<PAGE>
As filed with the Securities and Exchange Commission on May 23, 2000
Registration Statement No. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-1
REGISTRATION STATEMENT
Under
The Securities Act of 1933
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3-Dimensional Pharmaceuticals, Inc.
(Exact name of Registrant as specified in its charter)
Delaware 2834 23-2716487
(Primary Standard (IRS Employer
(State or other Industrial Identification Number)
jurisdiction of Classification Code No.)
incorporation or
organization)
Eagleview Corporate Center, Suite 104
665 Stockton Drive
Exton, PA 19341
610-458-8959
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
----------------
David C. U'Prichard, Ph.D.
Chief Executive Officer
3-Dimensional Pharmaceuticals, Inc.
Eagleview Corporate Center, Suite 104
665 Stockton Drive
Exton, PA 19341
610-458-8959
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
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Copies to:
Randall B. Sunberg Jeffrey E. Cohen
Morgan, Lewis & Bockius LLP Coudert Brothers
1701 Market Street 1114 Avenue of the Americas
Philadelphia, PA 19103 New York, NY 10036-7703
(215) 963-5000 (212) 626-4400
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.
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, check the following box. [_]
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 this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the Prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
Proposed
Title of Each Class of Maximum Proposed Amount of the
Securities to Be Amount to be Offering Price Maximum Aggregate Registration
Registered Registered Per Share(1) Offering Price(1) Fee
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<S> <C> <C> <C> <C>
Common Stock, $0.001 par
value(2).............. $70,000,000 $18,480
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</TABLE>
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(1) Estimated solely for purposes of calculating the registration fee in
accordance with Rule 457 under the Securities Act of 1933, as amended.
(2) Includes shares that the underwriters have the option to purchase to
cover over-allotments, if any.
----------------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, as amended or until this Registration Statement
shall become effective on such date as the Commission, acting pursuant to such
Section 8(a), may determine.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this preliminary prospectus is not complete and may be +
+changed. We may not sell these securities until the registration statement +
+filed with the Securities and Exchange Commission becomes effective. This +
+preliminary prospectus is not an offer to sell these securities nor a +
+solicitation of an offer to buy these securities in any jurisdiction where +
+the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED MAY 23, 2000
PRELIMINARY PROSPECTUS
Shares
[LOGO OF 3DP]
Common Stock
-----------
This is an initial public offering of shares of common stock of 3-
Dimensional Pharmaceuticals, Inc. We are selling all of the shares of common
stock offered under this prospectus.
We expect the public offering price for our common stock to be between $ and
$ per share. There is currently no public market for our common stock. We
have applied to have our common stock approved for listing on the Nasdaq
National Market under the symbol "DDDP".
See "Risk Factors" beginning on page 7 to read about risks that you should
consider before buying shares of our common stock.
Neither the Securities and Exchange Commission nor any other regulatory body
has approved or disapproved these securities or passed on the adequacy or
accuracy of this prospectus. Any representation to the contrary is a criminal
offense.
-----------
<TABLE>
<CAPTION>
Per
Share Total
----- -----
<S> <C> <C>
Public offering price............................................... $ $
Underwriting discounts and commissions.............................. $ $
Proceeds to 3-Dimensional Pharmaceuticals, Inc...................... $ $
</TABLE>
-----------
We have granted the underwriters a 30-day option to purchase up to an
additional shares of common stock from us at the initial public offering
price less the underwriting discount.
The underwriters are severally underwriting the shares being offered. The
underwriters expect to deliver the shares in New York, New York, on ,
2000.
-----------
Bear, Stearns & Co. Inc.
Chase H&Q
U.S. Bancorp Piper Jaffray
The date of this prospectus is , 2000.
<PAGE>
SUMMARY
Because this is only a summary, it does not contain all the information that
may be important to you. You should read the entire prospectus, especially the
section entitled "Risk Factors", and the financial statements and notes, before
deciding to invest in shares of our common stock.
Overview
We are a post-genomics drug discovery company that has developed a unique
integration of proprietary technologies to provide an accelerated and improved
methodology for "gene-to-clinic" small molecule drug discovery. We designed our
DiscoverWorks technologies to capitalize on the opportunities for drug
discovery presented by the thousands of new therapeutic targets being revealed
from the sequencing of the human genome. Our technologies also facilitate drug
discovery for well-characterized therapeutic targets that have historically
proven difficult using traditional discovery methods. We believe that our
technologies, which are applicable to virtually any disease target or
therapeutic indication, produce development compounds in a more timely and
cost-effective manner and with a higher probability of success than that
currently achieved using conventional methods. We are using our technologies
both to assist collaborators in discovering drug candidates, and to discover
and develop an internal pipeline of orally active drug candidates, initially
targeted at cardiovascular disease and oncology, which we currently intend to
out-license at the pre-clinical or early clinical stage.
Market Opportunity
Drug discovery has traditionally been a costly and time-consuming process in
which the failure rate remains very high. During the past decade,
pharmaceutical research and development has become more complex and expensive,
with the average cost of bringing a new drug to market now estimated to be in
excess of $500 million. Despite a more than three-fold increase in research and
development expenditure in the last ten years by the pharmaceutical industry,
there has been only a modest increase in the number of new chemical entities,
or NCEs, approved by the U.S. Food and Drug Administration or FDA.
The challenges to timely and cost-effective drug discovery faced by
pharmaceutical companies will grow as continuing advances are made in genomics
research. While there are approximately 500 currently known biological targets
for human therapeutics, it is estimated that an additional 5,000 to 10,000
potential targets will be identified through genomics research over the next
five years. Consequently, we expect bottlenecks in the discovery process to
become increasingly severe and impede exploitation of the wealth of
opportunities presented by genomics research. Accordingly, we believe that
pharmaceutical companies will increasingly outsource aspects of discovery to
companies with advanced technology capabilities, and in-license drug candidates
developed by others.
Our Solution
The major steps in the drug discovery process involve producing a target
protein; identifying compounds which interact with the particular target
protein; synthesis and testing of structurally similar compounds, or "analogs",
in order to produce "lead" compounds with increased suitability as potential
drugs; and additional chemical modification, or "optimization", of such lead
compounds to produce candidates for pre-clinical and clinical development. In
addition, parallel testing seeks to confirm, or "validate", the link between
the target protein and a specific disease.
1
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We believe that our DiscoverWorks technologies offer a solution to the post-
genomics drug discovery challenge by integrating the following technologies and
capabilities:
. Proprietary protein production technology, which permits us to produce
large quantities of target proteins rapidly and cost-efficiently.
. Proprietary ThermoFluor high-throughput screening technology which
permits us to set up in less than one week a screen for virtually any
target protein and quantitatively assess within one month the binding of
a large library of compounds to such target. We believe the industry norm
for setting up and running a high-throughput screen is two to six months.
. A collection, or "library", of over 200,000 chemical compounds, together
with a virtual library of approximately 2.5 billion novel analogs, stored
in our computer database, all of which analogs can be synthesized using
automated procedures.
. Proprietary DirectedDiversity technology which links combinatorial
chemistry with our patented software and drug property databases to
enable synthesis and testing of successive libraries of compounds
intelligently selected by our software to optimize desired drug-like
characteristics.
. Three-dimensional target protein structure analysis using X-ray
crystallography, which we combine with our DirectedDiversity technology
to incorporate structural knowledge of the protein in the intelligent
design of libraries of compounds for testing.
. Chemistry-driven target validation technology, based on ThermoFluor
screening of novel target proteins to establish their biochemical and
pharmacological properties, together with rapid production of lead
compounds to confirm the therapeutic significance of a given target
protein early in the discovery process.
We believe that using our DiscoverWorks technology creates the following
advantages:
. Time Compression. Our ThermoFluor screening process and our ability to
rapidly select and synthesize compounds from our libraries compress an
important segment of the R&D process, from assay set-up to the generation
of a series of lead compounds with potential in vivo efficacy, from
fourteen to thirty months at many pharmaceutical companies to as little
as seven to ten months. This is expected to reduce resources required and
development costs per target, allow more targets to be discovered with a
given set of resources and accelerate time to market of successful drugs.
. Improved Compound Characteristics. DiscoverWorks enhances the
incorporation of drug-like characteristics into development compounds,
thereby increasing the likelihood of commercial success, through the high
quality of our compound libraries and our lead optimization and
structure-based drug design capabilities.
. Broad Target Applicability. DiscoverWorks can be used for virtually any
target protein, through the flexible capabilities of ThermoFluor, the
breadth of our compound libraries and our protein expression
capabilities.
In summary, we believe DiscoverWorks has the potential to make better drug
candidates, in a faster and more efficient manner, for almost any given target
protein.
GPCR Drug Discovery Technology
G-Protein Coupled Receptors, or GPCRs, comprise a class of drug targets
estimated to account for over $20 billion in annual drug sales. While current
drugs target less than 100 of these receptors, there are at least an equal
number of other well-characterized but unexploited GPCRs, and genomic
sequencing has revealed an
2
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estimated 1,000 previously unknown GPCRs that are potential new drug targets.
To date, while there are computer derived model 3-D structures of GPCRs, there
are no experimentally derived 3-D structures of any GPCR, and therefore
rational structure-based drug design based on the actual 3-D molecular
structure of target GPCRs has not been possible. Recently, we successfully
produced high-quality crystals which we believe will enable us to
experimentally determine the first 3-D molecular structure of a GPCR. We
believe that this and other 3-D structures expected to emerge from our
laboratories, together with our supporting technology in protein production,
will be key to unlocking the potential of GPCR genomics data for new drug
discovery.
Collaborative Discovery Agreements
We currently have collaborative discovery agreements with DuPont
Pharmaceuticals Company, Boehringer Ingelheim Pharmaceuticals, Inc., Aventis
Crop Protection GmbH, E.I. DuPont de Nemours, Heska Corporation, Inc. and
BioCryst Pharmaceuticals, Inc.
Internal Drug Pipeline
We have also leveraged our technologies to develop a promising internal
pipeline of cardiovascular and oncology drug candidates, which we currently
intend to out-license at the pre-clinical or early clinical stage to
pharmaceutical companies for clinical development and marketing. This pipeline
includes one clinical and eight preclinical programs. Our most advanced
cardiovascular product candidate, an orally acting antithrombotic agent
designed to inhibit the formation of blood clots, is currently in Phase 1
clinical trials. Our most advanced oncology product candidate, which may also
be useful for cardiovascular indications, is an orally active urokinase
inhibitor designed to inhibit the supply of blood to and growth of tumors. We
have recently out-licensed our urokinase development program to Schering AG,
Germany.
Our Strategy
Our objective is to be an industry leader in the post-genomics era in the
discovery and optimization of novel drug candidates by:
. further developing our DiscoverWorks technologies;
. developing and commercializing our unique GPCR discovery technology;
. developing and expanding our internal drug discovery pipeline to produce
drug candidates for out-licensing; and
. entering into additional "gene-to-clinic" discovery collaborations.
We also intend to continue to apply our technologies to applications in the
agricultural and veterinary medicine industries.
Additional Information
We were incorporated in the State of Delaware in March 1993. Our executive
offices are located in the Eagleview Corporate Center, 665 Stockton Drive,
Exton, Pennsylvania 19341, and our telephone number is (610) 458-8959. Our web
site is http://www.3dp.com. The information found on our web site is not part
of this prospectus.
3
<PAGE>
THE OFFERING
Common stock offered by shares
us........................
Common stock to be
outstanding after the
offering..................
shares
Use of proceeds........... We intend to use the net proceeds from this
offering for research and development, acquisition
or licensing of targets or technologies; expansion
of our facilities; general corporate and working
capital purposes; and possible future acquisitions.
Proposed Nasdaq National
Market symbol.............
DDDP
The number of shares outstanding after this offering excludes, as of May 23,
2000:
. 6,691,093 shares of our common stock reserved for issuance under our
equity compensation plan, of which 5,757,124 shares are issuable upon
exercise of outstanding options at a weighted average exercise price of
$1.14 per share;
. warrants to purchase 4,920,626 shares of common stock at a weighted
average exercise price of $0.90 per share; and
. warrants to purchase 239,475 shares of series A-1 preferred stock, which
will either be exercised prior to the closing of this offering (and
therefore be automatically converted into shares of common stock at the
closing of this offering) or become exercisable for 239,475 shares of
common stock upon the closing of this offering at an exercise price of
$1.00 per share.
Generally, the information in this prospectus, unless otherwise noted:
. assumes that the over-allotment option is not exercised;
. reflects the automatic conversion of all outstanding shares of preferred
stock into an aggregate of shares of common stock upon the closing of
this offering; and
. assumes the issuance of an estimated shares of our common stock upon
the automatic conversion at the initial public offering price, at the
closing of this offering, of $979,000 of convertible promissory notes,
plus accrued interest, issued in lieu of cash payment of dividends to the
holders of our series A-1 preferred stock.
----------------
DirectedDiversity and ThermoFluor are federally registered trademarks of 3-
Dimensional Pharmaceuticals, Inc. or "3DP." We have also applied for a
federally registered trademark for DiscoverWorks. This prospectus also refers
to trade names and trademarks of other organizations.
4
<PAGE>
SUMMARY FINANCIAL DATA
(in thousands and per share data)
The following financial information should be read together with the
financial statements and notes thereto and the "Selected Financial Information"
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations" sections included elsewhere in this prospectus.
<TABLE>
<CAPTION>
Three Months Ended
Year ended December 31, March 31,
-------------------------------------------- -----------------------
1995 1996 1997 1998 1999 1999 2000
------- ------- ------- ------- -------- ------- --------------
(consolidated)
(unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
Statements of Operations
Data:
Grant and research
revenue................ $ 463 $ 967 $ 3,580 $ 5,095 $ 4,489 $ 1,379 $ 1,484
------- ------- ------- ------- -------- ------- -------
Costs and expenses
Research and
development........... 3,414 4,556 6,517 10,984 12,136 2,975 3,425
General and
administrative........ 1,122 1,708 3,000 4,458 6,525 1,155 1,537
Litigation settlement.. -- -- -- -- 1,500 -- --
------- ------- ------- ------- -------- ------- -------
Total costs and
expenses.............. 4,536 6,264 9,517 15,442 20,161 4,130 4,962
------- ------- ------- ------- -------- ------- -------
Loss from operations.... (4,073) (5,297) (5,937) (10,347) (15,672) (2,751) (3,478)
Interest income......... 16 14 521 868 328 125 87
Interest expense........ (401) (580) (149) (232) (625) (114) (351)
------- ------- ------- ------- -------- ------- -------
Net loss................ $(4,458) $(5,862) $(5,565) $(9,711) $(15,969) $(2,740) $(3,742)
Declared and accrued
cumulative dividends on
preferred stock........ -- -- -- (144) (669) (167) (167)
------- ------- ------- ------- -------- ------- -------
Net loss applicable to
common stock........... $(4,458) $(5,862) $(5,565) $(9,855) $(16,638) $(2,907) $(3,909)
======= ======= ======= ======= ======== ======= =======
Basic and diluted net
loss per common share--
historical............. $(32.30) $(20.71) $ (9.83) $ (7.93) $ (9.78) $ (1.79) $ (2.11)
======= ======= ======= ======= ======== ======= =======
Weighted average common
shares outstanding--
historical............. 138 283 566 1,243 1,701 1,624 1,849
======= ======= ======= ======= ======== ======= =======
Basic and diluted net
loss per common share--
pro forma.............. $ (.56) $ (.13)
======== =======
Weighted average common
shares outstanding--pro
forma.................. 28,555 28,808
======== =======
</TABLE>
<TABLE>
<CAPTION>
As of March 31, 2000
------------------------------
(consolidated)
Pro
Pro forma as
Actual Forma Adjusted
----------- -------- --------
(unaudited)
<S> <C> <C> <C>
Balance Sheet Data:
Cash and cash equivalents....................... $ 22,038 $ 22,038
Total assets.................................... 27,394 27,394
Notes payable--dividends and accrued interest... 701 701
Long-term debt, less current portion............ 2,020 2,020
Redeemable convertible preferred stock.......... 63,550 --
Accumulated deficit............................. (48,851) (48,851)
Total stockholders equity (deficit)............. (44,773) 18,777
</TABLE>
Pro forma net loss per share assumes all shares of our preferred stock had
been converted into common stock on the date of original issuance and certain
nonvested shares of our common stock, which automatically become vested upon
completion of this offering, were vested as of the original date of issuance.
See our financial statements for a more detailed description.
5
<PAGE>
Pro forma balance sheet data assumes the automatic conversion of all our
outstanding preferred stock into common stock upon the closing of this
offering.
The pro forma as adjusted balance sheet data above reflect the sale of
shares of our common stock in this offering at an assumed initial public
offering price of $ per share after deducting estimated underwriting
discounts and commissions and estimated expenses of this offering, the
conversion of all our outstanding preferred stock into common stock upon the
closing of this offering and the issuance of an estimated shares of our
common stock upon the automatic conversion at the initial public offering
price, at the closing of this offering, of $979,000 of convertible promissory
notes, plus accrued interest, issued in lieu of cash payment of dividends to
the holders of our series A-1 preferred stock. See "Use of Proceeds" and
"Capitalization" for a discussion about how we intend to use the proceeds from
this offering and about our capitalization.
6
<PAGE>
RISK FACTORS
An investment in our common stock offered by this prospectus involves a
substantial risk of loss. You should carefully consider the risks described
below before making an investment decision. The risks and uncertainties
described below are not the only ones facing us. Additional risks and
uncertainties not presently known to us or that we currently consider
immaterial may also impair our operations. If any of the following risks
actually occurs, our business could be harmed. In that case, the trading price
of our common stock could decline, and you may lose all or part of your
investment.
Risks Related to Our Business
We have a history of net losses and may never achieve or maintain
profitability.
We have incurred net losses since our inception, including net losses of
approximately $9.7 million for the year ended December 31, 1998, approximately
$16.0 million for the year ended December 31, 1999 and approximately $3.7
million for the three months ended March 31, 2000. As of March 31, 2000, we had
an accumulated deficit of approximately $48.9 million. We may incur additional
losses for at least the next several years. The extent of our future losses
will depend on the rate of growth, if any, of our revenue and on the level of
our expenses. To date, substantially all of our revenue has been derived from
corporate collaborations, license agreements and government grants. We expect
that substantially all of our revenue for the foreseeable future will result
from payments from these sources and from the outlicensing of our technologies
and of our internally developed pre-clinical and clinical drug candidates. We
also expect to spend significant amounts to enhance our drug discovery
technologies and to fund research and development of our internal pipeline of
drug candidates. Because our operating expenses will increase significantly in
the near term, we will need to generate significant additional revenue to
achieve profitability. In order to generate revenue, we must continue to
develop products and technologies from which we can derive revenue either
ourselves or through existing and future collaborations. Accordingly, we may
never achieve profitability. Even if we do achieve profitability, we may not be
able to sustain or increase profitability on a quarterly or annual basis.
We are developing and using new technologies, and if we are unable to
successfully commercialize these technologies, we will not be profitable.
Our DiscoverWorks technologies, in particular our DirectedDiversity and
ThermoFluor technologies, represent a new and unproven approach to the
identification and optimization of lead compounds with therapeutic potential.
These technologies have not been used in the discovery of any compound that has
been commercialized. Furthermore, our ThermoFluor technology was not used in
our most advanced internal programs, including our thrombin and urokinase
inhibitor programs. These technologies may not result in the successful
identification, optimization or development of compounds that are safe or
efficacious. Because the development of new pharmaceutical products is highly
uncertain, our drug discovery technologies may not produce any commercially
successful compounds. Failure to validate our technologies through the
successful discovery of compounds which become commercialized would hinder our
ability to out-license our internal pipeline of drug candidates and to market
successfully our technologies and services.
Historically, due to the highly proprietary nature of drug development and
lead optimization activities, the importance of these activities to drug
discovery and development efforts, and the desire to obtain maximum patent and
other proprietary protection for their programs, pharmaceutical and
biotechnology companies have conducted molecular target screening and lead
compound identification and optimization within their own internal research
departments. To succeed, we must convince these companies that our technologies
and capabilities justify the outsourcing of their programs to us or the
licensing by them of our technologies. To date, we have entered into only five
collaborations involving DirectedDiversity technology, including two signed
within the last three months. Under the terms of a settlement agreement with
Scriptgen Pharmaceuticals, Inc., we acquired a limited, non-exclusive license
to Scriptgen's ATLAS (Any Target Liquid Affinity Screen)
7
<PAGE>
assay technology and Scriptgen was granted a limited, nonexclusive license to
the method claims of our ThermoFluor screening technology. As part of this
settlement agreement, until March 7, 2003, we are precluded from using our
ThermoFluor screening technology in the Hepatitis C Virus "infection" area as
part of collaborative agreements or as part of our internal drug programs. In
addition, we are precluded from using our ThermoFluor screening technology as
part of more than one collaboration agreement in the area of "infection" until
March 7, 2003, and such collaborative agreement must be limited to a maximum of
3 anti-viral targets. The settlement with Scriptgen, however, does not restrict
use of our ThermoFluor screening technology by us for our internal drug
discovery efforts, or for purposes of collaborative agreements outside the area
of "infection" other than the limitation with respect to the Hepatitis C Virus
"infection". Only one of our existing collaborations involves the use of our
ThermoFluor screening technology. Our ability to succeed will depend upon the
acceptance by potential collaborators of our systems, services and technologies
as effective discovery tools.
As our DiscoverWorks technologies are further developed, integrated and used,
previously unforeseen or unexpected limitations or defects may emerge with
these technologies. In addition, operators using these technologies may require
substantial training in new technical skills. These potential complications
could delay or limit the use of our technologies, substantially increase the
anticipated cost of development, result in a breach by us of our contractual
obligations to our collaborators and others, or render us unable to use our
technologies at the quality and capacity levels required for success. Any
complication or delay could harm our ability to gain market acceptance for our
technologies and services and, in the case of a breach of a contractual
obligation, could subject us to litigation.
In addition, we may not be successful in our efforts to develop certain
aspects of our technologies and, as a result, we may not be able to
successfully commercialize these technologies. For example, if we are not
successful in determining the 3-D molecular structure of the b\\2\\ adrenergic
receptor, or any other GPCR, this would significantly limit the usefulness of
our GPCR technology and might result in the commercial failure of this
technology.
If we do not update and enhance our technologies, they will become obsolete.
The pharmaceutical market is characterized by rapid technological change, and
our future success will depend on our ability to update and enhance our
technologies. Because our technology platform is designed to integrate many
technologies, it may be difficult for us to stay abreast of the rapid change in
each of the areas encompassed within our technology platform. If we fail to
stay at the forefront of technological change we will be unable to compete
effectively. Further, because high throughput screening and lead optimization
are currently perceived by the pharmaceutical and biotechnology industries to
represent critical bottlenecks in the discovery process, our competitors are
using substantial resources to develop new technologies to reduce these
bottlenecks. Accordingly, our technologies may be rendered obsolete by advances
in existing technological approaches or the development of different approaches
by one or more of our current or future competitors.
The drug candidates in our internal pipeline are at an early stage of
development, and they may fail in subsequent development or commercialization.
Our most advanced compound, 3DP-4815, is currently in a Phase 1 clinical
trial. All of the compounds that we are currently developing will require
significant additional research, formulation and manufacture development, and
pre-clinical and extensive clinical testing prior to registration and
commercialization. Pre-clinical and clinical studies of our products under
development may not demonstrate the safety and efficacy necessary to obtain
regulatory approvals. Pharmaceutical and biotechnology companies have suffered
significant setbacks in advanced clinical trials, even after experiencing
promising results in earlier trials. Products that appear to be promising at
early stages of development may not reach the market or be marketed
successfully for a number of reasons, including the following:
. the product may be found to be ineffective or have harmful side effects
during subsequent pre-clinical testing or clinical trials;
8
<PAGE>
. the product may fail to receive necessary regulatory clearance;
. the product may be too difficult to manufacture on a large scale;
. the product may be too expensive to manufacture or market;
. the product may not achieve broad market acceptance;
. others may hold proprietary rights that will prevent the product from
being marketed; or
. others may market equivalent or superior products.
We do not expect any products we are developing either by ourselves to
outlicense or in conjunction with our collaborators to be commercially
available for at least several years, if at all. Our research and product
development efforts and those of our collaborators may not be successfully
completed and may not result in any successfully commercialized products.
Further, after commercial introduction of a new product, discovery of problems
through adverse event reporting could result in restrictions on the product,
including withdrawal from the market and, in certain cases, civil or criminal
penalties.
We are dependent on our collaborators, and our failure to successfully manage
our existing and future collaborations and license arrangements could prevent
us or our collaborators from developing and commercializing our products.
Our strategy depends upon the maintenance of our existing collaborations and
licensing arrangements as well as the formation of new collaborations and
licensing arrangements, principally with pharmaceutical and biotechnology
companies. We may not be able to maintain our existing collaborations or
licensing arrangements, or establish additional collaborative or licensing
arrangements, on terms favorable to us. In addition, our current or future
collaborations or licensing arrangements may not be successful or we may be
unable to successfully manage these collaborations or licensing arrangements.
As a result, we could become involved in disputes that might result in, among
other things, a significant strain on our management resources, legal claims
involving significant time and expense, a loss of capital and a loss of current
or future collaborators. Our present or future collaborations or licensing
arrangements could also be harmed if:
. we do not achieve our research and development objectives under our
collaborative agreements;
. conflicts arise with our collaborators as to rights to intellectual
property to technologies or product candidates either we or they develop;
. we enter into additional collaboration agreements that potentially
conflict with the business objectives of our collaborators;
. our collaborators become competitors of ours or enter into agreements
with our competitors; or
. consolidation in our target markets limits the number of potential
collaborators.
In addition, if we exclusively or co-exclusively license any aspect of our
technologies to a collaborator, we will limit our ability to license this
technology to other parties which may limit our ability to enter into future
collaborations or licensing arrangements.
Furthermore, since we do not currently possess the resources necessary to
complete development and commercialization of our internal drug candidates, we
expect to rely on and continue to enter into licensing arrangements for the
further development and commercialization of our drug candidates. These drug
candidates will require significant pre-clinical and/or clinical development
efforts, the receipt of the requisite regulatory approvals and the integration
of manufacturing capabilities and successful marketing efforts. With the
exception of certain aspects of pre-clinical and early clinical development, we
do not intend to perform any of these activities. A party to whom we outlicense
a drug candidate may not devote sufficient resources to the development,
manufacture, marketing or sale of these products. We will have limited or no
control over the resources that any third party may devote to our projects.
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Any of our present or future collaborators may breach or terminate their
agreements with us or otherwise fail to conduct their collaborative activities
successfully and in a timely manner. In addition, disputes could arise over the
application of payment provisions under any of our collaboration agreements. If
we fail to enter into or maintain collaborative agreements, or if any of these
events occur, we may not be able to commercialize our technologies or develop
and commercialize our drug candidates.
If our collaborators fail to advance compounds arising from the use of our
technologies to develop and commercialize pharmaceutical products, our business
will suffer.
Our future revenue will depend in part on the realization of milestone
payments and royalties, if any, triggered by the successful development and
commercialization by our collaborators of lead compounds identified through the
use of our technologies or of lead compounds developed internally by us and
then outlicensed. The agreements with our collaborators do not obligate them to
develop or commercialize lead compounds identified through the use of our
technologies. Development and commercialization of lead compounds will
therefore depend not only on the achievement of development objectives by us
and our collaborators, but also on each collaborator's own financial,
competitive, marketing and strategic considerations, such as the relative
advantages of alternative products being marketed or developed by others,
including relevant patent and proprietary positions. If a collaborator fails to
develop or commercialize a lead compound identified through the use of our
technologies, or if a compound developed by a collaborator is determined to be
unsafe or of no therapeutic benefit, we will not receive any future milestone
payments or royalties for that compound, and we may have only limited or no
rights to independently develop and commercialize that compound.
If the third-party expert clinical investigators and clinical research
organizations we intend to rely on to conduct any of our future clinical trials
do not perform in an acceptable or timely manner, our clinical trials could be
delayed or unsuccessful.
We do not have the ability to independently conduct clinical studies and
obtain regulatory approvals for our drug candidates and, to the extent our
collaborators do not perform these functions, we intend to rely on third-party
expert clinical investigators and clinical research organizations to perform
these functions. If we cannot locate acceptable third parties to run our
clinical studies or enter into favorable agreements with them, or if these
third parties do not successfully carry out their contractual duties, meet
expected deadlines and follow regulatory guidelines, including clinical
laboratory and manufacturing guidelines, then we will be unable to get required
approvals and will be unable to commercialize our drug candidates on a timely
basis, if at all.
If we or our collaborators are unable to manufacture or contract with third
parties to manufacture drug candidates in sufficient quantities and at an
acceptable cost, we or our collaborators may be unable to complete clinical
trials and commercialize these drug candidates.
Completion of any pre-clinical trials for our drug candidates involving large
quantities of chemical compounds, or any future clinical trials and
commercialization of drug candidates by us or our collaborators will require
access to, or development of, facilities to manufacture a sufficient supply of
our drug candidates. We do not have the facilities or experience to manufacture
the quantities of drug candidates necessary for any such trials or commercial
purposes on our own and do not intend to develop or acquire facilities for the
manufacture of such quantities of drug candidates in the foreseeable future. We
currently intend, instead, to rely on third-party contract manufacturers.
In addition, because we intend to outlicense drug candidates for further
development and commercialization, once a drug candidate is outlicensed, we
must rely on our collaborators' ability to manufacture, or have manufactured,
the quantities necessary for further development and commercialization of these
drug candidates.
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Our manufacturing strategy presents the following risks:
. we, or our collaborators, may not be able to locate acceptable
manufacturers or enter into favorable long-term agreements with them;
. third parties may not be able to successfully manufacture our drug
candidates and even if they can they may not be able to do so in a cost
effective and/or timely manner;
. the manufacturing processes for our drug candidates have not been tested
in quantities needed for clinical trials or commercial sales;
. delays in scale-up to commercial quantities could delay clinical studies,
regulatory submissions and commercialization of drug candidates;
. we may not have intellectual property rights, or may have to share
intellectual property rights, to many improvements in the manufacturing
processes or new manufacturing processes for our drug candidates;
. a long lead time is needed to manufacture our drug candidates and the
manufacturing process is complex; and
. manufacturers of our drug candidates are subject to the FDA's current
Good Manufacturing Practices regulations, or cGMPs, and similar foreign
standards and we and our collaborators do not have control over
compliance with these regulations by third-party manufacturers.
Any of these factors could delay clinical trials or commercialization of drug
candidates developed and commercialized by us or by our collaborators, entail
higher costs and result in us or our collaborators being unable to effectively
sell any products.
If we, or our collaborators, do not obtain and maintain required regulatory
approvals, we will be unable to commercialize our product candidates.
Regulation by governmental entities in the United States and other countries
will be a significant factor in the production and marketing of any
pharmaceutical products that may be developed by ourselves or by our
collaborators. The nature and the extent to which such regulation may apply
will vary depending on the nature of any such pharmaceutical products. In
particular, human pharmaceutical therapeutic products are subject to rigorous
pre-clinical and clinical testing and other approval requirements by the United
States Food and Drug Administration, or FDA, and by foreign regulatory
authorities. Various federal and, in some cases, state statutes and regulations
and similar statutes and regulations of foreign jurisdictions also govern or
influence the manufacturing, safety, labeling, storage, recordkeeping,
promotion, advertising and marketing of such pharmaceutical products. The
process of obtaining these approvals and the subsequent compliance with
appropriate federal and foreign statutes and regulations are time-consuming and
require the expenditure of substantial resources. Both we and our collaborators
may be unable to successfully complete the pre-clinical and clinical
development of, and file new drug applications, or NDAs, with the FDA, for any
drug candidate. In addition approval may not be granted on a timely basis, if
at all, for any drug candidate. Any failure by our collaborators or licensees
to obtain, or any delay in obtaining, regulatory approval could adversely
affect our ability to receive milestone payments or royalty revenues. Even if
FDA regulatory approvals are obtained, material changes to an approved product,
such as manufacturing changes or additional labeling claims, require further
FDA review and approval. Once obtained, any approval may be withdrawn. Further,
if we, our collaborators, our contract research organizations or our contract
manufacturers fail to comply with applicable FDA and other regulatory
requirements at any stage during the regulatory process, the FDA may impose
sanctions, including delays, warning letters, fines, product recalls or
seizures, injunctions, refusal of the FDA to review pending market approval
applications or supplements to approval applications, total or partial
suspension of production, civil penalties, withdrawals of previously approved
marketing applications, or criminal prosecutions. For marketing outside the
United States, we and our collaborators are also subject to foreign regulatory
requirements governing human clinical trials and marketing approval for
pharmaceutical products. The requirements governing the conduct of clinical
trials, product licensing, pricing and reimbursement may vary from country to
country, adding to the overall expense of drug development.
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If we are unable to build sales, marketing and distribution capabilities or
enter into agreements with third parties to perform these functions, we will
not be able to commercialize any of our drug candidates.
We currently have no sales, marketing or distribution capabilities to
commercialize our drug candidates. In order to commercialize any of our drug
candidates, we must either internally develop sales, marketing and distribution
capabilities or make arrangements with third parties to perform these services.
We intend to rely for the foreseeable future on collaborations with licensees
of our compounds to market any of our drug candidates which receive regulatory
approvals in the future.
To market any of our drug products directly, we would have to develop a
marketing and sales force with technical expertise and supporting distribution
capabilities and we may not be able to do so. To promote any of our drug
products through third parties, we would have to locate acceptable third
parties for these functions and enter into agreements with them on acceptable
terms and we may not be able to do so. If we enter into co-promotion or other
licensing arrangements, any product revenues would likely be lower than if we
directly marketed and sold our products, and any revenues we may receive would
depend upon the efforts of third parties, which efforts may not be successful.
If these third parties are not successful carrying out their contractual duties
or do not meet expected deadlines, our sales would suffer and we might not be
profitable.
Our ability to compete in the market may decline if we do not adequately
protect our proprietary technologies, or lose some of our intellectual property
rights as a result of, or otherwise become involved in expensive lawsuits or
administrative proceedings.
Our intellectual property consists of patents, copyrights, trade secrets, and
trademarks. As of May 23, 2000, 15 U.S. patents and seven foreign patents
relating to our technologies and compounds have issued, and 40 U.S. patent
applications (including non-provisional and provisional applications) and 122
foreign patent applications are pending. Our success depends in part on our
ability to obtain patents and maintain adequate protection of our intellectual
property for our technologies and products in the United States and other
countries. We currently do not have any issued patents for any of our lead
compounds for any of our internal programs and we may be unable to obtain any
issued patents for any patent applications we have filed or may file in the
future for such compounds.
Our commercial success depends in part on avoiding infringing patents and
proprietary rights of third parties and developing and maintaining a
proprietary position with regard to our own technologies, products and
business. The patent positions of pharmaceutical companies, including our
patent position, involve complex legal and factual questions and, therefore,
enforceability cannot be predicted with certainty. Patents, if issued, may be
lost in part or in whole as a result of lawsuits or administrative proceedings,
or may be otherwise challenged, invalidated or circumvented. We cannot be sure
that relevant patents have not been issued, or that relevant publications or
actions by others have not occurred, that could block our ability to obtain
patents or to operate as we would like. Others may develop similar technologies
or duplicate technologies developed by us. We are aware of the existence of
claims in published patent applications in some countries that, if granted and
valid, may block our ability to commercialize products or processes in those
countries if we are unable to circumvent or license them. As to those patents
that we have licensed, our rights depend on maintaining our obligations to the
licensor under the applicable license agreement and we may be unable to do so.
Our industry is characterized by extensive litigation regarding patents and
other intellectual property rights. Many companies have employed intellectual
property litigation as a way to gain a competitive advantage. If we became
involved in litigation or interference proceedings declared by the United
States Patent and Trademark Office, or oppositions or other intellectual
property proceedings outside of the United States, to defend our intellectual
property rights or as a result of alleged infringement of the rights of others,
we might have to spend significant amounts of time and money. We are aware of a
significant number of patents and patent applications relating to our
technologies filed by, and issued to, third parties. Should any of our
competitors have filed patent applications or obtain patents that claim
inventions also claimed by us, we may have to participate in an interference
proceeding declared by the relevant patent regulatory agency to determine
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priority of invention and, thus, the right to a patent for these inventions or
discoveries in the United States. Such a proceeding could result in substantial
cost to us even if the outcome is favorable. Even if successful on priority
grounds, an interference may result in loss of claims based on patentability
grounds raised in the interference. The litigation or proceedings could divert
our management time and efforts. Even unsuccessful claims could result in
significant legal fees and other expenses, diversion of management time and
disruption in our business. Uncertainties resulting from initiation and
continuation of any patent or related litigation could harm our ability to
compete.
An adverse ruling arising out of any intellectual property dispute, including
but not limited to an adverse decision as to the priority of our inventions,
would undercut or invalidate our intellectual property position. An adverse
ruling could also subject us to significant liability for damages, prevent us
from using processes or products, or require us to license disputed rights from
third parties. Although patent and intellectual property disputes in the
biotechnology area are often settled through licensing or similar arrangements,
costs associated with these arrangements may be substantial and could include
ongoing royalties. Furthermore, necessary licenses may not be available to us
on satisfactory terms, if at all.
From time to time we have received letters from third parties suggesting that
we may want to consider licensing patents held by such third parties. We
believe that we have defenses to any infringement claim with respect to such
patents. However, we cannot be certain that one or more of the third parties
will not initiate litigation alleging that our technologies infringe claims of
such patents or that a court would not find such claims valid and infringed.
Specific technologies developed by us were funded with U.S. government
grants. Portions of our ThermoFluor screening technology were developed using
funds from a grant awarded by the National Institute for General Medical
Sciences at the National Institutes of Health. Portions of our human fibroblast
growth factor analog technology were developed using funds from grants awarded
by the National Institute for Diabetes and Digestive and Kidney Diseases at the
National Institutes of Health. Portions of our GPCR technology were developed
using funds from grants awarded by the National Institute for General Medical
Sciences at the National Institutes of Health. We elected to retain title in
these technologies, subject to a nonexclusive, nontransferable, irrevocable,
paid-up license to the U.S. government to practice or have practiced for or on
behalf of the government any technology developed with these funds.
Confidentiality agreements with employees and others may not adequately prevent
disclosure of trade secrets and other proprietary information.
In order to protect our proprietary technology and processes, we also rely in
part on trade secret protection for our confidential and proprietary
information. Our policy is to execute confidentiality agreements with our
employees and consultants upon the commencement of an employment or consulting
arrangement with us. These agreements require that all confidential information
developed by the individual or made known to the individual by us during the
course of the individual's relationship with us be kept confidential and not
disclosed to third parties. These agreements also provide that inventions
conceived by the individual in the course of rendering services to us shall be
our exclusive property. Proprietary information, however, may be disclosed,
others may independently develop substantially equivalent proprietary
information and techniques or otherwise gain access to our trade secrets and we
may be unable to meaningfully protect our trade secrets. Costly and time-
consuming litigation could be necessary to enforce and determine the scope of
our proprietary rights, and failure to obtain or maintain trade secret
protection could adversely affect our competitive business position.
If our competitors develop and market drug discovery technologies or drug
candidates faster than we do or which are superior to our drug discovery
technologies or drug candidates, our commercial opportunities will be reduced
or eliminated.
We compete both in the markets for drug discovery technologies and services
and the markets for pharmaceutical products. We compete with major
pharmaceutical, biotechnology and discovery services
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companies, academic and scientific institutions, governmental agencies, and
public and private research organizations. These entities compete with us
either on their own or in collaborations.
The markets for our DiscoverWorks collaborative drug discovery technologies
and services are very competitive, and we expect the intensity of competition
to increase as pharmaceutical and biotechnology companies continue to outsource
a portion of their discovery processes and seek collaborations to access
innovations in discovery technologies.
We also compete with the internal drug discovery departments of our customers
and potential customers. Many of our customers and potential customers have
acquired or are developing integrated drug discovery capabilities that use high
throughput screening, combinatorial chemistry, specialized computer software,
and structure-based drug design.
For drug candidates we seek to out-license from our internal drug discovery
pipeline, we face, and will continue to face, intense competition from
organizations such as large pharmaceutical and biotechnology companies.
Competition to any of the programs in our internal drug discovery pipeline may
arise from current or future drug candidates in the same therapeutic class or
other classes of therapeutic agents or other methods of preventing or reducing
the incidence of disease. Furthermore, any drug candidate that is successfully
developed may compete with existing therapies that have long histories of safe
and effective use.
Due to perceived shortcomings of available agents and the large market
potential, competition to develop a safe, orally active antithrombotic agent is
intense, with many discovery programs in process. In addition, our orally
active urokinase inhibitor for the inhibition of cancer metastasis and tumor
angiogenesis and for cardiovascular indications faces competition from a number
of agents and approaches currently under development.
Our other research programs in small molecule drug discovery are also in
highly competitive areas. Many other companies are working in these areas and
they may achieve earlier or greater success than we may be able to achieve.
Our current and anticipated future research programs and services that focus
on the discovery of small molecule drugs that target GPCRs are also in a highly
competitive area. Most major pharmaceutical companies have extensive drug
discovery programs that target one or more GPCRs, and many biotechnology
companies have developed propriety positions for particular GPCR receptors or
screening technologies. Competition has also arisen and is anticipated to
accelerate in the area of structural genomics, where academic laboratories and
possibly companies, either on their own or in collaboration with others, are
seeking to determine the molecular structures of GPCRs, and databases of GPCR
molecular structures are being created in competition with the GPCR structural
genomics and other databases we expect to develop.
Most of our competitors, either alone, or together with their collaborators,
have substantially greater research and development capabilities and financial,
scientific, operational, marketing and sales resources than we do, as well as
significantly more experience in research and development, clinical trials,
regulatory matters, manufacturing, marketing and sales. These competitors and
other companies may have already developed or may in the future develop new
technologies or products that compete with ours or which could render our
technologies and products obsolete. In addition, our competitors may succeed in
obtaining broader patent protection, receiving FDA approval for products or
developing and commercializing products or technologies before us. We also
compete with these organizations in recruiting and retaining qualified
scientific and management personnel.
If we lose our key personnel or are unable to attract and retain qualified
personnel as necessary, it could delay our product development programs and
harm our research and development efforts.
We are highly dependent on the principal members of our scientific and
management staff, including David C. U'Prichard, our Chief Executive Officer,
and F. Raymond Salemme, our President and Chief
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Scientific Officer. If we lose the services of one or more such persons, we may
be unable to achieve our business objectives. Our future success also will
depend in part on the continued service of our other key scientific, software,
engineering and management personnel and our ability to identify, hire and
retain additional personnel. There is intense competition for such qualified
personnel in the areas of our activities, and there can be no assurance that we
will be able to continue to attract and retain such personnel necessary for the
development of our business. Failure to attract and retain key personnel could
have a material adverse effect on our business, financial condition and results
of operations.
We may encounter difficulties managing our growth, which could adversely affect
our results of operations.
We anticipate rapidly growing our business and if our growth continues, it
will place a strain on our management and operational and financial resources.
In order to effectively manage our growth, we must continue to improve our
operational, financial and management controls, reporting systems and
procedures and to attract and retain sufficient numbers of talented employees.
We may not be able to successfully implement improvements to our controls,
systems, and procedures in an efficient or timely manner or retract or retain
sufficient employees. In addition, we may discover deficiencies in existing
systems and controls.
If we fail to obtain necessary funds for our operations, we will be unable to
maintain and improve our technology position and will be unable to develop and
commercialize our drug candidates.
We believe that our available cash resources, funding from collaborations,
outlicensing of internal drug candidates and the net proceeds from this
offering will be sufficient to meet our capital requirements for at least the
next two years. However, we have based this estimate on assumptions that may
prove to be wrong. Our present and future capital requirements depend on many
factors, including:
. the level of research and development investment required to maintain and
improve our technology position;
. our ability to enter into new agreements with collaborators or to extend
the terms of our existing collaborations, and the terms of any agreement
of this type;
. our success rate or that of our collaborators in discovery efforts
associated with milestones and royalties;
. the timing, willingness and success of our collaborators to commercialize
our products that would result in milestone payments and in royalties;
. costs of recruiting and retaining qualified personnel;
. costs of filing, prosecuting, defending and enforcing patent claims and
other intellectual property rights;
. our need or decision to acquire or license complementary technologies or
novel targets, or acquire complementary businesses; and
. changes in drug candidate development plans needed to address any
difficulties in clinical studies or in commercialization.
We expect that additional capital may be required in the future to fund our
operations. We do not know whether additional financing will be available on
acceptable terms when needed. We have consumed substantial amounts of cash to
date and expect capital outlays and operating expenditures to increase over the
next several years as we expand our infrastructure and research and development
activities. We may raise these funds through public or private equity offerings
or debt financings or through corporate collaborations and licensing
arrangements.
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If we raise additional capital by issuing equity securities, our existing
stockholders' percentage ownership will be reduced and they may experience
substantial dilution. Any equity securities issued may also provide for rights,
preferences or privileges senior to holders of our common stock. If we raise
additional funds by issuing debt securities, these debt securities would have
rights, preferences and privileges senior to holders of our common stock and
the terms of the debt securities issued could impose significant restrictions
on our operations. If we raise additional funds through collaborations and
licensing arrangements, we may be required to relinquish some rights to our
technologies or drug candidates, or grant licenses on terms that are not
favorable to us. If adequate funds are not available, we may have to delay or
may not be able to continue developing our drug candidates.
If additional funds are required to operate our business, these funds may not
be available on terms favorable to us, if at all. If adequate funds are not
available or are not available on acceptable terms, our ability to fund our
operations, take advantage of opportunities, develop products or technologies
or otherwise respond to competitive pressures could be significantly delayed or
limited and we may need to downsize or cease our operations.
We expect that our quarterly results of operations will fluctuate, and this
fluctuation could cause our stock price to decline, causing investor losses.
To date, substantially all of our revenue has been from corporate
collaborations, license agreements and government grants. We expect that a
significant portion of our revenues for the foreseeable future will be
comprised of this funding as well as milestone payments. The timing of revenue
in the future will depend largely upon the signing of collaborative research
and development or technology licensing agreements or the outlicensing of drug
candidates for further development and payment of up-front fees, milestone
payments and royalty revenues as a result thereof. In any one fiscal quarter we
may receive multiple or no payments from our collaborators. As a result,
operating results may vary substantially from quarter to quarter. Revenue for
any given period may be greater or less than revenue in the immediately
preceding period or in the comparable period of the prior year. Our operating
results may also fluctuate due to other factors, including the following:
. termination of collaborations and licensing arrangements;
. the ability and willingness of collaborators to develop and commercialize
milestone and royalty-bearing products on expected timelines and the
resulting demand for any commercialized products;
. our ability to enter into new collaborative agreements, or to extend the
terms of our existing collaborative agreements, and the terms of any
agreement of this type;
. our ability or that of our collaborators to successfully satisfy all
pertinent regulatory requirements;
. the level of our expenditures on research and development and the level
of other operating expenses; and
. general and industry specific economic conditions, which may affect our
collaborators' research and development expenditures.
If revenue declines or does not grow as anticipated due to the expiration of
collaborative agreements, failure to obtain new agreements or grants, lower-
than-expected milestone or royalty payments or other factors, we may not be
able to correspondingly reduce our operating expenses. A large portion of our
expenses, including expenses for facilities, equipment and personnel, are
relatively fixed. Failure to achieve anticipated levels of revenue could
therefore significantly harm our operating results for a particular fiscal
period.
Due to the possibility of fluctuations in our revenue and expenses, we
believe that quarter-to-quarter comparisons of our operating results are not a
good indication of our future performance. Our operating results in some
quarters may not meet the expectations of stock market analysts and investors.
In that case, our stock price may decline.
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There is uncertainty of pharmaceutical pricing and health care reform.
We expect that a significant portion of our revenue in the foreseeable future
will be derived from products and services provided to the pharmaceutical and
biotechnology industries. Accordingly, our success in the foreseeable future is
directly dependent upon the success of the companies within those industries
and their continued demand for our products and services. The levels of
revenues and profitability of pharmaceutical and biotechnology companies may be
affected by the continuing efforts of governmental and third-party payors to
contain or reduce the costs of health care through various means and the
initiatives of third-party payors with respect to the availability of
reimbursement. For example, in certain foreign markets, pricing or
profitability of prescription pharmaceutical products is subject to
governmental control. In the United States, there have been, and we expect that
there will continue to be, a number of federal and state proposals to implement
similar governmental control. It is uncertain what legislative proposals may be
adopted or what actions federal, state or private payors for health care goods
and services may take in response to any health care reform proposals or
legislation. If these proposals or reforms harm pharmaceutical and
biotechnology companies that are current or prospective collaborators with whom
we work to develop drug candidates or to whom we outlicense internally
developed drug candidates, our ability to generate revenues will be diminished.
In addition, our ability, and the ability of our collaborators, to
commercialize any drug candidates could be adversely affected by successful
cost control initiatives and may also depend in part on the extent to which
reimbursement for the products will be available from:
. government and health administration authorities;
. private health insurers; and
. other third-party payors.
If government and other third-party payors do not provide adequate coverage and
reimbursement levels for products, the market acceptance of these products may
be reduced.
If we use or our collaborators use biological and hazardous materials in a
manner that causes injury, we may be liable for damages.
Both we and our collaborators conduct research and development activities
which involve the controlled use of potentially harmful biological materials as
well as hazardous materials, chemicals and various radioactive compounds. We
cannot completely eliminate the risk of accidental contamination or injury from
the use, storage, handling or disposal of these materials. In the event of
contamination or injury, we could be held liable for damages that result, and
any liability could exceed our resources. Both we and our collaborators are
subject to federal, state and local laws and regulations governing the use,
manufacture, storage, handling and disposal of these materials and specified
waste products. The cost of compliance with these laws and regulations could be
significant.
We may be sued for product liability.
Our business exposes us to potential product liability risks, which are
inherent in the life-science industry. We may not be able to avoid product
liability claims. Product liability insurance for the pharmaceutical industry
is generally expensive, if available at all. If we are unable to obtain
sufficient insurance coverage on reasonable terms or to otherwise protect
against potential product liability claims, we may be unable to commercialize
our product candidates. A successful product liability claim brought against us
in excess of our insurance coverage, if any, may cause us to incur substantial
liabilities and our business may fail.
If we engage in any acquisition or business combination, we will incur a
variety of risks that could adversely affect our business operations.
In the past we have considered and we will continue to consider in the
future, if and when appropriate opportunities become available, strategic
business initiatives intended to further the development of our
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business, including acquiring businesses, technologies or products or entering
into a business combination with another company. If we do pursue such a
strategy, we could, among other things:
. issue equity securities that would dilute current stockholders'
percentage ownership, incur substantial debt, or both;
. expend substantial operation, financial and management resources in
integrating new businesses, technologies and products;
. assume substantial actual or contingent liabilities; or
. merge, or otherwise enter into a business combination with, another
company in which our stockholders would receive cash or shares of the
other company, or a combination of both. In such case, many stockholders
may disagree with the terms of such business combination or may view the
sufficiency of the consideration to be received to be inadequate, or
both.
In addition, any future acquisitions or business combinations might
negatively impact our business relations with a collaborator and could lead to
a termination of our agreement with such collaborator. Further, recent proposed
accounting changes relating to accounting for acquisitions could result in a
negative impact on our results of operations. Any of the foregoing could harm
our business.
Risks Related to This Offering
Our common stock has never been publicly traded and we cannot predict the
extent to which a trading market will develop.
Prior to this offering, there has been no public market for our common stock.
If you purchase shares of our common stock in this offering, you will not pay a
price that was established in a competitive market. Rather, you will pay a
price that we negotiated with representatives of the underwriters. That price
may not be indicative of the public trading market for our common stock should
one develop. Although we have applied to list the shares on the Nasdaq National
Market, there can be no guarantee that after this offering an active trading
market in our stock will develop or continue.
Our common stock price is likely to be highly volatile and the value of your
investment may fluctuate significantly.
The market price for securities of early-stage drug discovery companies has
been particularly volatile, often for reasons unrelated to their business. In
addition to various risks described elsewhere in this prospectus, some of the
factors that could also cause volatility and could result in declines in the
market price of our common stock include:
. results of preclinical studies and clinical trials conducted by us or on
our behalf, by our collaborators, or by our competitors;
. announcements of technological innovations or new drug candidates or
commercial products by us, our collaborators or our competitors;
. regulatory developments in both the United States and foreign countries;
. changes in reimbursement policies;
. public concern as to the safety and efficacy of products developed by us,
our collaborators or our competitors;
. developments or disputes concerning patents or other proprietary rights;
. fluctuations in our operating results;
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. changes in financial estimates or recommendations by security analysts;
. lack of adequate trading liquidity as a public company; and
. general market conditions.
In the past, following periods of volatility in the market price of a
particular company's securities, class action litigation has often been brought
against the company. We may become involved in this type of litigation in the
future. Litigation of this type is often extremely expensive and diverts
management's attention and resources.
You will incur immediate and substantial dilution of the book value of your
shares.
The offering price of our common stock is substantially higher than the net
tangible pro forma book value per share of our outstanding common stock. As a
result, investors purchasing common stock in this offering will incur immediate
and substantial dilution in the net tangible book value of their common stock
of $ per share. In the past, we issued options and warrants to acquire
capital stock at prices significantly below the assumed offering price. There
will be further dilution to investors when any of these outstanding options and
warrants are exercised.
If a large number of shares of our common stock are sold after this offering,
or if there is the perception that such sales could occur, the market price of
our common stock may decline.
The market price of our common stock could decline due to sales of a large
number of shares in the market after this offering or the perception that such
sales could occur, including sales or distributions of shares by our large
stockholders. These sales could also make it more difficult for us to raise
funds through offerings of equity securities in the future at a time and price
that we deem appropriate, and could also make it more difficult for us to pay
in stock for any acquisitions we may decide to pursue in the future.
Upon the completion of this offering, we will have shares of common stock
outstanding, assuming no exercise of options or warrants and assuming no
exercise of the underwriters' over-allotment option. Of these outstanding
shares of common stock, the shares sold in this offering will be freely
tradable, without restriction under the Securities Act of 1933, as amended,
unless purchased by our "affiliates." The remaining shares of common stock
held by existing stockholders are "restricted securities" and may be resold in
the public market only if registered or pursuant to an exemption from
registration, such as Rule 144 under the Securities Act.
Immediately following the completion of this offering, holders of shares
of common stock will be entitled to registration rights. Upon registration,
these shares may be freely sold in the public market.
All of our officers, directors and % holders of shares have agreed, pursuant
to lock-up agreements, that they will not, directly or indirectly, offer, sell
or agree to sell, or otherwise dispose of any shares of our common stock or
convertible securities in the public market without the prior written consent
of Bear, Stearns & Co. Inc. for a period of 180 days after the date of this
prospectus. Upon expiration of the lock-up agreements, shares of common
stock currently outstanding will be immediately eligible for resale, subject to
the requirements of Rule 144.
We may issue additional shares:
. to employees, directors and consultants;
. in connection with corporate alliances;
. in connection with acquisitions; and
. to raise capital.
19
<PAGE>
As a result of these factors, a substantial number of shares of our common
stock could be sold in the public market at any time.
Our certificate of incorporation and Delaware law contain provisions that could
discourage a third party from making a takeover offer that could be beneficial
to us and our stockholders.
Certain provisions of our certificate of incorporation and bylaws and
Delaware law could delay or prevent a third party from acquiring shares of our
common stock or replacing members of our board of directors. Our certificate of
incorporation provides for the division of our board of directors into three
classes and requires supermajority approval of the removal of any member of our
board of directors. In addition, our certificate of incorporation prevents our
stockholders from acting by written consent. Our board of directors has the
power to issue up to five million shares of preferred stock without stockholder
approval. This preferred stock could have rights, including voting rights, that
would be superior to those of our common stock, and our board of directors has
the power to determine these rights. These provisions may make it more
difficult for a third party to acquire a majority of our outstanding voting
stock or to replace a majority of our board of directors.
In addition, we are subject to Section 203 of the Delaware General
Corporation Law which contains provisions imposing restrictions on the ability
of stockholders to take action to acquire control of us or otherwise engage in
transactions with us. Section 203 coupled with the provisions of our
certificate of incorporation and bylaws may discourage transactions in which
our stockholders might otherwise receive a premium for their shares over the
then current price and may limit our stockholders' ability to approve
transactions that they think are in their best interests.
Because our officers, directors, principal stockholders and affiliates will own
approximately % of our outstanding common stock following the offering, they
could control our actions in a manner that conflicts with our interests and the
interests of our other stockholders.
Upon the completion of this offering, our officers, directors, principal
stockholders and affiliates will own approximately shares, or %, of our
outstanding common stock. The interests of these controlling stockholders could
conflict with the interests of our other stockholders. For example, if these
controlling stockholders choose to act together, they may be able to exert
considerable influence over us, including in the election of directors and the
approval of actions submitted to our stockholders. This concentration of
ownership may also have the effect of discouraging third-party offers to
acquire our company or of delaying or preventing a change in control of our
company.
The net proceeds from this offering may be allocated in ways with which you and
other stockholders may not agree.
Management will have significant flexibility in applying the net proceeds of
this offering and could use these proceeds for purposes other than those
contemplated at the time of the offering.
We do not expect to pay dividends in the foreseeable future and stockholders
must rely on stock appreciation for any return on their investment.
We do not intend to pay any cash dividends on our common stock for the
foreseeable future. As a result, only the appreciation, if any, of the price of
our common stock will provide a return to investors.
20
<PAGE>
FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements under the captions
"Summary," "Risk Factors," "Management's Discussion and Analysis of Financial
Condition and Results of Operations," "Business" and elsewhere. These forward-
looking statements include, among others, statements about the following:
. anticipated losses and expenditures;
. anticipated revenues from corporate collaborations, licensing agreements,
government grants, products and/or services;
. development and commercialization of existing and new technologies;
. ability to out-license our internal pipeline of drug candidates;
. ability to market our technologies and services;
. potential determination of the 3-D molecular structure of the [FORMULA
APPEARS HERE] adrenergic receptor, or of any other GPCR;
. the status of our regulatory process for 3DP-4815 and our other product
candidates;
. our intentions concerning and our reliance on collaborations and license
arrangements;
. development and commercialization of product candidates by us or our
collaborators and licensors (including lead compounds identified by
collaborators or licensors through the use of our technologies or
developed internally by us and then out-licensed);
. our intention to rely on third-party expert clinical investigators and
clinical research organizations;
. our intention, or our collaborators' intention, to rely on third parties
for manufacturing, sales, marketing and distribution;
. ability of us, or our collaborators, to obtain and maintain required
regulatory approvals for product candidates;
. our competition;
. our intellectual property rights;
. our growth rate and ability to manage growth;
. our ability to meet capital requirements for at least the next two years;
. our intentions regarding use of proceeds;
. our intentions concerning payment of dividends; and
. our ability to broadly exploit our integrated technology platform.
When used in this prospectus, the terms "believe," "anticipate," "estimate,"
"expect," "seek," "intend," "could," "will," "predict," "plan," "potential,"
"continue," and "may", or the negative of these terms or other similar
terminology, are generally intended to identify "forward-looking statements."
Our forward-looking statements involve known and unknown risks, uncertainties
and other factors that may cause our actual results, performance or
achievements, to be materially different from any future results, performance
or achievements express or implied by these forward-looking statements. We
discuss these factors in more detail elsewhere in this prospectus, including
under the captions "Summary," "Risk Factors," "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and "Business." You
should not place undue reliance on our forward-looking statements. We do not
intend to update any of these factors or to publicly announce the result of any
revisions to any of these forward-looking statements.
21
<PAGE>
USE OF PROCEEDS
We estimate our net proceeds from the sale of our common stock in this
offering will be approximately $ million, or approximately $ million if the
underwriters' over-allotment option is exercised in full. This estimate is
based upon an assumed offering price of $ per share after deducting estimated
underwriting discounts and commissions and estimated offering expenses.
We expect to use these proceeds for the following purposes:
. further research and development of our drug discovery technologies and
programs;
. acquisition or licensing of targets or technologies;
. expansion of our facilities; and
. general corporate and working capital purposes.
In addition, a portion of the net proceeds may be used to acquire businesses
that are comparable to ours. We currently have no agreements with respect to
any material acquisitions.
The amounts and timing of our actual expenditures for each purpose may vary
significantly depending upon numerous factors, including:
. the scope of development efforts for our drug discovery technologies and
programs;
. the timing of regulatory approvals;
. our ability to enter into new and maintain current collaborative or
licensing arrangements, as well as their timing and terms;
. the progress and success of our internal pipeline of drug candidates and
our ability to outlicense them;
. competition;
. the progress and success of our research and development collaborations
and the receipt and variability of funding, milestone payments and
royalties from our collaborators;
. the market acceptance of any products introduced by us or our
collaborators;
. time and cost of defending and enforcing patent and other intellectual
property claims;
. future revenue growth, if any; and
. the amount of cash, if any, we generate from operations.
We will retain broad discretion in the allocation of the net proceeds of this
offering. Pending the uses described above, we intend to invest the net
proceeds of this offering in short-term, investment-grade, interest-bearing
securities.
DIVIDEND POLICY
Pursuant to our certificate of incorporation, from and after October 1998,
the holders of our series A-1 preferred stock were entitled to receive a 10%
dividend per annum, payable in equal quarterly installments. In connection
therewith, we have declared and paid aggregate dividends of $979,000 through
the first quarter of 2000. These dividends were paid by issuing each holder of
our series A-1 preferred stock a convertible promissory note payable for the
amount of the holder's portion of the declared dividend. These notes bear
interest at 10% per annum. In addition we will accrue approximately $1,800 per
day in additional dividends for each day between April 1, 2000 and the
completion of this offering which we intend to pay in cash. Our series A-2,
series A-3, series A-4 and series A-5 preferred stockholders are also entitled
to receive a 10% dividend per annum payable in equal installments from and
after the fifth anniversary of the date each such series was originally issued.
The $979,000 principal amount of and the accrued interest on the promissory
notes outstanding at the time of the closing of our initial public offering
will be automatically converted into shares of our common stock valued at the
initial public offering price. We estimate that shares of common stock will
be issued upon such conversion. We do not intend to pay any cash dividends,
other than the obligations described above, in the foreseeable future.
22
<PAGE>
CAPITALIZATION
You should read this table in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the financial
statements and the notes to those statements included elsewhere in this
prospectus. This table sets forth as of March 31, 2000 (consolidated):
. our actual capitalization;
. our pro forma capitalization, assuming the automatic conversion of all of
our outstanding preferred stock into common stock upon the closing of
this offering;
. our pro forma as-adjusted capitalization to give effect to the sale of
shares of our common stock in this offering at an assumed initial
public offering price of $ per share after deducting estimated
underwriting discounts and commissions and estimated expenses of this
offering and the automatic conversion of all of our outstanding preferred
stock into common stock upon the closing of this offering; and the
issuance of an estimated shares of common stock issuable at the
initial public offering price upon the automatic conversion at the
initial public offering price, at the closing of this offering, of
$979,000 of convertible promissory notes, plus accrued interest issued in
lieu of cash payment of dividends, to the holders of our series A-1
preferred stock.
<TABLE>
<CAPTION>
As of March 31, 2000
(consolidated)
--------------------------
Pro
Pro Forma As
Actual Forma Adjusted
------- ------- --------
(in thousands, except
share data)
<S> <C> <C> <C>
Notes payable--dividends and accrued interest........ 701 701
Long-term debt, less current portion................. 2,020 2,020
------- ------- -----
Total long-term debt................................ 2,721 2,721
------- -------
Redeemable convertible preferred stock............... 63,550 --
------- ------- -----
Stockholders' Equity (Deficit):
Convertible preferred stock--par..................... 1 --
Common stock--par.................................... 3 39
Additional paid in capital........................... 4,590 68,105
Deferred compensation................................ (516) (516)
Accumulated deficit.................................. (48,851) (48,851)
------- ------- -----
Total stockholders' equity (deficit)................ (44,773) 18,777
------- ------- -----
Total capitalization................................. 21,498 21,498
======= ======= =====
</TABLE>
This table assumes no exercise of stock options or warrants outstanding as of
March 31, 2000. As of March 31, 2000, there were options outstanding under our
stock option plan to purchase 5,835,911 shares with a weighted average exercise
price of $1.13 per share; warrants to purchase 4,920,626 shares of common stock
at a weighted average exercise price of $0.90 per share; and warrants to
purchase 239,475 shares of series A-1 preferred stock, which will either be
exercised prior to the closing of this offering or become exercisable for
239,475 shares of common stock upon the closing of this offering at an exercise
price of $1.00 per share.
23
<PAGE>
DILUTION
As of March 31, 2000, our pro forma net tangible book value was $ , or $
per share. Pro forma net tangible book value per share is determined by
dividing pro forma net tangible book value (total tangible assets less total
liabilities) by the pro forma number of shares of common stock after giving
effect to the automatic conversion of all outstanding shares of preferred stock
into an aggregate of shares of common stock upon the closing of this
offering.
Without taking into effect any changes in pro forma net tangible book value
after March 31, 2000, after giving effect to the sale of the common stock
offered hereby at an assumed offering price of $ per share and after
deducting estimated underwriting discounts and commissions and estimated
offering expenses, the pro forma as adjusted net tangible book value would have
been $ , or $ per share. This represents an immediate increase in pro forma
net tangible book value of $ per share of common stock to our recent
stockholders and an immediate dilution of $ or % per share to new investors
who purchase shares in this offering. The following table illustrates this
dilution.
<TABLE>
<S> <C> <C>
Assumed offering price per share.................................. $
Pro forma net tangible book value per share before the offering... $
Increase per share attributed to new investors....................
----
Pro forma net tangible book value per share after this offering...
----
Dilution in net tangible book value per share to new investors.... $
====
</TABLE>
If the underwriters exercise their over-allotment option in full, the pro
forma as-adjusted net tangible book value per share after the offering would be
$ per share, the increase in pro forma net tangible book value per share to
existing stockholders would be $ per share and the dilution in pro forma net
tangible book value to new investors would be $ per share.
The following table summarizes, on a pro forma as adjusted basis as of March
31, 2000, the differences between the total consideration paid and the average
price per share paid by the existing stockholders and the new investors with
respect to the number of shares of common stock purchased from us based on an
assumed offering price of $ per share:
<TABLE>
<CAPTION>
Total
Shares Consideration
-------------- -------------- Average Price
Number Percent Amount Percent Per Share
------ ------- ------ ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders............... % $ % $
--- ----- ----
New public investors................
--- ----- ---- -----
Total........................... 100.0% $ 100.0%
=== ===== ==== =====
</TABLE>
These tables do not assume exercise of stock options or warrants outstanding
as of March 31, 2000.
As of May 23, 2000, there were 5,757,124 shares issuable upon exercise of
outstanding stock options at a weighted average exercise price of $1.14 per
share. As of May 23, 2000, there were 4,920,626 shares of common stock issuable
upon the exercise of outstanding warrants, at a weighted average exercise price
of $0.90 per share and 239,475 shares of series A-1 preferred stock issuable
upon the exercise of outstanding warrants, which will either be exercised prior
to the closing of this offering or become exercisable for 239,475 shares of
common stock upon the closing of this offering at an exercise price of $1.00
per share. To the extent that any of these options or warrants are exercised,
there will be further dilution to new investors.
24
<PAGE>
SELECTED FINANCIAL INFORMATION
(in thousands and per share data)
The selected financial data set forth below are derived from our financial
statements. Our statements of operations data for the years ended December 31,
1997, 1998 and 1999 and our balance sheet data at December 31, 1998 and 1999,
are derived from our financial statements that have been audited by Richard A.
Eisner & Company, LLP, which are included elsewhere in this prospectus, and are
qualified by reference to such financial statements. The statement of
operations data for the years ended December 31, 1995 and 1996 and the balance
sheet data as of December 31, 1995, 1996 and 1997 are derived from our audited
financial statements, which are not included in this prospectus. The statement
of operations data for the three-months ended March 31, 2000 and 1999 and the
balance sheet data as of March 31, 2000, are derived from our unaudited
financial statements prepared on the same basis as our audited financial
statements and, in the opinion of our management, include all adjustments,
consisting of normal recurring adjustments, necessary for a fair presentation
of our financial position and results of operations. The results of operations
for an interim period are not necessarily indicative of results to be expected
for a full year. The selected financial information set forth below should be
read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and our financial statements and related
notes appearing elsewhere in this prospectus.
<TABLE>
<CAPTION>
Three Months Ended
Year ended December 31, March 31,
-------------------------------------------- -----------------------
1995 1996 1997 1998 1999 1999 2000
------- ------- ------- ------- -------- ------- --------------
(consolidated)
<S> <C> <C> <C> <C> <C> <C> <C>
Statements of Operations
Data:
Grant and research
revenue................ $ 463 $ 967 $ 3,580 $ 5,095 $ 4,489 $ 1,379 $ 1,484
------- ------- ------- ------- -------- ------- -------
Costs and expenses
Research and
development........... 3,414 4,556 6,517 10,984 12,136 2,975 3,425
General and
administrative........ 1,122 1,708 3,000 4,458 6,525 1,155 1,537
Litigation settlement.. -- -- -- -- 1,500 -- --
------- ------- ------- ------- -------- ------- -------
Total costs and
expenses.............. 4,536 6,264 9,517 15,442 20,161 4,130 4,962
------- ------- ------- ------- -------- ------- -------
Loss from operations.... (4,073) (5,297) (5,937) (10,347) (15,672) (2,751) (3,478)
Interest income......... 16 14 521 868 328 125 87
Interest expense........ (401) (580) (149) (232) (625) (114) (351)
------- ------- ------- ------- -------- ------- -------
Net loss................ $(4,458) $(5,862) $(5,565) $(9,711) $(15,969) $(2,740) $(3,742)
Declared and accrued
cumulative dividends on
preferred stock........ -- -- -- (144) (669) (167) (167)
------- ------- ------- ------- -------- ------- -------
Net loss applicable to
common stock........... $(4,458) $(5,862) $(5,565) $(9,855) $(16,638) $(2,907) $(3,909)
======= ======= ======= ======= ======== ======= =======
Basic and diluted net
loss per common share--
historical............. $(32.30) $(20.71) $ (9.83) $ (7.93) $ (9.78) $ (1.79) $ (2.11)
======= ======= ======= ======= ======== ======= =======
Weighted average common
shares outstanding--
historical............. 138 283 566 1,243 1,701 1,624 1,849
======= ======= ======= ======= ======== ======= =======
Basic and diluted net
loss per common share--
pro forma.............. $ (.56) $ (.13)
======== =======
Weighted average common
shares outstanding--pro
forma.................. 28,555 28,808
======== =======
</TABLE>
<TABLE>
<CAPTION>
As of December 31, March 31,
----------------------------------------------- ---------
1995 1996 1997 1998 1999 2000
------- -------- -------- -------- -------- ---------
(consolidated)
<S> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
Cash, cash equivalents
and marketable
securities............. $ 547 $ 1,312 $ 8,953 $ 9,726 $ 7,620 $ 22,038
Total assets............ 2,954 3,401 12,897 15,833 12,550 27,394
Notes payable--dividends
and accrued interest... 144 685 701
Long-term debt, less
current portion........ 1,077 575 820 3,270 2,330 2,020
Convertible notes and
accrued interest....... -- -- -- -- 10,115 --
Long-term portion of
settlement accrual..... -- -- -- -- 500 --
Redeemable convertible
preferred stock........ 6,610 12,015 24,461 34,834 34,834 63,550
Accumulated deficit..... (8,001) (13,864) (19,429) (29,140) (45,109) (48,851)
Total capital
deficiency............. (7,858) (11,198) (14,262) (25,263) (41,678) (44,773)
</TABLE>
See our financial statements for a description of the computation of the
historical and pro forma net loss per share and the number of shares used in
the historical and pro forma per share calculations in "Statements of
Operations Data" above.
25
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of our financial condition and results of operations
should be read in conjunction with the financial statements and the notes to
those statements and other financial information included elsewhere in this
prospectus. This discussion contains certain statements of a forward-looking
nature that involve risks and uncertainties. As a result of many factors, such
as those set forth under "Risk Factors" and elsewhere in this prospectus, our
actual results may differ materially from those anticipated by such forward-
looking statements.
Overview
We are a post-genomics drug discovery company that has developed a unique
integration of proprietary technologies to provide an accelerated and improved
methodology for "gene-to-clinic" small molecule drug discovery. Our objective
is to be an industry leader in the discovery and optimization of novel drug
candidates. Our strategy is to pursue collaborations with pharmaceutical and
biotechnology companies through: (1) application of our technology to partner-
funded research and development agreements and (2) outlicensing of drug
candidates that we have developed internally.
To date, substantially all of our revenue has been from corporate
collaborations, license agreements and government grants. Revenue from our
corporate collaborations and our licensing agreements consists of nonrefundable
up-front fees, ongoing research and development funding, potential milestone
payments and royalties upon the sale of designated products. Royalties from
sales of products are not expected for at least several years, if at all. We
recognize revenue from corporate collaborations, including periodic payments
for research and development activities and related nonrefundable technology
access fees and/or technology or software licensing fees, over the period that
we perform research and development activities under the terms of the
agreements. Revenue from nonrefundable up-front fees for the licensing of
technology, products or software under agreements which do not require us to
perform research or development activities or other significant future
performance obligations is recognized at the time the agreement is executed or
the software is delivered. Revenue resulting from the achievement of milestone
events stipulated in the agreements is recognized when the milestone is
achieved. Up-front fees and other amounts received in excess of revenue
recognized are recorded as deferred income.
We have incurred substantial operating losses since our inception in 1993. As
of March 31, 2000, our accumulated deficit was $48.9 million. We have funded
our operations primarily through private placements of equity securities
totaling $72.0 million and revenues of $16.1 million. Our losses have resulted
principally from costs incurred in research and development activities related
to our efforts to develop our technologies and our internal drug discovery
programs and from the associated administrative costs required to support these
efforts. We expect to incur additional operating losses over the next several
years as we continue to develop our technologies and fund internal product
research and development. Our ability to achieve profitability is dependent on
the progress and commercialization of drug candidates from existing internal
programs and collaborations and our ability to initiate and develop new
internal programs and enter into additional collaborations with favorable
economic terms. Payments either under collaborative agreements or related to
the outlicensing of drug candidates from our internal pipeline will be subject
to significant fluctuation in both timing and amount and therefore our results
of operations for any period may not be comparable to the results of operations
from any other period.
Results of Operations
Three Months Ended March 31, 2000 and 1999
Revenue. Our revenue for the three months ended March 31, 2000 was $1.5
million as compared to $1.4 million for the three months ended March 31, 1999.
Revenues in 2000 included $1.4 million from corporate collaborations,
26
<PAGE>
including revenue from new agreements with DuPont Pharmaceuticals Company and
Boehringer Ingelheim Pharmaceuticals, Inc., and continued funding from Aventis
and The Heska Corporation and $0.1 million from government grants. Revenues in
the first quarter of 1999 included $1.4 million from corporate collaborations,
including revenues from Wyeth-Ayerst, Merck KGaA, and Heska Corporation.
Research and Development Expenses. Our research and development expenses
increased $0.4 million, to $3.4 million for the three months ended March 31,
2000 from $3.0 million for the three months ended March 31, 1999. This increase
was attributable to the expansion of research efforts in our internal programs,
including clinical testing of our lead thrombin inhibitor compound, the
commencement of collaborative discovery programs and investment in our core
technologies, with related increases in expenses for personnel, facility
expansion, equipment and lab supplies for all of these activities.
General and Administrative Expenses. Our general and administrative expenses
increased $0.3 million, to $1.5 million for the three months ended March 31,
2000 from $1.2 million for the three months ended March 31, 1999. The increase
was primarily attributable to increased management and administrative personnel
expenses and legal and professional fees incurred in connection with litigation
over intellectual property, which we settled in March 2000, and the expansion
of our operations and business development efforts.
Other Income (Expenses). Interest income was approximately $0.1 million for
the first quarter of both 2000 and 1999. Interest expense increased $0.3
million to $0.4 million.
Years Ended December 31, 1999 and 1998
Revenue. Our revenue for 1999 was $4.5 million as compared to $5.1 million in
1998. Revenues in 1999 included $4.3 million from corporate collaborations,
including revenue from a new agreement with Aventis, continued funding from
Wyeth-Ayerst, Merck KGaA, Heska Corporation and E.I. DuPont de Nemours and $0.2
million from government grants. Revenues in 1998 included $4.5 million from
corporate collaborations, including funding from Wyeth-Ayerst, Merck KGaA, and
Heska Corporation, and $0.6 million from government grants. The decrease in
revenue for 1999 is primarily attributable to the completion in August 1998 of
funding from an Advanced Technology Program (ATP) award sponsored by the
National Institute of Standards and Technology, which commenced in August of
1995, and a reduction in revenues from Wyeth-Ayerst. Our agreements with Wyeth-
Ayerst and Merck KGaA ended in 1999.
Research and Development Expenses. Our research and development expenses
increased $1.1 million, to $12.1 million for 1999 from $11.0 million for 1998.
This increase was attributable to the expansion of research efforts in our
internal programs, including preclinical testing of our lead thrombin inhibitor
compounds, the commencement of collaborative discovery programs, investment in
our core technologies and associated increases in expenses for personnel,
facility expansion, equipment and lab supplies.
General and Administrative Expenses. Our general and administrative expenses
increased $2.0 million, to $6.5 million for 1999 from $4.5 million for 1998.
The increase was primarily attributable to increased management and
administrative personnel expenses and legal and professional fees incurred in
connection with litigation involving our ThermoFluor technology, which we
settled in March 2000, the expansion of our operations and business development
efforts. In connection with the settlement of litigation, we accrued an expense
of $1.5 million in 1999.
Other Income (Expenses). Interest income decreased $0.6 million, to $0.3
million for 1999 from $0.9 million for 1998. This was attributable to lower
average cash balances during 1999. Interest expense increased $0.4 million, to
$0.6 million in 1999 from $0.2 million in 1998. The increase in interest
expense was primarily attributable to an increase in short-term borrowings from
certain of our investors.
Provision for Income Taxes. We incurred net operating losses for the years
ended December 31, 1999 and 1998, and, accordingly, we did not pay any federal
income taxes. As of December 31, 1999, we had federal
27
<PAGE>
net operating loss carryforwards of approximately $40.4 million, which expire
through 2019. Our utilization of the net operating losses may be subject to
substantial annual limitations pursuant to Section 382 of the Internal Revenue
Code. The annual limitations may result in the expiration of net operating
losses prior to utilization.
Years Ended December 31, 1998 and 1997
Revenue. Our revenue for 1998 was $5.1 million as compared to $3.6 million in
1997. Revenues in 1998 included $4.5 million from corporate collaborations,
including revenue from Wyeth-Ayerst, Merck KGaA, and Heska Corporation, and
$0.6 million from government grants. Revenues in 1997 included $2.5 million
from corporate collaborations, including the initiation of the agreement with
Wyeth-Ayerst, funding from Merck KGaA, and $1.1 million from government grants.
The increase in revenue from corporate collaborations was primarily
attributable to the full year of funding under the Heska agreement. The
decrease in grant revenue is primarily attributable to the completion in August
1998 of funding from an Advanced Technology Program (ATP) award, sponsored by
the National Institute of Standards and Technology which commenced in August of
1995.
Research and Development Expenses. Our research and development expenses
increased $4.5 million to $11.0 million for 1998 from $6.5 million for 1997.
This increase was attributable to the expansion of research efforts in our
internal programs, including preclinical testing of our lead thrombin inhibitor
compounds, the commencement of collaborative discovery programs, investment in
our core technologies, and associated increases in expenses for personnel,
facility expansion, equipment and lab supplies.
General and Administrative Expenses. Our general and administrative expenses
increased $1.5 million to $4.5 million for 1998 from $3.0 million for 1997. The
increase was primarily attributable to increased management and administrative
personnel expenses and legal and professional fees incurred in connection with
the expansion of our operations and business development efforts.
Other Income (Expenses). Interest income increased $0.4 million to $0.9
million for 1998 from $0.5 million for 1997. This was attributable to higher
average cash balances during 1998. Interest expense increased $0.1 million to
$0.2 million in 1998 from $0.1 million in 1997. The increase in interest
expense was primarily attributable to an increase in short-term borrowings from
certain of our investors.
Provision for Income Taxes. We incurred net operating losses for 1998 and
1997, and, accordingly, we did not pay any federal income taxes.
Liquidity and Capital Resources
At March 31, 2000, we had cash and cash equivalents of $22.0 million and
working capital of $16.7 million. We have funded our operations to date
primarily through private placements of equity securities with aggregate
proceeds of approximately $72.0 million, revenues from corporate collaborations
totaling $12.9 million, government grants totaling $3.2 million, capital
equipment and leasehold improvement financing totaling $7.8 million and
interest earned on the net proceeds of our private placements. Our operating
activities used funds totaling $10.6 million, $8.4 million and $3.8 million in
1999, 1998 and 1997, respectively.
To date, substantially all of our revenue has been from corporate license
agreements and government grants. We expect that substantially all of our
revenue for the foreseeable future will come from similar sources as well as
from interest income. Furthermore, our ability to achieve profitability will be
dependent upon our ability to enter into additional corporate collaborations
and outlicense any internally developed products. There can be no assurance
that we will be able to negotiate additional collaborative agreements in the
future on acceptable terms, if at all, or that such current or future
collaborative agreements will be successful and provide us with expected
benefits. We believe that the net proceeds from this offering, expected revenue
from collaborations and outlicense arrangements, existing capital resources and
interest income should be sufficient to fund anticipated levels of operations
for at least the next two years.
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Recently Issued Accounting Standards
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Financial
Instruments and for Hedging Activities," which will be effective for our fiscal
year 2001. This statement establishes accounting and reporting standards
requiring that every derivative instrument, including derivative instruments
embedded in other contracts, be recorded in the balance sheet as either an
asset or liability measured at its fair value. The statement also requires that
changes in the derivative's fair value be recognized in earnings unless
specific hedge accounting criteria are met. SFAS 133 is not anticipated to have
a significant impact on our operating results or financial condition when
adopted, since we currently do not engage in hedging activities.
Quantitative and Qualitative Disclosures About Market Risk
Our exposure to market risk for changes in interest rates relates primarily
to the increase or decrease in the amount of interest income we can earn on our
investment portfolio and on the increase or decrease in the amount of interest
expense we must pay with respect to our various outstanding debt instruments.
Our risk associated with fluctuating interest expense is limited to our capital
lease obligations, the underlying interest rates of which are closely tied to
market rates, and our investments in interest rate sensitive financial
instruments. Under our current policies, we do not use interest rate derivative
instruments to manage exposure to interest rate changes. We seek to ensure the
safety and preservation of our invested principal funds by limiting default
risk, market risk and reinvestment risk. We seek to mitigate default risk by
investing in investment grade securities. A hypothetical 100 basis point
adverse move in interest rates along the entire interest rate yield curve would
not materially affect the fair value of our interest rate sensitive financial
instruments at December 31, 1998 or December 31, 1999. Declines in interest
rates over time will, however, reduce our interest income while increases in
interest rates over time will increase our interest expense.
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OUR BUSINESS
Overview
We are a post-genomics drug discovery company that has developed a unique
integration of proprietary technologies to provide an accelerated and improved
methodology for "gene-to-clinic" small molecule drug discovery. We designed our
DiscoverWorks technologies to capitalize on the opportunities for drug
discovery presented by the thousands of new therapeutic targets being revealed
from the sequencing of the human genome. Our technologies also facilitate drug
discovery for well-characterized therapeutic targets that have historically
proven difficult using traditional discovery methods. We believe that our
technologies, which are applicable to virtually any disease target or
therapeutic indication, produce development compounds in a more timely and
cost-effective manner and with a higher probability of success than that
currently achieved by other pharmaceutical and biotechnology companies. We are
using our technologies both to assist collaborators in discovering drug
candidates, and to discover and develop an internal pipeline of orally active
drug candidates initially targeted at cardiovascular disease and oncology,
which we currently intend to out-license at the pre-clinical or early clinical
stage.
Industry Background
Drugs are chemical compounds that change the activity of biological target
proteins associated with particular disease states to achieve the desired
therapeutic effect. Using traditional approaches, it has been estimated
generally to take from five to seven years from the initial identification of a
protein as a suitable therapeutic target to the production of a drug candidate
ready to go into clinical trials. The major steps in the drug discovery process
following identification of the biological target involve (a) hit
identification, (b) lead generation, (c) lead optimization and (d) target
validation, each of which is described below.
Hit identification: This involves the screening of large collections of
compounds to identify those compounds that interact with the biological target
(which may be an enzyme, receptor or other protein). A compound that interacts
with a target protein is referred to as a "hit." In order to identify hits, the
following steps are undertaken:
. production ("cloning and expression") of sufficient quantities of the
target protein to facilitate high throughput screening;
. design and development of a high throughput screen specific to the target
protein; and
. screening the target protein against collections or "libraries" of
compounds.
Lead generation: This involves the chemical modification of hits by iterative
synthesis and testing of analogs to produce "leads," which are compounds with
improved chemical characteristics, thereby increasing their suitability as
potential drugs.
Lead optimization: This involves the further optimization of leads by
additional iterative chemical modification to produce drug development
candidates with optimized characteristics for further preclinical and clinical
development.
Target validation: In parallel to the above steps in the discovery process,
studies are undertaken to demonstrate the link between the target protein and
the particular clinical disease. These tests usually involve correlating
changes in the level of the target protein in cells or animals with changes in
cell biology or animal physiology indicative of the disease state. This
"biology-driven" target validation, which is generally employed today in the
pharmaceutical industry, is in contrast to "chemistry-driven" target
validation, where the role of the target protein in disease is determined by
testing a target-specific compound in cell or animal models.
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Although advances in recent years have improved the drug discovery process,
there remain serious bottlenecks, which can include:
. an inability to produce in a reasonable time sufficient quantities of the
target protein for high throughput screening and concurrent 3-D structure
analysis of the target protein;
. the need to establish a different high throughput screen for each new
target, which typically can take from two to six months;
. an inability to rapidly generate leads from initial hits, a process which
typically can take one to two years;
. the need for large resources in the lead optimization process;
. an inability to incorporate desired drug-like attributes into leads, and
to validate target proteins, sufficiently early in the optimization
process; and
. the time-consuming and resource-intensive nature of the biology-driven
target validation process.
Traditional drug discovery thus remains a costly and time-consuming process,
in which the failure rate is very high. Despite a more than three-fold increase
in research and development expenditure in the last ten years by the
pharmaceutical industry, there has been only a modest increase in the number of
new chemical entities, or NCEs, approved by the FDA. The challenges faced by
pharmaceutical companies to timely and cost-effective drug discovery will grow
as continuing advances are made in genomics research, since it is estimated
that 5,000 to 10,000 potential target proteins will be identified through
genomics research within the next five years.
[GRAPHIC]
Illustration captioned "Expected Proliferation of New Target Proteins from
Genomics." This illustration shows two funnels that represent the drug
discovery process, beginning with the identification of new target proteins,
and ending with marketed drugs. Between the funnels are listed the five steps
in the drug discovery process: "Discovery," "Pre-clinical Development,"
"Clinical Development," "Registration and Marketing" and "Marketed Drug." The
funnel on the left illustrates the current process and is labeled "Now." The
funnel on the right illustrates the anticipated process five years from now and
is labeled "Next 5 years." The mouth of discovery funnel on the right is larger
than that of the funnel on the left to illustrate the anticipated increase from
500 target proteins to 5,000 to 10,000 target proteins.
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Our Integrated DiscoverWorks Solution
We believe we provide a unique solution to the problems of efficiency and
productivity in drug discovery in the post-genomics era, by integrating the use
of an array of advanced tools with proprietary information technology to more
efficiently discover novel drugs and harness the opportunities presented by
genomics. Our DiscoverWorks technology platform includes the following
technologies and capabilities:
. Broadly applicable target protein production capabilities: Our
proprietary protein expression and refolding technology allows for the
rapid, cost-efficient production of large quantities of a wide-range of
target proteins, including important membrane-bound proteins such as GPCR
targets.
. ThermoFluor any-target quantitative high-throughput screening: Our
proprietary ThermoFluor high-throughput screening technology provides a
direct means to quantitatively assess binding of potential drug compounds
to virtually any target protein, including those derived from genomics.
ThermoFluor screening does not require knowledge of a target's detailed
biochemical function, as is required to set-up and use conventional
screening assays. ThermoFluor screens can be set up for virtually any
target protein in less than one week. The ThermoFluor screen can also be
used to rapidly determine whether a target protein is suitable for small
molecule drug discovery (i.e. whether the target protein is "drugable").
. Libraries of diverse and drug-like compounds: We have a highly diverse
Probe Library of over 200,000 actual compounds pre-designed for
pharmaceutical acceptability, and a virtual library stored in our
computers of approximately 2.5 billion novel analogs of the Probe Library
compounds. We call this virtual library our "Synthetically Accessible
Library" because each of the compounds therein can be generated in
physical form using automated chemistry synthesis protocols developed and
verified in our laboratories. In DiscoverWorks, we initially screen our
Probe Library using the ThermoFluor screen to find hits. We then generate
leads from these hits by iteratively synthesizing and testing focused
libraries of up to 1,000 compounds selected from our virtual library.
Such focused libraries are routinely synthesized in two to three weeks.
We have indexed each of the compounds in our libraries using a
comprehensive set of approximately 500 molecular descriptors,
facilitating the rapid selection and synthesis of compounds with desired
properties.
. Patented DirectedDiversity technology linking combinatorial chemistry
with chemi-informatics software and drug property databases: Our
DirectedDiversity technology allows the directed, iterative synthesis and
testing of focused libraries of compounds for lead generation and
optimization, which compounds are intelligently selected by our decision
support and process control software to confer desired drug-like
characteristics. We believe that our DirectedDiversity technology,
combined with the high-quality compounds in our Probe Library and our
extensive knowledge of the chemistry of such compounds linked with
screening results in our drug property databases, allows lead generation
in as little as six to nine months, as compared to one to two years for
more traditional methods generally employed in the industry at this time.
Such leads are termed by us "Prototype NCE Leads", which we define in
terms of potency, selectivity, potential for in vivo activity, and
chemical properties that indicate potentially acceptable toxicologic,
pharmacokinetic and metabolic profiles in man.
. State-of-the-art structure-based drug design capabilities: We have
integrated into our DiscoverWorks platform structure-based drug design
technology that uses X-ray crystallography to directly visualize how
compounds bind to a target protein. This technology allows the atom-by-
atom modification of hits to produce leads with improved potency and
specificity, and permits us to incorporate 3-D structural information
into the intelligent selection of sub-libraries of the Probe Library
directed to specific families of target proteins, as well as the
intelligent design of focused libraries for lead generation. Our
structure analysis capabilities are enhanced by our ability to make large
amounts of proteins through our proprietary protein production
technology.
. Chemistry-driven target validation: Our DiscoverWorks technologies
provide us with two ways to validate novel genomics targets early in the
discovery process:
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. by using ThermoFluor screening of novel, unvalidated target proteins
against reference compound libraries to establish the biochemical or
pharmacological properties of the target, and
. by allowing us to rapidly produce potent and specific leads to
validate the significance of a novel target through assessment of the
activity of these leads in disease models.
We believe that our technology platform offers an important solution to the
resource and productivity dilemmas facing post-genomics drug discovery by
providing the following advantages:
. Time compression: The efficiency of our ThermoFluor process combined with
the capabilities of our DirectedDiversity combinatorial chemistry
technology and associated computer software, and our ability rapidly to
select and synthesize compounds from our libraries, compresses an
important segment of the R&D process, from assay set-up to the generation
of a lead series of compounds with potential for in vivo efficacy, to
seven to ten months (including one month for assay set up and Probe
Library screening, and six to nine months for Prototype NCE Lead
generation) compared with an estimated 14-30 months using traditional
methods. This is expected to significantly reduce resources required and
development costs per target; allow more drug targets to be exploited
with a given set of resources; and accelerate the time to market of
successful drugs, thereby improving market position and increasing post-
commercialization patent life.
[GRAPHIC]
Illustration captioned "Time Compression in the Discovery Process." This
illustration consists of two arrows, representing hypothetical timelines for
the development of a Prototype NCE Lead by, respectively, 3DP's DiscoverWorks
technology and conventional drug discovery technology. The first arrow, titled
"3DP's DiscoverWorks Technology," depicts two time periods, a period of "<1
month," with the caption "ThermoFluor HTS Setup and Probe Library Screening"
and a period of "6-9 months," with the caption "DirectedDiversity Lead
Generation." The first arrow points toward the words "Prototype NCE Lead 7-10
Months Total Time." The second arrow, titled "Conventional Pharmaceutical
Industry Technology," depicts two time periods, a period of "2-6 months," with
the caption "Conventional HTS Setup and Library Screening," and a period of
"12-24 months," with the caption "Conventional Lead Generation." The second
arrow points toward the words "Prototype NCE Lead 14-30 Months Total Time."
. Improved compound characteristics: DiscoverWorks enhances the
incorporation of drug-like characteristics into development compounds
through the high quality of our compound libraries together with our
DirectedDiversity combinatorial chemistry technology and associated
chemi-informatics software and drug property databases, and our
structure-based drug design capabilities, thus increasing the likelihood
of commercial success of individual compounds. In addition, since more
compounds can be developed with equivalent resources, a user has more
drug candidates from which to choose, thereby further enhancing the
likelihood of commercial success.
. Broad target applicability: As a result of the flexible capabilities of
ThermoFluor, the breadth of our compound libraries and our protein
expression capabilities, DiscoverWorks can be used for virtually any
target. While our efforts have initially focused on the areas of
cardiovascular disease and oncology, we believe our technology is
applicable to any therapeutic category or family of target proteins.
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We believe our technology drives value creation through the reduction of risk
in discovery and early development by facilitating better, more timely
decisions. We expect our technology, with its broad applicability, to increase
in value as the genomics revolution expands the number of novel molecular
targets.
Our Strategy
Our objective is to be an industry leader in post-genomics discovery and
optimization of novel drug candidates. The main elements of our strategy are
to:
. Maintain and improve technology position: We intend to continue to pursue
technological innovation to enable us to have the most advanced and
reliable drug discovery processes and tools, both for our collaborations
and for our internal development programs. To date, the key proprietary
technologies used in DiscoverWorks have been invented by us. We intend to
continue to patent or otherwise protect our technological innovations to
maintain our strong intellectual property position. We also intend to
expand our libraries of drug compounds and associated drug property
databases to facilitate the rapid discovery of new drug candidates.
A key component of our strategy is the development and commercialization
of our unique GPCR structural genomics technology, which we believe
represents a significant market opportunity. We believe that our
breakthrough work in GPCR production and 3-D structure determination has
the potential to drive multiple discovery collaborations with
pharmaceutical and biotechnology companies, as well as expand our internal
development pipeline. We intend to extend our technology platform by
determining new GPCR 3-D structures and developing a database of GPCR
structural models.
. Expand internal drug discovery pipeline: Our strategy is to outlicense
internally developed drug candidates at the preclinical or early clinical
stage, so that we utilize our resources on the stages of R&D where we can
add the greatest value. Our current internal drug discovery programs are
focused on cardiovascular and oncology indications. We intend to expand
our internal pipeline to focus on GPCR targets for central nervous system
and metabolic diseases and other biological targets in high-value
therapeutic markets. We intend to form collaborations with major genomics
and biotechnology companies to supply high-quality genomics targets to
add to our portfolio of target proteins.
. Pursue additional collaborative R&D agreements: We intend to continue to
enter into collaborative R&D agreements with leading companies based on
our DiscoverWorks technology platform, which is capable of providing our
partners with an entire range of drug discovery services from target
expression through generation of leads, which we can further optimize to
produce an IND candidate.
. Deploy our technologies across diverse markets: We intend to continue to
deploy our DiscoverWorks technologies in the pharmaceutical, agricultural
and veterinary medicine industries. Discoveries or products made for any
particular market may find use in other markets, resulting in enhanced
revenues.
Evolution of Our Integrated Platform
Our company was founded in 1993. Originally we focused on connecting
combinatorial chemistry and structure-based drug design to improve the lead
generation and optimization stages of drug discovery. To facilitate this
process, we developed and integrated proprietary chemi-informatic and process
control software systems for combinatorial chemistry, which we call
DirectedDiversity. Our first patent for DirectedDiversity was issued in 1995
and our DirectedDiversity software has been continually enhanced since then.
With the anticipated increase in previously unknown targets due to structural
genomics, we also sought to develop a flexible any-target screening technology,
which we call ThermoFluor. Our first patent for ThermoFluor was issued in
February 2000. Subsequently, we have been able to achieve an integration of our
DirectedDiversity and ThermoFluor technologies and our structure-based drug
design capability to create our DiscoverWorks platform. With the recent
settlement of a lawsuit with Scriptgen, we are able to broadly exploit our
integrated DiscoverWorks technology platform.
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Our DiscoverWorks Technology Platform
DiscoverWorks is a highly integrated, modular and flexible platform for drug
discovery that links our ThermoFluor high-throughput screening technology,
Probe and Synthetically Accessible Libraries, DirectedDiversity chemi-
informatics and combinatorial chemistry capabilities and structure-based drug
design expertise. Starting from the DNA sequence of a new molecular target, we
have developed complete capabilities required to generate Prototype NCE Leads.
Our DiscoverWorks technologies can efficiently assimilate and process vast
quantities of data produced from the combination of combinatorial chemistry and
high-throughput screening, and can be rapidly and efficiently scaled to meet
virtually any anticipated demand. Our DiscoverWorks process integrates the
following technologies:
[GRAPHIC]
Illustration captioned "3DP's Integrated Drug Discovery Technology." This
illustration consists of eight interconnected small illustrations, each with an
accompanying caption. The eight illustrations, counter-clockwise from the upper
lefthand corner, are as follows: First illustration: illustration of the 3D
molecular structure of a target protein, with an accompanying caption reading:
"Target Protein 3D Structure." Second illustration: illustration of stackable
plates containing a library of compounds, with an accompanying caption reading
"DirectedDiversity Probe Library." Third illustration: illustration of an
automated ThermoFluor high throughout screening station, with an accompanying
caption reading "ThermoFluor & other HTS." Fourth illustration: illustration of
a computer visualizing and analyzing data, with an accompanying caption reading
"Structure-Activity Data Analysis." Fifth illustration: illustration of a
rodent, with an accompanying caption reading "Prototype NCE Lead Target
Validation." Sixth illustration: illustration of a chemical compound, with an
accompanying caption reading "Structure-Based Drug Design." Seventh
illustration: illustration of an information storage facility, with an
accompanying caption reading "Synthetically Accessible Compound Library."
Eighth illustration: illustration of an automated chemical synthesizer, with an
accompanying caption reading "Automated Chemical Synthesis." Interposed in the
center of the illustration is a caption reading "DiscoverWorks Technology
Platform" and, in the lower left corner of the illustration, a caption reading
"Target Protein/Target Protein Production."
Target Protein Production
We believe that timely large-scale production of target proteins is essential
for effective use of quantitative high-throughput screening technology. We have
extensive experience in cloning, engineering and expressing target proteins
using a wide array of bacterial, insect cell and mammalian cell expression
systems. In addition, we have developed proprietary technology for refolding
proteins that allows the rapid, parallel production of target proteins derived
from genome sequencing. We believe that we can produce less expensively and
more efficiently large quantities of membrane protein and other target proteins
that are difficult to make, in order to facilitate high-throughput screening
and target protein 3-D molecular structure analysis.
ThermoFluor and Other High-Throughput Screening Technologies
Our proprietary ThermoFluor high-throughput screening system provides a
quantitative measurement of drug-binding affinity for virtually any target
protein. ThermoFluor is based on a physical effect common to all functionally
active proteins. Proteins, which constitute the vast majority of molecular
targets, are highly organized structures that melt at different defined
temperatures. By measuring the shift in melting temperature of the protein-drug
complex caused by drug binding, it is possible to estimate the binding affinity
of the drug.
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As a result, ThermoFluor can be applied with equal effectiveness to virtually
all varieties of enzymes, receptors, growth factors, antibodies, cell adhesion
molecules and other target proteins. We have developed ThermoFluor in an
automated workstation format using 384 well assay plates, with integrated data
processing and database connectivity. We intend to continue to develop
ThermoFluor to incorporate miniaturization technology and enhance throughput.
ThermoFluor is able to directly discover leads for targets with unknown
biological function, including the thousands of new targets being identified
through genome sequencing. Conventional high-throughput screening techniques
rely on readouts that reflect specific biological activities and thus are
generally time-consuming to set up and difficult to employ in the case of
targets with unknown biological function. We believe that ThermoFluor
significantly shortens the time required for high throughput screen development
and compound library screening from two to six months for conventional assays
to one month or less. This time savings results from the uniform ThermoFluor
assay approach, as opposed to the need to develop a custom assay for each new
conventional high-throughput screen. The ThermoFluor assay developed and used
for high throughput screening can also be applied during lead generation and
optimization, thus in many instances avoiding the need to set up secondary
biochemical assays and offering additional time and cost savings in the
discovery process. The technology is also portable and scalable.
We can also complement ThermoFluor with additional capabilities in high-
throughput screening using conventional robot-assisted receptor binding or
enzyme assays.
DirectedDiversity Probe Library
In order to initiate our DiscoverWorks discovery process, we have constructed
a DirectedDiversity Probe Library incorporating more than 200,000 individually
synthesized "drug-like" compounds designed to include the following desirable
properties:
. diversity of chemical structures;
. comprehensive representation of all 3-D molecular shapes that we believe
are useful for targeting drug binding sites on proteins; and
. possession of the structural and physicochemical features commonly found
in orally-active, small molecule marketed drugs.
As opposed to the compound libraries used by many pharmaceutical companies,
which may include compounds of unknown structure or which may lack certain
desired characteristics for drug candidates, our Probe Library has been
carefully assembled to reflect the parameters above, thereby optimizing its
value as a screening library. Prior to including a compound in our Probe
Library, we extensively analyze and accumulate information on the compound,
including a comprehensive set of approximately 500 molecular descriptors. The
Probe Library includes sub-libraries directed toward serine and
metalloproteases, GPCRs and several other enzyme receptor classes with broad
therapeutic relevance.
DirectedDiversity Synthetically Accessible Library
To complement our Probe Library, we have generated a Synthetically Accessible
Library of approximately 2.5 billion compounds that are analogs of the
compounds in our Probe Library. Each of the compounds in the Synthetically
Accessible Library can be generated in physical form using automated chemistry
synthesis protocols developed and verified in our laboratories. For a typical
optimization cycle, we select a focused library of approximately 1,000
compounds from our Synthetically Accessible Library and synthesize them within
two to three weeks. As with our Probe Library, each of the compounds in our
Synthetically Accessible Library is indexed using a comprehensive set of
approximately 500 molecular descriptors.
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DirectedDiversity Chemi-informatics Software and Databases
Using the 500 molecular descriptors referred to above and intelligent
algorithms, our patented DirectedDiversity chemi-informatics software helps
assure that properties important in drug development, such as potency,
selectivity, bio-availability and minimal toxicity, are factored into compound
selection for inclusion in a focused library, and more broadly the Prototype
NCE Lead generation and further lead optimization processes. Starting with hits
from the Probe Library, our chemists use our proprietary software and graphics
interfaces to rapidly retrieve thousands of compounds from our Synthetically
Accessible Library which conform to the range of desired properties. Each
selected compound can then be synthesized for subsequent biological testing.
Through our ability to rapidly select and synthesize a focused library of
compounds in each optimization cycle, our chemists can test many optimization
hypotheses in parallel, with all information tracked and captured by the
DirectedDiversity software for use in subsequent iterations and other discovery
programs. The combination of the detailed chemical description of each of our
compounds and the biological screening data that is generated provides a
valuable drug property database for lead generation and further optimization.
We believe our DiscoverWorks process is more efficient than traditional
methods due to the quality of both the compounds in our Probe Library and the
compounds from our Synthetically Accessible Library that we synthesize,
combined with the selection and feedback capabilities of our DirectedDiversity
chemi-informatics software and drug property databases. In contrast,
traditional approaches to library generation using combinatorial chemistry are
less directed and information-rich. Moreover, generation of leads derived from
conventional screening hits may require the development of novel synthetic
procedures to make analogs, either because synthetic methods for generating
analogs have not previously been developed or the hit has an unknown chemical
structure which must be first determined in order to develop analogs.
Accordingly, an unnecessary expenditure of time and effort may be required in
the discovery process, and the compounds thereby produced may lack required
properties for orally active drugs. We estimate that a Prototype NCE Lead can
typically be generated using our technology in as little as six to nine months,
with five cycles of focused library design, synthesis and biological testing.
This compares to an estimated traditional lead generation process of 12 to 24
months which often requires more synthesis and testing cycles.
Automated Chemical Synthesis Technologies
We have a broad repertoire of modern parallel synthetic technologies, which
enables us to synthesize approximately 10,000 compounds per month. We believe
this compound production is sufficient to support multiple concurrent discovery
programs and can be readily expanded.
Structure-Based Drug Design Technology
We have integrated into our DiscoverWorks platform structure-based drug
design technology that uses X-ray crystallography to directly visualize how
lead compounds bind to a target protein. Structure-based drug design allows the
atom-by-atom modification of leads to produce chemically novel compounds with
high potency and specificity toward a given target protein. We have established
a state-of-the-art facility for protein production, crystallization, X-ray
crystallography and computational chemistry to carry out 3-D structure
determination of target proteins and their bound complexes with lead compounds.
To date, our scientists have carried out in excess of 100 structure
determinations of protein complexes in our laboratories. The integration of
DirectedDiversity technology with structure-based drug design allows us to
automate and multiplex the rational design and chemical synthesis of compounds,
enabling the simultaneous investigation and optimization of multiple drug
properties.
We recently joined a consortium of major pharmaceutical companies who have
formed the Industrial Macromolecular Crystallography Association (IMCA) and
developed a facility for collecting X-ray diffraction data using the unique
properties of the Advanced Photon Source at the Argonne National Laboratory.
The Advanced Photon Source is among the most brilliant X-ray sources in the
world and greatly extends our capabilities for determining new structures and
rapidly carrying out structure-based design programs. By
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joining IMCA, 3DP becomes the only biotechnology company that currently has
direct and guaranteed access to synchrotron X-ray data collection facilities.
Other members of IMCA include Merck & Co., Glaxo-Wellcome, SmithKline Beecham,
Pharmacia, Eli Lilly and Company, Schering-Plough, Pfizer, Warner-Lambert,
Abbott Laboratories, Bristol-Myers Squibb, and Procter & Gamble.
Chemistry-Driven Target Validation
Our chemistry-driven target validation process relies on the any-target
capability of our ThermoFluor screen, coupled with our ability to generate
Prototype NCE Leads rapidly. We have two methods of chemistry-driven target
validation: (1) ThermoFluor screening of novel, unvalidated target proteins
with reference libraries of compounds designed specifically to classify
biochemical function and pharmacological properties of target proteins and (2)
use of DiscoverWorks technology to rapidly produce potent and specific leads to
assess and validate the significance of a new target protein in disease models.
By capitalizing on our ability, using DiscoverWorks, to produce a Prototype NCE
Lead in less time than with conventional drug discovery we can perform
chemistry-driven validation of novel genomics targets early in the discovery
process. This provides an advantage compared to the more prolonged and
resource-intensive strategies of validating target proteins either by chemistry
driven validation as performed in conventional drug discovery, or by biological
means of validation.
GPCR Technology Program
G-protein coupled receptors, or GPCRs, are an important class of target
proteins that exist on the surface membrane of all cells, and are associated
with a wide range of therapeutic categories, including asthma, inflammation,
obesity, cancer, and cardiovascular, metabolic, gastrointestinal and central
nervous system diseases. There are estimated to be over 1,000 GPCRs in the
human genome with potential therapeutic utility. GPCRs have been historically
valuable drug targets, but to date there are less than 200 well-characterized
GPCRs with known ligands (compounds which specifically bind to the GPCR), of
which only half are currently targets of commercial drugs. To date, the
industry has been unable to utilize an important drug discovery tool,
structure-based drug design using x-ray crystallography, to develop drugs
targeting either novel or well-characterized GPCRs. This is due to the
inability of the industry to crystallize GPCRs and thereby derive three-
dimensional X-ray structures that provide a direct view of the drug-binding
site.
Since 1995, we have been working to crystallize and determine the 3-D
structure of GPCRs. We believe that successful GPCR structure determination
will constitute a major breakthrough in drug discovery for this key group of
drug target proteins. Currently, it is estimated that the less than 100 GPCRs
targeted by commercial drugs account for over $20 billion in annual worldwide
drug sales. These include major drug classes such as antipsychotics,
antihistamines, beta-blockers, anti-migraine drugs, anti-ulcer drugs and
analgesics, and blockbuster drugs such as Claritin, Zantac, Cozaar, Zyprexa and
Tenormin. Both the characterized GPCRs with known ligands but for which no
commercial drugs have yet been developed, and the approximately 1,000
uncharacterized GPCRs with possible therapeutic utility, represent potentially
important drug targets.
Our GPCR 3-D structure determination program has four principal milestones:
1. production of the large amounts of pure GPCR protein required to make
crystals;
2. production of crystals of the target GPCR that will provide high quality
X-ray structural data;
3. collection of high quality X-ray structural data from such crystals; and
4. computer processing of such X-ray structural data to determine the 3-D
molecular structure of such GPCR in order to facilitate structure-based
drug design.
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To date, we have been successful in achieving the first three milestones, and
we are progressing toward the final objective for our initial GPCR target, the
B2-adrenergic receptor, which has an important role in asthma and central
nervous system diseases, and has been the subject of extensive biochemical
studies. We have successfully developed proprietary protein expression and
refolding technology to produce large amounts of GPCRs for discovery efforts. A
patent application has been filed for a component of this technology and we
intend to file additional patent applications for other components of this
technology. Our scientists have subsequently been able to produce stable, high-
quality crystals of the B2-adrenergic GPCR that have provided high-
resolution X-ray diffraction data, which we believe will allow for the first
time the determination of the 3-D molecular structure of a GPCR target.
GPCR Drug Discovery: We believe our GPCR technology presents a novel
opportunity to exploit this broad and important range of drug targets,
benefiting both our internal discovery programs and pharmaceutical and
biotechnology company collaborations. We believe that our GPCR technology, on
the basis of our anticipated successful 3-D molecular structure determination,
will enable for the first time the application of structure-based drug design,
based on actual molecular target protein structure, for both existing and new
GPCR targets leading to:
. more precisely designed drugs with fewer side effects than many existing
GPCR drugs, such as antipsychotics;
. drugs with lower addiction risk than existing GPCR drugs for pain, such
as morphine;
. small molecule, orally active drugs for GPCR targets for which the only
currently known ligands are peptides or proteins that, as drugs, would
need to be given by injection; and
. drugs targeting the approximately 1,000 identified GPCRs which are
potentially therapeutically relevant, but for which ligands have not yet
been discovered.
To expedite drug discovery using GPCR target proteins, our current Probe
Library contains more than 20,000 synthesized compounds which have been
designed based upon structural features of commercially successful GPCR drugs,
for utility against GPCR target proteins. In addition, our Synthetically
Accessible Library contains a corresponding collection of approximately 200
million analogs of these compounds.
GPCR Structural Genomics: If we successfully determine the B2-adrenergic
GPCR structure, we plan to create a database containing model 3-D structures of
all other GPCRs whose gene sequences have been identified in the human genome.
We believe that this "3-D homology database" will facilitate discovery of new
drugs that act at any of the estimated 1,000 uncharacterized GPCRs that are
potential new drug target proteins. In addition, we plan to expand the database
and enhance its accuracy and utility for drug discovery, through the 3-D
structure analysis of additional diverse GPCR target proteins, GPCRs complexed
with different types of receptor ligands, and GPCRs complexed with various
signal transduction proteins. We will utilize this structural genomics database
for our internal programs, and we will offer access to this database to
collaborative partners.
Our membership in the IMCA provides access to a facility for collecting X-ray
diffraction data using the unique properties of the Advanced Photon Source, a
dedicated synchrotron X-ray source located at the Argonne National Laboratory.
Access to this facility greatly extends our capabilities for determining new
GPCR structures and rapidly carrying out structure-based design programs.
Our Drug Discovery Collaborations
We seek to enter into discovery collaborations and joint discovery programs
with pharmaceutical, biotechnology, agrochemical and veterinary medicine
companies. These arrangements can take various forms ranging from comprehensive
"gene-to-clinic" programs to licensing agreements for portions of our
libraries, or specific R&D arrangements that utilize our technologies for lead
identification, lead generation and/or lead optimization purposes. Our
technologies are flexible and have applicability for virtually any therapeutic
area.
39
<PAGE>
Our collaboration strategy is aimed at capitalizing on the trend within the
pharmaceutical industry to outsource major components of the drug discovery
process that can be more effectively provided by companies that have unique
and/or focused technologies. We also seek collaborations with biotechnology
companies that may lack the chemical screening, synthesis and/or optimization
capabilities that our technology platform offers. These collaborations allow us
to leverage the investment we have made in our technology platform and provide
funding for our internal drug development efforts. A summary of our drug
discovery collaborations is provided below.
DuPont Pharmaceuticals Company
In February 2000, we entered into a collaboration with DuPont Pharmaceuticals
Company, or DuPont Pharmaceuticals, to use our DirectedDiversity technology to
assist DuPont Pharmaceuticals in the discovery of new human and animal drug
compounds for specific biological targets. The initial term of the
collaborative discovery and lead optimization agreement is until December 31,
2001, subject to extension by DuPont. Under our agreement, we will generate
custom combinatorial chemistry libraries based on molecules and information
provided by DuPont Pharmaceuticals and will optimize those molecules into
preclinical drug candidates. DuPont Pharmaceuticals is responsible for
preclinical and clinical development, and marketing and sales of the resulting
products. During the initial term of the agreement, we received a technology
access fee and are eligible to receive research funding. We could also receive
additional milestone payments for each product developed and we are entitled to
receive royalties on sales of licensed products. We have agreed not to work
with anyone other than DuPont on compounds acting through the targets of the
research program during the term of the program and for one year thereafter.
DuPont Pharmaceuticals may terminate the agreement upon 90 days notice,
provided they pay the balance of any financial support due for the remainder of
the term of the research program.
We have also entered into a separate agreement granting DuPont
Pharmaceuticals an option for a nonexclusive license to use our
DirectedDiversity patents in support of their internal and collaborative
research programs.
Boehringer Ingelheim Pharmaceuticals, Inc.
Effective December 1999, we entered into a collaboration agreement with
Boehringer Ingelheim Pharmaceuticals, Inc., or BIPI, to use our
DirectedDiversity technology to assist BIPI in the discovery of new drugs for
specific biological targets in humans. The initial term of our collaboration is
two years, subject to annual extensions by BIPI. Under our agreement, we have
agreed to generate custom combinatorial chemistry libraries based on molecules
and information provided by BIPI and will optimize those molecules into
preclinical development candidates. BIPI is responsible for preclinical and
clinical development, and marketing and sales of the resulting products. During
the initial term of the agreement, we will receive payments for technology
access and research funding totaling $3.25 million. We may also receive
milestone payments of up to $4.8 million and will receive royalties on sales of
resulting products.
BIPI may terminate the agreement upon 30 days' written notice provided it
pays us, in most circumstances, an early termination fee if it terminates the
agreement prior to the end of any term.
Aventis Crop Protection GmbH
In October 1999, we entered into a collaboration with Hoechst Schering AgrEvo
GmbH, now a part of Aventis Crop Protection GmbH, or Aventis, to use our
DirectedDiversity technology to assist Aventis in the discovery of compounds
applicable to plant and pest management and animal health. The initial term of
our agreement is two years. Under our agreement, we have agreed to provide
libraries of diverse compounds to
40
<PAGE>
Aventis, and will use our DirectedDiversity technologies to optimize active
compounds identified from Aventis' screening of the compound libraries. Aventis
will receive the exclusive worldwide right to commercialize products in the
fields of plant and pest management and animal health discovered during the
course of the collaboration. We will retain rights for non-agrochemical uses of
compounds. During the initial term of the agreement, we will receive payment
for delivery of compounds, research and development funding and license fees
totaling $3.6 million. We will also receive royalties on sales of resulting
products. If we enter into a business collaboration with a company that has
substantial activity in the plant and pest management or animal health field
and is a significant competitor of Aventis, Aventis may either terminate our
agreement or require us to take reasonable actions to ensure that Aventis'
confidential or proprietary information is not disclosed to such company.
E.I. DuPont de Nemours
In October 1998, we entered into a collaborative research and license
agreement with the Agricultural Products Division of E.I. DuPont de Nemours, or
DuPont, pursuant to which we are using our DirectedDiversity chemi-informatics
software and Synthetically Accessible Library to assist DuPont in the discovery
and development of new agrochemicals. We have received a technology licensing
fee, and we are eligible to receive additional technology licensing fees,
potential milestone payments and royalties on the sale of any products
developed through this collaboration. We have advanced in this collaboration
from initial hits to more potent compounds identified from our libraries.
The initial term of the agreement is three years. DuPont may terminate the
research program under the agreement at any time, but such termination will not
affect either DuPont's obligation to pay us license fees under the agreement or
our obligation to provide DuPont with access to DirectedDiversity workstations.
Heska Corporation
In December 1997, we entered into a research and license agreement with Heska
Corporation, or Heska, to use our DirectedDiversity technology to assist in the
discovery and development of new veterinary therapeutic agents. Under our
agreement, we also granted Heska the exclusive worldwide right to license the
veterinary therapeutic products developed for sale worldwide. Our agreement
originally had a two year-term expiring in December 1999 and has been extended
until July 2000. Under our agreement, we have received up-front payments and
research funding and could receive additional milestone payments and royalties
for products developed. Pursuant to this collaboration, candidate compounds
have been identified and Prototype NCE leads have been generated. We are also
entitled to royalties on sales of products licensed under the agreement.
BioCryst Pharmaceuticals, Inc.
In October 1996, we entered into a research collaboration with BioCryst
Pharmaceuticals, Inc., to share resources and technology to develop inhibitors
of key serine proteases that represent promising targets for inhibiting the
activation of "Complements" (plasma proteins that work to eliminate
microorganisms and other antigens from tissues and blood). This pathway plays a
major role in mediating a broad range of immunological diseases. In June 1999,
we updated and renewed our original agreement to concentrate on selected
complement enzymes as targets for the design of inhibitors. Under our
agreement, we are each responsible for our own research costs. If a drug
candidate emerges as a result of our joint research, we will then negotiate the
product development and commercialization rights and responsibilities. Under
this collaboration, we have generated Prototype NCE Leads which are currently
being optimized further through in vivo evaluation and for which we have filed
patent applications. The initial term of the agreement is one year, subject to
automatic annual renewal. Either of us may terminate the agreement at any time
upon 60 days written notice.
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<PAGE>
Our Internal Product Pipeline
We have developed a promising pipeline of small molecule, orally active
development candidates in the areas of cardiovascular disease and oncology. Our
current strategy with respect to our internal pipeline is to advance compounds
to late-stage pre-clinical or early stage clinical trials, and then to
outlicense such compounds to pharmaceutical companies for further development
and commercialization. We believe that by focusing our efforts on pre-clinical
development and the early stages of clinical development, we can use our
resources on the stages of drug research and development where we can add the
greatest value.
As of May 23, 2000, we had nine internal pipeline programs in various stages
of discovery and development. 3DP-4815, our most advanced cardiovascular
compound, is an oral thrombin inhibitor presently in Phase 1 clinical trials.
Our most advanced oncology compound, which also has cardiovascular utility, is
an orally bioavailable urokinase inhibitor. We have recently out-licensed the
urokinase inhibitor program to Schering AG, Germany. As illustrated below, many
of our development candidates have utility across therapeutic areas.
<TABLE>
<CAPTION>
Molecular Target Therapeutic Area Indication Status
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Thrombin Cardiovascular Thrombosis Phase 1 Trial
- -----------------------------------------------------------------------------------------------
Urokinase Oncology Solid Tumors Pre-clinical
(out-licensed to Cardiovascular Restenosis, Atherosclerosis
Schering AG, Germany)
- -----------------------------------------------------------------------------------------------
AvB3/AvB5 Oncology Solid Tumors Pre-clinical
Bone Disorders Osteoporosis
Cardiovascular Restenosis
- -----------------------------------------------------------------------------------------------
C1s-1 Inflammation Lupus, Autoimmune Diseases Pre-clinical
(in collaboration Cardiovascular Bypass Surgery
with BioCryst) Pulmonary Adult Respiratory Distress
Syndrome (ARDS)
- -----------------------------------------------------------------------------------------------
FXa Cardiovascular Thrombosis Prototype NCE Lead
- -----------------------------------------------------------------------------------------------
PAI-1 Cardiovascular Adjunct to tPA Therapy, Prototype NCE Lead
Oncology Prophylaxis of Cardiovascular
Disease
Solid Tumors
- -----------------------------------------------------------------------------------------------
hdm2 (mdm) Oncology Adjunct to Chemotherapy & Screening
Radiation
- -----------------------------------------------------------------------------------------------
mmp-2 Oncology Solid Tumor Screening
Cardiovascular Restenosis, Congestive Heart
Failure, Atherosclerosis
- -----------------------------------------------------------------------------------------------
VEGF Receptor Oncology Solid Tumor Screening
</TABLE>
To date, our internal program pipeline has been based on biological targets
in high-value therapeutic areas that are well known in the pharmaceutical
industry, and have either been recently validated and/or have proved difficult
targets for the industry to develop into commercially attractive products. We
believe that our discovery success to date, in particular our progress with
historically difficult targets such as thrombin, PAI-1 and AvB3/AvB5
demonstrate the capabilities of our technology platform.
The worldwide market for pharmaceuticals is approximately $60 billion
annually and is expected to grow substantially given expectations of improved
therapies which will arise from genomics and other scientific advances and the
demographics of an aging and longer-living global population. Despite the scale
of R&D
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<PAGE>
operations within large pharmaceutical companies, most will continue to in-
license a significant portion of the drugs that they eventually sell. The
market for pre-clinical/early clinical candidates from our internal programs is
therefore significant and is expected to continue to grow.
Cardiovascular Disease and Oncology Discovery Programs
Our initial cardiovascular disease focus is on the enzymes of the blood
coagulation cascade. This focus is derived from our expertise in serine
protease drug targets which are well-suited for structure-based drug design and
our other DiscoverWorks capabilities. We have assembled a portfolio of
molecular targets involved in such cardiovascular conditions as thrombosis,
restenosis (reocclusion of blood vessels), angina and atherosclerosis, and
which are also involved in the vascular remodeling (changes in blood vessel
structure) and angiogenesis (the formation of blood vessels that are required
to feed a growing tumor) which underlie the progression of cancer. Our
principal cardiovascular targets include inhibitors of thrombin, FXa and PAI-1.
Our anticancer efforts are aimed at inhibiting cellular processes that
facilitate tumor progression and angiogenesis for a majority of cancer types,
which we believe may result in broadly useful anticancer agents. These cellular
processes include cell activation, proliferation and migration, adhesion and
focal proteolysis which are involved in metastasis (the spread of tumor cells
away from the original tumor), and angiogenesis. In addition, we are initiating
programs that target molecules involved in cell-cycle regulation and apoptosis
(cell death). Many of the agents under development are anticipated to have
crossover utility in cardiovascular disease. Our principal oncology targets
include urokinase, AvB3/AvB5 integrins, hdm2 (mdm2) and mmp-2.
Key Cardiovascular Disease Drug Candidates
Oral Thrombin Inhibitor: Our most advanced cardiovascular drug discovery
program focuses on the development of potent, selective, and orally active
inhibitors of thrombin for arterial and venous thrombosis. The only oral
anticoagulant currently marketed is warfarin (Coumadin and generic versions).
We have designed our compounds to work by a different mechanism of action from
warfarin, which we believe will provide an enhanced safety profile without the
need for monitoring.
Following our initial work on the thrombin inhibitor program, in June 1997 we
entered into a license agreement with Wyeth-Ayerst Laboratories for the further
development and marketing of our small molecule thrombin inhibitors. During the
following two years, we collaborated with Wyeth-Ayerst on research and
development activities. On June 1, 1999, the parties agreed to terminate the
agreement with all rights returning to us. We believe that the termination was
influenced by Wyeth-Ayerst's shift in focus away from the cardiovascular
therapeutic area.
3DP-4815 was discovered through the close integration of structure-based drug
design and DirectedDiversity combinatorial chemistry and represents a new class
of orally bioavailable thrombin inhibitors. 3DP-4815 is a low molecular weight,
homogenous, achiral compound that potently and reversibly inhibits thrombin
with excellent specificity. 3DP-4815 is orally bioavailable and efficacious in
several animal models. We filed an Investigatory New Drug Application ("IND")
with the FDA for 3DP-4815 in December 1999 and initiated Phase 1 clinical
trials in January 2000. Unlike many agents, where the beneficial effect is
first indicated in extensive Phase 2 trials to establish efficacy in the
targeted disease, the effectiveness of agents in inhibiting blood clotting is
readily measured in Phase 1 trials on healthy volunteers. To date, in Phase 1
3DP-4815 appears to exhibit good safety and tolerability characteristics.
Throughout the pre-clinical development phase for 3DP-4815, we have actively
pursued the discovery of additional compounds in the thrombin inhibitor
program, and have identified novel classes of compounds that differ
significantly in their chemical structures and pharmacokinetic properties from
3DP-4815. These may offer the opportunity for backups to 3DP-4815, or
additional therapeutic types of oral antithrombotic agents differentiated by
their pharmacokinetic and other properties.
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<PAGE>
PAI-1 Antagonist: The pharmaceutical industry in the last decade has
recognized the potential commercial importance of an antagonist of plasminogen
activator inhibitor-1 (PAI-1) as a prophylactic thrombolytic, but the target
has proved difficult for traditional high throughput screening and discovery
efforts. PAI-1 has also been identified as an independent prognostic factor
associated with decreased long term survival for metastatic cancer, and
therefore PAI-1 antagonists may be of use in treating cancer. We have
discovered novel antagonists of PAI-1 through screening our Probe Library using
ThermoFluor, and are currently performing chemical optimization of the lead
series.
Key Oncology Disease Drug Candidates
Urokinase Inhibitor for Cancer Therapy: Our most advanced oncology discovery
program targets the inhibition of urokinase plasminogen activator (uPA or
Urokinase). An inhibitor of uPA provides a new therapeutic approach to cancer
treatment following surgical removal of tumors, through its ability to inhibit
angiogenesis and metastasis. An expanding body of evidence supports the
identification of uPA as a target for agents that control the spread and growth
of cancer. In addition, uPA has been identified as a target for agents that
prevent restenosis.
Urokinase is a serine protease enzyme that is related to thrombin, but has a
different active site structure and enzymatic specificity. Our urokinase
inhibitor discovery program draws substantially from the knowledge base
developed in our thrombin inhibitor program. We have advanced our urokinase
inhibitor program using focused libraries and structure-based drug design, and
have discovered proprietary, potent, orally active, small molecule inhibitors
of urokinase. Our pre-clinical lead compounds have been shown to inhibit tumor
cell invasion associated with prostate cancer and melanoma and vascular smooth
muscle cell migration without causing cytotoxic effects, and to have high oral
bioavailability in in vivo models. We believe that our urokinase inhibitor has
potential application as a stand alone agent or in combination with other
compounds under development or currently marketed as part of a multi-drug
therapy regimen.
In May 2000, we entered into a license and research agreement with Schering
AG, Germany in which Schering AG, Germany obtained, for human therapeutic uses,
exclusive worldwide rights to our urokinase inhibitor compounds. Under our
agreement, we will be responsible for further research and optimization of the
compounds and Schering AG, Germany will be responsible for development,
marketing and sales of the resulting products. During the initial two year
research and development term we will receive payments for research funding
totaling $5 million. We are also eligible to receive milestone payments of up
to approximately $23 million for the first product developed in a therapeutic
area, and we are eligible to receive further milestones for additional
therapeutic areas. We will also receive royalties on resulting products. After
the initial research term, Schering AG, Germany may terminate the agreement at
any time on 90 days' notice. In conjunction with the agreement, we issued
625,000 shares of our series D preferred stock to an affiliate of Schering AG,
Germany for $5 million.
Antagonists of AvB3 and AvB5 Integrins: The integrin adhesion
receptors for vitronectin and osteopontin, AvB3 and AvB5 are essential
modulators of angiogenesis and endothelial cell adhesion and have been
implicated in tumor angiogenesis, atherosclerosis, restenosis and osteoporosis.
We have applied our proprietary technology to the discovery of potent and
selective small molecule antagonists of AvB3 and AvB5 and discovered
several independent lead series of compounds. Our lead compounds have been
shown to inhibit both AvB3 and AvB5 dependent cell adhesion,
endothelial and smooth muscle cell migration, and to lack cytotoxic effects.
Other Internal Discovery Programs
In addition to programs in cardiovascular disease and oncology, we plan to
use our G-Protein Coupled Receptor technology as the basis for initiation of
additional programs for central nervous system and metabolic diseases.
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<PAGE>
Intellectual Property
Protection of our intellectual property is a strategic priority for our
business. Our ability to protect and use our intellectual property rights in
the continued development and commercialization of our technologies and drug
candidates, operate without infringing the proprietary rights of others and
prevent others from infringing on our proprietary rights is crucial to our
continued success. We will be able to protect our proprietary rights from
unauthorized use by third parties only to the extent that our proprietary
rights are covered by valid and enforceable patents, trademarks or copyrights,
or are effectively maintained as trade secrets, know-how or other proprietary
information. We currently rely on a combination of patents and pending patent
applications, some of which we license and most of which we own, trademarks,
copyrights, trade secrets, know-how and proprietary information to protect our
interests in continuing to develop and commercialize our technologies and drug
candidates.
We devote significant resources to obtaining, enforcing and defending
patents, as well as developing and protecting our other proprietary
information. Our comprehensive patent strategy is to augment our broad
proprietary portfolio by continuing to actively seek patents for our
technologies and compounds. We have already obtained patents or filed patent
applications on a number of our technologies and on certain of the compounds we
have developed. We also have certain proprietary trade secrets and know-how
that are not patentable or for which we have chosen to maintain secrecy rather
than file for patent protection.
We have taken security measures to protect our trade secrets, proprietary
know-how and technologies and confidential information and continue to explore
further methods of protection. We have executed confidentiality agreements with
our employees and consultants upon the commencement of an employment or
consulting arrangement with us. These agreements require that all confidential
information developed or made known to the individual by us during the course
of the individual's relationship with us be kept confidential and not disclosed
to third parties. These agreements also provide that inventions conceived by
the individual in the course of rendering services to us shall be our exclusive
property. We also attempt to limit access to, and dissemination of, our
confidential information.
Our intellectual property estate is as follows:
Drug Discovery Program Patents
We have eight issued U.S. patents, one Australian patent, one New Zealand
patent, and one South African patent covering our drug discovery program
inventions.
The patents cover various compounds, methods of making compounds,
pharmaceutical compositions, and methods of using the compounds for inhibiting
proteases and for treating particular disease states. The proteases that are
inhibited include, but are not limited to, thrombin, factor Xa, urokinase,
complement and other protease inhibitors, integrins and certain other targets.
Disease states include cardiovascular diseases and cancer as described in the
section entitled "Our Internal Pipeline." The U.S. patents are directed to
distinct families of novel compounds.
We also have 19 pending U.S. patent applications, two of which have received
notice of allowance from the U.S. patent office, and 86 pending foreign patent
applications also covering compounds, methods of making compounds,
pharmaceutical compositions, and methods of using the compounds for inhibiting
proteases and for treating particular disease states.
We currently do not have any issued patents for any of our lead compounds for
any of our internal programs and we may be unable to obtain any issued patents
for any patent applications we have filed or may file in the future for such
compounds.
DirectedDiversity Combinatorial Chemistry Process Patents
Our DirectedDiversity technology is protected by four issued U.S. patents.
Collectively, these patents provide apparatus and process patent coverage for
the automated, semi-automated and/or manual computer directed selection,
synthesis, testing, and refinement of compounds in chemical libraries,
including the computer codes that allow implementation of this process.
45
<PAGE>
In October 1995, we were issued our first U.S. patent covering our
DirectedDiversity technology. The patent covers the use of semi-automated
feedback control for refining the properties of combinatorial libraries for all
applications in which suitable properties can be measured (e.g., drugs,
herbicides, paints, scents, solvents, advanced materials, etc.). A second U.S.
patent related to our DirectedDiversity technology was issued in December 1996
covering the automatic generation of new drug leads through computer-
controlled, iterative robotic synthesis and analysis of chemical libraries. Our
third U.S. patent, issued in November 1997, covers additional features of our
DirectedDiversity technology, including inventions related to computer software
for semi-automatic and automatic generation of compounds of interest. We
received our fourth U.S. patent for DirectedDiversity, covering the generation
of new drug leads through computer-controlled, iterative robotic synthesis and
analysis of chemical libraries, in May 1999.
We also have two Australian patents and two Israeli patents covering our
DirectedDiversity technology described above.
Additionally, we have eight pending U.S. patent applications (one of which
received a notice of allowance from the U.S. Patent Office) and 18 pending
foreign patent applications. In addition to our DirectedDiversity technology
described above, these patent applications cover novel methods for handling
large multidimensional data sets. Within our DirectedDiversity technology,
these methods are utilized for visualizing chemical compound
similarity/dissimilarity, for lead identification, and for lead optimization.
The methods for handling large multi-dimensional data sets have applications
beyond our DirectedDiversity technology. Two of these pending U.S. patent
applications and one of these pending foreign patent applications cover
apparatuses, processes, and software inventions for quickly and efficiently
searching large chemical libraries, as well as other inventions relating to
data mining.
ThermoFluor Patents
We have two U.S. patents covering our ThermoFluor screening and protein
characterization technology, process and instruments. One U.S. patent covers
methods for screening compounds for binding to proteins and nucleic acids, and
the other covers an instrument for implementing our patented methods for
screening compounds.
We also have nine pending U.S. patent applications and nine pending foreign
patent applications covering this technology. The pending applications cover
methods for screening for biochemical conditions that stabilize proteins and
nucleic acids, methods for screening for biochemical conditions that facilitate
protein crystallization, methods for screening for biochemical conditions that
promote recombinant protein folding, and methods for screening for lead
compounds that bind to a target receptor. The pending applications also cover
"functional genomics," that include methods for screening proteins of unknown
function in order to determine the function of newly discovered proteins.
Under the terms of a settlement agreement with Scriptgen Pharmaceuticals,
Inc., we acquired a limited, non-exclusive license to Scriptgen's ATLAS (Any
Target Ligand Affinity Screen) assay technology and Scriptgen was granted a
limited, nonexclusive license to the method claims of our ThermoFluor assay
technology. Under this agreement, we paid Scriptgen $0.5 million and will make
two additional payments of $0.5 million in September 2000 and March 2001. This
agreement restricts us, for a period of three years, from specified activities
in connection with screening drugs useful for treating "infection" (defined as
relating to drugs whose principal aim is to treat or cure infectious disease in
humans). As part of this settlement agreement, until March 7, 2003, we are
precluded from using our ThermoFluor screening technology in the Hepatitis C
Virus "infection" area as part of collaborative agreements or as part of our
internal drug programs. In addition, we are precluded from using our
ThermoFluor screening technology as part of more than one collaboration
agreement in the area of "infection" until March 7, 2003, and such
collaborative agreement must be limited to a maximum of 3 anti-viral targets.
The settlement with Scriptgen, however, does not restrict use of our
ThermoFluor screening technology by us for our internal drug discovery efforts,
or for purposes of collaborative agreements outside the area of "infection",
other than the limitation with respect to Hepatitis C Virus "infection".
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<PAGE>
GPCR Technology Estate
We have made significant discoveries in the area of GPCR (G-Protein Coupled
Receptor) technology which are useful for drug discovery. One patent
application concerning a component of this technology has been filed and we
intend to file additional patent applications for other components of this
technology.
U.S. Government Grants
We have been awarded a number of U.S. government grants to fund a variety of
internal scientific programs and undertake exploratory research. Pursuant to
these grants, we retain ownership of all intellectual property and commercial
rights generated during these projects, subject to a non-exclusive, non-
transferable, paid-up license to practice, for or on behalf of the United
States, inventions made with federal funds. This license is retained by the
U.S. government as provided by applicable statutes and regulations. We have
received the following award and government grants from the National Institutes
of Health (Small Business Innovative Research "SBIR" grants) and the National
Institute of Standards and Technology (Advanced Technology Program "ATP" award)
during the past several years that have totaled approximately $4.2 million:
<TABLE>
<CAPTION>
Grant/Award
Grant/Award Title Date
- ----------------- --------------
<S> <C>
Automated Receptor Screening by Thermal Physical Assays
(SBIR)(Phase 1)............................................... May 1995
Crystallization and Structural Determination of G-Coupled
Protein Receptors (ATP)....................................... August 1995
Protein Engineering by Thermal Physical Assays (SBIR)(Phase
1)............................................................ September 1995
Automated Receptor Screening by Thermal Physical Assays
(SBIR)(Phase 2)............................................... September 1996
Four Helix Bundle Analog of a G-Protein Coupled Receptor
(SBIR)(Phase 1)............................................... February 1999
Expression of G-Protein Coupled Receptors for Structure
Determination (SBIR)(Phase 1)................................. September 1999
Four Helix Bundle Analog of a G-Protein Coupled Receptor
(SBIR)(Phase 2)............................................... March 2000
</TABLE>
The sponsoring agencies make decisions annually on continuations of multi-
year awards based on the availability of funds from the United States Congress
and our satisfactory performance under each award or grant.
Government Regulation
The FDA and comparable regulatory agencies in state and local jurisdictions
and in foreign countries impose substantial requirements on the development,
manufacture and marketing of pharmaceutical candidates. These agencies and
other federal, state and local entities regulate research and development
activities and the testing, manufacture, quality control, safety,
effectiveness, labeling, storage, record-keeping, approval, promotion and
advertising of our drug candidates and those of our collaborative partners.
Obtaining marketing approvals and subsequently complying with ongoing statutory
and regulatory requirements are costly and time-consuming. Any failure by us or
our collaborators, licensors or licensees to obtain, or any delay in obtaining,
regulatory approvals or in complying with other requirements could adversely
affect the commercialization of drug candidates and our ability to receive
upfront payments, milestone payments or royalty revenues.
The steps required before a new drug candidate for humans may be distributed
commercially in the U.S. generally include:
. conducting appropriate preclinical laboratory evaluations of the drug
candidate's chemistry, formulation and stability, and preclinical studies
to assess the potential safety and efficacy of the product candidate;
. submitting the results of these evaluations and tests to the FDA, along
with manufacturing information and analytical data, in an investigational
new drug application (IND);
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. making the IND effective after the resolution of any safety or regulatory
concerns of the FDA;
. obtaining approval of Institutional Review Boards, or IRBs, to introduce
the drug into humans in clinical studies;
. conducting adequate and well-controlled human clinical trials that
establish the safety and efficacy of the drug candidate for the intended
use, typically in the following sequential, or slightly overlapping,
stages:
Phase 1: The drug candidate is initially introduced into healthy human
subjects or patients and tested for safety, dose tolerance, absorption,
metabolism, distribution and excretion;
Phase 2: The drug candidate is studied in patients to identify possible
adverse effects and safety risks, to determine dosage tolerance and the
optimal dosage, and to collect some efficacy data;
Phase 3: The drug candidate is studied in an expanded patient
population at multiple clinical study sites to confirm efficacy and
safety at the optimized dose, by measuring a primary endpoint
established at the outset of the study; and
Phase 4: The FDA may in some circumstances require post-marketing
studies to delineate additional information about a drug's risks,
benefits and optimal use.
. submitting the results of preliminary research, preclinical studies, and
clinical trials as well as chemistry, manufacturing and control and
labeling information on the drug candidate to the FDA in an NDA; and
. obtaining FDA approval of the NDA prior to any commercial sale or
shipment of the drug candidate.
Upon approval, a drug candidate may be marketed only in those dosage forms
and for those indications approved in the NDA. In addition to obtaining FDA
approval for each indication to be treated with each product candidate, each
foreign and domestic drug candidate manufacturing establishment must register
with the FDA, list its product candidates with the FDA, comply with cGMPs and
permit and pass manufacturing plant inspections by the FDA. Moreover, the
submission of applications for approval may require additional time to complete
manufacturing stability studies. Foreign companies that manufacture drug
candidates for distribution in the United States also must list their product
candidates with the FDA and comply with cGMPs. They are also subject to
periodic inspection by the FDA or by local authorities under agreement with the
FDA. Moreover, approval of drug candidates may be delayed by certain market
exclusivity and patent protections awarded to other parties concerning similar
products or drug candidates.
Any drug candidates that we or our collaborators manufacture or distribute
pursuant to FDA approvals are subject to extensive continuing regulation by the
FDA, including recordkeeping requirements and reporting of adverse experiences
with the product candidate. Additionally, if we or our collaborators propose
any modifications to a product, including changes in indication, manufacturing
process, manufacturing facility or labeling, we or our collaborators may be
required to submit an NDA supplement to the FDA.
Failure to comply subjects the manufacturer to possible FDA action, such as
Warning Letters, suspension of manufacturing, seizure of the product, voluntary
recall of a product or injunctive action, as well as possible civil penalties.
We currently rely on, and intend to continue to rely on, third parties to
manufacture our compounds and product candidates. These third parties will be
required to comply with cGMPs.
Products manufactured in the United States for distribution abroad will be
subject to FDA regulations regarding export, as well as to the requirements of
the country to which they are shipped. These latter requirements are likely to
cover the conduct of clinical trials, the submission of marketing applications,
and all aspects of manufacturing and marketing. Such requirements can vary
significantly from country to country. As part of our strategic relationships,
our collaborators may be responsible for the foreign regulatory approval
process for our product candidates, although we may be legally liable for
noncompliance.
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We and our collaborators are also subject to various federal, state and local
laws, rules, regulations and policies relating to safe working conditions,
laboratory and manufacturing practices, the experimental use of animals and the
use and disposal of hazardous or potentially hazardous substances used in
connection with our research work.
The extent of government regulation which might result from future
legislation or administrative action cannot be accurately predicted.
Consequently, the actual effect of these developments on our business is
uncertain and unpredictable.
Competition
We compete both in the markets for drug discovery technologies and services
and the markets for pharmaceutical products. We compete with major
pharmaceutical, biotechnology and discovery services companies, academic and
scientific institutions, governmental agencies, and public and private research
organizations. These entities compete with us either on their own or in
collaborations.
The markets for our DiscoverWorks drug discovery technologies and services
are very competitive, and we expect the intensity of competition to increase as
pharmaceutical and biotechnology companies continue to outsource a portion of
their discovery processes and seek collaborations to access innovations in
discovery technologies. Our technology platform integrates many technologies,
including combinatorial chemistry, chemi-informatics software, structure-based
drug design and high-throughput screening and we compete with many drug
discovery service companies offering one or more technology components of the
discovery process. We face competition based on numerous factors, including
size, diversity and ease of use of compound libraries, speed and cost of
identifying and optimizing potential lead compounds and patent position.
Companies such as Aurora Biosciences Corporation and Evotec BioSystems AG have
developed ultra-high throughput screening capabilities. In addition, several
competitors, including Scriptgen Pharmaceuticals, Inc., Novalon Pharmaceutical
Corporation and Cetek Corporation have developed alternative approaches to
screening protein targets of unknown function that are competitive with our
"any target" ThermoFluor technology. There are many companies that provide
combinatorial chemistry services for lead generation and optimization that
compete with our DiscoverWorks technologies and discovery services. Competitors
such as Pharmacopeia Inc. and ArQule, Inc. use computer methods to assist in
the design of large screening libraries and synthesize them using combinatorial
or parallel chemical synthesis methods, which are competitive with our
DirectedDiversity technology. Competitors such as Tripos Inc. and MDL
Information Systems, Inc. are computer software companies that offer chemi-
informatics and other software and database services to support drug discovery,
which are competitive with the software components of our DirectedDiversity
chemi-informatics technology. Competitors such as Vertex Pharmaceuticals
Incorporated and Axys Pharmaceuticals Inc. extensively use structure-based drug
design integrated with combinatorial chemistry and other drug discovery
technologies.
We also compete with the internal drug discovery departments of our customers
and potential customers. Many of our customers and potential customers have
acquired or are developing integrated drug discovery capabilities that use
combinatorial chemistry, chemi-informatics software, structure-based drug
design and high throughput screening. In addition, many of these companies have
large collections of compounds that they have previously synthesized, purchased
from chemical supply catalogs or obtained from other sources against which they
may screen new targets.
For drug candidates that we seek to out-license from our internal drug
discovery pipeline, we face, and will continue to face, intense competition
from organizations such as large pharmaceutical and biotechnology companies.
Competition with any of the programs in our internal drug discovery pipeline
may arise from current or future drug candidates in the same therapeutic class
or other classes of therapeutic agents or other methods of preventing or
reducing the incidence of disease. Furthermore, any drug candidate that is
successfully developed may compete with existing therapies that have long
histories of safe and effective use.
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Due to perceived shortcomings of available agents and the large market
potential, competition to develop a safe, orally active antithrombotic agent is
intense, with many discovery programs in process, including programs in
clinical development by AstraZeneca PLC and BASF. In addition, we are aware of
several other programs targeting additional proteins in the coagulation process
which could be competitive with our thrombin inhibitor, including programs of
Schering AG, Germany and AstraZeneca PLC targeting Factor Xa. In addition, we
are aware of an oral heparin program of Emisphere believed to be in Phase 2
which may also compete with our thrombin inhibitor. In addition, oral agents
that effect blood platelet activation could provide competitive therapeutic
approaches to oral inhibitors of the coagulation process. We are aware of such
drug development programs at Merck and Co., Inc., SmithKline Beecham and
Schering-Plough Corporation, among others.
Our orally active urokinase inhibitor for the inhibition of cancer metastasis
and tumor angiogenesis faces competition from a number of agents and approaches
currently under development. We are aware of competing urokinase inhibitor
programs at Abbott Laboratories, Axys Pharmaceuticals, Inc., Corvas
International, Inc. and Pfizer Inc. We are also aware of urokinase receptor
antagonist programs under development which could compete with our oral
urokinase inhibitor. There are also a number of alternative approaches to
controlling angiogenesis or metastasis including the use of i) inhibitors of
matrix metalloproteases, including programs by British Biotech plc (in alliance
with Schering Plough), Bristol-Myers Squibb Company, Pharmacia Corporation and
Pfizer Inc., ii) inhibitors of cellular tyrosine kinases, including programs by
Cephalon Inc. and Sugen Inc., and iii) other therapeutic proteins or monoclonal
antibodies that target a variety of cellular mechanisms.
Our other research programs in small molecule drug discovery are also in
highly competitive areas. Many other companies are working in these areas and
they may achieve earlier or greater success than we may be able to achieve.
Our current and anticipated future research programs and services that focus
on the discovery of small molecule drugs that target GPCRs are also in a highly
competitive area. Most major pharmaceutical companies have extensive drug
discovery programs that target one or more GPCRs, and many biotechnology
companies have developed propriety positions on particular GPCR receptors or
screening technologies. Competition has also arisen and is anticipated to
accelerate in the area of structural genomics, where academic laboratories and
possibly certain companies, either on their own or in collaboration with
others, are seeking to determine the molecular structures of GPCRs, and
databases of GPCR molecular structures may be created in competition with the
GPCR structural genomics and other databases we expect to develop.
Most of our competitors, either alone, or together with their collaborators,
have substantially greater research and development capabilities and financial,
scientific, operational, marketing and sales resources than we do, as well as
significantly more experience in research and development, clinical trials,
regulatory matters, manufacturing, marketing and sales. These competitors and
other companies may have already developed or may in the future develop new
technologies or products that compete with ours or which could render our
technologies and products obsolete. In addition, our competitors may succeed in
obtaining broader patent protection, receiving FDA approval for products or
developing and commercializing products or technologies before us. We also
compete with these organizations in recruiting and retaining qualified
scientific and management personnel.
Clinical Testing Strategy
We do not have the ability to independently conduct clinical studies and
obtain regulatory approvals for our drug candidates. To the extent our
collaborators do not perform these functions, we intend to rely on third party
expert clinical investigators and clinical research organizations to perform
these functions.
Manufacturing Strategy
We are an early stage drug discovery company and, accordingly, do not at this
stage require commercial scale manufacturing capabilities. We currently rely,
and anticipate continuing to do so for the foreseeable
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future, on internal capabilities for synthesis of the small amounts of chemical
compounds required for the discovery phases of our internal programs and
external collaborations.
Completion of any preclinical trials for our drug candidates involving large
quantities of chemical compounds, or any future clinical trials and
commercialization of our drug candidates by us or our collaborators, will
require access to, or development of, facilities to manufacture a sufficient
supply of our drug candidates. We do not have the facilities or experience to
manufacture the quantities of drug candidates necessary for any such trials or
commercial purposes on our own and do not intend to develop or acquire
facilities for the manufacture of such quantities of drug candidates in the
foreseeable future. We currently intend, instead, to rely on third-party
contract manufacturers.
In addition, because we intend to outlicense drug candidates for further
development and commercialization, once a drug candidate is outlicensed, we
must rely on our collaborators' ability to manufacture, or have manufactured,
the quantities necessary for further development and commercialization of these
drug candidates.
Marketing and Sales
We market and sell our DiscoverWorks drug discovery services and
technologies, and outlicense drug candidates from our internal drug discovery
programs, through a direct marketing effort to potential customers in the
pharmaceutical, agrochemical, and biotechnology industries. Since we are an
early-stage company, we do not have an established sales and marketing effort,
but have solicited our collaborative partners primarily through the efforts of
our management team. We also make presentations at trade shows and have an
internet web site that describes our products and services.
We currently have no sales, marketing or distribution capabilities to
commercialize our drug candidates. In order to commercialize any of our drug
candidates, we must either internally develop sales, marketing and distribution
capabilities or make arrangements with third parties to perform these services.
We intend to rely for the foreseeable future on collaborations with licensees
of our compounds to market any of our drug candidates which receive regulatory
approvals in the future.
Employees
As of May 23, 2000, we had 86 full-time employees, 47 of whom hold Ph.D.
degrees. Of these employees, 70 were engaged in research and development and 16
were engaged in business development, finance and general administration. Our
scientific staff includes: 19 molecular and cell biologists, 10 structural
biologists, biophysicists and enzymologists, 30 chemists and 11 computer
scientists and engineers. Many of our employees have extensive experience in
drug discovery at major pharmaceutical companies. None of our employees are
represented by labor unions or covered by collective bargaining agreements. We
have not experienced any work stoppages, consider our employee relations to be
good and believe that we enjoy a strong corporate culture, built on cooperation
among our various departments, which we view as a key element in our
interdisciplinary approach to research.
Facilities
Our executive offices and research and development facility are located in
Exton, Pennsylvania. We lease approximately 30,000 square feet of space. Our
facility is leased through June 2008. To meet our expected growth needs, we are
also negotiating for approximately 10,000 square feet of adjacent space for use
in expansion of our research capabilities.
Legal Proceedings
We are not currently a party to any material legal proceedings.
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Center Gatefold
The gatefold consists of four pages.
The first page contains (under the 3-Dimensional Pharmaceuticals logo) four
illustrations. On the left side of the page, one above the other, are three
small illustrations depicting the major customer industries for our
technologies: the pharmaceutical, the agricultural and the veterinary medicine
industries. The first of the three small illustrations on the left side depicts
approximately a dozen capsules and tablets, with an accompanying caption
reading "Pharmaceutical"; the second of the three illustrations depicts a grain
mill, with an accompanying caption reading "Agrochemical"; and the third of the
three illustrations depicts two veterinarians and a dog, with an accompanying
caption reading "Veterinary". In the center of the page is a large illustration
of a double-strand of DNA coding for a target protein with an accompanying
caption reading: "We discover and optimize novel drug candidates through
employment of a uniquely integrated suite of proprietary technologies. We
believe our DiscoverWorks technologies can produce development compounds in a
more timely and cost effective manner, and with a higher probability of
success, than that currently achieved using more conventional methods. Our
DiscoverWorks technologies have application to the pharmaceutical, veterinary
and agrochemical industries."
The second and third pages of the gatefold constitute a unit entitled "The
DiscoverWorks Lead Generation Process." This two-page unit include nine small
illustrations, arranged in a circle, each with an accompanying caption. The
nine illustrations, counter-clockwise from the upper left-hand corner, are as
follows:
First illustration: illustration of the 3-D molecular structure of a protein
target, with an accompanying caption reading:
"3-D Protein Structure
The molecular 3-D structure of new targets allows direct visualization of how
compounds bind with target proteins, and enhanced intelligent selection of
Probe Library compound sets for screening."
Second illustration: illustration of stackable plates containing an inventory
of compounds, with an accompanying caption reading:
"Structure-Based Probe Library
Our Probe Library contains 200,000+ individually synthesized "drug-like"
compounds selected for chemical diversity and comprehensive representation of
3-D molecular shapes."
Third illustration: illustration of a double strand of DNA coding for a target
protein, with an accompanying caption reading:
"Target Proteins from Gene Sequencing
We clone and express target proteins using bacterial, insect and mammalian cell
expression systems. Our protein refolding technology allows rapid, parallel
production of target proteins at the required scale."
Fourth illustration: illustration of an automated ThermoFluor high throughput
screening station, with an accompanying caption reading:
"Quantitative High-Throughput Screening
Our ThermoFluor high-throughput screening technology provides a direct means to
quantitatively assess the binding affinity of potential drug compounds to
virtually any target protein, including those derived from genomics."
Fifth illustration: illustration of a computer visualizing and analyzing data,
with an accompanying caption reading:
"Structure-Activity Data Analysis
Our DirectedDiversity chemi-informatics software analyzes hits for structure-
activity relationships and rapidly retrieves from our Synthetically Accessible
Library thousands of compounds intelligently selected for predicted efficacy,
which are then synthesized and tested."
<PAGE>
Sixth illustration: illustration of a chemical compound in a gelatin capsule,
with an accompanying caption reading:
"Prototype NCE Lead
We are able to generate a Prototype NCE Lead suitable for in vivo efficacy in
7-10 months through iterative cycles of focused library selection, synthesis
and testing."
Seventh illustration: illustration of several chemical compounds bound to a
target protein, with an accompanying caption reading:
"Structure-Based Library Optimization
We integrate chemi-informatics software with target protein 3-D structural
information to automate and multiplex the rational design and chemical
synthesis of compounds and simultaneously optimize many drug properties."
Eighth illustration: illustration of a computer screen showing molecular
structures selected using our proprietary software, with an accompanying
caption reading:
"Synthetically Accessible Library
Our Synthetically Accessible Library contains 2.5 billion "drug-like" analogs
of Probe Library compounds. Our chemists make focused libraries of compounds
selected from our Synthetically Accessible Library using automated chemistry
synthesis protocols."
Ninth illustration: illustration of an automated chemical synthesizer, with an
accompanying caption reading:
"Automated Parallel Synthesis
We have a broad repertoire of modern parallel synthesis technologies and
synthesize thousands of novel compounds per month."
The fourth page of the gatefold is entitled: "Innovative Structure-Based Drug
Design and GPCR Structure Determination Program". This page consists of three
large illustrations placed diagonally from the top left hand side of the page
to the bottom right hand side of the page. The first illustration depicts a
protein crystal. The second illustration depicts a 3D protein structure. The
third illustration depicts an aerial view of the Argonne National Laboratory.
In the upper right hand side of the page is set forth the following two
paragraphs of text:
"Our innovations in structure-based drug design and X-ray crystallography
enable real time rational design of drugs using target protein structures. High
quality structural data is collected from crystals and analyzed to determine
the protein's 3-D molecular structure, which in turn facilitates structure-
based drug design."
"Recently, we successfully produced high quality crystals which we believe will
enable us to experimentally determine the first 3-D molecular structure of a G-
protein coupled receptor (GPCR). GPCRs comprise an important class of drug
targets, for which structure-based drug design based on the actual molecular
structure has not been possible to date."
In the lower left hand side of the page is set forth the following paragraph of
text:
"We have recently become a member of the Industrial Macromolecular
Crystallography Association (IMCA) consortium of major pharmaceutical companies
using dedicated resources for X-ray data collection at the Advanced Protein
Source within the Argonne National Laboratory in Chicago, Illinois. We are
currently the only biotechnology company to be an IMCA consortium member. This
access greatly enhances our ability to determine new structures and use
structure-based drug design as an effective discovery tool."
<PAGE>
MANAGEMENT
Executive Officers and Directors
The following table sets forth information about our directors, executive
officers and other key employees as of May 23, 2000:
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
David C. U'Prichard,
Ph.D.................... 51 Chief Executive Officer, Director
F. Raymond Salemme,
Ph.D.................... 54 President and Chief Scientific Officer, Director
Michael J. Wassil........ 49 Vice President and Chief Financial Officer
Roger F. Bone, Ph.D...... 42 Vice President, Biochemistry
David G. Fehr............ 54 Vice President, Technology Operations
Scott M. Horvitz......... 41 Vice President, Finance and Administration
Richard M. Soll, Ph.D.... 44 Vice President, Chemistry
Paul M. K. Weiss, Ph.D... 42 Executive Director, Technology Licensing
Stephen Bunting, Ph.D.... 47 Director
Bernard Canavan,
M.D.(2)................. 64 Director
James H. Cavanaugh,
Ph.D.(1)................ 63 Director
Zola P. Horovitz,
Ph.D.(1)(2)............. 65 Director
David R. King(2)......... 50 Director
Joshua Ruch(1)........... 50 Director
Harold R. Werner......... 51 Director
</TABLE>
- --------
(1) Member of compensation committee.
(2) Member of audit committee.
Dr. David C. U'Prichard joined us in September 1999 as our CEO. Most
recently, Dr. U'Prichard served as President of Research and Development at
SmithKline Beecham. While at SmithKline Beecham, Dr. U'Prichard oversaw the
entry of approximately ten compounds into global development, the international
registration of the diabetes drug Avandia and the entry of four compounds into
Phase III trials and six compounds into early clinical trials; additionally, he
instituted several major restructuring efforts at the company. Prior to
SmithKline Beecham, he worked for ICI/Zeneca from 1986 to 1997. Dr. U'Prichard
was also instrumental in the launch of Nova Pharmaceuticals in 1983, following
an academic career as the Associate Professor of Pharmacology and Neurobiology
at Northwestern University Medical School (1978-83), and his postdoctoral
fellowship at Johns Hopkins University (1975-78). Dr. U'Prichard received his
Ph.D. in Pharmacology from the University of Kansas, and his B.S. in
Pharmacology with first-class honors from the University of Glasgow, Scotland.
He has held academic appointments at Northwestern University, Johns Hopkins
University and the University of Pennsylvania and has an honorary professorship
at the University of Glasgow. He is also an author of more than 100 primary and
review publications and was a founding co-editor of Molecular Neurobiology, co-
editor of Epinephrine in the Central Nervous System and has served as a member
of various editorial boards.
Dr. F. Raymond Salemme founded our company in 1993 and currently serves as
President and Chief Scientific Officer. Prior to founding 3DP, Dr. Salemme held
research management positions at various pharmaceutical companies including:
Senior Director, Biophysics and Computational Chemistry at Sterling Winthrop;
Research Leader, Protein Structure Group for DuPont Merck Pharmaceuticals,
Inc.; and Research Leader, Protein Structure Group at DuPont Company. In 1983,
Dr. Salemme founded the Genex Protein Engineering Division, among the first
industrial groups to use three-dimensional structural tools as the basis for
engineering proteins. From 1973 to 1983, Dr. Salemme was Professor of
Biochemistry at the University of Arizona. Dr. Salemme received a B.A. in
Molecular Biophysics from Yale University and a Ph.D. in Chemistry from the
University of California, San Diego, specializing in protein X-ray
crystallography. Dr. Salemme is a member of numerous professional societies,
and serves on several national and international scientific review
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committees and journal editorial boards. Dr. Salemme has authored over 75
scientific publications and patents in the areas of structural biology,
biomaterials, computer modeling of proteins and structure-based drug design.
Dr. Salemme is a co-inventor of our DirectedDiversity chemi-informatics process
control technology and our ThermoFluor assay technology.
Mr. Michael J. Wassil joined us in September 1997 as Vice President and Chief
Financial Officer. Prior thereto, from 1995 to 1997, Mr. Wassil was President
and founder of Med Tech Advisers, Inc. From 1983 to 1994, Mr. Wassil held
various positions at Interspec, Inc. (ISPC). Since 1987, Mr. Wassil served as
Executive Vice President, Chief Financial Officer and Secretary. In 1993 he
also became General Manager of Interspec's international operations. In 1994,
Interspec, Inc. was acquired by Advanced Technology Laboratories Inc. (ATLI) at
which point Mr. Wassil became Vice President and Chief Financial Officer of
ATL--Interspec. From 1978 to 1983, Mr. Wassil held several financial and
operating positions at Rorer Group Inc. Mr. Wassil began his career in 1972
with Price Waterhouse. A Certified Public Accountant, Mr. Wassil received his
B.S. in Finance from King's College. He is also a Director of Telefactor
Corporation and the Eastern Technology Council.
Dr. Roger F. Bone joined us in 1993 and currently serves as Vice President,
Biochemistry. Prior thereto, Dr. Bone held several research positions at Merck
and Company from 1990 to 1993, and conducted his postdoctoral fellowship at the
University of California from 1985 to 1989. Dr. Bone received his Ph.D. in
Biochemistry from the University of North Carolina and his B.S. in Chemistry
from Purdue University.
Mr. David G. Fehr joined us in January 1998 as Vice President, Technology
Operations. Mr. Fehr previously served from 1987 to 1993 as Vice President,
Development and Manager of Systems Integration at Bell & Howell Publication
Systems Company. Prior thereto, Mr. Fehr was Manager, Analytical Systems
Development at BF Goodrich Company. Mr. Fehr received his B.S. degree in
Physics, his M.S. in Industrial Administration from Carnegie-Mellon University,
and his M.S. in Physics from the University of California, San Diego.
Mr. Scott M. Horvitz has served as Vice President, Finance and Administration
since our inception. From 1991 to 1993, Mr. Horvitz held various positions at
Magainin Pharmaceuticals Inc. and most recently served as Executive Director,
Finance and Human Resources. From 1983 to 1991, Mr. Horvitz was with the firm
of Richard A. Eisner and Company, LLP, Certified Public Accountants, where he
most recently served as a Senior Audit Manager specializing in venture-
financed, technology start-up companies. Mr. Horvitz holds a B.S. in Accounting
from the State University of New York at Albany and is a Certified Public
Accountant.
Dr. Richard M. Soll joined us in 1994 and currently serves as Vice President,
Chemistry. From 1983 to 1994, Dr. Soll held various positions at Wyeth-Ayerst
Research and Ayerst Laboratories, most recently serving as a Principal
Scientist, Medicinal Chemistry. Dr. Soll conducted his postdoctoral fellowship
at Harvard University, and he received his Ph.D. in synthetic organic chemistry
from Dartmouth College and his B.S. in chemistry from the University of
Massachusetts.
Dr. Paul M. K. Weiss joined us in December 1997 as Executive Director,
Technology Licensing. From 1993 to 1997, Dr. Weiss held various positions at
American Home Products Corporation and Wyeth-Ayerst Laboratories, including
Director-Licensing, Director-Business Development and Research, and Manager-
Business Development. Prior thereto, Dr. Weiss was employed by Columbia
Research Laboratories as International Director of Product Development and R&D
Coordinator. Dr. Weiss received his Ph.D. in Biochemistry and his M.B.A. from
the University of Wisconsin Madison, and his B.S. in Biochemistry from Carleton
University Institute of Biochemistry in Ottawa, Ontario.
Dr. Stephen Bunting joined us as a director in November 1997. Dr. Bunting has
been a director of Abingworth Management Limited in London, UK since March 1987
and has been in the venture capital business for over 17 years during which he
has been involved in over 50 investments in the biotechology and medical area.
He has served on the boards of many life science companies including Aurora
Biosciences, Cantab Pharmaceuticals (UK), Devgen (Belgium), Genetic Therapy and
Hexagen (UK).
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Dr. Bernard Canavan joined us as a director in March 1997. Dr. Canavan
recently retired from American Home Products Corporation where he held the
position of President and Chief Operating Officer. Dr. Canavan started his
pharmaceutical career with Wyeth Limited Canada in 1969 as Medical Director. He
left Wyeth Canada in 1975 as President. He then joined Wyeth International Ltd.
as Executive Assistant to the President and in 1980 became President of Wyeth
International. In 1984 he took over as President of Wyeth Laboratories in
charge of Pharmaceutical Operations. From 1990 to 1994 he was President and COO
of American Home Products Corporation. Dr. Canavan is on the board of the
following companies: Magainin Pharmaceuticals, and Shire Pharmaceuticals Group
Plc.
Dr. James H. Cavanaugh joined us as a director in May 1996 and has served as
our Chairman since August 1998. Dr. Cavanaugh is the President of HealthCare
Ventures LLC. Prior to HealthCare Ventures, he was President of SmithKline &
French Laboratories--U.S., the pharmaceutical division of SmithKline Beecham
Corporation. Previously, he served as President of SmithKline's clinical
laboratory business and as President of Allergan International. Prior to his
industry experience, Dr. Cavanaugh served as Staff Assistant to President Nixon
for Health Affairs and as Deputy Director of the Domestic Council. Under
President Ford, he was appointed Deputy Assistant to the President for Domestic
Affairs and Deputy Chief of the White House Staff. Before then, he served as
Deputy Assistant Secretary for Health and Scientific Affairs in the U.S.
Department of Health, Education and Welfare, and as Special Assistant to the
Surgeon General of the U.S. Public Health Service. He was a Special Consultant
to President Reagan and served as a member of the President's Export Council.
Preceding his government service, Dr. Cavanaugh was a member of the faculty of
the Graduate College and the College of Medicine at the University of Iowa,
where he received his Master's and Doctorate degrees. Dr. Cavanaugh currently
serves on the Boards of Trustees of the National Committee for Quality Health
Care (Chairman, 1988) and The National Center for Genome Resources, and as
Trustee Emeritus of the California College of Medicine. He has served on the
Board of Directors of the Pharmaceutical Research and Manufacturers
Association, Unihealth America, and the Proprietary Association. He was a
Founding Director of the Marine National Bank in Santa Ana, California. Dr.
Cavanaugh serves on the Board of the following companies: Diversa Corporation,
MedImmune Inc. and Shire Pharmaceuticals Group Plc.
Dr. Zola P. Horovitz joined us as a director in September 1996. Dr. Horovitz
recently retired from Bristol-Myers Squibb, last serving as Vice President of
Business Development and Planning. Previously, he spent 31 years with The
Squibb Institute for Medical Research in Princeton, New Jersey, last serving as
Vice President of Research Planning & Scientific Liaison. Dr. Horovitz recently
served as Commissioner of the New Jersey Cancer Research Commission. He has
been an active member of many industry organizations, including the American
Society for Pharmacology & Experimental Therapies, British Pharmacological
Society, American Pharmaceutical Association, International Society of
Biochemical Pharmacology, and the New York Academy of Sciences, among others.
Additionally, he is a Fellow of the New Jersey Academy of Sciences, American
Foundation for Pharmaceutical Education, Academy of Pharmaceutical Sciences,
and the American Association for the Advancement of Science. Dr. Horovitz
earned a B.S. in Pharmacy and an M.S. and Ph.D. in Pharmacology from the
University of Pittsburgh. He is a registered pharmacist in the state of
Pennsylvania and has published more than 90 books, articles and abstracts in
the areas of pharmacology and drug research and development. Dr. Horovitz
serves on the Board of the following companies: BioCryst Pharmaceuticals, Inc.,
Diacrin, Inc., Magainin Pharmaceuticals Inc., Avigen, Inc., Clinicor, Inc.,
Synaptic Pharmaceuticals Corporation, Shire Pharmaceuticals Group Plc and
HeavenlyDoor.Com.
Mr. David R. King joined us as a director in April 2000. Since 1981, Mr. King
has been a partner in the Business and Finance Section of the law firm of
Morgan, Lewis & Bockius LLP, Philadelphia, Pennsylvania. Mr. King's practice
focuses on biotechnology and emerging growth companies and he has extensive
experience in corporate and securities law matters. Mr. King serves on the
Board of Cephalon, Inc.
Mr. Joshua Ruch joined us as a director in March 1997. Mr. Ruch is Chairman
and Chief Executive Officer of Rho Management Company, Inc., an investment
advisory firm. Mr. Ruch has been employed by Rho Management Company in various
capacities since its inception in 1981. Mr. Ruch holds an M.B.A. from the
Harvard Graduate School of Business Administration.
54
<PAGE>
Mr. Harold R. Werner joined us as a director at our inception. Mr. Werner is
a Managing Director of HealthCare Ventures LLC. Mr. Werner has over twenty-five
years of experience in planning, development and financing of health care
technology. Prior to the founding of the HealthCare Ventures family of funds in
1985, Mr. Werner served as Director of New Ventures for Johnson & Johnson
Development Corporation, responsible for corporate venture capital and
strategic planning activities. These responsibilities included outside
investments and licenses for Johnson & Johnson in biotechnology,
pharmaceuticals, vision care, diagnostics and other high-technology areas of
health care. Previously, he was Senior Vice President of Robert S. First, Inc.,
and was responsible for managing its European and, later, U.S. health care
management consulting business. Mr. Werner received his B.S. (high honors) and
M.S. degrees in engineering from Princeton University and an M.B.A. from the
Harvard Graduate School of Business Administration.
Board Of Directors
Upon or prior to the closing of this offering, our board of directors will be
divided into the following three classes, with the members of the respective
classes serving for staggered three-year terms:
. Class 1 directors, whose terms expire at the annual meeting of
stockholders to be held in 2001;
. Class 2 directors, whose terms expire at the annual meeting of
stockholders to be held in 2002; and
. Class 3 directors, whose terms expire at the annual meeting of
stockholders to be held in 2003.
Messrs. , and will be our Class 1 directors, Messrs. ,
and will be our Class 2 directors, and Messrs. , and will be
our Class 3 directors. At each annual meeting of stockholders following this
offering, our stockholders will elect the successors to directors whose terms
have expired to serve from the time of election and qualification until the
third annual meeting following election.
All directors were nominated and elected as directors by the holders of our
common and preferred stock in accordance with provisions of our certificate of
incorporation, our bylaws and our current stockholders agreement. These
provisions of our stockholders agreement will terminate upon the completion of
this offering. Each of the individuals will remain as a director until
resignation or until the stockholders elect their replacements in accordance
with our certificate of incorporation.
Our executive officers are appointed by the board of directors and serve
until their successors have been duly elected and qualified. There are no
family relationships among any of our executive officers or directors.
Audit Committee
We have established an audit committee. Our audit committee consists of three
independent directors. Our audit committee is responsible for reviewing with
management our financial controls and accounting and reporting activities. In
addition, our audit committee is also responsible for reviewing the
qualifications of our independent auditors, making recommendations to the board
of directors regarding the scope, fees and results of any audit and reviewing
any non-audit services and related fees. David R. King, one of our directors
and a current member of the audit committee, is a partner at Morgan, Lewis &
Bockius LLP, a law firm which has provided legal services for us in each of our
last three fiscal years.
Compensation Committee and Compensation Committee Interlocks and Insider
Participation
We have established a compensation committee. Our compensation committee is
responsible for the evaluation, approval and administration of all salary,
incentive compensation, benefit plans and other forms of compensation for our
officers, directors and other employees, including bonuses and options granted
under our Equity Compensation Plan. None of the Compensation Committee members
has served as an officer or employee of us or our subsidiary.
55
<PAGE>
For information on recent purchases of our capital stock by the members of
our compensation committee or their respective affiliates, see the description
under "Certain Relationships and Related Transactions" included in this
prospectus.
Director Compensation
Drs. Canavan and Horovitz and Mr. King each receive $10,000 per year as
consideration for their services as directors. Drs. Canavan and Horovitz are
entitled to receive consulting fees of $1,500 per day of additional service,
although no such consulting services have been rendered to date. Additionally,
Drs. Canavan and Horovitz each have received grants of options to purchase
50,000 shares of our common stock under our equity compensation plan in
connection with their service as directors. Mr. King received a restricted
stock grant in connection with his service as a director of 20,000 shares of
common stock for an aggregate purchase price of $45,000. All of the option
grants and restricted stock grants for our directors vest in equal annual
installments over a period of four years. Our non-employee directors are
reimbursed for expenses in connection with attendance at board and committee
meetings.
Scientific Advisory Board
In addition to our in-house scientific resources, we have assembled a
Scientific Advisory Board of seven members with expertise in the areas of
protein structure-function relationships, computer-aided drug design, protein
modeling, intracellular signaling and molecular regulation of the immune
system. The Scientific Advisory Board meets as a group two to three times a
year to review our research, development and clinical activities. We also
consult with our scientific advisors throughout the year. Each member of the
Scientific Advisory Board has an individual consulting agreement under which he
is compensated by cash and/or by options to purchase shares of our common
stock. These consulting agreements also provide for confidentiality, assignment
of inventions and certain noncompetition provisions. None of our scientific
advisors is employed by us, and they may have commitments to, or consulting or
advisory contracts with, their employers or other entities that may conflict or
compete with their obligations to us. Our scientific advisors include:
<TABLE>
<CAPTION>
Name Title/Affiliation
- ---- -----------------
<S> <C>
Don C. Wiley, Ph.D, John L. Loeb Professor of Biochemistry and
Chairman............... Biophysics at Harvard University
Stephen J. Benkovic, Evan Pugh Professor and Eberly Chair in
Ph.D................... Chemistry, The Pennsylvania State University
Jeremy M. Berg, Ph.D.... Professor and Director of the Department of
Biophysics and Biophysical Chemistry at the
Johns Hopkins University School of Medicine
Dale L. Boger, Ph.D..... Richard and Alice Cramer Professor of Chemistry,
The Scripps Research Institute
Michael Levitt, Ph.D.... Chairman, Department of Structural Biology at
Stanford University
Victor J. Marder, M.D... Director of the Vascular Medicine Program at
Orthopaedic Hospital/UCLA
Clarence E. Schutt,
Ph.D................... Professor of Chemistry at Princeton University
</TABLE>
56
<PAGE>
Executive Compensation
The following table sets forth the compensation awarded or paid, or earned or
accrued for services rendered to us, in all capacities during the fiscal year
ended December 31, 1999 by our Chief Executive Officer and the four other most
highly compensated officers whose total salary and bonus exceeded $100,000 in
fiscal 1999. In accordance with SEC rules, the compensation described in the
table does not include medical, group life insurance or other benefits which
are available generally to all our salaried employees and perquisites and other
personal benefits which do not exceed the lesser of $50,000 or 10% of the
officers' total salary and bonus disclosed in this table. We refer to these
officers as our named executive officers in other parts of this prospectus.
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Compensation
------------
Annual Number of
Compensation Securities
Fiscal -------------------- Underlying
Name and Principal Position Year Salary($) Bonus($) Options
- --------------------------- ------ --------- -------- ------------
<S> <C> <C> <C> <C>
David C. U'Prichard, Ph.D........... 1999 92,330(1) -- 2,064,000
Chief Executive Officer
F. Raymond Salemme, Ph.D............ 1999 245,549 95,723(2) 28,571
President and Chief Scientific
Officer
Michael J. Wassil................... 1999 166,005 55,405(3) 20,714
Vice President and Chief Financial
Officer
Scott M. Horvitz.................... 1999 150,491 40,097(4) 19,643
Vice President, Finance and
Administration
Roger F. Bone....................... 1999 146,475 32,957 15,714
Vice President, Biochemistry
</TABLE>
- --------
(1) Dr. U'Prichard's employment with us began on September 20, 1999.
(2) Includes loan forgiveness of $29,565 and year end bonus of $66,158, $33,079
of which was paid in February 2000; balance still accrued.
(3) Includes loan forgiveness of $22,204 and year end bonus of $33,201, $16,601
of which was paid in February 2000; balance still accrued.
(4) Includes loan forgiveness of $6,261 and year end bonus of $33,836, $16,918
of which was paid in February 2000; balance still accrued.
57
<PAGE>
1999 Option Grants
The following table sets forth information concerning stock options granted
to our named executive officers during the fiscal year ended December 31, 1999.
The potential realizable value represents amounts, net of exercise price before
taxes, that may be realized upon exercise of the options immediately prior to
the expiration of their terms assuming appreciation of 5% and 10% over the
option term. The 5% and 10% values are calculated based on rules promulgated by
the SEC and do not reflect our estimate of future stock price growth. The
actual value realized may be greater or less than the potential realizable
value set forth in the table.
<TABLE>
<CAPTION>
Individual Grants
--------------------------------------------
Potential
Realizable
Value at
Assumed Rates
of Stock
Price
Number of Percentage of Appreciation
Securities Total Options Exercise for
Underlying Granted to Price Option Term
Options Employees in (per Expiration -------------
Name Granted Fiscal Year share) Date 5% 10%
- ---- ---------- ------------- -------- ---------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
David C. U'Prichard,
Ph.D................... 380,952 15.37 $1.05 09/17/09 $ $
1,339,048 54.03 1.05 09/17/09
344,000 13.88 2.60 09/17/09
F. Raymond Salemme,
Ph.D................... 28,571 1.15 1.05 04/09/09
Michael J. Wassil....... 20,714 .84 1.05 04/09/09
Scott M. Horvitz........ 19,643 .79 1.05 04/09/09
Roger F. Bone........... 15,714 .63 1.05 04/09/09
</TABLE>
Aggregated Option Exercises In Last Fiscal Year
And Fiscal Year-End Option Values
The following table sets forth information concerning year end option values
for the 1999 fiscal year for the executive officers named in the Summary
Compensation Table above. The value of unexercised in-the-money options is
calculated based on a value equal to an assumed initial public offering price
of per share.
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised in-
Options at the-Money Options at
December 31, 1999 December 31, 1999
------------------------- -------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
David U'Prichard,
Ph.D. .................. -- 2,064,000(1) $ $
F. Raymond Salemme,
Ph.D.................... 355,000 359,821
Michael J. Wassil........ 101,113 124,051
Scott M. Horvitz......... 43,386 40,943
Roger F. Bone............ 44,447 102,356
</TABLE>
- --------
(1) Pursuant to Dr. U'Prichard's offer letter with us, which permitted early
exercise of the above options prior to vesting for a period of six months
following the date of grant, Dr. U'Prichard exercised 495,238 options in
March 2000. The shares acquired pursuant to such exercise are subject to
restrictions which lapse over the same period as the predecessor stock
options would have vested.
58
<PAGE>
2000 Option Grants
The following table sets forth information concerning stock options granted
to our named executive officers in the year 2000 as of May 23, 2000.
<TABLE>
<CAPTION>
Individual Grants
-----------------------------------------------
Potential
Realizable
Value at
Assumed Rates
of
Stock Price
Number of Percentage of Appreciation
Securities Total Options for Option
Underlying Granted to Exercise Term
Options Employees in Price Expiration -------------
Name Granted Fiscal Year (per share) Date 5% 10%
- ---- ---------- ------------- ----------- ---------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
David C. U'Prichard,
Ph.D. ................. 37,500 $2.25 03/31/10
F. Raymond Salemme,
Ph.D. ................. 62,500 $2.25 03/31/10
Michael J. Wassil....... 13,000 $2.25 03/31/10
Scott M. Horvitz........ 42,000 $2.25 03/31/10
Roger F. Bone........... 46,000 $2.25 03/31/10
</TABLE>
The figures in the two tables above represent options granted under our
Equity Compensation Plan. We granted options to purchase 2,478,570 shares of
our common stock in 1999 and as of May 22, 2000 have granted options to
purchase 810,000 shares of our common stock in 2000. All options were granted
at an exercise price equal to or greater than the fair market value of the
common stock on the date of grant as determined by our board of directors.
The options granted to our employees typically vest in 25% increments on each
of the four annual anniversaries of the date of grant. The options granted to
our consultants generally vest in 33% increments on each of the three annual
anniversaries of the date of the grant or in accordance with specified
performance goals over a ten-year term. Options granted to the persons listed
above expire 10 years from the grant date.
We have never granted stock appreciation rights.
Equity Compensation Plan
On August 31, 1993, our board adopted our equity compensation plan, and the
plan was approved by our stockholders on October 12, 1993. The plan has been
subsequently amended, most recently in March 2000, to authorize a total of
9,325,000 shares of common stock for issuance under the plan.
The plan provides for grants of incentive stock options, nonqualified stock
options, and restricted stock grants to our officers and employees, our non-
employee directors and members of the Scientific Advisory Board, and
independent contractors and consultants (who may be individuals or entities)
that perform services for us.
General. The plan, as amended, authorizes up to 9,325,000 shares of our
common stock for issuance under the terms of the plan. The maximum number of
shares for which any individual may receive grants under the plan in any
calendar year is 1,000,000 shares. If options granted under the plan expire or
are terminated for any reason without being exercised, or if shares of
restricted stock are forfeited, the shares of common stock underlying the
grants will again be available for purposes of the plan. As of May 23, 2000,
5,757,124 shares are issuable upon the exercise of options outstanding under
the plan and 2,633,907 shares have been issued under the plan, including
706,488 shares subject to repurchase.
Administration of the Plan. The compensation committee of the board of
directors administers and makes grants under the plan.
59
<PAGE>
Grants. Grants under the plan may consist of:
. options intended to qualify as incentive stock options;
.nonqualified stock options; and
.restricted stock.
Eligibility for Participation. Grants may be made to any of our officers and
employees, members of our board of directors and the Scientific Advisory Board,
and independent contractors and consultants who perform services for us.
Options. The exercise price of options will be determined by the compensation
committee. The exercise price for incentive stock options will be equal to the
fair market value of our common stock on the date the option is granted;
however, the exercise price of an incentive stock option granted to an
individual who owns more than 10% of the voting power of our stock will not be
less than 110% of the fair market value of our stock on the date the option is
granted.
Participants may pay the exercise price:
. in cash;
. with the approval of the compensation committee, by delivering shares of
common stock owned by the grantee and having a fair market value on the
date of exercise equal to the exercise price of the option; or
. by such other method as the compensation committee may designate in the
grant letter, including tendering the grantee a recourse promissory note
on terms specified by the compensation committee.
Options will become exercisable according to the terms determined by the
compensation committee and specified in the grant letter. The compensation
committee may impose restrictions on shares received upon the exercise of
options. The compensation committee will determine the term of each option, up
to a maximum ten-year term.
Restricted Stock. The compensation committee may issue shares of stock to
participants subject to restrictions established by the committee. If
restricted stock is purchased, the grantee may pay the purchase price in cash
or, if the compensation committee permits, by a promissory note. If a grantee's
employment or service terminates during the restriction period or if any other
conditions are not met, the restricted stock will terminate as to all shares on
which restrictions are still applicable, and the shares must be immediately
returned to us, unless the compensation committee determines otherwise.
Certain Corporate Changes. If all or substantially all of our assets are sold
or exchanged, we are to be dissolved or liquidated, or we are party to a merger
or consolidation with another corporation in which we will not be the surviving
corporation, then, unless the compensation committee provides otherwise in the
grant letter, each grantee will have the right to exercise the entire portion
of his or her grant not previously exercised within ten days after written
notice of the transaction is given to grantees, and any grants not exercised
after the ten day period will be forfeited.
If we are a party to a merger or consolidation in which we are the surviving
corporation, then the compensation committee may determine that grantees will
have the right to exercise the entire portion of their grants not previously
exercised within ten days after written notice of the transaction is given to
grantees, and any grants not exercised after the ten day period will be
forfeited.
In addition, the compensation committee may provide in the grant letter
specific provisions that are applicable in the event of a corporate
transaction, and the committee may also articulate the exercisability or
vesting of grants in the event of a corporate transaction or allow the
surviving corporation to assume or substitute outstanding grants.
60
<PAGE>
Transferability. Grants are generally not transferable by the participant,
except in the event of death. However, the compensation committee may permit
participants to transfer nonqualified stock options to family members or other
persons or entities on such terms as the compensation committee deems
appropriate.
Amendment and Termination of the Plan. The board of directors may amend or
terminate the plan at any time. However, the board of directors may not make
any amendment without stockholder approval if stockholder approval is required
by Section 162(m) of the Internal Revenue Code. The plan will terminate on
August 31, 2003, unless the board of directors terminates the plan earlier or
extends it with approval of the stockholders.
Adjustment Provisions. Upon a merger, recapitalization, stock split or other
change to our stock, the compensation committee shall appropriately adjust:
. the maximum number and class of shares available for grants under the
plan;
. the number and class of shares covered by outstanding grants; and
. the price per share of each outstanding option.
Section 162(m). Section 162(m) of the Internal Revenue Code imposes a
$1,000,000 limit on the amount a public corporation can deduct for federal
income tax purposes for compensation paid to the chief executive officer or any
of the four other most highly compensated officers in any year. This limit
generally applies to all compensation, including amounts received upon the
exercise of stock options and the value of shares or cash paid pursuant to
other grants. An exception exists, however, for "performance-based
compensation." Stock options generally will meet the requirements of
performance-based compensation. Restricted stock granted under the plan will
not meet the requirements for performance-based compensation under section
162(m).
Employment, Change of Control and Termination of Employment Arrangements
All of our employees, including our officers, are given employment offer
letters providing for their base compensation as well as potential additional
compensation in the form of bonuses or equity compensation pursuant to our
equity compensation plan. Some of the employment offer letters also provide for
severance payments covering periods of up to six months. In addition, our
equity compensation plan, as described elsewhere in this prospectus, contains
provisions concerning accelerated vesting of options and restricted stock in
connection with certain corporate changes. Except for such accelerated vesting
of their options or restricted stock upon such changes, none of our officers,
except for Dr. U'Prichard, has any compensatory plan or arrangement whereby a
resignation, retirement or other termination or a change in control could
result in payments to such officer exceeding $100,000.
In addition, in September 1999, we entered into an employment offer letter
with David C. U'Prichard, Ph.D., our Chief Executive Officer. Pursuant to his
employment offer letter, Dr. U'Prichard's annual compensation was initially set
at a base salary of $325,000 and a target bonus of 40% of his base salary. In
addition, we granted Dr. U'Prichard options to purchase 1,720,000 shares of
common stock at an exercise price of $1.05 per share and options to purchase
344,000 shares of our common stock at an exercise price of $2.60. These options
vest 25% per year, beginning on the first anniversary of the grant date. During
the six months following the date of grant, such options may be exercised early
(i.e., without regard to the vesting provisions applicable to such options) and
the purchase price of such options may be paid by delivery of a promissory
note, bearing interest at the minimum rate necessary to avoid imputed interest,
with interest and principal being repayable in four equal installments on the
first four anniversaries of the date such options were granted. See "Certain
Relationships and Related Transactions". In general, early vesting provisions
would apply in the case of certain corporate changes, as provided in our equity
compensation plan, however, if a certain transaction occurs within the first
year of his date of hire, his early vesting rights under the plan would be
limited. In the event that, within two years of the date such options were
granted, there is a sale of substantially all our assets or a merger where we
are not the surviving entity, and such options are not assumed, the minimum
worth of all
61
<PAGE>
such options which are vested will be deemed to be not less than $1.5 million,
as determined by our board of directors, and we will, if necessary, make a cash
payment to Dr. U'Prichard. In the event Dr. U'Prichard's employment is
terminated without cause, he will receive a severance compensation equal to his
base salary and payment of health insurance premiums for up to 12 months or
until he begins new full-time employment (except in the nonprofit sector),
whichever occurs first, and a payment in each month of such period of an
additional amount equal to one-twelfth of his prior year's bonus, if any
(annualized in respect of the bonus payment for 1999), times the portion of the
current fiscal year that has expired up to the date of his termination. In
addition, with respect to the 25% of his options vesting on the next
anniversary following termination, such options will be deemed to have been
subject to vesting in equal monthly portions during the twelve months prior to
such anniversary. If such a termination without cause occurs within 12 months
after a sale of our company, then the continued salary referred to in the
preceding sentence will be paid in a lump sum, and Dr. U'Prichard will be
entitled to a further lump-sum payment equal to the prior year's bonus payment,
annualized in respect of the bonus payment for 1999.
62
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Transactions with Management and Others
Series A-5 Preferred Stock Financing. In March 2000, we issued 9,572,248
shares of series A-5 preferred stock for $3.00 per share to eleven accredited
investors. Included in the amount were 3,451,165 shares issued upon the
conversion of the November 1999 Bridge Financing. The series A-5 preferred
stock will automatically convert into an aggregate of shares of common
stock upon the closing of this offering. Investors owning 5% or more of our
shares and directors and officers who participated in this transaction include:
<TABLE>
<CAPTION>
Number of Shares of
Number of Shares of Common Stock upon
Series A-5 Conversion of Series A-5
Investor Preferred Stock Preferred Stock
- -------- ------------------- ------------------------
<S> <C> <C>
HealthCareVentures III, L.P. ..... 1,067,100
HealthCareVentures IV, L.P. ...... 313,366
HealthCareVentures V, L.P......... 1,022,253
Rho Management Trust II........... 1,702,016
Abingworth Bioventures SICAV...... 576,459
Biotech Growth SA................. 3,878,170
</TABLE>
Dr. Cavanaugh and Mr. Werner, two of our directors, are general partners of
HealthCare Partners III, L.P., HealthCare Partners IV, L.P. and HealthCare
Partners V, L.P., which are the general partners of HealthCare Ventures III,
L.P., HealthCare Ventures IV, L.P. and HealthCare Ventures V, L.P.,
respectively. In this prospectus we refer to HealthCare Ventures III, L.P.,
HealthCare Ventures IV, L.P. and HealthCare Ventures V, L.P., collectively, as
funds affiliated with HealthCare Ventures.
Mr. Ruch, one of our directors, is the Chairman and Chief Executive Officer
of Rho Management Company, Inc., financial advisor to Rho Management Trust II.
Dr. Bunting, one of our directors, is a director of Abingworth Management
Limited in London, UK. Abingworth Management Limited is the investment adviser
to Abingworth Bioventures SICAV.
1999 Bridge Loan Financing. In November 1999, we issued and sold $10,000,000
of secured convertible promissory notes to eight accredited investors. The
promissory notes carried an interest rate of prime plus one percent per year
and under their terms automatically converted into 3,451,165 shares of series
A-5 preferred stock in March 2000. In connection with this financing, we issued
warrants to purchase 3,500,000 shares of our common stock at an exercise price
of $1.25 per share. Investors owning 5% or more of our capital stock and
directors and officers who participated in this transaction include:
<TABLE>
<CAPTION>
Number of Shares of
Common Stock
Investor Promissory Note Underlying Warrants
- -------- --------------- -------------------
<S> <C> <C>
HealthCare Ventures III, L.P. .............. $3,092,000 1,082,200
HealthCare Ventures IV, L.P. ............... 908,000 317,800
Rho Management Trust II..................... 3,000,000 1,050,000
Abingworth Bioventures SICAV................ 884,732 309,656
Biotech Growth SA........................... 1,578,706 552,547
</TABLE>
Series A-4 Preferred Stock Financing. In January 1998, we issued 4,000,000
shares of series A-4 preferred stock for $2.60 per share to Biotech Growth SA.
The series A-4 preferred stock will automatically convert into an aggregate of
shares of common stock upon the closing of this offering.
63
<PAGE>
Series A-3 Preferred Stock Financing. In March 1997 we issued 10,304,264
shares of series A-3 preferred stock for $1.21 per share to twelve accredited
investors. The series A-3 preferred stock will automatically convert into an
aggregate of shares of common stock upon the closing of this offering.
Investors owning 5% or more of our shares and directors and officers who
participated in this transaction include:
<TABLE>
<CAPTION>
Number of Shares
of Common Stock
Number of Shares of upon Conversion
Series A-3 of Series A-3
Investor Preferred Stock Preferred Stock
- -------- ------------------- ----------------
<S> <C> <C>
HealthCareVentures III, L.P. ............. 318,608
HealthCareVentures IV, L.P. .............. 93,563
Rho Management Trust II................... 2,640,089
Abingworth Bioventures SICAV.............. 2,060,853
State of Michigan Retirement Systems...... 2,473,023
</TABLE>
1996 Bridge Loan Financing. In September 1996, we issued and sold $500,000 of
promissory notes to five accredited investors. The promissory notes carried an
interest rate of ten percent per year. In March 1997, we repaid the notes,
together with accrued interest of $23,014. In connection with this financing,
in March 1997 we issued warrants to purchase 100,000 shares of our common stock
at an exercise price of $0.01 per share. Investors owning 5% or more of our
capital stock and directors and officers who participated in this transaction
include:
<TABLE>
<CAPTION>
Number of Shares of
Common Stock
Investor Promissory Note Underlying Warrants
- -------- --------------- -------------------
<S> <C> <C>
HealthCare Ventures III, L.P. .............. $316,288 63,257
HealthCare Ventures IV, L.P. ............... 92,882 18,577
Rho Management Trust II..................... 74,709 14,941
</TABLE>
Other Agreements With Officers And Directors
In February 1997, we made a loan of $106,250 at 6.28% to F. Raymond Salemme,
our President and Chief Scientific Officer, to purchase 425,000 shares of our
restricted stock awarded to him under our equity compensation plan for a
purchase price of $0.25 per share. In September 1997, we made a loan of $75,000
at 6.14% to Michael J. Wassil, our Vice President and Chief Financial Officer,
to purchase 75,000 shares of our restricted stock awarded to him under our
equity compensation plan for a purchase price of $1.00 per share. Our
compensation committee has the discretion to forgive the loans to Dr. Salemme
and Mr. Wassil. Over the last two years, our compensation committee has
forgiven the loans at a rate of 25% of the outstanding principal and interest
per year. As of March 31, 2000, the outstanding principal amount of Dr.
Salemme's loan was $26,563 and the outstanding principal amount of Mr. Wassil's
loan was $37,500. In March 2000, we made a loan of $519,505 at 6.69% to David
C. U'Prichard, Ph.D., our Chief Executive Officer, to exercise options to
purchase 495,238 shares of our restricted stock at a purchase price of $1.05
per share, as provided under the terms of his employment offer letter. These
shares are subject to repurchase restrictions which lapse over the same period
as the predecessor stock options would have vested.
Drs. Canavan and Horovitz, two of our directors, each have received grants of
options to purchase 50,000 shares of our common stock under our Equity
Compensation Plan in connection with their service as directors. In addition,
Mr. King, one of our directors, received a restricted stock grant in connection
with his service as a director of 20,000 shares of common stock for an
aggregate purchase price of $45,000. All of the option grants and restricted
stock awards for our directors vest in equal annual installments over a period
of four years.
Certain Business Relationships
David R. King, one of our directors, is a partner at Morgan, Lewis & Bockius
LLP, a law firm which has provided legal services for us in each of our last
three fiscal years.
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<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth information with respect to the beneficial
ownership of our common stock as of May 23, 2000, and after the sale of shares
in this offering, by:
. each person or entity who beneficially owns more than 5% of our stock;
. each of our named executive officers;
. each of our directors; and
. all of our directors and executive officers as a group.
Unless otherwise indicated, the address for each stockholder is care of 3-
Dimensional Pharmaceuticals, Inc., 665 Stockton Drive, Exton, Pennsylvania
19341. Beneficial ownership is determined in accordance with the rules of the
SEC governing the determination of beneficial ownership of securities.
Under the rules of the SEC, a person is deemed to be a beneficial owner of a
security if that person has or shares voting power, which includes the power to
vote or to direct the voting of such security, or investment power, which
includes the power to dispose of or to direct the disposition of such security.
A person is also deemed to be a beneficial owner of any securities for which
that person has a right to acquire beneficial ownership within 60 days. Under
these rules, more than one person may be deemed a beneficial owner of the same
securities and a person may be deemed to be the beneficial owner of securities
as to which such person has no economic interest.
<TABLE>
<CAPTION>
Percentage of Shares
Beneficially Owned
-------------------------
Name and Address of Beneficial Number of Shares Before After
Owner Beneficially Owned Offering Offering
- ------------------------------ ------------------ ----------- ----------
<S> <C> <C> <C>
5% Stockholders
Funds Affiliated with HealthCare 12,570,688 29.95%
Ventures(1).....................
44 Nassau Street
Princeton, New Jersey 08542
Rho Management Trust II(2)....... 7,373,260 18.03
152 West 57th street
New York, NY 10019
State of Michigan Retirement 2,473,023 6.25
Systems.........................
Department of Treasury, Treasury
Building
30 West Allegan
East Lansing, Michigan 48922
Abingworth Bioventures SICAV(3).. 2,946,968 7.39
c/o Sanne & Cie
Boite Postale 566
L-2015 Luxembourg
Biotech Growth SA(4)............. 8,430,717 21.01
c/o Bellevue Asset Management AG
Graftenauweg 4
CH-6301 Zug
Switzerland
</TABLE>
65
<PAGE>
<TABLE>
<CAPTION>
Percentage of Shares
Beneficially Owned
------------------------
Number of Shares Before After
Directors and Executive Officers Beneficially Owned Offering Offering
- -------------------------------- ------------------ ----------- ----------
<S> <C> <C> <C>
David C. U'Prichard, Ph.D. ..... 495,238 1.25
F. Raymond Salemme, Ph.D.(5).... 1,413,273 3.52
Michael J. Wassil(6)............ 184,128 *
Roger F. Bone, Ph.D.(7)......... 171,792 *
David G. Fehr(8)................ 82,857 *
Scott M. Horvitz(9)............. 197,033 *
Richard M. Soll, Ph.D.(10)...... 157,554 *
Stephen Bunting, Ph.D.(3)....... 2,946,968 7.39
Bernard Canavan, M.D.(11)....... 22,500 *
James H. Cavanaugh, Ph.D.(1).... 12,570,688 29.95
Zola P. Horovitz, Ph.D.(12)..... 22,500 *
David R. King................... 20,000 *
Joshua Ruch(2).................. 7,373,260 18.03
Harold R. Werner(1)............. 12,570,688 29.95
---------- ----------- ---------
All executive officers and 26,144,332 58.50
directors as a group (13
persons).......................
</TABLE>
- --------
* less than one percent
(1) Includes 8,926,936 shares held by HealthCare Ventures III, L.P., including
1,853,385 shares issuable upon exercise of warrants exercisable within 60
days. Also includes 2,621,499 shares held by HealthCare Ventures IV, L.P.,
including 544,270 shares issuable upon exercise of warrants exercisable
within 60 days. Also includes 1,022,253 shares held by HealthCare Ventures
V, L.P. James H. Cavanaugh, Ph.D. and Harold R. Werner are General Partners
of the general partner of each of the above-listed investment funds, and
share investment and voting power over these shares with the other General
Partners of each of the general partners of these funds, none of whom are
affiliated with us. Dr. Cavanaugh and Mr. Werner disclaim beneficial
ownership of such shares except to the extent of their pecuniary interest
therein. Does not reflect shares of common stock issuable at the initial
public offering price upon the automatic conversion of $528,364 of
convertible promissory notes, plus accrued interest, and $155,160 of
convertible promissory notes, plus accrued interest, issued to HealthCare
Ventures III, L.P. and HealthCare Ventures IV, L.P., respectively, in lieu
of cash payment of dividends.
(2) Includes 7,373,260 shares held by Rho Management Trust II, including
1,335,121 shares issuable upon exercise of warrants exercisable within 60
days. Joshua Ruch is the Chairman and Chief Executive Officer of Rho
Management Company, Inc., financial advisor to Rho Management Trust II. Mr.
Ruch disclaims beneficial ownership of such shares except to the extent of
his pecuniary interest therein. Does not reflect shares of common stock
issuable at the initial public offering price upon the automatic conversion
of $91,422 of convertible promissory notes, plus accrued interest, issued
to Rho Management Trust II in lieu of cash payment of dividends.
(3) Includes 2,946,968 shares held by Abingworth Bioventures SICAV, including
309,656 shares issuable upon exercise of warrants exercisable within 60
days. Stephen Bunting, Ph.D. is a director of Abingworth Management
Limited, the investment adviser to Abingworth Bioventures SICAV. Dr.
Bunting is neither a director nor an officer of Abingworth Bioventures
SICAV. Dr. Bunting disclaims beneficial ownership of such shares except to
the extent of his pecuniary interest in Abingworth Bioventures SICAV.
(4) Includes 552,547 shares issuable upon exercise of warrants exercisable
within 60 days.
(5) Includes 559,523 shares of common stock issuable upon the exercise of stock
options exercisable within 60 days.
(6) Includes 109,128 shares of common stock issuable upon the exercise of stock
options exercisable within 60 days.
(7) Includes 90,381 shares of common stock issuable upon the exercise of stock
options exercisable within 60 days.
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<PAGE>
(8) Includes 72,857 shares of common stock are issuable upon the exercise of
stock options exercisable within 60 days.
(9) Includes 57,033 shares of common stock issuable upon the exercise of stock
options exercisable within 60 days.
(10) Includes 155,054 shares of common stock issuable upon the exercise of
stock options exercisable within 60 days.
(11) All 22,500 shares of common stock are issuable upon the exercise of stock
options exercisable within 60 days.
(12) Includes 17,500 shares of common stock are issuable upon the exercise of
stock options exercisable within 60 days.
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<PAGE>
DESCRIPTION OF CAPITAL STOCK
The following description reflects the amendment and restatement of our
certificate of incorporation and our bylaws to be effective immediately prior
to the closing of this offering.
Our authorized capital stock consists of million shares, of which
million shares are common stock, par value $.001 per share, and million
shares are preferred stock, par value $.001 per share, which our board of
directors has the power and authority to designate into classes or series.
Immediately after the sale of the shares of common stock in this offering, we
will have shares of common stock outstanding and no shares of preferred
stock outstanding. The following is a summary of various provisions of our
common stock and preferred stock.
Common Stock
The following summarizes the rights of holders of our common stock:
Voting:
. one vote for each share held of record on all matters submitted to a vote
of stockholders
. no cumulative voting rights
. election of directors by plurality of votes cast
. approval of all other matters by majority of votes cast
Dividends:
. subject to preferential dividend rights of outstanding shares of
preferred stock, if any, common stockholders are entitled to receive
declared dividends
. the board of directors may only declare dividends out of legally
available funds
Additional Rights:
. subject to the preferential liquidation rights of outstanding shares of
preferred stock, if any, common stockholders are entitled to receive
ratably net assets, available after the payment of all debts and
liabilities, upon our liquidation, dissolution or winding up
. no preemptive rights
. no subscription rights
. no redemption rights
. no sinking fund rights
. no conversion rights
The rights and preferences of common stockholders are subject to the rights
of the holders of any series of preferred stock we may issue in the future.
Preferred Stock
We may, by resolution of our board of directors, and without any further vote
or action by our stockholders, authorize and issue, subject to limitations
prescribed by law, up to an aggregate of million shares of preferred stock.
The preferred stock may be issued in one or more classes or series of shares of
any class or series. With respect to any classes or series, the board of
directors may determine the designation and the number of shares, preferences,
limitations and special rights, including dividend rights, conversion rights,
voting rights, redemption rights and liquidation preferences.
Prior to this offering, we had 6,686,986 shares of series A-1 preferred
stock, 4,333,990 shares of Series A-2 preferred stock, 10,304,264 shares of
series A-3 preferred stock, 4,000,000 shares of A-4 preferred stock,
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<PAGE>
9,572,248 shares of series A-5 preferred stock, 1,000,000 shares of series B
preferred stock, 400,000 shares of series C preferred stock and 625,000 shares
of series D preferred stock issued and outstanding. Upon the completion of this
offering, all of our outstanding shares of preferred stock will automatically
convert into a total of shares of common stock.
Registration Rights
Following completion of this offering and following the expiration of
applicable lock-up periods in connection with the offering, holders of
shares of common stock will have the right to require us to register their
shares under the Securities Act of 1933. The holders of at least 50% of the
shares of our common stock to be issued upon the conversion of our outstanding
series A preferred stock and certain warrants to acquire common stock may
require that we file up to four registration statements under the Securities
Act. In addition, when we are qualified to use Form S-3, each of these holders
may request an unlimited number of registrations on Form S-3. Beginning 12
months after the effective date of this offering, the holder of the shares of
our common stock to be issued upon the conversion of our outstanding series B
preferred stock may request that we file one registration statement. Subject to
the preference rights of the holders of common stock to be issued upon the
conversion of the series A preferred stock and subject to certain limitations,
beginning 12 months after the effective date of this offering, the holders of
the shares of our common stock to be issued upon the conversion of our
outstanding series C or D preferred stock may require that we file one
registration statement. They may also request that we file an unlimited number
of registrations on Form S-3, subject to preference rights of the holders of
common stock to be issued upon the conversion of the series A preferred stock.
Upon such a request, we generally will be required to use our best efforts to
effect any such registration. In addition, if we propose to register any of our
common stock, either for our own account or the account of stockholders, we are
required to notify the holders described above and, subject to certain
limitations, to include in such registration the shares of our common stock
acquired upon conversion of the preferred stock requested to be included.
Registration of shares of common stock pursuant to the exercise of these
registration rights would result in such shares becoming freely tradable
without restriction under the Securities Act of 1933 immediately upon the
effectiveness of such registration and may adversely affect our stock price. In
addition, we are generally obligated to bear the expenses, other than
underwriting discounts and sales commissions, of any such registration. The
registration rights associated with the series A preferred stock terminate on
December 31, 2007. The registration rights associated with the series B and C
preferred stock terminate six years following the effective date of this
offering and the registration rights associated with the series D preferred
stock terminate three years following such date.
Stockholders' Meeting
Our next annual meeting of stockholders will be held in 2001.
Limitations on Liability
Our certificate of incorporation limits or eliminates the liability of our
directors to us or our stockholders for monetary damage to the fullest extent
permitted by the Delaware General Corporation Law. As permitted by the Delaware
General Corporation Law, our certificate of incorporation provides that our
directors will not be personally liable to us or our stockholders for monetary
damages for a breach of fiduciary duty as a director, except for liability:
. for any breach of such person's duty of loyalty;
. for acts or omissions not in good faith or involving intentional
misconduct or a knowing violation of law; and
. for any transaction resulting in receipt by such person of an improper
personal benefit.
Our certificate of incorporation also contains provisions indemnifying our
directors and officers to the fullest extent permitted by the Delaware General
Corporation Law.
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<PAGE>
Anti-Takeover Effects of Provisions of Charter Documents and Delaware Law
Upon completion of this offering our certificate of incorporation will
provide for the division of our board of directors into three classes. Each
class must be as nearly equal in number as possible. Additionally, each class
must serve a three-year term. The terms of each class are staggered so that
each term ends in a different year over a three-year period. A director may
only be removed for cause and only by the vote of more than 50% of the shares
entitled to vote for the election of directors.
Our certificate of incorporation also provides that our board of directors
may establish the rights of, and cause us to issue, substantial amounts of
preferred stock without the need for stockholder approval. Further, our board
of directors may determine the terms, conditions, rights, privileges and
preferences of the preferred stock. Our board is required to exercise its
business judgment when making such determinations. Our board of directors' use
of the preferred stock may inhibit the ability of third parties to acquire us.
Additionally, our board may use the preferred stock to dilute the common stock
of entities seeking to obtain control of us. The rights of the holders of
common stock will be subject to, and may be adversely affected by, any
preferred stock that may be issued in the future. Our preferred stock provides
desirable flexibility in connection with possible acquisitions, financings and
other corporate transactions. However, it may have the effect of discouraging,
delaying or preventing a change in control of us. We have no present plans to
issue any shares of preferred stock.
The existence of the foregoing provisions in our certificate of incorporation
could make it more difficult for third parties to acquire or attempt to acquire
control of us or substantial amounts of our common stock.
After this offering is completed, Section 203 of the Delaware General
Corporation Law will apply to us. Section 203 of the Delaware General
Corporation Law generally prohibits specific business combinations between a
Delaware corporation and an interested stockholder. An interested stockholder
is generally defined as a person who, together with any affiliates or
associates of such person, beneficially owns, or within three years did own,
directly or indirectly, 15% or more of the outstanding voting shares of a
Delaware corporation. The statute broadly defines business combinations to
include:
. mergers;
. consolidations;
. sales or other dispositions of assets having an aggregate value in excess
of 10% of the consolidated assets of the corporation or aggregate market
value of all outstanding stock of the corporation; and
. certain transactions that would increase the interested stockholder's
proportionate share ownership in the corporation.
The statute prohibits any such business combination for a period of three
years commencing on the date the interested stockholder becomes an interested
stockholder, unless:
. the business combination is approved by the corporation's board of
directors prior to the date the interested stockholder becomes an
interested stockholder;
. the interested stockholder acquired at least 85% of the voting stock of
the corporation, other than stock held by directors who are also officers
or by certain employee stock plans, in the transaction in which it
becomes an interested stockholder; and
. the business combination is approved by a majority of the board of
directors and by the affirmative vote of at least two-thirds of the
outstanding voting stock that is not owned by the interested stockholder.
The Delaware General Corporation Law contains provisions enabling a
corporation to avoid Section 203's restrictions if stockholders holding a
majority of the corporation's voting stock approve an amendment to the
corporation's certificate of incorporation or bylaws to avoid the restrictions.
In addition, the restrictions contained in Section 203 are not applicable to
any of our existing stockholders. We have not and do not currently intend to
elect out of the application of Section 203 of the Delaware General Corporation
Law.
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<PAGE>
Nasdaq National Market
We have applied to list our common stock on the Nasdaq National Market under
the trading symbol DDDP.
Transfer Agent and Registrar
The transfer agent and registrar for our common stock is .
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no public market for our common stock.
Future sales of substantial amounts of our common stock in the public market
could adversely affect prevailing market prices. Since no shares will be
available for sale shortly after this offering because of the contractual and
legal restrictions on resale described below, sales of substantial amounts of
common stock in the public market after these restrictions lapse could
adversely affect the prevailing market price and our ability to raise equity
capital in the future.
Upon completion of this offering, we will have outstanding an aggregate of
shares of common stock, assuming no exercise of the underwriters' over-
allotment option, excluding shares issuable upon exercise of outstanding
options. Of these shares, all of the shares sold in this offering will be
freely tradable without restriction or further registration under the
Securities Act of 1933, unless such shares are purchased by affiliates as that
term is defined in Rule 144 under the Securities Act. The remaining shares of
common stock, excluding shares issuable upon exercise of outstanding
options, held by existing stockholders are restricted securities as that term
is defined in Rule 144 under the Securities Act. Restricted shares may be sold
in the public market only if registered or if they qualify for an exemption
from registration described below under Rules 144, 144(k) or 701 promulgated
under the Securities Act.
Beginning 180 days after the date of this prospectus, approximately
restricted shares subject to lock-up agreements between the underwriters and
most of our stockholders, including officers and directors, will become
eligible for sale in the public market under Rule 144(k), Rule 144 or Rule 701.
The lock-up agreements provide that the stockholders will not, directly or
indirectly, sell or otherwise dispose of any shares of common stock without the
prior written consent of Bear, Stearns & Co. Inc. for a period of 180 days from
the date of this prospectus. Bona fide gifts by individuals to immediate family
members or transfers by a partnership to its partners are excepted from the
restrictions of the lock-up agreements, provided the transferee agrees to be
bound by similar restrictions. Bear, Stearns & Co. Inc. may release all or any
portion of the securities subject to the lock-up agreements without notice.
Rule 144
Under Rule 144, beginning 90 days after the date the registration statement
of which this prospectus is a part is declared effective, a person, or persons
whose shares are aggregated, who has beneficially owned restricted shares for
at least one year, which includes the holding period of any prior owner other
than an affiliate, would generally be entitled to sell within any three-month
period a number of shares that does not exceed the greater of:
. 1% of the outstanding shares of our common stock then outstanding, which
will equal approximately shares immediately after this offering; or
. the average weekly trading volume of our common stock on the Nasdaq
National Market during the four calendar weeks preceding the filing of a
notice on Form 144 with respect to such sale.
Sales under Rule 144 are also subject to certain manner of sale provisions
and notice requirements and to the availability of current public information
about us.
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<PAGE>
Rule 144(k)
Under Rule 144(k), a person who was not an affiliate of ours at any time
during the 90 days preceding a sale, and who has beneficially owned the shares
proposed to be sold for at least two years, which includes the holding period
of any prior owner except an affiliate, is entitled to sell such shares without
complying with the manner of sale, public information, volume limitation or
notice provisions of Rule 144.
Rule 701
In general, under Rule 701 of the Securities Act, any of our employees,
consultants or advisors, other than affiliates, who purchase or receives shares
from us in connection with a compensatory stock purchase plan or option plan or
other written agreement will be eligible to resell such shares beginning 90
days after the effective date of the registration statement of which this
prospectus is a part, subject only to the manner of sale provisions of Rule
144, and by affiliates under Rule 144 without compliance with its holding
period.
Registration Rights
Upon completion of this offering, the holders of shares of common stock,
or their transferees, will be entitled to certain rights with respect to the
registration of such shares under the Securities Act. When these shares are
registered under the Securities Act, they will be freely tradable unless held
by affiliates.
Stock Options
We intend to file a registration statement under the Securities Act covering
shares of common stock reserved for issuance under our equity compensation
plan 180 days following completion of this offering. Thereafter, shares which
are issued under the plan will, subject to Rule 144 volume limitations
applicable to affiliates, be available for sale in the open market, beginning
approximately 180 days after the closing of this offering.
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<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in an agreement among the
underwriters and us, each of the underwriters named below, through their
representatives, Bear, Stearns & Co. Inc., Chase Securities Inc. and U.S.
Bancorp Piper Jaffray Inc., have severally agreed to purchase from us the
aggregate number of shares of our common stock set forth opposite its name
below:
<TABLE>
<CAPTION>
Number
Underwriter Of Shares
----------- ---------
<S> <C>
Bear, Stearns & Co. Inc............................................
Chase Securities Inc...............................................
U.S. Bancorp Piper Jaffray Inc.....................................
---
Total..........................................................
===
</TABLE>
The underwriting agreement provides that the obligations of the several
underwriters are subject to approval of various legal matters by their counsel
and to various other conditions, including delivery of legal opinions by our
counsel, the delivery of a letter by our independent auditors and the accuracy
of the representations and warranties made by us in the underwriting agreement.
Under the underwriting agreement, the underwriters are obliged to purchase and
pay for all of the above shares of our common stock if any are purchased.
Public Offering Price
The underwriters propose to offer the shares of common stock directly to the
public at the offering price set forth on the cover page of this prospectus and
at that price less a concession not in excess of $ per share of common stock
to other dealers who are members of the National Association of Securities
Dealers, Inc. The underwriters may allow, and those dealers may reallow,
concessions not in excess of $ per share of common stock to other dealers.
After this offering, the offering price, concessions and other selling terms
may be changed by the underwriters. Our common stock is offered subject to
receipt and acceptance by the underwriters and subject to other conditions,
including the right to reject orders in whole or in part. The underwriters have
informed us that the underwriters do not expect to confirm sales of common
stock to any accounts over which they exercise discretionary authority.
The following table summarizes the per share and total public offering price
of the shares of common stock in the offering, the underwriting compensation to
be paid to the underwriters by us and the proceeds of the offering, before
expenses, to us. The information presented assumes either no exercise or full
exercise by the underwriters of their over-allotment option.
<TABLE>
<CAPTION>
Total
------------------------
Per Without Over- With Over-
Share Allotment Allotment
----- ------------- ----------
<S> <C> <C> <C>
Public offering price.......................... $ $ $
Underwriting discounts and commissions payable
by us.........................................
Proceeds, before expenses, to us...............
</TABLE>
The underwriting discount and commission per share is equal to the public
offering price per share of our common stock less the amount paid by the
underwriters to us per share of common stock.
We estimate total expenses payable by us in connection with this offering,
other than the underwriting discounts and commissions referred to above, will
be approximately $1.2 million.
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<PAGE>
Over-Allotment Option To Purchase Additional Shares
We have granted a 30-day over-allotment option to the underwriters to
purchase up to an aggregate of additional shares of our common stock
exercisable at the offering price less the underwriting discounts and
commissions, each as set forth on the cover page of this prospectus. If the
underwriters exercise this option in whole or in part, then each of the
underwriters will be obligated to purchase additional shares of common stock in
proportion to their respective purchase commitments as shown in the table set
forth above, subject to various conditions.
Indemnification And Contribution
The underwriting agreement provides that we will indemnify the underwriters
against liabilities specified in the underwriting agreement under the
Securities Act or will contribute to payments that the underwriters may be
required to make in respect of those liabilities.
Lock-Up Agreements
Our directors and officers and stockholders holding shares have agreed
that they will not offer, sell or agree to sell, directly or indirectly, or
otherwise dispose of any shares of common stock in the public market without
the prior written consent of Bear, Stearns & Co. Inc. for a period of 180 days
from the date of this prospectus. Bona fide gifts by individuals to immediate
family members or transfers by a partnership to its partners are excepted from
the restrictions of the lock-up agreements, provided the transferee agrees to
be bound by similar restrictions.
In addition, we have agreed that for a period of 180 days from the date of
this prospectus, we will not, without the prior written consent of Bear,
Stearns & Co. Inc., offer, sell or otherwise dispose of any shares of common
stock, except that we may issue, and grant options to purchase, shares of
common stock and restricted stock under our equity compensation plan. During
this lock-up period, subject to various conditions, we may also issue
additional equity securities in connection with collaborative and licensing
arrangements or to pay for possible acquisitions, so long as the recipients of
such securities are also subject to the 180 day lock-up period.
Nasdaq National Market Quotation
Prior to this offering, there has been no public market for our common stock.
Consequently, the initial offering price for the common stock will be
determined by negotiations between us and the representatives of the
underwriters. Among the factors to be considered in those negotiations, the
primary factors will be our results of operations in recent periods, estimates
of our prospects and the industry in which we compete, an assessment of our
management, the general state of the securities markets at the time of this
offering and the prices of similar securities of generally comparable
companies. We have applied for approval for the quotation of our common stock
on the Nasdaq National Market, under the symbol "DDDP." We cannot assure you,
however, that an active or orderly trading market will develop for the common
stock or that the common stock will trade in the public market subsequent to
this offering at or above the initial offering price.
Stabilization, Syndicate Short Position And Penalty Bids
In order to facilitate this offering, persons participating in this offering
may engage in transactions that stabilize, maintain or otherwise affect the
price of the common stock during and after this offering. Specifically, the
underwriters may over-allot or otherwise create a short position in the common
stock for their own account by selling more shares of common stock than we have
actually sold to them. The underwriters may elect to cover any such short
position by purchasing shares of common stock in the open market and may impose
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<PAGE>
penalty bids, under which selling concessions allowed to syndicate members or
other broker-dealers participating in this offering are reclaimed if shares of
common stock previously distributed in this offering are repurchased in
connection with stabilization transactions or otherwise. The effect of these
transactions may be to stabilize or maintain the market price at a level above
that which might otherwise prevail in the open market. The imposition of a
penalty bid may also affect the price of the common stock to the extent that it
discourages resales thereof. No representation is made as to the magnitude or
effect of any such stabilization or other transactions. Such transactions may
be effected on the Nasdaq National Market or otherwise and, if commenced, may
be discontinued at any time.
Reserved Share Program
At our request, the underwriters have reserved for sale at the initial public
offering price up to shares of common stock to be sold in this offering for
sale to our directors, officers, employees, business associates, business and
legal advisors, vendors and related persons. Purchases of reserved shares are
to be made through an account at Bear, Stearns & Co. Inc. in accordance with
Bear, Stearns & Co. Inc.'s procedures for opening an account and transacting in
securities. The number of shares available for sale to the general public will
be reduced to the extent that any reserved shares are purchased. Any reserved
shares not purchased by our directors, officers, employees, business
associates, business and legal advisors, vendors and related persons will be
offered by the underwriters to the general public on the same terms as the
other shares offered by this prospectus.
----------------
Bear, Stearns & Co. Inc. was previously retained by us to identify and
provide advice with respect to potential transactions. Bear, Stearns & Co. Inc.
would be entitled to a fee, based on the value of the transaction as defined in
the engagement letter, if there is an agreement in respect of a covered
transaction prior to December 31, 2000.
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<PAGE>
LEGAL MATTERS
The validity of the shares of common stock offered hereby will be passed upon
for us by Morgan, Lewis & Bockius LLP, Philadelphia, Pennsylvania. Certain
legal matters will be passed upon for the Underwriters by Coudert Brothers, New
York, New York.
EXPERTS
Our financial statements and schedule included in this prospectus and
elsewhere in the registration statement as of December 31, 1999 (consolidated)
and 1998 and for the years ended December 1999, 1998 and 1997 have been audited
by Richard A. Eisner & Company, LLP, independent public accountants, as
indicated in their reports with respect thereto, and are included herein and
therein in reliance on said reports given upon the authority of said firm as
experts in accounting and auditing.
ADDITIONAL INFORMATION ABOUT US
We have filed with the Securities and Exchange Commission a registration
statement on Form S-1 with respect to the common stock offered hereby. This
prospectus, which constitutes a part of the registration statement, does not
contain all of the information set forth in the registration statement or the
exhibits and schedules which are part of the registration statement. For
further information with respect to us and our common stock, reference is made
to the registration statement and the exhibits and schedules. You may read and
copy any document we file at the Securities and Exchange Commission's public
reference facilities in Room 1024, 450 Fifth Street, N.W., Washington, D.C.
20549. Please call the Securities and Exchange Commission at 1-800-SEC-0330 for
further information about the public reference rooms. Our Securities and
Exchange Commission filings are also available to the public from the
Securities and Exchange Commission's web site at http://www.sec.gov. Upon
completion of this offering, we will become subject to the information and
periodic reporting requirements of the Securities Exchange Act and, in
accordance therewith, will file periodic reports, proxy statements and other
information with the Securities and Exchange Commission. Such periodic reports,
proxy statements and other information will be available for inspection and
copying at the Securities and Exchange Commission's public reference rooms and
the web site of the Securities and Exchange Commission referred to above.
76
<PAGE>
3-DIMENSIONAL PHARMACEUTICALS, INC.
Contents
<TABLE>
<CAPTION>
Page
----
<S> <C>
Financial Statements
Independent auditors' report............................................ F-2
Balance sheets as of March 31, 2000 (consolidated) (unaudited) and
December 31, 1999 (consolidated) and 1998.............................. F-3
Statements of operations for the three-month periods ended March 31,
2000 (consolidated) and 1999 (unaudited) and the years ended December
31, 1999, 1998 and 1997................................................ F-4
Statements of changes in capital deficiency for the three-month period
ended March 31, 2000 (consolidated) (unaudited) and the years ended
December 31, 1999, 1998 and 1997....................................... F-5
Statements of cash flows for the three-month periods ended March 31,
2000 (consolidated) and 1999 (unaudited) and the years ended December
31, 1999, 1998 and 1997................................................ F-6
Notes to financial statements........................................... F-7
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders
3-Dimensional Pharmaceuticals, Inc.
Exton, Pennsylvania
We have audited the accompanying balance sheets of 3-Dimensional
Pharmaceuticals, Inc. as of December 31, 1999 (consolidated) and 1998, and the
related statements of operations, changes in capital deficiency and cash flows
for each of the years in the three-year period ended December 31, 1999. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements enumerated above present fairly, in
all material respects, the financial position of 3-Dimensional Pharmaceuticals,
Inc. as of December 31, 1999 (consolidated) and 1998, and the results of
operations and cash flows for each of the years in the three-year period ended
December 31, 1999 in conformity with generally accepted accounting principles.
Richard A. Eisner & Company, LLP
New York, New York
February 25, 2000
F-2
<PAGE>
3-DIMENSIONAL PHARMACEUTICALS, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
March 31, --------------------------
2000 1999 1998
------------ ------------ ------------
(unaudited)
(consolidated)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.......... $ 22,038,000 $ 7,620,000 $ 2,439,000
Marketable securities.............. 7,287,000
Prepaid expenses and other current
assets............................ 298,000 243,000 271,000
Grants and contracts receivable.... 257,000 94,000 378,000
------------ ------------ ------------
Total current assets.............. 22,593,000 7,957,000 10,375,000
Property and equipment, net.......... 3,997,000 4,314,000 5,210,000
Other assets......................... 215,000 209,000 127,000
Notes receivable from officers....... 589,000 70,000 121,000
------------ ------------ ------------
$ 27,394,000 $ 12,550,000 $ 15,833,000
============ ============ ============
LIABILITIES AND CAPITAL DEFICIENCY
Current liabilities:
Accounts payable and accrued
expenses.......................... $ 1,917,000 $ 2,737,000 $ 1,272,000
Deferred income.................... 1,839,000 888,000 543,000
Current portion of long-term debt.. 1,140,000 1,139,000 1,033,000
Current portion of settlement
accrual........................... 1,000,000 1,000,000
------------ ------------ ------------
Total current liabilities......... 5,896,000 5,764,000 2,848,000
Notes payable--dividends and
accrued interest.................. 701,000 685,000 144,000
Long-term debt, less current
portion........................... 2,020,000 2,330,000 3,270,000
Convertible notes payable and
accrued interest.................. 10,115,000
Long-term portion of settlement
accrual........................... 500,000
------------ ------------ ------------
8,617,000 19,394,000 6,262,000
------------ ------------ ------------
Commitment and contingency (Notes L
and M)
Redeemable Convertible Series A
preferred stock--$.001 par value;
35,136,963 shares authorized,
34,897,488, 25,325,240 and
25,325,240 issued and outstanding at
March 31, 2000 and December 31, 1999
and 1998, respectively (aggregate
liquidating preference $63,721,218
at March 31, 2000 and $35,004,474 at
December 31, 1999 and 1998)......... 63,550,000 34,834,000 34,834,000
------------ ------------ ------------
Capital deficiency:
Convertible preferred stock--$.001
par value; 6,000,000 shares
authorized in aggregate, 1,400,000
issued and outstanding at March
31, 2000 and December 31, 1999 and
1998 (aggregate liquidating
preference $3,250,000)............ 1,000 1,000 1,000
Common stock--$.001 par value;
44,784,915 shares authorized,
2,620,923, 2,087,168, and
2,055,139 shares outstanding at
March 31, 2000 and December 31,
1999 and 1998, respectively....... 3,000 2,000 2,000
Additional paid-in capital......... 4,590,000 3,428,000 3,874,000
Deferred compensation.............. (516,000)
Accumulated deficit................ (48,851,000) (45,109,000) (29,140,000)
------------ ------------ ------------
Total capital deficiency.......... (44,773,000) (41,678,000) (25,263,000)
============ ============ ============
$ 27,394,000 $ 12,550,000 $ 15,833,000
============ ============ ============
</TABLE>
See notes to financial statements
F-3
<PAGE>
3-DIMENSIONAL PHARMACEUTICALS, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended
March 31, Year ended December 31,
-------------------------- ---------------------------------------
2000 1999 1999 1998 1997
-------------- ----------- ------------ ------------ -----------
(consolidated)
(unaudited)
<S> <C> <C> <C> <C> <C>
Grant and research
revenue................ $ 1,484,000 $ 1,379,000 $ 4,489,000 $ 5,095,000 $ 3,580,000
----------- ----------- ------------ ------------ -----------
Costs and expenses:
Research and
development.......... 3,425,000 2,975,000 12,136,000 10,984,000 6,517,000
General and
administrative....... 1,537,000 1,155,000 6,525,000 4,458,000 3,000,000
Litigation
settlement........... 1,500,000
----------- ----------- ------------ ------------ -----------
4,962,000 4,130,000 20,161,000 15,442,000 9,517,000
----------- ----------- ------------ ------------ -----------
Loss from operations.... (3,478,000) (2,751,000) (15,672,000) (10,347,000) (5,937,000)
Interest income......... 87,000 125,000 328,000 868,000 521,000
Interest expense........ (351,000) (114,000) (625,000) (232,000) (149,000)
----------- ----------- ------------ ------------ -----------
Net loss................ (3,742,000) (2,740,000) (15,969,000) (9,711,000) (5,565,000)
Declared and accrued
cumulative dividends on
preferred stock........ (167,000) (167,000) (669,000) (144,000)
----------- ----------- ------------ ------------ -----------
Net loss applicable to
common stock........... $(3,909,000) $(2,907,000) $(16,638,000) $ (9,855,000) $(5,565,000)
=========== =========== ============ ============ ===========
Basic and diluted net
loss per common share--
historical............. $ (2.11) $ (1.79) $ (9.78) $ (7.93) $ (9.83)
----------- ----------- ------------ ------------ -----------
Weighted average common
shares outstanding--
historical............. 1,849,000 1,624,000 1,701,000 1,243,000 566,000
----------- ----------- ------------ ------------ -----------
Basic and diluted net
loss per common share--
pro forma.............. $ (.13) $ (.56)
=========== ============
Weighted average common
shares outstanding--pro
forma.................. 28,808,000 28,555,000
=========== ============
</TABLE>
See notes to financial statements
F-4
<PAGE>
3-DIMENSIONAL PHARMACEUTICALS, INC.
STATEMENTS OF CHANGES IN CAPITAL DEFICIENCY
<TABLE>
<CAPTION>
Preferred Stock Common Stock
---------------- ----------------- Additional Total
Par Par Paid-in Accumulated Deferred Capital
Shares Value Shares Value Capital Deficit Compensation Deficiency
--------- ------ --------- ------ ---------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance--December 31,
1996................... 1,000,000 $1,000 1,166,128 $1,000 $2,663,000 $(13,864,000) $(11,199,000)
Common stock issued
pursuant to exercise of
stock options, warrants
and stock grants....... 1,105,467 1,000 324,000 325,000
Issuance of Series C
preferred stock, net of
offering costs of
$12,000................ 400,000 988,000 988,000
Net loss for the year... (5,565,000) (5,565,000)
--------- ------ --------- ------ ---------- ------------ --------- ------------
Balance--December 31,
1997................... 1,400,000 1,000 2,271,595 2,000 3,975,000 (19,429,000) (15,451,000)
Common stock issued
pursuant to exercise of
stock options, warrants
and stock grants....... 296,211 93,000 93,000
Common stock reacquired
from former chief
executive officer...... (512,667) (116,000) (116,000)
Dividend declared on
Series A-1 preferred... (144,000) (144,000)
Compensation charge in
connection with
acceleration of vesting
terms on restricted
shares and options..... 66,000 66,000
Net loss for the year... (9,711,000) (9,711,000)
--------- ------ --------- ------ ---------- ------------ --------- ------------
Balance--December 31,
1998................... 1,400,000 1,000 2,055,139 2,000 3,874,000 (29,140,000) (25,263,000)
Common stock issued
pursuant to exercise of
stock options.......... 32,029 11,000 11,000
Value of options issued
as compensation to
consultants............ 18,000 18,000
Value of warrants issued
in connection with
Bridge loan............ 26,000 26,000
Dividends declared on
Series A-1 preferred... (501,000) (501,000)
Net loss for the year... (15,969,000) (15,969,000)
--------- ------ --------- ------ ---------- ------------ --------- ------------
Balance--December 31,
1999................... 1,400,000 1,000 2,087,168 2,000 3,428,000 (45,109,000) (41,678,000)
Common stock issued
pursuant to exercise of
stock options, warrants
and stock grants....... 533,755 1,000 535,000 536,000
Value of options issued
to consultants......... 111,000 111,000
Deferred compensation
charge in connection
with option grant...... 516,000 $(516,000) 0
Net loss for the
period................. (3,742,000) (3,742,000)
--------- ------ --------- ------ ---------- ------------ --------- ------------
Balance--March 31, 2000
(unaudited)............ 1,400,000 $1,000 2,620,923 $3,000 $4,590,000 $(48,851,000) $(516,000) $(44,773,000)
========= ====== ========= ====== ========== ============ ========= ============
</TABLE>
See notes to financial statements
F-5
<PAGE>
3-DIMENSIONAL PHARMACEUTICALS, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended
March 31, Year Ended December 31,
-------------------------- --------------------------------------
2000 1999 1999 1998 1997
-------------- ----------- ------------ ----------- -----------
(consolidated)
(unaudited)
<S> <C> <C> <C> <C> <C>
Cash flows from
operating activities:
Net loss............... $(3,742,000) $(2,740,000) $(15,969,000) $(9,711,000) $(5,565,000)
Adjustments to
reconcile net loss to
net cash used in
operating activities:
Depreciation and
amortization......... 364,000 405,000 1,565,000 1,486,000 860,000
Amortization of
premium of short-term
investments.......... 11,000 19,000 62,000 43,000
Valuation of options
and warrants......... 111,000 44,000
Interest paid with
preferred stock...... 353,000 23,000
Compensation charge in
connection with
acceleration of
vesting of options
and stock............ 66,000
Changes in:
Grants and contracts
receivable.......... (163,000) 46,000 284,000 (78,000) (247,000)
Other assets......... (60,000) (202,000) (3,000) 336,000 (461,000)
Accounts payable and
accrued expenses.... (917,000) (64,000) 1,620,000 106,000 356,000
Settlement accrual... (500,000) 1,500,000
Deferred income...... 951,000 (194,000) 345,000 (675,000) 1,217,000
----------- ----------- ------------ ----------- -----------
Net cash used in
operating
activities......... (3,603,000) (2,738,000) (10,595,000) (8,408,000) (3,774,000)
----------- ----------- ------------ ----------- -----------
Cash flows from
investing activities:
Purchases of
investment
securities........... (8,334,000) (9,558,000)
Sale and maturities of
investment
securities........... 1,500,000 7,267,000 7,500,000 3,000,000
Capital expenditures.. (48,000) (84,000) (278,000) (3,999,000) (686,000)
Loan made to officer.. (520,000) (251,000)
----------- ----------- ------------ ----------- -----------
Net cash provided by
(used in) investing
activities......... (568,000) 1,416,000 6,989,000 (4,833,000) (7,495,000)
----------- ----------- ------------ ----------- -----------
Cash flows from
financing activities:
Proceeds from sale of
stock and exercise of
options and
warrants............. 18,898,000 11,000 10,490,000 13,235,000
Payment for stock
repurchased.......... (49,000)
Proceeds from issuance
of long-term debt and
notes payable........ 3,924,000
Proceeds from issuance
of short-term debt... 10,000,000
Reduction of long-term
debt and notes
payable.............. (309,000) (323,000) (1,224,000) (1,123,000) (840,000)
----------- ----------- ------------ ----------- -----------
Net cash (used in)
provided by
financing
activities......... 18,589,000 (323,000) 8,787,000 13,242,000 12,395,000
----------- ----------- ------------ ----------- -----------
Net increase (decrease)
in cash and cash
equivalents........... 14,418,000 (1,645,000) 5,181,000 1,000 1,126,000
Cash and cash
equivalents--beginning
of period............. 7,620,000 2,439,000 2,439,000 2,438,000 1,312,000
----------- ----------- ------------ ----------- -----------
Cash and cash
equivalents--end of
period................ $22,038,000 $ 794,000 $ 7,620,000 $ 2,439,000 $ 2,438,000
=========== =========== ============ =========== ===========
Supplemental
disclosures of cash
flow information:
Cash paid for
interest............. $ 95,000 $ 110,000 $ 446,000 $ 232,000 $ 139,000
Noncash investing and
financing activities:
Equipment purchased
under capital
leases............... $ 390,000 $ 390,000 $ 1,044,000
Dividend declared but
not paid............. $ 167,000 $ 501,000 $ 144,000
Note receivable
exchanged for common
stock................ $ 66,000
Notes payable
(including interest
due of $23,000)
exchanged for
redeemable preferred
stock................ $ 523,000
Notes payable
(including interest
due of $353,000)
exchanged for
redeemable preferred
stock................ $10,353,000
</TABLE>
See notes to financial statements
F-6
<PAGE>
3-DIMENSIONAL PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1999 and 1998
(Unaudited with respect to March 31, 2000 and the three-month periods ended
March 31, 2000 and 1999)
NOTE A--DESCRIPTION OF BUSINESS
3-Dimensional Pharmaceuticals, Inc. (the "Company") was incorporated on March
11, 1993. The Company is integrating advanced technologies in structural
biology, combinatorial chemistry, high throughput screening and computerized
drug design, for the cost-effective discovery of small molecule
pharmaceuticals.
The Company has incurred net losses since inception and may incur additional
losses for at least the next several years. Through March 31, 2000,
substantially all of the Company's revenue has been derived from corporate
collaborations, license agreements and government grants. The Company expects
that substantially all of its revenue for the foreseeable future will result
from payments from these sources and from the outlicensing of technologies and
of internally developed preclinical and clinical drug candidates. The Company
expects to spend significant amounts to enhance its drug discovery technologies
and to fund research and development of its internal pipeline of drug
candidates. In order to achieve profitability the Company must continue to
develop products and technologies from which it can derive revenue, including
through existing and future collaborations. Accordingly, the Company may never
achieve profitability.
NOTE B--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
[1] Principles of Consolidation
The consolidated financial statements at December 31, 1999 and March 31, 2000
and for the three months ended March 31, 2000 include the accounts of the
Company and its wholly-owned subsidiary. All material intercompany balances and
transactions have been eliminated in consolidation.
[2] Cash and cash equivalents and marketable securities:
The Company considers all highly liquid investment instruments purchased with
a maturity of three months or less to be cash equivalents.
Marketable securities include investments with original maturities of greater
than three months having a remaining maturity of less than 24 months. These
marketable securities are treated for accounting purposes as available-for-sale
and as such are reported at their fair market values. At December 31, 1998 the
securities are carried at amortized cost which approximates fair market value.
[3] Property and equipment:
Property and equipment are recorded at cost and depreciated using the
straight-line method over estimated useful lives of 2 to 5 years. Equipment
acquired under capital lease agreements is amortized over the term of the
lease. Leasehold improvements are amortized over the lesser of the economic
useful life of the improvement or the term of the lease.
[4] Concentration of credit risk:
The Company invests its excess cash in U.S. and U.S. Government agency
securities and debt instruments of financial institutions and corporations with
strong credit ratings. The Company has established guidelines regarding
diversification of its investments and their maturities which should maintain
safety and liquidity. The Company has not experienced any losses on its
investments. At December 31, 1998, marketable securities consisted of corporate
debt securities with maturities of one year or less.
[5] Research and development:
Research and development costs are expensed as incurred.
F-7
<PAGE>
3-DIMENSIONAL PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1999 and 1998
(Unaudited with respect to March 31, 2000 and the three-month periods ended
March 31, 2000 and 1999)
[6] Patent costs:
Patent application costs are expensed as incurred.
[7] Revenue recognition:
Revenue from corporate collaborations, including periodic payments for
research and development activities and related nonrefundable up-front
technology access fees and/or technology or software licensing fees, is
recognized over the period that the Company performs research and development
activities under the terms of the agreements. Revenue from nonrefundable up-
front fees for the licensing of technology, products or software under
agreements which do not require the Company to perform research or development
activities or other significant future performance obligations is recognized at
the time the agreement is executed or the software is delivered. Revenue
resulting from the achievement of milestone events stipulated in the agreements
is recognized when the milestone is achieved. Up-front fees and other amounts
received in excess of revenue recognized are recorded as deferred income.
In the year ended December 31, 1999, the Company changed its method of
recognizing revenue with respect to nonrefundable up-front fees received under
corporate collaboration research agreements to the method described above to
conform with the requirements of an accounting bulletin on revenue recognition
issued by the staff of the Securities and Exchange Commission in December 1999
and retroactively restated its prior years financial statements to reflect the
application of the new method. Prior to the change the Company recognized
revenue from such fees upon the execution of the agreement.
[8] Accounting for stock-based compensation:
The Company accounts for its stock-based compensation plans under Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees." In
October 1995, the Financial Accounting Standards Board issued Statement No.
123, "Accounting for Stock-Based Compensation" ("SFAS No. 123"), which
establishes a fair value-based method of accounting for stock-based
compensation plans. The Company has adopted the disclosure-only alternative
under SFAS No. 123, which requires disclosure of the pro forma effects on net
loss and net loss per share as if stock-based employee compensation was
measured under SFAS No. 123, as well as certain other information (see Note
J[2]). The Company accounts for stock based compensation to nonemployees using
the fair value method in accordance with SFAS No. 123 and Emerging Issues Task
Force (EITF) 96-18. The Company has recognized deferred stock compensation
related to certain stock option grants (see Note J[2]).
[9] Use of estimates:
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and the disclosure
of contingent assets and liabilities at the date of the financial statements
and the reported amounts of revenue and expenses during the reporting period.
Actual results could differ from those estimates.
[10] Per share data:
Historical basic and diluted net loss per common share is computed by
dividing the net loss increased by declared and accrued cumulative dividends on
the Series A-1 preferred stock for the period by the weighted average number of
common shares outstanding during the period, exclusive of outstanding common
stock
F-8
<PAGE>
3-DIMENSIONAL PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1999 and 1998
(Unaudited with respect to March 31, 2000 and the three-month periods ended
March 31, 2000 and 1999)
which are subject to repurchase and are nonvested. As their effects would be
anti-dilutive, shares of common stock issuable upon conversion of preferred
stock and exercise of outstanding options and warrants as well as outstanding
common shares which are nonvested during the periods were not included in
computing diluted net loss per common share. Securities and the related number
of common shares not included in the diluted computation that could potentially
dilute basic earnings per share, if any, in the future are as follows:
<TABLE>
<CAPTION>
Dilutive Potential
Common Shares
-----------------------
March 31, December 31,
2000 1999
---------- ------------
<S> <C> <C>
Preferred stock (see below).......................... 36,297,488 26,725,240
Options.............................................. 5,835,911 5,664,005
Warrants............................................. 5,160,101 5,160,101
Common stock--subject to repurchase.................. 686,488 321,875
---------- ----------
47,979,988 37,871,221
========== ==========
</TABLE>
The preferred stock will automatically convert into common stock on a 1 for 1
basis and certain nonvested common stock will automatically become vested upon
completion of an initial public offering of the Company's common stock.
Accordingly, pro forma basic and diluted net loss per common share has been
calculated by dividing net loss by the weighted average outstanding common
shares as if the preferred stock were converted into common stock, and certain
nonvested common stock was vested, as of the original date of issuance. Unpaid
cumulative dividends converted into notes payable together with accrued
interest will also automatically convert into common stock upon completion of
an initial public offering based on the initial public offering price. No
common stock issuable in connection therewith have been included in the pro
forma computation as their effect could not be significant.
[11] Comprehensive loss:
Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive
Income" requires the reporting of all changes in equity of an enterprise that
result from recognized transactions and other economic events of the period
other than transactions with owners in their capacity as owners. The Company
had no such other comprehensive items to report.
[12] Unaudited interim financial statements:
The financial information presented as of March 31, 2000 and for the three-
month periods ended March 31, 2000 and 1999 is unaudited, but in the opinion of
management contains all adjustments (consisting only of normally recurring
adjustments) necessary for a fair presentation of such financial information.
Results of operations for interim periods are not necessarily indicative of
those to be achieved for full fiscal years.
NOTE C--RESEARCH AND COLLABORATION AGREEMENTS
In August 1995, the Company commenced a research project in which it was the
recipient of a three-year Advanced Technology Program ("ATP") award totalling
up to $2 million. The ATP is sponsored by the National Institute of Standards
and Technology. During 1998, the project was completed and all available
funding was utilized.
F-9
<PAGE>
3-DIMENSIONAL PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1999 and 1998
(Unaudited with respect to March 31, 2000 and the three-month periods ended
March 31, 2000 and 1999)
In September 1996, the Company commenced a research project in which it was
the recipient of a two-year Small Business Innovative Research ("SBIR") award
totalling $750,000. The SBIR is sponsored by the National Institute of Health.
During 1998, the project was completed and all available funding was utilized.
In October 1996, the Company entered into a research collaboration with Merck
KGaA ("Merck"). During the initial two year term of the agreement and
subsequent one year extension, Merck provided research and development funding.
In addition, Merck agreed to pay the Company product development milestone
payments and royalties on the sales of certain resulting products. In 1996,
Merck made an equity investment in the Company, purchasing 1,000,000 shares of
preferred stock at $2.25 per share. The agreement expired in October 1999.
In June 1997, the Company entered into license agreements with Wyeth-Ayerst
Laboratories ("Wyeth"), for the development and marketing of the Company's
small molecule thrombin inhibitors. On June 1, 1999 the parties agreed to
terminate the agreements with all rights to the program returning to the
Company. Upon the signing of the original agreements, Wyeth made a $1 million
equity investment in the Company, consisting of 400,000 shares of preferred
stock at $2.50 per share. During the term of the agreements, the Company also
received additional monies for research and development funding.
In December 1997, the Company entered into a research collaboration with
Heska Corporation ("Heska") to assist in the discovery and development of new
veterinary therapeutic agents. The agreement originally had a two year term and
has been extended until July 2000. The Company has received up-front payments
and research funding. In addition, Heska has agreed to pay the Company certain
additional research funding and product development milestone payments and
royalties on the sales of certain resulting products.
In October 1998, the Company entered into a collaborative research and
license agreement with the Agricultural Products Division of E.I. DuPont de
Nemours ("DuPont") which allows DuPont to utilize the Company's
DirectedDiversity(R) Technology to develop and refine agrochemicals. The
Company received an up-front license fee and is eligible to receive additional
technology licensing fees, potential milestone payments and royalties on the
sales of any resulting products.
In October 1999, the Company entered into a research collaboration and
license agreement with AgrEvo GmbH, now known as Aventis Crop Protection GmbH
("Aventis") pursuant to which the Company will utilize its DirectedDiversity(R)
Technology in the discovery of compounds applicable to plant and pest
management and animal health. The initial term of the agreement is for two
years. Under the terms of the agreement, the Company is to receive payments for
delivery of compounds, research and development funding and license fees
totaling $3.6 million. In addition, AgrEvo has agreed to pay the Company
royalties on the sales of certain resulting products.
In December 1999, the Company granted an option to Boehringer Ingelheim
Pharmaceuticals, Inc. ("BIPI") to enter into an alliance with the Company to
use DirectedDiversity(R) Technology to assist BIPI in the discovery of new
drugs. In February 2000 BIPI exercised its option and entered into an agreement
with an initial term of two years. During the initial term of agreement, the
Company is to receive payments for technology access and research funding
totaling $3.25 million. In addition, BIPI has agreed to pay the Company product
development milestone payments and royalties on the sales of certain resulting
products.
F-10
<PAGE>
3-DIMENSIONAL PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1999 and 1998
(Unaudited with respect to March 31, 2000 and the three-month periods ended
March 31, 2000 and 1999)
On February 11, 2000, the Company entered into a collaboration with DuPont
Pharmaceuticals Company ("Dupont Pharmaceuticals") pursuant to which the
Company would utilize its DirectedDiversity(R) Technology to develop new drugs
for specific biological targets. The agreement provides for the Company to
receive payments for technology access, research funding and milestone and
royalty payments on any resulting products. The Company also entered into an
additional agreement, which gives Dupont Pharmaceuticals an option for a non-
exclusive license to the Company's DirectedDiversity(R) patents in support of
their internal and collaborative research programs.
On March 1, 2000, the Company was awarded and commenced a research project in
which it was the recipient of a two-year Small Business Innovative Research
("SBIR") Award totaling up to $1 million. The SBIR is sponsored by the National
Institutes of Health.
Revenue from foreign corporate collaborators comprised 25%, 23%, 17% and 20%
of total collaboration revenues for the three months ended March 31, 2000 and
the years ended December 31, 1999, 1998 and 1997, respectively.
NOTE D--PROPERTY AND EQUIPMENT
Property and equipment, stated at cost, is summarized as follows:
<TABLE>
<CAPTION>
December 31,
March 31, ---------------------
2000 1999 1998
---------- ---------- ----------
<S> <C> <C> <C>
Laboratory equipment, computer software
and office equipment.................... $7,122,000 $7,075,000 $6,438,000
Leasehold improvements................... 2,340,000 2,340,000 2,308,000
---------- ---------- ----------
9,462,000 9,415,000 8,746,000
Less accumulated depreciation and
amortization............................ 5,465,000 5,101,000 3,536,000
---------- ---------- ----------
$3,997,000 $4,314,000 $5,210,000
========== ========== ==========
</TABLE>
NOTE E--NOTES RECEIVABLE FROM OFFICERS
At December 31, 1999 the Company has notes receivable from three officers
aggregating $70,000 which are collateralized by the officers' beneficial
interest in an aggregate of 166,250 shares of common stock of the Company.
Under the terms of the notes, interest accrues on the unpaid principal at
approximately 6% per annum. Principal and accrued interest is to be paid in
four equal installments on the anniversary dates of the loans. In February
1998, 1999 and 2000, the Company forgave the first, second and third
installments of the principal and interest due on two of the loans. In
September 1998 and 1999, the Company forgave the first and second installment
on the third loan. In connection with forgiving certain portions of principal
and interest related to these loans, compensation expense was recorded in 1999
and 1998, respectively, in the amount of approximately $58,000 and $77,000.
The notes mature as follows:
<TABLE>
<S> <C>
2000................................................................. $19,000
2001................................................................. 51,000
</TABLE>
F-11
<PAGE>
3-DIMENSIONAL PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1999 and 1998
(Unaudited with respect to March 31, 2000 and the three-month periods ended
March 31, 2000 and 1999)
In March 2000, the Company made a loan to an additional officer in the amount
of $520,000 to purchase 495,238 restricted shares of the Company's common
stock. The loan is collateralized by the officer's beneficial interest in such
shares. Under the terms of the note, interest accrues on the unpaid principal
at approximately 7% per annum. Principal and accrued interest is to be paid in
four equal installments, with the first installment due six months from the
date of the loan and subsequent installments due on the anniversary dates of
the first loan payment.
NOTE F--ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consist of the following:
<TABLE>
<CAPTION>
December 31,
March 31, ---------------------
2000 1999 1998
---------- ---------- ----------
<S> <C> <C> <C>
Professional fees.......................... $ 981,000 $1,454,000 $ 186,000
Equipment.................................. 119,000 120,000 100,000
Payroll and related expenses............... 366,000 739,000 393,000
Trade...................................... 451,000 424,000 593,000
---------- ---------- ----------
$1,917,000 $2,737,000 $1,272,000
========== ========== ==========
</TABLE>
NOTE G--DEBT
[1] Convertible notes payable:
On November 18, 1999, the Company closed on a convertible note financing for
$10 million. The notes bear interest at the rate of prime + 1% per annum (9.5%
through December 31, 1999). Principal and interest are due on the first
anniversary of the closing date (the "Maturity Date"). If prior to the Maturity
Date, the Company raises an additional $10 million through the sale of
preferred stock, the notes and any unpaid accrued interest will convert into
the preferred stock on the same terms and conditions as given to the new
investors. In the event of any consolidation or merger of the Company or in the
event of any sale of substantially all of the assets of the Company, at the
election of the holders of the notes the Company will (a) repay any unpaid
amount, or (b) convert the notes into preferred stock with terms substantially
comparable to the currently outstanding Series A-4 preferred stock. In the
event that the holders of the notes elect for the notes to be repaid, (option
(a) above), the Company must pay the holder of the notes a premium equal to 25%
of the outstanding principal amount of the notes. The Company has granted to
the buyers of the notes a security interest in certain property and assets of
the Company, including all accounts, equipment and fixtures and all patents,
patent licenses, trademarks and trademark licenses. This security interest was
terminated upon conversion of the notes in March 2000 into Series A-5 preferred
shares (see below) and all rights granted under the security interest have
reverted to the Company. In connection with this transaction, the Company
issued warrants to purchase 3,500,000 shares of common stock exercisable at
$1.25 per share for a period of one year. The Company recorded a noncash
interest charge in connection with these warrants of $26,000 for the year ended
December 31, 1999.
On March 31, 2000, the Company raised $18.4 million through the sale of
6,121,083 shares of Series A-5 preferred stock at $3.00 per share. In
connection therewith, the holders of the convertible notes of $10 million of
principal converted their notes and $353,000 of accrued interest into 3,451,165
of Series A-5 preferred
F-12
<PAGE>
3-DIMENSIONAL PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1999 and 1998
(Unaudited with respect to March 31, 2000 and the three-month periods ended
March 31, 2000 and 1999)
shares. Accordingly, the convertible notes and accrued interest of $115,000
have been reclassified to noncurrent liabilities as of December 31, 1999.
[2] Long-term debt:
Long-term debt, including capital lease obligations was as follows:
<TABLE>
<CAPTION>
December 31,
March 31, ---------------------
2000 1999 1998
---------- ---------- ----------
<S> <C> <C> <C>
Loans payable.............................. $2,676,000 $2,889,000 $3,290,000
Capital lease obligations (Note I)......... 484,000 580,000 1,013,000
---------- ---------- ----------
3,160,000 3,469,000 4,303,000
Current portion of long-term debt.......... 1,140,000 1,139,000 1,033,000
---------- ---------- ----------
Long-term debt............................. $2,020,000 $2,330,000 $3,270,000
========== ========== ==========
</TABLE>
During 1998 and 1999, the Company entered into a series of 48-month loans to
finance an aggregate of $4,005,000 of laboratory equipment, office equipment
and certain tenant improvements at interest rates varying between 10.68% and
11.65%. The loans are payable in monthly installments of principal and interest
aggregating $98,000 with final payments in 2002 and 2003 aggregating $362,000
and $39,000. Borrowings related to the purchase of laboratory and office
equipment are collateralized by the equipment.
Long-term debt at December 31, 1999 is payable as follows:
<TABLE>
<S> <C>
2000.............................................................. $1,139,000
2001.............................................................. 1,231,000
2002.............................................................. 1,052,000
2003.............................................................. 47,000
----------
Total............................................................. $3,469,000
==========
</TABLE>
NOTE H--FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, "Disclosures About Fair
Value of Financial Instruments," requires the Company to disclose estimated
fair value for its financial instruments. The carrying amounts reported in the
balance sheet for cash and cash equivalents, accounts receivable, accounts
payable and accrued expenses approximate fair value because of the short-term
duration of those items. The carrying amounts of convertible notes, debt and
notes payable--dividends approximate fair value because the interest rates on
such debt approximate the market rate.
NOTE I--CAPITAL LEASE OBLIGATIONS
The Company has entered into a series of 48-month lease agreements to finance
$3,183,000 of laboratory and office equipment purchases. All of the equipment
leased under these agreements are accounted for as capital leases. The net book
value of the equipment held under capital leases was $463,000, $555,000 and
$993,000 at March 31, 2000, December 31, 1999 and 1998, respectively.
F-13
<PAGE>
3-DIMENSIONAL PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1999 and 1998
(Unaudited with respect to March 31, 2000 and the three-month periods ended
March 31, 2000 and 1999)
Future lease payments as of December 31, 1999 are as follows:
<TABLE>
<CAPTION>
Year Ending
December 31, Amount
------------ --------
<S> <C>
2000.......................................................... $383,000
2001.......................................................... 251,000
--------
Total minimum lease payments.................................... 634,000
Less amounts representing interest.............................. 54,000
--------
Present value of future lease payments at end of year........... $580,000
========
</TABLE>
In conjunction with these agreements, the Company granted its leasing
companies warrants expiring in 2004 to purchase 187,625 shares of Series A-1
preferred stock at an exercise price of $1.00 per share and 12,600 shares of
common stock at an exercise price of $2.50 per share. The value of these
warrants was not considered significant at the dates of grant.
NOTE J--REDEEMABLE PREFERRED STOCK AND EQUITY SECURITIES
[1] Preferred stock:
Redeemable convertible preferred Series A consists of:
<TABLE>
<CAPTION>
December 31,
March 31, -----------------------
2000 1999 1998
----------- ----------- -----------
<S> <C> <C> <C>
Redeemable convertible Series A-1--$.001
par value;
6,926,461 shares authorized, 6,686,986
shares issued and outstanding,
(liquidating preference $6,686,986)...... $ 6,611,000 $ 6,611,000 $ 6,611,000
Redeemable convertible Series A-2--$.001
par value;
4,333,990 shares authorized, 4,333,990
shares issued and outstanding,
(liquidating preference $5,417,488)...... 5,405,000 5,405,000 5,405,000
Redeemable convertible Series A-3--$.001
par value;
10,304,264 shares authorized, 10,304,264
shares issued and outstanding,
(liquidating preference $12,500,000)..... 12,446,000 12,446,000 12,446,000
Redeemable convertible Series A-4--$.001
par value;
4,000,000 shares authorized, 4,000,000
shares issued and outstanding,
(liquidating preference $10,400,000)..... 10,372,000 10,372,000 10,372,000
Redeemable convertible Series A-5, $.001
par value;
9,572,248 shares authorized, 9,572,248
shares issued and outstanding,
(liquidating preference $28,716,744)..... 28,716,000
----------- ----------- -----------
$63,550,000 $34,834,000 $34,834,000
=========== =========== ===========
</TABLE>
Convertible preferred stock consists of convertible Series B--$.001 par
value, 1,000,000 shares authorized, 1,000,000 shares issued and outstanding,
liquidating preference of $2,250,000 and convertible Series C--$.001 par value,
5,000,000 shares authorized, 400,000 shares issued and outstanding, liquidating
preference of $1,000,000.
F-14
<PAGE>
3-DIMENSIONAL PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1999 and 1998
(Unaudited with respect to March 31, 2000 and the three-month periods ended
March 31, 2000 and 1999)
The Series A-1, A-2, A-3, A-4, A-5, B, and C preferred shares have a
liquidation preference of $1.00, $1.25, $1.21, $2.60, $3.00, $2.25 and $2.50
per share, respectively, plus an amount equal to any accrued but unpaid
cumulative dividends and any declared but unpaid dividends. The Series A-1, A-
2, A-3, A-4 and A-5 shares are redeemable at the option of the stockholder in
25% annual increments commencing on March 12, 2002 at their original purchase
price, plus an amount equal to any accrued but unpaid cumulative dividends and
any declared but unpaid dividends. The shares of all series are convertible
into common shares of the Company on a 1 to 1 basis, subject to certain
adjustments based on future issuances of common stock. In addition, all
outstanding Series A, B and C preferred shares will automatically convert into
common shares of the Company on a 1 to 1 basis upon completion of an initial
public offering of the Company's common stock. The shares of all series are
entitled to one vote per share. The Series A shares provide for cumulative
dividends of 10% per share per annum (based on the original issue price), first
commencing for the Series A-1 shares on October 14, 1998. The Series A-2
through A-5 shares, which were issued from 1996 through 2000, provide for 10%
annual cumulative dividends from and after the fifth anniversary of the date
each such series was originally issued.
In December 1998, the Company declared a 10% per share dividend (based on the
original issue price) payable on January 1, 1999 for the Series A-1 shares for
the portion of the quarterly period beginning October 14, 1998 and ending
December 31, 1998. Thereafter the Company has declared dividends at each
calendar quarter through September 30, 1999. The Company's board did not
declare a dividend at December 31, 1999, therefore dividends of $167,000 were
in arrears at year-end 1999. On April 20, 2000, the Company's board declared a
dividend for $334,000 covering the period beginning October 1, 1999 and ending
March 31, 2000 and issued a note payable for such dividend. All dividends
declared during 1999 were paid during 1999 by issuing to each holder of Series
A-1 stock a note payable for the amount of the declared dividend. The notes
bear interest at 10% per annum and principal and interest are due no later than
five years from the date of issuance. Principal and interest are convertible
into common stock at the closing date of an initial public offering ("IPO"), as
defined, at the IPO price.
[2] Equity compensation plan:
The Company's equity compensation plan (the "Plan"), as amended, provides for
the issuance of restricted stock and the granting of both incentive stock
options and nonqualified stock options to purchase a total of 8,075,000 shares
of common stock. The options vest over various periods, not exceeding five
years, and expire no later than ten years from date of grant. On March 30,
2000, the Company increased the number of shares under the Plan by 1,250,000 to
9,325,000 shares of common stock.
The Plan is administered by a committee of the Board of Directors. The
committee has the authority to determine the term during which an option may be
exercised (provided that no option may have a term of more than 10 years), the
exercise price of an option and the rate at which options may be exercised.
Incentive stock options may be granted only to employees of the Company.
Nonqualified stock options may be granted to employees, directors, or
consultants of the Company. For incentive stock options, the exercise price may
not be less than the fair value of the stock on the date of grant.
The Company applies APB 25 in accounting for its employee stock options
awards, which requires the recognition of compensation expense for the
difference between the fair value of the underlying common stock and the
exercise price of the option at the grant date.
F-15
<PAGE>
3-DIMENSIONAL PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1999 and 1998
(Unaudited with respect to March 31, 2000 and the three-month periods ended
March 31, 2000 and 1999)
Pro forma information regarding net loss and loss per share is required by
SFAS 123, and has been determined as if the Company had accounted for its
employee stock options under the fair value method of that statement. The
weighted average fair value of options granted during years ended December 31,
1999 and 1998 is estimated to be $.35 and $.30, respectively. The fair value of
these options was estimated at the date of grant using the Black-Scholes
option-pricing model with the following assumptions:
<TABLE>
<CAPTION>
Three Months
Ended Year Ended
March 31, December 31,
--------------- -----------------------
2000 1999 1999 1998 1997
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Risk-free interest rate.............. 6% 5.5% 6.6% 5.5% 6%
Expected life........................ 6 years 6 years 6 years 6 years 7 years
Expected volatility.................. 10% 10% 10% 10% 10%
Dividend yield....................... 0% 0% 0% 0% 0%
</TABLE>
Had compensation cost for the Company's stock options been determined based
upon the fair value at the grant date for awards under the Plan consistent with
the methodology prescribed under SFAS No. 123, the Company's net loss and net
loss per share would be as follows:
<TABLE>
<CAPTION>
Three Months Ended Year Ended
March 31, December 31,
---------------------- -----------------------------------
2000 1999 1999 1998 1997
---------- ---------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net loss:
Historical............ $3,742,000 $2,740,000 $15,969,000 $9,711,000 $5,565,000
Pro forma............. 3,877,000 2,847,000 16,398,000 9,880,000 5,670,000
Basic and diluted net
loss per share:
Historical............ $ (2.11) $ (1.79) $ (9.78) $ (7.93) $ (9.83)
Pro forma............. $ (2.19) $ (1.86) $ (10.03) $ (8.06) $ (10.02)
</TABLE>
F-16
<PAGE>
3-DIMENSIONAL PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1999 and 1998
(Unaudited with respect to March 31, 2000 and the three-month periods ended
March 31, 2000 and 1999)
The following table summarizes information about stock option activity
during the periods indicated:
<TABLE>
<CAPTION>
Incentive Options Nonqualified Options
------------------- ------------------------
Weighted Weighted
Average Average
Exercise Exercise
Shares Price Shares Price
--------- -------- ----------- -----------
<S> <C> <C> <C> <C>
Balance--December 31, 1996.......... 691,820 $0.198 194,100 $ 0.143
Granted............................. 1,760,516 0.665 55,000 0.414
Exercised........................... (63,767) 0.178 (16,700) 0.084
Terminated.......................... (71,464) 0.233
--------- -----------
Balance--December 31, 1997.......... 2,317,105 $0.550 232,400 $ 0.210
Granted............................. 1,138,588 1.050 248,662 1.050
Exercised........................... (239,511) 0.268 (31,700) 0.079
Terminated.......................... (359,766) 0.802
--------- -----------
Balance--December 31, 1998.......... 2,856,416 0.743 449,362 0.685
Granted............................. 441,237 1.050 2,037,333 1.312
Exercised........................... (32,029) 0.345
Terminated.......................... (88,314) 0.946
--------- -----------
Balance--December 31, 1999.......... 3,177,310 0.784 2,486,695 1.198
Granted............................. 596,500 2.234 177,500 2.250
Exercised........................... (127,088) 0.891 (406,667) 1.038
Terminated.......................... (68,339) 0.844
--------- -----------
Balance--March 31, 2000............. 3,578,383 1.020 2,257,528 1.310
========= ===========
</TABLE>
F-17
<PAGE>
3-DIMENSIONAL PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1999 and 1998
(Unaudited with respect to March 31, 2000 and the three-month periods ended
March 31, 2000 and 1999)
In addition to the stock option activity, the Company issued net of 512,667
and 52,500 shares that were reacquired in 1998 and 1994, respectively,
1,585,333 shares of restricted stock at $.01-$1.05 per share under the Plan
through March 31, 2000.
As of March 31, 2000 and December 31, 1999, options and restricted stock for
880,140 and 335,801 common shares, respectively, were available for future
grant under the Plan.
At March 31, 2000 and December 31, 1999, the weighted average remaining
contractual life of options outstanding was 8.33 years and 7.95 years,
respectively.
The following table presents information relating to stock options
outstanding and exercisable at December 31, 1999 and March 31, 2000:
<TABLE>
<CAPTION>
December 31, 1999
-------------------------------------------------------
Options Outstanding Options Exercisable
---------------------------------- --------------------
Weighted
Average Weighted Weighted
Remaining Average Average
Number Contractual Exercise Number Exercise
Outstanding Life in Years Price Exercisable Price
----------- ------------- -------- ----------- --------
<S> <C> <C> <C> <C> <C>
Incentive stock options:
$0.01 to $1.00........ 1,756,649 7.15 $0.568 919,207 $0.544
$1.01 to $1.05........ 1,420,661 8.58 $1.05 288,640 $1.05
--------- ---------
3,177,310 $0.784 1,207,847 $0.665
========= ====== ========= ======
Nonqualified stock
options:
$0.01 to $1.00........ 200,700 5.85 $0.232 172,367 $0.205
$1.01 to $2.60........ 2,285,995 9.56 $1.283 150,745 $1.05
--------- ---------
2,486,695 $1.198 323,112 $0.599
========= ====== ========= ======
</TABLE>
<TABLE>
<CAPTION>
March 31, 2000
---------------------------------------------------
Options Outstanding Options Exercisable
------------------------------ --------------------
Weighted
Average Weighted Weighted
Remaining Average Average
Number Life in Exercise Number Exercise
Range of Exercise Price Outstanding Years Price Exercisable Price
- ----------------------- ----------- --------- -------- ----------- --------
<S> <C> <C> <C> <C> <C>
Incentive stock options:
$0.01 to $1.00.......... 1,700,442 6.91 $0.573 956,416 $0.534
$1.01 to $2.25.......... 1,877,941 8.80 $1.426 431,275 $1.050
--------- ---------
3,578,383 $1.020 1,387,691 $0.694
========= ====== ========= ======
Nonqualified stock
options:
$0.01 to $1.00.......... 194,033 5.55 $0.230 179,033 $0.207
$1.01 to $2.60.......... 2,063,495 9.34 $1.412 150,745 $1.050
--------- ---------
2,257,528 $1.310 329,778 $0.593
========= ====== ========= ======
</TABLE>
F-18
<PAGE>
3-DIMENSIONAL PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1999 and 1998
(Unaudited with respect to March 31, 2000 and the three-month periods ended
March 31, 2000 and 1999)
In 1998, the Company entered into an agreement with a former officer in which
the Company repurchased 265,625 shares of common stock, which collateralized a
note receivable held by the Company. In addition, the Company also accelerated
vesting on 90,791 shares of restricted stock and incentive stock options in
connection with the termination of this officer. In conjunction with this
modification of terms to the original grants, the Company recorded a charge to
compensation expense of $66,000 as of the date of termination.
During the three months ended March 31, 2000 in connection with the grant of
options to employees, the Company recorded deferred stock compensation of
$516,000, representing the difference between the exercise price and the fair
value of the Company's common stock as estimated by the Company's management
for financial reporting purposes on the date such stock options were granted.
Deferred compensation is included as a component of stockholders deficit and is
being amortized to expense over the vesting period of the stock options.
[3] Warrants:
At March 31, 2000 and December 31, 1999, the Company has outstanding
warrants, all of which are exercisable, as follows:
<TABLE>
<CAPTION>
Exercise Expiration Number of
Price Date Warrants
-------- ---------- ---------
<S> <C> <C>
$1.25.............................................. 2000 3,500,000
$1.00.............................................. 2004 60,125*
$1.00.............................................. 2004 179,350*
$0.01.............................................. 2005 300,000
$0.01.............................................. 2006 1,008,026
$0.01.............................................. 2007 100,000
$2.50.............................................. 2004 12,600
---------
5,160,101
=========
</TABLE>
--------
* Exercisable into Series A-1 preferred stock.
The weighted average exercise price at March 31, 2000 and December 31, 1999
was $.90. At March 31, 2000 and December 31, 1999, the weighted average
remaining contractual life of warrants outstanding was 2.30 and 2.55 years,
respectively.
[4] Common stock subject to repurchase:
As of March 31, 2000 and December 31, 1999, respectively, 686,488 and 321,875
shares of common stock are subject to repurchase by the Company. The shares are
subject to repurchase at the original purchase prices, ranging from $.25 to
$1.05, in the event that the purchaser's relationship with the Company is
terminated. The number of shares subject to repurchase by the Company decreases
by 25% on the one-year anniversary of the sale, and further reduces upon
subsequent anniversary dates. In addition, 128,750 shares of the 686,488 shares
subject to repurchase, vest with the purchaser at the completion of the
Company's initial public offering.
F-19
<PAGE>
3-DIMENSIONAL PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1999 and 1998
(Unaudited with respect to March 31, 2000 and the three-month periods ended
March 31, 2000 and 1999)
NOTE K--401(K) PLAN
The Company maintains a defined contribution 401(k) plan available to
eligible employees. Employee contributions are voluntary and are determined on
an individual basis, limited to the maximum amount allowable under federal tax
regulations. The Company at its discretion may make certain contributions to
the plan. However, no such contributions have been made through December 31,
1999 and for the three-month period ended March 31, 2000.
NOTE L--COMMITMENT
During 1995, the Company entered into a 10-year operating lease for office
and laboratory facilities. In November 1997, the Company amended and restated
its lease to provide additional office and laboratory space. The amended and
restated lease will expire in June 2008. In connection with this transaction,
the Company agreed to pay for one half of the anticipated leasehold improvement
costs. The Company's portion of these costs was approximately $900,000, which
has been recorded as leasehold improvements, to be amortized over the term of
the lease. The amended and restated lease provides for minimum annual rentals
as follows:
<TABLE>
<CAPTION>
Year Ending
December 31, Amount
------------ ----------
<S> <C>
2000........................................................... $ 516,000
2001........................................................... 516,000
2002........................................................... 516,000
2003........................................................... 516,000
2004........................................................... 516,000
Thereafter..................................................... 1,545,000
----------
$4,125,000
==========
</TABLE>
The lease provides for escalations for increases in real estate taxes and
certain operating expenses.
Rent expense was $129,000, $129,000, $516,000, $401,000 and $267,000 for the
three months ended March 31, 2000 and 1999 and the years ended December 31,
1999, 1998 and 1997, respectively.
NOTE M--CONTINGENCY
In October 1998, a complaint was filed in the United States District Court
for the District of Delaware, by Scriptgen Pharmaceuticals, Inc. alleging that
the Company infringed two Scriptgen U.S. Patents. On March 7, 2000 (the
"Effective Date"), the Company and Scriptgen entered into a Settlement
Agreement for a total of $1.5 million for settlement of the litigation. The
amount is payable by the Company in three equal installments of $500,000 on
each of the following dates: (a) the Effective Date; (b) six months after the
Effective Date; and (c) the first anniversary of the Effective Date. The amount
payable was accrued as of December 31, 1999.
NOTE N--INCOME TAXES
At December 31, 1999 the Company has a net operating loss carryforward and a
research and development credit carryforward for federal income tax purposes of
approximately $40,370,000 and $831,000, respectively, which expires through
2019.
F-20
<PAGE>
3-DIMENSIONAL PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1999 and 1998
(Unaudited with respect to March 31, 2000 and the three-month periods ended
March 31, 2000 and 1999)
Temporary differences at December 31, 1999 and March 31, 2000 result
primarily from certain operating expenses, which were capitalized and amortized
as start-up costs for federal income tax purposes and expensed for financial
reporting purposes. At December 31, 1999 and March 31, 2000 the Company has
deferred tax assets of approximately $19,168,000 and $20,894,000, respectively.
The Company has not recorded a benefit from its net operating loss or research
and development credit carryforwards or capitalized start-up costs, because
realization of the benefit is uncertain and, therefore, a valuation allowance
of $19,168,000 and $20,894,000 has been provided for the deferred tax asset at
December 31, 1999 and March 31, 2000, respectively. The difference between the
statutory tax rate of 34% and the Company's effective tax rate of 0% is due to
the increase in the valuation allowance of $6,805,000 (1999), $4,040,000
(1998), $2,415,000 (1997), $1,726,000 (3 months--2000) and $997,000 (3 months--
1999).
The Company may be subject to an annual limitation on the utilization of its
net operating loss and research and development tax credit carryforwards
pursuant to Section 382 of the Internal Revenue Code.
NOTE O--SUBSEQUENT EVENT (UNAUDITED)
In May 2000, the Company entered into a license and research agreement with
Schering AG, Germany, in which Schering AG obtained, for human therapeutic
uses, exclusive worldwide rights to our urokinase inhibitor compounds. During
the initial two year research and development term the Company is to receive
payments for research funding totaling $5 million. In addition, Schering AG has
agreed to pay the Company product development milestone payments and royalties
on the sales of resulting products. In conjunction with the agreement, an
affiliate of Schering AG made a $5 million equity investment consisting of
625,000 shares of Series D preferred stock at $8.00 per share.
F-21
<PAGE>
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- -------------------------------------------------------------------------------
You should only rely on the information contained in this prospectus. We have
not authorized any person to provide you with information different from that
contained in this prospectus. We are offering to sell, and seeking offers to
buy, shares of our common stock only in jurisdictions where offers and sales
are permitted. The information contained in this prospectus is accurate only
as of the date of this prospectus, regardless of the time of delivery of this
prospectus or any sale of our common stock.
Until , 2000, all dealers that effect transactions of these securities,
whether or not participating in this offering, may be required to deliver a
prospectus. This is in addition to the obligation of dealers to deliver a pro-
spectus when acting as underwriters and with respect to their unsold allot-
ments or subscriptions.
---------------------
TABLE OF CONTENTS
---------------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
Summary.................................................................. 1
Risk Factors............................................................. 7
Forward-Looking Statements............................................... 21
Use of Proceeds.......................................................... 21
Dividend Policy.......................................................... 22
Capitalization........................................................... 23
Dilution................................................................. 24
Selected Consolidated Financial Information.............................. 25
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 26
Our Business............................................................. 30
Management............................................................... 52
Certain Relationships and Related Transactions........................... 63
Principal Stockholders................................................... 65
Description of Capital Stock............................................. 68
Shares Eligible for Future Sale.......................................... 71
Underwriting............................................................. 73
Legal Matters............................................................ 76
Experts.................................................................. 76
Additional Information About Us.......................................... 76
Financial Statements..................................................... F-1
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
[LOGO]
Common Stock
-----------
PROSPECTUS
-----------
Bear, Stearns & Co. Inc.
Chase H&Q
U.S. Bancorp Piper Jaffray
, 2000
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution
The expenses (other than underwriting discounts and commissions) payable in
connection with this offering are as follows:
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee................ $18,480
NASD filing fee.................................................... 7,500
Nasdaq filing fee.................................................. *
Printing and engraving expenses.................................... *
Legal fees and expenses............................................ *
Accounting fees and expenses....................................... *
Blue Sky fees and expenses (including legal fees).................. *
Transfer agent and rights agent and registrar fees and expenses.... *
Premium paid on policy that indemnifies directors and officers
against liabilities in this offering.............................. *
Miscellaneous...................................................... *
-------
Total............................................................ *
=======
</TABLE>
- --------
*To be filed by amendment
All expenses are estimated except for the SEC fee and the NASD fee.
Item 14. Indemnification of Directors and Officers
The Registrant's Certificate of Incorporation permits indemnification to the
fullest extent permitted by Delaware law. The Registrant's bylaws require the
Registrant to indemnify any person who was or is an authorized representative
of the Registrant, and who was or is a party or is threatened to be made a
party to any corporate proceeding, by reason of the fact that such person was
or is an authorized representative of the Registrant, against judgments,
penalties, fines and amounts paid in settlement and expenses actually and
reasonably incurred by such person in connection with such third party
proceeding if such person acted in good faith and in a manner such person
reasonably believed to be in, or not opposed to, the best interests of the
Registrant and, with respect to any criminal third party proceeding (including
any action or investigation which could or does lead to a criminal third party
proceedings) had no reasonable cause to believe such conduct was unlawful. The
Registrant shall also indemnify any person who was or is an authorized
representative of the Registrant and who was or is a party or is threatened to
be made a party to any corporate proceeding by reason of the fact that that
such person was or is an authorized representative of the Registrant, against
expenses actually and reasonably incurred by such person in connection with the
defense or settlement of such corporate action if such person acted in good
faith and in a manner reasonably believed to be in, or not opposed to, the best
interests of the Registrant, except that no indemnification shall be made in
respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable to the Registrant unless and only to the extent that the
Delaware Court of Chancery or the court in which such corporate proceeding was
pending shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, such authorized
representative is fairly and reasonably entitled to indemnity for such expenses
which the Court of Chancery or such other court shall deem proper. Such
indemnification is mandatory under the Registrant' bylaws as to expenses
actually and reasonably incurred to the extent that an authorized
representative of the Registrant had been successful on the merits or otherwise
in defense of any third party or corporate proceeding or in defense of any
claim, issue or matter therein. The determination of whether an
II-1
<PAGE>
individual is entitled to indemnification may be made by a majority of
disinterested directors, independent legal counsel in a written legal opinion
or the stockholders. Delaware law also permits indemnification in connection
with a proceeding brought by or in the right of the Registrant to procure a
judgment in its favor. Insofar as indemnification for liabilities arising under
the Act may be permitted to directors, officers or persons controlling the
Registrant pursuant to the foregoing provisions, the Registrant has been
informed that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in that Act and is
therefore unenforceable.
The Underwriting Agreement provides that the underwriters are obligated,
under certain circumstances, to indemnify directors, officers, and controlling
persons of the Registrant against certain liabilities, including liabilities
under the Act. Reference is made to the form of Underwriting Agreement which
will be filed by amendment as Exhibit 1.1 hereto.
Item 15. Recent Sales of Unregistered Securities
Since our inception, we have issued the following securities that were not
registered under the Act:
Since our inception, we have issued an aggregate of 2,645,881 shares of
common stock, par value $0.001 per share. These shares include 11,974 shares of
common stock issued in July 1996 at a purchase price per share of $0.01 for a
total of $120, 1,028,574 shares of common stock issued upon exercise of options
granted under our equity compensation plan at a weighted average exercise price
of $0.63 per share and 2,170,500 shares of common stock issued in the form of
restricted stock grants under our equity compensation plan at a weighted
average purchase price of $0.24 per share, of which 565,167 shares have been
repurchased by the Company. All such sales and issuances were deemed to be
exempt from registration under Section 4(2) of the Act and/or Rule 701, or
Regulation D or Regulation S promulgated thereunder.
Since our inception we have also issued an aggregate of 36,922,488 shares of
preferred stock, par value of $0.001 per share. These shares include (i)
6,686,986 shares of series A-1 preferred stock prior to 1996 at a purchase
price per share of $1.00, for a total of approximately $6.7 million; (ii)
4,333,990 shares of series A-2 preferred stock issued in October 1996 at a
purchase price per share of $1.25, for a total of approximately $5.4 million;
(iii) 10,304,264 shares of series A-3 preferred stock issued in March 1997 at a
purchase price per share of $1.21, for a total of approximately $12.5 million;
(iv) 4,000,000 shares of series A-4 issued in January 1998 at a purchase price
per share of $2.60 for a total of approximately $10.4 million; (v) 9,572,248
shares of series A-5 preferred stock issued in March 2000 at a purchase price
per share of $3.00, for a total of approximately $28.7 million, which amount
includes 3,451,165 shares issued upon the conversion of convertible promissory
notes issued in November 1999; (vi) 1,000,000 shares of series B preferred
stock issued in October 1996 at a purchase price per share of $2.25 for a total
of approximately $2.3 million; (viii) 400,000 shares of series C preferred
stock issued in June 1997 at a purchase price per share of $2.50 for a total of
approximately $1.0 million; and (ix) 625,000 shares of series D preferred stock
issued in May 2000 at a purchase price per share of $8.00 for a total of
approximately $5.0 million. All such sales and issuances were deemed to be
exempt from registration under the Securities Act by virtue of Section 4(2),
Regulation D or Regulation S promulgated thereunder.
Since our inception, we have issued warrants to purchase a total of 4,932,600
shares of common stock and 239,475 shares of series A-1 preferred stock which
will either be exercised prior to the completion of this offering or become
exercisable for 239,475 shares of common stock upon the completion of this
offering.
The warrants we have issued consist of warrants to purchase a total of
1,320,000 shares of common stock issued prior to 1997 at an exercise price of
$0.01 per share, including warrants to purchase 11,974 shares which were
exercised in July 1996, and warrants to purchase (i) 3,500,000 shares of common
stock at an exercise price of $1.25 per share issued in November 1999; (ii)
12,600 shares of common stock at an exercise price of $2.50 per share issued in
June 1997; (iii) 239,475 shares of series A-1 preferred stock, which will
either be
II-2
<PAGE>
exercised prior to the completion of this offering or become exercisable for
239,475 shares of common stock at an exercise price of $1.00 per share reissued
in July 1998; and (iv) 100,000 shares of common stock at an exercise price of
$0.01 per share issued in March 1997. All such sales and issuances were deemed
to be exempt from registration under the Securities Act by virtue of Section
4(2), Regulation D or Regulation S promulgated thereunder.
Pursuant to our equity compensation plan, as of May 23, 2000, 5,797,124
shares are issuable upon the exercise of options outstanding under the plan at
a weighted average exercise price of $1.14 per share and 2,633,907 shares have
been issued under the plan, including 706,488 shares subject to repurchase at a
weighted average purchase price of $0.92 per share. For a more detailed
description of our equity compensation plan, see Management--Equity
Compensation Plan. In granting the options and selling the underlying
securities upon exercises of the options, we are relying upon exemption from
registration set forth in Section 4(2) of the Act and/or Rule 701, Regulation D
or Regulation S promulgated thereunder.
Item 16. Exhibits and Financial Statement Schedules
(a) Exhibits:
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
1.1 Form of Underwriting Agreement.#
3.1 Amended and Restated Certificate of Incorporation of the Company.#
3.2 Amended and Restated Bylaws of the Company.#
4.1 Form of Common Stock Certificate of Company.#
5.1 Opinion of Morgan, Lewis & Bockius LLP.#
10.1 3-Dimensional Pharmaceuticals, Inc. Equity Compensation Plan, as
amended.#
10.2 Third Amended and Restated Stockholders' Agreement by and among the
Company and the Stockholders identified therein, dated March 31,
2000.*
10.3 Series B Preferred Stock Purchase Agreement between the Company and
Merck KgaA, dated October 11, 1996.*
10.4 Series C Preferred Stock Purchase Agreement between the Company and
American Home Products Corporation, dated June 13, 1997.*
10.5 Series D Preferred Stock Purchase Agreement between the Company and
Schering Berlin Venture Corporation, dated May 17, 2000.#
10.6 Warrant to Purchase Common Stock of the Company issued to HealthCare
Ventures III, L.P., dated November 18, 1999.*
10.7 Warrant to Purchase Common Stock of the Company issued to HealthCare
Ventures IV, L.P., dated November 18, 1999.*
10.8 Warrant to Purchase Common Stock of the Company issued to Rho
Management Trust II, dated November 18, 1999.*
10.9 Warrant to Purchase Common Stock of the Company issued to Aetna Life
Insurance Company, dated November 18, 1999.*
10.10 Warrant to Purchase Common Stock of the Company issued to Henry
Rothman, dated November 18, 1999.*
10.11 Warrant to Purchase Common Stock of the Company issued to Abingworth
Bioventures SICAV, dated November 18, 1999.*
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
10.12 Warrant to Purchase Common Stock of the Company issued to Sentron
Medical, Inc., dated November 18, 1999.*
10.13 Warrant to Purchase Common Stock of the Company issued to Biotech
Growth S.A., dated November 18, 1999.*
10.14 Employment Offer Letter to David C. U'Prichard, dated September 1,
1999.#
10.15 Settlement Agreement between the Company and Scriptgen
Pharmaceuticals, Inc., dated March 7, 2000.*@
10.16 Research Collaboration Agreement between the Company and Biocryst
Pharmaceuticals, Inc., dated October 18, 1996, and Amendment No.1
thereto, dated October 18, 1996.*@
10.17 Collaborative Discovery and Lead Optimization Agreement between the
Company and Boehringer Ingelheim Pharmaceuticals, Inc., dated December
17, 1999.*@
10.18 Collaborative Research and License Agreement between the Company and
Hoechst Schering AgrEvo GmbH, now a part of Aventis Crop Science CmbH,
dated October 18, 1999.*@
10.19 Collaborative Research and License Agreement between the Company and
E.I. DuPont de Nemours & Co., dated October 12, 1998.*@
10.20 Collaborative Discovery and Lead Optimization Agreement between the
Company and DuPont Pharmaceuticals Company, dated February 11, 2000.#@
10.21 Nonexclusive Patent License Agreement between the Company and DuPont
Pharmaceuticals Company, dated February 11, 2000.#@
10.22 Research and License Agreement between the Company and the Heska
Corporation, dated December 18, 1997, and Amendment No.1 thereto,
dated December 18, 1997.*@
10.23 License and Research Agreement between the Company and Schering AG,
Germany, dated May 17, 2000.#@
10.24 Master Loan and Security Agreement between the Company and Phoenixcor,
Inc., dated June 18, 1998.#
10.25 Amended and Restated Lease for Combination Office/Laboratory/Light
Manufacturing Space at Eagleview Corporate Center Lot 28 between the
Company and Eagleview Technology Partners, dated December 12, 1997.#
10.26 Master Lease Agreement between the Company and Transamerica Business
Credit Corporation, dated June 12, 1997.#
10.27 Warrant to Purchase Common Stock of the Company issued to Transamerica
Business Credit Corporation, dated June 12, 1997.#
10.28 Master Lease Agreement, Loan Agreement and Subordination Agreement
between the Company and Comdisco, Inc., dated March 7, 1994.#
10.29 Warrant to Purchase Series A Preferred Stock, originally dated March
7, 1994 and reissued to CDC Realty, Inc., dated July 21, 1998.#
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
10.30 Warrant to Purchase Series A Preferred Stock, originally dated March
7, 1994 and reissued to Gregory Stento, dated July 21, 1998.#
10.31 Warrant to Purchase Series A Preferred Stock, originally dated April
25, 1995 and reissued to Comdisco, Inc., dated July 21, 1998.#
10.32 Warrant to Purchase Series A Preferred Stock, originally dated April
25, 1995 and reissued to Gregory Stento, dated July 21, 1998.#
21.1 Subsidiaries of the Registrant.*
23.1 Consent of Richard A. Eisner & Company, LLP.*
23.2 Consent of Morgan, Lewis & Bockius LLP (to be included in Exhibit
5.1).#
24.1 Power of Attorney (included on signature page).*
27.1 Financial Data Schedule.*
</TABLE>
- --------
* Filed herewith.
# To be filed by amendment.
@ Confidential treatment will be requested with respect to portions of this
exhibit. Omitted portions will be filed separately with the Securities and
Exchange Commission.
(b) Financial Statement Schedules
Schedule II--Valuation and Qualifying accounts.
All other information for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission is either
included in the financial statements or is not required under the related
instructions or is inapplicable, and therefore has been omitted.
Item 17. Undertakings.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, the Act, may be permitted to directors, officers and controlling
persons of the registrant pursuant to provisions described in Item 14 above, 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 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 Act and will be governed by the final adjudication of such
issue.
The undersigned registrant hereby undertakes (1) to provide to the
underwriter at the closing specified in the underwriting agreement,
certificates in such denominations and registered in such names as required by
the underwriter to permit prompt delivery to each purchaser; (2) for purposes
of determining any liability under the Act, the information omitted from the
form of prospectus filed as part of a registration statement in reliance upon
Rule 430(A) and contained in the form of prospectus filed by the registrant
pursuant to Rule 424(b)(1) or (4) or 497(h) under the Act shall be deemed to be
part of this registration statement as of the time it was declared effective;
and (3) that for the purpose of determining any liability under the Act, each
post-effective amendment that contains a form of prospectus 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.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has duly reasonable grounds to believe that it meets all of
the requirements for filing on Form S-1 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in Exton, Pennsylvania, on May 23, 2000.
3-Dimensional Pharmaceuticals, Inc.
/s/ David C. U'Prichard
By___________________________________
David C. U'Prichard
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated. Each person whose signature appears
below in so signing also makes, constitutes and appoints David C. U'Prichard
and F. Raymond Salemme and each of them acting alone, his true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities, to execute
and cause to be filed with the Securities and Exchange Commission any and all
amendments and post-effective amendments to this Registration Statement and a
related registration statement that is to be effective upon filing pursuant to
Rule 462(b) under the Securities Act of 1933, and in each case to file the
same, with all exhibits thereto and other documents in connection therewith,
and hereby ratifies and confirms all that said attorney-in-fact or his
substitute or substitutes may do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ David C. U'prichard Chief Executive Officer May 23, 2000
______________________________________ and Director (Principal
David C. U'Prichard Executive Officer)
/s/ Michael J. Wassil Vice President and Chief May 23, 2000
______________________________________ Financial Officer
Michael J. Wassil (Principal Financial
Officer)
/s/ Scott M. Horvitz Vice President, Finance May 23, 2000
______________________________________ and Administration
Scott M. Horvitz (Principal Accounting
Officer)
/s/ F. Raymond Salemme President, Chief May 23, 2000
______________________________________ Scientific Officer and
F. Raymond Salemme Director
/s/ Stephen Bunting Director May 23, 2000
______________________________________
Stephen Bunting
</TABLE>
II-6
<PAGE>
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Bernard Canavan Director May 23, 2000
______________________________________
Bernard Canavan
/s/ James H. Cavanaugh Director May 23, 2000
______________________________________
James H. Cavanaugh
/s/ Zola P. Horovitz Director May 23, 2000
______________________________________
Zola P. Horovitz
/s/ David R. King Director May 23, 2000
______________________________________
David R. King
/s/ Joshua Ruch Director May 23, 2000
______________________________________
Joshua Ruch
/s/ Harold R. Werner Director May 23, 2000
______________________________________
Harold R. Werner
</TABLE>
II-7
<PAGE>
INDEPENDENT AUDITORS' REPORT ON SCHEDULE II
Board of Directors and Stockholders
3-Dimensional Pharmaceuticals, Inc.
Our audits were conducted for the purpose of forming an opinion on the basic
financial statements of 3-Dimensional Pharmaceuticals, Inc. as of December 31,
1999 (consolidated) and 1998 and for each of the years in the three-year period
ended December 31, 1999 taken as a whole. The information included on Schedule
II is presented for purposes of additional analysis and is not a required part
of the basic financial statements. Such information has been subjected to the
auditing procedures applied in the audits of the basic financial statements
and, in our opinion, is fairly stated in all material respects in relation to
the basic financial statements taken as a whole. Also, such schedule presents
fairly the information set forth therein in compliance with the applicable
accounting regulations of the Securities and Exchange Commission.
New York, New York
February 25, 2000
<PAGE>
3-DIMENSIONAL PHARMACEUTICALS, INC.
Schedule II--Valuation and Qualifying Accounts
(in thousands)
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E
-------- ---------- --------------------------- ------------ ---------
Balance at Charged in Charge to Balance
Beginning Costs and Other Accounts-- Deductions-- at End of
Description of Period Expenses Describe Describe Period
----------- ---------- ---------- ---------------- ------------ ---------
<S> <C> <C> <C> <C> <C>
Accumulated depreciation
and amortization:
Year ended December
31, 1997............. $ 1,190 $ 860 $ -- $ -- $ 2,050
Year ended December
31, 1998............. 2,050 1,486 -- -- 3,536
Year ended December
31, 1999............. 3,536 1,565 -- -- 5,101
Tax asset valuation
allowance:
Year ended December
31, 1997............. $ 5,908 $2,415 $ -- $ -- $ 8,323
Year ended December
31, 1998............. 8,323 4,040 -- -- 12,363
Year ended December
31, 1999............. 12,363 6,805 -- -- 19,168
</TABLE>
2
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
1.1 Form of Underwriting Agreement.#
3.1 Amended and Restated Certificate of Incorporation of the Company.#
3.2 Amended and Restated Bylaws of the Company.#
4.1 Form of Common Stock Certificate of Company.#
5.1 Opinion of Morgan, Lewis & Bockius LLP.#
10.1 3-Dimensional Pharmaceuticals, Inc. Equity Compensation Plan, as
amended.#
10.2 Third Amended and Restated Stockholders' Agreement by and among the
Company and the Stockholders identified therein, dated March 31,
2000.*
10.3 Series B Preferred Stock Purchase Agreement between the Company and
Merck KgaA, dated October 11, 1996.*
10.4 Series C Preferred Stock Purchase Agreement between the Company and
American Home Products Corporation, dated June 13, 1997.*
10.5 Series D Preferred Stock Purchase Agreement between the Company and
Schering Berlin Venture Corporation, dated May 17, 2000.#
10.6 Warrant to Purchase Common Stock of the Company issued to HealthCare
Ventures III, L.P., dated November 18, 1999.*
10.7 Warrant to Purchase Common Stock of the Company issued to HealthCare
Ventures IV, L.P., dated November 18, 1999.*
10.8 Warrant to Purchase Common Stock of the Company issued to Rho
Management Trust II, dated November 18, 1999.*
10.9 Warrant to Purchase Common Stock of the Company issued to Aetna Life
Insurance Company, dated November 18, 1999.*
10.10 Warrant to Purchase Common Stock of the Company issued to Henry
Rothman, dated November 18, 1999.*
10.11 Warrant to Purchase Common Stock of the Company issued to Abingworth
Bioventures SICAV, dated November 18, 1999.*
10.12 Warrant to Purchase Common Stock of the Company issued to Sentron
Medical, Inc., dated November 18, 1999.*
10.13 Warrant to Purchase Common Stock of the Company issued to Biotech
Growth S.A., dated November 18, 1999.*
10.14 Employment Offer Letter to David C. U'Prichard, dated September 1,
1999.#
10.15 Settlement Agreement between the Company and Scriptgen
Pharmaceuticals, Inc., dated March 7, 2000.*@
10.16 Research Collaboration Agreement between the Company and Biocryst
Pharmaceuticals, Inc., dated October 18, 1996, and Amendment No.1
thereto, dated October 18, 1996.*@
10.17 Collaborative Discovery and Lead Optimization Agreement between the
Company and Boehringer Ingelheim Pharmaceuticals, Inc., dated December
17, 1999.*@
10.18 Collaborative Research and License Agreement between the Company and
Hoechst Schering AgrEvo GmbH, now a part of Aventis Crop Science CmbH,
dated October 18, 1999.*@
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
10.19 Collaborative Research and License Agreement between the Company and
E.I. DuPont de Nemours & Co., dated October 12, 1998.*@
10.20 Collaborative Discovery and Lead Optimization Agreement between the
Company and DuPont Pharmaceuticals Company, dated February 11, 2000.#@
10.21 Nonexclusive Patent License Agreement between the Company and DuPont
Pharmaceuticals Company, dated February 11, 2000.#@
10.22 Research and License Agreement between the Company and the Heska
Corporation, dated December 18, 1997, and Amendment No.1 thereto,
dated December 18, 1997.*@
10.23 License and Research Agreement between the Company and Schering AG,
Germany, dated May 17, 2000.#@
10.24 Master Loan and Security Agreement between the Company and Phoenixcor,
Inc., dated June 18, 1998.#
10.25 Amended and Restated Lease for Combination Office/Laboratory/Light
Manufacturing Space at Eagleview Corporate Center Lot 28 between the
Company and Eagleview Technology Partners, dated December 12, 1997.#
10.26 Master Lease Agreement between the Company and Transamerica Business
Credit Corporation, dated June 12, 1997.#
10.27 Warrant to Purchase Common Stock of the Company issued to Transamerica
Business Credit Corporation, dated June 12, 1997.#
10.28 Master Lease Agreement, Loan Agreement and Subordination Agreement
between the Company and Comdisco, Inc., dated March 7, 1994.#
10.29 Warrant to Purchase Series A Preferred Stock, originally dated March
7, 1994 and reissued to CDC Realty, Inc., dated July 21, 1998.#
10.30 Warrant to Purchase Series A Preferred Stock, originally dated March
7, 1994 and reissued to Gregory Stento, dated July 21, 1998.#
10.31 Warrant to Purchase Series A Preferred Stock, originally dated April
25, 1995 and reissued to Comdisco, Inc., dated July 21, 1998.#
10.32 Warrant to Purchase Series A Preferred Stock, originally dated April
25, 1995 and reissued to Gregory Stento, dated July 21, 1998.#
21.1 Subsidiaries of the Registrant.*
23.1 Consent of Richard A. Eisner & Company, LLP.*
23.2 Consent of Morgan, Lewis & Bockius LLP (to be included in Exhibit
5.1).#
24.1 Power of Attorney (included on signature page).*
27.1 Financial Data Schedule.*
</TABLE>
- --------
* Filed herewith.
# To be filed by amendment.
@ Confidential treatment will be requested with respect to portions of this
exhibit. Omitted portions will be filed separately with the Securities and
Exchange Commission.
<PAGE>
Exhibit 10.2
THIRD AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT
--------------------------------------------------
THIRD AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT (the "Agreement") dated
as of March 31, 2000, by and among 3-DIMENSIONAL PHARMACEUTICALS, INC., a
Delaware corporation (the "Company"), and those stockholders of the Company
whose names appear on the signature pages hereof.
W I T N E S S E T H
-------------------
WHEREAS, certain of the parties hereto have entered into that certain
Amended and Restated Stockholders' Agreement by and among them, dated as of
January 6, 1998 (the "Stockholders' Agreement");
WHEREAS, the Company has entered into a Series A-5 Preferred Stock Purchase
Agreement, dated as of March 31, 2000 (the "Stock Purchase Agreement"), between
the Company and the investors ("Investors") listed on Schedule 1 providing for
the purchase by the Investors of shares of Series A-5 Preferred Stock, $.001 par
value per share, of the Company, and, in connection therewith, the Company has
agreed to enter into this Agreement which is Exhibit 3.2.3 of the Stock Purchase
Agreement; and
WHEREAS, in connection with the Stock Purchase Agreement, the parties
hereto desire to amend and restate the Stockholders' Agreement as provided for
herein.
NOW, THEREFORE, in consideration of the foregoing and of the respective
covenants and undertakings hereunder and pursuant to the Stock Purchase
Agreement, the parties hereto do hereby amend and restate the Stockholders'
Agreement in its entirety and hereby agree as follows:
SECTION 1. Definitions.
-----------
As used in this Agreement, the following terms shall have the following
respective meanings:
"Affiliate" shall mean, with respect to any specified Person, (i) any
other Person which owns, directly or indirectly, individually or as part of a
group (as such term is defined under the Exchange Act), greater than 50% of the
voting stock or other capital interest of such specified Person or (ii) any
other Person of whom greater than 50% of the voting stock is owned, directly or
indirectly, individually or as part of a group (as such term is defined under
the Exchange Act), by such specified Person.
"Bylaws" shall mean the Bylaws of the Company, as amended.
"Capital Stock" shall mean any (i) shares of Common Stock, Preferred
Stock or any
<PAGE>
other equity security of the Company, (ii) debt securities convertible into or
exchangeable for any equity security of the Company or (iii) options, warrants
or other rights to subscribe for, purchase or otherwise acquire any such equity
security or debt security of the Company.
"Charter" shall mean the Certificate of Incorporation of the Company,
as restated and/or amended from time to time.
"Commission" shall mean the Securities and Exchange Commission or any
other Federal agency administering the Securities Act at the applicable time.
"Common Shares" shall mean the issued and outstanding shares of the
Company's Common Stock.
"Common Stock" shall mean the Company's authorized Common Stock, $.001
par value.
"Equity Stock" shall have the meaning set forth in Rule 3a11-1 under
the Exchange Act.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and any successor statute and the rules and regulations thereunder, as
shall be in effect from time to time.
"Excluded Stock" shall mean (a) the Preferred Shares, (b) the Option
Shares, (c) Common Stock issuable upon conversion of the Preferred Shares, (d)
the Warrants issued or issuable pursuant to the Loan Agreements dated as of
December 15, 1994, as amended, August 15, 1995, December 12, 1995, February 12,
1996, June 20, 1996 and September 25, 1996 between the Company and certain of
the Preferred Stockholders and the Common Stock issued pursuant to the exercise
thereof, (e) the Warrants issued in connection with the Master Lease Agreement
entered into between the Company and Transamerica Business Credit Corporation in
June 1997 and the Common Stock issued pursuant to the exercise thereof, (f)
securities issued pursuant to the acquisition of another corporation,
partnership, joint venture, trust or other entity by the Company by merger,
consolidation, stock acquisition, reorganization, or otherwise, whereby the
Company, or its stockholders of record immediately prior to the effectiveness of
such transaction, directly or indirectly, own at least the majority of the
voting power of such other entity or the resulting or surviving corporation
immediately after such transaction and (g) securities authorized by the
affirmative vote of at least 75% of the Company's Board of Directors then in
office to be issued in connection with (x) bridge loan financings from
institutional and/or other accredited investors or (y) corporate partnering
transactions or other strategic alliances with pharmaceutical or other companies
related to the Company's business.
"Family" shall include any spouse, lineal ancestor or descendant, or
sibling.
"Five Percent (5%) Stockholder" shall mean any Preferred Stockholder
owning (either of record or beneficially), at any time, five percent (5%) or
more of the Company's then outstanding Common Shares.
2
<PAGE>
"Group" shall mean as to (a) a Preferred Stockholder that is a limited
partnership, any and all of the venture capital limited partnerships now
existing or hereafter arising that are "affiliates" (as defined by Rule 405
promulgated under the Securities Act), in whole or in part, of one or more
general partners or of one or more general partners of a general partner of such
Preferred Stockholder and any predecessor or successor partnership and any
limited and general partners of any such partnership, (b) a Preferred
Stockholder that is a trust, any of the beneficiaries, settlers or grantors now
existing or hereafter arising of, or any Person under common control with, such
trust and (c) any other Preferred Stockholder, its Affiliates.
"Holder" shall mean each Preferred Stockholder and each holder of the
Warrants issued or issuable pursuant to the Loan Agreements dated as of December
15, 1994, as amended, August 15, 1995, December 12, 1995, February 12, 1996,
June 20, 1996 and September 25, 1996 between the Company and certain of the
Preferred Stockholders or of the Common Stock issued pursuant to the exercise
thereof and each holder of the Warrants issued or issuable pursuant to the 1999
Bridge Financing Agreements dated as of November 18, 1999 between the Company
and certain of the Preferred Stockholders and the Common Stock issued or to be
issued pursuant to the exercise thereof.
"Initial Public Offering" shall mean the Company's initial
distribution of Common Stock in an underwritten Public Offering to the general
public pursuant to a registration statement filed with and declared effective by
the Commission pursuant to the Securities Act resulting in gross proceeds
(before underwriting commissions and offering expenses) to the Company of not
less than $15 million.
"Offer" shall have the meaning set forth in Section 4(b) hereof.
"Offered Shares" shall have the meaning set forth in Section 4(a)
hereof.
"Option Shares" shall mean up to 9,325,000 shares of Common Stock
issued, available for issuance or subject to options, warrants or rights granted
or authorized to be granted to employees and others who provide services to the
Company pursuant to any Stock Plan.
"Person" shall mean and include a natural person, a corporation, a
partnership, a trust, an unincorporated organization and a government or any
department, agency or political subdivision thereof.
"Preferred Shares" shall mean the issued and outstanding shares of the
Company's Preferred Stock.
"Preferred Stock" shall mean the Company's authorized Series A-1
Preferred Stock, $.001 par value, Series A-2 Preferred Stock, $.001 par value,
Series A-3 Preferred Stock, $.001 par value, Series A-4 Preferred Stock, $.001
par value and Series A-5 Preferred Stock.
"Preferred Stockholder" shall mean (a) each Person purchasing or who
has purchased
3
<PAGE>
and holds Preferred Shares of the Company and (b) any Person to whom Preferred
Shares or Registrable Securities are Transferred and to whom registration rights
are assigned in accordance with Section 6.10.
"Preferred Stockholder's Group" shall mean each Person purchasing or
who has purchased and holds Preferred Shares from the Company, together with any
member of such Person's Group.
"Pro Rata Fraction" shall have the meaning set forth in Section 4(a).
"Public Offering" shall mean a distribution of Common Stock in an
underwritten public offering to be the general public pursuant to a registration
statement filed with and declared effective by the Commission pursuant to the
Securities Act.
"Registrable Securities" shall mean any shares of Common Stock issued
or to be issued pursuant to the conversion of Preferred Shares, and any shares
of Common Stock issued or to be issued pursuant to the exercise of the Warrants
issued or issuable pursuant to the Loan Agreements dated as of December 15,
1994, as amended, August 15, 1995, December 12, 1995, February 12, 1995, June
20, 1996 and September 25, 1996 between the Company and certain of the Preferred
Stockholders, and any Common Stock issued or to be issued pursuant to the
exercise of the Warrants issued or issuable pursuant to the 1999 Bridge
Financing Agreements dated as of November 18, 1999 between the Company and
certain of the Preferred Stockholders.
"Securities Act" shall mean the Securities Act of 1933, as amended,
and any successor statute and the rules and regulations of the Commission
thereunder, as shall be in effect at the applicable time.
"Shares" shall mean and include all shares of voting capital stock of
the Company now owned or hereafter acquired by any Preferred Stockholder or
transferee of such Preferred Stockholder.
"Stock Plan" shall mean the Company's Equity Compensation Plan or any
stock option plan for officers, directors, employees and others who render
services to the Company.
"Transfer" shall include any direct or indirect sale, assignment,
transfer, pledge, hypothecation or other disposition of any Shares or of any
legal or beneficial interest therein.
SECTION 2. Representations.
---------------
2.1 By the Company. The Company represents to each Preferred Stockholder
--------------
that:
(a) The execution, delivery and performance by the Company of this
Agreement and all transactions contemplated in this Agreement have been duly
authorized by all action required by law, its Charter, its Bylaws or otherwise.
4
<PAGE>
(b) This Agreement has been duly executed and delivered by the Company
and constitutes the legal, valid and binding obligation of the Company
enforceable against it in accordance with its terms.
2.2 By the Preferred Stockholders. Each Preferred Stockholder, as to
-----------------------------
itself or himself, represents to the Company and the other Preferred
Stockholders that:
(a) The execution, delivery and performance by such Preferred
Stockholder of this Agreement and all transactions contemplated in this
Agreement have been duly authorized by all action required by law, and by the
certificate of incorporation and by-laws, partnership agreement or other
governing instrument of such Preferred Stockholder.
(b) This Agreement has been duly executed and delivered by such
Preferred Stockholder and constitutes the legal, valid and binding obligation of
such Preferred Stockholder enforceable against it or him in accordance with its
terms.
SECTION 3. Legend on Shares and Notice of Transfer.
---------------------------------------
3.1 Restrictive Legends. Each certificate evidencing Shares, and each
-------------------
certificate evidencing Shares held by subsequent transferees of any such
certificate, shall (unless otherwise permitted by the provisions of Section 3.2
hereof) be stamped or otherwise imprinted with a legend in substantially the
following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR
ANY STATE SECURITIES LAW. ADDITIONALLY, THE TRANSFER OF THESE SECURITIES IS
SUBJECT TO THE CONDITIONS SPECIFIED IN THE THIRD AMENDED AND RESTATED
STOCKHOLDERS' AGREEMENT DATED AS OF MARCH 31, 2000, AMONG 3-DIMENSIONAL
PHARMACEUTICALS, INC. AND CERTAIN OTHER SIGNATORIES THERETO. NO TRANSFER
OF SUCH SECURITIES SHALL BE VALID OR EFFECTIVE UNTIL SUCH CONDITIONS HAVE
BEEN FULFILLED. COPIES OF SUCH AGREEMENT MAY BE OBTAINED AT NO COST BY
WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE TO THE
SECRETARY OF 3-DIMENSIONAL PHARMACEUTICALS, INC. THESE SECURITIES MAY NOT
BE SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF SUCH
REGISTRATION UNLESS EXEMPTIONS THEREFROM ARE AVAILABLE UNDER THE SECURITIES
ACT OF 1933 AND ANY APPLICABLE STATE SECURITIES LAW.
3.2 Notice of Transfer. (a) Each of the Preferred Stockholders, and any
------------------
other holder of any Shares by acceptance thereof, agrees that, prior to any
Transfer of any Shares, such holder will give written notice to the Company of
such holder's intention to effect such Transfer and to comply in all other
respects with the provisions of this Section 3.2. Each such notice shall
contain (i) a
5
<PAGE>
statement setting forth the intention of said holder's prospective transferee
with respect to its retention or disposition of said Shares, and (ii) unless
waived by the Company, an opinion of counsel for said holder (who may be the
inside or staff counsel employed by said holder), or an opinion of counsel for
the Company as to the necessity or non-necessity for registration under the
Securities Act and applicable state securities laws in connection with such
Transfer and stating the factual and statutory bases relied upon by counsel. The
following provisions shall then apply:
(i) If in the opinion of counsel for the Company the proposed Transfer
of Shares may be effected without registration or qualification under the
Securities Act and any applicable state securities laws, then the
registered holder of such Shares shall be entitled to Transfer such Shares
in accordance with the intended method of disposition specified in the
statement delivered by said holder to the Company.
(ii) If in the opinion of counsel for the Company the proposed
Transfer of such Shares may not be effected without registration under the
Securities Act or registration or qualification under any applicable state
securities laws, the registered holder of such Shares shall not be entitled
to Transfer such Shares until the requisite registration or qualification
is effective.
(b) Each certificate evidencing the Shares issued upon such Transfer
(and each certificate evidencing any balance of such Shares not transferred)
shall bear the legend set forth in Section 3.1 hereof unless (i) in the opinion
of counsel (reasonably acceptable to the Company) addressed to the Company the
registration of future Transfers is not required by the applicable provisions of
the Securities Act or applicable state securities laws; (ii) the Company shall
have waived the requirement of such legend; or (iii) in the reasonable opinion
of counsel to the Company, such Transfer shall have been made in connection with
an effective registration statement filed pursuant to the Securities Act or in
compliance with the requirements of Rule 144 or Rule 144A (or any similar or
successor rule) promulgated under the Securities Act, and in compliance with
applicable state securities laws.
(c) Notwithstanding the provisions of this Section 3, in the case of
a Transfer by a holder to a member of such holder's Group, no such opinion of
counsel shall be necessary, provided that the transferee agrees in writing to be
--------
subject to Sections 3.1 and 3.2 hereof to the same extent as if such transferee
were originally a signatory to this Agreement.
SECTION 4. Rights to Purchase Additional Stock..
------------------------------------
(a) Except for Excluded Stock, the Preferred Stockholders shall have
the right to subscribe to any and all issuances of Capital Stock of the Company
("Offered Shares"). Each Preferred Stockholder shall have the right to purchase
that number of Offered Shares as shall be equal to the number of Offered Shares
multiplied by a fraction, the numerator of which shall be the number of Shares
then owned by such Preferred Stockholder and denominator of which shall be the
aggregate number of Shares then owned by all of the Preferred Stockholders (the
"Pro Rata Fraction"). For purposes of calculating the Pro Rata Fraction, each
Preferred Share shall be deemed to represent the number of Common Shares into
which the Preferred Share is then convertible.
6
<PAGE>
(b) In the event the Company shall propose to issue Capital Stock
except for Excluded Stock, the Company shall give written notice (the "Offer")
to each Preferred Stockholder, which shall set forth the number and kind or
class of shares of Capital Stock proposed to be issued the terms and conditions
thereof and the price therefor. Such notice shall be given at least 20 days
prior to the issuance of such Capital Stock.
(c) The Offer by its term shall remain open and irrevocable for a
period of 20 days from the date of its delivery to such Preferred Stockholder
("20-Day Period").
(d) The Preferred Stockholder shall evidence its acceptance of the
Offer by delivering a written notice ("Notice of Acceptance"), signed by the
Preferred Stockholder, setting forth the number of Offered Shares which the
Preferred Stockholder elects to purchase. The Notice of Acceptance must be
delivered to the Company prior to the end of the 20-Day Period.
(e) If the Preferred Stockholders do not tender Notices of Acceptance
for all of the Offered Shares, the Company shall have 90 days from the
expiration of the 20-Day Period to sell all or any part of the Offered Shares
refused by the Preferred Stockholders to any person(s), but only upon terms and
conditions which are in all material respects no more favorable to such other
person(s) than those set forth in the Offer.
(f) Upon the closing of the sale of Offered Shares to any third party,
each Preferred Stockholder shall purchase from the Company, and the Company
shall issue and sell to such Preferred Stockholder, any Offered Shares for which
such Preferred Stockholder tendered a Notice of Acceptance upon the terms
specified in the Offer.
(g) In each case, any Offered Shares not purchased either by the
Preferred Stockholders or by any other person in accordance with this Section 4
may not be sold or otherwise disposed of until they are again offered to the
Preferred Stockholder under the procedures specified in this Section 4.
(h) If the Capital Stock to be issued by the Company is to be issued
pursuant to a Public Offering, notwithstanding the time periods set forth above,
the Company may require that the Preferred Stockholders make an election to
either (i) commit to purchase shares of Capital Stock from the Company at the
public offering price at the closing of the Public Offering or (ii) waive their
rights to subscribe for additional shares of Common Stock to be issued in the
Public Offering. Such election shall be made sufficiently in advance of the
filing of the registration statement relating to the Public Offering as shall be
reasonably requested by the Company.
(i) The rights provided by this Section 4 may be assigned by any
Preferred Stockholder to any and all members of its Group, provided that all
--------
such rights of any assignee to purchase Offered Shares will be subject to
receipt of appropriate representations from such assignee as reasonably
requested by the Company to ensure compliance with all applicable securities
laws.
SECTION 5. Reporting of Public Information Rule 144.
----------------------------------------
7
<PAGE>
(a) With a view to making available the benefits of Rule 144 under the
Securities Act (or any similar or successor rule which may at any time permit
the sale of Common Shares to the public without registration), at all times
after ninety (90) days after any registration statement covering an offering of
securities of the Company under the Securities Act shall have become effective,
the Company agrees to:
(i) make and keep public information available, as those terms are
defined in Rule 144 under the Securities Act;
(ii) use its best efforts to file with the Commission in a timely
manner all reports and other documents required of the Company under the
Securities Act and the Exchange Act; and
(iii) furnish to each Preferred Stockholder promptly upon request a
written statement by the Company as to its compliance with the reporting
requirements of the Exchange Act, a copy of the most recent annual or
quarterly report of the Company, and such other reports and documents so
filed by the Company as such holder may reasonably request in availing
itself of Rule 144 (or any similar or successor rule).
(b) With a view to making available the benefits of Rule 144A (or any
similar or successor rule), the Company shall, upon request of a Preferred
Stockholder, make and keep available such information as is required pursuant to
that rule.
SECTION 6. Registration Rights.
--------------------
6.1 Demand Registration Rights. Upon written request by Holders
--------------------------
representing in the aggregate at least 50% of the total number of Registrable
Securities that have not been registered under the Securities Act, the Company
shall use its best efforts to effect the registration under the Securities Act
and registration or qualification under all applicable state securities laws of
the Registrable Securities, as requested by the Holders all as provided in the
following provisions of this Section 6. Holders may require the Company to
effect no more than four registrations under the Securities Act, in the
aggregate, upon the request of the Holders pursuant to this Section 6.1. Except
as otherwise provided in Section 6.6., any registration which is not declared
effective pursuant to the Securities Act and which does not remain effective as
required by Section 6.5(a) below shall not constitute one of the four
registrations which the Company is obligated to effect pursuant to this Section
6.1. A request by a Holder to have the Company effect the registration of
Registrable Securities shall not obligate the Holder to convert them into Common
Stock, whether on not the registration of the Registrable Securities shall
become effective, provided that the Holder shall convert Registrable Securities
into Common Stock prior to the sale of such Registrable Securities pursuant to
such registration statement.
6.2 Registration Requested by Holders. Whenever the Company shall be
---------------------------------
requested, pursuant to Section 6.1 hereof, to effect the registration of any of
the Registrable Securities under the Securities Act (a "Request for
Registration"), the Company shall give notice of such proposed
8
<PAGE>
registration to all Holders at least 60 days before the Company files a
registration statement and thereupon shall, as expeditiously as possible after
such 60-day notice period, use its best efforts to effect the registration under
the Securities Act and under all applicable state securities laws of:
(a) all Registrable Securities which the Company has been requested to
register pursuant to the Request for Registration; and
(b) all other Registrable Securities which Holders have, within 20
days after the Company has given such notice, requested the Company to register;
all to the extent requisite to permit the sale or other disposition by the
Holders so to be registered. If the Holders who requested the registration of
Registrable Securities engage one or more underwriters to distribute such
Registrable Securities, the Company shall permit the managing underwriter(s) and
counsel to the underwriter(s) at the Company's expense to visit and inspect any
of the properties of the Company, examine its books, take copies and extracts
therefrom and discuss the affairs, finances and accounts of the Company with its
officers, employees and public accountants (and by this provision the Company
hereby authorizes said accountants to discuss with such underwriter(s) and such
counsel its affairs, finances and accounts), at reasonable times and upon
reasonable notice, with or without a representative of the Company being
present. The Company shall have the right to include in any registration of
Registrable Securities required pursuant to this Section 6.2 additional shares
of its Common Stock ("Company Securities") or shares of Common Stock that have
the benefit of duly exercised registration rights contractually binding on the
Company ("Third Party Registrable Securities"), provided that if any Registrable
--------
Securities to be so registered for sale are to be distributed by or through
underwriters, then all Registrable Securities to be so registered for sale,
Company Securities and Third Party Registrable Securities, if any, shall be
included in such underwriting on the same terms and provided, further that if,
-------- -------
in the written opinion of the managing underwriter(s) the total amount of such
securities to be registered will exceed the maximum amount of the Company's
securities which can be marketed (i) at a price reasonably related to their then
current market value, or (ii) without otherwise materially and adversely
affecting the entire offering, then the Company shall exclude from such
underwriting (x) first, the maximum number of Company Securities and Third Party
Registrable Securities as is necessary in the opinion of the managing
underwriter(s) to reduce the size of the offering and (y) then, the minimum
number of Registrable Securities, pro rata to the extent practicable, on the
--- ----
basis of the number of Registrable Securities requested to be registered among
the participating Holders, as is necessary to reduce the size of the offering.
(A registration that covers both Registrable Securities and Company Securities
or Third Party Registrable Securities shall be deemed to have been requested
pursuant to a Request for Registration if the Registrable Securities constitute
at least 50% of the total offering on the effective date of the registration
statement but shall not be deemed to be one of the four registrations referred
to in Section 6.1 hereof if the Registrable Securities constitute less than 50%
of the total offering on the effective date of the registration statement.)
6.3 "Piggyback" Registrations. (a) If the Company at any time proposes
------------------------
other than in accordance with a Request for Registration to register any of its
securities under the Securities Act on Form S-1, S-2 or S-3 or on any other form
upon which the Registrable Securities may be registered for sale to the general
public, solely for cash, whether for its own account or for the
9
<PAGE>
account of others, the Company will at each such time give notice to all Holders
of such proposal at least 30 days before the Company files a registration
statement. Upon the request of any Holder given within 20 days after the Company
has given such notice, the Company will cause the Registrable Securities which
the Company has been requested to register by such Holder to be registered under
the Securities Act, all to the extent requisite to permit the sale or other
disposition by such Holder of the Registrable Securities so registered.
(b) If securities are to be registered for sale under a registration
not initiated by a Request for Registration and are to be distributed for the
account of the Company by or through a firm of underwriters then any Registrable
Securities which the Company has been requested to register pursuant to clause
(a) of this Section 6.3 shall also be included in such underwriting on the same
terms as other securities of the same class as the Registrable Securities
included in such underwriting, provided that if, in the written opinion of the
--------
managing underwriter(s), the total amount of such securities to be so registered
and distributed for the account of the Company, when added to the Registrable
Securities and the securities held by holders of securities other than the
Registrable Securities, if any, will exceed the maximum amount of the Company's
securities which can be marketed (i) at a price reasonably related to their then
current market value, or (ii) without otherwise materially and adversely
affecting the entire offering, then (subject to clause (d) of this Section 6.3)
the Company shall exclude from such underwriting (x) first, the maximum number
of securities, if any, other than Registrable Securities, being sold for the
account of persons other than the Company as is necessary to reduce the size of
the offering and (y) then, the minimum number of Registrable Securities, pro
---
rata to the extent practicable, on the basis of the number of Registrable
- ----
Securities requested to be registered among the participating Holders, as is
necessary in the opinion of the managing underwriter(s) to reduce the size of
the offering.
(c) If securities are to be registered for sale under a registration
not initiated by a Request for Registration and are to be distributed for the
account of holders of Third Party Registrable Securities or holders (other than
the Company) of other securities of the Company other than Registrable
Securities by or through a firm of underwriters of recognized standing under
underwriting terms appropriate for such transaction, then any Registrable
Securities which the Company has been requested to register pursuant to clause
(a) of this Section 6.3 shall also be included in such underwriting on the same
terms as other securities included in such underwriting, provided that if, in
--------
the written opinion of the managing underwriter or underwriters, the total
amount of such securities to be so registered, when added to such Registrable
Securities, will exceed the maximum amount of the Company's securities which can
be marketed (i) at a price reasonably related to their then current market
value, or (ii) without otherwise materially and adversely affecting the entire
offering, then the Company shall exclude from such underwriting the number of
Registrable Securities and other securities, pro rata to the extent practicable,
--- ----
on the basis of the number of securities requested to be registered, as is
necessary to in the opinion of the managing underwriter(s) to reduce the size of
the offering.
(d) Notwithstanding Section 6.3 (a) and (b), the Company shall not
exclude more Registrable Securities from registration than is necessary to
reduce the number of Registrable Securities to be registered to one-fifth of the
total number of securities to be registered, provided, however, that the Company
-------- -------
may exclude all Registrable Securities from registration in connection
10
<PAGE>
with the Company's Initial Public Offering in its sole discretion, whether or
not such exclusion is required in the opinion of the managing underwriter(s).
6.4 Registrations on S-3. At such time as the Company shall have
--------------------
qualified for the use of Form S-3 (or any successor form promulgated under the
Securities Act), each Holder shall have the right to request in writing an
unlimited number of registrations on Form S-3. Each such request by a Holder
shall: (a) specify the number of Registrable Securities which the Holder intends
to sell or dispose of, and (b) state the intended method by which the Holder
intends to sell or dispose of such Registrable Securities. Upon receipt of a
request pursuant to this Section 6.4, the Company shall use its best efforts to
effect such registration or registrations on Form S-3. Notwithstanding the
foregoing: (i) the Company shall not be obligated to effect more than one such
registration on Form S-3 pursuant to this Section 6.4 during any thirteen-month
period (provided that this limitation shall not apply to any member of a
Preferred Stockholder Group if a member of such Preferred Stockholder Group has
not caused the Company to effect at least one such registration on Form S-3
during the proceeding thirteen-month period), and (ii) the Company shall not be
obligated to effect any registration on Form S-3 under this Section 6.4 if the
Holders propose to sell in the aggregate a number of Registrable Securities that
they otherwise would be eligible to sell during one three-month period in
compliance with Rule 144 under the Securities Act.
6.5 Company's Obligations in Registration. Whenever the Company is
-------------------------------------
obligated to effect the registration of any Registrable Securities under the
Securities Act, as expeditiously as possible the Company will use its best
efforts to:
(a) prepare and file with the Commission, a registration statement
with respect to such Registrable Securities and cause such registration
statement to become and remain effective, provided that the Company shall not be
--------
required to keep such registration statement effective, or to prepare and file
any amendments or supplements thereto, later than the last business day of the
fifteenth month following the date on which such registration statement becomes
effective under the Securities Act or such longer period during which the
Holders registered thereunder shall pay all expenses reasonably incurred to keep
such registration statement effective with respect to any of the Registrable
Securities so registered and provided, further, that in the event the Commission
-------- -------
shall have declared any other registration statement with respect to an offering
of securities of the Company to be effective within four months prior to the
Company's receiving a Request for Registration, the Company may delay the
effective date of the registration statement filed in response to the Request
for Registration until six months after the effective date of the previous
registration statement;
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective and
to comply with provisions of the Securities Act with respect to the disposition
of all Registrable Securities covered by such registration statement whenever
the Holders covered by such registration statement shall desire to dispose of
the same;
(c) furnish to the Holders for whom such Registrable Securities are
registered or are to be registered such numbers of copies of a printed
prospectus, including a preliminary
11
<PAGE>
prospectus and any amendments or supplements thereto, in conformity with the
requirements of the Securities Act, and such other documents as such Holders may
reasonably request in order to facilitate the disposition of such Registrable
Securities;
(d) notify each Holder at any time when a prospectus relating to the
Registrable Securities covered by such registration statement is required to be
delivered under the Securities Act, of the Company's becoming aware that the
prospectus in such registration statement, as then in effect, includes an untrue
statement of a material fact or omits to state any material fact required to be
stated therein or necessary to make the statements therein not misleading, and
at the request of any Holder prepare and furnish to such Holder any reasonable
number of copies of any supplement to or amendment of such prospectus necessary
so that, as thereafter delivered to any purchaser of the Registrable Securities,
such prospectus shall not include an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements therein not misleading;
(e) register or qualify the Registrable Securities covered by such
registration statement under such securities or blue sky laws of such
jurisdictions as the Holders for whom such Registrable Securities are registered
or are to be registered shall reasonably request, and do any and all other
reasonable acts and things which may be necessary or advisable to enable such
Holders to consummate the disposition in such jurisdictions of such Registrable
Securities, provided that the Company shall not be required to do business or to
--------
file a general consent to service of process in any such states or
jurisdictions, and provided, further, that (notwithstanding any other provision
-------- -------
of this Agreement with respect to the bearing of expenses) if any jurisdiction
in which the Registrable Securities shall be qualified shall require that
expenses incurred in connection with the qualifications of the Registrable
Securities in that jurisdiction be borne by the Holders thereof and not by the
Company, then such expenses shall be payable by the selling Holders pro rata, to
--- ----
the extent required by such jurisdiction;
(f) furnish to the Holders for whom such Registrable Securities are
registered or are to be registered an agreement satisfactory in form and
substance to them by the Company and each of its officers, directors and holders
of 5% or more of any class of capital stock, that during the 30 days before and
the 180 days after the effective date of any underwritten public offering, the
Company and such officers, directors and 5% security holders shall not offer,
sell, contract to sell or otherwise dispose of any shares of capital stock or
securities convertible into capital stock, except as part of such underwritten
public offering and except that gifts may be made to relatives or their legal
representatives upon the condition that the donees agree in writing to be bound
by the restrictions contained in this clause (f) of Section 6.5;
(g) in connection with any underwritten offering, furnish to the
Holders for whom such Registrable Securities are registered or are to be
registered at the closing of the sale of such Registrable Securities by such
Holders a signed copy of (i) an opinion or opinions of counsel for the Company
acceptable to such Holders in form and substance as is customarily given to
underwriters in public offerings, and (ii) a "cold comfort" letter from the
independent certified public accountants of the Company, in form and substance
as is customarily given by independent certified public accounts to underwriters
in an underwritten public offering, to the extent that such "cold
12
<PAGE>
comfort" letters are then available to selling stockholders;
(h) otherwise use its efforts to comply with all applicable rules and
regulations of the Commission, and, if required, make available to its security
holders, as soon as reasonably practicable, an earning statement covering the
period of at least twelve months, but not more than eighteen months, beginning
with the first day of the Company's first calendar quarter after the effective
date of the registration statement, which earning statement shall satisfy the
provisions of Section 11(a) of the Securities Act and Rule 158 thereunder;
(i) use its best efforts to cause all Registrable Securities covered
by such registration statement to be listed on the principal securities exchange
on which similar equity securities issued by the Company are then listed, if the
listing of such Registrable Securities is then permitted under the rules of such
exchange or, if similar equity securities are not listed, to use its best
efforts to cause such Registrable Securities to be included on the Nasdaq
National Market of The Nasdaq Stock Market, Inc.;
(j) in connection with any underwritten offering, enter into an
underwriting agreement with the underwriters of such offering in the form
customary for such underwriters for similar offerings, including such
representations and warranties by the Company, provisions regarding the delivery
of opinions of counsel for the Company and accountants' letters, provisions
regarding indemnification and contribution, and such other terms and conditions
as are at the time customarily contained in such underwriter's underwriting
agreements for similar offerings; and
(k) permit any Holder who, in the sole judgment, exercised in good
faith, of such Holder, might be deemed to be a controlling person of the
Company, to participate in the preparation of such registration statement and to
require the insertion therein of material, furnished to the Company in writing,
that in the judgment of such Holder, as aforesaid, should be included.
6.6 Payment of Registration Expenses. The costs and expenses of all
--------------------------------
registrations and qualifications under the Securities Act, and of all other
actions which the Company is required to take or effect pursuant to this Section
6, shall be paid by the Company or holders of Third Party Registrable Securities
or other securities of the Company other than Registrable Securities, if any
(including, without limitation, all registration and filing fees, printing
expenses, auditing costs and expenses, and the reasonable fees and disbursements
of counsel for the Company and, in connection with registrations under Section
6.1, one special counsel for the Holders) and the Holders shall pay only the
underwriting discounts and commissions and transfer taxes, if any, relating to
the Registrable Securities sold by them; provided that the Company shall pay
--------
without reimbursement such costs and expenses of no more than four registrations
which become effective under the Securities Act as a result of requests for
registration pursuant to Section 6.4, and provided, further, that the Company
-------- -------
shall not be obligated to pay for any costs or expenses incurred in connection
with a registration begun pursuant to a Request for Registration under Section
6.1 if such Request for Registration is subsequently withdrawn at the request of
the Holders of a majority of the Registrable Securities to be registered (in
which case all participating Holders shall bear such costs and expenses) unless
the Holders of a majority of the Registrable Securities agree to forfeit their
right to one demand registration under Section 6.1, and provided, further, that
-------- -------
in the event more than four
13
<PAGE>
registrations of Registrable Securities become effective under the Securities
Act as a result of requests for registration pursuant to Section 6.4, the
Holders and holders of other securities, if any, included in such registrations
shall reimburse the Company pro rata for all registration and filing fees,
reasonable printing expenses, reasonable auditing costs and expenses (excluding
costs and expenses of the Company's annual audit) and the reasonable fees and
expenses of counsel for the Company and such reimbursement shall be made to the
Company within five business days after the effective date of such a
registration statement.
6.7 Information from Holders. Notices and requests delivered by Holders
------------------------
to the Company pursuant to this Section 6 shall contain such information
regarding the Registrable Securities to be so registered and the intended method
of disposition thereof as shall reasonably be required in connection with the
action to be taken. Each Holder hereby agrees to provide the Company, or its
agents or designees, with all information reasonably required in connection with
the registration under the Securities Act or any applicable state securities law
of any Registrable Securities.
6.8 Indemnification. (a) In the event of any registration under the
---------------
Securities Act of any Registrable Securities pursuant to this Section 6, to the
extent permitted by law, the Company shall indemnify and hold harmless each
Holder disposing of such Registrable Securities and each other person, if any,
which controls (within the meaning of the Securities Act) such Holder and each
other person (including underwriters) who participates in the offering of such
Registrable Securities, against any losses, claims, damages or liabilities,
joint or several, to which such Holder or controlling person or participating
person may become subject under the Securities Act or otherwise, to the extent
that such losses, claims, damages or liabilities (or proceedings in respect
thereof) arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained, on the effective date thereof, in any
registration statement under which such Registrable Securities were registered
under the Securities Act, in any preliminary prospectus or final prospectus
contained therein, or in any amendment or supplement thereto, or arise out of or
are based upon the omission or alleged omission to state therein a material fact
required to be stated therein (in the case of a prospectus, in the light of the
circumstances under which they were made) or necessary to make the statements
therein not misleading, and will reimburse such Holder and each such controlling
person or participating person for any legal or any other expenses reasonably
incurred by such Holder or such controlling person or participating person in
connection with investigating or defending any such loss, claim, damage,
liability or proceeding, provided that the Company will not be liable in any
--------
such case to the extent that any such loss, claim, damage or liability arises
out of or is based upon an untrue statement or alleged untrue statement or
omission or alleged omission made in such registration statement, preliminary or
final prospectus or amendment or supplement in reliance upon and in conformity
with written information furnished to the Company by an instrument duly executed
by any such Holder or any such controlling or participating person, as the case
may be, specifically for use in the preparation thereof unless such Holder or
such controlling or participating person, as the case may be, in writing
corrects such information or provides additional information in a manner such
that the Company could reasonably correct such untrue statement or omission
contained in any such filings, and provided, further, that the Company will not
-------- -------
be liable for any amounts paid in settlement of any such loss, claim, damage or
liability if such settlement is
14
<PAGE>
effected without the consent of the Company. Each such Holder will, if requested
by the Company prior to the initial filing of any such registration statement,
agree in writing, severally but not jointly, to indemnify and hold harmless the
Company and each person which controls (within the meaning of the Securities
Act) the Company and each other person (including underwriters) who participates
in the offering of such Registrable Securities against all losses, claims,
damages and liabilities to which the Company or such controlling person or
participating person may become subject under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities arise out of or are based
upon any untrue statement of any material fact contained, on the effective date
thereof, in any registration statement under which such Registrable Securities
were registered under the Securities Act, or in any preliminary prospectus or
final prospectus contained therein, or in any amendment or supplement thereto,
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 the case of a prospectus, in the light of the
circumstances under which they were made) not misleading, to the extent that any
such loss, claim, damage or liability arises out of or is based upon any such
statement or omission made in such registration statement, preliminary or final
prospectus or amendment or supplement in reliance upon and in conformity with
written information furnished to the Company by an instrument duly executed by
such Holder and specifically stated to be for use in the preparation thereof
unless such Holder in writing corrects such information or provides additional
information in a manner such that the Company could reasonably correct such
untrue statement or omission contained in any such filings. Each indemnified
party shall cooperate with each indemnifying party in defending any loss, claim,
damage, liability or proceeding.
(b) To the extent permitted by law, indemnification similar to that
specified in the preceding clause of this Section 6.8 (with appropriate
modifications) shall be given by the Company and, at the Company's request, each
Holder with respect to any registration or other qualification of securities
under any state securities and "blue sky" laws.
(c) If the indemnification provided for in clause (a) and (b) of this
Section 6.8 is unavailable or insufficient to hold harmless an indemnified
party, then each indemnifying party shall contribute to the amount paid or
payable by such indemnified party referred to in clauses (a) and (b) of this
Section 6.8 in such proportion as is appropriate to reflect the relative fault
of the indemnifying party on the one hand and the indemnified party on the other
hand in connection with statements or omissions which resulted in losses,
claims, damages or liabilities, as well as any other relevant equitable
considerations. The relative fault shall be determined by reference to, among
other things, whether the 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 indemnifying party or the indemnified party and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such untrue statements or omissions. The parties agree that
it would not be just and equitable if contributions pursuant to this clause were
to be determined by pro rata allocation or by any other method of allocation
--- ----
which does not take account of the equitable considerations referred to in the
first sentence of this clause. The amount paid by an indemnified party as a
result of the losses, claims, damages or liabilities referred to in the first
sentence of this clause shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any loss, claim, damage, liability or proceeding which is the
subject of this clause. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f)
15
<PAGE>
of the Securities Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation.
(d) Each indemnified party shall notify the indemnifying party in
writing within 10 days after its receipt of notice of the commencement of any
action against it in respect of which indemnity may be sought from the
indemnifying party pursuant to this Section 6.8. In case any such action shall
be brought against any indemnified party and it shall notify the indemnifying
party, the indemnifying party will be entitled to participate in the defense
with counsel satisfactory to such indemnified party. Each indemnified party
shall cooperate with each indemnifying party in defending any loss, claim,
damage, liability or proceeding.
(e) Notwithstanding clauses (a) through (c) of this Section 6.8, the
aggregate amount which may be recovered by the Company, controlling persons of
the Company or underwriters from each Holder pursuant to the indemnification and
contribution provided for in this Section 6.8 shall be limited to the total net
proceeds for which the Registrable Securities were sold by such Holder.
(f) Notwithstanding any of the foregoing, if, in connection with an
underwritten public offering of Registrable Securities, the Company, the selling
stockholders and the underwriter(s) enter into an underwriting or purchase
agreement relating to such offering which contains provisions covering
indemnification and contribution among the parties, the indemnification and
contribution provisions of this Section 6.8 shall be deemed inoperative for
purposes of such offering.
6.9 Market Stand-Off Agreement. Each Holder agrees, if requested by the
--------------------------
Company or an underwriter in connection with a Public Offering, that during the
30 days before and the 180 days after the effective date of any Public Offering,
such Holder shall not offer, sell, contract to sell or otherwise dispose of any
shares of Capital Stock or securities convertible into Capital Stock, except as
part of such Public Offering. The Company may impose stop transfer instructions
with respect to the securities subject to the foregoing restrictions until the
end of the stand-off period. The foregoing provisions shall not apply to any
Holder after the Company's Initial Public Offering if the Holder or its group
(as defined in the Exchange Act) beneficially owns less than 5% of the Company's
Common Stock.
6.10 Assignment of Registration Rights. The right to cause the Company to
---------------------------------
register Registrable Securities pursuant to this Section 6 may be assigned by a
Holder to any member of such Holder's Group or in connection with a Transfer of
any Registrable Securities representing at least 1% of the then outstanding
Registrable Securities, provided that such assignment shall be effective only if
--------
the transferee becomes a party to this Agreement and agrees to be bound as a
Preferred Stockholder hereunder, and provided, further, that such registration
-------- -------
rights may not be Transferred to a competitor of the Company (as determined in
good faith by the Board of Directors) unless such Transfer is to a member of
such Holder's Group. A Holder shall retain all rights under this Section 6 with
respect to all Registrable Securities that are not subject to such Transfer.
6.11 Amendment of Registration Rights. Any provision of this Section 6 may
--------------------------------
be amended or the observance thereof may be waived (either generally or in a
particular instance and either
16
<PAGE>
retroactively or prospectively), only with the written consent of the Company
and the Holders of a majority of the Registrable Securities then outstanding;
provided, however, any amendment or waiver which adversely affects Rho
Management Trust II, Abingworth Bioventures SICAV, Biotech Growth SA or any
member of any of their Groups may not be made without the written consent of Rho
Management Trust II, Abingworth Bioventures SICAV or Biotech Growth SA and/or
their respective Group member, as the case may be. Any amendment or waiver
effected in accordance with this Section 6.11 shall be binding upon each
Preferred Stockholder, each future Holder and the Company.
6.12 Rights That May Be Granted To Subsequent Investors. (a) Within the
--------------------------------------------------
limitations prescribed by this paragraph (a), but not otherwise, the Company may
grant to subsequent investors in the Company rights of incidental registration
(such as those provided in Section 6.3). Such rights may only pertain to shares
of Common Stock, including shares of Common Stock into which any other
securities may be converted. Such rights may be granted with respect to (i)
registrations actually requested by initiating Holders pursuant to Section 6.1,
but only in respect of that portion of any such registration as remains after
inclusion of all Registrable Securities requested by Holders and (ii)
registrations initiated by the Company, but only in respect of that portion of
such registration as remains after inclusion of all Registrable Securities.
With respect to registrations which are for Public Offerings, "available
portion" shall mean the portion of the underwritten shares that is available as
specified in clauses (i) and (ii) of the third sentence of this paragraph (a).
Shares not included in such underwriting shall not be registered.
(b) The Company may not grant to subsequent investors in the Company
rights of registration upon request (such as those provided in Section 6.1)
unless (i) such rights are limited to shares of Common Stock, (ii) all Holders
are given enforceable contractual rights to participate in registrations
requested by such subsequent investors, such participation to be on a pro rata
--- ----
basis and subject to the limitations described in the final three sentences of
paragraph (a) of this Section 6.12, (iii) such rights shall not become effective
prior to 90 days after the effective date of the first registration pursuant to
Section 6.1 and (iv) such rights shall not be more favorable than those granted
to the Holders.
6.13 Termination of Obligations. Notwithstanding any other provisions of
--------------------------
this Agreement, all of the obligations of the Company under this Section 6 shall
terminate as to any Holder on the first day that such Holder may freely sell
such Registrable Securities in compliance with Rule 144(k) as now in effect or
hereafter amended under the Securities Act, provided that in the event such
--------
Holder becomes an affiliate of the Company (as defined in Rule 144 under the
Securities Act) after such date and prior to December 31, 2007, the Company's
obligations under this Section 6 shall survive and continue as to such Holder
during the period in which such Holder is an affiliate of the Company (as
defined in Rule 144 under the Securities Act), and provided, further, that
-------- -------
notwithstanding the provisions of this Section 6.13, all of the obligations of
the Company under this Section 6 shall terminate as to all Holders on December
31, 2007.
SECTION 7. Duration of Agreement. The rights and obligations of each
---------------------
Preferred Stockholder, except the rights and obligations contained in Sections 5
and 6 hereof, and the covenants hereunder to that Preferred Stockholder shall
terminate as to each Preferred Stockholder
17
<PAGE>
upon the earlier of (i) December 31, 2007 and (ii) the closing of the Initial
Public Offering by the Company. The obligations contained in Sections 5 and 6
shall survive indefinitely until, by their respective terms, they are no longer
applicable.
SECTION 8. Remedies. In case any one or more of the covenants and/or
--------
agreements set forth in this Agreement shall have been breached by any party
hereto, the party or parties entitled to the benefit of such covenants or
agreements may proceed to protect and enforce their rights either by suit in
equity and/or by action at law, including, but not limited to, an action for
damages as a result of any such breach; and/or an action for specific
performance of any such covenant or agreement contained in this Agreement and/or
a temporary or permanent injunction, in any case without showing any actual
damage. The rights, powers and remedies of the parties under this Agreement are
cumulative and not exclusive of any other right, power or remedy which such
parties may have under any other agreement or law. No single or partial
assertion or exercise of any right, power or remedy of a party hereunder shall
preclude any other or further assertion or exercise thereof. Any purported
Transfer in violation of the provisions of this Agreement shall be void ab
initio. -- ------
SECTION 9. Successors and Assigns. Except as otherwise expressly
----------------------
provided herein, this Agreement shall bind and inure to the benefit of the
Company, each of the Preferred Stockholders and the respective successors or
heirs and personal representatives and permitted assigns of the Company and each
of the Preferred Stockholders. Each Preferred Stockholder agrees further that it
shall not transfer any Shares to any Person not a party to this Agreement unless
such Person becomes a party to this Agreement contemporaneously with such
transfer by executing and delivering to the Company an agreement to be bound
hereby, whereupon such Person shall be deemed a Preferred Stockholder and shall
have the same rights and obligations as other Preferred Stockholders.
SECTION 10. Entire Agreement. This Agreement supersedes all prior
----------------
agreements among the parties with respect to its subject matter (including
without limitation the Amended and Restated Stockholders' Agreement, dated as of
January 6, 1998, which is hereby terminated and of no further force or effect),
and is intended (with the documents referred to herein) as a complete and
exclusive statement of the terms of the agreement among the parties with respect
thereto.
SECTION 11. Notices. All notices, requests, consents and other
-------
communications hereunder to any party shall be deemed to be sufficient if
contained in a written instrument delivered in person, duly sent by first class
registered or certified airmail, postage prepaid, or telecopied or telexed to
such party at the address or telecopier number set forth below, or such other
address or telecopier number as may hereafter be designated in writing by the
addressee; provided, however, that if the Preferred Stockholder is foreign,
notice shall be sent by both two-day guaranteed international air courier, and
telecopied or telexed to such Preferred Stockholder:
(a) If to the Company:
3-Dimensional Pharmaceuticals, Inc.
Eagleview Corporate Center
18
<PAGE>
665 Stockton Drive, Suite 104
Exton, PA 19341
Telecopier No.: (610) 458-8249
Attention: Thomas P. Stagnaro, President
and Chief Executive Officer
with a copy to:
Morgan, Lewis & Bockius LLP
2000 One Logan Square
Philadelphia, PA 19103-6993
Telecopier No.: (215) 963-5299
Attention: David R. King, Esq.
(b) If to HealthCare Ventures III, L.P. and HealthCare Ventures IV,
L.P.:
44 Nassau Street
Princeton, NJ 08542-4511
Telecopier No.: (609) 430-9525
Attention: Jeffrey Steinberg
with a copy to:
Counsel to HealthCare Ventures III, L.P. and
HealthCare Ventures IV, L.P. pursuant to instructions
received from such Preferred Stockholders
(c) If to Rho Management Trust II:
c/o Rho Management Co., Inc.
767 Fifth Avenue - 43rd Fl.
New York, NY 10153
Telecopier No.: (212) 751-3613
Attention: Joshua Ruch
with a copy to:
Gregory F.W. Todd, Esq.
888 7th Avenue - 45th Floor
New York, NY 10019
Telecopier No.: (212) 246-5454
(d) If to Hudson Trust:
Hudson Trust
19
<PAGE>
The Office Center
666 Plainsboro, Suite 445
Plainsboro, NJ 08536
Attention: Tina March
(e) If to Commonwealth Venture Partners II, L.P.:
c/o Philadelphia Ventures, Inc.
The Bellevue
200 South Broad Street
Philadelphia, PA 19102
Attention: Thomas R. Morse
(f) If to Larry Abrams:
24 Central Park South
New York, NY 10019
(g) If to M & G Equities:
c/o American Stock Transfer & Trust Company
40 Wall Street
New York, NY 10005
Attention: Michael Karfunkel
(h) If to Henry Rothman:
209 West 86th Street
New York, NY 10024
(i) If to Abingworth Bioventures SICAV
Abingworth Bioventures SICAV
c/o Sanne & Cie
Boite Postale 566
L-2015 Luxembourg
Telecopier No.: (352) 43 54 10
Attention: Karl U. Sanne
With a copy to:
Abingworth Management Limited
26 St. James's Street
London SW1A 1HA
England
20
<PAGE>
Telecopier No.: 44 171 930-1891
Attention: Stephen Bunting, Ph.D.
and to:
Testa, Hurwitz & Thibeault, LLP
High Street Tower
125 High Street
Boston, MA 02110
Telecopier No.: (617) 248-7100
Attention: Kenneth J. Gordon, Esq.
(j) If to Sentron Medical, Inc.
4445 Lake Forest Drive, Suite 600
Cincinnati, OH 45252
Telecopier No.: (513) 563-3261
Attention: Rick D'Augustine
(k) If to the State of Michigan Retirement Systems:
Department of Treasury
Treasury Building
430 Allegan
Lansing, MI 48922
Telecopier No.: (517) 335-3668
Attention: Joseph A. Taylor
(l) If to Aetna Life Insurance Company
151 Farmington Avenue - RC21
Hartford, CT 06156-9000
Telecopier No.: (860) 273-8650
Attention: David Clarke, Managing Director
(m) If to Biotech Growth SA
c/o Bellevue Asset Management AG
Grafenauweg 4
CH-6301 Zug
Switzerland
Telecopier No.: 011-41-724-5958
Attention: Dr. Andreas Bremer
With a copy to:
21
<PAGE>
Baker & McKenzie
815 Connecticut Avenue, N.W.
Washington, DC 20006
Telecopier No.: (202) 452-7072
Attention: Daniel Goelzer, Esq.
All such notices, requests, consents and communications shall be deemed to
have been given (i) in the case of personal delivery, on the date of such
delivery, (ii) in the case of telex or telecopier transmission, on the date on
which the sender receives machine confirmation of such transmission, and (iii)
in the case of mailing, on the fifth business day following the date of such
mailing. Notwithstanding the above, any notice or communication to an address
outside the United States shall additionally be given by telecopier and
confirmed in writing sent by two day guaranteed international courier.
SECTION 12. Changes. Except as otherwise provided in Section 6.11, the
-------
terms and provisions of this Agreement may not be modified or amended, or any of
the provisions hereof waived, temporarily or permanently, except pursuant to the
written consent of (i) the Company, and (ii) the holders of a majority of the
voting power of the Shares; provided, however, any modification, amendment or
-------- -------
waiver which adversely affects Rho Management Trust II, Biotech Growth SA or any
member of either of their Groups may not be made without the written consent of
Rho Management Trust II or Biotech Growth SA and/or their respective Group
member, as the case may be.
SECTION 13. Counterparts. This Agreement may be executed in any number of
------------
counterparts, and each such counterpart shall be deemed to be an original
instrument, but all such counterparts together shall constitute but one
agreement.
SECTION 14. Headings. The headings of the various sections of this
--------
Agreement have been inserted for convenience of reference only and shall not be
deemed to be part of this Agreement.
SECTION 15. Nouns and Pronouns. Whenever the context may require, any
------------------
pronouns used herein shall include the corresponding masculine, feminine or
neuter forms, and the singular form of names and pronouns shall include the
plural and vice- versa.
SECTION 17. Severability. Any provision of this Agreement that is
------------
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability. Such
prohibition or unenforceability in any one jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK.]
22
<PAGE>
SECTION 17. Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with (a) the laws of the Commonwealth of Pennsylvania
without giving effect to the principles of conflicts of law thereof and (b) the
laws of the State of Delaware applicable to corporations organized under the
laws of such state.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
date first above written, in the case of corporations by their respective
officers thereunto duly authorized.
3-DIMENSIONAL PHARMACEUTICALS, INC.
By: /s/ David C. U'Prichard
_____________________________________
STOCKHOLDERS:
------------
HEALTHCARE VENTURES III, L.P.
By: HealthCare Partners III, L.P.,
its General Partner
By: /s/ Jeffrey Steinberg
_______________________________
HEALTHCARE VENTURES IV, L.P.
By: HealthCare Partners IV, L.P.
Its General Partner
By: /s/ Jeffrey Steinberg
___________________________
HEALTHCARE VENTURES V, L.P.
By: HealthCare Partners V, L.P.
Its General Partner
By: /s/ Jeffrey Steinberg
___________________________
23
<PAGE>
RHO MANAGEMENT TRUST II (formerly Everest Trust)
By: /s/ Illegible
__________________________________
HUDSON TRUST
By: /s/ Scott Ciccone
_______________________________
COMMONWEALTH VENTURE PARTNERS II, L.P.
By: Charles A. Burton
________________________________
Its General Partner
By: /s/ Charles A. Burton
___________________________
M & G EQUITIES
By: /s/ Michael Karfunkel
__________________________________
/s/ Larry Abrams
__________________________________
LARRY ABRAMS
/s/ Henry Rothman
__________________________________
HENRY ROTHMAN
ABINGWORTH BIOVENTURES SICAV
By: /s/ M. - Rose Dock
__________________________________
24
<PAGE>
SENTRON MEDICAL, INC.
By: /s/ Steve R. Gailar
__________________________________
STATE TREASURER OF THE STATE OF
MICHIGAN, CUSTODIAN OF THE MICHIGAN
PUBLIC SCHOOL EMPLOYEES' RETIREMENT
SYSTEM, STATE EMPLOYEES' RETIREMENT
SYSTEM, MICHIGAN STATE POLICE
RETIREMENT SYSTEM, AND MICHIGAN
JUDGES RETIREMENT SYSTEM
By:
__________________________________
AETNA LIFE INSURANCE COMPANY
By: /s/ David Clarke
__________________________________
BIOTECH GROWTH SA
By: Nora Frey
__________________________________
By: /s/ Nora Frey
__________________________________
25
<PAGE>
Exhibit 10.3
EXHIBIT A
3-DIMENSIONAL PHARMACEUTICALS, INC.
SERIES B PREFERRED STOCK PURCHASE AGREEMENT
This Series B Preferred Stock Purchase Agreement (the "Agreement") is made
as of October 11, 1996 by and between 3-Dimensional Pharmaceuticals, Inc., a
Delaware corporation, having a place of business at Eagleview Corporate Center,
665 Stockton Drive, Suite 104, Exton, Pennsylvania 19341, U.S.A. (the
"Company"), and Merck KGaA, a German corporation, having a place of business at
Frankfurter Strasse 250, 64271 Darmstadt, Germany ("Merck").
Background
----------
The Company and Merck have entered into a Collaborative Research and
License Agreement (the "Collaborative Agreement") dated as of the date hereof.
In connection with the Collaborative Agreement, Merck has agreed to acquire
1,000,000 shares of Series B Preferred Stock (as hereinafter defined) of the
Company.
Witnesseth:
----------
1. Authorization and Sale of the Shares.
------------------------------------
1.1 Authorization of the Shares. The Company has authorized the
---------------------------
issuance and sale to Merck of 1,000,000 shares (the "Shares") of its Series B
Convertible Preferred Stock, par value $.001 per share (the "Series B Preferred
Stock"). The Series B Preferred Stock has the rights provided for in the Terms
of Series B Preferred Stock attached hereto as Exhibit A (the "Series B
---------
Preferred Stock Terms") and incorporated herein. The Series B Preferred Stock
Terms have been included in an amendment and restatement of the Restated
Certificate of Incorporation, as amended (the "Certificate of Incorporation"),
of the Company. The shares of Common Stock, par value $.001 per share (the
"Common Stock"), of the Company issuable upon conversion of the Shares are
hereinafter referred to as the "Conversion Shares." The Shares and the
Conversion Shares are hereinafter collectively referred to as the "Securities."
1.2 Sale of Shares. Subject to the terms and conditions hereof,
--------------
Merck will purchase the Shares at a purchase price of $2.25 per share, payable
at the Closing by wire transfer in immediately available funds to the account
designated by the Company in Exhibit B hereto and incorporated herein.
---------
2. Closing Date. The closing of the purchase and sale of the Shares to
------------
Merck hereunder (the "Closing") shall be held at the offices of Morgan, Lewis &
Bockius LLP, 2000 One Logan
<PAGE>
EXHIBIT A
Square, Philadelphia, Pennsylvania, 19103, simultaneously with the execution and
delivery of this Agreement, or at such other time and place as the Company and
Merck may agree. The date of the Closing is referred to herein as the "Closing
Date."
3. Representations and Warranties of the Company. The Company represents
---------------------------------------------
and warrants to Merck as of the date hereof and as of the Closing Date as
follows:
3.1 Organization and Standing. The Company has been duly
-------------------------
incorporated and is validly existing as a corporation in good standing under the
laws of the State of Delaware.
3.2 Corporate Power; Authorization. The Company has all requisite
------------------------------
legal and corporate power and has taken all requisite corporate action to
execute and deliver this Agreement, to sell and issue the Shares and to carry
out and perform all of its obligations hereunder. This Agreement has been duly
authorized, executed and delivered on behalf of the Company and constitutes the
valid and binding agreement of the Company, enforceable in accordance with its
terms, except (i) as limited by applicable bankruptcy, insolvency,
reorganization or similar laws relating to or affecting the enforcement of
creditors' rights generally, (ii) as limited by equitable principles generally
and (iii) rights to indemnification and contribution hereunder may be limited by
applicable law. The consummation of the transactions contemplated herein and
the fulfillment of the terms hereof will not result in a breach of any of the
terms or provisions of, or constitute a default under, the Company's Certificate
of Incorporation, the Company's bylaws, or any material indenture, mortgage,
deed of trust or other agreement or instrument to which the Company is a party
or by which it is bound.
3.3 Stockholder Approval. The holders of Series A-1 Preferred Stock
--------------------
(as defined below), voting separately as a single class in accordance with the
terms of the Certificate of Incorporation, have approved the designation of the
Series B Preferred Stock and the amendment to the Certificate of Incorporation
increasing the authorized capital stock of the Company and establishing the
Series B Preferred Stock Terms. In addition, the holders of Series A-1
Preferred Stock and Common Stock, voting together as a single class in
accordance with the terms of the Certificate of Incorporation and the Delaware
General Corporation Law, as amended, have approved the amendment to the
Certificate of Incorporation increasing the authorized capital stock of the
Company.
3.4 Series A-1 Preferred Stock Waiver. The holders of Series A-1
---------------------------------
Preferred Stock have waived their rights pursuant to Section 4 of the
Stockholders' Agreement to purchase Series B Preferred Stock contemporaneously
with the Closing of this Agreement upon the same terms and conditions as are set
forth herein and in the Series B Preferred Stock Terms.
3.5 Capitalization. As of the date hereof, the authorized capital
--------------
stock of the Company is 28,358,152 shares, consisting of 16,019,076 shares of
Common Stock and 7,005,086 shares of Series A-1 Convertible Preferred Stock, par
value $.001 per share (the "Series A-1 Preferred Stock"), 4,333,990 shares of
Series A-2 Convertible Preferred Stock, par value $.001 per
-2-
<PAGE>
EXHIBIT A
share (the "Series A-2 Preferred Stock, and together with the Series A-1
Preferred Stock, the "Series A Preferred Stock"), and 1,000,000 shares of Series
B Preferred Stock. The issued and outstanding shares of capital stock of the
Company as of the date hereof are set forth in Schedule 3.5 hereto.
3.6 Shares; Conversion Shares. The Company has full corporate power
-------------------------
and authority to sell the Shares on the terms and conditions contemplated
herein, and when so sold against payment therefor as provided herein, the Shares
will be validly authorized and issued, fully paid and nonassessable and will
have the rights, preferences and privileges described in the Series B Preferred
Stock Terms. The issuance and delivery of the Shares is not subject to
preemptive or any similar rights of the stockholders of the Company or any liens
or encumbrances arising through the Company, except such preemptive or similar
rights as will have been waived prior to the Closing hereunder; and when the
Conversion Shares are issued in accordance with the Series B Preferred Stock
Terms, they will be validly issued and outstanding, fully paid and nonassessable
and free of any liens or encumbrances arising through the Company.
4. Representations and Warranties of Merck. Merck represents and
---------------------------------------
warrants to the Company as of the date hereof and as of the Closing Date as
follows:
4.1 Investment Representations. Merck is aware of the Company's
--------------------------
business affairs and financial condition, has had an opportunity to ask
questions, review documents and gather information about the Company and has
acquired sufficient information about the Company to reach an informed and
knowledgeable decision to acquire the Securities. Merck has such business and
financial experience as is required to give it the capacity to protect its own
interests in connection with the purchase of the Securities. Merck is an
"accredited investor" as defined in Rule 501(a) under the Securities Act of
1933, as amended (the "Securities Act").
4.2 Investment Intent. Merck is purchasing the Securities for
-----------------
investment for its own account only and not with a view to, or for resale in
connection with, any "distribution" thereof within the meaning of the Securities
Act. Merck understands that the Securities have 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 Merck's investment intent as
expressed herein. Merck is familiar with Rule 144 under the Securities Act, as
presently in effect, and understands the resale limitations imposed thereby and
by the Securities Act.
4.3 No Legal, Tax or Investment Advice. Merck understands that
----------------------------------
nothing in this Agreement or any other materials presented to Merck in
connection with the purchase and sale of the Shares constitutes legal, tax or
investment advice. Merck 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.
4.4 Corporate Power; Authority. Merck has all requisite legal and
--------------------------
corporate power and has taken all requisite corporate action to execute, deliver
and perform it obligations under this Agreement. This Agreement has been duly
authorized, executed and delivered on behalf
-3-
<PAGE>
EXHIBIT A
of Merck and constitutes the valid and binding agreement of Merck, enforceable
in accordance with its terms, except (i) as limited by applicable bankruptcy,
insolvency, reorganization or similar laws relating to or affecting the
enforcement of creditors' rights generally, (ii) as limited by equitable
principles generally and (iii) rights to indemnification and contribution
hereunder may be limited by applicable law.
5. Restrictions on Transfer and Registration Rights.
------------------------------------------------
5.1 Restrictions on Transferability. The Securities 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
the transfer agent with respect to the Securities in order to enforce the
foregoing restrictions. The following provisions shall govern the transfer of
the Securities:
5.1.1 Merck, and any other holder of any Securities by
acceptance thereof, agrees that, prior to any transfer of any Securities, such
holder will give written notice to the Company of such holder's intention to
effect such transfer and to comply in all other respects with the provisions of
this Section 5.1. Each such notice shall contain (i) a statement setting forth
the intention of such holder's prospective transferee with respect to its
retention or disposition of such Securities, and (ii) unless waived by the
Company, an opinion of counsel for such holder (who may be the inside or staff
counsel employed by such holder), as to the necessity or non-necessity for
registration under the Securities Act and applicable state securities laws in
connection with such transfer and stating the factual and statutory bases relied
upon by counsel. The following provisions shall then apply:
5.1.1.1 If in the opinion of counsel for the Company the
proposed transfer of such Securities may be effected without registration or
qualification under the Securities Act and any applicable state securities laws,
then the registered holder of such Securities shall be entitled to transfer such
Securities in accordance with the intended method of disposition specified in
the statement delivered by such holder to the Company.
5.1.1.2 If in the opinion of counsel for the Company the
proposed transfer of such Securities may not be effected without registration
under the Securities Act or registration or qualification under any applicable
state securities laws, the registered holder of such Securities shall not be
entitled to transfer such Securities until the requisite registration or
qualification is effective.
5.1.2. Each certificate evidencing the Securities issued upon such
transfer (and each certificate evidencing any untransferred balance of such
Securities) shall bear the legend set forth in Section 5.2 hereof unless (i) in
the opinion of counsel (reasonably acceptable to the Company) addressed to the
Company the registration of future transfers is not required by the applicable
provisions of the Securities Act or applicable state securities laws; (ii) the
Company shall have waived the requirement of such legend; or (iii) in the
reasonable opinion of counsel to the
-4-
<PAGE>
EXHIBIT A
Company, such transfer shall have been made in connection with an effective
registration statement filed pursuant to the Securities Act or in compliance
with the requirements of Rule 144 or Rule 144A (or similar or successor rule)
promulgated under the Securities Act, and in compliance with applicable state
securities laws.
5.2 Restrictive Legends. Each certificate representing Securities
-------------------
shall bear substantially the following legends (in addition to any legends
required under applicable securities laws):
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933. THE SHARES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN EXEMPTION THEREFROM.
THE SHARES REPRESENTED BY THIS CERTIFICATE AND THE RIGHTS OF HOLDERS
THEREOF ARE SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER AND OTHER
RESTRICTIONS, AND THE HOLDER OF THE SHARES REPRESENTED BY THIS
CERTIFICATE (INCLUDING ANY HOLDERS) ARE BOUND BY THE TERMS OF A SERIES
B PREFERRED STOCK PURCHASE AGREEMENT BETWEEN THE ORIGINAL PURCHASER
AND THE COMPANY (COPIES OF WHICH MAY BE OBTAINED FROM THE COMPANY).
5.3 Registration of Shares.
----------------------
5.3.1 Registration on Demand. Merck will have the right, on one
----------------------
occasion after the expiration of 12 months after the Company has completed an
initial public offering of the Common Stock, to require the Company to file a
registration statement on Form S-3 (the "Registration Statement") with the
Securities and Exchange Commission (the "SEC") under the Securities Act to
register the resale of the Conversion Shares, or if Form S-3 is not available,
to otherwise effect the registration under the Securities Act of the resale of
the Conversion Shares. The Company shall not be obligated to file and cause to
become effective any Registration Statement within a period of four months after
the date of a request for registration pursuant to this Section 5.3.1 if, at the
time of such request, the filing of such registration statement would, as
determined in good faith by a majority of the Board, be seriously detrimental to
the Company or its stockholders or adversely affect a material financing project
or a material proposed or pending acquisition, merger or other similar corporate
transaction to which the Company is or expects to be a party, provided that such
right of the Company to delay a request for registration may be exercised by the
Company not more than once in any one-year period.
5.3.2. Piggyback Registration. If the Company at any time proposes
----------------------
to register any
-5-
<PAGE>
EXHIBIT A
of its securities under the Securities Act (other than a registration effected
on either Form S-4 or S-8, or similar or successor forms) for the purpose of
selling such securities to the public whether for its own account or for the
account of any of its security holders or both, the Company shall each such time
promptly give written notice to Merck of its intention so to do. Upon the
written request of Merck given within 15 days after such notice (which request
shall state the number of Conversion Shares to be disposed of by Merck and, if
such offering is not underwritten, the intended method of disposition of such
Conversion Shares by Merck), the Company will use its best efforts to cause
promptly all Conversion Shares of which registration is requested to be
registered or qualified under the Securities Act or any other applicable federal
or state law or regulation so as to permit the sale or other disposition thereof
in accordance with Merck's written request. If the registration is to be
effected in connection with an underwritten offering,
5.3.2.1 Merck shall be required to sell the Conversion Shares
through the underwriter(s);
5.3.2.2 Merck (together with the Company) shall enter into an
underwriting agreement with the managing underwriter in the form customarily
used by such underwriter; and
5.3.2.3. if the managing underwriter thereof determines that the
total number of shares of the Common Stock to be sold in such offering should be
limited due to market conditions or otherwise, subject to any preferential
registration rights of the holders of Series A Preferred Stock set forth in the
Stockholders Agreement (the "Preferential Registration Rights"), the reduction
in the total number of shares offered shall be made by first excluding any
shares of selling stockholders who are not holders of contractual rights to have
such shares registered under the Securities Act, and then, if necessary, by
excluding pro rata (based on the number of shares held by each of such security
holders) the Conversion Shares to be sold by Merck and the holders of other
contractual rights to have such shares registered pursuant to agreements
comparable to this Section 5.3.2 before any reduction is made in the total
number of shares to be sold pursuant thereto by the Company and any holders of
Preferential Registration Rights;
provided, however, that the Company may exclude all Conversion Shares from
- -------- -------
registration in connection with the Company's initial public offering in its
sole discretion, whether or not such exclusion is required in the opinion of the
managing underwriter.
-6-
<PAGE>
EXHIBIT A
5.4 About Registration.
------------------
5.4.1. The Company shall pay all Registration Expenses (as
hereinafter defined) in connection with any registration, qualification or
compliance hereunder, and Merck shall pay all Selling Expenses (as hereinafter
defined) and other expenses that are not Registration Expenses relating to the
securities ("Registrable Securities") resold by Merck. "Registration Expenses"
shall mean all expenses, except for Selling Expenses, incurred by the Company in
complying with the registration provisions of this Agreement, including without
limitation all federal and state registration, qualification and filing fees,
printing expenses, escrow fees, fees and disbursements of counsel for 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
all selling commissions, underwriting fees and stock transfer taxes applicable
to the Registrable Securities and all fees and disbursements of counsel for
Merck.
5.4.2. In the case of any registration effected by the Company
pursuant to these registration provisions, the Company will use its best efforts
to: (i) prepare and file with the SEC such amendments and supplements to the
Registration Statement and the prospectus used in connection with the
Registration Statement as may be necessary to comply with the provisions of the
Securities Act with respect to the disposition of the Registrable Securities and
keep such Registration Statement effective until the securities covered by such
Registration Statement have been sold, but in no event longer than 180 days;
(ii) furnish such number of prospectuses and other documents incident thereto,
including any amendment of or supplement to the prospectus, as Merck from time
to time may reasonably request; (iii) provide a transfer agent and registrar for
all Registrable Securities registered pursuant to the Registration Statement and
a CUSIP number for all such Registrable Securities, in each case not later than
the effective date of such registration; and (iv) file the documents required of
the Company and otherwise use its best efforts to maintain requisite blue sky
clearance in (A) all jurisdictions in which any of the Conversion Shares is
originally sold and (B) all other states specified in writing by Merck, provided
as to clause (B), however, that the Company shall not be required to qualify to
do business or consent to service of process in any state in which it is not now
so qualified or has not so consented.
5.4.3. Merck shall furnish to the Company such information
regarding it and the distribution proposed by it as the Company may reasonably
request in writing and as shall be reasonably required in connection with any
registration, qualification or compliance described herein. Merck shall
represent that such information is true and complete.
5.5 Expiration of Registration Rights. Notwithstanding anything to
---------------------------------
the contrary contained herein, the registration rights granted hereunder and the
Company's obligations under this Section 5 will expire on the earlier of (i) the
expiration of the five-year period commencing 12 months after the Company has
completed an initial public offering of the Common Stock and (ii) the date on
which all of the Conversion Shares can be sold freely without restriction under
the Securities Act.
-7-
<PAGE>
EXHIBIT A
5.6. Indemnification and Contribution.
--------------------------------
5.6.1. The Company agrees to indemnify and hold harmless Merck from
and against any losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) to which Merck 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 claim by a third party asserting any untrue statement of a
material fact or omission of a material fact contained in a Registration
Statement, on the effective date thereof, or arise out of any failure by the
Company to fulfill any undertaking included in such Registration Statement, and
the Company will, as incurred, reimburse Merck 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, damages or
liability arises out of, or is based upon (i) an untrue statement made in such
Registration Statement in reliance upon and in conformity with information
furnished to the Company by or on behalf of Merck for use in preparation of such
Registration Statement or (ii) any untrue statement in any prospectus that is
corrected in any subsequent prospectus that was delivered to Merck prior to the
pertinent sale or sales by Merck.
5.6.2. Merck agrees to indemnify and hold harmless the Company and
its successors, assigns, officers, directors, employees, stockholders, agents
and affiliates 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 claim by a third party asserting (i) an untrue
statement made in such Registration Statement in reliance upon and in conformity
with information furnished to the Company by or on behalf of Merck for use in
preparation of such Registration Statement, provided that Merck shall not be
liable in any such case for (i) any untrue statement included in any prospectus
which statement has been corrected, in writing, by Merck and delivered to the
Company before the sale from which such loss occurred or (ii) any untrue
statement in any prospectus that is corrected in any subsequent prospectus that
was delivered to Merck prior to the pertinent sale or sales by Merck, and Merck
will, as incurred, reimburse the Company for any legal or other expenses
reasonably incurred in investigating, defending or preparing to defend any such
action, proceeding or claim.
5.6.3. 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 5.6, such
indemnified person shall notify the indemnifying person in writing of such claim
or of the commencement of such action, 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, to the
extent that it shall wish, to 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
-8-
<PAGE>
EXHIBIT A
expenses subsequently incurred by such indemnified person in connection with the
defense thereof, provided 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.
5.6.4. The obligations of the Company and Merck under this Section
5 shall be in addition to any liability which the Company and Merck may
otherwise have and shall extend, upon the same terms and conditions, to each
person, if any, who controls the Company or Merck within the meaning of the
Securities Act.
5.7. Transfer of Registration Rights. The right to sell Registrable
-------------------------------
Securities pursuant to a Registration Statement described herein may not be
assigned or transferred by Merck.
5.8. Lock-Up Upon Initial Public Offering. Merck agrees that, in the
------------------------------------
event the Company proposes to conduct an underwritten initial public offering of
the Common Stock at a time at which Merck remains the holder of at least fifty
percent of the Securities, Merck will agree to be a party and subject to any
lock-up agreement with the underwriter(s) for such initial public offering with
respect to the sale, transfer, conversion or other disposition of the
Securities, which lock-up agreement will contain no more restrictive terms and
conditions than those to which the Company's then current directors, officers
and significant stockholders will be subject in connection therewith.
6. Miscellaneous.
-------------
6.1. Expenses. The Company and Merck shall each pay its own expenses
--------
incurred in connection with the negotiation, execution and performance of this
Agreement.
6.2. Waivers and Amendments. With the written consent of the Company
----------------------
and the record holders of more than fifty percent of the Shares then
outstanding, the terms of this Agreement may be waived or amended.
6.3. Governing Law. This Agreement shall be governed in all respects
-------------
by the laws of the State of Delaware as such laws are applied to agreements
between Delaware residents entered into and to be performed entirely within
Delaware, without giving effect to the conflicts of laws provisions thereof.
6.4. Survival. The representations, warranties, covenants and
--------
agreements made herein shall survive any investigation made by the Company or
Merck and the Closing.
6.5. Successors and Assigns. The provisions hereof shall inure to the
----------------------
benefit of, and be binding upon, the successors, assigns, heirs, executors and
administrators of the parties hereto (specifically including successors in
interest to the Shares).
-9-
<PAGE>
EXHIBIT A
6.6. Entire Agreement. This Agreement constitutes the full and
----------------
entire understanding and agreement between the parties with regard to the
subject hereof.
6.7. Notices, etc. All notices and other communications required or
-------------
permitted hereunder shall be effective upon receipt and shall be in writing and
may be delivered in person, by facsimile, overnight delivery service or U.S.
mail, in which event it may be mailed by first-class, certified or registered,
postage prepaid, addressed (a) if to Merck, at the address set forth at the
beginning of this Agreement or at such other address as Merck shall have
furnished the Company in writing, or (b) if to the Company, at its address set
forth at the beginning of this Agreement, or at such other address as the
Company shall have furnished to Merck in writing.
6.8. 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.
6.9. Titles and Subtitles. The titles of the paragraphs and
--------------------
subparagraphs of this Agreement are for convenience of reference only and are
not to be considered in construing this Agreement.
6.10. 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-
<PAGE>
EXHIBIT A
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered by their proper and duly authorized officers as of the
day and year first written above.
3-DIMENSIONAL PHARMACEUTICALS, INC.
By: /s/ Thomas P. Stagnaro
_________________________________
Name:
Title:
MERCK KGaA
By: /s/ J. Sombroek
_________________________________
Name:
Title:
-11-
<PAGE>
EXHIBIT A
B. TERMS OF SERIES B PREFERRED STOCK
---------------------------------
The Series B Preferred Stock shall have the following designations, powers,
preferences, relative, participating, optional or other special rights,
qualifications, limitations and restrictions:
6.11. Dividends.
---------
6.11.1 Dividends are payable on the Series B Preferred Stock, when, as
and if declared by the Board of Directors.
6.11.2 So long as any Series B Preferred Stock is outstanding the
Corporation shall not declare or pay any dividend or make any distribution
(whether in cash, shares of capital stock of the Corporation or other property)
on shares of its Common Stock unless prior thereto or simultaneously therewith
any dividends and distributions previously declared on the Series B Preferred
Stock shall have been paid or the Corporation shall have irrevocably deposited
or set aside cash or obligations the payment of which is backed by United States
Obligations sufficient for the payment thereof.
6.11.3 If the Board of Directors declares dividends or other
distributions (other than on Liquidation (as hereinafter defined)) on the Common
Stock in cash, property or securities (including Common Stock) of the
Corporation (or subscription or other rights to purchase or acquire securities
(including Common Stock) of the Corporation), the Board of Directors shall
simultaneously declare a dividend or distribution at the same rate and in the
same form on the Series B Preferred Stock so that the Series B Preferred Stock
participates equally with the Series A Preferred Stock and the Common Stock in
such dividend or distribution. For purposes of determining its proportional
share of the dividend or distribution, each share of the Series B Preferred
Stock shall be deemed to be that number of shares of Common Stock into which
such share of Series B Preferred Stock is then convertible, rounded to the
nearest one-tenth of a share.
6.12. Rights on Liquidation, Dissolution, Winding-up.
----------------------------------------------
6.12.1. In the event of any liquidation, dissolution or winding-up of
the affairs of the Corporation (collectively, a "Liquidation"), whether
voluntary or involuntary, before any payment of cash or distribution of other
property shall be made to the holders of the Common Stock (the "Common
Stockholders") or any other class or series of stock ranking on Liquidation
junior to the Series B Preferred Stock, the holders of Series B Preferred Stock
("Series B Preferred Stockholders"), subject to the rights of any series of
preferred stock ranking senior to the Series A Preferred Stock and the Series B
Preferred Stock, shall be entitled to receive out of the assets of the
Corporation legally available for distribution to its stockholders, $2.25 per
share (as appropriately adjusted for any combinations or divisions or similar
recapitalizations affecting the Series B Preferred Stock after the Original
Series B Issuance Date (as hereinafter defined)) (the "Series B Liquidation
Preference"), whether from capital, surplus or earnings, plus an amount equal to
any declared but unpaid dividends thereon. Upon the occurrence of a Liquidation,
the Series B Preferred
-12-
<PAGE>
Stock shall rank pari passu with the Series A Preferred Stock and any other
---- -----
series of preferred stock hereinafter created which ranks pari passu with the
---- -----
Series A Preferred Stock (the "Pari Passu Preferred Stock").
---- -----
6.12.2. If, upon any Liquidation, the assets of the Corporation available
for distribution to its stockholders shall be insufficient to pay the Series A
Preferred Stockholders, the Series B Preferred Stockholders and the holders of
Pari Passu Preferred Stock the full amounts to which they shall be entitled, the
- ---- -----
Series A Preferred Stockholders, the Series B Preferred Stockholders and the
holders of Pari Passu Preferred Stock shall share ratably in any distribution of
---- -----
assets in proportion to the amounts payable to them if all amounts payable with
respect to such shares on Liquidation were paid in full.
6.12.3. In the event of any Liquidation, so long as the Series A
Preferred Stockholders are entitled to distributions pursuant to Section A.2(c),
after payment shall have been made to the Series A Stockholders, the Series B
Preferred Stockholders and the holders of Pari Passu Preferred Stock of the full
amount to which they shall be entitled pursuant to Section B.2(a), with respect
to each other class or series of capital stock (other than Common Stock) ranking
on Liquidation junior to the Series A Preferred Stock, the Series B Preferred
Stock and the Pari Passu Preferred Stock (in descending order of seniority), the
---- -----
Series A Preferred Stockholders, the Series B Preferred Stockholders and the
holders of Pari Passu Preferred Stock, as a class, shall be entitled to receive
---- -----
an amount equal (and in like kind) to the aggregate preferential amount fixed
for each such junior class or series of capital stock, which amount shall be
distributed among the Series A Preferred Stockholders, the Series B Preferred
Stockholders and the holders of Pari Passu Preferred Stock in an equal amount
per share of the Series A Preferred Stock, the Series B Preferred Stock and the
Pari Passu Preferred Stock then outstanding. If, upon any Liquidation, the
- ---- -----
assets of the Corporation available for distribution to its stockholders shall
be insufficient to pay the Series A Preferred Stockholders, the Series B
Preferred Stockholders and the holders of Pari Passu Preferred Stock and a class
---- -----
Preferred Stock, the Series B Preferred Stock and the Pari Passu Preferred Stock
---- -----
the full amounts to which they shall be entitled pursuant to the immediately
preceding sentence, the Series A Preferred Stockholders, the Series B Preferred
Stockholders and the holders of Pari Passu Preferred Stock and such other class
---- -----
or series of capital stock shall share ratably in any distribution of assets
according to the respective preferential amounts fixed for the Series A
Preferred Stock, the Series B Preferred Stock and the Pari Passu Preferred Stock
---- -----
and such junior class or series of capital stock which would be payable in
respect of the shares held by them upon such distribution if all amounts payable
on or with respect to such shares were paid in full.
6.12.4. In the event that after payment of the full amount to which the
Series A Preferred Stockholders, Series B Preferred Stockholders and the holders
of Pari Passu Preferred Stock shall be entitled as aforesaid, cash or other
---- -----
property remains, such remaining proceeds shall be distributed pro rata among
--- ----
the Series A Preferred Stock, the Series B Preferred Stock, the Pari Passu
---- -----
Preferred Stock and the Common Stock. For purposes of determining its
proportional share of the cash or other property, each share of the Series B
Preferred Stock shall be deemed to be that number of shares of Common Stock into
which such share of Series B Preferred Stock is then
-13-
<PAGE>
convertible, rounded to the nearest one-tenth of a share.
6.13. Voting.
------
6.13.1 General. In addition to the rights otherwise provided for
-------
herein or by law, the Series B Preferred Stockholders shall be entitled to vote,
together with the Series A Preferred Stockholders, the holders of any other
class or series entitled to vote on such matters and the Common Stockholders, as
one class on all matters submitted to a vote of Stockholders, in the same manner
and with the same effect as the Series A Preferred Stockholders and the Common
Stockholders. In any such vote, each share of Series B Preferred Stock shall
entitle the holder thereof to one vote per share for each share of Common Stock
(including fractional shares) into which each share of Series B Preferred Stock
is then convertible, rounded to the nearest one-tenth of a share.
6.13.2 Protective Provision. So long as any Series B Preferred Stock
--------------------
is outstanding, the Corporation shall not, without the written consent in lieu
of a meeting, or the affirmative vote at a meeting called for such purpose, of
Series B Preferred Stockholders of record that hold at least a majority of the
outstanding Series B Preferred Stock, voting as a separate class, amend, alter
or repeal, in any manner whatsoever, the designations, powers, preferences,
relative, participating, optional or other special rights, qualifications,
limitations and restrictions of the Series B Preferred Stock.
-14-
<PAGE>
6.14. Conversion.
----------
6.12.1. Right to Convert.
----------------
6.14.1.1. Any Series B Preferred Stockholder shall have the right, at
any time or from time to time, prior to the closing date of the Corporation's
first Underwritten Offering in which all of the then outstanding shares of
Series A Preferred Stock are converted in connection therewith, to convert any
or all of its shares of Series B Preferred Stock into that number of fully paid
and nonassessable shares of Common Stock for each share of Series B Preferred
Stock equal to the quotient of the Series B Liquidation Preference divided by
the Series B Preferred Conversion Price for that share (as defined in Section
B.4(d)) (as last adjusted and then in effect) rounded to one-tenth of a share.
6.14.1.2. Any Series B Preferred Stock that remains unconverted on
such closing date shall be automatically converted without notice and without
any action on the part of the holder thereof into shares of Common Stock on the
closing date in accordance with Section B.4(a)(i). After the closing date all
rights of holders of shares of Series B Preferred Stock with respect to Series B
Preferred Stock, except the right to receive shares of Common Stock in
accordance with this Section B.4, shall cease and the shares of Series B
Preferred Stock shall no longer be deemed to be outstanding, whether or not the
Corporation has received the certificates representing such shares.
The Corporation shall promptly send by first-class mail, postage
prepaid, to each Series B Preferred Stockholder at such holder's address
appearing on the Corporation's records a copy of (i) each registration statement
filed by the Corporation under the Securities Act and each amendment thereof and
each exhibit and schedule thereto and (ii) each order of the Securities and
Exchange Commission declaring any such registration statement to be effective.
Holders of Series B Preferred Stock converted into shares of
Common Stock pursuant to this Section B.4 shall be entitled to payment of any
declared but unpaid dividends payable with respect to such shares of Series B
Preferred Stock, up to and including the Series B Conversion Date (as defined in
Section B.4(b) below) or the closing date, as the case may be.
6.14.2. Mechanics of Conversion.
-----------------------
6.14.2.1. Any Series B Preferred Stockholder that exercises its
right to convert its shares of Series B Preferred Stock into Common Stock shall
deliver the certificate(s) for the shares to be converted ("Series B Preferred
Certificate"), duly endorsed or assigned in blank to the Corporation, during
regular business hours, at the office of the transfer agent of the Corporation,
if any, at the principal place of business of the Corporation or at such other
place as may be designated by the Corporation.
-15-
<PAGE>
6.14.2. Each Series B Preferred Certificate shall be accompanied by
written notice stating that such holder elects to convert such shares and
stating the name or names (with address) in which the certificate(s) for the
shares of Common Stock ("Common Certificate") are to be issued. Such conversion
shall be deemed to have been effected on the date when the aforesaid delivery is
made ("Series B Conversion Date").
6.14.2.3. As promptly as practicable thereafter, the Corporation shall
issue and deliver to or upon the written order of such holder, at the place
designated by such holder, a Common Certificate(s) for the number of full shares
of Common Stock to which such holder is entitled and a check or cash for any
fractional interest in a share of Common Stock, as provided in Section B.4(c)
below, and for any declared but unpaid dividends, payable with respect to the
converted shares of Series B Preferred Stock, up to and including the Series B
Conversion Date or the closing date set forth in Section B.4(a)(i), as the case
may be.
6.14.2.4. The person in whose name each Common Certificate is to be
issued shall be deemed to have become a stockholder of record of Common Stock on
the applicable Series B Conversion Date or the closing date set forth in Section
B.4(a)(i), as the case may be, unless the transfer books of the Corporation are
closed on that date, in which event such holder shall be deemed to have become a
stockholder of record on the next succeeding date on which the transfer books
are open; provided, that the Series B Preferred Conversion Price shall be that
--------
in effect on the Series B Conversion Date or such closing date, as the case may
be.
6.14.2.5. Upon conversion of only a portion of the shares covered by a
Series B Preferred Certificate, the Corporation, at its own expense, shall issue
and deliver to or upon the written order of the holder of such Series B
Preferred Certificate, a new Series B Preferred Certificate representing the
number of unconverted shares of Series B Preferred Stock from the Series B
Preferred Certificate so surrendered.
6.14.3. Issuance of Common Stock on Conversion.
--------------------------------------
6.14.3.1. If a Series B Preferred Stockholder shall surrender more
than one Series B Preferred Certificate for conversion at any one time, the
number of such shares of Common Stock issuable upon conversion thereof shall be
computed on the basis of the aggregate number of shares of Series B Preferred
Stock so surrendered.
6.14.3.2 No fractional shares of Common Stock shall be issued upon
conversion of shares of Series B Preferred Stock. The Corporation shall pay a
cash adjustment for such fractional interest in an amount equal to the then
Current Market Price of a share of Common Stock multiplied by such fractional
interest.
6.14.4 Conversion Price; Adjustment. The Series B Preferred
----------------------------
Conversion Price shall initially be equal to the Series B Liquidation Preference
and shall be subject to adjustment from time to time as follows:
-16-
<PAGE>
6.14.4.1. If the Corporation shall at any time after the original
issuance of the first share of Series B Preferred Stock (the "Original Series B
Issuance Date") fix a record date for the subdivision or split-up of shares of
Common Stock, then, following the record date fixed for the determination of
holders of Common Stock entitled to receive such subdivision or split-up (or the
date of such subdivisions or split-up, if no record date is fixed), the Series B
Preferred Conversion Price shall be appropriately decreased so that the number
of shares of Common Stock issuable on conversion of each share of the Series B
Preferred Stock shall be increased in proportion to such increase in outstanding
shares.
6.14.4.2. If, at any time after the Original Series B Issuance Date,
the number of shares of Common Stock outstanding is decreased by a combination
of the outstanding shares of Common Stock, then, following the record date fixed
for such combination (or the date of such combination, if no record date is
fixed), the Series B Preferred Conversion Price shall be appropriately increased
so that the number of shares of Common Stock issuable on conversion of each
share of Series B Preferred Stock shall be decreased in proportion to such
decrease in outstanding shares.
6.14.4.3. If, at any time after the Original Series B Issuance Date,
there shall be any capital reorganization, or any reclassification of the
capital stock of the Corporation (other than a change in par value or from par
value to no par value or from no par value to par value or as a result of a
stock dividend or subdivision, split-up or combination of shares), or the
consolidation or merger of the Corporation with or into another corporation
(other than a consolidation or merger in which the Corporation is the continuing
corporation and which does not result in any change in the powers, designations,
preferences and rights (or the qualifications, limitations or restrictions, if
any) of the Series B Preferred Stock) (an "Extraordinary Transaction"), the
Series B Preferred Conversion Price with respect to the Series B Preferred Stock
outstanding after the Extraordinary Transaction shall be adjusted to provide
that the shares of Series B Preferred Stock outstanding immediately prior to the
effectiveness of the Extraordinary Transaction shall be convertible into the
kind and number of shares of stock or other securities or property of the
Corporation or of the corporation resulting from or surviving such Extraordinary
Transaction which the holder of the number of shares of Common Stock deliverable
(immediately prior to the effectiveness of the Extraordinary Transaction) upon
conversion of such Series B Preferred Stock would have been entitled to receive
upon such Extraordinary Transaction. The provisions of this Section B.4(d)(iii)
shall similarly apply to successive Extraordinary Transactions.
6.14.4.4. All calculations under this Section B.4(d) shall be made to
the nearest one-tenth of a cent ($.001) or to the nearest one-tenth of a share,
as the case may be.
6.14.4.5. As used herein, the Current Market Price at any date of one
share of Common Stock shall be deemed to be the average of the daily closing
prices for the thirty (30) consecutive business days ending on the fifth (5th)
business day before the day in question (as adjusted for any stock dividend,
split-up, combination or reclassification that took effect during such thirty
(30) business day period) as follows:
-17-
<PAGE>
If the Common Stock is listed or admitted for trading on a national
securities exchange, the closing price for each day shall be the last
reported sales price regular way or, in case no such reported sales took
place on such day, the average of the last reported bid and asked prices
regular way, in either case, on the principal national exchange on which
the Common Stock is listed or admitted to trading.
If the Common Stock is not at the time listed or admitted for trading
on any such exchange, then such price as shall be equal to the last
reported sale price, or, if there is no such sale price, the average of the
last reported bid and asked prices, as reported by the National Association
of Securities Dealers Automated Quotations System ("NASDAQ") on such day.
If, on any day in question, the security shall not be listed or
admitted to trading on a national securities exchange or quoted on the
NASDAQ, then such price shall be equal to the last reported bid and asked
prices on such day as reported by the National Quotation Bureau, Inc. or
any similar reputable quotation and reporting service, if such quotation is
not reported by the National Quotation Bureau, Inc.
If the Common Stock is not traded in such manner that the quotations
referred to in this clause (v) are available for the period required
hereunder, the Current Market Price shall be determined by the Board of
Directors of the Corporation.
6.14.4.6. In any case in which the provisions of this Section B.4(d)
shall require that an adjustment shall become effective immediately after a
record date for an event, the Corporation may defer until the occurrence of that
event (A) issuing to the holder of any share of Series B Preferred Stock
converted after such record date and before the occurrence of such event the
additional shares of capital stock issuable upon such conversion by reason of
the adjustment required by such event over and above the shares of capital stock
issuable upon such conversion before giving effect to such adjustment and (B)
paying to such holder any amount in cash in lieu of a fractional share of
capital stock pursuant to Section B.4(c) above; provided, however, that the
-------- -------
Corporation shall deliver to such holder a due bill or other appropriate
instrument evidencing such holder's right to receive such additional shares, in
such case, upon the occurrence of the event requiring such adjustment.
6.14.5. Notice of Adjustments.
---------------------
-18-
<PAGE>
6.14.5.1. Whenever the Series B Preferred Conversion Price shall be
adjusted as provided in Section B.4(d) above, the Corporation shall file, at its
principal office, at the office of the transfer agent for the Series B Preferred
Stock, if any, or at such other place as may be designated by the Corporation, a
statement, signed by its President and by its Chief Financial Officer, showing
in detail the facts requiring such adjustment and the Series B Preferred
Conversion Price that shall be in effect after such adjustment. The Corporation
shall also cause a copy of such statement to be sent, by first-class, certified
mail, return receipt requested, postage prepaid, to each Series B Preferred
Stockholder at such holder's address appearing on the Corporation's records.
Where appropriate, such copy may be given in advance and may be included as part
of a notice required to be mailed under the provisions of clause (ii) below.
6.14.5.2. In the event the Corporation shall propose to file a
registration statement under the Securities Act for a Public Offering or to take
any action of the types described in clauses (i), (ii) or (iii) of Section
B.4(d) above, the Corporation shall give notice to each Series B Preferred
Stockholder, in the manner set forth in Section B.4(e)(i) above, which shall
specify the record date, if any, with respect to any such action and the date on
which such action is to take place. The notice shall also set forth such facts
as are reasonably necessary to indicate the effect of such action (to the extent
such effect may be known at the date of such notice) on the Series B Preferred
Conversion Price and the number, kind or class of shares or other securities or
property which shall be deliverable or purchasable upon the occurrence of such
action or deliverable upon conversion of shares of Series B Preferred Stock. In
the case of any action which would require the fixing of a record date, such
notice shall be given at least ten (10) days prior to the date so fixed, and in
case of all other action, such notice shall be given at least fifteen (15) days
prior to the taking of such proposed action. Failure to give such notice, or any
defect therein, shall not affect the legality or validity of any such action.
6.14.6. Transfer Taxes. The Corporation shall pay all documentary,
--------------
stamp or other transactional taxes (excluding income taxes) attributable to the
issuance or delivery of shares of capital stock of the Corporation upon
conversion of any shares of Series B Preferred Stock; provided, however, that
-------- -------
the Corporation shall not be required to pay any taxes which may be payable in
respect of any transfer involved in the issuance or delivery of any certificate
for such shares in a name other than that of the holder of the shares of Series
B Preferred Stock in respect of which such shares are being issued.
6.14.7. Reservation of Common Stock. The Corporation shall at all
---------------------------
times reserve, free from preemptive rights, out of its authorized but unissued
shares of Common Stock, solely for the purpose of effecting the conversion of
the shares of Series B Preferred Stock, sufficient shares of Common Stock to
provide for the conversion of all outstanding shares of Series B Preferred
Stock.
6.14.8. Status of Common Stock. All shares of Common Stock which may
----------------------
be issued in connection with the conversion provisions set forth herein will,
upon issuance by the Corporation, be validly issued, fully paid and
nonassessable, free from preemptive rights and free from all taxes, liens or
charges with respect thereto created or imposed by Corporation.
-19-
<PAGE>
6.15. Miscellaneous.
-------------
6.15.1 Shares of Series B Preferred Stock are not subject to or
entitled to redemption or the benefit of a sinking fund.
6.15.2. Converted shares of Series B Preferred Stock shall not be
reissued but shall be retired. Upon the retirement of converted shares the
capital of the Corporation shall be reduced.
6.15.3. The shares of the Series B Preferred Stock shall not have any
preferences, voting powers or relative, participating, optional, preemptive or
other special rights except as set forth above in this Restated Certificate of
Incorporation of the Corporation, as amended from time to time.
C. COMMON STOCK
------------
1. Voting.
------
Series A Preferred Stockholders, Series B Preferred Stockholders, any
other class or series of capital stock entitled to vote and Common Stockholders
shall vote together as one class on all matters submitted to a vote of
Stockholders, except that Series A Preferred Stockholders are entitled, in
addition, to vote as a separate class on the matters described in Section A.4(b)
and (c), and Series B Preferred Stockholders are entitled, in addition, to vote
as a separate class on the matters described in Section B.3(b). Each Common
Stockholder shall be entitled to one vote for each share of Common Stock held on
all matters as to which Common Stockholders shall be entitled to vote. The
number of authorized shares of Common Stock may be increased or decreased (but
not below the number of shares thereof then outstanding) by the affirmative vote
of the holders of a majority of the Common Stock, the Series A Preferred Stock,
the Series B Preferred Stock and any other class or series of capital stock
entitled to vote, irrespective of the provisions of Section 242(b)(2) of Title 8
of the Delaware Code.
-20-
<PAGE>
EXHIBIT 10.4
SERIES C PREFERRED STOCK PURCHASE AGREEMENT
This Series C Preferred Stock Purchase Agreement (the "Agreement") is made
as of June 13, 1997 by and between 3-Dimensional Pharmaceuticals, Inc., a
Delaware corporation, having its principal place of business at Eagleview
Corporate Center, 665 Stockton Drive, Suite 104, Exton, Pennsylvania 19341 (the
"Company"), and American Home Products Corporation, a Delaware corporation,
having its principal place of business at Five Giralda Farms, Madison, New
Jersey 07940 ("AHP").
Background
----------
The Company and AHP acting through its Wyeth-Ayerst Laboratories Division
have entered into a Research, Supply and License Agreement No. 1 (the "License
Agreement") dated as of the date hereof. In connection with the License
Agreement, AHP has agreed to make the Initial Stock Purchase, the Second Stock
Purchase and the Third Stock Purchase (each as hereinafter defined, and
collectively, the "Stock Purchases"). This Agreement sets forth the agreement
of the parties with respect to the Stock Purchases. Certain defined terms used
herein and not defined herein shall have the respective meanings given to such
terms in the License Agreement.
Witnesseth:
----------
In consideration of the covenants and obligations expressed herein, and
intending to be legally bound, the parties agree as follows:
1. Definitions. As used in this Agreement, the following terms have the
-----------
meanings specified or referred to in this Section 1.
"Business Day" means any day that is not a Saturday or Sunday or a day
------------
on which banks located in the City of Philadelphia, Pennsylvania are authorized
or required to be closed.
"Business Plan" shall mean the business plan of the Company dated
-------------
October 1996.
"Certificate of Incorporation" means the Restated Certificate, as
----------------------------
amended from time to time.
"Commission" means the U.S. Securities and Exchange Commission.
----------
"Common Shares" means the shares of Common Stock issued and issuable
-------------
pursuant to the terms of this Agreement.
"Common Stock" means the common stock, par value $.001 per share, of
------------
the Company.
"Conversion Shares" means the shares of Common Stock issuable upon
-----------------
conversion
<PAGE>
of the Series C Preferred Shares.
"HSR Act" shall have the meaning set forth in Section 4.8.
-------
"ICE Determination Date" shall have the meaning set forth in Section
----------------------
"IND Track Date" shall have the meaning set forth in Section 2.3.
--------------
"Initial Closing" shall have the meaning set forth in Section 3.
---------------
"Initial Closing Date" shall have the meaning set forth in Section 3.
--------------------
"Initial Stock Purchase" shall have the meaning set forth in Section
----------------------
"IPO" means the Company's initial distribution of Common Stock for
---
cash in a firm commitment underwritten public offering to the general public
pursuant to a registration statement filed with and declared effective by the
Commission pursuant to the Securities Act.
"IPO Effective Date" means the date upon which the IPO Registration
------------------
Statement is declared effective by the Commission.
"IPO Filing Date" means the date upon which the IPO Registration
---------------
Statement is filed with the Commission.
"IPO Registration Statement" means the registration statement filed by
--------------------------
the Company with the Commission to register the Common Stock to be sold in the
IPO.
"IPO Share Price" means the price per share to the public of Common
---------------
Stock in the IPO.
"Market Price" per share of Common Stock shall be deemed to be, at any
------------
determination date, the average of the daily closing prices for the 15
consecutive business days ending on the third business day before the
determination date in question (as adjusted for any stock dividend, split,
combination or reclassification that took effect during such 15-business day
period) as follows:
(a) If the Common Stock is listed or admitted for trading on a
national securities exchange, the closing price for each day shall be the last
reported sales price regular way or, in case no such reported sales took place
on such day, the last reported bid price regular way, in either case, on the
principal national securities exchange on which the Common Stock is listed or
admitted to trading (specifically excluding any negotiated or composite
trading).
(b) If the Common Stock is not at the time listed or admitted for
trading on any such exchange, then such price as shall be equal to the last
reported sale price, or, if there is no such sale price, the last reported bid
price, as reported by NASDAQ on such day.
2
<PAGE>
(c) If, on any day in question, the security shall not be listed or
admitted to trading on a national securities exchange or quoted on NASDAQ, then
such price shall be equal to the last reported bid price on such day as reported
by the National Quotation Bureau, Inc. or any similar reputable quotation and
reporting service, if such quotation is not reported by the National Quotation
Bureau, Inc.
"Material Adverse Effect" shall have the meaning set forth in Section
-----------------------
"NASDAQ" shall mean the National Association of Securities Dealers
------
Automated Quotations System.
"Preferential Registration Rights" shall have the meaning set forth in
--------------------------------
Section 6.3.1.
"Registrable Securities" means the Common Shares and the Conversion
----------------------
Shares.
"Restated Certificate" shall have the meaning set forth in Section
--------------------
"Second Stock Purchase" shall have the meaning set forth in Section
---------------------
"Securities" means the Series C Preferred Shares, the Common Shares
----------
and the Conversion Shares.
"Securities Act" means the Securities Act of 1933, as amended.
--------------
"Series C Preferred Shares" means the shares of Series C Preferred
-------------------------
Stock issued and issuable pursuant to the terms of this Agreement and the anti-
dilution protective provisions of the Certificate of Incorporation.
"Series C Preferred Stock" means the Series C preferred stock, par
------------------------
value $.001 per share, of the Company.
"Shares" means the Series C Preferred Shares and the Common Shares.
------
"Stockholders' Agreement" means the Amended and Restated Stockholders'
-----------------------
Agreement dated as of March 12, 1997 among the Company and certain stockholders
of the Company.
"Subsequent Closing" shall have the meaning set forth in Section 3.
------------------
"Subsequent Closing Date" shall have the meaning set forth in Section
-----------------------
"Third Stock Purchase" shall have the meaning set forth in Section
--------------------
2. Authorization and Purchases and Sales of Series C Preferred Stock.
-----------------------------------------------------------------
3
<PAGE>
2.1. Authorization. The Series C Preferred Stock to be issued or
-------------
issuable to AHP hereunder shall have the voting powers, dividend rights,
liquidation rights, designations, preferences and relative, participating,
optional or other special rights, and the qualifications, limitations and
restrictions thereof, set forth in the Company's Fourth Restated Certificate of
Incorporation in the form of Exhibit 2.1 attached hereto and incorporated herein
-----------
(the "Restated Certificate").
2.2. Initial Stock Purchase. Subject to the terms and conditions
----------------------
hereof, at the Initial Closing, AHP will purchase from the Company and the
Company will sell to AHP 400,000 Series C Preferred Shares at a purchase price
of $2.50 per share for an aggregate purchase price of $1,000,000 (the "Initial
Stock Purchase"), payable by AHP by wire transfer in immediately available funds
to the account of the Company designated by the Company no fewer than three
Business Days prior to the Initial Closing Date.
2.3. Second Stock Purchase upon IND Track Qualification. Subject to
--------------------------------------------------
the terms and conditions hereof, five Business Days after the date (the "IND
Track Date") of the first determination that a Product qualifies for the IND
Track (each as defined in the License Agreement), AHP will purchase from the
Company and the Company will sell to AHP such number of Series C Preferred
Shares or Common Shares, as the case may be, for an aggregate purchase price of
$5,500,000 (the "Second Stock Purchase"), payable by AHP by wire transfer in
immediately available funds to the account of the Company designated by the
Company no fewer than three Business Days prior to any Subsequent Closing Date,
as shall be determined as follows:
2.3.1. if the IND Track Date occurs prior to the IPO Filing Date,
2,200,000 Series C Preferred Shares at a purchase price of $2.50 per share;
2.3.2. if the IND Track Date occurs on or after the IPO Filing Date
but prior to the IPO Effective Date, 2,200,000 Series C Preferred Shares at a
purchase price of $2.50 per share; provided, however, that if the IPO Effective
-------- -------
Date occurs within nine months after the IPO Filing Date and the IPO Share Price
is greater than $2.50, then the purchase price per share shall be equal to the
IPO Share Price, and on the Business Day immediately following the IPO Effective
Date, AHP, or the then holder of the Shares, shall return to the Company for
cancellation, with no consideration to be paid to AHP by the Company therefor,
such number of Shares as is equal to the difference between (i) 2,200,000
(subject, if applicable, to adjustment to reflect the events contemplated in
Section C.4(d) of Article FOURTH of the Certificate of Incorporation) and (ii)
$5,500,000 divided by the IPO Share Price, and the Company shall promptly
deliver to AHP a certificate representing the balance of the remaining shares;
2.3.3. if the IND Track Date occurs on or after the IPO Effective
Date but prior to or on the expiration date of the nine-month period commencing
on the IPO Effective Date, that number of Common Shares which can be purchased
for an aggregate purchase price of $5,500,000 at a price per share equal to the
IPO Share Price; or
2.3.4. if the IND Track Date occurs after the expiration date of
the nine-month period commencing on the IPO Effective Date, that number of
Common Shares which can
4
<PAGE>
be purchased for an aggregate purchase price of $5,500,000 at a price per share
equal to the Market Price as determined on the IND Track Date.
2.4 Third Stock Purchase upon ICE Determination. At the sole option
-------------------------------------------
of the Company and subject to the terms and conditions hereof, five Business
Days after the first date (the "ICE Determination Date") that the ROC (as
defined in the License Agreement) makes a determination that a Product meets ICE
(as defined in the License Agreement), such option to be exercisable by the
Company by written notice within three Business Days after the ICE Determination
Date, AHP will purchase from the Company and the Company will sell to AHP such
number of Series C Preferred Shares or Common Shares, as the case may be, for an
aggregate purchase price of $6,000,000 (the "Third Stock Purchase"), payable by
AHP by wire transfer in immediately available funds to the account of the
Company designated by the Company no fewer than three Business Days prior to any
Subsequent Closing Date, as shall be determined as follows:
2.4.1. if the ICE Determination Date occurs prior to the IPO Filing
Date, 2,400,000 Series C Preferred Shares at a purchase price of $2.50 per
share;
2.4.2. if the ICE Determination Date occurs on or after the IPO
Filing Date but prior to the IPO Effective Date, 2,400,000 Series C Preferred
Shares at a purchase price of $2.50 per share; provided, however, that if the
-------- -------
IPO Effective Date occurs within nine months after the IPO Filing Date and the
IPO Share Price is greater than $2.50, then the purchase price per share shall
be equal to the IPO Share Price, and on the Business Day immediately following
the IPO Effective Date, AHP, or the then holder of the Shares, shall return to
the Company for cancellation, with no consideration to be paid to AHP by the
Company therefor, such number of Shares as is equal to the difference between
(i) 2,400,000 (subject, if applicable, to adjustment to reflect the events
contemplated in Section C.4(d) of Article FOURTH of the Certificate of
Incorporation) and (ii) $6,000,000 divided by the IPO Share Price, and the
Company shall promptly deliver to AHP a certificate representing the balance of
the remaining shares;
2.4.3. if the ICE Determination Date occurs on or after the IPO
Effective Date but prior to or on the expiration date of the nine-month period
commencing on the IPO Effective Date, that number of Common Shares which can be
purchased for an aggregate purchase price of $6,000,000 at a price per share
equal to the IPO Share Price; or
2.4.4. if the ICE Determination Date occurs after the expiration
date of the nine-month period commencing on the IPO Effective Date, that number
of Common Shares which can be purchased for an aggregate purchase price of
$6,000,000 at a price per share equal to the Market Price as determined on the
ICE Determination Date.
3. Closings. The closing (the "Initial Closing") of the Initial Stock
--------
Purchase shall be held at the offices of Morgan, Lewis & Bockius LLP, 2000 One
Logan Square, Philadelphia, Pennsylvania, on the third Business Day after the
date on which the last to be fulfilled or waived of the conditions set forth in
Sections 8, 9 and 10 (other than those contemplated to be satisfied at the
Initial Closing or any Subsequent Closing) shall be fulfilled or waived in
accordance with this Agreement, or at such other time and place as the Company
and AHP may agree. The date of the
5
<PAGE>
Initial Closing is referred to herein as the "Initial Closing Date." The
closings (the "Subsequent Closings") of the Second Stock Purchase and the Third
Stock Purchase shall be held at the offices of Morgan, Lewis & Bockius LLP, at
the address set forth in the first sentence hereof, on the later of (a) the
fifth Business Day after the IND Track Date or the ICE Determination Date, as
applicable, or (b) the date on which the last to be fulfilled or waived of the
conditions set forth in Sections 8, 9 and 10 (other than those contemplated to
be satisfied at the Initial Closing) shall be fulfilled or waived in accordance
with this Agreement, or at such other time and place as the Company and AHP may
agree. The date of any Subsequent Closing is referred to herein as a "Subsequent
Closing Date." At the Initial Closing and any Subsequent Closing, the parties
will exchange funds, certificates and other documents specified in the
Agreement.
4. Representations and Warranties of the Company. The Company represents
---------------------------------------------
and warrants to AHP as of the date hereof and as of the Initial Closing Date as
follows:
4.1. Organization and Standing. The Company has been duly
-------------------------
incorporated and is validly existing as a corporation in good standing under the
laws of the State of Delaware and has all requisite corporate power and
authority to carry on its business as now conducted and as proposed to be
conducted in the Business Plan. The Company is duly qualified to transact
business and is in good standing in each jurisdiction in which the failure so to
qualify would be reasonably expected to have a material adverse effect on the
business, operations, properties, assets, prospects (as contemplated in the
Business Plan) or condition (financial or otherwise) of the Company (a "Material
Adverse Effect").
4.2. Corporate Power; Authorization. The Company has all requisite
------------------------------
legal and corporate power and has taken all requisite corporate action to
execute and deliver this Agreement, to sell and issue the Shares and to carry
out and perform all of its obligations hereunder. This Agreement has been duly
authorized, executed and delivered on behalf of the Company and constitutes the
valid and binding agreement of the Company, enforceable in accordance with its
terms, except (i) as limited by applicable bankruptcy, insolvency,
reorganization or similar laws relating to or affecting the enforcement of
creditors' rights generally, (ii) as limited by equitable principles generally
and (iii) rights to indemnification and contribution hereunder may be limited by
applicable law. The consummation of the transactions contemplated herein and
the fulfillment of the terms hereof will not result in a breach of any of the
terms or provisions of, or constitute a default under, the Company's Certificate
of Incorporation, the Company's bylaws, or any material indenture, mortgage,
deed of trust or other agreement or instrument to which the Company is a party
or by which it is bound, except such terms or provisions as will have been
waived prior to the Initial Closing or a Subsequent Closing hereunder.
4.3. Stockholder Approval. The holders of Series A-1 preferred stock,
--------------------
par value $.001 per share (the "Series A-1 Preferred Stock"), of the Company,
Series A-2 preferred stock, par value $.001 per share (the "Series A-2 Preferred
Stock"), of the Company and Series A-3 preferred stock, par value $.001 per
share (the "Series A-3 Preferred Stock" and, collectively with the Series A-1
Preferred Stock and the Series A-2 Preferred Stock, the "Series A Preferred
Stock"), of the Company, voting separately as a single class in accordance with
the terms of the Certificate of Incorporation, have approved an amendment to the
Certificate of Incorporation designating the
6
<PAGE>
Series C Preferred Stock in the form of the Restated Certificate. In addition,
the holders of Common Stock, Series A Preferred Stock and Series B preferred
stock, par value $.001 per share (the "Series B Preferred Stock"), have approved
the amendment to the Certificate of Incorporation increasing the authorized
capital stock of the Company.
4.4. Series A Preferred Stock Waiver. Prior to the Initial Closing,
-------------------------------
the holders of Series A Preferred Stock have waived their rights pursuant to
Section 4 of the Stockholders' Agreement to purchase Series C Preferred Stock
upon the same terms and conditions as are set forth herein and in the
Certificate of Incorporation.
4.5. Capitalization. As of the Initial Closing Date, the authorized
--------------
capital stock of the Company is 61,054,630 shares, consisting of 6,926,461
shares of Series A-1 Preferred Stock, 4,333,990 shares of Series A-2 Preferred
Stock, 10,304,264 shares of Series A-3 Preferred Stock, 1,000,000 shares of
Series B Preferred Stock, 5,000,000 shares of Series C Preferred Stock, and
33,489,915 shares of Common Stock. As of the date hereof, 6,686,986 shares of
Series A-1 Preferred Stock were issued and outstanding, 4,333,990 shares of
Series A-2 Preferred Stock were issued and outstanding, 10,304,264 shares of
Series A-3 Preferred Stock were issued and outstanding, 1,000,000 shares of
Series B Preferred Stock were issued and outstanding, no shares of Series C
Preferred Stock were issued and outstanding and 2,128,985 shares of Common Stock
were issued and outstanding. Except as disclosed in Schedule 4.5 and except for
------------
the transactions contemplated hereby, since January 1, 1997, the Company has not
issued any shares of Common Stock or Series C Preferred Stock, granted any
options or issued restricted stock (except for stock options granted and
restricted stock issued under the Company's employee, consultant and director
stock option plans), warrants, rights (including conversion or preemptive
rights, except for stock purchased under the Company's stock purchase plans), or
similar rights to any person or entity to purchase or acquire any rights with
respect to any shares of capital stock of the Company. The outstanding shares
of Series A-1 Preferred Stock, Series A-2 Preferred Stock, Series A-3 Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock and Common Stock have
been duly authorized and validly issued and are fully paid and nonassessable;
and none of such outstanding shares was issued in violation of the preemptive
rights, if any, of any stockholder of the Company. As of any Subsequent Closing
Date, the authorized capital stock of the Company will be as set forth in
Schedule 4.5 and incorporated herein. The issued and outstanding shares of
- ------------
capital stock of the Company as of the Initial Closing Date are set forth in
Schedule 4.5 hereto. As of any Subsequent Closing Date, the issued and
- ------------
outstanding shares of capital stock of the Company will be as set forth in
Schedule 4.5.
- ------------
4.6. Shares; Conversion Shares. The Company has full corporate power
-------------------------
and authority to sell the Shares on the terms and conditions contemplated
herein, and when so sold against payment therefor as provided herein, the Shares
will be validly authorized and issued, fully paid and nonassessable and will
have the rights, preferences and privileges described in the Certificate of
Incorporation and, assuming the accuracy of AHP's representations and warranties
contained in Section 5, will be issued in compliance with all applicable federal
and state securities laws. The issuance and delivery of the Shares is not
subject to preemptive or any similar rights of the stockholders of the Company
or any liens or encumbrances arising through the Company, except such preemptive
or similar rights as will have been waived prior to the Initial Closing or any
7
<PAGE>
Subsequent Closing hereunder; and when the Conversion Shares are issued in
accordance with the Certificate of Incorporation, they will be validly issued
and outstanding, fully paid and nonassessable and free of any liens or
encumbrances arising through the Company or any of its affiliates and, assuming
the accuracy of AHP's representations and warranties contained in Section 5,
will be issued in compliance with all applicable federal and state securities
laws.
4.7. Compliance with Other Instruments. The execution, delivery and
---------------------------------
performance of this Agreement and of the transactions contemplated hereby will
not result in any violation of or constitute, with or without the passage of
time and the giving of notice, a default under, any provision of the Certificate
of Incorporation or bylaws of the Company as each is in effect at such time of
such execution, delivery and performance or any material provision of any
material indenture, agreement or other instrument by which the Company or any of
its properties or assets is bound, or result in the creation or imposition of
any lien, or encumbrance upon any of the material properties or assets of the
Company or result in the acceleration or termination of, or the creation in any
party of, the right to accelerate, terminate, modify or cancel, any material
indenture, lease, sublease, loan agreement, note or other obligation or
liability to which the Company is a party or is bound, except with respect to
such terms and conditions thereof as shall have been waived prior to the Initial
Closing or a Subsequent Closing, as the case may be.
4.8. Governmental Consents. Except for any notification required to
---------------------
be filed or supplied pursuant to the Hart-Scott Rodino Antitrust Improvements
Act of 1976, as amended (the "HSR Act"), and except as set forth in Schedule
--------
4.8, no consent, approval, order or authorization of, or registration,
qualification, designation, declaration or filing with, any federal, state or
local governmental authority is required on the part of the Company in
connection with the Company's valid execution, delivery and performance of this
Agreement. The filings under state securities laws, if any, will be effected by
the Company at its cost within the applicable stipulated statutory period.
4.9. Financial Statements. Attached hereto as Schedule 4.9 are year-
-------------------- ------------
end audited financial statements of the Company for the fiscal year ended
December 31, 1996 and unaudited financial statements of the Company for the
month ended March 31, 1997 (the "Financial Statements"). The Financial
Statements have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis throughout the periods indicated
therein, except as may be indicated therein or in the notes thereto, and fairly
present the financial condition of the Company as of the respective dates
thereof and the results of its operations and statements of cash flows for the
periods then ended, subject, in the case of unaudited interim financial
statements, to normal year-end audit adjustments. Except as reflected in the
Financial Statements, the Company has no material liabilities, absolute or
contingent, other than ordinary course liabilities incurred since the date of
the last such Financial Statements in connection with the conduct of the
business of the Company.
4.10. Absence of Certain Changes. Except as set forth in Schedule
-------------------------- --------
4.10, since December 31, 1996, there has been no:
4.10.1. change in the assets, liabilities, financial condition or
operating results of the Company, except changes in the ordinary course of
business that have not, individually or in
8
<PAGE>
the aggregate, resulted in and are not reasonably expected to result in a
Material Adverse Effect;
4.10.2. damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the business, properties or
financial condition of the Company;
4.10.3. waiver or compromise by the Company of a material right or
of a material debt owed to it;
4.10.4. satisfaction or discharge of any lien, claim or encumbrance
by the Company, except in the ordinary course of business and which is not
material to the business, properties or financial condition of the Company (as
such business is presently conducted);
4.10.5. material change to a material contract or arrangement by
which the Company or any of its assets is bound or subject;
4.10.6. sale, assignment or transfer to a third party of any
material patents, trademarks, copyrights, trade secrets or other intangible
assets for compensation which is less than fair value;
4.10.7. mortgage, pledge, transfer of a security interest in, or
lien, created by the Company, with respect to any of its material properties or
assets, except liens for taxes not yet due or payable; or
4.10.8. declaration, setting aside or payment or other distribution
in respect of any of the Company's capital stock, except any direct or indirect
redemption, purchase or other acquisition of any such stock by the Company.
4.11. Contracts. The Company is not, and has no actual knowledge
---------
that any other party is, in default under or in respect of any material
contract, commitment or agreement to which the Company is a party or by which
any of its assets or properties are bound, the result of which default would be
reasonably expected to have a Material Adverse Effect. No party to any such
material contract, commitment or agreement would be authorized or permitted to
terminate its obligations thereunder by reason of the execution and delivery of
this Agreement or any of the transactions contemplated herein, except with
respect to such terms and conditions thereof as shall have been waived prior to
the Initial Closing or a Subsequent Closing, as the case may be.
4.12. Compliance. The Company has materially complied with, and is
----------
not in default under or in violation of, its Certificate of Incorporation,
bylaws or any law, ordinance or regulation or other governmental restriction,
order, judgment or decree directly applicable to the Company, except where the
failure to comply or any such default or violation would not be reasonably
expected to have a Material Adverse Effect. The Company has not received notice
of any possible or actual violation of any applicable law, ordinance, regulation
or order, the result of which violation would be reasonably expected to have a
Material Adverse Effect.
4.13. Litigation. Except as set forth in Schedule 4.13, there is no
---------- -------------
action, suit,
9
<PAGE>
proceeding or investigation pending or, to the Company's knowledge, currently
threatened against the Company which questions the validity of this Agreement or
the right of the Company to enter into the Agreement or to consummate the
transactions contemplated hereby. There is no action, suit, proceeding or
investigation pending or, to the Company's knowledge, currently threatened
against the Company, which singly or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, would be reasonably expected to have a
Material Adverse Effect.
4.14. Permits. To the Company's knowledge, the Company has
-------
materially complied with, and is not in default in any material respect under,
all governmental franchises, permits, licenses, and any similar authority
necessary for the conduct of its business as now being conducted by it, except
where the failure to so comply or such default would not be reasonably expected
to have a Material Adverse Effect.
4.15. Taxes. The Company has filed all federal, state and other tax
-----
returns which are required to be filed and has heretofore paid all taxes which
have become due and payable, except where the failure to file or pay would not
be reasonably expected to have a Material Adverse Effect. The provision for
taxes on the balance sheet as of December 31, 1996 is sufficient for the payment
of all material accrued and unpaid taxes of the Company with respect to the
period then ended.
4.16. Title. The Company owns no real properties. The Company has
-----
good and valid title to all other properties (personal and mixed, tangible and
intangible) that it purports to own and a valid leasehold interest in all
properties that it has leased.
4.17. Intellectual Property. To the knowledge of the Company and in
---------------------
the Company's reasonable opinion, the Company owns, or possesses adequate rights
to use, all of its patents, patent rights, trademarks, trade secrets, know-how
and proprietary techniques (including processes and substances, service marks,
trade names and copyrights) owned or used by it in the conduct of its business
as presently conducted, except where the failure to own or possess such patents,
patent rights, trademarks, trade secrets, know-how or proprietary techniques
would not be reasonably expected to have a Material Adverse Effect. Except as
set forth in Schedule 4.17, the Company has not received any notice of
-------------
infringement of or conflict with asserted rights of others with respect to any
patents, patent rights, trademarks, trade secrets, know-how or proprietary
techniques which, singly or in the aggregate, if the subject of an unfavorable
decision, ruling or finding, would be reasonably expected to have a Material
Adverse Effect.
4.18. Investment Company Act. The Company is not an "investment
----------------------
company" within the meaning of the Investment Company Act of 1940, as amended.
5. Representations and Warranties of AHP. AHP represents and warrants to
-------------------------------------
the Company as of the date hereof and as of the Initial Closing Date as follows:
5.1. Investment Representations. AHP is aware of the Company's
--------------------------
business affairs and financial condition, has had an opportunity to ask
questions, review documents and gather information about the Company and, based
upon such information and the representations and warranties made herein being
true and correct in all material respects, has acquired sufficient
10
<PAGE>
information about the Company to reach an informed and knowledgeable decision to
acquire the Securities. AHP has such business and financial experience as is
required to give it the capacity to protect its own interests in connection with
the purchase of the Securities. AHP is an "accredited investor" as defined in
Rule 501(a) under the Securities Act.
5.2. Investment Intent. AHP is purchasing the Securities for
-----------------
investment for its own account only and not with a view to, or for resale in
connection with, any "distribution" thereof within the meaning of the Securities
Act. AHP understands that the Securities have 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 AHP's investment intent as expressed
herein. AHP is familiar with Rule 144 under the Securities Act, as presently in
effect, and understands the resale limitations imposed thereby and by the
Securities Act.
5.3. No Legal, Tax or Investment Advice. AHP understands that
----------------------------------
nothing in this Agreement or any other materials presented to AHP in connection
with the purchase and sale of the Securities constitutes legal, tax or
investment advice. AHP 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 Securities.
5.4. Corporate Power; Authority. AHP has all requisite legal and
--------------------------
corporate power and has taken all requisite corporate action to execute, deliver
and perform it obligations under this Agreement. This Agreement has been duly
authorized, executed and delivered on behalf of AHP and constitutes the valid
and binding agreement of AHP, enforceable in accordance with its terms, except
(i) as limited by applicable bankruptcy, insolvency, reorganization or similar
laws relating to or affecting the enforcement of creditors' rights generally,
(ii) as limited by equitable principles generally and (iii) rights to
indemnification and contribution hereunder may be limited by applicable law.
6. Restrictions on Transfer and Registration Rights.
------------------------------------------------
6.1. Restrictions on Transferability. The Securities 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
the transfer agent with respect to the Securities in order to enforce the
foregoing restrictions. The following provisions shall govern the transfer of
the Securities:
6.1.1. AHP, and any other holder of any Securities by acceptance
thereof, agrees that, prior to any transfer of any Securities, such holder will
give written notice to the Company of such holder's intention to effect such
transfer and to comply in all other respects with the provisions of this Section
6.1. Unless waived by the Company, each such notice shall be accompanied by an
opinion of counsel for such holder (who may be the inside or staff counsel
employed by such holder), as to the necessity or non-necessity for registration
under the Securities Act and applicable state securities laws in connection with
such transfer and stating the factual and statutory bases relied upon by
counsel. The following provisions shall then apply:
11
<PAGE>
6.1.1.1. If in the opinion of counsel for the Company the
proposed transfer of such Securities may be effected without registration or
qualification under the Securities Act and any applicable state securities laws,
then the registered holder of such Securities shall be entitled to transfer such
Securities in accordance with the intended method of disposition specified in
the statement delivered by such holder to the Company.
6.1.1.2. If in the opinion of counsel for the Company the
proposed transfer of such Securities may not be effected without registration
under the Securities Act or registration or qualification under any applicable
state securities laws, the registered holder of such Securities shall not be
entitled to transfer such Securities until the requisite registration or
qualification is effective.
6.1.1.3. If Securities are sold or otherwise transferred
hereunder with the restrictive legends thereon, any such transferee of such
Securities shall agree in writing to be bound by the restrictions on transfer
set forth in this Section 6 prior to the transfer of the Securities.
6.1.2. Each certificate evidencing the Securities issued upon such
transfer (and each certificate evidencing any untransferred balance of such
Securities) shall bear the legend set forth in Section 6.2 hereof unless (i) in
the opinion of counsel (reasonably acceptable to the Company) addressed to the
Company the registration of future transfers is not required by the applicable
provisions of the Securities Act or applicable state securities laws; (ii) the
Company shall have waived the requirement of such legend; or (iii) in the
opinion of counsel to the Company, such transfer shall have been made in
connection with an effective registration statement filed pursuant to the
Securities Act or in compliance with the requirements of Rule 144 or Rule 144A
(or similar or successor rule) promulgated under the Securities Act, and in
compliance with applicable state securities laws.
6.2. Restrictive Legends.
-------------------
6.2.1. Each certificate representing Securities shall bear
substantially the following legend (in addition to any legends required under
applicable securities laws):
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933. THE SHARES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN EXEMPTION THEREFROM, PURSUANT TO CERTAIN PROCEDURES
SET FORTH IN THE SERIES C PREFERRED STOCK PURCHASE AGREEMENT BETWEEN
THE ORIGINAL PURCHASER AND THE COMPANY (COPIES OF WHICH MAY BE
OBTAINED FROM THE COMPANY).
6.2.2. Whenever such restrictions on transfer pursuant to this
Section 6 shall
12
<PAGE>
terminate, AHP shall be entitled to receive from the Company without expense a
new certificate or certificates for the Securities not bearing the legends set
forth in this Section 6.
6.3. Registration of Shares.
----------------------
6.3.1. Demand Registration. Subject to the preferential
-------------------
registration rights of the holders of Series A Preferred Stock set forth in the
Stockholders' Agreement attached hereto as Exhibit 6.3.1, as the same may be
-------------
amended from time to time (the "Preferential Registration Rights"), AHP will
have the right, on one occasion after the expiration of 12 calendar months after
the IPO Effective Date, to require the Company to file a registration statement
(the "Demand Registration Statement") with the Commission under the Securities
Act to register the resale of the Registrable Securities. The Company shall not
be obligated to file and cause to become effective any Demand Registration
Statement within a period not to exceed four months after the date of a request
for registration pursuant to this Section 6.3.1 if, at the time of such request,
the filing of such Demand Registration Statement would, as determined in good
faith by a majority of the Board, be seriously detrimental to the Company or its
stockholders or adversely affect a material financing project or a material
proposed or pending acquisition, merger or other similar corporate transaction
to which the Company is or imminently expects to be a party, in which case
registration shall take place as soon as practicable thereafter.
6.3.2. S-3 Registrations. Subject to the Preferential Registration
-----------------
Rights, AHP will have the right, at any time after the expiration of 12 calendar
months after the IPO Effective Date, to require the Company to file one or more
shelf registration statements on Form S-3 (each, a "Form S-3 Registration
Statement") with the Commission under the Securities Act to register the resale
of the Registrable Securities in a non-underwritten transaction. The Company
shall not be obligated to file and cause to become effective any Form S-3
Registration Statement within a period not to exceed four months after the date
of a request for registration pursuant to this Section 6.3.2 if, at the time of
such request, the filing of such Form S-3 Registration Statement would, as
determined in good faith by a majority of the Board, be seriously detrimental to
the Company or its stockholders or adversely affect a material financing project
or a material proposed or pending acquisition, merger or other similar corporate
transaction to which the Company is or imminently expects to be a party, in
which case registration shall take place as soon as practicable thereafter,
provided that such right of the Company to delay a request for registration may
be exercised by the Company not more than once in any one-year period.
6.3.3. Piggyback Registration. Subject to the Preferential
----------------------
Registration Rights, if the Company at any time proposes to register any of its
securities under the Securities Act (other than a registration effected on
either Form S-4 or S-8, or similar or successor forms) for the purpose of
selling such securities to the public whether for its own account or for the
account of any of its security holders or both, the Company shall each such time
promptly give written notice to AHP of its intention so to do. Upon the written
request of AHP given within 15 days after such notice (which request shall state
the number of Registrable Securities to be disposed of by AHP and, if such
offering is not underwritten, the intended method of disposition of such
Registrable Securities by AHP), the Company will use its best efforts to cause
promptly all Registrable Securities for which registration or qualification is
requested under the Securities Act or any other applicable federal or
13
<PAGE>
state law or regulation so as to permit the sale or other disposition thereof in
accordance with AHP's written request. If the registration is to be effected in
connection with an underwritten offering,
6.3.3.1. AHP shall be required to sell the Registrable
Securities through the underwriter(s);
6.3.3.2. AHP (together with the Company) shall enter into an
underwriting agreement with the managing underwriter in the form customarily
used by such underwriter, which is reasonably acceptable to AHP; and
6.3.3.3. if the managing underwriter thereof determines that the
total number of shares of the Common Stock to be sold in such offering should be
limited due to market conditions or otherwise, subject to the Preferential
Registration Rights, the reduction in the total number of shares offered shall
be made by first excluding any shares of selling stockholders who are not
holders of contractual rights to have such shares registered under the
Securities Act, and then, if necessary, by excluding pro rata (based on the
number of shares to be registered by each of such security holders) the
Registrable Securities to be sold by AHP and the holders of other contractual
rights to have such shares registered pursuant to agreements comparable to this
Section 6.3.3 before any reduction is made in the total number of shares to be
sold pursuant thereto by the Company and any holders of Preferential
Registration Rights;
provided, however, that the Company may exclude all Registrable Securities from
- -------- -------
registration in connection with the Company's IPO in its sole discretion,
whether or not such exclusion is required in the opinion of the managing
underwriter.
6.4. Registration Procedures.
-----------------------
6.4.1. The Company shall pay all Registration Expenses (as
hereinafter defined) in connection with any registration, qualification or
compliance hereunder, and AHP shall pay all Selling Expenses (as hereinafter
defined) and other expenses that are not Registration Expenses relating to the
Registrable Securities resold by AHP. "Registration Expenses" shall mean all
expenses, except for Selling Expenses, incurred by the Company in complying with
the registration provisions of this Agreement, including without limitation all
federal and state registration, qualification and filing fees, printing
expenses, escrow fees, fees and disbursements of counsel for 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 all selling
commissions, underwriting fees and stock transfer taxes applicable to the
Registrable Securities and all fees and disbursements of counsel for AHP.
6.4.2. In the case of any registration effected by the Company
pursuant to these registration provisions, the Company will use its best efforts
to: (i) prepare and file with the Commission such amendments and supplements to
the registration statement and the prospectus used in connection with the
registration statement as may be necessary to comply with the provisions of the
Securities Act with respect to the disposition of the Registrable Securities and
keep such registration statement effective until the securities covered by such
registration statement have been
14
<PAGE>
sold, but in no event longer than 180 days (subject to the right and obligation
of the Company to promptly advise the selling stockholder of applicable periods
when the prospectus is not current and, therefore, may not be used, in which
case the Company covenants to use its reasonable efforts to promptly take such
actions necessary to permit sale thereunder); (ii) furnish such number of
prospectuses and other documents incident thereto, including any amendment of or
supplement to the prospectus, as AHP from time to time may reasonably request;
(iii) provide a transfer agent and registrar for all Registrable Securities
registered pursuant to the registration statement and a CUSIP number for all
such Registrable Securities, in each case not later than the effective date of
such registration; and (iv) file the documents required of the Company and
otherwise use its best efforts to maintain requisite blue sky clearance in (A)
all jurisdictions in which any of the Registrable Securities is originally sold
and (B) all other states specified in writing by AHP, provided as to clause (B),
however, that the Company shall not be required to qualify to do business or
consent to service of process in any state in which it is not now so qualified
or has not so consented.
6.4.3. AHP shall furnish to the Company such information regarding
it and the distribution proposed by it as the Company may reasonably request in
writing and as shall be reasonably required in connection with any registration,
qualification or compliance described herein. AHP shall represent that such
information is true and complete in all material respects.
6.5. Expiration of Registration Rights. Notwithstanding anything to
---------------------------------
the contrary contained herein, the registration rights granted hereunder and the
Company's obligations under this Section 6 will expire on the earlier of (i) the
expiration of the five-year period commencing 12 months after the IPO Effective
Date and (ii) the date on which all of the Registrable Securities can be sold
freely without restriction under the Securities Act.
6.6. Indemnification and Contribution.
--------------------------------
6.6.1. The Company agrees to indemnify and hold harmless AHP and
its successors, assigns, officers, directors, employees, stockholders, agents
and affiliates from and against any losses, claims, damages or liabilities (or
actions or proceedings in respect thereof) to which AHP 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 claim by a third party, including any governmental agency,
asserting any untrue statement of a material fact or omission of a material fact
contained in a registration statement, on the effective date thereof, or arise
out of any failure by the Company to fulfill any undertaking included in such
registration statement, including but not limited to the Company's duty to
update, and the Company will, as incurred, reimburse AHP for any damages or
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, damages or liability arises out of, or is based upon (i) an untrue
statement made in such registration statement in reliance upon and in conformity
with information furnished to the Company by or on behalf of AHP for use in
preparation of such registration statement or (ii) any untrue statement in any
prospectus that is corrected in any subsequent prospectus that was delivered to
AHP prior to the pertinent sale or sales by AHP.
15
<PAGE>
6.6.2. AHP agrees to indemnify and hold harmless the Company and
its successors, assigns, officers, directors, employees, stockholders, agents
and affiliates 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 claim by a third party asserting (i) an untrue
statement made in such registration statement in reliance upon and in conformity
with information furnished to the Company by or on behalf of AHP for use in
preparation of such registration statement, provided that AHP shall not be
liable in any such case for (i) any untrue statement included in any prospectus
which statement has been corrected, in writing, by AHP and delivered to the
Company before the sale from which such loss occurred or (ii) any untrue
statement in any prospectus that is corrected in any subsequent prospectus that
was delivered to AHP prior to the pertinent sale or sales by AHP, and AHP will,
as incurred, reimburse the Company for any legal or other expenses reasonably
incurred in investigating, defending or preparing to defend any such action,
proceeding or claim.
6.6.3. 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 6.6, such
indemnified person shall notify the indemnifying person in writing of such claim
or of the commencement of such action, 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, to the
extent that it shall wish, to 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 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.
6.6.4. The obligations of the Company and AHP under this Section 6
shall be in addition to any liability which the Company and AHP may otherwise
have and shall extend, upon the same terms and conditions, to each person, if
any, who controls the Company or AHP within the meaning of the Securities Act.
6.7. Transfer of Registration Rights. The right to sell Registrable
-------------------------------
Securities pursuant to a registration statement described herein may not be
assigned or transferred by AHP.
6.8. Lock-Up Upon IPO. AHP agrees that, in the event the Company
----------------
proposes to conduct an IPO at a time at which AHP beneficially owns 5% or
greater of the Company's Common Stock, AHP will agree to be a party and subject
to any lock-up agreement with the underwriter(s) for the IPO with respect to the
sale, transfer, conversion or other disposition of the Registrable Securities,
which lock-up agreement will contain no more restrictive terms and conditions
than those to which the Company's then current directors, officers and other
stockholders
16
<PAGE>
who beneficially own 5% or greater of the Common Stock will be subject in
connection therewith and in no event shall the period of such lock-up exceed 180
days from the effective date of the IPO.
7. Filings and Authorizations. The Company and AHP will, as promptly as
--------------------------
practicable, file or supply, or cause to be filed or supplied, all notifications
and information required to be filed or supplied pursuant to the HSR Act in
connection with the transactions contemplated by this Agreement. The Company
and AHP, as promptly as practicable, (a) will make, or cause to be made, all
such other filings and submissions under laws, rules and regulations applicable
to them as may be required for them to consummate the transactions contemplated
hereby in accordance with the terms of this Agreement, and (b) will use
reasonable efforts to obtain, or cause to be obtained, all authorizations,
approvals, consents and waivers from all governmental authorities necessary to
be obtained by them in order for them so to consummate such transactions.
8. Conditions to Obligation of Each Party to Effect the Transactions
-----------------------------------------------------------------
Contemplated by this Agreement. The obligation of each party to effect the
- ------------------------------
transactions contemplated by this Agreement shall be subject to the fulfillment
at or prior to the Initial Closing or any Subsequent Closing of the following
conditions:
8.1. all governmental and other consents and approvals, if any,
necessary to permit the consummation of the transactions contemplated by this
Agreement shall have been obtained and any waiting period (and any extension
thereof) applicable to the consummation of the Agreement under the HSR Act shall
have expired or been terminated; and
8.2. no stop order or other order enjoining the sale of the Series C
Preferred Shares or Common Shares, as the case may be, to be purchased and sold
at the Initial Closing or any Subsequent Closing shall have been issued and no
proceedings for such purpose shall be pending or, to the knowledge of the
Company, threatened by the Commission or any commissioner of corporations or
similar officer of any state having jurisdiction over this transaction, and no
preliminary or permanent injunction or other order, decree or ruling issued by a
court of competent jurisdiction or by a governmental, regulatory or
administrative agency or commission nor any statute, rule, regulation or
executive order promulgated or enacted by any governmental authority shall be in
effect that would restrain or otherwise prevent the consummation of the
transactions contemplated by the Agreement.
9. Conditions to AHP's Obligations.
-------------------------------
9.1. Initial Closing. The obligations of AHP under this Agreement to
---------------
purchase the Series C Preferred Shares to be purchased pursuant to Section 2.2
of the Agreement are subject to the fulfillment on or before the Initial Closing
of each of the following conditions, the waiver of which shall not be effective
without the consent of AHP thereto:
9.1.1. Representations and Warranties. The representations and
------------------------------
warranties of the Company contained in Section 4 shall be true and correct on
and as of the Initial Closing Date with the same effect as though such
representations and warranties had been made on and as of the Initial Closing
Date.
17
<PAGE>
9.1.2. Performance. The Company shall have performed and complied
-----------
in all material respects with all agreements, obligations and conditions
contained in this Agreement that are required to be performed or complied with
by it on or before the Initial Closing, and all corporate or other proceedings
in connection with the transactions contemplated at the Initial Closing and all
documents incident thereto shall be reasonably satisfactory in form and in
substance to AHP.
9.1.3. Compliance Certificate. An officer of the Company shall
----------------------
have delivered to AHP a certificate certifying that the conditions specified in
Sections 9.1.1 and 9.1.2 have been fulfilled.
9.1.4. The License Agreement. The Company and AHP shall have
---------------------
entered into the License Agreement.
9.1.5. Opinion of Company Counsel. AHP shall have received an
--------------------------
opinion from Morgan, Lewis & Bockius LLP, counsel to the Company, dated as of
the Initial Closing Date, in substantially the form of Exhibit 9.1.5.
-------------
9.1.6. Certificate. The Company shall have furnished to AHP a
-----------
certificate, signed by an authorized officer of the Company, certifying: (i)
the due organization and good standing of the Company; (ii) the corporate
resolutions of the Company authorizing the transactions contemplated by this
Agreement; and (iii) the incumbency of officers of the Company executing this
Agreement and the other instruments or certificates delivered upon the Initial
Closing.
9.1.7. Share Certificate. The Company shall have furnished to AHP
-----------------
a certificate or certificates representing the Series C Preferred Shares to be
purchased and sold at the Initial Closing pursuant to Section 2.2 (free and
clear of all liens, claims and other encumbrances except as otherwise provided
herein).
9.1.8. Other Documentation. The Company shall have furnished to
-------------------
AHP such other instruments and documents, in form and substance reasonably
acceptable to AHP, as may be necessary to effect the Initial Closing.
9.2. Subsequent Closings. The obligations of AHP under this
-------------------
Agreement to purchase the Series C Preferred Shares or Common Shares, as the
case may be, pursuant to Sections 2.3 and 2.4 of the Agreement are subject to
the fulfillment on or before each Subsequent Closing of each of the following
conditions, the waiver of which shall not be effective without the consent of
AHP thereto:
9.2.1. Representations and Warranties. The representations and
------------------------------
warranties of the Company contained in Sections 4.1, 4.2, 4.5 through 4.9, 4.12,
4.14, 4.15 and 4.18 shall be true and correct on and as of each Subsequent
Closing Date with the same effect as though such representations and warranties
had been made on and as of each Subsequent Closing Date.
9.2.2. Performance. The Company shall have performed and complied
-----------
in all material respects with all agreements, obligations and conditions
contained in this Agreement that
18
<PAGE>
are required to be performed or complied with by it on or before each Subsequent
Closing, and all corporate or other proceedings in connection with the
transactions contemplated at each Subsequent Closing and all documents incident
thereto shall be reasonably satisfactory in form and in substance to
AHP.
9.2.3. Compliance Certificate. An officer of the Company shall
----------------------
have delivered to AHP a certificate certifying that the conditions specified in
Sections 9.2.1 and 9.2.2 have been fulfilled.
9.2.4. Opinion of Company Counsel. AHP shall have received an
--------------------------
opinion from Morgan, Lewis & Bockius LLP, counsel to the Company, dated as of
each Subsequent Closing Date, in substantially the form of Exhibit 9.1.5.
-------------
9.2.5. Certificate. The Company shall have furnished to AHP a
-----------
certificate, signed by an authorized officer of the Company, certifying: (i)
the due organization and good standing of the Company; (ii) the corporate
resolutions of the Company authorizing the transactions contemplated by this
Agreement; and (iii) the incumbency of officers of the Company executing the
instruments or certificates delivered upon each Subsequent Closing.
9.2.6. Share Certificate. The Company shall have furnished to AHP
-----------------
a certificate or certificates representing the Series C Preferred Shares or the
Common Shares, as the case may be, to be purchased and sold at each Subsequent
Closing pursuant to Sections 2.3 and 2.4 (free and clear of all liens, claims
and other encumbrances except as otherwise provided herein).
9.2.7. Other Documentation. The Company shall have furnished to
-------------------
AHP such other instruments and documentation, in form and substance reasonably
acceptable to AHP, as may be necessary to effect each Subsequent Closing.
10. Conditions to the Company's Obligations.
---------------------------------------
10.1. Initial Closing. The obligations of the Company under this
---------------
Agreement to sell the Series C Preferred Shares to be sold pursuant to Section
2.2 of the Agreement are subject to the fulfillment on or before the Initial
Closing of each of the following conditions by AHP, the waiver of which shall
not be effective without the consent of the Company thereto:
10.1.1. Representations and Warranties. The representations and
------------------------------
warranties of AHP contained in Section 5 shall be true on and as of the Initial
Closing Date with the same effect as though such representations and warranties
had been made on and as of the Initial Closing Date.
10.1.2. Performance. AHP shall have performed and complied in all
-----------
material respects with all agreements, obligations and conditions contained in
this Agreement that are required to be performed or complied with by it on or
before the Initial Closing, and all corporate or other proceedings in connection
with the transactions contemplated at the Initial Closing and all documents
incident thereto shall be reasonably satisfactory in form and in substance to
the Company.
19
<PAGE>
10.1.3. Compliance Certificate. An officer of AHP shall have
----------------------
delivered to the Company a certificate certifying that the conditions specified
in Sections 10.1.1 and 10.1.2 have been fulfilled.
10.1.4. Payment of Purchase Price. AHP shall have delivered the
-------------------------
purchase price required to be paid at the Initial Closing.
10.1.5. License Agreement. The Company and AHP shall have entered
-----------------
into the License Agreement.
10.1.6. Other Documentation. AHP shall have furnished to the
-------------------
Company such other instruments and documents, in form and substance reasonably
acceptable to the Company, as may be necessary to effect the Initial Closing.
10.2. Subsequent Closings. The obligations of the Company under this
-------------------
Agreement to sell the Series C Preferred Shares or Common Shares, as the case
may be, to be sold pursuant to Sections 2.3 and 2.4 of the Agreement are subject
to the fulfillment on or before each Subsequent Closing of each of the following
conditions by AHP, the waiver of which shall not be effective without the
consent of the Company thereto:
10.2.1. Representations and Warranties. The representations and
------------------------------
warranties of AHP contained in Section 5 shall be true on and as of each
Subsequent Closing Date with the same effect as though such representations and
warranties had been made on and as of the Subsequent Closing Date.
10.2.2 Performance. AHP shall have performed and complied in all
-----------
material respects with all agreements, obligations and conditions contained in
this Agreement that are required to be performed or complied with by it on or
before each Subsequent Closing Date, and all corporate or other proceedings in
connection with the transactions contemplated at each Subsequent Closing and all
documents incident thereto shall be reasonably satisfactory in form and
substance to the Company.
10.2.3. Compliance Certificate. An officer of AHP shall have
----------------------
delivered to the Company a certificate certifying that the conditions specified
in Sections 10.2.1 and 10.2.2 have been fulfilled.
10.2.4. Payment of Purchase Price. AHP shall have delivered the
-------------------------
purchase price required to be paid at each Subsequent Closing.
10.2.5. Other Documentation. AHP shall have furnished to the
-------------------
Company such other instruments and documents, in form and substance reasonably
acceptable to the Company, as may be necessary to effect each Subsequent
Closing.
11.0. Covenants. The Company covenants and agrees that, prior to the
---------
consummation of the Company's IPO and so long as AHP shall own any Shares, it
will perform and observe the
20
<PAGE>
following covenants and provisions:
11.1. Corporate Existence. Do or cause to be done all things
-------------------
necessary to preserve, renew and keep in full force and effect its legal
existence.
11.2. Reporting Requirements. Furnish to AHP:
----------------------
11.2.1. Monthly Reports: as soon as available and in any event
---------------
within 45 days after the end of each calendar month, balance sheets, statements
of income and retained earnings and a summary statement of monthly cash flow and
expenses of the Company and its subsidiaries for such month and for the period
commencing at the end of the previous fiscal year and ending with the end of
such month, setting forth in each case in comparative form the corresponding
figures for the corresponding period of the preceding fiscal year, and including
comparisons to the monthly budget or business plan and an analysis of the
variances from the budget or plan, prepared in accordance with generally
accepted accounting principles consistently applied, subject to year-end audit
adjustment.
11.2.2. Annual Reports: as soon as available and in any event
--------------
within 120 days after the end of each fiscal year of the Company, a copy of the
annual audit report for such year for the Company and its subsidiaries,
including therein consolidated and consolidating balance sheets of the Company
and its subsidiaries as of the end of such fiscal year and consolidated and
consolidating statements of income and retained earnings and of changes in
financial position of the Company and its subsidiaries for such fiscal year,
setting forth in each case in comparative form the corresponding figures for the
preceding fiscal year, all such consolidated statements to be duly certified by
an independent public accountant of recognized national standing approved by the
Board of Directors.
11.2.3. Notice of Adverse Changes: promptly after the
-------------------------
occurrence thereof and in any event with 15 business days after it becomes aware
of each occurrence, notice of any material adverse change in the business,
assets, management, licensing activities, operations or financial condition of
the Company.
12.0. Miscellaneous.
-------------
12.1. Expenses. The Company and AHP shall each pay its own expenses
--------
incurred in connection with the negotiation, execution and performance of this
Agreement.
12.2. Waivers and Amendments. With the written consent of the
----------------------
Company and the record holders of more than fifty percent of the Shares then
outstanding, the terms of this Agreement may be waived or amended.
12.3. Governing Law. This Agreement shall be governed in all
-------------
respects by the laws of the Commonwealth of Pennsylvania as such laws are
applied to agreements between Pennsylvania residents entered into and to be
performed entirely within Pennsylvania, without giving effect to the conflicts
of laws provisions thereof.
21
<PAGE>
12.4. Survival. The representations, warranties, covenants and
--------
agreements made herein shall survive any investigation made by the Company or
AHP and the Initial Closing or any Subsequent Closing.
12.5. Successors and Assigns. The provisions hereof shall inure to
----------------------
the benefit of, and be binding upon, the successors, assigns, heirs, executors
and administrators of the parties hereto (specifically including successors in
interest to the Shares).
12.6. Entire Agreement. This Agreement constitutes the full and
----------------
entire understanding and agreement between the parties with regard to the
subject hereof.
12.7. Notices, etc. All notices and other communications required or
-------------
permitted hereunder shall be effective upon receipt and shall be in writing and
may be delivered in person, by facsimile, overnight delivery service or U.S.
mail, in which event it may be mailed by first-class, certified or registered,
postage prepaid, addressed (a) if to AHP, at the address set forth at the
beginning of this Agreement or at such other address as AHP shall have furnished
the Company in writing, with a copy to Senior Vice President and General
Counsel, American Home Products Corporation, Five Giralda Farms, Madison, New
Jersey 07940, or (b) if to the Company, at its address set forth at the
beginning of this Agreement, or at such other address as the Company shall have
furnished to AHP in writing.
12.8. 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.
12.9. Titles and Subtitles. The titles of the paragraphs and
--------------------
subparagraphs of this Agreement are for convenience of reference only and are
not to be considered in construing this Agreement.
12.10. Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
12.11. Publicity. Except for information which in the opinion of
---------
counsel to the Company is required to be disclosed by applicable laws or rules,
including but not limited to the federal securities laws or the rules of NASDAQ
or any public exchange on which the Common Stock or the Series C Preferred
Stock is or may be publicly traded, the Company shall not issue any press
releases or public statements without first seeking the approval of AHP with
regard to this Agreement.
22
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered by their proper and duly authorized officers as of the
day and year first written above.
3-DIMENSIONAL PHARMACEUTICALS, INC.
By: /s/ Thomas P. Stagnaro
_____________________________________
Thomas P. Stagnaro
President and Chief Executive Officer
AMERICAN HOME PRODUCTS CORPORATION
By: /s/ Gerald A. Jibilian
_________________________________
Name:
Title:
23
<PAGE>
Exhibit 10.6
Warrant to Purchase 1,082,200 Shares of Common Stock or
such additional shares as this Warrant may entitle the holder
to purchase pursuant to provisions of this Warrant.
WARRANT TO PURCHASE COMMON STOCK
OF
3-DIMENSIONAL PHARMACEUTICALS, INC.
This is to Certify That, FOR VALUE RECEIVED, HealthCare Ventures III,
L.P. or assigns ("Holder") is entitled to purchase, subject to the provisions of
this Warrant, from 3-Dimensional Pharmaceuticals, Inc., a Delaware corporation
(the "Company"), 1,082,200 fully paid, validly issued and nonassessable shares
of Common Stock, par value $.001 per share, of the Company ("Common Stock") at a
price of $1.25 per share during the Exercise Period (as defined below). The
number of shares of Common Stock to be received upon the exercise of this
Warrant and the price to be paid for each share of Common Stock may be adjusted
from time to time as hereinafter set forth. The shares of Common Stock
deliverable upon such exercise, and as adjusted from time to time, are
hereinafter sometimes referred to as "Warrant Shares" and the exercise price of
a share of Common Stock in effect at any time and as adjusted from time to time
is hereinafter sometimes referred to as the "Exercise Price." This Warrant is
being issued in connection with the issuance by the Company of Warrants to
purchase shares of Common Stock and promissory notes in the aggregate principal
amount of up to $10,000,000 (the "Notes"), pursuant to a Note and Warrant
Purchase Agreement dated as of November 18, 1999 (the "Agreement").
1. EXERCISE OF WARRANT.
a. This Warrant may be exercised in whole or in part at
any time or from time to time on or after November 18,
1999 until 5 p.m. New York City Time on November 18,
2000 (the "Exercise Period"); provided, however, that
if such day is a day on which banking institutions in
the State of New York are authorized by law to close,
then on the next succeeding day which shall not be
such a day. This Warrant may be exercised by
presentation and surrender hereof to the Company at
its principal office, or at the office of its stock
transfer agent, if any, with the Purchase Form annexed
hereto duly executed and accompanied by payment of the
Exercise Price for the number of Warrant Shares
specified in such form. As soon as practicable after
each such exercise of the
-1-
<PAGE>
Warrants, but not later than seven (7) days from the
date of such exercise, the Company shall issue and
deliver to the Holder a certificate or certificates
for the Warrant Shares issuable upon such exercise,
registered in the name of the Holder or its designee.
If this Warrant should be exercised in part only, the
Company shall, upon surrender of this Warrant for
cancellation, execute and deliver a new Warrant
evidencing the rights of the Holder thereof to
purchase the balance of the Warrant Shares purchasable
thereunder. Upon receipt by the Company of this
Warrant at its office, or by the stock transfer agent
of the Company at its office, in proper form for
exercise, the Holder shall be deemed to be the holder
of record of the shares of Common Stock issuable upon
such exercise, notwithstanding that the stock transfer
books of the Company shall then be closed or that
certificates representing such shares of Common Stock
shall not then be physically delivered to the Holder.
b. At any time during the Exercise Period, the Holder
may, at its option, exchange this Warrant, in whole or in
part (a "Warrant Exchange") into the number of Warrant
Shares determined in accordance with this Section (a)(ii),
by surrendering this Warrant at the principal office of
the Company or at the office of its stock transfer agent,
accompanied by a notice stating such Holder's intent to
effect such exchange, the number of Warrant Shares to be
exchanged and the date on which the Holder requests that
such Warrant Exchange occur (the "Notice of Exchange").
The Warrant Exchange shall take place on the date
specified in the Notice of Exchange or, if later, the date
the Notice of Exchange is received by the Company (the
"Exchange Date"). Certificates for the shares issuable
upon such Warrant Exchange and, if applicable, a new
warrant of like tenor evidencing the balance of the shares
remaining subject to this Warrant, shall be issued as of
the Exchange Date and delivered to the Holder within seven
(7) days following the Exchange Date. In connection with
any Warrant Exchange, this Warrant shall represent the
right to subscribe for and acquire the number of Warrant
Shares (rounded to the next highest integer) equal to (i)
the number of Warrant Shares specified by the Holder in
its Notice of Exchange (the "Total Number") less (ii) the
number of Warrant Shares equal to the quotient obtained by
dividing (A) the product of the Total Number and the
existing Exercise Price by (B) the Fair Market Value.
"Fair Market Value" shall mean: (1) if the Common Stock is
listed on a National Securities Exchange or admitted to
unlisted trading privileges on such exchange or listed for
trading on the NASDAQ system, the average of the last
reported sale prices of the Common Stock on such exchange
or system for the twenty (20) business days ending on the
last business day prior to the date for which the
determination is being made; or (2) if the Common Stock is
not so listed or admitted to unlisted trading privileges,
the average of the means of the last reported bid and
asked prices reported
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by the National Quotation Bureau, Inc. for the twenty (20)
business days ending on the last business day prior to the
date for which the determination is being made; or (3) if
the Common Stock is not so listed or admitted to unlisted
trading privileges and bid and asked prices are not so
reported, an amount, not less than book value thereof as
at the end of the most recent fiscal year of the Company
ending prior to the Exchange Date, determined in such
reasonable manner as may be prescribed by the Board of
Directors of the Company.
2. RESERVATION OF SHARES. The Company shall at all times
reserve for issuance and/or delivery upon exercise of this Warrant
such number of shares of its Common Stock as shall be required for
issuance and delivery upon exercise of the Warrants.
3. FRACTIONAL SHARES. No fractional shares or script
representing fractional shares shall be issued upon the exercise of
this Warrant. With respect to any fraction of a share called for upon
any exercise hereof, the Company shall pay to the Holder an amount in
cash equal to such fraction multiplied by the Fair Market Value of a
share.
4. EXCHANGE, TRANSFER, ASSIGNMENT OR LOSS OF WARRANT.
(i) This Warrant is exchangeable, without expense, at
the option of the Holder, upon presentation and surrender
hereof to the Company or at the office of its stock
transfer agent, if any, for other warrants of different
denominations entitling the holder thereof to purchase in
the aggregate the same number of shares of Common Stock
purchasable hereunder. Subject to the restrictions set
forth in subparagraph (ii) below, upon surrender of this
Warrant to the Company at its principal office or at the
office of its stock transfer agent, if any, with the
Assignment Form annexed hereto duly executed and funds
sufficient to pay any transfer tax, the Company shall,
without charge, execute and deliver a new Warrant in the
name of the assignee named in such instrument of
assignment and this Warrant shall promptly be canceled.
This Warrant may be divided or combined with other
warrants which carry the same rights upon presentation
hereof at the principal office of the Company or at the
office of its stock transfer agent, if any, together with
a written notice specifying the names and denominations in
which new Warrants are to be issued and signed by the
Holder hereof. The term "Warrant" as used herein includes
any Warrants into which this Warrant may be divided or
exchanged. Upon receipt by the Company of evidence
satisfactory to it of the loss, theft, destruction or
mutilation of this Warrant, and (in the case of loss,
theft or destruction) of reasonably satisfactory
indemnification, and upon surrender and cancellation of
this Warrant, if mutilated, the Company will execute and
deliver a new Warrant of like tenor and date. Any such new
Warrant
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executed and delivered shall constitute an additional
contractual obligation on the part of the Company, whether
or not this Warrant so lost, stolen, destroyed, or
mutilated shall be at any time enforceable by anyone.
(ii) This Warrant and the shares of Common Stock issuable
upon exercise hereof have not been registered under the
Securities Act of 1933, as amended, or state securities
laws by reason of an exemption therefrom. The shares of
Common Stock issuable upon exercise of this Warrant are
not transferable except as provided in the Agreement and
the Stockholders' Agreement dated as of January 6, 1998,
as amended from time to time ("Stockholders' Agreement").
Shares of Common Stock issuable upon exercise of this
Warrant will bear an appropriate legend to this effect.
The restrictions contained herein shall be binding on any
transferee of the Common Stock issuable upon exercise of
this Warrant and the Company may require any such
transferee to execute an instrument agreeing in writing to
be bound by these restrictions as a condition to transfer.
5. RIGHTS OF THE HOLDER. The Holder shall not, by virtue
hereof, be entitled to any rights of a shareholder in the Company,
either at law or equity, and the rights of the Holder are limited to
those expressed in the Warrant and are not enforceable against the
Company except to the extent set forth herein.
6. ANTI-DILUTION PROVISIONS. The Exercise Price in effect at
any time and the number and kind of securities purchasable upon the
exercise of the Warrants shall be subject to adjustment from time to
time upon the happening of certain events as follows:
a. In case the Company shall (i) declare a dividend or
make a distribution on its outstanding shares of Common
Stock in shares of Common Stock, (ii) subdivide or
reclassify its outstanding shares of Common Stock into a
greater number of shares, or (iii) combine or reclassify
its outstanding shares of Common Stock into a smaller
number of shares, the Exercise Price in effect at the time
of the record date for such dividend or distribution or of
the effective date of such subdivision, combination or
reclassification shall be adjusted so that it shall equal
the price determined by multiplying the Exercise Price by
a fraction, the denominator of which shall be the number
of shares of Common Stock outstanding after giving effect
to such action, and the numerator of which shall be the
number of shares of Common Stock outstanding immediately
prior to such action. Such adjustment shall be made
successively whenever any event listed above shall occur.
b. In case the Company shall fix a record date for the
issuance of rights or warrants to all holders of its
Common Stock entitling them to
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subscribe for or purchase shares of Common Stock (or
securities convertible into Common Stock) at a price (the
"Subscription Price") (or having a conversion price per
share) less than the Exercise Price on the record date
mentioned below, the Exercise Price shall be adjusted so
that the same shall equal the price determined by
multiplying the Exercise Price in effect immediately prior
to the date of issuance by a fraction, the numerator of
which shall be the sum of the number of shares outstanding
on the record date mentioned below and the number of
additional shares of Common Stock which the aggregate
offering price of the total number of shares of Common
Stock so offered (or the aggregate conversion price of the
convertible securities so offered) would purchase at the
Exercise Price in effect immediately prior to the date of
such issuance, and the denominator of which shall be the
sum of the number of shares of Common Stock outstanding on
the record date mentioned below and the number of
additional shares of Common Stock offered for subscription
or purchase (or into which the convertible securities so
offered are convertible). Such adjustment shall be made
successively whenever such rights or warrants are issued
and shall become effective immediately after the record
date for the determination of shareholders entitled to
receive such rights or warrants; and to the extent that
shares of Common Stock are not delivered (or securities
convertible into Common Stock are not delivered) after the
expiration of such rights or warrants the Exercise Price
shall be readjusted to the Exercise Price which would then
be in effect had the adjustments made upon the issuance of
such rights or warrants been made upon the basis of
delivery of only the number of shares of Common Stock (or
securities convertible into Common Stock) actually
delivered.
c. In case the Company shall hereafter distribute to
the holders of its Common Stock evidences of its
indebtedness or assets (excluding cash dividends or
distributions and dividends or distributions referred to
in Subsection (i) above) or subscription rights or
warrants (excluding those referred to in Subsection (ii)
above), then in each such case the Exercise Price in
effect thereafter shall be determined by multiplying the
Exercise Price in effect immediately prior thereto by a
fraction, the numerator of which shall be the total number
of shares of Common Stock outstanding multiplied by the
Fair Market Value per share of Common Stock, less the fair
market value (as determined by the Company"s Board of
Directors) of said assets or evidences of indebtedness so
distributed or of such rights or warrants, and the
denominator of which shall be the total number of shares
of Common Stock outstanding multiplied by the Fair Market
Value per share of Common Stock. Such adjustment shall be
made successively whenever such a record date is fixed.
Such adjustment shall be made whenever any such
distribution is made and shall become effective
immediately after the record date for the determination of
shareholders entitled to receive such distribution.
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<PAGE>
d. Whenever the Exercise Price payable upon exercise of
each Warrant is adjusted pursuant to Subsections (i), (ii)
or (iii) above, the number of Shares purchasable upon
exercise of this Warrant shall simultaneously be adjusted
by multiplying the number of Shares initially issuable
upon exercise of this Warrant by the Exercise Price in
effect on the date hereof and dividing the product so
obtained by the Exercise Price, as adjusted.
e. No adjustment in the Exercise Price shall be
required unless such adjustment would require an increase
or decrease of at least 5% in such price; provided,
however, that any adjustments which by reason of this
Subsection (v) are not required to be made shall be
carried forward and taken into account in any subsequent
adjustment required to be made hereunder. All calculations
under this Section (f) shall be made to the nearest cent
or to the nearest one-hundredth of a share, as the case
may be. Anything in this Section (f) to the contrary
notwithstanding, the Company shall be entitled, but shall
not be required, to make such changes in the Exercise
Price, in addition to those required by this Section (f),
as it shall determine, in its sole discretion, to be
advisable in order that any dividend or distribution in
shares of Common Stock, or any subdivision,
reclassification or combination of Common Stock, hereafter
made by the Company shall not result in any Federal Income
tax liability to the holders of Common Stock or securities
convertible into Common Stock (including Warrants).
f. Whenever the Exercise Price is adjusted, as herein
provided, the Company shall promptly but no later than 10
days after any request for such an adjustment by the
Holder, cause a notice setting forth the adjusted Exercise
Price and adjusted number of Shares issuable upon exercise
of each Warrant, and, if requested, information describing
the transactions giving rise to such adjustments, to be
mailed to the Holders at their last addresses appearing in
the Warrant Register, and shall cause a certified copy
thereof to be mailed to its transfer agent, if any. The
Company may retain a firm of independent certified public
accountants selected by the Board of Directors (who may be
the regular accountants employed by the Company) to make
any computation required by this Section (f), and a
certificate signed by such firm shall be conclusive
evidence of the correctness of such adjustment.
g. In the event that at any time, as a result of an
adjustment made pursuant to Subsection (i) above, the
Holder of this Warrant thereafter shall become entitled to
receive any shares of the Company, other than Common
Stock, thereafter the number of such other shares so
receivable upon exercise of this Warrant shall be subject
to adjustment from time to
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<PAGE>
time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to the Common
Stock contained in Subsections (i) to (vi), inclusive
above.
h. Irrespective of any adjustments in the Exercise
Price or the number or kind of shares purchasable upon
exercise of this Warrant, Warrants theretofore or
thereafter issued may continue to express the same price
and number and kind of shares as are stated in the similar
Warrants initially issuable pursuant to the Agreement.
7. OFFICER'S CERTIFICATE. Whenever the Exercise Price shall
be adjusted as required by the provisions of the foregoing Section,
the Company shall forthwith file in the custody of its Secretary or an
Assistant Secretary at its principal office and with its stock
transfer agent, if any, an officer's certificate showing the adjusted
Exercise Price determined as herein provided, setting forth in
reasonable detail the facts requiring such adjustment, including a
statement of the number of additional shares of Common Stock, if any,
and such other facts as shall be necessary to show the reason for and
the manner of computing such adjustment. Each such officer's
certificate shall be made available at all reasonable times for
inspection by the holder or any holder of a Warrant executed and
delivered pursuant to Section (a) and the Company shall, forthwith
after each such adjustment, mail a copy by certified mail of such
certificate to the Holder or any such holder.
8. NOTICES TO WARRANT HOLDERS. So long as this Warrant shall
be outstanding, (i) if the Company shall pay any dividend or make any
distribution upon the Common Stock or (ii) if the Company shall offer
to the Holders of Common Stock for subscription or purchase by them
any share of any class or any other rights or (iii) if any capital
reorganization of the Company, reclassification of the capital stock
of the Company, consolidation or merger of the Company with or into
another corporation, sale, lease or transfer of all or substantially
all of the property and assets of the Company to another corporation,
or voluntary or involuntary dissolution, liquidation or winding up of
the Company shall be effected, then in any such case, the Company
shall cause to be mailed by certified mail to the Holder, at least
fifteen days prior to the date specified in (x) or (y) below, as the
case may be, a notice containing a brief description of the proposed
action and stating the date on which (x) a record is to be taken for
the purpose of such dividend, distribution or rights, or (y) such
reclassification, reorganization, consolidation, merger, conveyance,
lease, dissolution, liquidation or winding up is to take place and the
date, if any is to be fixed, as of which the Holders of Common Stock
or other securities shall receive cash or other property deliverable
upon such reclassification, reorganization, consolidation, merger,
conveyance, dissolution, liquidation or winding up.
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<PAGE>
9. RECLASSIFICATION, REORGANIZATION OR MERGER. In case of any
reclassification, capital reorganization or other change of
outstanding shares of Common Stock of the Company, or in case of any
consolidation or merger of the Company with or into another
corporation (other than a merger with a subsidiary in which merger the
Company is the continuing corporation and which does not result in any
reclassification, capital reorganization or other change of
outstanding shares of Common Stock of the class issuable upon exercise
of this Warrant) or in case of any sale, lease or conveyance to
another corporation of the property of the Company as an entirety, the
Company shall, as a condition precedent to such transaction, cause
effective provisions to be made so that the Holder shall have the
right thereafter by exercising this Warrant at any time prior to the
expiration of the Warrant, to purchase the kind and amount of shares
of stock and other securities and property receivable upon such
reclassification, capital reorganization and other change,
consolidation, merger, sale or conveyance by a holder of the number of
shares of Common Stock which might have been purchased upon exercise
of this Warrant immediately prior to such reclassification, change,
consolidation, merger, sale or conveyance. Any such provision shall
include provision for adjustments which shall be as nearly equivalent
as may be practicable to the adjustments provided for in this Warrant.
The foregoing provisions of this Section (i) shall similarly apply to
successive reclassifications, capital reorganizations and changes of
shares of Common Stock and to successive consolidations, mergers,
sales or conveyances. In the event that in connection with any such
capital reorganization or reclassification, consolidation, merger,
sale or conveyance, additional shares of Common Stock shall be issued
in exchange, conversion, substitution or payment, in whole or in part,
for a security of the Company other than Common Stock, any such issue
shall be treated as an issue of Common Stock covered by the provisions
of Subsection (i) of Section (f)hereof.
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<PAGE>
3-DIMENSIONAL PHARMACEUTICALS, INC.
By /s/ David C. U'Prichard
________________________________
Name: David C. U'Prichard
Title: Chief Executive Officer
[SEAL]
Dated: November 18, 1999
Attest:
/s/ Scott M. Horvitz
_____________________________
Secretary
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<PAGE>
PURCHASE FORM
-------------
Dated _____________,____
The undersigned hereby irrevocably elects to exercise the within Warrant to
the extent of purchasing _________ shares of Common Stock and hereby makes
payment of in payment of the actual exercise price thereof
---------
INSTRUCTIONS FOR REGISTRATION OF STOCK
--------------------------------------
Name ___________________________________________
(Please typewrite or print in block letters)
Address _________________________________________
Signature _______________________________________
---------
ASSIGNMENT FORM
---------------
FOR VALUE RECEIVED, __________________________ hereby sells, assigns and
transfers unto
Name _____________________________________________________
(Please typewrite or print in block letters)
Address __________________________________________________
the right to purchase Common Stock represented by this Warrant to the extent of
_____ shares as to which such right is exercisable and does hereby irrevocably
constitute and appoint ____________________ Attorney, to transfer the same on
the books of the Company with full power of substitution in the premises.
Date _____________, _____
Signature ____________________________
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<PAGE>
Exhibit 10.7
Warrant to Purchase 317,800 Shares of Common Stock or
such additional shares as this Warrant may entitle the holder
to purchase pursuant to provisions of this Warrant.
WARRANT TO PURCHASE COMMON STOCK
OF
3-DIMENSIONAL PHARMACEUTICALS, INC.
This is to Certify That, FOR VALUE RECEIVED, HealthCare Ventures IV,
L.P. or assigns ("Holder") is entitled to purchase, subject to the provisions of
this Warrant, from 3-Dimensional Pharmaceuticals, Inc., a Delaware corporation
(the "Company"), 317,800 fully paid, validly issued and nonassessable shares of
Common Stock, par value $.001 per share, of the Company ("Common Stock") at a
price of $1.25 per share during the Exercise Period (as defined below). The
number of shares of Common Stock to be received upon the exercise of this
Warrant and the price to be paid for each share of Common Stock may be adjusted
from time to time as hereinafter set forth. The shares of Common Stock
deliverable upon such exercise, and as adjusted from time to time, are
hereinafter sometimes referred to as "Warrant Shares" and the exercise price of
a share of Common Stock in effect at any time and as adjusted from time to time
is hereinafter sometimes referred to as the "Exercise Price." This Warrant is
being issued in connection with the issuance by the Company of Warrants to
purchase shares of Common Stock and promissory notes in the aggregate principal
amount of up to $10,000,000 (the "Notes"), pursuant to a Note and Warrant
Purchase Agreement dated as of November 18, 1999 (the "Agreement").
1. EXERCISE OF WARRANT.
a. This Warrant may be exercised in whole or in part at any
time or from time to time on or after November 18, 1999 until 5
p.m. New York City Time on November 18, 2000 (the "Exercise
Period"); provided, however, that if such day is a day on which
banking institutions in the State of New York are authorized by
law to close, then on the next succeeding day which shall not be
such a day. This Warrant may be exercised by presentation and
surrender hereof to the Company at its principal office, or at
the office of its stock transfer agent, if any, with the Purchase
Form annexed hereto duly executed and accompanied by payment of
the Exercise Price for the number of Warrant Shares specified
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<PAGE>
in such form. As soon as practicable after each such exercise of
the Warrants, but not later than seven (7) days from the date of
such exercise, the Company shall issue and deliver to the Holder
a certificate or certificates for the Warrant Shares issuable
upon such exercise, registered in the name of the Holder or its
designee. If this Warrant should be exercised in part only, the
Company shall, upon surrender of this Warrant for cancellation,
execute and deliver a new Warrant evidencing the rights of the
Holder thereof to purchase the balance of the Warrant Shares
purchasable thereunder. Upon receipt by the Company of this
Warrant at its office, or by the stock transfer agent of the
Company at its office, in proper form for exercise, the Holder
shall be deemed to be the holder of record of the shares of
Common Stock issuable upon such exercise, notwithstanding that
the stock transfer books of the Company shall then be closed or
that certificates representing such shares of Common Stock shall
not then be physically delivered to the Holder.
b. At any time during the Exercise Period, the Holder may, at
its option, exchange this Warrant, in whole or in part (a
"Warrant Exchange") into the number of Warrant Shares determined
in accordance with this Section (a)(ii), by surrendering this
Warrant at the principal office of the Company or at the office
of its stock transfer agent, accompanied by a notice stating such
Holder's intent to effect such exchange, the number of Warrant
Shares to be exchanged and the date on which the Holder requests
that such Warrant Exchange occur (the "Notice of Exchange"). The
Warrant Exchange shall take place on the date specified in the
Notice of Exchange or, if later, the date the Notice of Exchange
is received by the Company (the "Exchange Date"). Certificates
for the shares issuable upon such Warrant Exchange and, if
applicable, a new warrant of like tenor evidencing the balance of
the shares remaining subject to this Warrant, shall be issued as
of the Exchange Date and delivered to the Holder within seven (7)
days following the Exchange Date. In connection with any Warrant
Exchange, this Warrant shall represent the right to subscribe for
and acquire the number of Warrant Shares (rounded to the next
highest integer) equal to (i) the number of Warrant Shares
specified by the Holder in its Notice of Exchange (the "Total
Number") less (ii) the number of Warrant Shares equal to the
quotient obtained by dividing (A) the product of the Total Number
and the existing Exercise Price by (B) the Fair Market Value.
"Fair Market Value" shall mean: (1) if the Common Stock is listed
on a National Securities Exchange or admitted to unlisted trading
privileges on such exchange or listed for trading on the NASDAQ
system, the average of the last reported sale prices of the
Common Stock on such exchange or system for the twenty (20)
business days ending on the last business day prior to the date
for which the determination is being made; or (2) if the
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<PAGE>
Common Stock is not so listed or admitted to unlisted trading
privileges, the average of the means of the last reported bid and
asked prices reported by the National Quotation Bureau, Inc. for
the twenty (20) business days ending on the last business day
prior to the date for which the determination is being made; or
(3) if the Common Stock is not so listed or admitted to unlisted
trading privileges and bid and asked prices are not so reported,
an amount, not less than book value thereof as at the end of the
most recent fiscal year of the Company ending prior to the
Exchange Date, determined in such reasonable manner as may be
prescribed by the Board of Directors of the Company.
2. RESERVATION OF SHARES. The Company shall at all times reserve for
issuance and/or delivery upon exercise of this Warrant such number of
shares of its Common Stock as shall be required for issuance and
delivery upon exercise of the Warrants.
3. FRACTIONAL SHARES. No fractional shares or script representing
fractional shares shall be issued upon the exercise of this Warrant.
With respect to any fraction of a share called for upon any exercise
hereof, the Company shall pay to the Holder an amount in cash equal to
such fraction multiplied by the Fair Market Value of a share.
4. EXCHANGE, TRANSFER, ASSIGNMENT OR LOSS OF WARRANT.
(i) This Warrant is exchangeable, without expense, at the option
of the Holder, upon presentation and surrender hereof to the
Company or at the office of its stock transfer agent, if any, for
other warrants of different denominations entitling the holder
thereof to purchase in the aggregate the same number of shares of
Common Stock purchasable hereunder. Subject to the restrictions
set forth in subparagraph (ii) below, upon surrender of this
Warrant to the Company at its principal office or at the office
of its stock transfer agent, if any, with the Assignment Form
annexed hereto duly executed and funds sufficient to pay any
transfer tax, the Company shall, without charge, execute and
deliver a new Warrant in the name of the assignee named in such
instrument of assignment and this Warrant shall promptly be
canceled. This Warrant may be divided or combined with other
warrants which carry the same rights upon presentation hereof at
the principal office of the Company or at the office of its stock
transfer agent, if any, together with a written notice specifying
the names and denominations in which new Warrants are to be
issued and signed by the Holder hereof. The Term "Warrant" as
used herein includes any Warrants into which this Warrant may be
divided or exchanged. Upon receipt by the Company of evidence
satisfactory to it of the loss, theft, destruction or mutilation
of this Warrant, and (in the case of loss, theft or destruction)
of
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<PAGE>
reasonably satisfactory indemnification, and upon surrender and
cancellation of this Warrant, if mutilated, the Company will
execute and deliver a new Warrant of like tenor and date. Any
such new Warrant executed and delivered shall constitute an
additional contractual obligation on the part of the Company,
whether or not this Warrant so lost, stolen, destroyed, or
mutilated shall be at any time enforceable by anyone.
(ii) This Warrant and the shares of Common Stock issuable upon
exercise hereof have not been registered under the Securities Act
of 1933, as amended, or state securities laws by reason of an
exemption therefrom. The shares of Common Stock issuable upon
exercise of this Warrant are not transferable except as provided
in the Agreement and the Stockholders' Agreement dated as of
January 6, 1998, as amended from time to time ("Stockholders'
Agreement"). Shares of Common Stock issuable upon exercise of
this Warrant will bear an appropriate legend to this effect. The
restrictions contained herein shall be binding on any transferee
of the Common Stock issuable upon exercise of this Warrant and
the Company may require any such transferee to execute an
instrument agreeing in writing to be bound by these restrictions
as a condition to transfer.
5. RIGHTS OF THE HOLDER. The Holder shall not, by virtue hereof, be
entitled to any rights of a shareholder in the Company, either at law
or equity, and the rights of the Holder are limited to those expressed
in the Warrant and are not enforceable against the Company except to
the extent set forth herein.
6. ANTI-DILUTION PROVISIONS. The Exercise Price in effect at any
time and the number and kind of securities purchasable upon the
exercise of the Warrants shall be subject to adjustment from time to
time upon the happening of certain events as follows:
a. In case the Company shall (i) declare a dividend or make a
distribution on its outstanding shares of Common Stock in shares
of Common Stock, (ii) subdivide or reclassify its outstanding
shares of Common Stock into a greater number of shares, or (iii)
combine or reclassify its outstanding shares of Common Stock into
a smaller number of shares, the Exercise Price in effect at the
time of the record date for such dividend or distribution or of
the effective date of such subdivision, combination or
reclassification shall be adjusted so that it shall equal the
price determined by multiplying the Exercise Price by a fraction,
the denominator of which shall be the number of shares of Common
Stock outstanding after giving effect to such action, and the
numerator of which shall be the number of shares of Common Stock
outstanding immediately
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<PAGE>
prior to such action. Such adjustment shall be made successively
whenever any event listed above shall occur.
b. In case the Company shall fix a record date for the issuance
of rights or warrants to all holders of its Common Stock
entitling them to subscribe for or purchase shares of Common
Stock (or securities convertible into Common Stock) at a price
(the "Subscription Price") (or having a conversion price per
share) less than the Exercise Price on the record date mentioned
below, the Exercise Price shall be adjusted so that the same
shall equal the price determined by multiplying the Exercise
Price in effect immediately prior to the date of issuance by a
fraction, the numerator of which shall be the sum of the number
of shares outstanding on the record date mentioned below and the
number of additional shares of Common Stock which the aggregate
offering price of the total number of shares of Common Stock so
offered (or the aggregate conversion price of the convertible
securities so offered) would purchase at the Exercise Price in
effect immediately prior to the date of such issuance, and the
denominator of which shall be the sum of the number of shares of
Common Stock outstanding on the record date mentioned below and
the number of additional shares of Common Stock offered for
subscription or purchase (or into which the convertible
securities so offered are convertible). Such adjustment shall be
made successively whenever such rights or warrants are issued and
shall become effective immediately after the record date for the
determination of shareholders entitled to receive such rights or
warrants; and to the extent that shares of Common Stock are not
delivered (or securities convertible into Common Stock are not
delivered) after the expiration of such rights or warrants the
Exercise Price shall be readjusted to the Exercise Price which
would then be in effect had the adjustments made upon the
issuance of such rights or warrants been made upon the basis of
delivery of only the number of shares of Common Stock (or
securities convertible into Common Stock) actually delivered.
c. In case the Company shall hereafter distribute to the
holders of its Common Stock evidences of its indebtedness or
assets (excluding cash dividends or distributions and dividends
or distributions referred to in Subsection (i) above) or
subscription rights or warrants (excluding those referred to in
Subsection (ii) above), then in each such case the Exercise Price
in effect thereafter shall be determined by multiplying the
Exercise Price in effect immediately prior thereto by a fraction,
the numerator of which shall be the total number of shares of
Common Stock outstanding multiplied by the Fair Market Value per
share of Common Stock, less the fair market value (as determined
by the Company's Board of Directors) of said assets or evidences
of indebtedness so distributed or of such rights or warrants, and
the denominator of which shall be the total number of shares
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<PAGE>
of Common Stock outstanding multiplied by the Fair Market Value
per share of Common Stock. Such adjustment shall be made
successively whenever such a record date is fixed. Such
adjustment shall be made whenever any such distribution is made
and shall become effective immediately after the record date for
the determination of shareholders entitled to receive such
distribution.
d. Whenever the Exercise Price payable upon exercise of each
Warrant is adjusted pursuant to Subsections (i), (ii) or (iii)
above, the number of Shares purchasable upon exercise of this
Warrant shall simultaneously be adjusted by multiplying the
number of Shares initially issuable upon exercise of this Warrant
by the Exercise Price in effect on the date hereof and dividing
the product so obtained by the Exercise Price, as adjusted.
e. No adjustment in the Exercise Price shall be required unless
such adjustment would require an increase or decrease of at least
5% in such price; provided, however, that any adjustments which
by reason of this Subsection (v) are not required to be made
shall be carried forward and taken into account in any subsequent
adjustment required to be made hereunder. All calculations under
this Section (f) shall be made to the nearest cent or to the
nearest one-hundredth of a share, as the case may be. Anything in
this Section (f) to the contrary notwithstanding, the Company
shall be entitled, but shall not be required, to make such
changes in the Exercise Price, in addition to those required by
this Section (f), as it shall determine, in its sole discretion,
to be advisable in order that any dividend or distribution in
shares of Common Stock, or any subdivision, reclassification or
combination of Common Stock, hereafter made by the Company shall
not result in any Federal Income tax liability to the holders of
Common Stock or securities convertible into Common Stock
(including Warrants).
f. Whenever the Exercise Price is adjusted, as herein provided,
the Company shall promptly but no later than 10 days after any
request for such an adjustment by the Holder, cause a notice
setting forth the adjusted Exercise Price and adjusted number of
Shares issuable upon exercise of each Warrant, and, if requested,
information describing the transactions giving rise to such
adjustments, to be mailed to the Holders at their last addresses
appearing in the Warrant Register, and shall cause a certified
copy thereof to be mailed to its transfer agent, if any. The
Company may retain a firm of independent certified public
accountants selected by the Board of Directors (who may be the
regular accountants employed by the Company) to make any
computation required by this Section (f), and a
-6-
<PAGE>
certificate signed by such firm shall be conclusive evidence of
the correctness of such adjustment.
g. In the event that at any time, as a result of an adjustment
made pursuant to Subsection (i) above, the Holder of this Warrant
thereafter shall become entitled to receive any shares of the
Company, other than Common Stock, thereafter the number of such
other shares so receivable upon exercise of this Warrant shall be
subject to adjustment from time to time in a manner and on terms
as nearly equivalent as practicable to the provisions with
respect to the Common Stock contained in Subsections (i) to (vi),
inclusive above.
h. Irrespective of any adjustments in the Exercise Price or the
number or kind of shares purchasable upon exercise of this
Warrant, Warrants theretofore or thereafter issued may continue
to express the same price and number and kind of shares as are
stated in the similar Warrants initially issuable pursuant to the
Agreement.
7. OFFICER'S CERTIFICATE. Whenever the Exercise Price shall be
adjusted as required by the provisions of the foregoing Section, the
Company shall forthwith file in the custody of its Secretary or an
Assistant Secretary at its principal office and with its stock
transfer agent, if any, an officer's certificate showing the adjusted
Exercise Price determined as herein provided, setting forth in
reasonable detail the facts requiring such adjustment, including a
statement of the number of additional shares of Common Stock, if any,
and such other facts as shall be necessary to show the reason for and
the manner of computing such adjustment. Each such officer's
certificate shall be made available at all reasonable times for
inspection by the holder or any holder of a Warrant executed and
delivered pursuant to Section (a) and the Company shall, forthwith
after each such adjustment, mail a copy by certified mail of such
certificate to the Holder or any such holder.
8. NOTICES TO WARRANT HOLDERS. So long as this Warrant shall be
outstanding, (i) if the Company shall pay any dividend or make any
distribution upon the Common Stock or (ii) if the Company shall offer
to the Holders of Common Stock for subscription or purchase by them
any share of any class or any other rights or (iii) if any capital
reorganization of the Company, reclassification of the capital stock
of the Company, consolidation or merger of the Company with or into
another corporation, sale, lease or transfer of all or substantially
all of the property and assets of the Company to another corporation,
or voluntary or involuntary dissolution, liquidation or winding up of
the Company shall be effected, then in any such case, the Company
shall cause to be mailed by certified mail to the Holder, at least
fifteen days prior to the date specified in (x) or (y) below, as the
case may be, a notice containing a brief description of the proposed
-7-
<PAGE>
action and stating the date on which (x) a record is to be taken for
the purpose of such dividend, distribution or rights, or (y) such
reclassification, reorganization, consolidation, merger, conveyance,
lease, dissolution, liquidation or winding up is to take place and the
date, if any is to be fixed, as of which the Holders of Common Stock
or other securities shall receive cash or other property deliverable
upon such reclassification, reorganization, consolidation, merger,
conveyance, dissolution, liquidation or winding up.
9. RECLASSIFICATION, REORGANIZATION OR MERGER. In case of any
reclassification, capital reorganization or other change of
outstanding shares of Common Stock of the Company, or in case of any
consolidation or merger of the Company with or into another
corporation (other than a merger with a subsidiary in which merger the
Company is the continuing corporation and which does not result in any
reclassification, capital reorganization or other change of
outstanding shares of Common Stock of the class issuable upon exercise
of this Warrant) or in case of any sale, lease or conveyance to
another corporation of the property of the Company as an entirety, the
Company shall, as a condition precedent to such transaction, cause
effective provisions to be made so that the Holder shall have the
right thereafter by exercising this Warrant at any time prior to the
expiration of the Warrant, to purchase the kind and amount of shares
of stock and other securities and property receivable upon such
reclassification, capital reorganization and other change,
consolidation, merger, sale or conveyance by a holder of the number of
shares of Common Stock which might have been purchased upon exercise
of this Warrant immediately prior to such reclassification, change,
consolidation, merger, sale or conveyance. Any such provision shall
include provision for adjustments which shall be as nearly equivalent
as may be practicable to the adjustments provided for in this Warrant.
The foregoing provisions of this Section (i) shall similarly apply to
successive reclassifications, capital reorganizations and changes of
shares of Common Stock and to successive consolidations, mergers,
sales or conveyances. In the event that in connection with any such
capital reorganization or reclassification, consolidation, merger,
sale or conveyance, additional shares of Common Stock shall be issued
in exchange, conversion, substitution or payment, in whole or in part,
for a security of the Company other than Common Stock, any such issue
shall be treated as an issue of Common Stock covered by the provisions
of Subsection (i) of Section (f)hereof.
-8-
<PAGE>
3-DIMENSIONAL PHARMACEUTICALS, INC.
By /s/ David C. U'Prichard
________________________________
Name: David C. U'Prichard
Title: Chief Executive Officer
[SEAL]
Dated: November 18, 1999
Attest:
/s/ Scott M. Horvitz
_____________________________
Secretary
-9-
<PAGE>
PURCHASE FORM
-------------
Dated __________, ____
The undersigned hereby irrevocably elects to exercise the within Warrant to
the extent of purchasing _________ shares of Common Stock and hereby makes
payment of in payment of the actual exercise price thereof
---------
INSTRUCTIONS FOR REGISTRATION OF STOCK
--------------------------------------
Name __________________________________
(Please typewrite or print in block letters)
Address __________________________________________________
Signature ________________________________________________
---------
ASSIGNMENT FORM
---------------
FOR VALUE RECEIVED, __________________________ hereby sells, assigns and
transfers unto
Name _____________________________________________________
(Please typewrite or print in block letters)
Address __________________________________________________
the right to purchase Common Stock represented by this Warrant to the extent of
_____ shares as to which such right is exercisable and does hereby irrevocably
constitute and appoint ____________________ Attorney, to transfer the same on
the books of the Company with full power of substitution in the premises.
Date _____________, _____
Signature _________________________
-10-
<PAGE>
Exhibit 10.8
Warrant to Purchase 1,050,000 Shares of Common Stock or
such additional shares as this Warrant may entitle the holder
to purchase pursuant to provisions of this Warrant.
WARRANT TO PURCHASE COMMON STOCK
OF
3-DIMENSIONAL PHARMACEUTICALS, INC.
This is to Certify That, FOR VALUE RECEIVED, Rho Management Trust II
or assigns ("Holder") is entitled to purchase, subject to the provisions of this
Warrant, from 3-Dimensional Pharmaceuticals, Inc., a Delaware corporation (the
"Company"), 1,050,000 fully paid, validly issued and nonassessable shares of
Common Stock, par value $.001 per share, of the Company ("Common Stock") at a
price of $1.25 per share during the Exercise Period (as defined below). The
number of shares of Common Stock to be received upon the exercise of this
Warrant and the price to be paid for each share of Common Stock may be adjusted
from time to time as hereinafter set forth. The shares of Common Stock
deliverable upon such exercise, and as adjusted from time to time, are
hereinafter sometimes referred to as "Warrant Shares" and the exercise price of
a share of Common Stock in effect at any time and as adjusted from time to time
is hereinafter sometimes referred to as the "Exercise Price." This Warrant is
being issued in connection with the issuance by the Company of Warrants to
purchase shares of Common Stock and promissory notes in the aggregate principal
amount of up to $10,000,000 (the "Notes"), pursuant to a Note and Warrant
Purchase Agreement dated as of November 18, 1999 (the "Agreement").
1. EXERCISE OF WARRANT.
a. This Warrant may be exercised in whole or in part at any
time or from time to time on or after November 18, 1999 until 5
p.m. New York City Time on November 18, 2000 (the "Exercise
Period"); provided, however, that if such day is a day on which
banking institutions in the State of New York are authorized by
law to close, then on the next succeeding day which shall not be
such a day. This Warrant may be exercised by presentation and
surrender hereof to the Company at its principal office, or at
the office of its stock transfer agent, if any, with the Purchase
Form annexed hereto duly executed and accompanied by payment of
the Exercise Price for the number of Warrant Shares specified
<PAGE>
in such form. As soon as practicable after each such exercise of
the Warrants, but not later than seven (7) days from the date of
such exercise, the Company shall issue and deliver to the Holder
a certificate or certificates for the Warrant Shares issuable
upon such exercise, registered in the name of the Holder or its
designee. If this Warrant should be exercised in part only, the
Company shall, upon surrender of this Warrant for cancellation,
execute and deliver a new Warrant evidencing the rights of the
Holder thereof to purchase the balance of the Warrant Shares
purchasable thereunder. Upon receipt by the Company of this
Warrant at its office, or by the stock transfer agent of the
Company at its office, in proper form for exercise, the Holder
shall be deemed to be the holder of record of the shares of
Common Stock issuable upon such exercise, notwithstanding that
the stock transfer books of the Company shall then be closed or
that certificates representing such shares of Common Stock shall
not then be physically delivered to the Holder.
b. At any time during the Exercise Period, the Holder may, at its
option, exchange this Warrant, in whole or in part (a "Warrant
Exchange") into the number of Warrant Shares determined in
accordance with this Section (a)(ii), by surrendering this
Warrant at the principal office of the Company or at the office
of its stock transfer agent, accompanied by a notice stating such
Holder's intent to effect such exchange, the number of Warrant
Shares to be exchanged and the date on which the Holder requests
that such Warrant Exchange occur (the "Notice of Exchange"). The
Warrant Exchange shall take place on the date specified in the
Notice of Exchange or, if later, the date the Notice of Exchange
is received by the Company (the "Exchange Date"). Certificates
for the shares issuable upon such Warrant Exchange and, if
applicable, a new warrant of like tenor evidencing the balance of
the shares remaining subject to this Warrant, shall be issued as
of the Exchange Date and delivered to the Holder within seven (7)
days following the Exchange Date. In connection with any Warrant
Exchange, this Warrant shall represent the right to subscribe for
and acquire the number of Warrant Shares (rounded to the next
highest integer) equal to (i) the number of Warrant Shares
specified by the Holder in its Notice of Exchange (the "Total
Number") less (ii) the number of Warrant Shares equal to the
quotient obtained by dividing (A) the product of the Total Number
and the existing Exercise Price by (B) the Fair Market Value.
"Fair Market Value" shall mean: (1) if the Common Stock is listed
on a National Securities Exchange or admitted to unlisted trading
privileges on such exchange or listed for trading on the NASDAQ
system, the average of the last reported sale prices of the
Common Stock on such exchange or system for the twenty (20)
business days ending on the last business day prior to the date
for which the determination is being made; or (2) if the
<PAGE>
Common Stock is not so listed or admitted to unlisted trading
privileges, the average of the means of the last reported bid and
asked prices reported by the National Quotation Bureau, Inc. for
the twenty (20) business days ending on the last business day
prior to the date for which the determination is being made; or
(3) if the Common Stock is not so listed or admitted to unlisted
trading privileges and bid and asked prices are not so reported,
an amount, not less than book value thereof as at the end of the
most recent fiscal year of the Company ending prior to the
Exchange Date, determined in such reasonable manner as may be
prescribed by the Board of Directors of the Company.
2. RESERVATION OF SHARES. The Company shall at all times reserve for
issuance and/or delivery upon exercise of this Warrant such number of
shares of its Common Stock as shall be required for issuance and
delivery upon exercise of the Warrants.
3. FRACTIONAL SHARES. No fractional shares or script representing
fractional shares shall be issued upon the exercise of this Warrant.
With respect to any fraction of a share called for upon any exercise
hereof, the Company shall pay to the Holder an amount in cash equal to
such fraction multiplied by the Fair Market Value of a share.
4. EXCHANGE, TRANSFER, ASSIGNMENT OR LOSS OF WARRANT.
(i) This Warrant is exchangeable, without expense, at the option
of the Holder, upon presentation and surrender hereof to the
Company or at the office of its stock transfer agent, if any, for
other warrants of different denominations entitling the holder
thereof to purchase in the aggregate the same number of shares of
Common Stock purchasable hereunder. Subject to the restrictions
set forth in subparagraph (ii) below, upon surrender of this
Warrant to the Company at its principal office or at the office
of its stock transfer agent, if any, with the Assignment Form
annexed hereto duly executed and funds sufficient to pay any
transfer tax, the Company shall, without charge, execute and
deliver a new Warrant in the name of the assignee named in such
instrument of assignment and this Warrant shall promptly be
canceled. This Warrant may be divided or combined with other
warrants which carry the same rights upon presentation hereof at
the principal office of the Company or at the office of its stock
transfer agent, if any, together with a written notice specifying
the names and denominations in which new Warrants are to be
issued and signed by the Holder hereof. The term "Warrant" as
used herein includes any Warrants into which this Warrant may be
divided or exchanged. Upon receipt by the Company of evidence
satisfactory to it of the loss, theft, destruction or mutilation
of this Warrant, and (in the case of loss, theft or destruction)
of
<PAGE>
reasonably satisfactory indemnification, and upon surrender and
cancellation of this Warrant, if mutilated, the Company will
execute and deliver a new Warrant of like tenor and date. Any
such new Warrant executed and delivered shall constitute an
additional contractual obligation on the part of the Company,
whether or not this Warrant so lost, stolen, destroyed, or
mutilated shall be at any time enforceable by anyone.
(ii) This Warrant and the shares of Common Stock issuable upon
exercise hereof have not been registered under the Securities Act
of 1933, as amended, or state securities laws by reason of an
exemption therefrom. The shares of Common Stock issuable upon
exercise of this Warrant are not transferable except as provided
in the Agreement and the Stockholders' Agreement dated as of
January 6, 1998, as amended from time to time ("Stockholders"
Agreement"). Shares of Common Stock issuable upon exercise of
this Warrant will bear an appropriate legend to this effect. The
restrictions contained herein shall be binding on any transferee
of the Common Stock issuable upon exercise of this Warrant and
the Company may require any such transferee to execute an
instrument agreeing in writing to be bound by these restrictions
as a condition to transfer.
5. RIGHTS OF THE HOLDER. The Holder shall not, by virtue hereof, be
entitled to any rights of a shareholder in the Company, either at law
or equity, and the rights of the Holder are limited to those expressed
in the Warrant and are not enforceable against the Company except to
the extent set forth herein.
6. ANTI-DILUTION PROVISIONS. The Exercise Price in effect at any
time and the number and kind of securities purchasable upon the
exercise of the Warrants shall be subject to adjustment from time to
time upon the happening of certain events as follows:
a. In case the Company shall (i) declare a dividend or make a
distribution on its outstanding shares of Common Stock in shares
of Common Stock, (ii) subdivide or reclassify its outstanding
shares of Common Stock into a greater number of shares, or (iii)
combine or reclassify its outstanding shares of Common Stock into
a smaller number of shares, the Exercise Price in effect at the
time of the record date for such dividend or distribution or of
the effective date of such subdivision, combination or
reclassification shall be adjusted so that it shall equal the
price determined by multiplying the Exercise Price by a fraction,
the denominator of which shall be the number of shares of Common
Stock outstanding after giving effect to such action, and the
numerator of which shall be the number of shares of Common Stock
outstanding immediately
<PAGE>
prior to such action. Such adjustment shall be made successively
whenever any event listed above shall occur.
b. In case the Company shall fix a record date for the issuance
of rights or warrants to all holders of its Common Stock
entitling them to subscribe for or purchase shares of Common
Stock (or securities convertible into Common Stock) at a price
(the "Subscription Price") (or having a conversion price per
share) less than the Exercise Price on the record date mentioned
below, the Exercise Price shall be adjusted so that the same
shall equal the price determined by multiplying the Exercise
Price in effect immediately prior to the date of issuance by a
fraction, the numerator of which shall be the sum of the number
of shares outstanding on the record date mentioned below and the
number of additional shares of Common Stock which the aggregate
offering price of the total number of shares of Common Stock so
offered (or the aggregate conversion price of the convertible
securities so offered) would purchase at the Exercise Price in
effect immediately prior to the date of such issuance, and the
denominator of which shall be the sum of the number of shares of
Common Stock outstanding on the record date mentioned below and
the number of additional shares of Common Stock offered for
subscription or purchase (or into which the convertible
securities so offered are convertible). Such adjustment shall be
made successively whenever such rights or warrants are issued and
shall become effective immediately after the record date for the
determination of shareholders entitled to receive such rights or
warrants; and to the extent that shares of Common Stock are not
delivered (or securities convertible into Common Stock are not
delivered) after the expiration of such rights or warrants the
Exercise Price shall be readjusted to the Exercise Price which
would then be in effect had the adjustments made upon the
issuance of such rights or warrants been made upon the basis of
delivery of only the number of shares of Common Stock (or
securities convertible into Common Stock) actually delivered.
c. In case the Company shall hereafter distribute to the
holders of its Common Stock evidences of its indebtedness or
assets (excluding cash dividends or distributions and dividends
or distributions referred to in Subsection (i) above) or
subscription rights or warrants (excluding those referred to in
Subsection (ii) above), then in each such case the Exercise Price
in effect thereafter shall be determined by multiplying the
Exercise Price in effect immediately prior thereto by a fraction,
the numerator of which shall be the total number of shares
<PAGE>
of Common Stock outstanding multiplied by the Fair Market Value
per share of Common Stock, less the fair market value (as
determined by the Company's Board of Directors) of said assets or
evidences of indebtedness so distributed or of such rights or
warrants, and the denominator of which shall be the total number
of shares of Common Stock outstanding multiplied by the Fair
Market Value per share of Common Stock. Such adjustment shall be
made successively whenever such a record date is fixed. Such
adjustment shall be made whenever any such distribution is made
and shall become effective immediately after the record date for
the determination of shareholders entitled to receive such
distribution.
d. Whenever the Exercise Price payable upon exercise of
each Warrant is adjusted pursuant to Subsections (i), (ii) or
(iii) above, the number of Shares purchasable upon exercise of
this Warrant shall simultaneously be adjusted by multiplying the
number of Shares initially issuable upon exercise of this Warrant
by the Exercise Price in effect on the date hereof and dividing
the product so obtained by the Exercise Price, as adjusted.
e. No adjustment in the Exercise Price shall be required
unless such adjustment would require an increase or decrease of
at least 5% in such price; provided, however, that any
adjustments which by reason of this Subsection (v) are not
required to be made shall be carried forward and taken into
account in any subsequent adjustment required to be made
hereunder. All calculations under this Section (f) shall be made
to the nearest cent or to the nearest one-hundredth of a share,
as the case may be. Anything in this Section (f) to the contrary
notwithstanding, the Company shall be entitled, but shall not be
required, to make such changes in the Exercise Price, in addition
to those required by this Section (f), as it shall determine, in
its sole discretion, to be advisable in order that any dividend
or distribution in shares of Common Stock, or any subdivision,
reclassification or combination of Common Stock, hereafter made
by the Company shall not result in any Federal Income tax
liability to the holders of Common Stock or securities
convertible into Common Stock (including Warrants).
f. Whenever the Exercise Price is adjusted, as herein
provided, the Company shall promptly but no later than 10 days
after any request for such an adjustment by the Holder, cause a
notice setting forth the adjusted Exercise Price and adjusted
number of Shares issuable upon exercise of each Warrant, and, if
requested, information describing the transactions giving rise to
such adjustments, to be mailed to the Holders at their last
addresses appearing in the Warrant Register, and shall cause a
certified copy thereof to be mailed to its transfer agent, if
any. The Company may retain a firm of independent certified
public accountants selected by the Board of Directors (who may be
the regular accountants employed by the Company) to make any
computation required by this Section (f), and a
<PAGE>
certificate signed by such firm shall be conclusive evidence of
the correctness of such adjustment.
g. In the event that at any time, as a result of an
adjustment made pursuant to Subsection (i) above, the Holder of
this Warrant thereafter shall become entitled to receive any
shares of the Company, other than Common Stock, thereafter the
number of such other shares so receivable upon exercise of this
Warrant shall be subject to adjustment from time to time in a
manner and on terms as nearly equivalent as practicable to the
provisions with respect to the Common Stock contained in
Subsections (i) to (vi), inclusive above.
h. Irrespective of any adjustments in the Exercise Price or the
number or kind of shares purchasable upon exercise of this
Warrant, Warrants theretofore or thereafter issued may continue
to express the same price and number and kind of shares as are
stated in the similar Warrants initially issuable pursuant to the
Agreement.
7. OFFICER'S CERTIFICATE. Whenever the Exercise Price shall be
adjusted as required by the provisions of the foregoing Section, the
Company shall forthwith file in the custody of its Secretary or an
Assistant Secretary at its principal office and with its stock
transfer agent, if any, an officer's certificate showing the adjusted
Exercise Price determined as herein provided, setting forth in
reasonable detail the facts requiring such adjustment, including a
statement of the number of additional shares of Common Stock, if any,
and such other facts as shall be necessary to show the reason for and
the manner of computing such adjustment. Each such officer's
certificate shall be made available at all reasonable times for
inspection by the holder or any holder of a Warrant executed and
delivered pursuant to Section (a) and the Company shall, forthwith
after each such adjustment, mail a copy by certified mail of such
certificate to the Holder or any such holder.
8. NOTICES TO WARRANT HOLDERS. So long as this Warrant shall be
outstanding, (i) if the Company shall pay any dividend or make any
distribution upon the Common Stock or (ii) if the Company shall offer
to the Holders of Common Stock for subscription or purchase by them
any share of any class or any other rights or (iii) if any capital
reorganization of the Company, reclassification of the capital stock
of the Company, consolidation or merger of the Company with or into
another corporation, sale, lease or transfer of all or substantially
all of the property and assets of the Company to another corporation,
or voluntary or involuntary dissolution, liquidation or winding up of
the Company shall be effected, then in any such case, the Company
shall cause to be mailed by certified mail to the Holder, at least
fifteen days prior to the date specified in (x) or (y) below, as the
case may be, a notice containing a brief description of the proposed
<PAGE>
action and stating the date on which (x) a record is to be taken for
the purpose of such dividend, distribution or rights, or (y) such
reclassification, reorganization, consolidation, merger, conveyance,
lease, dissolution, liquidation or winding up is to take place and the
date, if any is to be fixed, as of which the Holders of Common Stock
or other securities shall receive cash or other property deliverable
upon such reclassification, reorganization, consolidation, merger,
conveyance, dissolution, liquidation or winding up.
9. RECLASSIFICATION, REORGANIZATION OR MERGER. In case of any
reclassification, capital reorganization or other change of
outstanding shares of Common Stock of the Company, or in case of any
consolidation or merger of the Company with or into another
corporation (other than a merger with a subsidiary in which merger the
Company is the continuing corporation and which does not result in any
reclassification, capital reorganization or other change of
outstanding shares of Common Stock of the class issuable upon exercise
of this Warrant) or in case of any sale, lease or conveyance to
another corporation of the property of the Company as an entirety, the
Company shall, as a condition precedent to such transaction, cause
effective provisions to be made so that the Holder shall have the
right thereafter by exercising this Warrant at any time prior to the
expiration of the Warrant, to purchase the kind and amount of shares
of stock and other securities and property receivable upon such
reclassification, capital reorganization and other change,
consolidation, merger, sale or conveyance by a holder of the number of
shares of Common Stock which might have been purchased upon exercise
of this Warrant immediately prior to such reclassification, change,
consolidation, merger, sale or conveyance. Any such provision shall
include provision for adjustments which shall be as nearly equivalent
as may be practicable to the adjustments provided for in this Warrant.
The foregoing provisions of this Section (i) shall similarly apply to
successive reclassifications, capital reorganizations and changes of
shares of Common Stock and to successive consolidations, mergers,
sales or conveyances. In the event that in connection with any such
capital reorganization or reclassification, consolidation, merger,
sale or conveyance, additional shares of Common Stock shall be issued
in exchange, conversion, substitution or payment, in whole or in part,
for a security of the Company other than Common Stock, any such issue
shall be treated as an issue of Common Stock covered by the provisions
of Subsection (i) of Section (f)hereof.
<PAGE>
3-DIMENSIONAL PHARMACEUTICALS, INC.
By /s/ David C. U'Prichard
_____________________________________
Name: David C. U'Prichard
Title: Chief Executive Officer
[SEAL]
Dated: November 18, 1999
Attest:
/s/ Scott M. Horvitz
_____________________________
Secretary
<PAGE>
PURCHASE FORM
-------------
Dated _____________,____
The undersigned hereby irrevocably elects to exercise the within Warrant to
the extent of purchasing _________ shares of Common Stock and hereby makes
payment of in payment of the actual exercise price thereof
---------
INSTRUCTIONS FOR REGISTRATION OF STOCK
--------------------------------------
Name _____________________________________________
(Please typewrite or print in block letters)
Address __________________________________________
Signature_________________________________________
---------
ASSIGNMENT FORM
---------------
FOR VALUE RECEIVED, __________________________ hereby sells, assigns and
transfers unto
Name _____________________________________________________
(Please typewrite or print in block letters)
Address __________________________________________________
the right to purchase Common Stock represented by this Warrant to the extent of
_____ shares as to which such right is exercisable and does hereby irrevocably
constitute and appoint ____________________ Attorney, to transfer the same on
the books of the Company with full power of substitution in the premises.
Date _____________, _____
Signature ____________________________
<PAGE>
Exhibit 10.9
Warrant to Purchase 89,797 Shares of Common Stock or
such additional shares as this Warrant may entitle the holder
to purchase pursuant to provisions of this Warrant.
WARRANT TO PURCHASE COMMON STOCK
OF
3-DIMENSIONAL PHARMACEUTICALS, INC.
This is to Certify That, FOR VALUE RECEIVED, Aetna Life Insurance
Company or assigns ("Holder") is entitled to purchase, subject to the provisions
of this Warrant, from 3-Dimensional Pharmaceuticals, Inc., a Delaware
corporation (the "Company"), 89,797 fully paid, validly issued and nonassessable
shares of Common Stock, par value $.001 per share, of the Company ("Common
Stock") at a price of $1.25 per share during the Exercise Period (as defined
below). The number of shares of Common Stock to be received upon the exercise of
this Warrant and the price to be paid for each share of Common Stock may be
adjusted from time to time as hereinafter set forth. The shares of Common Stock
deliverable upon such exercise, and as adjusted from time to time, are
hereinafter sometimes referred to as "Warrant Shares" and the exercise price of
a share of Common Stock in effect at any time and as adjusted from time to time
is hereinafter sometimes referred to as the "Exercise Price." This Warrant is
being issued in connection with the issuance by the Company of Warrants to
purchase shares of Common Stock and promissory notes in the aggregate principal
amount of up to $10,000,000 (the "Notes"), pursuant to a Note and Warrant
Purchase Agreement dated as of November 18, 1999 (the "Agreement").
1. EXERCISE OF WARRANT.
a. This Warrant may be exercised in whole or in part at any time
or from time to time on or after November 18, 1999 until 5 p.m.
New York City Time on November 18, 2000 (the "Exercise Period");
provided, however, that if such day is a day on which banking
institutions in the State of New York are authorized by law to
close, then on the next succeeding day which shall not be such a
day. This Warrant may be exercised by presentation and surrender
hereof to the Company at its principal office, or at the office of
its stock transfer agent, if any, with the Purchase Form annexed
hereto duly executed and accompanied by payment of the Exercise
Price for the number of Warrant Shares specified
<PAGE>
in such form. As soon as practicable after each such exercise of
the Warrants, but not later than seven (7) days from the date of
such exercise, the Company shall issue and deliver to the Holder a
certificate or certificates for the Warrant Shares issuable upon
such exercise, registered in the name of the Holder or its
designee. If this Warrant should be exercised in part only, the
Company shall, upon surrender of this Warrant for cancellation,
execute and deliver a new Warrant evidencing the rights of the
Holder thereof to purchase the balance of the Warrant Shares
purchasable thereunder. Upon receipt by the Company of this
Warrant at its office, or by the stock transfer agent of the
Company at its office, in proper form for exercise, the Holder
shall be deemed to be the holder of record of the shares of Common
Stock issuable upon such exercise, notwithstanding that the stock
transfer books of the Company shall then be closed or that
certificates representing such shares of Common Stock shall not
then be physically delivered to the Holder.
b. At any time during the Exercise Period, the Holder may, at
its option, exchange this Warrant, in whole or in part (a "Warrant
Exchange") into the number of Warrant Shares determined in
accordance with this Section (a)(ii), by surrendering this Warrant
at the principal office of the Company or at the office of its
stock transfer agent, accompanied by a notice stating such
Holder's intent to effect such exchange, the number of Warrant
Shares to be exchanged and the date on which the Holder requests
that such Warrant Exchange occur (the "Notice of Exchange"). The
Warrant Exchange shall take place on the date specified in the
Notice of Exchange or, if later, the date the Notice of Exchange
is received by the Company (the "Exchange Date"). Certificates for
the shares issuable upon such Warrant Exchange and, if applicable,
a new warrant of like tenor evidencing the balance of the shares
remaining subject to this Warrant, shall be issued as of the
Exchange Date and delivered to the Holder within seven (7) days
following the Exchange Date. In connection with any Warrant
Exchange, this Warrant shall represent the right to subscribe for
and acquire the number of Warrant Shares (rounded to the next
highest integer) equal to (i) the number of Warrant Shares
specified by the Holder in its Notice of Exchange (the "Total
Number") less (ii) the number of Warrant Shares equal to the
quotient obtained by dividing (A) the product of the Total Number
and the existing Exercise Price by (B) the Fair Market Value.
"Fair Market Value" shall mean: (1) if the Common Stock is listed
on a National Securities Exchange or admitted to unlisted trading
privileges on such exchange or listed for trading on the NASDAQ
system, the average of the last reported sale prices of the Common
Stock on such exchange or system for the twenty (20) business days
ending on the last business day prior to the date for which the
determination is being made; or (2) if the
<PAGE>
Common Stock is not so listed or admitted to unlisted trading
privileges, the average of the means of the last reported bid and
asked prices reported by the National Quotation Bureau, Inc. for
the twenty (20) business days ending on the last business day
prior to the date for which the determination is being made; or
(3) if the Common Stock is not so listed or admitted to unlisted
trading privileges and bid and asked prices are not so reported,
an amount, not less than book value thereof as at the end of the
most recent fiscal year of the Company ending prior to the
Exchange Date, determined in such reasonable manner as may be
prescribed by the Board of Directors of the Company.
2. RESERVATION OF SHARES. The Company shall at all times reserve for
issuance and/or delivery upon exercise of this Warrant such number of
shares of its Common Stock as shall be required for issuance and
delivery upon exercise of the Warrants.
3. FRACTIONAL SHARES. No fractional shares or script representing
fractional shares shall be issued upon the exercise of this Warrant.
With respect to any fraction of a share called for upon any exercise
hereof, the Company shall pay to the Holder an amount in cash equal to
such fraction multiplied by the Fair Market Value of a share.
4. EXCHANGE, TRANSFER, ASSIGNMENT OR LOSS OF WARRANT.
(i) This Warrant is exchangeable, without expense, at the option
of the Holder, upon presentation and surrender hereof to the
Company or at the office of its stock transfer agent, if any, for
other warrants of different denominations entitling the holder
thereof to purchase in the aggregate the same number of shares of
Common Stock purchasable hereunder. Subject to the restrictions
set forth in subparagraph (ii) below, upon surrender of this
Warrant to the Company at its principal office or at the office of
its stock transfer agent, if any, with the Assignment Form annexed
hereto duly executed and funds sufficient to pay any transfer tax,
the Company shall, without charge, execute and deliver a new
Warrant in the name of the assignee named in such instrument of
assignment and this Warrant shall promptly be canceled. This
Warrant may be divided or combined with other warrants which carry
the same rights upon presentation hereof at the principal office
of the Company or at the office of its stock transfer agent, if
any, together with a written notice specifying the names and
denominations in which new Warrants are to be issued and signed by
the Holder hereof. The term "Warrant" as used herein includes any
Warrants into which this Warrant may be divided or exchanged. Upon
receipt by the Company of evidence satisfactory to it of the loss,
theft, destruction or mutilation of this Warrant, and (in the case
of loss, theft or destruction) of
<PAGE>
reasonably satisfactory indemnification, and upon surrender and
cancellation of this Warrant, if mutilated, the Company will
execute and deliver a new Warrant of like tenor and date. Any such
new Warrant executed and delivered shall constitute an additional
contractual obligation on the part of the Company, whether or not
this Warrant so lost, stolen, destroyed, or mutilated shall be at
any time enforceable by anyone.
(ii) This Warrant and the shares of Common Stock issuable upon
exercise hereof have not been registered under the Securities Act
of 1933, as amended, or state securities laws by reason of an
exemption therefrom. The shares of Common Stock issuable upon
exercise of this Warrant are not transferable except as provided
in the Agreement and the Stockholders' Agreement dated as of
January 6, 1998, as amended from time to time ("Stockholders'
Agreement"). Shares of Common Stock issuable upon exercise of this
Warrant will bear an appropriate legend to this effect. The
restrictions contained herein shall be binding on any transferee
of the Common Stock issuable upon exercise of this Warrant and the
Company may require any such transferee to execute an instrument
agreeing in writing to be bound by these restrictions as a
condition to transfer.
5. RIGHTS OF THE HOLDER. The Holder shall not, by virtue hereof, be
entitled to any rights of a shareholder in the Company, either at law
or equity, and the rights of the Holder are limited to those expressed
in the Warrant and are not enforceable against the Company except to
the extent set forth herein.
6. ANTI-DILUTION PROVISIONS. The Exercise Price in effect at any time
and the number and kind of securities purchasable upon the exercise of
the Warrants shall be subject to adjustment from time to time upon the
happening of certain events as follows:
a. In case the Company shall (i) declare a dividend or make a
distribution on its outstanding shares of Common Stock in shares
of Common Stock, (ii) subdivide or reclassify its outstanding
shares of Common Stock into a greater number of shares, or (iii)
combine or reclassify its outstanding shares of Common Stock into
a smaller number of shares, the Exercise Price in effect at the
time of the record date for such dividend or distribution or of
the effective date of such subdivision, combination or
reclassification shall be adjusted so that it shall equal the
price determined by multiplying the Exercise Price by a fraction,
the denominator of which shall be the number of shares of Common
Stock outstanding after giving effect to such action, and the
numerator of which shall be the number of shares of Common Stock
outstanding immediately
<PAGE>
prior to such action. Such adjustment shall be made successively
whenever any event listed above shall occur.
b. In case the Company shall fix a record date for the issuance
of rights or warrants to all holders of its Common Stock entitling
them to subscribe for or purchase shares of Common Stock (or
securities convertible into Common Stock) at a price (the
"Subscription Price") (or having a conversion price per share)
less than the Exercise Price on the record date mentioned below,
the Exercise Price shall be adjusted so that the same shall equal
the price determined by multiplying the Exercise Price in effect
immediately prior to the date of issuance by a fraction, the
numerator of which shall be the sum of the number of shares
outstanding on the record date mentioned below and the number of
additional shares of Common Stock which the aggregate offering
price of the total number of shares of Common Stock so offered (or
the aggregate conversion price of the convertible securities so
offered) would purchase at the Exercise Price in effect
immediately prior to the date of such issuance, and the
denominator of which shall be the sum of the number of shares of
Common Stock outstanding on the record date mentioned below and
the number of additional shares of Common Stock offered for
subscription or purchase (or into which the convertible securities
so offered are convertible). Such adjustment shall be made
successively whenever such rights or warrants are issued and shall
become effective immediately after the record date for the
determination of shareholders entitled to receive such rights or
warrants; and to the extent that shares of Common Stock are not
delivered (or securities convertible into Common Stock are not
delivered) after the expiration of such rights or warrants the
Exercise Price shall be readjusted to the Exercise Price which
would then be in effect had the adjustments made upon the issuance
of such rights or warrants been made upon the basis of delivery of
only the number of shares of Common Stock (or securities
convertible into Common Stock) actually delivered.
c. In case the Company shall hereafter distribute to the holders
of its Common Stock evidences of its indebtedness or assets
(excluding cash dividends or distributions and dividends or
distributions referred to in Subsection (i) above) or subscription
rights or warrants (excluding those referred to in Subsection (ii)
above), then in each such case the Exercise Price in effect
thereafter shall be determined by multiplying the Exercise Price
in effect immediately prior thereto by a fraction, the numerator
of which shall be the total number of shares of Common Stock
outstanding multiplied by the Fair Market Value per share of
Common Stock, less the fair market value (as determined by the
Company's Board of Directors) of said assets or evidences of
indebtedness so distributed or of such rights or warrants, and the
denominator of which shall be the total number of shares
<PAGE>
of Common Stock outstanding multiplied by the Fair Market Value
per share of Common Stock. Such adjustment shall be made
successively whenever such a record date is fixed. Such adjustment
shall be made whenever any such distribution is made and shall
become effective immediately after the record date for the
determination of shareholders entitled to receive such
distribution.
d. Whenever the Exercise Price payable upon exercise of each
Warrant is adjusted pursuant to Subsections (i), (ii) or (iii)
above, the number of Shares purchasable upon exercise of this
Warrant shall simultaneously be adjusted by multiplying the number
of Shares initially issuable upon exercise of this Warrant by the
Exercise Price in effect on the date hereof and dividing the
product so obtained by the Exercise Price, as adjusted.
e. No adjustment in the Exercise Price shall be required unless
such adjustment would require an increase or decrease of at least
5% in such price; provided, however, that any adjustments which by
reason of this Subsection (v) are not required to be made shall be
carried forward and taken into account in any subsequent
adjustment required to be made hereunder. All calculations under
this Section (f) shall be made to the nearest cent or to the
nearest one-hundredth of a share, as the case may be. Anything in
this Section (f) to the contrary notwithstanding, the Company
shall be entitled, but shall not be required, to make such changes
in the Exercise Price, in addition to those required by this
Section (f), as it shall determine, in its sole discretion, to be
advisable in order that any dividend or distribution in shares of
Common Stock, or any subdivision, reclassification or combination
of Common Stock, hereafter made by the Company shall not result in
any Federal Income tax liability to the holders of Common Stock or
securities convertible into Common Stock (including Warrants).
f. Whenever the Exercise Price is adjusted, as herein provided,
the Company shall promptly but no later than 10 days after any
request for such an adjustment by the Holder, cause a notice
setting forth the adjusted Exercise Price and adjusted number of
Shares issuable upon exercise of each Warrant, and, if requested,
information describing the transactions giving rise to such
adjustments, to be mailed to the Holders at their last addresses
appearing in the Warrant Register, and shall cause a certified
copy thereof to be mailed to its transfer agent, if any. The
Company may retain a firm of independent certified public
accountants selected by the Board of Directors (who may be the
regular accountants employed by the Company) to make any
computation required by this Section (f), and a
<PAGE>
certificate signed by such firm shall be conclusive evidence of
the correctness of such adjustment.
g. In the event that at any time, as a result of an adjustment
made pursuant to Subsection (i) above, the Holder of this Warrant
thereafter shall become entitled to receive any shares of the
Company, other than Common Stock, thereafter the number of such
other shares so receivable upon exercise of this Warrant shall be
subject to adjustment from time to time in a manner and on terms
as nearly equivalent as practicable to the provisions with respect
to the Common Stock contained in Subsections (i) to (vi),
inclusive above.
h. Irrespective of any adjustments in the Exercise Price or the
number or kind of shares purchasable upon exercise of this
Warrant, Warrants theretofore or thereafter issued may continue to
express the same price and number and kind of shares as are stated
in the similar Warrants initially issuable pursuant to the
Agreement.
7. OFFICER'S CERTIFICATE. Whenever the Exercise Price shall be
adjusted as required by the provisions of the foregoing Section, the
Company shall forthwith file in the custody of its Secretary or an
Assistant Secretary at its principal office and with its stock
transfer agent, if any, an officer's certificate showing the adjusted
Exercise Price determined as herein provided, setting forth in
reasonable detail the facts requiring such adjustment, including a
statement of the number of additional shares of Common Stock, if any,
and such other facts as shall be necessary to show the reason for and
the manner of computing such adjustment. Each such officer's
certificate shall be made available at all reasonable times for
inspection by the holder or any holder of a Warrant executed and
delivered pursuant to Section (a) and the Company shall, forthwith
after each such adjustment, mail a copy by certified mail of such
certificate to the Holder or any such holder.
8. NOTICES TO WARRANT HOLDERS. So long as this Warrant shall be
outstanding, (i) if the Company shall pay any dividend or make any
distribution upon the Common Stock or (ii) if the Company shall offer
to the Holders of Common Stock for subscription or purchase by them
any share of any class or any other rights or (iii) if any capital
reorganization of the Company, reclassification of the capital stock
of the Company, consolidation or merger of the Company with or into
another corporation, sale, lease or transfer of all or substantially
all of the property and assets of the Company to another corporation,
or voluntary or involuntary dissolution, liquidation or winding up of
the Company shall be effected, then in any such case, the Company
shall cause to be mailed by certified mail to the Holder, at least
fifteen days prior to the date specified in (x) or (y) below, as the
case may be, a notice containing a brief description of the proposed
<PAGE>
action and stating the date on which (x) a record is to be taken for
the purpose of such dividend, distribution or rights, or (y) such
reclassification, reorganization, consolidation, merger, conveyance,
lease, dissolution, liquidation or winding up is to take place and the
date, if any is to be fixed, as of which the Holders of Common Stock
or other securities shall receive cash or other property deliverable
upon such reclassification, reorganization, consolidation, merger,
conveyance, dissolution, liquidation or winding up.
9. RECLASSIFICATION, REORGANIZATION OR MERGER. In case of any
reclassification, capital reorganization or other change of
outstanding shares of Common Stock of the Company, or in case of any
consolidation or merger of the Company with or into another
corporation (other than a merger with a subsidiary in which merger the
Company is the continuing corporation and which does not result in any
reclassification, capital reorganization or other change of
outstanding shares of Common Stock of the class issuable upon exercise
of this Warrant) or in case of any sale, lease or conveyance to
another corporation of the property of the Company as an entirety, the
Company shall, as a condition precedent to such transaction, cause
effective provisions to be made so that the Holder shall have the
right thereafter by exercising this Warrant at any time prior to the
expiration of the Warrant, to purchase the kind and amount of shares
of stock and other securities and property receivable upon such
reclassification, capital reorganization and other change,
consolidation, merger, sale or conveyance by a holder of the number of
shares of Common Stock which might have been purchased upon exercise
of this Warrant immediately prior to such reclassification, change,
consolidation, merger, sale or conveyance. Any such provision shall
include provision for adjustments which shall be as nearly equivalent
as may be practicable to the adjustments provided for in this Warrant.
The foregoing provisions of this Section (i) shall similarly apply to
successive reclassifications, capital reorganizations and changes of
shares of Common Stock and to successive consolidations, mergers,
sales or conveyances. In the event that in connection with any such
capital reorganization or reclassification, consolidation, merger,
sale or conveyance, additional shares of Common Stock shall be issued
in exchange, conversion, substitution or payment, in whole or in part,
for a security of the Company other than Common Stock, any such issue
shall be treated as an issue of Common Stock covered by the provisions
of Subsection (i) of Section (f)hereof.
<PAGE>
3-DIMENSIONAL PHARMACEUTICALS, INC.
By /s/ David C. U'Prichard
--------------------------------
Name: David C. U'Prichard
Title: Chief Executive Officer
[SEAL]
Dated: November 18, 1999
Attest:
/s/ Scott M. Horvitz
- -----------------------------
Secretary
<PAGE>
PURCHASE FORM
-------------
Dated _____________,____
The undersigned hereby irrevocably elects to exercise the within Warrant to
the extent of purchasing _________ shares of Common Stock and hereby makes
payment of in payment of the actual exercise price thereof
---------
INSTRUCTIONS FOR REGISTRATION OF STOCK
--------------------------------------
Name ____________________________________________
(Please typewrite or print in block letters)
Address _________________________________
Signature ________________________________
---------
ASSIGNMENT FORM
---------------
FOR VALUE RECEIVED, __________________________ hereby sells, assigns and
transfers unto
Name _____________________________________________________
(Please typewrite or print in block letters)
Address __________________________________________________
the right to purchase Common Stock represented by this Warrant to the extent of
_____ shares as to which such right is exercisable and does hereby irrevocably
constitute and appoint ____________________ Attorney, to transfer the same on
the books of the Company with full power of substitution in the premises.
Date _____________, _____
Signature ____________________________
<PAGE>
EXHIBIT 10.10
Warrant to Purchase 10,500 Shares of Common Stock or
such additional shares as this Warrant may entitle the holder
to purchase pursuant to provisions of this Warrant.
WARRANT TO PURCHASE COMMON STOCK
OF
3-DIMENSIONAL PHARMACEUTICALS, INC.
This is to Certify That, FOR VALUE RECEIVED, Henry Rothman or assigns
("Holder") is entitled to purchase, subject to the provisions of this Warrant,
from 3-Dimensional Pharmaceuticals, Inc., a Delaware corporation (the
"Company"), 10,500 fully paid, validly issued and nonassessable shares of Common
Stock, par value $.001 per share, of the Company ("Common Stock") at a price of
$1.25 per share during the Exercise Period (as defined below). The number of
shares of Common Stock to be received upon the exercise of this Warrant and the
price to be paid for each share of Common Stock may be adjusted from time to
time as hereinafter set forth. The shares of Common Stock deliverable upon such
exercise, and as adjusted from time to time, are hereinafter sometimes referred
to as "Warrant Shares" and the exercise price of a share of Common Stock in
effect at any time and as adjusted from time to time is hereinafter sometimes
referred to as the "Exercise Price." This Warrant is being issued in connection
with the issuance by the Company of Warrants to purchase shares of Common Stock
and promissory notes in the aggregate principal amount of up to $10,000,000 (the
"Notes"), pursuant to a Note and Warrant Purchase Agreement dated as of November
18, 1999 (the "Agreement").
1. EXERCISE OF WARRANT.
a. This Warrant may be exercised in whole or in part at
any time or from time to time on or after November 18, 1999
until 5 p.m. New York City Time on November 18, 2000 (the
"Exercise Period"); provided, however, that if such day is a
day on which banking institutions in the State of New York
are authorized by law to close, then on the next succeeding
day which shall not be such a day. This Warrant may be
exercised by presentation and surrender hereof to the
Company at its principal office, or at the office of its
stock transfer agent, if any, with the Purchase Form annexed
hereto duly executed and accompanied by payment of the
Exercise Price for the number of Warrant Shares specified
<PAGE>
in such form. As soon as practicable after each such
exercise of the Warrants, but not later than seven (7) days
from the date of such exercise, the Company shall issue and
deliver to the Holder a certificate or certificates for the
Warrant Shares issuable upon such exercise, registered in
the name of the Holder or its designee. If this Warrant
should be exercised in part only, the Company shall, upon
surrender of this Warrant for cancellation, execute and
deliver a new Warrant evidencing the rights of the Holder
thereof to purchase the balance of the Warrant Shares
purchasable thereunder. Upon receipt by the Company of this
Warrant at its office, or by the stock transfer agent of the
Company at its office, in proper form for exercise, the
Holder shall be deemed to be the holder of record of the
shares of Common Stock issuable upon such exercise,
notwithstanding that the stock transfer books of the Company
shall then be closed or that certificates representing such
shares of Common Stock shall not then be physically
delivered to the Holder.
b. At any time during the Exercise Period, the Holder
may, at its option, exchange this Warrant, in whole or in
part (a "Warrant Exchange") into the number of Warrant
Shares determined in accordance with this Section (a)(ii),
by surrendering this Warrant at the principal office of the
Company or at the office of its stock transfer agent,
accompanied by a notice stating such Holder's intent to
effect such exchange, the number of Warrant Shares to be
exchanged and the date on which the Holder requests that
such Warrant Exchange occur (the "Notice of Exchange"). The
Warrant Exchange shall take place on the date specified in
the Notice of Exchange or, if later, the date the Notice of
Exchange is received by the Company (the "Exchange Date").
Certificates for the shares issuable upon such Warrant
Exchange and, if applicable, a new warrant of like tenor
evidencing the balance of the shares remaining subject to
this Warrant, shall be issued as of the Exchange Date and
delivered to the Holder within seven (7) days following the
Exchange Date. In connection with any Warrant Exchange, this
Warrant shall represent the right to subscribe for and
acquire the number of Warrant Shares (rounded to the next
highest integer) equal to (i) the number of Warrant Shares
specified by the Holder in its Notice of Exchange (the
"Total Number") less (ii) the number of Warrant Shares equal
to the quotient obtained by dividing (A) the product of the
Total Number and the existing Exercise Price by (B) the Fair
Market Value. "Fair Market Value" shall mean: (1) if the
Common Stock is listed on a National Securities Exchange or
admitted to unlisted trading privileges on such exchange or
listed for trading on the NASDAQ system, the average of the
last reported sale prices of the Common Stock on such
exchange or system for the twenty (20) business days ending
on the last business day prior to the date for which the
determination is being made; or (2) if the
<PAGE>
Common Stock is not so listed or admitted to unlisted
trading privileges, the average of the means of the last
reported bid and asked prices reported by the National
Quotation Bureau, Inc. for the twenty (20) business days
ending on the last business day prior to the date for which
the determination is being made; or (3) if the Common Stock
is not so listed or admitted to unlisted trading privileges
and bid and asked prices are not so reported, an amount, not
less than book value thereof as at the end of the most
recent fiscal year of the Company ending prior to the
Exchange Date, determined in such reasonable manner as may
be prescribed by the Board of Directors of the Company.
2. RESERVATION OF SHARES. The Company shall at all times
reserve for issuance and/or delivery upon exercise of this
Warrant such number of shares of its Common Stock as shall be
required for issuance and delivery upon exercise of the
Warrants.
3. FRACTIONAL SHARES. No fractional shares or script
representing fractional shares shall be issued upon the exercise
of this Warrant. With respect to any fraction of a share called
for upon any exercise hereof, the Company shall pay to the
Holder an amount in cash equal to such fraction multiplied by
the Fair Market Value of a share.
4. EXCHANGE, TRANSFER, ASSIGNMENT OR LOSS OF WARRANT.
(i) This Warrant is exchangeable, without expense, at the
option of the Holder, upon presentation and surrender hereof to
the Company or at the office of its stock transfer agent, if
any, for other warrants of different denominations entitling the
holder thereof to purchase in the aggregate the same number of
shares of Common Stock purchasable hereunder. Subject to the
restrictions set forth in subparagraph (ii) below, upon
surrender of this Warrant to the Company at its principal office
or at the office of its stock transfer agent, if any, with the
Assignment Form annexed hereto duly executed and funds
sufficient to pay any transfer tax, the Company shall, without
charge, execute and deliver a new Warrant in the name of the
assignee named in such instrument of assignment and this Warrant
shall promptly be canceled. This Warrant may be divided or
combined with other warrants which carry the same rights upon
presentation hereof at the principal office of the Company or at
the office of its stock transfer agent, if any, together with a
written notice specifying the names and denominations in which
new Warrants are to be issued and signed by the Holder hereof.
The term "Warrant" as used herein includes any Warrants into
which this Warrant may be divided or exchanged. Upon receipt by
the Company of evidence satisfactory to it of the loss, theft,
destruction or mutilation of this Warrant, and (in the case of
loss, theft or destruction) of
<PAGE>
reasonably satisfactory indemnification, and upon surrender and
cancellation of this Warrant, if mutilated, the Company will
execute and deliver a new Warrant of like tenor and date. Any
such new Warrant executed and delivered shall constitute an
additional contractual obligation on the part of the Company,
whether or not this Warrant so lost, stolen, destroyed, or
mutilated shall be at any time enforceable by anyone.
(ii) This Warrant and the shares of Common Stock issuable
upon exercise hereof have not been registered under the
Securities Act of 1933, as amended, or state securities laws by
reason of an exemption therefrom. The shares of Common Stock
issuable upon exercise of this Warrant are not transferable
except as provided in the Agreement and the Stockholders'
Agreement dated as of January 6, 1998, as amended from time to
time ("Stockholders' Agreement"). Shares of Common Stock
issuable upon exercise of this Warrant will bear an appropriate
legend to this effect. The restrictions contained herein shall
be binding on any transferee of the Common Stock issuable upon
exercise of this Warrant and the Company may require any such
transferee to execute an instrument agreeing in writing to be
bound by these restrictions as a condition to transfer.
5. RIGHTS OF THE HOLDER. The Holder shall not, by virtue hereof,
be entitled to any rights of a shareholder in the Company, either at law
or equity, and the rights of the Holder are limited to those expressed
in the Warrant and are not enforceable against the Company except to the
extent set forth herein.
6. ANTI-DILUTION PROVISIONS. The Exercise Price in effect at any
time and the number and kind of securities purchasable upon the exercise
of the Warrants shall be subject to adjustment from time to time upon
the happening of certain events as follows:
a. In case the Company shall (i) declare a dividend or make a
distribution on its outstanding shares of Common Stock in shares
of Common Stock, (ii) subdivide or reclassify its outstanding
shares of Common Stock into a greater number of shares, or (iii)
combine or reclassify its outstanding shares of Common Stock
into a smaller number of shares, the Exercise Price in effect at
the time of the record date for such dividend or distribution or
of the effective date of such subdivision, combination or
reclassification shall be adjusted so that it shall equal the
price determined by multiplying the Exercise Price by a
fraction, the denominator of which shall be the number of shares
of Common Stock outstanding after giving effect to such action,
and the numerator of which shall be the number of shares of
Common Stock outstanding immediately
<PAGE>
prior to such action. Such adjustment shall be made successively
whenever any event listed above shall occur.
b. In case the Company shall fix a record date for the
issuance of rights or warrants to all holders of its Common
Stock entitling them to subscribe for or purchase shares of
Common Stock (or securities convertible into Common Stock) at a
price (the "Subscription Price") (or having a conversion price
per share) less than the Exercise Price on the record date
mentioned below, the Exercise Price shall be adjusted so that
the same shall equal the price determined by multiplying the
Exercise Price in effect immediately prior to the date of
issuance by a fraction, the numerator of which shall be the sum
of the number of shares outstanding on the record date mentioned
below and the number of additional shares of Common Stock which
the aggregate offering price of the total number of shares of
Common Stock so offered (or the aggregate conversion price of
the convertible securities so offered) would purchase at the
Exercise Price in effect immediately prior to the date of such
issuance, and the denominator of which shall be the sum of the
number of shares of Common Stock outstanding on the record date
mentioned below and the number of additional shares of Common
Stock offered for subscription or purchase (or into which the
convertible securities so offered are convertible). Such
adjustment shall be made successively whenever such rights or
warrants are issued and shall become effective immediately after
the record date for the determination of shareholders entitled
to receive such rights or warrants; and to the extent that
shares of Common Stock are not delivered (or securities
convertible into Common Stock are not delivered) after the
expiration of such rights or warrants the Exercise Price shall
be readjusted to the Exercise Price which would then be in
effect had the adjustments made upon the issuance of such rights
or warrants been made upon the basis of delivery of only the
number of shares of Common Stock (or securities convertible into
Common Stock) actually delivered.
c. In case the Company shall hereafter distribute to the
holders of its Common Stock evidences of its indebtedness or
assets (excluding cash dividends or distributions and dividends
or distributions referred to in Subsection (i) above) or
subscription rights or warrants (excluding those referred to in
Subsection (ii) above), then in each such case the Exercise
Price in effect thereafter shall be determined by multiplying
the Exercise Price in effect immediately prior thereto by a
fraction, the numerator of which shall be the total number of
shares of Common Stock outstanding multiplied by the Fair Market
Value per share of Common Stock, less the fair market value (as
determined by the Company's Board of Directors) of said assets
or evidences of indebtedness so distributed or of such rights or
warrants, and the denominator of which shall be the total number
of shares
<PAGE>
of Common Stock outstanding multiplied by the Fair Market Value
per share of Common Stock. Such adjustment shall be made
successively whenever such a record date is fixed. Such
adjustment shall be made whenever any such distribution is made
and shall become effective immediately after the record date for
the determination of shareholders entitled to receive such
distribution.
d. Whenever the Exercise Price payable upon exercise of each
Warrant is adjusted pursuant to Subsections (i), (ii) or (iii)
above, the number of Shares purchasable upon exercise of this
Warrant shall simultaneously be adjusted by multiplying the
number of Shares initially issuable upon exercise of this
Warrant by the Exercise Price in effect on the date hereof and
dividing the product so obtained by the Exercise Price, as
adjusted.
e. No adjustment in the Exercise Price shall be required
unless such adjustment would require an increase or decrease of
at least 5% in such price; provided, however, that any
adjustments which by reason of this Subsection (v) are not
required to be made shall be carried forward and taken into
account in any subsequent adjustment required to be made
hereunder. All calculations under this Section (f) shall be made
to the nearest cent or to the nearest one-hundredth of a share,
as the case may be. Anything in this Section (f) to the contrary
notwithstanding, the Company shall be entitled, but shall not be
required, to make such changes in the Exercise Price, in
addition to those required by this Section (f), as it shall
determine, in its sole discretion, to be advisable in order that
any dividend or distribution in shares of Common Stock, or any
subdivision, reclassification or combination of Common Stock,
hereafter made by the Company shall not result in any Federal
Income tax liability to the holders of Common Stock or
securities convertible into Common Stock (including Warrants).
f. Whenever the Exercise Price is adjusted, as herein
provided, the Company shall promptly but no later than 10 days
after any request for such an adjustment by the Holder, cause a
notice setting forth the adjusted Exercise Price and adjusted
number of Shares issuable upon exercise of each Warrant, and, if
requested, information describing the transactions giving rise
to such adjustments, to be mailed to the Holders at their last
addresses appearing in the Warrant Register, and shall cause a
certified copy thereof to be mailed to its transfer agent, if
any. The Company may retain a firm of independent certified
public accountants selected by the Board of Directors (who may
be the regular accountants employed by the Company) to make any
computation required by this Section (f), and a
<PAGE>
certificate signed by such firm shall be conclusive evidence of
the correctness of such adjustment.
g. In the event that at any time, as a result of an
adjustment made pursuant to Subsection (i) above, the Holder of
this Warrant thereafter shall become entitled to receive any
shares of the Company, other than Common Stock, thereafter the
number of such other shares so receivable upon exercise of this
Warrant shall be subject to adjustment from time to time in a
manner and on terms as nearly equivalent as practicable to the
provisions with respect to the Common Stock contained in
Subsections (i) to (vi), inclusive above.
h. Irrespective of any adjustments in the Exercise Price or
the number or kind of shares purchasable upon exercise of this
Warrant, Warrants theretofore or thereafter issued may continue
to express the same price and number and kind of shares as are
stated in the similar Warrants initially issuable pursuant to
the Agreement.
7. OFFICER'S CERTIFICATE. Whenever the Exercise Price shall be
adjusted as required by the provisions of the foregoing Section, the
Company shall forthwith file in the custody of its Secretary or an
Assistant Secretary at its principal office and with its stock transfer
agent, if any, an officer's certificate showing the adjusted Exercise
Price determined as herein provided, setting forth in reasonable detail
the facts requiring such adjustment, including a statement of the number
of additional shares of Common Stock, if any, and such other facts as
shall be necessary to show the reason for and the manner of computing
such adjustment. Each such officer's certificate shall be made available
at all reasonable times for inspection by the holder or any holder of a
Warrant executed and delivered pursuant to Section (a) and the Company
shall, forthwith after each such adjustment, mail a copy by certified
mail of such certificate to the Holder or any such holder.
8. NOTICES TO WARRANT HOLDERS. So long as this Warrant shall be
outstanding, (i) if the Company shall pay any dividend or make any
distribution upon the Common Stock or (ii) if the Company shall offer to
the Holders of Common Stock for subscription or purchase by them any
share of any class or any other rights or (iii) if any capital
reorganization of the Company, reclassification of the capital stock of
the Company, consolidation or merger of the Company with or into another
corporation, sale, lease or transfer of all or substantially all of the
property and assets of the Company to another corporation, or voluntary
or involuntary dissolution, liquidation or winding up of the Company
shall be effected, then in any such case, the Company shall cause to be
mailed by certified mail to the Holder, at least fifteen days prior to
the date specified in (x) or (y) below, as the case may be, a notice
containing a brief description of the proposed
<PAGE>
action and stating the date on which (x) a record is to be taken for the
purpose of such dividend, distribution or rights, or (y) such
reclassification, reorganization, consolidation, merger, conveyance,
lease, dissolution, liquidation or winding up is to take place and the
date, if any is to be fixed, as of which the Holders of Common Stock or
other securities shall receive cash or other property deliverable upon
such reclassification, reorganization, consolidation, merger,
conveyance, dissolution, liquidation or winding up.
9. RECLASSIFICATION, REORGANIZATION OR MERGER. In case of any
reclassification, capital reorganization or other change of outstanding
shares of Common Stock of the Company, or in case of any consolidation
or merger of the Company with or into another corporation (other than a
merger with a subsidiary in which merger the Company is the continuing
corporation and which does not result in any reclassification, capital
reorganization or other change of outstanding shares of Common Stock of
the class issuable upon exercise of this Warrant) or in case of any
sale, lease or conveyance to another corporation of the property of the
Company as an entirety, the Company shall, as a condition precedent to
such transaction, cause effective provisions to be made so that the
Holder shall have the right thereafter by exercising this Warrant at any
time prior to the expiration of the Warrant, to purchase the kind and
amount of shares of stock and other securities and property receivable
upon such reclassification, capital reorganization and other change,
consolidation, merger, sale or conveyance by a holder of the number of
shares of Common Stock which might have been purchased upon exercise of
this Warrant immediately prior to such reclassification, change,
consolidation, merger, sale or conveyance. Any such provision shall
include provision for adjustments which shall be as nearly equivalent as
may be practicable to the adjustments provided for in this Warrant. The
foregoing provisions of this Section (i) shall similarly apply to
successive reclassifications, capital reorganizations and changes of
shares of Common Stock and to successive consolidations, mergers, sales
or conveyances. In the event that in connection with any such capital
reorganization or reclassification, consolidation, merger, sale or
conveyance, additional shares of Common Stock shall be issued in
exchange, conversion, substitution or payment, in whole or in part, for
a security of the Company other than Common Stock, any such issue shall
be treated as an issue of Common Stock covered by the provisions of
Subsection (i) of Section (f)hereof.
<PAGE>
3-DIMENSIONAL PHARMACEUTICALS, INC.
By /s/ David C. U'Prichard
-------------------------------------
Name: David C. U'Prichard
Title: Chief Executive Officer
[SEAL]
Dated: November 18, 1999
Attest:
/s/ Scott M. Horvitz
- -----------------------------
Secretary
<PAGE>
PURCHASE FORM
-------------
Dated _____________, ____
The undersigned hereby irrevocably elects to exercise the within Warrant to
the extent of purchasing _________ shares of Common Stock and hereby makes
payment of in payment of the actual exercise price thereof
---------
INSTRUCTIONS FOR REGISTRATION OF STOCK
--------------------------------------
Name ____________________________________________
(Please typewrite or print in block letters)
Address _________________________________
Signature ________________________________
---------
ASSIGNMENT FORM
---------------
FOR VALUE RECEIVED, __________________________ hereby sells, assigns and
transfers unto
Name _____________________________________________________
(Please typewrite or print in block letters)
Address __________________________________________________
the right to purchase Common Stock represented by this Warrant to the extent of
_____ shares as to which such right is exercisable and does hereby irrevocably
constitute and appoint ____________________ Attorney, to transfer the same on
the books of the Company with full power of substitution in the premises.
Date _____________, _____
Signature ____________________________
<PAGE>
Exhibit 10.11
Warrant to Purchase 309,656 Shares of Common Stock or
such additional shares as this Warrant may entitle the
holder to purchase pursuant to provisions of this Warrant.
WARRANT TO PURCHASE COMMON STOCK
OF
3-DIMENSIONAL PHARMACEUTICALS, INC.
This is to Certify That, FOR VALUE RECEIVED, Abingworth Bioventures
SICAV or assigns ("Holder") is entitled to purchase, subject to the provisions
of this Warrant, from 3-Dimensional Pharmaceuticals, Inc., a Delaware
corporation (the "Company"), 309,656 fully paid, validly issued and
nonassessable shares of Common Stock, par value $.001 per share, of the Company
("Common Stock") at a price of $1.25 per share during the Exercise Period (as
defined below). The number of shares of Common Stock to be received upon the
exercise of this Warrant and the price to be paid for each share of Common Stock
may be adjusted from time to time as hereinafter set forth. The shares of
Common Stock deliverable upon such exercise, and as adjusted from time to time,
are hereinafter sometimes referred to as "Warrant Shares" and the exercise price
of a share of Common Stock in effect at any time and as adjusted from time to
time is hereinafter sometimes referred to as the "Exercise Price." This Warrant
is being issued in connection with the issuance by the Company of Warrants to
purchase shares of Common Stock and promissory notes in the aggregate principal
amount of up to $10,000,000 (the "Notes"), pursuant to a Note and Warrant
Purchase Agreement dated as of November 18, 1999 (the "Agreement").
1. EXERCISE OF WARRANT.
a. This Warrant may be exercised in whole or in part at
any time or from time to time on or after November 18, 1999
until 5 p.m. New York City Time on November 18, 2000 (the
"Exercise Period"); provided, however, that if such day is a day
on which banking institutions in the State of New York are
authorized by law to close, then on the next succeeding day
which shall not be such a day. This Warrant may be exercised by
presentation and surrender hereof to the Company at its
principal office, or at the office of its stock transfer agent,
if any, with the Purchase Form annexed hereto duly executed and
accompanied by payment of the Exercise Price for the number of
Warrant Shares specified
<PAGE>
in such form. As soon as practicable after each such exercise of
the Warrants, but not later than seven (7) days from the date of
such exercise, the Company shall issue and deliver to the Holder
a certificate or certificates for the Warrant Shares issuable
upon such exercise, registered in the name of the Holder or its
designee. If this Warrant should be exercised in part only, the
Company shall, upon surrender of this Warrant for cancellation,
execute and deliver a new Warrant evidencing the rights of the
Holder thereof to purchase the balance of the Warrant Shares
purchasable thereunder. Upon receipt by the Company of this
Warrant at its office, or by the stock transfer agent of the
Company at its office, in proper form for exercise, the Holder
shall be deemed to be the holder of record of the shares of
Common Stock issuable upon such exercise, notwithstanding that
the stock transfer books of the Company shall then be closed or
that certificates representing such shares of Common Stock shall
not then be physically delivered to the Holder.
b. At any time during the Exercise Period, the Holder
may, at its option, exchange this Warrant, in whole or in part
(a "Warrant Exchange") into the number of Warrant Shares
determined in accordance with this Section (a)(ii), by
surrendering this Warrant at the principal office of the Company
or at the office of its stock transfer agent, accompanied by a
notice stating such Holder's intent to effect such exchange, the
number of Warrant Shares to be exchanged and the date on which
the Holder requests that such Warrant Exchange occur (the
"Notice of Exchange"). The Warrant Exchange shall take place on
the date specified in the Notice of Exchange or, if later, the
date the Notice of Exchange is received by the Company (the
"Exchange Date"). Certificates for the shares issuable upon such
Warrant Exchange and, if applicable, a new warrant of like tenor
evidencing the balance of the shares remaining subject to this
Warrant, shall be issued as of the Exchange Date and delivered
to the Holder within seven (7) days following the Exchange Date.
In connection with any Warrant Exchange, this Warrant shall
represent the right to subscribe for and acquire the number of
Warrant Shares (rounded to the next highest integer) equal to
(i) the number of Warrant Shares specified by the Holder in its
Notice of Exchange (the "Total Number") less (ii) the number of
Warrant Shares equal to the quotient obtained by dividing (A)
the product of the Total Number and the existing Exercise Price
by (B) the Fair Market Value. "Fair Market Value" shall mean:
(1) if the Common Stock is listed on a National Securities
Exchange or admitted to unlisted trading privileges on such
exchange or listed for trading on the NASDAQ system, the average
of the last reported sale prices of the Common Stock on such
exchange or system for the twenty (20) business days ending on
the last business day prior to the date for which the
determination is being made; or (2) if the
<PAGE>
Common Stock is not so listed or admitted to unlisted trading
privileges, the average of the means of the last reported bid
and asked prices reported by the National Quotation Bureau, Inc.
for the twenty (20) business days ending on the last business
day prior to the date for which the determination is being made;
or (3) if the Common Stock is not so listed or admitted to
unlisted trading privileges and bid and asked prices are not so
reported, an amount, not less than book value thereof as at the
end of the most recent fiscal year of the Company ending prior
to the Exchange Date, determined in such reasonable manner as
may be prescribed by the Board of Directors of the Company.
2. RESERVATION OF SHARES. The Company shall at all times
reserve for issuance and/or delivery upon exercise of this Warrant such
number of shares of its Common Stock as shall be required for issuance and
delivery upon exercise of the Warrants.
3. FRACTIONAL SHARES. No fractional shares or script representing
fractional shares shall be issued upon the exercise of this Warrant. With
respect to any fraction of a share called for upon any exercise hereof,
the Company shall pay to the Holder an amount in cash equal to such
fraction multiplied by the Fair Market Value of a share.
4. EXCHANGE, TRANSFER, ASSIGNMENT OR LOSS OF WARRANT.
(i) This Warrant is exchangeable, without expense, at the option
of the Holder, upon presentation and surrender hereof to the
Company or at the office of its stock transfer agent, if any,
for other warrants of different denominations entitling the
holder thereof to purchase in the aggregate the same number of
shares of Common Stock purchasable hereunder. Subject to the
restrictions set forth in subparagraph (ii) below, upon
surrender of this Warrant to the Company at its principal office
or at the office of its stock transfer agent, if any, with the
Assignment Form annexed hereto duly executed and funds
sufficient to pay any transfer tax, the Company shall, without
charge, execute and deliver a new Warrant in the name of the
assignee named in such instrument of assignment and this Warrant
shall promptly be canceled. This Warrant may be divided or
combined with other warrants which carry the same rights upon
presentation hereof at the principal office of the Company or at
the office of its stock transfer agent, if any, together with a
written notice specifying the names and denominations in which
new Warrants are to be issued and signed by the Holder hereof.
The term "Warrant" as used herein includes any Warrants into
which this Warrant may be divided or exchanged. Upon receipt by
the Company of evidence satisfactory to it of the loss, theft,
destruction or mutilation of this Warrant, and (in the case of
loss, theft or destruction) of
<PAGE>
reasonably satisfactory indemnification, and upon surrender and
cancellation of this Warrant, if mutilated, the Company will
execute and deliver a new Warrant of like tenor and date. Any
such new Warrant executed and delivered shall constitute an
additional contractual obligation on the part of the Company,
whether or not this Warrant so lost, stolen, destroyed, or
mutilated shall be at any time enforceable by anyone.
(ii) This Warrant and the shares of Common Stock issuable upon
exercise hereof have not been registered under the Securities
Act of 1933, as amended, or state securities laws by reason of
an exemption therefrom. The shares of Common Stock issuable upon
exercise of this Warrant are not transferable except as provided
in the Agreement and the Stockholders' Agreement dated as of
January 6, 1998, as amended from time to time ("Stockholders'
Agreement"). Shares of Common Stock issuable upon exercise of
this Warrant will bear an appropriate legend to this effect. The
restrictions contained herein shall be binding on any transferee
of the Common Stock issuable upon exercise of this Warrant and
the Company may require any such transferee to execute an
instrument agreeing in writing to be bound by these restrictions
as a condition to transfer.
5. RIGHTS OF THE HOLDER. The Holder shall not, by virtue hereof, be
entitled to any rights of a shareholder in the Company, either at law or
equity, and the rights of the Holder are limited to those expressed in the
Warrant and are not enforceable against the Company except to the extent
set forth herein.
6. ANTI-DILUTION PROVISIONS. The Exercise Price in effect at any
time and the number and kind of securities purchasable upon the exercise
of the Warrants shall be subject to adjustment from time to time upon the
happening of certain events as follows:
a. In case the Company shall (i) declare a dividend or
make a distribution on its outstanding shares of Common Stock in
shares of Common Stock, (ii) subdivide or reclassify its
outstanding shares of Common Stock into a greater number of
shares, or (iii) combine or reclassify its outstanding shares of
Common Stock into a smaller number of shares, the Exercise Price
in effect at the time of the record date for such dividend or
distribution or of the effective date of such subdivision,
combination or reclassification shall be adjusted so that it
shall equal the price determined by multiplying the Exercise
Price by a fraction, the denominator of which shall be the
number of shares of Common Stock outstanding after giving effect
to such action, and the numerator of which shall be the number
of shares of Common Stock outstanding immediately
<PAGE>
prior to such action. Such adjustment shall be made successively
whenever any event listed above shall occur.
b. In case the Company shall fix a record date for the
issuance of rights or warrants to all holders of its Common
Stock entitling them to subscribe for or purchase shares of
Common Stock (or securities convertible into Common Stock) at a
price (the "Subscription Price") (or having a conversion price
per share) less than the Exercise Price on the record date
mentioned below, the Exercise Price shall be adjusted so that
the same shall equal the price determined by multiplying the
Exercise Price in effect immediately prior to the date of
issuance by a fraction, the numerator of which shall be the sum
of the number of shares outstanding on the record date mentioned
below and the number of additional shares of Common Stock which
the aggregate offering price of the total number of shares of
Common Stock so offered (or the aggregate conversion price of
the convertible securities so offered) would purchase at the
Exercise Price in effect immediately prior to the date of such
issuance, and the denominator of which shall be the sum of the
number of shares of Common Stock outstanding on the record date
mentioned below and the number of additional shares of Common
Stock offered for subscription or purchase (or into which the
convertible securities so offered are convertible). Such
adjustment shall be made successively whenever such rights or
warrants are issued and shall become effective immediately after
the record date for the determination of shareholders entitled
to receive such rights or warrants; and to the extent that
shares of Common Stock are not delivered (or securities
convertible into Common Stock are not delivered) after the
expiration of such rights or warrants the Exercise Price shall
be readjusted to the Exercise Price which would then be in
effect had the adjustments made upon the issuance of such rights
or warrants been made upon the basis of delivery of only the
number of shares of Common Stock (or securities convertible into
Common Stock) actually delivered.
c. In case the Company shall hereafter distribute to the
holders of its Common Stock evidences of its indebtedness or
assets (excluding cash dividends or distributions and dividends
or distributions referred to in Subsection (i) above) or
subscription rights or warrants (excluding those referred to in
Subsection (ii) above), then in each such case the Exercise
Price in effect thereafter shall be determined by multiplying
the Exercise Price in effect immediately prior thereto by a
fraction, the numerator of which shall be the total number of
shares of Common Stock outstanding multiplied by the Fair Market
Value per share of Common Stock, less the fair market value (as
determined by the Company's Board of Directors) of said assets
or evidences of indebtedness so distributed or of such rights or
warrants, and the denominator of which shall be the total number
of shares
<PAGE>
of Common Stock outstanding multiplied by the Fair Market Value
per share of Common Stock. Such adjustment shall be made
successively whenever such a record date is fixed. Such
adjustment shall be made whenever any such distribution is made
and shall become effective immediately after the record date for
the determination of shareholders entitled to receive such
distribution.
d. Whenever the Exercise Price payable upon exercise of
each Warrant is adjusted pursuant to Subsections (i), (ii) or
(iii) above, the number of Shares purchasable upon exercise of
this Warrant shall simultaneously be adjusted by multiplying the
number of Shares initially issuable upon exercise of this
Warrant by the Exercise Price in effect on the date hereof and
dividing the product so obtained by the Exercise Price, as
adjusted.
e. No adjustment in the Exercise Price shall be required
unless such adjustment would require an increase or decrease of
at least 5% in such price; provided, however, that any
adjustments which by reason of this Subsection (v) are not
required to be made shall be carried forward and taken into
account in any subsequent adjustment required to be made
hereunder. All calculations under this Section (f) shall be made
to the nearest cent or to the nearest one-hundredth of a share,
as the case may be. Anything in this Section (f) to the contrary
notwithstanding, the Company shall be entitled, but shall not be
required, to make such changes in the Exercise Price, in
addition to those required by this Section (f), as it shall
determine, in its sole discretion, to be advisable in order that
any dividend or distribution in shares of Common Stock, or any
subdivision, reclassification or combination of Common Stock,
hereafter made by the Company shall not result in any Federal
Income tax liability to the holders of Common Stock or
securities convertible into Common Stock (including Warrants).
f. Whenever the Exercise Price is adjusted, as herein
provided, the Company shall promptly but no later than 10 days
after any request for such an adjustment by the Holder, cause a
notice setting forth the adjusted Exercise Price and adjusted
number of Shares issuable upon exercise of each Warrant, and, if
requested, information describing the transactions giving rise
to such adjustments, to be mailed to the Holders at their last
addresses appearing in the Warrant Register, and shall cause a
certified copy thereof to be mailed to its transfer agent, if
any. The Company may retain a firm of independent certified
public accountants selected by the Board of Directors (who may
be the regular accountants employed by the Company) to make any
computation required by this Section (f), and a
<PAGE>
certificate signed by such firm shall be conclusive evidence of
the correctness of such adjustment.
g. In the event that at any time, as a result of an
adjustment made pursuant to Subsection (i) above, the Holder of
this Warrant thereafter shall become entitled to receive any
shares of the Company, other than Common Stock, thereafter the
number of such other shares so receivable upon exercise of this
Warrant shall be subject to adjustment from time to time in a
manner and on terms as nearly equivalent as practicable to the
provisions with respect to the Common Stock contained in
Subsections (i) to (vi), inclusive above.
h. Irrespective of any adjustments in the Exercise Price or
the number or kind of shares purchasable upon exercise of this
Warrant, Warrants theretofore or thereafter issued may continue
to express the same price and number and kind of shares as are
stated in the similar Warrants initially issuable pursuant to
the Agreement.
7. OFFICER'S CERTIFICATE. Whenever the Exercise Price
shall be adjusted as required by the provisions of the foregoing Section,
the Company shall forthwith file in the custody of its Secretary or an
Assistant Secretary at its principal office and with its stock transfer
agent, if any, an officer's certificate showing the adjusted Exercise
Price determined as herein provided, setting forth in reasonable detail
the facts requiring such adjustment, including a statement of the number
of additional shares of Common Stock, if any, and such other facts as
shall be necessary to show the reason for and the manner of computing
such adjustment. Each such officer's certificate shall be made available
at all reasonable times for inspection by the holder or any holder of a
Warrant executed and delivered pursuant to Section (a) and the Company
shall, forthwith after each such adjustment, mail a copy by certified
mail of such certificate to the Holder or any such holder.
8. NOTICES TO WARRANT HOLDERS. So long as this Warrant shall be
outstanding, (i) if the Company shall pay any dividend or make any
distribution upon the Common Stock or (ii) if the Company shall offer to
the Holders of Common Stock for subscription or purchase by them any
share of any class or any other rights or (iii) if any capital
reorganization of the Company, reclassification of the capital stock of
the Company, consolidation or merger of the Company with or into another
corporation, sale, lease or transfer of all or substantially all of the
property and assets of the Company to another corporation, or voluntary
or involuntary dissolution, liquidation or winding up of the Company
shall be effected, then in any such case, the Company shall cause to be
mailed by certified mail to the Holder, at least fifteen days prior to
the date specified in (x) or (y) below, as the case may be, a notice
containing a brief description of the proposed
<PAGE>
action and stating the date on which (x) a record is to be taken for the
purpose of such dividend, distribution or rights, or (y) such
reclassification, reorganization, consolidation, merger, conveyance,
lease, dissolution, liquidation or winding up is to take place and the
date, if any is to be fixed, as of which the Holders of Common Stock or
other securities shall receive cash or other property deliverable upon
such reclassification, reorganization, consolidation, merger, conveyance,
dissolution, liquidation or winding up.
9. RECLASSIFICATION, REORGANIZATION OR MERGER. In case of any
reclassification, capital reorganization or other change of outstanding
shares of Common Stock of the Company, or in case of any consolidation or
merger of the Company with or into another corporation (other than a
merger with a subsidiary in which merger the Company is the continuing
corporation and which does not result in any reclassification, capital
reorganization or other change of outstanding shares of Common Stock of
the class issuable upon exercise of this Warrant) or in case of any sale,
lease or conveyance to another corporation of the property of the Company
as an entirety, the Company shall, as a condition precedent to such
transaction, cause effective provisions to be made so that the Holder
shall have the right thereafter by exercising this Warrant at any time
prior to the expiration of the Warrant, to purchase the kind and amount
of shares of stock and other securities and property receivable upon such
reclassification, capital reorganization and other change, consolidation,
merger, sale or conveyance by a holder of the number of shares of Common
Stock which might have been purchased upon exercise of this Warrant
immediately prior to such reclassification, change, consolidation,
merger, sale or conveyance. Any such provision shall include provision
for adjustments which shall be as nearly equivalent as may be practicable
to the adjustments provided for in this Warrant. The foregoing provisions
of this Section (i) shall similarly apply to successive
reclassifications, capital reorganizations and changes of shares of
Common Stock and to successive consolidations, mergers, sales or
conveyances. In the event that in connection with any such capital
reorganization or reclassification, consolidation, merger, sale or
conveyance, additional shares of Common Stock shall be issued in
exchange, conversion, substitution or payment, in whole or in part, for a
security of the Company other than Common Stock, any such issue shall be
treated as an issue of Common Stock covered by the provisions of
Subsection (i) of Section (f)hereof.
<PAGE>
3-DIMENSIONAL PHARMACEUTICALS, INC.
By /s/ David C. U'Prichard
-------------------------------------
Name: David C. U'Prichard
Title: Chief Executive Officer
[SEAL]
Dated: November 18, 1999
Attest:
/s/ Scott M. Horvitz
- -----------------------------
Secretary
<PAGE>
PURCHASE FORM
-------------
Dated _____________, ____
The undersigned hereby irrevocably elects to exercise the within Warrant to
the extent of purchasing _________ shares of Common Stock and hereby makes
payment of in payment of the actual exercise price thereof
---------
INSTRUCTIONS FOR REGISTRATION OF STOCK
--------------------------------------
Name __________________________________
(Please typewrite or print in block letters)
Address _________________________________
Signature ________________________________
---------
ASSIGNMENT FORM
---------------
FOR VALUE RECEIVED, __________________________ hereby sells, assigns and
transfers unto
Name _____________________________________________________
(Please typewrite or print in block letters)
Address __________________________________________________
the right to purchase Common Stock represented by this Warrant to the extent of
_____ shares as to which such right is exercisable and does hereby irrevocably
constitute and appoint ____________________ Attorney, to transfer the same on
the books of the Company with full power of substitution in the premises.
Date _____________, _____
Signature ____________________________
<PAGE>
EXHIBIT 10.12
Warrant to Purchase 87,500 Shares of Common Stock or
such additional shares as this Warrant may entitle the holder
to purchase pursuant to provisions of this Warrant.
WARRANT TO PURCHASE COMMON STOCK
OF
3-DIMENSIONAL PHARMACEUTICALS, INC.
This is to Certify That, FOR VALUE RECEIVED, Sentron Medical, Inc. or
assigns ("Holder") is entitled to purchase, subject to the provisions of this
Warrant, from 3-Dimensional Pharmaceuticals, Inc., a Delaware corporation (the
"Company"), 87,500 fully paid, validly issued and nonassessable shares of Common
Stock, par value $.001 per share, of the Company ("Common Stock") at a price of
$1.25 per share during the Exercise Period (as defined below). The number of
shares of Common Stock to be received upon the exercise of this Warrant and the
price to be paid for each share of Common Stock may be adjusted from time to
time as hereinafter set forth. The shares of Common Stock deliverable upon such
exercise, and as adjusted from time to time, are hereinafter sometimes referred
to as "Warrant Shares" and the exercise price of a share of Common Stock in
effect at any time and as adjusted from time to time is hereinafter sometimes
referred to as the "Exercise Price." This Warrant is being issued in connection
with the issuance by the Company of Warrants to purchase shares of Common Stock
and promissory notes in the aggregate principal amount of up to $10,000,000 (the
"Notes"), pursuant to a Note and Warrant Purchase Agreement dated as of November
18, 1999 (the "Agreement").
1. EXERCISE OF WARRANT.
a. This Warrant may be exercised in whole or in part at any
time or from time to time on or after November 18, 1999 until 5
p.m. New York City Time on November 18, 2000 (the "Exercise
Period"); provided, however, that if such day is a day on which
banking institutions in the State of New York are authorized by
law to close, then on the next succeeding day which shall not be
such a day. This Warrant may be exercised by presentation and
surrender hereof to the Company at its principal office, or at
the office of its stock transfer agent, if any, with the
Purchase Form annexed hereto duly executed and accompanied by
payment of the Exercise Price for the number of Warrant Shares
specified
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in such form. As soon as practicable after each such exercise of
the Warrants, but not later than seven (7) days from the date of
such exercise, the Company shall issue and deliver to the Holder
a certificate or certificates for the Warrant Shares issuable
upon such exercise, registered in the name of the Holder or its
designee. If this Warrant should be exercised in part only, the
Company shall, upon surrender of this Warrant for cancellation,
execute and deliver a new Warrant evidencing the rights of the
Holder thereof to purchase the balance of the Warrant Shares
purchasable thereunder. Upon receipt by the Company of this
Warrant at its office, or by the stock transfer agent of the
Company at its office, in proper form for exercise, the Holder
shall be deemed to be the holder of record of the shares of
Common Stock issuable upon such exercise, notwithstanding that
the stock transfer books of the Company shall then be closed or
that certificates representing such shares of Common Stock shall
not then be physically delivered to the Holder.
b. At any time during the Exercise Period, the Holder may, at
its option, exchange this Warrant, in whole or in part (a
"Warrant Exchange") into the number of Warrant Shares determined
in accordance with this Section (a)(ii), by surrendering this
Warrant at the principal office of the Company or at the office
of its stock transfer agent, accompanied by a notice stating
such Holder's intent to effect such exchange, the number of
Warrant Shares to be exchanged and the date on which the Holder
requests that such Warrant Exchange occur (the "Notice of
Exchange"). The Warrant Exchange shall take place on the date
specified in the Notice of Exchange or, if later, the date the
Notice of Exchange is received by the Company (the "Exchange
Date"). Certificates for the shares issuable upon such Warrant
Exchange and, if applicable, a new warrant of like tenor
evidencing the balance of the shares remaining subject to this
Warrant, shall be issued as of the Exchange Date and delivered
to the Holder within seven (7) days following the Exchange Date.
In connection with any Warrant Exchange, this Warrant shall
represent the right to subscribe for and acquire the number of
Warrant Shares (rounded to the next highest integer) equal to
(i) the number of Warrant Shares specified by the Holder in its
Notice of Exchange (the "Total Number") less (ii) the number of
Warrant Shares equal to the quotient obtained by dividing (A)
the product of the Total Number and the existing Exercise Price
by (B) the Fair Market Value. "Fair Market Value" shall mean:
(1) if the Common Stock is listed on a National Securities
Exchange or admitted to unlisted trading privileges on such
exchange or listed for trading on the NASDAQ system, the average
of the last reported sale prices of the Common Stock on such
exchange or system for the twenty (20) business days ending on
the last business day prior to the date for which the
determination is being made; or (2) if the
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Common Stock is not so listed or admitted to unlisted trading
privileges, the average of the means of the last reported bid
and asked prices reported by the National Quotation Bureau, Inc.
for the twenty (20) business days ending on the last business
day prior to the date for which the determination is being made;
or (3) if the Common Stock is not so listed or admitted to
unlisted trading privileges and bid and asked prices are not so
reported, an amount, not less than book value thereof as at the
end of the most recent fiscal year of the Company ending prior
to the Exchange Date, determined in such reasonable manner as
may be prescribed by the Board of Directors of the Company.
2. RESERVATION OF SHARES. The Company shall at all times reserve
for issuance and/or delivery upon exercise of this Warrant such number
of shares of its Common Stock as shall be required for issuance and
delivery upon exercise of the Warrants.
3. FRACTIONAL SHARES. No fractional shares or script representing
fractional shares shall be issued upon the exercise of this Warrant.
With respect to any fraction of a share called for upon any exercise
hereof, the Company shall pay to the Holder an amount in cash equal to
such fraction multiplied by the Fair Market Value of a share.
4. EXCHANGE, TRANSFER, ASSIGNMENT OR LOSS OF WARRANT.
(i) This Warrant is exchangeable, without expense, at the
option of the Holder, upon presentation and surrender hereof to
the Company or at the office of its stock transfer agent, if
any, for other warrants of different denominations entitling the
holder thereof to purchase in the aggregate the same number of
shares of Common Stock purchasable hereunder. Subject to the
restrictions set forth in subparagraph (ii) below, upon
surrender of this Warrant to the Company at its principal office
or at the office of its stock transfer agent, if any, with the
Assignment Form annexed hereto duly executed and funds
sufficient to pay any transfer tax, the Company shall, without
charge, execute and deliver a new Warrant in the name of the
assignee named in such instrument of assignment and this Warrant
shall promptly be canceled. This Warrant may be divided or
combined with other warrants which carry the same rights upon
presentation hereof at the principal office of the Company or at
the office of its stock transfer agent, if any, together with a
written notice specifying the names and denominations in which
new Warrants are to be issued and signed by the Holder hereof.
The term "Warrant" as used herein includes any Warrants into
which this Warrant may be divided or exchanged. Upon receipt by
the Company of evidence satisfactory to it of the loss, theft,
destruction or mutilation of this Warrant, and (in the case of
loss, theft or destruction) of
<PAGE>
reasonably satisfactory indemnification, and upon surrender and
cancellation of this Warrant, if mutilated, the Company will
execute and deliver a new Warrant of like tenor and date. Any
such new Warrant executed and delivered shall constitute an
additional contractual obligation on the part of the Company,
whether or not this Warrant so lost, stolen, destroyed, or
mutilated shall be at any time enforceable by anyone.
(ii) This Warrant and the shares of Common Stock issuable
upon exercise hereof have not been registered under the
Securities Act of 1933, as amended, or state securities laws by
reason of an exemption therefrom. The shares of Common Stock
issuable upon exercise of this Warrant are not transferable
except as provided in the Agreement and the Stockholders'
Agreement dated as of January 6, 1998, as amended from time to
time ("Stockholders' Agreement"). Shares of Common Stock
issuable upon exercise of this Warrant will bear an appropriate
legend to this effect. The restrictions contained herein shall
be binding on any transferee of the Common Stock issuable upon
exercise of this Warrant and the Company may require any such
transferee to execute an instrument agreeing in writing to be
bound by these restrictions as a condition to transfer.
5. RIGHTS OF THE HOLDER. The Holder shall not, by virtue hereof,
be entitled to any rights of a shareholder in the Company, either at law
or equity, and the rights of the Holder are limited to those expressed
in the Warrant and are not enforceable against the Company except to the
extent set forth herein.
6. ANTI-DILUTION PROVISIONS. The Exercise Price in effect at any
time and the number and kind of securities purchasable upon the exercise
of the Warrants shall be subject to adjustment from time to time upon
the happening of certain events as follows:
a. In case the Company shall (i) declare a dividend or make a
distribution on its outstanding shares of Common Stock in shares of
Common Stock, (ii) subdivide or reclassify its outstanding shares
of Common Stock into a greater number of shares, or (iii) combine
or reclassify its outstanding shares of Common Stock into a smaller
number of shares, the Exercise Price in effect at the time of the
record date for such dividend or distribution or of the effective
date of such subdivision, combination or reclassification shall be
adjusted so that it shall equal the price determined by multiplying
the Exercise Price by a fraction, the denominator of which shall be
the number of shares of Common Stock outstanding after giving
effect to such action, and the numerator of which shall be the
number of shares of Common Stock outstanding immediately
<PAGE>
prior to such action. Such adjustment shall be made successively
whenever any event listed above shall occur.
b. In case the Company shall fix a record date for the issuance
of rights or warrants to all holders of its Common Stock entitling
them to subscribe for or purchase shares of Common Stock (or
securities convertible into Common Stock) at a price (the
"Subscription Price") (or having a conversion price per share) less
than the Exercise Price on the record date mentioned below, the
Exercise Price shall be adjusted so that the same shall equal the
price determined by multiplying the Exercise Price in effect
immediately prior to the date of issuance by a fraction, the
numerator of which shall be the sum of the number of shares
outstanding on the record date mentioned below and the number of
additional shares of Common Stock which the aggregate offering
price of the total number of shares of Common Stock so offered (or
the aggregate conversion price of the convertible securities so
offered) would purchase at the Exercise Price in effect immediately
prior to the date of such issuance, and the denominator of which
shall be the sum of the number of shares of Common Stock
outstanding on the record date mentioned below and the number of
additional shares of Common Stock offered for subscription or
purchase (or into which the convertible securities so offered are
convertible). Such adjustment shall be made successively whenever
such rights or warrants are issued and shall become effective
immediately after the record date for the determination of
shareholders entitled to receive such rights or warrants; and to
the extent that shares of Common Stock are not delivered (or
securities convertible into Common Stock are not delivered) after
the expiration of such rights or warrants the Exercise Price shall
be readjusted to the Exercise Price which would then be in effect
had the adjustments made upon the issuance of such rights or
warrants been made upon the basis of delivery of only the number of
shares of Common Stock (or securities convertible into Common
Stock) actually delivered.
c. In case the Company shall hereafter distribute to the
holders of its Common Stock evidences of its indebtedness or assets
(excluding cash dividends or distributions and dividends or
distributions referred to in Subsection (i) above) or subscription
rights or warrants (excluding those referred to in Subsection (ii)
above), then in each such case the Exercise Price in effect
thereafter shall be determined by multiplying the Exercise Price in
effect immediately prior thereto by a fraction, the numerator of
which shall be the total number of shares of Common Stock
outstanding multiplied by the Fair Market Value per share of Common
Stock, less the fair market value (as determined by the Company's
Board of Directors) of said assets or evidences of indebtedness so
distributed or of such rights or warrants, and the denominator of
which shall be the total number of shares
<PAGE>
of Common Stock outstanding multiplied by the Fair Market Value per
share of Common Stock. Such adjustment shall be made successively
whenever such a record date is fixed. Such adjustment shall be made
whenever any such distribution is made and shall become effective
immediately after the record date for the determination of
shareholders entitled to receive such distribution.
d. Whenever the Exercise Price payable upon exercise of each
Warrant is adjusted pursuant to Subsections (i), (ii) or (iii)
above, the number of Shares purchasable upon exercise of this
Warrant shall simultaneously be adjusted by multiplying the number
of Shares initially issuable upon exercise of this Warrant by the
Exercise Price in effect on the date hereof and dividing the
product so obtained by the Exercise Price, as adjusted.
e. No adjustment in the Exercise Price shall be required unless
such adjustment would require an increase or decrease of at least
5% in such price; provided, however, that any adjustments which by
reason of this Subsection (v) are not required to be made shall be
carried forward and taken into account in any subsequent adjustment
required to be made hereunder. All calculations under this Section
(f) shall be made to the nearest cent or to the nearest one-
hundredth of a share, as the case may be. Anything in this Section
(f) to the contrary notwithstanding, the Company shall be entitled,
but shall not be required, to make such changes in the Exercise
Price, in addition to those required by this Section (f), as it
shall determine, in its sole discretion, to be advisable in order
that any dividend or distribution in shares of Common Stock, or any
subdivision, reclassification or combination of Common Stock,
hereafter made by the Company shall not result in any Federal
Income tax liability to the holders of Common Stock or securities
convertible into Common Stock (including Warrants).
f. Whenever the Exercise Price is adjusted, as herein provided,
the Company shall promptly but no later than 10 days after any
request for such an adjustment by the Holder, cause a notice
setting forth the adjusted Exercise Price and adjusted number of
Shares issuable upon exercise of each Warrant, and, if requested,
information describing the transactions giving rise to such
adjustments, to be mailed to the Holders at their last addresses
appearing in the Warrant Register, and shall cause a certified copy
thereof to be mailed to its transfer agent, if any. The Company may
retain a firm of independent certified public accountants selected
by the Board of Directors (who may be the regular accountants
employed by the Company) to make any computation required by this
Section (f), and a
<PAGE>
certificate signed by such firm shall be conclusive evidence of the
correctness of such adjustment.
g. In the event that at any time, as a result of an adjustment
made pursuant to Subsection (i) above, the Holder of this Warrant
thereafter shall become entitled to receive any shares of the
Company, other than Common Stock, thereafter the number of such
other shares so receivable upon exercise of this Warrant shall be
subject to adjustment from time to time in a manner and on terms as
nearly equivalent as practicable to the provisions with respect to
the Common Stock contained in Subsections (i) to (vi), inclusive
above.
h. Irrespective of any adjustments in the Exercise Price or the
number or kind of shares purchasable upon exercise of this Warrant,
Warrants theretofore or thereafter issued may continue to express
the same price and number and kind of shares as are stated in the
similar Warrants initially issuable pursuant to the Agreement.
7. OFFICER'S CERTIFICATE. Whenever the Exercise Price shall be
adjusted as required by the provisions of the foregoing Section, the
Company shall forthwith file in the custody of its Secretary or an
Assistant Secretary at its principal office and with its stock transfer
agent, if any, an officer's certificate showing the adjusted Exercise
Price determined as herein provided, setting forth in reasonable detail
the facts requiring such adjustment, including a statement of the number
of additional shares of Common Stock, if any, and such other facts as
shall be necessary to show the reason for and the manner of computing
such adjustment. Each such officer's certificate shall be made available
at all reasonable times for inspection by the holder or any holder of a
Warrant executed and delivered pursuant to Section (a) and the Company
shall, forthwith after each such adjustment, mail a copy by certified
mail of such certificate to the Holder or any such holder.
8. NOTICES TO WARRANT HOLDERS. So long as this Warrant shall be
outstanding, (i) if the Company shall pay any dividend or make any
distribution upon the Common Stock or (ii) if the Company shall offer to
the Holders of Common Stock for subscription or purchase by them any
share of any class or any other rights or (iii) if any capital
reorganization of the Company, reclassification of the capital stock of
the Company, consolidation or merger of the Company with or into another
corporation, sale, lease or transfer of all or substantially all of the
property and assets of the Company to another corporation, or voluntary
or involuntary dissolution, liquidation or winding up of the Company
shall be effected, then in any such case, the Company shall cause to be
mailed by certified mail to the Holder, at least fifteen days prior to
the date specified in (x) or (y) below, as the case may be, a notice
containing a brief description of the proposed
<PAGE>
action and stating the date on which (x) a record is to be taken for the
purpose of such dividend, distribution or rights, or (y) such
reclassification, reorganization, consolidation, merger, conveyance,
lease, dissolution, liquidation or winding up is to take place and the
date, if any is to be fixed, as of which the Holders of Common Stock or
other securities shall receive cash or other property deliverable upon
such reclassification, reorganization, consolidation, merger,
conveyance, dissolution, liquidation or winding up.
9. RECLASSIFICATION, REORGANIZATION OR MERGER. In case of any
reclassification, capital reorganization or other change of outstanding
shares of Common Stock of the Company, or in case of any consolidation
or merger of the Company with or into another corporation (other than a
merger with a subsidiary in which merger the Company is the continuing
corporation and which does not result in any reclassification, capital
reorganization or other change of outstanding shares of Common Stock of
the class issuable upon exercise of this Warrant) or in case of any
sale, lease or conveyance to another corporation of the property of the
Company as an entirety, the Company shall, as a condition precedent to
such transaction, cause effective provisions to be made so that the
Holder shall have the right thereafter by exercising this Warrant at any
time prior to the expiration of the Warrant, to purchase the kind and
amount of shares of stock and other securities and property receivable
upon such reclassification, capital reorganization and other change,
consolidation, merger, sale or conveyance by a holder of the number of
shares of Common Stock which might have been purchased upon exercise of
this Warrant immediately prior to such reclassification, change,
consolidation, merger, sale or conveyance. Any such provision shall
include provision for adjustments which shall be as nearly equivalent as
may be practicable to the adjustments provided for in this Warrant. The
foregoing provisions of this Section (i) shall similarly apply to
successive reclassifications, capital reorganizations and changes of
shares of Common Stock and to successive consolidations, mergers, sales
or conveyances. In the event that in connection with any such capital
reorganization or reclassification, consolidation, merger, sale or
conveyance, additional shares of Common Stock shall be issued in
exchange, conversion, substitution or payment, in whole or in part, for
a security of the Company other than Common Stock, any such issue shall
be treated as an issue of Common Stock covered by the provisions of
Subsection (i) of Section (f)hereof.
<PAGE>
3-DIMENSIONAL PHARMACEUTICALS, INC.
By /s/ David C. U'Prichard
-------------------------------------
Name: David C. U'Prichard
Title: Chief Executive Officer
[SEAL]
Dated: November 18, 1999
Attest:
/s/ Scott M. Horvitz
- -----------------------------
Secretary
<PAGE>
PURCHASE FORM
-------------
Dated _____________, ____
The undersigned hereby irrevocably elects to exercise the within Warrant to
the extent of purchasing _________ shares of Common Stock and hereby makes
payment of in payment of the actual exercise price thereof
---------
INSTRUCTIONS FOR REGISTRATION OF STOCK
--------------------------------------
Name ____________________________________________
(Please typewrite or print in block letters)
Address _________________________________
Signature ________________________________
---------
ASSIGNMENT FORM
---------------
FOR VALUE RECEIVED, __________________________ hereby sells, assigns and
transfers unto
Name _____________________________________________________
(Please typewrite or print in block letters)
Address __________________________________________________
the right to purchase Common Stock represented by this Warrant to the extent of
_____ shares as to which such right is exercisable and does hereby irrevocably
constitute and appoint ____________________ Attorney, to transfer the same on
the books of the Company with full power of substitution in the premises.
Date _____________, _____
Signature ____________________________
<PAGE>
Exhibit 10.13
Warrant to Purchase 552,547 Shares of Common Stock or
such additional shares as this Warrant may entitle the holder
to purchase pursuant to provisions of this Warrant.
WARRANT TO PURCHASE COMMON STOCK
OF
3-DIMENSIONAL PHARMACEUTICALS, INC.
This is to Certify That, FOR VALUE RECEIVED, Biotech Growth SA or
assigns ("Holder") is entitled to purchase, subject to the provisions of this
Warrant, from 3-Dimensional Pharmaceuticals, Inc., a Delaware corporation (the
"Company"), 552,547 fully paid, validly issued and nonassessable shares of
Common Stock, par value $.001 per share, of the Company ("Common Stock") at a
price of $1.25 per share during the Exercise Period (as defined below). The
number of shares of Common Stock to be received upon the exercise of this
Warrant and the price to be paid for each share of Common Stock may be adjusted
from time to time as hereinafter set forth. The shares of Common Stock
deliverable upon such exercise, and as adjusted from time to time, are
hereinafter sometimes referred to as "Warrant Shares" and the exercise price of
a share of Common Stock in effect at any time and as adjusted from time to time
is hereinafter sometimes referred to as the "Exercise Price." This Warrant is
being issued in connection with the issuance by the Company of Warrants to
purchase shares of Common Stock and promissory notes in the aggregate principal
amount of up to $10,000,000 (the "Notes"), pursuant to a Note and Warrant
Purchase Agreement dated as of November 18, 1999 (the "Agreement").
1. EXERCISE OF WARRANT.
a. This Warrant may be exercised in whole or in part at any time
or from time to time on or after November 18, 1999 until 5 p.m.
New York City Time on November 18, 2000 (the "Exercise Period");
provided, however, that if such day is a day on which banking
institutions in the State of New York are authorized by law to
close, then on the next succeeding day which shall not be such a
day. This Warrant may be exercised by presentation and surrender
hereof to the Company at its principal office, or at the office
of its stock transfer agent, if any, with the Purchase Form
annexed hereto duly executed and accompanied by payment of the
Exercise Price for the number of Warrant Shares specified
<PAGE>
in such form. As soon as practicable after each such exercise of
the Warrants, but not later than seven (7) days from the date of
such exercise, the Company shall issue and deliver to the Holder
a certificate or certificates for the Warrant Shares issuable
upon such exercise, registered in the name of the Holder or its
designee. If this Warrant should be exercised in part only, the
Company shall, upon surrender of this Warrant for cancellation,
execute and deliver a new Warrant evidencing the rights of the
Holder thereof to purchase the balance of the Warrant Shares
purchasable thereunder. Upon receipt by the Company of this
Warrant at its office, or by the stock transfer agent of the
Company at its office, in proper form for exercise, the Holder
shall be deemed to be the holder of record of the shares of
Common Stock issuable upon such exercise, notwithstanding that
the stock transfer books of the Company shall then be closed or
that certificates representing such shares of Common Stock shall
not then be physically delivered to the Holder.
b. At any time during the Exercise Period, the Holder may, at
its option, exchange this Warrant, in whole or in part (a
"Warrant Exchange") into the number of Warrant Shares determined
in accordance with this Section (a)(ii), by surrendering this
Warrant at the principal office of the Company or at the office
of its stock transfer agent, accompanied by a notice stating such
Holder's intent to effect such exchange, the number of Warrant
Shares to be exchanged and the date on which the Holder requests
that such Warrant Exchange occur (the "Notice of Exchange"). The
Warrant Exchange shall take place on the date specified in the
Notice of Exchange or, if later, the date the Notice of Exchange
is received by the Company (the "Exchange Date"). Certificates
for the shares issuable upon such Warrant Exchange and, if
applicable, a new warrant of like tenor evidencing the balance of
the shares remaining subject to this Warrant, shall be issued as
of the Exchange Date and delivered to the Holder within seven (7)
days following the Exchange Date. In connection with any Warrant
Exchange, this Warrant shall represent the right to subscribe for
and acquire the number of Warrant Shares (rounded to the next
highest integer) equal to (i) the number of Warrant Shares
specified by the Holder in its Notice of Exchange (the "Total
Number") less (ii) the number of Warrant Shares equal to the
quotient obtained by dividing (A) the product of the Total Number
and the existing Exercise Price by (B) the Fair Market Value.
"Fair Market Value" shall mean: (1) if the Common Stock is listed
on a National Securities Exchange or admitted to unlisted trading
privileges on such exchange or listed for trading on the NASDAQ
system, the average of the last reported sale prices of the
Common Stock on such exchange or system for the twenty (20)
business days ending on the last business day prior to the date
for which the determination is being made; or (2) if the
<PAGE>
Common Stock is not so listed or admitted to unlisted trading
privileges, the average of the means of the last reported bid and
asked prices reported by the National Quotation Bureau, Inc. for
the twenty (20) business days ending on the last business day
prior to the date for which the determination is being made; or
(3) if the Common Stock is not so listed or admitted to unlisted
trading privileges and bid and asked prices are not so reported,
an amount, not less than book value thereof as at the end of the
most recent fiscal year of the Company ending prior to the
Exchange Date, determined in such reasonable manner as may be
prescribed by the Board of Directors of the Company.
2. RESERVATION OF SHARES. The Company shall at all times reserve for
issuance and/or delivery upon exercise of this Warrant such number of
shares of its Common Stock as shall be required for issuance and
delivery upon exercise of the Warrants.
3. FRACTIONAL SHARES. No fractional shares or script representing
fractional shares shall be issued upon the exercise of this Warrant.
With respect to any fraction of a share called for upon any exercise
hereof, the Company shall pay to the Holder an amount in cash equal to
such fraction multiplied by the Fair Market Value of a share.
4. EXCHANGE, TRANSFER, ASSIGNMENT OR LOSS OF WARRANT.
(i) This Warrant is exchangeable, without expense, at the option
of the Holder, upon presentation and surrender hereof to the
Company or at the office of its stock transfer agent, if any, for
other warrants of different denominations entitling the holder
thereof to purchase in the aggregate the same number of shares of
Common Stock purchasable hereunder. Subject to the restrictions
set forth in subparagraph (ii) below, upon surrender of this
Warrant to the Company at its principal office or at the office
of its stock transfer agent, if any, with the Assignment Form
annexed hereto duly executed and funds sufficient to pay any
transfer tax, the Company shall, without charge, execute and
deliver a new Warrant in the name of the assignee named in such
instrument of assignment and this Warrant shall promptly be
canceled. This Warrant may be divided or combined with other
warrants which carry the same rights upon presentation hereof at
the principal office of the Company or at the office of its stock
transfer agent, if any, together with a written notice specifying
the names and denominations in which new Warrants are to be
issued and signed by the Holder hereof. The term "Warrant" as
used herein includes any Warrants into which this Warrant may be
divided or exchanged. Upon receipt by the Company of evidence
satisfactory to it of the loss, theft, destruction or mutilation
of this Warrant, and (in the case of loss, theft or destruction)
of
<PAGE>
reasonably satisfactory indemnification, and upon surrender and
cancellation of this Warrant, if mutilated, the Company will
execute and deliver a new Warrant of like tenor and date. Any
such new Warrant executed and delivered shall constitute an
additional contractual obligation on the part of the Company,
whether or not this Warrant so lost, stolen, destroyed, or
mutilated shall be at any time enforceable by anyone.
(ii) This Warrant and the shares of Common Stock issuable upon
exercise hereof have not been registered under the Securities Act
of 1933, as amended, or state securities laws by reason of an
exemption therefrom. The shares of Common Stock issuable upon
exercise of this Warrant are not transferable except as provided
in the Agreement and the Stockholders' Agreement dated as of
January 6, 1998, as amended from time to time ("Stockholders'
Agreement"). Shares of Common Stock issuable upon exercise of
this Warrant will bear an appropriate legend to this effect. The
restrictions contained herein shall be binding on any transferee
of the Common Stock issuable upon exercise of this Warrant and
the Company may require any such transferee to execute an
instrument agreeing in writing to be bound by these restrictions
as a condition to transfer.
5. RIGHTS OF THE HOLDER. The Holder shall not, by virtue hereof, be
entitled to any rights of a shareholder in the Company, either at law
or equity, and the rights of the Holder are limited to those expressed
in the Warrant and are not enforceable against the Company except to
the extent set forth herein.
6. ANTI-DILUTION PROVISIONS. The Exercise Price in effect at any
time and the number and kind of securities purchasable upon the
exercise of the Warrants shall be subject to adjustment from time to
time upon the happening of certain events as follows:
a. In case the Company shall (i) declare a dividend or make a
distribution on its outstanding shares of Common Stock in shares
of Common Stock, (ii) subdivide or reclassify its outstanding
shares of Common Stock into a greater number of shares, or (iii)
combine or reclassify its outstanding shares of Common Stock into
a smaller number of shares, the Exercise Price in effect at the
time of the record date for such dividend or distribution or of
the effective date of such subdivision, combination or
reclassification shall be adjusted so that it shall equal the
price determined by multiplying the Exercise Price by a fraction,
the denominator of which shall be the number of shares of Common
Stock outstanding after giving effect to such action, and the
numerator of which shall be the number of shares of Common Stock
outstanding immediately
<PAGE>
prior to such action. Such adjustment shall be made successively
whenever any event listed above shall occur.
b. In case the Company shall fix a record date for the issuance
of rights or warrants to all holders of its Common Stock
entitling them to subscribe for or purchase shares of Common
Stock (or securities convertible into Common Stock) at a price
(the "Subscription Price") (or having a conversion price per
share) less than the Exercise Price on the record date mentioned
below, the Exercise Price shall be adjusted so that the same
shall equal the price determined by multiplying the Exercise
Price in effect immediately prior to the date of issuance by a
fraction, the numerator of which shall be the sum of the number
of shares outstanding on the record date mentioned below and the
number of additional shares of Common Stock which the aggregate
offering price of the total number of shares of Common Stock so
offered (or the aggregate conversion price of the convertible
securities so offered) would purchase at the Exercise Price in
effect immediately prior to the date of such issuance, and the
denominator of which shall be the sum of the number of shares of
Common Stock outstanding on the record date mentioned below and
the number of additional shares of Common Stock offered for
subscription or purchase (or into which the convertible
securities so offered are convertible). Such adjustment shall be
made successively whenever such rights or warrants are issued and
shall become effective immediately after the record date for the
determination of shareholders entitled to receive such rights or
warrants; and to the extent that shares of Common Stock are not
delivered (or securities convertible into Common Stock are not
delivered) after the expiration of such rights or warrants the
Exercise Price shall be readjusted to the Exercise Price which
would then be in effect had the adjustments made upon the
issuance of such rights or warrants been made upon the basis of
delivery of only the number of shares of Common Stock (or
securities convertible into Common Stock) actually delivered.
c. In case the Company shall hereafter distribute to the holders
of its Common Stock evidences of its indebtedness or assets
(excluding cash dividends or distributions and dividends or
distributions referred to in Subsection (i) above) or
subscription rights or warrants (excluding those referred to in
Subsection (ii) above), then in each such case the Exercise Price
in effect thereafter shall be determined by multiplying the
Exercise Price in effect immediately prior thereto by a fraction,
the numerator of which shall be the total number of shares of
Common Stock outstanding multiplied by the Fair Market Value per
share of Common Stock, less the fair market value (as determined
by the Company's Board of Directors) of said assets or evidences
of indebtedness so distributed or of such rights or warrants, and
the denominator of which shall be the total number of shares
<PAGE>
of Common Stock outstanding multiplied by the Fair Market Value
per share of Common Stock. Such adjustment shall be made
successively whenever such a record date is fixed. Such
adjustment shall be made whenever any such distribution is made
and shall become effective immediately after the record date for
the determination of shareholders entitled to receive such
distribution.
d. Whenever the Exercise Price payable upon exercise of each
Warrant is adjusted pursuant to Subsections (i), (ii) or (iii)
above, the number of Shares purchasable upon exercise of this
Warrant shall simultaneously be adjusted by multiplying the
number of Shares initially issuable upon exercise of this Warrant
by the Exercise Price in effect on the date hereof and dividing
the product so obtained by the Exercise Price, as adjusted.
e. No adjustment in the Exercise Price shall be required unless
such adjustment would require an increase or decrease of at least
5% in such price; provided, however, that any adjustments which
by reason of this Subsection (v) are not required to be made
shall be carried forward and taken into account in any subsequent
adjustment required to be made hereunder. All calculations under
this Section (f) shall be made to the nearest cent or to the
nearest one-hundredth of a share, as the case may be. Anything in
this Section (f) to the contrary notwithstanding, the Company
shall be entitled, but shall not be required, to make such
changes in the Exercise Price, in addition to those required by
this Section (f), as it shall determine, in its sole discretion,
to be advisable in order that any dividend or distribution in
shares of Common Stock, or any subdivision, reclassification or
combination of Common Stock, hereafter made by the Company shall
not result in any Federal Income tax liability to the holders of
Common Stock or securities convertible into Common Stock
(including Warrants).
f. Whenever the Exercise Price is adjusted, as herein provided,
the Company shall promptly but no later than 10 days after any
request for such an adjustment by the Holder, cause a notice
setting forth the adjusted Exercise Price and adjusted number of
Shares issuable upon exercise of each Warrant, and, if requested,
information describing the transactions giving rise to such
adjustments, to be mailed to the Holders at their last addresses
appearing in the Warrant Register, and shall cause a certified
copy thereof to be mailed to its transfer agent, if any. The
Company may retain a firm of independent certified public
accountants selected by the Board of Directors (who may be the
regular accountants employed by the Company) to make any
computation required by this Section (f), and a
<PAGE>
certificate signed by such firm shall be conclusive evidence of
the correctness of such adjustment.
g. In the event that at any time, as a result of an adjustment
made pursuant to Subsection (i) above, the Holder of this Warrant
thereafter shall become entitled to receive any shares of the
Company, other than Common Stock, thereafter the number of such
other shares so receivable upon exercise of this Warrant shall be
subject to adjustment from time to time in a manner and on terms
as nearly equivalent as practicable to the provisions with
respect to the Common Stock contained in Subsections (i) to (vi),
inclusive above.
h. Irrespective of any adjustments in the Exercise Price or the
number or kind of shares purchasable upon exercise of this
Warrant, Warrants theretofore or thereafter issued may continue
to express the same price and number and kind of shares as are
stated in the similar Warrants initially issuable pursuant to the
Agreement.
7. OFFICER'S CERTIFICATE. Whenever the Exercise Price shall be
adjusted as required by the provisions of the foregoing Section, the
Company shall forthwith file in the custody of its Secretary or an
Assistant Secretary at its principal office and with its stock
transfer agent, if any, an officer's certificate showing the adjusted
Exercise Price determined as herein provided, setting forth in
reasonable detail the facts requiring such adjustment, including a
statement of the number of additional shares of Common Stock, if any,
and such other facts as shall be necessary to show the reason for and
the manner of computing such adjustment. Each such officer's
certificate shall be made available at all reasonable times for
inspection by the holder or any holder of a Warrant executed and
delivered pursuant to Section (a) and the Company shall, forthwith
after each such adjustment, mail a copy by certified mail of such
certificate to the Holder or any such holder.
8. NOTICES TO WARRANT HOLDERS. So long as this Warrant shall be
outstanding, (i) if the Company shall pay any dividend or make any
distribution upon the Common Stock or (ii) if the Company shall offer
to the Holders of Common Stock for subscription or purchase by them
any share of any class or any other rights or (iii) if any capital
reorganization of the Company, reclassification of the capital stock
of the Company, consolidation or merger of the Company with or into
another corporation, sale, lease or transfer of all or substantially
all of the property and assets of the Company to another corporation,
or voluntary or involuntary dissolution, liquidation or winding up of
the Company shall be effected, then in any such case, the Company
shall cause to be mailed by certified mail to the Holder, at least
fifteen days prior to the date specified in (x) or (y) below, as the
case may be, a notice containing a brief description of the proposed
<PAGE>
action and stating the date on which (x) a record is to be taken for
the purpose of such dividend, distribution or rights, or (y) such
reclassification, reorganization, consolidation, merger, conveyance,
lease, dissolution, liquidation or winding up is to take place and the
date, if any is to be fixed, as of which the Holders of Common Stock
or other securities shall receive cash or other property deliverable
upon such reclassification, reorganization, consolidation, merger,
conveyance, dissolution, liquidation or winding up.
9. RECLASSIFICATION, REORGANIZATION OR MERGER. In case of any
reclassification, capital reorganization or other change of
outstanding shares of Common Stock of the Company, or in case of any
consolidation or merger of the Company with or into another
corporation (other than a merger with a subsidiary in which merger the
Company is the continuing corporation and which does not result in any
reclassification, capital reorganization or other change of
outstanding shares of Common Stock of the class issuable upon exercise
of this Warrant) or in case of any sale, lease or conveyance to
another corporation of the property of the Company as an entirety, the
Company shall, as a condition precedent to such transaction, cause
effective provisions to be made so that the Holder shall have the
right thereafter by exercising this Warrant at any time prior to the
expiration of the Warrant, to purchase the kind and amount of shares
of stock and other securities and property receivable upon such
reclassification, capital reorganization and other change,
consolidation, merger, sale or conveyance by a holder of the number of
shares of Common Stock which might have been purchased upon exercise
of this Warrant immediately prior to such reclassification, change,
consolidation, merger, sale or conveyance. Any such provision shall
include provision for adjustments which shall be as nearly equivalent
as may be practicable to the adjustments provided for in this Warrant.
The foregoing provisions of this Section (i) shall similarly apply to
successive reclassifications, capital reorganizations and changes of
shares of Common Stock and to successive consolidations, mergers,
sales or conveyances. In the event that in connection with any such
capital reorganization or reclassification, consolidation, merger,
sale or conveyance, additional shares of Common Stock shall be issued
in exchange, conversion, substitution or payment, in whole or in part,
for a security of the Company other than Common Stock, any such issue
shall be treated as an issue of Common Stock covered by the provisions
of Subsection (i) of Section (f) hereof.
<PAGE>
3-DIMENSIONAL PHARMACEUTICALS, INC.
By /s/ David C. U'Prichard
-------------------------------
Name: David C. U'Prichard
Title: Chief Executive Officer
[SEAL]
Dated: November 18, 1999
Attest:
/s/ Scott M. Horvitz
- -----------------------------
Secretary
<PAGE>
PURCHASE FORM
-------------
Dated _____________, ____
The undersigned hereby irrevocably elects to exercise the within
Warrant to the extent of purchasing _________ shares of Common Stock and hereby
makes payment of in payment of the actual exercise price thereof
---------
INSTRUCTIONS FOR REGISTRATION OF STOCK
--------------------------------------
Name __________________________________
(Please typewrite or print in block letters)
Address __________________________________
Signature ________________________________
---------
ASSIGNMENT FORM
---------------
FOR VALUE RECEIVED, __________________________ hereby sells, assigns
and transfers unto
Name _____________________________________________________
(Please typewrite or print in block letters)
Address __________________________________________________
the right to purchase Common Stock represented by this Warrant to the extent of
_____ shares as to which such right is exercisable and does hereby irrevocably
constitute and appoint ____________________ Attorney, to transfer the same on
the books of the Company with full power of substitution in the premises.
Date _____________, _____
Signature ____________________________
<PAGE>
EXHIBIT 10.15
SETTLEMENT AGREEMENT
This is a Settlement Agreement entered into March 7, 2000 (the "Effective
Date") by and between:
Scriptgen Pharmaceuticals, Inc., a Delaware corporation having a principal
place of business at 610 Lincoln Street, Waltham, MA 02451 ("Scriptgen"); and
3-Dimensional Pharmaceuticals, Inc., a Delaware corporation having a
principal place of business at 665 Stockton Drive, Exton, PA 19341 ("3DP").
WHEREAS, Scriptgen is the owner of U.S. Patent 5,585,277 ("the `277
patent'"), and U.S. Patent No. 5,679,582 ("the `582 patent'");
WHEREAS on October 13, 1998, Scriptgen filed an action in the United States
District Court for the District of Delaware, captioned Scriptgen
Pharmaceuticals, Inc. v. 3-Dimensional Pharmaceuticals, Inc., Civil Action No.
98-583-GMS, in which Scriptgen has asserted claims against 3DP for infringement
of the `277 patent and the `582 patent and 3DP has asserted defenses and
counterclaims against Scriptgen including the non-infringement, invalidity, and
unenforceability of the `277 patent and the `582 patent ("the Action"); and
WHEREAS Scriptgen and 3DP desire to settle all claims that have been raised
in the Action and wish to avoid any further controversy between them as set
forth herein.
NOW THEREFORE, in consideration of the mutual covenants and undertakings of
the parties, Scriptgen and 3DP agree as follows:
1. DEFINITIONS
1.1 "Affiliate" shall mean an entity that directly, or indirectly through one
or more intermediaries, controls, or is controlled by, or is under common
control with, 3DP or Scriptgen, as applicable; provided further that
"control(s)(led)" as used in this Section shall mean ownership by a third
party, not including a venture capital fund or group of venture capital
funds, of at least fifty percent (50%) of the equity capital of such
entity.
1.2 "Atlas Technology" shall mean the methods and processes generally disclosed
in the specifications and claims of the `277 patent, the `582 patent and/or
Scriptgen International Application No. PCT/US96/19698.
1.3 "Calendar Quarter" shall mean each three month period, or any portion
thereof, ending on March 31, June 30, September 30 and December 31.
1.4 "Development Compound" shall mean a compound that has entered pre-clinical
regulatory drug safety studies conducted under good laboratory practice
(GLP) guidelines.
<PAGE>
1.5 "Hepatitis C Virus Field" shall mean any program(s) whose intent is to
discover or develope a drug that exerts a therapeutic effect in Hepatitis C
Virus Infection.
1.6 "Infection" shall mean the field of treatment with, research on, and/or
development of drugs whose principal aim is to treat or cure infectious
disease in humans.
1.7 "Method Claims" shall mean any claim in a patent or application to a
process or method and shall not include any claim to a product or
apparatus.
1.8 "Net Revenues" shall mean the revenues actually received by a party from
the offering or provision of drug screening services or from the sale of
drug compounds, after allowing deductions for sales, use and other similar
taxes (excluding taxes based on such party's income or revenues), the legal
incidence of which is on such party, returns and other credits.
1.9 "Restriction Period" shall mean the period of time beginning from the
Effective Date and ending on the third (3rd) anniversary of the Effective
Date.
1.10 "Scriptgen" shall mean Scriptgen Pharmaceuticals, Inc., its present and
future Affiliates, and any entity in which Scriptgen Pharmaceuticals, Inc.
owns or controls a majority interest.
1.11 "ThermoFluor Deal" shall mean a business arrangement between 3DP and a
third party collaborator, for any duration of time, involving the use of
3DP's ThermoFluor(R) Screening Technology at one or more research sites
anywhere in the world and operated by 3DP and/or such third party
collaborating with 3DP.
1.12 "ThermoFluor Screening Technology" shall mean the methods, processes and
apparatus generally disclosed in the specifications and claims of U.S.
Patent No. 6,020,141 and/or allowed U.S. Patent Application Serial no.
08/853,459.
1.13 "3DP" shall mean 3-Dimensional Pharmaceuticals, Inc., its present and
future Affiliates, and any entity in which 3-Dimensional Pharmaceuticals,
Inc. owns or controls a majority interest.
1.14 "3DP Internal Program(s)" shall mean drug discovery and/or development
program(s) in any therapeutic field conducted for and by 3DP on-site at a
3DP facility.
2. FINANCIAL PAYMENT AND RELEASE
2.1 [**]
2.2 Each payment shall be by wire transfer to [**]. A letter confirming the
transfer shall be delivered to Scriptgen's counsel, DARBY & DARBY, PC, 805
Third Avenue, New York, NY 10022, by overnight courier.
**Certain portions of this Exhibit have been omitted based upon a request for
confidential treatment that has been filed with the Commission. The omitted
portions have been filed separately with the Commission.
-2-
<PAGE>
2.3 Upon full execution of this Agreement by the parties and receipt by
Scriptgen of the initial non-refundable payment specified in Section 2.1(a)
above, Scriptgen for itself and for its shareholders, officers, directors,
agents, representatives and all persons and entities claiming under or
through it, releases 3DP, and its shareholders, employees, agents,
officers, directors, representatives, customers, suppliers, manufacturers,
partners and distributors, from any and all claims of infringement of the
`277 patent and the `582 patent, and from all injuries and damages which
may have resulted therefrom, whether now known, unforeseen, unanticipated
or latent which Scriptgen ever had, now has, or hereafter can, shall or may
have, by reason of any act, omission or occurrence prior to the Effective
Date.
2.4 3DP, for itself and for its shareholders, officers, directors, agents,
representatives and all persons and entities claiming under or through it,
releases Scriptgen and its shareholders, employees, agents, officers,
directors, representatives, customers, suppliers, manufacturers, partners
and distributors, from any and all claims of any kind and from all injuries
and damages which may have resulted therefrom, whether now known,
unforeseen, unanticipated or latent which 3DP ever had, now has, or
hereafter can, shall or may have, by reason of any act, omission or
occurrence prior to the Effective Date with respect to the subject matter
of the Action.
2.5 The parties will direct their attorneys to sign the Stipulated Order of
Dismissal attached hereto as Exhibit A simultaneously with signing this
Agreement and to cause their respective attorneys to file the signed
Stipulated Order of Dismissal with the Court in the Action within five (5)
days after the full execution of this Agreement and the receipt by
Scriptgen of the initial non-refundable payment specified in Section 2.1(a)
above.
2.6 The parties each agree that within sixty (60) days after entry of the
Stipulated Order of Dismissal, they will each return to the other party, in
accordance with paragraph sixteen (16) of the Stipulation and Order
Governing the Protection and Exchange of Confidential Material in the
Action, dated March 23, 1999, or certify the destruction of, all
confidential documents that were produced by the other party during the
course of the Action.
3. LICENSE GRANT BY SCRIPTGEN TO 3DP
3.1 In settlement of the Action, Scriptgen hereby grants to 3DP beginning on
the Effective Date, and subject to Sections 3.2 through 3.11, a perpetual,
non-exclusive, worldwide, fully-paid license, with the right to sub-
license, under the `277 patent, the `582 patent, and any patents issuing
from Scriptgen International Application No. PCT/US96/19698, any and all
continuing applications, divisional applications, continuation-in-part
applications, reissues, extensions, renewals and reexaminations thereof,
and any U.S. and foreign counterparts thereof. In addition, Scriptgen
agrees not to file any future patent infringement actions against 3DP for
3DP's use of ThermoFluor Screening Technology that is consistent with the
terms of this Agreement.
-3-
<PAGE>
3.2 3DP shall not have the right to assign the license granted herein
except as part of the sale of its ThermoFluor Screening Technology or
business, the sale of substantially all the capital stock or assets of the
corporation, or the merger or consolidation of the corporation.
3.3 During the Restriction Period, 3DP shall be permitted to enter into only
one (1) ThermoFluor Deal, including the right to sub-license, and including
unrestricted sales of ThermoFluor Screening Technology instruments, where
the principal focus of such business arrangement is Infection, provided
however that such ThermoFluor Deal may not involve the Hepatitis C Virus
Field, nor involve more than three (3) other anti-viral targets.
3.4 3DP shall be able to freely secure any partnerships or other business
arrangements involving ThermoFluor Screening Technology, except that during
the Restriction Period the principal focus may not be Infection and 3DP
shall not grant any sublicenses for Infection during the Restriction
Period, except as permitted under Sections 3.3 and 3.10 of this Agreement.
In the event that a partner or other third party requests that 3DP screen,
during the Restriction Period, multiple targets which include Intended
Infection targets, 3DP shall inform such party that it cannot screen such
Infection targets, but shall disclose that such screening can be conducted
by Scriptgen. Scriptgen shall pay to 3DP [**] of all Net Revenues received
during the first year of an agreement which demonstrably resulted from such
an introduction by 3DP.
3.5 During the Restriction Period, Scriptgen may refer to 3DP any third parties
that have requested that Scriptgen screen multiple targets to identify
leads or drugs that are effective in any field other than Infection. In
such event, 3DP shall pay to Scriptgen [**] of all Net Revenues received
during the first year of an agreement which demonstrably resulted from such
an introduction by Scriptgen, if such third party or its Affiliates were
not previously contacted by 3DP.
3.6 3DP shall be free to use ThermoFluor Screening Technology without
restriction in any 3DP Internal Program, except in the Hepatitis C Virus
Field during the Restriction Period, and to license or transfer, in any
manner, any compounds discovered or optimized through such use of
ThermoFluor Screening Technology. 3DP shall not use ThermoFluor Screening
Technology in the Hepatitis C Virus Field during the Restriction Period.
3.7 In the event that 3DP uses ThermoFluor Screening Technology in a 3DP
Internal Program that leads to the designation, during the Restriction
Period, of a Development Compound that leads to a drug in Infection, 3DP
shall pay to Scriptgen a sliding-scale royalty based on 3DP's Net Revenues
from the sale of such drug by 3DP, as follows:
**Certain portions of this Exhibit have been omitted based upon a request for
confidential treatment that has been filed with the Commission. The omitted
portions have been filed separately with the Commission.
-4-
<PAGE>
Category Royalty
-------- -------
All anti-infectives, except anti-virals:
[**] [**]
[**] [**]
All anti-virals [**]
Nothing in this Section 3.7 shall be construed as giving 3DP the right to use
ThermoFluor Screening Technology in the Hepatitis C Virus field during the
Restriction Period.
3.8 The maximum aggregate amount of all royalty payments made under Section
3.7, on a cumulative basis including all such 3DP Internal Programs, shall
not exceed five million United States dollars ($5,000,000).
3.9 In the event that 3DP uses ThermoFluor Screening Technology, in a 3DP
Internal Program that leads to the designation, during the Restriction
Period, of a Development Compound that leads to a drug in Infection, and
3DP subsequently licenses or sells the rights to such drug to a third
party, 3DP shall pay to Scriptgen [**] in the case of anti-infectives
(excluding anti-virals), or [**] in the case of anti-virals, of the up-
front cash payments or sales price received by 3DP from such transaction.
The maximum amount of all such payments in aggregate shall not exceed two
million United States dollars ($2,000,000). Notwithstanding the foregoing,
if any such up-front payments are in the form of an investment in equity
securities of 3DP, the amount of such investment, calculated on a per share
basis, that is in excess of [**] of the amount per share paid in the last
3DP equity financing (or, if 3DP is public, [**] of the closing price
immediately prior to the transaction) shall be deemed to be an "up-front
payment" for purposes of this calculation.
3.10 There shall be no limitations on sales, licenses (including the right to
grant sublicenses limited to use of the ThermoFluor Screening Technology
instruments), or leases of ThermoFluor Screening Technology instruments,
except that during the Restriction Period, in the therapeutic field of
Infection, 3DP may only sell, license (including the right to grant
sublicenses limited to use of ThermoFluor Screening Technology
instruments), or lease ThermoFluor Screening Technology instruments as part
of the permitted ThermoFluor Deal in Infection specified in Section 3.3
above.
3.11 The license of Section 3.1 shall not be deemed to grant a license,
directly, or by implication or otherwise, under any know-how, copyright,
trademark, or other intellectual property right.
**Certain portions of this Exhibit have been omitted based upon a request for
confidential treatment that has been filed with the Commission. The omitted
portions have been filed separately with the Commission.
-5-
<PAGE>
4. THE RESTRICTION PERIOD
4.1 The restrictions of Sections 3.3, 3.4, 3.5, 3.6, 3.7, 3.8, 3.9 and 3.10 on
the perpetual, nonexclusive, worldwide, fully-paid license granted by
Scriptgen in Section 3.1 above, shall terminate on the earlier of:
(a) The end of the Restriction Period; or
(b) Any finding of invalidity or unenforceability of claims 1 and 17 of
the 277 patent and claims 1, 3, 5, 20, 23 and 26 of the 582 patent by
the USPTO or by a court of competent jurisdiction from either of which
an appeal can no longer be taken.
5. LICENSE GRANT BY 3DP TO SCRIPTGEN
5.1 (a) In settlement of the Action, 3DP hereby grants to Scriptgen beginning
on the Effective Date a perpetual, non-exclusive, worldwide, fully
paid license, under any Method Claims found in: (a) U.S. Patent No.
6,020,141; (b) any U.S. patents issuing from allowed U.S. Patent
Application Serial No. 08/853,459; (c) any patents issuing from any
and all continuing applications, divisional applications,
continuation-in-part applications of said `141 patent, said `459
application and/or the application on which said `141 patent was
granted, and any reissues, extensions, renewals and reexaminations of
such patents or patent applications; and/or (d) any foreign
counterparts of the patents in (a), (b) and (c). The license granted
to Scriptgen herein shall include the right to sublicense solely in
------
the field of Infection. In addition, 3DP agrees not to file any future
patent infringement actions against Scriptgen for Scriptgen's use of
Atlas Technology that is consistent with the terms of this Agreement.
(b) During the first three years after the Effective Date, screening
collaborations conducted by Scriptgen on behalf of third parties
outside the field of Infection shall be conducted on-site at a
Scriptgen facility only and shall not exceed ten (10) such screening
collaborations; provided however that this limitation shall expire at
the end of the three-year period.
5.2 The license of Section 5.1 shall not be deemed to grant a license, directly
or by implication or otherwise, under any know-how, copyright, trademark,
or any other intellectual property right.
5.3 Scriptgen shall not have the right to assign the license granted herein
except as part of the sale of its Atlas Technology or business, the sale of
substantially all the capital stock or assets of the corporation, or the
merger or consolidation of the corporation.
6. ROYALTY PAYMENTS, RECORDS AND INSPECTION
6.1 All payments based upon Net Revenues payable hereunder ("Royalty" or
"Royalties") which have accrued in any Calendar Quarter shall be made
within forty-five (45) days after the end of such Calendar Quarter.
6
<PAGE>
6.2 Each party shall keep accurate records and books of account in sufficient
detail to enable all Royalty payments to be determined. A written report
shall accompany each Royalty payment setting forth in reasonable detail,
for the applicable Calendar Quarter, the total Royalties that are to be
paid to a party hereunder and the other party's calculation thereof.
6.3 Upon ten (10) days' prior written notice to a party and during normal
business hours, but not more frequently than annually, an independent
auditor of nationally recognized standing agreed to by both parties and
paid for by the other party may inspect such books and records of such
party for the one-year period immediately preceding the date of inspection
to verify the correctness of the reports given to the other party under
this Section 6. If a material discrepancy is found in such books and
records, the right of inspection shall extend to books and records for
periods prior to such one-year period. Each party shall pay any deficiency,
plus interest thereon from the date each payment was due, calculated at the
prime rate of Citibank of New York, within thirty (30) days of the date of
any notice of such discrepancy. If the deficiency for any year is greater
than ten percent (10%), the reasonable costs of the audit shall be paid by
such party. All information learned in the course of any examination of
each party's books and records hereunder, except when it is necessary to
reveal such information in order to enforce any rights under this Agreement
in court, or similar dispute resolution or enforcement proceeding or
action, shall be treated as confidential information.
7. PRESS RELEASES AND CONFIDENTIALITY
7.1 Upon executing this Agreement, the parties shall issue a joint press
release as appearing in Exhibit B.
7.2 Upon entering the permitted ThermoFluor Deal in Infection specified in
Section 3.3 above, 3DP shall issue a press release which identifies
Scriptgen as part (i.e., a contributing licensor) of the collaboration
agreement and states that Scriptgen maintains exclusivity under its
intellectual property rights regarding future Infection collaborations.
7.3 The parties agree that except as provided in Sections 7.1 and 7.2 above,
the terms and provisions contained herein shall be confidential. It shall
not be a breach of this Agreement, however, for any party to: (a) disclose
this Agreement to its outside counsel, or the financial effect hereof to
its own accountants, auditors, creditors, investors, potential investors,
merger partners or potential merger partners, provided that such recipients
are directed to keep the terms confidential; or (b) make any disclosure
necessary to comply with the financial, public disclosure or other
reporting requirements under any applicable laws.
8. NOTICES
8.1 Under this Agreement, all required notices or communications shall be in
writing and deemed effective upon receipt if sent by first class mail
(postage prepaid), courier, or facsimile, and addressed as follows:
7
<PAGE>
For Scriptgen: Mark T. Weedon
President & CEO
Scriptgen Pharmaceuticals, Inc.
610 Lincoln Street
Waltham, MA 02451
Telephone: (781) 768-3400
Facsimile: (781) 768-5628
For 3DP: David C. U'Prichard, Ph.D.
Chief Executive Officer
3-Dimensional Pharmaceuticals, Inc.
Eagleview Corporate Center
665 Stockton Drive, Suite 104
Exton, Pa 19341
Telephone: (610) 458-8959
Facsimile: (610) 458-8258
8.2 The address of either party may be changed by notice duly given to the
other party.
9. GENERAL PROVISIONS
9.1 This Agreement is executed voluntarily and without any duress or undue
influence on the parties or their officers, employees, agents, or
attorneys. Neither party is relying on any inducements, promises, or
representations not contained herein made by the other party or any of its
officers, employees, agents, or attorneys.
9.2 If any legal action or other proceeding is brought to enforce the terms of
this Agreement, the prevailing party shall be entitled to recover its
reasonable attorneys' fees and other costs incurred in bringing such action
or proceeding, in addition to any other relief to which such party may be
entitled.
9.3 Any provision of this Agreement which is invalid, illegal, or unenforceable
in any jurisdiction shall, as to that jurisdiction, be ineffective only to
the extent of such invalidity, illegality, or unenforceability, and shall
not in any manner affect the remaining provisions hereof in such
jurisdiction or render any other provision of this Agreement invalid,
illegal, or unenforceable in any other jurisdiction.
9.4 This Agreement shall be governed by and interpreted in accordance with the
laws of the State of Delaware, United States of America, without regard to
the conflict of laws principles thereof.
9.5 The headings used herein are for reference and convenience only, and shall
not enter into the interpretation of this Agreement. This Agreement
contains the entire agreement between the parties as to the subject matter
hereof. This Agreement may not be modified or amended except by a written
amendment signed by an officer of each party.
8
<PAGE>
9.6 Subject to Sections 3.2 and 5.3, this Agreement shall inure to the benefit
of and be binding on any and all successors in interest to the parties
hereto.
9.7 It shall not be a breach of this Agreement for either party to fail to
perform its obligations under this Agreement on account of any act of God
or other cause beyond the control of the affected party, subject to such
party performing such obligation as soon as possible thereafter.
9.8 A breach of any provision of this Agreement may only be waived in writing
and the waiver of such breach shall not operate or be construed as a waiver
of any subsequent breach.
9.9 Each party represents and warrants that it has the full and unencumbered
right, power and authority to enter into this Agreement, to grant the
license rights granted hereunder, and otherwise to carry out its
obligations thereunder.
9.10 In making and performing this Agreement, the parties hereto are acting and
shall act as independent contractors. Neither party is, nor will be deemed
to be, an agent, legal representative, joint venturer or partner of the
other party for any purpose. Neither party will be entitled to bind the
other party without prior written approval, and each party shall bear its
own expenses and costs in connection with performing its obligations under
this Agreement.
9.11 This Agreement may be executed originally or by facsimile signature in
multiple counterparts, each of which shall be deemed an original and all of
which together shall constitute one instrument, provided however, that this
Agreement shall not be binding upon either of the parties until such time
it is actually executed by duly authorized officers of both parties.
IN WITNESS WHEREOF, the parties hereto have caused duplicate originals of this
Settlement Agreement to be executed by their duly authorized officers on the
date(s) set forth below:
Scriptgen Pharmaceuticals, Inc. 3-Dimensional Pharmaceuticals, Inc.
By: /s/ Mark T. Weedon By: /s/ David C. U'Prichard
-------------------------------- -------------------------------
Printed Name: Mark T. Weedon
Title: President & Chief Executive Officer Printed Name: David C. U'Prichard
Date: March 7, 2000 Title: Chief Executive Officer
9
<PAGE>
10
<PAGE>
Exhibit A
---------
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE
SCRIPTGEN PHARMACEUTICALS, INC., :
Plaintiff, :
v. : C.A. No. 98-583 (GMS)
3-DIMENSIONAL PHARMACEUTICALS, INC., :
:
Defendant. :
STIPULATED ORDER OF DISMISSAL
-----------------------------
Pursuant to Fed. R.Civ.P. 41(a)(1), it is hereby stipulated by the parties,
subject to the approval of the Court, that this action, including all claims and
counterclaims, is dismissed, with each party to bear its own costs.
POTTER ANDERSON & CORROON LLP
-------------------------------
Richard L. Horwitz (#2246)
Joanne Ceballos (#2854)
Hercules Plaza
P.O. Box 951
Wilmington, Delaware 19899-0951
(302) 984-6000
Attorneys for Plaintiff
Scriptgen Pharmaceuticals, Inc.
<PAGE>
MORRIS, NICHOLS, ARSHT &
TUNNELL
-------------------------------
Jack B. Blumenfeld (#1014)
Julia Heaney (#3052)
1201 N. Market Street
P.O. Box 1347
Wilmington, DE 19899-1347
(302) 658-9200
Attorneys for Defendant
3-Dimensional Pharmaceuticals, Inc.
SO ORDERED this _ day of
__________________, 2000
_____________________________
United States District Judge
<PAGE>
Exhibit B
---------
Contacts:
For Scriptgen:
Mark T. Weedon Gretchen L.P. Schwaltzer
Chief Executive Officer Feinstein Kean Healthcare
(781) 768-3400 (617) 577-8110
For 3-Dimensional Pharmaceuticals, Inc.
Michael J. Wassil Jerry Parrott
Chief Financial Officer Jerry Parrott & Associates
(610) 458-6073 (212) 472-1244
For Immediate Release
- ---------------------
Scriptgen and 3DP Settle Patent Dispute
Companies Cross-License High Throughout Screening - Technologies
To Advance Drug Discovery
Waltham, Massachusetts, and Exton, Pennsylvania, January XX, 2000 - Scriptgen
Pharmaceuticals, Inc. and 3-Dimensional Pharmaceuticals, Inc. (3DP) announced
today a mutually beneficial settlement of their dispute over Intellectual
property. 3DP has agreed to purchase a limited, non-exclusive worldwide license
to current and pending patents relating to Scriptgen's ATLAS(R) (Any Target
Ligand Affinity Screen) assay technology - a system for identifying compounds
that are drug candidates. 3DP will grant Scriptgen a limited, non-exclusive
worldwide license to pending patents relating to 3DP's ThermoFluor(R) assay
technology. Under the agreement, both companies can utilize their respective
assay technologies for the identification of novel drugs in a broad range of
therapeutic areas, however, Scriptgen does maintain a preferential position in
the area of anti-infectives. Financial terms were not disclosed.
Scriptgen Pharmaceuticals, Inc. (http://www.scriptgen.com) is a leader in the
discovery of drugs to control the expression of genes. Current programs in the
anti-infective area have identified multiple new drug targets and lead compounds
effective against drug-resistant bacterial, fungal and viral pathogens.
Scriptgen's products include GATH, a family of high-throughput target.
Identification and validation technologies and ATLAS and SCAN, high-throughput
screening technologies for proteins and RNA targets, respectively.
3-Dimensional Pharmaceuticals, Inc. is a drug discovery company using
DiscoverWorks(TM), a proprietary technology platform, to reduce the costs and
improve the quality of drugs entering clinical trials. DiscoverWorks(TM)
uniquely integrates high-throughput screening, combinatorial chemistry and
structure-based drug design for efficient drug discovery using targets from
genome sequencing. 3DP uses DiscoverWorks(TM) in its own drug discovery
programs and to provide discovery services to pharmaceutical and agrochemical
partners. The company's
<PAGE>
internal research programs are focused on the discovery of orally active small-
molecule pharmaceuticals for the treatment of cardiovascular disease and cancer.
(http://www.3dp.com).
<PAGE>
Exhibit 10.16
RESEARCH COLLABORATION AGREEMENT
This RESEARCH COLLABORATION AGREEMENT (the "Agreement"), effective as of
October 18, 1996 (the "Effective Date"), is made by and between 3-Dimensional
Pharmaceuticals, Inc. ("3DP"), a Delaware corporation, having a principal place
of business at 665 Stockton Drive, Suite 104, Exton, Pennsylvania 19341, and
BIOCRYST Pharmaceuticals, Inc. ("BIOCRYST"), a Delaware corporation, having a
principal place of business at 2190 Parkway Lake Drive, Birmingham, Alabama
35244.
BACKGROUND
WHEREAS, 3DP has rights to certain compound libraries and to certain
synthesis and screening technologies (including the DirectedDiversity
technology and the ThermoFluor technology) which, when applied, may reduce the
time and expense of identifying and developing potentially useful compounds for
use in the prevention, treatment, diagnosis and monitoring of diseases, states
and conditions in humans;
WHEREAS, BIOCRYST has identified certain compounds that are [**]
WHEREAS, subject to the terms and conditions of this Agreement, 3DP
and BIOCRYST desire to have access to each other's technologies, discoveries and
inventions and conduct a joint research program to attempt to identify and
optimize compounds that act as [**]
NOW, THEREFORE, for and in consideration of the foregoing premises, and the
covenants, conditions, and undertakings set forth herein, the receipt and
sufficiency of which the parties hereby acknowledge, it is agreed by and between
the parties as follows:
ARTICLE 1
DEFINITIONS
For purposes of this Agreement the following terms shall have the following
meanings:
1.1 "3DP Compound" shall mean a compound contained in a 3DP Library
------------
and/or any other compound synthesized by 3DP independently of the Research
Program for activity outside the Field excluding BIOCRYST Compounds and any
compound contained in a Focused Library.
1.2 "3DP Library" shall mean any chemical compound library developed
-----------
by or on behalf of 3DP independently of the Research Program for activity
outside the Field using the 3DP Technology and excluding Focused Libraries.
1.3 "3DP Technology" shall mean the patented and proprietary
--------------
technology developed, licensed or acquired by 3DP prior to the Effective Date or
developed, licensed or acquired by 3DP after the Effective Date either
independently of the Research Program or by 3DP alone without any assistance or
contribution from BIOCRYST as part of the Research Program, which is useful for
the creation of custom combinatorial chemical libraries as well as
**Certain portions of this Exhibit have been omitted based upon a request for
confidential treatment that has been filed with the Commission. The omitted
portions have been filed separately with the Commission.
<PAGE>
the chemical synthesis of compounds contained in such libraries, including
without limitation the screening technologies known as DirectedDiversity and
ThermoFluor.
1.4 "Affiliate" shall mean any corporation, firm, partnership or
---------
other entity which during the term of this Agreement controls, is directly or
indirectly owned by or controlled by or is under common control with 3DP or
BIOCRYST, respectively, but only for so long as such entity controls, is
directly or indirectly owned by or controlled by, or is under common control
with 3DP or BIOCRYST. For this purpose, control means the possession of the
power to direct or cause the direction of the management and the policies of an
entity whether through ownership, either directly or indirectly, of over fifty
percent (50%) of the stock entitled to vote, or in the case of a non-corporate
entity, the right to receive over fifty percent (50%) of either the profits or
the assets upon dissolution or if not meeting the preceding requirements, any
company owned or controlled by or owning or controlling 3DP or BIOCRYST at the
maximum control or ownership right permitted in the country where such company
exists.
1.5 "BIOCRYST Compounds" shall mean (i) the compounds and classes of
------------------
compounds specified on Exhibit A attached hereto, which have been identified by
---------
BIOCRYST prior to the Effective Date as having activity (or potential activity)
[**] (ii) any derivatives of the compounds specified in Exhibit A that are
---------
"obvious" to scientists skilled in the art of compound structure or drug design.
For purposes of this definition, "obvious" shall have the meaning ascribed to
such term by the Federal Patent Laws of the United States of America.
1.6 "BIOCRYST Compound Derivative" shall mean a compound that (i)
----------------------------
has been synthesized in the course of the Research Program and demonstrates
activity within the Field, (ii) is not a BIOCRYST Compound but (iii) is a non-
obvious derivative of a BIOCRYST Compound. For purposes of this definition,
"obvious" shall have the meaning ascribed to such term by the Federal Patent
Laws of the United States of America.
1.7 "BIOCRYST Technology" shall mean BIOCRYST's structure based drug
-------------------
design technologies developed, licensed or acquired by BIOCRYST prior to the
Effective Date or developed, licensed or acquired by BIOCRYST after the
Effective Date either independently of the Research Program or by BIOCRYST alone
without any assistance or contribution from 3DP as part of the Research Program.
1.8 [**]
1.9 "Confidential Information" means all non-public, proprietary or
------------------------
otherwise confidential information, now owned, licensed or controlled or
hereafter acquired, developed, owned, licensed or controlled by a disclosing
party or any of its Affiliates during the Term of this Agreement. Confidential
Information shall include, but not be limited to: (i) BIOCRYST Compounds and
BIOCRYST Technology; (ii) the 3DP Libraries, the 3DP Compounds and the 3DP
Technology; (iii) Focused Libraries and Research Results; (iv) Lead Compounds,
BIOCRYST Compound Derivatives, Optimized Lead Compounds, and Development
Candidates; and (v) Products prior to their first commercial sale.
**Certain portions of this Exhibit have been omitted based upon a request for
confidential treatment that has been filed with the Commission. The omitted
portions have been filed separately with the Commission.
2
<PAGE>
1.10 "Consultant" shall mean any Third Party that has been retained by
----------
either party to assist such party in performing any of its research obligations
under this Agreement, and, in the case of BIOCRYST, includes, without
limitation, the University of Alabama at Birmingham.
1.11 "Development Candidate" shall mean a Lead Compound, BIOCRYST
---------------------
Compound Derivative or an Optimized Lead Compound identified in the course of
the Research Program that meets the criteria for full preclinical development of
such compound into a drug for human use (i) as set forth in the Research Plan or
(ii) as otherwise agreed by the parties.
1.12 "Field" shall mean inhibitors of [**], and all uses and
-----
applications thereof; provided, however, that the Field may be broadened to
-------- -------
include [**] by mutual agreement of both parties in writing.
1.13 "Focused Assay" shall mean a test or trial developed specifically
-------------
for screening against Focused Libraries in the course of the Research Program,
to identify Lead Compounds, BIOCRYST Compound Derivatives or Optimized Lead
Compounds that have activity in the Field, including, without limitation,
ThermoFluor technology.
1.14 "Focused Library" shall mean any chemical compound library that
---------------
has been synthesized by or on behalf of 3DP specifically for use by or on behalf
of 3DP or BIOCRYST in the course of the Research Program.
1.15 "Interest" shall mean a party's right, title and interest in any
--------
Jointly Owned Right.
1.16 "Invention" shall mean any invention or discovery, whether or not
---------
patented or patentable, including, but not limited to, discoveries,
compositions, know-how, procedures, technical information, and any process,
method, device, formula, protocol, technique, design, drawing, methodology, and
biological or chemical material.
1.17 "Jointly Owned Rights" shall have the meaning ascribed to such
--------------------
term in Section 5.2 hereto.
1.18 "Lead Compound" shall mean a chemically defined compound that
-------------
has been synthesized in the course of the Research Program, has activity in the
Field and which meets the criteria set forth in the Research Plan to be fit for
optimization, but excluding BIOCRYST Compounds and BIOCRYST Compound
Derivatives.
1.19 "License Income" shall mean the gross amount actually received by
--------------
either party or its Affiliates for or on account of authorized licenses of
rights to any Development Candidate or any Product containing such Development
Candidate, including upfront license fees, milestone payments and royalties (the
amount of the gross royalties being determined by the terms of the agreement
with the authorized licensee, which may take into account factors such as
combination sales) without deduction of any kind, but excluding the following:
**Certain portions of this Exhibit have been omitted based upon a request for
confidential treatment that has been filed with the Commission. The omitted
portions have been filed separately with the Commission.
3
<PAGE>
(a) Payments received by either party or its Affiliate solely
for performance of research and development, including but not limited
to milestone payments for achievement of objectives in research and
development, only to the extent that such payments cover the actual
cost of the research and development work.
(b) Investments made by a licensee in either party or its
Affiliates to the extent that such investments are made at current
market value, including but not limited to, any payments or other
consideration representing the current market value of shares in such
party or its Affiliates.
(c) Payments made to either party or its Affiliate solely to the
extent that they cover the actual costs of conducting clinical testing
and other activities in connection with obtaining regulatory approval
for a Product.
(d) Reimbursed expenses of either party or its Affiliates.
For purposes of Subparagraph (b) above, the "current market value" of
the investment shall be determined as follows: (i) it shall be determined as at
the earlier of (a) the date when the investment is made or (b) the day prior to
the date when the investment is first publicly disclosed on the Dow Jones News
--------------
Wire (the "Determination Date"); (ii) if there is no public market for the
- ----
party's securities that are being purchased by the licensee, then the current
market value shall be determined by that party's Board of Directors in good
faith, and if the other party disputes such determination, the current market
value shall be determined by an independent investment banker whose fees shall
be shared by the parties; (iii) if there is a public market for such party's
securities that are being purchased by the licensee, then the current market
value shall be determined using the average of the closing price quoted on any
exchange on which the securities are listed as published in The Wall Street
---------------
Journal for the ten (10) trading days prior to the Determination Date.
- -------
Notwithstanding the foregoing, in the event the licensee is purchasing a party's
securities in connection with such party's initial public offering of such
securities, the current market value shall be determined using the offering
price of such securities to the public in such party's initial public offering.
-
1.20 "Net Sales" shall mean the gross invoice price of a Product sold by
---------
3DP, BIOCRYST or their Affiliates ("Selling Party") to Third Parties, less, to
the extent included in such invoice price, the total of: (i) ordinary and
customary trade discounts actually allowed; (ii) credits, rebates and returns;
(iii) freight, postage, and duties paid for and separately identified on the
invoice or other documentation maintained in the ordinary course of business;
and (iv) excise taxes, sales taxes, value added taxes, and duties actually paid
and separately identified on the invoice or other documentation maintained in
the ordinary course of business. Net Sales shall also include the amount or fair
market value of all other considerations received by the Selling Party from
Third Parties in respect of a Product, whether such consideration is in cash,
payment in kind, exchange, or another form. Sales between or among 3DP or
BIOCRYST and their respective Affiliates or authorized licensees shall be
excluded from the computation of Net Sales, except where such Affiliates or
authorized licensees are end users of the Product, in which case such sales
shall be deemed to have been made for cash at a price equal to the amount that
would
4
<PAGE>
be charged to a Third Party at such time, in an arms-length transaction for a
similar quantity of the Product. A "sale" of a Product is deemed to occur upon
the earlier of invoicing, shipment or transfer of title in the Product to a
Third Party, unless a party's Affiliate or licensee is an end user of the
Product, in which case the sale shall occur upon the transfer of the Product to
the Affiliate or licensee that is the end user. In the event that a Product is
sold or distributed for use in combination with or as a component of other
products, the calculation of "Net Sales" from such combination product shall be
determined (i) by agreement of the parties acting reasonably in good faith or
(ii) if agreement cannot be reached within six (6) months after commencement of
negotiations, by arbitration in accordance with Article 10 hereof, in either
case considering the relative importance and proprietary protection of the
various products and components involved.
1.21 "Optimized Lead Compound" shall mean a Lead Compound or a
-----------------------
BIOCRYST Compound Derivative which, through a process of optimization,
demonstrates a specified level of activity in the Field (i) as set forth in the
Research Plan or (ii) as otherwise agreed by the parties.
1.22 "Patent Rights" shall mean patent applications and issued
-------------
patents, in the United States or any other country or jurisdiction, as well as
any divisions, continuations, continuations-in-part, reissues, reexaminations,
patents of addition, extensions or other governmental actions which extend any
of the subject matter of such patent application or patent, and any
substitutions, confirmations, registrations, or revalidation of any of the
foregoing.
1.23 "Product" shall mean any product containing a Development
-------
Candidate.
1.24 "Proprietary Rights" shall mean Patent Rights, copyrights, trade
------------------
secret rights, trademarks and similar rights.
1.25 "Research Committee" or "RC" shall mean the research organization
------------------ --
comprising representatives of 3DP and BIOCRYST as described in Article 3 hereof.
1.26 "Research Plan" shall mean the written overall plan prepared by
-------------
the RC for the Research Program the parties will conduct in the Field during the
Term.
1.27 "Research Program" shall mean the program of collaborative
----------------
research in the Field to be carried out by the parties in accordance with the
Research Plan and the terms and conditions of this Agreement.
1.28 "Research Program Invention" shall mean an Invention first
--------------------------
conceived, identified, isolated, created or first reduced to practice by the
parties, either independently or jointly, in the course of the Research Program
excluding any improvement to 3DP's DirectedDiversity, BIOCRYST Technology and
either party's assay technologies.
1.29 "Research Results" shall mean all data and information arising
----------------
from either party's performance of its obligations under the Research Plan in
the course of the Research Program.
5
<PAGE>
1.30 "Term" shall mean the period commencing on the Effective Date and
----
terminating in accordance with Article II hereof.
1.31 "Third Party" shall mean any person, business or entity other
-----------
than 3DP, BIOCRYST, and their respective Affiliates.
1.32 "Third Party Obligation" shall mean any contractual or other
----------------------
obligation of a party or any of its Affiliates to a Third Party, including,
without limitation, an obligation to make payments to a Third Party for a
license to technology or in respect of a Third Party's Proprietary Rights.
1.33 "Unresolved Dispute" shall mean a dispute or disagreement that
------------------
has arisen between the parties in connection with the validity, construction,
meaning, enforceability, or performance of this Agreement or in connection with
any aspect of the arrangements under this Agreement, that has been submitted for
resolution to the RC, and to the senior officers of each party in accordance
with Section 3.4 hereof, and remains unresolved after taking such steps.
ARTICLE 2
COLLABORATIVE RESEARCH PROGRAM
2.1 Preparation of Research Plan. Promptly after execution of this
-----------------------------
Agreement, the parties' representatives on the RC shall commence preparation of
a detailed research plan which shall set forth the parties' respective
obligations and responsibilities in connection with the Research Program. Once
the RC has prepared the proposed research plan, it shall submit the proposed
research plan to the appropriate members of management of both parties for their
review. Once the parties mutually agree that the proposed research plan is in an
acceptable form, the proposed research plan shall become the Research Plan for
purposes of this Agreement once it has been executed and delivered by a duly
authorized representative of each party.
2.2 Research Program Activities. Once the Research Plan has been
----------------------------
completed and executed and delivered, subject to the terms and conditions set
forth herein, the parties shall carry out the Research Program in accordance
with the Research Plan with the goal of identifying Lead Compounds and Optimized
Lead Compounds. The RC shall review the Research Plan on an ongoing basis and
may revise the Research Plan periodically or as necessary by agreement of the RC
in accordance with Article 3 hereto.
2.2.1 BIOCRYST's Responsibilities. BIOCRYST shall have the
---------------------------
following responsibilities, which shall be carried out in accordance with the
Research Plan in the Field:
(a) providing results of its research, structural
knowledge of compounds and information regarding Research
Program Inventions, all within the Field;
(b) through its participation in the RC, designing
Lead Compounds based in part on the structural knowledge,
discoveries, Research Program Inventions, research results and
expertise described in Section 2.2.1(a) above;
6
<PAGE>
(c) conducting optimization of Lead Compounds or
BIOCRYST Compound Derivatives either independently or jointly
with 3DP;
(d) conducting preliminary preclinical
pharmacological analyses of Lead Compounds and Optimized Lead
Compounds to evaluate potency, efficacy and selectivity;
(e) presenting Lead Compounds, Optimized Lead
Compounds and the Research Results in relation thereto to the RC;
(f) providing adequate reagents for screening;
(g) screening assays as appropriate to validate and
confirm Focused Assay results; and
(h) performing such other responsibilities set forth
in this Agreement or that the parties may mutually agree upon
in writing.
2.2.2 3DP's Responsibilities. 3DP shall have the following
-----------------------
responsibilities, which shall be carried out in accordance with the Research
Plan in the Field:
(a) preparing Focused Libraries;
(b) preparing Focused Assays;
(c) screening the Focused Libraries using the Focused
Assays of its DirectedDiversity technology and ThermoFluor
technology, conducting chemical synthesis of the compounds in
the Focused Library which have activity in the Field discovered
by such screening, identifying Lead Compounds and providing
Research Results in relation thereto to the RC;
(d) conducting optimization of Lead Compounds or
BIOCRYST Compound Derivatives either independently or jointly
with BIOCRYST;
(e) presenting Lead Compounds, Optimized Lead
Compounds and Research Results in relation thereto to the RC; and
(f) performing such other responsibilities set forth
in this Agreement or that the parties may mutually agree upon in
writing.
2.2.3 Research Licenses. Subject to all the terms and
------------------
conditions of this Agreement, and only to the limited extent necessary for the
purposes of this Agreement, each party (the "Licensor") hereby grants to the
other party (the "Licensee") under its Proprietary Rights, a royalty free, non-
transferable, non-sublicensable, license to conduct the Licensee's research
responsibilities under the Research Plan for the Term of this Agreement.
7
<PAGE>
2.2.4 Disclosure of Research Results and Research Program
---------------------------------------------------
Inventions. Each party shall promptly disclose in writing to the chief
- ----------
scientific officer of the other party and to the RC, all Research Results and
Research Program Inventions it develops, conceives or first reduces to practice
in the course of the Research Program.
2.3 Access to Focused Libraries and Screening. BIOCRYST shall have direct
------------------------------------------
access to the Focused Libraries during the Research Program, as is necessary for
purposes of the Research Program.
2.4 BIOCRYST Compounds and BIOCRYST Technology. 3DP acknowledges that (i)
--------------------------------------------
BIOCRYST has previously expended substantial financial and research resources in
relation to its work in the Field and the BIOCRYST Technology that exists as of
the Effective Date, (ii) has identified the BIOCRYST Compounds and (iii) has an
on-going research, development and commercialization program in relation to the
BIOCRYST Compounds in the Field which BIOCRYST shall be conducting independently
of the arrangements under this Agreement. Notwithstanding any other provision of
this Agreement to the contrary, the parties agree that BIOCRYST shall be free to
(a) conduct its independent research, development and commercialization program
in the Field in relation to BIOCRYST Compounds using the BIOCRYST Technology,
(b) research, develop and commercialize BIOCRYST Compounds and any product or
service based thereon in the Field, without restriction, reference or payment to
3DP, (c) conduct any independent research, development and commercialization
program outside the Field in relation to BIOCRYST Compounds and BIOCRYST
Technology and (d) research, develop and commercialize BIOCRYST Compounds,
BIOCRYST Technology and any product or service based thereon outside the Field,
without restriction, reference or payment to 3DP.
2.5 3DP Compounds, 3DP Libraries and 3DP Technology. BIOCRYST
-------------------------------------------------
acknowledges that 3DP (i) has previously expended substantial financial and
research resources in relation to the 3DP Compounds, the 3DP Libraries and the
3DP Technology that exist as of the Effective Date and (ii) has an on-going
research, development and commercialization program in relation to the 3DP
Compounds, the 3DP Libraries and the 3DP Technology outside the Field which 3DP
shall be conducting independently of the arrangements under this Agreement.
Notwithstanding any other provision of this Agreement to the contrary, the
parties agree that 3DP shall be free to (a) conduct its independent research,
development and commercialization program outside the Field in relation to the
3DP Compounds, the 3DP Libraries and the 3DP Technology, (b) research, develop
and commercialize such 3DP Compounds, 3DP Libraries, the 3DP Technology and any
product or service based thereon outside the Field, without restriction,
reference or payment to BIOCRYST and (c) test within the Field any 3DP Compounds
which have activity outside the Field solely to establish the potential for
side-effects.
2.6 Records. 3DP, BIOCRYST and their Affiliates shall maintain records of
--------
their own activities and conduct in the course of the Research Program (or cause
such records to be maintained) in sufficient detail and in good scientific
manner as will properly reflect all work done and results achieved in the
performance of the Research Program (including, but not limited to, all data in
the form required under any applicable governmental regulations and as
8
<PAGE>
directed by the RC). Each party shall allow the other party, at the other
party's sole cost, to have reasonable access to all pertinent materials and data
generated by or on behalf of such party in connection with the Research Program.
2.7 Expenditures.
-------------
2.7.1 BIOCRYST Expenditures. BIOCRYST shall bear all costs and
----------------------
expenses (other than 3DP's costs of participating in the RC and reviewing the
Research Results from BIOCRYST's work) related to (i) performance of its
obligations under Section 2.2.1 hereof and (ii) performance of all its other
obligations under the Research Plan.
2.7.2 3DP Expenditures. 3DP shall bear all costs and expenses
-----------------
(other than BIOCRYST's costs of participating in the RC and reviewing the
Research Results from 3DP's work) related to (i) performance of its obligations
under Section 2.2.2 hereof and (ii) performance of all its other obligations
under the Research Plan.
2.7.3 Third Party Obligations. Each party shall be responsible
------------------------
for its own Third Party Obligations in connection with the Research Program,
this Agreement and any further development and commercialization of a
Development Candidate and any Product containing such Development Candidate. In
the event that it is necessary for either party to acquire any new Third Party
Obligations (i.e., a Third Party Obligation not existing as of the Effective
----
Date) for the conduct of its duties and obligations under the Research Program,
the party acquiring such license shall be solely responsible for such Third
Party Obligations, unless the parties mutually agree in writing to alternative
arrangements.
2.7.4 After determination of a Development Candidate. After the
-----------------------------------------------
date on which the RC determines that an Optimized Lead Compound is a Development
Candidate, the parties shall no longer be responsible individually for
expenditures in relation to such Development Candidate. All such post-
determination expenditures shall be borne in accordance with the arrangements
set forth in Sections 2.9 and 2.10 hereof and any other arrangements the parties
mutually agree upon in writing.
2.8 Development Candidates.
----------------------
2.8.1 Determination of Development Candidates. The RC shall have
---------------------------------------
responsibility for determining if an Optimized Lead Compound meets the criteria
specified in the Research Plan for a Development Candidate. If the RC determines
that an Optimized Lead Compound is a Development Candidate, it shall promptly
give written notice of its decision to each of the parties (a "Development
Candidate Notice"). The RC shall also prepare a written report of the Research
Results in relation to such Development Candidate and deliver a copy of such
report to each of the parties as soon as possible after giving each party the
Development Candidate Notice.
2.8.2 Joint Notice. Provided that a Development Candidate Notice
-------------
and Research Results report have been delivered to each party in accordance with
Section 2.8.1 hereof, if within sixty (60) days of the date of the determination
of a Development Candidate by
9
<PAGE>
the RC each party gives written notice to the other that it desires to fund
development and commercialization of the Development Candidate, the parties
shall promptly after receipt of the later of the two notices enter into good
faith negotiations in accordance with Section 2.9 hereof.
2.8.3 Single Notice. Provided that a Development Candidate
--------------
Notice and Research Results report have been delivered to each party in
accordance with Section 2.8.1 hereof, if within sixty (60) days of the date of
the determination of a Development Candidate by the RC, only one party (the
"Electing Party") gives written notice to the other that it desires to fund
development and commercialization of the Development Candidate, the Electing
Party shall have exclusive rights to develop and commercialize the Development
Candidate at its sole expense in accordance with Section 2.10 hereof.
2.9 Joint Development and Commercialization. In the event that both
----------------------------------------
parties elect to develop and commercialize a Development Candidate in accordance
with Section 2.8.2 hereof, the parties shall promptly, after such election,
begin good faith negotiations as to the arrangements and terms and conditions
for further development and commercialization of such Development Candidate,
including without limitation, the following:
2.9.1 Funding Commitments. The parties shall determine the
--------------------
funding commitments and arrangements for the development and commercialization
of each Development Candidate. Such funding commitments and arrangements shall
include, without limitation, the cost of providing research scientists,
administration and management staff, research facilities, animal studies,
clinical trials, and manufacturing. The parties shall also determine a written
budget for the short term funding commitments. If the parties agree to share
equally the funding commitments for the development and commercialization of the
Development Candidate, the parties shall also share equally in any income from
the commercialization of any resulting products or services. If the parties
agree to unequal funding commitments for the development and commercialization
of such Development Candidate, any income from resulting products or services
shall be shared in proportion to the funding commitments made by the parties.
The funding commitments and arrangements, reallocation of interests in a
Development Candidate in the event of failure to meet funding commitments and
the arrangements for sharing of income from the commercialization of any Product
containing the Development Candidate shall be dealt with in a written agreement
between the parties (a "Development and Commercialization Agreement").
2.9.2 Development. The Development and Commercialization
------------
Agreement shall also identify the party or parties and/or any Third Parties that
shall be responsible for carrying out the development and commercialization of
the Development Candidate into a Product.
2.9.3 Licenses. The Development and Commercialization Agreement
---------
shall also specify the terms of the grant of any necessary licenses or
assignments of rights to the Development Candidate, Research Results, and
Proprietary Rights in relation thereto.
2.9.4 Third parties. BIOCRYST and 3DP may also consider
--------------
reasonable proposals for development and commercialization of the Development
Candidate by one or more Third Parties, with or without any participation by
BIOCRYST and/or 3DP.
10
<PAGE>
2.10 Independent Development and Commercialization. The parties agree that
----------------------------------------------
a party shall be an "Independently Developing Party" in respect of a Development
Candidate if (i) such party is the Electing Party pursuant to Section 2.8.3
hereof, (ii) the parties agree in writing that such party will be solely
responsible for the future funding of the development and commercialization of a
Development Candidate, or (iii) the other party has paid less than its agreed
share of the funding for the development and commercialization of the
Development Candidate for a period in excess of six (6) months. If a party
becomes an Independently Developing Party, the other party shall thereafter be
referred to as the "Non-Developing Party" in respect of such Development
Candidate. Each party agrees that if the other party becomes an Independently
Developing Party, it, as the Non-Developing Party with respect to such
Development Candidate, shall and hereby does grant the Independently Developing
Party, in respect of the subject Development Candidate and limited to the Field,
an exclusive, worldwide, fully sublicensable, irrevocable license, under all of
its Proprietary Rights relating in any way to the Development Candidate and any
Product containing the Development Candidate, to develop, improve, modify, make,
have made, use and sell the Development Candidate and any Product containing the
Development Candidate, subject to the terms and conditions of this Agreement.
The Independently Developing Party shall indemnify, defend and hold harmless the
Non-Developing Party and its employees and agents (the "Non-Developing Party
Indemnitee"), against any and all causes of action, liability, damage, loss or
expense (including, but not limited to, reasonable fees and disbursements of
counsel incurred by the Non-Developing Party Indemnitee in any action or
proceeding between the Independently Developing Party and the Non-Developing
Party Indemnitee or between the Non-Developing Indemnitee and any third party or
otherwise) arising from (a) any product liability or other lawsuit, claim,
demand or other action brought with respect to the subject Development Candidate
or any Product based thereon, or (b) the death of or injury to any person or
persons, damage to property, or any other claim, proceeding, demand, expense and
liability of any kind whatsoever resulting from the design, testing (including,
without limitation, clinical trials), production, manufacture, shipping,
handling, use (in commerce or otherwise), sale, lease, consumption, promotion or
advertisement of the subject Development Candidate or any Product based thereon.
The foregoing indemnity shall be subject to the procedures set forth in Section
9.3 hereof. The parties also agree to negotiate in good faith as to any other
terms and conditions as are necessary in relation to the independent development
of a Development Candidate by an Independently Developing Party. If the Non-
Developing Party has made no or nominal funding payments for the development and
commercialization of the subject Development Candidate, the Minimum Royalty as
described in Section 2.11 hereto shall be the only payment due to the Non-
Developing Party for the subject Development Candidate, the license granted to
the Independently Developing Party in respect of the Development Candidate under
this Section 2.10, and the Non-Developing Party's contribution to the
identification and optimization of the Development Candidate as part of the
Research Program. In the event that the Non-Developing Party has made some
funding payments in respect of the Development Candidate, the Non-Developing
Party shall be entitled to the payments specified by the applicable Development
and Commercialization Agreement, which shall not be less than the Minimum
Royalty unless the parties otherwise agree in writing.
2.11 Minimum Royalty for Non-Developing Party. [**]
-----------------------------------------
**Certain portions of this Exhibit have been omitted based upon a request for
confidential treatment that has been filed with the Commission. The omitted
portions have been filed separately with the Commission.
11
<PAGE>
ARTICLE 3
MANAGEMENT
3.1 Research Committee. The parties shall establish a Research Committee
------------------
("RC") which shall be in existence for the Term of this Agreement, to oversee,
review and coordinate the conduct of the Research Program. The responsibilities
of the RC shall include without limitation:
3.1.1 drafting the Research Plan promptly after the execution of
this Agreement;
3.1.2 determining the research and manpower commitments to be
made by the parties pursuant to the Research Plan;
3.1.3 determining criteria for Lead Compounds, Optimized Lead
Compounds and Development Candidates;
3.1.4 reviewing the Research Results, choosing Lead Compounds for
optimization and reporting research progress towards the
Research Program's objectives to each of the parties;
3.1.5 ensuring open and frequent exchange between both parties of
biological, chemical, screening and other technological
advances and Research Program Inventions;
3.1.6 reviewing the Research Program's objectives, and proposing
appropriate changes to the Research Plan as necessary;
3.1.7 reviewing all patent applications for Research Program
Inventions and coordinating all other patent related
activities resulting from the Research Program in
accordance with the terms of this Agreement; and
3.1.8 taking such other actions as the parties may mutually
agree, from time to time, during the Term of this Agreement.
3.2 Membership of Research Committee. The RC shall be comprised of three
--------------------------------
representatives from each of 3DP and BIOCRYST. Each party's representatives
shall be selected solely by that party, but must be appropriately technically
qualified. The initial representatives of each party on the RC are listed on
Exhibit C attached hereto. 3DP and BIOCRYST may replace their respective RC
- ---------
representatives at any time, upon written notice to the other party. The RC
shall be chaired as agreed by the members of the RC. From time to time, the RC
may establish subcommittees to oversee particular projects or activities, and
such subcommittees will be constituted as the RC agrees.
3.3 RC Meetings. During the Term of this Agreement, the RC shall meet at
-----------
least four (4) times per year either in person or by telephone or video
conference, at regular intervals, or more often as agreed by the parties, at
alternate or such other mutually agreed locations and times as the parties
agree. With the consent of the parties, other representatives of 3DP or
12
<PAGE>
BIOCRYST or their Affiliates may attend RC meetings as non-voting observers.
Each party shall be responsible for all of its own expenses in connection with
the RC, including without limitation, compensation, if any, for its
representatives to the RC.
3.4 Decision Making. Each party shall be entitled to one vote
---------------
irrespective of the actual number of each such party's representatives on the RC
present at the relevant RC meeting, provided, however, that at least one (1)
-------- -------
representative of each party is present at such meeting. In the event that a
decision is not achieved within the RC, the dispute will be referred to 3DP's
Chief Scientific Officer (or designee of similar rank) and BIOCRYST's Chief
Scientific Officer (or designee of similar rank), who shall promptly meet and
endeavor to resolve the dispute in a timely manner. In the event such
individuals are unable to resolve such dispute, the matter shall be referred to
the respective Chief Executive Officers ("CEOs") of 3DP and BIOCRYST, who shall
promptly meet and endeavor to resolve the dispute. In the event that the
respective CEOs of 3DP and BIOCRYST are unable to resolve such dispute, the
dispute shall be deemed an "Unresolved Dispute" and shall be submitted to
binding arbitration decision in accordance with Article 10 hereof.
3.5 Reports. Within twenty (20) days following each RC meeting during the
-------
Term of this Agreement, the RC shall prepare and provide to each party a
reasonably detailed written summary report which shall (i) summarize all matters
discussed by the RC, (ii) state any determinations of the RC regarding any
matters discussed by the RC described in clause (i) above including, but not
limited to, any determinations regarding any Lead Compounds, Optimized Lead
Compounds, Development Candidates, Research Results, and Patent Rights and (iii)
summarize the reasons for each determination described in clause (ii) above.
ARTICLE 4
EXCLUSIVITY
4.1 3DP's Exclusivity Commitment. 3DP agrees that during the Term of this
-----------------------------
Agreement, it shall conduct research within the Field only with BIOCRYST and as
part of the Research Program. 3DP further agrees that, during the Term of this
Agreement, other than in the course of the Research Program, it shall not (i)
knowingly design, develop, use, make or synthesize compounds or chemical
compound libraries for itself, any Affiliate or any Third Party specifically for
screening within the Field or (ii) perform screening or DirectedDiversity? or
ThermoFluor? for itself, any Affiliate or any Third Party within the Field.
Notwithstanding any of the foregoing, testing solely to establish the potential
for side effects of 3DP Compounds that have activity outside the Field will not
be deemed to constitute screening within the Field.
4.2 BIOCRYST's Exclusivity Commitment. Except in relation to BIOCRYST
----------------------------------
Compounds, BIOCRYST agrees that during the Term of this Agreement it shall
conduct research within the Field only with 3DP and as part of the Research
Program.
4.3 Use of Consultants. Nothing in this Agreement shall be construed as
-------------------
restricting either party's right to conduct research within the Field with any
Consultant in furtherance of the Research Program; provided, however, that such
-------- -------
party shall require each Consultant to sign (i) a non-disclosure agreement the
provisions of which shall be substantially similar to those of Article 7 of this
Agreement and (ii) an agreement which provides for the assignment of all
13
<PAGE>
Proprietary Rights to the Consultants' work product and Inventions made for the
hiring party, to the hiring party (who is in turn subject to the ownership
provisions contained herein). Unless 3DP and BIOCRYST otherwise agree in
writing, Consultants shall not participate in the commercialization of any
Development Candidate or Product.
ARTICLE 5
OWNERSHIP
5.1 Retained Rights. The parties agree that they shall each separately
----------------
retain all their respective rights, title and interest in relation to any
Invention, technology, know-how, compound, product, process, information or
Proprietary Right which they either (i) held prior to the Effective Date or (ii)
they conceive, identify, isolate' create, first reduce to practice, license or
acquire entirely independently of the Research Program (which shall be subject
to reasonable documented verification). Nothing contained herein shall be deemed
to create a license or right under any of the foregoing for purposes outside the
scope of the Research Program, including without limitation, the development and
commercialization of Development Candidates. The parties specifically agree
that, subject to the licenses granted herein, (i) BIOCRYST shall retain all
right, title and interest (including, but not limited to, any Proprietary
Rights) that BIOCRYST holds in relation to BIOCRYST Compounds and BIOCRYST
Technology and (ii) 3DP shall retain all right, title and interest (including,
but not limited to, any Proprietary Rights) that 3DP holds in relation to the
3DP Compounds, 3DP Libraries and 3DP Technology. The Focused Libraries will not
include any 3DP Compounds. In the event that 3DP desires to include a 3DP
Compound in a Focused Library, 3DP shall give prior written notice to BIOCRYST
of its intention and the parties shall negotiate in good faith as to the terms
and conditions for use of such 3DP Compound in the course of the Research
Program. In the event no such prior notice is given, any compound contained
within a Focused Library may not thereafter qualify as a 3DP Compound for
purposes of this Agreement. Notwithstanding the foregoing, 3DP shall retain full
right, title and interest in any 3DP Compounds that have activity outside the
Field which have been tested within the Field solely to establish the potential
of side-effects.
5.2 Ownership of Result from the Research Program. 3DP and BIOCRYST shall
----------------------------------------------
jointly own in equal shares all right, title and interest to any Lead Compounds,
Optimized Lead Compounds, BIOCRYST Compound Derivatives, Research Results,
Research Program Inventions or any other results from the Research Program
(including, but not limited to, the utility of the foregoing both within and
outside the Field) that may be conceived, identified, isolated, created or first
reduced to practice by the parties, either independently (subject to Sections
1.3 and 1.7 hereof) or jointly, during the Term of this Agreement or within
twelve (12) months of the effective date of termination or expiration of this
Agreement; provided, however, that the foregoing shall not apply to any
compounds that might have utility outside the Field and that have not been
synthesized during the course of the Research Program ("Jointly Owned Rights").
5.3 Ownership of Proprietary Rights resulting from the Research Program.
--------------------------------------------------------------------
3DP and BIOCRYST shall also jointly own in equal shares all right, title and
interest to any and all Proprietary Rights that arise in relation to any Jointly
Owned Rights. Each party hereby represents that all employees and other persons
acting on its behalf in performing its obligations
14
<PAGE>
under this Agreement shall be obligated under a binding written agreement to
assign to such party, or as such party shall direct, all Lead Compounds,
Optimized Lead Compounds, BIOCRYST Compound Derivatives, Research Program
Inventions and Research Results made or developed by such employees or other
persons.
5.4 Assignment. The parties hereby make any assignments necessary to
----------
accomplish the joint ownership provisions set forth in Sections 5.2 and 5.3
hereof. A party being assigned any Proprietary Right or any interest therein
under this Agreement will have the right, at such party's expense, to require
that the assigning party assist such party in every proper way (including,
without limitation, becoming a nominal party) to evidence, record and perfect
the assignment and to apply for and obtain recordation of and from time to time
enforce, maintain, and defend such Proprietary Right.
5.5 Buyout. Either party may initiate, at any time during the Term or at
-------
any stage during the development and commercialization of any Development
Candidates, discussions to buy out the other party's Interest, or to sell its
own Interest, to the other, or to sell both parties' Interests to a Third Party.
In the event either party initiates such discussions, both parties will
negotiate such a buyout or sale, as the case may be, in good faith; provided,
however, that neither party will be obligated to sell or buy any such Interest.
5.6 Commercialization of Jointly Owned Rights. Except as set forth in
-------------------------------------------
Section 2.9 hereof and for the purposes of the Research Plan, neither 3DP nor
BIOCRYST shall have the right to use or commercialize any Jointly Owned Right or
any Proprietary Rights in relation thereto, either inside the Field or outside
the Field, during the Term of this Agreement or at any time thereafter, without
the prior written consent or agreement of the other party.
ARTICLE 6
PATENT PROSECUTION AND ENFORCEMENT
6.1 Prosecution. The RC shall determine, from time to time, the party or
------------
parties that (i) shall be responsible for preparing, filing, prosecuting and
maintaining in such countries the RC deems appropriate, patent applications and
patents relating to Research Program Inventions, (ii) shall be responsible for
conducting any interferences, reexaminations, reissues and oppositions relating
to such Research Program Inventions. The parties shall bear in equal shares the
costs arising under this Section 6. 1.
6.2 Cooperation. Each of BIOCRYST and 3DP shall keep the other fully
-----------
informed as to the status of patent matters described in this Article 6,
including without limitation, by providing the other the opportunity to fully
review and comment on any substantive documents (i.e., documents affecting the
----
scope of the Research Program Invention) which will be filed in any patent
office as far in advance of filing dates as practicable, and providing the other
with copies of any substantive documents that such party receives from such
patent offices promptly after receipt, including notice of all interferences,
reissues, re-examinations, oppositions or requests for patent term extensions.
Upon request by BIOCRYST and 3DP, the other party shall provide copies of any
patent documents in addition to those described in the preceding sentence.
BIOCRYST and 3DP shall each reasonably cooperate with and assist the other in
connection with such activities, at the other party's request. Patent counsel
designated by the RC will meet at
15
<PAGE>
least on a semi-annual basis, unless otherwise agreed in writing, during (i) the
Term and (ii) the pendency of any patent applications claiming Research Program
Inventions, to coordinate, discuss, review and implement patent filing and
prosecution strategy.
6.3 Failure to Prosecute or Pay. In the event that a party declines to
----------------------------
file or, having filed, fails to further prosecute or maintain any jointly owned
Patent Right, or conduct any interferences, re-examinations, reissues, or
oppositions relating thereto, or pay its share of any of the expenses in
relation to any of the foregoing, then the other party shall have the right to
prepare, file, prosecute and maintain such Patent Right, and conduct any
interferences, re-examinations, reissues or oppositions relating thereto at its
sole expense. In such event, the funding party shall thereafter be the sole
owner of the subject Patent Right and the non-funding party shall make any
assignment necessary to achieve such ownership position, in accordance with the
provisions of the second sentence of Section 5.4 hereof.
6.4 Enforcement. The RC shall determine, from time to time, the party or
-------------
parties (i) responsible for the enforcement of Patent Rights arising under this
Agreement, and (ii) that shall bear the costs arising under this Section 6.4.
6.5 Infringement Claims. If the manufacture, sale or use of any Jointly
--------------------
Owned Rights or any of the parties' respective technologies results in any
claim, suit or proceeding alleging patent infringement against 3DP or BIOCRYST
(or their respective Affiliates), such party shall promptly notify the other
party hereto in writing setting forth the facts of such claim in reasonable
detail. The party subject to such claim shall have the exclusive right and
obligation to defend and control the defense of any such claim, suit or
proceeding, at its own expense, using counsel of its own choice; provided,
---------
however, such party shall not enter into any settlement which makes any
- -------
admission or concession in relation to any Jointly Owned Rights or any of the
parties' respective technologies without the prior written consent of the other
party. The party subject to the claim shall keep the other party hereto
reasonably informed of all material developments in connection with any such
claim, suit or proceeding, and such other party shall cooperate with the party
subject to the claim in connection with such claim. If both parties are subject
to such claim, they shall each cooperate with the other in connection with
defending such claim.
ARTICLE 7
CONFIDENTIALITY
7.1 Confidential Information. Except as otherwise expressly provided
------------------------
herein, the parties agree that a party receiving Confidential Information ("the
Receiving Party") from the other party (the "Disclosing Party") shall not,
except as expressly provided in this Article 7, disclose to any Third Party or
use for any purpose any Confidential Information furnished to it by the
Disclosing Party hereto pursuant to this Agreement, except to the extent that it
can be established by the Receiving Party by written records that such
information:
(a) was already known to the Receiving Party, other than under
an obligation of confidentiality, at the time of disclosure;
16
<PAGE>
(b) was generally available to the public or otherwise part of
the public domain at the time of its disclosure to the Receiving
Party;
(c) became generally available to the public or otherwise part
of the public domain after its disclosure and other than through any
act or omission of the Receiving Party in breach of this Agreement;
(d) was lawfully disclosed to the Receiving Party, other than
under an obligation of confidentiality, by a Third Party who had no
obligation to the Disclosing Party not to disclose such information to
others;
(e) was independently developed by employees of the Receiving
Party having no knowledge of such Confidential Information; or
(f) is required to be disclosed pursuant to applicable law,
governmental rule or regulation or rule or regulation of any
securities exchange, provided the Receiving Party uses reasonable
efforts to limit disclosure and to obtain confidential treatment or a
protective order and has allowed the Disclosing Party to participate
in the proceedings
7.2 Permitted Use and Disclosures. Each party hereto may use or disclose
------------------------------
Confidential Information disclosed to it by the other party only to the extent
such use or disclosure is reasonably necessary and permitted in the exercise of
such rights granted hereunder and the other agreements contemplated hereby,
including without limitation in (i) conducting the Research Program internally
(including conducting the Research Program through Consultants), (ii) filing or
prosecuting patent applications, or prosecuting or defending litigation, (iii)
complying with applicable law, governmental regulation or court order, or (iv)
submitting information to tax or other governmental authorities; provided, that
if a party is required to make any such disclosure of another party's
Confidential Information, such party will give reasonable advance notice to the
other party of such disclosure and, save to the extent inappropriate in the case
of patent applications, will use its reasonable commercial efforts to secure
confidential treatment of such information in consultation with the other party
prior to its disclosure (whether through protective orders or otherwise) and
disclose only the minimum necessary to comply with such requirements.
7.3 Nondisclosure of Terms. Each of the parties hereto agrees not to
-----------------------
disclose the terms of this Agreement to any Third Party (except any
Consultants,) without the prior written consent of the other party hereto, which
consent shall not be unreasonably withheld, except to such party's attorneys,
advisors, investors and others on a need to know basis under circumstances that
reasonably ensure the confidentiality thereof, or to the extent required by
applicable law. In addition, BIOCRYST and 3DP may make public statements
regarding the progress of the Research Program and other matters regarding the
Research Program (i) without the other party's prior consent to the extent
required by applicable law, rules or regulations, and (ii) otherwise following
consultation and mutual agreement with the other party, the consent of neither
party to be unreasonably withheld. In the event that either party is required to
file a copy of this Agreement with the Securities and Exchange Commission or
equivalent entity, such party
17
<PAGE>
shall first provide the other party with an opportunity to review the form of
the copy of this Agreement which such party intends to file.
7.4 Publication. Any manuscript by 3DP or BIOCRYST or its Affiliates
------------
describing the Research Results or any other scientific results of the Research
Program to be published during the Term of this Agreement or within twelve (12)
months of the effective date of termination or expiration of this Agreement
shall be subject to the prior review of the parties at least ninety (90) days
prior to submission. Further, to avoid loss of Patent Rights as a result of
premature public disclosure of patentable information, the Receiving Party shall
notify the Disclosing Party in writing within thirty (30) days after receipt of
any disclosure whether the Receiving Party desires that the parties file a
patent application on any Research Program Invention disclosed in such Research
Results or other scientific results. In the event that the Receiving Party
desires that the parties file such a patent application, the Disclosing Party
shall withhold publication or disclosure of such Research Results or other
scientific results until the earlier of (i) a patent application is filed
thereon, or (ii) the parties determine after consultation that no patentable
invention exists, or (iii) one (1) year after receipt by the Disclosing Party of
the Receiving Party's written notice of the Receiving Party's desire that the
parties file such patent application, or such other period as is reasonable for
seeking patent protection. Further, if such Research Results or any other
scientific results contain information that is subject to use and nondisclosure
restrictions under this Article 7, the Disclosing Party agrees to remove such
information from the proposed publication or disclosure. Following the filing of
any patent application under this Agreement, in the eighteen (18) month period
prior to the publication of such a patent application neither party shall make
any public disclosure regarding any invention claimed in such patent application
without the prior consent of the other party.
7.5 Survival. The parties agree that the confidentiality obligations
--------
under this Article 7 shall survive any termination or expiration of this
Agreement and shall remain in effect indefinitely.
ARTICLE 8
REPRESENTATIONS AND WARRANTIES
8.1 General. Each party represents and warrants to the other party that
-------
as of the Effective Date: (i) it has the legal right and authority to extend the
rights granted in this Agreement; (ii) it has the legal right and authority to
enter into this Agreement and to perform all of its obligations hereunder; (iii)
all consents, approvals and authorizations of all governmental authorities and
other persons required to be obtained by such party in connection with this
Agreement and its responsibilities and activities hereunder have been obtained;
(iv) its execution, delivery and performance of this Agreement does not and will
not conflict with, or constitute a breach or default under, or require the
consent of any Third Party under, its charter documents or any material license,
loan or other agreement, contract, commitment or instrument to which it is a
party or any of its assets are bound or violate any provision of law, statute,
rule or regulation or any ruling, writ, injunction, order, judgment or decree of
any court, administrative agency or other governmental body; (v) when executed
by both parties, this Agreement will constitute the valid and legally binding
obligation of such party and shall be enforceable against such party in
accordance with its terms; (vi) it has not previously granted, and during the
Term of this
18
<PAGE>
Agreement will not make any Commitment of, or grant, any rights which in any way
conflict with the rights granted herein; and (vii) there are no existing or
threatened actions, suits or claims pending or, to the best of its knowledge
threatened against it that may affect the performance of its obligations under
the Agreement.
8.2 Third Party Obligations. Each party represents to the other that the
------------------------
Third Party Obligations set forth on Exhibit D is a full and complete list of
---------
such party's Third Party Obligations that are applicable to the Research Program
or development and commercialization of products and processes in the Field, and
that such party is not subject to any other Third Party Obligations that are
relevant to the Research Program.
8.3 Disclaimer.
----------
8.3.1 NEITHER BIOCRYST NOR 3DP MAKES ANY REPRESENTATION OR WARRANTY
OR GUARANTY THAT THE RESEARCH PROGRAM WILL BE SUCCESSFUL IN WHOLE OR IN PART.
THE FAILURE OF THE PARTIES TO SUCCESSFULLY IDENTIFY LEAD COMPOUNDS, OPTIMIZED
LEAD COMPOUNDS, BIOCRYST COMPOUND DERIVATIVES, DEVELOPMENT CANDIDATES OR
PRODUCTS WILL NOT CONSTITUTE A BREACH OF ANY REPRESENTATION OR WARRANTY OR OTHER
OBLIGATION UNDER THIS AGREEMENT.
8.3.2 NOTHING IN THIS AGREEMENT SHALL BE CONSTRUED AS A
REPRESENTATION MADE, OR WARRANTY GIVEN, BY EITHER PARTY THAT ANY PATENT WILL
ISSUE BASED UPON ANY PENDING PATENT APPLICATION, OR THAT ANY SUCH PATENT WHICH
ISSUES WILL BE VALID.
8.3.3 EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN THIS AGREEMENT, THE
PARTIES MAKE NO REPRESENTATIONS AND EXTEND NO WARRANTIES OR CONDITIONS OF ANY
KIND, EITHER EXPRESS OR IMPLIED, WITH RESPECT TO FOCUSED LIBRARIES, 3DP
LIBRARIES, BIOCRYST COMPOUNDS, BIOCRYST TECHNOLOGY, 3DP COMPOUNDS, 3DP
TECHNOLOGY, BIOCRYST COMPOUND DERIVATIVES, LEAD COMPOUNDS, OPTIMIZED LEAD
COMPOUNDS, DEVELOPMENT CANDIDATES, PRODUCTS, RESEARCH RESULTS, OR INFORMATION
DISCLOSED HEREUNDER, INCLUDING, BUT NOT LIMITED TO, WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR ANY PARTICULAR PURPOSE.
ARTICLE 9
INDEMNIFICATION
9.1 BIOCRYST. BIOCRYST agrees to indemnify, defend and hold 3DP and its
--------
Affiliates and their directors, officers, employees and agents (the "3DP
Indemnitees") harmless from and against any losses, costs, claims, damages,
liabilities or expense (including without limitation, fees and disbursements of
counsel incurred by the 3DP Indemnitee in any action or proceeding between
BIOCRYST and the 3DP lndemnitee and the 3DP Indemnitee and any third party or
otherwise) (collectively, "Liabilities") arising out of or in connection with
Third Party claims relating to: (i) BIOCRYST's performance of its
responsibilities and activities under this
19
<PAGE>
Agreement, including without limitation, the Research Program; (ii) any breach
by BIOCRYST of its representations and warranties made in Article 8 of this
Agreement, or (iii) any breach by BIOCRYST in the performance or observation of
any covenant, agreement, obligation or provision in this Agreement to be
performed or observed by BIOCRYST, except, in each case, to the extent such
Liabilities result from the gross negligence or intentional misconduct of 3DP.
9.2 3DP. 3DP agrees to indemnify, defend and hold BIOCRYST and its
---
Affiliates and their directors, officers, employees and agents (the "BIOCRYST
Indemnitees") harmless from and against any losses, costs, claims, damages,
liabilities or expense (including without limitation, fees and disbursements of
counsel incurred by the BIOCRYST Indemnitee in any action or proceeding between
3DP and the BIOCRYST Indemnity and the BIOCRYST Indemnitee and any third party
or otherwise) (collectively, "Liabilities") arising out of or in connection with
Third Party claims relating to: (i) 3DP's performance of its responsibilities
and activities under the Research Program; (ii) any breach by 3DP of its
representations and warranties made in Article 8 of this Agreement, or (iii) any
breach by 3DP in the performance or observation of any covenant, agreement,
obligation or provision in this Agreement to be performed or observed by 3DP,
except, in each case, to the extent such Liabilities result from the gross
negligence or intentional misconduct of BIOCRYST.
9.3 Procedure. A party (the "Indemnitee") that intends to claim
---------
indemnification under this Agreement shall promptly notify the other party (the
"Indemnitor") of any claim, demand, action or other proceeding for which the
Indemnitee intends to claim such indemnification, and the Indemnitor shall have
the right to participate in, and, to the extent the Indemnitor so desires, to
assume sole control of the defense thereof with counsel selected by the
Indemnitor; provided, however, that the Indemnitee shall have the absolute right
-------- -------
to retain its own counsel, with the fees and expenses to be paid by the
Indemnitee. The indemnity obligations under this Agreement shall not apply to
amounts paid in settlement of any loss, claim, damage, liability or action if
such settlement is effected without the consent of the Indemnitor, which consent
shall not be unreasonably withheld or delayed. The failure to deliver notice to
the Indemnitor within a reasonable time after the commencement of any such
action, if prejudicial to Indemnitor's ability to defend such action, shall
relieve the Indemnitor of any liability to the Indemnitee under this Agreement,
but the omission to deliver such notice to the Indemnitor shall not relieve it
of any liability that it may have to the Indemnitee otherwise than under this
Agreement. The Indemnitee, its employees and agents, shall cooperate fully with
the Indemnitor and its legal representatives in the investigation of any action,
claim or liability covered by an indemnification from the Indemnitor. No
Indemnitor shall, without the prior written consent of the Indemnitee, effect
any settlement of any pending or threatened action, suit or proceeding in
respect of which any Indemnitee is or could have been a party and indemnity
could have been sought hereunder by such Indemnitee, unless such settlement
includes an unconditional release of such Indemnitee from all liability on
claims that are the subject matter of such action, suit or proceeding.
9.4 Insurance. 3DP and BIOCRYST each shall maintain, through self
---------
insurance or otherwise, insurance with respect to its activities contemplated by
the Agreement, in such amount and for such term, as 3DP or BIOCRYST,
respectively, customarily maintains covering its similar activities.
20
<PAGE>
ARTICLE 10
ARBITRATION
10.1 General. Any Unresolved Dispute shall be finally settled at the
--------
election of either party by final and binding arbitration, conducted in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association. There shall be three (3) arbitrators for each arbitration of an
Unresolved Dispute, unless the parties otherwise agree to only one arbitrator.
On commencement of an arbitration each party shall promptly select one (1)
arbitrator. Each party's selection of an arbitrator shall be in that party's
sole discretion, and such arbitrator may be from a list provided by the AAA or
may be any other person chosen by such party. A party's choice of arbitrator
shall not be subject to challenge by the other party. Within twenty (20) days of
the appointment of the second arbitrator, the two arbitrators shall appoint the
third arbitrator from a list of arbitrators provided by the AAA, who shall be an
attorney or a former judge unless an arbitrator so qualified is unavailable;
provided, however, that if the two existing arbitrators are unable to agree upon
- -------- -------
the third arbitrator within such period, either party may request the AAA to
appoint the third arbitrator. The parties agree to use good faith efforts to
choose arbitrators with appropriate qualifications in relation to the Unresolved
Dispute in question. Such qualifications may include, but are not limited to,
expertise in patent law, medicinal chemistry, and/or pharmaceutical product
development (including clinical development and regulatory affairs). The
arbitration shall be held in New York City, unless the parties agree to conduct
the arbitration in another location, and at least one of the arbitrators shall
be an independent expert in pharmaceutical product development. The arbitrators
shall determine what discovery will be permitted, consistent with the goal of
limiting the cost and time which the parties must expend for discovery; provided
the arbitrators shall permit such discovery as they deem necessary to permit an
equitable resolution of the dispute. The arbitrators will apply the laws of the
State of New York in any arbitration, except in relation to patents or other
forms of Proprietary Rights, including but not limited to determination of
inventorship of inventions, or issues relating to interpretation, enforcement,
validity, or ownership of patents or other intellectual property rights, in
which case the arbitrators shall apply the Federal laws of the United States.
10.2 Final Award and Costs. In any arbitration pursuant to this Article
---------------------
10, the award of the arbitrators shall be final and binding upon the parties and
judgement upon the award may be entered in and enforced by any court of
competent jurisdiction. The costs of the arbitration, including administrative
and the third arbitrator's fees but excluding the fees of the two arbitrators
selected by the parties, shall be shared equally by the parties. Each party
shall bear its own costs and attorneys' and witness, fees and the fees of the
arbitrator that it has selected. A disputed performance or suspended performance
pending the resolution of the arbitration must be completed within thirty (30)
days following the final decision of the arbitrators or such other reasonable
period as the arbitrators determine in a written opinion. Any arbitration
subject to this Article 10 shall be completed, to the extent reasonably possible
in the light of all the circumstances, within one (1) year from the date of the
original filing of the demand for such arbitration with the AAA.
21
<PAGE>
10.3 Confidentiality. All arbitration proceedings under this Article 10
---------------
shall be confidential and the arbitrators may issue appropriate protective
orders to safeguard the parties' Confidential Information. Except as required by
law, neither party shall make (or instruct any arbitrator to make) any public
announcement with respect to the proceedings or decisions of any arbitration
without the prior written consent of the other party. The existence of any
Unresolved Dispute, the submission of an Unresolved Dispute to arbitration
pursuant to this Article 10, and any award by the arbitrators, shall be kept in
confidence by the parties and the arbitrators, except as required in connection
with the enforcement of such award or implementation of such decisions, as
mutually agreed by the parties or as required by law.
10.4 Interim Relief. This Article 10 shall not limit the rights of any
--------------
party to seek in any court of competent jurisdiction interim relief, and only
such interim relief, as may be needed to maintain the status quo or otherwise
------ ---
protect the subject matter of the Unresolved Dispute and the arbitration until
the arbitrators shall have been appointed and shall have had an opportunity to
act.
ARTICLE 11
TERM AND TERMINATION
11.1 Term of the Agreement. The term of this Agreement shall begin as of
---------------------
the Effective Date and shall continue in force for a period of twelve (12)
months, extended annually for an additional twelve (12) months unless otherwise
terminated earlier pursuant to this Article 11.
11.2 Failure to Agree on Research Plan. If the parties fail to agree upon
---------------------------------
and execute a Research Plan within three (3) months from the Effective Date of
this Agreement, then either party may terminate this Agreement immediately by
giving written notice to the other party to such effect.
11.3 Right to Terminate. Either party has the right to terminate the
------------------
Agreement, with or without cause, upon providing sixty (60) days prior written
notice to the other party.
11.4 Effect of Termination.
---------------------
11.4.1 Accrued Rights and Obligations. Termination of this
------------------------------
Agreement for any reason shall not release either party hereto from any
liability which, at the time of such termination, has already accrued to the
other party or which is attributable to a period prior to such termination, nor
preclude either party from pursuing any rights, indemnities and remedies it may
have hereunder or at law or in equity with respect to any breach of this
Agreement.
11.4.2 Return of Materials. Upon any termination of this Agreement,
3DP and BIOCRYST shall promptly return to the other all Confidential Information
received from the other party (except one copy of which may be retained solely
for legal archival purposes, such copy to remain subject to the provisions of
Article 7 hereof).
22
<PAGE>
11.4.3 Survival. Articles 5, 6, 7, 8, 9, 10 and 2.11 and Sections
2.9, 2. 10 and 2.11 of this Agreement and any accrued rights of payment or
causes of action shall survive the expiration or termination of this Agreement
for any reason.
ARTICLE 12
MISCELLANEOUS
12.1 Governing Laws. Except as otherwise specified herein, this Agreement
--------------
and any dispute arising from the performance or breach hereof shall be governed
by and construed and enforced in accordance with the laws of the state of New
York, without reference to conflict of laws principles thereof.
12.2 No Implied Licenses. Only the licenses granted pursuant to the
-------------------
express terms of this Agreement shall be of any legal force or effect. No other
license rights shall be created by implication, estoppel or otherwise.
12.3 Waiver. It is agreed that no waiver by either party hereto of any
------
breach or default of any of the covenants or agreements herein set forth shall
be deemed a waiver as to any subsequent and/or similar breach or default.
12.4 Assignment. This Agreement shall not be assignable by either party to
----------
any Third Party without the written consent of the other party hereto, except
either party may assign this Agreement, without such consent, to either (i) one
of its Affiliates, or (ii) an entity that acquires all or substantially all of
the business, assets or stock of such party to which this Agreement pertains,
whether by merger, reorganization, acquisition, sale, or otherwise, provided, in
each case, that the assignor remains liable for all of its obligations hereunder
and for performance by the assignee. This Agreement shall be binding upon and
accrue to the benefit of any permitted assignee, and any such assignee shall
agree to perform the obligations of the assignor.
12.5 Independent Contractors. The parties expressly agree that the
-----------------------
relationship between them is that of independent contractors. The parties hereto
shall not be deemed to be agents, partners or joint venturers of the other for
any purpose as a result of this Agreement or the transactions contemplated
hereby.
12.6 Compliance. In connection with their respective activities under this
----------
Agreement, the parties and their Affiliates shall fully comply in all material
respects with the requirements of any and all applicable laws, regulations,
rules and orders of any governmental body having jurisdiction over the exercise
of right under this Agreement including, without limitations those applicable to
the research, discovery, development, patent prosecution, manufacture,
distribution, import and export and sale of any products pursuant to this
Agreement.
12.7 Export Control. The parties agree not to remove or export from the
--------------
United States or re-export from anywhere any part of the Lead Compounds,
BIOCRYST Compound Derivatives, Optimized Lead Compounds, Research Results,
Development Candidates, or any direct product thereof to Afghanistan, the
Peoples' Republic of China or any Group Q, S, W, Y
23
<PAGE>
or Z country (as specified in Supplement No. I to Section 770 of the U.S. Export
Administration Regulations, or a successor thereto) or otherwise except in
compliance with and with all licenses and approvals required under applicable
export laws and regulations, including without limitation, those of the U.S.
Department of Commerce.
12.8 Notices. All notices, reports, consents, requests and other
--------
communications hereunder shall be in writing and shall be personally delivered,
sent by registered or certified mail, postage prepaid, or by facsimile (with
proof of receipt and a confirmation copy sent by registered or certified mail,
postage prepaid) or sent by overnight delivery service, in each case to the
respective address specified below, or such other address as may be specified in
writing to the other party hereto and shall be deemed to have been given upon
receipt:
If to 3DP: 3-Dimensional Pharmaceuticals, Inc.
665 Stockton Drive, Suite 104
Exton, PA 19341
U.S.A.
Attn: Chief Executive Officer
Fax No.: (610) 458-8258
with a copy to: Morgan Lewis & Bockius LLP
2000 One Logan Square
Philadelphia, PA 19103
Attn: David R. King, Esq.
Fax No.: (215) 963-5299
BIOCRYST: BioCryst Pharmaceuticals, Inc.
2190 Parkway Lake Drive
Birmingham, AL 35244
Attn: President
Fax No.: (205) 444-4640
With a copy to: Brobeck, Phleger & Harrison LLP
1301 Avenue of the Americas,
---------------------------
New York, New York 10019
Attn: Richard R. Plumridge, Esq.
Fax No.: (212) 586-7878
12.9 Severability. In the event that any provision of this Agreement
-------------
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision, and the parties shall amend this
24
<PAGE>
Agreement to the extent feasible to lawfully include the substance of the
excluded term to as fully as possible realize the intent of the parties and
their commercial bargain.
12.10 SPECIAL, INCIDENTAL AND CONSEOUENTIAL DAMAGES. NEITHER PARTY WILL BE
----------------------------------------------
LIABLE UNDER ANY CONTRACT, NEGLIGENCE, STRICT LIABILITY OR OTHER THEORY FOR ANY
SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES WITH RESPECT TO ANY SUBJECT MATTER
OF THIS AGREEMENT EXCEPT FOR A BREACH OF ARTICLE 7.
12.11 Force Majeure. Neither party shall lose any rights hereunder or be
--------------
liable to the other party for damages or losses or be deemed to have defaulted
under or breached this Agreement on account of failure of performance by the
defaulting party if the failure is occasioned by war, acts of war (whether
declared or not), strike, insurrections, riots, civil commotions, fire, act of
god, earthquake, flood, lockout or other labor disturbances, embargo,
governmental acts or orders or restrictions, failure of suppliers, or any other
reason where failure to perform is beyond the reasonable control and not caused
by the negligence, intentional conduct or misconduct of the non-performing party
and such party has exerted all commercially reasonable efforts to avoid and
remedy such force majeure; provided, however, that in no event shall a party be
-------- -------
required to settle any labor dispute or disturbance.
12.12 Entire Agreement. This Agreement and the Exhibits attached hereto
-----------------
constitute the entire agreement, both written and oral, between the parties with
respect to the subject matter hereof, and all prior agreements respecting the
subject matter hereof, either written or oral, expressed or implied, shall be
abrogated, canceled, and are null and void and of no effect. No amendment or
change hereof or addition hereto shall be effective or binding on either of the
parties hereto unless reduced to writing and executed by the respective duly
authorized representatives of the parties.
12.13 Headings. The captions to the several Articles and Sections hereof
--------
are not a part of this Agreement, but are included merely for convenience of
reference and location only and shall not affect its meaning or interpretation.
12.14 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed to be an original and all of which
together shall be deemed to be one and the same instrument.
25
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Research
Collaboration Agreement to be duly executed by their authorized representatives
and delivered in duplicate originals as of the Effective Date.
3-DIMENSIONAL BIOCRYST
PHARMACEUTICALS, INC. PHARMACEUTICALS, INC.
By:/s/ Thomas P. Stagnaro By:/s/ Charles E. Bugg
-------------------------------- ------------------------------------
Name: Thomas P. Stagnaro Name: Charles E. Bugg
------------------------------ ----------------------------------
Title: President and CEO Title: Chairman, President and CEO
---------------------------- --------------------------------
26
<PAGE>
DRAFT 10/17/96
EXHIBIT A
[**]
**Certain portions of this Exhibit have been omitted based upon a request for
confidential treatment that has been filed with the Commission. The omitted
portions have been filed separately with the Commission.
A-1
<PAGE>
EXHIBIT B
[**]
**Certain portions of this Exhibit have been omitted based upon a request for
confidential treatment that has been filed with the Commission. The omitted
portions have been filed separately with the Commission.
B-1
<PAGE>
EXHIBIT C
Initial Representatives on the Research Committee
-------------------------------------------------
1. Initial Representatives of 3DP:
------------------------------
[**]
2. Initial Representatives of BIOCRYST
-----------------------------------
[**]
**Certain portions of this Exhibit have been omitted based upon a request for
confidential treatment that has been filed with the Commission. The omitted
portions have been filed separately with the Commission.
C-1
<PAGE>
EXHIBIT D
Third Party Obligations
-----------------------
[**]
**Certain portions of this Exhibit have been omitted based upon a request for
confidential treatment that has been filed with the Commission. The omitted
portions have been filed separately with the Commission.
D-1
<PAGE>
[Exhibit]
[**]
**Certain portions of this Exhibit have been omitted based upon a request for
confidential treatment that has been filed with the Commission. The omitted
portions have been filed separately with the Commission.
<PAGE>
Amendment No. 1 to Research Collaboration Agreement
---------------------------------------------------
THIS IS AMENDMENT NO. 1 TO RESEARCH COLLABORATION AGREEMENT effective as of
October 18,1996 between 3-Dimensional Pharmaceuticals, Inc., a Delaware
corporation ("3DP"), and BIOCRYST Pharmaceuticals, Inc., a Delaware corporation
("BioCryst").
Background
----------
WHEREAS, 3DP and BioCryst are parties to a Research Collaboration Agreement
dated October 18, 1996 (the "Agreement"), and WHEREAS, the parties desire to
amend the Agreement as set forth below.
NOW, THEREFORE, for and in consideration of the foregoing premises and the
mutual promises and covenants contained herein, the parties agree as follows:
Terms
-----
1. Amendment of Agreement
----------------------
1.1 The Agreement is hereby amended by adding Sections 1.6a, 1.10a,
2.2.1(i), 2.2.2(g), 3.6, 4.4 and 4.5 to read in full as follows:
1.6a "BIOCRYST Library" shall mean any chemical compound library
----------------
developed by or on behalf of BIOCRYST independently of the Research
Program for activity outside the Field using BIOCRYST Technology
and excluding Focused Libraries.
1.10a "Counter Screening Targets" shall mean those enzymes and
-------------------------
proteins set forth in Exhibit E, as amended from time to time in
accordance with Section 4.5.
2.2.1
(i) at the sole discretion of BIOCRYST, selecting and
screening compounds contained in BIOCRYST Libraries to
discover Lead Compounds or to develop structure-activity
relationships.
2.2.2
(g) at the sole discretion of 3DP, selecting and screening
3DP Compounds to discover Lead Compounds or to develop
structure-activity relationships.
1
<PAGE>
3.6 Materials Transfer Agreement. Any 3DP Compounds which do
----------------------------
not meet the criteria for Lead Compounds, but which are
identified by the Research Committee for further study to develop
structure-activity relationships may, with 3DP's consent, be
transferred to BIOCRYST for further study. Such transferred 3DP
Compounds will be transferred and tested pursuant to the
Materials Transfer Agreement in the form of Exhibit F hereto and
executed by the parties herewith. Compounds contained in BioCryst
Libraries which do not meet the criteria for Lead Compounds, but
which are identified by the Research Committee for screening or
for further study to develop structure-activity relationships
may, with BioCryst's consent, be transferred from BIOCRYST to 3DP
for further study. Such transferred compounds will be transferred
and tested pursuant to the Materials Transfer Agreement in the
form of Exhibit G hereto and executed by the parties herewith.
4.4 Both parties agree that their respective research outside of
the Field may identify compounds which also have activity within
the Field and that such research does not violate the exclusivity
commitment set forth in section 4.1 or 4.2.
4.5 Either party may amend Exhibit E to add a new Counter
Screening Target by written notice to the other, provided that
such amendment shall have no effect on any rights under this
Agreement which arose prior to such amendment, including without
limitation any rights relating to any Research Results, Lead
Compounds, Optimized Lead Compounds, BIOCRYST Compound
Derivatives or Research Program Inventions that were conceived,
identified, isolated, created or first reduced to practice prior
to the date of such notice.
1.2 The Agreement is hereby amended by adding Exhibits E, F, and G
thereto in the form attached hereto.
1.3 The Agreement is hereby amended by amending and restating Sections
1.9, 1.12, 2.4 and 5.1 to read in full as follows:
1.9 "Confidential Information" means all non-public, proprietary
------------------------
or otherwise confidential information, now owned, licensed or
controlled or hereafter acquired, developed, owned, licensed or
controlled by a disclosing party or any of its Affiliates during
the Term of this Agreement and which is disclosed in writing or
(if disclosed orally) confirmed in writing and marked
"confidential". Confidential Information shall include, but not
be limited to: (i) BIOCRYST Libraries, BIOCRYST Compounds and
BIOCRYST Technology; (ii) the 3DP Libraries, the 3DP Compounds
and the 3DP Technology; (iii) Focused Libraries and Research
Results; (iv) Lead Compounds, BIOCRYST Compound Derivatives,
Optimized Lead Compounds, and Development Candidates; and (v)
Products prior to their first commercial sale.
2
<PAGE>
1.12 "Field" Shall mean [**]
-----
2.4 BIOCRYST Compounds, BIOCRYST Libraries and BIOCRYST
---------------------------------------------------
Technology. 3DP acknowledges that BIOCRYST (i) has previously
----------
expended substantial financial and research resources in relation
to its work in the Field, the BIOCRYST Libraries and the BIOCRYST
Technology that exists as of the Effective Date, (ii) has
identified the BIOCRYST Compounds and (iii) has an on-going
research, development and commercialization program in relation
to the BIOCRYST Compounds in the FIELD which BIOCRYST shall be
conducting independently of the arrangements under this
Agreement. Notwithstanding any other provisions of this
Agreement to the contrary, the parties agree that BIOCRYST shall
be free to (a) conduct its independent research, development and
commercialization program in the FIELD in relation to BIOCRYST
Compounds using BIOCRYST Technology, (b) research, develop and
commercialize BIOCRYST Compounds and any product or service based
thereon in the Field, without restriction, reference or payment
to 3DP, (c) conduct any independent research, development and
commercialization program outside the Field in relation to
BIOCRYST Compounds, the BIOCRYST Libraries and BIOCRYST
Technology and (d) research, develop and commercialize BIOCRYST
Compounds, the BIOCRYST Libraries and BIOCRYST Technology and any
product or service based thereon outside the FIELD, without
restriction, reference or payment to 3DP.
**Certain portions of this Exhibit have been omitted based upon a request for
confidential treatment that has been filed with the Commission. The omitted
portions have been filed separately with the Commission.
3
<PAGE>
5.1 Retained Rights. The parties agree that they shall each
---------------
separately retain all their respective rights, title and interest
in relation to any Invention, technology, know-how, compound,
product, process, information or Proprietary Right which they
either (i) held prior to the Effective Date or (ii) they
conceive, identify, isolate, create, first reduce to practice,
license or acquire entirely independently of the Research Program
(which shall be subject to reasonable documented verification).
Nothing contained herein shall be deemed to create a license or
right under any of the foregoing for purposes outside the scope
of the Research Program, including without limitation, the
development and commercialization of Development Candidates. The
parties specifically agree that, subject to the licenses granted
herein, (i) BIOCRYST shall retain all right, title and interest
(including, but not limited to any Proprietary Rights) that
BIOCRYST holds in relation to BIOCRYST Compounds, BIOCRYST
Libraries and BIOCRYST Technology and (ii) 3DP shall retain all
right, title and interest (including, but not limited to, any
Proprietary Rights) that 3DP holds in relation to the 3DP
Compounds, 3DP Libraries and 3DP Technology. 3DP shall retain
full right, title and interest in any 3DP Compounds that have
activity outside the Field which have been tested within the
Field solely to establish the potential of side-effects.
BIOCRYST shall retain full right, title and interest in any
BioCryst Compounds having activity outside the Field which have
been tested within the Field solely to establish the potential
for side-effects.
1.4 The Agreement is hereby amended by amending and restating Exhibit B in
the form attached hereto.
2. Miscellaneous.
-------------
2.1 Governing Law; Parties in Interest. This Amendment shall be governed
----------------------------------
by the laws of the State of Delaware, without regard to the conflicts of laws
thereof, and shall bind and inure to the benefit of the parties hereby and their
respective successors and assigns.
2.2 Counterparts. This Amendment may be executed simultaneously in two or
------------
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
2.3 Full Force and Effect. Except as expressly set forth herein, the
---------------------
Agreement remains unchanged and in full force and effect.
4
<PAGE>
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement on
the date written below.
3-DIMENSIONAL PHARMACEUTICALS, INC.
By: /s/ F. Raymond Salemme
--------------------------------
Dated: June 18, 1999
-----------------------------
BIOCRYST PHARMACEUTICALS, INC.
By: /s/ Charles E. Bugg
------------------------------
Dated: June 18, 1999
-----------------------------
5
<PAGE>
EXHIBIT B
[**]
**Certain portions of this Exhibit have been omitted based upon a request for
confidential treatment that has been filed with the Commission. The omitted
portions have been filed separately with the Commission.
B-1
<PAGE>
EXHIBIT E
[**]
**Certain portions of this Exhibit have been omitted based upon a request for
confidential treatment that has been filed with the Commission. The omitted
portions have been filed separately with the Commission.
E-1
<PAGE>
EXHIBIT F
MATERIALS TRANSFER AGREEMENT
----------------------------
This MATERIALS TRANSFER AGREEMENT ("MTA"), is made by and between
3DIMENSIONAL PHARMACEUTICALS, INC. ("3DP"), a corporation having its principal
place of business at Eagleview Corporate Center, 665 Stockton Drive, Suite 104,
Exton, Pennsylvania 19341, and BIOCRYST PHARMACEUFICALS, INC. (THE RECIPIENT), A
Delaware corporation having a principal place of business at 2190 Parkway Lake
Drive, Birmingham, Alabama 35244.
RECITALS
--------
WHEREAS, 3DP and RECIPIENT are parties to the Research Collaboration
Agreement dated October 18, 1996, as amended ("the Agreement"). WHEREAS the
parties desire to set forth herein the terms and conditions under which 3DP may
transfer to RECIPIENT certain 3DP compounds pursuant to Section 3.6 of the
Agreement. Capitalized terms used herein without definition have the meaning
set forth in the Agreement.
AGREEMENT
---------
1.00 Definitions. As used in this Materials Transfer Agreement, the
-----------
following terms shall have the following meanings:
1.01 "Effective Date" means the date hereof.
1.02 "Compound" means any 3DP Compound transferred to RECIPIENT by 3DP
after June 1, 1999 pursuant to Section 3.6 of the Agreement and
identified as such by 3DP in writing.
1.03 "Experimental Tests" shall mean any test performed an a Compound by
RECIPIENT. Such tests consist only of:
a. [**]
b. [**]
c. Other assays or experiments identified by the Research Committee.
**Certain portions of this Exhibit have been omitted based upon a request for
confidential treatment that has been filed with the Commission. The omitted
portions have been filed separately With the Commission.
F-1
<PAGE>
Experimental tests performed by RECIPIENT shall be limited to those listed above
in this Section 1.03. Under no circumstances shall RECIPIENT conduct any other
Experimental Tests an a Compound, including, but not limited to, tests related
to determining the chemical composition of such Compound.
1.04 "Technology" means all technical information, developments, data,
results, formulae and processes relating to any Compound that result from
RECIPIENT's tests of such Compound.
2.00 Transfer of Material. RECIPIENT agrees to protect the confidentiality
--------------------
of any Compound and any Technology resulting from the testing of such Compound
as provided in Article 4.00.
2.01 RECIPIENT agrees to return any and all of the remaining sample of any
Compounds upon termination of the Agreement.
3.00 Data and Documents
------------------
3.01 Access to Compound. Access to the Compound will be limited and
controlled. RECIPIENT shall provide to 3DP upon written request a list of the
names of all access to any such Compound and the dates of such access.
3.02 Access to Documents Relating to Compound. Access to documents relating
to any Compound will be limited and controlled. Such documents will be clearly
marked m the face thereof with an appropriate indication of their confidential
status. As noted below in Paragraph 4.00, RECIPIENT may retain one copy of all
documents relating to such for archive purposes. The obligations specified in
this paragraph continue with respect to the archive copy of the documents
retained by RECIPIENT.
3.03 Testing Relating to Compound. RECIPIENT shall provide to 3DP a
summary of each experiment or test performed on any Compound, the person
performing such experiment or test, the date of such experiment or test, and the
quantities of such Compound used in the experiment or test. 3DP shall keep this
information confidential as provided in Article 4.00.
3.04 Return of Compound and Documents Relating to Compound. When this MTA
is terminated, RECIPIENT agrees to return all unused samples of Compound and all
documents relating to such Compound, including all copies of such documents, to
3DP, provided, however, that RECIPIENT may retain one copy of all documents
relating to such Compounds for archive purposes. RECIPIENT agrees to continue
to maintain the confidentiality of the documents relating to any such Compounds
as provided by Article 4.00.
F-2
<PAGE>
4.00 Confidentiality and Ownership of Proprietary Information.
--------------------------------------------------------
Notwithstanding anything to the contrary set forth herein, 3DP and RECIPIENT
agree to maintain the confidentiality of all of the other party's Confidential
Information, provided or generated in connection with this MTA and each party
will promptly return to the other party all copies of written materials, whether
secret or otherwise, which have been so provided or generated except for one
archive copy. 3DP and RECIPIENT further agree that they will not use such
information or disclose it to third parties, except within the scope of this
MTA. Upon termination of this MTA, this obligation will continue for a period
of five (5) years from the date of termination. For the purposes of this MTA,
Confidential Information shall mean all nonpublic, proprietary or otherwise
confidential information, now owned, licensed or controlled or hereafter
acquired, developed, owned, licensed or controlled by a disclosing party during
the term of this MTA and which is disclosed in writing or (if disclosed orally)
confirmed in writing and marked "Confidential". Confidential Information may
include, but is not limited to: (i) chemical compounds; (ii) Technology; and
(iii) the existence and details of this MTA. Ownership of all Technology and
related intellectual property rights created under this MTA shall be governed
the Terms of the Agreement. Information will not be considered Confidential
Information hereunder that:
a. is publicly known when disclosed by the disclosing party;
b. later becomes publicly known without fault of the receiving
party;
c. is known by the receiving party before disclosure by the
disclosing party
d. is independently discovered by the receiving party without use of
the confidential information; or
e. is required to be disclosed by court order or regulation.
5.00 Warranty
--------
5.01 3DP warrants to RECIPIENT that it has the lawful right to transfer
samples of Compound.
5.02 Nothing in this MTA:
a. is a warranty or representation that anything made, used, sold,
or offered for sale under any license from 3DP is or will be free
from infringement of patents of third parties;
b. is an obligation to bring or prosecute actions or suits against
third parties for patent infringement.
6.00 Term and Termination of MTA
---------------------------
6.01 The term of this MTA shall commence on the Effective Date.
6.02 This MTA will terminate upon termination of the Agreement, provided
that the provisions of Section 3.04 and 4.00 will survive such termination.
F-3
<PAGE>
7.00 Miscellaneous
-------------
7.01 Notices
-------
(a) All notices to, demands, consents, or communications which any
party may desire or may be required to give to the other must be in
writing, shall be effective upon receipt in the United States after having
been sent by registered or certified mail or sent by facsimile
transmission. Receipt shall be presumed on the date of proper transmission
as to facsimile transmissions and otherwise within three (3) days as to
notices given within the United States.
(b) Any notice required or permitted by this MTA shall be addressed
to the Party in question as follows:
If to 3DP: 3-Dimensional Pharmaceuticals, Inc.
Eagleview Corporate Center
665 Stockton Drive, Suite 104
Exton, PA 19341
Attention: Chief Executive Officer
If to RECIPIENT: BioCryst Pharmaceuticals Inc.
2190 Parkway Lake Drive
Birmingham, AL 35244
Attention: Chief Executive Officer
or to such other address or addresses as may from time to time be given in
writing by either party to the other pursuant to the terms hereof.
7.02 Sole Agreement. This MTA constitutes and embodies the entire Agreement
--------------
between the Parties with respect to the subject matter hereof, and supersedes
all previous agreements, understandings, negotiations, discussions, offers and
acceptances with respect to such matter. This MTA may not be modified except in
writing signed by authorized representatives of both parties and may not be
assigned by either party without the written consent of the other, which consent
shall not be unreasonably withheld or delayed.
7.03 Severability. Any of the provisions of this MTA which are determined to be
------------
invalid or unenforceable in any jurisdiction shall be ineffective to the extent
of such invalidity or unenforceability in such jurisdiction, without rendering
invalid or unenforceable the remaining provisions hereof or affecting the
validity or unenforceability of any of the terms of the MTA in any other
jurisdiction.
7.04 No Third Party Benefits. Nothing in this MTA, express or implied, is
-----------------------
intended to confer on any person other than the parties hereto or their
permitted assigns, any benefits, rights or remedies.
7.05 Governing Law. This MTA shall be governed by Delaware law.
-------------
F-4
<PAGE>
7.06 No Waiver. A waiver by either party of a breach or violation of any
---------
provision of this MTA will not constitute or be construed as a waiver of any
subsequent breach or violation of that provision or as a waiver of any breach or
violation of any other provision of this MTA.
7.07 Headings. Any headings and captions included herein are for convenience of
--------
reference only and shall not be used to construe this MTA.
7.08 Consequential Damages. Neither party shall be liable for any or damage
---------------------
arising out of or resulting from anything made available hereunder, or for the
exercise by the other party of any rights granted hereunder, nor be liable to
the other party for consequential damages under any circumstances.
7.09 Agency. This MTA does not constitute either party hereto the agent of the
------
other party for any purpose whatsoever, nor does either party thereto have the
right or authority to assume, create, or incur any liability of any kind,
express, or implied, against or in the name or on behalf of the other party.
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement as of
the date written below.
3-DIMENSIONAL PHARMACEUTICALS, INC.
By: /s/ F. Raymond Salemme
-------------------------------
Dated: June 18, 1999
-----------------------------
BIOCRYST PHARMACEUTICALS, INC.
By: /s/ Charles E. Bugg
-------------------------------
Dated: June 18, 1999
-----------------------------
F-5
<PAGE>
EXHIBIT G
MATERIALS TRANSFER AGREEMENT
----------------------------
This MATERIALS TRANSFER AGREEMENT ("MTA"), is made by and between, BIOCRYST
PHARMACELMCALS, INC. ("BIOCRYST"), a Delaware corporation having a principal
place of business at 2190 Parkway Lake Drive, Birmingham, Alabama 35244, and 3-
DIMENSIONAL PHARMACEUTICALS, INC. (THE RECIPIENT), a corporation having its
principal place of business at Eagleview Corporate Center, 665 Stockton Drive,
Suite 104, Exton, Pennsylvania 19341.
RECITALS
--------
WHEREAS, BioCryst and RECIPIENT are parties to the Research Collaboration
Agreement dated October 18, 1996, as amended ("the Agreement"). WHEREAS the
parties desire to set forth herein the terms and conditions under which BioCryst
may transfer to RECIPIENT certain compounds pursuant to Section 3.6 of the
Agreement. Capitalized terms used herein without definition have the meaning
set forth in the Agreement.
AGREEMENT
---------
1.00 Definitions. As used in this Materials Transfer Agreement, the
-----------
following terms shall have the following meanings:
1.01 "Effective Date" means the date hereof.
1.02 "Compound" means any compound transferred to RECIPIENT by BioCryst
after June 1, 1999 pursuant to Section 3.6 of the Agreement and identified as
such by BioCryst in writing.
1.03 "Experimental Tests" shall mean any test performed an a Compound by
RECIPIENT. Such tests consist only of:
a. [**]
b. [**]
c. Other assays or experiments identified by the Research Committee.
Experimental tests performed by RECIPIENT shall be limited to those listed above
in this Section 1.03. Under no circumstances shall RECIPIENT conduct any other
Experimental Tests on a Compound, including, but not limited to, tests related
to determining the chemical composition of such Compound.
1.04 "Technology" means all technical information, developments, data,
results, formulae and processes relating to any Compound that result from
RECIPIENT's tests of such Compound.
**Certain portions of this Exhibit have been omitted based upon a request for
confidential treatment that has been filed with the Commission. The omitted
portions have been filed separately With the Commission.
G-1
<PAGE>
2.00 Transfer of Material. RECIPIENT agrees to protect the confidentiality
--------------------
of any Compound and any Technology resulting from the testing of such Compound
as provided in Article 4.00.
2.01 RECIPIENT agrees to return any and all of the remaining sample of any
Compounds upon termination of the Agreement.
3.00 Data and Documents
------------------
3.01 Access to Compound. Access to Compound will be limited and
controlled. RECIPIENT shall provide to BIOCRYST upon written request a list of
the names of all persons having access to any such Compound and the dates of
such access.
3.02 Access to Documents Relating to Compound. Access to documents
relating to any Compound will be limited and controlled. Such documents will be
clearly marked on the face thereof with an appropriate indication of their
confidential status. As noted below in Paragraph 4.00, RECIPIENT may retain one
copy of all documents relating to such Compound for archive purposes. The
obligations specified in this paragraph continue with respect to the archive
copy of the documents retained by RECIPIENT.
3.03 Testing Relating to Compound. RECIPIENT shall provide to BIOCRYST a
summary of each experiment or test performed on any Compound, the person
performing such experiment or test, the date of such experiment or test, and the
quantities of such Compound used in the experiment or test. BIOCRYST shall keep
this information confidential as provided in Article 4.00.
3.04 Return of Compound and Documents Relating to Compound. When this MTA
is terminated, RECIPIENT agrees to return all unused samples of Compound and all
documents relating to such Compound, including all copies of such documents, to
BIOCRYST, provided, however, that RECIPIENT may retain one copy of all documents
relating to such Compounds for archive purposes. RECIPIENT agrees to continue to
maintain the confidentiality of the documents relating to such Compounds as
provided by Article 4.00.
G-2
<PAGE>
4.00 Confidentiality and Ownership of Proprietary Information.
--------------------------------------------------------
Notwithstanding anything to the contrary set forth herein, BIOCRYST and
RECIPIENT agree to maintain the confidentiality of all of the other party's
Confidential Information, provided or generated in connection with this MTA and
each party will promptly return to the other party all copies of written
materials, whether secret or otherwise, which have been so provided or generated
except for one archive copy. BIOCRYST and RECIPIENT further agree that they
will not use such information or disclose it to third parties, except within the
scope of this MTA. Upon termination of this MTA, this obligation will continue
for a period of five (5) years from the date of termination. For the purposes
of this MTA, Confidential Information shall mean all nonpublic, proprietary or
otherwise confidential information, now owned, licensed or controlled or
hereafter acquired, developed, owned, licensed or controlled by a disclosing
party during the term of this MTA and which is disclosed in writing or (if
disclosed orally) confirmed in writing and marked "Confidential". Confidential
Information may include, but is not limited to: (i) chemical compounds; (ii)
Technology; and (iii) the existence and details of this MTA. Ownership of all
Technology and related intellectual property rights created under this MFA shall
be governed by the Terms of the Agreement. Information will not be considered
Confidential Information hereunder that:
a. is publicly known when disclosed by the disclosing party;
b. later becomes publicly known without fault of the receiving
party;
c. is known by the receiving party before disclosure by the
disclosing party
d. is independently discovered by the receiving party without use of
the confidential information; or
e. is required to be disclosed by court order or regulation.
5.00 Warranty
--------
5.01 BIOCRYST warrants to RECIPIENT that it has the lawful right to
transfer samples of Compound.
5.02 Nothing in this MTA:
a. is a warranty or representation that anything made, used, sold,
or offered for sale under any license from BIOCRYST is or win be
free from infringement of patents of third parties;
b. is an obligation to bring or prosecute actions or suits against
third parties for patent infringement.
6.00 Term and Termination of MTA
---------------------------
6.01 The term of this MTA shall commence on the Effective Date.
6.02 This MTA will terminate upon termination of the Agreement, provided
that the provisions of Section 3.04 and 4.00 will survive such termination.
7.00 Miscellaneous
-------------
G-3
<PAGE>
7.01 Notices
-------
(a) All notices to, demands, consents, or communications which any
party may desire or may be required to give to the other must be in writing,
shall be effective upon receipt in the United States after having been sent by
registered or certified mail or sent by facsimile transmission. Receipt shall
be presumed on the date of proper transmission as to facsimile transmissions and
otherwise within three (3) days as to notices given within the United States.
(b) Any notice required or permitted by this MTA shall be addressed
to the Party in question as follows:
If to BIOCRYST: BioCryst Pharmaceuticals Inc.
2190 Parkway Lake Drive
Birmingham, AL 35244
Attention: Chief Executive Officer
If to RECIPIENT: 3-Dimensional Pharmaceuticals, Inc.
Eagleview Corporate Center
665 Stockton Drive, Suite 104
Exton, PA 19341
Attention: Chief Executive Officer:
or to such other address or addresses as may from time to time be given in
writing by either party to the other pursuant to the terms hereof.
7.02 Sole Agreement. This MTA constitutes and embodies the entire
--------------
Agreement between the Parties with respect to the subject matter hereof, and
supersedes all previous agreements, understandings, negotiations, discussions,
offers and acceptances with respect to such subject matter. This MTA may not be
modified except in writing signed by authorized representatives of both parties
and may not be assigned by either party without the written consent of the
other, which consent shall not be unreasonably withheld or delayed.
7.03 Severability. Any of the provisions of this MTA which are
------------
determined to be invalid or unenforceable in any jurisdiction shall be
ineffective to the extent of such invalidity or unenforceability in such
jurisdiction, without rendering invalid or unenforceable the remaining
provisions hereof or affecting the validity or unenforceability of any of the
terms of the MTA in any other jurisdiction.
7.04 No Third Party Benefits. Nothing in this MTA, express or
-----------------------
implied, is intended to confer on any person other than the parties hereto or
their permitted assigns, any benefits, rights or remedies.
7.05 Governing Law. This MTA shall be governed by Delaware law.
-------------
7.06 No Waiver. A waiver by either party of a breach or violation of
---------
any provision of this MTA will not constitute or be construed as a waiver of any
subsequent breach
G-4
<PAGE>
or violation of that provision or as a waiver of any breach or
violation of any other provision of this MTA.
7.07 Headings. Any headings and captions included herein are for
--------
convenience of reference only and shall not be used to construe this MTA.
7.08 Consequential Damages. Neither party shall be liable for any
---------------------
consequence or damage arising out of or resulting from anything made available
hereunder, or for the exercise by the other party of any rights granted
hereunder, nor be liable to the other party for consequential damages under any
circumstances.
7.09 Agency. This MTA does not constitute either party hereto the
------
agent of the other party for any purpose whatsoever, nor does either party
thereto have the right or authority to assume, create, or incur any liability of
any kind, express, or implied, against or in the name or on behalf of the other
party.
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement as of
the date written below.
3-DIMENSIONAL PHARMACEUTICALS, INC.
By: /s/ F. Raymond Salemme
-----------------------------
Dated: June 18, 1999
---------------------------
BIOCRYST PHARMACEUTICALS, INC.
By: /s/ Charles E. Bugg
-----------------------------
Dated: June 18, 1999
---------------------------
G-5
<PAGE>
EXHIBIT 10.17
APPENDIX A
COLLABORATIVE DISCOVERY AND LEAD OPTIMIZATION AGREEMENT
This Collaborative Discovery and Lead Optimization Agreement (the "Agreement')
is made and effective as of December 17, 1999 (the "Effective Date"), by and
between 3-Dimensional Pharmaceuticals, Inc., a corporation having its principal
place of business at Eagleview Corporate Center, 665 Stockton Drive, Suite 104,
Exton, PA 19341, U.S.A. ("3DP'), and Boehringer Ingelheim Pharmaceuticals, Inc.,
a corporation having its principal place of business at 900 Ridgebury Road,
Danbury, CT 06877, U.S.A. ("BIPI"). 3DP and BIPI may be referred to herein as a
"Party" or, collectively, as "Parties".
WHEREAS, 3DP is engaged in discovery research for a variety of biologically
active compounds and the development of technologies to facilitate such
research, and 3DP has patented systems for generating chemical compounds having
desired pharmaceutical properties;
WHEREAS, BIPI is engaged in research and development of human therapeutic
products;
WHEREAS, 3DP and BIPI desire to enter into a research and development
collaboration to identify qualified lead compounds active against selected
targets and suitable for medicinal chemistry optimization that may be developed
and commercialized by BIPI;
NOW, THEREFORE, in consideration of the various promises and undertakings set
forth herein, the Parties agree as follows:
1. DEFINITIONS
Unless otherwise specifically provided herein, the following terms shall have
the following meanings, and may be used in the singular or plural, as indicated
by their context:
1.1 "Active Compound" means a Qualified Lead Compound or a compound
derived from a Qualified Lead Compound that has been formally selected
by BIPI after recommendation by the Research Steering Committee for
preclinical development as evidenced by initiation of a BIPI supported
range finding toxicology study to be performed by the BIPI Toxicology
Department or its designate.
1.2 "Affiliate" of a Party means: (a) any corporation owning or directly
or indirectly controlling at least fifty percent (50%) of the stock
normally entitled to vote for election of directors of a party, and
(b) any corporation owned or directly or indirectly controlled by a
party, or by a corporation defined by subparagraph (a) above, through
ownership of at least fifty percent (50%) of stock normally entitled
to vote for election of directors.
1.3 "Agreement" shall mean the present agreement including its appendices.
1
<PAGE>
1.4 "Confidential Information" means all information that has or could
have commercial value or other utility In a Party's business, or the
unauthorized disclosure of which could be detrimental to the Party's
interests, including confidential information, inventions, know-how,
data and materials relating to the Research Program or to the Licensed
Products, and shall include without limitation research, technical,
clinical development, manufacturing, marketing, financial, personnel
and other business information and plans, whether in oral, written,
graphic or electronic form.
1.5 "Custom Accessible Libraries" means any DirectedDiversity(R) Chemical
Library produced using 3DP DirectedDiversity(R) Technology and
structure activity data provided by BIPI.
1.6 "DirectedDiversity(R) Chemical Library" means a computer-generated
library of compounds containing integrated structure-activity and
synthesis data.
1.7 "Effective Date" means the effective date of this Agreement as set
forth in the first paragraph hereof.
1.8 "Field" means human therapeutic and diagnostic uses of Qualified Lead
Compounds or Active Compounds against Targets.
1.9 "Licensed Product" means any commercial product containing an Active
Compound.
1.10 "Net Sales" means the gross invoiced sales price charged to third
parties for all Licensed Products sold by BIPI and its Affiliates
after deduction of the following items: (a) customary trade, quantity
and case discounts, wholesaler-charge backs, or rebates (including
rebates to governmental agencies); provided that such discounts,
charge backs and rebates are not applied disproportionately with
respect to particular products sold; (b) customary credits or
allowances for rejection or return of previously sold Licensed
Products; (c) any direct tax or government charge (other than an
income tax) levied on the sale, transportation or delivery of a
Licensed Product and borne by the seller thereof; and (d) any charge
for freight or insurance if separately stated.
Combination Products: Where Product is sold in the form of a
combination product containing one or more active ingredients in
addition to an Active Compound, Net Sales for such Combination Product
will be calculated by multiplying actual Net Sales of such combination
Product by the fraction A/(A+B) where A is the net invoice price of
Product to an end use customer containing such Active Compound, if
sold separately, and B is the net invoice price of a product to an end
use customer containing any other component or components in the
combination, if sold separately. If, on a country-by-country basis,
the other active component or components in the combination are not
sold separately in said country, Net Sales for the purpose of
determining royalties on the Combination Product shall be calculated
by multiplying actual Net Sales of
2
<PAGE>
such Combination Product by the fraction A/C where A is the invoice
price of Product containing the Active Compound, if sold separately,
and C is the invoice price of the Combination Product. If, on a
country-by-country basis, neither the Product nor the other active
component or components of the Combination Product is sold separately
in said country, Net Sales for the purposes of determining royalties
of the combination Product shall be reasonably allocated between the
Product and the other active components based upon their relative
value as determined by the Parties hereto in good faith.
1.11 "Patents" means all U.S. patent applications or issued patents,
including provisionals, divisionals, continuations, continuations-in-
part, reissues and extensions derived therefrom, such as patent term
restorations, supplementary protection certificates, etc., as well as
all foreign patents and foreign patent counterparts to the foregoing.
1.12 "Qualified Lead Compound" means a chemical compound produced in the
course of the Program that satisfies criteria established by the
Research Steering Committee. A "3DP Qualified Lead Compound" means a
Qualified Lead Compound that is generated from a 3DP Accessible
Library. A "BIPI Qualified Lead Compound" means a Qualified Lead
Compound that is generated from a Custom Accessible Library.
1.13 "Research Program" means the collaborative discovery and optimization
activities of the Parties, as described in Article 2, that are
intended to lead to the discovery of Active Compounds that have an
agreed upon level of activity against a Target and are suitable for
pre-clinical and commercial development by BIPI.
1.14 "Research Program Patents" shall mean those Patents that claim
discoveries or inventions made as a result of the Research Program and
for a time period starting at the Effective Date through a period of
one year following the termination of the Research Program, regardless
of their ownership.
1.15 "Research Steering Committee" or "RSC" means the committee to be
formed pursuant to Article 3 of this Agreement.
1.16 "Target" means a protein, to be selected by the Senior Vice President
of R&D at BIPI, against which Qualified Lead Compounds and Active
Compounds are to be developed. Notwithstanding the above, 3DP may
reject a Target proposed by the Senior Vice President of R&D under the
following circumstances: (a) 3DP has entered into a contractual
relationship with a third party regarding the proposed Target or a
substantially similar Target; (b) other reasonable legal grounds; or
(c) 3DP has already selected the proposed Target or a substantially
similar Target for its internal research and development program as
may reasonably be demonstrated by 3DP.
3
<PAGE>
1.17 "Territory" means the entire world."3DP Accessible Libraries" means
any DirectedDiversity(R) Chemical Library that is generated by 3DP
outside of the Research Program.
1.18 "3DP DirectedDiversity(R) Technology" means 3DP Patents and know-how
in effect at the time of the Effective Date of this Agreement that
relate to generating and utilizing a DirectedDiversity(R) Chemical
Library, including but not limited to U.S. Patent Nos. 5,463,564,
5,574,656, 5,684,711 and 5,901,069. This term also includes any
discoveries, improvements, inventions and modifications made during
the Research Program to the extent that they relate to 3DP
DirectedDiversity(R) Technology. This term does not include the SAR
models as described in Article 2 of this Agreement.
1.19 "3DP Patents" means any Patents owned or controlled by 3DP other than
Research Program Patents.
1.20 "Valid Claim" means a claim of a Patent that has not lapsed or become
abandoned or been declared invalid or unenforceable by a court or
agency of competent jurisdiction from which no appeal can be or has
been taken.
2. RESEARCH PROGRAM
2.1 General Project Description. The Parties contemplate that the Research
Program will include the following steps and activities:
(a) BIPI will furnish to 3DP the structure and activity data on
chemical compounds screened against a Target that BIPI feels are
necessary for analysis of a Structure Activity Relationship
("SAR").
(b) 3DP will use its DirectedDiversity(R) Technology to compute a
chemical descriptor matrix to describe and map the compounds for
which BIPI provides data. 3DP also will develop an SAR model
based on this descriptor matrix for hits.
(c) 3DP will compare the SAR model with compounds in 3DP Accessible
Libraries, 3DP will identify [**] compounds to be synthesized by
3DP and supplied to BIPI for testing. 3DP will supply between
[**] milligrams of each such compound in 96 deep well plates
(about 80 compounds per plate). These compounds will meet a
minimum purity of 80% (resolved LCMSA/NMR) for 80% of the
compounds provided. Upon request of BIPI, 3DP will provide
additional quality control for individual compounds.
(d) 3DP will provide BIPI with a secure internet based communication
channel to provide activity or other compound related data to
3DP.
**Certain portions of this Exhibit have been omitted based upon a request for
confidential treatment that has been filed with the Commission. The omitted
portions have been filed separately with the Commission.
4
<PAGE>
(e) 3DP will develop an improved SAR model based on the testing data
provided by BIPI. This improved SAR will be used to perform
iterative rounds of selection and synthesis of compounds from 3DP
Accessible Libraries, and/or to develop Custom Libraries from
which compounds will be selected and synthesized, and/or to
perform medicinal chemistry optimization and synthesis. Such
compounds will be supplied to BIPI for additional testing in
furtherance of the Research Program.
2.2 Development of Active Compounds. BIPI will conduct the preclinical and
clinical tests as it deems appropriate for the commercial development
in the Field of Active Compounds.
2.3 Initial Term and Extension of Research Program. The initial term of
the Research Program shall be two (2) years. BIPI may extend this
Agreement on an annual basis by notifying 3DP in writing at least
sixty (60) days prior to the end of the initial two (2) year term or
any extended one-year term then in effect.
2.4 Additional and Alternative Targets. BIPI, through the Research
Steering Committee, shall have the option to bring forward a total of
up to five (5) Targets at any one time or to change Targets upon
thirty (30) days advance written notice to 3DP.
3. RESEARCH PROGRAM GOVERNANCE
3.1 Research Steering Committee. 3DP and BIPI agree to establish a
Research Steering Committee of seven (7) people. BIPI shall designate
four (4) members and 3DP shall designate three (3) members, each
selected by their respective R&D management to form this Research
Steering Committee. The Research Steering Committee shall be
responsible for:
(a) Adopting, reviewing and amending the research plan to implement
the Research Program, subject to the approval of the Vice
President of Research at BIPI.
(b) Monitoring the progress of research in the Research Program.
(c) Reviewing initial Target and any subsequent Target selection.
(d) Recommending to the Vice President of Research at BIPI
designation of a compound as an Active Compound.
(e) Reviewing and approving publications and other public disclosures
related to the subject matter of the Research Program subject to
the approval of the Vice President of Research at BIPI.
5
<PAGE>
3.2 Management of Matters Outside the Jurisdiction of the Research
Steering Committee. Matters outside the scope of the Research Program
and internal to each Party are not under the purview of the Research
Steering Committee. Such matters include, but are not limited to the
following: internal personnel policies and programs, budgeting,
finance, commercial and marketing strategies, and business decisions.
However, the Parties agree to communicate with each other promptly on
those matters which, while outside the scope of the Research Program,
nevertheless may reasonably be expected to influence the conduct or
term of the Research Program or the intended commercialization of
Active Compounds. Furthermore the RSC does not have responsibility for
or the authorization to choose the number of FTEs assigned to the
Research Program as set forth in Section 4.1 (b).
4. FINANCIAL TERMS
4.1 Technology Access and FTE Reimbursement Fees.
[**]
4.2 Extended Term Fees. The level of reimbursement for FTEs in an extended
term shall be negotiated in good faith by the Parties, and shall at
least reflect an increase to the FTE support level of Section 4.1 (b)
based on increases in the cost of living.
4.3 Early Termination Fees. If BIPI terminates this Agreement prior to the
end of the initial term or any extended term pursuant to Section 9.2,
it agrees to pay the lesser of a termination fee of [**] or the
remaining FTE reimbursement obligation for that term. No termination
fee is due if BIPI terminates the Agreement as set forth in any of
Sections 9.3 (a), 9.4 (a) or 9.6.
4.4 Milestone Payments for Designation of Qualified Lead Compounds. BIPI
agrees to make milestone payments as set forth below:
[**]
**Certain portions of this Exhibit have been omitted based upon a request for
confidential treatment that has been filed with the Commission. The omitted
portions have been filed separately with the Commission.
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4.5 Royalty on Net Sales of 3DP-Identified Active Compounds. [**]
4.6 Mode of Payment. All payments to 3DP hereunder shall be made by wire
transfer of United States Dollars in the requisite amount to such bank
account as 3DP may from time to time designate by notice to BIPI.
Payments shall be free and clear of any taxes (other than withholding
and other taxes imposed on 3DP), fees or charges, to the extent
applicable. As to the royalty payments, the amount of net sales shall
be converted into U.S. Dollars, by applying the buying rate for the
applicable day of conversion as published by Wall Street Journal on
the last business day of applicable payment period.
4.7 Records Retention. With respect to any products for which royalties
are due pursuant to Section 4.6, BIPI and its Affiliates and any
sublicensees shall keep records, for two (2) years, of such sales in
sufficient detail to confirm the accuracy of the royalty calculations
hereunder. At the request of 3DP, BIPI shall permit an independent
certified accountant appointed by 3DP, at reasonable times and upon
reasonable notice, to examine these records solely to the extent
necessary to verify such calculations. Such investigation shall be at
the expense of 3DP unless it reveals a discrepancy in BIPI's favor of
more than ten per cent (10%), in which event it shall be at BIPI's
expense.
4.8 Taxes. The Party receiving royalties and other payments under this
Agreement shall pay any and all taxes levied on account of such
payment. If any taxes are required to be withheld by the paying Party,
it shall: (a) deduct such taxes from the remitting payment, (b) timely
pay the taxes to the proper taxing authority, and (c) send proof of
payment to the other Party and certify its receipt by the taxing
authority within sixty (60) days following such payment.
5. OWNERSHIP AND LICENSE OF RIGHTS
5.1 Ownership of 3DP Accessible Libraries and 3DP Patents. 3DP shall own
all 3DP Accessible Libraries. However, in case a Qualified Lead
Compound, Active Compound or Licensed Product resulting from the
Research Program, or a method for making or using such a Qualified
Lead Compound, Active Compound or Licensed Product is covered by a
patent or patent application of 3DP based on research outside of the
Research Program, 3DP hereby grants to BIPI a fully paid up,
worldwide, exclusive license, including the right to sublicense, in
the Field under such patent to make, have made, use, sell, have sold,
import and have imported Licensed Products, provided that 3DP is not
contractually prohibited from granting such an exclusive license.
**Certain portions of this Exhibit have been omitted based upon a request for
confidential treatment that has been filed with the Commission. The omitted
portions have been filed separately with the Commission.
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5.2 Ownership of Custom Accessible Library Compounds. BIPI shall own
Custom Accessible Libraries and the compounds they contain that are
produced in the course of the Research Program. However, BIPI agrees
to grant 3DP a license in order to use chemical processes developed
for the synthesis of Custom Accessible Library compounds for 3DP
discovery programs. Notwithstanding the above, 3DP is not licensed to
produce Active Compounds, nor structurally related compounds to be
tested against Targets.
5.3 License to 3DP Outside of the Field. After a period of five (5) years
following the termination of the Research Program, BIPI agrees to
negotiate in good faith to grant to 3DP a license to commercialize
Qualified Lead Compounds, Active Compounds and Licensed Products
outside of the Field under any applicable Research Program Patents
owned or controlled by BIPI.
5.4 Use of Compounds After Termination of the Research Program. After a
period of five (5) years following termination of the Research
Program, BIPI agrees to grant to 3DP a fully paid up, worldwide, non-
exclusive license, including the right to sublicense, such that 3DP
shall be able to conduct research and enter into relationships with
third parties involving all compounds synthesized during and as a
result of the Research Program that are not developed or under
development by BIPI and all chemical processes developed for the
synthesis of Custom Accessible Libraries. The license grant does not
extend to BIPI patents filed after the termination of this Agreement.
5.5 License Under All 3DP Research Program Patents. Subject to the
provisions of Section 4.5, 3DP grants to BIPI a royalty-free, non-
exclusive license in the Field under all Research Program Patents
owned by 3DP to the extent such patents cover making, using, selling,
offering for sale or importing a Qualified Lead Compound, an Active
Compound or a Licensed Product.
6. CONFIDENTIAL INFORMATION
6.1 Confidentiality Obligations. The Parties agree that, for the term of
this Agreement and for ten (10) years thereafter, the "Receiving
Party" shall keep completely confidential and shall not publish or
otherwise disclose and shall not use for any purpose (except as
expressly permitted hereunder or set forth in Section 3.1 (d)) any
Confidential Information furnished to it by the "Disclosing Party"
pursuant to this Agreement (including without limitation, know-how),
except to the extent that it can be established by the Receiving Party
that such Confidential Information:
(a) was already known to the Receiving Party, other than under an
obligation of confidentiality from the Disclosing Party at the
time of disclosure;
(b) was generally available to the public or otherwise part of the
public domain at the time of its disclosure to the Receiving
Party;
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(c) became generally available to the public or otherwise part of the
public domain after its disclosure and other than through any act
or omission of the Receiving Party in breach of this Agreement;
(d) was subsequently lawfully disclosed to the Receiving Party by a
third party; or
(e) disclosure was compelled by governmental administrative agency or
judicial requirements, provided, however, that the Receiving
Party shall first have given advance notice to the Disclosing
Party so as to permit the Disclosing Party to attempt to obtain a
protective order or other appropriate remedy.
6.2 Written Assurances. Each Party shall inform its employees and
consultants who perform substantial work on the Research Program, of
the obligations of confidentiality specified in Section 6.1 and all
such persons shall be bound by the terms of confidentiality set forth
therein. All employees and consultants who are inventors on any
patents arising under work carried out under the Research Program
shall assign to such Party or Parties all inventions made by such
persons during the course of performing the Research Program. Each
Party may disclose the other's Confidential Information to the extent
such disclosure is reasonably necessary in filing or prosecuting
patent applications, prosecuting or defending litigation, complying
with applicable governmental regulations, making a permitted
sublicense of its rights hereunder or otherwise in performing its
obligations or exercising its rights hereunder, provided that if a
Party is required to make any such disclosure of another Party's
secret or Confidential Information it will give at least thirty (30)
day written, advance notice to the latter Party of such disclosure
requirement and, to the extent such disclosure is not required by law,
shall provide the Party whose information is being disclosed, an
opportunity to identify Confidential Information that shall not be
disclosed.
6.3 Permitted Disclosures for Business Development Purposes.
Notwithstanding the foregoing, or any other provision in this
Agreement to the contrary, 3DP may describe the financial terms of
this Agreement in confidence, in connection with capital raising or
due diligence activities. Furthermore, BIPI acknowledges that 3DP may
be obligated to disclose terms of this Agreement and make public a
copy of this Agreement in the event it becomes a public company as
required by applicable U.S. law.
7. PATENTS AND INTELLECTUAL PROPERTY
7.1 Title to Patents. Subject to the other provisions of this Agreement,
all Research Program Patents shall be owned by BIPI, to the extent
that they claim: (a) Custom Accessible Libraries or other small
molecules synthesized by 3DP under the Research Program; (b) Qualified
Lead Compounds; (c) Active Compounds; or (d) Licensed Products. All
Research Program Patents shall be owned by 3DP to the extent that they
claim 3DP DirectedDiversity(R) Technology. All other Research
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Program Patents shall be individually or jointly owned, depending on
the relative inventive contributions of each Party.
7.2 Filing of Patent Applications and Expenses.
(a) BIPI has the right but not the obligation to pursue and maintain
Research Program Patents that it owns, at its own cost. 3DP has
the right but not the obligation to pursue and maintain Research
Program Patents that it owns, at its own cost.
(b) Where there is co-ownership of any Research Program Patents, the
Parties will decide who is in the best position to file and
pursue patent applications, and shall regularly provide each
other with copies of all filings and other material submissions
and correspondence with the patent offices, in sufficient time to
allow for review and comment. The costs of prosecuting and
maintaining patent applications that are jointly owned shall be
shared equally by the Parties.
7.3 Enforcement of Patents.
(a) If either Party considers that a Valid Claim of any of the
Research Program Patents claiming the manufacture, use or sale of
a Licensed Product is being infringed by a third party, it shall
notify the other Party and provide it with any evidence of such
infringement which is reasonably available. BIPI shall have the
right but not the obligation, at its own expense, to attempt to
remove such infringement by commercially appropriate steps,
including a lawsuit. If required by law, 3DP shall join such suit
as a party, at BIPI's expense. In the event BIPI fails to take
commercially appropriate steps with respect to such infringement
within six (6) months following notice of such infringement, 3DP
shall have the right to do so at its expense, provided that BIPI
shall not be required to enforce such Research Program Patents
against more than one entity or in more than one country at any
one time. If 3DP enforces such Research Program Patents, BIPI
agrees to join any suit as a party if required by law.
(b) Any amounts recovered by BIPI pursuant to subsection (a), above,
whether by settlement or judgment shall be reported as Net Sales
for the purpose of calculating any applicable royalties to 3DP,
after deduction of BIPI's expenses in making such recovery. Any
amounts recovered by 3DP shall be retained by 3DP.
(c) The Parties agree to discuss whatever steps may be appropriate to
enforce Research Program Patents to the extent that they
encompass the manufacture, use or sale of Active Compounds and
Licensed Products outside of the Field.
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(d) The Party not enforcing the Research Program Patents pursuant to
subsection (a), above, shall provide reasonable assistance to the
other Party, including providing access to relevant documents and
other evidence and making its employees available, subject to the
enforcing Party's reimbursement of any out-of-pocket expenses
incurred by the other Party.
(e) If either Party considers that a Valid Claim of any of the
jointly owned Research Program Patents other than those Research
Program Patents covered by subsection (a), above, is being
infringed by a third party, it shall notify the other Party and
provide it with any evidence of such infringement which is
reasonably available. The Parties agree to discuss in good faith
the enforcement of any such jointly owned Research Program
Patents. If such Patents are enforced by either Party, the Party
not enforcing such Research Program Patents shall provide
reasonable assistance to the other Party, including providing
access to relevant documents and other evidence and making its
employees available, subject to the enforcing Party's
reimbursement of any out-of-pocket expenses incurred by the other
Party.
7.4 Third Party Patent Rights. If any warning letter or other notice of
infringement is received by a Party, or action, suit or proceeding is
brought against a Party alleging infringement of a patent of any third
party in the manufacture, use or sale of an Active Compound or
Licensed Product or in the conduct of the Research Program, the
Parties shall promptly discuss and decide the best way to respond.
8. INDEMNIFICATION
8.1 Indemnification by BIPI. BIPI shall indemnify, defend and hold 3DP and
its agents, employees and directors (the "3DP Indemnitees") harmless
from and against any and all liability, damage, loss, cost or expense
(including reasonable attorneys' fees) arising out of third party
claims or suits related to (a) BIPI's performance of its obligations
under this Agreement; or (b) the manufacture, use or sale of Licensed
Products by BIPI and its Affiliates, sublicensees, distributors and
agents, except to the extent such claims or suits result from the
breach of any of the provisions of this Agreement, negligence or
willful misconduct of the 3DP Indemnitees. Upon the assertion of any
such claim or suit, the 3DP Indemnitees shall promptly notify BIPI
thereof and BIPI shall appoint counsel reasonably acceptable to the
3DP Indemnitees to represent the 3DP Indemnitees with respect to any
claim or suit for which indemnification is sought. The 3DP Indemnities
shall not settle any such claim or suit without the prior written
consent of BIPI, unless they shall have first waived their rights to
indemnification hereunder.
8.2 Indemnification By 3DP. 3DP shall indemnify, defend and hold BIPI and
its agents, employees and directors (the "BIPI Indemnitees") harmless
from and
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against any and all liability, damage, loss, cost or expense
(including reasonable attorneys' fees) arising out of third party
claims or suits related to (a) 3DP's performance to its obligations
under this Agreement or (b) the manufacture, use, or sale of Licensed
Products by 3DP and its Affiliates sublicensees, distributors and
agents except to the extent that such claims or suits result from the
breach of any of the provisions of this Agreement, negligence or
willful misconduct of the BIPI Indemnitees. Upon the assertion of any
such claim or suit, the BIPI Indemnitees shall promptly notify 3DP
thereof and 3DP shall appoint counsel reasonably acceptable to the 3DP
Indemnitees to represent the BIPI Indemnitees with respect to any
claim or suit for which indemnification is sought. The BIPI
Indemnitees shall not settle any such claim or suit without the prior
written consent of 3DP, unless they shall have first waived their
rights to indemnification hereunder.
9. TERM AND TERMINATION
9.1 Term. This Agreement shall commence upon the Effective Date. The term
of the Research Program shall be two (2) years and may be extended as
provided herein. This Agreement otherwise shall terminate upon
expiration of the last Research Program Patent owned by BIPI that
encompasses Active Compounds or Licensed Products.
9.2 Termination. BIP1 may terminate the Research Program upon thirty (30)
days advance written notice during the initial or any extended term.
However, termination fees may be due as provided in Section 4.3.
9.3 Breach
(a) Failure by a Party to comply with any of the material obligations
contained herein shall entitle the Party not in default to give
notice to have the default cured. If such default is not cured
within sixty (60) days after the receipt of such notice, or
diligent steps not taken to cure if by its nature such default
could not be cured within sixty (60) days, the Party not in
default shall be entitled, without prejudice to any of its other
rights conferred on it by this Agreement, and in addition to any
other remedies available to it by law or in equity, to terminate
this Agreement, provided, however, that such right to terminate
shall be stayed in the event that during such sixty (60) day
period, the Party alleged to have been in default shall have: (i)
initiated arbitration in accordance with Section 12.9, below,
with respect to the alleged default, and (ii) diligently and in
good faith cooperated in the prompt resolution of such
arbitration proceedings.
(b) The right of a Party to terminate this Agreement, as hereinabove
provided, shall not be affected in any way by its waiver or
failure to take action with respect to any prior default.
9.4 Insolvency or Bankruptcy.
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(a) Either Party may, in addition to any other remedies available by
law or in equity, terminate this Agreement by written notice to
the other Party in the event the latter Party shall have become
insolvent or bankrupt, or shall have an assignment for the
benefit of its creditors, or there shall have been appointed a
trustee or receiver of the other Party or for all or a
substantial part of its property or any case or proceeding shall
have been commenced or other action taken by or against the other
Party in bankruptcy or seeking reorganization, liquidation,
dissolution, winding-up, arrangement or readjustment of its debts
or any other relief under any bankruptcy, insolvency,
reorganization or other similar act or law of any jurisdiction
now or hereafter in effect, or there shall have been issued a
warrant of attachment, execution, distraint or similar process
against any substantial part of the property of the other Party,
and any such event shall have continued for ninety (90) days
undismissed, unbonded and undischarged.
(b) All rights and licenses granted under or pursuant to this
Agreement by BIPI or 3DP are, and shall otherwise be deemed to
be, for purposes of Section 365(n) of the U.S. Bankruptcy Code,
licenses of right to "Intellectual property" as defined under
Section 101 of the U.S. Bankruptcy Code. The Parties agree that
the Parties as licensees of such rights under this Agreement,
shall retain and may fully exercise all of their rights and
elections under the U.S. Bankruptcy Code. The Parties further
agree that, in the event of the commencement of a bankruptcy
proceeding by or against either Parties under the U.S. Bankruptcy
Code, the Parties hereto which is not a party to such proceeding
shall be entitled to a complete duplicate of (or complete access
to, as appropriate) any such intellectual property and all
embodiments of such intellectual property, and same, if not
already in their possession, shall be promptly delivered to them
(i) upon any such commencement of a bankruptcy proceeding upon
their written request therefor, unless the Party subject to such
proceedings elects to continue to perform all of their
obligations under this Agreement or (ii) if not delivered under
(i) above, upon the rejection of this Agreement by or on behalf
of the Party subject to such proceeding upon written request
therefor by a nonsubject Party.
9.5 Consequences of Termination. Upon termination or expiration of the
Research Program portion of this Agreement, each Party shall promptly
return all relevant records and materials in its possession or control
containing the other Party's Confidential Information and to which the
former Party does not retain rights hereunder.
9.6 Change of Control or Ownership. BIPI shall have the right to terminate
this Agreement if 3DP is acquired, merges with or otherwise combines
with a company not a party to this Agreement. Termination under this
clause does not require termination fee payments as set forth in
Section 4.3. However, before
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terminating the Agreement pursuant to this Section, BIPI shall
reasonably consider alternative steps as provided in Section 12.12.
10. REGULATORY RESPONSIBILITIES
10.1 Regulatory Approvals. BIPI shall be responsible for all regulatory
filings and related submissions that are made in connection with the
commercialization of Licensed Products and shall do at BIPI's sole
discretion and expense.
11. REPRESENTATIONS AND WARRANTIES
11.1 Authority. Each Party represents and warrants that it has the full
right, power and authority to execute, deliver and perform this
Agreement.
11.2 No Conflicts. Each Party represents and warrants that the execution,
delivery and performance of this Agreement does not conflict with, or
constitute a breach or default under any of its charter or
organizational documents, any law, order, judgment or governmental
rule or regulation applicable to it, or any material agreement,
contract, commitment or instrument to which it is a party.
11.3 No Existing Third Party Rights. The Parties represent and warrant that
their obligations under this Agreement are not encumbered by any
rights granted by either Party to any third parties.
11.4 Continuing Representations. The representations and warranties of each
Party contained in this Article 11 shall survive the execution and
delivery of this Agreement and shall remain true and correct at all
times during the term of this Agreement with the same effect as if
made on and as of such later date.
11.5 No Warranty as to Commercial Success. 3DP offers no warranty that use
of the 3DP DirectedDiversity(R) Technology under this Agreement will
result in the discovery or the successful commercialization of a
Licensed Product for use against the Target in the Field.
12. MISCELLANEOUS PROVISIONS
12.1 Accrued Rights; Surviving Obligations.
(a) Termination, relinquishment or expiration of this Agreement for
any reason shall be without prejudice to any rights which shall
have accrued to the benefit of a Party prior to such termination,
or expiration. Such termination, relinquishment or expiration
shall not relieve a Party from obligations which are expressly
indicated to survive termination or expiration of this Agreement.
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(b) Without limiting the foregoing, Sections 4.3 to 4.8 and Articles
5, 6, 7, 8 and 12 of this Agreement shall survive the expiration
or termination of this Agreement.
12.2 Further Actions. Each Party agrees to execute, acknowledge and deliver
such further instruments and to do all such other acts as may be
necessary or appropriate in order to carry out the purposes and intent
of this Agreement.
12.3 Force Majeure. The failure of a Party to perform any obligation under
this Agreement by reason of acts of God, acts of governments, riots,
wars, strikes, accidents or deficiencies in materials or
transportation or other causes of a similar magnitude beyond its
control shall not be deemed to be a breach of this Agreement.
12.4 No Trademark Rights. No right, expressed or implied, is granted by
this Agreement to a Party to use in any manner the name or any other
trade name or trademark of a Party in connection with the performance
of this Agreement.
12.5 Public Announcements. The Parties shall consult with each other and
reach mutual written agreement before making any public announcement
concerning this Agreement or the subject matter hereof. The Parties
agree to coordinate the dissemination of a joint press release to
announce the signing of this Agreement. Notwithstanding the foregoing,
the Parties may disclose the existence and general nature of this
Agreement. However, neither Party shall use the name of the other
Party for promotional purposes. BIPI shall have the right to review
all filings, to the extent that they describe the terms of this
Agreement or the arrangements with BIPI reflected herein, prior to
their submittal by 3DP to the SEC, including all proposed redacted
copies of this Agreement. 3DP shall give due respect to any reasonable
and timely request by BIPI with respect thereto, including
confidential treatment of selected portions of this Agreement.
12.6 Entire Agreement of the Parties; Amendments. This Agreement and the
exhibits hereto constitute and contain the entire understanding and
agreement of the Parties respecting the subject matter hereof and
cancels and supersedes any all prior negotiations, correspondence,
understandings and agreements between the Parties, whether oral or
written, regarding such subject matter. No waiver, modification or
amendment of any provision of this Agreement shall be valid or
effective unless made in writing and signed by a duly authorized
officer of each Party. Notwithstanding the above, the "Bilateral
Confidential Disclosure Agreement" executed on February 12, 1999 shall
remain with full force and effect.
12.7 Captions. The captions to this Agreement are for convenience only, and
are to be of no force or effect in construing or interpreting any of
the provisions of this Agreement.
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12.8 Applicable Law. This Agreement shall be governed by and interpreted
in accordance with the laws of the State of Delaware without
reference to its conflicts of law provisions.
12.9 Disputes. Either Party may give the other Party written notice of a
dispute not resolved in the normal course of business. Upon such
notice, the Parties shall attempt in good faith to resolve any
dispute arising out of or relating to this Agreement promptly by
negotiation between executives who have the authority to settle the
controversy and who are at a higher level of management than the
persons with direct responsibility for administration of this
Agreement. If the matter has not been resolved by these persons
within thirty (30) days of a disputing party's notice, either Party
may initiate mediation as provided herein. If the dispute has not
been resolved by negotiation, the Parties shall endeavor to settle
the dispute by mediation under the Center for Public Resources
("CPR") Model Procedure for Mediation of Business Disputes in effect
on the Effective Date of this Agreement. Unless the Parties agree
otherwise, a neutral mediator will be selected from a CPR Panel of
Neutrals, with the assistance of CPR or, if the Parties agree, from
the American Intellectual Property Law Association (AIPLA) Panel of
Mediators.
12.10 Notices and Deliveries. Any notice, request, delivery, approval or
consent required or permitted to be given under this Agreement shall
be in writing and shall be deemed to have been sufficiently given
when it is received, whether delivered in person, transmitted by
facsimile with contemporaneous confirmation of delivery by registered
letter (or its equivalent) or delivery by certified overnight courier
service, to the Party to which it is directed at its address shown
below or such other address as such Party shall have last given by
notice to the other Parties.
If to BIPI:
Boehringer Ingelheim Pharmaceuticals, Inc.
900 Ridgebury Road
P.O. Box 368
Danbury, CT 06877-0368
Attention: Senior Vice President, Research & Development
with a copy to:
Attention: Vice President, General Counsel
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If to 3DP:
3-Dimensional Pharmaceuticals, Inc.
Eagleview Corporate Center
665 Stockton Drive, Suite 104
Exton, PA 19341
Attention: CEO
with a copy to:
Morgan, Lewis & Bockius LLP
1701 Market Street
Philadelphia, PA 19103-2921
Attention: David R. King, Esq.
12.11 No Consequential Damages. IN NO EVENT SHAI.L EITHER PARTY NOR ANY OF
ITS RESPECTIVE AFFILIATES BE LIABLE TO THE OTHER PARTY OR ANY OF ITS
AFFILIATES FOR SPECIAL, INDIRECT, INCIDENTAL OR CONSEQUENTIAL
DAMAGES, WHETHER IN CONTRACT, WARRANTY, TORT, NEGLIGENCE, STRICT
LIABILITY OR OTHERWISE, including, but not limited to, loss of
profits or revenue, or claims of customers of any of them or other
third parties for such or other damages.
12.12 Assignment. This Agreement may be assigned by either Party in
connection with the sale or transfer of substantially all of its
assets that relate to this Agreement. If 3DP acquires, is acquired
by, merges with or otherwise combines with a company that has
substantial activities related to Targets and is a competitor of
BIPI, BIPI may require 3DP to take reasonable actions necessary to
ensure that any of BIPI's Confidential Information, trade secrets or
proprietary information is not disclosed to personnel within such
company directly involved in such competitive activities.
12.13 Independent Contractors. Both Parties are independent contractors
under this Agreement. Nothing contained in this Agreement is intended
nor is to be construed so as to constitute 3DP or BIPI as partners or
joint ventures with respect to this Agreement. Neither Party shall
have any express or implied right or authority to assume or create
any obligations on behalf of or in the name of the other Party or to
bind the other Party to any other contract, agreement, or undertaking
with any Third Party.
12.14 Advice of Counsel. BIPI and 3DP have each consulted with counsel of
their choice regarding this Agreement, and each acknowledges and
agrees that this
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Agreement shall not be deemed to have been drafted by one party or
another and will be construed accordingly.
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed by
their respective duly authorized officers as of the day and year first above
written, each copy of which shall for all purposes be deemed to be an original.
3 DIMENSIONAL BOEHRINGER INGELHEIM
PHARMACEUTICALS, INC. PHARMACEUTICALS, INC.
By: /s/ David C. U'Prichard By: /s/ Prof. Dr. Peter Mueller
------------------------------------ ----------------------------------
Name: David C. U'Prichard, Ph.D. Name: Prof. Dr. Peter Mueller
Title:CEO Title:Sr. Vice President
Research & Development
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EXHIBIT 10.18
COLLABORATIVE RESEARCH AND LICENSE AGREEMENT
This Collaborative Research and License Agreement is made and effective as
of October 18, 1999 (the "Effective Date"), by and between 3-Dimensional
Pharmaceuticals, Inc., a corporation having its principal place of business at
Eagleview Corporate Center, 665 Stockton Drive, Suite 104, Exton, PA 19341,
U.S.A. ("3DP"), and Hoechst Schering AgrEvo GmbH, a corporation having its
principal place of business at Miraustr. 54, D-13509 Berlin, Germany ("AgrEvo").
3DP and AgrEvo may be referred to herein as a "Party" or, collectively as
Parties
WHEREAS, 3DP is engaged in discovery research for a variety of biologically
active compounds and the development of technologies to facilitate such
research, and 3DP has developed patented and other proprietary systems for
generating chemical compounds having desired biological and other properties;
WHEREAS, AgrEvo is engaged in research and development of biologically
active compounds and the development of technology for various agrochemical and
related purposes;
WHEREAS, 3DP and AgrEvo desire to enter into a collaborative research and
development agreement to discover, identify, and evaluate compounds that have
certain biological and other properties, and AgrEvo may develop, own, patent,
manufacture, distribute, market and sell worldwide products containing one or
more of such compounds;
NOW, THEREFORE in consideration of the various promises and understandings
set forth herein, the Parties agree as follows:
1. DEFINITIONS
Unless otherwise specifically provided herein, the following terms shall have
the following meanings and may be used in the singular or plural, as indicated
by their context:
1.1 "Accessible Compound Library" means a computer database that is proprietary
to 3DP which describes small organic compounds that are generated using the
DirectedDiversity Software Tools and are not obtained from any public source.
1.2 "Active Compound" means a 3DP Screening Compound that has been synthesized
by 3DP and that has been selected by AgrEvo for development or optimization
according to Section 2.3.
1.3 "Affiliate" of a Party means: (i) any corporation or other business entity
owning or directly or indirectly controlling at least fifty percent (50%) of the
stock or other ownership interest normally entitled to vote for election of
directors of a Party, and (ii) any corporation or other business entity owned or
directly or indirectly controlled by a Party, or by a corporation defined by
subparagraph (i) above, through ownership of at least fifty percent (50%) of
stock or other ownership interest normally entitled to vote for election of
directors.
<PAGE>
1.4 "Agreement" shall mean the present agreement including its appendices.
1.5 "Compound Patents" means any Patents that claim: (i) an Active Compound
and/or a Research Program Compound; and/or any precursor, intermediate or
starting material used to make the Active Compound and/or the Research Program
Compound and/or any related compounds of any of the foregoing that are claimed
in the Compound Patents; or (ii) methods of making or using any compositions
containing any of the compounds specified in subparagraph i) above.
1.6 "Confidential Information" means any and all knowledge, information, data
material, experience or reports by one Party to the other under this Agreement
including inventions, compounds, know-how, data and materials relating to the
Research Program or to the licensed Products, and shall include without
limitation research, technical, manufacturing, marketing, financial, personnel
and other business information and plans, whether in oral, written, graphic or
electronic form.
1.7 "Directed Diversity Software Tools" or "Software" means certain software
tools proprietary to 3DP and used to generate combinatorial libraries, calculate
compound property descriptors, compare mapping and visualize compound libraries,
and support multi-objective selection strategies for compound optimization.
1.8 "Effective Date" means the effective date of this Agreement as set forth in
its first paragraph.
1.9 "Field" means plant management, pest management (including fungi) and
animal health, including but not limited to the use of herbicides, plant trait
modifiers, plant growth regulators, pesticides, fungicides, animal health care,
home and garden products, and environmental health products. The term "Field"
expressly excludes human diagnostic and human therapeutic products.
1.10 "Licensed Product" means any commercial product comprising: (1) an Active
Compound or a Research Program Compound; or (2) a compound synthesized by AgrEvo
and covered by a Compound Patent, provided that the compound synthesized by
AgrEvo results from Optimization Synthesis performed at 3DP on an Active
Compound selected for optimization by 3DP pursuant to Sections 2.5 and 5.
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1.11 "Net Sales" means the gross invoiced sales price charged to third parties
in an arms length transaction for all Licensed Products sold by AgrEvo, its
Affiliates and sublicensees in the Field in the Territory after deduction of the
following items: (i) customary trade, quantity and case discounts, wholesaler-
charge backs, or rebates (including rebates to governmental agencies); provided
that such discounts, charge backs and rebates are not applied disproportionately
with respect to particular products sold; (ii) customary credits or allowances
for rejection or return of previously sold Licensed Products; (iii) any direct
tax or government charge (other than an income tax) levied on the sale, use,
transportation or delivery of a Licensed Product and borne by the seller
thereof; and (iv) any charge for freight or insurance if separately stated.
Combination Products: Where Licensed Product is sold in the form of a
Combination Product containing one or more active ingredients in addition to an
Active Compound, Research Program Compound or a compound synthesized by AgrEvo
and covered by a Compound Patent, provided that the compound synthesized by
AgrEvo results from Organization Synthesis performed at 3DP on an Active
Compound selected for optimization by 3DP pursuant to Sections 2.6 and 5.3
(hereinafter, "Licensed Compounds"), Net Sales for such Combination Product will
be calculated by multiplying actual Net Sales of such Combination Product by the
fraction A/(A+B) where A is the net invoice price to third parties of product
containing such Licensed Compound, if sold separately. If, on a country-by-
country basis, the other active component or components in the combination are
not sold separately and where B is the net invoice price to third parties of
product containing the additional ingredients, if sold separately in said
country, Net Sales for the purpose of determining royalties on the Combination
Product shall be calculated by multiplying actual Net Sales of such Combination
Product by the fraction A/C where A is the invoice price of Product containing
the Licensed Compound, if sold separately, and C is the invoice price of the
Combination Product. If, on a country-by-country basis, neither the Product nor
the other active component or components of the Combination Product is sold
separately in said country, Net Sales for the purposes of determining royalties
of the combination Product shall be reasonably allocated between the Product and
the other active components based upon their relative value as determined by the
Parties hereto in good faith.
1.12 "Optimization Synthesis" means at least [**] interactive rounds of SAR
generation, selection synthesis and testing.
1.13 "Patents" means all patent applications or issued patents, including
provisionals, divisionals, continuations, continuations-in-part, reissues and
extensions derived therefrom in any country.
1.14 "Probe library" means the collection of discrete, structurally diverse
small organic molecules synthesized at the Effective Date from the Accessible
Compound Libraries, including additional compounds synthesized subsequently.
1.15 "Research Program" means the collaborative research activities conducted
by 3DP and AgrEvo, as described in Article 2 of this Agreement.
**Certain portions of this Exhibit have been omitted upon a request of
confidential treatment that has been filed with the Commission. The omitted
portions have been filed seperately with the Commission.
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1.16 "Research Program Compound" means a compound that has been synthesized by
3DP in the course of the Research Program, e.g., in the course of optimizing an
Active Compound.
1.17 "Research Program Patents" means any Patents, other than Compound Patents
and 3DP Technology Patents, that claim inventions made by either Party in the
course of the Research Program.
1.18 "Research Program Term" means an initial period of two (2) years from the
Effective Date in which the Parties have agreed to conduct collaborative
research pursuant to the Research Program. This Research Program Term may be
extended pursuant to Sections 2.8 and 6.2 or may be shortened pursuant to
Section 12.4 of this Agreement.
1.19 "Research Steering Committee"or"Committee"means the committee to be formed
pursuant to Article 3 of this Agreement.
1.20 "ThermoFluor Protein Characterization and Screening Technology" or
"ThermoFluor Technology" means [**].
1.21 "Territory" means the entire world.
1.22 "3DP Screening Library" means a collection of [**] compounds, selected
from the Probe Library and from the Accessible Compound Library, provided by 3DP
to AgrEvo for screening pursuant to Section 2.2 of this Agreement "3DP Screening
Compound" means a compound present in the 3DP Screening Library.
1.23 "3DP Technology" means U.S. Patents No. 5,463,564; 5,574,656; 5,684,711
and 5,901,069, associated know-how and other intellectual property rights of 3DP
that cover the use of DirectedDiversity Accessible Compound Libraries,
DirectedDiversity Software Tools and ThermoFluor Protein Characterization and
Screening Technology, and other related technology developed by 3DP during the
course of this Agreement.
1.24 "3DP Technology Patents" mean Patents covering 3DP Technology.
1.25 "Valid Claim" means a claim of a Patent that has not lapsed or become
abandoned or been declared invalid or unenforceable by a court or agency of
competent jurisdiction from which no appeal can be or has been taken.
2. COLLABORATIVE RESEARCH PROGRAM
2.1 Research Program. The goal of the Research Program is to identify and
optimize compounds of commercialization in the Field. The Parties agree to
collaborate in drafting a specific research plan, to be approved by the Research
Steering Committee pursuant to Section 3.1 of this Agreement, and agree to use
their reasonable efforts to achieve the goal of the Research Program.
**Certain portions of this Exhibit have been omitted upon a request of
confidential treatment that has been filed with the Commission. The omitted
portions have been filed seperately with the Commission.
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2.2 3DP Screening Compounds. 3DP will supply 3DP Screening Compounds to AgrEvo
to be screened at AgrEvoin in [**] according to section 2.4 with the aim to
identify Active Compounds for potential use in the Field under the following
terms or other terms agreed to by the Research Steering Committee on behalf of
the Parties:
(a) 3DP will supply the 3DP Screening Library to AgrEvo through approximately
monthly deliveries that cumulatively contains [**] compounds that are jointly
selected by the Research Steering Committee from the Probe Library and
Accessible Compound Libraries designated by 3DP.
(b) 3DP will deliver samples of 3DP Screening Compounds to AgrEvo at a rate of
approximately [**] compounds per month until the entire 3DP Screening Library
has been delivered to AgrEvo. Each 3DP Screening Compound sample will contain
approximately [**] mg of compound as a [**] solution in 96 deep well plates in
DMSO, each deep well plate containing 88 compounds. 3DP agrees to use
commercially reasonable efforts to deliver the initial [**] 3DP Screening
Compounds within four (4) weeks from the Effective Date. If requested by the
Research Steering Committee, reasonable additional amounts of the Screening
Library Compounds will be provided by 3DP to AgrEvo for screening purposes. 3DP
shall be reimbursed by AgrEvo at 3DP's costs for providing such additional
amounts of the Screening Library Compounds, if providing such additional amounts
of compounds requires the services of FTEs outside of the Research Program.
(c) 3DP will supply an electronic record of structures of 3DP Screening
Compounds as delivered. AgrEvo agrees to restrict access to inspection of these
structures to its employees on a need to know basis for AgrEvo's research
activities, unless and until otherwise agreed to in writing by 3DP.
2.3 Screening at AgrEvo. AgrEvo will conduct screening tests on the 3DP
Screening Compounds and Research Program Compounds. Within [**] months
of receipt of a given 3DP Screening Compound, AgrEvo will declare if it is
interested in further research on such a compound. In case of interest, such a
compound shall be designated as an Active Compound by AgrEvo. AgrEvo's general
criteria for the designation of an Active Compound shall be discussed at the
Research Steering Committee.
2.4 Screening at 3DP. Upon request of AgrEvo, 3DP shall perform enzymology or
ThermoFluor Protein Characterization assays on molecular targets supplied by
AgrEvo as required for screening of 3DP Screening Compounds and/or Research
Program Compounds. [**] 3DP shall promptly report the results of such screening
to AgrEvo. In the event that AgrEvo requests 3DP to conduct assays on a larger
number of molecular targets than can be conducted by the FTE commitment
hereunder, AgrEvo shall negotiate in good faith to increase FTE support.
**Certain portions of this Exhibit have been omitted upon a request of
confidential treatment that has been filed with the Commission. The omitted
portions have been filed seperately with the Commission.
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<PAGE>
2.5 Research on Active Compounds. AgrEvo may conduct further research pursuant
to this Agreement on Active Compounds. If AgrEvo decides that the activity of an
Active Compound is not sufficient to direct further development, it may select,
at its sole discretion, such a compound for optimization. Optimization may be
carried out either by 3DP or AgrEvo. Notwithstanding the foregoing, in deciding
which Party carries out the optimization of a given Active Compound the members
of 3DP in the Research Steering Committee shall have a first right of refusal to
perform such optimization at 3DP. For purposes of clarification, once 3DP
exercises its right to optimize an Active Compound, 3DP shall have the
obligation to perform such optimization, and 3DP shall have the right to
continue optimizing compounds that result from previous rounds of optimization
performed at 3DP. It is understood, however, that 3DP shall not be obligated to
perform optimization work that either exceeds the capacity of the FTE's
allocated to the Research Program, or the term of the Research Program.
2.6 Synthesis at 3DP. 3DP will provide chemical and biochemical support
services for the optimization of Active Compounds as stipulated in Section 2.5
and/or prepare new libraries of Research Program Compounds for screening
according to Sections 2.3 and 2.4. The optimization services to be provided by
3DP shall include the following, with specific FTE allocations to be determined
by the Research Steering Committee.
(a) Optimization of Active Compounds obtained from screens performed at AgrEvo
through iterative rounds of SAR generation, selection, synthesis and testing (at
AgrEvo or 3DP) of compounds selected from 3DP Accessible Compound Libraries. The
Research Program compounds derived from the optimization of Active Compounds
under this subparagraph shall not be considered as part of the 3DP Screening
Library to be provided to AgrEvo under Paragraph 2.2(a). [**]
(b) Design and production chemistry development for new libraries for screening
purposes according to Section 2.3 and 2.4 and/or new libraries based on Active
Compounds obtained from screens performed at AgrEvo or 3DP. Such new libraries
and the Research Program Compounds contained therein shall not be considered as
part of the 3DP Screening Library to be provided to AgrEvo under Paragraph
2.2(a) [**]
(c) ThermoFluor Protein Characterization assays performed to support
optimization programs on molecular targets supplied by AgrEvo as required for
the progress of the Research Program. [**]
2.7 Notwithstanding the Confidentiality Obligations of Article 8, and except
for the use of DirectedDiversity Software Tools by AgrEvo as described in
Article 4 and the use of the ThermoFluor Workstation as described in Section
5.8, 3DP hereby agrees that research, optimization and development undertaken by
AgrEvo pursuant to the terms of this Agreement may be undertaken for AgrEvo by
any Affiliate or Affiliates of AgrEvo, provided that such Affiliate or
Affiliates agree(s) to be bound by the obligations accepted by AgrEvo under this
Agreement.
**Certain portions of this Exhibit have been omitted upon a request of
confidential treatment that has been filed with the Commission. The omitted
portions have been filed seperately with the Commission.
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<PAGE>
2.8 AgrEvo shall have the option to extend the Research Program for additional
one-year terms, on ninety (90) days written notice prior to the end of the
initial or extended term, [**]. For any ongoing project that is started but not
completed before the expiration of a term, the parties shall negotiate in good
faith an appropriate extension of the existing term which is less than one year
in order to complete such project.
3. RESEARCH STEERING COMMITTEE
3.1 Research Steering Committee. The Research Program will be managed by a
Research Steering Committee ("Committee"). AgrEvo and 3DP shall each designate
three (3) employees, to be selected by their respective R&D management, to form
this Committee. One of the AgrEvo members shall be designated as the
chairperson. In the event of a tie vote, the chairperson shall cast the
deciding vote, except with respect to the first right of refusal of 3DP to
perform such optimization at 3DP as stipulated in Section 2.5. From time-to-
time, the Research Steering Committee may designate additional qualified
representatives of AgrEvo and 3DP to perform specific Committee-related tasks.
The Research Steering Committee shall be responsible for:
(a) Reviewing and approving a research plan, and monitoring the progress of
research; and
(b) Reviewing the research plan on a quarterly basis, and amending the research
plan from time to time;
(c) Discussing general criteria for designating Active Compounds.
(d) Tracking the development and status of Active Compounds and Research
Program Compounds.
(e) Adjusting the objectives and program priorities of the FTEs allocated to
the Research Program on a quarterly and a project-by-project-basis; and
(f) Reviewing and approving publications and other like disclosures related to
the subject matter of the Research Program.
3.2 Meetings of the Research Steering Committee. The Research Steering
Committee shall meet quarterly, alternating at the facilities of AgrEvo and 3DP,
unless meeting locations are otherwise agreed to by the Committee.
4. DIRECTEDDIVERSITY SOFTWARE TOOLS
The use of DirectedDiversity Software Tools by AgrEvo, as covered by this
Article 4, and support obligations of 3DP, may be extended by AgrEvo to its
Affiliate, [**]
**Certain portions of this Exhibit have been omitted upon a request of
confidential treatment that has been filed with the Commission. The omitted
portions have been filed seperately with the Commission.
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<PAGE>
[**] if such research sites agree in writing to be bound by the provisions of
this Agreement.
4.1 Use of DirectedDiversity Software Tools. 3DP will provide DirectedDiversity
Software Tools and support to AgrEvo for in-house use by AgrEvo only in the
Field according to Section 4.3.
4.2 DirectedDiversity Software Tools and Support. 3DP will supply the
following Software modules and technical support to AgrEvo:
[**]
4.3 Workstation for DirectedDiversity Software Tools. DirectedDiversity
Software Tools will be implemented on a Windows NT Workstation. 3DP agrees to
furnish up to [**] singleseat Windows NT DirectedDiversity code installations at
sites to be defined by AgrEvo. 3DP shall provide up to [**] days of on-site
consultation at 3DP to one to three (1-3) AgrEvo scientists per year. Licenses
to DirectedDiversity Software Tools shall be renewable on a yearly basis
provided that the Research Program is in effect. After the expiration or
termination of the Research Program, 3DP agrees to negotiate in good faith with
AgrEvo for AgrEvo's continued use of the Directed Diversity Software Tools. In
the absence of such a further agreement, and upon 3DP's written request, AgrEvo
agrees to return the DirectedDiversity Software Tools promptly to 3DP. 3DP
agrees to use commercially reasonable efforts to install the DirectedDiversity
Software Tools within eight (8) weeks from the Effective Date.
4.4 Limitations on Use of Software. The DirectedDiversity Software Tools are
provided to AgrEvo pursuant to this Agreement and, notwithstanding anything else
in this Agreement to the contrary, they may not be transferred or assigned to,
or used by or on behalf of any third parties. AgrEvo may make no more than one
(1) copy of the Software, which may be used for backup purposes only. AgrEvo
may not, directly or indirectly, decompile, disassemble, reverse engineer or
otherwise attempt to derive source code for the Software, and may not modify,
enhance, create derivative works based on, or otherwise change the Software,
AgrEvo may not sell, assign, lease, sublicense, or otherwise transfer, disclose,
or grant access to the Software or any copy thereof to any third party, without
the written consent of 3DP, which may be withheld in 3DP's sole discretion.
Except as expressly permitted by this Agreement, AgrEvo may not place or install
any portion of the Software on any electronic media, including but not limited
to, local or wide area networks, multiple processing units, multiple site
arrangements, service or software rental bureaus, list servers, electronic
bulletin boards, World Wide Web sites or any other server that is Internet-
enabled.
4.5 Proprietary Rights, Protection of Confidentiality. AgrEvo acknowledges
that 3DP owns all right, title and interest in and to the Software or any
portion thereof. AgrEvo acknowledges that the Software contains confidential
and proprietary information and trade secrets of 3DP whether or not the
Software, or any portion thereof, is or may be copyright or copyrightable and/or
patented or patentable, and that the Software is disclosed to AgrEvo in the
strictest confidence. AgrEvo hereby agrees to maintain the Software in
confidence using the same degree of care as
**Certain portions of this Exhibit have been omitted upon a request of
confidential treatment that has been filed with the Commission. The omitted
portions have been filed seperately with the Commission.
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<PAGE>
AgrEvo takes to safeguard its own proprietary information and trade secrets, but
in no event shall AgrEvo use less than a reasonable degree of care, and to
refrain from disclosing the Software to third parties.
4.6 Warranties as to the Software. 3DP warrants that, to 3DP's knowledge, based
upon its review of the results of a reasonable search of relevant issued U.S.
patents, as of the Effective Date, the use of the 3DP DirectDiversity Technology
as permitted by this Agreement, will not violate the rights of third parties in
the U.S. In the event that 3DP has reason to change this view after the
Effective Date and during the term of the Research Program, 3DP shall promptly
inform AgrEvo and provide full justification therefor. 3DP guarantees the
operability of the software at the AgrEvo Workstation and that the Software has
been written following the accepted rules of programming.
4.7 Limitation of Warranties and liabilities as to the Software. 3DP SHALL NOT
BE LIABLE FOR ANY INDIRECT, SPECIAL, INCIDENTAL, CONSEQUENTIAL OR PUNITIVE
DAMAGES, ARISING OUT OF OR IN CONNECTION WITH THE LICENSE GRANTED HEREIN OR USE
OF THE SOFTWARE; INCLUDING WITHOUT LIMITATION, LOSS OF DATA, LOSS OF INCOME OR
PROFIT, OR OTHER LOSSES SUSTAINED AS A RESULT OF INJURY TO ANY PERSON OR LOSS OR
DAMAGE TO PROPERTY; OR CLAIMS OF THIRD PARTIES.
5. LICENSE AND ALLOCATION OF RIGHTS
5.1 Research Program License for 3DP Technology. 3DP hereby grants to AgrEvo a
worldwide, non-exclusive, irrevocable license under the 3DP Technology during
the term of the Research Program to conduct the Research Program.
Notwithstanding anything in this Agreement to the contrary, AgrEvo may not use
3DP Technology outside the Field. This license is provided to AgrEvo and those
of its Affiliates who agree to be bound by the provisions of this Agreement and
may not be assigned, sublicensed or used on behalf of any third parties without
written permission from 3DP. Notwithstanding the foregoing, the use of the
DirectedDiversity Software Tools by AgrEvo is limited by the provisions of
Article 4 and Section 5.7, and the use of the ThermoFluor Workstation is limited
by the provisions of Section 5.8.
5.2 Rights to Exclusive Screening. AgrEvo shall have the exclusive right to
screen each 3DP Screening Compound for use in the Field pursuant to Section 2.3
for one [**] from its date of receipt by AgrEvo. Subject to Section 5.3,
after the [**] exclusivity period, 3DP shall regain all rights [**]. With
regard to 3DP Screening Compounds for which 3DP regains rights pursuant to this
Section 5.2, AgrEvo also hereby grants to 3DP a fully paid-up, royalty free
worldwide license in the Field, with the right to sublicense under any Compound
Patents and under Research Program Patents to make, have made, use, sell, have
sold, import and have imported patented products.
**Certain portions of this Exhibit have been omitted upon a request of
confidential treatment that has been filed with the Commission. The omitted
portions have been filed seperately with the Commission.
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<PAGE>
5.3 Rights to Nonexclusive Screening. Notwithstanding the provisions of Section
5.2, after the period outlined in Section 5.2, AgrEvo shall have the
nonexclusive right to screen any remaining amount of all 3DP Screening Compounds
for use in the Field. If, as a result of such nonexclusive screening, AgrEvo is
interested in the optimization for subsequent development of a 3DP Screening
Compound, and provided 3DP is not contractually prohibited from granting
development and commercialization rights to AgrEvo for such a compound, 3DP
shall have the first right of refusal to optimize for subsequent development
such a compound under terms and conditions to be negotiated in good faith by the
Parties, taking into account the terms and conditions of this Agreement.
5.4 Rights to Exclusive Optimization and Development. 3DP shall not provide
any Active Compound nor any Research Program Compound to any third party for use
in the Field, unless AgrEvo has declared in writing that it is not interested in
the further development of such Active Compound or Research Program Compound.
5.5 Ownership of Compound Patents by AgrEvo and License to 3DP. AgrEvo shall
own all Compound Patents. AgrEvo hereby grants to 3DP a fully paid-up, royalty
free worldwide, exclusive license outside of the Field, with the right to
sublicense under such Compound Patents and under Research Program Patents to
make, have made, use, sell, have sold, import and have imported patented
products. AgrEvo shall have the right to enforce the Compound Patents in the
Field, and 3DP shall have the right to enforce the Compound Patents outside of
the Field, as described in Section 9.5. Notwithstanding the foregoing, this
license shall not permit 3DP to sell or license for uses outside of the Field,
the specific Active Compounds and Research Program Compounds that are
commercially developed by AgrEvo.
5.6 Other 3DP Patents. In case a compound resulting from the Research Program
and developed by AgrEvo is covered by a patent or patent application of 3DP, 3DP
hereby grants to AgrEvo irrevocable worldwide, exclusive license in the Field
under such patent to make, have made, use, sell, have sold, import and have
imported licensed Products, under the conditions stipulated in Article 6,
provided that 3DP is not contractually prohibited from granting such an
exclusive license.
5.7 Research License to DirectedDiversity Software Tools Outside of the
Research Program. 3DP hereby also grants to AgrEvo a worldwide, nonexclusive
license under the 3DP Technology to utilize the DirectedDiversity Software Tools
within the Field but outside of the Research Program. The license conveyed by
this Section 5.7 is granted to AgrEvo pursuant to the terms and conditions of
Articles 4 and 6 of this Agreement, and may not be assigned or sublicensed or
used on behalf of third parties without written permission from 3DP.
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5.8 ThermoFluor Protein Characterization and Screening Technology. At AgrEvo's
option, 3DP agrees to lease to AgrEvo a ThermoFluor Workstation and associated
analysis software [**]. 3DP hereby also grants to AgrEvo a nonexclusive license
under the 3DP Technology to utilize the ThermoFluor Protein Characterization and
Screening Technology within the Field also outside of the Research Program. The
license conveyed by this Section 5.8 is granted, pursuant to the terms and
conditions of Article 6 of this Agreement, to AgrEvo and its Affiliate, as such
Affiliate is defined in Article 4, and may not be assigned or sublicensed or
used on behalf of third parties without written permission from 3DP.
6. FINANCIAL TERMS
[**]
6.8 Mode of Payment. All payments to 3DP shall be made against invoice within
thirty (30) days net in United States Dollars in the requisite amount to one
account to be named by 3DP. As to the royalty payments, the amount of Net Sales
in any country in the Territory shall be converted into U.S. Dollars, by
applying the buying rate for the application day of conversion as published by
Wall Street Journal on the last business day of applicable quarter.
6.9 Taxes.
(a) General. Any existing or future taxes, duties, fees or other charges which
are incurred in connection with the conclusion and execution of this Agreement
shall be borne by AgrEvo if they are incurred in the Federal Republic of Germany
and by 3DP if they are incurred in the U.S.
(b) German Income Tax. 3DP becomes with the license fee income a non-resident
taxpayer in Germany, and AgrEvo has to deduct and pay the income tax at a rate
of 25% of the license income (Section 50(a)(4) no.3 EStG). According to the
Double Tax Treaty between the U.S. and the Federal Republic of Germany, licensee
fees derived and beneficially owned by a resident of a Contracting State shall
be taxable only in that State, which means that 3DP shall only be taxed in the
U.S. This does not apply, if 3DP carries on business in Germany through a
permanent establishment or performs independent personal services from a fixed
base and the property raising the license fee is part of these activities (Art.
12). The exemption from the 25% rate has to be applied for at the Bundesamt fur
Finanzen, Bonn/Germany. AgrEvo will assist 3DP in this procedure and send the
application form to 3DP in advance to provide sufficient time to prepare and
file the application but in no event less than 60 days before the filing
deadline. AgrEvo is exempted from the duty to deduct and pay only from that
point in time, when AgrEvo has received the exemption assessment from the
Bundesamt fur Finanzen. The application should be made immediately after signing
the contract. Payments from this agreement should be done after AgrEvo has
received the exemption assessment. If payments will be done before this point in
** Certain portions of this Exhibit have been omitted upon a request of
confidential treatment that has been filed with the Commission. The omitted
portions have been filed separately with the Commission.
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<PAGE>
time, AgrEvo will deduct and pay the amount of 25% of the license income, but
then AgrEvo will assist 3DP with the refund application.
(c) VAT. In general, 3DP becomes a VAT player on the license fees received from
AgrEvo. AgrEvo would have to deduct and pay the VAT (actual rate: 16%). This can
be avoided, if 3DP does not allocate VAT in its invoices submitted to AgrEvo,
and AgrEvo, if VAT would be allocated, could be refunded (Section 52 UstDV,
Nullregelung ("Zero Regulation")). AgrEvo shall confirm the non-deduction of VAT
to 3DP.
7. AGREVO OBLIGATIONS
7.1 Development. The development of any compound from the Research Program
(Active Compound, Research Program Compound or a compound resulting from
optimization work by AgrEvo) is at the sole discretion of AgrEvo. The above
notwithstanding, in developing and commercializing such a compound AgrEvo will
use its reasonable efforts, comparable to those extended to its in-house
development of products of similar importance and/or commercial value.
7.2 Annual Progress Reports. AgrEvo shall provide 3DP with written annual
reports after the end of each calendar year during the term of this Agreement to
report on AgrEvo's progress in developing Active Compounds and Research Program
Compounds. The obligation to submit such progress reports shall end upon the
commencement of Net Sales.
7.3 Annual Sales Reports. Following first Net Sales, AgrEvo shall provide 3DP
with written annual reports on Net Sales within ninety (90) days after the end
of each calendar year during the term of this Agreement.
7.4 Records Retention. AgrEvo, its Affiliates and sublicensees shall keep
complete, accurate and correct records of Net Sales in sufficient and
appropriate detail to determine the amount of royalties due to 3DP. Such
records shall be available for inspection and maintained for a period of three
(3) years after the payment of any such royalty. AgrEvo shall permit such books
and records to be examined at a reasonable time during normal business hours by
a certified public accountant chosen by 3DP and reasonably acceptable to AgrEvo
for the purposes only of verifying the report and payments required by this
Agreement. Such investigation shall be at the expense of 3DP unless it reveals
a discrepancy in 3DP's favor of more than ten per cent, in which event it shall
be at AgrEvo's expense.
7.5 Compliance with Applicable Law. AgrEvo agrees to comply with all
applicable federal, state and local laws that relate to the manufacture, use and
sale of Licensed Products. 3DP shall comply with all applicable federal, state
and local laws that relate to its activities under this Agreement.
8. CONFIDENTIAL INFORMATION
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8.1 Confidentiality Obligations. The Parties agree that, for the term of this
Agreement and for five years thereafter, the "Receiving Party" shall keep
completely confidential and shall not publish or otherwise disclose and shall
not use for any purpose (except as expressly permitted hereunder) any
Confidential Information furnished to it by the "Disclosing Party" pursuant to
this Agreement (including without limitation, know-how), except to the extent
that it can be established by the Receiving Party that such Confidential
Information:
(a) was already known to the Receiving Party, other than under an obligation of
confidentiality from the Disclosing Party; at the time of disclosure;
(b) was generally available to the public or otherwise part of the public
domain at the time of its disclosure to the Receiving Party;
(c) became generally available to the public or otherwise part of the public
domain after its disclosure and other than through any act or omission of the
Receiving Party in breach of this Agreement;
(d) was subsequently lawfully disclosed to the Receiving Party by a third
party; or disclosure was compelled by governmental administrative agency or
judicial requirements. The Receiving Party shall notify the Disclosing Party of
such action prior to disclosure.
The obligations of confidentiality and non-use set forth in this Section 8.1
shall also apply to biological material and chemical compounds and associated
information (including without limitation know-how) disclosed by one Party to
the other prior to or during the term of this Agreement.
8.2 Written Assurance. Each Party shall limit the disclosure of Confidential
Information that it receives from the other Party to those employees and
consultants who have a reasonable need to know such Confidential Information in
connection with the activities contemplated under this Agreement. Each party
also agrees to inform its employees and consultants who perform substantial work
on the Research Program of the obligations of confidentiality specified in
Paragraph 8.1 and all such persons shall be bound by the terms of
confidentiality set forth therein. The Parties shall ensure that all employees
and consultants who are inventors on any patents arising under work carried out
under the Research Program will assign to such Party or Parties all inventions
made by such persons during the course of performing the Research Program. Each
Party may disclose the other's Confidential Information to the extent such
disclosure is reasonably necessary in filing or prosecuting patent applications,
prosecuting or defending litigation, complying with applicable governmental
regulations, making a permitted sublicense of its rights hereunder or otherwise
in performing its obligations or exercising its rights hereunder, provided that
if a Party is required to make any such disclosure of another Party's secret or
Confidential Information, it will give at least thirty (30) day written, advance
notice to the latter Party of such disclosure requirement. However, to the
extent such disclosure is not required by law, a Party shall provide the Party
whose Information is being disclosed, an opportunity to identify Confidential
Information that shall not be disclosed.
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8.3 Permitted Disclosures
(a) Notwithstanding the foregoing, or any other provision in this Agreement to
the contrary, and subject to Section 12.7 herein, 3DP may describe the financial
terms of this Agreement in confidence, in connection with capital raising or due
diligence activities. Furthermore, AgrEvo acknowledges that 3DP may be obligated
to disclose terms of this Agreement and make public a copy of this Agreement in
the event it becomes a public company as required by applicable U.S. law.
(b) Notwithstanding the forgoing, AgrEvo shall be free to disclose Confidential
Information to those of its Affiliates that agree to be bound by the terms of
this Agreement.
9. INVENTIONS AND PATENTS
9.1 Ownership. As stipulated in Article 5, all Research Program Patents shall
be individually or jointly owned depending on the relative inventive
contributions of each Party. All 3DP Technology Patents or improvements thereto
made in the course of the Research Program shall be owned by 3DP regardless of
inventorship. All Compound Patents shall be owned by AgrEvo regardless of
inventorship.
9.2 Disclosure of Inventions. The Parties agree to disclose, on a timely
basis, all inventions and discoveries made in the course of the Research Program
to the Research Steering Committee.
9.3 Filing of Patent Applications.
(a) Compound Patents. AgrEvo has the right but not the obligation to file and
pursue Compound Patents. If AgrEvo chooses to do so, then 3DP shall not file or
pursue any patent directed to the same invention. If AgrEvo chooses not to do
so, then 3DP shall have the right but not the obligation to file and pursue such
Compound Patents at 3DP's expense. This right includes the right to file in
countries where AgrEvo has not sought patent protection.
If necessary, 3DP will assist AgrEvo in complying with all formal and
substantive requirements for filing such Compound Patents free of charge. If
AgrEvo intends to abandon a Compound Patent in any country it shall inform 3DP
thereof in advance and, upon, request of 3DP, shall assign said patent in said
county to 3DP at 3DP's expense.
(b) Research Program Patents. AgrEvo has the right but not the obligation to
file and pursue Research Program Patents that are owned solely by AgrEvo. 3DP
has the right but not the obligation to file and pursue Research Program Patents
that are owned solely by 3DP. Where there is co-inventorship and thus co-
ownership of Research Program Patents, the Parties will decide who is in the
best position to file, and shall regularly provide each other with copies of all
filings and other materials submissions and correspondence with the patent
offices, in sufficient time to allow for review and comment. The Parties shall
consult in good faith as to the territorial
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scope of filing jointly owned Research Program Patents and on the preparation,
prosecution and maintenance and jointly owned Research Program Patents.
(c) 3DP Technology Patents. 3DP shall have the sole responsibility and
discretion as to the filing and prosecution of any 3DP Technology Patents to the
extent that they claim 3DP Technology.
9.4 Patent Expenses. AgrEvo shall bear the costs of prosecuting and
maintaining Compound Patents, owned by AgrEvo. 3DP shall bear the costs of
prosecuting and maintaining any patents owned by 3DP. The Parties agree to
share the reasonable cost of prosecuting and maintaining jointly owned Research
Program Patents. However, either party may chose to assign any of such Compound
Patents or jointly owned Research Program Patents to the other party and have no
further obligations for costs for such patent rights and no further license
rights with respect to Compound Patents.
9.5 Enforcement of Compound Patents.
If either Party considers that a Valid Claim of any of the Compound Patents or
Research Program Patents is being infringed by a third Party in the Field, it
shall notify the other Party and provide it with any evidence of such
infringement which is reasonably available. AgrEvo shall have the right but not
the obligation at its own expense, to attempt to remove such infringement by
commercially appropriate steps, including suit. If required by law, 3DP shall
join such suit as a party, at AgrEvo's reasonable expense. In the event AgrEvo
does not take commercially appropriate steps with respect to such infringement
that is likely to have a material adverse effect on the sale of Licensed
Products, within six months following notice of such infringement, 3DP shall
have the right to do so at its expense and shall retain any recovery, provided
that AgrEvo shall not be required to enforce such Compound Patents against more
than one entity or in more than one country at any one time.
Any amounts recovered by AgrEvo pursuant to this Section 9.5, whether by
settlement or judgment, shall be reported as Net Sales for the purpose of
calculating royalties to 3DP, after deduction of AgrEvo's reasonable expenses
[e.g. attorney fees] in making such recovery.
AgrEvo shall have the right to enforce the Compound Patents in the Field, and
3DP shall have the right to enforce the Compound Patents outside of the Field.
However, neither AgrEvo or 3DP or any of their Affiliates and sublicensees, may
enforce Compound Patents without first consulting in good faith with the other
Parties and taking into account the reasonable concerns of all parties.
The Party not enforcing the Compound Patents and Research Program Patents shall
provide reasonable assistance to the other Party, including providing access to
relevant documents and other evidence and making its employees available,
subject to the enforcing Party's reimbursement of any reasonable out-of-pocket
expenses incurred by the other Party.
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9.6 Third Party Patent Rights. If any warning letter or other notice of
infringement is received by a Party, or action, suit or proceeding is brought
against a Party alleging infringement of a patent of any third party in the
manufacture, use or sale of a Licensed Products or the conduct of the Research
Program, the Parties shall promptly discuss the best way to respond. Each party
shall be responsible for responding for its own activities.
10. DISPUTE RESOLUTION
10.1 Dispute Resolution. Any dispute concerning or arising out of this
Agreement or concerning the existence or validity hereof, shall be determined by
the following procedure.
(a) Both Parties understand and appreciate that their long term mutual interest
will be best served by affecting a rapid and fair resolution of any claims or
disputes which may a risk out of services performed under this contract or from
any dispute concerning the terms of this Agreement. Therefore, both Parties
agree to use their best efforts to resolve all such disputes as rapidly as
possible on a fair and equitable basis. Toward this end both Parties agree to
develop and follow a process for presenting, rapidly assessing, and settling
claims on a fair and equitable basis which takes into account the precise
subject and nature of the dispute.
(b) If any dispute or claim arising under this Agreement cannot be readily
resolved by the Parties pursuant to the process described above, the Parties
agree to refer the matter to a panel consisting of the Chief Executive Officer
("CEO") of 3DP and the AgrEvo Board member responsible for research for review
and a non-binding resolution. A copy of the terms of this Agreement, agreed upon
facts (and areas of disagreement), and concise summary of the basis for each
side's contentions will be provided to the panel described above which shall
review the same, confer, and attempt to reach a mutual resolution of the issue.
(c) If the matter has not been resolved utilizing the foregoing process, and
the Parties are unwilling to accept the non-binding decision of the indicated
panel, either, or both Parties may elect to pursue definitive resolution through
binding arbitration, which the Parties agree to accept in lieu of litigation or
other legally available remedies (with the exception of injunctive relief where
such relief is necessary to protect a Party from irreparable harm pending the
outcome of any such arbitration proceeding). Binding arbitration shall be
settled in accordance with the Rules of Conciliation and Arbitration of the
International Chamber of Commerce by a panel of three arbitrators chosen in
accordance with said Rules. This Agreement shall be governed by and construed in
accordance with the substantive laws of the State of Delaware without regard to
the conflicts of laws provision thereof. The arbitration will be held in
Wilmington, Delaware if initiated by AgrEvo, or in Frankfurt am Main, Germany,
if initiated by 3DP. Judgment upon the award rendered may be entered in any
court having jurisdiction and the Parties hereby consent to the said
jurisdiction and venue, and further irrevocably waive any objection which either
Party may have now or hereafter to the laying of venue of any proceedings in
said courts and to any claim that such proceedings have been brought in an
inconvenient forum, and further irrevocably agrees that judgment or order in any
such proceedings shall be conclusive and binding upon the Parties and may be
enforced in the courts of any other jurisdiction thereof.
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11. INDEMNIFICATION
11.1 Indemnification by AgrEvo. AgrEvo shall indemnify, defend and hold 3DP
and its agents, employees and directors (the "3DP Indemnitees") harmless from
and against any and all liability, damage, loss, cost or expense (including
reasonable attorney's fees) arising out of third party claims or suits relates
to (a) AgrEvo's performance of its obligations under this Agreement; or (b) the
manufacture, use or sale or other commercialization of Licensed Products by
AgrEvo and its Affiliates sublicensees, distributors and agents, except to the
extent such claims or suits result from the breach of any of the material
provisions of this Agreement, negligence or willful misconduct of the 3DP
Indemnitees. Upon the assertion of any such claim or suit, the 3DP Indemnitees
shall promptly notify AgrEvo thereof and AgrEvo shall appoint counsel reasonably
acceptable to the 3DP Indemnitees to represent the 3DP Indemnitees with respect
to any claim or suit for which indemnification is sought. The 3DP Indemnitees
shall not settle any such claim or suit without the prior written consent of
AgrEvo, which consent shall not unreasonably be withheld, unless they shall have
first waived their rights to indemnification hereunder.
11.2 Indemnification with respect to U.S. Civil Action No. 98-583 by 3DP. 3DP
shall indemnify, defend and hold AgrEvo and its agents, employees and directors
harmless from and against any and all liability, damage, loss, cost or expense
(including reasonable attorney's fees) arising out of claims in relation to
Civil Action No. 98-583 in the U.S. District Court in Delaware, as stipulated in
Section 13.5, with respect to 3DP's activities pursuant to Section 2.4 of this
Agreement.
11.3 Indemnification by 3DP. 3DP shall indemnify, defendant hold AgrEvo and
its agents, employees and directors (the "AgrEvo Indemnitees') harmless from and
against any and all liability, damage, loss, cost or expense (including
reasonable attorney's fees) arising out of third party claims or suits related
to 3DP's performance to its obligations under this Agreement except to the
extent that such claims or suits result from the breach of any of the material
provisions of this Agreement, negligence or willful misconduct of the AgrEvo
Indemnitees. Upon the assertion of any such claim or suit, the AgrEvo
Indemnitees shall promptly notify 3DP thereof and 3DP shall appoint counsel
reasonably acceptable to the AgrEvo Indemnitees to represent the AgrEvo
Indemnitees with respect to any claim or suit for which indemnification is
sought. The AgrEvo Indemnitees shall not settle any such claim or suit without
the prior written consent of 3DP, which consent shall not unreasonably be
withheld, unless they shall have first waived their rights to indemnification
hereunder.
12. TERM AND TERMINATION
12.1 Effective Date. This Agreement shall commence upon the Effective Date.
12.2 Term of the Research Program. The initial term of the Research Program
shall be two (2) years unless it is extended pursuant to Section 2.8.
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12.3 Termination. This Agreement shall terminate upon the expiration of the
last-to-expire of the Compound Patents and jointly owned Research Program
Patents, unless earlier terminated pursuant to this Article 12.
12.4 Termination for Breach. Failure by a Party to comply with any of the
material obligations contained herein or failure of 3DP to comply essentially
with the requirements of the Research Program shall entitle the Party not in
default to give notice to have the default cured. If such default is not cured
within sixty (60) days after the receipt of such notice, or diligent steps not
taken to cure if by its nature such default could not be cured within sixty (60)
days, the Party not in default shall be entitled, without prejudice to any of
its other rights conferred on it by this Agreement, and in addition to any other
remedies available to it by law or in equity, to terminate this Agreement
provided however, that such right to terminate shall be stayed in the event
that, during such 60 day period, the Party alleged to have been in default shall
have: (i) initiated arbitration in accordance with Section 10.1, above with
respect to the alleged default, and (ii) diligently and in good faith co-
operated in the prompt resolution of such arbitration proceedings.
The right of a Party to terminate this Agreement as provided above shall not be
affected in any way by its waiver or failure to take action with respect to any
prior default.
12.5 Insolvency or Bankruptcy. Either Party may, in addition to any other
remedies available by law or in equity, terminate this Agreement by written
notice to the other Party in the event the latter Party shall have become
insolvent or bankrupt, or shall have an assignment for the benefit of its
creditors, or there shall have been appointed a trustee or receiver of the other
Party or for all or a substantial part of its property or any case or proceeding
shall have been commenced or other action taken by or against the other Party in
bankruptcy or seeking reorganization, liquidation, dissolution, winding-up,
arrangement or readjustment of its debts or any other relief under any
bankruptcy, insolvency, reorganization or other similar act or law of any
jurisdiction now or hereafter in effect, or there shall have been issued a
warrant of attachment, execution, distraint or similar process against any
substantial part of the property of the other Party, and any such event shall
have continued for ninety (90) days undismissed, unbonded and undischarged.
12.6 Consequence of Termination. Upon termination or expiration of the
Research Program Portion of this Agreement, each Party shall promptly return all
relevant records and materials in its possession or control containing the other
Party's Confidential Information and to which the former Party does not have
rights hereunder -- except for one copy for documentation and proof purposes.
The obligations of confidentiality specified in Sections 4.5, 8.1 and 8.2
continue and remain in force even if this Agreement is terminated. Accrued
financial obligations pursuant to Article 6 shall be due and payable upon
termination.
12.7 Change of Control. If 3DP acquires, is acquired by, merges with or
otherwise combines with a company that has substantial activities in the Field
and is a significant competitor of AgrEvo in the Field, AgrEvo has the option to
terminate this Agreement upon written notice to 3DP or to require 3DP to take
reasonable actions necessary to ensure that any of AgrEvo's confidential
information, trade secrets or proprietary information is not disclosed to
personnel within such company directly involved in such competitive activities.
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13. REPRESENTATION AND WARRANTIES
13.1 Authority. Each Party represents and warrants that it has the full right,
power and authority to execute, deliver and perform this Agreement.
13.2 No Conflicts. Each Party represents and warrants that the execution,
delivery and performance of this Agreement does not conflict with, or constitute
a breach or default under any of its charter or organizational documents, any
law, order, judgment or governmental rule or regulation applicable to it, or any
material agreement, contract, commitment or instrument to which it is a party.
13.3 No Existing Third Party Rights. The Parties represent and warrant that
their obligations under this Agreement are not encumbered by any rights granted
by either Party to any third parties. Notwithstanding the foregoing, 3DP
represents to AgrEvo that 3DP has entered into contractual relationship with
E.I. DuPont de Nemours & Co. and with Heska Corporation that 3DP warrants will
not encumber this Agreement and the Research Program as presently contemplated
by the Parties.
13.4 Continuing Representations. The representations and warranties of each
Party contained in this Article 13 shall survive the execution and delivery of
this Agreement and shall remain and correct at all times during the term of this
Agreement with the same effect as if made on as of such latter date.
13.5 Warranty as to Third Party Patents. 3DP warrants that, to 3DP's knowledge,
based upon its review of the results of a reasonable search of relevant issued
U.S. patents, as of the Effective Date, the conduct of the Research Program,
including the use of the 3DP DirectedDiversity Technology as permitted by this
Agreement, will not violate any Valid Claims of third parties in the U.S.
Notwithstanding the foregoing, 3DP hereby advises AgrEvo that Scriptgen
Pharmaceuticals, Inc. has filed suit against 3DP in the U.S. District Court in
Delaware, Civil Action No. 98-583 (GNS), alleging that 3DP's ThermoFluor
Technology infringes certain U.S. patent rights of Scriptgen. In the event that
3DP has reason to change this view after the Effective Date and during the term
of the Research Program, 3DP shall promptly inform AgrEvo and provide full
justification therefor.
13.6 No Warranty as to Commercial Success. 3DP offers no warranty that use of
the 3DP DirectedDiversity Technology under this Agreement will result in the
discovery or the successful commercialization of a Licensed Product for in the
Field.
13.7 No Other litigation. Other than Civil Action 98-583 set forth in
Paragraph 13.5, 3DP warrants and represents that it is not presently involved in
any other legal proceedings involving the alleged infringement of any third
party's intellectual property rights.
14. MISCELLANEOUS PROVISIONS
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14.1 Accrued Rights; Surviving Obligations Termination, relinquishment or
expiration of this Agreement for any reasons shall be without prejudice to any
rights which shall have accrued to the benefit of a Party prior to such
termination, or expiration. Such termination, relinquishment or expiration
shall not relieve a Party from obligations which are expressly indicated to
survive termination or expiration of this Agreement. Without limiting the
foregoing, Sections 4.7, 5.2 (license to 3DP), 5.5, 5.6, 7.4 and 9.5, and
Articles 8, 10, 11 and 14 of this Agreement shall survive the expiration or
termination of this Agreement
14.2 Further Actions. Each Party agrees to execute, acknowledge and deliver
such further instruments and to do all such other acts as may be necessary or
appropriate in order to carry out the purposes and intent of this Agreement.
14.3 Independent Contractor. Both Parties are independent contractors under
this Agreement. Nothing contained in this Agreement is intended nor is to be
construed so as to constitute AgrEvo or 3DP as partners or joint ventures with
respect to this Agreement. Neither Party shall have any express or implied
right or authority to assume or create any obligation s on behalf of or in the
name of the other Party or to bind the other Party to any other contract,
agreement, or understanding with any Third Party.
14.4 Force Majeure. The failure of a Party to perform any obligation under
this Agreement by reason of acts of God, acts of governments, riots, wars,
strikes, accidents or deficiencies in materials or other causes of a similar
magnitude beyond its control shall not be deemed to be a breach of this
Agreement
14.5 No Trademark Rights. No right, expressed or implied, is granted by this
Agreement to a Party to use in any manner the name or any other trade name or
trademark of a Party in connection with the performance of this Agreement
14.6 Public Announcements. A joint press release to announce the signing of
this Agreement is attached as Appendix A to this Agreement, and the Parties
agrees to coordinate the dissemination of this press release. The Parties shall
consult with each other and reach mutual written agreement before making any
other public announcement concerning this Agreement or the subject matter
hereof. Notwithstanding the foregoing, the Parties may disclose the existence
and general nature of this Agreement. However, neither Party shall use the name
of the other Party for promotional purposes. AgrEvo shall have the right to
review all filings, to the extent that they describe the terms of this Agreement
or the arrangements with AgrEvo reflected herein, prior to their submittal by
3DP to the SEC, including all proposed redacted copies of this Agreement. 3DP
shall give due respect to any reasonable and timely request by AgrEvo with
respect thereto, including confidential treatment of selected portions of this
Agreements.
14.7 Entire Agreement of the Parties; Amendments. This Agreement constitutes
and contains the entire understanding and agreement of the Parties respecting
the subject matter hereof and cancels and supersedes any all prior negotiations,
correspondence, understandings and agreements between the Parties, whether oral
or written, regarding such subject matter. No
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waiver, modification or amendment of any provision of this Agreement shall be
valid or effective unless made in writing and signed by a duly authorized
officer of each Party.
14.8 Severability. If any provision of this Agreement becomes or is declared
by a court of competent jurisdiction to be illegal, unenforceable or void, this
Agreement shall continue in full force and effect without said provision, so
long as the Agreement, talking into account said voided provision(s), continues
to provide the Parties with the same practical economic benefits as the
Agreement containing said voided provision(s) did on the date of this Agreement.
If, after taking into account said voided provision(s), the Parties are unable
to realize the practical economic benefit contemplated on the date of this
Agreement, the Parties shall negotiate in good faith to amend this Agreement to
reestablish the practical benefit provided the Parties on the date of this
Agreement.
14.9 Captions. The captions to this Agreement are for convenience only, and
are to be of no force or effect in construing or interpreting any of the
provisions of this Agreement.
14.10 Applicable Law. This Agreement shall be governed by and interpreted in
accordance with the laws of the State of Delaware without reference to its
conflicts of laws provisions.
14.11 Notices and Deliveries. Any formal notices, request, delivery, approval
or consent required or permitted to be given under this Agreement shall be in
writing and shall be deemed to have been sufficiently given when it is received,
whether delivered in person, transmitted by facsimile with contemporaneous
confirmation, or delivery by registered letter (or its equivalent) or delivery
by certified overnight courier service, to the Party to which it is directed at
its address shown below or such other address as such Party shall have last
given by notice to the other parties.
If to AgrEvo:
Hoechst Schering AgrEvo GmbH
Hoechst Works, G 836
D-65926 Frankfurt am Main
Germany
Attention: Head of Research, Agrochemicals
with a copy to:
Hoechst Schering AgrEvo GmbH
Patent & License Department, K 801
D-65926 Frankfurt am Main
Germany
Attention: Head of Patents
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If to 3DP:
3-Dimensional Pharmaceuticals, Inc.
Eagleview Corporate Center
665 Stockton Drive, Suite 104 Exton, PA 10341
Attention: CEO
with a copy to:
Morgan, Lewis & Bockius LLP
1701 Market Street
Philadelphia, PA 19103
Attention: David R. King, Esq.
14.12 No Consequential Damages. IN NO EVENT SHALL EITHER PARTY NOR ANY OF ITS
RESPECTIVE AFFILIATES BE LIABLE TO THE OTHER PARTY OR ANY OF ITS AFFILIATES FOR
SPECIAL, INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES, WHETHER IN CONTRACT,
WARRANTY, TORT, NEGLIGENCE, STRICT LIABILITY OR OTHERWISE, including, but not
limited to, loss of profits or revenue, or claims of customers of any of them or
other third parties for such or other damages.
14.13 Assignment. Except for the research license granted pursuant to Section
5.1 and AgrEvo's access to 3DP DirectedDiversity Technology pursuant to the
confidentiality provisions under Article 8, which shall be limited to the
current sites of AgrEvo or such Affiliate as have agreed to be bound by the
provisions of this Agreement accepted by AgrEvo, this Agreement may be assigned
by either Party in connection with the sale or transfer of substantially all of
its assets that relate to this Agreement, subject in the case of 3DP, to the
provisions of Section 12.7. The above notwithstanding, this Agreement and any
rights and obligations herein shall be freely transferable or assignable by: (1)
AgrEvo to the successor company of AgrEvo resulting from the intended merger of
Hoechst Aktiengesellschaft and Rhone Poulenc S.A.; and (2) 3DP to a subsidiary
that is reasonably acceptable to AgrEvo.
14.14 Advice of Counsel. AgrEvo and 3DP have each consulted with counsel of
their choice regarding this Agreement, and each acknowledges and agrees that
this Agreement shall not be deemed to have been drafted by one party or another
and will be construed accordingly.
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IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed
by their respective duly authorized officers as of the day and year first above
written, each copy of which shall for all purposes be deemed to be an original.
3 DIMENSIONAL HOECHST SCHERING
PHARMACEUTICALS, INC. AGREVO GMB
By: /s/ David U' Prichard, Ph.D. By: /s/ Dr. Wengenmayer /s/ Dr. Rippel
--------------------------------- -----------------------------------
Name: David U'Prichard, Ph.D. Name: Dr. Wengenmayer Dr. Rippel
Title: Chief Executive Officer Title: Head of Research, Patents,
Frankfurt Agrochemicals
By: /s/ F. Raymond Salemme, Ph.D.
-----------------------------
Name: F. Raymond Salemme, Ph.D.
Title: President and Chief Scientific
Officer
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EXHIBIT 10.26
Appendix A
----------
Confidential Draft (Dated October 8, 1999)
Bechtold's version
JOINT PRESS RELEASE FOR IMMEDIATE PUBLISHING
For 3DP, Contact: For AgrEvo, Contact:
Business F. Rainer Bechtold
Michael J. Wassil AgrEvo Corporate Communication
Chief Financial Officer + 49 69 305-40033
610-458-6073
Media
Jerry Parrott
Jerry Parrott & Associates
212-472-1244
3-Dimensional Pharmaceuticals and AgrEvo
Announce Agrochemical Discovery Collaboration
Exton, PA and Frankfurt am Main, Germany - October 19, 1999 -- 3-Dimensional
Pharmaceuticals, Inc. (3DP) and Hoechst Schering AgrEvo GmbH today announced a
strategic collaboration in which 3DP's DirectedDiversity technology will be used
to discover and refine innovative new agrochemicals.
3DP will provide libraries of diverse compounds to AgrEvo, and will make
available its DirectedDiversity Technology to optimize active compounds
identified from screening the compound libraries. AgrEvo will receive the
exclusive right to commercialize agricultural products discovered during the
course of the collaboration. 3DP will retain rights for non-
<PAGE>
agrochemical uses of compounds developed through the collaboration.
"3DP's technology brings together a unique blend of powerful computational
tools, combinatorial chemistry and high-throughput screening techniques", said
Dr. Friedrich Wengenmayer, Head of Research, Agrochemicals, AgrEvo. "We believe
it has the potential to make a significant contribution to our research and
development efforts."
F. Raymond Salemme, Ph.D., 3DP President and Chief Scientific Officer,
noted that 3DP scientists are looking forward to working with their colleagues
at AgrEvo. "We are confident 3DP's technology will enhance AgrEvo's discovery
efforts and will help speed the time to market for new agrochemical products.
This is a multi-million dollar agreement in which 3DP will receive payment for
delivery of compounds, research and development funding, license fees and
royalties on resulting products. Equally important is the continued market
validation of our proprietary technology brought by this collaboration with one
of the world's leading companies in agricultural biotechnology and chemistry."
DirectedDiversity is a patented, computer-aided, iterative process for
generating chemical compounds with a prescribed set of physical, chemical and/or
biological properties. A key feature of the technology is that
DirectedDiversity Accessible Compound Libraries are initially generated and
indexed using a comprehensive set of more than 200 molecular descriptors to
allow rapid retrieval of compounds with user-selectable ranges of structural and
chemical properties. 3DP to date has developed Accessible Libraries totaling
over 1.5 billion compounds, virtually any of which can be synthesized through
automated chemistry. To prime its drug and chemical discovery process, 3DP has
synthesized DirectedDiversity Probe
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Libraries that include diverse selections of over 150,000 compounds from the
Accessible Libraries.
AgrEvo is a global leader in biotechnology, seeds, crop protection and
environmental health. The company markets globally a range of products for
enhancing crop production, together with applications for urban pest control.
AgrEvo operates in more than 70 countries with approximately 8,600 employees.
3-Dimensional Pharmaceuticals, Inc. is a leading innovator in drug
discovery. The company has developed a proprietary technology platform known as
DiscoverWorks(TM), which uniquely integrates structure-based drug design,
combinatorial chemistry and high-throughput screening. DiscoverWorks reduces
discovery costs, increases the rate of success and enhances the ultimate
commercial value of a drug development pipeline. 3DP is using its proprietary
technology both in collaboration with other companies and in its own research
programs, which currently target orally active small-molecule pharmaceuticals to
treat cardiovascular disease and cancer.
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EXHIBIT 10.19
COLLABORATIVE RESEARCH AND LICENSE AGREEMEENT
This Collaborative Research and License Agreement is made and effective as
of October 12, 1998 (the "Effective Date"), by and between 3-Dimensional
Pharmaceuticals, Inc., a corporation having its principal place of business at
Eagleview Corporate Center, 665 Stockton Drive, Suite 104, Exton, PA 19341,
U.S.A. ("3DP"), and E.I. DuPont de Nemours & Co., a corporation having its
principal place of business at 1007 Market Street, Wilmington, Delaware 19898,
U.S.A. ("DuPont"). 3DP and DuPont may be referred to herein as a "Party" or,
collectively, as "Parties".
WHEREAS, 3DP is engaged in discovery research for a variety of biologically
active compounds and the development of technologies to facilitate such
research, and 3DP has patented systems for generating chemical compounds having
desired properties;
WHEREAS, DuPont is engaged in research and development of biologically
active compounds and the development of technology for the control of pests and
disease.
WHEREAS, 3DP and DuPont desire to enter into a research and development
collaboration to discover, identify, and evaluate compounds that have the
property of [**]; and DuPont may develop, manufacture, distribute, market and
sell world-wide products containing one or more of such [**] products;
NOW, THEREFORE, in consideration of the various promises and undertakings
set forth herein, the Parties agree as follows:
1. DEFINITIONS
Unless otherwise specifically provided herein, the following terms shall
have the following meanings:
1.1 "Active Compound" means any composition of matter that has been shown
to have [**] and [**] activity in the course of the Research Program.
1.2 "Active Compound Patents" means any Patents that claim: (1) Active
Compounds that are first conceived by either Party in the course of the Research
Program; or (2) methods of making or using Active Compounds, where such methods
are first conceived by either Party in the course of the Research Program.
1.3 "Affiliate" of a Party means: (1) any corporation owning or directly
or indirectly controlling at least fifty percent (50%) of the stock normally
entitled to vote for election of directors of a party, and (2) any corporation
owned or directly or indirectly controlled by a party, or by a corporation
defined by subparagraph (1) above, through
** Certain portions of this Exhibit have been omitted based upon a request for
confidential treatment that has been filed with the Commission. The omitted
portions have been filed separately with the Commission.
<PAGE>
ownership of at least fifty percent (50%) of stock normally entitled to vote
for election of directors.
1.4 "Agreement" shall mean the present agreement including its
appendices.
1.5 "Commercialization Candidate" means a Development Candidate that
meets DuPont's formal criteria for marketing.
1.6 "Confidential Information" means all information that has or could
have commercial value or other utility in a Party's business, or the
unauthorized disclosure of which could be detrimental to the Party's interests,
including confidential information, inventions, know-how, data and materials
relating to the Research Program or to the Licensed Products, and shall include
without limitation research, technical, clinical development, manufacturing,
marketing, financial, personnel and other business information and plans,
whether in oral, written, graphic or electronic form.
1.7 "Custom Accessible Libraries" means any DirectedDiversity Chemical
Library derived from using 3DP DirectedDiversity Technology and structure
activity data provided by DuPont, and includes synthetically accessible
compounds generated by 3DP and DuPont in the course of the Research Program
derived from any source other than DuPont Compounds or a DuPont Compound Library
or the Available Chemicals Directory.
1.8 "Development Candidate" means an Active Compound that has
commercially useful properties and has been selected for advanced field testing.
1.9 "DirectedDiversity Chemical Library" means a computer-generated
library of compounds containing integrated structure-activity and synthesis
data.
1.10 "DuPont" means E.I. DuPont de Nemours & Co. and Affiliates.
1.11 "DuPont Compounds" means any compound developed or obtained by DuPont
outside of the Research Program.
1.12 "DuPont Compound Library" means any collection of DuPont Compounds or
an electronic data file describing such a collection of DuPont Compounds, for
example DuPont's CBCH compound file.
1.13 "DuPont Custom Accessible Libraries" means any DirectedDiversity
Chemical Library derived from using 3DP DirectedDiversity Technology and
structure activity data provided by DuPont, and includes synthetically
accessible compounds generated by 3DP and DuPont in the course of the Research
Program derived only from DuPont Compounds or a DuPont Compound Library.
1.14 "DuPont Patents" means any Patents owned or controlled by DuPont.
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1.15 "Effective Date" means the effective date of this Agreement as set
forth in the first paragraph hereof.
1.16 "Field" means [**]
1.17 "Joint Project Team" means the committee to be formed pursuant to
Article 4 of this Agreement.
1.18 "Licensed Product" means any product containing an Active Compound.
1.19 "Major Market" means Brazil, Canada, China, France, Germany, Italy,
Japan, Russia, Spain, United Kingdom and United States.
1.20 "Net Sales" means the gross invoiced sales price charged to third
parties for all Licensed Products sold by DuPont and its Affiliates to such
third parties after deduction of the following items: (i) customary trade,
quantity and case discounts, wholesaler-charge backs, or rebates (including
rebates to governmental agencies); provided that such discounts, charge backs
and rebates are not applied disproportionately with respect to particular
products sold; (ii) customary credits or allowances for rejection or return of
previously sold Licensed Products; (iii) any direct tax or government charge
(other than an income tax) levied on the sale, transportation or delivery of a
Licensed Product and borne by the seller thereof; and (iv) any charge for
freight or insurance if separately stated.
Combination Products: Where Product is sold in the form of a combination
product containing one or more active ingredients in addition to an Active
Compound, Net Sales for such Combination Product will be calculated by
multiplying actual Net Sales of such combination Product by the fraction A/(A+B)
where A is the net invoice price of Product to an end use customer containing
such Active Compound, if sold separately, and B is the net invoice price of a
product to an end use customer containing any other component or components in
the combination, if sold separately. If, on a country-by-country basis, the
other active component or components in the combination are not sold separately
in said country, Net Sales for the purpose of determining royalties on the
Combination Product shall be calculated by multiplying actual Net Sales of such
Combination Product by the fraction A/C where A is the invoice price of Product
containing the Active Compound, if sold separately, and C is the invoice price
of the Combination Product. If, on a country-by-country basis, neither the
Product nor the other active component or components of the Combination Product
is sold separately in said country, Net Sales for the purposes of determining
royalties of the combination Product shall be reasonably allocated between the
Product and the other active components based upon their relative value as
determined by the Parties hereto in good faith.
** Certain portions of this Exhibit have been omitted based upon a request for
confidential treatment that has been filed with the Commission. The omitted
portions have been filed separately with the Commission.
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1.21 "Patents" means all U.S. patent applications or issued patents,
including provisionals, divisionals, continuations, continuations-in-part,
reissues and extensions derived therefrom, as well as all foreign patents and
foreign patent counterparts to the foregoing.
1.22 [**]
1.23 "Research Program" means the joint research program that will be
implemented pursuant to the research plan described in Article 2.
1.24 "Research Program Patents" means any Patents, other than Active
Compound Patents and 3DP DirectedDiversity Technology, that claim inventions,
discoveries or knowhow conceived or reduced to practice by either Party in the
course of the Research Program.
1.25 "Research Term" means an initial period of three (3) years in which
the Parties conduct research pursuant to the Research Program. This Research
Term may be extended pursuant to Section 6.1 or can be shortened pursuant to
Section 9.2 of this Agreement.
1.26 [**]
1.27 "Target Leads" means any compound selected for evaluation of its [**]
from any source, including but not limited to Custom Accessible Libraries, 3DP
Accessible Libraries, DuPont Compound Libraries and the Available Chemicals
Directory (which is a commercially available directory).
1.28 "3DP Accessible Libraries" means any DirectedDiversity Chemical
Library that is generated by 3DP outside of the Research Program.
1.29 "3DP Compounds" means any compounds that are developed by 3DP outside
of the Research Program, including but not limited to compounds that are
actually synthesized by 3DP or contained in a 3DP Accessible Library.
1.30 "3DP DirectedDiversity Technology" means 3DP Patents and know-how
that relate to generating and utilizing a DirectedDiversity Chemical Library,
including but not limited to U.S. Patent Nos. 5,463,564; 5,574,656; and
5,684,711. This term also includes any discoveries, improvements, inventions and
modifications made in the Research Program to the extent that they relate to 3DP
DirectedDiversity Technology. This term does not include the SAR models as
described in Article 2 of this Agreement.
1.31 "3DP Patents" means any Patents owned or controlled by 3DP.
1.32 "Territory" means the entire world.
** Certain portions of this Exhibit have been omitted based upon a request for
confidential treatment that has been filed with the Commission. The omitted
portions have been filed separately with the Commission.
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1.33 "Valid Claim" means a claim of a Patent that has not lapsed or become
abandoned or been declared invalid or unenforceable by a court or agency of
competent jurisdiction from which no appeal can be or has been taken.
2. RESEARCH PROGRAM AND RESEARCH PLAN
A. Discovery Phase I. Discovery Phase I will be implemented pursuant to
-----------------
the confidentiality conditions of Article 3 below. The objective of this Phase
I is to utilize 3DP DirectedDiversity Technology and DuPont knowledge and
expertise to identify a first set of Target Leads to be screened for [**]
against the Target. It is anticipated that this Discovery Phase I will be
completed within three (3) months from the time that 3DP is provided access by
DuPont to the DirectedDiversity Workstation described in Section 3.1 below.
2.1 DuPont will furnish to 3DP structure and activity data on the [**] or
additional properties of agrochemical utility of DuPont Compounds screened
against the Target, including both compounds that are active and compounds that
are inactive.
2.2 3DP and DuPont will use 3DP's DirectedDiversity Technology to compute
a chemical descriptor matrix to describe and map into a chemical descriptor
space those DuPont Compounds for which [**] is provided by DuPont in Section
2.1.
2.3 3DP and DuPont will develop a Structure Activity Relationship ("SAR")
model based on the descriptor matrix described in Section 2.2 and other relevant
information that may be available to 3DP.
2.4 The chemical descriptor matrix of Section 2.2 and the SAR of Section
2.3 will be used to map DuPont Compounds, as they may be described in the DuPont
Chemical Library, into the chemical descriptor space described in Section 2.2.
2.5 3DP and DuPont will utilize 3DP's DirectedDiversity Technology to
select jointly between [**] compounds as candidates for acquisition or
synthesis. These candidate compounds, which will be selected based on the SAR
described in Section 2.3, may be drawn from any appropriate source, including
but not limited to, 3DP Accessible Libraries, Custom Accessible Libraries,
DuPont Chemical Libraries, DuPont Custom Accessible Libraries, the Available
Chemicals Directory and other chemical and available chemical libraries.
2.6 3DP will provide synthesis protocols and consultations to DuPont for
production of the compounds selected from the 3DP Accessible Libraries in
Section 2.5.
B. Discovery Phase II. Discovery Phase II will be implemented pursuant to
------------------
the confidentiality conditions of Article 3 below. The objective of this task is
to utilize 3DP DirectedDiversity Technology to identify a Target Lead having
[**]. It is
** Certain portions of this Exhibit have been omitted based upon a request for
confidential treatment that has been filed with the Commission. The omitted
portions have been filed separately with the Commission.
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anticipated that this Discovery Phase II will be completed within twelve (12)
months from the completion of Phase 1.
2.7 DuPont will make a reasonable effort to acquire or synthesize the
compounds identified in Section 2.5, and to screen these compounds for [**]
against the Target.
2.8 From the screening results obtained pursuant to Section 2.7, 3DP and
DuPont jointly will develop a second generation SAR and will select an
additional set of between [**] Target Leads for acquisition or synthesis. These
compounds are to be selected from any of the sources identified in Section 2.5.
DuPont will make a reasonable effort to acquire or synthesize the Target Leads
selected in this Section 2.8, and to screen these Target Leads for [**] against
the Target.
C. Discovery Phase III. Discovery Phase III will be implemented pursuant
-------------------
to the confidentiality conditions of Article 3 below. The objective of this
task is to utilize 3DP DirectedDiversity Technology identify an Active Compound.
It is anticipated that this Discovery Phase III will be completed within twenty-
two (22) months from the completion of Phase II.
2.9 Based on the data developed in Phase II, or as soon as practically
defined by a derived SAR obtained in paragraph 2.3, 3DP and DuPont will jointly
develop more refined Custom Accessible Libraries. 3DP and DuPont will jointly
determine the selection criteria of the Target Leads to be selected from the
Custom Accessible Libraries. DuPont shall be responsible for developing the
synthesis protocols of selected Target Lead compounds in the Custom Accessible
Libraries and will validate production chemistry to produce the selected Target
Lead compounds with high fidelity (typically >80% of library compounds
synthesized at > 80% purity). DuPont will make a reasonable effort to acquire or
synthesize the compounds selected from the Custom Accessible Libraries in this
Section 2.9, and to screen the selected compounds for Protease Inhibition
Activity against the Target.
2.10 3DP and DuPont will perform iterative cycles of selection, synthesis,
acquisition, screening and SAR generation until Active Compounds are produced
with commercially useful properties. Progress toward these properties will be
evaluated no less frequently than every six (6) months by the Joint Project Team
described in Article 4. Performance criteria that will define Active Compounds
against the Target both in vitro and in vivo will be established that are
mutually agreeable to DuPont and 3DP.
2.11 In the event that a suitable high resolution X-ray crystal structure
of the Target becomes available during the course of the Program, 3DP- shall use
this structural information to suggest other Target Leads from any appropriate
and available source.
** Certain portions of this Exhibit have been omitted based upon a request for
confidential treatment that has been filed with the Commission. The omitted
portions have been filed separately with the Commission.
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3. IMPLEMENTATION AND SECURITY FOR CONFIDENTIAL
INFORMATION
3.1 Access by DuPont to DirectedDiversity Workstation. In order to satisfy
the confidentiality concerns of the Parties about their respective Confidential
Information, particularly including but not limited to the 3DP DirectedDiversity
Technology, 3DP Accessible Libraries, DuPont Compounds and the DuPont Compound
Libraries, the Parties agree to utilize the following procedures and safeguards.
A restricted access computer workstation will be established at a DuPont
facility to be identified that is capable of operating the 3DP DirectedDiversity
Technology and accessing 3DP Accessible Libraries and DuPont Compound Libraries.
DuPont will provide the required hardware and system software and 3DP the
required application software component of the 3DP DirectedDiversity Technology
for the workstation. Access to this workstation will be limited to selected 3DP
and DuPont employees. The software application component will be jointly
operated by representatives of 3DP and DuPont. A dual password protection system
will be used to ensure that there is at least one employee from both 3DP and
DuPont present at all times when the workstation is being used interactively.
Additional operational details regarding the workstation will be jointly
determined.
3.2 Confidentiality Obligations. The Parties agree that, for the term of
this Agreement and for five years thereafter, the "Receiving Party" shall keep
completely confidential and shall not publish or otherwise disclose and shall
not use for any purpose (except as expressly permitted hereunder) any
Confidential Information furnished to it by the "Disclosing Party" pursuant to
this Agreement (including without limitation, know-how), except to the extent
that it can be established by the Receiving Party that such Confidential
Information:
(a) was already known to the Receiving Party, other than under an
obligation of confidentiality from the Disclosing Party; at the time of
disclosure;
(b) was generally available to the public or otherwise part of the
public domain at the time of its disclosure to the Receiving Party;
(c) became generally available to the public or otherwise part of the
public domain after its disclosure and other than through any act or
omission of the Receiving Party in breach of this Agreement;
(d) was subsequently lawfully disclosed to the Receiving Party by a
third party; or
(e) disclosure was compelled by governmental administrative agency or
judicial requirements.
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(f) The obligations of confidentiality and non-use set forth in this
Section 3.2 shall also apply to biological material and chemical compounds
and associated information (including without limitation know-how)
disclosed by one Party to the other prior to or during the term of this
Agreement. The Receiving Party shall notify the Disclosing Party of such
action prior to disclosure.
3.3 Written Assurances. Each Party shall inform its employees and
consultants who perform substantial work on the Research Program, of the
obligations of confidentiality specified in Paragraph 3.2 and all such persons
shall be bound by the terms of confidentiality set forth therein. All employees
and consultants who are inventors on any patents arising under work carried out
under the Research Program shall assign to such Party or Parties all inventions
made by such persons during the course of performing the Research Program. Each
Party may disclose the other's Confidential Information to the extent such
disclosure is reasonably necessary in filing or prosecuting patent applications,
prosecuting or defending litigation, complying with applicable governmental
regulations, making a permitted sublicense of its rights hereunder or otherwise
in performing its obligations or exercising its rights hereunder, provided that
if a Party is required to make any such disclosure of another Party's secret or
Confidential Information, it will give at least 30 day written, advance notice
to the latter Party of such disclosure requirement and, to the extent such
disclosure is not required by law, shall provide the Party whose information is
being disclosed, a first right of refusal.
3.4 Permitted Disclosures for Business Development Purposes.
Notwithstanding the foregoing, or any other provision in this Agreement to the
contrary, 3DP may describe the financial terms of this Agreement in confidence
to those whose primary business is venture capital, their agents, and investment
bankers.
4. JOINT PROJECT TEAM
4.1 Joint Project Team.
(a) The Discovery Phase of the Program will be managed by a Joint
Project Team. DuPont and 3DP will each designate three (3) members selected
by their respective R&D management to form this Joint Protect Team. The
Joint Project Team shall be responsible for:
i. Monitoring the progress of research; and
ii. Reviewing, approving, and amending the research plan.
(b) The Joint Project Team may make recommendations about, but will
not have sole authority over:
i. Review and approval of publications and other
disclosures related to the subject matter of the Program;
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ii. Selecting compounds to be advanced for further chemical
elaboration or field testing, or regulatory animal testing; and
iii. Annual allocation of the Program budget within DuPont.
The final decision on items i, ii, and iii in subparagraph (b) above shall
be made by DuPont.
Matters outside the scope of the Program and internal to each Party are not
under the purview of the Joint Project Team. Such matters include, but are not
limited to the following: internal personnel policies and programs, budgeting,
finance, commercial and marketing strategies, and business decisions. However,
the Parties agree to communicate with each other promptly on those matters which
while outside the scope of the Program, nevertheless may reasonably be expected
to influence the conduct or term of the Program or the intended
commercialization of an Active Compound.
5. LICENSE AND ALLOCATION OF RIGHTS
5.1 Research License to DuPont for DirectedDiversity Technology. 3DP
hereby grants to DuPont a three (3) year, world-wide, nonexclusive, non-
cancelable license under the 3DP DirectedDiversity Technology and 3DP Patents to
evaluate the Custom Accessible Libraries, DuPont Custom Accessible Libraries and
3DP Accessible Libraries to identify Target Leads pursuant to the Research
Program. DuPont shall not use the 3DP DirectedDiversity Technology or the
foregoing research license for any other purpose except that which is provided
in Section 5.9. This license is personal to DuPont and may not be assigned or
sublicensed without written permission from 3DP.
5.2 Ownership of DuPont Compounds, DuPont Custom Accessible Libraries and
their Use in the Research Program. DuPont retains ownership of the DuPont
Compounds and DuPont Custom Accessible Libraries produced in the course of the
Research Program. The Parties agree that 3DP may use, for purposes of this
Research Program only, any information provided by DuPont about any of the
DuPont Compounds to produce a data base containing compound descriptors, and
that 3DP may use such a data base to jointly develop Custom Accessible Libraries
for the Target field exclusively.
5.3 Ownership of 3DP Compounds and 3DP Accessible Libraries. 3DP shall own
all 3DP Compounds and 3DP Accessible Libraries.
5.4 Ownership of Custom Accessible Libraries and their Use in the Research
Program. Custom Accessible Libraries produced in the course of the Research
Program shall be jointly owned. For a period of five (5) years following the
end of the Research Term, 3DP agrees not to utilize any Custom Accessible
Libraries or 3DP Accessible Libraries to identify Target Leads or Active
Compounds outside of this Agreement. Notwithstanding the foregoing, in the
event that any compound contained in any Custom Accessible Library falls within
the scope of any DuPont Patents or any Active Compound
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Patent, this Agreement provides no license or other rights under such DuPont
Patents to 3DP.
5.5 Ownership of Inventions Made in the Research Program. All Active
Compound Patents shall be owned by DuPont. All Research Program Patents shall be
owned on the basis of inventorship as described in Section 7. 1. All 3DP
DirectedDiversity Technology shall be owned by 3DP.
5.6 Background License to DuPont in the Field for Active Compounds. 3DP
hereby grants to DuPont a world-wide, paid-up nonexclusive license, with the
right to sublicense, under any Custom Accessible Library, 3DP Accessible
Library, 3DP Patents or Research Program Patents to the extent that such rights
are reasonably necessary for the synthesis or commercialization of Active
Compounds in the Field.
5.7 Commercialization by DuPont of Custom Accessible Library Compounds
Outside of the Field. Where Active Compounds are concerned, the royalty
provisions of Sections 6.4 and 6.5 shall apply for commercialization by DuPont
outside of the Field. The Parties agree to negotiate in good faith an exclusive
license under any Custom Accessible Library, 3DP Accessible Library, 3DP Patents
or Research Program Patents for any compounds contained in a Custom Accessible
Library, other than Active Compounds, that are actually synthesized by DuPont
and selected for marketing for uses outside of the Field. Accordingly, 3DP
grants DuPont rights to screen such compounds against Targets outside of the
Field.
5.8 License of Active Compounds by 3DP for Uses Outside of the Field.
DuPont agrees to negotiate in good faith a license for 3DP to commercialize
Active Compounds under the Active Compound Patents to develop, make, have made,
import, use, sell and offer for sale Active Compounds for all uses outside of
the Field, provided the Active Compounds are outside DuPont's life science
efforts or interest.
5.9 Expansion of License Rights to 3DP DirectedDiversity Technology. Upon
request by DuPont, 3DP agrees to enter into good faith negotiations to expand
DuPont's license rights granted pursuant to Section 5.1 to use 3DP
DirectedDiversity Technology to additional targets and/or other fields. During
the term of the license agreement granted pursuant to Section 5.1, 3DP will work
with a representative of DuPont to design and run mutually agreeable experiments
utilizing 3DP DirectedDiversity Technology. The purpose of such experiments will
be to allow DuPont to evaluate the additional application of 3DP
DirectedDiversity Technology.
5.10 Further Assurances. Each Party shall refrain from allowing any lien
or encumbrance to vest with respect to any rights granted pursuant to this
Article 5. Each Party agrees that it shall not practice or use any rights
granted to it by the other Party under this Agreement, except as permitted by
the terms hereof
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5.11 Non-Compete. 3DP shall not enter into any agreement with a
third party to discover inhibitors of the Target while the license in Section
5.1 to use the 3DP DirectedDiversity Technology remains in effect and for a
period of five years thereafter.
6. FINANCIAL TERMS
6.1 DirectedDiversity Licensing Fee. [**] These fees are non-refundable,
and provide a license to use 3DP DirectedDiversity Technology, including custom
software, that is limited to research involving the Target in the Field, and
that is further limited to the confidentiality obligations and joint
implementation protocol described in Section 3.1.
6.2 Discovery Phase Milestone Payments.
i. Discovery Phase I - [**].
ii. Discover Phase II - [**].
iii. Discovery Phase III - [**] every six (6) months
thereafter until the completion of the Discovery Phase III
pursuant to Section 2.10. These payments will continue until the
Launch Decision Milestone described in Section 6.3 has been
achieved. Prior to each six (6) month period, evaluation of the
progress toward an inhibitor with commercial promise will be made
by a DuPont and 3DP Joint Project Team. New objectives will be
established by the Joint Project Team for each six (6) month
period. It is expected that the tasks outlined in Section 2.9 and
Section 2.10 will lead to the identification of an Active
Compound [**]. A corresponding acceptable level of in vivo
activity is to be mutually agreed upon by DuPont and 3DP.
6.3 Development Phase Milestone Payments.
[**]
6.4 Commercialization Phase Payments.
[**]
6.5 Royalty for Net Sales of Active Compounds. DuPont shall pay 3DP a
sliding scale royalty on annual Net Sales in the Territory, on a country by
country basis, for a period of not less than 10 years or until any Active
Compound Patent(s) in that country expire, whichever period of time is greater.
Thereafter, DuPont shall have a fully paid-up perpetual license in such country.
These royalty payments shall be paid on an
** Certain portions of this Exhibit have been omitted based upon a request for
confidential treatment that has been filed with the Commission. The omitted
portions have been filed separately with the Commission.
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annual basis within thirty (30) days following the end of each calendar year.
The sliding scale royalty shall be:
[**]
6.6 Mode of Payment. All payments to 3DP hereunder shall be made by wire
transfer of United States Dollars in the requisite amount to such bank account
as 3DP may from time to time designate by notice to DuPont. Payments shall be
free and clear of any taxes (other than withholding and other taxes imposed on
3DP), fees or charges, to the extent applicable. As to the royalty payments,
the amount of Net Sales shall be converted into U.S. Dollars, by applying the
buying rate for the applicable day of conversion as published by Wall Street
Journal on the last business day of applicable quarter.
6.7 Records Retention. For two years after each sale of each Licensed
Product, DuPont shall keep (and shall assure that its Affiliates and any
sublicensees shall keep) records of such sale in sufficient detail to confirm
the accuracy of the royalty calculations hereunder. At the request of 3DP,
DuPont shall permit an independent certified accountant appointed by 3DP, at
reasonable times and upon reasonable notice, to examine these records solely to
the extent necessary to verify such calculations. Such investigation shall be at
the expense of 3DP unless it reveals a discrepancy in DuPont's favor of more
than ten per cent, in which event it shall be at DuPont's expenses.
6.8 Taxes. The Party receiving royalties and other payments under this
Agreement shall pay any and all taxes levied on account of such payment. If any
taxes are required to be withheld by the paying Party, it shall (a) deduct such
taxes from the remitting payment, (b) timely pay the taxes to the proper taxing
authority, and (c) send proof of payment to the other Party and certify its
receipt by the taxing authority within sixty (60) days following such payment.
7. INVENTIONS AND PATENTS
7.1 Title to Patents. Subject to the conditions of Article 5, all Active
Compound Patents shall be owned by DuPont. All Research Program Patents shall
be individually or jointly owned depending on the relative inventive
contributions of each Party. All 3DP DirectedDiversity Technology made in the
course of the Research Program shall be owned by 3DP.
** Certain portions of this Exhibit have been omitted based upon a request for
confidential treatment that has been filed with the Commission. The omitted
portions have been filed separately with the Commission.
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7.2 Filing of Patent Applications.
(a) DuPont has the right but not the obligation to file patent
applications that fall within the scope of Active Compound Patents. DuPont
also has the right but not the obligation to file patent applications that
fall within the scope of Research Program Patents that are owned solely by
DuPont or owned jointly with 3DP. 3DP has the right but not the obligation
to file patent applications that fall within the scope of Research Program
Patents that are owned solely by 3DP and patent applications that fall
within the scope of 3DP DirectedDiversity Technology.
(b) If either Party having the right to file patent applications
chooses not to do so, the other Party may file such patent applications.
Notwithstanding the foregoing, DuPont shall have the sole responsibility
and discretion as to the filing and prosecution of any Active Compound
patents or Research Program Patents to the extent that they claim DuPont
Compounds. 3DP shall have the sole responsibility and discretion as to the
filing and prosecution of any Patents to the extent that they claim 3DP
DirectedDiversity Technology.
(c) DuPont and 3DP shall consult as to the territorial scope of
filing of Active Compound Patents and Research Program Patents and the
preparation, prosecution and maintenance of resulting patent rights. Where
there is co-ownership, the Parties will decide who is in the best position
to file, and shall regularly provide each other with copies of all filings
and other material submissions and correspondence with the patent offices,
in sufficient time to allow for review and comment.
7.3 Patent Expenses. The costs of prosecuting and maintaining patent
applications that are jointly owned shall be shared equally by the Parties.
However, either party may chose to assign any of such patent rights to the other
party and have no further obligations for costs for such patent rights.
7.4 Enforcement of Patents.
(a) If either Party considers that a Valid Claim of any of the
Active Compound Patents claiming the manufacture, use or sale of a
Commercialization Candidate or Licensed Product is being infringed by a
third party, it shall notify the other Party and provide it with any
evidence of such infringement which is reasonably available. DuPont shall
have the right but not the obligation, at its own expense, to attempt to
remove such infringement by commercially appropriate steps, including suit.
If required by law, 3DP shall join such suit as a party, at DuPont's
expense. In the event DuPont fails to take commercially appropriate steps
with respect to such an infringement of the Active Compound Patents that is
likely to have a material adverse effect on the sale of Commercialization
Candidates or Licensed Products, within six months following
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<PAGE>
notice of such infringement, 3DP shall have the right to do so at its
expense, provided that DuPont shall not be required to enforce such Active
Compound Patents against more than one entity or in more than one country
at any one time.
(b) Any amounts recovered by DuPont pursuant to subsection a), above,
whether by settlement or judgment shall be reported as Net Sales for the
purpose of calculating royalties to 3DP, after deduction of DuPont's
expenses in making such recovery.
(c) The Parties agree to discuss whatever steps may be appropriate to
enforce Active Compound Patents to the extent that they encompass uses of
Active Compounds outside of the Field.
(d) The Party not enforcing the Active Compound Patents shall provide
reasonable assistance to the other Party, including providing access to
relevant documents and other evidence and making its employees available,
subject to the enforcing Party's reimbursement of any out-of-pocket
expenses incurred by the other Party.
(e) If either Party considers that a Valid Claim of any of the
Research Program Patents is being infringed by a third party, it shall
notify the other Party and provide it with any evidence of such
infringement which is reasonably available. The Parties agree to discuss in
good faith the enforcement of any such Patents. If such Patents are
enforced by either Party, the Party not enforcing the Research Program
Patents shall provide reasonable assistance to the other Party, including
providing access to relevant documents and other evidence and making its
employees available, subject to the enforcing Party's reimbursement of any
out-of-pocket expenses incurred by the other Party.
7.5 Third Party Patent Rights. If any warning letter or other notice of
infringement is received by a Party, or action, suit or proceeding is brought
against a Party alleging infringement of a Patent of any third party in the
manufacture, use or sale of a Commercialization Candidate or Licensed Product or
in the conduct of the Research Program, the Parties shall promptly discuss and
decide the best way to respond.
8. INDEMNIFICATION
8.1 Indemnification by DuPont. DuPont shall indemnify, defend and hold 3DP
and its agents, employees and directors (the "3DP Indemnitees") harmless from
and against any and all liability, damage, loss, cost or expense (including
reasonable attorneys' fees) arising out of third party claims or suits related
to (a) DuPont's performance of its obligations under this Agreement; or (b) the
manufacture, use or sale of Licensed Products by DuPont and its Affiliates,
sublicensees, distributors and agents, except to the extent such claims or suits
result from the breach of any of the provisions of this Agreement, negligence or
willful misconduct of the 3DP Indemnitees. Upon the
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<PAGE>
assertion of any such claim or suit, the 3DP Indemnitees shall promptly notify
DuPont thereof and DuPont shall appoint counsel reasonably acceptable to the 3DP
Indemnitees to represent the 3DP Indemnitees with respect to any claim or suit
for which indemnification is sought. The 3DP Indemnities shall not settle any
such claim or suit without the prior written consent of DuPont, unless they
shall have first waived their rights to indemnification hereunder.
8.2 Indemnification By 3DP. 3DP shall indemnify, defend and hold DuPont
and its agents, employees and directors (the "DuPont Indemnitees') harmless from
and against any and all liability, damage, loss, cost or expense (including
reasonable attorneys' fees) arising out of third party claims or suits related
to (a) 3DP's performance to its obligations under this Agreement or (b) the
manufacture, use, or sale of Licensed Products by 3DP and its Affiliates
sublicensees, distributors and agents except to the extent that such claims or
suits result from the breach of any of the provisions of this Agreement,
negligence or willful misconduct of the DuPont Indemnitees. Upon the assertion
of any such claim or suit, the DuPont Indemnitees shall promptly notify 3DP
thereof and 3DP shall appoint counsel reasonably acceptable to the 3DP
Indemnitees to represent the DuPont Indemnitees with respect to any claim or
suit for which indemnification is sought. The DuPont Indemnitees shall not
settle any such claim or suit without the prior written consent of 3DP, unless
they shall have first waived their rights to indemnification hereunder.
9. TERM AND TERMINATION
9.1 Term. This Agreement shall commence upon the Effective Date. The term
of the research license to the 3DP DirectedDiversity Technology and 3DP Patents
that is granted in Section 5.1 shall be three (3) years from the Effective Date
unless the Research Program and research license are extended in the Field
pursuant to Section 6. 1. The Research Term of this Agreement shall be
coextensive with the term of the foregoing research license and shall expire
when the research license expires or is terminated. This Agreement otherwise
shall expire on the expiration of all royalty obligations hereunder. DuPont may
be granted a research license to include other targets outside of the Research
Program pursuant to Section 5.9.
9.2 Termination. DuPont may terminate the Research Program at any time by
giving 3DP at least one (1) month written notice. However, such termination
does not affect the license fees otherwise due under Section 5.1, Section 5.9
and Section 6. 1. Such termination also does not affect 3DP's obligations under
Section 3.1 and Section 5.9 during the three-year license period pursuant to
Section 5.1. Termination of the Research Program also does not terminate
obligations of confidentiality under the Research Program.
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<PAGE>
9.3 Breach.
(a) Failure by a Party to comply with any of the material obligations
contained herein shall entitle the Party not in default to give notice to
have the default cured. If such default is not cured within 60 days after
the receipt of such notice, or diligent steps not taken to cure if by its
nature such default could not be cured within 60 days, the Party not in
default shall be entitled, without prejudice to any of its other rights
conferred on it by this Agreement, and in addition to any other remedies
available to it by law or in equity, to terminate this Agreement, provided,
however, that such right to terminate shall be stayed in the event that,
during such 60 day period, the Party alleged to have been in default shall
have: (i) initiated arbitration in accordance with Section 12.9, below,
with respect to the alleged default, and (ii) diligently and in good faith
cooperated in the prompt resolution of such arbitration proceedings.
(b) The right of a Party to terminate this Agreement, as hereinabove
provided, shall not be affected in any way by its waiver or failure to take
action with respect to any prior default.
9.4 Insolvency or Bankruptcy.
(a) Either Party may, in addition to any other remedies available by
law or in equity, terminate this Agreement by written notice to the other
Party in the event the latter Party shall have become insolvent or
bankrupt, or shall have an assignment for the benefit of its creditors, or
there shall have been appointed a trustee or receiver of the other Party or
for all or a substantial part of its property or any case or proceeding
shall have been commenced or other action taken by or against the other
Party in bankruptcy or seeking reorganization, liquidation, dissolution,
winding-up, arrangement or readjustment of its debts or any other relief
under any bankruptcy, insolvency, reorganization or other similar act or
law of any jurisdiction now or hereafter in effect, or there shall have
been issued a warrant of attachment, execution, distraint or similar
process against any substantial part of the property of the other Party,
and any such event shall have continued for 90 days undismissed, unbonded
and undischarged.
(b) Rights in Bankruptcy. All rights and licenses granted under or
pursuant to this Agreement by DuPont or 3DP are, and shall otherwise be
deemed to be, for purposes of Section 365(n) of the U.S. Bankruptcy Code,
licenses of right to "Intellectual property" as defined under Section 101
of the U.S. Bankruptcy Code. The Parties agree that the Parties as
licensees of such rights under this Agreement, shall retain and may fully
exercise all of their rights elections under the U.S. Bankruptcy Code. The
Parties further agree that, in the event of the commencement of a
bankruptcy proceeding by or against either Parties under the U.S.
Bankruptcy Code, the Parties hereto which is not a party to such proceeding
shall be entitled to a complete duplicate of (or complete access
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<PAGE>
to, as appropriate) any such intellectual property and all embodiments of
such intellectual property, and same, if not already in their possession,
shall be promptly delivered to them (i) upon any such commencement of a
bankruptcy proceeding upon their written request therefor, unless the Party
subject to such proceedings elects to continue to perform all of their
obligations under this Agreement or (ii) if not delivered under (i) above,
upon the rejection of this Agreement by or on behalf of the Party subject
to such proceeding upon written request therefore by a non-subject Party.
9.5 Consequences of Termination. Upon termination or expiration of the
Research Program Portion of this Agreement, each Party shall promptly return all
relevant records and materials in its possession or control containing the other
Party's Confidential Information and to which the former Party does not retain
rights hereunder. The obligations of confidentiality specified in Paragraphs 3.2
continue and remain in force even if this Agreement is terminated.
10.1 Advanced Field Trials and Regulatory Responsibilities
10.1 Field Trials. DuPont will design and conduct all field trials that are
required in connection with the commercialization of Licensed Products, at
DuPont's sole expense.
10.2 Regulatory Approvals. DuPont shall be responsible for all regulatory
filings and related submissions that are made in connection with the
commercialization of Licensed Products for agricultural purposes, at DuPont's
sole expense.
11. Representations and Warranties
11.1 Authority. Each Party represents and warrants that it has the full
right, power and authority to execute, deliver and perform this Agreement.
11.2 No Conflicts. Each Party represents and warrants that the execution,
delivery and performance of this Agreement does not conflict with, or constitute
a breach or default under any of its charter or organizational documents, any
law, order, judgment or governmental rule or regulation applicable to it, or any
material agreement, contract, commitment or instrument to which it is a party.
11.3 No Existing Third Party Rights. The Parties represent and warrant that
their obligations under this Agreement are not encumbered by any rights granted
by either Party to any third parties.
11.4 Continuing Representations. The representations and warranties of each
Party contained in this Article 11 shall survive the execution and delivery of
this Agreement and shall remain true and correct at all times during the term of
this Agreement with the same effect as if made on and as of such later date.
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<PAGE>
11.5 Warranty as to Third Party Patents. 3DP warrants that, to 3DP's
knowledge, based upon its review of the results of a reasonable search of
relevant issued U.S. patents, as of the Effective Date, the conduct of the
Research Program, including the use of the 3DP DirectedDiversity Technology as
permitted by this Agreement, will not violate the intellectual property rights
of any third party.
11.6 No Warranty as to Commercial Success. 3DP offers no warranty that use
of the 3DP DirectedDiversity Technology under this Agreement will result in the
discovery or the successful commercialization of a Licensed Product for use
against the Target in the Field.
12. Miscellaneous Provisions
12.1 Accrued Rights; Surviving Obligations.
(a) Termination, relinquishment or expiration of this Agreement for
any reason shall be without prejudice to any rights which shall have
accrued to the benefit of a Party prior to such termination, or expiration.
Such termination, relinquishment or expiration shall not relieve a Party
from obligations which are expressly indicated to survive termination or
expiration of this Agreement.
(b) Without limiting the foregoing, Articles 3, 7, 8 and 12 and
Sections 5.1, 5.2, 5.3, 5.4, 6.1 and 6.7 of this Agreement shall survive
the expiration or termination of this Agreement.
12.2 Further Actions. Each Party agrees to execute, acknowledge and
deliver such further instruments and to do all such other acts as may be
necessary or appropriate in order to carry out the purposes and intent of this
Agreement.
12.3 Force Majeure. The failure of a Party to perform any obligation under
this Agreement by reason of acts of God, acts of governments, riots, wars,
strikes, accidents or deficiencies in materials or transportation or other
causes of a similar magnitude beyond its control shall not be deemed to be a
breach of this Agreement.
12.4 No Trademark Rights. No right, expressed or implied, is granted by
this Agreement to a Party to use in any manner the name or any other trade name
or trademark of a Party in connection with the performance of this Agreement.
12.5 Public Announcements. The Parties shall consult with each other and
reach mutual written agreement before making any public announcement concerning
this Agreement or the subject matter hereof. DuPont shall have the right to
review all filings, to the extent that they describe the terms of this Agreement
or the arrangements with DuPont reflected herein, prior to their submittal by
3DP to the SEC, including all proposed redacted copies of this Agreement. 3DP
shall give due respect to any reasonable
-18-
<PAGE>
and timely request by DuPont with respect thereto, including confidential
treatment of selected portions of this Agreement.
12.6 Entire Agreement of the Parties; Amendments. This Agreement and the
exhibits hereto constitute and contain the entire understanding and agreement of
the Parties respecting the subject matter hereof and cancels and supersedes any
all prior negotiations, correspondence, understandings and agreements between
the Parties, whether oral or written, regarding such subject matter. No waiver,
modification or amendment of any provision of this Agreement shall be valid or
effective unless made in writing and signed by a duly authorized officer of each
Party.
12.7 Captions. The captions to this Agreement are for convenience only,
and are to be of no force or effect in construing or interpreting any of the
provisions of this Agreement.
12.8 Applicable Law. This Agreement shall be governed by and interpreted
in accordance with the laws of the State of Delaware without reference to its
conflicts of laws provisions.
12.9 Disputes. Either Party may give the other Party written notice of a
dispute not resolved in the normal course of business. Upon such notice, the
Parties shall attempt in good faith to resolve any dispute arising out of or
relating to this Agreement promptly by negotiation between executives who have
the authority to settle the controversy and who are at a higher level of
management than the persons with direct responsibility for administration of
this Agreement. If the matter has not been resolved by these persons within 30
days of a disputing party's notice, either Party may initiate mediation as
provided herein. If the dispute has not been resolved by negotiation, the
Parties shall endeavor to settle the dispute by mediation under the Center for
Public Resources ("CPR") Model Procedure for Mediation of Business Disputes in
effect on the Effective Date of this Agreement. Unless the Parties agree
otherwise, a neutral mediator will be selected from a CPR Panel of Neutrals,
with the assistance of CPR or, if the Parties agree, from the American
Intellectual Property Law Association (AIPLA) Panel of Mediators.
12.10 Notices and Deliveries. Any notice, request, delivery, approval or
consent required or permitted to be given under this Agreement shall be in
writing and shall be deemed to have been sufficiently given when it is received,
whether delivered in person, transmitted by facsimile with contemporaneous
confirmation of delivery by registered letter (or its equivalent) or delivery by
certified overnight counter service, to the Party to which it is directed at its
address shown below or such other address as such Party shall have last given by
notice to the other Parties.
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<PAGE>
If to DuPont:
E.I. DuPont de Nemours & Co.
1007 Market Street
Washington, DE 19898
Attention: Corporate Secretary
with a copy to:
DuPont Agricultural Products
Barley Mill Plaza Routes 141 and 48
Wilmington, DE 19885
Attention: Manager, Cereal and Specialty Herbicides
If to 3DP:
3-Dimensional Pharmaceuticals, Inc.
Eagleview Corporate Center
665 Stockton Drive, Suite 104
Exton, PA 19341
Attention: President
with a copy to:
Morgan, Lewis & Bockius LLP
2000 One Logan Square
Philadelphia, PA 19103
Attention: David R. King, Esq.
12.11 No Consequential Damages. IN NO EVENT SHALL EITHER PARTY NOR ANY OF
ITS RESPECTIVE AFFILIATES BE LIABLE TO THE OTHER PARTY OR ANY OF ITS AFFILIATES
FOR SPECIAL, INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES, WHETHER IN CONTRACT,
WARRANTY, TORT, NEGLIGENCE, STRICT LIABILITY OR OTHER WISE, including, but not
limited to, loss of profits or revenue, or claims of customers of any of them or
other third parties for such or other damages.
12.12 Assignment. Except for the research license granted pursuant to
Section 5.1 and DuPont's access to 3DP DirectedDiversity Technology pursuant to
the confidentiality provisions under Article 3, this Agreement may be assigned
by either
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<PAGE>
Party in connection with the sale or offer of substantially all of its
assets that relate to this Agreement. 3DP shall provide reasonable notice to
DuPont before making such an assignment so that DuPont may decide whether or not
to terminate this Agreement.
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<PAGE>
___________________________________
In WITNESS WHEREOF, the Parties have caused this Agreement to be executed by
their respective duly authorized officers as of the day and year first above
written, each copy of which shall for all purposes be deemed to be an original.
3 DIMENSIONAL E. I. DUPONT DE NEMOURS & CO.
PHARMACEUTICALS, INC.
By: /s/ F. Raymond Salemme By:/s/ Philip L. Meredith
------------------------- -------------------------------
Name: F. Raymond Salmme Name: Philip L. Meredith
----------------------- ----------------------------
Title: President & CEO Title: R & D Director
---------------------- ---------------------------
By: /s/ Elmo Berger
------------------------------
Name: Elmo Berger
----------------------------
Title: Vice President of R & D
---------------------------
By: /s/ Kurt Landgraf
------------------------------
Name: Kurt Landgraf
----------------------------
Title: Executive Vice President,
---------------------------
Dupont Life Sciences
---------------------------
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<PAGE>
EXHIBIT 10.22
AMENDMENT NO. 1 TO
RESEARCH AND LICENSE AGREEMENT
This Amendment No. 1 modifies the Research and License Agreement dated
December 18, 1997 ("Original Agreement") between Heska Corporation and 3-
Dimensional Pharmaceuticals Inc.
1. Expiration. Termination or Extension of Research Term. Section 9.1.2 of the
-----------------------------------------------------
Original Agreement is amended to extend the Research Term to July 14, 2000,
which is six months from the Project Team meeting held on January 14, 2000.
2. Research Funding. Section 3 of the Original Agreement is amended to
----------------
include the following:
During the extended Research Term Heska will pay to 3DP the amount of [**]
in two equal installments in consideration for 3DP's dedication of [**]
FTE's during this extension. The first installment of [**] shall be paid
within 15 days of complete execution of this Amendment. The second
installment of [**] shall be paid on or before April 14, 2000.
3. No Other Changes. Except as expressly modified by this Amendment, all
provisions of the Original Agreement shall remain in full force and effect.
IN WITNESS WHEREOF, this Amendment has been executed by the duly authorized
representatives of the parties.
SIGNED:
Heska Corporation 3-Dimensional Pharmaceuticals Inc.
By: /s/ Ronald L. Hendrick By: /s/ Scott Horvitz
------------------------------- ------------------------------
Name: Ronald L. Hendrick Name: /s/ Scott Horvitz
----------------------------- ----------------------------
Title: Executive Vice President, Title: Executive Vice President,
Chief Financial Officer Finance & Adm.
---------------------------- ---------------------------
Date: February 25, 2000 Date: February 17, 2000
----------------------------- ----------------------------
**Certain portions of this Exhibit have been omitted based upon a request for
confidential treatment that has been filed with the Commission. The omitted
portions have been filed separately with the Commission.
<PAGE>
RESEARCH AND LICENSE AGREEMENT
THIS IS A RESEARCH AND LICENSE AGREEMENT ("Agreement") dated as of December
18, 1997 between 3-Dimensional Pharmaceuticals Inc., a Delaware corporation
("3DP"), and the Heska Corporation ("Heska").
BACKGROUND
----------
3DP has developed and owns certain patented and proprietary technology
which is registered under the name "DirectedDiversity(R)" and which may be
useful in developing certain compounds.
Heska desires to fund a research project whereby 3DP will use its
technologies to attempt to develop an array of administered compounds with the
goal of [**] in non-human animals.
Heska desires to obtain and 3DP desires to grant an exclusive worldwide
license in such compounds, provided that 3DP will retain all rights to the
compounds for all human applications, on the terms and conditions contained
herein.
TERMS
-----
NOW, THEREFORE, in consideration of the mutual covenants and obligations
contained herein, and intending to be legally bound hereby, the parties agree as
follows:
1. Definitions. For purposes of this Agreement the following terms shall have
-----------
the following meanings:
1.1 "Abbreviated NADA" shall mean the application described at 21 U.S.C.
----------------
(S) 360b(n) (1994).
1.2 "Affiliate" shall mean any corporation, firm, partnership or other
---------
entity, which, at the time in question, is directly or indirectly owned by or
controlled by, or under common control with, Heska or 3DP, as the case may be.
For the purposes of this definition, "control" shall mean the ownership,
directly or indirectly, of more than 50% of the voting stock or shareholders'
equity of a corporation or, in the case of a non-corporate entity, the right to
receive more than 50% of either the profits or the assets upon dissolution.
1.3 "Candidate Compound" shall mean any Test Compound or Derivative
------------------
Compound which has demonstrated activity in the Primary Field in Initial
Screening.
**Certain portions of this Exhibit have been omitted based upon a request for
confidential treatment that has been filed with the Commission. The omitted
portions have been filed separately with the Commission.
1
<PAGE>
1.4 "Commercialization" shall mean the process of commercializing a
-----------------
Development Compound or Heska Compound, including without limitation the
manufacturing, marketing and distribution of the resulting Product or Heska
Product after receipt of applicable Regulatory Approvals.
1.5 "Companion Animal" shall mean dog or cat.
----------------
1.6 "Competitive Program" shall mean a small molecule drug discovery
-------------------
program that is based on the compounds that (i) are listed in Exhibit 1.12, (ii)
------------
[**], (iii) [**].
1.7 "Controlled" shall mean, with respect to a particular Patent, Patent
----------
Application, item of Know-How or Material, that a Party (a) owns or has a
license to such Patent, Patent Application, item of Know-How or Material, and
(b) has the ability to grant to the other Party access to and a license or
sublicense, as applicable, to such Patent, Patent Application, item of Know-How
or Material as provided herein at the time such access or license is required to
be granted.
1.8 "Derivative Compound" shall mean any compound that is an analog,
-------------------
homolog, isomer or other chemical derivative of a Test Compound and that was
made by Heska based on Heska's knowledge of such Test Compound or information
about its activity in the Fields derived from the Research. Derivative
Compounds are not Test Compounds.
1.9 "Development Compound" shall mean any Candidate Compound that has
--------------------
been selected for Development by Heska pursuant to Section 4.1 for use in the
Primary Field.
1.10 "Development" shall mean the process of creating data and dossiers for
-----------
the purposes of obtaining Regulatory Approval for the purpose of
Commercialization of any Development Compound, including without limitation the
conduct of all appropriate target animal studies on such Development Compound.
1.11 "Effective Date" shall be December __, 1997.
--------------
1.12 "Existing Compound" shall mean any of the compounds set forth in
-----------------
Exhibit 1.12 of this Agreement.
- ------------
1.13 "First Commercial Sale" shall mean the first sale by Heska of a
---------------------
Product after Regulatory Approval thereof.
1.14 "Fields" shall mean the Primary Field and the Other Fields.
------
**Certain portions of this Exhibit have been omitted based upon a request for
confidential treatment that has been filed with the Commission. The omitted
portions have been filed separately with the Commission.
2
<PAGE>
1.15 "FDA" shall mean the U.S. Food and Drug Administration.
---
1.16 "FTE" shall mean a full-time scientific or technical personnel
---
equivalent who (i) has a Ph.D. and at least 2 years, or a master's degree and at
least 3 years, of experience in the pharmaceutical or combinatorial chemistry
industry or (ii) has been approved by the Project Team.
1.17 "FTE Year" shall mean one or more FTEs working for the summed
--------
equivalent of one year on the Research, excluding administrative or management
time.
1.18 "Heska Compound" shall mean any Derivative Compound or Test Compound,
--------------
which Derivative Compound or Test Compound is developed by Heska for use in the
Other Fields.
1.19 "Heska Intellectual Property" shall mean (a) the Heska Patents; and
---------------------------
(b) all Know-How and Materials existing as of the Effective Date that are
Controlled by Heska and that are necessary for or reasonably useful to any
aspect of the Research activities to be conducted by 3DP hereunder, including
without limitation the manufacture of Test Compounds; and (c) all Results that
are made, created, developed or generated solely by employees, directors,
agents, consultants or others working on behalf of Heska; and (d) any and all
intellectual property rights (other than Patents or Patent Applications)
appurtenant to the Results described in subsection (c).
1.20 "Heska Patents" shall mean (a) all Patents and Patent Applications
-------------
existing as of the Effective Date that are Controlled by Heska and that claim
any aspect of the Research activities to be conducted by 3DP hereunder,
including without limitation the manufacture of Test Compounds; and (b) all
Patents and Patent Applications that claim any inventions in the Results that
are made, created, developed or generated solely by employees, directors,
agents, consultants or others working on behalf of Heska.
1.21 "Heska Product" shall mean any product (including any formulation
-------------
thereof) containing a Heska Compound, which product is marketed and sold for use
in the Other Fields and not in the Primary Field.
1.22 "Initial Screening" shall mean the initial efficacy screens of Test
-----------------
Compounds and Derivative Compounds for use in the Primary Field performed by
Heska on suitable screening models (such as an artificial dog model) pursuant to
Section 2.2.2.
1.23 "Initial Animal Studies" shall mean target non-human animal safety and
----------------------
efficacy studies performed by Heska pursuant to Section 2.2.4 on the Candidate
Compounds for use in the Primary Field to prepare the data needed to select
Development Compounds.
1.24 "Joint Intellectual Property" shall mean (a) all Results that are
---------------------------
made, created, developed or generated jointly by employees, directors, agents,
consultants or others working on behalf of Heska and
**Certain portions of this Exhibit have been omitted based upon a request for
confidential treatment that has been filed with the Commission. The omitted
portions have been filed separately with the Commission.
3
<PAGE>
by employees, directors, agents, consultants or others working on behalf of 3DP;
and (b) any and all intellectual property rights appurtenant to the Results
described in subsection (a), including without limitation any and all Patents or
Patent Applications that claim inventions in such Results.
1.25 "Joint Patents" shall mean all Patents and Patent Applications
-------------
included in the Joint Intellectual Property.
1.26 "Know-How" shall mean any and all information, expertise, data,
--------
results, techniques, methods, trade secrets, know-how, ideas, inventions,
discoveries, developments, concepts, formulas, designs, specifications or
procedures.
1.27 "Licensed Product" shall mean any product (including any formulation
----------------
thereof) containing any Development Compound, which product is sold for use in
the Primary Field and is claimed by a Valid Claim.
1.28 "Materials" shall mean all chemical, biological and physical tangible
---------
materials, as well as any other materials ordinarily engendered by such tangible
materials.
1.29 "NADA" shall mean a New Animal Drug Application as provided in the
----
Federal Food, Drug and Cosmetic Act, 21 U.S.C. (S) 360b(b) (1994).
1.30 "NADA Approval" shall mean the order issued by the Secretary approving
-------------
a NADA or an Abbreviated NADA.
1.31 "Net Sales" shall mean, with respect to a Product sold, the invoiced
---------
sales price of such Product billed to third party purchasers who are not
Affiliates or sublicensees of Heska, less actual amounts for (a) credits,
allowances, discounts and rebates to, and charge backs from the account of, such
independent customers for damages or rejected Product or out of date Product
returned in accordance with Heska policies; (b) freight and insurance costs as
set forth on the invoice for transporting such Products to such customers; (c)
quantity and trade discounts and other price reductions and commissions paid to
third parties with respect to the sale of Products; (d) sales, use, value-added
and other direct taxes incurred; and (e) customs, duties, surcharges and other
governmental charges incurred in connection with the exportation or importation
of the Products. Sales between or among Heska and its Affiliates or permitted
sublicensees shall be excluded from the computation of Net Sales. Net Sales
shall include the subsequent final sales to Third Parties by such Affiliates or
permitted sublicensees. In the event that a Product is sold or distributed for
use in combination with or as a component of another product or products (a
"Combination Product"), the calculation of "Net Sales" from such Combination
Product shall be determined by multiplying the Net Sales of the Combination
Product by a fraction, the numerator of which is the fair market value of the
Product in such Combination Product, and the denominator of which is the sum of
the fair market value of the Product and the fair market value of the other
products in the Combination Product. In the event that a Product is sold or
distributed as part of a bundle of other
4
<PAGE>
products where the bundle is sold at one total price and there is no separate
invoiced selling price for the Product along (a "Bundled Product"), the
calculation of "Net Sales" for the Product sold in such Bundle Product shall be
determined by multiplying the Net Sales for the Bundled Product (calculated as
provided above for the total invoiced price for such Bundled Product), by a
fraction, the numerator of which is the fair market value of the Product
included in such Bundled Product and the denominator is the sum of the fair
market values of all the products, including the Product, included in such
Bundled Product. As used herein, the "fair market value" of a particular product
shall be the average invoiced selling price for such product when sold alone
during the quarter for which Net Sales are being calculated hereunder, if such
amount can be calculated, and otherwise will be the amount that the selling
party reasonably could expect to charge for an independent sale of such product
to a willing third party purchaser during such period.
1.32 "Other Fields" shall mean any use of a compound other than (a) in or
------------
on a human, or (b) in the Primary Field.
1.33 "Party" or "Parties" shall mean, respectively, 3DP or Heska, and 3DP
----- -------
and Heska.
1.34 "Patent" or "Patents" shall mean an issued United States or foreign
------ -------
patent or supplementary protection certificate, including all provisional
applications, substitutions, extensions, reissues, reexaminations, renewals,
patents of addition, divisionals, continuations, continuations-in-part and
inventors' certificates and all foreign counterparts of the foregoing.
1.35 "Patent Application" shall mean an application for a Patent.
------------------
1.36 "Pivotal Animal Study" shall mean any test performed for regulatory
--------------------
submission by Heska or other studies in preparation for such submission pursuant
to Section 4.2 on non-human animals to establish the safety and efficacy of a
Development Compound.
1.37 "Post Launch Year" shall mean, for any Product, the 12-month period
----------------
beginning on the first day that the Product first receives Regulatory Approval
and ending on the first anniversary and each 12-month period thereafter.
1.38 "Primary Field" [**].
-------------
1.39 "Product" shall mean a Licensed Product or Heska Product.
-------
1.40 "Project Team" shall be the Project Team established by the Parties
------------
pursuant to Section 5.
**Certain portions of this Exhibit have been omitted based upon a request for
confidential treatment that has been filed with the Commission. The omitted
portions have been filed separately with the Commission.
5
<PAGE>
1.41 "Project Year" shall mean any of the 12-month periods during the
------------
Research Term beginning on the Effective Date or on an anniversary thereof.
1.42 "Regulatory Approval" shall mean, with respect to any country, filing
-------------------
for and receipt of all regulatory agency registrations, approvals, licenses or
marketing authorizations required from the applicable Regulatory Authorities for
the marketing and sale of a Product for the indication for which it is being
marketed in such country, including but not limited to, any NADA Approvals.
"Regulatory Approval" shall also include pricing or reimbursement approval, to
the extent that such approval is required from a Regulatory Authority to legally
place the Product on the market in such countries.
1.43 "Regulatory Authority" shall mean the Governmental authority or entity
--------------------
responsible for authorizing the placement on the market in any country or
territory in the Territory of any Product for commercial sale.
1.44 "Regulatory Filings" shall mean all applications, filings, materials,
------------------
studies, data and documents of any nature whatsoever filed with, prepared in
connection with or necessary to support any application for a Regulatory
Approval from a Regulatory Authority in any country or territory in the
Territory.
1.45 "Research" shall mean all the research activities conducted by 3DP and
--------
Heska pursuant to Section 2.2 and the Research Plan.
1.46 "Research Funding" shall mean the funding provided under Section 3 of
----------------
this Agreement by Heska to 3DP for 3DP's efforts in conducting the Research.
1.47 "Research Plan" shall mean the research plan for the Research prepared
-------------
by and agreed upon by the Project Team pursuant to Section 2.1, as amended from
time to time by written agreement of the entire Project Team.
1.48 "Research Term" shall have the meaning attributed to it in Section
-------------
9.1.2.
1.49 "Results" shall mean any and all Know-How and Materials that are made,
-------
created, or reduced to practice in the course of, or as a result of, the
Research, as well as any and all reports resulting from testing conducted
pursuant to the Research during the Research Term.
1.50 "Royalty Expiration Date" of a Product shall mean, on a country-by-
-----------------------
country basis, the later to occur of:
1.50.1 the expiration date of the last to expire Valid Claim of a
Patent Right in such country that claims the Product, its manufacture, or its
use; and
6
<PAGE>
1.50.2 the expiration date of the ten-year period commencing on the
Effective Date.
1.51 "Subsequent Development Compound" shall mean each Candidate Compound,
-------------------------------
excluding Replacement Compounds as defined in Section 8.1, on which Heska
conducts Development for use in the Primary Field as a Development Compound in
addition to the Development Compound first selected for Development pursuant to
Section 4.1.
1.52 "Territory" shall mean all the countries and territories of the world.
---------
1.53 "Test Compound" shall mean any compound discovered, synthesized or
-------------
produced by 3DP pursuant to or in the course of the Research that has the
potential for activity or efficacy in the Primary Field. It is understood that
a Test Compound, as defined herein, may also meet the definition for Candidate
Compound, Development Compound, Heska Compound or Product, and any such Test
Compound will in such event be deemed to be, for purposes of this Agreement, a
Test Compound as well as a Candidate Compound, Development Compound, Heska
Compound or Product, as applicable.
1.54 "3DP Intellectual Property" shall mean (a) the 3DP Patents; and (b)
-------------------------
all Know-How and Materials existing as of the Effective Date that are Controlled
by 3DP and that are necessary for or reasonably useful to any aspect of the
Research, Development and Commercialization activities to be conducted by Heska
or its Affiliates or sublicensees pursuant to this Agreement, including without
limitation the manufacture and use of Test Compounds and the sale of Products;
and (c) all Results that are made, created, developed or generated solely by
employees, directors, agents, consultants or others working on behalf of 3DP;
and (d) any and all intellectual property rights (other than Patents or Patent
Applications) appurtenant to the Results described in subsection (c).
1.55 "3DP Patents" shall mean (a) all Patents and Patent Applications
-----------
existing as of the Effective Date that are Controlled by 3DP and that claim any
aspect of the Research, Development and Commercialization activities to be
conducted by Heska or its Affiliates or sublicensees pursuant to this Agreement,
including without limitation the manufacture and use of Test Compounds and the
sale of Products; and (b) all Patents and Patent Applications that claim any
inventions in the Results that are made, created, developed or generated solely
by employees, directors, agents, consultants or other working on behalf of 3DP.
1.56 "Third Party" shall mean any person other than a Party or its
-----------
Affiliate.
1.57 "Valid Claim" shall mean a claim which (i) in the case of any
-----------
unexpired United States or foreign Patent, shall not have been donated to the
public, disclaimed, nor held invalid or unenforceable by a court of competent
jurisdiction in an unappealed or unappealable decision, or (ii) in the case of
any United States or foreign Patent Application, shall not have been canceled,
withdrawn, or abandoned without being refiled in another Patent Application or
finally rejected by an administrative agency action from which no appeal can be
taken, or shall have been pending for more than four years. For purposes of
this definition,
7
<PAGE>
time periods shall be measured cumulatively for claims in a later filed Patent
Application in a country which are substantially the same as claims in an
earlier filed Patent Application in that country. If a claim of a Patent
Application that ceased to be a Valid Claim under clause (ii) due to the passage
of time later issues as part of a Patent described within clause (i) then it
shall again be considered to be a Valid Claim effective as of the issuance of
such Patent.
2. Research
--------
2.1 Preparation of Research Plan. Within sixty days after execution of
----------------------------
this Agreement, the Parties' representatives on the Project Team shall prepare
a detailed research plan which shall set forth the Parties' respective
obligations and responsibilities in connection with the Agreement through the
selection of a Development Compound under Section 4.1. Once the Project Team
has prepared the proposed research plan, it shall submit the proposed research
plan to the appropriate members of management of both Parties for their review.
Once the Parties mutually agree in writing that the proposed research plan is in
an acceptable form, the proposed research plan shall become the Research Plan
for purposes of this Agreement. Upon selection of the Development Compounds by
Heska pursuant to Section 4.2, the Project Team shall meet only as needed to
perform the functions as set forth in Section 5.2.
2.2 Research and Initial Screening. During the Research Term, pursuant to
------------------------------
the Research Plan and subject to the provisions of this Agreement, the parties
will undertake the following Research:
2.2.1 3DP will use combinatorial or analog chemistry to discover,
synthesize or produce Test Compounds for use in the Primary Field until a
Development Compound is selected by Heska under Section 4.1.
2.2.2 3DP will provide Heska with up to [**] quantities of any
synthesized Test Compounds for evaluation in the Initial Screening. Test
Compounds will be validated by 3DP to be at least 80% pure. 3DP will provide to
Heska information regarding the structure and purity of such Test Compounds as
soon as practicable or as otherwise directed by the Project Team. Upon receipt
by Heska from 3DP of any Test Compounds, Heska will perform the Initial
Screening of such Test Compounds. Heska may also perform Initial Screening of
Heska Compounds. Test Compounds showing activity for use in the Primary Field
in the Initial Screening will be designated Candidate Compounds.
2.2.3 After the identification of Candidate Compounds that Heska
believes have a likelihood of success in the Primary Field, Heska will provide
3DP notice of such Candidate Compounds selected by Heska (up to a total of ten
compounds), and 3DP will promptly use commercially reasonable efforts to obtain
a written opinion of independent patent counsel selected by 3DP, and reasonably
**Certain portions of this Exhibit have been omitted based upon a request for
confidential treatment that has been filed with the Commission. The omitted
portions have been filed separately with the Commission.
8
<PAGE>
acceptable to Heska, as to whether such Candidate Compounds may infringe on the
issued patents, if any, that, in the reasonable opinion of such counsel, are
relevant to such Candidate Compounds (the "Relevant Patents"). Heska may
provide such notice on more than one occasion, until such time as Heska has
received written opinions, subject to qualifications reasonably acceptable to
Heska, of the patent counsel that a total of ten of such identified Candidate
Compounds do not infringe the Relevant Patents. Promptly after Heska has
received such written opinion, subject to qualifications reasonably acceptable
to Heska, that one or more of such selected Candidate Compounds do not infringe
the Relevant Patents, 3DP will use commercially reasonable efforts to produce
within a reasonable time after Heska's written request five grams of each of the
Candidate Compounds identified as non-infringing in such opinion, for Heska to
use in the Initial Animal Studies for purposes of identifying Development
Compounds. If additional quantities of a selected Candidate Compound are
required for any purpose, the cost to produce the additional amounts of such
selected Candidate Compounds will be borne by Heska. The quantities of
Candidate Compounds produced by 3DP for Heska hereunder shall be at least 99%
pure and shall be accompanied by a certificate of analysis.
2.2.4 Within sixty days after receipt of the required quantities of
all selected Candidate Compounds from 3DP pursuant to Section 2.2.3, Heska will
use commercially reasonable efforts to initiate and conduct Initial Animal
Studies on Candidate Compounds until a Development Compound has been selected by
Heska pursuant to Section 4.1. In the event that Heska does not initiate such
Initial Animal Studies within such time period, then Heska shall promptly give
written notice thereof to 3DP, including a reasoned scientific or commercial
rationale for Heska's decision. Heska shall use commercially reasonable efforts
to conduct and complete the Initial Animal Studies promptly after receipt of the
required quantifies of the selected Candidate Compounds. If Heska fails to
complete such Initial Animal Studies within nine months after receiving all such
Candidate Compounds from 3DP, Heska shall either (a) provide to 3DP written
documentation that Heska is using diligent efforts to complete such Initial
Animal Studies promptly, and continue all such efforts as necessary to complete
such studies as soon as practicable thereafter, or (b) provide to 3DP the
scientific, technical, regulatory or other substantial reasons for Heska's
inability, in such time period, to commence or complete such studies, along with
a written plan for overcoming the problems caused thereby and for completing
such studies, and shall use all reasonable efforts to complete such studies as
soon as practicable thereafter. If Heska fails to comply with the foregoing in
such time frame, at 3DP's election and upon written notice to Heska, all rights
of Heska in the Candidate Compounds shall revert to 3DP and Heska shall have no
further rights thereto. In the event that, upon completion of the Initial Animal
Studies on the first set of ten selected Candidate Compounds provided by 3DP,
Heska determines that none of such compounds is appropriate for selection as
Development Compounds for Development for use in the Primary Field, then, upon
Heska's request, 3DP will generate and provide to Heska additional Test
Compounds, and after testing such compounds Heska may select additional
Candidate Compounds, which will be identified by written notice to 3DP as
provided in Section 2.2.3 above, and the testing procedures, including all
applicable time frames, set forth in Sections 2.2.3 and 2.2.4 will be repeated
for such additional selected Candidate Compounds. Heska will pay 3DP, at 3DP's
actual cost, for (i) any Candidate Compounds in excess of the five grams
provided pursuant to Section 2.3.3 of the first ten
9
<PAGE>
selected Candidate Compounds, and (ii) any quantity of any Test Compound in
excess of 2 milligrams of such Test Compound.
2.3 Research Manpower Estimates. During the first Project Year, 3DP will
---------------------------
require its personnel to conduct the Research for an equivalent of [**] Years.
During the second Project Year, 3DP will require its personnel to conduct the
Research for an equivalent of up to [**] years as determined by the Project
Team. Any revisions to the number of FTE hours needed to complete the Research
shall be authorized by the Project Team.
2.4 Records. The Parties will maintain records of their own activities
-------
and conduct in the course of the Research (or cause such records to be
maintained) pursuant to the Research Plan in sufficient detail and in good
scientific manner as will properly reflect all work done and results achieved in
the performance of the Research (including, but not limited to, all data in the
form required under any applicable governmental regulations and as directed by
the Project Team). Each Party shall allow the other Party, at the other Party's
sole cost, to have reasonable access to all pertinent materials and data
generated by or on behalf of such Party in connection with the Research to the
extent such Party reasonably needs such materials and data to perform its duties
under this Agreement.
2.5 Compliance with Laws. All activities undertaken in connection with
--------------------
the Research shall be carried out in compliance with federal, state and local
laws, regulations and guidelines and professional standards governing the
conduct of the Research at the site where it is being conducted in the
Territory.
2.6 Exclusivity of Research. During the Research Term, neither Party
-----------------------
will, except pursuant to this Agreement, conduct or fund, either by itself or at
a Third Party, any research or Development activity specifically intended to
identify, discover, synthesize or develop compounds using any of the Existing
Compounds as leads for, or as the basis for, chemical discovery for use in the
Primary Field.
3. Research Funding. During the Research Term, Heska shall provide the
----------------
following funding ("Research Funding") to 3DP to enable 3DP to carry out 3DP's
responsibilities under the Research Plan in accordance with this Section 3. [**]
Heska shall bear its own costs and expenses incurred in performing its
responsibilities under the Research in accordance with this Section 3. All
payments of Research Funding shall be made by Heska to 3DP in U.S. Dollars by
wire transfer of immediately available funds to the account specified in Exhibit
-------
3 or to such other account notified to Heska by 3DP from time to time in a
- -
written notice to Heska.
**Certain portions of this Exhibit have been omitted based upon a request for
confidential treatment that has been filed with the Commission. The omitted
portions have been filed separately with the Commission.
10
<PAGE>
4. Pivotal Animal Studies, Development and Commercialization
---------------------------------------------------------
4.1 Selection of Development Compounds. Within one hundred eighty days
----------------------------------
after completion of the Initial Animal Studies pursuant to Section 2.2.4
(including testing required on additional Candidate Compounds), Heska shall
select one or more Candidate Compounds as Development Compounds for use in the
Primary Field. If the results of the Initial Animal Studies indicate that
additional testing needs to be completed before Heska is able to select
Development Compounds (including testing required on additional Candidate
Compounds), Heska shall so indicate to 3DP in writing and shall use reasonably
commercial efforts to conduct such additional required testing promptly; in such
event, the foregoing one hundred eighty day period will commence at the
completion of such additional studies. Heska shall provide 3DP with written
notice during the applicable time period of the Candidate Compounds it has
selected as Development Compounds, and shall indicate the non-human animal
species in which it intends to use such Development Compounds. In the event
that Heska selects a Development Compound for use in any additional non-human
animal species, it shall immediately notify 3DP in writing of such decision. If
Heska fails to select any Development Compounds within one hundred eighty days
after completion of all required Initial Animal Studies, Heska shall provide to
3DP the scientific, technical, regulatory or other substantial reasons for
Heska's inability, in such time period, to select at least one Development
Compound, along with a written plan for overcoming the problems caused thereby,
selecting a Development Compound and commencing Development, and shall use all
reasonable efforts to do so as soon as practicable thereafter. If Heska fails
to comply with the foregoing in such time frame, then at 3DP's election and upon
written notice to Heska, all rights of Heska in the Candidate Compounds shall
revert to 3DP and Heska will have no further rights thereto. If, during such
time period, Heska has selected at least one Development Compound for
Development in one non-human animal species, Heska may decide at any time during
the term of this Agreement to engage in Development of such Development Compound
for use in the Fields in additional non-human animal species, or select
Subsequent Development Compounds for Development in the Fields, provided that
Heska shall provide 3DP with written notice immediately upon reaching such
decision.
4.2 Development. After selection of Development Compounds, Heska will use
-----------
commercially reasonable efforts to design, initiate and conduct Pivotal Animal
Studies in the Primary Field and shall be deemed the sponsor of all such Pivotal
Animal Studies as defined in applicable regulations. At Heska's request, 3DP
will supply to Heska, at 3DP's actual cost to be paid by Heska, sufficient
Development Compounds to Heska in order for Heska to conduct the Pivotal Animal
Studies. If Heska is unable to initiate Pivotal Animal Studies on at least one
Development Compound within one hundred eighty days after selection of a
Development Compound under Section 4.1, Heska shall provide to 3DP the
scientific, technical, regulatory or other substantial reasons for Heska's
inability, in such time period, to commence such Pivotal Animal Studies, along
with a written plan for overcoming the problems caused thereby and for
commencing such Pivotal Animal Studies promptly thereafter, and shall use all
reasonable efforts to commence such Pivotal Animal Studies as soon as
practicable thereafter. If Heska fails to comply with the foregoing in such
time frame, then at 3DP's election and upon written notice to Heska, all rights
of Heska
11
<PAGE>
in Test Compounds and the Development Compounds shall revert to 3DP, Heska will
have no further rights thereto and this Agreement will terminate.
4.3 Commercialization of Development Compound. Within ninety days after
-----------------------------------------
the first Regulatory Approval of a Development Compound, Heska shall provide
written notice to 3DP of Heska's decision regarding whether to undertake
Commercialization in the Primary Field of the Development Compound. If Heska
decides to undertake Commercialization in the Primary Field of a Development
Compound, such notice to 3DP shall identify the countries and territories within
the Territory in which Heska intends to pursue such Commercialization. Heska
will commence Commercialization in the Primary Field of such Development
Compound within twelve months after such decision and will use commercially
reasonable efforts to conduct such Commercialization. If Heska fails to commence
such Commercialization of the Development Compound within twelve months after
Regulatory Approval, Heska will provide to 3DP the scientific, technical or
regulatory or other substantial reasons for Heska's inability, in such time
period, to commence such Commercialization, along with a written plan for
overcoming the problems caused thereby and for commencing such Commercialization
promptly thereafter, and shall use all reasonable efforts to commence such
Commercialization as soon as practicable thereafter. If Heska fails to comply
with the foregoing in such time frame, then at 3DP's election and upon written
notice to Heska, all rights of Heska in such Development Compounds shall revert
to 3DP and Heska will have no further rights thereto.
4.4 Cessation of Commercialization by Heska. If Heska has commenced
---------------------------------------
Commercialization in accordance with Section 4.3, Heska's right to market the
resulting Licensed Product and any other Licensed Product for use in the Primary
Field hereunder shall be worldwide so long as Heska is conducting
Commercialization of a Licensed Product in the United States. If Heska ceases
(other than due to government or legal action) Commercialization of all Licensed
Products in the United States, it shall immediately notify 3DP in writing, and
Heska shall use good faith efforts to find a sublicensee reasonably acceptable
to 3DP to conduct Commercialization of at lease one Licensed Product in such
countries in the Territory where Heska or its Affiliates or existing
sublicensees are not conducting Commercialization of Licensed Products,
including without limitation the United States. If Heska does not enter in to
such a sublicensing arrangement for such countries within six months after
Heska's termination of Commercialization of Licensed Products in the United
States, then the Parties shall work together during the six months immediately
following such six-month period to locate an acceptable sublicensing
arrangement. If, after such additional six-month time period, Heska has not
entered into such a sublicensing arrangement, then all rights of Heska in the
Licensed Products shall revert to 3DP and Heska shall have no further rights
thereto in such countries where none of Heska, its Affiliates or sublicensees is
marketing Licensed Products, except that in the event that 3DP locates a
sublicensee after Heska's rights have terminated or commences marketing such
Licensed Products, 3DP will pay to Heska an amount equal to [**] of any
royalties or other license fees or milestone payments received by 3DP under any
license granted
**Certain portions of this Exhibit have been omitted based upon a request for
confidential treatment that has been filed with the Commission. The omitted
portions have been filed separately with the Commission.
12
<PAGE>
by 3DP to commercialize such Licensed Product in such countries for use in the
Primary Field or, if sold directly by 3DP or its Affiliates, [**] of the Net
Sales of Licensed Products made by 3DP or its Affiliates, until such time that
the total of such payments to Heska equal the amounts paid by Heska to 3DP
pursuant to Section 8.1 and 8.2 as of the date that Heska ceases
Commercialization of the Licensed Products in the United States.
4.5 Responsibility for and Costs of Pivotal Animal Studies, Development
-------------------------------------------------------------------
and Commercialization. Heska shall be solely responsible for the implementation
- ---------------------
of Pivotal Animal Studies and Development and Commercialization of Development
Compounds and Products, as the case may be, at Heska's cost except as otherwise
provided herein. 3DP will provide or disclose to Heska all Results and 3DP
Intellectual Property relating to Test Compounds reasonably needed to conduct
such Development and Commercialization.
4.6 Development and Commercialization Summaries. For each Development
-------------------------------------------
Compound or Licensed Product for which Heska has begun to pursue Development or
Commercialization and for which Heska has not ceased pursuing Development or
Commercialization, Heska shall keep 3DP informed periodically with summary
reports on the proposed design and the conduct of any Clinical Trials, including
summaries of proposed study protocols, other clinical or investigative research
and other Regulatory Filings for such Development Compound or Product, and shall
provide to 3DP copies of all toxicological data and reports of Development and
Commercialization efforts. Heska shall provide such reports each year in
meetings as reasonably requested by 3DP, and each party shall be responsible for
its own costs with regard to such meeting.
4.7 3DP Right of First Negotiation. During the two year period commencing
------------------------------
on the Effective Date, Heska hereby grants to 3DP a right of first negotiation
according to the terms of this Section regarding entering into collaborations or
other agreements for Competitive Programs, excluding (i) any program entered
into pursuant to exercise by [**] of rights [**], or (ii) any [**] (the
"Excluded Programs"). If Heska desires to enter into an agreement with a third
party to conduct such a Competitive Program other than an Excluded Program,
Heska will give 3DP written notice of such desire, specifying the specific
targets to be pursued in such Competitive Program. 3DP shall have twenty days
in which to provide Heska written notice that it desires to enter into such an
agreement, in which case the Parties shall meet promptly thereafter and
negotiate in good faith the terms of such an agreement, for a period of up to
ninety days, with the understanding that Heska may also negotiate with Third
Parties during such period regarding the terms of such an agreement so long as
Heska does not enter into such an agreement with any Third Party during the
period. If 3DP does not provide such written notice, or if the Parties are
unable to execute such an agreement by the end of the ninety day negotiation
period, for a period of nine months, Heska may enter into such an agreement with
a third party without again complying with this Section,
**Certain portions of this Exhibit have been omitted based upon a request for
confidential treatment that has been filed with the Commission. The omitted
portions have been filed separately with the Commission.
13
<PAGE>
5. Project Team.
------------
5.1 Membership of Project Team. The Parties shall select a team to direct
--------------------------
the Research which shall consist of six members, three of whom shall be
appointed by Heska and three of whom shall be appointed by 3DP (the "Project
Team"). Each Party shall notify the other in writing if it substitutes any
member of the Project Team.
5.2 Meetings of Project Team. The Project Team shall meet (at their
------------------------
option, telephonically, by video conference or in person) at such times and
places as it may select but in no event shall the Project Team meet less
frequently than quarterly.
5.3 Responsibilities of Project Team. The Project Team shall be
--------------------------------
responsible for:
5.3.1 reviewing, approving and amending the Research Plan;
5.3.2 monitoring the progress of the Research;
5.3.3 reviewing and approving publications in accordance with Section
11.5;
5.3.4 monitoring and assisting the drafting, filing and prosecution
of Patents and Patent Applications in accordance with Section 12.2; and
5.3.5 allocating resources for the Research budget as established in
Section 2.3.
5.4 Quorum; Voting. The presence of at least four members, two of whom
--------------
shall have been selected by each Party, shall constitute a quorum for purposes
of consideration and action by the Project Team. Any decision taken by the
Project Team shall at all times be unanimous. In the event that the Project
Team is not able to reach agreement on any issue, the matter may be approved or
settled in accordance with Section 17.3, and any requirement for approval by the
Project Team under this Agreement shall be satisfied by approval in accordance
with Section 17.3.
5.5 Reports and Conferences. During the Research Term and any time during
-----------------------
which a Party is conducting activities under Sections 4.1, 4.2 and 4.3, 3DP and
Heska shall provide the Project Team with written project reports during each
calendar quarter concerning their efforts with respect to Research, Development
and Commercialization, including any change in plans in the Research,
Development or Commercialization activities or any adverse effects of any Test
Compound or Derivative Compound and shall also provide a final written report
concerning the Research within forty-five (45) days after the end of the
Research Term or such activities or earlier termination of this Agreement.
14
<PAGE>
6. Ownership of Intellectual Property
----------------------------------
6.1 3DP Intellectual Property. 3DP has and shall have and retain
-------------------------
exclusive right, title and interest in and to: (a) any and all Patents, Patent
Applications, Know-How, Materials or other intellectual property owned by 3DP on
the Effective Date; (b) any and all Results which are made, reduced to practice,
or created solely by employees, directors, agents, consultants or others working
on behalf of 3DP; (c) any and all intellectual property rights (including
without limitation Patents and Patent Applications, except to the extent
provided in Section 12.2.3) appurtenant to or claiming the Results described in
subsection (b); and (d) any and all Know-How, Materials and intellectual
property rights made, created or reduced to practice by or on behalf of 3DP
independent of this Agreement.
6.2 Heska Intellectual Property. Heska has and shall have and retain
---------------------------
exclusive right, title and interest in and to: (a) any and all Patents, Patent
Applications, Know-How, Materials or other intellectual property owned by Heska
on the Effective Date; (b) any and all Results which are made, reduced to
practice, or created solely by employees, directors, agents, consultants or
others working on behalf of Heska; (c) any and all intellectual property rights
(including without limitation Patents and Patent Applications) appurtenant to or
claiming the Results described in subsection (b); and (d) any and all Know-How,
Materials and intellectual property rights made, created or reduced to practice
by or on behalf of Heska independent of this Agreement.
6.3 Joint Intellectual Property. Each Party has and shall retain an
---------------------------
undivided one-half interest in all right, title and interest in and to the Joint
Intellectual Property, subject to the licenses and other rights granted
hereunder.
6.4 Independent Rights. Each Party shall retain exclusive right, title
------------------
and interest in and to all its other inventions, developments, know-how, patent
rights and other intellectual property that are not 3DP Intellectual Property
Rights, Heska Intellectual Property Rights or Joint Intellectual Property
Rights, independent of and not subject to any provision of this Agreement.
7. Licenses.
--------
7.1 Licenses from 3DP to Heska. Subject to all the terms and conditions
--------------------------
of this Agreement:
7.1.1 Research License. 3DP hereby grants to Heska, for the term of
----------------
this Agreement, the exclusive (except as to 3DP), worldwide right and license
under the 3DP Intellectual Property and 3DP's interest in the Joint Intellectual
Property to use the Test Compounds solely for the purpose of conducting Research
on the Test Compounds solely for use in the Fields, including without limitation
the right to prepare Heska Compounds for Research hereunder.
7.1.2 Production and Use License. 3DP hereby grants to Heska, for the
--------------------------
term of this Agreement, an exclusive, worldwide, royalty-bearing right and
license under the 3DP Intellectual Property and 3DP's interest in the Joint
Intellectual Property to engage in Development, and to use, sell, have sold,
import and offer to sell and engage in the Commercialization of any Test
Compound,
15
<PAGE>
3DP's interest in the Joint Intellectual Property to use the Test Compounds
solely for the purpose of conducting Research on the Test Compounds solely for
use in the Fields, including without limitation the right to prepare Heska
Compounds for Research hereunder.
7.1.2 Production and Use License. 3DP hereby grants to Heska, for the
--------------------------
term of this Agreement, an exclusive, worldwide, royalty-bearing right and
license under the 3DP Intellectual Property and 3DP's interest in the Joint
Intellectual Property to engage in Development, and to use, sell, have sold,
import and offer to sell and engage in the Commercialization of any Test
Compound, Derivative Compound or Licensed Product for use in the Fields and any
Heska Compound or Heska Product for use in the Other Fields throughout the
Territory. Subject to the provisions of Section 17.7 and Section 7.1.4, Heska
shall have the right to grant sublicenses, subject to and upon terms consistent
with this Agreement, under the license granted in this Section 7.1.2, provided
that Heska shall remain primarily liable under this Agreement.
7.1.3 Manufacturing License. Subject to the limitations herein, 3DP
---------------------
hereby grants to Heska, for the term of the Agreement, an exclusive, worldwide
right and license under the 3DP Intellectual Property and 3DP's interest in the
Joint Intellectual Property to make and have made any Test Compound, Derivative
Compound or Licensed Product for use in the Fields or any Heska Compound or
Heska Product for use within the Other Fields throughout the Territory. Subject
to the provisions of Section 17.7 and Section 7.1.4, Heska shall have the right
to grant sublicenses, subject to and upon terms consistent with this Agreement,
under the license granted in this Section 7.1.3, provided that Heska shall
remain primarily liable under this Agreement.
7.1.4 Limitation of Grant. Notwithstanding the foregoing Sections
-------------------
7.1.1, 7.1.2 and 7.1.3, and except for the licenses granted to Heska in Sections
7.1.1, 7.1.2 and 7.1.3, 3DP shall retain all of its rights, title and interest
to the 3DP Intellectual Property and 3DP's interest in the Joint Intellectual
Property , including without limitation the right to develop, make, have made,
use and sell, import and offer to sell any compound, product or composition of
matter for human use. Without limiting the foregoing, nothing in Section 7.1.1,
7.1.2 or 7.1.3 shall be deemed to grant to Heska, and 3DP shall retain, any
rights to the Test Compounds, 3DP Intellectual Property or 3DP's interest in the
Joint Intellectual Property for use in or on a human. Nothing contained in any
provision of this Agreement shall be deemed to grant to Heska any rights in
3DP's proprietary technology known as DirectedDiversity(R), its proprietary
technology known as ThermoFluor(R), or its other proprietary technology useful
for the creation of combinatorial chemical libraries, the processes for the
chemical synthesis of compounds and optimization of their properties, except to
the extent, if any, necessary for the manufacture of Test Compounds as permitted
by Section 7.1.3.
7.1.5 Exclusivity in the Fields. 3DP agrees that Heska shall have
-------------------------
exclusive rights to use the Test Compounds in the Fields during the term of and
in accordance with the terms of this Agreement, and that 3DP may not make, use,
sell, promote, market or license or otherwise permit or authorize any other
party to make, use, sell, promote, or market the Test Compounds for any use
16
<PAGE>
in the Fields during the term of this Agreement except as permitted by Section
4. 3DP covenants that it shall expressly prohibit any licensees of 3DP or its
Affiliates who are licensed to make, use or sell any Test Compounds for use in
or on humans from making, using, selling, promoting, or marketing the Test
Compounds for any use in the Fields.
7.2 Licenses from Heska to 3DP.
--------------------------
7.2.1 License for Research and Development. Heska hereby grants to
------------------------------------
3DP, for the Research Term, an exclusive (except as to Heska), worldwide right
and license under the Heska Intellectual Property and an exclusive (except as to
Heska) worldwide right and license under Heska's interest in Joint Intellectual
Property to engage in the Research contemplated by this Agreement.
7.2.2 Human Use. Heska hereby grants to 3DP, for the term of this
---------
Agreement, the exclusive, worldwide right and license, under the Results
comprising toxicological data for Test Compounds included in Heska's
Intellectual Property and under Heska's interest in Joint Intellectual Property
to use, make, have made, sell, have sold, import and offer to sell and engage in
the Commercialization of any Test Compound for use in or on humans. Subject to
the provisions of Section 17.7 and Section 7.2,2, 3DP shall have the right to
grant sublicenses under the license granted in this Section 7.2.1, provided that
3DP shall remain primarily liable to Heska under this Agreement.
7.2.3 Limitation of Grant. Notwithstanding the foregoing Sections
-------------------
7.2.1, and except for the licenses granted to 3DP in Section 7.2.1, Heska shall
retain all of its rights, title and interest to the Heska Intellectual Property
and Heska's interest in the Joint Intellectual Property, including without
limitation the right to develop, make, have made, use and sell, import and offer
to sell any compound, product or composition of matter for use in the Fields.
Without limiting the foregoing, nothing in Section 7.2.2 shall be deemed to
grant 3DP, and Heska shall retain, any rights to Heska Intellectual Property or
Heska's interest in Joint Intellectual Property for any use in the Fields.
8. Milestone Payments and Royalties.
--------------------------------
8.1 One-time Milestone Payments. Heska shall make one-time milestone
---------------------------
payments to 3DP as follows:
[**]
In the event that Heska or its Affiliates or sublicensees are conducting
Development on a particular Development Compound, and such Development efforts
cease for any reason (other than Regulatory Approval), and Heska or its
Affiliates or sublicensees subsequently select a different Development Compound
(the "Replacement Compound") and commence Development on such Replacement
Compound to replace the Development Compound that was dropped from Development,
then Heska shall
**Certain portions of this Exhibit have been omitted based upon a request for
confidential treatment that has been filed with the Commission. The omitted
portions have been filed separately with the Commission.
17
<PAGE>
not be obligated to pay any of the milestone payments set forth in Section 8.1.2
through 8.1.5 for achievement of the milestone events set forth therein by the
Replacement Compound if such payments were previously made by Heska as a result
of achievement of such milestone events by such Development Compound that was
dropped from Development.
8.2 Additional Milestones. Heska shall make additional milestone payments
---------------------
to 3DP with respect to Subsequent Development Compounds as follows:
[**]
In the event that Heska or its Affiliates or sublicensees are conducting
Development on a particular Subsequent Development Compound, and such
Development efforts cease for any reason (other than Regulatory Approval), and
Heska or its Affiliates or sublicensees subsequently select a different
Subsequent Development Compound (the "Subsequent Replacement Compound") and
commence Development on such Subsequent Replacement Compound to replace the
Subsequent Development Compound that was dropped from Development, then Heska
shall not be obligated to pay the milestone payments set forth in Section 8.2
for achievement of the milestone events set forth therein by the Subsequent
Replacement Compound to the extent such payments were previously made by Heska
as a result of achievement of such milestone events by such Subsequent
Development Compound that was dropped from Development.
8.3 Milestones for Heska Products. [**]
-----------------------------
8.4 Combined Milestone Payments. Heska shall make the following one-time
---------------------------
payments to 3DP upon the occurrence of the following events:
[**]
8.5 Royalties. As consideration for the licenses and rights granted by
---------
3DP to Heska under this Agreement, Heska shall pay to 3DP during the period
ending on the applicable Royalty Expiration Date the following royalties:
[**]
8.6 Royalty Reductions. Royalties payable under Section 8.5 with respect
------------------
to a Product in a country where such Product is not claimed by a Valid Claim
within the 3DP Patents or Joint Patents, shall be reduced by [**]. In addition,
in the event that Heska or its Affiliate or sublicenses is required to obtain a
license under a Patent owned by a Third Party in order to manufacture or sell a
Product, Heska may deduct from the royalty amounts otherwise owed to 3DP based
on sales of such Product [**] of the
**Certain portions of this Exhibit have been omitted based upon a request for
confidential treatment that has been filed with the Commission. The omitted
portions have been filed separately with the Commission.
18
<PAGE>
amount of royalties paid to such Third Party based on sale of such Product,
provided that such deduction may not reduce the royalty payment made in any one
quarter by more than [**] of the amount otherwise owed.
8.7 Records. Heska shall keep, and require its Affiliates and
-------
sublicensees to keep, complete and accurate records, on a country-by-country
basis, of Net Sales of Products and the calculation of royalties with respect
thereto, separately showing the calculation of all adjustments.
8.8 Royalty Reports. Heska shall deliver to 3DP written reports,
---------------
consistent with U.S. generally accepted accounting principles, within forty-five
(45) days after the close of each calendar quarter, showing separately for each
Product or Development Compound in each such quarter:
8.8.1 gross sales by Heska its Affiliates and sublicensees, broken
down by both units sold and revenue and the calculation of Net Sales;
8.8.2 details of the quantities sold in each country;
8.8.3 royalties due to 3DP pursuant to Section 8; and
8.8.4 the exchange rates used in determining the amount of U.S.
dollars and the basis for such determination.
8.9 Royalty Payments. Within 45 days after the end of each calendar
----------------
quarter during which royalties accrue on a Product pursuant to this Section 8 on
account of Net Sales, Heska shall pay to 3DP the total amount of royalties due
to 3DP for the previous calendar period, with such royalties to be accompanied
by a report for the previous calendar period described in this Section. All
payments of royalties made by Heska shall be made in U.S. Dollars by wire
transfer of immediately available funds to the account specified in Exhibit 3 or
---------
to such other account as 3DP may specify to Heska from time to time in a written
notice to Heska.
9. Term and Termination
--------------------
9.1 Term.
-----
9.1.1 Expiration of Agreement. Unless otherwise terminated, this
-----------------------
Agreement shall expire upon the last Royalty Expiration Date. Upon such
expiration, Heska shall have a non-exclusive, worldwide, perpetual, irrevocable
license under the 3DP Intellectual Property and 3DP's interest under the Joint
Intellectual Property to make, have made, use, sell, import and offer for sale
all Test Compounds, Derivative Compounds and Licensed Products for use in the
Fields and Heska Compounds and Heska Products for use in the Other Fields and
3DP shall have a non-exclusive, worldwide, perpetual, irrevocable license, with
the right to sublicense, under Heska's interest in the Joint Intellectual
Property and under any
19
<PAGE>
Results comprising toxicological data for Test Compounds included in the Heska
Intellectual Property to develop, commercialize, make, have made, use, sell,
import and offer for sale any Test Compounds for use in or on humans.
9.1.2 Expiration, Termination or Extension of Research Term. The
-----------------------------------------------------
Research Term shall be for an initial period of two years from the Effective
Date. The Research Term may be terminated prior to its expiration or extended
beyond its expiration by written agreement of the Parties.
9.2 Termination
-----------
9.2.1 Termination for Default. If either Party breaches any material
-----------------------
provision of this Agreement and if such breach is not corrected within 45 days
after the non-breaching Party gives notice of the breach to the breaching Party,
in the case of a breach consisting of the non-payment of money, or 90 days after
the non-breaching Party gives notice of the default to the breaching Party, in
the case of any other breach, the non-breaching Party may terminate this
Agreement immediately by giving notice of the termination, effective on the date
of the notice; provided, however, that if any such non-monetary breach is not
-------- -------
capable of being cured within the aforesaid 90-day period, so long as the
breaching Party commences to cure the breach promptly after receiving notice of
the breach from the non-breaching Party and thereafter diligently prosecutes the
cure to completion as soon as is practicable, the non-breaching Party may not
terminate this Agreement unless the breaching Party, notwithstanding such
efforts, is unable to cure the breach within 180 days after the other Party
gives notice of the default, in which case the non-breaching Party may terminate
this Agreement immediately by giving notice of the termination, effective on the
date of the notice.
9.2.2 Rights in Event of Bankruptcy.
-----------------------------
9.2.2.1 Notwithstanding the bankruptcy of a Party, or the
impairment of performance by a Party of its obligations under this Agreement as
a result of bankruptcy or insolvency of the Party, the other Party shall be
entitled to retain the license rights and licenses granted herein, subject to
such Party's performance of all its obligations under the Agreement and to the
Party's rights to terminate this Agreement for reasons other than bankruptcy or
insolvency as expressly provided in this Agreement.
9.2.2.2 All license rights and licenses granted under or
pursuant to this Agreement under Patents and other intellectual property rights,
including know-how and trade secrets, by one Party to the other Party are, and
shall otherwise be deemed to be, for purposes of Section 365(n) of the U.S.
Bankruptcy Code, licenses of rights to "intellectual property" as defined under
Section 101(52) of the U.S. Bankruptcy Code. Each Party agrees that the other
Party as a licensee of such rights under this Agreement, shall retain and may
fully exercise all of its rights and elections under the U.S. Bankruptcy Code,
subject to performance by such electing Party of its preexisting obligations
under this Agreement.
20
<PAGE>
9.2.3 Voluntary Termination of License Rights. Heska may
---------------------------------------
terminate the license rights granted to it by 3DP under Section 7.1 of this
Agreement with respect to any particular country or countries in the Territory
or with respect to a particular Test Compound or Licensed Product by giving 3DP
at least thirty (30) days written notice thereof.
9.2.4 Mutual Termination. By written agreement, the Parties may
------------------
at any time terminate this Agreement on mutually acceptable terms.
10. Rights and Duties upon Termination
----------------------------------
10.1 Monies Paid or Due. Upon the termination of this Agreement, 3DP shall
------------------
have the right to retain all payments previously received from Heska, subject to
the resolution, by audit or by settlement pursuant to Section 17.3 below, of any
dispute regarding such payments, and each Party shall pay to the other all sums
accrued hereunder which are then due.
10.2 Remaining Product. In the event that this Agreement is terminated
-----------------
early for any reason, Heska shall notify 3DP of the amounts of each Product that
Heska, its Affiliates, sublicensees and distributors then have on hand in the
applicable country or countries, and, at 3DP's election Heska and its
sublicensees and distributors may sell the Product in that country or countries
if Heska pays royalties thereon in accordance with Section 8.
10.3 Termination of Licenses. Any early termination of this Agreement
-----------------------
shall terminate all licenses granted to Heska under Section 7.1 with respect to
the applicable country or countries, with full reversion to 3DP of all 3DP's
interest and rights in the 3DP Intellectual Property in such country or
countries.
10.4 Sublicenses. Any termination of this Agreement will terminate all
-----------
sublicenses granted by Heska under the license rights granted to Heska
hereunder.
10.5 Survival of Rights. In the event of the termination of this Agreement
------------------
prior to its expiration, the obligations of the Parties theretofore accrued
under this Agreement shall survive, and the rights and obligations of the
Parties under this Section 10 and Sections [6, 7, 8, 10, 11, 13, 15, 16 and 17]
shall survive in accordance with the terms of such Sections.
10.6 Rights Not Exclusive. All rights to terminate, and rights upon
--------------------
termination, provided for either Party in this Agreement are in addition to
other remedies in law or equity which may be available to either Party.
11. Exchange of Information and Confidentiality
-------------------------------------------
11.1 Requirement of Confidentiality. This Agreement contemplates the
------------------------------
exchange of certain confidential and proprietary information orally and in
writing both inside and outside the Fields by one Party
21
<PAGE>
(the "Disclosing Party") to the other Party (the "Receiving Party") during the
term of this Agreement (the "Confidential Information") and the development of
certain confidential and proprietary information in the Fields in the course of
the Research collaboration by the Parties hereunder, including, without
limitation, Test Compounds and Results (the "Research Information") (the
Confidential Information and Research Information are collectively referred to
hereinafter as the "Information"). Such information shall be marked
"Confidential" and any information disclosed orally shall be deemed not to be
Information unless notified in writing by the Disclosing Party to the Receiving
Party within thirty (30) days of the oral disclosure. With respect to
Information, each Party, shall:
11.1 1 use the Information only for the purpose of performing its
duties or exercising its rights under this Agreement and for no other purpose,
subject to the terms and conditions of this Agreement;
11.1.2 safeguard the Information against disclosure to others with
the same degree of care as it exercises with its own data of a similar nature,
but not less than a reasonable degree of care; and
11.1.3 not disclose the Information to others (except to its
employees, consultants, Affiliates, or sublicensees, or the employees or
consultants of an Affiliate or sublicensee, who have a need to know such
Information in order to perform or supervise Research or otherwise exercise the
Party's rights under this Agreement and who are bound to the Receiving Party by
a like obligation of confidentiality and restriction on use) without the express
written consent of the other Party.
11.2 Exemption from Restrictions on Information. The obligations of
------------------------------------------
Section 11.1 shall not apply to Information of the Disclosing Party which:
11.2.1 the Receiving Party or its Affiliate can demonstrate by written
records was previously known to it;
11.2.2 is now, or in the future becomes, public knowledge other than
through the acts or omissions of the Receiving Party or its Affiliate;
11.2.3 is or was lawfully obtained by the Receiving Party or its
Affiliate from sources independent of the Disclosing Party;
11.2.4 the Receiving Party can demonstrate was independently developed
by or for employees of the Receiving Party or its Affiliate having no knowledge
of such Information; or
11.2.5 The Receiving Party is required to disclose by law or pursuant
to the direction of a court or government agency; provided the Disclosing Party
is first given a reasonable opportunity to contest such disclosure or seek a
protective order.
22
<PAGE>
11.3 Permitted Use and Disclosure of Information. Nothing contained herein
-------------------------------------------
is intended to prevent either Party from using the Information to make
Regulatory Filings and to obtain necessary or appropriate Regulatory Approvals
or to prosecute or obtain Patents and Patent Applications for Products developed
hereunder; provided, however, that the Disclosing Party shall take all
reasonable efforts to prevent disclosure of the Information to Third Parties.
Each Party may use and disclose Information owned by such Party, provided that
such Information is not exclusively licensed to the other Party under this
Agreement.
11.4 Disclosure of Information Not a License. The furnishing of the
---------------------------------------
Information of the Disclosing Party to the Receiving Party shall not constitute
any grant or license to the Receiving Party under any legal rights now or
hereinafter held by the Disclosing Party.
11.5 Prior Review of Publications. Neither Party shall submit for written
----------------------------
or oral publication any manuscript, abstract or the like which includes
Information, including without limitation any data or other information relating
to any Test Compound, Product, Development or Commercialization without first
obtaining the prior written consent of the Project Team pursuant to Section
5.3.4 and the other Party. Such consent shall not be unreasonably withheld or
delayed. Notwithstanding the foregoing, either Party may make publications
relating to such Party's Patent Applications that were filed prior to the
Effective Date without such Party having to obtain the other Party's consent to
the publication. The contribution of each Party shall be noted in all
publications or presentations by acknowledgment or co-authorship, whichever is
appropriate.
11.6 Publicity and News Releases. Except as may be required by applicable
---------------------------
laws, rules or regulations, neither Party will originate any publicity, news
release, or other public announcement or filing, written or oral, whether to the
public press or otherwise, relating to performance hereunder or the existence of
an arrangement between the Parties including this Agreement or any amendment
hereto, without the prior written approval of the other Party which approval
shall not be unreasonably withheld or delayed. In the event disclosure is
required by applicable law, rules or regulations, then the Party required to so
disclose such information shall, to the extent possible, provide to the other
Party for its approval (such approval not to be unreasonably withheld or
delayed) a written copy of such public announcement at least three business days
prior to disclosure. Notwithstanding the foregoing, (i) the Parties have agreed
to the press releases relating to the entering into of this Agreement agreed
upon by the Parties, copies of which are attached to this Agreement as Exhibit
-------
11.6 and (ii) the Parties shall have the right to disclose the material terms of
- ----
this Agreement to any bona-fide financial partner or potential investor or
acquirer.
11.7 Period of Confidentiality. The obligations of this Section 11 shall
-------------------------
remain in effect during the term of this Agreement and the five-year period
beginning on the termination or expiration date of the term of this Agreement.
11.8 Injunctive Relief. 3DP and Heska agree that unauthorized disclosure
-----------------
of Information could result in irreparable harm. Accordingly, in the event that
either 3DP or Heska breaches its obligations with
23
<PAGE>
respect to Information under the Agreement, the Party injured shall be entitled
to enjoin any further breach and may take such additional action as it deems
necessary and appropriate including seeking damages in any court of competent
jurisdiction.
12. Inventions, Patents and Patent Prosecution
------------------------------------------
12. Joint Intellectual Property.
---------------------------
12.1.1 Each Party shall promptly inform the other Party upon the
making of a potentially patentable invention that is Joint Intellectual
Property. The Parties thereafter shall promptly meet to discuss in good faith an
appropriate patent prosecution strategy for such invention. It is the intention
of the Parties whenever possible to divide prosecution of Patent Applications
claiming such inventions so that Heska has the responsibility for prosecution of
Patent Applications that claim uses or applications of the invention in the
Fields and 3DP shall have the responsibility for prosecution of Patent
Applications that claim uses or applications of the invention in or on humans.
Based on such discussions, the Parties will allocate to each Party the agreed
responsibility for filing and prosecution of Patent Applications claiming such
invention.
12.1.2 3DP shall have the first right, at its own expense and using
in-house or outside legal counsel reasonably acceptable to Heska, to prepare,
file, prosecute, maintain and extend such Patent Applications and Patents
claiming the Joint Intellectual Property as allocated to 3DP by the Parties
under Section 12.1.1, in countries of its choice throughout the world. Heska
shall have the first rights, at its own expense and using in-house or outside
legal counsel reasonably acceptable to 3DP, to prepare, file, prosecute,
maintain and extend such Patent Applications and Patents claiming the Joint
Intellectual Property as allocated to Heska by the Parties under Section 12.1.1,
in countries of its choice throughout the world. Each Party shall consult with
the Project Team concerning the nature and text of such Patent Applications and
prosecution matters related thereto prior to filing of such applications or
responding to any correspondence with patent authorities regarding such
applications.
12.1.3 If a Party that has the right under Section 12.1.2 to
prosecute certain Patent Applications claiming an invention in the Joint
Intellectual Property declines to file, prosecute or maintain such Patent
Applications or Patents issuing therefrom, such Party will give the other Party
written notice of its election to cease such efforts at least sixty days before
any date that would act as a forfeiture or abandonment of the rights in such
Patent Application or Patent. Thereafter, the other Party may at its expense
undertake the filing, prosecution and maintenance of such abandoned application
or Patent.
12.1.4 In the event that a Party desires to license to a Third Party
any of such Party's interest in Joint Intellectual Property (to the extent not
already licensed hereunder), such Party shall provide the other Party notice of
such proposed license, in confidence, and agrees to negotiate with such other
Party, if it so requests, to grant such license rights to such Party, provided
that the noticing Party may negotiate with any Third Party at the same time.
24
<PAGE>
12.2 3DP Intellectual Property.
-------------------------
12.2.1 3DP shall promptly inform Heska of any potentially
patentable invention within the Results that may have applicability or utility
in the Primary Field, promptly after making such invention. Heska shall have
the right to discuss such invention with 3DP and to request the filing and
prosecution of Patent Applications with respect to such invention to the extent
applicable to or useful in the Primary Field, and 3DP shall consider reasonably
all such requests.
12.2.1 3DP shall have the first right, at its own expense and using
in-house or outside legal counsel reasonably acceptable to Heska, to prepare,
file, prosecute, maintain and extent Patent Applications and Patents claiming
inventions in the Results, in countries of its choice throughout the world. With
respect to any such Patent Applications that have claims that relate to the
Primary Field or have application or utility in the Primary Field, 3DP will
provide Heska the Patent Application a reasonable amount of time prior to filing
(at least 30 days wherever possible) so that Heska may review and give comments
to 3DP, which comments 3DP will reasonably consider. 3DP also will provide Heska
copies of all correspondence and other communications from patent authorities
regarding such Patent Applications and copies of the responses or other
communications proposed to be made by 3DP to such authorities a reasonable
amount of time prior to making such communications so that Heska may review and
give comments to 3DP, which comments 3DP will reasonably consider.
12.2.2 If 3DP declines to file, prosecute or maintain any Patent
Applications or Patents claiming Results that, in Heska's reasonable belief,
relate to the Primary Field or have application or utility in the Primary Field,
3DP will give Heska written notice of its election to cease such efforts at
least sixty days before any date that would act as a forfeiture or abandonment
of the rights in such Patent Application or Patent. Thereafter, Heska may at
its expense undertake the filing, prosecution and maintenance of such abandoned
Patent Applications or Patent, and immediately after Heska undertakes such
efforts 3DP shall assign to Heska all right, title and interest in and to such
Patent Application or Patent.
12.3 Heska Intellectual Property.
---------------------------
12.3.1 Heska shall promptly inform 3DP of any potentially patentable
invention within the Results included in the Heska Intellectual Property that
may have applicability or utility to use of a Test Compound in the Primary
Field, promptly after making such invention. 3DP shall have the right to
discuss such invention with Heska and to request the filing and prosecution of
Patent Applications with respect to such invention to the extent of such
applicability to or utility for use of Test Compounds in the Primary Field, and
Heska shall consider reasonably all such requests.
12.3.2 Heska shall have the first right, at its own expense and using
in-house or outside legal counsel reasonably acceptable to 3DP, to prepare,
file, prosecute, maintain and extend Patent Applications and Patents claiming
inventions in the Results included in the Heska Intellectual Property, in
25
<PAGE>
countries of its choice throughout the world. With respect to any such Patent
Applications that have claims that relate to or have application or utility to
use of a Test Compound in the Primary Field, Heska will provide 3DP the Patent
Application a reasonable amount of time (at least thirty days whenever possible)
prior to the filing so that 3DP may review and give comments to Heska, which
comments Heska will reasonably consider. Heska also will provide 3DP copies of
all correspondence and other communications from patent authorities regarding
such Patent Applications and copies of the responses or other communications
proposed to be made by Heska to such authorities a reasonable amount of time
prior to making such communication so that 3DP may review and give comments to
Heska, which comments Heska will reasonably consider.
12.4 Assistance. Each Party shall, at its own expense, provide reasonable
----------
assistance, including without limitation making inventors available to discuss
their inventions and appropriate documentation, to the other Party to facilitate
filing of all Patent Applications prosecuted by such other Party pursuant to
this Section 12 and shall execute all documents deemed necessary or desirable
therefore.
13. Infringement
------------
13.1 Third Party Litigation. In the event of the institution of any suit
----------------------
by a Third Party against 3DP, Heska or their respective Affiliates or
sublicensees for patent infringement involving the manufacture, use, sale,
distribution or marketing of a Development Compound or Licensed Product by
Heska, its Affiliates or sublicensees anywhere in the Territory, the Party sued
shall promptly notify the other Party in writing. Heska shall defend such suit
at its expense. Any costs and expenses of Heska in defending a suit arising
solely out of the use of 3DP Intellectual Property, and any amounts that Heska
is required to pay to the Third Party in order to settle or otherwise dispose of
such suit or in damages or other amounts finally awarded to such Third Parties
in such suit may be offset by Heska against any amounts that Heska owes to 3DP
under Section 8; provided that Heska may not settle such suit without 3DP's
prior written approval, such approval to not be unreasonably be withheld or
delayed.
13.2 Infringement. In the event that 3DP or Heska becomes aware of actual
------------
or threatened infringement of 3DP Patents or Joint Intellectual Property
(insofar as they relate to the Heska Compounds, Development Compounds or
Products) anywhere in the Territory, that Party shall promptly so notify the
other Party in writing. Heska shall have the first right but not the obligation
to bring, at its own expense, an infringement action or file any other
appropriate action or claim against any Third Party related to infringement of
such Patents or Joint Intellectual Property. If Heska does not commence a
particular infringement action within 90 days after it receives written notice
of such infringement of 3DP Intellectual Property or Joint Intellectual
Property, 3DP, after so notifying Heska in writing, shall be entitled to bring
such infringement action or any other appropriate action or claim at 3DP's
expense. In any action pursuant to this section, the Party bringing the action
shall have the right to use the name of the other Party in connection therewith,
provided that the Party bringing the action defends, indemnifies and holds
harmless the other Party, its officers, directors, shareholders, employees,
successors and assigns from any loss, damage or liability, including reasonable
attorneys' fees, resulting from the action.
26
<PAGE>
13.3 Control of Litigation, Assistance and Settlement. The Party
------------------------------------------------
conducting any action pursuant to Section 13.2 shall be entitled to bring and
control the action through counsel of its choice, and, upon request, the other
Party shall cooperate and provide reasonable assistance in any such action
without expense to the requesting Party. No settlement or consent judgment or
other voluntary final disposition of any suit defended or action brought by one
Party pursuant to this Section may be entered into without the consent of the
other Party if such settlement would require the non-settling Party to be
subject to an injunction or to make a monetary payment or would adversely affect
the non-settling Party's rights under this Agreement or in its intellectual
property.
13.4 Expenses and Awards. The damages and awards recovered in an action
-------------------
brought under Section 13.1 or 13.2 shall be applied as follows:
13.4.1 first, to reimburse the Party defending or bringing such
action;
13.4.2 second, to reimburse the expenses of the other Party in
connection with such action; and
13.4.3 the balance to the Party that controlled the action, which, if
the Party controlling the action is Heska, shall be treated as Net Sales.
13.5 Obligation to Inform. The Parties shall keep one another informed of
--------------------
the status of, and their respective activities regarding, any litigation
concerning any Development Compound or Product.
14. Audit Rights, Taxes, Payments and Interest
-------------------------------------------
14.1 Audit Rights.
------------
14.1.1 3DP shall have the right, at its expense, through a certified
public accountant reasonably acceptable to Heska and 3DP, to examine the records
required to be maintained by Heska under this Agreement during regular business
hours, and upon reasonable prior notice, before the termination or expiration of
this Agreement and for three years thereafter, provided that such examination
shall not take place more often than once a year and shall not cover such
records for more than the preceding three years, and provided further that such
accountant shall report to 3DP only on the accuracy of royalty statements and
payments. If the auditor discloses a discrepancy in royalties owed by Heska to
3DP and royalties paid to 3DP which exceeds five percent (5%) of total Net Sales
made until the date of completion of the audit, Heska shall pay the entire
expense of the audit and pay to 3DP the entire amount of the discrepancy plus
interest within 30 days from the date upon which 3DP notified Heska of the
discrepancy. Interest shall be computed at the rate set forth in Section 14.5.
27
<PAGE>
14.1.2 Heska shall have the right, at its expense, through a certified
public accountant reasonably acceptable to 3DP and Heska, during regular
business hours and upon reasonable prior notice, to examine 3DP's records of FTE
Years applied to the Research and costs of Test Compounds supplied to Heska at
Heska's expense to determine 3DP's compliance with its obligations as to the
allocation of FTE Years to the Research and to charge Heska its cost for such
Test Compounds, and its records relating to amounts payable to Heska under
Section 4.4 to determine compliance with its obligations under Section 4.4,
before the termination or expiration of this Agreement and for three years
thereafter, provided that such examination shall not take place more often than
once a year and shall not cover such records for more than the preceding three
years, and provided further that such accountant shall report to Heska only on
3DP's allocation of FTE Years or the accuracy of payments under Section 4.4. If
the auditor discloses a discrepancy in amounts owed by 3DP to Heska under
Section 4.4 which exceeds five percent (5%) of total amounts payable until the
date of completion of the audit, 3DP shall pay the entire expense of the audit
and pay to Heska the entire amount of the discrepancy plus interest within 30
days from the date upon which Heska notified 3DP of the discrepancy. Interest
shall be computed at the rate set forth in Section 14.5.
14.2 Taxes. Any tax required to be withheld and paid by a Party on account
-----
of royalties payable to the other Party under this Agreement shall be deducted
from the amount of royalties otherwise due. The paying Party shall secure and
send to the other Party written proof of any such taxes withheld and paid for
the benefit of the other Party in a form sufficient to satisfy the United States
Internal Revenue Service.
14.3 Payments in U.S. Dollars. All dollar amounts set forth in this
------------------------
Agreement are references to U.S. dollars. If Heska is prevented from making any
payment under this Agreement by virtue of the statutes, laws, codes or
governmental regulations of the country from which the payment is to be made,
then such payments may be paid by depositing them in the currency in which
accrued to 3DP's account in a bank acceptable to 3DP in the country whose
currency is involved.
14.4 Conversions to U.S. Dollars. Monetary conversions from the currency
---------------------------
of a foreign country, in which a Product is sold, into U.S. currency shall be
made at the average spot rate for the purchase of U.S. dollars with such
currency as quoted by Citibank, N.A., New York, New York (or its successor in
interest), at approximately 9 a.m. (New York City time) on the last ten business
days of the calendar quarter with respect to which such revenues were earned.
14.5 Interest. Any payment that is not made on or before the date when due
--------
under this Agreement shall accrue interest thereon from and including such date
and until but excluding the date of payment at the rate of 1.5% (one and one-
half percent) per month or, if such rate is in excess of the rate then permitted
by applicable law, at the highest rate so permitted.
28
<PAGE>
15. Representations and Warranties
------------------------------
15.1 Each Party represents and warrants to the other Party:
15.1.1 Corporate Power. Such Party is duly organized and validly
---------------
existing under the laws of the jurisdiction of its formation and has full
corporate power and authority to enter into this Agreement and carry out the
provisions hereof.
15.1.2 Due Authorization. Such Party is duly authorized to execute
-----------------
and deliver this Agreement and to perform its obligations hereunder.
15.1.3 Binding Agreement. This Agreement is a legal and valid
-----------------
obligation of such Party and the execution, delivery and performance of this
Agreement by such Party does not and will not conflict with any agreement,
instrument or understanding, oral or written, to which it is a Party or by which
it may be bound, nor violate any law or regulation of any court, governmental
body or administrative or other agency having authority over such Party.
15.1.4 Authorizations. Such Party has obtained, and will maintain
--------------
for the term of the Agreement, all licenses, authorizations, approvals and
reviews required by any federal, state or local governmental authority for
performance of any activities under this Agreement.
15.1.5 No Agreement. No agreement exists between such Party and a
------------
Third Party as of the Effective Date which would prevent such Party from
performing its obligations under this Agreement or granting to the other Party
the rights granted hereunder, and such Party shall not enter into any such Third
Party agreement that would prevent such Party from performing its obligations
under this Agreement or granting to those other Party the rights granted
hereunder.
15.2 3DP represents and warrants to Heska that:
15.2.1 To 3DP's knowledge, based upon its review of the issued
Patents covering the Existing Compounds and its having performed a reasonable
search of relevant published Patents, as of the Effective Date, the conduct of
the Research, including the use of the 3DP Intellectual Property by Heska as
permitted by this Agreement, will not violate the intellectual property rights
of any Third Party and there is a reasonable likelihood that 3DP will be able to
discover, synthesize or produce a reasonable number of Test Compounds that will
not violate the intellectual property rights of any Third Party. Nothing in this
Agreement shall be construed as a representation or warranty that the Patents in
the 3DP Intellectual Property are valid or enforceable, or that they will be
during the term of this Agreement.
15.3 3DP Disclaimer of Warranties. EXCEPT AS OTHERWISE EXPRESSLY SET FORTH
----------------------------
IN THIS AGREEMENT, 3DP MAKES NO REPRESENTATIONS AND EXTENDS NO WARRANTIES OR
CONDITIONS OF ANY KIND, EITHER EXPRESS OR IMPLIED, WITH
29
<PAGE>
RESPECT TO THE 3DP INTELLECTUAL PROPERTY, ANY PATENTS, ANY KNOW-HOW, ANY
DEVELOPMENT COMPOUND, ANY PRODUCT, THE RESEARCH, THE RESULTS OR ANY INFORMATION
DISCLOSED HEREUNDER. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, 3DP
DISCLAIMS ANY AND ALL IMPLIED WARRANTIES INCLUDING, WITHOUT LIMITATION, ANY AND
ALL IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE AND
NON-INFRINGEMENT.
15.4 Heska Disclaimer of Warranties. EXCEPT AS OTHERWISE EXPRESSLY SET
------------------------------
FORTH IN THIS AGREEMENT, HESKA MAKES NO REPRESENTATIONS AND EXTENDS NO
WARRANTIES OR CONDITIONS OF ANY KIND, EITHER EXPRESS OR IMPLIED, WITH RESPECT TO
THE HESKA INTELLECTUAL PROPERTY, ANY PATENTS, ANY KNOW-HOW, ANY DEVELOPMENT
COMPOUND, ANY PRODUCT, THE RESEARCH, THE RESULTS OR ANY INFORMATION DISCLOSED
HEREUNDER. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, HESKA DISCLAIMS ANY
AND ALL IMPLIED WARRANTIES INCLUDING, WITHOUT LIMITATION, ANY AND ALL IMPLIED
WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE AND NON-
INFRINGEMENT.
16. Indemnification and Insurance
-----------------------------
16.1 Mutual Indemnification. Each party (the "Indemnifying Party") agrees
----------------------
to indemnify, defend and hold harmless the other, its officers, directors,
shareholders, employees, Affiliates, agents, sublicensees, successors and
assigns (the "Indemnified Parties") from and against any loss, damage, or
liability, including interest and penalties and reasonable attorney's fees, and
any claim, complaint, suit, proceeding or cause of action against an Indemnified
Party resulting from or arising out of:
16.1.1 any negligent or intentional act by the Indemnifying Party,
its officers, directors, shareholders, employees, Affiliates, agents,
sublicensees successors and assigns;
16.1.2 any breach by Indemnifying Party of any representation,
warranty, covenant or provision in this Agreement;
16.2 Indemnification by Heska. Heska agrees to indemnify, defend and hold
------------------------
harmless 3DP, its officers, directors, shareholders, employees, Affiliates,
agents, sublicensees, successors and assigns (the "3DP Indemnified Parties")
from and against any loss, damage, or liability, including interest and
penalties and reasonable attorney's fees, and any claim, complaint, suit,
proceeding or cause of action against an 3DP Indemnified Party resulting from or
arising out of:
30
<PAGE>
16.2.1 any product liability or other lawsuit, claim, demand or other
action brought with respect to damage or harm caused by a Development Compound
or Product sold by Heska or any of its Affiliates or sublicensees; and
16.2.2 the death of or injury to any person or persons, damage to
property, or any other claim, proceeding, demand, expense and liability of any
kind whatsoever resulting from the design, testing (including, without
limitation, clinical trials), production, manufacture, shipping, handling, use
(in commerce or otherwise), sale, lease, consumption, promotion or advertisement
of any Development Compound or Product by Heska or any of its Affiliates or
sublicensees.
Heska shall not be responsible or have any obligation hereunder, however, for
the negligent or intentional wrongdoing of any 3DP Indemnified Party.
16.3 Indemnification by 3DP. 3DP agrees to indemnify, defend and hold
----------------------
harmless Heska, its officers, directors, shareholders, employees, Affiliates,
agents, sublicensees, successors and assigns (the "Heska Indemnified Parties")
from and against any loss, damage, or liability, including interest and
penalties and reasonable attorney's fees, and any claim, complaint, suit,
proceeding or cause of action against a Heska Indemnified Party resulting from
or arising out of:
16.3.1 any product liability or other lawsuit, claim, demand or other
action brought with respect to damage or harm caused by a Product sold by 3DP or
any of its Affiliates or sublicensees; and
16.3.2 the death of or injury to any person or persons, damage to
property, or any other claim, proceeding, demand, expense and liability of any
kind whatsoever resulting from the design, testing (including, without
limitation, clinical trials), production, manufacture, shipping, handling, use
(in commerce or otherwise), sale, lease, consumption, promotion or advertisement
of any Product by 3DP or any of its Affiliates or sublicensees.
3DP shall not be responsible or have any obligation hereunder, however, for the
negligent or intentional wrongdoing of any Heska Indemnified Party.
16.4 Insurance. During the term of this Agreement and for a period of five
---------
years thereafter, Heska shall obtain and/or maintain at its sole cost and
expense, product liability insurance in amounts, which are reasonable and
customary in the animal health industry for companies of comparable size and
activities. Such product liability insurance shall insure against all
liability, including product liability, personal liability, physical injury or
property damage (subject to usual policy exceptions). Heska shall provide
written proof of the existence of such insurance to 3DP upon request therefor.
16. Procedures for Indemnification. In the event that a Party seeks
------------------------------
indemnification under the terms of Sections 16.2 or 16.3, it shall inform the
indemnifying party of the claim as soon as
31
<PAGE>
reasonably practicable after it receives notice of the claim, shall permit the
indemnifying party to assume direction and control of the defense of the claim
(including the right to settle the claim solely for monetary consideration), and
shall cooperate as requested (at the indemnifying party's expense), in the
defense of the claim.
17. Miscellaneous
-------------
17.1 Force Majeure. If the performance of any part of this Agreement by
-------------
either Party, including the performance of the Research, or of any obligation
under this Agreement, is prevented, restricted, interfered with or delayed by
reason of any cause beyond the reasonable control of the Party liable to
perform, unless conclusive evidence to the contrary is provided, the Party so
affected shall, upon giving written notice to the other Party, be excused from
such performance to the extent of such prevention, restriction, interference or
delay, provided that the affected Party shall use its best efforts to avoid or
remove such causes of non-performance and shall continue performance with the
utmost dispatch whenever such causes are removed. When such circumstances
arise, the Parties shall discuss what, if any, modification of the terms of this
Agreement may be required in order to arrive at an equitable solution.
17.2 Governing Law; Convention on Contracts for the International Sale of
--------------------------------------------------------------------
Goods. This Agreement shall be deemed to have been made in the State of New
- -----
York, U.S.A., and its form, execution, validity, construction and effect shall
be determined in accordance with the law of First Circuit of the United States
and of the State of New York, U.S.A., without giving effect to the principles
of conflicts of law thereof. To the extent that it may otherwise be applicable,
the Parties hereby expressly agree to exclude from the operation of this
Agreement the United Nations Convention on Contracts for the International Sale
of Goods, concluded at Vienna, on April 11, 1980, as amended and as may be
amended further from time to time.
17.3 Dispute Resolution. Either Party may initiate the dispute resolution
------------------
procedure set forth in this Section 17.3 by providing written notice to the
other Party. Any dispute between the Parties relating to this Agreement shall be
resolved pursuant to the following procedures:
17.3.1 Any dispute arising out of or in connection with the Research
shall first be submitted to the Project Team for resolution. The Project Team
shall have 30 days to attempt to resolve the dispute. The Project Team will set
forth its resolution in writing.
17.3.2 If the Project Team is unable to resolve the dispute related
to the Research within the 30-day period specified in Section 17.3.1, or if
either Party gives written notice to the other Party of any dispute under this
Agreement that is not related to the Research, the dispute shall automatically
be referred to the President/CEO of 3DP and an executive officer designated by
Heska from time to time (together, the "Officers"), who shall attempt to resolve
the dispute within a reasonable
32
<PAGE>
time, but in no case more than 45 days from the time that the Project Team
forwards its resolution to the Officers. The Officers shall issue their
resolution in writing.
17.3.3 If the Officers are unable to resolve the dispute, they shall
use best efforts to select and agree upon a neutral arbitrator. If the
executives are unable to agree upon a neutral arbitrator within twenty (20)
days, a neutral arbitrator shall be appointed pursuant to the Commercial
Arbitration Rules of the American Arbitration Association ("AAA") then in
effect. The Officers and the neutral arbitrator shall participate in a meeting
in which the Parties shall work in good faith to resolve the dispute in
question. The meeting shall be held within 15 days after the selection or
appointment of the neutral arbitrator at a time and place to which the Parties
mutually agree, which agreement shall not be unreasonably withheld by the other
Party. The meeting shall be of such duration as the Parties in good faith deem
necessary, but in no event shall it extend beyond two business days. No formal
procedural rules shall govern this meeting. Each of the Parties may make such
oral and written presentations and present such oral and written presentations
and present such documents and other exhibits as it deems appropriate. After
listening to such presentations and examining such documents and other exhibits,
the two Officers, with the assistance of the neutral arbitrator, shall work
together in good faith to resolve the dispute in question. Each Party shall
absorb all of its own expenses in connection with such meeting and shall pay on
e-half of any costs or fees related to the services of the neutral arbitrator.
In the event the dispute is not resolved after such meeting is concluded, the
provisions of Section 17.3.4 below shall apply.
17.3.4 If any dispute arising out of or in connection with this
Agreement is not resolved pursuant to Section 17.3.4, then the dispute shall be
settled by arbitration in accordance with the Commercial Arbitration Rules of
the AAA then in effect, as modified below. The Parties will cooperate with each
other in causing the arbitration to be held in as efficient and expeditious a
manner as practicable.
17.3.4.1 Arbitration shall be initiated by filing a demand
at the office of the AAA at 225 N. Michigan Avenue, Suite 2527, Chicago,
Illinois 60601.
17.3.4.2 Disputes will be heard and determined by a panel
of three arbitrators. One Party arbitrator will be appointed by each Party to
serve on a panel. One neutral arbitrator will be appointed by the AAA.
17.3.4.3 Neither Party will communicate separately with any
arbitrator. All communications between a Party and a Party arbitrator or the
neutral arbitrator will be directed to the AAA for transmittal to the
arbitrator.
17.3.4.4 Any award rendered by the arbitrators shall be
final and binding upon the Parties hereto. Judgment upon the award may be
entered in any court of record of competent jurisdiction.
33
<PAGE>
17.3.5 Notwithstanding the foregoing provisions, either Party may
initiate and pursue any legal or equitable action to protect its Information,
intellectual property rights and ownership rights and either Party may initiate
and pursue legal action to avoid the expiration of any applicable statute of
limitations by seeking injunctive or other legal or equitable relief in any
court having jurisdiction over such matter.
17.4 Severability. In the event that any provision of this Agreement shall
------------
be held illegal, void or ineffective, the remaining portions hereof shall remain
in full force and effect so long as such remaining portions do not materially
change the intent of this Agreement or the right or obligations of the Parties
hereunder. If any provision of this Agreement is in conflict with any applicable
statute or law in any jurisdiction, then such provision shall be deemed
inoperative in such jurisdiction to the extent of such conflict and the Parties
will renegotiate the affected provisions of this Agreement to resolve any
inequities. It is the intention of the Parties that, if any court or other
tribunal construes any provision or clause of this Agreement, or any portion
thereof, to be illegal, void or unenforceable because of the duration of such
provision or the area or matter covered thereby, such court shall reduce the
duration, area or matter of such provision and enforce such provision in its
reduced form.
17.5 Entire Agreement, Amendment. This Agreement constitutes the entire
---------------------------
agreement between the Parties relating to the subject matter hereof and
supersedes all previous writings and understandings, whether oral or written,
relating to the subject matter of this Agreement. This Agreement may not be
amended, supplemented or otherwise modified except by an instrument in writing
signed by both Parties that specifically refers to this Agreement.
17.6 Notices. Any notice or other communication required or permitted
-------
under this Agreement shall be sent by certified mail or courier service, charges
pre-paid, or by facsimile transmission, to the address or facsimile number
specified below:
If to 3DP:
3-Dimensional Pharmaceuticals, Inc.
Eagleview Corporate Center
665 Stockton Drive, Suite 104
Exton, PA 19341
Fax No.: (610) 458-8258
Attention: Thomas P. Stagnaro, President
and Chief Executive Officer
34
<PAGE>
with a copy to:
Morgan, Lewis & Bockius LLP
2000 One Logan Square
Philadelphia, PA 19103
Fax No.: (215) 963-5299
Telephone No.: (215) 953- 5371
Attention: David R. King, Esq.
If to Heska:
The Heska Corporation
1825 Sharp Point Drive
Fort Collins, CO 80525
Fax No.: (970) 484-9505
Telephone No.: (970) 493-7272
Attention: Paul Hudnut
Vice President of Business Development
with a copy to:
Cooley Godward LLP
Five Palo Alto Square
3000 El Camino Real
Palo Alto, California 94306
Fax No.: (650) 857-0003
Telephone No.: (650) 857-5000
Attention: Bob Jones, Esq.
or to such other address or facsimile number as the person may specify in a
notice duly given to the sender as provided herein. A notice will be deemed to
have been given five days after the date deposited in the United States mail or
with a courier service or, in the case of facsimile transmission, when received.
17.7 Assignment and Binding Effect. This Agreement and the licenses herein
-----------------------------
granted shall be binding upon and inure to the benefit of the successors and
assigns of the Parties hereto. Neither Party may assign any of its rights, or
delegate any of its obligations, under this Agreement without the written
consent of the other Party. Notwithstanding the foregoing, either Party may,
without obtaining the consent of the other Party assign this Agreement to any
Affiliate or to any corporation with which it may merge or consolidate, or to
which it may transfer all or substantially all of its assets.
35
<PAGE>
17.8 Recordation. Each Party shall have the right during the term of this
-----------
Agreement to record or register this Agreement in any patent office or other
appropriate facility anywhere in the Territory, and the other Party shall
provide reasonable assistance in effecting such recording.
17.9 Headings and References. All section headings contained in this
-----------------------
Agreement are for convenience of reference only and shall not affect the meaning
or interpretation of this Agreement. Unless the context requires otherwise, all
references in this Agreement to any section, exhibit or appendix shall be deemed
and construed as references to a section of, or an exhibit or appendix to, this
Agreement, and any such exhibits and appendices are hereby incorporated in this
Agreement by such reference.
17.10 No Agency. It is understood and agreed that each Party shall have the
---------
status of an independent contractor under this Agreement and that nothing in
this Agreement shall be construed as authorization for either Party to act as
agent for the other. Members of the Project Team shall remain employees of Heska
or 3DP, as the case may be, and neither Party shall incur any liability for any
act or failure to act by employees of the other Party, including members of any
of the foregoing committees who are employees of the other Party.
17.11 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be an original as against any Party whose
signature appears thereon but all of which together shall constitute but one and
the same instrument.
17.12 Export Control. The Parties agree not to remove or export from the
--------------
United States or reexport from anywhere any Results, 3DP Intellectual Property,
Development Compound or Product to Afghanistan, the Peoples' Republic of China
or any Group Q, S, W, Y or Z country (as specified in Supplement No. 1 to
Section 770 of the U.S. Export Administration Regulations, or a successor
thereto) or otherwise except in compliance with and with all licenses and
approvals required under applicable export laws and regulations, including,
without limitation, those of the U.S. Department of Commerce.
36
<PAGE>
IN WITNESS WHEREOF, the Parties, through their authorized officers,
have duly executed this Agreement as of the date first written above.
3-DIMENSIONAL PHARMACEUTICALS, INC.
By: /s/ Thomas P. Stagnaro
------------------------------------------------
Name: Thomas P. Stagnaro
Title: President & CEO
HESKA CORPORATION
By: /s/ Paul Hudnut
------------------------------------------------
Name: Paul Hudnut
Title: Vice President, Business Development
37
<PAGE>
EXHIBIT 1.12
------------
[**]
**Certain portions of this Exhibit have been omitted based upon a request for
confidential treatment that has been filed with the Commission. The omitted
portions have been filed separately with the Commission.
<PAGE>
EXHIBIT 3
------------
[**]
**Certain portions of this Exhibit have been omitted based upon a request for
confidential treatment that has been filed with the Commission. The omitted
portions have been filed separately with the Commission.
<PAGE>
Exhibit 21.1
Subsidiaries of the Registrant
The Company currently has one subsidiary:
3-Dimensional Pharmaceuticals GMBH, incorporated in Germany.
<PAGE>
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the inclusion in the Registration Statement on Form S-1 of our
reports dated February 25, 2000, on our audits of the financial statements and
Schedule II of 3-Dimensional Pharmaceuticals, Inc. as of December 31, 1999
(consolidated) and 1998 and for each of the years in the three year period
ended December 31, 1999, and to the reference to our firm under the captions
"Selected Financial Information" and "Experts" included in the Prospectus.
Richard A. Eisner & Company, LLP
New York, New York
May 17, 2000
<TABLE> <S> <C>
<PAGE>
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<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-2000 DEC-31-1999
<PERIOD-START> JAN-01-2000 JAN-01-1999
<PERIOD-END> MAR-31-2000 DEC-31-1999
<CASH> 22,038 7,620
<SECURITIES> 0 0
<RECEIVABLES> 257 94
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 22,593 7,957
<PP&E> 9,462 9,414
<DEPRECIATION> (5,465) (5,101)
<TOTAL-ASSETS> 27,394 12,550
<CURRENT-LIABILITIES> 5,952 5,804
<BONDS> 0 0
63,550 34,834
1 1
<COMMON> 3 2
<OTHER-SE> 0 0
<TOTAL-LIABILITY-AND-EQUITY> 27,394 12,550
<SALES> 0 0
<TOTAL-REVENUES> 1,484 4,489
<CGS> 0 0
<TOTAL-COSTS> 4,962 20,161
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 351 625
<INCOME-PRETAX> (3,742) (15,969)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (3,742) (15,969)
<DISCONTINUED> 0 0
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<CHANGES> 0 0
<NET-INCOME> (3,742) (15,969)
<EPS-BASIC> (2.11) (9.78)
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