<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 18, 1998
REGISTRATION NO. 333-
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- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
CENTAUR PHARMACEUTICALS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
---------------
DELAWARE 2384 77-030431
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION OF INDUSTRIAL IDENTIFICATION NO.)
INCORPORATION OR CLASSIFICATION CODE
ORGANIZATION) NUMBER)
484 OAKMEAD PARKWAY
SUNNYVALE, CALIFORNIA 94086
(408) 822-1600
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
JOSEPH L. TURNER
CHIEF FINANCIAL OFFICER
CENTAUR PHARMACEUTICALS, INC.
484 OAKMEAD PARKWAY
SUNNYVALE, CALIFORNIA 94086
(408) 822-1600
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
COPIES TO:
BARRY J. KRAMER, ESQ. STEPHAN HUTTER, ESQ.
DAVID K. MICHAELS, ESQ. SHEARMAN & STERLING
JODY HUCKO, ESQ. BOCKENHEIMER LANDSTRASSE 55
JAMES M. HACKETT, ESQ. 60325 FRANKFURT AM MAIN
FENWICK & WEST LLP (49 69) 97107 230
TWO PALO ALTO SQUARE
PALO ALTO, CALIFORNIA 94306
(650) 494-0600
---------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED PRICE(2) REGISTRATION FEE
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<S> <C> <C>
Common Stock, par value $0.001 per share(1)
.......................................... $89,700,000 $26,462
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</TABLE>
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(1) The shares of Common Stock being registered hereby consist of shares
initially being offered in the United States, and any shares initially
offered or sold outside the United States that are thereafter sold or
resold in the United States in transactions not exempt from registration
under Section 4(1) or 4(3) of the Securities Act of 1933, as amended.
Offers and sales outside of the United States are being made pursuant to
the exemption afforded by Rule 901 of Regulation S under the Securities
Act, and this Registration Statement shall not be deemed effective with
respect to such offers and sales.
(2) Estimated pursuant to Rule 457(a) solely for the purpose of calculating
the amount of the registration fee.
---------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF ANY OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED JUNE 18, 1998
SHARES
[LOGO]
COMMON STOCK
Of the shares of common stock, par value $0.001 per share (the
"Common Stock"), offered hereby, shares are being offered by Centaur
Pharmaceuticals, Inc. ("Centaur" or the "Company") and shares are being
offered by certain stockholders of the Company (the "Selling Stockholders").
The Company will not receive any of the proceeds from the sale of shares by the
Selling Stockholders. See "Principal and Selling Stockholders." Of the
shares of Common Stock being offered, shares are initially being offered
in Switzerland and elsewhere outside the United States (the "International
Offering") and shares are initially being concurrently offered in the
United States (the "U.S. Offering"). The final allocation of Common Stock
between the International Offering and the U.S. Offering may differ from the
amounts set forth above. The public offering price, the underwriting discounts
and commissions per share and the proceeds per share to the Company and Selling
Stockholders in the International Offering are the same as in the U.S.
Offering, except that purchasers in the U.S. Offering have the option to pay
the public offering price at the U.S. Dollar equivalent thereof.
Prior to this offering, there has been no public market for the Common Stock.
It is currently estimated that the initial public offering price will be
between and Swiss francs (CHF) per share (between $ and $ per
share, based on an assumed exchange rate of $ per Swiss franc).
See "Underwriting" for factors to be considered in determining the initial
public offering price. Application has been made to have the Common Stock
approved for quotation on the Swiss Exchange under the symbol CEN. It is
currently anticipated that the Company's Common Stock will not be listed or
quoted on any U.S. exchange or quotation system, and accordingly it is not
anticipated that there will be an active market for the Company's Common Stock
other than the Swiss Exchange. It is expected that the Common Stock will be
listed on the Swiss Exchange, and that dealings in the Common Stock will
commence, on or about , 1998.
FOR A DISCUSSION OF CERTAIN RISKS OF AN INVESTMENT IN THE SHARES OF COMMON
STOCK OFFERED HEREBY, SEE "RISK FACTORS" COMMENCING ON PAGE 7.
-----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
-----------
<TABLE>
<CAPTION>
UNDERWRITING
DISCOUNTS PROCEEDS TO
PRICE TO AND PROCEEDS TO SELLING
PUBLIC COMMISSIONS (1) COMPANY (2) STOCKHOLDERS
-------- -------------- ----------- ------------
<S> <C> <C> <C> <C>
Per Share (3)........ CHF CHF CHF CHF
Total (3)(4)......... CHF CHF CHF CHF
</TABLE>
- -----
(1) The Company and the Selling Stockholders have agreed to indemnify the
Managers against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See "Underwriting."
(2) Before deducting estimated expenses of the offering payable by the Company
estimated to be CHF (based on an assumed exchange rate of $ per
Swiss franc).
(3) Reference to "CHF" are to Swiss francs. Based on an assumed exchange rate
of US$ per Swiss franc, the per share price to public, underwriting
discounts and commissions, proceeds to the Company and proceeds to Selling
Stockholders would be $ , $ , $ and $ , respectively, and the
total price to public, underwriting discounts and commissions, proceeds to
the Company and proceeds to Selling Stockholders would be $ , $ , $
and $ , respectively.
(4) Certain of the Selling Stockholders have granted the Managers a 30-day
option to purchase up to additional shares of Common Stock on the
same terms per share solely to cover over-allotments, if any. If such
option is exercised in full, the total price to public will be CHF ,
the total underwriting discounts and commissions will be CHF , the
total proceeds to the Company will be CHF and the total proceeds
to the Selling Stockholders will be CHF . See "Underwriting."
-----------
THE COMMON STOCK IS BEING OFFERED BY THE MANAGERS AS SET FORTH UNDER
"UNDERWRITING" HEREIN. IT IS EXPECTED THAT THE DELIVERY OF THE COMMON STOCK
WILL BE MADE ON OR ABOUT , 1998, AGAINST PAYMENT THEREFOR IN
IMMEDIATELY AVAILABLE FUNDS.
GLOBAL COORDINATOR AND LEAD MANAGER
BANK J. VONTOBEL & CO AG
VECTOR SECURITIES VONTOBEL SECURITIES LTD.
INTERNATIONAL, INC.
SPECIAL U.S. ADVISOR
The date of this Prospectus is , 1998
<PAGE>
[PICTURE TO COME]
NO ACTION HAS BEEN OR WILL BE TAKEN IN ANY JURISDICTION BY THE COMPANY, THE
SELLING STOCKHOLDERS OR ANY MANAGER THAT WOULD PERMIT A PUBLIC OFFERING OF THE
SHARES OF COMMON STOCK OR POSSESSION OR DISTRIBUTION OF THIS PROSPECTUS IN ANY
JURISDICTION, OTHER THAN THE UNITED STATES AND SWITZERLAND. PERSONS INTO WHOSE
POSSESSION THIS PROSPECTUS COMES ARE REQUIRED BY THE COMPANY, THE SELLING
STOCKHOLDERS AND THE MANAGERS TO INFORM THEMSELVES ABOUT AND TO OBSERVE ANY
RESTRICTIONS AS TO THE OFFERING OF THE SHARES OF COMMON STOCK AND THE
DISTRIBUTION OF THIS PROSPECTUS.
CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK OF
THE COMPANY, INCLUDING OVER-ALLOTMENT, STABILIZING AND SHORT-COVERING
TRANSACTIONS IN SUCH SECURITIES, AND THE IMPOSITION OF A PENALTY BID, IN
CONNECTION WITH THE OFFERING. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE
"UNDERWRITING."
----------------
CENTAUR AND NRT ARE TRADEMARKS OF THE COMPANY. ALL OTHER TRADEMARKS INCLUDED
IN THIS PROSPECTUS ARE THE PROPERTY OF THEIR RESPECTIVE HOLDERS.
2
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements and notes thereto appearing elsewhere in
this Prospectus. Except as set forth in the audited financial statements or as
otherwise indicated, all information in this Prospectus (i) reflects the
conversion of all of the Company's outstanding shares of Preferred Stock into
shares of Common Stock, which will occur automatically upon the closing of this
offering and (ii) assumes that the Managers' over-allotment option is not
exercised. References in this Prospectus to "U.S. Dollars," "US $," or "$" are
to United States currency and references to "CHF" are to Swiss francs. The
Company has presented its financial statements in accordance with United States
generally accepted accounting principles ("U.S. GAAP") in U.S. Dollars. See
"Description of Capital Stock," "Underwriting" and Notes 1 and 7 of Notes to
Financial Statements.
THE COMPANY
Centaur Pharmaceuticals, Inc. ("Centaur" or the "Company") is developing a
novel class of small molecule pharmaceutical compounds, which the Company calls
(TM)NRTs (nitrone related therapeutics), for the treatment of diseases
involving oxidative stress. Oxidative stress results from the formation of free
radicals and other reactive oxygen species (collectively referred to as
"oxidative stress agents" or "OSA") that can damage cells. OSA are produced as
by-products of the body's normal metabolism of oxygen and nutrients, as a
result of the activation of white blood cells during inflammation, through the
loss and subsequent restoration of blood flow (ischemia/reperfusion) and due to
trauma, radiation and infection. The Company believes that NRTs may have
several mechanisms of action, including (i) neutralizing OSA, thereby
protecting cells from potential damage, (ii) preventing OSA from inducing genes
to produce toxins that can damage or destroy cells and (iii) slowing the
release of cytokines which induce inflammation.
The Company's initial therapeutic targets are neurodegenerative conditions
such as Parkinson's disease, acute cerebral stroke ("stroke"), AIDS dementia
complex ("AIDS dementia") and Alzheimer's disease, in which the Company
believes oxidative stress is a major cause of neuronal damage. The Company has
completed Phase I clinical studies in the United States of an orally
administered NRT for the treatment of Parkinson's disease. In collaboration
with Astra AB ("Astra"), Phase Ia clinical studies of an NRT for the
intravenous treatment of stroke have been completed in Sweden, and potential
lead compounds for Alzheimer's disease are being tested. The Company is
currently conducting a Phase I clinical trial in HIV-infected volunteers of an
orally administered NRT for the treatment of AIDS dementia. Centaur believes
that its NRT technology also provides a broad platform for developing
therapeutics for other diseases in which oxidative stress and inflammation are
important and has established research programs evaluating NRTs to treat
arthritis, myocardial infarction, inflammatory bowel disease, multiple
sclerosis, ophthalmic disorders and other diseases.
Centaur's technology evolved from work with the compound a-phenyl-N-t-butyl-
nitrone ("PBN"), a well-known antioxidant that has been shown to reduce
cellular damage resulting from oxidative stress and inflammation in preclinical
models. Centaur has developed a library of proprietary NRTs that the Company
believes may act to slow or reverse the potentially dangerous effects of
oxidative stress and inflammation. Centaur has developed candidate NRTs for
both oral and intravenous administration. No treatment-limiting side effects
have been observed in Phase I clinical testing of these compounds.
Parkinson's disease is a degenerative neurological disorder caused by a
shortage of the neurotransmitter dopamine. Dopamine is essential for movement
control. A growing body of evidence suggests that oxidative stress contributes
to Parkinson's disease progression. In certain preclinical models, Centaur's
lead compound provided significant protection to dopamine-producing and other
cells in the brain, suggesting potential efficacy against the progressive loss
of motor and mental function characteristic of Parkinson's disease. Centaur
initiated Phase I clinical testing in humans in July 1996 to test safety and
obtain a pharmacokinetic profile in healthy volunteers. These studies were
recently completed, and no treatment-limiting side effects were observed. The
Company plans to commence a Phase IIa clinical trial by the end of 1998 for the
purpose of testing safety and evaluating preliminary efficacy information in
Parkinson's disease patients.
3
<PAGE>
Centaur's NRT for the treatment of stroke protects nerve cells against death
in recognized preclinical stroke models. Preclinical studies suggest that the
compound may be effective in humans when administered up to six or more hours
after the stroke has occurred. This long window of activity is important
because stroke patients often experience delays of several hours before
receiving treatment. Astra began Phase Ia clinical testing of Centaur's stroke
NRT in Sweden in 1997 to test safety and obtain a pharmacokinetic profile in
healthy volunteers. These studies were recently completed, and no treatment-
limiting side effects were observed. The Company and Astra plan to commence a
Phase I/II clinical trial in Europe by the end of 1998 for the purpose of
testing safety and possibly obtaining preliminary efficacy information in
stroke patients.
AIDS dementia refers to the debilitating neurological and cognitive
impairments associated with acquired immune deficiency syndrome (AIDS). The
Company believes that AIDS dementia is caused by toxins and brain inflammation
produced as a result of HIV infection. In addition, the Company believes that
the same NRT under development to treat Parkinson's disease may also be
effective as a treatment for AIDS dementia. In in vitro tests using human brain
cells, this NRT has proven highly effective in protecting such cells from
toxins and inflammation associated with AIDS dementia. A Phase I clinical study
in HIV-infected volunteers commenced in 1997 and is in progress. The Company
plans to commence a Phase II clinical trial by the end of 1998 for the purpose
of testing safety and obtaining efficacy information in AIDS dementia patients.
The Company's Alzheimer's disease research program focuses on preventing
nerve cell damage associated with neuroinflammation related to b-amyloid
protein deposition in the brain. b-amyloid deposits have been associated with
the memory loss and behavioral disorders characteristic of Alzheimer's disease.
The Company's research findings from both cell culture and in vivo models
suggest that NRTs may prevent loss of neuronal cell function or prevent
neuronal cell death induced by inflammatory agents and b-amyloid peptides. In
related studies, the administration of NRTs has diminished the cognitive
decline in older animals with learning and memory deficits.
The Company has also established a number of research programs to evaluate
NRTs for the treatment of other diseases. The Company believes that one of the
most promising is the evaluation of NRTs for the treatment of arthritis. The
Company believes that oxidative stress plays an important role in the
pathophysiology of arthritis and that NRTs could prove to be effective
therapeutics for this disease. Candidate compounds for this purpose have been
identified, and research to select a clinical lead compound is underway.
In June 1995, Centaur entered into a collaborative agreement with Astra (the
"Astra Agreement") to develop new drugs for the treatment of stroke,
Alzheimer's disease, traumatic brain injury and multi-infarct dementia. Under
the Astra Agreement, Astra (i) pays Centaur up to $6.0 million per year for 5
years, primarily to fund research by Centaur for these conditions, (ii)
conducts most of the development of NRTs for these conditions, (iii) makes
payments to Centaur based upon the achievement of certain development
milestones and (iv) pays royalties to Centaur on sales of licensed products, in
exchange for exclusive worldwide marketing and other rights. Centaur retains
worldwide manufacturing rights for the active ingredient of the products and
has an option to obtain certain co-promotion rights in the United States.
Approximately $26.1 million has been received to date by Centaur under the
Astra Agreement. In October 1996, the Company entered into a collaborative
agreement with H. Lundbeck A/S ("Lundbeck") to jointly commercialize the
Company's NRT for Parkinson's disease (the "Lundbeck Agreement"). In March
1998, Lundbeck terminated the Lundbeck Agreement based primarily on a claim
that Centaur had breached the agreement by commencing clinical trials for AIDS
dementia, using the same compound as is being used in the Company's Parkinson's
disease clinical trials, without obtaining consent from Lundbeck. This claim is
disputed by the Company. See "Risk Factors--Lundbeck Dispute."
Centaur has built a strong proprietary position protecting its NRT technology
which includes ownership of, or license rights to, 24 United States patents, 23
United States patent applications, 37 foreign patents and 137 foreign patent
applications related to NRTs and their use as pharmaceuticals.
4
<PAGE>
The Company employs 90 persons, including 23 with Ph.D. and/or M.D. degrees.
The Company occupies a modern 31,000 square foot facility located in Sunnyvale,
California and has leased a 77,000 square foot facility in Santa Clara,
California, in which it is constructing a 30,000 square foot manufacturing
plant that is designed to comply with the U.S. Food and Drug Administration
("FDA") Good Manufacturing Practices ("GMP") regulations.
The Company's executive offices are located at 484 Oakmead Parkway,
Sunnyvale, California 94086. Its telephone number is (408) 822-1600.
THE OFFERING
Common Stock Offered:
<TABLE>
<C> <S>
Offered by the Company..................... shares
Offered by the Selling Stockholders........ shares
--------------
Total..................................... shares(1)
=================
Outstanding after the offering.............. shares(2)
Use of proceeds............................. Funding of research and
development, capital
expenditures and general
corporate purposes, including
working capital. See "Use of
Proceeds."
Proposed Swiss Exchange symbol.............. CEN
</TABLE>
SUMMARY FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
----------------------------------------- ----------------
1993(3) 1994(3) 1995 1996 1997 1997(3) 1998(3)
------- ------- ------ ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Net revenue............. $ -- $ 156 $7,875 $ 9,429 $11,774 $3,570 $ 2,937
Operating expenses:
Research and
development........... 925 2,735 5,490 7,854 15,446 3,347 3,481
General and
administrative........ 309 912 1,385 2,306 2,166 592 660
------- ------- ------ ------- ------- ------ -------
Total operating
expenses............... 1,234 3,647 6,875 10,160 17,612 3,939 4,141
------- ------- ------ ------- ------- ------ -------
Income (loss) from
operations............. (1,234) (3,491) 1,000 (731) (5,838) (369) (1,204)
Interest and other
income, net............ 35 41 491 362 1,107 187 174
------- ------- ------ ------- ------- ------ -------
Net income (loss)....... $(1,199) $(3,450) $1,491 $ (369) $(4,731) $ (182) $(1,030)
======= ======= ====== ======= ======= ====== =======
Pro forma net loss per
share, basic and
diluted (4)............ $ (0.36) $ (0.07)
Shares used in computing
pro forma net loss per
share, basic and
diluted (4)............ 13,243 13,824
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, 1998(3)
------------------------------------
ACTUAL PRO FORMA(5) AS ADJUSTED(6)
------- ------------ --------------
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents and short term
investments.............................. $10,668 $18,419 $
Working capital........................... 9,655 16,106
Total assets.............................. 22,969 30,720
Long term debt, net of current portion.... -- 6,478
Redeemable convertible preferred stock.... 28,105 --
Accumulated deficit....................... (9,394) (9,394)
Total stockholders' equity (net capital
deficiency).............................. (9,087) 19,018
</TABLE>
5
<PAGE>
- --------
(1) Of the shares of Common Stock being offered, shares are
initially being offered in the International Offering in Switzerland and
elsewhere outside the United States and shares are initially being
concurrently offered in the U.S. Offering in the United States. The final
allocation of Common Stock between the International Offering and the U.S.
Offering may differ from these amounts.
(2) Based on the number of shares outstanding as of March 31, 1998. Excludes
(i) 1,776,877 shares of Common Stock subject to options outstanding as of
March 31, 1998 under the Company's 1993 Equity Incentive Plan (the "1993
Incentive Plan"), at a weighted average per share exercise price of $1.44;
(ii) 123,663 shares of Common Stock reserved as of March 31, 1998 for
future grant or issuance under the 1993 Incentive Plan and (iii) 68,603
shares of Common Stock reserved as of March 31, 1998 for issuance upon the
exercise of warrants at a weighted average per share exercise price of
$2.69. Since March 31, 1998, the Company has reserved 1,250,000 shares of
Common Stock for future grant or issuance under the Company's 1998 Equity
Incentive Plan (the "1998 Incentive Plan"), 1998 Directors Stock Option
Plan (the "Directors Plan") and 1998 Employee Stock Purchase Plan (the
"Purchase Plan"). See "Management--Directors Compensation" and "--Employee
Benefit Plans" and Note 7 of Notes to Financial Statements.
(3) Unaudited.
(4) See Note 1 of Notes to Financial Statements for an explanation of the
determination of pro forma diluted net loss per share and the number of
shares used in computing pro forma diluted net loss per share.
(5) Gives pro forma effect to the conversion of outstanding Redeemable
Convertible Preferred Stock ("Preferred Stock") into Common Stock upon the
completion of this offering and the receipt of $7.75 million in cash (net
of the first repayment of approximately $250,000) in April 1998 from a debt
financing.
(6) Adjusted to reflect the sale of shares of Common Stock offered by
the Company hereby at an assumed initial public offering price per share of
CHF and an assumed exchange rate of $ per Swiss franc, and after
deducting the estimated underwriting discounts and commissions and offering
expenses.
6
<PAGE>
RISK FACTORS
The shares offered hereby involve a high degree of risk. The following risk
factors should be considered carefully in addition to the other information in
this Prospectus before purchasing the shares of Common Stock offered hereby.
In addition to the historical information contained herein, the discussion in
this Prospectus contains certain forward-looking statements that involve risks
and uncertainties, such as statements of the Company's plans, objectives,
expectations and intentions. The cautionary statements made in this Prospectus
should be read as being applicable to all related forward-looking statements
wherever they appear in this Prospectus. The Company's actual results could
differ materially from those discussed in this Prospectus. Factors that could
cause or contribute to such differences include those discussed below, as well
as those discussed elsewhere herein.
EARLY STAGE OF DEVELOPMENT; TECHNOLOGICAL UNCERTAINTIES
Centaur was incorporated in March 1992 and is in an early stage of
development. All of the Company's potential products are in early stages of
research, development or testing, and no revenues have been generated from the
sale of products. Products resulting from the Company's research and
development efforts, if any, are not expected to be commercially available for
at least several years. The Company's potential products will require
substantial additional research and development, preclinical and clinical
testing and regulatory approval prior to commercialization. There can be no
assurance that the Company's product development efforts will progress as
expected, if at all. In addition, the Company's 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
product candidates will not receive FDA approval (or equivalent approvals
outside the United States) or market acceptance; that any or all of the
Company's product candidates will be found to be unsafe or ineffective; 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 more cost-effective products. As a result,
there can be no assurance that the Company will be able to produce any
commercially viable products, and this would have a material adverse effect on
the Company's business, financial condition and results of operations.
UNCERTAINTY OF PRECLINICAL AND CLINICAL TRIALS
The Company's potential products are subject to the risks of failure
inherent in the development of pharmaceutical products and will require
additional development, preclinical studies, clinical trials and regulatory
approval prior to commercialization. Most of the diseases and disorders being
targeted by the Company are highly complex, their causes are not fully known
and there are no widely accepted in vitro or in vivo models of such diseases
and disorders. The Company tests potential compounds in a number of models
that are believed to provide useful information about the compound, but there
can be no assurance that any or all of such models are valid predictors of the
activity of the compound in humans. Some of the Company's lead compounds have
failed to demonstrate efficacy in at least one of the numerous models in which
they have been tested. Currently, the Company's Parkinson's disease, AIDS
dementia and stroke product candidates are all in or have just recently
completed Phase I clinical trials. All other product candidates are in various
stages of preclinical testing or research. The results of preclinical and
early clinical studies may not be predictive of results that will be obtained
in later stage testing. There can be no assurance that the Company's ongoing
clinical trials will be completed, that clinical trials of the Company's
products under development will be permitted, or if permitted, will be
completed, or that clinical trials will demonstrate the safety and efficacy of
any products to the extent necessary to obtain regulatory approvals for
marketing or will result in marketable products. The Company's potential
products could prove to have undesirable side effects or other characteristics
that may prevent or limit their commercial use. In addition, there can be no
assurance that any of the Company's products will ultimately obtain approval
to be marketed from the FDA or similar foreign marketing approvals for any
indication or that an approved compound will be capable of being produced in
commercial quantities at a reasonable cost and
7
<PAGE>
successfully marketed. The failure to adequately demonstrate the safety and
efficacy of a therapeutic product under development would delay or prevent
regulatory approval of the product and could have a material adverse effect on
the Company.
The ability to undertake and complete clinical trials in a timely manner is
dependent upon, among other factors, the enrollment of patients to meet
inclusion criteria of the investigational protocol. Patient accrual is a
function of many factors, including the size of the patient population, the
proximity of patients to clinical sites, the eligibility criteria for the
study and the existence of competitive clinical studies. Delays in planned
patient enrollment in future clinical trials may result in increased costs,
program delays or both, which could have a material adverse effect on the
Company.
NOVEL THERAPEUTIC APPROACH
The Company's product development efforts center around its family of NRTs
that the Company believes protect against the damaging effects of oxidation
and inflammation caused by OSA. Initially, the Company has targeted
neurodegenerative diseases and disorders where it believes that oxidative
stress is a major cause of neuronal damage, and it has recently expanded its
research and development efforts into other areas, including arthritis,
myocardial infarction, inflammatory bowel disease and ophthalmic disorders.
The Company's novel approach has not been widely studied, the mechanisms of
action of its technology and compounds are not well understood, and many of
the diseases and disorders being targeted by the Company do not have widely
accepted in vitro or in vivo models of such disease. Accordingly there can be
no assurance that the Company's approach, technologies or product candidates
will prove to be successful. Moreover, the Company is focusing on new
treatments for conditions that are also the subject of research and
development of other companies. The Company's competitors may succeed in
developing products that are more efficacious, more cost-effective or safer
than the Company's product candidates. Rapid technological change or
developments by others may result in the Company's technology or proposed
products becoming obsolete or noncompetitive. See "--Competition; Rapid
Technological Change."
DEPENDENCE UPON COLLABORATORS
The Company's strategy for the development and commercialization of its
products includes maintaining and entering into various collaborations with
corporate partners, licensors, licensees and others. The Company currently has
a collaborative arrangement with Astra for the research, development and
marketing of drugs for the treatment of stroke, Alzheimer's disease, traumatic
brain injury and multi-infarct dementia. There can be no assurance that the
interests and motivations of Astra are, or will remain, aligned with those of
the Company or that Astra will successfully perform its development,
regulatory compliance or marketing functions, or that such collaboration will
continue. The Company's revenues to date have consisted primarily of research
and development support from Astra under the Astra Agreement, and to a
significantly lesser extent from Lundbeck under the now terminated Lundbeck
Agreement and from U.S. government research grants. There can be no assurance
that the Company will be able to negotiate additional collaborative
arrangements in the future on acceptable terms, if at all, or that any such
collaborative arrangements will be successful. To the extent that the Company
is not able to maintain or establish such arrangements, the Company would be
required to undertake such activities at its own expense, which would
significantly increase the Company's capital requirements and limit the
programs that the Company is able to pursue. In addition, the Company may
encounter significant delays in introducing its products into certain markets
or find that the development, manufacture or sale of its products in such
markets is adversely affected by the absence of such collaborative agreements.
The Company cannot control the amount and timing of resources that its
collaborative partners devote to the Company's programs or potential products,
which can vary because of factors unrelated to the potential product.
Collaborative participation will depend not only on the achievement of
research and development objectives by the Company and its collaborators,
which cannot be assured, but also on each collaborator's own financial,
competitive, marketing and strategic considerations, which are outside the
Company's control. Such strategic considerations may include the relative
advantages of alternative products being marketed or developed
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by others, including relevant patent and proprietary positions. The Company's
collaborative partners may develop, either alone or with others, products that
compete with the development and marketing of the Company's products.
Competing products, either developed by the collaborative partners or to which
the collaborative partners have rights, may result in their withdrawal of
support with respect to all or a portion of the Company's technology, which
would have a material adverse effect on the Company's business, financial
condition and results of operations. Astra has the ability under the Astra
Agreement to terminate the Astra Agreement, in whole or in part, upon twelve
months notice, and can terminate research funding and the Company's
manufacturing rights under the Astra Agreement if more than 30% of the
Company's voting capital stock is acquired by a company engaged in the
manufacture and/or sale of pharmaceutical products. Future agreements with
collaborative partners, if any, may provide such partners with similar
termination rights. If Astra or any future collaborative partner breaches or
terminates their agreements with the Company or otherwise fails to conduct
their collaborative activities in a timely manner, the preclinical or clinical
development or commercialization of product candidates or research programs
will be delayed, and the Company will be required to devote additional
resources to product development and commercialization or terminate certain
development programs. For example, in March 1998, Lundbeck terminated its
agreement with the Company for the development and marketing of drugs to treat
Parkinson's disease. See "--Lundbeck Dispute." There also can be no assurance
that disputes will not arise in the future with respect to the ownership of
rights to any technology developed with third parties. These and other
possible disagreements between collaborators and the Company could lead to
delays in the research, development and commercialization of certain product
candidates or could require or result in litigation or arbitration, which
would be time consuming and expensive, and would have a material adverse
effect on the Company's business, financial condition and results of
operations. See "Business--Astra Alliance."
LUNDBECK DISPUTE
In 1996, the Company and Lundbeck entered into the Lundbeck Agreement for
the development and marketing of drugs to treat Parkinson's disease. In March
1998, Lundbeck terminated the Lundbeck Agreement based primarily on a claim
that Centaur had breached the agreement by commencing clinical trials for AIDS
dementia, using the same compound as is being used in the Company's
Parkinson's disease clinical trials, without obtaining Lundbeck's consent.
Lundbeck has demanded rescission of the contract and the repayment of all
amounts paid by Lundbeck to Centaur under the Lundbeck Agreement, together
with certain other amounts expended by Lundbeck in connection therewith,
believed to aggregate approximately $7 million. The Company disputes
Lundbeck's claim and has demanded the payment of approximately $7 million that
it believes is owed to it by Lundbeck. The Company and Lundbeck are currently
engaged in discussions with respect to a resolution of this matter. If the
matter is not resolved, it is likely that the dispute will be submitted to
arbitration in Canada. There can be no assurance as to the outcome of any such
arbitration, and an adverse result could have a material adverse effect on the
Company's business, financial condition and results of operation.
FUTURE CAPITAL NEEDS; UNCERTAINTY OF ADDITIONAL FUNDING
Since inception, the Company has funded its operations primarily through
equity investments and research and development support under the Astra
Agreement and, to a significantly lesser extent, payments under the now
terminated Lundbeck Agreement and U.S. government research grants. The Company
has generated no product revenue, and none is expected for at least several
years. The Company believes that its current resources, together with the
estimated proceeds of this offering, will be sufficient to meet its capital
requirements for at least the next eighteen months. There can be no assurance
that the Company will not require additional funds in order to continue its
research and development programs, to enter into and sustain preclinical and
clinical testing and to manufacture and market products that gain regulatory
approval, if any. The Company's capital requirements depend on numerous
factors, including the progress of the Company's research and development
programs, manufacturing activities, revenues or investments from
collaborators, the scope and results of preclinical and clinical testing, the
time and costs involved in obtaining regulatory approval, the cost of filing,
prosecuting, defending and enforcing any patent claims and other intellectual
property rights, competing
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technological and market developments, changes in the Company's existing
research relationships and the ability of the Company to establish additional
collaborative and other arrangements. The Company anticipates that it will
need to raise substantial additional funds for research, development,
expansion of manufacturing and administrative facilities and other expenses,
through equity or debt financings, research and development grants,
collaborative relationships or otherwise, prior to the commercialization of
any of its products. There can be no assurance that any such additional
funding will be available to the Company or, if available, that it will be on
reasonable terms. Any such additional financing may result in dilution to
existing stockholders. If adequate funds are not available, the Company may be
required to significantly curtail its research and development programs,
including clinical trials, or enter into arrangements that may require the
Company to relinquish certain material rights to its potential products on
terms that it might otherwise find unacceptable.
HISTORY OF OPERATING LOSSES; ACCUMULATED DEFICIT; UNCERTAINTY OF FUTURE
PROFITABILITY
The Company has experienced net losses of $369,000, $4.7 million and $1.0
million for the years ended December 31, 1996 and 1997 and the three months
ended March 31, 1998, respectively. As of March 31, 1998, the Company had an
accumulated deficit of $9.4 million. Substantially all of the Company's
revenues to date have been derived from funding from Astra and, to a
significantly lesser extent, the now terminated Lundbeck Agreement and U.S.
government research grants. Revenues from product sales and collaborative
agreement royalties are not expected for at least several years, if at all.
There can be no assurance that the Company will ever achieve significant
revenues or profitable operations.
NO ASSURANCE OF FDA APPROVAL; COMPREHENSIVE GOVERNMENT REGULATION
The Company's research, development, manufacturing, preclinical and clinical
testing, labeling, distribution, advertising, marketing, promotion and sales
activities, as well as the operations of its current and any future
collaborators, are subject to extensive regulation by numerous government
authorities in the United States and other countries. The Company's potential
products require governmental approvals for commercialization, which have not
yet been obtained and applications are not expected for at least several
years. The regulatory process, which includes preclinical and clinical testing
to establish safety and efficacy of the product, and possibly post-marketing
testing to confirm safety and/or efficacy, and confirmation by the FDA that
good laboratory, clinical and manufacturing practices were maintained during
testing and manufacturing, can take many years and requires the expenditure of
substantial funds and other resources. The Company has had only limited
experience in conducting preclinical testing and human clinical trials and
obtaining FDA and other regulatory approvals for investigations, and no
experience in obtaining FDA and other regulatory approvals for marketing. Data
obtained from preclinical and clinical activities are susceptible to varying
interpretations, which could delay, limit or prevent regulatory approval. In
addition, delays or rejection may be encountered based upon changes in, or
additions to, regulatory policies for drug approval during the period of
product development and regulatory review. Delays in obtaining such approvals
could adversely affect the marketing of products developed by the Company and
the Company's ability to generate commercial product revenues. There can be no
assurance that requisite regulatory approvals will be obtained within a
reasonable period of time, if at all. Additionally, the Phase Ia clinical
studies for the Company's stroke drug candidate were conducted by Astra in
Sweden, and Astra currently plans to also conduct a Phase I/II clinical trial
of this compound in Europe. These studies are not being conducted under an FDA
Investigational New Drug application ("IND") and accordingly there can be no
assurance that the FDA will accept the studies to support regulatory filings
in the United States. If regulatory approval of a product is granted, the
approval may impose limitations on the indicated uses for which such product
may be marketed. FDA requirements prohibit the marketing or promotion of a
drug for unapproved indications. Further, even if regulatory approval is
obtained, the Company, any marketed product, and its manufacturing facilities
would be subject to continual review and periodic inspections, and later
discovery of previously unknown problems with a product, the Company or its
facilities may result in restrictions, including withdrawal of the product
from the market. Failure to comply with the applicable regulatory requirements
can, among other things, result in fines, suspensions and/or withdrawals of
regulatory approvals, product recalls, prohibitions against manufacture,
distribution, sales and/or marketing, operating restrictions and criminal
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prosecution of a company and/or its officers and employees. The Company is
also subject to numerous environmental, health and workplace safety laws and
regulations, including those governing laboratory procedures and the handling
of hazardous materials. Any violations of, and cost of compliance with, these
laws and regulations could materially adversely affect the Company's business,
financial condition and results of operations. See "Business--Government
Regulation."
DEPENDENCE ON LICENSES, PATENTS AND PROPRIETARY TECHNOLOGY
The Company licenses certain core technology related to its NRTs from the
University of Kentucky Research Foundation ("UKRF") and the Oklahoma Medical
Research Foundation ("OMRF"). The Company will be obligated to pay royalties
on products, if any, incorporating this or other licensed technology. The
Company may be required to obtain additional licenses to patents or other
proprietary rights from third parties. There can be no assurance that any
licenses required under any patents or proprietary rights will be made
available on terms acceptable to the Company, if at all. If the Company does
not obtain required licenses, it could encounter delays in product development
while it attempts to redesign products or methods, or it could find that the
development, manufacture or sale of products requiring such licenses is
foreclosed.
The Company's success will depend to a significant degree on its ability to
obtain, maintain and enforce patent protection for its products and
manufacturing processes or license rights to applicable patents, preserve its
trade secrets and operate without infringing the proprietary rights of third
parties both in the United States and other countries. The degree of patent
protection afforded to pharmaceutical and biomedical inventions is uncertain
and involves complex legal and factual questions; therefore, the breadth of
claims allowed in pharmaceutical and biomedical patents cannot be predicted.
The product candidates important to Centaur are subject to the above
uncertainties. The Company has ongoing research efforts and expects to seek
additional patents covering this research in the future. There can be no
assurance that patent applications relating to the Company's potential
products or technology will result in patents being issued or that, if issued,
such patents, or the Company's current patents, will afford adequate
protection to the Company, provide a competitive advantage or not be
challenged, invalidated or infringed. In the past, in order to increase the
value of the protection afforded by certain patents it had licensed, the
Company has initiated actions in the United States Patent and Trademark Office
("PTO") to amend these already issued patents. The Company is engaged in one
such action now, and there can be no assurance that this action or any future
action will be successful. Furthermore, there can be no assurance that others
will not independently develop similar products or processes, duplicate any of
the Company's products or, if patents are issued to the Company, design around
such patents. In this regard, it should be noted that PBN, the compound from
which much of the Company's technology evolved, and certain related compounds,
are not covered by composition of matter patents. Although the Company has
issued and pending patents covering certain methods of use of these compounds,
the Company cannot prevent others from using these compounds for other uses.
In addition, litigation, which would result in substantial cost to the
Company, may be necessary to enforce any patents issued to the Company or to
determine the scope and validity of the proprietary rights of third parties.
In certain cases, the Company is dependent upon third parties for the
prosecution of patents and patent applications for technology that the Company
licenses, such as the core technology related to its NRTs licensed from UKRF
and OMRF. Failure of these third parties to effectively prosecute such patents
could have a material adverse effect on the Company's business and results of
operations.
Competitors of the Company may have filed patent applications, may have been
issued patents or may obtain additional patents and proprietary rights
relating to products or processes competitive with those of the Company. There
is a substantial backlog of pharmaceutical and biomedical patent applications
at the PTO. Accordingly, the time at which the Company's or its competitors'
patent applications will issue as patents cannot be predicted. Patent
applications in the United States are maintained in secrecy until patents
issue, and publication of discoveries in scientific or patent literature often
lag behind the actual discoveries. Thus, the Company cannot be certain that it
has been or will be the first to discover the subject matter covered by its
patent applications or patents or that it was the first to file patent
applications for such inventions. The Company may, therefore, have to
participate in interference proceedings declared by the PTO or litigation to
determine priority of inventions, either of which could result in substantial
cost to the Company.
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The Company's success will also depend, in part, on its not infringing
patents issued to others and not breaching the technology licenses upon which
the Company's products are based. The Company has received correspondence from
an individual who has obtained certain patents related to the use of PBN and
related compounds. The Company does not believe that these patents adversely
affect its ability to develop and commercialize its products. If the Company
is required to defend against charges of patent infringement or breach of a
license or to protect its own proprietary rights against third parties, the
Company may incur substantial cost and could lose rights to develop or market
certain products. If the Company's product candidates are found to infringe
upon the patents of others, or otherwise impermissibly utilize the
intellectual property of others, the Company's development, manufacture and
sale of such potential products could be severely restricted or prohibited. In
such event, the Company may be required to obtain licenses to patents or other
proprietary rights of third parties. No assurance can be given that any
licenses required under any such patents or proprietary rights would be made
available on terms acceptable to the Company, if at all. If the Company does
not obtain such licenses, it could encounter delays in product market
introductions while it attempts to design around such patents or other rights,
or it may be unable to develop, manufacture or sell such products. In
addition, the breach of an existing or future license may have a material
adverse effect on the Company's business, financial condition and results of
operations.
The Company also seeks to protect its proprietary technology, including
technology which may not be patented or patentable, by confidentiality
agreements and, if applicable, invention assignment agreements with its
collaborators, advisors, employees and consultants. There can be no assurance
that these agreements will not be breached, that the Company will have
adequate remedies for any breach or that the Company's trade secrets will not
otherwise be disclosed to, or discovered by, competitors. There can be no
assurance that such persons or institutions will not assert rights to
intellectual property arising out of their research. See "Business--Patents,
Trade Secrets and Licenses."
COMPETITION; RAPID TECHNOLOGICAL CHANGE
The pharmaceutical industry is subject to intense competition and rapid and
significant technological change. Competitors of Centaur in the United States
and abroad are numerous and include, among others, pharmaceutical and
biotechnology companies, universities, and other research institutions. Many
of these companies and institutions are actively engaged in activities similar
to those of the Company, including research and development of products for
Parkinson's disease, stroke, AIDS dementia, Alzheimer's disease and arthritis.
While the Company believes that its products may offer significant advantages
over available products, currently marketed products often have a significant
competitive advantage over new entrants. If regulatory approvals are received,
certain of the Company's potential products will compete with well-
established, FDA approved proprietary and generic therapies that have
generated substantial sales over a number of years and which are reimbursed
from government health administration authorities and private health insurers.
There can be no assurance that the Company's products under development will
be able to compete successfully with existing therapies or with products under
development by its competitors. Many of these competitors have substantially
greater financial and technical resources and production and marketing
capabilities than the Company, and certain of these competitors may compete
with the Company in establishing development and marketing agreements with
pharmaceutical companies. In addition, many of the Company's competitors have
greater experience than the Company in conducting preclinical testing and
human clinical trials and obtaining FDA and other regulatory approvals. The
Company's competitors may succeed in obtaining FDA approval for products
sooner than the Company.
DEPENDENCE UPON KEY PERSONNEL; NEED TO ATTRACT QUALIFIED EMPLOYEES AND
CONSULTANTS
The Company is highly dependent on certain members of its management and
scientific staff. In addition, the Company relies on certain consultants and
advisors. The loss of one or more of these key personnel could have a material
adverse effect on the Company's research, development and product marketing
efforts. In addition, the Company believes that its future success will depend
in large part upon its ability to attract and
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retain highly skilled scientific and managerial personnel, particularly as the
Company expands its activities in clinical trials and the regulatory approval
process. The Company faces significant competition for such personnel from
other companies, research and academic institutions, government entities and
other organizations. There can be no assurance that the Company will be
successful in hiring or retaining the personnel it requires for continued
growth. The failure to hire and retain such personnel could materially
adversely affect the Company's business, financial condition and results of
operations. The Company intends to grant additional stock options and provide
other forms of incentive compensation to attract and retain such key
personnel. The Company has established a Scientific Advisory Board ("SAB")
composed of individuals with expertise in free radical chemistry, drug
discovery model development, drug screening, clinical pharmacology and
clinical medicine. SAB members assist the Company in identifying scientific
and product development opportunities, review with management the progress of
the Company's projects and assist in the recruitment and evaluation of the
Company's scientific staff. SAB members receive compensation for the services
they provide to the Company. Most SAB members have substantial commitments to
third parties, which commitments may conflict or compete with their obligation
to the Company. Accordingly, such persons will be able to devote only a small
portion of their time to matters related to the Company.
ABSENCE OF SALES AND MARKETING EXPERIENCE AND LIMITED MANUFACTURING
CAPABILITIES
The Company has no experience in product sales, marketing or distribution.
The Company has entered into a marketing agreement with Astra for stroke,
Alzheimer's disease, traumatic brain injury and multi-infarct dementia
indications and intends to establish marketing arrangements with other
pharmaceutical companies with effective distribution capabilities in order to
market other product candidates. There can be no assurance that the Company
will be successful in entering into such arrangements. If the Company does
enter into marketing arrangements in the future, sales of the Company's
products will depend heavily upon the efforts of Astra and other third
parties, and there can be no assurance that such efforts will be successful.
The Company also may need to acquire its own direct sales force for certain
products, and there can be no assurance that the Company will be able to
recruit and retain adequate sales, marketing and distribution personnel or
that such direct marketing will be able to compete successfully in the
pharmaceutical market.
The Company plans to manufacture bulk product for its drug candidates at its
facilities in Sunnyvale and Santa Clara, California and/or at other locations
that may be established in the future. To date, the Company has manufactured
only a small amount of pharmaceutical compounds for preclinical and clinical
studies at its Sunnyvale facility. The Company is currently constructing a
30,000 square foot manufacturing facility in Santa Clara which is expected to
be sufficient to produce the amount of product needed for clinical trials and
early commercial sales. There can be no assurance that the Santa Clara
facility will be satisfactorily completed. Additionally, the Santa Clara
facility is not expected to be capable of producing the quantity of the
Company's products that may be needed for later stage commercial sales.
Accordingly, the Company expects to need to develop substantial additional
capacity by expanding its current facilities or building new facilities. To
meet projected time schedules, the Company may commence construction and/or
otherwise commit itself to additional capacity prior to FDA or other
regulatory approval of the products to be manufactured at the new facility.
The cost of any new facility would be substantial, and such facility could
ultimately prove to be unnecessary if the required approvals are not obtained
or market demand is insufficient. Additionally, there can be no assurance that
such a large scale manufacturing facility can be satisfactorily constructed
and operated in compliance with applicable regulatory requirements or that the
Company will be able to manufacture in an efficient and cost-effective manner.
The State of California, the FDA and other U.S. and international regulatory
authorities will inspect the Company's manufacturing facilities on a regular
basis to determine compliance with applicable regulations. Failure to comply
with applicable state, FDA and other regulatory requirements can, among other
things, result in fines, suspensions and/or withdrawals of regulatory
approvals, product recalls, prohibitions against manufacture, distribution,
sales and/or marketing, operating restrictions and criminal prosecution of a
company and/or its officers and employees. If the Company is unable to
manufacture its own products, it will need to seek
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third-party manufacturers. There can be no assurance that the Company will be
able to enter into such arrangements on favorable terms. The manufacturing of
sufficient quantities of new drugs is a time consuming, complex and
unpredictable process. If the Company is unable to fully develop its own
manufacturing capabilities or obtain and maintain third-party manufacturing
arrangements on acceptable terms, this could materially impair the Company's
competitive position and the possibility of the Company achieving regulatory
approval and/or profitability. See "Business--Manufacturing" and "--Government
Regulation."
MANAGEMENT DISCRETION AS TO USE OF PROCEEDS
The Company expects to use the net proceeds of the offering to fund research
and development, including preclinical and clinical programs, for capital
expenditures, including the construction of an additional manufacturing
facility, and for other general corporate purposes. As such, the Company's
management will retain broad discretion as to the allocation of a significant
portion of the net proceeds of the offering. As a result of such discretion,
the Company's management could allocate the proceeds of the offering to uses
which stockholders may not deem desirable. In addition, there can be no
assurance that the proceeds can or will be invested to yield an acceptable
return. See "Use of Proceeds."
RISK OF PRODUCT LIABILITY AND LIMITED INSURANCE
Exposure to potential product liability claims is inherent in the testing,
manufacturing, marketing and sale of human therapeutics. The use of the
Company's product candidates in clinical trials will also expose the Company
to product liability claims and possible adverse publicity. These risks
increase with respect to the Company's product candidates, if any, that
receive regulatory approval for sale. The Company currently has limited
product liability insurance coverage for the clinical research use of its
product candidates. There can be no assurance that the Company will be able to
maintain this coverage on acceptable terms or that it will be adequate to
cover product liability claims if they arise. The Company does not have
product liability coverage for the commercial sale of its products but intends
to obtain such coverage if its products are approved for commercial use.
However, there can be no assurance that the Company will be able to obtain
additional insurance coverage on acceptable terms, if at all, or that a
product liability claim would not materially adversely affect the business,
financial condition or results of operations of the Company. The Company
intends to evaluate its coverage on a regular basis and in connection with the
clinical testing and subsequent commercial introduction of its products under
development, but such coverage is expensive and may not be available on
acceptable terms or in sufficient amounts.
DEPENDENCE ON THIRD-PARTY REIMBURSEMENT; UNCERTAINTY OF HEALTH CARE REFORM
In both domestic and foreign markets, the ability of the Company to
commercialize its products will depend, in part, on the availability of
reimbursement from third-party payors, such as government health
administration authorities, private health insurers and other organizations.
Third-party payors are increasingly challenging the price and cost
effectiveness of medical products and significant uncertainty exists as to the
reimbursement status of newly approved health care products. There can be no
assurance that the Company's potential products will be considered cost
effective or that adequate third-party reimbursement will be available to
enable the Company to maintain price levels sufficient to realize an
appropriate return on its investment in product development. In addition, for
international sales of the Company's products, the Company and its
collaborators will be required to seek reimbursement on a country by country
basis. In certain foreign countries, the Company's potential products may be
subject to governmentally mandated prices that are artificially low. If
adequate coverage and reimbursement levels are not provided by the government
and other third-party payors for uses of the Company's therapeutic products,
the market acceptance of these products could be materially adversely
affected. Additionally, healthcare reform is receiving significant attention
both in the United States and abroad, and legislation and regulations
affecting the pricing of and reimbursement for pharmaceuticals may adversely
change before the Company's products are approved for commercial use.
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ANIMAL TESTING; HAZARDOUS MATERIALS
Much of the Company's research and development involves the testing of
compounds on laboratory animals. The Company may be adversely affected by
changes in laws and regulations or by social pressures that would restrict the
use of animals in testing or by actions against the Company or its
collaborators by groups of individuals opposed to such testing. In addition,
research and development processes sponsored by the Company involve the
controlled use of hazardous materials. The Company and its collaborators are
subject to various international, federal, state and local laws governing the
use, manufacture, storage, handling and disposal of hazardous materials. While
the Company believes that its safety procedures involving such materials are
adequate and comply with prescribed legal standards, the risk of accidental
contamination or injury cannot be completely eliminated. Such an event at the
Company's facilities or the facilities of any collaborator could result in the
Company being held liable for damages, which could have a material adverse
effect on the Company's business, financial condition and results of
operations. The Company contracts with third parties to remove hazardous
wastes generated by the Company. The disposal of such waste, third-party waste
disposal companies contracted by the Company, and their disposal sites are
regulated by the Environmental Protection Agency ("EPA"). The Company is
unaware of any actions initiated by the EPA against it, its third-party waste
disposal companies or their disposal sites. Such an action by the EPA could
have a material adverse effect on the Company's business, financial condition
or results of operations if it were to be held liable in whole or in part for
any clean up costs. See "Business--Government Regulations."
ABSENCE OF PRIOR TRADING MARKET; POTENTIAL VOLATILITY OF STOCK PRICE
Prior to this offering, there has been no public market for the Common Stock
of the Company. There can be no assurance that an active trading market will
develop or, if one does develop, that it will be maintained. The Company does
not currently anticipate that its Common Stock will be listed or quoted on a
United States securities exchange or quotation system, and expects the Swiss
Exchange to be the only trading market for the Common Stock. However, there
can be no assurance that the Common Stock will not be listed or quoted on a
United States exchange or quotation system in the future. See "Description of
Capital Stock--Listing." The public offering price of the Common Stock will be
established by negotiations between the Company and the Global Coordinator.
See "Underwriting" for a discussion of the factors to be considered in
determining the initial public offering price. There can be no assurance that
the initial public offering price will be indicative of the trading price of
the Company's Common Stock after the offering. The market price of the shares
of Common Stock, like that of the common stock of many other early stage
pharmaceutical and biotechnology companies, may be highly volatile. Factors
such as announcements of technological innovations or new commercial products
by the Company or its competitors, disclosure of results of clinical testing
or regulatory proceedings, government regulations and approvals, developments
in patent or other proprietary rights, public concern as to the safety of
products developed by the Company and general market conditions may have a
significant effect on the market price of the Common Stock. In addition, most
of the world's stock markets have experienced significant price and volume
fluctuations in recent years. This volatility has significantly affected the
market prices of securities of many pharmaceutical and biotechnology companies
for reasons frequently unrelated to or disproportionate to the operating
performance of the specific companies. These broad market fluctuations may
adversely affect the market price of the Company's Common Stock.
YEAR 2000 COMPLIANCE
The Company recognizes the need to ensure its operations will not be
adversely impacted by Year 2000 software failures. Software failures due to
processing errors potentially arising from calculations using the Year 2000
date are a known risk. The Company has established procedures for evaluating
and managing the risks and costs associated with this problem and expects to
replace software that is not Year 2000 compliant in the near future. There can
be no assurance that such procedures will be successful or that the date
change from 1999 to 2000 will not have a material adverse affect on Centaur's
business, operating results and financial condition. The Company's operations
may also be affected by the ability of third parties dealing with Centaur to
manage the effect of the Year 2000 date change.
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SHARES ELIGIBLE FOR FUTURE SALE
Sales of substantial amounts of the Company's Common Stock (including shares
issued upon the exercise of outstanding options or warrants) in the public
market after this offering could adversely affect the market price of the
Common Stock. Such sales also might make it more difficult for the Company to
sell equity or equity-related securities in the future at a time and price
that the Company deems appropriate. In addition to the shares of
Common Stock offered by the Company hereby, as of March 31, 1998, there were
approximately 13,824,925 shares of Common Stock outstanding. Of such shares,
approximately are subject to lock-up agreements entered into by the
holders of such shares that provide that none of such shares may be sold for a
period of 18 months after the initial trading of the Company's common stock on
the Swiss Exchange (the "Initial Listing Date") provided that one-third of
such shares may be sold beginning 180 days after the Initial Listing Date and
a total of two-thirds of such shares may be sold beginning 12 months after the
Initial Listing Date. An additional shares of Common Stock are subject to
lock-up agreements that provide that such shares may not be sold for 180 days
following the date of this Prospectus. Bank J. Vontobel & Co. AG may, in its
sole discretion and at any time without notice, release all or any portion of
the securities subject to lock-up agreements. Outstanding shares not subject
to these lock-up agreements, shares permitted to be sold under the lock-up
agreements and shares released from the lock-up agreements will generally be
immediately saleable on the Swiss Exchange, subject to compliance with certain
conditions. In addition, soon after the date of this Prospectus, the Company
expects to register approximately shares of the Common Stock reserved
for issuance under its stock option and purchase plans.
CONTROL BY EXISTING STOCKHOLDERS
Upon completion of this offering, the present directors, executive officers
and 5% stockholders of the Company and their affiliates will beneficially own
approximately % of the Company's outstanding Common Stock ( % if the
Managers' over-allotment option is exercised in full). As a result, these
stockholders would likely be able to control the management and affairs of the
Company and exercise significant influence over all matters requiring
stockholder approval, including the election of directors and approval of
significant corporate transactions such as a merger, consolidation or sale of
substantially all of the Company's assets. Such concentration of ownership may
have the effect of delaying or preventing a change in control of the Company
and might affect the market price of the Company's Common Stock and the voting
and other rights of the other stockholders. See "Principal and Selling
Stockholders."
EFFECT OF CERTAIN ANTI-TAKEOVER PROVISIONS
Although only Common Stock will be outstanding after the closing of this
offering and the Company has no current plans to issue shares of preferred
stock, the Company's Board of Directors will have the authority to issue up to
three million shares of preferred stock and to determine the price, rights,
preferences, privileges and restrictions, including voting rights, of those
shares without any further vote or action by the stockholders. The rights of
the holders of Common Stock will be subject to, and may be adversely affected
by, the rights of the holders of any preferred stock that may be issued in the
future. The issuance of preferred stock, while providing flexibility in
connection with possible acquisitions and other corporate purposes, could have
the effect of making it more difficult for a third party to acquire a majority
of the outstanding voting stock of the Company. The Company also has the
authority to issue shares of its authorized but unissued Common Stock without
further stockholder approval. However, the Company has agreed to certain
limitations on its ability to issue additional stock without stockholder
approval for a period of three years. See "Underwriting". Additionally,
certain provisions of the Company's charter documents and of Delaware
corporate law could discourage potential acquisition proposals and could delay
or prevent a change in control of the Company. These provisions are designed
to reduce the vulnerability of the Company to an unsolicited acquisition
proposal. These provisions are also intended to discourage certain tactics
that may be used in proxy fights. However, such provisions could have the
effect of discouraging others from making tender offers for the Company's
shares, and, as a consequence, they also may inhibit increases in the market
price of the Company's shares, that could result from actual or
16
<PAGE>
rumored takeover attempts. Such provisions also may have the effect of
preventing changes in the management of the Company. In addition, Section 203
of the Delaware General Corporation Law restricts certain business
combinations with any "interested stockholder" as defined by such statute. The
statute may have the effect of delaying, deferring or preventing a change in
control of the Company. See "Description of Capital Stock."
Additionally, under the Astra Agreement, Astra can terminate research
funding and the Company's manufacturing rights if more than 30% of the
Company's voting capital stock is acquired by a company engaged in the
manufacture and/or sale of pharmaceutical products. This may make Centaur less
valuable to a potential pharmaceutical acquiror and thereby decrease the
likelihood that such a company would pursue an acquisition of Centaur or
decrease the price that such a company would be willing to pay for Centaur.
See "Business--Astra Alliance."
IMMEDIATE AND SUBSTANTIAL DILUTION; DIVIDENDS
The initial public offering price for the Company's Common Stock is
substantially higher than the net tangible book value per share of the
Company's Common Stock. Investors purchasing shares of the Company's Common
Stock in this offering will therefore incur immediate and substantial dilution
in net tangible book value of $ per share. To the extent that options or
warrants (currently outstanding or subsequently granted) to purchase the
Common Stock are exercised, there will be further dilution. If the net
proceeds of this offering, together with funds from collaborations and
research grants, are insufficient to satisfy the Company's cash needs, the
Company may decide to sell additional equity or convertible debt securities.
The sale of such additional securities will result in additional dilution to
the Company's stockholders. See "Dilution."
The Company has never paid dividends and does not intend to pay any cash
dividends in the foreseeable future. See "Dividend Policy."
FORWARD-LOOKING STATEMENTS
This Prospectus contains certain forward-looking statements, including,
without limitation, statements containing the words "believes", "anticipates",
"expects" and words of similar import. Such forward-looking statements involve
known and unknown risks, uncertainties and other factors which may cause the
actual results, financial condition, performance or achievements of the
Company, or industry results, to be materially different from any future
results, performance or achievements expressed or implied by such forward-
looking statements. Such factors include, among others, the following: the
early stage of the Company's development and uncertainties related to its
technology, the uncertainty of preclinical and clinical trials of potential
products, the Company's novel therapeutic approach, the Company's dependence
on collaborative partners, potential liability to Lundbeck, future capital
needs and the uncertainty of additional funding, the Company's prior operating
losses and accumulated deficit and the uncertainty of future profitability,
the need for FDA approval and government regulation of the Company's
operations and potential products, dependence on licenses, patents and
proprietary technology, competition from other biotechnology, chemical and
pharmaceutical companies, attraction and retention of technologically skilled
employees, absence of sales and marketing experience and limited manufacturing
capabilities, management's discretion as to use of proceeds, risks of product
liability and limitations on insurance, dependence on third party
reimbursement for potential products, uncertainties relating to health care
reform, risks of animal testing and use of hazardous materials, absence of a
prior market in the Common Stock and possible volatility of the stock price,
Year 2000 compliance issues, the number of shares of Common Stock available
for future sale in the public market, the control by existing stockholders,
certain anti-takeover provisions of the Company's organizational documents and
contracts and other factors referenced in the Prospectus. Given these
uncertainties, prospective investors are cautioned not to place undue reliance
on such forward-looking statements. The Company disclaims any obligation to
update any such forward-looking statements to reflect future events or
developments.
17
<PAGE>
THE COMPANY
The Company's technology emerged from research begun in the 1980's by the
Company's scientific founders, Dr. John Carney, then at the University of
Oklahoma, and Dr. Robert Floyd at the Oklahoma Medical Research Foundation,
with a compound known as PBN. The Company was incorporated under the name
Centaur Pharmaceuticals, Inc. on March 17, 1992. Since its inception, the
Company has been developing a novel class of small molecule pharmaceutical
compounds, which the Company calls NRTs, for the treatment of diseases
involving oxidative stress. The Company's initial therapeutic targets are
neurodegenerative conditions such as Parkinson's disease, stroke, AIDS
dementia and Alzheimer's disease, in which the Company believes oxidative
stress is a major cause of neuronal damage. The Company has also established
research programs evaluating NRTs to treat arthritis, myocardial infarction,
inflammatory bowel disease, multiple sclerosis, ophthalmic disorders and other
diseases. The Company does not own any equity securities of any other
corporation, except for a small investment in Cutanix Corporation. See
"Business--Cutanix--Skin Care Affiliate."
USE OF PROCEEDS
The net proceeds to the Company from the sale of the shares of Common
Stock offered by the Company hereby will be approximately $55 million at an
assumed initial public offering price of CHF per share and an assumed
exchange rate of $ per Swiss franc, and after deducting the estimated
underwriting discounts and commissions and offering expenses. The Company will
not receive any proceeds from the sale of shares by the Selling Stockholders.
Centaur expects to use the net proceeds of the offering as follows: (i) $25
million to fund its research and development programs not covered by Astra,
including the Company's programs for the treatment of Parkinson's disease,
AIDS dementia, and arthritis; (ii) $10 million to fund its exploratory
research programs; and (iii) $10 million for capital expenditures, and (iv)
the remainder for general corporate purposes, including working capital. The
amount and timing of expenditures will depend upon numerous factors, including
the progress of the Company's research and development programs, progress with
preclinical and clinical trials, the establishment of additional collaborative
relationships, if any, or the modification or termination of the Company's
existing collaborative relationship, the cost of manufacturing scale-up, the
development of marketing activities, if undertaken by the Company, the cost of
preparing, filing, prosecuting, maintaining and enforcing patent claims and
other intellectual property rights and competing technological and market
developments. Furthermore, the net proceeds of the offering may be used to
acquire other companies, technologies or products that complement the business
of the Company, although no such transactions are being planned or negotiated
as of the date hereof. Pending such application, the Company intends to invest
such net proceeds in short-term, interest-bearing investment grade securities.
DIVIDEND POLICY
Dividends are payable on the Common Stock only at such times and in such
amounts as the Board of Directors may from time to time determine, subject to
certain limitations. See "Description of Capital Stock." The Company has not
paid any cash dividends on its capital stock to date. The Company currently
anticipates that it will retain any future earnings for use in its business
and does not anticipate paying any cash dividends in the foreseeable future.
18
<PAGE>
CAPITALIZATION
The following table sets forth, as of March 31, 1998, the (i) actual
capitalization of the Company, (ii) the capitalization of the Company on a pro
forma basis to give effect to the conversion of all outstanding shares of
Preferred Stock into Common Stock upon the closing of this offering and the
receipt of $7.75 million in cash (net of the first repayment of approximately
$250,000) in April 1998 from a debt financing, and (iii) the capitalization of
the Company as adjusted to give effect to the sale of the shares of
Common Stock offered by the Company hereby and the receipt of the net proceeds
therefrom (at an assumed initial public offering price of CHF per share
and an assumed exchange rate of $ per Swiss franc, and after deducting the
estimated underwriting discounts and commissions and offering expenses). See
"Description of Capital Stock" for a description of the Company's authorized
and issued capital stock.
<TABLE>
<CAPTION>
MARCH 31, 1998
--------------------------
PRO AS
ACTUAL FORMA ADJUSTED
------- ------- --------
(US$ IN THOUSANDS,
EXCEPT SHARE AND PER
SHARE DATA)
<S> <C> <C> <C>
Cash, cash equivalents and short term investments... $10,668 $18,419 $
======= ======= =======
Obligations under capital lease..................... $ 147 $ 147 $ 147
======= ======= =======
Obligation under debt financing (including short
term portion) (1).................................. $ -- $ 7,751 $ 7,751
======= ======= =======
Preferred Stock, $0.001 par value (2): 10,922,735
shares authorized; 10,922,735 shares issued and
outstanding; aggregate redemption value of
$28,310,242; no shares authorized, issued and
outstanding pro forma or as adjusted............... $28,105 $ -- $ --
------- ------- -------
Stockholders' equity(2):
Preferred stock, $0.001 par value: no shares
authorized, issued or outstanding; 3,000,000
shares authorized pro forma and as adjusted; no
shares issued or outstanding pro forma or as
adjusted......................................... -- -- --
Common Stock, $0.001 par value (3): 18,200,000
shares authorized; 2,902,190 shares issued and
outstanding; 33,000,000 shares authorized pro
forma and as adjusted; 13,824,925 shares issued
and outstanding pro forma; shares issued and
outstanding as adjusted.......................... 3 14
Additional paid-in capital........................ 1,875 29,969
Deferred compensation, net........................ (1,572) (1,572) (1,572)
Accumulated other comprehensive income............ 1 1 1
Accumulated deficit............................... (9,394) (9,394) (9,394)
------- ------- -------
Total stockholders' equity (net capital
deficiency)...................................... (9,087) 19,018
------- ------- -------
Total capitalization................................ $19,018 $19,018 $
======= ======= =======
</TABLE>
- --------
(1) Includes approximately $1.3 million short-term and approximately $6.5
million long-term obligations under debt financing. See Note 9 of Notes to
Financial Statements.
(2) See Note 7 of Notes to Financial Statements.
(3) Based on the number of shares outstanding as of March 31, 1998. Excludes
(i) 1,776,877 shares of Common Stock subject to options outstanding as of
March 31, 1998 under the Company's 1993 Incentive Plan, at a weighted
average per share exercise price of $1.44; (ii) 123,663 shares of Common
Stock reserved as of such date for future grant or issuance under the
Company's 1993 Incentive Plan; and (iii) 68,603 shares of Common Stock
reserved as of such date for issuance upon the exercise of warrants, at a
weighted average per share exercise price of $2.69. Since March 31, 1998,
the Company has reserved 1,250,000 shares of Common Stock for future grant
or issuance under the Company's 1998 Incentive Plan, Directors Plan and
Purchase Plan. See "Management--Directors Compensation" and "--Employee
Benefit Plans" and Note 7 of Notes to Financial Statements.
19
<PAGE>
DILUTION
The pro forma net tangible book value of the Common Stock as of March 31,
1998, assuming the conversion of all outstanding shares of Preferred Stock
into shares of Common Stock, was $ or $ per share. "Pro forma net
tangible book value per share" is determined by dividing the number of
outstanding shares of Common Stock into the net tangible book value of the
Company (total tangible assets less total liabilities). After giving effect to
the sale of the shares of Common Stock offered by the Company hereby
and the receipt of the net proceeds therefrom (based upon an assumed initial
public offering price of CHF per share and an assumed exchange rate of
$ per Swiss franc, and after deducting the estimated underwriting discounts
and commissions and offering expenses), the pro forma net tangible book value
of the Company as of March 31, 1998 would have been $ , or $ per share.
This represents an immediate increase in net tangible book value of $
per share to existing stockholders and an immediate dilution of $ per
share to new investors purchasing shares at the initial public offering price.
See "Risk Factors--Immediate and Substantial Dilution; Dividends." The
following table illustrates the per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $
------
Pro forma net tangible book value per share as of March
31, 1998................................................. $
Increase per share attributable to new investors..........
-----
Pro forma net tangible book value per share after offering..
------
Dilution per share to new investors......................... $
======
</TABLE>
The following table sets forth, on a pro forma basis as of March 31, 1998,
the number of shares of Common Stock purchased from the Company, the total
consideration paid to the Company and the average price per share paid by the
existing stockholders and by the investors purchasing shares of Common Stock
in this offering (based upon an assumed initial public offering price of
$ per share at an assumed exchange rate of $ per Swiss franc, and
before deducting the estimated underwriting discounts and commissions):
<TABLE>
<CAPTION>
TOTAL CASH
SHARES PURCHASED CONSIDERATION AVERAGE
------------------ --------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ------- ------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders (1).......... 13,824,925 % $ % $
New investors (1)..................
---------- ----- ------- -----
Total.......................... 100.0% $ 100.0%
========== ===== ======= =====
</TABLE>
As of March 31, 1998, there were options outstanding to purchase a total of
1,776,877 shares of Common Stock, at a weighted average per share exercise
price of $1.44, and warrants outstanding to purchase 68,603 shares of Common
Stock, at a weighted average per share exercise price of $2.69. To the extent
that any of these options or warrants is exercised, there will be further
dilution to new investors. See "Capitalization" and Note 7 of Notes to
Financial Statements.
- --------
(1) Sales by Selling Stockholders in this offering will reduce the number of
shares held by existing stockholders to or % of the total
number of shares of Common Stock outstanding, and will increase the number
of shares held by new investors to or % of the total number
of shares of Common Stock outstanding after the offering. See "Principal
and Selling Stockholders."
20
<PAGE>
SELECTED FINANCIAL DATA
The selected financial data set forth below with respect to the Company's
statement of operations for each of the three years in the period ended
December 31, 1997 and balance sheet data at December 31, 1995, 1996 and 1997,
are derived from the financial statements of the Company that have been
audited by Ernst & Young LLP, independent auditors, which are included
elsewhere in this Prospectus and are qualified by reference to such financial
statements and the notes related thereto. The statement of operations data for
the years ended December 31, 1993 and 1994 and the balance sheet data at
December 31, 1993 and 1994 are derived from unaudited financial statements not
included in this Prospectus. The statement of operations data for the three-
months ended March 31, 1997 and 1998 and the balance sheet data as of March
31, 1998 are derived from unaudited financial statements included elsewhere
herein. The unaudited financial statements, in the opinion of the management
of the Company, include all adjustments, consisting only of normal recurring
adjustments, that the Company considers necessary for a fair presentation of
the financial position and results of operations for these periods. The
selected financial data set forth below should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the financial statements and notes thereto included elsewhere
in this Prospectus.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
----------------------------------------- ----------------
1993(1) 1994(1) 1995 1996 1997 1997(1) 1998(1)
------- ------- ------ ------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Net revenue............. $ -- $ 156 $7,875 $ 9,429 $11,774 $3,570 $ 2,937
Operating expenses:
Research and
development........... 925 2,735 5,490 7,854 15,446 3,347 3,481
General and
administrative........ 309 912 1,385 2,306 2,166 592 660
------- ------- ------ ------- ------- ------ -------
Total operating
expenses............... 1,234 3,647 6,875 10,160 17,612 3,939 4,141
------- ------- ------ ------- ------- ------ -------
Income (loss) from
operations............. (1,234) (3,491) 1,000 (731) (5,838) (369) (1,204)
Interest and other
income, net............ 35 41 491 362 1,107 187 174
------- ------- ------ ------- ------- ------ -------
Net income (loss)....... $(1,199) $(3,450) $1,491 $ (369) $(4,731) $ (182) $(1,030)
======= ======= ====== ======= ======= ====== =======
Pro forma net loss per
share, basic and
diluted (2)............ $ (0.36) $ (0.07)
Shares used in computing
pro forma net loss per
share, basic and
diluted (2)............ 13,243 13,824
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------------- MARCH 31,
1993(1) 1994(1) 1995 1996 1997 1998(1)
------- ------- ------- -------- -------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents
and short term
investments............ $ 2,390 $ 7,088 $ 8,699 $ 10,966 $ 13,633 $ 10,668
Working capital......... 2,224 6,803 8,199 10,234 11,300 9,655
Total assets............ 3,433 7,985 11,058 15,407 24,243 22,969
Long-term portion of
obligations under
capital lease.......... -- 561 343 210 -- --
Redeemable convertible
preferred stock (3).... 4,428 11,698 11,698 11,698 28,105 28,105
Accumulated deficit..... (1,305) (4,755) (3,264) (3,633) (8,364) (9,394)
Total stockholders'
equity (net capital
deficiency)............ 3,225 7,013 (3,196) (3,559) (8,148) (9,087)
</TABLE>
- --------
(1) Unaudited.
(2) See Note 1 of Notes to Financial Statements for an explanation of the
determination of pro forma diluted net loss per share and the number of
shares used in computing pro forma net loss per share.
(3) Shares of Preferred Stock automatically convert to Common Stock upon
completion of this offering. See "Capitalization" and Note 7 of Notes to
Financial Statements.
21
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of the financial condition and results of
operations of the Company should be read in conjunction with the Financial
Statements and Notes thereto included elsewhere in this Prospectus. This
discussion contains forward-looking statements that involve risks and
uncertainties. The Company's actual results may differ from those anticipated
in these forward-looking statements. Factors that may cause such a difference
include, but are not limited to, those set forth under "Risk Factors."
OVERVIEW
The Company was incorporated in March 1992 and has devoted substantially all
of its resources since that time to the research and development of
proprietary, small molecule pharmaceutical compounds for the treatment of
diseases involving oxidative stress. From inception through March 31, 1998,
the Company has recognized cumulative revenues from collaborative research and
development agreements and grants of $32.1 million. The Company does not
anticipate revenues from product sales or collaborative agreement royalties
for at least several years. The Company's sources of potential revenue for the
next several years will be payments under existing and possible future
collaborative arrangements, U.S. government research grants and possible
manufacturing revenue from existing and possible future collaborators for the
manufacture of bulk drug product for use in clinical testing. The Company has
incurred cumulative losses through March 31, 1998 of $9.4 million. The Company
expects to incur additional operating losses over at least the next several
years as the Company continues its clinical trial programs and expands its
research and preclinical development.
In June 1995, the Company entered into a collaborative agreement with Astra
for the research, development and marketing of NRT-related drugs to treat
stroke, Alzheimer's disease, traumatic brain injury and multi-infarct
dementia. Under the terms of the Astra Agreement, Centaur is primarily
responsible for research work and Astra is primarily responsible for
development work, including conducting clinical trials. The Astra Agreement
also provides for Astra to pay Centaur up to $6.0 million per year for five
years primarily as reimbursement for the Company's projects related research,
subject to certain limitations, and for Astra to bear the costs of its
development work. Astra is also obligated to make payments to Centaur upon
achievement of certain milestones, to reimburse the Company for the
manufacture of bulk drug product for use in clinical testing, and to pay
royalties to Centaur on product sales covered by the Astra Agreement. In
return, Astra received exclusive worldwide marketing rights to any
pharmaceuticals resulting from the collaboration. The Company retains
worldwide manufacturing rights for the active ingredients of the product and
an option to obtain certain co-promotion rights in the United States. Through
March 31, 1998, the Company recognized $24.6 million of revenue under the
Astra Agreement. See "Business--Astra Alliance."
In October 1996, the Company entered into a research and development
collaboration with Lundbeck to jointly commercialize the Company's proprietary
drug compound for Parkinson's disease. Under the Lundbeck Agreement, Lundbeck
and the Company jointly funded research, development, regulatory and other
nonresearch activities. Upon achievement of certain drug development
milestones, Lundbeck was to make milestone payments. From the inception of the
Lundbeck collaboration to March 31, 1998, $5.9 million of revenue has been
recognized, of which $4.3 million has been received. In March 1998, Lundbeck
terminated the Lundbeck Agreement based primarily on a claim that Centaur had
breached the agreement by commencing clinical trials for AIDS dementia, using
the same compound as is being used in the Company's Parkinson's disease
clinical trials, without obtaining consent from Lundbeck. Lundbeck has
demanded the rescission of the contract and the repayment of all amounts paid
by Lundbeck to the Company under the Lundbeck Agreement, together with certain
other amounts expended by Lundbeck in connection therewith, believed to
aggregate approximately $7 million. The Company has not recorded a loss
contingency for any of this amount because the Company does not believe that
Lundbeck's claim has merit. The Company has fully reserved all unpaid balances
due from Lundbeck. The Company disputes Lundbeck's claim and has demanded the
payment of approximately $7 million that it believes is owed to it by
Lundbeck. The Company and Lundbeck are currently engaged in discussions with
respect to a resolution of this matter. If the matter is not resolved it is
likely that the dispute will be
22
<PAGE>
submitted to arbitration in Canada. There can be no assurance as to the
outcome of such arbitration and an adverse result could have a material
adverse effect on the Company's business, financial condition and results of
operations. See "Risk Factors--Lundbeck Dispute."
The Company expects to continue to incur net operating losses through at
least the next several years as it continues to expand its research and
development programs, including preclinical and clinical studies, and there
can be no assurance that the Company will ever be able to achieve or sustain
profitability in the future. The Company also expects its results of
operations to vary significantly from quarter to quarter. Quarterly operating
results will depend upon many factors, including the timing and amount of
expenses associated with expanding the Company's operations, the timing of
receipt of milestone payments from new and existing collaborative partners, if
any, the conduct and results of clinical trials and the timing of regulatory
approvals, the timing of potential product introductions both in the United
States and internationally and the cost to validate and operate manufacturing
facilities.
RESULTS OF OPERATIONS
Three Months Ended March 31, 1997 and 1998
Substantially all of the Company's revenues have been derived from
collaborative research and development agreements and U.S. National Institutes
of Health ("NIH") grants. The Company records milestone payments received
under collaborative agreements as deferred revenue and recognizes this revenue
as progress is made toward the attainment of the next anticipated milestone.
The Company's revenues for the three months ended March 31, 1997 were $3.6
million compared to revenues of $2.9 million for the three months ended March
31, 1998. The decrease in revenues in the first three months of 1998 was
primarily due to the recognition of manufacturing revenue from Lundbeck and
grant revenue from NIH in the three months ended March 31, 1997, whereas no
such revenue was recognized in the three months ended March 31, 1998. Revenues
from the Astra Agreement for milestone payments, research support and
manufacturing revenues were $2.3 million in the first three months of 1997 and
$2.1 million for the first three months of 1998. The Company expects that its
revenue for 1998 will be less than its revenue for 1997 as a result of the
termination of the Lundbeck Agreement, unless the Company is able to enter
into one or more additional collaborations in 1998. See "Risk Factors--
Dependence Upon Collaborators."
Research and development expenses increased slightly from $3.3 million in
the three months ended March 31, 1997 to $3.5 million for the same period in
1998 due to an increase in headcount in 1998, largely offset by a decrease in
clinical study expenses. The Company expects 1998 research and development
expenses to be equal to or less than that incurred in 1997. However, the
Company expects to incur further increases in research and development costs
in the future, resulting from the addition of new clinical programs as well as
continuation of the Parkinson's disease and AIDS dementia clinical trials. The
Company is seeking to enter into additional collaborative research and
development agreements to help fund these additional expenses. However, there
can be no assurance that new collaborators will be found or that total
collaborative research revenue will be sufficient to offset the anticipated
increase in expenses.
General and administrative expenses were $592,000 in the three months ended
March 31, 1997 and $660,000 in the same period in 1998. The Company expects
that general and administrative expenses will increase in the future as a
result of increased activity by the Company in corporate development, the
increased costs of being a public company, the addition of personnel and
facilities that are needed to support the expected growth in research and
development activities and possible expenses related to the Lundbeck dispute.
In addition, if the Company is successful in commercializing one or more
drugs, it will incur substantial general, selling and administrative expenses
in connection with the marketing and sales effort. However, there can be no
assurance that the Company will be able to commercialize any of its drug
candidates.
23
<PAGE>
Net interest and other income decreased from approximately $187,000 in the
three months ended March 31, 1997 to approximately $174,000 for the same
period in 1998 due to decreased cash balances. The Company expects higher
interest costs in the future as a result of its April 1998 debt financing.
During the three months ended March 31, 1997 and 1998, the Company recorded
aggregate deferred compensation of $9,000 and $1.1 million, respectively, in
connection with certain stock options and warrants granted by the Company in
those periods. In the second quarter of 1998, the Company recorded additional
deferred compensation of $355,000 in connection with the grant of additional
options in that period. Of the total deferred compensation, approximately
$89,000 was amortized in the quarter ended March 31, 1998. The Company expects
noncash amortization of approximately $454,000 during the remainder of 1998,
$531,000 during 1999, $519,000 during 2000 and $381,000 during 2001 related to
these options. The amortization amounts were allocated, and are expected to
continue to be allocated in future periods, primarily to research and
development expenses, and, to a lesser extent, to general and administrative
expenses. See Note 7 of Notes to Financial Statements.
Years Ended December 31, 1995, 1996 and 1997
Revenues were $7.9 million in 1995, $9.4 million in 1996, and $11.8 million
in 1997. Revenues from the Astra Agreement representing milestone payments,
research support, reimbursement of certain previously incurred Alzheimer's
disease and stroke costs and manufacturing revenues for the stroke product
used in preclinical and clinical studies were $7.6 million in 1995, $7.6
million in 1996, and $7.2 million in 1997. Revenues from Astra decreased in
1997 due to reduced revenue from the manufacture of bulk drug product for use
in clinical testing. Revenues from Lundbeck representing a milestone payment,
research support, reimbursement of development, regulatory and other
nonresearch activities and manufacturing revenue for the Parkinson's product
used in preclinical and clinical studies were $1.1 million in 1996 and $4.1
million in 1997. NIH grant revenue totaled $301,000 in 1995, $682,000 in 1996
and $364,000 in 1997.
Research and development expenses increased from $5.5 million in 1995 to
$7.9 million in 1996 and $15.4 million in 1997. The increases in research and
development expenses were primarily due to the initiation of Parkinson's
disease clinical trials in 1996 and AIDS dementia clinical trials in 1997 and
increased activity in the Company's other research and development projects.
In connection with these trials and projects, the Company hired additional
research and development personnel, leading to increased payroll and personnel
expenses and associated increased purchases of laboratory supplies and
chemicals and increased equipment depreciation and facilities expenses. In
addition, during 1996 and 1997, the Company expanded its funding of work at
outside research institutions.
General and administrative expenses increased from $1.4 million in 1995 to
$2.3 million in 1996 and decreased slightly to $2.2 million in 1997. The
increase in 1996 was primarily attributable to increased payroll and personnel
expenses as the Company hired additional administrative personnel to support
expanded business activities.
Net interest and other income decreased from $491,000 in 1995 to $362,000 in
1996 as a result of the Company's decreasing average cash and investment
balance which primarily resulted from higher levels of capital expenditures
during 1996. The increase in net interest and other income in 1997 to $1.1
million was due primarily to increases in the Company's cash balances from the
net proceeds of a $16.4 million private placement completed in early 1997.
During the years ended 1996 and 1997, the Company recorded aggregate
deferred stock compensation of $50,000 and $593,000, respectively, in
connection with certain stock options and warrants granted by the Company in
those periods. The Company did not record any deferred stock compensation in
1995. The amortization amounts were allocated primarily to research and
development expenses, and, to a lesser extent, general and administrative
expenses. See Note 7 of Notes to Financial Statements.
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<PAGE>
The Company's net income decreased from a profit of $1.5 million in 1995 to
losses of $369,000 in 1996 and $4.7 million in 1997, primarily as a result of
increased research and development expenses partially offset by higher net
revenue from collaborative agreements and grants.
As of December 31, 1997, the Company had a federal income tax loss
carryforward of approximately $3.5 million and no California income tax loss
carryforward. The Company's research and development tax credit carryforwards
are approximately $0.1 million for federal income tax purposes. The federal
net operating loss and credit carryforwards will expire in the year 2012 if
not utilized. Utilization of the net operating losses and credit carryforwards
may be subject to substantial annual limitation due to ownership change
provisions of the Internal Revenue Code of 1986 and similar state provisions.
The annual limitation may result in the expiration of net operating losses and
credits before utilization.
LIQUIDITY AND CAPITAL RESOURCES
From inception through March 31, 1998, the Company has financed its
operations primarily through $30.5 million generated from corporate
collaborations, $28.1 million received from private placements of equity
securities, $1.6 million from NIH grant funding, and $593,000 in capital lease
financing. As of March 31, 1998, the Company had approximately $10.7 million
in cash and investment securities. In April 1998, the Company received $7.75
million in cash (net of the first repayment of approximately $250,000) from a
debt financing. The debt bears interest at 14.8% per annum, is secured by
equipment and leasehold rights and improvements, and is payable in monthly
installments through 2002. See Note 2, 7 and 9 of Notes to Financial
Statements.
The Company's operations used $1.5 million of cash in the three months ended
March 31, 1998 and $6.2 million of cash in the year ended December 31, 1997,
and provided cash of $17,000 in the three months ended March 31, 1997 and $2.5
million and $5.1 million of cash in the years ended December 31, 1995 and
1996, respectively. These uses and contributions of cash primarily reflect the
Company's net profit or loss for such periods, as adjusted for changes in the
Company's current assets and liabilities, and deferred revenue, over such
periods.
The Company's use of cash in investing activities reflects the Company's
purchase of property and equipment, together with purchases and sales of
securities in which the Company has invested its cash prior to use. Additions
to property and equipment were $706,000, $2.7 million, $7.5 million and $1.5
million for the years ended December 31, 1995, 1996 and 1997 and the three
months ended March 31, 1998, respectively. The increased spending in 1996
compared to 1995 primarily reflected the Company's expansion of its laboratory
and research animal facility and the concurrent investment in laboratory
equipment. The further increase in 1997 was primarily due to the Company's
investment in its Santa Clara, California manufacturing facility. The Company
anticipates incurring capital expenditures of at least $20 million over the
next several years to establish a commercial scale pharmaceutical
manufacturing plant, and to expand its research, development, and
administrative facilities and equipment in its Santa Clara facility. The
Company plans to fund a significant portion of such expenditures through loans
and government grants, although there can be no assurance that such funding
will be available.
The Company believes that its current resources, together with the estimated
proceeds of this offering, will be sufficient to meet its capital requirements
for at least the next eighteen months. There can be no assurance that the
Company will not require additional funds in order to continue its research
and development programs, to enter into and sustain preclinical and clinical
testing and to manufacture and market products that gain regulatory approval,
if any. The Company's capital requirements depend on numerous factors,
including the progress of the Company's research and development programs,
manufacturing activities, revenues or investments from collaborators, the
scope and results of preclinical and clinical testing, the time and costs
involved in obtaining regulatory approval, competing technological and market
developments, changes in the Company's existing research relationships and the
ability of the Company to establish additional collaborative
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<PAGE>
and other arrangements. The Company anticipates that it will need to raise
substantial additional funds for research, development, expansion of
manufacturing and administrative facilities and other expenses, through equity
or debt financings, research and development financings, collaborative
relationships or otherwise, prior to the commercialization of any of its
products. There can be no assurance that any such additional funding will be
available to the Company or, if available, that it will be on reasonable
terms. Any such additional financing may result in dilution to existing
stockholders. If adequate funds are not available, the Company may be required
to significantly curtail its research and development programs, including
clinical trials, or enter into arrangements that may require the Company to
relinquish certain material rights to its potential products on terms that it
might otherwise find unacceptable.
RECENT ACCOUNTING PRONOUNCEMENTS
As of January 1, 1998, the Company adopted the Financial Accounting
Standards Board's Statement of Financial Accounting Standards No. 130 ("SFAS
130"), Reporting Comprehensive Income. SFAS 130 establishes new rules for the
reporting and display of comprehensive income and its components; however, the
adoption of this Statement had no impact on the Company's results of
operations or financial condition. SFAS 130 requires unrealized gains or
losses on the Company's available-for-sale securities and foreign currency
translation adjustments, which prior to adoption were reported separately in
stockholders' equity, to be included in other comprehensive income. Prior year
financial statements have been reclassified to conform to the requirements of
SFAS 130. During the three months ended March 31, 1997 and 1998, total
comprehensive income amounted to losses of $182,000 and $1.0 million,
respectively.
Effective January 1, 1998, the Company adopted the Financial Accounting
Standards Board's Statement of Financial Accounting Standards No. 131 ("SFAS
131"), Disclosures about Segments of an Enterprise and Related Information.
SFAS 131 superseded SFAS 14, Financial Reporting for Segments of a Business
Enterprise. SFAS 131 establishes standards for the way that public business
enterprises report selected information about operating segments in interim
financial reports. SFAS 131 also establishes standards for related disclosures
about products and services, geographic areas, and major customers. The
adoption of SFAS 131 had no impact on the Company's results of operations,
financial position, or disclosure of segment information at March 31, 1998.
YEAR 2000 COMPLIANCE
The Company recognizes the need to ensure its operations will not be
adversely impacted by Year 2000 software failures. Software failures due to
processing errors potentially arising from calculations using dates beginning
with the Year 2000 are a known risk. The Company has established procedures
for evaluating and managing the internal risks and costs associated with this
problem and expects to replace software that is not Year 2000 compliant in the
near future. The Company does not expect the internal costs of managing the
risks or replacing the software to be material; however, there can be no
assurance that such procedures will be successful or that the date change from
1999 to 2000 will not have a material adverse affect on Centaur's business,
operating results and financial condition. The Company's operations may also
be affected by the ability of third parties, including collaborative partners,
dealing with Centaur to also manage the effect of the year 2000 date change.
26
<PAGE>
BUSINESS
OVERVIEW
Centaur is developing a novel class of small molecule pharmaceutical
compounds, which the Company calls NRTs (nitrone related therapeutics), for
the treatment of diseases involving oxidative stress. Oxidative stress results
from the formation of free radicals and other reactive oxygen species
(collectively referred to as "oxidative stress agents" or "OSA") that can
damage cells. OSA are produced as by-products of the body's normal metabolism
of oxygen and nutrients, as a result of the activation of white blood cells
during inflammation, through the loss and subsequent restoration of blood flow
(ischemia/reperfusion) and due to trauma, radiation and infection. The Company
believes that NRTs may have several mechanisms of action, including
(i) neutralizing OSA, thereby protecting cells from potential damage, (ii)
preventing OSA from inducing genes to produce toxins that can damage or
destroy cells and (iii) slowing the release of cytokines which induce
inflammation.
The Company's initial therapeutic targets are neurodegenerative conditions
such as Parkinson's disease, stroke, AIDS dementia and Alzheimer's disease, in
which the Company believes oxidative stress is a major cause of neuronal
damage. The Company has completed Phase I clinical studies in the United
States of an orally administered NRT for the treatment of Parkinson's disease.
In collaboration with Astra, Phase Ia clinical studies of an NRT for the
intravenous treatment of stroke have been completed in Sweden, and potential
lead compounds for Alzheimer's disease are being tested. The Company is
currently conducting a Phase I clinical trial in HIV-infected volunteers of an
orally administered NRT for the treatment of AIDS dementia. Centaur believes
that its NRT technology also provides a broad platform for developing
therapeutics for other diseases in which oxidative stress and inflammation are
important, and has established research programs evaluating NRTs to treat
arthritis, myocardial infarction, inflammatory bowel disease, multiple
sclerosis, ophthalmic disorders and other diseases.
TECHNOLOGY
A wide variety of human diseases and disorders have been linked to cell
damage caused by oxidation. These diseases and disorders include acute
conditions associated with the temporary loss of blood flow such as stroke and
myocardial infarction, debilitating chronic diseases such as Parkinson's
disease and Alzheimer's disease, inflammatory conditions such as arthritis,
and the process of aging itself. Oxidation is a chemical reaction in which one
or more electrons are transferred from one molecule to another. Stable
molecules usually have matched pairs of electrons and are unlikely to initiate
oxidation. However, in certain biochemical reactions, free radicals having an
unpaired electron can be created. Free radicals and other OSA tend to be
highly reactive, and their formation can lead to a series of oxidative
reactions that damage and kill cells. This damage can include protein and DNA
oxidation, dangerous increases in intracellular calcium, activation of
damaging proteases and nucleases, and peroxidation of cellular membrane
lipids. The effect of this process of cell damage and death is known as
oxidative stress.
The body generates a variety of OSA as by-products of the body's normal
metabolism of oxygen and nutrients to produce energy. The most common of these
by-products are hydrogen peroxide, superoxide, nitric oxide and the hydroxyl,
perhydroxyl, alkoxyl and peroxyl radicals. The body also generates OSA as part
of the inflammation process in which white blood cells produce OSA to attack
antigens. These OSA may also indirectly attract additional white blood cells,
amplifying the inflammatory response. Under normal circumstances, these
processes are balanced by the body's natural antioxidants, which include
enzymes such as superoxide dismutase, catalase and glutathione peroxidase, and
vitamins such as tocopherol (vitamin E), ascorbate (vitamin C) and b-carotene
(vitamin A), and by the body's cellular repair mechanisms.
As people age, OSA production tends to increase while the body's natural
antioxidant and cellular repair mechanisms decline. Accordingly, cell damage
caused by oxidative stress tends to increase with age. This effect is
especially damaging in the brain due to its high metabolic rate, the
relatively low level of antioxidant protection in the brain, and the inability
of neurons to regenerate. One of the consequences of this higher level
27
<PAGE>
of oxidative stress is that a significant percentage of the enzymes critical
to normal neuron function may become oxidized, increasing susceptibility to
debilitating and potentially fatal degenerative diseases such as Parkinson's
disease and Alzheimer's disease. In addition, age associated changes may bring
about increases in inflammation-causing cytokines and other cellular mediators
in the brain that may induce certain genes to produce higher levels of
neuronal toxins. These neurotoxins may result in older individuals becoming
more susceptible to sudden increases in oxidative stress caused by acute
events such as stroke and trauma.
OSA are also created as a result of ischemia/reperfusion, trauma, radiation
and infection. In acute conditions such as stroke and myocardial infarction,
the reperfusion of oxygenated blood can induce a cascade of OSA that
overwhelms natural antioxidant and cellular repair mechanisms. The resulting
tissue injury can occur in several stages. Initially, after the tissue is
reoxygenated, there is a rapid rise in OSA that cause oxidative damage.
Subsequently, these early OSA can create additional OSA and initiate cellular
signaling processes that induce genes to produce higher levels of
inflammation-causing cytokines and toxins such as nitric oxide. The cascade of
damage can last for many hours or days. In chronic conditions such as
Alzheimer's disease and arthritis, inflammation may exacerbate oxidative
stress, causing further tissue damage.
Centaur's technology is based on a proprietary library of small molecule
pharmaceutical compounds, known as NRTs. This technology emerged from research
begun in the 1980's by the Company's scientific founders, Dr. John Carney,
then at the University of Oklahoma, and Dr. Robert Floyd at the Oklahoma
Medical Research Foundation, with a compound known as PBN. PBN is a small
organic molecule that neutralizes OSA and has been shown to reduce cellular
damage resulting from oxidative stress and inflammation in animal models.
Centaur has developed a library of proprietary derivatives which the Company
believes improve upon the properties of PBN. This drug discovery process has
involved the systematic preclinical screening and modification of compounds to
improve their safety, efficacy and pharmacokinetic profile using a variety of
screening methods and disease models.
The Company believes that NRTs act to reestablish the balance between OSA
production and the body's oxidation defense mechanisms. The Company believes
that NRTs may have several mechanisms of action, including (i) neutralizing
OSA, thereby protecting cells from potential damage, (ii) preventing OSA from
inducing genes to produce toxins that can damage or destroy cells and (iii)
slowing the release of cytokines which cause inflammation. These properties
may make it possible to treat acute conditions, such as stroke, by
administering NRTs several hours after the initial insult. In such
circumstances, NRTs may be able to stop the escalating cascade of oxidative
damage, thus slowing the production of additional OSA and toxins and reducing
inflammation. The Company believes that NRTs may also be effective if given
chronically for the treatment of certain degenerative and inflammatory
conditions. In addition to possibly reestablishing the balance between OSA
production and the body's oxidation defense mechanisms, chronic administration
of NRTs may suppress the production of toxins and cytotoxic gene expression,
thus rendering cells less susceptible to age-associated oxidative damage.
Centaur views both acute and chronic conditions involving oxidative stress
as attractive pharmaceutical development targets. Most acute conditions
require drugs that (i) can be administered through injection or intravenous
solution in the ambulance or hospital emergency room, (ii) are absorbed
quickly to achieve rapid effectiveness and (iii) are swiftly eliminated by the
body after they have had their intended effect. Chronic conditions require
drugs that (i) are orally active so that they can be conveniently administered
over a long period of treatment and (ii) have a relatively long period of
elimination to allow daily dosing.
The Company believes that its proprietary NRTs have the following
characteristics that may make them attractive as pharmaceutical candidates:
. EFFECTIVE ANTIOXIDANTS. In in vitro tests and animal models, the
Company's NRTs neutralize pathological OSA without interfering with
normal metabolism.
. ANTI-INFLAMMATORY ACTIVITY. NRTs have demonstrated anti-inflammatory
activity in both in vitro tests and animal models.
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<PAGE>
. SAFETY. The Company has developed NRTs that have low toxicity in in vivo
preclinical studies at dosage levels well above those that have
demonstrated therapeutic effects in animal models of disease. NRTs have
been administered to human volunteers in Phase I clinical studies in
Parkinson's disease and acute stroke with no treatment limiting side
effects.
. ORAL OR INTRAVENOUS ADMINISTRATION. NRTs have been engineered for either
oral or intravenous administration depending on the target indication.
. MANUFACTURABILITY. Because NRTs are small organic compounds, they are
relatively easy and inexpensive to manufacture compared to larger
molecules such as polypeptides and proteins.
. COMPATIBILITY WITH EXISTING THERAPEUTICS. Based on limited testing to
date, the Company has observed little or no negative interaction between
its drugs and existing therapies, and believes that most NRT drug
candidates will prove to be compatible and administrable with existing
therapeutics.
BUSINESS STRATEGY
The Company plans to apply its proprietary NRT technology to develop new
treatments for a broad range of acute and chronic conditions associated with
oxidative stress. Important elements of the Company's strategy include the
following:
. TARGET LARGE MARKETS WITH UNMET MEDICAL NEEDS. In selecting therapeutic
opportunities, Centaur targets large pharmaceutical markets that are not
adequately served by existing therapies. The Company initially focused on
neurodegenerative diseases due to their substantial unmet market needs
and the brain's high degree of vulnerability to oxidative stress. More
recently, the Company has expanded its drug discovery efforts to include
applications outside the brain where oxidative stress and inflammation
are believed to play major roles, such as arthritis, myocardial
infarction, inflammatory bowel disease, multiple sclerosis and ophthalmic
disorders.
. EMPHASIZE DRUG DISCOVERY AND EARLY STAGE DEVELOPMENT; PARTNER ACTIVITIES
REQUIRING SUBSTANTIAL RESOURCES. Centaur emphasizes its research and
early stage development capabilities, focusing on the discovery and
screening of new drug candidates and the development of such candidates
through early stage clinical trials. For later stage, larger and more
complex clinical trials, and for worldwide marketing and distribution,
Centaur generally intends to seek strategic collaborations with large
pharmaceutical companies, as it has with Astra for stroke and Alzheimer's
disease.
. PROTECT PROPRIETARY POSITION WITH BROAD PATENT COVERAGE. The Company is
building a strong domestic and international patent position protecting
its NRT technology. Centaur's proprietary position includes ownership of,
or license rights to, 24 United States patents, 23 United States patent
applications, 37 foreign patents and 137 foreign patent applications
covering NRTs and their use in oxidative tissue damage, degenerative
diseases, inflammatory conditions and the aging process. The Company has
an active program of patent application and prosecution to protect and
expand its proprietary position in NRT-based compounds and therapies.
. EXPAND THE NRT PLATFORM. Centaur has established the capability to
rapidly synthesize and evaluate new NRT compounds. The Company focuses on
candidate drugs that are highly bioavailable, active in animal models of
the target diseases and relatively easy to manufacture.
. MAXIMIZE VALUE ADDED AND KNOW HOW THROUGH INTERNAL MANUFACTURING. Because
NRTs can be produced by relatively simple manufacturing processes at
relatively moderate cost, Centaur has established, and is currently
expanding, an internal manufacturing capability. This capability is
expected to provide the Company with the ability to produce the volume of
product needed through the clinical trial process and early stage
commercial sales, and positions the Company to realize manufacturing
revenues. It also permits the Company to gain the knowledge and insights
that come from developing and implementing production methods and affords
the Company the potential to enhance its proprietary position.
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<PAGE>
PRODUCT DEVELOPMENT PROGRAMS
The table below summarizes the status of the Company's principal product
development programs:
<TABLE>
<CAPTION>
COMPOUND COMMERCIALIZATION
INDICATION NAME STATUS(/1/) RIGHTS
---------- -------- ----------- -----------------
<S> <C> <C> <C>
Parkinson's
disease CPI-1189 Initiating Phase IIa Centaur
Stroke CPI-22(/2/) Initiating Phase I/II(/3/) Astra/Centaur(/4/)
AIDS demen-
tia CPI-1189 Phase I Centaur
Alzheimer's
disease N/A Preclinical Astra/Centaur(/4/)
Arthritis N/A Preclinical Centaur
</TABLE>
--------
(1) "Initiating Phase IIa" means that the Company has completed Phase I
clinical trials of the compound and is preparing to commence a
controlled clinical trial in a small sample of patients with the
targeted disease for purposes of testing safety and evaluating
preliminary efficacy information. "Initiating Phase I/II" means that the
Company has completed Phase Ia clinical trials of the compound and is
preparing to commence a controlled clinical trial in patients with the
targeted disease for purposes of testing safety and possibly obtaining
preliminary efficacy information. "Phase I" means that the FDA has
approved the Company's IND and Phase I clinical trials have begun to
assess the safety of the compound in humans. "Preclinical" refers to
projects that have progressed to the point of intensive screening
designed to select a lead compound from potential candidates. See "--
Government Regulation."
(2) This compound is referred to as NXY-059 by Astra.
(3) Performed in Sweden under the Swedish equivalent of an IND. An FDA IND
was not submitted. Trial results are expected to be used to support
regulatory filings in the United States and other countries.
(4) Centaur's commercialization rights consist of worldwide manufacturing
rights and an option to acquire United States co-promotion rights. See
"--Astra Alliance."
PARKINSON'S DISEASE PROGRAM
Parkinson's disease is a degenerative neurological disorder caused by a
shortage of the neurotransmitter dopamine, which is essential to movement
control. The disease results from the gradual depletion of dopamine producing
neurons located in the substantia nigra region of the brain. Parkinson's
disease symptoms generally begin later in life after roughly 80% of the cells
in the substantia nigra stop functioning properly. As substantia nigra cells
die, dopamine levels decline, and Parkinson's patients experience increasing
difficulty initiating and controlling movement. Symptoms of Parkinson's
disease include tremors, slowed movement, muscle rigidity and decreased range
of motion. Impaired motor control is often accompanied by depression and/or
dementia. Symptoms become progressively worse until the patient is totally
incapacitated, typically over a 10 to 15 year period. If the patient does not
die from other causes, Parkinson's disease eventually leads to death from loss
of respiratory muscle control.
Although the exact cause of Parkinson's disease is unknown, the disease is
thought to arise from a combination of genetic susceptibility, long term
exposure to endogenous and exogenous environmental toxins and
neuroinflammation. A growing body of evidence suggests that oxidative stress
also contributes to Parkinson's disease progression. For example, human post-
mortem substantia nigra samples show higher levels of oxidative damage in
Parkinson's patients when compared to age-matched controls.
Therapeutics currently available and many products under development treat
Parkinson's disease symptoms through dopamine replacement or by prolonging the
effectiveness of the dopamine produced by the brain. These drugs elevate
dopamine levels in the brain, but they do not address the underlying causes of
Parkinson's disease. Consequently, they provide only symptomatic relief, and,
as the disease progresses, they tend to lose their effectiveness. A number of
companies are developing alternative therapeutic approaches. These approaches
30
<PAGE>
include the use of neuroimmunophilins and other factors to stimulate nerve
growth, compounds that promote neurotransmitter release and dopaminergic cell
transplantation. Centaur believes that NRTs may prove effective in treating
Parkinson's disease by protecting dopamine producing cells from oxidative
stress. See "Risk Factor--Competition; Rapid Technological Change."
Centaur is developing an orally administered, neuroprotective NRT designated
CPI-1189 to treat patients with Parkinson's disease. The Company has tested
this compound in a number of preclinical models of neuroinflammation and
Parkinson's disease, and the compound has been effective in protecting
dopamine producing neurons. Drug distribution studies in animal models have
demonstrated excellent brain penetration while producing little toxicity at
effective chronic doses. The Company believes that CPI-1189's combination of
pharmacologic efficacy in established animal models of Parkinson's disease and
excellent pharmacokinetics suggest that it may prove effective in treating
Parkinson's disease symptoms, including both motor dysfunction and mental
deficiency.
Centaur has completed Phase I clinical studies of CPI-1189 in the United
States. The Phase I trial was designed to assess the compound's safety and
pharmacokinetics in healthy volunteers. In studies involving over 180
subjects, no treatment-limiting side effects were observed. The Company plans
to commence a Phase IIa clinical trial in 36 Parkinson's disease patients by
the end of 1998 for the purpose of testing safety and evaluating preliminary
efficacy information.
In October 1996, the Company entered into a research and development
agreement with Lundbeck to jointly develop and commercialize CPI-1189 for
Parkinson's disease. In March 1998, Lundbeck terminated the agreement based
primarily on a claim that Centaur had breached the agreement by commencing
clinical trials of CPI-1189 for AIDS dementia without obtaining consent from
Lundbeck. This claim is disputed by the Company. See "Risk Factors--Lundbeck
Dispute."
There are over 500,000 Parkinson's disease cases in the United States and
over four million worldwide. The onset of disease symptoms usually occurs
between ages 50 and 65, although about 15% of patients develop symptoms in
their 30s and 40s. The Company expects the number of Parkinson's disease cases
to continue to grow due to demographic trends and the possible earlier
diagnosis of the disease.
STROKE PROGRAM
Stroke is classified into two major subtypes, ischemic and hemorrhagic.
Ischemic stroke results when blood flow to the brain is interrupted by
cerebral thrombosis or embolism. Neurons begin to die from loss of oxygen and
nutrients when the brain is deprived of blood for more than a few minutes.
When blood flow is restored to the affected area, either through clearing of
the obstruction or through collateral blood flow, reperfusion of oxygenated
blood induces a cascade of OSA that can cause cell damage and death and
trigger an inflammatory response. This process can continue for many hours
following reperfusion, resulting in a spreading region of damaged and dead
brain cells. Patients may suffer loss of speech, muscle control and mental
capacity and may become paralyzed, comatose or die depending on which region
of the brain is impaired and the magnitude of the stroke. Hemorrhagic stroke
results from the rupture of vessels supplying blood to the brain. In
hemorrhagic stroke, the release of hemoglobin containing iron into the brain
also propagates damaging OSA, further compounding the damage caused by loss of
blood flow and reperfusion. As a result, hemorrhagic strokes are often more
severe than ischemic strokes.
Until recently, stroke was considered untreatable. The condition was
monitored until the patient stabilized and rehabilitation was begun. In 1996,
a thrombolytic agent, tissue plasminogen activator (tPA), was approved as a
therapy for ischemic stroke in the United States. The use of tPA is intended
to restore blood flow to the brain as quickly as possible. While early
reperfusion has proven beneficial in ischemic stroke, it exposes tissue to
oxygenated blood, which the Company believes can lead to a cascade of damaging
OSA. Other approaches under development by other companies to treat stroke
utilize neuroprotective agents such as N-methyl-D-aspartate ("NMDA") ion-
channel blockers, NMDA-receptor antagonists, calcium channel blockers and
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<PAGE>
substrates for rebuilding damaged cells. The effectiveness of most of these
approaches is limited by the short window of time following the stroke during
which they must be administered, and some have serious side effects. In
addition, a number of prophylactic therapies for stroke are currently
available, such as surgery to enlarge narrowed blood vessels and the regular
use of anticlotting agents such as aspirin and ticlopidine. See "Risk
Factors--Competition; Rapid Technological Change."
Centaur believes that NRTs may prove effective in treating stroke by
neutralizing damaging OSA, and through other possible mechanisms of action,
thereby protecting nerve cells from oxidative stress associated with stroke.
Data from preclinical studies suggest the therapeutic window of activity for
NRTs may be significantly longer than for most other neuroprotective agents.
This would be a major advantage in a disease in which patients may not arrive
at the hospital for treatment for several hours. Centaur also believes that it
may be possible to develop an orally administered drug for prophylactic use by
individuals considered at risk for stroke.
Centaur has developed an NRT designated CPI-22 for the intravenous treatment
of stroke in collaboration with Astra. Preclinical studies in animal models
indicate that the compound is effective in reducing neurological and
behavioral consequences of permanent and transient ischemias. Neuronal
protection has been demonstrated in both the core of the brain lesion and the
expanding penumbral zone, even though the compound does not appear to
penetrate the blood/brain barrier in significant quantities. Based on these
animal studies, the Company believes that CPI-22 may be efficacious in humans
when used up to six or more hours post-stroke. This compound yielded dose
related neuronal protection at doses substantially below those that show any
toxicity in animal models and showed little or no toxicity after
administration to human volunteers. Pursuant to the Astra Agreement, Astra is
to fund certain research, product development and clinical studies of the drug
candidate. Astra and Centaur have completed two Phase Ia clinical studies in
Sweden under the Swedish equivalent of an IND and no treatment-limiting side
effects were observed. The Company and Astra plan to commence a Phase I/II
clinical trial in 150 stroke patients in Europe by the end of 1998 for the
purpose of testing safety and possibly obtaining preliminary efficacy
information. See "--Astra Alliance" and "Risk Factors--Dependence Upon
Collaborators."
Stroke is the third leading cause of death and the most common cause of
adult disability in the United States. There are approximately 500,000 new
stroke victims each year in the United States. Nearly 150,000 of these victims
die and over 100,000 suffer severe, permanent disability. Of the more than two
million stroke survivors in the United States, two-thirds have some type of
long term neurologic disability.
AIDS DEMENTIA PROGRAM
AIDS dementia refers to the debilitating neurological and cognitive
impairments frequently associated with acquired immune deficiency syndrome
(AIDS). Symptoms of this condition include loss of memory, loss of motor
control and behavioral abnormalities. The Company believes that AIDS dementia
is caused by toxins and brain inflammation produced as a result of HIV
infection. These toxins can damage or destroy neurons through oxidative
stress. Approximately 10% of individuals with AIDS dementia develop a
condition resembling Parkinson's disease.
No effective treatment for AIDS dementia currently exists. Antiretroviral
agents are sometimes used, but treatment response is frequently
unsatisfactory, short lived or poorly tolerated. The Company believes that two
compounds targeted for AIDS dementia are in clinical trials.
Centaur believes that CPI-1189 could delay the occurrence and/or slow the
progression of AIDS dementia. In in vitro tests using human brain cells, the
compound has proved highly effective in protecting cells from injury caused by
toxins implicated in AIDS dementia. Further, CPI-1189 has proven effective in
protecting neurons in in vivo animal models of AIDS dementia. CPI-1189 does
not appear to increase the viability of HIV, or suppress immune system
function, based on in vitro and standard rodent model tests, respectively. The
Company believes that this compound may also be suitable for prophylactic use
by HIV infected persons.
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Centaur initiated an AIDS dementia Phase I clinical trial of CPI-1189 in the
United States in October 1997 in HIV infected individuals undergoing treatment
with reverse transcriptase and protease inhibitor therapies. This trial is
currently in progress. No treatment limiting side effects were observed when
CPI-1189 was tested in the Company's Parkinson's disease Phase I clinical
trials. See "--Parkinson's Disease Program." The Company plans to commence a
Phase II clinical trial by the end of 1998 for the purpose of testing safety
and evaluating efficacy information in AIDS dementia patients.
Although the Company generally intends to attempt to establish
collaborations with larger pharmaceutical companies to develop and market its
drug candidates, it may not need to do so to develop CPI-1189 for AIDS
dementia. This is based on the Company's belief that (i) the AIDS dementia
market can be reached by a relatively small sales force, because a significant
portion of the patient population tends to actively seek and adopt new
treatments, and (ii) AIDS dementia drug candidates may qualify for faster than
normal regulatory consideration if clinical results are supportive. These
factors could allow the Company to commercialize CPI-1189 for AIDS dementia
without requiring the larger resources of a major pharmaceutical company. See
"Risk Factors--No Assurance of FDA Approval; Comprehensive Government
Regulation."
In the United States, over 750,000 individuals are infected with HIV,
approximately one-third of which have AIDS. Historically, approximately one-
third of adults and one-half of children with AIDS developed neurological
complications associated with AIDS dementia. New AIDS therapies, such as the
use of protease inhibitors in combination with traditional reverse
transcriptase inhibitors, appear to be effective in extending the life span of
AIDS patients. It is not known whether the development of these new therapies
will affect the prevalence of AIDS dementia, and if so, whether the effect
will be to increase the prevalence of the disease, due to the increase in the
life span of AIDS patients, or to decrease the prevalence of the disease due
to the effect of the new therapies.
ALZHEIMER'S DISEASE PROGRAM
Alzheimer's disease is a debilitating neurodegenerative disease which causes
progressive loss of memory, ability to communicate, time and space
orientation, and abstract thinking skills. Anxiety, depression and other
changes in personality are also common symptoms of the disease. Later stage
symptoms include loss of speech, loss of bladder control and total dependence
on caregivers. If patients do not die of other causes during the course of the
disease, Alzheimer's disease ultimately proves fatal. Several genetic factors
have been identified as risk factors for the onset of Alzheimer's disease.
Many hypotheses for the causes of neurodegeneration in Alzheimer's disease
have been proposed by medical researchers. Recent studies suggest that
oxidative stress and neuroinflammation may be important to the onset and
progression of Alzheimer's disease.
Alzheimer's disease is distinguished from other dementias by the presence of
b-amyloid plaques and neurofibrillary tangles in the brain. When b-amyloid
comes into contact with brain tissue, it spontaneously generates OSA and
causes the formation of advanced glycation end products which also produce
OSA. Clinical studies suggest that regular use of vitamin E, a naturally
occurring antioxidant, slows the progression of Alzheimer's disease. Brain
inflammation occurs around the senile plaques characteristic of Alzheimer's
disease, and inflammatory cells and cytokines are typically found in brain
regions affected by Alzheimer's disease. Retrospective studies indicate that
nonsteroidal anti-inflammatory drug users have a lower incidence of
Alzheimer's disease. Since NRTs have both antioxidant and anti-inflammatory
effects, the Company believes that NRTs may prove to be effective in treating
Alzheimer's disease.
No effective treatment to significantly slow the progression of Alzheimer's
disease is currently available. Treatments on the market and many of those
under development focus on increasing the level of the neurotransmitter
acetylcholine in the brain. The only FDA approved pharmaceuticals to treat
Alzheimer's disease enhance acetylcholine activity by inhibiting
cholinesterase, an enzyme responsible for breaking down acetylcholine in the
brain. These medications provide only limited symptomatic relief, and their
side effects can
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be significant. A number of other products for the treatment of Alzheimer's
disease are in clinical trials being conducted by other companies. See "Risk
Factors--Competition; Rapid Technological Change."
Since there are no universally accepted models for Alzheimer's disease,
Centaur utilizes a battery of tests looking for candidate drugs that succeed
in a variety of disease models. Initial screens target compounds that prevent
the death of cultured brain neurons caused by inflammatory mediators. Later
stage screens look for prevention of age-related decline in cognitive function
in mice and other animals. Centaur's objective has been to identify safe
compounds that protect brain function. The Astra Agreement covers the
development of therapeutics for the treatment of Alzheimer's disease. Several
promising drug candidates have been identified, and further preclinical drug
optimization is underway. See "--Astra Alliance" and "Risk Factors--Dependence
Upon Collaborators."
Alzheimer's disease affects four million people in the United States. The
incidence of Alzheimer's disease increases steadily with age, affecting
approximately five percent of individuals aged 65 and over 40% of people at
age 80. The elderly are the fastest growing population segment in the United
States.
ARTHRITIS PROGRAM
Arthritis is a chronic inflammatory disease of the joints. Although there
are many forms of arthritis, most patients suffer from either rheumatoid
arthritis or osteoarthritis. Rheumatoid arthritis most often affects the
joints of the hands, wrists or feet. It results in thickening and inflammation
of the synovial membranes, and causes progressive damage to the joint capsule,
cartilage and bone. The onset of rheumatoid arthritis is usually gradual,
typically beginning between the ages of 25 and 50. The progress of the disease
is unpredictable, with up to 50% of patients developing severe functional
incapacity within ten years of initial diagnosis of the disease.
Osteoarthritis is an age associated condition that results in joint pain and
stiffness. The Company believes that oxidative stress plays an important role
in the pathophysiology of both forms of arthritis.
Most current arthritis medications, including aspirin and other nonsteroidal
anti-inflammatory drugs, decrease pain and swelling but do not prevent
cartilage and bone destruction. Therapeutics for the treatment of joint
destruction in arthritis include immunosuppressants, gold salts and anti-
mitotics, all of which can produce significant side effects, such as
myelosuppression, renal toxicity and gastric ulceration. Many pharmaceutical
and biotechnology firms have programs aimed at developing new arthritis
therapeutics. See "Risk Factors--Competition; Rapid Technological Change."
Based on preclinical studies in established animal models, Centaur believes
that its NRTs could prove to be efficacious therapeutics that reduce swelling
and slow disease progression. Lead compounds have been identified and research
toward the selection of a clinical candidate is underway. See "Risk Factors--
Uncertainty of Preclinical and Clinical Trials."
It is estimated that approximately 2 million people in the United States
have rheumatoid arthritis and over 15 million people in the United States,
mostly over 65 years old, have osteoarthritis.
EXPLORATORY RESEARCH PROGRAMS
Centaur is also pursuing feasibility testing of proprietary NRTs as
therapeutics for other indications in which oxidative stress may be a factor,
including myocardial infarction, inflammatory bowel disease, traumatic brain
disease, ophthalmic disorders, multiple sclerosis and other diseases. These
programs may receive increased funding and personnel should promising data
result from the preliminary research underway at Centaur and in the
laboratories of the Company's sponsored academic collaborators.
In addition to these exploratory research programs, Centaur periodically
evaluates other potential commercial applications of its NRT technology. The
Company believes that many of the wide range of diseases involving oxidative
damage may be treatable with compounds developed using the Company's
technology.
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In evaluating new product opportunities, the Company often leverages the
efforts of its scientific staff with assistance from outside consultants,
scientific advisory board members and contract research organizations. This
enables the Company to maintain a relatively small internal staff while
evaluating a significant number of product opportunities. The Company also
utilizes NIH Small Business Innovative Research grants to fund exploratory
research.
ASTRA ALLIANCE
In June 1995, Centaur entered into an agreement with Astra for the research,
development and marketing of certain drugs to treat Alzheimer's disease,
stroke, traumatic brain injury and multi-infarct dementia. Centaur is
primarily responsible for research work under the Astra agreement, and Astra
is primarily responsible for development work, including clinical trials.
The Astra Agreement provides for Astra to pay up to $6.0 million per year
for five years to fund Centaur's research and development work, subject to
certain limitations, and for Astra to bear the costs of its development work.
Astra is also obligated to make milestone payments to Centaur upon achievement
of development milestones and to pay royalties to Centaur on product sales
covered by the Astra Agreement. In return, Astra was granted exclusive
worldwide marketing rights to any products resulting from the alliance.
Centaur retains worldwide manufacturing rights for the active ingredient of
the products, and Astra has agreed to buy all of its requirements of such
substance from Centaur, subject to certain exceptions intended to permit Astra
to maintain a second source of supply. Centaur also has an option to obtain
co-promotion rights in the United States for five years for products covered
by the Astra Agreement. Centaur and Astra have agreed to work exclusively with
each other in the fields covered by the Astra Agreement. In addition, Centaur
has provided Astra with a right of first negotiation to enter into agreements
with Centaur in certain other diseases of the central nervous system.
The Astra Agreement expires on the later of (i) 15 years after the first
commercial sale of a licensed product, or (ii) the expiration of applicable
patents, on a country-by-country basis. Additionally, Astra can terminate the
agreement either in whole or in part, without cause, upon 12 months notice.
Astra may also terminate its research support obligations, and its obligation
to purchase products from Centaur, upon the acquisition by a company engaged
in the manufacture and/or sale of pharmaceutical products of more than 30% of
the Company's voting capital stock.
The Company's strategy for the development, clinical trials and
commercialization of its products includes maintaining its collaborative
arrangement with Astra and establishing additional collaborations with
partners, licensors, licensees and others. To the extent that the Company is
unable to maintain or establish such collaborative arrangements, the Company's
research, development efforts and business would be adversely affected. See
"Risk Factors--Dependence Upon Collaborators."
PATENTS, TRADE SECRETS AND LICENSES
Protection of the Company's proprietary rights is important for the Company
to maintain its competitive position. The Company actively seeks, when
appropriate, protection for its products and proprietary information by means
of United States and foreign patents. In addition, the Company relies upon
trade secrets and contractual arrangements to protect certain of its
proprietary information and products.
The Company owns 4 United States patents, 15 United States patent
applications, 2 foreign patents and 81 foreign patent applications related to
NRTs and their use as pharmaceuticals. The Company also holds exclusive
license rights to 20 United States patents, 8 United States patent
applications, 35 foreign patents and 56 foreign patent applications related to
NRTs and their use as pharmaceuticals.
Several of the patents and patent applications licensed from UKRF and OMRF,
and certain related technology, were licensed pursuant to an agreement between
the Company and UKRF and OMRF in 1992 (the "UKRF/OMRF Agreement"). The
underlying technology was primarily developed by the Company's founders,
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Dr. John Carney, at the Universities of Oklahoma and Kentucky, and Dr. Robert
Floyd, at OMRF. The UKRF/OMRF Agreement grants Centaur exclusive worldwide
rights to the covered patents and technology, subject to certain standard
exceptions. In exchange, Centaur has agreed to pay certain royalties and
sublicense fees to the licensors, as well as pay the patent costs related to
the subject technology. The UKRF/OMRF Agreement requires Centaur to make
minimum payments of $25,000 per year until an NDA is approved by the FDA, and
$100,000 per year thereafter. In connection with the UKRF/OMRF Agreement, Drs.
Carney and Floyd transferred 200,000 shares of Centaur Common Stock to UKRF
and OMRF, respectively.
Centaur is obligated by the UKRF/OMRF Agreement to use reasonable efforts to
bring one or more licensed products to market. The UKRF/OMRF Agreement expires
on the later of (i) July 2007 or (ii) the expiration of the last to expire
patent. UKRF and OMRF have entered into a similar license with Astra that is
only effective if the UKRF/OMRF Agreement or Astra Agreement is terminated
under certain conditions, including breach by Centaur.
Much of the Company's technology and many of its processes are dependent
upon the knowledge, experience and skills of its scientific and technical
personnel. To protect its rights to its proprietary know-how and technology,
the Company requires all employees, consultants, advisors and collaborators to
enter into confidentiality agreements that prohibit the disclosure of
confidential information to anyone outside the Company. These agreements
generally require disclosure and assignment to the Company of ideas,
developments, discoveries and inventions made by employees, consultants,
advisors and collaborators. There can be no assurance that these agreements
will effectively prevent disclosure of the Company's confidential information
or will provide meaningful protection for the Company's confidential
information if there is unauthorized use or disclosure. Furthermore, in the
absence of patent protection, the Company's business may be adversely affected
by competitors who independently develop substantially equivalent technology.
See "Risk Factors--Dependence on Patents and Proprietary Technology".
The Company does not currently have any registered trademarks or tradenames.
The Company has entered into an agreement with Chiron Corporation ("Chiron")
whereby Chiron agreed to not challenge the Company's use of "Centaur" in the
pharmaceutical field and the Company agreed to not challenge Chiron's use of
"Centaur" in the medical diagnostics field. The Company intends to apply for
trademark and tradename registrations as appropriate.
CUTANIX--SKIN CARE AFFILIATE
Because of the antioxidative and anti-inflammatory properties of NRT
compounds, the Company believes that these compounds could be effective in
treating various diseases and disorders of the skin, including dermatitis,
psoriasis and photoaging. In January 1998, the Company exclusively licensed
all of its current and future NRT technology for the field of dermatology,
cosmetics and other skin care applications to a newly formed company, Cutanix
Corporation ("Cutanix"), which has undertaken a research program to identify
compounds which could be developed into dermatological drugs or cosmetics.
Centaur owns 67% of the outstanding stock of Cutanix, and the management of
Cutanix owns the remaining stock. Centaur has the exclusive right to supply
any NRT active ingredients for commercial sale by Cutanix, subject to certain
rights of each party to terminate the non-exclusivity, at a cost-based
purchase price. Centaur has committed to provide up to $250,000 in cash and
services to Cutanix. The Company and Cutanix also entered into a services and
supply agreement under which the Company agreed to provide certain
administrative and other services to Cutanix at cost. Cutanix plans to raise
private equity financing to fund the continued development of its lead
compounds, although there can be no assurance that it will be able to do so. A
director of the Company is a director and major stockholder, and the chief
executive officer, of Cutanix. See "Certain Transactions."
RESEARCH COLLABORATIONS
Centaur sponsors research at a number of institutions to augment its
internal resources. The Company has worked with scientists at the University
of Kentucky and OMRF through sponsored research contracts and
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research collaborations since 1992. The research at the University of Kentucky
was conducted by Dr. Carney until he joined Centaur as Chief Technical Officer
in June 1996 and is continuing through collaboration with other University of
Kentucky scientists. The research at OMRF is conducted by Dr. Floyd in the
fields of free radical chemistry and mechanisms of drug action.
The Company plans to sponsor a research program with the Neuroscience
Institute of The Queen's Medical Center in Honolulu, Hawaii. The research
program is expected to be under the direction of Professor Bo Siesjo, M.D.,
Ph.D., and is aimed at understanding the role of OSA in neurodegeneration and
neuroinflammation, and the neuroprotective mechanisms of NRT action. The
Company previously sponsored a similar research program with Dr. Siesjo while
he was at the University of Lund in Sweden. In addition, Centaur has research
collaborations with the Department of Ophthalmology and Neuroscience Center-
Louisiana State University (preclinical studies in NRT mechanisms of action in
arthritis and myocardial ischemia); the Department of Chemistry-University of
Florida (medicinal chemistry); the Department of Pharmacology-University of
North Texas Health Science Center (preclinical studies in brain aging and
cognition) and other academic research institutions.
MANUFACTURING
Centaur has established a pilot GMP manufacturing facility with the capacity
to manufacture NRT compounds for preclinical research and early stage clinical
trials at its Sunnyvale, California headquarters. The Company is constructing
a larger 30,000 square foot manufacturing facility in Santa Clara, California.
These facilities are expected to be sufficient to permit the Company to
produce the volume of product needed through the clinical trial process and
for early commercial sales, and position the Company to realize manufacturing
revenues. These facilities also permit the Company to gain the knowledge and
insights about the Company's products and technology that result from
developing and implementing the production methods, and afford the Company the
potential to enhance its proprietary position. Further expansion of Centaur's
facilities, procurement of a larger facility and/or arrangements with third-
party manufacturers will be required to satisfy later commercial needs. See
"Risk Factors--Absence of Sales and Marketing Experience and Limited
Manufacturing Capabilities".
COMPETITION
The pharmaceutical industry is subject to intense competition and rapid and
significant technological change. Competitors of Centaur in the United States
and abroad are numerous and include, among others, pharmaceutical and
biotechnology companies, universities, and other research institutions. Many
of these companies and institutions, are actively engaged in activities
similar to those of Centaur, including research and development of products
for Parkinson's disease, stroke, AIDS dementia, Alzheimer's disease and
arthritis. While the Company believes that its products will offer significant
advantages over available products, currently marketed products often have a
significant competitive advantage over new entrants. If regulatory approvals
are received, certain of the Company's potential products will compete with
well-established, FDA approved proprietary and generic therapies that have
generated substantial sales over a number of years and which are reimbursed
from government health administration authorities and private health insurers.
There can be no assurance that Centaur's products under development will be
able to compete successfully with existing therapies or with products under
development by its competitors. Many of these competitors have substantially
greater financial and technical resources and production and marketing
capabilities than Centaur, and certain of these competitors may compete with
the Company in establishing development and marketing agreements with
pharmaceutical companies. In addition, many of the Company's competitors have
greater experience than the Company in conducting preclinical testing and
human clinical trials and obtaining FDA and other regulatory approvals. The
Company's competitors may succeed in obtaining FDA approval for products
sooner than Centaur.
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GOVERNMENT REGULATION
The preclinical and clinical testing, manufacturing, labeling, distribution,
sales, marketing, promotion and advertising of the Company's products and its
research and development activities are subject to extensive regulation by
numerous governmental authorities in the United States and other countries.
Pharmaceutical products intended for therapeutic use in humans are governed by
FDA and state regulations in the United States and by comparable requirements
in foreign countries. The process of completing clinical testing and obtaining
regulatory approval for a new human drug requires a number of years and the
expenditure of substantial resources. There can be no assurance that any
product will ultimately complete such testing or receive such approval.
The steps required before new human pharmaceutical products may be marketed
in the United States include (i) preclinical laboratory and animal tests, (ii)
submission to the FDA of an IND application, (iii) adequate and well-
controlled human clinical trials to establish the safety and efficacy of the
drug, (iv) the submission of a New Drug Application ("NDA") to the FDA and (v)
FDA approval of the NDA prior to any commercial sale or shipment of the drug.
Preclinical studies are conducted in the laboratory and in animal model
systems to gain preliminary information on the drug's efficacy and to identify
safety issues. The results of these studies are submitted to the FDA as part
of the IND application. Testing in humans may commence 30 days after filing of
the IND unless the FDA objects, although companies typically wait for approval
from the FDA before commencing clinical trials. Human clinical trials are
designed to collect data relating to the dosing and side effects, if any, of
the new product and to the product's efficacy in comparison with any currently
accepted therapy. Phase I clinical trials are typically not controlled and are
conducted with a small number of patients or healthy volunteers and are
designed to determine the metabolic and pharmacologic activities of the
product, to test its safety and, if possible, to gain early evidence on
effectively. Phase II clinical trials involve controlled studies in a limited
number of patients to evaluate the efficacy of the product for specific
targeted indications and to determine the common short term side effects and
risks associated with the product. Phase III clinical trials are controlled
studies conducted to more conclusively evaluate clinical efficacy and safety
within an expanded patient population. Phase III clinical trials often involve
a substantial number of patients in multiple study centers and may include
chronic administration of the product to assess the overall benefit-risk
relationship of the product. A given clinical trial may combine the elements
of more than one phase, and typically two or more Phase III studies are
required. The designation of a clinical trial as being of a particular Phase
is not necessarily indicative that such a trial will yield results sufficient
to justify the continuation of clinical testing. For example, no assurance can
be given that a Phase III clinical trial will be sufficient to support an NDA
without further clinical trials. The FDA monitors the progress of each of the
three phases of clinical testing and may alter, suspend or terminate the
trials based on the data that have been accumulated to that point and its
assessment of the risk-benefit ratio to the patient. Typical estimates of the
total time required to complete clinical testing vary between four and ten
years. Upon completion of clinical testing which demonstrates that the product
is safe and effective for a specific indication, an NDA may be filed with the
FDA. This application includes details of the manufacturing and testing
processes, preclinical studies and clinical trials. FDA approval of the NDA is
required before the applicant may market the new product. There can be no
assurance that the NDA will contain sufficient preclinical, clinical or
manufacturing data for approval, or that additional studies will not be
required, or that regulatory approval will eventually be granted.
Even after initial FDA approval has been obtained, further studies may be
required to provide additional data on safety or to gain approval for the use
of a product as a treatment in clinical indications other than those for which
the product was initially tested. Also, the FDA may require post-marketing
testing and surveillance programs to monitor the drug's effects. Side effects
resulting from the use of pharmaceutical products may prevent or limit the
further marketing of the products.
In addition to obtaining FDA approval for each product, each United States
and foreign drug manufacturing establishment must be registered with, and
approved by, the FDA and, if applicable, licensed by the State of
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California or other states. United States manufacturing establishments are
subject to biennial inspections by the FDA and must comply with FDA-mandated
GMP.
In addition to regulations enforced by the FDA, the Company also is subject
to regulation under the Occupational Safety and Health Act, federal
environmental protection statutes, the Toxic Substances Control Act, the
Resource Conservation and Recovery Act and other present and future federal,
state and local regulations. Failure to comply with applicable regulatory
requirements can, among other things, result in fines, suspensions and/or
withdrawals of regulatory approvals, product recalls, prohibitions against
manufacture, distribution, sales and/or marketing and criminal prosecution of
a company and/or its officers and employees.
For marketing outside the United States, the Company will be subject to FDA
export requirements and foreign regulatory requirements governing human
clinical trials and marketing approval for drugs. The requirements relating to
the conduct of clinical trials, product licensing, pricing and reimbursement
vary widely from country to country.
As noted above, the Company and Astra have conducted Phase Ia clinical
studies of the Company's stroke compound in Sweden and expect to conduct a
Phase I/II clinical trial of such compound in Europe. These trials are not
being conducted pursuant to an FDA IND. See "--Stroke Program". In general,
the FDA accepts foreign studies to support clinical investigations in the
United States or marketing approval so long as such studies are well designed,
well conducted, performed by qualified investigators and conducted in
accordance with ethical principles acceptable to the world community. Such
studies would not typically be sufficient to form the sole basis for marketing
approval in the United States, and clinical studies would typically need to be
conducted in the United States as well. See "Risk Factors--No Assurance of FDA
Approval; Comprehensive Government Regulation."
If certain of the Company's proprietary compounds are eventually marketed in
the United States, the Company may be required to manufacture the drug
substance for such sales in the United States pursuant to the provisions of
NIH grants received by the Company.
SCIENTIFIC ADVISORY BOARD
The Company has established a Scientific Advisory Board ("SAB") composed of
individuals with expertise in free radical chemistry, drug discovery model
development, drug screening, clinical pharmacology and clinical medicine. SAB
members assist the Company in identifying scientific and product development
opportunities, review with management the progress of the Company's projects
and assist in the recruitment and evaluation of the Company's scientific
staff. SAB members receive compensation for the services they provide to the
Company. Most SAB members have substantial commitments to third parties, which
commitments may conflict or compete with their obligation to the Company.
Accordingly, such persons devote only a small portion of their time to matters
related to the Company. See "Risk Factors--Dependence Upon Key Personnel; Need
to Attract Qualified Employees and Consultants".
The following individuals are members of the Company's Scientific Advisory
Board:
ROBERT FLOYD, PH.D., CHAIRMAN. Dr. Floyd, a co-founder of the Company, is
head of the Free Radical Biology and Aging Program at the Oklahoma Medical
Research Foundation and Professor of Biochemistry and Molecular Biology at the
University of Oklahoma Medical School in Oklahoma City, Oklahoma. Dr. Floyd
has published over 200 peer reviewed papers on the identification and
quantification of free radicals in biological systems, their roles in aging
and disease, and related subjects. Dr. Floyd consults with the Company on both
the mechanism of action of NRTs and the role of OSA in injury to biological
systems, including oxidative damage to brain tissue during stroke and trauma,
Parkinson's disease, Alzheimer's disease, AIDS dementia, inflammation and
aging.
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GENERAL ADVISORS
BRUCE AMES, PH.D. Dr. Ames is Professor of Biochemistry and Molecular
Biology and Director of the National Institute of Environmental Health
Sciences Center at the University of California, Berkeley. Dr. Ames is a
member of the National Academy of Sciences and has published extensively on
the detection of free radical damage to DNA in biological tissue and the role
of antioxidants, vitamins and enzymes in aging. Dr. Ames consults with the
Company in the areas of OSA biochemistry and the role of antioxidants in
mitochondrial function and aging.
NICHOLAS BAZAN, M.D., PH.D. Dr. Bazan is Professor of Ophthalmology,
Biochemistry and Molecular Biology, and Neurology and Director of the
Neurosciences Program at Louisiana University Medical School in New Orleans,
Louisiana. Dr. Bazan is an internationally recognized neuroscientist,
ophthalmologist and lipid biochemist and has published over 300 peer reviewed
papers in the area of inflammatory processes and the role of cyclo-oxygenase-2
and platelet activating factor. Dr. Bazan consults with the Company in the
areas of inflammatory mechanisms, ophthalmology and arthritis.
M. FLINT BEAL, M.D. Dr. Beal is Professor and Chair of Neurology at Cornell
University Medical School in New York, New York. Dr. Beal has published over
200 peer reviewed papers on the preclinical and clinical importance of
metabolically derived OSA in aging and disease. Dr. Beal is recognized for his
research in the roles of mitochondrial dysfunction and free radical-induced
damage in neurodegeneration. Dr. Beal consults with the Company in the areas
of neurodegeneration mechanisms and Parkinson's disease therapeutics.
RONALD MASON, PH.D. Dr. Mason is Head, Free Radical Metabolite Section,
Laboratory of Pharmacology and Chemistry, National Institute of Environmental
Health Sciences, National Institute of Health, Research Triangle Park, North
Carolina. Dr. Mason has published more than 200 peer reviewed articles on the
chemistry of free radicals and the mechanism of action of antioxidants. Dr.
Mason consults with the Company in the areas of disease mechanisms and the
mechanism of NRT action.
BO SIESJO, M.D., PH.D. Dr. Siesjo is Director of Research at the
Neuroscience Institute of the Queen's Medical Center, Honolulu, Hawaii. Dr.
Siesjo is the former Chairman of the Experimental Brain Research Center, Lund
University Hospital, University of Lund, Sweden. He has published over 500
peer reviewed articles on the biochemistry of stroke and metabolic
neurodegenerative conditions. His research into the role of calcium in
mitochondrial dysfunction in stroke and epilepsy is internationally
recognized. He consults with the Company in the areas of neurodegenerative
processes and stroke and trauma therapeutics.
EARL STADTMAN, PH.D. Dr. Stadtman is Chief, Section on Enzymes, Laboratory
of Biochemistry, National Heart, Blood and Lung Institute, at the National
Institutes of Health in Bethesda, Maryland. Dr. Stadtman is a member of the
National Academy of Science and has published over 200 peer reviewed articles
on the biochemistry of free radicals, free radical damage to proteins and
lipids and the mechanisms of action for antioxidants. Dr. Stadtman consults
with the Company in the areas of free radical biochemistry and NRT mechanism
of action.
SPECIFIC THERAPEUTIC PROGRAM ADVISORS
Parkinson's Disease
J. WILLIAM LANGSTON, M.D. Dr. Langston is President of the Parkinson's
Institute in Sunnyvale, California. Previously, Dr. Langston was Senior
Scientist and Director of the Parkinson's Disease Research Program for the
Institute of Medical Research in San Jose, California. In addition to his
clinical research background in Parkinson's disease, Dr. Langston co-
discovered the toxin MPTP and its mechanism of producing Parkinson-like
neurodegeneration, which is used as a model of Parkinson's disease. Dr.
Langston consults with the Company in the area of preclinical and clinical
Parkinson's disease research.
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C. WARREN OLANOW, M.D. Dr. Olanow is Professor and Chairman of the
Department of Neurology of Mount Sinai School of Medicine, Mount Sinai Medical
Center, New York, New York. Dr. Olanow has published extensively on the
biochemistry of Parkinson's disease development and progression. He consults
with the Company in the area of Parkinson's disease treatment.
Stroke
LARS HILLERED, M.D., PH.D. Dr. Hillered is Professor of Neuroscience at
Uppsala University Medical Center, Uppsala, Sweden. Dr. Hillered has published
more than 100 peer reviewed articles on the neurochemistry and treatment of
stroke and trauma. He consults with the Company in the areas of mechanisms of
oxidative brain damage and NRT mechanism of action in stroke.
Alzheimer's Disease
KONRAD BEYREUTHER, PH.D. Dr. Beyreuther is Professor of Molecular Biology at
the Zentrum fur Molekulare Biologie, Heidelberg University, Heidelberg,
Germany. Dr. Beyreuther has published extensively on the mechanism of amyloid
plaque formation and the etiology of Alzheimer's disease. Dr. Beyreuther
consults with the Company in the area of Alzheimer's disease therapeutics.
ALBERT DRESSE, M.D., PH.D. Dr. Dresse is Professor of Pharmacology at the
University of Liege Medical School, Liege, Belgium. Dr. Dresse's fields of
expertise include neurodegeneration, electrophysiology and molecular biology
of learning, memory and aging. Dr. Dresse consults with the Company in the
area of Alzheimer's disease.
ZAVEN KHACHATURIAN, PH.D. Dr. Khachaturian is Director of the Ronald and
Nancy Reagan Institute for Alzheimer's Research. He is the former Program
Director of the Neuroscience and Neurology of Aging Division of the National
Institute of Aging. He consults with the Company in the area of Alzheimer's
disease therapeutics.
WILLIAM MARKESBERY, M.D. is Professor of Pathology and Neurology at the
University of Kentucky College of Medicine and Director of the Sanders-Brown
Center on Aging. In addition, he is the Director and Principal Investigator of
the Alzheimer's Disease Research Center. Dr. Markesbery has particular
expertise in Alzheimer's disease and served on the U.S. Congressional advisory
panel on dementing illnesses. Dr. Markesbery has published over 250 articles
on brain pathology and Alzheimer's disease. He consults with the Company in
the area of Alzheimer's disease mechanisms and clinical trial design.
Communication with many members of the Scientific Advisory Board takes place
on a regular basis. In accordance with consulting agreements the Company has
with these advisors, discoveries made as part of the consulting activity are
generally the property of the Company. Should scientific discoveries be made
by a member of the Scientific Advisory Board in conjunction with other
research at another institution rather than while acting as a consultant to
the Company, that discovery would generally be owned by the researcher or that
institution. If such a discovery were deemed to be helpful in the Company's
own research, the Company would have to enter into a license agreement in
order to utilize the discovery. The Company relies on its scientific advisors
to assist the Company in formulating its research and development strategy.
Retaining and attracting qualified advisors will be critical to the Company's
success.
EMPLOYEES
As of March 31, 1998, Centaur had 90 full-time employees of which 23 have
Ph.D. and/or M.D. degrees. Of the Company's full time employees, 58 work in
research and development, 15 work in manufacturing, product development and
QA/QC and 17 work in finance and administration. On December 31, 1995, 1996
and 1997 the Company had 55, 66 and 87 employees, respectively. The Company's
employees are not represented by any collective bargaining unit, the Company
has never experienced a work stoppage, and the Company believes that its
employee relations are good. See "Management--Executive Officers, Directors
and Key Employees."
41
<PAGE>
FACILITIES
The Company leases approximately 31,000 square feet of laboratory,
production and office space in a single facility in Sunnyvale, California. The
lease expires in 2001. The Company also leases a 77,000 square foot facility
in Santa Clara, California, in which it is constructing a 30,000 square foot
manufacturing plant that is designed to comply with GMP. This lease expires in
2004. While Centaur's existing facilities (including its facility under
construction) are believed to be sufficient to produce the volume of product
needed for clinical trials and early commercial sales, the Company expects
that larger facilities will be needed for any later stage commercial sales.
There can be no assurance that the Company will be able to obtain such space
on commercially reasonable terms.
42
<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS, DIRECTORS AND KEY EMPLOYEES
The executive officers, directors and key employees of the Company are as
follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<C> <C> <S>
Brian D. Frenzel................. 47 President, Chief Executive Officer and
Director
John M. Carney, Ph.D. (1)........ 51 Chief Technical Officer and Director
Joseph L. Turner................. 46 Chief Financial Officer and Treasurer
William A. Garland, Ph.D......... 53 Executive Vice President,
Pharmaceutical
Development
Vice President, Pharmaceutical
Kirk R. Maples, Ph.D. ........... 39 Discovery
John J. Vajda.................... 58 Vice President, Operations
Lucy O. Day...................... 39 Director of Finance and Administration
Mark R. Collins (2).............. 50 Director
Graham K. Crooke, MB.BS. (3)(4).. 39 Director
Steinar J. Engelsen, M.Sc., M.D.
(4)............................. 47 Director
Charles R. Engles (1)............ 50 Director
Selvi Vescovi (2)(3)............. 67 Director
</TABLE>
- --------
(1) Member of the Intellectual Property Oversight Committee.
(2) Member of the Finance and Audit Committee.
(3) Member of the Compensation Committee.
(4) Member of the Regulatory Oversight Committee.
BRIAN D. FRENZEL. Mr. Frenzel is a co-founder of the Company and has been a
director since April 1992 and President and Chief Executive Officer since
October 1992. Mr. Frenzel was also Acting Chief Financial Officer from August
1996 until November 1997. In 1991, Mr. Frenzel co-founded Vesta Medical
Corporation, a company that developed minimally invasive surgical device
technology. Mr. Frenzel served as President of Vesta Medical, Inc. until July
1994, and Chairman of the Board until July 1996, when the company was acquired
by Pfizer Inc. Mr. Frenzel also serves on the Board of the Glenn Foundation
for Medical Research (the "Glenn Foundation"), a non-profit foundation
specializing in aging research that is a principal stockholder of the Company,
and is a member of the board of advisors of Charter Venture Capital, a
principal stockholder of the Company. Mr. Frenzel received a B.S. in physics
and an M.B.A. from Stanford University.
JOHN M. CARNEY, PH.D. Dr. Carney co-founded the Company and has been a
director since its inception in March 1992 and a member of the Intellectual
Property Oversight Committee since May 1998. Dr. Carney was President of the
Company from March 1992 until October 1992 and Chairman of the Board of
Directors from October 1992 until July 1996. After four years as a scientific
consultant to the Company, Dr. Carney joined the Company as its full time
Chief Technical Officer in June 1996. From 1987 until June 1996, Dr. Carney
was an Associate Professor of Pharmacology at the University of Kentucky
College of Medicine. He has published over 100 papers in the fields of
pharmacology and neurophysiology. Dr. Carney received a B.S. in biology from
St. Mary's College, an M.S. in vertebrate zoology from San Diego State
University, and a Ph.D. in pharmacology from the University of Michigan at Ann
Arbor.
JOSEPH L. TURNER. Mr. Turner joined the Company as Chief Financial Officer
and Treasurer in November 1997. From 1992 until November 1997, Mr. Turner was
Vice President, Finance and Administration, Chief Financial Officer, Secretary
and Treasurer of Cortech, Inc., a biopharmaceutical firm. From 1979 to 1992,
Mr.
43
<PAGE>
Turner served in various management positions at Eli Lilly and Company, a
pharmaceutical company, most recently as Director of Finance of Eli Lilly S.A.
(Switzerland). He received a B.A. in Chemistry from Swarthmore College, an
M.A. in molecular biology from the University of Colorado, and an M.B.A. from
the University of North Carolina at Chapel Hill.
WILLIAM A. GARLAND, PH.D. Dr. Garland joined the Company as Vice President,
Pharmaceutical Development in August 1994 and became Executive Vice President,
Pharmaceutical Development in February 1997. Prior to joining the Company, Dr.
Garland spent 20 years with Hoffmann-La Roche Inc., a pharmaceutical company,
most recently as Senior Director and U.S. Head of International Project
Management from March 1991 until July 1994. Dr. Garland received a B.S. in
chemistry from the University of San Francisco and a Ph.D. in medicinal
chemistry from the University of Washington School of Pharmacy.
KIRK R. MAPLES, PH.D. Dr. Maples joined the Company as Director of
Biochemistry in May 1993. He became Senior Director and Group Project Leader
in February 1995 and Vice President, Pharmaceutical Discovery in February
1996. Prior to joining the Company, Dr. Maples was an Associate Scientist at
the Inhalation Toxicology Research Institute from 1989 to April 1993 and was a
Clinical Assistant Professor at the University of New Mexico College of
Pharmacy from August 1991 to April 1993. Dr. Maples received a B.S. in
chemistry from the University of Missouri at Kansas City and a Ph.D. in
inorganic chemistry from Duke University.
JOHN J. VAJDA. Mr. Vajda joined the Company in January 1997 as Director of
Operations and became Vice President, Operations in charge of facilities,
manufacturing and process development in February 1998. Prior to joining the
Company, Mr. Vajda was General Manager at Biostride, Inc., an in vitro
diagnostic product company, from October 1995 to October 1996. From February
1993 to October 1995, Mr. Vajda was Director of Operations of OCULEX
Pharmaceuticals, Inc., a manufacturer of pharmaceuticals for eye care. Mr.
Vajda has attended New York University in biology and chemistry.
LUCY O. DAY, CPA. Ms. Day joined the Company as Controller in February 1994
and was appointed Director of Finance in February 1997 and Director of Finance
and Administration in February 1998. Prior to joining the Company, Ms. Day
worked at Bank of America NT&SA from 1990 to January 1994, most recently as
Vice President, Financial Consolidation and Reporting from January 1993 to
January 1994. Ms. Day received a B.A. in political economies of industrial
societies from the University of California at Berkeley and is a Certified
Public Accountant in the State of California.
MARK R. COLLINS. Mr. Collins has been a director of the Company since its
inception in March 1992 and a member of the Finance and Audit Committee since
September 1993. Mr. Collins was the Company's Chief Financial Officer from its
inception until August 1996. Since 1986, Mr. Collins has been Executive Vice
President and a member of the Board of Directors of the Glenn Foundation, a
private non-profit foundation specializing in aging research that is a
principal stockholder of the Company.
GRAHAM K. CROOKE, MB.BS. Dr. Crooke has been a director of the Company since
September 1995 and a member of the Compensation Committee since November 1995
and a member of the Regulatory Oversight Committee since June 1998. Since
September 1997, Dr. Crooke has been a principal of Ticonderoga Capital, Inc.
(formerly Dillon Read Venture Capital), a venture capital firm that provides
management services to Concord Partners II, L.P. (a principal stockholder of
the Company), and has been a general partner of the general partner of Concord
Partners II, L.P. From April 1992 to September 1997, Dr. Crooke held various
positions with Dillon Read Venture Capital, most recently as Vice President.
Dr. Crooke is a director of several privately-held companies. He earned his
medical degree from the University of Western Australia and an MBA from the
Stanford Graduate School of Business.
STEINAR J. ENGELSEN, M.SC., M.D. Dr. Engelsen became a director of the
Company and member of the Regulatory Oversight Committee in June 1998. Since
November 1996, Dr. Engelsen has been a partner of Teknoinvest Management AS, a
venture capital firm. From 1989 until September 1996, Dr. Engelsen was
employed in various management positions with responsibility for therapeutic
research and development within
44
<PAGE>
Hafslund Nycomed AS, a pharmaceutical company based in Europe and affiliated
companies, most recently serving as Senior Vice President, Research and
Development of Nycomed Pharma AS from January 1994 until September 1996. Dr.
Engelsen received an M.Sc. in nuclear chemistry and an M.D. from the
University of Oslo. Dr. Engelsen is a director of Axis ASA (a Norwegian public
company) and several privately-held companies.
CHARLES R. ENGLES. Mr. Engles became a director of the Company and a member
of the Intellectual Property Committee in June 1998. Since November 1997, Mr.
Engles has been President and Chief Executive Officer of Cutanix, an affiliate
of the Company engaged in development of products for dermatology, cosmetics
and other skin care applications. From October 1994 until March 1997, Mr.
Engles was Chairman and Chief Executive Officer of Stillwater Mining Co. a
platinum and palladium mining and processing company. From May 1989 until
October 1994, Mr. Engles was Senior Vice President, Corporate Development of
Johns Manville Corp., a building materials company. Mr. Engles received a B.A.
in electrical engineering from Rice University, an M.Sc. in management from
the University of Warwick and a Ph.D. in operations research from Stanford
University. Mr. Engles also studied as a Rhodes scholar at Oxford University.
Mr. Engles is a director of Sundance Homes, Inc., a builder of single family
homes.
SELVI VESCOVI. Mr. Vescovi has been a director of the Company since May 1996
and a member of the Finance and Audit Committee and Compensation Committee
since May 1998. Since 1988, Mr. Vescovi has been a consultant to the
pharmaceutical industry. Prior to 1988, Mr. Vescovi spent 35 years with Upjohn
Company, a pharmaceutical company, serving in a variety of senior positions,
including President and General Manager of the International Division. From
May 1992 until June 1996, Mr. Vescovi was Chairman of the Board of Carrington
Laboratories, Inc., a research-based pharmaceutical and medical device
company. Mr. Vescovi currently is a director of Carrington Laboratories, Inc.
and one privately held company. Mr. Vescovi received a B.S. in biology from
the College of William and Mary.
Directors are elected at each annual meeting of stockholders to serve until
the next annual meeting of stockholders, or until their successors are duly
elected and qualified, or until their earlier resignation, removal or death.
The Company's directors were elected pursuant to the terms of a voting
agreement (the "Voting Agreement") under which certain stockholder groups have
the right to designate members of the Company's Board of Directors. The Voting
Agreement will terminate upon the consummation of this offering.
BOARD COMMITTEES
Finance and Audit Committee. The Finance and Audit Committee of the Board
consists of Mr. Collins and Mr. Vescovi. The Finance and Audit Committee
reviews the Company's financial statements and accounting practices, makes
recommendations to the Board regarding the selection of independent auditors
and reviews the results and scope of the audit and other services provided by
the Company's independent auditors.
Compensation Committee. The Compensation Committee of the Board consists of
Dr. Crooke and Mr. Vescovi. The Compensation Committee makes recommendations
to the Board concerning salaries and incentive compensation for the Company's
officers and employees and administers the Company's employee benefit plans.
Regulatory Oversight Committee. The Regulatory Oversight Committee of the
Board consists of Drs. Engelsen and Crooke. The Regulatory Oversight Committee
oversees the Company's regulatory compliance and clinical trial activities.
Intellectual Property Oversight Committee. The Intellectual Property
Oversight Committee consists of Dr. Carney and Mr. Engles. The Intellectual
Property Oversight Committee makes recommendations to the Board regarding the
Company's intellectual property portfolio and reviews the Company's policies
and procedures for protecting its intellectual property rights.
45
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
None of the members of the Compensation Committee of the Board was an
officer or employee of the Company during 1997. No executive officer of the
Company serves as a member of the board of directors or compensation committee
of any for-profit entity that has one or more executive officers serving on
the Company's Board or Compensation Committee, except that Mr. Frenzel serves
on the Board of Directors of Cutanix, whose chief executive officer, Mr.
Engles, is a director of the Company.
DIRECTOR COMPENSATION
Directors of the Company do not receive cash compensation for their services
as directors (other than Mr. Vescovi, who receives a fee of $1,000 per month)
but are reimbursed for their reasonable expenses in attending meetings of the
Board. In 1997, Mr. Collins, Dr. Crooke and Mr. Vescovi each received a
nonqualified stock option to purchase 5,000 shares of Common Stock at $2.50
per share, expiring in 2007. In February 1998, Mr. Collins, Dr. Crooke and Mr.
Vescovi each received an additional nonqualified stock option to purchase
5,000 shares of Common Stock at $4.00 per share, expiring in 2008. In
connection with their 1998 appointment as directors of the Company, Dr.
Engelsen and Mr. Engles each received a nonqualified stock option to purchase
5,000 shares of Common Stock at $6.50 per share, expiring in 2008.
In June 1998, the Board adopted the Directors Plan and reserved a total of
125,000 shares of the Company's Common Stock for issuance thereunder. The
Directors Plan will become effective upon the date of this Prospectus (the
"Effective Date"). Members of the Board who are not employees of the Company
are eligible to participate in the Directors Plan. Each eligible director who
first becomes a member of the Board on or after the Effective Date will
initially automatically be granted an option for a number of shares equal to
417 shares multiplied by the number of full and partial calendar months
between (a) the date such director first becomes a director and (b) the
following May 1. On May 1 of each year following the Effective Date, each
eligible director will automatically be granted an additional option to
purchase 5,000 shares if such director has served continuously as a member of
the Board since the date of grant of such director's initial option, or if
such director did not receive an initial option, such director has served
continuously as a member of the Board since the Effective Date. All options
issued under the Directors Plan will vest as to 1/36 of the shares on each
monthly anniversary of the date of grant, provided the optionee continues as a
member of the Board or as a consultant to the Company. The exercise price of
all options granted under the Directors Plan will be the fair market value of
the Common Stock on the date of grant.
46
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth all compensation awarded to, earned by or
paid for services rendered to the Company in all capacities during fiscal 1997
by (i) the Company's chief executive officer and (ii) the Company's other
executive officers who were serving as executive officers at the end of 1997
and whose total annual salary and bonus during 1997 equaled or exceeded
$100,000 (together, the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
NAME AND PRINCIPAL -----------------------------------------------------
POSITIONS SALARY BONUS SECURITIES UNDERLYING OPTIONS(#)
------------------ ----------- -----------------------------------------
<S> <C> <C> <C>
Brian D. Frenzel......... $ 218,877 $ -- 15,000
President and Chief Ex-
ecutive Officer
John M. Carney, Ph.D..... 157,219 -- 6,250
Chief Technical Officer
William A. Garland, 187,056 -- 20,000
Ph.D....................
Executive Vice
President,
Pharmaceutical
Development
</TABLE>
In November 1997, Joseph L. Turner was appointed Chief Financial Officer and
Treasurer of the Company at an initial base salary of $150,000 per year. In
connection with his appointment, Mr. Turner was granted an incentive stock
option to purchase 100,000 shares of Common Stock at an exercise price of
$2.50 per share, expiring in November 2007.
47
<PAGE>
The following table sets forth further information regarding option grants
pursuant to the Company's 1993 Incentive Plan during 1997 to each of the Named
Executive Officers. In accordance with the rules of the Securities and
Exchange Commission, the table sets forth the hypothetical gains or "option
spreads" that would exist for the options at the end of their respective ten-
year terms. These gains are based on assumed rates of annual compound stock
price appreciation of 5% and 10% from the date the option was granted to the
end of the option term.
OPTION GRANTS IN 1997
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
------------------------------------------------------ VALUE AT ASSUMED ANNUAL
NUMBER OF RATES OF STOCK PRICE
SECURITIES PERCENT OF TOTAL APPRECIATION FOR OPTION
UNDERLYING OPTIONS GRANTED TERM (3)
OPTIONS TO EMPLOYEES EXERCISE PRICE EXPIRATION ------------------------
NAME GRANTED (1) IN 1997 PER SHARE (2) DATE 5% 10%
- ---- ----------- ---------------- -------------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Brian D. Frenzel........ 15,000 3.2% $2.50 2/06/07 $ 23,584 $ 59,765
John M. Carney, Ph.D.... 6,250 1.3 2.50 2/06/07 9,826 24,902
William A. Garland,
Ph.D................... 20,000 4.3 2.50 2/06/07 31,445 79,687
</TABLE>
- --------
(1) All the options shown in the table are incentive stock options to purchase
shares of Common Stock. Options vest monthly over a four-year period, with
one forty-eighth of the shares vesting each month on a date specified by
the Board on the date of grant, provided that the optionee continues to
render services to the Company.
(2) Options were granted at an exercise price equal to the fair market value
of the Common Stock on the date of grant, as determined by the Board.
(3) The 5% and 10% assumed annual compound rates of stock price appreciation
are mandated by the rules of the Securities and Exchange Commission and do
not represent the Company's estimate or projection of future Common Stock
prices.
The above table does not reflect options granted since December 31, 1997, as
follows: incentive stock options granted on February 13, 1998, at an exercise
price of $4.00 per share, expiring February 12, 2008, to Mr. Frenzel (20,000
shares), Dr. Carney (15,000 shares) and Dr. Garland (20,000 shares). See
footnotes (1) and (2) above.
48
<PAGE>
The following table sets forth information with respect to (i) the exercise
of stock options by Named Executive Officers during the fiscal year ended
December 31, 1997 and (ii) the number of shares covered by both exercisable
and unexercisable stock options as of December 31, 1997. Also reported are
values of "in-the-money" options that represent the positive spread between
the respective exercise prices of outstanding stock options and the fair
market value of the Company's Common Stock as of December 31, 1997.
AGGREGATE OPTION EXERCISES IN 1997
AND YEAR-END VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED
SHARES UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS AT
ACQUIRED ON VALUE AT FISCAL YEAR-END FISCAL YEAR-END (1)
EXERCISE REALIZED ----------------------------------- -------------------------
(#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- -------- --------------- ---------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Brian D. Frenzel........ 65,000 $312,188 76,770 51,980 $362,184 $217,816
John M. Carney, Ph.D.... -- -- 6,093 10,157 24,814 35,810
William A. Garland,
Ph.D................... 99,279 479,513 9,896 48,325 38,034 195,203
</TABLE>
- --------
(1) For purposes of determining the value of in-the-money options, the fair
market value of the Company's Common Stock as of December 31, 1997 is
deemed to be $5.00.
EMPLOYMENT AGREEMENT
The Company entered into an employment agreement with Mr. Frenzel, effective
as of December 1, 1993, in connection with Mr. Frenzel's service as President
and Chief Executive Officer of the Company (the "Employment Agreement"). The
Employment Agreement contemplated that, due to other commitments, Mr. Frenzel
initially would serve the Company as a part-time employee but would become a
full-time employee on or before September 1, 1994 (the "Full Time Employment
Date"). Mr. Frenzel became a full-time employee on July 1, 1994. The
Employment Agreement provided that Mr. Frenzel would receive a salary of
$132,500 as a part-time employee and an initial minimum salary of $175,000 as
a full-time employee. The initial term of the Employment Agreement was four
years. The Employment Agreement is currently renewable automatically for
successive one-year terms on the same terms and conditions, unless either
party notifies the other of its intention to terminate at least 90 days before
the expiration of the applicable term. The Employment Agreement provides that
Mr. Frenzel's employment may be terminated by the Company, with or without
cause, or voluntarily by Mr. Frenzel. If the Company terminates the Employment
Agreement for cause, or if Mr. Frenzel terminates the Employment Agreement
voluntarily, the Company is obligated to pay Mr. Frenzel only compensation and
benefits otherwise payable to Mr. Frenzel through the effective date of such
termination. If the Company terminates the Employment Agreement without cause,
the Company must pay Mr. Frenzel a severance payment equal to six months'
salary, payable on the Company's normal payroll dates during that period;
provided, however, that if Mr. Frenzel secures other full-time employment
during such six-month period, the Company will pay an amount equal to one half
of any additional amount the Company would have been obligated to pay Mr.
Frenzel for the period from the date on which Mr. Frenzel secured such other
employment until the end of the six-month period.
Pursuant to the terms of the Employment Agreement, the Company granted Mr.
Frenzel an incentive stock option to purchase up to 300,000 shares of Common
Stock at a price of $0.15 per share (the "Option"). One half of the Option
vested monthly over four years beginning on December 1, 1993, and the other
half vests monthly over four years beginning on the Full-Time Employment Date
and will be fully vested on July 1, 1998. To date, Mr. Frenzel has purchased
212,500 shares of Common Stock upon exercise of the Option.
49
<PAGE>
EMPLOYEE BENEFIT PLANS
1993 Equity Incentive Plan. In February 1993, the Board adopted the
Company's 1993 Incentive Plan. As originally adopted, the 1993 Incentive Plan
reserved 500,000 shares of Common Stock for issuance. This reserve was
increased to 1,500,000 shares in April 1994, 1,540,000 shares in February
1996, 2,000,000 shares in May 1996, 2,250,000 shares in July 1996 and
2,400,000 shares in February 1998. As of March 31, 1998, under the 1993
Incentive Plan, options to purchase 1,776,877 shares of Common Stock at
exercise prices from $0.10 to $4.00 per share were outstanding, options to
purchase 499,460 shares of Common Stock had been exercised, and options to
purchase 123,663 shares of Common Stock were available for grant. From April 1
through May 8, 1998 (the last date on which options were granted), the Board
granted options to purchase an additional 49,500 shares of Common Stock at an
exercise price of $6.50 per share. Generally, options granted under the 1993
Incentive Plan are subject to the terms described below with respect to
options granted under the 1998 Equity Incentive Plan (the "1998 Incentive
Plan") although there is no limit on the aggregate number of options that may
be granted to an optionee under the 1993 Incentive Plan.
1998 Equity Incentive Plan. In June 1998, the Board adopted the 1998
Incentive Plan. The 1998 Incentive Plan will become effective upon the
Effective Date and will serve as the successor equity incentive program to the
Company's 1993 Incentive Plan. Options granted under the 1993 Incentive Plan
before its termination will remain outstanding in accordance with their terms,
but no further options will be granted under the 1993 Incentive Plan after the
Effective Date. The Company has reserved 1,000,000 shares of Common Stock for
issuance under the 1998 Incentive Plan. In addition, any authorized shares not
issued or subject to outstanding options under the 1993 Incentive Plan on the
Effective Date, and any shares that (i) are subject to issuance upon exercise
of an option granted under the 1993 Incentive Plan or the 1998 Incentive Plan
but cease to be subject to such option for any reason other than exercise of
such option, (ii) are subject to an award granted under the 1993 Incentive
Plan or the 1998 Incentive Plan but are forfeited or are repurchased by the
Company at the original issue price or (iii) are subject to an award that
otherwise terminates without shares being issued will be available for grant
and issuance in connection with future awards under the 1998 Incentive Plan.
The 1998 Incentive Plan provides for the grant of stock options and stock
bonuses and the issuance of restricted stock by the Company to its employees,
officers, directors, consultants, independent contractors and advisers. The
1998 Incentive Plan will be administered by the Compensation Committee of the
Board, currently consisting of Dr. Crooke and Mr. Vescovi. The 1998 Incentive
Plan permits the Compensation Committee to grant options that are either
incentive stock options (as defined in Section 422 of the Internal Revenue
Code) or nonqualified stock options, on terms (including the exercise price,
which may not be less than 85% of the fair market value of the Company's
Common Stock, and the vesting schedule) determined by the Compensation
Committee, subject to certain statutory and other limitations in the 1998
Incentive Plan. In addition to, or in tandem with, awards of stock options,
the Compensation Committee may grant participants restricted stock awards to
purchase the Company's Common Stock for not less than 85% of its fair market
value at the time of grant. The other terms of such restricted stock awards
may be determined by the Compensation Committee. The Compensation Committee
may also grant stock bonus awards of the Company's Common Stock either in
addition to, or in tandem with, other awards under the 1998 Incentive Plan,
under such terms, conditions and restrictions as the Compensation Committee
may determine. The 1998 Incentive Plan will terminate in 2008, unless
terminated earlier in accordance with the provisions of the 1998 Incentive
Plan.
1998 Employee Stock Purchase Plan. In June 1998, the Board adopted the
Purchase Plan and reserved a total of 125,000 shares of the Company's Common
Stock for issuance thereunder. In addition, on each January 1, the aggregate
number of shares reserved for issuance under the Purchase Plan will be
increased automatically by a number of shares equal to one quarter of one
percent of the total outstanding shares of Common Stock of the Company on the
immediately preceding December 31. Such increase is limited to a maximum of
200,000 shares per year. The Purchase Plan permits eligible employees to
acquire shares of the Company's Common Stock through payroll deductions. The
Purchase Plan is intended to qualify as an "employee stock purchase plan"
under Section 423 of the Internal Revenue Code. Except for the initial
offering under the Purchase Plan, each offering under the Purchase Plan will
be for a period of eighteen months (the "Offering Period") consisting of
50
<PAGE>
three six-month purchase periods (each a "Purchase Period"). The first
Offering Period will begin on the day that trading of the Common Stock
commences on the Swiss Exchange and will end on January 31, 2000. Offering
Periods thereafter will commence on February 1 and August 1 of each year. The
Board has the power to set the beginning of any Offering Period, to terminate
any Offering Period under certain circumstances and to change the duration of
Offering Periods without stockholder approval, provided that the change is
announced at least 15 days prior to the scheduled beginning of the first
Offering Period to be affected. Eligible employees may select a rate of
payroll deduction between 2.0% and 10% of their compensation, up to an
aggregate total payroll deduction not to exceed $25,000 in any calendar year.
The purchase price for the Company's Common Stock purchased under the Purchase
Plan is 85% of the lesser of the fair market value of the Company's Common
Stock on the first day of the Offering Period or on the last day of the
applicable Purchase Period.
51
<PAGE>
CERTAIN TRANSACTIONS
Since January 1, 1995, there has not been, nor is there currently proposed,
any transaction or series of similar transactions to which the Company was or
is to be a party in which the amount involved exceeds $60,000 and in which any
director, executive officer or holder of more than five percent of the Common
Stock of the Company had or will have a direct or indirect material interest
other than (i) compensation arrangements, which are described where required
under "Management," and (ii) the transactions described below.
SECURITIES ISSUANCES
From February through October 1997, the Company sold an aggregate of
2,200,000 shares of the Company's Series D Preferred Stock to 60 individuals
and entities at the price of $7.50 per share, for an aggregate purchase price
of $16,500,000, paid in cash. The following individuals and entities, which
were, at the time, executive officers, directors or their affiliates, five
percent stockholders and/or members of a five percent stockholder group,
purchased shares in the amounts set forth immediately after their respective
names: (i) Paul F. Glenn, Trustee, Paul F. Glenn Revocable Trust (66,667
shares), and the Glenn Foundation (33,334 shares), members of a five percent
stockholder group; (ii) Brian D. Frenzel, President, Chief Executive Officer,
a director and a five percent stockholder (10,000 shares); (iii) Selvi
Vescovi, a director (5,000 shares); (iv) Charter Ventures II, L.P. (40,000
shares), member of a five percent stockholder group; (v) Menlo Ventures IV,
L.P. (66,666 shares), a five percent stockholder; and (vi) Oklahoma Medical
Research Foundation (20,000 shares), of which an executive officer and trustee
was then a director of the Company.
In addition, since January 1, 1995, the Company has issued 2,730 shares of
Common Stock as compensation for consulting services and issued warrants to
purchase an aggregate of 35,000 shares of Common Stock, having exercise prices
of from $3.00 to $4.00 per share, as compensation for consulting services.
5,000 of these warrants were issued in 1998 to Steinar Engelsen, who became a
director of the Company in June 1998. Finally, since January 1, 1995 through
March 31, 1998, the Company granted options to purchase an aggregate of
1,485,979 shares of its Common Stock, having exercise prices of from $0.20 per
share to $6.50 per share, to employees, directors and consultants under the
1993 Incentive Plan and issued 497,711 shares of Common Stock to employees,
directors and consultants upon exercise of outstanding options, having
exercise prices of from $0.10 per share to $2.50 per share.
INDEBTEDNESS OF MANAGEMENT
In January 1998, the Company made a short-term relocation loan to Joseph L.
Turner, its Chief Financial Officer and Treasurer. The principal amount of
$371,322 accrued interest at an annual rate of 6%. Mr. Turner repaid the
balance of $342,679 (net of certain expenses paid by the Company) and $1,997
in accrued interest in February 1998.
OTHER TRANSACTIONS
Charles Engles, a director of the Company, is the chief executive officer
and a director and major stockholder of Cutanix, a corporation formed in
November 1997 to develop dermatological drugs and cosmetics. The Company
currently owns 67% of the outstanding capital stock of Cutanix, and Mr. Engles
currently owns 22% of its outstanding capital stock. In January 1998, the
Company exclusively licensed to Cutanix all of its current and future NRT
technology for the fields of dermatology, cosmetics and other skin care
applications. The Company and Cutanix also entered into a services and supply
agreement in January 1998 under which the Company agreed to provide certain
administrative and other services to Cutanix at cost. In addition, the Company
and Cutanix agreed that the Company would be the exclusive supplier of NRT
active compounds to Cutanix (subject to certain rights of each party to
terminate this exclusivity) at a cost-based purchase price. The Company has
committed to contribute up to $250,000 in cash and services to Cutanix. See
"Business--Cutanix-Skin Care Affiliate" and Note 1 of Notes to Financial
Statements.
Mark Collins, a director of the Company, has provided consulting services to
the Company from time to time and received compensation therefor. In 1997, the
Company paid Mr. Collins $18,000 as compensation for such services.
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PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information known to the Company with
respect to the beneficial ownership of the Company's Common Stock as of March
31, 1998 by: (i) each person who is known by the Company to be the beneficial
owner of more than five percent of the Company's Common Stock, (ii) each
director of the Company, (iii) each of the Named Executive Officers (see
"Management--Executive Compensation"), (iv) all executive officers and
directors of the Company as a group, and (v) each Selling Stockholder.
<TABLE>
<CAPTION>
SHARES SHARES
BENEFICIALLY BENEFICIALLY
OWNED PRIOR TO OWNED AFTER
5% STOCKHOLDERS, DIRECTORS OFFERING(1) OFFERING(1)(2)
AND ----------------- NUMBER OF SHARES -----------------
NAMED EXECUTIVE OFFICERS NUMBER PERCENT BEING OFFERED(2) NUMBER PERCENT
- -------------------------- --------- ------- ---------------- --------- -------
<S> <C> <C> <C> <C> <C>
Graham K. Crooke, MB.BS.
and
Concord Partners II,
L.P.(3).................. 1,584,415 11.5%
535 Madison Avenue, 36th
Floor
New York, New York 10022
Menlo Ventures IV, L.P.... 1,290,692 9.3
3000 Sand Hill Road,
Bldg. 4, Ste. 100
Menlo Park, California
94025
Bismuth Investments
Limited.................. 1,142,857 8.3
Suite 922C
Europort, Gibraltar
Paul F. Glenn(4).......... 1,101,948 8.0
c/o Glenn Foundation
1250 Coast Village Road,
Suite K
Santa Barbara, California
93108
Charter Ventures, a
California Limited
Partnership(5)........... 1,053,637 7.6
525 University Avenue,
Suite 1500
Palo Alto, California
94301
Neuroscience Partners
Limited Partnership...... 990,475 7.2
100 International
Boulevard
Etobicoke, Ontario,
Canada M9W 6J6
Brian D. Frenzel(6)....... 892,970 6.4
c/o Centaur
Pharmaceuticals, Inc.
484 Oakmead Parkway
Sunnyvale, California
94086
Robert A. Floyd, Ph.D.(7). 805,625 5.8
c/o Oklahoma Medical
Research Foundation
825 North East 13th
Street
Oklahoma City, OK 73104
John M. Carney, Ph.D.(8).. 748,515 5.4
c/o Centaur
Pharmaceuticals, Inc.
484 Oakmead Parkway
Sunnyvale, California
94086
Mark R. Collins(9)........ 283,519 2.0
William A. Garland,
Ph.D.(10)................ 123,967 *
Charles R. Engles(11)..... 21,514 *
Steinar J. Engelsen,
M.D.(12)................. 12,335 *
Selvi Vescovi(13)......... 11,582 *
All executive officers and
directors as a group (9
persons)(14)............. 3,673,215 26.3
</TABLE>
53
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<TABLE>
<S> <C> <C> <C> <C> <C>
OTHER SELLING STOCKHOLDERS
- --------------------------
[TO COME]
</TABLE>
- --------
* Less than 1% of the Company's outstanding Common Stock
(1) Percentage ownership is based on 13,824,925 shares outstanding as of
March 31, 1998 (assuming conversion of the Preferred Stock) and
shares outstanding after the offering. Unless otherwise indicated below,
the persons and entities named in the table have sole voting and sole
investment power with respect to all shares beneficially owned, subject
to community property laws where applicable. Shares of Common Stock
subject to options that are currently exercisable or exercisable within
60 days of March 31, 1998 are deemed to be outstanding and to be
beneficially owned by the person holding such options for the purpose of
computing the percentage ownership of such person but are not treated as
outstanding for the purpose of computing the percentage ownership of any
other person.
(2) Assumes that the Managers' overallotment option to purchase up to
shares of the Company is not exercised.
(3) Represents 7,187 shares of Common Stock that may be acquired upon
exercise of stock options held by Dr. Crooke that are currently
exercisable or will become exercisable within 60 days of March 31, 1998,
10,129 shares of Common Stock beneficially owned by Dr. Crooke and
1,584,415 shares held of record by Concord Partners II, L.P. ("Concord
II"). The investment policies and affairs of Concord II are managed by
its general partner, Venture Associates II, L.P. ("Venture Associates"),
of which CPML Associates, Inc. ("CPML") is the managing general partner.
Dr. Crooke, a director of the Company, is a general partner of Venture
Associates and one of three principals of CPML.
(4) Represents 1,068,614 shares held of record by Paul F. Glenn, Trustee,
Paul F. Glenn Revocable Trust, and 33,334 shares held of record by Glenn
Foundation. Mr. Glenn is President and a member of the Board of Directors
of Glenn Foundation. Mr. Collins and Mr. Glenn each has voting and
investment power with respect to the shares held of record by the Glenn
Foundation (the "Glenn Foundation Shares"). Accordingly, such shares are
also included as securities beneficially owned by Mr. Collins. See
footnote (9).
(5) Represents 440,000 shares held of record by Charter Ventures II, L.P.,
and 613,637 shares held of record by Charter Ventures, a California
Limited Partnership.
(6) Represents an aggregate of 797,971 shares held of record by Mr. Frenzel
and his wife and 94,999 shares of Common Stock that may be acquired upon
exercise of stock options that are currently exercisable or will become
exercisable within 60 days of March 31, 1998 held by Mr. Frenzel. Does
not include an aggregate of 27,998 shares held of record by Mr. Collins
on behalf of the Frenzels' minor children. See footnote (9). Also does
not include 33,334 shares held of record by Glenn Foundation, of which
Mr. Frenzel serves as a member of the Board of Directors. See footnote
(4). Mr. Frenzel is President, Chief Executive Officer and a director of
the Company.
(7) Represents an aggregate of 800,000 shares held of record by Dr. Floyd
and/or Mrs. Floyd as trustee(s) of certain trusts for the benefit of Dr.
and Mrs. Floyd and members of their family and 5,625 shares of Common
Stock that may be acquired upon exercise of stock options that are
currently exercisable or will become exercisable within 60 days of March
31, 1998 held by Dr. Floyd. Dr. Floyd is Chairman of the Company's
Scientific Advisory Board and a consultant to the Company.
(8) Represents 740,000 shares held of record by Dr. Carney and his wife as
joint tenants and 8,515 shares of Common Stock that may be acquired upon
exercise of stock options that are currently exercisable or will become
exercisable within 60 days of March 31, 1998 held by Dr. Carney. Does not
include an aggregate of 60,000 shares held of record by Mr. Collins as
custodian for the Carney's minor children. See footnote (9). Dr. Carney
is Chief Technical Officer and a director of the Company.
(9) Represents 155,000 shares held of record by Mr. Collins and his wife, an
aggregate of 60,000 shares held by Mr. Collins as custodian for the minor
children of Dr. and Mrs. Carney, an aggregate of 27,998 shares held of
record by Mr. Collins on behalf of the minor children of Mr. and Mrs.
Frenzel, and 7,187 shares of
54
<PAGE>
Common Stock that may be acquired upon exercise of stock options that are
currently exercisable or will become exercisable within 60 days of March
31, 1998 held by Mr. Collins. Also includes 33,334 shares held of record
by Glenn Foundation, of which Mr. Collins is an executive officer and
member of the Board of Directors. Mr. Collins and Mr. Glenn each has
voting and investment power with respect to the Glenn Foundation Shares.
Accordingly, such shares are also included as securities beneficially
owned by Mr. Glenn. See footnote (4). Mr. Collins is a director of the
Company.
(10) Represents 99,279 shares held of record by Dr. Garland and his wife, and
24,688 shares of Common Stock that may be acquired upon exercise of stock
options that are currently exercisable or will become exercisable within
60 days of March 31, 1998. Dr. Garland is Executive Vice President,
Pharmaceutical Development of the Company.
(11) Mr. Engles is a director of the Company.
(12) Represents 415 shares of Common Stock that may be acquired upon exercise
of a warrant to the extent that such warrant is currently exercisable or
will become exercisable within 60 days of March 31, 1998 and 11,920
shares of Common Stock owned of record by Eiken Invest '97 AS, as to
which Dr. Engelsen has shared voting and dispositive power. Dr. Engelsen
disclaims beneficial ownership of the shares. Does not include 254,747
shares held of record by Teknoinvest IV ANS, an investment fund managed
by Teknoinvest Management AS, of which Dr. Engelsen is a partner. Dr.
Engelsen is a director of the Company.
(13) Includes 6,582 shares of Common Stock that may be acquired upon exercise
of stock options that are currently exercisable or will become
exercisable within 60 days of March 31, 1998. Mr. Vescovi is a director
of the Company.
(14) Includes 159,989 shares of Common Stock that may be acquired upon
exercise of stock options and warrants that are currently exercisable or
will become exercisable within 60 days of March 31, 1998 and 1,584,415
shares held of record by Concord II. See footnote (3).
55
<PAGE>
DESCRIPTION OF CAPITAL STOCK
Immediately following the closing of this offering, the authorized capital
stock of the Company will consist of 33,000,000 shares of Common Stock, $0.001
par value per share, and 3,000,000 shares of preferred stock, $0.001 par value
per share. Of those authorized shares, as of March 31, 1998, and assuming the
conversion of each outstanding share of Preferred Stock into one share of
Common Stock upon the closing of this Offering, there were outstanding
13,824,925 shares of Common Stock held of record by approximately 125
stockholders. In addition, as of March 31, 1998, options to purchase 1,776,877
shares of Common Stock and warrants to purchase 68,603 shares of Common Stock
were outstanding. The authorized capital stock of the Company and the issuance
by the Company of the shares of Common Stock to be sold by it in this offering
was approved by the Company's Board of Directors in June 1998. The Company has
agreed in the Underwriting Agreement not to issue or sell any Common Stock or
preferred stock for cash for a period of three years after the initial trading
of the Company's Common Stock on the Swiss Exchange, unless certain conditions
are satisfied. See "Underwriting."
COMMON STOCK
After giving effect to this offering, and based on the shares of Common
Stock and options and warrants outstanding on March 31, 1998, the Company will
have authorized and unissued shares of Common Stock, of which 3,219,143
shares are reserved for issuance pursuant to outstanding warrants and pursuant
to the Company's 1993 Incentive Plan, 1998 Incentive Plan, Directors Plan and
Purchase Plan. All of the Company's authorized and outstanding shares of
Common Stock are "registered" shares, which means that the holders of such
shares are registered in the Company's stock register maintained by its
transfer agent. In the following description, a "stockholder" is the holder of
a registered share of Common Stock. Subject to preferences that may apply to
any preferred stock outstanding at the time, the holders of outstanding shares
of Common Stock are entitled to receive dividends out of assets legally
available therefor at such times and in such amounts as the Board of Directors
may from time to time determine. Each stockholder is entitled to one vote for
each share of Common Stock held on all matters submitted to a vote of
stockholders. Cumulative voting for the election of directors is not provided
for in the Company's Certificate of Incorporation, which means that the
holders of a majority of the shares voted can elect all of the directors then
standing for election. The Common Stock is not entitled to preemptive rights
and is not subject to conversion or redemption. Upon liquidation, dissolution
or winding-up of the Company, the assets legally available for distribution to
stockholders are distributable ratably among the holders of the Common Stock
outstanding at that time, after payment of liquidation preferences, if any, on
any outstanding preferred stock and payment of other claims of creditors. Each
outstanding share of Common Stock is, and all shares of Common Stock to be
outstanding upon completion of this Offering will be, fully paid and
nonassessable.
PREFERRED STOCK
Upon the closing of this offering, all outstanding shares of Preferred Stock
will be converted into shares of Common Stock and no shares of Preferred Stock
will remain outstanding. See Note 7 to Notes to Financial Statements. The
Board of Directors is authorized, subject to any limitations prescribed by
Delaware law, to provide for the issuance of up to 3,000,000 shares of new
preferred stock in one or more series, to establish from time to time the
number of shares to be included in each such series, to fix the powers,
designations, preferences and rights of the shares of each wholly unissued
series and any qualifications, limitations or restrictions thereon and to
increase or decrease the number of shares of any such series (but not below
the number of shares of such series then outstanding) without any further vote
or action by the stockholders. The Board of Directors may authorize the
issuance of preferred stock with voting or conversion rights that could
adversely affect the voting power or other rights of the holders of Common
Stock. Thus, the issuance of preferred stock may have the effect of delaying,
deferring or preventing a change in control of the Company. The Company has no
current plan to issue any shares of preferred stock.
WARRANTS
As of March 31, 1998, the Company had outstanding warrants to purchase
68,603 shares of Common Stock at a weighted average per share exercise price
of $2.69. These warrants will remain outstanding following the closing of this
offering and will expire between August 1999 and September 2002.
56
<PAGE>
ANTI-TAKEOVER PROVISIONS
Delaware Law
Section 203 ("Section 203") of the Delaware General Corporation Law is
applicable to corporate takeovers of Delaware corporations. Subject to certain
exceptions set forth therein, Section 203 provides that a corporation shall
not engage in any business combination with any "interested stockholder" for a
three-year period following the date that such stockholder becomes an
interested stockholder unless (a) prior to such date, the board of directors
of the corporation approved either the business combination or the transaction
that resulted in the stockholder becoming an interested stockholder, (b) upon
consummation of the transaction that resulted in the stockholder becoming an
interested stockholder, the interested stockholder owned at least 85% of the
voting stock of the corporation outstanding at the time the transaction
commenced (excluding certain shares) or (c) on or subsequent to such date, the
business combination is approved by the board of directors of the corporation
and by the affirmative vote of at least two-thirds of the outstanding voting
stock that is not owned by the interested stockholder. Except as specified in
Section 203, an interested stockholder is generally defined to include any
person that is the owner of 15% or more of the outstanding voting stock of the
corporation, or is an affiliate or associate of the corporation and was the
owner of 15% or more of the outstanding voting stock of the corporation any
time within three years immediately prior to the relevant date, and the
affiliates and associates of such person. Under certain circumstances, Section
203 makes it more difficult for an interested stockholder to effect various
business combinations with a corporation for a three-year period, although the
stockholders may, by adopting an amendment to the corporation's certificate of
incorporation or bylaws, elect not to be governed by this section, effective
12 months after adoption. The Company's Certificate of Incorporation and
Bylaws do not exclude the Company from the restrictions imposed under Section
203. These provisions may have the effect of deterring hostile takeovers or
delaying changes in control of the Company, which could depress the market
price of the Common Stock and which could deprive the stockholders of
opportunities to realize a premium on shares of the Common Stock held by them.
Charter and Bylaw Provisions
The Company's Certificate of Incorporation and Bylaws contain certain
provisions that could discourage potential takeover attempts and make more
difficult attempts by stockholders to change management. The Company's
Certificate of Incorporation provides that stockholders may not take action by
written consent but may only act at a stockholders' meeting, and that special
meetings of the stockholders of the Company may only be called by the Chairman
of the Board, the Chief Executive Officer or a majority of the Board.
Under the Company's Bylaws, persons (or groups of persons) who acquire or
dispose of shares of the Company's Common Stock and thereby reach, exceed or
fall below the respective threshold of 5%, 10%, 20%, 33 1/3%, 50% or 66 2/3%
of the voting rights of the Company must notify the Company and the Swiss
Exchange of such transactions, whether or not the voting rights can be
exercised, unless at such time the Common Stock is listed on a U.S. national
securities exchange or quoted on the Nasdaq National Market.
REGISTRATION RIGHTS
The holders of approximately outstanding shares of Common Stock
following the consummation of this offering (the "Demand Registrable
Securities") have certain rights with respect to the registration of those
shares under the Securities Act of 1933, as amended (the "Securities Act"). If
requested by holders of at least 40% of the Demand Registrable Securities, the
Company must file a registration statement under the Securities Act covering
all Demand Registrable Securities requested to be included by all holders of
such Demand Registrable Securities. The Company may be required to effect up
to two such registrations. The Company has the right to delay any such
registration for up to 120 days under certain circumstances. All expenses
incurred in connection with such registrations (other than underwriters'
discounts and commissions) and the reasonable costs and disbursements of one
counsel for the selling holders will be borne by the Company. These demand
registration rights expire ten years after the closing date of this offering
and do not apply to any Demand
57
<PAGE>
Registrable Securities proposed to be sold by a holder if such securities may
be sold in a three-month period without registration pursuant to Rule 144
under the Securities Act of 1933 (the "Securities Act").
In addition, if the Company proposes to register any of its shares of Common
Stock under the Securities Act other than in connection with a Company
employee benefit plan or a corporate reorganization, the holders of the Demand
Registrable Securities and holders of approximately an additional
outstanding shares of Common Stock following the consummation of this offering
and shares of Common Stock issuable upon exercise of outstanding
warrants following the consummation of this offering may require the Company
to include all or a portion of their shares in such registration, although the
managing underwriter of any such offering has certain rights to limit the
number of shares in such registration. All expenses incurred in connection
with such registrations (other than underwriters' discounts and commissions)
and the reasonable costs and disbursements of one counsel for the selling
holders will be borne by the Company. These piggyback registration rights
expire ten years after the closing date of this offering and do not apply to
any securities proposed to be sold by a holder if such securities may be sold
in a three-month period without registration pursuant to Rule 144.
Further, holders of at least 20% of all Demand Registrable Securities may
require the Company to register all or any portion of their Demand Registrable
Securities on Form S-3 when such form becomes available to the Company,
subject to certain conditions and limitations. The Company may be required to
effect only one such registration in any twelve-month period. All expenses
incurred in connection with the first two of such registrations (other than
underwriters' or brokers' discounts and commissions) and reasonable costs and
disbursements of one counsel for the selling holders will be borne by the
Company.
THE SWISS EXCHANGE
The Swiss Exchange is a self-regulated private organisation comprised of
over 50 members. The Swiss Exchange is licensed and supervised by the Swiss
Federal Banking Commission (the "FBC"), a regulatory agency of the Swiss
Federal Government. Securities traded on the Swiss Exchange include Swiss and
foreign bonds, equities, investment funds, options and warrants. As of May 31,
1998, 224 Swiss companies and 203 foreign companies were listed on the Swiss
Exchange. The aggregate market value of equity securities listed on the Swiss
Performance Index (which consists of all Swiss and Liechtenstein companies
listed on the Swiss Exchange) as of May 29, 1998 was CHF 1,023 billion, CHF
788 billion (or 77%) of which was represented by securities of 21 companies.
The aggregate turn over in equity securities on the Swiss Exchange was
approximately CHF 720 billion in 1997 and approximately CHF 421 billion in the
first five months of 1998.
The Swiss Exchange is an order-driven exchange system. Transactions on the
Swiss Exchange are transmitted electronically through a computer processing
center. Trading is divided into three separate daily phases: pre-opening,
opening and regular trading. During the pre-opening phase, orders can be
entered or deleted. However, no actual trades are made. The system is further
available for inquiries and for reporting off exchange transactions. During
the opening phase, the system closes the order book and starts opening
procedures. It establishes the opening price and determines the orders to be
executed according to matching rules. After opening, regular trading begins.
New orders are continuously matched to existing ones in the order book in
accordance with matching rules. If an order cannot be executed, it is entered
into the order book. The matching stops at the end of regular trading. The
trading system, including the order books, however, remains open and traders
can enter new orders for the next business day. The Swiss Exchange interrupts,
for limited periods, trading in a security that is subject to significant
price fluctuation during a particular trading period.
The Swiss Exchange links trading and settlement electronically. Buyers and
sellers are obliged to settle all completed exchange business on the value
date set by the Swiss Exchange. Normally, delivery and payment of exchange
transactions occur three days after the trade date. In order to promote
efficient processing of the settlement by the exchange members, the Swiss
Exchange automatically transmits transactions to SEGA (or Intersettle) over an
electronic settlement system. On the settlement date, SEGA debits the agreed
purchase price to the purchaser's account with the Swiss National Bank and
credits it to the seller. In return, securities are
58
<PAGE>
transferred from the seller's SEGA account to the purchaser's SEGA account.
Settlement with Intersettle is effected in similar manner.
The Swiss Exchange requires the reporting of all transactions in listed
securities by exchange members and securities dealers. For transactions
effected on the Swiss Exchange, reporting occurs automatically. Off exchange
transactions and other business must be reported to the Swiss Exchange within
30 minutes. This information is collected, processed and distributed by the
Swiss Exchange. Transactions outside trading hours (i.e., between 10 p.m. and
6 a.m.) must be reported by the next opening.
LISTING AND SETTLEMENT
In connection with this offering, application has been made to list all the
shares of Common Stock outstanding after the offering on the official market
of the Swiss Exchange under the symbol CEN. It is expected that the shares
will be listed, and that dealings will commence, on or about , 1998 and
that payment for, and delivery of, the shares of Common Stock offered hereby
will take place on or about , 1998. It is currently anticipated
that the Company's Common Stock will not be listed or quoted on any United
States exchange or quotation system, and accordingly it is not anticipated
that there will be an active market for the Company's Common Stock other than
the Swiss Exchange. There can be no assurance that the Common Stock will not
be listed on a United States exchange or quotation system in the future. The
Swiss security number for the Common Stock is 917088. The ISIN code is
CH0009170884.
TRANSFER OF SHARES
The Company's Common Stock is issued only in "registered" form, which means
that the holder of such shares is registered in the Company's stock register
maintained by its U.S. transfer agent and registrar. The transfer agent and
registrar for the Company's Common Stock is . In general, the Common Stock
will trade on the Swiss Exchange only through book-entry transfers of
beneficial interests therein through Swiss Nominee Company ("SNOC"), a nominee
of SEGA. Any investor who holds a certificate representing shares of Common
Stock, and who desires to sell such shares of Common Stock on the Swiss
Exchange, will be required to deposit the certificate with the U.S. transfer
agent for credit to SNOC's account, and will receive a beneficial interest
therein that is reflected on SNOC's books and records. On request, an investor
holding shares of Common Stock through SNOC may withdraw the certificate
representing such shares from SNOC and receive physical delivery of such
shares. In the event of such withdrawal, such shares will not be eligible to
trade on the Swiss Exchange unless redeposited with SNOC as described above.
SNOC will record all transfers of such Common Stock on its books and records
through its book-entry system. Investors who are beneficial owners of Common
Stock held through SNOC will receive confirmations and statements of their
holdings only through a broker or other financial institution. Any
communications by SNOC to beneficial owners of Common Stock will be governed
by the general rules and practices of SNOC.
The shares of Common Stock sold in the International Offering and the U.S.
Offering will not bear any restrictive legends or be subject to restrictions
on transfer. However, any persons acting as "underwriters" (within the meaning
of the Securities Act) and, until the date 90 days after the Common Stock
commences trading on the Swiss Exchange, any dealers, would be required to
deliver a prospectus in the form contained in the registration statement filed
with the U.S. Securities and Exchange Commission in connection with any offers
or sales in the United States. See "Underwriting."
STAMP DUTIES UPON TRANSFER OF SECURITIES
The purchase and sale of shares of Common Stock may be subject to a Swiss
Security Transfer Stamp Duty of an aggregate of 0.30%, as well as a SWX
Turnover Fee including FBC surcharge of an aggregate of 0.02%, calculated on
the sale proceeds if the sale occurs through or with a Swiss bank or other
Swiss securities dealer as defined in the Swiss Federal Stamp Tax Act.
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TAXATION
The following is a general discussion of certain U.S. federal income tax
considerations relevant to Non-U.S. holders (as defined below) of the Common
Stock. This discussion is based upon the Internal Revenue Code of 1986, as
amended (the "Code"), Treasury Regulations, Internal Revenue Service ("IRS")
rulings and judicial decisions now in effect, all of which are subject to
change (possibly with retroactive effect) or different interpretations. There
can be no assurance that the IRS will not challenge one or more of the tax
consequences described herein, and the Company has not obtained, nor does it
intend to obtain, a ruling from the IRS with respect to the U.S. federal
income tax consequences of acquiring or holding the Common Stock. This
discussion does not purport to deal with all aspects of U.S. federal income
taxation that may be relevant to a particular holder in light of the holder's
circumstances (for example, persons subject to the alternative minimum tax
provisions of the Code). Also, it is not intended to be wholly applicable to
all categories of investors, some of which (such as dealers in securities,
banks, insurance companies and tax-exempt organizations) may be subject to
special rules. This discussion also does not discuss any aspect of state,
local or foreign law that may be relevant to Non-U.S. Holders. This discussion
is for general information only and is not tax advice. Accordingly, each
investor should consult its own tax adviser as to particular tax consequences
to it of purchasing, holding and disposing of the Common Stock of the Company,
including the applicability and effect of any state, local or foreign tax
laws, and of any proposed changes in applicable laws. See "Description of
Capital Stock--Stamp Duties Upon Transfer of Securities" for a description of
certain Swiss securities transfer stamp duties that may be payable upon the
sale of shares of Common Stock on the Swiss Exchange.
As used herein, the term "Non-U.S. Holder" means a beneficial owner of
Common Stock that is not, for United States federal income tax purposes, (i) a
citizen or resident (as defined in Section 7701 (b) of the Code) of the United
States, (ii) a corporation, partnership or other entity formed under the laws
of the United States or any political subdivision thereof, (iii) an estate the
income of which is includable in gross income for U.S. federal income tax
purposes regardless of its source or (iv) a trust which is subject to the
supervision of a court within the United States and the control of a United
States person as described in Section 7701 (a) (30) of the Code.
Dividends
In general, dividends paid to a Non-U.S. Holder of Common Stock will be
subject to withholding of U.S. federal income tax at a 30% rate or such lower
rate as may be specified by an applicable income tax treaty. However,
dividends that are either effectively connected with a trade or business
carried on by the Non-U.S. Holder in the U.S. or, where a relevant income tax
treaty applies, attributable to a permanent establishment in the U.S.
maintained by the Non-U.S. Holder, are generally not subject to the
withholding tax, but instead are subject to United States federal income tax
on a net income basis at applicable graduated individual or corporate rates.
Certain certification and disclosure requirements must be complied with in
order for dividends which are effectively connected with a U.S. trade or
business or attributable to a U.S. permanent establishment to be exempt from
withholding. Any such dividends received by a Non-U.S. Holder that is a
corporation may also, under certain circumstances, be subject to an additional
"branch profits tax" at a 30% rate or such lower rate as may be specified by
an applicable income tax treaty.
To determine the applicability of an income tax treaty providing for a lower
rate of withholding tax, under current rules dividends paid to an address in a
foreign country generally are presumed (absent actual knowledge to the
contrary) to be paid to a resident of such country. Under recently finalized
United States Treasury regulations ("Final Regulations"), however, a Non-U.S.
Holder of Common Stock who wishes to claim the benefit of an applicable treaty
rate for dividends paid after December 31, 1999 would be required to satisfy
applicable certification and other requirements, which would include the
requirement that the Non-U.S. Holder files a form which contains the holder's
name and address or provides certain documentary evidence issued by foreign
governmental authorities to prove residence in the foreign country. Non-U.S.
Holders should consult their tax advisors concerning the effect of such Final
Regulations on an investment in the Common Stock.
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<PAGE>
A Non-U.S. Holder of Common Stock that is eligible for a reduced rate of
U.S. withholding tax pursuant to an income tax treaty may obtain a refund of
any amounts currently withheld in excess of such reduced rate by timely filing
an appropriate claim for a refund with the Internal Revenue Service ("IRS").
Sale, or Other Disposition of Common Stock
Except as described below and subject to the discussion concerning backup
withholding, any gain realized by a Non-U.S. Holder on the sale or other
disposition of Common Stock generally will not be subject to U.S. federal
income tax, unless (i) such gain is effectively connected with a trade or
business carried on by the Non-U.S. Holder in the United States or, where a
relevant income tax treaty applies, is attributable to a permanent
establishment in the United States maintained by the Non-U.S. Holder, (ii) the
Non-U.S. Holder is an individual who holds the Common Stock as a capital asset
and is present in the United States for 183 days or more in the taxable year
of the sale or other disposition and certain other conditions are met, (iii)
the Non-U.S. Holder is subject to tax pursuant to the provisions of U.S. tax
law applicable to certain U.S. expatriates (including certain former citizens
or residents of the United States), or (iv) in general, the Company is or has
been a "U.S. real property holding corporation" for U.S. federal income tax
purposes. The Company does not believe that it is currently a "United States
real property holding corporation," or that it will become one in the future.
Special rules may apply to certain Non-U.S. Holders, such as "controlled
foreign corporations", "passive foreign investment companies" and "foreign
personal holding companies", that are subject to special treatment under the
Code. Such entities should consult their own tax advisors to determine the
U.S. federal, state, local and other tax consequences that my be relevant to
them.
Federal Estate Tax
Common Stock owned or treated as owned by an individual Non-U.S. Holder at
the date of death will be included in such individual's gross estate for U.S.
federal estate tax purposes, unless an applicable estate tax treaty otherwise
applies.
Information Reporting and Backup Withholding
The Company must report annually to the IRS and to each Non-U.S. Holder the
amount of dividends paid to, and the tax withheld with respect to, each Non-
U.S. Holder. These reporting requirements apply regardless of whether
withholding was reduced or eliminated by an applicable income tax treaty.
Copies of these information returns may also be made available, under the
provisions of a specific treaty or agreement, to the tax authorities of the
country in which the Non-U.S. Holder resides.
Under current rules, U.S. backup withholding tax (which is generally imposed
at a 31% rate) generally will not apply to dividends paid on Common Stock to a
Non-U.S. Holder at an address outside of the U.S. (unless the payor has
knowledge that the payee is a U.S. person). Backup withholding and information
reporting generally will apply to dividends paid to a Non-U.S. Holder at an
address in the U.S., if such holder fails to establish an exemption or to
provide certain other information to the payor. Under the Final Regulations,
however, a Non-U.S. Holder that fails to certify its Non-U.S. Holder status in
accordance with the requirements of the Final Regulations may be subject to
U.S. backup withholding tax on payments of dividends. Non-U.S. Holders should
consult their tax advisors concerning the effect, if any, of such Final
Regulations on an investment in the Common Stock.
The payment of the proceeds from the sale or other disposition Common Stock
to or through the U.S. office of any broker, U.S. or foreign, will be subject
to information reporting and possible backup withholding unless the Non-U.S.
Holder certifies to the broker as to its Non-U.S. Holder status under
penalties of perjury or otherwise establishes an exemption, provided that the
broker does not have actual knowledge that the holder is a U.S. Holder or that
the conditions of any other exemption are not, in fact, satisfied. The payment
of the proceeds from the sale or other disposition of Common Stock to or
through a non-U.S. office of a non-U.S. broker that is
61
<PAGE>
not a U.S. related person will not be subject to information reporting or
backup withholding. For this purpose, a "U.S. related person" is (i) a
"controlled foreign corporation" for U.S. federal income tax purposes or (ii)
a foreign person 50% or more of whose gross income from all sources for the
three-year period ending with the close of its taxable year preceding the
payment (or for such part of the period that the broker has been in existence)
is derived from activities that are effectively connected with the conduct of
a U.S. trade or business.
In the case of the payment of proceeds from the disposition of the Common
Stock to or through a non-U.S. office of a broker that is either a U.S. person
or a U.S. related person, information reporting is required on the payment
unless the broker has documentary evidence in the files that the owner is a
Non-U.S. Holder and the broker has no knowledge to the contrary.
Any amounts withheld under the backup withholding rules from a payment to a
Non-U.S. Holder will be allowed as a refund or a credit against such Non-U.S.
Holder's U.S. federal income tax liability, provided that the requisite
procedures are followed.
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no market for the Common Stock of the
Company and there can be no assurance that a significant public market for the
Common Stock will develop or be sustained after this offering. As described
below, no shares currently outstanding will be available for sale immediately
after this offering (other than the shares sold in this offering) due to
certain contractual restrictions on resale. Sales of substantial amounts of
Common Stock of the Company in the public market after the restrictions lapse
or are waived could adversely affect the prevailing market price of the Common
Stock and the ability of the Company to raise equity capital in the future.
Upon completion of this offering, the Company will have outstanding
shares of Common Stock, assuming no exercise of the Managers' over-
allotment option and no exercise of outstanding options and warrants. Of these
shares, the shares sold in this offering will be freely tradable
without restriction under the Securities Act (unless purchased by "affiliates"
of the Company as that term is defined in Rule 501 under the Securities Act).
Of the remaining shares held by existing stockholders (the
"Restricted Shares"), shares will be subject to lock-up agreements
prohibiting their sale for specified periods after the date of this
Prospectus, as described below, and will be eligible for public sale pursuant
to Rule 144, Rule 701 or Regulation S under the Securities Act following the
expiration of these lock-up agreements. Of these Restricted Shares, an
aggregate of shares are held by "affiliates" of the Company and
accordingly will be subject to certain volume and other restrictions set forth
in Rule 144. The remaining Restricted Shares will not be subject to lock-
up agreements, and accordingly may be sold pursuant to Rule 144, Rule 701 or
Regulation S immediately upon the completion of this offering.
The Company's executive officers and directors, certain Selling Stockholders
and certain other Stockholders, holding an aggregate of Restricted Shares
after this offering, have agreed that, without the prior written consent of
Bank J. Vontobel & Co AG., they will not, for a period of 18 months following
the Initial Listing Date, directly or indirectly, offer to sell, grant any
option for the sale of, or otherwise dispose of, any shares of Common Stock or
any securities convertible into or exchangeable or exercisable for any such
shares; provided however that beginning 180 days after the Initial Listing
Date, each such executive officer, director or Selling Stockholder may sell or
otherwise dispose of up to 33 1/3% of the shares of Common Stock or other
securities beneficially owned by them on the Initial Listing Date; and
provided further that beginning 12 months after the Initial Listing Date, each
such executive officer, director or Selling Stockholder may sell or otherwise
dispose of up to 66 2/3% of the shares of Common Stock or other securities
beneficially owned by them. Certain other existing stockholders of the
Company, holding an aggregate of Restricted Shares, have agreed that they
will not, without the consent of Bank J. Vontobel & Co AG, for a period of 180
days following the Initial Listing Date, directly or indirectly, offer to
sell, grant any option for the sale of, or otherwise dispose of,
62
<PAGE>
any shares of Common Stock or any securities convertible into or exchangeable
or exercisable for any such shares.
In general, under Regulation S as currently in effect, a holder of
Restricted Shares may resell such shares on the Swiss Exchange, subject to
contractual lock-up agreements, certain restrictions on "directed selling
efforts" in the United States and transactions that have been pre-arranged
with a buyer in the United States and certain other conditions. In addition,
subject to such lock-up agreements, Restricted Shares may be resold on the
Swiss Exchange, in the United States or otherwise pursuant to Rule 144 or Rule
701 under the Securities Act.
Under Rule 144 as currently in effect, beginning 90 days after the date of
this Prospectus, a person (or persons whose shares are aggregated) who has
beneficially owned Restricted Shares for at least one year (including the
holding period of any prior owner except an affiliate) would be entitled to
sell within any three-month period a number of shares that does not exceed the
greater of: (i) 1% of the number of shares of Common Stock then outstanding
(which will equal approximately shares immediately after this
offering); or (ii) the average weekly trading volume of the Common Stock
during the four calendar weeks preceding the filing of a Form 144 with respect
to such sale. Sales under Rule 144 are also subject to certain manner of sale
provisions and notice requirements and to the availability of current public
information about the Company. Under Rule 144(k), a person who is not deemed
to have been an affiliate of the Company at any time during the 90 days
preceding a sale, and who has beneficially owned the shares proposed to be
sold for at least two years (including the holding period of any prior owner
except an affiliate), is entitled to sell such shares without complying with
the manner of sale, public information, volume limitation or notice provisions
of Rule 144. Rule 701 permits resales of certain shares, beginning 90 days
after the date of this Prospectus, in reliance upon Rule 144 but without
compliance with certain restrictions, including the holding period
requirement, of Rule 144. Any employee, officer or director of or consultant,
independent contractor or adviser to the Company who purchased his or her
shares pursuant to a written compensatory plan or contract may be entitled to
rely on the resale provisions of Rule 701.
Soon after the date of this Prospectus, the Company intends to file a
registration statement under the Securities Act registering shares of Common
Stock reserved for issuance under the Company's 1993 Incentive Plan, 1998
Incentive Plan, Directors Plan and Purchase Plan. Based on the number of
shares subject to outstanding options at March 31, 1998 and currently reserved
for issuance under all such plans, such registration statement would cover
approximately 3,150,450 shares. Such registration statement will automatically
become effective upon filing. Accordingly, shares registered under such
registration statement will, subject to Rule 144 volume limitations applicable
to affiliates of the Company, be available for sale in the open market
immediately after the expiration of applicable lock-up periods. Also, holders
of shares of Common Stock (after giving effect to this offering) are
entitled to certain rights with respect to registration of such shares of
Common Stock for offer and sale to the public. See "Description of Capital
Stock--Registration Rights."
63
<PAGE>
UNDERWRITING
The Managers named below (the "Managers"), acting through their global
coordinator, Bank J. Vontobel & Co AG (the "Global Coordinator"), have
severally agreed, subject to the terms and conditions of the Underwriting
Agreement (the "Underwriting Agreement") with the Company and the Selling
Stockholders to purchase from the Company and the Selling Stockholders the
number of shares of Common Stock set forth opposite their respective names
below.
<TABLE>
<CAPTION>
NUMBER
OF
UNDERWRITERS SHARES
------------ -------
<S> <C>
-------
Total.........................................................
=======
</TABLE>
In the Underwriting Agreement, the Managers have agreed, subject to the
terms and conditions set forth in the Underwriting Agreement, to purchase all
of the shares of Common Stock being sold pursuant to the Underwriting
Agreement if any of the shares of Common Stock being sold pursuant to the
Underwriting Agreement are purchased.
Certain of the Selling Stockholders have granted the Managers an option,
exercisable for 30 days after the date of this Prospectus, to purchase up to
an additional shares of Common Stock to cover over-allotments, if any, at
the public offering price, less the underwriting discount. To the extent that
the Managers exercise such option, each of the Managers will have a firm
commitment, subject to certain conditions, to purchase approximately the same
percentage of the option shares that the number of shares to be purchased
initially by that Manager is of the number of shares of Common Stock initially
purchased by the Managers.
The Global Coordinator has advised the Company and the Selling Stockholders
that the Managers propose to offer the shares of Common Stock to the public
initially at the public offering price set forth on the cover page of this
Prospectus, and to certain dealers at such price less a concession not in
excess of CHF per share. The Managers may allow, and such dealers may
reallow, a discount not in excess of CHF per share on sales to certain
other dealers. After the public offering of the Common Stock, the public
offering price, concession and discount may be changed.
Of the shares of Common Stock being offered, shares are
initially being offered in the International Offering in Switzerland and
elsewhere outside the United States and shares are initially being
concurrently offered in the U.S. Offering in the United States. The final
allocation of Common Stock between the International Offering and the U.S.
Offering may differ from these amounts. This Prospectus is intended for use
only in connection with offers and sales of Common Stock in the U.S. Offering
and any shares initially offered in the International Offering that are
thereafter sold or resold in the United States by underwriters or, for a
period of 90 days after the date of this Prospectus, dealers (as such terms
are defined in the Securities Act). The initial offers and sales of Common
Stock in the International Offering are not being registered under the
Securities Act, and this Prospectus is not to be sent or given to any person
outside of the United States. As used
64
<PAGE>
herein, "United States" means the United States of America (including the
States and the District of Columbia), its territories, possessions and other
areas subject to its jurisdiction, and an offer or sale shall be deemed made
in the United States if it is made to (i) any individual resident in the
United States or (ii) any corporation, partnership, pension, profit-sharing or
other trust or other entity (including any such entity acting as an investment
adviser with discretionary authority) whose office most directly involved with
the purchase is located in the United States.
Application has been made to have the Common Stock approved for quotation on
the Swiss Exchange under the symbol CEN. It is currently anticipated that the
Company's Common Stock will not be listed or quoted on any United States
exchange or quotation system, and accordingly it is not anticipated that there
will be an active market for the Company's Common Stock other than the Swiss
Exchange. It is expected that the Common Stock will be listed on the Swiss
Exchange, and that dealings in the Common Stock will commence, on or about
, 1998.
Each Manager has severally agreed that (i) it has not offered or sold, and
will not for a period of six months following consummation of the Offering
offer or sell, in the United Kingdom by means of any document, any shares of
Common Stock offered hereby, other than to person whose ordinary activities
involve them in acquiring, holding, managing or disposing of investments (as
principal or agent) for the purposes of their businesses or otherwise in
circumstances than do not constitute an offer to the public within the meaning
of the Public Offers of Securities Regulations 1995, (ii) it has complied with
and will comply with all applicable provisions of the Financial Services Act
1986 with respect to anything done by it in relation to the shares of Common
Stock in, from, or otherwise involving the United Kingdom and (iii) it has
only issued or passed on and will only issue or pass on to any person in the
United Kingdom any document received by it in connection with the issue of the
shares of Common Stock if that person is of a kind described in Article 11(3)
of the Financial Services Act 1986 (Investment Advertisements) (Exemptions)
Order 1995, as amended, or is a person to whom the document may otherwise
lawfully be issued or passed on.
The Company and the Selling Stockholders have agreed to indemnify the
Managers against certain liabilities which may be incurred in connection with
the offering of the Common Stock and the exercise of the over-allotment
options, including liabilities under the 1993 Act and other applicable
securities laws.
The Managers have informed the Company that they do not expect to confirm
sales of Common Stock offered hereby to any accounts over which they exercise
discretionary authority.
Prior to this offering, there has been no public market for the Common
Stock. Accordingly, the initial public offering price for the shares will be
determined by negotiation among the Company and the Global Coordinator. In
determining such price, consideration will be given to various factors,
including market conditions for initial public offerings, the history of and
prospects for the Company's business, the Company's past and present
operations, the present state of the Company's development, certain financial
information of the Company, an assessment of the Company's management, the
market for securities of companies in businesses similar to those of the
Company, the general condition of the securities markets and other factors
deemed relevant. There can be no assurance that the initial public offering
price will correspond to the price at which the Common Stock will trade in the
public market subsequent to the offering or that an active trading market for
the Common Stock will develop and continue after the offering.
Bank J. Vontobel & Co AG, on behalf of the Managers, may engage in over-
allotment, stabilizing transactions, syndicate covering transactions and
penalty bids. Over-allotment involves syndicate sales in excess of the
offering size, which creates a syndicate short position. Stabilizing
transactions permit bids to purchase the underlying security so long as the
stabilizing bids do not exceed a specified maximum. Syndicate covering
transactions involve purchases of the Common Stock in the open market after
the distribution has been completed in order to cover syndicate short
positions. Penalty bids permit the Managers to reclaim a selling concession
from a syndicate member when the Common Stock originally sold by such
syndicate member is purchased in a syndicate covering transaction to cover
syndicate short positions. Such stabilizing transactions, syndicate
65
<PAGE>
covering transactions and penalty bids may cause the price of the Common Stock
to be higher than it would otherwise be in the absence of such transactions.
These transactions may be effected on the Swiss Exchange or otherwise and, if
commenced, may be discontinued at any time.
Without the consent of Bank J. Vontobel & Co AG, the Company's executive
officers and directors, certain Selling Stockholders and certain other
stockholders have agreed that they will not, for a period of 18 months
following the Initial Listing Date, directly or indirectly, offer to sell,
grant any option for the sale of, or otherwise dispose of, any shares of
Common Stock or any securities convertible into or exchangeable or exercisable
for any such shares; provided however that beginning 180 days after the
Initial Listing Date, each such executive officer, director or Selling
Stockholder may sell or otherwise dispose of up to 33 1/3% of the shares of
Common Stock or other securities beneficially owned by them on the Initial
Listing Date; and provided further that beginning 12 months after the Initial
Listing Date, each such executive officer, director or Selling Stockholder may
sell or otherwise dispose of up to 66 2/3% of the shares of Common Stock or
other securities beneficially owned by them on the Initial Listing Date.
Certain other existing stockholders of the Company have agreed that they will
not, without the consent of Bank J. Vontobel & Co AG, for a period of 180 days
following the date of this Prospectus, directly or indirectly, offer to sell,
grant any option for the sale of, or otherwise dispose of, any shares of
Common Stock or any securities convertible into or exchangeable or exercisable
for any such shares.
The Company has agreed in the Purchase Agreement to not issue any of its
authorized but unissued shares of Common Stock or preferred stock for a period
of three years after the date of this Prospectus, other than (i) pursuant to
the exercise of currently outstanding options and warrants and conversion of
currently outstanding convertible securities, (ii) pursuant to the exercise of
options granted, or the purchase of shares, under the Company's 1998 Incentive
Plan, Directors Plan or Purchase Plan, (iii) in connection with any
acquisition of a company, technology or product, or any research, development,
manufacturing or marketing collaboration, or any other transaction where the
primary consideration for the issuance of the shares is other than cash, or
(iv) up to 100,000 shares for miscellaneous purposes, unless (a) the issuance
is approved by Bank J. Vontobel & Co AG, such approval not to be unreasonably
withheld, (b) the issuance is approved by a majority of the Company's
shareholders present, in person or by proxy, at a shareholder meeting at which
a quorum is present, or by the written consent of holders of a majority of the
Company's outstanding Common Stock, (c) the Company's Common Stock is then
listed, or designated for listing on notice of issuance, on the Nasdaq
National Market or the New York Stock Exchange, or (d) the Company's
shareholders are provided with the right to purchase their pro rata share of
the issuance.
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<PAGE>
LEGAL MATTERS
The validity of the issuance of the shares of Common Stock offered hereby
will be passed upon for the Company by Fenwick & West LLP, Palo Alto,
California. Certain Swiss legal matters in connection with this offering will
be passed upon for the Company by Lenz & Staehelin, Zurich, Switzerland.
Certain legal matters in connection with this offering will be passed upon for
the Managers by Shearman & Sterling, Frankfurt, Germany. A general
partnership, of which certain members of the firm of Fenwick & West LLP are
partners, owns an aggregate of 50,000 shares of Common Stock of the Company.
EXPERTS
The financial statements of Centaur Pharmaceuticals, Inc. as of December 31,
1995, 1996, and 1997 and for each of the three years in the period ended
December 31, 1997, appearing in this prospectus and Registration Statement
have been audited by Ernst & Young LLP, independent auditors, as set forth in
their report thereon appearing elsewhere herein, and are included in reliance
upon such report given upon the authority of such firm as experts in
accounting and auditing.
ADDITIONAL INFORMATION
The Company has filed with the U.S. Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-1 under the Securities Act
with respect to the shares of Common Stock offered hereby. This Prospectus
does not contain all of the information set forth in the Registration
Statement and the exhibits thereto. For further information with respect to
the Company and the Common Stock offered hereby, reference is made to the
Registration Statement and the exhibits thereto. Statements contained in this
Prospectus regarding the contents of any contract or any other document to
which reference is made are not necessarily complete, and, in each instance,
reference is made to the copy of such contract or other document filed as an
exhibit to the Registration Statement, each such statement being qualified in
all respects by such reference. A copy of the Registration Statement and the
exhibits thereto may be inspected without charge at the offices of the
Commission at Judiciary Plaza, 450 Fifth Street, Washington, D.C. 20549, and
copies of all or any part of the Registration Statement may be obtained from
the Public Reference Section of the Commission, Washington, D.C. 20549 upon
the payment of the fees prescribed by the Commission. The Commission maintains
a Web site (http://www.sec.gov) that contains reports, proxy and information
statements and other information regarding registrants, such as the Company,
that file electronically with the Commission.
The Company intends to furnish the Swiss Exchange with copies of periodic
reports and other documents filed by it with the Commission, including annual
reports containing audited financial statements and a report thereon by its
independent auditors, and interim reports containing unaudited financial
information. Such audited financial statements and unaudited interim financial
information will be prepared in accordance with United States generally
accepted accounting principles. In addition, notices required under the
listing rules of the Swiss Exchange will be published in the Swiss Federal
Commercial Gazette (Schweizerisches Handelsamitsblatt) and the Neue Zurcher
Zeitung, including notices of meetings of stockholders.
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<PAGE>
CENTAUR PHARMACEUTICALS, INC.
FINANCIAL STATEMENTS
EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1997
WITH REPORT OF INDEPENDENT AUDITORS
CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Ernst & Young LLP, Independent Auditors......................... F-2
Financial Statements
Balance Sheets.......................................................... F-3
Statements of Operations................................................ F-4
Statement of Stockholders' Equity....................................... F-5
Statements of Cash Flows................................................ F-6
Notes to Financial Statements........................................... F-7
</TABLE>
F-1
<PAGE>
ERNST & YOUNG LLP
1451 California Avenue
Palo Alto, California U.S.A. 94304
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Centaur Pharmaceuticals, Inc.
We have audited the accompanying balance sheets of Centaur Pharmaceuticals,
Inc. as of December 31, 1995, 1996 and 1997, and the related statements of
operations, stockholders' equity, and cash flows for each of the three years
in the period ended December 31, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards of the United States of America. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Centaur Pharmaceuticals,
Inc. at December 31, 1995, 1996 and 1997, and the results of its operations
and its cash flows for each of the three years in the period ended December
31, 1997 in conformity with generally accepted accounting principles of the
United States of America.
/s/ Ernst & Young LLP
Palo Alto, California, U.S.A.
April 28, 1998, except for Note 9 as to which the date is
June 15, 1998
F-2
<PAGE>
CENTAUR PHARMACEUTICALS, INC.
BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA
STOCKHOLDERS'
DECEMBER 31, EQUITY AT
------------------------- MARCH 31, MARCH 31,
ASSETS 1995 1996 1997 1998 1998 (Note 9)
------ ------- ------- ------- --------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents. $ 2,801 $ 5,699 $ 1,469 $ 4,096
Short-term investments.... 5,898 5,267 12,164 6,572
Contract revenue
receivable............... 832 976 84 416
Prepaid expenses.......... 115 31 343 207
Other current assets...... 180 217 329 451
------- ------- ------- -------
Total current assets.... 9,826 12,190 14,389 11,742
Property and equipment, net. 1,158 3,140 9,635 10,787
Other assets, net of
accumulated amortization of
$13, $34 and $47 as of
December 31, 1995, 1996 and
1997, respectively, and $52
as of March 31, 1998....... 74 77 219 440
------- ------- ------- -------
$11,058 $15,407 $24,243 $22,969
======= ======= ======= =======
<CAPTION>
LIABILITIES AND
STOCKHOLDERS' EQUITY
--------------------
<S> <C> <C> <C> <C> <C>
Current liabilities:
Accounts payable.......... $ 354 $ 375 $ 1,675 $ 573
Accrued compensation...... 58 99 169 204
Other accrued liabilities. 1,103 1,364 1,062 1,163
Short-term portion of
obligations under capital
lease.................... 112 118 183 147
------- ------- ------- -------
Total current
liabilities............ 1,627 1,956 3,089 2,087
Deferred revenue............ 586 5,102 1,197 1,864
Long-term portion of
obligations under capital
lease...................... 343 210 -- --
Commitments and
contingencies
Redeemable convertible
preferred stock, $0.001 par
value; 10,922,735 shares
authorized; issuable in
series; 8,722,735 shares
issued and outstanding at
December 31, 1995 and 1996
and 10,922,735 shares
issued and outstanding at
December 31, 1997 and March
31, 1998, aggregate
redemption value of
$11,810,242 at December 31,
1995 and 1996 and
$28,310,242 at December 31,
1997 and March 31, 1998
(pro forma at March 31,
1998: none issued and
outstanding)............... 11,698 11,698 28,105 28,105 $ --
Stockholders' equity:
Preferred stock, $0.001
par value, none
authorized, issued and
outstanding at December
31, 1995, 1996, 1997 and
March 31, 1998 (pro forma
at March 31, 1998:
3,000,000 shares
authorized, none issued
and outstanding)......... -- -- -- -- --
Common stock, $0.001 par
value; 18,200,000 shares
authorized; 2,403,103,
2,649,303 and 2,901,336
shares issued and
outstanding at December
31, 1995, 1996 and 1997,
respectively, and
2,902,190 shares issued
and outstanding at March
31, 1998 (pro forma at
March 31, 1998:
33,000,000 shares
authorized, 13,824,925
shares issued and
outstanding)............. 2 3 3 3 14
Additional paid-in
capital.................. 29 114 757 1,875 29,969
Deferred compensation..... -- (42) (545) (1,572) (1,572)
Accumulated other
comprehensive income..... 37 (1) 1 1 1
Accumulated deficit....... (3,264) (3,633) (8,364) (9,394) (9,394)
------- ------- ------- ------- -------
Total stockholders'
equity (net capital
deficiency)............ (3,196) (3,559) (8,148) (9,087) $19,018
------- ------- ------- ------- -------
$11,058 $15,407 $24,243 $22,969
======= ======= ======= =======
</TABLE>
F-3
<PAGE>
CENTAUR PHARMACEUTICALS, INC.
STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
----------------------------------- ----------------------
1995 1996 1997 1997 1998
----------- ---------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net revenue from
collaborative
agreements and grants.. $ 7,875 $ 9,429 $ 11,774 $ 3,570 $ 2,937
Operating expenses:
Research and
development.......... 5,490 7,854 15,446 3,347 3,481
General and
administrative....... 1,385 2,306 2,166 592 660
----------- ---------- ---------- ---------- ----------
Total operating
expenses............... 6,875 10,160 17,612 3,939 4,141
----------- ---------- ---------- ---------- ----------
Income (loss) from
operations............. 1,000 (731) (5,838) (369) (1,204)
Interest and other
income................. 565 438 1,145 200 180
Interest and other
expense................ (74) (76) (38) (13) (6)
----------- ---------- ---------- ---------- ----------
Net income (loss)....... $ 1,491 $ (369) $ (4,731) $ (182) $ (1,030)
=========== ========== ========== ========== ==========
Net income (loss) per
share:
Basic................. $ 0.62 $ (0.14) $ (1.73) $ (0.07) $ (0.35)
Diluted............... $ 0.13 $ (0.14) $ (1.73) $ (0.07) $ (0.35)
Shares used in computing
net income (loss) per
share:
Basic................. 2,403,062 2,551,003 2,742,431 2,698,204 2,901,336
Diluted............... 11,602,067 2,551,003 2,742,431 2,698,204 2,901,336
Pro forma net loss per
share, basic and
diluted................ $ (0.36) $ (0.07)
Shares used in computing
pro forma net loss per
share, basic and
diluted................ 13,243,111 13,824,071
</TABLE>
F-4
<PAGE>
CENTAUR PHARMACEUTICALS, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
ACCUMULATED TOTAL
COMMON STOCK ADDITIONAL DEFERRED OTHER STOCK-
---------------- PAID-IN COMPEN- COMPREHENSIVE ACCUMULATED HOLDERS'
SHARES AMOUNT CAPITAL SATION INCOME DEFICIT EQUITY
--------- ------ ---------- -------- ------------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1994 (unaudited)....... 2,401,749 $ 2 $ 28 $ -- $-- $(4,755) $(4,725)
Unrealized gain on
available-for-sale
securities of $37...... -- -- -- -- 37 -- 37
Net income for the year
ended December 31,
1995................... -- -- -- -- -- 1,491 1,491
-------
Comprehensive income.... 1,528
-------
Issuance of common stock
on exercise of stock
options by former
employees.............. 1,354 -- 1 -- -- -- 1
--------- --- ------ ------- ---- ------- -------
Balance at December 31,
1995................... 2,403,103 2 29 -- 37 (3,264) (3,196)
Unrealized loss on
available-for-sale
securities of $13, net
of reclassification
adjustment for gains
included in net income
of $25................. -- -- -- -- (38) -- (38)
Net loss for the year
ended December 31,
1996................... -- -- -- -- -- (369) (369)
-------
Comprehensive loss...... (407)
-------
Issuance of common stock
on exercise of stock
options by employees,
former employees and a
board of directors
member................. 243,470 1 34 -- -- -- 35
Issuance of common stock
for services rendered.. 2,730 -- 1 -- -- -- 1
Deferred compensation
related to certain
options granted to
employees and
consultants............ -- -- 50 (50) -- -- --
Amortization of deferred
compensation........... -- -- -- 8 -- -- 8
--------- --- ------ ------- ---- ------- -------
Balance at December 31,
1996................... 2,649,303 3 114 (42) (1) (3,633) (3,559)
Unrealized gain on
available-for-sale
securities of $1, net
of reclassification
adjustment for gains
included in net income
of $1.................. -- -- -- -- 2 -- 2
Net loss for the year
ended December 31,
1997................... -- -- -- -- -- (4,731) (4,731)
-------
Comprehensive loss...... (4,729)
-------
Issuance of common stock
on exercise of stock
options by employees,
former employees and a
board of directors
member................. 252,033 -- 50 -- -- -- 50
Deferred compensation
related to certain
options and warrants
granted to employees
and consultants -- -- 593 (593) -- -- --
Amortization of deferred
compensation........... -- -- -- 90 -- -- 90
--------- --- ------ ------- ---- ------- -------
Balance at December 31,
1997................... 2,901,336 3 757 (545) 1 (8,364) (8,148)
Net loss for the period
ended March 31, 1998
(unaudited)............ -- -- -- -- -- (1,030) (1,030)
-------
Comprehensive loss
(unaudited)............ -- -- -- -- -- -- (1,030)
-------
Issuance of common stock
on exercise of stock
options (unaudited).... 854 -- 2 -- -- -- 2
Deferred compensation
related to certain
options and warrants
granted to employees
and consultants
(unaudited)............ -- -- 1,116 (1,116) -- -- --
Amortization of deferred
compensation
(unaudited)............ -- -- -- 89 -- -- 89
--------- --- ------ ------- ---- ------- -------
Balance at March 31,
1998 (unaudited)....... 2,902,190 $ 3 $1,875 $(1,572) $ 1 $(9,394) $(9,087)
========= === ====== ======= ==== ======= =======
</TABLE>
F-5
<PAGE>
CENTAUR PHARMACEUTICALS, INC.
STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS
YEARS ENDED DECEMBER 31, ENDED MARCH 31,
-------------------------- -----------------
1995 1996 1997 1997 1998
------ -------- -------- -------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss).............. $1,491 $ (369) $ (4,731) $ (182) $(1,030)
Adjustments to reconcile net
loss to net cash provided by
(used in) operating
activities:
Depreciation and amortization.. 296 724 1,060 212 303
Amortization of deferred
compensation.................. -- 8 90 12 89
Changes in assets and
liabilities:
Contract revenue receivable,
net of allowance.............. (832) (144) 892 204 (332)
Prepaid expenses and other
current assets................ (167) 47 (424) (114) 14
Other assets................... (9) (15) (154) (18) (225)
Accounts payable............... 57 21 1,300 76 (1,102)
Accrued compensation........... 24 41 70 35 35
Other accrued liabilities...... 1,082 261 (302) 159 70
Deferred revenue............... 586 4,516 (3,905) (367) 667
Long-term liabilities.......... (78) 6 (69) -- --
------ -------- -------- -------- -------
Net cash provided by (used in)
operating activities.......... 2,450 5,096 (6,173) 17 (1,511)
------ -------- -------- -------- -------
INVESTING ACTIVITIES
Purchase of property and
equipment..................... (706) (2,731) (7,542) (184) (1,451)
Purchase of available-for-sale
securities.................... (8,916) (12,403) (34,219) (12,605) --
Maturity and sale of available-
for-sale securities........... 3,018 13,034 27,322 2,277 5,592
------ -------- -------- -------- -------
Net cash (used in) provided by
investing activities.......... (6,604) (2,100) (14,439) (10,512) 4,141
------ -------- -------- -------- -------
FINANCING ACTIVITIES
Proceeds from issuances of
common stock.................. -- 36 50 15 2
Net proceeds from issuance of
preferred stock............... -- -- 16,407 8,916 --
Principal payments on asset
financing arrangements........ (133) (134) (75) (33) (5)
------ -------- -------- -------- -------
Net cash (used in) provided by
financing activities.......... (133) (98) 16,382 8,898 (3)
------ -------- -------- -------- -------
Net (decrease) increase in cash
and cash equivalents.......... (4,287) 2,898 (4,230) (1,597) 2,627
Cash and cash equivalents at
beginning of period........... 7,088 2,801 5,699 5,699 1,469
------ -------- -------- -------- -------
Cash and cash equivalents at
end of period................. $2,801 $ 5,699 $ 1,469 $ 4,102 $ 4,096
====== ======== ======== ======== =======
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION
Interest paid.................. $ 74 $ 59 $ 38 $ 12 $ 7
====== ======== ======== ======== =======
Income taxes paid.............. $ -- $ 56 $ 254 $ 5 $ --
====== ======== ======== ======== =======
</TABLE>
F-6
<PAGE>
CENTAUR PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
(INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1998 IS UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Basis of Presentation
Centaur Pharmaceuticals, Inc. (the "Company") was incorporated in the State
of Delaware on March 17, 1992. The Company was founded to commercialize
proprietary pharmaceutical technology with broad potential applications in
neurodegenerative diseases and other disorders.
The financial statements have been prepared in accordance with generally
accepted accounting principles of the United States of America ("U.S.") and
are stated in U.S. dollars ("$"). The Company currently holds a 67% interest
in Cutanix Corporation, which was incorporated on October 24, 1997, with an
investment basis of $0 at December 31, 1997 and March 31, 1998. At March 31,
1998, the Company had a remaining funding commitment of $85,000. The Company's
control is considered temporary as additional equity financings of Cutanix
Corporation, anticipated to be completed within one year, are expected to
reduce the Company's interest below 50%. Accordingly, the assets, liabilities
and results of operations of Cutanix Corporation have not been consolidated in
these financial statements.
The Company changed its fiscal year end from June 30 to December 31,
effective December 31, 1997. The accompanying financial statements
retroactively reflect this change in year end.
Interim Financial Information
The financial information at March 31, 1998 and for the three months ended
March 31, 1997 and 1998 is unaudited but, in the opinion of management, has
been prepared on the same basis as the annual financial statements and
includes all adjustments (consisting only of normal recurring adjustments)
that the Company considers necessary for a fair presentation of the financial
position at such date and the operating results and cash flows for such
periods. Results for the interim period are not necessarily indicative of the
results to be expected for any subsequent three-month period nor for the
entire year.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Cash and Cash Equivalents
The Company considers all highly liquid investments with remaining
maturities of three months or less at the date of purchase to be cash
equivalents. Investments with maturities of less than one year from the
balance sheet date and with remaining maturities greater than three months at
the date of purchase are considered short-term investments. At December 31,
1995, 1996 and 1997 and March 31, 1998, cash equivalents consisted of money
market accounts.
The Company invests its excess cash balances in marketable securities with
maturities of two years or less. These investments primarily consist of
corporate debt securities.
Management determines the appropriate classification of debt securities in
accordance with Statement of Financial Accounting Standard No. 115,
"Accounting for Certain Investments in Debt and Equity Securities," at the
time of purchase and reevaluates such designation as of each balance sheet
date. During 1995, 1996 and 1997, all investments were classified as
available-for-sale securities and are carried at fair value, with the
unrealized gains and losses reported as a component of accumulated other
comprehensive income in
F-7
<PAGE>
CENTAUR PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1998 IS UNAUDITED)
stockholders' equity. At December 31, 1995, 1996 and 1997 and March 31, 1998,
the fair value of investments approximates cost. The amortized cost of debt
securities in this category is adjusted for amortization of premiums and
accretion of discounts to maturity. Such amortization is included in interest
income. Realized gains and losses and declines in value judged to be other-
than-temporary on available-for-sale securities are included in interest
income or expense and have been immaterial in all periods presented. The cost
of securities sold is based on the specific identification method. Interest
and dividends on securities classified as available-for-sale are included in
interest.
Concentrations of Credit Risk
Cash, cash equivalents and short-term investments are financial instruments
which potentially subject the Company to concentrations of risk. Company
policy limits, among other things, the amount of credit exposure to any one
issuer and to any one type of investment, other than securities issued or
guaranteed by the U.S. government.
The net revenue from collaborative agreements and the related contract
revenue receivable at December 31, 1995, 1996 and 1997 and March 31, 1998 are
earned primarily under two collaborative arrangements the Company has entered
into. One of these collaborations was terminated in March 1998. The Company
has no collateral as security for these receivables.
Revenue Recognition
Revenue under research collaborations is recorded as earned based on the
performance requirements of the contracts. Nonrefundable signing payments
related to precontract performance by the Company are recognized as revenue
when received. Nonrefundable signing and contract milestone payments which
management has determined are related to future contract costs are deferred
and recognized as revenue as progress is made toward the next anticipated
milestone. Deferred revenue includes the portion of payments received under
research and development collaborations which have been deferred and will be
recognized over an estimated period in relation to efforts expended under the
agreement. The total expected effort under each contract is estimated by
management and updated periodically in light of current conditions and
expected development timelines.
Stock-Based Compensation
As permitted by Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" ("SFAS 123"), the Company has
elected to continue to account for stock issued or options granted to
employees under its 1993 Equity Incentive Stock Option Plan in accordance with
the provisions of Accounting Principles Board No. 25, "Accounting for Stock
Issued to Employees" ("APB 25") and related interpretations. For issuances or
grants to all others, stock-based compensation expense is measured using the
fair value method described in SFAS 123 and recorded in the accompanying
financial statements. Pro forma disclosures as required by SFAS 123 are
included in Note 7.
Property and Equipment
Property and equipment is stated at cost. Depreciation is calculated using
the straight-line method over the five year estimated useful lives of the
assets. Equipment held under capital leases is amortized using the straight-
line method over the shorter of the lease term or estimated useful life of the
asset. Leasehold improvements are amortized using the straight-line method
over the estimated useful lives of the assets or the term of the lease,
whichever is shorter.
F-8
<PAGE>
CENTAUR PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1998 IS UNAUDITED)
Income (Loss) Per Share
In December 1997, the Company adopted the provisions of Statement of
Financial Accounting Standards No. 128, "Earnings Per Share" ("SFAS 128").
Under the provisions of SFAS 128, basic earnings per share is calculated based
on the weighted-average number of common shares outstanding during the period.
Diluted earnings per share gives effect to the dilutive effect of common stock
equivalents consisting of stock options and warrants (calculated using the
treasury stock method and the proposed price per share to the public).
A reconciliation of shares used in the calculation is as follows:
<TABLE>
<CAPTION>
YEARS ENDED THREE MONTHS ENDED
DECEMBER 31, MARCH 31,
------------------------------- --------------------
1995 1996 1997 1997 1998
---------- --------- ---------- --------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Basic:
Weighted-average
shares outstanding... 2,403,062 2,551,003 2,742,431 2,698,204 2,901,336
Diluted:
Dilutive effect of
stock options and
warrants............. 476,270 -- -- -- --
Dilutive effect of
redeemable
convertible preferred
stock................ 8,722,735 -- -- -- --
---------- --------- ---------- --------- ----------
11,602,067 2,551,003 2,742,431 2,698,204 2,901,336
========== ========= =========
Pro forma basic and
diluted:
Automatic conversion of
redeemable convertible
preferred stock........ 10,500,680 10,922,735
---------- ----------
13,243,111 13,824,071
========== ==========
</TABLE>
Options and warrants to purchase 1,389,699, 1,584,040, 1,533,409 and
1,845,480 shares of the Company's common stock at December 31, 1996 and 1997
and March 31, 1997 and 1998, respectively, as well as 8,722,735, 10,922,735,
10,513,429 and 10,922,735 shares of the Company's common stock issuable upon
conversion of the redeemable convertible preferred stock at December 31, 1996
and 1997 and March 31, 1997 and 1998, were excluded from the computation of
diluted net loss per share as they had an antidilutive effect.
The computation of pro forma net loss per share includes shares issuable
upon the automatic conversion of outstanding shares of redeemable convertible
preferred stock (using the as-if converted method) upon closing of the
proposed initial public offering described in Note 9.
Recent Accounting Pronouncements
As of January 1, 1998, the Company adopted the Financial Accounting
Standards Board's Statement of Financial Accounting Standards No. 130,
"Reporting Comprehensive Income" ("SFAS 130"). SFAS 130 establishes new rules
for the reporting and display of comprehensive income and its components;
however, the adoption of this Statement had no impact on the Company's results
of operations or financial condition. SFAS 130 requires unrealized gains or
losses on the Company's available-for-sale securities and foreign currency
translation adjustments, which prior to adoption were reported separately in
stockholders' equity, to be included in other comprehensive income. Prior year
financial statements have been reclassified to conform to the requirements of
SFAS 130. During the three months ended March 31, 1998 and 1997, total
comprehensive loss amounted to $1,030,000 and $182,000, respectively.
F-9
<PAGE>
CENTAUR PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1998 IS UNAUDITED)
Effective January 1, 1998, the Company adopted the Financial Accounting
Standards Board's Statement of Financial Accounting Standards No. 131,
"Disclosures About Segments of an Enterprise and Related Information" ("SFAS
131"). SFAS 131 superseded SFAS 14, "Financial Reporting for Segments of a
Business Enterprise." SFAS 131 establishes standards for the way that public
business enterprises report selected information about operating segments in
interim financial reports. SFAS 131 also establishes standards for related
disclosures about products and services, geographic areas and major customers.
The adoption of SFAS 131 had no impact on the Company's results of operations,
financial position or disclosure of segment information at March 31, 1998.
2. RESEARCH AND DEVELOPMENT ARRANGEMENTS
In June 1995, the Company entered into a research and development
collaboration with Astra AB ("Astra") to develop new drugs to treat
Alzheimer's disease, stroke, traumatic brain injury and multi-infarct
dementia. Astra paid an initial amount of $4,000,000 in 1995 as a
reimbursement for research performed by the Company prior to the
collaboration. Also, under the terms of the agreement, Astra provides funding
of up to $6,000,000 per year for five years for research and development work,
subject to certain limitations and for Astra to bear the costs of its
development work. In addition, payments are made to the Company based on
achievement of certain drug development milestones. In return, Astra was
granted exclusive worldwide marketing rights to any products resulting from
this collaboration. The agreement also provides for the Company to receive a
royalty on sales under the collaboration. During the years ended December 31,
1995, 1996 and 1997 and the three months ended March 31, 1997 and 1998, the
Company recognized net revenue of $7,573,000, $7,634,000, $7,269,000,
$2,328,000 and $2,136,000, respectively, in connection with this
collaboration. Costs associated with this contract, including allocated
general and administrative costs, approximate the revenue recorded. This
agreement expires on the later of 15 years after the first commercial sale of
a licensed product or the expiration of applicable patents. Astra has the
right to terminate all or certain portions of this agreement upon 12 month's
notice.
In October 1996, the Company entered into a four-year research and
development collaboration with H. Lundbeck A/S ("Lundbeck") to jointly
commercialize the Company's proprietary drug compound for Parkinson's disease.
This collaboration was terminated in March 1998 (see Note 9). Under the terms
of this agreement, Lundbeck jointly funded research, development, regulatory,
and other nonresearch activities with the Company. In addition, nonrefundable
payments were made to the Company based on achievement of certain drug
development milestones. The agreement provided for the Company to receive a
royalty on sales and a profit on manufacturing for products developed under
the collaboration. During the years ended December 31, 1996 and 1997, the
Company recognized net revenue of $1,093,000 and $4,134,000, respectively, in
connection with this collaboration. During the three months ended March 31,
1997 and 1998, the Company recognized net revenue of $997,000 and $693,000,
respectively, in connection with this collaboration. Costs associated with
this contract including allocated general and administrative costs approximate
the revenue recorded.
During the years ended December 31, 1995, 1996 and 1997, the Company was
awarded several National Institutes of Health grants to further its research
efforts related to its proprietary technology. In 1997, $364,000 was
recognized as revenue under completed grants. Costs associated with these
grants approximate the revenues recorded.
Contract revenue receivable is net of allowances for doubtful accounts of
$1,600,000 and $1,700,000 at December 31, 1997 and March 31, 1998,
respectively (none at December 31, 1995 and 1996).
F-10
<PAGE>
CENTAUR PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1998 IS UNAUDITED)
3. INVESTMENTS
The following is a summary of available-for-sale securities at December 31,
1995, 1996 and 1997 (in thousands):
<TABLE>
<CAPTION>
GROSS GROSS ESTIMATED
UNREALIZED UNREALIZED FAIR
COST LOSSES GAINS VALUE
------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
U.S. corporate securities........ $ 5,861 $-- $ 37 $ 5,898
------- ---- ---- -------
Total as of December 31,
1995........................ $ 5,861 $-- $ 37 $ 5,898
======= ==== ==== =======
U.S. corporate securities........ $ 5,268 $ (3) $ 2 $ 5,267
------- ---- ---- -------
Total as of December 31,
1996........................ $ 5,268 $ (3) $ 2 $ 5,267
======= ==== ==== =======
U.S. corporate securities........ $11,163 $ (2) $ 3 $11,164
U.S. government securities....... 1,000 $-- $-- $ 1,000
------- ---- ---- -------
Total as of December 31,
1997........................ $12,163 $ (2) $ 3 $12,164
======= ==== ==== =======
U.S. corporate securities
(unaudited)..................... $ 6,571 $-- $ 1 $ 6,572
------- ---- ---- -------
Total as of March 31, 1998
(unaudited)................. $ 6,571 $-- $ 1 $ 6,572
======= ==== ==== =======
</TABLE>
All of the above securities are included in the balance sheet as short-term
investments at December 31, 1995, 1996 and 1997 and March 31, 1998.
There were no material gross realized gains or losses in 1995, 1996 and 1997
or for the three months ended March 31, 1998.
As of December 31, 1995, 1996 and 1997 and March 31, 1998, the average
remaining maturity of the portfolio was approximately five months, and no
individual contractual maturity exceeds one year.
4. PROPERTY AND EQUIPMENT
Property and equipment consists of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------ MARCH 31,
1995 1996 1997 1998
------ ------- ------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Laboratory and office equipment.... $1,314 $ 3,199 $ 4,430 $ 4,602
Leasehold improvements............. 287 1,096 1,065 1,113
Construction in-process............ -- -- 6,342 7,573
------ ------- ------- -------
1,601 4,295 11,837 13,288
Less accumulated depreciation and
amortization...................... (443) (1,155) (2,202) (2,501)
------ ------- ------- -------
Property and equipment, net........ $1,158 $ 3,140 $ 9,635 $10,787
====== ======= ======= =======
</TABLE>
As of December 31, 1995, 1996 and 1997 and March 31, 1998, laboratory and
office equipment held under capital leases totaled $593,000, with related
accumulated amortization of $216,000, $364,000, $512,000 and $549,000,
respectively.
F-11
<PAGE>
CENTAUR PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1998 IS UNAUDITED)
5. OTHER ACCRUED LIABILITIES
Other accrued liabilities consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------- MARCH 31,
1995 1996 1997 1998
------ ------ ------ -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Clinical trials.......................... $ 465 $ 480 $ 250 $ 200
Patent accruals.......................... 415 375 289 280
Professional fees........................ 120 340 340 340
Other.................................... 103 169 183 343
------ ------ ------ ------
$1,103 $1,364 $1,062 $1,163
====== ====== ====== ======
</TABLE>
6. COMMITMENTS
In September 1994, the Company entered into a $750,000 capital lease
agreement. As of December 31, 1995, 1996 and 1997 and March 31, 1998, lease
obligations under this agreement totaled $455,000, $328,000, $183,000 and
$147,000, respectively. The lease obligations bear interest at 15.2%, are
secured by the related equipment and are payable through October 1998. At the
conclusion of the capital lease, the Company has the option to purchase the
equipment at 15% of its original fair market value.
The Company leases certain research and manufacturing facilities under
operating leases that expire in 2001 and 2004. Future minimum lease payments
under capital leases and such noncancelable operating leases are as follows
(in thousands):
<TABLE>
<CAPTION>
OPERATING CAPITAL
LEASES LEASES
--------- -------
<S> <C> <C>
Year ended December 31,
1998................................................. $ 813 $198
1999................................................. 856 --
2000................................................. 892 --
2001................................................. 542 --
2002................................................. 438 --
Thereafter........................................... 543 --
------ ----
Total minimum payment required..................... $4,084 198
======
Less amount representing interest...................... (15)
----
Present value of future lease payments--due in one
year.................................................. $183
====
</TABLE>
Rent expense was approximately $254,000, $385,000 and $640,000 in 1995, 1996
and 1997, respectively.
In connection with construction in-process on the Company's pilot synthesis
plant and its research and development activities, primarily clinical studies
and sponsored research and development agreements, the Company has total
noncancelable commitments of approximately $4,300,000 at December 31, 1997
payable over the next 12 months.
F-12
<PAGE>
CENTAUR PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1998 IS UNAUDITED)
7. REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY
Redeemable Convertible Preferred Stock
Through December 31, 1996, the Company had sold a total of 8,722,735 shares
of Series A, B and C redeemable convertible preferred stock ("preferred
stock") for total net proceeds of $11,698,000. In 1997, the Company sold a
total of 2,200,000 shares of Series D preferred stock for cash proceeds of
$16,407,000, net of issuance costs of $93,000.
The authorized and outstanding shares of Series A, B, C and D preferred
stock were as follows at December 31, 1997 and March 31, 1998:
<TABLE>
<CAPTION>
AGGREGATE
AUTHORIZED SHARES REDEMPTION
SHARES OUTSTANDING VALUE
---------- ----------- -----------
<S> <C> <C> <C>
Series A............................... 2,000,000 2,000,000 $ 1,000,000
Series B............................... 2,545,454 2,545,454 3,500,000
Series C............................... 4,177,281 4,177,281 7,310,242
Series D............................... 2,200,000 2,200,000 16,500,000
---------- ---------- -----------
10,922,735 10,922,735 $28,310,242
========== ========== ===========
</TABLE>
The shares of Series A, B, C and D preferred stock are convertible at any
time into common stock on a one-for-one basis, subject to adjustment for
antidilution. Conversion is automatic upon the closing of an underwritten
public offering with aggregate offering proceeds exceeding $10,000,000 and an
offering price of at least $4.125 per share ($7.50 per share for the Series
D). The Company has reserved 10,922,735 shares of common stock to be issued to
stockholders upon conversion of the outstanding preferred stock.
Holders of Series A, B, C and D preferred stock are entitled, out of any
funds legally available, to noncumulative dividends if and when declared by
the board of directors. These dividends are to be paid in advance of any
distributions to common stockholders. No dividends have been declared through
December 31, 1997 or March 31, 1998.
At any time between October 1, 1999 and September 30, 2000, should the
Company receive notification from holders of at least 66 2/3% of its
outstanding Series A, B, C and D shares, the Company will be required to
redeem all of the then outstanding preferred stock at the original issue
prices of $0.50, $1.375, $1.75 and $7.50 per share, respectively, plus any
accrued and unpaid dividends.
In the event of a liquidation or winding up of the Company, holders of
Series A, B, C and D preferred stock shall have a liquidation preference of
$0.50, $1.375, $1.75 and $7.50 per share, respectively, together with any
declared but unpaid dividends, over holders of common shares.
The Series A, B, C and D preferred stockholders are entitled to the number
of votes they would have upon conversion of their preferred stock into common
stock.
1993 Equity Incentive Stock Option Plan ("1993 Stock Plan")
Under the 1993 Stock Plan, options, restricted stock, or stock bonuses may
be granted by a committee of the board of directors to employees, officers,
directors, consultants, and independent contractors. Options granted may be
either incentive stock options or nonstatutory stock options. Incentive stock
options may be granted to
F-13
<PAGE>
CENTAUR PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1998 IS UNAUDITED)
employees at exercise prices of no less than the fair market value and
nonstatutory options may be granted to employees or consultants at exercise
prices of no less than 85% of the fair market value of the common stock on the
grant date as determined by the board of directors. Options become exercisable
as determined by the board of directors (or a committee of the board of
directors), generally monthly over four years. Restricted stock awards shall
be subject to restrictions as determined by a committee of the board of
directors. Stock bonuses are awarded by a committee of the board of directors
for services rendered to the Company. A total of 1,751,437 common shares were
reserved for issuance under the 1993 Stock Plan at December 31, 1997, of which
220,957 remained available for future option grants.
The Company has issued the following options under the 1993 Stock Plan, as
described below. These options have a ten-year term and generally become
exercisable over a four-year period. A summary of the option activity is as
follows:
<TABLE>
<CAPTION>
SHARES WEIGHTED-
AVAILABLE OPTIONS PRICE AVERAGE
FOR GRANT OUTSTANDING PER SHARE EXERCISE PRICE
--------- ----------- ----------- --------------
<S> <C> <C> <C> <C>
Balance at December 31,
1994................... 993,397 1,004,854 $0.10-$0.15 $0.14
Options granted....... (362,750) 362,750 $0.20-$0.30 $0.24
Options exercised..... -- (1,354) $ 0.15 $0.15
Options canceled...... 70,584 (70,584) $0.15-$0.20 $0.17
-------- ---------
Balance at December 31,
1995................... 701,231 1,295,666 $0.15-$0.20 $0.17
Additional shares
authorized........... 250,000 -- -- --
Options granted....... (334,610) 334,610 $0.30-$2.00 $0.47
Options exercised..... -- (243,470) $0.10-$1.00 $0.15
Options canceled...... 46,710 (46,710) $0.15-$2.00 $0.35
-------- ---------
Balance at December 31,
1996................... 663,331 1,340,096 $0.10-$2.00 $0.24
Options granted....... (530,000) 530,000 $2.50-$3.00 $2.55
Options exercised..... -- (252,033) $0.15-$2.50 $0.20
Options canceled...... 87,626 (87,626) $0.15-$2.50 $0.73
-------- ---------
Balance at December 31,
1997................... 220,957 1,530,437 $0.15-$3.00 $1.00
Additional shares
authorized
(unaudited).......... 150,000 -- -- --
Options granted
(unaudited).......... (258,619) 258,619 $ 4.00 $4.00
Options exercised
(unaudited).......... -- (854) $ 2.50 $2.50
Options canceled
(unaudited).......... 11,325 (11,325) $0.30-$4.00 $2.62
-------- ---------
Balance at March 31,
1998 (unaudited)....... 123,663 1,776,877 $0.10-$4.00 $1.44
======== =========
</TABLE>
The weighted-average fair value per share of the options granted during the
year were $0.06, $0.40 and $1.46 in 1995, 1996 and 1997, respectively, and
$4.58 for options granted during the three months ended March 31, 1998.
F-14
<PAGE>
CENTAUR PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1998 IS UNAUDITED)
Exercise prices of options outstanding and options exercisable were as
follows:
<TABLE>
<CAPTION>
OPTIONS
OPTIONS OUTSTANDING EXERCISABLE
------------------------------- -----------------
WEIGHTED- WEIGHTED- WEIGHTED-
AVERAGE AVERAGE AVERAGE
REMAINING EXERCISE NUMBER EXERCISE
NUMBER OF CONTRACTUAL PRICE OF PRICE
OPTIONS LIFE PER SHARE OPTIONS PER SHARE
--------- ----------- --------- ------- ---------
<S> <C> <C> <C> <C> <C>
December 31, 1997
$0.10-$0.50............. 992,338 6.86 $0.21 714,564 $0.19
$1.00-$2.50............. 490,099 9.32 $2.45 74,717 $2.38
$3.00................... 48,000 9.93 $3.00 2,951 $3.00
--------- -------
1,530,437 7.74 $1.02 792,232 $0.40
========= =======
March 31, 1998 (unaudited)
$0.10-$0.50............. 991,504 6.61 $0.21 769,379 $0.19
$1.00-$2.50............. 480,881 9.06 $2.45 104,297 $2.40
$3.00-$4.00............. 304,492 9.84 $3.84 11,219 $3.47
--------- -------
1,776,877 7.83 $1.44 884,895 $0.49
========= =======
</TABLE>
At December 31, 1995 and 1996, 516,878 and 630,072 options were exercisable
with weighted-average exercise prices of $0.14 and $0.18, respectively.
Pro forma information regarding net income (loss) is required by SFAS 123,
which also requires that the pro forma information be determined as if the
Company has accounted for its employee stock options granted subsequent to
December 31, 1995 under the fair value method of that Statement. The fair
value of these options was estimated at the date of grant using the minimum
value method option pricing model with the following weighted-average
assumptions: risk-free interest rate of 6.5%; a dividend yield of 0%; and a
weighted-average expected life of the option of five years.
Had the Company valued its stock options according to the provisions of SFAS
123, pro forma net income (loss) and pro forma net income (loss) per share
would have been as follows (in thousands):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER
31,
---------------------
1995 1996 1997
------ ----- -------
<S> <C> <C> <C>
Net income (loss):
As reported..................................... $1,491 $(369) $(4,731)
Pro forma for SFAS 123.......................... 1,488 (402) (4,878)
Basic net income (loss) per share:
As reported..................................... 0.62 (0.14) (1.73)
Pro forma for SFAS 123.......................... 0.62 (0.16) (1.78)
Diluted net income (loss) per share:
As reported..................................... 0.13 (0.14) (1.73)
Pro forma for SFAS 123.......................... 0.13 (0.16) (1.78)
</TABLE>
Deferred Compensation
During the year ended December 31, 1997 and the three months ended March 31,
1998, the Company recorded deferred compensation of $593,000 and $1,116,000,
respectively, for the excess of the deemed fair
F-15
<PAGE>
CENTAUR PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1998 IS UNAUDITED)
value of the Company's common stock over the exercise price for certain
options and warrants granted in 1997 and the three months ended March 31,
1998. This deferred compensation will be amortized to compensation expense
over the related vesting period, generally four years. Subsequent to March 31,
1998, the Company granted additional options to acquire 49,500 shares of
common stock at exercise prices of $6.50 per share. The Company will record
deferred compensation of $355,000 related to these additional grants in the
three months ending June 30, 1998.
Warrants
Under the terms of the capital lease agreement, the Company issued a five-
year warrant to purchase 33,603 shares of the Company's common stock at an
exercise price of $1.925 per share. The warrant is exercisable in full upon
surrender of the warrant to the Company.
The Company has issued the following warrants to consultants to purchase
shares of the Company's common stock:
<TABLE>
<CAPTION>
NUMBER OF EXERCISE VESTING
ISSUE DATE SHARES PRICE TERM
---------- --------- -------- -------
<S> <C> <C> <C>
August 1996.................. 10,000 $3.00 3 years
September 1997............... 10,000 $3.00 3 years
February 1998................ 5,000 $4.00 3 years
February 1998................ 10,000 $4.00 5,000 upon completion of an
initial public offering,
subject to certain terms;
remaining 5,000 over 3 years
</TABLE>
8. INCOME TAXES
As of December 31, 1997, the Company had federal net operating loss
carryforwards of approximately $3,500,000. The Company also had federal
research and development tax credit carryforwards of approximately $100,000.
The federal net operating loss and credit carryforwards will expire in the
year 2012 if not utilized.
Utilization of the net operating losses and credit carryforwards may be
subject to substantial annual limitation due to ownership change provisions of
the Internal Revenue Code of 1986 and similar state provisions. The annual
limitation may result in the expiration of net operating losses and credits
before utilization.
Significant components of the Company's deferred tax assets are as follows
(in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1995 1996 1997
----- ------- -------
<S> <C> <C> <C>
Net operating loss carryforwards................. $ 300 $ -- $ 1,400
Research credit carryforwards.................... 100 -- 100
Capitalized research and development............. 200 200 200
Deferred revenue................................. -- 600 500
Other accruals and reserves...................... 100 300 400
----- ------- -------
Total deferred tax assets.................... 700 1,100 2,600
Valuation allowance for deferred tax assets...... (700) (1,100) (2,600)
----- ------- -------
Net deferred tax assets.......................... $ -- $ -- $ --
===== ======= =======
</TABLE>
The valuation allowance increased by $300,000 during the year ended December
31, 1995.
F-16
<PAGE>
CENTAUR PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1998 IS UNAUDITED)
9. EVENTS SUBSEQUENT TO DECEMBER 31, 1997
In February 1998, the board of directors resolved to increase the number of
shares of common stock reserved for issuance under the 1993 Stock Plan by
150,000. A total of 1,900,540 common shares are reserved for issuance under
the 1993 Stock Plan at March 31, 1998, of which 123,663 remained available for
future option grants.
In March 1998, the Company's research and development collaboration with
Lundbeck was terminated by Lundbeck. Lundbeck has demanded the rescission of
the contract and the repayment of all amounts paid by Lundbeck to the Company
under the Lundbeck Agreement, together with certain other amounts expended by
Lundbeck in connection therewith, believed to aggregate approximately
$7,000,000. A loss contingency is not reflected in the Company's financial
statements as of December 31, 1997 or March 31, 1998 because the Company
believes Lundbeck's claims have no merit. The Company has fully reserved the
unpaid balances of $1,270,000 and $1,370,000 due from Lundbeck at December 31,
1997 and March 31, 1998, respectively. The Company disputes Lundbeck's claim
and has demanded the payment of approximately $7,000,000 that it believes is
owed to it by Lundbeck. The Company and Lundbeck are currently engaged in
discussions with respect to a resolution of this matter. If the matter is not
resolved, it is likely that the dispute will be submitted to arbitration in
Canada.
In April 1998, the Company received $7,750,000 (net of the first payment of
$250,000) related to a debt financing arrangement with a third-party lender.
The debt bears interest at 14.8% per annum, is secured by certain equipment
and leasehold rights and improvements and is payable in 48 monthly
installments through 2002.
In June 1998, the board of directors approved the Company's 1998 Equity
Incentive Plan, the 1998 Directors Stock Option Plan and the 1998 Employee
Stock Purchase Plan (the "1998 Plans") and initially reserved 1,250,000 shares
for issuance thereunder, subject to stockholder approval. The 1998 Plans
provide for the grant of incentive stock options to employees and employee
directors and nonstatutory stock options and stock purchase rights to
employees, directors and consultants.
In June 1998, the board of directors of the Company authorized management to
file a registration statement with the Securities and Exchange Commission in
the United States and also to apply for listing with the Swiss Exchange for
the sale of common stock to the public. In June 1998, the board of directors
also approved an increase in the number of authorized shares of common stock
to 33,000,000 and an increase in the authorized number of undesignated shares
of preferred stock by 3,000,000 shares, for which the board of directors is
authorized to fix the designation, powers, preferences and rights.
If the offering is consummated under the terms presently anticipated, all of
the preferred stock outstanding will be converted into 10,922,735 shares of
common stock upon the closing of the offering, and such shares will no longer
be available for issuances at that time. Unaudited pro forma stockholders'
equity as of December 31, 1997 and March 31, 1998 as adjusted for the assumed
conversion of the preferred stock is set forth on the accompanying balance
sheet.
F-17
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFOR-
MATION OR TO MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PRO-
SPECTUS IN CONNECTION WITH THE OFFER CONTAINED HEREIN, AND IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AU-
THORIZED BY THE COMPANY OR ANY UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTI-
TUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, SHARES OF COMMON
STOCK IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS NOT LAWFUL TO MAKE ANY
SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION OR IN WHICH THE PERSON MAKING
SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO. NEITHER THE DELIVERY OF
THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COM-
PANY SINCE THE DATE HEREOF.
---------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary........................................................ 3
Risk Factors.............................................................. 7
The Company............................................................... 18
Use of Proceeds........................................................... 18
Dividend Policy........................................................... 18
Capitalization............................................................ 19
Dilution.................................................................. 20
Selected Financial Data................................................... 21
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 22
Business.................................................................. 27
Management................................................................ 43
Certain Transactions...................................................... 52
Principal and Selling Stockholders........................................ 53
Description of Capital Stock.............................................. 56
Taxation.................................................................. 60
Shares Eligible for Future Sale........................................... 62
Underwriting.............................................................. 64
Legal Matters............................................................. 67
Experts................................................................... 67
Additional Information.................................................... 67
Index to Financial Statements............................................. F-1
</TABLE>
UNTIL , 1998 (90 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
[CENTAUR LOGO]
SHARES
COMMON STOCK
PROSPECTUS
, 1998
BANK J. VONTOBEL & CO AG
GLOBAL COORDINATOR AND LEAD MANAGER
VECTOR SECURITIES INTERNATIONAL, INC.
U.S. SPECIAL ADVISOR
VONTOBEL SECURITIES LTD.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the costs and expenses to be paid by the
Company in connection with the sale of the shares of Common Stock being
registered hereby. All amounts are estimates except for the Securities and
Exchange Commission registration fee, the National Association of Securities
Dealers, Inc. filing fee and the Swiss Exchange listing fee.
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee.............. $26,462
Swiss Exchange listing fee....................................... *
National Association of Securities Dealers, Inc. filing fee...... 9,470
Accounting fees and expenses..................................... *
Legal fees and expenses.......................................... *
Road show expenses............................................... *
Printing and engraving expenses.................................. *
Blue sky fees and expenses....................................... *
Transfer agent and registrar fees and expenses................... *
Miscellaneous.................................................... *
-------
Total........................................................ $ *
=======
</TABLE>
- --------
* To be provided by amendment
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
As permitted by the Delaware General Corporation Law, the Registrant's
Certificate of Incorporation includes a provision that eliminates the personal
liability of its directors for monetary damages for breach of fiduciary duty
as a director except for liability (i) for any breach of the director's duty
of loyalty to the corporation or its stockholders, (ii) for acts or omissions
not in good faith or that involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the Delaware General Corporation
Law or (iv) for any transaction from which the director derived an improper
personal benefit.
As permitted by Section 145 of the Delaware General Corporation Law, the
Bylaws of the Registrant provide that (i) the Registrant is required to
indemnify its directors and executive officers to the fullest extent permitted
by the Delaware General Corporation Law, (ii) the Registrant may indemnify its
other officers, employees and agents as set forth in the Delaware General
Corporation Law, (iii) to the fullest extent permitted by the Delaware General
Corporation Law, the Registrant is required to advance expenses, as incurred,
to its directors and executive officers in connection with a legal proceeding
(subject to certain exceptions), (iv) the rights conferred in the Bylaws are
not exclusive, (v) the Registrant is authorized to enter into indemnification
agreements with its directors, officers, employees and agents and (vi) the
Registrant may not retroactively amend its Bylaws provisions relating to
indemnity.
The Registrant's policy is to enter into indemnity agreements with each of
its directors and executive officers. The indemnity agreements provide that
directors and executive officers will be indemnified and held harmless to the
fullest possible extent permitted by law including against all expenses
(including attorneys' fees), judgments, fines and settlement amounts paid or
reasonably incurred by them in any action, suit or proceeding, including any
derivative action by or in the right of the Registrant, on account of their
services as directors, officers, employees or agents of the Registrant or as
directors, officers, employees or agents of any other company or enterprise
when they are serving in such capacities at the request of the Registrant. The
Registrant will not be obligated pursuant to the agreements to indemnify or
advance expenses to an indemnified party with respect to proceedings or claims
(i) initiated by the indemnified party and not by way of defense, except with
respect to a proceeding authorized by the Board of Directors and successful
proceedings brought to enforce a right to indemnification under the Indemnity
Agreement, (ii) for any amounts paid in settlement of a proceeding unless the
Registrant consents to such settlement, (iii) on account of any suit in which
judgment is rendered
II-1
<PAGE>
against the indemnified party for an accounting of profits made from the
purchase or sale by the indemnified party of securities of the Registrant
pursuant to the provisions of Section 16(b) of the Securities Exchange Act of
1934 and related laws, (iv) on account of conduct by a director which is
finally adjudged to have been in bad faith or conduct that the director did
not reasonably believe to be in, or not opposed to, the best interests of the
Registrant, (v) on account of any criminal action or proceeding arising out of
conduct that the director had reasonable cause to believe was unlawful or (vi)
if a final decision by a court having jurisdiction in the matter shall
determine that such indemnification is not lawful.
The indemnity agreement also provides for contribution in certain situations
in which the Registrant and a director or executive officer are jointly liable
but indemnification is unavailable, such contribution to be based on the
relative benefits received and the relative fault of the Registrant and the
director or executive officer. Contribution is not allowed in connection with
a Section 16(b) judgment, an adjudication of bad faith or conduct that a
director or executive officer did not reasonably believe to be in, or not
opposed to, the best interests of the Registrant or a proceeding arising out
of conduct a director or executive officer had reasonable cause to believe was
unlawful.
The indemnity agreement requires a director or executive officer to
reimburse the Registrant for all expenses advanced only to the extent it is
ultimately determined that the director or executive officer is not entitled,
under Delaware law, the Bylaws, the indemnity agreement or otherwise, to be
indemnified for such expenses. The indemnity agreement provides that it is not
exclusive of any rights a director or executive officer may have under the
Certificate of Incorporation, Bylaws, other agreements, any majority-in-
interest vote of the stockholders or vote of disinterested directors, the
Delaware law or otherwise.
The indemnification provision in the Bylaws, and the indemnity agreements
entered into between the Registrant and its directors and executive officers,
may be sufficiently broad to permit indemnification of the Registrant's
executive officers and directors for liabilities arising under the Securities
Act of 1933, as amended (the "Securities Act").
As authorized by the Registrant's Bylaws, the Registrant, with approval by
the Board, expects to purchase director and officer liability insurance.
See also the undertakings set out in response to Item 17.
Reference is made to the following documents filed as exhibits to this
Registration Statement regarding relevant indemnification provisions described
above and elsewhere herein:
<TABLE>
<CAPTION>
DOCUMENT EXHIBIT NUMBER
-------- --------------
<S> <C>
Underwriting Agreement.................................... 1.01
Registrant's Restated Certificate of Incorporation........ 3.01
Form of Registrant's Amended and Restated Certificate of
Incorporation to be filed immediately following the
offering................................................. 3.02
Registrant's Bylaws....................................... 3.03
Third Amended and Restated Investors' Rights Agreement,
dated as of February 14, 1997............................ 4.02
Form of Indemnification Agreement......................... 10.05
</TABLE>
II-2
<PAGE>
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
The following table sets forth information regarding all securities sold by
the Registrant since April 1, 1995.
<TABLE>
<CAPTION>
AGGREGATE PURCHASE
DATE OF TITLE OF NUMBER OF PRICE AND FORM OF
CLASS OF PURCHASERS SALE(S) SECURITIES(1) SECURITIES CONSIDERATION
------------------- ---------- ------------------- ---------- -------------------
<S> <C> <C> <C> <C>
Neil Solomon and Andrew
Newcorn................. 2/15/96 Common Stock 2,730 Issued in
connection with
consulting services
rendered
Prospektiva Investments. 8/12/96 Warrant to purchase 10,000 Issued in
Common Stock at connection with
$3.00 consulting services
rendered
52 unaffiliated
purchasers and the
following purchasers
that were then officers,
directors and their
affiliates, and greater
than 5% stockholders:
Paul F. Glenn, Trustee,
Paul F. Glenn Revocable
Trust; Glenn Foundation
for Medical Research;
Brian D. Frenzel; Selvi
Vescovi; Charter Ventures
II, L.P.; Menlo Ventures
IV, L.P.; Oklahoma
Medical Research
Foundation; and Dillon,
Read & Co. Inc., as
agent................... 2/14/97 to Series D Preferred 2,200,000 $16,500,000 cash
10/3/97 Stock
Prospektiva Investments. 9/19/97 Warrant to purchase 10,000 Issued in
Common Stock at connection with
$3.00 per share consulting services
rendered
Hans-Jurg Buss.......... 2/14/98 Warrant to purchase 10,000 Issued in
Common Stock at connection with
$4.00 per share consulting services
rendered
Steinar Engelsen........ 2/14/98 Warrant to purchase 5,000 Issued in
Common Stock at connection with
$4.00 per share consulting services
rendered
131 officers, directors,
employees and/or
consultants............. 4/1/95 to Options to purchase 1,312,479 Options granted for
4/30/98 Common Stock under no cash
the 1993 Equity consideration
Incentive Plan.
Exercise prices
range from $0.20 to
$6.50 per share.(2)
23 officers, directors,
employees and/or
consultants............. 4/1/95 to Common Stock(3) 435,871 $81,826 cash (upon
4/30/98 exercise of stock
options with
exercise prices
ranging from $0.10
to $2.50 per share)
</TABLE>
- --------
(1) Unless otherwise noted, all sales were made in reliance on Section 4(2) of
the Securities Act and/or Regulation D promulgated under the Securities
Act. The securities were sold to a limited number of people with no
general solicitation or advertising. The purchasers were sophisticated
investors with access to all relevant information necessary to evaluate
the investment who represented to the Registrant that the shares were
being acquired for investment.
(2) With respect to the grant of stock options, exemptions from registration
under the Securities Act were unnecessary in that none of such
transactions involved a "sale" of securities as such term is used in
Section 2(3) of the Securities Act.
(3) All sales of Common Stock pursuant to the exercise of stock options
granted under the Registrant's stock option plan were made pursuant to the
exemption from the registration requirements of the Securities Act
afforded by Rule 701 promulgated under the Securities Act as transactions
pursuant to a compensatory benefit plan or a written contract relating to
compensation.
II-3
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) The following exhibits are filed herewith:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT TITLE
------- -------------
<C> <S>
1.01 --Underwriting Agreement.*
3.01 --Registrant's Restated Certificate of Incorporation.
3.02 --Form of Registrant's Amended and Restated Certificate of In-
corporation to be filed immediately following the offering.
3.03 --Registrant's Bylaws.
4.01 --Form of Specimen Certificate for Registrant's Common Stock.*
4.02 --Third Amended and Restated Investors' Rights Agreement, dated
as of February 14, 1997.
5.01 --Opinion of Fenwick & West LLP regarding legality of the secu-
rities being registered.*
10.01 --Registrant's 1993 Equity Incentive Plan, as amended.
10.02 --Registrant's 1998 Equity Incentive Plan.
10.03 --Registrant's 1998 Directors Stock Option Plan.
10.04 --Registrant's 1998 Employee Stock Purchase Plan.
10.05 --Form of Indemnification Agreement entered into by Registrant
with each of its directors and executive officers.
10.06 --Master Loan and Security Agreement between Registrant and
Finova Technology Finance, Inc., dated as of November 3,
1997; Loan and Security Agreement No. 1 dated April 22, 1998
between Registrant and Finova Technology Finance, Inc.;
Commitment Letter between the Registrant and Finova
Technology Finance, Inc., dated as of October 7, 1997 (as
revised on December 23, 1997), as amended April 20, 1998;
Leasehold Deeds of Trust dated November 3, 1997 executed by
the Registrant; Promissory Note dated April 22, 1998 executed
by Registrant.
10.07 --Lease for 484 Oakmead Parkway, Sunnyvale, CA dated February
25, 1993, as amended August 18, 1995.
10.08 --Sublease for additional space at 484 Oakmead Parkway, Sunny-
vale, CA dated March 22, 1995.
10.09 --Lease for 1220 Memorex Drive, Suite 100, Santa Clara, CA dated
February 12, 1997.
10.10 --Lease for 1220 Memorex Drive, Suites 200 and 300, Santa Clara,
CA dated June 12, 1997.
10.11 --License with UKRF and OMRF dated July 15, 1992.*
10.12 --First Amendment to License with UKRF and OMRF dated June 26,
1995.*
10.13 --Development, License and Marketing Agreement with Astra AB
dated June 26, 1995.*
10.14 --Supply Agreement with Astra AB dated June 26, 1995.*
10.15 --Amendment to Development, License and Marketing Agreement with
Astra AB dated July 8, 1997.*
10.16 --Development, Patent and Trademark/Know-How Licensing and Sup-
ply Agreement-- CPI-1189 with H. Lundbeck A/S dated October
31, 1996.*
10.17 --Employment Agreement with Brian D. Frenzel dated December 1,
1993, and associated Stock Option Agreements.
10.18 --License Agreement dated January 15, 1998 between Registrant
and Cutanix
Corporation.*
10.19 --Services and Supply Agreement dated January 15, 1998 between
Registrant and Cutanix Corporation.*
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT TITLE
------- -------------
<C> <S>
23.01 --Consent of Fenwick & West LLP (included in Exhibit 5.01).*
23.02 --Consent of Ernst & Young LLP, independent auditors.
24.01 --Power of Attorney (see Page II-6 of this Registration State-
ment).
27.01 --Financial Data Schedule.
</TABLE>
- --------
* To be supplied by amendment.
(b) The following financial statement schedule is filed herewith:
Schedule II--Valuation and Qualifying Accounts
Other financial statement schedules are omitted because the information
called for is not required or is shown either in the financial statements or
the notes thereto.
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes to provide to the Managers at
the closing specified in the Purchase Agreement certificates in such
denominations and registered in such names as required by the Managers to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described under Item 14 above, or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other
than the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense of
any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-5
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE REGISTRANT HAS DULY
CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF SUNNYVALE, STATE OF
CALIFORNIA, ON THE 18TH DAY OF JUNE, 1998.
Centaur Pharmaceuticals, Inc.
/s/ Brian D. Frenzel
By: _________________________________
Brian D. FrenzelPresident and
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS that each individual whose signature
appears below constitutes and appoints Brian D. Frenzel and Joseph L. Turner,
and each of them, his or her true and lawful attorneys-in-fact and agents with
full power of substitution, for him or her and in his or her name, place and
stead, in any and all capacities, to sign any and all amendments (including
post-effective amendments) to this Registration Statement, and to sign any
registration statement for the same offering covered by the Registration
Statement that is to be effective upon filing pursuant to Rule 462(b)
promulgated under the Securities Act, and all post-effective amendments
thereto, and to file the same, with all exhibits thereto and all documents in
connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he or she might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or any of them, or his
or her or their substitute or substitutes, may lawfully do or cause to be done
or by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THIS REGISTRATION
STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON
THE DATES INDICATED.
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
Principal Executive Officer:
<S> <C> <C>
/s/ Brian D. Frenzel President, Chief Executive June 18, 1998
____________________________________ Officer and a Director
Brian D. Frenzel
Principal Financial Officer and
Principal Accounting Officer:
/s/ Joseph L. Turner Chief Financial Officer, June 18, 1998
____________________________________ Treasurer and Secretary
Joseph L. Turner
</TABLE>
Additional Directors:
<TABLE>
<S> <C> <C>
/s/ John M. Carney Director June 18, 1998
____________________________________
John M. Carney
/s/ Mark R. Collins Director June 18, 1998
____________________________________
Mark R. Collins
</TABLE>
II-6
<PAGE>
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<S> <C> <C>
/s/ Graham K. Crooke Director June 18, 1998
____________________________________
Graham K. Crooke
/s/ Charles R. Engles Director June 18, 1998
____________________________________
Charles R. Engles
/s/ Steinar J. Engelsen Director June 18, 1998
____________________________________
Steinar J. Engelsen
/s/ Selvi Vescovi Director June 18, 1998
____________________________________
Selvi Vescovi
</TABLE>
II-7
<PAGE>
CENTAUR PHARMACEUTICALS, INC.
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONS
--------------------
BALANCE AT CHARGED CHARGED BALANCE AT
BEGINNING TO COSTS AGAINST END OF
OF YEAR AND EXPENSES REVENUE DEDUCTIONS YEAR
---------- ------------ ------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Year ended December 31,
1997 deducted from
asset account:
Allowance for doubtful
accounts.............. $ 0 $ -- $1,600 $ 0 $1,600
======= ======= ====== ====== ======
Year ended December 31,
1996 deducted from
asset account:
Allowance for doubtful
accounts.............. $ 0 $ -- $ -- $ -- $ 0
======= ======= ====== ====== ======
Year ended December 31,
1995 deducted from
asset account:
Allowance for doubtful
accounts.............. $ 0 $ -- $ -- $ -- $ 0
======= ======= ====== ====== ======
</TABLE>
S-1
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
NUMBERED
EXHIBIT EXHIBIT TITLE PAGE
------- ------------- ------------
<C> <S> <C>
1.01 --Underwriting Agreement.*
3.01 --Registrant's Restated Certificate of Incorporation.
3.02 --Form of Registrant's Amended and Restated Certifi-
cate of Incorporation to be filed immediately fol-
lowing the offering.
3.03 --Registrant's Bylaws.
4.01 --Form of Specimen Certificate for Registrant's Com-
mon Stock.*
4.02 --Third Amended and Restated Investors' Rights Agree-
ment, dated as of February 14, 1997.
5.01 --Opinion of Fenwick & West LLP regarding legality of
the securities being registered.*
10.01 --Registrant's 1993 Equity Incentive Plan, as amend-
ed.
10.02 --Registrant's 1998 Equity Incentive Plan.
10.03 --Registrant's 1998 Directors Stock Option Plan.
10.04 --Registrant's 1998 Employee Stock Purchase Plan.
10.05 --Form of Indemnification Agreement entered into by
Registrant with each of its directors and execu-
tive officers.
10.06 --Master Loan and Security Agreement between
Registrant and Finova Technology Finance, Inc.,
dated as of November 3, 1997; Loan and Security
Agreement No. 1 dated April 22, 1998 between
Registrant and Finova Technology Finance, Inc.;
Commitment Letter between the Registrant and
Finova Technology Finance, Inc., dated as of
October 7, 1997 (as revised on December 23, 1997),
as amended April 20, 1998; Leasehold Deeds of
Trust dated November 3, 1997 executed by the
Registrant; Promissory Note dated April 22, 1998
executed by Registrant.
10.07 --Lease for 484 Oakmead Parkway, Sunnyvale, CA dated
February 25, 1993, as amended August 18, 1995.
10.08 --Sublease for additional space at 484 Oakmead Park-
way, Sunnyvale, CA dated March 22, 1995.
10.09 --Lease for 1220 Memorex Drive, Suite 100, Santa
Clara, CA dated February 12, 1997.
10.10 --Lease for 1220 Memorex Drive, Suites 200 and 300,
Santa Clara, CA dated June 12, 1997.
10.11 --License with UKRF and OMRF dated July 15, 1992.*
10.12 --First Amendment to License with UKRF and OMRF dated
June 26, 1995.*
10.13 --Development, License and Marketing Agreement with
Astra AB dated June 26, 1995.*
10.14 --Supply Agreement with Astra AB dated June 26,
1995.*
10.15 --Amendment to Development, License and Marketing
Agreement with Astra AB dated July 8, 1997.*
10.16 --Development, Patent and Trademark/Know-How Licens-
ing and Supply Agreement-- CPI-1189 with H.
Lundbeck A/S dated October 31, 1996.*
10.17 --Employment Agreement with Brian D. Frenzel dated
December 1, 1993, and associated Stock Option
Agreements.
10.18 --License Agreement dated January 15, 1998 between
Registrant and Cutanix
Corporation.*
10.19 --Services and Supply Agreement dated January 15,
1998 between Registrant and Cutanix Corporation.*
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIALLY
NUMBERED
EXHIBIT EXHIBIT TITLE PAGE
------- ------------- ------------
<C> <S> <C>
23.01 --Consent of Fenwick & West LLP (included in Exhibit
5.01).*
23.02 --Consent of Ernst & Young LLP, independent auditors.
24.01 --Power of Attorney (see Page II-6 of this Registra-
tion Statement).
27.01 --Financial Data Schedule.
</TABLE>
- --------
* To be supplied by amendment.
<PAGE>
EXHIBIT 3.01
RESTATED CERTIFICATE OF INCORPORATION
OF
CENTAUR PHARMACEUTICALS, INC.
ARTICLE I
The name of the corporation is Centaur Pharmaceuticals, Inc.
ARTICLE II
The address of the registered office of the corporation in the State
of Delaware is 1013 Centre Road, Wilmington, New Castle County. The name of its
registered agent at that address is Corporation Service Company.
ARTICLE III
The purpose of the corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware.
ARTICLE IV
A. Authorization of Shares
-----------------------
The total number of shares of all classes of stock which the
corporation has authority to issue is Forty-Six Million Nine Hundred Twenty-Two
Thousand Seven Hundred Thirty-Five (46,922,735) shares, consisting of Thirty-
Three Million (33,000,000) shares of Common Stock, $0.001 par value per share,
and Thirteen Million Nine Hundred Twenty-Two Thousand Seven Hundred Thirty-Five
(13,922,735) shares of Preferred Stock, $0.001 par value per share, of which Two
Million (2,000,000) shares are designated Series A Preferred Stock, Two Million
Five Hundred Forty-Five Thousand Four Hundred Fifty-Four (2,545,454) shares are
designated Series B Preferred Stock, Four Million One Hundred Seventy-Seven
Thousand Two Hundred Eighty-One (4,177,281) shares are designated Series C
Preferred Stock and Two Million Two Hundred Thousand (2,200,000) shares are
designated Series D Preferred Stock.
B. Designation of Future Series of Preferred Stock
-----------------------------------------------
The Board of Directors is authorized, subject to any limitations
prescribed by the law of the State of Delaware, to provide for the issuance of
the shares of Preferred Stock in one or more series, and, by filing a
certificate of designation pursuant to the applicable law of the State of
Delaware, to establish from time to time the number of shares to be included in
each such series, to fix the designation, powers, preferences and rights of the
shares of each such
<PAGE>
series and any qualifications, limitations or restrictions thereof and to
increase or decrease the number of shares of any such series (but not below the
number of shares of such series then outstanding). Subject to approval by the
Board of Directors, the number of authorized shares of Preferred Stock may be
increased or decreased (but not below the number of shares thereof then
outstanding) by the affirmative vote of the holders of a majority of the stock
of the corporation entitled to vote, unless a vote of any other holders is
required pursuant to a certificate or certificates establishing a series of
Preferred Stock.
Except as expressly provided in any certificate of designation
designating any series of Preferred Stock pursuant to the foregoing provisions
of this Article IV, any new series of Preferred Stock may be designated, fixed
and determined as provided herein by the Board of Directors without approval of
the holders of Common Stock or the holders of Preferred Stock, or any series
thereof, and any such new series may have powers, preferences and rights,
including, without limitation, voting rights, dividend rights, liquidation
rights, redemption rights and conversion rights senior to, junior to or pari
passu with the rights of the Common Stock, the Preferred Stock, or any future
class or series of Preferred Stock or Common Stock.
If the certificate of designation creating a series of Preferred Stock
so provides, any shares of a series of Preferred Stock that are acquired by the
corporation, whether by redemption, purchase, conversion or otherwise, so that
such shares are issued but not outstanding, may not be reissued as shares of
such series or as shares of the class of Preferred Stock. Upon the retirement of
any such shares and the filing of a certificate of retirement pursuant to
Sections 103 and 243 of the Delaware General Corporation Law with respect
thereto, the shares of such series shall be eliminated and the number of shares
of Preferred Stock shall be reduced accordingly.
ARTICLE V
The rights, preferences, privileges and restrictions granted to and
imposed on the Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock, Series D Preferred Stock and the Common Stock are as follows:
1. DEFINITIONS. For purposes of this Article V, the following
-----------
definitions shall apply:
1.1 "BOARD" shall mean the Board of Directors of the
-----
corporation.
1.2 "CORPORATION" shall mean Centaur Pharmaceuticals, Inc.
-----------
1.3 "COMMON STOCK" shall mean the Common Stock, $0.001 par
------------
value of the corporation.
-2-
<PAGE>
1.4 "LIQUIDATION PREFERENCE" shall mean $0.50 per share for the
----------------------
Series A Preferred Stock, $1.375 per share for the Series B Preferred Stock,
$1.75 per share for the Series C Preferred Stock and $7.50 per share for the
Series D Preferred Stock, plus any declared but unpaid dividends on such share
of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock
or Series D Preferred Stock, as appropriately adjusted for stock dividends,
splits, combinations and the like.
1.5 "ORIGINAL ISSUE DATE" shall mean the date on which the first
-------------------
share of Series D Preferred Stock is issued by the corporation.
1.6 "ORIGINAL ISSUE PRICE" shall mean $0.50 per share for the
--------------------
Series A Preferred Stock, $1.375 per share for the Series B Preferred Stock,
$1.75 per share for the Series C Preferred Stock and $7.50 per share for the
Series D Preferred Stock.
1.7 "PREFERRED STOCK" shall mean the Series A Preferred Stock,
---------------
the Series B Preferred Stock, the Series C Preferred Stock and the Series D
Preferred Stock, collectively.
1.8 "SERIES A PREFERRED STOCK" shall mean the Series A Preferred
------------------------
Stock, $0.001 par value, of the corporation.
1.9 "SERIES B PREFERRED STOCK" shall mean the Series B Preferred
------------------------
Stock, $0.001 par value, of the corporation.
1.10 "SERIES C PREFERRED STOCK" shall mean the Series C Preferred
------------------------
Stock, $0.001 par value, of the corporation.
1.11 "SERIES D PREFERRED STOCK" shall mean the Series D Preferred
------------------------
Stock, $0.001 par value, of the corporation.
1.12 "SUBSIDIARY" shall mean any corporate entity of which at
----------
least fifty percent (50%) of the outstanding voting stock is at the time owned
directly or indirectly by the corporation or by one or more of such subsidiary
corporate entities.
2. DIVIDEND RIGHTS.
---------------
2.1 PAYMENT OF DIVIDENDS. The holders of Preferred Stock shall
--------------------
be entitled to receive, out of any funds legally available therefor, dividends
on each outstanding share, if, when and as declared by the Board. The Board
shall not be under any obligation to declare dividends on Preferred Stock,
except as set forth in the following sentence. No dividends (other than
dividends payable in Common Stock) shall be declared or paid to the holders of
Common Stock unless there is first or simultaneously declared and paid on each
outstanding share of Series A Preferred Stock, Series B Preferred Stock, Series
C Preferred Stock and Series D Preferred Stock a dividend (payable in the same
type and proportionate amount of cash and/or property as the dividend then to be
declared and paid on the Common Stock) in an amount
-3-
<PAGE>
greater than or equal to the amount obtained by multiplying (a) the amount of
the dividend to be paid on each share of Common Stock, by (b) the Conversion
Rate (as hereinafter defined) for the respective series of Preferred Stock.
2.2 NON-CASH DIVIDENDS. Whenever a dividend provided for in
------------------
this Section 2 shall be payable in property other than cash, the value of such
dividend shall be deemed to be the fair market value of such property as
determined in good faith by the Board.
3. LIQUIDATION RIGHTS. In the event of any liquidation, dissolution
------------------
or winding up of the corporation, whether voluntary or involuntary, the funds
and assets of the corporation that may be legally distributed to the
corporation's stockholders (the "Available Funds and Assets") shall be
--------------------------
distributed to stockholders in the following manner:
3.1 PREFERRED STOCK. The holders of each share of each series
---------------
of Preferred Stock then outstanding shall be entitled to be paid, out of the
Available Funds and Assets, and prior and in preference to any payment or
distribution (or any setting apart of any payment or distribution) of any
Available Funds and Assets on any shares of Common Stock, an amount per share
equal to the Liquidation Preference of each such series of Preferred Stock. If
upon any liquidation, dissolution or winding up of the corporation, the
Available Funds and Assets shall be insufficient to permit the payment to
holders of the Preferred Stock of their full preferential amount described in
this subsection, then all of the Available Funds and Assets shall be distributed
among the holders of the then outstanding Preferred Stock, with each holder of
Preferred Stock entitled to a proportion of the Available Funds and Assets equal
to the total Liquidation Preference of the Preferred Stock held by such holder,
if such Liquidation Preference were paid in full, divided by the total
Liquidation Preference of the Preferred Stock held by all holders of Preferred
Stock, if such Liquidation Preference were paid in full.
3.2 REMAINING ASSETS. If there are any Available Funds and
----------------
Assets remaining after the payment or distribution (or the setting aside for
payment or distribution) to the holders of the Preferred Stock of their full
preferential amounts described above in this Section 3, then all such remaining
Available Funds and Assets shall be distributed among the holders of the then
outstanding Common Stock pro rata according to the number of shares of Common
Stock held by each holder thereof.
3.3 MERGER OR SALE OF ASSETS. A (i) consolidation or merger of
------------------------
the corporation with or into any other entity or entities in which the holders
of the corporation's outstanding shares immediately before such consolidation or
merger do not, immediately after such consolidation or merger, hold stock
representing a majority of the voting power of the surviving entity or entities
of such consolidation or merger; or (ii) sale of all or substantially all of the
assets of the corporation, shall each be deemed to be a liquidation, dissolution
or winding up of the corporation as those terms are used in this Section 3.
3.4 NON-CASH CONSIDERATION. If any assets of the corporation
----------------------
distributed to stockholders in connection with any liquidation, dissolution, or
winding up of the corporation are other than cash, then the value of such assets
shall be their fair market value as
-4-
<PAGE>
determined by the Board, except that any securities to be distributed to
------ ----
stockholders in a liquidation, dissolution, or winding up of the corporation
shall be valued as follows:
(a) The method of valuation of securities not subject to
investment letter or other similar restrictions on free marketability shall be
as follows:
(i) if the securities are then traded on a national
securities exchange or the Nasdaq National Market (or a similar national
quotation system), then the value shall be deemed to be the average of the
closing prices of the securities on such exchange or system over the 30-day
period ending three (3) days prior to the distribution; and
(ii) if actively traded over-the-counter, then the
value shall be deemed to be the average of the closing bid prices over the 30-
day period ending three (3) days prior to the distribution; and
(iii) if there is no active public market, then the
value shall be the fair market value thereof, as determined in good faith by the
Board.
(b) The method of valuation of securities subject to
investment letter or other restrictions on free marketability shall be to make
an appropriate discount from the market value determined as above in
subparagraphs (a)(i), (ii) or (iii) of this subsection to reflect the
approximate fair market value thereof, as determined in good faith by the Board.
4. REDEMPTION.
----------
4.1 MANDATORY REDEMPTION OF SERIES A, SERIES B. SERIES C AND
--------------------------------------------------------
SERIES D PREFERRED STOCK.
- ------------------------
(a) Schedule for Redemption. Subject to the terms and
-----------------------
conditions of this subsection and upon receipt of a Redemption Request (as
defined below), the corporation shall redeem, ninety (90) days after receipt of
a Redemption Request (the "Redemption Date"), all of the shares of the Series A
---------------
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D
Preferred Stock outstanding on the Redemption Date.
(b) Request for Redemption. A request for redemption
----------------------
pursuant to this subsection 4.1 (a "Redemption Request") shall be in writing,
------------------
shall state that it is a request for redemption of all the Series A, Series B,
Series C and Series D Preferred Stock under this subsection 4.1, and shall be
signed by the holders of at least sixty-six and two-thirds percent (66 2/3%) of
the then outstanding shares of Preferred Stock voting on an as-if-converted-
into-Common Stock basis. The Redemption Request must be received by the
corporation between October 1, 1999 and September 30, 2000, inclusive. Upon
receipt of such Redemption Request, the corporation shall redeem the shares of
Series A, Series B, Series C and Series D Preferred Stock from any source of
funds legally available therefor, on the Redemption Date and at the respective
redemption prices set forth in this subsection.
-5-
<PAGE>
(c) Redemption Price. The redemption price for each
----------------
share of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred
Stock and Series D Preferred Stock shall be an amount equal to the Original
Issue Price for such share of Series A Preferred Stock, Series B Preferred
Stock, Series C Preferred Stock and Series D Preferred Stock, respectively, plus
all declared and unpaid dividends thereon, as appropriately adjusted for stock
dividends, splits, combinations and the like.
(d) Insufficient Legally Available Funds.
------------------------------------
(i) Proportional Redemption. If on the Redemption
-----------------------
Date, the funds and assets of the corporation legally available to redeem the
Series A, Series B, Series C and Series D Preferred Stock shall be insufficient
to redeem all shares of Series A, Series B, Series C and Series D Preferred
Stock to be redeemed on the Redemption Date, then the corporation shall redeem
the maximum possible number of shares of Series A, Series B, Series C and Series
D Preferred Stock on the Redemption Date; provided, however, that (x) the
-------- -------
corporation shall redeem the same percentage of Series A Preferred Stock, Series
B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock, and
(y) any such redemption shall be pro rata by series among the holders of Series
A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series
D Preferred Stock.
(ii) Unredeemed Shares. Any shares of Series A and/or
-----------------
Series B and/or Series C and/or Series D Preferred Stock which are to be
redeemed hereunder but which have not been redeemed due to insufficient legally
available funds and assets of the corporation (the "Unredeemed Shares") shall be
-----------------
carried forward and shall be redeemed pro rata, as set forth in subparagraph
4.1(d)(i), on the 30th day of each calendar quarter thereafter, to the full
extent of legally available funds and assets of the corporation, from the funds
and assets of the corporation legally available at such time, until all
Unredeemed Shares are redeemed. Subject to the provision of Section 4.4,
Unredeemed Shares shall continue to be outstanding and entitled to all dividend,
liquidation, conversion and other rights, preferences, privileges and
restrictions of the Series A, Series B, Series C and Series D Preferred Stock,
respectively, until such shares have been converted or redeemed.
4.2 REDEMPTION NOTICE.
-----------------
(a) Timing; Address for Notice. If the corporation has
--------------------------
received a Redemption Request, then at least twenty (20) but no more than sixty
(60) days prior to the Redemption Date, the corporation shall mail, postage
prepaid, or send by a nationally or internationally (as applicable) recognized
express courier service, fees prepaid, a written notice (the "Redemption
----------
Notice") to each holder of record of the Series A and/or Series B and/or Series
- ------
C and/or Series D Preferred Stock on the applicable Record Date, at the address
last shown on the records of the corporation for such holder or given by the
holder to the corporation for the purpose of notice.
(b) Contents of Notice. The Redemption Notice shall
------------------
specify the following: (i) that the redemption will be effected on the
Redemption Date set forth therein;
-6-
<PAGE>
(ii) the applicable redemption price(s); (iii) the place at which payment may be
obtained; (iv) the date on which such holder's conversion rights as to such
shares terminate (as set forth in Section 6); and (v) a request that such holder
surrender to the corporation, in the manner and at the place designated, the
certificate or certificates representing the shares to be redeemed.
4.3 SURRENDER OF CERTIFICATES. On or after the Redemption Date,
-------------------------
each holder of Preferred Stock to be redeemed shall (unless such holder has
previously exercised his right to convert such shares of Preferred Stock into
Common Stock as provided in Section 6 below), surrender the certificate(s)
representing such shares of Preferred Stock to be redeemed on such Redemption
Date to the corporation, in the manner and at the place designated in the
Redemption Notice, and thereupon the redemption price for such shares shall be
payable to the order of the person whose name appears on such certificate(s) as
the owner thereof, and each surrendered certificate shall be canceled and
retired. If less than all of the shares represented by such certificate are
redeemed, then the corporation shall promptly issue a new certificate
representing the unredeemed shares.
4.4 EFFECT OF REDEMPTION. If the Redemption Notice has been
--------------------
given, and if on the Redemption Date the redemption price for the shares of
Series A, Series B, Series C and Series D Preferred Stock to be redeemed on such
Redemption Date is either paid or irrevocably deposited or set aside for
payment, then notwithstanding that the certificates evidencing any of the shares
of Preferred Stock so called for redemption shall not have been surrendered,
such shares shall not thereafter be transferred on the corporation's books, and
all of the rights of the holders of such shares with respect to such shares
shall terminate after the Redemption Date, except only the right of the holders
to receive the redemption price without interest upon surrender of their
certificate(s) therefor. Shares which have been called for redemption shall not
be deemed to be outstanding shares for the purpose of voting or determining the
total number of shares entitled to vote on any matter on and after the date of
the Redemption Notice and a sum sufficient to redeem such shares has been
irrevocably deposited or set aside to pay the redemption price to the holders of
such shares upon surrender of certificates therefor. Notwithstanding the
foregoing, in the event that shares of Preferred Stock are not redeemed due to a
default in payment by the corporation or because the corporation does not have
sufficient legally available funds, such shares of Preferred Stock shall remain
outstanding and shall be entitled to all of the rights and preferences provided
herein and counted by the corporation for all voting purposes as provided
herein.
5. VOTING RIGHTS.
-------------
5.1 COMMON STOCK. Each holder of shares of Common Stock shall
------------
be entitled to one (1) vote for each share thereof held.
5.2 PREFERRED STOCK. Each holder of shares of Preferred Stock
---------------
shall be entitled to the number of votes equal to the number of whole shares of
Common Stock into which such shares of Preferred Stock could be converted
pursuant to the provisions of Section 6 below at the record date for the
determination of the stockholders entitled to vote on such matters or, if no
such record date is established, the date such vote is taken or any written
consent of stockholders is solicited.
-7-
<PAGE>
5.3 GENERAL. Subject to the foregoing provisions of this
-------
Section 5, each holder of Preferred Stock shall have full voting rights and
powers equal to the voting rights and powers of the holders of Common Stock, and
shall be entitled to notice of any stockholders' meeting in accordance with the
bylaws of the corporation (as in effect at the time in question) and applicable
law, and shall be entitled to vote, together with the holders of Common Stock,
with respect to any question upon which holders of Common Stock have the right
to vote, except as may be otherwise provided by applicable law. Except as
otherwise expressly provided herein or as required by law, the holders of
Preferred Stock and the holders of Common Stock shall vote together and not as
separate classes. Nothing herein shall limit the ability of the corporation and
the holders of the corporation's capital stock to enter into voting agreements.
6. CONVERSION RIGHTS. The outstanding shares of Preferred Stock
-----------------
shall be convertible into Common Stock as follows:
6.1 OPTIONAL CONVERSION.
-------------------
(a) Subject to the terms and conditions of this Section 6,
each share of Preferred Stock shall be convertible, at the option of the holder
thereof and without the payment of any additional consideration therefor, at any
time or from time to time, into fully paid and nonassessable shares of Common
Stock. The number of shares of Common Stock which a holder of Preferred Stock
shall be entitled to receive upon conversion thereof shall be the product
obtained by multiplying the Conversion Rate (as defined herein) for the series
of Preferred Stock held by such holder by the number of shares of such series of
Preferred Stock being converted. In the event of a redemption pursuant to
Section 4 hereof, the conversion rights set forth in this subsection 6.1 shall
terminate at the close of business on the business day immediately preceding the
Redemption Date as to the shares of Preferred Stock to be redeemed pursuant to
Section 4 on such Redemption Date, provided that in the event that shares of
Preferred Stock are not redeemed due to a default in payment by the corporation
or because the corporation does not have sufficient legally available funds, the
conversion rights set forth in this subsection 6.1 for such shares of Preferred
Stock shall survive and continue as if such shares were not to be redeemed.
(b) Each holder of Preferred Stock who elects to convert
the same into shares of Common Stock shall surrender the certificate or
certificates therefor, duly endorsed, at the office of the corporation or any
transfer agent for the Preferred Stock or Common Stock, and shall give written
notice to the corporation at such office that such holder elects to convert the
same and shall state therein the number of shares of Preferred Stock being
converted. Thereupon the corporation shall promptly issue and deliver to such
holder a certificate or certificates for the number of shares of Common Stock to
which such holder is entitled upon such conversion. Such conversion shall be
deemed to have been made immediately prior to the close of business on the date
of such surrender of the certificate or certificates representing the shares of
Preferred Stock to be converted, and the person entitled to receive the shares
of Common Stock issuable upon such conversion shall be treated for all purposes
as the record holder of such shares of Common Stock on such date.
-8-
<PAGE>
6.2 AUTOMATIC CONVERSION.
--------------------
(a) Each share of Preferred Stock shall automatically be
converted into fully paid and nonassessable shares of Common Stock at the then
effective Conversion Rate, as provided herein: (i) immediately prior to the
closing of a firm commitment underwritten public offering pursuant to (A) an
effective registration statement filed under the Securities Act of 1933, as
amended, and/or (B) a listing of the Company's Common Stock on the Swiss
Exchange, in either case covering the offer and sale of Common Stock for the
account of the corporation in which the aggregate public offering price (before
deduction of underwriters' discounts and commissions) equals or exceeds
$10,000,000 and the public offering price per share of which equals or exceeds
$4.125 per share, such price per share of Common Stock to be appropriately
adjusted to reflect Common Stock Events (as defined in subsection 6.4);
provided, however, that notwithstanding anything to the contrary herein, shares
- -------- -------
of Series D Preferred Stock shall not automatically be converted into shares of
Common Stock pursuant to this clause (a)(i) of this subsection 6.2 unless the
public offering price per share equals or exceeds $7.50 per share, such price
per share to be appropriately adjusted to reflect Common Stock Events; or (ii)
upon the corporation's receipt of the written consent of the holders of more
than sixty percent (60%) of the then outstanding shares of Preferred Stock to
the conversion of all then outstanding Preferred Stock under this Section 6;
provided, however, that an automatic conversion effected pursuant to clause (ii)
of this subsection 6.2(a) shall not apply to the Series D Preferred Stock unless
holders of a majority of the then-outstanding shares of Series D Preferred Stock
approve of such automatic conversion.
(b) Upon the occurrence of any event specified in
subparagraph 6.2(a)(i) or (ii) above, the outstanding shares of Preferred Stock
shall be converted into Common Stock automatically without the need for any
further action by the holders of such shares and whether or not the certificates
representing such shares are surrendered to the corporation or its transfer
agent; provided, however, that the corporation shall not be obligated to issue
-------- -------
certificates evidencing the shares of Common Stock issuable upon such conversion
unless the certificates evidencing such shares of Preferred Stock are either
delivered to the corporation or its transfer agent as provided below, or the
holder notifies the corporation or its transfer agent that such certificates
have been lost, stolen or destroyed and executes an agreement satisfactory to
the corporation to indemnify the corporation from any loss incurred by it in
connection with such certificates. Upon the occurrence of such automatic
conversion of the Preferred Stock, the holders of Preferred Stock shall
surrender the certificates representing such shares at the office of the
corporation or any transfer agent for the Preferred Stock or Common Stock.
Thereupon, there shall be issued and delivered to such holder promptly at such
office and in its name as shown on such surrendered certificate or certificates,
a certificate or certificates for the number of shares of Common Stock into
which the shares of Preferred Stock surrendered were convertible on the date on
which such automatic conversion occurred.
6.3 CONVERSION RATE AND CONVERSION PRICE. Each share of
------------------------------------
Preferred Stock shall be convertible in accordance with subsection 6.1 or
subsection 6.2 above into the number of shares of Common Stock (the "Conversion
----------
Rate") which results from dividing the Original Issue Price for such series of
- ----
Preferred Stock by the conversion price for such series of
-9-
<PAGE>
Preferred Stock that is in effect at the time of conversion (the "Conversion
----------
Price"). The initial Conversion Price for each series of Preferred Stock shall
- -----
be the Original Issue Price for such series of Preferred Stock. The Conversion
Price for each series of Preferred Stock shall be subject to adjustment from
time to time as provided below.
6.4 ADJUSTMENT UPON COMMON STOCK EVENT. Upon the happening of a
----------------------------------
Common Stock Event (as hereinafter defined), the Conversion Price of the Series
A Preferred Stock, the Series B Preferred Stock, the Series C Preferred Stock
and the Series D Preferred Stock shall, simultaneously with the happening of
such Common Stock Event, be adjusted by multiplying the Conversion Price of each
such series of Preferred Stock in effect immediately prior to such Common Stock
Event by a fraction, (i) the numerator of which shall be the number of shares of
Common Stock issued and outstanding immediately prior to such Common Stock
Event, and (ii) the denominator of which shall be the number of shares of Common
Stock issued and outstanding immediately after such Common Stock Event, and the
product so obtained shall thereafter be the Conversion Price for such series of
Preferred Stock. The Conversion Price for a series of Preferred Stock shall be
readjusted in the same manner upon the happening of each subsequent Common Stock
Event. As used herein, the term "Common Stock Event"
------------------
shall mean (i) the issue by the corporation of additional shares of Common Stock
as a dividend or other distribution, without consideration, on outstanding
Common Stock, (ii) a subdivision of the outstanding shares of Common Stock into
a greater number of shares of Common Stock, or (iii) a combination of the
outstanding shares of Common Stock into a smaller number of shares of Common
Stock. This Section 6.4 shall not apply to dividends or distributions also made
with respect to the Preferred Stock pursuant to Section 2.1 hereof.
6.5 ADJUSTMENTS FOR OTHER DIVIDENDS AND DISTRIBUTIONS. If at
--------------------------------------------------
any time or from time to time after the Original Issue Date the corporation pays
a dividend or makes another distribution, without consideration, to the holders
of the Common Stock payable in securities of the corporation other than shares
of Common Stock, then in each such event, provision shall be made so that the
holders of the Preferred Stock shall receive upon conversion thereof, in
addition to the number of shares of Common Stock receivable upon conversion
thereof, the amount of securities of the corporation which they would have
received had their Preferred Stock been converted into Common Stock on the date
of such event (or such record date, as applicable) and had they thereafter,
during the period from the date of such event (or such record date, as
applicable) to and including the conversion date, retained such securities
receivable by them as aforesaid during such period, subject to all other
adjustments called for during such period under this Section 6 with respect to
the rights of the holders of the Preferred Stock or with respect to such other
securities by their terms. This Section 6.5 shall not apply to dividends or
distributions also made with respect to the Preferred Stock pursuant to Section
2.1 hereof.
6.6 ADJUSTMENT FOR RECLASSIFICATION, EXCHANGE AND SUBSTITUTION.
----------------------------------------------------------
If at any time or from time to time after the Original Issue Date the Common
Stock issuable upon the conversion of the Preferred Stock is changed into the
same or a different number of shares of any class or classes of stock, whether
by recapitalization, reclassification or otherwise (other than by a Common Stock
----- ----
Event or a dividend or distribution provided for elsewhere in this Section 6),
-10-
<PAGE>
then in any such event each holder of Preferred Stock shall have the right
thereafter to convert such stock into the kind and amount of stock and other
securities and property receivable upon such recapitalization, reclassification
or other change by holders of the number of shares of Common Stock into which
such shares of Preferred Stock could have been converted immediately prior to
such recapitalization, reclassification or change, all subject to further
adjustment as provided herein or with respect to such other securities or
property by the terms thereof.
6.7 SALE OF SHARES BELOW CONVERSION PRICE.
-------------------------------------
(a) Adjustment Formula. If at any time or from time to
------------------
time after the Original Issue Date the corporation issues or sells, or is deemed
by the provisions of this subsection 6.7 to have issued or sold, Additional
Shares of Common Stock (as hereinafter defined), otherwise than in connection
with a Common Stock Event as provided in subsection 6.4, a dividend or
distribution as provided in subsection 6.5 or a recapitalization,
reclassification or other change as provided in subsection 6.6, for no
consideration or for an Effective Price (as hereinafter defined) that is less
than the Conversion Price for a series of Preferred Stock in effect immediately
prior to such issue or sale, then, and in each such case, the Conversion Price
for such series of Preferred Stock shall be reduced, as of the close of business
on the date of such issue or sale, to the price obtained by multiplying such
Conversion Price by a fraction:
(i) the numerator of which shall be the sum of (A)
the number of Common Stock Equivalents Outstanding (as hereinafter defined)
immediately prior to such issue or sale of Additional Shares of Common Stock,
plus (B) the quotient obtained by dividing the Aggregate Consideration Received
(as hereinafter defined) by the corporation for the total number of Additional
Shares of Common Stock so issued or sold (or deemed so issued and sold) by the
Conversion Price for such series of Preferred Stock in effect immediately prior
to such issue or sale; and
(ii) the denominator of which shall be the sum of (A)
the number of Common Stock Equivalents Outstanding immediately prior to such
issue or sale plus (B) the number of Additional Shares of Common Stock so issued
or sold (or deemed so issued and sold).
(b) Certain Definitions. For the purpose of making any
-------------------
adjustment required under this subsection 6.7:
(i) "Additional Shares of Common Stock" shall mean
---------------------------------
all shares of Common Stock issued by the corporation, whether or not
subsequently reacquired or retired by the corporation, other than: (A) shares of
Common Stock issued or issuable upon conversion of Preferred Stock; and (B)
shares of Common Stock (or options, warrants or rights therefor) issued to
employees, officers or directors of, or contractors, consultants or advisers to,
the corporation or any Subsidiary pursuant to stock purchase or stock option
plans, stock bonuses or awards, warrants, contracts or other arrangements that
are approved by the Board.
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<PAGE>
(ii) The "Aggregate Consideration Received" by the
--------------------------------
corporation for any issue or sale (or deemed issue or sale) of securities shall
(A) to the extent it consists of cash, be computed at the gross amount of cash
received by the corporation before deduction of any underwriting or similar
commissions, compensation or concessions paid or allowed by the corporation in
connection with such issue or sale and without deduction of any expenses payable
by the corporation; (B) to the extent it consists of property other than cash,
be computed at the fair value of that property as determined in good faith by
the Board; and (C) if Additional Shares of Common Stock, Convertible Securities
or Rights or Options to purchase either Additional Shares of Common Stock or
Convertible Securities are issued or sold together with other stock or
securities or other assets of the corporation for a consideration which covers
both, be computed as the portion of the consideration so received that may be
reasonably determined in good faith by the Board to be allocable to such
Additional Shares of Common Stock, Convertible Securities or Rights or Options.
(iii) "Common Stock Equivalents Outstanding" shall mean
------------------------------------
the number of shares of Common Stock that is equal to the sum of (A) all shares
of Common Stock of the corporation that are outstanding at the time in question,
plus (B) all shares of Common Stock of the corporation issuable upon conversion
of all shares of Preferred Stock or other Convertible Securities that are
outstanding at the time in question, plus (C) all shares of Common Stock of the
corporation that are issuable upon the exercise of Rights or Options for
Convertible Securities that are outstanding at the time in question and the
conversion or exchange of such Convertible Securities into or for Common Stock.
(iv) "Convertible Securities" shall mean stock or
----------------------
other securities convertible into or exchangeable for shares of Common Stock.
(v) The "Effective Price" of Additional Shares of
---------------
Common Stock shall mean the quotient determined by dividing the total number of
Additional Shares of Common Stock issued or sold, or deemed to have been issued
or sold, by the corporation under this subsection 6.7, into the Aggregate
Consideration Received, or deemed to have been received, by the corporation
under this subsection 6.7, for the issue of such Additional Shares of Common
Stock; and
(vi) "Rights or Options" shall mean warrants, options
-----------------
or other rights to purchase or acquire shares of Common Stock or Convertible
Securities.
(c) Deemed Issuances. For the purpose of making any
----------------
adjustment to the Conversion Price of any series of Preferred Stock as required
under this subsection 6.7, if the corporation issues or sells any Rights or
Options or Convertible Securities and if the Effective Price of the shares of
Common Stock issuable upon exercise of such Rights or Options and/or the
conversion or exchange of Convertible Securities (computed without reference to
any additional or similar protective or antidilution clauses) is less than the
Conversion Price then in effect for a series of Preferred Stock, then the
corporation shall be deemed to have issued, at the time of the issuance of such
Rights, Options or Convertible Securities, that number of Additional Shares of
Common Stock that is equal to the maximum
-12-
<PAGE>
number of shares of Common Stock issuable upon exercise or conversion of such
Rights, Options or Convertible Securities upon their issuance and to have
received, as the Aggregate Consideration Received for the issuance of such
shares, an amount equal to the total amount of the consideration, if any,
received by the corporation for the issuance of such Rights or Options or
Convertible Securities, plus, in the case of such Rights or Options, the minimum
amounts of consideration, if any, payable to the corporation upon the exercise
in full of such Rights or Options, plus, in the case of Convertible Securities,
the minimum amounts of consideration, if any, payable to the corporation (other
than by cancellation of liabilities or obligations evidenced by such Convertible
Securities) upon the conversion or exchange thereof; provided that:
-------- ----
(i) if the minimum amounts of such consideration
cannot be ascertained, but are a function of antidilution or similar protective
clauses, then the corporation shall be deemed to have received the minimum
amounts of consideration without reference to such clauses;
(ii) if the minimum amount of consideration payable to
the corporation upon the exercise of Rights or Options or the conversion or
exchange of Convertible Securities is reduced over time or upon the occurrence
or non-occurrence of specified events other than by reason of antidilution or
similar protective adjustments, then the Effective Price shall be recalculated
using the figure to which such minimum amount of consideration is reduced; and
(iii) if the minimum amount of consideration payable to
the corporation upon the exercise of such Rights or Options or the conversion or
exchange of Convertible Securities is subsequently increased, then the Effective
Price shall be recalculated using the increased minimum amount of consideration
payable to the corporation upon the exercise of such Rights or Options or the
conversion or exchange of such Convertible Securities.
No further adjustment of the Conversion Price, adjusted upon the issuance of
such Rights or Options or Convertible Securities, shall be made as a result of
the actual issuance of shares of Common Stock on the exercise of any such Rights
or Options or the conversion or exchange of any such Convertible Securities. If
any such Rights or Options or the conversion rights represented by any such
Convertible Securities shall expire without having been fully exercised, then
the Conversion Price as adjusted upon the issuance of such Rights or Options or
Convertible Securities shall be readjusted to the Conversion Price which would
have been in effect had an adjustment been made on the basis that the only
shares of Common Stock so issued were the shares of Common Stock, if any, that
there actually issued or sold on the exercise of such Rights or Options or
rights of conversion or exchange of such Convertible Securities, and such shares
of Common Stock, if any, were issued or sold for the consideration actually
received by the corporation upon such exercise, plus the consideration, if any,
actually received by the corporation for the granting of all such Rights or
Options, whether or not exercised, plus the consideration received for issuing
or selling all such Convertible Securities actually converted or exchanged, plus
the consideration, if any, actually received by the corporation (other than by
cancellation of liabilities or obligations evidenced by such Convertible
Securities) on the conversion or exchange of such Convertible Securities,
provided that such readjustment shall not apply to prior conversions of
Preferred Stock.
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<PAGE>
6.8 CERTIFICATE OF ADJUSTMENT. In each case of an adjustment or
-------------------------
readjustment of the Conversion Price for a series of Preferred Stock, the
corporation, at its expense, shall cause its Chief Financial Officer to compute
such adjustment or readjustment in accordance with the provisions hereof and
prepare a certificate showing such adjustment or readjustment and the
calculations thereof, and shall mail such certificate, by first class mail,
postage prepaid, to each registered holder of the Preferred Stock at the
holder's address as shown in the corporation's books.
6.9 FRACTIONAL SHARES. No fractional shares of Common Stock
-----------------
shall be issued upon any conversion of Preferred Stock. In lieu of any
fractional share to which the holder would otherwise be entitled, the
corporation shall pay the holder cash equal to the product of such fraction
multiplied by the Common Stock's fair market value as determined in good faith
by the Board as of the date of conversion.
6.10 RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The
---------------------------------------------
corporation shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock, solely for the purpose of effecting the
conversion of the shares of the Preferred Stock, such number of its shares of
Common Stock as shall from time to time be sufficient to effect the conversion
of all outstanding shares of the Preferred Stock; and if at any time the number
of authorized but unissued shares of Common Stock shall not be sufficient to
effect the conversion of all then outstanding shares of the Preferred Stock, the
corporation will take such corporate action as may, in the opinion of its
counsel, be necessary to increase its authorized but unissued shares of Common
Stock to such number of shares as shall be sufficient for such purpose.
6.11 NOTICES. Any notice required by the provisions of this
-------
Section 6 to be given to the holders of shares of the Preferred Stock shall be
deemed given upon the earlier of (i) actual receipt, (ii) for United States
addresses, deposit in the United States mail, by certified or registered mail,
return receipt requested, postage prepaid, or (iii) deposit with a nationally or
internationally (as applicable) recognized express courier, fees prepaid, in
each case addressed to each holder of record at the address of such holder
appearing on the books of the corporation.
6.12 NO IMPAIRMENT. The corporation shall not avoid or seek to
-------------
avoid the observance or performance of any of the terms to be observed or
performed hereunder by the corporation, but shall at all times in good faith
assist in carrying out all such action as may be reasonably necessary or
appropriate in order to protect the conversion rights of the holders of the
Preferred Stock against impairment.
7. RESTRICTIONS AND LIMITATIONS.
----------------------------
7.1 CLASS PROTECTIVE PROVISIONS - STOCK MATTERS. The approval,
-------------------------------------------
by vote or written consent, of the holders of a majority of the outstanding
shares of Preferred Stock voting together on an as-converted-into-Common Stock
basis will be required for the corporation to:
-14-
<PAGE>
(a) increase the total number of authorized shares of
Preferred Stock;
(b) reclassify any outstanding shares or securities of the
corporation into shares having rights, preferences or privileges senior to the
Preferred Stock; or
(c) authorize any other stock having rights or preferences
senior to, or pari passu with, the Preferred Stock.
In addition to the foregoing, the approval, by vote or written consent, of the
holders of at least sixty percent (60%) of the outstanding shares of Preferred
Stock, voting together on an as-converted-into-Common Stock basis, will be
required for the corporation to alter or change any of the rights, preferences,
privileges or restrictions of the Preferred Stock.
7.2 CLASS PROTECTIVE PROVISIONS - TRANSACTIONS. So long as any
------------------------------------------
shares of Preferred Stock remain outstanding, the corporation shall not, without
the approval, by vote or written consent, of the holders of sixty percent (60%)
of the Preferred Stock then outstanding, voting as a single class on an as-
converted-into-Common Stock basis, consummate any of the following transactions
unless the aggregate fair value of the consideration received by all the
corporation's stockholders in such transaction equals or exceeds the product of
$7.50 times the number of Common Stock Equivalents (as defined in subsection
6.7(b)(iii)) outstanding immediately prior to the closing of such transaction:
(a) merger or consolidation with or into any entity if such
merger or consolidation would result in the stockholders of the corporation
immediately prior to such merger or consolidation holding less than a majority
of the voting power of the surviving entity immediately after such merger or
consolidation;
(b) sale of all or substantially all the corporation's
assets in a single transaction or series of related transactions; or
(c) liquidation or dissolution of the corporation.
8. MISCELLANEOUS
-------------
8.1 NO REISSUANCE OF PREFERRED STOCK. No share or shares of
--------------------------------
Preferred Stock acquired by the corporation by reason of redemption, purchase,
conversion or otherwise shall be reissued, and all such shares shall be
canceled, retired and eliminated from the shares which the corporation shall be
authorized to issue.
ARTICLE VI
The Board of Directors of the corporation shall have the power to
adopt, amend or repeal Bylaws of the corporation.
-15-
<PAGE>
ARTICLE VII
Election of directors need not be by written ballot unless a
stockholder demands election by written ballot at the meeting and before voting
begins, or unless the Bylaws of the corporation shall so provide.
ARTICLE VIII
A director of the corporation shall not be personally liable to the
corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the Delaware General Corporation
Law or (iv) for any transaction from which the director derived an improper
personal benefit.
If the Delaware General Corporation Law is hereafter amended to
authorize the further elimination or limitation of the liability of a director,
then the liability of a director of the corporation shall be eliminated or
limited to the fullest extent permitted by the Delaware General Corporation Law,
as so amended.
Neither any amendment nor repeal of this Article VIII, nor the
adoption of any provision of this Certificate of Incorporation inconsistent with
this Article VIII, shall eliminate, reduce or otherwise adversely affect any
limitation on the personal liability of a director of the corporation existing
at the time of such amendment, repeal or adoption of an inconsistent provision.
ARTICLE IX
Effective immediately after the closing of a firm commitment
underwritten public offering of shares of the corporation's Common Stock actions
shall be taken by the corporation's stockholders only at annual or special
meetings of stockholders, and the corporation's stockholders shall not be able
to act by written consent.
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<PAGE>
EXHIBIT 3.02
RESTATED CERTIFICATE OF INCORPORATION
OF
CENTAUR PHARMACEUTICALS, INC.
ARTICLE I
The name of the corporation is Centaur Pharmaceuticals, Inc.
ARTICLE II
The address of the registered office of the corporation in the State of
Delaware is 1013 Centre Road, City of Wilmington, County of New Castle. The
name of its registered agent at that address is Corporation Service Company.
ARTICLE III
The purpose of the corporation is to engage in any lawful act or activity
for which corporations may be organized under the General Corporation Law of the
State of Delaware.
ARTICLE IV
A. Authorization of Shares
-----------------------
The total number of shares of all classes of stock which the corporation has
authority to issue is Thirty Six Million (36,000,000) shares, consisting of two
classes: Thirty Three Million (33,000,000) shares of Common Stock, $0.001 par
value per share, and Three Million (3,000,000) shares of Preferred Stock, $0.001
par value per share.
B. Designation of Future Series of Preferred Stock
-----------------------------------------------
The Board of Directors is authorized, subject to any limitations prescribed
by the law of the State of Delaware, to provide for the issuance of the shares
of Preferred Stock in one or more series, and, by filing a certificate of
designation pursuant to the applicable law of the State of Delaware, to
establish from time to time the number of shares to be included in each such
series, to fix the designation, powers, preferences and rights of the shares of
each such series and any qualifications, limitations or restrictions thereof and
to increase or decrease the number of shares of any such series (but not below
the number of shares of such series then outstanding). Subject to approval by
the Board of Directors, the number of authorized shares of Preferred Stock may
be increased or decreased (but not below the number of shares thereof then
outstanding) by the affirmative vote of the holders of a majority of the stock
of the corporation entitled to vote, unless a vote of any other holders is
required pursuant to a certificate or certificates establishing a series of
Preferred Stock.
<PAGE>
Centaur Pharmaceuticals, Inc.
Restated Certificate of Incorporation
Except as expressly provided in any certificate of designation designating
any series of Preferred Stock pursuant to the foregoing provisions of this
Article IV, any new series of Preferred Stock may be designated, fixed and
determined as provided herein by the Board of Directors without approval of the
holders of Common Stock or the holders of Preferred Stock, or any series
thereof, and any such new series may have powers, preferences and rights,
including, without limitation, voting rights, dividend rights, liquidation
rights, redemption rights and conversion rights senior to, junior to or pari
passu with the rights of the Common Stock, the Preferred Stock, or any future
class or series of Preferred Stock or Common Stock.
If the certificate of designation creating a series of Preferred Stock so
provides, any shares of a series of Preferred Stock that are acquired by the
corporation, whether by redemption, purchase, conversion or otherwise, so that
such shares are issued but not outstanding, may not be reissued as shares of
such series or as shares of the class of Preferred Stock. Upon the retirement
of any such shares and the filing of a certificate of retirement pursuant to
Sections 103 and 243 of the Delaware General Corporation Law with respect
thereto, the shares of such series shall be eliminated and the number of shares
of Preferred Stock shall be reduced accordingly.
ARTICLE V
The Board of Directors of the corporation shall have the power to adopt,
amend or repeal the Bylaws of the corporation.
ARTICLE VI
Election of directors need not be by written ballot unless the Bylaws of the
corporation shall so provide.
ARTICLE VII
To the fullest extent permitted by law, no director of the corporation shall
be personally liable for monetary damages for breach of fiduciary duty as a
director. Without limiting the effect of the preceding sentence, if the
Delaware General Corporation Law is hereafter amended to authorize the further
elimination or limitation of the liability of a director, then the liability of
a director of the corporation shall be eliminated or limited to the fullest
extent permitted by the Delaware General Corporation Law, as so amended.
Neither any amendment nor repeal of this Article VII, nor the adoption of
any provision of this Certificate of Incorporation inconsistent with this
Article VII, shall eliminate, reduce or otherwise adversely affect any
limitation on the personal liability of a director of the corporation existing
at the time of such amendment, repeal or adoption of such an inconsistent
provision.
-2-
<PAGE>
Centaur Pharmaceuticals, Inc.
Restated Certificate of Incorporation
ARTICLE VIII
Actions shall be taken by the corporation's stockholders only at annual or
special meetings of stockholders, and the corporation's stockholders shall not
be able to act by written consent.
-3-
<PAGE>
EXHIBIT 3.03
_______________________________
BYLAWS
OF
CENTAUR PHARMACEUTICALS, INC.
(a Delaware corporation)
As Adopted June 10, 1998
_______________________________
<PAGE>
BYLAWS
OF
CENTAUR PHARMACEUTICALS, INC.
(a Delaware corporation)
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I - STOCKHOLDERS................................................. 1
Section 1.1: Annual Meetings.................................... 1
Section 1.2: Special Meetings................................... 1
Section 1.3: Notice of Meetings................................. 1
Section 1.4: Adjournments....................................... 1
Section 1.5: Quorum............................................. 2
Section 1.6: Organization....................................... 2
Section 1.7: Voting; Proxies.................................... 2
Section 1.8: Fixing Date for Determination of Stockholders
of Record.......................................... 3
Section 1.9: List of Stockholders Entitled to Vote.............. 4
Section 1.10: Action by Written Consent of Stockholders.......... 4
Section 1.11: Inspectors of Elections............................ 5
Section 1.12: Notice of Stockholder Business; Nominations........ 6
ARTICLE II - BOARD OF DIRECTORS.......................................... 8
Section 2.1: Number; Qualifications............................. 8
Section 2.2: Election; Resignation; Removal; Vacancies.......... 8
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
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<S> <C>
Section 2.3: Regular Meetings................................... 8
Section 2.4: Special Meetings................................... 9
Section 2.5: Telephonic Meetings Permitted...................... 9
Section 2.6: Quorum; Vote Required for Action................... 9
Section 2.7: Organization....................................... 9
Section 2.8: Written Action by Directors........................ 9
Section 2.9: Powers............................................. 9
Section 2.10: Compensation of Directors.......................... 9
ARTICLE III - COMMITTEES................................................. 10
Section 3.1: Committees......................................... 10
Section 3.2: Committee Rules.................................... 10
ARTICLE IV - OFFICERS.................................................... 11
Section 4.1: Generally.......................................... 11
Section 4.2: Chief Executive Officer............................ 11
Section 4.3: Chairman of the Board.............................. 12
Section 4.4: President.......................................... 12
Section 4.5: Vice President..................................... 12
Section 4.6: Chief Financial Officer............................ 12
Section 4.7: Treasurer.......................................... 12
Section 4.8: Secretary.......................................... 12
Section 4.9: Delegation of Authority............................ 12
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Section 4.10: Removal............................................ 13
ARTICLE V - STOCK........................................................ 13
Section 5.1: Certificates....................................... 13
Section 5.2: Lost, Stolen or Destroyed Stock Certificates;
Issuance of New Certificates....................... 13
Section 5.3: Other Regulations.................................. 13
ARTICLE VI - INDEMNIFICATION............................................. 13
Section 6.1: Indemnification of Officers and Directors.......... 13
Section 6.2: Advance of Expenses................................ 14
Section 6.3: Non-Exclusivity of Rights.......................... 14
Section 6.4: Indemnification Contracts.......................... 14
Section 6.5: Effect of Amendment................................ 14
ARTICLE VII - NOTICES.................................................... 15
Section 7.1: Notice............................................. 15
Section 7.2: Waiver of Notice................................... 15
ARTICLE VIII - INTERESTED DIRECTORS...................................... 15
Section 8.1: Interested Directors; Quorum....................... 15
ARTICLE IX - MISCELLANEOUS............................................... 16
Section 9.1: Fiscal Year........................................ 16
Section 9.2: Seal............................................... 16
Section 9.3: Form of Records.................................... 16
Section 9.4: Reliance Upon Books and Records.................... 16
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Section 9.5: Certificate of Incorporation Governs............... 16
Section 9.6: Severability....................................... 16
ARTICLE X - AMENDMENT.................................................... 17
Section 10.1: Amendments......................................... 17
ARTICLE XI - SWISS EXCHANGE MATTERS...................................... 17
Section 11.1: Stockholder Notification of Certain Shareholdings
Above 5%........................................... 17
Section 11.2: Swiss Exchange Publicity Guidelines................ 17
</TABLE>
<PAGE>
BYLAWS
OF
CENTAUR PHARMACEUTICALS, INC.
(a Delaware corporation)
As Adopted June 10, 1998
ARTICLE I
STOCKHOLDERS
Section 1.1: Annual Meetings. An annual meeting of stockholders shall be
----------- ---------------
held for the election of directors at such date, time and place, either within
or without the State of Delaware, as the Board of Directors shall each year fix.
Any other proper business may be transacted at the annual meeting.
Section 1.2: Special Meetings. Special meetings of stockholders for any
----------- ----------------
purpose or purposes may be called at any time by the Chairman of the Board, the
Chief Executive Officer, the President or by a majority of the members of the
Board of Directors. Special meetings may not be called by any other person or
persons. If a special meeting of stockholders is called by any person or
persons other than by a majority of the members of the Board of Directors, then
----- ----
such person or persons shall call such meeting by delivering a written request
to call such meeting to each member of the Board of Directors, and the Board of
Directors shall then determine the time, date and place of such special meeting,
which shall be held not more than one hundred twenty (120) nor less than thirty-
five (35) days after the written request to call such special meeting was
delivered to each member of the Board of Directors.
Section 1.3: Notice of Meetings. Written notice of all meetings of
----------- ------------------
stockholders shall be given stating the place, date and time of the meeting and,
in the case of a special meeting, the purpose or purposes for which the meeting
is called. Unless otherwise required by applicable law or the Certificate of
Incorporation of the Corporation, such notice shall be given not less than ten
(10) nor more than sixty (60) days before the date of the meeting to each
stockholder entitled to vote at such meeting.
Section 1.4: Adjournments. Any meeting of stockholders may adjourn from
----------- ------------
time to time to reconvene at the same or another place, and notice need not be
given of any such adjourned meeting if the time, date and place thereof are
announced at the meeting at which the adjournment is taken; provided, however,
-------- -------
that if the adjournment is for more than thirty (30) days, or if after the
adjournment, a new record date is fixed for the adjourned meeting, then a notice
of the adjourned meeting shall be given to each stockholder of record entitled
to vote at
<PAGE>
the meeting. At the adjourned meeting, the Corporation may transact any
business that might have been transacted at the original meeting.
Section 1.5: Quorum. At each meeting of stockholders, the holders of
----------- ------
a majority of the shares of stock entitled to vote at the meeting, present in
person or represented by proxy, shall constitute a quorum for the transaction of
business, except if otherwise required by applicable law. If a quorum shall
------
fail to attend any meeting, the chairman of the meeting or the holders of a
majority of the shares entitled to vote who are present, in person or by proxy,
at the meeting may adjourn the meeting. Shares of the Corporation's stock
belonging to the Corporation (or to another corporation, if a majority of the
shares entitled to vote in the election of directors of such other corporation
are held, directly or indirectly, by the Corporation), shall neither be entitled
to vote nor be counted for quorum purposes; provided, however, that the
-------- -------
foregoing shall not limit the right of the Corporation or any other corporation
to vote any shares of the Corporation's stock held by it in a fiduciary
capacity.
Section 1.6: Organization. Meetings of stockholders shall be presided over
----------- ------------
by such person as the Board of Directors may designate, or, in the absence of
such a person, the Chairman of the Board, or, in the absence of such person, the
President of the Corporation, or, in the absence of such person, such person as
may be chosen by the holders of a majority of the shares entitled to vote who
are present, in person or by proxy, at the meeting. Such person shall be
chairman of the meeting and, subject to Section 1.11 hereof, shall determine the
order of business and the procedure at the meeting, including such regulation of
the manner of voting and the conduct of discussion as seems to him or her to be
in order. The Secretary of the Corporation shall act as secretary of the
meeting, but in his or her absence, the chairman of the meeting may appoint any
person to act as secretary of the meeting.
Section 1.7: Voting; Proxies. Unless otherwise provided by law or the
----------- ---------------
Certificate of Incorporation, and subject to the provisions of Section 1.8 of
these Bylaws, each stockholder shall be entitled to one (1) vote for each share
of stock held by such stockholder. Each stockholder entitled to vote at a
meeting of stockholders, or to express consent or dissent to corporate action in
writing without a meeting, may authorize another person or persons to act for
such stockholder by proxy. Such a proxy may be prepared, transmitted and
delivered in any manner permitted by applicable law. Voting at meetings of
stockholders need not be by written ballot unless such is demanded at the
meeting before voting begins by a stockholder or stockholders holding shares
representing at least one percent (1%) of the votes entitled to vote at such
meeting, or by such stockholder's or stockholders' proxy; provided, however,
-------- -------
that an election of directors shall be by written ballot if demand is so made by
any stockholder at the meeting before voting begins. If a vote is to be taken
by written ballot, then each such ballot shall state the name of the stockholder
or proxy voting and such other information as the chairman of the meeting deems
appropriate. Directors shall be elected by a plurality of the votes of the
shares present in person or represented by proxy at the meeting and entitled to
vote on the election of directors. Unless otherwise provided by applicable law,
the Certificate of Incorporation or these Bylaws, every matter other than the
election of directors shall be decided by the affirmative vote of the holders of
a majority of the shares of stock entitled to vote thereon
-2-
<PAGE>
that are present in person or represented by proxy at the meeting and are voted
for or against the matter.
Section 1.8: Fixing Date for Determination of Stockholders of Record.
----------- -------------------------------------------------------
(a) Generally. In order that the Corporation may determine the stockholders
---------
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the Board of Directors may fix, in advance, a record date,
which shall not precede the date upon which the resolution fixing the record
date is adopted by the Board of Directors and which shall not be more than sixty
(60) nor less than ten (10) days before the date of such meeting, nor more than
sixty (60) days prior to any other action. If no record date is fixed by the
Board of Directors, then the record date shall be as provided by applicable law.
A determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting; provided,
--------
however, that the Board of Directors may fix a new record date for the adjourned
- -------
meeting.
(b) Stockholder Request for Action by Written Consent. For such period of
-------------------------------------------------
time as stockholders are authorized to act by written consent pursuant to the
provisions of the Certificate of Incorporation and Section 1.10 hereof, any
stockholder of record seeking to have the stockholders authorize or take
corporate action by written consent without a meeting shall, by written notice
to the Secretary of the Corporation, request the Board of Directors to fix a
record date for such consent. Such request shall include a brief description of
the action proposed to be taken. The Board of Directors shall, within ten (10)
days after the date on which such a request is received, adopt a resolution
fixing the record date. Such record date shall not precede the date upon which
the resolution fixing the record date is adopted by the Board of Directors, and
shall not be more than ten (10) days after the date upon which the resolution
fixing the record date is adopted by the Board of Directors. If no record date
has been fixed by the Board of Directors within ten (10) days after the date on
which such a request is received, then the record date for determining
stockholders entitled to consent to corporate action in writing without a
meeting, when no prior action by the Board of Directors is required by
applicable law, shall be the first date on which a signed written consent
setting forth the action taken or proposed to be taken is delivered to the
Corporation by delivery to its registered office in the State of Delaware, to
its principal place of business or to any officer or agent of the Corporation
having custody of the book in which proceedings of meetings of stockholders are
recorded. Delivery made to the Corporation's registered office shall be by hand
or by certified or registered mail, return receipt requested. If no record date
has been fixed by the Board of Directors and prior action by the Board of
Directors is required by applicable law, then the record date for determining
stockholders entitled to consent to corporate action in writing without a
meeting shall be at the close of business on the date on which the Board of
Directors adopts the resolution taking such prior action.
-3-
<PAGE>
Section 1.9: List of Stockholders Entitled to Vote. A complete list of
----------- -------------------------------------
stockholders entitled to vote at any meeting of stockholders, arranged in
alphabetical order and showing the address of each stockholder and the number of
shares registered in the name of each stockholder, shall be open to the
examination of any stockholder, for any purpose germane to the meeting, during
ordinary business hours, for a period of at least ten (10) days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof and may be inspected by any stockholder who is present at the meeting.
Section 1.10: Action by Written Consent of Stockholders.
------------ -----------------------------------------
(a) Procedure. Unless otherwise provided by the Certificate of
---------
Incorporation, and except as set forth in Section 1.8(b) above, any action
required or permitted to be taken at any annual or special meeting of the
stockholders may be taken without a meeting, without prior notice and without a
vote, if a consent or consents in writing, setting forth the action so taken,
shall be signed by the holders of outstanding stock having not less than the
number of votes that would be necessary to authorize or take such action at a
meeting at which all shares entitled to vote thereon were present and voted;
provided, however, that effective immediately after the closing of a firm
- -------- -------
commitment underwritten public offering of shares of the Corporation's Common
Stock, any action required or permitted to be taken by the Corporation's
stockholders shall be taken only at a duly called annual or special meeting of
such stockholders, and the Corporation's stockholders shall not be able to act
by written consent. For such period of time as written stockholder consents are
permitted, such consents shall bear the date of signature of each stockholder
who signs the consent and shall be delivered to the Corporation by delivery to
its registered office in the State of Delaware, to its principal place of
business or to any officer or agent of the Corporation having custody of the
book in which proceedings of meetings of stockholders are recorded. Delivery
made to the Corporation's registered office shall be by hand or by certified or
registered mail, return receipt requested. No written consent shall be
effective to take the action set forth therein unless, within sixty (60) days of
the earliest dated consent delivered to the Corporation in the manner provided
above, written consents signed by a sufficient number of stockholders to take
the action set forth therein are delivered to the Corporation in the manner
provided above.
(b) Notice of Consent. Prompt notice of the taking of corporate action by
-----------------
stockholders without a meeting by less than unanimous written consent of the
stockholders shall be given to those stockholders who have not consented thereto
in writing, and, in the case of a Certificate Action (as defined below), if the
Delaware General Corporation Law so requires, such notice shall be given prior
to filing of the certificate in question. If the action which is consented to
requires the filing of a certificate under the Delaware General Corporation Law
(a "Certificate Action"), then if the Delaware General Corporation Law so
------------------
requires, the certificate so filed shall state that written stockholder consent
has been given in accordance with Section 228 of the Delaware General
Corporation Law and that written notice of the taking of corporate action by
stockholders without a meeting as described herein has been given as provided in
such section.
-4-
<PAGE>
Section 1.11: Inspectors of Elections.
------------ -----------------------
(a) Applicability. Unless otherwise provided in the Corporation's
-------------
Certificate of Incorporation or required by the Delaware General Corporation
Law, the following provisions of this Section 1.11 shall apply only if and when
the Corporation has a class of voting stock that is: (i) listed on a national
securities exchange; (ii) authorized for quotation on an interdealer quotation
system of a registered national securities association; or (iii) held of record
by more than 2,000 stockholders; in all other cases, observance of the
provisions of this Section 1.11 shall be optional and at the discretion of the
Corporation.
(b) Appointment. The Corporation shall, in advance of any meeting of
-----------
stockholders, appoint one or more inspectors of election to act at the meeting
and make a written report thereof. The Corporation may designate one or more
persons as alternate inspectors to replace any inspector who fails to act. If
no inspector or alternate is able to act at a meeting of stockholders, the
person presiding at the meeting shall appoint one or more inspectors to act at
the meeting.
(c) Inspector's Oath. Each inspector of election, before entering upon the
----------------
discharge of his duties, shall take and sign an oath faithfully to execute the
duties of inspector with strict impartiality and according to the best of his or
her ability.
(d) Duties of Inspectors. At a meeting of stockholders, the inspectors of
--------------------
election shall (i) ascertain the number of shares outstanding and the voting
power of each share, (ii) determine the shares represented at a meeting and the
validity of proxies and ballots, (iii) count all votes and ballots, (iv)
determine and retain for a reasonable period of time a record of the disposition
of any challenges made to any determination by the inspectors and (v) certify
their determination of the number of shares represented at the meeting and their
count of all votes and ballots. The inspectors may appoint or retain other
persons or entities to assist the inspectors in the performance of the duties of
the inspectors.
(e) Opening and Closing of Polls. The date and time of the opening and the
----------------------------
closing of the polls for each matter upon which the stockholders will vote at a
meeting shall be announced by the inspectors at the meeting. No ballot, proxies
or votes, nor any revocations thereof or changes thereto, shall be accepted by
the inspectors after the closing of the polls unless the Court of Chancery upon
application by a stockholder shall determine otherwise.
(f) Determinations. In determining the validity and counting of proxies and
ballots, the inspectors shall be limited to an examination of the proxies, any
envelopes submitted with those proxies, any information provided in connection
with proxies in accordance with Section 212(c)(2) of the Delaware General
Corporation Law, the ballots and the regular books and records of the
Corporation, except that the inspectors may consider other reliable information
------
for the limited purpose of reconciling proxies and ballots submitted by or on
behalf of banks, brokers, their nominees or similar persons that represent more
votes than the holder of a proxy is authorized by the record owner to cast or
more votes than the stockholder holds of record. If the
-5-
<PAGE>
inspectors consider other reliable information for the limited purpose permitted
herein, the inspectors at the time they make their certification of their
determinations pursuant to this Section 1.11 shall specify the precise
information considered by them, including the person or persons from whom they
obtained the information, when the information was obtained, the means by which
the information was obtained and the basis for the inspectors' belief that such
information is accurate and reliable.
Section 1.12: Notice of Stockholder Business; Nominations.
------------ -------------------------------------------
(a) Annual Meeting of Stockholders.
------------------------------
(i) Nominations of persons for election to the Board of Directors and
the proposal of business to be considered by the stockholders shall be made at
an annual meeting of stockholders (A) pursuant to the Corporation's notice of
such meeting, (B) by or at the direction of the Board of Directors or (C) by any
stockholder of the Corporation who was a stockholder of record at the time of
giving of the notice provided for in this Section 1.12, who is entitled to vote
at such meeting and who complies with the notice procedures set forth in this
Section 1.12.
(ii) For nominations or other business to be properly brought before
an annual meeting by a stockholder pursuant to clause (C) of subparagraph (a)(i)
of this Section 1.12, the stockholder must have given timely notice thereof in
writing to the Secretary of the Corporation and such other business must
otherwise be a proper matter for stockholder action. To be timely, a
stockholder's notice must be delivered to the Secretary at the principal
executive offices of the Corporation not later than the close of business on the
sixtieth (60th) day nor earlier than the close of business on the ninetieth
(90th) day prior to the first anniversary of the preceding year's annual
meeting; provided, however, that in the event that the date of the annual
-------- -------
meeting is more than thirty (30) days before or more than sixty (60) days after
such anniversary date, notice by the stockholder, to be timely, must be so
delivered not earlier than the close of business on the ninetieth (90th) day
prior to such annual meeting and not later than the close of business on the
later of the sixtieth (60th) day prior to such annual meeting or the close of
business on the tenth (10th) day following the day on which public announcement
of the date of such meeting is first made by the Corporation. Such
stockholder's notice shall set forth: (a) as to each person whom the stockholder
proposes to nominate for election or reelection as a director all information
relating to such person that is required to be disclosed in solicitations of
proxies for election of directors, or is otherwise required, in each case
pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), including such person's written consent to being named in
------------
the proxy statement as a nominee and to serving as a director if elected; (b) as
to any other business that the stockholder proposes to bring before the meeting,
a brief description of the business desired to be brought before the meeting,
the reasons for conducting such business at the meeting and any material
interest in such business of such stockholder and the beneficial owner, if any,
on whose behalf the proposal is made; and (c) as to the stockholder giving the
notice and the beneficial owner, if any, on whose behalf the nomination or
proposal is made, (1) the name and address of such stockholder, as they appear
on the Corporation's books, and of such beneficial owner and (2) the class and
number of shares of
-6-
<PAGE>
the Corporation that are owned beneficially and held of record by such
stockholder and such beneficial owner.
(iii) Notwithstanding anything in the second sentence of subparagraph
(a)(ii) of this Section 1.12 to the contrary, in the event that the number of
directors to be elected to the Board of Directors of the Corporation is
increased and there is no public announcement by the Corporation naming all of
the nominees for director or specifying the size of the increased board of
directors at least seventy (70) days prior to the first anniversary of the
preceding year's annual meeting (or, if the annual meeting is held more than
thirty (30) days before or sixty (60) days after such anniversary date, at least
seventy (70) days prior to such annual meeting), a stockholder's notice required
by this Section 1.12 shall also be considered timely, but only with respect to
nominees for any new positions created by such increase, if it shall be
delivered to the Secretary of the Corporation at the principal executive office
of the Corporation not later than the close of business on the tenth (10th) day
following the day on which such public announcement is first made by the
Corporation.
(b) Special Meetings of Stockholders. Only such business shall be
--------------------------------
conducted at a special meeting of stockholders as shall have been brought before
the meeting pursuant to the Corporation's notice of such meeting. Nominations
of persons for election to the Board of Directors may be made at a special
meeting of stockholders at which directors are to be elected pursuant to the
Corporation's notice of such meeting (i) by or at the direction of the Board of
Directors or (ii) provided that the Board of Directors has determined that
directors shall be elected at such meeting, by any stockholder of the
Corporation who is a stockholder of record at the time of giving of notice of
the special meeting, who shall be entitled to vote at the meeting and who
complies with the notice procedures set forth in this Section 1.12. In the
event the Corporation calls a special meeting of stockholders for the purpose of
electing one or more directors to the Board of Directors, any such stockholder
may nominate a person or persons (as the case may be), for election to such
position(s) as specified in the Corporation's notice of meeting, if the
stockholder's notice required by subparagraph (a)(ii) of this Section 1.12 shall
be delivered to the Secretary of the Corporation at the principal executive
offices of the Corporation not earlier than the ninetieth (90th) day prior to
such special meeting and not later than the close of business on the later of
the sixtieth (60th) day prior to such special meeting or the tenth (10th) day
following the day on which public announcement is first made of the date of the
special meeting and of the nominees proposed by the Board of Directors to be
elected at such meeting.
(c) General.
-------
(i) Only such persons who are nominated in accordance with the
procedures set forth in this Section 1.12 shall be eligible to serve as
directors and only such business shall be conducted at a meeting of stockholders
as shall have been brought before the meeting in accordance with the procedures
set forth in this Section 1.12. Except as otherwise provided by law or these
Bylaws, the chairman of the meeting shall have the power and duty to determine
whether a nomination or any business proposed to be brought before the meeting
was made or proposed, as the case may be, in accordance with the procedures set
forth in this Section 1.12
-7-
<PAGE>
and, if any proposed nomination or business is not in compliance herewith, to
declare that such defective proposal or nomination shall be disregarded.
(ii) For purposes of this Section 1.12, the term "public
------
announcement" shall mean disclosure in a press release reported by the Dow Jones
- ------------
News Service, Associated Press or comparable news service or in a document
publicly filed by the Corporation with the Securities and Exchange Commission
pursuant to Sections 13, 14 or 15(d) of the Exchange Act.
(iii) Notwithstanding the foregoing provisions of this Section 1.12,
at any time that the Corporation is registered under the Exchange Act, a
stockholder shall also comply with all applicable requirements of the Exchange
Act and the rules and regulations thereunder with respect to the matters set
forth herein. Nothing in this Section 1.12 shall be deemed to affect any rights
of stockholders to request inclusion of proposals in the Corporation's proxy
statement pursuant to Rule 14a-8 under the Exchange Act at such time as the
Corporation is subject to the Exchange Act.
ARTICLE II
BOARD OF DIRECTORS
Section 2.1: Number; Qualifications. The Board of Directors shall
----------- ----------------------
consist of one or more members. The number of directors as of the date of
adoption of these Bylaws shall be [SEVEN (7)], and thereafter shall be fixed
from time to time by resolution of the Board of Directors. No decrease in the
authorized number of directors constituting the Board of Directors shall shorten
the term of any incumbent director. Directors need not be stockholders of the
Corporation.
Section 2.2: Election; Resignation; Removal; Vacancies. Each director shall
----------- -----------------------------------------
hold office until the next annual meeting of stockholders and until his or her
successor is elected and qualified, or until his or her earlier death,
resignation or removal. Any director may resign at any time upon written notice
to the Corporation. Subject to the rights of any holders of Preferred Stock then
outstanding: (i) any director or the entire Board of Directors may be removed,
with or without cause, by the holders of a majority of the shares then entitled
to vote at an election of directors; and (ii) any vacancy occurring in the Board
of Directors for any cause, and any newly created directorship resulting from
any increase in the authorized number of directors to be elected by all
stockholders having the right to vote as a single class, may be filled by the
stockholders, by a majority of the directors then in office, although less than
a quorum, or by a sole remaining director.
Section 2.3: Regular Meetings. Regular meetings of the Board of Directors
----------- ----------------
may be held at such places, within or without the State of Delaware, and at such
times as the Board of Directors may from time to time determine. Notice of
regular meetings need not be given if the date, times and places thereof are
fixed by resolution of the Board of Directors.
-8-
<PAGE>
Section 2.4: Special Meetings. Special meetings of the Board of Directors
----------- ----------------
may be called by the Chairman of the Board, the President or a majority of the
members of the Board of Directors then in office and may be held at any time,
date or place, within or without the State of Delaware, as the person or persons
calling the meeting shall fix. Notice of the time, date and place of such
meeting shall be given, orally or in writing, by the person or persons calling
the meeting to all directors at least four (4) days before the meeting if the
notice is mailed, or at least twenty-four (24) hours before the meeting if such
notice is given by telephone, hand-delivery, telegram, telex, mailgram,
facsimile or similar communication method. Unless otherwise indicated in the
notice, any and all business may be transacted at a special meeting.
Section 2.5: Telephonic Meetings Permitted. Members of the Board of
----------- -----------------------------
Directors, or any committee of the Board, may participate in a meeting of the
Board or such committee by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and participation in a meeting pursuant to
conference telephone or similar communications equipment shall constitute
presence in person at such meeting.
Section 2.6: Quorum; Vote Required for Action. At all meetings of the
----------- --------------------------------
Board of Directors a majority of the total number of authorized directors shall
constitute a quorum for the transaction of business. Except as otherwise
provided herein or in the Certificate of Incorporation, or required by law, the
vote of a majority of the directors present at a meeting at which a quorum is
present shall be the act of the Board of Directors.
Section 2.7: Organization. Meetings of the Board of Directors shall be
----------- ------------
presided over by the Chairman of the Board, or in his or her absence by the
President, or in his or her absence by a chairman chosen at the meeting. The
Secretary shall act as secretary of the meeting, but in his or her absence, the
chairman of the meeting may appoint any person to act as secretary of the
meeting.
Section 2.8: Written Action by Directors. Any action required or
----------- ---------------------------
permitted to be taken at any meeting of the Board of Directors, or of any
committee thereof, may be taken without a meeting if all members of the Board or
such committee, as the case may be, consent thereto in writing and the writing
or writings are filed with the minutes of proceedings of the Board or committee,
respectively.
Section 2.9: Powers. The Board of Directors may, except as otherwise
------------ ------
required by law or the Certificate of Incorporation, exercise all such powers
and do all such acts and things as may be exercised or done by the Corporation.
Section 2.10: Compensation of Directors. Directors, as such, may
------------ -------------------------
receive, pursuant to a resolution of the Board of Directors, fees and other
compensation for their services as directors, including without limitation their
services as members of committees of the Board of Directors.
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<PAGE>
ARTICLE III
COMMITTEES
Section 3.1: Committees. The Board of Directors may, by resolution
----------- ----------
passed by a majority of the whole Board, designate one or more committees, each
committee to consist of one or more of the directors of the Corporation. The
Board may designate one or more directors as alternate members of any committee
who may replace any absent or disqualified member at any meeting of the
committee. In the absence or disqualification of a member of the committee, the
member or members thereof present at any meeting of such committee who are not
disqualified from voting, whether or not he, she or they constitute a quorum,
may unanimously appoint another member of the Board of Directors to act at the
meeting in place of any such absent or disqualified member. Any such committee,
to the extent provided in a resolution of the Board of Directors, shall have and
may exercise all the powers and authority of the Board of Directors in the
management of the business and affairs of the Corporation and may authorize the
seal of the Corporation to be affixed to all papers that may require it; but no
such committee shall have the power or authority in reference to amending the
Certificate of Incorporation (except that a committee may, to the extent
------
authorized in the resolution or resolutions providing for the issuance of shares
of stock adopted by the Board of Directors as provided in subsection (a) of
Section 151 of the Delaware General Corporation Law, fix the designations and
any of the preferences or rights of such shares relating to dividends,
redemption, dissolution, any distribution of assets of the Corporation, or the
conversion into, or the exchange of such shares for, shares of any other class
or classes or any other series of the same or any other class or classes of
stock of the Corporation, or fix the number of shares of any series of stock or
authorize the increase or decrease of the shares of any series), adopting an
agreement of merger or consolidation under Sections 251 or 252 of the Delaware
General Corporation Law, recommending to the stockholders the sale, lease or
exchange of all or substantially all of the Corporation's property and assets,
recommending to the stockholders a dissolution of the Corporation or a
revocation of a dissolution, or amending the Bylaws of the Corporation; and
unless the resolution of the Board of Directors expressly so provides, no such
committee shall have the power or authority to declare a dividend, authorize the
issuance of stock or adopt a certificate of ownership and merger pursuant to
Section 253 of the Delaware General Corporation Law.
Section 3.2: Committee Rules. Unless the Board of Directors otherwise
----------- ---------------
provides, each committee designated by the Board may make, alter and repeal
rules for the conduct of its business. In the absence of such rules, each
committee shall conduct its business in the same manner as the Board of
Directors conducts its business pursuant to Article II of these Bylaws.
-10-
<PAGE>
ARTICLE IV
OFFICERS
Section 4.1: Generally. The officers of the Corporation shall consist of a
----------- ---------
Chief Executive Officer and/or a President, one or more Vice Presidents, a
Secretary, a Treasurer and such other officers, including a Chairman of the
Board of Directors and/or Chief Financial Officer, as may from time to time be
appointed by the Board of Directors. All officers shall be elected by the Board
of Directors; provided, however, that the Board of Directors may empower the
-------- -------
Chief Executive Officer of the Corporation to appoint officers other than the
Chairman of the Board, the Chief Executive Officer, the President, the Chief
Financial Officer or the Treasurer. Each officer shall hold office until his or
her successor is elected and qualified or until his or her earlier death,
resignation or removal. Any number of offices may be held by the same person.
Any officer may resign at any time upon written notice to the Corporation. Any
vacancy occurring in any office of the Corporation by death, resignation,
removal or otherwise may be filled by the Board of Directors.
Section 4.2: Chief Executive Officer. Subject to the control of the
----------- -----------------------
Board of Directors and such supervisory powers, if any, as may be given by the
Board of Directors, the powers and duties of the Chief Executive Officer of the
Corporation are:
(a) To act as the general manager and, subject to the control of the
Board of Directors, to have general supervision, direction and control of the
business and affairs of the Corporation;
(b) To preside at all meetings of the stockholders;
(c) To call meetings of the stockholders to be held at such times and,
subject to the limitations prescribed by law or by these Bylaws, at such places
as he or she shall deem proper; and
(d) To affix the signature of the Corporation to all deeds, conveyances,
mortgages, guarantees, leases, obligations, bonds, certificates and other papers
and instruments in writing which have been authorized by the Board of Directors
or which, in the judgment of the Chief Executive Officer, should be executed on
behalf of the Corporation; to sign certificates for shares of stock of the
Corporation; and, subject to the direction of the Board of Directors, to have
general charge of the property of the Corporation and to supervise and control
all officers, agents and employees of the Corporation.
The President shall be the Chief Executive Officer of the Corporation unless the
Board of Directors shall designate another officer to be the Chief Executive
Officer. If there is no President, and the Board of Directors has not designated
any other officer to be the Chief Executive Officer, then the Chairman of the
Board shall be the Chief Executive Officer.
-11-
<PAGE>
Section 4.3: Chairman of the Board. The Chairman of the Board shall have
----------- ---------------------
the power to preside at all meetings of the Board of Directors and shall have
such other powers and duties as provided in these Bylaws and as the Board of
Directors may from time to time prescribe.
Section 4.4: President. The President shall be the Chief Executive
----------- ---------
Officer of the Corporation unless the Board of Directors shall have designated
another officer as the Chief Executive Officer of the Corporation. Subject to
the provisions of these Bylaws and to the direction of the Board of Directors,
and subject to the supervisory powers of the Chief Executive Officer (if the
Chief Executive Officer is an officer other than the President), and subject to
such supervisory powers and authority as may be given by the Board of Directors
to the Chairman of the Board and/or to any other officer, the President shall
have the responsibility for the general management and control of the business
and affairs of the Corporation and the general supervision and direction of all
of the officers, employees and agents of the Corporation (other than the Chief
Executive Officer, if the Chief Executive Officer is an officer other than the
President) and shall perform all duties and have all powers that are commonly
incident to the office of president or that are delegated to the President by
the Board of Directors.
Section 4.5: Vice President. Each Vice President shall have all such
----------- --------------
powers and duties as are commonly incident to the office of Vice President or
that are delegated to him or her by the Board of Directors or the Chief
Executive Officer. A Vice President may be designated by the Board to perform
the duties and exercise the powers of the Chief Executive Officer in the event
of the Chief Executive Officer's absence or disability.
Section 4.6: Chief Financial Officer. Subject to the direction of the
----------- -----------------------
Board of Directors and the President, the Chief Financial Officer shall perform
all duties and have all powers that are commonly incident to the office of chief
financial officer.
Section 4.7: Treasurer. The Treasurer shall have custody of all monies
------------ ---------
and securities of the Corporation. The Treasurer shall make such disbursements
of the funds of the Corporation as are authorized and shall render from time to
time an account of all such transactions. The Treasurer shall also perform such
other duties and have such other powers as are commonly incident to the office
of a treasurer or as the Board of Directors or the President may from time to
time prescribe.
Section 4.8: Secretary. The Secretary shall issue or cause to be issued
----------- ---------
all authorized notices for, and shall keep or cause to be kept, minutes of all
meetings of the stockholders and the Board of Directors. The Secretary shall
have charge of the corporate minute books and similar records and shall perform
such other duties and have such other powers as are commonly incident to the
office of secretary or as the Board of Directors or the President may from time
to time prescribe.
Section 4.9: Delegation of Authority. The Board of Directors may from
----------- -----------------------
time to time delegate the powers or duties of any officer to any other officers
or agents, notwithstanding any provision hereof.
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<PAGE>
Section 4.10: Removal. Any officer of the Corporation shall serve at the
------------ -------
pleasure of the Board of Directors and may be removed at any time, with or
without cause, by the Board of Directors. Such removal shall be without
prejudice to the contractual rights of such officer, if any, with the
Corporation.
ARTICLE V
STOCK
Section 5.1: Certificates. Every holder of stock shall be entitled to
----------- ------------
have a certificate signed by or in the name of the Corporation by the Chairman
or Vice-Chairman of the Board of Directors, or the President or a Vice
President, and by the Treasurer or an Assistant Treasurer, or the Secretary or
an Assistant Secretary, of the Corporation, certifying the number of shares
owned by such stockholder in the Corporation. Any or all of the signatures on
the certificate may be a facsimile.
Section 5.2: Lost, Stolen or Destroyed Stock Certificates; Issuance of
----------- ---------------------------------------------------------
New Certificates. The Corporation may issue a new certificate of stock in
- ----------------
the place of any certificate previously issued by it that is alleged to have
been lost, stolen or destroyed, and the Corporation may require the owner of the
lost, stolen or destroyed certificate, or such owner's legal representative, to
agree to indemnify the Corporation and/or to give the Corporation a bond
sufficient to indemnify it against any claim that may be made against it on
account of the alleged loss, theft or destruction of any such certificate or the
issuance of such new certificate.
Section 5.3: Other Regulations. The issue, transfer, conversion and
----------- -----------------
registration of stock certificates shall be governed by such other regulations
as the Board of Directors may establish.
ARTICLE VI
INDEMNIFICATION
Section 6.1: Indemnification of Officers and Directors. Each person who
----------- -----------------------------------------
was or is made a party to, or is threatened to be made a party to, or is
involved in any action, suit or proceeding, whether civil, criminal,
administrative or investigative (a "proceeding"), by reason of the fact that he
----------
or she (or a person of whom he or she is the legal representative) is or was a
director or officer of the Corporation or is or was serving at the request of
the Corporation as a director or officer of another corporation or of a
partnership, joint venture, trust or other enterprise, including service with
respect to employee benefit plans, shall be indemnified and held harmless by the
Corporation to the fullest extent permitted by the Delaware General Corporation
Law against all expenses, liability and loss (including attorneys' fees,
judgments, fines, ERISA excise taxes and penalties and amounts paid or to be
paid in settlement) reasonably incurred or suffered by such person in connection
therewith, and such indemnification shall
-13-
<PAGE>
continue as to a person who has ceased to be a director or officer and shall
inure to the benefit of his or her heirs, executors and administrators;
provided, however, that the Corporation shall indemnify any such person seeking
- -------- -------
indemnity in connection with a proceeding (or part thereof) initiated by such
person only if such proceeding (or part thereof) was authorized by the Board of
Directors of the Corporation; provided, further, that the Corporation shall not
-------- -------
be required to indemnify a person for amounts paid in settlement of a proceeding
unless the Corporation consents in writing to such a settlement (such consent
not to be unreasonably withheld).
Section 6.2: Advance of Expenses. The Corporation shall pay all expenses
----------- -------------------
(including attorneys' fees) incurred by such a director or officer in defending
any such proceeding as such expenses are incurred in advance of its final
disposition; provided, however, that if the Delaware General Corporation Law
-------- -------
then so requires, the payment of such expenses incurred by such a director or
officer in advance of the final disposition of such proceeding shall be made
only upon delivery to the Corporation of an undertaking, by or on behalf of such
director or officer, to repay all amounts so advanced if it should be determined
ultimately that such director or officer is not entitled to be indemnified under
this Article VI or otherwise; and provided, further, that the Corporation shall
-------- -------
not be required to advance any expenses to a person against whom the Corporation
directly brings a claim, in a proceeding, alleging that such person has breached
his or her duty of loyalty to the Corporation, committed an act or omission not
in good faith or that involves intentional misconduct or a knowing violation of
law, or derived an improper personal benefit from a transaction.
Section 6.3: Non-Exclusivity of Rights. The rights conferred on any
------------ -------------------------
person in this Article VI shall not be exclusive of any other right that such
person may have or hereafter acquire under any statute, provision of the
Certificate of Incorporation, Bylaw, agreement, vote or consent of stockholders
or disinterested directors, or otherwise. Additionally, nothing in this Article
VI shall limit the ability of the Corporation, in its discretion, to indemnify
or advance expenses to persons whom the Corporation is not obligated to
indemnify or advance expenses pursuant to this Article VI.
Section 6.4: Indemnification Contracts. The Board of Directors is
----------- -------------------------
authorized to cause the Corporation to enter into indemnification contracts with
any director, officer, employee or agent of the Corporation, or any person
serving at the request of the Corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, including employee benefit plans, providing indemnification and
related rights to such person. Such rights may be greater than those provided
in this Article VI.
Section 6.5: Effect of Amendment. Any amendment, repeal or modification
----------- -------------------
of any provision of this Article VI shall be prospective only, and shall not
adversely affect any right or protection conferred on a person pursuant to this
Article VI and existing at the time of such amendment, repeal or modification.
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<PAGE>
ARTICLE VII
NOTICES
Section 7.1: Notice. Except as otherwise specifically provided herein or
----------- ------
required by law, all notices required to be given pursuant to these Bylaws shall
be in writing and may in every instance be effectively given by hand delivery
(including use of a delivery service), by depositing such notice in the mail,
first-class postage prepaid for notices within the U.S. and airmail postage
prepaid for notices in which the sender or recipient is outside of the U.S., or
by sending such notice by prepaid telegram, telex, recognized express courier,
mailgram or facsimile. Any such notice shall be addressed to the person to whom
notice is to be given at such person's address as it appears on the records of
the Corporation. The notice shall be deemed given (i) in the case of hand
delivery, when received by the person to whom notice is to be given or by any
person accepting such notice on behalf of such person, (ii) in the case of
delivery by mail, upon deposit in the mail, (iii) in the case of delivery by
recognized express courier, on the first business day after such notice is
dispatched, and (iv) in the case of delivery via telegram, telex, mailgram, or
facsimile, when dispatched.
Section 7.2: Waiver of Notice. Whenever notice is required to be given
----------- ----------------
under any provision of these Bylaws, a written waiver of notice, signed by the
person entitled to notice, whether before or after the time stated therein,
shall be deemed equivalent to notice. Attendance of a person at a meeting shall
constitute a waiver of notice of such meeting, except when the person attends a
meeting for the express purpose of objecting at the beginning of the meeting to
the transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the stockholders, directors or members of a
committee of directors need be specified in any written waiver of notice.
ARTICLE VIII
INTERESTED DIRECTORS
Section 8.1: Interested Directors; Quorum. No contract or transaction
----------- ----------------------------
between the Corporation and one or more of its directors or officers, or between
the Corporation and any other corporation, partnership, association or other
organization in which one or more of its directors or officers are directors or
officers, or have a financial interest, shall be void or voidable solely for
this reason, or solely because the director or officer is present at or
participates in the meeting of the Board or committee thereof that authorizes
the contract or transaction, or solely because his, her or their votes are
counted for such purpose, if: (i) the material facts as to his, her or their
relationship or interest and as to the contract or transaction are disclosed or
are known to the Board of Directors or the committee, and the Board or committee
in good faith authorizes the contract or transaction by the affirmative votes of
a majority of the disinterested directors, even though the disinterested
directors be less than a quorum; (ii) the material facts as to his, her or their
relationship or interest and as to the contract or transaction are disclosed or
are known to the
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<PAGE>
stockholders entitled to vote thereon, and the contract or transaction is
specifically approved in good faith by vote of the stockholders; or (iii) the
contract or transaction is fair as to the Corporation as of the time it is
authorized, approved or ratified by the Board of Directors, a committee thereof
or the stockholders. Common or interested directors may be counted in
determining the presence of a quorum at a meeting of the Board of Directors or
of a committee which authorizes the contract or transaction.
ARTICLE IX
MISCELLANEOUS
Section 9.1: Fiscal Year. The fiscal year of the Corporation shall be
----------- -----------
determined by resolution of the Board of Directors.
Section 9.2: Seal. The Board of Directors may provide for a corporate
----------- ----
seal, which shall have the name of the Corporation inscribed thereon and shall
otherwise be in such form as may be approved from time to time by the Board of
Directors.
Section 9.3: Form of Records. Any records maintained by the Corporation
----------- ---------------
in the regular course of its business, including its stock ledger, books of
account and minute books, may be kept on, or be in the form of, magnetic tape,
diskettes, photographs, microphotographs or any other information storage
device, provided that the records so kept can be converted into clearly legible
--------
form within a reasonable time. The Corporation shall so convert any records so
kept upon the request of any person entitled to inspect the same.
Section 9.4: Reliance Upon Books and Records. A member of the Board of
----------- -------------------------------
Directors, or a member of any committee designated by the Board of Directors
shall, in the performance of his or her duties, be fully protected in relying in
good faith upon records of the Corporation and upon such information, opinions,
reports or statements presented to the Corporation by any of the Corporation's
officers or employees, or committees of the Board of Directors, or by any other
person as to matters the member reasonably believes are within such other
person's professional or expert competence and who has been selected with
reasonable care by or on behalf of the Corporation.
Section 9.5: Certificate of Incorporation Governs. In the event of any
----------- ------------------------------------
conflict between the provisions of the Corporation's Certificate of
Incorporation and Bylaws, the provisions of the Certificate of Incorporation
shall govern.
Section 9.6: Severability. If any provision of these Bylaws shall be held
----------- ------------
to be invalid, illegal, unenforceable or in conflict with the provisions of the
Corporation's Certificate of Incorporation, then such provision shall
nonetheless be enforced to the maximum extent possible consistent with such
holding and the remaining provisions of these Bylaws (including, without
limitation, all portions of any section of these Bylaws containing any such
provision held to be invalid, illegal, unenforceable or in conflict with the
Certificate of Incorporation that are not
-16-
<PAGE>
themselves invalid, illegal, unenforceable or in conflict with the Certificate
of Incorporation) shall remain in full force and effect.
ARTICLE X
AMENDMENT
Section 10.1: Amendments. Stockholders of the Corporation holding a
------------ ----------
majority of the Corporation's outstanding voting stock shall have the power to
adopt, amend or repeal Bylaws. To the extent provided in the Corporation's
Certificate of Incorporation, the Board of Directors of the Corporation shall
also have the power to adopt, amend or repeal Bylaws of the Corporation, except
insofar as Bylaws adopted by the stockholders shall otherwise provide.
ARTICLE XI
SWISS EXCHANGE MATTERS
Section 11.1: Stockholder Notification of Certain Shareholdings Above 5%.
------------ ----------------------------------------------------------
If, at any time that (i) the Corporation's shares are listed on the Swiss
Exchange and (ii) the Corporation is not registered under the Exchange Act, a
person or group of affiliated persons acquires or disposes of shares of the
Corporation's Common Stock and thereby reaches, exceeds or falls below the
respective threshold of 5%, 10%, 20%, 33 1/3%, 50% or 66 2/3% of the aggregate
outstanding Common Stock of the Corporation, such person(s) must notify the
Corporation and the Swiss Exchange of such transaction. Any notice pursuant to
this Section 11.1 shall be given by such person(s) promptly (and in any event
within ten (10) days) after such person(s) reaches, exceeds or falls below any
one or more of such percentage thresholds, by delivery in writing to the
Secretary of the Corporation and to the appropriate person at the Swiss
Exchange.
Section 11.2: Swiss Exchange Publicity Guidelines. So long as the
------------ -----------------------------------
Corporation's shares are listed on the Swiss Exchange, the Corporation shall
comply with the publicity guidelines of the listing rules of the Swiss Exchange.
-17-
<PAGE>
EXHIBIT 4.02
THIRD AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
This THIRD AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT (this
"Agreement") is made and entered into as of February 14, 1997 by and among
---------
Centaur Pharmaceuticals, Inc., a Delaware corporation (the "Company"), the
-------
persons listed on Exhibit A-1 attached hereto (the "Prior Investors"), the
----------- ---------------
persons listed on Exhibit A-2 attached hereto (the "New Investors"), the persons
----------- -------------
listed on Exhibit B attached hereto (the "Stockholders"), Aberlyn Capital
--------- ------------
Management Limited Partnership, a Delaware limited partnership ("Aberlyn"), and
-------
Prospektiva Investments ("Prospektiva"). The New Investors and the Prior
-----------
Investors are collectively referred to herein as the "Investors." Aberlyn and
---------
Prospektiva are collectively referred to herein as the "Warrant Holders."
---------------
R E C I T A L S
- - - - - - - -
A. The Company, the Prior Investors, certain of the Stockholders and
Aberlyn are parties to the Amended and Restated Registration Rights Agreement
dated as of December 5, 1994 (the "Prior Agreement").
---------------
B. The New Investors have agreed to purchase from the Company, and
the Company has agreed to sell to the New Investors, shares of the Company's
Series D Preferred Stock ("Series D Stock") on the terms and conditions set
--------------
forth in that certain Series D Preferred Stock Purchase Agreement, dated of even
date herewith, by and among the Company and the New Investors (the "Series D
--------
Agreement").
- ---------
C. The Series D Agreement provides that, as a condition of Closing
under such Series D Agreement, the Company will enter into this Agreement and
the New Investors will be granted the rights set forth herein which shall be
pari passu with rights granted to the Prior Investors with respect to shares of
the Company's Series A Preferred Stock (the "Series A Stock"), the Company's
--------------
Series B Preferred Stock (the "Series B Stock") and/or the Company's Series C
--------------
Preferred Stock (the "Series C Stock") held by the Prior Investors, except that
--------------
the New Investors shall be granted a separate S-3 registration right.
D. The Company and the undersigned parties hereto who are parties to
the Prior Agreement desire to enter into this Agreement in order to amend,
restate and replace their rights and obligations under the Prior Agreement with
the rights and obligations set forth in this Agreement.
NOW, THEREFORE, in consideration of the foregoing recitals and the mutual
promises hereinafter set forth, the parties hereby agree as follows:
1.1 INFORMATION RIGHTS.
------------------
1.1 FINANCIAL INFORMATION. The Company covenants and agrees that,
---------------------
commencing on the date of this Agreement, for so long as any Investor holds at
least the
<PAGE>
designated number of shares of Series A Stock issued to it under that certain
Series A Stock Purchase Agreement dated as of August 31, 1992 (the "Series A
--------
Agreement") and/or shares of Series B Stock issued to it under that certain
- --------
Series B Stock Purchase Agreement dated as of July 16, 1993 (the "Series B
--------
Agreement") and/or shares of Series C Stock issued to it under that certain
- ---------
Series C Stock Purchase Agreement dated as of December 5, 1994 (the "Series C
--------
Agreement") and/or shares of Series D Stock issued to it under the Series D
- ---------
Agreement and/or the equivalent number (on an as-converted basis) of shares of
Common Stock of the Company ("Common Stock") issued upon the conversion of such
------------
shares of Series A Stock and/or Series B Stock and/or Series C Stock and/or
Series D Stock ("Conversion Stock"), or any combination thereof (collectively,
----------------
the "Series ABCD Based Stock"), the Company will:
-----------------------
(a) Annual Reports. Furnish to any Investor holding at least fifty
--------------
thousand (50,000) shares of Series ABCD Based Stock, as soon as practicable and
in any event within ninety (90) days after the end of each fiscal year of the
Company, a consolidated Balance Sheet as of the end of such fiscal year, a
consolidated Statement of Income and a consolidated Statement of Cash Flows of
the Company and its subsidiaries for such year, setting forth in each case in
comparative form the figures from the Company's previous fiscal year (if any),
all prepared in accordance with generally accepted accounting principles and
practices and audited by nationally recognized independent certified public
accountants;
(b) Quarterly Reports. Furnish to any Investor holding at least fifty
-----------------
thousand (50,000) shares of Series ABCD Based Stock, as soon as practicable, and
in any case within forty-five (45) days of the end of each fiscal quarter of the
Company (except the last quarter of the Company's fiscal year) the following:
(i) quarterly unaudited financial statements, including an unaudited Balance
Sheet, an unaudited Statement of Income and an unaudited Statement of Cash
Flows, all prepared in accordance with generally accepted accounting principles
and practices, other than footnote presentation and year-end adjustments,
consistently applied and all in reasonable detail; (ii) a comparison of such
statements to the Company's operating plan and budget; and (iii) a certificate
of the Chief Financial Officer of the Company explaining any significant
differences in the statements from the Company's operating plan and budget for
the period and certifying that such statements fairly present the consolidated
financial position and consolidated financial results of the Company for the
fiscal quarter covered;
(c) Monthly Reports. Furnish to any Investor holding at least one
---------------
hundred thousand (100,000) shares of Series ABCD Based Stock, as soon as
practicable, and in any case within forty-five (45) days of the end of each
calendar month (except the last month of the Company's fiscal year) the
following: (i) monthly unaudited financial statements, including an unaudited
Balance Sheet, an unaudited Statement of Income and an unaudited Statement of
Cash Flows, all prepared in accordance with generally accepted accounting
principles and practices, other than footnote presentation and year-end
adjustments, consistently applied and all in reasonable detail; (ii) a
comparison of such statements to the Company's operating plan and budget; and
(iii) a certificate of the Chief Financial Officer of the Company certifying
that such statements fairly present the
2
<PAGE>
consolidated financial position and consolidated financial results of the
Company for the fiscal period covered; and
(d) Annual Budget. Furnish to any Investor holding at least one
-------------
hundred thousand (100,000) shares of Series ABCD Based Stock, as soon as
practicable and in any event no later than thirty (30) days after the close of
each fiscal year of the Company, an annual operating plan and budget, prepared
on a monthly basis, for the next immediate fiscal year. The Company shall also
furnish to such Investor, within a reasonable time of its preparation,
amendments to the annual budget, if any.
(e) Confidentiality. Each Investor agrees to hold all information
---------------
received pursuant to this Section in confidence, not to use such information for
any purpose other than monitoring and/or evaluating its investment in the
Company and not to disclose any of such information to any third party, except
to the extent such information may be made publicly available by the Company;
provided, however, that, notwithstanding the foregoing and subject to the
- -------- -------
limitations hereinafter stated, nothing herein shall limit or impair any
Investor from disclosing (i) any information that is rightfully obtained from a
third party who is not obligated to maintain its confidentiality; (ii) any
information that is or that becomes generally available to the public other than
as a result of a breach by an Investor of its obligations under this Section
1.1(e); (iii) any information (including financial information) to its partners,
shareholders or advisors which such Investor discloses to its partners,
shareholders and/or advisors generally, provided that any such partner,
-------- ----
shareholder and/or advisor receiving information pursuant to this Section agrees
to be bound by this or a substantially similar non-use and confidentiality
provision, and provided further that no Investor shall disclose any proprietary
-------- -------
and confidential technical/scientific information without the Company's written
approval; or (iv) any information required to be disclosed by any governmental
body, provided that the Company is given fifteen (15) days advance written
-------- ----
notice unless such notice is not legally possible.
1.2 INSPECTION RIGHTS. The Company shall permit each Investor holding
-----------------
at least one hundred thousand (100,000) shares of Series ABCD Based Stock, at
such Investor's expense, to visit and inspect the Company's properties, to
examine its books of account and records and to discuss the Company's affairs,
finances and accounts with its officers and senior management, all at such
reasonable times as may be requested by such Investor. Each Investor agrees to
hold all information received from such inspections in confidence, not to use
such information for any purpose other than monitoring and/or evaluating its
investment in the Company, and not to disclose any of such information to any
third party, ex cept to the extent such information may be made publicly
available by the Company; provided, however, that, notwithstanding the foregoing
-------- -------
and subject to the limitations hereinafter stated, nothing herein shall limit or
impair any Investor from disclosing (i) any information that is rightfully
obtained from a third party who is not obligated to maintain its
confidentiality; (ii) any information that is or that becomes generally
available to the public other than as a result of a breach by an Investor of its
obligations under this Section 1.2; (iii) any information (including financial
information) to its partners, shareholders or advisors which such Investor
discloses to its partners, shareholders and/or advisors generally, provided that
-------- ----
any such partner, shareholder and/or
3
<PAGE>
advisor receiving information pursuant to this Section agrees to be bound by
this or a substantially similar non-use and confidentiality provision, and
provided further that no Investor shall disclose any proprietary and
- -------- -------
confidential technical/scientific information without the Company's written
approval; or (iv) any informati on required to be disclosed by any governmental
body, provided that the Company is given fifteen (15) days advance written
-------- ----
notice unless such notice is not legally possible.
1.3 TERMINATION OF CERTAIN RIGHTS. The Company's obligations under
-----------------------------
Sections 1.1 and 1.2 above will terminate upon the closing of the Company's
initial public offering of Common Stock pursuant to an effective registration
statement filed under the U.S. Securities Act of 1933, as amended (the
"Securities Act").
--------------
1.4 RULE 144A INFORMATION. The Company agrees to provide each
---------------------
Investor, upon request, with such written information as may be required in
order to permit such Investor to resell any shares of Series A Stock, Series B
Stock, Series C Stock, Series D Stock or Conversion Stock pursuant to Rule 144A
promulgated under the Securities Act.
1.5 NON-LIMITATION. The provisions of this Section 1 shall not be in
--------------
limitation of any rights which an Investor may have with respect to the books of
account and records of the Company and its subsidiaries (if any) or to inspect
their properties and assets or discuss their affairs, finances and accounts,
under the laws of the respective jurisdictions in which the Company and its
subsidiaries (if any) are incorporated.
2. REGISTRATION RIGHTS.
-------------------
2.1 DEFINITIONS. For purposes of this Section 2:
-----------
(a) Registration. The terms "register," "registered," and
------------ -------- ----------
"registration" refer to a registration effected by preparing and filing a
- -------------
registration statement in compliance with the Securities Act, and the
declaration or ordering of effectiveness of such registration statement.
(b) Registrable Securities. The term "Registrable Securities"
---------------------- ----------------------
means: (1) all the shares of Common Stock of the Company issued or issuable upon
the conversion of any shares of Series A Stock issued under the Series A
Agreement that are now owned or may hereafter be acquired by any Investor or any
Investor's permitted successors and assigns; (2) all the shares of Common Stock
of the Company issued or issuable upon the conversion of any shares of Series B
Stock issued under the Series B Agreement that are now owned or may hereafter be
acquired by any Investor or any Investor's permitted successors and assigns; (3)
all the shares of Common Stock of the Company issued or issuable upon the
conversion of any shares of Series C Stock issued under the Series C Agreement
that are now owned or may hereafter be acquired by any Investor or any
Investor's permitted successors and assigns; (4) all the shares of Common Stock
of the Company issued or issuable upon the conversion of any shares of Series D
Stock issued under the Series D Agreement that are now owned or may hereafter be
acquired by any Investor or any Investor's permitted successors or assigns; (5)
the shares of Common Stock now held by the Stockholders and set forth in
Exhibit B attached hereto
4
<PAGE>
(the "Stockholders' Shares"); (6) up to 33,603 shares of the Company's Common
--------------------
Stock that may be issued to Aberlyn (the "Aberlyn Shares") pursuant to that
--------------
certain warrant dated as of December 5, 1994 (the "Aberlyn Warrant"); (7) up to
---------------
10,000 shares of the Company's Common Stock that may be issued to Prospektiva
(the "Prospektiva Shares") pursuant to that certain Consulting Warrant Agreement
------------------
dated August 12, 1996 (the "Prospektiva Warrant"); and (8) any shares of Common
-------------------
Stock of the Company issued as (or issuable upon the conversion or exercise of
any warrant, right or other security which is issued as) a dividend or other
distribution with respect to, or in exchange for or in replacement of, all such
shares of Common Stock described in clause (1), (2), (3), (4), (5), (6) or (7)
of this subsection (b); excluding in all cases, however, any Registrable
---------
Securities sold by a person in a transaction in which rights under this Section
2 are not assigned in accordance with this Agreement or any Registrable
Securities sold to the public or sold pursuant to Rule 144 promulgated under the
Securities Act; provided, however, that notwithstanding anything herein to the
-------- -------
contrary, the Stockholders' Shares and any shares of Common Stock described in
clause (8) of this Section 2(b) that are issued in respect of any Stockholders'
Shares (which with the Stockholders' Shares are collectively hereinafter
referred to as the "Excluded Shares"), shall not be Registrable Securities for
---------------
purposes of Sections 2.2 or 2.4 of this Agreement; and provided, further, that
-------- -------
notwithstanding anything herein to the contrary, the Aberlyn Shares and the
Prospektiva Shares (collectively, the "Warrant Shares") and any shares of Common
--------------
Stock described in clause (8) of this Section 2(b) that are issued in respect of
any Warrant Shares (which with the Warrant Shares are collectively hereinafter
referred to as the "Excluded Warrant Shares"), shall not be Registrable
-----------------------
Securities for purposes of Sections 2.2, 2.4 and 3 of this Agreement.
(c) Registrable Securities Then Outstanding. The number of shares of
---------------------------------------
"Registrable Securities then outstanding" shall mean the number of shares of
---------------------------------------
Common Stock which are Registrable Securities and (1) are then issued and
outstanding or (2) are then issuable pursuant to the exercise or conversion of
then outstanding and then exercisable options, warrants or convertible
securities.
(d) Holder. For purposes of this Section 2 and Section 3 hereof, the
------
term "Holder" means any person owning of record Registrable Securities that have
------
not been sold to the public or pursuant to Rule 144 promulgated under the
Securities Act or any assignee of record of such Registrable Securities to whom
rights under this Section 2 have been duly assigned in accordance with this
Agreement; provided, however, that for purposes of this Agreement, a record
-------- -------
holder of shares of Series A Stock and/or Series B Stock and/or Series C Stock
and/or Series D Stock convertible into such Registrable Securities shall be
deemed to be the Holder of such Registrable Securities; provided, further, that
-------- -------
(i) a holder of Excluded Shares (as defined in Section 2.1(b)) shall not be a
Holder with respect to such Excluded Shares for purposes of Sections 2.2 or 2.4
of this Agreement; (ii) a holder of Excluded Warrant Shares (as defined in
Section 2.1(b)) shall not be a Holder with respect to such Excluded Warrant
Shares for purposes of Sections 2.2, 2.4 and 3 of this Agreement; (iii) the
Company shall in no event be obligated to register shares of Series A Stock
and/or Series B Stock and/or Series C Stock and/or Series D Stock; and (iv)
Holders of Registrable Securities will not be required to convert their shares
of Series A Stock and/or Series B Stock and/or Series C Stock and/or Series D
Stock into
5
<PAGE>
Common Stock in order to exercise the registration rights granted hereunder
until immediately before the closing of the offering to which the registration
relates.
(e) Form S-3. The term "Form S-3" means such form under the
-------- --------
Securities Act as is in effect on the date hereof or any successor registration
form under the Securities Act subsequently adopted by the SEC which permits
inclusion or incorporation of substantial information by reference to other
documents filed by the Company with the SEC.
(f) SEC. The term "SEC" or "Commission" means the U.S. Securities
--- --- ----------
and Exchange Commission.
2.2 DEMAND REGISTRATION.
-------------------
(a) Request by Holders. If the Company shall receive at any
------------------
time after the earlier of (i) August 31, 1997, or (ii) six (6) months after the
effective date of the Company's initial public offering of its securities
pursuant to a registration filed under the Securities Act, a written request
from the Holders of at least forty percent (40%) of the Registrable Securities
then outstanding that the Company file a registration statement under the
Securities Act covering the registration of Registrable Securities pursuant to
this Section 2.2, then the Company shall, within ten (10) business days of the
receipt of such written request, give written notice of such request ("Request
-------
Notice") to all Holders, and effect, as soon as practicable, the registration
- ------
under the Securities Act of all Registrable Securities which Holders request to
be registered and included in such registration by written notice given by such
Holders to the Company within thirty (30) days after receipt of the Request
Notice, subject only to the limitations of this Section 2.2; provided that the
--------
Registrable Securities requested by all Holders to be registered pursuant to
such request must either (i) be at least thirty percent (30%) of all Registrable
Securities then outstanding or (ii) have an anticipated aggregate public
offering price (before any underwriting discounts and commissions) of not less
than $3,000,000.
(b) Underwriting. If the Holders initiating the registration
------------
request under this Section 2.2 ("Initiating Holders") intend to distribute the
------------------
Registrable Securities covered by their request by means of an underwriting,
then they shall so advise the Company as a part of their request made pursuant
to this Section 2.2 and the Company shall include such information in the
written notice referred to in subsection 2.2(a). In such event, the right of
any Holder to include such Holder's Registrable Securities in such registration
shall be conditioned upon such Holder's participation in such underwriting and
the inclusion of such Holder's Registrable Securities in the underwriting
(unless otherwise mutually agreed by a majority in interest of the Initiating
Holders and such Holder) to the extent provided herein. All Holders proposing
to distribute their securities through such underwriting shall enter into an
underwriting agreement in customary form with the managing underwriter or
underwriters selected for such underwriting by the Company. Notwithstanding any
other provision of this Section 2.2, if the underwriter(s) advise(s) the Company
in writing that marketing factors require a limitation of the number of
securities to be underwritten then the Company shall so advise all Holders of
Registrable Securities which would otherwise be registered and underwritten
pursuant hereto, and the number of
6
<PAGE>
Registrable Securities that may be included in the underwriting shall be reduced
as required by the underwriter(s) and allocated among the Holders of Registrable
Securities on a pro rata basis according to the number of Registrable Securities
then outstanding held by each Holder requesting registration (including the
Initiating Holders); provided, however, that the number of shares of Registrable
-------- -------
Securities to be included in such underwriting and registration shall not be
reduced unless all other securities of the Company are first entirely excluded
from the underwriting and registration. Any Registrable Securities excluded and
withdrawn from such underwriting shall be withdrawn from the registration.
(c) Maximum Number of Demand Registrations. The Company is
--------------------------------------
obligated to effect only two (2) such registrations pursuant to this Section
2.2.
(d) Deferral. Notwithstanding the foregoing, if the Company
--------
shall furnish to Holders requesting the filing of a registration statement
pursuant to this Section 2.2, a certificate signed by the President or Chief
Executive Officer of the Company stating that, in the good faith judgment of the
Board of Directors of the Company, it would be seriously detrimental to the
Company and its stockholders for such registration statement to be filed and it
is therefore essential to defer the filing of such registration statement, then
the Company shall have the right to defer such filing for a period of not more
than 120 days after receipt of the request of the Initiating Holders; provided,
--------
however, that the Company may not utilize this right more than once in any
- -------
twelve (12) month period.
(e) Expenses. All expenses incurred in connection with a
--------
registration pursuant to this Section 2.2, including without limitation all
registration and qualification fees, printers' and accounting fees, fees and
disbursements of counsel for the Company, and the reasonable fees and
disbursements of one counsel for the selling Holders (but excluding
underwriters' discounts and commissions), shall be borne by the Company. Each
Holder participating in a registration pursuant to this Section 2.2 shall bear
such Holder's proportionate share (based on the total number of shares sold in
such registration other than for the account of the Company) of all discounts,
commissions or other amounts payable to underwriters or brokers in connection
with such offering. Notwithstanding the foregoing, the Company shall not be
required to pay for any expenses of any registration proceeding begun pursuant
to this Section 2.2 if the registration request is subsequently withdrawn at the
request of the Holders of a majority of the Registrable Securities to be
registered, unless the Holders of a majority of the Registrable Securities then
outstanding agree to forfeit their right to one (1) demand registration pursuant
to this Section 2.2 (in which case such righ t shall be forfeited by all Holders
of Registrable Securities); provided, further, however, that if at the time of
--------- ------- -------
such withdrawal, the Holders have learned of a material adverse change in the
condition, business, or prospects of the Company not known to the Holders at the
time of their request for such registration and have withdrawn their request for
registration with reasonable promptness after learning of such material adverse
change, then the Holders shall not be required to pay any of such expenses and
shall retain their rights pursuant to this Section 2.2.
2.3 PIGGYBACK REGISTRATIONS. The Company shall notify all Holders of
-----------------------
Registrable Securities in writing at least thirty (30) days prior to filing any
registration statement under the Securities Act for purposes of effecting a
public offering of securities
7
<PAGE>
of the Company (including, but not limited to, registration statements relating
to secondary offerings of securities of the Company, but excluding registration
---------
statements relating to any registration under Section 2.2 or Section 2.4 of this
Agreement or to any employee benefit plan or a corporate reorganization;
provided, however, that notwithstanding the foregoing, the registration rights
- -------- -------
provided in this Section 2.3 to the Warrant Holders shall apply to registrations
under Section 2.4 of this Agreement) and will afford each such Holder an
opportunity to include in such registration statement all or any part of the
Registrable Securities then held by such Holder. Each Holder desiring to include
in any such registration statement all or any part of the Registrable Securities
held by such Holder shall, within thirty (30) days after receipt of the above-
described notice from the Company, so notify the Company in writing, and in such
notice shall inform the Company of the number of Registrable Securities such
Holder wishes to include in such registration statement. If a Holder decides not
to include all of such Holder's Registrable Securities in any registration
statement thereafter filed by the Company, such Holder shall nevertheless
continue to have the right to include any Registrable Securities in any
subsequent registration statement or registration statements as may be filed by
the Company with respect to offerings of its securities, all upon the terms and
conditions set forth herein.
(a) Underwriting. If a registration statement under which the
------------
Company gives notice under this Section 2.3 is for an underwritten offering,
then the Company shall so advise the Holders of Registrable Securities. In such
event, the right of any such Holder's Registrable Securities to be included in a
registration pursuant to this Section 2.3 shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting to the extent provided herein. All
Holders proposing to distribute their Registrable Securities through such
underwriting shall enter into an underwriting agreement in customary form with
the managing underwriter or underwriter(s) selected for such underwriting.
Notwithstanding any other provision of this Agreement, if the managing
underwriter(s) determine(s) in good faith that marketing factors require a
limitation of the number of shares to be underwritten, then the managing
underwriter(s) may exclude shares (including Registrable Securities) from the
registration and the underwriting, and the number of shares that may be included
in the registration and the underwriting shall be allocated, first, to the
-----
Company, and second, to each of the Holders requesting inclusion of their
------
Registrable Securities in such registration statement on a pro rata basis based
on the total number of Registrable Securities then held by each such Holder;
provided, however, that the right of the underwriters to exclude shares
- -------- -------
(including Registrable Securities) from the registration and underwriting as
described above shall be restricted so that the number of Registrable Securities
included in any such registration is not reduced below twenty percent (20%) of
the shares included in the registration, except for a registration relating to
the Company's initial public offering, from which all Registrable Securities may
be excluded. If any Holder disapproves of the terms of any such underwriting,
such Holder may elect to withdraw therefrom by written notice to the Company and
the underwriter, delivered at least ten (10) business days prior to the
effective date of the registration statement. Any Registrable Securities
excluded or withdrawn from such underwriting shall be excluded and withdrawn
from the registration. For any Holder which is a partnership or corporation,
the partners, retired partners and shareholders of such Holder, or the estates
and family members of any such partners and retired partners and any trusts for
the benefit of any of
8
<PAGE>
of the foregoing persons shall be deemed to be a single "Holder", and any pro
rata reduction with respect to such "Holder" shall be based upon the aggregate
amount of shares carrying registration rights owned by all entities and
individuals included in such "Holder", as defined in this sentence.
(b) Expenses. All expenses incurred in connection with a
--------
registration pursuant to this Section 2.3 (excluding underwriters' and brokers'
discounts and commissions), including, without limitation all federal and "blue
sky" registration and qualification fees, printers' and accounting fees, fees
and disbursements of counsel for the Company and reasonable fees and
disbursements of one (1) counsel for the selling Holders, shall be borne by the
Company.
2.4 FORM S-3 REGISTRATION. In case the Company shall receive from any
---------------------
Holder or Holders of at least (i) twenty percent (20%) of all Registrable
Securities or (ii) a majority of the Registrable Securities that are issued or
issuable upon conversion of the Series D Stock, a written request or requests
that the Company effect a registration on Form S-3 and any related qualification
or compliance with respect to all or a part of the Registrable Securities owned
by such Holder or Holders, then the Company will:
(a) Notice. Promptly give written notice of the proposed
------
registration and the Holder's or Holders' request therefor, and any related
qualification or compliance, to all other Holders of Registrable Securities; and
(b) Registration. As soon as practicable, effect such
------------
registration and all such qualifications and compliances as may be so requested
and as would permit or facilitate the sale and distribution of all or such
portion of such Holder's or Holders' Registrable Securities as are specified in
such request, together with all or such portion of the Registrable Securities of
any other Holder or Holders joining in such request as are specified in a
written request given within thirty (30) days after receipt of such written
notice from the Company; provided, however, that the Company shall not be
-------- -------
obligated to effect any such registration, qualification or compliance pursuant
to t his Section 2.4:
(1) if Form S-3 is not available for such offering by the
Holders;
(2) if the Holders, together with the holders of any other
securities of the Company entitled to inclusion in such registration, propose to
sell Registrable Securities and such other securities (if any) at an aggregate
price to the public of less than $500,000;
(3) if the Company shall furnish to the Holders a
certificate signed by the President or Chief Executive Officer of the Company
stating that in the good faith judgment of the Board of Directors of the
Company, it would be seriously detrimental to the Company and its stockholders
for such Form S-3 Registration to be effected at such time, in which event the
Company shall have the right to defer the filing of the Form S-3 registration
statement no more than once during any twelve (12) month period for a period
9
<PAGE>
of not more than 120 days after receipt of the request of the Holder or Holders
under this Section 2.4;
(4) if the Company has, within the twelve (12) month period
preceding the date of such request, already effected one (1) registration on
Form S-3 for the Holders pursuant to this Section 2.4; or
(5) in any particular jurisdiction in which the Company
would be required to qualify to do business or to execute a general consent to
service of process in effecting such registration, qualification or compliance.
(6) if such registration is initiated pursuant to clause
(ii) of the first paragraph of this Section 2.4 and the Company has already
effected one (1) registration that was initiated pursuant to such clause.
(c) Expenses. Subject to the foregoing, the Company shall file
--------
a Form S-3 registration statement covering the Registrable Securities and other
securities so requested to be registered pursuant to this Section 2.4 as soon as
practicable after receipt of the request or requests of the Holders for such
registration. The Company shall pay all expenses incurred in connection with the
first registration requested pursuant to this Section 2.4, (excluding
underwriters' or brokers' discounts and commissions), including without
limitation all filing, registration and qualification, printers' and accounting
fees and the reasonable fees and disbursements of one (1) counsel for the
selling Holder or Holders and counsel for the Company; provided, however that if
-------- -------
such registration is initiated pursuant to clause (i) of the first paragraph of
this Section 2.4, the Company shall also be obligated to pay all expenses as
provided for in this subsection 2.4(c) (excluding underwriters' or brokers
discounts and commissions) in connection with the first registration initiated
pursuant to clause (ii) of the first paragraph of this Section 2.4. All
expenses incurred in connection with any subsequent registration requested
pursuant to this Section 2.4 shall be borne by the Holders who participate in
such registration on a pro rata basis according to the number of Registrable
Securities owned by the Holders that are included in such registration at the
time it goes effective.
(d) Not Demand Registration. Form S-3 registrations shall not
-----------------------
be deemed to be demand registrations as described in Section 2.2 above.
2.5 OBLIGATIONS OF THE COMPANY. Whenever required to effect the
--------------------------
registration of any Registrable Securities under this Agreement, the Company
shall, as expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use its best efforts to cause such
registration statement to become effective, and, upon the request of the Holders
of a majority of the Registrable Securities registered thereunder, keep such
registration statement effective for up to ninety (90) days.
10
<PAGE>
(b) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement.
(c) Furnish to the Holders such number of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as they may
reasonably request in order to facilitate the disposition of the Registrable
Securities owned by them that are included in such registration.
(d) Use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or Blue Sky
laws of such jurisdictions as shall be reasonably requested by the Holders,
provided that the Company shall not be required in connection therewith or as a
condition thereto to qualify to do business or to file a general consent to
service of process in any such states or jurisdictions.
(e) In the event of any underwritten public offering, enter into
and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter(s) of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement.
(f) Notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing.
(g) Furnish, at the request of any Holder requesting
registration of Registrable Securities, on the date that such Registrable
Securities are delivered to the underwriters for sale, if such securities are
being sold through underwriters, or, if such securities are not being sold
through underwriters, on the date that the registration statement with respect
to such securities becomes effective, (i) an opinion, dated as of such date, of
the counsel representing the Company for the purposes of such registration, in
form and substance as is customarily given to underwriters in an underwritten
public offering and reasonably satisfactory to a majority in interest of the
Holders requesting registration, addressed to the underwriters, if any, and to
the Holders requesting registration of Registrable Securities and (ii) a
"comfort" letter dated as of such date, from the independent certified public
accountants of the Company, in form and substance as is customarily given by
independent certified public accountants to underwriters in an underwritten
public offering and reasonably satisfactory to a majority in interest of the
Holders requesting registration, addressed to the underwriters, if any, and to
the Holders requesting registration of Registrable Securities.
11
<PAGE>
2.6 FURNISH INFORMATION. Each selling Holder shall furnish to the
-------------------
Company such information regarding itself, the Registrable Securities held by
it, and the intended method of disposition of such securities as the Company
shall request in writing and as shall be required to timely effect the
registration of such selling Holder's Registrable Securities.
2.7 DELAY OF REGISTRATION. No Holder shall have any right to obtain
---------------------
or seek an injunction restraining or otherwise delaying any such registration as
the result of any controversy that might arise with respect to the
interpretation or implementation of this Section 2.
2.8 INDEMNIFICATION. In the event any Registrable Securities are
---------------
included in a registration statement under Sections 2.2, 2.3 or 2.4:
(a) By the Company. To the extent permitted by law, the Company
--------------
will indemnify and hold harmless each Holder, the partners, officers and
directors of each Holder, any underwriter (as defined in the Securities Act) for
such Holder and each person, if any, who controls such Holder or underwriter
within the meaning of the Securities Act or the Securities Exchange Act of 1934,
as amended (the "1934 Act"), ag ainst any losses, claims, damages or liabilities
--------
(joint or several) to which they may become subject under the Securities Act,
the l934 Act or other federal or state law, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon any of the following statements, omissions or violations (collectively a
"Violation"):
---------
(i) any untrue statement or alleged untrue statement of a
material fact contained in such registration statement, including
any preliminary prospectus or final prospectus contained therein
or any amendments or supplements thereto;
(ii) the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make
the statements therein not misleading, or
(iii) any violation or alleged violation by the Company of
the Securities Act, the 1934 Act, any federal or state securities
law or any rule or regulation promulgated under the Securities
Act, the 1934 Act or any federal or state securities law in
connection with the offering covered by such registration
statement;
and the Company will reimburse each such Holder, partner, officer, director,
underwriter or controlling person for any legal or other expenses reasonably
incurred by them, as incurred, in connection with investigating or defending any
such loss, claim, damage, liability or action; provided however, that the
-------- -------
indemnity agreement contained in this subsection 2.8(a) shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability or action
if such settlement is effected without the consent of the Company (which consent
shall not be unreasonably withheld), nor shall the Company be liable in any such
case for
12
<PAGE>
any such loss, claim, damage, liability or action to the extent that it arises
out of or is based upon a Violation which occurs in reliance upon and in
conformity with written information furnished expressly for use in connection
with such registration by such Holder, partner, officer, director, underwriter
or controlling person of such Holder.
(b) By Selling Holders. To the extent permitted by law, each
------------------
selling Holder will indemnify and hold harmless the Company, each of its
directors, each of its officers who have signed the registration statement, each
person, if any, who controls the Company within the meaning of the Securities
Act, any underwriter and any other Holder selling securities under such
registration statement or any of such other Holder's partners, directors or
officers or any person who controls such Holder within the meaning of the
Securities Act or the 1934 Act, against any losses, claims, damages or
liabilities (joint or several) to which the Company or any such director,
officer, controlling person, underwriter or other such Holder, or partner,
director, officer or controlling person of such other Holder may become subject
under the Securities Act, the 1934 Act or other federal or state law, insofar as
such losses, claims, damages or liabilities (or actions in respect thereto)
arise out of or are based upon any Violation, in each case to the extent (and
only to the extent) that such Violation occurs in reliance upon and in
conformity with written information furnished by such Holder expressly for use
in connection with such registration; and each such Holder will reimburse any
legal or other expenses reasonably incurred by the Company or any such director,
officer, controlling person, underwriter or other Holder, or partner, officer,
director or controlling person of such other Holder in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided, however, that the indemnity agreement contained in this subsection
- -------- -------
2.8(b) shall not apply to amounts paid in settlement of any such loss, claim,
damage, liability or action if such settlement is effected without the consent
of the Holder, which consent shall not be unreasonably withheld; and provided
--------
further, that the total amounts payable in indemnity by a Holder under this
- -------
Section 2.8(b) in respect of any Violation shall not exceed the net proceeds
received by such Holder in the registered offering out of which such Violation
arises.
(c) Notice. Promptly after receipt by an indemnified party under this
------
Section 2.8 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 2.8, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifyin g party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
-------- -------
have the right to retain its own counsel, with the fees and expenses to be paid
by the indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to actual
or potential conflict of interests between such indemnified party and any other
party represented by such counsel in such proceeding. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action, if prejudicial to its ability to defend such
action, shall relieve such indemnifying party of any liability to the
indemnified party under this Section 2.8, but the omission so to deliver written
notice to the indemnifying party will not
13
<PAGE>
relieve it of any liability that it may have to any indemnified party otherwise
than under this Section 2.8.
(d) Defect Eliminated in Final Prospectus. The foregoing
--------------------------------------
indemnity agreements of the Company and Holders are subject to the condition
that, insofar as they relate to any Violation made in a preliminary prospectus
but eliminated or remedied in the amended prospectus on file with the SEC at the
time the registration stateme nt in question becomes effective or the amended
prospectus filed with the SEC pursuant to SEC Rule 424(b) (the "Final
-----
Prospectus), such indemnity agreement shall not inure to the benefit of any
- ----------
person if a copy of the Final Prospectus was furnished to the indemnified party
and was not furnished to the person asserting the loss, liability, claim or
damage at or prior to the time such action is required by the Securities Act.
(e) Contribution. In order to provide for just and equitable
------------
contribution to joint liability under the Securities Act in any case in which
either (i) any Holder exercising rights under this Agreement, or any controlling
person of any such Holder, makes a claim for indemnification pursuant to this
Section 2.8 but it is judicially determined (by the entry of a final judgment or
decree by a court of competent jurisdiction and the expiration of time to appeal
or the denial of the last right of appeal) that such indemnification may not be
enforced in such case notwithstanding the fact that this Section 2.8 provides
for indemnification in such case, or (ii) contribution under the Securities Act
may be required on the part of any such selling Holder or any such controlling
person in circumstances for which indemnification is provided under this Section
2.8; then, and in each such case, the Company and such Holder will contribute to
the aggregate losses, claims, damages or liabilities to which they may be
subject (after contribution from others) in such proportion so that such Holder
is responsible for the portion represented by the percentage that the public
offering price of such Holder's Registrable Securities offered by and sold under
the registration statement bears to the public offering price of all securities
offered by and sold under such registration statement, and the Company and other
selling Holders are responsible for the remaining portion; provided, however,
-------- -------
that, in any such case, (A) no such Holder will be required to contribute any
amount in excess of the public offering price of all such Registrable Securities
offered and sold by such Holder pursuant to such registration statement; and (B)
no person or entity guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) will be entitled to contribution from
any person or entity who was not guilty of such fraudulent misrepresentation.
(f) Survival. The obligations of the Company and Holders under
--------
this Section 2.8 shall survive the completion of any offering of Registrable
Securities in a registration statement, and otherwise.
2.9 "MARKET STAND-OFF" AGREEMENT. Each Holder hereby agrees that such
---------------------------
Holder shall not, to the extent requested by the Company or an underwriter of
securities of the Company, sell or otherwise transfer or dispose of any
Registrable Securities or other shares of stock of the Company then beneficially
owned by such Holder (other than to donees or partners of the Holder who agree
to be similarly bound) for up to
14
<PAGE>
one hundred eighty (180) days following the effective date of a registration
statement of the Company filed under the Securities Act; provided, however,
-------- -------
that:
(a) such agreement shall be applicable only to the first such
registration statement of the Company which covers securities to be sold on its
behalf to the public in an underwritten offering but not to Registrable
Securities sold pursuant to such registration statement; and
(b) all executive officers and directors of the Company then
holding Common Stock of the Company enter into similar agreements.
In order to enforce the foregoing covenant, the Company shall have the right to
place restrictive legends on the certificates representing the shares subject to
this Section and to impose stop transfer instructions with respect to the
Registrable Securities and such other shares of stock of each Holder (and the
shares or securities of every other person subject to the foregoing restriction)
until the end of such period.
2.10 RULE 144 REPORTING. With a view to making available the benefits
------------------
of certain rules and regulations of the Commission which may at any time permit
the sale of the Registrable Securities to the public without registration, after
such time as a public market exists for the Common Stock of the Company, the
Company agrees to:
(a) Make and keep public information available, as those terms
are understood and defined in Rule 144 under the Securities Act, at all times
after the effective date of the first registration under the Securities Act
filed by the Company for an offering of its securities to the general public;
(b) Use its best efforts to file with the Commission in a timely
manner all reports and other documents required of the Company under the
Securities Act and the 1934 Act (at any time after it has become subject to such
reporting requirements); and
(c) So long as a Holder owns any Registrable Securities, to
furnish to the Holder forthwith upon request a written statement by the Company
as to its compliance with the reporting requirements of said Rule 144 (at any
time after 90 days after the effective date of the first registration statement
filed by the Company for an offering of its securities to the general public),
and of the Securities Act and the 1934 Act (at any time after it has become
subject to the reporting requirements of the 1934 Act), a copy of the most
recent annual or quarterly report of the Company, and such other reports and
documents of the Company as a Holder may reasonably request in availing itself
of any rule or regulation of the Commission allowing a Holder to sell any such
securities without registration (at any time after the Company has become
subject to the reporting requirements of the 1934 Act).
2.11 TERMINATION OF THE COMPANY'S OBLIGATIONS. The Company shall have
----------------------------------------
no obligations pursuant to Sections 2.2 through 2.4 with respect to: (i) any
request or requests for registration made by any Holder on a date more than ten
(10) years after the
15
<PAGE>
closing date of the Company's initial public offering; or (ii) any Registrable
Securities proposed to be sold by a Holder in a registration pursuant to Section
2.2, 2.3 or 2.4 if, in the opinion of counsel to the Company, all such
Registrable Securities proposed to be sold by a Holder may be sold in a three-
month period without registration under the Securities Act pursuant to Rule 144
under the Securities Act.
2.12 LIMITATION ON SUBSEQUENT REGISTRATION RIGHTS. From and after the
--------------------------------------------
date of this Agreement, the Company shall not, without the prior written consent
of the Holders of a majority of the Registrable Securities then outstanding,
enter into any agreement with any holder or prospective holder of any securities
of the Company relating to registration rights unless such agreement includes:
(a) to the extent the agreement would allow such holder or prospective holder to
include such securities in any registration filed under Section 2.2, 2.3 or 2.4
hereof, a provision that such holder or prospective holder may include such
securities in any such registration only to the extent that the inclusion of its
securities will not reduce the amount of the Registrable Securities of the
Holders which would otherwise be included; (b) to the extent the agreement would
allow such holder or prospective holder to include such securities in any
registration effected pursuant to Section 2.2, 2.3 or 2.4 hereof, a provision
that the rights of such holder to participate in such registration shall permit
participation on no greater level than that of the Holders; and (c) no provision
which would allow such holder or prospective holder to make a demand
registration which could result in such registration statement being declared
effective prior to the earlier of the dates set forth in Section 2.2(a).
3. RIGHT OF FIRST REFUSAL.
----------------------
3.1 GENERAL. Each Holder (as defined in Section 2.1(d)) and any party
-------
to whom such Holder's rights under this Section 3 have been duly assigned in
accordance with Section 4.1(b) (each such Holder or assignee being hereinafter
referred to as a "Rights Holder") has the right of first refusal to purchase
-------------
such Rights Holder's Pro Rata Share (as defined below), of all (or any part) of
any "New Securities" (as defined in Section 3.2) that the Company may from time
to time issue after the date of this Agreement. A Rights Holder's "Pro Rata
--------
Share" for purposes of this right of first refusal is the ratio of (a) the
- -----
number of Registrable Securities as to which such Rights Holder is the Holder
(and/or is deemed to be the Holder under Section 2.1(d)), to (b) a number of
shares of Common Stock of the Company equal to the sum of (i) the total number
of shares of Common Stock of the Company then outstanding plus (ii) the total
number of shares of Common Stock of the Company into which all then outstanding
shares of Preferred Stock of the Company are then convertible plus (iii) the
number of shares of Common Stock of the Company reserved for issuance under
stock purchase and stock option plans of the Company and outstanding warrants.
3.2 NEW SECURITIES. "New Securities" shall mean any Common Stock or
-------------- --------------
Preferred Stock of the Company, whether now authorized or not, and rights,
options or warrants to purchase such Common Stock or Preferred Stock, and
securities of any type whatsoever that are, or may become, convertible or
exchangeable into such Common Stock or Preferred Stock; provided, however, that
-------- -------
the term "New Securities" does not include:
---- --- -------
16
<PAGE>
(a) any shares of the Company's Common Stock (and/or options or
warrants therefor) issued to employees, officers, directors, contractors,
advisors or consultants of the Company pursuant to incentive agreements or plans
approved by the Board of Directors of the Company;
(b) any shares of Series A Stock issued under the Series A
Agreement as such agreement may be amended;
(c) any shares of Series B Stock issued under the Series B
Agreement as such agreement may be amended, including, without limitation, any
shares of Series B Stock issued to Other Investors pursuant to Section 2.2 of
the Series B Agreement;
(d) any shares of Series C Stock issued under the Series C
Agreement as such agreement may be amended, including, without limitation, any
shares of Series C Stock issued to Other Investors pursuant to Section 2.2 of
the Series C Agreement;
(e) any shares of Series D Stock issued under the Series D
Agreement as such agreement may be amended, including, without limitation, any
shares of Series D Stock issued to Other Investors pursuant to Section 2.2 of
the Series D Agreement;
(f) any securities issuable upon conversion of any shares of
Series A Stock, Series B Stock, Series C Stock or Series D Stock;
(g) any securities issuable upon exercise of any options,
warrants or rights to purchase any securities of the Company outstanding on the
date of this Agreement ("Warrant Securities") and any securities issuable upon
-------------------
the conversion of any Warrant Securities;
(h) any securities issuable upon exercise or conversion of any
New Securities;
(i) shares of the Company's Common Stock or Preferred Stock
issued in connection with any stock split or stock dividend;
(j) securities offered by the Company to the public pursuant to
a registration statement filed under the Securities Act;
(k) any shares of the Company's Common Stock or Preferred Stock
(and/or options or warrants therefor) issued or issuable to parties providing
the Company with equipment leases, real property leases, loans, credit lines,
guaranties of indebtedness, cash price reductions or similar financing; or
17
<PAGE>
(l) securities issued pursuant to the acquisition of another
corporation or entity by the Company by consolidation, merger, purchase of all
or substantially all of the assets, or other reorganization in which the Company
acquires, in a single transaction or series of related transactions, all or
substantially all of the assets of such other corporation or entity or fifty
percent (50%) or more of the voting power of such other corporation or entity or
fifty percent (50%) or more of the equity ownership of such other entity.
3.3 PROCEDURES. In the event that the Company proposes to undertake
----------
an issuance of New Securities, it shall give to each Rights Holder written
notice of its intention to issue New Securities (the "Notice"), describing the
------
type of New Securities and the price and the general terms upon which the
Company proposes to issue such New Securities. Each Rights Holder shall have
twenty (20) days from the date on which any such Notice was given to agree in
writing to purchase such Rights Holder's Pro Rata Share of such New Securities
for the price and upon the general terms specified in the Notice by giving
written notice to the Company and stating therein the quantity of New Securities
to be purchased (not to exceed such Rights Holder's Pro Rata Share). If any
Rights Holder fails to so agree in writing within such twenty (20) day period to
purchase such Rights Holder's full Pro Rata Share of an offering of New
Securities (a "Nonpurchasing Holder"), then such Nonpurchasing Holder shall
--------------------
forfeit the right hereunder to purchase that part of such Nonpurchasing Holder's
Pro Rata Share of such New Securities that such Nonpurchasing Holder did not so
agree to purchase; and the Company shall promptly give each Rights Holder who
has timely agreed to purchase such Rights Holder's full Pro Rata Share of such
offering of New Securities (a "Purchasing Holder") written notice of the failure
-----------------
of any Nonpurchasing Holder to purchase such Nonpurchasing Holder's full Pro
Rata Share of such offering of New Securities (the "Overallotment Notice").
--------------------
Each Purchasing Holder shall have a right of overallotment such that such
Purchasing Holder may agree to purchase a portion of the Nonpurchasing Holders'
unpurchased Pro Rata Shares of such offering on a pro rata basis according to
the relative Pro Rata Shares of the Purchasing Holders, at any time within five
(5) days after receiving the Overallotment Notice.
3.4 FAILURE TO EXERCISE. In the event that the Rights Holders fail to
-------------------
exercise in full the right of first refusal within such twenty (20) plus five
(5) day period, then the Company shall have ninety (90) days thereafter to sell
the New Securities with respect to which the Rights Holders' rights of first
refusal hereunder were not exercised, at a price and upon general terms not
materially more favorable to the purchasers thereof than specified in the
Company's Notice to the Rights Holders. In the event that the Company has not
issued and sold the New Securities within such ninety (90) day period, then the
Company shall not thereafter issue or sell any New Securities without again
first offering such New Securities to the Rights Holders pursuant to this
Section 3.
3.5 TERMINATION. This right of first refusal shall terminate (a)
-----------
immediately before the closing of the first underwritten sale of Common Stock of
the Company to the public pursuant to a registration statement filed with, and
declared effective by, the SEC under the Securities Act, covering the offer and
sale of Common Stock to the public for an aggregate gross public offering price
(calculated before deduction of underwriters' discounts and commissions) of at
least $10.0 million and a public offering price per share which equals or
exceeds $4.125 per share (such price per
18
<PAGE>
share of Common Stock to be appropriately adjusted to reflect stock dividends,
splits, combinations and the like), or (b) upon an acquisition of the Company by
another corporation or entity by consolidation, merger or other reorganization
in which the holders of the Company's outstanding voting stock immediately prior
to such transaction own, immediately after such transaction, securities
representing less than fifty percent (50%) or more of the voting power of the
corporation or other entity surviving such transaction.
4. ASSIGNMENT AND AMENDMENT.
------------------------
4.1 ASSIGNMENT. Notwithstanding anything herein to the contrary:
----------
(a) Information Rights. The rights of an Investor under Section
------------------
1.1 or 1.2 or 1.4 hereof may be assigned only to a party who acquires from an
Investor (or an Investor's permitted assigns) at least that number of shares of
Series ABCD Based Stock as is described in Section 1.1 or 1.2 or 1.4 hereof,
respectively.
(b) Registration Rights; Refusal Rights. The registration rights of
-----------------------------------
a Holder under Section 2 hereof and the rights of first refusal of a Rights
Holder under Section 3 hereof, as applicable, may be assigned only: (i) to a
party who acquires at least forty thousand (40,000) shares of Series A Stock
issued under the Series A Agreement and/or Series B Stock issued under the
Series B Agreement and/or Series C Stock issued under the Series C Agreement
and/or Series D Stock issued under the Series D Agreement and/or an equivalent
number (on an as-converted basis) of Registrable Securities issued upon
conversion thereof and/or Stockholders' Shares or some combination thereof (as
appropriately adjusted for stock dividends, splits, combinations and the like);
(ii) to a party who acquires at least five thousand (5,000) Warrant Shares (as
appropriately adjusted for stock dividends, splits, combinations and the like);
(iii) to a successor entity to an Investor pursuant to a reorganization or
recapitalization of an Investor; (iv) to an affiliate of an Investor; (v) with
respect to the Warrant Shares, to an affiliate of a Warrant Holder; (vi) to the
partners or shareholders of an Investor; or (vii) with respect to rights of
first refusal under Section 3 hereof, in all or part by Commonwealth BioVentures
IV Limited Partnership or Commonwealth BioVentures V Limited Partnership or any
affiliates thereof who are Rights Holders to Concord Partners II, L.P. or any
affiliates thereof; provided that such holder as described in Clauses (iii),
-------- ----
(iv) or (vi) hereof owns at least ten thousand (10,000) shares of Series ABCD
Based Stock and/or Registrable Securities or some combination thereof (as
appropriately adjusted for stock dividends, splits, combinations and the like);
provided, however that no party may be assigned any of the foregoing rights
- --------- -------
unless the Company is given written notice by the assigning party at the time of
such assignment stating the name and address of the assignee and identifying the
securities of the Company as to which the rights in question are being assigned;
and provided further that any such assignee shall receive such assigned rights
-------- -------
subject to all the terms and conditions of this Agreement, including without
limitation the provisions of this Section 4.
4.2 AMENDMENT OF RIGHTS. Any provision of this Agreement may be
-------------------
amended and the observance thereof may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with the
written consent of the Company and Investors (and/or any of their permitted
successors or assigns) holding shares
19
<PAGE>
of Series A Stock and/or Series B Stock and/or Series C Stock and/or Series D
Stock and/or Conversion Stock representing and/or convertible into sixty percent
(60%) of all the Investors' Shares (as defined below); provided, however, any
-------- -------
such amendment or waiver shall be equally applicable to all Investors; provided,
--------
further, that it is acknowledged that the effect or implication of an amendment
- -------
or waiver may be different for different Investors. Notwithstanding the
foregoing, (i) the piggyback registration rights granted to the Stockholders and
Warrant Holders under Section 2 of this Agreement may not be eliminated or
materially and adversely changed without the written consent of persons holding
a majority of the Stockholders' Shares and Warrant Shares, voting as one group;
provided, however, that the grant to third parties of piggyback registration
- -------- -------
rights under Section 2.3 hereof on a pari passu basis with the piggyback
registration rights of the Stockholders' Shares and Warrant Shares under Section
2.3 shall not be deemed to be a material and adverse change to the piggyback
registration rights of the Stockholders and Warrant Holders under this
Agreement; and (ii) the Form S-3 registration right granted to the holders of
Registrable Securities issued or issuable upon conversion of the Series D Stock,
pursuant to clause (ii) of the first paragraph of Section 2.4 herein, may not be
eliminated or materially and adversely changed without the written consent of
persons holding a majority of the Registrable Securities issued or issuable upon
conversion of the Series D Stock. As used herein, the term "Investors' Shares"
-----------------
shall mean, collectively, (a) the shares of Common Stock then issuable upon
conversion of (i) all then outstanding shares of Series A Stock issued under the
Series A Agreement, (ii) all then outstanding shares of Series B Stock issued
under the Series B Agreement, (iii) all then outstanding shares of Series C
Stock issued under the Series C Agreement and (iv) all then outstanding shares
of Series D Stock issued under the Series D Agreement; and (b) all then
outstanding shares of Conversion Stock that were issued upon the conversion of
any shares of Series A Stock, Series B Stock, Series C Stock or Series D Stock
issued under the Series A Agreement, Series B Agreement, Series C Agreement or
Series D Agreement, respectively. Any amendment or waiver effected in
accordance with this Section 4.2 shall be binding upon each Investor, each
Stockholder, each Holder, each permitted successor or assignee of such Investor
or Holder and the Company.
4.3 OTHER INVESTORS. By signing a counterpart signature page to this
---------------
Agreement, without the need for any further consent, approval or signature of
any party to this Agreement, any party who becomes a party to the Agreement as
an "Other Investor" pursuant to Section 2.2 of the Series D Agreement shall
--------------
become a party to this Agreement, as an Investor hereunder.
4.4 RESTRICTED ACTIVITIES. Without the unanimous written consent of
---------------------
the Company's Board of Directors, or the affirmative vote of a majority plus one
of the members of the Company's Board of Directors present at a meeting duly
called and at which a quorum (which shall not be less than a majority of the
authorized number of directors) is present, neither the Company nor its
subsidiaries (if any) shall, together or alone:
(a) borrow, guarantee or otherwise incur any indebtedness or
commit itself to pay in excess of $250,000 in any transaction or series of
similar transactions;
20
<PAGE>
(b) lease, purchase, sell or otherwise acquire or dispose of any
property or services having a value in excess of $250,000 in any transaction or
series of similar transactions or license, sell or otherwise dispose of any
material United States patents, foreign patents, patent rights, invention
disclosures, know-how, trademarks, trade names, trade name rights, copyrights or
other proprietary information;
(c) assign, mortgage, pledge or otherwise encumber any assets
having a value of more than $250,000 or any material United States patents,
foreign patents, patent rights, invention disclosures, know-how, trademarks,
trade names, trade name rights, copyrights or other proprietary information;
(d) enter into any employment, consulting or similar agreement
obligating the Company to pay in excess of $100,000 per annum which the Company
or its subsidiaries shall be unable to cancel, without penalty or other cost,
upon notice of one month or less, or any collective bargaining agreement;
(e) make any loan, extend any credit or forgive or otherwise
change the terms of any indebtedness, in excess of $250,000;
(f) purchase or otherwise acquire the securities of any other
corporation, partnership or other entity or enter into any partnership, joint
venture or other similar agreement; provided, however, that investments in
-------- -------
short-term U.S. government securities, bank certificates of deposit or other
similar investments shall not be deemed a breach of this covenant;
(g) declare or pay any dividend in cash or in property or make
or authorize any other distribution directly or indirectly on its Common Stock
or any other capital stock now outstanding or hereafter issued other than as
required by the Company's Certificate of Incorporation; or (h) directly or
indirectly purchase, acquire, redeem (except as provided in the Company's
Certificate of Incorporation) or retire any share of its outstanding capital
stock or any securities exercisable for, or convertible into, its capital stock
(except that the Company, if approved by the Board of Directors of the Company,
may purchase shares of capital stock of the Company from employees upon
termination of their employment or upon any proposed sale or other transfer by
any employee of any shares of capital stock owned by such employee).
Notwithstanding the foregoing, the requirements of this Section 4.4 shall not
apply to the following transactions:
(x) merger or consolidation of the Company with or into any
entity;
21
<PAGE>
(y) sale of all or substantially all the Company's assets in a
single transaction or series of related transactions; or
(z) liquidation or dissolution of the Company.
GENERAL PROVISIONS.
------------------
5.1 NOTICES. Any notice, request or other communication required or
-------
permitted hereunder shall be in writing and shall be deemed to have been duly
given if (i) personally delivered, (ii) for U.S. addresses, deposited in the
U.S. mail by registered or certified mail, return receipt requested, postage
prepaid, (iii) deposited with a nationally or internationally (as applicable)
recognized express courier service, fees prepaid, or (iv) sent by facsimile,
with proof of transmission, as follows:
(a) if to an Investor, at such Investor's address or fax number
as set forth on Exhibit A-1 or A-2 hereto.
(b) if to a Stockholder, at such Stockholder's address or fax
number as set forth on Exhibit B hereto.
(c) if to Aberlyn, at 1000 Winter Street, Suite 1100, Waltham,
MA 02154, Attention: President, fax number: (617) 895-1645.
(d) if to Prospektiva, at Strada Regina 3, 6900 Lugano,
SWITZERLAND, Attention: Erik Danielsen, fax number: 41-91-980-0401.
(e) if to the Company, at 484 Oakmead Parkway, Sunnyvale, CA
94086, Attention: President, fax number: (408) 481-1601; with a copy to Gordon
K. Davidson, Esq., Fenwick & West LLP, Two Palo Alto Square, Palo Alto, CA
94306, fax number: (415) 494-1417.
Any party hereto (and such party's permitted assigns) may by notice so given
change such party's address or fax number for future notices hereunder. Notice
shall conclusively be deemed to have been given when delivered, deposited or
sent in the manner set forth above.
5.2 ENTIRE AGREEMENT. This Agreement, together with all the Exhibits
----------------
hereto, constitutes and contains the entire agreement and understanding of the
parties with respect to the subject matter hereof and supersedes any and all
prior negotiations, correspondence, agreements, understandings, duties or
obligations between the parties respecting the subject matter hereof, including,
without limitation, the Prior Agreement. By becoming a Stockholder under this
Agreement, UKRF acknowledges and agrees that the Right of First Refusal granted
to UKRF under this Agreement supersedes the right of first refusal granted to
UKRF pursuant to Section 4.7(b) of that certain License Agreement, dated as of
July 15, 1992, among the Company, UKRF and Oklahoma Medical Research Foundation.
Nothing herein limits Aberlyn's rights under the Aberlyn Warrant.
22
<PAGE>
5.3 GOVERNING LAW. This Agreement shall be governed by and construed
-------------
exclusively in accordance with the internal laws of the State of California as
applied to agreements among California residents entered into and to be
performed entirely within California, excluding that body of law relating to
conflict of laws and choice of law.
5.4 SEVERABILITY. If one or more provisions of this Agreement are
------------
held to be unenforceable under applicable law, then such provision(s) shall be
excluded from this Agreement and the balance of this Agreement shall be
interpreted as if such provision(s) were so excluded and shall be enforceable in
accordance with its terms.
5.5 THIRD PARTIES. Nothing in this Agreement, express or implied, is
-------------
intended to confer upon any person, other than the parties hereto and their
successors and assigns, any rights or remedies under or by reason of this
Agreement.
5.6 SUCCESSORS AND ASSIGNS. Subject to the provisions of Section
----------------------
4.1, the provisions of this Agreement shall inure to the benefit of, and shall
be binding upon, the successors and permitted assigns of the parties hereto.
5.7 CAPTIONS. The captions to sections of this Agreement have been
--------
inserted for identification and reference purposes only and shall not be used to
construe or interpret this Agreement.
5.8 COUNTERPARTS. This Agreement may be executed in counterparts,
------------
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
5.9 COSTS AND ATTORNEYS' FEES. In the event that any action, suit or
-------------------------
other proceeding is instituted concerning or arising out of this Agreement or
any transaction contemplated hereunder, the prevailing party shall recover all
of such party's costs and attorneys' fees incurred in each such action, suit or
other proceeding, including any and all appeals or petitions therefrom.
5.10 ADJUSTMENTS FOR STOCK SPLITS, ETC. Wherever in this Agreement
---------------------------------
there is a reference to a specific number of shares of Common Stock or Preferred
Stock of the Company of any class or series, then, upon the occurrence of any
subdivision, combination or stock dividend of such class or series of stock, the
specific number of shares so referenced in this Agreement shall automatically be
proportionally adjusted to reflect the effect on the outstanding shares of such
class or series of stock by such subdivision, combination or stock dividend.
5.11 AGGREGATION OF STOCK. All shares held or acquired by affiliated
--------------------
entities or persons shall be aggregated together for the purpose of determining
whether the share ownership of any entity or person satisfies the requirements
under this Agreement with respect to the availability of any rights under this
Agreement.
23
<PAGE>
5.12 DELAYS OR OMISSIONS. No delay or omission to exercise any right,
-------------------
power or remedy accruing to any party hereto upon any breach or default of any
other party under this Agreement shall impair any such right, power or remedy
nor shall it be construed to be a waiver of any such breach or default, or an
acquiescence therein, or in any similar breach or default occurring thereafter;
nor shall any waiver of any single breach or default be deemed a waiver of any
other breach or default theretofore or thereafter occurring.
[REST OF PAGE LEFT BLANK INTENTIONALLY]
24
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the date and year first above written.
COMPANY STOCKHOLDERS
- ------- ------------
CENTAUR PHARMACEUTICALS, INC. /s/ John M. Carney
----------------------------
John M. Carney
By: /s/ Brian D. Frenzel
---------------------------------
Brian D. Frenzel, President
/s/ Patricia A. Carney
----------------------------
Patricia A. Carney
ABERLYN
- -------
ABERLYN CAPITAL MANAGEMENT /s/ Robert A. Floyd
LIMITED PARTNERSHIP ----------------------------
Robert A. Floyd [trustee of Robert
A. Floyd 1995 Revocable Trust and
Marlene G. Floyd 1995 Revocable
Trust]
By: Aberlyn Capital Management Co., Inc.,
General Partner OKLAHOMA MEDICAL
RESEARCH FOUNDATION
By: /s/ Diana M. Spano
----------------------------------- By: /s/ William G. Thurman, M.D.
Name: Diana M. Spano -------------------------------
--------------------------------- Name: William G. Thurman, M.D.
Title: Vice President -----------------------------
-------------------------------- Title: President
----------------------------
PROSPEKTIVA THE UNIVERSITY OF KENTUCKY
- -----------
RESEARCH FOUNDATION
PROSPEKTIVA INVESTMENTS
By: /s/ Per Erik Danielsen By:________________________________
-----------------------------------
Name: Per Erik Danielsen Name:______________________________
---------------------------------
Title: Principal Title:_____________________________
--------------------------------
[SIGNATURE PAGE TO THIRD AMENDED AND
RESTATED INVESTORS' RIGHTS AGREEMENT]
[ADDITIONAL SIGNATURE PAGES WITH SIGNATURES OF PRIOR INVESTORS (IDENTIFIED ON
EXHIBIT A-1) AND NEW INVESTORS (IDENTIFIED ON EXHIBIT A-2) OMITTED]
25
<PAGE>
EXHIBIT A-1
PRIOR INVESTORS
---------------
Name & Address Name & Address
- -------------- --------------
Charter Ventures Brian D. Frenzel and Constance
525 University Avenue, Suite 1500 S.A. Frenzel as Community Property
Palo Alto, CA 94301 1973 Newcastle Drive
Fax No.: Los Altos, CA 94024
Fax No.:
Mark R. Collins and Susan L. Paul F. Glenn
Collins as Community Property c/o Glenn Foundation
1250 Coast Village Road, Suite K 1250 Coast Village, Rd., Ste. K
Santa Barbara, CA 93108 Santa Barbara, CA 93108
Fax No.: Fax No.:
Commonwealth BioVentures V Jeremy Goldberg
Limited Partnership 397 Marlboro Street,
One Innovation Drive Boston, MA 02115
Worcester, MA 01605 Fax No.:
Fax No.:
Concord Partners II, L.P. George W. Holbrook, Jr.
535 Madison Avenue Bradley Resources Co.
New York, NY 10022 107 John Street
Fax No.: Southport, CT 06490
Fax No.:
Guy P. Curtis and Frances L. Robert Horton
Curtis P.O. Box 2294
Co-Trustees FBO Guy P. Curtis and Carefree, AZ 85377
Frances L. Curtis dated 8/1/91 Fax No.:
2133 Tokalon Street
San Diego, CA 92110-1247
Fax No.:
Dillon, Read & Co. Inc., as agent Gary S. Kledzik, Ph.D.
535 Madison Avenue 922 Fellowship Road
New York, NY 10022 Santa Barbara, CA 93109
Fax No.: Fax No.:
Charles Engles Nancy M. Lessner Trust
1299 Gilpin St., #6W 627 Lilac Drive
Denver, CO 80218 Santa Barbara, CA 93108
Fax No.: Fax No.:
26
<PAGE>
F & W Investments 1992 Lexington Partners IV, L.P.
Two Palo Alto Square, Suite 800 535 Madison Avenue
Palo Alto, CA 94306 New York, NY 10022
Attn: Gordon K. Davidson, Esq. Fax No.:
Fax No.:
Ling-Yun Wu Sheldon M. Wool
8/F, TFIT Tower 403 Simon Willard Road
85 Jen Ai Road, Section 4 Concord, MA 01742
Taipei 106, Taiwan Fax No.:
Fax No.:
Charles McVean Raymond A. & Carol B. Williams
McVean Trading Company as Community Property
850 Ridge Lake Blvd. S G01 2600 El Camino Real, Suite 607
Memphis, TN 38120 Palo Alto, CA 94306
Fax No.: Fax No.:
Menlo Ventures IV, L.P. Michael Wharton
3000 Sand Hill Road McVean Trading Company
Building 4, Suite 100 850 Ridge Lake Blvd.
Menlo Park, CA 94025 Memphis, TN 38120
Fax No.: Fax No.:
Daniel Ritchie Bismuth Investments Limited*
2000 East 12th Street Suite 922C
Apt. 1-A Europort, GIBRALTAR
Denver, CO 80206 Fax No.:
Fax No.:
Randy Scott Neptune Investment Company
c/o Cornish & Carey 2128 Stuart Street
400 Hamilton Avenue Denver, CO 80212
Palo Alto, CA 94301 Fax No.:
Fax No.:
Smith Barney CND for the IRA of Charter Ventures II, L.P.
Jack Love 525 University Avenue, Ste. 1500
Acct # OSN-465909 Palo Alto, CA 94301
c/o Smith Barney, Attn: Dan Fax No.:
Heidman
333 West 34th Street, 7th Floor
New York, NY 10001
Fax No.:
George J. Still, Jr. Lexington Partners IV, L.P.
3000 Sand Hill Road 535 Madison Avenue
Building 3, Suite 245 New York, NY 10022
Menlo Park, CA 94025 Fax No.:
Fax No.:
27
<PAGE>
Declaration of Trust made on Declaration of Trust made on
August August
17, 1935 by Winfield S. Smyth 17, 1935 by Winfield S. Smyth
for the for the
benefit of Joan S. Smyth and benefit of Joan S. Smyth and
Others Others
- - Gamble Share - Carper Share
c/o Lennart Lindberg, Trustee c/o Lennart Lindberg, Trustee
440 Main Street 440 Main Street
Worcester, MA 01608 Worcester, MA 01608
Fax No.: Fax No.:
Neuroscience Partners Limited
Partnership
100 International Blvd.
Etobicoke, Ontario
CANADA M9W 656
Fax No.:
* Effective notice to Bismuth Investments Limited requires a copy to both of
the following as well as the above address: Springfield & Company,
Attention: Legal Department, 1188 Centre Street, Newton Centre, MA 02159;
and Springfield Financial Advisory Limited, Hang Lung Centre, 22nd Floor,
2-20 Paterson Street, Causeway Bay, Hong Kong, fax 011-852-576-3105.
28
<PAGE>
EXHIBIT A-2
NEW INVESTORS
-------------
EXHIBIT A-2
CENTAUR PHARMACEUTICALS, INC.
SERIES D INVESTORS
FIRST CLOSING 2/14/97
NO. OF
INVESTOR NAME & ADDRESS SHARES
Walter R. Baron 13,336
Room 1220
400 East Randolph Street
Chicago, IL 60601
Bradley Resources Company 7,000
c/o George W. Holbrook, Jr.
P.O. Box 761-107 John Street
Southport, CT 06490-0761
John Burd 2,000
c/o LXN Corporation
5830 Oberlin Dr., Ste. 102
San Diego, CA 92121
Charter Ventures II L.P. 40,000
A. Barr Bolan
525 University Avenue, Ste. 1500
Palo Alto, CA 94301
Dillon, Read & Co. Inc., as Agent 6,164
c/o Bob Signorino
535 Madison Avenue
New York, NY 10022
Charles R. Engles 3,333
5 Wintercreek
Portola Valley, CA 94028
J. Richard Crow 13,333
Sparks Companies
889 Ridge Lake Blvd., Ste. 301
Memphis, TN 38120
James J. Fritz 13,334
234 Millcreek Lane
Naperville, IL 60540
Paul F. Glenn, Trustee, Paul F. Glenn
Revocable Trust 66,667
c/o Glenn Foundation
1250 Cost Village Rd., Ste. K
Santa Barbara, CA 93108
Glenn Foundation for Medical Research 33,334
c/o Glenn Foundation
1250 Cost Village Rd., Ste. K
Santa Barbara, CA 93108
William G. Goldstandt 20,000
10040 Happy Valley #469
Scottsdale, AZ 85255
Lloyd A. Hightower and Julia J. Hightower 13,333
c/o Hightower Investment, LLC
108-B Hilltop Drive
Segum, WA 98382
George Kramer 13,350
151 E. 79th Street
New York, NY 10021
James D. Lackie 14,000
5810 Shelby Oaks Drive
Memphis, TN 38134
Nancy M. Lessner Trust 13,334
Nancy Lessner
627 Lilac Drive
Santa Barbara, CA 93108
Menlo Ventures IV, L.P. 66,666
c/o Michael Laufer
3000 Sand Hill Road, Bldg. 4-Ste. 100
Menlo Park, CA 94025
Merrill Lynch as Custodian FBO 412-82-H44 3,000
c/o Robert Horton
2525 E. Camelback Rd., Ste. 300
Phoenix, AZ 85016
EXHIBIT A-2
CENTAUR PHARMACEUTICALS, INC.
SERIES D INVESTORS
FIRST CLOSING 2/14/97
NO. OF
INVESTOR NAME & ADDRESS SHARES
Kenneth M. Norwood 14,000
7750 Dogwood Road
Germantown, TN 83138
Oklahoma Medical Research Foundation 20,000
c/o William G. Thurman, M.D.
825 N.E. 13th Street
Oklahoma City, OK 73104
Mark W. Pacelli 14,000
206 W. Ayres
Hinsdale, IL 60521
Porcelain Partners, L.P. 14,000
Morgan Stanley & Co. Acct. 038-05330-2
One Pierpont Plaza-c/o Sheung Tom
Brooklyn, NY 11201
Jefferey Douglas Sennott 15,000
451 Chaptel Hill Lane
Northfield, IL 60093
Richard J. Sennott 30,000
1701 Gulf of Mexico Drive Unit 601
Longboat Key, FL 34228
Robert Bradley Sennott 15,000
747 42nd Street
Sarasota, FL 34234
The Slavich Family Trust, Denis M. Slavich
Trustee 12,500
3633 Jackson Street
San Francisco, CA 94118
John A. Sprague IRA 33,334
c/o Jupiter Partners LP
30 Rockefeller Plaza, #4525
New York, NY 10112
Michael Towbes 20,000
The Towbes Group
21 East Victoria Street, Ste. 300
Santa Barbara, CA 93101
William M. Van Cleve Trust dated 6/19/95,
William M. Van Cleve, Trustee 12,000
8 Dromara Road
St. Louis, MO 63124
Selvi Vescovi 5,000
924 Essex Circle
Kalamazoo, MI 49008
S. Robert Weltz, Jr. 19,166
415 Hot Springs Road
Santa Barbara, CA 93108
Banca del Gottardo 213,767
Mr. Fabio Testori
Viole S. Franscini 8
6900 Lugano
Switzerland
Buss Investment AG 210,000
Mr. Hans Jorg Buss
Norzissenweg 3
CH 4102 Binningen
Switzerland
Fonds Finans a.s. 4,000
c/o Tore Elstad Forgrigd
Haakon Vll's gt. 2
P.O. Box 1782 Vika
0122 Oslo
Norway
EXHIBIT A-2
CENTAUR PHARMACEUTICALS, INC.
SERIES D INVESTORS
FIRST CLOSING 2/14/97
NO. OF
INVESTOR NAME & ADDRESS SHARES
Hicksville os 12,000
Tore Sviland c/o Delta Invest as
Haakon Vll's gt. 6
6. etg. Oslo
Norway
Hyndoy as 10,000
Egil Wichstraud Iversen
Holmenkolveien 135
0391 Oslo, Norway
Hiroya Iwasaki 13,340
4-7-14 Yushima Bunkyoku
Tokyo, Japan
Widor Kirkeby 3,000
Huk Aveny 54 A
0287 Oslo, Norway
Harold Henry Larsen 6,668
Lundovn. 45
3032 Drommen
Norway
Monsun as 133,333
c/o Magne Jordanger
Askerveien 61
1370 Asker, Norway
Olav W. Pedersen 10,000
Bjormelia 65
N-14532 Bjornemyr
Norway
Troust AS 6,667
c/o Indre by Biendom
Nygardsgt. 114
5008 Bergen, Norway
Totals: 1,188,959
EXHIBIT A-2
CENTAUR PHARMACEUTICALS, INC.
SERIES D INVESTORS
SECOND CLOSING ON 3/31/97
NO. OF
INVESTOR NAME & ADDRESS SHARES
DOMESTIC:
Biotechnology Development Fund, L.P. 133,334
c/o Frank Kung
1055 Lemon St.
Menlo Park, CA 94025
Brian D. Frenzel 10,000
13311 Country Way
Los Altos Hills, CA 94024
Gulf Horizons, Ltd. 7,000
c/o Herbert L. Dillon, Fr.
3100 Weslayan, Ste. 360
Houston, TX 77027
Robert Morefield, Trustee of the
Robert Morefield Trust dtd. 2/26/88 4,000
725 El Rancho Road
Santa Barbara, CA 93108
John A. Sprague 33,334
c/o Jupiter Partners LP
30 Rockefeller Plaza, #4525
New York, NY 10112
FOREIGN:
Odd A. Danielsen 12,000
N. Stor at 46
3015 Drammen Norway
Informatique-MTF SA 6,667
c/o Mark Busser/bsr
Route due Bleuet 1
1762 Givisiez / FR
Switzerland
Ole K. Karlsen 40,000
Peter Oestbysgate 22
3014 Drammen Norway
Heinz Mueller 13,333
Unteraltstadt 28
6300 Zug Switzerland
Tommy Laupsa 6,000
Chamstr 34, 8934 Knonau
Switzerland
LGT Bank in Liechtenstein 13,400
Herengasse 12 9490 Vaduz
Principality of Lichtenstein
Niklaus Rychen 40,000
Sonnenbergstrasse 33
Ch8645 Jona Switzerland
Teknoinvest IV ANS 266,667
c/o Teknoinvest Management AS
Grev Wedels Pl. 5, P.O. Box 556 Sentrum
0105 Oslo, Norway
Traust AS 16,000
5008 Bergen Norway
Totals: 601,735
EXHIBIT A-2
CENTAUR PHARMACEUTICALS, INC.
SERIES D INVESTORS
THIRD CLOSING
NO. OF
INVESTOR NAME & ADDRESS SHARES
Alexandra Huitfeldt Holding AS 118,333
Universitets 6T 14
0164, Oslo Norway
Halvor Isaksen 30,000
Universitets 6T 14
0164, Oslo Norway
Istria AS 118,333
Universitets 6T 14
0164 Oslo, Norway
Neuroscience Partners Limited Partnership 133,333
c/o MDS Health Ventures Capital Corp.
Attn: Edward K. Rygiel
100 International Blvd.,
Etobicoke, Ontario M9W 6J6
Totals: 399,999
EXHIBIT A-2
CENTAUR PHARMACEUTICALS, INC.
SERIES D INVESTORS
FOURTH CLOSING ON 10/3/97
NO. OF
INVESTOR NAME & ADDRESS SHARES
Veron International Ltd. 9,307
Top Floor, Chinachem Golden Plaza
77 Mody Road
Tsimshtsui East
Kowloon, Hong Kong
Total: 9,307
Grand Total (All Closings): 2,200,000
29
<PAGE>
EXHIBIT B
STOCKHOLDERS
------------
Name & Address Name & Address
- -------------- --------------
John M. Carney and Patricia A. Carney Robert A. Floyd
20010 Heritage Oak 9608 Regal Lane
Saratoga, CA 95070 Oklahoma City, OK 73162
Fax No.: Fax No.:
Oklahoma Medical Research The University of Kentucky
Foundation Research Foundation*
825 N.E. 13th Street 214 Kinkead Hall
Oklahoma City, CA 73104 Lexington, KY 40506-0057
Fax No.: Fax No.:
* As of October 3, 1997, the University of Kentucky Research Foundation had
not become a party to the Investors' Rights Agreement.
---
30
<PAGE>
EXHIBIT 10.01
CENTAUR PHARMACEUTICALS, INC.
1993 EQUITY INCENTIVE PLAN
--------------------------
As Adopted February 6, 1993
As Amended through February 13, 1998
1. PURPOSE. The purpose of the Plan is to provide incentives to attract,
-------
retain and motivate eligible persons whose present and potential contributions
are important to the success of the Company, its Parent, Subsidiaries and
Affiliates, by offering them an opportunity to participate in the Company's
future performance through awards of Options, Restricted Stock and Stock
Bonuses. Capitalized terms not defined in the text are defined in Section 24.
2. SHARES SUBJECT TO THE PLAN.
--------------------------
2.1 NUMBER OF SHARES AVAILABLE. Subject to Sections 2.2 and 18, the
--------------------------
total number of Shares reserved and available for grant and issuance pursuant to
the Plan shall be 2,400,000 Shares. Subject to Sections 2.2 and 18, Shares shall
again be available for grant and issuance in connection with future Awards under
the Plan that: (a) are subject to issuance upon exercise of an Option but cease
to be subject to such Option for any reason other than exercise of such Option,
(b) are subject to an Award granted hereunder but are forfeited or are
repurchased by the Company at the original issue price, or (c) are subject to an
Award that otherwise terminates without Shares being issued.
2.2 ADJUSTMENT OF SHARES. In the event that the number of outstanding
--------------------
Shares is changed by a stock dividend, recapitalization, stock split, reverse
stock split, subdivision, combination, reclassification or similar change in the
capital structure of the Company without consideration, then (a) the number of
Shares reserved for issuance under the Plan, (b) the Exercise Prices of and
number of Shares subject to outstanding Options, and (c) the number of Shares
subject to other outstanding Awards shall be proportionately adjusted, subject
to any required action by the Board or the shareholders of the Company and
compliance with applicable securities laws; provided, however, that fractions of
-------- -------
a Share shall not be issued but shall either be paid in cash at Fair Market
Value or shall be rounded up to the nearest Share, as determined by the
Committee; and provided, further, that the Exercise Price of any Option may not
-------- -------
be decreased to below the par value of the Shares.
3. ELIGIBILITY. ISOs (as defined in Section 5 below) may be granted only
-----------
to employees (including officers and directors who are also employees) of the
Company or of a Parent or Subsidiary of the Company. All other Awards may be
granted to employees, officers, directors, consultants, independent contractors
and advisers of the Company or any Parent, Subsidiary or Affiliate of the
Company; 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. A person may be granted more than one Award under the
Plan.
<PAGE>
4. ADMINISTRATION.
--------------
4.1 COMMITTEE AUTHORITY. The Plan shall be administered by the
-------------------
Committee or the Board acting as the Committee. Subject to the general purposes,
terms and conditions of the Plan, and to the direction of the Board, the
Committee shall have full power to implement and carry out the Plan. The
Committee shall have the authority to:
(a) construe and interpret the Plan, any Award Agreement and any
other agreement or document executed pursuant to the Plan;
(b) prescribe, amend and rescind rules and regulations relating
to the Plan;
(c) select persons to receive Awards;
(d) determine the form and terms of Awards;
(e) determine the number of Shares or other consideration
subject to Awards;
(f) determine whether Awards will be granted singly, in
combination, in tandem, in replacement of, or as
alternatives to, other Awards under the Plan or any other
incentive or compensation plan of the Company or any Parent,
Subsidiary or Affiliate of the Company;
(g) grant waivers of Plan or Award conditions;
(h) determine the vesting, exercisability and payment of Awards;
(i) correct any defect, supply any omission, or reconcile any
inconsistency in the Plan, any Award or any Award Agreement;
(j) determine whether an Award has been earned; and
(k) make all other determinations necessary or advisable for the
administration of the Plan.
4.2 COMMITTEE DISCRETION. Any determination made by the Committee
--------------------
with respect to any Award shall be made in its sole discretion at the time of
grant of the Award or, unless in contravention of any express term of the Plan
or Award, at any later time, and such determination shall be final and binding
on the Company and all persons having an interest in any Award under the Plan.
The Committee may delegate to one or more officers of the Company the authority
to grant an Award under the Plan to Participants who are not Insiders of the
Company.
2
<PAGE>
4.3 EXCHANGE ACT REQUIREMENTS. If the Company is subject to the
-------------------------
Exchange Act, the Company will take appropriate steps to comply with the
disinterested director requirements of Section 16(b) of the Exchange Act,
including but not limited to, the appointment by the Board of a Committee
consisting of not less than two persons (who are members of the Board), each of
whom is a Disinterested Person.
5. OPTIONS. The Committee may grant Options to eligible persons and
-------
shall determine whether such Options shall be Incentive Stock Options within the
meaning of the Code ("ISOs") or Nonqualified Stock Options ("NQSOs"), 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 the Plan shall
--------------------
be evidenced by an Award Agreement which shall expressly identify the Option as
an ISO or NQSO ("Stock Option Agreement"), and be in such form and contain such
----------------------
provisions (which need not be the same for each Participant) as the Committee
shall from time to time approve, and which shall comply with and be subject to
the terms and conditions of the 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 Stock Option Agreement and a copy of
the Plan will be delivered to the Participant within a reasonable time after the
granting of the Option.
5.3 EXERCISE PERIOD. Options shall be exercisable within the times
---------------
or upon the events determined by the Committee as set forth in the Stock Option
Agreement; provided, however, that no Option shall be exercisable after the
-------- -------
expiration of one hundred twenty (120) months from the date the Option is
granted, and provided further that no Option granted to a person who directly or
by attribution owns more than ten percent (10%) 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 be exercisable after the expiration of
-----------------------
five (5) years from the date the Option is granted. The Committee also may
provide for the exercise of Options to become exercisable at one time or from
time to time, periodically or otherwise, in such number or percentage as the
Committee determines.
5.4 EXERCISE PRICE. The Exercise Price shall be determined by the
--------------
Committee when the Option is granted and may be not less than 85% of the Fair
Market Value of the Shares on the date of grant; provided that (i) the Exercise
--------
Price of an ISO shall be not less than 100% of the Fair Market Value of the
Shares on the date of grant and (ii) the Exercise Price of any Option granted to
a Ten Percent Shareholder shall not be less than 110% of the Fair Market Value
of the Shares on the date of grant. Payment for the Shares purchased may be
made in accordance with Section 8 of the Plan.
5.5 METHOD OF EXERCISE. Options may be exercised only by delivery to
------------------
the Company of a written stock option exercise agreement (the "Exercise
--------
Agreement") in a form
- ---------
3
<PAGE>
approved by the Committee (which need not be the same for each Participant),
stating the number of Shares being purchased, the restrictions imposed on the
Shares, if any, and such representations and agreements regarding Participant's
investment intent and access to information, if any, as may be required or
desirable 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.
5.6 TERMINATION. Notwithstanding the exercise periods set forth in
-----------
the Stock Option Agreement, exercise of an Option shall always be subject to the
following:
(a) If the Participant is Terminated for any reason except death
or Disability, then Participant may exercise such
Participant's Options only to the extent that such Options
would have been exercisable upon the Termination Date no
later than ninety (90) days after the Termination Date (or
such shorter time period as may be specified in the Stock
Option Agreement), but in any event, no later than the
expiration date of the Options.
(b) If the Participant is terminated because of death or
Disability, then Participant's Options may be exercised only
to the extent that such Options would have been exercisable
by Participant on the Termination Date and must be exercised
by Participant (or Participant's legal representative or
authorized assignee) no later than twelve (12) months after
the Termination Date (or such shorter time period as may be
specified in the Stock Option Agreement), but in any event
no later than the expiration date of the Options; provided,
however, that in the event of termination due to Disability
other than as defined in Section 22(e)(3) of the Code, any
ISO that remains exercisable after 90 days after the date of
termination shall be deemed a NQSO.
5.7 LIMITATIONS ON EXERCISE. 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 Participant from exercising
the Option for the full number of Shares for which it is then exercisable.
5.8 LIMITATIONS ON ISOS. The aggregate Fair Market Value (determined
-------------------
as of the date of grant) of Shares with respect to which ISOs are exercisable
for the first time by a Participant during any calendar year (under the Plan or
under any other incentive stock option plan of the Company or any Affiliate,
Parent or Subsidiary of the Company) shall not exceed $100,000. If the Fair
Market Value of Shares on the date of grant with respect to which ISOs are
exercisable for the first time by a Participant during any calendar year exceeds
$100,000, the Options for the first $100,000 worth of Shares to become
exercisable in such calendar year shall be ISOs and the Options for the amount
in excess of $100,000 that become exercisable in that calendar year shall be
NQSOs. In the event that the Code or the regulations promulgated
4
<PAGE>
thereunder are amended after the Effective Date of the 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 automatically incorporated herein and shall
apply to any Options granted after the effective date of such amendment.
5.9 MODIFICATION, EXTENSION OR RENEWAL. The Committee may modify,
----------------------------------
extend or renew outstanding Options and authorize the grant of new Options in
substitution therefor, provided that any such action may not, without the
written consent of Participant, impair any of Participant's 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 Code. The Committee may reduce the Exercise Price of outstanding Options
without the consent of Participants affected by a written notice to them;
provided, however, that the Exercise Price may not be reduced below the minimum
- -------- -------
Exercise Price that would be permitted under Section 5.4 of the Plan for Options
granted on the date the action is taken to reduce the Exercise Price; provided,
--------
further, that the Exercise Price shall not be reduced below the par value of the
- -------
Shares, if any.
5.10 NO DISQUALIFICATION. Notwithstanding any other provision in the
-------------------
Plan, no term of the Plan relating to ISOs shall be interpreted, amended or
altered, nor shall any discretion or authority granted under the Plan be
exercised, so as to disqualify the Plan under Section 422 of the Code or,
without the consent of the Participant affected, to disqualify any ISO under
Section 422 of the Code.
6. RESTRICTED STOCK. A Restricted Stock Award is an offer by the Company
----------------
to sell to an eligible person Shares that are subject to restrictions. The
Committee shall determine to whom an offer will be made, the number of Shares
the person may purchase, the price to be paid (the "Purchase Price"), the
--------------
restrictions to which the Shares shall be subject, and all other terms and
conditions of the Restricted Stock Award, subject to the following:
6.1 FORM OF RESTRICTED STOCK AWARD. All purchases under a
------------------------------
Restricted Stock Award made pursuant to the Plan shall be evidenced by an Award
Agreement ("Restricted Stock Purchase Agreement") that shall be in such form
-----------------------------------
(which need not be the same for each Participant) as the Committee shall from
time to time approve, and shall comply with and be subject to the terms and
conditions of the Plan. The offer of Restricted Stock shall be accepted by the
Participant's execution and delivery of the Restricted Stock Purchase Agreement
and full payment for the Shares to the Company within thirty (30) days from the
date the Restricted Stock Purchase Agreement is delivered to the person. If
such person does not execute and deliver the Restricted Stock Purchase Agreement
along with full payment for the Shares to the Company within thirty (30) days,
then the offer shall terminate, unless otherwise determined by the Committee.
6.2 PURCHASE PRICE. The Purchase Price of Shares sold pursuant to a
--------------
Restricted Stock Award shall be determined by the Committee and shall be at
least 85% of the Fair Market Value of the Shares when the Restricted Stock Award
is granted, except in the case of a sale to a
5
<PAGE>
Ten Percent Shareholder, in which case the Purchase Price shall be 100% of the
Fair Market Value. Payment of the Purchase Price may be made in accordance with
Section 8 of the Plan.
6.3 RESTRICTIONS. Restricted Stock Awards shall be subject to such
------------
restrictions as the Committee may impose. The Committee may provide for the
lapse of such restrictions in installments and may accelerate or waive such
restrictions, in whole or part, based on length of service, performance or such
other factors or criteria as the Committee may determine.
7. STOCK BONUSES.
-------------
7.1 AWARDS OF STOCK BONUSES. A Stock Bonus is an award of Shares
-----------------------
(which may consist of Restricted Stock) for services rendered to the Company or
any Parent, Subsidiary or Affiliate of the Company. A Stock Bonus may be
awarded for past services already rendered to the Company, or any Parent,
Subsidiary or Affiliate of the Company pursuant to an Award Agreement (the
"Stock Bonus Agreement") that shall be in such form (which need not be the same
- ----------------------
for each Participant) as the Committee shall from time to time approve, and
shall comply with and be subject to the terms and conditions of the Plan. A
Stock Bonus may be awarded upon satisfaction of such performance goals as are
set out in advance in Participant's individual Award Agreement (the "Performance
-----------
Stock Bonus Agreement") that shall be in such form (which need not be the same
- ---------------------
for each Participant) as the Committee shall from time to time approve, and
shall comply with and be subject to the terms and conditions of the Plan. Stock
Bonuses may vary from Participant to Participant and between groups of
Participants, and may be based upon the achievement of the Company, Parent,
Subsidiary or Affiliate and/or individual performance factors or upon such other
criteria as the Committee may determine.
7.2 TERMS OF STOCK BONUSES. The Committee shall determine the
----------------------
number of Shares to be awarded to the Participant and whether such Shares shall
be Restricted Stock. If the Stock Bonus is being earned upon the satisfaction
of performance goals pursuant to a Performance Stock Bonus Agreement, then the
Committee shall determine: (a) the nature, length and starting date of any
period during which performance is to be measured (the "Performance Period") for
------------------
each Stock Bonus; (b) the performance goals and criteria to be used to measure
the performance, if any; (c) the number of Shares that may be awarded to the
Participant; and (d) the extent to which such Stock Bonuses have been earned.
Performance Periods may overlap and Participants may participate simultaneously
with respect to Stock Bonuses that are subject to different Performance Periods
and different performance goals and other criteria. The number of Shares may be
fixed or may vary in accordance with such performance goals and criteria as may
be determined by the Committee. The Committee may adjust the performance goals
applicable to the Stock Bonuses to take into account changes in law and
accounting or tax rules and to make such adjustments as the Committee deems
necessary or appropriate to reflect the impact of extraordinary or unusual
items, events or circumstances to avoid windfalls or hardships.
7.3 FORM OF PAYMENT. The earned portion of a Stock Bonus may be
---------------
paid currently or on a deferred basis with such interest or dividend equivalent,
if any, as the Committee may determine. Payment may be made in the form of
cash, whole Shares, including
6
<PAGE>
Restricted Stock, or a combination thereof, either in a lump sum payment or in
installments, all as the Committee shall determine.
7.4 TERMINATION DURING PERFORMANCE PERIOD. If a Participant is
-------------------------------------
Terminated during a Performance Period for any reason, then such Participant
shall be entitled to payment (whether in Shares, cash or otherwise) with respect
to the Stock Bonus only to the extent earned as of the date of Termination in
accordance with the Performance Stock Bonus Agreement, unless the Committee
shall determine otherwise.
8. PAYMENT FOR SHARE PURCHASES.
---------------------------
8.1 PAYMENT. Payment for Shares purchased pursuant to the Plan may
-------
be made in cash (by check) or, where expressly approved for the Participant by
the Committee and where permitted by law:
(a) by cancellation of indebtedness of the Company to the
Participant;
(b) by surrender of Shares that either: (1) have been owned by
Participant for more than six (6) months and 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 (2) were obtained by Participant in the public market;
(c) by tender of a full recourse promissory note having such
terms as may be approved by the Committee and bearing
interest at a rate sufficient to avoid imputation of income
under Sections 483 and 1274 of the Code; provided, however,
-------- -------
that Participants who are not employees of the Company shall
not be entitled to purchase Shares with a promissory note
unless the note is adequately secured by collateral other
than the Shares; provided, further, that the portion of the
-------- -------
Purchase Price equal to the par value of the Shares, if any,
must be paid in cash;
(d) by waiver of compensation due or accrued to Participant for
services rendered;
(e) by tender of property;
(f) with respect only to purchases upon exercise of an Option,
and provided that a public market for the Company's stock
exists:
(1) through a "same day sale" commitment from Participant
and a broker-dealer that is a member of the National
Association of Securities Dealers (an "NASD Dealer")
-----------
7
<PAGE>
whereby Participant 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;
or
(2) through a "margin" commitment from Participant and an
NASD Dealer whereby Participant 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
(g) by any combination of the foregoing.
8.2 LOAN GUARANTEES. The Committee may help the Participant pay for
---------------
Shares purchased under the Plan by authorizing a guarantee by the Company of a
third-party loan to the Participant.
9. WITHHOLDING TAXES.
-----------------
9.1 WITHHOLDING GENERALLY. Whenever Shares are to be issued in
---------------------
satisfaction of Awards granted under the Plan, the Company may require the
Participant to remit to the Company an amount sufficient to satisfy federal,
state and local withholding tax requirements prior to the delivery of any
certificate or certificates for such Shares. Whenever, under the Plan, payments
in satisfaction of Awards are to be made in cash, such payment shall be net of
an amount sufficient to satisfy federal, state, and local withholding tax
requirements.
9.2 STOCK WITHHOLDING. When, under applicable tax laws, a
-----------------
Participant incurs tax liability in connection with the exercise or vesting of
any Award that is subject to tax withholding and the Participant is obligated to
pay the Company the amount required to be withheld, the Committee may allow the
Participant to satisfy the minimum withholding tax obligation by electing to
have the Company withhold from the Shares to be issued that number of Shares
having a Fair Market Value equal to the minimum amount required to be withheld,
determined on the date that the amount of tax to be withheld is to be determined
(the "Tax Date"). All elections by a Participant to have Shares withheld for
--------
this purpose shall be made in writing in a form acceptable to the Committee and
shall be subject to the following restrictions:
(a) the election must be made on or prior to the applicable Tax
Date;
8
<PAGE>
(b) once made, then except as provided below, the election shall
be irrevocable as to the particular Shares as to which the
election is made;
(c) all elections shall be subject to the consent or disapproval
of the Committee;
(d) if the Participant is an Insider and if the Company is
subject to Section 16(b) of the Exchange Act: (1) the
election may not be made within six (6) months of the date
of grant of the Award, except as otherwise permitted by SEC
Rule 16b-3(e) under the Exchange Act, and (2) either (A) the
election to use stock withholding must be irrevocably made
at least six (6) months prior to the Tax Date (although such
election may be revoked at any time at least six (6) months
prior to the Tax Date) or (B) the exercise of the Option or
election to use stock withholding must be made in the ten
(10) day period beginning on the third day following the
release of the Company's quarterly or annual summary
statement of sales or earnings; provided, that, prior to the
--------
date the Company elects to comply with the requirements of
Rule 16b-3, as amended effective May 1, 1992, the provisions
of former Rule 16b-3(e) of the Exchange Act shall apply with
respect to any such elections; and
(e) in the event that the Tax Date is deferred until six (6)
months after the delivery of Shares under Section 83(b) of
the Code, the Participant shall receive the full number of
Shares with respect to which the exercise occurs, but such
Participant shall be unconditionally obligated to tender
back to the Company the proper number of Shares on the Tax
Date.
10. PRIVILEGES OF STOCK OWNERSHIP.
-----------------------------
10.1 VOTING AND DIVIDENDS. No Participant shall have any of the
--------------------
rights of a shareholder with respect to any Shares until the Shares are issued
to the Participant. After Shares are issued to the Participant, the Participant
shall be a shareholder and have all the rights of a shareholder with respect to
such Shares, including the right to vote and receive all dividends or other
distributions made or paid with respect to such Shares; provided, that if such
--------
Shares are Restricted Stock, then any new, additional or different securities
the Participant may become entitled to receive with respect to such Shares by
virtue of a stock dividend, stock split or any other change in the corporate or
capital structure of the Company shall be subject to the same restrictions as
the Restricted Stock; provided, further, that the Participant shall have no
-------- -------
right to retain such dividends or distributions with respect to Shares that are
repurchased at the Participant's original Purchase Price pursuant to Section 12.
9
<PAGE>
10.2 FINANCIAL STATEMENTS. The Company shall provide financial
--------------------
statements to each Participant prior to such Participant's purchase of Shares
under the Plan, and to each Participant annually during the period such
Participant has Options outstanding; provided, however, the Company shall not be
-------- -------
required to provide such financial statements to Participants whose services in
connection with the Company assure them access to equivalent information.
11. TRANSFERABILITY. Awards granted under the Plan, and any interest
---------------
therein, shall not be transferable or assignable by Participant, 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 as consistent with the specific
Plan and Award Agreement provisions relating thereto. During the lifetime of
the Participant an Award shall be exercisable only by the Participant, and any
elections with respect to an Award, may be made only by the Participant.
12. RESTRICTIONS ON SHARES. At the discretion of the Committee, the
----------------------
Company may reserve to itself and/or its assignee(s) in the Award Agreement (a)
a right of first refusal to purchase all Shares that a Participant (or a
subsequent transferee) may propose to transfer to a third party, and/or (b) a
right to repurchase a portion of or all Shares held by a Participant following
such Participant's Termination at any time within ninety (90) days after the
later of Participant's Termination Date and the date Participant purchases
Shares under the Plan, for cash or cancellation of purchase money indebtedness,
at: (A) with respect to Shares that are "Vested" (as defined in the Award
Agreement), the higher of: (1) Participant's original Purchase Price, or (2)
the Fair Market Value of such Shares on Participant's Termination Date,
provided, such right of repurchase terminates when the Company's securities
- --------
become publicly traded; or (B) with respect to Shares that are not "Vested" (as
defined in the Award Agreement), at the Participant's original Purchase Price,
provided, that the right to repurchase at the original Purchase Price lapses at
- --------
the rate of at least 20% per year over 5 years from the date the Shares were
purchased, and if the right to repurchase is assignable, the assignee must pay
the Company, upon assignment of the right to repurchase, cash equal to the
excess of the Fair Market Value of the Shares over the original Purchase Price.
13. CERTIFICATES. All certificates for Shares or other securities
------------
delivered under the Plan shall be subject to such stock transfer orders, legends
and other restrictions as the Committee may deem necessary or advisable,
including restrictions under any applicable federal, state or foreign securities
law, or any rules, regulations and other requirements of the SEC or any stock
exchange or automated quotation system upon which the Shares may be listed.
14. ESCROW; PLEDGE OF SHARES. To enforce any restrictions on a
------------------------
Participant's Shares, the Committee may require the Participant to deposit all
certificates, together with stock powers or other instruments of transfer
approved by the Committee, appropriately endorsed in blank, with the Company or
an agent designated by the Company to hold in escrow until such restrictions
have lapsed or terminated, and the Committee may cause a legend or legends
referencing such restrictions to be placed on the certificates. Any Participant
who is permitted to execute a promissory note as partial or full consideration
for the purchase of Shares under the Plan shall be required to pledge and
deposit with the Company all or part of the Shares so purchased as collateral to
secure the payment of Participant's obligation to the
10
<PAGE>
Company under the promissory note; provided, however, that the Committee may
-------- -------
require or accept other or additional forms of collateral to secure the payment
of such obligation and, in any event, the Company shall have full recourse
against the Participant under the promissory note notwithstanding any pledge of
the Participant's Shares or other collateral. In connection with any pledge of
the Shares, Participant shall be required to execute and deliver a written
pledge agreement in such form as the Committee shall from time to time approve.
The Shares purchased with the promissory note may be released from the pledge on
a pro rata basis as the promissory note is paid.
15. EXCHANGE AND BUYOUT OF AWARDS. The Committee may, at any time or
-----------------------------
from time to time, authorize the Company, with the consent of the respective
Participants, to issue new Awards in exchange for the surrender and cancellation
of any or all outstanding Awards. The Committee may at any time buy from a
Participant an Award previously granted with payment in cash, Shares (including
Restricted Stock) or other consideration, based on such terms and conditions as
the Committee and the Participant shall agree.
16. SECURITIES LAW AND OTHER REGULATORY COMPLIANCE. An Award shall
----------------------------------------------
not be effective unless such Award is in compliance with all applicable federal
and state securities laws, rules and regulations of any governmental body, and
the requirements of any stock exchange or automated quotation system upon which
the Shares may then be listed, as they are in effect on the date of grant of the
Award and also on the date of exercise or other issuance. Notwithstanding any
other provision in the Plan, the Company shall have no obligation to issue or
deliver certificates for Shares under the Plan prior to (a) obtaining any
approvals from governmental agencies that the Company determines are necessary
or advisable, and/or (b) completion of any registration or other qualification
of such shares under any state or federal law or ruling of any governmental body
that the Company determines to be necessary or advisable. 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 automated quotation system, and the Company
shall have no liability for any inability or failure to do so.
17. NO OBLIGATION TO EMPLOY. Nothing in the Plan or any Award granted
-----------------------
under the Plan shall confer or be deemed to confer on any Participant 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
Participant's employment or other relationship at any time, with or without
cause.
18. CORPORATE TRANSACTIONS.
----------------------
18.1 ASSUMPTION OR REPLACEMENT OF AWARDS BY SUCCESSOR. 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 of the Company in a different jurisdiction, or
other transaction in which there is no substantial change in the shareholders of
the Company and the Awards granted under the Plan are assumed or replaced by
11
<PAGE>
the successor corporation, which assumption shall be binding on all
Participants), (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 Code
wherein the shareholders 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 Awards may be assumed or replaced by the successor corporation,
which assumption or replacement shall be binding on all Participants. In the
alternative, the successor corporation may substitute equivalent Awards or
provide substantially similar consideration to Participants as was provided to
shareholders (after taking into account the existing provisions of the Awards).
The successor corporation may also issue, in place of outstanding Shares of the
Company held by the Participant, substantially similar shares or other property
subject repurchase restrictions no less favorable to the Participant.
18.2 EXPIRATION OF OPTIONS. In the event such successor corporation,
---------------------
if any, refuses to assume or substitute the Options, as provided above, pursuant
to a transaction described in Subsection 18.1(a) above, such Options shall
expire on such transaction at such time and on such conditions as the Board
shall determine. In the event such successor corporation, if any, refuses to
assume or substitute the Options as provided above, pursuant to a transaction
described in Subsections 18.1(b), (c) or (d) above, or there is no successor
corporation, and if the Company ceases to exist as a separate corporate entity,
then, notwithstanding any contrary terms in the Award Agreement, the Options
shall expire on a date at least twenty (20) days after the Board gives written
notice to Participants specifying the terms and conditions of such termination.
18.3 OTHER TREATMENT OF AWARDS. Subject to any greater rights
-------------------------
granted to Participants under the foregoing provisions of this Section 18, in
the event of the occurrence of any transaction described in Section 18.1, any
outstanding Awards shall be treated as provided in the applicable agreement or
plan of merger, consolidation, dissolution, liquidation, sale of assets or other
"corporate transaction."
18.4 ASSUMPTION OF AWARDS BY THE COMPANY. The Company, from time to
-----------------------------------
time, also may substitute or assume outstanding awards granted by another
company, whether in connection with an acquisition of such other company or
otherwise, by either (a) granting an Award under the Plan in substitution of
such other company's award, or (b) assuming such award as if it had been granted
under the Plan if the terms of such assumed award could be applied to an Award
granted under the Plan. Such substitution or assumption shall be permissible if
the holder of the substituted or assumed award would have been eligible to be
granted an Award under the Plan if the other company had applied the rules of
the Plan to such grant. In the event the Company assumes an award granted by
another company, the terms and conditions of such award shall remain unchanged
(except that the exercise price and the number and nature of Shares issuable
------
upon exercise of any such option will be adjusted appropriately pursuant to
Section 424(a) of the Code). In the event the Company elects to grant a new
Option rather than assuming an existing option, such new Option may be granted
with a similarly adjusted Exercise Price.
12
<PAGE>
19. ADOPTION AND SHAREHOLDER APPROVAL. The Plan shall become effective on
---------------------------------
the date that it is adopted by the Board (the "Effective Date"). The Plan shall
--------------
be approved by the shareholders of the Company (excluding Shares issued pursuant
to this Plan), consistent with applicable laws, within twelve months before or
after the Effective Date. Upon the Effective Date, the Board may grant Awards
pursuant to the Plan; provided, however, that: (a) no Option may be exercised
-------- -------
prior to initial shareholder approval of the Plan; (b) no Option granted
pursuant to an increase in the number of Shares approved by the Board shall be
exercised prior to the time such increase has been approved by the shareholders
of the Company; and (c) in the event that shareholder approval is not obtained
within the time period provided herein, all Awards granted hereunder shall be
canceled, any Shares issued pursuant to any Award shall be canceled and any
purchase of Shares hereunder shall be rescinded. After the Company becomes
subject to Section 16(b) of the Exchange Act, the Company will comply with the
requirements of Rule 16b-3 (or its successor), as amended, with respect to
shareholder approval.
20. TERM OF PLAN. The Plan will terminate ten (10) years from the
------------
Effective Date or, if earlier, the date of shareholder approval.
21. AMENDMENT OR TERMINATION OF PLAN. The Board may at any time
--------------------------------
terminate or amend the Plan in any respect, including without limitation
amendment of any form of Award Agreement or instrument to be executed pursuant
to the Plan; provided, however, that the Board shall not, without the approval
-------- -------
of the shareholders of the Company, amend the Plan in any manner that requires
such shareholder approval pursuant to the Code or the regulations promulgated
thereunder as such provisions apply to ISO plans or pursuant to the Exchange Act
or Rule 16b-3 (or its successor), as amended, thereunder.
22. NONEXCLUSIVITY OF THE PLAN. Neither the adoption of the Plan by
--------------------------
the Board, the submission of the Plan to the shareholders of the Company for
approval, nor any provision of the Plan shall be construed as creating any
limitations on the power of the Board to adopt such additional compensation
arrangements as it may deem desirable, including, without limitation, the
granting of stock options and bonuses otherwise than under the Plan, and such
arrangements may be either generally applicable or applicable only in specific
cases.
23. GOVERNING LAW. The Plan and all agreements, documents and
-------------
instruments entered into pursuant to the Plan shall be governed by and construed
in accordance with the internal laws of the State of California, excluding that
body of law pertaining to conflict of laws.
24. DEFINITIONS. As used in the Plan, the following terms shall have the
-----------
following meanings:
"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
13
<PAGE>
management and policies of the corporation, whether through the ownership of
voting securities, by contract or otherwise.
"Award" means any award under the Plan, including any Option,
-----
Restricted Stock or Stock Bonus.
"Award Agreement" means, with respect to each Award, the signed
---------------
written agreement between the Company and the Participant setting forth the
terms and conditions of the Award.
"Board" means the Board of Directors of the Company.
-----
"Code" means the Internal Revenue Code of 1986, as amended.
----
"Committee" means the committee appointed by the Board to administer
---------
the Plan, or if no committee is appointed, the Board.
"Company" means Centaur Pharmaceuticals, Inc., a corporation organized
-------
under the laws of the State of Delaware, or any successor corporation.
"Disability" means a disability, whether temporary or permanent,
----------
partial or total, as determined by the Committee.
"Disinterested Person" means a director who has not, during the period
--------------------
that person is a member of the Committee and for one year prior to service as a
member of the Committee, been granted or awarded equity securities pursuant to
the Plan or any other plan of the Company or any Parent, Subsidiary or Affiliate
of the Company, except in accordance with the requirements set forth in Rule
16b-3(c)(2)(i) (and any successor regulation thereto) as promulgated by the SEC
under Section 16(b) of the Exchange Act, as such rule is amended from time to
time and as interpreted by the SEC.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
------------
"Exercise Price" means the price at which a holder of an Option may
--------------
purchase the Shares issuable upon exercise of the Option.
"Fair Market Value" means, as of any date, the value of a share of the
-----------------
Company's Common Stock determined as follows:
(a) if such Common Stock is then quoted on the NASDAQ National
Market System, its last reported sale price on the NASDAQ
National Market System or, if no such reported sale takes
place on such date, the average of the closing bid and asked
prices;
14
<PAGE>
(b) if such Common Stock is publicly traded and is then listed
on a national securities exchange, the last reported sale
price or, if no such reported sale takes place on such date,
the average of the closing bid and asked prices on the
principal national securities exchange on which the Common
Stock is listed or admitted to trading;
(c) if such Common Stock is publicly traded but is not quoted on
the NASDAQ National Market System nor listed or admitted to
trading on a national securities exchange, the average of
the closing bid and asked prices on such date, as reported
by The Wall Street Journal, for the over-the-counter market;
or
(d) if none of the foregoing is applicable, by the Board of
Directors of the Company in good faith.
"Insider" means an officer or director of the Company or any other
-------
person whose transactions in the Company's Common Stock are subject to Section
16 of the Exchange Act.
"Option" means an award of an option to purchase Shares pursuant to
------
Section 5.
"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
an Award under the Plan, 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.
"Participant" means a person who receives an Award under the Plan.
-----------
"Plan" means this Centaur Pharmaceuticals, Inc. 1993 Equity Incentive
----
Plan, as amended from time to time.
"Restricted Stock Award" means an award of Shares pursuant to Section
----------------------
6.
"SEC" means the Securities and Exchange Commission.
---
"Securities Act" means the Securities Act of 1933, as amended.
--------------
"Shares" means shares of the Company's Common Stock, $0.001 par value,
------
reserved for issuance under the Plan, as adjusted pursuant to Sections 2 and 15,
and any successor security.
"Stock Bonus" means an award of Shares, or cash in lieu of Shares,
-----------
pursuant to Section 7.
15
<PAGE>
"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 Award, 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.
"Termination" or "Terminated" means, for purposes of the Plan with
----------- ----------
respect to a Participant, that the Participant has ceased to provide services as
an employee, director, consultant, independent contractor or adviser, to the
Company or a Parent, Subsidiary or Affiliate of the Company, except in the case
of sick leave, military leave, or any other leave of absence approved by the
Committee, provided, that such leave is for a period of not more than ninety
--------
(90) days, or reinstatement upon the expiration of such leave is guaranteed by
contract or statute. The Committee shall have sole discretion to determine
whether a Participant has ceased to provide services and the effective date on
which the Participant ceased to provide services (the "Termination Date").
----------------
16
<PAGE>
EXHIBIT 10.02
CENTAUR PHARMACEUTICALS, INC.
1998 EQUITY INCENTIVE PLAN
As Adopted June 10, 1998
1. PURPOSE. The purpose of this Plan is to provide incentives to
-------
attract, retain and motivate eligible persons whose present and potential
contributions are important to the success of the Company, its Parent and
Subsidiaries, by offering them an opportunity to participate in the Company's
future performance through awards of Options, Restricted Stock and Stock
Bonuses. Capitalized terms not defined in the text are defined in Section 23.
2. SHARES SUBJECT TO THE PLAN.
--------------------------
2.1 Number of Shares Available. Subject to Sections 2.2 and 18,
--------------------------
the total number of Shares reserved and available for grant and issuance
pursuant to this Plan will be 1,000,000 Shares plus (a) any authorized shares
not issued or subject to outstanding grants under the Company's 1993 Equity
Incentive Plan the ("PRIOR PLAN") on the Effective Date (as defined in Section
19 below); (b) shares that are subject to issuance upon exercise of an option
granted under the Prior Plan but cease to be subject to such option for any
reason other than exercise of such option; and (c) shares that were issued under
the Prior Plan which are repurchased by the Company at the original issue price
or forfeited. Subject to Sections 2.2 and 18, Shares that are subject to: (x)
issuance upon exercise of an Option but cease to be subject to such Option for
any reason other than exercise of such Option; (y) an Award granted hereunder
but are forfeited or are repurchased by the Company at the original issue price;
and (z) an Award that otherwise terminates without Shares being issued, will
again be available for grant and issuance in connection with future Awards under
this Plan. At all times the Company shall reserve and keep available a
sufficient number of Shares as shall be required to satisfy the requirements of
all outstanding Options granted under this Plan and all other outstanding but
unvested Awards granted under this Plan.
2.2 Adjustment of Shares. In the event that the number of
--------------------
outstanding shares is changed by a stock dividend, recapitalization, stock
split, reverse stock split, subdivision, combination, reclassification or
similar change in the capital structure of the Company without consideration,
then (a) the number of Shares reserved for issuance under this Plan, (b) the
Exercise Prices of and number of Shares subject to outstanding Options, and (c)
the number of Shares subject to other outstanding Awards will be proportionately
adjusted, subject to any required action by the Board or the stockholders of the
Company and compliance with applicable securities laws; provided, however, that
-------- -------
fractions of a Share will not be issued but will either be replaced by a cash
payment equal to the Fair Market Value of such fraction of a Share or will be
rounded up to the nearest whole Share, as determined by the Committee.
3. ELIGIBILITY. ISOs (as defined in Section 5 below) may be granted
-----------
only to employees (including officers and directors who are also employees) of
the Company or of a Parent or Subsidiary of the Company. All other Awards may
be granted to employees, officers, directors, consultants, independent
contractors and advisors of the Company or any Parent or Subsidiary of the
Company; provided such consultants, contractors and advisors render bona fide
--------
services not in connection with the offer and sale of securities in a capital-
raising transaction. No person will be eligible to receive more than 800,000
Shares in any calendar year under this Plan pursuant to the grant of Awards
hereunder, other than new employees of the Company or of a Parent or Subsidiary
of the Company (including new employees who are also officers and directors of
the Company or any Parent or Subsidiary of the Company), who are eligible to
receive up to a maximum of 1,000,000 Shares in the calendar year in which they
commence their employment. A person may be granted more than one Award under
this Plan.
<PAGE>
Centaur Pharmaceuticals, Inc.
1998 Equity Incentive Plan
4. ADMINISTRATION.
--------------
4.1 Committee Authority. This Plan will be administered by the
-------------------
Committee or by the Board acting as the Committee. Subject to the general
purposes, terms and conditions of this Plan, and to the direction of the Board,
the Committee will have full power to implement and carry out this Plan. Without
limitation, the Committee will have the authority to:
(a) construe and interpret this Plan, any Award Agreement and any
other agreement or document executed pursuant to this Plan;
(b) prescribe, amend and rescind rules and regulations relating to
this Plan or any Award;
(c) select persons to receive Awards;
(d) determine the form and terms of Awards;
(e) determine the number of Shares or other consideration subject to
Awards;
(f) determine whether Awards will be granted singly, in combination
with, in tandem with, in replacement of, or as alternatives to,
other Awards under this Plan or any other incentive or
compensation plan of the Company or any Parent or Subsidiary of
the Company;
(g) grant waivers of Plan or Award conditions;
(h) determine the vesting, exercisability and payment of Awards;
(i) correct any defect, supply any omission or reconcile any
inconsistency in this Plan, any Award or any Award Agreement;
(j) determine whether an Award has been earned; and
(k) make all other determinations necessary or advisable for the
administration of this Plan.
4.2 Committee Discretion. Any determination made by the Committee
--------------------
with respect to any Award will be made in its sole discretion at the time of
grant of the Award or, unless in contravention of any express term of this Plan
or Award, at any later time, and such determination will be final and binding on
the Company and on all persons having an interest in any Award under this Plan.
The Committee may delegate to one or more officers of the Company the authority
to grant an Award under this Plan to Participants who are not Insiders of the
Company.
5. OPTIONS. The Committee may grant Options to eligible persons and
-------
will determine whether such Options will be Incentive Stock Options within the
meaning of the Code ("ISO") or Nonqualified Stock Options ("NQSOS"), 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
--------------------
will be evidenced by an Award Agreement which will expressly identify the Option
as an ISO or an NQSO ("STOCK OPTION AGREEMENT"), and will be in such form and
contain such provisions (which need not be the same for each Participant) as the
Committee may from time to time approve, and which will comply with and be
subject to the terms and conditions of this Plan.
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Centaur Pharmaceuticals, Inc.
1998 Equity Incentive Plan
5.2 Date of Grant. The date of grant of an Option will be the
-------------
date on which the Committee makes the determination to grant such Option, unless
otherwise specified by the Committee. The Stock Option Agreement and a copy of
this Plan will be delivered to the Participant within a reasonable time after
the granting of the Option.
5.3 Exercise Period. Options may be exercisable within the times
---------------
or upon the events determined by the Committee as set forth in the Stock Option
Agreement governing such Option; provided, however, that no Option will 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 person who directly or by
-------- -------
attribution owns more than ten percent (10%) of the total combined voting power
of all classes of stock of the Company or of any Parent or Subsidiary of the
Company ("TEN PERCENT STOCKHOLDER") will be exercisable after the expiration of
five (5) years from the date the ISO is granted. The Committee also may provide
for Options to become exercisable at one time or from time to time, periodically
or otherwise, in such number of Shares or percentage of Shares as the Committee
determines. Subject to earlier termination of the Option as provided herein,
each Participant who is not an officer, director or consultant of the Company or
of a Parent or Subsidiary of the Company, shall have the right to exercise an
Option granted hereunder at the rate of at least twenty percent (20%) per year
over five (5) years from the date such Option is granted.
5.4 Exercise Price. The Exercise Price of an Option will be
--------------
determined by the Committee when the Option is granted and may be not less than
85% of the Fair Market Value of the Shares on the date of grant; provided that:
(i) the Exercise Price of an ISO will be not less than 100% of the Fair Market
Value of the Shares on the date of grant; and (ii) the Exercise Price of any
Option granted to a Ten Percent Stockholder will not be less than 110% of the
Fair Market Value of the Shares on the date of grant. Payment for the Shares
purchased may be made in accordance with Section 8 of this Plan.
5.5 Method of Exercise. 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 Participant), stating the number of Shares being purchased, the
restrictions imposed on the Shares purchased under such Exercise Agreement, if
any, and such representations and agreements regarding Participant's investment
intent and access to information and other matters, if any, as may be required
or desirable 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.
5.6 Termination. Notwithstanding the exercise periods set forth
-----------
in the Stock Option Agreement, exercise of an Option will always be subject to
the following:
(a) If the Participant is Terminated for any reason except death or
Disability, then the Participant may exercise such Participant's
Options only to the extent that such Options would have been
exercisable upon the Termination Date no later than three (3)
months after the Termination Date (or within such shorter time
period, not less than 30 days, or within such longer time period,
not exceeding five (5) years, as may be determined by the
Committee, with any exercise beyond three (3) months after the
Termination Date deemed to be an NQSO), but in any event, no later
than the expiration date of the Options.
(b) If the Participant is Terminated because of Participant's death or
Disability (or the Participant dies within three (3) months after
a Termination other than for Cause or because of Participant's
Disability), then Participant's Options may be exercised only to
the extent that such Options would have been exercisable by
Participant on the Termination Date and must be exercised by
Participant (or Participant's legal representative or authorized
assignee) no later than twelve (12) months after the Termination
Date (or within such shorter time period, not less than six (6)
months, or within such longer time period, not exceeding five (5)
years, as may be determined by the Committee, with any such
exercise beyond (a) three (3) months after the Termination Date
when the Termination is for any
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<PAGE>
Centaur Pharmaceuticals, Inc.
1998 Equity Incentive Plan
reason other than the Participant's death or Disability, or (b)
twelve (12) months after the Termination Date when the Termination
is for Participant's death or Disability, deemed to be an NQSO),
but in any event no later than the expiration date of the Options.
(c) Notwithstanding the provisions in paragraph 5.6(a) above, if a
Participant is terminated for Cause, neither the Participant, the
Participant's estate nor such other person who may then hold the
Option shall be entitled to exercise any Option with respect to
any Shares whatsoever, after termination of service, whether or
not after termination of service the Participant may receive
payment from the Company or Subsidiary for vacation pay, for
services rendered prior to termination, for services rendered for
the day on which termination occurs, for salary in lieu of notice,
or for any other benefits. In making such determination, the
Committee shall give the Participant an opportunity to present to
the Committee evidence on his or her behalf. For the purpose of
this paragraph, termination of service shall be deemed to occur on
the date when the Company dispatches notice or advice to the
Participant that his or her service is terminated.
5.7 Limitations on Exercise. 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 Participant from
exercising the Option for the full number of Shares for which it is then
exercisable.
5.8 Limitations on ISO. The aggregate Fair Market Value
------------------
(determined as of the date of grant) of Shares with respect to which ISO are
exercisable for the first time by a Participant during any calendar year (under
this Plan or under any other incentive stock option plan of the Company, Parent
or Subsidiary of the Company) will not exceed $100,000. If the Fair Market
Value of Shares on the date of grant with respect to which ISO are exercisable
for the first time by a Participant during any calendar year exceeds $100,000,
then the Options for the first $100,000 worth of Shares to become exercisable in
such calendar year will be ISO and the Options for the amount in excess of
$100,000 that become exercisable in that calendar year will be NQSOs. In the
event that the 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 ISO, such different limit will
be automatically incorporated herein and will apply to any Options granted after
the effective date of such amendment.
5.9 Modification, Extension or Renewal. The Committee may
----------------------------------
modify, extend or renew outstanding Options and authorize the grant of new
Options in substitution therefor, provided that any such action may not, without
the written consent of a Participant, impair any of such Participant's rights
under any Option previously granted. Any outstanding ISO that is modified,
extended, renewed or otherwise altered will be treated in accordance with
Section 424(h) of the Code. The Committee may reduce the Exercise Price of
outstanding Options without the consent of Participants affected by a written
notice to them; provided, however, that the Exercise Price may not be reduced
-------- -------
below the minimum Exercise Price that would be permitted under Section 5.4 of
this Plan for Options granted on the date the action is taken to reduce the
Exercise Price.
5.10 No Disqualification. Notwithstanding any other provision in
-------------------
this Plan, no term of this Plan relating to ISO will be interpreted, amended or
altered, nor will any discretion or authority granted under this Plan be
exercised, so as to disqualify this Plan under Section 422 of the Code or,
without the consent of the Participant affected, to disqualify any ISO under
Section 422 of the Code.
6. RESTRICTED STOCK. A Restricted Stock Award is an offer by the
----------------
Company to sell to an eligible person Shares that are subject to restrictions.
The Committee will determine to whom an offer will be made, the number of Shares
the person may purchase, the price to be paid (the "PURCHASE PRICE"), the
restrictions to which the Shares will be subject, and all other terms and
conditions of the Restricted Stock Award, subject to the following:
6.1 Form of Restricted Stock Award. All purchases under a
------------------------------
Restricted Stock Award made pursuant to this Plan will be evidenced by an Award
Agreement ("RESTRICTED STOCK PURCHASE AGREEMENT")
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<PAGE>
Centaur Pharmaceuticals, Inc.
1998 Equity Incentive Plan
that will be in such form (which need not be the same for each Participant) as
the Committee will from time to time approve, and will comply with and be
subject to the terms and conditions of this Plan. The offer of Restricted Stock
will be accepted by the Participant's execution and delivery of the Restricted
Stock Purchase Agreement and full payment for the Shares to the Company within
thirty (30) days from the date the Restricted Stock Purchase Agreement is
delivered to the person. If such person does not execute and deliver the
Restricted Stock Purchase Agreement along with full payment for the Shares to
the Company within thirty (30) days, then the offer will terminate, unless
otherwise determined by the Committee.
6.2 Purchase Price. The Purchase Price of Shares sold pursuant
--------------
to a Restricted Stock Award will be determined by the Committee and will be at
least eighty-five percent (85%) of the Fair Market Value of the Shares on the
date the Restricted Stock Award is granted or at the time the purchase is
consummated, except in the case of a sale to a Ten Percent Stockholder, in which
case the Purchase Price will be 100% of the Fair Market Value on the date the
Restricted Stock Award is granted or at the time the purchase is consummated.
Payment of the Purchase Price may be made in accordance with Section 8 of this
Plan.
6.3 Terms of Restricted Stock Awards. Restricted Stock Awards
--------------------------------
shall be subject to such restrictions as the Committee may impose. These
restrictions may be based upon completion of a specified number of years of
service with the Company or upon completion of the performance goals as set out
in advance in the Participant's individual Restricted Stock Purchase Agreement.
Restricted Stock Awards may vary from Participant to Participant and between
groups of Participants. Prior to the grant of a Restricted Stock Award, the
Committee shall: (a) determine the nature, length and starting date of any
Performance Period for the Restricted Stock Award; (b) select from among the
Performance Factors to be used to measure performance goals, if any; and (c)
determine the number of Shares that may be awarded to the Participant. Prior to
the payment of any Restricted Stock Award, the Committee shall determine the
extent to which such Restricted Stock Award has been earned. Performance
Periods may overlap and Participants may participate simultaneously with respect
to Restricted Stock Awards that are subject to different Performance Periods and
having different performance goals and other criteria.
6.4 Termination During Performance Period. If a Participant is
-------------------------------------
Terminated during a Performance Period for any reason, then such Participant
will be entitled to payment (whether in Shares, cash or otherwise) with respect
to the Restricted Stock Award only to the extent earned as of the date of
Termination in accordance with the Restricted Stock Purchase Agreement, unless
the Committee will determine otherwise.
7. STOCK BONUSES.
-------------
7.1 Awards of Stock Bonuses. A Stock Bonus is an award of Shares
-----------------------
(which may consist of Restricted Stock) for services rendered to the Company or
any Parent or Subsidiary of the Company. A Stock Bonus may be awarded for past
services already rendered to the Company, or any Parent or Subsidiary of the
Company pursuant to an Award Agreement (the "STOCK BONUS AGREEMENT") that will
be in such form (which need not be the same for each Participant) as the
Committee will from time to time approve, and will comply with and be subject to
the terms and conditions of this Plan. A Stock Bonus may be awarded upon
satisfaction of such performance goals as are set out in advance in the
Participant's individual Award Agreement (the "PERFORMANCE STOCK BONUS
AGREEMENT") that will be in such form (which need not be the same for each
Participant) as the Committee will from time to time approve, and will comply
with and be subject to the terms and conditions of this Plan. Stock Bonuses may
vary from Participant to Participant and between groups of Participants, and may
be based upon the achievement of the Company, Parent or Subsidiary and/or
individual performance factors or upon such other criteria as the Committee may
determine.
7.2 Terms of Stock Bonuses. The Committee will determine the
----------------------
number of Shares to be awarded to the Participant. If the Stock Bonus is being
earned upon the satisfaction of performance goals pursuant to a Performance
Stock Bonus Agreement, then the Committee will: (a) determine the nature, length
and starting date of any Performance Period for each Stock Bonus; (b) select
from among the Performance Factors to be used to measure the performance, if
any; and (c) determine the number of Shares that may be awarded to the
Participant. Prior to the payment of any Stock Bonus, the Committee shall
determine the extent to which such Stock
-5-
<PAGE>
Centaur Pharmaceuticals, Inc.
1998 Equity Incentive Plan
Bonuses have been earned. Performance Periods may overlap and Participants may
participate simultaneously with respect to Stock Bonuses that are subject to
different Performance Periods and different performance goals and other
criteria. The number of Shares may be fixed or may vary in accordance with such
performance goals and criteria as may be determined by the Committee. The
Committee may adjust the performance goals applicable to the Stock Bonuses to
take into account changes in law and accounting or tax rules and to make such
adjustments as the Committee deems necessary or appropriate to reflect the
impact of extraordinary or unusual items, events or circumstances to avoid
windfalls or hardships.
7.3 Form of Payment. The earned portion of a Stock Bonus may be
---------------
paid currently or on a deferred basis with such interest or dividend equivalent,
if any, as the Committee may determine. Payment may be made in the form of cash
or whole Shares or a combination thereof, either in a lump sum payment or in
installments, all as the Committee will determine.
8. PAYMENT FOR SHARE PURCHASES.
---------------------------
8.1 Payment. Payment for Shares purchased pursuant to this Plan
-------
may be made in cash (by check) or, where expressly approved for the Participant
by the Committee and where permitted by law:
(a) by cancellation of indebtedness of the Company to the Participant;
(b) by surrender of shares that either: (1) have been owned by
Participant for more than six (6) months and 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 (2) were
obtained by Participant in the public market;
(c) by tender of a full recourse promissory note having such terms as
may be approved by the Committee and bearing interest at a rate
sufficient to avoid imputation of income under Sections 483 and
1274 of the Code; provided, however, that Participants who are not
-------- -------
employees or directors of the Company will not be entitled to
purchase Shares with a promissory note unless the note is
adequately secured by collateral other than the Shares;
(d) by waiver of compensation due or accrued to the Participant for
services rendered;
(e) with respect only to purchases upon exercise of an Option, and
provided that a public market for the Company's stock exists:
(1) through a "same day sale" commitment from the Participant and
a broker-dealer that is a member of the National Association
of Securities Dealers or a member firm of the Swiss Stock
Exchange (a "QUALIFIED DEALER") whereby the Participant
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 Qualified Dealer irrevocably commits
upon receipt of such Shares to forward the Exercise Price
directly to the Company; or
(2) through a "margin" commitment from the Participant and a
Qualified Dealer whereby the Participant irrevocably elects
to exercise the Option and to pledge the Shares so purchased
to the Qualified Dealer in a margin account as security for a
loan from the Qualified Dealer in the amount of the Exercise
Price, and whereby the Qualified 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.
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Centaur Pharmaceuticals, Inc.
1998 Equity Incentive Plan
8.2 Loan Guarantees. The Committee may help the Participant pay
---------------
for Shares purchased under this Plan by authorizing a guarantee by the Company
of a third-party loan to the Participant.
9. WITHHOLDING TAXES.
-----------------
9.1 Withholding Generally. Whenever Shares are to be issued in
---------------------
satisfaction of Awards granted under this Plan, the Company may require the
Participant to remit to the Company an amount sufficient to satisfy federal,
state and local withholding tax requirements prior to the delivery of any
certificate or certificates for such Shares. Whenever, under this Plan,
payments in satisfaction of Awards are to be made in cash, such payment will be
net of an amount sufficient to satisfy federal, state, and local withholding tax
requirements.
9.2 Stock Withholding. When, under applicable tax laws, a
-----------------
Participant incurs tax liability in connection with the exercise or vesting of
any Award that is subject to tax withholding and the Participant is obligated to
pay the Company the amount required to be withheld, the Committee may in its
sole discretion allow the Participant to satisfy the minimum withholding tax
obligation by electing to have the Company withhold from the Shares to be issued
that number of Shares having a Fair Market Value equal to the minimum amount
required to be withheld, determined on the date that the amount of tax to be
withheld is to be determined. All elections by a Participant to have Shares
withheld for this purpose will be made in accordance with the requirements
established by the Committee and be in writing in a form acceptable to the
Committee
10. PRIVILEGES OF STOCK OWNERSHIP.
-----------------------------
10.1 Voting and Dividends. No Participant will have any of the
--------------------
rights of a stockholder with respect to any Shares until the Shares are issued
to the Participant. After Shares are issued to the Participant, the Participant
will be a stockholder and have all the rights of a stockholder with respect to
such Shares, including the right to vote and receive all dividends or other
distributions made or paid with respect to such Shares; provided, that if such
--------
Shares are Restricted Stock, then any new, additional or different securities
the Participant may become entitled to receive with respect to such Shares by
virtue of a stock dividend, stock split or any other change in the corporate or
capital structure of the Company will be subject to the same restrictions as the
Restricted Stock; provided, further, that the Participant will have no right to
-------- -------
retain such stock dividends or stock distributions with respect to Shares that
are repurchased at the Participant's Purchase Price or Exercise Price pursuant
to Section 12.
10.2 Financial Statements. The Company will provide or otherwise
--------------------
make available financial statements to each Participant prior to such
Participant's purchase of Shares under this Plan, and to each Participant
annually during the period such Participant has Awards outstanding; provided,
--------
however, the Company will not be required to provide such financial statements
- -------
to Participants whose services in connection with the Company assure them access
to equivalent information.
11. TRANSFERABILITY. Awards granted under this Plan, and any interest
---------------
therein, will not be transferable or assignable by Participant, and may not be
made subject to execution, attachment or similar process, otherwise than by will
or by the laws of descent and distribution. During the lifetime of the
Participant an Award will be exercisable only by the Participant, and any
elections with respect to an Award may be made only by the Participant.
12. RESTRICTIONS ON SHARES. At the discretion of the Committee, the
----------------------
Company may reserve to itself and/or its assignee(s) in the Award Agreement a
right to repurchase a portion of or all Unvested Shares held by a Participant
following such Participant's Termination at any time within ninety (90) days
after the later of Participant's Termination Date and the date Participant
purchases Shares under this Plan, for cash and/or
cancellation of purchase money indebtedness, at the Participant's Exercise Price
or Purchase Price, as the case may be, provided, that unless the Participant is
an officer, director or consultant of the Company or of a Parent or Subsidiary
of the Company, such right of repurchase lapses at the rate of at least twenty
percent (20%) per year over
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Centaur Pharmaceuticals, Inc.
1998 Equity Incentive Plan
five (5) years from (a) the date of grant of the Option, or (b) in the case of
Restricted Stocks, the date the Participant purchases the Shares.
13. CERTIFICATES. All certificates for Shares or other securities
------------
delivered under this Plan will be subject to such stock transfer orders, legends
and other restrictions as the Committee may deem necessary or advisable,
including restrictions under any applicable federal, state or foreign securities
law, or any rules, regulations and other requirements of the SEC or any stock
exchange or automated quotation system upon which the Shares may be listed or
quoted.
14. ESCROW; PLEDGE OF SHARES. To enforce any restrictions on a
------------------------
Participant's Shares, the Committee may require the Participant to deposit all
certificates representing Shares, together with stock powers or other
instruments of transfer approved by the Committee, appropriately endorsed in
blank, with the Company or an agent designated by the Company to hold in escrow
until such restrictions have lapsed or terminated, and the Committee may cause a
legend or legends referencing such restrictions to be placed on the
certificates. Any Participant who is permitted to execute a promissory note as
partial or full consideration for the purchase of Shares under this Plan will be
required to pledge and deposit with the Company all or part of the Shares so
purchased as collateral to secure the payment of Participant's obligation to the
Company under the promissory note; provided, however, that the Committee may
-------- -------
require or accept other or additional forms of collateral to secure the payment
of such obligation and, in any event, the Company will have full recourse
against the Participant under the promissory note notwithstanding any pledge of
the Participant's Shares or other collateral. In connection with any pledge of
the Shares, Participant will be required to execute and deliver a written pledge
agreement in such form as the Committee will from time to time approve. The
Shares purchased with the promissory note may be released from the pledge on a
pro rata basis as the promissory note is paid.
15. EXCHANGE AND BUYOUT OF AWARDS. The Committee may, at any time or
-----------------------------
from time to time, authorize the Company, with the consent of the respective
Participants, to issue new Awards in exchange for the surrender and cancellation
of any or all outstanding Awards. The Committee may at any time buy from a
Participant an Award previously granted with payment in cash, Shares (including
Restricted Stock) or other consideration, based on such terms and conditions as
the Committee and the Participant may agree.
16. SECURITIES LAW AND OTHER REGULATORY COMPLIANCE. An Award will not
----------------------------------------------
be effective unless such Award is in compliance with all applicable federal and
state securities laws, rules and regulations of any governmental body, and the
requirements of any stock exchange or automated quotation system upon which the
Shares may then be listed or quoted, as they are in effect on the date of grant
of the Award and also on the date of exercise or other issuance.
Notwithstanding any other provision in this Plan, the Company will have no
obligation to issue or deliver certificates for Shares under this Plan prior to:
(a) obtaining any approvals from governmental agencies that the Company
determines are necessary or advisable; and/or (b) completion of any registration
or other qualification of such Shares under any state or federal law or ruling
of any governmental body that the Company determines to be necessary or
advisable. The Company will 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 automated quotation
system, and the Company will have no liability for any inability or failure to
do so.
17. NO OBLIGATION TO EMPLOY. Nothing in this Plan or any Award
-----------------------
granted under this Plan will confer or be deemed to confer on any Participant
any right to continue in the employ of, or to continue any other relationship
with, the Company or any Parent or Subsidiary of the Company or limit in any way
the right of the Company or any Parent or Subsidiary of the Company to terminate
Participant's employment or other relationship at any time, with or without
cause.
18. CORPORATE TRANSACTIONS.
----------------------
18.1 Assumption or Replacement of Awards by Successor. In the
------------------------------------------------
event of (a) a dissolution or liquidation of the Company, (b) a merger or
consolidation in which the Company is not the surviving
-8-
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Centaur Pharmaceuticals, Inc.
1998 Equity Incentive Plan
corporation (other than a merger or consolidation with a wholly-owned
subsidiary, a reincorporation of the Company in a different jurisdiction, or
other transaction in which there is no substantial change in the stockholders of
the Company or their relative stock holdings and the Awards granted under this
Plan are assumed, converted or replaced by the successor corporation, which
assumption will be binding on all Participants), (c) a merger in which the
Company is the surviving corporation but after which the stockholders of the
Company immediately prior to such merger (other than any stockholder that
merges, or which owns or controls another corporation that merges, with the
Company in such merger) cease to own their shares or other equity interest in
the Company, (d) the sale of substantially all of the assets of the Company, or
(e) the acquisition, sale, or transfer of more than 50% of the outstanding
shares of the Company by tender offer or similar transaction, any or all
outstanding Awards may be assumed, converted or replaced by the successor
corporation (if any), which assumption, conversion or replacement will be
binding on all Participants. In the alternative, the successor corporation may
substitute equivalent Awards or provide substantially similar consideration to
Participants as was provided to stockholders (after taking into account the
existing provisions of the Awards). The successor corporation may also issue, in
place of outstanding Shares of the Company held by the Participant,
substantially similar shares or other property subject to repurchase
restrictions no less favorable to the Participant. In the event such successor
corporation (if any) refuses to assume or substitute Awards, as provided above,
pursuant to a transaction described in this Subsection 18.1, such Awards will
expire on such transaction at such time and on such conditions as the Committee
will determine; provided, however, that the Committee may, in its sole
-------- -------
discretion, provide that the vesting of any or all Awards granted pursuant to
this Plan will accelerate. If the Committee exercises such discretion with
respect to Options, such Options will become exercisable in full prior to the
consummation of such event at such time and on such conditions as the Committee
determines, and if such Options are not exercised prior to the consummation of
the corporate transaction, they shall terminate at such time as determined by
the Committee.
18.2 Other Treatment of Awards. Subject to any greater rights
-------------------------
granted to Participants under the foregoing provisions of this Section 18, in
the event of the occurrence of any transaction described in Section 18.1, any
outstanding Awards will be treated as provided in the applicable agreement or
plan of merger, consolidation, dissolution, liquidation, or sale of assets.
18.3 Assumption of Awards by the Company. The Company, from time
-----------------------------------
to time, also may substitute or assume outstanding awards granted by another
company, whether in connection with an acquisition of such other company or
otherwise, by either; (a) granting an Award under this Plan in substitution of
such other company's award; or (b) assuming such award as if it had been granted
under this Plan if the terms of such assumed award could be applied to an Award
granted under this Plan. Such substitution or assumption will be permissible if
the holder of the substituted or assumed award would have been eligible to be
granted an Award under this Plan if the other company had applied the rules of
this Plan to such grant. In the event the Company assumes an award granted by
another company, the terms and conditions of such award will remain unchanged
(except that the exercise price and the number and nature of Shares issuable
- -------
upon exercise of any such option will be adjusted appropriately pursuant to
Section 424(a) of the Code). In the event the Company elects to grant a new
Option rather than assuming an existing option, such new Option may be granted
with a similarly adjusted Exercise Price.
19. ADOPTION AND STOCKHOLDER APPROVAL. This Plan will become
---------------------------------
effective on the earlier of (i) the date on which a registration statement filed
by the Company with the SEC under the Securities Act registering the initial
public offering of the Company's Common Stock is declared effective by the SEC,
or (ii) the date on which the Company makes an initial public offering of its
Common Stock on the Swiss Stock Exchange (the "EFFECTIVE DATE"). This Plan
shall be approved by the stockholders of the Company (excluding Shares issued
pursuant to this Plan), consistent with applicable laws, within twelve (12)
months before or after the date this Plan is adopted by the Board. Upon the
Effective Date, the Committee may grant Awards pursuant to this Plan; provided,
--------
however, that: (a) no Option may be exercised prior to initial stockholder
- -------
approval of this Plan; (b) no Option granted pursuant to an increase in the
number of Shares subject to this Plan approved by the Board will be exercised
prior to the time such increase has been approved by the stockholders of the
Company; (c) in the event that initial stockholder approval is not obtained
within the time period provided herein, all Awards granted hereunder shall be
cancelled, any Shares pursuant to any Award shall be cancelled and any purchase
of Shares issued hereunder shall
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Centaur Pharmaceuticals, Inc.
1998 Equity Incentive Plan
be rescinded; and (d) in the event that stockholder approval of such increase is
not obtained within the time period provided herein, all Awards granted pursuant
to such increase will be cancelled, any Shares issued pursuant to any Award
granted pursuant to such increase will be cancelled, and any purchase of Shares
pursuant to such increase will be rescinded.
20. TERM OF PLAN/GOVERNING LAW. Unless earlier terminated as provided
--------------------------
herein, this Plan will terminate ten (10) years from the date this Plan is
adopted by the Board or, if earlier, the date of stockholder approval. This
Plan and all agreements thereunder shall be governed by and construed in
accordance with the laws of the State of California.
21. AMENDMENT OR TERMINATION OF PLAN. The Board may at any time
--------------------------------
terminate or amend this Plan in any respect, including without limitation
amendment of any form of Award Agreement or instrument to be executed pursuant
to this Plan; provided, however, that the Board will not, without the approval
-------- -------
of the stockholders of the Company, amend this Plan in any manner that requires
such stockholder approval.
22. NONEXCLUSIVITY OF THE PLAN. Neither the adoption of this Plan by
--------------------------
the Board, the submission of this Plan to the stockholders of the Company for
approval, nor any provision of this Plan will be construed as creating any
limitations on the power of the Board to adopt such additional compensation
arrangements as it may deem desirable, including, without limitation, the
granting of stock options and bonuses otherwise than under this Plan, and such
arrangements may be either generally applicable or applicable only in specific
cases.
23. DEFINITIONS. As used in this Plan, the following terms will have
-----------
the following meanings:
"AWARD" means any award under this Plan, including any Option,
Restricted Stock or Stock Bonus.
"AWARD AGREEMENT" means, with respect to each Award, the signed
written agreement between the Company and the Participant setting forth the
terms and conditions of the Award.
"BOARD" means the Board of Directors of the Company.
"CAUSE" means the commission of an act of theft, embezzlement,
fraud, dishonesty or a breach of fiduciary duty to the Company or a Parent or
Subsidiary of the Company.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMMITTEE" means the Compensation Committee of the Board or the
Board if no such committee is appointed.
"COMPANY" means Centaur Pharmaceuticals, Inc. or any successor
corporation.
"DISABILITY" means a disability, whether temporary or permanent,
partial or total, as determined by the Committee.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"EXERCISE PRICE" means the price at which a holder of an Option
may purchase the Shares issuable upon exercise of the Option.
"FAIR MARKET VALUE" means, as of any date, the value of a share of
the Company's Common Stock determined as follows:
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Centaur Pharmaceuticals, Inc.
1998 Equity Incentive Plan
(a) if such Common Stock is then quoted on the Nasdaq National Market,
its closing price on the Nasdaq National Market on the date of
determination as reported in The Wall Street Journal;
-----------------------
(b) if subsection (a) is not applicable and if such Common Stock is
publicly traded and is then listed on the Swiss Stock Exchange,
its closing price on the Swiss Stock Exchange on the date of
determination as reported by the Swiss Stock Exchange or in any
newspaper of general circulation in Zurich, Switzerland;
(c) if subsection (a) and (b) are not applicable and if such Common
Stock is publicly traded and is then listed on a national
securities exchange, its closing price on the date of
determination on the principal national securities exchange on
which the Common Stock is listed or admitted to trading as
reported in The Wall Street Journal;
-----------------------
(d) if such Common Stock is publicly traded but is not quoted on the
Nasdaq National Market nor listed or admitted to trading on a
national securities exchange or the Swiss Stock Exchange, the
average of the closing bid and asked prices on the date of
determination as reported in The Wall Street Journal;
-----------------------
(e) in the case of an Award made on the Effective Date, the price per
share at which shares of the Company's Common Stock are initially
offered for sale to the public by the Company's underwriters in
the initial public offering of the Company's Common Stock; or
(f) if none of the foregoing is applicable, by the Committee in good
faith.
"INSIDER" means an officer or director of the Company or any other
person whose transactions in the Company's Common Stock are subject to Section
16 of the Exchange Act.
"OPTION" means an award of an option to purchase Shares pursuant
to Section 5.
"PARENT" means any corporation (other than the Company) in an
unbroken chain of corporations ending with the Company if 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.
"PARTICIPANT" means a person who receives an Award under this
Plan.
"PERFORMANCE FACTORS" means the factors selected by the Committee
from among the following measures to determine whether the performance goals
established by the Committee and applicable to Awards have been satisfied:
(a) Net revenue and/or net revenue growth;
(b) Earnings before income taxes and amortization and/or earnings
before
income taxes and amortization growth;
(c) Operating income and/or operating income growth;
(d) Net income and/or net income growth;
(e) Earnings per share and/or earnings per share growth;
(f) Total shareholder return and/or total shareholder return
growth;
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<PAGE>
Centaur Pharmaceuticals, Inc.
1998 Equity Incentive Plan
(g) Return on equity;
(h) Operating cash flow return on income;
(i) Adjusted operating cash flow return on income;
(j) Economic value added; and
(k) Individual confidential business objectives.
"PERFORMANCE PERIOD" means the period of service determined by the
Committee, not to exceed five years, during which years of service or
performance is to be measured for Restricted Stock Awards or Stock Bonuses.
"PLAN" means this Centaur Pharmaceuticals, Inc. 1998 Equity
Incentive Plan, as amended from time to time.
"RESTRICTED STOCK AWARD" means an award of Shares pursuant to
Section 6.
"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SHARES" means shares of the Company's Common Stock reserved for
issuance under this Plan, as adjusted pursuant to Sections 2 and 18, and any
successor security.
"STOCK BONUS" means an award of Shares, or cash in lieu of Shares,
pursuant to Section 7.
"SUBSIDIARY" means any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company if 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.
"TERMINATION" or "TERMINATED" means, for purposes of this Plan
with respect to a Participant, that the Participant has for any reason ceased to
provide services as an employee, officer, director, consultant, independent
contractor, or advisor to the Company or a Parent or Subsidiary of the Company.
An employee will not be deemed to have ceased to provide services in the case of
(i) sick leave, (ii) military leave, or (iii) any other leave of absence
approved by the Committee, provided, that such leave is for a period of not more
than 90 days, unless reemployment upon the expiration of such leave is
guaranteed by contract or statute or unless provided otherwise pursuant to
formal policy adopted from time to time by the Company and issued and
promulgated to employees in writing. In the case of any employee on an approved
leave of absence, the Committee may make such provisions respecting suspension
of vesting of the Award while on leave from the employ of the Company or a
Subsidiary as it may deem appropriate, except that in no event may an Option be
exercised after the expiration of the term set forth in the Option agreement.
The Committee will have sole discretion to determine whether a Participant has
ceased to provide services and the effective date on which the Participant
ceased to provide services (the "TERMINATION DATE").
"UNVESTED SHARES" means "Unvested Shares" as defined in the Award
Agreement.
"VESTED SHARES" means "Vested Shares" as defined in the Award
Agreement.
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<PAGE>
EXHIBIT 10.03
CENTAUR PHARMACEUTICALS, INC.
1998 DIRECTORS STOCK OPTION PLAN
As Adopted June 10, 1998
1. PURPOSE. This 1998 Directors Stock Option Plan (this "PLAN") is
established to provide equity incentives for certain nonemployee members of the
Board of Directors of Centaur Pharmaceuticals, Inc. (the "COMPANY"), who are
described in Section 6.1 below, by granting such persons options to purchase
shares of stock of the Company.
2. ADOPTION AND STOCKHOLDER APPROVAL. After this Plan is adopted by the
Board of Directors of the Company (the "BOARD"), this Plan will become effective
on the earlier of (i) the time and date on which a registration statement filed
by the Company with the Securities and Exchange Commission ("SEC") under the
Securities Act of 1933, as amended (the "SECURITIES ACT"), to register the
initial public offering of the Company's Common Stock is declared effective by
the SEC, or (ii) the date on which the Company makes an initial public offering
of its Common Stock on the Swiss Stock Exchange (the "EFFECTIVE DATE"). This
Plan shall be approved by the stockholders of the Company, consistent with
applicable laws, within twelve (12) months after the date this Plan is adopted
by the Board.
3. TYPES OF OPTIONS AND SHARES. Options granted under this Plan shall be
non-qualified stock options ("NQSOS"). The shares of stock that may be
purchased upon exercise of Options granted under this Plan (the "SHARES") are
shares of the Common Stock of the Company.
4. NUMBER OF SHARES. The maximum number of Shares that may be issued
pursuant to Options granted under this Plan (the "MAXIMUM NUMBER") is 125,000
Shares, subject to adjustment as provided in this Plan. If any Option is
terminated for any reason without being exercised in whole or in part, the
Shares thereby released from such Option shall be available for purchase under
other Options subsequently granted 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
granted under this Plan; provided, however that if the aggregate number of
Shares subject to outstanding Options granted under this Plan plus the aggregate
number of Shares previously issued by the Company pursuant to the exercise of
Options granted under this Plan equals or exceeds the Maximum Number, then
notwithstanding anything herein to the contrary, no further Options may be
granted under this Plan until the Maximum Number is increased or the aggregate
number of Shares subject to outstanding Options granted under this Plan plus the
aggregate number of Shares previously issued by the Company pursuant to the
exercise of Options granted under this Plan is less than the Maximum Number.
5. ADMINISTRATION. This Plan shall be administered by the Board or by a
committee of not less than two members of the Board appointed to administer this
Plan (the "COMMITTEE"). As used in this Plan, references to the Committee shall
mean either such Committee 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.
6. ELIGIBILITY AND AWARD FORMULA.
6.1 Eligibility. Options shall be granted only to directors of the
-----------
Company who are not employees of the Company (each such person
referred to as an "OPTIONEE").
<PAGE>
Centaur Pharmaceuticals, Inc.
1998 Directors Stock Option Plan
6.2 Initial Grant. Each Optionee who first becomes a member of the
-------------
Board on or after the Effective Date will automatically be granted an Option for
a number of Shares equal to 417 shares multiplied by the number of full and
partial calendar months between (a) the date such Optionee becomes a member of
the Board and (b) the next succeeding May 1 (an "INITIAL GRANT"). Initial Grants
shall be awarded on the date such Optionee becomes a member of the Board.
6.3 Succeeding Grants. On May 1 of each year following the Effective
-----------------
Date, each Optionee will automatically be granted an Option for 5,000 Shares (a
"SUCCEEDING GRANT"), provided the Optionee is a member of the Board on such date
and has served continuously as a member of the Board since the date of such
Optionee's Initial Grant or, if such Optionee was ineligible to receive an
Initial Grant, since the Effective Date.
7. TERMS AND CONDITIONS OF OPTIONS. Subject to the following and to
Section 6 above:
7.1 Form of Option Grant. Each Option granted under this Plan shall
--------------------
be evidenced by a written Stock Option Grant ("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.
7.2 Vesting. The date an Optionee receives an Initial Grant or a
-------
Succeeding Grant is referred to in this Plan as the "START DATE" for such
Option.
(a) Initial Grants. Each Initial Grant will vest as one thirty-
--------------
sixth (1/36th) of the Shares on each monthly anniversary of the Start Date for
such Initial Grant, so long as the Optionee continuously remains a director or a
consultant of the Company.
(b) Succeeding Grants. Each Succeeding Grant will vest as to one
-----------------
thirty-sixth (1/36th) of the Shares on each monthly anniversary of the Start
Date for such Succeeding Grant, so long as the Optionee continuously remains a
director or a consultant of the Company.
7.3 Exercise Price. The exercise price of an Option shall be the
--------------
Fair Market Value (as defined in Section 17) of the Shares, at the time that the
Option is granted.
7.4 Termination of Option. Except as provided below in this Section,
---------------------
each Option shall expire ten (10) years after its Start Date (the "EXPIRATION
DATE"). The Option shall cease to vest when the Optionee ceases to be a member
of the Board or a consultant of the Company. The date on which the Optionee
ceases to be a member of the Board or a consultant of the Company shall be
referred to as the "TERMINATION DATE". An Option may be exercised after the
Termination Date only as set forth below:
(a) Termination Generally. If the Optionee ceases to be a member
---------------------
of the Board or a consultant of the Company for any reason except death of the
Optionee or disability of the Optionee (whether temporary or permanent, partial
or total, as determined by the Committee), then each Option then held by such
Optionee, to the extent (and only to the extent) that it would have been
exercisable by the Optionee on the Termination Date, may be exercised by the
Optionee no later than seven (7) months after the Termination Date, but in no
event later than the Expiration Date.
(b) Death or Disability. If the Optionee ceases to be a member of
-------------------
the Board or a consultant of the Company because of the death of the Optionee or
the disability of the Optionee (whether temporary or permanent, partial or
total, as determined by the Committee), then each Option then held by such
Optionee to the extent (and only to the extent) that it would have been
exercisable by the Optionee on the Termination Date, may be exercised by the
Optionee (or the Optionee's legal representative) no later than twelve (12)
months after the Termination Date, but in no event later than the Expiration
Date.
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Centaur Pharmaceuticals, Inc.
1998 Directors Stock Option Plan
8. EXERCISE OF OPTIONS.
8.1 Exercise Period. Subject to the provisions of Section 8.5
---------------
below, Options shall be exercisable as they vest.
8.2 Notice. Options may be exercised only by delivery to the Company
------
of an exercise agreement in a form approved by the Committee stating the number
of Shares being purchased, the restrictions imposed on the Shares and such
representations and agreements regarding the Optionee's investment intent and
access to information 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.
8.3 Payment. Payment for the Shares purchased upon exercise of an
-------
Option may be made (a) in cash or by check; (b) by surrender of shares of Common
Stock of the Company that have been owned by the 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 the
Optionee in the open public market, having a Fair Market Value equal to the
exercise price of the Option; (c) by waiver of compensation due or accrued to
the Optionee for services rendered; (d) provided that a public market for the
Company's stock exists, through a "same day sale" commitment from the Optionee
and a broker-dealer that is a member of the National Association of Securities
Dealers or a member firm of the Swiss Stock Exchange (a "QUALIFIED DEALER")
whereby the 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
Qualified 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 the Optionee and
a Qualified Dealer whereby the Optionee irrevocably elects to exercise the
Option and to pledge the Shares so purchased to the Qualified Dealer in a margin
account as security for a loan from the Qualified Dealer in the amount of the
exercise price, and whereby the Qualified 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.
8.4 Withholding Taxes. Prior to issuance of the Shares upon exercise
-----------------
of an Option, the Optionee shall pay or make adequate provision for any federal
or state withholding obligations of the Company, if applicable.
8.5 Limitations on Exercise. Notwithstanding the exercise periods
-----------------------
set forth in the Grant, exercise of an Option shall always be subject to the
following limitations:
(a) An Option shall not be exercisable unless such exercise is in
compliance with the Securities Act and all other applicable laws, as they are in
effect on the date of exercise.
(b) The Committee may specify a reasonable minimum number of
Shares that may be purchased upon any exercise of an Option, provided that such
minimum number will not prevent the Optionee from exercising the full number of
Shares as to which the Option is then exercisable.
9. NONTRANSFERABILITY OF OPTIONS. During the lifetime of the Optionee, an
Option shall be exercisable only by the Optionee or by the Optionee's guardian
or legal representative, unless otherwise determined by the Committee. No Option
may be sold, pledged, assigned, hypothecated, transferred or disposed of in any
manner other than by will or by the laws of descent and distribution, unless
otherwise determined by the Committee.
10. PRIVILEGES OF STOCK OWNERSHIP. No Optionee shall have any of the rights
of a stockholder with respect to any Shares subject to an Option until the
Option has been validly exercised. No adjustment shall be made for dividends or
distributions or other rights for which the record date is prior to the date of
exercise, except as provided in this Plan. The Company shall provide to each
Optionee a copy of the annual financial statements of the Company at such time
after the close of each fiscal year of the Company as they are released by the
Company to its stockholders.
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Centaur Pharmaceuticals, Inc.
1998 Directors Stock Option Plan
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, combination, reclassification or
similar change in the capital structure of the Company without consideration,
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 outstanding
Options shall be proportionately adjusted, subject to any required action by the
Board or stockholders of the Company and compliance with applicable securities
laws; provided, however, that no fractional shares shall be issued upon exercise
of any Option and any resulting fractions of a Share shall be rounded up to the
nearest whole Share.
12. NO OBLIGATION TO CONTINUE AS DIRECTOR. Nothing in this Plan or
any Option granted under this Plan shall confer on any Optionee any right to
continue as a director of the Company.
13. COMPLIANCE WITH LAWS. The grant of Options and the issuance of
Shares upon exercise of any Options shall be subject to and conditioned upon
compliance with all applicable requirements of law, including without limitation
compliance with the Securities Act, compliance with all other applicable state
securities laws and compliance with the requirements of any stock exchange or
national market system on which the Shares may be listed. The Company shall be
under no obligation to register the Shares with the SEC or to effect compliance
with the registration or qualification requirement of any state securities laws,
stock exchange or national market system.
14. ACCELERATION OF OPTIONS ON CERTAIN CORPORATE TRANSACTIONS. In
the event of (a) a dissolution or liquidation of the Company, (b) 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 of
the Company in a different jurisdiction, or other transaction in which there is
no substantial change in the stockholders of the Company or their relative stock
holdings and the Options granted under this Plan are assumed, converted or
replaced by the successor corporation, which assumption, conversion or
replacement will be binding on all Optionees), (c) a merger in which the Company
is the surviving corporation but after which the stockholders of the Company
(other than any stockholder which merges (or which owns or controls another
corporation which merges) with the Company in such merger) cease to own their
shares or other equity interests in the Company, (d) the sale of substantially
all of the assets of the Company, or (e) the acquisition, sale or transfer of
more than 50% of the outstanding shares of the Company by tender offer or
similar transaction, the vesting of all options granted pursuant to this Plan
will accelerate and the options will become exercisable in full prior to the
consummation of such event at such times and on such conditions as the Committee
determines, and must be exercised, if at all, within six months of the
consummation of said event. Any options not exercised within such six-month
period shall expire.
15. AMENDMENT OR TERMINATION OF PLAN. The Board may at any time
terminate or amend this Plan or any outstanding option, provided that the Board
may not terminate or amend the terms of any outstanding option without the
consent of the Optionee. In any case, no amendment of this Plan may adversely
affect any then outstanding Options or any unexercised portions thereof without
the written consent of the Optionee.
16. TERM OF PLAN. Options may be granted pursuant to this Plan from
time to time within a period of ten (10) years from the Effective Date.
17. "FAIR MARKET VALUE" means, as of any date, the value of a share of
the Company's Common Stock determined as follows:
(a) if such Common Stock is then quoted on the Nasdaq National
Market, its closing price on the Nasdaq National Market on the
date of determination as reported in The Wall Street Journal;
-----------------------
(b) if subsection (a) is not applicable and if such Common Stock
is publicly traded and is then listed on the Swiss Stock
Exchange, its closing price on the Swiss Stock Exchange on the
date of determination as reported by the Swiss Stock Exchange or
in any newspaper of general circulation in Zurich, Switzerland;
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Centaur Pharmaceuticals, Inc.
1998 Directors Stock Option Plan
(c) if subsection (a) and (b) are not applicable and if such Common
Stock is publicly traded and is then listed on a national
securities exchange, its closing price on the date of
determination on the principal national securities exchange on
which the Common Stock is listed or admitted to trading as
reported in The Wall Street Journal;
-----------------------
(d) if such Common Stock is publicly traded but is not quoted on the
Nasdaq National Market nor listed or admitted to trading on a
national securities exchange or the Swiss Stock Exchange, the
average of the closing bid and asked prices on the date of
determination as reported in The Wall Street Journal;
-----------------------
(e) in the case of an Option granted on the Effective Date, the price
per share at which shares of the Company's Common Stock are
initially offered for sale to the public by the Company's
underwriters in the initial public offering of the Company's
Common Stock; or
(f) if none of the foregoing is applicable, by the Committee in good
faith .
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<PAGE>
EXHIBIT 10.04
CENTAUR PHARMACEUTICALS, INC.
1998 EMPLOYEE STOCK PURCHASE PLAN
As Adopted June 10, 1998
1. ESTABLISHMENT OF PLAN. Centaur Pharmaceuticals, Inc. (the "COMPANY")
proposes to grant options for purchase of the Company's Common Stock to eligible
employees of the Company and its Participating Subsidiaries (as hereinafter
defined) pursuant to this Employee Stock Purchase Plan (this "PLAN"). For
purposes of this Plan, "PARENT CORPORATION" and "SUBSIDIARY" (collectively,
"SUBSIDIARIES") shall have the same meanings as "parent corporation" and
"subsidiary corporation" in Sections 424(e) and 424(f), respectively, of the
Internal Revenue Code of 1986, as amended (the "CODE"). "PARTICIPATING
SUBSIDIARIES" are Parent Corporations or Subsidiaries that the Board of
Directors of the Company (the "BOARD") designates from time to time as
corporations that shall participate in this Plan. The Company intends this Plan
to qualify as an "employee stock purchase plan" under Section 423 of the Code
(including any amendments to or replacements of such Section), and this Plan
shall be so construed. Any term not expressly defined in this Plan but defined
for purposes of Section 423 of the Code shall have the same definition herein.
A total of 125,000 shares of the Company's Common Stock is reserved for
issuance under this Plan. In addition, on each January 1, the aggregate number
of shares of the Company's Common Stock reserved for issuance under the Plan
shall be increased automatically by a number of shares equal to one quarter of
one percent (1/4%) of the total outstanding shares of the Company as of the
immediately preceding December 31; provided, however, that such increase shall
in no event exceed 200,000 shares per year. Such number shall be subject to
adjustments effected in accordance with Section 14 of this Plan.
2. PURPOSE. The purpose of this Plan is to provide eligible employees of
the Company and Participating Subsidiaries with a convenient means of acquiring
an equity interest in the Company through payroll deductions, to enhance such
employees' sense of participation in the affairs of the Company and
Participating Subsidiaries, and to provide an incentive for continued
employment.
3. ADMINISTRATION. This Plan shall be administered by the Compensation
Committee of the Board (the "COMMITTEE"). Subject to the provisions of this
Plan and the limitations of Section 423 of the Code or any successor provision
in the Code, all questions of interpretation or application of this Plan shall
be determined by the Committee and its decisions shall be final and binding upon
all participants. Members of the Committee shall receive no compensation for
their services in connection with the administration of this Plan, other than
standard fees as established from time to time by the Board for services
rendered by Board members serving on Board committees. All expenses incurred in
connection with the administration of this Plan shall be paid by the Company.
4. ELIGIBILITY. Any employee of the Company or the Participating
Subsidiaries is eligible to participate in an Offering Period (as hereinafter
defined) under this Plan except the following:
(a) employees who are not employed by the Company or a Participating
Subsidiary five (5) days before the beginning of such Offering Period, except
that employees who are employed on the earlier of (i) the effective date of a
Registration Statement filed by the Company with the Securities and Exchange
Commission ("SEC") under the Securities Act of 1933, as amended (the "SECURITIES
ACT") registering the initial public offering of the Company's Common Stock, or
(ii) the date on which the Company makes an initial public offering of its
Common Stock on the Swiss Stock Exchange, shall be eligible to participate in
the first Offering Period under the Plan;
(b) employees who, together with any other person whose stock would be
attributed to such employee pursuant to Section 424(d) of the Code, own stock or
hold options to purchase stock possessing five percent (5%) or
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Centaur Pharmaceuticals, Inc.
1998 Employee Stock Purchase Plan
more of the total combined voting power or value of all classes of stock of the
Company or any of its Participating Subsidiaries or who, as a result of being
granted an option under this Plan with respect to such Offering Period, would
own stock or hold options to purchase stock possessing five percent (5%) or more
of the total combined voting power or value of all classes of stock of the
Company or any of its Participating Subsidiaries; and
(c) individuals who provide services to the Company or any of its
Participating Subsidiaries as independent contractors who are reclassified as
common law employees for any reason except for federal income and employment tax
------ ---
purposes.
5. OFFERING DATES. The offering periods of this Plan (each, an "OFFERING
PERIOD") shall be of eighteen (18) months duration commencing on February 1 and
August 1 of each year and ending on July 31 and January 31 of each year;
provided, however, that notwithstanding the foregoing, the first such Offering
- -------- --------
Period shall commence on the first business day on which price quotations for
the Company's Common Stock are available on the Swiss Stock Exchange (the "FIRST
OFFERING DATE") and shall end on January 31, 2000. Except for the first Offering
Period, each Offering Period shall consist of three (3) six-month purchase
periods (each, a "Purchase Period") during which payroll deductions of the
participants are accumulated under this Plan. The first Offering Period shall
consist of no more than four and no less than two Purchase Periods, any of which
may be greater or less than six months, as determined by the Committee. The
first business day of each Offering Period is referred to as the "OFFERING
DATE". The last business day of each Purchase Period is referred to as the
"PURCHASE DATE". The Committee shall have the power to change the duration of or
suspend Offering Periods with respect to offerings without stockholder approval
if such change is announced at least fifteen (15) days prior to the scheduled
beginning of the first Offering Period to be affected.
6. PARTICIPATION IN THIS PLAN. Eligible employees may become participants
in an Offering Period under this Plan on the first Offering Date after
satisfying the eligibility requirements by delivering a subscription agreement
to the Company's treasury department (the "TREASURY DEPARTMENT") not later than
five (5) days before such Offering Date. Notwithstanding the foregoing, the
Committee may set a later time for filing the subscription agreement authorizing
payroll deductions for all eligible employees with respect to a given Offering
Period. An eligible employee who does not deliver a subscription agreement to
the Treasury Department by such date after becoming eligible to participate in
such Offering Period shall not participate in that Offering Period or any
subsequent Offering Period unless such employee enrolls in this Plan by filing a
subscription agreement with the Treasury Department not later than five (5) days
preceding a subsequent Offering Date. Once an employee becomes a participant in
an Offering Period, such employee will automatically participate in the Offering
Period commencing immediately following the last day of the prior Offering
Period unless the employee withdraws or is deemed to withdraw from this Plan or
terminates further participation in the Offering Period as set forth in Section
11 below. Such participant is not required to file any additional subscription
agreement in order to continue participation in this Plan.
7. GRANT OF OPTION ON ENROLLMENT. Enrollment by an eligible employee in
this Plan with respect to an Offering Period will constitute the grant (as of
the Offering Date) by the Company to such employee of an option to purchase on
the Purchase Date up to that number of shares of Common Stock of the Company
determined by dividing (a) the amount accumulated in such employee's payroll
deduction account during such Purchase Period by (b) the lower of (i) eighty-
five percent (85%) of the fair market value of a share of the Company's Common
Stock on the Offering Date, and (ii) eighty-five percent (85%) of the fair
market value of a share of the Company's Common Stock on the Purchase Date,
provided, however, that the number of shares of the Company's Common Stock
- --------- -------
subject to any option granted pursuant to this Plan shall not exceed the lesser
of (x) the maximum number of shares set by the Committee pursuant to Section
10(c) below with respect to the applicable Purchase Date, or (y) the maximum
number of shares which may be purchased pursuant to Section 10(b) below with
respect to the applicable Purchase Date. The fair market value of a share of
the Company's Common Stock shall be determined as provided in Section 8 below.
8. PURCHASE PRICE. The purchase price per share at which a share of
Common Stock will be sold in any Offering Period shall be eighty-five percent
(85%) of the lesser of:
(a) The fair market value on the Offering Date; or
(b) The fair market value on the Purchase Date.
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Centaur Pharmaceuticals, Inc.
1998 Employee Stock Purchase Plan
For purposes of this Plan, the term "FAIR MARKET VALUE" means, as of
any date, the value of a share of the Company's Common Stock determined as
follows:
(a) if such Common Stock is then quoted on the Nasdaq National
Market, its closing price on the Nasdaq National Market on the
date of determination as reported in The Wall Street Journal;
-----------------------
(b) if subsection (a) is not applicable and if such Common Stock is
publicly traded and is then listed on the Swiss Stock Exchange,
its closing price on the Swiss Stock Exchange on the date of
determination as reported by the Swiss Stock Exchange or in any
newspaper of general circulation in Zurich, Switzerland;
(c) if subsection (a) and (b) are not applicable and if such Common
Stock is publicly traded and is then listed on a national
securities exchange, its closing price on the date of
determination on the principal national securities exchange on
which the Common Stock is listed or admitted to trading as
reported in The Wall Street Journal;
-----------------------
(d) if such Common Stock is publicly traded but is not quoted on the
Nasdaq National Market nor listed or admitted to trading on a
national securities exchange or the Swiss Stock Exchange, the
average of the closing bid and asked prices on the date of
determination as reported in The Wall Street Journal; or
-----------------------
(e) if none of the foregoing is applicable, by the Board in good
faith, which in the case of the First Offering Date will be the
price per share at which shares of the Company's Common Stock are
initially offered for sale to the public by the Company's
underwriters in the initial public offering of the Company's
Common Stock.
9. PAYMENT OF PURCHASE PRICE; CHANGES IN PAYROLL DEDUCTIONS; ISSUANCE OF
SHARES.
(a) The purchase price of the shares is accumulated by regular
payroll deductions made during each Offering Period. The deductions are made as
a percentage of the participant's compensation in one percent (1%) increments
not less than two percent (2%), nor greater than ten percent (10%) or such lower
limit set by the Committee. Compensation shall mean base salary not to exceed
$250,000 per calendar year, provided however, that for purposes of determining a
participant's compensation, any election by such participant to reduce his or
her regular cash remuneration under Sections 125 or 401(k) of the Code shall be
treated as if the participant did not make such election. Payroll deductions
shall commence on the first payday of the Offering Period and shall continue to
the end of the Offering Period unless sooner altered or terminated as provided
in this Plan.
(b) A participant may decrease or increase the rate of payroll
deductions during an Offering Period by filing with the Treasury Department a
new authorization for payroll deductions, in which case the new rate shall
become effective for the next payroll period commencing more than fifteen (15)
days after the Treasury Department's receipt of the authorization and shall
continue for the remainder of the Offering Period unless changed as described
below. Such change in the rate of payroll deductions may be made at any time
during an Offering Period, but not more than one (1) change may be made
effective during any Purchase Period. A participant may increase or decrease the
rate of payroll deductions for any subsequent Offering Period by filing with the
Treasury Department a new authorization for payroll deductions not later than
fifteen (15) days before the beginning of such Offering Period.
(c) A participant may reduce his or her payroll deduction percentage
to zero during an Offering Period by filing with the Treasury Department a
request for cessation of payroll deductions. Such reduction shall be effective
beginning with the next payroll period commencing more than fifteen (15) days
after the Treasury Department's receipt of the request and no further payroll
deductions will be made for the duration of the Offering Period. Payroll
deductions credited to the participant's account prior to the effective date of
the request shall be used to purchase shares of Common Stock of the Company in
accordance with Section (e) below. A participant
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<PAGE>
Centaur Pharmaceuticals, Inc.
1998 Employee Stock Purchase Plan
may not resume making payroll deductions during the Offering Period in which he
or she reduced his or her payroll deductions to zero.
(d) All payroll deductions made for a participant are credited to his
or her account under this Plan and are deposited with the general funds of the
Company. No interest accrues on the payroll deductions. All payroll deductions
received or held by the Company may be used by the Company for any corporate
purpose, and the Company shall not be obligated to segregate such payroll
deductions.
(e) On each Purchase Date, so long as this Plan remains in effect and
provided that the participant has not submitted a signed and completed
withdrawal form before that date which notifies the Company that the participant
wishes to withdraw from that Offering Period under this Plan and have all
payroll deductions accumulated in the account maintained on behalf of the
participant as of that date returned to the participant, the Company shall apply
the funds then in the participant's account to the purchase of whole shares of
Common Stock reserved under the option granted to such participant with respect
to the Offering Period to the extent that such option is exercisable on the
Purchase Date. The purchase price per share shall be as specified in Section 8
of this Plan. Any cash remaining in a participant's account after such purchase
of shares shall be refunded to such participant in cash, without interest;
provided, however that any amount remaining in such participant's account on a
Purchase Date which is less than the amount necessary to purchase a full share
of Common Stock of the Company shall be carried forward, without interest, into
the next Purchase Period or Offering Period, as the case may be. In the event
that this Plan has been oversubscribed, all funds not used to purchase shares on
the Purchase Date shall be returned to the participant, without interest. No
Common Stock shall be purchased on a Purchase Date on behalf of any employee
whose participation in this Plan has terminated prior to such Purchase Date.
(f) As promptly as practicable after the Purchase Date, the Company
shall issue shares for the participant's benefit representing the shares
purchased upon exercise of his or her option.
(g) During a participant's lifetime, his or her option to purchase
shares hereunder is exercisable only by him or her. The participant will have
no interest or voting right in shares covered by his or her option until such
option has been exercised.
10. LIMITATIONS ON SHARES TO BE PURCHASED.
(a) No participant shall be entitled to purchase stock under this
Plan at a rate which, when aggregated with his or her rights to purchase stock
under all other employee stock purchase plans of the Company or any Subsidiary,
exceeds $25,000 in fair market value, determined as of the Offering Date (or
such other limit as may be imposed by the Code) for each calendar year in which
the employee participates in this Plan. The Company shall automatically suspend
the payroll deductions of any participant as necessary to enforce such limit
provided that when the Company automatically resumes such payroll deductions,
the Company must apply the rate in effect immediately prior to such suspension.
(b) No more than two hundred percent (200%) of the number of shares
determined by using eighty-five percent (85%) of the fair market value of a
share of the Company's Common Stock on the Offering Date as the denominator may
be purchased by a participant on any single Purchase Date.
(c) No participant shall be entitled to purchase more than the
Maximum Share Amount (as defined below) on any single Purchase Date. The maximum
number of shares which may be purchased by any employee at any single Purchase
Date (hereinafter the "MAXIMUM SHARE AMOUNT") shall be 500 shares, until
otherwise determined by the Committee not less than thirty (30) days prior to
the commencement of any Offering Period. In no event shall the Maximum Share
Amount exceed the amounts permitted under Section 10(b) above. If a new Maximum
Share Amount is set, then all participants must be notified of such Maximum
Share Amount prior to the commencement of the next Offering Period. The Maximum
Share Amount shall continue to apply with respect to all succeeding Purchase
Dates and Offering Periods unless revised by the Committee as set forth above.
(d) If the number of shares to be purchased on a Purchase Date by all
employees participating in this Plan exceeds the number of shares then available
for issuance under this Plan, then the Company will make a pro
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Centaur Pharmaceuticals, Inc.
1998 Employee Stock Purchase Plan
rata allocation of the remaining shares in as uniform a manner as shall be
reasonably practicable and as the Committee shall determine to be equitable. In
such event, the Company shall give written notice of such reduction of the
number of shares to be purchased under a participant's option to each
participant affected.
(e) Any payroll deductions accumulated in a participant's account
which are not used to purchase stock due to the limitations in this Section 10
shall be returned to the participant as soon as practicable after the end of the
applicable Purchase Period, without interest.
11. WITHDRAWAL.
(a) Each participant may withdraw from an Offering Period under this
Plan by signing and delivering to the Treasury Department a written notice to
that effect on a form provided for such purpose. Such withdrawal may be elected
at any time at least fifteen (15) days prior to the end of an Offering Period.
(b) Upon withdrawal from this Plan, the accumulated payroll
deductions shall be returned to the withdrawn participant, without interest, and
his or her interest in this Plan shall terminate. In the event a participant
voluntarily elects to withdraw from this Plan, he or she may not resume his or
her participation in this Plan during the same Offering Period, but he or she
may participate in any Offering Period under this Plan which commences on a date
subsequent to such withdrawal by filing a new authorization for payroll
deductions in the same manner as set forth in Section 6 above for initial
participation in this Plan.
(c) If the Fair Market Value on the first day of the current Offering
Period in which a participant is enrolled is higher than the Fair Market Value
on the first day of any subsequent Offering Period, the Company will
automatically enroll such participant in the subsequent Offering Period. Except
as set forth below, any funds accumulated in a participant's account prior to
the first day of such subsequent Offering Period will be applied to the purchase
of shares on the Purchase Date immediately prior to the first day of such
subsequent Offering Period. If the First Offering Date occurs prior to August 1,
1998 and the Fair Market Value on the First Offering Date is higher than the
Fair Market Value on the first day of the second Offering Period, any funds
accumulated in a participant's account prior to the first day of the second
Offering Period will be applied to the purchase of shares on the Purchase Date
next following the first day of such second Offering Period. A participant does
not need to file any forms with the Company to automatically be enrolled in the
subsequent Offering Period.
12. TERMINATION OF EMPLOYMENT. Termination of a participant's employment
for any reason, including retirement, death or the failure of a participant to
remain an eligible employee of the Company or of a Participating Subsidiary,
immediately terminates his or her participation in this Plan. In such event,
the payroll deductions credited to the participant's account will be returned to
him or her or, in the case of his or her death, to his or her legal
representative, without interest. For purposes of this Section 12, an employee
will not be deemed to have terminated employment or failed to remain in the
continuous employ of the Company or of a Participating Subsidiary in the case of
sick leave, military leave, or any other leave of absence approved by the Board;
provided that such leave is for a period of not more than ninety (90) days or
- --------
reemployment upon the expiration of such leave is guaranteed by contract or
statute.
13. RETURN OF PAYROLL DEDUCTIONS. In the event a participant's interest
in this Plan is terminated by withdrawal, termination of employment or
otherwise, or in the event this Plan is terminated by the Board, the Company
shall deliver to the participant all payroll deductions credited to such
participant's account. No interest shall accrue on the payroll deductions of a
participant in this Plan.
14. CAPITAL CHANGES. Subject to any required action by the stockholders
of the Company, the number of shares of Common Stock covered by each option
under this Plan which has not yet been exercised and the number of shares of
Common Stock which have been authorized for issuance under this Plan but have
not yet been placed under option (collectively, the "RESERVES"), as well as the
price per share of Common Stock covered by each option under this Plan which has
not yet been exercised, shall be proportionately adjusted for any increase or
decrease in the number of issued and outstanding shares of Common Stock of the
Company resulting from a stock split or the payment of a stock dividend (but
only on the Common Stock) or any other increase or decrease in the number of
issued and outstanding shares of Common Stock effected without receipt of any
consideration by the Company; provided, however, that conversion of any
--------- -------
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration". Such adjustment shall be made by the
Committee, whose determination shall be final, binding and conclusive. Except as
expressly provided herein, no issue by the Company of shares of
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Centaur Pharmaceuticals, Inc.
1998 Employee Stock Purchase Plan
stock of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of shares of Common Stock subject to an option.
In the event of the proposed dissolution or liquidation of the Company, the
Offering Period will terminate immediately prior to the consummation of such
proposed action, unless otherwise provided by the Committee. The Committee may,
in the exercise of its sole discretion in such instances, declare that this Plan
shall terminate as of a date fixed by the Committee and give each participant
the right to purchase shares under this Plan prior to such termination. In the
event of (i) 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 of the Company in a different jurisdiction, or
other transaction in which there is no substantial change in the stockholders of
the Company or their relative stock holdings and the options under this Plan are
assumed, converted or replaced by the successor corporation, which assumption
will be binding on all participants), (ii) a merger in which the Company is the
surviving corporation but after which the stockholders of the Company
immediately prior to such merger (other than any stockholder that merges, or
which owns or controls another corporation that merges, with the Company in such
merger) cease to own their shares or other equity interest in the Company, (iii)
the sale of all or substantially all of the assets of the Company or (iv) the
acquisition, sale, or transfer of more than 50% of the outstanding shares of the
Company by tender offer or similar transaction, the Plan shall continue for the
duration of all Offering Periods which began prior to the transaction and shares
will be purchased based on the Fair Market Value of the surviving corporation's
stock on each Purchase Date (taking into account the exchange ratio where
necessary).
The Committee may, if it so determines in the exercise of its sole
discretion, also make provision for adjusting the Reserves, as well as the price
per share of Common Stock covered by each outstanding option, in the event that
the Company effects one or more reorganizations, recapitalizations, rights
offerings or other increases or reductions of shares of its outstanding Common
Stock, or in the event of the Company being consolidated with or merged into any
other corporation.
15. NONASSIGNABILITY. Neither payroll deductions credited to a
participant's account nor any rights with regard to the exercise of an option or
to receive shares under this Plan may be assigned, transferred, pledged or
otherwise disposed of in any way (other than by will, the laws of descent and
distribution or as provided in Section 22 below) by the participant. Any such
attempt at assignment, transfer, pledge or other disposition shall be void and
without effect.
16. REPORTS. Individual accounts will be maintained for each participant
in this Plan. Each participant shall receive promptly after the end of each
Purchase Period a report of his or her account setting forth the total payroll
deductions accumulated, the number of shares purchased, the per share price
thereof and the remaining cash balance, if any, carried forward to the next
Purchase Period or Offering Period, as the case may be.
17. NOTICE OF DISPOSITION. Each participant shall notify the Company in
writing if the participant disposes of any of the shares purchased in any
Offering Period pursuant to this Plan if such disposition occurs within two (2)
years from the Offering Date or within one (1) year from the Purchase Date on
which such shares were purchased (the "NOTICE PERIOD"). The Company may, at any
time during the Notice Period, place a legend or legends on any certificate
representing shares acquired pursuant to this Plan requesting the Company's
transfer agent to notify the Company of any transfer of the shares. The
obligation of the participant to provide such notice shall continue
notwithstanding the placement of any such legend on the certificates.
18. NO RIGHTS TO CONTINUED EMPLOYMENT. Neither this Plan nor the grant of
any option hereunder shall confer any right on any employee to remain in the
employ of the Company or any Participating Subsidiary, or restrict the right of
the Company or any Participating Subsidiary to terminate such employee's
employment.
19. EQUAL RIGHTS AND PRIVILEGES. All eligible employees shall have equal
rights and privileges with respect to this Plan so that this Plan qualifies as
an "employee stock purchase plan" within the meaning of Section 423 or any
successor provision of the Code and the related regulations. Any provision of
this Plan which is inconsistent with Section 423 or any successor provision of
the Code shall, without further act or amendment by the Company, the Committee
or the Board, be reformed to comply with the requirements of Section 423. This
Section 19 shall take precedence over all other provisions in this Plan.
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Centaur Pharmaceuticals, Inc.
1998 Employee Stock Purchase Plan
20. NOTICES. All notices or other communications by a participant to the
Company under or in connection with this Plan shall be deemed to have been duly
given when received in the form specified by the Company at the location, or by
the person, designated by the Company for the receipt thereof.
21. TERM; STOCKHOLDER APPROVAL. After this Plan is adopted by the Board,
this Plan will become effective on the First Offering Date (as defined above).
This Plan shall be approved by the stockholders of the Company, in any manner
permitted by applicable corporate law, within twelve (12) months before or after
the date this Plan is adopted by the Board. No purchase of shares pursuant to
this Plan shall occur prior to such stockholder approval. This Plan shall
continue until the earlier to occur of (a) termination of this Plan by the Board
(which termination may be effected by the Board at any time), (b) issuance of
all of the shares of Common Stock reserved for issuance under this Plan, or (c)
ten (10) years from the adoption of this Plan by the Board.
22. DESIGNATION OF BENEFICIARY.
(a) A participant may file a written designation of a beneficiary who
is to receive any shares and cash, if any, from the participant's account under
this Plan in the event of such participant's death subsequent to the end of an
Purchase Period but prior to delivery to him of such shares and cash. In
addition, a participant may file a written designation of a beneficiary who is
to receive any cash from the participant's account under this Plan in the event
of such participant's death prior to a Purchase Date.
(b) Such designation of beneficiary may be changed by the participant
at any time by written notice. In the event of the death of a participant and
in the absence of a beneficiary validly designated under this Plan who is living
at the time of such participant's death, the Company shall deliver such shares
or cash to the executor or administrator of the estate of the participant, or if
no such executor or administrator has been appointed (to the knowledge of the
Company), the Company, in its discretion, may deliver such shares or cash to the
spouse or to any one or more dependents or relatives of the participant, or if
no spouse, dependent or relative is known to the Company, then to such other
person as the Company may designate.
23. CONDITIONS UPON ISSUANCE OF SHARES; LIMITATION ON SALE OF SHARES.
Shares shall not be issued with respect to an option unless the exercise of such
option and the issuance and delivery of such shares pursuant thereto shall
comply with all applicable provisions of law, domestic or foreign, including,
without limitation, the Securities Act, the Securities Exchange Act of 1934, as
amended, the rules and regulations promulgated thereunder, and the requirements
of any stock exchange or automated quotation system upon which the shares may
then be listed, and shall be further subject to the approval of counsel for the
Company with respect to such compliance.
24. APPLICABLE LAW. The Plan shall be governed by the substantive laws
(excluding the conflict of laws rules) of the State of California.
25. AMENDMENT OR TERMINATION OF THIS PLAN. The Board may at any time
amend, terminate or extend the term of this Plan, except that any such
termination cannot affect options previously granted under this Plan, nor may
any amendment make any change in an option previously granted which would
adversely affect the right of any participant. Notwithstanding the foregoing,
the Board may terminate any Purchase Period or Offering Period if the accounting
standards in effect on the date this Plan is adopted by the Board change in any
way. Such determination shall be made by the Committee in its sole discretion.
No amendment shall be made without approval of the stockholders of the Company
obtained in accordance with Section 21 above within twelve (12) months of the
adoption of such amendment (or earlier if required by Section 21) if such
amendment would:
(a) increase the number of shares that may be issued under this Plan;
or
(b) change the designation of the employees (or class of employees)
eligible for participation in this Plan.
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<PAGE>
EXHIBIT 10.05
CENTAUR PHARMACEUTICALS, INC.
INDEMNIFICATION AGREEMENT
This Indemnification Agreement (this "Agreement"), dated as of _______ __,
---------
1998, is made by and between Centaur Pharmaceuticals, Inc., a Delaware
corporation (the "Company"), and _________________, a director and/or officer of
-------
the Company (the "Indemnitee").
----------
RECITALS
A. The Company is aware that competent and experienced persons are
increasingly reluctant to serve as directors or officers of corporations unless
they are protected by comprehensive liability insurance and/or indemnification,
due to increased exposure to litigation costs and risks resulting from their
service to such corporations, and due to the fact that the exposure frequently
bears no reasonable relationship to the compensation of such directors and
officers;
B. Based upon their experience as business managers, the Board of
Directors of the Company (the "Board") has concluded that, to retain and attract
-----
talented and experienced individuals to serve as officers and directors of the
Company, and to encourage such individuals to take the business risks necessary
for the success of the Company, it is necessary for the Company contractually to
indemnify officers and directors and to assume for itself maximum liability for
expenses and damages in connection with claims against such officers and
directors in connection with their service to the Company;
C. Section 145 of the General Corporation Law of Delaware, under which
the Company is organized ("Section 145"), empowers the Company to indemnify by
-----------
agreement its officers, directors, employees and agents, and persons who serve,
at the request of the Company, as directors, officers, employees or agents of
other corporations or enterprises, and expressly provides that the
indemnification provided by Section 145 is not exclusive; and
D. The Company desires and has requested the Indemnitee to serve or
continue to serve as a director or officer of the Company free from undue
concern for claims for damages arising out of or related to such services to the
Company.
NOW, THEREFORE, the parties hereto, intending to be legally bound, hereby
agree as follows:
1. DEFINITIONS.
-----------
1.1 Agent. For the purposes of this Agreement, "agent" of the
----- -----
Company means any person who is or was a director or officer of the Company or a
subsidiary of the Company; or is or was serving at the request of, for the
convenience of, or to represent the interest of the Company or a subsidiary of
the Company as a director or officer of another foreign
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Centaur Pharmaceuticals, Inc.
Indemnification Agreement
or domestic corporation, partnership, joint venture, trust or other enterprise
or an affiliate of the Company; or was a director or officer of a foreign or
domestic corporation which was a predecessor corporation of the Company or a
subsidiary of the Company, or was a director or officer of another enterprise or
affiliate of the Company at the request of, for the convenience of, or to
represent the interests of such predecessor corporation. The term "enterprise"
----------
includes any employee benefit plan of the Company, its subsidiaries, affiliates
and predecessor corporations.
1.2 Expenses. For purposes of this Agreement, "expenses" includes
-------- --------
all direct and indirect costs of any type or nature whatsoever (including,
without limitation, all attorneys' fees and related disbursements and other out-
of-pocket costs) actually and reasonably incurred by the Indemnitee in
connection with the investigation, defense or appeal of a proceeding or
establishing or enforcing a right to indemnification or advancement of expenses
under this Agreement, Section 145 or otherwise; provided, however, that expenses
-------- -------
shall not include any judgments, fines, ERISA excise taxes or penalties or
amounts paid in settlement of a proceeding.
1.3 Proceeding. For the purposes of this Agreement, "proceeding"
---------- ----------
means any threatened, pending or completed action, suit or other proceeding,
whether civil, criminal, administrative, investigative or any other type
whatsoever.
1.4 Subsidiary. For purposes of this Agreement, "subsidiary" means
---------- ----------
any corporation of which more than 50% of the outstanding voting securities is
owned directly or indirectly by the Company, by the Company and one or more of
its subsidiaries or by one or more of the Company's subsidiaries.
2. AGREEMENT TO SERVE. The Indemnitee agrees to serve and/or continue to
------------------
serve as an agent of the Company, at the will of the Company (or under separate
agreement, if such agreement exists), in the capacity the Indemnitee currently
serves as an agent of the Company, faithfully and to the best of his ability, so
long as he is duly appointed or elected and qualified in accordance with the
applicable provisions of the charter documents of the Company or any subsidiary
of the Company; provided, however, that the Indemnitee may at any time and for
-------- -------
any reason resign from such position (subject to any contractual obligation that
the Indemnitee may have assumed apart from this Agreement), and the Company or
any subsidiary shall have no obligation under this Agreement to continue the
Indemnitee in any such position.
3. DIRECTORS' AND OFFICERS' INSURANCE. The Company shall, to the extent
----------------------------------
that the Board determines it to be economically reasonable, maintain a policy of
directors' and officers' liability insurance ("D&O Insurance"), on such terms
-------------
and conditions as may be approved by the Board.
4. MANDATORY INDEMNIFICATION. Subject to Section 9 below, the Company
-------------------------
shall indemnify the Indemnitee:
4.1 Third Party Actions. If the Indemnitee is a person who was or is
-------------------
a party or is threatened to be made a party to any proceeding (other than an
action by or in the right of the Company) by reason of the fact that he is or
was an agent of the Company, or by reason of
2
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Indemnification Agreement
anything done or not done by him in any such capacity, against any and all
expenses and liabilities of any type whatsoever (including, but not limited to,
judgments, fines, ERISA excise taxes or penalties and amounts paid in
settlement) actually and reasonably incurred by him in connection with the
investigation, defense, settlement or appeal of such proceeding if he acted in
good faith and in a manner he reasonably believed to be in, or not opposed to,
the best interests of the Company and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful; and
4.2 Derivative Actions. If the Indemnitee is a person who was or is
------------------
a party or is threatened to be made a party to any proceeding by or in the right
of the Company to procure a judgment in its favor by reason of the fact that he
is or was an agent of the Company, or by reason of anything done or not done by
him in any such capacity, against any amounts paid in settlement of any such
proceeding and all expenses actually and reasonably incurred by him in
connection with the investigation, defense, settlement or appeal of such
proceeding if he acted in good faith and in a manner he reasonably believed to
be in, or not opposed to, the best interests of the Company; except that no
------
indemnification under this subsection shall be made in respect of any claim,
issue or matter as to which such person shall have been finally adjudged to be
liable to the Company by a court of competent jurisdiction due to willful
misconduct of a culpable nature in the performance of his duty to the Company,
unless and only to the extent that the Court of Chancery or the court in which
such proceeding was brought shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances of the case, such
person is fairly and reasonably entitled to indemnity for such amounts which the
Court of Chancery or such other court shall deem proper; and
4.3 Exception for Amounts Covered by Insurance. Notwithstanding the
------------------------------------------
foregoing, the Company shall not be obligated to indemnify the Indemnitee for
expenses or liabilities of any type whatsoever (including, but not limited to,
judgments, fines, ERISA excise taxes or penalties and amounts paid in
settlement) to the extent such have been paid directly to the Indemnitee by D&O
Insurance.
5. PARTIAL INDEMNIFICATION AND CONTRIBUTION.
----------------------------------------
5.1 Partial Indemnification. If the Indemnitee is entitled under any
-----------------------
provision of this Agreement to indemnification by the Company for some or a
portion of any expenses or liabilities of any type whatsoever (including, but
not limited to, judgments, fines, ERISA excise taxes or penalties and amounts
paid in settlement) incurred by him in the investigation, defense, settlement or
appeal of a proceeding but is not entitled, however, to indemnification for all
of the total amount thereof, then the Company shall nevertheless indemnify the
Indemnitee for such total amount except as to the portion thereof to which the
Indemnitee is not entitled to indemnification.
5.2 Contribution. If the Indemnitee is not entitled to the
------------
indemnification provided in Section 4 for any reason other than the statutory
limitations set forth in the Delaware General Corporation Law, then in respect
of any threatened, pending or completed proceeding in which the Company is
jointly liable with the Indemnitee (or would be if joined in such
3
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Centaur Pharmaceuticals, Inc.
Indemnification Agreement
proceeding), the Company shall contribute to the amount of expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred and paid or payable by the Indemnitee in such proportion as
is appropriate to reflect (i) the relative benefits received by the Company on
the one hand and the Indemnitee on the other hand from the transaction from
which such proceeding arose and (ii) the relative fault of the Company on the
one hand and of the Indemnitee on the other hand in connection with the events
which resulted in such expenses, judgments, fines or settlement amounts, as well
as any other relevant equitable considerations. The relative fault of the
Company on the one hand and of the Indemnitee on the other hand shall be
determined by reference to, among other things, the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent the
circumstances resulting in such expenses, judgments, fines or settlement
amounts. The Company agrees that it would not be just and equitable if
contribution pursuant to this Section 5 were determined by pro rata allocation
or any other method of allocation which does not take account of the foregoing
equitable considerations.
6. MANDATORY ADVANCEMENT OF EXPENSES.
---------------------------------
6.1 Advancement. Subject to Section 9 below, the Company shall
-----------
advance all expenses incurred by the Indemnitee in connection with the
investigation, defense, settlement or appeal of any proceeding to which the
Indemnitee is a party or is threatened to be made a party by reason of the fact
that the Indemnitee is or was an agent of the Company or by reason of anything
done or not done by him in any such capacity. The Indemnitee hereby undertakes
to promptly repay such amounts advanced only if, and to the extent that, it
shall ultimately be determined that the Indemnitee is not entitled to be
indemnified by the Company under the provisions of this Agreement, the
Certificate of Incorporation or Bylaws of the Company, the General Corporation
Law of Delaware or otherwise. The advances to be made hereunder shall be paid by
the Company to the Indemnitee within thirty (30) days following delivery of a
written request therefor by the Indemnitee to the Company.
6.2 Exception. Notwithstanding the foregoing provisions of this
---------
Section 6, the Company shall not be obligated to advance any expenses to the
Indemnitee arising from a lawsuit filed directly by the Company against the
Indemnitee if an absolute majority of the members of the Board reasonably
determines in good faith, within thirty (30) days of the Indemnitee's request to
be advanced expenses, that the facts known to them at the time such
determination is made demonstrate clearly and convincingly that the Indemnitee
acted in bad faith. If such a determination is made, the Indemnitee may have
such decision reviewed by another forum, in the manner set forth in Sections
8.3, 8.4 and 8.5 hereof, with all references therein to "indemnification" being
deemed to refer to "advancement of expenses," and the burden of proof shall be
on the Company to demonstrate clearly and convincingly that, based on the facts
known at the time, the Indemnitee acted in bad faith. The Company may not avail
itself of this Section 6.2 as to a given lawsuit if, at any time after the
occurrence of the activities or omissions that are the primary focus of the
lawsuit, the Company has undergone a change in control. For this purpose, a
change in control shall mean a given person or group of affiliated persons or
groups increasing their beneficial ownership interest in the Company by at least
twenty (20) percentage points.
4
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Centaur Pharmaceuticals, Inc.
Indemnification Agreement
7. NOTICE AND OTHER INDEMNIFICATION PROCEDURES.
-------------------------------------------
7.1 Promptly after receipt by the Indemnitee of notice of the
commencement of or the threat of commencement of any proceeding, the Indemnitee
shall, if the Indemnitee believes that indemnification with respect thereto may
be sought from the Company under this Agreement, notify the Company of the
commencement or threat of commencement thereof.
7.2 If, at the time of the receipt of a notice of the commencement of
a proceeding pursuant to Section 7.1 hereof, the Company has D&O Insurance in
effect, the Company shall give prompt notice of the commencement of such
proceeding to the insurers in accordance with the procedures set forth in the
respective policies. The Company shall thereafter take all necessary or
desirable action to cause such insurers to pay, on behalf of the Indemnitee, all
amounts payable as a result of such proceeding in accordance with the terms of
such D&O Insurance policies.
7.3 In the event the Company shall be obligated to advance the
expenses for any proceeding against the Indemnitee, the Company, if appropriate,
shall be entitled to assume the defense of such proceeding, with counsel
approved by the Indemnitee (which approval shall not be unreasonably withheld),
upon the delivery to the Indemnitee of written notice of its election to do so.
After delivery of such notice, approval of such counsel by the Indemnitee and
the retention of such counsel by the Company, the Company will not be liable to
the Indemnitee under this Agreement for any fees of counsel subsequently
incurred by the Indemnitee with respect to the same proceeding, provided that:
--------
(a) the Indemnitee shall have the right to employ his own counsel in any such
proceeding at the Indemnitee's expense; (b) the Indemnitee shall have the right
to employ his own counsel in connection with any such proceeding, at the expense
of the Company, if such counsel serves in a review, observer, advice and
counseling capacity and does not otherwise materially control or participate in
the defense of such proceeding; and (c) if (i) the employment of counsel by the
Indemnitee has been previously authorized by the Company, (ii) the Indemnitee
shall have reasonably concluded that there may be a conflict of interest between
the Company and the Indemnitee in the conduct of any such defense, or (iii) the
Company shall not, in fact, have employed counsel to assume the defense of such
proceeding, then the fees and expenses of the Indemnitee's counsel shall be at
the expense of the Company.
8. DETERMINATION OF RIGHT TO INDEMNIFICATION.
-----------------------------------------
8.1 To the extent the Indemnitee has been successful on the merits or
otherwise in defense of any proceeding referred to in Section 4.1 or 4.2 of this
Agreement or in the defense of any claim, issue or matter described therein, the
Company shall indemnify the Indemnitee against expenses actually and reasonably
incurred by him in connection with the investigation, defense or appeal of such
proceeding, or such claim, issue or matter, as the case may be.
8.2 In the event that Section 8.1 is inapplicable, or does not apply
to the entire proceeding, the Company shall nonetheless indemnify the Indemnitee
unless the Company shall
5
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Centaur Pharmaceuticals, Inc.
Indemnification Agreement
prove by clear and convincing evidence to a forum listed in Section 8.3 below
that the Indemnitee has not met the applicable standard of conduct required to
entitle the Indemnitee to such indemnification.
8.3 The Indemnitee shall be entitled to select the forum in which the
validity of the Company's claim under Section 8.2 hereof that the Indemnitee is
not entitled to indemnification will be heard from among the following, except
------
that the Indemnitee can select a forum consisting of the stockholders of the
Company only with the approval of the Company:
(a) A quorum of the Board consisting of directors who are not
parties to the proceeding for which indemnification is being sought;
(b) The stockholders of the Company;
(c) Legal counsel mutually agreed upon by the Indemnitee and the
Board, which counsel shall make such determination in a written opinion;
(d) A panel of three arbitrators, one of whom is selected by the
Company, another of whom is selected by the Indemnitee and the last of whom is
selected by the first two arbitrators so selected; or
(e) The Court of Chancery of Delaware or other court having
jurisdiction of subject matter and the parties.
8.4 As soon as practicable, and in no event later than thirty (30)
days after the forum has been selected pursuant to Section 8.3 above, the
Company shall, at its own expense, submit to the selected forum its claim that
the Indemnitee is not entitled to indemnification, and the Company shall act in
the utmost good faith to assure the Indemnitee a complete opportunity to defend
against such claim.
8.5 If the forum selected in accordance with Section 8.3 hereof is
not a court, then after the final decision of such forum is rendered, the
Company or the Indemnitee shall have the right to apply to the Court of Chancery
of Delaware, the court in which the proceeding giving rise to the Indemnitee's
claim for indemnification is or was pending or any other court of competent
jurisdiction, for the purpose of appealing the decision of such forum, provided
--------
that such right is executed within sixty (60) days after the final decision of
such forum is rendered. If the forum selected in accordance with Section 8.3
hereof is a court, then the rights of the Company or the Indemnitee to appeal
any decision of such court shall be governed by the applicable laws and rules
governing appeals of the decision of such court.
8.6 Notwithstanding any other provision in this Agreement to the
contrary, the Company shall indemnify the Indemnitee against all expenses
incurred by the Indemnitee in connection with any hearing or proceeding under
this Section 8 involving the Indemnitee and against all expenses incurred by the
Indemnitee in connection with any other proceeding between the Company and the
Indemnitee involving the interpretation or enforcement of the rights of the
6
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Centaur Pharmaceuticals, Inc.
Indemnification Agreement
Indemnitee under this Agreement unless a court of competent jurisdiction
finds that each of the material claims and/or defenses of the Indemnitee in any
such proceeding was frivolous or not made in good faith.
9. EXCEPTIONS. Any other provision herein to the contrary
----------
notwithstanding, the Company shall not be obligated pursuant to the terms of
this Agreement:
9.1 Claims Initiated by Indemnitee. To indemnify or advance expenses
------------------------------
to the Indemnitee with respect to proceedings or claims initiated or brought
voluntarily by the Indemnitee and not by way of defense, except with respect to
proceedings specifically authorized by the Board or brought to establish or
enforce a right to indemnification and/or advancement of expenses arising under
this Agreement, the charter documents of the Company or any subsidiary or any
statute or law or otherwise, but such indemnification or advancement of expenses
may be provided by the Company in specific cases if the Board finds it to be
appropriate; or
9.2 Unauthorized Settlements. To indemnify the Indemnitee hereunder
------------------------
for any amounts paid in settlement of a proceeding unless the Company consents
in advance in writing to such settlement, which consent shall not be
unreasonably withheld; or
9.3 Securities Law Actions. To indemnify the Indemnitee on account
----------------------
of any suit in which judgment is rendered against the Indemnitee for an
accounting of profits made from the purchase or sale by the Indemnitee of
securities of the Company pursuant to the provisions of Section l6(b) of the
Securities Exchange Act of 1934 and amendments thereto or similar provisions of
any federal, state or local statutory law; or
9.4 Unlawful Indemnification. To indemnify the Indemnitee if a final
------------------------
decision by a court having jurisdiction in the matter shall determine that such
indemnification is not lawful. In this respect, the Company and the Indemnitee
have been advised that the Securities and Exchange Commission takes the position
that indemnification for liabilities arising under the federal securities laws
is against public policy and is, therefore, unenforceable and that claims for
indemnification should be submitted to appropriate courts for adjudication.
10. NON-EXCLUSIVITY. The provisions for indemnification and advancement
---------------
of expenses set forth in this Agreement shall not be deemed exclusive of any
other rights which the Indemnitee may have under any provision of law, the
Company's Certificate of Incorporation or Bylaws, the vote of the Company's
stockholders or disinterested directors, other agreements or otherwise, both as
to action in the Indemnitee's official capacity and to action in another
capacity while occupying his position as an agent of the Company, and the
Indemnitee's rights hereunder shall continue after the Indemnitee has ceased
acting as an agent of the Company and shall inure to the benefit of the heirs,
executors and administrators of the Indemnitee.
11. GENERAL PROVISIONS
------------------
11.1 Interpretation of Agreement. It is understood that the parties
---------------------------
hereto intend this Agreement to be interpreted and enforced so as to provide
indemnification and advancement
7
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Centaur Pharmaceuticals, Inc.
Indemnification Agreement
of expenses to the Indemnitee to the fullest extent now or hereafter permitted
by law, except as expressly limited herein.
11.2 Severability. If any provision or provisions of this Agreement
------------
shall be held to be invalid, illegal or unenforceable for any reason whatsoever,
then: (a) the validity, legality and enforceability of the remaining provisions
of this Agreement (including, without limitation, all portions of any paragraphs
of this Agreement containing any such provision held to be invalid, illegal or
unenforceable that are not themselves invalid, illegal or unenforceable) shall
not in any way be affected or impaired thereby; and (b) to the fullest extent
possible, the provisions of this Agreement (including, without limitation, all
portions of any paragraphs of this Agreement containing any such provision held
to be invalid, illegal or unenforceable, that are not themselves invalid,
illegal or unenforceable) shall be construed so as to give effect to the intent
manifested by the provision held invalid, illegal or unenforceable and to give
effect to Section 11.1 hereof.
11.3 Modification and Waiver. No supplement, modification or
-----------------------
amendment of this Agreement shall be binding unless executed in writing by both
of the parties hereto. No waiver of any of the provisions of this Agreement
shall be deemed or shall constitute a waiver of any other provision hereof
(whether or not similar), nor shall such waiver constitute a continuing waiver.
11.4 Subrogation. In the event of full payment under this Agreement,
the Company shall be subrogated to the extent of such payment to all of the
rights of recovery of the Indemnitee, who shall execute all documents required
and shall do all acts that may be necessary or desirable to secure such rights
and to enable the Company effectively to bring suit to enforce such rights.
11.5 Counterparts. This Agreement may be executed in one or more
------------
counterparts, which shall together constitute one agreement.
11.6 Successors and Assigns. The terms of this Agreement shall bind,
----------------------
and shall inure to the benefit of, the successors and assigns of the parties
hereto.
11.7 Notice. All notices, requests, demands and other communications
------
under this Agreement shall be in writing and shall be deemed duly given: (a) if
delivered by hand and receipted for by the party addressee; or (b) if mailed by
certified or registered mail, with postage prepaid, on the third business day
after the mailing date. Addresses for notice to either party are as shown on
the signature page of this Agreement or as subsequently modified by written
notice.
11.8 Governing Law. This Agreement shall be governed exclusively by
-------------
and construed according to the laws of the State of Delaware, as applied to
contracts between Delaware residents entered into and to be performed entirely
within Delaware.
8
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Indemnification Agreement
11.9 Consent to Jurisdiction. The Company and the Indemnitee each
hereby irrevocably consent to the jurisdiction of the courts of the State of
Delaware for all purposes in connection with any action or proceeding which
arises out of or relates to this Agreement.
IN WITNESS WHEREOF, the parties hereto have entered into this
Indemnification Agreement effective as of the date first written above.
CENTAUR PHARMACEUTICALS, INC. INDEMNITEE:
By:_______________________________ By:________________________________
Title:____________________________
Address:__________________________ Address:___________________________
__________________________________ ___________________________________
9
<PAGE>
EXHIBIT 10.06
MASTER
LOAN AND SECURITY AGREEMENT
MASTER LOAN AND SECURITY AGREEMENT dated as of November 3, 1997 (the
"Master Agreement") between CENTAUR PHARMACEUTICALS, INC. a Delaware
corporation with its executive office and principal place of business at 484
Oakmead Parkway Sunnyvale, California 94086 (the "Borrower"), and FINOVA
TECHNOLOGY FINANCE, INC., a Delaware corporation with its executive office and
principal place of business at 10 Waterside Drive, Farmington, Connecticut
06032-3065 ("Lender").
1. Loans by Lender to Borrower. Lender shall from time to time make loans
----------------------------
to the Borrower (each a "Loan") in an aggregate total amount not to exceed Ten
Million Dollars ($10,000,000). Each Loan to be evidenced by a Promissory Note
(each a "Note") and to be on the terms set forth herein and in that certain
Commitment Letter to Borrower from Lender dated October 7, 1997 which was
revised on December 23, 1997 and amended on April 20, 1998 (the "Commitment
Letter"), and subject to the conditions in the Note and the related Loan and
Security Agreement between Borrower and Lender (each a "Loan and Security
Agreement"), and secured by a security interest in the equipment and other
assets of Borrower described as "Collateral" in this Agreement or any of the
Loan and Security Agreements. The terms of each such Loan and Security
Agreement shall incorporate the terms and provisions of this Master Agreement
with such modifications, if any, as therein set forth. Only the signed copy of
each Loan and Security Agreement and not this Master Agreement shall constitute
chattel paper the possession of which can perfect a security interest. In the
event of a conflict between the provisions of this Master Agreement and the
provisions of any Loan and Security Agreement, the Loan and Security Agreement
shall prevail.
2. Release of Collateral. When payment in full has been made on any Note,
----------------------
the Collateral described in the related Loan and Security Agreement shall be
released from the security interest created by the Loan and Security Agreements
provided that no Event of Default shall have occurred under this Master
Agreement and not be cured and provided, further, that if any event that with
either or both the passage of time or giving of notice would be an Event of
Default shall exist, such release shall be made if and when such event has been
cured and no Event of Default has occurred and not been cured. Borrower shall
not have the right to prepay any Note except as described in the Promissory
Note.
3. Disclaimer of Warranties. BORROWER ACKNOWLEDGES THAT IT HAS SELECTED
-------------------------
ALL GOODS, CONTRACT RIGHTS AND GENERAL INTANGIBLES (SUCH AS LICENSES) INCLUDED
IN THE COLLATERAL (THE "EQUIPMENT") AND EVERY MANUFACTURER AND OTHER VENDOR OF
THE EQUIPMENT, AND THAT BORROWER HAS NOT RELIED UPON LENDER FOR SUCH SELECTION.
LENDER HAS NOT MADE AND SHALL NOT BE DEEMED TO HAVE MADE ANY REPRESENTATION OR
- ------------------- ---------------------
WARRANTY, EXPRESS OR IMPLIED, AS TO THE MERCHANTABILITY, FITNESS FOR USE,
- -------- ----------------------------------------------------------------
FITNESS FOR A PARTICULAR PURPOSE OR TITLE OF THE EQUIPMENT (OR ANY PART THEREOF)
- --------------------------------------------------------------------------------
OR AS TO COMPLIANCE WITH SPECIFICATIONS, COMPLIANCE WITH GOVERNMENTAL
REGULATIONS, QUALITY, SELECTION, INSTALLATION, SUITABILITY, PERFORMANCE,
CONDITION, DESIGN, ABSENCE OF DEFECTS, OPERATION, OR NON-INFRINGEMENT OF PATENT,
COPYRIGHT, TRADEMARK OR OTHER INTELLECTUAL PROPERTY RIGHTS OF THE EQUIPMENT (OR
ANY PART THEREOF). BORROWER HEREBY DISCLAIMS ANY AND ALL SUCH WARRANTIES OR
REPRESENTATIONS, EXPRESS
1
<PAGE>
OR IMPLIED. BORROWER AND LENDER AGREE THAT ALL RISKS INCIDENT TO THE MATTERS
REFERRED TO IN THIS SECTION ARE TO BE BORNE BY BORROWER. Lender has and shall
have no responsibility for the installation, adjustment or servicing of the
Equipment. The provisions of this Section have been negotiated and are intended
to be a complete exclusion and negation of any representations or warranties by
Lender, express or implied, with respect to the Equipment that may arise
pursuant to any law now or hereafter in effect, or otherwise. In no event shall
defect in, or unfitness of, any or all of the Equipment, or any breach of
warranty or representation by any or every Manufacturer or other Vendor relieve
Borrower of the obligation to pay any Loan or to make any other payments
required hereunder or to perform any other obligation hereunder. Without
limiting the generality of the foregoing, Lender shall not be responsible or
liable for any (i) defect, either latent or patent, in any of the Equipment or
for any direct or consequential damages therefrom, (ii) loss of use of any of
the Equipment or for any loss of profits or any interruption in Borrower's
business occasioned by Borrower's inability to use any or all of the Equipment
for any reason whatsoever, or (iii) in the event that any Vendor delays or fails
to make delivery of any or all of the Equipment or fails to fulfill or comply
with any purchase contract or order.
4. Borrower's Representations and Warranties. Borrower represents and
------------------------------------------
warrants (and if requested by Lender, promptly will provide supporting documents
to the effect and an initial, one time only opinion of counsel substantially in
the form requested by Lender) that as of the date that Borrower signs this
Master Agreement and as of the date of each subsequent Loan and Security
Agreement and the date of each advance of funds by Lender for a Loan: (i) all
items of the Equipment either are new and unused or have been used only by
Borrower for not more than six months, except as otherwise specified in a Loan
and Security Agreement; (ii) Borrower is duly organized, validly existing and in
good standing under the laws of the jurisdiction of its organization, and is
qualified and in good standing to do business wherever necessary to carry on its
present business and operations, including the jurisdictions where the Equipment
is located; (iii) Borrower has the power to enter into this Agreement and the
other instruments and documents executed by Borrower in connection herewith
(together with this Agreement, the "Transactional Documents") and to pay and
perform its obligations under this Agreement and the other Transactional
Documents; (iv) this Agreement and the other Transactional Documents have been
duly authorized, executed and delivered by Borrower, and constitute the valid,
legal and binding obligations of Borrower enforceable in accordance with their
terms; (v) no vote or consent of, or notice to, the holders of any class of
stock of Borrower is required, or if required, such vote or consent has been
obtained or given, to authorize the execution, delivery and performance of this
Agreement and the other Transactional Documents by Borrower; (vi) neither the
execution and delivery by Borrower of this Agreement or the other Transactional
Documents, nor the consummation by Borrower of the transactions contemplated
hereby or thereby, nor compliance by Borrower with the provisions hereof or
thereof, conflicts with or results in a breach of any of the provisions of any
Certificate of Incorporation or By-laws or partnership or trust agreement or
certificate of Borrower, or of any applicable law, judgment, order, writ,
injunction, decree, award, rule or regulation of any court, administrative
agency or other governmental authority, or of any indenture, mortgage, deed of
trust, other agreement or instrument of any nature to which Borrower is a party
or by which it or its property is bound or affected or pursuant to which it is
constituted, or constitutes a default under any thereof or will result in the
creation of any lien, charge, security interest or other encumbrance upon any of
the Collateral, other than the interests therein of Lender or any Assignee (as
hereinafter defined), or upon any other right or property of Borrower or will in
any manner adversely affect Lender's or any Assignee's security interest in any
of the Equipment; (vii) no consent, approval, withholding of objection or other
authorization of or by any court, administrative agency, other
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governmental authority or any other Person is required, except such consents,
approvals or other authorizations which have been duly obtained and are in full
force and effect and copies of which have been furnished Lender, in connection
with the execution, delivery or performance by Borrower, or the consummation by
Borrower, of the transactions contemplated by this Agreement and the other
Transactional Documents; (viii) there are no actions, suits or proceedings
pending, or, to the knowledge of Borrower, threatened, in any court or before
any administrative agency or other governmental authority against or affecting
Borrower, which, if adversely decided would or could, individually or in the
aggregate, materially and adversely affect the financial or other condition,
business, operations, properties, assets or prospects of Borrower or the ability
of Borrower to perform any of its obligations under this Agreement or under the
other Transactional Documents, except for any such actions, suits or proceedings
that Borrower has described in writing to Lender; (ix) no Event of Default or
event or condition which upon the passage of time, the giving of notice, or
both, would constitute an Event of Default, exists or is continuing; (x) there
has been no material adverse change or threatened change in Borrower's,
financial or other condition, business, operations, properties, assets or
prospects since the date of Borrower's, most recent financial statements
reported on by an independent public accounting firm prior to the date of this
Agreement, since the dates of each such Person's interim and annual financial
statements, if any, subsequent to such prior statements, or from the written
information that has been supplied to Lender by Borrower, (xi) Borrower
possesses any and all authorizations, certifications and licenses which are or
may be required to use and operate the Equipment; (xii) the actual Acquisition
Cost paid by Borrower for each item of the Equipment is set forth on a Schedule
A attached to a Loan and Security Agreement and does not exceed the fair and
usual price for like quantity purchases of such item and reflects all discounts,
rebates and allowances for the Equipment given to Borrower, or any affiliate of
Borrower or by any vendor or other Person including, without limitation,
discounts for advertising, prompt payment, testing or other services; (xiii) all
information supplied to Lender by Borrower is correct and does not omit any
statement necessary to make the information supplied not misleading; (xiv) the
financial statements of Borrower have been prepared in accordance with
generally accepted accounting principles consistently applied and accurately and
completely present the financial condition and the results of operations of
Borrower at the dates of and for the periods covered by such statements; (xv)
Borrower has delivered to Lender a copy of each invoice and bill of sale to
Borrower for its purchase of the Equipment, and a copy of each canceled check
pursuant to which Borrower paid for the Equipment; (xvi) Borrower has paid the
purchase price for all of the Equipment except as otherwise specified by
Borrower in Exhibit A to the applicable Loan and Security Agreement; (xvii) no
security interest or lien exists on any of the Collateral (other than of Lender)
except for statutory liens that do not materially affect the value of the
collateral and the Borrower's use thereof; (xviii) no security interest or lien
on any of the Collateral has been previously granted by Borrower or has been
effective against the Equipment when owned by Borrower that has been, or will
be, released prior to the making of any Loan pursuant to the applicable Loan and
Security Agreement, except as described in Exhibit A to such Loan and Security
Agreement; and (xix) except for the security interest granted to Lender,
Borrower is the owner of, and has clear title to, the Collateral.
5. Identification Marks. To the extent requested by Lender or if
---------------------
required by applicable law, Borrower shall affix to the Equipment at Borrower's
expense signs, labels, or other forms of notice to disclose Lender's and any
Assignee's security interest in the Equipment. Borrower shall keep and maintain
such signs, labels or other forms of notice affixed to the Equipment. Lender
may furnish such signs, labels or other forms of notice to Borrower. Except as
otherwise directed by Lender, Borrower shall not allow the name of any person
other than Lender or manufacturer to be placed on any part of the
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<PAGE>
Equipment as a designation that might reasonably be interpreted as a claim of
rights therein.
6. Fees and Taxes. Borrower agrees to pay promptly when due, and to
---------------
indemnify and hold Lender harmless from, all license, title, registration and
recording fees whatsoever, all taxes including, without limitation, sales, use,
franchise, personal property, excise, import, export and stamp taxes and customs
duties, and all charges together with any penalties, fines or interest thereon
which are assessed, levied or imposed by any governmental or taxing authority
with respect to any or all of the Collateral or the purchase, acquisition,
ownership, construction, installation, shipment, delivery, possession, use,
maintenance, condition, operation, control, return or other disposition thereof.
If it shall be determined that any Federal, state or local tax is payable in
respect of the issuance of any Note or the making of any Loan, or in connection
with the filing or recording of any financing statements or other documents
(whether measured by the amount of Loans secured or otherwise) contemplated by
this Master Agreement, then the Borrower will pay any such tax and all interest
and penalties, if any, and will indemnify the Lender against and save it
harmless from any loss or damage resulting from or arising out of the nonpayment
or delay in payment of any such tax other than taxes related to Lenders income.
Notwithstanding any other provision contained in this Agreement, the covenants
and agreements of the Borrower in this Section shall survive payment of the
Obligations and the termination of this Master Agreement.
7. General Indemnity. (a) Borrower shall indemnify Lender and any
------------------
Assignee, and their respective agents and servants, against, and agrees to
defend, protect, save and keep them harmless from, any and all liabilities,
obligations, losses, damages, penalties, claims, actions, suits, costs, expenses
and disbursements, including attorneys' fees and expenses and costs for customs,
completion, performance and appeal bonds, of whatsoever kind and nature
(including, without limitation, for negligence, tort liability, damages by
reason of strict or absolute liability, punitive damages, and third party
indirect and consequential damages, but excluding any such amounts imposed or
incurred as a result of Lender's gross negligence or willful misconduct),
imposed on or incurred by or assessed against Lender and/or any Assignee, in any
way relating to or arising out of (i) the failure of Borrower to provide or
obtain any certificates, documents, consents, authorizations, clearances,
licenses, permits or instruments required hereunder or under any of the other
Transactional Documents, or (ii) the ordering, construction, installation,
ownership, delivery, testing, possession, use, maintenance, operation, control,
movement, import, export, shipment or condition of the Equipment (including but
not limited to latent and other defects, whether or not discoverable by Lender
or Borrower, and any claim for patent, trademark, copyright, software or other
intellectual property infringement). The obligations of Borrower under this
Section shall survive the payment of the Obligations and the termination of this
Master Agreement.
8. Use of Equipment; Location; Liens. (a) Borrower warrants and agrees
----------------------------------
that the Equipment shall be used and operated and otherwise be in compliance
with any established operating procedures therefor of any Manufacturer and all
statutes, regulations and orders of any governmental body having power to
regulate the Equipment or its use. Borrower shall bear and pay all costs of
such compliance. Borrower shall not permit the Equipment to be used or
maintained in any manner or condition that would violate, or could result in the
termination of, the insurance policies carried by Borrower pursuant to the
provisions of this Master Agreement on insurance, or in any manner or condition
or for any purpose for which, in the opinion of any Manufacturer, the Equipment
is not designed or suited.
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<PAGE>
(b) Borrower agrees that without Lender's prior written consent, it will
not remove any of the Equipment from the location specified in Schedule A to the
applicable Loan and Security Agreement for such Equipment or permit any of the
Equipment to be used by anyone other than Borrower, Borrower's employees or a
responsible independent contractor engaged by Borrower.
(c) Borrower shall not directly or indirectly create, incur, assume or
suffer to exist any mortgage, security interest, lien or encumbrance on any of
the Collateral or Lender's or any Assignee's security interest therein, except
in the name of Lender and its successor(s) and any Assignee except for statutory
liens that do not materially affect the value of the collateral and the
Borrowers use thereof. At its own expense, Borrower shall promptly take such
action as may be necessary to keep the Collateral free and clear of, and to duly
discharge, any such mortgage, security interest, lien or encumbrance not
excepted above except for statutory liens that do not materially affect the
value of the collateral and the Borrowers use thereof.
(d) Borrower agrees to procure and maintain in effect all licenses,
certificates, permits and other approvals and consents required by federal,
state and local laws and regulations in connection with Borrower's possession,
use, operation and maintenance of the Equipment.
(e) Borrower shall cooperate fully with Lender or any Assignee to perfect
and record their respective security interests in connection with the
Transactional Documents, and will pay Lender its reasonable costs related
thereto. Borrower authorizes Lender to file financing statements on the
Collateral that are signed only by Lender or that are signed for Borrower by
Lender in any jurisdiction when permitted by law or local authority upon 10 days
advance written notice to Borrower. Borrower hereby grants to Lender power-of-
attorney to act as Borrower's attorney-in-fact to sign Borrower's name on
financing statements as "Debtor" on the collateral upon 10 days advance written
notice to Borrower.
9. Maintenance and Repairs; Additions to Equipment. (a) Borrower shall
------------------------------------------------
maintain all of the Equipment in good, safe and efficient operating repair,
appearance and condition, will keep all components of the Equipment properly
calibrated and aligned, will make all required adjustments, replacements and
repairs (collectively, "maintenance and repairs"). Such maintenance and repairs
shall include, but not be limited to, all recommended or advised by a
Manufacturer, all required or advised by cognizant governmental agencies or
regulatory bodies and all commonly performed by prudent business and/or
professional practice. All maintenance and repairs to any item of the Equipment
shall be made by the Manufacturer or, those of substantially equal skill or
knowledge in maintaining and repairing the Equipment.
(b) Borrower shall not make any modification that would diminish value of
the Equipment without the prior written consent of Lender. Any replacements,
substitutions, additions, attachments, accessions, parts, fittings, accessories,
modifications, enhancements, maintenance and repairs and other upgrades to the
Equipment whenever made shall be considered accessions to the Equipment and
shall automatically become subject to the security interest of Lender.
(c) All instruction manuals, published statements of capabilities and
technical specifications, service, maintenance and repair records, installation,
qualification, certification and calibration reports, usage logs, and printed
material relating to the Equipment shall be deemed part of the Equipment.
Computer programs, programming codes, operating systems, data processing
instructions, series of instructions or statements
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<PAGE>
which are machine readable, and any like symbols or signals usable by an
electronic data processing system (collectively "Software") that has been or
shall be installed or entered in the Equipment shall become a part of the
Equipment except for any Software that is proprietary Software of Borrower, that
contains trade secrets or confidential information of Borrower, or that is not
transferable, and is not a modification, change, enhancement or improvement to
any Software which is financed hereunder and identified or listed in the
description of specific items of the Equipment in or attached to Schedule A of a
Loan and Security Agreements provided, however that all operating system
Software necessary to operate the Equipment shall notwithstanding the aforesaid
be considered to be part of the Equipment. Whenever Borrower acquires Software
licenses related to the equipment from other parties that is financed hereunder
and listed on Exhibit A, with respect to the Software such licenses shall
automatically and without further action by Borrower be assigned to Lender and
become through assignment a part of the Equipment transferable to any future
user of the Equipment for use with the Equipment.
10. Loss, Damage or Destruction of Equipment. (a) No damage to, taking of
-----------------------------------------
or theft, loss or destruction of any Equipment shall impair any obligation of
Borrower to Lender, including, without limitation, the obligation to pay the
Loans.
(b) In the event that any item of Equipment shall become lost, stolen,
destroyed or damaged from any cause whatsoever, Borrower agrees to promptly
notify Lender in writing of such fact, fully informing Lender of the details
thereof. If any item of Equipment is damaged (unless the same is irreparably
damaged, in which case the provisions of this Master Agreement with respect to a
Casualty Occurrence shall apply), Borrower shall, at its sole cost and expense,
place the same in good repair, condition and working order or replace the same
with "like property" having the same value and operating capabilities and useful
life at least equal to the damaged Equipment prior to the date of such damage,
which property shall thereupon become subject to the security interest of
Lender. In the event that an item of Equipment has been damaged, but not
irreparably, if no Event of Default has occurred and is continuing hereunder,
upon receipt by Lender of evidence, reasonably satisfactory to Lender, that such
repair, restoration or replacement has been completed, and an invoice therefor,
Lender shall release to Borrower or its supplier the proceeds of any insurance
received by Lender as a result of such damage for the purpose of reimbursing
Borrower for the costs of repairing, restoring or replacing such item.
(c) In the event that any item of Equipment shall become lost, stolen,
destroyed or irreparably damaged from any cause whatsoever, or if any item of
Equipment or Borrower's title thereto shall be requisitioned or seized by any
governmental authority (each such occurrence being herein called a "Casualty
Occurrence"), Borrower shall promptly notify Lender in writing of such fact,
fully informing Lender of all details of the Casualty Occurrence in question,
and shall pay Lender in cash the outstanding principal balance and accrued
interest calculated as of the date of the Casualty Occurrence. In addition, a
Prepayment Premium shall be paid, which shall be calculated as if prepayment had
been made on the date of the Casualty Occurrence. If the Casualty Occurrence
affects less than all of the Equipment, Borrower shall only be required to pay
the Pro Rata Percentage of the outstanding principal balance, accrued interest
and Prepayment Premium. The "Pro Rata Percentage" is to be calculated by
dividing the original equipment cost of the affected Equipment by the original
equipment cost of all tangible Equipment financed hereunder (excluding all soft
costs), as set forth in the various Schedules. This payment shall be made
within 30 days following the Casualty Occurrence and shall be applied to the
Loan and Note made together with such Loan and Security Agreement.
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<PAGE>
11. Reports; Inspections. Borrower will cause to be furnished to Lender,
---------------------
if requested, from time-to-time a statement showing the condition and such other
information regarding the Collateral as Lender may reasonably request. Lender
and any Assignee shall have the right, upon reasonable notice to Borrower, to
inspect the Equipment including Borrower's records with respect to the
Collateral, to copy such records, and to inspect and copy Borrower's records
with respect to the financial statements Borrower is required to furnish Lender
or has warranted to Lender pursuant to this Master Agreement. Any inspection by
Lender or any Assignee shall not be deemed to be approval or acknowledgment by
Lender or such Assignee of the safety, freedom from defects, performance or
compliance with specifications or governmental requirements of the Collateral or
of the conformity of the Collateral or such financial statements to the
requirements or warranties of this Master Agreement, and the disclaimers set
forth in the provisions of this Master Agreement on disclaimer of warranties
shall apply to any such inspection. Borrower shall pay or reimburse Lender for
Lender's costs and travel expenses for an inspection upon a material breach of
the requirements of this Master Agreement or the warranties of Borrower pursuant
to this Master Agreement.
12. Insurance. Borrower shall procure and maintain at its expense with
----------
insurers acceptable to Lender (i) insurance on all of the Equipment in an amount
not less than the greater of the Equipment's replacement cost insuring against
all risks of loss or damage to the Equipment and against such other risks as
Borrower would, in the prudent management of its properties, maintain with
respect to similar equipment owned by it, and (ii) comprehensive public
liability and property damage insurance, in such amounts as shall be
satisfactory to Lender but for not less than the greater of $1,000,000 or the
amounts customarily maintained by parties similar to Borrower for similar
equipment with similar contemplated use, insuring Lender and any Assignees, as
their interests may appear. On the policies referred to in clause (i), such
insurance shall name Lender (and any Assignees) as Lender's loss payable so that
(and Lender and Borrower hereby agree that) the insurance proceeds payable under
such policies will be payable and paid jointly to Lender (and to any Assignees)
and Borrower. On the policies referred to in clause (ii), such insurance will
name Lender (and any Assignees) as an additional insured as its interests may
appear. All such policies shall provide that they may not be invalidated
against Lender (or any Assignees) because of any violation of a condition or a
breach of warranty of the policies or application therefor by Borrower, that
they may not be altered or canceled except after 30 days' prior written notice
to Lender, and that Lender and any Assignee have the right but not the
obligation to pay the premiums with respect to coverage required by this Master
Agreement in order to continue such insurance in effect or to obtain like
coverage. Under the policies of insurance required to be maintained by Borrower
pursuant to this Master Agreement, Borrower agrees to waive any right of
subrogation and to cause the insurance carrier to waive any right of subrogation
in each instance as such right may exist against Lender or any Assignee and for
any and all loss or damage to the Equipment. Borrower shall deliver to Lender,
prior to the grant of a security interest to Lender in any item of the Equipment
and at such other time or times as Lender may request, a certificate or other
evidence satisfactory to Lender of the maintenance of such insurance. Lender
shall be under no duty to examine such policies, certificates or other evidence
of insurance or to advise Borrower in the event that its insurance is not in
compliance with this Master Agreement. Should Borrower fail to provide such
insurance coverage, Lender may obtain coverage protecting interests of Lender
and Borrower, or the interest of Lender only, for so long as all of the
Obligations have not been satisfied or discharged or such longer period as is
required by this Master Agreement or by the insurance company issuing such
coverage. The proceeds of such insurance shall be applied, at the option of
Borrower if no Event of Default shall exist, and otherwise at Lender's option,
toward (i) replacement, restoration or repair of the Equipment or (ii) payment
of the liabilities of Borrower pursuant to the Obligations.
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<PAGE>
13. Equipment To Be and Remain Personal Property. All of the Equipment
---------------------------------------------
shall be and remain personal property notwithstanding the manner in which the
Equipment may be attached or affixed to realty. In the exercise of its rights,
Lender shall not be liable for any damage to the realty or any such building or
other real or personal property occasioned by any removal of the Equipment by
Lender or the agents of Lender. Borrower further covenants and agrees that
Borrower will, at the request of Lender, obtain and deliver to Lender a waiver,
in recordable form, from the owner and any landlord, tenant or holder of any
lien or encumbrance on the realty or building(s) on or in which any of the
Equipment described in such Loan and Security Agreement shall be located, under
which such owner, landlord, tenant and holder (i) agree and consent that such
Equipment is and shall be personal property removable by Lender upon an Event of
Default under this Master Agreement, and (ii) waive any rights of distraint or
similar rights with respect to such Equipment.
b) Notwithstanding the foregoing provisions of this Section, without
Lender's prior written consent, Borrower shall not permit any of the Equipment
to be attached or affixed to, imbedded in or incorporated into any building,
structure, real estate or other personal or real property.
14. Other Covenants. (a) Borrower agrees to furnish, upon Lender's
----------------
request, such financial, business and operational information concerning
Borrower , including copies of its tax returns, as Lender or its assigns may
reasonably request. Additionally, Borrower shall furnish to Lender and its
assigns without notice or demand therefor two complete copies of its (i)
quarterly interim financial statements within 45 days of the close of each of
the first three fiscal quarters of every year, certified by the chief financial
officer of Borrower and (ii) annual financial statements within 90 days of the
close of each fiscal year reported on by independent accountants without
material adverse qualification or comment. All such financial statements shall
be prepared in accordance with generally accepted accounting principles
consistently applied, and shall accurately and completely present Borrower's
financial condition and results of operations at the dates of and for the
periods covered by such statements.
(b) Borrower shall promptly furnish to Lender copies of (i) filings that
Borrower makes with the SEC or other government agencies under the securities
laws including but not limited to definitive proxy statements, registration
statements, prospectuses and tender offer filings, and reports on holdings or
acquisitions of securities, relating to proxy solicitations, and on Form 10-K,
10-Q, 8-K or similar forms, and any amendments to such filings, (ii) press
releases of Borrower , and (iii) new product (or service) announcements of
Borrower.
(c) Borrower shall give Lender notice of all meetings of the stockholders
or directors of Borrower copies of all materials that are furnished to the
stockholders or directors excluding highly confidential and or client privileged
matters for the meetings at the same time that the notice or materials are sent
to the stockholders or directors.
(d) There shall be no actual or threatened conflict with, or violation of,
any statute, regulation, standard or rule relating to Borrower, its present or
future operations, or the Equipment.
(e) All information supplied to Lender or its assigns by Borrower shall
be correct and shall not omit any statement necessary to make the information
supplied not be misleading. There shall be no material breach of the
representations and warranties made by Borrower in connection with this Master
Agreement.
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<PAGE>
(f) Borrower shall give Lender notice of any change in the address of the
executive office or principal place of business of Borrower not less than 15
days prior to the change.
(g) No change in control of Borrower shall occur, without the written
consent of the Lender, which consent shall not be unreasonably withheld or
delayed. For the purpose of this Agreement a "change in control" shall mean a
transaction or series of related transactions (together, a "Transaction") as a
result of which (i) the Borrower's shareholders prior to the Transaction own
less than a majority of the voting securities of Borrower (or of its successor
in the case of a merger of consolidation) after the transaction or (ii) the
Borrower has transfered or otherwise disposed of all or a substantial portion of
its assets.
(h) Borrower shall not make any payment or distribution of money, checks,
securities or property to any Person in contravention of the provisions of any
Guaranty or subordination that such Person has made in favor of Lender or its
assigns of which Borrower shall have notice or knowledge.
15. Events of Default. If one or more of the following events
-----------------
(hereinafter called "Events of Default" or an "Event of Default") shall occur:
(i) default shall be made in any payment when due on any of the
obligations of principal, interest or other sums of any Loan or any Note or
other of the Obligations when due to Lender, and any such default shall continue
for more than ten (10) days after the due date thereof;
(ii) any representation or warranty by Borrower made in any of the
Obligations or in any other Transactional Document or certificate furnished to
Lender in connection with any Loan or any of the Transactional Documents or any
of the Obligations shall at the time made prove to be incorrect in any material
respect;
(iii) Borrower shall make or permit any unauthorized sublease or transfer
of any Equipment or the possession of any Equipment;
(iv) Borrower shall default in the observance and/or performance of any
other covenant, condition or agreement on the part of Borrower to be observed
and/or performed under any of the Transactional Documents or any of the
Obligations, which default is not governed by paragraphs (i), (ii) or (iii)
above, and such default shall continue for 30 days after written notice from
Lender to Borrower specifying the default and demanding the same to be remedied;
(v) Borrower shall make an assignment for the benefit of creditors, or
cease being in substantially the same line or lines of business in which it is
presently engaged, or generally fail to pay its debts as they become due, or
become insolvent or commence a voluntary case under the federal Bankruptcy Code
as now or hereafter constituted or any other applicable federal or state
bankruptcy, insolvency or similar law, or admit in writing its inability to pay
its debts as they mature, or consent to the appointment of a trustee or
receiver, or a trustee or a receiver shall be appointed for Borrower or for a
substantial part of Borrower's property without such party's' consent and such
appointment shall be not dismissed for a period of 60 days; there shall have
been entered a decree or order for relief by a court having jurisdiction in
respect of Borrower, or approving as properly filed a petition seeking a
reorganization, arrangement, adjustment or composition of or in respect of
Borrower in an involuntary proceeding or case under any applicable federal or
state bankruptcy, insolvency or other similar law, or appointing a receiver,
liquidator,
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<PAGE>
assignee, custodian, trustee or similar official of Borrower or of any
substantial part of its property, or ordering the winding-up or liquidation of
its affairs, and the continuance of any such decree or order unstayed and in
effect for a period of 60 days, or there shall have been filed a petition by or
against Borrower under any bankruptcy law or other insolvency law and, if
petition is filed against Borrower , the petition is not withdrawn or dismissed
within 60 days after the date of filing; or Borrower shall cease doing business
as a going concern or shall liquidate or be dissolved;
(vi) there shall occur under any lease, contract or agreement between
Borrower and Lender, a material, continuing Event of Default, as defined in
such agreement, contract or agreement;
(vii) any of the Collateral shall be attached, levied upon, encumbered,
pledged, seized or taken under any judicial process (except for any attachment,
levy, encumbrance or pledge caused to be placed on the Equipment by Lender) and
such proceedings shall not be vacated, or fully stayed, within 30 days thereof;
(viii) at any time there shall occur under (A) any lease between Borrower
and a party other than Lender as lessor or (B) under any lease wholly or
partially guaranteed by Borrower, the exercise by the lessor of its possessory
remedies or commencement of legal proceedings by the lessor for default under
the lease; provided that the aggregate future payments remaining to be made or
guaranteed by Borrower exceed $10,000, and that under a lease described in (B)
above within ten days of notice to Borrower of such exercise of remedies and
demand for payment by Borrower any such amount guaranteed by Borrower remains
unpaid; or
(ix) any obligation of Borrower for the payment of borrowed money or the
acquisition of assets by purchase, conditional sale or other arrangement is not
paid or refinanced at maturity, whether by acceleration or otherwise, or is
declared due and payable prior to the stated maturity thereof by reason of
default or other violation of the terms of any promissory note or agreement
evidencing or governing such obligation, and Lender has given Borrower an
opportunity to either cure the purported Event of Default or supply information
satisfactory to Lender that it does not, in fact, exist;
all the Loans and all of the Notes and other Obligations shall be declared in
default, immediately and without notice upon the occurrence of an Event of
Default specified in clause (v) above, and in the case of any other Event of
Default, upon Lender at any time at its option subsequent to such Event of
Default and so long as the Event of Default is continuing giving notice to
Borrower that the Obligations are declared in default. At any time after the
Obligations have been declared in default, Lender may exercise one or more of
the following remedies, to the extent not then prohibited by law, as Lender in
its sole discretion may elect:
(I) to proceed by appropriate court action or actions at law or in equity
or in bankruptcy to enforce performance by Borrower of the covenants and terms
of the Obligations and to recover damages for the breach thereof;
(II) to accelerate payment of the Notes for their full amounts;
(III) with ten (10) days written notice to Borrower, to take possession of
the Collateral and/or to render inoperable the Collateral wherever found, with
or without legal process, and for this purpose Lender and/or its agents may
enter upon any premises of or under the control or jurisdiction of Borrower or
any agent of Borrower without liability for suit, action or other proceeding by
Borrower and remove the Collateral
10
<PAGE>
therefrom; Borrower hereby expressly waives any claims for damages occasioned by
such taking of possession by Lender; BORROWER HEREBY EXPRESSLY WAIVES ANY AND
ALL RIGHTS, INCLUDING RIGHTS TO NOTICE OR A JUDICIAL HEARING, WITH RESPECT TO
LENDER'S TAKING POSSESSION OF THE COLLATERAL AFTER AN EVENT OF DEFAULT;
(IV) Upon ten days written notice to Borrower of intention to sell or
lease the Collateral, to sell any Collateral at a private or public, cash or
credit sale, and to lease or license any Collateral including to lease any
Equipment, in all the foregoing events free and clear of any rights of Borrower
in the Collateral including the Equipment;
(V) whether or not Lender shall have exercised, or shall hereafter at any
time exercise, any of its other rights with respect to the Collateral, upon
written notice to Borrower, to demand that Borrower pay to Lender, and Borrower
shall pay to Lender on the date specified in such notice, as liquidated damages
an amount equal to the prepayment premium which would have been payable if the
Loan had been prepaid on the date the default was declared.
(VI) Borrower authorizes and empowers Lender, with the aid and assistance
of any person or persons, with or without legal process, to enter any premises
of Borrower, or any other place or places where any of the Collateral is or may
be placed, and to take possession thereof, and to sell the same either in bulk
or in parcels at public or private sale upon any of such premises or at such
other place or places as Lender may designate, or to remove the Collateral and
to sell, lease and otherwise dispose of the same at public or private sale
either in bulk or in parcels, and at the same time to sell, lease and dispose of
all the right, title, and interest of Borrower in and to the Collateral, and out
of the moneys arising therefrom to pay Lender any and all sums then owing to
Lender that are secured by the Obligations, and all reasonable costs, fees,
charges, and expenses in connection therewith, including counsel fees, and
disbursements, premiums on bonds, custodian's fees, fees of public officers, and
an auctioneer's fee of 15 percent on gross sale proceeds, any disbursements for
advertising and labor, use and occupancy of premises, and any and all other
disbursements made by Lender in connection with the taking, maintaining,
storage, repair, refurbishment and disposition of the Collateral, and all
reasonable expenses (including reasonable counsel fees) incident to the
enforcement of payment of any obligations of Borrower to Lender by any suit or
action or by participation in, or in connection with, a case or proceeding under
the Bankruptcy Code, or any successor statute thereto, rendering the excess (if
any) to Borrower or its successors or assigns. Borrower shall be bound by the
result of any sales made in accordance herewith. If for any reason the
Collateral shall fail to satisfy all of the foregoing items, and amounts due
Lender including the Loans, Borrower shall pay Lender the deficiency;
and
(VII) to exercise the remedies provided by the Uniform Commercial Code or
other applicable law.
In addition to the foregoing, Lender may also recover from Borrower all
costs and expenses arising out of Borrower's default, including, without
limitation, expenses of Lender's taking possession of the Equipment and the
storage, inspection, repair, reconditioning, sale and re-leasing thereof, and
reasonable attorneys' fees incurred by Lender in exercising any of its rights or
remedies hereunder. No remedy referred to in this Section is intended to be
exclusive, but each shall be cumulative and in addition to any other remedy
referred to above or otherwise available to Lender at law or in equity or
11
<PAGE>
in bankruptcy. The exercise by Lender of any one or more remedies shall not be
deemed to preclude the simultaneous or later exercise by Lender of any or all
such previously exercised remedies and any and all other remedies. For the
purposes of this Section only, "fair market rental value" and "fair market sales
value" shall be determined by an appraisal of an independent appraiser mutually
agreed by Borrower and by Lender, and the cost of any such appraisal shall be
borne by Borrower.
16. Authorization of Lender. If Lender shall at any time rightfully
------------------------
obtain possession, either with or without legal process, or be entitled to
possession of any of the Collateral, it shall not be necessary for Lender to
remove such Collateral but Borrower will permit, and take security precautions
reasonably necessary to prevent the use or relocation of the Collateral until
ten (10) days after the sale of such Collateral. Borrower waives any and all
claims of any nature, kind, or description which it has or may claim to have
against Lender or its representative or any Assignee by reason of its or their
taking possession of or selling any or all of the Collateral.
17. Assignment and Transfer by Lender. (a) Lender may at any time and
----------------------------------
from time to time assign to one or more assignees (all herein called the
"Assignee") for the purpose of securing a loan to Lender or for any other
purpose without notice to or consent of Borrower, any or all of the Obligations
and the Transactional Documents, and any sums at any time due and to become due
or at any time owing or payable by Borrower to Lender under the obligations.
The Assignee shall not be obligated to perform any duty, covenant or condition
required to be performed by Lender, if any, in respect of the Obligations or the
Transactional Documents other than confidentiality obligations. Nothing herein
limits lenders obligations.
(b) Borrower further acknowledges and agrees that from and after the
receipt by Borrower of written notice of an assignment from Lender, Borrower
shall comply with the directions or demands given in writing by the Assignee,
and the Assignee shall have the right to exercise (either in its own name or in
the name of Lender) all rights, privileges, and remedies of Lender provided for
herein subject to the terms hereof and of the Confidentiality Agreement dated
June 27, 1997 (the "Confidentiality Agreement"), including those relating to
confidentiality and quiet enjoyment. Borrower agrees that any obligation to the
Assignee as a result of such assignment shall not be reduced or minimized by
reason of any claim, defense, counterclaim, set-off, abatement, reduction or
recoupment or other right that Borrower might otherwise have been able to assert
against Lender or any prior Assignee. After any assignment to the Assignee and
unless and until Borrower is otherwise notified by the Assignee, the Obligations
and Transactional Documents may not be amended or modified, and no consent or
waiver hereunder shall be effective, without the prior written consent of the
Assignee. Borrower agrees to execute, and Lender or any Assignee may record any
instruments and documents relating to such assignment, mortgage or security
interest desired by Lender or any Assignee. Borrower shall promptly provide any
such instruments and documents that are requested by Lender or any Assignee
including certificates indicating any claim, defense, counterclaim, set-off,
abatement, reduction, recoupment or other right that Borrower may have against
Lender or any Assignee, the payments that have been made under each Note and
that the Obligations and Transactional Documents are in effect without default
or amendment, or the extent of such default or amendment, as the case may be.
18. Recording and Filing; Expenses. Borrower will, upon demand of Lender,
-------------------------------
at Borrower's cost and expense, do and perform any reasonable other act and will
execute, acknowledge, deliver, file, register, record and deposit (and will re-
file, re-register, re-record or re-deposit whenever required) any and all
instruments required by law or reasonably requested by Lender (or any Assignee
but not at Borrower's cost for
12
<PAGE>
Assignee) including, without limitation, financing statements under the Uniform
Commercial Code, for the purpose of providing proper protection to the
satisfaction of Lender (and/or any Assignee) of Lender's security interest in
the Collateral (and/or of any Assignee's security interest in the Collateral).
Borrower will also pay, or will upon demand reimburse Lender for, all reasonable
costs and expenses incurred by Lender in connection with the origination of
Loan, and the Transactional Documents, enforcement of Lender's rights under the
Obligations and the Transactional Documents, proceedings involving Borrower as a
debtor under any chapter of the Bankruptcy Code, filings, the documentation of
this transaction, and fees and costs of attorneys for Lender in connection
therewith.
19. Quiet Enjoyment. So long as no Event of Default has occurred
----------------
hereunder, Borrower shall be entitled to the possession and the use and
enjoyment of the Collateral free from hindrance by the Lender or any Assignee.
20. Failure or Indulgence Not Waiver; Additional Rights of Lender. (a)
--------------------------------------------------------------
No failure to exercise, and no delay in exercising, any right, power or remedy
under the Obligations or the Transaction Documents on the part of Lender shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right, power or remedy preclude any other or further exercise thereof or the
exercise of any other right, power or remedy. Any waiver in respect of the
Obligations or the Transactional Documents, to be effective, must be in writing.
A waiver of any covenant, term or condition contained in the Obligations or the
Transactional Documents shall not be construed as a waiver of any subsequent
breach of the same covenant, term or condition. Receipt by Lender of any
payment from Borrower or on its behalf with knowledge of the breach of any
provisions of the Obligations or the Transactional Documents shall not
constitute a waiver of such breach.
(b) Lender shall be entitled to seek injunctive relief in case of the
violation or attempted or threatened violation of any of the provisions of the
Obligations or the Transactional Documents, or a decree compelling performance
of any of their provisions other than for the payment of money, and to any other
remedy allowed in law or in equity.
21. Leasing by Borrower. Borrower shall not lease the Equipment, or
--------------------
relinquish possession of the Equipment, in whole or in part, without the prior
written consent of Lender which consent shall not be unreasonably withheld by
Lender. Nevertheless, any such lease and the rents, profits and proceeds
therefrom shall be included in the Collateral and, unless Lender has consented
to such lease, Lender within 30 days after receiving notice thereof in
accordance with the provisions of this Master Agreement on notices shall have
the right to declare the lease void from its purported commencement, to
terminate the lease or to accept the lease.
22. Notices. Any notice or other communication required or permitted to
--------
be given by either party hereto to the other party shall be deemed to have been
given upon its receipt, in writing, by the receiving party at its address set
forth below, or at such other address as the receiving party shall have
furnished to the other party by notice pursuant to this Section.
If to Borrower: Centaur Pharmaceuticals, Inc.
484 Oakmead Parkway
Sunnyvale, CA 94086
If to Lender: FINOVA Technology Finance, Inc.
13
<PAGE>
10 Waterside Drive
Farmington, CT 06032-3065
23. Entire Agreement; Severability; Amendment or Cancellation of
------------------------------------------------------------
Obligations. The Obligations, confidentiality agreement dated June 27, 1997,
- ------------
schedules and the Commitment Letter dated October 7, 1997 which was revised on
December 23, 1997 and amended on April 20, 1998 constitute the complete and
exclusive statement of the terms of the agreement between the parties with
respect to the Loans. Any provision of the Obligations which are prohibited or
unenforceable in any jurisdiction shall be, as to such jurisdiction, ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
24. Waiver of Jury. Lender and Borrower waive any right and all right to
---------------
trial by jury in any action or proceeding relating in any way to the Obligations
and the Transactional Documents.
25. Governing Law; Consent to Jurisdiction and Service. The Obligations
---------------------------------------------------
shall be governed by and construed in accordance with the laws of the State of
New York (other than the conflicts of laws provisions). Borrower agrees that
any legal action or proceeding against Borrower in respect of or relating to the
Obligations or the Equipment may be brought in any state or federal court
sitting in the State of New York. Borrower hereby irrevocably consents and
submits to the nonexclusive personal jurisdiction of said courts and irrevocably
agrees that all claims in any such action or proceeding may be heard and
determined in and enforced by any such court. Borrower irrevocably consents to
the service of summons, notice, or other process relating to any such action or
proceeding by delivery thereof to it by hand or by mail in the manner set forth
in the provisions of this Master Agreement on notices.
26. Lender's Right to Perform for Borrower. If Borrower fails to duly and
---------------------------------------
promptly perform any of its obligations under this Master Agreement or fails to
comply with any of the covenants or agreements contained herein, Lender may
itself perform such obligations or comply with such covenants or agreements, for
the account of Borrower, without thereby waiving any default, and any amount
paid or expense (including, without limitation, attorney's fees) reasonably
incurred by Lender in connection with such performance or compliance shall,
together with interest thereon at the Default Interest Rate borne by the
earliest dated Note then outstanding, be payable by Borrower to Lender on
demand.
27. Binding Effect. This Master Agreement shall inure to the benefit of
---------------
and be binding upon the parties hereto and their respective permitted successors
and assigns.
28. General. The captions in this Master Agreement are for convenience of
--------
reference only. There shall be only one original executed copy of each of the
Obligations. This Master Agreement is and each Loan and Security Agreement
shall be executed in the State of Connecticut by Lender's countersigning the
same in the State of Connecticut, and are to be and shall be performed in the
State of Connecticut by reason of the requirements therein for payment by
Borrower to Lender to be made in the State of Connecticut.
29. Definitions. The following terms, not elsewhere defined, shall have
------------
the following meanings for all purposes hereof:
14
<PAGE>
"Acquisition Cost" of any item of the Equipment shall mean the purchase
price of such item of the Equipment paid by Borrower.
"Guarantor" shall mean a guarantor of any or all of the obligations of
Borrower pursuant to this Master Agreement.
"Guaranty" shall mean a writing containing a guaranty of any or all of the
obligations of Borrower pursuant to this Master Agreement under the Notes and in
regard to the Loans.
"Manufacturer" shall mean the Person that manufactures the item of the
Equipment in question.
"Obligations" shall mean this Master Agreement, the Notes and the Loan and
Security Agreements and the Schedules and Exhibits thereto.
"Person" shall mean an individual, a corporation, a partnership, an
association, a joint-stock company, a trust, an estate, any incorporated
organization or similar association, a government or political subdivision, or
any other entity.
Witness the execution hereof by the duly authorized representatives of
Borrower and Lender as of the day and year first above written.
ATTEST: CENTAUR PHARMACEUTICALS, INC.
(SEAL)
/s/ Lucy O. Day By /s/ Joseph L. Turner
- --------------------- ---------------------
Asst. Secretary CFO and Treasurer
ATTEST: FINOVA TECHNOLOGY FINANCE, INC.
(SEAL)
By /S/ Linda A Moschitto
__________________________ ---------------------
Linda A Moschitto
Director - Contract Administration
[NOTARY SEAL]
15
<PAGE>
A SECURITY INTEREST IN THIS LOAN AND SECURITY AGREEMENT TO BE PERFECTED BY
POSSESSION MAY ONLY BE PERFECTED BY POSSESSION OF THE ONE SIGNED COPY OF THIS
LOAN AND SECURITY AGREEMENT.
LOAN AND SECURITY AGREEMENT NO. 1
LOAN AND SECURITY AGREEMENT dated as of April 22, 1998 (the "Agreement")
between CENTAUR PHARMACEUTICALS, INC., A Delaware corporation with its
executive office and principal place of business at 484 Oakmead Parkway,
Sunnyvale, CA 94086 (the "Borrower"), and FINOVA TECHNOLOGY FINANCE, INC., a
Delaware corporation with its executive office and principal place of business
at 10 Waterside Drive, Farmington, Connecticut 06032-3065 ("Lender").
1. Obligation to pay. The Borrower concurrently with the execution and
------------------
delivery of this Agreement is borrowing Eight Million and 00/100 Dollars
($8,000,000.00) from the Lender, which borrowing is evidenced by the Borrower's
promissory note bearing the same date as this Agreement in the principal amount
of $8,000,000.009,167,110.47 (the "Promissory Note"). of which $6,956,686.95 is
principal and the remainder is interest.
2. Purpose of Loan and Collateral. The Borrower desires to enter into
-------------------------------
this Agreement for the purpose of financing or refinancing its acquisition of,
and creating a lien and security interest in favor of the Lender in, and hereby
grants the Lender a security interest in, the collateral described on Schedule A
attached hereto, and all replacements, substitutions, additions, attachments,
parts, fittings, accessories and accessions thereto and therefore, whether owned
or hereafter acquired, and all proceeds (including insurance proceeds and any
leases and the rentals and profits thereon) (all hereinafter called the
"Collateral"), to secure the obligations of the Borrower now existing and
hereafter arising under this Agreement and under all of the Notes under the
Master Loan and Security Agreement between Borrower and Lender dated November 3,
1997 ("Master Agreement").
3. Obligations of Borrower. The Borrower shall be obligated under this
------------------------
Agreement to make payment of (1) the debt evidenced by the Promissory Note,
including renewals and extensions thereof, and any other present or future
obligations of the Borrower to the Lender including, but not limited to, other
Notes secured by the Collateral. (2) any costs and expenses incurred in
collection of the Promissory Note or enforcement of the covenants and
obligations of the Borrower in this Agreement or under the Master Agreement, (3)
any future advances made by the Lender for taxes, levies, insurance, and repairs
to or maintenance of or on the Collateral , and (4) the costs for performance by
the Lender of any of the covenants and obligations of the Borrower under this
Agreement or the Master Agreement that are not timely performed by the Borrower.
4. Terms of Master Agreement. The terms of the Master Agreement are
-------------------------
hereby incorporated into and made a part of this Agreement with the same effect
as though hereat set forth at length. Any declaration that the Obligations have
been declared in default under the Master Agreement shall be a default under
this Loan and Security Agreement and permit exercise of all remedies either
provided or permitted by the Master Agreement.
1
<PAGE>
Witness the execution hereof the day and year first above written.
CENTAUR PHARMACEUTICALS, INC.
By /s/ Joseph L. Turner
---------------------------
FINOVA TECHNOLOGY FINANCE, INC.
By___________________________
[NOTARY SEAL]
2
<PAGE>
Revised as of December 23, 1997
October 7, 1997
Ms. Lucy O.Day
Director of Finance
Centaur Pharmaceuticals, Inc.
484 Oakwood Parkway
Sunnyvale, CA 94086
Dear Ms. Day:
FINOVA Technology Finance, Inc. ("Lender") is pleased to offer to loan $10
million for the financing and/or re-financing of Equipment described below to
Centaur Pharmaceuticals, Inc. ("Borrower").
Borrower: Centaur Pharmaceuticals Inc.
- ---------
Lender: FINOVA Technology Finance, Inc.
- -------
Equipment: Various laboratory and production equipment, and
- --------- manufacturing site tenant improvements to be selected
by Borrower. The Lender shall not be responsible for
any failure of suppliers or manufacturers of the
Equipment or their distributors to perform their
obligations to the Lender or the Borrower.
Equipment Cost: $ 6,700,000 Manufacturing site tenant improvement
- --------------- $ 1,000,000 1998 equipment purchases
$ 2,300,000 Advance on previously acquired equipment
-----------
$10,000,000 Total Equipment Cost
Equipment Location: Santa Clara, CA
- -------------------
Availability: Funding cut off July 31, 1998
- ------------
Term: 48 months to be repaid in full by July 31, 2002
- -----
Monthly Payments: 2.741% of Equipment Cost, monthly in advance for 48
- ---------------- months, based on a 4-year T-Bill interest rate of
6.08% per annum.
Adjustment to
- -------------
Monthly Payments: The actual interest rate for a given draw down shall be
- ---------------- adjusted for any increase in the highest yields on
four-year U.S. Treasury notes from the week ended
August 8, 1997 to the week preceding the Loan Term
Commencement date, as published in The Wall Street
Journal. Effective on each Loan Term Commencement, the
Monthly Payment for such note shall be adjusted to
reflect such change. (For example, if the applicable 4-
year T-Bill rate is 7.08%, then the Monthly Payment for
<PAGE>
such advance will be 2.790%) of Equipment Cost. As of
such date, the Monthly Payments shall be fixed for the
entire term.
Additional Provisions: Lender will have a first priority perfected security
- --------------------- interest in the Equipment.
In addition to a first perfected security interest in
the Equipment, Lender's collateral will include a first
deed of trust on Borrower's interest as Lessee in the
Santa Clara site. This commitment is subject to
Lender's review and approval of the terms of the real
property lease(s) for the Santa Clara site, and the
approval by the site landlord(s) of any amendment(s) to
the lease that may be requested by Lender as a result
of this review.
Lender will make advance(s) against previously acquired
equipment as follows:
Percent of Cost Year Acquired
--------------- --------------
25% 1995
65% 1996
80% Jan-June 1997
100% July-Dec. 1997
Amount advanced will be calculated beginning with the
most recently acquired equipment, however shall not
exceed $2,300,000.
Interim Payments: Interim Payments shall accrue from each Loan Term
- ---------------- Commencement until the next following first day of a
month (unless the Loan Term Commencement is on the
first day of a month). Interim Payments shall be at
the daily equivalent of the currently adjusted Monthly
Payment.
Loan Provisions
- ---------------
and Covenants: The Loan Documents shall include the usual provisions
- ------------- and covenants in the Lender's loan agreements and such
other or different provisions that are agreed to by the
parties. The Borrower shall deliver a note to the
Lender for each advance.
Insurance: Prior to any delivery of Equipment, the Borrower shall
- --------- furnish confirmation of insurance acceptable to the
Lender covering the Equipment including primary, all
risk, physical damage, property damage and bodily
injury, and earthquake coverage or equivalent
protection as Lender may agree with appropriate loss
payee endorsement in favor of the Lender.
Conditions to Closing: Conditions precedent to every Loan Term Commencement
- ---------------------- shall include (i) that no payment is then past due to
the Lender or any assign of the Lender from the
Borrower, (ii) that the Borrower is in compliance with
the provisions of this Commitment and the Loan, (iii)
that information requested by the Lender and all
documentation then required by the Lender's counsel has
been received by the Lender including resolutions of
the Board of Directors of the Borrower authorizing the
transactions contemplated by this Commitment, (iv) an
initial, opinion of counsel for the Borrower
satisfactory to counsel for the Lender, followed by
periodic certification by Borrower's management, (v)
that the Borrower is not in default under any material
contract to which it is a party or by which it or its
property is bound, and (vi) that there has not been any
material adverse change or likely material adverse
change in the financial or other condition, business,
operations, properties, assets or prospects of the
Borrower since June 30, 1996 or from the written
information that has been supplied to the Lender prior
to the date of this Commitment by the Borrower. The
Borrower shall provide quarterly financial statements
and status reports during the commitment period.
2
<PAGE>
In addition, prior to any advance under the line:
1) Borrower must provide audited fiscal year end 1997
financial statements with an unqualified opinion from
Ernst & Young;
2) Satisfactory review by FINOVA, in its sole
discretion, of the agreements between Borrower, Astra &
Lundbeck.
Fees and Expenses: The Borrower shall be responsible for the Lender's
- ----------------- reasonable out of pocket expenses in connection with
the transaction. Lender will advise if such fees will
exceed $3,000 as such costs are discovered during the
diligence and documentation process.
Commitment Fee: The $87,000 Application Fee previously paid by the
- -------------- Borrower and $33,000 incremental Application Fee shall
be applied to the Commitment Fee. The Commitment Fee
shall first be applied to the Lenders costs and
expenses in direct connection with this transaction,
and any remainder shall be refunded to the Borrower on
a pro rata basis by being applied against the second
Monthly Payment due on periodic advances.
Commitment Expiration: This Commitment shall expire on December 29, 1997
- --------------------- unless prior thereto either expended in writing by the
Lender or accepted as provided below by the Borrower.
Upon the Borrower's accepting this Commitment, the
Lender shall promptly prepare and send to the Borrower
the loan agreement called for by this Commitment. This
Commitment shall terminate 30 days after receipt of the
loan agreement by the Borrower unless by then the loan
agreement and related documentation have been signed by
the Borrower and delivered to the Lender.
Survivability: The terms and conditions of this Commitment shall
- ------------- survive the closing of the Loan, and to the extent any
such terms and conditions conflict with the Loan
Documents, the terms and conditions of the Loan
Documents shall control.
Should you have any questions, please call me. To accept this Commitment,
please so indicate by signing and returning the enclosed duplicate copy of this
letter to me by December 29, 1997.
Sincerely,
FINOVA TECHNOLOGY FINANCE, INC.
By /s/ Robert E. Schenkel
-----------------------------
Robert E. Schenkel
Vice President - Credit
Accepted this 29th day of December, 1997
Centaur Pharmaceuticals, Inc.
By:/s/ Joseph L. Turner
-------------------------------------
Joseph L. Turner
Title: C F O
3
<PAGE>
April 20, 1998
Ms. Lucy O. Day
Director of Finance
Centaur Pharmaceuticals, Inc.
484 Oakwood Parkway
Sunnyvale, CA 94086
Re: Amendment to Commitment Letter dated October 7, 1997 which was revised on
December 23, 1997
Dear Ms. Day:
This letter agreement amends the Commitment Letter dated October 7, 1997 which
was revised on December 23, 1997 of FINOVA Technology Finance, Inc. ("Lender")
to Centaur Pharmaceuticals, Inc. ("Borrower").
The initial funding will be in the amount of $8,000,000. It will be evidenced
by a Note and Security Agreement in the amount of $8,000,000 and collateralized
with personal property having an initial purchase price (inclusive of financed
soft costs) of $9,159,474.42.
Upon fulfillment to Lender's satisfaction of one of the following two
conditions, FINOVA will fund the remaining $2,000,000 . This funding will also
be evidenced by one or more Note and Security Agreements, which will be cross-
collateralized with and cross-defaulted to the Note and Security Agreement
evidencing the initial $8,000,000 funding. Conditions are:
(1) Borrower's entering into an additional collaboration agreement with 1998
cash flow of not less than $10,000,000, inclusive of equity contribution,
milestone or research and development payments by Collaborator to Borrower.
Lender reserves the right to review the creditworthiness of Collaborator.
(2) Successful completion and closing of an initial public offering of
Borrower's equity securities ("IPO"). Net proceeds to Borrower of the IPO
shall be no less than $30,000,000.
Please indicate your agreement to this amendment to the Commitment Letter by
signing below and returning to us.
Sincerely yours, Accepted and Agreed:
FINOVA Technology Finance, Inc. Centaur Pharmaceuticals, Inc.
By /s/ Linda A. Moschitto By /s/ Joseph L. Turner
---------------------- ------------------------
Title Director, Contract Administration Title CFO & Treasurer
Date 4/23/98 Date 4/22/98
1
<PAGE>
LEASEHOLD DEED OF TRUST
THIS LEASEHOLD DEED OF TRUST (this "Deed of Trust") is dated for
-------------
reference purposes and made as of November 3, 1997, by CENTAUR PHARMACEUTICALS,
INC., a Delaware corporation ("Trustor"), with its executive office and
-------
principal place of business at 484 Oakmead Parkway, Sunnyvale, California 94086,
in favor of COMMONWEALTH LAND TITLE COMPANY, a California corporation
("Trustee"), for the benefit of FINOVA TECHNOLOGY FINANCE, INC., a Delaware
-------
corporation ("Beneficiary"), whose address is 10 Waterside Drive, Farmington,
-----------
Connecticut 06032-3065.
RECITALS
--------
A. The Lease. Trustor is the sole holder of the lessee's rights,
---------
interest and estate (the "Leasehold Estate") arising under and created by that
----------------
certain Standard Industrial/Commercial Multi-Tenant Lease - Gross dated February
12, 1997 (the "Lease"), by and between Memorex Drive LLC, as the "Lessor"
-----
("Lessor"), and Trustor, as the "Lessee," as amended and supplemented by that
------
certain Agreement Concerning Encumbrance of Leasehold Estate of even date
herewith between Lessor and Trustor (the "Agreement Concerning Encumbrance").
--------------------------------
The Lease demises premises (the "Premises") commonly identified as Suite 100 in
--------
the building located at 1220 Memorex Drive in the City of Santa Clara, County of
Santa Clara, State of California. The real property on which such building is
situated (the "Real Property") is owned by Lessor and is more particularly
-------------
described in Exhibit A attached hereto and incorporated herein by this
---------
reference. Lessor and Trustor have executed a memorandum of the Lease and
caused such memorandum to be recorded on March 26, 1998, as Instrument No.
14112136 in the Official Records of Santa Clara County, California.
B. Loan Agreement; Credit Facility. Pursuant to a Master Loan and
-------------------------------
Security Agreement of even date herewith between Beneficiary and Trustor (such
Master Loan and Security Agreement, as it may be amended from time to time, is
hereinafter referred to the "Loan Agreement"), Beneficiary has agreed to
--------------
establish for Trustor a total credit facility in the aggregate principal amount
of up to $10,000,000.00 (the "Credit Facility"). The Credit Facility includes
---------------
one or more term loans evidenced by the Loan Agreement and the promissory note
or notes issued and to be issued by Trustor to Beneficiary pursuant to the Loan
Agreement (collectively, the "Debt Instruments"). The provisions of the Loan
----------------
Agreement, including those governing adjustments to the interest rates and
payment amounts and the accrual of interest, are incorporated herein by
reference.
GRANTING CLAUSE
---------------
In consideration of the Credit Facility, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Trustor hereby irrevocably grants, transfers and assigns to
Trustee, in trust for Beneficiary, with power of sale, under and subject to the
terms and conditions hereinafter set forth, for the benefit and security of
Beneficiary, all of Trustor's present and future estate, right, title and
interest in and to the Leasehold Estate, together with all of the following now
owned or hereafter acquired by Trustor (collectively, the "Mortgaged Property"):
------------------
(a) all fixtures and leasehold improvements now or hereafter located
in the Premises (but not including any equipment or installations that are
readily removable from the Premises without material damage to the Premises and
that constitute personal property in which a security interest may be perfected
by the filing of a financing statement in the Office of the California Secretary
of State);
1
<PAGE>
(b) any and all plans, drawings and specifications for any leasehold
improvements now located on, or hereafter to be constructed on or in the
Premises, and all studies, data and drawings relating thereto (but not including
any information specifically related to the manufacture of Trustor's products);
Trustor's rights under all payment, performance or other bonds and in all
deposits and other security delivered to, by or for the benefit of Trustor in
connection with the construction of any such improvements; any and all
construction materials, supplies and equipment used or to be used in connection
with the construction of any such improvements, whether or not stored in the
Premises, and all warranties and guaranties relating thereto; any and all
contracts, subcontracts, agreements, and purchase orders with architects,
engineers, consultants, contractors, subcontractors, suppliers and materialmen
incidental to construction of any such improvements; and all reserves, deferred
payment deposits, cost savings and payments of any kind relating to the
construction of such improvements; and
(c) all insurance and insurance policies insuring the Mortgaged
Property or any activity thereon or part thereof or interest therein and all
proceeds of such insurance policies; all claims, awards, damages, causes of
action, judgments, recoveries, compensation and insurance proceeds arising on
account of injury or damage to or taking of all or any part of the Mortgaged
Property or for any loss or diminution in value of the Mortgaged Property; all
advance payments of insurance premiums made by Trustor with respect to the
Mortgaged Property; all deposits or security given by Trustor to third parties
with respect to the Mortgaged Property; all claims or demands with respect to
such deposits or security; and all right to refunds or rebates of any such
insurance premiums deposits or security.
ARTICLE I
OBLIGATIONS SECURED
1.1. Secured Obligations; Loan Documents. This Deed of Trust secures
-----------------------------------
the following indebtedness and obligations (collectively, the "Secured
-------
Obligations"): (a) the payment and performance of all of Trustor's indebtedness
- -----------
and obligations, now or hereafter incurred by Trustor, under the Loan Agreement,
this Deed of Trust, and all other Loan Documents (as defined below in this
paragraph), including all principal due and all interest, prepayment charges,
late charges, loan fees and other charges at any time accruing or assessed under
the Loan Documents; (b) the payment of all sums advanced, paid or expended by
Beneficiary under or pursuant to any provision of this Deed of Trust or any
other Loan Document, or to protect the Mortgaged Property or any other security
for the Credit Facility, together with interest on each such advance, payment or
expenditure at the applicable rate of interest in effect under the applicable
Debt Instrument from the date of such advance, payment or expenditure until paid
in full; (c) any and all renewals, extensions, modifications, substitutions,
replacements and consolidations of the indebtedness and obligations described in
clauses (a) and (b) above; and (d) the payment of principal, interest and any
other indebtedness hereafter owing by Trustor under any additional loans made by
Beneficiary to Trustor that are evidenced by a promissory note or other writing
reciting that the same is secured hereby, including all prepayment charges, late
charges, loan fees and other charges accruing or assessed under such promissory
notes or other writings ("Additional Advances"). All of the foregoing amounts
-------------------
shall be secured by this Deed of Trust to the same extent and with the same
priority as the initial advance of proceeds of the Credit Facility made by
Beneficiary. The Loan Agreement and other Debt Instruments, this Deed of Trust,
and all other instruments, agreements, certificates and documents that evidence,
secure or set forth any of Trustor's obligations relating to the Credit Facility
and/or any Additional Advances, all as amended, modified, extended, renewed,
restated, and supplemented from time to time, and whether now in existence or
hereafter made or entered into, and whether or not secured by this Deed of
Trust, are hereinafter collectively referred to as the "Loan Documents."
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ARTICLE II
CERTAIN REPRESENTATIONS AND COVENANTS OF TRUSTOR
2.1. Actions Affecting Property; Duty to Protect Beneficiary and
-----------------------------------------------------------
Security. Trustor shall, at its own expense, appear in, prosecute, defend and
- --------
contest (with counsel approved by Beneficiary) any action or proceeding that
purports to materially and adversely affect the Mortgaged Property or any
portion thereof or Trustor's title thereto, the validity or priority of the lien
of this Deed of Trust, or the rights, powers, liabilities or obligations of
Beneficiary or Trustee as to the Mortgaged Property.
2.2. Transfer of Property. Upon any assignment, further encumbrance
--------------------
or other transfer of all or any part of or interest in the Mortgaged Property or
upon any subletting of all or any part of the Premises, or upon the dissolution,
liquidation or termination of Trustor, Beneficiary may, at its option, declare
all of the sums secured by this Deed of Trust to be immediately due and payable,
and if such sums are not paid in full within 10 days after written demand by
Beneficiary, Trustor shall be in default under this Deed of Trust and
Beneficiary may invoke all of the remedies available under this Deed of Trust
and the other Loan Documents as well as all additional remedies available at law
or in equity.
2.3. Performance of Lease Obligations. Trustor promptly shall pay
--------------------------------
when due all rents and other sums that Trustor is required to pay under the
terms of the Lease, and shall perform fully and when due each and all of
Trustor's other covenants and obligations under the Lease, and shall do all
other things necessary to preserve and keep unimpaired Trustor's rights under
the Lease.
2.4. Notices to Beneficiary. Trustor promptly shall notify
----------------------
Beneficiary in writing (a) of any default on the part of Lessor under the Lease,
or in the performance or observance of any of the terms, covenants, and
conditions on the part of Lessor to be kept and performed under the Lease, (b)
of the occurrence of any event that, with or without, the lapse of time or the
giving of notice, would constitute a default on the part of Lessor under the
Lease, or (c) the giving to or service upon Trustor by Lessor under the Lease of
any notice of default on the part of Trustor thereunder in the performance or
observance of any of the terms, covenants, and conditions to be kept, performed,
or observed by Trustor under the Lease, and Trustor shall cause a copy of any
notice furnished or delivered to Trustor by Lessor under the Lease to be
delivered forthwith to Beneficiary.
2.5. Surrender, Cancellation or Modification. Trustor shall not
---------------------------------------
surrender the Lease or the Premises or Trustor's Leasehold Estate, nor shall
Trustor terminate or cancel the Lease or, without Beneficiary's prior written
consent (which consent shall not be unreasonably withheld or delayed), amend or
supplement the Lease or consent to any of the foregoing. Any such termination,
cancellation and any such amendment or supplement made or consented to by
Trustor without Beneficiary's prior written consent shall be void and of no
effect.
2.6. Ability to Perform Trustor's Obligations. If at any time
----------------------------------------
Trustor fails to comply fully or in a timely manner with any of Trustor's
obligations under the Lease, and such failure materially threatens the value or
existence of Beneficiary's security under this Deed of Trust, Beneficiary, but
without obligation to do so and without notice to or demand upon Trustor and
without releasing Trustor from any obligation hereunder or removing or waiving
any corresponding default under this Deed of Trust, may perform on behalf of
Trustor any such obligations if Beneficiary acts reasonably in so doing;
provided that the foregoing shall not be construed to require Beneficiary to
incur any expense or take any action with respect to Trustor's failure to comply
with any of Trustor's
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obligations under the Lease. Upon demand, Trustor shall pay to Beneficiary all
costs and expenses (including, but not limited to, legal fees and disbursements)
paid or incurred by Beneficiary in connection with performing such obligations.
Any such costs or expenses not paid by Trustor within five business days after
demand shall be added to the indebtedness secured by this Deed of Trust, shall
bear interest at the rate that is the sum of 5% percent per annum plus the
highest interest rate then in effect under the Debt Instruments (or the highest
rate of interest permitted by law, if less), and shall be secured by the lien of
this Deed of Trust.
2.7. Bankruptcy of Trustor or Lessor. Trustor hereby unconditionally
-------------------------------
assigns, transfers, and sets over to Beneficiary, as additional security for the
Secured Obligations, all of Trustor's claims and rights to any damages arising
from any rejection of the Lease by Lessor pursuant to the United States
Bankruptcy Code (11 U.S.C. (S) 101 et seq. (the "Bankruptcy Code")). Any
-- --- ---------------
amounts received by Beneficiary as damages from Lessor's rejection of the Lease
shall be applied first to the payment of all reasonable costs and expenses
(including, but not limited to, reasonable legal fees and disbursements) paid or
incurred by Beneficiary in obtaining such damages and then to the payment of the
indebtedness and obligations secured by this Deed of Trust, in any order that
Beneficiary chooses. Upon demand, Trustor shall pay to Beneficiary all of the
foregoing reasonable costs and expenses not satisfied by the amounts received by
Beneficiary as damages. Any such costs or expenses not paid by Trustor upon
demand shall be added to the indebtedness secured by this Deed of Trust, shall
bear interest at the rate that is the sum of 5% percent per annum plus the
highest interest rate then in effect under the Debt Instruments (or the highest
rate of interest permitted by law, if less), and shall be secured by the lien of
this Deed of Trust.
(a) The lien of this Deed of Trust shall attach to all of Trustor's
rights and remedies at any time arising under or pursuant to Section 365(h) of
the Bankruptcy Code (11 U.S.C. (S) 365(h)) or other applicable law, including,
but not limited to, all of Trustor's rights to remain in possession of the
Premises.
(b) Trustor shall not elect to treat the Lease as terminated under
Section 365(h)(1) of the Bankruptcy Code (11 U.S.C. (S) 365(h)(1)) or other
applicable law without Beneficiary's prior written consent. Any such election
without Beneficiary's prior written consent shall be void and of no force or
effect.
(d) If, pursuant to Section 365(h)(2) of the Bankruptcy Code (11
U.S.C. (S) 365(h)(2)) or other applicable law, Trustor seeks to offset against
the rent reserved in the Lease the amount of any damages caused by the non-
performance by Lessor of any of Lessor's obligations under the Lease after the
rejection by Lessor of the Lease pursuant to the Bankruptcy Code, Trustor, prior
to making such offset, shall notify Beneficiary of Trustor's intent to do so,
setting forth the amounts proposed to be offset and the basis for such offset.
Beneficiary shall have the right to object to all or any part of such offset,
and, in the event of such objection, Trustor shall not offset any of the amounts
objected to by Beneficiary. If Beneficiary has failed to object to Trustor's
proposed offset within ten days after notice from Trustor in accordance with the
first sentence of this paragraph, Trustor may proceed to offset all or any part
of the amounts set forth in Trustor's notice. Neither Beneficiary's failure to
object to Trustor's proposed offset, nor any objection or other communication
between Beneficiary and Trustor relating to such offset shall constitute an
approval of any such offset by Trustor. Trustor shall defend and hereby
indemnifies and holds Beneficiary harmless from and against any and all claims,
demands, actions, suits, proceedings, damages, losses, costs, and expenses of
every nature whatsoever (including, but not limited to, legal fees and
disbursements) arising from or relating to any offset by Trustor against the
rent reserved in the Lease.
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(e) Trustor shall not commence any action, suit, proceeding, or case,
or file any application or make any motion, with respect to the Lease in any
such case under the Bankruptcy Code or
other applicable law without Beneficiary's prior written consent, which shall
not be unreasonably withheld or delayed.
(f) Trustor promptly shall notify Beneficiary of any information
Trustor receives about any filing by or against Lessor of a petition under the
Bankruptcy Code or other applicable law. Trustor shall provide all information
available to Trustor as of the date of such filing, including, but not limited
to, the court in which such petition was filed and the relief sought therein.
Trustor promptly shall deliver to Beneficiary copies of any and all notices,
summons, pleadings, applications, and other documents received by Trustor in
connection with any such petition and any proceedings relating to such petition.
(g) In the event there is filed by or against Trustor a petition
under the Bankruptcy Code or other applicable law, and Trustor, as lessee under
the Lease, shall determine to reject the Lease pursuant to Section 365(a) of the
Bankruptcy Code (11 U.S.C. (S) 365(a)) or other applicable law, Trustor shall
give Beneficiary not less than ten days' prior notice of the date on which
Trustor shall apply to the bankruptcy court for authority to reject the Lease.
Beneficiary shall have the right, but not the obligation, to serve upon Trustor
within such ten-day period a notice stating that (i) Beneficiary demands that
Trustor assume and assign the Lease to Beneficiary pursuant to Section 365 of
the Bankruptcy Code or other applicable law, and (ii) Beneficiary covenants to
cure or provide adequate assurances of future performance under the Lease. If
Beneficiary serves upon Trustor the notice described in the preceding sentence
of this paragraph, Trustor shall not seek authorization to reject the Lease and
shall comply with the demand provided for in clause (i) of the preceding
sentence within 30 days after the notice shall have been served upon Trustor,
subject to the performance by Beneficiary of the covenant provided for in clause
(ii) of the preceding sentence. Effective upon the entry of an order for relief
with respect to Trustor under the Bankruptcy Code, Trustor hereby assigns and
transfers to Beneficiary a non-exclusive right to apply to the bankruptcy court
for an order extending the period during which the Lease may be rejected or
assumed.
2.8. Representations and Warranties. Trustor represents and warrants
------------------------------
to Beneficiary that: (a) the copy of the Lease (including all attachments,
exhibits and amendments thereto) that Trustor has furnished to Beneficiary is a
complete and correct copy of the original; (b) the Lease has not been amended or
supplemented in any respect except as expressly stated in the recitals to this
Deed of Trust, and remains in full force and effect; (c) no uncured event of
default by either Trustor or Lessor exists under the Lease; (d) the Mortgaged
Property encumbered hereby includes the entire right, title and interest of the
"Lessee" under the Lease, and no person or entity other than Trustor (and, by
virtue of this Deed of Trust, Beneficiary) holds any such right, title or
interest. Trustor owns or leases the Mortgaged Property free and clear of all
security interests, liens, claims, charges and equities of any nature other than
the lien hereof and the rights of Beneficiary under this Deed of Trust; (e)
Trustor is not bound by, and shall not enter into, any agreement or commitment
that in any manner or to any extent will or could prevent Trustor from
performing any of its obligations hereunder; and (f) all information with
respect to the Mortgaged Property that has been given to Beneficiary by Trustor
or by any third party at the direction of Trustor is accurate and contains no
material misrepresentation or omission. Should any representation or warranty
made by Trustor in any Loan Document prove to be untrue as of the date of this
Deed of Trust, then Beneficiary may declare that an "Event of Default" (as
----------------
defined in Section 4.1) exists. Trustor agrees to indemnify and hold
-----------
Beneficiary free and harmless from all liabilities, obligations, damages, causes
of action, judgments,
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costs and expenses (including without limitation attorneys' fees) that
Beneficiary may incur or suffer in connection with any breach by Trustor of any
of Trustor's representations or warranties.
ARTICLE III
ASSIGNMENT OF SUBLEASES
3.1. Assignment of Subleases. Trustor hereby assigns and transfers
-----------------------
to Beneficiary, as additional security for the Secured Obligations, all of
Trustor's rights and interests in, to and under any and all existing and future
subleases of all or any portion of the Premises ("Subleases"), whether written
---------
or oral, and any guarantees thereof, together with any and all extensions,
modifications, amendments, assignments and renewals thereof, and all cash or
other security deposited to secure performance by the sublessees of their
obligations thereunder, and all rents and other sums due and to become due
thereunder.
3.2. No Subleases. Trustor represents and warrants to Beneficiary
------------
that no Subleases are now in effect. Trustor shall not enter into any Sublease
without first obtaining Beneficiary's written consent.
ARTICLE IV
REMEDIES UPON DEFAULT
4.1. Events of Default. Any of the following shall constitute an
-----------------
"Event of Default": (a) Trustor's failure to make any payment of money in
- -----------------
accordance with the terms of this Deed of Trust; or (b) Trustor's failure to
perform fully and when due any other material covenant or obligation of Trustor
under this Deed of Trust when such obligation is required hereunder to be
performed and such failure is not fully cured within 10 days after Beneficiary
shall have given Trustor notice thereof; or (c) any of Trustor's representations
or warranties made in this Deed of Trust shall be untrue or misleading in any
material respect; or (d) the lien or security interest of this Deed of Trust
shall lose validity or priority; or (e) the occurrence of an event of default
under, or the institution of judicial or nonjudicial foreclosure or other
proceedings to enforce, any deed of trust or other lien or encumbrance of any
kind upon the Mortgaged Property or any portion thereof, whether senior or
junior in priority to the lien of this Deed of Trust; or (f) the occurrence of
an "Event of Default" as defined in the Loan Agreement.
4.2. Rights and Remedies. At any time after the occurrence of an
-------------------
Event of Default, Beneficiary or Trustee may do any one or more of the
following, in any order:
(a) With or without notice to Trustor, declare all Secured
Obligations to be immediately due and payable;
(b) With or without notice, and without releasing Trustor from its
obligations relative to such Event of Default, cure such Event of Default, and
the costs and expenses incurred by Beneficiary or Trustee in so doing shall
become a part of the Secured Obligations;
(c) Exercise any remedy afforded by this Deed of Trust;
(d) Commence and maintain an action or actions to foreclose this Deed
of Trust, to specifically enforce any rights of Beneficiary hereunder (including
rights with respect to possession and sale of any additional security for the
Secured Obligations), to enjoin any conduct that impairs or
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<PAGE>
threatens to impair the security of this Deed of Trust, or to obtain such other
equitable remedies as may be appropriate;
(e) Execute a written declaration of default and demand for sale, and
a written notice of default and election to cause the Mortgaged Property or any
part thereof to be sold by exercise of Trustee's power of sale under this Deed
of Trust, which notice shall be filed for record in the Official Records of the
county in which the Mortgaged Property is located;
(f) Resort to and realize upon the security for the Secured
Obligations and any other security now or hereafter held by Beneficiary in such
order as Trustee and Beneficiary or either of them may, in their sole
discretion, determine, concurrently or successively or in one or several
consolidated or independent judicial actions or nonjudicial proceedings; and
(g) Exercise any and all other remedies at law, including any action
for damages suffered by Beneficiary as a result of any Event of Default, or in
equity as may be available now or hereafter, as Beneficiary may elect.
4.3. Exercise of Trustee's Power of Sale.
-----------------------------------
(a) Should Beneficiary elect to have Trustee exercise the power of
sale herein contained, Beneficiary shall deliver to Trustee a written
declaration of default and demand for sale.
(b) Upon receipt of such items from Beneficiary, Trustee shall cause
to be recorded, published and/or delivered to Trustor such notice of default and
election to sell as may then be required by law and by this Deed of Trust.
After giving notice of default and notice of sale, and the lapse of such time
period as may be required by applicable law, Trustee may, without demand on
Trustor, at the time and place of sale fixed in the notice of sale, either as a
whole or in separate parcels or items or through two or more successive sales,
sell the Mortgaged Property or any part thereof at public auction to the highest
bidder for cash in lawful money of the United States payable at the time of
sale. Trustor shall have no right to direct the order in which the Mortgaged
Property is sold. Beneficiary may, in its sole discretion, designate the order
in which the Mortgaged Property shall be offered for sale or sold and determine
if the Mortgaged Property shall be sold in a single sale or in two or more
successive sales or in any other manner Beneficiary deems to be in its best
interests. If Beneficiary determines that the Mortgaged Property shall be sold
in two or more sales, Beneficiary may, at its option, cause such sales to be
conducted simultaneously or successively on the same day or on different days
and times and in such order as Beneficiary shall determine, and no such sale
shall extinguish or otherwise affect the lien of this Deed of Trust or any part
of the Mortgaged Property not then sold until all Secured Obligations have been
fully paid and discharged. Trustor shall pay the costs and expenses of each
such sale and any judicial proceeding in which any such sale may be made.
Trustee shall deliver to such purchaser its deed conveying the portion of the
Mortgaged Property so sold, but without any covenant or warranty, express or
implied. The recitals in such deed of any matters or facts shall be conclusive
proof of the truthfulness thereof. Any person, including Beneficiary, may
purchase at such sale.
(c) After deducting all costs, fees and expenses of Trustee and of
the sale, including costs of evidence of title in connection with the sale,
Trustee shall apply the proceeds of sale to payment of all sums expended under
the terms hereof, not then repaid, with accrued interest at the highest rate of
interest then in effect under any Debt Instrument, all other sums then secured
hereby, and the remainder, if any, to the person or persons legally entitled
thereto.
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(d) Trustee may postpone the sale of all or any portion of the
Mortgaged Property by public announcement at the time and place first fixed for
sale, and from time to time thereafter may postpone such sale by public
announcement at the time and place fixed by the preceding postponement, and
without further notice make such sale at the time fixed by the last
postponement, or may, in its discretion, give a new notice of sale.
(e) Upon any sale pursuant to this Section, Trustor shall be
completely and irrevocably divested, to the maximum extent permitted by law, of
all its right, title, interest, claims and demands at law or in equity in and to
the Mortgaged Property sold or any part thereof, and such sale shall be a
perpetual bar both at law and in equity against Trustor and any and all other
persons claiming any such right, title, interest, claims or demands by, through
or under Trustor.
4.4. Rescission of Notice of Default. Beneficiary from time to time
-------------------------------
before Trustee's sale, may rescind any notice of default and of election to
cause the Mortgaged Property to be sold by executing and delivering to Trustee a
written notice of such rescission, which notice, when recorded, shall also
constitute a cancellation of any prior declaration of default and demand for
sale. The exercise by Beneficiary of such right of rescission shall not
constitute a waiver of any breach or default then existing or subsequently
occurring or impair the right of Beneficiary to execute and deliver to Trustee,
as provided above, other declarations of default and demand for sale, notices of
default and of election to cause the Mortgaged Property to be sold to satisfy
the obligations hereof, or otherwise affect any provision, agreement, covenant
or condition contained in this Deed of Trust or any other Loan Document or any
of the rights, obligations or remedies of Trustor or Beneficiary under this Deed
of Trust.
ARTICLE V
MISCELLANEOUS
5.1. Fixture Filing. This Deed of Trust constitutes and is filed as
--------------
a fixture filing under Section 9402 of the Uniform Commercial Code. Certain of
the Mortgaged Property consists of goods that are or are to become fixtures upon
the Real Property, and this Deed of Trust is to be recorded in the Official
Records of the County in which the Real Property is located. This Deed of Trust
shall remain in effect as a fixture filing until released or satisfied of record
or its effectiveness otherwise terminates as to the Real Property. Memorex
Drive LLC is the record owner of the Real Property.
5.2. Waiver of Offsets and Other Matters. All sums payable by
-----------------------------------
Trustor hereunder shall be paid without notice, demand, or defense and without
right of counterclaim, setoff, deduction, abatement, suspension, deferment,
diminution or reduction, all of which rights now or hereafter conferred by law
are hereby waived by Trustor. Without limiting the generality of the foregoing,
Trustor also waives, to the fullest extent permitted by law: (a) any right to
require Beneficiary or Trustee, prior to or as a condition to the enforcement of
this Deed of Trust, to proceed against or exhaust any other security for the
obligations secured hereby or pursue any other remedy whatsoever; and (b) any
defense arising by reason of: (i) any disability or other defense of Trustor
with respect to the obligations secured hereby; (ii) the unenforceability or
invalidity of any security for the Secured Obligations; or the lack of
perfection or failure of priority of any security for the Secured Obligations;
(iii) the cessation from any cause whatsoever of the personal liability of
Trustor (other than by reason of the full payment and discharge of all Secured
Obligations); or (iv) any act or omission of Trustee, Beneficiary or others that
directly or indirectly results in or aids in the discharge or release of Trustor
or the Secured Obligations or any other security therefor by operation of law or
otherwise.
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5.3. Governing Law. This Deed of Trust shall be governed by and
-------------
construed and enforced under the laws of the state or other jurisdiction, the
laws of which are specified in the Loan Agreement as governing the construction
and/or enforcement of the Loan Agreement; PROVIDED, HOWEVER, that the laws of
the state in which the Real Property is located shall govern procedural issues
pertaining to any foreclosure under this Deed of Trust.
5.4. Time of the Essence. Time is of the essence in the performance
-------------------
of each provision of this Deed of Trust.
5.5. Additional Powers of Beneficiary. Without affecting the
--------------------------------
liability of any other person liable for the payment of or performance of any of
the Secured Obligations, and without affecting the lien or charge of this Deed
of Trust upon any portion of the Mortgaged Property not then or theretofore
released as security for the full amount of all unpaid Secured Obligations,
Beneficiary may, at any time, and from time to time, without notice to or
consent of Trustor: (a) release the obligations of any person primarily or
secondarily liable for payment or performance of any Secured Obligations; (b)
extend the maturity date of any Secured Obligations or accept partial payments
thereon; (c) grant forbearances; (d) accept new or additional instruments,
documents or agreements in exchange for or relative to any of the Loan Documents
or the Secured Obligations; (e) release or reconvey, or cause to be released or
reconveyed, any or all of the Mortgaged Property; (f) take or release any other
or additional security for any Secured Obligations; or (g) consent to the
transfer of any security.
5.6. Reconveyance by Trustee. Upon written request of Beneficiary
-----------------------
and upon payment by Trustor of Trustee's fees for all services involved in the
preparation, execution and recordation of the reconveyance, Trustee shall
reconvey the Mortgaged Property or portions thereof then held hereunder, in
whole or in part, as designated by Beneficiary and in such portions as
designated by Beneficiary to Trustor, to the person or persons legally entitled
thereto, which reconveyance shall be without recourse or warranty. The recitals
in such reconveyance of any matters or facts shall be conclusive proof of the
truthfulness thereof. The grantee in any reconveyance may be described as "the
person or persons legally entitled thereto." Neither Beneficiary nor Trustee
shall have any duty to determine the rights of persons claiming to be rightful
grantees of any release.
5.7. Costs and Expenses; Actions by Trustee and/or Beneficiary to
------------------------------------------------------------
Preserve Property. Every provision of this Deed of Trust that imposes upon
- -----------------
Trustor an obligation to perform an act, or embodying an agreement by Trustor to
perform an act, shall be construed as obligating Trustor to pay all costs and
expenses relating thereto. Should Trustor fail to make any payment or to do any
act as herein provided, Beneficiary and/or Trustee, may, but shall not be
obligated to, make or do the same in such manner and to such extent as either
may deem necessary to protect the security hereof, all without notice to or
demand upon Trustor, without releasing Trustor from any obligation hereof or
secured hereby, and within such times and in such manner as Beneficiary or
Trustee may deem reasonable. All sums advanced in taking such action, together
with all other costs, fees and expenses incurred by Beneficiary or Trustee
hereunder (including costs of evidence of title, court costs, appraisals,
surveys and attorneys' fees), shall bear interest at the highest rate of
interest then in effect under any Debt Instrument from the date advanced until
paid in full, be payable in full, together with interest thereon, upon demand by
Beneficiary, and be added to the Secured Obligations. Neither the reservation
nor any exercise of the foregoing rights shall be construed to excuse Trustor's
failure to perform fully and when due all of Trustor's obligations under this
Deed of Trust or to prevent any such failure from constituting an Event of
Default.
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5.8. Partial or Late Payment. The acceptance by Beneficiary of any
-----------------------
sum after the same is due shall not constitute a waiver of the right either to
require prompt payment, when due, of all other sums then and thereafter secured
hereby. The acceptance by Beneficiary of any sum or sums in an amount less than
the sums then due shall be deemed an acceptance on account only and upon the
condition that it shall not constitute a waiver of the Event of Default existing
by virtue of Trustor's failure to pay the entire sum then due, or of
Beneficiary's right to declare or maintain an acceleration by virtue of such
Event of Default. Trustor's failure to pay the entire sum then due shall be and
continue to be an Event of Default notwithstanding such acceptance of such
amount on account, and Beneficiary and Trustee shall be at all times thereafter
until the entire sum then due shall have been paid, and notwithstanding the
acceptance by Beneficiary thereafter of further sums on account, or otherwise,
entitled to exercise all rights in this Deed of Trust conferred upon them or
either of them upon the occurrence of an Event of Default.
5.9. Substitution of Trustee. Beneficiary may, from time to time, by
-----------------------
a written instrument executed and acknowledged by Beneficiary and recorded in
the County in which the Mortgaged Property is located, and by otherwise
complying with the provisions of California Civil Code Section 2934a or any
successor statute, substitute a successor or successors to the Trustee named
herein or acting hereunder. Without conveyance of the Mortgaged Property, a
successor Trustee shall succeed to all the title, powers and duties conferred
upon the Trustee herein and by applicable law.
5.10. Successors and Assigns. This Deed of Trust applies to, inures
----------------------
to the benefit of, and binds all parties hereto, their heirs, legatees,
devisees, administrators, executors, successors and assigns. The term
"Beneficiary" shall mean the owner and holder (including a pledgee) of the Debt
-----------
Instruments, whether or not named as Beneficiary herein. The term "Trustor"
-------
shall mean all parties executing this Deed of Trust as Trustor, their respective
heirs, legatees, devisees, administrators, executors, successors in interest and
assigns to the extent permitted by this Deed of Trust, provided that neither
Beneficiary nor Trustee shall be obligated to give notice of default or notice
of sale hereunder to any person, firm or entity other than the Trustor shown on
the face page hereof.
5.11. Nonliability of Beneficiary.
---------------------------
(a) Beneficiary neither undertakes nor assumes any responsibility or
duty to Trustor or any third party to select, review, inspect, examine,
supervise, pass judgment upon or inform Trustor or any third party of the
quality, adequacy or suitability of any plans, specifications, construction
contracts, architects, contractors or other matters or items that Beneficiary
has the right to review, inspect, examine or approve under this Deed of Trust.
Any such selection, review, inspection, examination and the like is solely for
the purpose of (i) determining whether or not Trustor's obligations under this
Deed of Trust are being properly discharged and (ii) protecting Beneficiary's
security and preserving Beneficiary's rights under this Deed of Trust, and such
selection, review, inspection, examination and the like shall not render
Beneficiary liable to Trustor or any third party for the sufficiency, accuracy,
completeness, or legality thereof and shall not operate to waive any rights of
Beneficiary hereunder. Beneficiary owes no duty of care to protect or inform
Trustor or any third party against negligent, faulty, inadequate or defective
building or construction, or the existence of any environmentally hazardous
condition in any manner arising out of or related to the presence of any
hazardous materials on the Mortgaged Property, and Beneficiary shall not be
responsible or liable to Trustor or any other party therefor. Trustor shall make
or cause to be made such independent inspections as Trustor may desire for its
own protection. By accepting or approving anything required to be observed,
performed or fulfilled, or to be given to Beneficiary pursuant hereto,
Beneficiary shall not be deemed to have warranted or represented the
sufficiency, legality, effectiveness or legal effect of
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the same, or of any term, provision or condition thereof, and such acceptance or
approval thereof shall not be or constitute any warranty or representation to
anyone with respect thereto by Beneficiary.
(b) Prior to Beneficiary's actual entry upon and taking possession
of the Mortgaged Property, nothing in this Deed of Trust shall operate to impose
upon Beneficiary any responsibility for the operation, control, care, management
or repair of the Mortgaged Property, and the execution of this Deed of Trust by
Trustor shall constitute conclusive evidence that all responsibility for the
operation, control, care, management and repair of the Mortgaged Property is and
shall be that of Trustor prior to Beneficiary's actual entry and taking
possession.
(c) Beneficiary is hereby authorized to disclose (i) information
relating to hazardous materials to federal, state, or local authorities when
Beneficiary reasonably believes such disclosure to be required under applicable
law; and (ii) information concerning Trustor, the Mortgaged Property or the
Secured Obligations to any insurance agency or company, to any person or entity
proposing to acquire an interest in the Secured Obligations.
(d) Beneficiary shall not be liable, and is hereby released from
liability, for any act or omission of Trustee, except for such actions as may be
taken by Trustee at the express request of and in accordance with instructions
given by Beneficiary.
5.12. Cumulative Rights and Remedies; No Waiver. The rights, powers
-----------------------------------------
and remedies given to Beneficiary pursuant to this Deed of Trust shall be in
addition to, and shall not supersede or preempt, any rights, powers and remedies
given to Beneficiary by virtue of any applicable law. Every power or remedy
given by this Deed of Trust to Trustee or Beneficiary or to which either of them
may be otherwise entitled, may be exercised concurrently, independently, or
successively, in any order whatsoever, from time to time and as often as may be
deemed expedient by Trustee or Beneficiary and either of them may pursue
inconsistent remedies. No forbearance, failure or delay by Beneficiary in
exercising any right, power or remedy granted to Beneficiary hereunder shall be
deemed a waiver of such right, power or remedy, nor shall any such forbearance,
failure or delay preclude the further exercise of such right, power or remedy,
or any other right, power or remedy; and every such right, power and remedy of
Beneficiary shall continue in full force and effect until such right, power or
remedy is explicitly waived by Beneficiary in writing. The consent or approval
by Beneficiary to or of any act by Trustor requiring further consent or approval
shall not be deemed to waive or render unnecessary the consent or approval to or
of any subsequent similar act.
IN WITNESS WHEREOF, Trustor has executed this Deed of Trust as of the
date first above written.
CENTAUR PHARMACEUTICALS, INC.,
a Delaware corporation
By: /s/ Joseph L. Turner
--------------------
Name: Joseph L. Turner
------------------
Title: CFO & Treasurer
-----------------
11
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[NOTARY SEAL]
12
<PAGE>
EXHIBIT A
---------
DESCRIPTION OF THE REAL PROPERTY
--------------------------------
All that certain real property situate in the City of Santa Clara, County of
Santa Clara, State of California, described as follows:
PARCEL ONE:
Parcel 2, as shown on that Parcel Map filed for record in the office of the
Recorder of the County of Santa Clara, State of California on September 25,
1997, in Book 694 of Maps, pages 28 and 29.
PARCEL TWO:
An easement for private ingress and egress over Parcel 1, as shown and
designated and delineated as "Private Ingress, Egress Easement" on the Map filed
September 25, 1997, in Book 694 of Maps, pages 28 and 29.
PARCEL THREE:
An easement for the purpose of ingress and egress, installation, maintenance,
repair and replacement of electrical systems, including conduits, cables,
vaults, splice boxes, transformers and switches, as conveyed by deed recorded
January 25, 1989 in Book K 829, page 91, Official Records. Said easement being
more particularly described as follows:
Commencing at the most Southerly corner of Parcel D, as said Parcel is shown on
the certain Parcel Map recorded in Book 320 of Maps, at page 56, Santa Clara
County Records; thence along the Easterly boundary of said Parcel D, N. 00
degrees 12 minutes 36 seconds E. 40.00 feet to the true point of beginning.
Said course is also the Easterly boundary of an electric easement granted by
Memorex Corporation to the City of Santa Clara by deed recorded January 12, 1983
in Book H 266 of Santa Clara County Records, page 738; thence from the true
point of beginning along the Northerly boundary of said electric easement N. 89
degrees 47 minutes 24 seconds W. 30.00 feet; thence N. 00 degrees 12 minutes 36
seconds E. 2.10 feet; N. 61 degrees 21 minutes 19 seconds W. 34.18 feet; N. 00
degrees 12 minutes 36 seconds E. 16.82 feet; and S. 89 degrees 47 minutes 24
seconds E. 60.05 feet to the Easterly boundary of Parcel D hereinabove
described; thence along said Easterly boundary S. 00 degrees 12 minutes 36
seconds W. 35.20 feet to the true point of beginning.
ARB No. 224-5-109
APN 224-66-002 (portion)
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LEASEHOLD DEED OF TRUST
THIS LEASEHOLD DEED OF TRUST (this "Deed of Trust") is dated for
-------------
reference purposes and made as of November 3, 1997, by CENTAUR PHARMACEUTICALS,
INC., a Delaware corporation ("Trustor"), with its executive office and
-------
principal place of business at 484 Oakmead Parkway, Sunnyvale, California 94086,
in favor of COMMONWEALTH LAND TITLE COMPANY, a California corporation
("Trustee"), for the benefit of FINOVA TECHNOLOGY FINANCE, INC., a Delaware
-------
corporation ("Beneficiary"), whose address is 10 Waterside Drive, Farmington,
-----------
Connecticut 06032-3065.
RECITALS
--------
A. The Lease. Trustor is the sole holder of the lessee's rights,
---------
interest and estate (the "Leasehold Estate") arising under and created by that
----------------
certain Standard Industrial/Commercial Multi-Tenant Lease - Gross dated May 30,
1997 (the "Lease"), by and between Memorex Drive LLC, as the "Lessor"
-----
("Lessor"), and Trustor, as the "Lessee," as amended and supplemented by that
------
certain Agreement Concerning Encumbrance of Leasehold Estate of even date
herewith between Lessor and Trustor (the "Agreement Concerning Encumbrance").
--------------------------------
The Lease demises premises (the "Premises") commonly identified as Suites 200
--------
and 300 in the building located at 1220 Memorex Drive in the City of Santa
Clara, County of Santa Clara, State of California. The real property on which
such building is situated (the "Real Property") is owned by Lessor and is more
-------------
particularly described in Exhibit A attached hereto and incorporated herein by
---------
this reference. Lessor and Trustor have executed a memorandum of the Lease and
caused such memorandum to be recorded on March 26, 1998, as Instrument No.
___________ in the Official Records of Santa Clara County, California.
B. Loan Agreement; Credit Facility. Pursuant to a Master Loan and
-------------------------------
Security Agreement of even date herewith between Beneficiary and Trustor (such
Master Loan and Security Agreement, as it may be amended from time to time, is
hereinafter referred to the "Loan Agreement"), Beneficiary has agreed to
--------------
establish for Trustor a total credit facility in the aggregate principal amount
of up to $10,000,000.00 (the "Credit Facility"). The Credit Facility includes
---------------
one or more term loans evidenced by the Loan Agreement and the promissory note
or notes issued and to be issued by Trustor to Beneficiary pursuant to the Loan
Agreement (collectively, the "Debt Instruments"). The provisions of the Loan
----------------
Agreement, including those governing adjustments to the interest rates and
payment amounts and the accrual of interest, are incorporated herein by
reference.
GRANTING CLAUSE
---------------
In consideration of the Credit Facility, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Trustor hereby irrevocably grants, transfers and assigns to
Trustee, in trust for Beneficiary, with power of sale, under and subject to the
terms and conditions hereinafter set forth, for the benefit and security of
Beneficiary, all of Trustor's present and future estate, right, title and
interest in and to the Leasehold Estate, together with all of the following now
owned or hereafter acquired by Trustor (collectively, the "Mortgaged Property"):
------------------
(a) all fixtures and leasehold improvements now or hereafter located
in the Premises (but not including any equipment or installations that are
readily removable from the Premises without material damage to the Premises and
that constitute personal property in which a security interest may be
perfected by the filing of a financing statement in the Office of the California
Secretary of State);
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(b) any and all plans, drawings and specifications for any leasehold
improvements now located on, or hereafter to be constructed on or in the
Premises, and all studies, data and drawings relating thereto (but not including
any information specifically related to the manufacture of Trustor's products);
Trustor's rights under all payment, performance or other bonds and in all
deposits and other security delivered to, by or for the benefit of Trustor in
connection with the construction of any such improvements; any and all
construction materials, supplies and equipment used or to be used in connection
with the construction of any such improvements, whether or not stored in the
Premises, and all warranties and guaranties relating thereto; any and all
contracts, subcontracts, agreements, and purchase orders with architects,
engineers, consultants, contractors, subcontractors, suppliers and materialmen
incidental to construction of any such improvements; and all reserves, deferred
payment deposits, cost savings and payments of any kind relating to the
construction of such improvements; and
(c) all insurance and insurance policies insuring the Mortgaged
Property or any activity thereon or part thereof or interest therein and all
proceeds of such insurance policies; all claims, awards, damages, causes of
action, judgments, recoveries, compensation and insurance proceeds arising on
account of injury or damage to or taking of all or any part of the Mortgaged
Property or for any loss or diminution in value of the Mortgaged Property; all
advance payments of insurance premiums made by Trustor with respect to the
Mortgaged Property; all deposits or security given by Trustor to third parties
with respect to the Mortgaged Property; all claims or demands with respect to
such deposits or security; and all right to refunds or rebates of any such
insurance premiums deposits or security.
ARTICLE I
OBLIGATIONS SECURED
1.1. Secured Obligations; Loan Documents. This Deed of Trust secures
-----------------------------------
the following indebtedness and obligations (collectively, the "Secured
-------
Obligations"): (a) the payment and performance of all of Trustor's indebtedness
- -----------
and obligations, now or hereafter incurred by Trustor, under the Loan Agreement,
this Deed of Trust, and all other Loan Documents (as defined below in this
paragraph), including all principal due and all interest, prepayment charges,
late charges, loan fees and other charges at any time accruing or assessed under
the Loan Documents; (b) the payment of all sums advanced, paid or expended by
Beneficiary under or pursuant to any provision of this Deed of Trust or any
other Loan Document, or to protect the Mortgaged Property or any other security
for the Credit Facility, together with interest on each such advance, payment or
expenditure at the applicable rate of interest in effect under the applicable
Debt Instrument from the date of such advance, payment or expenditure until paid
in full; (c) any and all renewals, extensions, modifications, substitutions,
replacements and consolidations of the indebtedness and obligations described in
clauses (a) and (b) above; and (d) the payment of principal, interest and any
other indebtedness hereafter owing by Trustor under any additional loans made by
Beneficiary to Trustor that are evidenced by a promissory note or other writing
reciting that the same is secured hereby, including all prepayment charges, late
charges, loan fees and other charges accruing or assessed under such promissory
notes or other writings ("Additional Advances"). All of the foregoing amounts
-------------------
shall be secured by this Deed of Trust to the same extent and with the same
priority as the initial advance of proceeds of the Credit Facility made by
Beneficiary. The Loan Agreement and other Debt Instruments, this Deed of Trust,
and all other instruments, agreements, certificates and documents that evidence,
secure or set forth any of Trustor's obligations relating to the Credit Facility
and/or any Additional Advances, all as amended, modified, extended, renewed,
restated, and supplemented from time to time, and whether now in existence or
2
<PAGE>
hereafter made or entered into, and whether or not secured by this Deed of
Trust, are hereinafter collectively referred to as the "Loan Documents."
--------------
ARTICLE II
CERTAIN REPRESENTATIONS AND COVENANTS OF TRUSTOR
2.1. Actions Affecting Property; Duty to Protect Beneficiary and
-----------------------------------------------------------
Security. Trustor shall, at its own expense, appear in, prosecute, defend and
- --------
contest (with counsel approved by Beneficiary) any action or proceeding that
purports to materially and adversely affect the Mortgaged Property or any
portion thereof or Trustor's title thereto, the validity or priority of the lien
of this Deed of Trust, or the rights, powers, liabilities or obligations of
Beneficiary or Trustee as to the Mortgaged Property.
2.2. Transfer of Property. Upon any assignment, further encumbrance
--------------------
or other transfer of all or any part of or interest in the Mortgaged Property or
upon any subletting of all or any part of the Premises, or upon the dissolution,
liquidation or termination of Trustor, Beneficiary may, at its option, declare
all of the sums secured by this Deed of Trust to be immediately due and payable,
and if such sums are not paid in full within 10 days after written demand by
Beneficiary, Trustor shall be in default under this Deed of Trust and
Beneficiary may invoke all of the remedies available under this Deed of Trust
and the other Loan Documents as well as all additional remedies available at law
or in equity.
2.3. Performance of Lease Obligations. Trustor promptly shall pay
--------------------------------
when due all rents and other sums that Trustor is required to pay under the
terms of the Lease, and shall perform fully and when due each and all of
Trustor's other covenants and obligations under the Lease, and shall do all
other things necessary to preserve and keep unimpaired Trustor's rights under
the Lease.
2.4. Notices to Beneficiary. Trustor promptly shall notify
----------------------
Beneficiary in writing (a) of any default on the part of Lessor under the Lease,
or in the performance or observance of any of the terms, covenants, and
conditions on the part of Lessor to be kept and performed under the Lease, (b)
of the occurrence of any event that, with or without, the lapse of time or the
giving of notice, would constitute a default on the part of Lessor under the
Lease, or (c) the giving to or service upon Trustor by Lessor under the Lease of
any notice of default on the part of Trustor thereunder in the performance or
observance of any of the terms, covenants, and conditions to be kept, performed,
or observed by Trustor under the Lease, and Trustor shall cause a copy of any
notice furnished or delivered to Trustor by Lessor under the Lease to be
delivered forthwith to Beneficiary.
2.5. Surrender, Cancellation or Modification. Trustor shall not
---------------------------------------
surrender the Lease or the Premises or Trustor's Leasehold Estate, nor shall
Trustor terminate or cancel the Lease or, without Beneficiary's prior written
consent (which consent shall not be unreasonably withheld or delayed), amend or
supplement the Lease or consent to any of the foregoing. Any such termination,
cancellation and any such amendment or supplement made or consented to by
Trustor without Beneficiary's prior written consent shall be void and of no
effect.
2.6. Ability to Perform Trustor's Obligations. If at any time
----------------------------------------
Trustor fails to comply fully or in a timely manner with any of Trustor's
obligations under the Lease, and such failure materially threatens the value or
existence of Beneficiary's security under this Deed of Trust,
3
<PAGE>
Beneficiary, but without obligation to do so and without notice to or demand
upon Trustor and without releasing Trustor from any obligation hereunder or
removing or waiving any corresponding default under this Deed of Trust, may
perform on behalf of Trustor any such obligations if Beneficiary acts reasonably
in so doing; provided that the foregoing shall not be construed to require
Beneficiary to incur any expense or take any action with respect to Trustor's
failure to comply with any of Trustor's obligations under the Lease. Upon
demand, Trustor shall pay to Beneficiary all costs and expenses (including, but
not limited to, legal fees and disbursements) paid or incurred by Beneficiary in
connection with performing such obligations. Any such costs or expenses not paid
by Trustor within five business days after demand shall be added to the
indebtedness secured by this Deed of Trust, shall bear interest at the rate that
is the sum of 5% percent per annum plus the highest interest rate then in effect
under the Debt Instruments (or the highest rate of interest permitted by law, if
less), and shall be secured by the lien of this Deed of Trust.
2.7. Bankruptcy of Trustor or Lessor. Trustor hereby unconditionally
-------------------------------
assigns, transfers, and sets over to Beneficiary, as additional security for the
Secured Obligations, all of Trustor's claims and rights to any damages arising
from any rejection of the Lease by Lessor pursuant to the United States
Bankruptcy Code (11 U.S.C. (S) 101 et seq. (the "Bankruptcy Code")). Any
-- --- ---------------
amounts received by Beneficiary as damages from Lessor's rejection of the Lease
shall be applied first to the payment of all reasonable costs and expenses
(including, but not limited to, reasonable legal fees and disbursements) paid or
incurred by Beneficiary in obtaining such damages and then to the payment of the
indebtedness and obligations secured by this Deed of Trust, in any order that
Beneficiary chooses. Upon demand, Trustor shall pay to Beneficiary all of the
foregoing reasonable costs and expenses not satisfied by the amounts received by
Beneficiary as damages. Any such costs or expenses not paid by Trustor upon
demand shall be added to the indebtedness secured by this Deed of Trust, shall
bear interest at the rate that is the sum of 5% percent per annum plus the
highest interest rate then in effect under the Debt Instruments (or the highest
rate of interest permitted by law, if less), and shall be secured by the lien of
this Deed of Trust.
(a) The lien of this Deed of Trust shall attach to all of Trustor's
rights and remedies at any time arising under or pursuant to Section 365(h) of
the Bankruptcy Code (11 U.S.C. (S) 365(h)) or other applicable law, including,
but not limited to, all of Trustor's rights to remain in possession of the
Premises.
(b) Trustor shall not elect to treat the Lease as terminated under
Section 365(h)(1) of the Bankruptcy Code (11 U.S.C. (S) 365(h)(1)) or other
applicable law without Beneficiary's prior written consent. Any such election
without Beneficiary's prior written consent shall be void and of no force or
effect.
(d) If, pursuant to Section 365(h)(2) of the Bankruptcy Code (11
U.S.C. (S) 365(h)(2)) or other applicable law, Trustor seeks to offset against
the rent reserved in the Lease the amount of any damages caused by the non-
performance by Lessor of any of Lessor's obligations under the Lease after the
rejection by Lessor of the Lease pursuant to the Bankruptcy Code, Trustor, prior
to making such offset, shall notify Beneficiary of Trustor's intent to do so,
setting forth the amounts proposed to be offset and the basis for such offset.
Beneficiary shall have the right to object to all or any part of such offset,
and, in the event of such objection, Trustor shall not offset any of the amounts
objected to by Beneficiary. If Beneficiary has failed to object to Trustor's
proposed offset within ten days after notice from Trustor in accordance with the
first sentence of this paragraph, Trustor may
4
<PAGE>
proceed to offset all or any part of the amounts set forth in Trustor's notice.
Neither Beneficiary's failure to object to Trustor's proposed offset, nor any
objection or other communication between Beneficiary and Trustor relating to
such offset shall constitute an approval of any such offset by Trustor. Trustor
shall defend and hereby indemnifies and holds Beneficiary harmless from and
against any and all claims, demands, actions, suits, proceedings, damages,
losses, costs, and expenses of every nature whatsoever (including, but not
limited to, legal fees and disbursements) arising from or relating to any offset
by Trustor against the rent reserved in the Lease.
(e) Trustor shall not commence any action, suit, proceeding, or case,
or file any application or make any motion, with respect to the Lease in any
such case under the Bankruptcy Code or other applicable law without
Beneficiary's prior written consent, which shall not be unreasonably withheld or
delayed.
(f) Trustor promptly shall notify Beneficiary of any information
Trustor receives about any filing by or against Lessor of a petition under the
Bankruptcy Code or other applicable law. Trustor shall provide all information
available to Trustor as of the date of such filing, including, but not limited
to, the court in which such petition was filed and the relief sought therein.
Trustor promptly shall deliver to Beneficiary copies of any and all notices,
summons, pleadings, applications, and other documents received by Trustor in
connection with any such petition and any proceedings relating to such petition.
(g) In the event there is filed by or against Trustor a petition
under the Bankruptcy Code or other applicable law, and Trustor, as lessee under
the Lease, shall determine to reject the Lease pursuant to Section 365(a) of the
Bankruptcy Code (11 U.S.C. (S) 365(a)) or other applicable law, Trustor shall
give Beneficiary not less than ten days' prior notice of the date on which
Trustor shall apply to the bankruptcy court for authority to reject the Lease.
Beneficiary shall have the right, but not the obligation, to serve upon Trustor
within such ten-day period a notice stating that (i) Beneficiary demands that
Trustor assume and assign the Lease to Beneficiary pursuant to Section 365 of
the Bankruptcy Code or other applicable law, and (ii) Beneficiary covenants to
cure or provide adequate assurances of future performance under the Lease. If
Beneficiary serves upon Trustor the notice described in the preceding sentence
of this paragraph, Trustor shall not seek authorization to reject the Lease and
shall comply with the demand provided for in clause (i) of the preceding
sentence within 30 days after the notice shall have been served upon Trustor,
subject to the performance by Beneficiary of the covenant provided for in clause
(ii) of the preceding sentence. Effective upon the entry of an order for relief
with respect to Trustor under the Bankruptcy Code, Trustor hereby assigns and
transfers to Beneficiary a non-exclusive right to apply to the bankruptcy court
for an order extending the period during which the Lease may be rejected or
assumed.
2.8. Representations and Warranties. Trustor represents and warrants
------------------------------
to Beneficiary that: (a) the copy of the Lease (including all attachments,
exhibits and amendments thereto) that Trustor has furnished to Beneficiary is a
complete and correct copy of the original; (b) the Lease has not been amended or
supplemented in any respect except as expressly stated in the recitals to this
Deed of Trust, and remains in full force and effect; (c) no uncured event of
default by either Trustor or Lessor exists under the Lease; (d) the Mortgaged
Property encumbered hereby includes the entire right, title and interest of the
"Lessee" under the Lease, and no person or entity other than Trustor (and, by
virtue of this Deed of Trust, Beneficiary) holds any such right, title or
interest.
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Trustor owns or leases the Mortgaged Property free and clear of all security
interests, liens, claims, charges and equities of any nature other than the lien
hereof and the rights of Beneficiary under this Deed of Trust; (e) Trustor is
not bound by, and shall not enter into, any agreement or commitment that in any
manner or to any extent will or could prevent Trustor from performing any of its
obligations hereunder; and (f) all information with respect to the Mortgaged
Property that has been given to Beneficiary by Trustor or by any third party at
the direction of Trustor is accurate and contains no material misrepresentation
or omission. Should any representation or warranty made by Trustor in any Loan
Document prove to be untrue as of the date of this Deed of Trust, then
Beneficiary may declare that an "Event of Default" (as defined in Section 4.1)
---------------- -----------
exists. Trustor agrees to indemnify and hold Beneficiary free and harmless from
all liabilities, obligations, damages, causes of action, judgments, costs and
expenses (including without limitation attorneys' fees) that Beneficiary may
incur or suffer in connection with any breach by Trustor of any of Trustor's
representations or warranties.
ARTICLE III
ASSIGNMENT OF SUBLEASES
3.1. Assignment of Subleases. Trustor hereby assigns and transfers
-----------------------
to Beneficiary, as additional security for the Secured Obligations, all of
Trustor's rights and interests in, to and under any and all existing and future
subleases of all or any portion of the Premises ("Subleases"), whether written
---------
or oral, and any guarantees thereof, together with any and all extensions,
modifications, amendments, assignments and renewals thereof, and all cash or
other security deposited to secure performance by the sublessees of their
obligations thereunder, and all rents and other sums due and to become due
thereunder.
3.2. No Subleases. Trustor represents and warrants to Beneficiary
------------
that no Subleases are now in effect. Trustor shall not enter into any Sublease
without first obtaining Beneficiary's written consent.
ARTICLE IV
REMEDIES UPON DEFAULT
4.1. Events of Default. Any of the following shall constitute an
-----------------
"Event of Default": (a) Trustor's failure to make any payment of money in
----------------
accordance with the terms of this Deed of Trust; or (b) Trustor's failure to
perform fully and when due any other material covenant or obligation of Trustor
under this Deed of Trust when such obligation is required hereunder to be
performed and such failure is not fully cured within 10 days after Beneficiary
shall have given Trustor notice thereof; or (c) any of Trustor's representations
or warranties made in this Deed of Trust shall be untrue or misleading in any
material respect; or (d) the lien or security interest of this Deed of Trust
shall lose validity or priority; or (e) the occurrence of an event of default
under, or the institution of judicial or nonjudicial foreclosure or other
proceedings to enforce, any deed of trust or other lien or encumbrance of any
kind upon the Mortgaged Property or any portion thereof, whether senior or
junior in priority to the lien of this Deed of Trust; or (f) the occurrence of
an "Event of Default" as defined in the Loan Agreement.
4.2. Rights and Remedies. At any time after the occurrence of an
-------------------
Event of Default, Beneficiary or Trustee may do any one or more of the
following, in any order:
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(a) With or without notice to Trustor, declare all Secured
Obligations to be immediately due and payable;
(b) With or without notice, and without releasing Trustor from its
obligations relative to such Event of Default, cure such Event of Default, and
the costs and expenses incurred by Beneficiary or Trustee in so doing shall
become a part of the Secured Obligations;
(c) Exercise any remedy afforded by this Deed of Trust;
(d) Commence and maintain an action or actions to foreclose this Deed
of Trust, to specifically enforce any rights of Beneficiary hereunder (including
rights with respect to possession and sale of any additional security for the
Secured Obligations), to enjoin any conduct that impairs or threatens to impair
the security of this Deed of Trust, or to obtain such other equitable remedies
as may be appropriate;
(e) Execute a written declaration of default and demand for sale, and
a written notice of default and election to cause the Mortgaged Property or any
part thereof to be sold by exercise of Trustee's power of sale under this Deed
of Trust, which notice shall be filed for record in the Official Records of the
county in which the Mortgaged Property is located;
(f) Resort to and realize upon the security for the Secured
Obligations and any other security now or hereafter held by Beneficiary in such
order as Trustee and Beneficiary or either of them may, in their sole
discretion, determine, concurrently or successively or in one or several
consolidated or independent judicial actions or nonjudicial proceedings; and
(g) Exercise any and all other remedies at law, including any action
for damages suffered by Beneficiary as a result of any Event of Default, or in
equity as may be available now or hereafter, as Beneficiary may elect.
4.3. Exercise of Trustee's Power of Sale.
-----------------------------------
(a) Should Beneficiary elect to have Trustee exercise the power of
sale herein contained, Beneficiary shall deliver to Trustee a written
declaration of default and demand for sale.
(b) Upon receipt of such items from Beneficiary, Trustee shall cause
to be recorded, published and/or delivered to Trustor such notice of default and
election to sell as may then be required by law and by this Deed of Trust.
After giving notice of default and notice of sale, and the lapse of such time
period as may be required by applicable law, Trustee may, without demand on
Trustor, at the time and place of sale fixed in the notice of sale, either as a
whole or in separate parcels or items or through two or more successive sales,
sell the Mortgaged Property or any part thereof at public auction to the highest
bidder for cash in lawful money of the United States payable at the time of
sale. Trustor shall have no right to direct the order in which the Mortgaged
Property is sold. Beneficiary may, in its sole discretion, designate the order
in which the Mortgaged Property shall be offered for sale or sold and determine
if the Mortgaged Property shall be sold in a single sale or in two or more
successive sales or in any other manner Beneficiary deems to be in its best
interests. If Beneficiary determines that the Mortgaged Property shall be sold
in two or more sales, Beneficiary may, at its option, cause such sales to be
conducted simultaneously or successively on the same day or
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on different days and times and in such order as Beneficiary shall determine,
and no such sale shall extinguish or otherwise affect the lien of this Deed of
Trust or any part of the Mortgaged Property not then sold until all Secured
Obligations have been fully paid and discharged. Trustor shall pay the costs and
expenses of each such sale and any judicial proceeding in which any such sale
may be made. Trustee shall deliver to such purchaser its deed conveying the
portion of the Mortgaged Property so sold, but without any covenant or warranty,
express or implied. The recitals in such deed of any matters or facts shall be
conclusive proof of the truthfulness thereof. Any person, including Beneficiary,
may purchase at such sale.
(c) After deducting all costs, fees and expenses of Trustee and of
the sale, including costs of evidence of title in connection with the sale,
Trustee shall apply the proceeds of sale to payment of all sums expended under
the terms hereof, not then repaid, with accrued interest at the highest rate of
interest then in effect under any Debt Instrument, all other sums then secured
hereby, and the remainder, if any, to the person or persons legally entitled
thereto.
(d) Trustee may postpone the sale of all or any portion of the
Mortgaged Property by public announcement at the time and place first fixed for
sale, and from time to time thereafter may postpone such sale by public
announcement at the time and place fixed by the preceding postponement, and
without further notice make such sale at the time fixed by the last
postponement, or may, in its discretion, give a new notice of sale.
(e) Upon any sale pursuant to this Section, Trustor shall be
completely and irrevocably divested, to the maximum extent permitted by law, of
all its right, title, interest, claims and demands at law or in equity in and to
the Mortgaged Property sold or any part thereof, and such sale shall be a
perpetual bar both at law and in equity against Trustor and any and all other
persons claiming any such right, title, interest, claims or demands by, through
or under Trustor.
4.4. Rescission of Notice of Default. Beneficiary from time to time
-------------------------------
before Trustee's sale, may rescind any notice of default and of election to
cause the Mortgaged Property to be sold by executing and delivering to Trustee a
written notice of such rescission, which notice, when recorded, shall also
constitute a cancellation of any prior declaration of default and demand for
sale. The exercise by Beneficiary of such right of rescission shall not
constitute a waiver of any breach or default then existing or subsequently
occurring or impair the right of Beneficiary to execute and deliver to Trustee,
as provided above, other declarations of default and demand for sale, notices of
default and of election to cause the Mortgaged Property to be sold to satisfy
the obligations hereof, or otherwise affect any provision, agreement, covenant
or condition contained in this Deed of Trust or any other Loan Document or any
of the rights, obligations or remedies of Trustor or Beneficiary under this Deed
of Trust.
ARTICLE V
MISCELLANEOUS
5.1. Fixture Filing. This Deed of Trust constitutes and is filed as
--------------
a fixture filing under Section 9402 of the Uniform Commercial Code. Certain of
the Mortgaged Property consists of goods that are or are to become fixtures upon
the Real Property, and this Deed of Trust is to be recorded in the Official
Records of the County in which the Real Property is located. This Deed of Trust
shall remain in effect as a fixture filing until released or satisfied of record
or its effectiveness
8
<PAGE>
otherwise terminates as to the Real Property. Memorex Drive LLC is the record
owner of the Real Property.
5.2. Waiver of Offsets and Other Matters. All sums payable by
-----------------------------------
Trustor hereunder shall be paid without notice, demand, or defense and without
right of counterclaim, setoff, deduction, abatement, suspension, deferment,
diminution or reduction, all of which rights now or hereafter conferred by law
are hereby waived by Trustor. Without limiting the generality of the foregoing,
Trustor also waives, to the fullest extent permitted by law: (a) any right to
require Beneficiary or Trustee, prior to or as a condition to the enforcement of
this Deed of Trust, to proceed against or exhaust any other security for the
obligations secured hereby or pursue any other remedy whatsoever; and (b) any
defense arising by reason of: (i) any disability or other defense of Trustor
with respect to the obligations secured hereby; (ii) the unenforceability or
invalidity of any security for the Secured Obligations; or the lack of
perfection or failure of priority of any security for the Secured Obligations;
(iii) the cessation from any cause whatsoever of the personal liability of
Trustor (other than by reason of the full payment and discharge of all Secured
Obligations); or (iv) any act or omission of Trustee, Beneficiary or others that
directly or indirectly results in or aids in the discharge or release of Trustor
or the Secured Obligations or any other security therefor by operation of law or
otherwise.
5.3. Governing Law. This Deed of Trust shall be governed by and
-------------
construed and enforced under the laws of the state or other jurisdiction, the
laws of which are specified in the Loan Agreement as governing the construction
and/or enforcement of the Loan Agreement; PROVIDED, HOWEVER, that the laws of
the state in which the Real Property is located shall govern procedural issues
pertaining to any foreclosure under this Deed of Trust.
5.4. Time of the Essence. Time is of the essence in the performance
-------------------
of each provision of this Deed of Trust.
5.5. Additional Powers of Beneficiary. Without affecting the
--------------------------------
liability of any other person liable for the payment of or performance of any of
the Secured Obligations, and without affecting the lien or charge of this Deed
of Trust upon any portion of the Mortgaged Property not then or theretofore
released as security for the full amount of all unpaid Secured Obligations,
Beneficiary may, at any time, and from time to time, without notice to or
consent of Trustor: (a) release the obligations of any person primarily or
secondarily liable for payment or performance of any Secured Obligations; (b)
extend the maturity date of any Secured Obligations or accept partial payments
thereon; (c) grant forbearances; (d) accept new or additional instruments,
documents or agreements in exchange for or relative to any of the Loan Documents
or the Secured Obligations; (e) release or reconvey, or cause to be released or
reconveyed, any or all of the Mortgaged Property; (f) take or release any other
or additional security for any Secured Obligations; or (g) consent to the
transfer of any security.
5.6. Reconveyance by Trustee. Upon written request of Beneficiary
-----------------------
and upon payment by Trustor of Trustee's fees for all services involved in the
preparation, execution and recordation of the reconveyance, Trustee shall
reconvey the Mortgaged Property or portions thereof then held hereunder, in
whole or in part, as designated by Beneficiary and in such portions as
designated by Beneficiary to Trustor, to the person or persons legally entitled
thereto, which reconveyance shall be without recourse or warranty. The recitals
in such reconveyance of any matters or facts shall be conclusive proof of the
truthfulness thereof. The grantee in any reconveyance may be
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<PAGE>
described as "the person or persons legally entitled thereto." Neither
Beneficiary nor Trustee shall have any duty to determine the rights of persons
claiming to be rightful grantees of any release.
5.7. Costs and Expenses; Actions by Trustee and/or Beneficiary to
------------------------------------------------------------
Preserve Property. Every provision of this Deed of Trust that imposes upon
- -----------------
Trustor an obligation to perform an act, or embodying an agreement by Trustor to
perform an act, shall be construed as obligating Trustor to pay all costs and
expenses relating thereto. Should Trustor fail to make any payment or to do any
act as herein provided, Beneficiary and/or Trustee, may, but shall not be
obligated to, make or do the same in such manner and to such extent as either
may deem necessary to protect the security hereof, all without notice to or
demand upon Trustor, without releasing Trustor from any obligation hereof or
secured hereby, and within such times and in such manner as Beneficiary or
Trustee may deem reasonable. All sums advanced in taking such action, together
with all other costs, fees and expenses incurred by Beneficiary or Trustee
hereunder (including costs of evidence of title, court costs, appraisals,
surveys and attorneys' fees), shall bear interest at the highest rate of
interest then in effect under any Debt Instrument from the date advanced until
paid in full, be payable in full, together with interest thereon, upon demand by
Beneficiary, and be added to the Secured Obligations. Neither the reservation
nor any exercise of the foregoing rights shall be construed to excuse Trustor's
failure to perform fully and when due all of Trustor's obligations under this
Deed of Trust or to prevent any such failure from constituting an Event of
Default.
5.8. Partial or Late Payment. The acceptance by Beneficiary of any
-----------------------
sum after the same is due shall not constitute a waiver of the right either to
require prompt payment, when due, of all other sums then and thereafter secured
hereby. The acceptance by Beneficiary of any sum or sums in an amount less than
the sums then due shall be deemed an acceptance on account only and upon the
condition that it shall not constitute a waiver of the Event of Default existing
by virtue of Trustor's failure to pay the entire sum then due, or of
Beneficiary's right to declare or maintain an acceleration by virtue of such
Event of Default. Trustor's failure to pay the entire sum then due shall be and
continue to be an Event of Default notwithstanding such acceptance of such
amount on account, and Beneficiary and Trustee shall be at all times thereafter
until the entire sum then due shall have been paid, and notwithstanding the
acceptance by Beneficiary thereafter of further sums on account, or otherwise,
entitled to exercise all rights in this Deed of Trust conferred upon them or
either of them upon the occurrence of an Event of Default.
5.9. Substitution of Trustee. Beneficiary may, from time to time, by
-----------------------
a written instrument executed and acknowledged by Beneficiary and recorded in
the County in which the Mortgaged Property is located, and by otherwise
complying with the provisions of California Civil Code Section 2934a or any
successor statute, substitute a successor or successors to the Trustee named
herein or acting hereunder. Without conveyance of the Mortgaged Property, a
successor Trustee shall succeed to all the title, powers and duties conferred
upon the Trustee herein and by applicable law.
5.10. Successors and Assigns. This Deed of Trust applies to, inures
----------------------
to the benefit of, and binds all parties hereto, their heirs, legatees,
devisees, administrators, executors, successors and assigns. The term
"Beneficiary" shall mean the owner and holder (including a pledgee) of the Debt
-----------
Instruments, whether or not named as Beneficiary herein. The term "Trustor"
-------
shall mean all parties executing this Deed of Trust as Trustor, their respective
heirs, legatees, devisees, administrators, executors, successors in interest and
assigns to the extent permitted by this Deed of Trust, provided that neither
Beneficiary nor Trustee shall be obligated to give notice of default or notice
of sale hereunder to
10
<PAGE>
any person, firm or entity other than the Trustor shown on the face page hereof.
5.11. Nonliability of Beneficiary.
---------------------------
(a) Beneficiary neither undertakes nor assumes any responsibility
or duty to Trustor or any third party to select, review, inspect, examine,
supervise, pass judgment upon or inform Trustor or any third party of the
quality, adequacy or suitability of any plans, specifications, construction
contracts, architects, contractors or other matters or items that Beneficiary
has the right to review, inspect, examine or approve under this Deed of Trust.
Any such selection, review, inspection, examination and the like is solely for
the purpose of (i) determining whether or not Trustor's obligations under this
Deed of Trust are being properly discharged and (ii) protecting Beneficiary's
security and preserving Beneficiary's rights under this Deed of Trust, and such
selection, review, inspection, examination and the like shall not render
Beneficiary liable to Trustor or any third party for the sufficiency, accuracy,
completeness, or legality thereof and shall not operate to waive any rights of
Beneficiary hereunder. Beneficiary owes no duty of care to protect or inform
Trustor or any third party against negligent, faulty, inadequate or defective
building or construction, or the existence of any environmentally hazardous
condition in any manner arising out of or related to the presence of any
hazardous materials on the Mortgaged Property, and Beneficiary shall not be
responsible or liable to Trustor or any other party therefor. Trustor shall make
or cause to be made such independent inspections as Trustor may desire for its
own protection. By accepting or approving anything required to be observed,
performed or fulfilled, or to be given to Beneficiary pursuant hereto,
Beneficiary shall not be deemed to have warranted or represented the
sufficiency, legality, effectiveness or legal effect of the same, or of any
term, provision or condition thereof, and such acceptance or approval thereof
shall not be or constitute any warranty or representation to anyone with respect
thereto by Beneficiary.
(b) Prior to Beneficiary's actual entry upon and taking possession
of the Mortgaged Property, nothing in this Deed of Trust shall operate to impose
upon Beneficiary any responsibility for the operation, control, care, management
or repair of the Mortgaged Property, and the execution of this Deed of Trust by
Trustor shall constitute conclusive evidence that all responsibility for the
operation, control, care, management and repair of the Mortgaged Property is and
shall be that of Trustor prior to Beneficiary's actual entry and taking
possession.
(c) Beneficiary is hereby authorized to disclose (i) information
relating to hazardous materials to federal, state, or local authorities when
Beneficiary reasonably believes such disclosure to be required under applicable
law; and (ii) information concerning Trustor, the Mortgaged Property or the
Secured Obligations to any insurance agency or company, to any person or entity
proposing to acquire an interest in the Secured Obligations.
(d) Beneficiary shall not be liable, and is hereby released from
liability, for any act or omission of Trustee, except for such actions as may be
taken by Trustee at the express request of and in accordance with instructions
given by Beneficiary.
5.12. Cumulative Rights and Remedies; No Waiver. The rights, powers
-----------------------------------------
and remedies given to Beneficiary pursuant to this Deed of Trust shall be in
addition to, and shall not supersede or preempt, any rights, powers and remedies
given to Beneficiary by virtue of any applicable law. Every power or remedy
given by this Deed of Trust to Trustee or Beneficiary or to which either of them
may be otherwise entitled, may be exercised concurrently, independently, or
successively, in
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<PAGE>
any order whatsoever, from time to time and as often as may be deemed expedient
by Trustee or Beneficiary and either of them may pursue inconsistent remedies.
No forbearance, failure or delay by Beneficiary in exercising any right, power
or remedy granted to Beneficiary hereunder shall be deemed a waiver of such
right, power or remedy, nor shall any such forbearance, failure or delay
preclude the further exercise of such right, power or remedy, or any other
right, power or remedy; and every such right, power and remedy of Beneficiary
shall continue in full force and effect until such right, power or remedy is
explicitly waived by Beneficiary in writing. The consent or approval by
Beneficiary to or of any act by Trustor requiring further consent or approval
shall not be deemed to waive or render unnecessary the consent or approval to or
of any subsequent similar act.
IN WITNESS WHEREOF, Trustor has executed this Deed of Trust as of the
date first above written.
CENTAUR PHARMACEUTICALS, INC.,
a Delaware corporation
By: /s/ Joseph L. Turner
--------------------
Name: Joseph L. Turner
------------------
Title: CFO & Treasurer
-----------------
[NOTARY SEAL]
12
<PAGE>
EXHIBIT A
---------
DESCRIPTION OF THE REAL PROPERTY
--------------------------------
All that certain real property situate in the City of Santa Clara, County of
Santa Clara, State of California, described as follows:
PARCEL ONE:
Parcel 2, as shown on that Parcel Map filed for record in the office of the
Recorder of the County of Santa Clara, State of California on September 25,
1997, in Book 694 of Maps, pages 28 and 29.
PARCEL TWO:
An easement for private ingress and egress over Parcel 1, as shown and
designated and delineated as "Private Ingress, Egress Easement" on the Map filed
September 25, 1997, in Book 694 of Maps, pages 28 and 29.
PARCEL THREE:
An easement for the purpose of ingress and egress, installation, maintenance,
repair and replacement of electrical systems, including conduits, cables,
vaults, splice boxes, transformers and switches, as conveyed by deed recorded
January 25, 1989 in Book K 829, page 91, Official Records. Said easement being
more particularly described as follows:
Commencing at the most Southerly corner of Parcel D, as said Parcel is shown on
the certain Parcel Map recorded in Book 320 of Maps, at page 56, Santa Clara
County Records; thence along the Easterly boundary of said Parcel D, N. 00
degrees 12 minutes 36 seconds E. 40.00 feet to the true point of beginning.
Said course is also the Easterly boundary of an electric easement granted by
Memorex Corporation to the City of Santa Clara by deed recorded January 12, 1983
in Book H 266 of Santa Clara County Records, page 738; thence from the true
point of beginning along the Northerly boundary of said electric easement N. 89
degrees 47 minutes 24 seconds W. 30.00 feet; thence N. 00 degrees 12 minutes 36
seconds E. 2.10 feet; N. 61 degrees 21 minutes 19 seconds W. 34.18 feet; N. 00
degrees 12 minutes 36 seconds E. 16.82 feet; and S. 89 degrees 47 minutes 24
seconds E. 60.05 feet to the Easterly boundary of Parcel D hereinabove
described; thence along said Easterly boundary S. 00 degrees 12 minutes 36
seconds W. 35.20 feet to the true point of beginning.
ARB NO. 224-5-109
APN 224-66-002 (portion)
1
<PAGE>
PROMISSORY NOTE
---------------
$8,000,000.00 April 22, 1998
FOR VALUE RECEIVED, the undersigned, Centaur Pharmaceuticals, Inc.
(the "Maker"), hereby promises to pay the amount of Eight Million and 00/100
Dollars ($8,000,000.00) to the order of FINOVA Technology Finance, Inc. (the
"Payee") in 48 monthly payments of principal and interest at the rate of 14.838%
per annum, the first payment of $248,955.97 on April 22, 1998, and the next 47
payments each of $219,280.00 on the first day of each succeeding month
commencing on June 1, 1998.
This Note is secured by the Loan and Security Agreement Number 1 dated
April 22, 1998 herewith between the Maker and the Payee and is subject to
acceleration upon a default in payment hereof or default under the Loan and
Security Agreement.
If any payment hereunder is not made when due, including any payment
due by reason of acceleration hereof, delinquency interest thereon shall accrue
until paid at the higher of (a) 1 1/2% per month or (b) 150% of the then current
Prime Lending Rate of Citibank, N.A., but not more than the highest lawful rate
on past due amounts. A late payment charge of Five Hundred Dollars ($500) shall
be paid by the Maker on any payment hereunder more than ten (10) business days
past due. Any payments made shall be first applied to late payment charges,
second to default interest, third to other interest and charges, if any, and
lastly to principal.
During the first year of the term of the Loan you may not prepay the
You shall have the right, on any regularly scheduled payment date occurring
after the first year of the Term of the Loan and upon not less than ninety (90)
days prior written notice to us, to prepay the outstanding principal balance of
the Loan in whole, but not in part, which the prepayment is made, as set forth
below:
Year in Term of Loan
which Prepayment is made: Percentage
------------------------ ----------
2 4%
3 2 1/2%
4 1%
In no event shall interest and late charges under this Note exceed
that permitted under applicable federal or state law. If interest and late
charges would exceed the maximum so permitted, the amount due on this Note shall
instead be computed at the maximum rate and manner permitted by applicable law,
any amount paid in excess of the maximum amount permitted by applicable law
shall be considered a payment of principal, the payments remaining due hereunder
shall be adjusted accordingly, and any remaining excess amount paid after all
such adjustments have been made shall be refunded.
1
<PAGE>
All sums payable pursuant to this Note shall be payable in lawful
money of the United States of America to the Payee at 10 Waterside Drive,
Farmington, Connecticut 06032-3065, or at such other address as the holder
hereof may designate, in immediately available funds and without deduction or
offset.
The Maker hereby waives diligence, presentment, demand, protest and
notice of protest, nonpayment and dishonor and any and all other notice with
respect to this Note.
The Maker agrees to pay all costs and expenses incurred by the holder
of this Note in connection with the collection and enforcement of this Note
including, without limitation, reasonable attorney's fees and expenses.
This Note shall be deemed a contract made at Farmington, Connecticut
and shall be governed by and construed in accordance with the law of New York,
other than conflicts of law rules.
Centaur Pharmaceuticals, Inc.
ATTEST:
[SEAL] By:/s/ Joseph L. Turner
-----------------------
/s/ Lucy O. Day
- -------------------
Asst. Secretary
2
<PAGE>
EXHIBIT 10.07
LEASE AGREEMENT
THIS LEASE, made this 25th day of February, 1993 between JOHN ARRILLAGA,
Trustee, or his Successor Trustee UTA dated 7/20/77 (JOHN ARRILLAGA SEPARATE
PROPERTY TRUST) as amended, and RICHARD T. PEERY, Trustee, or his Successor
Trustee UTA dated 7/20/77 (RICHARD T. PEERY SEPARATE PROPERTY TRUST) as amended.
WILLIAM RIDDLE, Individually, and BARRY and PATRICIA SAPER, Trustee, dba OAKMEAD
ASSOCIATES, hereinafter called Landlord and CENTAUR PHARMACEUTICALS, INC., a
Delaware corporation, hereinafter called Tenant.
WITNESSETH:
Landlord hereby leases to Tenant and Tenant hereby hires and takes from
Landlord those certain premises (the "Premises") outlined in red on Exhibit "A,"
attached hereto and incorporated herein by this reference thereto more
particularly described as follows:
A portion of that certain 30,825+ square foot, one-story
-
building located at 484 Oakmead Pkwy., Sunnyvale,
California, consisting of approximately 9,998+ square feet
-
of space. Said Premises is more particularly shown within
the area outlined in Red on Exhibit A. The entire parcel, of
---------
which the Premises is a part, is shown within the area
outlined in Green on Exhibit A attached hereto. The interior
---------
of the building leased hereunder shall be improved by
Landlord and leased by Tenant in the configuration as shown
in Red on Exhibit B to be attached hereto.
---------
The word "Premises" as used throughout this lease is hereby defined to
include the nonexclusive use of sidewalks and driveways in front of or adjacent
to the Premises, and the nonexclusive use of the area directly underneath or
over such sidewalks and driveways. The leased area of the Premises shall be
measured from outside the exterior walls to outside of exterior walls, and shall
include any atriums, covered entrances or egresses and covered loading areas.
Said letting and hiring is upon and subject to the terms, covenants and
conditions hereinafter set forth and Tenant covenants as a material part of the
consideration for this Lease to perform and observe each and all of said terms,
covenants and conditions. This Lease is made upon the conditions of such
performance and observance.
1. USE. Tenant shall use the Premises only in conformance with applicable
---
governmental laws, regulations, rules and ordinances for the purpose of general
office, light manufacturing, biomedical research and development, ad storage and
other uses necessary for Tenant to conduct Tenant's business in accordance with
all applicable governmental laws and ordinances, and for no other purpose.
Tenant shall not do or permit to be done in or about the Premises nor bring or
keep or permit to be brought or kept in or about the premises anything which is
prohibited by or will in any way increase the existing rate of (or otherwise
affect) fire or any insurance covering the Premises or any part thereof, or any
of its contents, or will cause a cancellation of any insurance covering the
Premises or any part thereof, or any of its contents. Tenant shall not do or
permit to be done anything in, on or about the Premises which will in any
1
<PAGE>
way obstruct or interfere with the rights of other tenants or occupants of the
Premises or neighboring premises or injure or annoy them, or use or allow the
Premises to be used for any improper, immoral, unlawful or objectionable
purpose, nor shall Tenant cause, maintain or permit any nuisance in, on or about
the Premises. No sale by auction shall be permitted on the Premises. Tenant
shall not place any loads upon the floors, walls, or ceiling which endanger the
structure, or place any harmful fluids or other materials in the drainage system
of the building, or overload existing electrical or other mechanical systems. No
waste materials or refuse shall be dumped upon or permitted to remain upon any
part of the Premises or outside of the building in which Premises are a part,
except in trash containers placed inside exterior enclosures designated by
Landlord for that purpose or inside of the building proper where designated by
Landlord. No materials, supplies, equipment, finished products or semi-finished
products, raw materials or articles of any nature shall be stored upon or
permitted to remain outside the Premises. Tenant shall not place anything or
allow anything to be placed near the glass of any window, door partition or wall
which may appear unsightly from outside the Premises. No loud speaker or other
device, system or apparatus which can be heard outside the Premises shall be
used in or at the Premises without the prior written consent of Landlord. Tenant
shall not commit or suffer to be committed any waste upon the Premises. Tenant
shall indemnify, defend and hold Landlord harmless against any covenant,
condition, or restriction ("CC&Rs") affecting the Premises. The provisions of
this paragraph are for the benefit of Landlord only and shall not be construed
to be for the benefit of any tenant or occupant of the Premises. There are no
CC&Rs affecting the Premises at the time of Lease execution. In the event CC&Rs
are subsequently implemented, Landlord shall provide a copy of said CC&Rs to
Tenant.
2. TERM.*
----
A. The term of this Lease shall be for a period of five (5) years
(unless sooner terminated as hereinafter provided) and, subject to Paragraphs 2B
and 3, shall commence on the 1/st/ day of June, 1993 and end on the 31st day of
May, 1998.
B. Possession of the Premises shall be deemed tendered and the term
of the Lease shall commence when the first of the following occurs:
(a) One day after a Certificate of Occupancy is granted by the
proper governmental agency, or, if the governmental agency having jurisdiction
over the area in which the Premises are situated does not issue certificates of
occupancy, then the same number of days after certification by Landlord's
architect or contractor that Landlord's construction work has been completed; or
(b) Upon the occupancy of the Premises by any of Tenant's
operating personnel; or
* It is agreed in the event said Lease commences on a date other than the first
day of the month the term of the Lease will be extended to account for the
number of days in the partial month. The Basic Rent during the resulting
practical month will be pro-rated (for the number of days in the partial
month) at the Basic Rent rate scheduled for the projected commencement date as
shown in Paragraph 39.
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<PAGE>
(c) When the Tenant Improvements have been substantially
completed for Tenant's use and occupancy, in accordance and compliance with
Exhibit B of this Lease Agreement; or
(d) As otherwise agreed in writing.
3. POSSESSION. If Landlord, for any reason whatsoever, cannot deliver
----------
possession of said premises to Tenant at the commencement of the said term, as
hereinbefore specified, this Lease shall not be void or voidable; no obligation
of Tenant shall be affected thereby; nor shall Landlord or Landlord's agents be
liable to Tenant for any loss or damage resulting therefrom; but in that event
the commencement and termination dates of the Lease, and all other dates
affected thereby shall be revised to conform to the date of Landlord's delivery
of possession, as specified in paragraph 2B, above. The above is, however,
subject to the provision that the period of delay of delivery of the Premises
shall not exceed 30 days from the commencement date herein (except those delays
caused by Acts of God, strikes, war utilities, governmental bodies, weather,
unavailable materials, and delays beyond Landlord's control shall be excluded in
calculating such period) in which instance Tenant, at its option, may, by
written notice to Landlord, terminate this Lease.
4. RENT.
----
A. Basic Rent. Tenant agrees to pay to Landlord at such place as
----------
Landlord may designate without deduction, offset, prior notice, or demand, and
Landlord agrees to accept as Basic Rent for the leased Premises the total sum of
SIX HUNDRED FORTY-EIGHT THOUSAND THREE-HUNDRED EIGHTY-ONE AND NO/100 DOLLARS
- --------------------------------------------------------------------
($648,381.00) in lawful money of the United States of America, payable as
follows:
SEE PARAGRAPH 39 FOR BASIC RENT SCHEDULE.
B. Time for Payment. Full monthly rent is due in advance on the
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first day of each calendar month. In the event that the term of this Lease
commences on a date other than the first day of a calendar month, on the date of
commencement of the term hereof Tenant shall pay to Landlord as rent for the
period from such date of commencement to the first day of the next succeeding
calendar month that proportion of the monthly rent hereunder which the number of
days between such date of commencement and the first day of the next succeeding
calendar month bears to thirty (30). In the event that the term of this Lease
for any reason ends on a date other than the last day of a calendar month, on
the first day of the last calendar month of the term hereof Tenant shall pay to
Landlord as rent for the period from said fist day of said last calendar month
to and including the last day of the term hereof that proportion of the monthly
rent hereunder which the number of days between said first day of said last
calendar month and the last day of the term hereof bears to thirty (30).
C. Late Charge. Notwithstanding any other provision of this Lease,
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if Tenant is in default in the payment of rental as set forth in this Paragraph
4 when due, or any part
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thereof, Tenant agrees to pay Landlord, in addition to the delinquent rental
due, a late charge for each rental payment in default ten (10) days. Said late
charge shall equal ten percent (10%) of each rental payment so in default.
D. Additional Rent. Beginning with the commencement date of the
---------------
term of this Lease, Tenant shall pay to Landlord or to Landlord's designated
agent in addition to the Basic Rent and as Additional Rent the following:
(a) All Taxes relating to the Premises as set forth in Paragraph
9, and
(b) All insurance premiums relating to the Premises, as set forth
in Paragraph 12, and
(c) all charges, costs and expenses, which Tenant is required to
pay hereunder, together with all interest and penalties, costs and expenses
including reasonable attorneys' fees and legal expenses, that may accrue thereto
in the event of Tenant's failure to pay such amounts, and all damages,
reasonable costs and expenses which Landlord may incur by reason of default of
Tenant or failure on Tenant's part to comply with the terms of this Lease. In
the event of nonpayment by Tenant of Additional Rent, Landlord shall have all
the rights and remedies with respect thereto as Landlord has for nonpayment of
rent.
The Additional Rent due hereunder shall be paid to Landlord or
Landlord's agent (i) within five days for taxes and insurance and within thirty
(30) days for all other additional Rent items after presentation of invoice from
Landlord or Landlord's agent setting forth such Additional Rent and/or (ii) at
the option of Landlord, Tenant shall pay to Landlord monthly, in advance,
Tenant's prorata share of an amount estimated by Landlord to be Landlord's
approximate average monthly expenditure for such Additional Rent items, which
estimated amount shall be reconciled at the end of each calendar year as
compared to Landlord's actual expenditure for said Additional Rent items, with
Tenant paying to Landlord, upon demand, any amount of actual expenses expended
by Landlord in excess of said estimated amount, or Landlord refunding to Tenant
(providing Tenant is not in default in the performance of any of the terms,
covenants and conditions of this Lease) any amount of estimated payments made by
Tenant in excess of Landlord's actual expenditures for said Additional Rent
items.
Tenant shall have the right to review Landlord's records, at a time
convenient for Landlord at Landlord's office, that are related to Additional
Rent changes within 30 days of Tenant's receipt of notice for additional amounts
owed.
The respective obligations of Landlord and Tenant under this paragraph
shall survive the expiration or other termination of the term of this Lease, and
if the term hereof shall expire or shall otherwise terminate on a day other than
the last day of a calendar year, the actual Additional Rent incurred for the
calendar year in which the term hereof expires or otherwise terminates shall be
determined and settled on the basis of the statement of Additional Rent for such
calendar year and shall be prorated in the proportion which the number of days
in such calendar year preceding such expiration or termination bears to 365.
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E. Place of Payment of Rent and Additional Rent. All Basic Rent
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hereunder and all payments hereunder for Additional Rent shall be paid to
Landlord at the office of Landlord at OAKMEAD ASSOCIATES, 2560 Mission College
Blvd., #101, Santa Clara, California 95054, or to such other person or to such
other place as Landlord may from time to time designate in writing.
F. Security Deposit. Concurrently with Tenant's execution of this
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Lease, Tenant shall deposit with Landlord the sum of TWENTY FOUR THOUSAND NINE
-------------------------
HUNDRED NINETY FIVE AND 00/100 DOLLARS ($24,995.00). Said sum shall be held by
- ------------------------------
Landlord as a security Deposit for the faithful performance by tenant of all of
the terms, covenants, and conditions of this Lease to be kept and performed by
Tenant during the term hereof. If Tenant defaults with respect to any provision
of this Lease, including, but not limited to, the provisions relating to, the
payment of rent and any of the monetary sums due herewith. Landlord may (but
shall not be required to) use, apply or retain all or any part of this Security
Deposit for the payment of any other amount which Landlord may spend by reason
of Tenant's default or to compensate Landlord for any other loss or damage which
Landlord may suffer by reason of Tenant's default. If any portion of said
Deposit is so used or applied, Tenant shall, within ten (10) days after written
demand therefor, deposit cash with Landlord in the amount sufficient to restore
the Security Deposit to its original amount. Tenant's failure to do so shall be
a material breach of this Lease. Landlord shall not be required to keep this
Security Deposit separate from its general funds, and Tenant shall not be
entitled to interest on such Deposit. If Tenant fully and faithfully performs
every provision of this Lease to be performed by it, the Security Deposit or any
balance thereof shall be returned to Tenant (or at Landlord's option, to the
last assignee of Tenant's interest hereunder) at the expiration of the Lease
term and after Tenant has vacated the Premises. In the event of termination of
Landlord's interest in this Lease. Landlord shall transfer said Deposit to
Landlord's successor in interest whereupon Tenant agrees to release landlord
from liability for the return of such Deposit or the accounting therefor.
5. ACCEPTANCE AND SURRENDER OF PREMISES. By entry hereunder, Tenant
------------------------------------
accepts the premises as being in good and sanitary order, condition and repair
and accepts the building and improvements included in the Premises in their
present condition and without the representation or warranty by Landlord as to
the condition of such building or as to the use or occupancy which may be made
thereof. Any exceptions to the foregoing must be by written agreement executed
by Landlord and Tenant. Tenant agrees on the last day of the Lease term, or on
the sooner termination of this Lease, to surrender the Premises promptly and
peaceably to Landlord in good condition and repair (damage by Acts of God, fire,
normal wear and tear excepted), with all interior walls painted, or cleaned so
that they appear freshly painted, and repaired and replaced, if damaged; all
floors cleaned and waxed; all carpets cleaned and shampooed; all broken, marred
or non-conforming acoustical ceiling tiles replaced; all windows washed; the
air-conditioning and heating systems served by a reputable and licensed service
firm and in good operating condition and repair; the plumbing and electrical
systems and lighting in good order and repair, including replacement of any
burned out or broken light bulbs or ballasts; the lawn and shrubs in good
condition including the replacement of any dead or damaged plantings; the
sidewalk, driveways and parking areas in good order, condition and repair;
together with all alterations, additions, and improvements which may have been
made in, to, or
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<PAGE>
on the Premises (except moveable trade fixtures installed at the expense of
Tenant) except that Tenant shall ascertain from Landlord within thirty (30) days
before the end of the term of this Lease whether Landlord desires to have the
Premises or any part or parts thereof restored to their condition and
configuration as when the Premises were delivered to Tenant and if Landlord
shall so desire, then Tenant shall restore said Premises or such part or parts
thereof before the end of this Lease, at Tenant's sole cost and expense. Tenant,
on or before the end of the term of sooner termination of this Lease, shall
remove all of Tenant's personal property and trade fixtures from the Premises,
and all property not so removed on or before the end of the term or sooner
termination of this Lease shall be deemed abandoned by the Tenant and title to
same shall thereupon pass to Landlord without compensation to Tenant. Landlord
may, upon termination of this Lease, remove all moveable furniture and equipment
so abandoned by Tenant, at Tenant's sole cost, and repair any damage caused by
such removal at Tenant's sole cost. If the Premises be not surrendered at the
end of the term or sooner termination of this Lease, Tenant shall indemnify
Landlord against loss or liability resulting from the delay by Tenant in so
surrendering the Premises including, without limitation, any claims made by any
succeeding tenant founded on such delay. Nothing contained herein shall be
construed as an extension of the term hereof or as a consent of Landlord to any
holding over by Tenant. The voluntary or other surrender of this Lease or the
Premises by Tenant or a mutual cancellation of this Lease shall not work as a
merger and, at the option of Landlord, shall either terminate all or any
existing subleases or subtenancies or operate as an assignment to Landlord of
all or any such subleases or subtenancies.
6. ALTERATIONS AND ADDITIONS. Tenant shall not make, or suffer to be
-------------------------
made, any alteration or addition to the premises, or any part thereof, without
the written consent of Landlord first had and obtained by Tenant (such consent
not to be unreasonably withheld), but at the cost of Tenant, and any addition
to, or alteration of, the Premises, except moveable furniture and trade
fixtures, shall at once become a part of the Premises and belong to Landlord.
Landlord reserves the right to approve all contractors and mechanics proposed by
Tenant to make such alterations and additions. Tenant shall retain title to all
moveable furniture and trade fixtures placed in the Premises. All heating,
lighting, electrical air-conditioning, floor to ceiling partitioning, drapery,
carpeting, and floor installations made by Tenant, together with all property
that has become an integral part of the Premises, shall not be deemed trade
fixtures. Tenant agrees that it will not proceed to make such alteration or
additions, without having obtained consent from Landlord to do so, and until
five (5) days from the receipt of such consent, in order to make such alteration
or additions, without having obtained consent from Landlord to do so, and until
five (5) days from the receipt of such consent, in order that Landlord may post
appropriate notices to avoid any liability to contractors or material suppliers
for payment for Tenant's improvements. Tenant will at all times permit such
notices to be posted and to remain posted until the completion of work. Tenant
shall, if required by Landlord, secure at Tenant's own cost and expense, a
completion and lien indemnity bond, satisfactory to Landlord, for such work.
Tenant further covenants and agrees that any mechanic's lien filed against the
Premises for work claimed to have been done for, or materials claimed to have
been furnished to Tenant, will be discharged by Tenant, by bond or otherwise,
within ten (10) days after the filing thereof, at the cost and expense of
Tenant. Any exceptions to the foregoing must be made in writing and executed by
both Landlord and Tenant.
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7. TENANT MAINTENANCE. Tenant shall, at its sole cost and expense, keep
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and maintain the Premises (including appurtenances) and every part thereof in a
high standard of maintenance and repair, and in good and sanitary condition.
Tenant's maintenance and repair responsibilities herein referred to include, but
are not limited to, janitorization, plumbing systems within the Premises such as
water and rain lines, sinks, electrical systems within the Premises (such as
outlets, lighting fixtures, lamps, bulbs, tubes, ballasts, heating and air-
conditioning controls within the Premises such as mixing boxes, thermostats,
time clocks, supply and return grills), all interior improvements within the
premises including but not limited to wall coverings, window coverings,
acoustical ceilings, vinyl tile, carpeting, partitioning, doors (both interior
and exterior, including closing mechanisms, latches, locks, and all other
interior improvements of any nature whatsoever. Tenant agrees to provide carpet
shields under all rolling chairs or to otherwise be responsible for wear and
tear of the carpet caused by such rolling chairs if such wear and tear exceeds
that caused by normal foot traffic in surrounding areas. Areas of excessive
wear shall be replaced at Tenant's sole expense upon Lease termination.
8. UTILITIES. [Intentionally Omitted.]
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9. TAXES. Tenant shall not be responsible for any real estate tax
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increase related to tenant improvements constructed for another Tenant's use
outside the Premises leased hereunder.
A. As Additional Rent and in accordance with Paragraph 4D of this
Lease, Tenant shall pay to Landlord, or if Landlord so directs, directly to the
Tax Collector, all Real Property Taxes relating to the Premises. In the event
the Premises leased hereunder consist of only a portion of the entire tax
parcel, Tenant shall pay to Landlord Tenant's proportionate share of such real
estate taxes allocated to the leased Premises by square footage other reasonable
basis as calculated and determined by Landlord. If the tax billing pertains
100% to the leased Premises, and Landlord chooses to have Tenant to pay said
real estate taxes directly to the Tax Collector, then in such event it shall be
the responsibility of Tenant to obtain the tax and assessment bills and pay,
prior to delinquency, the applicable real property taxes and assessments
pertaining to the leased Premises, and failure to receive a bill for taxes
and/or assessment shall not provide a basis for cancellation of or
nonresponsibility for payment of penalties for nonpayment or late payment by
Tenant. The term "Real Property Taxes " as used herein, shall mean (i) all
taxes, assessments, levies and other charges of any kind or nature
(*Notwithstanding the above, it is agreed that if any special assessments for
capital improvements are assessed, and if Landlord has the option to either pay
the entire assessment in cash or go to bond, and if Landlord elects to pay the
entire assessment in cash in lieu of going to bond, the entire portion of the
assessment assigned to Tenant's page 3 of 8 Leased Premises will be pro rated
over the same period that the assessment would have been prorated had the
assessment gone to bond) whatsoever, general and special, foreseen and
unforeseen (including all installments of principal and interest required to pay
any general or special assessments for public improvements and any increases
resulting from reassessments caused by change in ownership of the Premises now
or hereafter imposed by any governmental or quasi-governmental authority or
special district having the director indirect power to tax or levy assessments,
which are levied or assessed against, or with respect to the value, occupancy or
use of, all or any portion of the Premises (as now constructed or as may at any
time hereafter be constructed, altered, or otherwise changed) or
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Landlord's interest therein; any improvements located within the Premises
(regardless of ownership), the fixtures, equipment and other property of
Landlord, real or personal, that are an integral part of and located in the
Premises, or parking areas, public utilities, or energy within the Premises:
(ii) all charges, levies or fees imposed by reason of environmental regulation
or other governmental control of the Premises: and (iii) all costs and fees
(including reasonable attorneys' fees) incurred by landlord in reasonably
contesting any Real Property Tax and in negotiating with public authorities as
to any Real Property Tax. If at any time during the term of this Lease the
taxation or assessment of the Premises prevailing as of the commencement date of
this Lease shall be altered so that in lieu of or in addition to any Real
Property Tax described above there shall be levied, assessed or imposed (whether
by reason of a use or occupancy of the Premises or Landlord's interest therein,
or (ii) on or measured by the gross receipts, income or rentals from the
Premises, on Landlord's business of leasing the Premises, or computed in any
manner with respect to the operation of the Premises, then any such tax or
charge, however designated, shall be included within the meaning of the term
"Real Property Taxes" for purposes of this Lease. If any Real Property Tax is
based upon property or rents unrelated to the Premises, then only that part of
such Real Property Tax that is fairly allocable to the Premises shall be
included within the meaning of the term "Real Property Taxes". Notwithstanding
the foregoing, the term "Real Property Taxes" shall not include state,
inheritance, gift or franchise taxes of Landlord or the federal or state net
income tax imposed on Landlord's income from all sources.
B. Taxes on Tenant's Property. Tenant shall be liable for and shall
--------------------------
pay ten days before delinquency, taxes levied against any personal property or
trade structures placed by Tenant in or about the Premises. If any such taxes
on Tenant's personal property or trade fixtures are levied against Landlord or
landlord's property or if the assessed value of the Premises is increased by the
inclusion therein of a value placed upon such personal property or trade
fixtures of Tenant and if Landlord, after written notice to Tenant, pays the
taxes based on such increased assessment, which Landlord shall have the right to
do regardless of the validity thereof, but only under proper protest if
requested by Tenant. Tenant shall upon demand, as the case may be, repay to
landlord the taxes so levied against Landlord, or the proportion of such taxes
resulting from such increase in the assessment; provided that in any such event
Tenant shall have the right, in the name of Landlord and with Landlord's full
cooperation, to bring suit in any court of competent jurisdiction to recover the
amount of such taxes so paid under protest, and any amount so recovered shall
belong to Tenant.
10. LIABILITY INSURANCE. Tenant, at Tenant's expense, agrees to keep in
-------------------
force during the term of this Lease a policy of comprehensive general liability
insurance for bodily injury and property damage occurring in, on or about the
Premises, including parking and landscaped areas, in the amount of $2,000,000
combined single limit. Such insurance shall be primary and noncontributory as
respects any insurance carried by Landlord. The policy or policies affecting
such insurance shall name Landlord as additional insureds, and shall insure any
liability of Landlord, contingent or otherwise, as respects acts or omissions of
Tenant, its agents, employees or invitees or otherwise by any conduct or
transactions of any of said persons in or about or concerning the Premises
including any failure of Tenant to observe or perform any of its obligations
hereunder; shall be issued by an insurance company admitted to transact business
in the State of California; and shall provide that the insurance effected
thereby shall not be
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canceled, except upon thirty (30) days' prior written notice to Landlord. A
certificate of insurance of said policy shall be delivered to Landlord. If,
during the term of this Lease, in the considered opinion of Landlord's Lender,
insurance advisor, or counsel, the amount of insurance described in this
Paragraph 10 is not adequate, Tenant agrees to increase said coverage to such
commercially reasonable amount as Landlord and Tenant shall agree, but not more
than once in any twelve (12) month period.
11. TENANT'S PERSONAL PROPERTY INSURANCE AND WORKMAN'S COMPENSATION
---------------------------------------------------------------
INSURANCE. Tenant shall maintain a policy or policies of fire and property
- ---------
damage insurance in "all risk" form with a sprinkle leakage endorsement insuring
the personal property, inventory, trade fixtures, and leasehold improvements
within the leased Premises for the full replacement value thereof. The proceeds
from any of such policies shall be used for the repair, replacement of such
items so insured. Tenant shall also maintain a policy or policies of workman's
compensation insurance and any other employee benefit insurance sufficient to
comply with all laws.
12. PROPERTY INSURANCE. Landlord shall purchase and keep in force, and as
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Additional Rent and in accordance with Paragraph 4.D of this Lease, Tenant shall
pay to Landlord Tenant's proportionate share (allocated to the leased Premises
by square footage or other equitable basis as calculated and determined by
Landlord) of the cost of, policy or policies of insurance covering loss or
damage to the Premises (excluding routine maintenance and repairs and incidental
damage or destruction caused by accidents or vandalism for which Tenant is
responsible under Paragraph 7) in the amount of the full and incidental damage
or destruction caused by accidents or vandalism for which Tenant is responsible
under Paragraph 7) in the amount of the full replacement value thereof,
providing protection against those perils included within the classification of
"all risks" insurance and flood and/or earthquake insurance, if available, plus
a policy of rental income insurance in the amount of one hundred (100%) percent
of twelve (12) months Basic Rent, plus sums paid as Additional Rent. If such
insurance cost is increased due to Tenant's use of the Premises, Tenant agrees
to pay to landlord the full cost of such increase. Tenant shall have no
interest in nor any right to the proceeds of any insurance procured by Landlord
for the Premises.
Landlord and Tenant do each hereby respectively release the other, to the
extent of insurance coverage of the releasing party, from any liability for loss
or damage caused by fire or any of the extended coverage casualties included in
the releasing party's insurance policies, irrespective of the cause of such fire
or casualty; provided, however, that if the insurance policy of either releasing
party prohibits such waiver, then this waiver shall not take effect until
consent to such waiver is obtained. If such waiver is so prohibited, the
insured party affected shall promptly notify the other party thereof.
13. INDEMNIFICATION. Landlord shall not be liable to Tenant and Tenant
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hereby waives all claims against Landlord for any injury to or death of any
person or damage to or destruction of property in or about the Premises by or
from any cause whatsoever, including, without limitation, gas, fire, oil,
electricity or leakage of any character from the roof, walls, basement or other
portion of the Premises but excluding, however, the negligence of Landlord,
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its agents, servants, employees invitees, or contractors of which negligence
Landlord has knowledge and reasonable time to correct. Except as to injury to
persons or damage to property the principal cause of which is the negligence of
Landlord, Tenant shall hold Landlord harmless from and defend Landlord against
any and all expenses, including reasonable attorneys' fees, in connection
therewith arising out of any injury to or death of any person or damage to or
destruction of property occurring in, on or about the Premises, or any part
thereof, from any cause whatsoever.
14. COMPLIANCE. Tenant, at its sole cost and expense, shall promptly
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comply with all laws, statutes, ordinances and governmental rules, regulations
or requirements now or hereafter in effect; with the requirements of any board
of fire underwriters or other similar body now or hereafter constituted; and
with any direction or occupancy certificate issued pursuant to law by any public
officer; provided, however, that n such failure shall be deemed a breach of the
provisions if Tenant, immediately upon notification, commences to remedy or
rectify said failure. The judgment of any court of competent jurisdiction or
the provision if Tenant, immediately upon notification, commences to remedy or
rectify said failure. The judgment of any court of competent jurisdiction or
the admission of Tenant in any action against Tenant, whether Landlord be a
party thereto or not, that Tenant has violated any such law, statute, ordinance
or governmental rule, regulation, requirement, direction or provision, shall be
conclusive of that fact as between Landlord and Tenant. Tenant shall, at its
sole cost and expense, comply with any and all requirements pertaining to said
Premises, of any insurance organization or company, necessary for the
maintenance of reasonable fire and public liability insurance requirements
pertaining to said Premises, of any insurance organization or company, necessary
for the maintenance of reasonable fire and public liability insurance covering
the Premises. Any non-conformance of the Common Areas of the Parcel and
Building which the Premises are located and the Leased Premises which includes
the improvements installed by Landlord as set forth on Exhibit B, required to
be corrected by the governing agency, shall be corrected at the cost and expense
of Landlord if such non-conformance exists as of the commencement date of this
Lease Agreement and further provided that such governing agency's requirement to
correct the non-conformance is not initiated as a reason of: (1) any future
improvements made by Tenant; or (ii) any permit request made to a governing
agency by Tenant. Any non-conformance of the Premises occurring after the
commencement date of this Lease Agreement shall be the responsibility of Tenant
to correct at Tenant's cost and expense.
15. LIENS. Tenant shall keep the Premises free from any liens arising out
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of any work performed, materials furnished or obligation incurred by Tenant. In
the event that Tenant shall not, within ten (10) days following the imposition
of such lien, cause the same to be released of record. Landlord shall have, in
addition to all other remedies provided herein and by law, the right, but not
the obligation, to cause the same to be released by such means as it shall deem
proper, including payment of the claim giving rise to such lien. All sums paid
by Landlord for such purpose, and all expenses incurred by it in connection
therewith, shall be payable to Landlord by Tenant on demand with interest at the
rime rate of interest as quoted by the Bank of America.
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16. ASSIGNMENT AND SUBLETTING. Tenant shall not assign, transfer, or
-------------------------
hypothecate the leasehold estate under this Lease, or any interest therein, and
shall not sublet the Premises, or any part thereof, or any right or privilege
appurtenant thereto, or suffer any other person or entity to occupy or use the
Premises, or any portion thereof, without, in each case, the prior written
consent of Landlord which consent will not be unreasonably withheld. As a
condition for granting this consent to any assignment, transfer, or subletting,
Landlord may require that Tenant agrees to pay to Landlord, as Additional Rent,
after deducting brokers fees, if any, required for the new subtenant, all rents
or additional consideration received by Tenant from its assignees, transferees,
or subtenants in excess of the rent payable by Tenant to Landlord hereunder.
Tenant shall, by thirty (30) days written notice, advise Landlord of its intent
to assign or transfer Tenant's interest in the Lease or sublet the Premises or
any portion thereof for any part of the term hereof. Within thirty (30) days
after receipt of said written notice. Landlord may, in its sole discretion,
elect to terminate this Lease as to the portion of the Premises described in
Tenant's notice on the date specified in Tenant's notice by giving written
notice of such election to terminate. If no such notice to terminate is given
to Tenant within said thirty (30) day period, Tenant may proceed to locate an
acceptable sublessee, assignee, or other transferee for presentment to Landlord
for Landlord's approval, all in accordance with the terms, covenants, and
conditions of this paragraph 16. If Tenant intends to sublet the entire
Premises and Landlord elects to terminate this Lease, this Lease shall be
terminated on the date specified in Tenant's notice. If, however, this Lease
shall terminate pursuant to the foregoing with respect to less than all the
Premises, the rent, as defined and reserved hereinabove shall be adjusted on a
pro rata basis to the number of square feet retained by Tenant, and this Lease
as so amended shall continue in full force and effect. In the event Tenant is
allowed to assign, transfer or subject the whole or any part of the Premises,
with the prior written consent of Landlord, no assignee, transferee or subtenant
shall assign or transfer this Lease, either in whole or in part, or sublet the
whole or any part of the Premises, without also having obtained the prior
written consent of Landlord. A consent of Landlord to one assignment, transfer,
hypothecation, subletting, occupation or use by any other person shall not
release Tenant from any of Tenant's obligations hereunder or be deemed to be a
consent to any subsequent similar or dissimilar assignment, transfer,
hypothecation, subletting, occupation or use by any other person. Any such
assignment, transfer, hypothecation, subletting, occupation or use without such
consent shall be void and shall constitute a breach of this Lease by Tenant and
shall, at the option of Landlord exercised by written notice to Tenant,
terminate this Lease. The leasehold estate under this Lease shall not, nor
shall any interest therein, be assignable for any purpose by operation of law
without the written consent of Landlord. As a condition to its consent,
Landlord may require Tenant to pay all expenses in connection with the
assignment, and Landlord may require Tenant's assignee or transferee (or other
assignees or transferees) to assume in writing all of the obligations under this
Lease and for Tenant to remain liable to Landlord under the Lease. SEE
PARAGRAPH 46.
17. SUBORDINATION AND MORTGAGES. In the event Landlord's title or
---------------------------
leasehold interest is now or hereafter encumbered by a deed of trust, upon the
interest of Landlord in the land and buildings in which the demised Premises are
located, to secure a loan from a lender (hereinafter referred to as "Lender") to
Landlord, Tenant shall, at the request of Landlord or Lender, execute in writing
an agreement subordinating its rights under this Lease to the lien of such deed
of trust or, if so requested, agreeing that the lien of Lender's deed of trust
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shall be or remain subject and subordinate to the rights of Tenant under this
Lease. Notwithstanding any such subordination, Tenant's possession under this
Lease shall not be disturbed if Tenant is not in default so long as Tenant shall
pay all rent and observe and perform all of the provisions set forth under this
Lease, and Lender shall agree to and acknowledge same in writing upon Tenant's
request.
18. ENTRY BY LANDLORD. Landlord reserves, and shall at all reasonable
-----------------
times after at least 24 hours notice (except in emergency) have the right to
enter the Premises to inspect them; to perform any services to be provided by
Landlord hereunder; to make repairs or provide any services to a contiguous
tenant(s); to submit the Premises to prospective purchasers, mortgagors or
tenants; to post notices of nonresponsibility; and to alter, improve or repair
the Premises or other parts of the building, all without abatement of rent, and
may erect scaffolding and other necessary structures in or through the Premises
where reasonably required by the character of the work to be performed;
provided, however, that the business of Tenant shall be interfered with to the
least extent that is reasonable practical. Any entry to the Premises by
Landlord for the purposes provided herein shall not under any circumstances be
construed or deemed to be a forcible or unlawful entry into or a detainer of the
Premises or an eviction, actual or constructive, of Tenant from the Premises or
any portion thereof.
19. BANKRUPTCY AND DEFAULT. The commencement of a bankruptcy action or
----------------------
liquidation action or reorganization action or insolvency action or an
assignment of or by Tenant for the benefit of creditors, or any similar action
undertaken by Tenant, or the insolvency of Tenant, shall at Landlord's option
constitute a breach of this Lease by Tenant. If the trustee or receiver shall
notify Landlord in writing of its election within thirty (30) days after an
order for relief in a liquidation action or within thirty (30) days after the
commencement of any action.
Within thirty (30) days after court approval of the assumption of this
Lease, the trustee or receiver shall cure (or provide adequate assurance to the
reasonable satisfaction of Landlord that the trustee or receiver shall cure) any
and all previous defaults under the unexpired Lease and shall compensate
Landlord for all actual pecuniary loss and shall provide adequate assurance of
future performance under said Lease to the reasonable satisfaction of Landlord
adequate assurance of future performance, as used herein, includes, but shall
not be limited to: (i) assurance of source and payment of rent, and other
consideration due under this Lease; (ii) assurance that the assumption or
assignment of this Lease will not breach substantially any provision, such as
radius location, use, or exclusivity provision, in any agreement relating to the
above described Premises.
Nothing contained in this section shall affect the existing right of
Landlord to refuse to accept an assignment upon commencement of or in connection
with a bankruptcy, liquidation, reorganization or insolvency action or an
assignment of Tenant for the benefit of creditors or other similar act. Nothing
contained this Lease shall be construed as giving or granting or creating an
equity in the demised Premises to Tenant. In no event shall the leasehold
estate under this Lease, or any interest therein, be assigned by voluntary or
involuntary bankruptcy proceeding without the prior written consent of Landlord.
In no event shall this Lease or any
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rights or privileges hereunder be an asset of Tenant under any bankruptcy,
insolvency or reorganization proceedings.
The failure to perform or honor any covenant, condition, or representation
made under this Lease shall constitute a default hereunder by Tenant upon
expiration of the appropriate grace period hereinafter provided. Tenant shall
have a period of five (5) days from the date of written notice from landlord
within which to cure any default in the payment of rental or adjustment thereto.
Tenant shall have a period of thirty (30) days from the date of written notice
from Landlord within which to cure any other default under this Lease; provided,
however, that if the nature of Tenant's failure is such that more than thirty
(30) days is reasonably required to cure the same. Tenant shall no be in
default so long as Tenant commences performance within such thirty (30) day
period and thereafter prosecutes the same to completion. Upon an uncured
default of this Lease by Tenant, Landlord shall have the following rights and
remedies in addition to any other rights or remedies available to Landlord at
law or in equity.
(a) The rights and remedies provided for by California Civil Code
Section 1951.2, including but not limited to recovery of the worth at the time
of award of the amount by which the unpaid rent for the balance of item after
the time of award exceeds the amount of rental loss for the same period that
Tenant provides could be reasonably avoided, as computed pursuant to subsection
(b) of said Section 1951.2. any roof by Tenant under subparagraphs (2) and (3)
of Section 1951.2 of the California Civil Code of the amount of rental loss that
could be reasonably avoided shall be made in the following manner. Landlord and
Tenant shall each select a licensed real estate broker in the business of
renting property of the same type and use as the Premises and in the same
geographic vicinity. Such two real estate brokers shall select a third licensed
real estate broker, and the three licensed real estate brokers so selected shall
determine the amount of the rental loss that could be reasonably avoided from
the balance of the term of this Lease after the time of award. The decision of
the majority of said licensed real estate brokers shall be final and binding
upon the parties hereto.
(b) The rights and remedies provided by California Civil Code Section
which allows Landlord to continue the Lease in effect and to enforce all of the
rights and remedies under this Lease, including the right to recover rent as it
becomes due, for so long as Landlord does not terminate Tenant's right to
possession, acts of maintenance or preservation, efforts to reset the Premises,
or the appointment of a receiver upon Landlord's initiative to protect its
interest under this Lease shall not constitute a termination of Tenant's right
to possession.
(c) The right to terminate this Lease by giving notice to Tenant in
accordance with applicable law.
(d) The right and power to enter the Premises and remove therefrom all
persons and property, to store such property in a public warehouse or elsewhere
at the cost of and for the account of Tenant, and to sell such property and
apply such proceeds therefrom pursuant to applicable California law. Landlord
may from time to time sublet the Premises or any part thereof for such term or
terms (which may extend beyond the term of this Lease) and at such rent and such
other terms as Landlord in its reasonable sole discretion may deem advisable,
with the
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right to make alterations and repairs to the Premises. Upon each subletting and
of such alterations and repairs,: third to payment of rent due and unpaid
hereunder from Tenant to Landlord; second, to the payment of any costs of such
subletting and of such alterations and repairs; third to payment of rent due and
unpaid hereunder; and the resident, if any, shall be held by Landlord and
applied in payment of future rent as the same becomes due hereunder, Tenant
shall pay any such deficiency to Landlord. Such deficiency shall be calculated
and paid monthly. No taking possession of the Premises by Landlord shall be
constituted as an election on its part to terminate this Lease unless a written
notice of such intention be given to Tenant. Notwithstanding any such subletting
without termination, Landlord may at any time hereafter elect to terminate this
Lease for such previous breach.
(e) The right to have a receiver appointed for Tenant upon
application by Landlord, to take possession of the Premises and to apply any
rents collected from the Premises and to exercise all other rights and remedies
gained to Landlord pursuant to subparagraph (c) above (except that Tenant may
vacate so long as it pays rent, provides an on-site security guard during normal
business hours from Monday through Friday, and otherwise performs its
obligations hereunder).
20. ABANDONMENT. Tenant shall not vacate or abandon the Premises at
any time during the term of this Lease and if Tenant shall abandon, vacate or
surrender said Premises, or be dispossessed by the process of law, or otherwise,
any personal property belonging to Tenant and left on the Premises shall be
deemed to be abandoned, at the option of Landlord, except such property as may
be mortgaged to Landlord.
21. DESTRUCTION. In the event the Premises are destroyed in whole or
in part from any cause, except for routine maintenance and repairs and
incidental (provided, however, that if the nature of Tenant's failure is such
that more than thirty (30) days is reasonably required to cure the same, Tenant
shall not be in default so long notwithstanding the above, Tenant shall have the
right to terminate this Lease if any damage to the Premises occurs during the
last year of the term, this Lease and said damage cannot be repaired within six
months, Tenant shall have the right to terminate this Lease. In the event
Tenant elect to terminate this Lease, Tenant shall give written notice to
Landlord of Tenant's election to terminate this Lease within five days of
Tenant's receipt of notice from Landlord identifying the projected time required
to make the necessary repairs of said Premises), damage and destruction caused
from vandalism and accidents for which Tenant is responsible under Paragraph 7,
Landlord may, at its option:
(a) Rebuild or restore the Premises in their condition prior to the
damage or destruction, or
(b) Terminate this Lease (providing that the Premises is damaged to
the extent of 33 1/3% of the replacement cost).
If Landlord does not give Tenant notice in writing within thirty (30)
days from the destruction of the Premises of its election to either rebuild and
restore them, or to terminate this Lease, Landlord shall be deemed to have
elected to rebuild or restore them, in which event
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Landlord agrees, at its expense, promptly to rebuild or restore the Premises to
their condition prior to the damage or destruction. Tenant shall be entitled to
a reduction in rent while such repair is being made in the proportion that the
area of the Premises rendered untenantable by such damage bears to the total
area of the Premises. If Landlord initially estimates that the rebuilding or
restoration will exceed 180 days or if Landlord does not complete the rebuilding
or restoration within one hundred eight (180) days following the date of
destruction (such period of time to be extended for delays caused by the fault
or neglect of Tenant or because of Acts of God, acts of public agencies, labor
disputes, strikes, fires, freight embargoes, rainy or stormy weather, inability
to obtain materials, supplies or fuels, acts of contractors or subcontractors,
or delay of the contractors or subcontractors due to such causes or other
contingencies beyond the control of Landlord, then Tenant shall have the right
to terminate this Lease by giving fifteen (15) days prior written notice to
Landlord. Notwithstanding anything herein the contrary, Landlord's obligation to
rebuild or restore shall be limited to the building and interior improvements
constructed by Landlord as they existed as of the commencement date of the Lease
and shall not include restoration of Tenant's trade fixtures, equipment,
merchandise, or any improvements, alterations or additions made by Tenant to the
Premises, which Tenant shall forthwith replace or fully repair at Tenant's sole
cost and expense provided this Lease is not canceled according to the provisions
above.
Unless this Lease is terminated pursuant to the foregoing provisions, this
Lease shall remain in full force and effect. Tenant hereby expressly waives the
provisions of Section 1932, Subdivision 2, in Section 1933, Subdivision 4 of the
California Civil Code.
In the event that the building in which the Premises are situated is
damaged or destroyed to the extent of not less than 33 1/3% of the replacement
cost thereof, Landlord may elect to terminate this Lease, whether the Premises
be injured or not. In the event the destruction of the Premises is caused by
Tenant, Tenant shall pay the deductible portion of Landlord's insurance
proceeds.
Notwithstanding the above, Tenant shall have the right to terminate this
Lease if any damage to the Premises occurs during the last year of the term of
this Lease and said damage cannot be repaired within six months, Tenant shall
have the right to terminate this Lease. In the event Tenant elects to terminate
this Lease, Tenant shall give written notice to Landlord of Tenant's election to
terminate this Lease within five days of Tenant receipt of notice from Landlord
identifying the projected time required to make the necessary repairs of said
damage in which event this Lease would terminate thirty (30) days after
Landlord receives written notice from Tenant of Tenant's election to terminate.
Tenant will remain responsible for the full performance of all terms, covenants
and conditions herein contained through the effective date of termination.
22. EMINENT DOMAIN. If all or any part of the Premises shall be taken by
any public or quasi-public authority under the power of eminent domain or
conveyance in lieu thereof, this Lease shall terminate as to any portion of the
Premises so taken or conveyed on the date when title vests in the condemnor, and
Landlord shall be entitled to any and all payment, income, rent, award, or any
interest therein whatsoever which may be paid or made in connection with such
taking or conveyance, and Tenant shall have no claim against Landlord or
otherwise
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for the value of any unexpired term of this Lease. Notwithstanding the foregoing
paragraph, any compensation specifically awarded Tenant for loss of business,
Tenant's personal property, moving costs or loss of goodwill, shall be and
remain the property of Tenant.
If any action or proceeding is commenced for such taking of the Premises or
any part thereof, or if Landlord is advised in writing by any entity or body
having the right or power of condemnation of its intention to condemn the
premises or any portion thereof, then Landlord shall have the right to terminate
this Lease by giving Tenant written notice thereof within sixty (60) days of the
date of receipt of said written advice, or commencement of said action or
proceeding, or taking conveyance, which termination shall take place as of the
first to occur of the last day of the calendar month next following the month in
which such taking conveyance, which termination shall take place as of the first
to occur of the last day of the calendar month next following the month in which
such notice is given or the date on which title to the Premises shall vest in
the condemnor.
If the event of such a partial taking or conveyance of the Premises, if the
portion of the Premises taken or conveyed is so substantial that the Tenant can
no longer reasonably conduct its business. Tenant shall have the privilege of
terminating this Lease within sixty (60) days from the date of such taking or
conveyance, upon written notice to Landlord of its intention so to do, and upon
giving of such notice this Lease shall terminate on the last day of the calendar
month next following the month in which such notice is given, upon payment by
Tenant of the rent from the date of such taking or conveyance to the date of
termination.
If a portion of the Premises be taken by condemnation or conveyance in lieu
thereof and neither Landlord nor Tenant shall terminate this Lease as provided
herein, this Lease shall continue in full force and effect as to the part of the
Premises not so taken or conveyed, and the rent herein shall be apportioned as
of the date of such taking or conveyance so that thereafter the rent to paid by
Tenant shall be in the ratio that the area of the portion of the Premises not so
taken or conveyed bears to the total area of the Premises prior to such taking.
23. SALE OR CONVEYANCE BY LANDLORD. In the event of a sale or conveyance
of the Premises or any interest therein, by any owner of the reversion then
constituting Landlord, the transferor shall thereby be released from any further
liability upon any of the terms, covenants or conditions (express or implied)
herein contained in favor of Tenant provided that the transferee assumes in
writing all obligations hereunder, and in such event, insofar as such transfer
is concerned, Tenant agrees to look solely to the responsibility of the
successor in interest of such transferor in and to the Premises and this Lease.
This Lease shall not be affected by any such sale or conveyance, and Tenant
agrees to attorn to the successor in interest of such transfer.
24. ATTORNMENT TO LENDER OR THIRD PARTY. In the event the interest of
Landlord in the land and buildings in which the leased Premises are located
(whether such interest of Landlord is a fee title interest or a leasehold
interest) is encumbered by deed of trust, and such interest is acquired by the
lender or any third party through judicial foreclosure or by exercise of a power
of sale at private trustee's foreclosure sale. Tenant hereby agrees to attorn
to
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the purchaser at any such foreclosure sale and to recognize such purchase
purchaser as the Landlord under this Lease. In the event the lien of the deed of
trust securing the loan from a Lender to Landlord is prior and paramount to the
Lease, this Lease shall nonetheless continue in full force and effect for the
remainder of the unexpired term hereof, at the same rental herein reserved and
upon all the other terms, conditions and covenants herein contained.
25. HOLDING OVER. Any holding over by Tenant after expiration or other
termination of the term of this Lease with the written consent of Landlord
delivered to Tenant shall not constitute a renewal or extension of the Lease or
give Tenant any rights in or to the leased Premises except as expressly provided
in this Lease. Any holding over after the expiration or other termination of
the term of this Lease, with the consent of Landlord, shall be construed to be a
tenancy from month to month, on the same terms and conditions herein specified
insofar as applicable except that the monthly Basic Rent shall be increased to
any amount equal to one hundred (150%) percent of the monthly Basic Rent
required during the last month of the Lease term.
26. CERTIFICATE OF ESTOPPEL. Tenant shall at any time upon not less than
ten (10) days prior written notice to Landlord execute, acknowledge and deliver
to Landlord a statement in writing k(i) certifying that this Lease is unmodified
and in full force and effect (or, if modified, stating the nature of such
nullification and certifying that this Lease, as so modified, is in full force
and effect) and the date to which the rent and other charges are paid in
advance, if any, and (ii) acknowledging that there are not, to Tenant's
knowledge, any uncured defaults on the part of Landlord hereunder, or specifying
such defaults, if any are claimed. Any such statement may be conclusively relied
upon by any prospective purchaser or encumbrance of the Premises. Tenant's
failure to deliver such statement within such time shall be conclusive upon
Tenant that this Lease is in full force and effect, without modification except
as may be represented by Landlord, that there are no unsecured defaults in
Landlord's performance, and that not more than one month's rent has been paid in
advance.
27. CONSTRUCTION CHANGES. It is understood that the description of the
Premises and the location of ductwork, plumbing and other facilities therein are
subject to such minor changes as Landlord or Landlord's architect determines to
be desirable in the course of construction of the Premises, and no such changes
shall affect this Lease or entitle Tenant to any reduction of rent hereunder or
result in any liability of Landlord to Tenant, Landlord does not guarantee the
accuracy of any drawings supplied to Tenant and verification of the accuracy of
such drawings rests with Tenant.
28. RIGHT OF LANDLORD TO PERFORM. All terms, covenants and conditions of
this Lease to be performed or observed by Tenant shall be performed or observed
by Tenant at Tenant's sole cost and expense and without any reduction of rent.
If Tenant shall within the time period allowed under said Lease fail to pay any
sum of money, or other rent, required to be paid by it hereunder or shall fail
to perform any other term of covenant hereunder on its part to be performed, and
such failure shall continue for five days after written notice thereof by
Landlord, Landlord, without waiving or releasing Tenant from any obligation of
Tenant hereunder, may, but shall not be obliged to, make any such payment or
perform any such other term or covenant
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on Tenant's part to be performed. All sums so paid by Landlord and all necessary
costs of such performance by Landlord together with interest thereon at the rate
of the primate rate of interest per annum as quoted by the Bank of America from
the date of such payment on performance by Landlord, shall be paid (and Tenant
covenants to make such payment) to Landlord on demand by Landlord, and Landlord
shall have (in addition to any other right or remedy of Landlord) the same
rights and remedies in the event of nonpayment by Tenant as in the case of
failure by Tenant in the payment of rent hereunder.
29. ATTORNEY'S FEES.
A. In the event that either Landlord or Tenant should bring suit for
the possession of the Premises, for the recovery of any sum due under this
Lease, or because of the breach of any provision of this Lease, or for any other
relief against the other party hereunder, then all costs and expenses, including
reasonable attorneys fees, incurred by the prevailing party therein shall be
paid by the other party, which obligation on the part of the other party shall
be deemed to have accrued to date of the commencement of such action and shall
be enforceable whether or not the action is prosecuted to judgment.
B. Should Landlord be named as a defendant in any suet brought
against Tenant in connection with or arising out of Tenant's occupancy hereunder
Tenant shall pay to Landlord its casts and expenses incurred in such suit
including a reasonable attorney's fee.
30. WAIVER. The waiver by either party d the other party's failure to
perform or observe any term, covenant or condition herein contained to be
performed or observed by such waiving party shaft not be deemed to be a waiver
of such term, covenant or condition or of any subsequent failure of the party
failing to perform or observe the same or any other such term, covenant or
condition therein contained, and no custom or practice which may develop between
the parties hereunder during the term hereof shall be deemed a waiver of, or in
any way affect, the right of either party to insist upon performance and
observance of the other party in strict accordance with the terms hereof.
31. NOTICES. All notices, demands, requests, advices or designations
which may be or are required to be given by either party to the other hereunder
shall be in writing. All notices, demands, requests, advices or designations by
Landlord to Tenant shall be sufficiently given, made or delivered if personally
served on Tenant by leaving the same at the Premises or if sent by United States
certified or registered mail, postage prepaid addressed to Tenant at the
Premises. All notices, demands, requests, advices or designations by Tenant to
Landlord shall be sent by United States certified or registered mail, postage
prepaid, addressed to Landlord at is offices at: PEERY/ARRILLAGA, 2560 Mission
College Blvd, #101, Santa Clara, CA 95051. Each notice, request, demand, advice
or designation referred to in this paragraph shall be deemed received on the
date of the personal service named thereof in the manner herein provided, as the
case may be.
32. EXAMINATION OF LEASE. Submission of this instrument for examination
or signature by Tenant does not constitute a reservation of or option lease, and
this instrument is not effective as a lease or otherwise until its execution and
delivery by both Landlord and Tenant.
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33. DEFAULT BY LANDLORD. Landlord shall not be in default unless Landlord
fails to perform obligations required of Landlord within a reasonable but in no
event earlier than (30) days after written notice by Tenant to Landlord and to
the holder of any first mortgage or deed of trust covering the Premises whose
name and address shall have heretofore been furnished to Tenant in writing,
specifying wherein Landlord has failed to perform such obligations, provided
however, that if the nature of Landlord's obligations is such that more than
thirty (30) days are required for performance, then Landlord shall be in default
if Landlord commences performance within such thirty (30) day period and
thereafter diligently prosecutes the same to completion.
34. CORPORATE AUTHORITY. If Tenant is a corporation (or partnership)
represents and warrants that he is duly authorized to execute and deliver this
Lease on behalf of a said corporation (or partnership) in accordance with the
by-laws of said corporation (or partnership in accordance with the partnership
agreement) and that this Lease is binding upon said corporation (or partnership)
in accordance with its terms. If Tenant is a corporation, Tenant shall, within
thirty (30) days after execution of this Lease, deliver to Landlord a certified
copy of the resolution of the Board of Directors of said corporation authorizing
or ratifying the execution of this Lease.
35. [INTENTIONALLY OMITTED]
36. LIMITATION OF LIABILITY. In consideration of the benefits accruing
hereunder, Tenant and all successors and assigns covenant and agree that in the
event of any actual or alleged failure, breach of default hereunder by Landlord:
(a) the sole and exclusive remedy shall be against Landlord and Landlord's
assets;
(b) no partner of Landlord shall be sued or named as a party in any suit
or action (except as may be necessary to secure jurisdiction of the
partnership);
(c) no service of process shall be made against any partner of Landlord
(except as may be necessary to secure jurisdiction of the partnership);
(d) no partner of Landlord shall be required or otherwise plead to any
service of process;
(e) no judgment will taken against any partner of Landlord;
(f) any judgment taken against any partner of Landlord may be vacated and
set aside at any time without hearing;
(g) no writ of execution will ever be levied against the assets of any
partner of Landlord;
(h) these covenants and agreements are enforceable both by Landlord and
also by any partner of Landlord.
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Tenant agrees that each of the foregoing covenants and agreements shall be
applicable to any covenant or agreement either expressly contained in the Lease
or imposed by statute or at common law.
37. SIGNS. No sign, placard, picture, advertisement, name or notice shall
be inscribed, displayed or printed or affixed on or to any part of the outside
of Premises or any exterior windows of the Premises without the written consent
of Landlord first had and obtained and Landlord shall have the right to remove
any such sign, placard, picture, advertisement, name or notice without notice to
and at the expense of Tenant. If Tenant is allowed to print or affix or to in
any way place a sign in, on, or about the Premises, upon expiration or other
sooner termination of this Lease, Tenant at Tenant's sole cost and expense shall
remove such sign and repair all damage in such a manner as to restore all
aspects of the appearance of the Premises to the condition prior to the
placement of said sing.
All approved signs or lettering on outside doors shall be printed, painted,
affixed or inscribed at the expense of Tenant by a person approved of by
Landlord.
Tenant shall not place anything or allow anything to be placed near the
glass of any window, door partition or wall which may appear unsightly from
outside the Premises.
38. MISCELLANEOUS AND GENERAL PROVISIONS.
A. Use of Building Name. Tenant shall not, without the consent of
Landlord, use the name of the building for any purpose other than an address of
the business conducted by Tenant in the Premises.
B. Choice of Law; Severability. This Lease shall in all respects be
governed by and construed in accordance with the laws of the State of
California. If any provision of this Lease shall be invalid, unenforceable or
ineffective for any reason whatsoever, all other provisions hereof shall be and
remain in full force and effect.
C. Definition of Terms. The term "Premises" includes the space leased
hereby and any improvements now or hereafter installed therein or attached
thereto. The term "Landlord" or any pronoun used in place thereof includes the
plural as well as the singular and the successors and assigns of Landlord. The
term "Tenant" or any pronoun used in place thereof includes the plural as well
as the singular and individuals, firms, associations, partnerships and
corporations, and their and each of their respective heirs, executors,
administrators, successors and permitted assigns, according to the context
hereof, and the provisions of this Lease shall inure to the benefit of and bind
such heirs, executors, administrators, successors and permitted assigns.
The term "person" includes the plural as well as the singular and
individuals, firms, associations, partnerships and corporations. Words used in
any gender include other genders. If there be more than one Tenant the
obligations of Tenant hereunder are joint and several. The paragraph headings
of this Lease are for convenience of reference only and shall have no effect
upon the construction or interpretation of any provision thereof.
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D. Time of Essence. Time is of the essence of this Lease and of each and
all of its provisions.
E. Quitclaim. At the experience or earlier termination of this Lease.
Tenant shall execute, acknowledge and deliver to Landlord, within (10) days
after written demand written demand from Landlord to Tenant, any quitclaim deed
or other document required by any reputable title company, licensed to operate
in the State of California, to remove the cloud or encumbrance created by the
Lease from the real property of which Tenant's Premises are part.
F. Incorporation of Prior Agreements; Amendments. This instrument along
with any exhibits and attachments hereto constitutes the entire agreement
between Landlord and Tenant relative to the Premises and this agreement and the
exhibits and attachments may be altered, amended or revoked only by an
instrument in writing signed by both Landlord and Tenant. Landlord and Tenant
agree hereby that all prior or contemporaneous oral Agreements between and among
themselves and their agents or representatives relative to the leasing of the
Premises are merged in or revoked by this agreement.
G. Recording. Neither Landlord nor Tenant shall record this Lease or a
short form memorandum hereof without the consent of the other.
H. Amendments for Financing. Tenant further agrees to execute any
amendments required by a lender to enable Landlord to obtain financing, so long
as Tenant's rights hereunder are not materially affected and there is no change
in the Basic Rent and Lease terms.
I. Additional Paragraphs. Paragraphs 19 through 47 are added hereto and
are hereto and are included as part of this lease.
J. Clauses, Plats and Riders. Clauses, plats and riders, if any, signed
by Landlord and Tenant and endorsed on or affixed to this Lease are a part
hereof.
K. Diminution of Light, Air or View. Tenant covenants and agrees that no
diminution or shutting off of light, air or view by an structure which may be
hereafter erected (whether or not by Landlord) shall in any way affect his
Lease, entitle Tenant to any reduction of rent hereunder or result in any
liability of Landlord to Tenant.
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IN WITNESS WHEREOF, Landlord and Tenant have executed and delivered this
Lease as of the date and year last written below.
LANDLORD: TENANT:
JOHN ARRILLAGA CENTAUR PHARMACEUTICALS, INC.,
SEPARATE PROPERTY TRUST a Delaware corporation
By /s/ John Arrillaga By /s/ Brian D. Frenzel
-------------------------- ---------------------------------
John Arrillaga, Trustee
Title President and CEO
-------------------------------
RICHARD T. PEERY Type or Print Name Brian D. Frenzel
-----------------
SEPARATE PROPERTY TRUST
By /s/ Richard T. Peery
---------------------------
Richard T. Peery, Trustee
/s/ William Riddle
- -----------------------------
William Riddle, Trustee
/s/ Barry Saper
- -----------------------------
Barry Saper, Trustee
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Paragraphs 39 through 46 to Lease Agreement Dated December 15, 1992. By and
Between Oakmead Associates, as Landlord, and Centaur, Inc., a California
corporation, as Tenant for 9,998+ Square Feet of Space Located at 484 Oakmead
-
Pkwy., Sunnyvale, California.
39. BASIC RENT: In accordance with Paragraph 4(A) herein, the total
----------
aggregate sum of SIX HUNDRED FORTY EIGHT THOUSAND THREE HUNDRED EIGHTY ONE AND
NO/100 DOLLARS ($648,381.00), shall be payable as follows:
On June 1, 1993, the sum of SEVEN THOUSAND AND NO/100 DOLLARS ($7,000.00)
shall be due, and a like sum due on the first day of each month thereafter,
through and including September 1, 1993.
On October 1, 1993, the sum of EIGHT THOUSAND FIVE HUNDRED AND NO/100
DOLLARS ($8,500.00) shall be due, and a like sum due on the first day of each
month thereafter, through and including December 1, 1993.
On January 1, 1994, the sum of NINE THOUSAND NINE HUNDRED NINETY EIGHT AND
NO/100 DOLLARS ($9,998.00) shall be due, and a like sum due on the first day of
each month thereafter, through and including March 1, 1994
On April 1, 1994, the sum of TEN THOUSAND FOUR HUNDRED NINETY SEVEN AND
90/100 DOLLARS ($10,497.90) shall be due, and a like sum on the first day of
each month thereafter, through and including March 1, 1995.
On April 1, 1995, the sum of TEN THOUSAND NINE HUNDRED NINETY SEVEN AND
80/100 DOLLARS ($10,997.80) shall be due and a like sum due on the first day of
each month thereafter, through and including March 1, 1996.
On April 1, 1996, the sum of ELEVEN THOUSAND FOUR HUNDRED NINETY SEVEN AND
70/100 dollars ($11,497.70) shall be due, and a like sum due on the first day of
each month thereafter, through and including March 1, 1997.
On April 1, 1997, the sum of ELEVEN THOUSAND NINE HUNDRED NINETY SEVEN AND
60/100 dollars ($11,997.60) shall be due, and a like sum due on the first day of
each month thereafter, through and including March 1, 1998.
On April 1, 1998, the sum of TWELVE THOUSAND FOUR HUNDRED NINETY SEVEN AND
50/100 dollars ($12,497.50) shall be due, and a like sum due on the first day of
each month thereafter, through and including May 1, 1998; or until the entire
aggregate sum of SIX HUNDRED FORTY EIGHT THOUSAND THREE HUNDRED EIGHTY ONE AND
NO/100 DOLLARS ($648,381.00) has been paid.
23
<PAGE>
40. "AS-IS" BASIS: It is hereby agreed that the Premises leased hereunder
-------------
is leased strictly on an "as-is" basis and in its present condition, and in the
configuration as show on Exhibit B to be attached hereto, Landlord shall not be
---------
required to make, nor be responsible for any cost, in connection with any
repair, restoration, and/or improvement to the Premises in order for this Lease
to commence. Landlord makes no warranty or representation of any kind or nature
whatsoever as to the condition or repair of the Premises, nor as to the use or
occupancy which may be made thereof, other than those representations otherwise
set forth in this Lease.
41. CONSENT: Whenever the consent of one party to the other is required
-------
hereunder, such consent shall not be unreasonably withheld.
42. RULES AND REGULATIONS AND COMMON AREA: Subject to the terms and
-------------------------------------
conditions of this Lease and such Rules and Regulations as Landlord may from
time to time prescribe, Tenant and Tenant's employees, invitees and customers
shall, in common with other occupants of the Parcel/Building in which the
premises are located, and their respective employees, invitees and customers,
and others entitled to the use thereof, have the non-exclusive right to use the
access roads, parking areas, and facilities provided and designated by Landlord
for the general use and convenience of the occupants of the Parcel/Building in
which the Premises are located, which areas and facilities are referred to
herein as "Common Area'.. This right shall terminate upon the termination of
this Lease. Landlord reserves the right from time to time to mace changes in the
shape. size, location, amount and extent of Common Area. Landlord further
reserves the right to promulgate such reasonable rules and regulations relating
to the use of the Common Area, and any part or parts thereof, as Landlord may
deem appropriate for the best interests of the occupants of the Parcel/Building.
Such Rules and Regulations may be amended by Landlord from time to time, with or
without advance notice, and all amendments shall be effective upon delivery of a
copy to Tenant. Landlord shall not be responsible to Tenant for the non-
performance by any other tenant or occupant of the Parcel/Building of any of
said Rules and Regulations.
Landlord shall operate, manage and maintain the Common Area. The manner in
which the Common Area shall be maintained and the expenditures for such
maintenance shall be at the discretion of Landlord; however, the Common Area
shall be managed in a manner comparable to other similar commercial properties
owned and managed by Landlord
43. EXPENSES OF OPERATION, MANAGEMENT, AND MAINTENANCE OF THE COMMON AREAS
----------------------------------------------------------------------
OF THE PARCEL AND BUILDING IN WHICH THE PREMISES ARE LOCATED: As Additional
- ------------------------------------------------------------
Rent and in accordance with Paragraph 4D of this Lease, Tenant shall pay to
Landlord Tenant s proportionate share (calculated on a square footage or other
equitable basis as calculated by landlord) of all expenses of operation,
management, maintenance and repair of the Common Areas of the Parcel/Building
including, but not limited to, license, permit, and inspection fees; security;
utility charges associated with exterior landscaping and lighting (including
water and sewer charges); all charges incurred in the maintenance of landscaped
areas, lakes, parking lots, sidewalks, driveways, maintenance, repair and
replacement of all fixtures and electrical, mechanical and plumbing systems;
structural elements and exterior surfaces of the buildings; salaries and
employee benefits of personnel and
24
<PAGE>
payroll taxes applicable thereto; supplies, materials, equipment and tools; the
cost of capital expenditures which have the effect of reducing operating
expenses, provided, however, that in the event Landlord makes such capital
improvements, Landlord may amortize its investment in said improvements
(together with interest at the rate of fifteen (15%) percent per annum on the
unamortized balance) as an operating expense in accordance with standard
accounting practices, provided, that such amortization is not at a rate greater
than the anticipated savings in the operating expenses.
"Additional Rent" as used herein shall not include Landlord's debt
repayments. interest on charges, expenses directly or indirectly incurred by
Landlord for the benefit of any other tenant: cost for the installation of
partitioning or any other tenant improvements; cost of attracting tenants;
depreciation; interest; or executive salaries.
As Additional Rent and in accordance with Paragraph 4D of this Lease,
Tenant shall pay its proportionate share (calculated on a square footage or
other equitable basis as calculated by Landlord) of the cost of operation
(including common utilities), management, maintenance, and repair of the
building (including common areas such as lobbies, restrooms, janitor's closets,
hallways, elevators, mechanical and telephone rooms, stairwells, entrances,
spaces above the ceilings and janitorization of said common areas) in which the
Premises are located. The maintenance items herein referred to include, but are
not limited to, all windows, window frames, plate glass, glazing, truck doors,
main plumbing systems of the building (such as water drain lines, sinks,
toilets, faucets, drains, showers and water fountains), main electrical systems
(such as panels and conduits), heating and air-conditioning systems (such as
compressors, fans, air handlers, ducts, boilers, heaters), store fronts, roofs,
downspouts, building common area interiors (such as wall coverings, window
coverings, floor coverings and partitioning), ceilings, building exterior doors,
skylights (if any), automatic fire extinguishing systems, and elevators (if
any); license, permit and inspection fees; security, salaries and employee
benefits of personnel and payroll taxes applicable thereto; supplies, materials,
equipment and tools; the cost of capital expenditures which have the effect of
reducing operating expenses, provided, however, that in the event Landlord makes
such capital improvements, Landlord may amortize its investment in said
improvements (together with interest at the rate of fifteen (15%) percent per
annum on the unamortized balance) as an operating expense in accordance with
standard accounting practices, provided, that such amortization is not at a rate
greater than the anticipated savings in the operating expenses. Tenant hereby
waives all rights hereunder, and benefits of, subsection 1 of Section 1932 and
Sections 1941 and 1947 of the California Civil Code and under any similar law,
statute or ordinance now or hereafter in effect.
44. UTILITIES OF THE BUILDING IN WHICH THE PREMISES ARE LOCATED: As
-----------------------------------------------------------
Additional Rent and in accordance with Paragraph 4D of this Lease Tenant shall
pay its proportionate share (calculated on a square footage or other equitable
basis as calculated by Landlord) of the cost of all utility charges such as
water, gas, electricity, telephone, telex and other electronic communications
service, sewer service, waste pick-up and any other utilities, materials or
services furnished directly to the building in which the Premises are located,
including without limitation, any temporary or permanent utility surcharge or
other exactions whether or not hereinafter imposed.
25
<PAGE>
Landlord shall not be liable for and Tenant shall not be entitled to any
abatement or reduction of rent by reason of any interruption or failure of
utility services to the Premises when such interruption or failure is caused by
accidents, breakage, repair, strikes, lockouts, or other labor disturbances or
labor disputes of any nature, or by any other cause, similar or dissimilar,
beyond the reasonable control of Landlord.
Provided that Tenant is not in default in the performance or observance of
any of the terms, covenants or conditions of this Lease to be performed or
observed by it. Utilities services are generally available on a twenty four (24)
hour-a-day seven day-a-week basis and subject to the rules and regulations of
the Complex hereinbefore referred to, reasonable quantities of water, gas and
electricity suitable for the intended use of the Premises and heat and air-
conditioning required in Landlord's judgment for the comfortable use and
occupation of the Premises for such purposes. Tenant agrees that at all times it
will cooperate fully with Landlord and abide by all regulations and requirements
that Landlord may prescribe for the proper functioning and protection of the
building heating, ventilating and air-conditioning systems. Whenever heat
generating machines, equipment, or any other devices (including exhaust fans)
are used in the Premises by Tenant which affect the temperature or otherwise
maintained by the air-conditioning system, Landlord shall have the right to
install supplementary air-conditioning units in the Premises and the cost
thereof, including the cost of installation and the cost of operation and
maintenance thereof, shall be paid by Tenant to Landlord upon demand by
Landlord. Tenant will not, without the written consent of Landlord, use any
apparatus or device in the Premises (including, without limitation), electronic
data processing machines or machines using current in excess of 110 Volts which
will in any way increase the amount of electricity, gas, water or air-
conditioning usually furnished or supplied to premises being used as a general
office space, or connect with electric current (except through existing
electrical outlets in the Premises), or with gas or water pipes any apparatus or
device for the purposes of using electric current, gas, or water. If Tenant
shall require water, gas or electric current in excess of that usually furnished
or supplied to premises being used as general office space, Tenant shall first
obtain the written consent of Landlord, which consent shall not be unreasonably
withheld and Landlord may cause an electric current, gas or water meter to be
installed in the Premises in order to measure the amount of electric current,
gas or water consumed for any such excess use. The cost of any such meter and of
the installation, maintenance and repairs thereof, all charges for excess water,
gas and electric current consumed (as shown by such meters and at the rates then
charged by the furnishing public utility): account of electric current, gas, or
water so consumed shall be paid by Tenant, and Tenant agrees to pay Landlord
therefor promptly upon demand by Landlord.
45. PARKING: Tenant shall have the right to the nonexclusive use of
-------
thirty seven (37) spaces in the common parking area of the building. Tenant
agrees that Tenant, Tenant's employees, agents, representatives, and/or invitees
shall not use parking spaces in excess of said 37 parking spaces allocated to
Tenant hereunder. Landlord shall have the right, at Landlord's sole discretion,
to specifically designate the location of Tenant's parking spaces within the
common parking area of the building in the event of a dispute among the tenants
occupying the building referred to herein, in which event Tenant agrees that
Tenant, Tenant's employees, agents, representatives and/or invitees shall not
use any parking spaces other than those parking
26
<PAGE>
spaces specifically designated by Landlord for Tenant's use. Said parking
spaces, if specifically designated by Landlord to Tenant, may be relocated by
Landlord at any time, and from time to time. Landlord reserves the right, at
Landlord's sole discretion, to rescind any specific designation of parking
spaces, thereby returning Tenant's parking spaces to the common parking area.
Landlord shall give Tenant written notice of any change in Tenant's parking
spaces. Tenant shall not, at any time, park, or permit to be parked, any trucks
or vehicles adjacent to the loading area so as to interfere in any way with the
use of such areas, nor shall Tenant, at any time, park or permit the parking of
Tenant's trucks and other vehicles or the trucks and vehicles of Tenant's
suppliers or others, in any portion of the common areas not designated by
Landlord for such use by Tenant. Tenant shall not park nor permit to be parked,
any inoperative vehicles or equipment on any portion of the common parking area
or other common areas of the building. Tenant agrees to assume responsibility
for compliance by its employees with the parking provision contained herein. If
Tenant or its employees park in other than designated parking areas, then
Landlord may charge Tenant, as an additional charge, and Tenant agrees to pay
Ten Dollars ($10.00) per day for each day or partial day each such vehicle is
parking in any area other than that designated. Tenant hereby authorizes
Landlord, at Tenant's sole expense, to tow away form the building any vehicle
belonging to Tenant or Tenant's employees parked in violation of these
provisions, or to attach violation stickers or notices to such vehicles. Tenant
shall use the parking area for vehicle parking only and shall not use the
parking areas for storage.
46. ASSIGNMENT AND SUBLETTING CONTINUED: Notwithstanding the foregoing,
-----------------------------------
Tenant shall be entitled to assign or sublet without Landlord's consent (but
shall still give Landlord notice thereof) to any parent or subsidiary
corporation, or corporation with which Tenant merges or consolidates, or to whom
Tenant sells all or substantially all of its assets, provided no such
assignment, merger, consolidation, transfer of stock, (or in the event of a
transfer of greater than fifty percent (50%) of the ownership interest or voting
interest in the stock of Tenant, providing said offering is a public offering
and further provided the net worth of the corporation with which Tenant merges
or consolidates or sells substantially all of its assets or acquires has greater
than fifty percent (50%) of the ownership interest or voting interest in the
stock of Tenant and has a net worth after the merger, consolidation, purchase or
acquisition equal to or greater than the net worth of Tenant at the time said
Lease commences), or subletting will release Tenant to the extent Tenant
continues in existence following such transaction.
47. HAZARDOUS MATERIALS: Landlord and Tenant agree as follows with
-------------------
respect to the existence or use of "Hazardous Materials" (as defined herein) on,
in, under or about the Premises and real property located beneath said Premises
(hereinafter collectively referred to as the "Property").
As used herein, the term "Hazardous Materials" shall mean any hazardous or
toxic substance, material or waste which is or becomes subject to or regulated
by any local governmental authority, the State of California, or the United
States Government. The term "Hazardous Materials" includes, without limitation
any material or hazardous substance which is (i) listed under Article 9 or
define as "hazardous" or "extremely hazardous" pursuant to Article 11 of Title
22 of the California Administrative Code, Division 4, Chapter 30, (ii) listed or
defined as a "hazardous waste" pursuant to the Federal Resource Conservation and
Recovery Act,
27
<PAGE>
Section 42 U.S.C. Section 6901 et. seq., K(iii) listed or defined as a
"hazardous substance" pursuant to the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. Section 9601 et. seq. (42 U.S.C.
Section 9601), (iv) petroleum or any derivative of petroleum (or (v) asbestos.
Tenant shall have no obligation to "clean up", reimburse, release,
indemnify, or defend Landlord with respect to any Hazardous Materials or wastes
which Tenant prior to and during the term of the Lease) or other parties on the
Property did not store, dispose, or transport in, use, or cause to be on the
Property in violation of applicable law.
Tenant will be 100 percent liable and responsible for: (i) any and all
"cleanup" of said toxic waste and/or Hazardous Materials contamination which
Tenant, its agents, or its future subtenants and/or assignees (if any), or other
parties on the Property, does store, dispose, or transport in, use of cause to
be on the Property, and (ii) any claims by third parties resulting from such
Hazardous Materials contamination. Tenant shall indemnify Landlord and hold
Landlord harmless from any liabilities, demands, costs, expenses and damages,
including, without limitation, attorney fees incurred as a result of any claims
resulting from such Hazardous Materials contamination.
Tenant also agrees not to use or dispose of any toxic waste or Hazardous
Materials on the Property without first obtaining Landlord's written consent. In
the event consent is granted by Landlord, Tenant agrees to complete compliance
with governmental regulations, and prior to the termination of said Lease Tenant
agrees to follow the proper closure procedures and will obtain a clearance from
the local fire department and/or the appropriate city agency. If Tenant uses
Hazardous Materials, Tenant also agrees to install, at Tenant's expense, such
toxic waste and/or Hazardous Materials monitoring devices as Landlord deems
necessary. It is agreed that the Tenant's responsibilities related to toxic
waste and Hazardous Materials will survive the termination date of the Lease and
that Landlord may obtain specific performance of Tenant's responsibilities under
this Paragraph 47.
28
<PAGE>
TENANT: Centaur
BUILDING: Oakmead
<TABLE>
<CAPTION>
Rate PSF Based
Square Feet Square Feet on No. of
Period Occupying Leasing SF Occupying Rent per No. Months Rent Due for Period
<S> <C> <C> <C> <C> <C> <C>
06/01/93-09/32/93 7000 9998 1.00 $ 7,000.00 4 $ 28,000.00
10/01/93-12/31/93 8500 9998 1.00 $ 8,500.00 3 $ 35,500.00
01/01/94-03/31/94 9998 9998 1.00 $ 9,998.00 3 $ 29,994.00
04/01/94-03/31/95 9998 9998 1.05 $10,497.90 12 $125,974.80
04/01/95-03/31/96 9998 9998 1.10 $10,997.80 12 $131,973.60
04/01/96-03/31/97 9998 9998 1.15 $11,497.70 12 $137,972.40
04/01/97-03/31/98 9998 9998 1.20 $11,997.60 12 $143,971.20
04/01/96-05/31/98 9998 9998 1.25 $12,497.50 2 $ 24,995.00
Security Deposit $24,995.00 60 $648,381.00
5Y AGGREGATE
</TABLE>
29
<PAGE>
EXHIBIT A
[DESCRIPTION OF PROPERTY]
<PAGE>
EXHIBIT B
[DESCRIPTION OF PROPERTY]
<PAGE>
AMENDMENT NO. 1
TO LEASE
THIS AMENDMENT NO. 1 is made and entered into this 18th day of August,
1995, by and between OAKMEAD ASSOCIATES, and LANDLORD, and Centaur
Pharmaceuticals, Inc., a Delaware corporation, as TENANT.
RECITALS
A. WHEREAS, by Lease Agreement dated February 25, 1993 Landlord leased to
Tenant approximately 9,998 + square feet of that certain 30,825 + square foot
- -
building located at 484 Oakmead Parkway, Sunnyvale, California, the details of
which are more particularly set forth in said February 25, 1993 Lease Agreement,
and
B. WHEREAS, said Lease was amended by the Commencement Letter dated July
1, 1993 which confirmed the Commencement Date of the Lease as June 1, 1993 and
the Termination Date as May 31, 1998, and,
C. WHEREAS, the John Arrillaga Separate Property Trust, a partner in
Oakmead Associates, was amended to be the "Arrillaga Family Trust," and
D. WHEREAS, it is now the desire of the parties hereto to amend the Lease
by: (i) extending the Term for two (2) years ten (10) months; (ii) increasing
the size of the Leased Premises from 9,998 + square feet to 19,425 + square feet
- -
effective November 1, 1995; (iii) increasing the size of the Leased Premises
from 19,425 + square feet to 30,825 + square feet effective March 1, 1998; (iv)
- -
amending the Basic Rent schedule and Aggregate Rent of said Lease Agreement, and
(v) establishing Landlord's responsibility to maintain the Leased Premises
structure as provided for Paragraph 9; and (vi) adding a provision for the
replacement of a 3-ton or 5-ton HVAC unit, as hereinafter set forth.
AGREEMENT
NOW THEREFORE, for valuable consideration, receipt of which is hereby
acknowledged, and in consideration of the hereinafter mutual promises, the
parties hereto do agree as follows:
1. TERM OF LEASE: It is agreed between the parties that the Term of said
-------------
Lease Agreement shall be extended for an additional two (2) year ten (10) month
period, and the Lease Termination Date shall be changed from May 31, 1998 to
March 31, 2001.
2. INCREASED PREMISES: It is understood that Tenant is currently in
------------------
possession of the entire 30,835 + square foot building in which Tenant's Leased
-
Premises are located under the following agreements: (i) under Lease Agreement
dated February 24, 1993. Tenant is leasing 9,981 + square feet of space; (ii)
-
under sublease, dated March 15, 1994, between Rosenbluth Travel Agency (as
leased by Rosenbluth Travel Agency) from Landlord, and which
1
<PAGE>
lease and sublease terminates on October 31, 1995 ("Sublease"); and (iii) under
sub-sublease, dated April 24, 1995, between Nycomed Salutar, Inc. (as Master
Tenant), Prism Solutions, Inc. (as Sublessor), and Tenant (as Sublessee), Tenant
is sub-subleasing all of the 11,400 + square feet of space subleased by Prism
-
Solutions from Nycomed Salutar, Inc. under sublease dated January 17, 1994,
(which said 11,400 + square feet of space is leased by Nycomed Salutar, Inc.
from Landlord), and which lease, sublease, and sub-sublease shall terminate on
February 28, 1998 ("Sub-sublease"). Upon the respective termination of the
aforementioned Rosenbluth Travel Agency lease and the Nycomed Salutar lease,
Tenant's square footage of Leased Premises shall increase accordingly.
Therefore, effective November 1, 1995, the size of the Leased Premises will be
increased by 9,427 + square feet, or from 9,998 + square feet to 19,425 + square
- - -
feet of space. Total said Premises are more particularly shown within the area
as shown in Red on Exhibit A. The entire parcel, of which the Leased Premises
----------
is a part, is shown within the area outlined in Green on Exhibit A. The
---------
additional 9,427 + square feet of space is leased on an "as-is" basis, in its
-
present condition and configuration, as set forth in Blue on Exhibit B to be
---------
attached hereto, with the entire interior leased Premises shown in Red on said
Exhibit B.
- ---------
Effective March 1, 1998, the size of the Leased Premises will be increased by
11,400 + square feet, or from 19,425 + square feet to 30,825 + square feet of
- - -
space. Total said Premises are more particularly shown within the area outlined
in Red on Exhibit C. The entire parcel, of which the Leased Premises is a part,
---------
is shown within the area outlined in Green on Exhibit C. The additional 11,400
---------
+ square feet of space is leased on an "as-is" basis, in its present condition
- -
and configuration, as set forth in Blue on Exhibit D to be attached hereto, with
---------
the entire interior Leased Premises shown in Red on said Exhibit D.
---------
3. BASIC RENT SCHEDULE: The Basic Rent schedule, as shown in Paragraph
-------------------
4(A) of the Lease Agreement, shall be payable as follows:
On November 1, 1995, the sum of TWENTY ONE THOUSAND THREE HUNDRED SIXTY
SEVEN AND 50/100 DOLLARS ($21,367.50) shall be due, and a like sum due on the
first day of each month thereafter, through and including March 1, 1996.
On April 1, 1996, the sum of TWENTY TWO THOUSAND THREE HUNDRED THIRTY EIGHT
AND 75/100 DOLLARS ($22,338.75) shall be due, and a like sum due on the first
day of each month thereafter, through and including March 1, 1997.
On April 1, 1997 the sum of TWENTY THREE THOUSAND THREE HUNDRED TEN AND
00/100 DOLLARS ($23,310.00) shall be due, and a like sum due on the first day of
each month thereafter, through and including February 1, 1998.
On March 1, 1998, the sum of THIRTY SIX THOUSAND NINE HUNDRED NINETY AND
00/100 DOLLARS ($36,990.00) shall be due, representing the Rental for the period
March 1, 1998 through March 31, 1998.
2
<PAGE>
On April 1, 1998, the sum of THIRTY EIGHT THOUSAND FIVE HUNDRED THIRTY ONE
AND 25/100 DOLLARS ($38,531.25) shall be due, and a like sum due on the first
day of each month thereafter, through and including March 1, 1999.
On April 1, 1999, the sum of FORTY THOUSAND SEVENTY TWO AND 50/100 DOLLARS
($40,072.50) shall be due, and a like sum due on the first day of each month
thereafter, through and including March 1, 2000.
On April 1, 2000, the sum of FORTY ONE THOUSAND SIX HUNDRED THIRTEEN AND
75/100 DOLLARS ($41,613.75) shall be due, and a like sum due on the first day of
each month thereafter, through and including March 1, 2001.
The Aggregate Rent shall be increased by $1,748,984.90, or from $648,381.00
to $2,397,365.90.
4. SECURITY DEPOSIT: Tenant's Security Deposit shall be increased by
----------------
$21,625.00, or from $24,995.00 to $46,620.00, payable upon Tenant's execution of
this Amendment. Tenant's Security Deposit shall be increased by $36,607.50, or
from $46,620.00 to $83,227.50, due on February 1, 1998.
5. PARKING: Effective November 1, 1995, Tenant's nonexclusive parking
-------
spaces shall be increased by 35 spaces or from 37 spaces to 72 spaces.
Effective March 1, 1998, Tenant shall lease 100% of the Building from Landlord,
and shall be entitled to the parking appurtenant to the Leased Premises.
Effective March 1, 1998, Lease Paragraph 45 ("PARKING") shall be deleted in its
entirety.
6. DELETE NON APPLICABLE PARAGRAPHS: Effective March 1, 1998, Tenant
--------------------------------
shall lease 100% of the Building from Landlord and the following Lease
Paragraphs referring to Common Areas shall no longer be applicable and shall be
deleted in their entirety. Any cross reference to said deleted Paragraphs in
other Paragraphs within the Lease is considered null and void: Paragraph 42
("RULES AND REGULATIONS AND COMMON AREA") and Paragraph 43 ("EXPENSES OF
OPERATION, MANAGEMENT, AND MAINTENANCE OF THE COMMON AREAS OF THE PARCEL AND
BUILDING IN WHICH THE PREMISES ARE LOCATED").
7. REPLACEMENT OF PARAGRAPHS: Effective March 1, 1998, the following
-------------------------
Paragraphs shall be replaced:
A. UTILITIES. Effective March 1,1998, Paragraph 44 ("UTILITIES OF
THE BUILDING IN WHICH THE PREMISES ARE LOCATED") shall be deleted in its
entirety and shall be replaced with the following:
"44. UTILITIES: Tenant shall pay promptly, as the same become
---------
due, all charges for water, gas, electricity, telephone, telex
and other electronic, communications service, sewer service,
waste pick-up and any other utilities, materials or services
furnished directly to or used by Tenant on or
3
<PAGE>
about the Premises during the Term of this Lease, including,
without limitation any temporary or permanent utility
surcharge or other exactions whether or not hereinafter
imposed.
Landlord shall not be liable for and Tenant shall not
be entitled to any abatement or reduction of Rent by reason
of any interruption or failure of utility services to the
Premises when such interruption of failure is caused by
accident, breakage, repair, strikes, lockouts, or other
labor disturbances or labor disputes of any nature, or by
any other cause, similar or dissimilar, beyond the
reasonable control of Landlord."
B. TENANT MAINTENANCE. Effective March 1, 1998, Paragraph 7 ("TENANT
MAINTENANCE") shall be deleted in its entirety and shall be replaced with the
following:
"7. TENANT MAINTENANCE: Tenant shall, at its sole cost and
------------------
expense, keep and maintain the Premises (including
appurtenances) and every part thereof in a high standard of
maintenance and repair, or replacement, and in good and
sanitary condition. Tenant's maintenance and repair
responsibilities herein referred to include, but are not
limited to, janitorization, all windows (interior and
exterior), window frames, plate glass and glazing (destroyed
by accident or act of third parties), truck doors, plumbing
systems (such as water and drain lines, sinks, toilets,
faucets, drains, showers, and water fountains), electrical
systems (such as panels, conduits, outlets, lighting
fixtures, lamps, bulbs, tubes and ballasts), heating and air-
conditioning systems (such as compressors, fans, air
handlers, ducts, mixing boxes, thermostats, time clocks,
boilers, heaters, supply and return grills), structural
elements and exterior surfaces of the Building, store
fronts, roofs, downspouts, all interior improvements within
the Premises including but not limited to wall coverings,
window coverings, carpet, floor coverings, partitioning,
ceilings, doors (both interior and exterior), including
closing mechanisms, latches, locks, skylights (if any),
automatic extinguishing systems, and elevators and all other
interior improvements of any nature whatsoever, and all
exterior improvements including but not limited to
landscaping, sidewalks, driveways, parking lots including
striping and sealing, sprinkler systems, lighting, ponds,
fountains, waterways, and drains. Tenant agrees to provide
carpet shields under all rolling chairs or to otherwise be
responsible for wear and tear of the carpet caused by such
rolling chairs if such wear and tear exceeds that caused by
normal foot traffic in surrounding areas. Areas of excessive
wear shall be replaced at Tenant's sole expense upon Lease
termination. Tenant hereby waives all rights under, and
benefits of, Subsection 1 of Section 1932 and Section 1941
and 1942 of the California Civil Code and under any similar
law, statute or ordinance now or hereafter in effect. In the
event any of the above
4
<PAGE>
maintenance responsibilities apply to any other tenant(s) of
Landlord where there is common usage with other tenant(s),
such maintenance responsibilities and charges shall be
allocated to the Leased Premises by square footage or other
equitable basis as calculated and determined by Landlord."
8. "AS-IS" BASIS: Inasmuch as Tenant is currently occupying the Increased
-------------
Premises under the aforementioned Sublease and Sub-sublease, subject only to
Paragraph 10 below and Landlord making the improvements shown on Exhibit B and D
---------------
to be attached hereto, it is hereby agreed that said Increased Premises leased
hereunder, is leased strictly on an "as-is" basis in its present condition, and
in the configuration as shown on Exhibits B and D to be attached hereto, and by
----------------
reference made a part hereof. Tenant shall accept the Premises as being in good
and sanitary order, condition and repair and shall accept the building and
improvements on the Premises in the condition that exists at the effective dates
set forth in this Amendment No. 1 and without any representation or warranty by
Landlord as to the condition of said building or Premises at the effective dates
set forth in this Amendment No. 1, or as to the conformance of the building or
Premises to any building codes or governmental rules or regulations that may
then or thereafter be in existence. It is specifically agreed between the
parties that, after Landlord makes the interior improvements as shown on Exhibit
-------
B and D, Landlord shall not be required under any circumstances, to make, nor be
- -------
responsible for any cost in connection with, any repair, restoration, and/or
improvements to the Premises to prepare the Premises for Tenant's use and
occupancy.
9. MAINTENANCE OF THE PREMISES: In addition to, and notwithstanding
---------------------------
anything to the contrary in Lease Paragraph 7 ("TENANT MAINTENANCE"), Landlord
shall maintain the structural shell, foundation, and roof structure (but not the
interior improvements, roof membrane, or glazing) of the building leased
hereunder at Landlord's cost and expense provided Tenant has not caused such
damage, in which event Tenant shall be responsible for 100 percent of any such
costs or repair or damage so caused by the Tenant. Notwithstanding the
foregoing, a crack in the foundation, or exterior walls that does not endanger
the structural integrity of the building, or which is not life-threatening,
shall not be considered material, nor shall Landlord be responsible for repair
of same.
10. REPLACEMENT OF HVAC: Notwithstanding anything to the contrary in
-------------------
Lease Paragraph 7 ("TENANT MAINTENANCE"), in the event the HVAC unit serving the
rear portion of the building, has served its useful life and needs replacing
during the Term of the Lease) provided said replacement is not the result of
damage caused by Tenant, its agents, employees, invitees, contractors, or its
future subtenants and/or assignees (if any)), Landlord shall: (i) replace said
unit at Landlord's sole cost, if said HVAC unit is a three (3) ton unit; or,
(ii) replace said HVAC unit and the cost of such replacement shall be equally
split between Landlord and Tenant, if said HVAC unit is a five (5) ton unit.
(THIS SPACE LEFT BLANK INTENTIONALLY)
5
<PAGE>
EXCEPT AS MODIFIED HEREIN, all other terms, covenants, and conditions of
said February 25, 1993 Lease Agreement shall remain in full force and effect.
IN WITNESS WHEREOF, Landlord and Tenant have executed this Amendment No. 1
to Lease as of the date and year last written below.
LANDLORD: TENANT:
ARRILLAGA FAMILY TRUST CENTAUR PHARMACEUTICALS, INC.
a Delaware corporation
By /s/ John Arrillaga By /s/ Brian D. Frenzel
------------------------------ ------------------------------
John Arrillaga, Trustee Brian D. Frenzel
--------------------------------
Date: 10/24/95 Print or Type Name
---------------------------
Title: President
--------------------------
RICHARD T. PEERY SEPARATE Date: 10/24/95
PROPERTY TRUST ---------------------------
By /s/ Richard T. Peery
------------------------------
Richard T. Peery, Trustee
Date: 10/24/95
---------------------------
RIDDLE FAMILY TRUST
By: /s/ William Riddle
-----------------------------
William Riddle, Trustee
Date: 10/28/95
---------------------------
BARRY AND PATRICIA SAPER TRUSTS
By: /s/ Barry Saper
-----------------------------
Barry Saper, Trustee
Date: 10/25/95
---------------------------
6
<PAGE>
EXHIBIT A
[DESCRIPTION OF PROPERTY]
8
<PAGE>
EXHIBIT B
[DESCRIPTION OF PROPERTY]
9
<PAGE>
EXHIBIT C
[DESCRIPTION OF PROPERTY]
10
<PAGE>
EXHIBIT D
[DESCRIPTION OF PROPERTY]
11
<PAGE>
EXHIBIT 10.08
[LOGO] PEERY/ARRITTAGA
March 31, 1995
Mr. Samuel Hegpeth
Vice President of Finance and Administration
PRISM SOLUTIONS, INC.
480 Oakmead Parkway
Sunnyvale, CA 94086
RE: CONSENT TO SUBLEASE TO CENTAUR PHARMACEUTICALS, INC., A DELAWARE
CORPORATION ("Sublessee")
Gentlemen:
This letter is written with regard to your proposed sublease of all of the
eleven thousand four hundred (11,400) square feet of space (as shown on Exhibit
-------
A attached hereto) (the "Sublet Premises") located at 480 Oakmead Parkway,
- -
Sunnyvale, California. The sublease is subject to that certain Lease Agreement
dated November 25, 1992 ("Master Lease"), by and between Oakmead Associates
("Master Lessor"), and Nycomed Salutar, Inc. a California corporation
("Lessee"), and that certain sublease by and between Lessee and Prism Solutions,
Inc., a California corporation ("Sublessor") dated January 17, 1994. A copy of
the Sublease (the "Sublease") proposed by you is set forth in Exhibit B attached
---------
hereto.
Master Lessor hereby approves Sublessor's sublease of the Sublet Premises
to Sublessee under the Sublease, subject to the following terms and conditions:
1. In approving such Sublease, Master Lessor is in no way relieving Lessee or
Sublessor from any obligation to perform each and every term, covenant, and
condition of the Master Lease.
2. Sublessee shall have no rights or privileges in excess of those given
Lessee under the terms of the Master Lease.
3. In approving said Sublease, Master Lessor is in no way approving any term,
covenant, or condition contained therein, and said Sublease is subject and
subordinate to all terms,
<PAGE>
Page 2
covenants, and conditions of the Master Lease. In the event of conflict in the
terms, covenants, and conditions between the Sublease and the Master Lease, the
terms, covenants, and conditions of the Master Lease shall prevail and take
precedence over the Sublease. This consent shall in no event be construed as
consent to any future sublease or assignment between Sublessor and Sublessee, or
any other party; and any future sublease or assignment proposed by Lessee,
Sublessor, or and Sublessee, or any other third party shall require the prior
written consent of Master Lessor.
4. A. As a condition to our consent, Sublessor and Sublessee hereby agree
that in the event Master Lessor terminates the Master Lease, pursuant to any
right contained therein, the Sublease shall automatically terminate
simultaneously with the Master Lease, in Master Lessor's sole and absolute
discretion. Notwithstanding the foregoing, Master Lessor may choose to allow
Sublessee to remain in possession of the Sublet Premises subject to all terms,
covenants, and conditions of the Master Lease by giving Sublessee written
approval thereof. In such event, Sublessee shall remain in possession of the
Sublet Premises under the terms of the Sublease, subject to all terms,
covenants, and conditions of the Master Lease. Such election by Master Lessor
shall not operate as a waiver of any claims Master Lessor may have against
Lessee or Sublessee. Following such written notice by Master Lessor, Sublessee
shall be liable to and shall attorn directly to Master Lessor as though the
Sublease were executed directly between Master Lessor and Sublessee; provided,
however, that whether Master Lessor elects to allow Sublessee to remain in
possession of the Sublet Premises under the terms of the Sublease, subject to
the Master Lease, or elects to allow the Sublease to terminate concurrently with
the Master Lease, Master Lessor shall not, in any event, be responsible or
liable to Sublessee for (i) the return of any security deposit paid by Sublessee
to Sublessor, nor shall Sublessee by given credit for any prepaid rental or
other monetary consideration paid by Sublessee to Sublessor under the Sublease;
(ii) any other claim or damage of any kind or nature whatsoever by reason of or
in connection with Master Lessor's termination of the Master Lease and/or
Sublease; and (iii) any default of Sublessor under the Sublease.
B. In the event Master Lessor has terminated the Master Lease pursuant to
the foregoing, the Sublease shall terminate coterminously with the effective
termination of the Master Lease automatically, without notice, and Sublessee and
/or Sublessor, jointly and severally, shall surrender the Sublet Premises to
Master Lessor in good condition and repair as of the effective date of
termination of the Master Lease. In the event Sublessee and/or Sublessor fails
to timely surrender the Sublet Premises to Master Lessor in good condition and
repair as of the date the Master Lease terminates, Sublessee, Sublessor, and/or
Lessee, jointly and severally, shall be liable to Master Lessor in such event
for all damages, costs, claims, losses, liabilities, fees or expenses sustained
by or asserted against Master Lessor, including, but not limited to, loss of
rental income, attorney's fees, and court costs resulting from or in connection
with Sublessee's failure to timely vacate the Sublet Premises and surrender the
Sublet Premises to Master Lessor as of the effective date of termination of the
Master Lease.
<PAGE>
Page 3
C. In consideration of Master Lessor's consent to Sublease, Sublessor
irrevocably assigns to Master Lessor, as security for Lessee's obligations under
the Master Lease, all rent and income payable to Sublessor under the Sublease.
In the event of a default under the terms of the Master Lease, Master Lessor, in
its sole and absolute direction, may collect all rent due under the Sublease and
apply it towards Lessee's obligations under the Master Lease Sublessor and
Sublessee agree to pay same to Master Lessor upon demand without the requirement
of further consent of Sublessor and Sublessee; provided, however, that until the
occurrence of a default by Lessee under the Master Lease, Sublessor shall have
the right to collect such rent. Sublessor hereby irrevocably authorizes and
directs Sublessee, upon receipt of written notice from Master Lessor stating
that a default exists in the performance of Lessee's and/or Sublessor's
obligation under the Master Lease, to pay to Master Lessor the rents due and to
become due under the Sublease. Sublessor agrees that Sublessee shall have the
right to rely on any such statement and request from Master Lessor, and that
Sublessee shall pay such rents to Master Lessor without any obligation or right
to inquire as to whether such default exists and notwithstanding any notice or
claim from Lessee or Sublessor to the contrary. If a default exists, Sublessor
shall have no right or claim against Sublessee or Master Lessor for any such
rents so paid by Sublessee to Master Lessor. Neither Sublessor's assignment of
such rent and income, nor Master Lessor's acceptance of any payment of rental or
other sum due by Sublessee to Sublessor under the Sublease, whether payable
directly to Master Lessor or endorsed to Master Lessor by Sublessor, shall in
any way be construed as creating a direct contractual relationship between
Master Lessor and Sublessee, unless the parties expressly agree to a direct
contractual relationship in writing, and such acceptance shall be deemed to be
an accommodation by Master Lessor to, and for the convenience of, Sublessor and
Sublessee.
D. Pursuant to the provisions of Paragraph 16 entitled "Assignment and
Subletting" of the Master Lease, Master Lessor hereby requires Sublessor to pay
to Master Lessor, as Additional Rent, fifty percent (50%) of all rents or
additional consideration received by Sublessor from the Sublease in excess of
the Rent payable to Master Lessor in the Master Lease (hereinafter referred to
as "Excess Rent"). Sublessor and Sublessee acknowledge that any Excess Rent is
owed to Master Lessor, and Sublessor hereby agrees to pay any Excess Rent to
Master Lessor upon receipt of the same. Sublessor and Sublessee represent and
warrant to Master Lessor that: (1) information to be completed and provided by
Lessee and Sublessee on the attached "Summary of Amounts/Consideration to be
paid by Sublessee" as Exhibit C accurately represents amounts to be paid by
---------
Sublessee under the Sublease; (2) no additional consideration is due Sublessor
under the Sublease, other than the additional consideration (if any) identified
in the Sublease; and (3) no changes in the terms and/or conditions of the
Sublease shall be made without Master Lessor's prior written approval.
E. This Consent to Sublease shall only be considered effective, and
Master Lessor's consent to Sublease given, when this Letter Agreement is
executed by Master Lessor,
<PAGE>
Page 4
Lessee, Sublessor and Sublessee. Please execute this letter in the space
provided below, obtain the signature of Lessee and Sublessee, and return all
copies to our office. A fully executed original will be returned to you after
execution by the Master Lessor.
5. The parties agree as follows with respect to the existence or use of
Hazardous Materials on the Premises, the Building, or the Property:
A. Commencing with the date of Consent to Sublease of said Sublease,
Sublessee, at its sole cost, shall comply with all laws relating to the storage,
use, and disposal of Hazardous Materials that Sublessee, its agents, employees,
contractors, invitees or other parties bring or permit to be brought onto the
Premises, the Building, or the Property. If Sublessee intends to store, use, or
dispose of any Hazardous Materials, Sublessee shall first notify Master Lessor
and Sublessor in writing. Such Hazardous Materials shall not be stored, used, or
disposed of on the Premises without Master Lessor's and Sublessor advance
written approval. Notwithstanding anything to the contrary in the Master Lease,
Lessee, Sublessor, and Sublessee shall be subject to the following provisions:
B. Any handling, transportation, storage, treatment, disposal or use
of Hazardous Materials by Sublessee shall strictly comply with all applicable
Hazardous Materials Laws. Lessee, Sublessor, and Sublessee shall indemnify,
defend upon demand with counsel reasonably acceptable to, and hold harmless
Master Lessor from and against any liabilities, losses, claims, damages, lost
profits, consequential damages, interest, penalties, fines, monetary
sanctions, attorneys' fees, experts' fees, court costs, remediation costs,
investigation costs, and other expenses which result from or arise in any manner
whatsoever out of the use, storage, treatment, transportation, release, or
disposal of Hazardous Materials on or about the Premises or Property by
Sublessee after the date of the Consent to Sublease.
C. If the presence of Hazardous Materials on the Premises, the
Building or the Property caused or permitted by Sublessee after the date of the
Consent to Sublease results in contamination or deterioration of water or soil
resulting in a level of contamination greater than the levels established as
acceptable by any governmental agency having jurisdiction over such
contamination, Sublessee shall promptly take any and all action necessary to
investigate and remediate such contamination if required by Law or as a
condition to the issuance or continuing effectiveness of any governmental
approval which relates to the use of the Premises, the Building or the Property
or any part thereof. Lessee, Sublessor and Sublessee shall further be jointly
and severally responsible for, and shall defend, indemnify and hold Master
Lessor and its agents harmless from and against all claims, costs and
liabilities, including attorneys' fees and costs, arising out of or in
connection with any investigation and remediation required hereunder to return
the Premises, the Building or the Property to its condition existing prior to
the appearance of such Hazardous Materials. Notwithstanding anything to the
contrary above, Sublessee, shall not be responsible or liable
<PAGE>
Page 5
to remediate or restore the Premises, Building, or the Property, or to indemnify
Master lessor and its agents under any provision of this Consent or of the
Master Lease for any Hazardous Materials contamination caused by Lessee or
Sublessor, or which occurred prior to the date of the Consent to Sublease of
said Sublease or for any off-site migration of Hazardous Materials onto the
Property which was not caused by or contributed to by Sublessee.
D. Sublessee shall give written notice to Master Lessor and
Sublessor as soon as reasonably practicable of (i) any communication received
from any governmental authority concerning Hazardous Materials which relates to
the Premises, the Building or the Property, and (ii) any contamination thereof
by Hazardous Materials which constitutes a violation of any Hazardous Materials
Law. Sublessee may use small quantities of household chemicals such as
adhesives, lubricants, and cleaning fluids in order to conduct its business at
the Premises and such other Hazardous Materials as are necessary for the
operation of Sublessee's business of which Master Lessor and Sublessor receive
notice prior to such Hazardous Materials being brought onto the Premises and
which Master Lessor consents in writing may be brought onto the Premises. At any
time during the Master Lease Term, Sublessee shall, within five (5) days after
written request thereof received from Master Lessor, disclose in writing all
Hazardous Materials that are being used by Sublessee on the Premises, the nature
of such use, and the manner of storage and disposal.
E. Master Lessor may cause testing wells to be installed on the
Premises or Property, and may cause the ground water to be tested to detect the
presence of Hazardous Material by the use of such tests as are then customarily
used for such purposes. If Sublessee so requests, Master Lessor shall supply
Sublessee with copies of such test results. The cost of such tests and of the
installation, maintenance, repair and replacement of such wells shall be paid by
Sublessee.
F. As used herein, the term "Hazardous Material" means any hazardous
or toxic substance, material or waste which is or becomes regulated by any local
governmental authority, the State of California or the United States Government.
The term "Hazardous Material" includes, without limitation, petroleum
products, asbestos, PCB'S, and any material or substance which is (i) listed
under Article 9 or defined as hazardous or extremely hazardous pursuant to
Article 11 of Title 22 of the California Administrative Code, Division 4,
Chapter 20; (ii) defined as a "hazardous waste" pursuant to Section 1004 of the
Federal Resource Conservation and Recovery Act, 42 U.S.C. 6901 et seq. (42
U.S.C. 6903)p or (iii) defined as a "Hazardous substance" pursuant to Section
101 of the Comprehensive Environmental Response, Compensation and Liability Act,
42 U.S.C. 6901 et seq. (42 U.S.C. 9601). As used herein, the term "Hazardous
Material Law" shall mean any statute, law, ordinance, or regulation of any
government body or agency (including the U.S. Environmental Protection Agency,
the California Regional Water Quality Control Board, and the California
Department of Health Services) which regulates the use,
<PAGE>
Page 6
storage, release or disposal of any Hazardous Material.
G. The obligations of Lessee, Sublessor, and Sublessee under this
Paragraph 5 on Hazardous Materials shall survive the expiration or earlier
termination of the Sublease or the Master Lease Term. In the event of any
inconsistency between any part of this Consent, the Master Lease, the Sublease,
and this Paragraph 5, the terms of this Paragraph 5 shall control. Pursuant to
Paragraph 5, Lessee, Sublessor, and Sublessee shall jointly and severally be
responsible for and shall defend, indemnify, and hold Master Lessor and its
agents harmless from and against all claims, costs and liabilities, including
attorney's fees and costs, arising out of or in connection with the storage,
use, or disposal of Hazardous Materials in or about the Premises by Sublessee,
its agents, employees, contractors, or invitees which occur after the date of
the Consent to Sublease. Sublessee's responsibility and duty as set forth in
this Paragraph 5 shall not relieve Lessee or Sublessor of their responsibilities
and duties pursuant to Paragraph 49 of the Master Lease.
H. Master Lessor, Lessee, and Sublessor acknowledge that Sublessor
uses and stores Hazardous Materials necessary for its business under its lease
dated February 25, 1993 with Master Lessor for the property known as 484 Oakmead
Parkway. Though primarily located at 484 Oakmead Parkway, such Hazardous
Materials may be used and stored at 480 Oakmead Parkway as well in accordance
with all applicable governmental laws and regulations. A copy of Sublessor's
Hazardous Materials Inventory submitted to the Sunnyvale, California Department
of Public Safety on December 8, 1994 is included as Exhibit C attached hereto.
(This space left blank intentionally.)
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<PAGE>
EXHIBIT B
SPALLINO REID
CORPORATE REAL ESTATE SERVICES
- ------------------------------
SUBLEASE DOCUMENT
-----------------
1. PARTIES
-------
John Arrillaga, Trustee, or his Successor Trustee UTA as Landlord. Nycomed
Salutar, Inc., as Master Tenant under the Master Lease. Prism Solutions,
Inc., as the "Sublessee" of Nycomed (The "Sublessor") under the Master
Lease, and Centaur Pharmaceuticals, Inc., as the "Sublessee" to Prism
Solutions, Incorporated.
This Sublease is made and entered into as of the Lease Date defined and
stated herein on Page 1., (the "Term") by and between PRISM SOLUTIONS,
INC., [The ("Sublessee") to that special Sublease dated January 17, 1994
under the Master Lease dated November 25, 1992) and shall hereinafter be
referred to as the ("Sublessor") and CENTAUR PHARMACEUTICALS, INC., the
("Sublessee"), in reference to this Sublease Agreement (The Second Sublease
Agreement)], and also under the Master Lease dated November 25, 1992
entered into by John Arrillaga, Trustee, or his Successor Trustee UTA dated
7/20/77 (JOHN ARRILLAGA SEPARATE PROPERTY TRUST) as amended, and RICHARD T.
PEERY, Trustee, or his Successor Trustee UTA dated 7/20/77 (RICHARD T.
PEERY SEPARATE PROPERTY TRUST), as amended, WILLIAM RIDDLE, Individually,
and BARRY SAPER, Individually, dba OAKMEAD ASSOCIATES, as Lessor, and
Sublessor under this Sublease as Lessee; a copy of the Master Lease is
attached hereto as Exhibit "A".
2. PREMISES
--------
Sublessor leases to Sublessee and Sublessee leases from Sublessor the
Premises shown on the floor plan attached hereto as Exhibit "B", together
with the appurtenances, situated in the City of Sunnyvale, County of Santa
Clara, State of California, commonly known and described as a portion of
480 Oakmead Parkway and comprising approximately 11,400 square feet.
<PAGE>
SUBLEASE
PAGE TWO
3. COMMENCEMENT DATE
-----------------
Sublessor shall deliver possession of the Premises to Sublessee on April
24, 1995, and such date hereinafter shall be referred to as the
"Commencement Date"
4. TERM
----
The term of this Sublease shall be from the Commencement Date until
February 28, 1998.
5. RENTAL
------
From the Commencement Date through February 28, 1998 (The Expiration), the
rent shall be $0.80 NNN per square foot per month ($9,120.00). Upon
execution of this sublease, Sublessee shall deposit with Sublessor an
amount of ELEVEN THOUSAND TWO HUNDRED FORTY EIGHT AND 00/100 DOLLARS
($11,248.00), representing rental for the period from April 24, 1995 (the
Commencement Date) to April 30, 1995 plus the Security Deposit in the
amount of $9,120.00 referred to in paragraph 6
6. SECURITY DEPOSIT
----------------
Sublessee shall deposit with Sublessor upon the execution hereof in the
amount of $9,120.00 as security for Sublessee's faithful performance of
Sublessee's obligation hereunder. If Sublessee fails to pay rent or other
charges due hereunder, or otherwise breaches or defaults on with respect to
any provision of this Sublease, Sublessor may use, apply or retain all or
any portion of said deposit for the payment of any rent or other charge in
default or for the payment of any other sum to which Sublessor may become
obligated, and actually pays by reason of Sublessee's default, or to
compensate Sublessor for any expense, cost, loss or damage which Sublessor
actually incurs thereby. If Sublessee performs all of Sublessee's
obligations hereunder, said deposit, or so much thereof as has not
heretofore been applied by Sublessor, shall be returned, without payment of
interest or other increment for its use to Sublessee at the expiration of
the term hereof.
<PAGE>
SUBLEASE
PAGE THREE.
7. USE
---
Sublessee shall use the premises for general office, laboratory use, and
all legally related uses necessary for Sublessee to conduct its daily
business.
8. PROVISIONS CONSTITUTING SUBLEASE
---------------------------------
a. This sublease is subject to all of the terms and conditions of the
Master Lease in Exhibit "A" and Sublessee shall assume and perform the
obligations of the Lessee in said Master Lease, to the extent said
terms and conditions are applicable to the Premises subleased pursuant
to this Sublease. Sublessee shall not commit or permit to be committed
on the Premises any act or omission which shall violate any term or
condition of the Master Lease. In the event of termination of
Sublessor's obligations and interest as a Lessee under the Master
Lease for any reason, then this Sublease shall terminate
coincidentally therewith without Sublessor incurring any liability as
a result thereof to Sublessee. Sublessor has no obligation to renew
its contract under the Master Lease.
b. All of the terms and conditions contained in the Master Lease are
incorporated herein. In the event of any express conflict between the
terms and conditions in this Sublease and those set forth in the
Master Lease, the latter shall control.
9. ASSIGNMENT OF SUBLEASE
----------------------
Sublessee shall not assign this Sublease or any interest herein, nor sublet
the demised premises or any part thereof, nor any right or privilege
appurtenant thereto, nor permit the occupancy or use of any part thereof by
any person without the prior written consent of Sublessor, which shall not
be unreasonably withheld. Any assignment, further subletting, occupancy or
use without the prior written consent of the Sublessor shall constitute a
breach of this Sublease Agreement and Sublessor may, at the option of the
Sublessor terminate this Sublease.
<PAGE>
SUBLEASE
PAGE FOUR.
10. TRIPLE NET EXPENSES
-------------------
Sublessee shall pay all pass-through expenses and other charges (whether
described as additional rent or otherwise) payable under the Master Lease
in respect of the Premises covered by this Sublease. Sublessee shall pay
all real property taxes assessed with respect to any alterations or
additions, if any, to the Premises installed by Sublessee in accordance
with the Sublease.
11. CONDITIONS OF PREMISES
----------------------
Sublessor will deliver the Premises in good operating condition and free
and clear of debris. Sublessor has not received written notice of any Code
violations that exist or have existed in the Premises, and to the best of
its knowledge, no such code violations exist or have existed in the
Premises. Any additional costs that would become evident because of Code
requirements other than code violations of which Sublessor has received
written notice are not the responsibility of the Sublessor, but would
become additional Tenant Improvement cost to Sublessee.
Sublessor warrants that the HVAC equipment has been maintained on a regular
schedule since the commencement of Sublessor's lease, and to the best of
Sublessor's knowledge is currently in good operating condition. Sublessor
also warrants to the best of Sublessor's knowledge that all the plumbing
and electrical within the Premises are in good operating condition.
12. HAZARDOUS MATERIALS
-------------------
Subject to the remaining provisions of this paragraph, Sublessee shall be
entitled to use and store only those Hazardous Materials that are necessary
for Sublessee's business, provided that such usage and storage is in full
compliance with all applicable local, state and federal statutes, orders,
ordinaces, rules and regulations (as interpreted by judicial and
administrative decisions). Should Sublessee and Sublessee's employees and
agents generate, release, or dispose of, or allow the release of any
hazardous materials on the subject property; then Sublessee shall
indemnify, defend
<PAGE>
SUBLEASE
PAGE FIVE.
HAZARDOUS MATERIALS (CONTINUED)
------------------------------
and hold Sublessor harmless from and against any and all claims, judgments,
damages, penalties, fines, liabilities, losses suits, administrative
proceedings and costs (including, but not limited to, reasonable attorneys'
and consultant fees) arising from or related to the use, presence,
transportation, storage, disposal, spill, release or discharge of Hazardous
Materials on or about the Premises caused by the acts or omissions of
Sublessee, its agents, employees, representatives, invitees, licensees,
subtenants, customers or contractors.
13. ALTERATIONS AND ADDITIONS
-------------------------
Any construction work to be done by Sublessee within the premises during
this sublease term shall require the written approval of Sublessor and
Master lessor, prior to commencement of such construction work. Sublessee
shall submit construction documents to Sublessor for approval. Such
Sublessee approval shall be handled expeditiously and shall not be
unreasonably withheld. When and if the construction work is approved, it
will be contracted with a licensed and bonded California contractor.
Furthermore, Sublessee covenants and agrees, at its sole costs and expense,
to fully restore the premises to the original condition found upon
Sublessor's initial occupancy, subject to allowances for normal wear and
tear.
14. COMMISSION
----------
Upon execution of this Sublease, PRISM SOLUTIONS, INC., shall pay SPALLINO
REID (Broker), fees set forth in a separate agreement between Sublessor and
Broker. Each party represents to the other that is has not dealt with any
other broker of finder in reference to the subject transaction.
<PAGE>
SUBLEASE
PAGE SIX.
Dated: 3/13/95 Dated: 3/14/95
----------------- -----------------
/s/ Sam Hedgpeth /s/ Brian D. Frenzel
- ------------------------ ------------------------
Sam Hedgpeth Brian D. Frenzel
V.P. of Finance and Administration President and Chief Executive
Prism Solutions Inc., (Sublessor) Officer Centaur Pharmaceuticals,
Inc., (Sublessee)
Dated: 3/22/95
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[SIGNATURE ILLEGIBLE]
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Nycomed Salutar, Inc.,
(Master Tenant)
IN WITNESS WHEREOF, the parties hereto have executed this Sublease in duplicate.
CONSENT TO SUBLEASE
DATED:__________________ ________________________
John Arrillaga, Trustee
Lessor under the Master Lease
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EXHIBIT A
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[DESCRIPTION OF PROPERTY APPEARS HERE]
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EXHIBIT B
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[DESCRIPTION OF PROPERTY APPEARS HERE]
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EXHIBIT C TO "CONSENT TO SUBLEASE"
SUMMARY OF AMOUNTS/CONSIDERATION TO BE PAID BY SUBLESSEE
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PERIOD* BASIC RENT R.E TAXES PROP. INS. UTILITIES LANDSCAPE MISCELLANEOUS
BY MONTH TOTAL PSF TOTAL PSF TOTAL RSF TOTAL PSF TOTAL PSF TOTAL PFS
================== ========= ====== ========= ====== ======= ====== ======= ====== ======= ===== ======= =======
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
4/24/95 - 2/28/98 /// $ .80NNN /// /// /// /// ///
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PERIOD* MISCELLANEOUS TOTAL CHARGE PER PERIOD
BY MONTH TOTAL PSF TOTAL PSF
================== ========= ======== =========== ==========
<S> <C> <C> <C> <C>
4/24/95 - 2/28/98 /// ///
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ADDITIONAL CONSIDERATION: YES_______ NO______
IF "YES", IDENTIFY TYPE CONSIDERATION AND DOLLAR VALUE ASSIGNED TO SAID
CONSIDERATION: TYPE________________ $ VALUE_______________
*IF PAYMENTS ARE REQUIRED OTHER THAN MONTHLY, PLEASE INCLUDE THESE PAYMENTS AS
WELL.
**IF SUBLEASE RENT PAID INCLUDES MISCELLANEOUS EXPENSES, PLEASE IDENTIFY THE $
AMOUNT / PSF OF THE TOTAL RENT PAYMENT ALLOCATED TO BASIC RENT AND EACH
ADDITIONAL EXPENSE ITEM.
IF ADDITIONAL SPACE IS NEEDED, PLEASE DUPLICATE AND ATTACH
LESSEE:
By /s/ Sam Hedgpeth
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Printed: HEDGPETH
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Title Vp
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SUBLESSEE:
By: /s/ Brian D. Frenzel
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Printed: Brian D. Frenzel
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Title: President
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<PAGE>
EXHIBIT 10.09
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STANDARD INDUSTRIAL/COMMERCIAL MULTI-TENANT LEASE-GROSS
AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION
1. Basic Provisions ("Basic Provisions").
1.1 Parties: This Lease ("Lease"), dated for reference purposes only,
February 12th, 1997, is made by and between Memorex Drive LLC ("Lessor") and
Centaur Pharmaceuticals, Inc. ("Lessee"), (collectively the "Parties," or
individually a "Party").
1.2(a) Premises: That certain portion of the Building, including all
improvements therein or to be provided by Lessor under the terms of this Lease,
commonly known by the street address of 1220 Memorex Drive, Suite 100, located
in the City of Santa Clara, County of Santa Clara, State of California, with zip
code 95050, as outlined on Exhibit ____ attached hereto ("Premises"). The
"Building" is that certain building containing the Premises and generally
described as (describe briefly the nature of the Building): Memorex Drive
Business Park. In addition to Lessee's rights to use and occupy the Premises as
hereinafter specified, Lessee shall have non-exclusive rights to the Common
Areas (as defined in Paragraph 2.7 below) as hereinafter specified, but shall
not have any rights to the roof, exterior walls or utility raceways of the
Building or to any other buildings in the Industrial Center. The Premises, the
Building, the Common Areas, the land upon which they are located, along with all
other buildings and improvements thereon, are herein collectively referred to as
the "Industrial Center." (Also see Paragraph 2.)
1.2(b) Parking: 45 unreserved vehicle parking spaces ("Unreserved Parking
Spaces"); and 0 reserved vehicle parking spaces ("Reserved Parking Spaces").
(Also see Paragraph 2.6.)
1.3 Term: 7 years and 0 months ("Original Term") commencing May 1st,
1997 ("Commencement Date") and ending April 30th, 2004 ("Expiration Date").
(Also see Paragraph 3.)
1.4 Early Possession: Allowed, (see Addendum I) ("Early Possession
Date"). (Also see Paragraphs 3.2 and 3.3.)
1.5 Base Rent: $_____________ (See Addendum I) per month ("Base Rent"),
payable on the First day of each month commencing May 1st, 1997. (Also see
Paragraph 4.)
[ X ] If this box is checked, this Lease provides for the Base Rent to be
adjusted per Addendum I, attached hereto.
1.6(a) Base Rent Paid Upon Execution: $0 as Base Rent for the period --- .
-----
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1.6(b) Lessee's Share of Common Area Operating Expenses: thirteen point
nine percent (13.9%) ("Lessee's Share") as determined by [ x ] prorata square
footage of the Premises as compared to the total square footage of the Building
or [ x ] other criteria as described in Addendum I.
1.7 Security Deposit: $17,750 ("Security Deposit"). (Also see Paragraph
5.) (See Addendum I.)
1.8 Permitted Use: Pharmaceutical research and development,
manufacturing use, storage, and other related uses ("Permitted Use"). (Also see
Paragraph 6.)
1.9 Insuring Party. Lessor is the "Insuring Party." (Also see Paragraph
8.)
1.10(a) Real Estate Brokers. The following real estate broker(s)
(collectively, the "Brokers") and brokerage relationships exist in this
transaction and are consented to be the Parties (check applicable boxes):
[ ] __________________ represents Lessor exclusively ("Lessor's Broker");
[ ] __________________ represents Lessee exclusively ("Lessee's Broker"); or
[ x ] Cornish and Carey Commercial represents both Lessor and Lessee ("Dual
Agency"). (Also see Paragraph 15.)
1.10(b) Payment to Brokers. Upon the execution of this Lease by both
Parties, Lessor shall pay to said Broker(s) jointly, or in such separate shares
as they may mutually designate in writing, a fee as set forth in a separate
written agreement between Lessor and said Broker(s) (or in the event there is no
separate written agreement between Lessor and said Broker(s), the sum of $---
for brokerage services rendered by said Broker(s) in connection with this
transaction.
1.11 Guarantor. The obligations of the Lessee under this Lease are to be
guaranteed by ______________________________________ ("Guarantor"). (Also see
Paragraph 37.)
1.12 Addenda and Exhibits. Attached hereto is an Addendum or Addenda
consisting of Paragraphs 1 through 25, and Exhibits A through C, all of which
constitute a part of this Lease.
2. Premises, Parking and Common Areas.
2.1 Letting. Lessor hereby leases to Lessee, and Lessee hereby leases
from Lessor, the Premises, for the term, at the rental, and upon all of the
terms, covenants and conditions set forth in this Lease. Unless otherwise
provided herein, any statement of square footage set forth in this Lease, or
that may have been used in calculating rental and/or Common Area Operating
Expenses, is an approximation which Lessor and Lessee agree is reasonable and
the rental and Lessee's Share (as defined in Paragraph 1.6(b))
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based thereon is not subject to revision whether or not the actual square
footage is more or less.
2.2 Condition. Lessor shall deliver the Premises to Lessee clean and free
of debris on the Commencement Date and warrants to Lessee that the existing
plumbing, electrical systems, fire sprinkler system, lighting, air conditioning
and heating systems and loading doors, if any, in the Premises, other than those
constructed by Lessee, shall be in good operating condition on the Commencement
Date. If a non-compliance with said warranty exists as of the Commencement Date,
Lessor shall, except as otherwise provided in this Lease, promptly after receipt
of written notice from Lessee setting forth with specificity the nature and
extent of such non-compliance, rectify same at Lessor's expense. If Lessee does
not give Lessor written notice of a non-compliance with this warranty within
thirty (30) days after the Commencement Date, correction of that non-compliance
shall be the obligation of Lessee at Lessee's sole cost and expense.
2.3 Compliance with Covenants, Restrictions and Building Code. Lessor
warrants that any improvements (other than those constructed by Lessee or at
Lessee's direction) on or in the Premises which have been constructed or
installed by Lessor or with Lessor's consent or at Lessor's direction shall
comply with all applicable covenants or restrictions of record and applicable
building codes, regulations and ordinances in effect on the Commencement Date.
Lessor further warrants to Lessee that Lessor has no knowledge of any claim
having been made by any governmental agency that a violation or violations of
applicable building codes, regulations, or ordinances exist with regard to the
Premises as of the Commencement Date. Said warranties shall not apply to any
Alterations or Utility Installations (defined in Paragraph 7.3(a)) made or to be
made by Lessee. If the Premises do not comply with said warranties, Lessor
shall, except as otherwise provided in this Lease, promptly after receipt of
written notice from Lessee given within six (6) months following the
Commencement Date and setting forth with specificity the nature and extent of
such non-compliance, take such action, at Lessor's expense, as may be reasonable
or appropriate to rectify the non-compliance. Lessor makes no warranty that the
Permitted Use in Paragraph 1.8 is permitted for the Premises under Applicable
Law as (as defined in Paragraph 2.4).
2.4 Acceptance of Premises. Lessee hereby acknowledges: (a) that it has
been advised by the Broker(s) to satisfy itself with respect to the condition of
the Premises (including but not limited to the electrical and fire sprinkler
systems, security, environmental aspects, seismic and earthquake requirements,
and compliance with the Americans with Disabilities Act and applicable zoning,
municipal, county, state and federal laws, ordinances and regulations and any
covenants or restrictions of record (collectively, "Applicable Laws") and the
present and future suitability of the Premises for Lessee's intended use; (b)
that Lessee has made such investigation as it deems necessary with reference to
such matters, is satisfied with reference thereto, and assumed all
responsibility therefore except as otherwise stated in this Lease, as the same
relate to Lessee's occupancy of the Premises and/or the terms of this Lease; and
(c) that neither
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Lessor, nor any of Lessor's agents, has made any oral or written representations
or warranties with respect to said matters other than as set forth in this
Lease.
2.5 Lessee as Prior Owner/Occupant. The warranties made by Lessor in
this Paragraph 2 shall be of no force or effect if immediately prior to the date
set forth in Paragraph 1.1 Lessee was the owner or occupant of the Premises. In
such event, Lessee shall, at Lessee's sole cost and expense, correct any non-
compliance of the Premises with said warranties.
2.6 Vehicle Parking. Lessee shall be entitled to use the number of
Unreserved Parking Spaces and Reserved Parking Spaces specified in Paragraph 1.2
on those portions of the Common Spaces designated from time to time by Lessor
for parking. Lessee shall not use more parking spaces than said number. Said
parking spaces shall be used for parking by vehicles no larger than full-size
passenger automobiles or pick-up trucks, herein called "Permitted Size
Vehicles." Vehicles other than Permitted Size Vehicles shall be parked and
loaded or unloaded as directed by Lessor in the Rules and Regulations (as
defined in Paragraph 40) issued by Lessor. (Also see Paragraph 2.9).
(a) Lessee shall not permit or allow any vehicles that belong to or
are controlled by Lessee or Lessee's employees, suppliers, shippers, customers,
contractors or invitees to be loaded, unloaded, or parked in areas other than
those designated by Lessor for such activities.
(b) If Lessee permits or allows any of the prohibited activities
described in this Paragraph 2.6, then Lessor shall have the right, without
notice, in addition to such other rights and remedies that it may have, to
remove or tow away the vehicle involved and charge the cost to Lessee, which
cost shall be immediately payable upon demand by Lessor.
(c) Lessor shall at the Commencement Date of this Lease, provide
the parking facilities required by Applicable Law.
2.7 Common Areas--Definition. The term "Common Areas" is defined as all
areas and facilities outside the Premises and within the exterior boundary line
of the Industrial Center and interior utility raceways within the Premises that
are provided and designated by the Lessor from time to time for the general non-
exclusive use of Lessor, Lessee and other lessees of the Industrial Center and
their respective employees, suppliers, shippers, customers, contractors and
invitees, including parking areas, loading and unloading areas, trash areas,
roadways, sidewalks, walkways, parkways, driveways and landscaped areas.
2.8 Common Areas-Lessee's Rights. Lessor hereby grants to Lessee, for
the benefit of Lessee and its employees, suppliers, shippers, contractors,
customers and invitees, during the term of this Lease, the non-exclusive right
to use, in common with others entitled to such use, the Common Areas as they
exist from time to time, subject to any rights, powers, and privileges reserved
by Lessor under the terms hereof or under the
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terms of any rules and regulations or restrictions governing the use of the
Industrial Center. Under no circumstances shall the right herein granted to use
the Common Areas be deemed to include the rights to store any property,
temporarily or permanently, in the Common Areas. Any such storage shall be
permitted only by the prior written consent of Lessor or Lessor's designated
agent, which consent may be revoked at any time. In the event that any
unauthorized storage shall occur then Lessor shall have the right, without
notice, in addition to such other rights and remedies that it may have, to
remove the property and change the cost to Lessee, which cost shall be
immediately payable upon demand by Lessor.
2.9 Common Areas--Rules and Regulations. Lessor or such other person(s)
as Lessor may appoint shall have the exclusive control and management of the
Common Areas and shall have the right, from time to time, to establish, modify,
amend and enforce reasonable Rules and Regulations with respect thereto in
accordance with Paragraph 40. Lessee agree to abide by and conform to all such
Rules and Regulations, and to cause its employees, suppliers, shippers,
customers, contractors, and invitees to so abide and conform. Lessor shall not
be responsible to Lessee for the non-compliance with said rules and regulations
by other lessees of the Industrial Center.
2.10 Common Areas--Changes. Lessor shall have the right, in Lessor's
sole discretion, from time to time:
(a) To make changes to the Common Areas, including, without
limitation, changes in the location, size, shape and number of driveways,
entrances, parking spaces, parking areas, loading and unloading areas, ingress,
egress, direction of traffic, landscaped areas, walkways and utility raceways;
(b) To close temporarily any of the Common Areas for maintenance
purposes so long as reasonable access to the Premises remains available;
(c) To designate other land outside the boundaries of the
Industrial Center to be a part of the Common Areas;
(d) To add additional buildings and improvements to the Common
Areas;
(e) To use the Common Areas while engaged in making additional
improvements, repairs or alterations to the Industrial Center, or any portion
thereof; and
(f) To do and perform such other acts and make such other changes
in, to or with respect to the Common Areas and Industrial Center as Lessor may,
in the exercise of sound business judgment, deemed to be appropriate. (See
Addendum I.)
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3. Term.
3.1 Term. The Commencement Date, Expiration Date and Original Term and
this Lease are as specified in Paragraph 1.3.
3.2 Early Possession. If an Early Possession Date is specified in
Paragraph 1.4 and if Lessee totally or partially occupies the Premises after the
Early Possession Date but prior to the Commencement Date, the obligation to pay
Base Rent shall be abated for the period of such early occupancy. All other
terms of this Lease, however, (including but not limited to the obligations to
pay Lessee's Share of Common Area Operating Expenses and to carry the insurance
required, by Paragraph 8) shall be in effect during such period. Any such early
possession shall be affect nor advance the Expiration Date of the Original Term.
3.3 Delay in Possession. If for any reason Lessor cannot deliver
possession of the Premises to Lessee by the Early Possession Date, if one is
specified in Paragraph 1.4, or if no Early Possession Date is specified, by the
Commencement Date, Lessor shall not be subject to any liability therefor, nor
shall such failure affect the validity of this Lease, or the obligations of
Lessee hereunder, or extend the term hereof, but in such case, Lessee shall not,
except as otherwise provided herein, by obligated to pay rent or perform any
other obligation of Lessee under the terms of this Lease, until Lessor delivers
possession of the Premises to Lessee. If possession of the Premises is not
delivered to Lessee within sixty (60) days after the Commencement Date, Lessee
may, at its option, by notice in writing to Lessor within ten (10) days after
the end of said sixty (60) day period, cancel this Lease, in which event the
parties shall be discharged from all obligations hereunder; provided, further,
however, that if such written notice of Lessee is not received by Lessor within
said ten (10) day period, Lessee's right to cancel this Lease hereunder shall
terminate and be of no further force or effect. Except as may be otherwise
provided, and regardless of when the Original Term actually commences, if
possession is not tendered to Lessee when required by this Lease and Lessee does
not terminate this Lease, as aforesaid, the period free of the obligation to pay
Base Rent, if any, that Lessee would otherwise have enjoyed shall run from the
date of delivery of possession and continue for a period equal to the period
during which the Lessee would otherwise enjoyed under the terms hereof, but
minus any days of delay by the acts, changes or omissions of Lessee.
4. Rent.
4.1 Base Rent. Lessee shall pay Base Rent and other rent or charges, as
the same may be adjusted from time to time, to Lessor in lawful money of the
United States, without offset or deduction, on or before the day on which its
due under the terms of this Lease. Base Rent and all other rent and charges for
any period during the term hereof which is for less than one full month shall be
prorated based upon the actual number of days of the month involved. Payment of
Base Rent and other charges shall be made to Lessor at its address stated herein
or to such other persons or at such other addresses as Lessor may from time to
time designate in writing to Lessee.
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4.2 Common Area Operating Expenses. Lessee shall pay to Lessor during
the term hereof, in addition to the Base Rent, Lessee's Share (as specified in
Paragraph 1.6(b)) of all Common Area Operating Expenses, as hereinafter defined,
during each calendar year of the term of this Lease, in accordance with the
following provisions (see Addendum I):
(a) "Common Area Operating Expenses" are defined, for purposes of
this Lease, as all costs incurred by Lessor relating to the ownership and
operation of the Industrial Center, including, but not limited to, the
following:
(i) The operation, repair and maintenance, in neat, clean, good
order and condition of the following:
(aa) The Common Areas, including parking areas, loading and
unloading areas, trash areas, roadways, sidewalks, walkways, parkways,
driveways, landscaped areas, striping, bumpers, irrigation systems, Common Area
lighting facilities, fences and gates, elevators and roof.
(bb) Exterior signs and any tenant directories.
(cc) Fire detection and sprinkler systems.
(ii) The cost of water, gas, electricity and telephone to
service the Common Areas;
(iii) Trash disposal, property management and security services.
(iv) Reserves set aside for maintenance and repair of Common
Areas.
(v) any increases above the Base Rent Property Taxes (as
defined in Paragraph 10.2(b) for the Building and the Common Areas.
(vi) Any "Insurance Cost Increase" (as defined in Paragraph
8.1).
(vii) The cost of insurance carried by Lessor with respect to
the Common Areas. Maximum deductible to be $5,000.
(viii) Any deductible portion of an insured loss concerning the
Building or its Common Areas.
(ix) Any other services to be provided by Lessor that are stated
elsewhere in this Lease to be a Common Area Operating Expense.
(b) Any Common Area Operating Expenses and Real Property Taxes that
are specifically attributable to the Building or to any other building in the
Industrial
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Center or to the operation, repair and maintenance thereof, shall be
allocated entirely to the Building or to such other Building. However, any
Common Area Operating Expenses and Real Property Taxes that are not specifically
attributable to the Building or to any other building or to the operation,
repair and maintenance thereof, shall be equitably allocated by Lessor to all
buildings in the Industrial Center.
(c) The inclusion of the improvements, facilities and services set
forth in Subparagraph 4.2(a) shall not be deemed to impose an obligation upon
Lessor to either have said improvements or facilities or to provide those
services unless the Industrial Center already has the same, Lessor already
provides the services, or Lessor has agreed elsewhere in this Lease to provide
the same or some of them.
(d) Lessee's Share of Common Area Operating Expenses shall be payable
by Lessee within ten (10) days after a reasonably detailed statement of actual
expenses is presented to Lessee by Lessor. At Lessor's option, however, an
amount may be estimated by Lessor from time to time of Lessee's Share of annual
Common Area Operating Expenses and the same shall be payable monthly or
quarterly, as Lessor shall designate, during each 12-month period of the Lease
term, on the same day as the Base Rate is due hereunder. Lessor shall deliver
to Lessee within sixty (60) days after the expiration of each calendar year a
reasonably detailed statement showing Lessee's Share of the actual Common Area
Operating Expenses incurred during the preceding year. If Lessee's payments
under this Paragraph 4.2(d) during said preceding year exceed Lessee's Share as
indicated on said statement, Lessee shall be credited the amount of such over-
payment against Lessee's Share of Common Area Operating Expenses next becoming
due. If Lessee's payments under this Paragraph 4.2(d) during said preceding
year were less than Lessee's Share as indicated on said statement, Lessee shall
pay to Lessor the amount of the deficiency within ten (10) days after delivery
by Lessor to Lessee of said statement.
5. Security Deposit. Lessee shall deposit with Lessor upon Lessee's execution
hereof the Security Deposit set forth in Paragraph 1.7 as security for Lessee's
faithful performance of Lessee's obligations under this Lease. If Lessee fails
to pay Base Rent or other rent or charges due hereunder, or otherwise Defaults
under this Lease (as defined in Paragraph 13.1), Lessor may use, apply or retain
all or any portion of said Security Deposit for the payment of any amount due
Lessor or to reimburse or compensate Lessor for any liability, cost, expense,
loss or damage (including attorneys' fees) which Lessor may suffer or incur by
reason thereof. If Lessor uses or applies all or any portion of said Security
Deposit, Lessee shall within ten (10) days after written request therefore
deposit monies with Lessor sufficient to restore said Security Deposit to the
full amount required by this Lease. Any time the Base Rent increases during the
term of this Lease, Lessee shall, upon written request from Lessor, deposit
additional monies with Lessor as an addition to the Security Deposit so that the
total amount of the Security Deposit shall at all times bear the same proportion
to the then current Base Rent as the initial Security Deposit bears to the
initial Base Rent set forth in Paragraph 1.5. Lessor shall not be required to
keep all or any part of the Security Deposit separate from its general accounts.
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Lessor shall, at the expiration or earlier termination of the term hereof and
after Lessee has vacated the Premises, return to Lessee (or, at Lessor's option,
to the last assignee, if any, of Lessee's interest herein), that portion of the
Security Deposit not used or applied by Lessor. Unless otherwise expressly
agreed in writing by Lessor, no part of the Security Deposit shall be considered
to be held in trust, to bear interest or other increment for its use, or to be
prepayment for any monies to be paid by Lessee under this Lease.
6. Use.
6.1 Permitted Use.
(a) Lessee shall use and occupy the Premises only for the Permitted
Use set forth in Paragraph 1.8, or any other legal use which is reasonably
comparable thereto, and for no other purpose. Lessee shall not use or permit
the use of the Premises in a manner that is unlawful, creates waste or a
nuisance, or that disturbs owners and/or occupants of, or causes damage to the
Premises or neighboring premises or properties.
(b) Lessor hereby agrees to not unreasonably withhold or delay its
consent to any written request by Lessee, Lessee's assignees or subtenants, and
by prospective assignees and subtenants of Lessee, its assignees and subtenants,
for a modification of said Permitted Use, so long as the same will not impair
the structural integrity of the improvements on the Premises or in the Building
or the mechanical or electrical systems therein, does not conflict with uses by
other lessees, is not significantly more burdensome to the Premises or the
Building and the improvements thereon, and is otherwise permissible pursuant to
this Paragraph 6. If Lessor elects to withhold such consent, Lessor shall
within five (5) business days after such request give a written notification of
same, which notice shall include an explanation of Lessor's reasonable
objections to the change in use.
6.2 Hazardous Substances.
(a) Reportable Uses Require Consent. The term "Hazardous Substance"
as used in this Lease shall mean any product, substance, chemical material or
waste whose presence, nature, quantity and/or intensity of existence, use,
manufacture, disposal, transportation, spill, release or effect, either by
itself or in combination with other materials expected to be on the Premises, is
either: (i) potentially injurious to the public health, safety, welfare, the
environment, or the Premises; (ii) regulated or monitored by any governmental
authority; or (iii) a basis for potential liability of Lessor to any
governmental agency or third party under any applicable statute or common law
theory. Hazardous Substance shall include, but not be limited to, hydrocarbon,
petroleum, gasoline, crude oil or any products or by-products thereof. Lessee
shall not engage in any activity in or about the Premises which constitutes a
Reportable Use (as hereinafter defined) of Hazardous Substances without the
express prior written consent of Lessor and compliance in a timely manner (at
Lessee's sole cost and expense) with all Applicable Requirements (as defined in
Paragraph 6.3). "Reportable Use" shall mean (i) the installation or use of any
above or below ground storage tank, (ii) the generation,
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possession, storage, use, transportation, or disposal of a Hazardous Substance
that requires a permit from, or with respect to which a report, notice,
registration or business plan is required to be filed with, any governmental
authority, and (iii) the presence in, on or about the Premises of a Hazardous
Substance with respect to which any Applicable Laws require that a notice be
given to persons entering or occupying the Premises or neighboring properties.
Notwithstanding the foregoing, Lessee may, without Lessor's prior consent, but
upon notice to Lessor and in compliance with all Applicable Requirements, use
any ordinary and customary materials reasonably required to be used by Lessee in
the normal course of the Permitted Use, so long as such use is not a Reportable
Use and does not expose the Premises or neighboring properties to any meaningful
risk of contamination or damage or expose Lessor to any liability therefor. In
addition, Lessor may (but without any obligation to do so) condition its consent
to any Reportable Use of any Hazardous Substance by Lessee upon Lessee's giving
Lessor such additional assurance as Lessee, in its reasonable discretion, deems
necessary to protect itself, the public, the Premises and the environment
against damage, contamination or injury and/or liability thereto, including but
not limited to the installation (and, at Lessor's option, removal on or before
Lease expiration or earlier termination) of reasonably necessary protective
modifications to the Premises (such as concrete encasements) and/or the deposit
of an additional Security Deposit under Paragraph 5 hereof.
(b) Duty to Inform Lessor. If Lessee knows, or has reasonable cause
to believe that a Hazardous Substance has come to be located in, on, under or
about the Premises or the Building, other than as previously consented to by
Lessor, Lessee shall immediately give Lessor written notice thereof, together
with a copy of any statement, report, notice, registration, application, permit,
business plan, license, claim, action, or proceeding given to, or received from,
any governmental authority or private party concerning the presence, spill,
release, discharge of, or exposure to, such Hazardous Substance including but
not limited to all such documents as may be involved in any Reportable Use
involving the Premises. Lessee shall not cause or permit any Hazardous
Substance to be spilled or release in, on, under or about the Premises
(including, without limitation), through the plumbing or sanitary sewer system).
(c) Indemnification. Lessee shall indemnity, protect, defend and hold
Lessor, its agents, employees, lenders and ground lessor, if any, and the
Premises, harmless from and against any and all damages, liabilities, judgments,
costs, claims, liens, expenses, penalties, loss of permits and attorneys' and
consultants' fees arising out of or involving any Hazardous Substance brought
onto the Premises by or for Lessee or by anyone under Lessee's control.
Lessee's obligation under this Paragraph 6.2(c) shall include, but not be
limited to, the effects of any contamination or injury to person, property or
the environment created or suffered by Lessee, and the cost of investigation
(including consultants' and attorneys' fees and testing), removal, remediation,
restoration and/or abatement thereof, or of any contamination therein involved,
and shall survive the expiration or earlier termination of this Lease. No
termination, cancellation or release agreement entered into by Lessor and Lessee
shall release Lessee from its obligations
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under this Lease with respect to Hazardous Substances, unless specifically so
agreed by Lessor in writing at the time of such agreement.
6.3 Lessee's Compliance with Requirements. Lessee shall, at Lessee's
sole cost and expense, fully, diligently and in a timely manner, comply with all
"Applicable Requirements", which term is used in this Lease to mean all laws,
rules, regulations, ordinances, directives, covenants, easements and
restrictions of record, permits, the requirements of any applicable fire
insurance underwriter or rating bureau, and the recommendations of Lessor's
engineers and/or consultants, relating in any manner to the Premises (including
but not limited to matters pertaining to (i) industrial hygiene, (ii)
environmental conditions on, in, under or about the Premises, including soil and
groundwater conditions, and (iii) the use, generation, manufacture, production,
installation, maintenance, removal, transportation, storage, spill, or release
of any Hazardous Substance, now in effect or which may hereafter come into
effect, Lessee shall, within five (5) days after receipt of Lessor's written
request, provide Lessor with copies of all documents and information, including
but not limited to, permits, registrations, manifests, applications, reports and
certificates, evidencing Lessee's compliance with any Applicable Requirements
specified by Lessor, and shall immediately upon receipt, notify Lessor in
writing (with copies of any documents involved) of any threatened or actual
claim, notice, citation, warning, complaint or report pertaining to or involving
failure by Lessee or the Premises to comply with any Applicable Requirements.
6.4 Inspection; Compliance with Law. Lessor, Lessor's agents,
employees, contractors and designated representatives, and the holders of any
mortgages, deeds of trust or ground leases on the Premises ("Lenders") shall
have the right to enter the Premises at any time in the case of an emergency,
and otherwise at reasonable times, for the purpose of inspecting the condition
of the Premises and for verifying compliance by Lessee with this Lease and all
Applicable Requirements (as defined in Paragraph 6.3), and Lessor shall be
entitled to employ experts and/or consultants in connection therewith to advise
Lessor with respect to Lessee's activities, including but not limited to
Lessee's installation, operation, use, monitoring, maintenance, or removal of
any Hazardous Substance on or from the Premises. The costs and expense of any
such inspections hall be paid by the party requesting same, unless a Default or
Breach of this Lease by Lessee or a violation of Applicable Requirements or a
contamination, caused or materially contributed to by Lessee, is found to exist
or to be imminent, or unless the inspection is requested or entered by a
governmental authority as the result of any such existing or imminent violation
or contamination. In such case, Lessee shall upon request reimburse Lessor or
Lessor's Lender, as the case may be, for the costs and expenses of such
inspections.
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7. Maintenance, Repairs, Utility Installations, Trade Fixtures and Alterations.
7.1 Lessee's Obligations. (See Addendum I.)
(a) Subject to the provisions of Paragraphs 2.2 (Condition), 2.3
(Compliance with Covenants, Restrictions and Building Code), 7.2 (Lessor's
Obligations), 9 (Damage or Destruction), and 14 (Condemnation), Lessee shall, at
Lessee's sole cost and expense and at all times, keep the Premises and every
part thereof in good order, condition and repair (whether or not such portion of
the Premises requiring repair, or the means of repairing the same, are
reasonably or readily accessible to Lessee, and whether or not the need for such
repairs occurs as a result of Lessee's use, any prior use, the elements or the
age of such portion of the Premises), including, without limiting the generality
of the foregoing, all equipment or facilities specifically serving the Premises,
such as plumbing, heating, air conditioning, ventilating, electrical, lighting
facilities, boilers, fired or unfired pressure vessels, fire hose connections if
within the Premises, fixtures, interior walls, interior surfaces of exterior
walls, ceilings, floors, windows, doors, plate glass, and skylights, but
excluding any items which are the responsibility of Lessor pursuant to Paragraph
7.2 below. Lessee, in keeping the Premises in good order, condition and repair,
shall exercise and perform good maintenance practices. Lessee's obligations
shall include restorations, replacements or renewals when necessary to keep the
Premises and all improvements thereon or a part thereof in good order, condition
and state of repair.
(b) Lessee shall, at Lessee's sole cost and expense, procure and
maintain a contract, with copies to Lessor, in customary form and substance for
and with a contractor specializing and experienced in the inspection,
maintenance and service of the heating, air conditioning and ventilation system
for the Premises. However, Lessor reserves the right, upon notice to Lessee, to
procure and maintain the contract for the heating and air-conditioning and
ventilating systems, and if Lessor so elects, Lessee shall reimburse Lessor,
upon demand, for the cost thereof.
(c) If Lessee fails to perform Lessee's obligations under this
Paragraph 7.1, Lessor may enter upon the Premises after ten (10) days' prior
written notice to Lessee (except in the case of an emergency, in which case no
notice shall be required), perform such obligations on Lessee's behalf, and put
the Premises in good order, condition and repair, in accordance with Paragraph
13.2 below.
7.2 Lessor's Obligations. Subject to the provisions of Paragraphs 2.2
(Condition), 2.3 (Compliance with Covenants, Restrictions and Building Code),
4.2 (Common Area Operating Expenses), 6 (Use), 7.1 (Lessee's Obligations), 9
(Damage or Destruction) and 14 (Condemnation), Lessor, subject to reimbursement
pursuant to Paragraph 4.2, shall keep in good order, condition and repair the
foundations, exterior walls, structural condition of interior bearing walls,
exterior roof, fire sprinkler and/or standpipe and hose (if located in the
Common Areas) or other automatic fire extinguishing system including fire alarm
and/or smoke detection systems and
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equipment, fire hydrants, parking lots, walkways, parkways, driveways,
landscaping, fences, signs and utility systems serving the Common Areas and all
parts thereof, as well as providing the services for which there is a Common
Area Operating Expense pursuant to Paragraph 4.2. Lessor shall not be obligated
to paint the exterior or interior surfaces of exterior walls nor shall Lessor be
obligated to maintain, repair or replace windows, doors or plate glass of the
Premises. Lessee expressly waives the benefit of any statute now or hereafter in
effect which would otherwise afford Lessee the right to make repairs at Lessor's
expense or to terminate this Lease because of Lessor's failure to keep the
Building, Industrial Center or Common Areas in good order, condition and repair.
7.3 Utility Installations, Trade Fixtures, Alterations.
(a) Definitions; Consent Required. The term "Utility Installations"
is used in this Lease to refer to all air lines, power panels, electrical
distribution, security, fire protection systems, communications systems,
lighting fixtures, heating, ventilating and air conditioning equipment,
plumbing, and fencing in, on or about the Premises. The term "Trade Fixtures"
shall mean Lessee's machinery and equipment which can be removed without doing
material damage to the Premises. The term "Alterations" shall mean any
modification of the improvements on the Premises which are provided by Lessor
under the terms of this Lease, other than Utility Installations or Trade
Fixtures. "Lessee-Owned Alterations and/or Utility Installations" are defined as
Alterations and/or Utility Installations made by Lessee that are not yet owned
by Lessor pursuant to Paragraph 7.4(a). Lessee shall not make nor cause to be
made any Alterations or Utility Installations in, on, under or about the
Premises without Lessor's prior written consent. Lessee may, however, make non-
structural Utility Installations to the interior of the Premises (excluding the
roof) without Lessor's consent but upon notice to Lessor, so long as they are
not visible from the outside of the Premises, do not involve puncturing,
relocating or removing the roof or any existing walls, or changing or
interfering with the fire sprinkler or fire detection systems and the cumulative
cost thereof during the term of this Lease as extended does not exceed
$2,500.00.
(b) Consent. Any Alterations or Utility Installations that Lessee
shall desire to make and which require the consent of the Lessor shall be
presented to Lessor in written form with detailed plans. All consents given by
Lessor, whether by virtue of Paragraph 7.3(a) or by subsequent specific consent,
shall be deemed conditioned upon: (i) Lessee's acquiring all applicable permits
required by governmental authorities; (ii) the furnishing of copies of such
permits together with a copy of the plans and specifications for the Alteration
or Utility Installation to Lessor prior to commencement of the work thereon; and
(iii) the compliance by Lessee with all conditions of said permits in a prompt
and expeditious manner. Any Alterations or Utility Installations by Lessee
during the term of this Lease shall be done in a good and workmanlike manner,
with good and sufficient materials, and be in compliance with all Applicable
Requirements. Lessee shall promptly upon completion thereof furnish Lessor with
as-built plans and specifications therefor. Lessor may, (but without obligation
to do so) condition its consent to any requested Alteration or Utility
Installation that costs $2,500.00 or more upon Lessee's
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providing Lessor with a lien and completion bond in an amount equal to one and
one-half times the estimated cost of such Alteration or Utility Installation.
(c) Lien Protection. Lessee shall pay when due all claims for labor
or materials furnished or alleged to have been furnished to or for Lessee at or
for use on the Premises, which claims are or may be secured by any mechanic's or
materialmen's lien against the Premises or any interest therein. Lessee shall
give Lessor not less than ten (10) days' notice prior to the commencement of any
work in, on, or about the Premises, and Lessor shall have the right to post
notices of non-responsibility in or on the Premises as provided by law. If
Lessee shall, in good faith, contest the validity of any such lien, claim or
demand, then Lessee shall, at its sole expense, defend and protect itself,
Lessor and the Premises against the same and shall pay and satisfy any such
adverse judgment that may be rendered thereon before the enforcement thereof
against the Lessor or the Premises. If Lessor shall require, Lessee shall
furnish to Lessor a surety bond satisfactory to Lessor in an amount equal to one
and one-half times the amount of such contested lien claim or demand,
indemnifying Lessor against liability for the same, as required by law for the
holding of the Premises free from the effect of such lien or claim. In addition,
Lessor may require Lessee to pay Lessor's attorneys' fees and costs in
participating in such action if Lessor shall decide it is to its best interest
to do so.
7.4 Ownership, Removal, Surrender, and Restoration.
(a) Ownership. Subject to Lessor's right to require their removal
and to cause Lessee to become the owner thereof as hereinafter provided in this
Paragraph 7.4, all Alterations and Utility Installations made to the Premises by
Lessee shall be the property of and owed by Lessee, but considered a part of the
Premises. Lessor may, at any time and at its option, elect in writing to Lessee
to be the owner of all or any specified part of the Lessee-Owned Alterations and
Utility Installations. Unless otherwise instructed per Subparagraph 7.4(b)
hereof, all Lessee-Owned Alterations and Utility Installations shall, at the
expiration or earlier termination of this Lease, become the property of Lessor
and remain upon the Premises and be surrendered with the Premises by Lessee.
(b) Removal. Unless otherwise agreed in writing, Lessor may require
that any or all Lessee-Owned Alterations or Utility Installations be removed by
the expiration or earlier termination of this Lease notwithstanding that their
installation may have been consented to by Lessor. Lessor may require the
removal at any time of all or any part of any Alterations or Utility
Installations made without the required consent of Lessor.
(c) Surrender/Restoration. Lessee shall surrender the Premises by
the end of the last day of the Lease term or any earlier termination date, clean
and free of debris and in good operating order, condition and state of repair,
ordinary wear and tear excepted. Ordinary wear and tear shall not include any
damage or deterioration that would have been prevented by good maintenance
practice or by Lessee performing all of
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its obligations under this Lease. Except as otherwise agreed or specified
herein, the Premises, as surrendered, shall include the Alterations and Utility
Installations. The obligation of Lessee shall include the repair of any damage
occasioned by the installation, maintenance or removal of Lessee's Trade
Fixtures, furnishings, equipment, and Lessee-Owned Alterations and Utility
Installations, as well as the removal of any storage tank installed by or for
Lessee and the removal, replacement, or remediation of any soil, material or
ground water contaminated by Lessee, all as may then be required by Applicable
Requirements and/or good practice. Lessee's Trade Fixtures shall remain the
property of Lessee and shall be removed by Lessee subject to its obligation to
repair and restore the Premises per this Lease.
8. Insurance Indemnity.
8.1 Payment of Premium Increases.
(a) As used herein, the term "Insurance Cost Increase" is defined
as any increase in the actual cost of the insurance applicable to the Building
and required to be carried by Lessor pursuant to paragraphs 8.2(b), 8.3(a) and
8.3(b). ("Required Insurance"), over and above the Base Premium, as hereinafter
defined, calculated on an annual basis. "Insurance Cost Increase" shall include,
but not be limited to, requirements of the holder of a mortgage or deed of trust
covering the Premises, increased valuation of the Premises, and/or a general
premium rate increase. The term "Insurance Cost Increase" shall not, however,
include any premium increases resulting from the nature of the occupancy of any
other lessee of the Building. If the parties insert a dollar amount in Paragraph
1.9, such amount shall be considered the "Base Premium." If a dollar amount has
not been inserted in Paragraph 1.9 and if the Building has been previously
occupied during the twelve (12) month period immediately preceding the
Commencement Date, the "Base Premium" shall be the annual premium applicable to
such twelve (12) month period. If the Building was not fully occupied during
such twelve (12) month period, the "Base Premium" shall be the lowest annual
premium, reasonable month period. If the Building was not fully occupied during
such twelve (12) month period, the "Base Premium" shall be the lowest annual
premium reasonably obtainable for the Required insurance as of the Commencement
Date, assuming the most nominal use possible of the Building. In no event,
however, shall Lessee be responsible for any portion of the premium cost
attributable to liability insurance coverage in excess of $1,000,000 procured
under Paragraph 8.2(b)
(b) Lessee shall pay Lessee's pro-rata share of any Insurance Cost
Increase to Lessor pursuant to Paragraph 4.2 Premiums for policy periods
commencing prior to, or extending beyond, the term of this Lease shall be
prorated to coincide with the corresponding Commencement Date or Expiration
Date.
8.2 Liability Insurance.
(a) Carried by Lessee. Lessee shall obtain and keep in force during
the term of this Lease a Commercial General Liability policy of insurance
protecting
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Lessee, Lessor and any Lender(s) whose names have been provided to Lessee in
writing (as additional insureds) against claims for bodily injury, personal
injury and property damage based upon, involving or arising out of the
ownership, use, occupancy or maintenance of the Premises and all areas
appurtenant thereto. Such insurance shall be on an occurrence basis providing
single limit coverage in an amount not less than $1,000,000 per occurrence with
an "Additional Insured-Managers or Lessors of Premises" endorsement and contain
the "Amendment of the Pollution Exclusion" endorsement for damage caused by
heat, smoke or fumes from a hostile fire. The policy shall not contain any
intra-insured exclusions as between, insured persons or organizations, but shall
include coverage for liability assumed under this Lease as an "Insured contract"
for the performance of Lessee's indemnity obligations under this Lease. The
limits of said insurance required by this Lease or as carried by Lessee shall
not, however, limit the liability of Lessee nor relieve Lessee of any obligation
hereunder. All insurance to be carried by Lessee shall be primary to and not
contributory with any similar insurance carried by Lessor, whose insurance shall
be considered excess insurance only.
(b) Carried by Lessor. Lessor shall also maintain liability
insurance described in Paragraph 8.2(a) above, in addition to and no in lieu of,
the insurance required to be maintained by Lessee. Lessee shall not be named as
an additional insured therein.
8.3 Property Insurance-Building, Improvements and Rental Value.
(a) Building and Improvements. Lessor shall obtain and keep in
force during the term of this Lease a policy or policies in the name of Lessor,
with loss payable to Lessor and to any Lender(s), insuring against loss or
damage to the Premises. Such insurance shall be for full replacement cost, as
the same shall exist from time to time, or the amount required by any Lender(s),
but in no event more than the commercially reasonable and available insurable
value thereof if, by reason of the unique nature or age of the improvements
involved, such latter amount is less than full replacement cost. lessee-Owned
Alterations and Utility Installations, Trade Fixtures and Lessee's personal
property shall be insured by Lessee pursuant to Paragraph 8.4. If the coverage
is available and commercially appropriate, Lessor's policy or policies shall
insure against all risks of direct physical loss or damage (except the perils of
flood and/or earthquake unless required by a lender or included in the Base
Premium), including coverage for any additional costs resulting from debris
removal and reasonable amounts of coverage for the enforcement of any ordinance
or law regulating the reconstruction or replacement of any undamaged sections of
the Building required to be demolished or removed by reason of the enforcement
of any building, zoning, safety or land use laws as the result of a covered
loss, but not including plate glass insurance. Said policy or policies shall
also contain an agreed valuation provision in lieu of any co-insurance clause,
waiver of subrogation, and inflation guard protection causing an increase in the
annual property insurance coverage amount by a factor of not less than the
adjusted U.S. Department of
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Labor Consumer Price Index for All Urban Consumers for the city nearest to where
the Premises are located.
(b) Rental Value. Lessor shall also obtain and keep in force during
the term of this Lease a policy or policies in the name of Lessor, with loss
payable to Lessor and any Lender(s), insuring the loss of the full rental and
other charges payable by all lessees of the Building to Lessor for one year
(including all Real Property Taxes, insurance costs, all Common Area Operating
Expenses and any scheduled rental increases). Said insurance may provide that in
the event the Lease is terminated by reason of an insured loss, the period of
indemnity for such coverage shall be extended beyond the date of the completion
of repairs or replacement of the Premises, to provide for one full year's loss
of rental revenues from the date of any such loss. Said insurance shall contain
an agreed valuation provision in lieu of any co-insurance clause, and the amount
of coverage shall be adjusted annually to reflect the projected rental income,
Real Property Taxes, insurance premium costs and other expenses, if any,
otherwise payable, for the next 12-month period. Common Area Operating Expenses
shall include any deductible amount in the event of such loss.
(c) Adjacent Premises. Lessee shall pay for any increase in the
premiums for the property insurance of the Building and for the Common Areas of
other buildings in the Industrial Center if said increase is caused by Lessee's
acts, omissions, use or occupancy of the Premises.
(d) Lessee's Improvements. Since Lessor is the Insuring Party,
Lessor shall not be required to insure Lessee-Owned Alterations and Utility
Installations unless the item in question has become the property of Lessor
under the terms of this Lease.
8.4 Lessee's Property Insurance. Subject to the requirements of Paragraph
8.5, Lessee at its cost shall either by separate policy or, at Lessor's option
by endorsement to a policy already carried, maintain insurance coverage on all
of Lessee's personal property, Trade Fixtures and Lessee-Owned Alterations and
Utility Installations in, on, or about the Premises similar in coverage to that
carried by Lessor as the Insuring Party under Paragraph 8.3(a). Such insurance
shall be full replacement cost coverage with a deductible not to exceed $1,000
per occurrence. The proceeds from any such insurance shall be used by Lessee
for the replacement of personal property and the restoration of Trade Fixtures
and Lessee-Owned Alterations and Utility Installations. Upon request from
Lessor, Lessee shall provide Lessor with written evidence that such insurance is
in force. (See Addendum I.)
8.5 Insurance Policies. Insurance required hereunder shall be in
companies duly licensed to transact business in the state where the Premises are
located, and maintaining during the policy term a "General Policyholder Rating"
of at last B+, V, or such other rating as may be required by a Lender, as set
forth in the most current issue of "Best's Insurance Guide." Lessee shall not
do or permit to be done anything which shall invalidate the insurance policies
referred to in this Paragraph 8. Lessee shall cause to be
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delivered to lessor, within seven (7) days after the earlier of the Early
Possession Date or the Commencement Date, certified copies of, or certificates
evidencing the existence and amounts of, the insurance required under Paragraph
8.2(a) and 8.4. No such policy shall be cancelable or subject to modification
except after thirty (30) days' prior written notice to Lessor. Lessee shall at
lest thirty (30) days prior to the expiration of such policies, furnish Lessor
with evidence of renewals or "insurance binders" evidencing renewal thereof, or
Lessor may order such insurance and charge the cost thereof to Lessee, which
amount shall be payable by Lessee to Lessor upon demand.
8.6 Waiver of Subrogation. Without affecting any other rights or
remedies, Lessee and Lessor each hereby release and relieve the other, and waive
their entire right to recover damages (whether in contract or in tort) against
the other, for loss or damage to their property arising out or incident to the
perils required to be insured against under Paragraph 8. The effect of such
releases and waivers of the right to recover damages shall not be limited by the
amount of insurance carried or required, or by any deductibles applicable
thereto. Lessor and Lessee agree to have their respective insurance companies
issuing property damage insurance waive any right to subrogation that such
companies may have against Lessor or Lessee, as the case may be, so long as the
insurance is not invalidated thereto.
8.7 Indemnity. Except for Lessor's negligence and/or breach of express
warranties, Lessee shall indemnify, protect, defend and hold harmless the
Premises, Lessor and its agents, Lessor's master or ground lessor, partners and
Lenders, from and against any and all claims, loss of rents and/or damages,
costs, liens, judgments, penalties, loss of permits, attorneys' and consultants'
fees, expenses and/or liabilities arising out of, involving, or in connection
with, the occupancy of the Premises by Lessee, the conduct of Lessee's business,
any act, omission or neglect of Lessee, its agents, contractors, employees or
invitees, and out of any Default or Breach by Lessee in the performance in a
timely manner of any obligation on Lessees part to be performed under this
Lease. The foregoing shall include, but not be limited to, the defense or
pursuit of any claim or any action or proceeding involved therein, and whether
or not (in the case of claims made against Lessor) litigated and/or reduced to
judgment. In case any action or proceeding be brought against Lessor by reason
of any of the foregoing matters, Lessee upon notice from Lessor shall defend the
same at Lessee's expense by counsel reasonably satisfactory to Lessor and lessor
shall cooperate with Lessee in such defense. Lessor need not have first paid any
such claim in order to be so indemnified. (See Addendum I.)
8.8 Exemption of Lessor from Liability. Lessor shall not be liable for
injury or damage to the person or goods, wares, merchandise or other property of
Lessee, Lessee's employees, contractors, invitees, customers, or any other
person in or about the Premises, whether such damage or injury is caused by or
results from fire, steam, electricity, gas, water or rain, or from the breakage,
leakage, obstruction or other defects of pipes, fire sprinklers, wires,
appliances, plumbing, air conditioning or lighting fixtures, or from any other
cause, whether said injury or damage results from conditions arising upon the
Premises or upon other portions of the Building of which the Premises are a
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part, from other sources or places, and regardless of whether the cause of such
damage or injury or the means of repairing the same is accessible or not. Lessor
shall not be liable for any damages arising from any act or neglect of any other
Lessee or lessor nor from the failure by Lessor to enforce the provisions of any
other lease in the Industrial Center. Notwithstanding Lessor's negligence or
breach of this Lease, Lessor shall under no circumstances be liable for injury
to Lessee's business or for any loss of income or profit therefrom. (See
Addendum I.)
9. Damage or Destruction.
9.1 Definitions.
(a) "Premises Partial Damage" shall mean damage or destruction to the
Premises, other than Lessee-Owned Alterations and Utility Installations, the
repair cost of which damage or destruction is less than fifty percent (50%) of
the then Replacement Cost (as defined in paragraph 9.1(d)) of the Premises
(excluding Lessee-Owned Alterations and Utility Installations and Trade
Fixtures) immediately prior to such damage or destruction.
(b) "Premises Total Destruction" shall mean damage or destruction to
the Premises, other than Lessee-Owned Alterations and Utility Installations, the
repair cost of which damage or destruction is fifty percent (50%) or more of the
then Replacement Cost of the Premises (excluding Lessee-Owned Alterations and
Utility Installations and Trade Fixtures) immediately prior to such damage or
destruction. In addition, damage or destruction to the Building, other than
Lessee-Owned Alterations and Utility Installations and Trade Fixtures of any
lessees of the Building, the cost of which damage or destruction is fifty
percent (50%) or more of the Replacement Cost (excluding Lessee-Owned
Alterations and Utility Installations and Trade Fixtures of any lessees of the
Building) of the Building shall, at the option of Lessor, be deemed to be
Premises Total Destruction.
(c) "Insured Loss" shall mean the damage or destruction to the
Premises, other than Lessee-Owned Alterations and Utility Installations and
Trade fixtures, which was caused by an event required to be covered by the
insurance described in Paragraph 8.3(a) irrespective of any deductible amounts
or coverage limits involved.
(d) "Replacement Cost" shall mean the cost to repair or rebuild the
improvements owned by Lessor at the time of the occurrence to their condition
existing immediately prior thereto, including demolition, debris removal and
upgrading required by the operation of applicable building codes, ordinances or
laws, and without deduction for depreciation.
(e) "Hazardous Substance Condition" shall mean the occurrence or
discovery of a condition involving the presence of, or a contamination by, a
Hazardous Substance as defined in paragraph 6.2(a), in, on, or under the
Premises.
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9.2 Premises Partial Damages -- Insured Loss. If Premises Partial Damage
that is an Insured Loss occurs, then Lessor shall, at Lessor's expense, repair
such damage (but not Lessee's Trade Fixtures or Lessee-Owned Alterations and
Utility Installations) as soon as reasonably possible and this Lease shall
continue in full force and effect. In the event, however, that there is a
shortage of insurance proceeds and such shortage is due to the fact that, by
reason of the unique nature of the improvements in the Premises, full
replacement cost insurance coverage was not commercially reasonable and
available, Lessor shall have no obligation to pay for the shortage in insurance
proceeds or to fully restore the unique aspects of the Premises unless Lessee
provides Lessor with the funds to cover same, or adequate assurance thereof,
within thirty (30) days following receipt of written notice of such shortage and
request therefor. If Lessor receives said funds or adequate assurance thereof
within said thirty (30) day period, Lessor shall complete them as soon as
reasonably possible and this Lease shall remain in full force and effect. If
Lessor does not receive such funds or assurance within said period, Lessor may
nevertheless elect by written notice to lessee within thirty (30) days
thereafter to make such restoration and repair as is commercially reasonable
with Lessor paying any shortage in proceeds, in which case this Lease shall
remain in full force and effect. If Lessor does not receive such funds or
assurance within such thirty (30) day period, and if Lessor does not so elect to
restore and repair, then this Lease shall terminate sixty (60) days following
the occurrence of the damage or destruction. Unless otherwise agreed, Lessee
shall in no event have any right to reimbursement from Lessor for any funds
contributed by Lessee to repair any such damage or destruction. Premises Partial
Damage due to flood or earthquake shall be subject to Paragraph 9.3 rather than
Paragraph 9.2, notwithstanding that there may be some insurance coverage, but
the net proceeds of any such insurance shall be made available for the repairs
if made by either party. (See Addendum I.)
9.3 Partial Damage--Uninsured Loss. If Premises Partial Damage that is not
an insured Loss occurs, unless caused by a negligent or willful act of Lessee
(in which event Lessee shall make the repairs at Lessee's expense and this Lease
shall continue in full force and effect), Lessor may at Lessor's option, either
(i) repair such damage as soon as reasonably possible at Lessor's expense, in
which event this Lease shall continue in full force and effect, or (ii) give
written notice to Lessee within thirty (30) days after receipt by Lessor or
knowledge of the occurrence of such damage of Lessor's desire to terminate this
Lease as of the date sixty (60) days following the date of such notice. In the
event Lessor elects to give such notice of Lessor's intention to terminate this
Lease, Lessee shall have the right within thirty (30) days after the receipt of
such notice to give written notice to Lessor of Lessee's commitment to pay for
the repair of such damage totally at Lessee's expense and without reimbursement
from Lessor. Lessee shall provide Lessor with the required funds or satisfactory
assurance thereof within thirty (30) days following such commitment from Lessee.
In such event this Lease shall continue in full force and effect, and Lessor
shall proceed to make such repairs as soon as reasonably possible after the
required funds are available. If Lessee does not give such notice and provide
the funds or assurance thereof within the times specified above, this Lease
shall terminate as of the date specified in Lessor's notice of termination.
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9.4 Total Destruction. Notwithstanding any other provision hereof, if
Premises Total Destruction occurs (including any destruction required by any
authorized public authority), this Lease shall terminate sixty (60) days
following the date of such Premises Total Destruction, whether or not the damage
or destruction is an Insured Loss or was caused by a negligent or willful act of
Lessee. In the event, however, that the damage or destruction was caused by
Lessee, Lessor shall have the right to recover Lessor's damages from Lessee
except as released and waived in Paragraph 9.7.
9.5 Damage Near End of Term. If at any time during the last six (6) months
of the term of this Lease there is damage for which the cost to repair exceeds
one month's Base Rent, whether or not an Insured Loss, Lessor may, at Lessor's
option, terminate this Lease effective sixty (60) days following the date of
occurrence of such damage by giving written notice to Lessee of Lessor's
election to do so within thirty (30) days after the date of occurrence of such
damage. Provided, however, if Lessee at that time has an exercisable option to
extend this Lease or to purchase the Premises, then Lessee may preserve this
Lease by (a) exercising such option, and (b) providing Lessor with any shortage
in insurance proceeds (or adequate assurance thereof) needed to make the repairs
on or before the earlier of (i) the date which is ten (10) days after Lessee's
receipt of Lessor's written notice purporting to terminate this Lease, or (ii)
the day prior to the date upon which such option expires. If Lessee duly
exercises such option during such period and provides Lessor with funds (or
adequate assurance thereof) to cover any shortage in insurance proceeds, Lessor
shall, at Lessor's expense repair such damage as soon as reasonably possible and
this Lease shall continue in full force and effect. If Lessee fails to exercise
such option and provide such funds or assurance during such period, then this
Lease shall terminate as of the date set forth in the first sentence of this
Paragraph 9.5.
9.6 Abatement of Rent; Lessee's Remedies.
(a) In the event of (i) Premises Partial Damage or (ii) Hazardous
Substance Condition for which Lessee is not legally responsible, the Base Rent,
Common Area Operating Expenses and other charges, if any, payable by Lessee
hereunder for the period during which such damage or condition, its repair,
remediation or restoration continues, shall be abated in proportion to the
degree to which Lessee's use of the Premises is impaired, but not in excess of
proceeds from Insurance required to be carried under Paragraph 8.3(b). Except
for abatement of Base Rent, Common Area Operating Expenses and other charges, if
any, as aforesaid, all other obligations of Lessee hereunder shall be performed
by Lessee, and Lessee shall have no claim against Lessor for any damage suffered
by reason of any such damage, destruction, repair, remediation or restoration.
(b) If Lessor shall be obligated to repair or restore the Premises
under the provisions of this Paragraph 9 and shall not commence, in a
substantial and meaningful way, the repair or restoration of the Premises within
sixty (60) days after such obligation shall accrue Lessee may, at any time prior
to the commencement of such repair or restoration, give written notice to Lessor
and to any Lenders of which Lessee has
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actual notice of Lessee's election to terminate this Lease on a date not
less than sixty (60) days following the giving of such notice. If Lessee gives
such notice to Lessor and such Lenders and such repair or restoration is not
commenced within thirty (30) days after receipt of such notice, this Lease shall
terminate as of the date specified in said notice. If Lessor or a Lender
commences the repair or restoration of the Premises within thirty (30) days
after the receipt of such notice, this Lease shall continue in full force and
effect. "Commence" as used in this Paragraph 9.6 shall mean either the
unconditional authorization of the preparation of the required plans, or the
beginning of the actual work on the Premises whichever occurs first.
9.7 Hazardous Substance Conditions. If a Hazardous Substance Condition
occurs not already identified, unless Lessee is legally responsible therefor (in
which case Lessee shall make the investigation and remediation thereof required
by Applicable Requirements and this Lease shall continue in full force and
effect, but subject to Lessor's rights under Paragraph 6.2(c) and paragraph 13),
Lessor may at Lessor's option either (i) investigate and remediate such
Hazardous Substance Condition, if required, as soon as reasonably possible at
Lessor's expense in which event this Lease shall continue in full force and
effect, or (ii) if the estimated cost to investigate and remediate such
condition exceeds twelve (12) times the then monthly base rent or $500,000
whichever is greater, give written notice to Lessee within thirty (30) days
after receipt by Lessor of knowledge of the occurrence of such Hazardous
Substance Condition of Lessor's desire to terminate this Lease as of the date
sixty (60) days following the date of such notice. In the event Lessor elects to
give such notice of Lessor's intention to terminate the Lease, Lessee shall have
the right within ten (10) days after the receipt of such notice to give written
notice to lessor of Lessee's commitment to pay for the excess costs of (a)
investigation and remediation of such Hazardous Substance Condition to the
extent required by Applicable Requirements, over (b) an amount equal to twelve
(12) times the then monthly Base Rent or $500,000, whichever is greater. Lessee
shall provide Lessor with the funds required of Lessee or satisfactory assurance
thereof within thirty (30) days following said commitment by Lessor. In such
event this Lease shall continue in full force and effect, and Lessor shall
proceed to make such investigation and remediation as soon as reasonably
possible after the required funds are available. If Lessee does not give such
notice and provide the required funds or assurance thereof within the time
period specified above, this Lease shall terminate as of the date specified in
Lessor's notice of termination.
9.8 Termination--Advance Payments. Upon termination of this Lease pursuant
to this Paragraph 9, Lessor shall return to Lessee any advance payment made by
Lessee to Lessor and so much of Lessee's Security Deposit as has not been, or is
not then required to be, used by Lessor under the terms of this Lease.
9.9 Waiver of Statutes. Lessor and Lessee agree that the terms of this Lease
shall govern the effect of any damage to or destruction of the Premises and the
Building with respect to the termination of this Lease and hereby waive the
provisions of any present or future statute to the extent it is inconsistent
herewith.
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10. Real Property Tax Definitions.
10.1 Payment of Taxes. Lessor shall pay the Real Property Taxes, as
defined in Paragraph 10.2(a), applicable to the Industrial Center, and except as
otherwise provided in Paragraph 10.3, any increases in such amounts over the
Base Real Property Taxes shall be included in the calculation of Common Area
Operating Expenses in accordance with the provisions of Paragraph 4.2.
10.2 Real Property Tax Definitions.
(a) As used herein, the term "Real Property Taxes" shall include any
form of real estate tax or assessment, general, special, ordinary or
extraordinary, and any license fee, commercial rental tax, improvement bond or
bonds, levy or tax (other than inheritance, personal income or estate taxes)
imposed upon the Industrial Center by any authority having the direct or
indirect power to tax, including any city, state or federal government, or any
school agricultural, sanitary, fire, street, drainage, or other improvement
district thereof, levied against any legal or equitable interest of Lessor in
the Industrial Center or any portion thereof, Lessor's right to rent or other
income therefrom, and/or Lessor's business of leasing the premises. The term
"Real Property Taxes" shall also include any tax, fee, levy, assessment or
charge, or any increase therein, imposed by reason of events occurring, or
changes in Applicable Law taking effect during the term of this Lease, including
but not limited to a change in the ownership of the Industrial Center or in the
improvements thereon, the execution of this Lease, or any modification,
amendment or transfer thereof, and whether or not contemplated by the Parties.
(b) As used herein, the term "Base Real Property Taxes" shall be the
amount of Real Property Taxes, which are assessed against the Premises, Building
or Common Areas in the calendar year during which the Lease is executed. In
calculating Real Property Taxes for any calendar year, the Real Property
Building or Common Areas in the calendar year during which the Lease is
executed. In calculating Real Property Taxes for any calendar year, the Real
Property Taxes for any real estate tax year shall be included in the calculation
of Real Property Taxes for such calendar year based upon the number of days
which such calendar year and tax year have in common.
10.3 Additional Improvements. Common Area Operating Expenses shall not
include Real Property Taxes specified in the tax assessor's records and work
sheets as being caused by additional improvements placed upon the Industrial
Center by other lessees or by Lessor for the exclusive enjoyment of such other
lessees. Notwithstanding Paragraph 10.1 hereof, Lessee shall, however, pay to
Lessor at the time Common Area Operating Expenses are payable under Paragraph
4.2, the entirety of any increase in real Property Taxes if assessed solely by
reason of Alterations, Trade Fixtures or Utility Installations placed upon the
Premises by Lessee or at Lessee's request.
10.4 Joint Assessment. If the Building is not separately assessed, Real
Property Taxes allocated to the Building shall be an equitable proportion of the
Real Property Taxes for all of the land and improvements included within the tax
parcel assessed, such
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proportion to be determined by Lessor from the respective valuations assigned in
the assessor's worksheets or such other information as may be reasonably
available. Lessor's reasonable determination thereof, in good faith, shall be
conclusive.
10.5 Lessee's Property Taxes. Lessee shall pay prior to delinquency all
taxes assessed against and levied upon Lessee-Owned Alterations and Utility
Installations, Trade Fixtures, furnishings, equipment and all personal property
of Lessee contained in the Premises or stored within the Industrial Center.
When possible, Lessee shall cause its Lessee-Owned Alterations and Utility
Installations, Trade Fixtures, furnishings, equipment and all other personal
property to be assessed and billed separately from the real property of lessor.
If any of Lessee's said property shall be assessed with Lessor's real property,
Lessee shall pay Lessor the taxes attributable to Lessee's property within ten
(10) days after receipt of a written statement setting forth the taxes
applicable to Lessee's property.
11. Utilities. Lessee shall pay directly for all utilities and services
supplied to the Premises, including but not limited to electricity, telephone,
security, gas and cleaning of the Premises, together with any taxes thereon, if
any such utilities or services are not separately metered to the Premises or
separately billed to the Premises, Lessee shall pay to Lessor a reasonable
proportion to be determined by Lessor of all such charges jointly metered or
billed with other premises in the Building, in the manner and within the time
periods set forth in the Paragraph 4.2(d).
12. Assignment and Subletting.
12.1 Lessor's Consent Required. (See Addendum I.)
(a) Lessee shall not voluntarily assign, transfer, mortgage or
otherwise transfer or encumber (collectively "assign") or sublet all or any part
of Lessee's interest in this Lease or in the Premises without Lessor's prior
written consent given under and subject to the terms of Paragraph 36.
(b) A change in the control of Lessee shall constitute an assignment
requiring Lessor's consent. The transfer, on a cumulative basis, of fifty
percent (50%) or more of the voting control of Lessee shall constitute a change
in control for this purpose. (See Addendum I.)
(c) The involvement of Lessee or its assets in any transaction, or
series of transactions (by way of merger, sale, acquisition, financing,
refinancing, transfer, leveraged buy-out or otherwise), whether or not a formal
assignment or hypothecation of this Lease or Lessee's assets occurs, which
results or will result in a reduction of the Net worth of Lessee, as hereinafter
defined, by an amount equal to or greater than fifty percent (50%) of such Net
Worth of Lessee as it was represented to Lessor at the time of full execution
and delivery of this Lease or at the time of the most recent assignment to which
Lessor has consented, or as it exists immediately prior to said transaction or
transactions constituting such reduction, at whichever time said Net Worth of
Lessee was
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or is greater, shall be considered an assignment of this Lease by Lessee to
which Lessor may reasonably withhold its consent. "Net Worth of Lessee" for
purposes of this Lease shall be the net worth of Lessee (excluding any
Guarantors) established under generally accepted accounting principles
consistently applied.
(d) An assignment or subletting of Lessee's interest in this Lease
without Lessor specific prior written consent shall, at Lessor's option, be a
Default curable after notice per Paragraph 13.1, or a non-durable Breach without
the necessity of any notice and grace period. If Lessor elects to treat such
unconsented to assignment or subletting as a non-curable Breach, Lessor shall
have the right to either: (i) terminate this Lease, or (ii) upon thirty (30)
days written notice ("Lessor's Notice"), increase the monthly Base Rent to the
greater of the then fair market rental value of the Premises, as reasonably
determined by Lessor, or one hundred five percent (105%) of the Base Rent than
in effect. Pending determination of the new fair market rental value, if
disputed by Lessee, Lessee shall pay the amount set forth in Lessor's Notice,
with any overpayment credited against the next installment(s) of Base Rent
coming due, and any underpayment for the period retroactively to the effective
date of the adjustment being due and payable immediately upon the determination
thereof. Further, in the event of such Breach and rental adjustment, (i) the
purchase price of any opinion to purchase the Premises held by Lessee shall be
subject to similar adjustment to the then fair market value as reasonably
determined by Lessor (without the Lease being considered an encumbrance or any
deduction for depreciation or obsolescence, and considering the Premises at its
highest and best use and in good condition) or one hundred ten percent (110%) of
the price previously in effect, (ii) any index-oriented rental or price
adjustment formulas contained in this Lease shall be adjusted to require that
the base index be determined with reference to the index applicable to the time
of such adjustment, and (iii) any fixed rental adjustments scheduled during the
remainder of the Lease term shall be increased in the same ratio as the new
rental bears to the Base Rent in effect immediately prior to the adjustment
specified in Lessor's Notice.
(e) Lessee's remedy for any breach of this Paragraph 12.1 by Lessor
shall be limited to compensatory damages and/or injunctive relief.
12.2 Terms and Conditions Applicable to Assignment and Subletting.
(a) Regardless of Lessor's consent, any assignment or subletting
shall not (i) be effective without the express written assumption by such
assignee or sublessee of the obligations of the Lessee under this Lease, (ii)
release Lessee of any obligations hereunder, nor (iii) alter the primary
liability of Lessee for the payment of Base Rent and other sums due Lessor
hereunder or for the performance of any other obligations to be performed by
Lessee under this Lease.
(b) Lessor may accept any rent or performance of Lessee's obligations
from any person other than Lessee pending approval or disapproval of an
assignment. Neither a delay in the approval or disapproval of such assignment
nor the acceptance of
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any rent for performance shall constitute a waiver or estoppel of Lessor's right
to exercise its remedies for the Default or Breach by Lessee of any of the
terms, covenants or conditions of this Lease.
(c) The consent of Lessor to any assignment or subletting shall not
constitute a consent to any subsequent assignment or subletting by Lessee or to
any subsequent or successive assignment or subletting by the assignee or
sublessee. However, Lessor may consent to subsequent sublettings and assignments
of the sublease or any amendments or modifications thereto and without obtaining
their consent, and such action shall not relieve such persons from liability
under this Lease or the sublease.
(d) In the event of any Default or Breach of Lessee's obligation
under this Lease, Lessor may proceed directly against Lessee, any Guarantors or
anyone else responsible for the performance of the Lessee's obligations under
this Lease, including any sublessee, without first exhausting Lessor's remedies
against any other person or entity responsible therefor to Lessor, or any
security held by Lessor.
(e) Each request for consent to an assignment or subletting shall be
in writing accompanied by information relevant to Lessor's determination as to
the financial and operational responsibility and appropriateness of the proposed
assignee or sublessee, including but not limited to the intended use and/or
required modification of the Premises, if any, together with a non-refundable
deposit of $1,000 or ten percent (10%) of the monthly Base Rent applicable to
the portion of the Premises which is the subject of the proposed assignment or
sublease, whichever is greater, as reasonable consideration for Lessor's
considering and processing the request for consent. Lessee agrees to provide
Lessor with such other or additional information and/or documentation as may be
reasonably requested by Lessor.
(f) Any assignee of, or sublessee under, this Lease shall, by reason
of accepting such assignment or entering into such sublease, be deemed, for the
benefit of Lessor, to have assumed and agreed to conform and comply with each
and every term, covenant, condition and obligation herein to be observed or
performed by Lessee during the term of said assignment of sublease, other than
such obligations as are contrary to or inconsistent with provisions of an
assignment or sublease to which Lessor has specifically consented in writing.
(g) The occurrence of a transaction described in Paragraph 12.2(c)
shall give Lessor the right (but not the obligation) to require that the
Security Deposit be increased by an amount equal to two (2) times the then
monthly Base Rent, and Lessor may make the actual receipt by Lessor of the
Security Deposit Increase a condition to Lessor's consent to such transaction.
12.3 Additional Terms and Conditions Applicable to Subletting. The
following terms and conditions shall apply to any subletting by Lessee of all or
any part of the Premises and shall be deemed included in al subleases under this
Lease whether or not expressly incorporated therein:
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(a) Lessee hereby assigns and transfers to Lessor all of Lessee's
interest in all rentals and income arising from any sublease of all or a portion
of the Premises heretofore or hereafter made by Lessee, and Lessor may collect
such rent and income and apply same toward Lessee's obligations under this
Lease; provided, however, that until a Breach (as defined in Paragraph 13.1)
shall occur in the performance of Lessee's obligations under this Lease, Lessee
may, except as otherwise provided in this Lease, receive collect and enjoy the
rents accruing under such sublease. Lessor shall not, by reason of the foregoing
provision or any other assignment of such sublease to Lessor nor by reason of
the collection of the rents from a sublessee, be deemed liable to the sublessee
for failure of Lessee to perform and comply with any of Lessee's obligations to
such sublessee under such Sublease. Lessee hereby irrevocably authorizes and
directs any such sublessee, upon receipt of a written notice from Lessor stating
that a Breach exists in the performance of Lessee's obligations under this
Lease, to pay to Lessor the rents and other charges due and to become due under
the sublease. Sublessee shall rely upon any such statement and request from
Lessor and shall pay such rents and other charges to Lessor without any
obligations or right to inquire as to whether such Breach exists and
notwithstanding any notice from or claim from Lessee to the contrary. Lessee
shall have no right or claim against such sublessee, or, until the Breach has
been cured, against Lessor, for any such rents and other charges so paid by said
sublessee to Lessor.
(b) In the event of a Breach by Lessee in the performance of its
obligations under this Lease, Lessor, at its option and without any obligation
to do so, may require any sublessee to attorn to Lessor, in which event Lessor
shall undertaken the obligations of the sublessor under such sublease from the
time of the exercise of said option to the expiration of such sublease;
provided, however, Lessor shall not be liable for any prepaid rents or security
deposit paid by such sublessee to such sublessor or for any other prior defaults
or breaches of such sublessor under such sublease.
(c) any matter or thing requiring the consent of the sublessor under
a sublease shall also require the consent of Lessor herein.
(d) No sublessee under a sublease approved by Lessor shall further
assign or sublet all or any part of the Premises without Lessor's prior written
consent.
(e) Lessor shall deliver a copy of any notice of Default or Breach by
Lessee to the sublessee, who shall have the right to cure the Default of Lessee
within the grace period, if any, specific in such notice. The sublessee shall
have a right or reimbursement and offset from and against Lessee for any such
Defaults cured by the sublessee.
13. Default; Breach; Remedies.
13.1 Default; Breach. Lessor and Lessee agree that if an attorney is
consulted by Lessor in connection with a Lessee Default or Breach (as
hereinafter defined) $350.00 is a reasonable minimum sum per such occurrence for
legal services and costs in the preparation and service of a notice of Default,
and that Lessor may include the cost of
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such services and costs in said notice as rent due and payable to cure said
default. A "Default" by Lessee is defined as a failure by Lessee to observe,
comply with or perform any of the terms, covenants, conditions or rules
applicable to Lessee under this Lease. A "Breach" by Lessee is defined as the
occurrence of any one or more of the following Defaults, and, where a grace
period for cure after notice is specified herein, the failure by Lessee to cure
such Default prior to the expiration of the applicable grace period, and shall
entitled Lessor to pursue the remedies set forth in Paragraphs 13.2 and/or 13.3:
(a) The vacating of the Premises without the intention to reoccupy
same, or the abandonment of the Premises.
(b) Except as expressly otherwise provided in this Lease, the failure
by Lessee to make any payment of Base Rent, Lessee's Share of Common area
Operating Expenses, or any other monetary payment required to be made by Lessee
hereunder as and when due, the failure by Lessee to provide Lessor with
reasonable evidence of insurance or surety bond required under this Lease, or
the failure of Lessee to fulfill any obligation under this Lease which endangers
or threatens life or property, where such failure continues for a period of
three (3) days following written notice thereof by or on behalf of Lessor to
Lessee.
(c) Except as expressly otherwise provided in this Lease, the failure
by Lessee to provide Lessor with reasonable written evidence (in duly executed
original form, if applicable) of (i) compliance with Applicable Requirements per
Paragraph 6.3, (ii) the inspection, maintenance and service contracts required
under Paragraph 7.1(b), (iii) the rescission of an unauthorized assignment or
subletting per Paragraph 12.1, (iv) a Tenancy Statement per Paragraphs 16 or 37,
(v) the subordination or non-subordination of this Lease per Paragraph 30, (vi)
the guaranty of the performance of Lessee's obligations under this Lease if
required under Paragraphs 1.11 and 37, (vii) the execution of any document
requested under Paragraph 42 (easements) or (viii) any other documentation or
information which Lessor may reasonably require of Lessee under the terms of
this lease, where any such failure continues for a period of ten (10) days
following written notice by or on behalf of Lessor to Lessee.
(d) A Default by Lessee as to the terms, covenants, conditions or
provisions of this Lease, or of the rules adopted under Paragraph 40 hereof that
are to be observed, complied with or performed by Lessee, other than those
described in Subparagraphs 13.1(a), (b) or (c), above, where such Default
continues for a period of thirty (30) days after written notice thereof by or on
behalf of Lessor to Lessee, provided, however, that if the nature of Lessee's
Default is such that more than thirty (30) days are reasonably required for its
cure, then it shall not be deemed to be a Breach of this Lease by Lessee if
Lessee commences such cure within said thirty (30) day period and thereafter
diligently prosecutes such cure to completion.
(e) The occurrence of any of the following events: (i) the making by
Lessee of any general arrangement or assignment for the benefit of creditors;
(ii) Lessee's
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becoming a :debtor as defined in 11 U.S. Code Section 101 or any successor
statute thereto (unless, in the case of a petition filed against Lessee, the
same is dismissed within sixty (60) days); (iii) the appointment of a trustee or
receiver to take possession of or substantially all of Lessee's assets located
at the Premises or of Lessee's interest in this Lease, where possession is not
restored to Lessee within thirty (30) days; or (iv) the attachment, execution or
other judicial seizure of substantially all of Lessee's assets located at the
Premises or of Lessees interest in this Lease, where such seizure is not
discharged within thirty(30) days; provided, however, in the event that any
provision of this Subparagraph 13.1(e) is contrary to any applicable law, such
provision shall be of no force or effect and shall not affect the validity of
the remaining provisions.
(f) The discovery by Lessor that any financial statement of Lessee or
of any Guarantor, given to lessor by Lessee or any Guarantor, was materially
false.
(g) If the performance of Lessee's obligations under this Lease is
guaranteed: (i) the death of a Guarantor, (ii) the termination of a Guarantor's
liability with respect to this Lease other than in accordance with the terms of
such guaranty, (iii) a Guarantor's becoming insolvent or the subject of a
bankruptcy filing, (iv) a Guarantor's refusal to honor the guaranty, or (v) a
Guarantor's breach of its guaranty obligation on an anticipatory breach basis,
and Lessee's failure, within sixty (60) days following written notice by or on
behalf of Lessor to Lessee of any such event, to provide Lessor with written
alternative assurances of security, which, when coupled with the then existing
resources of Lessee, equals or exceeds the combined financial resources of
Lessee and the Guarantors that existed at the time of execution of this Lease.
13.2 Remedies. If Lessee fails to perform any affirmative duty or
obligation of Lessee under this Lease, within ten (10) days after written notice
to Lessee (or in case of an emergency, without notice), Lessor may at its option
(but without obligation to do so), perform such duty or obligation on Lessee's
behalf, including but not limited to the obtaining of reasonably required bonds,
insurance policies, or governmental licenses, permits or approvals. The costs
and expenses of any such performance by lessor shall be due and payable by
Lessee to Lessor upon invoice therefor. If any check given to Lessor by Lessee
shall not be honored by such performance by Lessor shall be due and payable by
Lessee to Lessor upon invoice therefore. If any check given to lessor by Lessee
shall not be honored by such performance by Lessor shall be due and payable by
Lessee to Lessor upon. invoice therefor. If any check given to Lessor by Lessee
shall not be honored by the bank upon which it is drawn, Lessor at its own
option, may require all future payments to be made under this Lease by Lessee to
be made only by cashier's check. In the event of a Breach of this lease by
Lessee (as defined in Paragraph 13.1), with or without further notice or demand,
and without limiting Lessor in the exercise of any right or remedy which Lessor
may have by reason of such Breach. Lessor may:
(a) Terminate Lessee's right to possession of the Premises by any
lawful means, in which case this Lease and the term hereof shall terminate and
Lessee shall immediately surrender possession of the Premises to lessor. In such
event Lessor
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shall be entitled to recover from Lessee: (i) the worth at the time of the award
of the unpaid rent which had been earned at the time of termination; (ii) the
worth at the time of award of the amount by which the unpaid rent which would
have been earned after termination until the time of award exceeds the amount of
such rental loss that the Lessee proves could have been reasonably avoided;
(iii) the worth at the time of award of the amount by which the unpaid rent for
the balance of the term after the time of award exceeds the amount of such
rental loss that the Lessee roves could be reasonably avoided; and (iv) any
other amount necessary to compensate Lessor for all the detriment proximately
caused by the Lessee's failure to perform its obligations under this Lease or
which in the ordinary course of things would be likely to result therefrom,
including but not limited to the cost of recovering possession of the Premises,
expenses of reletting, including necessary renovation and alteration of the
Premises, reasonable attorneys' fees, and that portion of any leasing commission
paid by lessor in connection with this Lease applicable to the unexpired term of
this Lease. The worth at the time of award of the amount referred to in
provision (iii) of the immediately preceding sentence shall be computed by
discounting such amount at the discount rate of the Federal reserve Bank of San
Francisco or the Federal Reserve Bank District in which the Premises are located
at the time of award of the amount referred to in provision (iii) of the
immediately preceding sentence shall be computed by discounting such amount at
the discount rate of the Federal Reserve Bank of San Francisco or the Federal
Reserve Bank District in which the Premises are located at the time of award
plus one percent (1%). Efforts by Lessor to mitigate damages caused by Lessee's
Default or Breach of this Lease shall not waive Lessor's right to recover
damages under this paragraph 13.2. If termination of this Lease is obtained
through the provisional remedy of unlawful detainer. Lessor shall have the right
to recover in such proceeding the unpaid rent and damage as recoverable therein,
or Lessor may reserve the right to recover all or any part thereof n a separate
suit for such rent and/or damages. If a notice and grace period required under
Subparagraph 13(b), (c) or (d). In such case, the applicable grace period under
the unlawful detainer statute shall run concurrently after the one such
statutory notice and the failure of Lessee to cure the Default with the greater
of the two (2) such grace periods shall constitute both an unlawful detainer and
a Breach of this Lease entitled Lessor to the remedies provided for in this
Lease and/or by said statute.
(b) Continue the Lease and Lessee's right to possession in effect (in
California under California Civil Code Section 1951.4) after Lessee's Breach and
recover the rent as it becomes due, provided Lessee has the right to sublet or
assign, subject only to reasonable limitations. Lessor and Lessee agree that the
limitations on assignment and subletting in this Lease are reasonable. Acts of
maintenance or preservation, efforts to relet the premises, or the appointment
of a receiver to protect the Lessor's interest under this Lease, shall not
constitute a termination of the Lessee's right to possession.
(c) Pursue any other remedy now or hereafter available to Lessor
under the laws or judicial decisions of the state wherein the Premises are
located.
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(d) The expiration or termination of this Lease and/or the
termination of Lessee's right to possession shall not relieve Lessee from
liability under any indemnity provisions of this Lease as to matters occurring
during the term hereof or by reason of Lessee's occupancy of the Premises.
13.3 Inducement Recapture In Event of Breach. Any agreement by Lessor for
free or abated rent or other charges applicable to the Premises, or for the
giving or paying by Lessor to or for Lessee of any cash or other bonus,
inducement or consideration for Lessee's entering into this Lease, all of which
concessions are hereinafter referred to as "Inducement Provisions" shall be
deemed conditioned upon Lessee's full and faithful performance of all of the
terms, covenants and conditions of this Lease to be performed or observed by
Lessee during the term hereof as the same may be extended. Upon the occurrence
of a Breach (as defined in Paragraph 13.1) of this Lease by Lessee, any such
inducement Provision shall automatically be deemed deleted from this Lease and
of no further force or effect, and any rent, other charge, bonus, inducement or
consideration heretofore abated, given or paid by Lessor under such an
Inducement Provision shall be immediately due and payable by Lessee to Lessor,
and recoverable by Lessor as additional rent under this Lease, notwithstanding
any subsequent cure of said Breach by Lessee. The acceptance by lessor of rent
or the cure of the Breach which initiated the operation of this paragraph 13.3
shall not be deemed a waiver by Lessor of the provisions of this Paragraph 13.3
unless specifically so stated in writing by Lessor at the time of such
acceptance.
13.4 Late Charges. Lessee hereby acknowledges that late payment by Lessee
to Lessor of rent and other sums due hereunder will cause Lessor to incur costs
not contemplated by this Lease, the exact amount of which will be extremely
difficult to ascertain. Such costs include, but are not limited to, processing
and accounting charges, and late charges which may be imposed upon Less or by
the terms of any ground lease, mortgage or deed of trust covering the Premises.
Accordingly, if any installment of rent or other sum due from Lessee shall not
be received by Lessor or Lessor's designee within ten (10) days after such
amount shall be due, then, without any requirement for notice to Lessee, Lessee
shall pay to Lessor a late charge equal to six percent (6%) of such overdue
amount. The parties hereby agree that such late charge represents a fair and
reasonable estimate of the costs Lessor will incur by reason of late payment by
Lessee. Acceptance of such late charge by lessor shall in no event constitute a
waiver of Lessee's Default or Breach with respect to such overdue amount, nor
prevent Lessor from exercising any of the other rights and remedies granted
hereunder. In the event that a late charge is payable hereunder, whether or not
collected, for three (3) consecutive installments of Base Rent, then
notwithstanding paragraph 4.1 or any other provision of this Lease to the
contrary, Base Rent shall, at Lessor's option become due and payable quarterly
in advance.
13.5 Breach by Lessor. Lessor shall not be deemed in breach of this Lease
unless Lessor fails within a reasonable time to perform an obligation required
to be performed by Lessor. For purposes of this Paragraph 13.5, a reasonable
time shall in no event be less than thirty (30) days after receipt by Lessor,
and by any lender(s) whose
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name and address shall have been furnished to Lessee in writing for such
purpose, of written notice specifying wherein such obligation of Lessor has not
been performed; provided, however, that if the nature of Lessor's obligation is
such that more than thirty (30) days after such notice are reasonably required
for its performance, then Lessor shall not be in breach of this Lease if
performance is commenced within thirty (30) day period and thereafter diligently
pursued to completion.
14. Condemnation. If the Premises or any portion thereof are taken under the
power of eminent domain or sold under the threat of the exercise of said power
(all of which are herein called "condemnation"), this Lease shall terminate as
to the part so taken as of the date the condemning authority takes title or
possession, whichever first occurs. If more than ten percent (10%) of the floor
area of the Premises, or more than twenty-five percent (25%) of the portion of
the Common Areas designated for Lessee's parking, is taken by condemnation,
Lessee may, at Lessee's option, to be exercised in writing within ten (10) days
after Lessor shall have given Lessee written notice of such taking (or in the
absence of such notice, within thirty (30) days after the condemning authority
shall have taken possession) terminate this Lease s of the date the condemning
authority takes such possession. If Lessee does not terminate this Lease in
accordance with the foregoing, this Lease shall remain in full force and effect
as to the portion of the Premises remaining, except that the Base Rent shall be
reduced in the same proportion as the rentable floor area of the Premises taken
bears to the total rentable floor area of the Premises. No reduction of Base
Rent shall occur if the condemnation does not apply to any portion of the
Premises. Any award for the taking of all or any part of the Premises. Any award
for the taking of all or any part of the Premises under the power of eminent
domain or any payment made under threat of the exercise of such power shall be
the property of Lessor, whether such award shall be made as compensation for
diminution of value of the leasehold or, for the taking of the fee, or as
severance damages; provided, however, that lessee shall be entitled to any
compensation for diminution of value of the leasehold or, for the taking of the
fee, or as severance damages; provided, however, that Lessee shall be entitled
to any compensation, separately awarded to Lessee for Lessee's relocation
expenses and/or loss of Lessee's Trade Fixtures. In the event that this Lease is
not terminated by reason of such condemnation, Lessor shall to the extent of its
net severance damages received, over and above Lessee's Share of the legal and
other expenses incurred by Lessor in the condemnation matter, repair any damage
to the Premises caused by such condemnation authority.
15. Brokers' Fees.
15.1 Procuring Cause. The Broker(s) named in paragraph 1.10 is/are the
procuring cause of this Lease.
15.2 Additional Terms. Unless Lessor and Broker(s) have otherwise agreed
in writing, Lessor agrees that: (a) if Lessee exercises any Option (as defined
in paragraph 39.1) granted under this Lease or any Option subsequently granted,
or (b) if Lessee acquires any rights to the Premises or other premises in which
Lessor has an
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interest, or (c) if Lessee remains in possession of the Premises with the
consent of Lessor after the expiration of the term of this lease after having
failed to exercise an Option, or (d) if said Brokers are the procuring cause of
any other lease or sale entered into between the Parties pertaining to the
Premises and/or any adjacent property in which Lessor has an interest, or (e) if
Base Rent is increased, whether by agreement or operation of an escalation
clause herein, then as to any of said transactions, lessor shall pay said
Broker(s) a fee in accordance with the schedule of said Broker(s) in effect at
the time of the execution of this Lease.
15.3 Assumption of Obligations. Any buyer or transferee of Lessor's
interest in this Lease, whether such transfer is by agreement or by operation of
law, shall be deemed to have assumed Lessor's obligation under this Paragraph
15. Each Broker shall be an intended third party beneficiary of the provisions
of Paragraph 1.10 and of this Paragraph 15 to the extent of its interest in any
commission arising from this Lease and may enforce that right directly against
Lessor and its successors.
15.4 Representatives and Warranties. Lessee and Lessor each represent and
warrant to the other that it has had no dealings with any person, firm, broker
or finder other than as named in Paragraph 1.01(a) in connection with the
negotiation of this Lease and/or the consummation of the transaction
contemplated hereby, and that no broker or other person, firm or entity other
than aid named Broker(s) is entitled to any commission or finder's fee in
connection with said transaction. Lessee and Lessor do each hereby agree to
indemnify, protect, defend and hold the other harmless from and against
liability for compensation or changes which may be claimed by any such unnamed
broker, finder or other similar party, by reason of any dealings or actions of
the indemnifying Party, including any costs, expenses, and/or attorneys' fees
reasonably incurred with respect thereto.
16. Tenancy and Financial Statements.
16.1 Tenancy Statement. Each Party (as "responding Party") shall within
ten (10) days after written notice from the other Party (the "Requesting Party")
execute, acknowledge and deliver to the Requesting Party a statement in writing
in a form similar to the then most current "Tenancy Statement" form published by
the American Industrial Real Estate Association, plus such additional
information, confirmation and/or statements as may be reasonably requested by
the Requesting Party.
16.2 Financial Statement. If Lessor desires to finance, refinance, or
sell the Premises or the Building, or any part thereof, Lessee and all
Guarantors shall deliver to any potential lender or purchaser designated by
lessor such financial statements of Lessee and such Guarantors as may be
reasonably required by such lender or purchaser, including but not limited to
Lessee's financial statements for the past three (3) years. All such financial
statements shall be received by Lessor and such lender or purchaser in
confidence and shall be used only for the purposes herein set forth.
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17. Lessor's Liability. Lessor's Liability. the term "Lessor" as used herein
shall mean the owner or owners at the time in question of the fee title to the
Premises. In the event of a transfer of lessor's title or interest in the
Premises or in this Lease, Lessor shall deliver to the transferee or assignee
(in cash or by credit) any unused Security Deposit held by lessor a the time of
such transfer or assignment. Except as provided in Paragraph 15.3, upon such
transfer or assignment and delivery of the Security Deposit, as aforesaid, the
prior Lessor shall be relieved of all liability with respect to the future
obligations and/or covenants under this Lease thereafter to be performed by the
Lessor but not for past actions. Subject to the foregoing, the obligations
and/or covenants in this Lease to be performed by the Lessor shall be binding up
only upon the Lessor as hereinabove defined. (See Addendum I.)
18. Severability. The invalidity of any provision of this Lease, as determined
by a court of competent jurisdiction, shall in no way affect the validity of any
other provision hereof.
19. Interest On Past-Due Obligations. Any monetary payment due Lessor
hereunder, other than late charges, not received by Lessor within ten (10) days
following the ate on which it was due, shall bear interest from the date due at
the prime rate charged by the largest state chartered bank in the state in which
the Premises are located plus four percent (4%) per annum, but not exceeding the
maximum rate allowed by law, in addition to the potential late charge provided
for in Paragraph 13.4.
20. Time of Essence. Time is o the essence with respect to the performance of
all obligations to be performed or served by the parties to this Lease.
21. Rent Defined. All monetary obligations of Lessee to lessor under the terms
of this Lease are deemed to be rent.
22. No Prior or Other Agreements; Broker Disclaimer. This Lease contains all
agreements between the Parties with respect to any matter mentioned herein, and
no other prior contemporaneous agreement or understanding shall be effective.
Lessor and Lessee each represents and warrants to the Brokers that it has made,
and is relying solely upon, its own investigation as to the nature, quality,
character and financial responsibility of the of the Party to this Lease and as
to the nature, quality and character of the Premises. Brokers have no
responsibility with respect thereto or with respect to any default or breach
hereof by either Party. each Broker shall be an intended third party
beneficiary of the provisions of this Paragraph 22.
23. Notices.
23.1 Notice Requirements. All notices required or permitted by this Lease
shall be in writing and may be delivered in person (by hand or by messenger or
courier service) or may be sent by regular, certified or registered mail or U.S.
Postal Service Express Mail, with postage prepaid, or by facsimile transmission
during normal business hours, and shall be deemed sufficiently given it served
in a manner specified in this
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Paragraph 23. The addresses noted adjacent to a Party's signature on this Lease
shall be that Party's address for delivery or mailing of notice purposes. Either
Party may be written notice to the other specify a different address for notice
purposes. A copy of all notices required or permitted to be given to Lessor
hereunder shall be concurrently transmitted to such party or parties at such
addresses as Lessor may from time to time hereafter designate by written notice
to Lessee.
23.2 Date of Notice. Any notice sent by registered or certified mail,
return receipt requested, shall be deemed given on the date of delivery shown on
the receipt card, or if no delivery date is shown, the postmark thereon. If
sent by regular mail, the notice shall be deemed given forty-eight (48) hours
after the same is addressed as required herein and mailed with postage prepaid.
Notices delivered by United States Express Mail or overnight courier that
guarantees next day delivery shall be deemed given twenty-four (24) hours after
delivery of the same to the United States Postal Service or courier. If any
notice is transmitted by facsimile transmission or similar means, the same shall
be deemed served or delivered upon telephone or facsimile confirmation of
receipt of the transmission thereof, provided a copy is also delivered via
delivery or mail. If notice is received on a Saturday or a Sunday or a legal
holiday, it shall be deemed received on the next business day.
24. Waivers. No waiver by Lessor of the Default or Breach of any term,
covenant or condition hereof by Lessee, shall be deemed a waiver of any other
term, covenant or condition hereof, or of any subsequent Default or Breach by
Lessee of the same or any other term, covenant or condition hereof. Lessor's
consent to, or approval of, any such act shall not be deemed to render
unnecessary the obtaining of Lessor's consent to, or approval of, any subsequent
or similar act by Lessee, or be construed as the basis of an estoppel to enforce
the provision of provisions of this Lease requiring such consent. Regardless of
Lessor's knowledge of a Default or Breach at the time of accepting rent, the
acceptance of rent by Lessor shall not be a waiver of any Default or Breach by
Lessee of any provision hereof. Any payment given Lessor by Lessee may be
accepted by Lessor on account of moneys or damages due Lessor, notwithstanding
any qualifying statements or conditions made by Lessee in connection therewith,
which such statements and/or conditions shall be of no force or effect
whatsoever unless specifically agreed to in writing by Lessor at or before the
time of deposit of such payment.
25. Recording. Either Lessor or Lessee shall, upon request of the other,
execute, acknowledge and deliver to the other a short form memorandum of this
Lease for recording purposes. The Party requesting recordation shall be
responsible for payment of any fees or taxes applicable thereto.
26. No Right To Holdover. Lessee has no right to retain possession of the
Premises or any part thereof beyond the expiration or earlier termination of
this Lease. In the event that Lessee holds over in violation of this Paragraph
266 then the Base Rent payable from and after the tie of the expiration or
earlier termination of this Lease shall be increased to two hundred percent
(200%) of the Base Rent applicable during the month immediately
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preceding such expiration or earlier termination. Nothing contained herein shall
be construed as a consent by Lessor to any holding over by Lessee.
27. Cumulative Remedies. No remedy or election hereunder shall be deemed
exclusive but shall, wherever possible, be cumulative with all other remedies at
law or in equity.
28. Covenants and Conditions. All provisions of this Lease to be observed or
performed by Lessee are both covenants and conditions.
29. Binding Effect; Choice of Law. This Lease shall be binding upon the
Parties, their personal representatives, successors and assigns and be governed
by the laws of the State in which the Premises are located. Any litigation
between the Parties hereto concerning this Lease shall be initiated in the
county in which the Premises are located.
30. Subordination; Attornment; Non-Disturbance.
30.1 Subordination. This Lease and any Option granted hereby shall be
subject and subordinate to any ground lease, mortgage, deed of trust, or other
hypothecation or security device (collectively, "Security Device"), now or
hereafter placed by Lessor upon the real property of which the Premises are a
part, to any and all advances made on the security thereof, and to all renewals,
modifications, consolidations, replacements and extensions thereof. Lessee
agrees that the Lenders holding any such Security Device shall have no duty,
liability or obligation to perform any of the obligations of Lessor under this
Lease, but that in the event of Lessor's default with respect to any such
obligation, Lessee will give any Lender whose name and address have been
furnished Lessee in writing for such purpose notice of Lessor's default pursuant
to Paragraph 13.5. If any Lender shall elect to have this Lease and/or any
Option granted hereby superior to the lien of its Security Device and shall give
written notice thereof to Lessee, this Lease and such Options shall be deemed
prior to such Security Device, notwithstanding the relative dates of the
documentation or recordation thereof.
30.2 Attornment. Subject to the non-disturbance provisions of Paragraph
30.3. Lessee agrees to attorn to a Lender or any other party who acquires
ownership of the Premises by reason of a foreclosure of a Security Device, and
that in the event of such foreclosure, such new owner shall not: (ii) be liable
for any act or omission of any prior lessor or with respect to events occurring
prior to acquisition of ownership, (ii) be subject to any offsets or defenses
which Lessee might have against any prior lessor, or (iii) be bound by
prepayment of more than one month's rent.
30.3 Non-Disturbance. With respect to Security Devices entered into by
Lessor after the execution of this lease, Lessee's subordination of this Lease
shall be subject to receiving assurance (a "non-disturbance agreement") from the
Lender that Lessee's possession and this Lease, including any options to extend
the term hereof, will not be disturbed so long as Lessee is not in Breach hereof
and attorns to the record owner of the Premises.
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30.4 Self-Executing. The agreements contained in this Paragraph 30 shall
be effective without the execution of any further documents; provided, however,
that upon written request from Lessor or a Lender in connection with a sale,
financing or refinancing of Premises, Lessee and Lessor shall execute such
further writings as may be reasonably required to separately document any such
subordination or non-subordination, attornment and/or non-disturbance agreement
as is provided for herein.
31. Attorneys' Fees. If any Party or Broker brings an action or proceeding o
enforce the terms hereof or declare rights hereunder, the Prevailing Party (as
hereafter defined) in any such proceeding, action, or appeal thereon, shall be
entitled to reasonable attorney's fees. Such fees may be awarded in the same
suit or recovered in a separate suit, whether or not such action or proceeding
is pursued to decision or judgment. The term "Prevailing Party" shall include,
without limitation, a Party or Broker who substantially obtains or defeats the
relief sought, as the case may be, whether by compromise, settlement, judgment,
or the abandonment by the other Party or Broker of its claim or defense. The
attorneys' fee award shall not be computed in accordance with any court fee
schedule, but shall be such as to fully reimburse all attorneys' fees reasonably
incurred. Lessor shall be entitled to attorneys' fees, costs and expenses
incurred in preparation and service of notices of Default and consultations in
connection therewith, whether or not a legal action is subsequently commenced in
connection with such Default or resulting Breach. Broker(s) shall be intended
third party beneficiaries of this Paragraph 31.
32. Lessor's Access; Showing Premises; Repairs. Lessor and Lessor's agents
shall have the right to enter the Premises at any time, in the case of an
emergency, and otherwise at reasonable times for the purpose of showing the same
to prospective purchasers, lenders, or lessees, and making such alterations,
repairs, improvements or additions to the Premises or to the Building, as Lessor
may reasonably deem necessary. Lessor may at any time place on or about the
Premises or Building any ordinary ""or Sale" signs and Lessor may at any time
during the last one hundred eighty (180) days of the term hereof place on or
about the Premises any ordinary "For Lease" signs. All such activities of Lessor
shall be without abatement of rent or liability to Lessee unless substantially
interfering with Lessee's physical operations.
33. Auctions. Lessee shall not conduct, nor permit to be conducted, either
voluntarily or involuntarily, any auction upon the Premises without first having
obtained Lessor's prior written consent. Notwithstanding any thing to the
contrary in this Lease, Lessor shall not be obligated to exercise any standard
of reasonableness in determining whether to grant such consent.
34. Signs. Lessee shall not place any sign upon the exterior of the Premises
or the Building, except that Lessee may, with Lessor's prior written consent,
install (but not on the roof) such signs as are reasonably required to advertise
Lessee's own business so long as such signs are in a location designated by
Lessor and comply with Applicable Requirements and the signage criteria
established for the Industrial Center by Lessor. The installation of any sign
on the Premises by or for Lessee shall be subject to the
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provisions of Paragraph 7 (Maintenance, Repairs, Utility Installations, Trade
Fixtures and Alterations). Unless otherwise expressly agreed herein, Lessor
reserves all rights to the use of the roof of the Building, and the right to
install advertising signs on the Building, including the roof, which do not
unreasonably interfere with the conduct of Lessee's business; Lessor shall be
entitled to all revenues from such advertising signs.
35. Termination; Merger. Unless specifically stated otherwise in writing by
Lessor, the voluntary or other surrender of this Lease by Lessee, the mutual
termination or cancellation hereof, or a termination hereof by Lessor for Breach
by Lessee, shall automatically terminate any sublease or lesser estate in the
Premises; provided, however, Lessor shall, in the event of any such surrender,
termination or cancellation, have the option to continue any one or all of any
existing subtenancies. Lessor's failure within ten (10) days following any such
event to make a written election to the contrary by written notice to the holder
of any such lesser interest, shall constitute Lessor's election to have such
event constitute the termination of such interest.
36. Consents.
(a) Except for Paragraph 33 hereof (Auctions) or as otherwise provided
herein, whether in this Lease the consent of a Party is required to an act by or
for the other Party, such consent shall not be unreasonably withheld or delayed.
Lessor's actual reasonable costs and expenses (including but not limited o
architects', attorneys', engineers' and other consultants' fees) incurred in the
consideration of, or response to, a request by Lessee for any Lessor consent
pertaining to this Lease or the Premises, including but not limited to consents
to an assignment a subletting or the presence or use of a Hazardous Substance,
shall be paid by Lessee to Lessor upon receipt of an invoice and supporting
documentation therefor. In addition to the deposit described in Paragraph
12.2(e), Lessor may, as a condition to considering any such request by Lessee,
require that Lessee deposit with Lessor an amount of money (in addition to the
Security Deposit held under Paragraph 5) reasonably calculated by Lessor to
represent the cost Lessor will incur in considering and responding o Lessee's
request. Any unused portion of said deposit shall be refunded to Lessee without
interest. Lessor a consent to any act, assignment of this Lease or subletting of
the Premises by Lessee shall not constitute an acknowledgment that no Default or
Breach by Lessee of this Lease exists, nor shall such consent be deemed a waiver
of any then existing Default or Breach, except as may be otherwise specifically
stated in writing by Lessor at the time of such consent.
(b) All conditions to Lessor's consent authorized by this Lease are
acknowledged by Lessee as being reasonable. The failure to specify herein any
particular condition to Lessor's consent shall not preclude the impositions by
Lessor at the time of consent of such further or other conditions as are then
reasonable with reference to the particular matter for which consent is being
given.
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37. Guarantor.
37.1 Form of Guaranty. If there are to be any Guarantors of this Lease
per Paragraph 1.11, the form of the guaranty to be executed by each such
Guarantor shall be in the form most recently published by the American
Industrial Real Estate Association, and each such Guarantor shall have the same
obligations are Lessee under this lease, including but not limited to the
obligation to provide the Tenancy Statement and information required in
Paragraph 16.
37.2 Additional Obligations of Guarantor. It shall constitute a Default
of the Lessee under this Lease if any such Guarantor fails or refuses, upon
reasonable request by lessor to give: (a) evidence of the due execution of the
guaranty called for by this Lease, including the authority of the Guarantor (and
of the party signing on Guarantor's behalf) to obligate such Guarantor on said
guaranty, and resolution of its board of directors authorizing the making of
such guaranty, together with a certificate of incumbency showing the signatures
of the persons authorized to sign on its behalf, (b) current financial
statements of Guarantor as may from time to time be requested by Lessor, (c) a
Tenancy Statement, or (d) written confirmation that the guaranty is still in
effect.
38. Quiet Possession. Upon payment by Lessee of the rent for the Premises and
the performance of all of the covenants, conditions and provisions on Lessee's
part to be observed and performed under this Lease, Lessee shall have quiet
possession of the Premises for the entire term hereof subject to all of the
provisions of this Lease.
39. Options.
39.1 Definition. As used in this Lease, the word "Option" has the
following meaning: (a) the right to extend the term of this Lease or to renew
this Lease or to extend or renewal any lease that Lessee has on other property
of Lessor; (b) the right of first refusal to lease the Premises or the right of
first refusal to lease other property of Lessor or the right of first offer to
lease other property of Lessor; (c) the right to purchase the Premises, or the
right of first refusal to purchase the Premises, or the right of first offer to
purchase the Premises, or the right to purchase other property of Lessor, or the
right of first refusal to purchase other property of Lessor, or the right of
first offer to purchase other property of Lessor.
39.2 Options Personal to Original Lessee. Each Option granted to Lessee
in this Lease is personal to the original lessee named in paragraph 1.1 hereof,
and cannot be voluntarily or involuntarily assigned or exercised by any person
or entity other than said original Lessee while the original Lessee is in full
and actual possession of the Premises and without the intention of thereafter
assigning or subletting except as a successor.
39.3 Multiple Options. In the event that Lessee has any multiple Options
to extend or renew this Lease, a later option cannot be exercised unless the
prior Options to extend or renew this Lease have been validly exercised.
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39.4 Effect of Default on Options.
(a) Lessee shall have no right to exercise an Option, notwithstanding
any provision in the grant of Option to the contrary: (i) during the period
commencing with the giving of any notice of Default under Paragraph 13.1 and
continuing until the noticed Default is cured, or (ii) during the period of time
any monetary obligation due Lessor from Lessee is unpaid (without regard to
whether notice thereof is given Lessee), or (iii) during the time Lessee is in
Breach of this Leases, or (iv) in the event that Lessor has given to Lessee
three (3) or more notices of separate Defaults under Paragraph 13.1 during the
twelve (12) month period immediately preceding the exercise of the Option,
whether or not the Defaults are cured.
(b) The period of time within which an Option may be exercised shall
not be extended or enlarged by reason of Lessee's inability to exercise an
Option because of the provisions of Paragraph 39.4(a).
(c) All rights of Lessee under the provisions of an Option shall
terminate and be of no further fore or effect, notwithstanding Lessee's due and
timely exercise of the Option, if, after such exercise and during the term of
this Lease, (i) Lessee fails to pay to Lessor a monetary obligation of Lessee
for a period of thirty (30) days after such obligation becomes due and Lessor
gives notice thereof to Lessee, or (ii) Lessor gives to Lessee three (3) or more
notices of separate Defaults under paragraph 13.1 during any twelve (12) month
period, whether or not the Defaults are cured, or (iii) if Lessee commits a
Breach of this Lease.
40. Rules and Regulations. Lessee agrees that it will abide by, and keep and
observe all reasonable rules and regulations ("Rules and Regulations") which
Lessor may make from time to time for the management, safety, care, and
cleanliness of the grounds, the parking and unloading of vehicles and the
preservation of good order, as well s for the convenience of other occupants or
tenants of the Building and the Industrial Center and their invitees.
41. Security Measures. Lessee hereby acknowledges that the rental payable to
Lessor hereunder does not include the cost of guard service or other security
measures, and that Lessor shall have no obligation whatsoever to provide same.
Lessee assumes all responsibility for the protection of the Premises, Lessee,
its agents and invitees and their property from the acts of third parties.
42. Reservations. Lessor reserves the right, from time to time, to grant
without the consent or joinder of Lessee, such easements, rights of way, utility
raceways, and dedications that Lessor deems necessary, and to cause the
recordation of parcel maps and restrictions, so long as such easements, rights
of way, utility raceways, dedications, maps and restrictions do not reasonably
interfere with the use of the Premises by Lessee. Lessee agrees to sign any
documents reasonably requested by lessor to effectuate any such easement rights,
dedication, map or restrictions.
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43. Performance Under Protest. If at any time a dispute shall arise as to any
amount or sum of money to be aid by one Party to the other under the provisions
hereof, the party against whom the obligation to pay the money is asserted shall
have the right to make payment "under protest" and such payment shall not be
regarded as a voluntary payment and there shall survive the right on the part of
said Party to institute suit for recovery of such sum. If it shall be adjudged
that there was no legal obligation on the part of said Party to pay such sum or
any part thereof, said Party shall be entitled to recover such sum or so much
thereof as it was not legally required to pay under the provisions of this
Lease.
44. Authority. If either Party hereto is a corporation, trust, or general or
limited partnership, each individual executing this Lease on behalf of such
entity represents and warrants that he or she is duly authorized to execute and
deliver this Lease on its behalf. If Lessee is a corporation, trust or
partnership, Lessee shall, within thirty (30) days after request by Lessor,
deliver to Lessor evidence satisfactory to Lessor of such authority.
45. Conflict. Any conflict between the printed provisions of this Lease and
the typewritten or handwritten provisions shall be controlled by the typewritten
or handwritten provisions.
46. Offer. Preparation of this Lease by either Lessor or Lessee or Lessor's
agent or Lessee's agent and submission of same to Lessee or Lessor shall not be
deemed an offer to lease. This Lease is not intended to be binding until
executed and delivered by all Parties hereto.
47. Amendments. This Lease may be modified only in writing, signed by the
parties in interest at the time of the modification. The Parties shall amend
this Lease from time to time to reflect any adjustments that are made to the
Base Rent or other rent payable under this Lease. As long as they do not
materially change Lessee's obligations hereunder, Lessee agrees to make such
reasonable non-monetary modifications to this Lease as may e reasonably required
by an institutional insurance company or pension plan Lender in connection with
the obtaining of normal financing or refinancing of the property of which the
Premises are part.
48. Multiple Parties. Except as otherwise expressly provided herein, if more
than one person or entity is named herein as either Lessor or Lessee, the
obligations of such multiple parties shall be the joint and several
responsibility of all persons or entities named herein as such Lessor or Lessee.
49. Additional Terms:
(a) Lease is contingent upon satisfactory review of preliminary title
report. Such review to expire February 28, 1997.
(b) Lessor agrees to provide to lessee necessary space on the 3rd floor at
the same terms and conditions herewith for seismic upgrades as required by the
city.
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Lessee shall pay for all costs to restore unused 3rd floor space to
leasable condition, comparable to current condition.
LESSOR AND LESSEE HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM AND
PROVISION CONTAINED HEREIN AND BY THE EXECUTION OF THIS LEASE SHOW THEIR
INFORMED AND VOLUNTARY CONSENT THERETO. THE PARTIES HEREBY AGREE THAT, AT THE
TIME THIS LEASE IS EXECUTED, THE TERMS OF THIS LEASE ARE COMMERCIALLY REASONABLE
AND EFFECTUATE THE INTENT AND PURPOSE OF LESSOR AND LESSEE WITH RESPECT TO THE
PREMISES.
IF THIS LEASE HAS BEEN FILLED IN, IT HAS BEEN PREPARED FOR YOUR
ATTORNEY'S REVIEW AND APPROVAL. FURTHER, EXPERTS SHOULD BE CONSULTED
TO EVALUATE THE CONDITION OF THE PROPERTY FOR THE POSSIBLE PRESENCE OF
ASBESTOS, UNDERGROUND STORAGE TANKS OR HAZARDOUS SUBSTANCES. NO
REPRESENTATION OR RECOMMENDATION IS MADE BY THE AMERICAN INDUSTRIAL
REAL ESTATE ASSOCIATION OR BY THE REAL ESTATE ASSOCIATION OR BY THE
REAL ESTATE BROKERS OR THEIR CONTRACTORS, AGENTS OR EMPLOYEES AS TO
THE LEGAL SUFFICIENCY, LEGAL EFFECT, OR TAX CONSEQUENCES OF THIS LEASE
OR THE TRANSACTION TO WHICH IT RELATES; THE PARTIES SHALL RELY SOLELY
UPON THE ADVICE OF THEIR OWN COUNSEL AS TO THE LEGAL AND TAX
CONSEQUENCES OF THIS LEASE. IF THE SUBJECT PROPERTY IS IN A STATE
OTHER THAN CALIFORNIA, AN ATTORNEY FROM THE STATE WHERE THE PROPERTY
IS LOCATED SHOULD BE CONSULTED.
The parties hereto have executed this Lease at the place and on the dates
specified above their respective signatures.
Executed at:______________ Executed at: Centaur Pharmaceuticals, Inc.
on:_______________________ on: February 13, 1997
By LESSOR: By LESSSEE:
Memorex Drive LLC Centaur Pharmaceuticals, Inc.
4966 El Camino Real, #209 484 Oakmead Parkway
Los Altos, CA (4022 Sunnyvale, CA 94086
By: /s/ Moosa Malek By: /s/ Brian D. Frenzel
---------------------- --------------------------------------
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Name Printed: Moosa Makek Name Printed: Brian D. Frenzel
------------- ----------------------------
Title: Property Manager Title: President and CEO
-------------------- ----------------------------------
/s/ Lucy O. Day
By:_________________________ By:---------------------------------------
Name Printed:_______________ Name Printed: Lucy O. Day
---------------------------
Title:______________________ Title: Director of Finance & Asst. Secty.
----------------------------------
Address:____________________ Address:__________________________________
____________________________ __________________________________________
Telephone: ( )_________ Telephone: ( )_______________________
Facsimile: ( )_________ Facsimile: ( )_______________________
BROKER: BROKER:
Executed at:_______________ Executed at:______________________________
on:________________________ on:_______________________________________
By:________________________ By:_______________________________________
Name Printed:______________ Name Printed:_____________________________
Title:_____________________ Title:____________________________________
Address:___________________ Address:__________________________________
___________________________ __________________________________________
Telephone: ( )________ Telephone: ( )_______________________
Facsimile: ( )________ Facsimile: ( )_______________________
NOTE: These forms are often modified to meet changing requirements of law and
needs of the industry. Always write or call to make sure you are utilizing the
most current form: AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION, 700 South
Flower Street, Suite 600, Los Angeles, CA 90017. (212) 687-8777.
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ADDENDUM I
to: Standard Industrial/Commercial Multi-Tenant Lease -- Gross
between: Memorex Drive LLC, as Lessor, and
Centaur Pharmaceuticals, Inc., as Lessee
dated: January 9th, 1997
1) Base Rent: Months 1 - 12 $.45 industrial gross, per Rental Square
Foot
Rentable Square Footage shall be based upon actual
measurements according to BOMA standards, including 100%
of ground floor space, a pro-rated share of building
common area space, and 50% of any mezzanine space to be
used for warehousing purposes. all building common areas
shall be individually calculated, and pro-rated according
to square footage of those tenants having access to each
specific area.
2) Base Rent Years 2 - 3 Four Percent (4%) annual increase.
Increases: Years 4 - 7 Five Percent (5%) annual increase.
3) Square Footage Paragraphs 1.6(b), and 1.7, in the Lease shall be
Adjustments: adjusted following completion of Architectural work and
measurement of Rentable Square footage. Lessee's share of
Common Area Operating Expenses shall be equal to Rentable
Square Footage, divided by 230,000 total project square
footage. Security deposit shall be increased, or refunded
to become equal to the amount of Rent due in the final
month of the Lease.
4) Option to Tenant shall have one(1), three (3) year option to renew
Renew: the Lease provided a) Lessee is not in default, and b)
Lessee gives written notice t Lessor fits intent to
exercise such option no later than six (6) months prior
to Lease expiration. First month's Rent during the Option
period shall be equal to the greater of one hundred five
percent (105%) of the previous month's Rent, or the then
prevailing fair market Rent for similar properties having
improvements similar to those existing at the time of
original Early Possession.
5) Use: Lessee shall use the Premises for pharmaceutical research
and development, manufacturing, laboratory use, storage,
and all other related uses.
Tenant shall secure and maintain all necessary permits to
operate from all applicable governmental agencies.
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6) Landlord's Landlord shall provide the following improvements at
Improvements: Landlord's sole cost and expense:
-- Parking lot and landscaping improvements including
exterior ADA compliance per Landlord's existing plan.
-- Paint and carpet in common area lobby.
-- Demise premises.
-- Remove any asbestos pipe insulation if found to be
present on existing hot water supply lines or any
other exposed pipelines within Tenant's Premises.
Tenant shall be allowed access to the premises for the
purpose of conducting an asbestos survey by a licensed
professional.
7) Tenant's Except for those items specifically listed above, or
Improvements: elsewhere within this Lease, tenant shall accept premises
in an "as is" condition. Tenant shall provide all interior
improvements necessary to conduct Tenant's business, and
to meet all current codes at Tenant's sole cost and
expense. Tenant shall secure all necessary building
permits from the city of Santa Clara and other
governmental agencies.
Tenant acknowledges that existing HVAC system is non-
functional due to removal of hot and cold water processing
equipment.
Tenant further acknowledges that existing electrical
distribution is non-functional due to removal of
significant amounts of switching and conducting equipment.
Tenant's space plan, architectural, and structural
engineering drawings shall be subject to landlord's
approval prior to permit submittal. Such approval shall
not be unreasonably withheld.
Tenant shall provide in house sub-meters approved by
landlord, for all electrical power, natural gas, and
domestic water serving Tenant's space. Landlord shall have
access to these meters for the purpose of pro-rating
Tenant's share of Building utility expenses.
Lessee shall be allowed rooftop space for equipment
placement, a) only in areas of roof directly above
Lessee's space, b) not in areas of above any other
---
Tenant's or future Tenant's space, c) subject to City of
Santa Clara approval, d) subject to approval of a
registered structural engineer, and e) subject to Lessor's
approval, Lessor will require some areas of this space for
future equipment needs of other Tenants. Lessor may allow
Lessee's use of additional areas of roof and penthouse.
Lessee shall accept full responsibility for damage, and
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increased wear and tear to roof membrane resulting from
Lessee's equipment maintenance activities.
All interior improvements and modifications by Tenant
shall be removed, and the premises shall be restored to
its previous condition, by Tenant, prior to Termination of
this Lease. However, Landlord shall indicate certain items
which may be considered a part of the Premises upon Lease
Termination (and not subject to removal), if requested to
do so by Tenant at the time that plans are presented for
Landlord's approval. This Paragraph shall supersede
Paragraph 7.4(a) of the Lease, with regard to which
property shall be removed upon Lease termination. Those
items which are not to be removed, shall remain the
property of the Lessee until such time as Lessor's rights
in Paragraph 7.4(a) are exercised.
8) Early Tenant shall be allowed early occupancy free of Base Rent,
Occupancy: following Lease execution, and Landlord's demising of
space.
9) HVAC Tenant shall maintain an HVAC service contract and be
Maintenance: responsible for periodic maintenance costs.
10) Roof Landlord shall be responsible for all roof maintenance
Maintenance repair costs (other than Lessee caused) during the Lease
and Repair: term. Replacement of roof if necessary shall also be at
Landlord's sole cost and expense.
11) Disposition of Lessor and Lessee agree that in the event of any
Additional Rent: subletting or assignment, except for assignment by way of
merger, sale, acquisition, financing, refinancing,
transfer, leveraged buy-out or otherwise, any rent
collected in excess of the rent due under this Lease,
shall be distributed first t the cost of incurring the
sublease or assignment, and then any remainder shall be
split fifty-fifty between Lessor and Lessee.
12) Environmental: The soils underlying the subject property are known t
contain residues of organic solvents. Ongoing ground water
monitoring is currently being conducted by Landlord as
required by the Bay Area Regional Water Quality Control
Board. Upon request, Landlord will provide Tenant copies
of environmental/soils reports concerning the Premises and
the subject property.
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Lessor shall indemnity, defend and hold Lessee, its
lenders, agents, employees, officers, and/or directors
harmless from and against any and all losses, claims,
damages, costs, judgements, penalties, attorney's and
consultant fees, expenses and/or liabilities, arising out
of, involving or in connection with any contamination and
Hazardous Substance investigation, clean-up, remediation
and monitoring (i) resulting from any act or omission by
Lessor or its agents, contractors and/or employees, and
(ii) existing on, in or under the Premises, the Building
or the property on which the Building is situated at the
time Lessee takes possession of the Premises. This
indemnification shall survive termination of this Lease.
Lessee shall indemnify, defend and hold Lessor, its
lenders, agents, employees, offices, and/or directors
harmless from and against any and all claims, damages,
costs, judgments, penalties, attorneys and consultant
fees, expenses and/or liabilities, arising out of,
involving or in connection with any contamination and
Hazardous Substance investigation, clean-up, remediation
and monitoring resulting from any act or omission by
Lessee or its agents, contractors and/or employees. This
indemnification shall survive termination of this Lease.
13) Par. 2.10(f): Paragraph 2.10(f), of the Lease shall be extended as
follows, "...deemed to be appropriate, so long as such
acts and changes do not materially and adversely affect
Lessee's operations or materially result in cost to Lessee
without appropriate benefit. Lessor intends to create a
property due east of Lessee's Premises. Lessee hereby
agrees that this parcel split, and its adjoining ingress
and egress easements shall have no material effect on
Lessee's operations."
14) Common Area If any expense that otherwise qualifies as a Common Area
Operating Operating Expense is required to be capitalized for
Costs: federal income tax purposes, such expenses shall not be
passed through as a Common Area Operating Expense in the
year incurred but rather will be amortized on a straight-
line basis over the useful life thereof utilized for
federal tax purposes.
Structural maintenance and repair will not be included in
reserves.
Lessee shall not be responsible for any real estate tax
increase related to tenant improvements constructed for
another tenant's use outside the Premises leased herein.
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Lessee shall have the right to review Lessors records, at
a time convenient for Lessor, at Lessor's office, that are
related to Common Area Operating Expenses charged to
Lessee for a period of twelve (12) months after
presentment of such charges to Lessee.
15) Lessee's Lessee shall only be individually responsible for the
Obligations repair and maintenance of all systems, or parts of
systems, dedicated for the exclusive use of Lessee.
Structural repair and maintenance of structural
alterations specifically required for Lessee's use and
occupancy shall be the responsibility of Lessee.
16) Par. 8.4: Paragraph 8.4 of the Lease shall be modified to include the
following sentence prior to the final sentence, "At Lease
Termination, lessee shall not be required to use the
proceeds from any such insurance for replacement of
improvements which Lessee would otherwise be required to
remove."
17) Par. 8.7: Paragraph 8.7, of the Lease shall be modified as follows,
"Except for Lessor's negligence, willful misconduct, breach
of express warranties, and/or building defects, (except for
defects in structural alterations specifically required for
Lessee's use and occupancy, to be installed by Lessee),
Lessee...".
18) Par. 8.8: Paragraph 88, of the Lease shall be modified as follows,
"...accessible or not, unless due to lessor's negligence,
willful misconduct, breach of express warranties, and/or
building defects, (except for defects in structural
alterations specifically required for Lessee's use and
occupancy, to be installed by Lessee).".
19) Par. 9.2: Paragraph 9.2, of the Lease shall be modified as follows,
"...if Lessor does not elect to restore and repair, then
Lessor and Lessee will work to achieve a mutually acceptable
resolution. If an acceptable resolution cannot be obtained
within 45 days, this lease shall terminate sixty (60) days
following the occurrence f the damage or destruction. ...".
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20) Par. 12.1(a): Paragraph 12.1 (a) of the Lease shall be modified as
follows:, "...transfer or encumber (collectively, "assign")
except for assignment by way of merger, sale, acquisition,
financing, refinancing, transfer, leveraged buy-out or
otherwise provided such merger, sale, acquisition,
financing, refinancing, transfer, leveraged buy-out or
otherwise, does not diminished the financial strength of
Lessee below the level demonstrated at the time of the
original execution of this Lease, or sublet all...".
21) Par. 12.1 (b): Add the following sentence at the end of Paragraph 12.1 (b),
"Such consent will not be unreasonably withheld provided
transfer does not diminish the financial strength of Lessee
below the level demonstrated at the time of the original
execution of this Lease.".
22) Notices: Lessor shall deliver all written notices to Lessee at the
following address, (unless specified otherwise by written
notice from Lessee):
Centaur Pharmaceuticals, Inc.
484 Oakmead Parkway
Sunnyvale, California 94086
23) Cancellation: Lessee shall have the Right to Cancel this Lease on or
before February 28th, 1997, and receive a full refund of
deposit, should the estimated cost of any required seismic
upgrade exceed $300,000.
24) Rules: Lessee shall be allowed to install cardkey locks on doors to
Lessee's Premises. Lessor shall be provided with ability to
access Lessee's Premises.
Lessor shall pre-approve of the manner and general timing of
significant freight movement to and from the Premises.
Lessee will coordinate movements so as not to disturb other
---
Tenants as much as possible. lessee shall maintain common
driveway/fire lane access at all times. Lessor will
designate a single truck loading area for Lessee's use.
25) Par 17: Add the following sentence at the end of Paragraph 17, "The
prior Lessor shall be relieved of all liability with respect
to past actions if Lessee failed to notify Lessor within
thirty (30) days of Lessee's knowledge of such complaint".
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ADDENDUM II
to: Standard Industrial/Commercial Multi-Tenant Lease - Gross
between: Memorex Drive LLC, as Lessor, and Centaur Pharmaceuticals,
Inc., as Lessee
dated: January 9th, 1997
The original Lease Agreement shall be modified as follows:
1) Landlord's
Improvements: Landlord's obligation to provide paint and carpet in common
area lobby is hereby waived.
2) Exterior
Premises: Tenant is hereby granted exclusive use of the area outside,
and immediately adjacent to the southeast corner of
Tenant's existing ground floor Premises. The Exterior
premises shall be approximately twelve feet (12') wide,
(measured from the exterior wall of the Building), by fifty
feet (50') long. Exterior Premises shall eliminate one (1)
existing automobile parking space, and partially eliminate
Tenant's existing truck parking space.
Exact location of new Exterior Premises shall be subject to
Landlord's prior approval.
3) Use: Exterior Premises shall be used for placement of Nitrogen
storage tanks, emergency electrical generator, and related
equipment.
4) Tenant's
Improvements: Tenant shall provide the following improvements at Tenant's
sole cost and expense.
. install all necessary concrete pads, foundations, and
earthquake bracing.
. provide alternate means for stormwater migration.
. provide chain link fencing with redwood slats (or
landlord approved equal), eight feet (8')
tall, along all exposed perimeters.
. meet all City codes.
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5) Additional
Base Rent: The Base Rent shall be increased by an amount equal to Two
Hundred Dollars ($200.00) per month.
6) Other: All other provisions of the Lease agreement shall remain
intact.
Agreed:
/s/ Brian D. Frenzel 10/27/97
- ------------------------------------ -----------------------------
for Centaur Pharmaceutical, Inc.: Date:
/s/ Moosa Malek 11/11/97
- ------------------------------------ -----------------------------
for Memorex Drive LLC; Date:
STARTING DATE NOV 1, 1997 [Initials: BDF, MM]
---------------------
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EXHIBIT A
[DESCRIPTION OF PROPERTY]
53
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EXHIBIT C
RULES AND REGULATIONS FOR
MEMOREX DRIVE BUSINESS PARK
Dated: January 9, 1997
By and Between: Memorex Drive LLC ("Lessor") and Centaur Pharmaceuticals, Inc.
("Lessee")
1) Lessee shall not suffer or permit the obstruction of any Common Areas,
including driveways, walk-ways and stairways.
2) Lessor reserves the right to refuse access to any persons Lessor in good
faith judges to be a threat to the safety, reputation or property at the
Business Park and its occupants.
3) Lessee shall not make or permit any noise or odors that annoy or interfere
with other lessees or persons having business within the Business Park,
except for fire or burglar alarm.
4) Lessee shall not keep animals or birds within the Building Area, and shall
not bring bicycles, motorcycles or other vehicles into areas not designated
as authorized for same.
5) Lessee shall not make, suffer or permit litter except in appropriate
receptacles for that purpose.
6) Lessee shall not alter any lock or install new or additional locks or
bolts. See Addendum I.
7) Lessee shall be responsible for the inappropriate use of any toilet rooms,
plumbing or other utilities. No foreign substances of any kind are to be
inserted therein.
8) Lessee shall not deface the walls, partitions or other surfaces of the
premises or the Business Park
9) Lessee shall not suffer or permit any thing in or around the Premises or
Building that causes excessive vibration or floor loading in any part of
the Building Areas.
10) Significant freight and equipment shall be moved into or out of the
building only with the Lessor's knowledge and consent, and subject to such
reasonable limitations, techniques and timing, as may be designated by
lessor. Lessee shall be responsible for any damage to the Building arising
from any such activity undertaken by or for Lessee. See Addendum I.
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11) Lessee shall not employ any service or contractor for services or work to
be performed in the Common Areas, except as approved by Lessor.
12) No window covering, shades or awnings shall be installed or used by Lessee
without the approval of Lessor.
13) No Lessee, employee or invites shall go upon the roof of the Buildings
(except for HVAC or other equipment Repairs & Maint.) See Addendum I.
14) Lessee shall not suffer or permit smoking or carrying of lighted cigars or
cigarettes in areas reasonably designated by Lessor or by applicable
governmental agencies as non-smoking areas.
15) Lessee shall not use any method of heating or air conditioning other than
as approved by Lessor.
16) Lessee shall not install, maintain or operate any vending machines upon the
Premises without Lessor's written consent.
17) The premises shall not be used for lodging, cooking or food preparation,
except employee break room with microwave and refrigerator, and
miscellaneous other applicants.
18) Lessee shall comply with all safety, fire protection and evacuation
regulations established by Lessor or any applicable governmental agencies.
19) Lessor reserves the right to waive any one of these rules or regulations,
and/or as to any particular Lessee, and any such waiver shall not
constitute a waiver of any other rule or regulation or any subsequent
application thereof to such Lessee.
20) Lessee assumes all risks from theft or vandalism and agrees to keep its
Premises locked as may be required.
21) Lessor reserves the right to make such other reasonable rules regulations
as it may from time to time deem necessary for the appropriate operation
and safety of the Business Park and its occupants. Lessee agrees to abide
by these and such rules and regulations.
PARKING RULES
1) Parking areas shall be used only for parking by vehicles no longer than
full size, passenger automobiles herein called "Permitted Size Vehicles."
Vehicles other than Permitted Size Vehicles are herein referred t as
"Oversized Vehicles."
2) Lessee shall not permit or allow any vehicles that belong to or are
controlled by Lessee or Lessee's employees, suppliers, shippers, customers,
or invites to be
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loaded, unloaded, or parked in areas other than those designated by Lessor
for such activities.
3) Parking stickers or identification devices shall be the property of Lessor
and be returned to Lessor by the holder thereof upon termination of the
holder's parking privileges. Lessee will pay such replacement charge as is
reasonably established by Lessor the loss of such devices.
4) Lessor reserves the right to refuse the sale of monthly identification
devices to any person or entity that willfully refuses to comply with the
applicable rules, regulations, laws and/or agreements.
5) Lessor reserves the right to relocate all or a part of parking spaces from
floor to floor, within one floor, and/or to reasonably adjacent office
location(s), and to reasonably allocate them between compact and standard
size spaces, as long as the same complies with applicable laws, ordinances
and regulations.
6) Users of the parking area will obey all posted signs and park only in the
areas designated for vehicle parking.
7) Unless otherwise instructed, every person using the parking area is
required to park and lock his own vehicle. Lessor will not be responsible
for any damage to vehicles, injury to persons or loss of property, all of
which risks are assured by the party using the parking area.
8) Validation, if established, will be permissible only by such method or
methods as Lessor and/or its licensee may establish at rules generally
applicable to visitor parking.
9) The maintenance, washing, waxing or cleaning of vehicles in the parking
structure or Common Areas is prohibited.
10) Lessee shall be responsible for seeing that all of its employees, agents
and invites comply with applicable parking rules, regulations, laws and
agreements.
11) Lessor reserves the right to modify these rules and/or adopt such other
reasonable and non-discriminatory rules and regulations as it may deem
necessary for the proper operation of the parking area.
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12) Such parking use as is herein provided in intended merely as a license only
and no bailment in intended or shall be created hereby.
BY LESSOR: BY LESSEE:
/s/ Moosa Malek /s/ Brian Frenzel
----------------------------- -----------------------------
Moosa Malek Brian Frenzel
----------------------------- -----------------------------
Named Printed Name Printed
Managing Member President
----------------------------- -----------------------------
Title Title
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EXHIBIT 10.10
-------------
STANDARD INDUSTRIAL/COMMERCIAL MULTI-TENANT LEASE-GROSS
AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION
1. Basic Provisions ("Basic Provisions").
1.1 Parties: This Lease ("Lease"), dated for reference purposes only,
May 30th, 1997, is made by and between Memorex Drive LLC ("Lessor") and Centaur
Pharmaceuticals, Inc. ("Lessee"), (collectively the "Parties," or individually a
"Party").
1.2(a) Premises: That certain portion of the Building, including all
improvements therein or to be provided by Lessor under the terms of this Lease,
commonly known by the street address of 1220 Memorex Drive, Ste. 200, Ste. 300,
located in the City of Santa Clara, County of Santa Clara, State of California,
with zip code 95050, as outlined on Exhibit A attached hereto ("Premises"). The
"Building" is that certain building containing the Premises and generally
described as (describe briefly the nature of the Building): Memorex Drive
Business Park. In addition to Lessee's rights to use and occupy the Premises as
hereinafter specified, Lessee shall have non-exclusive rights to the Common
Areas (as defined in Paragraph 2.7 below) as hereinafter specified, but shall
not have any rights to the roof, exterior walls or utility raceways of the
building or to any other buildings in the Industrial Center. The Premises, the
Building, the Common Areas, the land upon which they are located, along with all
other buildings and improvements thereon, are herein collectively referred to as
the "Industrial Center." (Also see Paragraph 2.)
1.2(b) Parking: 100 unreserved vehicle parking spaces ("Unreserved Parking
Spaces"); and 0 reserved vehicle parking spaces ("Reserved Parking Spaces").
(Also see Paragraph 2.6.)
1.3 Term: 6 years and 11 months ("Original Term") commencing June 1st,
1997 ("Commencement Date") and ending April 30th, 2004 ("Expiration Date").
(Also see Paragraph 3.)
1.4 Early Possession: Allowed, see Addendum I ("Early Possession Date").
(Also see Paragraphs 3.2 and 3.3.)
1.5 Base Rent: $ (see Addendum I) per month ("Base Rent"), payable on
the First day of each month commencing August 1st, 1997 (Also see Paragraph 4.)
[X] If this box is checked, this Lease provides for the Base Rent to be
adjusted per Addendum I, attached hereto.
1.6(a) Base Rent Paid Upon Execution: $0 as Base Rent for the period ---
-----
.
- -----
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1.6(b) Lessee's Share of Common Area Operating Expenses: nineteen point
eight percent (19.8%) ("Lessee's Share") as determined by [X] pro rata square
footage of the Premises as compared to the total square footage of the Building
or [X] other criteria as described in Addendum I.
1.7 Security Deposit: $20,919 ("Security Deposit"). (Also see Paragraph
5.)
1.8 Permitted Use: Pharmaceutical research and development,
manufacturing, and other related uses ("Permitted Use") (Also see Paragraph 6.)
1.9 Insuring Party. Lessor is the "Insuring Party." (Also see Paragraph
8.)
1.10(a) Real Estate Brokers. The following real estate broker(s)
(collectively, the "Brokers") and brokerage relationships exist in this
transaction and are consented to be the Parties (check applicable boxes):
[_] None - represents Lessor exclusively ("Lessor's Broker");
[_] None - represents Lessee exclusively ("Lessee's Broker"); or
[_] None - represents both Lessor and Lessee ("Dual Agency"). (Also see
Paragraph 15.)
1.10(b) Payment to Brokers. Upon the execution of this Lease by both
Parties, Lessor shall pay to said Broker(s) jointly, or in such separate shares
as they may mutually designate in writing, a fee as set forth in a separate
written agreement between Lessor and said Broker(s) (or in the event there is no
separate written agreement between Lessor and said Broker(s), the sum of $0.00)
for brokerage services rendered by said Broker(s) in connection with this
transaction.
1.11 Guarantor. The obligations of the Lessee under this Lease are to be
guaranteed by _____________________________________ ("Guarantor"). (Also see
Paragraph 37.)
1.12 Addenda and Exhibits. Attached hereto is an Addendum or Addenda
consisting of Paragraph 1 through 25, and Exhibits A through C, all of which
constitute a part of this Lease.
2. Premises, Parking and Common Areas.
2.1 Letting. Lessor hereby leases to Lessee, and Lessee hereby leases
from Lessor, the Premises, for the term, at the rental, and upon all of the
terms, covenants and conditions set forth in this Lease. Unless otherwise
provided herein, any statement of square footage set forth in this Lease, or
that may have been used in calculating rental and/or Common Area Operating
Expenses, is an approximation which Lessor and Lessee agree is reasonable and
the rental and Lessee's Share (as defined in Paragraph 1.6(b))
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based thereon is not subject to revision whether or not the actual square
footage is more or less.
2.2 Condition. Lessor shall deliver the Premises to Lessee clean and
free of debris on the Commencement Date and warrants to Lessee that the existing
plumbing, electrical systems, fire sprinkler system, lighting, air conditioning
and heating systems and loading doors, if any, in the Premises, other than those
constructed by Lessee, shall be in good operating condition on the Commencement
Date. If a non-compliance with said warranty exists as of the Commencement Date,
Lessor shall, except as otherwise provided in this Lease, promptly after receipt
of written notice from Lessee setting forth with specificity the nature and
extent of such non-compliance, rectify same at Lessor's expense. If Lessee does
not give Lessor written notice of a non-compliance with this warranty within
thirty (30) days after the Commencement Date, correction of that non-compliance
shall be the obligation of Lessee at Lessee's sole cost and expense.
2.3 Compliance with Covenants, Restrictions and Building Code. Lessor
warrants that any improvements (other than those constructed by Lessee or at
Lessee's direction) on or in the Premises which have been constructed or
installed by Lessor or with Lessor's consent or at Lessor's direction shall
comply with all applicable covenants or restrictions of record and applicable
building codes, regulations and ordinances in effect on the Commencement Date.
Lessor further warrants to Lessee that Lessor has no knowledge of any claim
having been made by any governmental agency that a violation or violations of
applicable building codes, regulations, or ordinances exist with regard to the
Premises as of the Commencement Date. Said warranties shall not apply to any
Alterations or Utility Installations (defined in Paragraph 7.3(a)) made or to be
made by Lessee. If the Premises do not comply with said warranties, Lessor
shall, except as otherwise provided in this Lease, promptly after receipt of
written notice from Lessee given within six (6) months following the
Commencement Date and setting forth with specificity the nature and extent of
such non-compliance, take such action, at Lessor's expense, as may be reasonable
or appropriate to rectify the non-compliance. Lessor makes no warranty that the
Permitted Use in Paragraph 1.8 is permitted for the Premises under Applicable
Law as (as defined in Paragraph 2.4).
2.4 Acceptance of Premises. Lessee hereby acknowledges: (a) that it has
been advised by the Broker(s) to satisfy itself with respect to the condition of
the Premises (including but not limited to the electrical and fire sprinkler
systems, security, environmental aspects, seismic and earthquake requirements,
and compliance with the Americans with Disabilities Act and applicable zoning,
municipal, county, state and federal laws, ordinances and regulations and any
covenants or restrictions of record (collectively, "Applicable Laws") and the
present and future suitability of the Premises for Lessee's intended use; (b)
that Lessee has made such investigation as it deems necessary with reference to
such matters, is satisfied with reference thereto, and assumed all
responsibility therefore except as otherwise stated in this Lease, as the same
relate to Lessee's occupancy of the Premises and/or the terms of this Lease; and
(c) that neither
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Lessor, nor any of Lessor's agents, has made any oral or written representations
or warranties with respect to said matters other than as set forth in this
Lease.
2.5 Lessee as Prior Owner/Occupant. The warranties made by Lessor in
this Paragraph 2 shall be of no force or effect if immediately prior to the date
set forth in Paragraph 1.1 Lessee was the owner or occupant of the Premises. In
such event, Lessee shall, at Lessee's sole cost and expense, correct any non-
compliance of the Premises with said warranties.
2.6 Vehicle Parking. Lessee shall be entitled to use the number of
Unreserved Parking Spaces and Reserved Parking Spaces specified in Paragraph 1.2
on those portions of the Common Spaces designated from time to time by Lessor
for parking. Lessee shall not use more parking spaces than said number. Said
parking spaces shall be used for parking by vehicles no larger than full-size
passenger automobiles or pick-up trucks, herein called "Permitted Size
Vehicles." Vehicles other than Permitted Size Vehicles shall be parked and
loaded or unloaded as directed by Lessor in the Rules and Regulations (as
defined in Paragraph 40) issued by Lessor. (Also see Paragraph 2.9).
(a) Lessee shall not permit or allow any vehicles that belong to
or are controlled by Lessee or Lessee's employees, suppliers, shippers,
customers, contractors or invitees to be loaded, unloaded, or parked in areas
other than those designated by Lessor for such activities.
(b) If Lessee permits or allows any of the prohibited activities
described in this Paragraph 2.6, then Lessor shall have the right, without
notice, in addition to such other rights and remedies that it may have, to
remove or tow away the vehicle involved and charge the cost to Lessee, which
cost shall be immediately payable upon demand by Lessor.
(c) Lessor shall at the Commencement Date of this Lease, provide
the parking facilities required by Applicable Law.
2.7 Common Areas--Definition. The term "Common Areas" is defined as all
areas and facilities outside the Premises and within the exterior boundary line
of the Industrial Center and interior utility raceways within the Premises that
are provided and designated by the Lessor from time to time for the general non-
exclusive use of Lessor, Lessee and other lessees of the Industrial Center and
their respective employees, suppliers, shippers, customers, contractors and
invitees, including parking areas, loading and unloading areas, trash areas,
roadways, sidewalks, walkways, parkways, driveways and landscaped areas.
2.8 Common Areas--Lessee's Rights. Lessor hereby grants to Lessee, for
the benefit of Lessee and its employees, suppliers, shippers, contractors,
customers and invitees, during the term of this Lease, the non-exclusive right
to use, in common with others entitled to such use, the Common Areas as they
exist from time to time, subject to any rights, powers, and privileges reserved
by Lessor under the
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terms hereof or under the terms of any rules and regulations or restrictions
governing the use of the Industrial Center. Under no circumstances shall the
right herein granted to use the Common Areas be deemed to include the rights to
store any property, temporarily or permanently, in the Common Areas. Any such
storage shall be permitted only by the prior written consent of Lessor or
Lessor's designated agent, which consent may be revoked at any time. In the
event that any unauthorized storage shall occur then Lessor shall have the
right, without notice, in addition to such other rights and remedies that it may
have, to remove the property and change the cost to Lessee, which cost shall be
immediately payable upon demand by Lessor.
2.9 Common Area--Rules and Regulations. Lessor or such other person(s)
as Lessor may appoint shall have the exclusive control and management of the
Common Areas and shall have the right, from time to time, to establish, modify,
amend and enforce reasonable Rules and Regulations with respect thereto in
accordance with Paragraph 40. Lessee agree to abide by and conform to all such
Rules and Regulations, and to cause its employees, suppliers, shippers,
customers, contractors, and invitees to so abide and conform. Lessor shall not
be responsible to Lessee for the non-compliance with said rules and regulations
by other lessees of the Industrial Center.
2.10 Common Areas--Changes. Lessor shall have the right, in Lessor's
sole discretion, from time to time:
(a) To make changes to the Common Areas, including, without
limitation, changes in the location, size, shape and number of driveways,
entrances, parking spaces, parking areas, loading and unloading areas, ingress,
egress, direction of traffic, landscaped areas, walkways and utility raceways;
(b) To close temporarily any of the Common Areas for maintenance
purposes so long as reasonable access to the Premises remains available;
(c) To designate other land outside the boundaries of the
Industrial Center to be a part of the Common Areas;
(d) To add additional buildings and improvements to the Common
Areas;
(e) To use the Common Areas while engaged in making additional
improvements, repairs or alterations to the Industrial Center, or any portion
thereof; and
(f) To do and perform such other acts and make such other changes
in, to or with respect to the Common Areas and Industrial Center as Lessor may,
in the exercise of sound business judgment, deemed to be appropriate. (See
Addendum I.)
3. Term.
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3.1 Term. The Commencement Date, Expiration Date and Original Term and
this Lease are as specified in Paragraph 1.3.
3.2 Early Possession. If an Early Possession Date is specified in
Paragraph 1.4 and if Lessee totally or partially occupies the Premises after the
Early Possession Date but prior to the Commencement Date, the obligation to pay
Base Rent shall be abated for the period of such early occupancy. All other
terms of this Lease, however, (including but not limited to the obligations to
pay Lessee's Share of Common Area Operating Expenses and to carry the insurance
required, by Paragraph 8) shall be in effect during such period. Any such early
possession shall be affect nor advance the Expiration Date of the Original Term.
3.3 Delay in Possession. If for any reason Lessor cannot deliver
possession of the Premises to Lessee by the Early Possession Date, if one is
specified in Paragraph 1.4, or if no Early Possession Date is specified, by the
Commencement Date, Lessor shall not be subject to any liability therefor, nor
shall such failure affect the validity of this Lease, or the obligations of
Lessee hereunder, or extend the term hereof, but in such case, Lessee shall not,
except as otherwise provided herein, by obligated to pay rent or perform any
other obligation of Lessee under the terms of this Lease, until Lessor delivers
possession of the Premises to Lessee. If possession of the Premises is not
delivered to Lessee within sixty (60) days after the Commencement Date, Lessee
may, at its option, by notice in writing to Lessor within ten (10) days after
the end of said sixty (60) day period, cancel this Lease, in which event the
parties shall be discharged from all obligations hereunder; provided, further,
however, that if such written notice of Lessee is not received by Lessor within
said ten (10) day period, Lessee's right to cancel this Lease hereunder shall
terminate and be of no further force or effect. Except as may be otherwise
provided, and regardless of when the Original Term actually commences, if
possession is not tendered to Lessee when required by this Lease and Lessee does
not terminate this Lease, as aforesaid, the period free of the obligation to pay
Base Rent, if any, that Lessee would otherwise have enjoyed shall run from the
date of delivery of possession and continue for a period equal to the period
during which the Lessee would otherwise enjoyed under the terms hereof, but
minus any days of delay by the acts, changes or omissions of Lessee.
4. Rent.
4.1 Base Rent. Lessee shall pay Base Rent and other rent or charges, as
the same may be adjusted from time to time, to Lessor in lawful money
of the United States, without offset or deduction, on or before the
day on which its due under the terms of this Lease. Base Rent and all
other rent and charges for any period during the term hereof which is
for less than one full month shall be prorated based upon the actual
number of days of the month involved. Payment of Base Rent and other
charges shall be made to Lessor at its address stated herein or to
such other persons or at such other addresses as Lessor may from time
to time designate in writing to Lessee.
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4.2 Common Area Operating Expenses. Lessee shall pay to Lessor during the
term hereof, in addition to the Base Rent, Lessee's Share (as
specified in Paragraph 1.6(b)) of all Common Area Operating Expenses,
as hereinafter defined, during each calendar year of the term of this
Lease, in accordance with the following provisions (see Addendum 1):
(a) "Common Area Operating Expenses" are defined, for purposes of
this Lease, as all costs incurred by Lessor relating to the
ownership and operation of the Industrial Center, including,
but not limited to, the following:
(i) The operation, repair and maintenance, in neat, clean,
good order and condition of the following:
(aa) The Common Areas, including parking areas,
loading and unloading areas, trash areas,
roadways, sidewalks, walkways, parkways,
driveways, landscaped areas, striping,
bumpers, irrigation systems, Common Area
lighting facilities, fences and gates,
elevators and roof.
(bb) Exterior signs and any tenant directories.
(cc) Fire detection and sprinkler systems.
(ii) The cost of water, gas, electricity and telephone to
service the Common Areas;
(iii) Trash disposal, property management and security
services.
(iv) Reserves set aside for maintenance and repair of
Common Areas.
(v) any increases above the Base Rent Property Taxes (as
defined in Paragraph 10.2(b) for the Building and the
Common Areas.
(vi) Any "Insurance Cost Increase" (as defined in
Paragraph 8.1).
(vii) The cost of insurance carried by Lessor with respect
to the Common Areas. Maximum deductible to be $5,000.
(viii) Any deductible portion of an insured loss concerning
the Building or its Common Areas.
(ix) Any other services to be provided by Lessor that are
stated elsewhere in this Lease to be a Common Area
Operating Expense.
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(b) Any Common Area Operating Expenses and Real Property Taxes that
are specifically attributable to the Building or to any other
building in the Industrial Center or to the operation, repair and
maintenance thereof, shall be allocated entirely to the Building
or to such other Building. However, any Common Area Operating
Expenses and Real Property Taxes that are not specifically
attributable to the Building or to any other building or to the
operation, repair and maintenance thereof, shall be equitably
allocated by Lessor to all buildings in the Industrial Center.
(c) The inclusion of the improvements, facilities and services set
forth in Subparagraph 4.2(a) shall not be deemed to impose an
obligation upon Lessor to either have said improvements or
facilities or to provide those services unless the Industrial
Center already has the same, Lessor already provides the
services, or Lessor has agreed elsewhere in this Lease to provide
the same or some of them.
(d) Lessee's Share of Common Area Operating Expenses shall be payable
by Lessee within ten (10) days after a reasonably detailed
statement of actual expenses is presented to Lessee by Lessor. At
Lessor's option, however, an amount may be estimated by Lessor
from time to time of Lessee's Share of annual Common Area
Operating Expenses and the same shall be payable monthly or
quarterly, as Lessor shall designate, during each 12-month period
of the Lease term, on the same day as the Base Rate is due
hereunder. Lessor shall deliver to Lessee within sixty (60) days
after the expiration of each calendar year a reasonably detailed
statement showing Lessee's Share of the actual Common Area
Operating Expenses incurred during the preceding year. If
Lessee's payments under this Paragraph 4.2(d) during said
preceding year exceed Lessee's Share as indicated on said
statement, Lessee shall be credited the amount of such over-
payment against Lessee's Share of Common Area Operating Expenses
next becoming due. If Lessee's payments under this Paragraph
4.2(d) during said preceding year were less than Lessee's Share
as indicated on said statement, Lessee shall pay to Lessor the
amount of the deficiency within ten (10) days after delivery by
Lessor to Lessee of said statement.
5. Security Deposit. Lessee shall deposit with Lessor upon Lessee's execution
hereof the Security Deposit set forth in Paragraph 1.7 as security for Lessee's
faithful performance of Lessee's obligations under this Lease. If Lessee fails
to pay Base Rent or other rent or charges due hereunder, or otherwise Defaults
under this Lease (as defined in Paragraph 13.1), Lessor may use, apply or retain
all or any portion of said Security Deposit for the payment of any amount due
Lessor or to reimburse or compensate Lessor for any liability, cost, expense,
loss or damage (including attorneys' fees) which Lessor may suffer or incur by
reason thereof. If Lessor uses or applies all or any portion of said
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Security Deposit, Lessee shall within ten (10) days after written request
therefore deposit monies with Lessor sufficient restore said Security Deposit to
the full amount required by this Lease. Any time the Base Rent increases during
the term of this Lease, Lessee shall, upon written request from Lessor, deposit
additional monies with Lessor as an addition to the Security Deposit so that the
total amount of the Security Deposit shall at all times bear the same proportion
to the then current Base Rent as the initial Security Deposit bears to the
initial Base Rent set forth in Paragraph 1.5. Lessor shall not be required to
keep all or any part of the Security Deposit separate from its general accounts.
Lessor shall, at the expiration or earlier termination of the term hereof and
after Lessee has vacated the Premises, return to Lessee (or, at Lessor's option,
to the last assignee, if any, of Lessee's interest herein), that portion of the
Security Deposit not used or applied by Lessor. Unless otherwise expressly
agreed in writing by Lessor, no part of the Security Deposit shall be considered
to be held in trust, to bear interest or other increment for its use, or to be
prepayment for any monies to be paid by Lessee under this Lease.
6. Use.
6.1 Permitted Use.
(a) Lessee shall use and occupy the Premises only for the Permitted
Use set forth in Paragraph 1.8, or any other legal use which is
reasonably comparable thereto, and for no other purpose. Lessee
shall not use or permit the use of the Premises in a manner that
is unlawful, creates waste or a nuisance, or that disturbs owners
and/or occupants of, or causes damage to the Premises or
neighboring premises or properties.
(b) Lessor hereby agrees to not unreasonably withhold or delay its
consent to any written request by Lessee, Lessee's assignees or
subtenants, and by prospective assignees and subtenants of
Lessee, its assignees and subtenants, for a modification of said
Permitted Use, so long as the same will not impair the structural
integrity of the improvements on the Premises or in the Building
or the mechanical or electrical systems therein, does not
conflict with uses by other lessees, is not significantly more
burdensome to the Premises or the Building and the improvements
thereon, and is otherwise permissible pursuant to this Paragraph
6. If Lessor elects to withhold such consent, Lessor shall within
five (5) business days after such request give a written
notification of same, which notice shall include an explanation
of Lessor's reasonable objections to the change in use.
6.2 Hazardous Substances.
(a) Reportable Uses Require Consent. The term "Hazardous Substance"
as used in this Lease shall mean any product, substance, chemical
material or waste whose presence, nature, quantity and/or
intensity of existence, use, manufacture, disposal,
transportation, spill, release or
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effect, either by itself or in combination with other materials
expected to be on the Premises, is either: (i) potentially
injurious to the public health, safety, welfare, the environment,
or the Premises; (ii) regulated or monitored by any governmental
authority; or (iii) a basis for potential liability of Lessor to
any governmental agency or third party under any applicable
statute or common law theory. Hazardous Substance shall include,
but not be limited to, hydrocarbon, petroleum, gasoline, crude
oil or any products or by-products thereof. Lessee shall not
engage in any activity in or about the Premises which constitutes
a Reportable Use (as hereinafter defined) of Hazardous Substances
without the express prior written consent of Lessor and
compliance in a timely manner (at Lessee's sole cost and expense)
with all Applicable Requirements (as defined in Paragraph 6.3).
"Reportable Use" shall mean (i) the installation or use of any
above or below ground storage tank, (ii) the generation,
possession, storage, use, transportation, or disposal of a
Hazardous Substance that requires a permit from, or with respect
to which a report, notice, registration or business plan is
required to be filed with, any governmental authority, and (iii)
the presence in, on or about the Premises of a Hazardous
Substance with respect to which any Applicable Laws require that
a notice be given to persons entering or occupying the Premises
or neighboring properties. Notwithstanding the foregoing, Lessee
may, without Lessor's prior consent, but upon notice to Lessor
and in compliance with all Applicable Requirements, use any
ordinary and customary materials reasonably required to be used
by Lessee in the normal course of the Permitted Use, so long as
such use is not a Reportable Use and does not expose the Premises
or neighboring properties to any meaningful risk of contamination
or damage or expose Lessor to any liability therefor. In
addition, Lessor may (but without any obligation to do so)
condition its consent to any Reportable Use of any Hazardous
Substance by Lessee upon Lessee's giving Lessor such additional
assurance as Lessee, in its reasonable discretion, deems
necessary to protect itself, the public, the Premises and the
environment against damage, contamination or injury and/or
liability thereto, including but not limited to the installation
(and, at Lessor's option, removal on or before Lease expiration
or earlier termination) of reasonably necessary protective
modifications to the Premises (such as concrete encasements)
and/or the deposit of an additional Security Deposit under
Paragraph 5 hereof.
(b) Duty to Inform Lessor. If Lessee knows, or has reasonable cause
to believe that a Hazardous Substance has come to be located in,
on, under or about the Premises or the Building, other than as
previously consented to by Lessor, Lessee shall immediately give
Lessor written notice thereof, together with a copy of any
statement, report, notice,
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registration, application, permit, business plan, license, claim,
action, or proceeding given to, or received from, any
governmental authority or private party concerning the presence,
spill, release, discharge of, or exposure to, such Hazardous
Substance including but not limited to all such documents as may
be involved in any Reportable Use involving the Premises. Lessee
shall not cause or permit any Hazardous Substance to be spilled
or release in, on, under or about the Premises (including,
without limitation), through the plumbing or sanitary sewer
system).
(c) Indemnification. Lessee shall indemnity, protect, defend and hold
Lessor, its agents, employees, lenders and ground lessor, if any,
and the Premises, harmless from and against any and all damages,
liabilities, judgments, costs, claims, liens, expenses,
penalties, loss of permits and attorneys' and consultants' fees
arising out of or involving any Hazardous Substance brought onto
the Premises by or for Lessee or by anyone under Lessee's
control. Lessee's obligation under this Paragraph 6.2(c) shall
include, but not be limited to, the effects of any contamination
or injury to person, property or the environment created or
suffered by Lessee, and the cost of investigation (including
consultants' and attorneys' fees and testing), removal,
remediation, restoration and/or abatement thereof, or of any
contamination therein involved, and shall survive the expiration
or earlier termination of this Lease. No termination,
cancellation or release agreement entered into by Lessor and
Lessee shall release Lessee from its obligations under this Lease
with respect to Hazardous Substances, unless specifically so
agreed by Lessor in writing at the time of such agreement.
6.3 Lessee's Compliance with Requirements. Lessee shall, at Lessee's sole
cost and expense, fully, diligently and in a timely manner, comply
with all "Applicable Requirements", which term is used in this Lease
to mean all laws, rules, regulations, ordinances, directives,
covenants, easements and restrictions of record, permits, the
requirements of any applicable fire insurance underwriter or rating
bureau, and the recommendations of Lessor's engineers and/or
consultants, relating in any manner to the Premises (including but not
limited to matters pertaining to (i) industrial hygiene, (ii)
environmental conditions on, in, under or about the Premises,
including soil and groundwater conditions, and (iii) the use,
generation, manufacture, production, installation, maintenance,
removal, transportation, storage, spill, or release of any Hazardous
Substance, now in effect or which may hereafter come into effect,
Lessee shall, within five (5) days after receipt of Lessor's written
request, provide Lessor with copies of all documents and information,
including but not limited to, permits, registrations, manifests,
applications, reports and certificates, evidencing Lessee's compliance
with any Applicable Requirements specified by Lessor, and shall
immediately upon receipt, notify
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Lessor in writing (with copies of any documents involved) of any
threatened or actual claim, notice, citation, warning, complaint or
report pertaining to or involving failure by Lessee or the Premises to
comply with any Applicable Requirements.
6.4 Inspection; Compliance with Law. Lessor, Lessor's agents, employees,
contractors and designated representatives, and the holders of any
mortgages, deeds of trust or ground leases on the Premises ("Lenders")
shall have the right to enter the Premises at any time in the case of
an emergency, and otherwise at reasonable times, for the purpose of
inspecting the condition of the Premises and for verifying compliance
by Lessee with this Lease and all Applicable Requirements (as defined
in Paragraph 6.3), and Lessor shall be entitled to employ experts
and/or consultants in connection therewith to advise Lessor with
respect to Lessee's activities, including but not limited to Lessee's
installation, operation, use, monitoring, maintenance, or removal of
any Hazardous Substance on or from the Premises. The costs and expense
of any such inspections hall be paid by the party requesting same,
unless a Default or Breach of this Lease by Lessee or a violation of
Applicable Requirements or a contamination, caused or materially
contributed to by Lessee, is found to exist or to be imminent, or
unless the inspection is requested or entered by a governmental
authority as the result of any such existing or imminent violation or
contamination. In such case, Lessee shall upon request reimburse
Lessor or Lessor's Lender, as the case may be, for the costs and
expenses of such inspections.
7. Maintenance, Repairs, Utility Installations, Trade Fixtures and Alterations.
7.1 Lessee's Obligations. (See Addendum I.)
(a) Subject to the provisions of Paragraphs 2.2 (Condition), 2.3
(Compliance with Covenants, Restrictions and Building Code), 7.2
(Lessor's Obligations), 9 (Damage or Destruction), and 14
(Condemnation), Lessee shall, at Lessee's sole cost and expense
and at all times, keep the Premises and every part thereof in
good order, condition and repair (whether or not such portion of
the Premises requiring repair, or the means of repairing the
same, are reasonably or readily accessible to Lessee, and whether
or not the need for such repairs occurs as a result of Lessee's
use, any prior use, the elements or the age of such portion of
the Premises), including, without limiting the generality of the
foregoing, all equipment or facilities specifically serving the
Premises, such as plumbing, heating, air conditioning,
ventilating, electrical, lighting facilities, boilers, fired or
unfired pressure vessels, fire hose connections if within the
Premises, fixtures, interior walls, interior surfaces of exterior
walls, ceilings, floors, windows, doors, plate glass, and
skylights, but excluding any items
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which are the responsibility of Lessor pursuant to Paragraph 7.2
below. Lessee, in keeping the Premises in good order, condition
and repair, shall exercise and perform good maintenance
practices. Lessee's obligations shall include restorations,
replacements or renewals when necessary to keep the Premises and
all improvements thereon or a part thereof in good order,
condition and state of repair.
(b) Lessee shall, at Lessee's sole cost and expense, procure and
maintain a contract, with copies to Lessor, in customary form and
substance for and with a contractor specializing and experienced
in the inspection, maintenance and service of the heating, air
conditioning and ventilation system for the Premises. However,
Lessor reserves the right, upon notice to Lessee, to procure and
maintain the contract for the heating and air-conditioning and
ventilating systems, and if Lessor so elects, Lessee shall
reimburse Lessor, upon demand, for the cost thereof.
(c) If Lessee fails to perform Lessee's obligations under this
Paragraph 7.1, Lessor may enter upon the Premises after ten (10)
days' prior written notice to Lessee (except in the case of an
emergency, in which case no notice shall be required), perform
such obligations on Lessee's behalf, and put the Premises in good
order, condition and repair, in accordance with Paragraph 13.2
below.
7.2 Lessor's Obligations. Subject to the provisions of Paragraphs 2.2
(Condition), 2.3 (Compliance with Covenants, Restrictions and Building Code),
4.2 (Common Area Operating Expenses), 6 (Use), 7.1 (Lessee's Obligations), 9
(Damage or Destruction) and 14 (Condemnation), Lessor, subject to reimbursement
pursuant to Paragraph 4.2, shall keep in good order, condition and repair the
foundations, exterior walls, structural condition of interior bearing walls,
exterior roof, fire sprinkler and/or standpipe and hose (if located in the
Common Areas) or other automatic fire extinguishing system including fire alarm
and/or smoke detection systems and equipment, fire hydrants, parking lots,
walkways, parkways, driveways, landscaping, fences, signs and utility systems
serving the Common Areas and all parts thereof, as well as providing the
services for which there is a Common Area Operating Expense pursuant to
Paragraph 4.2. Lessor shall not be obligated to paint the exterior or interior
surfaces of exterior walls nor shall Lessor be obligated to maintain, repair or
replace windows, doors or plate glass of the Premises. Lessee expressly waives
the benefit of any statute now or hereafter in effect which would otherwise
afford Lessee the right to make repairs at Lessor's expense or to terminate this
Lease because of Lessor's failure to keep the Building, Industrial Center or
Common Areas in good order, condition and repair.
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7.3 Utility Installations, Trade Fixtures, Alterations.
(a) Definitions; Consent Required. The term "Utility Installations"
is used in this Lease to refer to all air lines, power panels, electrical
distribution, security, fire protection systems, communications systems,
lighting fixtures, heating, ventilating and air conditioning equipment,
plumbing, and fencing in, on or about the Premises. The term "Trade Fixtures"
shall mean Lessee's machinery and equipment which can be removed without doing
material damage to the Premises. The term "Alterations" shall mean any
modification of the improvements on the Premises which are provided by Lessor
under the terms of this Lease, other than Utility Installations or Trade
Fixtures. "Lessee-Owned Alterations and/or Utility Installations" are defined as
Alterations and/or Utility Installations made by Lessee that are not yet owned
by Lessor pursuant to Paragraph 7.4(a). Lessee shall not make nor cause to be
made any Alterations or Utility Installations in, on, under or about the
Premises without Lessor's prior written consent. Lessee may, however, make non-
structural Utility Installations to the interior of the Premises (excluding the
roof) without Lessor's consent but upon notice to Lessor, so long as they are
not visible from the outside of the Premises, do not involve puncturing,
relocating or removing the roof or any existing walls, or changing or
interfering with the fire sprinkler or fire detection systems and the cumulative
cost thereof during the term of this Lease as extended does not exceed
$2,500.00.
(b) Consent. Any Alterations or Utility Installations that Lessee
shall desire to make and which require the consent of the Lessor shall be
presented to Lessor in written form with detailed plans. All consents given by
Lessor, whether by virtue of Paragraph 7.3(a) or by subsequent specific consent,
shall be deemed conditioned upon: (i) Lessee's acquiring all applicable permits
required by governmental authorities; (ii) the furnishing of copies of such
permits together with a copy of the plans and specifications for the Alteration
or Utility Installation to Lessor prior to commencement of the work thereon; and
(iii) the compliance by Lessee with all conditions of said permits in a prompt
and expeditious manner. Any Alterations or Utility Installations by Lessee
during the term of this Lease shall be done in a good and workmanlike manner,
with good and sufficient materials, and be in compliance with all Applicable
Requirements. Lessee shall promptly upon completion thereof furnish Lessor with
as-built plans and specifications therefor. Lessor may, (but without obligation
to do so) condition its consent to any requested Alteration or Utility
Installation that costs $2,500.00 or more upon Lessee's providing Lessor with a
lien and completion bond in an amount equal to one and one-half times the
estimated cost of such Alteration or Utility Installation.
(c) Lien Protection. Lessee shall pay when due all claims for labor
or materials furnished or alleged to have been furnished to or for Lessee at or
for use on the Premises, which claims are or may be secured by any mechanic's or
materialmen's lien against the Premises or any interest therein. Lessee shall
give Lessor not less than ten (10) days' notice prior to the commencement of any
work in, on, or about the Premises, and Lessor shall have the right to post
notices of non-responsibility in or on the Premises as provided by law. If
Lessee shall, in good faith, contest the validity of any such lien,
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claim or demand, then Lessee shall, at its sole expense, defend and protect
itself, Lessor and the Premises against the same and shall pay and satisfy any
such adverse judgment that may be rendered thereon before the enforcement
thereof against the Lessor or the Premises. If Lessor shall require, Lessee
shall furnish to Lessor a surety bond satisfactory to Lessor in an amount equal
to one and one-half times the amount of such contested lien claim or demand,
indemnifying Lessor against liability for the same, as required by law for the
holding of the Premises free from the effect of such lien or claim. In addition,
Lessor may require Lessee to pay Lessor's attorneys' fees and costs in
participating in such action if Lessor shall decide it is to its best interest
to do so.
7.4 Ownership, Removal, Surrender, and Restoration.
(a) Ownership. Subject to Lessor's right to require their removal
and to cause Lessee to become the owner thereof as hereinafter provided in this
Paragraph 7.4, all Alterations and Utility Installations made to the Premises by
Lessee shall be the property of and owed by Lessee, but considered a part of the
Premises. Lessor may, at any time and at its option, elect in writing to Lessee
to be the owner of all or any specified part of the Lessee-Owned Alterations and
Utility Installations. Unless otherwise instructed per Subparagraph 7.4(b)
hereof, all Lessee-Owned Alterations and Utility Installations shall, at the
expiration or earlier termination of this Lease, become the property of Lessor
and remain upon the Premises and be surrendered with the Premises by Lessee.
(b) Removal. Unless otherwise agreed in writing, Lessor may require
that any or all Lessee-Owned Alterations or Utility Installations be removed by
the expiration or earlier termination of this Lease notwithstanding that their
installation may have been consented to by Lessor. Lessor may require the
removal at any time of all or any part of any Alterations or Utility
Installations made without the required consent of Lessor.
(c) Surrender/Restoration. Lessee shall surrender the Premises by
the end of the last day of the Lease term or any earlier termination date, clean
and free of debris and in good operating order, condition and state of repair,
ordinary wear and tear excepted. Ordinary wear and tear shall not include any
damage or deterioration that would have been prevented by good maintenance
practice or by Lessee performing all of its obligations under this Lease. Except
as otherwise agreed or specified herein, the Premises, as surrendered, shall
include the Alterations and Utility Installations. The obligation of Lessee
shall include the repair of any damage occasioned by the installation,
maintenance or removal of Lessee's Trade Fixtures, furnishings, equipment, and
Lessee-Owned Alterations and Utility Installations, as well as the removal of
any storage tank installed by or for Lessee and the removal, replacement, or
remediation of any soil, material or ground water contaminated by Lessee, all as
may then be required by Applicable Requirements and/or good practice. Lessee's
Trade Fixtures shall remain the property of Lessee and shall be removed by
Lessee subject to its obligation to repair and restore the Premises per this
Lease.
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8. Insurance Indemnity.
8.1 Payment of Premium Increases.
(a) As used herein, the term "Insurance Cost Increase" is defined as
any increase in the actual cost of the insurance applicable to the Building and
required to be carried by Lessor pursuant to paragraphs 8.2(b), 8.3(a) and
8.3(b). ("Required Insurance"), over and above the Base Premium, as hereinafter
defined, calculated on an annual basis. "Insurance Cost Increase" shall include,
but not be limited to, requirements of the holder of a mortgage or deed of trust
covering the Premises, increased valuation of the Premises, and/or a general
premium rate increase. The term "Insurance Cost Increase" shall not, however,
include any premium increases resulting from the nature of the occupancy of any
other lessee of the Building. If the parties insert a dollar amount in Paragraph
1.9, such amount shall be considered the "Base Premium." If a dollar amount has
not been inserted in Paragraph 1.9 and if the Building has been previously
occupied during the twelve (12) month period immediately preceding the
Commencement Date, the "Base Premium" shall be the annual premium applicable to
such twelve (12) month period. If the Building was not fully occupied during
such twelve (12) month period, the "Base Premium" shall be the lowest annual
premium, reasonable month period. If the Building was not fully occupied during
such twelve (12) month period, the "Base Premium" shall be the lowest annual
premium reasonably obtainable for the Required insurance as of the Commencement
Date, assuming the most nominal use possible of the Building. In no event,
however, shall Lessee be responsible for any portion of the premium cost
attributable to liability insurance coverage in excess of $1,000,000 procured
under Paragraph 8.2(b)
(b) Lessee shall pay Lessee's pro-rata share of any Insurance Cost
Increase to Lessor pursuant to Paragraph 4.2 Premiums for policy periods
commencing prior to, or extending beyond, the term of this Lease shall be
prorated to coincide with the corresponding Commencement Date or Expiration
Date.
8.2 Liability Insurance.
(a) Carried by Lessee. Lessee shall obtain and keep in force during
the term of this Lease a Commercial General Liability policy of insurance
protecting Lessee, Lessor and any Lender(s) whose names have been provided to
Lessee in writing (as additional insureds) against claims for bodily injury,
personal injury and property damage based upon, involving or arising out of the
ownership, use, occupancy or maintenance of the Premises and all areas
appurtenant thereto. Such insurance shall be on an occurrence basis providing
single limit coverage in an amount not less than $1,000,000 per occurrence with
an "Additional Insured-Managers or Lessors of Premises" endorsement and contain
the "Amendment of the Pollution Exclusion" endorsement for damage caused by
heat, smoke or fumes from a hostile fire. The policy shall not contain any
intra-insured exclusions as between, insured persons or organizations, but shall
include coverage for liability assumed under this Lease as an
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"Insured contract" for the performance of Lessee's indemnity obligations under
this Lease. The limits of said insurance required by this Lease or as carried by
Lessee shall not, however, limit the liability of Lessee nor relieve Lessee of
any obligation hereunder. All insurance to be carried by Lessee shall be primary
to and not contributory with any similar insurance carried by Lessor, whose
insurance shall be considered excess insurance only.
(b) Carried by Lessor. Lessor shall also maintain liability insurance
described in Paragraph 8.2(a) above, in addition to and no in lieu of, the
insurance required to be maintained by Lessee. Lessee shall not be named as an
additional insured therein.
8.3 Property Insurance-Building, Improvements and Rental Value.
(a) Building and Improvements. Lessor shall obtain and keep in force
during the term of this Lease a policy or policies in the name of Lessor, with
loss payable to Lessor and to any Lender(s), insuring against loss or damage to
the Premises. Such insurance shall be for full replacement cost, as the same
shall exist from time to time, or the amount required by any Lender(s), but in
no event more than the commercially reasonable and available insurable value
thereof if, by reason of the unique nature or age of the improvements involved,
such latter amount is less than full replacement cost. lessee-Owned Alterations
and Utility Installations, Trade Fixtures and Lessee's personal property shall
be insured by Lessee pursuant to Paragraph 8.4. If the coverage is available and
commercially appropriate, Lessor's policy or policies shall insure against all
risks of direct physical loss or damage (except the perils of flood and/or
earthquake unless required by a lender or included in the Base Premium),
including coverage for any additional costs resulting from debris removal and
reasonable amounts of coverage for the enforcement of any ordinance or law
regulating the reconstruction or replacement of any undamaged sections of the
Building required to be demolished or removed by reason of the enforcement of
any building, zoning, safety or land use laws as the result of a covered loss,
but not including plate glass insurance. Said policy or policies shall also
contain an agreed valuation provision in lieu of any co-insurance clause, waiver
of subrogation, and inflation guard protection causing an increase in the annual
property insurance coverage amount by a factor of not less than the adjusted
U.S. Department of Labor Consumer Price Index for All Urban Consumers for the
city nearest to where the Premises are located.
(b) Rental Value. Lessor shall also obtain and keep in force during
the term of this Lease a policy or policies in the name of Lessor, with loss
payable to Lessor and any Lender(s), insuring the loss of the full rental and
other charges payable by all lessees of the Building to Lessor for one year
(including all Real Property Taxes, insurance costs, all Common Area Operating
Expenses and any scheduled rental increases). Said insurance may provide that in
the event the Lease is terminated by reason of an insured loss, the period of
indemnity for such coverage shall be extended beyond the date of the completion
of repairs or replacement of the Premises, to provide
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for one full year's loss of rental revenues from the date of any such loss. Said
insurance shall contain an agreed valuation provision in lieu of any co-
insurance clause, and the amount of coverage shall be adjusted annually to
reflect the projected rental income, Real Property Taxes, insurance premium
costs and other expenses, if any, otherwise payable, for the next 12-month
period. Common Area Operating Expenses shall include any deductible amount in
the event of such loss.
(c) Adjacent Premises. Lessee shall pay for any increase in the
premiums for the property insurance of the Building and for the Common Areas of
other buildings in the Industrial Center if said increase is caused by Lessee's
acts, omissions, use or occupancy of the Premises.
(d) Lessee's Improvements. Since Lessor is the Insuring Party,
Lessor shall not be required to insure Lessee-Owned Alterations and Utility
Installations unless the item in question has become the property of Lessor
under the terms of this Lease.
8.4 Lessee's Property Insurance. Subject to the requirements of Paragraph
8.5, Lessee at its cost shall either by separate policy or, at Lessor's option
by endorsement to a policy already carried, maintain insurance coverage on all
of Lessee's personal property, Trade Fixtures and Lessee-Owned Alterations and
Utility Installations in, on, or about the Premises similar in coverage to that
carried by Lessor as the Insuring Party under Paragraph 8.3(a). Such insurance
shall be full replacement cost coverage with a deductible not to exceed $1,000
per occurrence. The proceeds from any such insurance shall be used by Lessee for
the replacement of personal property and the restoration of Trade Fixtures and
Lessee-Owned Alterations and Utility Installations. Upon request from Lessor,
Lessee shall provide Lessor with written evidence that such insurance is in
force. (See Addendum I.)
8.5 Insurance Policies. Insurance required hereunder shall be in
companies duly licensed to transact business in the state where the Premises are
located, and maintaining during the policy term a "General Policyholder Rating"
of at last B+, V, or such other rating as may be required by a Lender, as set
forth in the most current issue of "Best's Insurance Guide." Lessee shall not
do or permit to be done anything which shall invalidate the insurance policies
referred to in this Paragraph 8. Lessee shall cause to be delivered to lessor,
within seven (7) days after the earlier of the Early Possession Date or the
Commencement Date, certified copies of, or certificates evidencing the existence
and amounts of, the insurance required under Paragraph 8.2(a) and 8.4. No such
policy shall be cancelable or subject to modification except after thirty (30)
days' prior written notice to Lessor. Lessee shall at lest thirty (30) days
prior to the expiration of such policies, furnish Lessor with evidence of
renewals or "insurance binders" evidencing renewal thereof, or Lessor may order
such insurance and charge the cost thereof to Lessee, which amount shall be
payable by Lessee to Lessor upon demand.
8.6 Waiver of Subrogation. Without affecting any other rights or
remedies, Lessee and Lessor each hereby release and relieve the other, and waive
their entire right
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to recover damages (whether in contract or in tort) against the other, for loss
or damage to their property arising out or incident to the perils required to be
insured against under Paragraph 8. The effect of such releases and waivers of
the right to recover damages shall not be limited by the amount of insurance
carried or required, or by any deductibles applicable thereto. Lessor and Lessee
agree to have their respective insurance companies issuing property damage
insurance waive any right to subrogation that such companies may have against
Lessor or Lessee, as the case may be, so long as the insurance is not
invalidated thereto.
8.7 Indemnity. Except for Lessor's negligence and/or breach of express
warranties, Lessee shall indemnify, protect, defend and hold harmless the
Premises, Lessor and its agents, Lessor's master or ground lessor, partners and
Lenders, from and against any and all claims, loss of rents and/or damages,
costs, liens, judgments, penalties, loss of permits, attorneys' and consultants'
fees, expenses and/or liabilities arising out of, involving, or in connection
with, the occupancy of the Premises by Lessee, the conduct of Lessee's business,
any act, omission or neglect of Lessee, its agents, contractors, employees or
invitees, and out of any Default or Breach by Lessee in the performance in a
timely manner of any obligation on Lessees part to be performed under this
Lease. The foregoing shall include, but not be limited to, the defense or
pursuit of any claim or any action or proceeding involved therein, and whether
or not (in the case of claims made against Lessor) litigated and/or reduced to
judgment. In case any action or proceeding be brought against Lessor by reason
of any of the foregoing matters, Lessee upon notice from Lessor shall defend the
same at Lessee's expense by counsel reasonably satisfactory to Lessor and lessor
shall cooperate with Lessee in such defense. Lessor need not have first paid any
such claim in order to be so indemnified. (See Addendum I.)
8.8 Exemption of Lessor from Liability. Lessor shall not be liable for
injury or damage to the person or goods, wares, merchandise or other property of
Lessee, Lessee's employees, contractors, invitees, customers, or any other
person in or about the Premises, whether such damage or injury is caused by or
results from fire, steam, electricity, gas, water or rain, or from the breakage,
leakage, obstruction or other defects of pipes, fire sprinklers, wires,
appliances, plumbing, air conditioning or lighting fixtures, or from any other
cause, whether said injury or damage results from conditions arising upon the
Premises or upon other portions of the Building of which the Premises are a
part, from other sources or places, and regardless of whether the cause of such
damage or injury or the means of repairing the same is accessible or not.
Lessor shall not be liable for any damages arising from any act or neglect of
any other Lessee or lessor nor from the failure by Lessor to enforce the
provisions of any other lease in the Industrial Center. Notwithstanding
Lessor's negligence or breach of this Lease, Lessor shall under no circumstances
be liable for injury to Lessee's business or for any loss of income or profit
therefrom. (See Addendum I.)
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9. Damage or Destruction.
9.1 Definitions.
(a) "Premises Partial Damage" shall mean damage or destruction to
the Premises, other the Lessee-Owned Alterations and Utility Installations, the
repair cost of which damage or destruction is less than fifty percent (50%) of
the then Replacement Cost (as defined in paragraph 9.1(d)) of the Premises
(excluding Lessee-Owned Alterations and Utility Installations and Trade
Fixtures) immediately prior to such damage or destruction.
(b) "Premises Total Destruction" shall mean damage or destruction to
the Premises, other than Lessee-Owned Alterations and Utility Installations, the
repair cost of which damage or destruction is fifty percent (50%) or more of the
then Replacement Cost of the Premises (excluding Lessee-Owned Alterations and
Utility Installations and Trade Fixtures) immediately prior to such damage or
destruction. In addition, damage or destruction to the Building, other than
Lessee-Owned Alterations and Utility Installations and Trade Fixtures of any
lessees of the Building, the cost of which damage or destruction is fifty
percent (50%) or more of the Replacement Cost (excluding Lessee-Owned
Alterations and Utility Installations and Trade Fixtures of any lessees of the
Building) of the Building shall, at the option of Lessor, be deemed to be
Premises Total Destruction.
(c) "Insured Loss" shall mean the damage or destruction to the
Premises, other than Lessee-Owned Alterations and Utility Installations and
Trade fixtures, which was caused by an event required to be covered by the
insurance described in Paragraph 8.3(a) irrespective of any deductible amounts
or coverage limits involved.
(d) "Replacement Cost" shall mean the cost to repair or rebuild the
improvements owned by Lessor at the time of the occurrence to their condition
existing immediately prior thereto, including demolition, debris removal and
upgrading required by the operation of applicable building codes, ordinances or
laws, and without deduction for depreciation.
(e) "Hazardous Substance Condition" shall mean the occurrence or
discovery of a condition involving the presence of, or a contamination by, a
Hazardous Substance as defined in paragraph 6.2(a), in, on, or under the
Premises.
9.2 Premises Partial Damages -- Insured Loss. If Premises Partial Damage
that is an Insured Loss occurs, then Lessor shall, at Lessor's expense, repair
such damage (but not Lessee's Trade Fixtures or Lessee-Owned Alterations and
Utility Installations) as soon as reasonably possible and this Lease shall
continue in full force and effect. In the event, however, that there is a
shortage of insurance proceeds and such shortage is due to the fact that, by
reason of the unique nature of the improvements in the Premises, full
replacement cost insurance coverage was not commercially reasonable and
available, Lessor shall have no obligation to pay for the shortage in insurance
proceeds or to fully
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restore the unique aspects of the Premises unless Lessee provides Lessor with
the funds to cover same, or adequate assurance thereof, within thirty (30) days
following receipt of written notice of such shortage and request therefor. If
Lessor receives said funds or adequate assurance thereof within said thirty (30)
day period, Lessor shall complete them as soon as reasonably possible and this
Lease shall remain in full force and effect. If Lessor does not receive such
funds or assurance within said period, Lessor may nevertheless elect by written
notice to lessee within ten (10) days thereafter to make such restoration and
repair as is commercially reasonable with Lessor paying any shortage in
proceeds, in which case this Lease shall remain in full force and effect. If
Lessor does not receive such funds or assurance within such thirty (30) day
period, and if Lessor does not so elect to restore and repair, then this Lease
shall terminate sixty (60) days following the occurrence of the damage or
destruction. Unless otherwise agreed, Lessee shall in no event have any right to
reimbursement from Lessor for any funds contributed by Lessee to repair any such
damage or destruction. Premises Partial Damage due to flood or earthquake shall
be subject to Paragraph 9.3 rather than Paragraph 9.2, notwithstanding that
there may be some insurance coverage, but the net proceeds of any such insurance
shall be made available for the repairs if made by either party. (See Addendum
I.)
9.3 Partial Damage--Uninsured Loss. If Premises Partial Damage that is
not an insured Loss occurs, unless caused by a negligent or willful act of
Lessee (in which event Lessee shall make the repairs at Lessee's expense and
this Lease shall continue in full force and effect), Lessor may at Lessor's
option, either (i) repair such damage as soon as reasonably possible at Lessor's
expense, in which event this Lease shall continue in full force and effect, or
(ii) give written notice to Lessee within thirty (30) days after receipt by
Lessor or knowledge of the occurrence of such damage of Lessor's desire to
terminate this Lease as of the date sixty (60) days following the date of such
notice. In the event Lessor elects to give such notice of Lessor's intention to
terminate this Lease, Lessee shall have the right within thirty (30) days after
the receipt of such notice to give written notice to Lessor of Lessee's
commitment to pay for the repair of such damage totally at Lessee's expense and
without reimbursement from Lessor. Lessee shall provide Lessor with the
required funds or satisfactory assurance thereof within thirty (30) days
following such commitment from Lessee. In such event this Lease shall continue
in full force and effect, and Lessor shall proceed to make such repairs as soon
as reasonably possible after the required funds are available. If Lessee does
not give such notice and provide the funds or assurance thereof within the times
specified above, this Lease shall terminate as of the date specified in Lessor's
notice of termination.
9.4 Total Destruction. Notwithstanding any other provision hereof, if
Premises Total Destruction occurs (including any destruction required by any
authorized public authority), this Lease shall terminate sixty (60) days
following the date of such Premises Total Destruction, whether or not the damage
or destruction is an Insured Loss or was caused by a negligent or willful act of
Lessee. In the event, however, that the damage or destruction was caused by
Lessee, Lessor shall have the right to recover Lessor's damages from Lessee
except as released and waived in Paragraph 9.7.
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9.5 Damage Near End of Term. If at any time during the last six (6)
months of the term of this Lease there is damage for which the cost to repair
exceeds one month's Base Rent, whether or not an Insured Loss, Lessor may, at
Lessor's option, terminate this Lease effective sixty (60) days following the
date of occurrence of such damage by giving written notice to Lessee of Lessor's
election to do so within thirty (30) days after the date of occurrence of such
damage. Provided, however, if Lessee at that time has an exercisable option to
extend this Lease or to purchase the Premises, then Lessee may preserve this
Lease by (a) exercising such option, and (b) providing Lessor with any shortage
in insurance proceeds (or adequate assurance thereof) needed to make the repairs
on or before the earlier of (i) the date which is ten (10) days after Lessee's
receipt of Lessor's written notice purporting to terminate this Lease, or (ii)
the day prior to the date upon which such option expires. If Lessee duly
exercises such option during such period and provides Lessor with funds (or
adequate assurance thereof) to cover any shortage in insurance proceeds, Lessor
shall, at Lessor's expense repair such damage as soon as reasonably possible and
this Lease shall continue in full force and effect. If Lessee fails to exercise
such option and provide such funds or assurance during such period, then this
Lease shall terminate as of the date set forth in the first sentence of this
Paragraph 9.5.
9.6 Abatement of Rent; Lessee's Remedies.
(a) In the event of (i) Premises Partial Damage or (ii) Hazardous
Substance Condition for which Lessee is not legally responsible, the Base Rent,
Common Area Operating Expenses and other charges, if any, payable by Lessee
hereunder for the period during which such damage or condition, its repair,
remediation or restoration continues, shall be abated in proportion to the
degree to which Lessee's use of the Premises is impaired, but not in excess of
proceeds from Insurance required to be carried under Paragraph 8.3(b). Except
for abatement of Base Rent, Common Area Operating Expenses and other charges, if
any, as aforesaid, all other obligations of Lessee hereunder shall be performed
by Lessee, and Lessee shall have no claim against Lessor for any damage suffered
by reason of any such damage, destruction, repair, remediation or restoration.
(b) If Lessor shall be obligated to repair or restore the Premises
under the provisions of this Paragraph 9 and shall not commence, in a
substantial and meaningful way, the repair or restoration of the Premises within
sixty (60) days after such obligation shall accrue Lessee may, at any time prior
to the commencement of such repair or restoration, give written notice to Lessor
and to any Lenders of which Lessee has actual notice of Lessee's election to
terminate this Lease on a date not less than sixty (60) days following the
giving of such notice. If Lessee gives such notice to Lessor and such Lenders
and such repair or restoration is not commenced within thirty (30) days after
receipt of such notice, this Lease shall terminate as of the date specified in
said notice. If Lessor or a Lender commences the repair or restoration of the
Premises within thirty (30) days after the receipt of such notice, this Lease
shall continue in full force and effect. "Commence" as used in this Paragraph
9.6 shall mean either the unconditional
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authorization of the preparation of the required plans, or the beginning of the
actual work on the Premises whichever occurs first.
9.7 Hazardous Substance Conditions. If a Hazardous Substance Condition
occurs not already identified, unless Lessee is legally responsible therefor (in
which case Lessee shall make the investigation and remediation thereof required
by Applicable Requirements and this Lease shall continue in full force and
effect, but subject to Lessor's rights under Paragraph 6.2(c) and paragraph 13),
Lessor may at Lessor's option either (i) investigate and remediate such
Hazardous Substance Condition, if required, as soon as reasonably possible at
Lessor's expense in which event this Lease shall continue in full force and
effect, or (ii) if the estimated cost to investigate and remediate such
condition exceeds twelve (12) times the then monthly base rent or $500,000
whichever is greater, give written notice to Lessee within thirty (30) days
after receipt by Lessor of knowledge of the occurrence of such Hazardous
Substance Condition of Lessor's desire to terminate this Lease as of the date
sixty (60) days following the date of such notice. In the event Lessor elects
to give such notice of Lessor's intention to terminate the Lease, Lessee shall
have the right within ten (10) days after the receipt of such notice to give
written notice to lessor of Lessee's commitment to pay for the excess costs of
(a) investigation and remediation of such Hazardous Substance Condition to the
extent required by Applicable Requirements, over (b) an amount equal to twelve
(12) times the then monthly Base Rent or $500,000, whichever is greater. Lessee
shall provide Lessor with the funds required of Lessee or satisfactory assurance
thereof within thirty (30) days following said commitment by Lessor. In such
event this Lease shall continue in full force and effect, and Lessor shall
proceed to make such investigation and remediation as soon as reasonably
possible after the required funds are available. If Lessee does not give such
notice and provide the required funds or assurance thereof within the time
period specified above, this Lease shall terminate as of the date specified in
Lessor's notice of termination.
9.8 Termination--Advance Payments. Upon termination of this Lease
pursuant to this Paragraph 9, Lessor shall return to Lessee any advance payment
made by Lessee to Lessor and so much of Lessee's Security Deposit as has not
been, or is not then required to be, used by Lessor under the terms of this
Lease.
9.9 Waiver of Statutes. Lessor and Lessee agree that the terms of this
Lease shall govern the effect of any damage to or destruction of the Premises
and the Building with respect to the termination of this Lease and hereby waive
the provisions of any present or future statute to the extent it is inconsistent
herewith.
10. Real Property Tax Definitions.
10.1 Payment of Taxes. Lessor shall pay the Real Property Taxes, as
defined in Paragraph 10.2(a), applicable to the Industrial Center, and except as
otherwise provided in Paragraph 10.3, any increases in such amounts over the
Base Real Property Taxes shall
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be included in the calculation of Common Area Operating Expenses in accordance
with the provisions of Paragraph 4.2.
10.2 Real Property Tax Definitions.
(a) As used herein, the term "Real Property Taxes" shall include
any form of real estate tax or assessment, general, special, ordinary or
extraordinary, and any license fee, commercial rental tax, improvement bond or
bonds, levy or tax (other than inheritance, personal income or estate taxes)
imposed upon the Industrial Center by any authority having the direct or
indirect power to tax, including any city, state or federal government, or any
school agricultural, sanitary, fire, street, drainage, or other improvement
district thereof, levied against any legal or equitable interest of Lessor in
the Industrial Center or any portion thereof, Lessor's right to rent or other
income therefrom, and/or Lessor's business of leasing the premises. The term
"Real Property Taxes" shall also include any tax, fee, levy, assessment or
charge, or any increase therein, imposed by reason of events occurring, or
changes in Applicable Law taking effect during the term of this Lease, including
but not limited to a change in the ownership of the Industrial Center or in the
improvements thereon, the execution of this Lease, or any modification,
amendment or transfer thereof, and whether or not contemplated by the Parties.
(b) As used herein, the term "Base Real Property Taxes" shall be
the amount of Real Property Taxes, which are assessed against the Premises,
Building or Common Areas in the calendar year during which the Lease is
executed. In calculating Real Property Taxes for any calendar year, the Real
Property Building or Common Areas in the calendar year during which the Lease is
executed. In calculating Real Property Taxes for any calendar year, the Real
Property Taxes for any real estate tax year shall be included in the calculation
of Real Property Taxes for such calendar year based upon the number of days
which such calendar year and tax year have in common.
10.3 Additional Improvements. Common Area Operating Expenses shall not
include Real Property Taxes specified in the tax assessor's records and work
sheets as being caused by additional improvements placed upon the Industrial
Center by other lessees or by Lessor for the exclusive enjoyment of such other
lessees. Notwithstanding Paragraph 10.1 hereof, Lessee shall, however, pay to
Lessor at the time Common Area Operating Expenses are payable under Paragraph
4.2, the entirety of any increase in real Property Taxes if assessed solely by
reason of Alterations, Trade Fixtures or Utility Installations placed upon the
Premises by Lessee or at Lessee's request.
10.4 Joint Assessment. If the Building is not separately assessed, Real
Property Taxes allocated to the Building shall be an equitable proportion of the
Real Property Taxes for all of the land and improvements included within the tax
parcel assessed, such proportion to be determined by Lessor from the respective
valuations assigned in the assessor's worksheets or such other information as
may be reasonably available. Lessor's reasonable determination thereof, in good
faith, shall be conclusive.
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10.5 Lessee's Property Taxes. Lessee shall pay prior to delinquency all
taxes assessed against and levied upon Lessee-Owned Alterations and Utility
Installations, Trade Fixtures, furnishings, equipment and all personal property
of Lessee contained in the Premises or stored within the Industrial Center.
When possible, Lessee shall cause its Lessee-Owned Alterations and Utility
Installations, Trade Fixtures, furnishings, equipment and all other personal
property to be assessed and billed separately from the real property of lessor.
If any of Lessee's said property shall be assessed with Lessor's real property,
Lessee shall pay Lessor the taxes attributable to Lessee's property within ten
(10) days after receipt of a written statement setting forth the taxes
applicable to Lessee's property.
11. Utilities. Lessee shall pay directly for all utilities and services
supplied to the Premises, including but not limited to electricity, telephone,
security, gas and cleaning of the Premises, together with any taxes thereon, if
any such utilities or services are not separately metered to the Premises or
separately billed to the Premises, Lessee shall pay to Lessor a reasonable
proportion to be determined by Lessor of all such charges jointly metered or
billed with other premises in the Building, in the manner and within the time
periods set forth in the Paragraph 4.2(d).
12. Assignment and Subletting.
12.1 Lessor's Consent Required. (See Addendum I.)
(a) Lessee shall not voluntarily assign, transfer, mortgage or otherwise
transfer or encumber (collectively "assign") or sublet all or any part of
Lessee's interest in this Lease or in the Premises without Lessor's prior
written consent given under and subject to the terms of Paragraph 36.
(b) A change in the control of Lessee shall constitute an assignment
requiring Lessor's consent. The transfer, on a cumulative basis, of fifty
percent (50%) or more of the voting control of Lessee shall constitute a change
in control for this purpose. (See Addendum I.)
(c) The involvement of Lessee or its assets in any transaction, or series
of transactions (by way of merger, sale, acquisition, financing, refinancing,
transfer, leveraged buy-out or otherwise), whether or not a formal assignment or
hypothecation of this Lease or Lessee's assets occurs, which results or will
result in a reduction of the Net worth of Lessee, as hereinafter defined, by an
amount equal to or greater than fifty percent (50%) of such Net Worth of Lessee
as it was represented to Lessor at the time of full execution and delivery of
this Lease or at the time of the most recent assignment to which Lessor has
consented, or as it exists immediately prior to said transaction or transactions
constituting such reduction, at whichever time said Net Worth of Lessee was or
is greater, shall be considered an assignment of this Lease by Lessee to which
Lessor may reasonably withhold its consent. "Net Worth of Lessee" for purposes
of this Lease shall be the net worth of Lessee (excluding any Guarantors)
established under generally accepted accounting principles consistently applied.
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(d) An assignment or subletting of Lessee's interest in this Lease
without Lessor specific prior written consent shall, at Lessor's option, be a
Default curable after notice per Paragraph 13.1, or a non-durable Breach without
the necessity of any notice and grace period. If Lessor elects to treat such
unconsented to assignment or subletting as a non-curable Breach, Lessor shall
have the right to either: (i) terminate this Lease, or (ii) upon thirty (30)
days written notice ("Lessor's Notice"), increase the monthly Base Rent to the
greater of the then fair market rental value of the Premises, as reasonably
determined by Lessor, or one hundred five percent (105%) of the Base Rent than
in effect. Pending determination of the new fair market rental value, if
disputed by Lessee, Lessee shall pay the amount set forth in Lessor's Notice,
with any overpayment credited against the next installment(s) of Base Rent
coming due, and any underpayment for the period retroactively to the effective
date of the adjustment being due and payable immediately upon the determination
thereof. Further, in the event of such Breach and rental adjustment, (i) the
purchase price of any opinion to purchase the Premises held by Lessee shall be
subject to similar adjustment to the then fair market value as reasonably
determined by Lessor (without the Lease being considered an encumbrance or any
deduction for depreciation or obsolescence, and considering the Premises at its
highest and best use and in good condition) or one hundred ten percent (110%) of
the price previously in effect, (ii) any index-oriented rental or price
adjustment formulas contained in this Lease shall be adjusted to require that
the base index be determined with reference to the index applicable to the time
of such adjustment, and (iii) any fixed rental adjustments scheduled during the
remainder of the Lease term shall be increased in the same ratio as the new
rental bears to the Base Rent in effect immediately prior to the adjustment
specified in Lessor's Notice.
(e) Lessee's remedy for any breach of this Paragraph 12.1 by Lessor
shall be limited to compensatory damages and/or injunctive relief.
12.2 Terms and Conditions Applicable to Assignment and Subletting.
(a) Regardless of Lessor's consent, any assignment or subletting
shall not (i) be effective without the express written assumption by such
assignee or sublessee of the obligations of the Lessee under this Lease, (ii)
release Lessee of any obligations hereunder, nor (iii) alter the primary
liability of Lessee for the payment of Base Rent and other sums due Lessor
hereunder or for the performance of any other obligations to be performed by
Lessee under this Lease.
(b) Lessor may accept any rent or performance of Lessee's
obligations from any person other than Lessee pending approval or disapproval of
an assignment. Neither a delay in the approval or disapproval of such assignment
nor the acceptance of any rent for performance shall constitute a waiver or
estoppel of Lessor's right to exercise its remedies for the Default or Breach by
Lessee of any of the terms, covenants or conditions of this Lease.
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(c) The consent of Lessor to any assignment or subletting shall not
constitute a consent to any subsequent assignment or subletting by Lessee or to
any subsequent or successive assignment or subletting by the assignee or
sublessee. However, Lessor may consent to subsequent sublettings and assignments
of the sublease or any amendments or modifications thereto and without obtaining
their consent, and such action shall not relieve such persons from liability
under this Lease or the sublease.
(d) In the event of any Default or Breach of Lessee's obligation
under this Lease, Lessor may proceed directly against Lessee, any Guarantors or
anyone else responsible for the performance of the Lessee's obligations under
this Lease, including any sublessee, without first exhausting Lessor's remedies
against any other person or entity responsible therefor to Lessor, or any
security held by Lessor.
(e) Each request for consent to an assignment or subletting shall be
in writing accompanied by information relevant to Lessor's determination as to
the financial and operational responsibility and appropriateness of the proposed
assignee or sublessee, including but not limited to the intended use and/or
required modification of the Premises, if any, together with a non-refundable
deposit of $1,000 or ten percent (10%) of the monthly Base Rent applicable to
the portion of the Premises which is the subject of the proposed assignment or
sublease, whichever is greater, as reasonable consideration for Lessor's
considering and processing the request for consent. Lessee agrees to provide
Lessor with such other or additional information and/or documentation as may be
reasonably requested by Lessor.
(f) Any assignee of, or sublessee under, this Lease shall, by reason
of accepting such assignment or entering into such sublease, be deemed, for the
benefit of Lessor, to have assumed and agreed to conform and comply with each
and every term, covenant, condition and obligation herein to be observed or
performed by Lessee during the term of said assignment of sublease, other than
such obligations as are contrary to or inconsistent with provisions of an
assignment or sublease to which Lessor has specifically consented in writing.
(g) The occurrence of a transaction described in Paragraph 12.2(c)
shall give Lessor the right (but not the obligation) to require that the
Security Deposit be increased by an amount equal to two (2) times the then
monthly Base Rent, and Lessor may make the actual receipt by Lessor of the
Security Deposit Increase a condition to Lessor's consent to such transaction.
(h) (See Addendum I.)
12.3 Additional Terms and Conditions Applicable to Subletting. The
following terms and conditions shall apply to any subletting by Lessee of all or
any part of the Premises and shall be deemed included in al subleases under this
Lease whether or not expressly incorporated therein:
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(a) Lessee hereby assigns and transfers to Lessor all of Lessee's
interest in all rentals and income arising from any sublease of all or a portion
of the Premises heretofore or hereafter made by Lessee, and Lessor may collect
such rent and income and apply same toward Lessee's obligations under this
Lease; provided, however, that until a Breach (as defined in Paragraph 13.1)
shall occur in the performance of Lessee's obligations under this Lease, Lessee
may, except as otherwise provided in this Lease, receive collect and enjoy the
rents accruing under such sublease. Lessor shall not, by reason of the foregoing
provision or any other assignment of such sublease to Lessor nor by reason of
the collection of the rents from a sublessee, be deemed liable to the sublessee
for failure of Lessee to perform and comply with any of Lessee's obligations to
such sublessee under such Sublease. Lessee hereby irrevocably authorizes and
directs any such sublessee, upon receipt of a written notice from Lessor stating
that a Breach exists in the performance of Lessee's obligations under this
Lease, to pay to Lessor the rents and other charges due and to become due under
the sublease. Sublessee shall rely upon any such statement and request from
Lessor and shall pay such rents and other charges to Lessor without any
obligations or right to inquire as to whether such Breach exists and
notwithstanding any notice from or claim from Lessee to the contrary. Lessee
shall have no right or claim against such sublessee, or, until the Breach has
been cured, against Lessor, for any such rents and other charges so paid by said
sublessee to Lessor.
(b) In the event of a Breach by Lessee in the performance of its
obligations under this Lease, Lessor, at its option and without any obligation
to do so, may require any sublessee to attorn to Lessor, in which event Lessor
shall undertaken the obligations of the sublessor under such sublease from the
time of the exercise of said option to the expiration of such sublease;
provided, however, Lessor shall not be liable for any prepaid rents or security
deposit paid by such sublessee to such sublessor or for any other prior defaults
or breaches of such sublessor under such sublease.
(c) any matter or thing requiring the consent of the sublessor under
a sublease shall also require the consent of Lessor herein.
(d) No sublessee under a sublease approved by Lessor shall further
assign or sublet all or any part of the Premises without Lessor's prior written
consent.
(e) Lessor shall deliver a copy of any notice of Default or Breach by
Lessee to the sublessee, who shall have the right to cure the Default of Lessee
within the grace period, if any, specific in such notice. The sublessee shall
have a right or reimbursement and offset from and against Lessee for any such
Defaults cured by the sublessee.
13. Default; Breach; Remedies.
13.1 Default; Breach. Lessor and Lessee agree that if an attorney is
consulted by Lessor in connection with a Lessee Default or Breach (as
hereinafter defined) $350.00 is a reasonable minimum sum per such occurrence for
legal services and costs in the preparation and service of a notice of Default,
and that Lessor may include the cost of
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such services and costs in said notice as rent due and payable to cure said
default. A "Default" by Lessee is defined as a failure by Lessee to observe,
comply with or perform any of the terms, covenants, conditions or rules
applicable to Lessee under this Lease. A "Breach" by Lessee is defined as the
occurrence of any one or more of the following Defaults, and, where a grace
period for cure after notice is specified herein, the failure by Lessee to cure
such Default prior to the expiration of the applicable grace period, and shall
entitled Lessor to pursue the remedies set forth in Paragraphs 13.2 and/or 13.3:
(a) The vacating of the Premises without the intention to reoccupy
same, or the abandonment of the Premises.
(b) Except as expressly otherwise provided in this Lease, the failure
by Lessee to make any payment of Base Rent, Lessee's Share of Common area
Operating Expenses, or any other monetary payment required to be made by Lessee
hereunder as and when due, the failure by Lessee to provide Lessor with
reasonable evidence of insurance or surety bond required under this Lease, or
the failure of Lessee to fulfill any obligation under this Lease which endangers
or threatens life or property, where such failure continues for a period of
three (3) days following written notice thereof by or on behalf of Lessor to
Lessee.
(c) Except as expressly otherwise provided in this Lease, the failure
by Lessee to provide Lessor with reasonable written evidence (in duly executed
original form, if applicable) of (i) compliance with Applicable Requirements per
Paragraph 6.3, (ii) the inspection, maintenance and service contracts required
under Paragraph 7.1(b), (iii) the rescission of an unauthorized assignment or
subletting per Paragraph 12.1, (iv) a Tenancy Statement per Paragraphs 16 or 37,
(v) the subordination or non-subordination of this Lease per Paragraph 30, (vi)
the guaranty of the performance of Lessee's obligations under this Lease if
required under Paragraphs 1.11 and 37, (vii) the execution of any document
requested under Paragraph 42 (easements) or (viii) any other documentation or
information which Lessor may reasonably require of Lessee under the terms of
this lease, where any such failure continues for a period of ten (10) days
following written notice by or on behalf of Lessor to Lessee.
(d) A Defa ult by Lessee as to the terms, covenants, conditions or
provisions of this Lease, or of the rules adopted under Paragraph 40 hereof that
are to be observed, complied with or performed by Lessee, other than those
described in Subparagraphs 13.1(a), (b) or (c), above, where such Default
continues for a period of thirty (30) days after written notice thereof by or on
behalf of Lessor to Lessee, provided, however, that if the nature of Lessee's
Default is such that more than thirty (30) days are reasonably required for its
cure, then it shall not be deemed to be a Breach of this Lease by Lessee if
Lessee commences such cure within said thirty (30) day period and thereafter
diligently prosecutes such cure to completion.
(e) The occurrence of any of the following events: (i) the making by
Lessee of any general arrangement or assignment for the benefit of creditors;
(ii) Lessee's
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becoming a :debtor as defined in 11 U.S. Code Section 101 or any successor
statute thereto (unless, in the case of a petition filed against Lessee, the
same is dismissed within sixty (60) days); (iii) the appointment of a trustee or
receiver to take possession of or substantially all of Lessee's assets located
at the Premises or of Lessee's interest in this Lease, where possession is not
restored to Lessee within thirty (30) days; or (iv) the attachment, execution or
other judicial seizure of substantially all of Lessee's assets located at the
Premises or of Lessees interest in this Lease, where such seizure is not
discharged within thirty(30) days; provided, however, in the event that any
provision of this Subparagraph 13.1(e) is contrary to any applicable law, such
provision shall be of no force or effect and shall not affect the validity of
the remaining provisions.
(f) The discovery by Lessor that any financial statement of Lessee or
of any Guarantor, given to lessor by Lessee or any Guarantor, was materially
false.
(g) If the performance of Lessee's obligations under this Lease is
guaranteed: (i) the death of a Guarantor, (ii) the termination of a Guarantor's
liability with respect to this Lease other than in accordance with the terms of
such guaranty, (iii) a Guarantor's becoming insolvent or the subject of a
bankruptcy filing, (iv) a Guarantor's refusal to honor the guaranty, or (v) a
Guarantor's breach of its guaranty obligation on an anticipatory breach basis,
and Lessee's failure, within sixty (60) days following written
notice by or on behalf of Lessor to Lessee of any such event, to provide Lessor
with written alternative assurances of security, which , when coupled with the
then existing resources of Lessee, equals or exceeds the combined financial
resources of Lessee and the Guarantors that existed at the time of execution of
this Lease.
13.2 Remedies. If Lessee fails to perform any affirmative duty or
obligation of Lessee under this Lease, within ten (10) days after written notice
to Lessee (or in case of an emergency, without notice), Lessor may at its option
(but without obligation to do so), perform such duty or obligation on Lessee's
behalf, including but not limited to the obtaining of reasonably required bonds,
insurance policies, or governmental licenses, permits or approvals. The costs
and expenses of any such performance by lessor shall be due and payable by
Lessee to Lessor upon invoice therefor. If any check given to Lessor by Lessee
shall not be honored by such performance by Lessor shall be due and payable by
Lessee to Lessor upon invoice therefore. If any check given to lessor by Lessee
shall not be honored by such performance by Lessor shall be due and payable by
Lessee to Lessor upon. invoice therefor. If any check given to Lessor by Lessee
shall not be honored by the bank upon which it is drawn, Lessor at its own
option, may require all future payments to be made under this Lease by Lessee to
be made only by cashier's check. In the event of a Breach of this lease by
Lessee (as defined in Paragraph 13.1), with or without further notice or demand,
and without limiting Lessor in the exercise of any right or remedy which Lessor
may have by reason of such Breach. Lessor may:
(a) Terminate Lessee's right to possession of the Premises by any
lawful means, in which case this Lease and the term hereof shall terminate and
Lessee shall immediately surrender possession of the Premises to lessor. In such
event Lessor
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shall be entitled to recover from Lessee: (i) the worth at the time of the award
of the unpaid rent which had been earned at the time of termination; (ii) the
worth at the time of award of the amount by which the unpaid rent which would
have been earned after termination until the time of award exceeds the amount of
such rental loss that the Lessee proves could have been reasonably avoided;
(iii) the worth at the time of award of the amount by which the unpaid rent for
the balance of the term after the time of award exceeds the amount of such
rental loss that the Lessee roves could be reasonably avoided; and (iv) any
other amount necessary to compensate Lessor for all the detriment proximately
caused by the Lessee's failure to perform its obligations under this Lease or
which in the ordinary course of things would be likely to result therefrom,
including but not limited to the cost of recovering possession of the Premises,
expenses of reletting, including necessary renovation and alteration of the
Premises, reasonable attorneys' fees, and that portion of any leasing commission
paid by lessor in connection with this Lease applicable to the unexpired term of
this Lease. The worth at the time of award of the amount referred to in
provision (iii) of the immediately preceding sentence shall be computed by
discounting such amount at the discount rate of the Federal reserve Bank of San
Francisco or the Federal Reserve Bank District in which the Premises are located
at the time of award of the amount referred to in provision (iii) of the
immediately preceding sentence shall be computed by discounting such amount at
the discount rate of the Federal Reserve Bank of San Francisco or the Federal
Reserve Bank District in which the Premises are located at the time of award
plus one percent (1%). Efforts by Lessor to mitigate damages caused by Lessee's
Default or Breach of this Lease shall not waive Lessor's right to recover
damages under this paragraph 13.2. If termination of this Lease is obtained
through the provisional remedy of unlawful detainer. Lessor shall have the right
to recover in such proceeding the unpaid rent and damage as recoverable therein,
or Lessor may reserve the right to recover all or any part thereof n a separate
suit for such rent and/or damages. If a notice and grace period required under
Subparagraph 13(b), (c) or (d). In such case, the applicable grace period under
the unlawful detainer statute shall run concurrently after the one such
statutory notice and the failure of Lessee to cure the Default with the greater
of the two (2) such grace periods shall constitute both an unlawful detainer and
a Breach of this Lease entitled Lessor to the remedies provided for in this
Lease and/or by said statute.
(b) Continue the Lease and Lessee's right to possession in effect (in
California under California Civil Code Section 1951.4) after Lessee's Breach and
recover the rent as it becomes due, provided Lessee has the right to sublet or
assign, subject only to reasonable limitations. Lessor and Lessee agree that the
limitations on assignment and subletting in this Lease are reasonable. Acts of
maintenance or preservation, efforts to relet the premises, or the appointment
of a receiver to protect the Lessor's interest under this Lease, shall not
constitute a termination of the Lessee's right to possession.
(c) Pursue any other remedy now or hereafter available to Lessor
under the laws or judicial decisions of the state wherein the Premises are
located.
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(d) The expiration or termination of this Lease and/or the
termination of Lessee's right to possession shall not relieve Lessee from
liability under any indemnity provisions of this Lease as to matters occurring
during the term hereof or by reason of Lessee's occupancy of the Premises.
13.3 Inducement Recapture In Event of Breach. Any agreement by Lessor for
free or abated rent or other charges applicable to the Premises, or for the
giving or paying by Lessor to or for Lessee of any cash or other bonus,
inducement or consideration for Lessee's entering into this Lease, all of which
concessions are hereinafter referred to as "Inducement Provisions" shall be
deemed conditioned upon Lessee's full and faithful performance of all of the
terms, covenants and conditions of this Lease to be performed or observed by
Lessee during the term hereof as the same may be extended. Upon the occurrence
of a Breach (as defined in Paragraph 13.1) of this Lease by Lessee, any such
inducement Provision shall automatically be deemed deleted from this Lease and
of no further force or effect, and any rent, other charge, bonus, inducement or
consideration heretofore abated, given or paid by Lessor under such an
Inducement Provision shall be immediately due and payable by Lessee to Lessor,
and recoverable by Lessor as additional rent under this Lease, notwithstanding
any subsequent cure of said Breach by Lessee. The acceptance by lessor of rent
or the cure of the Breach which initiated the operation of this paragraph 13.3
shall not be deemed a waiver by Lessor of the provisions of this Paragraph 13.3
unless specifically so stated in writing by Lessor at the time of such
acceptance.
13.4 Late Charges. Lessee hereby acknowledges that late payment by Lessee
to Lessor of rent and other sums due hereunder will cause Lessor to incur costs
not contemplated by this Lease, the exact amount of which will be extremely
difficult to ascertain. Such costs include, but are not limited to, processing
and accounting charges, and late charges which may be imposed upon Less or by
the terms of any ground lease, mortgage or deed of trust covering the Premises.
Accordingly, if any installment of rent or other sum due from Lessee shall not
be received by Lessor or Lessor's designee within ten (10) days after such
amount shall be due, then, without any requirement for notice to Lessee, Lessee
shall pay to Lessor a late charge equal to six percent (6%) of such overdue
amount. The parties hereby agree that such late charge represents a fair and
reasonable estimate of the costs Lessor will incur by reason of late payment by
Lessee. Acceptance of such late charge by lessor shall in no event constitute a
waiver of Lessee's Default or Breach with respect to such overdue amount, nor
prevent Lessor from exercising any of the other rights and remedies granted
hereunder. In the event that a late charge is payable hereunder, whether or not
collected, for three (3) consecutive installments of Base Rent, then
notwithstanding paragraph 4.1 or any other provision of this Lease to the
contrary, Base Rent shall, at Lessor's option become due and payable quarterly
in advance.
13.5 Breach by Lessor. Lessor shall not be deemed in breach of this Lease
unless Lessor fails within a reasonable time to perform an obligation required
to be performed by Lessor. For purposes of this Paragraph 13.5, a reasonable
time shall in no event be less than thirty (30) days after receipt by Lessor,
and by any lender(s) whose
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name and address shall have been furnished to Lessee in writing for such
purpose, of written notice specifying wherein such obligation of Lessor has not
been performed; provided, however, that if the nature of Lessor's obligation is
such that more than thirty (30) days after such notice are reasonably required
for its performance, then Lessor shall not be in breach of this Lease if
performance is commenced within thirty (30) day period and thereafter diligently
pursued to completion.
14. Condemnation. If the Premises or any portion thereof are taken under the
power of eminent domain or sold under the threat of the exercise of said power
(all of which are herein called "condemnation"), this Lease shall terminate as
to the part so taken as of the date the condemning authority takes title or
possession, whichever first occurs. If more than ten percent (10%) of the floor
area of the Premises, or more than twenty-five percent (25%) of the portion of
the Common Areas designated for Lessee's parking, is taken by condemnation,
Lessee may, at Lessee's option, to be exercised in writing within ten (10) days
after Lessor shall have given Lessee written notice of such taking (or in the
absence of such notice, within thirty (30) days after the condemning authority
shall have taken possession) terminate this Lease s of the date the condemning
authority takes such possession. If Lessee does not terminate this Lease in
accordance with the foregoing, this Lease shall remain in full force and effect
as to the portion of the Premises remaining, except that the Base Rent shall be
reduced in the same proportion as the rentable floor area of the Premises taken
bears to the total rentable floor area of the Premises. No reduction of Base
Rent shall occur if the condemnation does not apply to any portion of the
Premises. Any award for the taking of all or any part of the Premises. Any award
for the taking of all or any part of the Premises under the power of eminent
domain or any payment made under threat of the exercise of such power shall be
the property of Lessor, whether such award shall be made as compensation for
diminution of value of the leasehold or, for the taking of the fee, or as
severance damages; provided, however, that lessee shall be entitled to any
compensation for diminution of value of the leasehold or, for the taking of the
fee, or as severance damages; provided, however, that Lessee shall be entitled
to any compensation, separately awarded to Lessee for Lessee's relocation
expenses and/or loss of Lessee's Trade Fixtures. In the event that this Lease is
not terminated by reason of such condemnation, Lessor shall to the extent of its
net severance damages received, over and above Lessee's Share of the legal and
other expenses incurred by Lessor in the condemnation matter, repair any damage
to the Premises caused by such condemnation authority.
15. Brokers' Fees.
15.1 Procuring Cause. The Broker(s) named in paragraph 1.10 is/are the
procuring cause of this Lease.
15.2 Additional Terms. Unless Lessor and Broker(s) have otherwise agreed
in writing, Lessor agrees that: (a) if Lessee exercises any Option (as defined
in paragraph 39.1) granted under this Lease or any Option subsequently granted,
or (b) if Lessee acquires any rights to the Premises or other premises in which
Lessor has an
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interest, or (c) if Lessee remains in possession of the Premises with the
consent of Lessor after the expiration of the term of this lease after having
failed to exercise an Option, or (d) if said Brokers are the procuring cause of
any other lease or sale entered into between the Parties pertaining to the
Premises and/or any adjacent property in which Lessor has an interest, or (e) if
Base Rent is increased, whether by agreement or operation of an escalation
clause herein, then as to any of said transactions, lessor shall pay said
Broker(s) a fee in accordance with the schedule of said Broker(s) in effect at
the time of the execution of this Lease.
15.3 Assumption of Obligations. Any buyer or transferee of Lessor's
interest in this Lease, whether such transfer is by agreement or by operation of
law, shall be deemed to have assumed Lessor's obligation under this Paragraph
15. Each Broker shall be an intended third party beneficiary of the provisions
of Paragraph 1.10 and of this Paragraph 15 to the extent of its interest in any
commission arising from this Lease and may enforce that right directly against
Lessor and its successors.
15.4 Representatives and Warranties. Lessee and Lessor each represent and
warrant to the other that it has had no dealings with any person, firm, broker
or finder other than as named in Paragraph 1.01(a) in connection with the
negotiation of this Lease and/or the consummation of the transaction
contemplated hereby, and that no broker or other person, firm or entity other
than aid named Broker(s) is entitled to any commission or finder's fee in
connection with said transaction. lessee and Lessor do each hereby agree to
indemnify, protect, defend and hold the other harmless from and against
liability for compensation or changes which may be claimed by any such unnamed
broker, finder or other similar party, by reason of any dealings or actions of
the indemnifying Party, including any costs, expenses, and/or attorneys' fees
reasonably incurred with respect thereto.
16. Tenancy and Financial Statements.
16.1 Tenancy Statement. Each Party (as "responding Party") shall within
ten (10) days after written notice from the other Party (the "Requesting Party")
execute, acknowledge and deliver to the Requesting Party a statement in writing
in a form similar to the then most current "Tenancy Statement" form published by
the American Industrial Real Estate Association, plus such additional
information, confirmation and/or statements as may be reasonably requested by
the Requesting Party.
16.2 Financial Statement. If Lessor desires to finance, refinance, or
sell the Premises or the Building, or any part thereof, Lessee and all
Guarantors shall deliver to any potential lender or purchaser designated by
lessor such financial statements of Lessee and such Guarantors as may be
reasonably required by such lender or purchaser, including but not limited to
Lessee's financial statements for the past three (3) years. All such financial
statements shall be received by Lessor and such lender or purchaser in
confidence and shall be used only for the purposes herein set forth.
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17. Lessor's Liability. Lessor's Liability. the term "Lessor" as used herein
shall mean the owner or owners at the time in question of the fee title to the
Premises. In the event of a transfer of lessor's title or interest in the
Premises or in this Lease, Lessor shall deliver to the transferee or assignee
(in cash or by credit) any unused Security Deposit held by lessor a the time of
such transfer or assignment. Except as provided in Paragraph 15.3, upon such
transfer or assignment and delivery of the Security Deposit, as aforesaid, the
prior Lessor shall be relieved of all liability with respect to the future
obligations and/or covenants under this Lease thereafter to be performed by the
Lessor but not for past actions. Subject to the foregoing, the obligations
and/or covenants in this Lease to be performed by the Lessor shall be binding up
only upon the Lessor as hereinabove defined. (See Addendum I.)
18. Severability. The invalidity of any provision of this Lease, as determined
by a court of competent jurisdiction, shall in no way affect the validity of any
other provision hereof.
19. Interest On Past-Due Obligations. Any monetary payment due Lessor
hereunder, other than late charges, not received by Lessor within ten (10) days
following the ate on which it was due, shall bear interest from the date due at
the prime rate charged by the largest state chartered bank in the state in which
the Premises are located plus four percent (4%) per annum, but not exceeding the
maximum rate allowed by law, in addition to the potential late charge provided
for in Paragraph 13.4.
20. Time of Essence. Time is o the essence with respect to the performance of
all obligations to be performed or served by the parties to this Lease.
21. Rent Defined. All monetary obligations of Lessee to lessor under the terms
of this Lease are deemed to be rent.
22. No Prior or Other Agreements; Broker Disclaimer. This Lease contains all
agreements between the Parties with respect to any matter mentioned herein, and
no other prior contemporaneous agreement or understanding shall be effective.
Lessor and Lessee each represents and warrants to the Brokers that it has made,
and is relying solely upon, its own investigation as to the nature, quality,
character and financial responsibility of the of the Party to this Lease and as
to the nature, quality and character of the Premises. Brokers have no
responsibility with respect thereto or with respect to any default or breach
hereof by either Party. each Broker shall be an intended third party
beneficiary of the provisions of this Paragraph 22.
23. Notices.
23.1 Notice Requirements. All notices required or permitted by this Lease
shall be in writing and may be delivered in person (by hand or by messenger or
courier service) or may be sent by regular, certified or registered mail or U.S.
Postal Service Express Mail, with postage prepaid, or by facsimile transmission
during normal business hours, and shall be deemed sufficiently given it served
in a manner specified in this
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Paragraph 23. The addresses noted adjacent to a Party's signature on this Lease
shall be that Party's address for delivery or mailing of notice purposes. Either
Party may be written notice to the other specify a different address for notice
purposes. A copy of all notices required or permitted to be given to Lessor
hereunder shall be concurrently transmitted to such party or parties at such
addresses as Lessor may from time to time hereafter designate by written notice
to Lessee.
23.2 Date of Notice. Any notice sent by registered or certified mail,
return receipt requested, shall be deemed given on the date of delivery shown on
the receipt card, or if no delivery date is shown, the postmark thereon. If
sent by regular mail, the notice shall be deemed given forty-eight (48) hours
after the same is addressed as required herein and mailed with postage prepaid.
Notices delivered by United States Express Mail or overnight courier that
guarantees next day delivery shall be deemed given twenty-four (24) hours after
delivery of the same to the United States Postal Service or courier. If any
notice is transmitted by facsimile transmission or similar means, the same shall
be deemed served or delivered upon telephone or facsimile confirmation of
receipt of the transmission thereof, provided a copy is also delivered via
delivery or ail. If notice is received on a Saturday or a Sunday or a legal
holiday, it shall be deemed received on the next business day.
24. Waivers. No waiver by Lessor of the Default or Breach of any term, covenant
or condition hereof by Lessee, shall be deemed a waiver of any other term,
covenant or condition hereof, or of any subsequent Default or Breach by Lessee
of the same or any other term, covenant or condition hereof. Lessor's consent
to, or approval of, any such act shall not be deemed to render unnecessary the
obtaining of Lessor's consent to, or approval of, any subsequent or similar act
by Lessee, or be construed as the basis of an estoppel to enforce the provision
of provisions of this Lease requiring such consent. Regardless of Lessor's
knowledge of a Default or Breach at the time of accepting rent, the acceptance
of rent by Lessor shall not be a waiver of any Default or Breach by Lessee of
any provision hereof. Any payment given Lessor by Lessee may be accepted by
Lessor on account of moneys or damages due Lessor, notwithstanding any
qualifying statements or conditions made by Lessee in connection therewith,
which such statements and/or conditions shall be of no force or effect
whatsoever unless specifically agreed to in writing by Lessor at or before the
time of deposit of such payment.
25. Recording. Either Lessor or Lessee shall, upon request of the other,
execute, acknowledge and deliver to the other a short form memorandum of this
Lease for recording purposes. The Party requesting recordation shall be
responsible for payment of any fees or taxes applicable thereto.
26. No Right To Holdover. Lessee has no right to retain possession of the
Premises or any part thereof beyond the expiration or earlier termination of
this Lease. In the event that Lessee holds over in violation of this Paragraph
266 then the Base Rent payable from and after the tie of the expiration or
earlier termination of this Lease shall be increased to two hundred percent
(200%) of the Base Rent applicable during the month immediately
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preceding such expiration or earlier termination. Nothing contained herein shall
be construed as a consent by Lessor to any holding over by Lessee.
27. Cumulative Remedies. No remedy or election hereunder shall be deemed
exclusive but shall, wherever possible, be cumulative with all other remedies at
law or in equity.
28. Covenants and Conditions. All provisions of this Lease to be observed or
performed by Lessee are both covenants and conditions.
29. Binding Effect; Choice of Law. This Lease shall be binding upon the
Parties, their personal representatives, successors and assigns and be governed
by the laws of the State in which the Premises are located. Any litigation
between the Parties hereto concerning this Lease shall be initiated in the
county in which the Premises are located.
30. Subordination; Attornment; Non-Disturbance.
30.1 Subordination. This Lease and any Option granted hereby shall be
subject and subordinate to any ground lease, mortgage, deed of trust, or other
hypothecation or security device (collectively, "Security Device"), now or
hereafter placed by Lessor upon the real property of which the Premises are a
part, to any and all advances made on the security thereof, and to all renewals,
modifications, consolidations, replacements and extensions thereof. Lessee
agrees that the Lenders holding any such Security Device shall have no duty,
liability or obligation to perform any of the obligations of Lessor under this
Lease, but that in the event of Lessor's default with respect to any such
obligation, Lessee will give any Lender whose name and address have been
furnished Lessee in writing for such purpose notice of Lessor's default pursuant
to Paragraph 13.5. If any Lender shall elect to have this Lease and/or any
Option granted hereby superior to the lien of its Security Device and shall give
written notice thereof to Lessee, this Lease and such Options shall be deemed
prior to such Security Device, notwithstanding the relative dates of the
documentation or recordation thereof.
30.2 Attornment. Subject to the non-disturbance provisions of Paragraph
30.3. Lessee agrees to attorn to a Lender or any other party who acquires
ownership of the Premises by reason of a foreclosure of a Security Device, and
that in the event of such foreclosure, such new owner shall not: (ii) be liable
for any act or omission of any prior lessor or with respect to events occurring
prior to acquisition of ownership, (ii) be subject to any offsets or defenses
which Lessee might have against any prior lessor, or (iii) be bound by
prepayment of more than one month's rent.
30.3 Non-Disturbance. With respect to Security Devices entered into by
Lessor after the execution of this lease, Lessee's subordination of this Lease
shall be subject to receiving assurance (a "non-disturbance agreement") from the
Lender that Lessee's possession and this Lease, including any options to extend
the term hereof, will not be disturbed so long as Lessee is not in Breach hereof
and attorns to the record owner of the Premises.
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30.4 Self-Executing. The agreements contained in this Paragraph 30 shall
be effective without the execution of any further documents; provided, however,
that upon written request from Lessor or a Lender in connection with a sale,
financing or refinancing of Premises, Lessee and Lessor shall execute such
further writings as may be reasonably required to separately document any such
subordination or non-subordination, attornment and/or non-disturbance agreement
as is provided for herein.
31. Attorneys' Fees. If any Party or Broker brings an action or proceeding o
enforce the terms hereof or declare rights hereunder, the Prevailing Party (as
hereafter defined) in any such proceeding, action, or appeal thereon, shall be
entitled to reasonable attorney's fees. Such fees may be awarded in the same
suit or recovered in a separate suit, whether or not such action or proceeding
is pursued to decision or judgment. The term "Prevailing Party" shall include,
without limitation, a Party or Broker who substantially obtains or defeats the
relief sought, as the case may be, whether by compromise, settlement, judgment,
or the abandonment by the other Party or Broker of its claim or defense. The
attorneys' fee award shall not be computed in accordance with any court fee
schedule, but shall be such as to fully reimburse all attorneys' fees reasonably
incurred. Lessor shall be entitled to attorneys' fees, costs and expenses
incurred in preparation and service of notices of Default and consultations in
connection therewith, whether or not a legal action is subsequently commenced in
connection with such Default or resulting Breach. Broker(s) shall be intended
third party beneficiaries of this Paragraph 31.
32. Lessor's Access; Showing Premises; Repairs. Lessor and Lessor's agents
shall have the right to enter the Premises at any time, in the case of an
emergency, and otherwise at reasonable times for the purpose of showing the same
to prospective purchasers, lenders, or lessees, and making such alterations,
repairs, improvements or additions to the Premises or to the Building, as Lessor
may reasonably deem necessary. Lessor may at any time place on or about the
Premises or Building any ordinary ""or Sale" signs and Lessor may at any time
during the last one hundred eighty (180) days of the term hereof place on or
about the Premises any ordinary "For Lease" signs. All such activities of Lessor
shall be without abatement of rent or liability to Lessee unless substantially
interfering with Lessee's physical operations.
33. Auctions. Lessee shall not conduct, nor permit to be conducted, either
voluntarily or involuntarily, any auction upon the Premises without first having
obtained Lessor's prior written consent. Notwithstanding any thing to the
contrary in this Lease, Lessor shall not be obligated to exercise any standard
of reasonableness in determining whether to grant such consent.
34. Signs. Lessee shall not place any sign upon the exterior of the Premises
or the Building, except that Lessee may, with Lessor's prior written consent,
install (but not on the roof) such signs as are reasonably required to advertise
Lessee's own business so long as such signs are in a location designated by
Lessor and comply with Applicable Requirements and the signage criteria
established for the Industrial Center by Lessor. The installation of any sign
on the Premises by or for Lessee shall be subject to the
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provisions of Paragraph 7 (Maintenance, Repairs, Utility Installations, Trade
Fixtures and Alterations). Unless otherwise expressly agreed herein, Lessor
reserves all rights to the use of the roof of the Building, and the right to
install advertising signs on the Building, including the roof, which do not
unreasonably interfere with the conduct of Lessee's business; Lessor shall be
entitled to all revenues from such advertising signs.
35. Termination; Merger. Unless specifically stated otherwise in writing by
Lessor, the voluntary or other surrender of this Lease by Lessee, the mutual
termination or cancellation hereof, or a termination hereof by Lessor for Breach
by Lessee, shall automatically terminate any sublease or lesser estate in the
Premises; provided, however, Lessor shall, in the event of any such surrender,
termination or cancellation, have the option to continue any one or all of any
existing subtenancies. Lessor's failure within ten (10) days following any such
event to make a written election to the contrary by written notice to the holder
of any such lesser interest, shall constitute Lessor's election to have such
event constitute the termination of such interest.
36. Consents.
(a) Except for Paragraph 33 hereof (Auctions) or as otherwise provided
herein, whether in this Lease the consent of a Party is required to an act by or
for the other Party, such consent shall not be unreasonably withheld or delayed.
Lessor's actual reasonable costs and expenses (including but not limited o
architects', attorneys', engineers' and other consultants' fees) incurred in the
consideration of, or response to, a request by Lessee for any Lessor consent
pertaining to this Lease or the Premises, including but not limited to consents
to an assignment a subletting or the presence or use of a Hazardous Substance,
shall be paid by Lessee to Lessor upon receipt of an invoice and supporting
documentation therefor. In addition to the deposit described in Paragraph
12.2(e), Lessor may, as a condition to considering any such request by Lessee,
require that Lessee deposit with Lessor an amount of money (in addition to the
Security Deposit held under Paragraph 5) reasonably calculated by Lessor to
represent the cost Lessor will incur in considering and responding o Lessee's
request. Any unused portion of said deposit shall be refunded to Lessee without
interest. Lessor a consent to any act, assignment of this Lease or subletting of
the Premises by Lessee shall not constitute an acknowledgment that no Default or
Breach by Lessee of this Lease exists, nor shall such consent be deemed a waiver
of any then existing Default or Breach, except as may be otherwise specifically
stated in writing by Lessor at the time of such consent.
(b) All conditions to Lessor's consent authorized by this Lease are
acknowledged by Lessee as being reasonable. The failure to specify herein any
particular condition to Lessor's consent shall not preclude the impositions by
Lessor at the time of consent of such further or other conditions as are then
reasonable with reference to the particular matter for which consent is being
given.
37. Guarantor.
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37.1 Form of Guaranty. If there are to be any Guarantors of this Lease
per Paragraph 1.11, the form of the guaranty to be executed by each such
Guarantor shall be in the form most recently published by the American
Industrial Real Estate Association, and each such Guarantor shall have the same
obligations are Lessee under this lease, including but not limited to the
obligation to provide the Tenancy Statement and information required in
Paragraph 16.
37.2 Additional Obligations of Guarantor. It shall constitute a Default
of the Lessee under this Lease if any such Guarantor fails or refuses, upon
reasonable request by lessor to give: (a) evidence of the due execution of the
guaranty called for by this Lease, including the authority of the Guarantor (and
of the party signing on Guarantor's behalf) to obligate such Guarantor on said
guaranty, and resolution of its board of directors authorizing the making of
such guaranty, together with a certificate of incumbency showing the signatures
of the persons authorized to sign on its behalf, (b) current financial
statements of Guarantor as may from time to time be requested by Lessor, (c) a
Tenancy Statement, or (d) written confirmation that the guaranty is still in
effect.
38. Quiet Possession. Upon payment by Lessee of the rent for the Premises and
the performance of all of the covenants, conditions and provisions on Lessee's
part to be observed and performed under this Lease, Lessee shall have quiet
possession of the Premises for the entire term hereof subject to all of the
provisions of this Lease.
39. Options.
39.1 Definition. As used in this Lease, the word "Option" has the
following meaning: (a) the right to extend the term of this Lease or to renew
this Lease or to extend or renewal any lease that Lessee has on other property
of Lessor; (b) the right of first refusal to lease the Premises or the right of
first refusal to lease other property of Lessor or the right of first offer to
lease other property of Lessor; (c) the right to purchase the Premises, or the
right of first refusal to purchase the Premises, or the right of first offer to
purchase the Premises, or the right to purchase other property of Lessor, or the
right of first refusal to purchase other property of Lessor, or the right of
first offer to purchase other property of Lessor.
39.2 Options Personal to Original Lessee. Each Option granted to Lessee
in this Lease is personal to the original lessee named in paragraph 1.1 hereof,
and cannot be voluntarily or involuntarily assigned or exercised by any person
or entity other than said original Lessee while the original Lessee is in full
and actual possession of the Premises and without the intention of thereafter
assigning or subletting except as a successor.
39.3 Multiple Options. In the event that Lessee has any multiple Options
to extend or renew this Lease, a later option cannot be exercised unless the
prior Options to extend or renew this Lease have been validly exercised.
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39.4 Effect of Default on Options.
(a) Lessee shall have no right to exercise an Option, notwithstanding
any provision in the grant of Option to the contrary: (i) during the period
commencing with the giving of any notice of Default under Paragraph 13.1 and
continuing until the noticed Default is cured, or (ii) during the period of time
any monetary obligation due Lessor from Lessee is unpaid (without regard to
whether notice thereof is given Lessee), or (iii) during the time Lessee is in
Breach of this Leases, or (iv) in the event that Lessor has given to Lessee
three (3) or more notices of separate Defaults under Paragraph 13.1 during the
twelve (12) month period immediately preceding the exercise of the Option,
whether or not the Defaults are cured.
(b) The period of time within which an Option may be exercised shall
not be extended or enlarged by reason of Lessee's inability to exercise an
Option because of the provisions of Paragraph 39.4(a).
(c) All rights of Lessee under the provisions of an Option shall
terminate and be of no further fore or effect, notwithstanding Lessee's due and
timely exercise of the Option, if, after such exercise and during the term of
this Lease, (i) Lessee fails to pay to Lessor a monetary obligation of Lessee
for a period of thirty (30) days after such obligation becomes due, and Lessor
gives notice thereof to Lessee, or (ii) Lessor gives to Lessee three (3) or more
notices of separate Defaults under paragraph 13.1 during any twelve (12) month
period, whether or not the Defaults are cured, or (iii) if Lessee commits a
Breach of this Lease.
40. Rules and Regulations. Lessee agrees that it will abide by, and keep and
observe all reasonable rules and regulations ("Rules and Regulations") which
Lessor may make from time to time for the management, safety, care, and
cleanliness of the grounds, the parking and unloading of vehicles and the
preservation of good order, as well s for the convenience of other occupants or
tenants of the Building and the Industrial Center and their invitees.
41. Security Measures. Lessee hereby acknowledges that the rental payable to
Lessor hereunder does not include the cost of guard service or other security
measures, and that Lessor shall have no obligation whatsoever to provide same.
Lessee assumes all responsibility for the protection of the Premises, Lessee,
its agents and invitees and their property from the acts of third parties.
42. Reservations. Lessor reserves the right, from time to time, to grant
without the consent or joinder of Lessee, such easements, rights of way, utility
raceways, and dedications that Lessor deems necessary, and to cause the
recordation of parcel maps and restrictions, so long as such easements, rights
of way, utility raceways, dedications, maps and restrictions do not reasonably
interfere with the use of the Premises by Lessee. Lessee agrees to sign any
documents reasonably requested by lessor to effectuate any such easement rights,
dedication, map or restrictions.
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43. Performance Under Protest. If at any time a dispute shall arise as to any
amount or sum of money to be aid by one Party to the other under the provisions
hereof, the party against whom the obligation to pay the money is asserted shall
have the right to make payment "under protest" and such payment shall not be
regarded as a voluntary payment and there shall survive the right on the part of
said Party to institute suit for recovery of such sum. If it shall be adjudged
that there was no legal obligation on the part of said Party to pay such sum or
any part thereof, said Party shall be entitled to recover such sum or so much
thereof as it was not legally required to pay under the provisions of this
Lease.
44. Authority. If either Party hereto is a corporation, trust, or general or
limited partnership, each individual executing this Lease on behalf of such
entity represents and warrants that he or she is duly authorized to execute and
deliver this Lease on its behalf. If Lessee is a corporation, trust or
partnership, Lessee shall, within thirty (30) days after request by Lessor,
deliver to Lessor evidence satisfactory to Lessor of such authority.
45. Conflict. Any conflict between the printed provisions of this Lease and
the typewritten or handwritten provisions shall be controlled by the typewritten
or handwritten provisions.
46. Offer. Preparation of this Lease by either Lessor or Lessee or Lessor's
agent or Lessee's agent and submission of same to Lessee or Lessor shall not be
deemed an offer to lease. This Lease is not intended to be binding until
executed and delivered by all Parties hereto.
47. Amendments. This Lease may be modified only in writing, signed by the
parties in interest at the time of the modification. The Parties shall amend
this Lease from time to time to reflect any adjustments that are made to the
Base Rent or other rent payable under this Lease. As long as they do not
materially change Lessee's obligations hereunder, Lessee agrees to make such
reasonable non-monetary modifications to this Lease as may be reasonably
required by an institutional insurance company or pension plan Lender in
connection with the obtaining of normal financing or refinancing of the property
of which the Premises are part.
48. Multiple Parties. Except as otherwise expressly provided herein, if more
than one person or entity is named herein as either Lessor or Lessee, the
obligations of such multiple parties shall be the joint and several
responsibility of all persons or entities named herein as such Lessor or Lessee.
LESSOR AND LESSEE HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM AND
PROVISION CONTAINED HEREIN AND BY THE EXECUTION OF THIS LEASE SHOW THEIR
INFORMED AND VOLUNTARY CONSENT THERETO. THE PARTIES HEREBY AGREE THAT, AT THE
TIME THIS LEASE IS EXECUTED, THE TERMS OF THIS LEASE ARE COMMERCIALLY REASONABLE
AND EFFECTUATE THE INTENT AND PURPOSE OF LESSOR AND LESSEE WITH RESPECT TO THE
PREMISES.
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IF THIS LEASE HAS BEEN FILLED IN, IT HAS BEEN PREPARED FOR YOUR
ATTORNEY'S REVIEW AND APPROVAL. FURTHER, EXPERTS SHOULD BE CONSULTED
TO EVALUATE THE CONDITION OF THE PROPERTY FOR THE POSSIBLE PRESENCE OF
ASBESTOS, UNDERGROUND STORAGE TANKS OR HAZARDOUS SUBSTANCES. NO
REPRESENTATION OR RECOMMENDATION IS MADE BY THE AMERICAN INDUSTRIAL
REAL ESTATE ASSOCIATION OR BY THE REAL ESTATE ASSOCIATION OR BY THE
REAL ESTATE BROKERS OR THEIR CONTRACTORS, AGENTS OR EMPLOYEES AS TO
THE LEGAL SUFFICIENCY, LEGAL EFFECT, OR TAX CONSEQUENCES OF THIS LEASE
OR THE TRANSACTION TO WHICH IT RELATES; THE PARTIES SHALL RELY SOLELY
UPON THE ADVICE OF THEIR OWN COUNSEL AS TO THE LEGAL AND TAX
CONSEQUENCES OF THIS LEASE. IF THE SUBJECT PROPERTY IS IN A STATE
OTHER THAN CALIFORNIA, AN ATTORNEY FROM THE STATE WHERE THE PROPERTY
IS LOCATED SHOULD BE CONSULTED.
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The parties hereto have executed this Lease at the place and on the dates
specified above their respective signatures.
<TABLE>
<S> <C>
Executed at:___________________________________ Executed at: Sunnyvale, California
-----------------------------------------------
on:____________________________________________ on: June 12, 1997
-------------------------------------------------------
By LESSOR: By LESSSEE:
Memorex Drive LLC Centaur Pharmaceuticals, Inc.
4966 El Camino Real, #209 484 Oakmead Parkway
- ----------------------------------------------- ------------------------------------------------------------
Los Altos, CA 94022 Sunnyvale, CA 94086
- ----------------------------------------------- ------------------------------------------------------------
By: /s/ Moosa Malek By: /s/ Brian D. Frenzel
-------------------------------------------- --------------------------------------------------------
Name Printed: Moosa Malek Name Printed: Brian D. Frenzel
--------------------------------- ----------------------------------------------
Title: Property Manager Title: President
------------------------------------------ ------------------------------------------------------
By:____________________________________________ By:_________________________________________________________
Name Printed:__________________________________ Name Printed:_______________________________________________
Title:_________________________________________ Title:______________________________________________________
Address:_______________________________________ Address:____________________________________________________
_______________________________________________ ____________________________________________________________
Telephone: ( ) ___________________________ Telephone: ( )_________________________________________
Facsimile: ( ) ___________________________ Facsimile: ( )_________________________________________
BROKER: BROKER:
Executed at:__________________________________ Executed at:________________________________________________
on:___________________________________________ on:_________________________________________________________
By:___________________________________________ By:_________________________________________________________
Name Printed:_________________________________ Name Printed:_______________________________________________
Title:________________________________________ Title:______________________________________________________
Address:______________________________________ Address:____________________________________________________
______________________________________________ ____________________________________________________________
Telephone: ( )_______________________________ Telephone: ( )_____________________________________________
Facsimile: ( )_______________________________ Facsimile: ( )_____________________________________________
</TABLE>
NOTE: These forms are often modified to meet changing requirements of law and
needs of the industry. Always write or call to make sure you are utilizing the
most current form: AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION, 700 South Flower
Street, Suite 600, Los Angeles, CA 90017. (212) 687-8777.
44
<PAGE>
BROKER: BROKER:
Executed at:____________________ Executed at:___________________
on:_____________________________ on:____________________________
By:_____________________________ By:____________________________
Name Printed:___________________ Name Printed:__________________
Title:__________________________ Title:_________________________
Address:________________________ Address:_______________________
________________________________ _______________________________
Telephone:( )_________________ Telephone:( )________________
Facsimile:( )_________________ Facsimile:( )________________
NOTE: These forms are often modified to meet changing requirements of law and
needs of the industry. Always write or call to make sure you are utilizing the
most current form: AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION, 700 South
Flower Street, Suite 600, Los Angeles, CA 90017. (212) 687-8777.
45
<PAGE>
ADDENDUM I
to: Standard Industrial/Commercial Multi-Tenant Lease --
Gross
between: Memorex Drive LLC, as Lessor, and
Centaur Pharmaceuticals, Inc., as Lessee
dated: May 30, 1997
<TABLE>
<CAPTION>
1) Base Rent: Months Rent Per Sq. Ft Calculated Rent/Month
------ --------------- ---------------------
<S> <C> <C> <C>
1 Free Free
2 Free Free
3 $.35 per third floor, rentable sq. ft $12,257
4-11 $.35 per total, rentable sq ft $15,912
12-23 4% increase $16,548
24-35 4% increase $17,210
36-47 5% increase $18,071
48-59 5% increase $18,974
60-71 5% increase $19,923
72-83 5% increase $20,919
</TABLE>
Rentable Square Footage shall be based upon actual
measurements according to BOMA standards, including 100%
of ground floor space, a pro-rated share of building
common area space, and 50% of any mezzanine space to be
used for warehousing purposes. all building common areas
shall be individually calculated, and pro-rated according
to square footage of those tenants having access to each
specific area.
Lessor has calculated Rentable Square Footage as follows:
Third Floor 35,020 sq. ft.
Second Floor 10,442 sq. ft.
------------
Total 45,462 sq. ft.
Lessee shall have until July 1st, 1997 to verify size of
premises or provide in writing any claims of discrepancy.
In the event of a discrepancy, Lessor and Lessee shall
mutually agree upon Rentable Square Footage within thirty
(30) days.
2) Base Rent See paragraph 1) above.
Increases:
46
<PAGE>
3) Square Footage Paragraphs 1.6(b), and 1.7, in the Lease shall be
Adjustments: adjusted following completion of Architectural work
and measurement of Rentable Square footage. Lessee's
share of Common Area Operating Expenses shall be equal
to Rentable Square Footage, divided by 230,000 total
project square footage. Security deposit shall be
increased, or refunded to become equal to the amount
of Rent due in the final month of the Lease.
4) Option to Renew: Tenant shall have one(1), three (3) year option to
renew the Lease provided a) Lessee is not in default,
and b) Lessee gives written notice t Lessor fits
intent to exercise such option no later than six (6)
months prior to Lease expiration. First month's Rent
during the Option period shall be equal to the greater
of one hundred five percent (105%) of the previous
month's Rent, or the then prevailing fair market Rent
for similar properties having improvements similar to
those existing at the time of original Early
Possession.
5) Use: Lessee shall use the Premises for pharmaceutical
research and development, manufacturing, laboratory
use, storage, and all other related uses.
6) Landlord's
Improvements: NONE
Tenant shall secure and maintain all necessary permits
to operate from all applicable governmental agencies.
7) Tenant's Except as for those items specifically listed above,
Improvements: or elsewhere within this Lease, tenant shall accept
premises in an "as is" condition. Tenant shall provide
all interior improvements necessary to conduct
Tenant's business, and to meet all current codes at
Tenant's sole cost and expense. Tenant shall secure
all necessary building permits from the city of Santa
Clara and other governmental agencies.
Tenant acknowledges that existing HVAC system is non-
functional due to removal of hot and cold water
processing equipment. Tenant further acknowledges that
existing electrical distribution is non-functional due
to removal of significant amounts of switching and
conducting equipment.
Tenant's space plan, architectural, and structural
engineering drawings shall be subject to landlord's
approval prior to permit submittal. Such approval
shall not be unreasonably withheld.
47
<PAGE>
Tenant shall provide in house sub-meters approved by
landlord, for all electrical power, natural gas, and
domestic water serving Tenant's space. Landlord shall
have access to these meters for the purpose of pro-
rating Tenant's share of Building utility expenses.
Lessee shall be allowed rooftop space for equipment
placement, a) only in areas of roof directly above
Lessee's space, b) not in areas of above any other
Tenant's or future Tenant's space, c) subject to City
of Santa Clara approval, d) subject to approval of a
registered structural engineer, and e) subject to
Lessor's approval, Lessor will require some areas of
this space for future equipment needs of other
Tenants. Lessor may allow Lessee's use of additional
areas of roof and penthouse. Lessee shall accept full
responsibility for damage, and increased wear and tear
to roof membrane resulting from Lessee's equipment
maintenance activities.
All interior improvements and modifications by Tenant
shall be removed, and the premises shall be restored
to its previous condition, by Tenant, prior to
Termination of this Lease. However, Landlord shall
indicate certain items which may be considered a part
of the Premises upon Lease Termination (and not
subject to removal), if requested to do so by Tenant
at the time that plans are presented for Landlord's
approval. This Paragraph shall supersede Paragraph
7.4(a) of the Lease, with regard to which property
shall be removed upon Lease termination. Those items
which are not to be removed, shall remain the property
of the Lessee until such time as Lessor's rights in
Paragraph 7.4(a) are exercised.
8) Early Occupancy: Tenant shall be allowed early occupancy, following
Lease execution.
9) HVAC Maintenance: Tenant shall maintain an HVAC service contract and be
responsible for periodic maintenance costs.
10) Roof Maintenance Landlord shall be responsible for all roof maintenance
and Repair: repair costs (other than Lessee caused) during the
Lease term. Replacement of roof if necessary shall
also be at Landlord's sole cost and expense.
48
<PAGE>
11) Disposition of Lessor and Lessee agree that in the event of any
Additional Rent: subletting or assignment, except for assignment by way
of merger, sale, acquisition, financing, refinancing,
transfer, leveraged buy-out or otherwise, or
subletting or assignment to a wholly owned affiliate
or subsidiary; any rent collected in excess of the
rent due under this Lease, shall be distributed first
to the cost of incurring the sublease or assignment,
and to the cost of any tenant improvements provided by
Lessee as defined below, and then any remainder shall
be split fifty-fifty between Lessor and Lessee. Rent
deduction for tenant improvement expense contributed
by Lessee shall be calculated by amortizing the total
cost of the contribution, at ten percent (10%) per
annum, over the Term of the Sub-Lease, except that in
no event shall the improvements be amortized over a
period of less than three (3) years.
12) Environmental: The soils underlying the subject property are known t
contain residues of organic solvents. Ongoing ground
water monitoring is currently being conducted by
Landlord as required by the Bay Area Regional Water
Quality Control Board. Upon request, Landlord will
provide Tenant copies of environmental/soils reports
concerning the Premises and the subject property.
Lessor shall indemnify, defend and hold Lessee, its
lenders, agents, employees, officers, and/or directors
harmless from and against any and all losses, claims,
damages, costs, judgments, penalties, attorneys and
consultant fees, expenses and/or liabilities, arising
out of, involving or in connection with any
contamination and Hazardous Substance investigation,
clean-up, remediation and monitoring (i) resulting
from any act or omission by Lessor or its agents,
contractors and/or employees, and (ii) existing on, in
or under the Premises, the Building or the property on
which the Building is situated at the time Lessee
takes possession of the Premises. This indemnification
shall survive termination of this Lease.
Lessee shall indemnify, defend and hold Lessor, its
lenders, agents, employees, offices, and/or directors
harmless from and against any and all claims, damages,
costs, judgments, penalties, attorneys and consultant
fees, expenses and/or liabilities, arising out of,
involving or in connection with any contamination and
Hazardous Substance investigation, clean-up,
remediation and monitoring resulting from any act or
omission by Lessee or its agents, contractors and/or
employees. This indemnification shall survive
termination of this Lease.
49
<PAGE>
13) Par. 2.10(f): Paragraph 2.10(f), of the Lease shall be extended as
follows, "...deemed to be appropriate, so long as such
acts and changes do not materially and adversely
affect Lessee's operations or materially result in
cost to Lessee without appropriate benefit. Lessor
intends to create a separate land parcel of, and sell
the building and property due east of Lessee's
Premises. Lessee hereby agrees that this parcel split,
and its adjoining ingress and egress easements shall
have no material effect on Lessee's operations."
14) Common Area If any expense that otherwise qualifies as a Common
Operating Costs: Area Operating Expense is required to be capitalized
for federal income tax purposes, such expenses shall
not be passed through as a Common Area Operating
Expense in the year incurred but rather will be
amortized on a straight-line basis over the useful
life thereof utilized for federal tax purposes.
Structural maintenance and repair will not be included
in reserves.
Lessee shall not be responsible for any real estate
tax increase related to tenant improvements
constructed for another tenant's use outside the
Premises leased herein.
Lessee shall have the right to review Lessors records,
at a time convenient for Lessor, at Lessor's office,
that are related to Common Area Operating Expenses
charged to Lessee for a period of twelve (12) months
after presentment of such charges to Lessee.
15) Lessee's Lessee shall only be individually responsible for the
Obligations: repair and maintenance of all systems, or parts of
systems, dedicated for the exclusive use of Lessee.
Structural repair and maintenance of structural
alterations specifically required for Lessee's use and
occupancy shall be the responsibility of Lessee.
16) Par. 8.4: Paragraph 8.4 of the Lease shall be modified to
include the following sentence prior to the final
sentence, "At Lease Termination, lessee shall not be
required to use the proceeds from any such insurance
for replacement of improvements which Lessee would
otherwise be required to remove."
50
<PAGE>
17) Par. 8.7: Paragraph 8.7, of the Lease shall be modified as
follows, "Except for Lessor's negligence, willful
misconduct, breach of express warranties, and/or
building defects, (except for defects in structural
alterations specifically required for Lessee's use and
occupancy, to be installed by Lessee), Lessee...".
18) Par. 8.8: Paragraph 8.8, of the Lease shall be modified as
follows, "...accessible or not, unless due to lessor's
negligence, willful misconduct, breach of express
warranties, and/or building defects, (except for
defects in structural alterations specifically
required for Lessee's use and occupancy, to be
installed by Lessee).".
19) Par. 9.2: Paragraph 9.2, of the Lease shall be modified as
follows, "...if Lessor does not elect to restore and
repair, then Lessor and Lessee will work to achieve a
mutually acceptable resolution. If an acceptable
resolution cannot be obtained within 45 days, this
lease shall terminate sixty (60) days following the
occurrence f the damage or destruction. ...".
20) Par. 12.1(a): Paragraph 12.1 (a) of the Lease shall be modified as
follows:, "...transfer or encumber (collectively,
"assign") except for assignment by way of merger,
sale, acquisition, financing, refinancing, transfer,
leveraged buy-out or otherwise provided such merger,
sale, acquisition, financing, refinancing, transfer,
leveraged buy-out or otherwise, does not diminished
the financial strength of Lessee below the level
demonstrated at the time of the original execution of
this Lease, or sublet all...".
21) Par. 12.1 (b): Add the following sentence at the end of Paragraph
12.1 (b), "Such consent will not be unreasonably
withheld provided transfer does not diminish the
financial strength of Lessee below the level
demonstrated at the time of the original execution of
this Lease.".
22) Notices: Lessor shall deliver all written notices to Lessee at
the following address, (unless specified otherwise by
written notice from Lessee):
Centaur Pharmaceuticals, Inc.
484 Oakmead Parkway
Sunnyvale, California 94086
23) Cancellation: No right to cancel.
24) Rules: Lessee shall be allowed to install cardkey locks on
doors to Lessee's Premises. Lessor shall be provided
with ability to access Lessee's Premises.
51
<PAGE>
Lessor shall pre-approve of the manner and general
timing of significant freight movement to and from the
Premises. Lessee will coordinate movements so as not
to disturb other Tenants as much as possible, lessee
shall maintain common driveway/fire lane access at all
times. Lessor will designate a single truck loading
area for Lessee's use.
25) Par 17: Add the following sentence at the end of Paragraph 17,
"The prior Lessor shall be relieved of all liability
with respect to past actions if Lessee failed to
notify Lessor within thirty (30) days of Lessee's
knowledge of such complaint".
52
<PAGE>
EXHIBIT A
[DESCRIPTION OF PROPERTY]
53
<PAGE>
EXHIBIT C
RULES AND REGULATIONS FOR
MEMOREX DRIVE BUSINESS PARK
Dated: January 9, 1997
By and Between: Memorex Drive LLC ("Lessor") and Centaur Pharmaceuticals, Inc.
("Lessee")
1) Lessee shall not suffer or permit the obstruction of any Common Areas,
including driveways, walk-ways and stairways.
2) Lessor reserves the right to refuse access to any persons Lessor in good
faith judges to be a threat to the safety, reputation or property at the
Business Park and its occupants.
3) Lessee shall not make or permit any noise or odors that annoy or interfere
with other lessees or persons having business within the Business Park,
except for fire or burglar alarm.
4) Lessee shall not keep animals or birds within the Building Area, and shall
not bring bicycles, motorcycles or other vehicles into areas not designated
as authorized for same.
5) Lessee shall not make, suffer or permit litter except in appropriate
receptacles for that purpose.
6) Lessee shall not alter any lock or install new or additional locks or
bolts. See Addendum I.
7) Lessee shall be responsible for the inappropriate use of any toilet rooms,
plumbing or other utilities. No foreign substances of any kind are to be
inserted therein.
8) Lessee shall not deface the walls, partitions or other surfaces of the
premises or the Business Park
9) Lessee shall not suffer or permit any thing in or around the Premises or
Building that causes excessive vibration or floor loading in any part of
the Building Areas.
10) Significant freight and equipment shall be moved into or out of the
building only with the Lessor's knowledge and consent, and subject to such
reasonable limitations, techniques and timing, as may be designated by
lessor. Lessee shall be responsible for any damage to the Building arising
from any such activity undertaken by or for Lessee. See Addendum I.
64
<PAGE>
11) Lessee shall not employ any service or contractor for services or work to
be performed in the Common Areas, except as approved by Lessor.
12) No window covering, shades or awnings shall be installed or used by Lessee
without the approval of Lessor.
13) No Lessee, employee or invites shall go upon the roof of the Buildings
(except for HVAC or other equipment Repairs & Maint.) See Addendum I.
14) Lessee shall not suffer or permit smoking or carrying of lighted cigars or
cigarettes in areas reasonably designated by Lessor or by applicable
governmental agencies as non-smoking areas.
15) Lessee shall not use any method of heating or air conditioning other than
as approved by Lessor.
16) Lessee shall not install, maintain or operate any vending machines upon the
Premises without Lessor's written consent.
17) The premises shall not be used for lodging, cooking or food preparation,
except employee break room with microwave and refrigerator, and
miscellaneous other applicants.
18) Lessee shall comply with all safety, fire protection and evacuation
regulations established by Lessor or any applicable governmental agencies.
19) Lessor reserves the right to waive any one of these rules or regulations,
and/or as to any particular Lessee, and any such waiver shall not
constitute a waiver of any other rule or regulation or any subsequent
application thereof to such Lessee.
20) Lessee assumes all risks from theft or vandalism and agrees to keep its
Premises locked as may be required.
21) Lessor reserves the right to make such other reasonable rules regulations
as it may from time to time deem necessary for the appropriate operation
and safety of the Business Park and its occupants. Lessee agrees to abide
by these and such rules and regulations.
PARKING RULES
1) Parking areas shall be used only for parking by vehicles no longer than
full size, passenger automobiles herein called "Permitted Size Vehicles."
Vehicles other than Permitted Size Vehicles are herein referred t as
"Oversized Vehicles."
2) Lessee shall not permit or allow any vehicles that belong to or are
controlled by Lessee or Lessee's employees, suppliers, shippers, customers,
or invites to be
65
<PAGE>
loaded, unloaded, or parked in areas other than those designated by Lessor
for such activities.
3) Parking stickers or identification devices shall be the property of Lessor
and be returned to Lessor by the holder thereof upon termination of the
holder's parking privileges. Lessee will pay such replacement charge as is
reasonably established by Lessor the loss of such devices.
4) Lessor reserves the right to refuse the sale of monthly identification
devices to any person or entity that willfully refuses to comply with the
applicable rules, regulations, laws and/or agreements.
5) Lessor reserves the right to relocate all or a part of parking spaces from
floor to floor, within one floor, and/or to reasonably adjacent office
location(s), and to reasonably allocate them between compact and standard
size spaces, as long as the same complies with applicable laws, ordinances
and regulations.
6) Users of the parking area will obey all posted signs and park only in the
areas designated for vehicle parking.
7) Unless otherwise instructed, every person using the parking area is
required to park and lock his own vehicle. Lessor will not be responsible
for any damage to vehicles, injury to persons or loss of property, all of
which risks are assured by the party using the parking area.
8) Validation, if established, will be permissible only by such method or
methods as Lessor and/or its licensee may establish at rules generally
applicable to visitor parking.
9) The maintenance, washing, waxing or cleaning of vehicles in the parking
structure or Common Areas is prohibited.
10) Lessee shall be responsible for seeing that all of its employees, agents
and invites comply with applicable parking rules, regulations, laws and
agreements.
11) Lessor reserves the right to modify these rules and/or adopt such other
reasonable and non-discriminatory rules and regulations as it may deem
necessary for the proper operation of the parking area.
12) Such parking use as is herein provided in intended merely as a license only
and no bailment in intended or shall be created hereby.
BY LESSOR: BY LESSEE:
/s/ Moosa Malek /s/ Brian D. Frenzel
--------------------------- -----------------------------
Moosa Malek Brian D. Frenzel
--------------------------- -----------------------------
Name Printed Name Printed
Managing Member President
--------------------------- -----------------------------
Title Title
66
<PAGE>
EXHIBIT 10.17
EMPLOYMENT AGREEMENT
--------------------
This Employment Agreement (the "Agreement") is entered into as of December
---------
1, 1993 (the "Effective Date") between Centaur Pharmaceuticals, Inc., a Delaware
--------------
corporation with its principal offices located at 484 Oakmead Parkway,
Sunnyvale, California 94086 (the "Company"), and Brian D. Frenzel, an individual
-------
residing at 1973 Newcastle Drive, Los Altos, California 94024 ("Employee").
--------
In consideration of the promises and the terms and conditions set forth in
this Agreement, the parties agree as follows:
1. POSITION. During the term of this Agreement, Company will employ
--------
Employee, and Employee will serve Company, as Company's President and Chief
Executive Officer, with such responsibilities and authority as may from time to
time be assigned to Employee by the Board of Directors of Company. Employee
will report directly to the Chairman of Company's Board of Directors.
2. DUTIES. Employee will serve Company in such capacities and with such
------
duties and responsibilities as the Board of Directors of Company may from time
to time determine. Employee will comply with and be bound by Company's
operating policies, procedures and practices from time to time in effect during
Employee's employment. Employee will perform his duties under this Agreement at
the offices of Company, provided, that Employee may be required to do extensive
--------
traveling in connection with the performance of his duties hereunder. Employee
hereby represents and warrants that he is free to enter into and fully perform
this Agreement and the agreements referred to herein without breach of any
agreement or contract to which he is a party or by which he is bound.
3. EXCLUSIVE SERVICE.
-----------------
3.1 INTERIM PERIOD. The parties acknowledge that as of the Effective
--------------
Date, because of certain other obligations, Employee is unable to devote his
full time and efforts exclusively to this employment. The parties agree that
Employee will use his best efforts to secure a release from such other
obligations, so that Employee may become a full-time employee of Company no
later than September 1, 1994. The period beginning on the Effective Date and
ending on the date Employee becomes a full-time employee of Company (the "Full-
----
Time Employment Date") is hereinafter referred to as the "Interim Period."
- -------------------- --------------
Employee will notify Company in writing as soon as he is able to become a full-
time employee of Company.
3.2 BALANCE OF TERM. After the Interim Period and for the balance of
---------------
the term of this Agreement, Employee will devote his full time and efforts
exclusively to this employment and apply all his skill and experience to the
performance of his duties and advancing Company's interests in accordance with
Employee's experience and skills. Notwithstanding the foregoing, Company
acknowledges that Employee currently serves on the boards of directors of four
other companies (Vesta Medical Company, Immusol, Alamed and PCD Therapeutics)
that are not competitive with Company and that Employee may continue to serve on
those boards of
<PAGE>
directors so long as Employee's duties to those companies do not conflict with
his obligations to Company or interfere with his ability to perform his duties
to Company during the normal work week. Employee may serve on other boards of
directors only with the prior written approval of Company, which will not be
unreasonably withheld. In addition, Company acknowledges that Employee is a
Venture Partner of Charter Ventures and that in his capacity as a Venture
Partner he may provide occasional consultation to Charter Ventures so long as
such consultation does not conflict with his obligations to Company or interfere
with his ability to perform his duties to the Company during the normal work
week. Employee will not engage in any other consulting activity except with the
prior written approval of Company, or at the direction of Company, and Employee
will otherwise do nothing inconsistent with the performance of his duties
hereunder.
4. TERM OF AGREEMENT.
-----------------
4.1 TERM. This Agreement will commence on the Effective Date, and
----
will continue until the earlier of four (4) years after the Effective Date or
when terminated pursuant to Section 7 hereof, unless renewed pursuant to Section
4.2 hereof.
4.2 RENEWAL. After the initial four-year term, unless either party
-------
notifies the other of its intention to terminate this Agreement pursuant to
Section 7 hereof at least 90 days prior to the expiration of the term, this
Agreement shall automatically renew for successive one-year terms on the same
terms and conditions stated herein.
5. COMPENSATION AND BENEFITS.
-------------------------
5.1 BASE SALARY. During the Interim Period, Company agrees to pay
-----------
Employee a salary at the rate of one hundred thirty-two thousand five hundred
dollars ($132,500) per year. As of the Full-Time Employment Date, Company
agrees to pay Employee an initial minimum salary at the rate of one hundred
seventy-five thousand dollars ($175,000) per year. Employee's salary will be
payable as earned in accordance with Company's customary payroll practice.
Employees' salary will be reviewed periodically by the Company's Board of
Directors and may be adjusted from time to time by the Board of Directors in its
discretion.
5.2 ADDITIONAL BENEFITS. Employee will be eligible to participate in
-------------------
Company's employee benefit plans of general application, including without
limitation those plans covering pension and profit sharing, executive bonuses,
stock purchases, stock options, and those plans covering life, health, and
dental insurance in accordance with the rules established for individual
participation in any such plan and applicable law. Employee will receive such
other benefits, including vacation, holidays and sick leave, as Company
generally provides to its employees holding positions similar to that of
Employee.
5.3 STOCK OPTIONS. Upon amendment of the Company's 1993 Equity
-------------
Incentive Plan to increase the number of shares issuable thereunder and the
granting of a permit therefor by the California Department of Corporations,
Employee shall be granted an incentive stock option, under Company's 1993 Equity
Incentive Plan, to purchase up to 300,000 shares of Company's Common Stock at a
price of $0.15 per share (the "Options"). One half of the Options (150,000
-------
shares) will vest monthly over four (4) years beginning on the Effective Date.
2
<PAGE>
The remaining half of the Options will vest monthly over four (4) years
beginning on the Full-Time Employment Date. The Options will have a ten (10)
year term and will be subject to the terms and conditions set forth on the form
of Option Grant attached hereto as Exhibit 1.
---------
5.4 EXPENSES. Company will reimburse Employee for all reasonable and
--------
necessary expenses incurred by Employee in connection with Company's business,
provided that such expenses (i) are deductible in whole or in substantial part
- --------
by Company, (ii) are in accordance with the Company's applicable policy, and
(iii) are properly documented and accounted for in accordance with Company
Policy and with the requirements of the Internal Revenue Service.
6. PROPRIETARY RIGHTS. Employee hereby agrees to execute an Employee
------------------
Invention Assignment and Confidentiality Agreement with Company in substantially
the form attached hereto as Exhibit 2.
---------
7. TERMINATION.
-----------
7.1 EVENTS OF TERMINATION. Employee's employment with Company shall
---------------------
terminate upon any one of the following:
(a) Company's determination made in good faith that it is
terminating Employee for "cause" as defined under Section 7.2 below
("Termination for Cause");
---------------------
(b) the effective date of a written notice sent to Employee
stating that Company is terminating his employment without cause,
which notice can be given by Company at any time after the Effective
Date at Company's sole discretion, for any reason or for no reason
("Termination Without Cause"); or
-------------------------
(c) the effective date of a written notice sent to Company from
Employee stating that Employee is electing to terminate his employment
with Company ("Voluntary Termination").
---------------------
7.2 "CAUSE" DEFINED. For purposes of this Agreement, "cause" for
--------------
Employee's termination will exist at any time after the happening of one or more
of the following events:
(a) failure to carry out the reasonable duties assigned to
Employee by the Board of Directors consistent with his position as
President and Chief Executive Officer of Company, after written notice
thereof and a thirty (30) day opportunity to cure;
(b) any act of fraud, dishonesty or breach of fiduciary duty to
the Company;
3
<PAGE>
(c) any intentional act that is materially harmful to the
Company, undertaken without the approval of the Board of Directors and
inconsistent with Employee's role as President and Chief Executive
Officer;
(d) as a result of disability, Employee is unable to perform the
duties contemplated by this Agreement for more than an aggregate of
ninety (90) days out of any six-month period; or
(e) Employee's death.
8. EFFECT OF TERMINATION.
---------------------
8.1 TERMINATION FOR CAUSE OR VOLUNTARY TERMINATION. In the event of
----------------------------------------------
any termination of this Agreement pursuant to Sections 7.1(a) or 7.1(c), Company
shall pay Employee the compensation and benefits otherwise payable to Employee
under Section 5 through the date of termination. Employee's rights under
Company's benefit plans of general application shall be determined under the
provisions of those plans.
8.2 TERMINATION WITHOUT CAUSE. In the event of any termination of
-------------------------
this Agreement pursuant to Section 7.1(b),
(a) Company will pay Employee the compensation and benefits
otherwise payable to Employee under Section 5 through the date of
termination;
(b) For six (6) months after the date of termination, Company
will continue to pay Employee his base salary under Section 5.1 above
at Employee's then-current salary rate, less applicable withholding
taxes, payable on Company's normal payroll dates during that period;
provided, however, that if Employee secures other full-time employment
-------- -------
during such six-month period, Employee shall promptly notify Company
thereof and Company shall pay to Employee, by check or cancellation of
indebtedness of Employee to Company (if any), within ten (10) days of
such notice by Employee to Company, an amount equal to one half (1/2)
of any additional amount Company would otherwise be obligated to pay
to Employee pursuant to this Section 8.2(b) for the period beginning
on the date Employee secures such other employment through the end of
such six-month period, which amount shall constitute payment in full
by Company to Employee of any outstanding obligations pursuant to this
Section 8.2(b).
(c) Employee's rights under Company's benefit plans of general
application shall be determined under the provisions of those plans.
9. EMPLOYEE SOLICITATION. So long as Employee is an employee of Company
---------------------
and for one (1) year thereafter, Employee shall not, directly or indirectly,
either for himself or for any other person or entity, directly or indirectly,
solicit, induce or attempt to induce any employee of Company to terminate his or
her employment with Company.
4
<PAGE>
10. MISCELLANEOUS.
-------------
10.1 ARBITRATION. Employee and Company shall submit to mandatory
-----------
binding arbitration in any controversy or clam arising out of, or relating to,
this Agreement or any breach hereof, provided, however, that Company retains its
-------- -------
right to, and shall not be prohibited, limited or in any other way restricted
from, seeking or obtaining equitable relief from a court having jurisdiction
over the parties. Such arbitration shall be conducted in accordance with the
commercial arbitration rules of the American Arbitration Association in effect
at that time, and judgment upon the determination or award rendered by the
arbitrator may be entered in any court having jurisdiction thereof.
10.2 SEVERABILITY. If any provision of this Agreement shall be found
------------
by any arbitrator or court of competent jurisdiction to be invalid or
unenforceable, then the parties hereby waive such provision to the extent that
it is found to be invalid or unenforceable and to the extent that to do so would
not deprive one of the parties of the substantial benefit of its bargain. Such
provision shall, to the extent allowable by law and the preceding sentence, be
modified by such arbitrator or court so that it becomes enforceable and, as
modified, shall be enforced as any other provision hereof, all the other
provisions continuing in full force and effect.
10.3 REMEDIES. Company and Employee acknowledge that the service to
--------
be provided by Employee is of a special, unique, unusual, extraordinary and
intellectual character, which gives it peculiar value, the loss of which cannot
be reasonably or adequately compensated in damages in an action at law.
Accordingly, Employee hereby consents and agrees that for any breach or
violation by Employee of any of the provisions of this Agreement including,
without limitation, Section 3. a restraining order and/or injunction may be
issued against Employee, in addition to any other rights and remedies Company
may have, at law or equity, including without limitation the recovery of money
damages.
10.4 NO WAIVER. The failure by either party at any time to require
---------
performance or compliance by the other of any of its obligations or agreements
shall in no way affect the right to require such performance or compliance at
any time thereafter. The waiver by either party of a breach of any provision
hereof shall not be taken or held to be a waiver of any preceding or succeeding
breach of such provision or as a waiver of the provision itself. No waiver of
any kind shall be effective or binding, unless it is in writing and is signed by
the party against whom such waiver is sought to be enforced.
10.5 ASSIGNMENT. This Agreement and all rights hereunder are
----------
personal to Employee and may not be transferred or assigned by Employee at any
time. Company may assign its rights, together with its obligations hereunder,
to any parent, subsidiary, affiliate or successor, or in connection with any
sale, transfer or other disposition of all or substantially all of its business
and assets, provided, however, that any such assignee assumes Company's
-------- -------
obligations hereunder.
10.6 WITHHOLDING. All sums payable to Employee hereunder shall be
-----------
reduced by all federal, state, local and other withholding and similar taxes and
payments required by applicable law.
5
<PAGE>
10.7 ENTIRE AGREEMENT. This Agreement constitutes the entire and
----------------
only agreement between the parties relating to employment of Employee with
Company, and this Agreement supersedes and cancels any and all previous
contracts, arrangements or understandings with respect thereto including but not
limited to the Consulting Agreement between Employee and Company dated October
8, 1992, as amended May 1, 1993, but does not affect Employee's Restricted Stock
Purchase Agreement dated October 8, 1992.
10.8 AMENDMENT. This Agreement may be amended, modified, superseded,
---------
canceled, renewed or extended only by an agreement in writing executed by both
parties hereto.
10.9 NOTICES. All notices and other communications required or
-------
permitted under this Agreement shall be in writing and hand delivered, sent by
telecopier, sent by certified first class mail, postage pre-paid, or sent by
nationally recognized express courier service. Such notices and other
communications shall be effective upon receipt if hand delivered or sent by
telecopier, five (5) days after mailing if sent by mail, and one (1) day after
dispatch if sent by express courier, to the following addresses, or such other
address as either party shall notify the other:
If to Company: Centaur Pharmaceuticals, Inc.
484 Oakmead Parkway
Sunnyvale, CA 94086
Telecopier: (408) 481-1601
Attention: Chairman of the Board of Directors
With a copy to: Gordon K. Davidson, Esq.
Fenwick & West
Two Palo Alto Square, Suite 800
Palo Alto, CA 94306
Telecopier: (415) 857-0361
If to Employee: Brian D. Frenzel
1973 Newcastle Drive
Los Altos, CA 94024
Telecopier: (415) 967-4675
With a copy to: Thomas L. Barton, Esq.
Holtzman, Wise & Shepard
3030 Hansen Way
Palo Alto, CA 94304
Telecopier: (415) 856-1344
10.10 BINDING NATURE. This Agreement shall be binding upon, and inure
--------------
to the benefit of, the successors and personal representatives of the respective
parties hereto.
10.11 HEADINGS. The headings contained in this Agreement are for
--------
reference purposes only and shall in no way affect the meaning or interpretation
of this Agreement. In this
6
<PAGE>
Agreement, the singular includes the plural, the plural included the singular,
the masculine gender includes both male and female referents, and the word "or"
is used in the inclusive sense.
10.12 COUNTERPARTS. This Agreement may be executed in multiple
------------
counterparts, each of which shall be deemed to be an original but all of which,
taken together, constitute one and the same agreement.
10.13 GOVERNING LAW. This Agreement and the rights and obligations
-------------
of the parties hereto shall be construed in accordance with the laws of the
State of California, without giving effect to the principles of conflict of
laws.
10.14 ATTORNEYS' FEES. In the event that any litigation, arbitration
---------------
or other legal proceeding is brought by either party to enforce the terms of
this Agreement, the prevailing party in such proceeding shall be entitled, in
addition to any other relief awarded, to recover its reasonable costs and
attorneys' fees incurred in such proceeding.
IN WITNESS WHEREOF, Company and Employee have executed this Agreement as of
the date first above written.
COMPANY EMPLOYEE
Centaur Pharmaceuticals, Inc.
By: /s/ Mark R. Collins /s/ Brian D. Frenzel
------------------------------- --------------------
Brian D. Frenzel
Print Name: Mark. R. Collins
------------------------
Title: Chief Financial Officer
-------------------------
List of Exhibits
- ----------------
Exhibit 1: Stock Option Grant
Exhibit 2: Employee Invention Assignment and Confidentiality Agreement
7
<PAGE>
EXHIBIT 1 NO. ______
CENTAUR PHARMACEUTICALS, INC.
1993 EQUITY INCENTIVE PLAN
STOCK OPTION AGREEMENT
This Stock Option Agreement ("Agreement") is made and entered into as of
---------
the date of grant set forth below (the "Date of Grant") by and between Centaur
-------------
Pharmaceuticals, Inc., a Delaware corporation (the "Company"), and the
-------
participant named below ("Participant"). Capitalized terms not defined herein
-----------
shall have the meaning ascribed to them in the Company's 1993 Equity Incentive
Plan (the "Plan").
----
PARTICIPANT: Brian D. Frenzel
----------------------------------
SOCIAL SECURITY NUMBER: __________________________________
ADDRESS: 1973 Newcastle Drive
----------------------------------
Los Altos, CA 94024
----------------------------------
TOTAL OPTION SHARES: 300,000
----------------------------------
EXERCISE PRICE PER SHARE: $0.15
----------------------------------
DATE OF GRANT: __________________________________
VESTING START DATE: See Section 2.1 below
----------------------------------
EXPIRATION DATE: 10 years after Date of Grant
----------------------------------
TYPE OF STOCK OPTION
(CHECK ONE): [X] INCENTIVE STOCK OPTION
[_] NONQUALIFIED STOCK OPTION
1. GRANT OF OPTION. The Company hereby grants to Participant an option
---------------
(the "Option") to purchase the total number of shares of Common Stock, $0.001
------
par value, 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 Agreement and the Plan. If designated as an Incentive
Stock Option above, the 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 "Code").
----
2. EXERCISE PERIOD.
---------------
2.1 EXERCISE PERIOD OF OPTION. For purposes of vesting hereunder,
-------------------------
this Option shall be deemed granted in two (2) equal parts of One Hundred Fifty
Thousand (150,000)
<PAGE>
Shares each (hereinafter referred to as the "Initial Option" and the "Full-Time
-------------- ---------
Employment Option"). Provided Participant continues to provide services to the
- -----------------
Company throughout the specified periods, each of the Initial Option and the
Full-Time Employment Option shall become exercisable with respect to One Forty-
Eighth (1/48) of the Shares thereof on its respective First Vesting Date ("First
-----
Vesting Date"); thereafter at the end of each full succeeding month, each of the
- ------------
Initial Option and the Full-Time Employment Option shall become exercisable as
to an additional One Forty-Eighth (1/48) of the Shares thereof.
(a) The First Vesting Date for the Initial Option shall be
January 1, 1994
(b) The First Vesting Date for the Full-Time Employment Option
shall be the first day of the second calendar month
following the "Full-Time Employment Date," as defined in
that certain Employment Agreement between Participant and
the Company and dated of even dated herewith.
2.2 EXPIRATION. The Option shall expire on the Expiration Date set
----------
forth above and must be exercised, if at all, on or before the Expiration Date;
provided, that the Option will become fully exercisable within 5 years from the
- --------
Date of Grant with at least 20% of the total shares first becoming exercisable
at the end of each of the five years.
3. TERMINATION.
-----------
3.1 TERMINATION FOR ANY REASON EXCEPT DEATH OR DISABILITY. If
-----------------------------------------------------
Participant is Terminated for any reason, except death or Disability, the
Option, to the extent (and only to the extent) that it would have been
exercisable by Participant on the date of Termination, may be exercised by
Participant no later than ninety (90) days after the date of Termination, but in
any event no later than the Expiration Date.
3.2 TERMINATION BECAUSE OF DEATH OR DISABILITY. If Participant is
------------------------------------------
Terminated because of death or Disability of Participant, the Option, to the
extent that it is exercisable by Participant on the date of Termination, may be
exercised by Participant (or Participant's legal representative) no later than
twelve (12) months after the date of Termination, but in any event no later than
the Expiration Date.
3.3 NO OBLIGATION TO EMPLOY. Nothing in the Plan or this Agreement
-----------------------
shall confer on Participant 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 Participant's employment or other
relationship at any time, with or without cause.
4. MANNER OF EXERCISE.
------------------
4.1 STOCK OPTION EXERCISE AGREEMENT. To exercise this Option,
-------------------------------
Participant (or in the case of exercise after Participant's death, Participant's
executor, administrator, heir or
2
<PAGE>
legatee, as the case may be) must deliver to the Company an executed stock
option exercise agreement in the form attached hereto as Exhibit A, or in such
---------
other form as may be approved by the Company) from time to time (the "Exercise
--------
Agreement"), which shall set forth, inter alia, Participant's election to
- --------- ----- ----
exercise the Option, the number of Shares being purchased, any restrictions
imposed on the Shares and any representations, warranties and agreements
regarding Participant's investment intent and access to information as may be
required by the Company to comply with applicable securities laws. If someone
other than Participant exercises the Option, then such person must submit
documentation reasonably acceptable to the Company that such person has the
right to exercise the Option.
4.2 LIMITATIONS ON EXERCISE. The Option may not be exercised unless
-----------------------
such exercise is in compliance with all applicable federal and state securities
laws, as they are in effect on the date of exercise. The Option may not be
exercised as to fewer than 100 Shares unless it is exercised as to all Shares as
to which the Option is then exercisable.
4.3 PAYMENT. The Exercise Agreement shall be accompanied by full
-------
payment of the Exercise Price for the Shares being purchased in cash (by check),
or where permitted by law:
(a) by cancellation of indebtedness of the Company to the
Participant;
(b) by surrender of shares of the Company's Common Stock that
either: (1) have been owned by Participant for more than six
(6) months and 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 (2) were
obtained by Participant in the open public market; and (3)
are clear of all liens, claims, encumbrances or security
interests;
(c) by waiver of compensation due or accrued to Participant for
services rendered;
(d) provided that a public market for the Company's stock
exists, (1) through a "same day sale" commitment from
Participant and a broker-dealer that is a member of the
National Association of Securities Dealers (an "NASD
----
Dealer") whereby Participant 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, or (2) through a
--
"margin" commitment from Participant and an NASD Dealer
whereby Participant 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
3
<PAGE>
commits upon receipt of such Shares to forward the exercise
price directly to the Company; or
(e) by any combination of the foregoing.
4.4 TAX WITHHOLDING. Prior to the issuance of the Shares upon
---------------
exercise of the Option, Participant must pay or provide for any applicable
federal or state withholding obligations of the Company. If the Committee
permits, Participant 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. In such
case, the Company shall issue the net number of Shares to the Participant by
deducting the Shares retained from the Shares issuable upon exercise.
4.5 ISSUANCE OF SHARES. Provided that the Exercise Agreement and
-------------------
payment are in form and substance satisfactory to counsel for the Company, the
Company shall issue the Shares registered in the name of Participant,
Participant's authorized assignee, or Participant's legal representative, and
shall deliver certificates representing the Shares with the appropriate legends
affixed thereto.
5. NOTICE OF DISQUALIFYING DISPOSITION OF ISO SHARES. If the Option is an
-------------------------------------------------
ISO, and if Participant sells or otherwise disposes of any of the Shares
acquired pursuant to the ISO on or before the later of (1) the date two years
after the Date of Grant, and (2) the date one year after transfer of such Shares
to Participant upon exercise of the Option, Participant shall immediately notify
the Company in writing of such disposition. Participant agrees that Participant
may be subject to income tax withholding by the Company on the compensation
income recognized by Participant from the early disposition by payment in cash
or out of the current wages or other compensation payable to Participant.
6. COMPLIANCE WITH LAWS AND REGULATIONS. The exercise of the Option and
------------------------------------
the issuance and transfer of Shares shall be subject to compliance by the
Company and Participant with all applicable requirements of federal and state
securities laws and with all applicable requirements of any stock exchange on
which the Company's Common Stock may be listed at the time of such issuance or
transfer. Participant understands that the Company is under no obligation to
register or qualify the Shares with the Securities and Exchange Commission, any
state securities commission or any stock exchange to effect such compliance.
7. NONTRANSFERABILITY OF OPTION. The Option may not be transferred in any
----------------------------
manner other than by will or by the laws of descent and distribution and may be
exercised during the lifetime of Participant only by Participant. The terms of
the Option shall be binding upon the executors, administrators, successors and
assigns of Participant.
8. TAX CONSEQUENCES. Set forth below is a brief summary as of the Date of
----------------
Grant of some of the federal and California tax consequences of exercise of the
Option and disposition of the Shares. THIS SUMMARY IS NECESSARILY INCOMPLETE,
AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. PARTICIPANT SHOULD
CONSULT
2
<PAGE>
A TAX ADVISER BEFORE EXERCISING THE OPTION OR DISPOSING OF THE SHARES.
8.1 EXERCISE OF ISO. If the Option qualifies as an ISO, there will
----------------
be no regular federal 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 a tax
preference item for federal income tax purposes and may subject the Participant
to the alternative minimum tax in the year of exercise.
8.2 EXERCISE OF NONQUALIFIED STOCK OPTION. If the Option does not
-------------------------------------
qualify as an ISO, there may be a regular federal and California income tax
liability upon the exercise of the Option. Participant 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
Participant's compensation or collect from Participant 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. If the Shares are held for more than
---------------------
twelve (12) months after the date of the transfer of the Shares pursuant to the
exercise of the Option (and, in the case of an ISO, are disposed of more than
two years after the Date of Grant), any gain realized on disposition of the
Shares will be treated as long term capital gain for federal and California
income tax purposes. If Shares purchased under an ISO are disposed of within
one year of exercise or within two years after the Date of Grant, any gain
realized on such 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
Company will be required to withhold from Participant's compensation or collect
from Participant and pay to the applicable taxing authorities an amount equal to
a percentage of this compensation income at the time of exercise.
9. PRIVILEGES OF STOCK OWNERSHIP. Participant shall not have any of the
-----------------------------
rights of a shareholder with respect to any Shares until Participant exercises
the Option and pays the Exercise Price.
10. INTERPRETATION. Any dispute regarding the interpretation of this
--------------
Agreement shall be submitted by Participant or the Company to the Committee for
review. The resolution of such a dispute by the Committee shall be final and
binding on the Company and Participant.
11. ENTIRE AGREEMENT. The Plan is incorporated herein by reference. This
----------------
Agreement and the Plan constitute the entire agreement of the parties and
supersede all prior undertakings and agreements with respect to the subject
matter hereof.
12. NOTICES. Any notice required to be given or delivered to the Company
-------
under the terms of this Agreement shall be in writing and addressed to the
Corporate Secretary of the Company at its principal corporate offices. Any
notice required to be given or delivered to Participant shall be in writing and
addressed to Participant at the address indicated above or to such other address
as such party may designate in writing from time to time to the Company. All
5
<PAGE>
notices shall be deemed to have been given or delivered upon: personal delivery;
three (3) days after deposit in the United States mail by certified or
registered mail (return receipt requested); one (1) business day after deposit
with any return receipt express courier (prepaid); or one (1) business day after
transmission by rapifax or telecopier.
13. SUCCESSORS AND ASSIGNS. The Company may assign any of its rights
----------------------
under this Agreement. This Agreement shall be binding upon and inure to the
benefit of the successors and assigns of the Company. Subject to the
restrictions on transfer set forth herein, this Agreement shall be binding upon
Participant and Participant's heirs, executors, administrators, legal
representatives, successors and assigns.
14. GOVERNING LAW. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of California as such laws are applied to
agreements between California residents entered into and to be performed
entirely within California.
15. ACCEPTANCE. Participant hereby acknowledges receipt of a copy of the
----------
Plan and this Agreement. Participant has read and understands the terms and
provisions thereof, and accepts the Option subject to all the terms and
conditions of the Plan and this Agreement. Participant acknowledges that there
may be adverse tax consequences upon exercise of the Option or disposition of
the Shares and that Participant should consult a tax adviser prior to such
exercise or disposition.
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed in
duplicate by its duly authorized representative and Participant has executed
this Agreement in duplicate as of the Effective Date.
CENTAUR PHARMACEUTICALS, INC. PARTICIPANT
By:__________________________ ______________________________
Brian D. Frenzel
_____________________________
(Please print name)
_____________________________
(Please print title)
SIGNATURE PAGE TO BRIAN D. FRENZEL STOCK OPTION AGREEMENT
6
<PAGE>
EXHIBIT A
---------
STOCK OPTION EXERCISE AGREEMENT
<PAGE>
EXHIBIT A NO. ______
CENTAUR PHARMACEUTICALS, INC.
1993 EQUITY INCENTIVE PLAN
STOCK OPTION EXERCISE AGREEMENT
This Exercise Agreement is made and entered into as of ____________,
_________ (the "Effective Date") by and between Centaur Pharmaceuticals, Inc., a
--------------
Delaware corporation (the "Company"), and the purchaser named below (the
-------
"Purchaser"). Capitalized terms not defined herein shall have the meaning
---------
ascribed to them in the Company's 1993 Equity Incentive Plan (the "Plan").
----
PURCHASER:______________________________________________________________________
SOCIAL SECURITY NUMBER:_________________________________________________________
ADDRESS:________________________________________________________________________
________________________________________________________________________________
TOTAL NUMBER OF SHARES:_________________________________________________________
PURCHASE PRICE PER SHARE:_______________________________________________________
TOTAL PURCHASE PRICE:___________________________________________________________
OPTION NO.__________ DATE OF GRANT:_________________________________________
TYPE OF OPTION: [_] INCENTIVE STOCK OPTION
[_] NONQUALIFIED STOCK OPTION
1. EXERCISE OF OPTION.
1.1 EXERCISE. Pursuant to exercise of that certain option ("Option")
-------- ------
granted to Purchaser under the Plan and subject to the terms and conditions of
this Agreement, Purchaser hereby purchases from the Company, and the Company
hereby sells to Purchaser, the total number of shares set forth above ("Shares")
------
of the Company's Common Stock, $0.001 par value per share, at a purchase price
per share set forth above for a total purchase price set forth above (the
"Purchase Price"). As used in this Agreement, the term "Shares" refers to the
-------------- ------
Shares purchased under this Exercise Agreement and includes all securities
received (a) in replacement of the Shares, (b) as a result of stock dividends or
stock splits with respect to the Shares, and (c) all securities received in
replacement of the Shares in a merger, recapitalization, reorganization or
similar corporate transaction.
<PAGE>
1.2 TITLE TO SHARES. The exact spelling of the name(s) under which
---------------
Purchaser will take title to the Shares is:
________________________________________________________________________
________________________________________________________________________
Purchaser desires to take title to the Shares as follows:
[_] Individual, as separate property
[_] Husband and wife, as community property
[_] Joint Tenants
[_] Alone or with spouse as trustee(s) of the following trust (including
date):
_______________________________________________________________________
_______________________________________________________________________
[_] Other: please specify:
_______________________________________________________________________
_______________________________________________________________________
1.3 PAYMENT. Purchaser hereby delivers pavement of the Purchase
-------
Price in the manner permitted in the Stock Option Agreement as follows (check
and complete as appropriate):
[_] in cash in the amount of $_____ , receipt of which is acknowledged by
the Company;
[_] by cancellation of indebtedness of the Company to Purchaser in the
amount of $_______; or
[_] by the waiver hereby of compensation due or accrued for services
rendered in the amount of $_____________.
2. DELIVERY.
--------
2.1 DELIVERIES BY PURCHASER. Purchaser hereby delivers to the
-----------------------
Company (i) this Exercise Agreement, (ii) two (2) copies of a blank Stock Power
and Assignment Separate from Stock Certificate in the form of Exhibit I attached
---------
hereto (the "Stock Powers"), both executed by Purchaser (and Purchaser's spouse,
------------
if any), (iii) if Purchaser is married, a Consent of Spouse in the form of
Exhibit 2 attached hereto (the "Spouse Consent") executed by Purchaser's spouse.
- --------- --------------
and (iv) the Purchase Price.
2.2 DELIVERIES BY THE COMPANY. Upon its receipt of the Purchase
-------------------------
Price and all the documents to be executed and delivered by Purchaser to the
Company under Section 2.1, the Company will issue a duly executed stock
certificate evidencing the Shares in the name of Purchaser, to be placed in
escrow as provided in Section 1 until expiration or termination of the Company's
Right of First Refusal described in Section 8.
2
<PAGE>
3. REPRESENTATIONS AND WARRANTIES OF PURCHASER. Purchaser represents and
-------------------------------------------
warrants to the Company that:
3.1 AGREES TO TERMS OF THE PLAN. Purchaser has received a copy of
---------------------------
the Plan and the Stock Option Agreement, has read and understands the terms of
the Plan, the Stock Option Agreement and this Exercise Agreement, and agrees to
be bound by their terms and conditions. Purchaser acknowledges that there may
be adverse tax consequences upon exercise of the Option or disposition of the
Shares, and that Purchaser should consult a tax adviser prior to such exercise
or disposition.
3.2 PURCHASE FOR OWN ACCOUNT FOR INVESTMENT. Purchaser is purchasing
---------------------------------------
the Shares for Purchaser's own account for investment purposes only and not with
a view to, or for sale in connection with, a distribution of the Shares within
the meaning of the Securities Act of 1933, as amended (the "Securities Act").
--------------
Purchaser has no present intention of selling or otherwise disposing of all or
any portion of the Shares and no one other than Purchaser has any beneficial
ownership of any of the Shares.
3.3 ACCESS TO INFORMATION. Purchaser has had access to all
---------------------
information regarding the Company and its present and prospective business,
assets, liabilities and financial condition that Purchaser reasonably considers
important in making the decision to purchase the Shares, and Purchaser has had
ample opportunity to ask questions of the Company's representatives concerning
such matters and this investment.
3.4 UNDERSTANDING OF RISKS. Purchaser is fully aware of: (i) the
----------------------
highly speculative nature of the investment in the Shares; (ii) the financial
hazards involved; (iii) the lack of liquidity of the Shares and the restrictions
on transferability of the Shares (e.g., that Purchaser may not be able to sell
---
or dispose of the Shares or use them as collateral for loans); (iv) the
qualifications and backgrounds of the management of the Company; and (v) the tax
consequences of investment in the Shares. Purchaser is capable of evaluating
the merits and risks of this investment, has the ability to protect Purchaser's
own interests in this transaction and is financially capable of bearing a total
loss of this investment.
3.5 NO GENERAL SOLICITATION. At no time was Purchaser presented with
-----------------------
or solicited by any publicly issued or circulated newspaper, mail, radio,
television or other form of general advertising or solicitation in connection
with the offer, sale and purchase of the Shares.
4. COMPLIANCE WITH SECURITIES LAWS.
-------------------------------
4.1 COMPLIANCE WITH FEDERAL SECURITIES LAWS. Purchaser understands
---------------------------------------
and acknowledges that the Shares have not been registered with the Securities
and Exchange Commission ("SEC") under the Securities Act and that,
---
notwithstanding any other provision of the Stock Option Agreement to the
contrary, the exercise of any rights to purchase any Shares is expressly
conditioned upon compliance with the Securities Act and all applicable state
securities laws. Purchaser agrees to cooperate with the Company to ensure
compliance with such laws. The Shares are being issued under the Securities Act
pursuant to (the Company will check the applicable box):
3
<PAGE>
[_] the exemption provided by SEC Rule 701;
[_] the exemption provided by SEC Rule 504;
[_] Section 4(2) of the Securities Act;
[_] other: ______________________________________
4.2 COMPLIANCE WITH CALIFORNIA SECURITIES LAWS. THE SALE OF THE
------------------------------------------
SECURITIES THAT ARE THE SUBJECT OF THIS EXERCISE AGREEMENT, IF NOT YET QUALIFIED
WITH THE CALIFORNIA COMMISSIONER OF CORPORATIONS AND NOT EXEMPT FROM SUCH
QUALIFICATION, IS SUBJECT TO SUCH QUALIFICATION, AND THE ISSUANCE OF SUCH
SECURITIES, AND THE RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR PRIOR TO
SUCH QUALIFICATION IS UNLAWFUL UNLESS THE SALE IS EXEMPT. THE RIGHTS OF THE
PARTIES TO THIS EXERCISE AGREEMENT ARE EXPRESSLY CONDITIONED UPON SUCH
QUALIFICATION BEING OBTAINED OR AN EXEMPTION BEING AVAILABLE.
5. RESTRICTED SECURITIES.
---------------------
5.1 NO TRANSFER UNLESS REGISTERED OR EXEMPT. Purchaser understands
---------------------------------------
that Purchaser may not transfer any Shares unless such Shares are registered
under the Securities Act or qualified under applicable state securities laws or
unless, in the opinion of counsel to the Company, exemptions from such
registration and qualification requirements are available. Purchaser
understands that only the Company may file a registration statement with the SEC
and that the Company is under no obligation to do so with respect to the Shares.
Purchaser has also been advised that exemptions from registration and
qualification may not be available or may not permit Purchaser to transfer all
or any of the Shares in the amounts or at the times proposed by Purchaser.
5.2 SEC RULE 144. In addition, Purchaser has been advised that SEC
------------
Rule 144 promulgated under the Securities Act, which permits certain limited
sales of unregistered securities, is not presently available with respect to the
Shares and, in any event, requires that the Shares be held for a minimum of two
years, and in certain cases three years, after they have been purchased and paid
--------
for (within the meaning of Rule 144), before they may be resold under Rule 144.
- ---
Purchaser understands that Rule 144 may indefinitely restrict transfer of the
Shares so long as Purchaser remains an "affiliate" of the Company or if "current
public information" about the Company (as defined in Rule 144) is not publicly
available.
5.3 SEC RULE 701. The Shares may become freely tradeable by non-
------------
affiliates if issued pursuant to SEC Rule 701 promulgated under the Securities
Act (under limited conditions regarding the method of sale) 90 days after the
first sale of Common Stock of the Company to the general public pursuant to a
registration statement filed with and declared effective by the SEC, subject to
the lengthier market standoff agreement contained in Section 7 of this Exercise
Agreement or any other agreement entered into by Purchaser. Affiliates must
comply with the provisions (other than the holding period requirements) of Rule
144.
5.4 STATE LAW RESTRICTIONS ON TRANSFER. Purchaser understands that
----------------------------------
transfer of the Shares may be restricted by Section 260.141.11 of the Rules of
the California
4
<PAGE>
Commissioner of Corporations, a copy of which is attached hereto as Exhibit 3,
and that the certificate(s) representing the Shares may bear a legend to that
effect.
6. RESTRICTIONS ON TRANSFERS.
-------------------------
6.1 DISPOSITION OF SHARES. Purchaser hereby agrees that Purchaser
---------------------
shall make no disposition of the Shares (other than as permitted by this
Agreement) unless and until:
(a) Purchaser shall have notified the Company of the proposed
disposition and provided a written summary of the terms and conditions of the
proposed disposition;
(b) Purchaser shall have complied with all requirements of this
Exercise Agreement applicable to the disposition of the Shares;
(c) Purchaser shall have provided the Company with written
assurances, in form and substance satisfactory to counsel for the Company, that
(i) the proposed disposition does not require registration of the Shares under
the Securities Act or (ii) all appropriate action necessary for compliance with
the registration requirements of the Securities Act or of any exemption from
registration available under the Securities Act (including Rule 144) has been
taken: and
(d) Purchaser shall have provided the Company with written
assurances, in form and substance satisfactory to the Company, that the proposed
disposition will not result in the contravention of any transfer restrictions
applicable to the Shares pursuant to the provisions of the Commissioner Rules
identified in Section 4.2.
6.2 RESTRICTION ON TRANSFER. Purchaser shall not transfer, assign,
-----------------------
grant a lien or security interest in, pledge, hypothecate, encumber or otherwise
dispose of any of the Shares which are subject to the Company's Right of First
Refusal, except as permitted by this Agreement.
6.3 TRANSFEREE OBLIGATIONS. Each person (other than the Company) to
----------------------
whom the Shares are transferred by means of one of the permitted transfers
specified in this Agreement must, as a condition precedent to the validity of
such transfer, acknowledge in writing to the Company that such person is bound
by the provisions of this Exercise Agreement and that the transferred shares are
subject to (i) the Company's Right of First Refusal granted hereunder and (ii)
the market stand-off provisions of Section 7, to the same extent such shares
would be so subject if retained by the Purchaser.
7. MARKET STANDOFF AGREEMENT. Purchaser agrees in connection with any
-------------------------
registration of the Company's securities that, upon the request of the Company
or the underwriters managing any public offering of the Company's securities,
Purchaser will not sell or otherwise dispose of any Shares without the prior
written consent of the Company or such underwriters, as the case may be, for
such period of time (not to exceed the longer of 90 days or such longer period
as the California Department of Corporations may subsequently allow to be
5
<PAGE>
provided for under equity incentive plans generally) after the effective date of
such registration requested by such managing underwriters.
8. COMPANY'S RIGHT OF FIRST REFUSAL. Before any Shares held by Purchaser
--------------------------------
or any transferee of such Shares (either being sometimes referred to herein as
the "Holder") may be sold or otherwise transferred (including without limitation
a transfer by gift or operation of law), the Company and/or its assignee(s)
shall have an assignable right of first refusal to purchase the Shares to be
sold or transferred (the "Offered Shares") on the terms and conditions set forth
--------------
in this Section (the "Right of First Refusal").
----------------------
8.1 NOTICE OF PROPOSED TRANSFER. The Holder of the Shares shall
---------------------------
deliver to the Company a written notice (the "Notice") stating: (i) the Holder's
------
bona fide intention to sell or otherwise transfer the Offered Shares; (ii) the
name of each proposed bona fide purchaser or other transferee ("Proposed
--------
Transferee"); (iii) the number of Offered Shares to be transferred to each
- ----------
Proposed Transferee, (iv) the bona fide cash price or other consideration for
which the Holder proposes to transfer the Offered Shares (the "Offered Price");
-------------
and (v) that the Holder will offer to sell the Offered Shares to the Company
and/or its assignee(s) at the Offered Price as 'provided in this Section.
8.2 EXERCISE OF RIGHT OF FIRST REFUSAL. At any time within thirty
----------------------------------
(30) days after the date of the Notice, the Company and/or its assignee(s) may,
by giving written notice to the Holder, elect to purchase all of the Offered
Shares proposed to be transferred to any one or more of the Proposed Transferees
named in the Notice, at the purchase price determined as specified below.
8.3 PURCHASE PRICE. The purchase price for the Offered Shares
--------------
purchased under this Section will be the Offered Price. If the Offered Price
includes consideration other than cash, then the cash equivalent value of the
non-cash consideration shall conclusively be deemed to be the value of such non-
cash consideration as determined in good faith by the Company's Board of
Directors.
8.4 PAYMENT. Payment of the purchase price for Offered Shares will
-------
be payable, at the option of the Company and/or its assignee(s) (as applicable),
by check or by cancellation of all or a portion of any outstanding indebtedness
of the Holder to the Company (or to such assignee, in the case of a purchase of
Offered Shares by such assignee) or by any combination thereof. The purchase
price will be paid without interest within sixty (60) days after the Company's
receipt of the Notice, or, at the option of the Company and/or its assignee(s),
in the manner and at the time(s) set forth in the Notice.
8.5 HOLDER'S RIGHT TO TRANSFER. If all of the Offered Shares
--------------------------
proposed in the Notice to transferred to a given Proposed Transferee are not
purchased by the Company and/or its assignee(s) as provided in this Section,
then the Holder may sell or otherwise transfer such Offered Shares to that
Proposed Transferee at the Offered Price or at a higher price, provided that
--------
such sale or other transfer is consummated within 120 days after the date of the
Notice, and provided further, that (i) any such sale or other transfer is
----------------
effected in compliance with all applicable securities laws and (ii) the Proposed
Transferee agrees in writing that the provisions of
6
<PAGE>
this Section will continue to apply to the Offered Shares in the hands of such
Proposed Transferee. If the Offered Shares described in the Notice are not
transferred to the Proposed Transferee within such 120 day period, then a new
Notice must be given to the Company, and the Company will again be offered the
Right of First Refusal before any Shares held by the Holder may be sold or
otherwise transferred.
8.6 EXEMPT TRANSFERS. Notwithstanding anything to the contrary in
----------------
this Section, the following transfers of Shares will be exempt from the Right of
First Refusal: (i) the transfer of any or all of the Shares during Purchaser's
lifetime by gift or on Purchaser's death by will or intestacy to Purchaser's
"immediate family" (as defined below) or to a trust for the benefit of Purchaser
or Purchaser's immediate family, provided that each transferee or other
recipient agrees in a writing satisfactory to the Company that the provisions of
this Section will continue to apply to the transferred Shares in the hands of
such transferee or other recipient; (ii) any transfer of Shares made pursuant to
a statutory merger or statutory consolidation of the Company with or into
another corporation or corporations (except that the Right of First Refusal will
continue to apply thereafter to such Shares, in which case the surviving
corporation of such merger or consolidation shall succeed to the rights of the
Company under this Section unless the agreement of merger or consolidation
expressly otherwise provides); or (iii) any transfer of Shares pursuant to the
winding up and dissolution of the Company. As used herein, the term "immediate
---------
family" will mean Purchaser's spouse, the lineal descendant or antecedent,
- ------
father, mother, brother or sister, adopted child or grandchild of the Purchaser
or the Purchaser's spouse, or the spouse of any child, adopted child, grandchild
or adopted grandchild of Purchaser or the Purchaser's spouse.
8.7 TERMINATION OF RIGHT OF FIRST REFUSAL. The Right of First
-------------------------------------
Refusal will terminate as to all Shares on the effective date of the first sale
of Common Stock of the Company to the general public pursuant to a registration
statement filed with and declared effective by the SEC under the Securities Act
(other than a registration statement relating solely to the issuance of Common
Stock pursuant to a business combination or an employee incentive or benefit
plan).
9. RIGHTS AS SHAREHOLDER. Subject to the terms and conditions of this
---------------------
Exercise Agreement, Purchaser will have all of the rights of a shareholder of
the Company with respect to the Shares from and after the date that Purchaser
delivers payment of the Purchase Price until such time as Purchaser disposes of
the Shares or the Company and/or its assignee(s) exercise(s) the Right of First
Refusal. Upon an exercise of the Right of First Refusal, Purchaser will have no
further rights as a holder of the Shares so purchased upon such exercise, except
the right to receive payment for the Shares so purchased in accordance with the
provisions of this Exercise Agreement, and Purchaser will promptly surrender the
stock certificate(s) evidencing the Shares so purchased to the Company for
transfer or cancellation.
10. ESCROW. As security for Purchaser's faithful performance of this
------
Agreement. Purchaser agrees, immediately upon receipt of the stock
certificate(s) evidencing the Shares, to deliver such certificate(s), together
with the Stock Powers executed by Purchaser and by Purchaser's spouse, if any
(with the date and number of Shares left blank), to the Secretary of the Company
or other designee of the Company ("Escrow Holder"), who is hereby appointed to
-------------
hold
7
<PAGE>
such certificate(s) and Stock Powers in escrow and to take all such actions and
to effectuate all such transfers and/or releases of such Shares as are in
accordance with the terms of this Agreement. Purchaser and the Company agree
that Escrow Holder will not be liable to any party to this Exercise Agreement
(or to any other party) for any actions or omissions unless Escrow Holder is
grossly negligent or intentionally fraudulent in carrying out the duties of
Escrow Holder under this Exercise Agreement. Escrow Holder may rely upon any
letter, notice or other document executed by any signature purported to be
genuine and may rely on the advice of counsel and obey any order of any court
with respect to the transactions contemplated by this Agreement. The Shares will
be released from escrow upon termination of both the Repurchase Option and the
Right of First Refusal.
11. RESTRICTIVE LEGENDS AND STOP-TRANSFER ORDERS.
--------------------------------------------
11.1 LEGENDS. Purchaser understands and agrees that the Company will
-------
place the legends set forth below or similar legends on any stock certificate(s)
evidencing the Shares, together with any other legends that may be required by
state or federal securities laws, the Company's Certificate of Incorporation or
Bylaws, any other agreement between Purchaser and the Company or any agreement
between Purchaser and any third party:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR UNDER
--------------
THE SECURITIES LAWS OF CERTAIN STATES. THESE SECURITIES ARE SUBJECT TO
RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED
OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT AND APPLICABLE STATE
SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM.
INVESTORS SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO BEAR THE
FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.
THE ISSUER OF THESE SECURITIES MAY REQUIRE AN OPINION OF COUNSEL IN
FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY
PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE SECURITIES ACT
AND ANY APPLICABLE STATE SECURITIES LAWS.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
RESTRICTIONS ON PUBLIC RESALE, TRANSFER AND RIGHT OF FIRST REFUSAL
OPTIONS HELD BY THE ISSUER AND/OR ITS ASSIGNEE(S) AS SET FORTH IN A
STOCK OPTION EXERCISE AGREEMENT BETWEEN THE ISSUER AND THE ORIGINAL
HOLDER OF THESE SHARES. A COPY OF WHICH MAY BE OBTAINED AT THE
PRINCIPAL OFFICE OF THE ISSUER. SUCH PUBLIC SALE AND TRANSFER
RESTRICTIONS AND THE RIGHT OF FIRST REFUSAL ARE BINDING ON TRANSFEREES
OF THESE SHARES.
8
<PAGE>
The California Commissioner of Corporations may require that the
following legend also be placed upon the share certificate(s) evidencing
ownership of the Shares:
IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY, OR
ANY INTEREST THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR,
WITHOUT THE PRIOR WRITTEN CONSENT OF THE COMMISSIONER OF CORPORATIONS
OF THE STATE OF CALIFORNIA, EXCEPT AS PERMITTED IN THE COMMISSIONER'S
RULES.
11.2 STOP-TRANSFER INSTRUCTIONS. Purchaser agrees that, to ensure
--------------------------
compliance with the restrictions imposed by this Agreement, the Company may
issue appropriate "stop-transfer" instructions to its transfer agent, if any,
and if the Company transfers its own securities, it may make appropriate
notations to the same effect in its own records.
11.3 REFUSAL TO TRANSFER. The Company will not be required (i) to
-------------------
transfer on its books any Shares that have been sold or otherwise transferred in
violation of any of the provisions of this Agreement or (ii) to treat as owner
of such Shares, or to accord the right to vote or pay dividends to any purchaser
or other transferee to whom such Shares have been so transferred.
12. TAX CONSEQUENCES. Purchaser Understands That Purchaser May Suffer
----------------
Adverse Tax Consequences As A Result Of Purchaser's Purchase Or Disposition Of
The Shares. Purchaser Represents That Purchaser Has Consulted With Any Tax
Adviser Purchaser Deems Advisable In Connection With The Purchase Or Disposition
Of The Shares And That Purchaser Is Not Relying On The Company For Any Tax
Advice. In Particular, If The Shares Are Subject To Repurchase By The Company
Or If Purchaser Is An Insider Subject To Section 16(B) Of The Exchange Act.
Purchaser Represents That Purchaser Has Consulted With Purchaser's Tax Adviser
Concerning The Advisability Of Filing An 83(B) Election With The Internal
Revenue Service. Set Forth Below Is A Brief Summary As Of The Date Of This
Exercise Agreement Of Some Of The Federal And California Tax Consequences Of
Exercise Of The Option And Disposition Of The Shares. This Summary Is
Necessarily Incomplete, And The Tax Laws And Regulations Are Subject To Change.
Participant Should Consult A Tax Adviser Before Executing This Option Or
Disposing Of The Shares.
12.1 EXERCISE OF INCENTIVE STOCK OPTION. If the Option qualifies as
----------------------------------
an incentive stock option, 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 Purchase Price Per Share will be treated as a tax preference item for
federal income tax purposes and may subject Purchaser to the alternative minimum
tax in the year of exercise.
12.2 EXERCISE OF NONQUALIFIED STOCK OPTION. If the Option does not
-------------------------------------
qualify as an incentive stock option, there may be a regular federal income tax
liability and a California income tax liability upon the exercise of the Option.
Purchaser will be treated as having received compensation income (taxable at
ordinary income tax rates) equal to the excess, if any, of the fair
9
<PAGE>
market value of the Shares on the date of exercise over the Purchase Price Per
Share. The Company will be required to withhold from Purchaser's compensation or
collect from Purchaser and pay to the applicable taxing authorities an amount
equal to a percentage of this compensation income at the time of exercise.
12.3 DISPOSITION OF SHARES. If the Shares are held for more than
---------------------
twelve months after the date of the transfer of the Shares pursuant to the
exercise of the Option (and, in the case of an ISO, are disposed of more than
two years after the Option Date of Grant), any gain realized on disposition of
the Shares will be treated as long term capital gain for federal and California
income tax purposes. If Shares purchased under an ISO are disposed of within
one year of exercise or within two years after the Option Date of Grant, any
gain realized on such 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 Purchase Price
Per Share. The Company will be required to withhold from Purchaser's
compensation or collect from Purchaser and pay to the applicable taxing
authorities an amount equal to a percentage of this compensation income at the
time of exercise.
13. COMPLIANCE WITH LAWS AND REGULATIONS. The issuance and transfer of
------------------------------------
the Shares will be subject to and conditioned upon compliance by the Company and
Purchaser with all applicable state and federal laws and regulations and with
all applicable requirements of any stock exchange or automated quotation system
on which the Company's Common Stock may be listed or quoted at the time of such
issuance or transfer.
14. SUCCESSORS AND ASSIGNS. The Company may assign any of its rights
----------------------
under this Agreement, including its rights to repurchase Shares under the Right
of First Refusal. This Agreement shall be binding upon and inure to the
benefit of the successors and assigns of the Company. Subject to the
restrictions on transfer herein set forth, this Agreement will be binding upon
Purchaser and Purchaser's heirs, executors, administrators, legal
representatives, successors and assigns.
15. GOVERNING LAW; SEVERABILITY. This Agreement shall be governed by and
---------------------------
construed in accordance with the internal laws of the State of California as
such laws are applied to agreements between California residents entered into
and to be performed entirely within California, excluding that body of laws
pertaining to conflict of laws. If any provision of this Agreement is
determined by a court of law to be illegal or unenforceable, then such provision
will be enforced to the maximum extent possible and the other provisions will
remain fully effective and enforceable.
16. NOTICES. Any notice required to be given or delivered to the Company
-------
shall be in writing and addressed to the Corporate Secretary of the Company at
its principal corporate offices. Any notice required to be given or delivered
to Purchaser shall be in writing and addressed to Purchaser at the address
indicated above or to such other address as Purchaser may designate in writing
from time to time to the Company. All notices shall be deemed effectively given
upon personal delivery, three (3) days after deposit in the United States mail
by certified or registered mail (return receipt requested), one (1) business day
after its deposit with any return
10
<PAGE>
receipt express courier (prepaid), or one (1) business day after transmission by
rapifax or telecopier.
17. FURTHER INSTRUMENTS. The parties agree to execute such further
-------------------
instruments and to take such further action as may be reasonably necessary to
carry out the purposes and intent of this Agreement.
18. HEADINGS. The captions and headings of this Agreement are included
--------
for ease of reference only and will be disregarded in interpreting or construing
this Agreement. All references herein to Sections will refer to Sections of
this Agreement.
19. ENTIRE AGREEMENT. The Plan and this Agreement, together with all its
----------------
Exhibits, constitute the entire agreement and understanding of the parties with
respect to the subject matter of this Agreement, and supersede all prior
understandings and agreements, whether oral or written, between the parties
hereto with respect to the specific subject matter hereof.
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed in
duplicate by its duly authorized representative and Purchaser has executed this
Agreement in duplicate as of the Effective Date.
CENTAUR PHARMACEUTICALS, INC. PURCHASER
By:______________________ _______________________________
(Signature)
_________________________ _______________________________
(Please print name) (Please print name)
_________________________
(Please print title)
[SIGNATURE PAGE TO CENTAUR PHARMACEUTICALS, INC.
STOCK OPTION EXERCISE AGREEMENT]
11
<PAGE>
LIST OF EXHIBITS
----------------
Exhibit 1: Stock Power and Assignment Separate from Stock Certificate
Exhibit 2: Spouse Consent
Exhibit 3: California Commissioner Rule 260.141.11
Exhibit 4: Copy of Purchaser's Check or other Evidence of Payment
<PAGE>
EXHIBIT 1
---------
STOCK POWER AND ASSIGNMENT
SEPARATE FROM STOCK CERTIFICATE
-------------------------------
FOR VALUE RECEIVED and pursuant to that certain Stock Option Exercise
Agreement No.______ dated as of _______________, (the "Agreement"), the
---------
undersigned hereby sells, assigns and transfers unto _______________,
______________ shares of the Common Stock, $0.001 par value per share, of
Centaur Pharmaceuticals, Inc., a Delaware corporation (the "Company"), standing
-------
in the undersigned's name on the books of the Company represented by Certificate
No(s). _____ delivered herewith, and does hereby irrevocably constitute and
appoint the Secretary of the Company as the undersigned's attorney-in-fact, with
full power of substitution, to transfer said stock on the books of the Company.
THIS ASSIGNMENT MAY ONLY BE USED AS AUTHORIZED BY THE AGREEMENT AND ANY EXHIBITS
THERETO.
Dated:______________________
PURCHASER
________________________________________
(Signature)
________________________________________
(Please Print Name)
________________________________________
(Spouse's Signature, if any)
________________________________________
(Please Print Spouse's Name)
INSTRUCTIONS: Please do not fill in any blanks other than the signature line.
- ------------
The purpose of this Stock Power and Assignment is to enable the Company to
acquire the shares upon exercise of its "Repurchase Option" set forth in the
Agreement without requiring additional signatures on the part of the Purchaser
or Purchaser's Spouse.
<PAGE>
EXHIBIT 2
---------
SPOUSE CONSENT
--------------
I, the undersigned, am the spouse of __________________ ("Purchaser"). I
---------
have read, understand, and hereby approve the Stock Option Exercise Agreement
between Purchaser and the Company (the "Agreement"). In consideration of the
---------
Company's granting my spouse the right to purchase the Shares as set forth in
the Agreement, I hereby agree to be irrevocably bound by the Agreement and
further agree that any community property interest shall similarly be bound by
the Agreement. I hereby appoint Purchaser as my attorney-in-fact with respect
to any amendment or exercise of any rights under the Agreement.
Date:_____________________
_________________________________
Purchaser's Spouse
Address: ________________________
________________________
________________________
<PAGE>
EXHIBIT 3
---------
CALIFORNIA COMMISSIONER RULE 260.141.11
---------------------------------------
(a) The issuer of any security upon which a restriction on transfer has been
imposed pursuant to Sections 260.102.6, 260.141.10 or 260.534 shall cause a copy
of this section to be delivered to each issuee or transferee of such security at
the time the certificate evidencing the security is delivered to the issuee or
transferee.
(b) It is unlawful for the holder of any such security to consummate a sale or
transfer of such security, or any interest therein, without the prior written
consent of the Commissioner (until this condition is removed pursuant to Section
260.141.12 of these rules), except:
(1) to the issuer;
(2) pursuant to the order or process of any court;
(3) to any person described in Subdivision (i) of Section 25102 of the
Code or Section 260.105.14 of these rules:
(4) to the transferor's ancestors, descendants or spouse, or any custodian
or trustee for the account of the transferor or the transferor's
ancestors, descendants, or spouse; or to a transferee by a trustee or
custodian for the account of the transferee or the transferee's
ancestors, descendants or spouse;
(5) to holders of securities of the same class of the same issuer;
(6) by way of gift or donation intervivos or on death;
(7) by or through a broker-dealer licensed under the Code (either acting
as such or as a finder) to a resident of a foreign state, territory or
country who is neither domiciled in this state to the knowledge of the
broker-dealer, nor actually present in this state if the sale of such
securities is not in violation of any securities law of the foreign
state, territory or country concerned;
(8) to a broker-dealer licensed under the Code in a principal transaction,
or as an underwriter or member of an underwriting syndicate or selling
group;
(9) if the interest sold or transferred is a pledge or other lien given by
the purchaser to the seller upon a sale of the security for which the
Commissioner's written consent is obtained or under this rule not
required;
(10) by way of a sale qualified under Section 25111, 25112, 25113, or 25121
of the Code, of the securities to be transferred, provided that no
order under Section 25140 or subdivision (a) of Section 25143 is in
effect with respect to such qualification;
<PAGE>
(11) by a corporation to a wholly owned subsidiary of such corporation, or
by a wholly owned subsidiary of a corporation to such corporation;
(12) by way of an exchange qualified under Section 25111, 25112 or 25113 of
the Code, provided that no order under Section 25140 or subdivision
(a) of Section 25143 is in effect with respect to such qualification;
(13) between residents of foreign states, territories or countries who are
neither domiciled nor actually present in this state;
(14) to the State Controller pursuant to the Unclaimed Property Law or the
administrator of the unclaimed property law of another state; or
(15) by the State Controller pursuant to the Unclaimed Property Law or by
the administrator of the unclaimed property law of another state if,
in either such case, such person (i) discloses to potential purchasers
at the sale that transfer of the securities is restricted under this
rule, and (ii) delivers to each purchaser a copy of this rule, and
(iii) advises the Commissioner of the name of each purchaser;
(16) by a trustee to a successor trustee when such transfer does not
involve a change in the beneficial ownership of the securities;
(17) by way of an offer and sale of outstanding securities in an issuer
transaction that is subject to the qualification requirements of
Section 25110 of the Code but exempt from that qualification
requirement by subdivision (f) of Section 25102;
provided that any such transfer is on the condition that any certificate
evidencing the security issued to such transferee shall contain the legend
required by this section.
(c) The certificates representing all such securities subject to such a
restriction on transfer, whether upon initial issuance or upon any transfer
thereof, shall bear on their face a legend, prominently stamped or printed
thereon in capital letters of not less than 10-point size, reading as
follows:
IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY, OR ANY
INTEREST THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFORE, WITHOUT THE
PRIOR WRITTEN CONSENT OF THE COMMISSIONER OF CORPORATIONS OF THE STATE OF
CALIFORNIA, EXCEPT AS PERMITTED IN THE COMMISSIONER'S RULES.
<PAGE>
EXHIBIT 2
---------
EMPLOYEE INVENTION ASSIGNMENT AND CONFIDENTIALITY AGREEMENT
-----------------------------------------------------------
In consideration of my employment with Centaur Pharmaceuticals, Inc., a
Delaware corporation (the "Company"), I hereby represent to, and agree with the
-------
Company as follows:
1. COMPANY BUSINESS. I understand that the Company is engaged in a
----------------
continuous program of research, development, production and marketing in
connection with its business and that, as an essential part of my employment
with the Company, I may be expected to make new contributions to and create
inventions of value for the Company.
2. DISCLOSURE OF INVENTIONS. From and after the date I first became
------------------------
employed with the Company, I will promptly disclose in confidence to the Company
all inventions, improvements, designs, original works of authorship, formulas,
processes, compositions of matter, computer software programs, databases, and
trade secrets ("Inventions"), whether or not patentable, copyrightable or
----------
protectible as trade secrets, that are made or conceived or first reduced to
practice or created by me, either alone or jointly with others, during the
period of my employment, whether or not in the course of my employment.
3. WORK FOR HIRE; ASSIGNMENT OF INVENTIONS. I acknowledge that
---------------------------------------
copyrightable works prepared by me within the scope of my employment are "works
for hire" under the Copyright Act and that the Company will be considered the
author thereof. I agree that all Inventions that (a) are developed using
equipment, supplies, facilities or trade secrets of the Company, (b) result from
work performed by me for the Company or (c) relate to the Company's business or
current or anticipated research and development, will be the sole and exclusive
property of the Company and are hereby assigned by me to the Company.
4. LABOR CODE 2870 NOTICE. I have been notified and understand that the
----------------------
provisions of this paragraph do not apply to any Invention that qualifies fully
under the provisions of Section 2870 of the California Labor Code, which states
as follows:
ANY PROVISION IN AN EMPLOYMENT AGREEMENT WHICH PROVIDES THAT AN EMPLOYEE SHALL
ASSIGN, OR OFFER TO ASSIGN, ANY OF HIS OR HER RIGHTS IN AN INVENTION TO HIS OR
HER EMPLOYER SHALL NOT APPLY TO AN INVENTION THAT THE EMPLOYEE DEVELOPED
ENTIRELY ON HIS OR HER OWN TIME WITHOUT USING THE EMPLOYER'S EQUIPMENT,
SUPPLIES, FACILITIES, OR TRADE SECRET INFORMATION EXCEPT FOR THOSE INVENTIONS
THAT EITHER: (1) RELATE AT THE TIME OF CONCEPTION OR REDUCTION TO PRACTICE OF
THE INVENTION TO THE EMPLOYER'S BUSINESS, OR ACTUALLY OR DEMONSTRABLY
ANTICIPATED RESEARCH OR DEVELOPMENT OF THE EMPLOYER, OR (2) RESULT FROM ANY WORK
PERFORMED BY THE EMPLOYEE FOR THE EMPLOYER. TO THE EXTENT A PROVISION IN AN
EMPLOYMENT AGREEMENT PURPORTS TO REQUIRE AN EMPLOYEE TO ASSIGN AN INVENTION
OTHERWISE EXCLUDED FROM BEING
1
<PAGE>
REQUIRED TO BE ASSIGNED UNDER CALIFORNIA LABOR CODE SECTION 2870(a), THE
PROVISION IS AGAINST THE PUBLIC POLICY OF THIS STATE AND IS UNENFORCEABLE.
5. ASSIGNMENT OF OTHER RIGHTS. I hereby irrevocably transfer and assign
--------------------------
to the Company: (a) all worldwide patents, patent applications, copyrights,
trade secrets and other intellectual property rights in Invention; and (b) any
and all "Moral Rights" (as defined below) that I may have in or with respect to
any Invention. I also hereby forever waive and agree never to assert any and
all Moral Rights I may have in or with respect to any Invention, even after
termination of my work on behalf of the Company. "Moral Rights" mean any rights
------------
of paternity or integrity, any right to claim authorship of an Invention, to
object to any distortion, mutilation or other modification of, or other
derogatory action in relation to, any Invention, whether or not such would be
prejudicial to my honor or reputation, and any similar right, existing under
judicial or statutory law of any country in the world, or under any treaty,
regardless of whether or not such right is denominated or Generally referred to
as a "moral right".
6. ASSISTANCE. I agree to assist the Company in every proper way to
----------
obtain for the Company and enforce patents, copyrights and other legal
protections for the Company's Inventions in any and all countries. I will
execute any documents that the Company may reasonably request for use in
obtaining or enforcing such patents, copyrights, trade secrets and other legal
protections. My obligations under this paragraph will continue beyond the
termination of my employment with the Company, provided that the Company will
compensate me at a reasonable rate after such termination for time or expenses
actually spent by me at the Company's request on such assistance. I appoint the
Secretary of the Company as my attorney-in-fact to execute documents on my
behalf for this purpose.
7. PROPRIETARY INFORMATION. I understand that my employment by the
-----------------------
Company creates a relationship of confidence and trust with respect to any
information of a confidential or secret nature that may be disclosed to me by
the Company that relates to the business of the Company or to the business of
any parent, subsidiary, affiliate, customer or supplier of the Company or any
other party with whom the Company agrees to hold information of such party in
confidence ("Proprietary Information"). Such Proprietary Information includes
-----------------------
but is not limited to Inventions, marketing plans, product plans, business
strategies, financial information, forecasts, personnel information and customer
lists.
8. CONFIDENTIALITY. At all times, both during my employment and after its
---------------
termination, I will keep and hold all such Proprietary Information in strict
confidence and trust, and I will not use or disclose any of such Proprietary
Information without the prior written consent of the Company, except as may be
necessary to perform my duties as an employee of the Company. Upon termination
of my employment with the Company, I will promptly deliver to the Company all
documents and materials of any nature pertaining to my work with the Company and
I will not take with me any documents or materials or copies thereof containing
any Proprietary Information.
2
<PAGE>
9. NO BREACH OF PRIOR AGREEMENT. I represent that my performance of all
----------------------------
the terms of this Agreement and my duties as an employee of the Company will not
breach any invention assignment, proprietary information or similar agreement
with any former employer or other party. I represent that I will not bring with
me to the Company or use in the performance of my duties for the Company any
documents or materials of a former employer that are not generally available to
the public or have not been legally transferred to the Company.
10. NOTIFICATION. I hereby authorize the Company to notify my actual or
------------
future employers of the terms of this Agreement and my responsibilities
hereunder.
11. NON-SOLICITATION. During, and for a period of one (1) year after
----------------
termination of, my employment with the Company, I will not solicit or take away
suppliers, customers, employees or consultants of the Company for my own benefit
or for the benefit of any other party.
12. INJUNCTIVE RELIEF. I understand that in the event of a breach or
-----------------
threatened breach of this Agreement by me the Company may suffer irreparable
harm and will therefore be entitled to injunctive relief to enforce this
Agreement.
13. GOVERNING LAW. This Agreement will be governed and interpreted in
-------------
accordance with the internal laws of the State of California, excluding that
body of law governing conflicts of law.
14. NO DUTY TO EMPLOY. I understand that this Agreement does not
-----------------
constitute a contract of employment or obligate the Company to employ me for any
stated period of time. This Agreement shall be effective as of the first day of
my employment by the Company, namely: _______________, 199__.
CENTAUR PHARMACEUTICALS, INC. EMPLOYEE
- ----------------------------- --------
By:__________________________ _____________________________
Signature
Its:_________________________ _____________________________
Name (Please print)
3
<PAGE>
EXHIBIT 4
---------
COPY OF PURCHASER'S CHECK
OR OTHER EVIDENCE OF PAYMENT
----------------------------
<PAGE>
EXHIBIT 23.02
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the references to our firm under the captions "Selected
Financial Data" and "Experts" and to the use of our report dated April 28,
1998, except for Note 9 as to which the date is June 15, 1998, in the
Registration Statement (Form S-1) and related Prospectus of Centaur
Pharmaceuticals, Inc. for the registration of its common stock.
Our audits also included the financial statement schedule of Centaur
Pharmaceuticals, Inc. listed in Item 16(b). This schedule is the
responsibility of the Company's management. Our responsibility is to express
an opinion based on our audits. In our opinion, the financial statement
schedule referred to above, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.
/s/ Ernst & Young LLP
Palo Alto, California
June 16, 1998
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE AUDITED
FINANCIAL STATEMENT AS OF DECEMBER 31, 1997 AND FOR THE YEAR THEN ENDED; AND THE
UNAUDITED FINANCIAL STATEMENTS AS OF MARCH 31, 1998 AND FOR THE THREE-MONTH
PERIOD THEN ENDED AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> YEAR 3-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1998
<PERIOD-START> JAN-01-1997 JAN-01-1998
<PERIOD-END> DEC-31-1997 MAR-31-1998
<CASH> 1,469 4,096
<SECURITIES> 12,164 6,572
<RECEIVABLES> 84 416
<ALLOWANCES> (1,600) (1,700)
<INVENTORY> 0 0
<CURRENT-ASSETS> 11,742 11,742
<PP&E> 10,787 10,787
<DEPRECIATION> (2,202) (2,501)
<TOTAL-ASSETS> 24,243 22,969
<CURRENT-LIABILITIES> 3,089 2,087
<BONDS> 0 0
28,105 28,105
0 0
<COMMON> 3 3
<OTHER-SE> 8,148 9,090
<TOTAL-LIABILITY-AND-EQUITY> 24,243 22,969
<SALES> 0 0
<TOTAL-REVENUES> 11,774 2,937
<CGS> 0 0
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 15,446 3,481
<LOSS-PROVISION> 1,600 100
<INTEREST-EXPENSE> 38 6
<INCOME-PRETAX> (4,731) (1,030)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (4,731) (1,030)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (4,731) (1,030)
<EPS-PRIMARY> (0.36) (0.07)
<EPS-DILUTED> (0.36) (0.07)
</TABLE>
