<PAGE> 1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM
--------------- TO
--------------- .
COMMISSION FILE NUMBER: 0-22788
------------------------
AXYS PHARMACEUTICALS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
DELAWARE 22-2969941
(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
</TABLE>
180 KIMBALL WAY
SOUTH SAN FRANCISCO, CALIFORNIA 94080
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(650) 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 30,358,514 at April 30, 1999.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
AXYS PHARMACEUTICALS, INC.
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited) *
Consolidated Balance Sheets -- March 31, 1999 and December
31, 1998.................................................... 3
Consolidated Statements of Operations -- Three months ended
March 31, 1999 and 1998..................................... 4
Consolidated Statements of Cash Flows -- Three months ended
March 31, 1999 and 1998..................................... 5
Notes to Consolidated Financial Statements.................. 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................... 9
Item 3. Quantitative and Qualitative Disclosures About Market
Risk........................................................ 14
PART II: OTHER INFORMATION
Item 1. Legal Proceedings........................................... 15
Item 2. Changes in Securities....................................... 15
Item 3. Defaults Upon Senior Securities............................. 15
Item 4. Submission of Matters to a Vote of Security Holders......... 15
Item 5. Other Information........................................... 15
Item 6. Exhibits and Reports on Form 8-K............................ 15
Signature............................................................ 17
</TABLE>
- ---------------
* The financial information contained herein should be read in conjunction with
the consolidated financial statements and notes thereto included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1998,
filed with the Securities and Exchange Commission on March 31, 1999.
2
<PAGE> 3
AXYS PHARMACEUTICALS, INC.
PART 1: FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
MARCH 31,
1999 DECEMBER 31,
(UNAUDITED) 1998(1)
----------- ------------
(IN THOUSANDS)
<S> <C> <C>
Current assets:
Cash and cash equivalents................................. $ 28,760 $ 36,261
Marketable investments.................................... 35,277 36,456
Accounts receivable, trade................................ 4,529 2,140
Inventory................................................. 766 435
Prepaid expenses and other current assets................. 3,096 4,513
-------- --------
Total current assets.............................. 72,428 79,805
Property and equipment, net................................. 21,630 21,510
Investment in joint venture................................. 1,370 1,908
Note receivable from officer................................ 646 821
Intangible assets........................................... 3,814 2,200
Other assets................................................ 889 1,018
-------- --------
TOTAL ASSETS...................................... $100,777 $107,262
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 3,418 $ 3,788
Accrued compensation...................................... 2,694 4,232
Other accrued liabilities................................. 2,334 2,956
Deferred revenue.......................................... 4,807 8,698
Current portion of capital lease and debt obligations..... 9,227 9,872
-------- --------
Total current liabilities......................... 22,480 29,546
Capital lease and debt obligations, net of current
portion................................................... 16,070 16,816
Minority Interest........................................... 8,898 388
Stockholders' equity:
Preferred stock........................................... -- --
Common stock.............................................. 290,942 290,291
Accumulated other comprehensive income.................... 30 116
Accumulated deficit....................................... (237,643) (229,895)
-------- --------
Total stockholders' equity........................ 53,329 60,512
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY........ $100,777 $107,262
======== ========
</TABLE>
- ---------------
(1) The balance sheet at December 31, 1998 has been derived from the audited
financial statements at that date but does not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements.
See accompanying notes to consolidated financial statements.
3
<PAGE> 4
AXYS PHARMACEUTICALS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
----------------------
1999 1998
-------- ----------
(IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C>
Revenues
Collaboration and license revenue......................... $ 8,662 $ 8,351
Product and service revenue............................... 3,142 83
------- ---------
Total revenues.................................... 11,804 8,434
Operating expenses:
Cost of goods sold........................................ 548 446
Research and development.................................. 15,925 15,041
General and administrative................................ 3,201 3,432
Acquired in-process research and development.............. -- 124,888
------- ---------
Total operating expenses.......................... 19,674 143,807
------- ---------
Operating loss.............................................. (7,870) (135,373)
Interest income............................................. 907 1,381
Interest expense............................................ (507) (568)
Equity interest in loss of joint venture.................... (563) (457)
Minority interest........................................... 285 --
------- ---------
Net loss.................................................... $(7,748) $(135,017)
======= =========
Basic and diluted net loss per share........................ $ (.26) $ (4.69)
======= =========
Shares used in computing basic and diluted net loss per
share..................................................... 30,321 28,782
======= =========
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE> 5
AXYS PHARMACEUTICALS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------
1999 1998
------- ---------
(IN THOUSANDS)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.................................................... $(7,748) $(135,017)
Adjustments to reconcile net loss to net cash and cash
equivalents used in operating activities:
Depreciation and amortization............................. 2,743 2,072
Gain on sale of fixed asset............................... (22) --
Equity interest in loss on joint venture.................. 538 457
Forgiveness of note receivable from officer............... 175 125
Acquired in-process research and development.............. -- 124,888
Changes in assets and liabilities:
Accounts receivable.................................... (2,389) --
Inventory.............................................. (331) --
Prepaid expenses and other current assets.............. 1,155 1,305
Other assets........................................... (1,542) (2,791)
Accounts payable and accrued liabilities............... (1,974) (2,994)
Deferred revenue....................................... (3,891) (3,653)
------- ---------
Net cash and cash equivalents used in operating
activities................................................ (13,286) (15,608)
------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Available-for-sale securities:
Purchases................................................. (8,235) (8,206)
Maturities................................................ 9,259 23,805
Minority interest........................................... 8,510 --
Acquisition, net of cash balances........................... -- 13,270
Proceeds from sale of fixed assets.......................... 22 --
Purchase of property and equipment.......................... (2,477) (830)
------- ---------
Net cash and cash equivalents provided by investing
activities................................................ 7,079 28,039
------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuance of common stock.................. 651 1,535
Proceeds from note receivable............................... -- 593
Principal payments on notes payable and capital leases...... (1,945) (1,630)
------- ---------
Net cash and cash equivalents (used in) provided by
financing activities...................................... (1,294) 498
------- ---------
Net increase (decrease) in cash and cash equivalents........ (7,501) 12,929
Cash and cash equivalents, beginning of period.............. 36,261 22,938
------- ---------
Cash and cash equivalents, end of period.................... $28,760 $ 35,867
======= =========
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING
ACTIVITIES:
Issuance of common stock and value of options and warrants
issued in acquisition..................................... $ -- $ 169,730
======= =========
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE> 6
AXYS PHARMACEUTICALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1999
(UNAUDITED)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
Axys Pharmaceuticals, Inc., a Delaware corporation ("Axys" or the
"Company"), focuses on transforming gene discoveries into drugs. Axys' business
is focused in three primary areas: (i) drug discovery and development programs
in collaboration with pharmaceutical and biotechnology companies, (ii) drug
discovery and development programs which are not partnered in the area of
oncology, and (iii) the spin out of affiliated businesses in combinatorial
chemistry, pharmacogenomics, and agricultural biotechnology.
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries, Arris Pharmaceuticals Canada, Inc., and
Sequana Therapeutics, Inc. ("Sequana") and includes the accounts of Xyris
Corporation and PPGx, Inc. the Company's majority owned subsidiaries (See
"Formation of PPGx, Inc.", Note 3). All significant intercompany accounts and
transactions have been eliminated.
Sequana owns 50% of Genos, a joint venture with Memorial Sloan-Kettering
Cancer Center ("MSKCC"). This investment is accounted for under the equity
method.
RECLASSIFICATIONS
Certain 1998 amounts have been reclassified to conform to the March 31,
1999 presentations.
BASIS OF PRESENTATION
The unaudited consolidated financial statements included herein have been
prepared by the Company 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, 1999 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 1998 Annual
Report on Form 10-K filed with the Securities and Exchange Commission.
2. SECOND ROUND OF FINANCING FOR XYRIS CORPORATION
In February 1999, Xyris concluded the negotiation of an exclusive license
to all Axys technology in the field of agriculture (the "Technology License").
This resulted in the Company receiving additional shares of Xyris in exchange
for the Technology License.
Also in February 1999, Xyris completed a financing in which it raised
$4,500,000 from a third party. After this financing, the third party's
investment in Xyris totaled $5,000,000. Under the terms of the financing, the
Company granted the third party the right (the "Put Option") to require the
Company to purchase all of the third party's interest in Xyris in exchange for
that number of shares of the Company whose market value equals $5,000,000 at the
date of the exercise of the Put Option. The Put Option may be exercised at any
time between August 5, 1999 and February 5, 2001.
6
<PAGE> 7
AXYS PHARMACEUTICALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1999
(UNAUDITED)
The net effect of issuance of shares in connection with the Technology
License and in connection with the financing reduced the Company's ownership in
Xyris from 82% to 70%.
3. FORMATION OF PPGX, INC.
In February 1999, the Company announced the formation of a majority-owned
subsidiary, PPGx, Inc. ("PPGx") which is engaged in the business of providing
pharmacogenomic (the science of how genetic variations among individuals affects
drug safety and efficacy) products and services to the pharmaceutical industry.
In connection with the formation of PPGx, Axys contributed certain assets and
technology in exchange for an 82% ownership interest in PPGx. PPD, Inc. ("PPD"),
Axys' partner in PPGx, contributed certain assets, technology, cash and loan
guarantees in exchange for an 18% ownership interest in PPGx and the exclusive,
worldwide right to market the pharmacogenomic products and services of PPGx.
Under the terms of a shareholder agreement between the Company and PPD, PPD
has the option (the "PPD Option") to purchase 32% of PPGx from the Company at
various escalating prices until February 1, 2002. Under certain circumstances,
the Company has the option to put (the "Axys Put") 32% of PPGx to PPD at various
escalating prices until August 1, 2002. At such time as either the PPD Option or
the Axys Put are exercised, the Company would also become a co-guarantor of a
certain PPGx line of credit to the extent any borrowings are outstanding at that
time. Additionally, at any time after the fifth anniversary of the formation of
PPGx, the Company and, provided either the PPD Option or the Axys Put have been
exercised, PPD have the right to buy all of the outstanding equity interests in
PPGx at fair market value in accordance with the terms of buy-sell provisions of
the shareholder agreement.
4. INVENTORY
Inventories are stated at the lower of cost (first-in, first-out) or
market. At March 31, 1999, inventories consisted of the following (in
thousands):
<TABLE>
<S> <C>
Raw materials................................. $171
Finished goods................................ 595
----
$766
====
</TABLE>
5. COMPREHENSIVE INCOME
Total comprehensive loss was ($7,718) and ($135,017) for the three months
ended March 31, 1999 and 1998, respectively.
7
<PAGE> 8
AXYS PHARMACEUTICALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1999
(UNAUDITED)
6. SEGMENT INFORMATION
Segment information consists of the following:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
----------------------
1999 1998
------- ---------
(IN THOUSANDS)
<S> <C> <C>
Revenues:
Drug discovery............................. $ 8,509 $ 7,851
ATD........................................ 3,114 583
Other...................................... 181 --
------- ---------
Total consolidated................. $11,804 $ 8,434
======= =========
Operating income (loss):
Drug discovery(1).......................... $(7,821) $(133,808)
ATD........................................ 1,315 (1,209)
Other...................................... (1,242) --
------- ---------
Total consolidated................. $(7,748) $(135,017)
======= =========
</TABLE>
Other represents the results of PPGx's and Xyris' principal activities
which commenced in 1999.
- ---------------
(1) Includes $125 million in acquired in-process research and development
recorded in 1998 relating to the acquisition of Sequana Therapeutics, Inc.
in January 1998.
8
<PAGE> 9
AXYS PHARMACEUTICALS, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion contains both historical information and
forward-looking statements that involve risks and uncertainties. Forward-looking
statements include projections and other statements about events that may occur
at some point in the future. The company's actual results could differ
significantly from those described in the forward-looking statements. Factors
that could cause or contribute to such differences include, but are not limited
to, those discussed in this section as well as under "Item 1. Business,"
including the sections entitled "What Factors Could Cause Our Results To Differ
Significantly From Those You Might Expect?" and "What Other Matters Should
Stockholders Consider with Respect to the Company?" in the Company's Annual
Report on Form 10-K for the year ended December 31, 1998 filed with the
Securities and Exchange Commission.
OVERVIEW
Since the company's founding in 1989, Axys has devoted most of its
resources to research and development programs. To date, the company's revenues
have resulted from its collaborative research programs with pharmaceutical
companies as part of its drug discovery business and more recently from sales of
chemical compound libraries as part of its Advanced Technologies Division
("ATD") combinatorial chemistry business.
The company's collaborative research programs generally contain one or more
of the following sources of revenue to the company:
- Research Support: Payments which are generally based on the number of
researchers Axys is committing to a particular program. These revenues
are recorded when earned by the company.
- License Fees: Payments generally made when a collaboration agreement is
signed. These revenues are recorded when the agreement is signed.
- Commitment Fees: Payments made in conjunction with the company's
commitment to perform certain funded research. These revenues are
recorded in equal periodic amounts over the course of the research
efforts.
- Milestone Payments: Payments which are based on the company or its
partner achieving certain technical or regulatory milestones in the
collaboration. These revenues are recorded upon the achievement of
mutually agreed upon milestones.
- Royalties: Upon commercialization of products resulting from a
collaboration, the company may earn royalties based on a percentage of
the revenue earned by the collaboration partner. These revenues would be
recorded when product sales result from the company's collaborations.
The company's sales of chemical compound libraries contain one or more of
the following sources of revenue to the company:
- Product Sales: As chemical compound libraries are shipped to customers of
the ATD, the company records revenue based on the contracted price per
compound.
- License Fees: Payments made when compound supply or technology license
agreements are signed. These revenues are recorded when the agreement is
signed.
- Commitment Fees: Payments made in conjunction with the ATD's commitment
to perform certain obligations under compound supply or technology
license agreements. These revenues are recorded in equal periodic amounts
over the course of the relevant agreement.
Although the sale of stock by the company to one of its partners is not a
source of revenue, unless sold at a premium to market, the company's
collaborative research programs occasionally include the sale of stock by the
company to the pharmaceutical company sponsoring the research.
9
<PAGE> 10
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, 1999, the company's accumulated deficit was approximately $238
million. Included in the company's accumulated deficit at March 31, 1999 was
approximately $147 million of acquired in-process research and development from
the acquisition of Khepri Pharmaceuticals, Inc. in 1995 and the acquisition of
Sequana in January 1998.
RESULTS OF OPERATIONS
REVENUES
Collaboration and licensing revenues
The company's collaboration and licensing revenues increased to $8.6
million for the three months ended March 31, 1999, compared to $8.4 million for
the same period in 1998. The change was primarily due to: (i) the increase in
technology licensing fees of $2,000,000; (ii) the commencement in December 1998
of research support payments in connection with an agreement with Rhone-Polenc
Rorer for the development of small molecule therapeutics that inhibit cathepsin
S, which may be associated with certain inflammatory diseases; and (iii) the
termination fee paid by Corange International, Ltd. in connection with the
termination of their collaboration in February 1999. These increases were offset
by lower revenues compared to the prior year due to the following: (i) the end
of the research funding in mid-1998 under the Pharmacia & Upjohn agreement for
the development of inhibitors of Factor Xa; (ii) the reduction in research
support in the Boehringer Ingelheim International GmbH agreement for the gene
identification program in asthma; and (iii) the conclusion of the Glaxo-Wellcome
Inc. agreement for the genomics work in the area of type II diabetes and related
conditions.
Product and service revenues
The company's product and service revenues increased to $3.1 million for
the three months ended March 31, 1999 compared to $83,000 for the same period in
1998. The increase was primarily due to an increase in the number of
combinatorial chemistry compounds shipped in 1999 under three ATD agreements, as
well as the inclusion of the service revenue recognized by PPGx, Inc., the
company's majority owned subsidiary formed in February 1999, compared to the
number of combinatorial chemistry compounds shipped in 1998 under one ATD
agreement.
Cost of Goods Sold
The company's cost of goods sold increased to $548,000 for the three months
ended March 31, 1999 compared to $446,000 for the same period in 1998. The costs
in 1999 are directly related to the costs of producing combinatorial chemistry
compounds. The costs in 1998 primarily reflect start up costs for the production
of combinatorial chemistry compounds.
Research and Development
The company's research and development expenses increased to $15.9 million
for the three months ended March 31, 1999, compared to $15.0 million for the
same period in 1998. In both periods research and development expenses included
the clinical costs associated with pursuing the company's own clinical programs.
In 1999 those costs related to the clinical trials of both ulcerative colitis
and psoriasis. In 1998 those costs related to the clinical trials of developing
an inhaled therapeutic for asthma. Other factors contributing to the increase
are primarily due to severance costs associated with the reduction in headcount
and include the research and development expenses of the company's newly formed
subsidiaries, PPGx, Inc. and Xyris Corporation.
10
<PAGE> 11
General and Administrative
The company's general and administrative expenses were $3.2 million for the
three months ended March 31, 1999 compared to $3.4 million for the same period
in 1998. The difference between periods was due to efficiencies applied in
combining general and administrative functions among the consolidating entities.
Interest Income and Interest Expense
Interest income decreased to $907,000 for the three months ended March 31,
1999, compared to $1.4 million for the same period in 1998. The decrease was
primarily due to the decrease in average cash and investment balances between
the periods. Interest expense decreased to $507,000 for the three months ended
March 31, 1999, compared to $568,000 for the same period in 1998. The decrease
was primarily due to the lower debt balances from the company's two lines of
credit and capital lease arrangements.
Equity Interest in Loss of Joint Venture
Equity interest in loss of joint venture increased to $563,000 for the
three months ended March 31, 1999, compared to $457,000 for the same period in
1998. This account represents the company's 50% portion of Genos' loss for the
period based on the company's 50% ownership of Genos.
Minority interest
Minority interest represents another investor's share of a subsidiary's
operating income (loss), where the company owns 51% to 99% of that subsidiary.
Income reported by the company, which is attributable to a minority owner was
$285,000 at March 31, 1999, compared to zero for the same period in 1998. This
amount is the result of the formation of the company's majority owned
subsidiaries, PPGx, Inc. and Xyris Corporation. Since the company records all of
the PPGx and Xyris operating expenses as our expenses, a portion of the losses
from these entities is allocated to the minority shareholders in these entities,
offsetting the company's operating loss.
IMPACT OF THE YEAR 2000
The Year 2000 problem or the "Y2K problem" is a problem that may arise at
the turn of the century in computers or other equipment utilizing microprocessor
technology. Some computer software programs and computer equipment, as well as
other equipment using embedded microprocessors, use two digit date fields rather
than four date digit fields (that is, "98" in the computer code refers to the
year "1998"). As a result, time-related functions in such software and equipment
may misinterpret dates after January 1, 2000 to refer to the twentieth century
rather than the twenty-first century (that is, "02" could be interpreted as
"1902" rather than "2002"). This could potentially cause system or equipment
shutdowns, failures or miscalculations, resulting in inaccuracies in computer
output. The Y2K problem is a global problem and has the potential to impact
virtually every company to one degree or another, including Axys.
The company has been addressing the Y2K problem by reviewing its core
information technology systems, including its servers, databases, desktop
computers, significant applications (whether licensed from third parties or
developed internally) and significant microprocessor-controlled equipment for
Y2K readiness. Because the Y2K problem potentially affects many other companies,
the company is also in the process of reviewing the Y2K readiness of its
vendors, service providers and other companies (including its collaboration
partners and customers) with whom the company has significant business
relationships ("Important Third Parties").
As the company completes these internal and external reviews, the company
has been prioritizing the responses it needs to take to address the Y2K problem,
to address the highest priorities first and to develop by the end of the second
quarter of 1999 such contingency plans as management believes to be prudent. The
company expects to update and revise this contingency plan throughout the
remainder of 1999 as additional information becomes known. With respect to the
company's core information technology systems, the review is complete and
modifications have been substantially completed. The review and modification
process of the
11
<PAGE> 12
desktop computers is substantially complete. The company expects to have
completed its review and to have made any necessary modifications or
replacements by the end of the second quarter of 1999. With respect to third
party software applications, the company expects to complete its review and to
replace or upgrade such applications by the end of the third quarter of 1999. In
this regard, the company has completed the replacement of its enterprise
management information system with a new system that is Y2K ready. With respect
to the few software applications the company has developed and licensed to third
parties, the company has completed its review of some of these applications and
believes them to be Y2K ready. The remaining applications are undergoing testing
and if determined not to be Y2K ready, the company expects to provide upgrades
to such applications, making them Y2K ready by the third quarter of 1999. With
respect to other internally-developed software applications, the company has
compiled a list of such applications and has completed the design of appropriate
tests. The company is in the process of running these tests and expects to
complete its review by the end of the second quarter. The company expects to
complete the replacement or upgrade of these applications during the second and
third quarters of 1999. Finally, with respect to other significant
microprocessor-controlled equipment, the company has identified and completed
its review of such equipment. The company expects to complete its test of such
equipment and to have made any necessary upgrades or replacements by the end of
the second quarter of 1999.
The review of the Y2K readiness of Important Third Parties is in-progress
and is expected to be substantially completed by the end of the second quarter
of 1999. Following completion, the company expects to assess the nature and
extent of the risk from non-readiness by such third parties and to either cease
doing business with such third parties, locate back-up businesses who are Y2K
ready, obtain reasonable assurances of Y2K readiness, or to implement other
appropriate contingency plans, by the end of 1999.
The total costs associated with the company's Y2K readiness efforts is
currently projected to be in the range of $250,000. Out-of-pocket expenditures
to date with respect to the Y2K problem have not been material and the time of
company personnel to address Y2K readiness has also not been material. Until the
reviews described above are completed, the company's estimates of the extent of
the expenditures that will be necessary to address the Y2K problem are subject
to change.
The company believes that its Y2K readiness review and the actions it
intends to take prior to the end of 1999 should result in the absence of
significant Y2K-related problems for the company's computer systems,
applications and microprocessor-controlled equipment. However, there can be no
assurances that the company will be able to complete its review of various
systems within the time frames indicated, that the company, will be completely
Y2K ready by the end of 1999 or that the company will not encounter Y2K-related
problems that could have a material adverse affect on the company's results of
operations and financial condition. In addition, the company cannot guarantee
the Y2K readiness of Important Third Parties and certain business disruptions
could occur, such as a financial institution's inability to process checks drawn
on bank accounts, to accept deposits or process wire transfers, an Important
Third Party's business failure, interruption in deliveries of equipment,
supplies and services from Important Third Parties, loss of voice and/or data
connections, loss of power to electrical facilities, and other business
interruptions which cannot be predicted. Accordingly, there can be no assurance
that Y2K-related problems of Important Third Parties will not have a material
adverse affect on the company's results of operations and financial condition.
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, 1999, the company had realized approximately
$183 million in net proceeds from offerings of its capital stock. In addition,
the company had realized approximately $174 million since inception from its
corporate collaborations.
The company's principal sources of liquidity are its cash and investments,
which totaled $64 million as of March 31, 1999. The company has two lines of
credit under which it had borrowed $25.9 million under the agreements as of
March 31, 1999. The company has no additional borrowing capacity under these
agreements. The company is in discussions to refinance these borrowings.
12
<PAGE> 13
Net cash used in operating activities during the three-month period ended
March 31, 1999 was $13.3 million compared to $15.6 million in the same period in
1998. The change relates to the costs incurred in 1998 in relation to the
acquisition of Sequana Therapeutics, Inc., as well as the timing of cash
received under the company's collaboration or combinatorial chemistry compound
sales agreements. Cash used in operating activities is expected to fluctuate
from quarter to quarter depending, in part, upon the timing and amounts, if any,
of cash received from existing and any new collaboration agreements or the sale
of combinatorial chemistry compound libraries.
The company also spent approximately $2.5 million for the purchase of
property, plant and equipment during the three months ended March 31, 1999.
Additional equipment is expected to be acquired or leased in connection with the
company's continuing research and development activities.
We expect that our existing money resources, including research and
development revenues from existing collaborations, will enable us to maintain
current and planned operations for at least the next two years. However, we
expect to raise substantial additional money to fund operations before the end
of this period. In addition, we will need to continue to raise money until we
achieve substantial product or royalty revenues.
We expect that we will seek additional funding through one or more of the
following: new collaborations, the extension of existing collaborations, through
sale of our interests in our affiliated businesses, or through public or private
equity or debt financings. Furthermore, we may obtain funds through arrangements
with collaborative partners or others that require us to give up rights to
technologies or products that we would otherwise seek to develop or
commercialize ourselves. We cannot be certain that additional funding will be
available or that the terms will be acceptable. Existing stockholders will
experience dilution of their investment if additional funds are raised by a
follow-on stock offering. If adequate funds are not available, we may delay,
reduce or eliminate any of our research or development programs.
CERTAIN BUSINESS RISKS
We are at an early stage of development. Our technologies are, in many
cases, new and all are still under development. All of our 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 involving many
complexities. Our research and development efforts may not be successful, our
proposed products may not prove to be safe and efficacious in clinical trials
and no commercially successful products may ultimately be developed by us. In
addition, many of our currently proposed products are subject to development and
licensing arrangements with our collaborators. Therefore, we are dependent on
the research and development efforts of these collaborators. Moreover, we are
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. We have
experienced significant operating losses since our inception and expect to incur
significant operating losses over at least the next several years. The
development of our technology and proposed products will require a commitment of
substantial funds to conduct these costly and time consuming activities.
Should we or our collaborators fail to perform in accordance with the terms
of the applicable agreements, any consequent loss of revenue under the
collaboration agreements could have a material adverse effect on our business,
financial condition and results of operations. The proposed products under
development by us have never been manufactured on a commercial scale and it is
possible that proposed products may not be able to be manufactured at a cost or
in quantities necessary to make them commercially viable. We have no sales,
marketing or distribution capability for our proposed products. If any of the
products subject to our collaborative agreements are successfully developed, we
must rely on our collaborators to market the products. We cannot ensure that any
collaborator's marketing efforts would be successful.
If we develop any products which are not subject to our collaborative
agreements, we must either rely on other pharmaceutical companies to market our
products or we must develop a marketing and sales force with technical expertise
and supporting distribution capability in order to market our products directly.
We cannot guarantee that these marketing efforts would be successful.
13
<PAGE> 14
The foregoing risks reflect our early stage of development and the nature
of our industry and products. Also inherent in the Company's stage of
development are a number of additional risks, including competition, the
substantially greater financial resources of a number of our competitors, the
manufacturing challenges presented by the production of increasing numbers of
combinatorial chemistry compounds, uncertainties regarding protection of patents
and proprietary rights, government regulation, uncertainties related to clinical
trials and health care reform and the potential volatility of our stock price.
These risks and uncertainties are discussed further in "Item 1. Business -- What
Factors Could Cause Our Results to Differ Significantly From Those You Might
Expect?" and "-- What Other Matters Should Stockholders Consider with Respect to
the Company?" in the Company's Report on Form 10-K for the year ended December
31, 1998, filed by the Company with the Securities and Exchange Commission on
March 31, 1999.
ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Not Applicable.
14
<PAGE> 15
AXYS PHARMACEUTICALS, INC.
PART II: OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES
In February 1999, the company issued an option (the "Put Option") to The
Bay City Capital Fund I, L.P. ("BCC"), granting BCC the right to require the
company to purchase from BCC all of the 1,501,501 shares of Series A Preferred
Stock of Xyris Corporation (the "Xyris Stock") held by BCC. If the Put Option is
exercised, the company would purchase the Xyris Stock with shares of the
Company's Common Stock, at its then market price, with an aggregate market value
on the date the Put Option is exercised equal to $5,000,000, rounded down to the
nearest whole number of shares. The Put Option was granted in connection with
Series A Preferred Stock Purchase Agreement between BCC, Xyris Corporation and
the Company, whereby BCC purchased Series A Preferred Stock of Xyris Corporation
in connection with the additional financing of Xyris Corporation, a majority
owned agricultural biotechnology subsidiary of the company. The Put Option may
be exercised at any time between August 2, 1999 and February 2, 2001.
The issuance of the above securities were intended to be exempt from
registration and prospectus delivery requirements under the Securities Act of
1933, as amended (the "Securities Act"), by virtue of Section 4(2) thereof, due
to, among other things, (i) the limited number of persons to whom the securities
were issued, (ii) the distribution of disclosure documents to the investor,
(iii) the fact that such investors represented and warranted to the company,
among other things, that such investors were acquiring the securities for
investment only and not with a view to the resale or distribution thereof, and
(iv) the fact that such investors were knowledgeable, sophisticated and
experienced in making investment decisions of this kind.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) EXHIBITS
<TABLE>
<S> <C>
10.97 Employment Agreement, dated February 26, 1999, between the
John Walker and the Registrant.
10.98 Series A Preferred Stock Purchase Agreement, dated February
2, 1999 by and among Xyris Corporation, Bay City Capital
Fund I and the Registrant.
10.99 Third Amendment to Expansion Lease, dated August 24, 1998
between the Registrant and ARE-11099 North Torrey Pines,
LLC.
10.100 Fourth Amendment to Expansion Lease, dated March 31, 1999
between the Registrant and ARE-11099 North Torrey Pines,
LLC.
10.101 First Amendment to the Research Agreement, dated February
28, 1999 between the Registrant and Pharmacia & Upjohn, Inc.
</TABLE>
15
<PAGE> 16
<TABLE>
<S> <C>
10.102 Seventh Amendment to Standard Industrial Lease Multi-tenant,
dated February 13, 1998, between Shelton Corporation and the
Registrant.
10.103 Eighth Amendment to Standard Industrial Lease Multi-tenant,
dated November 18, 1998 between Shelton International
Holdings, Inc. and the Registrant.
10.104 Ninth Amendment to Standard Industrial Lease Multi-tenant,
dated November 18, 1998 between Shelton International
Holdings, Inc. and the Registrant.
10.105* Termination of Collaborative Research Agreement, dated
February 13, 1999 between Corange International, Ltd. and
the Registrant.
10.106* Termination Agreement, dated February 5, 1999 between
Pharmacia and Upjohn AB and the Registrant.
27 Financial Data Schedule
</TABLE>
- ---------------
* Confidential treatment has been requested with respect to certain portions of
this exhibit.
b) REPORTS ON FORM 8-K
None
16
<PAGE> 17
AXYS PHARMACEUTICALS, INC.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
AXYS PHARMACEUTICALS, INC.
Date: May 17, 1999
By: /s/ FREDERICK J. RUEGSEGGER
------------------------------------
Frederick J. Ruegsegger
Senior Vice President Finance and
Corporate
Development and Chief Financial
Officer
(Principal Financial and Accounting
Officer)
17
<PAGE> 18
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
- ------- -------
<S> <C> <C>
10.97 Employment Agreement, dated February 26, 1999, between the
John Walker and the Registrant.
10.98 Series A Preferred Stock Purchase Agreement, dated February
2, 1999 by and among Xyris Corporation, Bay City Capital
Fund I and the Registrant.
10.99 Third Amendment to Expansion Lease, dated August 24, 1998
between the Registrant and ARE-11099 North Torrey Pines,
LLC.
10.100 Fourth Amendment to Expansion Lease, dated March 31, 1999
between the Registrant and ARE-11099 North Torrey Pines,
LLC.
10.101 First Amendment to the Research Agreement, dated February
28, 1999 between the Registrant and Pharmacia & Upjohn, Inc.
10.102 Seventh Amendment to Standard Industrial Lease Multi-tenant,
dated February 13, 1998 between Shelton Corporation and the
Registrant.
10.103 Eighth Amendment to Standard Industrial Lease Multi-tenant,
dated November 18, 1998 between Shelton International
Holdings, Inc. and the Registrant.
10.104 Ninth Amendment to Standard Industrial Lease Multi-tenant,
dated November 18, 1998 between Shelton International
Holdings, Inc. and the Registrant.
10.105* Termination of Collaborative Research Agreement, dated
February 13, 1999 between Corange International, Ltd. and
the Registrant.
10.106* Termination Agreement, dated February 5, 1999 between
Pharmacia and Upjohn AB and the Registrant.
27 Financial Data Schedule
</TABLE>
- ---------------
* Confidential treatment has been requested with respect to certain portions of
this exhibit.
<PAGE> 1
Exhibit 10.97
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is entered into as of this 26th
day of February, 1999, by and between JOHN WALKER ("Executive") and AXYS
PHARMACEUTICALS, INC., a Delaware corporation (the "Company").
WHEREAS, the Company desires to continue to employ Executive to provide
personal services to the Company, and wishes to provide Executive with certain
compensation and benefits in return for such future services; and
WHEREAS, Executive wishes to continue to be employed by the Company and
provide personal services to the Company in return for certain compensation and
benefits; and
WHEREAS, Executive and the Company wish to amend and restate that
Employment Agreement entered into between the two parties as of September 12,
1997 (the "Prior Agreement").
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein, it is hereby agreed by and between the parties hereto as
follows:
1. EMPLOYMENT BY THE COMPANY.
1.1 The Company agrees to employ Executive in the position of
President and Chief Executive Officer of the Company for the term commencing on
the date of this Agreement and ending January 31, 2003. This Agreement shall
automatically renew on February 1, 2003 and every February 1 thereafter unless
notice (in accordance with Section 7.1 of this Agreement) is provided by either
party prior to November 1, 2002 or any November 1 thereafter. During Executive's
employment with the Company, Executive will devote his best efforts and
substantially all of his business time and attention to the business of the
Company.
1.2 Executive shall serve in an executive capacity and shall
perform such duties as are customarily associated with his then current titles,
consistent with the Bylaws of the Company and as required by the Company's Board
of Directors (the "Board").
1.3 The employment relationship between the parties shall also
be governed by the general employment policies and practices of the Company,
including those relating to protection of confidential information and
assignment of inventions, except that when the terms of this Agreement differ
from or are in conflict with the Company's general employment policies or
practices, this Agreement shall control.
1.4 The Company and Executive each acknowledge that either
party has the right to terminate Executive's employment with the Company at any
time for any reason whatsoever, with or without cause or advance notice. This
at-will employment relationship cannot be changed except in a writing signed by
both Executive and a majority of the Board.
1.
<PAGE> 2
1.5 This Agreement shall supercede the Prior Agreement, except
as expressly set forth in this section, at the time that this Agreement becomes
effective upon execution by both parties. However, Section 2.2 of the Prior
Agreement, as it relates to a previously granted stock option, shall continue to
apply to such option.
2. COMPENSATION.
2.1 SALARY. Executive shall receive, for services to be
rendered under this Agreement, an annualized base salary ("Base Salary") equal
to $410,000. Such Base Salary shall be effective as of January 1, 1999, and
shall be payable in installments consistent with the Company's payroll policies.
Executive's Base Salary shall be reviewed at least annually by the Board, and in
the Board's sole discretion, may be increased at any time.
In the event Executive's employment terminates for any reason other than death,
disability, a voluntary termination not for Good Reason, or a termination for
Cause, upon execution of an effective release in the form attached hereto as
Exhibit A, Executive shall continue to receive his Base Salary and Target Bonus
(as defined below) for a period of two (2) years, paid in installments
consistent with the Company's then current payroll policies. In addition, the
Company shall reimburse Executive for all costs associated with the continuation
of benefits pursuant to COBRA for the shorter of: (x) two (2) years or (y) the
maximum legal period for which COBRA may be extended.
For purposes of this Agreement, "Good Reason" means that any of the following
are undertaken without Executive's express written consent: (a) the assignment
to Executive of any duties or responsibilities which result in any diminution or
adverse change of Executive's position, status or circumstances of employment;
(b) a reduction by the Company in Executive's Base Salary; (c) the taking of any
action by the Company which would adversely affect Executive's participation in,
or reduce Executive's benefits under, the Company's benefit plans (including
equity benefits) as of the time this Agreement is executed, except to the extent
the benefits of all other executive officers of the Company are similarly
reduced; (d) a relocation of Executive's principal office to a location more
than forty (40) miles from the location at which Executive was performing his
duties at the time this Agreement is executed, except for required travel by
Executive on the Company's business; (e) any breach by the Company of any
provision of this Agreement; or (f) any failure by the Company to obtain the
assumption of this Agreement by any successor or assign of the Company. For
purposes of this Agreement, "Cause" means: (a) an intentional action or
intentional failure to act by Executive which was performed in bad faith and to
the material detriment of the Company; (b) Executive intentionally refuses or
intentionally fails to act in accordance with any lawful and proper direction or
order of the Board; (c) Executive willfully and habitually neglects the duties
of employment; (d) Executive violates Section 5 or Section 6 of this Agreement
or (e) Executive is convicted of a felony crime involving moral turpitude;
provided, however, that in the event that any of the foregoing events under
clauses (a), (b), (c) or (d) above is capable of being cured, the Company shall
provide written notice to Executive describing the nature of such event and
Executive shall thereafter have ten (10) business days to cure such event.
2.2 ANNUAL BONUS. Executive will be eligible for an annual
bonus up to fifty percent (50%) of Executive's then current Base Salary upon
achievement of goals specified by the
2.
<PAGE> 3
Board (the "Target Bonus"), and up an additional fifty percent (50%), for an
aggregate one hundred percent (100%) of Executive's then current Base Salary,
upon overachievement of goals specified by the Board. Such goals shall be set
forth in writing by the Board prior to the close of the first quarter of each
fiscal year of the Company.
2.3 DEBT FORGIVENESS.
(a) The Company and Executive agree that as of the
date immediately prior to this Agreement, the Executive currently is obligated
to pay the Company principal and accrued but unpaid interest under a $750,000
promissory note issued by the Executive to the Company in September 1997, (the
"Note"), on which $560,000 in principal remains unpaid to date and $83,019.42 in
interest has accrued to date. The Note is full-recourse and secured by one
hundred thirty thousand two hundred thirty-six (130,236) shares of Company stock
owned by Executive, bears interest at the rate of 6.02% per annum and is payable
in full in January 2001.
(b) Company and Executive hereby agree that Executive
will issue a new note in exchange for the existing Note. Such new note (the "New
Note") will contain all of the terms and conditions of the Note, except that:
(i) the term of the New Note will be January 31, 2003, (ii) the interest rate of
the New Note shall equal 4.71% per annum, interest compounding annually and
(iii) the principal and all accrued interest under the New Note shall become
immediately due and payable upon Executive's termination of service for any
reason.
(c) Provided that Executive continues to render
services to the Company through each of the respective dates listed in the
"Effective Date" column below, a proportionate amount of the principal of the
New Note, together with interest accrued upon such respective principal amounts,
shall be forgiven as follows:
<TABLE>
<CAPTION>
EFFECTIVE DATE DEBT FORGIVENESS TAX GROSS-UP TOTAL
<S> <C> <C> <C>
02/01/2000 $160,000 $ 64,000 $ 224,000
02/01/2001 133,333 53,333 186,666
02/01/2002 133,333 53,333 186,666
01/31/2003 133,334 53,334 186,668
-------- -------- ---------
$560,000 $224,000 $ 784,000
</TABLE>
Any amounts under the New Note not otherwise forgiven or previously paid by
Executive shall be paid by Executive to the Company on January 31, 2003.
(a) The "Tax Gross-Up" payments provided for in the
table above shall be paid by the Company in a lump-sum payment within three (3)
days following each respective "Effective Date."
1.2 MEDICAL AND DENTAL COVERAGE. The Company shall continue to
provide Executive with coverage that is commensurate with coverage currently
provided to Executive and which is provided to similarly situated executives of
the Company.
3.
<PAGE> 4
1.3 LIFE INSURANCE. The Company shall continue to maintain one
or more life insurance policies in the name of Executive (subject to Executive's
insurability) funded through the use of a split dollar agreement with a
collateral assignment in favor of the Company which are projected to provide
aggregate death benefits of no more than $1,200,000.
1.4 STANDARD COMPANY BENEFITS. Executive shall be entitled to
all other rights and benefits for which he is eligible under the terms and
conditions of such benefits which may be in effect from time to time and
provided by the Company to its employees generally and to its management and
executive employees in particular.
1.5 EXPENSES. Executive shall be entitled to receive prompt
reimbursement of all reasonable expenses incurred by Executive in performing
Company services. Executive agrees to furnish the Company reasonably adequate
records and other documentary evidence of such expenses for which Executive
seeks reimbursement. Such expenses shall be accounted for under the policies and
procedures established by the Company.
1.6 VACATION AND SICK LEAVE. Executive shall be entitled to
vacation and to sick leave in accordance with policies as periodically
established by the Company for similarly situated executives. In addition,
Executive shall be entitled, without loss of pay, to be absent voluntarily from
the performance of employment duties for such periods of time and for such valid
and legitimate reasons as the Board in its discretion may determine.
2. CONFIDENTIAL INFORMATION OBLIGATIONS.
2.1 AGREEMENT. Except as otherwise specifically modified by
this Agreement, Executive agrees to execute and abide by the relevant terms
concerning confidential information and inventions set forth in Executive's
Employment, Confidential Information and Invention Assignment Agreement
("Confidentiality Agreement"), a copy of which has been previously executed by
Executive.
2.2 REMEDIES. Executive's duties under the Confidentiality
Agreement shall survive termination of his employment with the Company.
Executive acknowledges that a remedy at law for any breach or threatened breach
by him of the provisions of the Confidentiality Agreement would be inadequate,
and he therefore agrees that the Company shall be entitled to injunctive relief
in case of any such breach or threatened breach.
3. OUTSIDE ACTIVITIES.
3.1 Except with the prior written consent of the Board,
Executive will not during the term of this Agreement undertake or engage in any
other employment, occupation or business enterprise, other than ones in which
Executive is a passive investor. Executive may engage in civic and
not-for-profit activities so long as such activities do not materially interfere
with the performance of his duties hereunder.
3.2 Except as permitted by Section 4.3, Executive agrees not
to acquire, assume, or participate in (directly or indirectly) any position,
investment or interest known by him to be adverse or antagonistic to the
Company, its business, or its prospects, financial or otherwise.
4.
<PAGE> 5
3.3 During the term of his employment by the Company, except
on behalf of the Company, Executive will not have any direct or indirect
business connection or interest, in any capacity whatsoever, with any other
person or entity known by him to compete directly with the Company, throughout
the world, in any line of business engaged in (or planned to be engaged in) by
the Company. Nothing in this paragraph shall bar Executive from owning
securities of any competitor corporation as a passive investor, so long as his
aggregate direct holdings in any one such corporation shall not constitute more
than 1% of the voting stock of that corporation.
4. RESTRICTIVE COVENANT. While employed by the Company, and for two (2)
years immediately following the termination of Executive's employment, Executive
shall not, without the prior written approval of the Company, directly or
indirectly engage or prepare to engage in any activities in competition with the
Company, or accept employment or establish a business relationship with a
business engaged in or preparing to engage in competition with the Company, in
any geographical location in which the Company as of the termination date either
conducts or plans to conduct business. Executive agrees that this restriction is
reasonably necessary to protect the Company's legitimate business interests in
its trade secrets, and valuable confidential business information. In the event
Executive violates the provisions of this Section 5, then (i) that stock option
granted to Executive on October 16, 1998 to acquire 100,000 shares of the
Company's common stock (but not the other stock options simultaneously granted
to Executive on October 16, 1998) shall, to the extent not previously exercised,
immediately terminate and cease to remain outstanding and (ii) the payment
schedule under the New Note shall immediately accelerate and the New Note shall
become immediately due and payable in full.
5. NONINTERFERENCE. While employed by the Company, and for one (1) year
immediately following the termination of Executive's employment, Executive
agrees not to interfere with the Company's business by:
(a) soliciting, attempting to solicit, inducing, or
otherwise causing any employee of the Company to terminate his or her employment
in order to become an employee, consultant, or independent contractor to or for
any competitor of the Company; or
(b) directly or indirectly soliciting the business or
services of any customer, client, vendor, or distributor of the Company which
was a customer, client, vendor, or distributor of the Company at the time of
termination or at any time in the year immediately preceding that date.
Executive agrees that this restriction is reasonably necessary to protect the
Company's legitimate business interest in its substantial relationships with
specific customers, and its valuable confidential business information.
6. GENERAL PROVISIONS.
6.1 NOTICES. Any notices provided hereunder must be in writing
and shall be deemed effective upon the earlier of (i) personal delivery
(including delivery by fax) or (ii) the third day after mailing by first-class
mail to the Company at its primary office location and to Executive at his
address as then listed on the Company payroll.
5.
<PAGE> 6
6.2 SEVERABILITY. Whenever possible, each provision of this
Agreement will be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal, or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality, or unenforceability will not affect
any other provision or any other jurisdiction, but this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal, or unenforceable provisions had never been contained herein.
6.3 WAIVER. If either party should waive any breach of any
provisions of this Agreement, that party shall not thereby be deemed to have
waived any preceding or succeeding breach of the same or any other provision of
this Agreement.
6.4 COMPLETE AGREEMENT. This Agreement and its Exhibits
constitute the entire agreement between Executive and the Company and it is the
complete, final, and exclusive embodiment of their agreement with regard to this
subject matter. It is entered into without reliance on any promise or
representation other than those expressly contained herein, and it cannot be
modified or amended except in a writing signed by both the Executive and at
least one member of the Compensation Committee of the Board.
6.5 COUNTERPARTS. This Agreement may be executed in separate
counterparts, any one of which need not contain signatures of more than one
party, but all of which taken together will constitute one and the same
Agreement.
6.6 HEADINGS. The headings of the sections hereof are inserted
for convenience only and shall not be deemed to constitute a part hereof nor to
affect the meaning thereof.
6.7 SUCCESSORS AND ASSIGNS. This Agreement is intended to bind
and inure to the benefit of and be enforceable by Executive and the Company, and
their respective successors, assigns, heirs, executors and administrators,
except that Executive may not assign any duties hereunder and may not assign any
rights hereunder without the written consent of the Company, which shall not be
withheld unreasonably.
6.8 CHOICE OF LAW. All questions concerning the construction,
validity and interpretation of this Agreement will be governed by the law of the
State of California, without regard to such state's conflict-of-laws rules.
6.9 NON-PUBLICATION. The parties mutually agree not to
disclose publicly the terms of this Agreement except to the extent that
disclosure is mandated by applicable law or such disclosure is to the parties'
respective attorneys, accountants and other advisors.
6.10 CONSTRUCTION OF PLAN. In the event of a conflict between
the text of the Agreement and any summary, description or other information
regarding the Agreement, the text of the Agreement shall control.
6.
<PAGE> 7
6.11 ATTORNEYS' FEES. If either party hereto brings any action
to enforce his or its rights hereunder, each party in any such action shall be
responsible for his or its costs and attorneys fees incurred in connection with
such action.
6.12 TAX WITHHOLDING. All payments made pursuant to this
Agreement shall be subject to all applicable federal, state and local income and
employment tax withholding.
6.13 ARBITRATION. To ensure rapid and economical resolution of
any and all disputes which may arise under this Agreement, the Company and
Executive each agree that any and all disputes or controversies, whether of law
or fact of any nature whatsoever (including, but not limited to, all state and
federal statutory and common law discrimination claims), with the sole exception
of those disputes which may arise from Executive's Confidentiality Agreement,
arising from or regarding the interpretation, performance, enforcement or breach
of this Agreement, or any other disputes or claims arising from or related to
Executive's employment or the termination of his employment, shall be resolved
by final and binding confidential arbitration under the procedures set forth in
Exhibit B to this Agreement and the then existing Judicial Arbitration and
Mediation Services Rules of Practice and Procedure (except insofar as they are
inconsistent with the procedures set forth in Exhibit B).
IN WITNESS WHEREOF, the parties have executed this Agreement on the day
and year first above written.
AXYS PHARMACEUTICALS, INC.
By: /s/ Frederick J. Ruegsegger
-----------------------------
Name: Frederick J. Ruegsegger
Title: Senior Vice President &
Chief Financial Officer
Accepted and agreed this
26th day of February, 1999
/s/ John Walker
- ------------------------------
John Walker
7.
<PAGE> 8
EXHIBIT A
RELEASE
Certain capitalized terms used in this Release are defined in the
Employment Agreement entered into as of February 26, 1999 between Axys
Pharmaceuticals, Inc. and me which I have reviewed.
I acknowledge that I have read and understand Section 1542 of the
California Civil Code which reads as follows: "A GENERAL RELEASE DOES NOT EXTEND
TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT
THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY
AFFECTED HIS SETTLEMENT WITH THE debtor." I hereby expressly waive and
relinquish all rights and benefits under that section and any law of any
jurisdiction of similar effect with respect to my release of any claims I may
have against the Company.
Except as otherwise set forth in this Release, I hereby release, acquit
and forever discharge the Company, its parents and subsidiaries, and their
officers, directors, agents, servants, employees, shareholders, successors,
assigns and affiliates, of and from any and all claims, liabilities, demands,
causes of action, costs, expenses, attorneys fees, damages, indemnities and
obligations of every kind and nature, in law, equity, or otherwise, known and
unknown, suspected and unsuspected, disclosed and undisclosed, arising out of or
in any way related to claims and demands directly or indirectly arising out of
my employment with the Company or the termination of that employment, including
but not limited to, claims of intentional and negligent infliction of emotional
distress, any and all tort claims for personal injury, claims or demands related
to salary, bonuses, commissions, or any other ownership interests in the
Company, vacation pay, fringe benefits, expense reimbursements, severance pay,
or any other form of disputed compensation; claims pursuant to any federal,
state or local law or cause of action including, but not limited to, the federal
Civil Rights Act of 1964, as amended; the federal Age Discrimination in
Employment Act of 1967, as amended ("ADEA"); the federal Employee Retirement
Income Security Act of 1974, as amended; the federal Americans with Disabilities
Act of 1990; the California Fair Employment and Housing Act, as amended; tort
law; contract law; statutory law; common law; wrongful discharge;
discrimination; fraud; defamation; and breach of the implied covenant of good
faith and fair dealing; provided, however, that nothing in this paragraph shall
be construed in any way to release the Company from its obligation to indemnify
me from any third party action brought against me based on my employment with
the Company, pursuant to any applicable agreement or applicable law, or to
reduce or eliminate any coverage I may have under the Company's director and
officer liability policy, if any.
I acknowledge that I am knowingly and voluntarily waiving and releasing
any rights I may have under ADEA. I also acknowledge that the consideration
given under the Agreement for the waiver and release in the preceding paragraph
hereof is in addition to anything of value to which I was already entitled. I
further acknowledge that I have been advised by this writing, as required by the
ADEA, that: (A) my waiver and release do not apply to any rights or claims that
may arise on or after the date I execute this Release; (B) I should consult with
an attorney prior to executing this Release; (C) I have twenty-one (21) days to
consider this Release (although I may
1.
<PAGE> 9
choose to voluntarily execute this Release earlier); (D) I have seven (7) days
following the execution of this Release to revoke this Release; and (E) this
Release shall not be effective until the date upon which the revocation period
has expired, which shall be the eighth day after this Release is executed by me.
[NAME OF EMPLOYEE]
Date:
------------------------ -----------------------------------
2.
<PAGE> 10
EXHIBIT B
ARBITRATION PROCEDURE
1. The parties agree that any dispute that arises in connection with
this Agreement or the termination of this Agreement shall be resolved by binding
arbitration in the manner described below.
2. A party intending to seek resolution of any dispute under the
Agreement by arbitration shall provide a written demand for arbitration to the
other party, which demand shall contain a brief statement of the issues to be
resolved.
3. The arbitration shall be conducted in San Francisco, California by a
mutually acceptable retired judge from the panel of Judicial Arbitration and
Mediation Services, Inc. ("JAMS"). At the request of either party, arbitration
proceedings will be conducted in the utmost secrecy and, in such case, all
documents, testimony and records shall be received, heard and maintained by the
arbitrator in secrecy under seal, available for inspection only by the parties
to the arbitration, their respective attorneys, and their respective expert
consultants or witnesses who shall agree, in advance and in writing, to receive
all such information confidentially and to maintain such information in secrecy,
and make no use of such information except for the purposes of the arbitration,
unless compelled by legal process.
4. The arbitrator is required to disclose any circumstances that might
preclude the arbitrator from rendering an objective and impartial determination.
In the event the parties cannot mutually agree upon the selection of a JAMS
arbitrator, the President and Vice-President of JAMS shall designate the
arbitrator. The party demanding arbitration shall promptly request that JAMS
conduct a scheduling conference within fifteen (15) days of the date of that
party's written demand for arbitration or on the first available date thereafter
on the arbitrator's calendar. The arbitration hearing shall be held within
thirty (30) days after the scheduling conference or on the first available date
thereafter on the arbitrator's calendar. Nothing in this paragraph shall prevent
a party from at any time seeking temporary equitable relief, from JAMS or any
court of competent jurisdiction, to prevent irreparable harm pending the
resolution of the arbitration.
5. Discovery shall be conducted as follows: (a) prior to the
arbitration any party may make a written demand for lists of the witnesses to be
called and the documents to be introduced at the hearing; (b) the lists must be
served within fifteen (15) days of the date of receipt of the demand, or one day
prior to the arbitration, whichever is earlier; and (c) each party may take no
more than two (2) depositions (pursuant to the procedures set forth in the
California Code of Civil Procedure) with a maximum of five (5) hours of
examination time per deposition, and no other form of pre-arbitration discovery
shall be permitted.
6. It is the intent of the parties that the Federal Arbitration Act
("FAA") shall apply to the enforcement of this provision unless it is held
inapplicable by a court with jurisdiction over the dispute, in which event the
California Arbitration Act ("CAA") shall apply.
1.
<PAGE> 11
7. The arbitrator shall apply California law, including the California
Evidence Code, and shall be able to decree any and all relief of an equitable
nature, including but not limited to such relief as a temporary restraining
order, a preliminary injunction, a permanent injunction, or replevin of Company
property. The arbitrator shall also be able to award actual, general or
consequential damages, but shall not award any other form of damage (e.g.,
punitive damages).
8. Each party shall pay its pro rata share of the arbitrator's fees and
expenses, in addition to other expenses of the arbitration approved by the
arbitrator, pending the resolution of the arbitration. The arbitrator shall have
authority to award the payment of such fees and expenses to the prevailing
party, as appropriate in the discretion of the arbitrator. Each party shall pay
its own attorneys fees, witness fees and other expenses incurred for its own
benefit.
9. The arbitrator shall render a written award setting forth the
reasons for his or her decision. The decree or judgment of an award rendered by
the arbitrator may be entered and enforced in any court having jurisdiction over
the parties. The award of the arbitrator shall be final and binding upon the
parties without appeal or review except as permitted by the FAA, or if the FAA
is not applicable, as permitted by the CAA.
2.
<PAGE> 1
EXHIBIT 10.98
SERIES A PREFERRED STOCK PURCHASE AGREEMENT
DATED FEBRUARY 2, 1999
BY AND AMONG
XYRIS CORPORATION,
A CALIFORNIA CORPORATION,
BAY CITY CAPITAL FUND I,
A DELAWARE LIMITED PARTNERSHIP,
AND
AXYS PHARMACEUTICALS, INC.,
A DELAWARE CORPORATION
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C> <C>
1. AGREEMENT TO SELL AND PURCHASE...........................................................................1
1.1 Authorization of Shares.........................................................................1
1.2 Sale and Purchase...............................................................................1
2. CLOSING, DELIVERY AND PAYMENT............................................................................2
2.1 Closing.........................................................................................2
2.2 Delivery........................................................................................2
3. PUT OPTION...............................................................................................2
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND AXYS...................................................2
4.1 Organization, Good Standing and Qualification of the Company....................................3
4.2 Capitalization; Voting Rights of the Company....................................................3
4.3 Authorization; Binding Obligations of the Company...............................................3
4.4 Agreements; Action..............................................................................3
4.5 Proprietary Information and Inventions Agreements...............................................4
4.6 Organization, Good Standing and Qualification of Axys...........................................4
4.7 Capitalization of Axys..........................................................................4
4.8 Authorization; Binding Obligations of Axys......................................................4
5. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER..........................................................4
5.1 Requisite Power and Authority...................................................................4
5.2 Investment Representations......................................................................5
5.3 Transfer Restrictions...........................................................................6
6. CONDITIONS TO CLOSING....................................................................................6
6.1 Conditions to Purchaser's Obligations at the Closing............................................6
6.2 Conditions to Obligations of the Company........................................................7
7. MISCELLANEOUS............................................................................................7
7.1 Governing Law...................................................................................7
7.2 Survival........................................................................................7
7.3 Successors and Assigns..........................................................................7
7.4 Entire Agreement................................................................................7
7.5 Severability....................................................................................8
7.6 Amendment and Waiver............................................................................8
7.7 Delays or Omissions. ...........................................................................8
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
7.8 Notices.........................................................................................8
7.9 Attorneys' Fees.................................................................................8
7.10 Titles and Subtitles............................................................................8
7.11 Counterparts....................................................................................8
7.12 Pronouns........................................................................................8
7.13 California Corporate Securities Law.............................................................9
</TABLE>
LIST OF EXHIBITS
<TABLE>
<S> <C>
Put Option Subscription Form Exhibit A
Registration Rights Agreement Exhibit B
</TABLE>
ii
<PAGE> 4
SERIES A PREFERRED STOCK PURCHASE AGREEMENT
THIS SERIES A PREFERRED STOCK PURCHASE AGREEMENT (the "Agreement") is
entered into as of February 2, 1999, by and among XYRIS CORPORATION, a
California corporation (the "Company"), BAY CITY CAPITAL FUND I, a Delaware
limited partnership ("Purchaser"), and AXYS PHARMACEUTICALS, INC., a Delaware
corporation, as Put Grantor ("Axys").
RECITALS
WHEREAS, the Company, Purchaser and Axys are parties to that certain
Series A Preferred Stock Purchase Agreement dated June 1, 1998 (the "Prior
Purchase Agreement");
WHEREAS, pursuant to the Prior Purchase Agreement, Purchaser purchased
150,000 shares of Series A Preferred (the "Prior Shares") and agreed to purchase
2,850,000 additional shares of Series A Preferred upon certain conditions (the
"Options Shares");
WHEREAS, Purchaser now desires to purchase 1,351,501 of the Option
Shares (the "Shares") on the Closing Date (as defined below) on the terms and
conditions set forth herein;
WHEREAS, the Company and Axys agree that Purchaser's purchase of the
Shares shall fully satisfy Purchaser's obligations under the Prior Purchase
Agreement; and
WHEREAS, the Company desires to issue and sell the Shares to Purchaser
and Axys desires to issue to Purchaser the Put Option (as defined below) for the
Shares and the Prior Shares on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual promises hereinafter set forth, the parties hereto agree as follows:
1. AGREEMENT TO SELL AND PURCHASE.
1.1 AUTHORIZATION OF SHARES. On or prior to the Closing (as
defined in Section 2 below), the Company shall have authorized (i) the sale and
issuance to Purchaser of the Shares and (ii) the issuance of 1,351,501 shares of
Common Stock upon conversion of the Shares (the "Conversion Shares"). The Shares
and the Conversion Shares shall have the rights, preferences, privileges and
restrictions set forth in the Amended and Restated Articles of Incorporation of
the Company substantially in the form attached as Exhibit B to the Prior
Purchase Agreement (the "Restated Articles").
1.2 SALE AND PURCHASE. Subject to the terms and conditions
hereof, at the Closing the Company hereby agrees to issue and sell to Purchaser
and Purchaser agrees to purchase from the Company the Shares at a purchase price
of three dollars and thirty-three cents ($3.33) per share.
2. CLOSING, DELIVERY AND PAYMENT.
2.1 CLOSING. The closing of the sale and purchase of the
Shares under this Agreement (the "Closing") shall take place at 5:00 p.m. on the
date hereof, at the offices of
1.
<PAGE> 5
Heller, Ehrman, White & McAuliffe, 333 Bush Street, Suite 3100, San Francisco,
California or at such other time or place as the Company and Purchaser may
mutually agree (such date is hereinafter referred to as the "Closing Date").
2.2 DELIVERY. At the Closing, subject to the terms and
conditions hereof, the Company will deliver to Purchaser a certificate
representing the Shares, against payment of the purchase price therefor by wire
transfer or check made payable to the order of the Company.
3. PUT OPTION.
3.1 Subject to the terms and conditions herein set forth, Axys
hereby grants Purchaser the right (the "Put Option") at any time after the
Trigger Date (as defined in Section 3.3 below) to require Axys to purchase from
Purchaser, the Shares and the Prior Shares in exchange for shares of Axys Common
Stock, at its then "market price," with an aggregate market value on the date
immediately prior to the day the Put Option is exercised equal to $4,999,998,
rounded down to the nearest whole number of shares (the "Put Option Shares"), on
or prior to the Expiration Date set forth in Section 3.4 below. For purposes of
the Put Option, the market price for Axys Common Stock shall be (i) if the Axys
Common Stock is then reported on The Nasdaq National Market or its successor,
the closing sales price for such stock (or the closing bid, if no sales were
reported) as quoted in The Nasdaq National Market or its successor on the last
market trading day prior to exercise of the Put Option, (ii) if the Axys Common
Stock is then listed or admitted to trading on the New York Stock Exchange, the
last sale price, regular way (or, in case no such sale takes places on such day,
the average of the closing bid and asked prices, regular way) in either case as
reported in the consolidated transaction reporting system with respect to
securities listed or admitted to trading on the New York Stock Exchange on the
last market trading day prior to exercise of the Put Option, (iii) if the Axys
Common Stock is not then reported on The Nasdaq National Market or then listed
or admitted to trading on the New York Stock Exchange, the last quoted price
(or, if not so quoted, the average of the high bid and low asked prices in the
over-the-counter market) as reported by the National Association of Securities
Dealers, Inc. Automated Quotation System or such other system then in use on the
last market trading day prior to exercise of the Put Option, or (iv) in the
event none of the foregoing situations applies, the average of the closing bid
and asked prices, as furnished by a professional market maker making a market in
Axys Common Stock selected by the Axys Board of Directors, on the last market
trading day prior to exercise of the Put Option.
3.2 The Put Option shall be deemed to have been exercised
immediately prior to the close of business on the date of surrender to Axys of
the Put Option Subscription Form, attached hereto as Exhibit A.
3.3 The Put Option shall not be exercisable until August 2,
1999 (the "Trigger Date").
3.4 The Put Option shall terminate in full on February 2,
2001.
3.5 The Put Option shall not be transferable by Purchaser
except to an affiliate of Purchaser reasonably acceptable to Axys who is also a
transferee of the Shares and the Prior Shares and agrees in a writing reasonably
acceptable to Axys to be bound by the provisions of this Agreement pertaining to
the Put Option and the Put Option Shares, the Registration Rights
2.
<PAGE> 6
Agreement and the side letter referred to in Section 3.4 thereof (the "SIDE
LETTER") to the same extent as Purchaser.
3.6 Upon the exercise of the Put Option and concurrent with
the issuance of the Put Option Shares within a reasonable time period (not to
exceed 10 business days after Axys' receipt of the Put Option Subscription
Form), Axys shall execute the Registration Rights Agreement in the form attached
as Exhibit B (the "REGISTRATION RIGHTS AGREEMENT"). Purchaser shall provide such
reasonable cooperation as Axys requests in connection with the issuance of the
Put Option Shares.
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND AXYS.
(a) The Company hereby represents and warrants to Purchaser as of the
date of this Agreement as follows:
4.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION OF THE
COMPANY. The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of California. The Company has all
requisite corporate power and authority to own and operate its properties and
assets, to execute and deliver this Agreement, to issue and sell the Shares and
the Conversion Shares, to carry out the provisions of this Agreement and the
Restated Articles and to carry on its business as presently conducted and as
presently proposed to be conducted.
4.2 CAPITALIZATION; VOTING RIGHTS OF THE COMPANY. The
authorized capital stock of the Company, immediately prior to the Closing, will
consist of 10,000,000 shares of Common Stock, no par value per share, 550,000
shares of which are issued and outstanding; 8,200,000 shares of Preferred Stock
no par value per share, all of which are designated Series A Preferred Stock,
2,200,000 of which are issued and outstanding. All issued and outstanding shares
of the Company's Common Stock have been duly authorized and validly issued. The
rights, preferences, privileges and restrictions of the Shares are as stated in
the Restated Articles. The Conversion Shares have been duly and validly reserved
for issuance. Other than as set forth in this Agreement; the Prior Purchase
Agreement; the Series A Preferred Stock Purchase Agreement between the Company
and Axys dated as of June 1, 1998; the Common Stock Purchase Agreement between
the Company and Jerry Caulder, dated as of April 30, 1998; the Shareholders'
Agreement between the Company, Jerry Caulder, Purchaser and Axys, dated as of
June 1, 1998; and the Company's 1998 Equity Incentive Plan (pursuant to which
options to purchase 20,000 shares of Common Stock are outstanding), there are no
outstanding options, warrants, rights (including conversion or preemptive rights
and rights of first refusal), proxy or shareholder agreements, or agreements of
any kind for the purchase or acquisition from the Company of any of its
securities. When issued in compliance with the provisions of this Agreement and
the Restated Articles, the Shares and the Conversion Shares will be validly
issued, fully paid and nonassessable, and will be free of any liens or
encumbrances other than liens and encumbrances created by or imposed upon
Purchaser; provided, however, that the Shares and the Conversion Shares may be
subject to restrictions on transfer under the Company's Bylaws or state and/or
federal securities laws as set forth herein or as otherwise required by such
laws at the time a transfer is proposed.
4.3 AUTHORIZATION; BINDING OBLIGATIONS OF THE COMPANY. All
corporate action on the part of the Company, its officers, directors and
shareholders necessary for the
3.
<PAGE> 7
authorization of this Agreement, the performance of all obligations of the
Company hereunder at the Closing and the authorization, sale, issuance and
delivery of the Shares pursuant hereto and the Conversion Shares pursuant to the
Restated Articles has been taken or will be taken prior to the Closing. The
Agreement, when executed and delivered, will be a valid and binding obligation
of the Company enforceable in accordance with its terms, except (a) as limited
by applicable bankruptcy, insolvency, reorganization, moratorium or other laws
of general application affecting enforcement of creditors' rights; and (b)
general principles of equity that restrict the availability of equitable
remedies.
4.4 AGREEMENTS; ACTION.
Except for agreements explicitly contemplated hereby and pursuant to
the Employment Agreement by and between the Company and Jerry Caulder, dated
April 30, 1998, and agreements between the Company and its employees with
respect to the sale, or the issuance of options providing for the sale, of the
Company's Common Stock, pursuant to the Company's 1998 Equity Incentive Plan
there are no agreements, understandings or proposed transactions between the
Company and any of its officers, directors, affiliates or any affiliate thereof.
4.5 PROPRIETARY INFORMATION AND INVENTIONS AGREEMENTS.
Each employee, officer and consultant of the Company has executed a
Proprietary Information and Inventions Agreement in the form previously approved
by Axys and Purchaser.
(b) Axys, as Put Grantor, hereby represents and warrants to Purchaser
as of the date of this Agreement as follows:
4.6 ORGANIZATION, GOOD STANDING AND QUALIFICATION OF AXYS.
Axys is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware. Axys has all requisite corporate power
and authority to own and operate its properties and assets, to execute and
deliver this Agreement, to issue and sell the Put Option and Put Option Shares,
to carry out the provisions of this Agreement relating to it as Put Grantor and
to carry on its business as presently conducted and as presently proposed to be
conducted.
4.7 CAPITALIZATION OF AXYS. The authorized capital stock of
Axys, as of October 31, 1998, consisted of 50,000,000 shares of Common Stock,
$.001 par value per share, 30,147,403 shares of which were issued and
outstanding; 10,000,000 shares of Preferred Stock $.001 par value per share,
none of which were issued and outstanding. All issued and outstanding shares of
the Company's Common Stock have been duly authorized and validly issued. The
rights, preferences, privileges and restrictions of the Shares are as stated in
Axys' public filings. The Put Option Shares have been duly and validly reserved
for issuance. When issued in compliance with the provisions of this Agreement
and Axys' public filings, the Put Option Shares will be validly issued, fully
paid and nonassessable, and will be free of any liens or encumbrances other than
liens and encumbrances created by or imposed upon Purchaser; provided, however,
that the Put Option Shares may be subject to restrictions on transfer under
state and/or federal securities laws, as set forth herein, or as otherwise
required by such laws at the time a transfer is proposed.
4.8 AUTHORIZATION; BINDING OBLIGATIONS OF AXYS. All corporate
action on the part of Axys, its officers, directors and stockholders necessary
for the authorization of this Agreement, the performance of all obligations of
Axys as Put Grantor hereunder at the Closing
4.
<PAGE> 8
and the authorization, sale, issuance and delivery of the Put Option and the Put
Option Shares pursuant hereto has been taken or will be taken prior to the
Closing. The Agreement, when executed and delivered, will be a valid and binding
obligation of Axys enforceable in accordance with its terms, except (a) as
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other laws of general application affecting enforcement of creditors' rights;
and (b) general principles of equity that restrict the availability of equitable
remedies.
5. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.
Purchaser hereby represents and warrants to the Company as follows:
5.1 REQUISITE POWER AND AUTHORITY. Purchaser has all necessary
power and authority under all applicable provisions of law to execute and
deliver this Agreement and to carry out its provisions. All action on
Purchaser's part required for the lawful execution and delivery of this
Agreement have been or will be effectively taken prior to the Closing. Upon its
execution and delivery, this Agreement will be a valid and binding obligation of
Purchaser, enforceable in accordance with its terms, except (a) as limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other laws of
general application affecting enforcement of creditors' rights, and (b) general
principles of equity that restrict the availability of equitable remedies
5.2 INVESTMENT REPRESENTATIONS. Purchaser understands that
neither the Shares, the Conversion Shares, the Put Option nor the Put Option
Shares have been registered under the Securities Act of 1933, as amended (the
"Securities Act"). Purchaser also understands that the Shares and the Put Option
are being offered and sold pursuant to an exemption from registration contained
in the Securities Act based in part upon Purchaser's representations contained
in this Agreement. Purchaser hereby represents and warrants as follows:
(a) PURCHASER BEARS ECONOMIC RISK. Purchaser has
substantial experience in evaluating and investing in private placement
transactions of securities in companies similar to the Company so that it is
capable of evaluating the merits and risks of its investment in the Company and
has the capacity to protect its own interests. Purchaser must bear the economic
risk of this investment indefinitely unless the Shares (or the Conversion
Shares) and the Put Option (or the Put Option Shares) are registered pursuant to
the Securities Act, or an exemption from registration is available. Purchaser
understands that the Company has no present intention of registering the Shares,
the Conversion Shares, or any shares of its Common Stock and that Axys has no
present intention of registering the Put Option and only intends to register the
Put Option Shares pursuant to the terms and provisions of the Registration
Rights Agreement. Purchaser also understands that there is no assurance that any
exemption from registration under the Securities Act will be available and that,
even if available, such exemption may not allow Purchaser to transfer all or any
portion of the Shares or the Conversion Shares or the Put Option or the Put
Option Shares under the circumstances, in the amounts or at the times Purchaser
might propose.
(b) ACQUISITION FOR OWN ACCOUNT. Purchaser is
acquiring the Shares, the Conversion Shares, the Put Option and the Put Option
Shares for Purchaser's own account for investment only, and not with a view
towards their distribution; provided that Purchaser may transfer the Shares and
the Conversion Shares to an affiliate of Purchaser reasonably acceptable to
Axys, may transfer the Put Option as provided herein and may transfer the Put
Option Shares
5.
<PAGE> 9
(subject to the provisions of the Side Letter) as permitted by applicable law or
pursuant to the Registration Rights Agreement.
(c) PURCHASER CAN PROTECT ITS INTEREST. Purchaser
represents that by reason of its, or of its management's, business or financial
experience, Purchaser has the capacity to protect its own interests in
connection with the transactions contemplated in this Agreement. Further,
Purchaser is aware of no publication of any advertisement in connection with the
transactions contemplated in this Agreement.
(d) ACCREDITED INVESTOR. Purchaser represents that it
is an accredited investor within the meaning of Regulation D under the
Securities Act.
(e) COMPANY INFORMATION. Purchaser has had an
opportunity to discuss the Company's business, management and financial affairs
with the directors of the Company. Purchaser has also had the opportunity to ask
questions of and receive answers from the Company and its management regarding
the terms and conditions of this investment.
(f) RULE 144. Purchaser acknowledges and agrees that
the Shares and the Put Option, and, if issued, the Conversion Shares
and the Put Option Shares must be held indefinitely unless they are subsequently
registered under the Securities Act or an exemption from such registration is
available. Purchaser has been advised or is aware of the provisions of Rule 144
promulgated under the Securities Act as in effect from time to time, which
permits limited resale of shares purchased in a private placement subject to the
satisfaction of certain conditions, including, among other things: the
availability of certain current public information about the Company, the resale
occurring following the required holding period under Rule 144 and the number of
shares being sold during any three-month period not exceeding specified
limitations.
5.3 TRANSFER RESTRICTIONS. Purchaser acknowledges and agrees
that the Shares and the Put Option and, if issued, the Conversion Shares and the
Put Option Shares are subject to restrictions on transfer as set forth in the
Company's Bylaws.
6. CONDITIONS TO CLOSING.
6.1 CONDITIONS TO PURCHASER'S OBLIGATIONS AT THE CLOSING.
Purchaser's obligations to purchase the Shares and the Put Option at the Closing
are subject to the satisfaction, at or prior to the Closing Date, of the
following conditions, any one or more of which may be waived in writing by
Purchaser:
(a) REPRESENTATIONS AND WARRANTIES TRUE; PERFORMANCE
OF OBLIGATIONS. The representations and warranties made by the Company in
Section 4 hereof shall be true and correct in all material respects as of the
Closing Date with the same force and effect as if they had been made as of the
Closing Date, and the Company shall have performed all obligations and
conditions herein required to be performed or observed by it on or prior to the
Closing.
(b) LEGAL INVESTMENT. On the Closing Date, the sale
and issuance of the Shares and the Put Option and the potential issuance of the
Conversion Shares and the Put Option Shares shall be legally permitted by all
laws and regulations to which Purchaser, the Company and Axys are subject.
6.
<PAGE> 10
(c) CONSENTS, PERMITS, AND WAIVERS. The Company and
Axys shall have obtained any and all consents, permits and waivers necessary or
appropriate for consummation of the transactions contemplated by the Agreement,
except for such as may be properly obtained subsequent to the Closing.
(d) CORPORATE DOCUMENTS. The Company and Axys shall
have delivered to Purchaser or its counsel, copies of all corporate documents of
the Company and Axys, respectively, as Purchaser shall reasonably request.
(e) RESERVATION OF CONVERSION SHARES. The Conversion
Shares shall have been duly authorized and reserved for issuance by the Company
and the Put Option Shares shall have been duly authorized and reserved for
issuance by Axys.
(f) PROCEEDINGS AND DOCUMENTS. All corporate and
other proceedings in connection with the transactions contemplated at the
Closing hereby and all documents and instruments incident to such transactions
shall be reasonably satisfactory in substance and form to the Purchaser and its
counsel, and the Purchaser and its counsel shall have received all such
counterpart originals or certified or other copies of such documents as they may
reasonably request.
6.2 CONDITIONS TO OBLIGATIONS OF THE COMPANY. The Company's
obligation to issue and sell the Shares at the Closing and Axys' obligation to
issue the Put Option are subject to the satisfaction, on or prior to the
Closing, of the following conditions, any one or more of which may be waived in
writing by the Company:
(a) REPRESENTATIONS AND WARRANTIES TRUE. The
representations and warranties made by Purchaser in Section 5 hereof shall be
true and correct in all material respects at the date of the Closing, with the
same force and effect as if they had been made on and as of said date.
(b) PERFORMANCE OF OBLIGATIONS. Purchaser shall have
performed and complied with all agreements and conditions herein
required to be performed or complied with by Purchaser on or before the Closing,
including but not limited to the tender of the purchase price for the Shares.
(c) CONSENTS, PERMITS AND WAIVERS. The Company and
Axys shall have obtained any and all consents, permits and waivers necessary or
appropriate for consummation of the transactions contemplated by the Agreement,
except for such as may be properly obtained subsequent to the Closing.
7. MISCELLANEOUS.
7.1 GOVERNING LAW. This Agreement shall be governed in all
respects by the laws of the State of California as such laws are applied to
agreements between California residents entered into and performed entirely in
California.
7.2 SURVIVAL. The representations, warranties, covenants and
agreements made herein shall survive any investigation made by Purchaser and the
closing of the transactions contemplated hereby. All statements as to factual
matters contained in any certificate or other instrument delivered by or on
behalf of the Company pursuant hereto in
7.
<PAGE> 11
connection with the transactions contemplated hereby shall be deemed to be
representations and warranties by the Company hereunder solely as of the date of
such certificate or instrument.
7.3 SUCCESSORS AND ASSIGNS. Except as otherwise expressly
provided herein, the provisions hereof shall inure to the benefit of, and be
binding upon, the successors, assigns, and administrators of the parties hereto
and shall inure to the benefit of and be enforceable by each person who shall be
a holder of the Shares from time to time.
7.4 ENTIRE AGREEMENT. This Agreement and the Exhibits hereto
constitute the full and entire understanding and agreement between the parties
with regard to the subject matter hereof and no party shall be liable or bound
to any other in any manner by any representations, warranties, covenants and
agreements, except as specifically set forth herein and therein.
7.5 SEVERABILITY. In case any provision of the Agreement shall
be invalid, illegal or unenforceable, the validity, legality and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.
7.6 AMENDMENT AND WAIVER. This Agreement may be amended or
modified and any provision hereof may be waived only upon the written consent of
the Company, the Purchaser and Axys.
7.7 DELAYS OR OMISSIONS. It is agreed that no delay or
omission to exercise any right, power or remedy accruing to any party, upon any
breach, default or noncompliance by another party under this Agreement or the
Restated Articles, shall impair any such right, power or remedy, nor shall it be
construed to be a waiver of any such breach, default or noncompliance, or any
acquiescence therein, or of or in any similar breach, default or noncompliance
thereafter occurring.
7.8 NOTICES. All notices required or permitted hereunder shall
be in writing and shall be deemed effectively given: (a) upon personal delivery
to the party to be notified; (b) when sent by confirmed telex or facsimile if
sent during normal business hours of the recipient, if not, then on the next
business day; (c) five days after having been sent by registered or certified
mail, return receipt requested, postage prepaid; or (d) one day after deposit
with a nationally recognized overnight courier, specifying next day delivery,
with written verification of receipt. All communications shall be sent to the
Company, the Purchaser or Axys at the address as set forth on the signature page
hereof for such party or at such other address as a party may designate by ten
days advance written notice to the other parties hereto.
7.9 ATTORNEYS' FEES. In the event that any dispute among the
parties to this Agreement should result in litigation, the prevailing party in
such dispute shall be entitled to recover from the losing party all fees, costs
and expenses of enforcing any right of such prevailing party under or with
respect to this Agreement, including without limitation, such reasonable fees
and expenses of attorneys and accountants, which shall include, without
limitation, all fees, costs and expenses of appeals.
7.10 TITLES AND SUBTITLES. The titles of the sections and
subsections of this Agreement are for convenience of reference only and are not
to be considered in construing this Agreement.
8.
<PAGE> 12
7.11 COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which shall be an original, but all of which
together shall constitute one instrument.
7.12 PRONOUNS. All pronouns contained herein, and any
variations thereof, shall be deemed to refer to the masculine, feminine or
neutral, singular or plural, as the identity of the parties hereto may require.
7.13 CALIFORNIA CORPORATE SECURITIES LAW. THE SALE OF THE
SECURITIES WHICH ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH
THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF
SUCH SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION
THEREFOR PRIOR TO SUCH QUALIFICATION OR IN THE ABSENCE OF AN EXEMPTION FROM SUCH
QUALIFICATION IS UNLAWFUL. PRIOR TO ACCEPTANCE OF SUCH CONSIDERATION BY THE
COMPANY, THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY CONDITIONED
UPON SUCH QUALIFICATION BEING OBTAINED OR AN EXEMPTION FROM SUCH QUALIFICATION
BEING AVAILABLE.
9.
<PAGE> 13
IN WITNESS WHEREOF, the parties hereto have executed this SERIES A
PREFERRED STOCK PURCHASE AGREEMENT as of the date set forth in the first
paragraph hereof.
COMPANY: PURCHASER:
XYRIS CORPORATION BAY CITY CAPITAL FUND I
By: /s/ Jerry Caulder By: /s/ Fred Craves
------------------------------ -----------------------------
Jerry Caulder Print Name: Fred Craves
President Title: Gen. Partner
Address: 11099 North Torrey Pines Road Address: 750 Battery Street, Suite 600
La Jolla, California 92037 San Francisco, CA 94111
Attn: President Attn: Roger Salquist
FAX: (619) 794-5525 FAX: (415) 837-0996
PUT GRANTOR:
AXYS PHARMACEUTICALS, INC.
By: /s/ Frederick Ruegsegger
-------------------------------------
Print Name: Frederick Ruegsegger
Title: Sr. V.P. & CFO
Address: 180 Kimball Way
South San Francisco, CA 94080
Attn: Chief Financial Officer
FAX: (650) 829-1001
10.
<PAGE> 14
SERIES A PREFERRED STOCK PURCHASE AGREEMENT
EXHIBIT A
PUT OPTION SUBSCRIPTION FORM
To: Axys Pharmaceuticals, Inc.
180 South Kimball Way
South San Francisco, California 94080
Attn: Chief Financial Officer
BAY CITY CAPITAL FUND I, a Delaware limited partnership ("BCC"), the
holder of the Put Option (the "Put Option") described in Section 3 of that
certain Series A Preferred Stock Purchase Agreement dated February 2, 1999, by
and among Xyris Corporation, a California corporation ("Xyris"), BCC and Axys
Pharmaceuticals, Inc., a Delaware corporation ("Axys"), hereby elects to
exercise the right represented by the Put Option to sell to Axys 1,501,501
shares of Series A Preferred Stock of Xyris held by BCC in exchange for that
number of shares of Axys Common Stock having an aggregate market value of
$4,999,998, rounded down to the nearest whole number of shares, at the "market
price" as defined in the Put Option.
BCC hereby covenants to cause a certificate representing such shares of
Common Stock to be delivered to Axys upon surrender of this Put Option
Subscription Form in accordance with the Put Option.
Dated:
--------------------
BAY CITY CAPITAL FUND I, a Delaware
Limited Partnership
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
<PAGE> 15
SERIES A PREFERRED STOCK PURCHASE AGREEMENT
EXHIBIT B
FORM OF REGISTRATION RIGHTS AGREEMENT
<PAGE> 16
REGISTRATION RIGHTS AGREEMENT
----------- --, ----
<PAGE> 17
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
SECTION 1. GENERAL.............................................................................................1
1.1 Definitions.....................................................................................1
SECTION 2. REGISTRATION; RESTRICTIONS ON TRANSFER..............................................................2
2.1 Restrictions on Transfer........................................................................2
2.2 Piggyback Registrations.........................................................................3
2.3 Form S-3 Registration...........................................................................4
2.4 Expenses of Registration........................................................................6
2.5 Obligations of the Company......................................................................6
2.6 Termination of Registration Rights..............................................................7
2.7 Delay of Registration; Furnishing Information...................................................7
2.8 Indemnification.................................................................................7
2.9 Assignment of Registration Rights...............................................................9
2.10 "Market Stand-Off" Agreement; Agreement to Furnish Information..................................9
2.11 Rule 144 Reporting.............................................................................10
SECTION 3. MISCELLANEOUS......................................................................................10
3.1 Governing Law..................................................................................10
3.2 Survival.......................................................................................10
3.3 Successors and Assigns.........................................................................11
3.4 Entire Agreement...............................................................................11
3.5 Severability...................................................................................11
3.6 Amendment and Waiver...........................................................................11
3.7 Delays or Omissions............................................................................11
3.8 Notices........................................................................................11
3.9 Attorneys' Fees................................................................................12
3.10 Titles and Subtitles...........................................................................12
3.11 Counterparts...................................................................................12
</TABLE>
i
<PAGE> 18
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "AGREEMENT") is entered into as
of the ___ day of __________, ____, by and among AXYS PHARMACEUTICALS, INC., a
Delaware corporation (the "COMPANY") and BAY CITY CAPITAL FUND I, a Delaware
limited partnership ("BAY CITY CAPITAL").
RECITALS
WHEREAS, the Company proposes to sell and issue shares of its Common
Stock upon exercise of a put option held by Bay City Capital (the "PUT OPTION")
pursuant to a Series A Preferred Stock Purchase Agreement, dated February 2,
1999, among the Company, Xyris Corporation and Bay City Capital (the "1999 XYRIS
PURCHASE AGREEMENT").
WHEREAS, as a condition of entering into the 1999 Xyris Purchase
Agreement, Bay City Capital has requested that the Company extend to Bay City
Capital certain registration rights as set forth below on any shares of Company
Common Stock issued upon exercise of the Put Option.
NOW, THEREFORE, in consideration of the mutual promises,
representations, warranties, covenants and conditions set forth in this
Agreement and the 1999 Xyris Purchase Agreement, the parties mutually agree as
follows:
SECTION 1. GENERAL
1.1 DEFINITIONS. As used in this Agreement the following terms shall
have the following respective meanings:
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"FORM S-3" means such form under the Securities Act as in
effect on the date hereof or any successor registration form under the
Securities Act subsequently adopted by the SEC which permits inclusion or
incorporation of substantial information by reference to other documents filed
by the Company with the SEC.
"HOLDER" means any person owning of record Registrable
Securities that have not been sold to the public or any assignee of record of
such Registrable Securities in accordance with Section 2.8 hereof.
"MATERIAL ADVERSE EVENT" means an occurrence having a
consequence that either (a) is materially adverse to the business, prospects or
financial condition of the Company or (b) has a reasonable likelihood of
occurring and, if it were to occur, would be reasonably likely to materially
adversely affect the business, prospects or financial condition of the Company.
"REGISTER," "REGISTERED," and "REGISTRATION" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of
effectiveness of such registration statement.
1.
<PAGE> 19
"REGISTRABLE SECURITIES" means (a) Common Stock of the
Company issued to Bay City Capital in connection with the Xyris Purchase
Agreements; and (b) any Common Stock of the Company issued as (or issuable upon
the conversion or exercise of any warrant, right or other security which is
issued as) a dividend or other distribution with respect to, or in exchange for
or in replacement of, such above-described securities. Notwithstanding the
foregoing, Registrable Securities shall not include any securities sold by a
person to the public pursuant to a registration statement or Rule 144 or sold in
a private transaction in which the transferor's rights under Section 2 of this
Agreement are not assigned.
"REGISTRATION EXPENSES" means all expenses incurred by the
Company in complying with Section 2.2 hereof, including, without limitation, all
registration and filing fees, printing expenses, fees and disbursements of
counsel for the Company, reasonable fees and disbursements not to exceed
twenty-five thousand dollars ($25,000) of a single special counsel for the
Holders, blue sky fees and expenses and the expense of any special audits
incident to or required by any such registration (but excluding the compensation
of regular employees of the Company which shall be paid in any event by the
Company).
"SEC" or "COMMISSION" means the Securities and Exchange
Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SELLING EXPENSES" means all underwriting discounts and
selling commissions applicable to the sale.
"XYRIS PURCHASE AGREEMENTS" means the 1999 Xyris Purchase
Agreement and the Series A Preferred Stock Purchase Agreement, dated June 1,
1998 between the Company, Xyris Corporation and Bay City Capital.
SECTION 2. REGISTRATION; RESTRICTIONS ON TRANSFER
2.1 RESTRICTIONS ON TRANSFER.
(a) The Holder agrees not to make any disposition of all or
any portion of the Registrable Securities unless and until:
(i) There is then in effect a registration statement
under the Securities Act covering such proposed disposition and such disposition
is made in accordance with such registration statement or such proposed
disposition is otherwise exempt from registration under the Securities Act; or
(ii) (A) The transferee has agreed in writing to be
bound by the terms of this Agreement, (B) such Holder shall have notified the
Company of the proposed disposition and shall have furnished the Company with a
detailed statement of the circumstances surrounding the proposed disposition,
and (C) if requested by the Company, such Holder shall have furnished the
Company with an opinion of counsel, reasonably satisfactory to the Company, that
such disposition will not require registration of such shares under the
Securities Act.
2.
<PAGE> 20
(iii) Notwithstanding the provisions of paragraphs
(i) and (ii) above, no such registration statement or opinion of counsel
shall be necessary for a transfer by a Holder which is (A) a partnership to its
partners or former partners in accordance with partnership interests, (B) a
corporation to its shareholders in accordance with their interest in the
corporation, (C) a limited liability company to its members or former members in
accordance with their interest in the limited liability company, (D) to an
entity of which a majority of the equity and voting interest is owned by such
Holder, directly or indirectly (an "AFFILIATE"), or (E) to the Holder's family
member or trust for the benefit of an individual Holder; provided that in each
case the transferee will be subject to the terms of this Agreement to the same
extent as if he were an original Holder hereunder.
(b) Each certificate representing Registrable Securities shall
(unless otherwise permitted by the provisions of the Agreement) be stamped or
otherwise imprinted with a legend substantially similar to the following (in
addition to any legend required under applicable state securities laws):
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND
MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, ASSIGNED,
PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE
ACT OR UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT SUCH
REGISTRATION IS NOT REQUIRED.
(c) The Company shall be obligated to reissue promptly
unlegended certificates at the request of any holder thereof if the holder shall
have obtained an opinion of counsel (which counsel may be counsel to the
Company) reasonably acceptable to the Company to the effect that the securities
proposed to be disposed of may lawfully be so disposed of without registration,
qualification or legend.
(d) Any legend endorsed on an instrument pursuant to
applicable state securities laws and the stop-transfer instructions with respect
to such securities shall be removed upon receipt by the Company of an order of
the appropriate blue sky authority authorizing such removal.
2.2 PIGGYBACK REGISTRATIONS. The Company shall notify all Holders of
Registrable Securities in writing at least twenty-one (21) days prior to the
filing of any registration statement under the Securities Act for purposes of a
public offering of securities of the Company (including, but not limited to,
registration statements relating to secondary offerings of securities of the
Company, but excluding registration statements relating to employee benefit
plans or with respect to corporate reorganizations or other transactions under
Rule 145 of the Securities Act) and will afford each such Holder an opportunity
to include in such registration statement all or part of such Registrable
Securities held by such Holder. Each Holder desiring to include in any such
registration statement all or any part of the Registrable Securities held by it
shall, within fifteen (15) days after the above-described notice from the
Company, so notify the Company in
3.
<PAGE> 21
writing. Such notice shall state the intended method of disposition of the
Registrable Securities by such Holder. If a Holder decides not to include all of
its Registrable Securities in any registration statement thereafter filed by the
Company, such Holder shall nevertheless continue to have the right to include
any Registrable Securities in any subsequent registration statement or
registration statements as may be filed by the Company with respect to offerings
of its securities, all upon the terms and conditions set forth herein.
(a) UNDERWRITING. If the registration statement under which
the Company gives notice under this Section 2.2 is for an underwritten offering,
the Company shall so advise the Holders of Registrable Securities. In such
event, the right of any such Holder to be included in a registration pursuant to
this Section 2.2 shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's Registrable Securities in the
underwriting to the extent provided herein. All Holders proposing to distribute
their Registrable Securities through such underwriting shall enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting by the Company. Notwithstanding any other
provision of the Agreement, if the underwriter determines in good faith that
marketing factors require a limitation of the number of shares to be
underwritten, the number of shares that may be included in the underwriting
shall be allocated, first, to the Company; second, to the Holders and any other
shareholders of the Company currently having registration rights on a pro rata
basis based on the total number of Registrable Securities held by the Holders
and the total number of registrable securities held by such other shareholders;
and third, to any shareholder of the Company (other than a Holder) on a pro rata
basis. No such reduction shall (i) reduce the securities being offered by the
Company for its own account to be included in the registration and underwriting,
or (ii) reduce the amount of securities of the selling Holders included in the
registration below twenty-five percent (25%) of the total amount of securities
included in such registration, unless such registration does not include shares
of any other selling shareholders, in which event any or all of the Registrable
Securities of the Holders may be excluded in accordance with the immediately
preceding sentence. In no event will shares of any other selling shareholder
(other than those presently entitled to registration rights) be included in such
registration which would reduce the number of shares which may be included by
Holders without the written consent of Holders of not less than sixty-six and
two-thirds percent (66 2/3%) of the Registrable Securities proposed to be sold
in the offering. If any Holder disapproves of the terms of any such
underwriting, such Holder may elect to withdraw therefrom by written notice to
the Company and the underwriter, delivered at least ten (10) business days prior
to the effective date of the registration statement. Any Registrable Securities
excluded or withdrawn from such underwriting shall be excluded and withdrawn
from the registration. For any Holder which is a partnership or corporation, the
partners, retired partners and shareholders of such Holder, or the estates and
family members of any such partners and retired partners and any trusts for the
benefit of any of the foregoing person shall be deemed to be a single "Holder",
and any pro rata reduction with respect to such "Holder" shall be based upon the
aggregate amount of shares carrying registration rights owned by all entities
and individuals included in such "Holder," as defined in this sentence.
(b) RIGHT TO TERMINATE REGISTRATION. The Company shall have
the right to terminate or withdraw any registration initiated by it under this
Section 2.2 prior to the effectiveness of such registration whether or not any
Holder has elected to include securities in
4.
<PAGE> 22
such registration. The Registration Expenses of such withdrawn registration
shall be borne by the Company in accordance with Section 2.3 hereof.
2.3 FORM S-3 REGISTRATION. In case the Company shall receive from any
Holder or Holders of Registrable Securities a written request that the Company
effect a registration on Form S-3 (or any successor to Form S-3) or any similar
short-form registration statement and any related qualification or compliance
with respect to all or a part of the Registrable Securities owned by such Holder
or Holders, the Company will:
(a) promptly give written notice of the proposed registration,
and any related qualification or compliance, to all other holders of registrable
securities; and
(b) as soon as practicable, effect such registration and all
such qualifications and compliances as may be so requested and as would permit
or facilitate the sale and distribution of all or such portion of such Holder's
or Holders' Registrable Securities as are specified in such request, together
with all or such portion of the registrable securities of any other holder or
holders joining in such request as are specified in a written request given
within fifteen (15) days after receipt of such written notice from the Company;
provided, however, that the Company shall not be obligated to effect any such
registration, qualification or compliance pursuant to this Section 2.3:
(i) if Form S-3 (or any successor or similar form) is
not available for such offering by the Holders, or
(ii) if the Holders, together with the holders of any
other securities of the Company entitled to inclusion in such registration,
propose to sell Registrable Securities and such other securities (if any) at an
aggregate price to the public of less than one million dollars ($1,000,000), or
(iii) if within thirty (30) days of receipt of a
written request from the Holders pursuant to this Section, the Company gives
notice to the Holders of the Company's intention to make a public offering
within ninety (90) days;
(iv) if the Company shall furnish to the Holders a
certificate signed by the Chairman of the Board of Directors of the Company
stating that in the good faith judgment of the Board of Directors of the
Company, it would be seriously detrimental to the Company and its shareholders
for such Form S-3 registration to be effected at such time, in which event the
Company shall have the right to defer the filing of the Form S-3 registration
statement for a period of not more than ninety (90) days after receipt of the
request of the Holder or Holders under this Section 2.4; provided, that such
right to delay a request shall be exercised by the Company not more than once in
any twelve (12) month period, or
(v) if the Company has already effected one (1)
registration on Form S-3 for the Holders pursuant to this Section 2.3, or
(vi) in any particular jurisdiction in which the
Company would be required to qualify to do business or to execute a general
consent to service of process in effecting such registration, qualification or
compliance.
5.
<PAGE> 23
Notwithstanding the foregoing, in the event that the Holder or Holders of
Registrable Securities request the withdrawal of a registration being made
pursuant to this Section 2.3 and, in such withdrawal request, the Holder(s)
state that it first learned (within seven (7) days of the date of such
withdrawal request) of a Material Adverse Event (which is specified in
reasonable detail in such withdrawal request) not known to the Holder(s) at the
time of its request for registration of their Registrable Securities pursuant to
this Section 2.3, then the Holder(s) shall retain its rights to request
registration pursuant to this Section 2.3 as if it had not previously requested
registration hereunder.
(c) Subject to the foregoing, the Company shall file a Form
S-3 registration statement covering the Registrable Securities and other
securities so requested to be registered as soon as practicable after receipt of
the request or requests of the Holders.
2.4 EXPENSES OF REGISTRATION. Except as specifically provided herein,
all Registration Expenses incurred in connection with any registration under
Section 2.2 or 2.3 herein shall be borne by the Company. All Selling Expenses
incurred in connection with any registrations hereunder, shall be borne by the
holders of the securities so registered pro rata on the basis of the number of
shares so registered.
2.5 OBLIGATIONS OF THE COMPANY. Whenever required to effect the
registration of any Registrable Securities, the Company shall, as expeditiously
as reasonably possible:
(a) Prepare and file with the SEC a registration statement
with respect to such Registrable Securities and use all reasonable efforts to
cause such registration statement to become effective, and, upon the request of
the Holders of a majority of the Registrable Securities registered thereunder,
keep such registration statement effective for up to ninety (90) days or, if
earlier, until the Holder or Holders have completed the distribution related
thereto. The Company shall not be required to file, cause to become effective or
maintain the effectiveness of any registration statement that contemplates a
distribution of securities on a delayed or continuous basis pursuant to Rule 415
under the Securities Act.
(b) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement for the period set forth in
paragraph (a) above.
(c) Furnish to the Holders such number of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as they may
reasonably request in order to facilitate the disposition of Registrable
Securities owned by them.
(d) Use its reasonable best efforts to register and qualify
the securities covered by such registration statement under such other
securities or Blue Sky laws of such jurisdictions as shall be reasonably
requested by the Holders; provided that the Company shall not be required in
connection therewith or as a condition thereto to qualify to do business or to
file a general consent to service of process in any such states or
jurisdictions.
6.
<PAGE> 24
(e) In the event of any underwritten public offering, enter
into and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter(s) of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement.
(f) Notify each Holder of Registrable Securities covered by
such registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing.
(g) Use its best efforts to furnish, on the date that such
Registrable Securities are delivered to the underwriters for sale, if such
securities are being sold through underwriters, (i) an opinion, dated as of such
date, of the counsel representing the Company for the purposes of such
registration, in form and substance as is customarily given to underwriters in
an underwritten public offering, addressed to the underwriters, if any, and (ii)
a letter dated as of such date, from the independent certified public
accountants of the Company, in form and substance as is customarily given by
independent certified public accountants to underwriters in an underwritten
public offering addressed to the underwriters.
2.6 TERMINATION OF REGISTRATION RIGHTS. All registration rights granted
under this Section 2 shall terminate and be of no further force and effect two
(2) years after the date of this Agreement. In addition, a Holder's registration
rights shall expire if all Registrable Securities held by and issuable to such
Holder (and its affiliates, partners, former partners, members and former
members) may be sold under Rule 144 during any ninety (90) day period.
2.7 DELAY OF REGISTRATION; FURNISHING INFORMATION.
(a) No Holder shall have any right to obtain or seek an
injunction restraining or otherwise delaying any such registration as the result
of any controversy that might arise with respect to the interpretation or
implementation of this Section 2.
(b) It shall be a condition precedent to the obligations of
the Company to take any action pursuant to Section 2.2 or 2.3 that the selling
Holders shall furnish to the Company such information regarding themselves, the
Registrable Securities held by them and the intended method of disposition of
such securities as shall be required to effect the registration of their
Registrable Securities.
2.8 INDEMNIFICATION. In the event any Registrable Securities are
included in a registration statement under Section 2.2.or 2.3:
(a) To the extent permitted by law, the Company will indemnify
and hold harmless each Holder, the partners, officers and directors of each
Holder, any underwriter (as defined in the Securities Act) for such Holder and
each person, if any, who controls such Holder or underwriter within the meaning
of the Securities Act or the Exchange Act, against any losses, claims, damages,
or liabilities (joint or several) to which they may become subject under the
Securities Act, the Exchange Act or other federal or state law, insofar as such
losses, claims,
7.
<PAGE> 25
damages or liabilities (or actions in respect thereof) arise out of or are based
upon any of the following statements, omissions or violations (collectively a
"VIOLATION") by the Company: (i) any untrue statement or alleged untrue
statement of a material fact contained in such registration statement, including
any preliminary prospectus or final prospectus contained therein or any
amendments or supplements thereto, (ii) the omission or alleged omission to
state therein a material fact required to be stated therein, or necessary to
make the statements therein not misleading, or (iii) any violation or alleged
violation by the Company of the Securities Act, the Exchange Act, any state
securities law or any rule or regulation promulgated under the Securities Act,
the Exchange Act or any state securities law in connection with the offering
covered by such registration statement; and the Company will pay as incurred to
each such Holder, partner, officer, director, underwriter or controlling person
for any legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided however, that the indemnity agreement contained in this Section 2.7(a)
shall not apply to amounts paid in settlement of any such loss, claim, damage,
liability or action if such settlement is effected without the consent of the
Company, which consent shall not be unreasonably withheld, nor shall the Company
be liable in any such case for any such loss, claim, damage, liability or action
to the extent that it arises out of or is based upon a Violation which occurs in
reliance upon and in conformity with written information furnished expressly for
use in connection with such registration by such Holder, partner, officer,
director, underwriter or controlling person of such Holder.
(b) To the extent permitted by law, each Holder will, if
Registrable Securities held by such Holder are included in the securities as to
which such registration is being effected, indemnify and hold harmless the
Company, each of its directors, its officers and each person, if any, who
controls the Company within the meaning of the Securities Act, any underwriter
and any other Holder selling securities under such registration statement or any
of such other Holder's partners, directors or officers or any person who
controls such Holder, against any losses, claims, damages or liabilities (joint
or several) to which the Company or any such director, officer, controlling
person, underwriter or other such Holder, or partner, director, officer or
controlling person of such other Holder may become subject under the Securities
Act, the Exchange Act or other federal or state law, insofar as such losses,
claims, damages or liabilities (or actions in respect thereto) arise out of or
are based upon any Violation, in each case to the extent (and only to the
extent) that such Violation occurs in reliance upon and in conformity with
written information furnished by such Holder under an instrument duly executed
by such Holder and stated to be specifically for use in connection with such
registration; and each such Holder will pay as incurred any legal or other
expenses reasonably incurred by the Company or any such director, officer,
controlling person, underwriter or other Holder, or partner, officer, director
or controlling person of such other Holder in connection with investigating or
defending any such loss, claim, damage, liability or action if it is judicially
determined that there was such a Violation; provided, however, that the
indemnity agreement contained in this Section 2.7(b) shall not apply to amounts
paid in settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Holder, which consent shall
not be unreasonably withheld; provided further, that in no event shall any
indemnity under this Section 2.7 exceed the net proceeds from the offering
received by such Holder.
(c) Promptly after receipt by an indemnified party under this
Section 2.7 of notice of the commencement of any action (including any
governmental action), such
8.
<PAGE> 26
indemnified party will, if a claim in respect thereof is to be made against any
indemnifying party under this Section 2.7, deliver to the indemnifying party a
written notice of the commencement thereof and the indemnifying party shall have
the right to participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly noticed, to assume
the defense thereof with counsel mutually satisfactory to the parties; provided,
however, that an indemnified party shall have the right to retain its own
counsel, with the fees and expenses to be paid by the indemnifying party, if
representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential differing
interests between such indemnified party and any other party represented by such
counsel in such proceeding. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action, if materially prejudicial to its ability to defend such action, shall
relieve such indemnifying party of any liability to the indemnified party under
this Section 2.7, but the omission so to deliver written notice to the
indemnifying party will not relieve it of any liability that it may have to any
indemnified party otherwise than under this Section 2.7.
(d) If the indemnification provided for in this Section 2.7 is
held by a court of competent jurisdiction to be unavailable to an indemnified
party with respect to any losses, claims, damages or liabilities referred to
herein, the indemnifying party, in lieu of indemnifying such indemnified party
thereunder, shall to the extent permitted by applicable law contribute to the
amount paid or payable by such indemnified party as a result of such loss,
claim, damage or liability in such proportion as is appropriate to reflect the
relative fault of the indemnifying party on the one hand and of the indemnified
party on the other in connection with the Violation(s) that resulted in such
loss, claim, damage or liability, as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by a court of law by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission; provided, that in no event shall any contribution by a
Holder hereunder exceed the net proceeds from the offering received by such
Holder.
(e) The obligations of the Company and Holders under this
Section 2.7 shall survive completion of any offering of Registrable Securities
in a registration statement and the termination of this Agreement. No
indemnifying party, in the defense of any such claim or litigation, shall,
except with the consent of each indemnified party, consent to entry of any
judgment or enter into any settlement which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such indemnified party
of a release from all liability in respect to such claim or litigation.
2.9 ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause the Company
to register Registrable Securities pursuant to this Section 2 may be assigned by
Bay City Capital to a transferee or assignee which is an affiliate, subsidiary,
parent, general partner, limited partner, retired partner, member or retired
member of Bay City Capital; provided, however, (i) Bay City Capital shall,
within ten (10) days after such transfer, furnish to the Company written notice
of the name and address of such transferee or assignee and the securities with
respect to which such
9.
<PAGE> 27
registration rights are being assigned and (ii) such transferee shall agree to
be subject to all restrictions set forth in this Agreement.
2.10 "MARKET STAND-OFF" AGREEMENT; AGREEMENT TO FURNISH INFORMATION.
Each Holder hereby agrees that such Holder shall not sell, transfer, make any
short sale of, grant any option for the purchase of, or enter into any hedging
or similar transaction with the same economic effect as a sale, any Common Stock
(or other securities) of the Company held by such Holder (other than those
included in the registration) for a period specified by the representative of
the underwriters of Common Stock (or other securities) of the Company not to
exceed ninety (90) days following the effective date of a registration statement
of the Company filed under the Securities Act; provided that all officers and
directors of the Company enter into similar agreements.
Each Holder agrees to execute and deliver such other agreements as may
be reasonably requested by the Company or the underwriter which are consistent
with the foregoing or which are necessary to give further effect thereto. In
addition, if requested by the Company or the representative of the underwriters
of Common Stock (or other securities) of the Company, each Holder shall provide,
within ten (10) days of such request, such information as may be required by the
Company or such representative in connection with the completion of any public
offering of the Company's securities pursuant to a registration statement filed
under the Securities Act. The obligations described in this Section 2.10 shall
not apply to a registration relating solely to employee benefit plans on Form
S-1 or Form S-8 or similar forms that may be promulgated in the future, or a
registration relating solely to a SEC Rule 145 transaction on Form S-4 or
similar forms that may be promulgated in the future. The Company may impose
stop-transfer instructions with respect to the shares of Common Stock (or other
securities) subject to the foregoing restriction until the end of said ninety
(90) day period.
2.11 RULE 144 REPORTING. With a view to making available to the Holders
the benefits of certain rules and regulations of the SEC which may permit the
sale of the Registrable Securities to the public without registration, the
Company agrees to use its best efforts to:
(a) Make and keep public information available, as those terms
are understood and defined in SEC Rule 144 or any similar or analogous rule
promulgated under the Securities Act, at all times after the effective date of
the first registration filed by the Company for an offering of its securities to
the general public;
(b) File with the SEC, in a timely manner, all reports and
other documents required of the Company under the Exchange Act; and
(c) So long as a Holder owns any Registrable Securities,
furnish to such Holder forthwith upon request: a written statement by the
Company as to its compliance with the reporting requirements of said Rule 144 of
the Securities Act, and of the Exchange Act (at any time after it has become
subject to such reporting requirements); a copy of the most recent annual or
quarterly report of the Company; and such other reports and documents as a
Holder may reasonably request in availing itself of any rule or regulation of
the SEC allowing it to sell any such securities without registration.
10.
<PAGE> 28
SECTION 3. MISCELLANEOUS
3.1 GOVERNING LAW. This Agreement shall be governed by and construed
under the laws of the State of California as applied to agreements among
California residents entered into and to be performed entirely within
California.
3.2 SURVIVAL. The representations, warranties, covenants, and
agreements made herein shall survive any investigation made by any Holder and
the closing of the transactions contemplated by the 1999 Xyris Purchase
Agreement. All statements as to factual matters contained in any certificate or
other instrument delivered by or on behalf of the Company pursuant hereto in
connection with the transactions contemplated hereby shall be deemed to be
representations and warranties by the Company hereunder solely as of the date of
such certificate or instrument.
3.3 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors, and administrators of the
parties hereto and shall inure to the benefit of and be enforceable by each
person who shall be a holder of Registrable Securities from time to time;
provided, however, that prior to the receipt by the Company of adequate written
notice of the transfer of any Registrable Securities specifying the full name
and address of the transferee, the Company may deem and treat the person listed
as the holder of such shares in its records as the absolute owner and holder of
such shares for all purposes, including the payment of dividends or any
redemption price.
3.4 ENTIRE AGREEMENT. This Agreement, the 1999 Xyris Purchase Agreement
and the side letter dated of even date herewith between Bay City Capital and the
Company (the "SIDE LETTER") and the other documents delivered pursuant thereto
constitute the full and entire understanding and agreement between the parties
with regard to the subjects hereof and thereof and no party shall be liable or
bound to any other in any manner by any representations, warranties, covenants
and agreements except as specifically set forth herein and therein.
3.5 SEVERABILITY. In the event one or more of the provisions of this
Agreement should, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality, or unenforceability
shall not affect any other provisions of this Agreement, and this Agreement
shall be construed as if such invalid, illegal or unenforceable provision had
never been contained herein.
3.6 AMENDMENT AND WAIVER.
(a) Except as otherwise expressly provided, this Agreement may
be amended or modified only upon the written consent of the Company and each of
the holders of the Registrable Securities.
(b) Except as otherwise expressly provided, the obligations of
the Company and the rights of the Holders under this Agreement may be waived
only with the written consent of each of the holders of the Registrable
Securities.
11.
<PAGE> 29
3.7 DELAYS OR OMISSIONS. It is agreed that no delay or omission to
exercise any right, power, or remedy accruing to any Holder, upon any breach,
default or noncompliance of the Company under this Agreement shall impair any
such right, power, or remedy, nor shall it be construed to be a waiver of any
such breach, default or noncompliance, or any acquiescence therein, or of any
similar breach, default or noncompliance thereafter occurring. It is further
agreed that any waiver, permit, consent, or approval of any kind or character on
any Holder's part of any breach, default or noncompliance under the Agreement or
any waiver on such Holder's part of any provisions or conditions of this
Agreement must be in writing and shall be effective only to the extent
specifically set forth in such writing. All remedies, either under this
Agreement, by law, or otherwise afforded to Holders, shall be cumulative and not
alternative.
3.8 NOTICES. All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given: (a) upon personal delivery to the
party to be notified, (b) when sent by confirmed telex or facsimile if sent
during normal business hours of the recipient; if not, then on the next business
day, (c) five (5) days after having been sent by registered or certified mail,
return receipt requested, postage prepaid, or (d) one (1) day after deposit with
a nationally recognized overnight courier, specifying next day delivery, with
written verification of receipt. All communications shall be sent to the party
to be notified at the address as set forth on the signature pages hereof or at
such other address as such party may designate by ten (10) days advance written
notice to the other parties hereto.
3.9 ATTORNEYS' FEES. In the event that any suit or action is instituted
to enforce any provision in this Agreement, the prevailing party in such dispute
shall be entitled to recover from the losing party all fees, costs and expenses
of enforcing any right of such prevailing party under or with respect to this
Agreement, including without limitation, such reasonable fees and expenses of
attorneys and accountants, which shall include, without limitation, all fees,
costs and expenses of appeals.
3.10 TITLES AND SUBTITLES. The titles of the sections and subsections
of this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
3.11 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
12.
<PAGE> 30
IN WITNESS WHEREOF, the parties hereto have executed this REGISTRATION
RIGHTS AGREEMENT as of the date set forth in the first paragraph hereof.
AXYS PHARMACEUTICALS, INC. BAY CITY CAPITAL FUND I
By: By:
--------------------------------- --------------------------------
Title: Title:
--------------------------------- --------------------------------
Address: 180 Kimball Way Address: 750 Battery Street, Suite 600
South San Francisco, CA 94080 San Francisco, California
94111
Attn: Chief Financial Officer Attn: Roger Salquist
FAX: (650) 829-1001 FAX: (415) 837-0996
REGISTRATION RIGHTS AGREEMENT
SIGNATURE PAGE
<PAGE> 1
EXHIBIT 10.99
THIRD AMENDMENT TO EXPANSION LEASE
THIS THIRD AMENDMENT TO EXPANSION LEASE ("Amendment"), dated and
effective as of August 24, 1998 (the "Effective Date"), is entered into by and
between SEQUANA THERAPEUTICS, INC., a California corporation, doing business as
AXYS PHARMACEUTICALS, INC. ("Tenant"), and ARE-11099 NORTH TORREY PINES, LLC, a
Delaware limited liability company, successor in interest to ALEXANDRIA REAL
ESTATE EQUITIES, INC., formerly HEALTH SCIENCE PROPERTIES, INC., a Maryland
corporation ("Landlord") in connection with the following:
A. Landlord and Tenant are parties to that certain Expansion Lease,
dated as of November 20, 1995, as amended by that certain First Amendment to
Expansion Lease dated as of October __, 1996, and by that certain Second
Amendment to Expansion Lease dated as of May 20, 1997 (as amended, the "Lease"),
pursuant to which Tenant leases from Landlord certain premises (the "Demised
Premises") in a building located at 11099 North Torrey Pines Road, La Jolla,
California (the "Building"), and more particularly described in the Lease. All
capitalized terms used but not otherwise defined herein shall have the meanings
given them in the Lease.
B. Landlord has agreed, among other things, to lease to Tenant the suite
in the Building currently designated as Suite 100, as outlined on Exhibit A
attached hereto (the "Additional Space"), and Tenant has agreed to accept such
Additional Space.
C. Landlord and Tenant now desire to amend the Lease to reflect the
lease of the Additional Space to Tenant upon the terms and conditions set forth
herein.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and the mutual covenants contained
herein, the parties hereto hereby agree as follows:
1. AMENDMENT TO LEASE.
1.1 Effective from and after the Effective Date, Exhibit A-2 to
the Lease is hereby replaced in its entirety with Exhibit B attached hereto.
1.2 Section 2.1.2 of the Lease is hereby amended in its entirety,
effective from and after the Effective Date, to read as follows:
"Designation of Demised Premises:
<TABLE>
<CAPTION>
Suite Floor
----- -----
<S> <C>
1. Suite 100 First
2. Suites 160 & 160-A First
3. Suite 160 Exp. First
4. Suite 200 Second
5. Suite 210 Second
6. Suite 210 Exp. Second
7. Suite 220 Second
8. Suite 250 Second
9. Suite 280 Second
10. Suite 290 Second
</TABLE>
1.3 Section 2.1.3(a) of the Lease is hereby amended in its
entirety, effective from and after the Effective Date, to read as follows:
"Rentable Area of the Demised Premises: 60,056 total sq. ft. as
follows:
<PAGE> 2
1. Suite 100: 4,508 sq. ft.
2. Suites 160 & 160-A: 25,063 sq. ft.
3. Suite 160 Exp.: 1,105 sq. ft.
4. Suite 200: 5,821 sq. ft.
5. Suite 210: 2,558 sq. ft.
6. Suite 210 Exp.: 632 sq. ft.
7. Suite 220: 4,403 sq. ft.
8. Suite 250: 2,981 sq. ft.
9. Suite 280: 5,546 sq. ft.
10. Suite 290: 7,439 sq. ft."
1.4 Section 2.1.3(b) of the Lease is hereby amended in its
entirety, effective from and after the Effective Date, to read as follows:
"Rentable Area of the Demised Premises: 60,056 total sq. ft. as
follows:
1.5 Section 2.1.3(c) of the Lease is hereby amended in its
entirety, effective from and after the Effective Date, to read as follows:
"Useable Area of the Demised Premises: 52,638 total sq. ft. as
follows:
1. Suites 100: 3,922 sq. ft.
2. Suites 160 & 160-A: 22,339 sq. ft.
3. Suite 160 Exp.: 962 sq. ft.
4. Suite 200: 4,992 sq. ft.
5. Suite 210: 2,194 sq. ft.
6. Suite 210 Exp.: 541 sq. ft.
7. Suite 220: 3,780 sq. ft.
8. Suite 250: 2,515 sq. ft.
9. Suite 280: 4,866 sq. ft.
10. Suite 290: 6,527 sq. ft."
1.6 Section 2.1.4 of the Lease is hereby amended in its entirety,
effective from and after the Effective Date, to read as follows:
"Basic Annual Rent: For all of the Demised Premises: (60,056 sq.
ft.) x ($1.8567 per sq. ft.) x (12 months) = $1,338,047.68."
1.7 Section 2.1.5 of the Lease is hereby amended in its entirety,
effective from and after the Effective Date, to read as follows:
"Monthly Rental Installments of Basic Annual Rent: For all of the
Demised Premises: (60,056 sq. ft.) x ($1.8567 per sq. ft.) =
$111,503.97."
1.8 Section 2.1.6 of the Lease is hereby amended in its entirety,
effective from and after the Effective Date, to read as follows:
"Tenant's Pro Rata Share of the Building: 69.06%"
1.9 Section 2.1.10 of the Lease is hereby amended in its
entirety, effective from and after the Effective Date, to read as follows:
"Address for Rent Payment:
135 N. Los Robles Avenue, Suite 250
Pasadena, CA 91101
Attention: Accounts Receivable
<PAGE> 3
Address for Notices to Landlord:
135 N. Los Robles Avenue, Suite 250
Pasadena, CA 91101
Attention: General Counsel
Address for Notices to Tenant:
11099 North Torrey Pines Road, Suite 160
La Jolla, California, 92037"
2. IMPROVEMENTS; COMMENCEMENT.
2.1 Tenant acknowledges that: (i) the occupancy of Suite 100 is
limited to a maximum of 30 persons as a result of the current exiting from such
Suite, and (ii) a second one hour fire rated exit cannot practically be provided
at this time. Landlord and Tenant agree that Landlord shall pay one half the
cost (not to exceed $8,000) of providing a non-fire rated exit as described on
the attached Exhibit C. In addition, Landlord shall provide to Tenant an
allowance of $21,591.00 to be used by Tenant for improvements to Suite 100. Upon
Landlord's payment of such amount at the direction of Tenant for such
improvements to Suite 100, Landlord shall, for all purposes of the Lease be
deemed to have fully discharged all of its obligations under Section 14.1 of the
Lease with respect to Suite 100. Tenant acknowledges and agrees that Landlord's
sole obligation under Section 14.1 of the Lease with respect to Suite 100 shall
be to make such allowance available to Tenant.
2.2 Notwithstanding anything to the contrary contained herein,
Tenant shall have no obligation to pay Rent or perform any other obligation of
the Lease with respect to Suite 100 until 30 days after Landlord tenders
possession of Suite 100 to Tenant.
3. MISCELLANEOUS:
3.1 This Amendment shall be deemed to have been executed and
delivered within the State of California, and the rights and obligations of the
parties hereto shall be construed and enforced in accordance with, and governed
by, the laws of the State of California.
3.2 This Amendment is the entire agreement between the parties
with respect to the subject matter hereof and supersedes all prior and
contemporaneous oral and written agreements and discussions. This Amendment may
be amended only by an agreement in writing, signed by the parties hereto.
3.3 This Amendment is binding upon and shall inure to the benefit
of the parties hereto, their respective agents, employees, representatives,
officers, directors, divisions, subsidiaries, affiliates, assigns, heirs,
successors in interest and shareholders.
3.4 Each party has cooperated in the drafting and preparation of
this Amendment. Hence, in any construction to be made of this Amendment, the
same shall not be construed against any party.
3.5 Each term of this Amendment is contractual and not merely a
recital.
3.6 This Amendment may be executed in counterparts, and when each
party has signed and delivered at least one such counterpart, each counterpart
shall be deemed an original, and, when taken together with other signed
counterparts, shall constitute one Amendment, which shall be binding upon and
effective as to all parties.
3.7 The unenforceability of a portion of this Amendment shall not
affect the enforceability of the remainder of this Amendment.
<PAGE> 4
3.8 The parties will execute all such further and additional
documents as shall be reasonable, convenient, necessary or desirable to carry
out the provisions of this Amendment.
3.9 Except as specifically amended or modified by this Amendment,
the Lease (including, without limitation, the First Amendment and the Second
Amendment) remains in full force and effect.
3.10 EACH PARTY ACKNOWLEDGES THAT IT HAS HAD ADEQUATE OPPORTUNITY
TO CONSULT WITH LEGAL COUNSEL OF ITS CHOOSING IN CONNECTION WITH THE EXECUTION
HEREOF AND HAS DONE SO, OR VOLUNTARILY ELECTED NOT TO DO SO.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as
of the date first written above.
"Tenant"
SEQUANA THERAPEUTICS, INC.,
a California corporation
By: Fred Ruegsegger
-------------------------------------
Its: Sr VP & CFO
------------------------------------
"Landlord"
ARE-11099 NORTH TORREY PINES, LLC, a
Delaware limited liability company
By: ALEXANDRIA REAL ESTATE EQUITIES, INC.,
a Maryland corporation
By: Lynne Anne Shapiro
------------------------------
Its: General Counsel
------------------------------
<PAGE> 1
EXHIBIT 10.100
FOURTH AMENDMENT TO EXPANSION LEASE
THIS FOURTH AMENDMENT TO EXPANSION LEASE ("Amendment"), dated and
effective as of March 31, 1999 (the "Effective Date"), is entered into by and
between SEQUANA THERAPEUTICS, INC., a California corporation, doing business as
AXYS PHARMACEUTICALS, INC. ("Tenant"), and ARE - 11099 NORTH TORREY PINES, LLC,
a Delaware limited liability company, successor-in-interest to ALEXANDRIA REAL
ESTATE EQUITIES, INC., formerly HEALTH SCIENCE PROPERTIES, INC., a Maryland
corporation ("Landlord") in connection with the following:
A. Landlord and Tenant are parties to that certain Expansion Lease,
dated as of November 20, 1995, as amended by that certain First Amendment to
Expansion Lease dated as of October __, 1996, by that certain Second Amendment
to Expansion Lease dated as of May 20, 1997, and by that certain Third Amendment
to Expansion Lease ("Third Amendment") dated as of August 24, 1998 (as amended,
the "Lease"), pursuant to which Tenant leases from Landlord certain premises
(the "Demised Premises") in a building located at 11099 North Torrey Pines Road,
La Jolla, California (the "Building"), and more particularly described in the
Lease. All capitalized terms used but not otherwise defined herein shall have
the meanings given them in the Lease.
B. Landlord has agreed to provide a tenant improvement allowance to
Tenant for a portion of the Demised Premises, conditioned upon Tenant repaying
such tenant improvement allowance over the remainder of the term of the Lease,
and Tenant has agreed to accept such tenant improvement allowance upon such
condition.
C. Landlord and Tenant now desire to amend the Lease to reflect
Landlord's provision of the tenant improvement allowance to and the amortized
repayment thereof by Tenant upon the terms and conditions set forth herein.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and the mutual covenants contained
herein, the parties hereto hereby agree as follows:
1. AMENDMENTS TO LEASE.
1.1 Section 4.6 of the Lease is hereby amended by (i) adding the
title "Tenant Improvement Allowances:" at the beginning of such section (after
the number of the section), (ii) renumbering the existing text of Section 4.6 as
Section 4.6(a), (iii) changing all existing references in the Lease from "Tenant
Improvements" to "Suite 160 & 210 Tenant Improvements," (iv) changing all
existing references in the Lease from "TI Allowance" to "Suite 160 & 210 TI
Allowance," and (v) adding the following as Section 4.6(b):
"(b) Landlord shall provide Tenant with a tenant improvement
allowance (the "Suite 100 TI Allowance") of up to Three Hundred Thousand Dollars
($300,000) for tenant improvements which Tenant desires to make to Suite 100
(the "Suite 100 TI's"). Such amount shall be paid by Landlord to Tenant in one
lump sum payment upon: (i) lien free completion of the Suite 100 TI's, (ii)
Tenant's acceptance thereof from the contractor or contractors performing such
work, and (iii) presentation to Landlord of lien waivers, receipts for payment
and such other evidence of the payment in full of all costs and expenses of the
Suite 100 TI's as Landlord shall reasonably request. If the total cost of the
Suite 100 TI's exceeds the Suite 100 TI Allowance, the overage shall be the sole
responsibility of Tenant, and shall be at Tenant's sole cost and expense. Except
for the payment of the Suite 100 TI Allowance and as set forth in the Third
Amendment, Landlord shall have no obligation or liability of any kind with
respect to the Suite 100 TI's, which shall be subject to all of the approvals
and conditions described in Article 17 hereof with respect to Alterations
undertaken by Tenant."
1.2 Section 5.2 of the Lease is hereby amended in its entirety,
effective from and after the Effective Date, to read as follows:
<PAGE> 2
"5.2 In addition to Basic Annual Rent, Tenant agrees to pay to Landlord
as additional rent ("Additional Rent") at times hereinafter specified in this
Lease (i) Tenant's pro rate share ("Tenant's Pro Rata Share"), as set forth in
Section 2.1.6 and as may be subsequently amended, of Operating Expenses as
provided in Article 7, (ii) commencing June 1, 1999, tenant improvement rent
equal to the actual amount of the Suite 100 TI Allowance actually paid by
Landlord, fully amortized, with interest at a rate of 13% per annum, in 31 equal
monthly installments commencing June 1, 1999 and ending December 1, 2001
($11,445.04 per month if the full $300,000 Suite 100 TI Allowance is used by
Tenant), and (iii) any other amounts that Tenant assumes or agrees to pay under
the provisions of this Lease that are owed to Landlord, including without
limitation the cost of utilities not paid by Tenant directly to the supplier and
any and all other sums that may become due by reason of any default of Tenant or
failure on Tenant's part to comply with the agreements, terms, covenants and
conditions of this Lease to be performed by Tenant, after notice and lapse of
applicable cure period."
2. MISCELLANEOUS:
2.1 This Amendment shall be deemed to have been executed and
delivered within the State of California, and the rights and obligations of the
parties hereto shall be construed and enforced in accordance with, and governed
by, the laws of the State of California.
2.2 This Amendment is the entire agreement between the parties
with respect to the subject matter hereof and supersedes all prior and
contemporaneous oral and written agreements and discussions. This Amendment may
be amended only by an agreement in writing, signed by the parties hereto.
2.3 This Amendment is binding upon and shall inure to the benefit
of the parties hereto, their respective agents, employees, representatives,
officers, directors, divisions, subsidiaries, affiliates, assigns, heirs,
successors in interest and shareholders.
2.4 Each party has cooperated in the drafting and preparation of
this Amendment. Hence, in any construction to be made of this Amendment, the
same shall not be construed against any party.
2.5 Each term of this Amendment is contractual and not merely a
recital.
2.6 This Amendment may be executed in counterparts, and when each
party has signed and delivered at least one such counterpart, each counterpart
shall be deemed an original, and, when taken together with other signed
counterparts, shall constitute one Amendment, which shall be binding upon and
effective as to all parties.
2.7 The unenforceability of a portion of this Amendment shall not
affect the enforceability of the remainder of this Amendment.
2.8 The parties will execute all such further and additional
documents as shall be reasonable, convenient, necessary or desirable to carry
out the provisions of this Amendment.
2.9 Except as specifically amended or modified by this Amendment,
the Lease (including, without limitation, the First Amendment, the Second
Amendment, and the Third Amendment) remains in full force and effect.
2.10 EACH PARTY ACKNOWLEDGES THAT IT HAS HAD ADEQUATE OPPORTUNITY
TO CONSULT WITH LEGAL COUNSEL OF ITS CHOOSING IN CONNECTION WITH THE EXECUTION
HEREOF AND HAS DONE SO, OR VOLUNTARILY ELECTED NOT TO DO SO.
IN WITNESS WHEREOF, the parties hereto have executed this
Amendment as of the date first written above.
<PAGE> 3
"Tenant"
SEQUANA THERAPEUTICS, INC., a
California corporation, d/b/a Axys
Pharmaceuticals, Inc.
By: Daniel H. Petree
-----------------------------------
Its: President & COO
-----------------------------------
"Landlord"
ARE - 11099 NORTH TORREY PINES, LLC,
a Delaware limited liability company
By: ALEXANDRIA REAL REAL ESTATE
EQUITIES, INC., a Maryland corporation
By: Lynne Anne Shapiro
----------------------------
Its: General Counsel
----------------------------
<PAGE> 1
EXHIBIT 10.101
FIRST AMENDMENT TO RESEARCH AGREEMENT
THIS FIRST AMENDMENT TO RESEARCH AGREEMENT (the "Amendment") is made
and entered into effective as of February 28, 1999, by and between AXYS
PHARMACEUTICALS, INC. (formerly known as ARRIS PHARMACEUTICAL CORPORATION), a
Delaware corporation having its principal place of business at 180 Kimball Way,
South San Francisco, CA 94080 ("Axys"), and PHARMACIA & UPJOHN INC., a Delaware
corporation having its principal place of business at 7000 Portage Road,
Portage, Michigan 49001 ("P&U"). Axys and P&U may be referred to herein as a
"Party" or, collectively, as "Parties".
RECITALS
A. Axys and P&U entered into a Research Agreement dated February 29, 1996
(the "Agreement"), regarding the provision by Axys to P&U of, among other
things, certain libraries of combinatorial chemistry compounds.
B. Axys and P&U desire to amend the Agreement to memorialize their
agreement to reduce the number of compounds remaining to be delivered to P&U
under the Agreement and to revise the delivery schedule for such compounds.
NOW, THEREFORE, the Parties agree as follows:
1. AMENDMENT OF THE AGREEMENT
The Parties hereby agree to amend the terms of the Agreement as
provided below. To the extent that the Agreement is explicitly amended by this
Amendment, the terms of the Amendment will control where the terms of the
Agreement are contrary to or conflict with the following provisions. Where the
Agreement is not explicitly amended, the terms of the Agreement will remain in
force. Capitalized terms used in this Amendment that are not otherwise defined
herein shall have the same meanings as such terms are defined in the Agreement.
1.1 REVISED DELIVERY OBLIGATION AND SCHEDULE.
Notwithstanding any provision of the Agreement, the parties hereby
agree that (a) Axys shall only be obligated to develop and provide to P&U an
additional 50,000 compounds, in addition to the compounds previously provided to
P&U and (b) said 50,000 compounds shall be delivered to P&U prior to December
31, 1999 and such deliveries shall be in the same format as previously agreed to
by the parties. Notwithstanding the third sentence of Section 5.2 of the
Agreement, Axys shall not be entitled to the one-time supplemental fee of
$50,000 upon completion of the delivery of said 50,000 compounds.
1.2 EXTENSION OF TERM.
Notwithstanding the first sentence of Section 7.1 of the Agreement, the
parties agree that the Agreement shall remain in effect until the earlier of (a)
the completion of delivery of said
1.
<PAGE> 2
50,000 compounds by Axys under the Agreement or (b) December 31, 1999, unless
the parties otherwise agree in writing.
2. MISCELLANEOUS
2.1 COUNTERPARTS. This Amendment may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the Parties have executed this Amendment in duplicate
originals by their authorized officers as of the date and year first above
written.
PHARMACIA & UPJOHN INC.
By: /s/ Douglas R. Morton, PH.D.
Title: GVP, Technology Acquisition & Skill-
base Development
By:________________________________________
Title:_____________________________________
AXYS PHARMACEUTICALS, INC.
By: /s/ Frederick J. Ruegsegger
Title: Sr. VP & CFO
By:________________________________________
Title:_____________________________________
2.
<PAGE> 1
EXHIBIT 10.102
SEVENTH AMENDMENT TO STANDARD INDUSTRIAL LEASE
MULTI-TENANT
PAGE 1 OF 1
LEASE DATE FEBRUARY 26, 1993
BETWEEN
AXYS PHARMACEUTICALS INC.
A CALIFORNIA CORPORATION,
SUCCESSOR IN INTEREST TO
ARRIS PHARMACEUTICAL CORPORATION,
A DELAWARE CORPORATION
("LESSEE")
AND
SHELTON CORPORATION,
A HAWAII CORPORATION,
SUCCESSOR IN INTEREST TO
SHELTON PROPERTIES, INC.,
A HAWAII CORPORATION
("LESSOR")
THIS SEVENTH AMENDMENT TO STANDARD INDUSTRIAL LEASE MULTI-TENANT Lease Agreement
("Seventh Amendment") is entered into this 13th day of February, 1998, by and
between AxyS PHARMACEUTICAL, a Delaware corporation, successor in interest to
Arris Pharmaceuticals Inc., a California corporation, ("Lessee") and SHELTON
CORPORATION, a Hawaii corporation, successor in interest to, Shelton Properties
Inc., a Hawaii corporation ("Lessor").
WHEREAS Lessor and Lessee have entered into that certain Standard Industrial
Lease Agreement (Multi-Tenant), dated October 15, 1992 and Amendment No. 1,
dated December 29, 1992, Second Amendment, dated August 1, 1993, Third
Amendment, dated March 29, 1994, Fourth Amendment, dated October 1, 1994, Fifth
Amendment, dated August 18, 1995, and Sixth Amendment, dated March 27, 1996 (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"); and
WHEREAS Lessor and Lessee wish to amend the Lease as follows:
NOW, THEREFORE, Lessor and Lessee agree as follows:
1) TENANT'S NAME: Tenant's name is hereby changed to AxyS
Pharmaceuticals Inc., a California corporation.
2) MAILING ADDRESS FOR ALL CORRESPONDENCE: The mailing
address for all correspondence, invoices and notices to
tenant under the Lease, Section 23, shall, from and after
the effective date of January 21, 1998, be as follows:
AxyS Pharmaceuticals, Inc.
180 Kimball Way
South San Francisco, CA 94080
Telephone Number: (650) 829-1000
Fax Number: (650) 829-1001
<PAGE> 2
4) 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 Seventh Amendment as of
the date and year first written above.
LESSOR: LESSEE:
Shelton Corporation, a Hawaii corporation AxyS Pharmaceuticals Inc.,
a California corporation
By: AMB Institutional Realty Advisors,
Limited Partnership, a Delaware limited
Partnership, its investment advisor
By: AMB Institutional Realty Advisors, Inc.,
a Maryland corporation, Its: General Partner
By: /s/ Gayle P. Starr By: /s/ Frederick Ruegsegger
------------------------------- ------------------------------------
Print Name: Gayle P. Starr Print Name: Frederick Ruegsegger
----------------------- ----------------------------
Its: Regional Manager Its: Senior VP & Chief Financial Officer
------------------------------ -----------------------------------
Date: 3/11/98 Date: 2/24/98
----------------------------- ----------------------------------
<PAGE> 1
EXHIBIT 10.103
EIGHTH AMENDMENT TO STANDARD INDUSTRIAL LEASE MULTI-TENANT
THIS EIGHTH AMENDMENT TO STANDARD INDUSTRIAL LEASE MULTI-TENANT (this
"Eighth Amendment") is made and entered into as of November 18, 1998, by and
between SHELTON INTERNATIONAL HOLDINGS, INC., a Hawaii corporation, formerly
known as Shelton Properties, Inc., a Hawaii corporation ("Lessor"), and AXYS
PHARMACEUTICALS INC., a Delaware corporation, successor in interest to Arris
Pharmaceutical Corporation, a Delaware corporation ("Lessee").
RECITALS
A. Lessor, as "Lessor", and Lessee, as "Lessee", are parties to that
certain Standard Industrial Lease-Multi-Tenant dated October 15, 1992 and First
Addendum to Standard Industrial Lease, Second Addendum to Standard Industrial
Lease and Third Addendum to Standard Industrial Lease (collectively, the
"Original Lease"), as amended by (i) that certain Amendment No. 1 dated as of
December 29, 1992, (ii) Second Amendment to Lease Agreement dated as of August
1, 1993, (iii) Third Amendment to Lease dated as of March 29, 1994, (iv) Fourth
Amendment to Lease Agreement dated as of October 1, 1994, (v) Fifth Amendment to
Lease Agreement dated as of August 28, 1995, (vi) Sixth Amendment to Lease
Agreement dated as of March 27, 1996, and (vii) Seventh Amendment to Standard
Industrial Lease Multi-Tenant dated as of February 13, 1998 (the Original Lease,
as so amended, is referred to herein as the "Lease"), respecting certain
"Premises" (as more particularly described in the Lease) commonly known as 385
Oyster Point Boulevard, Units 1, 3, 4, 5, 6, 11, 12, 13 and 14, South San
Francisco, California 94080 (collectively, the "Premises"). All initial
capitalized terms used herein but not herein defined shall have the meaning
ascribed to such terms in the Lease.
B. Lessor and Lessee now desire to enter into this Eighth Amendment to
amend the Lease to provide for (i) the expansion of the Premises leased pursuant
to the Lease to include certain "Additional Premises" (as hereinafter defined);
and (ii) the extension of the term of the Lease so as to expire upon October 31,
2002, all upon the terms and subject to the conditions more particularly set
forth herein.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, Lessor and Lessee agree as follows:
1. (a) As of the "Additional Premises Commencement Date" (as hereinafter
defined), the Premises leased pursuant to the Lease shall include both the
existing Premises (as described in Recital A above) plus that certain space
containing approximately 2,700 square feet of floor area commonly known as 385
Oyster Point Boulevard, Unite 10 (the "Additional Premises"). The Additional
Premises shall be leased by Lessee pursuant hereto in an "AS IS", "WHERE IS"
condition, the parties hereby agreeing and acknowledging that neither Lessor nor
any of Lessor's employees, agents, representatives or contractors has made any
representations or warranties to Lessee as to the Additional Premises, its
condition or use by Lessee; excepting only that prior to the delivery of
possession of the Additional Premises, Lessor shall remove from the Additional
Premises (i) any personal property or debris left in the Additional Premises by
the existing tenant thereof upon the surrender of the Additional Premises by
such existing tenant and (ii) the temporary office improvements made by the
existing tenant of the Additional Premises located in the rear of the original
office area within the Additional premises (the parties agreeing that Lessor's
obligation shall only include removal of temporary office improvements but not
improvements included as a part of such original office build out). As used
herein, the "Additional Premises Commencement Date" shall mean the later to
occur of December 1, 1998 or such date as Lessor delivers notice to Lessee that
the Additional Premises are available for occupancy by Lessee in the condition
required by this Eighth Amendment. The parties hereby acknowledge that the
Additional Premises are presently leased to and occupied by an existing tenant
and, accordingly, Lessor's ability to lease and deliver the Additional Premises
pursuant hereto is subject to the condition precedent that Lessor terminate such
existing tenant's lease and cause such existing tenant to vacate the Additional
Premises (the "Condition Precedent"). Lessor shall not be liable for any failure
to satisfy such Condition Precedent or any delay in the delivery of the
Additional Premises pursuant hereto, nor shall any such delay affect this Eighth
Amendment, except, however, that if such Condition Precedent is not satisfied by
February 1, 1999, then, notwithstanding anything to the contrary contained in
this Eighth Amendment, either party shall have the right to elect, by written
notice
<PAGE> 2
delivered to the other party prior to the satisfaction of the Condition
Precedent, to nullify and terminate this Eighth Amendment, in which event this
Eighth Amendment shall be of no force or effect and neither party shall have any
right, obligation or liability hereunder.
(b) Lessee's lease of the Additional Premises from and after the
Additional Premises Commencement Date pursuant hereto shall be for a term
co-terminous with the lease of the remainder of the Premises and shall otherwise
be subject to all the terms and conditions of the Lease then applicable to the
remainder of the Premises subject to the following:
(i) The term of the Lease of the Premises (including the
Additional Premises) is hereby extended to expire upon October 21, 2002.
(ii) Base Rent payable under the Lease from and after the
Additional Premises Commencement Date shall be as follows: from the Additional
Premises Commencement Date through and including August 31, 1999, Base Rent
shall equal $50,635.32 per month (being the sum of $48,016.32 per month
allocable to the Premises other than the Additional Premises plus $2,619.00 per
month allocable to the Additional Premises); from September 1, 1999 through and
including August 31, 2000, Base Rent shall equal $52,663.98 per month; from
September 1, 2000 through and including August 31, 2001, Base Rent shall equal
$54,769.46 per month; and from September 1, 2001 through and including October
31, 2002, Base Rent shall equal $56,960.24 per month.
(iii) The Additional Premises shall be deemed for all
purposes of the Lease (as hereby amended) to contain 2,700 square feet of floor
area, such that from and after the Additional Premises Commencement Date, the
Premises (including both the original Premises describe in Recital A above and
the Additional Premises) shall be deemed to contain 52,200 square feet of floor
area, and Lessee's Share of Real Property Taxes shall be deemed to be 12.923%
and Lessee's Share of Operating Expenses shall be deemed to be 12.923%.
(iv) From and after the Additional Premises Commencement
Date, the Security Deposit required of Lessee under the Lease shall be increased
to equal $56,139.54 and, accordingly, upon the Additional Premises Commencement
Date, Lessee shall deposit with Lessor the sum of $2,619.00 to increase the
Security Deposit to such required amount.
(v) Lessee shall not cause or permit the Additional
Premises to be integrated with, or metered jointly with, the remainder of the
Premises for purposes of utility and mechanical systems serving the Additional
Premises.
(c) Each party represents and warrants that it has had no
dealings with any real estate broker or agent in connection with the negotiation
of this Eighth Amendment or the lease of the Additional Premises by Lessee
pursuant hereto and that it knows of no real estate broker, agent or finder who
is or might be entitled to a commission or fee in connection with this Eighth
Amendment or the lease of the Additional Premises pursuant hereto. If either
party has dealt with any finder or real estate broker with respect to leasing or
renting the Additional Premises pursuant hereto, such party shall be solely
responsible for the payment of any fees due said finder or broker and shall
indemnify, defend and hold harmless the other party from and against any
liabilities, damages or claims with respect thereto, including, without
limitation, attorneys' fees and costs.
2. This Eighth Amendment may be executed in any number of counterparts,
each of which shall be deemed to be an original, but all of which, taken
together, shall constitute one and the same instrument.
3. Except as specifically amended by this Eighth Amendment, the Lease
shall continue in full force and effect. In the event of any conflict between
the provisions of the Lease and the provisions of this Eighth Amendment, the
provisions of this Eighth Amendment shall prevail.
IN WITNESS WHEREOF, Lessor and Lessee have entered into this Eighth
Amendment as of the date first written above.
<PAGE> 3
LESSOR: LESSEE:
SHELTON INTERNATIONAL HOLDINGS, AXYS PHARMACEUTICALS, INC.,
INC., a Hawaii corporation a Delaware corporation
By: AMB INVESTMENT MANAGEMENT, INC., By: /s/ Frederick Ruegsegger
a Maryland corporation, -------------------------------
Its Investment Advisor Print Name: Frederick Ruegsegger
-----------------------
By: /s/ Gayle P. Starr Its: Sr. V.P. & CFO
--------------------------------- ------------------------------
Print Name: Gayle P. Starr
-------------------------
Its: Vice President
--------------------------------
<PAGE> 1
EXHIBIT 10.104
NINTH AMENDMENT TO STANDARD INDUSTRIAL LEASE MULTI-TENANT
THIS NINTH AMENDMENT TO STANDARD INDUSTRIAL LEASE MULTI-TENANT (this "Ninth
Amendment") is made and entered into as of November 18, 1998, by and between
SHELTON INTERNATIONAL HOLDINGS, INC., a Hawaii corporation, formerly known as
Shelton Properties, Inc., a Hawaii corporation ("Lessor"), and AXYS
PHARMACEUTICALS INC., a Delaware corporation, successor in interest to Arris
Pharmaceutical Corporation, a Delaware corporation ("Lessee").
RECITALS
A. Lessor, as "Lessor", and Lessee, as "Lessee", are parties to that
certain Standard Industrial Lease-Multi-Tenant dated October 15, 1992 and First
Addendum to Standard Industrial Lease, Second Addendum to Standard Industrial
Lease and Third Addendum to Standard Industrial Lease (collectively, the
"Original Lease"), as amended by (i) that certain Amendment No. 1 dated as of
December 29, 1992, (ii) Second Amendment to Lease Agreement dated as of August
1, 1993, (iii) Third Amendment to Lease dated as of March 29, 1994, (iv) Fourth
Amendment to Lease Agreement dated as of October 1, 1994, (v) Fifth Amendment to
Lease Agreement dated as of August 28, 1995, (vi) Sixth Amendment to Lease
Agreement dated as of March 27, 1996 (vii) Seventh Amendment to Standard
Industrial Lease Multi-Tenant dated as of February 13, 1998, and (viii) Eighth
Amendment to Standard Industrial Lease Multi-Tenant (the "Eighth Amendment")
dated as of November 18, 1998 (the Original Lease, as so amended, is referred to
herein as the "Lease"), respecting certain "Premises" (as more particularly
described in the Lease) commonly known as 385 Oyster Point Boulevard, Units 1,
3, 4, 5, 6, 11, 12, 13 and 14, South San Francisco, California 94080
(collectively, the "Premises"). All initial capitalized terms used herein but
not herein defined shall have the meaning ascribed to such terms in the Lease.
B. Lessor and Lessee now desire to enter into this Ninth Amendment to
amend the Lease to correct certain typographical errors made in the Eighth
Amendment, all as more particularly set forth herein.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, Lessor and Lessee agree as follows:
1. (a) The reference in Recital B of the Eighth Amendment to
"October 31, 2002" is hereby modified to refer to "November 30, 2003".
(b) The reference in Section 1(b)(i) of the Eighth Amendment to
"October 31, 2002: is hereby modified to refer to "November 30, 2003".
(c) Section 1(b)(ii) of the Eighth Amendment is hereby entirely
amended and restated as follows: "Base Rent payable under the Lease from and
after the Additional Premises Commencement Date shall be as follows: from the
Additional Premises Commencement Date through and including November 30, 1999,
Base Rent shall equal $50,635.32 per month (being the sum of $48,016.32 per
month allocable to the Premises other than the Additional Premises plus
$2,619.00 per month allocable to the Additional Premises); from December 1, 1999
through and including November 30, 2000, Base Rent shall equal $52,663.98 per
month; from December 1, 2000 through and including November 30, 2001, Base Rent
shall equal $54,769.46 per month; from December 1, 2001 through including
November 30, 2002, Base Rent shall equal $56,960.24 per month; and from December
1, 2002 through and including November 30, 2003. Base Rent shall equal
$59,238.65 per month."
2. This Ninth Amendment may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all of which,
taken together, shall constitute one and the same instrument.
3. Except as specifically amended by this Ninth Amendment, the Lease
shall continue in full force and effect. In the event of any conflict between
the provisions of the Lease and the provisions of this Ninth Amendment, the
provisions of this Ninth Amendment shall prevail.
<PAGE> 2
IN WITNESS WHEREOF, Lessor and Lessee have entered into this Ninth
Amendment as of the date first written above.
SHELTON INTERNATIONAL HOLDINGS, INC., AXYS PHARMACEUTICALS INC.,
a Hawaii corporation a California corporation
By: AMB INVESTMENT MANAGEMENT, By: /s/ Frederick Ruegsegger
INC. ----------------------------
a Maryland corporation, Print Name: Frederick Ruegsegger
Its Investment Advisor --------------------
Its: Sr VP & CFO
By: /s/ Gayle P. Starr ---------------------------
---------------------------------
Print Name: Gayle P. Starr
-------------------------
Its: Vice President
--------------------------------
<PAGE> 1
[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 OF THE SECURITIES AND EXCHANGE ACT
OF 1934, AS AMENDED.
EXHIBIT 10.105
TERMINATION OF COLLABORATIVE RESEARCH AGREEMENT
BETWEEN SEQUANA THERAPEUTICS, INC.
AND
CORANGE INTERNATIONAL LTD
This Termination Agreement, effective as of February 13, 1999 (the
"Effective Date"), is made by and between Sequana Therapeutics, Inc., a
California corporation (d/b/a Axys Pharmaceuticals, Inc, ("Axys")) and Corange
International Ltd., a Bermuda Corporation, ("Corange") and terminates the
Collaborative Research Agreement entered into as of the 30th day of June 1995,
by and between Axys and Corange, as amended (the "Collaboration Agreement").
WHEREAS, the Parties desire to terminate the Collaboration Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and of the
mutual promises and covenants set forth below, for other good and valuable
consideration, the receipt and sufficiency of which the Parties acknowledge, the
Parties intending to be legally bound, agree as follows:
1. Unless otherwise defined in this Termination Agreement, capitalized
terms shall have the meanings given to them in the Collaboration
Agreement.
2. The Collaboration Agreement is hereby terminated and, except as set
forth herein, shall be of no further force or effect, such termination
to be effective as of the Effective Date. Except as specifically granted
herein, all rights, privileges, obligations and licenses granted under
the Collaboration Agreement are canceled. The Parties acknowledge and
agree that Articles IX and X of the Collaboration Agreement shall not
survive termination of the Collaboration Agreement.
3. (a) Axys shall deliver to Corange or its designee as soon as reasonably
practicable following the Effective Date: (i) [*] contained in the
Osteoporosis Database and (ii) duplicate copies of all data contained in
the Osteoporosis Database excluding any data relating to [*] sample
collections, in a file format mutually agreed by the parties. Such
delivery shall be performed in accordance with instructions provided by
Corange or its designee and at Corange's or its designee's expense.
(b) In the event that Axys or Corange or its designee are able to
successfully negotiate an agreement with [*] as described in paragraph 8
within [*] following the Effective Date, Axys shall deliver to Corange
or its designee as soon as reasonably practicable thereafter, [*]
contained in the Osteoporosis Database and duplicate copies of all data
relating to the [*] contained in the Osteoporosis Database. In the
<PAGE> 2
event that Axys or Corange or its designee are able to successfully
negotiate an agreement with [*] as described in paragraph 8 within [*]
following the Effective Date, Axys shall deliver to Corange or its
designee as soon as reasonably practicable thereafter, [*] contained in
the Osteoporosis Database and duplicate copies of all data relating to
the [*] contained in the Osteoporosis Database. All such deliveries
shall be performed in accordance with instructions provided by Corange
or its designee and at Corange's or its designee's expense.
4. Corange or its designee will pay to Axys within thirty (30) days
following the Effective Date the sum of [*], upon receipt of invoice.
5. Corange acknowledges and agrees that Axys has fulfilled all of its
obligations under the Collaboration Agreement and there are no funds to
be returned to Corange under Section 2.4 of the Collaboration Agreement.
Axys acknowledges and agrees that Corange has fulfilled all of its
obligations under the Collaboration Agreement. Other than the payment
obligations contained in this Termination Agreement, Corange has no
further payment obligations to Axys under the Collaboration Agreement.
6. Subject to paragraphs 3 and 7, each Party shall have the right to use
and exploit the Osteoporosis Database without a duty to account to the
other Party for profits derived therefrom.
7. (a) Subject to paragraph 10(a) below, Corange hereby grants to Axys and
Axys hereby accepts a perpetual, paid-up, exclusive (even as to
Corange), world-wide license (with the right to grant sublicenses) under
Corange's interest in the Joint Results to use the [*] data contained in
the Osteoporosis Database, for any purpose.
(b) Subject to paragraph 10(b) below, Corange hereby grants to Axys and
Axys hereby accepts a perpetual, paid-up, exclusive (even as to
Corange), world-wide license (with the right to grant sublicenses) under
Corange's interest in the Joint Results to use the [*] data contained in
the Osteoporosis Database, for any purpose.
8. Promptly following the Effective Date, Axys will endeavor to negotiate
on behalf of Corange or its designee, agreements with each of [*] to (i)
allow [*] provided to Axys by [*] to be transferred to Corange or its
designee; (ii) fix the maximum royalty payment which may be owed by
Corange or its designee to [*] by Corange or its designee of diagnostic
and therapeutic products which result from the use of samples and data
from the [*] and to [*] by Corange or its designee of diagnostic and
therapeutic products which result from the use of samples and data from
the [*], with [*] as under the agreement between Axys and [*]; (iii)
grant Corange or its designee a non-exclusive license to develop and
commercialize diagnostic and therapeutic products; and (iv) relieve Axys
of any royalty or milestone
[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 OF THE SECURITIES AND EXCHANGE ACT
OF 1934, AS AMENDED.
2
<PAGE> 3
obligations to [*] with respect to Corange's or its designee's use of
the [*]. In the event that Axys is unable to successfully negotiate one
or both of the agreements described in this paragraph 8 within a period
of [*] from the Effective Date, either Corange or its designee or Axys
may endeavor to negotiate such agreements for a further [*] period
during which time Axys agrees to use reasonable efforts to assist
Corange or its designee in obtaining such agreements.
9. In the event that Axys and/or Corange or its designee are able to
successfully negotiate both agreements as described in paragraph 8 above
within [*] following the Effective Date, Corange or its designee will
pay Axys [*]. In the event that Axys and/or Corange or its designee are
able to successfully negotiate only one of the agreements as described
in paragraph 8 above within [*] following the Effective Date, Corange or
its designee will pay Axys [*] if such agreement is with [*] or [*] if
such agreement is with [*].
10. (a) In the event that Axys and/or Corange or its designee are unable to
successfully negotiate an agreement with [*] as described in paragraph 8
above, Corange or its designee's scientists will have the right to
access the [*] for additional analyses, on Axys' premises, for a period
of [*] from the end of the negotiation periods referred to in paragraph
8 above, upon payment to Axys, within thirty (30) days of the end of the
negotiation periods described in paragraph 8 above, of the sum of [*].
In such event Axys will also provide Corange or its designee with
duplicate copies of all data related to the [*] contained in the
Osteoporosis Database. If Corange or its designee fails to make such
payments within the said thirty (30) day period, Corange's or its
designee's rights with respect to the [*] data contained in the
Osteoporosis Database will terminate and the rights granted in paragraph
7(a) above will be deemed granted by Corange to Axys.
(b) In the event that Axys and/or Corange or its designee are unable to
successfully negotiate an agreement with [*] as described in paragraph 8
above, Corange or its designee will have the right to receive and use
[*], in Axys possession, upon payment to Axys within thirty (30) days of
the end of the negotiation periods described in paragraph 8 above, of
the further sum of [*] and a written agreement from Corange or its
designee reasonably acceptable to Axys, within that same thirty (30) day
period, to assume responsibility for [*] with respect to Corange's or
its designee's use of such samples. In such event Axys will also provide
Corange or its designee with duplicate copies of all data related to the
[*] contained in the Osteoporosis Database. If Corange or its designee
fails to make such payment and provide such written agreement within the
said thirty (30) day period, Corange's or its designee's rights with
respect to the [*] data contained in the Osteoporosis Database will
terminate and the rights granted in paragraph 7(b) above, will be deemed
granted by Corange to Axys.
[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 OF THE SECURITIES AND EXCHANGE ACT
OF 1934, AS AMENDED.
3
<PAGE> 4
11. Neither Party hereto shall issue any press release or other publicity
materials, or make any public representation with respect to the
existence of the Termination Agreement or the subject matter hereto
without the prior written consent of the other Party. However, this
restriction shall not apply to disclosures required by law or
regulation.
12. Section 17 of the Collaboration Agreement shall continue in full force
and effect.
13. Section 12 of the Collaboration Agreement shall continue in full force
and effect. Further, Corange agrees to indemnify, defend and hold Axys,
its Affiliates and sublicensees and their respective directors,
officers, employees and agents harmless from and against any losses,
costs, claims, damages, liabilities or expense (including reasonable
attorneys fees and other expenses of litigation) arising out of or in
connection with Corange's or its designee's transfer or use of the
biological materials and data provided by Axys to Corange or its
designee under this Termination Agreement.
14. Each Party hereby covenants and represents to the other Party that it
has full right and authority to enter into this Termination Agreement.
15. This Termination Agreement shall not be assignable by either Party
hereto, except to an Affiliate, without the prior written consent of the
other Party.
16. This Termination Agreement represents the entire understanding and
agreement between the Parties hereto with respect to the subject matter
hereof. This Termination Agreement may be amended, modified,
supplemented or changed only by an agreement in writing which is signed
by each Party.
17. This Termination Agreement may be executed in counterparts, each of
which shall be deemed an original, but all of which shall constitute one
and the same instrument.
IN WITNESS WHEREOF, the parties hereto cause this Termination Agreement
to be duly executed in its name and on its behalf, as of the Effective Date.
<TABLE>
<S> <C> <C>
SEQUANA THERAPEUTICS, INC. CORANGE INTERNATIONAL LTD.
By: /s/ Daniel H. Petree By: /s/ C. George Burch /s/ John S.T. Stout
----------------------------- ---------------------- ----------------------------
Name: Daniel H. Petree Name: C. George Burch Name: John S.T. Stout
----------------------------- ---------------------- ----------------------
Title: CEO Title: Director Title: Director
--------------------------- ---------------------- ---------------------
</TABLE>
[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 OF THE SECURITIES AND EXCHANGE ACT
OF 1934, AS AMENDED.
4
<PAGE> 1
[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 OF THE SECURITIES AND EXCHANGE ACT
OF 1934, AS AMENDED.
EXHIBIT 10.106
TERMINATION AGREEMENT
THIS TERMINATION AGREEMENT (the "Agreement") is made and entered into as
of February 5, 1999 , by and between AXYS PHARMACEUTICALS, INC. (formerly known
as Arris Pharmaceutical Corporation), a Delaware corporation having a place of
business at 180 Kimball Way, South San Francisco, CA 94080 ("Axys"), and
PHARMACIA AND UPJOHN AB, a corporation organized and existing under the laws of
Sweden having a place of business at Lindhagensgatan 133, Stockholm, Sweden
("P&U"). Axys and P&U may be referred to herein as a "Party" or, collectively,
as "Parties."
RECITALS
A. Axys (under its former name Arris Pharmaceutical Corporation) and
Pharmacia AB (a precursor corporation to P&U) entered into a collaboration
agreement August 29, 1995, regarding inter alia use of Axys technology to
identify orally active inhibitors of specific coagulation cascade enzymes (as
amended, the "Collaboration Agreement").
B. Axys and P&U now desire to terminate the Collaboration Agreement and to
set forth specific the terms regarding each Party's rights and obligations upon
such termination, as provided below in this Agreement.
NOW, THEREFORE, the Parties agree as follows:
1. DEFINITIONS
Capitalized terms used in this Agreement, unless otherwise defined
herein, shall have the same meanings as defined in the Collaboration Agreement.
2. TERMINATION OF THE COLLABORATION AGREEMENT
Effective as of March 1, 1998 the ("Termination Date"), the
Collaboration Agreement is terminated, and all rights and obligations of the
Parties under the Collaboration Agreement are terminated except for those rights
specifically identified below in this Agreement which shall survive such
termination. Specific consequences of such termination are set forth below.
3. CONSEQUENCES OF TERMINATION
3.1 Axys hereby agrees that all obligations of P&U under the
Collaboration Agreement to pay Axys research support or other amounts, including
without limitation any amounts that are owed to Axys under the Collaboration
Agreement, are hereby terminated, and P&U shall not be obligated to pay Axys any
amounts pursuant to obligations under the Collaboration Agreement. Further, any
and all obligations of P&U
1.
<PAGE> 2
to use diligence to conduct any work under the Collaboration Agreement
terminate. P&U hereby agrees that all obligations of Axys under the
Collaboration Agreement to conduct Research are hereby terminated, and Axys
shall not be obligated to account to P&U for any expenditures of any amounts
paid by P&U to Axys or to make any payments to P&U based upon or under the
Collaboration Agreement. Further, any and all obligations of Axys to use
diligence to conduct any work under the Collaboration Agreement terminate.
3.2 As of the Termination Date, any and all rights of P&U to use or
practice the Arris Know-How, Arris Delta Technology, Arris Improvement
Technology and Arris Patents shall immediately terminate and revert exclusively
and solely to Axys. Commencing on the Termination Date and continuing
thereafter, Axys shall have, and P&U hereby grants to Axys, the sole and
exclusive right and license, with full rights to sublicense, to use and practice
all Research Technology, Joint Patents, Pharmacia Patents and Pharmacia Know-How
to develop, make, have made, use, import, sell and offer for sale Collaboration
Products, and after the Termination Date P&U shall have no further rights
thereto except as provided below. In addition, for clarity it is understood and
agreed that all obligations of and limitations on the Parties under Section 2.10
of the Collaboration Agreement terminate immediately upon the Termination Date,
and each Party shall be free to do research, development and commercialization
work in the Field independent of and without obligation to the other Party
except as specifically provided in this Agreement.
3.3 As soon as practicable, P&U shall provide to Axys copies of all
data, results, and internal study reports resulting from or developed under
P&U's activities in the Research that are reasonably required by Axys to
continue the work in the Field, and all compounds, reagents and physical samples
that are in P&U's possession resulting from or developed under the Research and
that are reasonably required by Axys to continue the work in the Field. Further,
Axys shall have reasonable access to review and copy the laboratory notebooks
that contain the data and results of P&U's work under the Research, to the
extent reasonably required by Axys to continue the work in the Field.
3.4 Axys hereby agrees that Axys shall pay P&U a royalty equal to [*]
sales of Axys Products (as defined below) by Axys or its Affiliates or
sublicensees, provided that for sales by sublicensees, such royalty shall not in
any event exceed [*] of the royalties paid to Axys by such sublicensees based on
sales of such Axys Products. Such royalty amounts shall be calculated and
payable in the manner and for the time period comparable to that required of P&U
for such Collaboration Products under the Collaboration Agreement.
3.5 As used above, the term "Axys Products" shall mean a Collaboration
Product that:
[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 OF THE SECURITIES AND EXCHANGE ACT
OF 1934, AS AMENDED.
2.
<PAGE> 3
(a) contains a Collaboration Compound that was identified prior
to [*] and
(b) is sold in a country where there is an issued patent in the
Arris Patents, Joint Patents or Pharmacia Patents that claims an invention that
is made in the course of the Research and that relates directly to such
Collaboration Product or its manufacture or use.
For clarity, it is understood and agreed that products sold in countries that do
not have an issued patent as required in subsection (b) shall not be royalty
bearing under Section 3.5.
3.6 P&U shall have the right to publish or present the results of P&U's
work on the Research, subject to the prior review by Axys for patentability and
protection of Confidential Information. P&U shall provide Axys the opportunity
to review any proposed abstracts, manuscripts or presentations that cover or
include the results of the Research (the "Proposed Publication"), prior to any
publication or disclosure of the information in the Proposed Publication. Axys
shall respond in writing promptly and in no event later than thirty (30) days
after its receipt of the Proposed Publication with either approval of the
Proposed Publication or a specific statement of concern, based upon either the
need to seek patent protection covering, or concern regarding competitive
disadvantage arising from publication of, information in the Proposed
Publication. In the event of such concern, P&U agrees not to submit such
Proposed Publication for publication or make other disclosure thereof until Axys
is given a reasonable period of time (not to exceed an additional thirty (30)
days) to seek patent protection for any material therein and to delete from the
Proposed Publication any Confidential Information upon reasonable request based
upon the commercial value of the secrecy of such information. Axys shall have
full rights to publish all results and information relating to the Research,
subject to Axys agreement to give P&U appropriate recognition in such
publications of P&U Research work or results to extent included in such
publication.
3.7 Sections 3.5, 8.1 and 10.6 and Articles 1, 7, 9 and 11 of the
Collaboration Agreement shall survive the termination of the Collaboration
Agreement.
4. MISCELLANEOUS
4.1 This Agreement shall be governed by and interpreted in accordance
with the laws of the State of California, USA, applicable to contracts entered
into and to be performed wholly within the State of California, excluding
conflict of laws principles.
4.2 Any dispute arising under this Agreement shall be resolved in
accordance with Section 11.12 of the Collaboration Agreement.
[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 OF THE SECURITIES AND EXCHANGE ACT
OF 1934, AS AMENDED.
3.
<PAGE> 4
4.3 Each Party agrees to execute, deliver and acknowledge such further
instruments and to do all such other acts as may be necessary or appropriate in
order to carry out the purposes and intent of this Agreement.
4.4 This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
IN WITNESS WHEREOF, the Parties have executed this Agreement in duplicate
originals by their authorized officers as of the date and year first above
written.
PHARMACIA AND UPJOHN AB
By: /s/ Ulf Lindqvist /s/ Fredrik Berg
---------------------------- ----------------------
Title: Director R.D. Operations Fredrik Berg
------------------------ VP, Asst. Gen. Counsel
----------------------
AXYS PHARMACEUTICALS, INC.
By: /s/ John P. Walker
---------------------------
Title: Chairman/CEO
-----------------------
[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 OF THE SECURITIES AND EXCHANGE ACT
OF 1934, AS AMENDED.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated balance sheets, statements of operations and statements of cash
flows included in the Company's Form 10-Q for the period ended March 31, 1999,
and is qualified in its entirety by reference to such financial statements and
notes thereto.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 28,760
<SECURITIES> 35,277
<RECEIVABLES> 4,529
<ALLOWANCES> 0
<INVENTORY> 766
<CURRENT-ASSETS> 72,428
<PP&E> 52,094
<DEPRECIATION> (30,464)
<TOTAL-ASSETS> 100,777
<CURRENT-LIABILITIES> 22,480
<BONDS> 0
0
0
<COMMON> 290,942
<OTHER-SE> 53,329
<TOTAL-LIABILITY-AND-EQUITY> 100,777
<SALES> 3,142
<TOTAL-REVENUES> 8,662
<CGS> 548
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 19,126
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 507
<INCOME-PRETAX> (7,748)
<INCOME-TAX> 0
<INCOME-CONTINUING> (7,748)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (7,748)
<EPS-PRIMARY> (.26)
<EPS-DILUTED> (.26)
</TABLE>
