<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 12, 1999.
Registration No. ___-______
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SECURITIES AND EXCHANGE COMMISSION
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------------
AFFYMETRIX, INC.
(Exact Name of Registrant as Specified in its Charter)
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<S> <C>
DELAWARE 77-0319159
(State or Other Jurisdiction (I.R.S. Employer
of Identification
Incorporation or Organization) Number)
</TABLE>
3380 CENTRAL EXPRESSWAY
SANTA CLARA, CA 95051
(408) 731-5000
(Address, Including zip code, and telephone number, including
area code, of registrant's principal executive offices)
------------------------------
VERN NORVIEL
SENIOR VICE PRESIDENT AND GENERAL COUNSEL
AFFYMETRIX, INC.
3380 CENTRAL EXPRESSWAY
SANTA CLARA, CA 95051
(408) 731-5000
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
The Commission is requested to send copies of all communications to:
------------------------------
COPIES TO:
ROBERT V. GUNDERSON, JR., ESQ.
CARLA S. NEWELL, ESQ.
ROBERT C. SEPUCHA, JR., ESQ.
GUNDERSON DETTMER STOUGH VILLENEUVE FRANKLIN & HACHIGIAN, LLP
155 CONSTITUTION DRIVE
MENLO PARK, CALIFORNIA 94025
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
If the securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box. / /
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
------------------------------
CALCULATION OF REGISTRATION FEE
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<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED (1) UNIT (2) PRICE (2) REGISTRATION FEE
<S> <C> <C> <C> <C>
Common Stock, $0.01 par value per share.... 1,000,000 shares $57.875 $57,875,000.00 $16,089.25
</TABLE>
(1) Pursuant to Rule 416 of the Securities Act, this Registration Statement also
covers such indeterminable additional shares as may become issuable as a
result of any stock splits, stock dividends or similar transactions.
(2) The price of $57.875 per share, which was the average of the high and low
prices of the Common Stock on the Nasdaq National Market on July 8, 1999, is
set forth solely for the purpose of calculating the registration fee in
accordance with Rule 457(c) of the Securities Act of 1933, as amended.
The registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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<PAGE>
SUBJECT TO COMPLETION, DATED JULY 12, 1999
AFFYMETRIX, INC.
COMMON STOCK
------------------------
Investing in our common stock involves various risks. You should read "Risk
Factors" starting on page 6.
------------------------
The selling stockholder listed on page 24 is offering and selling 1,000,000
shares of our common stock under this prospectus.
The selling stockholder may offer its Affymetrix stock through public or
private transactions, on or off the Nasdaq National Market, at prevailing market
prices, or at privately negotiated prices.
Our common stock is traded on The Nasdaq National Market under the symbol
"AFFX." On July 8, 1999, the average of the high and low prices of our common
stock on The Nasdaq National Market was $57.875 per share.
------------------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
------------------------
The date of this prospectus is July , 1999.
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TABLE OF CONTENTS
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PAGE
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<S> <C>
The Business of Affymetrix................................................................................. 4
Recent Developments........................................................................................ 5
Risk Factors............................................................................................... 6
Forward-Looking Statements................................................................................. 23
Use of Proceeds............................................................................................ 23
Selling Stockholder........................................................................................ 24
Plan of Distribution....................................................................................... 25
Description of Capital Stock............................................................................... 25
Legal Matters.............................................................................................. 26
Experts.................................................................................................... 26
Where You Can Find More Information........................................................................ 27
</TABLE>
<PAGE>
THE BUSINESS OF AFFYMETRIX
We have developed and intend to establish our GeneChip system as the
platform of choice for acquiring, analyzing and managing complex genetic
information in order to improve the diagnosis, monitoring and treatment of
disease. Our GeneChip system consists of disposable DNA probe arrays containing
gene sequences on a chip, reagents for use with the probe arrays, a scanner and
other instruments to process the probe arrays, and software to analyze and
manage genetic information.
Our principle executive offices are located at 3380 Central Expressway,
Santa Clara, CA 95051 and our telephone number is (408) 731-5000.
------------------------
This prospectus includes trademarks of Affymetrix and other corporations.
------------------------
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RECENT DEVELOPMENTS
On May 12, 1999, we entered into an amendment to our standard
industrial/commercial single-tenant lease with Harry Locklin. This amendment
extended the term of our lease to April 30, 2003. A copy of this amendment is
attached as an exhibit to this prospectus.
On June 4, 1999, Oxford Gene Technology, or OGT, filed suit against us in
the United States District Court for the District of Delaware and in the United
Kingdom alleging infringement of United States Patent 5,700,637 and European
Patent 0-373-203, respectively. On June 17, 1999, we filed a complaint in the
United States District Court for the Northern District of California asking for,
among other things, a declaration that we have a valid license to use the
patents and that, in light of this license, we are not infringing on these
patents. For more information about these and other lawsuits we face, you should
read "Risk Factors--Our Business May Be Harmed by Significant Outstanding
Litigation."
On June 5, 1999, an asset transfer agreement with Beckman Coulter became
effective, giving us access to various assets, including licenses to United
States Patent 5,700,637 and European Patent 0-373-203. We disclosed a
transaction with Beckman that contemplated this asset transfer in our public
filings with the Securities Exchange Commission in August 1998.
On June 9, 1999, we loaned Susan E. Siegel, our senior vice president,
marketing and sales, $150,000. A copy of her promissory note is attached as an
exhibit to this prospectus.
On June 16, 1999, we filed an amended and restated certificate of
incorporation in Delaware. The amended certificate changed the authorized number
of shares of our stock. In particular, the amended certificate increased the
authorized number of shares of our common stock from 50 million shares to 75
million shares. In addition, the certificate decreased the authorized number of
our preferred stock from 27.5 million shares to 5 million shares.
On June 28, 1999, we entered into an addendum to our lease with Solar
Oakmead for the property located at 424-430 Oakmead Parkway in Sunnyvale,
California. The addendum extended our lease to December 31, 2002. A copy of this
addendum is attached as an exhibit to this prospectus.
On July 8, 1999, our board of directors elected Adrian Hennah to fill the
one vacancy on the board. On the same day, the board of directors approved an
amendment to our 1996 nonemployee directors stock option plan. A copy of the
amendment is attached as an exhibit to this prospectus.
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RISK FACTORS
WE ARE IN THE EARLY STAGES OF DEVELOPMENT AND COMMERCIALIZATION
For the most part, our technologies are still in the early stages of
development and we have just begun to incorporate our technologies into
commercialized products. Our GeneChip system has thus far been sold solely for
research use, and the majority of these sales have been for our expression-
monitoring application. In order to further develop and commercialize the
expression-monitoring, genotyping and disease management applications of our
GeneChip system and other potential products, we will need to make significant
additional investments, including funding efforts in bioinformatics, new
product, software and instrument design, manufacturing scale-up and quality
testing to ensure our products perform correctly and are cost-effective. In
addition, while our initial research product sales have either not required
regulatory approval or have been regulated only as analyte specific reagents, we
expect that we and our collaborators will need to obtain additional regulatory
approvals in the future. Obtaining such approvals, could be costly and
time-consuming and we can not be sure we will be able to obtain all necessary
approvals. Even if we develop our products for commercial use and obtain all
necessary regulatory approval, however, we may not be able to develop products
that:
- Are accepted by the research, diagnostic or other marketplaces;
- Are accurate and effective;
- Meet applicable regulatory standards in a timely manner;
- Are protected from competition by others;
- Do not infringe the intellectual proprietary rights of others;
- Can be manufactured in sufficient quantities or at a reasonable cost; or
- Can be marketed successfully.
Any failure to develop such products would seriously harm our business,
financial condition and results of operations.
WE HAVE A HISTORY OF LOSSES AND EXPECT TO INCUR LOSSES IN THE FUTURE
We have experienced significant operating losses each year since our
inception and expect these losses to continue for the next several years. For
example, we experienced net losses of approximately $12.2 million in 1996, $22.5
million in 1997 and $23.1 million in 1998. As of December 31, 1998, we had an
accumulated deficit of approximately $92.7 million. Our losses have resulted
principally from costs incurred in research and development and from general and
administrative costs associated with our operations. These costs have exceeded
our revenues and interest income, which, to date, have been generated
principally from product sales and technology access fees, collaborative
research and development agreements, government research grants and from cash
and investment balances. We expect to incur substantial additional operating
losses for at least the next two years as a result of increases in expenses for
manufacturing, marketing and sales capabilities, research and product
development and general and administrative costs. We may never achieve
profitability. Among other things, our ability to manage the transition to a
commercially successful company will depend upon our ability to:
- Establish our commercial manufacturing capability for probe arrays and
consistently achieve acceptable yields from those facilities;
- Cost-effectively manufacture components of the GeneChip system;
- Develop our marketing capabilities cost-effectively;
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- Establish sales and distribution capabilities cost-effectively;
- Enter into supply agreements with customers desiring to use our products;
- Develop products that are accepted by the marketplace;
- Create a product mix that is appealing to pharmaceutical and biotechnology
companies, academic research centers and clinical reference laboratories;
- Avoid infringing on the intellectual property rights of others;
- Enforce our intellectual property rights against others;
- Obtain necessary regulatory approvals; and
- Hire and retain qualified key personnel.
In addition, any delays in receipt of any necessary regulatory approvals or
any adverse developments with respect to our ability to enforce our intellectual
property relative to our competitors could seriously harm the successful
commercialization of our technologies.
OUR QUARTERLY OPERATING RESULTS ARE VOLATILE AND UNCERTAIN AND OUR FAILURE TO
MEET PUBLIC MARKET ANALYSTS' EXPECTATIONS WOULD HARM THE MARKET PRICE OF OUR
COMMON STOCK
Our quarterly operating results depend upon:
- The volume and timing of orders for GeneChip products;
- The timing of probe array, instrument and software deliveries and
installations;
- Our manufacturing capabilities;
- Variations in product yields and gross margins;
- Variations in revenue recognized under our supply and collaborative
agreements, including license fees, product sales, design fees,
milestones, royalties and other contract revenues;
- Our mix of products sold;
- The timing of new product introductions by us; and
- Variations in expenses incurred in connection with the operations of our
business, including legal fees, manufacturing facility start-up costs and
capital expenditures.
Our quarterly operating results may also fluctuate significantly depending
on factors out of our control, including:
- The introduction of new products by our competitors;
- Regulatory actions;
- Market acceptance of the GeneChip system and other potential products;
- The cost, quality and availability of reagents and components required to
manufacture or use our products;
- Changes in commercial and government funding of research using our
products; and
- Third-party reimbursement policies.
Because our revenues and operating results are volatile and difficult to
predict, we believe that period-to-period comparisons of our results of
operations are not a good indication of our future performance. It is likely
that in some future quarter or quarters, our operating results will be below the
expectations of public market analysts or investors. In such event, the market
price of our common stock may fall significantly.
7
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WE CURRENTLY HAVE LIMITED MANUFACTURING CAPACITY AND CONTINUE TO EXPERIENCE
VARIABILITY IN MANUFACTURING YIELDS
We are currently manufacturing limited quantities of probe arrays for
internal and collaborative purposes and for sale to the research market. We
currently have one manufacturing facility located in Sunnyvale, California. The
actual number of probe arrays we are able to sell or use depends on the
utilization of the capacity at this facility and the yield of probe arrays that
pass quality control testing as well as the number of probe arrays manufactured
on each wafer. Furthermore, portions of our production capacity are limited to
certain types of probe arrays. We have experienced and continue to experience
variability in the manufacturing yield of our GeneChip products which has
adversely impacted, and may continue to adversely impact, our gross margins and
business. We have also experienced and anticipate that we will continue to
experience difficulties in meeting anticipated customer and internal demand for
certain of our probe array products. Our inability to deliver products in a
timely manner could seriously harm our relationship with our customers and our
business, financial condition and results of operations.
OUR MANUFACTURING FACILITY MAY BE PRONE TO NATURAL DISASTERS
Our manufacturing equipment requires significant capital investment. We
presently rely on a single manufacturing facility for our probe arrays, fluidics
stations and software. This manufacturing facility is subject to natural
disasters such as earthquakes and floods. Earthquakes are of particular
significance since the manufacturing facility is located in an earthquake prone
area. Although we have built a second manufacturing facility, which we expect to
mitigate earthquake risks when it becomes operational in the second half of
1999, in the event that our existing manufacturing facilities are affected by
accidental or natural disasters, we could be unable to manufacture products for
sale or our capacity could be significantly decreased until the facilities are
replaced or restored to operation. If manufacturing operations were curtailed or
ceased it would seriously harm our business, financial condition and results of
operations.
WE HAVE A LIMITED HISTORY IN MANUFACTURING OUR PRODUCTS AND WE MAY ENCOUNTER
PROBLEMS AS WE INCREASE OUR MANUFACTURING EFFORTS
There are certain aspects of our manufacturing processes that are not fully
understood and that may not be readily scalable to allow for production of probe
arrays in larger volumes. As a result, manufacturing and quality control
problems will arise as we attempt to scale-up our manufacturing facilities. We
may not be able to scale-up these facilities in a timely and cost-effective
manner or at commercially reasonable cost. If we are unable to consistently
manufacture probe arrays on a timely basis because of these or other factors,
our business, financial condition and results of operations could be seriously
harmed.
OUR QUALITY CONTROL PROCEDURES MAY NOT BE SUFFICIENT TO ENSURE PROPER
PERFORMANCE OF OUR PRODUCTS
The GeneChip system is a complex set of products, which are produced in an
innovative and complicated manufacturing process. As part of this manufacturing
process, we test only selected probe arrays from each wafer and only selected
probes on such probe arrays against a number of performance criteria. We
therefore rely on limited internal quality control procedures to verify the
correct completion of the manufacturing process. In addition, we and our
customers rely on the accuracy of genetic sequence information contained in
databases upon which our products are based. It is therefore possible that probe
arrays that do not meet all of our performance specifications may not be
identified before they are shipped. After the probe arrays are shipped, a
customer may test only selected probes. Due to the complexity and limited
operating history of these products, we have experienced technical problems and
anticipate that additional technical problems will occur and be discovered as
more
8
<PAGE>
systems are placed into operation. If we are unable to consistently deliver
products to our customers that meet their performance expectations, demand for
our products will decline and our business, financial condition and results of
operations could be seriously harmed.
WE MAY HAVE TO RELY ON LICENSES FROM THIRD PARTIES FOR CERTAIN TECHNOLOGY
Our commercial success also depends in part on us neither infringing patents
or proprietary rights of third parties nor breaching any licenses that may
relate to our technologies and products. For example, we or our collaborators
and customers may need to acquire a license for an amplification technology to
use the GeneChip system in certain applications. Such license may not be
available on commercially reasonable terms. Furthermore, we are aware of
third-party patents that may relate to our technology. In addition, we have
received and may in the future receive notices claiming that we infringe third
party rights as well as invitations to take licenses under third party patents.
We cannot guarantee that we will not be determined to infringe on patents or
proprietary rights of third parties or that we, our collaborative partners or
our customers would be able to obtain a license to such patents or proprietary
rights on commercially acceptable terms, if at all.
We are aware of U.S. and European patents and patent applications owned by
Oxford Gene Technology that have issued or that are pending and may issue that
may relate to our technology. We have opposed two such allowed European patents.
Several of the applications have broad claims to certain array related
technology. In August 1998, we entered into a series of agreements with Beckman
Coulter designed to provide us with a path to obtain a license to these patents
and patent applications. On June 4, 1999, Oxford Gene Technology filed patent
infringement suits against us in the U.S. and in the U.K. asserting that it is
not obligated to grant us a license under a consortium clause in Oxford Gene
Technology's 1996 license agreement with Beckman Coulter. On June 5, 1999,
pursuant to the series of agreements we entered with Beckman Coulter, the
license agreement between Beckman Coulter and Oxford Gene Technology was
assigned to us. This series of agreements and their interpretation may be
challenged and, if interpreted adversely, we could be subject to an injunction
or damages that could delay or preclude sales of some or all of our products.
Any such delay or constraint would seriously harm our business, financial
condition and results of operations.
We have various option, supply and license agreements with third parties
that give us rights to use certain technologies. If we fail to maintain rights
to such technology it could have a material adverse effect on our business,
financial condition and results of operations. For example, our inability to
exercise the option for the University of California technology relating to
miniaturized polymerase chain reaction devices or other option agreements under
reasonable terms, or at all, could seriously harm our ability to sell integrated
device products.
OUR BUSINESS MAY BE HARMED BY SIGNIFICANT OUTSTANDING LITIGATION
We are parties to significant litigation, which will consume substantial
financial and managerial resources and which could seriously harm our business,
financial condition and results of operations. Further, because of the
substantial amount of discovery required in connection with any such litigation,
there is a risk that confidential information could be compromised by
disclosure.
On March 3, 1997, Hyseq filed a lawsuit in United States District Court for
the Northern District of California (San Jose Division) alleging that our
products infringe United States Patents 5,202,231 and 5,525,464. In addition, in
December 1997, Hyseq filed a second action claiming that our products infringe a
related patent, United States Patent 5,695,940. On August 18, 1998, we filed a
lawsuit in Federal District Court in the Northern District of California (San
Francisco Division) against Hyseq alleging infringement of U.S. Patent Nos.
5,795,716 and 5,744,305, or '305. On September 1, 1998, we added our U.S. Patent
No. 5,800,992, or '992, to the complaint of infringement against Hyseq.
9
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On June 4, 1999, Oxford Gene Technology, or OGT, filed suit against us in
the United States District Court for the District of Delaware and in the United
Kingdom alleging infringement of United States Patent 5,700,637 and European
Patent 0-373-203, respectively. On June 5, 1999, an asset transfer agreement
with Beckman Coulter became effective, giving us access to various assets,
including licenses to United States Patent 5,700,637 and European Patent
0-373-203. On June 17, 1999, we filed a complaint in the United States District
Court for the Northern District of California asking for, among other things, a
declaration that we have a valid license to use the patents and that, in light
of this license, we are not infringing on these patents.
The Hyseq and the Oxford Gene Technology actions seek damages based on the
sale of our products and processes and seek to enjoin commercial activities
relating to those products and processes. In addition to subjecting us to
potential liability for damages, these actions, and any other similar legal
actions against us or our collaborative partners, could require us or our
collaborative partners to obtain a license in order to continue to manufacture,
market or use the affected products and processes. While we believe that the
Hyseq and Oxford Gene Technology complaints are without merit, we may not
prevail in the these actions and we or our collaborative partners may not
prevail in any other related action. Moreover, in the event we do not prevail in
the Hyseq and Oxford Gene Technology actions and we, our partners or our
customers are required to obtain a license to continue to manufacture, market or
use the affected products and processes, we, our partners or our customers may
not be able to obtain such a license on commercially acceptable terms, if at
all. Furthermore, we have expended and are likely to continue to expend
substantial financial and managerial resources in defending against the claims
filed by Hyseq and Oxford Gene Technology.
On January 6, 1998, we filed a patent infringement action in the United
States District Court for the District of Delaware (No. 98-6) alleging that
certain of Incyte's and Synteni's products infringe United States Patent
5,445,934, or '934. On September 1, 1998, we filed a complaint against Incyte
and Synteni in Federal District Court in Delaware alleging infringement of the
'305 Patent and the '992 Patent. These actions were transferred to the United
States District Court for the Northern District of California on November 18,
1998, as case numbers C98-4507 and C98-4508, respectively. The actions seek to
enjoin commercial activities of Incyte and Synteni relating to our patents and,
in regard to the '992 Patent, sought a preliminary injunction. Incyte and
Synteni moved for summary judgement that certain claims of the '992 Patent were
invalid. On May 4, 1999, the Court denied our motion for preliminary injunction
and denied Incyte/Synteni's motion for summary judgement.
We may not prevail in asserting our patent rights against Hyseq, Incyte,
Synteni or others. We have expended and are likely to continue to expend
substantial financial and managerial resources in asserting our patent rights
against Hyseq, Incyte, Synteni and others. Our failure to successfully enforce
our patent rights or the loss of these patent rights or others would remove a
legal obstacle to competitors in designing probe array systems with similar
competitive advantages to our GeneChip technology. The removal of such barriers
could seriously harm our business, financial condition and results of
operations.
On April 17, 1998, Incyte filed a response and counterclaim to case number
C98-4507, asserting that the '934 Patent is invalid and not infringed. On April
17, 1998, Incyte also filed a counterclaim alleging that a patent license
agreement we entered into in December 1997 with Molecular Dynamics interfered
with an agreement between Incyte and Molecular Dynamics. In the counterclaim,
Incyte alleges that the terms of our patent license to Molecular Dynamics
prevented Molecular Dynamics from meeting its obligations to Incyte. Incyte
seeks damages from us. On September 21, 1998, Incyte and Synteni filed an answer
asserting various defenses to the lawsuits in relation to the '992 Patent and
the '305 Patent, and asserted several counterclaims, including:
- A request for declaration of non-infringement and invalidity;
- An assertion of unfair competition;
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- A request for a declaration that Synteni and Dari Shalon (a one time
employee of Synteni) have not misappropriated any of our trade secrets;
- A claim of tortious interference with Incyte's and Synteni's economic
advantage;
- A claim of slander of title of a patent and a claim of trade libel.
We believe that the counterclaims are without merit. However, we have
expended and are likely to continue to expend significant financial and
managerial resources defending against these and any other counterclaims filed
by Incyte and Synteni. Our failure to successfully enforce our patent rights or
defend against counterclaims of Incyte, Synteni, or others could seriously harm
our business, financial condition and results of operations.
The United States Patent and Trademark Office, or USPTO, notified us that
Stanford University presented claims that relate to substantially the same
subject matter as certain claims from the '992 Patent and all of the claims of
the '305 Patent. The Stanford application is alleged to be exclusively licensed
to Incyte. The USPTO notified us on April 2, 1999 that it had declared an
interference proceeding relating to these patents and claims of patents. The
USPTO will conduct proceedings to determine the priority of these claims. We
will expend substantial financial and managerial resources as a result of these
proceedings. Moreover, we may not prevail in such proceedings. Such a failure to
prevail could result in our inability to commercialize our products and to
prevent others from copying aspects of our products.
OUR SUCCESS DEPENDS ON OUR ABILITY TO KEEP PACE WITH THE LATEST TECHNOLOGICAL
CHANGES
Expression monitoring, polymorphism analysis and disease management
technologies have undergone and are expected to continue to undergo rapid and
significant change. Our future success will depend in large part on our ability
to maintain a competitive position with respect to these and future
technologies. Rapid technological development by us or others may result in our
products or technologies becoming obsolete. In addition, products offered by us
could be made obsolete by less expensive or more effective tests based on other
technologies or by new therapeutic or prophylactic agents that obviate the need
for the information our products generate. Moreover, our efforts to develop
research and disease management products based on our technologies will be
subject to the risks of failure inherent in the development of products based on
new technologies. These risks include:
- The potential discovery that these technologies will be found to be
ineffective, unreliable or unsafe;
- Difficulties in manufacturing our products cost effectively;
- Difficulties in marketing our products on a large scale;
- The existence of third party proprietary rights precluding us or our
collaborative partners from manufacturing, using or selling products;
- The development of superior products by third parties; or
- The failure to receive necessary regulatory clearances.
If we are unable to develop the enhancements to our technology necessary to
compete successfully with newly emerging technologies, or if we are unable to
develop products based on these technologies, our business, financial condition
and results of operations will be seriously harmed.
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OUR SUCCESS DEPENDS ON MARKET ACCEPTANCE OF OUR PRODUCTS AS AN ALTERNATIVE TO
CURRENT TECHNOLOGIES
The commercial success of our GeneChip system will depend upon market
acceptance by pharmaceutical and biotechnology companies, academic research
centers and clinical reference laboratories. Market acceptance will depend on
many factors, including:
- Convincing researchers that the GeneChip system is an attractive
alternative to other technologies for the acquisition, analysis and
management of genetic information;
- Our ability to manufacture products with acceptable variations in quality
or performance;
- Our ability to provide our customers with software that enables the
integration and analysis of large volumes of genetic and other
experimental data;
- The cost of our GeneChip system and access to probe arrays, which may
deter certain potential customers of our products;
- Any failure by us in placing and servicing sufficient quantities of the
GeneChip system;
- Limitations in funding for commercial and academic research organizations
that are the potential customers for the GeneChip system;
- The receipt of regulatory clearances in the United States, Europe, Japan
and elsewhere;
- The availability of genetic content including proprietary markers that may
be important for incorporation into our probe arrays;
- Ethical concerns, which may limit the use of the GeneChip system for
certain disease management applications or the analysis of genetic
information;
- The ability of laboratories to license other technologies, such as
amplification technologies that may be required to use the GeneChip system
for certain applications; and
- The inability of potential customers to employ skilled laboratory
technicians necessary to operate the GeneChip system.
Because of these and other factors, our products may not gain market
acceptance.
WE FACE INTENSE COMPETITION IN OUR CURRENT AND POTENTIAL MARKETS
Competition in our existing and potential markets is intense and expected to
increase. Currently, our principal competition comes from existing technologies
and other DNA array technologies that are used to perform many of the same
functions for which we market our GeneChip systems. In order to compete against
existing and newly developed technologies and maintain pricing and gross
margins, we will need to be successful in asserting our patents in the DNA array
field and in demonstrating to potential customers that the GeneChip system
provides improved performance and capabilities.
In the expression monitoring and polymorphism analysis fields, existing
competitive technologies include gel-based sequencing performed using
instruments provided by companies such as the Applied Biosystems division of
Perkin-Elmer and Amersham Pharmacia Biotech. A large number of publicly-traded
and privately-held companies including CuraGen, Gene Logic, General Scanning
Inc., Genetic MicroSystems, Genome Solutions Hewlett Packard, Hitachi,
Incyte/Synteni and Motorola also are developing or have developed DNA probe
based assays or other products and services, some of which may be competitive
with ours.
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Our principal sales representative, Amersham Pharmacia Biotech and its
wholly owned subsidiary, Molecular Dynamics, offer products based on licenses of
our patents that are potentially competitive with our products. Amersham
Pharmacia Biotech's and Molecular Dynamics' commercial activities with respect
to their competing products may seriously harm our sales and supply agreements.
WE HAVE RELIED AND EXPECT TO CONTINUE TO RELY ON A LIMITED NUMBER OF CUSTOMERS
FOR A SIGNIFICANT PORTION OF OUR REVENUES
Our customers are concentrated in a small number of pharmaceutical and
biotechnology companies, academic research centers and clinical reference
laboratories. For example, in 1998, two of our customers accounted for 20% and
16% of total revenues, respectively. As a result of the significance of a few
customers, our business, financial condition and results of operations may be
seriously harmed by a limited number of customers. Furthermore, there are only
three major reference laboratories in the United States, two of which are
associated with large pharmaceutical companies. For a variety of reasons, these
affiliations may cause the laboratories to elect not to purchase GeneChip
systems. A decision by these reference laboratories to not purchase our GeneChip
technology could adversely impact our business, results of operations and
financial condition. In addition, our dependence on sales to a few customers may
strengthen the negotiating position of our potential customers, which, in turn,
could reduce the sales price of the GeneChip system and seriously harm our
business, financial condition and results of operations.
Several of our current customers have announced plans to merge, and further
consolidation in the pharmaceutical and biotechnology industries is generally
expected to occur. Planned or future consolidation among our current and
potential customers could decrease or slow aggregate sales of our technology and
shrink the research market our products target. Any such consolidation could
seriously harm our business, financial condition and results of operations.
In addition, we believe that the sales cycle for the GeneChip system will be
lengthy due to the need to educate potential customers about its
characteristics. Our failure to gain additional customers, the loss of any
customer or a significant reduction in the level of sales to any customer would
seriously harm our business, financial condition and results of operations.
WE DEPEND ON OUR ABILITY TO INCREASE AND SUSTAIN OUR INTERNATIONAL OPERATIONS
We intend to expand our international presence in order to increase our
export sales. Export sales to international customers entail a number of risks,
each of which could seriously harm our business, financial condition and results
of operations. These risks include:
- Unexpected changes in, or impositions of, legislative or regulatory
requirements;
- Delays resulting from difficulty in obtaining export licenses for certain
technology, tariffs, quotas and other trade barriers and restrictions;
- Longer payment cycles and greater difficulty in accounts receivable
collection;
- Potentially adverse taxes;
- Currency exchange fluctuations;
- The burdens of complying with a variety of foreign laws; and
- Other factors beyond our control.
We are also subject to general geopolitical risks in connection with
international operations, such as political, social and economic instability,
potential hostilities and changes in diplomatic and trade relationships.
Although we have not to date experienced any material adverse effect on our
operations
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as a result of such regulatory, geopolitical and other factors, such factors may
seriously harm our operations in the future or require us to modify our current
business practices.
OUR EXISTING PRODUCTS MAY NOT BE COMMERCIALLY VIABLE
We first introduced our GeneChip system in April 1996 with its first
commercial disease management application, an HIV probe assay designed to detect
mutations in HIV, the virus that causes AIDS. The HIV probe array provides
sequence information from the reverse transcriptase and protease genes of HIV,
and the system includes a fluidics station, a scanner, a workstation, a
hybridization oven and related software. In July 1997, we introduced our second
commercially available disease management product, the p53 tumor suppressor gene
assay for research use, which was developed in collaboration with Gene Logic. In
November 1997, we introduced our third commercially available disease management
product, the p450 assay for determining variations in two members of the CYP450
gene family. We have also entered into several supply and collaborative
agreements pursuant to which we are supplying GeneChip systems and expression
and genotyping probe arrays for research purposes.
Because our products and systems have been in operation for a limited period
of time, their accuracy and efficacy have not been fully established.
Accordingly, any of the following adverse events may occur, each of which would
seriously undermine our business, financial condition and results of operations:
- The accuracy of the probe arrays in providing sequence information may not
be equal to or better than current technologies, such as gel-based
sequencing techniques;
- The probe arrays may not provide commercially useful information;
- The probe arrays or the GeneChip system may experience operational
difficulties;
- We may experience manufacturing problems or marketing difficulties selling
the probe arrays to pharmaceutical and biotechnology companies, academic
research centers and clinical reference laboratories;
- Cost containment pressures for biomedical research and patient management
may limit the price we may be able to charge potential customers for our
probe arrays;
- Newly identified genetic information or incorrect genetic information
deposited in the sequence databases upon which we and our customers rely
may require us to redesign our current probe arrays or develop new probe
arrays;
- Technicians may not have adequate training to use the GeneChip system or
interpret the results generated from the system;
- The probe arrays and associated reagents may not gain regulatory approval
for clinical use; or
- Advanced therapies could be discovered that obviate the need for certain
probe arrays.
WE RELY HEAVILY ON OUR COLLABORATIVE PARTNERS
An important element of our business strategy involves collaborations with
pharmaceutical, diagnostic, biotechnology, bioinformatics, analytical instrument
and reagent companies as well as with academic researchers to help develop,
test, manufacture, sell and service our GeneChip technology. We have significant
collaborations with Amersham Pharmacia Biotech, Amersham Pharacia Biotech KK,
Hewlett Packard, bioMerieux and Roche Molecular Systems and we have entered into
a consortium with the Whitehead Institute, Millennium Pharmaceuticals and
Bristol-Myers Squibb.
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We have received a material portion of our revenue since inception from
these and other collaborative partners. We also intend to enter into
collaborative arrangements with other companies to expand our operations, apply
our technology, and commercialize potential future products. Our present or
future collaborative partners may not be able to perform their obligations as
expected or devote sufficient resources to the development, clinical testing,
supply or marketing of our potential products developed under these
collaborations. Moreover, any of the following developments could seriously harm
our business, financial condition and results of operations:
- One of our partners develops technologies or components competitive with
our GeneChip system;
- Our existing collaborations preclude us from entering into additional
arrangements;
- Failure of our partners to obtain timely regulatory approvals;
- Premature termination of an agreement;
- One of our partners' failure to devote sufficient resources to the
development and commercialization of our products; or
- Inability of one of our partners to supply products to us.
In addition, our agreements with our collaborators may have provisions that
allow for termination or give rise to disputes regarding the rights and
obligations of the parties. These and other possible disagreements could lead to
termination of the agreement or delays in collaborative research, development,
supply or commercialization of certain products, or could require or result in
litigation or arbitration. Any such delay, litigation or arbitration could
seriously harm our business, financial condition and results of operations.
Accordingly, any of our collaborations may prove to be unsuccessful. Likewise,
we may not be able to negotiate future collaborative arrangements on acceptable
terms, if at all.
OUR LIMITED ABILITY TO PROTECT OUR INTELLECTUAL PROPERTY AND PROPRIETARY RIGHTS
MAY HARM OUR COMPETITIVENESS
Our competitive position in the future will depend in large part on our
ability to do the following:
- Strengthen and defend our patent position;
- Preserve our copyrights and trade secrets;
- Operate without infringing the proprietary rights of third parties; and
- Acquire licenses related to enabling technology or products used with our
GeneChip technology.
Our failure to successfully do any of these things will seriously harm our
business, financial condition and results of operations.
Moreover, the patent positions of pharmaceutical and biotechnology companies
are generally uncertain and involve complex legal and factual questions. We
believe that there will continue to be significant litigation in the industry
regarding patent and other intellectual property rights. As a result, we cannot
guarantee any of the following:
- That any of our pending patent applications will result in issued patents;
- That we will develop additional technologies that are patentable;
- That any patents issued to us or our strategic partners will provide a
basis for commercially viable products;
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- That any patents issued to us or our strategic partners will provide us
with any competitive advantages;
- That any patents issued to us or our strategic partners will not be
challenged by third parties; or
- That the patents of others will not have an adverse effect on our ability
to do business.
In addition, patent law relating to the scope of claims in the technology
fields in which we operate is still evolving and the extent of future protection
for our proprietary rights is uncertain.
Others may independently develop similar or alternative technologies,
duplicate any of our technologies, or design around or invalidate our patented
technologies. In addition, we have and expect to continue to incur substantial
costs in litigation to defend against the patent suits brought by third parties
and when we initiate such suits. In addition, administrative proceedings, such
as interferences, in the United States Patent Office could substantially impact
the scope of our patent protection as well as result in the expenditure of
substantial funds in legal fees. We have been notified that third parties are
attempting to copy certain claims from two of our issued U.S. patents. As a
result of these attempts, an interference was declared on April 2, 1999. We may
not prevail in such proceedings. Other third parties may attempt to copy claims
of our patents to provoke interferences in the future.
Others have filed, and in the future are likely to file, patent applications
that are similar or identical to those of us or those of our licensors. To
determine the priority of inventions, we will have to participate in
interference proceedings declared by the United States Patent and Trademark
Office that could result in substantial cost to us. We cannot assure you that
any such patent applications will not have priority over our patent
applications.
WE RELY ON THIRD PARTY SUPPLIERS FOR MANY COMPONENTS OF OUR GENECHIP SYSTEM
We rely on Hewlett-Packard to manufacture and service our scanners and on
Enzo to manufacture certain reagents used with probe arrays. Our scanner,
introduced in April 1997, is obtained from Hewlett-Packard under a supply
agreement that expires in 2003. We are dependent on Hewlett-Packard for quality
testing and service of this instrument. Certain labeling kits needed to process
samples on GeneChip probe arrays are supplied to us by Enzo under a supply
agreement that expires in 2001. We are obligated to purchase certain labeling
kits from Enzo or compensate Enzo for any lost sales of these reagents.
Certain key parts of the GeneChip system, such as the scanner, certain
reagents kits and lithographic masks as well as certain raw materials used in
the synthesis of probe arrays, are currently available only from a single source
or a limited number of sources. No assurance can be given that scanners,
reagents, lithographic masks or other components of the GeneChip system will be
available in commercial quantities under acceptable terms. Even if alternative
sources of supply are available, it could be time consuming and expensive for us
to qualify new vendors. In addition, we are dependent on our vendors to provide
components of appropriate quality and reliability and to meet applicable
regulatory requirements. Consequently, in the event that supplies from these
vendors were delayed or interrupted for any reason, we could be delayed in our
ability to develop and deliver products to our customers. Any such delay could
seriously harm our business, financial condition and results of operations.
WE MAY NEED TO RAISE ADDITIONAL CAPITAL THAT MAY NOT BE AVAILABLE
We anticipate that our existing capital resources, including the proceeds of
approximately $32.5 million from the private placement of 1,000,000 shares of
our common stock in March 1999, will enable us to maintain currently planned
operations through at least the year 2000. However, this expectation is based on
our current operating plan, which is expected to change as a result of many
factors, and we may need additional funding sooner than anticipated. In
addition, we may choose to
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raise additional capital due to market conditions or strategic considerations
even if we believe we have sufficient funds for our current or future operating
plans. To the extent that additional capital is raised through the sale of
equity or convertible debt securities, the issuance of such securities could
result in dilution to our stockholders.
We have no credit facility or other committed sources of capital. To the
extent operating and capital resources are insufficient to meet future
requirements, we will have to raise additional funds to continue the development
and commercialization of our technologies. Moreover, such funds may not be
available on favorable terms, or at all. If adequate funds are not available on
attractive terms, we may be required to curtail operations significantly or to
obtain funds by entering into financing, supply or collaboration agreements on
unattractive terms. Our inability to raise capital would seriously harm our
business, financial condition and results of operations.
OUR MANUFACTURING IS SUBJECT TO REGULATORY COMPLIANCE AND MAY BE AFFECTED BY THE
INTRODUCTION OF NEW TECHNOLOGY
We must comply with the FDA's regulations for sale of analyte specific
reagents, or ASRs, in the United States, ISO standards for sale of products in
Europe, as well as other standards prescribed by various federal, state and
local regulatory agencies in the United States and other countries. Although we
have filed an application for the registration of the manufacturing site for our
arrays as ASRs, we cannot guarantee that we will be able to comply with the
regulations at reasonable costs.
As our technologies evolve, new manufacturing techniques and systems will be
required. For example, it is anticipated that additional automated processing
systems will be needed to meet our future probe array demand. Further, as
products requiring increased density are developed, miniaturization of the
features on the arrays will be necessary. This will require new or modified
manufacturing equipment and processes. We cannot be sure that we will be able to
develop or access new manufacturing technologies.
WE HAVE LIMITED SALES, MARKETING AND TECHNICAL SUPPORT EXPERIENCE, WHICH MAY
HURT OUR EFFORTS AT SELLING OUR PRODUCTS
We are marketing our products to pharmaceutical and biotechnology companies,
academic research centers and clinical reference laboratories. We currently have
a limited direct sales, marketing and technical support organization and we have
entered into a non-exclusive sales agency agreement with Amersham Pharmacia
Biotech, a distribution agreement with Amersham Pharmacia Biotech KK, and a
service agreement with Hewlett Packard for our GeneArray scanner. Our existing
organization and relationships may not be sufficient and we may be required to
expand our organization and enter into additional collaboration or distribution
arrangements to commercialize our products both inside and outside the United
States. We cannot assure you that:
- We will be able to establish a sufficiently sized sales, marketing or
technical support organization;
- Amersham Pharmacia Biotech or Amersham Pharmacia Biotech KK will be
successful in distributing our products;
- Amersham Pharmacia Biotech or Amersham Pharmacia Biotech KK will not sell
competitive products;
- Hewlett Packard will be successful in servicing our instruments and not
become our competitor; or
- We will be able to establish additional collaborative or distribution
arrangements to sell, market and service our products.
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Failure to develop our sales, market and technical support capabilities would
have a material adverse effect on our business, financial condition and results
of operations.
CHANGES IN GOVERNMENT FUNDING OF RESEARCH INSTITUTIONS COULD HARM OUR BUSINESS
A significant portion of our products for research use are likely to be sold
to universities, government research laboratories, private foundations and other
institutions where funding is dependent upon grants from government agencies,
such as the National Institute of Health. Research funding by the government,
however, may be significantly reduced in the future. Any such reduction may
seriously affect the ability of our existing and prospective research customers
to purchase our products for research use. In addition, we have received and
expect to continue to receive significant funds under various United States
government research and technology programs including the advanced technology
program, or ATP. Funding of the ATP grant expires in January 2000 and the 1999
budget has not yet been approved. Consequently, there can be no assurance that
we will complete work under the ATP and we may not receive any of the $8.6
million funding remaining on the grant and any funding that is not spent before
completion of the grant will no longer be available to us. Our failure to
receive this funding from the ATP could have a serious adverse effect on our
business. There can be no assurance that additional grants or other sources of
funding will be available following completion of the ATP grant to allow for
commercialization of products resulting from this funded research. Our failure
to obtain sources of future funding for this research could seriously harm our
business, financial condition and results of operations.
OUR BUSINESS MAY BE THREATENED BY SERIOUS ETHICAL, LEGAL AND SOCIAL IMPLICATIONS
OF GENETIC TESTING
Our success will depend in part upon our ability to develop tests for
specific genetic information discovered by us and others. These genetic tests
have given rise to some difficult issues, including:
- Genetic tests such as certain of our GeneChip assays may be difficult to
perform and interpret and may lead to misinformation or misdiagnosis;
- Even when a genetic test identifies the existence of a mutation in an
individual, the interpretation of the result is often limited to the
identification of a statistical probability that the tested individual
will develop a particular disease or condition;
- Once available, such tests may be subject to ethical concerns or
reluctance to administer or pay for tests for conditions that are not
treatable; and
- The possibility that specific gene-based diagnostic tests marketed by
other companies could encounter public resistance, thereby resulting in
societal and governmental concerns regarding genetic testing in general.
The prospect of broadly available genetic predisposition testing has raised
issues regarding the appropriate utilization and the confidentiality of
information provided by such testing. It is possible that discrimination by
insurance companies could occur through:
- An increase in premiums by insurers to prohibitive levels;
- Outright cancellation of insurance; or
- Unwillingness to provide coverage to patients shown to have a genetic
predisposition to a particular disease.
In addition, employers could discriminate against employees with a genetic
predisposition to develop a particular disease. Finally, governmental
authorities could limit the use of genetic testing or prohibit testing for
genetic predisposition to certain conditions which could adversely affect the
use of our products. As a result, ethical concerns about genetic testing may
seriously affect market acceptance
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of our GeneChip system or give rise to legislative restrictions in some
countries adversely affecting markets, and thereby seriously harm our business,
financial condition and results of operations.
WE DEPEND ON CERTAIN KEY PERSONNEL
We are highly dependent on the principal members of our management and
scientific staff. The loss of services of any of these persons could have a
serious adverse effect on our product development and commercialization efforts.
In addition, research, product development and commercialization will require
additional skilled personnel in areas such as bioinformatics, organic chemistry,
information services, regulatory affairs, manufacturing, sales, marketing and
technical support.
There is a shortage of such skilled personnel, which is likely to continue
for some time. As a result, competition for these people, particularly for
employees with technical expertise, is intense and the turnover rate for these
people is high. If we are unable to hire, train and retain a sufficient number
of qualified employees, our business, financial condition and results of
operations could be seriously harmed. This inability could also hinder the
planned expansion of our business.
In addition, we rely on our scientific advisors and consultants to assist us
in formulating our research, development and commercialization strategy. All of
the scientific advisors and consultants are engaged by employers other than us
and have commitments to other entities that may limit their availability to us.
Some of our scientific advisors and consultants also consult for companies that
may be our competitors. If we are unable to retain our scientific advisors and
consultants, our business, financial condition and results of operations could
be adversely harmed.
WE MAY BE EXPOSED TO LIABILITY DUE TO PRODUCT DEFECTS
Our business exposes us to potential product liability claims that are
inherent in the testing, manufacturing, marketing and sale of human diagnostic
and therapeutic products. We intend to acquire additional insurance, should it
be desirable, for clinical liability risks. We may not be able to obtain such
insurance or general product liability insurance on acceptable terms or at
reasonable costs. In addition, such insurance may not be in sufficient amounts
to provide us with adequate coverage against potential liabilities. A product
liability claim or recall could seriously harm our business, financial condition
and results of operations.
GLAXO OWNS A SUBSTANTIAL PORTION OF OUR OUTSTANDING STOCK
Glaxo Wellcome, plc and its affiliates currently beneficially own
approximately 32% of our outstanding common stock. In March 1998, we sold Glaxo
$49.9 million of Series AA preferred stock, which is convertible subject to
certain conditions into an additional 1,257,229 shares of common stock. On an
as-converted basis, Glaxo owns approximately 35% of our common stock. Although
we have executed a governance agreement and voting trust agreement with Glaxo,
Glaxo nevertheless may be able to influence the outcome of shareholder votes,
including votes concerning the election of directors, adoption of amendments to
our certificate of incorporation and bylaws and approval of mergers and other
significant corporate transactions.
WE HAVE VARIOUS MECHANISMS IN PLACE TO DISCOURAGE TAKEOVER ATTEMPTS
In October 1998, we adopted a stockholder rights plan and change of control
policy. The purpose of the stockholder rights plan is to allow us and our board
of directors an opportunity to deal responsibly with parties that attempt to
gain a control position in our company without the approval of the board of
directors. The purpose of the change of control policy is to ensure that our
employees are treated fairly in the event of a change of control of us. Our
stockholder rights plan and change of control policy may discourage, delay or
prevent a change in control of us that a stockholder may consider favorable.
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In addition, certain provisions of our certificate of incorporation and
bylaws may discourage, delay or prevent a change in control of us that a
stockholder may consider favorable. These provisions include:
- Authorizing the issuance of "blank check" preferred stock;
- Prohibiting cumulative voting in the election of directors;
- Requiring the super-majority voting to effect certain amendments to our
certificate of incorporation and bylaws;
- Limiting the persons who may call special meetings of stockholders;
- Prohibiting stockholder action by written consent; and
- Establishing advance notice requirements for nominations for election to
the board of directors or for proposing matters that can be acted upon by
stockholders at stockholder meetings.
In addition, certain provisions of Delaware law and our stock incentive
plans as well as recent and anticipated rulings from the Securities and Exchange
Commission relating to the accounting for acquisitions may discourage, delay or
prevent a change in control.
OUR STOCK PRICE HAS BEEN AND MAY CONTINUE TO BE VOLATILE
The market price of our common stock since our initial public offering in
June 1996 has increased dramatically and has been highly volatile. This
volatility has been caused by the following factors, some of which are beyond
our control:
- Announcements of our results of research activities;
- Quarterly variations in our operating results;
- New collaborative agreements;
- Technological innovations by ourselves and our competitors;
- Announcements of new commercial products and initiatives by us,
collaborative partners or competitors;
- Changes in government regulation or new regulatory actions;
- Changes in patent laws;
- Developments concerning proprietary rights;
- Developments in litigation initiated against us or by us; and
- Fluctuations in the stock market price and volume of traded shares
generally, especially fluctuations in the traditionally volatile
technology and biotechnology sectors.
WE ARE AT RISK OF SECURITIES CLASS ACTION LITIGATION DUE TO STOCK PRICE
VOLATILITY
In the past, securities class action litigation has often been brought
against a company following periods of volatility in the market price of its
securities. Due to the potential volatility of our stock price, we may be the
target of such litigation in the future. Securities litigation could result in
substantial costs and divert management's attention and resources, which could
seriously harm our business, financial condition and results of operations.
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OUR BUSINESS COULD BE AFFECTED BY YEAR 2000 COMPUTER PROBLEMS
We are assessing the potential impact of the Year 2000 computer problem on
our products (including GeneChip systems and software), information systems,
embedded systems (including computers used in its manufacturing process) and on
the ability of certain third parties to supply critical materials and services
as well as the readiness of certain customers. We completed the assessment of
our products, computer systems, embedded systems, certain third party suppliers
and major customers in the second quarter of 1999, and plan to take necessary
remediation action by the end of 1999. While we do not anticipate a material
business interruption to result from the Year 2000 problem, we cannot guarantee
that our products or systems will be Year 2000 ready. In addition, we could be
seriously affected by the lack of Year 2000 readiness of key third party
suppliers and service providers and major customers. We cannot guarantee that we
or third parties will be Year 2000 ready. Finally, we are also subject to
external forces that might generally affect industry and commerce, such as
utility and transportation failures. We have not yet developed a contingency
plan to address situations that may result if we or certain third parties are
unable to achieve Year 2000 readiness. If any of our products, information
systems, embedded systems, key third party suppliers and services providers and
major customers are not Year 2000 ready, we may experience a business
interruption which would seriously harm our business, results of operations and
financial condition.
COMPLIANCE WITH GOVERNMENT REGULATION IS CRITICAL TO OUR BUSINESS
Many of our products, including our diagnostic products, will be regulated
as medical devices and therefore be subject to approval by the United States
Food and Drug Administration. Unless exempted by government regulation, there
are two primary methods for securing FDA approval.
First, the FDA determines that the proposed medical device can be marketed
in the United States because it is substantially equivalent to an existing
medical device already in the United States market and issues what is known as a
510(k) pre-market notification clearance. Second, the FDA may require that the
new device satisfy a more in depth approval process, known as pre-market
approval, or PMA. Both the 510(k) clearance and the PMA processes may require
the presentation of a substantial volume of clinical data, as well as a
substantial review, thereby delaying the introduction of the new device into the
market. Moreover, the PMA process requires extensive clinical studies,
manufacturing information (including demonstration of compliance with quality
systems requirements) and likely review by a panel of experts outside the FDA.
FDA review of a PMA application could take significantly longer than that for a
510(k) application, thereby further delaying the introduction of the new medical
device into the market. Finally, even if the FDA approves the new device, it may
impose restrictions on our ability to market the device.
We cannot assure you that we will or our collaborators will be able to meet
the FDA's requirements or receive FDA clearance for our products. Moreover, even
if we are exempt from approval or even if we receive clearance, the FDA may
impose restrictions on our marketing efforts. Finally, delays in the approval
process may cause us to introduce our products into the market later than
anticipated. Any failure to obtain regulatory approval, restrictions on our
ability to market our products, or delay in the introduction of our products to
the market could seriously harm our business, financial condition and results of
operations.
Moreover, medical device manufacturers are subject to periodic inspections
by the FDA and state agencies. If the FDA believes that a company is not in
compliance with applicable laws or regulations, it can take any of the following
actions:
- Issue a warning or other letter notifying the particular manufacturer of
improper conduct;
- Impose civil penalties;
- Detain or seize products;
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- Issue a recall;
- Ask a court to seize products;
- Enjoin future violations;
- Withdraw clearances or approvals; or
- Assess civil and criminal penalties against us, our officers or our
employees.
If we fail to comply with the FDA's requirements and are subject to any of the
actions mentioned above, our business, financial condition or results of
operations would be seriously harmed.
Medical device laws and regulations are also in effect in many of the
countries in which we may do business outside the United States. These laws and
regulations range from comprehensive device approval requirements for some or
all of our medical device products to requests for product data or
certifications. The number and scope of these requirements are increasing. We
may not be able to obtain regulatory approvals in such countries and we may be
required to incur significant costs in obtaining or maintaining our foreign
regulatory approvals. In addition, the export of certain of our products which
have not yet been cleared for domestic commercial distribution may be subject to
FDA export restrictions. Any failure to obtain product approvals in a timely
fashion or to comply with state or foreign medical device laws and regulations
may seriously harm our business, financial condition or results of operations.
We are also subject to numerous environmental and safety laws and
regulations, including those governing the use, storage and disposal of
hazardous and biological materials, and construction of new facilities. We may
not be able to obtain the necessary permits to construct new facilities,
including our planned facility near Sacramento, California. Any violation of,
and the cost of compliance with, these regulations or permit requirements could
have a serious adverse effect on our business, financial condition and results
of operations.
WE DEPEND ON REIMBURSEMENT BY HEALTH CARE ORGANIZATIONS
Our ability to commercialize certain products and services successfully may
depend on the extent to which we are able to secure reimbursement from
government authorities, such as Medicare and Medicaid, private health insurers,
and other organizations, such as health maintenance organizations. These
third-party payors are increasingly likely to challenge the prices charged for
health care products and services. The cumulative effect of the trend towards
managed health care in the United States, legislative proposals to reform health
care or reduce government insurance programs, and the concurrent growth of
organizations such as HMOs, which could control or significantly influence the
purchase of health care products and services, may result in lower prices for
health care products and services commercialized by us, our customers and our
collaborative partners. This reduction in turn could reduce the amount of our
future revenues or royalty payments that may be due to us. The lower prices
could also harm our profits and the profits of our customers and collaborative
partners. As a result, pharmaceutical, diagnostic and biotechnology companies
may choose to reduce or eliminate certain research and development programs that
utilize our products. Any such reduction of our revenues or royalty payments or
the reduction or cancellation of research programs that utilize our products
could seriously harm our business, financial condition and results of
operations.
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FORWARD-LOOKING STATEMENTS
This prospectus and the documents incorporated by reference herein contain
forward-looking statements. These statements relate to future events or our
future financial performance. In some cases, you can identify forward-looking
statements by terminology such as "may," "will," "should," "expects,"
"anticipates," "believes," "estimates," "predicts," "potential" or "continue" or
the negative of such terms or other comparable terminology. These statements are
only predictions and involve known and unknown risks, uncertainties and other
factors, including the risks outlined under "Risk Factors" that may cause our or
our industry's actual results, levels of activity, performance or achievements
expressed or implied by such forward-looking statements. Before deciding to
purchase our common stock, you should carefully consider the risks described in
the "Risk Factors" section, in addition to the other information set forth in
this prospectus and the documents incorporated by reference herein.
Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements. Moreover, neither we nor any other person
assumes responsibility for the accuracy and completeness of such statements. We
are under no duty to update any of the forward-looking statements after the date
of this prospectus to conform such statements to actual results.
USE OF PROCEEDS
All net proceeds from the sale of our common stock will go to the
stockholder who offers and sells its shares. Accordingly, we will not receive
any proceeds from the sale of the shares by the selling stockholder.
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SELLING STOCKHOLDER
The following table sets forth certain information, as of July 1, 1999, with
respect to the number of shares of common stock owned by the selling stockholder
named below and as adjusted to give effect to the sale of the shares offered
hereby. The shares are being registered to permit public secondary trading of
the shares, and the selling stockholder may offer the shares for resale from
time to time. Based upon 24,259,186 shares of common stock outstanding on July
1, 1999, the Growth Fund of America owns more than 1% of our outstanding stock.
The shares being offered by the selling stockholder were acquired from us
pursuant to a common stock purchase agreement dated March 12, 1999. The shares
of common stock were issued pursuant to an exemption from the registration
requirements of the Securities Act. The selling stockholder represented to us
that it was acquiring the shares for investment and with no present intention of
distributing the shares.
We have filed with the SEC, under the Securities Act, a registration
statement on Form S-3, of which this prospectus forms a part, with respect to
the resale of the shares from time to time on The Nasdaq National Market, in
privately-negotiated transactions, or in any combination of these types of
transactions. We have agreed to use our best efforts to keep such registration
statement effective until the earlier of:
- March 12, 2001;
- The date on which all the shares have been sold; or
- The date on which all the shares may be sold under Rule 144 of the
Securities Act in any three-month period.
The shares offered by this prospectus may be offered from time to time by
the selling stockholder named below:
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED PRIOR TO SHARES BENEFICIALLY
OFFERING OWNED AFTER THE OFFERING
--------------------- ------------------------------
NAME AND ADDRESS OF NUMBER OF NUMBER OF SHARES NUMBER OF
SELLING STOCKHOLDER SHARES PERCENT BEING OFFERED SHARES PERCENT
- -------------------------------------------------- ---------- --------- ----------------- --------------- -------------
<S> <C> <C> <C> <C> <C>
The Growth Fund of America, Inc................... 1,000,000 4.12% 1,000,000 -- *
</TABLE>
- ------------------------
* Less than 1%
24
<PAGE>
PLAN OF DISTRIBUTION
The shares offered hereby may be sold by the selling stockholder at various
times in one or more of the following transactions:
- On The Nasdaq National Market;
- In privately negotiated transactions; or
- In a combination of any of the above transactions.
The selling stockholder may sell its shares at market prices prevailing at
the time of the sale, at prices related to such prevailing market prices, at
negotiated prices or at fixed prices.
The selling stockholder may use broker-dealers to sell its shares. If this
happens, broker-dealers will either receive discounts or commissions from the
selling stockholder, or they will receive commissions from purchasers of shares
for whom they acted as agents.
For the purposes of this prospectus, the term "selling stockholder" shall
include donees, pledgees and other assignees selling shares received from the
selling stockholder named herein as well as any donees, pledgees and other
assignees selling shares received from such donees, pledgees or assignees.
DESCRIPTION OF CAPITAL STOCK
Our authorized capital stock consists of 75,000,000 shares of common stock
and 5,000,000 shares of preferred stock, each with a per share par value of
$0.01. As of July 1, 1999, there were 24,259,186 shares of common stock issued
and outstanding and 1,634,522 shares of preferred stock issued and outstanding.
COMMON STOCK
Holders of shares of our common stock are entitled to one vote per share on
all matters voted on by our stockholders. Subject to the preferences that maybe
applicable to any outstanding shares of preferred stock, holders of our common
stock are entitled to receive ratably such dividends, if any, that may be
declared from time to time by our board of directors out of funds legally
available for such dividends. Such dividends are not cumulative. In the event of
a liquidation, dissolution or winding up of Affymetrix, holders of our common
stock are entitled to receive, after payment of liabilities and after payment of
a liquidation preference to the holders of our Series AA preferred stock (as
described below), an amount per share equal to the quotient obtained by dividing
(A) the per share Series AA preferred stock liquidation preference by (B) the
number of shares of common stock into which one share of Series AA preferred
stock could then be converted. After such payment, any remaining assets would be
distributed ratably to the holders of our common stock and holders of our Series
AA preferred stock. Holders of our common stock have no preemptive or conversion
rights or other subscription rights. No redemption or sinking fund provisions
apply to our common stock. All outstanding shares of our common stock are fully
paid and nonassessable.
PREFERRED STOCK
Our board of directors has the authority to issue the preferred stock in one
or more series and to fix the rights, privileges, preferences and restrictions
thereof, including dividend rights, conversion rights, voting terms, terms of
redemption, liquidation preferences and the number of shares constituting any
series or the designation of such series. Any such action by our board of
directors does not require any further vote or action of our stockholders.
Our certificate of incorporation authorizes 5,000,000 shares of preferred
stock, 1,634,522 shares of which have been designated as Series AA preferred
stock. Holders of our Series AA preferred stock
25
<PAGE>
are entitled to receive cumulative dividends payable in cash prior and in
preference to any dividends paid to holders of our common stock at the rate of
$1.99 per share per year payable in two installments on June 30 and December 31
of each year. These dividends accrue on each share of Series AA preferred stock
whether or not earned or declared from the date on which the Series AA preferred
stock was first issued. Holders of our Series AA preferred stock are also
entitled to receive an amount equal to any cash dividend paid to holders of our
common stock. In the event of a liquidation, dissolution or winding up of
Affymetrix, holders of our Series AA preferred stock are entitled to receive a
liquidation preference prior and in preference to any payments made to holders
of our common stock. This preference is an amount per share equal to the sum of:
- $30.59 for each outstanding share of our Series AA preferred stock;
- accrued but unpaid dividends on such shares of our Series AA preferred
stock; and
- a per share amount equal to the difference obtained by subtracting (A) the
product of ten percent of the annual per share dividend multiplied by a
fraction, the numerator of which is the number of days elapsed since the
date on which the first share of Series AA preferred stock was first
issued and the denominator of which is 365, from (B) the annual per share
dividend.
After such payment, holders of our common stock are entitled to receive an
amount per share equal to the quotient obtained by dividing (A) the per share
Series AA preferred stock liquidation preference by (B) the number of shares of
common stock into which one share of Series AA preferred stock could then be
converted. After such payment, any remaining assets would be distributed ratably
to the holders of our common stock and holders of our Series AA preferred stock
Holders of shares of our common stock are entitled to one vote per share on
all matters voted on by our stockholders. Our Series AA preferred stock can be
redeemed either at the election of us or at the election of the holders of our
Series AA preferred stock. Each share of our Series AA preferred stock is
convertible into common stock at the option of the holder of such share. All
shares of Series AA preferred stock shall be converted into common stock upon
the written consent of the holders of a majority of the Series AA preferred
stock.
For more information regarding our capital stock, you should read "Where You
Can Find More Information" on page 27.
LEGAL MATTERS
The legality of the securities offered hereby will be passed upon for
Affymetrix by Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, LLP,
Menlo Park, California.
EXPERTS
Ernst & Young LLP, independent auditors, have audited our financial
statements and schedule included in our annual report on form 10-K for the year
ended December 31, 1998, as set forth in their report, which is incorporated by
reference in this prospectus and elsewhere in the registration statement. Our
financial statements and schedule are incorporated by reference in reliance on
Ernst & Young LLP's report, given on their authority as experts in accounting
and auditing.
26
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. You may read and copy any document we file at the
SEC's public reference rooms in Washington, D.C., New York, New York and
Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for further information
on the public reference rooms. Our SEC filings are also available to the public
from the SEC's website at "http://www.sec.gov."
The SEC allows us to "incorporate by reference" the information we file with
them, which means that we can disclose important information to you by referring
you to those documents. The information incorporated by reference is considered
to be part of this prospectus, and information that we file later with the SEC
will automatically update and supersede this information. We incorporate by
reference the documents listed below and any future filings we will make with
the SEC under Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act
of 1934:
1. Our annual report on form 10-K for the year ended December 31, 1998, as
filed with the SEC on March 31, 1999 (file number 000-28218);
2. Our proxy statement as filed on April 29, 1999 pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (file number 000-28218);
3. Our quarterly report on form 10-Q for the quarter ended March 31, 1999, as
filed with the SEC on May 17, 1999 (file number 000-28218); and
4. The description of our preferred share purchase rights in our registration
statement on form 8-A, as filed with the SEC on October 16, 1998 (file
number 000-28218).
You may request a copy of these filings, at no cost, by calling us at (408)
731-5000 or by writing to us at the following address:
Affymetrix, Inc.
3380 Central Expressway
Santa Clara, CA 95051
Attn: Investor Relations, Anne Bowdidge
This prospectus is part of a registration statement we filed with the SEC.
You should rely only on the information or representations provided in this
prospectus. We have authorized no one to provide you with different information.
We are not making an offer of these securities in any state where the offer is
not permitted. You should not assume that the information in this prospectus is
accurate as of any date other than the date on the front of the document.
27
<PAGE>
1,000,000 SHARES
AFFYMETRIX, INC.
-----------------
JULY , 1999
--------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth all expenses, other than the underwriting
discounts and commissions, payable by us in connection with the sale of the
common stock being registered. All the amounts shown are estimates except for
the registration fee.
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee............. $16,089.25
Legal Fees and Expenses......................................... 15,000.00
Accounting Fees and Expenses.................................... 4,500.00
Transfer Agent and Registrar Fees............................... 2,500.00
Miscellaneous................................................... 5,000.00
---------
Total................................................... $43,089.25
</TABLE>
ITEM 15. INDEMNIFICATION OF OFFICERS AND DIRECTORS.
Section 145 of the Delaware General Corporation law empowers a Delaware
corporation to indemnify any persons who are, or are threatened to be made,
parties to any threatened, pending or completed legal action, suit or
proceedings, whether civil, criminal, administrative or investigative (other
than action by or in the right of such corporation), by reason of the fact that
such person was an officer or director of such corporation, or is or was serving
at the request of such corporation as a director, officer, employee or agent of
another corporation or enterprise. The indemnity may include expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by such person in connection with such action, suit or
proceeding, provided that such officer or director acted in good faith and in a
manner he reasonably believed to be in or not opposed to the corporation's best
interests, and, for criminal proceedings, had no reasonable cause to believe his
conduct was illegal. A Delaware corporation may indemnify officers and directors
in an action by or in the right of the corporation under the same conditions,
except that no indemnification is permitted without judicial approval if the
officer or director is adjudged to be liable to the corporation in the
performance of his duty. Where an officer or director is successful on the
merits or otherwise in the defense of any action referred to above, the
corporation must indemnify him against the expenses which such officer or
director actually and reasonably incurred.
In accordance with Delaware law, our restated certificate of incorporation
contains a provision to limit the personal liability of our directors for
violations of their fiduciary duty as a director. This provision eliminates each
director's liability to us or our stockholders for monetary damages except (i)
for any breach of the director's duty of loyalty to us or our 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 providing for liability of directors for unlawful payment of
dividends or unlawful stock purchases or redemptions, or (iv) for any
transaction from which a director derived an improper personal benefit. The
effect of this provision is to eliminate the personal liability of directors for
monetary damages for actions involving a breach of their fiduciary duty of care,
including any such actions involving gross negligence.
Our restated certificate of incorporation and our bylaws provide for
indemnification of our officers and directors to the fullest extend permitted by
applicable law.
We have entered into indemnification agreements with each director and
executive officer which provide indemnification to such directors and executive
officers under certain circumstances for acts or omissions which may not be
covered by directors' and officers' liability insurance.
II-1
<PAGE>
ITEM 16. EXHIBITS.
The exhibits listed in the exhibit index as filed as part of this
registration statement.
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- --------- ----------------------------------------------------------------------------------
<S> <C>
3.1 Amended and Restated Certificate of Incorporation
(1)3.2 Bylaws
(2)4.1 Summary of Rights to Purchase Shares of Preferred Stock pursuant to the Rights
Agreement dated as of October 15, 1998
23 Consent of Ernst & Young LLP, Independent Auditors
**10.1 Asset Purchase Agreement by and between Beckman Coulter, Inc. and Affymetrix, Inc.
**10.2 Assumption of Certain Liabilities
**10.3 License Agreement
**10.4 License agreement by and among ISIS Innovation Limited and Beckman Instruments,
Inc. dated as of April 17, 1996
**10.5 License Agreement
**10.6 Limited Liability Operating Agreement
**10.7 Form of Assignment of Assets
**10.8 Letter of Agreement dated July 23, 1998
**10.9 OEM Supply Agreement by and between Beckman Coulter, Inc. and Affymetrix, Inc.
10.10 Promissory Note by Susan E. Siegel
10.11 Amendment to Lease by and between Affymetrix, Inc. and Harry Locklin dated as of
May 12, 1999
10.12 First Addendum to Lease by and between Solar Oakmead Joint Venture and Affymetrix,
Inc.
10.13 Amendment No. 1 to the 1996 Nonemployee Directors Stock Option Plan of Affymetrix,
Inc.
**10.14 Letter of Agreement dated as of August 28, 1998
</TABLE>
- ------------------------
(1) Incorporated by reference to the same number exhibit filed with our form 8-K
as filed on September 29, 1998 (File No. 000-28218).
(2) Incorporated by reference to exhibit 3.3 filed with our form 8-K as filed on
October 16, 1998 (File No. 000-28218).
** To be filed with an amendment to this prospectus.
ITEM 17. UNDERTAKINGS.
We hereby undertake:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement: (i) to include
any prospectus required by section 10(a)(3) of the Securities Act; (ii) to
reflect in the prospectus any facts or events arising after the effective date
of the registration statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate, represent a fundamental change
in the information set forth in the registration statement; and (iii) to include
any material information with respect to the plan of distribution not previously
disclosed in the registration statement or any material change to such
information in the registration statement.
II-2
<PAGE>
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of us pursuant
to the provisions described in Item 15, or otherwise, we have been advised that
in the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by us of expenses incurred or paid by a
director, officer or controlling person of us in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, we will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
We hereby undertake that, for purposes of determining any liability under
the Securities Act, each filing of our annual report pursuant to Section 13(a)
or Section 15(d) of the 1934 Act (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the 1934 Act)
that is incorporated by reference in the registration statement shall be deemed
to be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
For purposes of determining any liability under the Securities Act, the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by us pursuant to Rule 424(b)(1) or (4) or 497(h) under the
Securities Act shall be deemed to be part of this registration statement as of
the time it was declared effective.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Santa Clara, State of California, on the 12th day of
July, 1999.
<TABLE>
<S> <C> <C>
AFFYMETRIX, INC.
By: /s/ STEPHEN P.A. FODOR, PH.D.
-----------------------------------------
Stephen P.A. Fodor, Ph.D.
PRESIDENT AND CHIEF EXECUTIVE OFFICER,
DIRECTOR
</TABLE>
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------
<C> <S> <C>
/s/ STEPHEN P.A. FODOR,
PH.D. President and Chief
- ------------------------------ Executive Officer, July 12, 1999
Stephen P.A. Fodor, Ph.D. Director
Vice President and Chief
/s/ EDWARD M. HURWITZ Financial Officer
- ------------------------------ (Principal Financial and July 12, 1999
Edward M. Hurwitz Accounting Officer)
/s/ JOHN D. DIEKMAN, PH.D.
- ------------------------------ Chairman of the Board July 12, 1999
John D. Diekman, Ph.D.
/s/ PAUL BERG, PH.D.
- ------------------------------ Director July 12, 1999
Paul Berg, Ph.D.
/s/ ADRIAN HENNAH
- ------------------------------ Director July 12, 1999
Adrian Hennah
/s/ VERNON R. LOUCKS, JR.
- ------------------------------ Director July 12, 1999
Vernon R. Loucks, Jr.
/s/ BARRY C. ROSS, PH.D.
- ------------------------------ Director July 12, 1999
Barry C. Ross, Ph.D.
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------
<C> <S> <C>
/s/ DAVID B. SINGER
- ------------------------------ Director July 12, 1999
David B. Singer
/s/ LUBERT STRYER, M.D.
- ------------------------------ Director July 12, 1999
Lubert Stryer, M.D.
/s/ JOHN A. YOUNG
- ------------------------------ Director July 12, 1999
John A. Young
</TABLE>
<TABLE>
<S> <C> <C> <C>
*By: /s/ STEPHEN P.A. FODOR,
PH.D.
-------------------------
Stephen P.A. Fodor, Ph.D.
ATTORNEY-IN-FACT
</TABLE>
II-5
<PAGE>
Exhibit 3.1
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF AFFYMETRIX, INC.,
A DELAWARE CORPORATION
(PURSUANT TO SECTIONS 228, 242 AND 245
OF THE DELAWARE GENERAL CORPORATION LAW)
Affymetrix, Inc. (the "Corporation"), a corporation organized and
existing under the General Corporation Law of the State of Delaware (the
"General Corporation Law") originally incorporated on September 29, 1998.
DOES HEREBY CERTIFY:
FIRST: The name of the corporation is Affymetrix, Inc. (the
"Corporation").
SECOND: The address of the Corporation's registered office in the
State of Delaware is 9 E. Lockerman Street, City of Dover, County of Kent.
The name of the Corporation's registered agent at such address is National
Corporate Research.
THIRD: The nature of the business or purposes to be conducted or
promoted by the Corporation is to engage in any lawful act or activity for
which corporations may be organized under the Delaware General Corporation
Law.
FOURTH: I. The Corporation is authorized to issue two classes of
stock to be designated, respectively, Common Stock, par value $0.01 per share
("Common Stock"), and Preferred Stock, par value $0.01 per share ("Preferred
Stock"). The total number of shares of all classes of stock which the
Corporation shall have authority to issue is eighty million (80,000,000),
consisting of seventy-five (75,000,000) shares of Common Stock and five
million (5,000,000) shares of Preferred Stock.
II. The board of directors is authorized from time to time,
subject to any limitations prescribed by law, to provide for the issuance of
shares of Preferred Stock in one or more series, and in connection with the
creation of any such series, by resolution or resolutions providing for the
issuance of shares thereof, to establish from time to time the number of
shares to be included in each such series, to determine and fix such voting
powers, full or limited or no voting powers, and to fix the designation,
preferences, and relative, participating, optional or other special rights of
the shares of each such series, and any qualifications, limitations or
restrictions thereof. The number of authorized shares of Preferred Stock may
be increased or decreased (but not below the number of shares thereof then
outstanding) by the affirmative vote of the holders of a majority of the
Common Stock, without a vote of the holders of the Preferred Stock, or of any
series thereof, unless a vote of any such holders is required pursuant to the
terms of any resolution or resolutions providing for the issue of such stock
adopted by the board of directors of the Corporation.
FIFTH: There shall be a series of Preferred Stock designated as
"Series AA Preferred Stock" and the number of shares constituting such series
shall be one million six
<PAGE>
hundred thirty four thousand five hundred twenty two (1,634,522) shares (the
"Series AA Preferred Stock"). The rights, preferences, privileges, and
restrictions granted to and imposed on the Series AA Preferred Stock are
asset forth below:
1. DIVIDEND PROVISIONS.
(a) Subject to the rights of any series of Preferred Stock that
may from time to time come into existence, the holders of shares of Series AA
Preferred Stock shall be entitled to receive dividends payable in cash, out
of any assets legally available therefor, prior and in preference to any
declaration or payment of any dividend (payable other than in Common Stock or
other securities and rights convertible into or entitling the holder thereof
to receive, directly or indirectly, additional shares of Common Stock of this
Corporation) on the Common Stock of this Corporation, at the rate per share
per annum of $1.99 (as adjusted for any stock splits, stock dividends,
combinations, recapitalizations or the like with respect to the Series AA
Preferred Stock) payable in two equal installments on June 30 and December 31
of each year so long as such share of Series AA Preferred Stock is then
outstanding. Such dividends shall accrue on each share from the Purchase Date
(as defined below), and shall accrue from day to day, whether or not earned
or declared. Such dividends shall be cumulative so that, except as provided
below, if such dividends in respect of any previous or current dividend
period, at the annual rate specified above, shall not have been paid, the
deficiency shall first be fully paid before any dividend or other
distribution shall be paid on or declared and set apart for the Common Stock.
Cumulative dividends with respect to a share of Series AA Preferred Stock
which are accrued, payable and/or in arrears shall, upon conversion of such
share to Common Stock or redemption of such share, be paid to the extent
assets are legally available therefor pursuant to the provisions of Section 2
and Section 3, respectively, and any amounts for which assets are not legally
available shall be paid promptly as assets become legally available therefor;
any partial payment will be made pro rata among the holders of such shares.
The holders of the outstanding Series AA Preferred Stock can waive any
dividend preference that such holders shall be entitled to receive under this
Section 1 upon the affirmative vote or written consent of the holders of at
least a majority of the Series AA Preferred Stock then outstanding.
(b) Subject to the rights of any shares of Preferred Stock that
may from time to time come into existence and in addition to the amounts paid
pursuant to subsection 1(a) above, the holders of shares of Series AA
Preferred Stock shall be entitled to receive an amount equal to any dividend
paid (other than dividends paid in Common Stock or other securities and
rights convertible into or entitling the holder thereof to receive, directly
or indirectly, additional shares of Common Stock of this Corporation) on the
Common Stock of this Corporation (as determined on a per annum basis and on
as a converted basis for the Series AA Preferred Stock), payable when, as and
if declared by the Board of Directors. Such dividends shall not be cumulative.
2. LIQUIDATION PREFERENCE.
(a) In the event of any liquidation, dissolution or winding up
of this Corporation, either voluntary or involuntary, subject to the rights
of series of Preferred Stock that may from time to time come into existence,
the holders of Series AA Preferred Stock shall be entitled to receive, prior
and in preference to any distribution of any of the assets of this
2
<PAGE>
Corporation to the holders of Common Stock by reason of their ownership
thereof, an amount per share equal to the sum of (i) $30.59 for each
outstanding share of Series AA Preferred Stock (the "Original Series AA Issue
Price") (subject to adjustment of such fixed dollar amounts for any stock
splits, stock dividends, combinations, recapitalizations or the like with
respect to the Series AA Preferred Stock), (ii) accrued but unpaid dividends
on such share, and (iii) a per share amount equal to the difference obtained
by subtracting (A) the product of ten percent of the annual per share
dividend multiplied by a fraction, the numerator of which is the number of
days elapsed since the date upon which the first share of Series AA Preferred
Stock was first issued (the "Purchase Date") and the denominator of which is
365, from (B) the annual per share dividend. The sum obtained by adding the
amounts described in clauses (i), (ii) and (iii) of the preceding sentence is
referred to herein as the "Series AA Liquidation Preference". If upon the
occurrence of such event, the assets and funds thus distributed among the
holders of the Series AA Preferred Stock shall be insufficient to permit the
payment to such holders of the full aforesaid preferential amounts, then,
subject to the rights of series of Preferred Stock that may from time to time
come into existence, the entire assets and funds of this Corporation legally
available for distribution shall be distributed ratably among the holders of
the Series AA Preferred Stock in proportion to the amount of such stock owned
by each such holder.
(b) Upon the completion of the distribution required by
subparagraph (a) of this Section 2 and any other distribution that may be
required with respect to series of Preferred Stock that may from time to time
come into existence, if assets remain in this Corporation, the holders of the
Common Stock of this Corporation, shall receive an amount per share of Common
Stock equal to the quotient obtained by dividing (i) the Series AA
Liquidation Preference, by (ii) the number of shares of Common Stock into
which one (1) share of Series AA Preferred Stock could then be converted
pursuant to Section 4 hereof. If upon the occurrence of such event, the
assets and funds thus distributed among the holders of the Common Stock shall
be insufficient to permit the payment to such holders of the full aforesaid
preferential amount, then, subject to the rights of series of Preferred Stock
that may from time to time come into existence, the entire remaining assets
and funds of this Corporation legally available for distribution shall be
distributed ratably among the holders of the Common Stock in proportion to
the amount of such stock owned by each such holder.
(c) After the distributions described in subsection (a) and (b)
above have been paid, subject to the rights of series of Preferred Stock that
may from time to time come into existence, the remaining assets of this
Corporation available for distribution to stockholders shall be distributed
among the holders of Series AA Preferred Stock and Common Stock pro rata
based on the number of shares of Common Stock held by each (assuming full
conversion of all such Series AA Preferred Stock).
(d) (i) The following events shall be deemed to be a
liquidation, dissolution or winding up within the meaning of this Section 2:
(A) a consolidation or merger of this Corporation with or into any other
corporation or corporations as a result of which the holders of voting stock
of this Corporation immediately prior to such transaction do not own,
directly or indirectly, more than 50% of the voting power of the surviving
corporation or its parent corporation immediately after such transaction, or
(B) a sale, conveyance or disposition of all or substantially all of the
assets of this Corporation.
3
<PAGE>
(ii) In any of such events, the value of the assets
distributed to the stockholders of this Corporation shall be determined as
set forth herein. If the assets distributed to the stockholders of this
Corporation consist of other than cash or securities, the value of such
assets shall be the fair market value thereof, as determined by this
Corporation and the holders of at least a majority of the voting power of all
the then outstanding shares of Preferred Stock. If the assets distributed to
the stockholders of this Corporation consist of securities, such securities
shall be valued as follows:
A. Securities not subject to investment letter or
other similar restrictions on free marketability covered by (B) below:
(1) If traded on a securities exchange or
through the Nasdaq National Market, the value shall be deemed to be the
average of the closing prices of the securities on such exchange or system
over the twenty (20) trading day period ending three (3) trading days prior
to the closing;
(2) If actively traded over-the-counter, the
value shall be deemed to be the average of the closing bid or sale prices
(whichever is applicable) over the twenty (20) trading day period ending
three (3) trading days prior to the closing; and
(3) If there is no active public market, the
value shall be the fair market value thereof, as mutually determined by this
Corporation and the holders of at least a majority of the voting power of all
then outstanding shares of Preferred Stock.
B. The method of valuation of securities subject to
investment letter or other restrictions on free marketability (other than
restrictions arising solely by virtue of a stockholder's status as an
affiliate or former affiliate) shall be to make an appropriate discount from
the market value determined as above in (A) (1), (2) or (3) to reflect the
approximate fair market value thereof, as mutually determined by this
Corporation and the holders of at least a majority of the voting power of all
then outstanding shares of such Preferred Stock.
3. REDEMPTION.
(a) REDEMPTION AT THE OPTION OF THIS CORPORATION.
(i) Subject to the rights of series of Preferred Stock that
may from time to time come into existence, at any time on or prior to March
9, 2001, this Corporation may at any time it may lawfully do so, at the
option of the Board of Directors, redeem in whole or in part the Series AA
Preferred Stock by paying in cash therefor a sum equal to (A) the Original
Series AA Issue Price (subject to adjustment of such fixed dollar amount for
any stock splits, stock dividends, combinations, recapitalizations or the
like with respect to the Series AA Preferred Stock), plus (B) accrued but
unpaid dividends on such share (the "Early Redemption Price"); provided that
the closing sale price of this Corporation's Common Stock on the Nasdaq
National Market (or such other national securities exchange on which the
Common Stock is then listed) has been at or above $52.00 (subject to
adjustment of such fixed dollar amount for any stock splits, stock dividends,
combinations, recapitalizations or the like with respect to the Common Stock)
for twenty (20) of thirty (30) consecutive trading days prior to the
applicable Corporation Redemption Date (as defined below), which thirty (30)
day period shall have ended not more
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than ten (10) trading days prior to the date of the Corporation Redemption
Notice (as defined below). Any redemption effected pursuant to this
subsection 3(a)(i) shall be made on a pro rata basis among the holders of the
Series AA Preferred Stock in proportion to the number of shares of Series AA
Preferred Stock then held by them.
(ii) Subject to the rights of series of Preferred Stock that
may from time to time come into existence, at any time after March 9, 2001,
this Corporation may at any time it may lawfully do so, at the option of the
Board of Directors, redeem in whole or in part the Series AA Preferred Stock
by paying in cash therefor a sum equal to the Series AA Liquidation
Preference (the "Late Redemption Price"). Any redemption effected pursuant to
this subsection 3(a)(ii) shall be made on a pro rata basis among the holders
of the Series AA Preferred Stock in proportion to the number of shares of
Series AA Preferred Stock then held by them.
(iii) Subject to the rights of series of Preferred Stock that
may from time to time come into existence, at least twenty (20) but no more
than thirty (30) days prior to the date on which this Corporation proposes to
redeem any shares of Series AA Preferred Stock (each a "Corporation
Redemption Date"), written notice shall be personally delivered, sent by
reliable international courier, or sent by confirmed facsimile to each holder
of record (at the close of business on the business day next preceding the
day on which notice is given) of the Series AA Preferred Stock to be
redeemed, at the address last shown on the records of this Corporation for
such holder, notifying such holder of the redemption to be effected on the
applicable Corporation Redemption Date, specifying the number of shares to be
redeemed from such holder, the applicable Corporation Redemption Date, the
Early or Late Redemption Price, as applicable, the place at which payment may
be obtained and calling upon such holder to surrender to this Corporation, in
the manner and at the place designated, his, her or its certificate or
certificates representing the shares to be redeemed (the "Corporation
Redemption Notice"). Except as provided in subsection 3(a)(iv) or 3(a)(v), on
or after each Corporation Redemption Date, each holder of Series AA Preferred
Stock to be redeemed on such Corporation Redemption Date shall surrender to
this Corporation the certificate or certificates representing such shares, in
the manner and at the place designated in the Corporation Redemption Notice,
and thereupon the Early or Late Redemption Price, as applicable, of such
shares shall be payable to the order of the person whose name appears on such
certificate or certificates as the owner thereof and each surrendered
certificate shall be cancelled. In the event less than all the shares
represented by any such certificate are redeemed, a new certificate shall be
issued representing the unredeemed shares. Any shares of Series AA Preferred
Stock that are not redeemed shall remain subject to redemption by this
Corporation pursuant to this Section 3(a).
(iv) Each holder of Series AA Preferred Stock may, at any time
up to two (2) trading days prior to the applicable Corporation Redemption
Date, elect to convert all shares of Series AA Preferred Stock designated for
redemption in the Corporation Redemption Notice into shares of Common Stock
pursuant to Section 4 below.
(v) From and after each Corporation Redemption Date, unless
there shall have been a default in payment of the Early or Late Redemption
Price, as applicable, all rights of the holders of shares of Series AA
Preferred Stock designated for redemption on such Corporation Redemption Date
in the Corporation Redemption Notice as holders of Series AA Preferred Stock
(except the right to receive the Early or Late Redemption Price, as
applicable, without interest
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upon surrender of their certificate or certificates) shall cease with respect
to such shares, and such shares shall not thereafter be transferred on the
books of this Corporation or be deemed to be outstanding for any purpose
whatsoever. Subject to the rights of series of Preferred Stock that may from
time to time come into existence, if the funds of this Corporation legally
available for redemption of shares of Series AA Preferred Stock on any
Corporation Redemption Date are insufficient to redeem the total number of
shares of Series AA Preferred Stock to be redeemed on such date, those funds
that are legally available will be used to redeem the maximum possible number
of such shares ratably among the holder(s) of such shares to be redeemed such
that an equal percentage of the number of shares held by each holder of
Series AA Preferred Stock is redeemed (provided that this Corporation shall
have no obligation to issue or redeem any fractional shares). The shares of
Series AA Preferred Stock not redeemed shall remain outstanding and entitled
to all the rights and preferences provided herein. Subject to the rights of
series of Preferred Stock that may from time to time come into existence, at
any time thereafter when additional funds of this Corporation are legally
available for the redemption of shares of Series AA Preferred Stock, such
funds will immediately be used to redeem the balance of the shares that this
Corporation has become obliged to redeem on any Corporation Redemption Date
but that it has not redeemed.
(b) REDEMPTION AT OPTION OF STOCKHOLDERS.
(i) Subject to the rights of series of Preferred Stock that may
from time to time come into existence, at any time on or after March 9, 2005,
provided that this Corporation shall have received a written request from the
holders of not less than a majority of the then outstanding Series AA
Preferred Stock that a specified percentage of such holders' shares of Series
AA Preferred Stock be redeemed, and concurrently with surrender by such
holders of the certificates representing such shares, this Corporation shall,
to the extent it may lawfully do so, redeem the shares specified in such
request by paying in cash therefor a sum per share equal to (A) $30.59 per
share of Series AA Preferred Stock (as adjusted for any stock splits, stock
dividends, recapitalizations or the like) plus (B) accrued but unpaid
dividends on such share (the "Series AA Redemption Price"); provided,
however, in no event shall this Corporation be required to redeem more than
817,261 shares of Series AA Preferred Stock (as adjusted for any stock
splits, stock dividends, recapitalizations or the like) during any twelve
month period. Any request made pursuant to this subsection 3(b)(i) shall be
delivered at least one hundred and eighty (180) days prior to the date on
which the redemption is requested to occur (a "Stockholder Redemption Date").
Any redemption of Series AA Preferred Stock effected pursuant to this
subsection 3(b)(i) shall be made on a pro rata basis among the holders of the
Series AA Preferred Stock in proportion to the number of shares of Series AA
Preferred Stock proposed to be redeemed by such holders.
(ii) Subject to the rights of series of Preferred Stock that
may from time to time come into existence, at least twenty (20) but no more
than thirty (30) days prior to a Stockholder Redemption Date, written notice
shall be personally delivered, sent by reliable international courier, or
sent by confirmed facsimile to each holder of record (at the close of
business on the business day next preceding the day on which notice is given)
of the Series AA Preferred Stock to be redeemed, at the address last shown on
the records of this Corporation for such holder, notifying such holder of the
redemption to be effected on the Stockholder Redemption Date, specifying the
number of shares to be redeemed from such holder, the
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<PAGE>
Stockholder Redemption Date, the Series AA Redemption Price, the place at
which payment may be obtained and calling upon such holder to surrender to
this Corporation, in the manner and at the place designated, his, her or its
certificate or certificates representing the shares to be redeemed (the
"Stockholder Redemption Notice"). Except as provided in subsection
(3)(b)(iii), on or after the Stockholder Redemption Date, each holder of
Series AA Preferred Stock to be redeemed on such Redemption Date shall
surrender to this Corporation the certificate or certificates representing
such shares, in the manner and at the place designated in the Stockholder
Redemption Notice, and thereupon the Series AA Redemption Price for such
shares shall be payable to the order of the person whose name appears on such
certificate or certificates as the owner thereof and each surrendered
certificate shall be cancelled. In the event less than all the shares
represented by any such certificate are redeemed, a new certificate shall be
issued representing the unredeemed shares.
(iii) From and after the Stockholder Redemption Date, unless
there shall have been a default in payment of the Series AA Redemption Price,
all rights of the holders of shares of Series AA Preferred Stock designated
for redemption on the Stockholder Redemption Date in the Stockholder
Redemption Notice as holders of Series AA Preferred Stock (except the right
to receive the Series AA Redemption Price without interest upon surrender of
their certificate or certificates) shall cease with respect to such shares,
and such shares shall not thereafter be transferred on the books of this
Corporation or be deemed to be outstanding for any purpose whatsoever.
Subject to the rights of series of Preferred Stock that may from time to time
come into existence, if the funds of this Corporation legally available for
redemption of shares of Series AA Preferred Stock on the Stockholder
Redemption Date are insufficient to redeem the total number of shares of
Series AA Preferred Stock to be redeemed on such date, those funds that are
legally available will be used to redeem the maximum possible number of such
shares ratably among the holders of such shares to be redeemed such that an
equal percentage of the number of shares held by each holder of Series AA
Preferred Stock is redeemed (provided that this Corporation shall have no
obligation to issue or redeem any fractional shares). The shares of Series AA
Preferred Stock not redeemed shall remain outstanding and entitled to all the
rights and preferences provided herein. Subject to the rights of series of
Preferred Stock that may from time to time come into existence, at any time
thereafter when additional funds of this Corporation are legally available
for the redemption of shares of Series AA Preferred Stock, such funds will
immediately be used to redeem the balance of the shares that this Corporation
has become obliged to redeem on the Stockholder Redemption Date but that it
has not redeemed.
4. CONVERSION. The holders of the Series AA Preferred Stock
shall have conversion rights as follows (the "Conversion Rights"):
(a) RIGHT TO CONVERT. Each share of Series AA Preferred Stock
shall be convertible, at the option of the holder thereof, at any time after
the Purchase Date of such share and on or prior to the second trading day
prior to the Redemption Date, if any, as may have been fixed in any
Redemption Notice with respect to such share of the Series AA Preferred
Stock, at the office of this 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 the Original Series AA Issue Price by the
Conversion Price applicable to such share, determined as hereafter provided,
in effect on the date the certificate is surrendered for conversion (the
"Conversion Ratio"). The initial Conversion Price per share for shares of
Series AA Preferred Stock shall be $39.77 per
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share; provided, however, that the Conversion Price for the Series AA
Preferred Stock shall be subject to adjustment as set forth in subsection
4(d).
(b) AUTOMATIC CONVERSION. Each share of Series AA Preferred
Stock shall automatically be converted into shares of Common Stock at the
Conversion Ratio at the time in effect for such Series AA Preferred Stock
immediately upon the date specified by written consent or agreement of the
holders of a majority of the then outstanding shares of Series AA Preferred
Stock.
(c) MECHANICS OF CONVERSION. Before any holder of Series AA
Preferred Stock shall be entitled to convert the same into shares of Common
Stock, he or she shall surrender the certificate or certificates therefor,
duly endorsed, at the office of this Corporation or of any transfer agent for
the Series AA Preferred Stock, and shall give written notice to this
Corporation at its principal corporate office, of the election to convert the
same and shall state therein the name or names in which the certificate or
certificates for shares of Common Stock are to be issued. This Corporation
shall, as soon as practicable thereafter, issue and deliver at such office to
such holder of Series AA Preferred Stock, or to the nominee or nominees of
such holder, a certificate or certificates for the number of shares of Common
Stock to which such holder shall be entitled as aforesaid. 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 Series AA 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 as of such
date. If the conversion is in connection with an underwritten offering of
securities registered pursuant to the Securities Act of 1933, the conversion
may, at the option of any holder tendering Series AA Preferred Stock for
conversion, be conditioned upon the closing with the underwriters of the sale
of securities pursuant to such offering, in which event the persons entitled
to receive the Common Stock upon conversion of the Series AA Preferred Stock
shall not be deemed to have converted such Series AA Preferred Stock until
immediately prior to the closing of such sale of securities.
(d) CONVERSION PRICE ADJUSTMENTS OF PREFERRED STOCK FOR SPLITS,
STOCK DIVIDENDS, COMBINATIONS AND THE LIKE. The Conversion Price of the
Series AA Preferred Stock shall be subject to adjustment from time to time as
follows:
(i) In the event this Corporation should at any time or from
time to time after the Purchase Date fix a record date for the effectuation
of a split or subdivision of the outstanding shares of Common Stock or the
determination of holders of Common Stock entitled to receive a dividend or
other distribution payable in additional shares of Common Stock or other
securities or rights convertible into, or entitling the holder thereof to
receive directly or indirectly, additional shares of Common Stock
(hereinafter referred to as "Common Stock Equivalents") without payment of
any consideration by such holder for the additional shares of Common Stock or
the Common Stock Equivalents (including the additional shares of Common Stock
issuable upon conversion or exercise thereof), then, as of such record date
(or the date of such dividend distribution, split or subdivision if no record
date is fixed), the Conversion Price of the Series AA Preferred Stock shall
be appropriately decreased so that the number of shares of Common Stock
issuable on conversion of each share of such series shall be increased in
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<PAGE>
proportion to such increase of the aggregate of shares of Common Stock
outstanding and those issuable with respect to such Common Stock Equivalents.
(ii) If the number of shares of Common Stock outstanding at any
time after the Purchase Date is decreased by a combination of the outstanding
shares of Common Stock, then, following the record date of such combination,
the Conversion Price for the Series AA Preferred Stock shall be appropriately
increased so that the number of shares of Common Stock issuable on conversion
of each share of such series shall be decreased in proportion to such
decrease in outstanding shares.
(e) OTHER DISTRIBUTIONS. In the event this Corporation shall
declare a distribution payable in securities of other persons, evidences of
indebtedness issued by this Corporation or other persons, assets (excluding
cash dividends) or other options or rights not referred to in subsection
4(d)(i), then, in each such case for the purpose of this Subsection 4(e), the
holders of the Series AA Preferred Stock shall be entitled to a proportionate
share of any such distribution as though they were the holders of the number
of shares of Common Stock of this Corporation into which their shares of
Series AA Preferred Stock are convertible as of the record date fixed for the
determination of the holders of Common Stock of this Corporation entitled to
receive such distribution.
(f) RECAPITALIZATIONS. If at any time or from time to time
there shall be a recapitalization of the Common Stock (other than a
subdivision, combination or merger or sale of assets transaction provided for
elsewhere in this Section 4 or Section 2) provision shall be made so that the
holders of the Series AA Preferred Stock shall thereafter be entitled to
receive upon conversion of the Series AA Preferred Stock the number of shares
of stock or other securities or property of this Corporation or otherwise, to
which a holder of Common Stock deliverable upon conversion would have been
entitled on such recapitalization. In any such case, appropriate adjustment
shall be made in the application of the provisions of this Section 4 with
respect to the rights of the holders of the Series AA Preferred Stock after
the recapitalization to the end that the provisions of this Section 4
(including adjustment of the Conversion Price then in effect and the number
of shares purchasable upon conversion of the Series AA Preferred Stock) shall
be applicable after that event as nearly equivalent as may be practicable.
(g) NO IMPAIRMENT. This Corporation will not, by amendment of
its Amended and Restated Certificate of Incorporation or through any
reorganization, recapitalization, 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 this 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 Series AA
Preferred Stock against impairment.
(h) NO FRACTIONAL SHARES AND CERTIFICATE AS TO ADJUSTMENTS.
(i) No fractional shares shall be issued upon the conversion of
any share or shares of the Series AA Preferred Stock, and the number of
shares of Common Stock to be
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<PAGE>
issued shall be rounded down to the nearest whole share. This Corporation
shall provide the holder of any fractional interest with an amount of cash
equal to the fair market value of one share of this Corporation's Common
Stock multiplied by such fractional interest. Whether or not fractional
shares are issuable upon such conversion shall be determined on the basis of
the total number of shares of Series AA Preferred Stock the holder is at the
time converting into Common Stock and the number of shares of Common Stock
issuable upon such aggregate conversion.
(ii) Upon the occurrence of each adjustment or readjustment of
the Conversion Price of Series AA Preferred Stock pursuant to this Section 4,
this Corporation, at its expense, shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and prepare and furnish to
each holder of Series AA Preferred Stock a certificate setting forth such
adjustment or readjustment and showing in detail the facts upon which such
adjustment or readjustment is based. This Corporation shall, upon the written
request at any time of any holder of Series AA Preferred Stock, furnish or
cause to be furnished to such holder a like certificate setting forth (A)
such adjustment and readjustment, (B) the Conversion Price for such series of
Preferred Stock at the time in effect, and (C) the number of shares of Common
Stock and the amount, if any, of other property that at the time would be
received upon the conversion of a share of Series AA Preferred Stock.
(i) NOTICES OF RECORD DATE. In the event of any taking by this
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 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, this
Corporation shall mail to each holder of Series AA Preferred Stock, at least
twenty (20) days prior to the date specified therein, a notice specifying the
date on which any such record is to be taken for the purpose of such
dividend, distribution or right, and the amount and character of such
dividend, distribution or right.
(j) RESERVATION OF STOCK ISSUABLE UPON CONVERSION. This
Corporation shall at all times reserve and keep available out of its
authorized but unissued shares of Common Stock, solely for the purpose of
effecting the conversion of the shares of the Series AA Preferred Stock, such
number of its shares of Common Stock as shall from time to time be sufficient
to effect the conversion of all outstanding shares of the Series AA Preferred
Stock; and if at any time the number of authorized but unissued shares of
Common Stock shall not be sufficient to effect the conversion of all then
outstanding shares of the Series AA Preferred Stock, in addition to such
other remedies as shall be available to the holder of such Preferred Stock,
this 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
purposes, including, without limitation, engaging in best efforts to obtain
the requisite stockholder approval of any necessary amendment to this
Certificate of Designation or the Amended and Restated Certificate of
Incorporation.
(k) NOTICES. Any notice required by the provisions of this
Section 4 to be given to the holders of shares of Series AA Preferred Stock
shall be deemed given if deposited in the United States mail, postage
prepaid, and addressed to each holder of record at his address appearing on
the books of this Corporation.
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5. VOTING RIGHTS. The holder of each share of Series AA Preferred
Stock shall have the right to one vote for each share of Common Stock into
which such Series AA Preferred Stock could then be converted at the record
date for determination of the stockholders entitled to vote thereon, and with
respect to such vote, such holder shall have full voting rights and powers
equal to the voting rights and powers of the holders of Common Stock, and
shall be entitled, notwithstanding any provision hereof, to notice of any
stockholders' meeting in accordance with the bylaws of this Corporation, and
shall be entitled to vote, together with holders of Common Stock, with
respect to any question upon which holders of Common Stock have the right to
vote and otherwise as required by law. Fractional votes shall not, however,
be permitted and any fractional voting rights available on an as-converted
basis (after aggregating all shares into which shares of Series AA Preferred
Stock held by each holder could be converted) shall be rounded to the nearest
whole number (with one-half be in grounded upward).
SIXTH: The following provisions are inserted for the management
of the business and for the conduct of the affairs of the Corporation, and
for further definition, limitation and regulation of the powers of the
Corporation and of its directors and stockholders:
A. The business and affairs of the Corporation shall be
managed by or under the direction of the board of directors. In addition to
the powers and authority expressly conferred upon them by statute or by this
Certificate of Incorporation or the Bylaws of the Corporation, the directors
are hereby empowered to exercise all such powers and do all such acts and
things as may be exercised or done by the Corporation.
B. The directors of the Corporation need not be elected by
written ballot unless the Bylaws of the Corporation so provide. Directors
need not be stockholders.
C. Any action required or permitted to be taken by the
stockholders of the Corporation must be effected at a duly called annual or
special meeting of stockholders of the Corporation and may not be effected by
any consent in writing by such stockholders.
D. Advance notice of stockholder nominations for the
election of directors and of business to be brought by stockholders before
any meeting of the stockholders of the Corporation shall be given in the
manner provided in the Bylaws of the Corporation.
E. Special meetings of stockholders of the Corporation may
be called only by the Chairman of the Board or the President or by the board
of directors acting pursuant to a resolution adopted by a majority of the
entire board of directors. For purposes of this Certificate of Incorporation,
the term "entire board of directors" shall mean the total number of
authorized directors whether or not there exist any vacancies in previously
authorized directorships.
SEVENTH: The board of directors is expressly empowered to
adopt, alter, amend or repeal Bylaws of the Corporation. Any adoption,
alteration, amend mentor repeal of the Bylaws of the Corporation by the board
of directors shall require the approval of a majority of the entire board of
directors. The stockholders shall also have power to adopt, amend or repeal
the Bylaws of the Corporation; provided, however, that, in addition to any
vote of the holders of any class or series of stock of the Corporation
required by law or by this Certificate of
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Incorporation, the affirmative vote of the holders of at least a majority of
the voting power of all of the then-outstanding shares of the capital stock
of the Corporation entitled to vote generally in the election of directors,
voting together as a single class, shall be required to adopt, alter, amend
or repeal any provision of the Bylaws of the Corporation.
EIGHTH: The corporation reserves the right to amend and repeal
any provision contained in this Certificate of Incorporation in the manner
from time to time prescribed by the laws of the State of Delaware. All rights
herein conferred are granted subject to this reservation.
NINTH: To the fullest extent permitted by Delaware General
Corporation Law, a director of the corporation shall not be personally liable
to the corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability (i) for any breach of the
director's duty of loyalty to the corporation or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct
or a knowing violation of law, (iii) under Section 174 of the Delaware
General Corporation Law, or (iv)for any transaction from which the director
derived an improper personal benefit. If the Delaware General Corporation Law
is amended to authorize corporate action further eliminating or limiting the
personal liability of directors, then the liability of a director of the
corporation shall be eliminated or limited to the fullest extent permitted by
the Delaware General Corporation Law, as so amended. Any repeal or
modification of this provision shall not adversely affect any right or
protection of a director of the corporation existing at the time of such
repeal or modification.
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IN WITNESS WHEREOF, the undersigned have executed this
Certificate this 15th day of June, 1999.
/s/ Stephen P.A. Fodor
-------------------------------------
Stephen P.A. Fodor
Chief Executive Officer and President
ATTEST:
/s/ Vern Norviel
- -------------------
Secretary
<PAGE>
EXHIBIT 23
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-3) of the Affymetrix, Inc. for the registration
of 1,000,000 shares of its common stock and to the incorporation by reference
therein of our report dated January 29, 1999 (except for Note 11, as to which
the date is March 25, 1999) with respect to the financial statements and
schedule of Affymetrix, Inc. included in its Annual Report (Form 10-K) for the
year ended December 31, 1998, filed with the Securities and Exchange Commission.
Palo Alto, California
July 9, 1999
<PAGE>
Exhibit 10.10
PROMISSORY NOTE
Santa Clara, California $150,000.00
June 9, 1999
1. FOR VALUE RECEIVED, the undersigned Susan E. Siegel ("Siegel")
unconditionally promises to pay to the order of Affymetrix, Inc.
("Affymetrix") at 3380 Central Expressway, Santa Clara, California
(or at such other address as the holder of this Note may designate
by notice to Siegel), the sum of One Hundred Fifty Thousand Dollars
($150,000.00) with interest from the date hereof at 5.49% simple
interest per annum. Such interest shall be forgiven so long as
Siegel shall remain an employee in good standing.
2. This note shall become immediately due and payable in full upon the
first to occur of 1) the stock trading window opening for sale of
stock by Siegel when the stock is trading at or above 30% of the option
price of Siegel's vested options or 2) when Siegel leaves the Company.
3. Siegel requests and authorizes Affymetrix to withhold any amount due
Affymetrix hereunder from any salary, vacation, or other compensation
due or payable to Siegel.
4. Siegel agrees to pay all reasonable costs of collection of this Note
if payments are not made when due. If any legal action is necessary
to enforce or collect this Note, such costs shall include, without
limitation, reasonable attorney's fees. Interest shall accrue on all
past due payments at the rate of 10% per annum or the highest rate
permitted by law if lower.
5. This Note shall be governed by and construed in accordance with the
internal laws of the State of California. Siegel consents to
personal jurisdiction in any court in Santa Clara County, California.
/s/ SUSAN E. SIEGEL 6/9/99
----------------------------- --------------------------
Date
/s/ KAREN HAYNES
Witness: ------------------
<PAGE>
Exhibit 10.11
AMENDMENT TO LEASE
This Amendment to Lease ("Amendment") is made this 12th day of May, 1999
by and between Harry Locklin ("Lessor") and Affymetrix, a California
corporation ("Lessee").
RECITALS
A. Lessor and Lessee entered into that certain Standard
Industrial/Commercial Single-Tenant Lease-Not dated December 5, 1994 (the
"Lease").
B. The original term of the Lease expires April 30, 2000, but is subject to
extension, at the election of Lessee, by virtue of two (2) options
contained in the Lease to extend the term for (3) years each.
C. The parties wish to amend the Lease to reflect, among other things, the
extension of the original term and to affirm the remaining option to
extend.
NOW, THEREFORE, in consideration of the agreements herein contained, and
for other good and valuable consideration, the receipt and sufficiency of
which are herein acknowledged, the parties agree as follows:
TERMS
1. Lessor and Lessee, by checking the appropriate option below, have
elected to extend the original term of the Lease at the Base Rent stated, and
the unchecked option shall have no force or effect. This Amendment shall be
unenforceable if both options are checked.
[ ] The original term of the Lease is hereby extended for a period of
five (5) years, commencing May 1, 2000 and ending April 30, 2005, said period
hereby being referred to as the "Extension Period." Base Rent during
Extension Period shall be thirty-four thousand eight hundred twenty-five
dollars ($34,825) per month.
[x] The original term of the Lease is hereby extended for a period of
three (3) years, commencing May 1, 2000 and ending April 30, 2003, said
period hereby being referred to as the "Extension Period." Base Rent during
Extension Period shall be thirty-five thousand seven hundred eighty-two
dollars ($35,782) per month.
2. Sections 12 and 16 of the Addendum to Lease are hereby deleted.
3. Section 6 of the Addendum to Lease is hereby modified to indicate that
Lessee has one (1) remaining option to extend the term of the Lease with the
Base rent to be determined as set forth therein.
1
<PAGE>
4. Lessee hereby covenants and warrants that it has not dealt with any
third party (other than its attorney) in negotiating this Amendment, and
hereby agrees to indemnify Lessor harmless from all claims made by third
parties for any commissions or other fees based in whole or in part upon this
Amendment of any of the terms and/or conditions contained herein.
5. Except as hereby modified, and as modified by the First Amendment and
Second Amendment, the Lease remains unchanged and in full force and effect.
IN WITNESS WHEREOF, the parties have executed this Amendment.
LESSOR:
HARRY LOCKLIN
/s/ Harry Locklin
-----------------
Date: 6/21/99
-----------
LESSEE:
AFFYMETRIX,
A CALIFORNIA CORPORATION
BY: /s/ ILLEGIBLE
-------------
ITS: President/CEO
-------------
Date: 12 May 99
------------
Approved for signature / /s/ ILLEGIBLE/
by AFFX Legal Dept. / 5/12/99 /
2
<PAGE>
Exhibit 10.12
FIRST ADDENDUM TO LEASE
This First Addendum to Lease is made to that certain Lease (the "Lease")
dated for reference purposes as October 20th, 1995 by and between Solar Oakmead
Joint Venture, a California Limited Partnership (as "Landlord") and
Affymetrix (as "Tenant") for the Lease of approximately 31,068 SF of space
located at 424-430 Oakmead Parkway APN#215-44-23 and parking areas associated
with the premises, Sunnyvale, California (the "Leased Premises").
The parties hereto agree that the Lease is Amended, changed and modified by
the following Provisions, which are hereby added to the Lease:
1. General Provisions: Unless otherwise expressly provided herein all
terms and conditions of the Lease will remain in full force and effect.
In the event of any inconsistency between the Lease and this Addendum,
the terms of the Addendum shall prevail.
2. Paragraphs 3 & 4 are modified as follows:
A. The term will be extended to the 31st day of December 2002.
B. Rent will be as follows:
Sixty-two Thousand One Hundred Thirty Six Dollars and NO/100
($62,136.00) will be due January 1, 2000 constituting rent for
January 2000. Sixty-two Thousand One Hundred Thirty Six and NO/100
($62,136.00) will be due February 1, 2000 and on the 1st of each
succeeding month to and including December 1, 2002.
In Witness where of, Landlord and Tenant have executed this First Addendum To
Lease on the dates set forth below.
AS LANDLORD
Solar Oakmead Joint Venture, a California Limited Partnership
by /s/ ILLEGIBLE
-----------------------------
its Managing General Partner
-----------------------------
Dated June 28, 1999
--------------------------
AS TENANT
Affymetrix
by /s/ STEPHEN P.A. FODOR
-----------------------------
its President and CEO
----------------------------
Dated June 16, 1999
--------------------------
Approved for signature / ILLEGIBLE /
by AFFX Legal Dept. / 6/4/99 /
<PAGE>
Exhibit 10.13
AMENDMENT NO. 1 TO THE
1996 NONEMPLOYEE DIRECTORS STOCK OPTION PLAN OF
AFFYMETRIX, INC.
Section 3 of the 1996 Nonemployee Directors Stock Option
Plan of Affymetrix, Inc. shall be amended in its entirety to read as follows:
3. ELIGIBLE PERSONS
Every person who at the date of grant of an
Option is a Nonemployee Director is eligible to receive Options
under this Plan, except that a Nonemployee Director who is elected
to the Board on or after July 8, 1999, shall not be eligible for
any grants of Options if he or she is affiliated with a holder of
10% or more of the voting power of the Company's capital stock.
Adopted by the Board of Directors: July 8, 1999
