As filed with the Securities and Exchange Commission on October 31, 1997
Registration No. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
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Lynx Therapeutics, Inc.
(Exact name of registrant as specified in its charter)
Delaware 94-3161073
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
-----------
3832 Bay Center Place
Hayward, California 94545
(510) 670-9300
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
-----------
Edward C. Albini
Chief Financial Officer
Lynx Therapeutics, Inc.
3832 Bay Center Place
Hayward, California 94545
(510) 670-9300
Fax: (510) 670-9302
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
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Copies to:
James C. Kitch, Esq.
COOLEY GODWARD LLP
Five Palo Alto Square
3000 El Camino Real
Palo Alto, California 94306-2155
(650) 843-5000
Fax (650) 857-0663
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Approximate date of commencement of proposed
sale to the public: As soon as practicable after the
effective date of this Registration Statement.
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If the only 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. [ ]
<TABLE>
CALCULATION OF REGISTRATION FEE
<CAPTION>
====================================================================================================================================
Proposed Maximum
Title of Class of Amount to be Proposed Maximum Offering Aggregate Offering Amount of
Securities to be Registered Registered (1) Price Per Share (2) Price (2) Registration Fee
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $0.01 par
value per share 2,675,500 shares $14.00 $37,457,000 $11,351
====================================================================================================================================
<FN>
(1) All 2,675,500 shares of Common Stock offered hereby are being offered and sold by the Selling Stockholders. See "Selling
Stockholders."
(2) The price of $14.00 per share, which was the average of the high and low prices of the Common Stock reported on the
Over-the-Counter ("OTC") market on October 27, 1997, 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.
</FN>
</TABLE>
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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 that 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.
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED OCTOBER 31, 1997
PROSPECTUS
2,675,500 Shares
LYNX THERAPEUTICS, INC.
Common Stock
-------------------
All of the shares of Common Stock, par value $0.01 per share, of Lynx
Therapeutics, Inc. ("Lynx" or the "Company") offered hereby (the "Shares") are
being offered and sold by certain persons listed herein under "Selling
Stockholders" (collectively, the "Selling Stockholders"). The Shares were
purchased by the Selling Stockholders from the Company in a private placement in
1997. All of the Shares are being offered hereby by the Selling Stockholders,
and the Company will not receive any of the proceeds from the sale of the Shares
by the Selling Stockholders. The Company's Common Stock is currently traded on
the over-the-counter ("OTC") market. The last reported sales price of the
Company's Common Stock on the OTC market on October 30, 1997 was $14.50 per
share.
The Selling Stockholders, directly or through agents, broker-dealers or
underwriters, may sell the Shares offered hereby from time to time on terms to
be determined at the time of sale, in transactions on the Nasdaq National Market
or in privately negotiated transactions. The Selling Stockholder and any agents,
broker-dealers or underwriters that participate in the distribution of the
Common Stock may be deemed to be "underwriters" within the meaning of the
Securities Act of 1933, as amended (the "Securities Act"), and any commission
received by them and any profit on the resale of the Common Stock purchased by
them may be deemed to be underwriting discounts or commissions under the
Securities Act. See "Selling Stockholders" and "Plan of Distribution."
----------------
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK. SEE
"RISK FACTORS" COMMENCING ON PAGE 3 HEREOF.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
----------------
No underwriting commissions or discounts will be paid by the Company in
connection with this offering. Estimated expenses payable by the Company in
connection with this offering are $60,000. The aggregate proceeds to the Selling
Stockholders from the sale of the Shares will be the purchase price of the
Shares sold less the aggregate agents' commissions and underwriters' discounts,
if any, and other expenses of issuance and distribution not borne by the
Company. See "Plan of Distribution."
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The date of this Prospectus is October , 1997.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the information reporting requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith file reports, proxy statements and other information with
the Securities and Exchange Commission (the "SEC"). Such reports, proxy
statements and other information may be inspected and copied at the public
reference facilities maintained by the SEC at Room 1024, Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549, and at the SEC's regional offices
located at Seven World Trade Center, Suite 1300, New York, New York 10048, and
at Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511. Copies of such material may be obtained by mail from the Public
Reference Section of the SEC at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. The SEC also maintains a Web site
that contains reports, proxy and information statements and other information
regarding registrants that file electronically with the SEC at the address
http://www.sec.gov. The Company's reports, proxy statements and other
information can also be inspected and copied at the offices of The Nasdaq Stock
Market, 1735 K Street, N.W., Washington DC 20006.
The Company has filed with the SEC a registration statement on Form S-3
(herein referred to, together with all amendments and exhibits, as the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"). This Prospectus does not contain all of the information set
forth in the Registration Statement, certain parts of which are omitted in
accordance with the rules and regulations of the SEC. For further information,
reference is hereby made to the Registration Statement. Copies of the
Registration Statement and the exhibits and schedules are available as described
above.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, filed or to be filed with the Commission under
the Exchange Act are hereby incorporated by reference into this Prospectus:
(a) The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996;
(b) The Company's Quarterly Reports on Form 10-Q, as amended, for the
quarterly periods ended March 31, and June 30, 1997; and
(c) The description of the Common Stock contained in the Company's
Registration Statement on Form 10 (No. 0-22570), as amended, initially filed on
October 5, 1993.
All documents filed by the Company pursuant to Sections 13(a), 13(c),
14 or 15(d) of the Exchange Act after the date of this Prospectus and prior to
the termination of the offering shall be deemed to be incorporated by reference
herein and to be a part hereof from the date of filing of such documents. Any
statement contained in this Prospectus or in a document incorporated or deemed
to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any subsequently-filed document which also is or is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person, including any
beneficial owner, to whom this Prospectus is delivered, upon written or oral
request of such person, a copy of any and all of the documents that have been
incorporated by reference herein (not including exhibits to such documents
unless such exhibits are specifically incorporated by reference herein or into
such documents). Such request may be directed to Lynx Therapeutics, Inc.,
Attention: Chief Financial Officer, 3832 Bay Center Place, Hayward, California
94545, telephone (510) 670-9300.
FORWARD LOOKING STATEMENTS
This Prospectus contains forward-looking statements within the meaning
of Section 27A of the Securities Act and Section 21E of the Exchange Act which
are subject to the "safe harbor" created by those sections. When used in this
Prospectus, the words "anticipate," "believe," "estimate," and "expect" and
similar expressions as they relate to the Company or its management are intended
to identify such forward-looking statements. The Company's actual results,
performance, or achievements could differ materially from the results expressed
in, or implied by, these forward-looking statements as a result of certain
factors, including those set forth in "Risk Factors" and elsewhere in this
Prospectus.
2
<PAGE>
THE COMPANY
Lynx Therapeutics, Inc. (the "Company") was incorporated in Delaware in
February 1992. The Company's executive offices are located at 3832 Bay Center
Place, Hayward, California 94545, and its telephone number is (510) 670-9300.
RISK FACTORS
This Prospectus contains forward-looking statements that involve risks
and uncertainties. Actual results could differ materially from those discussed
in the forward-looking statements as a result of certain factors, including
those set forth below and elsewhere in this Prospectus. The following risk
factors should be considered carefully in addition to the other information in
this Prospectus before purchasing the shares of Common Stock offered hereby.
Unproven Business Strategy; Uncertainty of Product Success or Market Acceptance
The Company's strategy of using its massively parallel signature
sequencing technologies for gene sequencing for the purpose of rapidly
identifying genes, defining and characterizing gene function, and enabling
high-resolution genomic mapping is unproven. While certain other companies have
similar technology or have adopted a similar strategy, the application of these
technologies and strategies is in too early a stage to determine whether it can
be successfully implemented.
The Company's genomic database subscription business and the use of its
products to assist in and improve the efficiency of the traditional drug
discovery process is in too early a stage to determine whether it can be
successful. There can be no assurance that companies will accept the usefulness
of the Company's products and related services. In addition, the Company has
limited experience in providing software-based database products or services.
The Company's ability to achieve profitability depends on attracting customers
for its database and sequencing products and services. The nature of the
Company's products and services are such that there is a limited number of large
pharmaceutical companies that are potential customers for such products and
services, two of which have signed agreements with the Company to date. There
can be no assurance that any of the Company's product development efforts will
be successfully completed or that the Company's products will gain market
acceptance.
Early Stage of Development; Technological Uncertainty
Lynx is at an early stage of development and must be evaluated in light
of the uncertainties and complications present in an early stage biotechnology
company. All of Lynx's products and services are in research or development, and
have not generated significant revenues. To date, most of Lynx's efforts have
been dedicated to the development of its original oligodeoxynucleotide ("ODN")
chemistry technology and recently developed technologies for massively parallel
signature sequencing of cloned cDNA. The massively parallel signature sequencing
program is in the development stage and is dependent upon the successful
integration of independent technologies, each of which has its own development
risks. There can be no assurance that these technologies will be successfully
developed or, if they are, that they can be integrated successfully. Lynx's
research in molecular biology and medicinal chemistry and its assessment of the
potential pharmaceutical effectiveness of ODN compounds have, to date, been
entirely dependent on collaborative efforts. While Lynx and its collaborators
have demonstrated that some of Lynx's antisense compounds are active in cellular
in vitro systems and in animal models, there can be no assurance that these
results are indicative of results that will be obtained in human clinical
testing. Pharmaceutical or biotechnology based products, if any, resulting from
Lynx's research and development programs are not expected to be commercially
available for a number of years even if they are successfully developed and
proven to be safe and effective.
Competition
There are a finite number of genes in the human genome. The race
amongst competitors in the genomics field is not just to identify these genes by
their sequences, but also to determine gene function, particularly gene function
in disease. Even when all genes are known, and their sequences determined, the
hunt for functional information in the wide variety of diseases and disease
conditions will continue, and characterization of genes (by their sequences) in
various samples will still be needed. While Lynx believes that it contributes a
uniquely efficient gene analysis technique to that hunt, other companies have
substantially greater research and product development capabilities and
financial, scientific, and marketing resources than the Company.
3
<PAGE>
In its gene analysis programs, Lynx will be competing in some sense
with both purveyors and users of current DNA analysis technology. Competition
from fully integrated pharmaceutical companies and more established
biotechnology companies also is intense and is expected to increase. Academic
institutions, governmental agencies and other public and private research
organizations also conduct research, seek patent protection and establish
collaborative arrangements for products and data access. While Lynx at this time
is not aware of a technology that is equivalent or superior to its massively
parallel signature sequencing, there are other companies that provide data or
access to data similar to that which Lynx intends to offer. There can be no
assurance that research and development efforts by others will not render any of
the Company's potential products and services noncompetitive.
Patents and Proprietary Rights
Lynx's success will depend on its ability to obtain patents for its
technologies and products, maintain trade secrets and operate without infringing
on the proprietary rights of others, both in the United States and in other
countries. Patent matters in biotechnology are highly uncertain and involve
complex legal and factual questions. Accordingly, the availability of and
breadth of claims allowed in biotechnology and pharmaceutical patents cannot be
predicted. Lynx has filed and will continue to file applications, as
appropriate, for patents covering both its products and processes and has
licensed a number of patents and patent applications covering certain of its
technologies, processes and compounds. No assurance can be given that patents
will issue from any of the pending applications or that, if patents do issue,
the claims allowed will be sufficiently broad to protect Lynx's technology. In
addition, no assurance can be given that any patents issued to or licensed by
Lynx will not be challenged, invalidated, infringed or circumvented or that the
rights granted thereunder will provide competitive advantages to Lynx.
Competitors may have been issued patents, may have filed applications or may
obtain additional patents and proprietary rights relating to products or
processes competitive with those of the Company or which could block the
Company's efforts to obtain patents.
The commercial success of Lynx will also depend in part on Lynx not
infringing patents issued to competitors and on others not breaching the
technology licenses upon which Lynx's products might be based. There can be no
assurance that Lynx will be able to obtain a license to any third party
technology that it may require to conduct its business or that, if obtainable,
such technology can be licensed at a reasonable cost. Failure by Lynx to obtain
a license to any technology that it may require to commercialize its
technologies or products may have a material adverse effect on Lynx.
Litigation, which could result in substantial costs to Lynx, may also
be necessary to enforce any patents issued or licensed to Lynx or to determine
the scope and validity of third party proprietary rights. There can be no
assurance that the Company's issued patents would be held valid by a court of
competent jurisdiction. Even if the outcome of such litigation is favorable, the
cost of such litigation and the diversion of the Company's resources during such
litigation could have a material adverse effect on the Company. An adverse
outcome could subject the Company to significant liabilities to third parties,
require disputed rights to be licensed from third parties or require the Company
to cease using such technology, any of which could have a material adverse
effect on the Company. If competitors of the Company prepare and file patent
applications in the United States that claim technology also claimed by the
Company, the Company may have to participate in interference proceedings
declared by the Patent and Trademark Office to determine priority of invention,
which could result in substantial cost to the Company, even if the eventual
outcome is favorable to Lynx.
Lynx also relies on trade secrets and proprietary know-how, which it
seeks to protect in part by confidentiality agreements with its collaborators,
employees and consultants. There can be no assurance that these agreements will
not be breached, that Lynx would have adequate remedies for any breach or that
its trade secrets will not otherwise become known or be independently developed
by competitors. To the extent that the Company or its consultants or research
collaborators use intellectual property owned by others in their work for the
Company, disputes may also arise as to the rights in related or resulting
know-how and inventions.
Need to Establish Collaborative Relationships; Dependence on Partners
Lynx's business strategy includes entering into subscription
arrangements, strategic alliances or licensing arrangements with corporate
partners, primarily pharmaceutical and biotechnology companies, relating to the
development and commercialization of certain of its potential technologies, data
bases and products. There can be
4
<PAGE>
no assurance that Lynx will be able to negotiate attractive collaborative
arrangements or that such collaborations will be available to Lynx on acceptable
terms so that any such relationships, once established, will be scientifically
or commercially successful. Lynx currently has two corporate agreements for its
massively parallel signature sequencing technology, with Hoechst AG and Hoechst
Marion Roussel (collectively referred to as "Hoechst") and BASF AG ("BASF"). In
exchange for access to the technology and for a specified number of massively
parallel signature sequencing analyses per year, Lynx has received signing fees,
and may receive milestone payments (upon demonstration by Lynx that the
technology can substantially reproduce data obtained by other means in
well-studied systems) and subscription fees. Additionally, under the Hoechst
agreement, Lynx received an initial equity investment and will receive an
additional equity investment, subject to achievement of a milestone.
There can be no assurance that Hoechst or BASF or any other future
collaborator will not pursue their existing or alternative technologies in
preference to those being developed in collaboration with the Company.
Furthermore, there can be no assurance that the Company will be able to
negotiate additional collaborative arrangements on acceptable terms, if at all,
or that such collaborations will be successful. To the extent that the Company
chooses not to or is unable to establish such arrangements, it would require
substantially greater capital to undertake research and development of certain
of its potential technologies, data bases and products at its own expense.
Lynx will be dependent on collaborative arrangements relating to the
development of LR 3280 for the treatment of restenosis and other potential
antisense compounds. Although LR 3280 is in Phase II clinical trials in Europe
for the prevention of restenosis following balloon angioplasty and is the object
of development and commercialization agreements with two pharmaceutical
companies, there can be no assurance that the Company's clinical trials will
demonstrate sufficient safety and efficacy necessary to obtain the requisite
regulatory approvals or will result in marketable products. While Lynx will
depend on partners for funding and development expertise in connection with the
Company's antisense research, the amount and timing of resources to be devoted
to these activities by such corporate partners, if any, are not within the
control of the Company. In addition, there can be no assurance that the Company
will be able to negotiate such collaborative arrangements on acceptable terms,
if at all, or that such collaborations will be successful.
Absence of Sales and Marketing Experience
Lynx has no experience in the sales, marketing or distribution of
pharmaceutical products or services. To market the products or services of its
massively parallel signature sequencing technologies, Lynx must define the
particular products and services that it will offer and develop a sales and
marketing group with the appropriate technical expertise. Lynx does not plan to
market any of its future pharmaceutical products directly. There can be no
assurance that Lynx will be able to build such a sales force or that its direct
sales and marketing efforts will be successful.
History of Operating Losses
The Company has a limited history of operations and has experienced
significant operating losses since its inception in 1992. The Company had an
accumulated deficit of approximately $39.0 million through September 30, 1997.
To achieve and sustain profitable operations, the Company, alone or with others,
must develop successfully, obtain regulatory approval for, manufacture,
introduce, market and sell its products. The time frame necessary to achieve
market success is uncertain. There can be no assurance that the Company will
ever generate sufficient product revenues to become profitable or to sustain
profitability.
Use of Hazardous Materials
Lynx's research and development may involve the controlled use of
hazardous materials, chemicals, viruses and various radioactive compounds.
Although Lynx believes that its safety procedures for handling and disposing of
such materials will comply with the standards prescribed by state, federal and
local regulations, the risk of accidental contamination or injury from these
materials cannot be completely eliminated. In the event of such an accident,
Lynx could be held liable for any damages that result, and any such liability
could exceed the resources of Lynx.
5
<PAGE>
Dependence Upon Key Personnel
Lynx is highly dependent on the principal members of its management and
scientific staff, the loss of whose services could significantly delay or
prevent the achievement of research, development and business objectives, thus
having a material adverse effect on Lynx. Furthermore, recruiting and retaining
qualified scientific personnel to perform research and development work in the
future will be critical to Lynx's success. Although Lynx believes it will be
successful in attracting and retaining skilled and experienced scientific
personnel, there can be no assurance that Lynx will be able to attract and
retain such personnel on acceptable terms, given the competition among numerous
pharmaceutical and health care companies, universities and non-profit research
institutions for experienced scientists. The Company is dependent on its
Chairman and Chief Executive Officer, Sam Eletr, Ph.D., the loss of whose
services would have a material adverse effect on the Company. The Company has
recently applied for key-man life insurance on Dr. Eletr. The Company has not
entered into an employment agreement with him.
Potential Volatility of Stock Price; Limited Market for Stock
The Common Stock is currently traded on the OTC market. The Company
anticipates qualifying its Common Stock to trade on the Nasdaq National Market
("Nasdaq") by the end of 1997. There can be no assurance that the Common Stock
will be listed on Nasdaq or that a sufficient trading market will develop at
that time. In addition, should the Common Stock be traded on the Nasdaq National
Market, the securities markets have from time to time experienced significant
price and volume fluctuations that may be unrelated to the operating performance
of particular companies. The market prices of the common stock of many publicly
held, early stage biotechnology companies have in the past been, and can in the
future be expected to be, especially volatile. Factors such as fluctuations in
the Company's operating results, announcements of technological innovations or
new commercial products by the Company or its competitors, release of reports by
securities analysts, developments or disputes concerning patent or proprietary
rights, developments in the Company's relationships with current or future
collaborative partners, if any, and general market conditions may have a
significant and adverse impact on the market price of the Common Stock.
Control by Officers, Directors and Principal Stockholders
As of September 30, 1997, directors, executive officers and principal
stockholders of the Company will beneficially own approximately 31% of the
outstanding shares of the Company's capital stock. Accordingly, these
stockholders, individually and as a group, may be able to control the Company
and direct its affairs and business, including any determination with respect to
a change in control of the Company, future issuances of Common Stock or other
securities by the Company, declaration of dividends on the Common Stock and the
election of directors.
Shares Eligible for Future Sale
On March 31, 1998, the outstanding shares of Series B Preferred Stock,
Series C Preferred Stock and Series D Preferred Stock will automatically convert
into shares of Common Stock on a ten-for-one basis. Sales of shares of Common
Stock, including shares issued upon conversion of outstanding shares of
Preferred Stock and shares issued upon the exercise of outstanding options, in
the public market could adversely affect the market price of the Common Stock.
Such sales also might make it more difficult for the Company to sell equity
securities or equity-related securities in the future at a time and price that
the Company deems appropriate.
6
<PAGE>
<TABLE>
SELLING STOCKHOLDERS
The following table sets forth the names of the Selling Stockholders,
the number of shares of Common Stock, on an as-converted basis, owned
beneficially by each Selling Stockholder prior to this offering, the number of
shares of Common Stock being offered for the account of each Selling Stockholder
and the number of shares of Common Stock, on an as-converted basis, to be owned
by each Selling Stockholder after completion of this offering. This information
is based upon information provided by the Selling Stockholders. Because the
Selling Stockholders may offer all, some or none of its Common Stock, no
definitive estimate as to the number of shares thereof that will be held by the
Selling Stockholders after such offering can be provided.
<CAPTION>
Shares Beneficially Shares Shares Beneficially
Owned Prior to Being Owned After
Offering (1) Offered Offering (1)(2)
------------------------ -------- ----------------
Selling Stockholder Number Percent% Number Percent%
------------------- ------ -------- ------ --------
<S> <C> <C> <C> <C> <C>
WPG-Farber, Weber Fund, L.P............... 459,000 7.8 459,000 0 -
WPG-Farber, Weber Overseas, L.P........... 22,500 * 22,500 0 -
Star Creation Ltd......................... 18,500 * 18,500 0 -
Lombard Odier Zuerich Ltd................. 400,000 6.8 400,000 0 -
Four Partners............................. 360,000 6.1 360,000 0 -
FBB Associates............................ 40,000 * 40,000 0 -
INVESCO Global Health Sciences Fund....... 350,000 5.9 350,000 0 -
H&Q Healthcare Investors.................. 150,000 2.5 150,000 0 -
H&Q Life Sciences Investors............... 100,000 1.7 100,000 0 -
BioCentive Limited........................ 150,000 2.5 150,000 0 -
PHARMA/wHealth............................ 150,000 2.5 150,000 0 -
Caduceus Capital, Ltd..................... 110,000 1.9 110,000 0 -
Caduceus Capital, L.P..................... 40,000 * 40,000 0 -
Axa U.S. Growth Fund LLC.................. 57,500 * 57,500 0 -
Parvest U.S. Partners II C.V.............. 120,000(3) 2.0 20,000 100,000 1.7
U.S. Growth Fund Partners C.V............. 210,000(4) 3.5 20,000 190,000 3.1
Double Black Diamond II LLC............... 10,000 * 10,000 0 -
Almanori Limited.......................... 2,200 * 2,200 0 -
David Sherry.............................. 2,500 * 2,500 0 -
Multinvest Limited........................ 4,300 (5) * 1,300 3,000 *
Partech International Salary Deferral
Plan U/A Dated 1/1/92
FBO: Thomas G. McKinley................. 3,000(6) * 1,000 2,000 *
Partech International Salary Deferral
Plan U/A Dated 1/1/92
FBO: Scott Matson....................... 500 * 500 0 -
CDC - Valeurs de Croissance............... 75,000 1.3 75,000 0 -
Punk, Ziegel & Knoell Investors LLC....... 28,000 * 28,000 0 -
William J. Punk, Jr....................... 5,000 * 5,000 0 -
Julia P. Gregory.......................... 3,000 * 3,000 0 -
European Medical Ventures Fund SCA........ 163,000(7) 2.7 30,000 133,000 2.2
David Bellet.............................. 10,000 * 10,000 0 -
The Pidwell Family Living Trust -
Dated 6/25/87........................... 5,000 * 5,000 0
Tony Di Bona.............................. 1,000 * 1,000 0 -
Douglas E. Kelly SEP-IRA.................. 1,000 * 1,000 0 -
Mark Platshon............................. 2,500 * 2,500 0 -
Sam Eletr, Ph.D. (8)...................... 463,759 7.5 50,000 413,759 6.8
<FN>
* Represents beneficial ownership of less than 1%.
(1) Percentage of ownership is based on 5,886,253 shares of Common Stock
outstanding as of October 1, 1997 and the number of shares of Common
Stock, on an as-converted basis, owned as of such date. The
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<PAGE>
number of shares of Series B Preferred Stock, Series C Preferred Stock
and Series D Preferred Stock outstanding as of October 1, 1997 was
332,288, 123,299 and 40,000, respectively. The Series B, Series C and
Series D Preferred Stock are convertible into Common Stock on a
ten-for-one basis. Beneficial ownership is determined in accordance
with the rules of the Securities and Exchange Commission and includes
sole or shared voting or investment power with respect to shares shown
as beneficially owned.
(2) Assumes the sale of all Shares offered hereby. The Company has agreed
to pay all reasonable fees and expenses incident to the filing of
offering. See "Plan of Distribution."
(3) Represents 10,000 shares of Series C Preferred Stock and 20,000 shares
of Common Stock.
(4) Represents 15,000 shares of Series B Preferred Stock, 4,000 shares of
Series C Preferred Stock and 20,000 shares of Common Stock.
(5) Represents 300 shares of Series C Preferred Stock and 1,300 shares of
Common Stock.
(6) Represents 200 shares of Series C Preferred Stock and 1,000 shares of
Common Stock.
(7) Represents 13,300 shares of Series C Preferred Stock and 30,000 shares
of Common Stock.
(8) Includes 217,500 shares of Common Stock issuable upon exercise of stock
options held by Dr. Eletr that are exercisable within 60 days. Dr.
Eletr is Chairman of the Board and Chief Executive Officer of the
Company.
</FN>
</TABLE>
8
<PAGE>
PLAN OF DISTRIBUTION
The Shares may be offered by the Selling Stockholders from time to time
on the OTC market and the Nasdaq National Market in the future, in privately
negotiated transactions or a combination of such methods of sale, at fixed
prices that may be changed, at market prices prevailing at the time of sale, at
prices related to such prevailing market prices or at negotiated prices. The
Selling Stockholders may effect such transactions by selling the Shares directly
or by or through agents or broker-dealers who may receive compensation in the
form of discounts, concessions or commissions from the Selling Stockholders or
the purchasers of the Shares for whom such broker-dealers may act as agent or to
whom they sell as principal or both (which compensation to a particular
broker-dealer might be in excess of customary commissions).
The Selling Stockholders and any underwriters, dealers or agents that
participate in the distribution of the Shares may be deemed to be "underwriters"
within the meaning of the Securities Act, and any discounts, commissions or
concessions received by them and any provided pursuant to the sale of the Shares
by them might be deemed to be underwriting discounts and commissions under the
Securities Act. In order to comply with the securities laws of certain states,
if applicable, the Shares will be sold in such jurisdictions only through
registered or licensed brokers or dealers. In addition, in certain states the
Shares may not be sold unless they have been registered or qualified for sale or
an exemption from the registration or qualification requirement is available and
is complied with.
Pursuant to an agreement with the Selling Stockholders, the Company
will pay substantially all of the expenses incident to the offering and sale to
the public of the Shares offered hereby, other than commissions, concessions and
discounts of underwriters, dealers or agents. Such expenses (excluding such
commissions and discounts) are estimated to be approximately $60,000. Such
agreement provides for the cross-indemnification of the Selling Stockholders and
the Company to the extent permitted by law, for losses, claims, damages,
liabilities and expenses arising, under certain circumstances, out of any
registration of the Shares.
LEGAL MATTERS
The validity of the issuance of the shares of Common Stock offered
hereby will be passed upon for the Company by Cooley Godward LLP, Palo Alto,
California ("Cooley Godward"). As of the date of this Prospectus, Cooley Godward
beneficially owns 700 shares of Series B Preferred Stock, 300 shares of Series C
Preferred Stock and 10,000 shares of Common Stock issuable upon exercise of
stock options held by James C. Kitch, a partner of Cooley Godward, on behalf of
Cooley Godward. In addition, Mr. Kitch is a director of the Company.
EXPERTS
The consolidated financial statements of Lynx Therapeutics, Inc.
appearing in the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996, have been audited by Ernst & Young LLP, independent auditors,
as set forth in their report thereon included therein and incorporated herein by
reference. Such consolidated financial statements are incorporated herein by
reference in reliance upon such report given upon the authority of such firm as
experts in accounting and auditing.
9
<PAGE>
================================================================================
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY, ANY SELLING
STOCKHOLDERS OR BY ANY OTHER PERSON. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE
SHARES OF COMMON STOCK OFFERED HEREBY, NOR DOES IT CONSTITUTE AN OFFER TO SELL
OR A SOLICITATION TO BUY ANY OF THE SHARES OFFERED HEREBY TO ANY PERSON IN ANY
JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL OR TO ANY
PERSON TO WHOM IT IS UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY
OFFER OR SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY OR THAT
THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE
DATE HEREOF.
----------
TABLE OF CONTENTS
Page
----
Available Information........................................................ 2
Incorporation of Certain Documents by
Reference.................................................................. 2
Forward Looking Statements................................................... 2
The Company.................................................................. 3
Risk Factors................................................................. 3
Selling Stockholders......................................................... 7
Plan of Distribution......................................................... 9
Legal Matters................................................................ 9
Experts...................................................................... 9
================================================================================
2,675,500 Shares
Lynx Therapeutics, Inc.
Common Stock
----------
PROSPECTUS
----------
OCTOBER __, 1997
================================================================================
10
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The following table sets forth all expenses payable by the Registrant
in connection with the sale of the Common Stock being registered. All the
amounts shown are estimates except for the registration fee and the Nasdaq
Listing Fee.
Registration fee........................ $11,351
Nasdaq listing fee...................... 18,500
Printing expenses....................... 1,500
Legal fees and expenses................. 25,000
Accounting fees and expenses............ 2,000
Miscellaneous........................... 1,649
-------
TOTAL........................... $60,000
Item 15. Indemnification of Officers and Directors.
Under Section 145 of the Delaware General Corporation Law, the
Registrant has broad powers to indemnify its directors and officers against
liabilities they may incur in such capacities, including liabilities under the
Securities Act of 1933, as amended (the "Securities Act"). The Registrant's
Bylaws also provide that the Registrant will indemnify its directors and
executive officers and may indemnify its other officers, employees and agents to
the fullest extent permitted by Delaware law.
The Registrant's Certificate of Incorporation provides for the
elimination of liability for monetary damages for breach of the directors'
fiduciary duty of care to the Registrant and its stockholders. These provisions
do not eliminate the directors' duty of care and, in appropriate circumstances,
equitable remedies such an injunctive or other forms of non-monetary relief will
remain available under Delaware law. In addition, each director will continue to
be subject to liability for breach of the director's duty of loyalty to the
Registrant, for acts or omissions not in good faith or involving intentional
misconduct, for knowing violations of law, for any transaction from which the
director derived an improper personal benefit, and for payment of dividends or
approval of stock repurchases or redemptions that are unlawful under Delaware
law. The provision does not affect a director's responsibilities under any other
laws, such as the federal securities laws or state or federal environmental
laws.
Item 16. Exhibits and Financial Statement Schedules
(a) Exhibits
Exhibit
Number Description of Document
------ -----------------------
4.1 Form of Common Stock Purchase Agreement, dated as of
September 28, 1997, by and between the Company and the
investors listed therein.
5.1 Opinion of Cooley Godward LLP.
23.1 Consent of Ernst & Young LLP, Independent Auditors.
23.2 Consent of Cooley Godward LLP. Reference is made to
Exhibit 5.1.
24.1 Power of Attorney. Reference is made to page II-3.
II-1
<PAGE>
Item 17. Undertakings.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement 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.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, 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; and
(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.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 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.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to provisions described in Item 15, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
II-2
<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 Hayward, State of California, on the 31st day of
October, 1997.
LYNX THERAPEUTICS, INC.
By: /s/ Sam Eletr
-----------------------------------------------
Sam Eletr, Ph.D.
Chairman and Chief Executive Officer
(Principal Executive Officer)
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Sam Eletr and Edward C. Albini, and each
or any one of them, his or her true and lawful attorney-in-fact and agent, with
full power of substitution and resubstitution, for him or her and in his or her
name, place and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this Registration Statement, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
connection therewith, as fully to all intents and purposes as he or she might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their or his substitutes or
substitute, may lawfully do or cause to be done by virtue hereof.
<TABLE>
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capabilities and on the dates indicated.
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Sam Eletr Chairman and Chief Executive October 31, 1997
- --------------------------------------- Officer
Sam Eletr (Principal Executive Officer)
/s/ Edward C. Albini Chief Financial Officer October 31, 1997
- --------------------------------------- (Principal Financial and
Edward C. Albini Accounting Officer)
/s/ William K. Bowes, Jr. Director October 31, 1997
- ---------------------------------------
William K. Bowes, Jr.
/s/ Craig C. Taylor Director October 31, 1997
- ---------------------------------------
Craig C. Taylor
/s/ Sydney Brenner Director October 31, 1997
- ---------------------------------------
Sydney Brenner
Director October ___, 1997
- ---------------------------------------
Kathleen D. La Porte
/s/ James C. Kitch Director October 31, 1997
- ---------------------------------------
James C. Kitch
</TABLE>
II-3
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number Description of Document
- ------ -----------------------
4.1 Form of Common Stock Purchase Agreement, dated as of
September 28, 1997, by and between the Company and
the investors listed therein.
5.1 Opinion of Cooley Godward LLP.
23.1 Consent of Ernst & Young LLP, Independent Auditors.
23.2 Consent of Cooley Godward LLP. Reference is made to Exhibit 5.1.
24.1 Power of Attorney. Reference is made to page II-3.
Exhibit 4.1
FORM OF COMMON STOCK PURCHASE AGREEMENT
<PAGE>
LYNX THERAPEUTICS, INC.
COMMON STOCK PURCHASE AGREEMENT
This COMMON STOCK PURCHASE AGREEMENT (this "Agreement") is made as of
September 26, 1997, by and among LYNX THERAPEUTICS, INC., a Delaware corporation
(the "Company"), with its principal office at 3832 Bay Center Place, Hayward,
California 94545, and the persons listed on the Schedule of Investors attached
hereto as Exhibit A (individually, a "Purchaser," and collectively, the
"Purchasers").
SECTION 1 AUTHORIZATION AND SALE OF COMMON STOCK
1.1 Authorization. The Company has authorized the sale and issuance of
up to Two Million Seven Hundred Thousand (2,700,000) shares of its common stock,
par value $.01 per share (the "Common Stock"), pursuant to this Agreement.
1.2 Sale of Common. Subject to the terms and conditions of this
Agreement, the Company agrees to issue and sell to each Purchaser, and each
Purchaser severally agrees to purchase from the Company, on the Closing Date
hereinafter defined, the number of shares of Common Stock set forth opposite
such Purchaser's name on Exhibit A (collectively, the "Shares") for a purchase
price of $10.00 per share (the "Purchase Price").
SECTION 2 CLOSING DATE; DELIVERY
2.1 Closing Date. The closing of the purchase and sale of the Shares
hereunder (the "Closing") shall be held at the offices of Cooley Godward LLP,
Five Palo Alto Square, 3000 El Camino Real, Palo Alto, California at 9:00 a.m.
(Pacific Daylight Time), on the third business day following the date hereof or
at such other time and place upon which the Company and the Purchasers
purchasing the majority of the Shares shall agree. The date of the Closing is
hereinafter referred to as the "Closing Date."
2.2 Delivery. At the Closing, the Company will deliver to each
Purchaser a certificate, registered in the Purchaser's name as shown on Exhibit
A, representing the number of shares of Common Stock to be purchased by such
Purchaser. Such delivery shall be against payment of the Purchase Price therefor
by wire transfer of immediately available funds in the amount set forth opposite
such Purchaser's name on Exhibit A to a bank account designated in writing by
the Company to each Purchaser at least two (2) business days prior to the
Closing Date. Each Purchaser shall only be obligated to pay the Purchase Price
of the Shares purchased by it.
SECTION 3 REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Purchasers as follows,
effective as of the date hereof and the Closing Date:
3.1 Organization and Standing. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. The Company has all requisite corporate power to own or lease and
operate its properties and assets and to carry on its business as presently
conducted and as proposed to be conducted. The Company is duly qualified to
transact business and is in good standing in each jurisdiction in which the
failure to be so qualified would have a material adverse effect on its business
or properties.
3.2 Corporate Power. The Company has all requisite legal and corporate
power to execute and deliver this Agreement, to sell and issue the Shares and to
carry out and perform its obligations under the terms of this Agreement
including all exhibits and schedules hereto.
3.3 Capitalization. The authorized capital stock of the Company
consists of (i) 20,000,000 shares of Common Stock, of which 3,207,903 shares are
issued and outstanding as of September 10, 1997, and (ii) 2,000,000 shares of
Preferred Stock, par value $.01 per share (the "Preferred"), (a) 332,288 shares
of which have been designated Series B Convertible Preferred Stock (the "Series
B Preferred"), of which all 332,288 shares are issued and outstanding as of the
date hereof, (b) 123,299 shares of which have been designated Series C
Convertible Preferred Stock (the "Series C Preferred"), of which all 123,299
shares are issued and outstanding as of the date hereof, and (c) 40,000 shares
of which have been designated Series D Convertible Preferred Stock (the "Series
D Preferred"), of which all 40,000 shares are issued and outstanding as of the
date hereof. The rights,
2
<PAGE>
privileges and preferences of the Series B Preferred are as stated in the
Certificate of Amendment to Certificate of Designation of Preferences of Series
B Convertible Preferred Stock, dated October 31, 1995, as amended by the
Certificate of Amendment thereto dated December 23, 1996 (together, the "Series
B Certificate of Designation"). The rights, privileges and preferences of the
Series C Preferred are as stated in the Certificate of Amendment to the
Certificate of Designation of Preferences of Series C Convertible Preferred
Stock, dated October 31, 1995, as amended by the Certificate of Amendment
thereto dated December 23, 1996 (together, the "Series C Certificate of
Designation"). The rights, privileges and preferences of the Series D Preferred
are as stated in the Series D Certificate of Designation of Preferences of
Series D Convertible Preferred Stock, dated October 31, 1995, as amended by the
Certificate of Amendment thereto dated December 23, 1996 (together, the "Series
D Certificate of Designation"). The Company has heretofore delivered or caused
to be delivered to the Purchasers and Weil, Gotshal & Manges LLP, counsel to the
Purchasers ("Purchasers' Counsel"), true, correct and complete copies of the
Series B Certificate of Designation, the Series C Certificate of Designation,
the Series D Certificate of Designation, the Amended and Restated Certificate of
Incorporation of the Company (as amended through the date hereof) and the Bylaws
of the Company (as amended through the date hereof). The minute books of the
Company previously made available to Purchasers' Counsel contain complete and
accurate records of all meetings and accurately reflect all other corporate
actions of the stockholders and board of directors (including committees
thereof) of the Company. All such issued and outstanding shares of Common Stock,
Series B Preferred, Series C Preferred and Series D Preferred have been duly
authorized and validly issued and are fully paid and nonassessable. The Company
has reserved (i) 3,400,000 shares of Common Stock for issuance to officers,
directors, employees and consultants as may be determined by the Company's Board
of Directors from time to time, of which options to purchase an aggregate of
1,577,522 shares of Common Stock are issued and outstanding as of September 10,
1997, and (ii) 152,400 shares of Common Stock for issuance to Applied
Biosystems, Inc. ("ABI") upon exercise of the stock purchase option, granted as
of October 1, 1992, with an exercise price of $.001 per share (the "Purchase
Option"). Except for (A) the conversion privileges of the Series B Preferred set
forth in the Series B Certificate of Designation, (B) the conversion privileges
of the Series C Preferred set forth in the Series C Certificate of Designation,
(C) the conversion privileges of the Series D Preferred set forth in the Series
D Certificate of Designation, (D) outstanding options to purchase an aggregate
of 1,577,522 shares of Common granted pursuant to the Company's 1992 Stock
Option Plan, (E) the Purchase Option, (F) rights provided in the Shareholders
Agreement, dated October 1, 1992, by and among the Company, Chiron Corporation
and ABI (the "Chiron/ABI Agreement"), (G) rights provided in the Investor Rights
Agreement dated as of November 1, 1995, among the Company and certain holders of
Series B Preferred, certain holders of Series C Preferred and certain holders of
Series D Preferred (the "Investor Rights Agreement"), (H) the rights and
obligations of Hoechst Marion Roussel, Inc. to purchase up to 400,000 shares of
Preferred or Common Stock pursuant to that certain Series D Convertible
Preferred Stock Purchase Agreement dated as of October 2, 1995, and (I) a
warrant to be issued in connection with this transaction to Punk, Ziegel &
Company to purchase up to 75,000 shares of Common Stock (the "PZ&C Warrant"),
(i) there are no outstanding rights of first refusal, preemptive rights or other
rights (contingent or otherwise), options, warrants, convertible securities,
conversion rights, or other agreements either directly or indirectly for the
purchase or acquisition from, or the issuance by, the Company of any shares of
its capital stock, and (ii) the Company has no obligation (contingent or
otherwise) to purchase, redeem or otherwise acquire any shares of its capital
stock or any interest therein or to pay any dividend or make any other
distribution in respect thereof. Except for its joint venture interest in
BASF-LYNX Bioscience AG, the Company does not own, directly or indirectly, any
interest in any joint venture, partnership, corporation or other business
entity. Except for the Chiron/ABI Agreement and the Investor Rights Agreement,
to the Company's knowledge, there are no outstanding stockholder agreements,
voting trusts, proxies or other arrangements or understandings among the
stockholders of the Company relating to the voting of their respective shares.
3.4 Authorization.
(a) All corporate action on the part of the Company, its
directors and stockholders necessary for the authorization, execution, delivery
and performance of the Agreement by the Company, the authorization, sale,
issuance and delivery of the Shares and the performance of the Company's
obligations under the Agreement has been taken. The Agreement, when executed and
delivered by the Company, will constitute valid and binding obligations of the
Company enforceable in accordance with their terms, subject to laws of general
application relating to bankruptcy, insolvency, the relief of debtors, general
equity principles, and limitations upon rights to indemnity. The Shares, when
issued in compliance with the provisions of this Agreement, will be duly and
validly issued, fully paid, and nonassessable, and will not be issued in
violation of any preemptive rights.
(b) The Company has heretofore delivered to the Purchasers and
Purchasers' Counsel true, correct and complete copies of the Waiver Agreements
that the Company obtained from certain of its current
3
<PAGE>
security holders (the "Waiver Agreements"). As a result of the execution and
delivery of the Waiver Agreements, the preemptive rights with respect to the
issuance of any capital stock of the Company contained in the Investor Rights
Agreement have been legally and effectively waived.
(c) Assuming that ABI and Chiron are not "affiliates" of the
Company, as that term is defined in Rule 144(a) of the Securities Act, the
capital stock of the Company held by ABI and Chiron is freely tradeable pursuant
to Rule 144(k) of the Securities Act. ABI's and Chiron's preemptive rights have
terminated pursuant to Section 4.8 of the Chiron/ABI Agreement.
3.5 Financial Information; SEC Reports.
(a) The Company has delivered to the Purchasers (i) an
unaudited consolidated balance sheet at June 30, 1997 and (ii) audited
consolidated balance sheets at December 31, 1996, and December 31, 1995, in each
case, together with the related consolidated statements of operations,
stockholders' equity and cash flows for the period then ended (the
"Financials"). The Financials have been prepared in accordance with generally
accepted accounting principles consistently applied by the Company throughout
the periods involved, except for accounting changes described in the related
notes thereto, and present fairly the financial position of the Company as of
the respective dates of said balance sheets and the results of operations of the
Company for the respective periods covered. The Financials at, or for the
quarterly period ending, June 30, 1997 are hereinafter referred to as the "June
1997 Financials."
(b) Since June 30, 1997 there has not been:
(i) any change in the assets, liabilities, financial
condition or operating results of the Company from that reflected in the June
1997 Financials, except changes in the ordinary course of business which have
not been, in the aggregate, materially adverse to the financial condition,
operating results, prospects or business of the Company;
(ii) any damage, destruction or loss or interruption
in use of any material asset or property of the Company, whether or not covered
by insurance, materially and adversely affecting the assets, properties,
financial condition, operating results, prospects or business of the Company (as
such business is presently conducted and as it is proposed to be conducted);
(iii) any waiver by the Company of a valuable right
or of a material debt owed to it;
(iv) any satisfaction or discharge of any lien, claim
or encumbrance or payment of any obligation by the Company, except in the
ordinary course of business and which is not material to the assets, properties,
financial condition, operating results or business of the Company (as such
business is presently conducted and as it is proposed to be conducted);
(v) any change or amendment to a material contract or
arrangement by which the Company or any of its assets or properties is bound or
subject, except for an amendment, dated as of September 1, 1997, to that certain
Technology Development and Services Agreement dated as of October 2, 1995, by
and between the Company and Hoechst Marion Roussel, Inc., a copy of which has
been provided to the Purchasers;
(vi) any change in any compensation arrangement or
agreement with any employee of or consultant to the Company, other than normal
merit or longevity increases in the ordinary course of business;
(vii) any change in the accounting or tax methods or
practices of the Company or the making or changing by the Company of any
material tax election; or
(viii) to the Company's knowledge, any other event or
condition of any character which reasonably could be expected to materially and
adversely affect the assets, properties, financial condition, operating results
or business of the Company (as such business is presently conducted and as it is
proposed to be conducted).
(c) Except to the extent reflected or reserved against in the
balance sheets contained in the Financials and except for fees payable in
respect of this transaction to Punk, Ziegel & Company, the Company does not have
any indebtedness, liability or obligation of any nature in an amount in excess
of $50,000, whether absolute, accrued, contingent, or otherwise (including,
without limitation, liabilities as guarantor or otherwise with respect
4
<PAGE>
to obligations of others) and whether due or to become due, including, without
limitation, any liabilities for taxes of the Company for any period prior to
such date, or arising out of any transaction of the Company entered into prior
to such date or arising out of any state of facts arising prior to such date.
The Company does not know and has no reasonable ground to know of any basis for
the assertion against the Company of any claim or liability of any nature or in
any amount not fully reflected or reserved against in the Financials or referred
to in this Section 3.5.
(d) The Company has filed in a timely manner all documents
that the Company was required to file with the SEC under Sections 13, 14(a) and
15(d) of the Securities Exchange Act of 1934, as amended, and the rules and
regulations of the SEC promulgated thereunder (the "Exchange Act"), during the
twelve (12) months preceding the date of this Agreement. As of their respective
filing dates, all documents filed by the Company with the SEC (the "SEC
Reports") complied in all material respects with the requirements of the
Exchange Act, and did not contain, as of the respective date of such SEC Report,
any untrue statement of a material fact or omitted as of its date to state a
material fact necessary in order to make the statements made therein, in light
of the circumstances in which they were made, not misleading.
3.6 Compliance with Other Instruments, etc. The Company is not, and
will not by virtue of entering into and performing this Agreement and the
transactions contemplated thereunder be, in violation of any term of its
Restated Certificate of Incorporation, Series B Certificate of Designation,
Series C Certificate of Designation, Series D Certificate of Designation or
Bylaws, or any term or provision of any mortgage, indenture, contract,
agreement, instrument, judgment or decree to which it is a party or by which it
is bound, and is not, and will not by virtue of entering into and performing
this Agreement and the transactions contemplated thereunder be, in violation of
any order addressed specifically to the Company nor, to the best of the
Company's knowledge, any order, statute, rule or regulation applicable to the
Company, other than any of the foregoing such violations that do not, either
individually or in the aggregate, have a material adverse effect on the
Company's financial condition, operating results, prospects or business (as such
business is presently conducted or as it is planned to be conducted).
3.7 Litigation, etc. There are no actions, suits, proceedings or
investigations pending or, to the best knowledge of the Company, overtly
threatened against the Company before any court or governmental agency,
department, commission or instrumentality; nor to the knowledge of the Company
is there any reasonable basis for any such action, proceeding, suit or
investigation. There is no judgment, decree, injunction or order of any court in
effect against the Company.
3.8 Employees. The Company has no collective bargaining agreements with
any of its employees and there is no labor union organizing activity pending or
threatened with respect to the Company. To the best knowledge of the Company,
there are no pending or overtly threatened material unfair labor practice
charges or employee grievance charges with respect to the Company's business.
Except for the Company's 401(k) plan, health and insurance plan, stock option
plan and employee benefit plan, there is no pension, health, profit sharing,
bonus, stock purchase, stock option, hospitalization, insurance, severance, or
any other employee benefit or welfare benefit plan with respect to any officer
or employee of the Company. The Company is not aware that any officer or key
employee, or that any group of key employees, intends to terminate their
employment with the Company. The Company is not aware that any of its employees
is obligated under any contract (including licenses, covenants or commitments of
any nature) or other agreement, or subject to any judgment, decree or order of
any court or administrative agency, that would interfere with the use of such
employee's best efforts to promote the interests of the Company or that would
conflict with the Company's business as presently conducted or proposed to be
conducted. Neither the execution nor delivery of this Agreement, nor the
carrying on of the Company's business by the employees of the Company, nor the
conduct of the Company's business as proposed, will, to the Company's best
knowledge, conflict with or result in a breach of the terms, conditions or
provisions of, or constitute a default under, any contract, covenant or
instrument under which any of such employees is now obligated. All employees of
the Company have entered into the Company's standard form of Proprietary
Information and Inventions Agreement.
3.9 Registration Rights. Except as set forth in the Investor Rights
Agreement, the Chiron/ABI Agreement and Section 7.2 hereto, the Company is not
under any obligation to register (as defined in Section 1.10 of the Investor
Rights Agreement) any of its presently outstanding securities or any of its
securities that may hereafter be issued. As a result of the execution and
delivery of the Waiver Agreements, the registration rights contained in the
Investor Rights Agreement with respect to the issuance and purchase of the
Shares have been legally and effectively waived.
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3.10 Compliance With Laws; Permits. The Company is in compliance with
all Laws (as defined below) applicable to it or to the conduct of its business
or operations or the use of its properties (including leased properties) and
assets, except for such non-compliance as would not, individually or in the
aggregate, have a material adverse effect on the Company's financial condition,
operating results, prospects or business (as such business is presently
conducted or as it is proposed to be conducted). The Company has all
governmental permits and approvals from state, local or federal authorities
which are currently required for the Company to operate its business, except
those the absence of which would not, individually or in the aggregate, have a
material adverse effect on the Company's financial condition, operating results,
prospects or business (as such business is presently conducted or as it is
proposed to be conducted). As used herein, "Laws" shall mean all federal, state
or local laws (including common law), statute, code, ordinance, rule, regulation
or other requirement or guideline or judicial or administrative decision.
3.11 Governmental Consent, etc. No consent, approval or authorization
of or designation, declaration or filing with any federal, state or local
governmental authority, department, agency or instrumentality on the part of the
Company is required in connection with the valid execution and delivery of the
Agreement, or the offer, sale or issuance of the Shares or the consummation of
any other transaction contemplated thereby, except the filing of (a) amendments
to the Series B Certificate of Designation and the Series C Certificate of
Designation, as contemplated by Section 5.4 herein, with the Secretary of State
of the State of Delaware, and (b) the required notices pursuant to Regulation D
promulgated by the SEC, which filing the Company agrees to make within fifteen
(15) days of the Closing.
3.12 Offering. Neither the Company nor any person or entity acting on
the Company's behalf has engaged or will engage in any form of general
solicitation of general advertising (within the meaning of Regulation D under
the Securities Act) in connection with any offer or sale of the Shares in the
United States. The Company has not issued, offered or sold shares of Common
Stock (including for this purpose any securities convertible into or
exchangeable or exercisable for Common Stock) within the six-month period next
preceding the date hereof, except as disclosed in the SEC Reports, and the
Company shall not, directly or indirectly, take, and shall not permit any of its
directors, officers or affiliates, directly or indirectly, to take, any action
(including, without limitation, any offering or sale to any person or entity of
shares of Common Stock) so as to make unavailable the exemption from Securities
Act registration being relied upon by the Company for the offer and sale to the
Purchasers of the Shares as contemplated by this Agreement. Assuming the
accuracy of the representations and warranties of the Purchasers contained in
Section 4 hereof, the offer, issuance and sale of the Shares are exempt from the
registration and prospectus delivery requirements of the Securities Act, and the
Shares have been registered or qualified (or are exempt from registration and
qualification) under the registration, permit, or qualification requirements of
all applicable state securities laws.
3.13 Certain Transactions. Since June 30, 1997, the Company has not (a)
discharged or satisfied any obligation or liability other than in the ordinary
course of business, (b) declared or made any payment or distribution to its
stockholders or redeemed or purchased any of its shares of capital stock or
securities, (c) mortgaged or subjected to encumbrances any of its assets, (d)
sold, transferred or leased to third parties any of its assets except in the
ordinary course of business, (e) canceled or compromised any material debt or
any claim or waived or released any right of material value, suffered any
physical damage or destruction or loss materially and adversely affecting its
properties, operations or business, (f) made any loans or advances to any
persons other than immaterial amounts (both individually and in the aggregate)
in the ordinary course of business or (g) entered into any material transaction
other than in the ordinary course of business or agreed to any of the foregoing
other than with respect to transactions relating to this Agreement except for
purchases of unvested securities from terminated employees.
3.14 Title to Properties and Assets; Right to Conduct Business. The
Company has good and marketable title to its properties and assets, and, to the
best of its knowledge, has good title to all its leasehold estates, in each case
subject to no mortgage, lien, loan or encumbrance, except such liens and
encumbrances which arise in the ordinary course of business and do not
materially impair the operations of the Company. As of the date hereof, the
Company owns no real property in fee. With respect to property it leases, such
property is held by the Company under valid and subsisting leases and the
Company is in compliance with such leases in all material respects. The Company
has, or in good faith after commercially reasonable efforts believes that it
will have, all rights necessary to conduct its business as now conducted and as
proposed to be conducted.
3.15 Patents and Trademarks. To the best of its knowledge, the Company
owns the entire right, title and interest in, or license rights under, all
patents, patent applications, trademarks, service marks, trade names,
copyrights, trade secrets, information, proprietary rights and processes
(including designs, specifications, formulas,
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composition, methods and procedures and computer software) (collectively,
"Proprietary Information") necessary for its business as now conducted and as
proposed to be conducted without any conflict with or infringement of the rights
of others. To the best knowledge of the Company, none of the Proprietary
Information is being infringed, misappropriated or otherwise violated by any
person or entity. No claim or demand of any person or entity has been made nor
is there any proceeding that is pending or, to the best knowledge of the
Company, threatened, which (i) challenges the rights of the Company in respect
of any Proprietary Information or (ii) asserts that the Company is infringing,
misappropriating, violating or otherwise in conflict with, or is required to pay
any royalty, license fee, charge or other amount with regard to, any Proprietary
Information. None of the Proprietary Information is subject to any outstanding
order, ruling, decree, judgment or stipulation by or with any court, arbitrator,
or administrative agency, or has been the subject or any litigation within the
last year, whether or not resolved in favor of the Company.
3.16 Tax Returns. The Company has accurately prepared and timely filed
all federal, state and other tax returns which are required to be filed by it
and has timely paid all taxes covered by such returns which have become due and
payable. The Company has not been advised, orally or in writing, that any of its
tax returns, federal, state, local or other, have been or are being audited as
of the date hereof. The Company is not delinquent in the payment of any taxes or
assessments (federal, state, local or other), has no tax deficiency proposed or
assessed and has not waived the statute of limitations or extended the period
for assessment or collection of any tax.
3.17 No Defaults. The Company has, in all material respects, performed
all obligations required to be performed by it to date and is not in default
under any of the contracts, loans, notes, mortgages, indentures, licenses,
security agreements, agreements, leases, documents, commitments or other
arrangements to which it is a party or by which it is otherwise bound, except
for such defaults which in the aggregate would not have a materially adverse
effect on the business, prospects, operating results or financial condition of
the Company, and no event or condition has occurred which, with the lapse of
time or the giving of notice, or both, would constitute such a default; nor does
the Company have knowledge or any material breach by the other parties to such
contracts, agreements or arrangements.
3.18 Disclosure. None of the representations or warranties made by the
Company in this Agreement and no information in the Exhibits hereto or otherwise
provided to the Purchasers by the Company contain any untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements contained herein and therein not misleading.
3.19 Nasdaq NMS Qualification. Immediately following the issuance and
purchase of the Shares contemplated by this Agreement, the Company will satisfy
the eligibility criteria for the Nasdaq National Market ("Nasdaq NMS") and, upon
submitting the appropriate listing application and listing agreement with the
Nasdaq National Market, the Common Stock, including the Shares, would be
eligible for quotation on Nasdaq NMS. The Company will submit a copy of such
application to the Nasdaq NMS for their approval and will deliver a true and
correct copy of such application to WPG Farber Weber (as defined in Section 7.5
below) and Purchasers' Counsel as soon as practicable after the Closing Date.
SECTION 4 REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PURCHASERS
Each Purchaser hereby severally and not jointly represents and warrants
to the Company, effective as of the Closing Date, as follows:
4.1 Authorization. Purchaser represents and warrants to the Company
that: (i) Purchaser has all requisite legal and corporate or other power and
capacity and has taken all requisite corporate or other action to execute and
deliver this Agreement, to purchase the Shares to be purchased by it and to
carry out and perform all of its obligations under this Agreement; and (ii)
assuming the due execution and delivery of this Agreement by the Company, this
Agreement constitutes the legal, valid and binding obligation of the Purchaser,
enforceable in accordance with its terms, except (a) as limited by applicable
bankruptcy, insolvency, reorganization, or similar laws relating to or affecting
the enforcement of creditors' rights generally and (b) as limited by equitable
principles generally.
4.2 Investment Experience. Purchaser is an "accredited investor" as
defined in Rule 501(a) under the Securities Act of 1933, as amended (the
"Securities Act"). Purchaser is aware of the Company's business affairs and
financial condition and has had access to and has acquired sufficient
information about the Company to reach an informed and knowledgeable decision to
acquire the Shares. Purchaser has such business and financial
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experience as is required to give it the capacity to protect its own interests
in connection with the purchase of the Shares.
4.3 Investment Intent. Purchaser is purchasing the Shares for its own
account as principal, for investment purposes only, and not with a present view
to, or for, resale, distribution or fractionalization thereof, in whole or in
part, within the meaning of the Securities Act. Purchaser understands that its
acquisition of the Shares has not been registered under the Securities Act or
registered or qualified under any state securities law in reliance on specific
exemptions therefrom, which exemptions may depend upon, among other things, the
bona fide nature of Purchaser's investment intent as expressed herein. Purchaser
has completed or caused to be completed the Purchaser Questionnaire attached
hereto as Exhibit B for use in preparation of the Shelf Registration (as defined
below), will deliver the Purchaser Questionnaire to the Company on or prior to
the Closing Date, and the responses provided therein shall be true and correct
as of the date hereof and the Closing Date and will be true and correct as of
the effective date of the Shelf Registration.
4.4 Registration or Exemption Requirements.
(a) Purchaser further acknowledges and understands that the
Shares must be held indefinitely, and they may not be resold or otherwise
transferred, except in a transaction registered under the Securities Act or
otherwise exempt from such registration requirements of the Securities Act.
Purchaser understands that the certificate(s) evidencing the Shares will be
imprinted with a legend in substantially the form set forth in Section 8.2
hereof that indicates that the transfer of the Shares is prohibited unless (i)
they are registered or such registration is not required to transfer such
Shares, or (ii) the transfer is pursuant to an exemption from registration under
the Securities Act and, if the Company shall so request in writing, an opinion
of counsel reasonably satisfactory to the Company is obtained to the effect that
the transaction is so exempt and in compliance with applicable state law.
(b) Purchaser further acknowledges that because the Company's
Common Stock is not currently listed on the Nasdaq NMS or a national securities
exchange, resale of the Shares may be limited by applicable state law, even
where a registration statement covering resale of the Shares has been declared
effective under the Securities Act. For example, certain states may limit resale
of the Shares to qualified institutions or in unsolicited qualified broker
transactions in the absence of qualification or another exemption in such state.
4.5 Restriction on Short Sales. Purchaser represents and warrants to
and covenants with the Company that Purchaser has not engaged and will not
engage in any short sales of the Company's Common Stock prior to the
effectiveness of the Shelf Registration (as defined below) except to the extent
that any such short sale is fully covered by shares of Common Stock of the
Company other than the Shares.
4.6 No Legal, Tax or Investment Advice. Purchaser understands that
nothing in this Agreement or any other materials presented to Purchaser in
connection with the purchase and sale of the Shares constitutes legal, tax or
investment advice. Purchaser has consulted such legal, tax and investment
advisors as it, in its sole discretion, has deemed necessary or appropriate in
connection with its purchase of the Shares.
SECTION 5 CONDITIONS TO CLOSING OF PURCHASERS
Each Purchaser's obligation to purchase the Shares at the Closing is,
at the option of such Purchaser, subject to the fulfillment or waiver as of the
Closing Date of the following conditions:
5.1 Representations and Warranties. The representations and warranties
made by the Company in Section 3 hereof shall be true and correct on the date
hereof, and shall be true and correct on the Closing Date with the same force
and effect as if they had been made on and as of said date.
5.2 Legal Opinion. The Company shall have delivered a legal opinion
from Cooley Godward LLP, counsel to the Company, addressed to each of the
Purchasers in the form attached hereto as Exhibit D.
5.3 Officers' Certificate. The Company shall deliver to the Purchasers
a certificate, dated as of the Closing Date, signed by the Chief Executive
Officer and the Chief Financial Officer of the Company certifying that the
representations and warranties set forth in Section 3 are true as of, and all of
the closing conditions set forth in Section 5 have been satisfied on, the
Closing Date.
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5.4 Amendment of Certificates of Designation. The Company shall have
caused the Series B Certificate of Designation and the Series C Certificate of
Designation to be amended to provide that (i) the Series B Preferred and Series
C Preferred are not convertible into shares of Common Stock until March 31, 1998
and (ii) the Series B Preferred and Series C Preferred will automatically
convert into shares of Common Stock at the applicable conversion rate on March
31, 1998.
5.5 Covenants. All covenants, agreements and conditions contained in
this Agreement to be performed by the Company on or prior to the Closing Date
shall have been performed or complied with in all material respects.
5.6 No Injunction, etc.
(a) No injunction, judgment, order, writ, decree,
law, rule or regulation shall exist that restrains, enjoins or prohibits the
consummation of any of the transactions contemplated hereby or awards damages or
other relief in respect of the consummation of any such transactions.
(b) No Purchaser shall be obligated to purchase
Shares which it has agreed to purchase under this Agreement unless, as of the
date immediately preceding the Closing Date, Purchasers have agreed to purchase
an aggregate of at least $15 million of Shares.
SECTION 6 CONDITIONS TO CLOSING OF COMPANY
The Company's obligation to sell and issue the Shares at the Closing
is, at the option of the Company, subject to the fulfillment or waiver of the
following conditions:
6.1 Representations and Warranties. The representations made by the
Purchasers in Section 4 hereof shall be true and correct in all material
respects on the date hereof, and shall be true and correct in all material
respects on the Closing Date with the same force and effect as if they had been
made on and as of such date.
6.2 Covenants. All covenants, agreements and conditions contained in
this Agreement to be performed by the Purchasers on or prior to the Closing Date
shall have been performed or complied with in all material respects.
SECTION 7 AFFIRMATIVE COVENANTS OF THE COMPANY
The Company hereby covenants and agrees as follows:
7.1 Financial Information. The Company will mail the following reports
to each Purchaser until such Purchaser transfers, assigns or sells the Shares
purchased by such Purchaser pursuant to this Agreement:
(a) As soon as practicable after the end of each fiscal year
and in any event within one hundred (100) days after the end of each fiscal
year, a copy of its Annual Report on Form 10-K.
(b) As soon as practicable after the end of each of the first
three quarterly periods in each fiscal year and in any event within fifty (50)
days after the end of the first, second and third quarterly accounting periods
of each fiscal year of the Company, a copy of its Quarterly Report on Form 10-Q.
7.2 Registration Requirements.
(a) Shelf Registration. The Company shall use its best efforts
to prepare and file with the Securities and Exchange Commission (the "SEC") a
Registration Statement pursuant to Rule 415 (or any appropriate similar rule
that may be adopted by the SEC) under the Securities Act covering the Shares
(including any amendment thereto, the "Shelf Registration") within thirty (30)
days of the Closing Date (the "Filing Date"). The Shelf Registration shall be on
Form S-3 or another appropriate form permitting registration of such Shares for
resale by the Purchasers from time to time. The Company acknowledges that it has
received all information from the Purchasers necessary to register any Shares.
Each Purchaser agrees to furnish promptly to the Company in writing all
information required from time to time to be disclosed in order to make the
information previously furnished to the Company by such holder not misleading.
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(b) Effectiveness. The Company shall use its best efforts to
cause the Shelf Registration to become effective under the Securities Act within
sixty (60) days of the Filing Date (the "Effective Date") and to prevent
stockholders other than the Purchasers from joining in such Shelf Registration.
Subject to the requirements of the Securities Act including, without limitation,
requirements relating to updating through post-effective amendments, prospectus
supplements or otherwise, the Company shall use its best efforts to keep the
Shelf Registration continuously effective and in compliance with the Securities
Act until the earlier of (i) the second anniversary of the Effective Date, (ii)
such date as all of the Shares have been resold or (iii) such time as all of the
Shares held by the Purchasers may be sold within a given three-month period
without compliance with the registration requirements of the Securities Act
pursuant to Rule 144 under the Securities Act ("Rule 144"); provided, however,
that in the event of a Suspension Period, as set forth in Section 7.2(c) hereof,
the Company shall extend the period of effectiveness of such Shelf Registration
by the number of days of each such Suspension Period. The Company shall use its
best efforts to take such actions under the laws of various states as may be
required, from time to time during the effectiveness of the Shelf Registration,
to cause the resale of the Shares pursuant to the Shelf Registration to be
lawful. The Company will cause, as of the Effective Date, all the Shares to be
listed for quotation on the Nasdaq NMS.
(c) Following the effectiveness of a Shelf Registration filed
pursuant to this section, the Company may, at any time, suspend the
effectiveness of such Shelf Registration for up to fifteen (15) days, as
appropriate (a "Suspension Period"), by giving notice to each Purchaser, if the
Company shall have determined, in good faith through action by its Board of
Directors, that the Company may be required to disclose any material corporate
development, which disclosure, in the good faith judgment of the Company's Board
of Directors, could reasonably be expected to have a material adverse effect on
the Company; and at least two (2) business days prior to implementing any such
Suspension Period, the Company shall deliver to each Purchaser a certificate to
that effect. Notwithstanding the foregoing, no more than two Suspension Periods
(i.e., 30 days) may occur in immediate succession and no more than three (3)
Suspension Periods may occur in any calendar year. The period of any such
suspension of the registration statement shall be added to the period of time
the Company agrees to keep the Shelf Registration effective as provided in
Section 7.2(b). The Company shall use its best efforts to limit the duration and
number of any Suspension Periods, including, without limitation, preparing and
filing with the SEC post-effective amendments to the Shelf Registration and/or
prospectus supplements to the prospectus included in the Shelf Registration.
Each Purchaser agrees that, upon receipt of notice from the Company of a
Suspension Period in accordance with the provisions of this Section 7.2(c), such
Purchaser shall forthwith discontinue disposition of shares covered by such
registration statement or prospectus in accordance with the provisions of this
Section 7.2(c) until such Purchaser (i) is advised in writing by the Company
that the applicable Suspension Period has been terminated and the use of the
prospectus may be resumed, (ii) has received copies of a supplemental or amended
prospectus, if applicable, and (iii) has received copies of any additional or
supplemental filings which are incorporated or deemed to be incorporated by
reference in such prospectus.
(d) Registration Expenses. The Company shall pay all
Registration Expenses (as defined below) in connection with any registration,
qualification or compliance hereunder, and each Purchaser shall pay all Selling
Expenses (as defined below) and other expenses that are not Registration
Expenses relating to the Shares resold by such Purchaser. "Registration
Expenses" shall mean all expenses, except for Selling Expenses, incurred by the
Company in complying with the registration provisions herein described,
including, without limitation, all registration, qualification and filing fees,
printing expenses, escrow fees, fees and expenses in connection with listing the
Shares for quotation on Nasdaq NMS, fees and disbursements of counsel for and
the independent auditors of the Company, blue sky fees and expenses and the
expense of any special audits incident to or required by any such registration.
"Selling Expenses" shall mean selling commissions, underwriting fees and stock
transfer taxes applicable to the Shares and all fees and disbursements of
counsel for any Purchaser.
(e) In addition to the Company's other obligations under this
Section 7.2, in connection with the registration of the Shares on the Shelf
Registration, the Company shall:
(i) (A) Prior to the filing with the SEC of the Shelf
Registration (including any amendments thereto), provide draft copies and
reflect in such documents all such comments as the Purchasers reasonably may
propose and (B) furnish to each Purchaser whose Shares are included in the Shelf
Registration (x) promptly after the same is prepared and publicly distributed,
filed with the SEC, or received by the Company, one copy of the Shelf
Registration, each prospectus, and each amendment or supplement thereto, and (y)
such number of copies of the prospectus and all amendments and supplements
thereto, as such Purchaser may reasonably request in order to facilitate the
disposition of the Shares owned by such Purchaser;
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(ii) As promptly as practicable after becoming aware
of such event, notify each Purchaser of the occurrence of any event, as a result
of which the prospectus included in the Shelf Registration, as then in effect,
includes an untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading, and
promptly prepare an amendment to the Shelf Registration and supplement to the
prospectus to correct such untrue statement or omission, and deliver a number of
copies of such supplement and amendment to each Purchaser as such Purchaser may
reasonably request;
(iii) As promptly as practicable after becoming aware
of such event, notify each Purchaser who holds Shares being sold of the issuance
by the SEC of any stop order or other suspension of the effectiveness of the
Shelf Registration at the earliest possible time and take all lawful action to
effect the withdrawal, recession or removal of such stop order or other
suspension; and
(iv) Make generally available to its security holders
as soon as practicable, but in any event not later than 18 months after (i) the
effective date (as defined in Rule 158(c) under the Securities Act) of the Shelf
Registration, and (ii) the effective date of each post-effective amendment to
the Shelf Registration, as the case may be, an earnings statement of the Company
and its subsidiaries complying with Section 11(a) of the Securities Act and the
rules and regulations of the Commission thereunder (including, at the option of
the Company, Rule 158).
(f) With a view to making available to the Purchasers the
benefits of Rule 144 promulgated under the Securities Act ("Rule 144") and any
other rule or regulation of the SEC that may at any time permit a Purchaser to
sell Shares to the public without registration or pursuant to registration, the
Company covenants and agrees to: (i) make and keep public information available,
as those terms are understood and defined in Rule 144, until the earlier of (A)
the second anniversary of the Closing Date or (B) such date as all of the Shares
shall have been resold; (ii) file with the SEC in a timely manner all reports
and other documents required of the Company under the Exchange Act; and (iii)
furnish to any Purchaser upon request, as long as the Purchaser owns any Shares,
(A) a written statement by the Company that it has complied with the reporting
requirements of the Exchange Act, (B) a copy of the most recent annual or
quarterly report of the Company, and (C) such other information as may be
reasonably requested in order to avail any Purchaser of any rule or regulation
of the SEC that permits the selling of any such Shares without registration.
(g) Prior to the Effective Date, the Company shall not enter
into any agreement or take any action with respect to its securities that is
inconsistent with the rights granted to the Purchasers under this Section 7.2,
could reasonably be expected to cause a delay of the Filing Date and/or the
Effective Date or would otherwise conflict with the provisions of this Section
7.2.
7.3 Indemnification and Contribution.
(a) The Company agrees to indemnify and hold harmless each
Purchaser from and against any losses, claims, damages or liabilities (or
actions or proceedings in respect thereof) to which such Purchaser may become
subject (under the Securities Act or otherwise) insofar as such losses, claims,
damages or liabilities (or actions or proceedings in respect thereof) arise out
of, or are based upon, any untrue statement or alleged untrue statement of a
material fact contained in the Shelf Registration or the prospectus (including
any supplement) contained therein or arise out of, or are based upon, the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein (in light of the
circumstances under which they were made in the case of the prospectus), not
misleading, or arise out of any failure by the Company to fulfill any
undertaking included in the Shelf Registration, and the Company will, as
incurred, reimburse such Purchaser for any legal or other expenses reasonably
incurred in investigating, defending or preparing to defend any such action,
proceeding or claim; provided, however, that the Company shall not be liable in
any such case to the extent that such loss, claim, damage or liability arises
out of, or is based upon (i) an untrue statement made in such Shelf Registration
in reliance upon and in conformity with written information furnished to the
Company by or on behalf of such Purchaser specifically for use in preparation of
the Shelf Registration, (ii) the failure of such Purchaser to comply with the
covenants and agreements contained in Section 7.2 or 8.3 hereof, or (iii) any
untrue statement in any prospectus that is corrected in any subsequent
prospectus that was delivered to the Purchaser prior to the pertinent sale or
sales by the Purchaser. The Company will reimburse the Purchasers for any legal
or other expenses reasonably incurred in investigating, defending or preparing
to defend any such action, proceeding or claim notwithstanding the absence of a
judicial determination as to the propriety and enforceability of the obligations
under this section and the possibility that such payments might later be held to
be improper, provided, that (i) to the extent
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any such payment is ultimately held to be improper, the persons receiving such
payments shall promptly refund them and (ii) such persons shall provide to the
Company, upon request, reasonable assurances of their ability to effect any
refund, when and if due.
(b) Each Purchaser, severally and not jointly, agrees to
indemnify and hold harmless the Company from and against any losses, claims,
damages or liabilities (or actions or proceedings in respect thereof) to which
the Company may become subject (under the Securities Act or otherwise) insofar
as such losses, claims, damages or liabilities (or actions or proceedings in
respect thereof) arise out of, or are based upon any untrue statement or alleged
untrue statement of a material fact contained in the Shelf Registration or the
prospectus (including any supplement) contained therein or arise out of, or are
based upon, the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein (in
light of the circumstances under which they were made in the case of the
prospectus), not misleading, in each case, to the extent, but only to the
extent, that such untrue statement or alleged untrue statement or omission or
alleged omission was made in reliance upon and in conformity with written
information furnished to the Company by or on behalf of such Purchaser
specifically for use in preparation of the Shelf Registration, provided,
however, that no Purchaser shall be liable in any such case for (i) any untrue
statement included in any prospectus which statement has been corrected, in
writing, by such Purchaser and delivered to the Company before the sale from
which such loss occurred, (ii) the failure of such Purchaser to comply with the
covenants and agreements contained in Section 7.2 or 8.3 hereof, or (iii) any
untrue statement in any prospectus that is corrected in any subsequent
prospectus that was delivered to the Purchaser prior to the pertinent sale or
sales by the Purchaser; provided further, that the obligations of each Purchaser
hereunder shall be limited to an amount equal to the net proceeds to such
Purchaser of Shares sold under the Shelf Registration. The Purchaser will
reimburse the Company for any legal or other expenses reasonably incurred in
investigating, defending or preparing to defend any such action, proceeding or
claim notwithstanding the absence of a judicial determination as to the
propriety and enforceability of the obligations under this section and the
possibility that such payments might later be held to be improper, provided,
that (i) to the extent any such payment is ultimately held to be improper, the
persons receiving such payments shall promptly refund them and (ii) such persons
shall provide to the Purchaser, upon request, reasonable assurances of their
ability to effect any refund, when and if due.
(c) Promptly after receipt by any indemnified person of a
notice of a claim or the beginning of any action in respect of which indemnity
is to be sought against an indemnifying person pursuant to this Section 7.3,
such indemnified person shall notify the indemnifying person in writing of such
claim or of the commencement of such action (but the omission to so notify the
indemnifying party shall not relieve it from any liability that it otherwise may
have to the indemnified party, except to the extent that the indemnifying party
is materially prejudiced and forfeits substantive rights and defenses by reason
of such failure), and, subject to the provisions hereinafter stated, in case any
such action shall be brought against an indemnified person and the indemnifying
person shall have been notified thereof, the indemnifying person shall be
entitled to participate therein, and, in the case of any claim as to which both
the indemnified party and the indemnifying party are parties, to the extent that
it shall wish, the indemnifying party may assume the defense thereof, with
counsel reasonably satisfactory to the indemnified person. After notice from the
indemnifying person to such indemnified person of the indemnifying person's
election to assume the defense thereof, the indemnifying person shall not be
liable to such indemnified person for any legal expenses subsequently incurred
by such indemnified person in connection with the defense thereof; provided,
however, that if there exists or shall exist a conflict of interest that would
make it inappropriate in the reasonable judgment of the indemnified person for
the same counsel to represent both the indemnified person and such indemnifying
person or any affiliate or associate thereof, the indemnified person shall be
entitled to retain its own counsel at the expense of such indemnifying person.
If the indemnifying party shall assume the defense of any such claim, it shall
not, without prior written consent of the indemnified party (which consent shall
not unreasonably be withheld), settle or compromise any such claim or consent to
the entry of any judgment that does not include an unconditional release of the
indemnified party from all liabilities with respect to such claim or judgment.
(d) If the indemnification provided for in this Section 7.3 is
unavailable to or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) referred to therein,
then each indemnifying party shall contribute to the amount paid or payable by
such indemnified party as result of such losses, claims, damages or liabilities
(or actions in respect thereof) in such proportion as is appropriate to reflect
the relative fault of the Company on the one hand and the Purchasers on the
other in connection with the statements or omissions which resulted in such
losses, claims, damages or liabilities (or actions in respect thereof), as well
as any other relevant equitable considerations. The relative fault shall be
determined by reference to, among other things, whether the
12
<PAGE>
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the Company
on the one hand or a Purchaser on the other and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The Company and the Purchasers agree that it would not be
just and equitable if contribution pursuant to this subsection (d) were
determined by pro rata allocation (even if the Purchasers were treated as one
entity for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to above in this
subsection (d). The amount paid or payable by an indemnified party as a result
of the losses, claims, damages, or liabilities (or actions in respect thereof)
referred to above in this subsection (d) shall be deemed to include any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this subsection (d), no Purchaser shall be required to contribute
any amount in excess of the amount by which the amount received by the Purchaser
from the sale of the Shares to which such loss relates exceeds the amount of any
damages which such Purchaser has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. The Purchasers'
obligations in this subsection (d) to contribute are several in proportion to
their respective sales of Shares to which such loss relates and not joint.
(e) The obligations of the Company and the Purchasers under
this Section 7.3 shall be in addition to any liability which the Company and the
respective Purchasers may otherwise have and shall extend, upon the same terms
and conditions, to each person, if any, who controls the Company or any
Purchaser within the meaning of the Act.
7.4 Key Person Insurance. As soon as practicable after the Closing Date
and in any event within sixty (60) days of the Closing Date, the Company will
obtain key-person life insurance in the amount of $1,500,000 on Sam Eletr,
Ph.D., for a period of three (3) years from the Closing Date, with proceeds
payable to the Company.
7.5 Board Representation. For a period of three (3) years from the
Closing Date, so long as WPG- Farber, Weber Fund, L.P. ("WPG Farber Weber")
holds at least 400,000 shares of Common Stock of the Company, the Company agrees
to nominate a designee of WPG Farber Weber reasonably acceptable to the Company
(the "Nominee"), for election to the Board of Directors of the Company at each
meeting of the Company's stockholders, or pursuant to each written consent of
the Company's stockholders, held or solicited for the purpose of the election of
directors of the Company. If WPG Farber Weber elects not to have a designee
nominated to the Company's Board of Directors, WPG Farber Weber shall be
entitled to have one representative as an observer (with no right to vote) at
each meeting of the Board of Directors of the Company, and the Board of
Directors of the Company shall furnish (or cause to be furnished) WPG Farber
Weber, to the attention of such person as WPG Farber Weber may designate as its
observer (the "Observer"), and at the same time and in the same manner furnished
to directors of the Company, notice of each such meeting and any other materials
relevant to such meeting so provided to the directors of the Company (including
resolutions to be adopted by the directors at any meeting or by written
consent); provided, however, that (i) such Observer acknowledges that he or she
will have access to confidential, nonpublic, material, insider information, and
(ii) such Observer may be excluded from portions of meetings of the Board of
Directors of the Company if Company's Counsel determines that such Observer's
presence could jeopardize the attorney-client privilege.
7.6 Nasdaq NMS Listing. The Company shall use its best efforts as soon
as practicable after the Closing Date, and in any event no later than the
Effective Date, to cause the Common Stock to be listed for inclusion on the
Nasdaq NMS and shall take all actions necessary to comply with the rules and
regulations of the Nasdaq NMS in order to maintain the inclusion of the Common
Stock on the Nasdaq NMS.
SECTION 8 RESTRICTIONS ON TRANSFERABILITY OF SHARES: COMPLIANCE WITH SECURITIES
ACT
8.1 Restrictions on Transferability. The Shares shall not be
transferable in the absence of a registration under the Securities Act or an
exemption therefrom or in the absence of compliance with any term of this
Agreement. The Company shall be entitled to give stop transfer instructions to
its transfer agent with respect to the Shares in order to enforce the foregoing
restrictions.
8.2 Restrictive Legend. Each certificate representing Shares shall bear
substantially the following legends (in addition to any legends required under
applicable securities laws):
13
<PAGE>
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT PURPOSES ONLY AND HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 OR ANY STATE SECURITIES LAWS. THE SHARES MAY NOT
BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN
EXEMPTION THEREFROM.
ADDITIONALLY, THE TRANSFER OF THE SHARES REPRESENTED BY THIS
CERTIFICATE IS SUBJECT TO CERTAIN RESTRICTIONS SPECIFIED IN THE COMMON
STOCK PURCHASE AGREEMENT DATED SEPTEMBER __, 1997 BETWEEN THE COMPANY
AND THE ORIGINAL PURCHASER, AND NO TRANSFER OF SHARES SHALL BE VALID OR
EFFECTIVE ABSENT COMPLIANCE WITH SUCH RESTRICTIONS. ALL SUBSEQUENT
HOLDERS OF THIS CERTIFICATE WILL HAVE AGREED TO BE BOUND BY CERTAIN OF
THE TERMS OF THE AGREEMENT, INCLUDING SECTIONS 4.4 AND 8.3 OF THE
AGREEMENT. COPIES OF THE AGREEMENT MAY BE OBTAINED AT NO COST BY
WRITTEN REQUEST MADE BY THE REGISTERED HOLDER OF THIS CERTIFICATE TO
THE SECRETARY OF THE COMPANY.
8.3 Transfer of Shares after Registration. Each Purchaser hereby
covenants with the Company not to make any sale of the Shares except either (i)
in accordance with the Shelf Registration, in which case Purchaser covenants to
comply with the requirement of delivering a current prospectus, or (ii) in
accordance with Rule 144, in which case Purchaser covenants to comply with Rule
144. Purchaser further acknowledges and agrees that such Shares are not
transferable on the books of the Company unless the certificate submitted to the
Company's transfer agent evidencing such Shares is accompanied by a separate
certificate executed by an officer of, or other person duly authorized by, the
Purchaser in the form attached hereto as Exhibit C.
8.4 Purchaser Information. Each Purchaser covenants that it will
promptly notify the Company in writing of any changes in the information set
forth in the Shelf Registration regarding such Purchaser or such Purchaser's
"Plan of Distribution."
SECTION 9 PREEMPTIVE RIGHTS
9.1 Preemptive Right. Except as set forth below, if, at any time prior
to the expiration of the period set forth in Section 9.7 below, the Company
should desire to issue any Equity Securities (as defined below), it shall give
each Purchaser the first right to purchase its Pro Rata Share (as defined
below), or any part thereof, of all of such offered Equity Securities on the
same terms as the Company is willing to sell such Equity Securities to any other
person. The Purchaser's "Pro Rata Share" of such Equity Securities shall be
equal to the percentage of the outstanding Equity Securities held by the
Purchaser on the date of the Company's written notification referred to in
Section 9.2 below, assuming for purposes of such calculation (i) that all Equity
Securities reserved under the Company's equity incentive plans for issuance to
employees, officers and directors of, and consultants to, the Company, are
issued and outstanding, and (ii) that all Equity Securities issuable upon
exercise of options, warrants or convertible securities existing as of the date
hereof are issued and outstanding.
9.2 Notification. Prior to any sale or issuance by the Company of any
Equity Securities, the Company shall notify each Purchaser, in writing, of its
intention to sell and issue such securities, setting forth in reasonable detail
the terms under which it proposes to make such sale. Within twenty (20) days
after notice, the Purchaser shall notify the Company whether the Purchaser
exercises its option and elects to purchase its Pro Rata Share (or any part
thereof) of the Equity Securities so offered.
9.3 Issuance; Preemptive Rights Waived or Lapsed. If, within twenty
(20) days after the Company gives its aforesaid notice the Purchaser does not
notify the Company that the Purchaser desires to purchase all of its Pro Rata
Share of the Equity Securities described in such notice upon the terms and
conditions set forth in such notice, or notifies the Company that it desires to
purchase less than all of its Pro Rata Share, the Company may, during a period
of ninety (90) days following the end of such 20-day period, sell and issue such
securities as to which the Purchaser does not indicate a desire to purchase to
another person upon the same general terms and conditions as those set forth in
the notice to the Purchaser, but at a price at least as great as the price
offered to the Purchaser; provided, that failure by the Purchaser to exercise
its option to purchase with respect to one offering, sale and issuance shall not
affect its option to purchase Equity Securities in any subsequent offering, sale
and purchase. In the event the Company has not sold the Equity Securities or
entered into an agreement to sell the Equity Securities within said 90-day
period, the Company shall not thereafter issue or sell any Equity Securities
without first offering such securities to the Purchaser in the manner provided
above.
14
<PAGE>
9.4 Issuance; Preemptive Rights Exercised. If a Purchaser gives the
Company notice that the Purchaser desires to purchase any of the Equity
Securities offered by the Company, payment for the Equity Securities shall be by
check or wire transfer, against delivery of the securities at the executive
offices of the Company within ten (10) days after giving the Company such
notice, or, if later, the closing date for the sale by the Company of all such
Equity Securities proposed to be sold. The Company shall take all such action as
may be required by any regulatory authority in connection with the exercise by
the Purchaser of the right to purchase Equity Securities as set forth in this
Section 9.
9.5 Excluded Securities. The preemptive rights contained in this
Section 9 shall not apply to (a) the granting of options to purchase Common
Stock or issuance by the Company of Common Stock to employees, officers,
directors or consultants of the Company under stock option plans or purchase
agreements or other purchase arrangements approved by the Company's Board of
Directors including, without limitation, the PZ&C Warrant, (b) the issuance of
Equity Securities in connection with the acquisition of a third party by merger
or acquisition of more than fifty-one percent (51%) of the outstanding shares or
substantially all of the assets of such third party on terms approved by the
Company's Board of Directors, (c) the issuance of Equity Securities in
connection with venture leasing transactions or issued to the seller or lessor
of equipment in equipment purchase and lease transactions approved by the Board
of Directors, (d) the issuance of Equity Securities pursuant to the exercise of
options, warrants or convertible securities outstanding as of the date hereof,
(e) the issuance of Equity Securities in connection with any stock split, stock
dividend or recapitalization of the Company, (f) the issuance of Equity
Securities offered generally to the public pursuant to a registration statement
(including any such issuance of rights to purchase capital stock offered to
stockholders or optionholders of the Company at such time) or (g) the issuance
of Common Stock of the Company upon conversion or exercise of any Equity
Security which was not subject to the preemptive rights set forth in this
Section 9 or for which the preemptive rights were not exercised.
9.6 Assignment. A Purchaser's right to purchase any Equity Securities
pursuant to this Section 9 may not be assigned by the Purchaser without the
prior written consent of the Company.
9.7 Termination. All rights and duties set forth in this Section 9
shall terminate upon the first to occur of (i) June 30, 2002 or (ii)
consummation of the IPO (as defined below).
9.8 Waiver. Any term of this Section 9 may be amended or waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and holders of a
majority of the outstanding Shares.
9.9 Definitions. For purposes of this Section 9:
(a) "Equity Securities" means (i) Common Stock, Series B
Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and rights,
options or warrants to purchase Common Stock, Series B Preferred Stock, Series C
Preferred Stock or Series D Preferred Stock, (ii) any security of the Company
having voting rights in the election of the Board of Directors, not contingent
upon a failure to pay dividends, (iii) any security of the Company convertible
into or exchangeable for any of the foregoing, and (iv) any agreement or
commitment to issue any of the foregoing. All references to a certain percentage
of the outstanding Equity Securities shall be calculated on an as-converted,
as-exercised basis.
(b) "IPO" means the first firmly underwritten public offering
of Common Stock of the Company that is pursuant to a registration statement
filed with, and declared effective by, the SEC under the Securities Act,
covering the offer and sale of the Company's Common Stock to the public.
SECTION 10 MISCELLANEOUS
10.1 Waivers and Amendments. With the exception of Sections 7 and 9
hereof, the terms of this Agreement may be waived or amended with the written
consent of the Company and each Purchaser. With respect to Sections 7 and 9
hereof, with the written consent of the Company and the record holders of more
than fifty percent (50%) of the Shares then outstanding and held by Purchasers,
the terms of the Agreement may be waived or amended and any such amendment or
waiver shall be binding upon the Company and all holders of Shares. No delay or
omission to exercise any right, power or remedy accruing to a Purchaser, upon
any breach or default of the Company under this Agreement, shall impair any such
right, power or remedy of the Purchaser nor shall it be construed to be a waiver
or any such breach or default, or an acquiescence therein, or of or in any
similar breach or default thereafter occurring; nor shall any waiver of any
single breach or default be deemed a waiver of any other
15
<PAGE>
breach or default theretofore or thereafter occurring. Any waiver, permit,
consent or approval of any kind or character on the part of the Purchaser of any
breach or default under this Agreement, or any waiver on the part of the
Purchaser of any provisions or conditions of this Agreement, must be in writing
and shall be effective only to the extent specifically set forth in such
writing.
10.2 Broker's Fee. Each of the parties hereto hereby represents that,
on the basis of any actions and agreements by it, there are no other brokers or
finders entitled to compensation of any kind or nature in connection with the
sale of the Shares to the Purchasers, except for the fee to be paid and a
warrant for up to 75,000 shares of Common Stock to be issued by the Company to
Punk, Ziegel & Company.
10.3 Governing Law. This Agreement shall be governed in all respects by
and construed in accordance with the laws of the State of California without any
regard to conflicts of laws principles.
10.4 Survival.
(a) The representations, warranties, covenants and agreements
made in this Agreement shall survive any investigation made by the Company or
the Purchasers and the closing of the transactions contemplated hereby.
(b) The Company shall indemnify and hold harmless each of the
Purchasers against and from all liability, demands, claims, actions or causes of
action, assessments, losses, penalties, costs, damages or expenses, including
all reasonable attorneys' and expert witness fees, sustained or incurred by any
such Purchaser and its successors or assigns:
(i) as a result of or arising out of or by virtue of
any incorrect representation or warranty made by the Company to the Purchasers
herein or in any closing document delivered to the Purchasers in connection
herewith; or
(ii) as a result of or arising out of or by virtue of
the failure of the Company to comply with, or the breach by the Company of, any
of the covenants of this Agreement to be performed by the Company under this
Agreement.
(c) Each Purchaser, severally and not jointly, shall indemnify
and hold harmless the Company against and from all liability, demands, claims,
actions or causes of action, assessments, losses, penalties, costs, damages or
expenses, including all reasonable attorneys' and expert witness fees, sustained
or incurred by the Company and its successors or assigns:
(i) as a result of or arising out of or by virtue of
any incorrect representation or warranty made by such Purchaser to the Company
herein or in any closing document delivered by such Purchaser to the Company in
connection herewith; or
(ii) as a result of or arising out of or by virtue of
the failure of such Purchaser to comply with, or the breach by such Purchaser
of, any of the covenants of this Agreement to be performed by such Purchaser
under this Agreement.
10.5 Successors and Assigns.
(a) The provisions hereof shall inure to the benefit of, and
be binding upon, the successors, assigns, heirs, executors and administrators of
the parties to this Agreement. Notwithstanding the foregoing, prior to the
Effective Date no Purchaser shall assign this Agreement without the prior
written consent of the Company. The Company shall not have the right to delegate
or assign its obligations hereunder without the prior written consent of the
record holders of more than fifty percent (50%) of the Shares then outstanding
and held by the Purchasers.
10.6 Entire Agreement. This Agreement and the other documents delivered
pursuant hereto constitute the full and entire understanding and agreement
between the parties with regard to the subjects hereof and thereof.
10.7 Notices, etc. All notices and other communications required or
permitted under this Agreement shall be effective upon receipt and shall be in
writing and may be delivered in person, by telecopy, overnight delivery service
or registered or certified United States mail, addressed to the Company or the
Purchasers, as the
16
<PAGE>
case may be, at their respective addresses set forth at the beginning of this
Agreement or on Exhibit A, or at such other address as the Company or the
Purchasers shall have furnished to the other party in writing. All notices and
other communications shall be effective upon the earlier of actual receipt
thereof by the person to whom notice is directed or (i) in the case of notices
and communications sent by personal delivery or telecopy, one business day after
such notice or communication arrives at the applicable address or was
successfully sent to the applicable telecopy number, (ii) in the case of notices
and communications sent by overnight delivery service, at noon (local time) on
the second business day following the day such notice or communication was sent,
and (iii) in the case of notices and communications sent by United States mail,
seven days after such notice or communication shall have been deposited in the
United States mail.
10.8 Severability of this Agreement. If any provision of this Agreement
shall be judicially determined to be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.
10.9 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
10.10 Further Assurances. Each party to this Agreement shall do and
perform or cause to be done and performed all such further acts and things and
shall execute and deliver all such other agreements, certificates, instruments
and documents as the other party hereto may reasonably request in order to carry
out the intent and accomplish the purposes of this Agreement and the
consummation of the transactions contemplated hereby.
10.11 Expenses. The Company and each such Purchaser shall bear its own
expenses incurred on its behalf with respect to this Agreement and the
transactions contemplated hereby, including fees of legal counsel; provided,
however, that the Company shall pay to WPG Farber Weber as soon as practicable
after the Closing Date, the reasonable actual legal fees and expenses, not to
exceed $25,000, for one legal counsel to the Purchasers.
10.12 Announcements. The parties hereto agree that all public
announcements regarding the transactions contemplated by this Agreement shall be
approved in advance by the Company and WPG Farber Weber; provided, however that
neither party will be precluded hereby from making such disclosures as it may be
required to make in order to comply with all applicable laws or listing
agreements.
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<PAGE>
The foregoing agreement is hereby executed as of the date first above
written.
"COMPANY"
LYNX THERAPEUTICS, INC.
a Delaware corporation
By:_____________________________________
Sam Eletr
Chief Executive Officer
<PAGE>
<TABLE>
EXHIBIT A
SCHEDULE OF INVESTORS
<CAPTION>
Investor Name Shares Purchase
Purchased Price
<S> <C> <C>
WPG-Farber, Weber Fund, L.P. 459,000 $4,590,000
David Present
590 Madison Avenue
27th Floor
New York, NY 10022
212/857-3402
212/421-0418 (Fax)
WPG-Farber, Weber Overseas, L.P. 22,500 $225,000
Daivd Present
590 Madison Avenue
27th Floor
New York, NY 10022
212/857-3402
212/421-0418 (Fax)
Star Creation Ltd. 18,500 $185,000
David Present
590 Madison Avenue
27th Floor
New York, NY 10022
212/857-3402
212/421-0418 (Fax)
Lombard Odier Zuerich Ltd. 400,000 $4,000,000
Daniel Richner, Ph.D.
Todistrasse 36
8027 Zuerich
411/287-1788
411/287-1714 (Fax)
Four Partners 360,000 $3,600,000
Barry Bloom
Tisch Financial Management
655 Madison Avenue
New York, NY 10021
212/521-2930
212/521-2983 (Fax)
FBB Associates 40,000 $400,000
Julian Baker
667 Madison Avenue
New York, NY 10021
212/545-3034
212/545-2915 (Fax)
INVESCO Global Health Sciences Fund 350,000 $3,500,000
c/o INVESCO Trust Company
Buck Phillips
7800 East Union Avenue
Denver, CO 80237
303/930-6521
303/930-2423 (Fax)
22
<PAGE>
Investor Name Shares Purchase
Purchased Price
H&Q Healthcare Investors 150,000 $1,500,000
Paul A. Howard
50 Rowes Wharf
Boston, MA 02110-3328
617/574-0564
617/574-0562 (Fax)
H&Q Life Sciences Investors 100,000 $1,000,000
Paul A. Howard
50 Rowes Wharf
Boston, MA 02110-3328
617/574-0564
617/574-0562 (Fax)
BioCentive Limited 150,000 $1,500,000
c/o Winchester
Williams House
20 Reid Street
Hamilton HMPX, Bermuda
441/296-2000
441/296-1199 (Fax)
c/o Mehta and Isaly
Contact: Joel Mesznik
122 East 42nd Street, 49th Floor
New York, NY 10168
212/949-0707
212/949-6203 (Fax)
PHARMA/wHEALTH 150,000 $1,500,000
Mehta and Isaly
Samuel Isaly
Carl Gordon
41 Madison Avenue, 40th Floor
New York, NY 10010-2202
212/685-0800
212/685-1084 (Fax)
Caduceus Capital, Ltd. 110,000 $1,100,000
Mehta and Isaly
Samuel Isaly
Carl Gordon
41 Madison Avenue, 40th Floor
New York, NY 10010-2202
212/685-0800
212/685-1084 (Fax)
Caduceus Capital, L.P. 40,000 $400,000
Mehta and Isaly
Samuel Isaly
Carl Gordon
41 Madison Avenue, 40th Floor
New York, NY 10010-2202
212/685-0800
212/685-1084 (Fax)
23
<PAGE>
Investor Name Shares Purchase
Purchased Price
Axa U.S. Growth Fund LLC 57,500 $575,000
Partech International
Thomas G. McKinley
50 California Street
Suite 3200
San Francisco, CA 94111
415/788-2929
415/788-6763 (Fax)
Parvest U.S. Partners II C.V. 20,000 $200,000
Partech International
Thomas G. McKinley
50 California Street
Suite 3200
San Francisco, CA 94111
415/788-2929
415/788-6763 (Fax)
U.S. Growth Fund Partners C.V. 20,000 $200,000
Partech International
Thomas G. McKinley
50 California Street
Suite 3200
San Francisco, CA 94111
415/788-2929
415/788-6763 (Fax)
Double Black Diamond II LLC 10,000 $100,000
Partech International
Thomas G. McKinley
50 California Street
Suite 3200
San Francisco, CA 94111
415/788-2929
415/788-6763 (Fax)
Almanori Limited 2,200 $22,000
Partech International
Thomas G. McKinley
50 California Street
Suite 3200
San Francisco, CA 94111
415/788-2929
415/788-6763 (Fax)
David Sherry 2,500 $25,000
Partech International
Thomas G. McKinley
50 California Street
Suite 3200
San Francisco, CA 94111
415/788-2929
415/788-6763
24
<PAGE>
Investor Name Shares Purchase
Purchased Price
Multinvest Limited 1,300 $13,000
Partech International
Thomas G. McKinley
50 California Street
Suite 3200
San Francisco, CA 94111
415/788-2929
415/788-6763
Partech International Salary Deferral Plan 1,000 $10,000
U/A Dated 1/1/92
FBO: Thomas G. McKinley
Partech International
50 California Street
Suite 3200
San Francisco, CA 94111
415/788-2929
415/788-6763 (Fax)
Partech International Salary Deferral Plan 500 $5,000
U/A Dated 1/1/92
FBO: Scott Matson
Partech International
50 California Street
Suite 3200
San Francisco, CA 94111
415/788-2929
415/788-6763 (Fax)
CDC - Valeurs de Croissance 75,000 $750,000
Albert Miguel-Montanes
33, Avenue du Maine
BP 173
Paris 75755 Cedex 15
FRANCE
011-33 1 40 64 22 00
011-33 1 40 64 22 25 (Fax)
Punk, Ziegel & Knoell Investors LLC 28,000 $280,000
Julia Gregory
520 Madison Ave., 7th Floor
New York, NY 10022
212/308-9494
212/308-2203 (Fax)
William J. Punk, Jr. 5,000 $50,000
Punk, Ziegel & Knoell Investors LLC
520 Madison Ave., 7th Floor
New York, NY 10022
212/308-9494
212/308-2203 (Fax)
Julia P. Gregory 3,000 $30,000
Punk, Ziegel & Knoell Investors LLC
520 Madison Ave., 7th Floor
New York, NY 10022
212/308-9494
212/308-2203 (Fax)
25
<PAGE>
Investor Name Shares Purchase
Purchased Price
European Medical Ventures Fund SCA 30,000 $300,000
c/o FINOVELEC
Bernard Daugeras
6 Ruse Ancelle
92200 Neuilly Sur
Seine, FRANCE
011-33 1/55 61 51 56
011-33 1/46 40 79 38 (Fax)
David Bellet 10,000 $100,000
125 East 72nd Street
Apt. 11-D
New York, NY 10021
212/808-5278
212/808-9073 (Fax)
The Pidwell Family Living Trust dated 6/25/87 5,000 $50,000
c/o Asset Management Associates, Inc.
2275 E. Bayshore Road
Suite 150
Palo Alto, CA 94303
Contact: Tony Di Bona
650/494-7400
650/856-1826 (Fax)
Tony Di Bona 1,000 $10,000
155 South Palomar Drive
Redwood City, CA 94062-3237
650/494-7400
650/856-1826 (Fax)
Douglas E. Kelly SEP-IRA 1,000 $10,000
c/o Asset Management Associates, Inc.
2275 E. Bayshore Road
Suite 150
Palo Alto, CA 94303
Contact: Tony Di Bona
650/494-7400
650/856-1826 (Fax)
Mark Platshon 2,500 $25,000
3125 Barney Avenue
Menlo Park, CA 94025
Contact: Tony Di Bona
650/494-7400
650/856-1826 (Fax)
Sam Eletr, Ph.D. 50,000 $500,000
Lynx Therapeutics, Inc.
3832 Bay Center Place
Hayward, CA 94545
510/670-9300
510/670-9303 (Fax)
Total 2,675,500 $26,755,000
</TABLE>
26
<PAGE>
EXHIBIT B
INSTRUCTION SHEET FOR PURCHASER
(to be read in conjunction with the entire
Common Stock Purchase Agreement)
A. Complete the following items in the Common Stock Purchase Agreement:
1. Provide the information regarding the Purchaser requested on
the signature page. The Agreement must be executed by an
individual authorized to bind the Purchaser.
2. Exhibit B-1 - Stock Certificate Questionnaire:
Provide the information requested by the Stock Certificate
Questionnaire;
3. Exhibit B-2 - Registration Statement Questionnaire:
Provide the information requested by the Registration
Statement Questionnaire.
4. Exhibit B-3 - Purchaser Certificate:
Provide the information requested by the Certificate for
Individual Purchasers or the Certificate for Corporate,
Partnership, Trust, Foundation and Joint Purchasers, as
applicable.
5. Return the signed Purchase Agreement including the properly
completed Exhibit B to:
Punk, Ziegel & Company
520 Madison Avenue, 7th Floor
New York, NY 10022
Attn: Ellen Smith
B. Instructions regarding the transfer of funds for the purchase of Shares
will be telecopied to the Purchaser by the Placement Agent at a later
date.
C. Upon the resale of the Shares by the Purchaser after the Registration
Statement covering the Shares is effective, as described in the
Purchase Agreement, the Purchaser:
(i) must deliver a current prospectus, and annual and
quarterly reports of the Company to the buyer
(prospectuses, and annual and quarterly reports may
be obtained from the Company at the Purchaser's
request); and
(ii) must send a letter in the form of Exhibit C to the
Company so that the Shares may be properly
transferred.
<PAGE>
EXHIBIT B-1
LYNX THERAPEUTICS, INC.
STOCK CERTIFICATE QUESTIONNAIRE
Pursuant to Section 4.3 of the Agreement, please provide us with the
following information:
1. The exact name that the Shares
are to be registered in (this
is the name that will appear on
the stock certificate(s)). You
may use a nominee name if
appropriate:
___________________________________
2. The relationship between the
Purchaser of the Shares and the
Registered Holder listed in
response to item 1 above:
___________________________________
3. The mailing address of the
Registered Holder listed in
response to item 1 above:
___________________________________
___________________________________
___________________________________
___________________________________
___________________________________
4. The Tax Identification Number
of the Registered Holder listed
in response to item 1 above:
___________________________________
<PAGE>
EXHIBIT B-2
LYNX THERAPEUTICS, INC.
REGISTRATION STATEMENT QUESTIONNAIRE
In connection with the preparation of the Registration Statement,
please provide us with the following information regarding the Purchaser.
1. Please state your organization's name exactly as it should appear in
the Registration Statement:
2. Have you or your organization had any position, office or other
material relationship within the past three years with the Company?
______ Yes ______ No
If yes, please indicate the nature of any such relationships below:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
EXHIBIT B-3
LYNX THERAPEUTICS, INC.
CERTIFICATE FOR INDIVIDUAL PURCHASERS
If the investor is an individual Purchaser (or married couple) the
Purchaser must complete, date and sign this Certificate.
CERTIFICATE
I certify that the representations and responses below are true and
accurate:
In order for the Company to offer and sell the Shares in conformance
with state and federal securities laws, the following information must be
obtained regarding your investor status. Please initial each category applicable
to you as an investor in the Company.
_________ (1) A natural person whose net worth, either
individually or jointly with such person's spouse exceeds $1,000,000;
_________ (2) A natural person who had an income in excess of
$200,000, or joint income with that person's spouse in excess of $300,000 in
1995 and 1996, and reasonably expects to have individual income reaching the
same level in 1997;
_________ (3) An executive officer or director of the Company.
My principal residence is in the state of ____________________________.
Dated: _________ _____________________________________________________
Name(s) of Purchaser
____________________________________________
Signature
____________________________________________
Signature
<PAGE>
EXHIBIT B-3
LYNX THERAPEUTICS, INC.
CERTIFICATE FOR CORPORATE, PARTNERSHIP,
TRUST, FOUNDATION AND JOINT PURCHASERS
If the investor is a corporation, partnership, trust, pension plan,
foundation, joint purchaser (other than a married couple) or other entity, an
authorized officer, partner, or trustee must complete, date and sign this
Certificate.
CERTIFICATE
The undersigned certifies that the representations and responses below
are true and accurate:
(a) The investor has been duly formed and is validly existing and
has full power and authority to invest in the Company. The person signing on
behalf of the undersigned has the authority to execute and deliver the Common
Stock Purchase Agreement on behalf of the Purchaser and to take other actions
with respect thereto.
(b) Indicate the form of entity of the undersigned:
_________ Limited Partnership
_________ General Partnership
_________ Corporation
_________ Revocable Trust (identify each grantor and
indicate under what circumstances the trust
is revocable by the grantor): ______________
____________________________________________
____________________________________________
____________________________________________
____________________________________________
___________________________________________.
(Continue on a separate piece of paper, if
necessary.)
_________ Other Type of Trust (indicate type of trust
and, for trusts other than pension trusts,
name the grantors and beneficiaries):
____________________________________________
____________________________________________
____________________________________________
____________________________________________
(Continue on a separate piece of paper, if
necessary.)
_________ Other form of organization (indicate form of
organization):
___________________________________________.
(c) Indicate the date the undersigned entity was formed:_________.
(d) In order for the Company to offer and sell the Shares in
conformance with state and federal securities laws, the following information
must be obtained regarding your investor status. Please initial each category
applicable to you as an investor in the Company.
_________ 1. A bank as defined in Section 3(a)(2) of the
Securities Act, or any savings and loan association or other
institution as defined in Section 3(a)(5)(A) of the Securities
Act whether acting in its individual or fiduciary capacity;
_________ 2. A broker or dealer registered pursuant to
Section 15 of the Securities Exchange Act of 1934;
1
<PAGE>
_________ 3. An insurance company as defined in Section
2(13) of the securities Act;
_________ 4. An investment company registered under the
Investment Company Act of 1940 or a business development
company as defined in Section 2(a)(48) of that Act;
_________ 5. A Small Business Investment Company licensed
by the U.S. Small Business Administration under Section 301(c)
or (d) of the Small Business Investment Act of 1958;
_________ 6. A plan established and maintained by a
state, its political subdivisions, or any agency or
instrumentality of a state or its political subdivisions, for
the benefit of its employees, if such plan has total assets in
excess of $5,000,000;
_________ 7. An employee benefit plan within the meaning
of the Employee Retirement Income Security Act of 1974, if the
investment decision is made by a plan fiduciary, as defined in
Section 3(21) of such act, which is either a bank, savings and
loan association, insurance company, or registered investment
adviser, or if the employee benefit plan has total assets in
excess of $5,000,000 or, if a self-directed plan, with
investment decisions made solely by persons that are
accredited investors;
_________ 8. A private business development company as
defined in Section 202(a)(22) of the Investment Advisers Act
of 1940;
_________ 9. An organization described in Section
501(c)(3) of the Internal Revenue Code, a corporation,
Massachusetts or similar business trust, or partnership, not
formed for the specific purpose of acquiring the Shares, with
total assets in excess of $5,000,000;
_________ 10. A trust, with total assets in excess of
$5,000,000, not formed for the specific purpose of acquiring
the Shares, whose purchase is directed by a sophisticated
person who has such knowledge and experience in financial and
business matters that such person is capable of evaluating the
merits and risks of investing in the Company;
_________ 11. An entity in which all of the equity owners
qualify under any of the above subparagraphs. If the
undersigned belongs to this investor category only, list the
equity owners of the undersigned, and the investor category
which each such equity owner satisfies:
______________________________________________________________
______________________________________________________________
______________________________________________________________
(Continue on a separate piece of paper, if necessary.)
(e) The state of incorporation or formation of the investor is
__________________ and the investor's principal office is located in the state
of ___________________________________.
Dated: __________ ,19__
______________________________
Name of investor
______________________________
Signature and title of authorized
officer, partner or trustee
2
<PAGE>
EXHIBIT C
PURCHASER'S CERTIFICATE OF SUBSEQUENT SALE
To: Kathy San Roman
Lynx Therapeutics, Inc.
3832 Bay Center Place
Hayward, CA 94545
The undersigned, the Purchaser or an officer of, or other person duly
authorized by the Purchaser, hereby certifies that _____________________________
institution was the Purchaser of the shares evidenced by the attached
certificate, and as such, proposes to transfer such shares on or about
__________ either (check the applicable box) [ ] (i) in accordance with the
registration statement, file number _____ in which case the Purchaser certifies
that the requirement of delivering a current prospectus has been complied with
or will be complied with in connection with such sale, or [ ] (ii) in accordance
with Rule 144 under the Securities Act of 1933 ("Rule 144"), in which case the
Purchaser certifies that it has complied with or will comply with the
requirements of Rule 144.
Print or type:
Name of Purchaser: ____________________________________________________
Name of Individual
representing Purchaser
(if an Institution): __________________________________________________
Title of Individual
representing Purchaser
(if an Institution): __________________________________________________
Signature by:
Purchaser or
Individual representing
Purchaser: ____________________________________________________________
EXHIBIT 5.1
October 31, 1997
Lynx Therapeutics, Inc.
3832 Bay Center Place JAMES C. KITCH
Hayward, CA 94545 650 843-5027
[email protected]
Ladies and Gentleman:
You have requested our opinion with respect to certain matters in connection
with the filing by Lynx Therapeutics, Inc., a Delaware corporation (the
"Company"), of a Resale Registration Statement on Form S-3 (the "Registration
Statement") with the Securities and Exchange Commission (the "Commission") on
October 31, 1997, covering the offering of up to 2,675,500 shares of the
Company's Common Stock with a par value of $0.01 (the "Shares"). All of the
Shares are to be sold by certain stockholders as described in the Registration
Statement.
In connection with this opinion, we have examined and relied upon the
Registration Statement and related Prospectus included therein, the Company's
Restated Certificate of Incorporation and Bylaws, and the originals or copies
certified to our satisfaction of such records, documents, certificates,
memoranda and other instruments as in our judgment are necessary or appropriate
to enable us to render the opinion expressed below. We have assumed the
genuineness and authenticity of all documents submitted to us as originals, and
the conformity to originals of all documents where due execution and delivery
are a prerequisite to the effectiveness thereof.
On the basis of the foregoing, and in reliance thereon, we are of the opinion
that the Shares are validly issued, fully paid and nonassessable.
We consent to the reference to our firm under the caption "Legal Matters" in the
Prospectus included in the Registration Statement and to the filing of this
opinion as an exhibit to the Registration Statement.
Very truly yours,
COOLEY GODWARD LLP
By: /s/ James C. Kitch
--------------------------------
James C. Kitch
4
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT ACCOUNTANTS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-3) and related Prospectus of Lynx Therapeutics,
Inc. for the registration of 2,675,500 shares of common stock and to the
incorporation by reference therein of our report dated February 4, 1997, with
respect to the consolidated financial statements of Lynx Therapeutics, Inc.
included in its Annual Report (Form 10-K) for the year ended December 31, 1996,
filed with the Securities and Exchange Commission.
/s/ Ernst & Young LLP
Palo Alto, California
October 27, 1997
5
