its potential pharmaceutical and
medical device products, and to conduct marketing of any products that may
be developed. The Company's capital requirements depend on numerous
factors, including the progress of its research and development programs,
the progress of preclinical and clinical testing, the time and costs
involved in obtaining regulatory approvals, the cost of filing,
prosecuting, defending and enforcing any patent claims and other
intellectual property rights, the cost of obtaining technological rights,
competing technological and market developments, changes in the Company's
existing research relationships, the ability of the Company to establish
collaborative arrangements, the development of commercialization
activities and arrangements, the cost of purchasing additional capital
equipment, and legal expenses incurred in connection with defending
certain lawsuits that have been brought against the Company (described
above in Item 1). Based upon its current plans, the Company believes it
has sufficient funds to meet the Company's operating expenses and capital
requirements through 1997. However, there can be no assurance that
unanticipated changes or other events affecting the Company's operating
expenses will not result in the expenditure of available funds before the
end of 1997.
The Company will need to raise substantial additional capital to fund its
operations, including the development of its lead compounds. The Company
intends to seek additional funding through public or private financings
and/or collaborative or other arrangements with corporate partners. There
can be no assurance, however, that additional funding will be available
from any of these sources, or if available, will be available on favorable
or acceptable terms. If adequate funds are not available, the Company may
be required to delay, scale back or eliminate one or more of its research
and development programs, including but not limited to the development of
its lead compounds. If the Company raises additional funds through public
or private financings, such financings may result in substantial dilution
to the Company's stockholders. In 1996, the Company issued a total of
approximately 15 million shares and warrants therefor (or approximately
62% of the Company's total current outstanding stock, assuming all shares
underlying warrants and other rights are outstanding) to raise needed
funds. If the Company is able to enter into corporate partnerships to
obtain funds, such arrangements will require the Company to relinquish
certain rights to certain of its technologies on potential products that
the Company would not otherwise relinquish. Failure to obtain additional
funds will have a material adverse effect on the Company's operations.
Early Stage of Development; Regulatory, Technological and Other
Uncertainties
LXR is at an early stage of development. Other than the SLDI microscope, a
prototype of which was sold to Perkin-Elmer all of the Company's potential
pharmaceutical and medical device products are currently in research and
development, and no revenues from the sale of such potential products have
been generated to date. Substantially all of the Company's resources have
been and for the foreseeable future will continue to be dedicated to the
Company's research programs and the development of potential
pharmaceutical and medical device products emanating therefrom. There can
be no assurance that the Company will be able to develop a commercial
product from any of these projects. All of the Company's drug and medical
device candidates are in preclinical development. While the Company
believes that the results attained to date in such preclinical studies
generally support further research and development of these potential
products, results attained in preclinical studies are not necessarily
indicative of results that will be obtained in human clinical testing.
Additionally, the Company has not previously met its forecasted schedule
for introducing products into clinical trials. Finally, the Company
recently reassessed the market for Lexirin in the treatment of AIDS
patents and decided not to proceed with further U.S. clinical trials of
Lexirin in AIDS patients at this time. Similar assessments of market
opportunities and priorities for allocating available resources may again
affect the Company's decision to undertake or continue preclinical and/or
clinical trials or otherwise continue to pursue research and development
programs for its potential products.
15
<PAGE> 16
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FACTORS AFFECTING FUTURE RESULTS (CONTINUED)
The potential pharmaceutical products currently under development by the
Company will require significant additional research and development and
preclinical testing and will require extensive clinical testing prior to
submission of any regulatory application for commercial use. The Company's
potential pharmaceutical products are subject to the risks of failure
inherent in the development of pharmaceutical products based on new
technologies. These risks include the possibilities that the Company's
novel approach to diagnosis and therapy will not be successful; that any
or all of the Company's potential pharmaceutical products will be found to
be unsafe, ineffective or toxic, or otherwise fail to receive necessary
regulatory clearances; that the products, if safe and effective, will be
difficult to manufacture on a large scale or uneconomical to market; that
proprietary rights of third parties will preclude the Company from
marketing such products; or that third parties will market superior or
equivalent products. As a result, there can be no assurance that any of
the Company's research and development activities will be successfully
completed; that clinical trials will be allowed by the FDA or other
regulatory authorities; that clinical trials will commence as planned;
that required United States or foreign regulatory approvals will be
obtained on a timely basis, if at all; or that any products for which
approval is obtained will result in any commercially viable pharmaceutical
products.
The Company's product development efforts are based on the novel
scientific approach of therapeutic apoptosis modulation, which has not
been widely studied. There is, therefore, substantial risk that this
approach will not prove to be successful. Moreover, the Company is
applying this novel approach to discover new treatments for a variety of
diseases that are also the subject of research and development efforts by
other companies, many of which are much larger and better funded.
Biotechnology in general and apoptosis modulation in particular are
relatively new fields in which there is a potential for extensive
technological innovation in relatively short periods of time. The
Company's competitors may succeed in developing technologies or products
that are more effective than those of the Company. Rapid technological
change or developments by others may result in the Company's technology or
proposed products becoming obsolete or noncompetitive.
16
<PAGE> 17
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FACTORS AFFECTING FUTURE RESULTS (CONTINUED)
History of Losses; Uncertainty of Future Profitability
The Company has incurred significant operating losses since its inception
in 1992. At June 30, 1997, the Company had an accumulated deficit of
approximately $27.7 million. The Company will be required to conduct
significant research, development, testing and regulatory compliance
activities that, together with projected general and administrative
expenses, are expected to result in significant operating losses for at
least the next several years. Revenues, if any, that the Company may
receive in the next few years will be limited to potential payments from
Perkin-Elmer under the Perkin-Elmer License Agreement, potential payments
from Boehringer under the non-binding Boehringer Letter of Intent,
revenues from grants currently awarded to the Company and which may be
awarded to the Company in the future, payments under research or product
development relationships that the Company may hereafter establish,
payments under license agreements that the Company may hereafter
establish, sales of products that the Company may acquire in the future,
and interest payments. There can be no assurance, however, that the
Company will (i) receive any additional funds other than the $300,000 in
license fee revenue and $400,000 in contributed equipment under the
Perkin-Elmer License Agreement, as Perkin-Elmer may terminate such
agreement at any time in its discretion, (ii) be successful in its
collaboration with Boehringer or that such relationship will be expanded
beyond its current very limited scope, (iii) be able to establish any
additional relationships, (iv) enter into any license agreements, or (v)
acquire any products in the future. The Company's ability to achieve
profitability depends upon its ability successfully to complete either
alone or with others, development of its potential products, conduct
clinical trials, obtain required regulatory approvals, and manufacture and
market its products or to enter into license agreements on acceptable
terms. The Company may never achieve significant revenue or profitable
operations.
Dependence on Others; Collaborations
The Company's strategy for the research, development and commercialization
of its potential products may require the Company to enter into various
arrangements with corporate and academic collaborators, licensors,
licensees and others, in addition to those already established, and the
Company may therefore be dependent upon the subsequent success of outside
parties in performing their responsibilities. For example, the Company has
provided Perkin-Elmer with significant exclusive rights to its SLDI
product, and is dependent on Perkin-Elmer to satisfactorily commercialize
such product so that the Company will receive remuneration for its efforts
in this area. There can be no assurance that Perkin-Elmer's efforts to
commercialize this product will be successful, or that the Company will
receive any such remuneration. There can also be no assurance that the
Company will be able to establish additional collaborative arrangements or
license agreements to develop and commercialize its potential products, or
that any of its collaborative arrangements or license agreements will be
successful. Moreover, certain of the
17
<PAGE> 18
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FACTORS AFFECTING FUTURE RESULTS (CONTINUED)
collaborative arrangements that the Company may enter into in the future
may place responsibility for preclinical testing and human clinical trials
and for preparing and submitting applications for regulatory approval for
potential products on the collaborative partner. Should a collaborative
partner fail to develop or commercialize successfully any potential
product to which it has rights, the Company's business may be adversely
affected. In addition, there can be no assurance that collaborators will
not be pursuing alternative technologies or developing products either on
their own or in collaboration with others, including the Company's
competitors, as a means for developing treatments for the diseases or
disorders targeted by such partners' collaborative programs with the
Company.
18
<PAGE> 19
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The information called for by Part II, Item 1 is incorporated by reference
to Note 5 of the Condensed Consolidated Financial Statements included in
Part I of this document.
ITEM 2. CHANGES IN SECURITIES
In May 1997, the Company issued warrants to purchase 27,000 shares of the
Company's common stock at $2.1875 per share in connection with the
Equipment Loan.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On June 11, 1997, the Company held its Annual Meeting of Stockholders with
the following results:
1) The following individuals were elected as directors of the Company:
<TABLE>
<CAPTION>
Shares Voting Shares
in Favor Withheld
------------- -------------
<S> <C> <C>
Eugene Eidenberg 15,696,922 33,699
Donald H. Picker 15,692,322 38,299
L. David Tomei 15,678,222 52,399
Mark J. Tomei 15,684,772 45,849
Jack H. Watson, Jr. 15,695,922 34,699
</TABLE>
2) The proposal to amend the Company's 1993 Stock Option Plan to
increase the number of shares of common stock reserved for issuance
by 800,000 was approved with 15,180,874 shares cast in favor of the
amendment, 453,435 shares voting against and 96,312 shares withheld
and/or abstaining.
3) The selection of KPMG Peat Marwick LLP as the Company's certified
public accountants was ratified with 15,688,072 shares cast in favor
of the selection, 31,850 shares voting against, and 10,699 shares
withheld and/or abstaining.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits. The following exhibits are attached hereto:
<TABLE>
<CAPTION>
Exhibit
Number Title
------ -----
<S> <C>
10.01 1993 Stock Option Plan, as amended to date, and related Stock
Option Agreement and Exercise Agreement.
10.38 Master Loan and Security Agreement between the Company and
Transamerica Business Credit Corporation dated May 13, 1997.
10.39 Stock Subscription Warrant between the Company and Meier
Mitchell and Company, LLC dated May 13, 1997.
10.40 Stock Subscription Warrant between the Company and
Transamerica Business Credit Corporation dated May 13, 1997.
**10.41 Research and Development Agreement between the Company and
Oxford Asymmetry Limited, dated April 18, 1997.
27.01 Financial Data Schedule.
</TABLE>
** Confidential treatment has been requested with respect to certain
portions of this document.
19
<PAGE> 20
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (CONTINUED)
(b) Reports on Form 8-K.
On April 23, 1997, the Company filed a report on Form 8-K reporting
Kenneth R. McGuire's purchase of 1,606,900 shares of the Company's common
stock from Biotechnology Investment Group, L.L.C. and 437,666 shares of
the Company's common stock from various trusts of which David Blech and
members of Mr. Blech's family are beneficiaries.
On June 13, 1997, the Company filed a report on Form 8-K reporting the
Company's announcement that it would not proceed with further U.S.
clinical trials of Lexirin in AIDS patients at that time.
20
<PAGE> 21
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant has duly
caused this report to be signed on its behalf by the undersigned thereunto duly
authorized.
LXR BIOTECHNOLOGY INC.
Date: August 14, 1997 By: /s/ Mark J. Tomei
-------------------------------------
Mark J. Tomei
Chief Financial Officer and Secretary
21
<PAGE> 22
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Title
------ -----
<S> <C>
10.01 1993 Stock Option Plan, as amended to date, and related Stock
Option Agreement and Exercise Agreement.
10.38 Master Loan and Security Agreement between the Company and
Transamerica Business Credit Corporation dated May 13, 1997.
10.39 Stock Subscription Warrant between the Company and Meier
Mitchell and Company, LLC dated May 13, 1997.
10.40 Stock Subscription Warrant between the Company and
Transamerica Business Credit Corporation dated May 13, 1997.
**10.41 Research and Development Agreement between the Company and
Oxford Asymmetry Limited, dated April 18, 1997.
27.01 Financial Data Schedule.
</TABLE>
** Confidential treatment has been requested with respect to certain
portions of this document.
22
<PAGE> 1
EXHIBIT 10.01
LXR BIOTECHNOLOGY INC.
1993 STOCK OPTION PLAN
As adopted May 20, 1993 and
amended through February 11, 1997
1. PURPOSE. This 1993 Stock Option Plan ("Plan") is established as a
compensatory plan to attract, retain and provide equity incentives to selected
persons to promote the financial success of LXR Biotechnology Inc., a Delaware
corporation, (the "Company"). Capitalized terms not previously defined herein
are defined in Section 17 of this Plan.
2. TYPES OF OPTIONS AND SHARES. Options granted under this Plan (the
"Options") may be either (a) incentive stock options ("ISOs") within the meaning
of Section 422 of the Internal Revenue Code of 1986, as amended (the "Revenue
Code"), or (b) nonqualified stock options ("NQSOs"), as designated at the time
of grant. The shares of stock that may be purchased upon exercise of Options
granted under this Plan (the "Shares") are shares of the common stock, $0.0001
par value per share, of the Company.
3. NUMBER OF SHARES. The aggregate number of Shares that may be issued
pursuant to Options granted under this Plan is 1,849,850 Shares, subject to
adjustment as provided in this Plan. "Named Executive Officers" (as that term is
defined in Item 402(a)(3) of Regulation S-K promulgated under the Exchange Act
of 1934, as amended, (the "Exchange Act") shall each be eligible to receive up
to an aggregate maximum of 333,333 Shares over the term of the Plan. If any
Option expires or is terminated without being exercised in whole or in part, the
unexercised or released Shares from such Option shall be available for future
grant and purchase under this Plan. At all times during the term of this Plan,
the Company shall reserve and keep available such number of Shares as shall be
required to satisfy the requirements of outstanding Options under this Plan.
4. ELIGIBILITY. Options may be granted to employees, officers,
directors, consultants, independent contractors and advisers (provided such
consultants, contractors and advisers render bona fide services not in
connection with the offer and sale of securities in a capital-raising
transaction) of the Company or any Parent, Subsidiary or Affiliate of the
Company. ISOs may be granted only to employees (including officers and directors
who are also employees) of the Company or a Parent or Subsidiary of the Company.
The Committee (as defined in Section 14) in its sole discretion shall select the
recipients of Options ("Optionees"). An Optionee may be granted more than one
Option under this Plan. The Company may also, from time to time, substitute or
assume outstanding options granted by another company, whether in connection
with an acquisition of such other company or otherwise, by either (a) granting
an Option under this Plan in replacement of the option assumed by the Company,
or (b) treating the assumed option as if it had been granted under this Plan if
the terms of such assumed option could be applied to an Option granted under
this Plan. Such substitution or assumption shall be permissible if the holder of
the substituted or assumed option would have been eligible to be granted an
Option hereunder if the other company had applied the rules of this Plan to such
grant.
<PAGE> 2
5. TERMS AND CONDITIONS OF OPTIONS. The Committee shall determine
whether each Option is to be an ISO or an NQSO, the number of Shares subject to
the Option, the exercise price of the Option, the period during which the Option
may be exercised, and all other terms and conditions of the Option, subject to
the following:
5.1 Form of Option Grant. Each Option granted under this Plan
shall be evidenced by a written Stock Option Grant (the "Grant") in such form
(which need not be the same for each Optionee) as the Committee shall from time
to time approve, which Grant shall comply with and be subject to the terms and
conditions of this Plan.
5.2 Date of Grant. The date of grant of an Option shall be the
date on which the Committee makes the determination to grant such Option unless
otherwise specified by the Committee. The Grant representing the Option will be
delivered to Optionee with a copy of this Plan within a reasonable time after
the granting of the Option.
5.3 Exercise Price. The exercise price of an Option shall be
not less than 100% of the Fair Market Value of the Shares on the date the Option
is granted. The exercise price of any Option granted to a person owning more
than l0% of the total combined voting power of all classes of stock of the
Company or any Parent or Subsidiary of the Company ("Ten Percent Shareholder")
shall not be less than 110% of the Fair Market Value of the Shares on the date
the Option is granted.
5.4 Exercise Period. Options shall be exercisable within the
times or upon the events determined by the Committee as set forth in the Grant;
provided, however, that no Option shall be exercisable after the expiration of
ten (10) years from the date the Option is granted, and provided further that no
ISO granted to a Ten Percent Stockholder shall be exercisable after the
expiration of five (5) years from the date the Option is granted.
5.5 Limitations on ISOs. The aggregate Fair Market Value
(determined as of the time an Option is granted) of stock with respect to which
ISOs are exercisable for the first time by an Optionee during any calendar year
(under this Plan or under any other incentive stock option plan of the Company
or any Parent or Subsidiary of the Company) shall not exceed $100,000. If the
Fair Market Value of Shares with respect to which ISOs are exercisable for the
first time by an Optionee during any calendar year exceeds $100,000, the Options
for the first $100,000 worth of Shares to become exercisable in such year shall
be ISOs and the Options for the amount in excess of $100,000 that becomes
exercisable in that year shall be NQSOs. In the event that the Revenue Code or
the regulations promulgated thereunder are amended after the effective date of
this Plan to provide for a different limit on the Fair Market Value of Shares
permitted to be subject to ISOs, such different limit shall be incorporated
herein and shall apply to any Options granted after the effective date of such
amendment.
5.6 Options Non-Transferable. Options granted under this Plan,
and any interest therein, shall not be transferable or assignable by Optionee,
and may not be made subject to execution, attachment or similar process,
otherwise than by will or by the laws of descent and distribution or pursuant to
a qualified domestic relations order as defined by the Revenue Code or Title I
of the Employee Retirement Income Security Act, or the rules thereunder, and
shall be exercisable during the lifetime of Optionee only by Optionee; provided,
however, that NQSOs held by
-2-
<PAGE> 3
officers or directors of the Company or other persons whose transactions in the
Company's common stock are subject to Section 16(b) of the Exchange Act may be
transferred to such family members, trusts and charitable institutions as the
Committee, in its sole discretion, shall approve at the time of the grant of
such Option.
5.7 Assumed Options. In the event the Company assumes an
option granted by another company, the terms and conditions of such option shall
remain unchanged (except the exercise price and the number and nature of shares
issuable upon exercise, which will be adjusted appropriately pursuant to Section
424 of the Revenue Code). In the event the Company elects to grant a new option
rather than assuming an existing option (as specified in Section 4), such new
option need not be granted at Fair Market Value on the date of grant and may
instead be granted with a similarly adjusted exercise price.
6. EXERCISE OF OPTIONS.
6.1 Notice. Options may be exercised only by delivery to the
Company of a written stock option exercise agreement (the "Exercise Agreement")
in a form approved by the Committee (which need not be the same for each
Optionee), stating the number of Shares being purchased, the restrictions
imposed on the Shares, if any, and such representations and agreements regarding
Optionee's investment intent and access to information, if any, as may be
required by the Company to comply with applicable securities laws, together with
payment in full of the exercise price for the number of Shares being purchased.
6.2 Payment. Payment for the Shares may be made in cash (by
check) or, where approved by the Committee in its sole discretion and where
permitted by law: (a) by cancellation of indebtedness of the Company to the
Optionee; (b) by surrender of shares of common stock of the Company having a
Fair Market Value equal to the applicable exercise price of the Options that
have been owned by Optionee for more than six (6) months (and which have been
paid for within the meaning of the Securities and Exchange Commission ("SEC")
Rule 144 and, if such Shares were purchased from the Company by use of a
promissory note, such note has been fully paid with respect to such shares), or
were obtained by Optionee in the open public market; (c) by waiver of
compensation due or accrued to Optionee for services rendered; (d) provided that
a public market for the Company's stock exists, through a "same day sale"
commitment from Optionee and a broker-dealer that is a member of the National
Association of Securities Dealers (an "NASD Dealer") whereby Optionee
irrevocably elects to exercise the Option and to sell a portion of the Shares so
purchased to pay for the exercise price and whereby the NASD Dealer irrevocably
commits upon receipt of such Shares to forward the exercise price directly to
the Company; (e) provided that a public market for the Company's stock exists,
through a "margin" commitment from Optionee and an NASD Dealer whereby Optionee
irrevocably elects to exercise the Option and to pledge the Shares so purchased
to the NASD Dealer in a margin account as security for a loan from the NASD
Dealer in the amount of the exercise price, and whereby the NASD Dealer
irrevocably commits upon receipt of such Shares to forward the exercise price
directly to the Company; or (f) by any combination of the foregoing.
-3-
<PAGE> 4
6.3 Withholding Taxes. Prior to issuance of the Shares upon
exercise of an Option, Optionee shall pay or make adequate provision for any
federal or state withholding obligations of the Company, if applicable. Where
approved by the Committee in its sole discretion, Optionee may provide for
payment of withholding taxes upon exercise of the Option by requesting that the
Company retain Shares with a Fair Market Value equal to the minimum amount of
taxes required to be withheld, determined on the date that the amount of tax to
be withheld is to be determined. All elections by Optionees to have Shares
withheld for this purpose shall be made in accordance with the requirements
established by the Committee and be in writing in a form acceptable to the
Committee.
6.4 Limitations on Exercise. Notwithstanding the exercise
periods set forth in the Grant, exercise of an Option shall always be subject to
the following:
6.4.1 If Optionee ceases to be employed by the
Company or any Parent, Subsidiary or Affiliate of the Company for any reason
except death or disability, Optionee may exercise such Optionee's Options to the
extent (and only to the extent) that they would have been exercisable upon the
date of termination, within ninety (90) days after the date of termination (or
such shorter time period as may be specified in the Grant).
6.4.2 If Optionee's employment with the Company or
any Parent, Subsidiary or Affiliate of the Company is terminated because of the
death of Optionee or disability of Optionee, Optionee's Options may be exercised
to the extent (and only to the extent) that they would have been exercisable by
Optionee on the date of termination, by Optionee (or Optionee's legal
representative) within twelve (12) months after the date of termination (or such
shorter time period as may be specified in the Grant), but in any event no later
than the expiration date of the Options; provided that in the event of
termination due to disability, other than as defined in Section 22(a)(3) of the
Internal Revenue Code, as amended, any ISO which remains exercisable after 90
days after the date of termination shall be deemed a NQSO.
6.4.3 The Committee shall have discretion to
determine whether Optionee has ceased to be employed by the Company or any
Parent, Subsidiary or Affiliate of the Company and the effective date on which
such employment terminated.
6.4.4 In the case of an Optionee who is a director,
independent consultant or adviser, the Committee will have the discretion to
determine whether Optionee is "employed by the Company or any Parent, Subsidiary
or Affiliate of the Company" pursuant to the foregoing Sections.
6.4.5 The Committee may specify a reasonable minimum
number of Shares that may be purchased on any exercise of an Option, provided
that such minimum number will not prevent Optionee from exercising the full
number of Shares as to which the Option is then exercisable.
6.4.6 An Option shall not be exercisable unless such
exercise is in compliance with the Securities Act of 1933, as amended (the
"Securities Act"), all applicable state securities laws and the requirements of
any stock exchange or national market system upon
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<PAGE> 5
which the Shares may then be listed, as they are in effect on the date of
exercise. The Company shall be under no obligation to register the Shares with
the SEC or to effect compliance with the registration, qualification or listing
requirements of any state securities laws, stock exchange or national market
system, and the Company shall have no liability for any inability or failure to
do so.
7. RESTRICTIONS ON SHARES. At the discretion of the Committee, the
Company may reserve to itself and/or its assignee(s) in the Grant a right of
first refusal to purchase all Shares that an Optionee (or a subsequent
transferee) may propose to transfer to a third party. Further, at the discretion
of the Committee, the Company may reserve to itself and/or its assignee(s) in
the Grant a right to repurchase a portion of or all Shares held by an Optionee
upon Optionee's termination of employment or service with the Company or a
Parent, Subsidiary or Affiliate of the Company, for any reason within a
specified time as determined by the Committee at the time of grant at Optionee's
original purchase price, the Fair Market Value of such Shares or a price
determined by a formula or other provision set forth in the Grant.
8. MODIFICATION, EXTENSION AND RENEWAL OF OPTIONS. The Committee shall
have the power to modify, extend or renew outstanding Options and to authorize
the grant of new Options in substitution therefor, provided that any such action
may not, without the written consent of Optionee, impair any rights under any
Option previously granted. Any outstanding ISO that is modified, extended,
renewed or otherwise altered shall be treated in accordance with Section 424(h)
of the Revenue Code. The Committee shall have the power to reduce the exercise
price of outstanding Options without the consent of Optionees by a written
notice to the Optionees affected; provided, however, that the exercise price per
Share may not be reduced below the minimum exercise price that would be
permitted under Section 5.3 of this Plan for Options granted on the date the
action is taken to reduce the exercise price; and provided that the exercise
price per Share may not be reduced below the par value per Share.
9. STOCK OWNERSHIP; FINANCIAL STATEMENTS. No Optionee shall have any
of the rights of a stockholder with respect to any Shares subject to an Option
until such Option is properly exercised. No adjustment shall be made for
dividends or distributions or other rights for which the record date is prior to
such date, except as provided in this Plan. However, the Company shall provide
to each Optionee, during the period for which Optionee has one or more Options
outstanding, copies of the financial statements of the Company, consisting of,
at a minimum, a balance sheet and an income statement, at least annually. The
Company shall not be required to provide such information to key employees whose
duties in connection with the Company assume their access to equivalent
information.
10. NO OBLIGATION TO EMPLOY. Nothing in this Plan or any Option granted
under this Plan shall confer on any Optionee any right to continue in the employ
of, or other relationship with, the Company or any Parent, Subsidiary or
Affiliate of the Company or limit in any way the right of the Company or any
Parent, Subsidiary or Affiliate of the Company to terminate Optionee's
employment or other relationship at any time, with or without cause.
11. ADJUSTMENT OF OPTION SHARES. In the event that the number of
outstanding shares of common stock of the Company is changed by a stock
dividend, stock split, reverse stock split, recapitalization, combination,
reclassification or similar change in the capital
-5-
<PAGE> 6
structure of the Company without consideration, or if a substantial portion of
the assets of the Company are distributed, without consideration in a spin-off
or similar transaction, to the stockholders of the Company, the number of Shares
available under this Plan and the number of Shares subject to outstanding
Options and the exercise price per Share of such Options shall be
proportionately adjusted, subject to any required action by the Board of
Directors (the "Board") or stockholders of the Company and compliance with
applicable securities laws; provided, however, that a fractional share shall not
be issued upon exercise of any Option and any fractions of a Share that would
have resulted shall either be cashed out at Fair Market Value or the number of
Shares issuable under the Option shall be rounded up to the nearest whole
number, as determined by the Committee; and provided further that the exercise
price may not be decreased to below the par value, if any, for the Shares.
12. ASSUMPTION OF OPTIONS BY SUCCESSORS.
12.1 Assumption or Substitution. In the event of (a) a merger
or consolidation in which the Company is not the surviving corporation (other
than a merger or consolidation with a wholly owned subsidiary, a
reincorporation, or other transaction in which there is no substantial change in
the stockholders of the corporation and the Options granted under this Plan are
assumed or replaced by the successor corporation, which assumption shall be
binding on all Optionees), (b) a dissolution or liquidation of the Company, (c)
the sale of substantially all of the assets of the Company, or (d) any other
transaction which qualifies as a "corporate transaction" under Section 424(a) of
the Revenue Code wherein the stockholders of the Company give up all of their
equity interest in the Company (except for the acquisition, sale or transfer of
all or substantially all of the outstanding shares of the Company), any or all
outstanding Options may be assumed or replaced by the successor corporation,
which assumption shall be binding on all Optionees. In the alternative, the
successor corporation may substitute an equivalent option or provide
substantially similar consideration to Optionees as was provided to stockholders
(after taking into account the existing provisions of Optionee's options, such
as the exercise price and the vesting schedule). The successor corporation may
also issue, in place of outstanding shares of the Company held by Optionee as a
result of the exercise of an Option that is subject to repurchase, substantially
similar shares or other property subject to similar repurchase restrictions no
less favorable to Optionee.
12.2 Expiration. In the event such successor corporation, if
any, refuses to assume or substitute Options, as provided above, pursuant to a
transaction described in Section 12.1 above, or there is no successor
corporation, and if the Company is ceasing to exist as a separate corporate
entity, the Options shall, notwithstanding any contrary terms in the Grant,
expire on (and, in the case of a transaction described in Subsection 12.1(a)
above, if the Company has reserved to itself a right to repurchase Shares issued
on exercise of Options at the original purchase price of such Shares, such right
shall terminate on), a date at least 20 days after the Board gives written
notice to Optionees specifying the terms and conditions of such termination.
12.3 Additional Provisions. Subject to the foregoing
provisions of this Section 12, in the event of the occurrence of any transaction
described in Section 12.1, any outstanding Option shall be treated as provided
in the applicable agreement or plan of merger, consolidation, dissolution,
liquidation, sale of assets or other "corporate transaction".
-6-
<PAGE> 7
13. ADOPTION AND STOCKHOLDER APPROVAL. This Plan shall become effective
on the date that it is adopted by the Board of the Company. This Plan shall be
approved by the stockholders of the Company, in any manner permitted by
applicable corporate law, within twelve months before or after the date this
Plan is adopted by the Board. Upon the effective date of the Plan, the Board may
grant Options pursuant to this Plan; provided that, in the event that
Stockholder approval is not obtained within the time period provided herein, all
Options granted hereunder shall terminate. No Option that is issued as a result
of any increase in the number of shares authorized to be issued under this Plan
shall be exercised prior to the time such increase has been approved by the
Stockholders of the Company and all such Options granted pursuant to such
increase shall similarly terminate if such Stockholder approval is not obtained.
14. ADMINISTRATION. This Plan may be administered by the Board or a
committee appointed by the Board (the "Committee"). If two or more members of
the Board are Outside Directors, the Committee will be comprised of at least two
(2) members of the Board, all of whom are Outside Directors. As used in this
Plan, references to the "Committee" shall mean either the committee appointed by
the Board to administer this Plan or the Board if no committee has been
established. The interpretation by the Committee of any of the provisions of
this Plan or any Option granted under this Plan shall be final and binding upon
the Company and all persons having an interest in any Option or any Shares
purchased pursuant to an Option. The Committee may delegate to officers of the
Company the authority to grant Options under this Plan to Optionees who are not
officers or directors of the Company or other persons whose transactions in the
Company's common stock are subject to Section 16(b) of the Exchange Act.
15. TERM OF PLAN. Options may be granted pursuant to this Plan from
time to time within a period of ten (10) years after the date on which this Plan
is adopted by the Board.
16. AMENDMENT OR TERMINATION OF PLAN. The Committee may at any time
terminate or amend this Plan in any respect including (but not limited to)
amendment of any form of grant, exercise agreement or instrument to be executed
pursuant to this Plan; provided, however, that the Committee shall not, without
the approval of the stockholders of the Company, amend this Plan in any manner
that requires such stockholder approval pursuant to the Revenue Code or the
regulations promulgated thereunder as such provisions apply to ISO plans.
17. CERTAIN DEFINITIONS. As used in this Plan, the following terms
shall have the following meanings:
17.1 "Parent" means any corporation (other than the Company)
in an unbroken chain of corporations ending with the Company if, at the time of
the granting of the Option, each of such corporations other than the Company
owns stock possessing 50% or more of the total combined voting power of all
classes of stock in one of the other corporations in such chain.
17.2 "Subsidiary" means any corporation (other than the
Company) in an unbroken chain of corporations beginning with the Company if, at
the time of granting of the Option, each of the corporations other than the last
corporation in the unbroken chain owns stock possessing 50% or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.
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<PAGE> 8
17.3 "Affiliate" means any corporation that directly, or
indirectly through one or more intermediaries, controls or is controlled by, or
is under common control with, another corporation, where "control" (including
the terms "controlled by" and "under common control with") means the possession,
direct or indirect, of the power to cause the direction of the management and
policies of the corporation, whether through the ownership of voting securities,
by contract or otherwise.
17.4 "Fair Market Value" shall mean the fair market value of
the Shares as determined by the Committee from time to time in good faith. If a
public market exists for the Shares, the Fair Market Value shall be the average
of the last reported bid and asked prices for common stock of the Company on the
last trading day prior to the date of determination (or the average closing
price over the number of consecutive working days preceding the date of
determination as the Committee shall deem appropriate) or, in the event the
common stock of the Company is listed on a stock exchange or on the Nasdaq
National Market, the Fair Market Value shall be the closing price on such
exchange or quotation system on the last trading day prior to the date of
determination (or the average closing price over the number of consecutive
working days preceding the date of determination as the Committee shall deem
appropriate).
17.5 "Outside Director" shall mean any director who is not (i)
a current employee of the Company or any Parent, Subsidiary or Affiliate of the
Company, (ii) a former employee of the Company or any Parent, Subsidiary or
Affiliate of the Company who is receiving compensation for prior services (other
than benefits under a tax-qualified pension plan), (iii) a current or former
officer of the Company or any Parent, Subsidiary or Affiliate of the Company or
(iv) currently receiving compensation for personal services in any capacity,
other than as a director, from the Company or any Parent, Subsidiary or
Affiliate of the Company; provided, however, that at such time as the term
"Outside Director", as used in Section 162(m) is defined in regulations
promulgated under Section 162(m) of the Revenue Code, "Outside Director" shall
have the meaning set forth in such regulations, as amended from time to time and
as interpreted by the Internal Revenue Service.
####
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<PAGE> 9
LXR BIOTECHNOLOGY INC.
FORM OF STOCK OPTION GRANT
Optionee: ____________________________________________
Address: ____________________________________________
____________________________________________
Total Shares Subject to Option: ____________________________________________
Exercise Price per Share: ____________________________________________
Date of Grant: ____________________________________________
Expiration Date: ____________________________________________
Type of Option: [ ] Incentive Stock Option
[ ] Nonqualified Stock Option
1. GRANT OF OPTION. LXR Biotechnology Inc., a Delaware corporation (the
"Company"), hereby grants to the optionee named above ("Optionee") an option
(this "Option") to purchase the total number of shares of common stock $0.0001
par value per share, of the Company set forth above (the "Shares") at the
exercise price per share set forth above (the "Exercise Price"), subject to all
of the terms and conditions of this Stock Option Grant (this "Grant") and the
Company's 1993 Stock Option Plan, as amended to the date hereof (the "Plan"). If
designated as an Incentive Stock Option above, this Option is intended to
qualify as an "incentive stock option" ("ISO") within the meaning of Section 422
of the Internal Revenue Code of 1986, as amended (the "Revenue Code"). Unless
otherwise defined herein, capitalized terms used herein shall have the meanings
ascribed to them in the Plan.
2. EXERCISE PERIOD OF OPTION. Subject to the terms and conditions of
the Plan and this Grant, this Option shall become exercisable as to portions of
the Shares as follows: (a) This Option shall not be exercisable with respect to
any of the Shares until __________, 199__ (the "First Vesting Date"); (b) if
Optionee has been continuously employed by the Company within the meaning of
Section 4 below at all times during the time period beginning on the Date of
Grant set forth above and ending on the First Vesting Date, then on the First
Vesting Date this Option shall become exercisable as to ______ percent (_____%)
of the Shares; and (c) thereafter this Option shall become exercisable as to an
additional ________ percent (______%) of the Shares on the ________ day of each
month following the First Vesting Date if Optionee has remained continuously
employed by the Company at all times on or prior to the relevant vesting date;
provided that Optionee shall in no event be entitled under this Option to
purchase a number of shares of the Company's common stock greater than the
"Total Shares Subject to Option"
<PAGE> 10
indicated above. Notwithstanding anything herein to the contrary, this Option
shall expire on the Expiration Date set forth above and must be exercised, if at
all, on or before the Expiration Date; and provided further that this Option
must become exercisable as to at least 20% of the Shares for each full year
since the Date of Grant.
3. RESTRICTION ON EXERCISE. This Option may not be exercised unless
such exercise is in compliance with the Securities Act and all applicable state
securities laws as they are in effect on the date of exercise, and the
requirements of any stock exchange or national market system on which the
Company's common stock may be listed at the time of exercise. Optionee
understands that the Company is under no obligation to register, qualify or list
the Shares with the SEC, any state securities commission or any stock exchange
to effect such compliance.
4. TERMINATION OF OPTION. Except as provided below in this Section,
this Option shall terminate and may not be exercised if Optionee ceases to be
employed by the Company or any Parent or Subsidiary of the Company (or, in the
case of a nonqualified stock option, an Affiliate of the Company). Optionee
shall be considered to be employed by the Company for all purposes under Section
2 and this Section 4 if Optionee is an officer, director or full-time employee
of the Company or any Parent, Subsidiary or Affiliate of the Company or if the
Committee determines that Optionee is rendering substantial services as a
part-time employee, consultant or adviser to the Company or any Parent,
Subsidiary or Affiliate of the Company. The Committee shall have discretion to
determine whether Optionee has ceased to be employed by the Company or any
Parent, Subsidiary or Affiliate of the Company and the effective date on which
such employment terminated (the "Termination Date").
4.1 Termination Generally. If Optionee ceases to be employed
by the Company or any Parent, Subsidiary or Affiliate of the Company for any
reason except death or disability, this Option, to the extent (and only to the
extent) that it would have been exercisable by Optionee on the Termination Date,
may be exercised by Optionee within ninety (90) days after the Termination Date,
but in no event later than the Expiration Date.
4.2 Death or Disability. If Optionee's employment with the
Company or any Parent, Subsidiary or Affiliate of the Company is terminated
because of the death of Optionee or the disability of Optionee, this Option, to
the extent (and only to the extent) that it would have been exercisable by
Optionee on the Termination Date, may be exercised by Optionee (or Optionee's
legal representative) within twelve (12) months after the Termination Date, but
in no event later than the Expiration Date.
4.3 No Right to Employment. Nothing in the Plan or this Grant
shall confer on Optionee any right to continue in the employ of, or other
relationship with, the Company or any Parent, Subsidiary or Affiliate of the
Company or limit in any way the right of the Company or any Parent, Subsidiary
or Affiliate of the Company to terminate Optionee's employment or other
relationship at any time, with or without cause.
2
<PAGE> 11
5. MANNER OF EXERCISE.
5.1 Exercise Agreement. This Option shall be exercisable by
delivery to the Company of an executed written Stock Option Exercise Agreement
in the form attached hereto as Exhibit A, or in such other form as may be
approved by the Company, which shall set forth Optionee's election to exercise
some or all of this Option, the number of Shares being purchased, any
restrictions imposed on the Shares and such other representations and agreements
as may be required by the Company to comply with applicable securities laws.
5.2 Exercise Price. Such notice shall be accompanied by full
payment of the Exercise Price for the Shares being purchased. Payment for the
Shares may be made in cash (by check) or, where approved by the Committee in its
sole discretion and where permitted by law: (a) by cancellation of indebtedness
of the Company to Optionee; (b) by surrender of shares of common stock of the
Company having a Fair Market Value equal to the exercise price of the Option
that have been owned by Optionee for more than six (6) months (and which have
been paid for within the meaning of SEC Rule 144 and, if such Shares were
purchased from the Company by use of a promissory note, such note has been fully
paid with respect to such shares), or were obtained by Optionee in the open
public market; (c) by waiver of compensation due or accrued to Optionee for
services rendered; (d) provided that a public market for the Company's stock
exists, through a "same day sale" commitment from Optionee and a broker-dealer
that is a member of the National Association of Securities Dealers (an "NASD
Dealer") whereby Optionee irrevocably elects to exercise the Option and to sell
a portion of the Shares so purchased to pay for the Exercise Price and whereby
the NASD Dealer irrevocably commits upon receipt of such Shares to forward the
Exercise Price directly to the Company; (e) provided that a public market for
the Company's stock exists, through a "margin" commitment from Optionee and an
NASD Dealer whereby Optionee irrevocably elects to exercise the Option and to
pledge the Shares so purchased to the NASD Dealer in a margin account as
security for a loan from the NASD Dealer in the amount of the Exercise Price,
and whereby the NASD Dealer irrevocably commits upon receipt of such Shares to
forward the Exercise Price directly to the Company; or (f) by any combination of
the foregoing.
5.3 Withholding Taxes. Prior to the issuance of the Shares
upon exercise of this Option, Optionee must pay or make adequate provision for
any applicable federal or state withholding obligations of the Company.
5.4 Issuance of Shares. Provided that such notice and payment
are in form and substance satisfactory to counsel for the Company, the Company
shall cause the Shares to be issued in the name of Optionee, Optionee's legal
representative or Optionee's donee.
6. NOTICE OF DISQUALIFYING DISPOSITION OF ISO SHARES. If the Option
granted to Optionee herein is an ISO, and if Optionee sells or otherwise
disposes of any of the Shares acquired pursuant to the ISO within (a) the date
two years after the Date of Grant, or (b) the date one year after exercise of
the ISO with respect to the Shares to be sold or disposed, Optionee shall
immediately notify the Company in writing of such disposition.
3
<PAGE> 12
7. NONTRANSFERABILITY OF OPTION. If this Option is an ISO, then this
Option may not be transferred in any manner other than by will or by the law of
descent and distribution and may be exercised during the lifetime of Optionee
only by Optionee. Otherwise, this Option may only be transferred (a) pursuant to
a qualified domestic relations order as defined by the Revenue Code or Title I
of the Employee Retirement Income Security Act, or the rules thereunder, or (b)
to Optionee's immediate family, to a trust for the benefit of Optionee or
Optionee's immediate family, or to a charitable entity qualified under Revenue
Code Section 501(c), where "immediate family" shall mean spouse, lineal
descendant or antecedent, brother or sister. The terms of this Option shall be
binding upon the executors, administrators, successors and assigns of Optionee.
8. TAX CONSEQUENCES. Set forth below is a brief summary as of the date
this form of Grant was adopted of some of the federal and California tax
consequences of exercise of this Option and disposition of the Shares. THIS
SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT
TO CHANGE. OPTIONEE SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THIS OPTION
OR DISPOSING OF THE SHARES.
8.1 Exercise of ISO. If this Option qualifies as an ISO, there
will be no regular federal income tax liability or California income tax
liability upon the exercise of the Option, although the excess, if any, of the
Fair Market Value of the Shares on the date of exercise over the Exercise Price
will be treated as an adjustment to alternative minimum taxable income for
federal income tax purposes and may subject Optionee to an alternative minimum
tax liability in the year of exercise.
8.2 Exercise of Nonqualified Stock Option. If this Option does
not qualify as an ISO, there may be a regular federal income tax liability and a
California income tax liability upon the exercise of the Option. Optionee will
be treated as having received compensation income (taxable at ordinary income
tax rates) equal to the excess, if any, of the Fair Market Value of the Shares
on the date of exercise over the Exercise Price. The Company will be required to
withhold from Optionee's compensation or collect from Optionee and pay to the
applicable taxing authorities an amount equal to a percentage of this
compensation income at the time of exercise.
8.3 Disposition of Shares. In the case of an NQSO, if Shares
are held for more than one year before disposition, any gain on disposition of
the Shares will be treated as long- term capital gain for federal and California
income tax purposes. In the case of an ISO, if Shares are held for more than one
year after the date of exercise and more than two years after the Date of Grant,
any gain on disposition on the Shares will be treated as long-term capital gain
for federal and California income tax purposes. If Shares acquired pursuant to
an ISO are disposed of within such one year or two year periods (a
"disqualifying disposition"), gain on such disqualifying disposition will be
treated as compensation income (taxable at ordinary income rates) to the extent
of the excess, if any, of the fair market value of the Shares on the date of
exercise over the Exercise Price (the "Spread"), or, if less, the difference
between the amount
4
<PAGE> 13
realized on the sale of such Shares and the Exercise Price. Any gain in excess
of the Spread shall be treated as capital gain.
9. INTERPRETATION. Any dispute regarding the interpretation of this
Grant shall be submitted by Optionee or the Company to the Company's Board of
Directors or the Committee thereof that administers the Plan, which shall review
such dispute at its next regular meeting. The resolution of such a dispute by
the Board or Committee shall be final and binding on the Company and on
Optionee.
10. ENTIRE AGREEMENT. The Plan and the Stock Option Exercise Agreement
attached as Exhibit A are incorporated herein by this reference. This Grant, the
Plan and the Stock Option Exercise Agreement constitute the entire agreement of
the parties hereto and supersede all prior undertakings and agreements with
respect to the subject matter hereof.
LXR BIOTECHNOLOGY INC.
By:_______________________________________________
Title:____________________________________________
ACCEPTANCE
Optionee hereby acknowledges receipt of a copy of the Plan, represents
that Optionee has read and understands the terms and provisions thereof, and
accepts this Option subject to all the terms and conditions of the Plan and this
Stock Option Grant. Optionee acknowledges that there may be adverse tax
consequences upon exercise of this Option or disposition of the Shares and that
Optionee should consult a tax adviser prior to such exercise or disposition.
_____________________________
Optionee
5
<PAGE> 14
EXHIBIT A
LXR BIOTECHNOLOGY INC.
1993 STOCK OPTION PLAN
FORM OF STOCK OPTION EXERCISE AGREEMENT
I hereby elect to purchase the number of shares of Common Stock, $0.0001 par
value per share, as set forth below:
<TABLE>
<S> <C>
Optionee:_________________________________ Number of Shares Purchased:__________________
Social Security Number:___________________ Purchase Price per Share:____________________
Address:__________________________________ Aggregate Purchase Price:____________________
Date of Option Grant:________________________
Type of Option: [ ] Incentive Stock Option Exact Name of Title to Shares:_______________
[ ] Nonqualified Stock Option _____________________________________________
_____________________________________________
</TABLE>
Optionee hereby delivers to the Company the Aggregate Purchase Price,
to the extent permitted in the Grant, as follows (check as applicable and
complete):
[ ] in cash (by check) in the amount of $__________, receipt of which is
acknowledged by the Company;
[ ] by delivery of _________ fully-paid, nonassessable and vested shares
of the common stock of the Company owned by Optionee for at least six
(6) months prior to the date hereof (and which have been paid for
within the meaning of SEC Rule 144), or obtained by Optionee in the
open public market, and owned free and clear of all liens, claims,
encumbrances or security interests, valued at the current Fair Market
Value of $________ per share;
[ ] by cancellation of indebtedness of the Company to Optionee in the
amount of $_________;
[ ] by the waiver hereby of compensation due or accrued for services
rendered in the amount of $___________;
[ ] through a "same-day-sale" commitment, delivered herewith, from Optionee
and the NASD Dealer named therein, in the amount of $_________; or
[ ] through a "margin" commitment, delivered herewith from Optionee and the
NASD Dealer named therein, in the amount of $___________.
TAX CONSEQUENCES. OPTIONEE UNDERSTANDS THAT OPTIONEE MAY SUFFER ADVERSE
TAX CONSEQUENCES AS A RESULT OF OPTIONEE'S PURCHASE OR DISPOSITION OF THE
SHARES. OPTIONEE REPRESENTS THAT OPTIONEE HAS CONSULTED WITH ANY TAX
CONSULTANT(S) OPTIONEE DEEMS ADVISABLE IN CONNECTION WITH THE PURCHASE OR
DISPOSITION OF THE SHARES AND THAT OPTIONEE IS NOT RELYING ON THE COMPANY FOR
ANY TAX ADVICE.
ENTIRE AGREEMENT. The Plan and Grant are incorporated herein by
reference. This Exercise Agreement, the Plan and the Grant constitute the entire
agreement of the parties and supersede in their entirety all prior undertakings
and agreements of the Company and Optionee with respect to the subject matter
hereof, and is governed by Delaware law except for that body of law pertaining
to conflict of laws.
Date:_________________________ ______________________________
Signature of Optionee
<PAGE> 1
Exhibit 10.38
MASTER LOAN AND SECURITY AGREEMENT
THIS AGREEMENT dated as of May 13, 1997, is made by LXR
Biotechnology Inc. (the "Borrower"), a Delaware corporation having its principal
place of business and chief executive office at 1401 Marina Way South, Richmond,
CA 94804, in favor of Transamerica Business Credit Corporation, a Delaware
corporation (the "Lender"), having its principal office at Riverway II, West
Office Tower, 9399 West Higgins Road, Rosemont, Illinois 60018.
WHEREAS, the Borrower has requested that the Lender make Loans
to it from time to time; and
WHEREAS, the Lender has agreed to make such Loans on the terms
and conditions of this Agreement.
NOW, THEREFORE, in consideration of the premises and to induce
the Lender to extend credit, the Borrower hereby agrees with the Lender as
follows:
SECTION 1. DEFINITIONS.
As used herein, the following terms shall have the following
meanings, and shall be equally applicable to both the singular and plural forms
of the terms defined:
Agreement shall mean this Master Loan and Security Agreement together with all
schedules and exhibits hereto, as amended, supplemented, or otherwise modified
from time to time.
Applicable Law shall mean the laws of the State of Illinois (or any other
jurisdiction whose laws are mandatorily applicable notwithstanding the parties'
choice of Illinois law) or the laws of the United States of America, whichever
laws allow the greater interest, as such laws now exist or may be changed or
amended or come into effect in the future.
Business Day shall mean any day other than a Saturday, Sunday, or public holiday
or the equivalent for banks in New York City.
Code shall have the meaning specified in Section 8(d).
Collateral shall have the meaning specified in Section 2.
Collateral Access Agreement shall mean any landlord waiver, mortgagee waiver,
bailee letter, or similar acknowledgment of any warehouseman or processor in
possession of any Equipment, in each case substantially in the form of Exhibit
A.
Effective Date shall mean the date on which all of the conditions specified in
Section 3.3 shall have been satisfied.
Equipment shall have the meaning specified in Section 2.
Event of Default shall mean any event specified in Section 7.
Financial Statements shall have the meaning specified in Section 6.1.
GAAP shall mean generally accepted accounting principles in the United States of
America, as in effect from time to time.
<PAGE> 2
Loans shall mean the loans and financial accommodations made by the Lender to
the Borrower in accordance with the terms of this Agreement and the Notes.
Loan Documents shall mean, collectively, this Agreement, the Notes, and all
other documents, agreements, certificates, instruments, and opinions executed
and delivered in connection herewith and therewith, as the same may be modified,
extended, restated, or supplemented from time to time.
Material Adverse Change shall mean, with respect to any Person, a material
adverse change in the business, prospects, operations, results of operations,
assets, liabilities, or condition (financial or otherwise) of such Person taken
as a whole.
Material Adverse Effect shall mean, with respect to any Person, a material
adverse effect on the business, prospects, operations, results of operations,
assets, liabilities, or condition (financial or otherwise) of such Person taken
as a whole.
Note shall mean each Promissory Note made by the Borrower in favor of the
Lender, as amended, supplemented, or otherwise modified from time to time, in
each case substantially in the form of Exhibit B.
Obligations shall mean all indebtedness, obligations, and liabilities of the
Borrower under the Notes and under this Agreement, whether on account of
principal, interest, indemnities, fees (including, without limitation,
attorneys' fees, remarketing fees, origination fees, collection fees, and all
other professionals' fees), costs, expenses, taxes, or otherwise.
Permitted Liens shall mean such of the following as to which no enforcement,
collection, execution, levy, or foreclosure proceeding shall have been
commenced: (a) liens for taxes, assessments, and other governmental charges or
levies or the claims or demands of landlords, carriers, warehousemen, mechanics,
laborers, materialmen, and other like Persons arising by operation of law in the
ordinary course of business for sums which are not yet due and payable, or liens
which are being contested in good faith by appropriate proceedings diligently
conducted and with respect to which adequate reserves are maintained to the
extent required by GAAP; (b) deposits or pledges to secure the payment of
workmen's compensation, unemployment insurance, or other social security
benefits or obligations, public or statutory obligations, surety or appeal
bonds, bid or performance bonds, or other obligations of a like nature incurred
in the ordinary course of business; (c) licenses, restrictions, or covenants for
or on the use of the Equipment which do not materially impair either the use of
the Equipment in the operation of the business of the Borrower or the value of
the Equipment; and (d) attachment or judgment liens that do not constitute an
Event of Default.
Person shall mean any individual, sole proprietorship, partnership, joint
venture, trust, unincorporated organization, association, corporation,
institution, entity, party, or government (including any division, agency, or
department thereof), and the successors, heirs, and assigns of each.
Schedule shall mean each Schedule in the form of Schedule A hereto delivered by
the Borrower to the Lender from time to time.
Solvent means, with respect to any Person, that as of the date as to which such
Person's solvency is measured:
(a) the fair saleable value of its assets is in excess of the
total amount of its liabilities (including contingent liabilities as valued in
accordance with GAAP) as they become absolute and matured;
(b) it has sufficient capital to conduct its business; and
(c) it is able generally to meet its debts as they mature.
Taxes shall have the meaning specified in Section 5.5.
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<PAGE> 3
SECTION 2. CREATION OF SECURITY INTEREST; COLLATERAL. The
Borrower hereby assigns and grants to the Lender a continuing general, first
priority lien on, and security interest in, all the Borrower's right, title, and
interest in and to the collateral described in the next sentence (the
"Collateral") to secure the payment and performance of all the Obligations. The
Collateral consists of all of Borrower's equipment, furniture, fixtures and
tenant improvements, including, without limitation, equipment set forth on all
the Schedules delivered from time to time under the terms of this Agreement (the
"Equipment"), together with all present and future additions, parts,
accessories, attachments, substitutions, repairs, improvements, and replacements
thereof or thereto, and any and all proceeds thereof, including, without
limitation, proceeds of insurance and all manuals, blueprints, warranties, and
records in connection therewith, all rights against suppliers, warrantors,
manufacturers, sellers, or others in connection therewith, and together with all
substitutes for any of the foregoing.
SECTION 3. THE CREDIT FACILITY.
SECTION 3.1. BORROWINGS. Each Loan shall be in an amount
not less than $100,000.00, and in no event shall the sum of the aggregate Loans
made exceed the amount of the Lender's written commitment to the Borrower in
effect from time to time. Notwithstanding anything herein to the contrary, the
Lender shall be obligated to make the initial Loan and each other Loan only
after the Lender, in its sole discretion, determines that the applicable
conditions for borrowing contained in Sections 3.3 and 3.4 are satisfied. The
timing and financial scope of Lender's obligation to make Loans hereunder are
limited as set forth in a commitment letter executed by Lender and Borrower,
dated as of April 15, 1997 and attached hereto as Exhibit C (the "Commitment
Letter").
SECTION 3.2. APPLICATION OF PROCEEDS. The Borrower shall
not directly or indirectly use any proceeds of the Loans, or cause, assist,
suffer, or permit the use of any proceeds of the Loans, for any purpose other
than for the purchase, acquisition, installation, or upgrading of Equipment or
the reimbursement of the Borrower for its purchase, acquisition, installation,
or upgrading of Equipment.
SECTION 3.3. CONDITIONS TO INITIAL LOAN.
(a) The obligation of the Lender to make the initial Loan is
subject to the Lender's receipt of the following, each dated the date of the
initial Loan or as of an earlier date acceptable to the Lender, in form and
substance satisfactory to the Lender and its counsel:
(i) completed requests for information (Form UCC-11)
listing all effective Uniform Commercial Code financing
statements naming the Borrower as debtor and all tax lien,
judgment, and litigation searches for the Borrower as the
Lender shall deem necessary or desirable;
(ii) Uniform Commercial Code financing statements
(Form UCC-1) duly executed by the Borrower (naming the Lender
as secured party and the Borrower as debtor and in form
acceptable for filing in all jurisdictions that the Lender
deems necessary or desirable to perfect the security interests
granted to it hereunder) and, if applicable, termination
statements or other releases duly filed in all jurisdictions
that the Lender deems necessary or desirable to perfect and
protect the priority of the security interests granted to it
hereunder in the Equipment related to such initial Loan;
(iii) a Note duly executed by the Borrower evidencing
the amount of such Loan;
(iv) a Collateral Access Agreement duly executed by
the lessor or mortgagee, as the case may be, of each premises
where the Equipment is located;
(v) certificates of insurance required under Section
5.4 of this Agreement together with loss payee endorsements
for all such policies naming the Lender as lender loss payee
and as an additional insured;
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<PAGE> 4
(vi) a copy of the resolutions of the Board of
Directors of the Borrower (or a unanimous consent of directors
in lieu thereof) authorizing the execution, delivery, and
performance of this Agreement, the other Loan Documents, and
the transactions contemplated hereby and thereby, attached to
which is a certificate of the Secretary or an Assistant
Secretary of the Borrower certifying (A) that the copy of the
resolutions is true, complete, and accurate, that such
resolutions have not been amended or modified since the date
of such certification and are in full force and effect and (B)
the incumbency, names, and true signatures of the officers of
the Borrower authorized to sign the Loan Documents to which it
is a party;
(vii) such other agreements and instruments as the
Lender deems necessary in its sole and absolute discretion in
connection with the transactions contemplated hereby; and
(viii) Borrower's audited 1996 financial statements.
(b) There shall be no pending or, to the knowledge of the
Borrower after due inquiry, threatened litigation, proceeding, inquiry, or other
action (i) seeking an injunction or other restraining order, damages, or other
relief with respect to the transactions contemplated by this Agreement or the
other Loan Documents or thereby or (ii) which affects or could affect the
business, prospects, operations, assets, liabilities, or condition (financial or
otherwise) of the Borrower, except, in the case of clause (ii), where such
litigation, proceeding, inquiry, or other action could not be expected to have a
Material Adverse Effect in the judgment of the Lender, other than the securities
litigation disclosed in the Borrower's 12/21/96 audited financial statements.
(c) The Borrower shall have paid all fees and expenses
required to be paid by it to the Lender as of such date.
(d) The security interests in the Equipment related to the
initial Loan granted in favor of the Lender under this Agreement shall have been
duly perfected and shall constitute first priority liens.
SECTION 3.4. CONDITIONS PRECEDENT TO EACH LOAN. The
obligation of the Lender to make each Loan is subject to the satisfaction of the
following conditions precedent:
(a) the Lender shall have received the documents, agreements,
and instruments set forth in Section 3.3(a)(i) through (v) applicable to such
Loan, each in form and substance satisfactory to the Lender and its counsel and
each dated the date of such Loan or as of an earlier date acceptable to the
Lender;
(b) the Lender shall have received a Schedule of the Equipment
related to such Loan, in form and substance satisfactory to the Lender and its
counsel, and the security interests in such Equipment related to such Loan
granted in favor of the Lender under this Agreement shall have been duly
perfected and shall constitute first priority liens;
(c) all representations and warranties contained in this
Agreement and the other Loan Documents shall be true and correct on and as of
the date of such Loan as if then made, other than representations and warranties
that expressly relate solely to an earlier date, in which case they shall have
been true and correct as of such earlier date;
(d) no Event of Default or event which with the giving of
notice or the passage of time, or both, would constitute an Event of Default
shall have occurred and be continuing or would result from the making of the
requested Loan as of the date of such request; and
(e) the Borrower shall be deemed to have hereby reaffirmed and
ratified all security interests, liens, and other encumbrances heretofore
granted by the Borrower to the Lender.
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<PAGE> 5
SECTION 4. THE BORROWER'S REPRESENTATIONS AND WARRANTIES.
SECTION 4.1. GOOD STANDING; QUALIFIED TO DO BUSINESS. The
Borrower (a) is duly organized, validly existing, and in good standing under the
laws of the State of its organization, (b) has the power and authority to own
its properties and assets and to transact the businesses in which it is
presently, or proposes to be, engaged, and (c) is duly qualified and authorized
to do business and is in good standing in every jurisdiction in which the
failure to be so qualified could have a Material Adverse Effect on (i) the
Borrower, (ii) the Borrower's ability to perform its obligations under the Loan
Documents, or (iii) the rights of the Lender hereunder.
SECTION 4.2. DUE EXECUTION, ETC. The execution, delivery,
and performance by the Borrower of each of the Loan Documents to which it is a
party are within the powers of the Borrower, do not contravene the
organizational documents, if any, of the Borrower, and do not (a) violate any
law or regulation, or any order or decree of any court or governmental
authority, (b) conflict with or result in a breach of, or constitute a default
under, any material indenture, mortgage, or deed of trust or any material lease,
agreement, or other instrument binding on the Borrower or any of its properties,
or (c) require the consent, authorization by, or approval of or notice to or
filing or registration with any governmental authority or other Person. This
Agreement is, and each of the other Loan Documents to which the Borrower is or
will be a party, when delivered hereunder or thereunder, will be, the legal,
valid, and binding obligation of the Borrower enforceable against the Borrower
in accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency, or similar laws affecting creditors' rights generally
and by general principles of equity.
SECTION 4.3. SOLVENCY; NO LIENS. The Borrower is Solvent
and will be Solvent upon the completion of all transactions contemplated to
occur hereunder (including, without limitation, the Loan to be made on the
Effective Date); the security interests granted herein constitute and shall at
all times constitute the first and only liens on the Collateral other than
Permitted Liens; and the Borrower is, or will be at the time additional
Collateral is acquired by it, the absolute owner of the Collateral with full
right to pledge, sell, consign, transfer, and create a security interest
therein, free and clear of any and all claims or liens in favor of any other
Person other than Permitted Liens.
SECTION 4.4. NO JUDGMENTS, LITIGATION. No judgments are
outstanding against the Borrower nor is there now pending or, to the best of the
Borrower's knowledge after diligent inquiry, threatened any litigation,
contested claim, or governmental proceeding by or against the Borrower except
judgments and pending or threatened litigation, contested claims, and
governmental proceedings which would not, in the aggregate, have a Material
Adverse Effect on the Borrower.
SECTION 4.5. NO DEFAULTS. The Borrower is not in default
or has not received a notice of default under any material contract, lease, or
commitment to which it is a party or by which it is bound. The Borrower knows of
no dispute regarding any contract, lease, or commitment which could have a
Material Adverse Effect on the Borrower.
SECTION 4.6. COLLATERAL LOCATIONS. On the date hereof,
each item of the Collateral is located at the place of business specified in the
applicable Schedule.
SECTION 4.7. NO EVENTS OF DEFAULT. No Event of Default has
occurred and is continuing nor has any event occurred which, with the giving of
notice or the passage of time, or both, would constitute an Event of Default.
SECTION 4.8. NO LIMITATION ON LENDER'S RIGHTS. Except as
permitted herein, none of the Collateral is subject to contractual obligations
that may restrict or inhibit the Lender's rights or abilities to sell or dispose
of the Collateral or any part thereof after the occurrence of an Event of
Default.
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<PAGE> 6
SECTION 4.9.PERFECTION AND PRIORITY OF SECURITY INTEREST.
This Agreement creates a valid and, upon completion of all required filings of
financing statements, perfected first priority and exclusive security interest
in the Collateral, securing the payment of all the Obligations.
SECTION 4.10. MODEL AND SERIAL NUMBERS. The Schedules set
forth the true and correct model number and serial number of each item of
Equipment that constitutes Collateral.
SECTION 4.11. ACCURACY AND COMPLETENESS OF INFORMATION.
All data, reports, and information heretofore, contemporaneously, or hereafter
furnished by or on behalf of the Borrower in writing to the Lender or for
purposes of or in connection with this Agreement or any other Loan Document, or
any transaction contemplated hereby or thereby, are or will be true and accurate
in all material respects on the date as of which such data, reports, and
information are dated or certified and not incomplete by omitting to state any
material fact necessary to make such data, reports, and information not
misleading at such time. There are no facts now known to the Borrower which
individually or in the aggregate would reasonably be expected to have a Material
Adverse Effect and which have not been specified herein, in the Financial
Statements, or in any certificate, opinion, or other written statement
previously furnished by the Borrower to the Lender.
SECTION 4.12. PRICE OF EQUIPMENT. The cost of each item of
Equipment does not exceed the fair and usual price for such type of equipment
purchased in like quantity and reflects all discounts, rebates and allowances
for the Equipment (including, without limitation, discounts for advertising,
prompt payment, testing, or other services) given to the Borrower by the
manufacturer, supplier, or any other person.
SECTION 5. COVENANTS OF THE BORROWER.
SECTION 5.1. EXISTENCE, ETC. The Borrower shall: (a)
retain its existence and its current yearly accounting cycle, (b) maintain in
full force and effect all licenses, bonds, franchises, leases, trademarks,
patents, contracts, and other rights necessary or desirable to the profitable
conduct of its business unless the failure to do so could not reasonably be
expected to have a Material Adverse Effect on the Borrower, (c) continue in, and
limit its operations to, the same general lines of business as those presently
conducted by it, and (d) comply with all applicable laws and regulations of any
federal, state, or local governmental authority, except for such laws and
regulations the violations of which would not, in the aggregate, have a Material
Adverse Effect on the Borrower.
SECTION 5.2. NOTICE TO THE LENDER. As soon as possible,
and in any event within five days after the Borrower learns of the following,
the Borrower will give written notice to the Lender of (a) any proceeding
instituted or threatened to be instituted by or against the Borrower in any
federal, state, local, or foreign court or before any commission or other
regulatory body (federal, state, local, or foreign) involving a sum, together
with the sum involved in all other similar proceedings, in excess of $50,000 in
the aggregate, (b) any contract that is terminated or amended and which has had
or could reasonably be expected to have a Material Adverse Effect on the
Borrower, (c) the occurrence of any Material Adverse Change with respect to the
Borrower, and (d) the occurrence of any Event of Default or event or condition
which, with notice or lapse of time or both, would constitute an Event of
Default, together with a statement of the action which the Borrower has taken or
proposes to take with respect thereto.
SECTION 5.3. MAINTENANCE OF BOOKS AND RECORDS. The
Borrower will maintain books and records pertaining to the Collateral in such
detail, form, and scope as the Lender shall require in its commercially
reasonable judgment. The Borrower agrees that the Lender or its agents may enter
upon the Borrower's premises at any time and from time to time, upon reasonable
notice and during normal business hours, and at any time upon the occurrence and
continuance of an Event of Default, for the purpose of inspecting the Collateral
and any and all records pertaining thereto.
SECTION 5.4. INSURANCE. The Borrower will maintain
insurance on the Collateral under such policies of insurance, with such
insurance companies, in such amounts, and covering such risks as are at all
times satisfactory to the Lender. All such policies shall be made payable to the
Lender, in case of loss, under a
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<PAGE> 7
standard non-contributory "lender" or "secured party" clause and are to contain
such other provisions as the Lender may reasonably require to protect the
Lender's interests in the Collateral and to any payments to be made under such
policies. Certificates of insurance policies are to be delivered to the Lender,
premium prepaid, with the loss payable endorsement in the Lender's favor, and
shall provide for not less than thirty days' prior written notice to the Lender,
of any alteration or cancellation of coverage. If the Borrower fails to maintain
such insurance, the Lender may arrange for (at the Borrower's expense and
without any responsibility on the Lender's part for) obtaining the insurance.
Unless the Lender shall otherwise agree with the Borrower in writing, the Lender
shall have the sole right, in the name of the Lender or the Borrower, to file
claims under any insurance policies, to receive and give acquittance for any
payments that may be payable thereunder, and to execute any endorsements,
receipts, releases, assignments, reassignments, or other documents that may be
necessary to effect the collection, compromise, or settlement of any claims
under any such insurance policies.
SECTION 5.5. TAXES. The Borrower will pay, when due, all
taxes, assessments, claims, and other charges ("Taxes") lawfully levied or
assessed against the Borrower or the Collateral other than taxes that are being
diligently contested in good faith by the Borrower by appropriate proceedings
promptly instituted and for which an adequate reserve is being maintained by the
Borrower in accordance with GAAP. If any Taxes remain unpaid after the date
fixed for the payment thereof, or if any lien shall be claimed therefor, then,
without notice to the Borrower, but on the Borrower's behalf, the Lender may pay
such Taxes, and the amount thereof shall be included in the Obligations.
SECTION 5.6. BORROWER TO DEFEND COLLATERAL AGAINST CLAIMS;
FEES ON COLLATERAL. The Borrower will defend the Collateral against all claims
and demands of all Persons at any time claiming the same or any interest
therein. The Borrower will not permit any notice creating or otherwise relating
to liens on the Collateral or any portion thereof to exist or be on file in any
public office other than Permitted Liens. The Borrower shall promptly pay, when
payable, all transportation, storage, and warehousing charges and license fees,
registration fees, assessments, charges, permit fees, and taxes (municipal,
state, and federal) which may now or hereafter be imposed upon the ownership,
leasing, renting, possession, sale, or use of the Collateral, other than taxes
on or measured by the Lender's income and fees, assessments, charges, and taxes
which are being contested in good faith by appropriate proceedings diligently
conducted and with respect to which adequate reserves are maintained to the
extent required by GAAP.
SECTION 5.7. NO CHANGE OF LOCATION, STRUCTURE, OR
IDENTITY. The Borrower will not (a) change the location of its chief executive
office or establish any place of business other than those specified herein or
(b) move or permit the movement of any item of Collateral from the location
specified in the applicable Schedule, except that the Borrower may change its
chief executive office and keep Collateral at other locations within the United
States provided that the Borrower has delivered to the Lender (i) prior written
notice thereof and (ii) duly executed financing statements and other agreements
and instruments (all in form and substance satisfactory to the Lender) necessary
or, in the opinion of the Lender, desirable to perfect and maintain in favor of
the Lender a first priority security interest in the Collateral. Notwithstanding
anything to the contrary in the immediately preceding sentence, the Borrower may
keep any Collateral consisting of motor vehicles or rolling stock at any
location in the United States provided that the Lender's security interest in
any such Collateral is conspicuously marked on the certificate of title thereof
and the Borrower has complied with the provisions of Section 5.9.
SECTION 5.8. USE OF COLLATERAL; LICENSES; REPAIR. The
Collateral shall be operated by competent, qualified personnel in connection
with the Borrower's business purposes, for the purpose for which the Collateral
was designed and in accordance with applicable operating instructions, laws, and
government regulations, and the Borrower shall use every reasonable precaution
to prevent loss or damage to the Collateral from fire and other hazards. The
Collateral shall not be used or operated for personal, family, or household
purposes. The Borrower shall procure and maintain in effect all orders,
licenses, certificates, permits, approvals, and consents required by federal,
state, or local laws or by any governmental body, agency, or authority in
connection with the delivery, installation, use, and operation of the
Collateral. The Borrower shall keep all of the Equipment in a satisfactory state
of repair and satisfactory operating condition in accordance with industry
standards, and will make all repairs and replacements when and where necessary
and practical. The Borrower will not waste or destroy the Equipment or any part
thereof, and will not be negligent in the care or use thereof. The Equipment
shall not be
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<PAGE> 8
annexed or affixed to or become part of any realty without the Lender's prior
written consent.
SECTION 5.9. FURTHER ASSURANCES. The Borrower will,
promptly upon request by the Lender, execute and deliver or use its best efforts
to obtain any document required by the Lender (including, without limitation,
warehouseman or processor disclaimers, mortgagee waivers, landlord disclaimers,
or subordination agreements with respect to the Obligations and the Collateral),
give any notices, execute and file any financing statements, mortgages, or other
documents (all in form and substance satisfactory to the Lender), mark any
chattel paper, deliver any chattel paper or instruments to the Lender, and take
any other actions that are necessary or, in the opinion of the Lender, desirable
to perfect or continue the perfection and the first priority of the Lender's
security interest in the Collateral, to protect the Collateral against the
rights, claims, or interests of any Persons, or to effect the purposes of this
Agreement. The Borrower hereby authorizes the Lender to file one or more
financing or continuation statements, and amendments thereto, relating to all or
any part of the Collateral without the signature of the Borrower where permitted
by law. A carbon, photographic, or other reproduction of this Agreement or any
financing statement covering the Collateral or any part thereof shall be
sufficient as a financing statement where permitted by law. To the extent
required under this Agreement, the Borrower will pay all costs incurred in
connection with any of the foregoing.
SECTION 5.10. NO DISPOSITION OF COLLATERAL. The Borrower
will not in any way hypothecate or create or permit to exist any lien, security
interest, charge, or encumbrance on or other interest in any of the Collateral,
except for the lien and security interest granted hereby and Permitted Liens
which are junior to the lien and security interest of the Lender, and the
Borrower will not sell, transfer, assign, pledge, collaterally assign, exchange,
or otherwise dispose of any of the Collateral other than in a de minimus
transaction in the ordinary course of business. In the event the Collateral, or
any part thereof, is sold, transferred, assigned, exchanged, or otherwise
disposed of in violation of these provisions, the security interest of the
Lender shall continue in such Collateral or part thereof notwithstanding such
sale, transfer, assignment, exchange, or other disposition, and the Borrower
will hold the proceeds thereof in a separate account for the benefit of the
Lender. Following such a sale, the Borrower will transfer such proceeds to the
Lender in kind.
SECTION 5.11. NO LIMITATION ON LENDER'S RIGHTS. The
Borrower will not enter into any contractual obligations which may restrict or
inhibit the Lender's rights or ability to sell or otherwise dispose of the
Collateral or any part thereof.
SECTION 5.12. PROTECTION OF COLLATERAL. Upon notice to the
Borrower (provided that if no Event of Default has occurred and is continuing
the Lender need not give any notice), the Lender shall have the right at any
time to make any payments and do any other acts the Lender may deem necessary to
protect its security interests in the Collateral, including, without limitation,
the rights to satisfy, purchase, contest, or compromise any encumbrance, charge,
or lien which, in the reasonable judgment of the Lender, appears to be prior to
or superior to the security interests granted hereunder, and appear in, and
defend any action or proceeding purporting to affect its security interests in,
or the value of, any of the Collateral. The Borrower hereby agrees to reimburse
the Lender for all payments made and expenses incurred to protect its rights
under this Agreement including reasonable fees, expenses, and disbursements of
attorneys and paralegals (including the allocated costs of in-house counsel)
acting for the Lender, including any of the foregoing payments under, or acts
taken to protect its security interests in, any of the Collateral, which amounts
shall be secured under this Agreement, and agrees it shall be bound by any
payment made or act taken by the Lender hereunder absent the Lender's gross
negligence or willful misconduct. The Lender shall have no obligation to make
any of the foregoing payments or perform any of the foregoing acts.
SECTION 5.13. DELIVERY OF ITEMS. The Borrower will (a)
promptly (but in no event later than three Business Days) after its receipt
thereof, deliver to the Lender any documents or certificates of title issued
with respect to any property included in the Collateral, and any promissory
notes, letters of credit or instruments related to or otherwise in connection
with any property included in the Collateral, which in any such
8
<PAGE> 9
case come into the possession of the Borrower, or shall cause the issuer thereof
to deliver any of the same directly to the Lender, in each case with any
necessary endorsements in favor of the Lender and (b) deliver to the Lender as
soon as available copies of any and all press releases and other similar
communications issued by the Borrower.
SECTION 5.14. SOLVENCY. The Borrower shall be and remain
Solvent at all times.
SECTION 5.15. FUNDAMENTAL CHANGES. The Borrower shall not
(a) amend or modify its name, unless the Borrower delivers to the Lender thirty
days prior to any such proposed amendment or modification written notice of such
amendment or modification and within ten days before such amendment or
modification delivers executed Uniform Commercial Code financing statements (in
form and substance satisfactory to the Lender) or (b) merge or consolidate with
any other entity, in each case without the Lender's prior written consent which
shall not be unreasonably withheld.
SECTION 5.16. ADDITIONAL REQUIREMENTS. The Borrower shall
take all such further actions and execute all such further documents and
instruments as the Lender may reasonably request.
SECTION 6. FINANCIAL STATEMENTS. Until the payment and
satisfaction in full of all Obligations, the Borrower shall deliver to the
Lender the following financial information:
SECTION 6.1. ANNUAL FINANCIAL STATEMENTS. As soon as
available, but not later than 120 days after the end of each fiscal year of the
Borrower and its consolidated subsidiaries, the consolidated balance sheet,
income statement, and statements of cash flows and shareholders equity for the
Borrower and its consolidated subsidiaries (the "Financial Statements") for such
year, reported on by independent certified public accountants without an adverse
qualification; and
SECTION 6.2. QUARTERLY FINANCIAL STATEMENTS. As soon as
available, but not later than 60 days after the end of each of the first three
fiscal quarters in any fiscal year of the Borrower and its consolidated
subsidiaries, the Financial Statements for such fiscal quarter, together with a
certification duly executed by a responsible officer of the Borrower that such
Financial Statements have been prepared in accordance with GAAP and are fairly
stated in all material respects (subject to normal year-end audit adjustments).
SECTION 7. EVENTS OF DEFAULT. The occurrence of any of the
following events shall constitute an Event of Default hereunder:
(a) the Borrower shall fail to pay within five days of
when due any amount required to be paid by the Borrower under or in connection
with any Note and this Agreement;
(b) any representation or warranty made or deemed made by
the Borrower under or in connection with any Loan Document or any Financial
Statement shall prove to have been false or incorrect in any material respect
when made;
(c) the Borrower shall fail to perform or observe (i) any
of the terms, covenants or agreements contained in Sections 5.4, 5.7, 5.10,
5.14, or 5.15 hereof or (ii) any other material term, covenant, or agreement
contained in any Loan Document (other than the other Events of Default specified
in this Section 7) and such failure remains unremedied for the earlier of
fifteen days from (A) the date on which the Lender has given the Borrower
written notice of such failure and (B) the date on which the Borrower knew or
should have known of such failure;
(d) any material provision of any Loan Document to which
the Borrower is a party shall for any reason cease to be valid and binding on
the Borrower, or the Borrower shall so state;
(e) dissolution, liquidation, winding up, or cessation of
the Borrower's business, failure of the Borrower generally to pay its debts as
they mature, admission in writing by the Borrower of its inability generally to
pay its debts as they mature, or calling of a meeting of the Borrower's
creditors for purposes of
9
<PAGE> 10
compromising any of the Borrower's debts;
(f) the commencement by or against the Borrower of any
bankruptcy, insolvency, arrangement, reorganization, receivership, or similar
proceedings under any federal or state law and, in the case of any such
involuntary proceeding, such proceeding remains undismissed or unstayed for
forty-five days following the commencement thereof, or any action by the
Borrower is taken authorizing any such proceedings;
(g) an assignment for the benefit of creditors is made by
the Borrower, whether voluntary or involuntary, the appointment of a trustee,
custodian, receiver, or similar official for the Borrower or for any substantial
property of the Borrower, or any action by the Borrower authorizing any such
proceeding;
(h) the Borrower shall default in (i) the payment of
principal or interest on any indebtedness in excess of $50,000 (other than the
Obligations) beyond the period of grace, if any, provided in the instrument or
agreement under which such indebtedness was created; or (ii) the observance or
performance of any other agreement or condition relating to any such
indebtedness or contained in any instrument or agreement relating thereto, or
any other event shall occur or condition exist, the effect of which default or
other event or condition is to cause, or to permit the holder or holders of such
indebtedness to cause, with the giving of notice if required, such indebtedness
to become due prior to its stated maturity;
(i) the Borrower suffers or sustains a Material Adverse
Change;
(j) any tax lien, other than a Permitted Lien, is filed of
record against the Borrower and is not bonded or discharged within five Business
Days;
(k) any judgment which has had or could reasonably be
expected to have a Material Adverse Effect on the Borrower and such judgment
shall not be stayed, vacated, bonded, or discharged within sixty days;
(l) any material covenant, agreement, or obligation, as
determined in the sole discretion of the Lender, made by the Borrower and
contained in or evidenced by any of the Loan Documents shall cease to be
enforceable, or shall be determined to be unenforceable, in accordance with its
terms; the Borrower shall deny or disaffirm the Obligations under any of the
Loan Documents or any liens granted in connection therewith; or any liens
granted on any of the Collateral in favor of the Lender shall be determined to
be void, voidable, or invalid, or shall not be given the priority contemplated
by this Agreement.
SECTION 8. REMEDIES. If any Event of Default shall have
occurred and be continuing:
(a) The Lender may, without prejudice to any of its other
rights under any Loan Document or Applicable Law, declare all Obligations to be
immediately due and payable (except with respect to any Event of Default set
forth in Section 7(f) hereof, in which case all Obligations shall automatically
become immediately due and payable without necessity of any declaration) without
presentment, representation, demand of payment, or protest, which are hereby
expressly waived.
(b) The Lender may take possession of the Collateral and,
for that purpose may enter, with the aid and assistance of any person or
persons, any premises where the Collateral or any part hereof is, or may be
placed, and remove the same.
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<PAGE> 11
(c) The obligation of the Lender, if any, to make
additional Loans or financial accommodations of any kind to the Borrower shall
immediately terminate.
(d) The Lender may exercise in respect of the Collateral,
in addition to other rights and remedies provided for herein (or in any Loan
Document) or otherwise available to it, all the rights and remedies of a secured
party under the applicable Uniform Commercial Code (the "Code") whether or not
the Code applies to the affected Collateral and also may (i) require the
Borrower to, and the Borrower hereby agrees that it will at its expense and upon
request of the Lender forthwith, assemble all or part of the Collateral as
directed by the Lender and make it available to the Lender at a place to be
designated by the Lender that is reasonably convenient to both parties and (ii)
without notice except as specified below, sell the Collateral or any part
thereof in one or more parcels at public or private sale, at any of the Lender's
offices or elsewhere, for cash, on credit, or for future delivery, and upon such
other terms as the Lender may deem commercially reasonable. The Borrower agrees
that, to the extent notice of sale shall be required by law, at least ten days'
notice to the Borrower of the time and place of any public sale or the time
after which any private sale is to be made shall constitute reasonable
notification. The Lender shall not be obligated to make any sale of Collateral
regardless of notice of sale having been given. The Lender may adjourn any
public or private sale from time to time by announcement at the time and place
fixed therefor, and such sale may, without further notice, be made at the time
and place to which it was so adjourned.
(e) All cash proceeds received by the Lender in respect of
any sale of, collection from, or other realization upon all or any part of the
Collateral may, in the discretion of the Lender, be held by the Lender as
collateral for, or then or at any time thereafter applied in whole or in part by
the Lender against, all or any part of the Obligations in such order as the
Lender shall elect. Any surplus of such cash or cash proceeds held by the Lender
and remaining after the full and final payment of all the Obligations shall be
paid over to the Borrower or to such other Person to which the Lender may be
required under applicable law, or directed by a court of competent jurisdiction,
to make payment of such surplus.
SECTION 9. MISCELLANEOUS PROVISIONS.
SECTION 9.1. NOTICES. Except as otherwise provided herein,
all notices, approvals, consents, correspondence, or other communications
required or desired to be given hereunder shall be given in writing and shall be
delivered by overnight courier, hand delivery, or certified or registered mail,
postage prepaid, if to the Lender, then to Transamerica Technology Finance
Division, 76 Batterson Park Road, Farmington, Connecticut 06032, Attention:
Assistant Vice President, Lease Administration, with a copy to the Lender at
Riverway II, West Office Tower, 9399 West Higgins Road, Rosemont, Illinois
60018, Attention: Legal Department, and if to the Borrower, then to LXR
Biotechnology, Inc., 1401 Marina Way South, Richmond, CA 94804, Attention: Vice
President Finance and Administration, or such other address as shall be
designated by the Borrower or the Lender to the other party in accordance
herewith. All such notices and correspondence shall be effective when received.
SECTION 9.2. HEADINGS. The headings in this Agreement are
for purposes of reference only and shall not affect the meaning or construction
of any provision of this Agreement.
SECTION 9.3. ASSIGNMENTS. The Borrower shall not have the
right to assign any Note or this Agreement or any interest therein unless the
Lender shall have given the Borrower prior written consent and the Borrower and
its assignee shall have delivered assignment documentation in form and substance
satisfactory to the Lender in its sole discretion. The Lender may assign its
rights and delegate its obligations under any Note or this Agreement.
SECTION 9.4. AMENDMENTS, WAIVERS, AND CONSENTS. Any
amendment or waiver of any provision of this Agreement and any consent to any
departure by the Borrower from any provision of this Agreement shall be
effective only by a writing signed by the Lender and shall bind and benefit the
Borrower and the Lender and their respective successors and assigns, subject, in
the case of the Borrower, to the first sentence of Section 9.3.
11
<PAGE> 12
SECTION 9.5. INTERPRETATION OF AGREEMENT. Time is of the
essence in each provision of this Agreement of which time is an element. All
terms not defined herein or in a Note shall have the meaning set forth in the
applicable Code, except where the context otherwise requires. To the extent a
term or provision of this Agreement conflicts with any Note, or any term or
provision thereof, and is not dealt with herein with more specificity, this
Agreement shall control with respect to the subject matter of such term or
provision. Acceptance of or acquiescence in a course of performance rendered
under this Agreement shall not be relevant in determining the meaning of this
Agreement even though the accepting or acquiescing party had knowledge of the
nature of the performance and opportunity for objection.
SECTION 9.6. CONTINUING SECURITY INTEREST. This Agreement
shall create a continuing security interest in the Collateral and shall (i)
remain in full force and effect until the indefeasible payment in full of the
Obligations, (ii) be binding upon the Borrower and its successors and assigns
and (iii) inure, together with the rights and remedies of the Lender hereunder,
to the benefit of the Lender and its successors, transferees, and assigns.
SECTION 9.7. REINSTATEMENT. To the extent permitted by
law, this Agreement and the rights and powers granted to the Lender hereunder
and under the Loan Documents shall continue to be effective or be reinstated if
at any time any amount received by the Lender in respect of the Obligations is
rescinded or must otherwise be restored or returned by the Lender upon the
insolvency, bankruptcy, dissolution, liquidation, or reorganization of the
Borrower or upon the appointment of any receiver, intervenor, conservator,
trustee, or similar official for the Borrower or any substantial part of its
assets, or otherwise, all as though such payments had not been made.
SECTION 9.8. SURVIVAL OF PROVISIONS. All representations,
warranties, and covenants of the Borrower contained herein shall survive the
execution and delivery of this Agreement, and shall terminate only upon the full
and final payment and performance by the Borrower of the Obligations secured
hereby.
SECTION 9.9. INDEMNIFICATION. The Borrower agrees to
indemnify and hold harmless the Lender and its directors, officers, agents,
employees, and counsel from and against any and all costs, expenses, claims, or
liability incurred by the Lender or such Person hereunder and under any other
Loan Document or in connection herewith or therewith, unless such claim or
liability shall be due to willful misconduct or gross negligence on the part of
the Lender or such Person.
SECTION 9.10. COUNTERPARTS; TELECOPIED SIGNATURES. This
Agreement may be executed in counterparts, each of which when so executed and
delivered shall be an original, but both of which shall together constitute one
and the same instrument. This Agreement and each of the other Loan Documents and
any notices given in connection herewith or therewith may be executed and
delivered by telecopier or other facsimile transmission all with the same force
and effect as if the same was a fully executed and delivered original manual
counterpart.
SECTION 9.11. SEVERABILITY. In case any provision in or
obligation under this Agreement or any Note or any other Loan Document shall be
invalid, illegal, or unenforceable in any jurisdiction, the validity, legality,
and enforceability of the remaining provisions or obligations, or of such
provision or obligation in any other jurisdiction, shall not in any way be
affected or impaired thereby.
SECTION 9.12. DELAYS; PARTIAL EXERCISE OF REMEDIES. No
delay or omission of the Lender to exercise any right or remedy hereunder,
whether before or after the happening of any Event of Default, shall impair any
such right or shall operate as a waiver thereof or as a waiver of any such Event
of Default. No single or partial exercise by the Lender of any right or remedy
shall preclude any other or further exercise thereof, or preclude any other
right or remedy.
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<PAGE> 13
SECTION 9.13. ENTIRE AGREEMENT. The Borrower and the
Lender agree that this Agreement, the Schedule hereto, and the Commitment Letter
are the complete and exclusive statement and agreement between the parties with
respect to the subject matter hereof, superseding all proposals and prior
agreements, oral or written, and all other communications between the parties
with respect to the subject matter hereof. Should there exist any inconsistency
between the terms of the Commitment Letter and this Agreement, the terms of this
Agreement shall prevail.
SECTION 9.14. SETOFF. In addition to and not in limitation
of all rights of offset that the Lender may have under Applicable Law, and
whether or not the Lender has made any demand or the Obligations of the Borrower
have matured, the Lender shall have the right to appropriate and apply to the
payment of the Obligations of the Borrower all deposits and other obligations
then or thereafter owing by the Lender to or for the credit or the account of
the Borrower.
SECTION 9.15. WAIVER OF JURY TRIAL. THE BORROWER AND THE
LENDER IRREVOCABLY WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING,
OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT, ANY OTHER LOAN
DOCUMENT, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
SECTION 9.16. GOVERNING LAW. THE VALIDITY, INTERPRETATION,
AND ENFORCEMENT OF THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF ILLINOIS WITHOUT GIVING EFFECT TO THE
CONFLICT OF LAW PRINCIPLES THEREOF.
SECTION 9.17. VENUE; SERVICE OF PROCESS. ANY LEGAL ACTION
OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE
BROUGHT IN THE COURTS OF THE STATE OF ILLINOIS SITUATED IN COOK COUNTY, OR OF
THE UNITED STATES OF AMERICA FOR THE NORTHERN DISTRICT OF ILLINOIS, AND, BY
EXECUTION AND DELIVERY OF THIS AGREEMENT, THE BORROWER HEREBY ACCEPTS FOR ITSELF
AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION
OF THE AFORESAID COURTS. THE BORROWER HEREBY IRREVOCABLY WAIVES, IN CONNECTION
WITH ANY SUCH ACTION OR PROCEEDING, (a) ANY OBJECTION, INCLUDING, WITHOUT
LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF
FORUM NON CONVENIENS, THAT IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY
SUCH ACTION OR PROCEEDING IN SUCH RESPECTIVE JURISDICTIONS AND (b) THE RIGHT TO
INTERPOSE ANY NONCOMPULSORY SETOFF, COUNTERCLAIM, OR CROSS-CLAIM. THE BORROWER
IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OF ANY OF THE AFOREMENTIONED
COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY
REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO THE BORROWER AT THE ADDRESS
FOR IT SPECIFIED IN SECTION 9.1 HEREOF. NOTHING HEREIN SHALL AFFECT THE RIGHT OF
THE LENDER TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE
LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE BORROWER IN ANY OTHER
JURISDICTION, SUBJECT IN EACH INSTANCE TO THE PROVISIONS HEREOF WITH RESPECT TO
RIGHTS AND REMEDIES.
13
<PAGE> 14
IN WITNESS WHEREOF, the undersigned Borrower has caused
this Agreement to be duly executed and delivered by its proper and duly
authorized officer as of the date first set forth above.
LXR BIOTECHNOLOGY INC.
By:/s/ Shelli Geer
--------------------------------------
Name: Shelli J. Geer
Title: VP - Finance and Administration
Accepted as of the
16th day of May, 1997
TRANSAMERICA BUSINESS CREDIT CORPORATION
By:/s/Gerald A. Michaud
-------------------------------------
Name: Gerald A. Michaud
Title: Senior Vice President
14
<PAGE> 15
COLLATERAL ACCESS AGREEMENT Exhibit A
TRANSAMERICA BUSINESS CREDIT CORPORATION
9399 West Higgins Road, Suite 600
Rosemont, Illinois 60018
May 5, 1997
Marina Westshore Partners
c/o Penterra Company
1391 Marina Way South
Richmond, CA 94804
Re: LXR Biotechnology, Inc.
Ladies and Gentlemen:
We have been asked by LXR Biotechnology, Inc., a Delaware
corporation (the "Company") to finance certain equipment (the "Equipment"),
which will be located at the address identified on Schedule A (the "Premises").
The obligations of the Company to us will be secured by, among other things, the
Equipment. We understand that the Company leases the Premises from you pursuant
to a lease or is the owner of the Premises, which is subject to a lien in favor
of you pursuant to a mortgage (such lease or mortgage being referred to as the
"Agreement").
In connection with the extensions of credit to be made to the
Company, Transamerica Business Credit Corporation, ("Transamerica") will be
making customary Uniform Commercial Code filings on behalf of Transamerica with
respect to the Equipment. In addition, we request your acknowledgment and
cooperation for preserving and enforcing Transamerica's security interests. To
expedite the consummation of the proposed financing, we would appreciate your
execution of this letter.
At the Company's request, to enable it to finance the
Equipment, and for other good and valuable consideration, you confirm and
acknowledge the following matters to us:
1. You will allow us, or our auditors or other designees,
reasonable access to the Premises to inspect the Equipment from time to time. In
addition, upon our request, during the term of the Agreement, you will grant us
and our designees access to the Premises for 90 days at reasonable times to show
the Equipment to potential purchasers and to remove the Equipment from the
Premises.
2. In the event that the Company defaults in its obligations
under the Agreement or you desire or elect to terminate or exercise remedies
under the Agreement for any reason, including a default by the Company under the
Agreement, you will notify us in writing of this fact prior to your terminating
or exercising remedies under the Agreement and retaking possession of the
Premises. You hereby confirm and acknowledge to us that you do not and will not
have any claim to or lien on any of the Equipment, whether such Equipment
constitutes fixtures or personal property.
We would appreciate your confirming to us your agreement to
the foregoing provisions of this letter by signing and returning to us this
letter at our address shown above.
Very truly yours,
TRANSAMERICA BUSINESS CREDIT CORPORATION
By: /s/ Gerald Michaud
-------------------------------------
Name: Gerald Michaud
Title: Senior Vice President
ACKNOWLEDGED AND AGREED:
By: /s/ Richard Poe
-------------------------------------
Name: Richard R. Poe
Title: President
<PAGE> 16
Exhibit B
PROMISSORY NOTE
Date: May 16, 1997
FOR VALUE RECEIVED, the undersigned promises to pay to the
order of Transamerica Business Credit Corporation or its assigns (the "Payee")
at its office located at Riverway II, West Office Tower, 9399 West Higgins Road,
Rosemont, Illinois 60018, or at such other place as the Payee or the holder
hereof may designate in writing, the principal amount of Three Hundred Thirty
Thousand One Hundred Forty Nine and 03/100 Dollars ($330,149.03) received by the
undersigned, plus interest, in lawful money of the United States and in
immediately available funds. This Note shall be payable commencing with a first
installment of Twenty Five Thousand Eight Hundred Fifty Seven and 92/100 Dollars
($25,857.92) payable on June 1, 1997 and thereafter in 34 consecutive equal
monthly installments of Ten Thousand Two Hundred Seventy Six and 88/100 Dollars
($10,276.88) commencing July 1, 1997 and a final balloon payment of Thirty Three
Thousand Fourteen and 90/100 Dollars ($33,014.90) ,equal to ten percent (10%) of
the original principal amount, on May 1, 2000 together with any other amounts
due and owing to Lender. No amount of principal paid or prepaid hereunder may be
reborrowed.
This Note is one of the Notes referred to in the Security
Agreement dated as of May 13, 1997 (as amended, supplemented or otherwise
modified from time to time, the "Agreement"), between the undersigned and the
Payee and is subject and entitled to all provisions and benefits thereof.
Capitalized terms used but not defined herein shall have the meanings set forth
in the Agreement.
If any installment of this Note is not paid within five
business days after its due date, the undersigned agrees to pay on demand, in
addition to the amount of such installment, an amount equal to 5% of such
installment, but only to the extent permitted by Applicable Law.
The undersigned shall have the right to prepay this Note at
any time on thirty days' prior written notice to the Payee. On the date of any
such prepayment, the undersigned shall pay, if such prepayment is made on or
after June 1, 1998 an amount equal to the present value of the remaining
payments (principal and interest) due hereunder discounted at 6% simple interest
per annum, together with all interest, fees and other amounts payable on the
amount so prepaid or in connection therewith to the date of such prepayment. Any
prepayments shall be applied to the installments hereof in the inverse order of
maturity.
Upon the maturity of this Note or the acceleration of the
maturity of this Note in accordance with the terms of the Agreement, the entire
unpaid principal amount on this Note, together with all interest, fees and other
amounts payable hereon or in connection herewith, shall be immediately due and
payable without further notice or demand, with interest on all such amounts at a
rate not to exceed the lawful limit, from the date of such maturity or
acceleration, as the case may be, until all such amounts have been paid.
If any payment on this Note becomes payable on a day other
than a Business Day, the maturity thereof shall be extended to the next
succeeding Business Day.
The undersigned hereby waives diligence, demand, presentment,
protest and notice of any kind, and assents to extensions of the time of
payment, release, surrender or substitution of security, or forbearance or other
indulgence, without notice. The undersigned agrees to pay all amounts under this
Note without offset, deduction, claim, counterclaim, defense or recoupment, all
of which are hereby waived.
The Payee, the undersigned and any other parties to the Loan
Documents intend to contract in strict compliance with applicable usury law from
time to time in effect. In furtherance thereof such Persons stipulate and agree
that none of the terms and provisions contained in the Loan Documents shall ever
be construed to create a contract to pay, for the use, forbearance or detention
of money, interest in excess of the maximum amount of interest permitted to be
charged by Applicable Law from time to time in effect. Neither the undersigned
nor any present or future guarantors, endorsers, or other Persons hereafter
becoming liable for payment of any
<PAGE> 17
Obligation shall ever be liable for unearned interest thereon or shall ever be
required to pay interest thereon in excess of the maximum amount that may be
lawfully charged under Applicable Law from time to time in effect, and the
provisions of this paragraph shall control over all other provisions of the Loan
Documents which may be in conflict or apparent conflict herewith. The Payee
expressly disavows any intention to charge or collect excessive unearned
interest or finance charges in the event the maturity of any Obligation is
accelerated. If (a) the maturity of any Obligation is accelerated for any
reason, (b) any Obligation is prepaid and as a result any amounts held to
constitute interest are determined to be in excess of the legal maximum, or (c)
the Payee or any other holder of any or all of the Obligations shall otherwise
collect amounts which are determined to constitute interest which would
otherwise increase the interest on any or all of the Obligations to an amount in
excess of that permitted to be charged by Applicable Law then in effect, then
all sums determined to constitute interest in excess of such legal limit shall,
without penalty, be promptly applied to reduce the then outstanding principal of
the related Obligations or, at the Payee's or such holder's option, promptly
returned to the undersigned upon such determination. In determining whether or
not the interest paid or payable, under any specific circumstance, exceeds the
maximum amount permitted under Applicable Law, the Payee and the undersigned
(and any other payors thereof) shall to the greatest extent permitted under
Applicable Law, (i) characterize any non-principal payment as an expense, fee or
premium rather than as interest, (ii) exclude voluntary prepayments and the
effects thereof, and (iii) amortize, prorate, allocate, and spread the total
amount of interest through the entire contemplated term of this Note in
accordance with the amount outstanding from time to time thereunder and the
maximum legal rate of interest from time to time in effect under Applicable Law
in order to lawfully charge the maximum amount of interest permitted under
Applicable Law.
This Note may not be changed, modified or terminated orally,
but only by an agreement in writing signed by the undersigned and the Payee or
any holder hereof.
The undersigned shall, upon demand, pay to the Payee all costs
and expenses paid or incurred by the Payee in (A) enforcing or defending its
rights under or in respect of this Note or any of the other Loan Documents, (B)
collecting any of the liabilities by the undersigned to the Payee or otherwise
administering the Loan Documents, (C) foreclosing or otherwise collecting upon
any collateral and (D) obtaining any legal, accounting or other advice in
connection with any of the foregoing.
This Note shall be binding upon the successors and assigns of
the undersigned and inure to the benefit of the Payee and its successors,
endorsees and assigns. If any term or provision of this Note shall be held
invalid, illegal or unenforceable, the validity of all other terms and
provisions hereof shall in no way be affected thereby.
EACH OF THE UNDERSIGNED AND, BY ITS ACCEPTANCE HEREOF, THE
PAYEE HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES (TO THE FULLEST
EXTENT PERMITTED BY APPLICABLE LAW) ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY OF
ANY DISPUTE ARISING UNDER OR RELATING TO THIS NOTE AND AGREES THAT ANY SUCH
DISPUTE SHALL BE TRIED BEFORE A JUDGE SITTING WITHOUT A JURY.
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF ILLINOIS WITHOUT GIVING EFFECT TO PRINCIPLES OF
CONFLICTS OF LAW.
LXR BIOTECHNOLOGY, INC.
By:
------------------------------
Name:
Title:
-2-
<PAGE> 18
Exhibit C
April 15, 1997
Ms. Shelli Geer
Vice President Finance and Administration
LXR Biotechnology, Inc. REVISED
1401 Marina Way South
Richmond, California 94804
Dear Shelli:
Transamerica Business Credit Corporation-Technology Finance Division ("Lender)
is pleased to offer financing for the Equipment described below to LXR
Biotechnology Inc. ("Borrower"). This Commitment supersedes all prior
correspondence, proposals, and oral or other communications relating to lending
arrangements between Borrower and Lender.
The outline of this offer is as follows:
Borrower: LXR Biotechnology, Inc.
Lender: Transamerica Business Credit
Corporation-Technology Finance Division ("TFD")
and/or its affiliates, successors or assigns.
Guarantors: None
Equipment: All of Borrower's existing and new Scientific
Laboratory Equipment, Computer Equipment,
Furniture and Fixtures, Tenant Improvements and
all cash and non-cash proceeds (including
insurance proceeds) of all of the foregoing
(the "Collateral").
Loans: Lender shall make one loan for existing
equipment and/or tenant improvements and one or
a series of loans for new equipment, "New
Equipment Loans" (each a "Loan", unless
referred to individually).
Amount of Loan: Not to exceed $200,000 for existing Collateral
and/or tenant improvements and $500,000 for new
Equipment Loans.
Equipment Location: 1401 Marina Way South, Richmond, California
94804.
Anticipated Delivery: Through December 31, 1997.
Termination of Commitment: This commitment will terminate if the first
delivery of Equipment and funding is not
completed on or before May 15, 1997.
Loan Term
Commencement: Upon funding each Loan and/or New Equipment
Loan, which will occur upon delivery of the
Equipment or upon each completion of deliveries
of items of Equipment with aggregate cost of
not less than $100,000, and shall be no later
than
<PAGE> 19
December 31, 1997.
Term: From each Loan Term Commencement until 36
months from the first day of the month next
following or coincident with that Loan Term
Commencement.
Repayment Terms: Monthly Payments equal to 3.10% of the
Loan shall be payable monthly in advance. The
first and last month's payment shall be payable
upon funding each Loan and/or New Equipment
Loan.
As of the date of each Loan Term Commencement,
the Monthly Payments shall be fixed for the
term. A schedule of the actual Monthly Payments
shall be provided by the Lender following each
Loan Term Commencement.
The Lender shall adjust the Monthly Payments as
of the date of each Loan Term Commencement
based on any change in the weekly average of
the interest rates of three-year U.S. Treasury
Notes over 6.16% (the "Base Rate") to the week
preceding the date of each Loan Term
Commencement, as published in the Wall Street
Journal. For each basis point change from the
Base Rate, the rate implicit in the Monthly
Payments will be adjusted by one basis point
and a new Monthly Payment calculated.
Balloon Payment: At the end of the 36 month Loan and each 36
month New Equipment Loan, the Borrower shall be
obligated to make one final balloon payment
equal to 10% of the original principal amount
of such Loan or New Equipment Loan, plus any
other amounts due and owing to Lender.
Interim Payments: In the event that the Loan Term Commencement is
not on the first day of the month, Interim
Payments shall accrue from each Loan Term
Commencement until the next following first day
of a month and shall be payable at the end of
that Month. Interim Payments shall be
calculated at the daily equivalent of the
currently adjusted Monthly Payment.
Documentation: The documentation relating to this transaction
shall implement the transaction contemplated by
this commitment letter to the satisfaction of
Lender and its counsel, shall contain
conditions precedent, representations,
warranties and covenants by Borrower and shall
provide for events of defaults and remedies,
all as required by Lender for transactions of
this type. The documentation shall include, but
not be limited to, the terms and conditions
described in this commitment letter.
Insurance: Prior to any delivery of Equipment, the
Borrower shall furnish a certificate of
insurance acceptable to the Lender in amount,
type and term, covering the Equipment including
primary, all risk, physical damage, property
damage and bodily injury with appropriate loss
payee and additional insured endorsements in
favor of Lender.
Representation and There shall be no actual or threatened conflict
Additional Covenants: with, or violation of, any regulatory statute,
standard or rule relating to the Borrower, its
present or future operations, or the Equipment.
All information supplied by the Borrower shall
be correct and shall not omit any statement
necessary to make the information supplied not
to be misleading. There shall be no material
breach of the representations and warranties of
the Borrower in the Loan. The representations
shall include that the cost of each item of
Equipment does not exceed the fair and usual
price for such type of equipment purchased in
like quantity and reflects all discounts,
rebates and allowances for the Equipment
2
<PAGE> 20
given to Borrower by the manufacturer, supplier
or any other person including, without
limitation, discounts for advertising, prompt
payment, testing or other services.
Warrant Coverage: In consideration of the Lender's commitment to
enter into this loan transaction in accordance
with the terms herein, Lender will be granted
warrants to purchase 27,000 shares of the
common stock of the Borrower. The exercise
price will be $2.1875 per share. The warrants
will be exercisable from the date their
issuance and have a term of 7 years. Lender
shall have the option to exercise the Warrants
without payment of the exercise price and
receive only that number of shares which
represents the value of the difference between
the fair market value of the shares and the
exercise price (i.e., "net issuance" or
"cashless exercise"). Each Warrant will be
adjusted for stock splits, combinations, stock
dividends, reclassifications and exchanges, and
will enjoy other rights no less favorable than
the rights of any other holder of the
Borrower's capital stock. The shares issuable
under each Warrant will have piggyback
registration rights, including standard
indemnification and other provisions. Lender
may retain or transfer the Warrants or the
shares issuable thereunder, in whole or in
part, whether or not Lender sells the Loan or
any participation therein.
Conditions Precedent to 1. No material adverse change in the
Lending: financial condition, operations or
prospects of the Borrower prior to
funding.
2. Completion of the documentation and final
terms of the proposed financing
satisfactory to Lender and Lender's
counsel.
3. Results of all due diligence, including
lien, judgment and tax search and other
matters Lender may request shall be
satisfactory to Lender and Lender's
counsel.
4. Receipt by Lender of duly executed loan
documentation in form and substance
satisfactory to Lender and its counsel.
5. Lender shall receive a valid and perfected
first priority lien and security interest
in the Collateral of Borrower and Lender
shall have received satisfactory evidence
that there are no liens on any Collateral
except as expressly permitted herein.
6. Evidence of repayments of existing
indebtedness relating to any of Lender's
Collateral, and UCC and other lien
releases, as Lender deems appropriate.
7. Receipt and satisfactory review (which
will be at the sole discretion of Lender)
of final December 31, 1996 audited
financials for Borrower.
Fees and Expenses: The Borrower and Lender shall each be
responsible for its expenses (including
expenses of counsel and/or accountants) in
connection with the transaction.
Law: This letter and the proposed Loan are intended
to be governed by and construed in accordance
with Illinois law without regard to its
conflict of law provisions.
Indemnity: Borrower agrees to indemnify and to hold
harmless Lender and its officers, directors and
employees against all claims, damages,
liabilities and expenses which may be incurred
by or asserted against any such person in
connection with or arising out of this letter
and the transactions contemplated hereby, other
than for claims, damages, liability, and
expense resulting from such person's gross
negligence or willful misconduct.
Confidentiality: This letter is delivered to you with the
understanding that neither it nor its substance
shall be disclosed publicly or privately to any
third person except those who are in a
confidential relationship to you (such as your
legal counsel and accountants), or where the
same is required by law.
3
<PAGE> 21
Upon completion of the initial takedown by
Borrower, the Borrower will no longer be
required to obtain Lender's prior written
consent to disclose the transaction
contemplated hereby.
Conditions of Acceptance: This Commitment Letter is intended to be a
summary of the most important elements of the
agreement to enter into a financing transaction
with Borrower, and is subject to all
requirements and conditions contained in loan
documentation proposed by Lender or its counsel
in the course of closing the financing
described herein. Not every provision that
imposes duties, obligations, burdens, or
limitations on Borrower is contained herein,
but shall be contained in the final loan
documentation satisfactory to Lender and its
counsel.
EACH OF THE PARTIES HERETO IRREVOCABLY AND
UNCONDITIONALLY WAIVES ALL RIGHT TO TRIAL BY
JURY IN ANY SUIT, ACTION, PROCEEDING OR
COUNTERCLAIM ARISING OUT OF OR RELATED TO THIS
LETTER OR THE TRANSACTION DESCRIBED IN THIS
LETTER.
Commitment Fee: The $10,000 Application Fee previously paid by
Borrower (all of which is presently held by
Meier Mitchell & Company, LLC) shall be applied
to the Commitment Fee. The Commitment Fee shall
be applied to the first monthly payments under
the Loan on a prorata basis until it has been
exhausted.
Commitment Expiration: This Commitment shall expire on April 11, 1997,
unless prior thereto either extended in writing
by the Lender or accepted as provided below by
the Borrower.
Should you have any questions, please call me. If you wish to accept this
Commitment, please so indicate by signing and returning the enclosed duplicate
copy of this letter to me by April 11, 1997.
Yours truly,
TRANSAMERICA BUSINESS CREDIT
CORPORATION-TECHNOLOGY FINANCE
DIVISION
By /s/ GARY MORO
------------------------------
Gary Moro
Vice President
Credit
Accepted this 15th day of April, 1997
LXR BIOTECHNOLOGY, INC.
By /s/ SHELLI GEER
- -----------------------------------
Name: Shelli J. Geer
Title: VP-Finance and Administration
4
<PAGE> 1
Exhibit 10.39
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD OR OFFERED FOR SALE
IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER
SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR THE AVAILABILITY OF AN
EXEMPTION FROM REGISTRATION UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES
LAWS.
NO.
STOCK SUBSCRIPTION WARRANT
TO PURCHASE COMMON STOCK OF
LXR BIOTECHNOLOGY INC. (THE "COMPANY")
DATE OF INITIAL ISSUANCE: MAY 13, 1997
THIS CERTIFIES THAT for value received, MEIER MITCHELL & COMPANY, LLC
or its registered assigns (hereinafter called the "Holder") is entitled to
purchase from the Company, at any time during the Term of this Warrant, Nine
Thousand (9,000) shares of common stock, $0.0001 par value, of the Company (the
"Common Stock"), at the Warrant Price, payable in lawful money of the United
States of America to be paid upon the exercise hereof. The exercise of this
Warrant shall be subject to the provisions, limitations and restrictions herein
contained, and may be exercised in whole or in part.
SECTION 1. DEFINITIONS.
For all purposes of this Warrant, the following terms shall have the
meanings indicated:
COMMON STOCK - shall mean and include the Company's authorized Common
Stock, $0.0001 par value, as constituted at the date hereof.
EXCHANGE ACT - shall mean the Securities Exchange Act of 1934, as
amended from time to time.
SECURITIES ACT - the Securities Act of 1933, as amended.
TERM OF THIS WARRANT - shall mean the period beginning on the date of
initial issuance hereof and ending on May __, 2004.
WARRANT PRICE - $2.1875 per share, subject to adjustment in accordance
with Section 5 hereof.
<PAGE> 2
WARRANTS - this Warrant and any other Warrant or Warrants issued
pursuant to a Commitment Letter dated April 15, 1997 executed by the Company and
Transamerica Business Credit Corporation (the "Commitment Letter") to the
original holder of this Warrant, or any transferees from such original holder or
this Holder.
WARRANT SHARES - shares of Common Stock purchased or purchasable by the
Holder of this Warrant upon the exercise hereof.
SECTION 2. EXERCISE OF WARRANT.
2.1. PROCEDURE FOR EXERCISE OF WARRANT. To exercise this Warrant in
whole or in part (but not as to any fractional share of Common Stock), the
Holder shall deliver to the Company at its office referred to in Section 12
hereof at any time and from time to time during the Term of this Warrant: (i)
the Notice of Exercise in the form attached hereto, (ii) cash, certified or
official bank check payable to the order of the Company, wire transfer of funds
to the Company's account, or evidence of any indebtedness of the Company to the
Holder (or any combination of any of the foregoing) in the amount of the Warrant
Price for each share being purchased, and (iii) this Warrant. Notwithstanding
any provisions herein to the contrary, if the Current Market Price (as defined
in Section 5) is greater than the Warrant Price (at the date of calculation, as
set forth below), in lieu of exercising this Warrant as hereinabove permitted,
the Holder may elect to receive shares of Common Stock equal to the value (as
determined below) of this Warrant (or the portion thereof being canceled) by
surrender of this Warrant at the office of the Company referred to in Section 12
hereof, together with the Notice of Exercise, in which event the Company shall
issue to the Holder that number of shares of Common Stock computed using the
following formula:
CS = WCS x (CMP-WP)
--------------
CMP
Where
CS equals the number of shares of Common Stock to be issued to
the Holder
WCS equals the number of shares of Common Stock purchasable under
the Warrant or, if only a portion of the Warrant is being
exercised, the portion of the Warrant being exercised (at the
date of such calculation)
CMP equals the Current Market Price (at the date of such
calculation)
WP equals the Warrant Price (as adjusted to the date of such
calculation)
In the event of any exercise of the rights represented by this Warrant, a
certificate or certificates for the shares of Common Stock so purchased,
registered in the name of the Holder or such other name or names as may be
designated by the Holder, shall be delivered to the Holder hereof within a
reasonable time, not exceeding fifteen (15) days, after the rights represented
by this Warrant shall have been so exercised; and, unless this Warrant has
expired, a new Warrant representing the number of shares (except a remaining
fractional share), if any, with respect to which this Warrant
- 2 -
<PAGE> 3
shall not then have been exercised shall also be issued to the Holder hereof
within such time. The person in whose name any certificate for shares of Common
Stock is issued upon exercise of this Warrant shall for all purposes be deemed
to have become the holder of record of such shares on the date on which the
Warrant was surrendered and payment of the Warrant Price and any applicable
taxes was made, irrespective of the date of delivery of such certificate, except
that, if the date of such surrender and payment is a date when the stock
transfer books of the Company are closed, such person shall be deemed to have
become the holder of such shares at the close of business on the next succeeding
date on which the stock transfer books are open.
2.2. TRANSFER RESTRICTION LEGEND. Each certificate for Warrant Shares
shall bear the following legend (and any additional legend required by (i) any
applicable state securities laws and (ii) any securities exchange upon which
such Warrant Shares may, at the time of such exercise, be listed) on the face
thereof unless at the time of exercise such Warrant Shares shall be registered
under the Securities Act:
"The shares represented by this certificate have not been registered
under the Securities Act of 1933, as amended, and may not be sold or
transferred in the absence of such registration or an exemption
therefrom under said Act."
Any certificate issued at any time in exchange or substitution for any
certificate bearing such legend (except a new certificate issued upon completion
of a public distribution under a registration statement of the securities
represented thereby) shall also bear such legend unless, in the opinion of
counsel for the holder thereof (which counsel shall be reasonably satisfactory
to counsel for the Company) the securities represented thereby are not, at such
time, required by law to bear such legend.
SECTION 3. COVENANTS AS TO COMMON STOCK. The Company covenants and agrees that
all shares of Common Stock that may be issued upon the exercise of the rights
represented by this Warrant will, upon issuance, be validly issued, fully paid
and nonassessable, and free from all taxes, liens and charges with respect to
the issue thereof. The Company further covenants and agrees that it will pay
when due and payable any and all federal and state taxes which may be payable in
respect of the issue of this Warrant or any Common Stock or certificates
therefor issuable upon the exercise of this Warrant. The Company further
covenants and agrees that the Company will at all times have authorized and
reserved, free from preemptive rights, a sufficient number of shares of Common
Stock to provide for the exercise of the rights represented by this Warrant. The
Company further covenants and agrees that if any shares of capital stock to be
reserved for the purpose of the issuance of shares upon the exercise of this
Warrant require registration with or approval of any governmental authority
under any federal or state law before such shares may be validly issued or
delivered upon exercise, then the Company will in good faith and as
expeditiously as possible endeavor to secure such registration or approval, as
the case may be. If and so long as the Common Stock issuable upon the exercise
of this Warrant is listed on any national securities exchange, the Company will,
if permitted by the rules of such exchange, list within a reasonable time after
the initial issuance of this Warrant and keep listed on such exchange, upon
official notice of issuance, all shares of such Common Stock issuable upon
exercise of this Warrant.
- 3 -
<PAGE> 4
SECTION 4. ADJUSTMENT OF NUMBER OF SHARES. Upon each adjustment of the Warrant
Price as provided in Section 5, the Holder shall thereafter be entitled to
purchase, at the Warrant Price resulting from such adjustment, the number of
shares (calculated to the nearest tenth of a share) obtained by multiplying the
Warrant 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 Warrant Price resulting from such
adjustment.
SECTION 5. ADJUSTMENT OF WARRANT PRICE. The Warrant Price shall be subject to
adjustment from time to time as follows:
(i) If, at any time during the Term of this Warrant, the number of
shares of Common Stock outstanding is increased by a stock dividend payable in
shares of Common Stock or by a subdivision or split-up of shares of Common
Stock, then, following the record date fixed for the determination of holders of
Common Stock entitled to receive such stock dividend, subdivision or split-up,
the Warrant Price shall be appropriately decreased so that the number of shares
of Common Stock issuable upon the exercise hereof shall be increased in
proportion to such increase in outstanding shares.
(ii) If, at any time during the Term of this Warrant, the number of
shares of Common Stock outstanding is decreased by a combination of the
outstanding shares of Common Stock, then, following the record date for such
combination, the Warrant Price shall appropriately increase so that the number
of shares of Common Stock issuable upon the exercise hereof shall be decreased
in proportion to such decrease in outstanding shares.
(iii) In case, at any time during the Term of this Warrant, the Company
shall declare a cash dividend upon its Common Stock payable otherwise than out
of earnings or earned surplus or shall distribute to holders of its Common Stock
shares of its capital stock (other than Common Stock), stock or other securities
of other persons, evidences of indebtedness issued by the Company or other
persons, assets (excluding cash dividends and distributions) or options or
rights (excluding options to purchase and rights to subscribe for Common Stock
or other securities of the Company convertible into or exchangeable for Common
Stock), then, in each such case, immediately following the record date fixed for
the determination of the holders of Common Stock entitled to receive such
dividend or distribution, the Warrant Price in effect thereafter shall be
determined by multiplying the Warrant Price in effect immediately prior to such
record date by a fraction of which the numerator shall be an amount equal to the
difference of (x) the Current Market Price of one share of Common Stock minus
(y) the fair market value (as determined by the Board of Directors of the
Company, whose determination shall be conclusive) of the stock, securities,
evidences of indebtedness, assets, options or rights so distributed in respect
of one share of Common Stock, and of which the denominator shall be such Current
Market Price.
(iv) All calculations under this Section 5 shall be made to the nearest
cent or to the nearest one-tenth (1/10) of a share, as the case may be.
(v) For the purpose of any computation pursuant to this Section 5, the
Current Market Price at any date of one share of Common Stock shall be deemed to
be the average of the daily closing prices for the 15 consecutive business days
ending no more than 5 business days before the day in
- 4 -
<PAGE> 5
question (as adjusted for any stock dividend, split, combination or
reclassification that took effect during such 15 business day period). The
closing price for each day shall be the last reported sales price regular way
or, in case no such reported sales took place on such day, the average of the
last reported bid and asked prices regular way, in either case on the principal
national securities exchange on which the Common Stock is listed or admitted to
trading or as reported by Nasdaq (or if the Common Stock is not at the time
listed or admitted for trading on any such exchange or if prices of the Common
Stock are not reported by Nasdaq then such price shall be equal to the average
of the last reported bid and asked prices on such day as reported by The
National Quotation Bureau Incorporated or any similar reputable quotation and
reporting service, if such quotation is not reported by The National Quotation
Bureau Incorporated); provided, however, that if the Common Stock is not traded
in such manner that the quotations referred to in this clause (v) are available
for the period required hereunder, the Current Market Price shall be determined
in good faith by the Board of Directors of the Company or, if such determination
cannot be made, by a nationally recognized independent investment banking firm
selected by the Board of Directors of the Company (or if such selection cannot
be made, by a nationally recognized independent investment banking firm selected
by the American Arbitration Association in accordance with its rules).
(vi) Whenever the Warrant Price shall be adjusted as provided in
Section 5, the Company shall prepare a statement showing the facts requiring
such adjustment and the Warrant Price that shall be in effect after such
adjustment. The Company shall cause a copy of such statement to be sent by mail,
first class postage prepaid, to each Holder of this Warrant at its, his or her
address appearing on the Company's records. Where appropriate, such copy may be
given in advance and may be included as part of the notice required to be mailed
under the provisions of subsection (viii) of this Section 5.
(vii) Adjustments made pursuant to clauses (i), (ii) and (iii) above
shall be made on the date such dividend, subdivision, split-up, combination or
distribution, as the case may be, is made, and shall become effective at the
opening of business on the business day next following the record date for the
determination of stockholders entitled to such dividend, subdivision, split-up,
combination or distribution.
(viii) In the event the Company shall propose to take any action of the
types described in clauses (i), (ii), or (iii) of this Section 5, the Company
shall forward, at the same time and in the same manner, to the Holder of this
Warrant such notice, if any, which the Company shall give to the holders of
capital stock of the Company.
(ix) In any case in which the provisions of this Section 5 shall
require that an adjustment shall become effective immediately after a record
date for an event, the Company may defer until the occurrence of such event
issuing to the Holder of all or any part of this Warrant which is exercised
after such record date and before the occurrence of such event the additional
shares of capital stock issuable upon such exercise by reason of the adjustment
required by such event over and above the shares of capital stock issuable upon
such exercise before giving effect to such adjustment exercise; provided,
however, that the Company shall deliver to such Holder a due bill or other
appropriate instrument evidencing such Holder's right to receive such additional
shares upon the occurrence of the event requiring such adjustment.
- 5 -
<PAGE> 6
SECTION 6. OWNERSHIP.
6.1. OWNERSHIP OF THIS WARRANT. The Company may deem and treat the
person in whose name this Warrant is registered as the holder and owner hereof
(notwithstanding any notations of ownership or writing hereon made by anyone
other than the Company) for all purposes and shall not be affected by any notice
to the contrary until presentation of this Warrant for registration of transfer
as provided in this Section 6.
6.2. TRANSFER AND REPLACEMENT. Subject to compliance with applicable
securities laws, this Warrant and all rights hereunder are transferable in whole
or in part upon the books of the Company by the Holder hereof in person or by
duly authorized attorney, and a new Warrant or Warrants, of the same tenor as
this Warrant but registered in the name of the transferee or transferees (and in
the name of the Holder, if a partial transfer is effected) shall be made and
delivered by the Company upon surrender of this Warrant duly endorsed, at the
office of the Company referred to in Section 12 hereof. Upon receipt by the
Company of evidence reasonably satisfactory to it of the loss, theft or
destruction, and, in such case, of indemnity or security reasonably satisfactory
to it, and upon surrender of this Warrant if mutilated, the Company will make
and deliver a new Warrant of like tenor, in lieu of this Warrant; provided that
if the Holder hereof is an instrumentality of a state or local government or an
institutional holder or a nominee for such an instrumentality or institutional
holder an irrevocable agreement of indemnity by such Holder shall be sufficient
for all purposes of this Section 6, and no evidence of loss or theft or
destruction shall be necessary. This Warrant shall be promptly cancelled by the
Company upon the surrender hereof in connection with any transfer or
replacement. Except as otherwise provided above, in the case of the loss, theft
or destruction of a Warrant, the Company shall pay all expenses, taxes and other
charges payable in connection with any transfer or replacement of this Warrant,
other than stock transfer taxes (if any) payable in connection with a transfer
of this Warrant, which shall be payable by the Holder. Holder will not transfer
this Warrant and the rights hereunder except in compliance with federal and
state securities laws.
SECTION 7. MERGERS, CONSOLIDATION, SALES. In the case of any proposed
consolidation or merger of the Company with another entity, or the proposed sale
of all or substantially all of its assets to another person or entity, or any
proposed reorganization or reclassification of the capital stock of the Company,
then, as a condition of such consolidation, merger, sale, reorganization or
reclassification, lawful and adequate provision shall be made whereby the Holder
of this Warrant shall thereafter have the right to receive upon the basis and
upon the terms and conditions specified herein, in lieu of the shares of the
Common Stock of the Company immediately theretofore purchasable hereunder, such
shares of stock, securities or assets as may (by virtue of such consolidation,
merger, sale, reorganization or reclassification) be issued or payable with
respect to or in exchange for the number of shares of such Common Stock
purchasable hereunder immediately before such consolidation, merger, sale,
reorganization or reclassification. In any such case appropriate provision shall
be made with respect to the rights and interests of the Holder of this Warrant
to the end that the provisions hereof shall thereafter be applicable as nearly
as may be, in relation to any shares of stock, securities or assets thereafter
deliverable upon the exercise of this Warrant.
- 6 -
<PAGE> 7
SECTION 8. NOTICE OF DISSOLUTION OR LIQUIDATION. In case of any distribution of
the assets of the Company in dissolution or liquidation (except under
circumstances when the foregoing Section 7 shall be applicable), the Company
shall give notice thereof to the Holder hereof and shall make no distribution to
shareholders until the expiration of thirty (30) days from the date of mailing
of the aforesaid notice and, in any case, the Holder hereof may exercise this
Warrant within thirty (30) days from the date of the giving of such notice, and
all rights herein granted not so exercised within such thirty-day period shall
thereafter become null and void.
SECTION 9. NOTICE OF EXTRAORDINARY DIVIDENDS. If the Board of Directors of the
Company shall declare any dividend or other distribution on its Common Stock
except out of earned surplus or by way of a stock dividend payable in shares of
its Common Stock, the Company shall mail notice thereof to the Holder hereof not
less than thirty (30) days prior to the record date fixed for determining
shareholders entitled to participate in such dividend or other distribution, and
the Holder hereof shall not participate in such dividend or other distribution
unless this Warrant is exercised prior to such record date. The provisions of
this Section 9 shall not apply to distributions made in connection with
transactions covered by Section 7.
SECTION 10. FRACTIONAL SHARES. Fractional shares shall not be issued upon the
exercise of this Warrant but in any case where the Holder would, except for the
provisions of this Section 10, be entitled under the terms hereof to receive a
fractional share upon the complete exercise of this Warrant, the Company shall,
upon the exercise of this Warrant for the largest number of whole shares then
called for, pay a sum in cash equal to the excess of the value of such
fractional share (determined in such reasonable manner as may be prescribed in
good faith by the Board of Directors of the Company) over the Warrant Price for
such fractional share.
SECTION 11. SPECIAL ARRANGEMENTS OF THE COMPANY. The Company covenants and
agrees that during the Term of this Warrant, unless otherwise approved by the
Holder of this Warrant:
11.1. WILL RESERVE SHARES. The Company will reserve and set apart and
have available for issuance at all times, free from preemptive or other
preferential rights, the number of shares of authorized but unissued Common
Stock deliverable upon the exercise of this Warrant.
11.2. WILL BIND SUCCESSORS. This Warrant shall be binding upon any
corporation or other person or entity succeeding to the Company by merger,
consolidation or acquisition of all or substantially all of the Company's
assets.
SECTION 12. NOTICES. Any notice or other document required or permitted to be
given or delivered to the Holder shall be delivered at, or sent by certified or
registered mail or overnight courier to, the Holder at Meier Mitchell & Company,
LLC, 4 Orinda Way, Suite 200B, Orinda, California 94563 or to such other address
as shall have been furnished to the Company in writing by the Holder. Any notice
or other document required or permitted to be given or delivered to the Company
shall be delivered at, or sent by certified or registered mail or overnight
courier to, the Company at LXR Biotechnology, Inc., 1401 Marina Way South,
Richmond, CA 94804, Attention: Vice President Finance and Administration or to
such other address as shall have been furnished in writing to the Holder by the
Company. Any notice so addressed and mailed by registered or certified mail or
sent by overnight courier shall be deemed to be given when so mailed or sent.
Any notice so
- 7 -
<PAGE> 8
addressed and otherwise delivered shall be deemed to be given when actually
received by the addressee.
SECTION 13. NO RIGHTS AS STOCKHOLDER; LIMITATION OF LIABILITY. This Warrant
shall not entitle the Holder to any of the rights of a shareholder of the
Company. No provision hereof, in the absence of affirmative action by the Holder
to purchase shares of Common Stock, and no mere enumeration herein of the rights
or privileges of the Holder, shall give rise to any liability of the Holder for
the Warrant Price hereunder or as a shareholder of the Company, whether such
liability is asserted by the Company or by creditors of the Company.
SECTION 14. LAW GOVERNING. THE VALIDITY, INTERPRETATION, AND ENFORCEMENT OF THIS
WARRANT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF ILLINOIS WITHOUT GIVING EFFECT TO THE CONFLICT OF LAW PRINCIPLES
THEREOF.
SECTION 15. MISCELLANEOUS.
(a) This Warrant and any provision hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by the
party (or any predecessor in interest thereof) against which enforcement of the
same is sought. The headings in this Warrant are for purposes of reference only
and shall not affect the meaning or construction of any of the provisions hereof
(b) All capitalized terms used herein and not otherwise
defined herein shall have the meanings ascribed to them in the Financing
Agreement.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its duly authorized officer this 13th day of May, 1997.
LXR BIOTECHNOLOGY INC.
By: /s/ Shelli Geer
----------------------------------
Title: VP - Finance and Administration
-------------------------------
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<PAGE> 9
FORM OF NOTICE OF EXERCISE
[TO BE SIGNED ONLY UPON EXERCISE OF THE WARRANT]
TO BE EXECUTED BY THE REGISTERED HOLDER
TO EXERCISE THE WITHIN WARRANT
The undersigned hereby exercises the right to purchase _________ shares
of Common Stock which the undersigned is entitled to purchase by the terms of
the within Warrant according to the conditions thereof, and herewith
[check one]
/ / makes payment of $__________ therefor; or
/ / directs the Company to issue ______ shares,
and to withhold ____ shares in lieu of
payment of the Warrant Price, as described
in Section 2.1 of the Warrant.
All shares to be issued pursuant hereto shall be issued in the name of and the
initial address of such person to be entered on the books of the Company shall
be:
The shares are to be issued in certificates of the following
denominations:
________________________________
[Type Name of Holder]
By: ____________________________
Title: _________________________
Dated: ____________________________
- 9 -
<PAGE> 10
FORM OF ASSIGNMENT
(ENTIRE)
[TO BE SIGNED ONLY UPON TRANSFER OF ENTIRE WARRANT]
TO BE EXECUTED BY THE REGISTERED HOLDER
TO TRANSFER THE WITHIN WARRANT
FOR VALUE RECEIVED ___________________________ hereby sells, assigns
and transfers unto _______________________________ all rights of the undersigned
under and pursuant to the within Warrant, and the undersigned does hereby
irrevocably constitute and appoint _______________________________ Attorney to
transfer the said Warrant on the books of the Company, with full power of
substitution.
________________________________
[Type Name of Holder]
By: ____________________________
Title: _________________________
Dated: ____________________________
NOTICE
The signature to the foregoing Assignment must correspond to the name
as written upon the face of the within Warrant in every particular, without
alteration or enlargement or any change whatsoever.
- 10 -
<PAGE> 11
FORM OF ASSIGNMENT
(PARTIAL)
[TO BE SIGNED ONLY UPON PARTIAL TRANSFER OF WARRANT]
TO BE EXECUTED BY THE REGISTERED HOLDER
TO TRANSFER THE WITHIN WARRANT
FOR VALUE RECEIVED _________________________ hereby sells, assigns and
transfers unto _______________________________ (i) the rights of the undersigned
to purchase ___ shares of Common Stock under and pursuant to the within Warrant,
and (ii) on a non-exclusive basis, all other rights of the undersigned under and
pursuant to the within Warrant, it being understood that the undersigned shall
retain, severally (and not jointly) with the transferee(s) named herein, all
rights assigned on such non-exclusive basis. The undersigned does hereby
irrevocably constitute and appoint __________________________ Attorney to
transfer the said Warrant on the books of the Company, with full power of
substitution.
________________________________
[Type Name of Holder]
By: ____________________________
Title: _________________________
Dated: ____________________________
NOTICE
The signature to the foregoing Assignment must correspond to the name
as written upon the face of the within Warrant in every particular, without
alteration or enlargement or any change whatsoever.
- 11 -
<PAGE> 1
Exhibit 10.40
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD OR OFFERED FOR SALE
IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER
SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR THE AVAILABILITY OF AN
EXEMPTION FROM REGISTRATION UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES
LAWS.
NO.
STOCK SUBSCRIPTION WARRANT
TO PURCHASE COMMON STOCK OF
LXR BIOTECHNOLOGY INC. (THE "COMPANY")
DATE OF INITIAL ISSUANCE: MAY 13, 1997
THIS CERTIFIES THAT for value received, TRANSAMERICA BUSINESS CREDIT
CORPORATION or its registered assigns (hereinafter called the "Holder") is
entitled to purchase from the Company, at any time during the Term of this
Warrant, Eighteen Thousand (18,000) shares of common stock, $0.0001 par value,
of the Company (the "Common Stock"), at the Warrant Price, payable in lawful
money of the United States of America to be paid upon the exercise hereof. The
exercise of this Warrant shall be subject to the provisions, limitations and
restrictions herein contained, and may be exercised in whole or in part.
SECTION 1. DEFINITIONS.
For all purposes of this Warrant, the following terms shall have the
meanings indicated:
COMMON STOCK - shall mean and include the Company's authorized Common
Stock, $0.0001 par value, as constituted at the date hereof.
EXCHANGE ACT - shall mean the Securities Exchange Act of 1934, as
amended from time to time.
SECURITIES ACT - the Securities Act of 1933, as amended.
TERM OF THIS WARRANT - shall mean the period beginning on the date of
initial issuance hereof and ending on May __, 2004.
WARRANT PRICE - $2.1875 per share, subject to adjustment in accordance
with Section 5 hereof.
<PAGE> 2
WARRANTS - this Warrant and any other Warrant or Warrants issued
pursuant to a Commitment Letter dated April 15, 1997 executed by the Company and
Transamerica Business Credit Corporation (the "Commitment Letter") to the
original holder of this Warrant, or any transferees from such original holder or
this Holder.
WARRANT SHARES - shares of Common Stock purchased or purchasable by the
Holder of this Warrant upon the exercise hereof.
SECTION 2. EXERCISE OF WARRANT.
2.1. PROCEDURE FOR EXERCISE OF WARRANT. To exercise this Warrant in
whole or in part (but not as to any fractional share of Common Stock), the
Holder shall deliver to the Company at its office referred to in Section 12
hereof at any time and from time to time during the Term of this Warrant: (i)
the Notice of Exercise in the form attached hereto, (ii) cash, certified or
official bank check payable to the order of the Company, wire transfer of funds
to the Company's account, or evidence of any indebtedness of the Company to the
Holder (or any combination of any of the foregoing) in the amount of the Warrant
Price for each share being purchased, and (iii) this Warrant. Notwithstanding
any provisions herein to the contrary, if the Current Market Price (as defined
in Section 5) is greater than the Warrant Price (at the date of calculation, as
set forth below), in lieu of exercising this Warrant as hereinabove permitted,
the Holder may elect to receive shares of Common Stock equal to the value (as
determined below) of this Warrant (or the portion thereof being canceled) by
surrender of this Warrant at the office of the Company referred to in Section 12
hereof, together with the Notice of Exercise, in which event the Company shall
issue to the Holder that number of shares of Common Stock computed using the
following formula:
CS = WCS x (CMP-WP)
--------------
CMP
Where
CS equals the number of shares of Common Stock to be issued to
the Holder
WCS equals the number of shares of Common Stock purchasable under
the Warrant or, if only a portion of the Warrant is being
exercised, the portion of the Warrant being exercised (at the
date of such calculation)
CMP equals the Current Market Price (at the date of such
calculation)
WP equals the Warrant Price (as adjusted to the date of such
calculation)
In the event of any exercise of the rights represented by this Warrant, a
certificate or certificates for the shares of Common Stock so purchased,
registered in the name of the Holder or such other name or names as may be
designated by the Holder, shall be delivered to the Holder hereof within a
reasonable time, not exceeding fifteen (15) days, after the rights represented
by this Warrant shall have been so exercised; and, unless this Warrant has
expired, a new Warrant representing the number of shares (except a remaining
fractional share), if any, with respect to which this Warrant
- 2 -
<PAGE> 3
shall not then have been exercised shall also be issued to the Holder hereof
within such time. The person in whose name any certificate for shares of Common
Stock is issued upon exercise of this Warrant shall for all purposes be deemed
to have become the holder of record of such shares on the date on which the
Warrant was surrendered and payment of the Warrant Price and any applicable
taxes was made, irrespective of the date of delivery of such certificate, except
that, if the date of such surrender and payment is a date when the stock
transfer books of the Company are closed, such person shall be deemed to have
become the holder of such shares at the close of business on the next succeeding
date on which the stock transfer books are open.
2.2. TRANSFER RESTRICTION LEGEND. Each certificate for Warrant Shares
shall bear the following legend (and any additional legend required by (i) any
applicable state securities laws and (ii) any securities exchange upon which
such Warrant Shares may, at the time of such exercise, be listed) on the face
thereof unless at the time of exercise such Warrant Shares shall be registered
under the Securities Act:
"The shares represented by this certificate have not been registered
under the Securities Act of 1933, as amended, and may not be sold or
transferred in the absence of such registration or an exemption
therefrom under said Act."
Any certificate issued at any time in exchange or substitution for any
certificate bearing such legend (except a new certificate issued upon completion
of a public distribution under a registration statement of the securities
represented thereby) shall also bear such legend unless, in the opinion of
counsel for the holder thereof (which counsel shall be reasonably satisfactory
to counsel for the Company) the securities represented thereby are not, at such
time, required by law to bear such legend.
SECTION 3. COVENANTS AS TO COMMON STOCK. The Company covenants and agrees that
all shares of Common Stock that may be issued upon the exercise of the rights
represented by this Warrant will, upon issuance, be validly issued, fully paid
and nonassessable, and free from all taxes, liens and charges with respect to
the issue thereof. The Company further covenants and agrees that it will pay
when due and payable any and all federal and state taxes which may be payable in
respect of the issue of this Warrant or any Common Stock or certificates
therefor issuable upon the exercise of this Warrant. The Company further
covenants and agrees that the Company will at all times have authorized and
reserved, free from preemptive rights, a sufficient number of shares of Common
Stock to provide for the exercise of the rights represented by this Warrant. The
Company further covenants and agrees that if any shares of capital stock to be
reserved for the purpose of the issuance of shares upon the exercise of this
Warrant require registration with or approval of any governmental authority
under any federal or state law before such shares may be validly issued or
delivered upon exercise, then the Company will in good faith and as
expeditiously as possible endeavor to secure such registration or approval, as
the case may be. If and so long as the Common Stock issuable upon the exercise
of this Warrant is listed on any national securities exchange, the Company will,
if permitted by the rules of such exchange, list within a reasonable time after
the initial issuance of this Warrant and keep listed on such exchange, upon
official notice of issuance, all shares of such Common Stock issuable upon
exercise of this Warrant.
- 3 -
<PAGE> 4
SECTION 4. ADJUSTMENT OF NUMBER OF SHARES. Upon each adjustment of the Warrant
Price as provided in Section 5, the Holder shall thereafter be entitled to
purchase, at the Warrant Price resulting from such adjustment, the number of
shares (calculated to the nearest tenth of a share) obtained by multiplying the
Warrant 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 Warrant Price resulting from such
adjustment.
SECTION 5. ADJUSTMENT OF WARRANT PRICE. The Warrant Price shall be subject to
adjustment from time to time as follows:
(i) If, at any time during the Term of this Warrant, the number of
shares of Common Stock outstanding is increased by a stock dividend payable in
shares of Common Stock or by a subdivision or split-up of shares of Common
Stock, then, following the record date fixed for the determination of holders of
Common Stock entitled to receive such stock dividend, subdivision or split-up,
the Warrant Price shall be appropriately decreased so that the number of shares
of Common Stock issuable upon the exercise hereof shall be increased in
proportion to such increase in outstanding shares.
(ii) If, at any time during the Term of this Warrant, the number of
shares of Common Stock outstanding is decreased by a combination of the
outstanding shares of Common Stock, then, following the record date for such
combination, the Warrant Price shall appropriately increase so that the number
of shares of Common Stock issuable upon the exercise hereof shall be decreased
in proportion to such decrease in outstanding shares.
(iii) In case, at any time during the Term of this Warrant, the Company
shall declare a cash dividend upon its Common Stock payable otherwise than out
of earnings or earned surplus or shall distribute to holders of its Common Stock
shares of its capital stock (other than Common Stock), stock or other securities
of other persons, evidences of indebtedness issued by the Company or other
persons, assets (excluding cash dividends and distributions) or options or
rights (excluding options to purchase and rights to subscribe for Common Stock
or other securities of the Company convertible into or exchangeable for Common
Stock), then, in each such case, immediately following the record date fixed for
the determination of the holders of Common Stock entitled to receive such
dividend or distribution, the Warrant Price in effect thereafter shall be
determined by multiplying the Warrant Price in effect immediately prior to such
record date by a fraction of which the numerator shall be an amount equal to the
difference of (x) the Current Market Price of one share of Common Stock minus
(y) the fair market value (as determined by the Board of Directors of the
Company, whose determination shall be conclusive) of the stock, securities,
evidences of indebtedness, assets, options or rights so distributed in respect
of one share of Common Stock, and of which the denominator shall be such Current
Market Price.
(iv) All calculations under this Section 5 shall be made to the nearest
cent or to the nearest one-tenth (1/10) of a share, as the case may be.
(v) For the purpose of any computation pursuant to this Section 5, the
Current Market Price at any date of one share of Common Stock shall be deemed to
be the average of the daily closing prices for the 15 consecutive business days
ending no more than 5 business days before the day in
- 4 -
<PAGE> 5
question (as adjusted for any stock dividend, split, combination or
reclassification that took effect during such 15 business day period). The
closing price for each day shall be the last reported sales price regular way
or, in case no such reported sales took place on such day, the average of the
last reported bid and asked prices regular way, in either case on the principal
national securities exchange on which the Common Stock is listed or admitted to
trading or as reported by Nasdaq (or if the Common Stock is not at the time
listed or admitted for trading on any such exchange or if prices of the Common
Stock are not reported by Nasdaq then such price shall be equal to the average
of the last reported bid and asked prices on such day as reported by The
National Quotation Bureau Incorporated or any similar reputable quotation and
reporting service, if such quotation is not reported by The National Quotation
Bureau Incorporated); provided, however, that if the Common Stock is not traded
in such manner that the quotations referred to in this clause (v) are available
for the period required hereunder, the Current Market Price shall be determined
in good faith by the Board of Directors of the Company or, if such determination
cannot be made, by a nationally recognized independent investment banking firm
selected by the Board of Directors of the Company (or if such selection cannot
be made, by a nationally recognized independent investment banking firm selected
by the American Arbitration Association in accordance with its rules).
(vi) Whenever the Warrant Price shall be adjusted as provided in
Section 5, the Company shall prepare a statement showing the facts requiring
such adjustment and the Warrant Price that shall be in effect after such
adjustment. The Company shall cause a copy of such statement to be sent by mail,
first class postage prepaid, to each Holder of this Warrant at its, his or her
address appearing on the Company's records. Where appropriate, such copy may be
given in advance and may be included as part of the notice required to be mailed
under the provisions of subsection (viii) of this Section 5.
(vii) Adjustments made pursuant to clauses (i), (ii) and (iii) above
shall be made on the date such dividend, subdivision, split-up, combination or
distribution, as the case may be, is made, and shall become effective at the
opening of business on the business day next following the record date for the
determination of stockholders entitled to such dividend, subdivision, split-up,
combination or distribution.
(viii) In the event the Company shall propose to take any action of the
types described in clauses (i), (ii), or (iii) of this Section 5, the Company
shall forward, at the same time and in the same manner, to the Holder of this
Warrant such notice, if any, which the Company shall give to the holders of
capital stock of the Company.
(ix) In any case in which the provisions of this Section 5 shall
require that an adjustment shall become effective immediately after a record
date for an event, the Company may defer until the occurrence of such event
issuing to the Holder of all or any part of this Warrant which is exercised
after such record date and before the occurrence of such event the additional
shares of capital stock issuable upon such exercise by reason of the adjustment
required by such event over and above the shares of capital stock issuable upon
such exercise before giving effect to such adjustment exercise; provided,
however, that the Company shall deliver to such Holder a due bill or other
appropriate instrument evidencing such Holder's right to receive such additional
shares upon the occurrence of the event requiring such adjustment.
- 5 -
<PAGE> 6
SECTION 6. OWNERSHIP.
6.1. OWNERSHIP OF THIS WARRANT. The Company may deem and treat the
person in whose name this Warrant is registered as the holder and owner hereof
(notwithstanding any notations of ownership or writing hereon made by anyone
other than the Company) for all purposes and shall not be affected by any notice
to the contrary until presentation of this Warrant for registration of transfer
as provided in this Section 6.
6.2. TRANSFER AND REPLACEMENT. Subject to compliance with applicable
securities laws, this Warrant and all rights hereunder are transferable in whole
or in part upon the books of the Company by the Holder hereof in person or by
duly authorized attorney, and a new Warrant or Warrants, of the same tenor as
this Warrant but registered in the name of the transferee or transferees (and in
the name of the Holder, if a partial transfer is effected) shall be made and
delivered by the Company upon surrender of this Warrant duly endorsed, at the
office of the Company referred to in Section 12 hereof. Upon receipt by the
Company of evidence reasonably satisfactory to it of the loss, theft or
destruction, and, in such case, of indemnity or security reasonably satisfactory
to it, and upon surrender of this Warrant if mutilated, the Company will make
and deliver a new Warrant of like tenor, in lieu of this Warrant; provided that
if the Holder hereof is an instrumentality of a state or local government or an
institutional holder or a nominee for such an instrumentality or institutional
holder an irrevocable agreement of indemnity by such Holder shall be sufficient
for all purposes of this Section 6, and no evidence of loss or theft or
destruction shall be necessary. This Warrant shall be promptly cancelled by the
Company upon the surrender hereof in connection with any transfer or
replacement. Except as otherwise provided above, in the case of the loss, theft
or destruction of a Warrant, the Company shall pay all expenses, taxes and other
charges payable in connection with any transfer or replacement of this Warrant,
other than stock transfer taxes (if any) payable in connection with a transfer
of this Warrant, which shall be payable by the Holder. Holder will not transfer
this Warrant and the rights hereunder except in compliance with federal and
state securities laws.
SECTION 7. MERGERS, CONSOLIDATION, SALES. In the case of any proposed
consolidation or merger of the Company with another entity, or the proposed sale
of all or substantially all of its assets to another person or entity, or any
proposed reorganization or reclassification of the capital stock of the Company,
then, as a condition of such consolidation, merger, sale, reorganization or
reclassification, lawful and adequate provision shall be made whereby the Holder
of this Warrant shall thereafter have the right to receive upon the basis and
upon the terms and conditions specified herein, in lieu of the shares of the
Common Stock of the Company immediately theretofore purchasable hereunder, such
shares of stock, securities or assets as may (by virtue of such consolidation,
merger, sale, reorganization or reclassification) be issued or payable with
respect to or in exchange for the number of shares of such Common Stock
purchasable hereunder immediately before such consolidation, merger, sale,
reorganization or reclassification. In any such case appropriate provision shall
be made with respect to the rights and interests of the Holder of this Warrant
to the end that the provisions hereof shall thereafter be applicable as nearly
as may be, in relation to any shares of stock, securities or assets thereafter
deliverable upon the exercise of this Warrant.
- 6 -
<PAGE> 7
SECTION 8. NOTICE OF DISSOLUTION OR LIQUIDATION. In case of any distribution of
the assets of the Company in dissolution or liquidation (except under
circumstances when the foregoing Section 7 shall be applicable), the Company
shall give notice thereof to the Holder hereof and shall make no distribution to
shareholders until the expiration of thirty (30) days from the date of mailing
of the aforesaid notice and, in any case, the Holder hereof may exercise this
Warrant within thirty (30) days from the date of the giving of such notice, and
all rights herein granted not so exercised within such thirty-day period shall
thereafter become null and void.
SECTION 9. NOTICE OF EXTRAORDINARY DIVIDENDS. If the Board of Directors of the
Company shall declare any dividend or other distribution on its Common Stock
except out of earned surplus or by way of a stock dividend payable in shares of
its Common Stock, the Company shall mail notice thereof to the Holder hereof not
less than thirty (30) days prior to the record date fixed for determining
shareholders entitled to participate in such dividend or other distribution, and
the Holder hereof shall not participate in such dividend or other distribution
unless this Warrant is exercised prior to such record date. The provisions of
this Section 9 shall not apply to distributions made in connection with
transactions covered by Section 7.
SECTION 10. FRACTIONAL SHARES. Fractional shares shall not be issued upon the
exercise of this Warrant but in any case where the Holder would, except for the
provisions of this Section 10, be entitled under the terms hereof to receive a
fractional share upon the complete exercise of this Warrant, the Company shall,
upon the exercise of this Warrant for the largest number of whole shares then
called for, pay a sum in cash equal to the excess of the value of such
fractional share (determined in such reasonable manner as may be prescribed in
good faith by the Board of Directors of the Company) over the Warrant Price for
such fractional share.
SECTION 11. SPECIAL ARRANGEMENTS OF THE COMPANY. The Company covenants and
agrees that during the Term of this Warrant, unless otherwise approved by the
Holder of this Warrant:
11.1. WILL RESERVE SHARES. The Company will reserve and set apart and
have available for issuance at all times, free from preemptive or other
preferential rights, the number of shares of authorized but unissued Common
Stock deliverable upon the exercise of this Warrant.
11.2. WILL BIND SUCCESSORS. This Warrant shall be binding upon any
corporation or other person or entity succeeding to the Company by merger,
consolidation or acquisition of all or substantially all of the Company's
assets.
SECTION 12. NOTICES. Any notice or other document required or permitted to be
given or delivered to the Holder shall be delivered at, or sent by certified or
registered mail or overnight courier to, the Holder at Transamerica Technology
Finance Division, 76 Batterson Park Road, Farmington, Connecticut 06032,
Attention: Assistant Vice President, Lease Administration, with a copy to the
Lender at Riverway II, West Office Tower, 9399 West Higgins Road, Rosemont,
Illinois 60018, Attention: Legal Department or to such other address as shall
have been furnished to the Company in writing by the Holder. Any notice or other
document required or permitted to be given or delivered to the Company shall be
delivered at, or sent by certified or registered mail or overnight courier to,
the Company at LXR Biotechnology, Inc., 1401 Marina Way South, Richmond, CA
94804, Attention: Vice President Finance and Administration or to such other
address as shall have
- 7 -
<PAGE> 8
been furnished in writing to the Holder by the Company. Any notice so addressed
and mailed by registered or certified mail or sent by overnight courier shall be
deemed to be given when so mailed or sent. Any notice so addressed and otherwise
delivered shall be deemed to be given when actually received by the addressee.
SECTION 13. NO RIGHTS AS STOCKHOLDER; LIMITATION OF LIABILITY. This Warrant
shall not entitle the Holder to any of the rights of a shareholder of the
Company. No provision hereof, in the absence of affirmative action by the Holder
to purchase shares of Common Stock, and no mere enumeration herein of the rights
or privileges of the Holder, shall give rise to any liability of the Holder for
the Warrant Price hereunder or as a shareholder of the Company, whether such
liability is asserted by the Company or by creditors of the Company.
SECTION 14. LAW GOVERNING. THE VALIDITY, INTERPRETATION, AND ENFORCEMENT OF THIS
WARRANT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF ILLINOIS WITHOUT GIVING EFFECT TO THE CONFLICT OF LAW PRINCIPLES
THEREOF.
SECTION 15. MISCELLANEOUS.
(a) This Warrant and any provision hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by the
party (or any predecessor in interest thereof) against which enforcement of the
same is sought. The headings in this Warrant are for purposes of reference only
and shall not affect the meaning or construction of any of the provisions hereof
(b) All capitalized terms used herein and not otherwise
defined herein shall have the meanings ascribed to them in the Financing
Agreement.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its duly authorized officer this 13th day of May, 1997.
LXR BIOTECHNOLOGY INC.
By: s/s Shelli Geer
----------------------------------
Title: VP - Finance and Administration
-------------------------------
- 8 -
<PAGE> 9
FORM OF NOTICE OF EXERCISE
[TO BE SIGNED ONLY UPON EXERCISE OF THE WARRANT]
TO BE EXECUTED BY THE REGISTERED HOLDER
TO EXERCISE THE WITHIN WARRANT
The undersigned hereby exercises the right to purchase _________ shares
of Common Stock which the undersigned is entitled to purchase by the terms of
the within Warrant according to the conditions thereof, and herewith
[check one]
/ / makes payment of $__________
therefor; or
/ / directs the Company to issue ______
shares, and to withhold ____ shares
in lieu of payment of the Warrant
Price, as described in Section 2.1
of the Warrant.
All shares to be issued pursuant hereto shall be issued in the name of and the
initial address of such person to be entered on the books of the Company shall
be:
The shares are to be issued in certificates of the following
denominations:
________________________________
[Type Name of Holder]
By: ____________________________
Title: _________________________
Dated: ____________________________
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<PAGE> 10
FORM OF ASSIGNMENT
(ENTIRE)
[TO BE SIGNED ONLY UPON TRANSFER OF ENTIRE WARRANT]
TO BE EXECUTED BY THE REGISTERED HOLDER
TO TRANSFER THE WITHIN WARRANT
FOR VALUE RECEIVED ___________________________ hereby sells, assigns
and transfers unto _______________________________ all rights of the undersigned
under and pursuant to the within Warrant, and the undersigned does hereby
irrevocably constitute and appoint _______________________________ Attorney to
transfer the said Warrant on the books of the Company, with full power of
substitution.
________________________________
[Type Name of Holder]
By: ____________________________
Title: _________________________
Dated: ____________________________
NOTICE
The signature to the foregoing Assignment must correspond to the name
as written upon the face of the within Warrant in every particular, without
alteration or enlargement or any change whatsoever.
- 10 -
<PAGE> 11
FORM OF ASSIGNMENT
(PARTIAL)
[TO BE SIGNED ONLY UPON PARTIAL TRANSFER OF WARRANT]
TO BE EXECUTED BY THE REGISTERED HOLDER
TO TRANSFER THE WITHIN WARRANT
FOR VALUE RECEIVED _________________________ hereby sells, assigns and
transfers unto _______________________________ (i) the rights of the undersigned
to purchase ___ shares of Common Stock under and pursuant to the within Warrant,
and (ii) on a non-exclusive basis, all other rights of the undersigned under and
pursuant to the within Warrant, it being understood that the undersigned shall
retain, severally (and not jointly) with the transferee(s) named herein, all
rights assigned on such non-exclusive basis. The undersigned does hereby
irrevocably constitute and appoint __________________________ Attorney to
transfer the said Warrant on the books of the Company, with full power of
substitution.
________________________________
[Type Name of Holder]
By: ____________________________
Title: _________________________
Dated: ____________________________
NOTICE
The signature to the foregoing Assignment must correspond to the name
as written upon the face of the within Warrant in every particular, without
alteration or enlargement or any change whatsoever.
- 11 -
<PAGE> 1
EXHIBIT 10.41
CONFIDENTIAL TREATMENT REQUESTED
by LXR Biotechnology Inc.
located at 1401 Marina Way South
Richmond, California 94804
RESEARCH & DEVELOPMENT AGREEMENT
THIS AGREEMENT is made the 18th day of April, 1997 ("Agreement Date")
BETWEEN:
1 Full Name: Oxford Asymmetry Limited
Address: 151 Milton Park, Abingdon, Oxfordshire OX14 4SD,
United Kingdom
Telephone: +44 1235 851561, Fax: +44 1235 863139
("OA"); and
2 Full Name: LXR Biotechnology Inc.
Address: 1401 Marina Way South, Richmond, California
94804-3746, USA
Telephone: +1 510 412 9100, Fax: +1 510 412 9109
("LXR")
WHEREAS, OA is a company with expertise in the field of research and development
into novel methods to synthesize sophisticated organic chemical compounds; and
WHEREAS, LXR desires to obtain the benefit of OA's expertise in order to develop
analogues of [**] and develop chemical libraries.
OA and LXR hereby agree as follows:
1. DEFINITIONS
In this Agreement the following expressions shall have the following
meanings:
1.1 "Agreement" means this Research and Development Agreement
together with the Research Programme in Appendix A ("Research
Programme") and the Payment Schedule in Appendix B ("Payment
Schedule").
1.2 "Services" means the services to be carried out by OA under
the Research Plan as described in the Research Programme.
1.3 "OA's Personnel" means OA's directors and employees and any
other persons engaged upon the Research Programme under the
direction of OA.
1.4 "LXR's Personnel" means LXR's directors and employees and any
other person under the direction of LXR having access to the
substance and results of the Research Programme.
1.5 "Confidential Information" has the meaning given to it in
clause 7.1 of this Agreement.
1.6 "Technical Information" has the meaning given to it in clause
7.3 of this Agreement.
1.7 "Intellectual Property Rights" means patents, patent
applications, copyright, know how and other intellectual
property rights.
1.8 "Specifications" means the specifications, if any, identified
in the Research Programme.
<PAGE> 2
1.9 "Product" means any product to be manufactured or produced by
OA for LXR as set out in the Research Programme.
1.10 "Parties" means OA and LXR.
1.11 The "LXR Dedicated Team" means the two Ph.D.'s and one
technician at Oxford Asymmetry dedicated to providing the
Services. The composition of the LXR Dedicated Team may be
altered by written agreement between the Parties provided the
resulting cost is the monetary equivalent of the original LXR
Dedicated Team.
1.12 "Field of Use" means human pharmaceutical applications.
1.13 "Affiliates" means (a) any company or other legal entity which
directly or indirectly controls the party concerned and (b)
any company or other legal entity which is directly or
indirectly controlled by a company or other legal entity
referred to in (a) above.
2. THE SERVICES
2.1 OA shall provide the Services and LXR shall pay to OA the
payments specified in Appendix B and any royalties pursuant to
clause 5.2 subject to the provisions of this Agreement.
2.2 LXR shall use its reasonable endeavours to deliver the Initial
Data specified in the Research Programme to OA by 21st April
1997.
2.3 OA shall use its reasonable endeavours to:-
(i) commence the Services on or before 21st April 1997;
and
(ii) complete the Services on or before 20 April 1998.
2.4 OA shall ensure that OA's Personnel exercise all reasonable
skill, care and diligence in the performance of the Services,
and will comply with all applicable laws and regulations.
2.5 OA shall ensure that all OA's Personnel involved with the
Services are technically competent and suitably qualified to
carry out the parts of the Services assigned to them.
2.6 OA shall appoint Dr. Tony Baxter as Programme Manager together
with the LXR Dedicated Team and LXR shall appoint Dr. Graham
Goddard as Designated Supervisor for the Research Programme.
The Programme Manager and the Designated Supervisor shall be
the principal point of contact between the parties for all
matters relating to this Agreement. OA may change the
Programme Manager and the LXR Dedicated Team and LXR may
change the Designated Supervisor by giving notice in writing
to the other party.
2.7 No variation to the Services shall be made without the written
agreement of the duly authorized representative of each Party
to such variation.
3. INFORMATION AND REPORTS
3.1 OA shall keep LXR fully informed of the progress of the
Services by providing progress reports to the Designated
Supervisor at the end of each month until the Services are
completed.
3.2 OA shall ensure the Programme Manager is reasonably available
for telephone and face-to-face discussions with LXR's
Personnel. If LXR requests the LXR Dedicated Team to attend
any meetings other than those on OA premises, in addition to
those sums specified in Appendix B, OA shall be reimbursed for
reasonable travel expenses. If LXR requests OA Personnel other
<PAGE> 3
** Confidential Treatment Requested
than the LXR Dedicated Team to attend meetings other than
those on OA premises, OA shall be reimbursed for reasonable
travel expenses and be paid at OA's standard time charge rates
for such expenses incurred and time spent by OA Personnel
attending any such meetings.
4. INVOICES AND PAYMENT
4.1 When due, OA shall submit an invoice to LXR for each of the
payments in accordance with Appendix B together with such
documentary substantiation as LXR may reasonably request.
4.2 LXR shall pay OA's invoices within 30 days of invoice date.
4.3 In the event that LXR fails to pay OA's invoices within 30
days of the invoice date OA shall be entitled to suspend
performance of the Services until OA receives the sums due
plus interest at the rate of 1.5% per month or part thereof in
respect of the period by which LXR is late in making payment.
Following suspension of performance of the Services for this
reason OA may vary any subsequent dates in the Research
Programme and/or the date for completion of the Services
specified in clause 2.3.
5. RIGHT TO EXPLOIT THE "PRODUCTS"
5.1 LXR and/or any of its Affiliates shall have the right to
develop and/or patent any Product supplied under this
Agreement (or any analogue or derivative of any Product
conceived as a result of screening or testing a Product) as a
potential product within the Field of Use. In such
circumstances, LXR shall notify OA in writing of its intention
to develop and/or patent such Product (or analogue/derivative
thereof) and the potential application. OA hereby undertakes
to execute and do all things necessary to vest the title and
interest in such Products (together with the Intellectual
Property Rights relating thereto) in LXR.
5.2 In the event that LXR develops any Product (or
analogue/derivative thereof) and a member of OA's Personnel
would be considered as an inventor of the Product (or
analogue/derivative thereof) under the law of inventorship as
set forth under the laws of the United States, LXR shall pay
to OA a royalty on net sales of such Product equal to [**];
provided that such Product (or analogue/derivative thereof) is
patentable and was not claimed in a United States patent
application filed by LXR or its Affiliates with a priority
date on or before April 21, 1997. In the event that the
Product (or analogue/derivative thereof) is not patentable LXR
shall pay to OA a royalty on net sales of such Product equal
to [**]. Such royalties shall be the subject of a definitive
agreement between OA and LXR which will include other clauses
and provisions typical in similar agreements between similar
parties.
5.3 Where OA has Intellectual Property Rights related to the
method of making or the composition of matter of any Product
for which it receives notice under Clause 5.1, OA shall grant
to LXR a license under any such Intellectual Property Rights
owned by OA (and in respect of which OA is free to grant such
license) to the extent that such license is necessary to
enable LXR to make, use, offer to sell, sell or import such
Product (or analogue/derivative thereof).
6. INTELLECTUAL PROPERTY RIGHTS
6.1 It is hereby expressly agreed that the Parties shall each
retain all Intellectual Property Rights relating to the
Products that they respectively hold prior to the date of this
Agreement, including without limitation all patent
applications and other forms of patent protection undertaken
by the Parties in respect of the Products prior to the date of
this Agreement.
6.2 All Intellectual Property Rights relating to the use of the
Products in the Field of Use shall vest in LXR.
<PAGE> 4
6.3 All Intellectual Property Rights relating to chemical
processes and technology used to synthesize the Products
arising from the performance of the Services shall vest in OA.
6.4 All Intellectual Property Rights relating to composition of
matter and application claims outside the field of human
pharmaceuticals for compounds arising from the performance of
the Services shall be jointly owned by the Parties.
6.5 It is hereby agreed between the parties that if OA or any of
its Affiliates wish to file a patent application in respect of
a Product after the date of this Agreement, OA shall
immediately notify LXR in writing and the Parties shall meet
to discuss the patent protection to be applied for.
6.6 It is hereby further agreed that, unless agreed between the
Parties in writing, LXR shall at its sole option have the
right to patent the Products within the Field of Use.
6.7 OA hereby agrees that it shall take no action (which includes,
for the avoidance of doubt, the filing of any patent
applications in respect of Products provided to LXR under this
Agreement, and which fall within the Field of Use) which would
have the effect of frustrating LXR's ability to develop
Products and apply for patents in the manner contemplated in
Clause 5.1.
6.8 Subject to the agreement of LXR to compensate OA for any loss
arising from the disclosure of any Technical Information which
is valuable for purposes not covered by the royalty
arrangement described in clause 5.2, and which is identified
as such by OA, and which is made public in connection with
this clause, at the written request and expense of LXR, OA
shall, and shall procure that OA's Personnel shall, do all
things reasonably requested by LXR to apply for and obtain
effective patent protection anywhere in the world in respect
of any invention arising from the performance of the Services
including the execution of appropriate documents. For the
avoidance of doubt, LXR shall reimburse OA for all reasonable
costs incurred by OA and shall pay OA at OA's standard time
charge rates for time spent by OA Personnel in complying with
the provisions of this clause.
7. CONFIDENTIAL INFORMATION
7.1 In this Agreement, subject to clause 7.4 below, "Confidential
Information" (whether oral, written or in any other form)
includes but is not limited to:-
(i) any and all information concerning
transactions, dealings, projects, plans,
proposals and other business affairs of LXR
and of OA;
(ii) any and all Technical Information disclosed
by LXR to OA's Personnel;
(iii) any and all Technical Information used in
and/or developed by OA's Personnel in the
course of or in connection with the
Services.
7.2 The Parties shall procure that OA's Personnel and LXR's
Personnel shall:-
(i) not disclose any Confidential Information to
any person other than OA's Personnel and/or
LXR's Personnel who have entered into
legally binding confidentiality obligations
substantially similar in scope to those set
out in this clause 7;
(ii) not use any Confidential Information for any
purpose other than in accordance with this
Agreement; and
(iii) take all reasonable steps necessary to
prevent the unauthorised disclosure
<PAGE> 5
and/or use of any Confidential Information.
7.3 In this Agreement the expression "Technical Information" shall
include, but not be limited to, improvements, inventions,
developments, techniques, processes, methods, specifications,
procedures, data, results, trade secrets and know-how, all as
the same may be used in and/or arise from the performance of
the Services.
7.4 In this Agreement the expression "Confidential Information"
shall not include any information which:-
(i) is in the public domain other than through
any breach of this Agreement;
(ii) either Party can prove by documentary
evidence was already in the possession of
that Party prior to the date of this
Agreement;
(iii) is the subject of an order to disclose by a
Court having the right and power to make
such an order;
(iv) is received from a third party not under an
obligation of confidentiality to either
Party; or
(v) is required to be disclosed to any
regulatory authority when applying for a
licence to conduct clinical or other trials
or studies or for regulatory, marketing or
pricing approval (provided such disclosure
to any such authority shall be made subject
to conditions of confidentiality no less
onerous that those contained in Clause 7).
7.5 Confidential information exchanged prior to the date of this
Agreement shall be governed by the Non-disclosure Agreement
entered into between LXR and OA on November 25, 1996.
8. WARRANTIES, INDEMNITIES AND EXCLUSION OF LIABILITY
8.1 WARRANTIES
LXR warrants that it has disclosed to OA all information which
is known to LXR and which is relevant to the Research
Programme including but not limited to any actual or potential
health and safety hazards.
8.2 INDEMNITIES
8.2.1 LXR shall fully indemnify, and keep fully indemnified,
OA against any and all losses, costs and/or expenses
(including without limitation legal costs and
expenses) incurred by OA which arise directly out of
any claim or allegation that performance of the
Services constitutes infringement of any third party
intellectual property rights.
8.3 EXCLUSION OF LIABILITY
8.3.1 In addition to any express warranties and/or
indemnities given by OA in this Agreement and/or its
liability to perform its obligations under this
Agreement, OA shall, subject to the normal rules
concerning remoteness of damage, only be responsible
for:
(i) liability for death or personal injury
caused by OA or its employees when providing
the Services if it is established that such
death or personal injury has arisen as a
direct result of the negligence of OA or its
employees;
<PAGE> 6
** Confidential Treatment Requested
(ii) liability for damage to tangible physical
property caused by OA or its employees when
providing the Services if it is established
that such damage to property has arisen as a
direct result of the negligence of OA or its
employees to a maximum of pound sterling
1,000,000 per claim or series of claims.
8.3.2 In any event, OA's liability under or in connection
with this Agreement, whether in contract tort or
other wise (except as provided in sub clause 8.3.1
above), shall not exceed the total of the sums paid
by LXR under this Agreement up to the date of the
claim.
8.3.3 The express terms of this Agreement are in lieu of
all warranties, conditions, terms, undertakings and
obligations implied by statute, common law, custom,
trade usage, course of dealing or otherwise, all of
which are hereby excluded to the fullest extent
permitted by law, and, in any event, OA shall have no
liability under or in connection with this Agreement
for indirect, special or consequential losses, wasted
or lost management time or time of other employees or
for loss of profits or contracts.
9. TERMINATION
9.1 TERMINATION EVENTS
9.1.1 Having paid all sums invoiced by OA in accordance
with clause 4 of the Agreement up to the date of
termination LXR shall have the right to terminate the
Research Programme at any time by giving notice in
writing and making a prepayment to OA of an amount
equal to [**]of the next succeeding payment in
accordance with Appendix B not previously invoiced by
OA in accordance with clause 4 of this Agreement and
[**]of all subsequent payments listed in Appendix B.
9.1.2 If either Party shall be in breach of any of the
provisions of this Agreement, and should such breach
continue for 60 days after the same shall have been
notified to the Party in breach then the other Party
may at its option terminate this Agreement or suspend
the performance of its obligations under this
Agreement by giving the Party in breach immediate
notice of termination or suspension. Suspension by
one Party of performance shall not preclude such
Party later terminating this Agreement pursuant to
this Clause 9.1.2.
9.1.3 In the event that:-
i) either Party becomes insolvent, or an order
is made or a resolution passed for the
winding up of either party other than for
the purposes of a solvent scheme of
reconstruction or amalgamation or internal
reorganisation; or
ii) an administrator, administrative receiver or
receiver is appointed in respect of either
Party's assets and/or business; or
iii) as a result of financial difficulties either
party makes any voluntary arrangement with
its creditors; or
iv) as a consequence of debt and/or
maladministration, either Party takes or
suffers any similar or analogous action to
those listed in i), ii) or iii) above.
then the other Party shall be entitled to
terminate this Agreement by giving
<PAGE> 7
immediate written notice of termination.
9.2 CONSEQUENCES OF TERMINATION
9.2.1 Termination shall be without prejudice to any other
right or remedy the Parties may have arising on or
before the date of termination
9.2.2 Following termination of this Agreement clauses 1,
4.2, 5, 6, 7, 8, 11.2,11.3,11.4,11.5,11.6,11.7
and11.8 shall remain in full force and effect.
9.2.3 Following termination of this Agreement in accordance
with 9.1.1 or in accordance with 9.1.2 and 9.1.3 when
LXR is in default OA's obligations under clauses 5,
6.2, 6.4, 6.5, 6.6, 6.7 and 6.8 shall cease.
10. FORCE MAJEURE
10.1 If either Party is affected by any circumstances beyond its
reasonable control (including, without limitation, any strike,
lock out or other form of industrial action) it shall
forthwith notify the other Party of the nature and extent
thereof.
10.2 Neither Party shall be deemed to be in breach of this
Agreement, or otherwise be liable to the other, by reason of
any delay in performance, or non-performance, of any of its
obligations hereunder to the extent that such delay or
non-performance is due to any such circumstance as is
described in sub-clause 1 of this clause of which it has
notified the other Party; and the time for performance of that
obligation shall be extended accordingly.
10.3 If any of the circumstances described in sub-clause 1 of this
clause notified as aforesaid prevails for a continuous period
in excess of six months, the Parties hereto shall enter into
bona fide discussions with a view to alleviating its effects,
or to agreeing upon such alternative arrangements as may be
fair and reasonable in all the circumstances.
11 MISCELLANEOUS
11.1 ASSIGNMENT AND SUB-CONTRACTING
11.1.1 LXR shall have the right to assign all of its rights
and obligations under this Agreement, provided that
it gives advance written notice to OA.
11.1.2 This Agreement is personal to OA. OA shall not assign
or sub-contract any or any part of its obligations
under this Agreement without the prior written
consent of LXR.
11.2 RELATIONSHIP OF THE PARTIES
Nothing in this Agreement shall create, evidence or imply any
agency, partnership or joint venture between the Parties.
Neither Party shall act or describe itself as the agent of the
other Party nor shall it represent that it has authority to
make commitments on behalf of the other Party.
11.3 WAIVER
Failure or delay by either Party to exercise any right or
remedy under this Agreement shall not
<PAGE> 8
be deemed to be a waiver of that right or remedy, or prevent
it from exercising that or any other right or remedy on that
occasion or on any other occasion.
11.4 SEVERANCE
If any provision of this Agreement is found by a court or
other competent authority to be void and/or unenforceable such
provision shall be deemed to be deleted from this Agreement
and the remaining provisions of this Agreement shall continue
in full force and effect. The Parties shall attempt to
substitute for any invalid or unenforceable provision a valid
and enforceable provision which achieves to the greatest
extent possible the economic, legal and commercial objectives
of the invalid or unenforceable provision.
11.5 CLAUSE HEADINGS
The headings used in this Agreement are for convenience only
and shall not affect its interpretation.
11.6 ENTIRE AGREEMENT AND AMENDMENTS
This Agreement constitutes the entire agreement and
understanding of the Parties relating to the subject matter of
this Agreement and supersedes all prior oral and written
agreements, understandings or arrangements between them
relating to such subject matter. The Parties acknowledge that
they are not relying on any agreement, understanding,
arrangement, warranty representative or term which is not set
out in this Agreement. No variation, amendment, modification
or supplement to this Agreement shall be valid unless made in
writing and signed by the duly authorised representative of
each Party.
11.7 NOTICES
Any notice given under this Agreement shall be in writing and
shall be sent (1) by pre-paid first class post or (2) by fax
confirmed by pre-paid first class post to the address set out
in this Agreement or to such other address as may from time to
time be notified to the Party giving notice by the other
Party. Such notice shall be deemed to have been received:
11.7.1 in the case of first class pre-paid post, on the
fifth day following the day of posting; or
11.7.2 in the case of facsimile, on acknowledgement by the
recipient facsimile receiving equipment on a business
day provided that such acknowledgement occurs before
17.00 hours local time of the recipient on the
business day of acknowledgement and in any other case
on the business day next following the business day
of acknowledgement.
11.8. GOVERNING LAW AND DISPUTES
The construction validity and performance of this Agreement
shall be governed in all respects by English Law and each
Party hereby submits to the exclusive jurisdiction of the
English Courts.
11.9 COUNTERPARTS
This Agreement may be executed in any number of counterparts and by the
different Parties hereto by separate counterparts, each of which when
so executed shall be an original, and all of which shall constitute one
and the same instrument.
<PAGE> 9
11.10 COSTS
Each Party shall bear its own legal costs, legal fees, and
other expenses incurred in the preparation and execution of
the Agreement.
SIGNED for and on behalf of OA by: /s/ Edwin Moses
-----------------------
Dr. Edwin Moses
Managing Director
SIGNED for and on behalf of LXR by: /s/ L. David Tomei
-----------------------
Dr. L. David Tomei
Chief Executive Officer
<PAGE> 10
** Confidential Treatment Requested
RESEARCH PROGRAMME
(Appendix A to Research And Development Agreement)
Contents:-
. [**]
<PAGE> 11
PAYMENT SCHEDULE
(Appendix B to Research And Development Agreement)
Payments become due on the following dates:
<TABLE>
<S> <C>
April 21, 1997 $162,500
July 21, 1997 $162,500
January 2, 1998 $162,500
February 2, 1998 $162,500
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10QSB
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 6,674,730
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 7,041,249
<PP&E> 2,883,350
<DEPRECIATION> 1,819,732
<TOTAL-ASSETS> 8,341,021
<CURRENT-LIABILITIES> 852,401
<BONDS> 0
0
0
<COMMON> 2,167
<OTHER-SE> 7,264,210
<TOTAL-LIABILITY-AND-EQUITY> 8,341,021
<SALES> 0
<TOTAL-REVENUES> 108,193
<CGS> 0
<TOTAL-COSTS> 4,484,499
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (4,137,187)
<INCOME-TAX> 800
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,137,987)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0.00
</TABLE>
