<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------------------------
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
OR
[ ] TRANSITION REPORTS PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to .
--------------- ---------------
Commission File Number: 0-22788
ARRIS PHARMACEUTICAL CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 22-2969941
-------- ----------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
385 OYSTER POINT BOULEVARD
SOUTH SAN FRANCISCO, CALIFORNIA 94080
(Address of principal executive offices)
(415) 829-1000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. [x] Yes [ ] No
The number of outstanding shares of the registrant's Common Stock, $0.001 par
value, was 13,992,805 as of April 30, 1996.
1
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ARRIS PHARMACEUTICAL CORPORATION
INDEX
PAGE
PART I: FINANCIAL INFORMATION
ITEM 1. Financial Statements *
Consolidated Balance Sheets - March 31, 1996 and
December 31, 1995............................................. 3
Consolidated Statements of Operations - Three months
ended March 31, 1996 and 1995................................. 4
Consolidated Statements of Cash Flows - Three months ended
March 31, 1996 and 1995....................................... 5
Notes to Consolidated Financial Statements - March 31, 1996......... 6
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations........................... 9
PART II: OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K...................................13
SIGNATURES...................................................................14
* The financial information should be read in conjunction with the financial
statements and notes thereto included in the Company's Report on Form 10-K for
the year ended December 31, 1995, filed on March 14, 1996.
2
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ARRIS PHARMACEUTICAL CORPORATION
CONSOLIDATED BALANCE SHEETS
(unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
--------- ------------
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 48,127 $ 21,706
Short-term marketable investments 18,256 9,399
Prepaid expenses and other current assets 1,466 798
--------- ---------
Total current assets 67,849 31,903
Property and equipment, net 8,084 7,423
Other assets 908 967
--------- ---------
TOTAL ASSETS $ 76,841 $ 40,293
--------- ---------
--------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,355 $ 872
Accrued compensation 1,195 1,718
Other accrued liabilities 1,356 2,651
Current portion of deferred revenue 10,251 8,585
Current portion of capital lease and
debt obligations 2,357 2,699
--------- ---------
Total current liabilities 16,514 16,525
Deferred revenue, net of current portion 5,934 5,472
Capital lease and debt obligations, net of
current portion 4,051 3,263
Convertible acquisition liability 6,185 6,185
Minority interest payable 1,570 1,570
Stockholders' equity:
Preferred stock, $.001 par value; 10,000,000 shares
authorized, none issued or outstanding -- --
Common stock, $.001 par value; 30,000,000 shares
authorized, 13,333,126 shares and 10,169,076
shares issued and outstanding at March 31, 1996
and December 31, 1995, respectively 101,226 64,389
Note receivable from officer (200) (200)
Deferred compensation -- (35)
Accumulated deficit (58,439) (56,876)
--------- ---------
Total stockholders' equity 42,587 7,278
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 76,841 $ 40,293
--------- ---------
--------- ---------
</TABLE>
See accompanying notes to consolidated financial statements.
3
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ARRIS PHARMACEUTICAL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
----------------------------
1996 1995
---------- -----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C>
Contract revenues $ 5,044 $ 3,873
Operating expenses:
Research and development 5,644 3,568
General and administrative 1,205 1,089
---------- ----------
Total operating expenses 6,849 4,657
---------- ----------
Operating loss (1,805) (784)
Interest income 357 319
Interest expense (115) (70)
---------- ----------
Net loss $ (1,563) $ (535)
---------- ----------
---------- ----------
Net loss per share $ (0.15) $ (0.06)
---------- ----------
---------- ----------
Shares used in computing net loss
per share 10,404 8,672
---------- ----------
---------- ----------
</TABLE>
See accompanying notes to consolidated financial statements.
4
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ARRIS PHARMACEUTICAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
Three months ended
March 31,
-----------------------
1996 1995
-----------------------
(IN THOUSANDS)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (1,563) $ (535)
Adjustments to reconcile net loss
to net cash and cash equivalents
provided by (used in) operating
activities:
Depreciation and amortization 1,017 507
Loss on fixed assets -- 50
Changes in assets and liabilities:
Prepaid expenses and other current
assets (728) (146)
Other assets 59 (7)
Accounts payable, accrued liabilities
and deferred revenue 977 (1,759)
----------- ---------
Net cash and cash equivalents used in
operating activities (238) (1,890)
----------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Available-for-sale securities:
Purchases -- (8,808)
Maturities -- --
Purchase of held-to-maturity security (8,857) --
Expenditures for property and equipment (1,583) (531)
Proceeds from lease financing of equipment 1,664 --
----------- ---------
Net cash and cash equivalents used in
investing activities (8,776) (9,339)
----------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuance of common stock 36,653 147
Principal payments on note payable and
capital leases (1,218) (771)
------------ ---------
Net cash and cash equivalents provided
by (used in) financing activities 35,435 (624)
----------- ---------
Net increase (decrease) in cash and
cash equivalents 26,421 (11,853)
Cash and cash equivalents, beginning
of period 21,706 17,165
----------- ---------
Cash and cash equivalents, end of period $ 48,127 $ 5,312
----------- ---------
----------- ---------
</TABLE>
See accompanying notes to consolidated financial statements.
5
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ARRIS PHARMACEUTICAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31,1996
(unaudited)
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
Arris Pharmaceutical Corporation, a Delaware corporation ("Arris" or the
"Company") uses an integrated drug discovery approach combining
structure-based drug design, combinatorial chemistry and its proprietary
Delta Technology to discover and develop diverse small molecule therapeutics
for commercially important disease categories where existing therapies have
significant limitations. Arris' product development programs include: (1)
protease-based discovery programs targeting the inhibition of enzymes
implicated in inflammatory and other diseases, and (2) receptor-based
discovery programs including those designed to discover small molecule drugs
that mimic important therapeutic proteins that are already successful
products.
The consolidated financial statements include the accounts of the Company, its
wholly-owned subsidiary, Arris Protease, Inc., and its 50%-owned subsidiary,
Arris Pharmaceuticals Canada, Inc., which has been consolidated based on the
Company's ability to demonstrate effective control over this entity. All
significant intercompany accounts and transactions have been eliminated.
BASIS OF PRESENTATION
The consolidated financial statements included herein have been prepared by the
Company, without audit, according to the rules and regulations of the Securities
and Exchange Commission. Certain information and footnote disclosures normally
included in complete financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to such
rules and regulations. The financial statements reflect, in the opinion of
management, all adjustments (which include only normal recurring adjustments)
necessary to state fairly the financial position and results of operations as of
and for the periods indicated. The results of operations for the three-month
period ended March 31, 1996 are not necessarily indicative of the results to be
expected for subsequent quarters or the full fiscal year.
These financial statements should be read in conjunction with the audited
financial statements and the notes thereto included in the Company's 1995 Annual
Report on Form 10-K filed with the Securities and Exchange Commission.
6
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ARRIS PHARMACEUTICAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
CASH AND CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS
The Company considers all highly liquid investments with maturities of three
months or less at the date of purchase to be cash equivalents. Short-term and
long-term investments consist of U.S. treasury and agency securities, municipal
obligations and high-grade corporate obligations. Amortization of premiums and
accretion of discounts to maturity are included in interest income.
SECURITIES HELD-TO-MATURITY: Management determines the appropriate
classification of debt securities at the time of purchase and reevaluates such
designation as of each balance sheet date. Debt securities are classified as
held-to-maturity when the Company has the positive intent and ability to hold
the securities to maturity. Held-to-maturity securities are stated at amortized
cost.
The following is a summary of held-to-maturity debt securities at March 31, 1996
and December 31, 1995:
<TABLE>
<CAPTION>
HELD-TO-MATURITY SECURITIES
-------------------------------------------------------
GROSS GROSS ESTIMATED
UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
---------- ---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Balances at March 31, 1996
U.S. treasury securities $ 5,015 $ -- $ (25) $ 4,990
U.S. agency securities 1,948 -- (11) 1,937
U.S. corporate securities 11,293 -- (11) 11,282
--------------------------------------------------------
$ 18,256 $ -- $ (47) $ 18,209
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Balances at December 31, 1995
U.S. treasury securities $ 5,015 $ -- $ (101) $ 4,914
U.S. agency securities 7,392 -- (23) 7,369
U.S. corporate securities 11,487 -- (14) 11,473
-------------------------------------------------------
$ 23,894 $ -- $ (138) $ 23,756
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
At March 31, 1996, all held-to-maturity securities were included in short-term
marketable investments. At December 31, 1995, $14,495,000 was included in cash
and cash equivalents and $9,399,000 was included in short-term marketable
investments. As of March 31, 1996, the average remaining portfolio duration of
held-to-maturity securities was approximately two and one-half months and the
contractual maturity did not exceed five months.
SECURITIES AVAILABLE-FOR-SALE: Debt securities not classified as held-to-
maturity are classified as available-for-sale. Available-for-sale securities are
stated at fair market value, with the unrealized gains and losses included in
accumulated deficit. The company had no securities classified as available-
for-sale at March 31, 1996 or December 31, 1995.
7
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ARRIS PHARMACEUTICAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
ACCOUNTING FOR STOCK BASED COMPENSATION
The Company accounts for its stock option plan in accordance with the provisions
of the Accounting Principals Board Opinion No. 25 (APB 25) "Accounting for Stock
Issued to Employees". In 1995, the Financial Accounting Standards Board
released the Statement of Financial Accounting Standard No. 123 (SFAS 123),
"Accounting for Stock Based Compensation". SFAS 123 provides an alternative to
APB 25 and is effective for fiscal years beginning after December 15, 1995. The
Company expects to continue to account for its stock plans in accordance with
the provisions of APB 25. Accordingly, SFAS 123 is not expected to have any
material impact on the Company's financial position or results of operations.
8
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ARRIS PHARMACEUTICAL CORPORATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
THIS QUARTERLY REPORT ON FORM 10-Q CONTAINS, IN ADDITION TO HISTORICAL
INFORMATION, FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES.
THE COMPANY'S ACTUAL RESULTS COULD DIFFER SIGNIFICANTLY FROM THE RESULTS
DISCUSSED IN THE FORWARD-LOOKING STATEMENTS. FACTORS THAT COULD CAUSE OR
CONTRIBUTE TO SUCH DIFFERENCES INCLUDE THOSE DISCUSSED BELOW.
OVERVIEW
Since its inception in April 1989, the Company has devoted substantially all of
its resources to its research and development programs. To date, the Company's
only source of revenue has been its corporate collaborations with Pharmacia &
Upjohn, Inc. and its predecessors ("PNU"), Amgen, Inc. ("Amgen"), and Bayer AG
("Bayer"). Such collaborations, except for the initial collaboration with PNU,
provided for the payment to the Company of initial up-front commitment fees,
research funding and support fees upon the achievement of milestones and
royalties upon the sale of any resulting products. Up-front fees are recorded
as deferred revenue until earned. The initial collaboration with PNU was of a
similar structure except that PNU made an equity investment in the company of
$5.4 million and did not pay a commitment fee.
In January 1996, PNU exercised an option to extend the human growth hormone
("hGH") collaboration between it and the Company through April 1997. In
February 1996, Amgen and the Company restructured the erythropoietin ("EPO")
agreement between the two companies to extend through mid-February 1997, unless
further extended by Amgen.
In March 1996, the Company announced a new collaboration agreement with PNU to
significantly expand Arris' combinatorial chemistry and high throughput
screening capabilities. The Company is to share the technologies used for
synthesis and screening with PNU and to use combinatorial chemistry to create a
probe library consisting of 250,000 small molecule synthetic organic compounds
for the Company's and PNU's exclusive use. The Company received a commitment fee
at the initiation of the agreement and will receive additional commitment fees
at the first and second anniversary dates of the agreement. In addition, the
Company will be paid a fee for the compounds delivered.
The Company has not been profitable since inception and expects to incur
substantial losses for at least the next several years, primarily due to the
cost of its research and development programs, including preclinical studies and
human clinical trials. The Company expects that losses will fluctuate from
quarter to quarter, that such fluctuations may be substantial, and that results
from prior quarters may not be indicative of future operating results. As of
March 31, 1996, the Company's accumulated deficit was approximately $58.4
million.
RESULTS OF OPERATIONS
The Company's contract revenues increased to $5.0 million for the three months
ended March 31, 1996 from $3.9 million in the comparable period of 1995. The
increase for 1996 was primarily due to (i) commencement of a collaboration with
PNU in April 1995 for the
9
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ARRIS PHARMACEUTICAL CORPORATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
development of combinatorial organic library synthesis and high throughput
screening, (ii) commencement of a collaboration with PNU in August 1995 for the
discovery and development of oral therapeutics inhibitors of the serine
proteases involved in the blood clotting cascade, and (iii) commencement of the
combinatorial chemistry and high throughput screening collaboration commenced in
March 1996 and described above.
Research and development expenses increased to $5.6 million for the three months
ended March 31, 1996 from $3.6 million in the comparable period in 1995,
primarily due to the expansion of the Company's research efforts in new and
existing programs and the expenses of programs and facilities added as part of
the December 22, 1995 acquisition of Khepri Pharmaceuticals, Inc. ("Khepri").
The Company expects its research and development costs to increase during the
remainder of 1996 and into 1997 due to expansion of its research programs and
the conduct of additional preclinical studies and clinical trials.
The Company's general and administrative expenses increased to $1.2 million for
the three months ended March 31, 1996 from $1.1 million in the comparable period
in 1995, primarily due to the acquisition of Khepri, and the addition of general
and administrative personnel in support of the Company's expanded research and
development efforts. The Company expects its general and administrative costs
to increase for the remainder of 1996 and into 1997.
Interest income increased to $357,000 in the three months ended March 31, 1996
from $319,000 in the comparable period in 1995, largely due to the higher
average cash balances resulting from receipt of commitment fees under new
collaborations and net proceeds of approximately $36 million from the follow-on
offering of 3,000,000 shares of the Company's common stock, which closed on
March 27, 1996. Interest expense increased to $115,000 from $70,000 in the
comparable period of 1995 as a result of higher average debt balances incurred
to finance the expansion of the Company's facilities and acquisition of lab
equipment.
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed its operations since inception primarily through
private and public offerings of its capital stock and through corporate
collaborations. As of March 31, 1996, the Company had realized approximately
$84.4 million in net proceeds from offerings of its capital stock (excluding the
$16.8 million of common stock issued in the acquisition of Khepri in 1995). In
addition, the Company has realized $48.8 million from its corporate
collaborations (excluding the $5.4 million equity investment in the Company made
by PNU). On April 24, 1996 the underwriters in the Company's March 1996 public
offering exercised the over-allotment option for an additional 450,000 shares,
providing net equity proceeds of an additional $5.5 million to the Company.
The Company's principal sources of liquidity are its cash and investments, which
totaled $66.4 million as of March 31, 1996, which does not include the $5.5
million received from the exercise of the over-allotment option. The Company
currently has approximately $3.3 million available
10
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ARRIS PHARMACEUTICAL CORPORATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
under various capital lease and debt lines. Cash used by operating activities
during the three month period ended March 31, 1996 was $238,000. This includes
the receipt of research and development funding support and an up-front
commitment fee from PNU in relation to the combinatorial chemistry collaboration
agreement which commenced in March 1996. It also includes the Company's
operating expenditures for the period and payment of certain accrued expenses
related to the Khepri acquisition. Cash used in operating activities is
expected to fluctuate from quarter to quarter depending, in part, upon the
timing of cash received from new or expanded collaboration agreements. There
can be no assurances that such payments will be received on a quarterly basis or
at all. The Company also spent approximately $1.6 million for the purchase of
property, plant and equipment. Additional equipment will be needed as the
Company increases its research and development activities. The Company received
net financing of $446,000, including proceeds under leasing agreements, net of
principal repayments under the new and existing lease agreements.
At this time, the Company's contract revenues and collaboration funding is
attributable to collaborations with PNU, Amgen and Bayer. PNU recently
exercised an option to extend the hGH collaboration for one year through April
1997. Amgen and Arris recently restructured their collaboration to extend
through mid-February 1997, unless further extended by Amgen. All of the
Company's other collaborations extend beyond the next 12 months. If the Company
is unable to renew any of these collaborations, such event may have a material
adverse effect on the Company's business and financial condition.
The cash received by the Company under collaborations for the three months ended
March 31, 1996 was approximately $7.2 million, which includes an up-front
payment from Pharmacia & Upjohn for the new combinatorial chemistry agreement
signed February 29, 1996. The aggregate collaboration funding to be received by
the Company in 1996 is expected to be approximately $16 million, excluding
payments which may be received upon the acheivement of certain milestones.
There can be no assurance that the research proceeds or any milestone payments
will be realized on a timely basis or at all.
The Company expects that its existing capital resources, including research and
development revenues from existing collaborations, will enable the Company to
maintain current and planned operations through at least the next 48 months.
The Company may need to raise substantial additional capital to fund its
operations before the end of such period. The Company expects that it will seek
such additional funding through new collaborations, through the extension of
existing collaborations or through public or private equity or debt financing.
There can be no assurance that additional financing will be available on
acceptable terms or at all. If additional funds are raised by issuing
equity securities, further dilution to stockholders may result. If adequate
funds are not available, the Company may be required to delay, to reduce the
scope of or to eliminate one or more of its research or development programs
or to obtain funds through arrangements with collaborative partners or others
that may require the Company to relinquish rights to certain of its
technologies or products that the Company would otherwise seek to develop or
commercialize itself.
11
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ARRIS PHARMACEUTICAL CORPORATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
CERTAIN BUSINESS RISKS
The Company is at an early stage of development. The Company's technologies
are, in many cases, new and still under development. All of the Company's
proposed products are in research or development and will require significant
additional research and development efforts prior to any commercial use,
including extensive preclinical and clinical testing as well as lengthy
regulatory approval. There can be no assurance that the Company's research and
development efforts will be successful, that any of its proposed products will
prove to be safe and efficacious in the clinical trials or that any commercially
successful products will ultimately be developed by the Company. In addition,
many of the Company's currently proposed products are subject to development and
licensing arrangements with the Company's collaborators. Therefore, the Company
is dependent on the research and development efforts of these collaborators.
Moreover, the Company is entitled only to a portion of the revenues, if any,
realized from the commercial sale of any of the proposed products covered by the
collaborations. The Company has experienced significant operating losses since
its inception and expects to incur significant operating losses over at least
the next several years. The development of the Company's technology and
proposed products will require a commitment of substantial funds to conduct
these costly and time consuming activities. All of the Company's revenues to
date have been received pursuant to the Company's collaborations. Should the
Company or its collaborators fail to perform in accordance with the terms of any
of their agreements, any consequent loss of revenue under the agreements could
have a material adverse effect on the Company's results of operations. The
proposed products under development by the Company have never been manufactured
on a commercial scale and there can be no assurance that such products can be
manufactured at a cost or in quantities necessary to make them commercially
viable. The Company has no sales, marketing or distribution capability. If any
of its products subject to collaborative agreements are successfully developed,
the Company must rely on its collaborators to market such products.
If the Company develops any products which are not subject to collaborative
agreements, it must either rely on other large pharmaceutical companies to
market such products or must develop a marketing and sales force with technical
expertise and supporting distribution capability in order to market such
products directly. The foregoing risks reflect the Company's early stage of
development and the nature of the Company's industry and products. Also
inherent in the Company's stage of development is a range of additional risks,
including competition, uncertainties regarding protection of patents and
proprietary rights, government regulation and uncertainties regarding health
care reform.
12
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ARRIS PHARMACEUTICAL CORPORATION
PART II: OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits
10.33 Amendment to Agreement dated March 29, 1993 between
the Registrant and Kabi Pharmacia AB, dated
January 31, 1996. (1)
10.34 First Amendment to Research and License Agreement dated
May 28, 1993 between Registrant and Amgen, Inc., dated
February 2, 1996. (1)
10.35 Research Agreement between the Registrant and
Pharmacia & Upjohn, Inc., a Delaware corporation,dated
February 29, 1996. (1)
10.36 Form of Sixth Amendment to Lease dated October 15, 1992
between the Registrant and Shelton Properties, Inc.
dated March 27, 1996.
10.37 Financing Agreement between Hambrecht and Quist
Guaranty Finance, LLC, dated March 29, 1996, including
Security Agreement and Warrant Purchase Agreement of
even date.
10.38 Amendment to Lease Schedule under Master Property
Lease Agreement dated March 29, 1994 between Hambrecht
and Quist Guaranty Finance, L.P., dated March 29, 1996.
(b) Reports on Form 8-K
A Current Report on Form 8-K was filed on January 5, 1996, as
amended on February 5, 1996, in conjunction with the Company's
acquisition of Khepri Pharmaceuticals, Inc., which was completed
on December 22, 1995.
-------------------------
(1) Confidential treatment has been requested for portions to this document.
Brackets indicate portions of text that have been omitted. A separate filing of
such omitted text has been made with the Commission as part of the Company's
application for confidential treatment.
13
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ARRIS PHARMACEUTICAL CORPORATION
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ARRIS PHARMACEUTICAL CORPORATION
Date: May 13, 1996 By: /s/ John P. Walker
---------------------------------------
John P. Walker
President, Chief Executive Officer
and Director
Date: May 13, 1996 By: /s/ Daniel H. Petree
---------------------------------------
Daniel H. Petree
Vice President, Corporate Development
and Chief Financial Officer
(Principal Financial and Accounting
Officer)
14
<PAGE>
EXHIBIT 10.33 1(3)
AMENDMENT
This Amendment is entered into and effective on this 31st day of January,
1996, by and between ARRIS PHARMACEUTICAL CORPORATION, a corporation organized
and existing under the laws of the state of Delaware, U.S.A ("Arris") and
PHARMACIA AB (publ), a corporation organized and existing under the laws. of the
Kingdom of Sweden ("Pharmacia")
WHEREAS, Arris and Kabi Pharmacia AB, a precursor corporation to Pharmacia,
("Kabi") have entered into a collaboration agreement dated March 29, 1993, (the
"Agreement") inter alia regarding the application of Arris technology to the
identification of one or more orally active mimetics of or antagonists to human
growth hormone and [***]
WHEREAS, under the Agreement Kabi has the right to extend the term of the
research collaboration,
WHEREAS, Pharmacia, who has succeeded Kabi in all its rights and obligations
under the Agreement, wishes to exercise its right to extend the term of the
research performed under the Agreement,
NOW THEREFORE, the parties wish to confirm the extended research period and have
agreed to amend the Agreement as follows:
l DEFINITIONS
Where terms defined in the Agreement are used herein, they shall have the same
meanings as defined in the Agreement.
2 EXTENDED RESEARCH
2.1 Pharmacia hereby exercises its right to extend the Sponsored Research with
respect to the Licensed Products for a term of twelve (12) months from 1st
May 1996 to 30th April 1997 ("Phase IV Research"), as provided in Art. II
2.1 (c) in the Agreement.
[***] Confidential Treatment Requested
<PAGE>
2(3)
2.2 The Research Committee shall agree on a detailed research plan and budget
for the Phase IV Research. Arris shall allocate the resources of [***]
full-time equivalent (FTE) Arris personnel, having suitable competence and
skills, to perform the Phase IV Research, as outlined in the annexed Year 4
Research Plan for hGH Mimetic, Annex I. Although Arris retains the right,
consistent with its obligations hereunder, to determine which of its
employees shall be assigned to the Phase IV Research, Arris shall consider
in good faith the views of Pharmacia concerning the use of personnel.
2.3 Pharmacia will support Arris' Phase IV Research efforts by paying Arris an
amount equal to [***] per FTE working at Arris on the Phase IV Research,
during the term as extended hereunder. Such amounts shall be payable on a
quarterly basis, in advance. In the event that Pharmacia extends the
Sponsored Research beyond April 30, 1997, the amounts owing to Arris per
FTE shall be adjusted as follows: Effective May 1, 1997, such reimbursement
rate shall be adjusted for inflation based on changes in the Bureau of
Labor Statistics Consumer Price Index for Urban Wage Earners, San
Francisco/Oakland from April, 1996 to the most recent index available.
2.4 Arris shall provide Pharmacia with reports at each Research Committee
meeting of the names of the individual Arris scientists conducting the
Phase IV Research and the portion of time (on a percentage basis) each such
person is devoting to the Phase IV Research during the prior period of the
Phase IV Research. At the request of Pharmacia, Arris shall permit an
independent, certified accountant appointed by Pharmacia, at reasonable
times and upon reasonable notice but no more than once per year, to examine
the records of Arris as are necessary to verify such reports, at
Pharmacia's expense.
2.5 Pharmacia has the right to extend the Sponsored Research with respect to
the Licensed Products for an additional term of twelve (12) months, as set
forth in Art. II 2.1 (c) in the Agreement, by giving written notice thereof
to Arris prior to the expiration of Phase IV Research.
3 THE AGREEMENT
3.1 The Agreement and its terms and provisions governing the Sponsored
[***] Confidential Treatment Requested
<PAGE>
3(3)
Research shall be applicable to the Phase IV Research performed as a result of
the amendment.
3.2 The Agreement and its terms and provisions shall remain in effect as
provided therein except as expressly amended herein.
The parties have executed this amendment by their authorized representatives in
duplicate of which each party has retained one copy.
PHARMACIA AB (publ) ARRIS PHARMACEUTICAL
CORPORATION
/s/ Lars Ingelmark /s/ Daniel H. Petree
------------------------ --------------------------
Lars Ingelmark V.P., CFO
------------------------ --------------------------
<PAGE>
ANNEX 1
YEAR 4 RESEARCH PLAN FOR hGH MIMETIC
GOAL: [***]
[***]
GOAL: [***]
[***]
*** [***]
GOAL: [***]
[***]
GOAL: [***]
[***]
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GOAL: [***]
[***]
GOAL: [***]
[***]
GOAL: [***]
[***]
GOAL: [***]
[***]
GOAL: [***]
[***]
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GOAL: [***]
[***]
Total of Arris FTE's
________________________________________________________________________________
[***] AI
[***] Med Chem
[***] Combichem
[***] Assay
[***] Mol Biol
[***] HTS
[***] Crystallography
[***] Mass Spec.
[***]** Peptide
-------
[***]
** [***]
________________________________________________________________________________
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EXHIBIT 10.34
FIRST AMENDMENT TO
RESEARCH AND LICENSE AGREEMENT
THIS FIRST AMENDMENT (the "Amendment") is made and entered as of February
2, 1996, by and between ARRIS PHARMACEUTICAL CORPORATION, a Delaware corporation
with principal offices at 385 Oyster Point Boulevard, Suite 12, South San
Francisco, California 94080 ("ARRIS"), and AMGEN INC., a Delaware corporation
with offices located at Amgen Center, 1840 Dehavilland Drive, Thousand Oaks,
California 91320 ("AMGEN"), in order to amend the terms of that certain Research
and License Agreement between ARRIS and AMGEN, dated May 28, 1993.
RECITALS
WHEREAS, ARRIS and AMGEN have entered into and performed under the
Research and License Agreement, with ARRIS having devoted and AMGEN having
funded the Research Program in accordance with the attached Appendix;
WHEREAS, ARRIS and AMGEN desire to amend the terms of the Research and
License Agreement;
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE ONE
DEFINITIONS
1.1 Unless specified herein, each capitalized tenn shall have the meaning
assigned to it in the Agreement. Each reference to hereunder, hereof, herein and
hereby and each other similar reference and each reference to "this Agreement"
and each other similar reference contained in the Research and License Agreement
shall from and after the date of this Amendment refer to the Research and
License Agreement as modified hereby. Except as amended and supplemented hereby,
all of the terms of the Research and License Agreement shall remain and continue
in full force and affect and are hereby confirmed in all respects.
ARTICLE TWO
AMENDMENTS
2.1 Section 1.29 of the Agreement is hereby modified to read in its entirety
as follows:
" 1.29 'INITIAL TERM' shall mean the initial term of the Research Program,
commencing on September 1, 1993 and terminating on February 14, 1997."
2.2 Section 2.3(f) is hereby amended by adding the following sentences to the
end of the Section:
[***] shall be solely responsible for providing payments under [***]
including the [***]
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[***], except as mutually agreed by the Parties. AMGEN will meet with
ARRIS on or before [***] to discuss proposed terms and conditions [***]
under which [***] may elect to provide all or part of the March 1, 1997
quarterly payment ([***], as adjusted for CPI over the year extending
from May 28, 1995 to May 27, 1996), due under the [***], provided however,
the Parties acknowledge that should the Parties agree that [***] will make
all or part of such March 1, 1997 quarterly payment nothing shall imply
that [***] will have agreed to make any additional payments under any of
the [***], including the [***].
2.3 The second sentence of Section 4.6 of the Agreement is hereby modified to
read entirely as follows:
"The Research Program shall be carried out over the period of the Initial
Term.
2.4 The first sentence of Section 6.1 of the Agreement is hereby modified to
read in its entirety as follows:
"During the term of the Research Program, ARRIS will devote and AMGEN will
fund the conduct of the Research Program by (i) [***] FTEs from
September 1, 1993 to August 31, 1994, (ii) [***] FTEs from September 1,
1994 to October 31, 1995, (iii) [***] FTEs from November 1, 1995 through
February 14, 1997, and (iv) [***] FTEs during each Extension Term
(collectively, the Funding Commitment')."
2.5 Section 6.1(b) of the Agreement is hereby amended by adding the following
sentence to the end of the Section:
"Notwithstanding the foregoing, AMGEN agrees that any amounts by which
[***] between [***] through [***] shall be credited against amounts owed
by AMGEN to ARRIS for the quarter commencing on [***]."
ARTICLE THREE
MISCELLANEOUS
3.1 This Amendment shall be deemed to amend terms of the Agreement under
Section 15.7 thereof and the Agreement, as amended and modified by this
Amendment, shall remain in full force and effect and shall constitute the
complete, final and exclusive understanding and agreement of the parties
respecting subject hereof and thereof.
3.2 Whenever possible each provision of this Amendment shall be interpreted in
such a manner as to be effective and valid under applicable law, but should any
provision of this Agreement be held to be prohibited or invalid under applicable
law, such provision shall be ineffective only to the extent of such prohibition
or invalidity, without invalidating the remainder of this Agreement.
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3.3 This Amendment shall be governed by and interpreted in accordance with the
substantive laws of the State of California and the Parties hereby submit to the
jurisdiction of the California courts, both state and federal.
3.4 No amendment, modification or supplement of any provision of this
Agreement shall be valid or effective unless made in writing and signed by a
duly authorized officer of each Party.
3.5 This Amendment may be signed in any number of counterparts, each of which
shall be an original, with the same effect as though the signatures hereto and
thereto were on the same instrument.
3.6 The recitals and descriptive headings of this Amendment are for
convenience only and shall be of no force or effect in interpreting any of the
provisions of this Agreement.
IN WITNESS WHEREOF, the Parties hereto have executed this Amendment as of
the date first above written.
AMGEN INC. ARRIS PHARMACEUTICAL
CORPORATION
By: /s/ Daniel Vapnek By: /s/ Daniel H. Petree
----------------------------- ------------------------------
Printed Name: Daniel Vapnek Printed Name: Petree
------------------- --------------------
Title: Title: VP, CFO
3
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APPENDIX
<TABLE>
<CAPTION>
FTES DEVOTED FTES FUNDED
BY ARRIS BY AMGEN
------------ -----------
<S> <C> <C>
9/1/93 to 8/31/94 [***] [***]
9/1/94 to 8/31/95 [***] [***]
9/1/95 to 10/30/95 [***] [***]
11/1/95 to 2/28/96 [***] [***]
</TABLE>
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EXHIBIT 10.35
Arris/P&U Research Agreement
RESEARCH AGREEMENT
This Research Agreement (the "Agreement") is made and entered into as of this
29th day of February, 1996 (hereinafter, "Effective Date") by and between
Pharmacia & Upjohn, Inc. a Delaware Corporation having a place of business at
7000 Portage Road, Portage, Michigan 49001, (hereinafter, "P&U") and Arris
Pharmaceutical Corporation, 385 Oyster Point Boulevard, Suite 3, South San
Francisco, CA 94080, a Delaware corporation (hereinafter, "Arris").
WHEREAS, Arris and Kabi Pharmacia AB previously entered into a Collaboration
Agreement dated March 29, 1993 (hereinafter, "Collaboration Agreement"
attached as Appendix "A"), pursuant to which they are conducting a research
collaboration seeking to identify one or more orally active mimics of or
antagonists to human growth hormone and [***] and a Collaborative Research and
License Agreement dated August 29, 1995, (hereinafter, "Collaborative
Agreement") directed toward discovering compositions having anti-coagulation
activity targeting enzyme factor Xa, enzyme factor VIIa or the enzyme
Thrombin.
WHEREAS, Arris and Pharmacia AB previously entered into a Research Agreement
dated December 21, 1994 (hereinafter, "Research Agreement" attached as Appendix
"B"), pursuant to which the parties are conducting a research collaboration to
utilize combinatorial chemistry and high throughput screening (EMS) to
facilitate Pharmacia's drug discovery efforts.
WHEREAS, P&U is the merged company formed by the merger of Pharmacia AB and The
Upjohn Company, and P&U desires to continue the Research Agreement for the
collaboration with Arris to utilize combinatorial chemistry for P&U drug
discovery efforts.
NOW THEREFORE, in consideration of the mutual covenants and promises contained
herein, the parties do hereby agree as follows:
DEFINITIONS
Unless otherwise provided herein, all definitions will be as provided in the
Collaboration Agreement.
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Arris/P&U Research Agreement
"Library" means those compounds prepared by Arris under this Agreement which
includes the set of 250,000 suitably dissimilar nonpeptide compounds using
combinatorial chemistry techniques (also hereinafter referred to as the
"Diversity Set") and the 90,000 compounds supplied by Arris under the Research
Agreement ( also hereinafter referred to as the "Research Agreement Set").
1. DUTIES
1.1 Arris agrees to develop and provide P&U with the following:
(a) Scientific tools, know-how and expertise for establishing
combinatorial chemistry library synthesis capability at P&U's
facilities worldwide including those in the U.S.A., Italy and Sweden
using compatible, if not identical, hardware and software.
(b) A set of 250,000 suitably dissimilar nonpeptide compounds prepared by
Arris using combinatorial chemistry techniques (hereinafter,
"Diversity Set"). The Diversity Set will be prepared and delivered to
P&U on an ongoing basis in a format specified by P&U and acceptable
to Arris at a rate of approximately [***] compounds during the first
year, [***] compounds during the second year and [***] compounds
during the third year of the term of this Agreement. The Diversity
Set will not contain compounds purchased by Arris from third parties,
will be compounds of known structure with accompanying synthesis
protocols and structures in computer readable form, will be
distributed one compound per screening plate well and will be
supplied in a minimum amount of 5 mg to about 10 mg of the compound
in the dry state.
(c) Of the 90,000 compounds to be provided by Arris in the Research
Agreement Set those compounds not yet provided by Arris under the
Research Agreement hereinafter, "Research Agreement Residual Set"),
will be identified as such and will be supplied according to the
schedule in the Research Agreement and as further specified by P&U.
(d) P&U will have access to any Arris Artificial Intelligence,
computational chemistry or other computer technology specifically
designed for lead generation, molecular docking, DE NOVO design,
scaffold selection, library design or chemical diversity developed by
Arris
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prior to and during the term of this Agreement ("Combichem AI"). Arris
will provide to P&U the code and executables for that software
including that for molecular docking and DE NOVO molecular design.
P&U may from time to time participate with Arris in the joint design
of new software. New software so jointly designed will be jointly
owned by the parties. P&U will share with Arris software developments
including code and executables derived from Combichem AI under this
Agreement.
(e) For the term of this Agreement, Arris will provide to P&U scientific
tools and know-how for high throughput screening (HTS) as previously
provided under the Research Agreement.
(f) [***]
1.2 (a) In carrying out its duties under this Agreement, Arris will annually
devote the efforts of at least [***] FTE's (Full Time Equivalents) of
its fully trained staff to fulfilling its obligations under this
Agreement. These efforts are in addition to those being carried out
and already paid for under the Research Agreement.
(b) Arris will provide to the Research Committee a time report and a
financial accounting on at least a quarterly basis of the FTE's that
are committed under this Agreement and a progress report on at least
a quarterly basis as to the completion of their obligations
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Arris/P&U Research Agreement
under this Agreement.
1.3 The set of compounds provided under the Collaboration Agreement, The
Diversity Set and the Research Agreement Set will be mutually exclusive
sets, i.e. no compound in one set will be included in either of the other
sets. The terms of this Agreement will apply to any compound provided
under this Agreement and the Research Agreement.
1.4 If desired by P&U and acceptable to Arris, [***] at a cost to be
determined and agreed upon by the parties in a separate agreement.
2. RESEARCH COMMITTEE
2.1 For the term of this Agreement and [***] thereafter, the parties agree to
form a Research Committee consisting of two representatives from Arris and
up to six representatives from P&U, one of the P&U representatives being
the chair of the Research Committee, to facilitate the research,
collaboration and information exchange contemplated by this Agreement.
2.2 During the term of this Agreement, the Research Committee shall meet
regularly either in person or by tele-conference or video-conference but
at least once every four (4) months. All decisions by the Research
Committee will be made at any of its scheduled meetings and require
agreement by the senior representative of each party present at the
meeting.
2.3 The Research Committee shall be the primary vehicle for formal interaction
between the parties with respect to coordinating the P 1 HE'S obligated
under this Agreement and the research and disclosure of information as
well as transfer of compounds under this Agreement. Without limiting the
foregoing, the Research Committee will be responsible for (a) the timing
and manner of research, disclosure of information, technical exchanges,
transfer of compounds, scientific visits at Arris facilities; (b)
recommending what patent applications should be filed under this Agreement
and reviewing such patent application filings; (c) monitoring the progress
of research and other activities under this Agreement; (d) monitoring and
making
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decisions under Articles 6.2 and 6.3; (e) the chemical design and
monitoring the delivery of the Diversity Set and the Research Agreement
Residual Set; (f) determining the quality standards, suitability and
acceptability of the purity, diversity and dissimilarity of the compounds
provided under Articles l.l(b) and (c), above; (g) determining the
frequency, time and place of Research Committee meetings.
3. EXCHANGE OF CONFIDENTIAL INFORMATION
3.1 All information generated and relating to the compounds in the Diversity
Set and the Research Agreement Set as well as this Agreement is
confidential information and will not be communicated by P&U or Arris to
any third parties during the term of this Agreement and for [***]
thereafter without the express written consent of the nondisclosing party,
such consent to not be unreasonably withheld. Confidential information
will not include information which:
(a) is already known to the receiving party as evidenced by their own
written records;
(b) is disclosed to the receiving party by a third party who has the right
to make such disclosure;
(c) is or becomes part of the public domain through no fault of the
receiving party;
(d) is required to be disclosed to a government agency anywhere in the
world for legitimate commercial or legal purposes, relating TO, INTER
ALIA, drug registration, marketing, and patent applications; provided
the party required to make any such disclosure first notifies the
other party, allowing for comment prior to disclosure, and makes a
reasonable effort to maintain the confidentiality of such agreement;
or
(e) is disclosed to a collaborator or consultant or collaborator as
permitted under Articles 6.2 and 6.3 of the receiving party for
purposes of carrying out the obligations of this Agreement under a
duty of confidentiality to the disclosing party.
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3.2 Software which is jointly designed under this Agreement will be
confidential, and its disclosure will be according to the confidentiality
provisions of 3.1, above. Software which is the sole property of either
party will not be disclosed by the receiving party for a period of [***]
after the termination of this Agreement.
4. INVENTIONS AND PATENTS
4.1 Each party is responsible for filing and prosecuting its own patent
applications and maintaining patents issued from such applications for its
inventions under this Agreement as hereinafter provided. In accordance
with applicable laws of inventorship, each party shall cooperate with the
other to obtain such patent rights. [***] will retain title to
inventions, patents, and other intellectual property rights and know-how
which result from its research and development performed under this
Agreement.
4.2 After consultation with the Research Committee, each party responsible for
filing a patent application shall determine its patent filing strategy,
and the other party will cooperate to the extent necessary to prepare all
papers and documentation in the event of jointly invented inventions made
under this Agreement. All costs for such filing, prosecuting, and
maintaining of joint-inventorship patents shall be borne by [***].
4.3 As regards to patentable inventions independently owned by Arris which
cover the Library, [***]. In the event Arris decides to abandon any such
patent [***]. This paragraph will apply MUTATIS MUTANDIS for patentable
inventions independently owned by P&U which are licensed to Arris under
Article 6 of this Agreement.
4.4 Each party shall promptly advise the other upon becoming aware of any
third party infringement of a patent filed under this Agreement. Each
party shall [***] as follows:
(a) [***]
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Arris/P&U Research Agreement
[***]
(b) If one party holds exclusive rights to a compound which is the
subject of an infringement, that party [***]. In such event, the other
party shall cooperate fully with [***]. If [***] makes a preliminary
determination not to commence a suit, it shall consult with the other
party on a timely basis regarding such preliminary decision, and shall
consider any arguments made by such other party in favor of commencing
litigation, but the decision whether to institute suit shall remain
with the party holding the exclusive rights.
(c) If the subject of an infringement is not a compound as to which
either party holds exclusive rights, then the parties shall first
consult regarding their preferred course of action, as provided in
paragraph (a), above, and in the absence of agreement to institute
suit jointly, each party shall make its own determination as to what
action is in its best interests for the enforcement of its own
intellectual property rights.
(d) Neither party shall enter into any settlement or compromise which
would in any manner alter, diminish or be in derogation of the other
party's rights under this Agreement without the prior written
consent of such other party.
4.5 If any third party brings suits against either party asserting any patent
infringement related to compound(s) discovered, generated or developed
under this Agreement, [***].
5. PAYMENT
5.1 As partial compensation for services rendered and for the licenses and
grants under Article 6
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of this Agreement, P&U agrees to pay Arris as follows:
(a) [***] within thirty (30) days of the Effective Date of this Agreement;
(b) [***] by or upon the one (1) year anniversary of the Effective Date of
this Agreement; and
(c) [***] by or upon the second (2) year anniversary of the Effective Date
of this Agreement.
5.2 In addition to the payments under 5.1, above, P&U agrees to pay Arris as
full compensation for the delivery of compounds in the Diversity Set and for the
licenses and grants under Article 6 the following payments. At the end of each
calendar quarter, Arris shall send P&U an invoice for the number of compounds in
the Diversity Set which have been delivered to P&U in such quarter, multiplied
by [***] per compound. In addition, after Arris has delivered the 250,000
compounds to P&U, it shall be due a one-time supplemental fee of [***]. Such
invoices shall be paid by P&U within thirty (30) days after receipt. The
aggregate payments to be made by P&U under this Article 5.2, assuming delivery
by Arris of the full 250,000 compounds in the Diversity Set, shall be [***]
(consisting of [***] per compound delivered plus the one-time supplemental fee
of [***]).
6. OWNERSHIP, GRANTS AND LICENSES
6.1 (a) Subject to l.l(d), regarding [***] each party will [***] during the
term of this Agreement. The compounds and their chemical structures
contained within the Library shall be [***] for the term of this
Agreement and thereafter, subject to the rights exercised under
Articles 6.2 and 6.3.
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(b) Arris hereby grants to P&U and its Affiliates a nonexclusive,
irrevocable, royalty-free worldwide license under patents and
know-how owned or controlled by Arris and developed prior to or
during the term of this Agreements with no right to sublicense, for
[***].
(c) P&U hereby grants to Arris and its Affiliates a nonexclusive,
irrevocable, royalty-free worldwide license for [***] during the term
of this Agreement, for [***] with no right to sublicense.
6.2 (a) For the term of this Agreement, P&U and its Affiliates agree to
[***] subject to the terms and conditions of parts (b), (c)
and (d) below.
(b) For the term of this Agreement and [***] thereafter, P & U and
its Affiliates have the option to [***] by performing the following
steps:
1) notifying the Research Committee [***],
2) notifying the Research Committee [***]; and
3) obtaining the consent of the Research Committee [***]. The
purpose of such review shall be to
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[***] The Research Committee shall also have the authority to consent
to
[***] based upon a reasonable demonstration of [***].
(c) Arris agrees to grant P&U and its Affiliates a non-exclusive,
royalty-free, irrevocable worldwide license [***], above. [***];
except as provided under part (d), below.
(d) [***]
6.3 (a) Arris agrees to [***]. Over and above said [***], Arris must disclose
to P&U in sufficient detail [***]. Arris does not have the right [***]
during the term of this Agreement and for [***] thereafter.
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(b) For the term of this Agreement and [***] thereafter Arris and its
Affiliates have the option to [***] by performing the following steps:
1) notifying the Research Committee of [***],
2) notifying the Research Committee that [***]; and
3) obtaining the consent of the Research Committee to [***]. The
purpose of such review shall be to [***]. The Research Committee shall
also have the authority to consent to [***].
(c) P&U agrees to grant Arris and its Affiliates a non-exclusive, royalty-
free, worldwide license [***] above. [***] except as provided under
part (d), below.
(d) [***]
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[***]
6.4 Under either part 6.2(b) or 6.3(b), above, any [***] will be identified in
writing to the other party and Research Committee and shall represent a
commitment to develop or have developed [***] although no such
notification shall obligate either party [***], and failure to do so [***]
or other proofs satisfactory to the Research Committee will cause [***].
[***], respectively. In the event [***]. If both parties [***].
6.5 For purposes of part 6.2(c) or 6.3(c), Arris patent or know-how or P&U
patent or know-how, respectively shall mean a patent or know-how owned or
controlled by that party or patents or know-how licensed to that party,
and not held jointly with each other; and the term "Affiliates" shall have
the same meaning as defined in the Collaboration Agreement.
6.6 After the term of this Agreement and the [***] thereafter, the [***]. The
licenses set forth in Article 6.1(b) and any exclusive rights which have
been obtained by either party under 62 or 6.3 shall continue for the
periods indicated therein, but otherwise all licenses in this Agreement
shall terminate.
6.7 In the event a third party patent(s) issues or is discovered in the
U.S.A., Europe or Japan which through no fault of either party prevents
the use of the Arris Combichem AI or the use, manufacture or sale of
[***], such that
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the essential purposes of P&U in entering into this Agreement are
compromised, then the parties shall discuss and renegotiate the terms
and financial obligations of this Agreement to take into consideration
this situation. If agreement cannot be reached or if no license can be
obtained from such third party, through no fault of either party to this
Agreement, (neither party being obligated to institute litigation
against any such third party), then P&U will have the right to terminate
this Agreement without any further obligations or duties to Arris;
except the duty of confidentiality under Article 3 and to the extent
available a right of access to the Library under Article 6.
7. TERM AND TERMINATION
7.1 This Agreement shall be effective as of the date first written above and
shall remain in effect for three (3) years. This Agreement may be extended
upon written agreement by the parties. References in this Agreement to the
period [***] after termination means the period immediately following
termination or conclusion of any extension period.
7.2 Notwithstanding the provisions of Article 7.1 above, either party may
terminate this Agreement upon the bankruptcy or insolvency of the other or
an admission by the other of its inability to pay debts as they become
due.
7.3 P&U has the right to terminate this Agreement under Article 6.7, above.
7.4 This agreement may be terminated by either party for breach or default by
the other party, or for substantial failure by the other party to perform
its duties under this Agreement. If either party is in breach or default
of any of the provisions of this Agreement, or has substantially failed to
perform its duties under this Agreement, and does not rectify such breach
or default or failure within [***] from written notice thereof, the other
party can terminate this Agreement by notice.
7.5 Termination of this Agreement for any reason by either party shall not
relieve the parties of any obligation accruing prior to termination, such
as confidentiality and other provisions which
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by their nature would survive such termination. Any termination of this
Agreement by either party under this Article 7 shall not constitute an
election of remedies by it, and it shall in addition, have all other
remedies provided by law.
7.6 The right of either party to terminate this Agreement as hereinabove
provided shall not be affected in any way by its waiver of or failure to
take action with respect to any previous default. Any such termination
shall be without prejudice to any further rights and remedies vested in
the parties. The license rights granted herein shall survive the
bankruptcy or reorganization of either party.
8. GENERAL PROVISIONS
8.1 This Agreement controls, modifies and supersedes the Research Agreement to
the extent any provisions between them are inconsistent or redundant. This
Agreement, except as otherwise provided herein, constitutes the entire
understanding between the parties with reference to the subject matter
hereof, and no waiver, modification, or amendment of this Agreement shall
be valid or effective unless made in writing and signed by a duly
authorized officer of each party. Should the Collaboration Agreement be
terminated or expire, the references herein to provisions in the
Collaboration Agreement shall remain valid and effective for the purpose
of this Agreement. This Agreement is otherwise separate and independent
from the Collaboration Agreement and the Collaborative Agreement.
8.2 Neither this Agreement nor any interest hereunder shall be assignable by
either party without the other party's written consent; provided, however,
that a party may assign this agreement to any wholly owned subsidiary or
to any successor by merger or sale or the like of substantially all of its
assets to which this Agreement relates in a manner such that the assignor
shall remain liable and responsible for the performance and observance of
all its duties and obligations hereunder.
8.3 The parties expressly agree and contract that it is not the intention of
either party to violate any public policy, statutory or common laws,
rules, regulation, treaties or decisions of any government or agency
thereof of any country. If any word, sentence, paragraph, clause or
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Arris/P&U Research Agreement
combination thereof of this Agreement is judicially or administratively
interpreted or construed as being in violation of any such provisions in
any country, such words, sentences, paragraphs, clauses or combinations
thereof shall be inoperative in each such country and the remainder of
this Agreement shall remain binding upon the parties to this Agreement.
8.4 All notices Squired or authorized to be given under this Agreement shall
be in writing and shall be sent by registered or certified mail,
facsimile, courier, telex or the like to the following addresses for the
respective parties. Such notice shall be effective as of its date of
mailing or transmission.
President
Arris Pharmaceutical Corporation
385 Oyster Point Boulevard, Suite 3
South San Francisco, CA 94080
FAX: 415-737-8590
and
V.P. of Business Development
Pharmacia & Upjohn, Inc.
7000 Portage Road
Portage, Michigan 49001
FAX 616-323-6247
with a copy to
Exec. V P. Worldwide Science and Technology
Pharmacia & Upjohn, Inc.
Knyvett House, The Causeway
Staines
Middlesex TW18 3BA
United Kingdom
15
<PAGE>
8.5 Force Majeure Neither of the undersigned parties shall be liable for
failure to perform its obligations under this Agreement (other than the
payment of monies due) when occasioned by contingencies beyond its
control, such as strikes or other work stoppages, lock-outs, riots, wars
and acts of God, such as fire, floods, storms, and earthquakes. Each
party will notify the other immediately should any such contingency
occur and any time for performance hereunder shall be extended by the
actual time of delay caused by such occurrence.
8.6 (a) No right, expressed or implied, is granted to Arris to use in any
manner the name "Pharmacia AB", "The Upjohn Company" or "Pharmacia &
Upjohn, Inc." or any form thereof or any other trademark or trade
name of P&U or its Affiliates in connection with the performance of
this Agreement. No right, expressed or implied, is granted to P&U to
use in any manner the name "Arris" or any form thereof or any other
trademark or trade name of Arris or its Affiliates in connection
with the performance of this Agreement.
(b) Neither party will issue any press release, SEC filings, prospectus
or any other public announcement relating to this Agreement or its
terms without obtaining the other party's prior written approval
which approval will not be unreasonably withheld. The term "press
release", as used herein, includes follow-up correspondence, press
kits, and the like which may be provided in response to inquiries
from the media or others.
8.7 All titles and captions in this Agreement are for convenience only and
shall not be of any meaning or substance.
8.8 This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
8.9 Each party reserves the right to fulfill its obligations and exercise its
rights under this Agreement through the actions of any of its Affiliates.
8.10 Arris and P&U shall each have the status of an independent contractor
without the power to
16
<PAGE>
Arris/P&U Research Agreement
act as an agent or otherwise bind the other party or its employees.
8.11 This Agreement shall be construed in accordance with and governed by the
laws of the State of Michigan excluding the conflict of laws provisions.
IN WITNESS HEREOF, the parties intending to be bound hereby have caused this
Agreement to be signed by their duly authorized representatives as of the day
and year first above written.
ACCEPTED AND AGREED TO
ARRIS PHARMACEUTICAL CORP. PHARMACIA & UPJOHN, INCORPORATED
/s/Daniel H. Petree /s/ Ley S. Smith
-------------------------- -----------------------------
Name: Daniel H. Petree Name: Ley S. Smith
Title: V.P., C.F.O. Title: Executive VP & President PPC U.S.
17
<PAGE>
Arris/P&U Research Agreement
APPENDIX A
COLLABORATION AGREEMENT DATED MARCH 29, 1993.
<PAGE>
EXHIBIT 10.36
SIXTH AMENDMENT TO LEASE AGREEMENT
This Sixth Amendment to Lease Agreement (the "Sixth" Amendment")
is made as of March 27, 1996, by and between SHELTON PROPERTIES, INC., a
Hawaiian corporation ("Lessor"), and ARRIS PHARMACEUTICAL CORPORATION, a
Delaware corporation, ("Lessee"), with reference to the following:
A. Lessor and Lessee have entered into that certain Standard
Industrial Lease (Multi-Tenant) dated as of October 15, 1992, which Lease
includes that certain First Addendum, Second Addendum, and Third Addendum, all
dated October 15, 1992, which Lease has been amended by an Amendment No. 1 dated
December 29, 1992, Second Amendment to Lease Agreement dated as of August 1,
1993, Third Amendment to Lease dated as of March 29, 1994, Fourth Amendment to
Lease dated October 1, 1994, and Fifth Amendment to Lease dated August 28, 1995,
(collectively, the "Lease"), under which Lessee leased a portion of that certain
Business Park commonly known as Oyster Point Business Park and described as 385
Oyster Point Boulevard, South San Francisco, California (the "Building"), Units
1, 3, 4, 5, 6, 11, 12, 13 and 14 (the "Premises").
WHEREAS Lessor and Lessee wish to amend the Lease as follows:
NOW, THEREFORE, Lessor and Lessee agree as follows:
1. Pursuant to Paragraph 7 of the Fifth Amendment, the new term of
the Lease is November 1, 1995 - October 31, 2001.
2. Except as set forth in this Amendment, all terms and conditions of
the Lease shall remain in full force and effect.
IN WITNESS WHEREOF, Lessor and Lessee have executed this Amendment as of the
date and year first written above.
LESSOR: LESSEE:
Shelton Properties, Inc. Arris Pharmaceutical Corporation
A Hawaiian corporation A Delaware corporation
By: AMB Institutional Realty Advisors,
Inc.
Its: Agent
By: /s/ Gayle P. Starr By: /s/ Daniel H. Petree
Gayle P. Starr Print Name: Daniel H. Petree
Its: Vice President Its: VP, CFO
Date: 4/1/96 Date: 3/29/96
<PAGE>
EXHIBIT 10.37
AMENDMENT TO
FINANCING AGREEMENT
This first Amendment to Financing Agreement ("Amendment") is made as of
March 29, 1996 between Hambrecht & Quist Guaranty Finance, L.P., a California
limited partnership ("Secured Party") and Arris Pharmaceutical Corporation, a
Delaware corporation ("Debtor").
RECITALS
WHEREAS, Secured Party and Debtor entered into that certain Financing
Agreement dated as of March 29, 1994, and
WHEREAS, among other things, the Financing Agreement provides for the
extension of certain financing facilities by Secured Party to Debtor, (the
"Financing Accommodations") and
WHEREAS, Debtor has requested that Secured Party extend to Debtor
additional financing facilities by: (1) purchasing from and leasing back to
Debtor certain additional equipment, trade fixtures, tenant improvements and
other personal property located and used by Debtor in its business operations at
the Premises, (2) providing Debtor with a forward commitment to purchase and
lease to Debtor certain additional equipment to be identified by Debtor prior to
September 30, 1996, (3) permitting Bank to extend additional term loan financing
up to an amount of $2,500,000 and agreeing to subordinate to such Bank
financing, and (4) agreeing to subordinate to future Bank loans not to exceed a
further $2,500,000 (the foregoing financing facilities being hereinafter
included and made a part of the "Financing Accommodation" as that term is
defined in the Recitals of the Financing Agreement) and
WHEREAS, Secured Party has agreed to provide the additional financing
facilities requested by Debtor,
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, Debtor and Secured Party agree as follows:
1. CERTAIN DEFINITIONS: Unless otherwise defined herein, all capitalized
terms used in this Amendment shall have the meanings given to them in the
Financing Agreement.
The following definitions shall be amended as follows:
"EQUIPMENT" shall have the meaning given the term in Section 2.1 of the
Financing Agreement and in Section 2.1 of this Amendment.
<PAGE>
"EVENTS OF DEFAULT" shall have the meaning given the term in Section 13
of the Financing Agreement and in Section 8 of this Amendment.
"LEASE" means that certain Standard Industrial Lease Multi-Tenant, dated
as of October 15, 1992, as amended by those certain First Addendum, Second
Addendum and Third Addendum to Standard Industrial Lease Multi-Tenant, each
dated as of October 15, 1992, that certain Amendment No. 1, dated December 29,
1992, that certain Second Amendment to Lease, dated August 1, 1993, that certain
Third Amendment to Lease Agreement dated March 29, 1994, that certain Fourth
Amendment to Lease Agreement dated October 1, 1994, that certain Fifth Amendment
to Lease Agreement dated August 28, 1995, and that certain Sixth Amendment to
Lease Agreement dated March 29, 1996, (said lease, as amended, being defined
as the "LEASE").
"MASTER PROPERTY LEASE" means that certain Master Property Lease dated
March 29, 1994 and that Master Property Lease, dated as of even date herewith,
between Debtor as Lessee and Secured Party as Lessor, including any amendment
thereto.
"PERSONAL PROPERTY" shall have the meaning given the term in Section
2.1(b) of the Financing Agreement and in Section 2.1(b) of this Amendment.
"PROPERTY" shall have the meaning given the term in Section 2.1 of the
Financing Agreement and in Section 2.1 of this Amendment.
"TERM LOAN FACILITY" shall have the meaning given the term in Section 5.1
of the Financing Agreement and in Section 4.1 of this Amendment.
The following new definitions shall be added:
"AMENDMENT CLOSING DATE" means the later of (a) the date on which this
Amendment is executed by Debtor and Secured Party or (b) the date on which all
conditions precedent under Article 9 of the Financing Agreement and under
Section 7 herein have been satisfied.
"HQGF MARCH 1996 WARRANT AGREEMENT" and "HQGF MARCH 1996 WARRANT". HQGF
March 1996 Warrant Agreement means that certain Warrant Purchase Agreement dated
as of even date herewith by which Debtor grants to Secured Party the right to
purchase a warrant (HQGF March 1996 Warrant) for 38,000 shares of Debtor's
Common Stock at an exercise price of $11 per share, or the last closing price on
the Amendment Closing Date, whichever is higher, exercisable at any time prior
to March 31, 2004, on the terms set forth therein, including any amendment
thereto.
2. PURCHASE SALE AND LEASEBACK OF EQUIPMENT AND FIXTURES.
<PAGE>
2.1 PURCHASE AND SALE OF PROPERTY. On the Amendment Closing Date,
Debtor shall sell to Secured Party and Secured Party shall purchase from Debtor
the following property ("Property"):
(a) EQUIPMENT. Certain equipment located and used in connection with
Debtor's business operations at the Premises and described in the inventory
attached to the Master Property Lease as Schedules _____N/A______ (the
"Equipment").
.
(b) FIXTURES AND TENANT IMPROVEMENTS. Those certain fixtures and tenant
improvements installed in or affixed to the Premises and described in the
inventory attached to the Master Property lease as Schedule No. 2 (the Fixtures
and Improvements) (the Fixtures and Improvements and the Equipment are
collectively referred to in the Financing Agreement and this Amendment as the
Personal Property).
Debtor shall sell and transfer the Property to Secured Party free and
clear of all liens and interests and claims of third parties by executing and
delivering to Secured Party a Bill of Sale in the form of EXHIBIT A attached
hereto.
2.2 LEASEBACK OF PERSONAL PROPERTY. On the Amendment Closing Date
Debtor and Secured Party shall execute and deliver the Master Property Lease
pursuant to which Debtor will sell to Secured Party the Personal Property and
simultaneously lease it back from Secured Party.
3. FORWARD COMMITMENT TO PURCHASE AND LEASEBACK EQUIPMENT.
3.1 PURCHASE OF ADDITIONAL PERSONAL PROPERTY. Subject to the terms
of the Financing Agreement and this Amendment, at any time, and from time to
time, on or after the date of this Amendment and prior to September 30, 1996,
Debtor may direct Secured Party to purchase any Approved Additional Equipment
(as that term is defined in the Financing Agreement) that Debtor deems necessary
for use at the Premises in connection with its business operations therein;
provided however, in no event shall Secured Party be obligated to purchase
Approved Additional Equipment during the period from the Amendment Closing Date
through September 30, 1996, which in the aggregate costs in excess of Two
Million Dollars ($2,000,000) less the amount of Fixtures and Improvements and
Equipment already purchased under the Schedules to the Master Property Lease
referred to in Section 2.1(a) and 2.1(b) above. Subject to the conditions
precedent provided for herein and in the Financing Agreement, Secured Party
shall purchase the Approved Additional Equipment and lease said property to
Debtor pursuant to the Master Property Lease (whereupon the same shall be deemed
Personal Property for purposes of this Amendment).
3.2 INITIAL LEASE TERMS FOR APPROVED ADDITIONAL EQUIPMENT. The
initial lease rates for the Approved Additional Personal Property purchased by
Secured Party and leased to Debtor shall be: 2.1020% of the purchase cost of the
property, per month, for Personal Property purchased during the period from
April 1, 1996 to June 30, 1996, and
<PAGE>
2.1760% of the purchase cost per month, for Personal Property purchased during
the period from July 1, 1996 and September 30, 1996. The initial term of the
lease shall commence on the first day of the month following the purchase of the
property by Secured Party, and shall terminate on October 31, 2001.
3.3 PURCHASE AND RENEWAL TERMS FOR APPROVED ADDITIONAL EQUIPMENT. At
the end of the initial lease term, the Approved Additional Personal Property may
be purchased by Debtor at the original purchase cost less 65% of all rents paid,
down to a minimum price of 10% of cost. If Debtor does not elect to purchase,
Debtor can give six months notice to terminate the lease at any time on or after
October 31, 2001. If no termination notice is given, the lease will
automatically renew at 35% of the initial lease rate.
3.4 EXPIRATION OF COMMITMENT. If on or before September 30, 1996,
Debtor has not directed Secured Party to purchase or if because of a continuing
Event of Default under the Financing Agreement Secured Party is not obligated to
purchase Approved Additional Equipment during the period from the Amendment
Closing Date to September 30, 1996, up to the maximum aggregate cost of Two
Million Dollars ($2,000,000) less the amount of Fixtures and Improvements and
Equipment already purchased under the Schedules to the Master Property Lease
referred to in Section 2.1 (a) and 2.1(b) above, Secured Party's obligation
under this Article 3 to purchase and lease to Debtor Approved Additional
Equipment shall become null and void.
4. EXTENSION OF TERM LOAN FACILITY BY BANK.
4.1 TERM LOAN FACILITY. Arrangements have been made with Bank
for a new term loan facility to be made available to Debtor in an amount up to
Two Million, Five Hundred Thousand Dollars $2,500,000 on the terms more
particularly described in that certain Loan and Security Agreement between Bank
and Debtor dated March 29, 1996, a copy of which is attached hereto as EXHIBIT
B.
4.2 SUBORDINATION. Subject to the conditions precedent set
forth in Section 4.3 hereof, Secured Party agrees to amend the terms of the
intercreditor agreement entered into between Secured Party and Bank as of June
16, 1995 (the "Intercreditor Agreement") , such that Bank will have a senior
security interest in all of Debtor's assets, provided that Secured Party will
have a senior priority interest in the Personal Property covered by the Master
Property Lease.
4.3 CONDITIONS PRECEDENT. Secured Party's agreement to
subordinate to Bank is conditioned upon: ( i ) there being no material
amendment or modification to bank loan terms between Debtor and Bank prior to
the date of disbursement, (ii) Debtor being in compliance with the financial
covenants required by Bank and Secured Party, (iii) there being no amendment to
the maximum loan amount of $2,500,000 being made available by Bank, in addition
to the existing $1,000,000 loan facility.
<PAGE>
4.4 FUTURE SUBORDINATION OF INTEREST. Secured Party agrees to
further subordinate its security position to Bank (or other bank or commercial
lender) in the event that such bank or commercial lender provides Debtor with a
future bank term loan facility up to a maximum amount of $2,500,000,(in addition
to the existing $1,000,000 facility with Bank and the new $2,500,000 loan
facility contemplated in Section 4.1 above) provided that there has been no
material change in Debtor's position and that Debtor has a minimum cash balance
of $20,000,000 or 24 months of Remaining Months Liquidity, as that term is
defined herein, at the time additional loans are made; and further provided that
the loans are made no later than December 31, 1997 and are to be fully amortized
with equal monthly repayments no later than December 31, 2001.
5. ISSUANCE OF WARRANT.
WARRANT AGREEMENT. In consideration of Secured Party's agreement
to subordinate it's position to Bank and to provide the additional financing
accommodations under this Amendment, on the Amendment Closing Date, Debtor shall
execute and deliver to Secured Party the HQGF March 1996 Warrant Agreement and
HQGF March 1996 Warrant.
6. SECURITY AGREEMENT.
GRANT OF SECURITY INTEREST. The Security Interest granted
Secured Party by Debtor in the Collateral as described in the Security Agreement
entered into as of the Closing Date of the Financing Agreement, shall remain in
full force and effect and be continuing so long as there are any outstanding
obligations of Debtor to Secured Party or Bank.
7. CONDITIONS PRECEDENT.
CONDITIONS PRECEDENT. As conditions precedent to Secured Party's
obligation to (1) make any of the Financing Accommodations, or (2) take any
other action under this Amendment or any other Financing Document (which
conditions precedent are intended to be in addition to any conditions precedent
set forth in the Master Property Lease):
(a) Debtor shall deliver, or cause to be delivered, to Secured
Party any of the items described in Article 9 of the Financing Agreement
as they may be required by Secured Party in connection with this
Amendment provided that an opinion of counsel shall not be required. Any
reference to Closing Date in Section 9 of the Financing Agreement shall
also apply to the Amendment Closing Date.
(b) EXTENSION OF MASTER PROPERTY LEASE. Debtor has extended the
non-cancelable lease term for the Schedule 2 Fixtures and Tenant
Improvements, to the Master Property Lease Agreement No. 943, dated March
29, 1994 beyond the
<PAGE>
initial term of the lease to the new expiration date of October 31, 2001.
The lease rate for the extended period, after August 31, 1997, will be as
originally agreed upon, namely $0.7607 per $100.00 of purchase cost, per
month, the rental payments shall be due monthly in advance, together with
the payments due under the new lease schedules.
8. FINANCIAL COVENANTS.
FINANCIAL COVENANTS. Debtor will meet the following financial
covenants and maintain compliance with such covenants ("Financial Covenants"):
1. CASH BALANCE. Beginning March 31, 1996, Debtor shall
maintain a minimum balance of Twenty Million Dollars ($20,000,000) of
cash plus marketable securities, less balance sheet acquisition
liabilities that will, as represented to Bank and Secured Party by
Debtor, be satisfied by cash payment, less other liabilities that arise
outside the normal course of business.
2. DEBT TO NET WORTH RATIO. Beginning March 31, 1996, Debtor
shall maintain, as of the last day of each fiscal quarter (and, if the
Cash Balance falls below Twelve Million Dollars, ($12,000,000) as of the
last day of each month) a ratio of Total Liabilities (excluding deferred
revenue) less Subordinated Debt to Tangible Net Worth plus Subordinated
Debt of not more than 2.00 : 1.00.
In the event that the Cash Balance as defined above falls below
Twenty Million Dollars ($20,000,000), the following covenants shall be in
force:
(a). REMAINING MONTHS LIQUIDITY. Beginning March 31, 1996, if at any
time the Cash Balance specified above falls below Twenty Million Dollars
($20,000,000), Debtor shall maintain Remaining Months Liquidity based on
average monthly Cash Burn, during the quarter just ended, of twelve (12)
months. If the Remaining Months Liquidity is less than twelve (12)
months, Debtor shall pledge cash or a certificate of deposit to Secured
Party (or provide a guaranty by a guarantor and on terms acceptable to
Secured Party) in an amount not less than twenty five percent (25%) of
outstanding remaining lease payments. If the Remaining Months Liquidity
is less than nine (9) months, Debtor shall pledge cash or a certificate
of deposit to Secured Party (or provide a guaranty by a guarantor and on
terms acceptable to Secured Party) in an amount not less than fifty
percent (50%) of outstanding remaining lease payments . If the Remaining
Months Liquidity is less than seven (7) months, Debtor shall pledge cash
or a certificate of deposit to Secured Party (or provide a guaranty by a
guarantor and on terms acceptable to Secured Party) in an amount not less
than one hundred percent (100%) of outstanding remaining lease payments.
(b). PROFITABILITY. Beginning March 31, 1996, if at any time the Cash
Balance specified in Section 8.1 above falls below Twenty Million Dollars
($20,000,000)
<PAGE>
and Debtor's Tangible Net Worth is less than Ten Million Dollars
($10,000,000) then Debtor shall not suffer a loss for the fiscal quarter
ending March 31, 1996 or for any subsequent fiscal quarter in excess of
One Million Five Hundred Thousand Dollars ($1,500,000).
"Remaining Months Liquidity" is defined as Liquidity Coverage divided by
Cash Burn.
"Liquidity Coverage" is defined as cash and marketable securities plus
net amount available to Debtor under a line of credit, plus 50% of
Debtor's net accounts receivable.
"Cash Burn" is defined as cash (prior period) minus cash (current period)
plus any increase in short and long term liabilities (excluding deferred
revenues) plus any increase in equity (or subordinated debt), or minus
any decrease in short and long term liabilities (excluding deferred
revenues) and minus any decrease in equity (or subordinated debt).
Changes in equity shall be calculated exclusive of changes in retained
earnings.
9. EVENTS OF DEFAULTS.
EVENTS OF DEFAULT. If, in addition to any of the events
described in Section 13 of the Financing Agreement, Debtor shall be out of
compliance with the Financial Covenants described in Section 8 of this
Amendment, then an Event of Default shall have occurred.
10. CONTINUING EFFECT. Except as specifically amended hereby, the
Financing Agreement shall be and remain in full force and effect. Without
limiting the generality of the foregoing Debtor represents that the
representations made by Debtor to Secured Party as set out in Section 10 of the
Financing Agreement shall be accurate and valid as of this Amendment Closing
Date, and that Debtor shall comply with all requirements set forth in the
Financing Agreement as if they were a part of this Amendment.
<PAGE>
IN WITNESS WHEREOF, this Amendment has been entered into as of the day
and year first written above.
DEBTOR: ARRIS PHARMACEUTICAL CORPORATION.
a Delaware corporation
By: /S/ Daniel H. Petree
------------------------------
Name: Daniel H. Petree
Title: CFO
SECURED PARTY: HAMBRECHT & QUIST GUARANTY FINANCE, L.P.
a California limited partnership
By: /S/ Donald M. Campbell
------------------------------
Name: Donald M. Campbell
Title: President
Guaranty Finance Management Corp.
General Partner
<PAGE>
EXHIBIT A
TO
AMENDMENT TO FINANCING AGREEMENT
FORM OF
BILL OF SALE
<PAGE>
EXHIBIT B
TO
AMENDMENT TO FINANCING AGREEMENT
COPY OF
BANK
LOAN AND SECURITY AGREEMENT
<PAGE>
MASTER PROPERTY LEASE AGREEMENT
AGREEMENT NO. 963 DATED AS OF MARCH 29, 1996
This Master Property Lease Agreement (together with all Schedules
hereafter described, this "Lease") is entered into by and between HAMBRECHT &
QUIST GUARANTY FINANCE, L.P. ("Lessor"), having its principal place of business
at ONE BUSH STREET, SAN FRANCISCO, CALIFORNIA 94104, and ARRIS PHARMACEUTICAL
CORPORATION ("Lessee"), having its principal place of business at 385 OYSTER
POINT BLVD., SUITE 3, SOUTH SAN FRANCISCO, CALIFORNIA 94080.
1. LEASE: Lessor agrees to lease to Lessee, and Lessee agrees to
lease from Lessor the personal property (each a "Unit" and collectively, the
"Property" or the "Units") described in any schedule hereto described as
"Schedule No._____" from time to time incorporated herein by reference (each a
"Schedule" and collectively, the "Schedules") and on the terms and subject to
the conditions specified herein and therein. "Lessor's Cost", as may be in
effect from time to time, is set forth in each Schedule. Lessor may, in its
sole discretion, terminate its commitment herein to fund such Lessor's Cost at
any time if: (a) there is a material adverse change to the condition (financial
or otherwise) or prospects of Lessee, and/or (b) any Event of Default exists.
This Lease, and Lessee's obligation to pay all rent and
other sums thereunder, shall constitute a "finance lease" under the California
Uniform Commercial Code ("UCC") and shall be absolute and unconditional, and
shall not be subject to and Lessee hereby waives any right of or to abatement,
reduction, set-off, defense or counterclaim. Lessee waives any and all rights
and remedies against Lessor conferred upon Lessee by UCC Sections 10503 through
10522, including (without limitation) Lessee's rights to (i) cancel or repudiate
this Lease, (ii) reject or revoke acceptance of the leased property, (iii)
recover damages from the Lessor for breach of warranty or for any other reason
under such UCC sections, (iv) claim a security interest in any rejected property
in Lessee's possession of control, (v) deduct from rental payments all or any
part of any claimed damages resulting from Lessor's default under this Lease,
(vi) accept partial delivery of the Property, and (vii) "cover" by making any
purchase or lease of other property in substitution from property due from
Lessor, (viii) recover from the Lessor any general, special incidental or
consequential damages, for any reason whatsoever, and (ix) specific performance,
replevin or the like for any of the Property. Lessee acknowledges that it has
received and approved the terms of the agreements with the vendors under which
Lessor will, subject to the terms and conditions of the Lease, purchase the
Units. The Units shall be leased for commercial purposes only, and not for
consumer, personal, home or family purposes.
<PAGE>
2. TERMS AND RENTALS: THIS LEASE SHALL BE EFFECTIVE UPON EXECUTION HEREOF
by the Lessor and Lessee. The rental term as specified in the applicable
Schedule, including any renewal or extension thereof ("Term") shall commence
upon the date of such Schedule. For the Term, Lessee agrees to pay Lessor
aggregate rentals equal to the sum of the rental payments ("Rental Payments")
specified herein and in the applicable Schedule. Lessor will make reasonable
efforts to send Lessee invoices for Rental Payments, but the failure to do so or
the incorrectness of any invoice will not relieve Lessee of its obligation to
pay all amounts, including Rental Payments, due under this Lease. The first
Rental Payment is due on the Rent Commencement Date specified in the applicable
Schedule and remaining Rental Payments are due thereafter on the same date of
each succeeding month of the Term, or as specified in the applicable Schedule.
An interest charge on any overdue payments shall accrue at the rate of 1.5% per
month, or the highest lawful rate, whichever is less. This Lease may only be
terminated as expressly provided herein or in the applicable Schedule.
3. WARRANTIES: Lessee acknowledges that it has made the selection
of each Unit based upon its own judgment. LESSOR MAKES NO EXPRESS OR IMPLIED
WARRANTIES INCLUDING THOSE OF DESCRIPTION, INFRINGEMENT, MERCHANTABILITY OR
FITNESS FOR A PARTICULAR USE OR PURPOSE WITH RESPECT TO THE PROPERTY AND HEREBY
DISCLAIMS THE SAME. Lessor shall have no liability for any damages whether
direct or consequential, incurred by Lessee as a result of any defect or
malfunction of the Property. Lessor hereby assigns to Lessee, for and during
the Term, any warranty of the manufacturer or vendor issued to Lessor on the
Property.
4. TITLE, LOCATION AND RETURN: Lessor and Lessee hereby confirm
their intent that the Property remain and be deemed personal property and that
title thereto shall remain in Lessor. If requested by Lessor, Lessee will affix
plates or markings on the Property indicating the interests of Lessor. Lessee
may not remove the Property from its place of installation without Lessor's
prior written consent, which consent shall not be unreasonably withheld. Lessor
shall have the right to inspect the Property during regular business hours, with
reasonable notice, and in compliance with Lessee's reasonable security
procedures. Upon the expiration or earlier termination of the Term, Lessee at
its own risk and expense, will cause the Property, except as provided in the
Schedules, to be delivered to Lessor in the same condition as when delivered
hereunder, ordinary wear and tear excepted, to such point in the United States
as Lessor may designate and in such a manner as is consistent with the
manufacturer's recommendations, if any, for transportation and packaging of such
Property. All charges to cover Property transportation, deinstallation, storage
until returned, packing, and handling shall be paid by Lessee.
<PAGE>
5. SUBLEASE; ASSIGNMENT: Lessee acknowledges and agrees that
Lessor may sell, assign, grant a security interest in, or otherwise transfer all
or any part of its rights, title and interest in this Lease and the Property.
Upon Lessor's written notice, Lessee shall, if requested, pay directly to such
assignee with abatement, deduction or set-off all amounts which become due
hereunder. Lessee waives and agrees it will not assert against such assignee
any counterclaim or set-off in any action for the rent under the Lease. Such
assignee shall have and be entitled to exercise any and all rights and remedies
of Lessor hereunder, and all references herein to Lessor shall include Lessor's
assignee. Lessee acknowledges that such a sale, assignment, grant or transfer
would neither materially change the Lessee's duties nor materially increase the
burdens or risks imposed on the Lessee under this Lease. LESSEE MAY NOT,
WITHOUT LESSOR'S PRIOR WRITTEN CONSENT, (i) SUBLEASE, TRANSFER, DISPOSE OF OR
ASSIGN ITS RIGHTS IN RESPECT OF ANY UNIT OR ITS OBLIGATIONS UNDER THIS LEASE OR
(ii) ASSIGN, GRANT A SECURITY INTEREST IN, OR OTHERWISE TRANSFER ALL OR ANY PART
OF ITS RIGHTS, TITLE AND INTEREST IN AND TO THIS LEASE OR THE PROPERTY.
Notwithstanding anything to the contrary in the foregoing, Lessee may assign or
transfer its rights in respect of the Units and its obligations under this Lease
to a successor in interest to Lessee by merger, consolidation or sale of all or
substantially all of the assets of Lessee, provided that such successor has a
net worth or financial condition reasonably acceptable to Lessor.
6. TAXES: Lessee agrees to pay if and when due, in addition to
other amounts due hereunder and under each Schedule, all fees and assessments,
and all sales, use, property, excise and other taxes and charges (including all
interest and penalties) (collectively "Taxes"), now or hereafter imposed by any
governmental body or agency upon any of the Property or upon the purchase,
ownership, possession, leasing, operation, use, rentals or other payments, or
disposition hereunder whether payable by Lessor or Lessee (exclusive of taxes on
or measured by Lessor's net income). Lessee agrees to prepare and file promptly
with the appropriate offices any and all tax and similar returns required to be
filed with respect thereto, or, if requested by Lessor, to notify Lessor of such
requirements and furnish Lessor with all information required by Lessor so that
it may effect such filing, at Lessee's expense. Any Taxes paid by or imposed
on, Lessor on behalf of Lessee shall become immediately due and payable on
Lessor's demand. Lessor, as owner, shall be entitled to any and all
depreciation and modified cost recovery deductions provided under the Internal
Revenue Code of 1986, as amended from time to time ("Tax Benefits") and any
other such tax benefits which may now or hereafter be available to an owner of
such Property. If as a result of the acts or failure to act of Lessee or any
person claiming an interest in the Property though the Lessee (other than a
casualty or other event described in Section 9 with respect to which Stipulated
Loss Value shall have been paid by Lessee), Lessor or any of its assigns shall
lose, or shall not, in its reasonable opinion, have the right to claim, or there
shall be disallowed, deferred or recaptured, any portion of the Tax Benefits
with respect to a Unit (a "Loss of Tax Benefits") or there shall be included in
Lessor's gross income any amounts other than Rental Payments in respect of the
purchase price of any Property (an "inclusion"), then,
<PAGE>
on and after the next succeeding rent payment date after written notice to
Lessee by Lessor, Lessee agrees as follows: The rent for the Property shall, on
the rent payment date next succeeding Lessor's written notice to Lessee of
Lessor's payment of any tax payment attributable to such inclusion or of a Loss
of Tax Benefits, be increased to such amount or amounts as shall, by the end of
the original term of the last Schedule to this Lease, in the reasonable opinion
of Lessor, after deduction of all fees, taxes, or other charges required to be
paid by Lessor in respect of the receipt of all amounts payable by Lessee to
Lessor under this Section 6 under the laws of any federal, state, or local
government or taxing authority in the United States, cause Lessor's after-tax
yield and cash flow in respect of the Property to equal those which would have
been realized by Lessor if Lessor had not incurred such a Loss of Tax Benefits
or had such an inclusion. If any claim or contest regarding any tax indemnity
covered by this Section 6 shall arise, such claim or contest shall be addressed
or conducted, at Lessee's expense, in the manner reasonably specified by Lessor.
7. USE; MAINTENANCE: (a) Lessee, at its expense, shall make all
necessary site preparations and cause the Property to be operated in accordance
with any applicable manufacturer's manuals or instructions. So long as no Event
of Default has occurred and is continuing, Lessee shall have the right to
quietly possess and use the Property as provided herein without interference by
Lessor. (b) Lessee, at its expense, shall maintain the Property in good
condition, reasonable wear and tear excepted, and will comply with all laws to
which the use and operation of the Property may be or become subject. Such
obligation shall extend to repair and replacement of any partial loss or damage
to the Property, regardless of the cause. If maintenance is mandated by
manufacturer, Lessee shall obtain and keep in effect, at all times during the
Term maintenance service contracts with suppliers approved by Lessor, such
approval not to be unreasonably withheld. All parts furnished in connection
with such maintenance or repair shall immediately become part of the Property.
All such maintenance, repair and replacement services shall be immediately paid
for and discharged by Lessee with the result that no lien will attach to the
Property.
8. INSURANCE: (a) Lessee shall obtain and maintain for the Term,
at its own expense, "all risk" insurance against loss or damage to the Property,
and general public liability insurance (including contractual liability,
products liability and completed operations coverages) reasonably satisfactory
to Lessor, and such other insurance against other risks of loss and with such
terms, as shall in each case be reasonably satisfactory to Lessor (as to
carriers, amounts and otherwise) or as otherwise set forth in the applicable
Schedule. (b) The amount of the "all risk" insurance shall be the greater of
the replacement value of the Property (as new) or the "Stipulated Loss Value"
specified in the applicable Schedule, which amount shall be determined to
Lessor's reasonable satisfaction as of each anniversary date of this Lease with
the amount so determined being put into effect as of the next succeeding renewal
or inception date of such insurance. (c) The amount of liability and related
coverages shall be specified in the Schedules, or otherwise by the Lessor in
writing. (d) Each "all risk" policy shall: (i) name Lessor sole loss payee with
respect to the Collateral, (ii) provide each insurer's
<PAGE>
waiver of its right of subrogation against Lessor and Lessee, and (iii) provide
that such insurance (A) shall not be invalidated by any action of, or breach of
warranty by, Lessee of a provision of any of its insurance policies, and (B)
shall waive set-off, counterclaim or offset against Lessor. Each liability
policy shall (w) name Lessor as an additional insured and (x) provide that such
insurance shall have cross-liability and severability of interest endorsements
(which shall not increase the aggregate policy limits of Lessee's insurance).
All insurance policies shall (y) provide that Lessee's insurance shall be
primary without a right of contribution of Lessor's insurance, if any, or any
obligation on the part of Lessor to pay premiums of Lessee, and (z) shall
contain a clause requiring the insurer to give Lessor at least 30 days prior
written notice of its cancellation (other than cancellation for non-payment for
which 10 days notice shall be sufficient). Lessee shall on or prior to the date
of Schedule No. 1 and prior to each policy renewal, furnish to Lessor
certificates of insurance or other evidence satisfactory to lessor that such
insurance coverage is in effect. Lessee further agrees to give Lessor prompt
notice of any damage to, or loss of, the Property, or any part thereof.
9. LOSS; DAMAGE; DESTRUCTION AND SEIZURE: (a) Lessee shall bear the
risk of the Units being lost, stolen, destroyed, damaged or seized by
governmental authority for any reason whatsoever at any time until the latest to
occur of (i) the expiration or termination of the Term or (ii) any storage
period thereafter (as described in Section 4 hereof) or (iii) the return of the
subject Unit pursuant to Section 4 hereof, and shall proceed diligently and
cooperate fully to recover any and all damages, insurance proceeds or
condemnation awards. (b) Except as described in Section 9(c) hereof, if during
the Term or the storage period thereafter, any Unit shall be lost, stolen,
destroyed, irreparably damaged or seized by governmental authority for a period
equal to at least the remainder of the Term, Lessor shall receive from the
proceeds of insurance obtained pursuant to Section 8 hereof, from any award paid
by the seizing governmental authority and, to the extent not received from the
proceeds of such insurance or award or both, from Lessee, on or before the
rental payment date next succeeding such loss, theft, destruction, damage or
governmental seizure: (i) all accrued and unpaid rent in respect of such Unit
including rent due on the rental payment date next succeeding the date of such
loss or seizure if the rent is in arrears; (ii) the Stipulated Loss Value of
such Unit, determined as of such Rental Payment date; (iii) and other sums, if
any, that shall have become due and payable hereunder; and (iv) interest on the
foregoing at the lower of the rate equal to 1.5% per month or the highest rate
then permitted by applicable law from the due date(s) of such payment(s) to the
date of payment. On receipt by Lessor of the amount specified hereinabove with
respect to each such Unit so lost, stolen, destroyed, damaged or seized, this
Lease shall be deemed terminated as to such Unit and rent in respect of such
Unit shall be deemed abated, as of the Rental Payment date next succeeding such
loss, theft, damage, destruction or seizure; and so long as no default or Event
of Default has occurred and is continuing hereunder, Lessor shall on demand,
transfer title to such Unit "as is, where is, without recourse, representation
or warranty," to Lessee, or, if appropriate in Lessor's sole judgment, which
judgment shall be exercised in a reasonable manner, and on prior notice to
Lessee, to Lessee's insurance carrier. Any proceeds of insurance obtained by
Lessor pursuant to Section 8 hereof received by Lessee
<PAGE>
shall be paid to Lessor promptly upon their receipt by Lessee. (c) So long as
no Event of Default shall have occurred and be continuing, any proceeds of
insurance obtained pursuant to Section 8 hereof received with respect to any
Unit the repair of which is practical shall, at the election of Lessee, be
applied either to the repair of such Unit or, upon Lessor's receipt of evidence
of the repair of the Unit reasonably satisfactory to Lessor, to the
reimbursement of Lessee for the cost of such repair. (d) Lessee shall promptly,
but in any event within 30 days thereafter, notify Lessor in writing in
reasonable detail of any loss, theft, destruction or seizure described in this
Section 9.
10. EVENTS OF DEFAULT: An "Event of Default" shall occur if Lessee:
(a) fails to pay/make any Rental Payment or other payment required hereunder
when due and such failure continues for a period of 10 business days; or (b)
fails to perform or observe any other material covenant, condition or agreement
hereunder or breaches any provision contained herein or in any other document
furnished Lessor in connection herewith, and such failure or breach for a period
of 30 days after written notice by Lessor: or (c) makes any representation or
warranty herein or in any document furnished in connection herewith, which shall
have been materially false or inaccurate when made; or (d) fails to maintain
insurance under this Lease or otherwise required by the Lessor hereunder; or
(e) shall admit in writing that it is unable to pay its debts as they become
due, become insolvent or bankrupt or make an assignment for the benefit of its
creditors or consents to the appointment of a trustee or receiver or insolvency
proceedings shall be instituted by or against Lessee; or (f) has caused an
Event of Default to occur under the Financing Agreement.
11. REMEDIES: Upon the occurrence of any Event of Default and at any
time thereafter, provided such Event of Default is then continuing (which
occurrences, for purposes of clause (a)(ii)(B) below is the day Lessee shall be
deemed to tender possession of the Property to Lessor), (a) Lessor may, in its
discretion, do any one or more of the following all of which Lessor and Lessee
expressly agree are commercially reasonable under the UCC and any other
applicable law: (i) terminate this Lease; (ii) declare to be immediately due and
payable: (A) all unpaid rent and sums then due and payable under this Lease
(other than amounts payable under clause (B) hereof, if any,) plus (B) an amount
equal to the greater of the then applicable Stipulated Loss Value (which value
Lessee acknowledges has a reasonable discount rate implicit therein) or the then
applicable fair market value of the Property as determined by Lessor (but in no
event less than 15% of Lessor's Cost); (iii) require that Lessee return all
Property to Lessor in accordance with Section 4 hereof; (iv) enter upon the
premises where such Property is located and take immediate possession of and
remove the same, all without liability to Lessor or its agents for such entry;
(v) sell any or all of the Property at public or private sale, with or without
notice to Lessee or advertisement, or otherwise dispose of, hold, use, operate,
lease to others or keep idle such Property, all free and clear of any rights of
Lessee and without any duty to account to Lessee for such action or inaction or
for any proceeds with respect thereto subject to applicable law; (vi) exercise
any other right or remedy which may be available under the UCC or other
applicable law including the right to recover damages for the breach hereof.
(b) In addition, Lessee shall be liable for,
<PAGE>
and reimburse Lessor for, all reasonable and necessary attorneys' fees and other
expenses incurred by Lessor as a result of the foregoing defaults, or the
exercise of Lessor's remedies, including placing any Property in the condition
required by Section 4 hereof. 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 Lessor at law or in equity.
(c) There shall be no waiver by Lessor of any default unless in writing and such
waiver shall not constitute a waiver of any other default by Lessee, or a waiver
of any of Lessor's other rights. After final disposition of all equipment as a
result of the exercise of remedies under this Section 11, Lessee shall be
entitled to receive from Lessor the amount, if any, by which the monetary
recovery by Lessor under this Section 11 exceeds the aggregate amount payable to
Lessor by Lessee under clause (a)(ii) above; PROVIDED, HOWEVER, that Lessee
shall in no event be entitled to receive from Lessor more than the amount
actually paid to Lessor by Lessee under this Section 11 (which amount is
retained by Lessor).
12. LESSEE'S REPRESENTATIONS, WARRANTIES AND COVENANTS: Lessee
warrants and represents the following: (i) Lessee is a corporation duly
organized, validly existing and in good standing under the laws of the state of
its incorporation and is duly qualified and authorized to do business in the
state where the Property will be located. (ii) Lessee has the full corporate
power, authority and legal right and has obtained all necessary approvals,
consents and given all notices to execute and deliver this Lease and perform the
terms hereof and of each Schedule. (iii) There is no action, proceeding or
patent claim pending or, insofar as Lessee knows, threatened against Lessee or
any of its subsidiaries before any court or administrative agency which might
have a materially adverse effect of the business, condition or operations of
Lessee or such subsidiary. (iv) This Lease has been duly executed and
delivered by Lessee and constitutes the valid, binding and enforceable
obligation of Lessee.
13. MISCELLANEOUS: (a) Any notices hereunder shall be in writing and
shall be deemed given when delivered personally, by private courier, by
facsimile transmission or sent by certified mail, postage prepaid, addressed to
the other party at its address set forth herein or to such other address as
either party may designate in writing. Such notices or demands shall be deemed
given upon receipt in the case of personal delivery, mailing or facsimile
transmission. (b) Lessee will promptly execute and deliver to Lessor such
further reasonable documents (including, but not limited to, financing
statements) and take such further reasonable action (such as obtaining landlord
or mortgagee's waivers), as Lessor may
request in order to more effectively carry out the intent and purpose of this
Lease on an assignment of Lessor's interest herein. (c) Lessee shall furnish to
Lessor monthly and audited annual financial statements and such other financial
information as Lessor may reasonably request from time to time. (d) This Lease
constitutes the entire agreement on the subject matter hereof between the
parties hereto (other than any document executed in connection herewith) and
shall be binding upon and inure to the benefit of the parties hereto, their
permitted successors and assigns. (e) Any provision of the Lease which is
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent
<PAGE>
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. (f) Time is of the essence with respect to the Lease. (g)
The captions set forth herein are for convenience only and shall not define or
limit any of the terms hereof. (h) All payments shall be paid to the address
designated in writing by Lessor. (i) Lessee's and Lessor's obligations
hereunder shall survive the expiration and termination of the Term to the extent
required for full performance and satisfaction thereof. (i) ALL MATTERS
INVOLVING THE CONSTRUCTION, VALIDITY, PERFORMANCE AND ENFORCEMENT OF THIS LEASE
WILL BE GOVERNED BY THE LAWS OF THE STATE OF CALIFORNIA WITHOUT GIVING EFFECT TO
PRINCIPLES OF CONFLICTS OF LAW OR CHOICE OF LAW. This Lease is being executed
in the State of California and is to be performed in such State. (k) This Lease
may be executed by the parties hereto in separate counterparts, each of which
when so executed and delivered shall be an original, but all such counterparts
shall together constitute one and the same instrument PROVIDED, HOWEVER, that to
the extent, if any, that this Lease constitutes chattel paper (as such term is
defined in the Uniform Commercial Code as in effect in any applicable
jurisdiction), no security interest in this Lease may be created through the
transfer or possession of any counterpart of this Lease other than the original
executed counterpart of this Lease, which shall be identified as such
counterpart.
<PAGE>
14. AMENDMENTS, MODIFICATIONS, WAIVERS: NONE OF THE PROVISIONS OF
THIS LEASE MAY BE AMENDED, MODIFIED OR WAIVED EXCEPT IN A WRITING SIGNED BY
LESSOR AND LESSEE.
INITIALS____(LESSOR) INITIALS____(LESSEE)
This Lease is hereby duly executed by the parties hereto as set forth below.
LESSEE: LESSOR:
ARRIS PHARMACEUTICAL CORPORATION HAMBRECHT & QUIST GUARANTY FINANCE, L.P.
BY: BY:
----------------------------- -------------------------------
NAME: NAME:
----------------------------- -------------------------------
TITLE: TITLE:
----------------------------- -------------------------------
DATE: DATE:
----------------------------- -------------------------------
<PAGE>
14. AMENDMENTS, MODIFICATIONS, WAIVERS: NONE OF THE PROVISIONS OF
THIS LEASE MAY BE AMENDED, MODIFIED OR WAIVED EXCEPT IN A WRITING SIGNED BY
LESSOR AND LESSEE.
INITIALS DMC (LESSOR) INITIALS DHP (LESSEE)
This Lease is hereby duly executed by the parties hereto as set forth below.
LESSEE: LESSOR:
ARRIS PHARMACEUTICAL CORPORATION HAMBRECHT & QUIST GUARANTY FINANCE, L.P.
BY: /S/ DANIEL H. PETREE BY: /S/ DONALD M. CAMPBELL
----------------------------- -------------------------------
NAME: NAME:
----------------------------- -------------------------------
TITLE: CFO TITLE: President
----------------------------- -------------------------------
Guaranty Finance Management Corp.
General Partner
------------------------
DATE: MARCH 29, 1996 DATE: MARCH 29, 1996
----------------------------- -------------------------------
<PAGE>
SCHEDULE NO. 1
TRUE LEASE
EQUIPMENT SALE/LEASEBACK
This Schedule No. 1 (this "Schedule"), dated March ___, 1996 is a part
of the Master Property Lease Agreement, dated as of MARCH ___, 1996 (the
"Lease"), between Hambrecht & Quist Guaranty Finance, L.P. ("Lessor") and Arris
Pharmaceutical Corporation ("Lessee"). The terms used in this Schedule shall
have the meanings given to them in the Lease unless otherwise defined herein.
In the event of any conflict between the terms of the Lease and the terms of
this Schedule, the Schedule shall govern.
1. DESCRIPTION AND COST OF UNITS
(a) The Units are described in Annex A hereto. The Lessor's Cost
for this Schedule is: $__________
(b) The total Lessor's Cost of all Units under all Schedules
subject to the Lease shall not exceed $2,000,000 of which the initial $________
scheduled shall be the initial lease ("Initial Lease") of which no more than
$1,500,000 may be for Trade Fixtures/Tenant Improvements, and the rest may be
for Equipment. Subsequent to scheduling the Initial Lease no more than
$__________ may be for Equipment on an additional lease ("Additional Lease").
(c) Separate schedules under the Lease shall be prepared for
Trade Fixtures/Tenant Improvements and Equipment, and this Schedule is for:
EQUIPMENT.
(d) Separate schedules under the Lease shall be prepared for the
Initial Lease and in the event Additional Personal Property is added to the
Lease, the lease of such personal property shall be deemed an Additional Lease,
and this Schedule is for the INITIAL LEASE.
2. TERM; ACCEPTANCE; REPRESENTATIONS
(a) Lessee represents and warrants that all of the Units being
delivered on the date hereof are accurately described in Annex A attached hereto
and have been fully assembled and conform to all applicable performance
criteria.
(b) Lessee certifies that the requirements of the Lease and of
Lessor with respect to the identification of the Units have been met.
<PAGE>
(c) Lessee confirms that on the date hereof (i) all of the Units
described on Annex A attached hereto were duly accepted by Lessee and became
subject to the Lease; (ii) the term of the Lease with respect to said Units
commenced; and (iii) Lessee became obligated to make Rental Payments to Lessor
as provided in the Lease and this Schedule.
(d) The Initial Lease Term for the Units covered by this
Schedule shall commence on APRIL 1, 1996 and continue for 67 full months
thereafter through October 31, 2001. The term of this Lease with respect to
any Additional Personal Property covered by this Schedule shall commence on the
date shown in the Acceptance Notice and continue through October 31, 2001.
(e) This Schedule describes the terms of, and is intended by the
parties hereto to be, an integral part of a true lease; provided, however, that
the parties acknowledge that the terms and conditions of the Lease may,
alternatively, create a secured financing or lease for security. If the Lease
as supplemented by this Schedule constitutes such a security agreement or lease
for security, the Lessee hereby grants a security interest to Lessor in all of
Lessee's right, title and interest in the Units described in Annex A to this
Schedule and proceeds thereof, in accordance with the Security Agreement
executed by Lessee on March 29, 1994, to secure all of Lessee's obligations
under the Lease and this Schedule.
(f) On the date hereof, the representations and warranties
contained in Section 12 of the Lease are true and correct, except as described
in Annex C hereto, and there exists on such date no Event of Default.
3. RENT
The "Rent Commencement Date" for the Initial Lease shall be April 1,
1996. The "Rent Commencement Date" for an Additional Lease shall be the earlier
of (a) the first day of the month after the Equipment was purchased or (b)
October 1, 1996.
Initial rent per month: $________ plus applicable taxes, which amount
shall be adjusted in accordance with the rate factors and terms shown
hereinbelow:
- Lease Rate Factor (as a percentage of Property's original Cost to Lessor):
2.0348% PER MONTH.
<PAGE>
Rental Payments shall be made monthly in advance on the first day of each
month, beginning on the Rent Commencement Date.
INVOICE INFORMATION: Lessee's and Lessor's addresses for invoice purposes
for the Property on the Schedule shall be as follows:
Lessee's Invoice Address: Remit Monthly Rental Amount To:
Arris Pharmaceutical Corporation Hambrecht & Quist Guaranty Finance
385 Oyster Point Blvd., Ste. 3 One Bush Street
South San Francisco, CA 94080 San Francisco, CA 94104
It is not the intent of the parties to create rent or other payment
obligations on Lessee which will be considered usurious under applicable
California law. However, if any such payment shall be found to be usurious by a
court of competent jurisdiction, then the Lessee's rental shall automatically be
reduced to the highest rate or amounts permitted by applicable law and the
usurious portion of the rentals shall be applied to the Lessee's remaining
obligations under the Lease in a manner reasonably determined by Lessor.
4. STIPULATED LOSS VALUES
The Stipulated Loss Value payable by Lessee pursuant to Section 9 of the
Lease shall be that percentage of Lessor's Cost of the affected Unit(s) set
forth in the table attached hereto as Annex B opposite the rental payment date
next following the event giving rise to Lessee's obligation to pay Stipulated
Loss Value. Stipulated Loss Values and rents shall not be prorated.
5. INSURANCE
(a) The deductible with respect to "all-risk" and product liability
insurance to be obtained by Lessee pursuant to Section 8 of the Lease shall not
exceed $25,000; except for earthquake and flood insurance where the amount
customary for this shall apply, otherwise there shall be no deductible with
respect to any insurance required to be maintained hereunder without the prior
written approval of Lessor.
(b) The amount of the general public liability insurance (other than
products liability coverage and completed operations insurance) required by
Section 8 of the Lease shall be at least $2,000,000 per occurrence with a
$2,000,000 annual aggregate limit as of the date hereof. The amount of the
products liability and completed operations insurance required by Section 8 of
the Lease shall be at least $1,000,000 per occurrence with a $1,000,000 annual
aggregate
<PAGE>
limit. The amounts of comprehensive general public liability and products
liability insurance coverage (including contractual liability coverage) required
by Section 8 of the Lease shall be in an amount per occurrence, for all
Schedules in effect as of the date of this Schedule, of at least $2,000,000 as
of the date hereof.
6. OPTIONS
(a) Provided that the Lease has not been terminated and that no Event of
Default or event which, with notice or lapse of time or both, would become an
Event of Default shall have occurred and be continuing, Lessee may elect one of
the applicable following options in clauses (i) or (ii) or (iii) below:
(i) LESSEE'S OPTION TO PURCHASE TRADE FIXTURES/TENANT
IMPROVEMENTS: Lessee may elect to purchase all, but not less than all, of the
Units under all schedules for Trade Fixtures/Tenant Improvement under the Lease
at any time on or after the expiration of the initial term for a purchase price
equal to the Lessor's Cost as described in paragraph 1(a) of this Schedule less
fifty percent (50%) of all rents paid (exclusive of sales tax and miscellaneous
fees) to that date, but in no event for less than ten percent (10%) of Lessor's
Cost, plus any applicable sales or other transfer tax.
(ii) LESSEE'S OPTION TO PURCHASE EQUIPMENT: Lessee may elect to
purchase all, but not less than all, of the Units under all schedules for
Equipment, exclusive of Equipment on schedules that has been designated Special
Equipment on a rider to the schedule, under the Lease at any time on or after
the expiration of the initial term for a purchase price equal to the Lessor's
Cost as described in paragraph 1(a) of this Schedule less sixty five percent
(65%) of all rents paid (exclusive of sales tax and miscellaneous fees) to that
date, but in no event for less than ten percent (10%) of Lessor's Cost, plus any
applicable sales or other transfer tax.
(iii) LESSEE'S OPTION TO PURCHASE EQUIPMENT DESIGNATED AS SPECIAL
EQUIPMENT: Provided that Lessee has exercised its option to purchase Trade
Fixtures/Tenant Improvements under clause (i) above, Lessee may elect to
purchase all, but not less than all, the Units under all schedules for
Equipment that has been designated as Special Equipment on a rider to the
schedule, under the Lease at any time on or after the expiration of the initial
term for a purchase price equal to the Lessor's Cost as described in paragraph
1(a) of this Schedule less sixty five percent (65%) of all rents paid (exclusive
of sales tax and miscellaneous fees) to that date, but in no event for less than
ten percent (10%) of Lessor's Cost, plus any applicable sales or other transfer
tax.
(iv) LESSEE'S OPTION TO CANCEL TRADE FIXTURES/TENANT
IMPROVEMENT: Lessee may terminate the rental obligation on all, but not less
<PAGE>
than all, of all Trade Fixtures/Tenant Improvement schedules and all Equipment
schedules which have been designated as Special Equipment, as of October 31,
2001 or any subsequent month end, by giving six months written notice to Lessor;
and shall along with such notice notify Lessor it will return all such Units in
accordance with the terms of the Lease.
(v) LESSEE'S OPTION TO CANCEL EQUIPMENT: Lessee may terminate
the rental obligation on all, but not less than all, Equipment schedules,
exclusive of Equipment on schedules that has been designated Special Equipment
on a rider to the schedule, as of October 31, 2001 or any subsequent month end,
by giving six months written notice to Lessor; and shall along with such notice
notify Lessor it will return all Units in accordance with the terms of the
Lease.
(vi) LESSEE'S OPTION TO CANCEL EQUIPMENT ON SCHEDULES THAT HAS
BEEN DESIGNATED SPECIAL EQUIPMENT: Provided that Lessee has exercised its
option under clause (iv) above, Lessee may terminate the rental obligation on
all, but not less than all, Equipment on schedules that has been designated
Special Equipment on a rider to the schedule, as of October 31, 2001 or any
subsequent month end, by giving six months written notice to Lessor; and shall
along with such notice notify Lessor it will return all Units in accordance with
the terms of the Lease.
(vii) AUTOMATIC RENEWAL OF TRADE FIXTURES/TENANT IMPROVEMENT
LEASE: If the foregoing options in clauses (i) or (iv) for all Trade
Fixtures/Tenant Improvement Schedules are not duly exercised by Lessee, the
Lease shall be renewed at a month-to-month basis at a rate of fifty percent
(50%) of the initial rent rate or a Lease Rate Factor of 1.0422% times the
original cost to Lessor of the Tenant Improvements plus applicable taxes.
Monthly Rental Payments shall be made in advance.
(viii) AUTOMATIC RENEWAL OF EQUIPMENT LEASE: If the foregoing
options in clauses (ii) or (v) for an Equipment Schedule, exclusive of
Equipment on schedules that has been designated Special Equipment on a rider to
the schedule, are not duly exercised by Lessee, the Lease shall be renewed at a
month-to-month basis at a rate of thirty-five (35%) of the initial rent rate or
a Lease Rate Factor of 0.7121% times the original cost to Lessor of the
Equipment, plus applicable taxes. Monthly Rental Payments shall be made in
advance.
(ix) AUTOMATIC RENEWAL OF EQUIPMENT LEASE FOR EQUIPMENT DESIGNATED
AS SPECIAL EQUIPMENT: If the foregoing options in clauses (i) or (iv) for Trade
Fixtures/Tenant Improvements and clauses ((iii) and (vi) for Equipment
designated as Special Equipment, are not duly exercised by Lessee, the Lease
shall be renewed at a month-to-month basis at a rate of thirty-five (35%) of
the
<PAGE>
initial rent rate or a Lease Rate Factor of ______% times the original cost to
Lessor of the Equipment designated Special Equipment plus applicable taxes.
Monthly Rental Payments shall be made in advance.
(b) WARRANTIES: THE PURCHASE OF THE UNITS BY LESSEE PURSUANT TO ITS
OPTION HEREIN SHALL BE "AS IS, WHERE IS," WITHOUT RECOURSE TO OR ANY WARRANTY BY
LESSOR, OTHER THAN A WARRANTY THAT THE UNITS ARE FREE AND CLEAR OF LIENS AND
ENCUMBRANCES RESULTING FROM ACTS OF LESSOR.
7. NOTICES. All notices (and financial information required to be
delivered to Lessor under Section 13(c) of the Lease) shall be addressed as
follows:
If to Lessor: Hambrecht & Quist Guaranty Finance
One Bush Street
San Francisco, California 94104
If to Lessee, at the address set forth on the signature page to this Schedule.
8. CONDITIONS. Lessor's obligations under the Lease and the Schedules
are subject to the prior satisfaction of the following conditions:
(1) Duly executed Schedule marked "Original."
(2) Duly executed Certificate of Acceptance.
(3) UCC Searches, if requested by Lessor.
(4) Certificate of Chief Financial Officer in form attached hereto.
(5) Copies of invoices and/or purchase orders assigned to Lessor or
original invoices and/or purchase orders issued in Lessor's name, for all Units
being placed under the Lease on the date of this Schedule and a Purchase Order
and Invoice Assignment from Lessee to Lessor substantially in the form of
Exhibit A hereto.
(6) In addition, the following conditions must be satisfied:
(a) Lessor shall not be obligated to purchase Units after September
30, 1996
<PAGE>
(b) the Units described on the Schedule are reasonably acceptable to
Lessor,
(c) LESSEE or its agent has inspected and placed identification
labels (supplied by Lessor) on Units,
(d) On or before the date of this Schedule, Lessee shall have
executed and Lessor shall have filed or recorded, to the satisfaction of Lessor,
all instruments and documents, including, but not limited to, Financing
Statements on Form UCC-l and Releases and Termination Statements on Form UCC-2,
then deemed necessary by Lessor to preserve and protect its rights hereunder,
under the Uniform Commercial Code (including the termination of any after-
acquired property clause of third parties with respect to any Unit).
(e) As of the date of this Schedule, there shall not have occurred
any material adverse change in the general affairs, management, financial
condition or results of operations of Lessee and its consolidated subsidiaries
taken as a whole, whether or not arising from transactions in the ordinary
course of business, since the date first written on the first page of the Lease.
(f) On or before the date of this Schedule, Lessor shall have
provided to the entity which sold the Units to Lessor a sales tax exemption
certificate therefor.
(g) On or before the date of this Schedule, Lessor shall have
received all other documents and Lessee shall have performed all other acts as
Lessor shall have reasonably requested to consummate the transaction
contemplated by this Schedule.
<PAGE>
HAMBRECHT & QUIST ARRIS PHARMACEUTICAL
GUARANTY FINANCE, L.P. CORPORATION
By: . By: .
------------------------ ------------------------
Title: . Title: .
------------------------ ------------------------
Lessee's address for notices:
Arris Pharmaceutical Corporation
Attention: Controller
385 Oyster Point Blvd., Suite 3
South San Francisco, CA 94080
<PAGE>
SCHEDULE NO. 2
TRUE LEASE
TRADE FIXTURES/TENANT IMPROVEMENTS SALE/LEASEBACK
This Schedule No. 2 (this "Schedule"), dated March 29, 1996, is a part
of the Master Property Lease Agreement, dated as of March 29, 1996 (the
"Lease"), between Hambrecht & Quist Guaranty Finance, L.P. ("Lessor") and Arris
Pharmaceutical Corporation ("Lessee"). The terms used in this Schedule shall
have the meanings given to them in the Lease unless otherwise defined herein.
In the event of any conflict between the terms of the Lease and the terms of
this Schedule, the Schedule shall govern.
1. DESCRIPTION AND COST OF UNITS
(a) The Units are described in Annex A hereto. The Lessor's Cost for
this Schedule is: $1,296,622.00.
(b) The total Lessor's Cost of all Units under all Schedules subject
to the Lease shall not exceed $2,000,000, of which the initial $1,296,622.00
scheduled shall be the initial lease ("Initial Lease") of which no more than
$1,500,000 may be for Trade Fixtures/Tenant Improvements, and the rest may be
for Equipment. Subsequent to scheduling the Initial Lease no more than
$703,378.00 may be for Equipment on an additional lease ("Additional Lease").
(c) Separate schedules under the Lease shall be prepared for Trade
Fixtures/Tenant Improvements and Equipment, and this Schedule is for: TRADE
FIXTURES/TENANT IMPROVEMENTS.
(d) Separate schedules under the Lease shall be prepared for the
Initial Lease and in the event Additional Personal Property is added to the
Lease, the lease of such personal property shall be deemed an Additional Lease,
and this Schedule is for the INITIAL LEASE.
2. TERM; ACCEPTANCE; REPRESENTATIONS
(a) Lessee represents and warrants that all of the Units being
delivered on the date hereof are accurately described in Annex A attached hereto
and have been fully assembled and conform to all applicable performance
criteria.
(b) Lessee certifies that the requirements of the Lease and of
Lessor with respect to the identification of the Units have been met.
<PAGE>
(c) Lessee confirms that on the date hereof (i) all of the Units
described on Annex A attached hereto were duly accepted by Lessee and became
subject to the Lease; (ii) the term of the Lease with respect to said Units
commenced; and (iii) Lessee became obligated to make Rental Payments to Lessor
as provided in the Lease and this Schedule.
(d) The Initial Lease Term for the Units covered by this Schedule
shall commence on APRIL 1, 1996 and continue for 67 full months thereafter
through OCTOBER 31, 2001. The term of this Lease with respect to any
Additional Personal Property covered by this Schedule shall commence on the date
shown in the Acceptance Notice and continue through October 31, 2001.
(e) This Schedule describes the terms of, and is intended by the
parties hereto to be, an integral part of a true lease; provided, however, that
the parties acknowledge that the terms and conditions of the Lease may,
alternatively, create a secured financing or lease for security. If the Lease
as supplemented by this Schedule constitutes such a security agreement or lease
for security, the Lessee hereby grants a security interest to Lessor in all of
Lessee's right, title and interest in the Units described in Annex A to this
Schedule and proceeds thereof, in accordance with the Security Agreement
executed by Lessee on March 29, 1994, to secure all of Lessee's obligations
under the Lease and this Schedule.
(f) On the date hereof, the representations and warranties contained
in Section 12 of the Lease are true and correct, except as described in Annex C
hereto, and there exists on such date no Event of Default.
3. RENT
The "Rent Commencement Date" for the Initial Lease shall be April 1,
1996. The "Rent Commencement Date" for an Additional Lease shall be the earlier
of (a) the first day of the month after the Equipment was purchased or (b)
October 1, 1996.
Initial rent per month: $27,025.49, plus applicable taxes, which amount
shall be adjusted in accordance with the rate factors and terms shown herein
below:
- Lease Rate Factor (as a percentage of Property's original Cost to
Lessor): 2.0843% PER MONTH.
Rental Payments shall be made monthly in advance on the first day of each
month, beginning on the Rent Commencement Date.
<PAGE>
INVOICE INFORMATION: Lessee's and Lessor's addresses for invoice purposes
for the Property on the Schedule shall be as follows:
Lessee's Invoice Address: Remit Monthly Rental Amount To:
Arris Pharmaceutical Corporation Hambrecht & Quist Guaranty Finance
385 Oyster Point Blvd., Ste. 3 One Bush Street
South San Francisco, CA 94080 San Francisco, CA 94104
It is not the intent of the parties to create rent or other payment
obligations on Lessee which will be considered usurious under applicable
California law. However, if any such payment shall be found to be usurious by a
court of competent jurisdiction, then the Lessee's rental shall automatically be
reduced to the highest rate or amounts permitted by applicable law and the
usurious portion of the rentals shall be applied to the Lessee's remaining
obligations under the Lease in a manner reasonably determined by Lessor.
4. STIPULATED LOSS VALUES
The Stipulated Loss Value payable by Lessee pursuant to Section 9 of the
Lease shall be that percentage of Lessor's Cost of the affected Unit(s) set
forth in the table attached hereto as Annex B opposite the rental payment date
next following the event giving rise to Lessee's obligation to pay Stipulated
Loss Value. Stipulated Loss Values and rents shall not be prorated.
5. INSURANCE
(a) The deductible with respect to "all-risk" and product liability
insurance to be obtained by Lessee pursuant to Section 8 of the Lease shall not
exceed $25,000; except for earthquake and flood insurance where the amount
customary for this shall apply, otherwise there shall be no deductible with
respect to any insurance required to be maintained hereunder without the prior
written approval of Lessor.
(b) The amount of the general public liability insurance (other than
products liability coverage and completed operations insurance) required by
Section 8 of the Lease shall be at least $2,000,000 per occurrence with a
$2,000,000 annual aggregate limit as of the date hereof. The amount of the
products liability and completed operations insurance required by Section 8 of
the Lease shall be at least $1,000,000 per occurrence with a $1,000,000 annual
aggregate limit. The amounts of comprehensive general public liability and
products liability insurance coverage (including contractual liability coverage)
required by
<PAGE>
Section 8 of the Lease shall be in an amount per occurrence, for all Schedules
in effect as of the date of this Schedule, of at least $2,000,000 as of the date
hereof.
6. OPTIONS
(a) Provided that the Lease has not been terminated and that no Event of
Default or event which, with notice or lapse of time or both, would become an
Event of Default shall have occurred and be continuing, Lessee may elect one of
the applicable following options in clauses (i) or (ii) or (iii) below:
(i) LESSEE'S OPTION TO PURCHASE TRADE FIXTURES/TENANT
IMPROVEMENTS: Lessee may elect to purchase all, but not less than all, of the
Units under all schedules for Trade Fixtures/Tenant Improvement under the Lease
at any time on or after the expiration of the initial term for a purchase price
equal to the Lessor's Cost as described in paragraph 1(a) of this Schedule less
fifty percent (50%) of all rents paid (exclusive of sales tax and miscellaneous
fees) to that date, but in no event for less than ten percent (10%) of Lessor's
Cost, plus any applicable sales or other transfer tax.
(ii) LESSEE'S OPTION TO PURCHASE EQUIPMENT: Lessee may elect to
purchase all, but not less than all, of the Units under all schedules for
Equipment, exclusive of Equipment on schedules that has been designated Special
Equipment on a rider to the schedule, under the Lease at any time on or after
the expiration of the initial term for a purchase price equal to the Lessor's
Cost as described in paragraph 1(a) of this Schedule less sixty five percent
(65%) of all rents paid (exclusive of sales tax and miscellaneous fees) to that
date, but in no event for less than ten percent (10%) of Lessor's Cost, plus any
applicable sales or other transfer tax.
(iii) LESSEE'S OPTION TO PURCHASE EQUIPMENT DESIGNATED AS SPECIAL
EQUIPMENT: Provided that Lessee has exercised its option to purchase Trade
Fixtures/Tenant Improvements under clause (i) above, Lessee may elect to
purchase all, but not less than all, the Units under all schedules for
Equipment that has been designated as Special Equipment on a rider to the
schedule, under the Lease at any time on or after the expiration of the initial
term for a purchase price equal to the Lessor's Cost as described in paragraph
1(a) of this Schedule less sixty five percent (65%) of all rents paid (exclusive
of sales tax and miscellaneous fees) to that date, but in no event for less than
ten percent (10%) of Lessor's Cost, plus any applicable sales or other transfer
tax.
(iv) LESSEE'S OPTION TO CANCEL TRADE FIXTURES/TENANT
IMPROVEMENT: Lessee may terminate the rental obligation on all, but not less
than all, of all Trade Fixtures/Tenant Improvement schedules and all Equipment
schedules which have been designated as Special Equipment, as of October 31,
<PAGE>
2001, or any subsequent month end, by giving six months written notice to
Lessor; and shall along with such notice notify Lessor it will return all such
Units in accordance with the terms of the Lease.
(v) LESSEE'S OPTION TO CANCEL EQUIPMENT: Lessee may terminate
the rental obligation on all, but not less than all, Equipment schedules,
exclusive of Equipment on schedules that has been designated Special Equipment
on a rider to the schedule, as of October 31, 2001, or any subsequent month end,
by giving six months written notice to Lessor; and shall along with such notice
notify Lessor it will return all Units in accordance with the terms of the
Lease.
(vi) LESSEE'S OPTION TO CANCEL EQUIPMENT ON SCHEDULES THAT HAS
BEEN DESIGNATED SPECIAL EQUIPMENT: Provided that Lessee has exercised its
option under clause (iv) above, Lessee may terminate the rental obligation on
all, but not less than all, Equipment on schedules that has been designated
Special Equipment on a rider to the schedule, as of October 31, 2001, or any
subsequent month end, by giving six months written notice to Lessor; and shall
along with such notice notify Lessor it will return all Units in accordance with
the terms of the Lease.
(vii) AUTOMATIC RENEWAL OF TRADE FIXTURES/TENANT IMPROVEMENT
LEASE: If the foregoing options in clauses (i) or (iv) for all Trade
Fixtures/Tenant Improvement Schedules are not duly exercised by Lessee, the
Lease shall be renewed at a month-to-month basis at a rate of fifty percent
(50%) of the initial rent rate or a Lease Rate Factor of 1.0422% of the original
cost to Lessor of the Tenant Improvements, plus applicable taxes. Monthly
Rental Payments shall be made in advance.
(viii) AUTOMATIC RENEWAL OF EQUIPMENT LEASE: If the foregoing
options in clauses (ii) or (v) for an Equipment Schedule, exclusive of
Equipment on schedules that has been designated Special Equipment on a rider to
the schedule, are not duly exercised by Lessee, the Lease shall be renewed at a
month-to-month basis at a rate of thirty-five (35%) of the initial rent rate or
a Lease Rate Factor of _______times the original cost to Lessor of the
Equipment plus applicable taxes. Monthly Rental Payments shall be made in
advance.
(ix) Automatic Renewal of Equipment Lease for Equipment
designated as Special Equipment: If the foregoing options in clauses (i) or
(iv) for Trade Fixtures/Tenant Improvements and clauses ((iii) and (vi) for
Equipment designated as Special Equipment, are not duly exercised by Lessee,
the Lease shall be renewed at a month-to-month basis at a rate of
thirty-five (35%) of the initial rent rate or a Lease Rate Factor of
_________ times the original cost to
<PAGE>
Lessor of the Equipment designated Special Equipment plus applicable taxes.
Monthly Rental Payments shall be made in advance.
(b) WARRANTIES: THE PURCHASE OF THE UNITS BY LESSEE PURSUANT TO ITS
OPTION HEREIN SHALL BE "AS IS, WHERE IS," WITHOUT RECOURSE TO OR ANY WARRANTY BY
LESSOR, OTHER THAN A WARRANTY THAT THE UNITS ARE FREE AND CLEAR OF LIENS AND
ENCUMBRANCES RESULTING FROM ACTS OF LESSOR.
7. NOTICES. All notices (and financial information required to be
delivered to Lessor under Section 13(c) of the Lease) shall be addressed as
follows:
If to Lessor: Hambrecht & Quist Guaranty Finance
One Bush Street
San Francisco, California 94104
If to Lessee, at the address set forth on the signature page to this Schedule.
8. CONDITIONS. Lessor's obligations under the Lease and the Schedules
are subject to the prior satisfaction of the following conditions:
(1) Duly executed Schedule marked "Original."
(2) Duly executed Certificate of Acceptance.
(3) UCC Searches, if requested by Lessor.
(4) Certificate of Chief Financial Officer in form attached hereto.
(5) Copies of invoices and/or purchase orders assigned to Lessor or
original invoices and/or purchase orders issued in Lessor's name, for all Units
being placed under the Lease on the date of this Schedule and a Purchase Order
and Invoice Assignment from Lessee to Lessor substantially in the form of
Exhibit A hereto
(6) In addition, the following conditions must be satisfied:
(a) Lessor shall not be obligated to purchase Units after September
30, 1996.
(b) the Units described on the Schedule are reasonably acceptable to
Lessor,
<PAGE>
(c) Lessee or its agent has inspected and placed identification
labels (supplied by Lessor) on Units,
(d) On or before the date of this Schedule, Lessee shall have
executed and Lessor shall have filed or recorded, to the satisfaction of Lessor,
all instruments and documents, including, but not limited to, Financing
Statements on Form UCC-l and Releases and Termination Statements on Form UCC-2,
then deemed necessary by Lessor to preserve and protect its rights hereunder,
under the Uniform Commercial Code (including the termination of any after-
acquired property clause of third parties with respect to any Unit).
(e) As of the date of this Schedule, there shall not have occurred
any material adverse change in the general affairs, management, financial
condition or results of operations of Lessee and its consolidated subsidiaries
taken as a whole, whether or not arising from transactions in the ordinary
course of business, since the date first written on the first page of the Lease.
(f) On or before the date of this Schedule, Lessor shall have
provided to the entity which sold the Units to Lessor a sales tax exemption
certificate therefor.
(g) On or before the date of this Schedule, Lessor shall have
received all other documents and Lessee shall have performed all other acts as
Lessor shall have reasonably requested to consummate the transaction
contemplated by this Schedule.
HAMBRECHT & QUIST ARRIS PHARMACEUTICAL
GUARANTY FINANCE, L.P. CORPORATION
By: /s/ Donald M. Campbell By: /s/ Daniel H. Petree
------------------------------ ---------------------------
Title: President Title: CFO
Guaranty Finance Management Corp.
General Partner
Lessee's address for notices:
Arris Pharmaceutical Corporation
Attention: Controller
385 Oyster Point Blvd., Suite 3
South San Francisco, CA 94080
<PAGE>
SCHEDULE NO. ___
TRUE LEASE
EQUIPMENT
This Schedule No. ___ (this "Schedule"), dated ______________ is a part
of the Master Property Lease Agreement, dated as of March __, 1996 (the
"Lease"), between Hambrecht & Quist Guaranty Finance, L.P. ("Lessor") and Arris
Pharmaceutical Corporation ("Lessee"). The terms used in this Schedule shall
have the meanings given to them in the Lease unless otherwise defined herein.
In the event of any conflict between the terms of the Lease and the terms of
this Schedule, the Schedule shall govern.
1. DESCRIPTION AND COST OF UNITS
(a) The Units are described in Annex A hereto. The Lessor's Cost for
this Schedule is: $ __________
(b) The total Lessor's Cost of all Units under all Schedules subject
to the Lease shall not exceed $2,000,000 of which the initial $ _________
scheduled shall be the initial lease ("Initial Lease") of which no more than
$1,500,000 may be for Trade Fixtures/Tenant Improvements, and the rest may be
for Equipment. Subsequent to scheduling the Initial Lease no more than
$ _________ may be for Equipment on an additional lease ("Additional Lease").
(c) Separate schedules under the Lease shall be prepared for Trade
Fixtures/Tenant Improvements and Equipment, and this Schedule is for:
EQUIPMENT.
(d) Separate schedules under the Lease shall be prepared for the
Initial Lease and in the event Additional Personal Property is added to the
Lease, the lease of such personal property shall be deemed an Additional Lease,
and this Schedule is for an ADDITIONAL LEASE.
2. TERM; ACCEPTANCE; REPRESENTATIONS
(a) Lessee represents and warrants that all of the Units being
delivered on the date hereof are accurately described in Annex A attached hereto
and have been fully assembled and conform to all applicable performance
criteria.
(b) Lessee certifies that the requirements of the Lease and of
Lessor with respect to the identification of the Units have been met.
<PAGE>
(c) Lessee confirms that on the date hereof (i) all of the Units
described on Annex A attached hereto were duly accepted by Lessee and became
subject to the Lease; (ii) the term of the Lease with respect to said Units
commenced; and (iii) Lessee became obligated to make Rental Payments to Lessor
as provided in the Lease and this Schedule.
(d) The Initial Lease Term for the Units covered by this Schedule
shall commence on ______________ and continue for ____ full months thereafter
through October 31, 2001. The term of this Lease with respect to any
Additional Personal Property covered by this Schedule shall commence on the date
shown in the Acceptance Notice and continue through October 31, 2001.
(e) This Schedule describes the terms of, and is intended by the
parties hereto to be, an integral part of a true lease; provided, however, that
the parties acknowledge that the terms and conditions of the Lease may,
alternatively, create a secured financing or lease for security. If the Lease
as supplemented by this Schedule constitutes such a security agreement or lease
for security, the Lessee hereby grants a security interest to Lessor in all of
Lessee's right, title and interest in the Units described in Annex A to this
Schedule and proceeds thereof, in accordance with the Security Agreement
executed by Lessee concurrent herewith, to secure all of Lessee's obligations
under the Lease and this Schedule.
(f) On the date hereof, the representations and warranties contained
in Section 12 of the Lease are true and correct, except as described in Annex C
hereto, and there exists on such date no Event of Default.
3. RENT
The "Rent Commencement Date" for the Initial Lease shall be April 1,
1996. The "Rent Commencement Date" for an Additional Lease shall be the earlier
of (a) the first day of the month after the Equipment was purchased or (b)
October 1, 1996.
Initial rent per month: $________ plus applicable taxes, which amount
shall be adjusted in accordance with the rate factors and terms shown
hereinbelow:
- Lease Rate Factor (as a percentage of Property's original Cost to Lessor):
______% per month.
Rental Payments shall be made monthly in advance on the first day of
each month, beginning on the Rent Commencement Date.
<PAGE>
INVOICE INFORMATION: Lessee's and Lessor's addresses for invoice purposes
for the Property on the Schedule shall be as follows:
Lessee's Invoice Address: Remit Monthly Rental Amount To:
Arris Pharmaceutical Corporation Hambrecht & Quist Guaranty Finance
385 Oyster Point Blvd., Ste. 3 One Bush Street
South San Francisco, CA 94080 San Francisco, CA 94104
It is not the intent of the parties to create rent or other payment
obligations on Lessee which will be considered usurious under applicable
California law. However, if any such payment shall be found to be usurious by a
court of competent jurisdiction, then the Lessee's rental shall automatically be
reduced to the highest rate or amounts permitted by applicable law and the
usurious portion of the rentals shall be applied to the Lessee's remaining
obligations under the Lease in a manner reasonably determined by Lessor.
4. STIPULATED LOSS VALUES
The Stipulated Loss Value payable by Lessee pursuant to Section 9 of the
Lease shall be that percentage of Lessor's Cost of the affected Unit(s) set
forth in the table attached hereto as Annex B opposite the rental payment date
next following the event giving rise to Lessee's obligation to pay Stipulated
Loss Value. Stipulated Loss Values and rents shall not be prorated.
5. INSURANCE
(a) The deductible with respect to "all-risk" and product liability
insurance to be obtained by Lessee pursuant to Section 8 of the Lease shall not
exceed $25,000; except for earthquake and flood insurance where the amount
customary for this shall apply, otherwise there shall be no deductible with
respect to any insurance required to be maintained hereunder without the prior
written approval of Lessor.
(b) The amount of the general public liability insurance (other than
products liability coverage and completed operations insurance) required by
Section 8 of the Lease shall be at least $2,000,000 per occurrence with a
$2,000,000 annual aggregate limit as of the date hereof. The amount of the
products liability and completed operations insurance required by Section 8 of
the Lease shall be at least $1,000,000 per occurrence with a $1,000,000 annual
aggregate limit. The amounts of comprehensive general public liability and
products liability insurance coverage (including contractual liability coverage)
required by
<PAGE>
Section 8 of the Lease shall be in an amount per occurrence, for all Schedules
in effect as of the date of this Schedule, of at least $2,000,000 as of the date
hereof.
6. OPTIONS
(a) Provided that the Lease has not been terminated and that no Event of
Default or event which, with notice or lapse of time or both, would become an
Event of Default shall have occurred and be continuing, Lessee may elect one of
the applicable following options in clauses (i) or (ii) or (iii) below:
(i) LESSEE'S OPTION TO PURCHASE TRADE FIXTURES/TENANT
IMPROVEMENTS: Lessee may elect to purchase all, but not less than all, of the
Units under all schedules for Trade Fixtures/Tenant Improvement under the Lease
at any time on or after the expiration of the initial term for a purchase price
equal to the Lessor's Cost as described in paragraph 1(a) of this Schedule less
fifty percent (50%) of all rents paid (exclusive of sales tax and miscellaneous
fees) to that date, but in no event for less than ten percent (10%) of Lessor's
Cost, plus any applicable sales or other transfer tax.
(ii) LESSEE'S OPTION TO PURCHASE EQUIPMENT: Lessee may elect to
purchase all, but not less than all, of the Units under all schedules for
Equipment, exclusive of Equipment on schedules that has been designated Special
Equipment on a rider to the schedule, under the Lease at any time on or after
the expiration of the initial term for a purchase price equal to the Lessor's
Cost as described in paragraph 1(a) of this Schedule less sixty five percent
(65%) of all rents paid (exclusive of sales tax and miscellaneous fees) to that
date, but in no event for less than ten percent (10%) of Lessor's Cost, plus any
applicable sales or other transfer tax.
(iii) LESSEE'S OPTION TO PURCHASE EQUIPMENT DESIGNATED AS SPECIAL
EQUIPMENT: Provided that Lessee has exercised its option to purchase Trade
Fixtures/Tenant Improvements under clause (i) above, Lessee may elect to
purchase all, but not less than all, the Units under all schedules for
Equipment that has been designated as Special Equipment on a rider to the
schedule, under the Lease at any time on or after the expiration of the initial
term for a purchase price equal to the Lessor's Cost as described in paragraph
1(a) of this Schedule less sixty five percent (65%) of all rents paid (exclusive
of sales tax and miscellaneous fees) to that date, but in no event for less than
ten percent (10%) of Lessor's Cost, plus any applicable sales or other transfer
tax.
(iv) LESSEE'S OPTION TO CANCEL TRADE FIXTURES/TENANT
IMPROVEMENT: Lessee may terminate the rental obligation on all, but not less
than all, of all Trade Fixtures/Tenant Improvement schedules and all Equipment
schedules which have been designated as Special Equipment, as of October 31,
<PAGE>
2001, or any subsequent month end, by giving six months written notice to
Lessor; and shall along with such notice notify Lessor it will return all such
Units in accordance with the terms of the Lease.
(v) LESSEE'S OPTION TO CANCEL EQUIPMENT: Lessee may terminate
the rental obligation on all, but not less than all, Equipment schedules,
exclusive of Equipment on schedules that has been designated Special Equipment
on a rider to the schedule, as of October 31, 2001, or any subsequent month end,
by giving six months written notice to Lessor; and shall along with such notice
notify Lessor it will return all Units in accordance with the terms of the
Lease.
(vi) Lessee's Option to Cancel Equipment on schedules that has
been designated Special Equipment: Provided that Lessee has exercised its
option under clause (iv) above, Lessee may terminate the rental obligation on
all, but not less than all, Equipment on schedules that has been designated
Special Equipment on a rider to the schedule, as of October 31, 2001, or any
subsequent month end, by giving six months written notice to Lessor; and shall
along with such notice notify Lessor it will return all Units in accordance with
the terms of the Lease.
(vii) AUTOMATIC RENEWAL OF TRADE FIXTURES/TENANT IMPROVEMENT
LEASE: If the foregoing options in clauses (i) or (iv) for all Trade
Fixtures/Tenant Improvement Schedules are not duly exercised by Lessee, the
Lease shall be renewed at a month-to-month basis at a rate of fifty percent
(50%) of the initial rent rate or a Lease Rate Factor of 1.0422% of the original
cost to Lessor of the Tenant Improvements plus applicable taxes. Monthly Rental
Payments shall be made in advance.
(viii) AUTOMATIC RENEWAL OF EQUIPMENT LEASE: If the foregoing
options in clauses (ii) or (v) for an Equipment Schedule, exclusive of
Equipment on schedules that has been designated Special Equipment on a rider to
the schedule, are not duly exercised by Lessee, the Lease shall be renewed at a
month-to-month basis at a rate of thirty-five (35%) of the initial rent rate or
a Lease Rate Factor of ___% OF the original cost to Lessor of the Equipment
plus applicable taxes. Monthly Rental Payments shall be made in advance.
(ix) Automatic Renewal of Equipment Lease for Equipment
designated as Special Equipment: If the foregoing options in clauses (i) or
(iv) for Trade Fixtures/Tenant Improvements and clauses ((iii) and (vi) for
Equipment designated as Special Equipment, are not duly exercised by Lessee,
the Lease shall be renewed at a month-to-month basis at a rate of
thirty-five (35%) of the initial rent rate or a Lease Rate Factor of _____%
of the original cost to Lessor of
<PAGE>
the Equipment designated Special Equipment plus applicable taxes. Monthly
Rental Payments shall be made in advance.
(b) WARRANTIES: THE PURCHASE OF THE UNITS BY LESSEE PURSUANT TO ITS
OPTION HEREIN SHALL BE "AS IS, WHERE IS," WITHOUT RECOURSE TO OR ANY WARRANTY BY
LESSOR, OTHER THAN A WARRANTY THAT THE UNITS ARE FREE AND CLEAR OF LIENS AND
ENCUMBRANCES RESULTING FROM ACTS OF LESSOR.
7. NOTICES. All notices (and financial information required to be
delivered to Lessor under Section 13(c) of the Lease) shall be addressed as
follows:
If to Lessor: Hambrecht & Quist Guaranty Finance
One Bush Street
San Francisco, California 94104
If to Lessee, at the address set forth on the signature page to this Schedule.
8. CONDITIONS. Lessor's obligations under the Lease and the Schedules
are subject to the prior satisfaction of the following conditions:
(1) Duly executed Schedule marked "Original."
(2) Duly executed Certificate of Acceptance.
(3) UCC Searches, if requested by Lessor.
(4) Certificate of Chief Financial Officer in form attached hereto.
(5) Copies of invoices and/or purchase orders assigned to Lessor or
original invoices and/or purchase orders issued in Lessor's name, for all Units
being placed under the Lease on the date of this Schedule and a Purchase Order
and Invoice Assignment from Lessee to Lessor substantially in the form of
Exhibit A hereto.
(6) In addition, the following conditions must be satisfied:
(a) Lessor shall not be obligated to purchase Units after September
30, 1996.
(b) the Units described on the Schedule are reasonably acceptable to
Lessor,
<PAGE>
(c) Lessee or its agent has inspected and placed identification
labels (supplied by Lessor) on Units,
(d) On or before the date of this Schedule, Lessee shall have
executed and Lessor shall have filed or recorded, to the satisfaction of Lessor,
all instruments and documents, including, but not limited to, Financing
Statements on Form UCC-l and Releases and Termination Statements on Form UCC-2,
then deemed necessary by Lessor to preserve and protect its rights hereunder,
under the Uniform Commercial Code (including the termination of any after-
acquired property clause of third parties with respect to any Unit).
(e) As of the date of this Schedule, there shall not have occurred
any material adverse change in the general affairs, management, financial
condition or results of operations of Lessee and its consolidated subsidiaries
taken as a whole, whether or not arising from transactions in the ordinary
course of business, since the date first written on the first page of the Lease.
(f) On or before the date of this Schedule, Lessor shall have
provided to the entity which sold the Units to Lessor a sales tax exemption
certificate therefor.
(g) On or before the date of this Schedule, Lessor shall have
received all other documents and Lessee shall have performed all other acts as
Lessor shall have reasonably requested to consummate the transaction
contemplated by this Schedule.
HAMBRECHT & QUIST ARRIS PHARMACEUTICAL
GUARANTY FINANCE, L.P. CORPORATION
By: By:
--------------------------- ---------------------------
Title: Title:
------------------------ ------------------------
Lessee's address for notices:
Arris Pharmaceutical Corporation
Attention: Controller
385 Oyster Point Blvd., Suite 3
South San Francisco, CA 94080
<PAGE>
WARRANT PURCHASE AGREEMENT
THIS WARRANT PURCHASE AGREEMENT (the "Agreement") is made and entered
into as of the 29th day of March, 1996 by and among Arris Pharmaceutical
Corporation, a Delaware corporation (the "Company") and HAMBRECHT & QUIST
GUARANTY FINANCE L.P., a California limited partnership ("H&QGF"). H&QGF shall
be referred to herein as the "Investor." As used in this Agreement, the term
"Shares" shall mean the shares of Common Stock issuable from time to time upon
exercise of the Warrant, as defined in Section 1.1 below, or upon exercise of
the rights to convert the Warrant, as provided under Section 7 of the Warrant
(the "Conversion Rights").
The parties hereto agree as follows:
Article 1. SALE AND PURCHASE OF WARRANT; CLOSING.
1.1 SALE AND PURCHASE OF WARRANT. The Company agrees to sell to the
Investor and the Investor agrees to purchase from the Company for a purchase
price of $380.00, a warrant in the form attached hereto as Exhibit A to purchase
38,000 shares of the Company's Common Stock (the "Common Stock") at an initial
per share exercise price of $11.00 or the last closing price of the stock of the
Company, on the day of the Closing of this Agreement, whichever is higher. The
Warrant will be exercisable at any time on or before March 31, 2004. The
warrant to be issued to the Investor hereunder shall be referred to as the
"Warrant."
1.2 CLOSING. The issuance of the Warrant shall take place on the date
hereof, or on such other date as the parties shall mutually agree (the
"Closing"). At the Closing, the Company shall cause to be delivered to the
Investor the Warrant issued in the name of such Investor and Investor shall pay
the Company $380.00.
Article 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
hereby agrees and represents and warrants to the Investor as follows:
2.1 CORPORATE STATUS. The Company is a corporation duly organized,
validly existing, and in good standing under the laws of the State of Delaware
and has all requisite legal and corporate power and authority to own, lease and
operate its properties and assets and to carry on its business as now conducted
and as proposed to be conducted. The Company is duly licensed or qualified to
transact business as a foreign corporation in each jurisdiction in which the
Company is required by reason of its activities or ownership or lease of
property to be so qualified and where the failure
<PAGE>
to be so qualified would have a material adverse effect on the business or
operations of the Company.
2.2 CAPITALIZATION. As of February 29, 1996, the authorized, issued and
outstanding capitalization of the Company, including the number of shares of any
class reserved for issuance upon exercise of any outstanding options, warrants,
conversion privileges or preemptive or other rights is as provided in Schedule
1.
2.3 AUTHORIZATION. All corporate action on the part of the Company, its
officers, directors and shareholders necessary for the authorization, execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby, including the authorization, issuance and
delivery of the Warrant, the reservation of the Shares issuable upon the
exercise thereof, and the grant of registration rights to the Investor, has been
taken. The person signing this Agreement has full power and authority to enter
into this Agreement on behalf of the Company. When executed and delivered, this
Agreement will constitute a valid and binding obligation of the Company.
2.4 CORPORATE POWER. The Company has all requisite legal and corporate
power and authority to enter into this Agreement and all requisite legal and
corporate power and authority to issue and deliver the Warrant and the Shares
and to carry out and perform its obligations under the terms and conditions of
this Agreement and the Warrant.
2.5 VALIDITY OF WARRANT. The Warrant to be issued and delivered pursuant
to this Agreement shall constitute a valid and binding obligation of the
Company. The Shares have been duly and validly reserved, and when issued shall
be duly authorized, validly issued, fully paid and nonassessable and free of any
liens or encumbrances except for restrictions on transfer provided for under
applicable federal and state securities laws. During the period within which
the purchase right represented by the Warrant may be exercised, the Company
shall at all times have authorized, and reserved for issuance upon exercise of
the Warrant or upon exercise of the Conversion Rights, a sufficient number of
shares of Common Stock to provide for the issuance of the Shares. The issuance
of such Common Stock will not be subject to any preemptive rights or rights of
first refusal.
Article 3. REPRESENTATIONS AND WARRANTIES OF THE INVESTOR. The Investor
represents and warrants to the Company that:
3.1 AUTHORIZATION. The person signing this Agreement has full power and
authority to enter into this Agreement on behalf of the Investor. When executed
and
<PAGE>
delivered, this Agreement will constitute the Investor's valid and legally
binding obligation.
3.2 INVESTMENT REPRESENTATIONS.
(a) The Investor understands that the Warrant and the Shares have
not been registered under the Securities Act of 1933, as amended (the "Act") and
will be issued pursuant to an exemption from registration contained in the Act
based in part upon the representations of the Investor contained herein.
(b) The Investor is acquiring the Warrant and the Shares solely for
its own account and not as a nominee for any other party and not with a view
toward the resale or distribution thereof.
(c) The Investor is a sophisticated investor experienced in venture
capital investing and able to fend for itself. The Investor is able to bear the
economic risk of the purchase of the Warrant and the Shares, including a
complete loss of such Investor's investment. The Investor has been afforded an
opportunity to ask such questions of the Company's officers, employees, agents,
accountants and representatives concerning the Company's business, operations,
financial condition, assets, liabilities and other relevant matters as it has
deemed necessary or desirable.
Article 4. CONDITIONS OF THE INVESTOR'S OBLIGATIONS AT THE CLOSING. The
obligation of the Investor to purchase the Warrant is subject to the fulfillment
to its satisfaction, or its written waiver thereof, prior to or at the Closing,
of each of the following conditions:
4.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
of the Company contained in Article 2 hereof shall be true and correct on and as
of the Closing.
4.2 CORPORATE ACTION. All corporate action on the part of the Company,
its officers, directors and stockholders necessary for the authorization,
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby shall have been taken.
4.3 OPINION OF COUNSEL. There shall have been delivered to the Investor
an opinion of the Company's Counsel dated as of the date of the Closing in
substantially the form attached hereto as Exhibit B.
4.4 DELIVERY OF WARRANT. The Warrant shall have been delivered to the
Investor.
4.5 GOVERNMENTAL CONSENTS. All permits, consents, approvals, orders and
authorizations, if any, which the Company is required to obtain from, and all
<PAGE>
registrations, qualifications, designations, declarations and filings which the
Company is required to make with any Federal or state governmental authority of
the United States in connection with the execution, delivery or performance of
this Agreement, the consummation of the transactions contemplated hereby or the
issuance and delivery of the Warrant to the Investor pursuant to this Agreement,
except post-sale filings which may be required under the Blue Sky laws of any
applicable states, shall have been duly obtained or made and shall be effective
on and as of the Closing.
4.6 REGISTRATION RIGHTS. The Company shall provide the Investor such
evidence as the Investor may require that all corporate action on the part of
the Company, its officers, directors and stockholders necessary for the grant of
registration rights pursuant to Section 6 hereof has been taken prior to the
Closing.
Article 5. CONDITIONS OF THE COMPANY'S OBLIGATIONS AT THE CLOSING. The
obligation of the Company to issue the Warrant to the Investor is subject to the
fulfillment to its satisfaction, or its written waiver thereof, prior to or at
the Closing, of the condition that the representations and warranties of the
Investor contained in Article 3 hereof shall be true and correct on and as of
the Closing.
Article 6. REGISTRATION RIGHTS. The Company agrees that, with respect to
the Shares, the Investor or any transferee thereof shall be entitled to the same
registration rights (the "Registration Rights"), in the same manner and the same
extent, as a "Holder" pursuant to Section 2 of the Company's Registration Rights
Agreement dated April 16, 1993, a true and correct copy of which is attached
hereto as Exhibit C (the "Registration Rights Agreement") but shall not
otherwise be a party to such agreement. The Investor or its transferee, shall
be deemed a "Holder" and the Shares shall be deemed "Registrable Securities" as
those terms are defined in the Registration Rights Agreement. Anything to the
contrary in the Registration Rights Agreement notwithstanding, the Registration
Rights granted hereby to the Investor may be transferred to any affiliate of the
Investor. The Company agrees that no consent of the parties to the Registration
Rights Agreement is required for the grant of the Registration Rights to the
Investor, or if such consent is required it has been obtained in accordance with
the Registration Rights Agreement.
Article 7. COVENANTS OF COMPANY.
7.1 FINANCIAL STATEMENTS. So long as the Investor continues to hold a
Warrant or any Shares, the Company shall deliver to such Investor the Company's
annual audited financial statements (consisting of a consolidated profit or loss
statement for such fiscal year, a consolidated balance sheet of the Company as
of the end of the year, and a consolidated statement of changes in financial
condition for such fiscal year, certified by independent public accountants of
recognized national standing selected by the Company) within ninety (90) days
following the end of each fiscal year of the Company,
<PAGE>
and the Company's quarterly unaudited financial statements (consisting of an
unaudited consolidated profit or loss statement for such fiscal quarter and an
unaudited consolidated balance sheet as of the end of such fiscal quarter)
within forty-five (45) days after the end of each fiscal quarter. All financial
statements delivered to the Investor hereunder shall be prepared in accordance
with generally accepted accounting principles on a basis consistently applied by
the Company, except that unaudited statements may be subject to non-material
year-end audit adjustments and may not contain all footnotes required under
generally accepted account principles.
7.2 STOCKHOLDER DATA. The Company agrees to deliver to the Investor,
promptly after they are available, complete copies of any and all press
releases, proxy statements, financial statements and reports as the Company
shall send to its stockholders generally or to investors under any information
rights granted under stock purchase agreements. The Investor shall have all
rights to information and access to information as are granted stockholders
under the laws of the state of the Company's incorporation.
7.3 TRANSFER OF INFORMATION RIGHTS. The right to receive information
under this Article 7 may be transferred to any subsequent holder of a Warrant
who acquires the right to purchase not fewer than 25% of the Shares initially
subject to the Warrant (as appropriately adjusted for stock splits, stock
dividends, stock subdivisions and stock combinations with respect to Common
Stock).
Article 8. MISCELLANEOUS
8.1 AGREEMENT IS ENTIRE CONTRACT. This Agreement, including the Exhibits
and Schedule 1 hereto, constitutes the entire contract between the parties
hereto with respect to the subject matter hereof.
8.2 EXPENSES. The Company shall bear its own expenses incurred in
connection with the negotiation, preparation, execution and consummation of this
Agreement, and the Company shall reimburse the Investor for its out-of-pocket
expenses.
8.3 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations,
warranties, covenants and agreements of the Company and the Investor contained
herein or made pursuant to this Agreement shall survive the execution and
delivery of this Agreement and the Closing.
8.4 SEVERABILITY. If one or more provisions of this Agreement are held
to be invalid, illegal or unenforceable under applicable law, portions of such
provisions, or such provisions in their entirety, to the extent necessary, shall
be severed from this Agreement, and the balance of this Agreement shall be
enforceable in accordance with its terms.
<PAGE>
8.5 COUNTERPARTS. This Agreement may be executed in two counterparts,
each of which shall be deemed an original, but both of which together shall
constitute one and the same instrument.
8.6 GOVERNING LAW. It is the intention of the parties hereto that the
internal laws of the State of California, as applied to contracts entered into
between California residents to be performed wholly within California, shall
govern the validity of this Agreement, the construction of its terms, and the
interpretation and enforcement of the rights and duties of the parties hereto.
8.7 BINDING UPON SUCCESSORS AND ASSIGNS. This Agreement and the rights
and obligations of the parties hereunder shall be binding upon, and inure to the
benefit of, the permitted successors and assigns of the parties hereto.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
ARRIS PHARMACEUTICAL CORPORATION
By: /s/ Daniel H. Petree
---------------------------
(Signature)
Name: Daniel H. Petree
---------------------------
(Print)
Title: CFO
---------------------------
HAMBRECHT & QUIST GUARANTY FINANCE, L.P.
By: Guaranty Finance Management Corp.
Its General Partner
By: /s/ Donald M. Campbell
---------------------------
(Signature)
Name: Donald M. Campbell
---------------------------
(Print)
Title: President
Guaranty Finance Management Corp.
General Partner
<PAGE>
SCHEDULE 1
Capitalization of the Company as of _________ ___, 1996
<PAGE>
EXHIBIT A
(Attach a copy of the Warrant)
<PAGE>
EXHIBIT B
[LETTERHEAD OF COMPANY COUNSEL]
TO: HAMBRECHT & QUIST GUARANTY FINANCE, L.P.
Gentlemen:
We have acted as counsel to Arris Pharmaceutical Corporation, a Delaware
corporation (the "Company"), in connection with the issuance and sale to you of
a warrant (the "Warrant") to purchase an aggregate of 38,000 shares of the
Common Stock of the Company pursuant to that certain Warrant Purchase
Agreement, dated as of March ___, 1996 (the "Agreement"), between you and the
Company. We are rendering this opinion pursuant to Section 4.3 of the
Agreement. As counsel to the Company, we participated in the preparation,
execution and delivery of the Agreement and the Warrant and have made such legal
and factual examinations and inquiries as we have deemed advisable or necessary
for the purpose of rendering this opinion. In addition, we have examined
originals or copies of documents, corporate records and other writings which we
consider relevant for the purposes of this opinion. Capitalized terms defined
in the Agreement, and not otherwise defined herein, are used herein with the
meanings so defined.
Based upon and subject to the foregoing and subject to the qualifications
contained herein, we are of the opinion that:
1. All corporate action on the part of the Company and its officers,
directors and stockholders necessary for the due and valid execution and
delivery of the Agreement and for the consummation of the transactions
contemplated thereby, including, but not limited to, the issuance and sale of
the Warrant to you, has been taken. The Company is duly licensed or qualified
to transact business as a foreign corporation in each jurisdiction in which the
Company is required by reason of its activities or ownership or lease of
property to be so qualified.
2. The Company has all requisite legal and corporate power and
authority to enter into this Agreement and all requisite legal and corporate
power and authority to issue and deliver the Warrant and the Shares and to carry
out and perform its obligations under the terms and conditions of the Agreement
and the Warrant.
3. The Agreement has been duly executed and delivered by the Company
and represents a valid and binding obligation of the Company.
<PAGE>
4. The Warrant has been duly and validly issued and represents a valid
and binding obligation of the Company.
5. The shares of Common Stock issuable upon exercise of the Warrant
have been duly and validly reserved for issuance and, if issued pursuant to the
terms and conditions of the Warrant, shall be duly authorized, validly issued,
fully paid and nonassessable.
6. The Warrant and the Shares have been, or upon issuance will have
been, issued in compliance with all applicable federal and state securities
laws.
Very truly yours,
--------------------------
<PAGE>
EXHIBIT C
(Attach a copy of the Company's Stock Registration Rights Agreement)
<PAGE>
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY NOT BE OFFERED FOR SALE, SOLD, PLEDGED OR OTHERWISE TRANSFERRED
WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR LAWS OR PURSUANT TO
RULE 144 OR AN OPINION OF COUNSEL, REASONABLY SATISFACTORY TO THE COMPANY AND
ITS COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED.
WARRANT TO PURCHASE SHARES
OF COMMON STOCK
Company: Arris Pharmaceutical Corporation, a Delaware corporation (the
"Company"), and any corporation that shall succeed to the
obligations of the Company under this Warrant.
Number of Shares: 38,000
-------------------
Class of Stock: Common Stock
-------------------
Initial Exercise Price: $12.6875 per Share
-------------------
Expiration Date: March 31, 2004
-------------------
Date of Grant: March 29, 1996
-------------------
THIS CERTIFIES THAT, for value received, Hambrecht & Quist Guaranty
Finance, L.P., is entitled to purchase the above number (as adjusted pursuant
to Section 5 hereof) of fully paid and nonassessable shares of the above Class
of Stock of the Company at the Initial Exercise Price above (as adjusted
pursuant to Section 5 hereof), subject to the provisions and upon the terms and
conditions set forth herein.
1. DEFINITIONS.
As used herein, the following terms, unless the context otherwise
requires, shall have the following meanings:
(a) "Act" shall mean the Securities Act of 1933, as amended, or
any similar federal statute, and the rules and regulations thereunder, as shall
be in effect at the time.
(b) "Common Stock" shall mean shares of the presently
authorized common stock of the Company and any stock into which such common
stock may hereafter be exchanged.
<PAGE>
(c) "Holder" shall mean any person who shall at the time be the
holder of this Warrant.
(d) "Shares" shall mean the shares of the Class of Stock that
the Holder is entitled to purchase upon exercise of this Warrant, as adjusted
pursuant to Section 5 hereof.
(e) "Warrant Price" shall mean the Initial Exercise Price at
which this Warrant may be exercised, as adjusted pursuant to Section 5 hereof.
2. TERM.
The purchase right represented by this Warrant is exercisable, in
whole or in part, at any time on or before the Expiration Date.
3. METHOD OF EXERCISE; PAYMENT; ISSUANCE OF NEW WARRANT.
Subject to Section 2 hereof, the purchase right represented by this
Warrant may be exercised by the Holder, in whole or in part, by the surrender of
this Warrant (with the notice of exercise form attached hereto as Appendix A
duly executed) at the principal office of the Company and by the payment to the
Company, by check made payable to the Company drawn on a United States bank and
for United States funds of an amount equal to the then applicable Warrant Price
per share multiplied by the number of Shares then being purchased. In the event
of any exercise of the purchase right represented by this Section 3,
certificates for the Shares so purchased shall be delivered to the Holder within
thirty (30) days of receipt of such payment and, unless this Warrant has been
fully exercised or expired, a new Warrant representing the portion of the
Shares, if any, with respect to which this Warrant shall not then have been
exercised shall also be issued to the Holder within such thirty (30) day period.
4. EXERCISE PRICE.
The Warrant Price at which this Warrant may be exercised shall be
the Initial Exercise Price, as adjusted from time to time pursuant to Section 5
hereof.
5. ADJUSTMENT OF NUMBER AND KIND OF SHARES AND ADJUSTMENT OF WARRANT
PRICE.
5.1 CERTAIN DEFINITIONS. As used in this Section 5 the following terms
shall have the following respective meanings:
<PAGE>
(a) OPTIONS: rights, options or warrants to subscribe for,
purchase or otherwise acquire either shares of Common Stock or Convertible
Securities;
(b) CONVERTIBLE SECURITIES: any evidences of indebtedness,
shares of stock or other securities directly or indirectly convertible into or
exchangeable for Common Stock.
5.2 ADJUSTMENTS. The number and kind of securities purchasable upon the
exercise of this Warrant and the Warrant Price shall be subject to adjustment
from time to time upon the occurrence of certain events, as follows:
(a) RECLASSIFICATION, REORGANIZATION, CONSOLIDATION OR MERGER.
In the case of any reclassification of the Common Stock, or any reorganization,
consolidation or merger of the Company with or into another corporation (other
than a merger or reorganization with respect to which the Company is the
surviving corporation and which does not result in any reclassification of the
Common Stock), the Company, or such successor corporation, as the case may be,
shall execute a new warrant, providing that the Holder shall have the right to
exercise such new warrant and upon such exercise to receive, in lieu of each
share of the Class of Stock theretofore issuable upon exercise of this Warrant,
the number and kind of securities receivable upon such reclassification,
reorganization, consolidation or merger by a holder of shares of the same Class
of Stock of the Company for each share of the Class of Stock. The aggregate
warrant price of the new warrant shall be the aggregate Warrant Price in effect
immediately prior to the reclassification, reorganization, consolidation or
merger. Such new warrant shall provide for adjustments which shall be as nearly
equivalent as may be practicable to the adjustments provided for in this Section
5 including, without limitation, adjustments to the Warrant Price and to the
number of shares issuable upon exercise of this Warrant. The provisions of this
subsection (a) shall similarly apply to successive reclassification,
reorganizations, consolidations or mergers.
(b) SPLIT, SUBDIVISION OR COMBINATION OF SHARES. If the Company
at any time while this Warrant remains outstanding and unexpired shall split,
subdivide or combine the Class of Stock for which this Warrant is then
exercisable, the Warrant Price shall be proportionately decreased in the case
of a split or subdivision or proportionately increased in the case of a
combination. Any adjustment under this subsection (b) shall become effective
when the split, subdivision or combination becomes effective.
(c) STOCK DIVIDENDS. If the Company at any time while this
Warrant remains outstanding and unexpired shall pay a dividend with respect to
<PAGE>
the Class of Stock for which this Warrant is then exercisable, payable in shares
of that Class of Stock, Options or Convertible Securities, the Warrant Price
shall be adjusted, from and after the date of determination of the stockholders
entitled to receive such dividend or distributions, to that price determined by
multiplying the Warrant Price in effect immediately prior to such date of
determination by a fraction (i) the numerator of which shall be the total number
of shares of that Class of Stock outstanding immediately prior to such dividend
or distribution, and (ii) the denominator of which shall be the total number of
shares of the same Class of Stock outstanding immediately after such dividend or
distribution (including shares of that Class of Stock issuable upon exercise,
conversion or exchange of any Options or Convertible Securities issued as such
dividend or distribution). If the Options or Convertible Securities issued as
such dividend or distribution by their terms provide, with the passage of time
or otherwise, for any decrease in the consideration payable to the Company, or
any increase in the number of shares issuable upon exercise, conversion or
exchange thereof (by change of rate or otherwise), the Warrant Price shall, upon
any such decrease or increase becoming effective, be reduced to reflect such
decrease or increase as if such decrease or increase became effective
immediately prior to the issuance of the Options or Convertible Securities as
the dividend or distribution. Any adjustment under this subsection (c) shall
become effective on the record date.
5.3 ADJUSTMENT OF NUMBER OF SHARES. Upon each adjustment in the Warrant
Price pursuant to this Section 5, the number of Shares issuable upon exercise of
this Warrant shall be adjusted to the product obtained by multiplying the number
of Shares issuable immediately prior to such adjustment in the Warrant Price by
a fraction (i) the numerator of which shall be the Warrant Price immediately
prior to such adjustment, and (ii) the denominator of which shall be the Warrant
Price immediately after such adjustment.
6. NOTICE OF ADJUSTMENTS.
So long as this Warrant remains outstanding and unexpired, whenever
the Warrant Price shall be adjusted pursuant to Section 5 hereof, the Company
shall issue a certificate signed by its chief financial officer setting forth,
in reasonable detail, the event requiring the adjustment, the amount of the
adjustment, the method by which such adjustment was calculated and the Warrant
Price after giving effect to such adjustment, and shall cause a copy of such
certificate to be mailed (by first class mail, postage prepaid) to the Holder.
7. RIGHT TO CONVERT WARRANT INTO STOCK.
7.1 RIGHT TO CONVERT. In addition to the rights granted under Section 3
of this Warrant, the Holder shall have the right to require the Company to
<PAGE>
convert this Warrant (the "Conversion Right") into shares of the Class of Stock
for which the Warrant is then exercisable, as provided in this Section 7. Upon
exercise of the Conversion Right, the Company shall deliver to the Holder
(without payment by the Holder of any Warrant Price) that number of shares of
stock equal to the quotient obtained by dividing (x) the value of this Warrant
at the time the Conversion Right is exercised (determined by subtracting the
aggregate Warrant Price immediately prior to the exercise of the Conversion
Right from the aggregate fair market value of the Shares issuable upon exercise
of this Warrant immediately prior to the exercise of the Conversion Right, as
determined pursuant to Section 7.4 below) by (y) the fair market value (as
determined pursuant to Section 7.4 below) of one share of that Class of Stock
immediately prior to the exercise of the Conversion Right.
7.2 METHOD OF EXERCISE. So long as the Warrant remains outstanding and
unexpired, the Conversion Right may be exercised at any time by the Holder by
the surrender of this Warrant at the principal office of the Company together
with a written statement specifying that the Holder thereby intends to exercise
the Conversion Right. Certificates of the shares of stock issuable upon
exercise of the Conversion Right shall be delivered to the Holder within thirty
(30) days following the Company's receipt of this Warrant together with the
aforesaid written statement.
7.3 AUTOMATIC CONVERSION PRIOR TO EXPIRATION. To the extent this
Warrant is not previously exercised, and if the fair market value of one share
of the Class of Stock issuable upon exercise of this Warrant is greater than the
Warrant Price per share, this Warrant shall be deemed automatically exercised in
accordance with Section 7.1 hereof (even if not surrendered) immediately before
its expiration. The Company shall have no obligation to notify Holder of such
automatic exercise, but shall issue to the Holder, upon request, certificates
for the Shares issued upon such automatic conversion in accordance with Section
7.2 above, although the Company may condition receipt of the certificate upon
surrender of the Warrant to the Company.
7.4 VALUATION OF STOCK. For purposes of this Section 7, the fair market
value of one share of the Class of Stock issuable upon exercise of this Warrant
shall mean:
(a) The product of (i) the average of the closing price or, if no
closing price is reported, the closing bid and asked prices of the Common Stock,
quoted in the Over-The-Counter Market Summary or the closing price quoted on any
exchange on which the Common Stock is listed, whichever is applicable, as
published in the Western Edition of The Wall Street Journal for the ten (10)
trading days prior to the date of determination of fair market value, and (ii)
the
<PAGE>
number of shares of Common Stock into which each share of the Class of Stock is
then convertible, if applicable;
(b) If the Common Stock is not traded Over-The-Counter or on an
exchange, the fair market value of the Class of Stock per share shall be as
determined in good faith by the Company's Board of Directors; provided, however,
that if the Holder disputes in writing the fair market value determined by the
Board of Directors within thirty (30) days of being informed of such fair market
value, the fair market value shall be determined by an independent appraiser,
appointed in good faith by the Company's Board of Directors.
8. COMPLIANCE WITH ACT; TRANSFERABILITY OF WARRANT; DISPOSITION OF
SHARES.
8.1 LEGENDS. This Warrant and the Shares issued upon exercise thereof
shall be imprinted with a legend in substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY
NOT BE OFFERED FOR SALE, SOLD, PLEDGED OR OTHERWISE TRANSFERRED
WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR
PURSUANT TO RULE 144 OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT SUCH REGISTRATION
IS NOT REQUIRED."
8.2 TRANSFERABILITY AND NON-NEGOTIABILITY OF WARRANT AND SHARES. This
Warrant and the Shares issued upon exercise thereof shall not be sold,
transferred or assigned in whole or in part without compliance with applicable
federal and state securities laws by the transferor and the transferee
(including, without limitation, the delivery of investment representation
letters and legal opinions reasonably satisfactory to the Company, if reasonably
requested by the Company). Subject to the provisions of this Section 8.2, title
to this Warrant may be transferred in the same manner as a negotiable instrument
transferable by endorsement and delivery.
9. MISCELLANEOUS.
No fractional shares of the Shares shall be issued in connection
with any exercise hereunder, but in lieu of such fractional shares the Company
shall make a cash payment therefor upon the basis of the Warrant Price then in
effect. The terms and provisions of this Warrant shall inure to the benefit of,
and be binding upon, the Company and the Holders hereof and their respective
<PAGE>
successors and assigns. This Warrant shall be governed by and construed under
the laws of the State of California as applied to contracts entered into between
residents of the State of California to be wholly performed in the State of
California. The titles of the sections and subsections of this Warrant are for
convenience only and are not to be considered in construing this Warrant. All
pronouns used in the Warrant shall be deemed to include masculine, feminine and
neuter forms.
ARRIS PHARMACEUTICAL CORPORATION
By: /s/ Daniel H. Petree
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Name: Daniel H. Petree
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Title: CFO
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<PAGE>
APPENDIX A
NOTICE OF EXERCISE
TO:
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1. The undersigned hereby elects to purchase __________ shares of the
Common Stock of Arris Pharmaceutical Corporation, pursuant to terms of the
attached Warrant, and tenders herewith payment of the purchase price of such
shares in full, together with all applicable transfer taxes, if any.
2. Please issue a certificate or certificates representing said shares
of the Common Stock in the name of the undersigned or in such other name as is
specified below:
3. The undersigned represents it is acquiring the shares of Common
Stock solely for its own account for investment and not as a nominee for any
other party and not with a view toward the resale or distribution thereof within
the meaning of the Securities Act of 1933, as amended.
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(Name)
------------------------------------
(Address)
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------------------------------------
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(Taxpayer Identification Number)
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(print name of Holder)
By:
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Title:
----------------------
Date:
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<PAGE>
ARRIS PHARMACEUTICAL CORPORATION
OFFICER'S CERTIFICATE
The undersigned hereby certifies as follows:
1. That the undersigned is the duly elected and qualified, and at this
date is, Assistant Secretary of Arris Pharmaceutical Corporation, a Delaware
corporation (the "Company").
2. Attached hereto as Exhibit A are full, true and correct copies of
the resolutions pertaining to the lease financing transaction with Hambrecht &
Quist Guaranty Finance, L.P., adopted by the Board of Directors of the Company
on December 14, 1995. Such resolutions are in full force and effect, were duly
adopted, have not been amended, modified or revoked, and constitute all
resolutions adopted with respect to the subject matter thereof.
3. That the persons named below are duly elected and acting officers of
this corporation holding the offices set forth opposite their names:
John P. Walker President and Chief Executive Officer
Daniel H. Petree Vice President, Corporate Development and
Chief Financial Officer
4. That the signatures appearing opposite the names of the above
officers are the genuine signatures of such officers:
John P. Walker /s/ John P. Walker
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Daniel H. Petree /s/ Daniel H. Petree
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IN WITNESS WHEREOF, I have set my hand hereto as of the 29th day of
March, 1996.
/s/ Daniel H. Petree
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Name: Daniel H. Petree
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Title: Assistant Secretary
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<PAGE>
EXHIBIT 10.38
AMENDMENT TO LEASE SCHEDULE
Master Property Lease Agreement No. 943 Dated March 29, 1994
Schedule No. 2 Dated March 29, 1994
The Initial Term of the Lease for the Units covered by this Schedule No.
2 to the Master Property Lease Agreement No. 943, is hereby extended beyond the
original expiration date of August 31, 1997, such that the lease term will
continue through OCTOBER 31, 2001.
The Lease Rate Factor for the rents payable during the extended term of
the lease from September 1, 1997 through October 31, 2001, shall be 0.76074
times (fifty percent) of the original cost to Lessor of the Units under this
Lease Schedule, plus applicable taxes.
The rent per month for each of the months during the extended term shall
be $8,368.14, plus applicable taxes.
The rental payments during the extended lease term shall be made monthly
in advance on the first day of each month, beginning on September 1, 1997.
Lessee's Options as set forth in Section 6 of the Schedule, shall remain
in effect, with the exception that reference to the date of August 31, 1997,
shall be substituted with the date of October 31, 2001, which is the termination
date of the extended lease.
Except as specifically amended hereby, Schedule No.2 shall be and remain
in full force and effect.
This Amendment has been entered into, and is made a part of the above
referenced Schedule, as March 29, 1996.
ARRIS PHARMACEUTICAL HAMBRECHT & QUIST
CORPORATION GUARANTY FINANCE, L.P.
By: /s/ Daniel H. Petree . By: /s/ Donald M. Campbell .
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Name: . Name: .
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Title: CFO . Title: President
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Guaranty Finance Management Corp.
General Partner .
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Amendment to Schedule No. 2 to Master Property Lease Agreement No. 943
