<PAGE> 1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-Q
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[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000
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
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
</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 35,252,547 as of April 30, 2000.
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AXYS PHARMACEUTICALS, INC.
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)*
Consolidated Balance Sheets -- March 31, 2000 and December 3
31, 1999....................................................
Consolidated Statements of Operations -- Three months ended 4
March 31, 2000 and 1999.....................................
Consolidated Statements of Cash Flows -- Three months ended 5
March 31, 2000 and 1999.....................................
Notes to Consolidated Financial Statements -- March 31, 6
2000........................................................
Item 2. Management's Discussion and Analysis of Financial Condition 10
and Results of Operations...................................
Item 3. Quantitative and Qualitative Disclosure 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
Signatures........................................................... 16
</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, 1999,
filed with the Securities and Exchange Commission on March 8, 2000.
2
<PAGE> 3
PART 1: FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AXYS PHARMACEUTICALS, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
2000 1999(1)
----------- ------------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C>
Current assets:
Cash and cash equivalents................................. $ 48,484 $ 23,577
Marketable investments.................................... -- 3,080
Accounts receivable, trade................................ 4,861 4,786
Inventory................................................. 2,072 2,258
Prepaid expenses and other current assets................. 2,239 1,524
--------- ---------
Total current assets.............................. 57,656 35,225
Property and equipment, net................................. 18,254 18,873
Other long-term investment.................................. 1,500 --
Note receivable from officer................................ 480 671
Other assets................................................ 949 965
--------- ---------
Total Assets...................................... $ 78,839 $ 55,734
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 2,337 $ 4,563
Accrued compensation...................................... 2,657 2,980
Other accrued liabilities................................. 3,592 5,284
Deferred revenue.......................................... 1,327 2,083
Current portion of capital lease and debt obligations..... 26,392 23,646
--------- ---------
Total current liabilities......................... 36,305 38,556
Capital lease and debt obligations, net of current
portion................................................... 42 57
Minority interest in joint venture.......................... 2,665 3,074
Stockholders' equity:
Preferred stock........................................... -- --
Common stock.............................................. 325,601 291,328
Accumulated other comprehensive loss...................... (71) (70)
Accumulated deficit....................................... (285,703) (277,211)
--------- ---------
Total stockholders' equity........................ 39,827 14,047
--------- ---------
Total Liabilities and Stockholders' Equity........ $ 78,839 $ 55,734
========= =========
</TABLE>
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(1) The balance sheet at December 31, 1999 has been derived from the audited
financial statement 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.
3
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AXYS PHARMACEUTICALS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
----------------------
2000 1999
--------- ---------
(IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C>
Revenues
Collaboration and license revenue......................... $ 1,931 $ 8,662
Product and service revenue............................... 5,060 3,142
------- -------
Total revenue..................................... 6,991 11,804
Operating expenses
Cost of goods sold........................................ 1,124 548
Research and development.................................. 11,301 15,925
General and administrative................................ 3,888 3,201
Restructuring charge...................................... (545) --
------- -------
Total operating expenses.......................... 15,768 19,674
------- -------
Operating loss.............................................. (8,777) (7,870)
Interest income............................................. 161 907
Interest expense............................................ (284) (507)
Equity interest in loss of joint venture.................... -- (563)
Minority interest........................................... 408 285
------- -------
Net loss.................................................... $(8,492) $(7,748)
======= =======
Basic and diluted net loss per share........................ $ (.26) $ (.26)
======= =======
Shares used in computing basic and diluted net loss per
share..................................................... 32,067 30,321
======= =======
</TABLE>
See accompanying notes.
4
<PAGE> 5
AXYS PHARMACEUTICALS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------
2000 1999
-------- --------
(IN THOUSANDS)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.................................................... $ (8,492) $ (7,748)
Adjustments to reconcile net loss to net cash and cash
equivalents used in operating activities:
Non-cash restructuring charge.......................... (545) --
Depreciation and amortization.......................... 1,953 2,743
Gain on sale of fixed asset............................ (1) (22)
Equity interest in loss of joint venture............... -- 538
Forgiveness of note receivable from officer............ 191 175
Changes in assets and liabilities:
Accounts receivable.................................. (75) (2,389)
Inventory............................................ 186 (331)
Prepaid expenses and other current assets............ (715) 1,155
Other assets......................................... 16 (1,542)
Accounts payable..................................... (2,226) (370)
Accrued compensation................................. (323) (1,538)
Other accrued liabilities............................ (1,147) (66)
Deferred revenue..................................... (756) (3,891)
-------- --------
Net cash and cash equivalents used in operating
activities................................................ (11,934) (13,286)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Available-for-sale securities:
Purchases................................................. -- (8,235)
Maturities................................................ 3,080 9,259
Minority interest........................................... (409) 8,510
Proceeds from sale of fixed asset........................... 5 22
Other long-term investment.................................. (1,500) --
Purchase of property and equipment.......................... (1,338) (2,477)
-------- --------
Net cash and cash equivalents (used in) provided by
investing activities...................................... (162) 7,079
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuance of common stock............. 34,273 651
Proceeds from notes payable and lease financing........ 20,000 --
Principal payments on notes payable and capital
leases................................................ (17,269) (1,945)
-------- --------
Net cash and cash equivalents provided by (used in)
financing activities.................................. 37,004 (1,294)
-------- --------
Effect of exchange rate change.............................. (1) --
-------- --------
Net increase/(decrease) in cash and cash equivalents........ 24,907 (7,501)
Cash and cash equivalents, beginning of period.............. 23,577 36,261
-------- --------
Cash and cash equivalents, end of period.................... $ 48,484 $ 28,760
======== ========
</TABLE>
See accompanying notes.
5
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AXYS PHARMACEUTICALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000
(UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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, 2000 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 1999 Annual
Report on Form 10-K filed with the Securities and Exchange Commission.
Reclassifications
Certain 1999 amounts have been reclassified to conform to the March 31,
2000 presentations.
2. EQUITY FINANCING
In February 2000, the Company completed a private placement in which it
sold an aggregate 3.5 million newly issued shares of its common stock to
selected institutional and other accredited investors for $31.5 million.
3. OTHER LONG-TERM INVESTMENT
In March 2000, the Company entered into a collaboration agreement with a
privately held biotechnology company located in San Diego, CA, to discover and
develop anti-cancer compounds that induce apoptosis (programmed cell death).
Under the terms of the collaboration agreement, each company will fund its
own research as part of the collaboration. Axys will provide the privately held
company with up to approximately 700,000 compounds for screening over an
estimated 18-month period and Axys will provide preclinical and clinical
development for any leads. The Company also made a $1.5 million equity
investment in the privately held company for a minority ownership interest. The
investment is carried at cost.
4. RESTRUCTURING CHARGE
In December 1999, the Company completed the closing of its San Diego, CA
operations and relocated its oncology genomics activities to its South San
Francisco headquarters. As a result of this action, a one-time charge of $7.0
million was taken during the third quarter of 1999, of which $2.2 million
related to severance and other employee-related costs, $1.7 million related to
facilities costs, $1.8 million related to the disposal of assets, and $1.3
million in other costs associated with the restructuring. During the first
quarter of 2000, the restructuring reserve was reduced by actual cash payments
and additional subleases of the San Diego facility.
6
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AXYS PHARMACEUTICALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 2000
(UNAUDITED)
The following table summarizes the Company's 2000 restructuring charge
activity for the three months ended March 31, 2000 (in thousands):
<TABLE>
<CAPTION>
RESERVE RESERVE
BALANCE BALANCE
DESCRIPTION AT 12/31/99 OTHER PAYMENTS AT 3/31/00
----------- ----------- ----- -------- ----------
<S> <C> <C> <C> <C>
Severance and benefits............................. $(1,095) $ -- $674 $(421)
Facilities......................................... (748) 545 88 (115)
Contractual research commitments................... (81) -- 81 --
------- ---- ---- -----
Total.................................... $(1,924) $545 $843 $(536)
======= ==== ==== =====
</TABLE>
The Company anticipates that the remaining accruals will be utilized by
December 31, 2000.
5. INVENTORY
Inventories associated with the Company's Axys Advanced Technologies, Inc.
("AAT") subsidiary are stated at the lower of cost (first-in, first-out) or
market. At March 31, 2000, inventories consisted of the following (in
thousands):
<TABLE>
<S> <C>
Raw materials....................... $ 181
Finished goods...................... 1,891
------
$2,072
======
</TABLE>
6. PROPERTY AND EQUIPMENT
Property and equipment is recorded at cost and consists of the following:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
2000 1999
--------- ------------
(IN THOUSANDS)
<S> <C> <C>
Machinery and equipment.............................. $ 30,140 $ 29,119
Purchased software................................... 1,981 1,946
Furniture and office equipment....................... 2,728 2,702
Leasehold improvements............................... 14,620 14,614
Construction in progress............................. 466 227
-------- --------
$ 49,935 $ 48,608
Less accumulated depreciation and amortization....... (31,681) (29,735)
-------- --------
$ 18,254 $ 18,873
======== ========
</TABLE>
7. COMPREHENSIVE LOSS
Total comprehensive loss was ($8,493,000) and ($7,718,000) for the three
months ended March 31, 2000 and 1999, respectively.
7
<PAGE> 8
AXYS PHARMACEUTICALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 2000
(UNAUDITED)
8. SEGMENT INFORMATION
Segment information consists of the following:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-------------------
2000 1999
------- --------
(IN THOUSANDS)
<S> <C> <C>
Revenues:
Drug discovery........................................ $ 1,415 $ 8,509
AAT................................................... 5,340 3,114
Other affiliated businesses........................... 236 181
------- --------
Total consolidated............................ $ 6,991 $ 11,804
======= ========
Net income (loss):
Drug discovery........................................ $(8,405) $ (7,821)
AAT................................................... 2,184 1,315
Other affiliated businesses........................... (2,271) (1,242)
------- --------
Total consolidated............................ $(8,492) $ (7,748)
======= ========
Assets:
Drug discovery........................................ $65,432 $ 85,534
AAT................................................... 9,877 6,392
Other affiliated businesses........................... 3,530 8,851
------- --------
Total consolidated............................ $78,839 $100,777
======= ========
</TABLE>
Other affiliated businesses represent the results of Akkadix's and PPGx's
principal activities, which commenced in 1998 and 1999, respectively. The
Company's ownership of Akkadix was reduced from 52% to 38% in August 1999.
Therefore, Akkadix's activities are excluded above for the three months ended
March 31, 2000. Both Akkadix and PPGx are funded by third parties.
9. REVOLVING LINE OF CREDIT
The Company has a $30.0 million revolving line of credit with Foothill
Capital Corporation. The balance outstanding at March 31, 2000 was $20.0
million. The line is subject to the terms of a security agreement, and is fully
secured by the Company's cash and cash equivalents, and marketable investments,
if any. Interest is due on the line monthly and is computed at the reference
rate for Wells Fargo Bank, which approximated 9.0% at March 31, 2000. The line
is available through July 2002.
10. SUBSEQUENT EVENTS
Sale of AAT
In April 2000, the Company closed a definitive merger agreement to combine
AAT with Discovery Partners International, Inc. ("DPI"), a privately held
company. Under the terms of the agreement, AAT was merged with a subsidiary of
DPI and the Company primarily received as consideration 7,425,000 shares of
common stock in DPI (which represents an approximately 43% minority ownership
position), $50,000 in cash, $550,000 in a form of note receivable and a warrant
to purchase 200,000 additional shares of DPI at $8 per share. The Company will
account for its investment in DPI under the equity method of accounting.
8
<PAGE> 9
AXYS PHARMACEUTICALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 2000
(UNAUDITED)
Following is the March 31, 2000 Pro Forma Condensed Consolidated Balance
Sheet of Axys giving effect to the sale of AAT as if the sale had occurred on
March 31, 2000:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
Cash and cash equivalents................................... $ 48,534
Other current assets........................................ 2,396
--------
Total current assets.............................. 50,930
Property and equipment, net................................. 15,229
Equity investment in affiliate.............................. 41,008
Other assets................................................ 3,403
--------
Total assets...................................... $110,570
========
Total liabilities................................. $ 39,924
Total stockholders' equity........................ 70,646
--------
Total liabilities and stockholders' equity........ $110,570
========
</TABLE>
Following is certain information, which is presented as Pro Forma Condensed
Consolidated Statements of Operations giving effect to the sale of AAT as if the
sale had occurred on January 1, 1999:
<TABLE>
<CAPTION>
THREE MONTHS ENDED YEAR ENDED
MARCH 31, DECEMBER 31,
2000 1999
------------------- -------------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C>
Revenues............................... $ 1,651 $ 24,971
Operating loss......................... $(10,894) $(53,219)
Net loss............................... $(10,795) $(54,191)
Basic and diluted net loss per share... $ (.34) $ (1.78)
</TABLE>
Buy Back of Certain Technology Rights from Akkadix
In April 2000, the Company exchanged 2,000,000 shares of Akkadix's
preferred stock for the return of certain license technology rights.
Subsequently, some of these rights were effectively transferred to AAT in
exchange for a warrant to purchase 200,000 shares of DPI. The Company's
ownership of Akkadix reduced from 38% at March 31, 2000 to approximately 27%
after this exchange.
9
<PAGE> 10
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, "What Factors Could Cause Our Results to Differ Significantly from
Those You Might Expect" and "What 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, 1999 filed with the Securities and Exchange Commission.
OVERVIEW
The Company is an early-stage biopharmaceutical company focused on the
discovery, development and commercialization of small molecules. The Company
invests its own resources in discovering and developing therapeutics for the
treatment of various types of cancer and collaborates with large pharmaceutical
companies in discovering therapeutics for chronic diseases for which there are
large markets.
The Company previously formed three affiliated companies to provide capital
to Axys for its drug discovery operations:
- Axys Advanced Technologies, Inc. ("AAT"), which began operations in 1996
and was set up as a wholly owned subsidiary in 1999, markets
combinatorial chemistry compounds, enabling technology and services.
Financial results of AAT were consolidated into Axys' financial results
through April 2000 when a merger involving AAT was consummated and AAT
became a subsidiary of Discovery Partners International, Inc. ("DPI"). In
conjunction with the merger, Axys received as consideration 7,425,000
shares of common stock in DPI (which represents a minority ownership
position), $50,000 in cash, $550,000 note receivable and a warrant to
purchase 200,000 additional shares of DPI at $8 per share.
- Akkadix Corporation ("Akkadix"), an agricultural biotechnology company
founded in 1998, is 38% owned by Axys at March 31, 2000. In April 2000,
Axys exchanged shares of Akkadix's preferred stock for certain license
technology rights in connection with the DPI/AAT transaction described
above. The Company's ownership percentage following this exchange is
approximately 27%. Akkadix has incurred losses since inception. Akkadix
is separately managed and is funded by third parties. Akkadix financial
results were consolidated into Axys financial results though August 1999.
In September 1999, Axys' ownership in Akkadix fell below 50%. As a
result, Akkadix is now accounted for under the equity method.
- PPGx, Inc. ("PPGx"), a pharmacogenomics subsidiary founded in 1999, is
82% owned by Axys and 18% owned by PPD, Inc. ("PPD"). Financial results
of PPGx are consolidated into Axys' financial results. It has incurred
losses since inception, is separately managed and has been funded by
third parties.
To date, the Company has not generated any product revenue in its drug
discovery programs and does not expect to generate such revenues for at least
several years. The Company expects its sources of revenue, if any, for the next
several years to consist of payments under corporate partnerships and interest
income. The process of developing the Company's products will require
significant additional research and development, preclinical testing and
clinical trials, as well as regulatory approval. These activities, together with
general and administrative expenses, are expected to result in significant
operating losses for the foreseeable future. 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. Axys will not receive product revenue or royalties in
its drug discovery programs unless the Company or its collaborative partners
complete clinical trials and successfully commercialize one or more of the
Company's products. In addition,
10
<PAGE> 11
there can be no assurance that DPI, Akkadix or PPGx will ever generate funding
for the Company's drug discovery operations. As of March 31, 2000, the Company
had an accumulated deficit of $286 million. Included in the Company's
accumulated deficit at March 31, 2000 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 Therapeutics, Inc.
in January 1998.
The Company is subject to risks common to early-stage drug discovery and
development companies, including risks inherent in its research and development
efforts and clinical trials, reliance on collaborative partners, the need for
future capital, enforcement of patent and proprietary rights, potential
competition and uncertainty of regulatory approval. In order for a product to be
commercialized, it will be necessary for the Company, and in some programs, its
collaborators, to conduct preclinical tests and clinical trials to demonstrate
efficacy and safety of product candidates, obtain regulatory clearances and
enter into manufacturing, distribution and marketing arrangements, as well as
obtain market acceptance. There can be no assurance that the Company will
generate revenues or achieve and sustain profitability in the future.
RESULTS OF OPERATIONS
REVENUES
Total revenue was $7.0 million for the three months ended March 31, 2000,
compared to $11.8 million for the same period in 1999. Revenue is made up of two
components, which are discussed below.
Collaboration and Licensing Revenues
The Company's collaboration and licensing revenues were $1.9 million for
the three months ended March 31, 2000, compared to $8.7 million for the same
period in 1999. The decrease was primarily due to wind-up of several
collaborations in 1999. The collaboration and licensing revenues for the three
months ended March 31, 2000 consisted of research support and license fees from
four collaborative partners, compared to the research support and license fees
from eight collaborative partners for the same period in 1999.
Product and Service Revenues
The Company's product and service revenues were $5.1 million for the three
months ended March 31, 2000, compared to $3.1 million for the same period in
1999. The increase was primarily due to the increase in compound libraries
shipped in the first quarter of 2000 under five AAT agreements, as well as the
addition of PPGx's service revenue, compared to the compounds shipped in the
first quarter of 1999 under three AAT agreements and the absence of PPGx service
revenue.
Cost of Goods Sold
The Company's cost of goods sold was $1.1 million for the three months
ended March 31, 2000, compared to $548,000 for the same period in 1999. The
increase was primarily due to the greater number of compound libraries sold in
the first quarter of 2000 than in the first quarter of 1999 under the AAT
combinatorial chemistry agreements.
Research and Development
The Company's research and development expenses were $11.3 million for the
three months ended March 31, 2000, compared to $15.9 million for the same period
in 1999. The overall decrease for the first three months of 2000 was primarily
due to the shutdown of the San Diego operations and the conclusion of several
collaborations in gene identification in 1999. In addition, the Company's
results for the first quarter of 2000 do not include operations of Akkadix,
which is accounted for under the equity method, since the Company's ownership of
Akkadix was reduced from 52% to 38% in August 1999. Research and development
expenses for Akkadix for the three months ended March 31, 1999 were $209,000 and
were included in the Company's research and development expenses for the first
quarter of 1999. However, the decrease in research and
11
<PAGE> 12
development expenses for the first quarter of 2000 was partially offset by the
increased research and development expenses of PPGx.
General and Administrative
The Company's general and administrative expenses were $3.9 million for the
three months ended March 31, 2000, compared to $3.2 million for the same period
in 1999. The increase was primarily due to the expanded activities of PPGx and
the additions to AAT's general and administrative department, including sales
and marketing staff, in 2000. This increase was partially offset by the
reduction of general and administrative expenses due to the shutdown of the
Company's San Diego operations in 1999. In addition, the amount of increase in
these expenses was further lessened by the exclusion of Akkadix's results in
2000 because the Company's ownership of Akkadix had fallen from 52% to 38% in
August 1999. General and administrative expenses for Akkadix for the three
months ended March 31, 1999 were $174,000.
Interest Income and Interest Expense
Interest income was $161,000 for the three months ended March 31, 2000,
compared to $907,000 for the same period in 1999. The decrease was primarily due
to the decrease in average cash and investment balances during the first quarter
of 2000, compared to the first quarter of 1999. Interest expense was $284,000
for the three months ended March 31, 2000, compared to $507,000 for the same
period in 1999. The decrease was primarily due to the lower debt balances on the
Company's revolving line of credit and capital lease arrangements during the
first quarter of 2000, compared to the first quarter of 1999.
Equity Interest in Loss of Joint Venture
There was no equity interest in loss of joint venture for the three months
ended March 31, 2000, compared to $563,000 for the same period in 1999. This
account represents the Company's 38% ownership of Akkadix starting with the
period that the Company's ownership fell to 38%, and a 50% ownership of a
subsidiary that was written off in June 1999. The change was primarily
attributed to the write-off of the 50% owned subsidiary and the discontinuance
of recording the Company's pro rata share of the net losses of Akkadix as the
book value of Akkadix has been reduced to zero.
Minority Interest
Minority interest represents a third party's share of a subsidiary's
operating income (loss), where the Company owns 51% to 99% of that subsidiary.
Minority interest was $408,000 for the three months ended March 31, 2000,
compared to $285,000 for the same period in 1999. This amount is the result of
the formation of the Company's majority owned subsidiaries, PPGx in 1999 and
Akkadix in 1998. Since the Company reports all of PPGx's expenses as its
expenses (see "General and Administrative" above), this one line allocates a
portion of PPGx's loss to the minority shareholders, reducing the Company's
operating loss. As a result of the reduction in the Company's ownership level in
Akkadix to less than 50% in August 1999, Akkadix's results of operations are
included in Equity Interest in Loss of Joint Venture.
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed its operations since inception primarily through
private and public offerings of capital stock, corporate collaborative research
agreements, and sales of combinatorial chemistry compounds. From inception
through March 31, 2000, the Company realized approximately $217 million in net
proceeds from offerings of its capital stock. In addition, over the same period,
the Company realized approximately $206 million from its collaborative research
agreements and the sale of compound libraries.
The Company's principal sources of liquidity are its cash and cash
equivalents, which totaled $48.5 million as of March 31, 2000. The Company has a
$30.0 million line of credit under which $20.0 million was outstanding as of
March 31, 2000. The line is available through July 2002. PPGx has an $8.0
million line of credit that is guaranteed by PPD, Inc., its minority
shareholder, under which $6.0 million was outstanding as of March 31, 2000. This
line is available through June 2000. The Company's cash and cash equivalents at
12
<PAGE> 13
March 31, 2000 include the cash and cash equivalents from its wholly owned and
majority owned subsidiaries, some of which is subject to certain restrictions on
use. The Company's cash and cash equivalents, and marketable investments, if
any, serve as security for its borrowings under its line of credit.
Net cash used in operating activities during the three-month period ended
March 31, 2000 was $11.9 million, compared to $13.3 million for the same period
in 1999. The change was primarily attributable to lower operating expenses in
2000 due to the shutdown of the San Diego operations in 1999. 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.
The Company also spent approximately $1.3 million for the purchase of
property, plant and equipment during the three-month period ended March 31,
2000. The Company expects to acquire or lease additional equipment in connection
with future research and development activities. There were no material
commitments for capital expenditures outstanding at March 31, 2000. However, the
Company expects to enter into agreements pertaining to the construction of a
43,000 square foot medicinal chemistry building on leased property adjacent to
its corporate headquarters commencing the second quarter of 2000.
The Company's AAT subsidiary had approximately $22.3 million of backlog
from committed contracts for the sale of combinatorial chemistry libraries as of
March 31, 2000. The Company's consolidated financial statements will no longer
include any backlog after the sale of AAT in April 2000.
The Company's material commitments at March 31, 2000 included its
obligations to perform research under its collaboration agreements with Merck
and Aventis (for which the company is fully funded from its partners), its
obligations to develop, produce and deliver combinatorial compounds and transfer
related technology under AAT's combinatorial chemistry agreements with
Parke-Davis, Daiichi, Bristol-Myers Squibb, Aventis, and Allergan (for which the
Company receives payments in excess of its costs), and its obligations under its
line of credit. The Company believes that its existing cash and cash equivalents
(including the proceeds of the $31.5 million stock issuance described below) are
sufficient for the Company to fulfill its commitments to the lender under its
line of credit, which had a $20 million balance outstanding at March 31, 2000.
In February 2000, the Company completed a private placement of equity
financing agreements for the sale of an aggregate 3.5 million newly issued
shares of Axys Pharmaceuticals, Inc. common stock to selected institutional and
other accredited investors for $31.5 million in gross proceeds. The Company
intends to use net proceeds from this private placement for working capital and
other general corporate purposes.
The Company expects that existing cash and investments, revenues from
existing collaborations, and the net proceeds from its recently completed
private placement, together with debt financing which the Company believes is
available to it, will enable the Company to maintain current and planned
operations for a period of 15 to 21 months. The Company continues to actively
pursue a variety of financing alternatives.
In April 2000, the Company closed a definitive merger agreement to combine
AAT with Discovery Partners International, Inc. ("DPI"), a privately held
company. Under the terms of the agreement, AAT was merged with a subsidiary of
DPI and the Company primarily received as consideration 7,425,000 shares of
common stock in DPI (which represents an approximately 43% minority ownership),
$50,000 in cash, $550,000 note receivable and a warrant to purchase 200,000
additional shares of DPI at $8 per share. In May 2000, DPI filed a registration
statement with the Securities and Exchange Commission for a proposed public
offering of its common stock. As previously announced, it is the Company's
intention to monetize over time its ownership interest in DPI. However, the
monetization of the Company's investment in DPI is still uncertain.
The drug development process is expensive and the Company is at an early
stage of development. Therefore, the Company expects that it will continue to
need to raise money in the future until the Company achieves substantial product
or royalty revenues, if ever. The Company expects that it will continue to seek
additional funding from time to time through one or more of the following: new
collaborations, the extension of existing collaborations, the sale of its
interests in its affiliated businesses, or through public or private equity or
debt financings. Furthermore, the Company may obtain funds through arrangements
with collaborative partners or others that require the Company to give up rights
to technologies or products that it would
13
<PAGE> 14
otherwise seek to develop or commercialize itself. The Company cannot be certain
that additional funding will be available or that, if available, the terms will
be acceptable. Existing stockholders will experience dilution of their
investment if additional funds are raised through private or public stock sales.
If adequate funds are not available, the Company may delay, reduce or eliminate
any of its research or development programs.
CERTAIN BUSINESS RISKS
The Company is at an early stage of development and will need a substantial
amount of additional funding to continue to prosecute its research and
development programs. The Company's technologies are, in many cases, new and all
are still under development. All of its proposed products are in research or
development and will require significant additional research and development
efforts prior to any commercial use, including extensive and costly pre-clinical
and clinical testing, as well as lengthy regulatory approval involving many
complexities. The Company's research and development efforts may not be
successful, its proposed products may not prove to be safe and efficacious in
clinical trials, and no commercially successful products may ultimately be
developed by the Company. In addition, many of the Company's currently proposed
products are subject to development and licensing arrangements with its
collaborators. Therefore, the Company is dependent in many cases on the research
and development efforts of these collaborators. Moreover, the Company is
entitled only to a portion of the revenues, if any, realized from the commercial
sale of any of the proposed products covered by the collaborations. The Company
has experienced significant operating losses since inception and expects to
incur significant operating losses over at least the next several years. The
development of the Company's technology and proposed products will require a
commitment of substantial funds to conduct these costly and time-consuming
activities, which funds may not be available.
Should the Company or its 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 the Company's
business, financial condition and results of operations. The proposed products
under development by the Company 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. The Company has no sales, marketing or distribution capability for its
proposed products. If any of the products subject to the Company's collaborative
agreements are successfully developed, the Company must rely on its
collaborators to market the products. The Company cannot ensure that any
collaborator's marketing efforts would be successful.
If the Company develops any products which are not subject to its
collaborative agreements, we must either rely on other pharmaceutical companies
to market the products or the Company must develop a marketing and sales force
with technical expertise and supporting distribution capability in order to
market the products directly. The Company cannot guarantee that these marketing
efforts would be successful.
The foregoing risks reflect the Company's early stage of development and
the nature of its 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 its 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 its stock price.
These risks and uncertainties are discussed further in "Items 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, 1999, filed by the Company with the Securities and Exchange
Commission on March 8, 2000.
ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
The Company does not hold derivative financial investments, derivative
commodity investments or other financial investments or engage in foreign
currency hedging or other transactions that exposes it to market risk. In
addition, due to the short-term nature of the Company's financial instruments,
market risk is not material.
14
<PAGE> 15
PART II: OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
In February 2000, the Company issued and sold 3,497,778 shares of common
stock at $9.00 per share in a private placement, receiving net proceeds of
approximately $29.5 million, after deducting estimated offering expenses. The
Company intends to use net proceeds from this transaction for working capital
and other general corporate purposes. The shares were purchased by institutional
and other accredited investors. In March 2000, the Company filed a registration
statement on Form S-3 with the Securities and Exchange Commission to register
for resale of all of the shares issued in the private placement.
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>
10.123* Collaborative Research and License Agreement between Axys
Pharmaceuticals, Inc. and Cytovia, Inc., dated March 15,
2000.
10.124* Fourth Amendment to the Research Collaboration and License
Agreement between Arris Pharmaceuticals Corporation and
Merck and Co., Inc., dated March 3, 2000.
10.125 Form of Stock Purchase Agreement between Axys
Pharmaceuticals, Inc. and various Investors, dated February
15, 2000.(1)
27 Financial Data Schedule.
</TABLE>
- ---------------
* Confidential treatment has been requested with respect to certain portions
of this exhibit.
(1) Incorporated herein by reference to the Registrant's statement on Form S-3
filed with the Securities and Exchange Commission on March 10, 2000 as
Exhibit 10.1.
B) REPORTS ON FORM 8-K
On February 21, 2000, the Company filed with the Commission a Current
Report on Form 8-K relating to the supplemental disclosure of financial
statements for Sequana Therapeutics, Inc. for the year ended December
31, 1997.
15
<PAGE> 16
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AXYS PHARMACEUTICALS, INC.
Date: May 12, 2000 By: /s/ JOHN P. WALKER
------------------------------------
John P. Walker
Chief Executive Officer,
Chairman of the Board,
Director (Principal Executive
Officer and
Principal Financial Officer)
Date: May 12, 2000 By: /s/ MARK B. LUCKY
------------------------------------
Mark B. Lucky
Controller,
Director of Financial Planning &
Analysis
(Chief Accounting Officer)
16
<PAGE> 17
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
------- -----------
<S> <C>
10.123* Collaborative Research and License Agreement between Axys
Pharmaceuticals, Inc. and Cytovia, Inc., dated March 15,
2000.
10.124* Fourth Amendment to the Research Collaboration and License
Agreement between Arris Pharmaceuticals Corporation and
Merck and Co., Inc., dated March 3, 2000.
10.125 Form of Stock Purchase Agreement between Axys
Pharmaceuticals, Inc. and various Investors, dated February
15, 2000.(1)
27 Financial Data Schedule.
</TABLE>
- ---------------
* Confidential treatment has been requested with respect to certain portions
of this exhibit.
(1) Incorporated herein by reference to the Registrant's statement on Form S-3
filed with the Securities and Exchange Commission on March 10, 2000 as
Exhibit 10.1.
17
<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 EXCHANGE ACT OF 1934, AS
AMENDED.
EXHIBIT 10.123
COLLABORATIVE RESEARCH AND LICENSE AGREEMENT
BETWEEN
AXYS PHARMACEUTICALS, INC.
AND
CYTOVIA, INC.
<PAGE> 2
COLLABORATIVE RESEARCH AND LICENSE AGREEMENT
THIS COLLABORATIVE RESEARCH AND LICENSE AGREEMENT (this "Agreement") is
entered into and effective as of March 15, 2000, by and between AXYS
PHARMACEUTICALS, INC., a Delaware corporation having its principal place of
business at 180 Kimball Way, South San Francisco, CA 94080 ("Axys"), and
CYTOVIA, INC., a Delaware corporation having a place of business at 6650 Nancy
Ridge Dr., San Diego, CA 92121 ("Cytovia"). Axys and Cytovia may be referred to
herein individually as a "Party" or, collectively, as "Parties."
RECITALS
WHEREAS, Cytovia and its Affiliates possess proprietary technology and
know-how related to modulation of caspases; and
WHEREAS, Axys and its Affiliates are engaged in the research,
development and marketing of products for the treatment of, among other things,
diseases within the field of cancer; and
WHEREAS, Axys and Cytovia desire to collaborate in the discovery,
development and commercialization of products for use in the prevention, and/or
treatment of certain human diseases as identified below.
NOW, THEREFORE, in consideration of the various promises and
undertakings set forth herein, the Parties agree as follows:
ARTICLE 1
DEFINITIONS
Capitalized terms not otherwise defined herein will have the meaning set
forth below:
1.1 "AFFILIATE" with respect to either Party, will mean any Person
controlling, controlled by, or under common control with such Party. For the
purposes of this Section 1.1 only, "control" will refer to (a) the possession,
directly or indirectly, of the power to direct the management or policies of a
Person, whether through the ownership of voting securities, by contract or
otherwise, or (b) the ownership, directly or indirectly, of at least 50% (or, if
less, the maximum ownership interest permitted by law) of the voting securities
or other ownership interest of a Person.
1.2 "AXYS COMPOUNDS" means the compounds contributed by Axys pursuant to
Section 2.2(a).
1.3 "AXYS KNOW-HOW" means all Information Controlled by Axys at any time
during the Research Term or during the term of this Agreement that is necessary
or useful for the identification, development synthesis, assaying, manufacture,
use or sale of Lead Compounds, Candidate Compounds, Back-Up Compounds, Released
Compounds, Clinical Development Compounds, Licensed Products or Released
Products, but excluding Research Technology
[ * ] = 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 EXCHANGE ACT OF 1934, AS
AMENDED.
1.
<PAGE> 3
Patent Rights and any Information that Axys is restricted from disclosing due to
confidentiality obligations to any Third Party and provided that after the
period in which the license granted in Section 3.1(a)(ii) is in effect, that
Axys will have no obligation to disclose to Cytovia any Axys Know- How obtained,
discovered or developed after such period.
1.4 "AXYS PATENTS" means all Patent Rights that are Controlled by Axys
that claim (i) Lead Compounds, Candidate Compounds, Back-Up Compounds, Released
Compounds, Clinical Development Compounds, Licensed Products or Released
Products, (ii) the manufacture or use of Lead Compounds, Candidate Compounds,
Back-Up Compounds, Released Compounds, Clinical Development Compounds, Licensed
Products, or Released Products or (iii) methods or materials used for
discovering, identifying, or assaying for, Lead Compounds, Candidate Compounds,
Back-Up Compounds, Released Compounds, Clinical Development Compounds, Licensed
Products or Released Products, in each case where such Patent Rights claim
inventions made prior to the Effective Date.
1.5 "BACK-UP COMPOUND" means any Candidate Compound that has been
selected by Axys as a back-up compound with respect to a particular Clinical
Development Compound, as provided in Section 5.1(a)(iv), together with any salt,
solvate or prodrug of such selected back-up compound.
1.6 "CANDIDATE COMPOUND" means any Lead Compound that is recommended by
the JRC for further optimization and IND-enabling studies, pursuant to Section
5.1(a)(iii), and any derivative, analog or homolog of a compound contributed or
developed by either Party hereunder and designated by the JRC as a Candidate
Compound pursuant to Section 5.1(b), together with any salt, solvate or prodrug
of such selected compound.
1.7 "CLINICAL DEVELOPMENT COMPOUND" will have the meaning ascribed to
such term in Section 5.1(a)(iv).
1.8 "COMMERCIALIZATION BUDGET" will have the meaning ascribed to such
term in Section 5.2(b).
1.9 "COMMERCIALIZATION PLAN" will have the meaning ascribed to such term
in Section 5.2(b).
1.10 "CONFIDENTIAL INFORMATION" means a Party's confidential
information, inventions, know-how, data and materials relating to (i) the
Research, (ii) a Party's activities during the license period, and pursuant to
the licenses, set forth in Sections 3.1(a)(ii) or 3.2(a)(ii), or (iii) the Lead
Compounds, Candidate Compounds, Back-Up Compounds, Released Compounds, Clinical
Development Compounds, Licensed Products or Released Products including without
limitation research data and results, technical and scientific information,
clinical development data and results, manufacturing, marketing, financial,
personnel and other business information and plans, which, if disclosed in
written, graphic or electronic form, is marked or otherwise designated as
"confidential" or "proprietary" and, if disclosed orally, is summarized and
designated as "confidential" or "proprietary" in a writing provided to the
receiving Party not later than sixty (60) days after such disclosure. All
information presented at
[ * ] = 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 EXCHANGE ACT OF 1934, AS
AMENDED.
2.
<PAGE> 4
the JRC or JDC meetings will be rebuttably presumed to be Confidential
Information, regardless of whether it would otherwise qualify as such pursuant
to the preceding sentence.
1.11 "CONTROL" means, with respect to an item of Information or an
intellectual property right, possession of the ability, whether arising by
ownership or license, to grant a license or sublicense as provided for herein
under such item or right without violating the terms of any agreement or other
arrangements with any Third Party.
1.12 "CYTOVIA COMPOUNDS" means the compounds contributed by Cytovia
pursuant to Section 2.2(b).
1.13 "CYTOVIA KNOW-HOW" means all Information Controlled by Cytovia at
any time during the Research Term or during the term of this Agreement that is
necessary or useful for the identification, development, synthesis, assaying,
manufacture, use or sale of Lead Compounds, Candidate Compounds, Back-Up
Compounds, Released Compounds, Clinical Development Compounds, Licensed Products
or Released Products, but excluding Research Technology Patent Rights and any
Information that Cytovia is restricted from disclosing due to confidentiality
obligations to a Third Party and provided that after the period in which the
license granted in Section 3.2(a)(ii) is in effect, Cytovia will have no
obligation to disclose to Axys any Cytovia Know-How obtained, discovered or
developed after such period.
1.14 "CYTOVIA PATENTS" means all Patent Rights that are Controlled by
Cytovia that claim (i) Lead Compounds, Candidate Compounds, Back-Up Compounds,
Released Compounds, Clinical Development Compounds, Licensed Products, or
Released Products, (ii) the manufacture or use of Lead Compounds, Candidate
Compounds, Back-Up Compounds, Released Compounds, Clinical Development
Compounds, Licensed Products, or Released Products, or (iii) methods or
materials useful for discovering, identifying, or assaying for, Lead Compounds,
Candidate Compounds, Back-Up Compounds, Released Compounds, Clinical Development
Compounds, Licensed Products, or Released Products in each case where such
Patent Rights claim inventions made prior to the Effective Date. Without
limiting the foregoing, the Cytovia Patents will also include, when filed with
the appropriate patent authority, Cytovia's existing draft patent applications,
which have not been filed with a patent authority as of the Effective Date, that
disclose the Cytovia Compounds and are identified by Cytovia's internal docket
number as [ * ], and such applications, when so filed, will not be included in
the Research Technology Patent Rights.
1.15 "EFFECTIVE DATE" means the effective date of this Agreement as set
forth in the first paragraph hereof.
1.16 "EXCLUDED COMPOUND" means an Axys Compound that has been selected
by Axys or Axys Advanced Technologies, Inc. ("AAT") for any licensee of Axys or
AAT (i) for development and commercialization (other than pursuant to this
Agreement) or (ii) pursuant to any exclusivity rights or rights to restrict use.
1.17 "FAIR MARKET VALUE" means the cash consideration which a willing
seller would realize from an unaffiliated, unrelated and willing buyer in an
arm's length sale of an identical item sold in the same quantity and at the same
time and place of the transaction.
[ * ] = 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 EXCHANGE ACT OF 1934, AS
AMENDED.
3.
<PAGE> 5
1.18 "FDA" means the United States Food and Drug Administration, or the
successor federal agency thereto.
1.19 "FIELD" means any and all uses for the prevention or treatment of
[*].
1.20 "FIRST COMMERCIAL SALE" means, with respect to any Licensed Product
or Released Product in any country, the first sale for use or consumption by the
general public of such Licensed Product or Released Product in such country
after all Regulatory Approvals have been obtained in such country.
1.21 "FTE" means a full-time scientific person dedicated by Cytovia or
Axys to the Research, or in the case of less than a full-time dedicated
scientific person, a full-time, equivalent scientific person year, based upon a
total of forty-seven (47) weeks (i.e., one thousand eight hundred eighty (1,880)
hours) per year of scientific work on or directly related to the Research.
Scientific work on or directly related to the Research to be performed by a
Party's employees may include, without limitation, and to the extent consistent
with the Party's past practices, experimental laboratory work, recording and
writing up results, reviewing literature and references, holding scientific
discussions, attending appropriate meetings, seminars and symposia, managing and
directing scientific staff, carrying out management duties related to the
Research, including attendance at JRC meetings.
1.22 "IND" means an investigational new drug application filed with the
FDA for approval to commence human clinical trials of a pharmaceutical agent, or
the equivalent in other countries or regulatory jurisdictions.
1.23 "INFORMATION" means any data, results, inventories, information,
know-how, processes, machines, trade secrets, techniques, methods, development,
material, or compositions of matter of any type or kind.
1.24 "JOINT RESEARCH COMMITTEE" OR "JRC" means that committee to be
formed pursuant to Section 4.1.
1.25 "JOINT DEVELOPMENT COMMITTEE" OR "JDC" means that committee to be
formed pursuant to Section 4.2.
1.26 "KNOW-HOW" means Axys Know-How and/or Cytovia Know-How.
1.27 "LEAD COMPOUND" means a compound contributed by the Parties
pursuant to Section 2.2(a) or Section 2.2(b) that is identified as meeting the
criteria for a Lead Compound set forth in Schedule 1.27 by the JRC pursuant to
Section 5.1(a)(ii), and any derivative, analog or homolog of a compound
contributed or developed by either Party pursuant to the Research and designated
by the JRC as a Lead Compound pursuant to Section 5.1(b).
1.28 "LICENSED PRODUCT" means any product, including any formulation
thereof, containing or comprising a Clinical Development Compound for use within
the Field.
1.29 "LICENSED PRODUCT PATENT" will have the meaning ascribed to such
term in Section 6.4.
[ * ] = 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 EXCHANGE ACT OF 1934, AS
AMENDED.
4.
<PAGE> 6
1.30 "MAJOR PHARMACEUTICAL MARKET" means each of [ * ].
1.31 "MATERIALS" will have the meaning ascribed to such term in Section
2.8.
1.32 "NET SALES" means the gross amounts received by a Party or any of
its Affiliates or Sublicensees (each, a "Seller"), from all sales by Seller of
any Licensed Product or Released Product, as reflected in Seller's books and
records maintained in accordance with the accounting principles used by the
applicable entity consistently applied across all of its products (which
principles will comply with Generally Accepted Accounting Principles, where
applicable), less the following deductions with respect to such sale, to the
extent included in the amounts invoiced or subsequently actually allowed and
taken, (i) all trade, cash and quantity credits, discounts, refunds or rebates
or retroactive price reductions; (ii) allowances or credits for returns or
rejected product; (iii) handling fees and restocking expenses for returned or
rejected products; (iv) freight, transportation, postage and insurance paid by
Seller; (v) sales taxes, tariffs, duties and other governmental charges
(including value added tax) actually paid in connection with the sale (but
excluding what are commonly known as income taxes), and (vi) reasonable and
customary accrual-basis deductions from such gross amounts consistent with
Seller's accounting policy, as the case may be, for governmental chargebacks or
rebates (including without limitation Medicaid rebates). A "sale" will not
include transfers or dispositions for charitable or promotional purposes or for
preclinical, clinical, regulatory or governmental purposes prior to receiving
marketing approval. In the event a Licensed Product or Released Product is sold
in the form of a combination product containing one or more active ingredients
which are themselves not Licensed Products or Released Products, the Net Sales
will be calculated by multiplying the sales price of such combination product by
the fraction A/(A+B) where A is the invoice price or Fair Market Value,
whichever is greater, of the Licensed Product or Released Product and B is the
total invoice price or Fair Market Value, whichever is greater, of the other
product(s).
1.33 "PATENT RIGHT" means (i) an issued and existing letters patent,
including any extensions, supplemental protection certificates, registrations,
confirmations, reissues, reexaminations or renewals thereof, (ii) pending
applications, including any continuation, divisional, or continuation-in-part
application thereof, for any of the foregoing, and (iii) all counterparts to any
of the foregoing issued by or filed in any country or other jurisdiction.
1.34 "PERSON" means any natural person, corporation, firm, business
trust, joint venture, association, organization, company, limited liability
company, partnership or other business entity, or any government or agency or
political subdivision thereof.
1.35 "PHASE I" means that portion of the clinical development program
which generally provides for the first introduction into humans of a
pharmaceutical product with the primary purpose of determining safety, metabolic
and pharmacokinetic properties and clinical pharmacology of the product.
1.36 "PHASE II" means that portion of the clinical development program
which provides for the human clinical trials of a pharmaceutical product in a
limited number of patients with the primary purpose of determining safety,
dosing range and efficacy in the proposed therapeutic indication.
[ * ] = 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 EXCHANGE ACT OF 1934, AS
AMENDED.
5.
<PAGE> 7
1.37 "PHASE III" means that portion of the clinical development program
which provides for the Pivotal Trials of a pharmaceutical product on sufficient
numbers of patients to establish the safety and efficacy of a product for the
desired label claims and indications to support Regulatory Approval of such
product in a country or group of countries.
1.38 "PIVOTAL TRIAL" means a Phase III or Phase II/III clinical trial
designed to support Regulatory Approval of a pharmaceutical product, whether or
not on a provisional basis such as a "fast-track" product designation or a
nonprovisional basis.
1.39 "PRODUCT DEVELOPMENT PLAN" will have the meaning ascribed to such
term in Section 4.2(d).
1.40 "PRODUCT DEVELOPMENT BUDGET" will have the meaning ascribed to such
term in Section 4.2(d).
1.41 "PROFIT OR LOSS" will have the meaning ascribed to such term in
Exhibit A.
1.42 "PROFIT SHARE OPTION" will have the meaning ascribed to such term
in Section 5.3.
1.43 "PROFIT SHARE OPTION PERIOD" will have the meaning ascribed to such
term in Section 5.3.
1.44 "REGULATORY APPROVAL" means any and all approvals (including price
and reimbursement approvals), licenses, registrations, or authorizations of any
federal, national, state, provincial or local regulatory agency, department,
bureau or other government entity, necessary for the manufacture, use, storage,
import, transport and sale of a Licensed Product or Released Product in a
country.
1.45 "RELATED COMPOUND" will have the meaning ascribed to such term in
Section 5.4(c).
1.46 "RELEASED COMPOUND" will have the meaning ascribed to such term in
Section 3.2(b).
1.47 "RELEASED PRODUCT" will have the meaning ascribed to such term in
Section 3.2(b).
1.48 "RELEASED PRODUCT PATENT" will have the meaning ascribed to such
term in Section 6.4.
1.49 "RESEARCH" means the collaborative research program undertaken by
the Parties pursuant to this Agreement during the Research Term to discover,
identify, synthesize and evaluate compounds contributed, discovered or
identified by the Parties hereunder for use in the Field.
[ * ] = 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 EXCHANGE ACT OF 1934, AS
AMENDED.
6.
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1.50 "RESEARCH PLAN" means the specific plan for conducting the
Research, as described in Section 2.1, which will be attached hereto as Exhibit
B, as such plan may be amended or revised from time-to-time by the JRC.
1.51 "RESEARCH TECHNOLOGY" means all tangible and intangible Know-How,
trade secrets, inventions (whether or not patentable), discoveries,
developments, data, clinical and preclinical results, information, and physical,
chemical or biological materials, and any replication of or any part of any of
the foregoing, that was made by employees, agents or independent contractors of
Axys and/or Cytovia, either alone or jointly, during the course of and in the
conduct of the Research during the Research Term, or by employees, agents or
independent contractors of either Party or jointly by employees, agents or
independent contractors of Axys and Cytovia in connection with activities during
the license period, and pursuant to the licenses, set forth in Sections
3.1(a)(ii) or 3.2(a)(ii).
1.52 "RESEARCH TECHNOLOGY PATENT RIGHTS" means all Patent Rights that
cover Research Technology.
1.53 "RESEARCH TERM" means the period commencing on the Effective Date
and (unless this Agreement is terminated earlier pursuant to Section 10.2)
continuing for an initial term of [ * ]. Thereafter the Research Term may be
renewed for [ * ]; provided, however, that the Parties mutually agree in writing
to such renewal at least [ * ] prior to the expiration of the then current
initial or renewal term, as applicable.
1.54 "SCREENING" will have the meaning ascribed to such term in Section
2.7.
1.55 "SCREENING TREE AND TIMELINE" will mean the screening protocol and
timeline as set forth in Schedule 2.3(a).
1.56 "SUBLICENSEE" means a Person other than an Affiliate of a Party to
which either Party has granted sublicense rights under the licenses granted such
Party hereunder, which rights include at least the rights to make and sell
Licensed Products or Released Products. Third Parties that are permitted only to
distribute and resell finished Licensed Products or Released Products, or that
manufacture or finish Licensed Products or Released Products for supply to
either Party or any of their Affiliates, are not "Sublicensees."
1.57 "TERRITORY" means all countries, territories and protectorates
throughout the world.
1.58 "THIRD PARTY" means any Person other than Axys, Cytovia or
Affiliates of either of them, or any Sublicensee.
1.59 "VALID CLAIM" means a claim of an issued and unexpired patent which
patent has not lapsed, been abandoned and which claim has not been canceled or
declared invalid by an unreversed and unappealable decision or judgment of a
court or other appropriate body of competent jurisdiction, and which has not
been admitted to be invalid or unenforceable through reissue or disclaimer.
[ * ] = 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 EXCHANGE ACT OF 1934, AS
AMENDED.
7.
<PAGE> 9
ARTICLE 2
COLLABORATIVE RESEARCH
2.1 RESEARCH PLAN. Within thirty (30) days following the Effective Date,
the Parties will mutually agree upon a written Research Plan which will be
generally consistent with the research plans discussed previously by the Parties
in contemplation of this Agreement and will be attached hereto as Exhibit B and
thereby become incorporated into this Agreement. The Parties will conduct the
Research as generally specified in the Research Plan (as amended or revised by
the JRC from time-to-time). The Research Plan, among other things, will specify
the scientific direction, research objectives and research milestones, and will
allocate Research responsibilities and resources between the Parties in a manner
consistent with this Agreement. As promptly as practicable thereafter, subject
to the terms and conditions herein, the Parties will each use commercially
reasonable efforts to conduct the Research on a collaborative basis, with the
goal of discovering, identifying, synthesizing and performing preclinical
research on Lead Compounds and with the further goal of identifying and
selecting certain Candidate Compounds that are suitable for development as
Clinical Development Compounds and for commercialization as Licensed Products
for use in the Field.
2.2 RESEARCH CONTRIBUTIONS. Without limiting the foregoing, the Parties
agree to commit the resources set forth in this Section 2.2 to perform their
obligations under the Research Plan:
(a) Axys will initially provide Cytovia with approximately [ * ]
each of approximately four hundred thousand (400,000) compounds (each, an "Axys
Compound") in a [ * ] format to be delivered to Cytovia in approximately equal
installments over the first [ * ] of the Research Term, or as soon as reasonably
practicable thereafter. After Cytovia completes its screening of such compounds,
or within thirty (30) days after [ * ], whichever is earlier, the Parties will
determine in good faith whether screening of additional compounds is
appropriate. If such additional screening is agreed to, Axys will provide
Cytovia with an additional quantity of compounds as determined by the JRC, not
to exceed an additional three hundred thousand (300,000) compounds in total, as
soon as reasonably practicable following such determination. Upon completion of
all screening hereunder Cytovia will, at Axys' election, return or destroy
remaining compound inventories provided by Axys to Cytovia.
(b) Cytovia will initially contribute to the Research, from its
libraries of compounds, [ * ] compounds (each, a "Cytovia Compound"), identified
by the Parties and set forth on the attached Schedule 2.2(b), which will be the
subject of initial research related activities as provided in the Research Plan.
If and at such time as a Cytovia Compound fails either the second or third of
the Lead Compound tests set forth on Schedule 1.27, Cytovia will contribute an
additional Cytovia Compound mutually identified and agreed to by the Parties
from Cytovia's libraries of compounds which compound will become the subject of
research activities under the Research Plan. Notwithstanding anything to the
contrary herein, unless otherwise agreed by the Parties, Cytovia will only be
required to contribute a maximum of [ * ] such replacement Cytovia Compounds
(for a maximum total of [ * ] Cytovia Compounds contributed altogether). Cytovia
will provide Axys with the synthetic route for the Cytovia Compounds and such
quantities of such Cytovia Compounds as Axys reasonably requests for
[ * ] = 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 EXCHANGE ACT OF 1934, AS
AMENDED.
8.
<PAGE> 10
purposes of performing its obligations under the Research Plan which, in any
event, will not be less than [ * ] for each Cytovia Compound. Upon completion of
all activities under the Research Plan, Axys will, at Cytovia's election, return
or destroy remaining amounts Cytovia Compounds if Axys does not continue to
develop such compound.
(c) Each Party will commit such number of its FTEs as specified
from time-to-time in the Research Plan as necessary to conduct its
responsibilities under the Research Plan or such other number of FTEs as the
Parties may agree.
(d) The Parties will maintain and utilize scientific staff,
laboratories, offices and other facilities consistent with their performance of
activities under Section 2.2 and will use personnel with sufficient skills and
experience as are required to accomplish efficiently and expeditiously the
objectives of the Research as set forth in the Research Plan in good scientific
manner and in compliance in all material respects with all requirements of
applicable laws, rules and regulations, and all other requirements of applicable
good laboratory practices.
2.3 RESPONSIBILITIES. The Research will be managed and directed on a day
to day basis in accordance with the goals and objectives agreed upon by the JRC,
as provided in ARTICLE 4 hereof, in accordance with the Research Plan. Without
limiting the foregoing:
(a) Cytovia will, in accordance with the Screening Tree and
Timeline attached hereto as Schedule 2.3(a), (i) perform, as applicable,
primary, secondary and tertiary cell-based screens of the Axys Compounds
pursuant to Section 2.2(a), Cytovia Compounds and other compounds as the Parties
may agree that arise from the Parties' research activities during the license
period, and pursuant to the licenses, set forth in Sections 3.1(a)(ii) or
3.2(a)(ii), and (ii) provide to Axys and the JRC the results of such screens.
Cytovia will also conduct research to ascertain the [ * ] of Candidate Compounds
to the extent practicable, as directed by the JRC or as provided in the Research
Plan.
(b) With respect to Lead Compounds identified through screening
(pursuant to Section 2.3(a)) Axys will perform initial lead development to
identify prospective Candidate Compounds including (i) [ * ], (ii) preclinical
evaluation including, without limitation, [ * ] and (iii) [ * ]. Axys will
provide results of such activities to the JRC.
2.4 RESEARCH FUNDING. Each Party will be solely responsible for the
costs associated with its Research efforts and preclinical evaluation and
development efforts hereunder as each determines to be appropriate and
consistent with the Research Plan provided, however, that in the event either
Party exercises its Profit Share Option pursuant to Section 5.3, then such costs
will be allocated between the Parties in accordance with Section 5.3.
2.5 INFORMATION, DISCLOSURE AND REPORTS.
(a) During the course of the Research, each Party will disclose
to the other the Know-How and patent applications of such Party included in such
Party's Patents as the other Party reasonably needs to conduct its obligations
and assigned tasks under the Research Plan. All work conducted by either Party
in the course of the Research (or in connection with activities during the
license period and pursuant to the licenses set forth in Sections 3.1(a)(ii) or
3.2(a)(ii))
[ * ] = 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 EXCHANGE ACT OF 1934, AS
AMENDED.
9.
<PAGE> 11
will be completely and accurately recorded, in sufficient detail and in good
scientific manner, in separate laboratory notebooks that do not contain
information relating to other work being conducted by the Parties outside the
Research. On reasonable notice, and at reasonable intervals, each Party will
have the right to inspect and copy all such records of the other Party relating
to Research Technology, to the extent reasonably required to carry out its
respective obligations and to exercise its respective rights hereunder.
Notwithstanding any thing to the contrary in Section 1.10 or otherwise, all such
records will constitute Confidential Information of the Party creating such
records. The Parties acknowledge and agree that neither Party guarantees the
success of the Research tasks it undertakes hereunder.
(b) To protect the Parties' patent rights in any inventions
conceived or reduced to practice during or as a result of the Research, each
Party agrees to maintain a policy which requires its employees to record and
maintain all data and information developed during the Research in such a manner
as to enable the Parties to use such records to establish the earliest date of
invention and/or diligent reduction to practice. At a minimum, the policy will
require such individuals to record all inventions generated by them in standard
laboratory notebooks which are dated and corroborated by non-inventors on a
regular, reasonably contemporaneous basis.
(c) Subject to restrictions imposed by a Party's confidentiality
obligations to any Third Party, each Party will also disclose at any time at or
before the end of the Research Term (and in connection with activities during
the license period, and pursuant to the licenses, set forth in Sections
3.1(a)(ii) or 3.2(a)(ii)) any Know-How learned, acquired or discovered by such
Party reasonably promptly after such Know-How is learned, acquired or discovered
to the extent necessary or reasonably useful to the other Party for conducting
its tasks under the Research. Further, each Party will disclose to the other all
Research Technology discovered, invented, or acquired by such Party during the
Research Term (or in connection with activities during the license period, and
pursuant to the licenses, set forth in Sections 3.1(a)(ii) or 3.2(a)(ii))
promptly, including, without limitation, information regarding Lead Compounds,
Candidate Compounds, Back-Up Compounds, Released Compounds, Clinical Development
Compounds, Licensed Products or Released Products and results of in vitro and in
vivo studies. Nothing herein will require either Party to disclose information
received from a Third Party during the period in which such information remains
subject to confidentiality obligations to such Third Party.
2.6 TREATMENT FOR COMMERCIAL OR SCIENTIFIC IMPRACTICABILITY. If, during
the Research Term, the JRC determines that (a) the then current Research Plan is
not expected to lead to or result in Candidate Compounds or that it would be
commercially or scientifically impractical, imprudent or inadvisable to continue
with the then current Research Plan, or (b) a Patent Right owned by a Third
Party is either granted or published in a Major Pharmaceutical Market and such
Patent Right (a "Blocking Patent") claims (i) a Candidate Compound and a
substantial number of the compounds identified through the Research as having
the potential to be named as Candidate Compounds, or (ii) the use in the Field
of a Candidate Compound and a substantial number of the compounds identified
through the Research as having the potential to be named as Candidate Compounds
(each, a "Blocking Claim"), and (c) there is no reasonable revision that could
be made to such Research Plan so that the Research can continue in a productive
manner consistent with the objectives of the Research and this Agreement, then
upon
[ * ] = 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 EXCHANGE ACT OF 1934, AS
AMENDED.
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<PAGE> 12
such determination, the Parties will meet and confer to discuss the continuation
of research during the remainder of the Research Term on a substitute research
program to be mutually agreed to by the Parties. The terms and conditions of
such research and appropriate revisions to the Research Plan will be negotiated
by the Parties in good faith for a reasonable period not to exceed ninety (90)
days. In the event the Parties are unable to reach an agreement on such
substitute research program, either Party will have the right to terminate this
Agreement upon thirty (30) days written notice without liability to the other
Party.
2.7 TREATMENT FOR MATERIAL FAILURE TO CONDUCT THE RESEARCH. If, during
the Research Term, Cytovia materially breaches its obligations under the first
sentence of Section 2.3(a) or Section 5.1(a)(i), including without limitation,
any significant delay in the screening of a significant portion of the Axys
Compounds (the "Screening"), which breach is not due to any act or omission of
Axys and is not cured within [ * ] after the receipt of notice of such breach
from Axys (or, if such breach cannot be cured within such [ * ] period), Axys
will be entitled, in lieu of any of its other rights conferred on it by this
Agreement with respect to such breach, to perform the Screening, and Axys will
have the right to exercise the expanded license set forth in Section 3.1(a)(i)
with respect to the Screening. In addition, if Axys elects to perform the
Screening:
(a) Cytovia will promptly deliver to Axys at Cytovia's sole cost
(i) all materials (including, without limitation, equipment lists, know-how,
data, formulae, instructions and protocols) necessary to perform the Screening,
and (ii) any and all data, information, and know-how developed by Cytovia
pursuant to its performance to date of its responsibilities under Section 2.3(a)
and Section 5.1(a)(i);
(b) Cytovia will make available to Axys at Cytovia's sole cost,
for as long as Axys reasonably requires to complete the activities in accordance
with the Screening Tree, sufficient Cytovia personnel of appropriate knowledge,
training and experience, to provide instruction and guidance to Axys in
conducting the Screening and to assist in analyzing and interpreting the results
of the Screening; and
(c) With respect to any Licensed Product developed pursuant to
the Screening performed by Axys, Cytovia will have no Profit Share Option with
respect to such Licensed Product and all expenses incurred in conducting the
Screening will be fully creditable against any Royalties due Cytovia pursuant to
Section 6.2 and Section 6.3 as applicable.
(d) If Axys exercises the right to perform the Screening
activities set forth in this Section 2.7, then Axys shall have the right to
practice the expanded license set forth in Section 3.1(a)(i) with respect to
such Screening activities solely to perform activities set forth in this Section
2.7 and other related activities reasonably necessary to undertake and complete
such Screening, and Axys shall not use any materials, information or Know-How
provided by Cytovia pursuant to this Section 2.7 for any purpose other than to
perform such activities. Additionally, Axys shall limit access to such
materials, information, data or Know-How to those employees and independent
contractors who have a need to know such information to perform under this
Agreement. Upon Axys' completion of such activities, it shall return to Cytovia
all remaining materials transferred by Cytovia pursuant to Section 2.7(a)
(except for compounds identified by the JRC as Lead Compounds and any compounds
related thereto), if any, and shall either return
[ * ] = 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 EXCHANGE ACT OF 1934, AS
AMENDED.
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<PAGE> 13
to Cytovia or destroy, all remaining copies of any materials, information and
Know-How transferred to Axys by Cytovia that are not necessary for Axys'
performance of its other obligations under this Agreement and would not
otherwise have been provided hereunder, as Cytovia shall direct.
2.8 MATERIAL TRANSFER. Each Party will transfer to the other Party
certain biological materials or chemical compounds including, but not limited
to, the compounds to be provided by the Parties pursuant to Section 2.2(a) and
Section 2.2(b), for use in furtherance of the Research (collectively, the
"Materials"). Except as otherwise provided under this Agreement, all such
Materials transferred hereunder will (a) remain solely under the control of the
receiving Party and (as between the Parties) continue to be the sole property of
the transferring Party, (b) be used only in furtherance of the Research, (or in
connection with activities conducted during the license period, and pursuant to
the licenses, set forth in Sections 3.1(a)(ii) or 3.2(a)(ii)), (c) not be
provided or made available to, or used by the Receiving Party or for the benefit
of, any Third Party without the prior written consent of the transferring Party,
and (d) not be used in research or testing involving human subjects. The
Materials supplied under this Section 2.8 must be used with prudence and
appropriate caution in any experimental work, since not all of their
characteristics may be known. EXCEPT AS EXPRESSLY SET FORTH IN SECTION 11.3 AND
SECTION 11.4 HEREOF, THE MATERIALS ARE PROVIDED "AS IS" AND WITHOUT ANY
REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION ANY
IMPLIED WARRANTY OF MERCHANTABILITY OR OF FITNESS FOR ANY PARTICULAR PURPOSE OR
ANY WARRANTY THAT THE USE OF THE MATERIALS WILL NOT INFRINGE OR VIOLATE ANY
INTELLECTUAL PROPERTY OR OTHER RIGHTS OF ANY THIRD PARTY.
2.9 LIABILITY. In connection with the conduct of the Research (or in
connection with activities conducted during the license period, and pursuant to
the licenses, set forth in Sections 3.1(a)(ii) or 3.2(a)(ii)) each Party will be
responsible for, and hereby assumes, any and all risks of personal injury or
property damage attributable to the negligent acts or omissions of that Party
and its directors, officers, employees and agents.
2.10 SUBCONTRACTORS. Axys and Cytovia may perform some of their
obligations under the Research Plan (or in connection with activities conducted
during the license period, and pursuant to the licenses, set forth in Sections
3.1(a)(ii) or 3.2(a)(ii)) through one or more subcontractors provided that (i)
none of the rights of either Party hereunder are diminished or otherwise
adversely affected as a result of such subcontracting, and (ii) the
subcontractor undertakes in writing obligations of confidentiality and
limited-use regarding Confidential Information which are substantively the same
as those undertaken by the Parties pursuant to ARTICLE 8. In the event either
Party performs one or more of its obligations under the Research Plan (or in
connection with activities conducted during the license period, and pursuant to
the licenses, set forth in Sections 3.1(a)(ii) or 3.2(a)(ii)) through a
subcontractor, then such Party will at all times be responsible for the
performance and payment of such subcontractor.
2.11 EXCLUDED COMPOUNDS. Cytovia acknowledges and agrees that certain
Axys Compounds are subject to the exercise by Third Parties of rights of
exclusivity or rights to restrict use by other parties, including Axys. From
time-to-time Axys may be notified that such rights have been exercised. Upon
receipt of such notice(s), the Axys Compound(s) to which
[ * ] = 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 EXCHANGE ACT OF 1934, AS
AMENDED.
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such notice(s) apply will become Excluded Compounds and all rights hereunder
pertaining to such Excluded Compounds will be limited to the extent required by
such Third Party rights. Axys will inform Cytovia of the exercise of any such
rights as such rights are exercised from time-to-time and the limitations
resulting therefrom.
2.12 EXCLUSIVITY. In the event the JRC determines that an Axys Compound
should be designated as a Lead Compound pursuant to Section 5.1(a)(ii) and
further determines that such Axys Compound should be given exclusivity status to
the extent available, Axys will exercise and, if applicable, will cause AAT to
exercise, such rights of exclusivity and rights to restrict use with respect to
such Axys Compound as Axys and AAT may then have.
ARTICLE 3
LICENSES
3.1 TO AXYS.
(a) Subject to the other provisions of this Agreement, Cytovia
hereby grants Axys under the Cytovia Patents, Cytovia Know How and Cytovia's
interest in the Research Technology and Research Technology Patent Rights:
(i) a non-exclusive, worldwide, paid up right and license
(with the right to sublicense solely as permitted in Section 2.10) solely to
conduct its Research activities pursuant to this Agreement during the Research
Term. If Axys exercises its rights under Section 2.7 by reason of Cytovia's
material breach of certain obligations, then the foregoing license shall be
expanded to include Axys' performance of the Screening as set forth in Section
2.7.
(ii) Commencing at the expiration of the Research Term
(including any extension thereof) and for a period of [ * ] thereafter, a
non-exclusive, worldwide, paid up right and license (with the right to
sublicense solely as permitted in Section 2.10) to optimize and, in connection
with Axys' activities under this Agreement, make and use (but not sell, offer
for sale or import) Candidate Compounds for use in the Field subject to all
other provisions of this Agreement relating to Licensed Products. Axys may
extend the license granted in this Section 3.1(a)(ii) by written notice to
Cytovia while Axys continues to diligently pursue development of Candidate
Compounds under the provisions of this Agreement; and
(iii) subject to the other provisions of this Agreement an
exclusive (including with regard to Cytovia except as necessary to permit
Cytovia to perform its obligations under this Agreement and to practice the
licenses granted to it in Section 3.2), worldwide, royalty-bearing right and
license, with the right to sublicense, (A) solely to develop, and to make, have
made and use for such purpose, Candidate Compounds and Back-Up Compounds for use
in the Field, and (B) to make, have made, import, use, sell and offer for sale
Licensed Products for use in the Field. For the avoidance of doubt, it is
understood that the right of Axys, and its designated Affiliates, to sell
Licensed Products will include the right to sell such Licensed Products under
the foregoing license through distributors.
[ * ] = 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 EXCHANGE ACT OF 1934, AS
AMENDED.
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(b) Axys will at all times retain the exclusive right to develop
and commercialize without any payment to Cytovia, Axys Compounds or any other
compounds, other than Lead Compounds, Candidate Compounds, Back-Up Compounds,
Clinical Development Compound, Licensed Compounds and Released Compounds,
derived from compounds provided by Axys pursuant to Section 2.2(a), and
pharmaceutical products containing or comprising such compounds.
3.2 TO CYTOVIA.
(a) Subject to the other provisions of this Agreement, Axys
hereby grants Cytovia under the Axys Patents, Axys Know-How and Axys' interest
in the Research Technology and the Research Technology Patent Rights:
(i) a non-exclusive, worldwide, paid up right and license
(without the right to sublicense) solely to conduct its Research activities
pursuant to this Agreement during the Research Term; and
(ii) if Cytovia exercises its License Option pursuant to
Section 3.2(b), commencing at the expiration of the Research Term (including any
extension thereof) and for a period of [ * ] thereafter, a non-exclusive,
worldwide, paid up right and license (with the right to sublicense solely as
permitted in Section 2.10) solely to optimize, and, in connection with Cytovia's
activities under this Agreement, make and use (but not sell, offer for sale or
import) solely in connection with such optimization, Released Compounds for use
in the Field subject to all provisions of this Agreement relating to Released
Products. Cytovia may extend the license granted in this Section 3.2(a)(ii)
beyond such [ * ] period by written notice to Axys while Cytovia continues to
diligently pursue development of Released Compounds under the provisions of this
Agreement.
(b) Subject to the other provisions of this Agreement, (including
without limitation, Section 5.5) as to those Candidate Compounds, if any, Axys
decides not to advance as Clinical Development Compounds or Back-Up Compounds
pursuant to Section 5.1(a)(iv) (each a "Released Compound"), Axys hereby grants
to Cytovia, subject to the terms and conditions hereof, an exclusive option (the
"License Option") during [ * ] following each decision by Axys not to advance
any particular Candidate Compound as either a Clinical Development Compound or
Back-Up Compound (the "License Option Period"), to obtain an exclusive
(including with regard to Axys), world-wide, royalty-bearing right and license,
with the right to sublicense, under the Axys Patents and Axys Know-How solely
(i) except as provided in Section 3.2(a)(ii), to conduct development on, and to
make, have made and use for such purpose, any such Released Compound(s) for use
in the Field, and (ii) to make, have made, import, use, sell and offer for sale
pharmaceutical products containing or comprising any such Released Compound(s)
in any formulation (each, a "Released Product") for use in the Field. Except as
set forth herein, the terms of such license will be those that would apply if
Axys were commercializing such Released Product as a Licensed Product hereunder,
with the roles of the Parties reversed. Notwithstanding anything herein to the
contrary, Cytovia will not have a License Option with respect to any Back-Up
Compound to a Candidate Compound that Axys has selected as a Clinical
Development Compound. Each License Option will be exercisable by written notice
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
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from Cytovia to Axys during the applicable License Option Period, and any such
license will become effective automatically upon Axys' receipt of written notice
of exercise from Cytovia.
(c) Subject to Section 5.5, Cytovia will at all times retain the
exclusive right to develop and commercialize without any payment to Axys,
Cytovia Compounds other than Lead Compounds, Candidate Compounds, Back-Up
Compounds, Clinical Development Compounds and Licensed Compounds, and
pharmaceutical products containing or comprising such Cytovia Compounds.
3.3 TO THIRD PARTIES. In the event Cytovia does not exercise its License
Option pursuant to Section 3.2(b), then the Parties may mutually agree to
license rights in and to the applicable Released Compound or Released Product to
a Third Party acceptable to both Parties provided, however, that the Parties
will share equally any proceeds from such license.
ARTICLE 4
MANAGEMENT OF THE COLLABORATION
4.1 CREATION AND STRUCTURE OF THE JOINT RESEARCH COMMITTEE.
(a) CREATION OF JRC. Within ten (10) days of the Effective Date,
the Parties will create a Joint Research Committee of six (6) members to
facilitate the research collaboration called for herein. The JRC membership will
consist of an equal number of representatives nominated by each Party. Members
of the JRC may be represented at any meeting by a designee appointed by such
member for such meeting. Each Party will be free to change its representatives
on notice to the other or to send a substitute representative to any JRC
meeting.
(b) REGULAR MEETINGS. Axys will call the meetings of the JRC and
chair such meetings. The JRC will meet in person at least once every three (3)
months during the Research Term and thereafter as reasonably requested by either
of the Parties until (i) the expiration or termination of a license under
Sections 3.1(a)(ii) or 3.2(a)(ii), or (ii) such later date as the Parties may
agree if either Party has exercised the Profit Share Option and the Parties are
continuing the Research; thereafter, the JRC will cease to exist. Meetings will
alternate between the offices of Axys and Cytovia. A JRC member of the Party
hosting the meeting will serve as Secretary of that meeting. Each Party will
disclose to the other Party proposed agenda items in advance of each meeting of
the JRC. The Secretary of the meeting will prepare and distribute to all members
of the JRC minutes of the meeting sufficiently in advance of the next meeting to
allow adequate review and comment prior to the meeting. Such minutes will
provide a description in reasonable detail of the discussions had at the meeting
and a list of any actions, decisions or determinations approved by the JRC.
Minutes of each JRC meeting will be approved or disapproved, and revised as
necessary, at the next meeting. Final minutes of each meeting will be
distributed to the members of the JRC. The JRC may also convene, or be polled or
consulted from time-to-time by means of telecommunications, video conferencing
or written correspondence, as the Parties determine is necessary or appropriate.
(c) RESPONSIBILITIES OF THE JRC DURING THE RESEARCH TERM. During
the Research Term, the JRC will be the primary vehicle for interaction between
the Parties with
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respect to the Research. Without limiting the foregoing, during the Research
Term, the JRC will be responsible for: (i) reviewing, approving and amending the
Research Plan; (ii) directing, managing and monitoring the progress of the
Research, (iii) [ * ] Lead Compounds, Candidate Compounds and [ * ] Candidate
Compounds for further development as Clinical Development Compounds as
contemplated in Section 5.1(a); and (iv) reviewing and commenting upon (but not
approving) the patent filing strategies of the Parties as provided in ARTICLE 7.
(d) RESPONSIBILITIES OF THE JRC AFTER THE RESEARCH TERM. After
the Research Term, the JRC will continue to exist, subject to the other
provisions of this Section 4.1(d), primarily (i) as a vehicle to inform each
Party about, and to obtain each Party's input regarding, the other Party's
continuation of the activities conducted pursuant to the licenses granted under
Section 3.1(a)(ii) or Section 3.2(a)(ii), if any, and (ii) pursuant to Section
5.1(b), to [ * ] the class of compounds to which derivative, analogs and
homologs of compounds contributed or developed hereunder belong. After the end
of the Research Term, the JRC will cease to manage and direct the Research or
any continuation of activities conducted pursuant to the licenses granted under
Section 3.1(a)(ii) or Section 3.2(a)(ii) by either Party as permitted hereunder,
and, except as provided hereinafter and to perform its classification
responsibilities under Section 5.1(b), the JRC will no longer have the
responsibilities and decision-making authority otherwise provided for in this
Agreement; provided, however, that in the event that either Party exercises the
Profit Share Option and the Parties agree to a further continuation of the
Research thereafter, the JRC will again be responsible for managing and
directing the continuation of the Research to the same extent it is responsible
for managing and directing the Research during the Research Term. During the
period that the JRC does not have responsibility for managing and directing any
continuation of activities conducted pursuant to the licenses granted under
Section 3.1(a)(ii) or Section 3.2(a)(ii), the Party conducting such continuation
of Research will be responsible for managing and directing any Research
activities it deems appropriate and will do so in good faith with the same goals
as set forth in Section 2.1.
(e) DECISIONS OF THE JRC. At least four (4) members of the JRC
will constitute a quorum for any meeting of the JRC; provided, that there are at
least two (2) members present from each Party. All decisions of the JRC will be
made by the unanimous vote of all JRC members participating in the meeting. In
the event that the members of the JRC cannot agree with respect to a particular
issue, such issue will be referred to Axys' Chief Technical Officer and
Cytovia's Chief Executive Officer who will discuss such issue in good faith
(each Party giving due consideration to the other) and who will make a
reasonable good faith effort to reach agreement thereon within the [ * ] period
after such JRC meeting. In the event such persons are unable to reach an
agreement on such issue, it will be referred to the Chief Executive Officers of
Axys and Cytovia for resolution pursuant to Section 11.12.
(f) EXPENSES. Each Party will be responsible for all travel and
related costs for its representatives to attend meetings of, and otherwise
participate on, the JRC.
4.2 CREATION AND STRUCTURE OF THE JOINT DEVELOPMENT COMMITTEE.
(a) CREATION OF JDC. If either Party exercises its Profit Share
Option with respect to a Licensed Product or Released Product, pursuant to
Section 5.3 and only after the first such exercise, then within [ * ] thereafter
the Parties will create a Joint Development Committee
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COMMISSION PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
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(the "JDC") with the purpose of providing direction, as provided herein, in the
subsequent development through Regulatory Approval of Licensed Products or
Released Products, including without limitation, pre-clinical research and, if
any, clinical research. The JDC will be composed of six (6) representatives, of
which three (3) representatives will be appointed by each of Axys and Cytovia.
Such representatives will include individuals with expertise and
responsibilities in the areas of preclinical development and clinical
development and other relevant areas of expertise. Either Party may replace any
or all of its representatives on the JDC at any time upon written notice to the
other Party.
(b) REGULAR MEETING. The JDC will meet at least once each
calendar quarter, or more frequently, as agreed by the Parties until the First
Commercial Sale of the last Licensed Product or Released Product developed by
Axys or Cytovia, or until such time as the Parties otherwise agree. Axys will
call the meetings of the JDC by written advance notice to Cytovia and will chair
such meetings. At least four (4) members of the JDC will constitute a quorum for
any meeting; of the JDC; provided, that there are at least two (2) members
present from each Party. Each representative will have one (1) vote on all
matters within the JDC's purview. On matters requiring the approval of the JDC,
such approval will be by the unanimous vote of all JDC members participating in
the meeting.
(c) ROLE OF JDC AND INTERACTIONS WITH THE PARTIES. Each Party
will have responsibility as contemplated in Section 5.1(b) for the further
development and Regulatory Approval of Candidate Compounds and Back-Up Compounds
and the commercialization of Licensed Products or Released Products it selects
even after the JDC is formed. Each Party will update the JDC at the quarterly
JDC meetings, or more often as required, on important development plans,
Regulatory Approval and (to the extent relevant to the development process)
Commercialization Plans, activities and results. In their updates, reports and
plans, each Party will provide the JDC to the extent practicable with
information comparable to that relied on by such Party for its own internal
decision-making and all such updates, reports and plans will be in such form and
will contain such detail as the JDC may reasonably require in order to fulfill
its purposes.
(d) THE PRODUCT DEVELOPMENT PLAN PROCESS. At the quarterly JDC
meetings (which, upon agreement of the Parties, may be part of Axys' or
Cytovia's internal development review meetings) each Party will present, as
applicable, the significant updates, revisions and modifications to its product
development plan for a Candidate Compound (its "Product Development Plan"). The
Product Development Plan and any update, revision or modification thereto will
be consistent with generally accepted development practices in the industry for
development of similar products of similar market potential. Such presentations
will include the rationale for any significant revisions or modifications, as
well as timing and cost implications and other meaningful information. Each
Party, as applicable, will also present the annual product development budget
for their respective Product Development Plan(s) (the "Product Development
Budget") on an annual basis during such meetings. From time to time thereafter,
such Parties will present any modifications, increases and decreases to such
Product Development Budgets during the quarterly JDC meetings. The JDC will
review such plans, budgets as well as updates, revisions and modifications
thereto and will provide the presenting Party with input, advice and guidance
with respect thereto and will recommend additional revisions and modifications
as deemed appropriate.
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COMMISSION PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
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(e) RELATED COMPOUNDS. In the event that, after a Party exercises
its Profit Share Option, the other Party desires to engage in additional
research or clinical development with respect to any Candidate Compound related
to the Clinical Development Compound or Released Compound to which the Profit
Share Option applies (such as a Back-Up Compound or a second generation
compound), the Party proposing to undertake such research and development will
prepare and present to the JDC (and the JRC to the extent additional research is
contemplated) an initial Product Development Plan for such related Candidate
Compound. In any event, the Party exercising its Profit Share Option will have
the option to share equally with the other Party in the Profits and Losses for
any such related Candidate Compound subject to and as set forth in Section 5.3.
ARTICLE 5
PRODUCT DEVELOPMENT, COMMERCIALIZATION AND OPTION
5.1 DEVELOPMENT AND SELECTION OF COMPOUNDS.
(a) Candidate Compounds will be identified and selected as
follows:
(i) Cytovia will, in accordance with the Screening Tree
and Timeline, (A) perform, as applicable, primary, secondary and tertiary
cell-based screens of Axys Compounds and Cytovia Compounds (and certain other
compounds as the Parties may agree that are developed by either Party in
connection with activities during the license period and pursuant to the
licenses set forth in Sections 3.1(a)(ii) or 3.2(a)(ii)), and (B) provide to
Axys and the JRC the results of such screens including, in particular, the
identity of potential Lead Compounds indicated by such screening.
(ii) Based on its evaluation of such results, [ * ] will
determine the identity of Lead Compounds. With respect to such Lead Compounds,
Axys will perform (A) [ * ], (B) preclinical evaluation including, without
limitation, [ * ], and (C) [ * ].
(iii) Based on the results of the screening and lead
optimization efforts described above, and criteria established by the JRC, [ * ]
will recommend as promptly as practicable which specific compounds will be
designated Candidate Compounds and preclinical development activities to advance
one or more Candidate Compounds to the point of commencement of IND-enabling
studies. (All such recommendations will be noted in [ * ].) With respect to such
Candidate Compounds, Axys will perform [ * ] preclinical development activities
[ * ]; provided, however, that Axys will not be required to undertake such
development with respect to more than [ * ] at a time. Concurrently, Cytovia
will conduct [ * ] research to ascertain the [ * ] of such Candidate Compounds.
(iv) With respect to any such Candidate Compound(s) for
which preclinical development activities have been concluded, so developed and
researched Axys will, in its sole discretion, select the Candidate Compound(s)
for which it desires to perform IND-enabling studies and will prepare a
development plan and budget for each such compound for review by the JRC
("Clinical Development Compounds") and select one or more Candidate Compounds as
Back-Up Compounds to such Clinical Development Compound(s). Axys will
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promptly notify Cytovia upon Axys' decision not to pursue a Candidate Compound
as either a Clinical Development Compound or a Back-Up Compound.
(b) Any compounds selected by Axys for further development as a
Candidate Compound, Clinical Development Compound or Back-Up Compound will, upon
designation of such compound as a compound for an increasing level of
development, cease to be included in the class of compound in which it was
previously included, and any Candidate Compound that becomes a Released Compound
pursuant to Section 3.2(b) will thereafter cease to be included in any other
class of compound. The Parties anticipate that in the course of their activities
under this Section 5.1 and Cytovia's practice of its license, if any, under
Section 3.2(a)(ii) and Section 3.2(b) they will develop or discover derivatives,
analogs or homologs of Lead Compounds, Candidate Compounds, Clinical Development
Compounds, Back-Up Compounds and Released Compounds. During the Research Term
and during the license period set forth in Sections 3.1(a)(ii) or 3.2(a)(ii),
the applicable Party will report any development or discovery of any such
derivative, analog and homolog, and all relevant data pertaining thereto to the
JRC which, in turn, will [ * ] the class of compounds (e.g., Lead Compound,
Candidate Compound, etc.) to which such derivatives, analog, or homologs belong.
(c) Subject to Section 4.2, if applicable, once a Candidate
Compound is selected for IND-enabling studies (by Axys pursuant to Section
5.1(a)(iii), or by Cytovia pursuant to Section 3.2(b)), the selecting Party will
be solely responsible for directing the development of, and will have the sole
right to carry out the development of, such Candidate Compound through the final
stage of preclinical development, and all phases of clinical trials, and to make
all applications for and obtain all Regulatory Approvals on a worldwide basis.
The Parties will use commercially reasonable efforts to develop Candidate
Compounds; provided, however, that Axys and Cytovia will be entitled at any
time, without liability to the other Party, to determine in its sole discretion
to discontinue development or commercialization of any Clinical Development
Compounds, Candidate Compounds or Back-Up Compounds by written notice to the
other Party.
(d) Each Party will be solely responsible for all costs and
expenses it incurs in connection with its preclinical and clinical development
and regulatory efforts undertaken pursuant to and in accordance with this
Agreement with respect to Candidate Compounds, Back-Up Compounds, Released
Compounds and Clinical Development Compounds, except as otherwise provided
herein in the event, and to the extent, that either Party exercises Profit Share
Options pursuant to Section 5.3.
5.2 COMMERCIALIZATION.
(a) GOOD FAITH COMMERCIALIZATION. Subject to the Parties'
respective payment obligations hereunder, each Party will have the right in its
sole discretion to directly develop and commercialize the Licensed Products or
Released Products, as applicable, in the Territory in accordance with the terms
and conditions of this Agreement. Each Party will conduct its commercialization
activities (including without limitation development of its Commercialization
Plans) in good faith and in a manner consistent with generally accepted
commercialization practices in the industry for commercialization of similar
products.
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COMMISSION PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
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(b) COMMERCIALIZATION PLAN. Each Party will develop
commercialization plans (each a "Commercialization Plan") for each Licensed
Product or Released Product it intends to commercialize hereunder, which plan
will generally encompass, among other things, (i) demographics, market dynamics
and market strategies in the Territory, estimated country launch dates in the
Territory, a sales and expense forecast in the Territory, manufacturing plans
and expected product profile based upon the development plan; (ii) a marketing
plan (including projected strategies pertaining to discounts, and samples) for
the Territory; and (iii) a commercialization budget (containing the annual and
quarterly forecasts), including launch plan and launch budget
("Commercialization Budget") for each Licensed Product or Released Product for
the Territory. The Parties acknowledge that Commercialization Plans and
Commercialization Budgets are not static and are not guarantees and that each
may be revised and updated by the drafting Party from time-to-time. All
significant changes to Commercialization Plans and Commercialization Budgets
will be [ * ].
5.3 PROFIT-SHARE OPTION. With respect to the sale of Licensed Products
or Released Products the non-selling Party will have the option, on a
compound-by-compound basis, to share equally with the Party developing a
particular Licensed Product or Released Product in the Profits or Losses (as
defined in Exhibit A) from the sales of such Licensed Products or Released
Products, as applicable, pursuant to the terms and conditions provided in
Exhibit A, (the "Profit Share Option"), in lieu of the payments provided for in
Section 6.2 and Section 6.3. The selling Party will give written notice to the
non-selling Party immediately upon, in the case of Axys as the selling Party,
its decision to select a Clinical Development Compound under Section 5.1(a)(iv)
or, in the case of Cytovia as the selling Party, its decision to exercise its
option to develop a Released Compound under Section 3.2(a)(ii) (in either case
the "PSO Compound"). Thereafter, the selling Party will make available to the
non-selling Party at the selling Party's offices (to the extent not previously
provided) all relevant information pertaining to the selling Party's decision
and will make its Chief Medical Officer available at a mutually agreeable time
to present and discuss the selling Party's rationale for its decision as well as
its product development plan (the "Product Development Plan") for the PSO
Compound, including (among other things) a reasonably specific description of
the clinical trial plan for the PSO Compound, a reasonably detailed budget for
such clinical trial plan, the identification of any other indication for such
PSO Compound which the selling Party then intends to pursue, the projected cost
for clinical development for such other indication and the overall Product
Development Budget. The non-selling Party will have the right to exercise the
Profit Share Option only by written notice to the selling Party during a period
commencing on the date the non-selling Party begins its review, but in no event
later than [ * ] after receipt by the non-selling Party of written notice from
the selling Party of its decision to proceed with such Product Development Plan
and stating that the complete Project Development Plan is available at the
selling Party's offices for review by the non-selling Party, and continuing for
[ * ] thereafter. If a Party exercises the Profit Share Option as provided
herein the following will apply, subject to Section 4.2:
(a) The non-selling Party will not conduct any development of the
PSO Compound or incur any direct costs for such development, unless agreed to by
the selling Party in writing. With respect to the PSO Compound, the Parties will
share equally in all directly allocated development costs dating from the [ * ]
for the PSO Compound (collectively "Shared Costs") including without limitation
[ * ].
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COMMISSION PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
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(i) Within [ * ] after the non-selling Party has exercised
its Profit Share Option, each Party will report to the other Party the Shared
Cost incurred by the reporting Party as of the date the Profit Share Option is
exercised; within [ * ] after both reports have been received, the Party that
has incurred the smaller amount during the reporting period will pay to the
other Party one-half (1/2) of the difference between the amounts incurred by the
Parties during such period.
(ii) Within [ * ] after the end of each calendar quarter,
each Party will report to the other Party the Shared Costs incurred by the
reporting Party during such quarter; within [ * ] after both reports have been
received, the Party that has incurred the smaller amount during the reporting
period will pay to the other Party one-half (1/2) of the difference between the
amounts incurred by the Parties during such period.
(b) Provisions of this Section 5.3 will apply to all indications
of Licensed Products or Released Products, as applicable, incorporating the PSO
Compound. In addition, as indicated in Section 4.2(e), the non-selling Party
will have an independent Profit Share Option with respect to any subsequent
Clinical Development Compounds or Released Compounds related to the PSO Compound
(such as Back-Up Compounds and second generation compounds), provided that the
non-selling Party has first exercised its Profit Share Option with respect to
the related PSO Compound and has not exercised its opt out rights under Section
5.4 with respect to such PSO Compound.
(c) Subject to Section 6.10, the non-selling Party will pay to
the selling Party on a quarterly basis its share of all such documented Shared
Costs within sixty (60) days of the non-selling Party's receipt from the selling
Party of a reasonably detailed invoice of Shared Costs incurred during the
previous quarter. Without limiting the selling Party's obligations under Section
5.3(a), the selling Party will provide the non-selling Party with reasonably
prompt written notice in the event that the selling Party becomes aware that
actual costs for a quarter will exceed forecasted costs for such quarter (as
provided to the JDC) by [ * ] or more, together with an explanation of the
reason(s) for such variance.
(d) The Parties will share equally in Profits or Losses from
sales of Licensed Products or Released Products, as applicable, incorporating
the PSO Compound, calculated on a product-by-product basis, in the Territory as
provided in Exhibit A and from applicable royalties included in Profits or
Losses in accordance with Section 5.3.
(e) With respect to payments received by the selling Party from
its Sublicensee(s) with respect to Licensed Products or Released Products, as
applicable, that incorporate a PSO Compound, or sublicensed rights related
thereto, the selling Party will pay to the Party exercising its Profit Share
Option fifty percent (50%) of all royalties, license fees, milestone payments or
other non-royalty payments to the selling Party or its designated Affiliates and
cash equivalent of each non-cash benefit.
5.4 PROFIT SHARE OPT OUT.
(a) After the non-selling Party exercises the Profit Share
Option, if the selling Party significantly and materially deviates from the
Product Development Plan established for a
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PSO Compound, or exceeds the then current Product Development Budget (by more
than [ * ]), without prior written agreement from the non-selling Party, the
non-selling Party may opt out of further joint development in the Territory by
giving the selling Party [ * ] prior written notice. In addition to the
foregoing, the non-selling Party may opt out of further joint development in the
Territory by giving the selling Party written notice not more than [ * ] after
the following events with respect to a PSO Compound: (a) [ * ]; (b) [ * ]; and
(c) [ * ].
(b) The selling Party will pay the non-selling Party a royalty on
Net Sales in the Territory under this Agreement as if the non-selling Party had
not exercised the Profit Share Option, and the non-selling Party will not be
liable for any future development costs under the Profit Share Option. All
payments by the non-selling Party for development costs under development plans
and budgets prior to the opt out will be non-refundable, and each Party will
remain responsible for any and all payments due to the other Party hereunder
which accrue prior to termination under this Section.
(c) If the non-selling Party exercises its opt-out rights with
respect to any compound then (i) such opt-out shall be effective as to any and
all Related Compounds (defined below), and (ii) the non-selling Party shall no
Profit Share Option with respect to the compound for which the opt-out rights
have been exercised and any and all Related Compounds. For purposes of this
Section 5.4, a "Related Compound" shall mean (A) with respect to any PSO
Compound, any Back-Up Compound or second generation compound related thereto,
and (B) with respect to any Back-Up Compound or second generation compounds, as
applicable, the root PSO Compound, Back-Up Compound and any related second
generation compounds.
5.5 DIAGNOSTICS; ANIMALS. Nothing in this Agreement will be construed as
granting to either Party any rights with respect to the use or commercialization
of Candidate Compounds, Lead Compounds, Clinical Development Compounds or
Released Compounds for use as diagnostics or for use in animals. The Parties
will negotiate commercially reasonable terms and conditions for rights to
commercialize Candidate Compounds, Lead Compounds, Clinical Development
Compounds or Released Compounds for use as diagnostics and for use in animals
within [ * ] of the Effective Date and (a) any such rights and obligations
pertaining to Candidate Compounds and Lead Compounds for use in animals may be
assigned by Axys to Akkadix Corporation and assumed by Akkadix Corporation, and
(b) any such rights and obligations pertaining to Candidate Compounds and Lead
Compounds for use as diagnostics may be assigned by Axys to PPGx, Inc. and
assumed by PPGx, Inc.
ARTICLE 6
ROYALTIES AND OTHER PAYMENTS
6.1 EQUITY INVESTMENT. In connection with this Agreement, Axys will have
the right and obligation to purchase Preferred Stock of Cytovia pursuant to and
in accordance with the Stock Purchase Agreement attached hereto as Exhibit D.
6.2 ROYALTIES FOR PRODUCTS MARKETED DIRECTLY. Where a Profit Share
Option is not exercised with respect to a Clinical Development Compound or
Released Compound incorporated into a Licensed Product or Released Product,
respectively, then, subject to Section
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AMENDED.
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6.4, the selling Party will pay the non-selling Party royalties equal to [ * ]
of Net Sales for each Licensed Product or Released Products, as applicable, sold
directly by the selling Party. Notwithstanding the foregoing, if there is
generic competition in a country and the Licensed Product or Released Product
sold in such country is not covered by a Licensed Product Patent or a Released
Product Patent, respectively, the applicable royalty obligation on Net Sales of
such Licensed Product or Released Product under this Section 6.2 will be reduced
by [ * ]. The limitation of royalty obligations set forth in this Section 6.4
will not apply to limit the payment obligations with respect to Clinical
Development Compounds or Released Compound for which a Party has exercised its
Profit Share Option rights; in such case the division of profit share will apply
as long as the selling Party or its Affiliates market the product
6.3 ROYALTIES FOR PRODUCT IS MARKETED BY A SUBLICENSEE.
(a) Subject to the terms and conditions of this Agreement, where
a Profit Share Option is not exercised with respect to a Clinical Development
Compound or Released Compound, then the selling Party will pay the non-selling
Party the following royalties for each Licensed Product or Released Product
based thereon, as applicable, sold by a Sublicensee of the selling Party:
(i) "X"% of royalty payments to the selling Party, or its
designated Affiliates for Net Sales or other revenues in connection with the
sale or manufacture of products incorporating Licensed Products or Released
Products;
(ii) "X"% of licensing fees, milestone payments or
non-royalty payments and the cash equivalent of non-cash benefits to the selling
Party or its designated Affiliates in connection with the sale of Licensed
Products or Released Products, or the grant of a sublicense to make use, sell,
offer for sale or import Licensed Products or Released Products, as applicable.
(b) For Purposes of this Section 6.3, "X" will vary according to
[ * ] the applicable the sublicense as follows:
(i) X= [ * ], where the applicable sublicense [ * ] for
the Candidate Compound incorporated into the Licensed Product or Released
Product sold.
(ii) X=[ * ], where the applicable sublicense [ * ] for
such Candidate Compound [ * ].
(iii) X=[ * ], where the applicable sublicense [ * ] for
such Candidate Compound [ * ].
(iv) X=[ * ], where the applicable sublicense [ * ] for
such Candidate Compound.
6.4 TERM OF ROYALTY OBLIGATION. The royalty obligations under Section
6.2 or Section 6.3 as to particular Licensed Products or Released Products, as
applicable, will terminate in each instance, on a country-by-country basis:
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AMENDED.
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(a) with respect to Licensed Products, on the earlier of (i) the
expiration in such country of the last to expire Cytovia Patent or Research
Technology Patent Rights that contains at least one (1) Valid Claim to the
Clinical Development Compound contained in such Licensed Product, or to the use
or manufacture of such Clinical Development Compound or of a pharmaceutical
preparation containing such Clinical Development Compound (a "Licensed Product
Patent"); or (b) [ * ] from the date of First Commercial Sale in such country of
a Licensed Product the Clinical Development Compound respectively.
(b) with respect to Released Products, on the earlier of (i) the
expiration in such country of the last to expire Axys Patent or Research
Technology Patent Rights that contains at least one (1) Valid Claim to the
Released Compound contained in such Released Product, or to the use or
manufacture of such Released Compound or of a pharmaceutical preparation
containing such Released Compound (a "Released Product Patent"); or (b) [ * ]
from the date of First Commercial Sale in such country of Released Product
incorporating the Released Compound.
6.5 TIMING OF PAYMENT; REPORTING OBLIGATIONS. Royalties will be payable
on a quarterly basis, within [ * ] after the end of each calendar quarter, based
upon the Net Sales during each calendar quarter, commencing with the calendar
quarter in which the First Commercial Sale of a Licensed Product or Released
Product, as applicable, is made. Each such payment hereunder will be accompanied
by a report of Net Sales of Licensed Products (or Released Product), royalty and
non-royalty payments to the selling Party or its designated Affiliates for
Licensed Products (or Released Products) and premiums on equity in the selling
Party or its designated Affiliates in sufficient detail to permit confirmation
of the accuracy of the payment made to the other Party, including, without
limitation, the quantities of Licensed Products (or Released Products) sold, the
gross sales and Net Sales of Licensed Products (or Released Products), royalty
and non-royalty payments payable pursuant to this ARTICLE 6, the method used to
calculate royalty payments and the exchange rates used. Royalties and other
payments hereunder will be calculated in accordance with U.S. generally accepted
accounting principles consistently applied and with the terms of this ARTICLE 6.
6.6 THIRD PARTY LICENSES.
(a) In the event Axys or Cytovia does not exercise its Profit
Share Option with respect to a Released Compound or Clinical Development
Compound incorporated into a Released Product or Licensed Product, respectively,
as applicable, and if an unexpired Third Party patent(s) claiming a Released
Product or Licensed Product, or its manufacture or its use in the Field,
exist(s) in a country where a Released Product or Licensed Product containing
such Released Compound or Clinical Development Compound is being manufactured,
used or sold, and if it should prove in the commercializing Party's bona fide,
good faith judgment impractical or impossible for it or its Affiliates to
continue the manufacture, use or sale of such Licensed Product in such country
without obtaining a royalty-bearing patent license from such Third Party under
such patent, then such commercializing Party may elect in its discretion to
either:
(i) terminate its license rights hereunder with respect to
such Licensed Product or Released Product in such country upon [ * ] written
notice to the other Party,
[ * ] = 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 EXCHANGE ACT OF 1934, AS
AMENDED.
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whereupon such terminating Party and its Affiliates will have no further license
rights in such country regarding such Licensed Product; or
(ii) obtain a license from such Third Party under such
patent (a "Third Party License"), in which case the royalties paid by such
Party, or its Affiliates under such Third Party License with respect to the sale
of the Licensed Product or Released Product in such country will be [ * ] the
royalty payments to be paid to the other Party with respect to the sale of the
Licensed Product or Released Product in such country under Section 6.2 or 6.3.
6.7 MODE OF PAYMENT. All payments hereunder will be made by deposit of
United States Dollars in the requisite amount to such bank account as Cytovia or
Axys, as applicable, may from time to time designate by notice to the other
Party. Payments will be free and clear of any taxes (other than withholding and
other taxes imposed on the payee), fees or charges, to the extent applicable.
With respect to sales outside the United States, payments will be calculated
based on currency exchange rates for the last calendar quarter for which
remittance is made for royalties. For each quarter and each currency, such
exchange rate will equal the arithmetic average of the daily exchange rates
(obtained as described below) during the calendar quarter; each daily exchange
rate will be obtained from the Reuters Daily Rate Report or The Wall Street
Journal, Eastern U.S. Edition, or, if not so available, as otherwise agreed by
the Parties.
6.8 OBLIGATION TO PAY ROYALTIES. A Party's obligation to pay royalties
under this ARTICLE 6 is imposed only once with respect to the same unit of
Licensed Product or Released Products, as applicable, regardless of the number
of Research Technology Patent Rights pertaining thereto.
6.9 RECORDS RETENTION. For [ * ] after each sale of each Licensed
Product or Released Products, as applicable, the selling Party will keep (and
will ensure that its Affiliates and Sublicensees will keep and report to the
selling Party) records of such sale in sufficient detail to confirm the accuracy
of the royalty and other payment calculations hereunder. The selling Party will
use commercially reasonable efforts to ensure that the format of records
reported to the selling Party by its Affiliates and Sublicensees are
sufficiently similar to such Parties own records as to facilitate the
non-selling Party's review of such reported records pursuant to Section 6.10.
6.10 AUDITS.
(a) Upon the written request of a Party (the "Examiner"), and not
more than once in each calendar year, the other Party (the "Examinee") will
permit an independent certified public accounting firm of nationally recognized
standing selected by Examiner, and reasonably acceptable to Examinee, at
Examiner's expense, to have access during normal business hours, and upon
reasonable prior written notice, to such of the records of Examinee as may be
reasonably necessary to verify the accuracy of the reports under Section 6.5 for
the prior calendar quarter only. The accounting firm will disclose to Examiner
only whether the reports are correct or incorrect and, if incorrect, the amount
by which the reports reveal an underpayment to Examiner; no other information
will be disclosed.
[ * ] = 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 EXCHANGE ACT OF 1934, AS
AMENDED.
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(b) If such accounting firm concludes that additional royalties
or other payments were owed during such period, Examinee will pay the additional
royalties or other payments, with interest from the date originally due [ * ],
within [ * ] after the date Examiner delivers to Examinee such accounting firm's
written report, subject to the provisions of Section 6.10(d). If the amount of
the underpayment is greater than [ * ] of the total amount owed, then Examinee
will in addition reimburse Examiner for its reasonable costs related to such
audit.
(c) Examiner will treat all information subject to review under
this Section 6.10 in accordance with the confidentiality provisions of ARTICLE
8, and will cause its accounting firm to enter into a confidentiality agreement
acceptable in form and substance to Examinee, obligating such firm to retain all
such financial information in confidence pursuant to such confidentiality
agreement.
(d) If Examinee in good faith disputes the conclusion of the
accounting firm under subsection (b) above that Examinee owes additional
royalties or other payments, or any specific aspect of the conclusion, then
Examinee will inform Examiner by written notice within [ * ] of receiving a copy
of the audit containing such conclusion, specifying in detail the reasons for
Examinee's disputing such conclusion. The Parties will promptly thereafter meet
and negotiate in good faith a resolution to such dispute. In the event that the
Parties are unable to resolve such dispute within [ * ] after such Examinee
notice, the matter will be resolved in a manner consistent with the procedures
set forth in Section 11.12, and interest will be payable on any additional
royalties or other payments determined to be due in the same manner as provided
for in Section 6.10(b).
6.11 TAXES. The Party receiving royalties and other payments under this
Agreement will pay any and all taxes levied on account of such payment. If any
taxes are required to be withheld by the paying Party, it will (a) deduct such
taxes from the remitting payment, (b) timely pay the taxes to the proper taxing
authority, and (c) send proof of payment to the other Party and certify its
receipt by the taxing authority within [ * ] following such payment, and (d)
provide reasonable assistance to the receiving Party to claim any exemptions or
credits available to it under law.
ARTICLE 7
INVENTIONS AND PATENTS
7.1 TITLE TO INVENTIONS. Except as expressly set forth in this
Agreement, each Party will own and retain all right, title and interest in and
to all Information Controlled by such Party prior to the Effective Date
(including contributed compounds) and all intellectual property rights therein.
Each Party will own and retain all right, title and interest in and to all
Research Technology made solely by such Party's and/or, to the extent permitted
hereunder, any of its Affiliates' employee(s), agent(s) or independent
contractor(s) and all intellectual property rights in such Research Technology.
The Parties will jointly own any Research Technology made jointly by the
Parties' employees, agents, or independent contractors. Inventorship with
respect to Research Technology Patent Rights will be determined by the
applicable laws of the country or jurisdiction in which the particular
intellectual property rights are sought. In the event that there is a dispute
between the Parties as to whether technology constitutes Research Technology
[ * ] = 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 EXCHANGE ACT OF 1934, AS
AMENDED.
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or as to the inventive entity for any prospective Research Technology Patent
Rights, the JRC, or JDC as applicable, will establish a procedure to resolve
such dispute, which may include engaging a Third Party patent attorney
completely unaffiliated and independent of the Parties and jointly selected by
the Parties, as an expert to resolve such dispute.
7.2 RIGHTS TO OTHER COMPOUNDS. The Parties expect that each of them will
make compounds available for testing for purposes of this Agreement that may be
invented and/or synthesized in the course of the Research. With respect to such
compounds, the Parties agree that, (a) except as provided otherwise in this
Agreement, compounds that are owned by a Party as determined under the
provisions of Section 7.1, will remain the property of such Party, and (b)
notwithstanding anything herein to the contrary, the Party contributing
technology to the Research will retain full and exclusive rights to exploit such
technology outside the Field.
7.3 RESEARCH TECHNOLOGY PATENT PROSECUTION. The Parties expect that
patent applications will be filed and maintained as required to secure suitable
Research Technology Patent Rights. The Parties agree as follows with respect to
securing such Patent Rights:
(a) PATENT RIGHTS. In general, Axys will be responsible for
obtaining and maintaining throughout the world Research Technology Patent Rights
relating to the manufacture, use, sale, offer for sale or import of [ * ].
Cytovia will be responsible for obtaining and maintaining throughout the world
Cytovia Patents described in the last sentence of Section 1.14 and Research
Technology Patent Rights relating to the manufacture, use, sale, offer for sale
or import of (i) [ * ], and (ii) [ * ]. The Party owning any Research Technology
not described in the foregoing two sentences will obtain and maintain, in its
discretion, Research Technology Patent Rights relating thereto. Axys' efforts
with respect to its prosecution and maintenance of Research Technology Patent
Rights relating to the manufacture, use, sale, offer for sale or import of [ * ]
will be subject to review and comment by Cytovia. The Parties will review patent
strategies with the JRC from time-to-time.
(b) PATENT APPLICATIONS. The Party responsible for obtaining and
maintaining Research Technology Patent Rights pursuant to Section 7.3(a) (the
"Responsible Party") will file, or direct an appropriate law firm(s) to file on
its behalf, a United States provisional application under 37 CFR Section 1.54(c)
and will thereafter within one (1) year file a corresponding non-provisional
application for a United States patent under 37 CFR Section 1.54(b) and a
corresponding PCT International Application designating all countries, including
without limitation, the United States, and, at [ * ] discretion, corresponding
foreign applications in countries which are not PCT members and which are
designated in Exhibit C (as modified from time-to-time by the written agreement
of the Parties). Each such foreign application will claim priority to the
initial United States provisional application. PCT International Applications
will enter the national phase in each designated country at [ * ] discretion.
Notwithstanding the foregoing, the Parties (acting through their JRC or JDC
representatives), may agree to an alternative means of protecting such Research
Technology. In the event of any ambiguity regarding which Party will be the
Responsible Party for a given Research Technology invention, the JRC or the JDC,
as applicable, will decide which Party will be responsible for obtaining and
maintaining Research Technology Patent Rights claiming such invention; if the
JRC or JDC is unable to make such decision, the matter will be resolved in
accordance with the dispute resolution procedures set forth in Section 11.12.
[ * ] = 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 EXCHANGE ACT OF 1934, AS
AMENDED.
27.
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(c) EXPENSES. The Responsible Party will bear the expenses for
obtaining and maintaining the Research Technology Patent Rights for which it is
responsible. Notwithstanding the foregoing, Cytovia will bear the expenses for
obtaining and maintaining all Research Technology Patent Rights covering subject
matter related to [ * ] until the earlier to occur of (i) selection by Axys of
such compound as a Clinical Development Compound pursuant to Section 5.1(a)(iv),
or (ii) [ * ] after the filing of a patent application with respect to such
compound. Thereafter, Axys will bear the expense going forward of obtaining and
maintaining Research Technology Patent Rights with respect to such [ * ] unless
and until such compound (i) fails to any of the Lead Compound tests set forth on
Schedule 1.27, (ii) is not advanced by the JRC as set forth in Section 5.1, or
(iii) is rejected by Axys as a Clinical Development Compound; at which time Axys
will have no obligation with respect to bear such expenses going forward.
(d) EXPENSES RELATING TO RELEASED COMPOUNDS AND RELEASED
PRODUCTS. Cytovia will bear the expenses for obtaining and maintaining all
Research Technology Patent Rights covering [ * ]; provided, however, if the
applicable Research Technology Patent Rights covers Clinical Development
Compounds and/or Back-Up Compounds, in addition to [ * ], the expenses for
obtaining and maintaining such Research Technology Patent Rights will be shared
equally by the Parties.
(e) PATENT RIGHTS ON PSO COMPOUNDS. Notwithstanding the above, if
either Party exercises its Profit Share Option pursuant to Section 5.3, the
exercising party will reimburse the other Party fifty percent (50%) of the
expenses for obtaining or maintaining Patent Rights covering the applicable PSO
Compound and thereafter all such expenses will be shared equally by the Parties
unless the exercising Party exercises its right to opt out of its Profit Share
Option pursuant to Section 5.4.
(f) FAILURE TO PURSUE PATENT RIGHTS. Notwithstanding anything in
this Section 7.3 to the contrary, either Party may decline to obtain or maintain
Research Technology Patent Rights for which it otherwise has responsibility, or
may decline to pay its share of the costs for or fail to diligently pursue such
Patent Rights.
(g) PATENT TERM EXTENSIONS. The Party who is the owner of record
of a United States patent covering a Licensed Product which is eligible for the
extension of the patent term under 35 USC Sections 6 and/or 156 will file, or
cause to be filed, an application under Chapter 1, Subpart F, of Title 37 of the
CFR for the extension of the term of such patent.
7.4 ENFORCEMENT OF PATENTS.
(a) If either Party becomes aware that any of the Research
Technology Patent Rights is being infringed by a Third Party's activities within
the Field, it will notify the other Party and provide it with any evidence of
such infringement which is reasonably available. Subject to any limitations in
the license agreements between the Responsible Party and Third Party licensors,
the Responsible Party will have the first opportunity at its own expense to
attempt to terminate such infringement relating to Research Technology Patent
Rights for which it is the Responsible Party by commercially appropriate steps,
including filing an infringement suit or taking other similar action. In the
event the Responsible party fails to take commercially appropriate steps with
respect to an infringement that could reasonably have a material adverse
[ * ] = 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 EXCHANGE ACT OF 1934, AS
AMENDED.
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effect on the sale of Licensed Products or Released Products, as applicable,
within [ * ] following notice of such infringement, the other Party will have
the right to do so at its expense; provided that if the Responsible Party has
commenced negotiations with an alleged infringer of the patent for
discontinuance of such infringement within such [ * ] period, the Responsible
Party will have an additional [ * ] to conclude its negotiations before the
other Party may bring suit for such infringement. The Party not enforcing the
applicable Patent Rights will provide reasonable assistance to the other Party,
including providing access to relevant documents and other evidence and making
its employees available, subject to the enforcing Party's reimbursement of any
out-of-pocket expenses incurred by the non-enforcing Party.
(b) Any amounts recovered by the Party bringing an action
pursuant to Sections 7.4(a), whether by settlement or judgment, will be
allocated in the following order: (i) to reimburse Cytovia and Axys for their
reasonable out-of-pocket expenses in making such recovery (which amounts will be
allocated pro rata if insufficient to cover the totality of such expenses); and
(ii) the remainder will be retained by Responsible Party, with such remainder
being deemed "Net Sales" of Licensed Product or Released Products, as
applicable, to be shared as provided in Exhibit A if such recovery relates to a
PSO Compounds or related product, or, for recoveries relating to compounds other
than PSO Compounds, in a manner as if such remaining recovery were Net Sales of
a Licensed Product or Released Product upon which a royalty under Sections 6.2
or 6.3 is due, as the case may be; provided that if the Infringement activity on
which such recovery is based included actions outside the Field, then the
Parties will reasonably agree on an appropriate allocation of such recovery
between activities in the Field (which allocation will be deemed Net Sales to be
shared as provided in Exhibit A or for recoveries relating to compounds other
than PSO Compounds, upon which a royalty is due, as applicable) and activities
outside the Field (which allocation will be deemed net sales for which a
mutually agreed royalty will be paid).
7.5 THIRD PARTY PATENT RIGHTS. If any warning letter or other notice of
infringement is received by a Party, or action, suit or proceeding is brought
against a Party alleging infringement of a Patent Right of any Third Party in
the manufacture, use or sale of a Licensed Product or Released Products or
conduct of the Research, the Parties will promptly discuss the best way to
respond.
ARTICLE 8
CONFIDENTIALITY
8.1 CONFIDENTIALITY OBLIGATIONS. Each Party agrees that, for the term of
this Agreement and for [ * ] thereafter, such Party will keep, and will ensure
that its officers, directors, employees and agents keep, completely confidential
and will not publish or otherwise disclose and will not use for any purpose
except as permitted hereunder any Confidential Information furnished to it by
the other Party pursuant to this Agreement (including, without limitation,
Know-How of the disclosing Party). The foregoing obligations will not apply to
any information to the extent that it can be established by such receiving Party
that such information:
(a) was already known to the receiving Party as evidenced by its
written records, other than under an obligation of confidentiality, at the time
of disclosure;
[ * ] = 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 EXCHANGE ACT OF 1934, AS
AMENDED.
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(b) was generally available to the public or was otherwise part
of the public domain at the time of its disclosure to the receiving Party;
(c) became generally available to the public or otherwise becomes
part of the public domain after its disclosure and other than through any act or
omission of the receiving Party in breach of this Agreement;
(d) was subsequently lawfully disclosed to the receiving Party by
a Third Party other than in contravention of a confidentiality obligation of
such Third Party to the disclosing Party; or
(e) was developed or discovered by employees of the receiving
Party or its Affiliates who had no access to the Confidential Information of the
disclosing Party.
Each Party will obtain written agreements from each of its employees and
consultants who perform work on the Research, which agreements will obligate
such persons to similar obligations of confidentiality and non-use and to assign
to such Party all inventions made by such persons during the course of
performing the Research. Each Party may disclose the other's Confidential
Information to the extent such disclosure is reasonably necessary in filing or
prosecuting patent applications, prosecuting or defending litigation, advising
investors and the investment community of the results of the Research and/or
development activities hereunder (subject to the prior written consent of the
other Party, which consent will not be unreasonably withheld), complying with
applicable governmental regulations, granting a permitted sublicense of its
rights hereunder or conducting clinical trials or otherwise in performing its
obligations or exercising its rights hereunder. If a Party is required to make
any such disclosure of the other Party's Confidential Information, it will give
reasonable advance notice to that other Party of such disclosure requirement,
will cooperate with the other Party in its efforts to secure confidential
treatment of such Confidential Information prior to its disclosure, and, save to
the extent inappropriate in the case of patent applications, will use all
reasonable efforts to secure confidential treatment of such information prior to
its disclosure (whether through protective orders or confidentiality agreements
or otherwise).
8.2 PUBLICATIONS.
(a) Subject to the foregoing and the restrictions provided below,
either Party may publish or present the results of the Research or of
development studies carried out on such Licensed Product, Released Product, or
Candidate Compound, subject to the prior review by the other Party for
patentability and protection of such other Party's Confidential Information.
Each Party will provide to the other Party the opportunity to review any
proposed abstracts, manuscripts or summaries of presentations which cover the
results of the Research or of pre-clinical or clinical development of such
Licensed Product, Released Product, or Candidate Compound. Each Party will
designate a person who will be responsible for reviewing such publications. Such
designated person will respond in writing promptly and in no event later than [
* ], or such shorter period as circumstances may reasonably require, after
receipt of the proposed material with any specific statements of concern based
upon the need to seek patent protection or concern regarding competitive
disadvantage arising from the proposal. Except in cases involving clinical
research papers, in the event of such a concern, the submitting Party
[ * ] = 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 EXCHANGE ACT OF 1934, AS
AMENDED.
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agrees not to submit such publication or to make such presentation that contains
such information until the other Party is given a reasonable period of time (not
to exceed [ * ]) to initiate patent prosecution for any material in such
publication or presentation which it believes is patentable or to resolve any
other issues. Furthermore, with respect to any proposed abstracts, manuscripts
or summaries of presentations by investigators or other Third Parties, such
materials will be subject to review under this Section 8.2(a) to the extent that
Cytovia or Axys (as the case may be) has the right to do so.
(b) Each Party also agrees to delete from any such proposed
publication any Confidential Information of the other Party upon its reasonable
request.
(c) To the extent appropriate and within the Party's control, in
any publication permitted under this Section 8.2, each Party will acknowledge
its collaboration with the other Party under this Agreement,
8.3 PRESS RELEASES. Except to the extent required by law or as otherwise
permitted in accordance with this Section 8.3, neither Party will make any
public announcements concerning this Agreement or the terms hereof without the
prior written consent of the other, which will not be unreasonably withheld or
delayed. Notwithstanding the foregoing, the Parties intend to issue a joint
press release announcing the execution of this Agreement and agree that each
Party may desire or be required to issue subsequent press releases relating to
the Agreement or activities hereunder, and the Parties agree to consult with
each other reasonably and in good faith with respect to the text and timing of
such press releases prior to the issuance thereof, provided that a Party may not
unreasonably withhold consent to such releases, and that either Party may issue
such press releases as it determines, based on advice of counsel, are reasonably
necessary to comply with laws or regulations or for appropriate market
disclosure.
ARTICLE 9
INDEMNIFICATION
9.1 INDEMNIFICATION BY AXYS. Axys will indemnify, defend and hold
Cytovia and its agents, employees, officers and directors (the "Cytovia
Indemnitees") harmless from and against any and all liability, damage, loss,
cost or expense (including reasonable attorneys' fees) arising out of Third
Party claims or suits related to (a) Axys' performance of its obligations under
this Agreement; or (b) breach by Axys of its representations and warranties set
forth in Section 11.3; or (c) subject to Section 6.6, the manufacture, use, sale
offer for sale or import of the Licensed Products for which Cytovia does not
exercise its Profit Share Option or elects to opt out of its Profit Share
Option; provided, however, that Axys' obligations pursuant to this Section 9.1
will not apply to the extent such claims or suits result from (A) the negligence
or willful misconduct of any of the Cytovia Indemnitees, or (B) claims or suits
related to infringement or violation of Third Party intellectual property rights
by reason of the practice of the Cytovia Patents and Cytovia Know-How under this
Agreement, to the extent such suits or claims relate to the performance of
screening activities conducted by the Parties pursuant to the Research Plan or
to the Cytovia Compounds and not to Axys' development (other than performance of
such screening activities) or commercialization of any Lead Compounds, Candidate
Compounds, Clinical Development Compounds, Licensed Products or Backup Compounds
based thereon or
[ * ] = 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 EXCHANGE ACT OF 1934, AS
AMENDED.
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derived therefrom (other than a Cytovia Compound). Notwithstanding the
foregoing, Axys will have no obligation to indemnify the Cytovia Indemnitees
with respect to claims arising out of breach by Cytovia of its representations
and warranties set forth in Sections 11.3 or 11.4.
9.2 INDEMNIFICATION BY CYTOVIA. Cytovia will indemnify, defend and hold
Axys and its Affiliates and each of their respective agents, employees, officers
and directors (the "Cytovia Indemnitees") harmless from and against any and all
liability, damage, loss, cost or expense (including reasonable attorney's fees)
arising out of Third Party claims or suits related to (a) Cytovia's performance
of its obligations under this Agreement; or (b) breach by Cytovia of its
representations and warranties set forth in Sections 11.3 or 11.4; (c)
infringement or violation of Third Party intellectual property rights by reason
of the practice of the Cytovia Patents and Cytovia Know-How under this
Agreement, to the extent such suits or claims relate to the performance of
screening activities conducted by the Parties pursuant to the Research Plan or
to the Cytovia Compounds and not to Axys' development (other than performance of
such screening activities) or commercialization of any Lead Compounds, Candidate
Compounds, Clinical Development Compounds, Licensed Products or Backup Compounds
based thereon or derived therefrom (other than a Cytovia Compound), or (d)
subject to Section 6.6, the manufacture, use, sale offer for sale or import of
the Released Products for which Cytovia does not exercise its Profit Share
Option or elects to opt out of its Profit Share Option provided, however, that
Cytovia's obligations pursuant to this Section 9.2 will not apply to the extent
that such claims or suits result from the negligence or willful misconduct of
any of the Axys Indemnitees. Notwithstanding the foregoing, Cytovia will have no
obligation to indemnify the Axys Indemnitees with respect to claims arising out
of a breach by Axys of its representations and warranties set forth in Section
11.3.
9.3 NOTIFICATION OF CLAIM; CONDITIONS TO INDEMNIFICATION OBLIGATIONS. As
a condition to a Party's right to receive indemnification under this ARTICLE 9,
it will (i) promptly notify the other Party as soon as it becomes aware of a
claim or action for which indemnification may be sought pursuant hereto, (ii)
cooperate with the indemnifying Party in the defense of such claim or suit, and
(iii) permit the indemnifying Party to control the defense of such claim or
suit, including without limitation the right to select defense counsel. In no
event, however, may the indemnifying Party compromise or settle any claim or
suit in a manner which admits fault or negligence on the part of the indemnified
Party without the prior written consent of the indemnified Party. The
indemnifying Party will have no liability under this ARTICLE 9 with respect to
claims or suits settled or compromised without its prior written consent.
ARTICLE 10
TERMINATION AND EXPIRATION
10.1 TERM AND TERMINATION. This Agreement will commence upon the
Effective Date and, unless earlier terminated as provided herein, will expire on
the expiration of all royalty and other payment obligations herein.
(a) Upon the expiration, pursuant to Section 6.4 of royalty
obligations with respect to a particular Licensed Product or Released Product,
as applicable, the licenses granted under ARTICLE 3 with respect to such
Licensed Product or Released Product will expire, and
[ * ] = 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 EXCHANGE ACT OF 1934, AS
AMENDED.
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each Party and its Affiliates will automatically thereafter be granted a
non-exclusive, fully paid-up license under the other Party's Know-How and
Patents to make, have made, use, import, sell and offer for sale such Licensed
Product or Released Product for use in the Field worldwide.
(b) If a Party exercises its Profit Share Option pursuant to
Section 5.3 and the other Party is selling Licensed Products or Released
Product, as applicable, directly or through an Affiliate in the Territory, the
Parties will share the Profits and Losses provided for in Exhibit A for so long
as the sale of Licensed Products or Released Product on a country-by-country
basis in the Territory continues; provided, however, that if a Party exercises
the Profit Share Option and the other Party subsequently determines to cease
selling a Licensed Product or Released Product, as applicable, in any country in
the Territory in which either it or its Affiliate previously sold Licensed
Products or Released Product, then the Party exercising its Profit Share Option
will have the first right of negotiation to obtain the exclusive right to
commercialize such Licensed Product or Released Product, such country on
commercially reasonable terms to be agreed upon in good faith by the Parties. In
the event that the Parties are unable to agree on such terms, or the Party
exercising its Profit Share Option does not wish to obtain such right, then the
other Party will be free to sublicense such right to a Third Party in the
Territory, and the Parties will [ * ] all royalty payments, non-royalty payments
and equity premiums received in connection with such sublicense.
10.2 TERMINATION OF THE AGREEMENT UPON MATERIAL BREACH. Failure by a
Party to comply with any of its material obligations contained herein will
entitle the Party not in default to give to the Party in default notice
specifying the nature of the default, requiring it to make good or otherwise
cure such default, and stating its intention to terminate if such default is not
cured. If such default is not cured within [ * ] after the receipt of such
notice (or, if such default cannot be cured within such [ * ] period, if the
Party in default does not commence and diligently continue actions to cure such
default within such [ * ] period), the Party not in default will be entitled,
without prejudice to any of its other rights conferred on it by this Agreement,
and in addition to any other remedies available to it by law or in equity, to
terminate this Agreement; provided, however, that such right to terminate will
be stayed in the event that, during such [ * ] period, the Party alleged to have
been in default will have initiated dispute resolution in accordance with
Section 11.12 with respect to the alleged default, which stay will last so long
as the initiating Party diligently and in good faith cooperates in the prompt
resolution of such dispute resolution proceedings.
10.3 CONSEQUENCES OF TERMINATION.
(a) Upon termination of this Agreement (but not upon expiration
of its term under Section 10.1), (i) each Party will promptly return all
relevant records and materials in its possession or control containing or
comprising the other Party's Know-How or other Confidential Information and to
which the former Party does not retain rights hereunder' (ii) all licenses
granted by each Party to the other under ARTICLE 3 will terminate except as
provided in Section 10.3(b) or 10.3(c); (iii) all rights in any Lead Compounds
(including any Candidate Compounds) owned by a Party will revert to such Party
except as provided in Section 10.3(b) or 10.3(c); and (iv) any and all claims
and payment obligations that accrued prior to the date of such termination will
survive such termination.
[ * ] = 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 EXCHANGE ACT OF 1934, AS
AMENDED.
33.
<PAGE> 35
(b) In the event Axys terminates this Agreement pursuant to
Section 10.2, Cytovia covenants that Cytovia will not develop or sell any Lead
Compound, Candidate Compound or Released Compound or any derivative, analog or
homolog thereof developed in connection with the Research, for any use in the
Field, and will not license any Third Party or any Affiliate to do so, and all
licenses from Cytovia to Axys that are in effect immediately prior to such
termination under Section 3.1 will remain in full force and effect following
such termination for so long as Axys complies with its obligations hereunder.
(c) In the event Cytovia terminates this Agreement pursuant to
Section 10.2, Axys covenants that Axys will not develop or sell any Released
Compound or any derivative, analog or homolog thereof developed in connection
with the Research, for any use in the Field, and will not license any Third
Party or any Affiliate to do so, and all licenses from Axys to Cytovia that are
in effect immediately prior to such termination under Section 3.2 will remain in
full force and effect following such termination for so long as Cytovia complies
with its obligations hereunder,
(d) The right of a Party to terminate this Agreement, as herein
above provided, will not be affected in any way by its waiver or failure to take
action with respect to any prior default.
10.4 ACCRUED RIGHTS; SURVIVING OBLIGATIONS.
(a) Termination, relinquishment or expiration of this Agreement
for any reason will be without prejudice to any rights which will have accrued
to the benefit of a Party prior to such termination, or expiration. Such
termination, relinquishment or expiration will not relieve a Party from
obligations which are expressly indicated to survive termination or expiration
of this Agreement.
(b) Without limiting the foregoing, Sections 2.8 (last sentence
only), 2.9, 6.5, 6.7, 6.9, 6.10, 6.11, 7.1, 7.2, 7.3(f), 7.3(g), 8.1, 10.3,
10.4, and 10.5 and ARTICLE 8, ARTICLE 9 and ARTICLE 11 will survive the
expiration or termination of this Agreement for any reason (except as expressly
provided in Section 10.3).
(c) Upon any termination of this Agreement with respect to any
particular Licensed Product, or Released Product, each Party and their
respective Affiliates and Sublicensees will be entitled, during the next [ * ],
to sell any inventory of the Licensed Product or Released Product, as
applicable, which remains on hand as of the date of the termination, so long as
the selling Party pays the royalties or other amounts payable with respect to
said subsequent sales in accordance with the terms and conditions set forth in
this Agreement.
10.5 RIGHTS IN BANKRUPTCY. All rights and licenses granted under or
pursuant to this Agreement by Cytovia or Axys are, and will otherwise be deemed
to be, for purposes of Section 365(n) of the U.S. Bankruptcy Code, licenses of
right to "Intellectual property" as defined under Section 101 of the U.S.
Bankruptcy Code. The Parties agree that the Parties, as licensees of such rights
under this Agreement, will retain and may fully exercise all of their rights and
elections under the U.S. Bankruptcy Code. The Parties further agree that, in the
event of the commencement of a bankruptcy proceeding by or against either Party
under the U.S. Bankruptcy
[ * ] = 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 EXCHANGE ACT OF 1934, AS
AMENDED.
34.
<PAGE> 36
Code, the Party hereto which is not a party to such proceeding will be entitled
to a complete duplicate of (or complete access to, as appropriate) any such
intellectual property and all embodiments of such intellectual property, and
same, if not already in their possession, will be promptly delivered to them (i)
upon any such commencement of a bankruptcy proceeding upon their written request
therefor, unless the Party subject to such proceeding elects to continue to
perform all of its obligations under this Agreement, or (ii) if not delivered
under (i) above, following the rejection of this Agreement by or on behalf of
the Party subject to such proceeding upon written request therefor by the
non-subject Party.
ARTICLE 11
MISCELLANEOUS PROVISIONS
11.1 RELATIONSHIP OF THE PARTIES. Nothing in this Agreement is intended
or will be deemed to constitute a partnership, agency or employer-employee
relationship between the Parties. Neither Party will incur any debts or make any
commitments for the other.
11.2 ASSIGNMENTS. Except as expressly provided herein, neither this
Agreement nor any interest hereunder will be assignable, nor any other
obligation delegable, by a Party without the prior written consent of the other;
provided, however, that a Party may assign this Agreement without consent to any
Affiliate or to any successor in interest by way of merger or sale of all or
substantially all of its assets in a manner such that the assignor will remain
liable and responsible for the performance and observance of all such Party's
duties and obligations hereunder, except that no intellectual property of any
Third Party acquiror of such Party will be included in the licenses granted
hereunder. This Agreement will be binding upon the successors and permitted
assigns of the Parties. Any assignment not in accordance with this Section 11.2
will be null and void.
11.3 REPRESENTATIONS AND WARRANTIES. Each Party represents and warrants
to the other Party that, as of the date of this Agreement:
(a) Such Party is duly organized and validly existing under the
laws of the state of its incorporation and has full corporate power and
authority to enter into this Agreement and to carry out the provisions hereof;
(b) Such Party has taken all corporate action necessary to
authorize the execution and delivery of this Agreement and the performance its
obligations under this Agreement;
(c) This Agreement is a legal and valid obligation of such Party,
binding upon such Party and enforceable against such Party in accordance with
the terms of this Agreement. The execution, delivery and performance of this
Agreement by such Party does not conflict with any agreement, instrument or
understanding, oral or written, to which such Party is a party or by which such
Party may be bound, and does not violate any law or regulation of any court,
governmental body or administrative or other agency having authority over such
Party. All consents, approvals and authorizations from all governmental
authorities or other Third Parties required to be obtained by such Party in
connection with this Agreement have been obtained;
[ * ] = 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 EXCHANGE ACT OF 1934, AS
AMENDED.
35.
<PAGE> 37
(d) It has the full right, power and authority to enter into this
Agreement, to perform the Research and to grant the licenses granted under
ARTICLE 3 hereof;
(e) Except as set forth herein, there are no agreements between
such Party and any Third Parties which would preclude or otherwise limit such
Party's ability to conduct its tasks and obligations under the Research Plan or
otherwise fulfill its obligations under this Agreement;
(f) All individuals who will perform any activities on its behalf
in connection with the Research have assigned to it or its Affiliates the whole
of their rights in any intellectual property conceived or reduced to practice by
them as a result of the Research; and
(g) With respect to any Material provided by it to the other
Party, it has the full right to provide such Material and has no reason to
believe that the other Party's use of such Material as contemplated by this
Agreement will infringe the intellectual property rights of any Third Party.
11.4 ADDITIONAL REPRESENTATIONS AND WARRANTIES OF CYTOVIA. Cytovia
represents, warrants and covenants (as the case may be) to Axys that:
(a) As of the Effective Date, Cytovia has not received any
notice, claim or threat of claim by Third Parties alleging that [ * ];
(b) To Cytovia's knowledge, [ * ] the Cytovia Patents and Cytovia
Know-How [ * ]; and
(c) [ * ] the Cytovia Patents existing as of the Effective Date,
and the Cytovia Know-How existing as of the Effective Date, [ * ].
11.5 DISCLAIMER OF WARRANTIES. THE PARTIES EXPRESSLY DISCLAIM ALL
WARRANTIES, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION WARRANTIES OF
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, OR NON-INFRINGEMENT OF THIRD
PARTY RIGHTS, UNLESS OTHERWISE EXPRESSLY PROVIDED IN THIS AGREEMENT.
11.6 FURTHER ACTIONS. Each Party agrees to execute, acknowledge and
deliver 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.
11.7 FORCE MAJEURE. Neither Party will be liable to the other for
failure or delay in the performance of any of its obligations under this
Agreement for the time and to the extent such failure or delay is caused by
earthquake, riot, civil commotion, war, strike, flood, governmental acts or
restrictions or any other reason which is beyond the control of the respective
Party. The Party affected by force majeure will provide the other Party with
full particulars thereof as soon as it becomes aware of the same (including its
best estimate of the likely extent and duration of the interference with its
activities), and will use commercially reasonable efforts to overcome the
difficulties created thereby and to resume performance of its
[ * ] = 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 EXCHANGE ACT OF 1934, AS
AMENDED.
36.
<PAGE> 38
obligations as soon as practicable. If the performance of any obligation under
this Agreement is delayed owing to a force majeure for any continuous period of
more than six (6) months, the Parties hereto will consult with respect to an
equitable solution, including the possibility of the mutual termination of this
Agreement.
11.8 NO TRADEMARK RIGHTS. No right, express or implied, is granted by
this Agreement to a Party to use in any manner the name or any other trade name
or trademark of a Party in connection with the performance of this Agreement.
11.9 ENTIRE AGREEMENT OF THE PARTIES; AMENDMENTS. This Agreement,
Cytovia's March 15, 2000 letter regarding [ * ] and the exhibits and schedules
hereto constitute and contain the entire understanding and agreement of the
Parties respecting the subject matter hereof and cancel and supersede any and
all prior negotiations, correspondence, understandings and agreements between
the Parties, whether oral or written, regarding such subject matter. No waiver,
modification or amendment of any provision of this Agreement will be valid or
effective unless made in writing and signed by a duly authorized officer of each
Party.
11.10 CAPTIONS. The captions to this Agreement are for convenience only,
and are to be of no force or effect in construing or interpreting any of the
provisions of this Agreement
11.11 APPLICABLE LAW. This Agreement will 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.
11.12 DISPUTES. In the event of any controversy or claim arising out of,
relating to or in connection with any provision of this Agreement, including
without limitation the calculations specified in Exhibit A hereto, or the rights
or obligations of the Parties hereunder, the Parties will try to settle their
differences amicably between themselves as contemplated herein. To the extent
not provided for herein, either Party may initiate such informal dispute
resolution by sending written notice of the dispute to the other Party, and
within [ * ] after such notice appropriate representatives of the Parties will
meet for attempted resolution by good faith negotiations. If such
representatives are unable to resolve promptly such disputed matter, it will be
referred to the Chief Executive Officer of Axys and to the Chief Executive
Officer of Cytovia, for discussion and resolution. If such personnel are unable
to resolve such dispute within [ * ] of initiating such negotiations, the
Parties agree first to try in good faith to settle the dispute by mediation
under the Commercial Mediation Rules of the American Arbitration Association,
before resorting to arbitration, litigation or some other dispute resolution
procedure.
11.13 NOTICES AND DELIVERIES. Any notice, request, delivery, approval or
consent required or permitted to be given under this Agreement will be in
writing and will be deemed to have been sufficiently given if delivered in
person, transmitted by telecopier (receipt verified) or by express courier
service (signature required) or five (5) days after it was sent by registered
letter, return receipt requested (or its equivalent), to the Party to which it
is directed at its address or facsimile number shown below or such other address
or facsimile number as such Party will have last given by notice to the other
Parties.
If to Cytovia, addressed to:
[ * ] = 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 EXCHANGE ACT OF 1934, AS
AMENDED.
37.
<PAGE> 39
Cytovia, Inc.
6650 Nancy Ridge Drive
San Diego, CA U.S. 92121
Attn.: Chief Executive Officer
Telecopier: (858) 860-2300
and to
Cooley Godward LLP
4365 Executive Drive, Suite 1100
San Diego, CA 92121-2128
Telephone: (858) 550-6000
Fax: (858) 453-3555
Attn.: Lance Bridges, Esq.
If to Axys, addressed to:
Axys Pharmaceuticals, Inc.
180 Kimball Way
South San Francisco, CA U.S. 94080
Attn.: CEO
Telecopier: (650) 829-1067
with a copy to:
Axys Pharmaceuticals, Inc.
180 Kimball Way
South San Francisco, CA U.S. 94080
Attn.: General Counsel
Telecopier: (650) 829-1067
11.14 NO CONSEQUENTIAL DAMAGES. IN NO EVENT WILL EITHER PARTY OR ANY OF
ITS RESPECTIVE AFFILIATES BE LIABLE TO THE OTHER PARTY OR ANY OF ITS AFFILIATES
FOR SPECIAL, INDIRECT, INCIDENTAL, CONSEQUENTIAL OR PUNITIVE DAMAGES, WHETHER IN
CONTRACT, WARRANTY, TORT, NEGLIGENCE, STRICT LIABILITY OR OTHERWISE, INCLUDING
BUT NOT LIMITED TO, LOSS OF PROFITS OR REVENUE, OR CLAIMS OF CUSTOMERS OF ANY OF
THEM OR OTHER THIRD PARTIES FOR SUCH DAMAGES.
11.15 NON-SOLICITATION. [ * ], neither Party will solicit, induce,
encourage or attempt to induce or encourage any employee of the other Party to
terminate his or her employment with such other Party or to breach any other
obligation to such other Party.
11.16 WAIVER. A waiver by either Party of any of the terms and
conditions of this Agreement in any instance will not be deemed or construed to
be a waiver of such term or condition for the future, or of any subsequent
breach hereof. All rights, remedies, undertakings, obligations and agreements
contained in this Agreement will be cumulative and none of them
[ * ] = 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 EXCHANGE ACT OF 1934, AS
AMENDED.
38.
<PAGE> 40
will be in limitation of any other remedy, right, undertaking, obligation or
agreement of either Party.
11.17 COMPLIANCE WITH LAW. Nothing in this Agreement will be deemed to
permit a Party to export, re-export or otherwise transfer any Licensed Product
or Released Product sold under this Agreement without compliance with applicable
laws.
11.18 SEVERABILITY. When 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 prohibited by or invalid
under applicable law, such provision will be ineffective only to the extent of
such prohibition or invalidity, without invalidating the remainder of this
Agreement. The Parties will make a good faith effort to replace the invalid or
unenforceable provision with a valid one which in its economic effect is most
consistent with the invalid or unenforceable provision,
11.19 COUNTERPARTS. This Agreement may be executed simultaneously in any
number of counterparts, any one of which need not contain the signature of more
than one Party but all such counterparts taken together will constitute one and
the same agreement.
IN WITNESS WHEREOF, the Parties have caused this Agreement to be
executed by their respective duly authorized officers as of the Effective Date,
each copy of which will for all purposes be deemed to be an original.
AXYS PHARMACEUTICALS, INC. CYTOVIA, INC.
By: /s/ William J. Newell By: /s/ Eckard Weber
------------------------------ -----------------------------------
Name: William J. Newell Name: Eckard Weber
---------------------------- ---------------------------------
Title: Senior Vice President Title: President and 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 EXCHANGE ACT OF 1934, AS
AMENDED.
39.
<PAGE> 41
EXHIBIT A
SHARING OF PROFIT OR LOSS
FOR THE AXYS/CYTOVIA COLLABORATIVE AGREEMENT
This Exhibit A to the Collaborative Research and License Agreement (the
"Agreement") dated as of March 15, 2000, between AXYS PHARMACEUTICALS, INC.
("Axys"), and CYTOVIA, INC. ("Cytovia"), addresses the accounting policies and
procedures to be followed in determining Profits or Losses. Terms not defined in
this Exhibit will have the meanings set forth in the Agreement.
FOR PURPOSES OF THIS EXHIBIT ONLY, the accounting for the sales of each
Licensed Product and each Released Product (each, a "Product") by Axys and
Cytovia, respectively, together with certain related costs and expenses, and the
receipt of any applicable royalties and non-royalty payments for such products,
will be referred to as AxysCyt. AxysCyt is not intended to be and is not a legal
entity and has been defined for identification purposes only.
A.1. CALCULATION OF PROFIT OR LOSS.
The Profit or Loss for each Product will be determined on a
product-by-product basis and will be equal to: (i) Sublicense Revenues plus Net
Sales (as defined below), less (ii) Allowable Costs and Expenses (each as
defined below), plus or minus (iii) Net Interest Income of a Party in connection
with the development, manufacturing, marketing or selling of such Product, plus
or minus (iv) Other Non-Operating and Extraordinary Gains (Losses) incurred by a
Party in connection with the development, manufacturing, marketing or selling of
Products, all as more fully described below. All calculations hereunder will be
made using, and all defined and undefined terms will be construed in accordance
with, U.S. generally accepted accounting principles, consistently applied, and
consistent with generally accepted methods for activity-based project costing
for similar products in similar industries. Without limiting the foregoing, no
cost item subject to sharing by the Parties hereunder will be included more than
once in calculating Profit or Loss. The Parties anticipate that the non-selling
Party will not incur expenses which are included in the Profit or Loss
calculation applicable to the selling Party's Product unless the selling Party
and the non-selling Party have agreed that the non-selling Party will incur such
expenses.
A.2. FREQUENCY OF REPORTING.
The fiscal year of AxysCyt will be a twelve (12) month period ending on
December 31 or such portion thereof as will be applicable. AxysCyt's first,
second, third and fourth quarters will end on March 31, June 30, September 30
and December 31, respectively.
Reporting by the selling Party for AxysCyt revenues and expenses will be
performed as follows:
[ * ] = 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 EXCHANGE ACT OF 1934, AS
AMENDED.
A-1
<PAGE> 42
<TABLE>
<CAPTION>
Reporting Event Frequency Timing of Submission
--------------- --------- --------------------
<S> <C> <C>
Actuals Quarterly [ * ] following the end
of each quarter
Adjustment Annual [ * ] following the
selling Party's fiscal
year end*
</TABLE>
In addition, the selling Party will provide the non-selling Party with
the selling Party's internal, unaudited financial statements for AxysCyt for
each of [ * ] promptly after each such financial statement is distributed
internally at the selling Party.
The selling Party will be responsible for the preparation of reports,
calculation of the Profit or Loss with respect to the selling Party's Product to
be shared and determination of the cash settlement between the Parties as set
forth below. The selling Party will provide to the non-selling Party, by the
submission dates shown above, a statement showing the AxysCyt results for the
preceding calendar quarter and year-to-date in the format set forth in Schedule
A-1 hereto, comparing quarterly and year to date results to revenue forecasts
and expense budgets, calculating the Profit or Loss as provided in Section A.1
above and Schedule A-1 hereto, and determining the cash settlement required. To
the extent any year-end adjustments to AxysCyt are determined in good faith by
the selling Party to be appropriate, an appropriate adjustment to Profit or Loss
with respect to the selling Party's Product for the applicable year will be made
and an appropriate payment will be made by the applicable Party within [ * ]
following receipt of the report describing such adjustment; provided, however,
that in the event of a dispute between the Parties with respect to whether any
such adjustment or any other adjustment requested by the non-selling Party is
appropriate, such dispute will be referred to the Chief Executive Officer of the
selling Party and the non-selling Party Designee for resolution pursuant to
Section 11.10 of the Agreement. Any such adjustment payment will be without
interest if such amount is less than the lesser of (a) [ * ] of Profits or
Losses for such year or (b) [ * ] and will bear interest at the rate set forth
in Section 6.10(b) of the Agreement if such amount is greater than or equal to
the lesser of (x) [ * ] of Profits or Losses for such year or (y) [ * ].
A.3. DEFINITIONS.
As a supplement to the definitions provided in Article 1 of the
Agreement, the following accounting terms will be further specified as follows.
As used herein, the term "operating unit" will mean the standard operating unit
in which a profit and loss statement is prepared for management accounting
purposes in the Party's normal accounting procedures, consistently applied
within and across its operating units.
A.3.1 "ALLOCABLE OVERHEAD" means (for any particular cost item) a
Party's internal allocation, based on direct project headcount or other
generally accepted activity-based accounting methods, of indirect overhead costs
incurred by a Party or any of its operating units to support and carry out the
activities of the specific business function, such as development,
manufacturing, and sales and marketing, with respect to a Product, which
indirect costs may include but are not limited to: indirect labor costs;
occupancy costs; repair and maintenance costs; office supplies and service
costs; equipment costs; insurance costs; and outside
[ * ] = 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 EXCHANGE ACT OF 1934, AS
AMENDED.
A-2
<PAGE> 43
professional and other service costs. Such overhead will exclude any indirect
costs associated with any excess or unused capacity not directly related to a
Product. Furthermore, overhead costs of a Party or operating units that are not
engaged in the development, manufacturing, marketing or selling of a Product
will not be recoverable as Allocable Overhead or otherwise, except as provided
herein.
A.3.2 "ALLOWABLE COSTS AND EXPENSES" means those costs and expenses
incurred by the Parties or for their account that are specifically attributable
or related to the research (to the extent consistent with the terms of the
Agreement), development, manufacturing, marketing or selling of a Product, and
consisting of: (i) Cost of Goods Sold, (ii) Development Expenses, (iii) Sales
and Marketing Expenses and (iv) General and Administrative Expenses.
A.3.3 "COST OF GOODS SOLD" means the manufactured cost of a Product
shipped in final therapeutic form, calculated on a fully burdened basis (i.e.,
including Allocable Overhead specifically attributable thereto). The "cost of a
Product shipped in final therapeutic form" will mean the cost of Product shipped
in bulk form plus the cost of final manufacturing. The "cost of a Product
shipped in bulk form" means the standard unit cost of Product in bulk form
calculated in accordance with the customary cost accounting methods,
consistently applied, of the Party performing the work. Standard unit cost
generally consists of direct material, direct labor and Allocable Overhead
specifically attributable to the Product at standard. The cost of final
manufacturing will be calculated in accordance with customary cost accounting
methods, consistently applied, of the Party performing the work. Final
manufacturing costs generally consist of direct material, direct labor and
Allocable Overhead directly attributable to the Product at standard.
Direct material costs will include, but not be limited to, the costs
incurred in purchasing raw materials and finished goods, including (without
limitation) freight, sales and excise taxes imposed thereon and customs duty and
charges levied by government authorities, and all costs of packaging components.
Direct labor will include, but not be limited to, the cost of employees
engaged in direct manufacturing activities who are directly employed in Product
manufacturing and packaging.
Allocable Overhead included in Cost of Goods Sold will include, but not
be limited to, other indirect costs associated with the operating unit(s)
manufacturing a Product. Such Allocable Overhead will include, but not be
limited to, expenses associated with: warehousing of a Product; quality
assurance, manufacturing and engineering associated with the operating unit(s)
manufacturing a Product; and depreciation, repairs and maintenance, insurance
and property taxes associated with the plant(s) manufacturing Products.
Allocable Overhead will not include costs associated with capacity not
incorporated into standard unit costs. Standard unit costs will exclude costs
associated with excess or unused capacity not directly related to Products.
Costs of Goods Sold will also include, but not be limited to, (i)
manufacturing variances and other attributable costs not in standard (but
excluding capacity not incorporated into standard manufacturing unit costs) such
as, but not limited to, material price variances, labor hour variances, material
usage variances, excess and obsolescence, inventory reserves and batches that do
not conform to specification, and (ii) actual Third Party royalty expenses.
[ * ] = 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 EXCHANGE ACT OF 1934, AS
AMENDED.
A-3
<PAGE> 44
Third Party royalty expenses will include, but not be limited to,
royalties or other compensation payable to a Third Party possessing or having a
license under patents and/or other technology rights relating to the
manufacture, sale, use, offer for sale or import of a Product, subject to the
provisions of Section 6.6 of the Agreement.
A.3.4 "DEVELOPMENT EXPENSES" means the expenses incurred by a Party or
for its account that are attributable to the development of a Product,
calculated on a fully burdened basis (i.e., including Allocable Overhead
specifically attributable thereto). Without limiting the generality of the
foregoing, "Development Expenses" will mean amounts paid by a Party to third
parties involved in the development of a Product, and all internal costs
(calculated on a full-time equivalent basis) incurred by a Party in connection
with development of a Product. Development Expenses will include, but are not
limited to, the following costs incurred for the development of a Product: the
costs of modifying and optimizing a prospective Product, including its chemical
structure and formulation, to achieve product development goals regarding
efficacy, safety, dosing and route of administration; the cost of studies on the
toxicological, pharmacokinetic, metabolic or clinical aspects of a prospective
Product conducted internally or by individual investigators or consultants
necessary or desirable for the purpose of obtaining and/or maintaining
Regulatory Approval of a Product; costs (and related fees) for preparing,
submitting, reviewing or developing data or information for the purpose of
submission to a governmental authority to obtain and/or maintain Regulatory
Approval of a Product; and manufacturing process development and scale-up for a
Product in bulk and finished form for purposes of conducting preclinical and
clinical studies necessary to obtain and/or maintain Regulatory Approval of
Products. In addition, Development Expenses include, but are not limited to, the
following development costs incurred by the Parties in support of or for
extension of the applicable Product after the First Commercial Sale: Phase IV
clinical trials; ongoing product development (e.g., new formulations and routes
of administration); ongoing product support; ongoing medical affairs; and fees
and expenses of outside consultants and counsel in respect of regulatory
affairs.
A.3.5 "SALES AND MARKETING EXPENSES" means the costs which are incurred
by a Party or for its account attributable to the distribution, sale, promotion
and marketing of a Product, calculated on a fully burdened basis (i.e.,
including Allocable Overhead specifically attributable thereto). Sales and
Marketing Expenses will mean the sum of Selling Expenses, Marketing Management,
Market and Consumer Research, Advertising, Trade Promotion, Consumer Promotion,
Education Expenses and Freight and Transportation-Out, each of which is
specified below. The costs of activities which promote a Party's business as a
whole without being product specific (such as corporate image advertising) are
specifically excluded from Sales and Marketing Expenses. To the extent multiple
products are involved and some of such products are not a Product, then such
allowances will be allocated on a pro rata basis based upon net sales of each
respective product by such operating unit during the most recent quarter.
(a) "ADVERTISING" will include, but not be limited to, all media
costs associated with Product advertising as follows: production
expense/artwork including set up; design and art work for an
advertisement; the cost of securing print space, air time, etc.
in newspapers, magazines, trade journals, television, radio,
billboards, etc.
[ * ] = 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 EXCHANGE ACT OF 1934, AS
AMENDED.
A-4
<PAGE> 45
"CONSUMER PROMOTION" will include, but not be
limited to, the expenses associated with programs to promote a Product directly
to the prescriber or end user. This category will include, but not be limited
to, expenses associated with promoting products directly to the professional
community such as professional samples, professional literature, promotional
material costs, patient aids and detailing aids. To the extent multiple products
are involved and some of such products are not the applicable Product, then such
allowances will be allocated on a pro rata basis based upon net sales of each
respective product by such operating unit during the most recent quarter.
"EDUCATION" will include, but not be limited to,
expenses associated with professional education with respect to a Product
through any means not covered above, including, but not limited to, articles
appearing in journals, newspapers, magazines or other media; seminars,
scientific exhibits, and conventions; and symposia, advisory boards and opinion
leader development activities.
"FREIGHT AND TRANSPORTATION-OUT" will include (to
the extent not already recovered in the calculation of Net Sales), but not
limited to, the portion of distribution costs relating to moving Product goods
from a warehouse to the customer as follows: outbound transportation costs;
costs of moving goods from a manufacturing point to a warehouse at another
location from which it is ultimately to be distributed to a customer; the costs
of the traffic department where there is a separate department that has
responsibility for administration of freight costs.
"MARKET AND CONSUMER RESEARCH" will include, but
not be limited to, compensation and departmental expenses for market and
consumer research personnel and payments to Third Parties related to conducting
and monitoring professional and consumer appraisals of existing, new or proposed
Products, such as market share services (e.g., IMS data), special research
testing and focus groups.
"MARKETING MANAGEMENT" will include, but not be
limited to, product management and sales promotion management compensation and
departmental expenses. This will include, but not be limited to, costs
associated with developing overall sales and marketing strategies (e.g., product
line or customer segment), as well as planning and programs for Products. In
addition, payments to Third Parties in connection with trademark selection,
filing, prosecution and enforcement will be included in this category.
"SELLING EXPENSES" will include, but not be limited
to, the following costs directly associated with the efforts of field sales
representatives with respect to Products: field sales force; field sales
offices; home offices; staffs directly involved in the management of and the
performance of the selling functions; and payments to Third Parties under
contract sales and marketing agreements. The costs of detailing sales calls will
be allocated on a weighted average basis based on the proportionate time and
effort given to the detailing of Products versus product other than a Product at
an accounting charge rate consistently applied within and across a Party's or a
Third Party's operating units and which is no less favorable than the internal
charge rate used by such Party or such Third Party for its own internal cost
accounting purposes for products other than the Product (excluding internal
profit margins and markups).
[ * ] = 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 EXCHANGE ACT OF 1934, AS
AMENDED.
A-5
<PAGE> 46
"TRADE PROMOTION" will include, but not be limited
to, the allowances given to retailers, brokers, distributors, hospital buying
groups, etc. for purchasing, promoting, and distribution of Products. This will
include, but not be limited to, purchasing, advertising, new distribution, and
display allowances as well as free goods, wholesale allowances and reasonable
field sales samples.
A.3.6 "GENERAL AND ADMINISTRATIVE EXPENSES means a Party's customary
allocation, based on direct project headcount or other generally accepted
activity-based accounting methods, of the costs of the following corporate
general and administrative functions of such Party or any of its operating units
incurred to support or facilitate the development, manufacturing, marketing or
selling of Products: finance and accounting; purchasing and receiving;
management information systems; facilities; human resources; executive
management; and legal, patent and trademark. Such costs include, but not limited
to, the costs of employees performing such functions, the direct costs of
supporting such individuals in the performance of their jobs (e.g., travel,
floor space, computers and other supplies and telephones) and the actual cost of
outside services (e.g., consulting and audit services). In view of the manner in
which General and Administrative Expenses are calculated, administration
expenses will be excluded from the definition of each of the other cost items
that make up Allowable Costs and Expenses.
Notwithstanding any other provision of this Agreement, commencing as of
the [ * ] of a Product, total General and Administrative Expenses will not
exceed [ * ] of Net Sales of such Product in any quarter, except as otherwise
agreed in writing by the Parties.
A.3.7 "NET INTEREST INCOME" means interest income less interest expense
and adjusted for realized gains and losses from the sale of investments.
A.3.8 For purposes of calculating Profit or Loss only, "NET SALES" will
have the meaning ascribed to it in Section 1.29 of the Agreement.
A.3.9 "OTHER NON-OPERATING AND EXTRAORDINARY GAINS (LOSSES)" means gains
or losses incurred either from secondary or auxiliary activities of AxysCyt,
outside the ordinary and primary course of business, or unusual and infrequent
gains and losses of material amounts.
A.3.10 "PROFIT OR LOSS" will have the meaning ascribed to it in Section
A.1 above.
A.3.11 "SUBLICENSE REVENUES" means the amounts received by the selling
Party or its Affiliates described in Section 5.3(e) of the Agreement.
A.4. FOREIGN EXCHANGE
The functional currency for accounting for Profit or Loss will be U.S.
Dollars.
The statement of Profit or Loss will be translated into U.S. Dollars
using, for each currency, the arithmetic average of the daily exchange rates
(obtained as described below) during the reporting period; each daily exchange
rate will be obtained from the Reuters Daily Rate Report or The Wall Street
Journal, Eastern U.S. Edition, or, if not so available, as otherwise agreed to
by the Parties.
[ * ] = 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 EXCHANGE ACT OF 1934, AS
AMENDED.
A-6
<PAGE> 47
A.5. Reporting of the non-selling Party Costs
To the extent that, at the selling Party's written request, the
non-selling Party or a Third Party with whom the non-selling Party has
contracted incurs Allowable Costs and Expenses with respect to the selling
Party's Product, the non-selling Party will promptly provide the selling Party
with a reasonably detailed written invoice for such Allowable Costs and
Expenses, and such Allowable Costs and Expenses will be accounted for in the
fiscal quarter in which such invoice is received by the selling Party.
A.6. Audits
A.6.1 The non-selling Party will have the right to request that an
independent public accounting firm perform an audit of the selling Party's books
of accounts for the sole purpose of verifying compliance with this Exhibit A by
the selling Party. Such audits will be conducted at the expense of the
non-selling Party; provided, however, that if the audit results in an adjustment
in favor of the non-selling Party exceeding the lesser of (i) [ * ] of Losses or
Profits or (ii) [ * ] in any quarter, the reasonable cost of the audit will be
borne by the selling Party. Any disputes with regard to the foregoing will be
resolved in accordance with Section 11.10 of the Agreement. Audit results will
be shared with both Parties. Audits are limited to the same time periods as
provided in Section 6.10(a) of the Agreement.
A.6.2 The selling Party will have the right to request that an
independent public accounting firm perform an audit of the non-selling Party's
books of accounts for the sole purpose of verifying invoices for the non-selling
Party's Allowable Costs and Expenses submitted to the selling Party hereunder.
Such audits will be conducted at the expense of the selling Party; provided,
however, that if the audit results in an adjustment of greater than [ * ] of the
non-selling Party's Allowable Costs and Expenses in any period, the reasonable
cost of the audit will be borne by the non-selling Party. Audit results will be
shared with both Parties. Audits are limited to the same time periods as
provided in Section 6.10(a) of the Agreement.
A.7. PAYMENTS BETWEEN THE PARTIES
Balancing payments between the Parties will be made as necessary based
on Profit or Loss, adjusted for non-cash items other than those provided for in
Section A.10 below, including reasonable working capital allocations that
reflect differences between recognized cash flows and recognized revenues with
respect to a Product. Payments will be made quarterly, within [ * ] following
the end of each quarter (or, with respect to the non-selling Party, if later, [
* ] following receipt of the applicable report from the selling Party), based on
actual results within the time periods set forth in Section A.2 above subject to
adjustment as provided for herein.
A.8. SHARING OF PROFITS AND LOSSES
As provided in the Agreement, the Parties share equally (50%/50%) the
Profit or Loss for each quarterly period.
A.9. START OF OPERATIONS
[ * ] = 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 EXCHANGE ACT OF 1934, AS
AMENDED.
A-7
<PAGE> 48
Operation of AxysCyt will be deemed to have commenced on the date the
non-selling Party gives timely written notice to the selling Party that it has
exercised the Option pursuant to Section 5.3 of the Agreement.
A.10. CAPITAL INVESTMENTS BY THE SELLING PARTY
Notwithstanding anything to the contrary in the Agreement or herein, all
capital investments required to be made in connection with a Product (such as a
capital investment in a manufacturing facility) are to be borne by the selling
Party initially and recouped through an appropriate depreciation charge to
AxysCyt.
[ * ] = 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 EXCHANGE ACT OF 1934, AS
AMENDED.
A-8
<PAGE> 49
EXHIBIT B
RESEARCH PLAN
[ * ] = 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 EXCHANGE ACT OF 1934, AS
AMENDED.
B-1
<PAGE> 50
EXHIBIT C
NON-PCT MEMBER COUNTRIES
The non-PCT countries in which foreign patent applications may be filed
pursuant to Section 7.3(b) are set forth below.
CLASS A CLASS B CLASS C
[*] [ * ] [ * ]
[ * ] [ * ] [ * ]
[ * ] [ * ]
[ * ] [ * ]
[ * ] [ * ]
[ * ]
[ * ]
[ * ] will decide from time to time which of Class A, Class B or Class C
is the most appropriate with respect to a particular patent, which decision will
be memorialized in [ * ].
[ * ] = 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 EXCHANGE ACT OF 1934, AS
AMENDED.
C-1
<PAGE> 51
SCHEDULE D
STOCK PURCHASE 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 EXCHANGE ACT OF 1934, AS
AMENDED.
A-2
<PAGE> 52
CYTOVIA, INC.
SERIES C PREFERRED STOCK PURCHASE AGREEMENT
MARCH 16, 2000
[ * ] = 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 EXCHANGE ACT OF 1934, AS
AMENDED.
2.
<PAGE> 53
CYTOVIA, INC.
SERIES C PREFERRED STOCK PURCHASE AGREEMENT
THIS SERIES C PREFERRED STOCK PURCHASE AGREEMENT (this "Agreement") is
entered into as of March 16, 2000, by and among CYTOVIA, INC., a Delaware
corporation (the "Company") and AXYS PHARMACEUTICALS, INC., a Delaware
corporation (the "Purchaser").
RECITALS
WHEREAS, the Company has authorized the sale and issuance of 186,336
shares of its Series C Preferred Stock (the "Shares"); and
WHEREAS, in connection with that certain Collaboration Agreement dated
as of March 16, 2000, between the Company and the Purchaser (the "Collaboration
Agreement"), the Purchaser desires to purchase the Shares on the terms and
conditions set forth herein, and the Company desires to issue and sell the
Shares to the Purchaser 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. Prior to the Closing (as defined in Section 2
below), the Company shall have (i) authorized the sale and issuance to
the Purchaser of the Shares and (ii) reserved for issuance shares of
Common Stock to be issued 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 Certificate of Incorporation of the Company, in the form
attached hereto as Exhibit A (the "Restated Charter").
1.2.SALE AND PURCHASE. Subject to the terms and conditions hereof, at the
Closing the Company hereby agrees to issue and sell to the Purchaser,
and the Purchaser agrees to purchase from the Company, an aggregate of
186,336 Shares at a purchase price of $8.05 per share, for the aggregate
purchase price of $1,500,004.80.
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 p.m. on the date hereof,
at the offices of Cooley Godward LLP, 4365 Executive Drive, Suite 1100,
San Diego, CA 92121-2128. The date of the Closing shall hereinafter be
referred to as the Closing Date.
2.2.DELIVERY. At the Closing, subject to the terms and conditions hereof,
the Company will deliver to the Purchaser a certificate representing the
number of Shares to be purchased
1.
<PAGE> 54
at the Closing, against payment of the purchase price therefor by check
or wire transfer to the Company's bank account.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
Except as set forth in the Schedule of Exceptions attached as Exhibit B,
the Company hereby represents and warrants to the Purchaser as of the date of
this Agreement as follows:
3.1.ORGANIZATION, GOOD STANDING AND QUALIFICATION. The Company is a
corporation duly organized and validly existing under, and by virtue of,
the laws of the State of Delaware and is in good standing under such
laws. The Company has all requisite corporate power to own and operate
its assets and to carry on its business as presently conducted and as
proposed to be conducted. The Company is qualified to do business as a
foreign corporation in each jurisdiction in which the failure to so
qualify would have a material adverse effect on the Company or its
business as presently conducted or as proposed to be conducted.
3.2.CORPORATE POWER. The Company has all requisite legal and corporate power
to execute and deliver this Agreement, to sell and issue the Shares
under this Agreement, to issue the Common Stock issuable upon conversion
of the Shares and to carry out and perform its obligations under the
terms of this Agreement, including all exhibits and schedules hereto.
3.3.SUBSIDIARIES. The Company does not own or control, directly or
indirectly, any other corporation, association or business entity.
3.4.CAPITALIZATION. The authorized capital stock of the Company consists of
10,000,000 shares of Common Stock, par value $.001 per share, and
2,243,520 shares of Preferred Stock, par value $.001 per share, of which
1,084,860 shares are designated Series A Preferred Stock, 450,000 shares
are designated Series A-1 Preferred Stock, 150,000 shares are designated
Series B Preferred Stock, 558,660 are designated Series A-2 Preferred
Stock and 186,336 shares are designated Series C Preferred Stock. Upon
the Closing (excluding any Shares issued in the Closing), the Company
will have issued and outstanding 376,290 shares of Common Stock,
1,084,860 shares of Series A Preferred Stock, 450,000 shares of Series
A-1 Preferred Stock, 124,301 shares of Series B Preferred Stock, 558,660
shares of Series A-2 Preferred Stock and no shares of Series C Preferred
Stock. All of such issued and outstanding shares (i) have been duly
authorized and are validly issued, (ii) are fully-paid and
non-assessable, and (iii) were issued in compliance with all applicable
state and federal securities laws. The Company has reserved the
following shares of its stock for issuance from time to time as may be
determined by the Company's Board of Directors (collectively, the
"Reserved Shares"): (i) 457,688 shares of the Company's Common Stock
which may be issued to certain employees, directors and consultants of
the Company pursuant to the Company's 1998 Equity Incentive Plan (the
"1998 Plan"); (ii) 4,972 shares of Series B Preferred Stock issuable
upon exercise of outstanding warrants of the Company; (iii) 9,944 shares
of Series B Preferred Stock issuable upon the exercise of outstanding
warrants; and (iv) shares of Common Stock issuable upon conversion of
Company Preferred Stock. The
[ * ] = 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 EXCHANGE ACT OF 1934, AS
AMENDED.
2.
<PAGE> 55
Shares, upon issuance, shall have the rights, preferences and privileges
set forth in the Restated Charter. The Shares, and the shares of Common
Stock issuable upon conversion of the Shares (the "Conversion Shares")
have been duly and validly reserved for issuance. Except for the Shares,
the Founders' Shares, the Conversion Shares and the Reserved Shares, and
except for any rights created by the Investor Rights Agreement dated as
of March 27, 1998, as amended (the "Investor Rights Agreement"), there
are no preemptive rights or any options, warrants, conversion privileges
or other rights presently outstanding to purchase or otherwise acquire
any authorized but unissued shares of the Company's capital stock or
other securities of the Company. When issued in compliance with the
provisions of this Agreement and the Restated Charter, as the case may
be, the Shares and the Conversion Shares will be duly authorized,
validly issued, fully paid and nonassessable, and will be free of any
liens or encumbrances (other than any liens and encumbrances which may
be created by the Purchasers); provided, however, that the Shares and
the Conversion Shares may be subject to restrictions on transfer under
state and federal securities laws. The Reserved Shares, when issued
pursuant to the 1998 Plan or the terms of the corresponding option or
other award agreement, will be duly authorized, validly issued, fully
paid and nonassessable and will be free of any liens or encumbrances
(other than any liens and encumbrances which may be created by the
issuees thereof).
3.5.AUTHORIZATION; BINDING OBLIGATIONS. All corporate action on the part of
the Company, its directors and stockholders necessary for the
authorization, execution, delivery and performance of this Agreement by
the Company, the authorization, sale, issuance and delivery of the
Shares and the performance of the Company's obligations under this
Agreement has been taken or will be taken prior to the Closing. This
Agreement, when executed and delivered by the Company, will constitute a
valid and binding obligation of the Company enforceable in accordance
with its terms, subject to laws of general application relating to
bankruptcy, insolvency, the relief of debtors, general equity
principles, and limitations upon rights to indemnity.
3.6.GOVERNMENTAL CONSENT, ETC. No consent, approval or authorization of or
designation, declaration or filing with any governmental authority on
the part of the Company is required in connection with the valid
execution and delivery of this Agreement, or the offer, sale or issuance
of the Shares (and the Common Stock issuable upon conversion of the
Shares) or the consummation of any other transaction contemplated
hereby, except (a) qualification (or taking such action as may be
necessary to secure an exemption from qualification, if available) of
the offer and sale of the Shares under the California Corporate
Securities Law and any other applicable blue sky laws, which filing and
qualification, if required, will be accomplished in a timely manner
prior to or promptly upon completion of the Closing and (b) such filings
as may be determined by counsel to the Company to be necessary to secure
an exemption from registration under the Securities Act of 1933, as
amended (the "Securities Act"), which filing, if required, will be
accomplished in a timely manner prior to or promptly upon completion of
the Closing.
3.7.PATENTS, TRADEMARKS, AND TRADE SECRETS. There is no pending or, to the
Company's knowledge, threatened claims against the Company alleging that
the conduct of the
[ * ] = 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 EXCHANGE ACT OF 1934, AS
AMENDED.
3.
<PAGE> 56
Company's business infringes or conflicts with the rights of others
under patents, service marks, trade names, trademarks, copyrights, trade
secrets or other proprietary rights. To the Company's knowledge: (i) the
Company's business as now conducted and as proposed to be conducted will
not infringe or conflict with the rights of others, including rights
under patents, service marks, trade names, trademarks, copyrights, trade
secrets and other proprietary rights, and (ii) the Company owns or
possesses sufficient legal rights to all the patents, copyrights,
trademarks, trade names, service marks, trade secrets and other rights
necessary for the operation of its business as now conducted and as
proposed to be conducted. Schedule 3.7 hereto lists all material
licenses and other agreements with third parties which give such parties
rights in and to the Company's products and developments. Except as set
forth in Schedule 3.7, the Company is not bound by or a party to any
material options, licenses or agreements of any kind with respect to the
patents, trademarks, service marks, tradenames, copyrights, trade
secrets, licenses, proprietary rights or processes of any other person
or entity. No employee or consultant of the Company owns any rights in
patents, trademarks, trade names, processes, data or know-how directly
or indirectly competitive with those owned or to be used by the Company
or derived from or in connection with the conduct of the Company's
business. The Company is not aware of any violation or infringement by a
third party of any of the Company's patents, licenses, trademarks,
service marks, trade names, copyrights, trade secrets or other
proprietary rights. The Company has taken reasonable security measures
to protect the secrecy, confidentiality and value of all trade secrets
useful in the conduct of its business.
3.8.COMPLIANCE WITH LAWS AND OTHER INSTRUMENTS, NONE BURDENSOME, ETC.
Schedule 3.8 lists all notes, indentures, leases, purchase orders,
instruments or contracts material to the business of the Company as
presently conducted or as proposed to be conducted to which the Company
is a party or by which it or any of its property is bound (collectively
referred to as "Contracts"). The business and operations of the Company
have been conducted in accordance with all applicable rules,
regulations, orders, statutes, injunctions, decrees, writs, judgments,
determinations and awards of all courts and government agencies and
instrumentalities. The Company is not in violation of any term of the
Restated Charter or its Bylaws, or of any material term contained in any
Contract, and is not in violation of any order, injunction, decree,
judgment of any court or governmental body, or any statute, rule or
regulation applicable to the Company. No event or failure of performance
has occurred which, with the passage of time or the giving of notice or
both, would constitute such a violation. Neither the execution, delivery
and performance of this Agreement, nor the issuance of the Shares or the
Conversion Shares, will result in any such violation or be in conflict
with or constitute a default under any such order, judgment, statute,
rule or regulation, or result in the creation of any mortgage, pledge,
security interest, lien, encumbrance or charge upon any of the
properties or assets of the Company; and there is no such violation or
default which materially and adversely affects the business of the
Company as presently conducted or as proposed to be conducted or any of
its properties or assets. To the Company's knowledge, no other party is
in default of any such Contract. To the Company's knowledge, all
Contracts to which the Company is a party are valid and binding and in
full force and effect. The Company has not been notified by any party
[ * ] = 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 EXCHANGE ACT OF 1934, AS
AMENDED.
4.
<PAGE> 57
thereto of any such party's intention or desire to terminate or modify
in any material respect any of such Contracts, or of any claim or threat
that the Company has breached any of such Contracts.
3.9.LITIGATION, ETC. Except as disclosed in Part 3.9 of the Schedule of
Exceptions, there is no action, suit, proceeding or investigation
pending or, to the Company's knowledge, threatened against the Company,
nor, to its knowledge, is there any reasonable basis therefor. The
Company is not a party or subject to the provisions of any order, writ,
injunction, judgment or decree of any court or governmental body, agency
or instrumentality. Except as disclosed in Part 3.9 of the Schedule of
Exceptions, no action, suit, proceeding or investigation is pending or
threatened by the Company.
3.10. REGISTRATION RIGHTS. Except as set forth in the Investor Rights
Agreement, the Company is not under any obligation to register (as
defined in Section 1.1 of the Investor Rights Agreement) any of its
presently outstanding securities or any of its securities which may
hereafter be issued and has not granted any registration rights to any
person or entity.
3.11. PROPRIETARY INFORMATION AND INVENTIONS AGREEMENTS. Each employee,
officer and consultant of the Company has executed a Proprietary
Information and Inventions Agreement in the form of Exhibit C attached
hereto. No current employee, officer or consultant of the Company has
excluded works or inventions made prior to his or her employment with
the Company from his or her assignment of inventions pursuant to such
employee, officer or consultant's Proprietary Information and Inventions
Agreement.
3.12. NO DEFAULTS. The Company has, in all respects, performed all material
obligations required to be performed by it to date and is not in default
under any of the contracts, loans, notes, mortgages, indentures,
licenses, security agreements, agreements, leases, documents,
commitments or other arrangements to which it is a party or by which it
is otherwise bound, except for such defaults which in the aggregate
would not have a material adverse effect on the Company or its business
as presently conducted or as proposed to be conducted, and no event or
condition has occurred which, with the lapse of time or the giving of
notice, or both, would constitute such a default.
3.13. EMPLOYEES.
(a) The Company has no employment contract with any officer or employee or
any other consultant or person which is not terminable by it at will
without liability, except as the Company's right to terminate its
employees at will may be limited by applicable state law. To the
Company's knowledge, none of the directors, officers, consultants or
employees of the Company are bound by any noncompetition, employment,
proprietary information or other agreement which would in any manner
interfere with or affect such person's ability to provide the services
which such person is contractually or otherwise obligated to provide to
the Company. To the Company's knowledge, the services provided by
directors, officers, consultants and employees of the Company do not
violate any noncompetition, employment, proprietary information or other
agreement to which
[ * ] = 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 EXCHANGE ACT OF 1934, AS
AMENDED.
5.
<PAGE> 58
any such persons are bound. There are no controversies or labor trouble
or union organization activities pending or, to the knowledge of the
Company, threatened, between it and its employees. None of the Company's
employees belongs to any union or collective bargaining unit.
(b) Eckard Weber is not bound by any noncompetition, employment, proprietary
information or other agreement which would in any manner interfere with
or affect his ability to provide services as an officer or employee of
the Company and his services with the Company do not violate any such
agreements.
3.14. VOTING AND OTHER AGREEMENTS. Except as set forth in (i) the Amended
and Restated Voting Agreement dated as of May 18, 1999, (ii) the
Investor Rights Agreement, and (iii) the Restated Charter, the Company
has no agreement, obligation or commitment with respect to the election
of any individual or individuals to the Board of Directors or the
voting, acquisition or disposition of shares of its capital stock, and
to the Company's knowledge, there is no voting agreement or other
arrangement among its stockholders with respect to the election of any
individual or individuals to the Board of Directors or the voting,
acquisition or disposition of shares of its capital stock.
3.15. RELATED-PARTY TRANSACTIONS. No employee, officer, or director of the
Company or member of his or her immediate family is indebted to the
Company, nor is the Company indebted (or committed to make loans or
extend or guarantee credit) to any of them. To the Company's knowledge,
none of such persons has any direct or indirect ownership interest in
any firm or corporation with which the Company is affiliated or with
which the Company has a business relationship, or any firm or
corporation that competes with the Company, except that employees,
officers, or directors of the Company, and members of their immediate
families may own stock in publicly traded companies that may compete
with the Company. No officer or director or any member of their
immediate families is, directly or indirectly, interested in any
material contract with the Company. There are no obligations of the
Company to officers, directors, shareholders, or employees of the
Company other than (i) for payment of salary for services rendered, (ii)
reimbursement for reasonable expenses incurred on behalf of the Company
and (iii) for other standard employee benefits made generally available
to all employees (including stock option agreements outstanding under
any stock option plan approved by the Board of Directors of the
Company).
3.16. SECURITIES LAW COMPLIANCE. All of (i) the Shares, upon issuance
pursuant to the terms of this Agreement, (ii) the Conversion Shares,
upon conversion pursuant to the Restated Charter and assuming that the
applicable laws as of the date hereof are the applicable laws on the
date of conversion, and (iii) the Founders' Shares, upon issuance at the
Closing, will be issued in compliance with all federal and state
securities laws (except for the filing pursuant to Section 25102(f) of
the California Corporate Securities Law of 1968, as amended, and the
rules thereunder and the filing of a Form D pursuant to SEC Regulation
D). Neither the Company nor any person or entity acting on its behalf
has offered or sold any of the Shares or any shares of Common Stock or
other securities of the Company by any form of general solicitation or
general advertising, including, but not limited to, any advertisement,
article, notice or other communication
[ * ] = 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 EXCHANGE ACT OF 1934, AS
AMENDED.
6.
<PAGE> 59
published in any newspaper, magazine or similar media, or any seminar or
meeting whose attendees have been invited by any general solicitation or
general advertising.
3.17. OFFERING VALID. Subject in part to the accuracy of the representations
set forth in Section 4 hereof, the offer, sale and issuance of the
Shares pursuant to this Agreement and the issuance of the Common Stock
to be issued upon conversion of the Shares (i) constitute transactions
exempt from the registration requirements of Section 5 of the Securities
Act and (ii) are in compliance with all applicable state securities
laws.
3.18. MINUTE BOOKS. The minute books of the Company provided to the
Purchaser contain a complete summary of all meetings of directors and
stockholders since the time of incorporation.
3.19. REAL PROPERTY HOLDING CORPORATION. The Company is not a real property
holding corporation within the meaning of Section 897(c)(2) of the
Internal Revenue Code of 1986, as amended (the "Code"), and any
regulations promulgated thereunder.
3.20. INVESTMENT COMPANY ACT. The Company is not an "investment company", or
a company "controlled" by an "investment company", within the meaning of
the Investment Company Act of 1940, as amended.
3.21. BROKERS OR FINDERS. The Company has not incurred, and will not incur,
any liability for brokerage or finders' fees or agents' commissions or
any similar charges in connection with this Agreement.
3.22. DISCLOSURE. The Company has provided each Purchaser with the
information that such Purchaser has requested for deciding whether to
purchase the Series C Preferred Stock and all information that the
Company believes is reasonably necessary to enable such Purchaser to
make such decision. This Agreement does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make
the statements herein not misleading.
3.23. ENVIRONMENTAL AND SAFETY LAWS. To its knowledge, the Company is not in
violation of any applicable statute, law or regulation relating to the
environment or occupational health and safety, and to its knowledge, no
material expenditures are or will be required in order to comply with
any such existing statute, law or regulation.
3.24. PERMITS. The Company has all franchises, permits, licenses, and any
similar authority necessary for the conduct of its business as now being
conducted by it, the lack of which could materially and adversely affect
the business, properties, prospects or financial condition of the
Company.
4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.
The Purchaser hereby represents and warrants to the Company as follows
(such representations and warranties do not lessen or obviate the
representations and warranties of the Company set forth in this 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 EXCHANGE ACT OF 1934, AS
AMENDED.
7.
<PAGE> 60
4.1.REQUISITE POWER AND AUTHORITY. The 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 actions on the
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 the Purchaser, enforceable against the Purchaser
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, (b)
general principles of equity that restrict the availability of equitable
remedies, and (c) to the extent that the enforceability of any
indemnification provisions herein may be limited by applicable laws.
4.2.INVESTMENT REPRESENTATIONS. The Purchaser understands that neither the
Shares nor the Conversion Shares have been registered under the
Securities Act. The Purchaser also understands that the Shares are being
offered and sold pursuant to an exemption from registration contained in
the Securities Act based in part upon the Purchaser's representations
contained in this Agreement. The Purchaser hereby represents and
warrants as follows:
(a) PURCHASER BEARS ECONOMIC RISK. The 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. The Purchaser must bear the
economic risk of this investment indefinitely unless the Shares (or the
Conversion Shares) are registered pursuant to the Securities Act, or an
exemption from registration is available. The Purchaser understands that
the Company has no present intention of registering the Shares, the
Conversion Shares or any shares of its Common Stock. The 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 the Purchaser to transfer all
or any portion of the Shares or the Conversion Shares under the
circumstances, in the amounts or at the times the Purchaser might
propose.
(b) ACQUISITION FOR OWN ACCOUNT. The Purchaser is acquiring the Shares and
the Conversion Shares for the Purchaser's own account for investment
only, and not with a view towards their distribution.
(c) PURCHASER CAN PROTECT ITS INTEREST. The Purchaser represents that by
reason of its, or of its management's, business or financial experience,
the Purchaser has the capacity to protect its own interests in
connection with the transactions contemplated in this Agreement.
Further, the Purchaser is aware of no publication of any form of general
advertising in connection with the transactions contemplated in this
Agreement.
(d) ACCREDITED INVESTOR. The Purchaser represents that it is an accredited
investor within the meaning of Regulation D under the Securities Act.
[ * ] = 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 EXCHANGE ACT OF 1934, AS
AMENDED.
8.
<PAGE> 61
(e) COMPANY INFORMATION. The Purchaser has had an opportunity to discuss the
Company's business, management and financial affairs with directors,
officers and management of the Company and has had the opportunity to
review the Company's operations and facilities. The 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. The Purchaser acknowledges and agrees that the Shares, and, if
issued, the Conversion Shares must be held indefinitely unless they are
subsequently registered under the Securities Act or an exemption from
such registration is available. The 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.
(g) RESIDENCE. The office or offices of the Purchaser in which its
investment decision was made is located at the address or addresses of
the Purchaser set forth on the signature page hereto.
5. CONDITIONS TO CLOSING.
5.1.CONDITIONS TO PURCHASER'S OBLIGATIONS AT THE CLOSING. The Purchaser's
obligation to purchase the Shares at the Closing is subject to the
satisfaction at or prior to the Closing Date of the following
conditions:
(a) REPRESENTATIONS AND WARRANTIES TRUE; PERFORMANCE OF OBLIGATIONS. The
representations and warranties made by the Company in Section 3 hereof
shall be true and correct at the date of the Closing with the same force
and effect as if they had been made on and as of such 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 shall be legally permitted by all laws and regulations to which
the Purchaser and the Company are subject.
(c) CONSENTS, PERMITS, AND WAIVERS. The Company shall have obtained any and
all consents, permits and waivers necessary or appropriate for
consummation of the transactions contemplated by this Agreement (except
for such as may be properly obtained subsequent to the Closing).
(d) FILING OF RESTATED CHARTER. The Restated Charter shall have been
accepted for filing by the Secretary of State of the State of Delaware.
[ * ] = 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 EXCHANGE ACT OF 1934, AS
AMENDED.
9.
<PAGE> 62
(e) CORPORATE DOCUMENTS. The Company shall have delivered to the Purchaser
or its counsel, copies of all corporate documents of the Company as the
Purchaser shall reasonably request.
(f) RESERVATION OF CONVERSION SHARES. The Conversion Shares issuable upon
conversion of the Shares as set forth in the Restated Charter shall have
been duly authorized and reserved for issuance upon such conversion.
(g) COMPLIANCE CERTIFICATE. The Company shall have delivered to the
Purchaser a Compliance Certificate, executed by the President of the
Company, dated the Closing Date, to the effect that the conditions
specified in subsections (a), (c) and (f) of this Section 5.1 have been
satisfied.
(h) 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
special counsel, and the Purchaser and their special counsel shall have
received all such counterpart originals or certified or other copies of
such documents as they may reasonably request.
5.2.CONDITIONS TO OBLIGATIONS OF THE COMPANY. The Company's obligation to
issue and sell the Shares at each Closing is subject to the
satisfaction, on or prior to such Closing, of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES TRUE. The representations and warranties
made by the Purchaser in Section 4 hereof shall be true and correct 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. The Purchaser shall have performed and
complied with all agreements and conditions herein required to be
performed or complied with by the Purchaser on or before the Closing.
(c) FILING OF RESTATED CHARTER. The Restated Charter shall have been
accepted for filing by the Secretary of State of the State of Delaware.
(d) CONSENTS, PERMITS, AND WAIVERS. The Company shall have obtained any and
all consents, permits and waivers necessary or appropriate for
consummation of the transactions contemplated by this Agreement (except
for such as may be properly obtained subsequent to the Closing).
(e) 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 Company and its
legal counsel, and the Company and its legal counsel shall have received
all such counterpart originals or certified or other copies of such
documents as they may reasonably request.
[ * ] = 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 EXCHANGE ACT OF 1934, AS
AMENDED.
10.
<PAGE> 63
6. MISCELLANEOUS.
6.1.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.
6.2.SURVIVAL. The representations, warranties, covenants and agreements made
herein shall survive any investigation made by the 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 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.
6.3.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 the Shares from time to time.
6.4.ENTIRE AGREEMENT. This Agreement, and the Exhibits and Schedules hereto,
and the other documents delivered pursuant hereto constitute the full
and entire understanding and agreement between the parties with regard
to the subjects 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.
6.5.SEVERABILITY. In case any provision of this 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.
6.6.AMENDMENT AND WAIVER.
(a) This Agreement may be amended or modified only upon the written consent
of the Company and the Purchaser.
(b) The obligations of the Company and the rights of the Purchaser under
this Agreement may be waived only with the written consent of the
Purchaser.
6.7. 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 Charter, 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. It is further
agreed that any waiver, permit, consent or approval of any kind or
character on the Purchaser's part of any breach, default or
noncompliance under this Agreement or under the Restated Charter or any
waiver on such party's part of any provisions or conditions of this
Agreement or the Restated Charter must be in writing and shall be
effective only to the extent specifically set forth
[ * ] = 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 EXCHANGE ACT OF 1934, AS
AMENDED.
11.
<PAGE> 64
in such writing. All remedies, either under this Agreement, the Restated
Charter, by law, or otherwise afforded to any party, shall be cumulative
and not alternative.
6.8.WAIVER OF CONFLICTS. Each party to this Agreement acknowledges that
Cooley Godward LLP ("Cooley Godward"), has in the past and may continue
in the future to perform legal services for each of the parties or their
affiliates in matters unrelated to the transactions contemplated by this
Agreement, including, but not limited to, matters of a similar nature to
the transactions contemplated herein. Both parties to this Agreement
hereby (a) acknowledge that they have had an opportunity to ask for and
have obtained information relevant to such representation by Cooley
Godward, including disclosure of the reasonably foreseeable adverse
consequences of such representation; (b) acknowledge that with respect
to the transactions contemplated herein, Cooley Godward has represented
the Company; and (c) give their informed consent to Cooley Godward's
representation of the Company in the transactions contemplated by this
Agreement and Cooley Godward's representation of each party or its
affiliates in matters unrelated to such transactions.
6.9.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 (i) to the Company at 6650
Nancy Ridge Drive, San Diego, CA 92121, (ii) to the Purchaser at the
address set forth on the signature page attached hereto, or (iii) to any
party hereto at such other address as such party may designate by ten
(10) days advance written notice to the other parties hereto.
6.10. EXPENSES. Each party shall pay all costs and expenses that it incurs
with respect to the negotiation, execution, delivery and performance of
this Agreement.
6.11. 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.
6.12. 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.
6.13. BROKER'S FEES. Both parties hereto represent and warrant that no
agent, broker, investment banker, person or firm acting on behalf of or
under the authority of such party hereto is or will be entitled to any
broker's or finder's fee or any other commission directly or indirectly
in connection with the transactions contemplated herein. Both parties
hereto further agree to indemnify each other for any claims, losses or
expenses incurred by the other as a result of the representation in this
Section 6.13 being untrue.
[ * ] = 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 EXCHANGE ACT OF 1934, AS
AMENDED.
12.
<PAGE> 65
6.14. PRONOUNS. All pronouns contained herein, and any variations thereof,
shall be deemed to refer to the masculine, feminine or neutral, singular
or plural, as to the identity of the parties hereto may require.
IN WITNESS WHEREOF, the parties hereto have executed this SERIES C
PREFERRED STOCK PURCHASE AGREEMENT as of the date set forth in the first
paragraph hereof.
COMPANY: PURCHASER:
CYTOVIA, INC. AXYS PHARMACEUTICALS, INC.
By: /s/ E. Weber By: /s/ William J. Newell
---------------------------- ---------------------------------
Title: President and CEO Title: Senior Vice President
------------------------- ------------------------------
Address: 6650 Nancy Ridge Dr. Address: 180 Kimball Way,
----------------------- ----------------------------
San Diego, CA 9212 S. San Francisco, CA 94080
[ * ] = 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 EXCHANGE ACT OF 1934, AS
AMENDED.
13.
<PAGE> 66
LIST OF EXHIBITS
Restated Charter Exhibit A
Schedule of Exceptions Exhibit B
Form of Proprietary Information and Inventions Agreement Exhibit C
[ * ] = 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 EXCHANGE ACT OF 1934, AS
AMENDED.
<PAGE> 67
EXHIBIT A
RESTATED CHARTER
[ * ] = 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 EXCHANGE ACT OF 1934, AS
AMENDED.
<PAGE> 68
STATE OF DELAWARE
OFFICE OF THE SECRETARY OF STATE
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO
HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE RESTATED
CERTIFICATE OF "CYTOVIA, INC.", FILED IN THIS OFFICE ON THE TWENTY-SECOND DAY OF
DECEMBER, A.D. 1999, AT 3 O'CLOCK P.M. A FILED COPY OF THIS CERTICATE HAS BEEN
FORWARDED TO THE KENT COUNTY RECORDER OF DEEDS.
/s/ Edward J. Freel
- -----------------------------------
EDWARD J. FREEL, SECRETARY OF STATE
2844245 8100 AUTHENTICATION: 0158944
991555587 DATE: 12-22-99
[ * ] = 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 EXCHANGE ACT OF 1934, AS
AMENDED.
<PAGE> 69
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
CYTOVIA, INC.
CYTOVIA, INC., a corporation organized and existing under the General
Corporation Law of the State of Delaware, does hereby certify as follows: FIRST:
The name of this corporation is Cytovia, Inc.
SECOND: The corporation's original Certificate of Incorporation was
filed with the Secretary of State on January 9, 1998 under the name Sitovia,
Inc.
THIRD: The Amended and Restated Certificate of Incorporation of this
corporation, in the form attached hereto as Exhibit A, was duly adopted by the
Board of Directors and by written consent of the stockholders of the corporation
in accordance with Sections 228, 242 and 245 of the General Corporation Law of
the State of Delaware.
FOURTH: The Amended and Restated Certificate of Incorporation so adopted
reads in full as set forth in Exhibit A attached hereto and hereby incorporated
by reference.
IN WITNESS WHEREOF, Cytovia, Inc. has caused this Amended and Restated
Certificate of Incorporation to be signed by its President and Chief Executive
Officer and attested to by its Secretary this 22nd day of December, 1999.
CYTOVIA, INC.
By: /s/ E. Weber
---------------------------------------
Eckard Weber, M.D.
President and Chief Executive Officer
ATTEST:
/s/ Richard Canote
- ------------------------------------
Richard Canote, Secretary
[ * ] = 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 EXCHANGE ACT OF 1934, AS
AMENDED.
2.
<PAGE> 70
EXHIBIT A
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
CYTOVIA, INC.
I.
The name of the Corporation is Cytovia, Inc.
II.
The address of the registered office of the corporation in the State of
Delaware is 9 East Loockerman Street, City of Dover, County of Kent, and
the name of the registered agent of the corporation in the State of
Delaware at such address is National Registered Agents, Inc. III.
The purpose of this corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General
Corporation Law of the State of Delaware.
IV.
A. The Corporation is authorized to issue two classes of stock to be
designated, respectively, "Common Stock" and "Preferred Stock." The
total number of shares which the Corporation is authorized to issue is
twelve million two hundred forty three thousand five hundred and twenty
(12,243,520) shares. Ten Million (10,000,000) shares shall be Common
Stock, each having a par value of one tenth of one cent ($0.001). Two
million two hundred forty three thousand five hundred and twenty
(2,243,520) shares shall be Preferred Stock, each having a par value of
one tenth of one cent ($0.001). The preferences, privileges and
restrictions granted to or imposed on the respective classes and series
of shares of Common Stock and Preferred Stock are as set forth in this
Article IV.
B. The Preferred Stock may be issued from time to time in one or more
series. The Board of Directors is hereby authorized, within the
limitations and restrictions stated in this Certificate of
Incorporation, to fix or alter the dividend rights, dividend rate,
conversion rights, voting rights, rights and terms of redemption
(including sinking fund provisions), the redemption price or prices, and
the liquidation preferences of any wholly unissued series of Preferred
Stock, and the number of shares constituting any such series and the
designation thereof, or any of them; and to increase or decrease the
number of shares of any series subsequent to the issuance of shares of
that series, but not below the number of shares of such series then
outstanding. In case the number of shares of any series shall be so
decreased, the shares constituting such decrease shall resume the status
which they had prior to the adoption of the resolution originally fixing
the number of shares of such series.
[ * ] = 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 EXCHANGE ACT OF 1934, AS
AMENDED.
<PAGE> 71
C. One Million Eighty Four Thousand Eight Hundred Sixty (1,084,860) of the
authorized shares of Preferred Stock are hereby designated "Series A
Preferred Stock." The shares of Series A Preferred Stock are referred to
herein as the "Series A Preferred." Four Hundred Fifty Thousand
(450,000) of the authorized shares of Preferred Stock are hereby
designated "Series A-1 Junior Preferred Stock." The shares of Series A-1
Junior Preferred Stock are referred to herein as the "Series A-1
Preferred." Five Hundred Fifty-Eight Thousand Six Hundred Sixty
(558,660) of the authorized shares of Preferred Stock are hereby
designated "Series A-2 Preferred Stock." These shares of Series A-2
Preferred Stock are referred to herein as the "Series A-2 Preferred."
One Hundred Fifty Thousand (150,000) of the shares of Preferred Stock
are hereby designated "Series B Preferred Stock." The shares of Series B
Preferred Stock are referred to herein as the "Series B Preferred." The
Series A Preferred Stock, Series A-1 Preferred Stock, Series B Preferred
Stock and Series A-2 Preferred Stock shall be collectively referred to
herein as the "Preferred Stock." The rights, preferences and privileges
and restrictions granted to or imposed upon the Common Stock and
Preferred Stock are as follows:
1 DIVIDENDS. The holders of Preferred Stock, in preference to the holders
of any Common Stock or other class or series of capital stock of the
Corporation ("Junior Stock") shall be entitled to receive dividends
when, as and if declared by the Board of Directors, but only out of
funds legally available therefor. So long as any shares of Preferred
Stock shall be outstanding, no dividend, whether in cash or property,
shall be paid or declared, nor shall any other distribution be made, on
any Junior Stock, nor shall any shares of any Junior Stock of the
Corporation be purchased, redeemed, or otherwise acquired for value by
the Corporation (except for acquisitions of Common Stock by the
Corporation pursuant to agreements which permit the Corporation to
repurchase such shares upon termination of services to the Corporation
or in exercise of the Corporation's right of first refusal upon a
proposed transfer) unless a dividend is paid with respect to all
outstanding shares of Preferred Stock in an amount for each share of
Preferred Stock equal to or greater than the aggregate amount of such
dividends payable with respect to the number of shares of Common Stock
into which each such share of Preferred Stock could then be converted.
The provisions of this Section 1 shall not, however, apply to (i) a
dividend payable in Common Stock, (ii) the acquisition of shares of any
Junior Stock in exchange for shares of any other Junior Stock, or (iii)
any repurchase of any outstanding securities of the Corporation that is
unanimously approved by the Corporation's Board of Directors.
2 LIQUIDATION PREFERENCE.
a. In the event of any liquidation, dissolution or winding
up of the Corporation, either voluntary or involuntary, the holders of Series A
Preferred, Series B Preferred and Series A-2 Preferred shall be entitled to
receive, prior and in preference to any distribution of any of the assets or
surplus funds of the Corporation to the holders of the Series A-1 Preferred, by
reason of their ownership thereof, an amount of (i) $9.31 per share of Series A
Preferred, as adjusted for any stock splits, combinations, consolidations, stock
distributions or stock dividends with respect to such series (the "Series A
Original Issue Price") then held by them, (ii) $16.09 per share of Series B
Preferred Stock, as adjusted for any stock splits, combinations, consolidations,
stock distributions or stock dividends with respect to such
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
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series (the "Series B Original Issue Price") then held by them, (iii) $5.37 per
share of Series A-2 Preferred Stock, as adjusted for any stock splits,
combinations, consolidations, stock distributions or stock dividends with
respect to such series (the "Series A-2 Original Issue Price") then held by them
and (iv) any declared but unpaid dividends on each share of Preferred Stock then
held by them. If upon the occurrence of such event, the assets and funds thus
distributed among the holders of the Preferred Stock shall be insufficient to
permit the payment to such holders of the full aforesaid preferential amounts,
then the entire assets and funds of the Corporation then legally available for
distribution shall be distributed among the holders of the Preferred Stock in
relative proportion to the amount each such holder would have been entitled to
receive if assets and funds had been sufficient to permit payment of the full
aforesaid preferential amounts to all such holders.
b. After the distribution described in subsection 2.a.
above has been paid, remaining assets and funds of the Corporation then legally
available for distribution, if any, shall be distributed among the holders of
the Common Stock and Preferred Stock in proportion to the number of shares of
Common Stock then held by them (including shares of Common Stock which they then
have the right to acquire upon conversion of the shares of Preferred Stock then
held by them); provided, however, that at such time as the holders of the Series
A Preferred, Series B Preferred and Series A-2 Preferred shall have received
pursuant to subsections 2.a. and 2.b. hereof an aggregate amount equal to two
and one-half times the Series A Original Issue Price, two and one-half times the
Series B Original Issue Price and two and one-half times the Series A-2 Original
Issue Price, respectively, the holders of Series A Preferred, Series B Preferred
and Series A-2 Preferred shall not receive any further portion of the remaining
assets of the Corporation available for distribution to its stockholders and all
such remaining assets shall be distributed to the holders of Series A-1
Preferred and the holders of Common Stock in proportion to the number of shares
of Series A-1 Preferred and Common Stock then held by them.
c. For purposes of this Section 2: (i) any acquisition of
the Corporation in which a majority of the outstanding shares of the Corporation
are purchased or exchanged for cash or securities or other consideration issued
or caused to be issued by the acquiring corporation or its subsidiary (other
than a mere reincorporation transaction), (ii) a sale of all or substantially
all of the assets of the Corporation, or (iii) any consolidation or merger
involving the Corporation or any of its subsidiaries with or into any other
corporation, or any other entity or person, other than a wholly-owned
subsidiary, in which the stockholders of the Corporation immediately before the
consolidation or merger own less than a majority of the surviving corporation
immediately following such consolidation or merger shall be deemed to be a
liquidation, dissolution or winding up and shall entitle the holders of the
Preferred Stock and Common Stock to receive at the closing, in cash, securities
or other property (valued as provided in subsection 2.d. below), those amounts
that are specified in subsections 2.a. and 2.b.
d. Whenever the distribution provided in this Section 2
shall be payable in securities or property other than cash, the value of such
distribution shall be the fair market value of such securities or other property
as determined in good faith by the Board of Directors.
[ * ] = 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 EXCHANGE ACT OF 1934, AS
AMENDED.
5.
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3. VOTING RIGHTS. Except as otherwise provided herein or required by
law, each share of Common Stock issued and outstanding shall have one vote,
each share of Preferred Stock issued and outstanding shall have the number
of votes equal to the number of shares of Common Stock into which such share
of Preferred Stock is convertible (as adjusted from time to time pursuant to
Section 4 hereof) and the Common Stock and the Preferred Stock shall vote
together as a single class. Fractional votes by the holders of Preferred
Stock shall not, however, be permitted and any fractional voting rights
resulting from the above formula (after aggregating all shares into which
shares of Preferred Stock held by each holder could be converted) shall be
rounded down to the nearest whole number.
4. CONVERSION. The holders of Preferred Stock shall have conversion
rights as follows (the "Conversion Rights"):
a. RIGHT TO CONVERT.
(i) Each share of Series A Preferred shall be convertible, at the
option of the holder thereof, at any time after the date of issuance of
such share, at the office of the Corporation or any transfer agent for
such stock, into such number of fully paid and nonassessable shares of
Common Stock as is determined by dividing $9.31 by the then applicable
conversion price for the Series A Preferred, determined as hereinafter
provided, in effect on the date the certificate is surrendered for
conversion (the "Series A Conversion Price"). The Series A Conversion
Price shall initially be $4.655 per share. Such initial Series A
Conversion Price shall be adjusted as hereinafter provided.
(ii) Each share of Series A-1 Preferred shall be convertible, at
the option of the holder thereof, at any time after the date of issuance
of such share, at the office of the Corporation or any transfer agent
for such stock, into such number of fully paid and nonassessable shares
of Common Stock as is determined by dividing $7.39 by the then
applicable conversion price for the Series A-1 Preferred, determined as
hereinafter provided, in effect on the date the certificate is
surrendered for conversion (the "Series A-1 Conversion Price"). The
Series A-1 Conversion Price shall initially be $7.39 per share. Such
initial Series A-1 Conversion Price shall be adjusted as hereinafter
provided.
(iii) Each share of Series B Preferred shall be convertible, at
the option of the holder thereof, at any time after the date of issuance
of such share, at the office of the Corporation or any transfer agent
for such stock, into such number of fully paid and nonassessable shares
of Common Stock as is determined by dividing $16.09 by the then
applicable conversion price for the Series B Preferred, determined as
hereinafter provided, in effect on the date the certificate is
surrendered for conversion (the "Series B Conversion Price"). The Series
B Conversion Price shall initially be $7.69 per share. Such initial
Series B Conversion Price shall be adjusted as hereinafter provided.
(iv) Each share of Series A-2 Preferred shall be convertible, at
the option of the holder thereof, at any time after the date of issuance
of such share, at the office of the Corporation or any transfer agent
for such stock, into such number of fully paid and nonassessable shares
of Common Stock as is determined by dividing $5.37 by the then
applicable conversion price for the Series A-2 Preferred, determined as
hereinafter
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
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provided, in effect on the date the certificate is surrendered for
conversion (the "Series A-2 Conversion Price"). The Series A-2
Conversion Price shall initially be $5.37 per share. Such initial Series
A-2 Conversion Price shall be adjusted as hereinafter provided.
(v) Each share of Preferred Stock shall automatically be
converted into shares of Common Stock at the applicable Conversion Price
for each series in effect immediately prior to the closing of the sale
of the Common Stock in a firm commitment, underwritten public offering
registered under the Securities Act of 1933, as amended (the "Act"), at
a public offering price, prior to underwriter commissions and expenses,
equal to or exceeding $11.64 per share of Common Stock (appropriately
adjusted for subdivisions and combinations of shares of Common Stock and
dividends on Common Stock payable in shares of Common Stock) and
aggregate gross proceeds to the Corporation and/or any selling
stockholders equal to or exceeding $15,000,000. In such event, the
conversion of such shares of the Preferred Stock shall be deemed to have
occurred automatically immediately prior to the closing of such public
offering.
(vi) Each share of Preferred Stock shall automatically be
converted into shares of Common Stock at the then effective applicable
Conversion Price for each series upon the vote or the written consent of
holders of at least a majority of the Preferred Stock. In such event,
the conversion of such shares of Preferred Stock shall be deemed to have
occurred upon the date of receipt of such vote or consent or such later
date as may be specified by such holders.
B. MECHANICS OF CONVERSION. Before any holder of any shares of
Preferred Stock shall be entitled to convert the same into full shares
of Common Stock, it shall surrender the certificate or certificates
therefor, duly endorsed, at the office of the Corporation or of any
transfer agent for the Corporation and shall give written notice to the
Corporation at such office that it elects to convert the same (except
that no such written notice of election to convert shall be necessary in
the event of an automatic conversion pursuant to subsections 4.a.(iii)
or 4.a.(iv)). The Corporation shall, as soon as practicable thereafter,
issue and deliver at such office to such holder of Preferred Stock a
certificate or certificates, registered in such names as specified by
the holder, for the number of shares of Common Stock to which such
holder shall be entitled as aforesaid and check payable to the holder in
the amount of any cash amounts payable as the result of a conversion
into fractional shares of Common Stock, and any accrued and unpaid
dividends on the converted shares of the Preferred Stock. Such
conversion shall be deemed to have been made immediately prior to the
close of business on the date of such surrender of the shares of the
Preferred Stock to be converted, and the person or persons entitled to
receive the shares of Common Stock issuable upon such conversion shall
be treated for all purposes as the record holder or holders of such
shares of Common Stock on such date (except that in the event of an
automatic conversion pursuant to a public offering under subsection
4.a.(iii) such conversion shall be deemed to have been made immediately
prior to the closing of the offering referred to in such subsection
4.a.(iii) and except that in the event of an automatic conversion
pursuant to subsection 4.a.(iv), such conversion shall be deemed to have
been made upon the close of business on the date of receipt of the vote
referred to in such subsection or such later date as may be specified by
the stockholders submitting such vote). If the conversion is in
connection with an
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
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<PAGE> 75
underwritten offering of securities registered pursuant to the Act, the
conversion may, at the option of any holder tendering shares of the
Preferred Stock for conversion, be conditioned upon the closing with the
underwriter of the sale of securities pursuant to such offering, in
which event the person(s) entitled to receive the Common Stock issuable
upon such conversion of the Preferred Stock shall not be deemed to have
converted such shares of the Preferred Stock until immediately prior to
the closing of such sale of securities.
c. Adjustments to Conversion Price for Diluting Issues.
(i) SPECIAL DEFINITIONS. For purposes of this subsection 4.c. the
following definitions apply:
(a) "ADDITIONAL SHARES OF COMMON STOCK" shall mean all shares of Common
Stock issued (or, pursuant to subsection 4.c.(iii), deemed to be issued)
by the Corporation after the Series B Original Issue Date, other than
shares of Common Stock:
(1) issued or issuable upon conversion of shares of
Preferred Stock;
(2) issued or issuable to officers, directors or
employees of, or consultants to, the Corporation, on terms approved by the Board
of Directors;
(3) issued or issuable in connection with equipment
financing, lines of credit or other lending arrangements on terms approved by
the Board of Directors;
(4) issued or issuable in connection with the
acquisition of a business, the acquisition of assets, joint ventures, strategic
alliances or similar transactions or partnering arrangements on terms approved
by the Board of Directors;
(5) issued or issuable as a dividend or
distribution on the Preferred Stock; or
(6) for which adjustment of the applicable
Conversion Price for the Series A Preferred, Series B Preferred or Series A-2
Preferred is made pursuant to subsection 4.c.(iv), subsection 4.d. or subsection
4.e. hereof.
(b) "CONVERTIBLE SECURITIES" shall mean any evidences of indebtedness,
shares (other than Common Stock, Series A Preferred, Series A-1
Preferred, Series B Preferred and Series A-2 Preferred) or other
securities convertible into or exchangeable for Common Stock.
(c) "OPTIONS" shall mean rights, options, or warrants to subscribe for,
purchase or otherwise acquire either Common Stock or Convertible
Securities.
[ * ] = 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 EXCHANGE ACT OF 1934, AS
AMENDED.
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<PAGE> 76
(d) "SERIES B ORIGINAL ISSUE DATE" shall mean the date on which a share of
Series B Preferred Stock was first issued.
(ii) NO ADJUSTMENT OF CONVERSION PRICE. No
adjustment in the Conversion Price of a particular share of Series A Preferred,
Series B Preferred or Series A-2 Preferred, respectively, shall be made in
respect of the issuance of Additional Shares of Common Stock unless the
consideration per share for an Additional Share of Common Stock issued or deemed
to be issued by the Corporation is less than the applicable Series A Conversion
Price, the Series B Conversion Price or the Series A-2 Conversion Price,
respectively, in effect on the date of and immediately prior to such issuance.
No adjustment in the Conversion Price of any share of Series A-1 Preferred shall
be made in respect of the issuance or deemed issuance of Additional Shares of
Common Stock regardless of the consideration per share for such Additional
Shares of Common Stock.
(iii) DEEMED ISSUE OF ADDITIONAL SHARES OF COMMON
STOCK. In the event the Corporation at any time or from time to time after the
Series B Original Issue Date shall issue any Options or Convertible Securities
or shall fix a record date for the determination of holders of any class of
securities then entitled to receive any such Options or Convertible Securities,
then the maximum number of shares (as set forth in the instrument relating
thereto without regard to any provisions contained therein designed to protect
against dilution) of Common Stock issuable upon the exercise of such Options or,
in the case of Convertible Securities and Options therefor, the conversion or
exchange of such Convertible Securities, shall be deemed to be Additional Shares
of Common Stock issued as of the time of such issue or, in case such a record
date shall have been fixed, as of the close of business on such record date,
provided that Additional Shares of Common Stock shall not be deemed to have been
issued unless the consideration per share (determined pursuant to subsection
4.c.(v) hereof) of such Additional Shares of Common Stock would be less than the
applicable Series A Conversion Price, Series B Conversion Price or Series A-2
Conversion Price, as the case may be, in effect on the date of and immediately
prior to such issue, or such record date, as the case may be, and provided
further that in any such case in which Additional Shares of Common Stock are
deemed to be issued:
(a) no further adjustments in the applicable Series A Conversion Price, Series B
Conversion Price or Series A-2 Conversion Price shall be made upon the
subsequent issue of Convertible Securities or shares of Common Stock upon the
exercise of such Options or conversion or exchange of such Convertible
Securities;
(b) if such Options or Convertible Securities by their terms provide, with the
passage of time or otherwise, for any increase in the consideration payable to
the Corporation, or decrease in the number of shares of Common Stock issuable
upon the exercise, conversion or exchange thereof, the applicable Series A
Conversion Price, Series B Conversion Price or Series A-2 Conversion Price
computed upon the original issue thereof (or upon the occurrence of a record
date with respect thereto), and any subsequent adjustments based thereon, shall,
upon any such increase or decrease becoming effective, be recomputed to reflect
such increase or decrease insofar as it affects such Options or the rights of
conversion or exchange under such Convertible Securities, provided, however,
that no such adjustment of the applicable Series A Conversion
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
9.
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Price, Series B Conversion Price or Series A-2 Conversion Price shall affect
Common Stock previously issued upon conversion of any shares of Preferred Stock;
(c) upon the expiration of any such Options or any rights of conversion or
exchange under such Convertible Securities which shall not have been exercised,
the applicable Series A Conversion Price, Series B Conversion Price or Series
A-2 Conversion Price computed upon the original issue thereof (or upon the
occurrence of a record date with respect thereto), and any subsequent
adjustments based thereon, shall, upon such expiration, be recomputed as if:
(1) in the case of Convertible Securities or Options for Common Stock, the only
Additional Shares of Common Stock issued were the shares of Common Stock, if
any, actually issued upon the exercise of such Options or the conversion or
exchange of such Convertible Securities and the consideration received therefor
was the consideration actually received by the Corporation for the issue of all
such Options, whether or not exercised, plus the consideration actually received
by the Corporation upon such exercise, or for the issue of all such Convertible
Securities which were actually converted or exchanged, plus the additional
consideration, if any, actually received by the Corporation upon such conversion
or exchange, and
(2) in the case of Options for Convertible Securities, only the Convertible
Securities, if any, actually issued upon the exercise thereof were issued at the
time of issue of such Options and the consideration received by the Corporation
for the Additional Shares of Common Stock deemed to have been then issued was
the consideration actually received by the Corporation for the issue of all such
Options, whether or not exercised, plus the consideration deemed to have been
received by the Corporation (determined pursuant to subsection 4.c.(v)) upon the
issue of the Convertible Securities with respect to which such Options were
actually exercised;
(d) no readjustment pursuant to subsections 4.c.(iii)(b) or 4.c.(iii)(c) above
shall have the effect of increasing the applicable Series A Conversion Price,
Series B Conversion Price or Series A-2 Conversion Price to an amount which
exceeds the lower of (1) such Series A Conversion Price, Series B Conversion
Price or Series A-2 Conversion Price, respectively, on the original adjustment
date, or (2) such Series A Conversion Price, Series B Conversion Price or Series
A-2 Conversion Price, respectively, that would have resulted from any issuance
of Additional Shares of Common Stock between the original adjustment date and
such readjustment date;
(e) in the case of any Options which expire by their terms not more than 30 days
after the date of issue thereof, no adjustment of the applicable Series A
Conversion Price, Series B Conversion Price or Series A-2 Conversion Price shall
be made, except as to shares of Preferred Stock converted in such period, until
the expiration or exercise of all such Options, whereupon such adjustment shall
be made in the same manner provided in subsection 4.c.(iii)(c) above; and
(f) if any such record date shall have been fixed and such Options or
Convertible Securities are not issued on the date fixed thereof, the adjustment
previously made in the applicable Series A Conversion Price, Series B Conversion
Price or Series A-2 Conversion Price which became effective on such record date
shall be canceled as of the close of business on such record date, and shall
instead be made on the actual date of issuance, if any, of such Options or
Convertible Securities.
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
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(iv) ADJUSTMENT OF SERIES A CONVERSION PRICE,
SERIES B CONVERSION PRICE AND SERIES A-2 CONVERSION PRICE UPON ISSUANCE OF
ADDITIONAL SHARES OF COMMON STOCK. In the event this Corporation shall issue
Additional Shares of Common Stock (including Additional Shares of Common Stock
deemed to be issued pursuant to subsection 4.c.(iii)) without consideration or
for a consideration per share less than the applicable Series A Conversion
Price, Series B Conversion Price or Series A-2 Conversion Price in effect on the
date of and immediately prior to such issue, then and in such event, such Series
A Conversion Price, Series B Conversion Price or Series A-2 Conversion Price,
respectively, shall be reduced, concurrently with such issue, to a price
(calculated to the nearest tenth of a cent) determined by multiplying such
Series A Conversion Price, Series B Conversion Price or Series A-2 Conversion
Price, respectively, then in effect by a fraction, the numerator of which shall
be the number of shares of Common Stock outstanding immediately prior to such
issue plus the number of shares of Common Stock which the aggregate
consideration received by the Corporation for the total number of Additional
Shares of Common Stock so issued would purchase if purchased at the applicable
Series A Conversion Price, Series B Conversion Price or Series A-2 Conversion
Price, respectively, then in effect, and the denominator of which shall be the
number of shares of Common Stock outstanding immediately prior to such issue
plus the number of such Additional Shares of Common Stock so issued. For the
purposes of the above calculation, the number of shares of Common Stock
outstanding immediately prior to such issuance shall be calculated on a fully
diluted basis, as if all shares of Preferred Stock and all Convertible
Securities had been fully converted into shares of Common Stock immediately
prior to such issuance and any outstanding Options having an exercise price per
share less than the applicable Series A Conversion Price, Series B Conversion
Price or Series A-2 Conversion Price, respectively, in effect on such date had
been fully exercised immediately prior to such issuance (and the resulting
securities fully converted into shares of Common Stock, if so convertible) as of
such date but not including in such calculation any additional shares of Common
Stock issuable with respect to shares of Preferred Stock, Convertible Securities
or outstanding Options solely as a result of the adjustment of the respective
Series A Conversion Price, Series B Conversion Price or Series A-2 Conversion
Price (or other conversion ratios) resulting from the issuance of Additional
Shares of Common Stock causing such adjustment.
(v) DETERMINATION OF CONSIDERATION. For purposes of
this subsection 4.c., the consideration received by the Corporation for the
issue of any Additional Stock shall be computed as follows:
(a) CASH AND PROPERTY: Such consideration
shall:
(1) insofar as it consists of cash, be computed at the aggregate amount
of cash received by the Corporation excluding amounts paid or payable for
accrued interest or accrued dividends;
(2) insofar as it consists of property other than cash, be computed at
the fair value thereof at the time of such issue, as determined in good faith by
the Board of Directors; and
(3) in the event Additional Shares of Common Stock are issued together
with other shares or securities or other assets of the Corporation for
consideration which covers both cash and property other than cash be in the
proportion of such
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consideration so received, computed as provided in subsections 4.c.(v)(a)(1) and
4.c.(v)(a)(2) above, as determined in good faith by the Board of Directors.
(b) OPTIONS AND CONVERTIBLE SECURITIES. The consideration per share received by
the Corporation for Additional Shares of Common Stock deemed to have been issued
pursuant to subsection 4.c.(iii) relating to Options and Convertible Securities,
shall be determined by dividing:
(1) the total amount, if any, received or receivable by the Corporation as
consideration for the issue of such Options or Convertible Securities, plus the
minimum aggregate amount of additional consideration (as set forth in the
instruments relating thereto, without regard to any provision contained therein
designed to protect against dilution) payable to the Corporation upon the
exercise of such Options or the conversion or exchange of such Convertible
Securities, or in the case of Options for Convertible Securities, the exercise
of such Options for Convertible Securities and the conversion or exchange of
such Convertible Securities by
(2) the maximum number of shares of Common Stock (as set forth in the
instruments relating thereto, without regard to any provision contained therein
designed to protect against dilution) issuable upon the exercise of such Options
or the conversion or exchange of such Convertible Securities.
d. ADJUSTMENTS FOR COMBINATIONS OR SUBDIVISIONS OF COMMON STOCK.
In the event that the Corporation at any time or from time to time after
the date on which a share of Series A-2 Preferred is first issued (the
"Series A-2 Original Issue Date") shall declare or pay any dividend on
the Common Stock payable in Common Stock or in any right to acquire
Common Stock, or shall effect a subdivision of the outstanding shares of
Common Stock into a greater number of shares of Common Stock (by stock
split, reclassification or otherwise), or in the event the outstanding
shares of Common Stock shall be combined or consolidated, by
reclassification or otherwise, into a lesser number of shares of Common
Stock, then the applicable Conversion Price for each series of Preferred
Stock in effect immediately prior to such event shall, concurrently with
the effectiveness of such event, be proportionately decreased or
increased, as appropriate.
e. ADJUSTMENT FOR RECLASSIFICATION, EXCHANGE AND SUBSTITUTION. If
at any time or from time to time after the Series A-2 Original Issue
Date, the Common Stock issuable upon the conversion of the Preferred
Stock is changed into the same or a different number of shares of any
class or classes of stock, whether by recapitalization, reclassification
or otherwise (other than a subdivision, combination or reclassification
of shares or stock dividend or a reorganization, merger, consolidation
or sale of assets provided for elsewhere in this Section 4 or in
subsection 2.c.), in any such event each holder of shares of Preferred
Stock shall have the right thereafter to convert such stock into the
kind and amount of stock and other securities and property receivable
upon such recapitalization, reclassification or other change by holders
of such shares equal to the maximum number of shares of Common Stock
into which such shares of Preferred Stock could have been converted
immediately prior to such recapitalization, reclassification or change,
all subject to further adjustment as provided herein or with respect to
such other securities or property by the terms thereof.
[ * ] = 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 EXCHANGE ACT OF 1934, AS
AMENDED.
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f. OTHER DISTRIBUTIONS. In the event the Corporation shall at any
time or from time to time after the Series A-2 Original Issue Date make
or issue, or fix a record date for the determination of holders of
Common Stock entitled to receive, a stock dividend or other distribution
payable in securities of the Corporation or any of its subsidiaries
other than Additional Shares of Common Stock, then in each such event
provision shall be made so that the holders of Preferred Stock shall
receive, upon the conversion thereof, the securities of the Corporation
which they would have received had their stock been converted into
Common Stock on the date of such event and had they thereafter, during
the period from the date of such event to and including the conversion
date, retained such securities receivable by them as aforesaid during
such period, subject to all other adjustments called for during such
period under this Section 4 with respect to the rights of the holders of
the Preferred Stock or with respect to such other securities by their
terms.
g. NO IMPAIRMENT. The Corporation will not, by amendment of its
Certificate of Incorporation or through any reorganization, transfer of
assets, consolidation, merger, dissolution, issue or sale of securities
or any other voluntary action, avoid or seek to avoid the observance or
performance of any of the terms to be observed or performed hereunder by
the Corporation, but will at all times in good faith assist in the
carrying out of all the provisions of this Section 4 and in the taking
of all such action as may be necessary or appropriate in order to
protect the Conversion Rights of the holders of the Preferred Stock
against impairment.
h. CERTIFICATES AS TO ADJUSTMENTS. Upon the occurrence of each
adjustment or readjustment of the Series A Conversion Price, Series A-1
Conversion Price, Series B Conversion Price or Series A-2 Conversion
Price pursuant to this Section 4, the Corporation at its expense shall
promptly compute such adjustment or readjustment in accordance with the
terms hereof and cause independent public accountants selected by the
Corporation to verify such computation and prepare and furnish to each
holder of Preferred Stock a certificate setting forth such adjustment or
readjustment and showing in detail the facts upon which such adjustment
or readjustment is based. The Corporation shall, upon the written
request at any time of any holder of Preferred Stock, furnish or cause
to be furnished to such holder a like certificate setting forth (i) such
adjustments and readjustments, (ii) the Conversion Price for each series
of Preferred Stock at the time in effect, and (iii) the number of shares
of Common Stock and the amount, if any, of other property which at the
time would be received upon the conversion of the Preferred Stock.
i. NOTICES OF RECORD DATE. In the event of any taking by the
Corporation of a record of the holders of any class of securities for
the purpose of determining the holders thereof who are entitled to
receive any dividend (other than a cash dividend) or other distribution,
any security or right convertible into or entitling the holder thereof
to receive Additional Shares of Common Stock, or any right to subscribe
for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, the
Corporation shall mail to each holder of Preferred Stock at least 20
days prior to the date specified therein, a notice specifying the date
on which any such
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
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record is to be taken for the purpose of such dividend, distribution,
security or right, and the amount and character of such dividend,
distribution, security or right.
j. ISSUE TAXES. The Corporation shall pay any and all issue and
other taxes (other than income taxes) that may be payable in respect of
any issue or delivery of shares of Common Stock on conversion of shares
of Preferred Stock pursuant hereto; provided, however, that the
Corporation shall not be obligated to pay any transfer taxes resulting
from any transfer requested by any holder in connection with any such
conversion.
k. RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The Corporation
shall at all times reserve and keep available out of its authorized but
unissued shares of Common Stock, solely for the purpose of effecting the
conversion of the shares of Preferred Stock, such number of its shares
of Common Stock as shall from time to time be sufficient to effect the
conversion of all outstanding shares of Preferred Stock; and if at any
time the number of authorized but unissued shares of Common Stock shall
not be sufficient to effect the conversion of all then outstanding
shares of Preferred Stock, the Corporation will take such corporate
action as may, in the opinion of its counsel, be necessary to increase
its authorized but unissued shares of Common Stock to such number of
shares as shall be sufficient for such purpose, including, without
limitation, engaging in best efforts to obtain the requisite stockholder
approval of any necessary amendment to this Certificate of
Incorporation.
l. FRACTIONAL SHARES. No fractional share shall be issued upon
the conversion of any share or shares of Preferred Stock. All shares of
Common Stock (including fractions thereof) issuable upon conversion of
more than one share of Preferred Stock by a holder thereof shall be
aggregated for purposes of determining whether the conversion would
result in the issuance of any fractional share. If, after the
aforementioned aggregation, the conversion would result in the issuance
of a fraction of a share of Common Stock, the Corporation shall, in lieu
of issuing any fractional share, pay the holder otherwise entitled to
such fraction a sum in cash equal to the fair market value of such
fraction on the date of conversion (as determined in good faith by the
Board of Directors of the Corporation).
m. NOTICES. Any notice required by the provisions of this Section
4 to be given to the holders of shares of Preferred Stock shall be
deemed given if deposited in the United States mail, postage prepaid,
and addressed to each holder of record at its address appearing on the
books of the Corporation.
n. ADJUSTMENTS. Subject to the provisions of subsections 4.c. and
5 hereof, in case of any reorganization or any reclassification of the
capital stock of the Corporation, any consolidation or merger of the
Corporation with or into another corporation or corporations, or the
conveyance of all or substantially all of the assets of the Corporation
to another corporation, each share of Preferred Stock shall thereafter
be convertible into the number of shares of stock or other securities or
property (including cash) to which a holder of the number of shares of
Common Stock deliverable upon conversion of such share of Preferred
Stock would have been entitled upon the record date of (or date of, if
no record date is fixed) such reorganization, reclassification,
consolidation, merger or conveyance; and, in any case, appropriate
adjustment (as determined by the Board of
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
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Directors) shall be made in the application of the provisions herein set
forth with respect to the rights and interests thereafter of the holders
of Preferred Stock, to the end that the provisions set forth herein
shall thereafter be applicable, as nearly as equivalent as is
practicable, in relation to any shares of stock or the securities or
property (including cash) thereafter deliverable upon the conversion of
the shares of Preferred Stock.
5. PROTECTIVE PROVISIONS.
a. Unless otherwise required by law, the Corporation shall not, without
the vote or written consent by the holders of at least sixty-six and two-thirds
percent (66 2/3%) of the then outstanding shares of Preferred Stock, voting
together as a class on an as-converted-to-Common-Stock basis:
(i) Amend or repeal any provision of, or add any provision to,
the Corporation's Certificate of Incorporation;
(ii) Increase or decrease the number of authorized shares of
Series A Preferred, Series B Preferred or Series A-2 Preferred;
(iii) Authorize, create or issue, or obligate itself to issue,
any other equity security (i) ranking senior to or on a parity with
Series A Preferred, Series B Preferred or Series A-2 Preferred as to
liquidation preferences, the payment of dividends, distribution of
assets, redemptions, or (ii) which in any manner adversely affects the
rights of the holders of Series A Preferred, Series A-1 Preferred,
Series B Preferred or Series A-2 Preferred; provided, however, that this
subsection 5.a. shall not apply to the issuance of Common Stock (or
options to purchase Common Stock) with voting rights on a parity with
the voting rights of the Series A Preferred, Series A-1 Preferred,
Series B Preferred or Series A-2 Preferred (other than the voting rights
expressly reserved in this subsection 5.a. for the Series A Preferred,
Series A-1 Preferred, Series B Preferred and Series A-2 Preferred);
(iv) Effect any sale, lease, transfer or other conveyance of all
or substantially all of the assets of the Corporation or any of its
subsidiaries (other than in the ordinary course of business), or any
consolidation or merger involving the Corporation with or into any other
corporation, or any other entity or person, other than a wholly owned
subsidiary, in which the stockholders of the Corporation immediately
prior to such consolidation or merger own less than a majority of the
voting stock of the surviving corporation immediately following such
consolidation or merger;
(v) Effect any reclassification, recapitalization or other change
with respect to any outstanding shares of stock of the Corporation or
any liquidation, dissolution or winding-up of the Corporation;
(vi) Enter into any agreement regarding the acquisition of, or a
material investment in any other corporation or other business entity;
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
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(vii) Enter into any agreement with or bestow any benefit upon
any director or officer of the Corporation, or any immediate family
member of any such person other than with respect to employee or
consultant compensation consistent with the Corporation's ordinary
course of business or as is otherwise approved by the Corporation's
Board of Directors;
(viii) Enter into any transaction which as contemplated would
cause a material change in the Corporation's business; or
(ix) Pay or declare any dividend or distribution on, or redeem
any shares of Common Stock, Series A Preferred, Series A-1 Preferred,
Series B Preferred or Series A-2 Preferred (other than pursuant to
agreements with the holders thereof providing for a repurchase of shares
of Common Stock upon termination of employment with or services to the
Corporation or in connection with the Corporation's right of first
refusal to purchase shares of Common Stock on terms approved by the
Board of Directors of the Corporation).
b. Notwithstanding anything to the contrary in Section 5.a.
above, the Corporation shall not, without the vote or written consent by
the holders of at least sixty-six and two-thirds percent (66 2/3%) of
the then outstanding shares of Series A Preferred, voting as a separate
class, amend or repeal any provisions of, or add any provisions to, the
Corporation's Certificate of Incorporation or Bylaws so as to adversely
affect solely the holders of the outstanding shares of Series A
Preferred.
c. Notwithstanding anything to the contrary in Section 5.a.
above, the Corporation shall not, without the vote or written consent by
the holders of at least a majority of the then outstanding shares of
Series A-1 Preferred, voting as a separate class, amend or repeal any
provisions of, or add any provisions to, the Corporation's Certificate
of Incorporation or Bylaws so as to adversely affect solely the holders
of the outstanding shares of Series A-1 Preferred.
d. Notwithstanding anything to the contrary in Section 5.a.
above, the Corporation shall not, without the vote or written consent by
the holders of at least a majority of the then outstanding shares of
Series B Preferred, voting as a separate class, amend or repeal any
provisions of, or add any provisions to, the Corporation's Certificate
of Incorporation or Bylaws so as to adversely affect solely the holders
of the outstanding shares of Series B Preferred.
e. Notwithstanding anything to the contrary in Section 5.a.
above, the Corporation shall not, without the vote or written consent by
the holders of at least a majority of the then outstanding shares of
Series A-2 Preferred, voting as a separate class, amend or repeal any
provisions of, or add any provisions to, the Corporation's Certificate
of Incorporation or Bylaws so as to adversely affect solely the holders
of the outstanding shares of Series A-2 Preferred.
6. WAIVER BY HOLDERS OF SERIES A PREFERRED. Unless otherwise required by
law, the observance of any term relating to the Series A Preferred may be waived
either generally or in a particular instance (and either retroactively or
prospectively) with the vote or written consent of
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
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holders of at least sixty-six and two-thirds percent (66 2/3%) of the then
outstanding shares of Series A Preferred, voting as a separate class on an
as-converted-to-Common-Stock basis and the Corporation. Any waiver so effected
shall be binding upon the Corporation and any holder of Series A Preferred.
7. WAIVER BY HOLDERS OF SERIES A-1 PREFERRED. Unless otherwise
required by law, the observance of any term relating to the Series A-1
Preferred may be waived either generally or in a particular instance
(and either retroactively or prospectively) with the vote or written
consent of holders of at least a majority of the then outstanding shares
of Series A-1 Preferred, voting as a separate class on an
as-converted-to-Common-Stock basis and the Corporation. Any waiver so
effected shall be binding upon the Corporation and any holder of Series
A-1 Preferred.
8. WAIVER BY HOLDERS OF SERIES B PREFERRED. Unless otherwise
required by law, the observance of any term relating to the Series B
Preferred may be waived either generally or in a particular instance
(and either retroactively or prospectively) with the vote or written
consent of holders of at least a majority of the then outstanding shares
of Series B Preferred, voting as a separate class on an
as-converted-to-Common-Stock basis and the Corporation. Any waiver so
effected shall be binding upon the Corporation and any holder of Series
B Preferred.
9. WAIVER BY HOLDERS OF SERIES A-2 PREFERRED. Unless otherwise
required by law, the observance of any term relating to the Series A-2
Preferred may be waived either generally or in a particular instance
(and either retroactively or prospectively) with the vote or written
consent of holders of at least a majority of the then outstanding shares
of Series A-2 Preferred, voting as a separate class on an
as-converted-to-Common-Stock basis and the Corporation. Any waiver so
effected shall be binding upon the Corporation and any holder of Series
A-2 Preferred.
10. NO REISSUANCE OF PREFERRED STOCK. No share or shares of
Series A Preferred, Series A-1 Preferred, Series B Preferred or Series
A-2 Preferred acquired by the Corporation by reason of redemption,
purchase, conversion or otherwise shall be reissued, and all such shares
shall be returned to the status of undesignated shares of Preferred
Stock.
11. RESIDUAL RIGHTS. All rights accruing to the outstanding
shares of this Corporation not expressly provided for the contrary
herein shall be vested in the Common Stock.
V.
A. A director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for any breach of
fiduciary duty as a director, except for liability (i) for any breach of
the director's duty of loyalty to the Corporation or its stockholders,
(ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the Delaware General Corporation Law, or (iv) for any
transaction from which the director derived an improper
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
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personal benefit. If the Delaware General Corporation Law is amended
after approval by the stockholders of this Article V to authorize
corporate action further eliminating or limiting the personal liability
of directors, then the liability of a director shall be eliminated or
limited to the fullest extent permitted by the Delaware General
Corporation Law, as so amended.
B. The Corporation is authorized to provide indemnification of
agents (as defined in Section 145 of the Delaware General Corporation
Law) for breach of duty to the corporation and its stockholders through
Bylaw provisions, through agreements with the agents, and/or through
stockholder resolutions, or otherwise, in excess of the indemnification
otherwise permitted by Section 145 of the Delaware General Corporation
Law, subject to the limitations on such excess indemnification set forth
in Section 102 of the Delaware General Corporation Law.
C. Any repeal or modification of this Article V shall be
prospective and shall not affect the rights under this Article V in
effect at the time of the alleged occurrence of any act or omission to
act giving rise to liability or indemnification.
VI.
For the management of the business and for the conduct of the affairs of
the Corporation, and in further definition, limitation and regulation of the
powers of the Corporation, of its directors and of its stockholders or any class
thereof, as the case may be, it is further provided that:
A. The management of the business and the conduct of the affairs of the
Corporation shall be vested in its Board of Directors. The number of
directors which shall constitute the whole Board of Directors shall be
fixed by the Board of Directors in the manner provided in the Bylaws.
B. Subject to paragraph (h) of Section 43 of the Bylaws, the Bylaws may be
altered or amended or new Bylaws adopted by the stockholders entitled to
vote. The Board of Directors shall also have the power to adopt, amend
or repeal Bylaws.
C. The directors of the Corporation need not be elected by written ballot
unless the Bylaws so provide.
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COMMISSION PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
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EXHIBIT B
SCHEDULE OF EXCEPTIONS
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
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EXHIBIT C
PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
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<PAGE> 88
CYTOVIA, INC.
EMPLOYEE PROPRIETARY INFORMATION
AND INVENTIONS AGREEMENT
In consideration of my employment or continued employment by CYTOVIA,
INC. (the "COMPANY"), and the compensation now and hereafter paid to me, I
hereby agree as follows:
1. NONDISCLOSURE.
1.1. RECOGNITION OF COMPANY'S RIGHTS; NONDISCLOSURE. At all times during
my employment and thereafter, I will hold in strictest confidence
and will not disclose, use, lecture upon or publish any of the
Company's Proprietary Information (defined below), except as such
disclosure, use or publication may be required in connection with my
work for the Company, or unless an officer of the Company expressly
authorizes such in writing. I will obtain Company's written approval
before publishing or submitting for publication any material
(written, verbal, or otherwise) that relates to my work at Company
and/or incorporates any Proprietary Information. I hereby assign to
the Company any rights I may have or acquire in such Proprietary
Information and recognize that all Proprietary Information shall be
the sole property of the Company and its assigns.
1.2. PROPRIETARY INFORMATION. The term "PROPRIETARY INFORMATION" shall
mean any and all confidential and/or proprietary knowledge, data or
information of the Company and its affiliated entities. By way of
illustration but not limitation, "PROPRIETARY INFORMATION" includes
(a) trade secrets, inventions, ideas, processes, formulas, data,
programs, other works of authorship, know-how, improvements,
discoveries, cell lines, viruses, vectors, developments, designs and
techniques (hereinafter collectively referred to as "INVENTIONS");
and (b) information regarding plans for research, development, new
products, marketing and selling, business plans, budgets and
unpublished financial statements, licenses, prices and costs,
suppliers and customers; and (c) information regarding the skills
and compensation of other employees of the Company. Notwithstanding
the foregoing, it is understood that, at all such times, I am free
to use information which is generally known in the trade or
industry, which is not gained as result of a breach of this
Agreement, and my own, skill, knowledge, know-how and experience to
whatever extent and in whichever way I wish.
1.3. THIRD PARTY INFORMATION. I understand, in addition, that the Company
has received and in the future will receive from third parties
confidential or proprietary information ("THIRD PARTY INFORMATION")
subject to a duty on the Company's part to maintain the
confidentiality of such information and to use it only for certain
limited purposes. During the term of my employment and thereafter, I
will hold Third Party Information in the strictest confidence and
will not disclose to anyone (other than Company personnel who need
to know such information in connection with their work for the
Company) or use, except in connection with my work for the Company,
Third Party Information unless expressly authorized by an officer of
the Company in writing.
1.4. NO IMPROPER USE OF INFORMATION OF PRIOR EMPLOYERS AND OTHERS. During
my employment by the Company I will not improperly use or disclose
any confidential information or trade secrets, if any, of any former
employer or any other person to whom I have an obligation of
confidentiality, and I will not bring onto the premises of the
Company any unpublished documents or any property belonging to any
former employer or any other person to whom I have an obligation of
confidentiality unless consented to in writing by that former
employer or person. I will use in the performance of my duties only
information which is generally known and used by persons with
training and experience comparable to my own, which is common
knowledge in the industry or otherwise legally in the public domain,
or which is otherwise provided or developed by the Company.
2. ASSIGNMENT OF INVENTIONS.
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
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2.1. PROPRIETARY RIGHTS. The term "PROPRIETARY RIGHTS" shall mean all
trade secret, patent, copyright, and other intellectual property
rights throughout the world.
2.2. PRIOR INVENTIONS. Inventions, if any, patented or unpatented, which
I made prior to the commencement of my employment with the Company
are excluded from the scope of this Agreement. To preclude any
possible uncertainty, I have set forth on Exhibit B (Previous
Inventions) attached hereto a complete list of all Inventions that I
have, alone or jointly with others, conceived, developed or reduced
to practice or caused to be conceived, developed or reduced to
practice prior to the commencement of my employment with the
Company, that I consider to be my property or the property of third
parties and that I wish to have excluded from the scope of this
Agreement (collectively referred to as "PRIOR INVENTIONS"). If
disclosure of any such Prior Invention would cause me to violate any
prior confidentiality agreement, I understand that I am not to list
such Prior Inventions in Exhibit B but am only to disclose a cursory
name for each such invention, a listing of the party(ies) to whom it
belongs and the fact that full disclosure as to such inventions has
not been made for that reason. A space is provided on Exhibit B for
such purpose. If no such disclosure is attached, I represent that
there are no Prior Inventions. If, in the course of my employment
with the Company, I incorporate a Prior Invention into a Company
product, process or machine, the Company is hereby granted and shall
have a nonexclusive, royalty-free, irrevocable, perpetual, worldwide
license (with rights to sublicense through multiple tiers of
sublicensees) to make, have made, modify, use and sell such Prior
Invention. I agree not to incorporate into any Company product any
Prior Invention that I do not own or with respect to which I do not
have the right to grant such a nonexclusive license to the Company.
Notwithstanding the foregoing, I agree that I will not incorporate,
or permit to be incorporated, Prior Inventions in any Company
Inventions without the Company's prior written consent.
2.3. ASSIGNMENT OF INVENTIONS. Subject to Sections 2.4, and 2.6, I hereby
assign and agree to assign in the future (when any such Inventions
or Proprietary Rights are first conceived, reduced to practice or
fixed in a tangible medium, as applicable) to the Company all my
right, title and interest in and to any and all Inventions (and all
Proprietary Rights with respect thereto) whether or not patentable
or registrable under copyright or similar statutes, made or
conceived or reduced to practice or learned by me, either alone or
jointly with others, during the period of my employment with the
Company. Inventions assigned to the Company, or to a third party as
directed by the Company pursuant to this Section 2, are hereinafter
referred to as "COMPANY INVENTIONS."
2.4. NONASSIGNABLE INVENTIONS. This Agreement does not apply to an
Invention which qualifies fully as a nonassignable Invention under
Section 2870 of the California Labor Code (hereinafter "SECTION
2870"). I have reviewed the notification on Exhibit A (Limited
Exclusion Notification) and agree that my signature acknowledges
receipt of the notification.
2.5. OBLIGATION TO KEEP COMPANY INFORMED. During the period of my
employment and for twelve (12) months after termination of my
employment with the Company, I will promptly disclose to the Company
fully and in writing all Inventions authored, conceived or reduced
to practice by me, either alone or jointly with others that relate
to the Company's field of business or to the work I performed for
the Company during my employment ("Related Subsequent Inventions").
In addition, I will promptly disclose to the Company all patent
applications filed by me or on my behalf within a year after
termination of employment that claim or disclose Related Subsequent
Inventions. At the time of each such disclosure, I will advise the
Company in writing of any Inventions that I believe fully qualify
for protection under Section 2870; and I will at that time provide
to the Company in writing all evidence necessary to substantiate
that belief. The Company will keep in confidence and will not use
for any purpose or disclose to third parties without my consent any
confidential information disclosed in writing to the Company
pursuant to this Agreement relating to Inventions that qualify fully
for protection under the provisions of Section 2870. I will preserve
the confidentiality of any Invention that does not fully qualify for
protection under Section 2870.
2.6. GOVERNMENT OR THIRD PARTY. I also agree to assign all my right,
title and interest in and to any particular Invention to a third
party, including without limitation the United States, as directed
by the Company.
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
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2.7. WORKS FOR HIRE. I acknowledge that all original works of authorship
which are made by me (solely or jointly with others) within the
scope of my employment and which are protectable by copyright are
"works made for hire," pursuant to United States Copyright Act (17
U.S.C., Section 101).
2.8. ENFORCEMENT OF PROPRIETARY RIGHTS. I will assist the Company in
every proper way to obtain, and from time to time enforce, United
States and foreign Proprietary Rights relating to Company Inventions
in any and all countries. To that end I will execute, verify and
deliver such documents and perform such other acts (including
appearances as a witness) as the Company may reasonably request for
use in applying for, obtaining, perfecting, evidencing, sustaining
and enforcing such Proprietary Rights and the assignment thereof. In
addition, I will execute, verify and deliver assignments of such
Proprietary Rights to the Company or its designee. My obligation to
assist the Company with respect to Proprietary Rights relating to
such Company Inventions in any and all countries shall continue
beyond the termination of my employment, but the Company shall
compensate me at a reasonable rate after my termination for the time
actually spent by me at the Company's request on such assistance.
2.9. In the event the Company is unable for any reason, after reasonable
effort, to secure my signature on any document needed in connection
with the actions specified in the preceding paragraph, I hereby
irrevocably designate and appoint the Company and its duly
authorized officers and agents as my agent and attorney in fact,
which appointment is coupled with an interest, to act for and in my
behalf to execute, verify and file any such documents and to do all
other lawfully permitted acts to further the purposes of the
preceding paragraph with the same legal force and effect as if
executed by me. I hereby waive and quitclaim to the Company any and
all claims, of any nature whatsoever, which I now or may hereafter
have for infringement of any Proprietary Rights assigned hereunder
to the Company.
3. RECORDS. I agree to keep and maintain adequate and current records (in the
form of notes, sketches, drawings and in any other form that may be
required by the Company) of all Proprietary Information developed by me
and all Inventions made by me during the period of my employment at the
Company, which records shall be available to and remain the sole property
of the Company at all times.
4. ADDITIONAL ACTIVITIES. I agree that during the period of my employment by
the Company I will not, without the Company's express written consent,
engage in any employment or business activity which is competitive with,
or would otherwise conflict with, my employment by the Company. I agree
further that for the period of my employment by the Company and for one
(l) year after the date of termination of my employment by the Company I
will not induce any employee of the Company to leave the employ of the
Company.
5. NO CONFLICTING OBLIGATION. I represent that my performance of all the
terms of this Agreement and as an employee of the Company does not and
will not breach any agreement to keep in confidence information acquired
by me in confidence or in trust prior to my employment by the Company. I
have not entered into, and I agree I will not enter into, any agreement
either written or oral in conflict herewith.
6. RETURN OF COMPANY DOCUMENTS. When I leave the employ of the Company, I
will deliver to the Company any and all drawings, notes, memoranda,
specifications, devices, formulas, samples, and documents, together with
all copies thereof, and any other material containing or disclosing any
Company Inventions, Third Party Information or Proprietary Information of
the Company. I further agree that any property situated on the Company's
premises and owned by the Company, including disks and other storage
media, filing cabinets or other work areas, is subject to inspection by
Company personnel at any time with or without notice. Prior to leaving, I
will cooperate with the Company in completing and signing the Company's
termination statement.
7. LEGAL AND EQUITABLE REMEDIES. Because my services are personal and unique
and because I may have access to and become acquainted with the
Proprietary Information of the Company, the Company shall have the right
to enforce this Agreement and any of its provisions by injunction,
specific performance or other equitable relief, without bond and without
prejudice to any other rights and remedies that the Company may have for a
breach of this 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 EXCHANGE ACT OF 1934, AS
AMENDED.
3.
<PAGE> 91
8. NOTICES. Any notices required or permitted hereunder shall be given to the
appropriate party at the address specified below or at such other address
as the party shall specify in writing. Such notice shall be deemed given
upon personal delivery to the appropriate address or if sent by certified
or registered mail, three (3) days after the date of mailing.
9. NOTIFICATION OF NEW EMPLOYER. In the event that I leave the employ of the
Company, I hereby consent to the notification of my new employer of my
rights and obligations under this Agreement.
10. GENERAL PROVISIONS.
11. GOVERNING LAW; CONSENT TO PERSONAL JURISDICTION. This Agreement will be
governed by and construed according to the laws of the State of
California, as such laws are applied to agreements entered into and to be
performed entirely within California between California residents. I
hereby expressly consent to the personal jurisdiction of the state and
federal courts located in Orange County, California for any lawsuit filed
there against me by Company arising from or related to this Agreement.
11.1. SEVERABILITY. In case any one or more of the provisions contained in
this Agreement shall, for any reason, be held to be invalid, illegal
or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect the other provisions of this
Agreement, and this Agreement shall be construed as if such invalid,
illegal or unenforceable provision had never been contained herein.
If moreover, any one or more of the provisions contained in this
Agreement shall for any reason be held to be excessively broad as to
duration, geographical scope, activity or subject, it shall be
construed by limiting and reducing it, so as to be enforceable to
the extent compatible with the applicable law as it shall then
appear.
11.2. SUCCESSORS AND ASSIGNS. This Agreement will be binding upon my
heirs, executors, administrators and other legal representatives and
will be for the benefit of the Company, its successors, and its
assigns.
11.3. SURVIVAL. The provisions of this Agreement shall survive the
termination of my employment and the assignment of this Agreement by
the Company to any successor in interest or other assignee.
11.4. EMPLOYMENT. I agree and understand that nothing in this Agreement
shall confer any right with respect to continuation of employment by
the Company, nor shall it interfere in any way with my right or the
Company's right to terminate my employment at any time, with or
without cause.
11.5. WAIVER. No waiver by the Company of any breach of this Agreement
shall be a waiver of any preceding or succeeding breach. No waiver
by the Company of any right under this Agreement shall be construed
as a waiver of any other right. The Company shall not be required to
give notice to enforce strict adherence to all terms of this
Agreement.
11.6. ENTIRE AGREEMENT. The obligations pursuant to Sections 1 and 2 of
this Agreement shall apply to any time during which I was previously
employed, or am in the future employed, by the Company as a
consultant if no other agreement governs nondisclosure and
assignment of inventions during such period. This Agreement is the
final, complete and exclusive agreement of the parties with respect
to the subject matter hereof and supersedes and merges all prior
discussions between us. No modification of or amendment to this
Agreement, nor any waiver of any rights under this Agreement, will
be effective unless in writing and signed by the party to be
charged. Any subsequent change or changes in my duties, salary or
compensation will not affect the validity or scope of this
Agreement.
This Agreement shall be effective as of the first day of my employment
with the Company.
I HAVE READ THIS AGREEMENT CAREFULLY AND UNDERSTAND ITS TERMS. I HAVE
COMPLETELY FILLED OUT EXHIBIT B TO THIS AGREEMENT.
Dated:________________
[ * ] = 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 EXCHANGE ACT OF 1934, AS
AMENDED.
4.
<PAGE> 92
______________________________________
SIGNATURE
ACCEPTED AND AGREED:
CYTOVIA, INC.
By:_________________________________
Vice President of Operations
[ * ] = 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 EXCHANGE ACT OF 1934, AS
AMENDED.
5.
<PAGE> 93
EXHIBIT A
LIMITED EXCLUSION NOTIFICATION
THIS IS TO NOTIFY you in accordance with Section 2870 of the California
Labor Code that the foregoing Agreement between you and the Company does not
require you to assign or offer to assign to the Company any invention that you
developed entirely on your own time without using the Company's equipment,
supplies, facilities or trade secret information except for those inventions
that either:
(1) Relate at the time of conception or reduction to practice of the
invention to the Company's business, or actual or demonstrably anticipated
research or development of the Company;
(2) Result from any work performed by you for the Company.
To the extent a provision in the foregoing Agreement purports to require
you to assign an invention otherwise excluded from the preceding paragraph, the
provision is against the public policy of this state and is unenforceable.
This limited exclusion does not apply to any patent or invention covered
by a contract between the Company and the United States or any of its agencies
requiring full title to such patent or invention to be in the United States.
I ACKNOWLEDGE RECEIPT of a copy of this notification.
By:_________________________________
EMPLOYEE
Date:_______________________________
WITNESSED BY:
_________________________________
Dated:___________________________
[ * ] = 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 EXCHANGE ACT OF 1934, AS
AMENDED.
A-1.
<PAGE> 94
EXHIBIT B
TO: CYTOVIA, INC.
FROM: EMPLOYEE
DATE: _______________________
SUBJECT: PREVIOUS INVENTIONS
1. Except as listed in Section 2 below, the following is a complete list
of all inventions or improvements relevant to the subject matter of my
employment by CYTOVIA, INC. (the "COMPANY") that have been made or conceived or
first reduced to practice by me alone or jointly with others prior to my
engagement by the Company:
[ ] No inventions or improvements.
[ ] See below:
_______________________________________________________________
_______________________________________________________________
_______________________________________________________________
[ ] Additional sheets attached.
2. Due to a prior confidentiality agreement, I cannot complete the
disclosure under Section 1 above with respect to inventions or improvements
generally listed below, the proprietary rights and duty of confidentiality with
respect to which I owe to the following party(ies):
INVENTION OR IMPROVEMENT PARTY(ies) RELATIONSHIP
1. _________________________ _______________ ____________________
2. _________________________ _______________ ____________________
3. _________________________ _______________ ____________________
[ ] Additional sheets attached.
[ * ] = 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 EXCHANGE ACT OF 1934, AS
AMENDED.
A-1.
<PAGE> 95
[ * ] = 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 EXCHANGE ACT OF 1934, AS
AMENDED.
D-1
<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 EXCHANGE ACT OF 1934, AS
AMENDED.
EXHIBIT 10.124
FOURTH AMENDMENT TO AGREEMENT
This is the fourth amendment to the Research Collaboration and License
Agreement between MERCK & CO., INC., a corporation organized and existing under
the laws of New Jersey ("MERCK") and ARRIS PHARMACEUTICAL CORPORATION, a
corporation organized and existing under the laws of Delaware, now known as Axys
Pharmaceuticals, Inc. ("AXYS") made as of November 6, 1996 (the "Agreement").
The purpose of this fourth amendment is to increase the number of FTEs for the
period March 5, 2000 through November 5, 2000.
1. In accordance with the provisions of Section 2.8 and Section 5.2(d)
of the Agreement and subject to MERCK's right to terminate the Research Program
and the Agreement in accordance with Section 8.2, the parties agree that [ * ]
FTE's will be required during the period March 5, 2000 through November 5, 2000
payable at an annual rate of [ * ] per FTE.
2. Capitalized terms used and not otherwise defined herein shall have
the respective meanings set forth in the Agreement. The Agreement, together with
the first amendment dated November 18, 1999, and this fourth amendment contain
the entire understanding of the parties with respect to their subject matter.
All express or implied agreements and understandings, either oral or written,
heretofore made are expressly merged in and made a part of the Agreement as
amended by the first, second, third and fourth amendments. All other terms and
conditions of the Agreement, as amended, continue in full force and effect. The
Agreement and its amendments may be amended, or any term thereof modified, only
by a written instrument duly executed by both parties hereto.
IN WITNESS WHEREOF, the parties have entered into this Amendment as of
March 3, 2000.
MERCK & CO., INC. AXYS PHARMACEUTICAL, INC.
By: /s/ Mervyn Turner By: /s/ Michael Venuti 3/15/00
-------------------------------- ---------------------------------
[ * ] = 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 EXCHANGE ACT OF 1934, AS
AMENDED.
1.
<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, 2000,
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-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 48,484
<SECURITIES> 0
<RECEIVABLES> 4,861
<ALLOWANCES> 0
<INVENTORY> 2,072
<CURRENT-ASSETS> 57,656
<PP&E> 49,935
<DEPRECIATION> (31,681)
<TOTAL-ASSETS> 78,839
<CURRENT-LIABILITIES> 36,305
<BONDS> 0
0
0
<COMMON> 325,601
<OTHER-SE> 39,827
<TOTAL-LIABILITY-AND-EQUITY> 78,839
<SALES> 5,060
<TOTAL-REVENUES> 6,991
<CGS> 1,124
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 14,644
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 284
<INCOME-PRETAX> (8,492)
<INCOME-TAX> 0
<INCOME-CONTINUING> (8,492)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (8,492)
<EPS-BASIC> (0.26)
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