<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 27, 1997
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
RIBOGENE, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
CALIFORNIA 8731 94-309514
(STATE OR OTHER (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
JURISDICTION OF CLASSIFICATION CODE NUMBER) IDENTIFICATION
INCORPORATION OR NUMBER)
ORGANIZATION)
</TABLE>
21375 CABOT BOULEVARD
HAYWARD, CA 94545
(510) 732-5551
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
CHARLES J. CASAMENTO
CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER
21375 CABOT BOULEVARD
HAYWARD, CA 94545
(510) 732-5551
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
ALAN C. MENDELSON, ESQ.
ROBERT J. BRIGHAM, ESQ.
COOLEY GODWARD LLP
FIVE PALO ALTO SQUARE
3000 EL CAMINO REAL
PALO ALTO, CA 94306-2155
(415) 843-5000
RODD M. SCHREIBER, ESQ.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM (ILLINOIS)
333 WEST WACKER DRIVE
SUITE 2100
CHICAGO, IL 60606
(312) 407-0700
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this Registration Statement becomes effective.
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 delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
==============================================================================
<TABLE>
<S> <C> <C> <C> <C>
PROPOSED MAXIMUM PROPOSED MAXIMUM
NUMBER OF OFFERING PRICE AGGREGATE
TITLE OF SECURITIES SHARES TO BE PER OFFERING AMOUNT OF
TO BE REGISTERED REGISTERED(1) SHARE(2) PRICE(2) REGISTRATION FEE
- ------------------------------------------------------------------------------------------------------
Common Stock, $.001 par value.... 2,645,000 shares $12.00 $31,740,000 $9,619
</TABLE>
================================================================================
(1) Includes 345,000 shares of Common Stock issuable upon exercise of the
Underwriters' over-allotment option.
(2) Estimated solely for the purpose of calculating the amount of the
registration fee in accordance with Rule 457(a) under the Securities Act of
1933.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
PROSPECTUS SUBJECT TO COMPLETION, DATED OCTOBER 27, 1997
- --------------------------------------------------------------------------------
2,300,000 SHARES
RIBOGENE LOGO
Common Stock
All of the 2,300,000 shares of Common Stock offered hereby are being issued
and sold by RiboGene, Inc., a Delaware corporation ("RiboGene" or the
"Company"). Prior to this offering (the "Offering"), there has been no public
market for the Common Stock of the Company. It is currently estimated that the
initial public offering price will be between $10.00 and $12.00 per share. See
"Underwriting" for a discussion of the factors to be considered in determining
the initial public offering price. The Company has applied for listing of its
Common Stock on the Nasdaq National Market under the symbol "RIBO."
Abbott Laboratories ("Abbott"), the Company's corporate partner for its
antifungal program, has expressed its intention to purchase $4.0 million of
Common Stock in the Offering at the initial public offering price. See
"Business -- Collaborative and Licensing Agreements" and "Underwriting."
---------------------------------
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" BEGINNING ON PAGE 7.
---------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
================================================================================
<TABLE>
<S> <C> <C> <C>
UNDERWRITING
PRICE DISCOUNTS PROCEEDS TO
TO PUBLIC AND COMMISSIONS(1) COMPANY(2)
- -------------------------------------------------------------------------------------------------
Per Share $ $ $
- -------------------------------------------------------------------------------------------------
Total(3) $ $ $
</TABLE>
================================================================================
(1) Excludes the issuance of warrants to the Representatives of the Underwriters
(the "Representatives") to purchase an aggregate of 230,000 shares of Common
Stock, exercisable at any time following the first anniversary of the date
of this Prospectus, each warrant having an exercise price equal to 125% of
the initial public offering price of the Common Stock and expiring five
years from the date of this Prospectus. Holders of such warrants have been
granted certain registration rights under the Securities Act of 1933, as
amended (the "Securities Act"), with respect to the securities issuable upon
exercise of such warrants. The Company has agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act. See "Underwriting."
(2) Before deducting expenses of the Offering payable by the Company, estimated
at $750,000.
(3) The Company has granted to the Underwriters a 45-day option to purchase up
to an additional 345,000 shares of Common Stock, on the same terms and
conditions set forth above, solely to cover over-allotments, if any. If such
option is exercised in full, the total Price to Public, Underwriting
Discounts and Commissions and Proceeds to Company will total $ ,
$ and $ , respectively. See "Underwriting."
---------------------------------
The shares of Common Stock offered by the Underwriters are subject to prior
sale, receipt and acceptance by them and subject to the right of the
Underwriters to reject any order in whole or in part and certain other
conditions. It is expected that delivery of such shares of Common Stock will be
made by EVEREN Clearing Corp. through the facilities of the Depository Trust
Company, New York, New York on or about , 1997.
EVEREN SECURITIES, INC.
GRUNTAL & CO., L.L.C.
CRUTTENDEN ROTH
INCORPORATED
, 1997
<PAGE> 3
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK OF
THE COMPANY, INCLUDING BY ENTERING STABILIZING BIDS OR EFFECTING SYNDICATE
COVERING TRANSACTIONS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE
"UNDERWRITING."
2
<PAGE> 4
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and Financial Statements and Notes thereto appearing elsewhere in
this Prospectus, including information under "Risk Factors." This Prospectus
contains forward-looking statements which involve risks and uncertainties. The
Company's actual results could differ materially from those described in these
forward-looking statements as a result of certain factors, including those set
forth under "Risk Factors" and elsewhere in this Prospectus.
THE COMPANY
RiboGene is a drug discovery company focused on the identification of novel
leads and the development of potential drug candidates for the treatment of
infectious diseases. The Company's drug discovery efforts target bacterial and
fungal infections, for which the efficacy of existing therapies is being
threatened by the emergence of drug resistance and viral infections for which
existing therapies have had limited effectiveness. The Company's drug discovery
technology is based on the translational control of gene expression. Translation
is the process used by cells to make proteins and is an essential cellular
process for all living organisms, including infectious pathogens. The Company is
using its platform technology to discover compounds that inhibit or interfere
with pathogen specific translation mechanisms ("PSTMs"). RiboGene's extensive
knowledge of translation allows the Company to identify components of the
translation process unique to a particular pathogen and essential to its
existence. The Company believes that targeting PSTMs may lead to the discovery
of drugs that are effective against either drug-resistant pathogens or pathogens
for which current therapies are not effective. In addition, the Company believes
that any such drugs discovered using its PSTM approach may have little or no
harmful effect on humans.
Infectious diseases have increased significantly during the past 20 years
and are now the third most common cause of death in the United States. Worldwide
sales of antiinfective drugs were approximately $33.0 billion in 1996 and
constituted the second largest pharmaceutical category. The antibacterial,
antifungal and antiviral markets are estimated to be approximately $26.0
billion, $4.0 billion and $3.0 billion, respectively, based on 1996 sales. There
are currently three antibacterial drugs that each generate in excess of $1.0
billion in worldwide sales annually and one antifungal drug that generates
nearly $1.0 billion. Of the 100 best selling brand name drugs worldwide, 20 are
antiinfectives addressing bacterial, fungal and viral infections. The clinical
efficacy of many bacterial and fungal antiinfectives is being threatened by
emerging strains of drug-resistant pathogens. In the antiviral area, there are
only a limited number of effective therapeutics currently marketed.
The Company believes that its target-based approach is different from, and
provides advantages over, traditional drug discovery techniques. Antiinfective
drug discovery has historically used a limited number of biological targets
which has restricted the ability to discover new drugs effective against drug
resistant pathogens. RiboGene's PSTMs represent a new class of targets for drug
discovery. By focusing discovery efforts on drugs which are effective inhibitors
of PSTMs, the Company believes that it may be possible to discover drug
candidates, for which pathogens have not already developed resistance. In
addition, such compounds may in certain applications have better safety and
efficacy profiles than existing therapies, or may provide a therapy where no
other therapy currently exists. The Company's scientists and Scientific Advisory
Board ("SAB") use their knowledge and expertise in the field of translation to
identify unique targets specific to pathogens and to design and implement assays
in order to identify selective compounds which demonstrate activity at the
pathogen specific translation targets. By developing assays to discover
compounds with identified mechanisms of action against desired targets, the
Company believes that the compounds which demonstrate activity at these targets
will be better characterized and more likely to result in lead candidates for
optimization and further development.
RiboGene has established antibacterial, antifungal and antiviral drug
discovery programs. Within each program, the Company's drug discovery process
consists of four phases: (i) target identification -- the selection and
characterization of PSTM targets; (ii) assay development -- the design and
implementation of screening systems to identify small-molecule compounds active
against the PSTM targets; (iii) lead discovery -- the screening of compound
libraries to identify small-molecule lead compounds; and (iv) lead
optimization -- the refinement of lead compounds in order to develop drug
candidates. In its antibacterial program, the Company has two targets,
deformylase and ppGpp degradase, that are in the lead discovery stage and
several
3
<PAGE> 5
additional targets that are in the assay development stage. In its antifungal
program, which the Company conducts in collaboration with Abbott Laboratories
("Abbott"), there are two targets, EF3 and GCN4, that are at the lead
optimization stage and several others that are in various stages of development.
In its antiviral program which is currently focused exclusively on the hepatitis
C virus ("HCV"), the Company has one target, HCV IRES, in the lead discovery
stage and one target, HCV NS5A/PKR, in the assay development stage.
In order to accelerate the discovery, development and commercialization of
antiinfective drugs, the Company seeks to enter into collaborations with major
pharmaceutical companies and research and licensing agreements with
biotechnology companies, combinatorial chemistry companies and universities.
These relationships are intended to provide the Company with funding, research
and development support, access to additional compound libraries and targets, as
well as provide the Company with preclinical and clinical trial, manufacturing
and marketing capabilities. The Company has entered into a collaboration with
Abbott for its antifungal program (the "Abbott Collaboration"). As part of the
Abbott Collaboration, Abbott has agreed to provide the Company with $5.0 million
in research support payments and fund additional research and development at
Abbott, including lead optimization. The Company will also be entitled to
receive milestone payments upon the achievement of mostly late-stage regulatory
milestones in the amount of up to $9.0 million for each product developed
through the collaboration. In connection with the Abbott Collaboration, Abbott
made a $3.5 million equity investment in the Company. Abbott also agreed to
purchase an additional $4.0 million of Common Stock in a private placement.
Abbott has expressed its intention to fulfill this obligation by purchasing $4.0
million of Common Stock in the Offering at the initial public offering price.
The Company has also entered into agreements with ArQule, Inc., Pharmacopeia,
Inc. and Trega Biosciences Inc. to provide the Company with access to additional
compound libraries for its drug discovery programs and with the University of
Washington to acquire the rights to the HCV NS5A/PKR target for its antiviral
program.
STATUS OF RIBOGENE DRUG DISCOVERY PROGRAMS
LOGO
The Company was incorporated in California in May 1989 as TransGene, Inc.
and changed its name to RiboGene, Inc. in May 1990. The Company intends to
reincorporate in Delaware upon or prior to the closing of the Offering. The
principal executive offices of the Company are located at 21375 Cabot Boulevard,
Hayward, California 94545 and its telephone number is (510) 732-5551.
4
<PAGE> 6
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered...................... 2,300,000 shares
Common Stock to be outstanding after the
Offering................................ 6,847,117 shares(1)(2)
Use of proceeds........................... Expansion of chemistry capabilities, expansion
and advancement of drug discovery programs,
facility relocation, repayment of a secured note
and related obligations and working capital and
general corporate purposes. See "Use of
Proceeds."
Proposed Nasdaq National Market symbol.... RIBO
</TABLE>
- ---------------
(1) Based upon shares outstanding at June 30, 1997. Includes an aggregate of
4,196,682 shares of Common Stock (assuming an initial public offering price
of $11.00 per share) issuable upon the automatic conversion of all
outstanding shares of the Company's Series A through Series F Preferred
Stock concurrently with the closing of the Offering. The number of shares of
Common Stock to be issued upon conversion of the Company's Series F
Preferred Stock will depend upon the initial public offering price. See
"Certain Transactions" and "Description of Capital Stock."
(2) Excludes: (i) an aggregate of 452,429 shares of Common Stock reserved for
issuance under the Company's stock plans upon exercise of options
outstanding as of June 30, 1997, at a weighted average exercise price of
$1.07 per share; (ii) an aggregate of 2,213,963 shares of Common Stock
reserved for future grants or purchases under the Company's equity incentive
plans; (iii) 574,983 shares of Common Stock reserved for issuance upon
exercise of the warrants (the "Class A Warrants") issued in connection with
the private placement of the Series F Preferred Stock (the "Series F
Preferred Private Placement"), with an exercise price equal to the lesser of
(a) the initial public offering price and (b) $8.93 per share; (iv) 451,530
shares of Common Stock reserved for issuance upon the exercise of warrants
(other than Class A Warrants) outstanding as of June 30, 1997, at a weighted
average exercise price of $9.55 per share; (v) 574,996 shares of Common
Stock reserved for issuance upon exercise of options to purchase 570,665
units ("Units"), at an exercise price of $1.24 per Unit, issued to the
placement agent in connection with the Series F Preferred Private Placement
(the "Placement Agent Unit Options"), each Unit consisting of two shares of
Series F Preferred Stock and one Class A Warrant (the "Placement Agent Class
A Warrants"); (vi) 143,746 shares of Common Stock reserved for issuance upon
the exercise of the Placement Agent Class A Warrants; and (vii) an aggregate
of 230,000 shares of Common Stock reserved for issuance upon the exercise of
warrants issued to the Representatives, at an exercise price equal to 125%
of the initial public offering price of the Common Stock (the
"Representatives' Warrants"). The number of shares of Common Stock to be
issued upon conversion of the Series F Preferred Stock and exercise of the
Placement Agent Unit Options and the exercise price of the Placement Agent
Unit Options will depend upon the initial public offering price. See
"Management -- Stock and Related Employee Benefit Plans," "Certain
Transactions," "Description of Capital Stock" and "Underwriting."
------------------------
Except as otherwise noted, all information in this Prospectus, including
financial information, share and per share data: (i) assumes no exercise of the
Underwriters' over-allotment option; (ii) reflects a 1-for-3.97 reverse split of
the Company's Common Stock to be effected prior to or concurrently with the
closing of the Offering; (iii) reflects reincorporation of the Company in
Delaware prior to or concurrently with the closing of the Offering; and (iv)
assumes the conversion of all outstanding shares of the Company's Series A
through Series F Preferred Stock into an aggregate of 4,196,682 shares of Common
Stock, assuming an initial public offering price of $11.00 per share, which will
occur concurrently with the closing of the Offering. The number of shares of
Common Stock to be issued upon conversion of the Series F Preferred Stock and
upon the exercise of the Placement Agent Unit Options will depend upon the
initial public offering price. See "Certain Transactions" and "Description of
Capital Stock."
5
<PAGE> 7
SUMMARY FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SIX MONTHS PERIOD FROM
ENDED INCEPTION
YEAR ENDED DECEMBER 31, JUNE 30, (MAY 5, 1989)
---------------------------- ----------------- TO JUNE 30,
1994 1995 1996 1996 1997 1997
-------- ------- ------- ------- ------- -------------
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Total revenues...................... $ 238 $ 407 $ 2,087 $ 692 $ 1,581 $ 4,313
-------- ------- ------- ------- ------- --------
Operating expenses:
Research and development.......... 4,209 4,663 4,077 2,162 2,052 20,620
General and administrative........ 2,424 2,758 1,372 675 763 10,851
Restructuring costs............... -- -- 219 219 -- 219
Acquired in-process research and
development.................... 5,000 -- -- -- -- 5,000
-------- ------- ------- ------- ------- --------
Total operating expenses....... 11,633 7,421 5,668 3,056 2,815 36,690
-------- ------- ------- ------- ------- --------
Loss from operations................ (11,395) (7,014) (3,581) (2,364) (1,234) (32,377)
Interest expense, net............... (42) (240) (282) (241) (24) (465)
-------- ------- ------- ------- ------- --------
Net loss............................ $(11,437) $(7,254) $(3,863) $(2,605) $(1,258) $ (32,842)
======== ======= ======= ======= ======= ========
Pro forma net loss per share(1)..... $ (0.75) $ (0.23)
======= =======
Shares used in computing pro forma
net loss per share(1)............. 5,166 5,483
======= =======
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, 1997
---------------------------
DECEMBER 31, 1996 ACTUAL AS ADJUSTED(2)
----------------- -------- --------------
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents and short-term
investments..................................... $ 1,981 $ 3,282 $ 26,061
Working capital (deficit)......................... (954) 867 23,646
Total assets...................................... 2,657 4,004 26,783
Deficit accumulated during development stage...... (31,584) (32,842) (32,842)
Total stockholders' equity (deficit).............. (1,956) 904 23,683
</TABLE>
- ---------------
(1) See Note 1 of Notes to Financial Statements for information concerning the
computation of pro forma net loss per share.
(2) As adjusted to reflect the sale of the 2,300,000 shares of Common Stock
offered hereby (after deducting estimated underwriting discounts and
commissions and estimated expenses of the Offering) at an assumed initial
public offering price of $11.00 per share and the receipt and application of
the estimated net proceeds therefrom. See "Use of Proceeds" and
"Capitalization."
6
<PAGE> 8
RISK FACTORS
IN ADDITION TO OTHER INFORMATION IN THIS PROSPECTUS, THE FOLLOWING FACTORS
SHOULD BE CONSIDERED CAREFULLY BY POTENTIAL INVESTORS IN EVALUATING AN
INVESTMENT IN THE SHARES OF COMMON STOCK OFFERED HEREBY. THIS PROSPECTUS
CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES. THE
COMPANY'S ACTUAL RESULTS MAY DIFFER SIGNIFICANTLY FROM THE RESULTS DISCUSSED IN
THE FORWARD-LOOKING STATEMENTS. FACTORS THAT MIGHT CAUSE SUCH DIFFERENCES
INCLUDE THOSE DISCUSSED BELOW.
HISTORY OF LOSSES; UNCERTAINTY OF FUTURE PROFITABILITY. The Company is a
development stage company that has experienced operating losses every year since
its inception. At June 30, 1997, the Company had an accumulated deficit of
approximately $32.8 million. The Company expects to continue to incur
substantial and increasing operating losses for at least the next several years
as it expands its research and development activities.
Neither the Company nor its collaborative partner has developed products
that have generated any revenues to the Company or entered clinical trials with
any potential products developed with the Company that may lead to revenues to
the Company, if successful. To date, substantially all of the Company's revenues
have resulted from payments under the research agreement and license agreement
with Abbott Laboratories (the "Abbott Agreements") and grants from a
governmental agency. Payments from collaborators, payments under governmental
grants and investment income are expected to be the only source of revenue for
the foreseeable future. The Company has not generated any revenues from the
achievement of milestones under the Abbott Agreements. Royalties or other
revenues from commercial sales of products, if any, are not expected for a
significant number of years, if ever. To achieve profitable operations, the
Company, alone or with others, must successfully discover and identify drug
candidates suitable for testing in humans and use these discoveries to develop
products, conduct preclinical studies and clinical trials, obtain required
regulatory approvals and successfully manufacture, introduce and market such
products. There can be no assurance that any of these requirements to achieve
profitability will be met.
The aggregate amount of future net losses and the time required by the
Company to reach or sustain profitability are highly uncertain. There can be no
assurance that the Company will ever be able to generate product revenue or
achieve profitability on a sustained basis or at all. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
EARLY STAGE OF DEVELOPMENT; UNCERTAINTY OF PRODUCT DEVELOPMENT. RiboGene is
at an early stage of development and does not expect that any drugs resulting
from its research and development efforts will be commercially available for a
significant number of years, if at all. Although the Company was organized in
1989, the Company only began in January 1993 to focus its research and
development efforts on the identification of novel leads for antiinfective
drugs, initially focused on the identification of antifungal and antiviral
drugs. The Company's research efforts were expanded in 1996 to include the
identification of novel leads for antibacterial drugs. To date, the Company has
conducted only limited research and development activities and has not completed
the selection of any lead compounds for drug development. None of the Company's
potential lead compounds have advanced to the stage of preclinical or clinical
trials. The Company's leads for potential drug candidates will be subject to the
risks and failures inherent in the development of pharmaceutical products based
on new technologies. These risks include, but are not limited to, unanticipated
problems relating to product development, testing, regulatory compliance,
manufacturing, marketing and competition, and additional costs and expenses that
may exceed current estimates. Products, if any, resulting from the Company's
research and development programs will require significant additional research
and development efforts, and extensive preclinical studies and clinical trials
will be required prior to submission of any regulatory application for
commercial use. There can be no assurance that the Company, or its current or
any future collaborative partners, will be permitted to undertake clinical
trials of any potential products, if developed, that sufficient numbers of
patients can be enrolled for such trials or that such clinical trials will
demonstrate that the products tested are safe and efficacious. Any or all of the
Company's proposed products may prove to have undesirable and unintended side
effects or other characteristics that may limit or prevent their commercial use.
7
<PAGE> 9
Even if clinical trials are successful, there can be no assurance that the
Company or any collaborative partner will obtain regulatory approval for any
product, that any approved product can be produced and distributed in commercial
quantities at reasonable costs or gain acceptance for use by physicians and
other health care providers, or that any potential products will be marketed
successfully at prices that would permit the Company to operate profitably. The
failure of any of these events to occur would have a material adverse effect on
the Company's business, financial condition and results of operations. See
"Business -- The RiboGene Approach," "-- The RiboGene Programs" and
"-- Government Regulation."
DEPENDENCE ON A SINGLE TECHNOLOGICAL APPROACH. The Company's research and
development efforts are based solely on its pathogen specific translation
mechanism ("PSTM") targeted approach. To date, the Company has not developed or
commercialized any product or product candidates. While the Company has
demonstrated that certain compounds have the ability to inhibit the activity of
certain of the Company's PSTM targets, the Company has not proven that this
activity can be utilized clinically as a therapeutic. There can be no assurance
that the inhibitory activity demonstrated in existing screening will continue to
be shown in further screening or drug discovery studies. There can be no
assurance that the Company's technology platform will enable it to discover
compounds that will lead to the development of drugs relevant to the treatment
of infectious diseases. There is limited scientific understanding relating to
the role of genes or translation in diseases. Relatively few products based on
genetic discoveries and no drugs discovered using a translation-based discovery
approach have been developed and commercialized to date. The Company's PSTM
technology is still in early stages and will require significant further
research, development and testing in order to validate translation generally, or
PSTM targets specifically, as an effective method to discover new
antiinfectives. In the event that the Company's PSTM approach is unsuccessful,
the Company will be required to identify and license or acquire alternative
technologies or compounds in order to develop leads or product candidates. To
date, the Company has not identified, licensed or acquired alternative
technologies or compounds that would allow it to develop leads or product
candidates, and there can be no assurance that the Company would be able to do
so in the future. Even if the Company is successful in identifying and
developing lead compounds associated with specific diseases, there can be no
assurance that the Company will be successful in marketing its discoveries to
biopharmaceutical companies for use in the development of therapeutic products
or that any such resulting products will receive regulatory approval or be
manufactured or marketed successfully or that the Company will not be precluded
from commercialization of drug discoveries by proprietary rights of third
parties. See "-- Need For Chemistry Capabilities," "-- Dependence on Patents and
Proprietary Rights" and "Business -- Collaborative and Research Agreements."
NEED FOR ADDITIONAL CAPITAL; UNCERTAINTY OF ADDITIONAL FUNDING. The Company
expects negative cash flow from operations to continue for the foreseeable
future. The Company will require substantial additional funds to continue and
expand its research and development activities, conduct preclinical studies and
expand administrative capabilities. The Company estimates that at its planned
rate of spending, existing cash and cash equivalents, together with the net
proceeds from the Offering, and the interest income earned on such proceeds,
will be sufficient to fund operations through 1999. There can be no assurance,
however, that the Company's assumptions regarding its future level of
expenditures and operating losses will prove to be accurate. The Company's
future funding requirements will depend on many factors, including: any
expansion or acceleration and the breadth of the Company's research and
development programs; the results of research and development, preclinical
studies and clinical trials conducted by the Company or its collaborative
partners or licensees, if any; the acquisition or licensing of technologies or
compounds, if any; the Company's ability to maintain existing and establish new
corporate relationships and research collaborations; the Company's ability to
manage growth; competing technological and market developments; the time and
costs involved in filing, prosecuting, defending and enforcing patent and
intellectual property claims; the receipt of licensing or milestone fees from
its current or future collaborative and license arrangements, if established;
the continued funding of governmental research grants; the timing of regulatory
approvals; and other factors.
The Company will need to raise substantial additional capital to fund
operations. Initially the Company intends to seek such additional funding
through collaborative arrangements and through public or private financings,
including equity or debt financings. Any additional equity financing will be
dilutive to existing stockholders, and any debt financing, if available, may
involve restrictions on the Company's ability to pay
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dividends on its capital stock or the manner in which the Company conducts its
business. In addition, in the event that additional funds are obtained through
arrangements with collaborative partners, such arrangements may require the
Company to relinquish rights to technologies, product candidates or potential
products that the Company would not otherwise relinquish. The Company has no
commitments for any additional collaborations or financings, and there can be no
assurance that any such collaborations or financings will be available to the
Company when needed or, if available, on terms acceptable to the Company. The
inability to obtain sufficient funds when needed may require the Company to
delay, scale back or eliminate some or all of its research and development
programs or cease operations. See "Use of Proceeds" and "Management's Discussion
and Analysis of Financial Condition and Results of Operations."
DEPENDENCE ON COLLABORATIVE RELATIONSHIPS; FUNDING OF PROGRAMS. The
Company's strategy for the development, preclinical and clinical testing,
manufacturing and commercialization of new drugs based on its research and
development activities depends upon corporate partners, licensors, licensees and
others. The Company expects to rely upon the performance of these outside
parties to provide funding for its research program, further develop lead
compounds or potential product candidates, provide access to additional compound
libraries, conduct preclinical studies and clinical trials, obtain regulatory
approvals and manufacture and market any resulting products. In April 1996,
RiboGene established a collaboration with Abbott (the "Abbott Collaboration"),
to discover and develop antifungal drugs. Pursuant to the Abbott Agreements
Abbott was granted exclusive worldwide rights to develop and market any and all
antifungal products discovered during the Abbott-sponsored collaborative
research program using RiboGene's PSTM-based drug discovery approach. Since May
1996, Abbott has funded a significant portion of the costs associated with the
Company's antifungal program. Pursuant to the Abbott Agreements, Abbott has
committed to pay up to $5.0 million in research support payments over the
three-year term of the research program as well as to provide related antifungal
research support, including lead optimization capabilities, from Abbott
employees. As of June 30, 1997, the Company has recognized $2.0 million in
research support revenues from Abbott. Abbott has the right to terminate the
research agreement at any time and there can be no assurance that Abbott will
not do so prior to the expiration of the term of the research agreement.
The Company's revenues will be dependent on the success of the lead
compounds and potential drug candidates developed through the Abbott
Collaboration and on the Company's ability to establish additional
collaborations for its other programs. The failure of the Company to maintain
the Abbott Collaboration or to enter into agreements with additional
collaborators to provide research support, both financial and technical, and to
develop, obtain regulatory approval for, and market products incorporating, the
Company's discoveries would have a material adverse effect on the Company's
business, financial condition and results of operations. There can be no
assurance that any such collaborators will commit sufficient development
resources, technology, regulatory expertise, manufacturing, marketing and other
resources towards developing, promoting and commercializing products
incorporating the Company's discoveries. Further, competitive conflicts may
arise among these third parties that could prevent them from working
cooperatively with the Company. The amount and timing of resources devoted to
these activities by such parties could depend on the achievement of milestones
by the Company and otherwise generally will be controlled by such parties. In
addition, the Company expects that its agreements with future collaborators will
provide such collaborators with the right to terminate their agreements with the
Company upon written notice to the Company. Any such termination would
substantially reduce the likelihood that the applicable research program or any
lead candidate or candidates would be developed into a drug candidate, would
obtain regulatory approvals and would be manufactured and successfully
commercialized. Therefore, any such termination could have a material adverse
effect on the Company's business, financial condition and results of operations.
There can be no assurance that the Abbott Collaboration, or any future
collaborations will be successful in developing and commercializing products or
that the Company will receive milestone payments or generate revenues from
royalties sufficient to offset the Company's significant investment in research
and development and other costs. There also can be no assurance that disputes
will not arise in the future with the Company's collaborators, including with
respect to the ownership of rights to any technology developed pursuant to the
collaboration. These and other possible disagreements between collaborators and
the Company could lead to delays or interruptions in, or termination of,
collaborative research, development and commercialization of certain potential
products or could require or result in litigation or arbitration, which could be
time-consuming and
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expensive and could have a material adverse effect on the Company's business,
financial condition and results of operations. See "-- Need for Additional
Capital; Uncertainty of Additional Funding" and "Business -- Collaborative and
Research Agreements."
DEPENDENCE ON SCIENTIFIC ADVISORS. The Company is highly dependent on the
members of its Scientific Advisory Board ("SAB") who conduct research in
cooperation with the Company and provide the Company with access to technology
developed by them. The potential success of the Company's drug discovery
programs depends in part on continued collaborations with these advisors. The
Company and various members of its management and research staff rely heavily on
members of the SAB for new translation-based targets for its drug discovery
programs and for continued consulting and expertise in translation research. The
Company's scientific advisors are employed by employers other than the Company
and may have commitments to, or consulting or advisory contracts with, other
entities that may limit their availability to the Company. As a result, the
Company has limited control over their activities and, except as otherwise
required by its consulting agreements, can expect only limited amounts of their
time to be dedicated to the Company's activities. Most members of the SAB have
entered into scientific advisor agreements with the Company. These agreements
provide for indefinite terms of service on the SAB which are terminable at any
time by written notice of either the Company or the advisor. Certain members of
the SAB also have entered into separate consulting agreements with the Company.
These agreements have an initial one-year term, typically have been renewed by
the parties for successive one-year periods and provide for earlier termination
by either party upon 30 days' written notice. There can be no assurance that the
Company will be able to maintain such consulting agreements or that such
scientific advisors will not enter into consulting arrangements, exclusive or
otherwise, with competing pharmaceutical or biotechnology companies, any of
which would have a detrimental impact on the Company's research objectives and
could have a material adverse effect on the Company's business, financial
condition and results of operations.
The scientific advisor agreements and the consulting agreements provide for
confidentiality of the Company's proprietary information. These agreements also
provide that any confidential information that results from work performed for
the Company by such advisors is the sole and exclusive property of the Company.
In certain instances, such provisions are subject to the patent and other
policies now in effect or adopted in the future by the advisor's employer or
primary affiliation. To the extent any confidential information is also the
product of work performed for the advisor's affiliates, such affiliates'
policies may provide such affiliate with proprietary rights to such information.
Accordingly, the Company may not have rights to developments, publications or
the results of any research conducted by these advisors, which may adversely
affect the Company. There can be no assurance that the Company will be able to
maintain the confidentiality of its technology and other confidential
information, and any unauthorized dissemination of the Company's confidential
information could have a material adverse effect on the Company's business,
financial condition and results of operations. See "Business -- Scientific
Advisors."
DEPENDENCE ON PATENTS AND PROPRIETARY RIGHTS. The Company's commercial
success will depend, in part, on its ability, and the ability of any
licensor(s), to obtain patent protection for its products and technologies, both
in the United States and in other countries. The patent positions of
pharmaceutical and biotechnology firms can be highly uncertain and often involve
complex legal and technical questions for which important legal principles are
largely unresolved, thus making it difficult to predict the breadth of claims
which would be allowable in any particular case. The Company owns a provisional
patent application relating to its antibacterial drug discovery program; an
issued U.S. patent, a pending U.S. patent application and certain corresponding
foreign applications relating to its antifungal drug discovery program; and two
pending United States patent applications, one of which has been allowed by the
United States Patent and Trademark Office, and certain corresponding foreign
applications relating to its antiviral drug discovery program. The Company is an
assignee, along with McGill University, of a pending U.S. patent application
generally relating to the PSTM program. The Company is an exclusive licensee
under a University of Washington provisional application directed to HCV
NS5A/PKR. In addition, the Company has an option, from the University of
Washington and McGill University, to license a recently-issued U.S. patent and a
pending U.S. patent application relating to translational technology. There can
be no assurance that any of these patent applications, or any patent
applications which the Company may acquire in the future, will issue as patents,
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that any such issued patents will afford adequate protection to the Company and
will not be challenged, invalidated, circumvented or infringed, or that any
rights granted under such patents will afford competitive advantages to the
Company. To protect its rights to its patent applications and/or patents, the
Company may be required to participate in interference proceedings before the
United States Patent and Trademark Office to determine priority of invention and
the rights to a patent. In addition, if patents that cover the Company's
activities are issued to other companies, there can be no assurance that the
Company would be able to obtain a license to such patents. The Company also
could incur substantial costs in any litigation against third parties, in which
the Company asserts patents to which the Company has rights. There can be no
assurance that the Company's patents or those of its licensors, if issued would
not be held invalid by a court or that a competitor's technology or product
would be found to infringe such patents.
The Company's success further will depend, in part, on its ability to
operate without infringing the proprietary rights of others. There can be no
assurance that the Company's activities will not infringe patents owned by
others. The Company could incur substantial costs in defending itself in suits
brought against it or any licensor. Should the Company's products or
technologies be found to infringe patents issued to third parties, the
manufacture, use and sale of the Company's products could be enjoined, and the
Company could be required to pay substantial damages. In addition, the Company,
in connection with the development and use of its products and technologies, may
be required to obtain licenses to patents or other proprietary rights of third
parties. No assurance can be given that any licenses required under any such
patents or proprietary rights would be made available on terms acceptable to the
Company, if at all. Failure to obtain such licenses could have a material
adverse effect on the Company.
In addition to patent protection, the Company also relies to a significant
extent upon trade secret protection for its confidential and proprietary
information, including many of the Company's key discovery technologies. There
can be no assurance that others will not independently develop substantially
equivalent proprietary information and techniques or otherwise gain access to
the Company's trade secrets or disclose such technology. To protect its trade
secrets, RiboGene has required its employees, consultants, SAB members and
parties to collaboration and licensing agreements to execute confidentiality
agreements upon the commencement of employment, the consulting relationship or
the collaboration or licensing arrangement, as the case may be, with RiboGene.
In the case of employees, the agreements also provide that all inventions
resulting from work performed by them while employed by RiboGene will be the
exclusive property of RiboGene. In the case of SAB members, the agreements also
provide that any confidential information that results from work performed for
RiboGene will be the exclusive property of RiboGene. The Company will continue
to require its employees, consultants, SAB members and collaborators and
licensees to execute confidentiality agreements and inventions assignment
agreements (in the case of its employees) upon the commencement of employment,
the consulting relationship or the collaboration or license with the Company.
There can be no assurance, however, that these agreements will provide
meaningful protection of the Company's trade secrets or adequate remedies in the
event of unauthorized use or disclosure of such information, or that the
Company's trade secrets will not otherwise become known or be independently
discovered by its Competitors, that the Company can meaningfully protect its
rights in such unpatented proprietary technology through other means, that any
obligation to maintain the confidentiality of such proprietary technology will
not be breached by employees, consultants, advisors, collaborators, licensees or
others or that others will not independently develop the same or substantially
equivalent technology. The loss of trade secret protection of any of the
Company's key discovery technologies would materially and adversely affect the
Company's competitive position and could have a material adverse effect on the
Company's business, financial condition and results of operations. Finally,
disputes may arise as to the ownership of proprietary rights to the extent that
outside consultants, collaborators or licensees apply technological information
developed independently by them or others to Company projects or apply Company
technology to other projects and, if adversely determined, such disputes could
have a material adverse effect on the Company's business, financial condition
and results of operations. See "-- Dependence on Scientific Advisors,"
"-- Dependence on and Need for Additional Key Personnel" and
"Business -- Patents and Proprietary Rights."
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The Company has received notice that Peptech (Europe A/S) is opposing the
grant of a European patent with claims directed to the nasal administration of
benzodiazepines. As one of the grounds for the opposition, Peptech has submitted
a published abstract describing the nasal administration, to children, of the
benzodiazepine midazolam. This abstract has an apparent publication date of
February 1988, several months prior to the earliest filing date in the United
States from which the Company's European patent application could have claimed
priority. While the Company intends to respond vigorously to the opposition, no
assurance can be given as to the scope of the claims, if any, which the European
Patent Office ultimately will find patentable. Failure of the Company to prevail
in the opposition before the European Patent Office could impede the Company's
ability to outlicense the technology portfolio.
The issued United States patent relating to the nasal administration of
benzodiazepines is the subject of a reissue proceeding before the United States
Patent and Trademark Office. In the course of negotiations with a potential
licensee of the technology portfolio containing this patent, the Company became
aware that the issued United States patent for which reissue is being sought had
expired for failure to pay the required maintenance fees. While the Company is
seeking to revive the expired patent, there can be no assurance that such action
will be successful, which could impede the Company's ability to outlicense the
technology portfolio containing this patent.
NEED FOR CHEMISTRY CAPABILITIES. One of the Company's strategies is to
acquire substantial additional capabilities in chemistry in order to enhance the
Company's lead discovery and optimization capabilities. The Company currently
has two employees with degrees, experience and training in chemistry who conduct
the Company's chemistry activities on a limited basis. The Company's chemistry
requirements for its antifungal program are currently being provided by Abbott.
The Company plans to add medicinal, combinatorial, analytical and computational
chemistry capabilities internally and through external collaborations to support
its other programs. The Company intends to use a significant portion of the net
proceeds of the Offering to build its chemistry capabilities by recruiting
additional chemistry expertise in-house, constructing and building chemistry
facilities (including the design, acquisition and implementation of the capital
equipment necessary to support these activities), acquiring additional compounds
and supplies and entering into additional collaborative agreements. There can be
no assurance that the Company will be successful in developing these
capabilities. Qualified medicinal, combinatorial, analytical and computational
chemists and the corresponding support personnel are in high demand. The Company
may experience difficulty in attracting, recruiting or hiring the personnel
necessary to implement its strategy. Failure by the Company to successfully
complete or implement any of the strategy described above could prevent the
Company from implementing its overall business strategy, require the Company to
rely to a greater extent on collaborative agreements for the optimization of
leads for drug candidates and enter into such arrangements at an earlier stage
of development, and could have a material adverse impact on the Company's
business, financial condition and results of operations.
COMPETITION. The biotechnology and pharmaceutical industries are intensely
competitive and subject to rapid and significant technological change. Many of
the drugs which the Company is developing will be competing with existing
therapies. In addition, a number of companies are pursuing the development of
pharmaceuticals which target the same diseases and conditions the Company is
targeting, using technology similar to the RiboGene technology, as well as
alternative discovery technologies, including antisense, gene therapy and
genomics. The Company faces competition from pharmaceutical and biotechnology
companies both in the United States and abroad. Many of the Company's
competitors, particularly large pharmaceutical companies, have substantially
greater financial, technical and human resources than the Company. In addition,
unlike the Company, many of these competitors have experience in undertaking
preclinical studies and clinical trials of new pharmaceutical products and
obtaining the necessary regulatory approvals and manufacturing and marketing
products. In addition, academic institutions, government agencies, and other
public and private organizations conducting research may seek patent protection
with respect to potentially competing products or technologies and may establish
exclusive collaborative or licensing relationships with competitors of the
Company.
The Company believes that its ability to compete is dependent, in part,
upon its abilities to create and maintain scientifically advanced technology and
to develop and commercialize pharmaceutical products based
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on this technology, as well as its ability to attract and retain qualified
personnel, obtain patent protection or otherwise develop proprietary technology
or processes and secure sufficient capital resources for the expected
substantial time period between technological conception and commercial sales of
products based upon the Company's technology.
There can be no assurance that the Company's competitors will not succeed
in developing technologies and drugs that are more effective or less costly than
any which are being developed by the Company or which would render the Company's
technology and future drugs obsolete and noncompetitive. In addition, the
Company's competitors may succeed in obtaining FDA or other regulatory approvals
for drug candidates more rapidly than the Company. Companies that complete
clinical trials, obtain required regulatory agency approvals and commence
commercial sale of their drugs before their competitors may achieve a
significant competitive advantage, including certain patent and FDA marketing
exclusivity rights that would delay the Company's ability to market certain
products. There can be no assurance that drugs resulting from the Company's
research and development efforts, or from the joint efforts of the Company and
its existing or future collaborative partners, will be able to compete
successfully with competitors' existing products or products under development
or that they will obtain regulatory approval in the United States or elsewhere.
DEPENDENCE ON AND NEED FOR ADDITIONAL KEY PERSONNEL. The Company is highly
dependent on the principal members of its scientific and management staff,
including the services of Drs. Lehman, Gluchowski, and Moehle, the Company's
Vice President of Research, Director of Drug Discovery and Associate Director of
Translational Control Research, respectively, as well as the project leaders for
each of its core projects and the leader of its screening group. There can be no
assurance that these persons will continue to be employed by the Company in the
future. The loss of any of these persons could have a material adverse effect on
the Company's business, financial condition and results of operations. The
Company's potential growth and expansion into areas and activities requiring
additional expertise, such as chemistry, are expected to place increased demands
on the Company's management skills and resources. These demands are expected to
require a substantial increase in management and scientific personnel and the
development of additional expertise by existing management personnel.
Accordingly, recruiting and retaining management and operational personnel and
qualified scientific personnel to perform research and development work in the
future will also be critical to the Company's success. There can be no assurance
that the Company will be able to attract and retain skilled and experienced
management, operational and scientific personnel on acceptable terms given the
competition among numerous pharmaceutical and biotechnology companies,
universities and other research institutions for such personnel. The failure to
attract and retain such personnel or to develop such expertise could have a
material adverse effect on the Company's business, financial condition and
results of operations. See "Business -- Employees" and "Management."
UNCERTAINTIES RELATED TO CLINICAL TRIALS. The Company believes it will be
several years, if ever, before any potential product candidates discovered using
its technology would be ready to begin the regulatory approval process. Before
seeking such approval, the Company or its collaborative partners must
demonstrate in extensive preclinical studies and clinical trials that any such
product candidate is safe and effective for use in each target indication. The
results of preclinical studies and early clinical trials may not be predictive
of results that will be obtained in large-scale testing or use, and there can be
no assurance that any such preclinical studies and clinical trials will
demonstrate the safety and efficacy of any product candidate, if successfully
developed, or that, regardless of preclinical and clinical trial results, FDA
approval will be obtained or that marketable products will result. A number of
companies in the pharmaceutical industry have suffered significant setbacks in
advanced clinical trials or have not received FDA approval, even after promising
results in earlier trials. Clinical trials for any product candidates developed
by the Company and its collaborators may be delayed by many factors.
Furthermore, the FDA may suspend clinical trials at any time if it decides that
patients are being exposed to an unreasonable and significant health risk. In
addition, clinical trials are often conducted with patients having the most
advanced stages of disease. During the course of treatment, these patients can
die or suffer other adverse medical effects for reasons that may not be related
to the pharmaceutical agent being tested, but which can nevertheless affect
clinical trial results. Any delays in, or termination of, the clinical trials of
any of the Company's product candidates, if successfully developed, or the
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failure of any clinical trials to meet applicable regulatory standards, could
have a material adverse effect on the Company's business, financial condition
and results of operations.
GOVERNMENT REGULATION AND NEED FOR PRODUCT APPROVALS. The manufacture and
marketing of any products developed by the Company and its ongoing research and
development activities are subject to regulation by numerous governmental
authorities in the United States and other countries. Prior to marketing, any
drug developed by the Company must undergo rigorous preclinical and clinical
testing and an extensive regulatory approval process mandated by the FDA and
equivalent authorities in other countries. These processes can take a number of
years and require the expenditure of substantial resources. The time required
for completing such testing and obtaining such approvals is uncertain, and there
can be no assurance that such approvals will be obtained or that marketable
products will result. The safety and efficacy of a therapeutic product under
development by the Company must be supported by extensive data from clinical
trials. In addition, delays or rejections may be encountered in the regulatory
review process or in the event there are changes in FDA policy or the Company
decides to replace the compounds in testing with modified or optimized
compounds. There can be no assurance that even after such time and expenditures,
regulatory approval will be obtained for any products developed by the Company.
Failure by the Company to obtain regulatory approval of any products resulting
from its discovery programs could have a material adverse effect on the
Company's business, financial condition and results of operations. There can be
no assurance that if clinical trials are completed, the Company will submit an
NDA with respect to any potential products or that such applications will be
reviewed and approved by the FDA in a timely manner, if at all.
If regulatory approval of a product is granted, such approval will entail
limitations on the indicated uses for which the product may be marketed.
Further, even if such regulatory approval is obtained, a marketed product, its
manufacturer, and its manufacturing facilities are subject to continual review
and periodic inspections, and later discovery of previously unknown problems
with a product, manufacturer or facility may result in restrictions on such
product, manufacturer or facility, including withdrawal of the product from the
market. Failure to comply with ongoing relevant regulatory requirements may
result in, among other things, warning letters, fines, product recalls or
seizures, suspension or termination of production, injunctions, delays in
obtaining marketing authorization or refusal of the government to grant such
approvals, withdrawals of previously granted approvals, civil penalties and
criminal prosecution, any of which could have a material adverse effect on the
Company's business, financial condition and results of operations.
The Company and its collaborative partners may also be subject to
regulation under state and federal laws, including requirements regarding
occupational safety and laboratory practices, and may be subject to other
present and possible future local, state, federal and foreign regulation. The
impact of such regulation upon the Company cannot be predicted and could have a
material adverse effect on the Company's business, financial condition and
results of operations. See "Business -- Government Regulation."
LACK OF MANUFACTURING, MARKETING AND SALES CAPABILITY AND
EXPERIENCE. RiboGene does not expect to invest in the development of
manufacturing, marketing or sales capabilities in the foreseeable future. If the
Company is unable to contract for manufacturing capabilities on acceptable
terms, the Company's ability to conduct preclinical and clinical trials with any
potential drug candidates would be adversely affected, resulting in delays in
the submission of any drug candidate for regulatory approval and in the
initiation of new development programs, which in turn could materially impair
RiboGene's competitive position and the possibility of achieving profitability.
The Company has no experience in marketing drugs. The Company has granted
marketing rights to Abbott with respect to any antifungal drugs developed
through the Abbott Collaboration. The Company intends to collaborate with
additional third parties to market any drugs that may result from its other
areas of focus. There can be no assurance that any such collaborative agreement
can be reached on acceptable terms, if at all. There can be no assurance that
the Company will be able to establish third party relationships to provide any
or all of these capabilities.
PRODUCT LIABILITY AND AVAILABILITY OF INSURANCE. The Company's business
will expose it to potential liability risks that are inherent in the testing,
manufacturing and marketing of pharmaceutical products. The use of any drug
candidates ultimately developed by the Company or its collaborators in clinical
trials may
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expose the Company to product liability claims and possible adverse publicity.
These risks will expand with respect to the Company's drug candidates, if any,
that receive regulatory approval for commercial sale. Product liability
insurance for the biotechnology industry is generally expensive, if available at
all. The Company does not have product liability insurance but intends to obtain
such coverage if and when any drug candidates are tested in clinical trials.
However, such coverage is becoming increasingly expensive and there can be no
assurance that the Company will be able to obtain insurance coverage at
acceptable costs or in a sufficient amount, if at all, or that a product
liability claim would not adversely affect the Company's business, operating
results or financial condition.
UNCERTAINTY RELATED TO HEALTH CARE INDUSTRY. The successful
commercialization of any drug candidates developed by the Company and its
current and future collaborators will depend substantially on reimbursement of
the costs of the resulting drugs from government authorities, private health
insurers and other organizations at levels acceptable to the Company. There can
be no assurance that adequate reimbursement will be available or, if available,
will not be decreased in the future, or that reimbursement amounts will not
reduce the demand for, or the price of, any such drugs. Any of the foregoing
could have a material adverse effect on the Company's business, financial
condition and results of operations. If such reimbursement is not available or
is available on a limited basis, the Company may not be able to retain any
collaborative partners to manufacture and commercialize any drugs and may not be
able to obtain a financial return on the manufacture and commercialization of
any future drugs.
Third-party payors are increasingly focusing on the cost-effectiveness
profile of prescription drugs and challenging the prices charged for such
products and services. Also, the trend towards managed health care in the United
States and the concurrent growth of organizations such as health maintenance
organizations, which could control or significantly influence the purchase of
health care services and products, as well as legislative proposals to reform
health care or government medical assistance programs, may all result in lower
prices or reduced markets for any products developed by the Company or its
current and future collaborators. The cost containment measures that health care
providers and payors are instituting could adversely affect the Company's or its
current and future collaborators' ability to sell future products and may have a
material adverse effect on the Company. To date, the Company has conducted no
marketing studies on any of its potential product candidates and has not
undertaken any pharmacoeconomic analysis with respect to any potential products.
The cost containment measures and reforms that government institutions and
third-party payors are considering could result in significant and unpredictable
changes to the marketing and pricing and reimbursement practices of
biopharmaceutical and pharmaceutical companies such as the Company and its
current and future collaborators. The adoption of any such measures or reforms
could have a material adverse effect on the business, financial condition and
results of operations of the Company.
HAZARDOUS MATERIALS. The Company is subject to federal, state and local
laws and regulations governing the use, generation, manufacture, storage,
discharge, handling and disposal of certain materials and wastes used in its
operations. There can be no assurance that the Company will not be required to
incur significant costs to comply with environmental laws and regulations as its
research activities are increased, or that the operations, business and future
profitability of the Company will not be adversely affected by current or future
environmental laws and regulations. See "Business -- Government Regulation."
MANAGEMENT DISCRETION AS TO USE OF PROCEEDS. The Company intends to use
approximately $1.6 million of the net proceeds of the Offering to repay certain
secured indebtedness and related liabilities incurred in connection with an
acquisition. The Company will use the remaining net proceeds of the Offering to
establish internal chemistry capabilities, expansion and advancement of drug
discovery programs, facility relocation, and for working capital and other
general corporate purposes. Accordingly, the Company's management will retain
broad discretion as to the allocation of the balance of the net proceeds of the
Offering. As a result of such discretion, the Company's management could
allocate the proceeds of the Offering to uses which the stockholders may not
deem desirable. There can be no assurance as to the timing or application of
such proceeds, or that the application thereof will not have a material adverse
effect on the Company's future business, financial condition or results of
operations.
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CONTROL BY EXISTING STOCKHOLDERS. Immediately following the Offering,
officers, directors and existing stockholders of the Company will beneficially
own approximately 75% of the outstanding shares of Common Stock of the Company
(based on shares, warrants and options outstanding as of June 30, 1997). These
stockholders, if acting in concert, will continue to be able to control the
election of all members of the Company's Board of Directors and to determine all
corporate actions after the sale of the shares offered hereby. See "Principal
Stockholders."
ABSENCE OF DIVIDENDS. The Company has never declared or paid cash dividends
on its capital stock and does not anticipate paying cash dividends in the
foreseeable future, but intends instead to retain future earnings, if any, for
reinvestment in its business. Any future determination to pay cash dividends
will be at the discretion of the Board of Directors and will be dependent upon
the Company's financial condition, results of operations, capital requirements
and such other factors as the Board of Directors deems relevant. See "Dividend
Policy."
NO PRIOR PUBLIC MARKET; POSSIBLE VOLATILITY OF STOCK PRICE. Prior to the
Offering, there has been no public market for the Common Stock. Accordingly,
there can be no assurance that an active trading market for the Common Stock
will develop or be sustained upon completion of the Offering or that the market
price of the Common Stock will not decline below the initial public offering
price. The initial public offering price of the shares of Common Stock offered
hereby will be determined by negotiations between the Company and the
Representatives. The market prices for securities of biopharmaceutical companies
have been highly volatile. Announcements regarding the results of regulatory
approval filings, preclinical or clinical studies or other testing,
technological innovations or new commercial products by the Company or its
competitors, government regulations, developments concerning proprietary rights
or public concern as to safety of technology have historically had, and are
expected to continue to have, a significant impact on the market prices of the
stocks of biopharmaceutical companies. The trading price of the Common Stock
could also be subject to significant fluctuations in response to variations in
operating results.
DILUTION Purchasers of the Common Stock offered hereby will incur immediate
and substantial dilution equal to $7.54 per share, based upon an assumed initial
public offering price of $11.00 per share. The dilution will be increased to the
extent that the holders of outstanding options or warrants to purchase Common
Stock with exercise prices below the initial public offering price exercise such
options or warrants. If the initial public offering price is less than $8.93 per
share, the per share amount of dilution will be lower; however, investors
purchasing in the Offering will own a lesser percentage of the total shares of
Common Stock outstanding as a result of the issuance of additional shares of
Common Stock to holders of the Series F Preferred Stock upon conversion into
Common Stock of such preferred stock upon the closing of the Offering and to the
holder of the Placement Agent Unit Options upon the exercise thereof. See
"Dilution," "Certain Transactions" and "Description of Capital
Stock -- Preferred Stock."
ANTI-TAKEOVER EFFECTS OF DELAWARE LAW AND CERTAIN CHARTER PROVISIONS. Under
the Company's Certificate of Incorporation, the Company's Board of Directors has
the authority to issue up to 5,000,000 shares of Preferred Stock and to
determine the powers, rights, preferences and privileges of those shares without
any further vote or action by the Company's stockholders. The rights of the
holders of Common Stock will be subject to, and may be adversely affected by,
the rights of the holders of any Preferred Stock that may be issued in the
future. While the Company has no present intention to issue shares of Preferred
Stock, such issuance would dilute the voting power of holders of Common Stock
and, while providing desirable flexibility in connection with possible
acquisitions and other corporate purposes, could have the effect of making it
more difficult for a third party to acquire a majority of the outstanding voting
stock of the Company. In addition, the Company is subject to the anti-takeover
provisions of Section 203 of the Delaware General Corporation Law, which
prohibits the Company from engaging in a "business combination" with an
"interested stockholder" for a period of three years after the date of the
transaction in which the person became an interested stockholder, unless the
business combination is approved in a prescribed manner. The application of
Section 203 could have the effect of delaying or preventing a change of control
of the Company. The Company's Certificate of Incorporation provides for
staggered terms for the members of the Board of Directors. This and certain
other provisions of the Company's Certificate of Incorporation and Bylaws may
have the effect of delaying or preventing changes in control or management of
the Company, which could adversely affect the market price
16
<PAGE> 18
of the Company's Common Stock. See "Description of Capital Stock -- Delaware
Anti-Takeover Law and Certain Charter and By-law Provisions."
SHARES ELIGIBLE FOR FUTURE SALE. Sales of a substantial number of shares of
Common Stock (including shares issued upon the exercise of outstanding options
and warrants) in the public market after the Offering could materially adversely
affect the market price of the Common Stock. Such sales also might make it more
difficult for the Company to sell equity securities or equity-related securities
in the future at a time and price that the Company deems appropriate. Upon
completion of the Offering, the Company will have outstanding an aggregate of
6,847,117 shares of Common Stock, assuming no exercise of the Underwriters'
over-allotment option; an aggregate of 452,429 shares of Common Stock reserved
for issuance under the Company's stock plans upon exercise of options
outstanding as of June 30, 1997; 451,530 shares of Common Stock reserved for
issuance upon the exercise of warrants outstanding as of June 30, 1997; 574,983
shares of Common Stock reserved for issuance upon exercise of the Class A
Warrants; 574,996 shares of Common Stock reserved for issuance upon exercise of
the Placement Agent Unit Options; 143,746 shares of Common Stock reserved for
issuance upon the exercise of the Placement Agent Class A Warrants; and 230,000
shares of Common Stock reserved for issuance upon exercise of the
Representatives' Warrants. The 2,300,000 shares sold in the Offering will be
freely tradeable without restriction or further registration under the
Securities Act, except for any shares held by an "affiliate" of the Company as
that term is defined in Rule 144 under the Securities Act ("Rule 144"). The
4,547,117 shares of Common Stock held by existing stockholders of the Company
are "restricted securities" as that term is defined in Rule 144 (the "Restricted
Shares"). Restricted Shares may be sold in the public market only if registered
or if they qualify for an exemption from registration under Rules 144 or 701
under the Securities Act. For a summary description of the requirements of Rules
144 and 701, see "Shares Eligible for Future Sale." The Company intends to file
registration statements on Forms S-8 with respect to the shares reserved for
issuance under its stock plans.
The Company, certain of the Company's existing stockholders and holders of
options and warrants will enter into lock-up agreements with the Representatives
agreeing not to sell or otherwise dispose of any of their shares of Common Stock
or any securities convertible into or exercisable for shares of Common Stock,
for a period of 180 days from the date of this Prospectus without the prior
written consent of EVEREN Securities, Inc. Certain stockholders of the Company
are entitled to register their shares under the Securities Act for resale, at
the expense of the Company. See "Description of Capital Stock -- Registration
Rights," "Shares Eligible for Future Sale" and "Underwriting."
FORWARD-LOOKING STATEMENTS. Certain statements under the captions
"Prospectus Summary," "Use of Proceeds," "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and "Business" and elsewhere
in this Prospectus constitute "forward-looking statements." Such forward-looking
statements may be identified by the use of terminology such as "may," "will,"
"expect," "anticipate," "intend," "designed," "estimate," "should" or "continue"
or the negatives thereof or other variations thereon or comparable terminology.
Such forward-looking statements involve known or unknown risks, uncertainties
and other factors which may cause the actual results, performance or
achievements of the Company, or industry results, to be materially different
from any future results, performance or achievements expressed or implied by
such forward-looking statements. Such factors include those described above and
in the sections entitled "Prospectus Summary," "Use of Proceeds," "Management's
Discussion and Analysis of Financial Conditions and Results of Operations" and
"Business."
17
<PAGE> 19
USE OF PROCEEDS
The net proceeds to the Company from the sale of shares of Common Stock
offered hereby are estimated to be approximately $22.8 million ($26.3 million if
the Underwriters' over-allotment option is exercised in full), after deducting
the estimated underwriting discounts and commissions and estimated Offering
expenses.
The Company anticipates that it will use the remaining net proceeds of the
Offering over the next two years to establish internal chemistry capabilities,
including acquiring necessary equipment and recruiting qualified personnel, to
expand and advance the Company's antibacterial and HCV programs, to establish
new drug discovery programs, to relocate to a new facility and for working
capital and general corporate purposes. The Company will also use approximately
$1.6 million of the net proceeds from the Offering to repay certain secured
indebtedness (the "Secured Indebtedness") and to satisfy the Company's
obligations under related agreements. The Company may use a portion of the
proceeds to acquire or license technology rights or compounds. No such
transactions involving a material amount of consideration are being negotiated
as of the date of this Prospectus. Pending such uses, the Company intends to
invest such funds in short-term, interest-bearing obligations of investment
grade. The Secured Indebtedness is evidenced by a promissory note in the
principal amount of $909,000, which bears interest at a rate of 5.32% per annum
and becomes due in January 1998. This note was issued and the related agreements
were entered into in connection with the acquisition of in-process research and
development relating to products no longer under development by the Company. See
"Certain Transactions."
The Company anticipates that the net proceeds of the Offering, together
with existing cash, cash equivalents and short-term investments, will be
sufficient to maintain its current and planned operations through 1999. However,
there can be no assurance that the Company's assumptions regarding future
operating losses and operating expenses will be accurate. The Company's future
funding requirements will depend on many factors, including: any expansion or
acceleration and the breadth of the Company's research and development programs;
the results of research and development, preclinical studies and clinical trials
conducted by the Company or its collaborative partners or licensees, if any; the
acquisition or licensing of technologies or compounds, if any; the Company's
ability to maintain existing and establish new corporate relationships and
research collaborations; the Company's ability to manage growth; competing
technological and market developments; the time and costs involved in filing,
prosecuting, defending and enforcing patent and intellectual property claims;
the receipt of licensing or milestone fees from its current or future
collaborative and license arrangements, if established; the continued funding of
governmental research grants; the timing of regulatory approvals; and other
factors. See "Risk Factors -- Need for Additional Capital; Uncertainty of
Additional Funding" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
DIVIDEND POLICY
The Company has never declared or paid cash dividends on its capital stock
and does not anticipate paying cash dividends in the foreseeable future. The
Company intends to retain future earnings, if any, for reinvestment in its
business. Any future determination to pay cash dividends would be at the
discretion of the Board of Directors and would be dependent upon the Company's
financial condition, results of operations, capital requirements and such other
factors as the Board of Directors deems relevant.
18
<PAGE> 20
CAPITALIZATION
The following table sets forth as of June 30, 1997 (i) the actual
capitalization of the Company as if the 1-for-3.97 reverse split of the Common
Stock had occurred prior to June 30, 1997; (ii) the pro forma capitalization of
the Company, giving effect to the automatic conversion of each outstanding share
of Series A through Series E Preferred Stock into 0.2519 shares of Common Stock
and each outstanding share of Series F Preferred Stock into 0.5038 shares of
Common Stock concurrently with the closing of the Offering (assuming an initial
public offering price of $11.00 per share) and the reincorporation of the
Company prior to or upon the closing of the Offering; and (iii) the pro forma
capitalization of the Company as adjusted to reflect the sale of the 2,300,000
shares of Common Stock offered hereby (after deducting estimated underwriting
discounts and commissions and estimated expenses of the Offering) and the
receipt and application of the estimated net proceeds therefrom. The number of
shares of Common Stock to be issued upon conversion of RiboGene's Series F
Preferred Stock will depend upon the initial public offering price. See "Use of
Proceeds," "Certain Transactions" and "Description of Capital Stock."
<TABLE>
<CAPTION>
JUNE 30, 1997
--------------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
-------- ------------ --------------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C>
LONG-TERM OBLIGATIONS:
Capital lease obligations less current portion and
other noncurrent liabilities..................... $ 385 $ 385 $ 385
-------- -------- --------
STOCKHOLDERS' EQUITY:
Preferred Stock, no par value: 18,932,344 shares
authorized; 14,377,595 shares issued and
outstanding (actual); 5,000,000 shares, $0.001
par value authorized, none issued and outstanding
(pro forma and pro forma as adjusted)............ 33,560 -- --
Common Stock, no par value: 50,000,000 shares
authorized, (30,000,000 shares authorized, $0.001
par value pro forma and pro forma as adjusted);
350,435 shares issued and outstanding (actual);
4,547,117 shares issued and outstanding (pro
forma); 6,847,117 shares issued and outstanding
(pro forma as adjusted(1))....................... 340 5 7
Additional paid in capital............................ 33,895 56,672
Notes receivable from stockholders.................... (154) (154) (154)
Deficit accumulated during development stage.......... (32,842) (32,842) (32,842)
-------- -------- --------
Total stockholders' equity.......................... 904 904 23,683
-------- -------- --------
Total capitalization........................ $ 1,289 $ 1,289 $ 24,068
======== ======== ========
</TABLE>
- ---------------
(1) Excludes: (i) an aggregate of 452,429 shares of Common Stock reserved for
issuance under the Company's stock plans upon exercise of options
outstanding as of June 30, 1997, at a weighted average exercise price of
$1.07 per share; (ii) an aggregate of 2,213,963 shares of Common Stock
reserved for future grants or purchases under the Company's equity incentive
plans; (iii) 574,983 shares of Common Stock reserved for issuance upon the
exercise of the Class A Warrants; (iv) 451,530 shares of Common Stock
reserved for issuance upon the exercise of warrants (other than Class A
Warrants) outstanding as of June 30, 1997, at a weighted average exercise
price of $9.55 per share; (v) 574,996 shares of Common Stock reserved for
issuance upon the exercise of the Placement Agent Unit Options; (vi) 143,746
shares of Common Stock reserved for reserved for issuance upon the exercise
of the Placement Agent Class A Warrants and (vii) 230,000 shares of Common
Stock reserved for issuance upon the exercise of the Representatives
Warrants. The number of shares of Common Stock to be issued upon conversion
of the Series F Preferred Stock and exercise of the Placement Agent Options
and the exercise price of the Placement Agent Unit Options will depend upon
the initial public offering price. See "Management -- Stock Plans and
Related Employee Benefit Plans," "Certain Transactions, "Description of
Capital Stock" and "Underwriting."
19
<PAGE> 21
DILUTION
The pro forma net tangible book value of the Company as of June 30, 1997,
was approximately $904,000 or $0.20 per share of Common Stock. Pro forma net
tangible book value per share is equal to the Company's pro forma net tangible
assets (pro forma tangible assets less pro forma total liabilities) divided by
the pro forma number of shares of Common Stock outstanding at that date (as if
the 1-for-3.97 reverse split of the Common Stock had occurred prior to June 30,
1997), assuming the conversion of all outstanding shares of Preferred Stock of
the Company into an aggregate of 4,196,682 shares of Common Stock (assuming an
initial public offering price of $11.00 per share) concurrently with the closing
of the Offering. The number of shares of Common Stock to be issued upon
conversion of RiboGene's Series F Preferred Stock will depend upon the initial
public offering price. See "Certain Transactions" and 'Description of Capital
Stock." Without taking into account any other changes in pro forma net tangible
book value other than to give effect to the receipt and application of the net
proceeds from the sale of the 2,300,000 shares of Common Stock offered hereby at
an assumed initial public offering price of $11.00 per share, the pro forma net
tangible book value of the Company as of June 30, 1997 would have been $23.7
million or $3.46 per share. This represents an immediate increase in such pro
forma net tangible book value of $3.26 per share to existing stockholders and an
immediate dilution in pro forma net tangible book value of $7.54 per share to
new public investors and Abbott. The following table illustrates this per share
dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share......................... $11.00
Pro forma net tangible book value per share as of June 30, 1997....... $0.20
Increase in net tangible book value per share attributable to new
investors.......................................................... 3.26
-----
Pro forma net tangible book value per share after the Offering.......... 3.46
------
Dilution per share to new investors..................................... $ 7.54
======
</TABLE>
The following table summarizes, on a pro forma basis as of June 30, 1997,
the differences between the number of shares of Common Stock purchased from
the Company, the total consideration paid and the average price per share
paid by existing stockholders and by the new investors, including Abbott,
purchasing shares in the Offering (at an assumed initial public offering
price of $11.00 per share and before deducting estimated underwriting
discounts and commissions and estimated Offering expenses):
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
------------------- --------------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
--------- ------- ----------- ------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders..................... 4,547,117 66% $35,237,000 58% $ 7.75
New investors............................. 2,300,000 34 25,300,000 42 11.00
--------- --- ----------- ---
Total........................... 6,847,117 100% $60,537,000 100%
========= === =========== ===
</TABLE>
The foregoing discussion and table assumes no exercise of outstanding
options or warrants subsequent to June 30, 1997, and excludes: (i) an aggregate
of 452,429 shares of Common Stock reserved for issuance under the Company's
stock plans upon exercise of options outstanding as of June 30, 1997, at a
weighted average exercise price of $1.07 per share; (ii) an aggregate of
2,213,963 shares of Common Stock reserved for future grants or purchases under
the Company's equity incentive plans; (iii) 574,983 shares of Common Stock
reserved for issuance upon exercise of the Class A Warrants; (iv) 451,530 shares
of Common Stock reserved for issuance upon the exercise of warrants (other than
Class A Warrants) outstanding as of June 30, 1997, at a weighted average
exercise price of $9.55 per share; (v) 574,996 shares of Common Stock reserved
for issuance upon the exercise of the Placement Agent Unit Options; (vi) 143,746
shares of Common Stock reserved for issuance upon exercise of the Placement
Agent Class A Warrants; and (vii) 230,000 shares of Common Stock reserved for
issuance upon the exercise of Representatives' Warrants. The number of shares of
Common Stock to be issued upon conversion of the Series F Preferred Stock and
exercise of the Placement Agent Unit Options and the exercise price of the
Placement Agent Unit Options will depend upon the initial public offering price.
See "Management -- Stock Plans and Related Employee Benefits Plans," "Certain
Transactions," "Description of Capital Stock" and "Underwriting."
20
<PAGE> 22
SELECTED FINANCIAL DATA
The selected financial data set forth below at December 31, 1993, 1994,
1995, 1996 and for each of the years then ended and at and for the nine months
ended December 31, 1992 have been derived from the audited financial statements
of the Company. The audited financial statements of the Company as of December
31, 1995 and 1996 and for each of the three years in the period ended December
31, 1996, together with the notes thereto and the related report of Ernst &
Young LLP, independent auditors, are included elsewhere herein. The report of
Ernst & Young LLP contains an explanatory paragraph that describes the
uncertainty as to the ability of the Company to continue as a going concern as
described in Note 1 of Notes to Financial Statements. The balance sheet data as
of June 30, 1997 and the statement of operations data for the six-month periods
ended June 30, 1996 and 1997 and for the period from inception (May 5, 1989) to
June 30, 1997 have been derived from unaudited financial statements of the
Company and, in the opinion of management, include all adjustments (consisting
only of normal recurring adjustments) necessary to present fairly the
information set forth therein. The results for the six months ended June 30,
1997 are not necessarily indicative of the results to be expected for the year
ended December 31, 1997. The selected financial data set forth below should be
read in conjunction with the Financial Statements of the Company and related
Notes thereto and "Management's Discussion and Analysis of Financial Condition
and Results of Operations." The Company has not declared or paid cash dividends
on its Common Stock since inception and does not intend to pay any cash
dividends in the foreseeable future.
<TABLE>
<CAPTION>
SIX MONTHS PERIOD FROM
NINE MONTHS ENDED INCEPTION
ENDED YEAR ENDED DECEMBER 31, JUNE 30, (MAY 5, 1989)
DECEMBER 31, -------------------------------------- ----------------- TO JUNE 30,
1992 1993 1994 1995 1996 1996 1997 1997
------------ ------- -------- ------- ------- ------- ------- -------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Contract research............. $ -- $ -- $ -- $ -- $ 1,112 $ 278 $ 884 $ 1,996
Grants........................ -- -- 238 407 975 414 697 2,317
------- ------- -------- ------- ------- ------- ------- --------
-- -- 238 407 2,087 692 1,581 4,313
Operating expenses:
Research and development...... 1,112 1,970 4,209 4,663 4,077 2,162 2,052 20,620
General and administrative.... 907 1,924 2,424 2,758 1,372 675 763 10,851
Restructuring costs........... -- -- -- -- 219 219 -- 219
Acquired in-process research
and development............. -- -- 5,000 -- -- -- -- 5,000
------- ------- -------- ------- ------- ------- ------- --------
Total operating expenses........ 2,019 3,894 11,633 7,421 5,668 3,056 2,815 36,690
------- ------- -------- ------- ------- ------- ------- --------
Loss from operations............ (2,019) (3,894) (11,395) (7,014) (3,581) (2,364) (1,234) (32,377)
Interest income (expense),
net........................... 25 55 (42) (240) (282) (241) (24) (465)
------- ------- -------- ------- ------- ------- ------- --------
Net loss........................ $ (1,994) $(3,839) $(11,437) $(7,254) $(3,863) $(2,605) $(1,258) $ (32,842)
======= ======= ======== ======= ======= ======= ======= ========
Pro forma net loss per
share(1)...................... $ (0.75) $ (0.23)
======= =======
Shares used in computing pro
forma net loss per share(1)... 5,166 5,483
======= =======
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------------------------- JUNE 30,
1992 1993 1994 1995 1996 1997
------- ------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents and short-term investments........ $ 1,197 $ 2,105 $ 4,416 $ 1,897 $ 1,981 $ 3,282
Working capital (deficit)................................ 801 1,708 2,133 (1,762) (954) 867
Total assets............................................. 1,687 2,892 5,105 2,404 2,657 4,004
Long-term obligations.................................... 269 249 3,192 2,656 1,494 385
Deficit accumulated during the development stage......... (5,191) (9,030) (20,467) (27,721) (31,584) (32,842)
Total stockholders' equity (deficit)..................... 1,005 1,980 (504) (4,029) (1,956) 904
</TABLE>
- ---------------
(1) See Note 1 of Notes to Financial Statements for information concerning the
computation of pro forma net loss per share.
21
<PAGE> 23
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Prospectus contains, in addition to historical information,
forward-looking statements that involve risks and uncertainties. The Company's
actual results could differ significantly from the results discussed in the
forward-looking statements. Factors that could cause or contribute to such
differences include the factors discussed below as well as the factors discussed
in "Risk Factors" and elsewhere in this Prospectus.
OVERVIEW
RiboGene is a drug discovery company focused on the identification of novel
leads and the development of potential drug candidates for the treatment of
infectious diseases. The Company was founded in May 1989 to develop laboratory
equipment for cell-free protein synthesis. In January 1993, the Company
discontinued development of the lab equipment and began to focus its research
and development efforts on the identification of novel leads and the development
of potential drug candidates for the treatment of infectious diseases. The
Company's research efforts initially focused on infections caused by fungi and
viruses. In 1996, the Company expanded its research efforts to include
infections caused by bacteria. Simultaneously with the shift in focus to
infectious disease drug discovery, in 1993 and later in 1994, the Company
in-licensed certain technology not directly related to its drug discovery
efforts. In September 1993, the Company acquired the rights to a compound known
as RG-201. In January 1994, the Company acquired certain in-process research and
development (the "Intranasal Product Acquisition") including certain patents and
other intellectual property for an aggregate purchase price of $5.0 million, of
which $800,000 was paid in cash and $4.2 million was paid in the form of
promissory notes ($909,000 of which remains outstanding as of June 30, 1997),
and warrants to purchase 330,744 shares of Common Stock. In connection with the
Intranasal Product Acquisition, the Company also entered into an agreement with
a stockholder of the acquired company pursuant to which the Company is obligated
to pay such stockholder $50,000 per quarter through December 1999. One of the
potential products acquired by the Company was Emitasol, an intranasal
formulation of metoclopramide for the treatment of emesis following
chemotherapy. In 1996, the Company discontinued development of RG-201 and all
the intranasal products including Emitasol. See "Business -- Patents and
Proprietary Rights".
In April 1996, the Company entered into a collaboration with Abbott for its
antifungal program. As part of the Abbott Collaboration, Abbott has agreed to
provide the Company with $5.0 million in research support payments and fund
additional research and development at Abbott, including lead optimization. The
Company will also be entitled to receive milestone payments upon the achievement
of mostly late-stage regulatory milestones in the amount of up to $9.0 million
for each product developed through the collaboration. In connection with the
Abbott Collaboration, Abbott made a $3.5 million equity investment in the
Company. Abbott also agreed to purchase an additional $4.0 of Common Stock in a
private placement. Abbott has expressed its intention to fulfill this obligation
by purchasing $4.0 million of Common Stock in the Offering at the initial public
offering price. See "Business -- Collaborative and Research Agreements.'
The Company is a development stage company, has generated no revenue from
the sales of products and, through June 30, 1997, has incurred cumulative net
losses of approximately $32.8 million and, at June 30, 1997, had a net worth of
$904,000. The Company expects to incur significant operating losses over the
next several years due primarily to expanded research and development efforts,
preclinical and clinical testing of its product candidates and commercialization
activities. The Company does not anticipate revenues from product sales for a
significant number of years, if ever. The Company's sources of revenues for the
next several years will be payments from strategic collaborations if any, and
interest income. Certain payments under collaborations are or will be contingent
upon the Company or its collaborators achieving certain milestones as to which
there can be no assurance. Results of operations may vary significantly from
quarter to quarter depending on, among other factors, the progress of the
Company's research and development efforts, results of clinical testing, the
timing of certain expenses, the establishment of collaborative research
agreements and the receipt of grants or milestone payments, if any.
22
<PAGE> 24
RESULTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1997 AND 1996
For the six-month period ended June 30, 1997, the Company's revenues
consisted of revenues from the Abbott Agreements and SBIR grants from the
National Institutes of Health. Revenues earned under the Abbott Agreements were
$884,000 for the six months ended June 30, 1997, as compared to $278,000 in the
six months ended June 30, 1996. The increase is attributable to the Company's
research support payments beginning in May 1996 and, as a result, the 1996
period includes only two months of support revenue as compared to six months of
support during 1997. Revenues from the SBIR grants for the six months ended June
30, 1997 were $697,000 as compared to $414,000 in the six months ended June 30,
1996. The increase in grant revenue results from the funding of two grants that
were awarded in the fourth quarter of 1996. Revenues earned under research
grants are determined by the timing of the award from the issuing agency. As a
result, research grant revenue earned in one period is not predictive of
research grant revenue to be earned in future periods.
Research and development expenses decreased $110,000, or 5%, to $2.1
million for the first six months of 1997, from $2.2 million in the six month
period ended June 30, 1996. This decrease resulted from the discontinuance in
1996 of external activities involving Emitasol and RG-201. Research and
development expenses represented approximately 75% of total operating expenses
of $2.8 million in the 1997 six-month period as compared to 71% of total
operating expenses of $3.1 million in the 1996 six-month period.
General and administrative expenses increased $88,000, or 13%, to $763,000
for the six months ended June 30, 1997, from $675,000 in the six-month period
ended June 30, 1996. This increase was the result of additional facility,
equipment and administrative costs associated with a 1997 increase in the
Company's scientific staff.
Net interest expense in the six months ended June 30, 1997 decreased
$217,000, or 90%, to $24,000 in the six months ended June 30, 1996, resulting
from the repayment of debt and conversion of promissory notes issued to certain
of the Company's investors in the six months ended June 30, 1996.
The net loss for the six months ended June 30, 1997 was $1.3 million, a
decrease of $1.3 million or 50%, from the net loss of $2.6 million for the same
period in 1996, due primarily to revenue and operating expenses discussed above.
In March 1996, the Company restructured its operations to focus on its PSTM
technology and the search for novel leads for antiinfective drugs. As a result,
certain employees associated with discontinued programs (Emitasol, RG-201) were
terminated. Severance compensation and other associated costs were recognized as
a charge to operations of $219,000 in the six months ended June 30, 1996.
YEARS ENDED DECEMBER 31, 1996 AND 1995
Revenues for the year ended December 31, 1996 were $2.1 million compared to
$407,000 in the prior year. The Company's 1995 revenues consisted solely of SBIR
grants. Revenues in 1996 included $1.1 million in research payments from Abbott.
The increase in grant revenue in 1996 was attributed to the funding of SBIR
grants in the second quarter of 1995 and the fourth quarter of 1996. Revenues
earned under research grants are determined by the timing of the award from the
issuing agency. As a result, research grant revenue earned in one period is not
predictive of research grant revenue to be earned in future periods.
Research and development expenses decreased $586,000, or 12%, to $4.1
million in 1996, from $4.7 million in 1995 due primarily to the discontinuance
of outside consulting and contract research services related to preclinical
studies of RG-201 and various activities associated with Emitasol. Research and
development expenses represented approximately 72% of total operating expenses
of $5.7 million in 1996 and 64% of total operating expenses of $7.4 million in
1995.
General and administrative expenses decreased $1.4 million, or 50%, to $1.4
million in 1996, from $2.8 million in 1995. The decrease was due to several
one-time charges in 1995, including $646,000 related to a consulting services
agreement with an executive of the selling party in the Intranasal Product
Acquisition in
23
<PAGE> 25
1994 and relocation fees of approximately $200,000 paid to key employees. The
remainder of the decrease was attributable to personnel and administrative costs
savings associated with the reorganization of the business development function
in the first quarter of 1996 and a reduction in the use of external consulting
during 1996.
Net interest expense increased from $240,000 in 1995 to $282,000 in 1996.
The increase of $42,000, or 18%, was due primarily to interest on notes payable
to a bank and convertible promissory notes issued to certain of the Company's
investors.
The net loss decreased from $7.3 million in 1995 to $3.9 million in 1996.
The decrease of $3.4 million, or 47%, was due primarily to revenue and operating
expense differences discussed above.
As of December 31, 1996, the Company had a federal net operating loss
carryforward of approximately $26.0 million available to offset future taxable
income, if any. The Company also had federal and state research and development
tax credit carryforwards of approximately $550,000 and $350,000, respectively.
The net operating loss carryforward will expire at various dates beginning from
2004 through 2011, if not utilized. Utilization of the net operating losses and
credits may be subject to substantial annual limitation due to the "change in
ownership" provisions of the Internal Revenue Code of 1986, as amended, and
similar state provisions. The annual limitation may result in the expiration of
net operating losses and credits before utilization. See Note 8 of Notes to
Financial Statements.
YEARS ENDED DECEMBER 31, 1995 AND 1994
Revenues for the year ended December 31, 1995 were $407,000 compared to
$238,000 of revenues in the prior year. The Company's 1995 and 1994 revenues
consisted solely of SBIR grants. Prior to fiscal 1994, the Company had no
revenues.
Research and development expenses increased $454,000, or 11%, to $4.7
million in 1995, from $4.2 million in 1994 due primarily to an increase in
external activities related to RG-201 and Emitasol. Research and development
expenses represented approximately 64% of total operating expenses of $7.4
million in 1995 and 36% of the total operating expenses of $11.6 million in
1994. Total operating expenses of $11.6 million in 1994 included a $5.0 million
one-time charge associated with the acquisition of in-process research and
development pursuant to the Intranasal Product Acquisition. Exclusive of this
one-time charge, research and development expenses would have represented 64% of
total operating expenses in 1994.
General and administrative expenses increased $334,000, or 14%, to $2.8
million in 1995, from $2.4 million in 1994. The increase was due primarily to
the expenses related to the addition of key general and administrative
personnel.
Net interest expense was $240,000 in 1995 and $42,000 in 1994. The increase
in interest expense of $200,000 was due primarily to interest on notes payable
to a bank.
The net loss in 1995 was $7.3 million, a decrease of $4.1 million, or 36%,
from the net loss of $11.4 million in 1994. The net loss of $11.4 million in
1994 included the $5.0 million one-time charge described above. Exclusive of the
one-time $5.0 million expense, the net loss from 1994 to 1995 would have
increased by $817,000, or 11%.
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed its operations since incorporation primarily
through private sales of Common Stock and Preferred Stock, warrants, SBIR
grants, the Abbott Collaboration, the issuance of short-term convertible notes,
and equipment financing arrangements. Through June 30, 1997, the Company has
raised approximately $33.7 million from the sale of Common Stock and Preferred
Stock, warrants and short-term convertible notes, $2.3 million from SBIR grants
and $2.0 million from the Abbott Collaboration. The Company's capital
expenditures and payments under capital lease obligations aggregate
approximately $1.1 million through June 30, 1997, and cash used to fund
operating activities since incorporation $25.7 million.
At June 30, 1997, the Company had cash and cash equivalents of
approximately $3.3 million and working capital of $867,000.
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On March 7, 1997, the Company entered into a 15-year lease with the right
of sublease for a new facility located in Hayward, California. The lease
provides for an initial annual rent of $531,000, with scheduled increases. The
lease also provides that the Company will issue to the landlord six-year
warrants to purchase 62,975 shares of Common Stock at $8.93 per share. The
Company anticipates relocating to the new facility before the end of 1997. In
September 1997, the Company amended the lease to include additional square
footage in the new facility. The Company intends to sublet the additional space
for a period of time until it is needed by the Company. See
"Business -- Facilities."
The Company will require substantial additional funds to continue and
expand its research and development activities, conduct preclinical studies and
expand administrative capabilities. The Company estimates that at its planned
rate of spending, existing cash and cash equivalents, together with the net
proceeds from the Offering, and the interest income earned on such proceeds,
will be sufficient to fund operations through 1999. There can be no assurance,
however, that the Company's assumptions regarding its future level of
expenditures and operating losses will prove to be accurate. The Company's
future funding requirements will depend on many factors, including: any
expansion or acceleration and the breadth of the Company's research and
development programs; the results of research and development, preclinical
studies and clinical trials conducted by the Company or its collaborative
partners or licensees, if any; the acquisition and licensing of technologies or
compounds, if any; the Company's ability to maintain existing and establish new
corporate relationships and research collaborations; the Company's ability to
manage growth; competing technological and market developments; the time and
costs involved in filing, prosecuting, defending and enforcing patent and
intellectual property claims; the receipt of licensing or milestone fees from
its current or future collaborative and license arrangements, if established;
the continued funding of governmental research grants; the timing of regulatory
approvals; and other factors. See "Risk Factors -- Need for Additional Capital;
Uncertainty of Additional Funding."
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BUSINESS
OVERVIEW
RiboGene is a drug discovery company focused on the identification of novel
leads and the development of potential drug candidates for the treatment of
infectious diseases. The Company's drug discovery efforts target bacterial and
fungal infections, for which the efficacy of existing therapies is being
threatened by the emergence of drug resistance and viral infections for which
existing therapies have had limited effectiveness. The Company's drug discovery
technology is based on the translational control of gene expression. Translation
is the process used by cells to make proteins and is an essential cellular
process for all living organisms, including infectious pathogens. The Company is
using its platform technology to discover compounds that inhibit or interfere
with pathogen specific translation mechanisms ("PSTMs"). RiboGene's extensive
knowledge of translation allows the Company to identify components of the
translation process unique to a particular pathogen and essential to its
existence. The Company believes that targeting PSTMs may lead to the discovery
of drugs that are effective against either drug-resistant pathogens or pathogens
for which current therapies are not effective. In addition, the Company believes
that any such drugs discovered using its PSTM approach may have little or no
harmful effect on humans.
Infectious diseases have increased significantly during the past 20 years
and are now the third most common cause of death in the United States. Worldwide
sales of antiinfective drugs were approximately $33.0 billion in 1996 and
constituted the second largest pharmaceutical category. The antibacterial,
antifungal and antiviral markets are estimated to be approximately $26.0
billion, $4.0 billion and $3.0 billion, respectively, based on 1996 sales. There
are currently three antibacterial drugs that each generate in excess of $1.0
billion in worldwide sales annually and one antifungal drug that generates
nearly $1.0 billion. Of the 100 best selling brand name drugs worldwide, 20 are
antiinfectives addressing bacterial, fungal and viral infections. The clinical
efficacy of many bacterial and fungal antiinfectives is being threatened by
emerging strains of drug-resistant pathogens. In the antiviral area, there are
only a limited number of effective therapeutics currently marketed.
The Company believes that its target-based approach is different from, and
provides advantages over, traditional drug discovery techniques. Antiinfective
drug discovery has historically used a limited number of biological targets
which has restricted the ability to discover new drugs effective against drug
resistant pathogens. RiboGene's PSTMs represent a new class of targets for drug
discovery. By focusing discovery efforts on drugs which are effective inhibitors
of PSTMs, the Company believes that it may be possible to discover drug
candidates, for which pathogens have not already developed resistance. In
addition, such compounds may in certain applications have better safety and
efficacy profiles than existing therapies, or may provide a therapy where no
other therapy currently exists. The Company's scientists and Scientific Advisory
Board ("SAB") use their knowledge and expertise in the field of translation to
identify unique targets specific to pathogens and to design and implement assays
in order to identify selective compounds which demonstrate activity at the
pathogen specific translation targets. By developing assays to discover
compounds with identified mechanisms of action against desired targets, the
Company believes that the compounds which demonstrate activity at these targets
will be better characterized and more likely to result in lead candidates for
optimization and further development.
RiboGene has established antibacterial, antifungal and antiviral drug
discovery programs. Within each program, the Company's drug discovery process
consists of four phases: (i) target identification -- the selection and
characterization of PSTM phases of targets; (ii) assay development -- the design
and implementation of screening systems to identify compounds active against the
PSTM targets; (iii) lead discovery -- the screening of compound libraries to
identify small-molecule lead compounds; and (iv) lead optimization -- the
refinement of lead compounds in order to develop drug candidates. In its
antibacterial program, the Company has two targets, deformylase and ppGpp
degradase, that are in the lead discovery stage and several additional targets
that are in the assay development stage. In its antifungal program, which the
Company conducts in collaboration with Abbott Laboratories ("Abbott"), there are
two targets, EF3 and GCN4, that are at the lead optimization stage and several
others that are in various stages of development. In its antiviral program which
is currently focused exclusively on the hepatitis C virus ("HCV"), the Company
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has one target, HCV IRES, in the lead discovery stage and one target, HCV
NS5A/PKR, in the assay development stage.
In order to accelerate the discovery, development and commercialization of
antiinfective drugs, the Company seeks to enter into collaborations with major
pharmaceutical companies and research and licensing agreements with
biotechnology companies, combinatorial chemistry companies and universities.
These relationships are intended to provide the Company with funding, research
and development support, access to additional compound libraries and targets, as
well as provide the Company with preclinical and clinical trial, manufacturing
and marketing capabilities. The Company has entered into a collaboration with
Abbott for its antifungal program (the "Abbott Collaboration"). As part of the
Abbott Collaboration, Abbott has agreed to provide the Company with $5.0 million
in research support payments and fund additional research and development at
Abbott, including lead optimization. The Company will also be entitled to
receive milestone payments upon the achievement of mostly late-stage regulatory
milestones in the amount of up to $9.0 million for each product developed
through the collaboration. In connection with the Abbott Collaboration, Abbott
made a $3.5 million equity investment in the Company. Abbott also agreed to
purchase an additional $4.0 million of Common Stock in a private placement.
Abbott has expressed its intention to fulfill this obligation by purchasing $4.0
million of Common Stock in the Offering at the initial public offering price.
The Company has also entered into agreements with ArQule, Inc. ("ArQule"),
Pharmacopeia, Inc. ("Pharmacopeia") and Trega Biosciences Inc. ("Trega") to
provide the Company with access to additional compound libraries for its drug
discovery programs and with the University of Washington to acquire the rights
to the HCV NS5A/PKR target for its antiviral program.
STRATEGY
The Company's objective is to discover and develop novel antiinfective
drugs. To achieve this objective, the key elements of the Company's strategy are
to:
Exploit expertise in pathogen specific translation mechanisms. The Company
intends to use its accumulated expertise and know-how in pathogen specific
translation mechanisms to identify novel targets critical for the survival of
bacteria, fungi or viruses. With these targets, the Company develops unique
assays which are used to identify compounds with desired mechanisms of action.
By using targets which are specific to pathogens, the Company believes it may be
able to develop small-molecule lead compounds which inhibit pathogen function
and thereby kill or attenuate pathogen growth with minimal effects on humans. In
certain applications these small-molecule lead compounds may have better safety
and efficacy profiles than those of existing drugs.
Develop novel antiinfectives which target drug resistant pathogens. The
Company directs its drug discovery programs toward the development of drugs that
target pathogens which have developed resistance to currently marketed
antiinfectives. Because new drugs which inhibit PSTMs will have different
molecular targets than those of existing classes of antiinfectives, the Company
believes that any potential drug candidates resulting from its drug discovery
programs may be effective against existing drug resistant pathogens.
Leverage platform technology over multiple indications and multiple
targets. The Company will continue to leverage its platform technology over
multiple targets and across multiple disease states, including its current focus
on antibacterials, antifungals and antivirals, which, the Company believes, may
increase the likelihood of successful development of leads for potential drug
candidates.
Establish collaborative relationships. The Company employs a two-pronged
collaborative strategy to accelerate the discovery, development and
commercialization of novel antiinfective drugs. The Company seeks to enter into
collaborations with (i) major pharmaceutical companies, on entire programs or on
specific targets, to provide the Company with funds, research and development
resources, including chemistry capabilities, access to compound libraries and
preclinical and clinical, regulatory, manufacturing and commercialization
capabilities and (ii) combinatorial chemistry companies to provide the Company
with access to additional compound libraries and, in certain cases, lead
optimization resources. The Company has entered into the Abbott Collaboration in
order to enhance its antifungal program. The Company has also
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entered into agreements with ArQule, Pharmacopeia and Trega to provide RiboGene
with access to additional compound libraries for certain of RiboGene's drug
discovery programs.
Maintain and enhance proprietary position. RiboGene will continue to seek
protection for its discoveries and proprietary technology through the
maintenance of trade secrets, the filing of patent applications and the
in-licensing of issued and pending patents. The Company has received one issued
patent relating to its antifungal program, a notice of allowance relating to its
antiviral program and has several patents pending relating to its core drug
discovery programs.
BACKGROUND
Infectious Disease Resistance
The increase in prevalence of infectious disease caused by bacteria, fungi
and viruses that have developed resistance to existing antiinfective drugs is
well documented in medical literature. This current situation results in part
from the overuse or incorrect use of antiinfective drugs. Administering
antiinfectives in the presence of a resistant pathogen creates a growth
advantage for such pathogens and allows them to multiply preferentially over
those that have not developed resistance. These resistant pathogens can then
spread quickly from infected patients to healthy individuals.
Resistant pathogens have developed multiple mechanisms against certain
approved antiinfective drugs. Mechanisms of resistance include altering the
pathogen target, altering the drug itself or preventing the drug from
interacting with the target. Because traditional antiinfective drug discovery
approaches have used a limited number of biological targets, they have not
adequately addressed this resistance problem. As a result, new generations of
antiinfectives resulting from traditional approaches are susceptible to the same
resistance mechanisms.
Traditional Approaches to Antiinfective Drug Discovery
There are two traditional approaches to antiinfective drug discovery.
Biological approaches rely on the use of whole organism based assays to screen
for compounds which kill pathogens. Although antiinfectives have been discovered
using this approach, information on the molecular target or the mechanism of
action of the drug resulting from this approach is minimal. The lack of
information on the target or mechanism of action makes it difficult to
understand the cause of subsequent drug resistance. Chemistry driven approaches
focus on chemical modifications of known antiinfective compounds. This approach
has led to the identification of new drugs which have chemical structures that
are closely related to existing drugs. As a result, these newer drugs are active
at the same molecular targets and eventually encounter the same resistance
problems that were observed for earlier drugs.
RiboGene's target-based approach involves the identification and
characterization of translation mechanisms that are specific to pathogens and
essential to their survival. This approach stands in contrast to traditional
methods for antiinfective drug discovery (particularly for antibacterial agents)
which have produced the drugs that are in clinical use today. Although a number
of existing antibacterials kill pathogens by inhibiting bacteria translation,
these drugs were discovered through traditional approaches. The Company's
approach is one of several modern drug discovery methods, including antisense,
gene therapy and genomics, that have emerged as alternatives to traditional
methods. The Company believes that its targeted approach, which is based on
PSTMs, and assays incorporating those PSTM-based targets combined with
contemporary medicinal and combinatorial chemistry techniques could increase the
possibility of identifying unique drug candidates.
THE RIBOGENE APPROACH
The Company's scientists, in combination with its collaborative partners
and SAB, use their extensive knowledge and expertise in the field of translation
to identify targets specific to pathogens and to design and implement assays to
identify selective compounds which demonstrate activity at the specific
translation targets. By developing assays which identify compounds with
mechanisms of action against the desired target,
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the Company believes that the compounds which demonstrate activity at the target
will be better characterized and more likely to result in lead candidates for
optimization and further development. Because RiboGene's PSTMs represent new
drug targets, the Company believes that antiinfective drugs which result from
its drug discovery programs may also be effective against current drug resistant
pathogens.
Translation and protein synthesis are synonymous terms for the process used
by cells to make proteins from a template known as messenger RNA ("mRNA").
Proteins participate in virtually all cellular functions. All proteins are
assembled from a defined set of building blocks known as amino acids, and it is
the sequence in which the amino acids are assembled which distinguishes one
protein from another. The instructions that determine this sequence are encoded
within the genes of the organism. Typically, each gene contains coded
information for the synthesis of one particular protein. For this protein to be
synthesized, the information in the gene must be decoded. The decoding process
has two primary stages known as transcription and translation. (See Figure 1).
During the first stage, which is known as transcription, the genetic information
is "transcribed," or copied, and the copies produced are known as mRNA
molecules. During the second stage of gene expression, which is known as
translation, the information is "translated," or utilized, to assemble amino
acids into proteins. During this stage, these mRNA molecules direct the
synthesis of the protein by intracellular structures known as ribosomes. Each
ribosome moves along the mRNA and reads it like a tape, which tells the ribosome
which amino acid to add next as it synthesizes the protein.
FIGURE 1 -- THE NATURAL GENE EXPRESSION PROCESS
LOGO
Genetic information is stored archivally as DNA, transcribed into a working copy
as mRNA, and translated into functional units as proteins.
RIBOGENE'S DRUG DISCOVERY PROCESS
RiboGene's drug discovery process consists of four phases: (i) target
identification; (ii) assay development; (iii) lead discovery; and (iv) lead
optimization. The Company currently has the capability internally for the first
three phases and intends to use a portion of the proceeds of the Offering to
enhance its internal lead optimization capabilities internally.
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The following diagram illustrates RiboGene's four-phase integrated drug
discovery process.
FIGURE 2 -- RIBOGENE'S DRUG DISCOVERY PROCESS
LOGO
Target Identification
In the first phase of the process, the Company uses its accumulated
translation specific expertise and know-how in combination with functional
genetics and microbial genomics to identify and select the PSTM targets for use
in its drug discovery programs. Only PSTM targets which are essential for the
life of the pathogen and appear to bear little or no resemblance to their human
counterpart are selected for RiboGene's programs. The Company validates PSTM
targets by demonstrating their essential nature through the examination of the
effects on pathogens upon disruption or deletion of the gene which encodes the
PSTM target. The Company believes that the expertise of its staff and SAB
provides it with an important advantage in identifying PSTM targets. To date,
the Company has identified several PSTM targets utilizing its assembled
knowledge of pathogen and human translation.
Assay Development
When PSTM targets have been identified and validated, RiboGene scientists
use a variety of techniques to design and implement translation-based assays.
RiboGene has considerable expertise in the design and implementation of
translation-based assays incorporating conventional, automated and
high-throughput screening technology. The Company believes that its internal
translation-based assay development and implementation capabilities represent a
core competence of RiboGene and an advantage over more traditional drug
discovery screens. To date, the Company has applied its assay development
capabilities to create 40 unique PSTM assays, including those currently utilized
in its antifungal collaboration with Abbott.
Several types of assays have been developed internally for use in its drug
discovery programs including, primary and secondary in vitro biochemical assays
and secondary whole cell assays. Primary assays incorporate PSTM targets in a
high-throughput format and are used to indicate the biological activity of a
compound against the specific PSTM target. This biological activity is then
reconfirmed in separate assays to eliminate compounds that are not selectively
acting against the specific PSTM target. Secondary assays are used to further
characterize the activity of screened compounds.
The basic constructs in many of the Company's assays are similar throughout
all of its drug discovery programs. It is this similarity and the Company's
internal expertise in assay development that allow for advances made in the
design and development of screens for one particular program to be applied to
all of its other programs as well. This advantage can be demonstrated by a
review of the total assay development time for certain of its antifungal and
antibacterial assays. Advances made in the Company's antifungal program allowed
certain antibacterial screens to be developed in half the time required for
their fungal counterparts.
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Lead Discovery
Once a PSTM target has been incorporated into a high-throughput assay,
RiboGene scientists use these assays to screen compound libraries to identify
potential lead compounds suitable for lead optimization. Compounds with
demonstrated activity in the primary screen are considered "hits." Secondary
assays designed to further characterize the activity of hits consist of separate
analyses of the compound against (i) the specific PSTM target in an environment
that more closely resembles its natural state, (ii) the specific pathogens in
cell culture and (iii) an appropriate human cell line. The data generated from
screening compounds in these assays is used to identify compounds that have
activity against a given PSTM target. This information is then used to select
compounds to serve as the starting points for lead optimization.
Currently, the Company has the capacity to screen approximately 1.5 million
samples per year. The Company believes that with currently planned improvements,
this capacity can be increased to over 2.4 million samples per year. The Company
intends to use a portion of the proceeds from the Offering to further increase
its screening capacity.
In order to increase the probability of identifying compounds that are
active against selected PSTMs, the Company has acquired and will continue to
acquire access to diverse and biased compound libraries. Diverse libraries
contain compounds with a wide variety of chemical structures and structural
features or motifs. Biased libraries contain a narrower selection of chemical
structures and structural motifs that are selected based on their propensity to
bind selected targets. Currently, RiboGene's compound library consists of over
100,000 diverse small-molecule compounds and natural product extracts. The
RiboGene library has been assembled through acquisitions from commercial and
academic sources as well as through custom syntheses. The RiboGene library also
contains a small number of compounds that are biased toward certain PSTM
targets. Through its collaboration with Abbott, the Company gained access to the
Abbott compound library for use in its antifungal PSTM assays. In addition, the
Company has obtained access to certain compound libraries of Trega, ArQule and
Pharmacopeia through research agreements. See "-- Collaborative and Research
Agreements."
Lead Optimization
Lead optimization involves the use of contemporary medicinal and
combinatorial chemistry techniques to enhance the potency, selectivity and
pharmacokinetic and other properties of potential leads identified using the
Company's assays. Lead optimization begins with the generation of compounds
which are structurally related to the potential lead compounds ("analogs"). The
analogs are generated by methodically altering specific components of a
potential lead compound. The effect of this alteration on the activity of the
analog is studied in order to determine the function of the altered components.
Once the key components of a given core structure are known, undesirable or
unimportant components may be eliminated, leading to improved potential lead
compounds. Lead optimization is an iterative process involving the systematic
refinement and retesting of potential lead compounds. The Company currently has
limited internal lead optimization capabilities. For its antifungal program,
such capabilities are provided by Abbott. The Company intends to use a
significant portion of the net proceeds from the Offering to develop the
chemistry capabilities necessary to support its drug discovery programs. The
Company believes that developing these capabilities internally may allow it to
retain control over its discovery programs until a later stage and, therefore,
increase the value of its discovery programs. See "Risk Factors -- Need for
Chemistry Capabilities."
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THE RIBOGENE PROGRAMS
The status of RiboGene's primary drug discovery programs is shown below.
FIGURE 3 -- STATUS OF RIBOGENE DRUG DISCOVERY PROGRAMS
LOGO
ANTIBACTERIAL PROGRAM
Bacterial Infections
Bacterial infections are a significant and growing medical problem. These
infections may either be confined to a single organ or tissue, or disseminated
throughout the body by bloodstream infections, and can cause many serious
diseases, including pneumonia, meningitis and complicated urinary-tract
infections. Antibiotics are administered both to prevent bacterial infections
and to treat established bacterial disease. When administered to prevent an
infection, antibiotics are given before any clinical signs or symptoms of an
infection are present. When administered to treat an established infection,
antibiotics are often chosen and administered empirically before diagnostic
testing has established the causative bacterium and its susceptibility to
specific antibiotics.
Antibacterial Resistance and Market Opportunity
Annual worldwide sales of all antibacterial drugs in 1996 were
approximately $26.0 billion. At least three drugs have individually reached
worldwide sales of over $1.0 billion annually: Augmentin
(amoxicillin/clavulanate), Biaxin (clarithromycin) and Cipro (ciprofloxacin).
Each of these drugs replaced previously prescribed drugs (such as penicillin,
tetracycline and erythromycin) whose effectiveness has diminished as a
consequence of bacterial drug resistance which developed after years of
administration. The clinical efficacy of these new drugs, however, is similarly
being threatened by emerging strains of drug-resistant pathogens.
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The increasing prevalence of drug-resistant pathogens has contributed to
higher mortality rates from infectious diseases, particularly those caused by
Staphylococcus aureus, Streptococcus pneumoniae and Enterococcus
faecium/faecalis. S. aureus is the most common pathogen to cause
life-threatening infections. This organism is an aggressive pathogen that has
developed resistance to most antibiotics, except vancomycin (frequently called
"the drug of last resort"). Recent reports of vancomycin-resistant S. aureus
infections in the United States and Japan suggest that S. aureus has begun to
show, and the Company believes will continue to show, resistance to "the drug of
last resort." S. pneumoniae is a frequent cause of death among the elderly and
is the most frequently isolated pathogen in children with otitis media (middle
ear infections) and adults with sinusitis (sinus infection). Studies have shown
that patients with pneumonia caused by drug-resistant strains of S. pneumoniae
have a higher mortality rate than those with drug-sensitive strains. Enterococci
are commonly found living within the human intestinal tract, but can cause
serious bloodstream infections in weakened individuals. Vancomycin-resistant
enterococci, or "VRE" in the medical literature, are extremely difficult to
treat and are increasingly common in clinical settings. It is also feared that
these organisms will be able to pass their vancomycin resistance trait onto the
more serious pathogen S. aureus.
The Company believes that these examples demonstrate the importance of
identifying new molecular targets which will lead to antibacterial agents with
new mechanisms of action. RiboGene's PSTM technology is designed to identify
novel classes of antibiotics that act against new molecular targets.
RiboGene's Antibacterial Projects
RiboGene is focusing its antibacterial drug discovery programs on those
pathogens that have a high annual incidence rate worldwide and that have become
resistant to all but a few available antibacterial drugs. The Centers for
Disease Control ("CDC") has reported that 44% of the two million
hospital-acquired infections in the United States are caused by four bacteria:
staphylococci, enterococci, pneumococci and pseudomoni. The Company's
antibacterial projects are targeting infection caused by these and other
bacteria.
Translation in bacterial cells differs from translation in human cells. In
particular, the translation initiation factors used by bacterial cells are fewer
in number and have little homology with functional counterparts in human cell
types. In addition, bacteria use translational control processes not found in
human cells. RiboGene is exploiting its knowledge of these bacterial PSTMs and
is designing and implementing antibacterial drug discovery systems incorporating
these PSTM targets. The Company's bacterial PSTM targets are in various stages
of research and development. The Company has developed assays incorporating
certain of these targets and intends to continue assay development incorporating
previously identified and future bacterial PSTM targets. Several of the assays
utilize proprietary strains of bacteria that may allow identification of
inhibitors of the target. Other assays utilize in vitro enzymatic reactions
designed to identify enzyme inhibitors of the target.
The Company has identified several bacterial PSTM targets that are in
various stages of research and development. Two of these targets, deformylase
and ppGpp degradase, are the focus of the Company's most advanced antibacterial
projects. The Company believes that bacterial PSTMs such as deformylase and
ppGpp degradase may be excellent selective targets for drug intervention and has
therefore established drug discovery projects based on these targets.
Deformylase Inhibitor Project. Bacteria initiate translation using an amino
acid building block called formyl-methionine. The enzyme deformylase, common to
all bacteria, removes the formyl group from methionine releasing the protein for
use by the bacteria. This formylation-deformylation process is essential for
growth of all pathogenic bacteria. Because there is no mammalian counterpart,
the Company believes that the deformylase enzyme inhibition is a useful target
to identify selective inhibitors of bacterial translation. In addition, the
Company believes that all pathogenic bacteria utilize this translation process,
and therefore deformylase inhibitors have the potential to be broad spectrum
antibacterial agents. RiboGene scientists have designed and implemented assays
that target the identification of inhibitors of the deformylase enzyme.
The deformylase inhibitor project is currently in the lead discovery phase.
Through its assay system, the Company has discovered small-molecule deformylase
inhibitors that have activity against bacterial pathogens.
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The Company is continuing to screen compounds in the deformylase assays to
identify additional novel lead compounds suitable for lead optimization.
ppGpp Degradase Inhibitor Project. ppGpp (guanosine tetraphosphate) is an
unusual nucleotide, synthesized during the translation process and regulated by
the essential enzyme, ppGpp degradase. Bacteria carefully regulate ppGpp levels
because accumulation of this nucleotide is toxic to the organism. Therefore, the
Company believes that inhibitors of the ppGpp degradase enzyme should kill
bacteria. Since this process is not part of the human translation process, yet
all bacteria appear to utilize this process, RiboGene scientists believe that
ppGpp degradase inhibitors have the potential to be antibacterial agents with
selective broad spectrum activity against pathogens and potentially low toxicity
to humans. The Company has developed a high-throughput primary assay around the
ppGpp degradase enzyme. Secondary assays developed by the Company include an
assay which comprises the isolated ppGpp enzyme and an assay which
quantitatively measures the accumulation of ppGpp. These assays are being
utilized to confirm the mechanism of action of the inhibitors identified in the
primary assay.
The ppGpp degradase inhibitor project is in the lead discovery phase. The
ppGpp assays have identified several potential small-molecule lead compounds
which have been found to have antibacterial activity in vitro against pathogenic
bacteria. The Company continues to screen compounds in the ppGpp assays to
identify novel lead compounds suitable for lead optimization. The Company has
recently received a Phase I SBIR grant in the amount of $100,000 to support this
project.
ANTIFUNGAL PROGRAM
Fungal Infections
Systemic fungal infections are a serious and growing problem. Infections by
fungi or yeasts are frequently caused by Candida albicans, a yeast which is
commonly found in the intestinal tract and on mucosal linings of healthy
individuals. This yeast also causes thrush (sore throat), vaginitis, and
life-threatening infections, particularly in individuals with weakened immune
systems. Another frequent source of serious fungal infections is the Aspergillus
genus, which the average person is exposed to on a regular basis. Healthy
individuals resist Aspergillus infections, but after a severe illness or injury,
this fungus can cause lung infections which can then spread throughout the body
resulting in death. Many diseases and disease states (e.g., organ transplants,
diabetes, cancer) of an aging and increasingly affluent population correlate
with an increased susceptibility to systemic fungal infections, as do
increasingly common medical practices such as use of broad-spectrum antibiotics,
cancer chemotherapy and intensive-care unit support. C. albicans, the most
common fungal pathogen, now accounts for 8-15% of all hospital-acquired
infections, which represents a 480% increase over the last decade. Infections
caused by C. albicans are a significant cause of morbidity and mortality, with
median increased hospital stays of 30 days and estimates of death rates ranging
from 30 to 80%. Aspergillus, a less common cause of fungal infection, results in
a mortality rate estimated at greater than 50%.
Fungal Resistance and Market Opportunity
Worldwide sales of all antifungal drugs in 1996 were approximately $4.0
billion. The largest selling antifungal, Diflucan (fluconazole) had sales in
1996 of approximately $910 million. Diflucan is fungistatic in that it only
stops the growth of the fungus but does not kill it. The Company believes that a
fungicidal drug (i.e., a drug that kills fungi) would be a more effective
antifungal. Relatively few therapeutics have been approved for fungal infections
and almost all inhibit a common biochemical pathway. Because the differences
between fungal and mammalian cells are less than those between bacterial and
mammalian cells, agents that damage or kill fungal cells are more likely to have
toxic effects on mammalian cells. As a result, progress in antifungal therapy
has been slow. By attacking only one pathway, current antifungals are vulnerable
to increased resistance. Although resistance to antifungal therapeutics is not
yet as serious as for antibacterials, it is increasing and is expected to become
worse if present trends continue.
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RiboGene's Antifungal Projects
Certain fungal translational mechanisms differ from those found in human
cells and therefore provide opportunities for RiboGene scientists to identify
translation targets specific to fungal pathogens. RiboGene believes that it may
be possible to identify substances that interfere in fungal translation without
significantly affecting human translation. The Company has identified several
fungal PSTM targets and developed fungal-specific in vitro and whole cell
assays. RiboGene is conducting its antifungal program in collaboration with
Abbott. As part of the Abbott Collaboration, RiboGene is screening both Abbott's
and RiboGene's libraries of compounds. The hits identified in the primary
high-throughput assays are then analyzed using secondary in vitro translational
assays at RiboGene to confirm that the compounds interfere specifically with
fungal translation without significantly affecting mammalian translation.
Compounds with the desired potency and selectivity are then assayed for their
effects against pathogenic fungi in cell culture. Abbott has primary
responsibility for lead optimization and preclinical and clinical development of
any compounds discovered during the course of the collaboration. The Company
intends to develop additional fungal translation assays and screen the RiboGene
and Abbott compound libraries using these targets.
The Company has identified several fungal PSTM targets that are in various
stages of development. Two examples of antifungal PSTMs are the third soluble
elongation factor ("EF3") and another system focused more broadly on fungal
translation ("GCN4"). The Company believes that antifungal PSTMs, such as EF3
and GCN4, are excellent selective targets for drug intervention and has
therefore established drug discovery projects based on these targets.
Elongation Factor 3 (EF3) Project. EF3 is a translation factor unique to
fungi and essential for fungal translation and growth. Although EF3 is common to
all known fungi, the Company believes that no known human counterpart exists
which increases the probability of identifying selective drugs. At the
elongation stage of translation, fungi utilize three soluble elongation factors
whereas human cells utilize only two. Based upon such differing factors,
RiboGene believes that it may be possible to identify substances that interfere
in fungal translation without significantly affecting human translation.
Since 1996, RiboGene has been working with Abbott to discover novel lead
compounds that inhibit this factor. The Company, in conjunction with Abbott, has
developed multiple approaches to identify substances that interfere selectively
with EF3 function. Certain potential lead compounds have been identified that
have undergone and are undergoing lead optimization at Abbott. Several compounds
identified using the primary assay appear to be fungicidal. In addition, the
Company has recently received a Phase I SBIR grant in the amount of $100,000 to
fund the development of one EF3 assay system.
GCN4 Project. GCN4 is a biological signal which can provide information on
fungal translation by responding to inhibition of initiation steps within the
translation pathway. The Company uses whole living fungal cells with genetic
mutations to screen for inhibitors of these translational components. RiboGene
has developed and patented this drug screening system.
Since 1996, through the Abbott Collaboration, the Company has been working
towards the development of novel antifungal drugs identified with this assay.
The RiboGene and Abbott compound libraries have been examined in this assay
system. Potential lead compounds identified using the primary screen at RiboGene
have progressed to potential lead optimization at Abbott. The Company received
one Phase I and one Phase II SBIR grant in the aggregate amount of $830,000 to
fund early work on the GCN4 project.
ANTIVIRAL PROGRAM
Viral Infections and Hepatitis C
Viruses are intracellular parasites that can only reproduce and proliferate
within a living host cell. Viruses are composed of RNA or DNA genetic material
enclosed in a protective viral coat. A virus reproduces by entering a host cell
and releasing the genetic material which utilizes the host cell machinery to
recreate itself. Unlike bacteria and fungi, viruses do not have their own
cellular machinery to reproduce. The Company currently is focusing all of its
antiviral efforts on HCV.
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HCV is recognized as a major cause of chronic hepatitis worldwide.
According to the CDC, there are approximately four million HCV infected
individuals in the United States, with up to 180,000 new cases occurring each
year. The World Health Organization estimates that an additional 10 million
individuals are infected with HCV in Europe and a total of 100 million people
are infected worldwide. Hepatitis C accounts for 20% of all cases of acute
hepatitis. Approximately 85% of HCV infected persons will develop chronic
hepatitis, of which 20% will progress to liver cirrhosis. Chronic HCV infection
can also lead to the development of hepatocellular carcinoma and liver failure.
Currently, hepatitis C is responsible for an estimated 8,000 deaths annually,
and without effective intervention that number is estimated to triple in the
next 10 to 20 years. Hepatitis C is also a leading cause for liver
transplantation in the United States.
HCV and Market Opportunity
Interferon alpha and its derivatives are the only approved therapeutics for
HCV infections. Interferon alpha is estimated to be only 20% effective while
resistance to interferon occurs in the other 80% of HCV patients. Based on
published studies conducted by a team of researchers led by a member of the
Company's SAB, the Company believes that hepatitis C virus is intrinsically
resistant to interferon and that the clinical efficacy observed is due to the
occurrence of virus strains which are partially defective. As interferon alpha
is also administered for other indications, including cancer, it is difficult to
determine the precise amount used specifically for HCV treatment. However, total
worldwide sales of all brands of interferon alpha in 1996 were approximately
$2.0 billion.
RiboGene's HCV Projects
RiboGene's antiviral drug discovery program focuses on interfering with
viral translation mechanisms important for viral replication. The Company is
currently focusing its HCV efforts on two HCV PSTM targets, the HCV Internal
Ribosome Entry Site ("HCV IRES"), and the interaction between a viral protein
NS5A and a human protein kinase, RNA-activated enzyme ("PKR") together, known as
HCV NS5A/PKR. The Company has considerable expertise in the area of HCV
translation. Two members of the Company's SAB, Dr. Nahum Sonenberg and Dr.
Michael Katze, are responsible for certain important discoveries that have
significantly aided the Company's HCV efforts. Dr. Sonenberg was a co-discoverer
of the IRES mechanisms, and Dr. Katze recently published his findings on the
interaction of interferon-induced PKR and NS5A. Based in part on discoveries
made by Dr. Sonenberg, Company scientists have developed translation-based
assays incorporating certain viral IRES elements including the HCV IRES. The
Company has screened and will continue to screen compounds in these assays. In
April 1997, the Company licensed the rights to the HCV discovery made by Dr.
Katze from the University of Washington. The Company is currently incorporating
the findings of Dr. Katze and is developing an assay designed to identify
inhibitors of the interaction between NS5A and interferon-induced PKR.
HCV Internal Ribosome Entry Site (HCV IRES) Project. An IRES is a special
structure within HCV that enables the virus to manipulate a human cell's
translation process. Viruses with defective IRES elements replicate poorly
which, the Company believes, demonstrates that a loss of IRES function is
damaging to virus replication. RiboGene believes that drugs which affect IRES
function may have similarly damaging effects on viruses with minimal side
effects on human protein synthesis because humans do not utilize IRESs to
initiate translation.
The HCV-IRES project is in the lead discovery phase. The Company has
identified potential small-molecule lead compounds that have demonstrated
activity against HCV surrogates in cell culture. The Company has been awarded
Phase I and Phase II SBIR grants in an aggregate amount of $850,000 to fund the
HCV-IRES project.
HCV NS5A/PKR Project. PKR plays an important role in defending cells
against many kinds of viral infections. PKR regulates protein synthesis in
infected cells, thereby preventing the production of new viruses. Many viruses,
including HCV, have evolved certain defense mechanisms against PKR. RiboGene
believes that if a drug protects PKR against the HCV defense mechanisms it may
be an effective HCV therapeutic
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because it will enable the human enzyme to exert its natural anti-HCV effect.
The recent work published by Dr. Katze suggests that the HCV protein confers
interferon resistance by blocking the action of PKR.
The Company is working to discover novel therapeutics that protect PKR from
this viral protein in the belief that such therapeutics could increase the
efficacy of interferon treatment. The Company also believes that it may be
possible that a compound with this activity might even allow the efficacious use
of lower doses of interferon, thereby reducing the side effects of high-dose
interferon therapy or increase patient compliance to interferon therapy. The
target has undergone validation and is in the assay development stage. RiboGene
scientists are determining the optimal translational assay system to identify
inhibitors of the HCV NS5A/PKR interaction.
COLLABORATIVE AND RESEARCH AGREEMENTS
The Abbott Agreements
In April 1996, the Company entered into a research agreement with Abbott in
connection with its antifungal program. Pursuant to the research agreement,
Abbott and the Company agreed to collaborate in a research program directed at
accelerating the discovery of new products possessing antifungal activity and
new diagnostic products related to conditions caused by fungal infections or
diseases. Abbott has agreed to provide antifungal research and development
internally at Abbott and up to $5.0 million to support related research at
RiboGene over a three-year period, subject to extension upon mutual agreement by
both parties. Through June 1997, the Company has recognized $2.0 million in
contract research revenue from Abbott. Under the terms of the research
agreement, the duties and responsibilities of Abbott and RiboGene are determined
by a joint management team comprised of representatives from both companies.
RiboGene's initial responsibilities include target identification, assay
development and lead discovery. Abbott is responsible for providing chemistry
capabilities including lead optimization. Abbott may terminate the research
agreement upon 60 days' written notice to the Company.
Also in April 1996, the Company entered into a license agreement with
Abbott. Pursuant to the license agreement, the Company granted Abbott exclusive
worldwide rights to develop and market any and all antifungal products
discovered by the parties during the joint research collaboration using the
Company's drug discovery approach. Under the terms of the license agreement,
Abbott has responsibility for all development activities necessary to
commercialize potential lead compounds resulting from the Abbott Collaboration,
including preclinical testing, clinical development, submission for regulatory
approval, manufacturing and marketing. The Company is entitled to receive
milestone payments of $9.0 million for each product developed upon the
achievement of mostly late-stage regulatory milestones and royalties on
worldwide sales of any products that may result from such collaboration. Abbott
may terminate the license agreement upon 30 days' written notice to the Company.
Abbott made an initial equity investment in the Company of $3.5 million in
1996. In addition, Abbott agreed to purchase $4.0 million of Common Stock in a
private placement simultaneous with the Company's initial public offering, if
such initial public offering resulted in gross proceeds of $20.0 million
(including the $4.0 million investment by Abbott). Abbott has expressed its
intention to fulfill this obligation by purchasing $4.0 million of Common Stock
in the Offering at the initial public offering price. See "Description of
Capital Stock -- Registration Rights."
There can be no assurance that the Company and Abbott will be successful in
developing or commercializing any drugs or products under the Abbott Agreements.
As such, there can be no assurance that any milestones will be achieved or that
any royalties contemplated by the Abbott Agreements will ever be made. There can
be no assurance that the Abbott Agreements will not be terminated by Abbott
prior to their expiration. See "Risk Factors -- Dependence on Collaborative
Relationships; Funding of Programs."
Research Agreements
Trega Biosciences Inc. In April 1995, RiboGene entered into an agreement
with Trega (formerly Houghten Pharmaceuticals Inc.), pursuant to which the two
companies agreed to collaborate to screen
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combinatorial chemistry libraries developed by Trega using assays developed by
RiboGene. Core antifungals and certain antiviral assays were the initial
therapeutic targets. The Company has completed screening the Trega compounds in
the antifungal assays, but continues to screen compounds in its HCV assays. The
agreement provides for proportionate ownership of compounds resulting from the
collaboration, based on each party's contribution to development of the
compound.
Pharmacopeia, Inc. In September 1997, the Company entered into a Library
Sample Evaluation Agreement with Pharmacopeia, a combinatorial chemistry company
(the "Pharmacopeia Agreement"). The Pharmacopeia Agreement grants the Company
access to three of Pharmacopeia's proprietary compound libraries (the
"Pharmacopeia Compounds"). The Company intends to screen the Pharmacopeia
Compounds in certain of its antibacterial and antiviral assays. Upon receipt of
the Pharmacopeia Compounds, the Company will have four months (subject to
extension) during which it will have the exclusive right to screen the compounds
against specified targets. If the Company determines that a Pharmacopeia
Compound has demonstrated biological activity, the Company has the right, within
180 days, to negotiate a subsequent development agreement with respect to the
use and development of such compound.
ArQule, Inc. In September 1997, the Company entered into a Material
Transfer and Screening Agreement with ArQule, a combinatorial chemistry company
(the "ArQule Agreement"), which grants the Company access to ArQule's
proprietary combinatorial chemistry libraries (the "ArQule Compounds"). The
Company intends to screen the ArQule Compounds in certain of its assays. If the
Company detects activity in one or more of the ArQule Compounds and such
compounds have not already been licensed to a third-party, the Company will have
the opportunity to negotiate a collaboration agreement for such compounds. The
ArQule Agreement has an initial six-month term with automatic six-month renewal
periods, unless earlier terminated by either party.
Georgia State University. In March 1995, the Company entered into an
assignment agreement with Georgia State University Research Foundation ("GSU")
for the transfer of rights to certain compounds synthesized at GSU that have
shown activity in certain of the Company's antiviral assays. The agreement
transfers to RiboGene all right, title and ownership to such compounds. In
consideration for these rights, the Company paid to GSU a one-time fee of
$10,000 and agreed to the payment of royalties to GSU from any sales of products
which incorporate the assigned compounds.
License Agreements
University of Washington. In April 1997, the Company entered into an
agreement with the University of Washington pursuant to which RiboGene received
an exclusive worldwide license to certain patent rights and technology relating
to the interaction of the hepatitis C virus NS5A protein and PKR. Under the
agreement, the Company paid an upfront license fee and has agreed to pay a
quarterly patent maintenance fee and a milestone payment due upon the approval
of an NDA for a compound developed using the licensed patent rights.
University of Washington and McGill University. In April 1993, RiboGene
entered into an agreement with the University of Washington and McGill
University, under which RiboGene received an option to acquire an exclusive,
worldwide license to certain patent rights and technology relating to the tumor-
suppressing properties of the enzyme PKR. This agreement was amended in April
1996 to extend the term of the option through April 1998, in exchange for a
minimal payment and a commitment by the Company to continue screening compounds
in assays incorporating this technology and to continue preclinical studies on
future lead compounds. The funding for these obligations will be provided by an
SBIR grant that awarded the Company up to $640,000 over a two-year period.
PATENTS AND PROPRIETARY RIGHTS
The Company believes that patents and other proprietary rights are
important to its business. The Company's policy is to file patent applications
to protect technology, inventions and improvements to its inventions that are
considered important to the development of its business. The Company's
commercial success will depend, in part, on its ability, and the ability of any
licensors, to obtain patent protection for its
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products and technologies, both in the United States and in other countries. The
patent positions of pharmaceutical and biotechnology firms can be highly
uncertain and involve complex legal and technical questions for which important
legal principles are largely unresolved issues; thus making it difficult to
predict the breadth of claims which would be found allowable in any particular
case.
The Company owns a provisional patent application relating to its
antibacterial drug discovery program; an issued U.S. patent, a pending U.S.
patent application and certain corresponding foreign applications, relating to
its antifungal drug discovery program; and two pending United States patent
applications, one of which has been allowed by the United States Patent and
Trademark Office, and certain corresponding foreign applications relating to its
antiviral drug discovery program. The Company is an assignee, along with McGill
University, of a pending U.S. patent application generally relating to the PSTM
program. The Company is an exclusive licensee under a University of Washington
provisional application directed to HCV NS5A/PKR. In addition, the Company has
an option, from the University of Washington and McGill University, to license a
recently-issued U.S. patent and a pending U.S. patent application relating to
translational technology. There can be no assurance that any of these patent
applications, or any patent applications which the Company may acquire in the
future, will issue as patents, that any such issued patents will afford adequate
protection to the Company or not be challenged, invalidated, circumvented or
infringed, or that any rights granted under such patents will afford competitive
advantages to the Company. To protect its rights to its patent applications
and/or patents, the Company may be required to participate in interference
proceedings before the United States Patent and Trademark Office to determine
priority of invention. In addition, if patents that cover the Company's
activities are issued to other companies, there can be no assurance that the
Company would be able to obtain licenses to such patents at a reasonable cost if
at all or be able to develop alternative technology. The Company also could
incur substantial costs should suits be brought against third parties, in which
the Company asserts patents to which the Company has rights. There can be no
assurance that the Company's patents or those of its licensors if issued, would
not be held invalid by a court or that a competitor's technology or product
would be found to infringe such patents.
The Company's success further will depend, in part, on its ability to
operate without infringing the proprietary rights of others without breaching
agreements that cover technology used in the Company's products. There can be no
assurance that the Company's activities will not infringe patents owned by
others. The Company could incur substantial costs in defending itself in suits
brought against it or any licensor. Should the Company's products or
technologies be found to infringe patents issued to third parties, the
manufacture, use, and sale of any of the Company's products could be enjoined
and the Company could be required to pay substantial damages. In addition, the
Company, in connection with the development and use of its products and
technologies, may be required to obtain licenses to patents or other proprietary
rights of third parties. No assurance can be given that any licenses required
under any such patents or proprietary rights would be made available on terms
acceptable to the Company, if at all. Failure to obtain such licenses may have a
material adverse effect on the Company.
In addition to patent protection, the Company also relies to a significant
extent upon trade secret protection for its confidential and proprietary
information, including many of the Company's key discovery technologies. There
can be no assurance that others will not independently develop substantially
equivalent proprietary information and techniques or otherwise gain access to
the Company's trade secrets or disclose such technology. To protect its trade
secrets, it is RiboGene's policy to require its employees, consultants, SAB
members and parties to collaboration and licensing agreements to execute
confidentiality agreements upon the commencement of employment, the consulting
relationship or the collaboration or licensing arrangement, as the case may be,
with RiboGene. In the case of employees, the agreements also provide that all
inventions resulting from work performed by them while employed by RiboGene will
be the exclusive property of RiboGene. In the case of SAB members, the
agreements also provide that any confidential information that results from work
performed for RiboGene will be the exclusive property of RiboGene. The Company
will continue to require its employees, consultants, SAB members, collaborators
and licensees to execute confidentiality agreements and inventions assignment
agreements (in the case of its employees) upon the commencement of employment,
the consulting relationship or the collaboration or license with the Company.
There can be no assurance, however, that these agreements will not be breached
or that they will
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provide meaningful protection of the Company's trade secrets or adequate
remedies in the event of unauthorized use or disclosure of such information,
that the Company can meaningfully protect its rights in such unpatented
proprietary technology through other means, that any obligation to maintain the
confidentiality of such proprietary technology will not be breached by
employees, consultants, advisors, collaborators, licensees or others, or that
others will not independently develop the same or substantially equivalent
technology. The loss of trade secret protection of any of the Company's key
discovery technologies would materially and adversely affect the Company's
competitive position and could have a material adverse effect on the Company's
business, financial condition and results of operations. Finally, disputes may
arise as to the ownership of proprietary rights to the extent that outside
collaborators, licensees or consultants apply technology information developed
independently by them or others to Company projects or apply Company technology
to other projects and, if adversely determined, such disputes would have a
material adverse effect on the Company's business, financial condition and
results of operations.
The Company had acquired intellectual property that falls outside the field
of infectious diseases and translational control. The Company does not intend to
develop these products itself. These acquired products include Emitasol, for
emesis associated with chemotherapy, Migrastat, for migraine, and intranasal
benzodiazepines for various conditions such as anxiety, seizures, panic attacks
and sleep disorders. The Company has ongoing debt obligations relating to the
purchase of these products. See "Use of Proceeds" and "Management's Discussion
and Analysis of Financial Condition and Results of Operations."
The Company discontinued the development of Emitasol, Migrastat and the
intranasal benzodiazepines in 1996. The Company has decided to discontinue the
patent prosecution for Migrastat. The Company has licensed rights to Emitasol in
Italy, Spain, Austria and certain former Soviet block countries. The Italian
licensee for Emitasol applied to the Italian regulatory authorities in 1993 for
registration of the product. There can be no assurance that the foreign
licensees will obtain the necessary regulatory approvals to market Emitasol, or
that, in the event such approvals are obtained, that Emitasol will achieve
market acceptance in such countries, or that the Company will ever realize
royalties on sales of Emitasol in such countries.
The Company has received notice that Peptech (Europe A/S) is opposing the
grant of a European patent with claims directed to the nasal administration of
benzodiazepines. As one of the grounds for the opposition, Peptech has submitted
a published abstract describing the nasal administration, to children, of the
benzodiazepine midazolam. This abstract has an apparent publication date of
February 1988, several months prior to the earliest filing date in the United
States from which the Company's European patent application could have claimed
priority. While the Company intends to respond vigorously to the opposition, no
assurance can be given as to the scope of the claims, if any, which the European
Patent Office ultimately will find patentable. Failure of the Company to prevail
in the opposition before the European Patent Office could impede the Company's
ability to outlicense the technology portfolio containing this patent.
The issued United States patent relating to the nasal administration of
benzodiazepines is the subject of a reissue proceeding before the United States
Patent and Trademark Office. In the course of negotiations with a potential
licensee of the technology portfolio containing this patent, the Company became
aware that the issued United States patent for which reissue is being sought,
had expired for failure to pay the required maintenance fees. While the Company
fully is seeking to revive the expired patent, there can be no assurance that
such action will be successful, which could impede the Company's ability to
outlicense the technology portfolio containing this patent.
In April 1997, the Company entered into an agreement with CSC
Pharmaceuticals Ltd. ("CSC") of Vienna, Austria for the sale and distribution of
Emitasol in Austria, Eastern Europe and the Russian Federation. Under the terms
of the agreement, CSC is obligated to file for regulatory approval in Austria
and three other European Union countries (as directed by the Company) for the
purpose of obtaining European Union approval to market the product via the
Mutual Recognition process. CSC is obligated to file for approval in Austria by
May 1998. The Company is obligated to reimburse CSC for up to 200% of the costs
incurred to file for approval in the three other European Countries and to pay
certain royalties. The reimbursement will be paid at a maximum rate of 10% of
the upfront payment received from each license in the countries. In a separate
agreement, the Company's Italian Licensee, Crinos, has agreed to manufacture
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Emitasol for CSC and any other licensees. There can be no assurance that CSC
will obtain approval in Austria or that if approval is obtained, CSC will file
for and obtain approval in the other EU countries.
COMPETITION
The biotechnology and pharmaceutical industries are intensely competitive
and subject to rapid and significant technological change. Many of the drugs
which the Company is developing will be competing with existing therapies. In
addition, a number of companies are pursuing the development of pharmaceuticals
which target the same diseases and conditions the Company is targeting, using
technology similar to the RiboGene technology, as well as alternative discovery
technologies, including antisense, gene therapy and genomics. The Company faces
competition from pharmaceutical and biotechnology companies both in the United
States and abroad. Many of the Company's competitors, particularly large
pharmaceutical companies, have substantially greater financial, technical and
human resources than the Company. In addition, unlike the Company, many of these
competitors have experience in undertaking preclinical studies and clinical
trials of new pharmaceutical products, obtaining the necessary regulatory
approvals and manufacturing and marketing products. In addition, academic
institutions, government agencies, and other public and private organizations
conducting research may seek patent protection with respect to potentially
competing products or technologies and may establish exclusive collaborative or
licensing relationships with competitors of the Company.
The Company believes that its ability to compete is dependent, in part,
upon its abilities to create and maintain scientifically advanced technology and
to develop and commercialize pharmaceutical products based on this technology,
as well as its ability to attract and retain qualified personnel, obtain patent
protection or otherwise develop proprietary technology or processes and secure
sufficient capital resources for the expected substantial time period between
technological conception and commercial sales of products based upon the
Company's technology.
There can be no assurance that the Company's competitors will not succeed
in developing technologies and drugs that are more effective or less costly than
any which are being developed by the Company or which would render the Company's
technology and future drugs obsolete and noncompetitive. In addition, the
Company's competitors may succeed in obtaining FDA or other regulatory approvals
for drug candidates more rapidly than the Company. Companies that complete
clinical trials, obtain required regulatory agency approvals and commence
commercial sale of their drugs before their competitors may achieve a
significant competitive advantage, including certain patent and FDA marketing
exclusivity rights that would delay the Company's ability to market certain
products. There can be no assurance that drugs resulting from the Company's
research and development efforts, or from the joint efforts of the Company and
its existing or future collaborative partners, will be able to compete
successfully with competitors' existing products or products under development
or that they will obtain regulatory approval in the United States or elsewhere.
GOVERNMENT REGULATION
Regulation by governmental authorities in the United States and other
countries will be a significant factor in the production and marketing of any
pharmaceutical products that ultimately may be developed by the Company. All of
the Company's products will require regulatory approval by governmental agencies
prior to commercialization. Therapeutic drug products intended for human use are
subject to rigorous preclinical and clinical testing requirements and extensive
review and approval procedures by the FDA in the United States and similar
health authorities in other countries. Various statutes and regulations also
govern or affect, among other things, the clinical testing, safety, efficacy,
manufacturing, labeling, storage, record keeping, advertising and marketing and
distribution of such products. Failure to comply with such regulations could
result in, among other things, delays in obtaining required marketing
authorizations, warning letters, recalls, suspension or termination of
production, product seizures, injunctions, civil penalties and criminal
prosecution.
The Company currently is engaged in the preliminary stages of drug
development and does not expect to submit an application for FDA marketing
approval of any therapeutic product drug for a number of years, if ever. Once
the Company identifies a pharmaceutical candidate for potential commercial
development, it will be subject to a lengthy and uncertain regulatory review
process. The steps ordinarily required before a new
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biopharmaceutical product may be marketed in the United States include: (i) drug
discovery and screening activities; (ii) preclinical testing; (iii) the
submission to the FDA of an IND which must become effective before clinical
trials may commence; (iv) adequate and well-controlled clinical trials to
establish the safety and effectiveness of the drug for its intended use; (v) the
submission of an NDA to the FDA; and (vi) FDA review and approval of the NDA
prior to any commercial sale or distribution.
Preclinical testing includes laboratory evaluation of product chemistry and
formulation, as well as animal studies to assess the safety and efficacy of the
product. Preclinical tests must be conducted in compliance with good laboratory
practice regulations. The results of preclinical tests are submitted to the FDA
as part of an IND. Unless the FDA objects to an IND, the IND will become
effective 30 days following its receipt by the FDA. In addition, the FDA may, at
any time, impose a clinical hold on an ongoing trial, requiring the suspension
of the trial until the agency authorizes its re-commencement. There can be no
assurance that submission of an IND will result in FDA authorization to commence
clinical trials or that such authorization will lead to ultimate FDA approval of
a marketing application for the product.
Clinical trials involve the administration of the investigational product
to human subjects under the supervision of qualified principal investigators.
Clinical trials must be conducted in accordance with good clinical practices
under protocols submitted to the FDA as part of the IND. In addition, each
clinical trial must be approved and conducted under the auspices of an
Institutional Review Board ("IRB"), which will consider, among other things,
ethical factors, the safety of the human subjects and the potential liability of
the institution conducting the investigation.
Clinical trials ordinarily are conducted in three sequential phases and
generally take an average of five years, but may take longer. In certain cases
the phases may overlap. Phase I represents the initial introduction of the drug
to a small group of healthy subjects to test for safety, dosage tolerance, and
the essential characteristics of the drug. Phase II involves studies in a
limited number of patients to test the safety and efficacy of the drug at
different dosages. Phase III trials involve large-scale evaluation of safety and
effectiveness, usually (though not necessarily) in comparison with a placebo or
an existing treatment. The results of the preclinical and clinical testing are
submitted to the FDA in the NDA. In some cases, the FDA may require additional
trials to be conducted following marketing approval to confirm safety and/or
effectiveness. There can be no assurance that Phase I, Phase II or Phase III
testing will be completed successfully within any specified time period, if at
all, with respect to any potential products that may be developed by the
Company. Furthermore, the FDA may suspend clinical trials at any time if it
decides that patients are being exposed to a significant health risk.
All data obtained from a comprehensive development program are submitted as
an NDA to the FDA. Although the FDA is required by law to review applications
within 180 days of their filing, in practice longer times are typically
required. Review generally takes an average of at least 15 months but may take
longer. The FDA frequently requests that additional information be submitted
requiring significant additional review time. Any potential products of the
Company will be subject to demanding and time-consuming NDA or similar approval
procedures in countries where the Company intends to market its products. Such
regulations vary country by country.
The process of obtaining required FDA marketing approvals, including a
review of manufacturing process and facilities used to produce such products,
can be costly, time consuming and subject to unanticipated delays. The FDA may
refuse to approve an application if it believes that applicable regulatory
criteria are not satisfied. The FDA may also require additional testing of a
drug product as a condition of marketing approval. There can be no assurance
that approvals of any potential products that may be developed by the Company
will be granted on a timely basis, if at all. Even if granted, marketing
approval will be limited to specific therapeutic indications, and the Company
will be subject to periodic inspection for compliance with good manufacturing
practices and other applicable regulatory requirements relating to labeling,
advertising, record keeping, and reporting to FDA of adverse experiences and
other information.
For marketing outside of the United States before FDA approval to market,
the Company must submit an export permit application to the FDA. Whether or not
FDA approval is obtained, approval of a potential product by comparable
regulatory authorities may be necessary in other countries prior to marketing
such
42
<PAGE> 44
product in such countries. The review and approval procedures vary from country
to country, can involve additional testing and the time required may differ from
that required for FDA approval. In addition, product licensing, pricing and
reimbursement requirements vary widely from country to country. There can be no
assurance that the Company will meet and sustain any such requirements.
The Company's research and development activities involve the controlled
use of hazardous materials, chemicals and various radioactive materials. The
Company is subject to federal, state and local laws and regulations governing
the use, storage, handling and disposal of such materials and certain waste
products. Although the Company believes that its safety procedures for handling
and disposing of such materials comply with the standards prescribed by state
and federal laws and regulations, the risk of accidental contamination or injury
from these materials cannot be completely eliminated. In the event of such an
accident, the Company could be held liable for any damages that result and any
liability could exceed the resources of the Company. See "Risk
Factors -- Government Regulation and Need for Product Approvals."
SCIENTIFIC ADVISORS
The Company has established an SAB consisting of individuals with expertise
in translational biochemistry, particularly as it relates to bacteria, fungi,
and viruses. The Company is highly dependent on its SAB members, who conduct
research in cooperation with the Company and provide the Company with access to
technology developed by them. The potential success of the Company's drug
discovery programs depends in part on continued collaborations with these
advisors. The Company and various members of its management and research staff
rely heavily on the SAB for new translation-based targets and for expertise in
translation research. The Company has entered into agreements with its SAB
members which provide for confidentiality of the Company's proprietary
information. The agreements also provide that any confidential information that
results from work performed for the Company is the exclusive property of the
Company. However, the Company may not have rights to developments, publications
or the results of any research conducted by these advisors, which may adversely
affect the Company. See "Risk Factors -- Dependence on Scientific Advisors."
The SAB holds meetings at least twice a year, and SAB members consult with
and meet informally with the Company and with each other on a more frequent
basis. Certain SAB members hold options to purchase Common Stock of the Company.
The members of the SAB are as follows:
JOE B. HARFORD, PH.D., Chairman of the SAB, serves as Associate Director of
the National Cancer Institute ("NCI"). In his current position Dr. Harford plays
a role in shaping the course of the NIH in several areas. He is an editor of
several books related to Molecular Biology and has over 100 scientific
publications. Prior to joining the NCI, Dr. Harford was the Director of New Drug
Discovery at RiboGene from 1993 to 1996. Prior to that, Dr. Harford held various
research and managerial positions at the NIH from 1979 to 1993. Dr. Harford
holds a B.S. degree in Chemistry from Ohio University, and a Ph.D. degree in
Biochemistry from the University of Maryland School of Medicine. Dr. Harford has
been active in the translation field for over 10 years.
JOHN HERSHEY, PH.D., Professor and Chairman, Department of Biological
Chemistry, University of California, Davis. Dr. Hershey has conducted extensive
research relating to translation factors and mechanisms in many species,
including humans, bacteria, fungi, plants and sea urchins. He has 168 scientific
publications (30 in the last five years) and has served on the editorial board
of several journals, with current positions at BioChemie and Gene Expression.
Dr. Hershey also is a co-editor of the book Translational Control (1996), which
is a definitive text in the field. He received his B.S. degree from Haverford
College and his Ph.D. degree from Harvard University. Dr. Hershey has been
active in the translation field for over 35 years.
ALAN HINNEBUSCH, PH.D., Chief, Laboratory of Eukaryotic Gene Regulation,
National Institute of Child Health and Human Development. Dr. Hinnebusch's
research interests include translational control mechanisms in fungi and
mammals. He has devised methods for cloning many translation factor genes from
fungi and mammals and this work has led to a much greater understanding of how
the translation initiation process works. Dr. Hinnebusch has 76 scientific
publications (28 in the last five years) and has served on the editorial board
of several journals, with current positions at Molecular and Cellular Biology,
Microbiological Reviews
43
<PAGE> 45
and Genetics. He received his B.S. degree from the University of Dayton and his
Ph.D. degree from Harvard University. Dr. Hinnebusch has been active in the
translation field for over 10 years.
ADAM GEBALLE, M.D., Associate Member in Molecular Medicine and Clinical
Research, Fred Hutchinson Cancer Research Center and Associate Professor of
Medicine. Dr. Geballe's research interests include translational control of
viral gene expression and translation termination in eukaryotes. He has 26
scientific publications (nine in the last five years) and serves as Associate
Editor on the Journal of Infectious Diseases. Dr. Geballe is certified by the
American Board of Internal Medicine with a Subspecialty of Infectious Disease.
He received his B.A. degree from Stanford University and his M.D. degree from
Duke University. Dr. Geballe has been active in the translation field for over
10 years.
MICHAEL KATZE, PH.D., Professor, Department of Microbiology, University of
Washington and Associate Director for Scientific Affairs at the Regional Primate
Research Center. Dr. Katze has conducted extensive research relating to
translational control by several viruses, including HCV, influenza, and HIV, and
regulation of cellular translation and growth by PKR. Dr. Katze devised the
Company's current model of interferon resistance in HCV. He also was involved in
the development of an alternative animal model for HIV infection. He has 83
scientific publications (38 in the last five years) and serves on the editorial
boards of Interferon and Cytokine Research. He received his B.A. in Biology from
Boston University and his M.S. degree and Ph.D. degree from Hahnemann Medical
College and Hospital. Dr. Katze has been active in the translation field for
over 15 years.
DAVID MORRIS, PH.D., Professor, Department of Biochemistry, University of
Washington. Dr. Morris has conducted extensive research relating to polyamine
biochemistry, translational control mechanisms and growth control regulation of
translation in mammalian cells. He has 113 scientific publications (14 in the
last five years). He received his B.A. degree from the University of California
at Los Angeles and his Ph.D. degree from the University of Illinois. Dr. Morris
has been active in the translation field for over 25 years.
MICHAEL MATHEWS, PH.D., Professor and Chairman of the Department of
Biochemistry and Molecular Biology at the New Jersey Medical School. Dr. Mathews
has conducted extensive research relating to translational control mechanisms by
viruses, including HIV, adenovirus and hepatitis D virus, and regulation of
cellular translation and growth by PKR. He has 152 scientific publications (47
in the last five years), and has served on the editorial board of several
journals, with current positions at Genes & Development and Journal of Virology.
He also is a co-editor of the book Translational Control (1996), which is a
definitive text in the field. He received his B.A. degree and Ph.D. degree from
Cambridge University. Dr. Mathews has been active in the translation field for
30 years.
NAHUM SONENBERG, PH.D., Professor, Department of Biochemistry and McGill
Cancer Center, McGill University. Dr. Sonenberg has conducted extensive research
relating to translation factors and mechanisms in many species, including
humans, fungi and viruses. Most of his work has been focused on translational
control of mammalian cell growth, translational control by viruses, including
HCV, HIV and rhinovirus and the initiation phase of translation. Dr. Sonenberg
was one of the co-discoverers of viral IRES elements. He has 193 scientific
publications (68 in the last five years) and has served on the editorial board
of several journals, with current positions at Molecular & Cellular Biology,
Gene Expression, Journal of Virology and RNA. He is also a co-editor of the book
Translational Control (1996), which is a definitive text in the field. He
received his B.Sc. degree and M.Sc. degree from Tel-Aviv University and his
Ph.D. degree from the Weitzman Institute of Science. Dr. Sonenberg has been
active in the translation field for almost 25 years.
There can be no assurance that the Company will be able to maintain its
consulting arrangements with its SAB members or that such advisors will not
enter into consulting arrangements with competing pharmaceutical or
biotechnology companies, any of which would have a detrimental impact on the
Company's research objectives and could have a material adverse effect on the
Company's business, financial condition and results of operations. See "Risk
Factors -- Dependence on Scientific Advisors."
44
<PAGE> 46
EMPLOYEES
At September 30, 1997, the Company had 28 full-time employees. Twenty-two
of the Company's employees are engaged in, or directly support, the Company's
research and development activities. Of the employees engaged in research and
development activities, nine hold Ph.D. degrees. The Company considers relations
with its employees to be good. None of the Company's employees is covered by a
collective bargaining agreement.
The Company's success will depend in large part on its ability to attract
and retain key employees and scientific advisors. The Company's potential growth
and expansion into areas and activities requiring additional expertise, such as
chemistry, are expected to place increased demands on the Company's management
skills and resources. These demands are expected to require a substantial
increase in management and scientific personnel and the development of
additional expertise by existing management personnel. Accordingly, recruiting
and retaining management and operational personnel and qualified scientific
personnel to perform research and development work in the future will also be
critical to the Company's success. There can be no assurance that the Company
will be able to attract and retain skilled and experienced management,
operational and scientific personnel on acceptable terms given the competition
among numerous pharmaceutical and biotechnology companies, universities and
other research institutions for such personnel. The failure to attract and
retain such personnel or to develop such expertise could have a material adverse
effect on the Company's business, financial condition and results of operations.
See "Risk Factors -- Dependence on and Need for Additional Key Personnel" and
"Management."
FACILITIES
RiboGene currently leases approximately 20,300 square feet of laboratory
and office space in Hayward, California under a lease that provides for annual
rent of approximately $158,000, expiring in October 1997. The Company has
entered into a 15-year lease agreement with the right to sublease for a new
facility of approximately 30,000 square feet of laboratory and office space in
Hayward, California under a lease which provides for annual rent of $531,000
(subject to increase), which includes amortization of $2.0 million of tenant
improvements paid by the landlord. The Company intends to sublease 5,000 square
feet of the new facility until such space is needed by the Company. The Company
currently anticipates relocating to the new facility in November 1997. In
connection with the lease, the Company has agreed to issue the landlord a six-
year warrant to purchase 62,975 shares of Common Stock at $8.93 per share. See
"Description of Capital Stock."
LEGAL PROCEEDINGS
The Company is not subject to any material legal proceedings.
45
<PAGE> 47
MANAGEMENT
EXECUTIVE OFFICERS, DIRECTORS AND KEY EMPLOYEES
The following table sets forth certain information as of September 30, 1997
with respect to the current executive officers, directors and key employees of
the Company:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ----------------------------------- --- --------------------------------
<S> <C> <C>
Charles J. Casamento............... 52 President, Chief Executive
Officer and Chairman of the
Board of Directors
Laura S. Lehman, Ph.D.............. 40 Vice President of Research
Timothy E. Morris.................. 35 Vice President, Finance &
Administration, Chief Financial
Officer and Assistant Secretary
Charles Gluchowski, Ph.D........... 42 Director of Drug Discovery
Charles M. Moehle, Ph.D............ 38 Associate Director of
Translational Control Research
Alexander E. Barkas, Ph.D.(1)...... 50 Director
Digby W. Barrios(2)................ 59 Director
Jon S. Saxe(1)(2)(3)............... 61 Director
Jesse I. Treu, Ph.D.(2)(3)......... 50 Director
</TABLE>
- ---------------
(1) Member of the Nominating Committee.
(2) Member of the Compensation Committee.
(3) Member of the Audit Committee.
MR. CASAMENTO joined the Company as President, Chief Executive Officer and
Chairman of the Board in June 1993. Prior to joining the Company, he was
President and Chief Executive Officer of Interneuron Pharmaceuticals, Inc., a
biopharmaceutical company, from March 1989 until May 1993. Mr. Casamento is also
a director of CORTEX Pharmaceuticals, a biopharmaceutical company. Mr. Casamento
holds a bachelor's degree in Pharmacy from Fordham University and an M.B.A.
degree from Iona College.
DR. LEHMAN has served as the Company's Vice President of Research since
January 1996, and before that she was Vice President of Drug Discovery and Drug
Development, since June 1994. Prior to joining the Company, she served as Senior
Director, Medicinal Chemistry, at Amylin Pharmaceuticals, Inc., a pharmaceutical
discovery and development company, from June 1989 to June 1994. Dr. Lehman holds
a B.S. degree in Chemistry from Bucknell University, an M.S. degree in Organic
Chemistry from Bucknell University and a Ph.D. degree in Organic Chemistry from
Duke University.
MR. MORRIS joined the Company as Vice President, Finance & Administration
and Chief Financial Officer in June 1995 and was appointed Assistant Secretary
in October 1997. Prior to joining the Company, he served as Chief Accounting
Officer and Senior Director, Finance at Glycomed Incorporated, a biotechnology
company, from May 1992 until May 1995. Mr. Morris is a certified public
accountant and holds a B.S. degree in Accounting from California State
University, Chico.
DR. GLUCHOWSKI joined the Company as Director of Drug Discovery in January
1997. Prior to joining the Company, he was the Director, Department of Chemistry
at Synaptic Pharmaceutical Corporation, a research and drug discovery company,
from September 1990 until January 1997. Dr. Gluchowski received a B.S. degree in
Chemistry from the Stevens Institute of Technology and a Ph.D. degree in Organic
Chemistry from Texas A&M University.
DR. MOEHLE joined the Company in May 1993 and currently serves as the
Associate Director of Translational Control Research. Prior to joining the
Company, he was at the National Institute of Child Health and Human Development
from 1988 to 1993, most recently as a Senior Staff Fellow in the Laboratory
46
<PAGE> 48
of Molecular Genetics. Dr. Moehle holds a B.A. degree in Biochemistry and
Molecular Biology from Northwestern University and a Ph.D. degree in Biology
from Carnegie Mellon University.
DR. BARKAS joined the Company's Board of Directors in 1991. Dr. Barkas has
been a managing partner of Prospect Venture, a venture capital firm, Partners
since June 1997. From 1991 to 1997, he was a partner with Kleiner Perkins
Caufield & Byers ("KPCB"), a venture capital firm. Dr. Barkas also serves as
chairman of Geron Corporation, a biopharmaceutical company, and as a director of
Connetics Corporation, a biopharmaceutical company, as well as several private
medical technology companies.
MR. BARRIOS joined the Company's Board of Directors in August 1996. He is
currently a consultant to the pharmaceutical and biotechnology industries. From
1982 to 1992, Mr. Barrios served in various positions with Boehringer Ingelheim
Corporation, a pharmaceutical manufacturer, most recently as the President and
Chief Executive Officer. Mr. Barrios also serves as a director of Allelix
Biopharmaceuticals, a biopharmaceutical company, Cypros, Inc., a
biopharmaceutical company, Drug Royalty Corporation, a technology investment
company, Roberts Pharmaceutical Corporation, a pharmaceutical company, Sepracor,
Inc., a pharmaceutical company, and several private organizations.
MR. SAXE joined the Company's Board of Directors in April 1994. He has been
a director since 1989 and President since January 1995 of Protein Design Labs,
Inc., a biotechnology company. From August 1960 to September 1989, Mr. Saxe held
a number of executive positions at Hoffmann-La Roche Inc., including Vice
President, Licensing and Corporate Development. From October 1989 to May 1993,
he served as President and Chief Executive Officer of Synergen, Inc., a
biopharmaceutical company, and from May 1993 to May 1995, as President of Saxe
Associates, a biotechnology consulting firm. Mr. Saxe also serves as a director
of ID Biomedical Corporation, a diagnostics and vaccine development company, and
Incyte Pharmaceuticals, Inc., a genomics company.
DR. TREU joined the Company's Board of Directors in 1992. Since 1986, he
has been a general partner of Domain Associates, a venture capital management
firm. He serves on the board of Focal, Inc., a medical device company, GelTex
Pharmaceuticals, Inc., a pharmaceutical company, Trimeris, Inc., a biotechnology
company, and several private companies.
The Company's by-laws authorize and the Company currently has a board of
directors consisting of five members. Following the Offering, the Company's
certificate of incorporation and by-laws will provide that the Board of
Directors is divided into three classes. Each class will consist of one or two
directors. The terms of office of Class I, Class II and Class III directors will
expire at the Company's 1998, 1999 and 2000 annual meetings of stockholders,
respectively. At each annual meeting of stockholders at which the term of office
of a particular class of directors first expires, the person(s) elected to the
board positions represented by such class of directors will be elected to serve
from the time of election until the third annual meeting following election. Any
additional directorships resulting from an increase in the number of directors
will be distributed among the three classes of directors so that, as nearly as
possible, each class will consist of one-third of the directors. This
classification of the Board of Directors may have the effect of delaying or
preventing changes in control or management of the Company. Officers serve at
the discretion of the Board of Directors. There are no family relationships
among any of the directors or executive officers of the Company.
BOARD COMMITTEES
The Nominating Committee of the Board of Directors was formed in October
1997 to interview, evaluate, nominate and recommend individuals for membership
on the Company's Board of Directors and committees thereof. The Compensation
Committee of the Board of Directors was formed in March 1997 to establish
salaries, incentives and other forms of compensation paid to officers and
employees of the Company. The Compensation Committee also administers the
issuance of stock options and other awards under the Company's stock plans. The
Audit Committee of the Board of Directors was formed in October 1997 to review
the internal accounting procedures of the Company and consult with and review
the services provided by the Company's independent auditors.
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<PAGE> 49
DIRECTOR COMPENSATION
Directors who are employees of the Company currently do not receive any
cash compensation from the Company for their services as members of the Board of
Directors, although they are reimbursed for certain expenses in connection with
attendance at Board and committee meetings. Non-employee directors who are not
affiliated with a significant stockholder (the "Independent Directors") receive
$2,000 per meeting plus reimbursement of certain expenses. The Independent
Directors were paid an aggregate of $20,000 in director fees during the last
fiscal year. In 1996, Mr. Barrios was granted options to purchase 10,705 shares
of the Company's Common Stock under the 1993 Stock Option Plan. Upon completion
of the Offering, all non-employee directors will be eligible to receive stock
options pursuant to the Company's 1997 Non-Employee Directors' Stock Option
Plan. See "-- Stock Plans and Related Employee Benefit Plans."
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Prior to the formation of the Compensation Committee in March 1997, the
Board of Directors made all determinations with respect to executive officer
compensation. Of the directors who participated in deliberations concerning
executive officer compensation, either prior to the formation of the
Compensation Committee or in their capacity as a member of the Compensation
Committee, none have served as officers of the Company other than Mr. Casamento,
who has served as President and Chief Executive Officer of the Company since
June 1993. Certain of the Company's directors have purchased securities of the
Company individually or through an affiliated entity. See "Certain Transactions"
and "Principal Stockholders."
EXECUTIVE COMPENSATION
The following table sets forth the compensation earned in 1996 by the
Company's Chief Executive Officer and the other executive officers who earned in
excess of $100,000 during the fiscal year ended December 31, 1996 (collectively,
the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION ALL OTHER
---------------------- COMPENSATION
NAME AND PRINCIPAL POSITION SALARY($) BONUS($) ($)
- --------------------------------------------------------- --------- -------- ------------
<S> <C> <C> <C>
Charles J. Casamento..................................... 275,000 80,000 65,750(1)
President, Chief Executive Officer and Chairman of the
Board of Directors
Laura S. Lehman, Ph.D.................................... 140,000 35,000 37,216(2)
Vice President of Research
Timothy E. Morris........................................ 142,100 -- --
Vice President, Finance & Administration, Chief
Financial Officer and Assistant Secretary
Walter Singleton, M.A., M.D.(3).......................... 175,000 -- --
Vice President, Development
</TABLE>
- ---------------
(1) Represents $47,193 of principal and interest on a note forgiven by the
Company and $18,557 in life and disability insurance premiums paid by the
Company.
(2) Represents reimbursement for relocation costs.
(3) Dr. Singleton resigned from the Company in May 1997.
48
<PAGE> 50
No options were granted to Named Executive Officers during the fiscal year
ended December 31, 1996. In 1996, 33,074, 18,892, 6,297 and 6,297 shares were
issued to Messrs. Casamento and Morris and Drs. Lehman and Singleton,
respectively, pursuant to purchase rights granted under the 1993 Stock Plan.
Such shares are subject to the Company's right of repurchase upon termination of
employment, which lapses over four years. Such shares were purchased at fair
value as determined by the Company's Board of Directors. No Common Stock
purchase rights were granted to the Named Executive Officers during fiscal 1995
or 1994.
FISCAL YEAR-END OPTION VALUES
The following table sets forth for each of the Named Executive Officers the
number and value of securities underlying unexercised options held by the Named
Executive Officers at December 31, 1996:
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
DECEMBER 31, 1996(#) DECEMBER 31, 1996($)(1)
--------------------------- ---------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Charles J. Casamento........................................ 53,807 89,447 -- --
Laura S. Lehman............................................. 19,893 22,828 -- --
Timothy E. Morris........................................... 9,761 17,947 750 1,250
Walter Singleton............................................ 12,857 18,367 -- --
</TABLE>
- ---------------
(1) Based on the fair market value of the Common Stock on December 31, 1996
($0.89) as determined by the Board of Directors, less the option exercise
price.
EMPLOYMENT AGREEMENTS AND CHANGE OF CONTROL AGREEMENTS
In May 1993, the Company entered into an employment agreement with Charles
J. Casamento, President, Chief Executive Officer and Chairman of the Board of
Directors of the Company. The agreement provides for an annual base salary of
$200,000, subject to annual review. Effective May 1, 1996 and retroactive to
January 1, 1996, Mr. Casamento's annual base salary was increased to $275,000.
In addition, the Board of Directors approved a bonus of up to $150,000 to be
paid to Mr. Casamento in the event of a Merger (as defined in the employment
agreement) or an initial public offering of the Company's Common Stock, and up
to an additional $150,000 for the achievement of specific goals ($50,000 per
goal) in 1996, of which $50,000 was paid in connection with the execution of the
Abbott Agreements. On the first day of employment and on the first and second
anniversary of employment, the Company loaned Mr. Casamento $40,000 (for a total
of $120,000) in the form of three-year notes with interest rates of 5.7%, 5.8%
and 5.9% per annum, respectively. The loans due in June of 1996 and 1997 have
been forgiven. These loans were made in connection with cost-of-living
adjustments and may be forgiven, at the election of the Board of Directors, for
so long as Mr. Casamento remains employed by the Company. In addition, in
October 1993, the Company provided Mr. Casamento with a bridge loan in the
aggregate amount of $250,000, which loan subsequently was repaid by Mr.
Casamento in October 1994.
In July 1995, the Company entered into a Change of Control agreement with
Mr. Casamento that provides for certain severance benefits in the event his
employment is involuntarily terminated other than for "cause" at any time within
12 months after, or in contemplation of, a Change of Control (defined as a
reorganization in which the current shareholders hold less than a 50% ownership
interest in the surviving entity consummated without the approval of the Board
of Directors, a sale of all or substantially all of the Company's assets, a
liquidation of the Company or a transaction in which more than half of the
Company's Board of Directors is replaced). Severance benefits include a lump-sum
payment equal to 12 months' salary and the continued payment of medical benefits
during the 12 months following termination. In addition, all loans issued by the
Company to Mr. Casamento will be forgiven automatically upon a Change of
Control. The Change of Control agreement also provides that all options held by
Mr. Casamento will immediately vest, and the exercise period of such options
will be extended to a date one year from the earlier of the termination date or
the date upon which any relevant lock-up agreements expire.
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<PAGE> 51
In July 1995, the Company also entered into Change of Control agreements
with Dr. Lehman and Mr. Morris that provide for certain severance benefits in
the event their employment is terminated, other than for cause, at any time
within 12 months after, or in contemplation of, a Change of Control. Severance
benefits payable to Dr. Lehman and Mr. Morris include a lump-sum payment equal
to six months' salary and continuation of certain medical benefits for the
six-month period following termination. Dr. Lehman and Mr. Morris will receive
an additional six months of vesting on their stock options, and the exercise
term of such options will extend to 12 months from the earlier of the
termination date or the expiration of any relevant lock-up agreements.
Pursuant to an agreement between the Company and Mr. Morris, dated June 30,
1995, in the event that Mr. Morris's employment with the Company is
involuntarily terminated, he is entitled to continue to receive his then current
salary for a period of six months after the termination date.
The Company also has entered into letter agreements with Dr. Lehman and Mr.
Morris, providing each with a bonus payment of 25% of their annual salary upon
the achievement of certain objectives.
STOCK PLANS AND RELATED EMPLOYEE BENEFIT PLANS
1993 Stock Plan
The Company's 1993 Stock Plan, as amended (the "1993 Plan"), was adopted by
the Board of Directors and approved by the Company's stockholders in March 1993.
The 1993 Plan has been amended to increase the number of shares of Common Stock
reserved for issuance under the 1993 Plan to a total of 789,703 shares. As of
June 30, 1997, 276,218 shares had been issued under the 1993 Plan pursuant to
the exercise of stock options or purchase rights, options to purchase a total of
451,422 were outstanding and 62,063 shares remained available for future option
or purchase grants. On July 24, 1997, the Board of Directors authorized an
increase of the Common Stock reserved for issuance from 789,703 shares to
1,041,603 shares and granted 202,715 options, 140,652 of which are subject to
stockholder approval.
The 1993 Plan provides for the grant to employees of the Company (including
officers and employee directors) of "incentive stock options" within the meaning
of Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"),
for the grant of nonstatutory stock options, to employees and consultants of the
Company, and for the direct issuance of shares of Common Stock pursuant to
Restricted Stock Purchase Agreements. To the extent an optionee would have the
right in any calendar year to exercise for the first time one or more incentive
stock options for shares having an aggregate fair market value (under all plans
of the Company and determined for each share as of the date the option to
purchase the share was granted) in excess of $100,000, any such excess options
shall be treated as nonstatutory stock options.
The 1993 Plan is administered by the Compensation Committee of the Board of
Directors (the "Administrator"). The Administrator determines the terms of
options granted under the 1993 Plan, including the number of shares subject to
the option, exercise price, term and exercisability. The exercise price of all
incentive stock options granted under the 1993 Plan must be at least equal to
the fair market value of the Common Stock on the date of grant. The exercise
price of all nonstatutory stock options must equal at least 85% of the fair
market value of the Common Stock on the date of grant. The exercise price of any
incentive stock option granted to an optionee who owns stock representing more
than 10% of the voting power of the Company's outstanding capital stock (a "10%
Stockholder") must equal at least 110% of the fair market value of the Common
Stock on the date of grant. Payment of the exercise price may be made in cash,
promissory notes or other consideration determined by the Administrator. The
term of a stock option may not exceed 10 years (five years if issued to a 10%
Stockholder). No option may be transferred by the optionee other than by will or
the laws of descent or distribution. Each option may be exercised during the
lifetime of the optionee only by such optionee. Options granted to each employee
under the 1993 Plan generally become exercisable for 12.5% of the total number
of shares subject to the options after the six-month period from the date of
grant, and approximately 2% each month thereafter. Similarly, stock purchase
rights granted to employees typically are subject to the Company's right to
repurchase the shares at the purchase price in the event that the employee's
relationship with the Company terminates, which repurchase right typically
lapses in accordance with the vesting schedule set forth in the preceding
sentence.
50
<PAGE> 52
In the event of certain changes in control of the Company, the 1993 Plan
requires that each outstanding option be assumed or an equivalent option
substituted by the successor corporation. The Administrator has the authority to
amend or terminate the 1993 Plan as long as such action does not adversely
affect any outstanding option and provided that shareholder approval shall be
required for an amendment to increase the number of shares subject to the 1993
Plan, or any change in the designation of the class of persons eligible to be
granted options, or a material increase in benefits accruing to participants
under the 1993 Plan if the Company is registered under Section 12 of the
Exchange Act. If not terminated earlier, the 1993 Plan will terminate in March
2003.
The Company has reserved 1,007 shares of its Common Stock for issuance upon
the exercise of a stock option outstanding under a prior stock option plan,
which plan has since been terminated other than with respect to this outstanding
option.
1997 Equity Incentive Plan
The Company's 1997 Equity Incentive Plan (the "Incentive Plan") was adopted
by the Board in October 1997. Currently, there is an aggregate of 1,000,000
shares of Common Stock authorized for issuance under the Incentive Plan.
The Incentive Plan provides for the grant of incentive stock options,
nonstatutory stock options, restricted stock purchase awards and stock bonuses
under the Internal Revenue Code of 1986, as amended (the "Code"), to employees
(including officers and employee-directors) and nonstatutory stock options,
restricted stock purchase awards and stock bonuses to employees (including
officers and employee-directors), directors and consultants of the Company. The
Incentive Plan is administered by the Compensation Committee of the Board of
Directors which determines recipients and types of awards to be granted,
including the exercise price, number of shares subject to the award and the
exercisability thereof.
The terms of stock options granted under the Incentive Plan may not exceed
10 years. The exercise price of options granted under the Incentive Plan is
determined by the Compensation Committee of the Board of Directors, provided
that the exercise price for a nonstatutory stock option cannot be less than 85%
of the fair market value of the Common Stock on the date of the option grant,
and the exercise price for an incentive stock option cannot be less than 100% of
the fair market value of the Common Stock on the date of the option grant.
Options granted under the Incentive Plan vest at the rate specified in the
option agreement. Generally, no stock option may be transferred by the optionee
other than by will or the laws of descent or distribution, except a nonstatutory
stock may also be transferred pursuant to a domestic relations order. In all
events, an optionee may designate a beneficiary who may exercise the option
following the optionee's death. An optionee whose relationship with the Company
or any affiliate ceases for any reason (other than by death or permanent and
total disability) may generally exercise vested options in the three-month
period following such cessation (unless such options terminate or expire sooner
by their terms) or in such longer period as may be determined by the
Compensation Committee of the Board of Directors and set forth in an optionee's
option agreement. In the case of death or total and permanent disability, vested
options may be exercised for up to 18 or 12 months, respectively, after an
optionee's relationship with the Company and related entities ceases.
No incentive stock option may be granted to any person who at the time of
the grant is a 10% Stockholder unless the option exercise price is at least 110%
of the fair market value of the stock subject to the option on the date of grant
and the term of the option does not exceed five years from the date of grant. In
addition, the aggregate fair market value, determined at the time of grant, of
the shares of Common Stock with respect to which incentive stock options are
exercisable for the first time by an optionee during any calendar year (under
the Incentive Plan and all other stock plans of the Company and its affiliates)
may not exceed $100,000.
When the Company becomes subject to Section 162(m) of the Code (which
denies a deduction to publicly held corporations for certain compensation paid
to specified employees in a taxable year to the extent that the compensation
exceeds $1,000,000), no person may be granted options under the Incentive Plan
covering more than 300,000 shares of Common Stock in any calendar year.
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<PAGE> 53
Shares subject to stock awards that have expired or otherwise terminated
without having been exercised in full again become available for the grant of
awards under the Incentive Plan. The Compensation Committee of the Board of
Directors has the authority to reprice outstanding options and to offer
optionees the opportunity to replace outstanding options with new options for
the same or a different number of shares. Both the original and new options will
count toward the limitation set forth above.
Restricted stock purchase awards granted under the Incentive Plan may be
granted pursuant to a repurchase option in favor of the Company in accordance
with a vesting schedule and at a price determined by the Compensation Committee
of the Board of Directors. Restricted stock purchases must be at a price equal
to at least 85% of the stock's fair market value on the award date, but stock
bonuses may be awarded in consideration of past services without a purchase
payment. Rights under a stock bonus or restricted stock purchase agreement may
not be transferred other than by will, the laws of descent and distribution or a
domestic relations order during such period as the stock awarded pursuant to
such an agreement remains subject to the agreement.
Upon certain changes in control of the Company, all outstanding awards
under the Incentive Plan may either be assumed or substituted by the surviving
entity. If the surviving entity determines not to assume or substitute such
awards, then, with respect to persons then performing services for the Company,
the exercise period for such awards will be accelerated and the awards
terminated if not exercised prior to the change in control. Awards held by other
persons will be terminated if not exercised prior to such event, subject to a
limited number of exceptions. If the surviving entity assumes or substitutes
such awards, and if a person's service as an employee, director or consultant is
terminated within 13 months following the date of the change in control, the
full vesting of any award held by such person shall accelerate and such award
will become exercisable for 12 months after the date of full vesting. An award
under the Incentive Plan that has been assumed or substituted by the surviving
entity and is held by a person still providing services to the Company 13 months
after the change in control will become fully vested on such date, and such
award will become exercisable for 12 months following the date of full vesting.
1997 Non-Employee Directors' Stock Option Plan
In October 1997, the Board adopted the 1997 Non-Employee Directors' Stock
Option Plan (the "Directors' Plan") to provide for the automatic grant of
options to purchase shares of Common Stock to non-employee directors of the
Company. The Directors' Plan is administered by the Board, unless the Board
delegates administration to a committee.
The aggregate number of shares of Common Stock that may be issued pursuant
to options granted under the Directors' Plan is 150,000. Pursuant to the terms
of the Directors' Plan, each person serving as a director of the Company who is
not an employee of the Company (a "Non-Employee Director") shall upon the date
such person first becomes a Non-Employee Director after the date that the
Directors' Plan is adopted automatically be granted an option to purchase 10,000
shares of Common Stock. In addition, on the date immediately following the date
of each stockholders meeting, each Non-Employee Director who has been in office
for 6 months will automatically be granted an option to purchase 2,500 shares of
Common Stock.
Options under the Directors' Plan will vest in four equal, annual
installments commencing one year from the date of the grant of the option. Each
initial grant and subsequent annual grant shall become exercisable one year from
the date of grant. The exercise price of the options granted under the
Directors' Plan will be equal to the fair market value of the Common Stock
granted on the date of grant. No option granted under the Directors' Plan may be
exercised after the expiration of 10 years from the date it was granted. Options
granted under the Directors' Plan are generally non-transferable. The Directors'
Plan will terminate in 2007 unless sooner terminated by the Board.
In the event of certain changes of control, options outstanding under the
Directors' Plan will automatically become fully vested and will terminate if not
exercised prior to such change of control.
52
<PAGE> 54
Employee Stock Purchase Plan
In October 1997, the Board of Directors approved the Employee Stock
Purchase Plan (the "Purchase Plan") with an aggregate of 750,000 shares of
Common Stock reserved for issuance under such plan. The Purchase Plan is
intended to qualify as an "employee stock purchase plan" within the meaning of
Section 423 of the Code. Under the Purchase Plan, the Board may authorize
participation by eligible employees, including officers, in periodic offerings
following the adoption of the Purchase Plan. The offering period for any
offering will be no longer than 27 months.
Generally, employees are eligible to participate if they are employed by
the Company or an affiliate of the Company designated by the Board of Directors.
Employees who participate in an offering can have up to 15% of their earnings
withheld pursuant to the Purchase Plan and applied, on specified dates
determined by the Board, to the purchase of shares of Common Stock. The price of
Common Stock purchased under the Purchase Plan will be equal to 85% of the lower
of the fair market value of the Common Stock on the commencement date of each
offering period or the relevant purchase date. Subject to the terms of an
offering, employees may end their participation in the offering at any time
during the offering period, and participation ends automatically on termination
of employment with the Company.
In the event of certain changes of control, the Board of Directors has
discretion to provide that each right to purchase Common Stock will be assumed
or an equivalent right substituted by the successor corporation, or the Board
may shorten the offering period and provide for all sums collected by payroll
deductions to be applied to purchase stock immediately prior to the change in
control. The Purchase Plan will terminate at the Board's direction.
401(k) Plan
In 1992, the Company adopted a tax-qualified employee savings and
retirement plan (the "401(k) Plan") under which eligible employees may elect to
defer their current compensation up to certain statutorily prescribed annual
limits ($9,500 in 1997) and to contribute such amounts to the 401(k) Plan. The
401(k) Plan permits, but does not require, additional matching contributions to
the 401(k) Plan by the Company on behalf of all participants in the 401(k) Plan.
Effective January 1, 1997 the Company has agreed to match 10% of each
participant's contribution. Each employees matching contribution vests at a rate
of 25% per year. The 401(k) Plan is intended to qualify under Section 401 of the
Code, so that contributions by employees or by the Company to the 401(k) Plan,
and income earned on the 401(k) Plan contributions, are not taxable to employees
until withdrawn from the 401(k) Plan, and so that contributions by the Company,
if any, will be deductible by the Company when made. The trustee under the
401(k) Plan, at the direction of each participant, invests the 401(k) Plan
employee salary deferrals in selected investment options.
53
<PAGE> 55
CERTAIN TRANSACTIONS
In January 1994, the Company purchased the assets of Hyline Laboratories,
Inc. ("Hyline") in exchange for $800,000 in cash, notes due and payable on
January 5, 1995, January 5, 1996, January 5, 1997, and January 5, 1998 in the
principal amounts of $1,121,000, $916,000, $910,000 and $909,000, respectively,
and a warrant to purchase 330,744 shares of Common Stock at an original exercise
price of $11.91 per share (the "Hyline Warrant"). Hyline is a beneficial owner
of more than 5% of the outstanding Common Stock. Each such note accrued interest
at 3.98% per annum, except that the note due and payable on January 5, 1998
accrues interest at 5.32% per annum. The Company paid in full the principal
amounts of the notes due and payable in 1995, 1996 and 1997 and paid interest on
the notes due and payable in 1995, 1996 and 1997 in the amounts of $44,616,
$72,914 and $108,654, respectively. In connection with the asset purchase, the
Company entered into a non-competition agreement with Michael Ashkin, the
President and sole stockholder of Hyline, in exchange for $386,000, of which
$82,000 was due and paid on January 5, 1995, $91,000 was due and paid on January
5, 1996, $101,000 was due and paid on January 5, 1997 and $112,000 is due and
payable on January 5, 1998. In addition, the Company entered into a consulting
agreement with Mr. Ashkin. The agreement provides for guaranteed payments of
$50,000 per quarter from January 1995 through December 1999. Mr. Ashkin is not
required to perform, and to date has not performed, any services for the Company
under this agreement. The Hyline Warrant contains certain antidilution
adjustment provisions and as a result of various transactions since January
1994, the current exercise price is $9.83. As provided in the Hyline Warrant,
Hyline is required to exercise the Hyline Warrant prior to the closing of the
Offering. Hyline may elect to exercise this warrant through a cash-less exercise
feature, for cash, for shares of Common Stock or a combination thereof.
In April 1994, the Company sold an aggregate of 4,000,000 shares (after
giving effect to a three-for-four stock split of the Company's outstanding
Series E Preferred Stock effected in November 1995) of Series E Preferred Stock
at a price of $2.25 per share ($8.93 per share of Common Stock on an
as-converted basis) in a private placement to certain institutional investors,
including 444,445 shares to entities affiliated with Kleiner Perkins Caufield &
Byers V ("KPCB V"), 666,666 shares to CW Ventures II L.P. ("CW"), 444,445 shares
to Domain Partners II, L.P. ("Domain"), 444,445 shares to Sierra Ventures III
("Sierra"), 888,889 shares to Biotechnology Investments Limited ("BIL") and
666,666 shares to entities affiliated with Oxford Bioscience Partners
("Oxford"). Dr. Alexander E. Barkas, a director of the Company, was a partner
with KPCB until June 1997. KPCB is an affiliate of KPCB V, a beneficial owner of
more than 5% of the outstanding Common Stock. Charles Hartman, a former director
of the Company, is a partner with CW Group, the general partner of CW, which is
a beneficial owner of more than 5% of the outstanding Common Stock. Jesse Treu,
a director of the Company, is a general partner of Domain, a beneficial owner of
more than 5% of the outstanding Common Stock. Petri Vainio, a former director of
the Company, is a partner of Sierra, a beneficial owner of more than 5% of the
outstanding Common Stock. BIL and Oxford each are beneficial owners of more than
5% of the outstanding Common Stock.
In July and September 1995, the Company issued to certain investors and a
financial institution convertible promissory notes in an aggregate principal
amount of $4,394,680 bearing interest at a rate of 7% per annum, to provide
temporary working capital for the Company. Included in the total principal
amount of notes issued were $733,555 principal amount of notes issued to KPCB V,
$632,375 principal amount of notes issued to CW, $581,875 principal amount of
notes issued to each of Domain and Sierra, and $500,000 principal amount of
notes issued to each of BIL and $500,000 principal amount of notes issued to
Oxford. In September 1995, the Company repaid $765,000 principal amount of these
notes to the financial institution. In November 1995, the remaining outstanding
notes were converted into an aggregate of 1,647,814 shares of Series E Preferred
Stock at a rate of one share per $2.25 of principal and interest due and payable
(including 332,250 shares to KPCB V, 286,843 shares to CW, 264,180 to each of
Domain and Sierra and 227,437 to each of BIL and Oxford.)
In February 1996, the Company issued to certain investors convertible
promissory notes in an aggregate principal amount of $1,892,500 bearing interest
at a rate of 7% per annum to provide temporary working capital for the Company.
Included in the total amount of notes issued were $434,000 principal amount of
notes issued to KPCB V, $395,000 principal amount of notes issued to CW,
$346,500 principal amount of notes issued to Domain, $240,000 principal amount
of notes issued to Sierra, $265,000 principal amount of notes
54
<PAGE> 56
issued to BIL and $212,000 principal amount of notes issued to Oxford. In May
1996, such notes were converted into an aggregate of 860,844 shares of Series E
Preferred Stock at a rate of one share per $2.25 of principal and interest due
and payable (including 197,415 shares to KPCB V, 179,675 shares to CW, 157,613
shares to Domain, 109,169 shares to Sierra, 120,541 shares to BIL and 96,431
shares to Oxford).
In May 1996, in connection with the Abbott Agreements, Abbott purchased an
aggregate of 1,555,556 shares of Series E Preferred Stock at a per share price
of $2.25. Abbott also agreed to purchase an additional $4.0 million of Common
Stock in a private placement. Abbott has expressed its intention to fulfill this
obligation by purchasing $4.0 million of Common Stock in the Offering at the
initial public offering price. See "Business -- Collaborative and Research
Agreements." Abbott is a beneficial owner of more than 5% of the outstanding
Common Stock.
Concurrently with the closing of the Offering, each outstanding share of
Series E Preferred Stock will be converted into .2519 of a share of Common
Stock. See "Description of Capital Stock -- Preferred Stock."
In connection with the Series F Private Placement in August 1996, the
Company entered into a Placement Agency Agreement (the "Placement Agency
Agreement") with Paramount Capital, Inc. ("Paramount"). Pursuant to the
Placement Agency Agreement, the Company paid Paramount commissions and
non-accountable expense allowances of $667,679. The Company also granted to
Paramount Placement Agent Unit Options to purchase 228,266 Units, each now
consisting of two shares of Series F Preferred Stock and one Class A Warrant.
The Placement Agent Unit Options may be exercised for an aggregate of
approximately $283,000 and expire on December 23, 2007. The Class A Warrants
included in the Units expire on June 22, 2003. Pursuant to the Placement Agency
Agreement, Paramount is entitled to propose one person for nomination as a
voting director of the Company until 2001. The Company is required to vote all
voting securities for which the Company holds proxies granting it voting
discretion, or which the Company is otherwise entitled to vote, in favor of, and
to use its best efforts to cause the election of such individual. At the
Placement Agent's option, in lieu of proposing a voting director for nomination,
it may designate a nonvoting observer who shall be entitled to attend all
meetings of the Board of Directors and any of its committees. Paramount has
currently elected to designate an observer in lieu of a voting director.
In February 1997 and June 1997, the Company sold an aggregate of 2,282,663
Units in the Series F Private Placement at a purchase price of $2.25 per Unit.
In the Series F Private Placement, The Aries Trust purchased 573,334 units,
Aries Domestic Fund, L.P. (the "Aries Fund") purchased 315,555 Units, CW
purchased 44,445 Units, KPCB V purchased 88,889 Units and Oxford purchased
88,889 Units. The Aries Trust and related entities constitute a beneficial owner
of more than 5% of the outstanding Common Stock.
In connection with the Series F Private Placement, the Company also entered
into a Financial Advisory Agreement with Paramount in June 1997 (the "Financial
Advisory Agreement"), pursuant to which Paramount receives $4,000 per month for
a minimum of 24 months to provide financial advisory services to the Company.
Under the Financial Advisory Agreement, Paramount may receive additional
compensation for certain referral services including the introduction of parties
by Paramount to the Company in which the Company completes the sale of
securities, sale, merger or acquisition of the Company, strategic alliance or
product acquisition with such parties as provided for in the Financial Advisory
Agreement. In addition, Paramount received 342,399 Placement Agent Unit Options.
The Placement Agent Unit Options may be exercised for an aggregate of $424,500
and expire on December 23, 2007. The Class A Warrants included in the Placement
Agent Unit Options expire on June 22, 2003.
The Placement Agent Unit Options granted to Paramount were distributed by
Paramount in September 1997. As a result of this distribution, Dr. Lindsay
Rosenwald, a former director of the Company, holds 353,947 Placement Agent Unit
Options, the Aries Fund holds 31,556 Placement Agent Unit Options and The Aries
Trust holds 57,333 Placement Agent Unit Options.
Dr. Rosenwald is the President, Chairman of the Board of Directors and the
sole stockholder of both Paramount Capital Asset Management Inc., the general
partner of the Aries Fund and the investment manager to The Aries Trust, and
Paramount. Dr. Rosenwald was appointed by Paramount to the Board of
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<PAGE> 57
Directors pursuant to the rights, described above, but subsequently resigned in
September 1997. An employee of Paramount, currently serves as an observer on the
Board of Directors of the Company.
Concurrently with the closing of the Offering, each outstanding share of
Series F Preferred Stock will be converted into 0.5038 of a share of Common
Stock (assuming an initial public offering price of $11.00 per share). See
"Description of Capital Stock -- Preferred Stock."
In March 1997, the Company issued to Paramount warrants to purchase 6,297
shares of Common Stock at $8.93 per share. Paramount subsequently distributed
such warrant.
In May 1993, the Company entered into an employment agreement with Charles
J. Casamento, President, Chief Executive Officer and Chairman of the Board of
Directors of the Company. The agreement provides for an annual base salary of
$200,000, subject to annual review. Effective May 1, 1996 and retroactive to
January 1, 1996, Mr. Casamento's annual base salary was increased to $275,000.
In addition, the Board of Directors approved a bonus of up to $150,000 to be
paid to Mr. Casamento in the event of a Merger (as defined in the employment
agreement) or an initial public offering of the Company's Common Stock, and up
to an additional $150,000 for the achievement of specific goals ($50,000 per
goal) in 1996, of which $50,000 was paid in connection with the execution of the
Abbott Agreements. On the first day of employment and on the first and second
anniversary of employment, the Company loaned Mr. Casamento $40,000 (for a total
of $120,000) in the form of three-year notes with interest rates of 5.7%, 5.8%
and 5.9% per annum, respectively. These loans were made in connection with
cost-of-living adjustments and may be forgiven, at the election of the Board of
Directors, for so long as Mr. Casamento remains employed by the Company. The
loans due in June of 1996 and 1997 have been forgiven. In addition, in October
1993, the Company provided Mr. Casamento with a bridge loan in the aggregate of
$250,000, which loan subsequently was repaid by Mr. Casamento in October 1994.
In July 1993, Mr. Casamento purchased an aggregate of 37,785 shares of Common
Stock. In March 1994, August 1996 and March 1997 Mr. Casamento purchased an
aggregate of 108,644 shares of Common Stock pursuant to purchase rights issued
under the 1993 Stock Plan. In payment for such Common Stock, Mr. Casamento
issued promissory notes to the Company in the aggregate principal amount of
$108,293. Such Notes accrue interest at 5.47%, 5.29%, 6.73% and 6.32% per annum,
respectively. As of June 30, 1997, $103,093 of the aggregate principal amount of
such notes remained outstanding plus an aggregate of $13,229 of accrued
interest.
In July 1995, the Company entered into a Change of Control agreement with
Mr. Casamento that provides for certain severance benefits in the event his
employment is involuntarily terminated other than for cause at any time within
12 months after, or in contemplation of, a Change of Control (defined as a
reorganization in which the current shareholders hold less than a 50% ownership
interest in the surviving entity consummated without the approval of the Board
of Directors, a sale of all or substantially all of the Company's assets, a
liquidation of the Company or a transaction in which more than half of the
Company's Board of Directors is replaced). Severance benefits include a lump sum
payment equal to 12 months' salary and the continued payment of medical benefits
during the 12 months following termination. In addition, all loans issued by the
Company to Mr. Casamento shall automatically be forgiven upon a Change of
Control. The Change of Control agreement also provides that all options held by
Mr. Casamento will immediately vest, and the exercise period of such options
will be extended to a date one year from the earlier of the termination date or
the date upon which any lock-up agreements expire.
In July 1995, the Company also entered into Change of Control agreements
with Dr. Lehman and Mr. Morris that provide for certain severance benefits in
the event their employment is terminated, other than for cause, at any time
within 12 months after, or in contemplation of, a Change of Control. Severance
benefits payable to Dr. Lehman and Mr. Morris include a lump sum payment equal
to six months' salary and continuation of certain medical benefits for the six
month period following termination. Dr. Lehman and Mr. Morris will receive
additional vesting six months on their stock options, and the exercise term of
such options will extend to 12 months from the earlier of the termination date
or the expiration of any lock-up agreements.
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<PAGE> 58
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information with respect to
beneficial ownership of the Company's Common Stock as of September 30, 1997, as
adjusted to reflect the sale of 2,300,000 shares of Common Stock in the
Offering, by (i) each person who is known by the Company to own beneficially
more than five percent of the outstanding shares of Common Stock, (ii) each
director of the Company, (iii) each of the Named Executive Officers and (iv) all
directors and executive officers as a group.
<TABLE>
<CAPTION>
PERCENTAGE OF SHARES
NUMBER OF BENEFICIALLY OWNED
SHARES -----------------------
BENEFICIALLY PRIOR TO AFTER
BENEFICIAL OWNER OWNED(1) OFFERING OFFERING
- ---------------------------------------------------------- ------------ -------- --------
<S> <C> <C> <C>
Dr. Lindsay Rosenwald(2).................................. 1,229,481 17.26% 16.11%
787 Seventh Avenue
New York, NY 10019
Entities affiliated with the Aries Trust(3)............... 783,684 12.07% 10.90%
787 Seventh Avenue
New York, NY 10019
Kleiner Perkins Caufield & Byers V,....................... 578,308 13.90% 8.41%
a California Limited Partnership(4)
2750 Sand Hill Road
Menlo Park, CA 94025
CW Ventures II, L.P....................................... 499,114 12.24% 7.27%
1041 Third Avenue
New York, NY 10021
Domain Partners II, L.P................................... 407,938 10.26% 5.95%
One Palmer Square
Princeton, NJ 08542
Sierra Ventures III....................................... 395,073 9.94% 5.77%
a California Limited Partnership(5)
3000 Sand Hill Road
Building A, Suite 210
Menlo Park, CA 94025
Abbott Laboratories....................................... 391,844 9.85% 11.03%(6)
100 Abbott Park Road
Abbott Park, IL 60064
Hyline Laboratories, Inc.(7).............................. 330,744 7.68% 4.61%
100 Banks Avenue
Rockville Center, NY 11570
Oxford Bioscience Partners L.P.(8)........................ 316,685 7.36% 4.61%
650 Town Center Drive, Suite 810
Costa Mesa, CA 92626
Biotechnology Investment Limited(9)....................... 311,566 7.84% 4.55%
St. Julian's Court
St. Peter Port
Guernsey, Channel Islands
Dr. Alexander E. Barkas(10)............................... 8,564 * *
Digby Barrios(11)......................................... 10,705 * *
Charles J. Casamento(12).................................. 235,895 5.81% 3.40%
Laura Lehman(13).......................................... 43,538 1.09% *
Timothy E. Morris(14)..................................... 42,560 1.07% *
Jon S. Saxe............................................... 10,705 * *
Dr. Jesse I. Treu(15)..................................... 410,457 10.32% 5.99%
All executive officers and directors
as a group (7 persons)(16).............................. 762,424 18.48% 10.89%
</TABLE>
- ---------------
* Less than one percent
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<PAGE> 59
(1) Calculated in accordance with Rule 13d-3 promulgated under the Exchange Act
based on 6,851,080 shares of capital stock outstanding on an as-converted
basis as of September 30, 1997.
(2) Includes 288,845 shares held by The Aries Trust and 158,976 shares by the
Aries Fund. Also includes 216,632 shares issuable upon exercise of
outstanding Class A Warrants held by The Aries Trust and 119,231 shares
issuable upon exercise of Class A Warrants and Placement Agent Units
Options held by the Aries Fund. Dr. Rosenwald is the general partner of the
Aries Fund and the investment manager to The Aries Trust. Dr. Rosenwald
disclaims beneficial ownership of the securities held by the Aries Fund and
The Aries Trust, except to the extent of his pecuniary interest therein, if
any.
(3) Includes 288,845 shares held by The Aries Trust and 216,632 shares issuable
upon the exercise of Class A Warrants and Placement Agent Unit Options held
by The Aries Trust, 158,976 shares held by the Aries Fund and 119,231
shares issuable upon the exercise of Class A Warrants and Placement Agent
Unit Options held by the Aries Fund.
(4) Includes 2,080 shares held by KPCB Zaibatsu Fund I ("KPCB Zaibatsu"), an
entity affiliated with KPCB V.
(5) Includes 7,900 shares held by Sierra Ventures III International, an entity
affiliated with Sierra.
(6) Shares beneficially owned after the Offering include 363,636 shares to be
purchased by Abbott in the Offering at the initial public offering price
(assuming an initial public offering price of $11.00 per share).
(7) Consists of shares of Common Stock issuable upon exercise of an outstanding
warrants.
(8) Includes 58,858 shares held by Oxford Bioscience Partners (Adjunct) L.P.
("OBP Adjunct") and 51,123 shares held by Oxford Bioscience Partners
(Bermuda) ("OBP Bermuda"), entities affiliated with Oxford Bioscience
Partners L.P. ("OBP L.P."). Also includes Common Stock issuable upon
exercise of outstanding Class A Warrants, in the following amounts, 4,478
held by OBP Adjunct, 3,890 held by OBP Bermuda and 14,022 held by OBP L.P.
(9) Includes 87,655 shares held by Old Court Limited, an entity affiliated with
Biotechnology Investments Limited ("BIL").
(10) Consists of options to purchase 8,564 shares exercisable within 60 days of
September 30, 1997.
(11) Consists of options to purchase 10,705 shares exercisable within 60 days of
September 30, 1997.
(12) Includes 25,690 shares held by various family members of Mr. Casamento that
Mr. Casamento may be deemed to beneficially own; 55,111 shares subject to
repurchase as of September 30, 1997; and options or stock purchase rights
for the purchase of 84,433 shares exercisable within 60 days of September
30, 1997.
(13) Includes options to purchase 29,684 shares exercisable within 60 days of
September 30, 1997 and 10,810 shares subject to repurchase as of September
30, 1997.
(14) Includes 19,207 shares subject to repurchase as of September 30, 1997 and
options to purchase 16,111 shares exercisable within 60 days of September
30, 1997.
(15) Consists of 407,938 shares held by Domain. Dr. Treu is a general partner of
One Palmer Square Associates II, L.P. which is the general partner of
Domain. Dr. Treu shares voting and investment power with respect to such
shares and may be deemed the beneficial owner of such shares but disclaims
such beneficial ownership except to the extent of his proportionate
interest therein. Also includes options to purchase 2,519 shares
exercisable within 60 days of September 30, 1997. Excludes 223,911 shares
held by BIL. Domain Associates, of which Dr. Treu is a general partner, is
the United States venture capital advisor to BIL pursuant to a contractual
agreement. Domain Associates has no voting or investment power over BIL and
Dr. Treu disclaims beneficial ownership of the BIL shares.
(16) See footnote (4) and footnotes (10) - (15).
58
<PAGE> 60
DESCRIPTION OF CAPITAL STOCK
The Company's Amended and Restated Articles of Incorporation authorize
68,932,344 shares of capital stock, consisting of 50,000,000 shares of Common
Stock and 18,932,344 shares of Preferred Stock. In connection with the Offering
and the reincorporation of the Company in Delaware, the Company will adopt a
Certificate of Incorporation (the "Restated Certificate of Incorporation"),
which will authorize the issuance of 35,000,000 shares of capital stock,
consisting of 30,000,000 shares of Common Stock, par value $0.001 per share, and
5,000,000 shares of Preferred Stock, par value $0.001 per share. Set forth below
is a description of the capital stock of the Company.
COMMON STOCK
As of June 30, 1997, there were 4,547,117 shares of Common Stock issued and
outstanding held of record by 59 stockholders. The holders of Common Stock are
entitled to one vote per share on all matters submitted to a vote of
stockholders and are not entitled to cumulative voting rights with respect to
the election of directors. Accordingly, holders of a majority of the shares of
Common Stock entitled to vote in any election of directors may elect all of the
directors standing for election. Holders of Common Stock are entitled to receive
ratably such dividends, if any, as may be declared by the Board of Directors out
of funds legally available therefore, subject to preferences that may be
applicable to any outstanding Preferred Stock. In the event of liquidation,
dissolution or winding up of the Company, holders of Common Stock are entitled
to share ratably in all net assets remaining after payment of liabilities and
the liquidation preference of any outstanding Preferred Stock. Holders of Common
Stock have no preemptive, subscription, redemption, conversion or other
subscription rights, and there are no sinking fund provisions applicable to the
Common Stock. All currently outstanding shares of Common Stock are, and the
shares of Common Stock being issued and sold in the Offering will be, duly
authorized, validly, issued, fully paid and nonassessable.
PREFERRED STOCK
No shares of Preferred Stock will be outstanding after the Offering. At
June 30, 1997, the Company currently has outstanding an aggregate of 14,377,595
shares of Series A, Series B, Series C, Series D and Series E Preferred Stock.
Each share of such outstanding Preferred Stock will convert automatically into
0.2519 of a share of Common Stock concurrently with the closing of the Offering,
for a total of 3,046,694 shares of Common Stock. Holders of Series A through E
Preferred Stock have been granted certain registration rights. See
"-- Registration Rights."
The Company currently has outstanding 2,283,663 shares of Series F
Preferred Stock. Assuming an initial public offering price per share of $8.93 or
greater, each share of Series F Preferred Stock will convert automatically into
0.5038 of a share of Common Stock concurrently with the closing of the Offering,
for a total of 1,149,988 shares of Common Stock. If the Offering price is less
than $8.93 per share, the conversion ratio of the Series F Preferred Stock will
be adjusted, resulting in additional shares of Common Stock being issued to the
holders of the Series F Preferred Stock.
If the initial public offering per share price is below $8.93, the
aggregate number of shares of Common Stock into which the Series F Preferred
Stock is convertible (the "Aggregate Shares") equals:
4.5 X F
-------
P
where:
<TABLE>
<S> <C> <C>
F = the number of shares of Series F Preferred Stock outstanding plus the
number of shares of Series F Preferred Stock issuable upon exercise of
the Placement Agent Unit Options
P = the initial public offering per share price of Common Stock
</TABLE>
For example, assuming an initial public offering price of $8.00 per share
an additional 455,009 shares of Common Stock would be issuable upon conversion
of the Series F Preferred Stock.
59
<PAGE> 61
Thus, where:
<TABLE>
<S> <C> <C>
F = 2,282,663 + 570,665 = 2,853,328
P = $8.00
Aggregate Shares = 4.5 X (2,853,328)
-----------
8.00
= 12,839,976
-----------
8.00
= 1,604,997
Additional shares of
Common Stock issued = 1,604,997 - 1,149,988
= 455,009
</TABLE>
Any adjustment made to the conversion ratio of the Series F Preferred Stock
would increase the number of shares used in calculations of, among other things,
dilution to new investors, shares held by certain principal stockholders, shares
subject to registration rights and shares eligible for future sale. See
"Dilution," "Principal Stockholders," "-- Registration Rights," and "Shares
Eligible for Future Sale."
Following completion of the Offering and the conversion of all the
outstanding shares of Preferred Stock, the Board of Directors will have the
authority to issue from time to time up to 5,000,000 shares of Preferred Stock
in one or more series and to fix the powers, designations, preferences and
relative, participating, optional or other rights thereof, including dividend
rights, conversion rights, voting rights, redemption terms, liquidation
preferences and the number of shares constituting each such series, without any
further vote or action by the Company's stockholders. The issuance of Preferred
Stock could adversely affect the rights of holders of Common Stock and could
have the effect of delaying, deferring or preventing a change in control of the
Company. The Company has no present plans to issue any shares of Preferred
Stock.
WARRANTS
As of June 30, 1997, there were warrants outstanding to purchase (i) an
aggregate of 3,778 shares of Common Stock at an exercise price of $5.95 per
share, (ii) an aggregate of 13,312 shares at exercise of $7.94 per share, (iii)
an aggregate of 609,827 shares at an exercise price of $8.93 per share, (iv) an
aggregate of 330,744 shares of an exercise price of $9.83 and (v) an aggregate
of 5,877 shares at an exercise price of $10.21 per share. Each warrant contains
provisions for the adjustment of the exercise price and the aggregate number of
shares issuable upon the exercise of the warrant under certain circumstances,
including stock dividends, stock splits, reorganizations, reclassification,
consolidations and certain dilutive sales of the securities for which the
warrant is exercisable below the then existing exercise price. Each warrant may
be exercised, without the payment of cash, for an adjusted number of shares of
Common Stock. The warrants to purchase an aggregate of 330,744 shares of Common
Stock will expire upon the closing of the Offering. The remaining warrants have
terms expiring from September, 1998 to June, 2002. The Company is also obligated
to issue a warrant to purchase 62,975 shares of Common Stock at an exercise
price of $8.93 per share expiring six years from its date of issuance. The
Company will issue this warrant to its landlord in connection with the
relocation to its new facility which is expected in November 1997. Warrant
holders have been granted certain registration rights. See "-- Registration
Rights."
PLACEMENT AGENT UNIT OPTIONS
As of June 30, 1997, 570,665 Placement Agent Unit Options were outstanding,
at an exercise price of $1.24 per unit. Each Placement Agent Unit Option
entitles the holder thereof to purchase a Unit consisting of two shares of
Series F Preferred Stock and one Class A Warrant. The Class A Warrants entitle
the holder to purchase 0.25197 of a share of Common Stock at an exercise price
equal to the lesser of the initial public offering price and $8.93 per share,
and expire on June 22, 2003. The Placement Agent Unit Options expire on December
23, 2007. Following the Offering, assuming an initial public offering price at
or above $8.93 per share, each Placement Agent Unit Option will be exercisable
for 0.5038 of a share of Common Stock and a Class Warrant. The number of shares
of Common Stock to be issued upon exercise of the Placement Agent
60
<PAGE> 62
Unit Options, and the exercise price thereof, will depend upon the initial
public offering price. See "-- Preferred Stock" and "Certain Transactions."
If the initial public offering price is below $8.93 per share, the number
of shares of Common Stock issuable upon exercise of the Placement Agent Unit
Options will increase as a result of the increase in the Series F Preferred
Stock conversion ratio (the "Conversion Ratio"). The Conversion Ratio will be
equal to the quotient obtained by dividing (i) the Aggregate Shares by (ii) the
number of shares of Series F Preferred Stock outstanding on the date of the
closing of the Offering plus the number of shares of Series F Preferred Stock
issuable upon exercise of the Placement Agent Unit Options before giving effect
to any adjustments.
For example, if the initial public offering price per share is $8.00 the
number of shares issuable upon the exercise of the Placement Agent Unit Option
and subsequently would be determined as follows:
<TABLE>
<S> <C> <C>
1,604,997 = .5625
- ----------
2,853,328
</TABLE>
Consequently the aggregate number of shares of Common Stock issuable upon
exercise of the Placement Agent Units Option would be 641,998. This would result
in the issuance of 67,002 additional shares of Common Stock.
REPRESENTATIVES' WARRANTS
The Company has agreed to issue to the Representatives warrants to purchase
an aggregate of 230,000 shares of Common Stock, exercisable at any time
following the first anniversary of the date of this Prospectus, each warrant
having an exercise price equal to 125% of the initial public offering price of
the Common Stock and expiring five years from the date of this Prospectus. The
Company has granted the holders of the Representatives' Warrants certain demand
and piggy-back registration rights with respect to the shares of Common Stock
issuable upon the exercise of such warrants. See "-- Registration Rights" and
"Underwriting."
REGISTRATION RIGHTS
The holders of 3,046,694 shares of Common Stock issuable upon conversion of
outstanding preferred stock (except Series F Preferred Stock) and the holders of
warrants exercisable for up to 57,811 shares of Common Stock (collectively, the
"Registrable Securities") will be entitled to certain rights with respect to the
registration of such shares of Common Stock under the Securities Act. Under the
terms of an agreement between the Company and such holders, if the Company
proposes to register any of its Common Stock either for its own account or for
the account of other stockholders, subject to certain exceptions, under the
Securities Act, the holders of Registrable Securities are entitled to notice of
the registration and are entitled to include, at the Company's expense, shares
of such Common Stock therein. The holders of Registrable Securities have waived
their registration rights with respect to the Offering. In addition, holders of
at least 25% of the then-outstanding Registrable Securities may, on two
occasions, require the Company to file a registration statement under the
Securities Act at the Company's expense, registering the Registrable Securities
for public resale. Such rights may not be exercised until 90 days after the
effective date of the Offering. Further, holders of sufficient shares with
registration rights may require the Company to register their shares on Form S-3
at such holders' expense when such form becomes available to the Company,
subject to certain conditions and limitations. Such registration rights expire
in December 2004.
In addition, the holders of an aggregate of 1,149,988 shares of Common
Stock issuable upon conversion of the outstanding Series F Preferred Stock
concurrently with the closing of the Offering, the holders of Class A Warrants
issued in connection with the Series F Private Placement to purchase an
aggregate of 905,727 shares of Common Stock and holders of the Placement Agent
Unit Options (collectively, the "Series F Holders") are entitled to require the
Company to file a shelf registration statement at the Company's expense pursuant
to the Securities Act within 270 days after the closing of the Offering covering
shares of Common Stock then held by the holders of Series F Preferred Stock. The
number of shares of Common Stock to be issued upon conversion of the Series F
Preferred Stock and the exercise of the Placement Agent Unit Options will depend
upon the initial public offering price. See "-- Preferred Stock" and
"-- Placement Agent Unit Options."
61
<PAGE> 63
DELAWARE ANTI-TAKEOVER LAW AND CERTAIN CHARTER AND BY-LAW PROVISIONS
Upon the completion of the Company's reincorporation in Delaware, the
Company will be subject to the provisions of Section 203 of the Delaware General
Corporation Law, Section 203 prohibits a publicly-held Delaware corporation from
engaging in a "business combination" with an "interested stockholder" for a
period of three years after the date of the transaction in which the person
became an interested stockholder, unless the business combination is approved in
a prescribed manner. A "business combination" includes a merger, asset sale or
other transaction resulting in a financial benefit to the interested
stockholder. Subject to certain exceptions, an "interested stockholder" is a
person who, together with affiliates and associates, owns (or within three years
prior, did own) 15% or more of the corporation's voting stock.
The Restated Certificate of Incorporation provides for the division of the
Board of Directors into three classes as nearly equal in size as possible with
staggered three-year terms. See "Management." In addition, the Restated
Certificate of Incorporation provides that directors may be removed only for
cause by the affirmative vote of the holders of two-thirds of the shares of
capital stock of the corporation entitled to vote. Under the Restated
Certificate of Incorporation, any vacancy on the Board of Directors, however
occurring, including a vacancy resulting from an enlargement of the Board, may
only be filled by vote of a majority of the directors then in office. The
classification of the Board of Directors and the limitations on the removal of
directors and filling of vacancies could have the effect of making it more
difficult for a third party to acquire, or of discouraging a third party from
acquiring, control of the Company.
The Restated Certification of Incorporation also provides that after the
closing of the Offering, any action required or permitted to be taken by the
stockholders of the Company at an annual meeting or special meeting of
stockholders may only be taken if properly brought before such meeting and may
not be taken by written action in lieu of a meeting. The Restated Certificate of
Incorporation further provides that special meetings of the stockholders may
only be called by the Chairman of the Board of Directors, the Chief Executive
Officer, the Board of Directors or by any person or persons holding at least
10.0% of the outstanding capital stock. Under the Company's Amended and Restated
By-Laws (the "By-Laws"), in order for any matter to be considered "properly
brought" before a meeting, a stockholder must comply with certain requirements
regarding advance notice to the Company. The foregoing provisions could have the
effect of delaying until the next stockholders meeting stockholder actions which
are favored by holders of a majority of the outstanding voting securities of the
Company. These provisions may also discourage another person or entity from
making a tender offer for the Company's Common Stock, because such person or
entity, even if it acquired a majority of the outstanding voting securities of
the Company, would be able to take action as a stockholder (such as electing new
directors or approving a merger) only at a duly called stockholders meeting, and
not by written consent.
The General Corporation Law of Delaware provides generally that the
affirmative vote of a majority of the shares entitled to vote on any matter is
required to amend a corporation's certificate of incorporation or by-laws,
unless a corporation's certificate of incorporation or by-laws, as the case may
be, requires a greater percentage. The Restated Certificate of Incorporation and
the By-Laws require the affirmative vote of the holders of at least 66 2/3
percent of the shares of capital stock of the Company issued and outstanding and
entitled to vote to amend or repeal any of the provisions described in the prior
two paragraphs.
The Restated Certificate of Incorporation contains certain provisions
permitted under the General Corporation Law of Delaware relating to the
liability of directors. The provisions eliminate a director's liability for
monetary damages for a breach of fiduciary duty, except in certain circumstances
involving wrongful acts, such as the breach of a director's duty of loyalty or
acts or omissions which involve intentional misconduct or a knowing violation of
law. Further, the Restated Certificate of Incorporation contains provisions to
indemnify the Company's directors and officers to the fullest extent permitted
by the General Corporation Law of Delaware. The Company believes that these
provisions will assist the Company in attracting and retaining qualified
individuals to serve as directors.
TRANSFER AGENT AND REGISTRAR
The transfer agent for the Common Stock of the Company is American Stock
Transfer & Trust Company, 40 Wall Street, New York, New York 10005.
62
<PAGE> 64
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offering, the Company will have outstanding an
aggregate of 6,847,117 shares of Common Stock, assuming no exercise of the
Underwriters' over-allotment option; an aggregate of 452,429 shares of Common
Stock reserved for issuance under the Company's stock plans upon exercise of
options outstanding as of June 30, 1997; 451,530 shares of Common Stock reserved
for issuance upon the exercise of warrants outstanding as of June 30, 1997;
574,983 shares of Common Stock reserved for issuance upon exercise of the Class
A Warrants; 574,996 shares of Common Stock reserved for issuance upon exercise
of the Placement Agent Unit Options; 143,746 shares of Common Stock reserved for
issuance upon the exercise of the Placement Agent Class A Warrants; and 230,000
shares of Common Stock reserved for issuance upon exercise of the
Representatives' Warrants. The 2,300,000 shares sold in the Offering will be
freely tradeable without restriction or further registration under the
Securities Act except for any shares held by an "affiliate" of the Company as
that term is defined in Rule 144. The remaining 4,547,117 shares of Common Stock
held by existing stockholders will be restricted shares under the Securities Act
and may be sold in the public market only if registered or if they qualify for
an exemption from Registration under Rules 144 or 701 promulgated under the
Securities Act.
All directors and executive officers and certain other stockholders of the
Company, holding in the aggregate substantially all of the shares of Common
Stock outstanding prior to the Offering, have agreed with the Underwriters not
to sell or otherwise dispose of any shares of Common Stock for a period of 180
days after the date of this Prospectus (the "Lockup Period") without the prior
written consent of the Representatives. See "Underwriting." Upon expiration of
the Lockup Period, approximately 369,123 Restricted Shares held by
non-affiliates will be eligible for sale in the public market without
restriction pursuant to Rule 144(k) and approximately 3,221,740 Restricted
Shares held by affiliates and approximately 503,483 Restricted Shares held by
non-affiliates will be so eligible subject to compliance with the volume
limitations of Rule 144 described below. Sales of Restricted Shares in the
public market, or the availability of such shares for sale, could adversely
affect the market price of the Common Stock.
Rule 701 permits resales of shares issued pursuant to certain compensatory
benefit plans and contracts commencing 90 days after the issuer becomes subject
to the reporting requirements of the Securities Exchange Act of 1934, as
amended, in reliance upon Rule 144 but without compliance with certain
restrictions, including the holding period requirements, contained in Rule 144.
If all the requirements of Rule 701 are met, upon expiration of the Lockup
Period an aggregate of 298,340 shares of Common Stock issuable upon exercise of
currently outstanding options will be eligible for sale pursuant to such rule.
In general, under Rule 144 as currently in effect, an affiliate of the
Company or a person (or persons whose shares are aggregated) who has
beneficially owned Restricted Shares for at least one year will be entitled to
sell within any three-month period a number of shares that does not exceed the
greater of (i) one percent of the number of shares of Common Stock then
outstanding (68,471) or (ii) the average weekly trading volume of the Common
Stock during the four calendar weeks immediately preceding the date on which
notice of the sale is filed with the Commission. Sales pursuant to Rule 144 are
subject to certain requirements relating to manner of sale, notice and
availability of current public information about the Company. A person (or
persons whose shares are aggregated) who is not deemed to have been an affiliate
of the Company at any time during the 90 days preceding a sale, and who has
beneficially owned for at least two years the shares proposed to be sold, is
entitled to sell such shares under Rule 144(k) without regard to the limitations
described above.
The Company is unable to estimate accurately the number of Restricted
Shares that will be sold under Rule 144 since this will depend in part on the
market price for the Common Stock, the personal circumstances of the seller and
other factors. See "Description of Capital Stock -- Preferred Stock."
After the effective date of the Offering, the Company intends to file
registration statements on Forms S-8 to register an aggregate of 2,665,385
shares of Common Stock reserved for issuance upon exercise of its plans. Such
registration statements will become effective automatically upon filing. Shares
issued under the plans after the filing of the registration statements on Form
S-8 may be sold in the open market subject, in the case of certain holders, to
the Rule 144 limitations applicable to affiliates, the above-referenced lockup
agreements and vesting restrictions imposed by the Company.
The holders of substantially all of the Restricted Shares as well as shares
subject to outstanding warrants have been granted certain registration rights,
under the Securities Act. See "Description of Capital Stock -- Registration
Rights."
63
<PAGE> 65
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
underwriters (the "Underwriters") named below, for whom EVEREN Securities, Inc.,
Gruntal & Co., L.L.C., and Cruttenden Roth Incorporated are acting as the
Representatives, have severally agreed to purchase, and the Company has agreed
to sell to the Underwriters, the following respective number of shares of Common
Stock.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
------------------------------------------------------------------ ---------
<S> <C>
EVEREN Securities, Inc............................................
Gruntal & Co., L.L.C..............................................
Cruttenden Roth Incorporated......................................
-------
Total................................................... 2,300,000
=======
</TABLE>
The Underwriting Agreement provides that the obligations of the
Underwriters are subject to certain conditions precedent, including the absence
of any material adverse change in the Company's business and the receipt of
certain certificates, opinions and letters from the Company and its counsel and
independent auditors. The nature of the Underwriters' obligation is such that
they are committed to purchase all shares of Common Stock offered hereby if any
of such shares are purchased.
The Underwriters propose to offer the shares of Common Stock to the public
at the offering price set forth on the cover page of this Prospectus, and to
certain dealers at such price less a concession not in excess of $ per
share. The Underwriters may allow to selected dealers and such dealers may
reallow a concession not in excess of $ per share to certain other
dealers. After the initial public offering of the shares of Common Stock, the
offering price and other selling terms may be changed by the Representatives.
The Company has granted to the Underwriters an option, exercisable at any
time during the 45-day period after the date of this Prospectus, to purchase up
to an additional 345,000 shares of Common Stock at the initial public offering
price set forth on the cover page of this Prospectus, less underwriting
discounts and commissions. The Underwriters may exercise such option solely for
the purpose of covering over-allotments, if any, in connection with the
Offering. To the extent such option is exercised, each Underwriter will be
obligated, subject to certain conditions, to purchase approximately the same
percentage of such additional shares as the number of shares set forth next to
such Underwriter's name in the preceding table bears to the total number of
shares listed in the table.
The offering of the shares is made for delivery when, as and if accepted by
the Underwriters and subject to prior sale and to withdrawal, cancellation or
modification of the Offering without notice. The Underwriters reserve the right
to reject an order for the purchase of shares in whole or in part.
In connection with the Offering, the Underwriters may engage in
transactions that stabilize, maintain or otherwise affect the price of the
Common Stock. Specifically, the Underwriters may over-allot the Offering,
creating a syndicate short position. In addition, the Underwriters may bid for
and purchase shares of Common Stock in the open market to cover syndicate short
positions or to stabilize the price of the Common Stock. Finally, the
underwriting syndicate may reclaim selling concessions from syndicate members in
the Offering, if the syndicate repurchases previously distributed Common Stock
in syndicate covering transactions, in stabilization transactions or otherwise.
Any of these activities may stabilize or maintain the market price of the Common
Stock above independent market levels. The Underwriters are not required to
engage in these activities, and may end any of these activities at any time.
The Representatives have informed the Company that the Underwriters do not
intend to confirm sales to accounts over which they exercise discretionary
authority.
The Company has agreed to issue to the Representatives warrants to purchase
up to an aggregate of 230,000 shares of Common Stock, exercisable at any time
following the first anniversary of the date of this Prospectus, each warrant
having an exercise price equal to 125% of the initial public offering price of
the Common Stock set forth on the cover page of this Prospectus, and expiring
five years from the date of this Prospectus. The Representatives' Warrants
contain provisions providing for adjustment of the exercise price
64
<PAGE> 66
and the number and type of securities issuable upon the exercise thereof upon
the occurrence of certain events, including the issuance of any shares of Common
Stock or other securities convertible into or exercisable for shares of Common
Stock at a price per share less than the exercise price, or the market price of
the Common Stock, or in the event of any stock dividend, stock split, stock
combination or similar transaction. Holders of the Representatives' Warrants
have been granted certain demand and piggy-back registrations rights under the
Securities Act with respect to the securities issuable upon exercise of the
Representatives' Warrants. For a period of twelve months from the date of this
Prospectus, the Representatives are generally prohibited from selling,
transferring, assigning, pledging or hypothecating the Representatives' Warrants
or the Common Stock underlying the Representatives' Warrants. Thereafter, the
Representatives' Warrants will be transferable subject to compliance with the
Securities Act. See "Description of Capital Stock -- Registration Rights" and
"Shares Eligible For Future Sale."
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act, or to contribute to
payments that the Underwriters may be required to make in respect thereof.
The executive officers, directors and certain employees of the Company and
other stockholders, including Abbott, have agreed that they will not, without
the prior written consent of EVEREN Securities, offer, sell or otherwise dispose
of any shares of Common Stock, options or warrants to acquire shares of Common
Stock, or securities exchangeable for or convertible into shares of Common Stock
for a period of 180 days from the date of this Prospectus. The Company has also
agreed that it will not, without the prior written consent of EVEREN Securities,
offer, sell, contract to sell, grant any option to purchase or otherwise dispose
of any shares of Common Stock, options or warrants to acquire shares of Common
Stock or securities exchangeable for or convertible into shares of Common Stock
for a period of 180 days after the date of this Prospectus, except for
securities issued under its option plan or upon exercise of currently
outstanding warrants. See "Shares Eligible for Future Sale."
Prior to the Offering, there has been no public market for the Common
Stock. Consequently, the initial public offering price for the shares of Common
Stock included in the Offering will be determined by negotiations between the
Company and the Representatives. Among the factors to be considered in
determining such price will be the history of and prospects for the Company's
business and the industry in which it competes, an assessment of the Company's
management and the present state of the Company's development, its past and
present operations and financial performance, the prospects for future earnings
of the Company, the present state of the Company's research programs, the
current state of the economy in the United States and the current level of
economic activity in the industry in which the Company competes and in
comparable industries, and the current prevailing condition in the securities
markets, including current market valuations of publicly traded companies that
are comparable to the Company.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by Cooley Godward LLP. Certain legal matters will be passed
upon for the Underwriters by Skadden, Arps, Slate, Meagher & Flom (Illinois),
Chicago, Illinois.
EXPERTS
The financial statements of the Company as of December 31, 1995 and 1996
and for each of the three years in the period ended December 31, 1996 and for
the period from inception (May 5, 1989) to December 31, 1996 included in this
Prospectus and Registration Statement have been audited by Ernst & Young LLP,
independent auditors, as set forth in their report thereon (which contains an
explanatory paragraph describing conditions that raise substantial doubt about
the Company's ability to continue as a going concern as described in Note 1 to
the financial statements) appearing elsewhere herein and are included in
reliance upon such report, given on the authority of such firm as experts in
accounting and auditing.
65
<PAGE> 67
The statements in this Prospectus under the captions "Risk
Factors -- Dependence on Patents and Proprietary Rights" and
"Business -- Patents and Proprietary Rights" relating to United States patent
matters have been reviewed and approved by Pennie & Edmonds LLP, New York, New
York, patent counsel to the Company, and have been included herein in reliance
upon the review and approval by such firm as experts in patent law.
ADDITIONAL INFORMATION
As a result of the Offering, the Company will become subject to the
information and reporting requirements of the Exchange Act, and in accordance
therewith will file periodic reports, proxy statements and other information
with the Commission. The Company intends to furnish to its stockholders annual
reports containing financial statements audited by an independent public
accounting firm and will make available copies of quarterly reports containing
unaudited financial statements for the first three quarters of each fiscal year.
A Registration Statement on Form S-1, including amendments thereto,
relating to the Common Stock offered by the Company hereby has been filed with
the Commission, Washington, D.C. 20549. This Prospectus does not contain all of
the information set forth in the Registration Statement and the exhibits and
schedules thereto. Statements contained in this Prospectus as to the contents of
any contract or any other document referred to are not necessarily complete, and
in each instance reference is made to the copy of such contract or other
document filed as an exhibit to the Registration Statement, each such statement
being qualified in all respects by such reference. For further information with
respect to the Company and the Common Stock offered hereby, reference is made to
the Registration Statements and the exhibits and schedules thereto. A copy of
the Registration Statement and exhibits thereto may be inspected without charge
at the public reference facilities maintained by the Commission in Room 1024,
450 Fifth Street, N.W., Washington D.C. 20549, and at the Commission's regional
offices located at the Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661 and at Seven World Trade Center, 13th Floor, New York,
New York 10048, and copies of all or any part thereof may be obtained from such
offices, upon payment of certain fees prescribed by the Commission. The
Commission maintains a World Wide Web site that contains reports, proxy and
information statements and other information filed electronically with the
Commission. The address of the Commission World Wide Website is
http://www.sec.gov.
66
<PAGE> 68
RIBOGENE, INC.
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Ernst & Young LLP, Independent Auditors................................... F-2
Financial Statements
Balance Sheets...................................................................... F-3
Statements of Operations............................................................ F-4
Statements of Stockholders' Equity (Deficit)........................................ F-5
Statements of Cash Flows............................................................ F-7
Notes to Financial Statements....................................................... F-8
</TABLE>
F-1
<PAGE> 69
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors
RiboGene, Inc.
We have audited the accompanying balance sheets of RiboGene, Inc. (a
development stage company) as of December 31, 1995 and 1996, and the related
statements of operations, cash flows and stockholders' equity (deficit) for each
of the three years in the period ended December 31, 1996 and for the period from
inception (May 5, 1989) to December 31, 1996. 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 referred to above present fairly,
in all material respects, the financial position of RiboGene, Inc. (a
development stage company) at December 31, 1995 and 1996, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1996 and for the period from inception (May 5, 1989) to December
31, 1996, in conformity with generally accepted accounting principles.
As more fully described in Note 1 to the financial statements, the Company
is in the development stage, has incurred losses from inception to December 31,
1996 of approximately $31.6 million and expects such losses to continue. At
December 31, 1996, the Company had a working capital deficit and a net
stockholders' deficit of approximately $954,000 and $2.0 million, respectively.
These factors raise substantial doubt about the Company's ability to continue as
a going concern. Management's plans as to these matters are also described in
Note 1. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
Palo Alto, California
February 25, 1997, except as to Note 9,
for which the date is , 1997
- ----------------------------------------------------------
The foregoing report is in the form that will be signed upon the completion
of the changes of the capital accounts as described in Note 9 to the financial
statements.
/s/ ERNST & YOUNG LLP
Palo Alto, California
October 22, 1997
F-2
<PAGE> 70
RIBOGENE, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
ASSETS
<TABLE>
<CAPTION>
UNAUDITED
PRO FORMA
DECEMBER 31, STOCKHOLDERS'
------------------- JUNE 30, EQUITY AT
1995 1996 1997 JUNE 30, 1997
-------- -------- ----------- -------------
(UNAUDITED) (NOTE 9)
<S> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents....................... $ 1,897 $ 1,981 $ 2,401
Short-term investments.......................... -- -- 881
Prepaid expenses and other current assets....... 118 184 300
-------- -------- --------
Total current assets.................... 2,015 2,165 3,582
Property and equipment, net....................... 344 285 260
Other assets...................................... 45 207 162
-------- -------- --------
$ 2,404 $ 2,657 $ 4,004
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Short-term note payable to bank................. $ 1,500 $ -- $ --
Accounts payable................................ 294 499 275
Accrued compensation............................ 190 263 253
Accrued interest payable........................ 280 294 199
Deferred revenue -- related party............... -- 556 556
Other current liabilities....................... 361 401 336
Current portion of capital lease obligations.... 152 106 96
Current portion of notes payable................ 1,000 1,000 1,000
-------- -------- --------
Total current liabilities............... 3,777 3,119 2,715
Long-term portion of capital lease obligations.... 147 137 112
Long-term portion of notes payable................ 2,000 1,000 --
Other noncurrent liabilities...................... 509 357 273
Commitments
Stockholders' equity (deficit):
Preferred stock, no par value; 12,658,491 shares
authorized at December 31, 1995 and 1996,
18,932,344 shares authorized at June 30, 1997
(5,000,000 shares authorized, $0.001 par
value, pro forma); issuable in series;
9,441,884, 12,094,932 and 14,377,595
convertible preferred shares issued and
outstanding at December 31, 1995 and 1996 and
at June 30, 1997, respectively (none pro
forma) (aggregate liquidation preference of
$30,206,397 in 1996 and $40,478,381 in
1997)........................................ 23,571 29,449 33,560 $ --
Common stock, no par value; 25,000,000 shares
authorized at December 31, 1995 and 1996,
50,000,000 at June 30, 1997 (30,000,000
shares authorized, $0.001 par value, pro
forma); 156,197, 294,224 and 350,435 shares
issued and outstanding at December 31, 1995
and 1996, and at June 30, 1997, respectively
(4,547,117 shares pro forma)................. 175 290 340 5
Additional paid-in capital........................ -- -- -- 33,895
Notes receivable from stockholders................ (54) (111) (154) (154)
Deficit accumulated during the development
stage........................................... (27,721) (31,584) (32,842) (32,842)
-------- -------- -------- --------
Total stockholders' equity (deficit).............. (4,029) (1,956) 904 $ 904
========
-------- -------- --------
$ 2,404 $ 2,657 $ 4,004
======== ======== ========
</TABLE>
See accompanying notes.
F-3
<PAGE> 71
RIBOGENE, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PERIOD FROM PERIOD FROM
INCEPTION SIX MONTHS ENDED INCEPTION
YEARS ENDED DECEMBER 31, (MAY 5, 1989) JUNE 30, (MAY 5, 1989)
-------------------------------- TO DECEMBER 31, -------------------- TO JUNE 30,
1994 1995 1996 1996 1996 1997 1997
-------- ------- --------- --------------- ------- --------- -------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue:
Contract research revenue
from related party......... $ -- $ -- $ 1,112 $ 1,112 $ 278 $ 884 $ 1,996
Grant revenue................ 238 407 975 1,620 414 697 2,317
-------- ------- --------- -------- ------- --------- --------
Total revenue.......... 238 407 2,087 2,732 692 1,581 4,313
-------- ------- --------- -------- ------- --------- --------
Operating expenses:
Research and development..... 4,209 4,663 4,077 18,568 2,162 2,052 20,620
General and administrative... 2,424 2,758 1,372 10,088 675 763 10,851
Restructuring costs.......... -- -- 219 219 219 -- 219
Acquired in-process research
and development............ 5,000 -- -- 5,000 -- -- 5,000
-------- ------- --------- -------- ------- --------- --------
Total operating
expenses............. 11,633 7,421 5,668 33,875 3,056 2,815 36,690
-------- ------- --------- -------- ------- --------- --------
Loss from operations........... (11,395) (7,014) (3,581) (31,143) (2,364) (1,234) (32,377)
Interest expense, net.......... (42) (240) (282) (441) (241) (24) (465)
-------- ------- --------- -------- ------- --------- --------
Net loss....................... $(11,437) $(7,254) $ (3,863) $ (31,584) $(2,605) $ (1,258) $ (32,842)
======== ======= ========= ======== ======= ========= ========
Pro forma net loss per share... $ (0.75) $ (0.23)
========= =========
Shares used in computing pro
forma net loss per share..... 5,166 5,483
========= =========
</TABLE>
See accompanying notes.
F-4
<PAGE> 72
RIBOGENE, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
PERIOD FROM INCEPTION (MAY 5, 1989) TO JUNE 30, 1997
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
DEFICIT
NOTES ACCUMULATED
PREFERRED STOCK COMMON STOCK RECEIVABLE DURING THE TOTAL
-------------------- ---------------- FROM DEVELOPMENT STOCKHOLDERS'
SHARES AMOUNT SHARES AMOUNT STOCKHOLDERS STAGE EQUITY (DEFICIT)
----------- ------- ------- ------ ------------ ----------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Issuance of shares of common stock to
founders for services in May 1989 at
$0.10 per share........................ -- $ -- 32,080 $ 3 $ -- $ -- $ 3
Issuance of Series A preferred stock
for in-process technology in May
1990................................. 65,329 -- -- -- -- -- --
Sale of Series A preferred stock at
$6.60 per share and Series B and
Series C preferred stock warrants at
$0.10 per warrant to investors for
cash in June 1990, net of issuance
costs of $25......................... 68,182 437 -- -- -- -- 437
Exercise of Series B preferred stock
warrants at $10.00 per share in
October 1990......................... 75,000 750 -- -- -- -- 750
Exercise of common stock purchase
rights at $3.97 per share............ -- -- 36 -- -- -- --
Exercise of Series C preferred stock
warrants at $12.00 per share by
investors for cash in April 1991
(subsequently converted to Series B
preferred stock)..................... 25,000 300 -- -- -- -- 300
Dividend of Series A preferred stock in
June 1991............................ 4,757 -- -- -- -- -- --
Conversion of Series C preferred stock
to Series B preferred stock in June
1991................................. 5,000 -- -- -- -- -- --
Sale of Series B preferred stock at
$10.00 per share to investors for
cash in December 1990 and June 1991,
net of issuance costs of $43......... 187,695 1,834 -- -- -- -- 1,834
Issuance of Series B preferred stock at
$10.00 per share to consultants for
services performed in November
1991................................. 1,303 13 -- -- -- -- 13
Sale of Series B preferred stock at
$10.00 per share and common stock
warrants at $0.04 per warrant to
investors for cash in February 1992,
net of issuance costs of $23......... 170,673 1,685 -- -- -- -- 1,685
Exercise of common stock options and
common stock purchase rights at $3.97
to $4.76 per share................... -- -- 17,895 82 (79) -- 3
Repurchase of common stock issued to
founders at $0.10 per share.......... -- -- (13,266) (1) -- -- (1)
Exercise of common stock options and
common stock purchase rights at $4.76
per share............................ -- -- 3,237 16 (3) -- 13
Repurchase of unvested shares of common
stock at prices ranging from $0.10 to
$4.76 per share and cancellation of
notes receivable on termination of
employment of stockholders........... -- -- (9,276) (41) 41 -- --
Payments on notes receivable........... -- -- -- -- 24 -- 24
Sale of Series B preferred stock at
$10.00 per share and common stock
warrants at $0.04 per warrant to
investors for cash in June 1992, net
of issuance costs of $19............. 115,390 1,135 -- -- -- -- 1,135
Net loss -- inception (May 5, 1989) to
December 31, 1992.................... -- -- -- -- -- (5,191) (5,191)
---------- ------- ------- ---- ----- -------- --------
Balances at December 31, 1992 (carried
forward)............................... 718,329 $ 6,154 30,706 $ 59 $ (17) $ (5,191) $ 1,005
</TABLE>
F-5
<PAGE> 73
RIBOGENE, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT) (CONTINUED)
PERIOD FROM INCEPTION (MAY 5, 1989) TO JUNE 30, 1997
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
DEFICIT
NOTES ACCUMULATED
PREFERRED STOCK COMMON STOCK RECEIVABLE DURING THE TOTAL
--------------------- ----------------- FROM DEVELOPMENT STOCKHOLDERS'
SHARES AMOUNT SHARES AMOUNT STOCKHOLDERS STAGE EQUITY (DEFICIT)
----------- ------- ------- ------ ------------ ----------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance December 31, 1992 (brought
forward) 718,329 $ 6,154 30,706 $ 59 $ (17) $ (5,191) $ 1,005
Issuance of Series C preferred
stock at $1.50 per share and
Series D preferred stock
warrants at $0.01 per share for
cash in April and June 1993,
net of issuance costs of $52... 2,805,519 4,159 -- -- -- -- 4,159
Exercise of Series D preferred
stock warrants at $2.25 in
August 1993.................... 270,222 608 -- -- -- -- 608
Issuance of common stock at $0.60
per share to an officer........ -- -- 37,785 23 (23) -- --
Exercise of common stock options
and common stock purchase
rights at $0.05 to $5.95 per
share.......................... -- -- 13,363 47 (25) -- 22
Repurchase of unvested shares of
common stock at $4.76 per share
for cancellation of notes
receivable..................... -- -- (3,675) (17) 17 -- --
Forgiveness of notes
receivable..................... -- -- -- -- 25 -- 25
Net loss -- year ended December
31, 1993....................... -- -- -- -- -- (3,839) (3,839)
---------- ------- ------- ---- ----- -------- --------
Balances at December 31, 1993...... 3,794,070 10,921 78,179 112 (23) (9,030) 1,980
Issuance of Series E preferred
stock at $2.25 per share in
April 1994, net of issuance
costs of $58................... 4,000,000 8,942 -- -- -- -- 8,942
Exercise of common stock options
and common stock purchase
rights at $0.60 to $1.19 per
share.......................... -- -- 79,848 62 (51) -- 11
Net loss -- year ended December
31, 1994....................... -- -- -- -- -- (11,437) (11,437)
---------- ------- ------- ---- ----- -------- --------
Balances at December 31, 1994...... 7,794,070 19,863 158,027 174 (74) (20,467) (504)
Exercise of common stock options
and purchase rights at $0.89 to
$1.19 per share................ -- -- 11,604 11 -- -- 11
Repurchase of unvested shares of
common stock................... -- -- (13,434) (13) 13 -- --
Repayment and forgiveness of
stockholder notes receivable... -- -- -- -- 7 -- 7
Issuance of common stock warrants
at $0.20 per share............. -- -- -- 3 -- -- 3
Issuance of Series E preferred
stock at $2.25 per share for
conversion of notes payable and
accrued interest in November
1995........................... 1,647,814 3,708 -- -- -- -- 3,708
Net loss -- year ended December
31, 1995....................... -- -- -- -- -- (7,254) (7,254)
---------- ------- ------- ---- ----- -------- --------
Balances at December 31, 1995...... 9,441,884 23,571 156,197 175 (54) (27,721) (4,029)
Exercise of common stock options
and purchase rights of $0.60 to
$1.19 per share................ -- -- 138,027 115 (57) -- 58
Issuance of Series E preferred
stock at $2.25 per share for
cash and the conversion of
notes payable and accrued
interest in February and May
1996, net of issuance cost of
$92............................ 2,653,048 5,878 -- -- -- -- 5,878
Net loss -- year ended December
31, 1996....................... (3,863) (3,863)
---------- ------- ------- ---- ----- -------- --------
Balances at December 31, 1996...... 12,094,932 29,449 294,224 290 (111) (31,584) (1,956)
Exercise of common stock options
and purchase rights at $0.89
per share, net of repurchases
(unaudited).................... -- -- 56,211 50 (43) -- 7
Sale of Series F preferred stock
and common stock warrants at
$2.25 per unit in February and
June 1997, net of issuance
costs of $1,025 (unaudited).... 2,282,663 4,111 -- -- -- -- 4,111
Net loss -- six-months ended June
30, 1997 (unaudited)........... -- -- -- -- -- (1,258) (1,258)
---------- ------- ------- ---- ----- -------- --------
Balances at June 30, 1997
(unaudited)...................... 14,377,595 $33,560 350,435 $340 $ (154) $ (32,842) $ 904
========== ======= ======= ==== ===== ======== ========
</TABLE>
See accompanying notes
F-6
<PAGE> 74
RIBOGENE, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
PERIOD FROM SIX MONTHS ENDED PERIOD FROM
YEARS ENDED INCEPTION INCEPTION
DECEMBER 31, (MAY 5, 1989) JUNE 30, (MAY 5, 1989)
---------------------------- TO DECEMBER 31, ----------------- TO JUNE 30,
1994 1995 1996 1996 1996 1997 1997
-------- ------- ------- --------------- ------- ------- -------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss..................................... $(11,437) $(7,254) $(3,863) $ (31,584) $(2,605) $(1,258) $ (32,842)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization.............. 165 204 168 826 96 66 892
Accrued interest on bridge notes converted
to preferred stock....................... -- 78 44 122 44 -- 122
Losses on advances to related parties...... -- 120 -- 465 -- -- 465
Acquisition of in-process research and
development for notes payable............ 4,200 -- -- 4,200 -- -- 4,200
Other...................................... (19) 7 -- 38 -- -- 38
Changes in assets and liabilities:
Prepaid expenses and other current
assets................................. (118) 16 (66) (184) (59) (116) (300)
Other assets............................. 19 (7) (162) (207) (47) 45 (162)
Accounts payable......................... 11 200 205 499 (38) (224) 275
Deferred revenue -- related party........ -- -- 556 556 172 -- 556
Accrued expenses and other liabilities... 484 388 (25) 1,315 (65) (254) 1,061
-------- ------- ------- -------- ------- ------- --------
Net cash used in operating activities........ (6,695) (6,248) (3,143) (23,954) (2,502) (1,741) (25,695)
-------- ------- ------- -------- ------- ------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment.......... (28) (4) (14) (397) -- (20) (417)
Organization costs........................... -- -- -- (68) -- -- (68)
Advances to related parties.................. (40) (40) -- (715) -- -- (715)
Repayment of notes receivable -- officer..... 250 -- -- 250 -- -- 250
Purchase of short-term investments........... (5,981) (500) -- (6,481) -- (881) (7,362)
Maturities of short-term investments......... 4,000 500 -- 4,500 -- -- 4,500
Sales of short-term investments.............. -- 2,000 -- 2,000 -- -- 2,000
-------- ------- ------- -------- ------- ------- --------
Net cash provided by (used in) investing
activities................................. (1,799) 1,956 (14) (911) -- (901) (1,812)
-------- ------- ------- -------- ------- ------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from bridge financing............... -- 3,630 -- 3,630 -- -- 3,630
Proceeds from short-term debt................ -- 3,015 1,893 4,908 1,893 -- 4,908
Repayment of short-term debt................. -- (1,515) (1,500) (3,015) -- -- (3,015)
Repayment of notes payable................... -- (1,200) (1,000) (2,200) (2,500) (1,000) (3,200)
Principal payments on capital lease
obligations................................ (148) (171) (151) (622) (79) (56) (678)
Proceeds from sale-leaseback of equipment.... -- -- -- 207 -- -- 207
Proceeds from issuances of common stock and
warrants, net of repurchases and repayment
of stockholder notes....................... 11 14 58 147 57 7 154
Net proceeds from issuance of convertible
preferred stocks and warrants.............. 8,942 -- 3,941 23,791 3,941 4,111 27,902
-------- ------- ------- -------- ------- ------- --------
Net cash provided by financing activities.... 8,805 3,773 3,241 26,846 3,312 3,062 29,908
-------- ------- ------- -------- ------- ------- --------
Net increase (decrease) in cash and cash
equivalents................................ 311 (519) 84 1,981 810 420 2,401
Cash and cash equivalents at beginning of
period..................................... 2,105 2,416 1,897 -- 1,897 1,981 --
-------- ------- ------- -------- ------- ------- --------
Cash and cash equivalents at end of period... $ 2,416 $ 1,897 $ 1,981 $ 1,981 $ 2,707 $ 2,401 $ 2,401
======== ======= ======= ======== ======= ======= ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Cash paid for interest....................... $ 59 $ 160 $ 335 $ 634 $ 210 $ 132 $ 766
======== ======= ======= ======== ======= ======= ========
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING
AND FINANCING ACTIVITIES
Equipment purchased under capital leases..... $ 150 $ 107 $ 95 $ 658 $ 10 $ 24 $ 682
======== ======= ======= ======== ======= ======= ========
Conversion of debt obligations and accrued
interest to preferred stock................ $ -- $ 3,708 $ 1,937 $ 5,645 $ 1,937 $ -- $ 5,645
======== ======= ======= ======== ======= ======= ========
</TABLE>
See accompanying notes.
F-7
<PAGE> 75
RIBOGENE, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
(INFORMATION AT AND FOR THE SIX-MONTH PERIODS ENDED JUNE 30, 1996 AND 1997 IS
UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND BASIS OF PRESENTATION
RiboGene, Inc. (the "Company") was incorporated in the State of California
on May 5, 1989. The Company was originally founded to develop laboratory
equipment for cell-free protein synthesis. In January 1993, the Company
discontinued development of the lab equipment and began to focus its research
and development efforts on the identification of novel leads and the development
of potential drug candidates for the treatment of infectious diseases. The
Company's research effort initially focused on infections caused by fungi and
viruses. In 1996, the Company expanded its research efforts to include
infections caused by bacteria. The Company is in the development stage and its
principal activities to date have involved performing research and development
on the above technologies.
The accompanying financial statements have been prepared assuming the
Company will continue as a going concern. The Company has sustained operating
losses since inception and expects such losses to continue as it furthers its
research and development programs. From inception to December 31, 1996, the
Company incurred cumulative net losses of approximately $31,584,000, and had a
working capital deficit of $954,000 and a net stockholders' deficit of
$1,956,000 at December 31, 1996. The Company will need to obtain additional
funds from outside sources to continue its research and development activities,
fund operating expenses and pursue regulatory approvals for its products under
development. Management believes that sufficient funds are available to support
planned operations through at least December 31, 1997. The Company may seek to
fund its operations thereafter through collaborative arrangements and through
public or private financings, including debt or equity financings. If the
Company is unable to obtain the necessary capital, substantial restructuring
options may be necessary which would have a material adverse effect on the
Company's business, results of operations and prospects. The financial
statements do not include any adjustments to reflect the possible future effects
in the recoverability and classification of assets or the amounts and
classification of liabilities that might result from the possible inability of
the Company to continue as a going concern.
INTERIM FINANCIAL INFORMATION
The financial information at June 30, 1997 and for the six-month periods
ended June 30, 1996 and 1997 is unaudited but includes all adjustments
(consisting only of normal recurring adjustments) which the Company considers
necessary for a fair presentation of the financial position at such date and of
the operating results and cash flows for those periods. Results for the 1997
period are not necessarily indicative of results expected for the entire year.
USE OF ESTIMATES
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS
The Company considers all highly liquid investments with a maturity from
the date of purchase of three months or less to be cash equivalents.
F-8
<PAGE> 76
RIBOGENE, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
(INFORMATION AT AND FOR THE SIX-MONTH PERIODS ENDED JUNE 30, 1996 AND 1997 IS
UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The Company classifies its investments as available-for-sale.
Available-for-sale securities are carried at fair value, with the unrealized
gains and losses, if any, reported in a separate component of stockholders'
equity. Realized gains and losses and declines in value judged to be
other-than-temporary on available-for-sale securities are included in income.
The Company has not experienced any realized gains or losses on its cash
equivalents. The cost of securities sold is based on the specific identification
method. Cash and cash equivalents at December 31, 1995 and 1996, is comprised of
demand deposits with banks and investments in money market accounts. Cash and
cash equivalents at December 31, 1995 also included a U.S. Treasury bill which
matured in January 1996 and had a carrying value ($987,000) which approximated
market value (based on quoted market prices). At June 30, 1997, the Company's
cash equivalents and short-term investments consisted of the following:
<TABLE>
<CAPTION>
JUNE 30,
1997
----------
<S> <C>
Cash..................................................... $ 464,000
Money market funds....................................... 1,937,000
Commercial paper......................................... 881,000
----------
Total.......................................... $3,282,000
==========
</TABLE>
At June 30, 1997, the difference between cost and fair value of
available-for-sale securities was not significant.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost less accumulated depreciation.
Depreciation is provided on the straight-line method over the estimated useful
lives of the assets which range from four to five years. Assets recorded under
capital leases are amortized using the straight-line method over the shorter of
the useful life or the lease term.
REVENUE RECOGNITION
Revenues earned under collaborative research agreements are recognized as
the related research expenses are incurred. Amounts received in advance of
services to be performed are recorded as deferred revenue until the related
expenses are incurred. Milestone payments are recognized as revenue in the
period earned.
The Company has received government grants which support the Company's
research effort in specific research projects. These grants generally provide
for reimbursement of approved costs incurred as defined in the various awards.
NET LOSS PER SHARE
Except as noted below, historical net loss per share is computed using the
weighted-average number of common shares outstanding. Common equivalent shares
from outstanding stock options, convertible preferred stock and warrants are
excluded from the computation as their effect is antidilutive, except that,
pursuant to the Securities and Exchange Commission Staff Accounting Bulletins,
common and common equivalent shares issued during the period beginning 12 months
prior to the proposed initial filing of the Company's Registration Statement at
prices below the assumed public offering price have been included in the
calculation as if they were outstanding for all periods presented (using the
treasury stock method and the assumed public offering price for stock options
and warrants and the if-converted method for convertible preferred stock).
F-9
<PAGE> 77
RIBOGENE, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
(INFORMATION AT AND FOR THE SIX-MONTH PERIODS ENDED JUNE 30, 1996 AND 1997 IS
UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Historical net loss per share information calculated on this basis is as
follows:
<TABLE>
<CAPTION>
YEARS ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30,
---------------------------- -----------------
1994 1995 1996 1996 1997
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Net loss per share............................ $(5.16) $(3.24) $(1.65) $(1.13) $(0.52)
====== ====== ====== ====== ======
Shares used in computing historical net loss
per share (in thousands).................... 2,217 2,241 2,341 2,303 2,437
====== ====== ====== ====== ======
</TABLE>
Pro forma net loss per share has been computed as described above and also
gives effect to the conversion of convertible preferred shares not included
above that will automatically convert upon completion of the Company's initial
public offering (using the if-converted method). Such shares are included from
the original date of issuance.
In February 1997, the Financial Accounting Standards Board issued Statement
No. 128, "Earnings Per Share," which is required to be adopted by December 31,
1997. At that time, the Company will be required to change the method currently
used to compute earnings per share and to restate all prior periods. Under the
new requirements for calculating primary earnings per share, the dilutive effect
of stock options will be excluded. It is expected that there will be no impact
on the Company from the adoption of Statement No. 128.
ACCOUNTING FOR EMPLOYEE STOCK OPTIONS
As permitted by Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" ("SFAS 123"), the Company has elected
to account for stock options granted to employees using the intrinsic value
method and, accordingly, does not recognize compensation expense for options
granted to employees at fair value.
2. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------ JUNE 30,
1995 1996 1997
--------- ---------- ----------
<S> <C> <C> <C>
Laboratory equipment................................... $ 574,000 $ 579,000 $ 596,000
Office and computer equipment.......................... 155,000 223,000 239,000
Furniture and fixtures................................. 177,000 204,000 212,000
Leasehold improvements................................. 28,000 37,000 37,000
--------- ---------- ----------
934,000 1,043,000 1,084,000
Less accumulated depreciation and amortization......... (590,000) (758,000) (824,000)
--------- ---------- ----------
Property and equipment, net............................ $ 344,000 $ 285,000 $ 260,000
========= ========== ==========
</TABLE>
Property and equipment includes approximately $770,000 and $550,000 of
equipment under capital leases for the years ended December 31, 1995 and 1996,
respectively, that are pledged as security for the related lease obligations.
Accumulated amortization related to leased assets totaled $483,000 and $308,000
for the years ended December 31, 1995 and 1996, respectively.
3. COLLABORATION AGREEMENT WITH RELATED PARTY
In April 1996, the Company entered into collaborative research and license
agreements with Abbott Laboratories ("Abbott") to discover and develop
antifungal products identified using the Company's drug
F-10
<PAGE> 78
RIBOGENE, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
(INFORMATION AT AND FOR THE SIX-MONTH PERIODS ENDED JUNE 30, 1996 AND 1997 IS
UNAUDITED)
3. COLLABORATION AGREEMENT WITH RELATED PARTY (CONTINUED)
discovery technology. This agreement grants Abbott the nonexclusive worldwide
right to develop and market antifungal products discovered with the Company.
Abbott has agreed to provide financial support in the form of contract research
payments for up to $5,000,000 of the Company's antifungal research activity over
a three-year period. During 1996, Abbott made payments of $1,668,000 pursuant to
this agreement, of which $1,112,000 was recognized as revenue based on costs
incurred during the period. The agreement also provides milestone payments to
the Company for up to $9,000,000 per product as well as royalties on any product
sales. The agreements may be terminated by Abbott with notice of up to 60 days.
In connection with this agreement, Abbott purchased 1,555,556 shares of
Series E preferred stock (convertible into 391,844 shares of common stock) which
resulted in net proceeds to the Company of $3,500,000.
4. NOTES PAYABLE AND OTHER LIABILITIES
In December 1996, the Company obtained a $2,000,000 line of credit from a
bank. As of December 31, 1996, the Company had not drawn on this line of credit
and the line expired in May 1997. In connection with the line of credit, the
Company issued the bank a warrant with a five-year term to acquire 44,444 shares
of Series E preferred stock (which will be convertible into 11,195 shares of
common stock) at $2.25 per share.
In January and February 1996, the Company issued $1,893,000 principal
amount of bridge notes payable. In May 1996, the $1,893,000 of principal and
$44,000 of accrued interest were converted into 860,844 shares of Series E
preferred stock (convertible into 216,846 shares of common stock) at a price of
$2.25 per share.
In May 1995, the Company borrowed $750,000 from a bank subject to a note
payable. The note was repaid in July 1995. In connection with this borrowing,
the Company issued the bank a warrant with a five-year term to acquire 13,333
shares of Series E preferred stock (which will be convertible into 3,358 shares
of common stock) at $2.25 per share.
In July through September 1995, the Company received $4,394,680 in bridge
financing from stockholders. In connection with this transaction, the lenders
purchased warrants at a price of $0.20 per warrant, to acquire 13,312 shares of
common stock at $7.94 per share. The warrants have a three-year term. In
September 1995, $765,000 of these notes were repaid. In November 1995, the
remaining $3,629,680 of principal and $77,906 of accrued interest were converted
into 1,647,814 shares of Series E preferred stock (convertible into 415,084
shares of common stock) at a price of $2.25 per share.
In September 1995, the Company borrowed $1,500,000 from a bank under a note
payable. In connection with this borrowing, the Company issued the bank a
warrant with a five-year term to acquire 20,000 shares of Series E preferred
stock (which will be convertible into 5,038 shares of common stock) at $2.25 per
share. The note was repaid in April 1996.
In January 1994, in consideration for the acquisition of certain
technology, the Company issued notes payable totaling $4,200,000, which are due
with interest of 4%-5%. At December 31, 1996, notes payable totaling $2,000,000
remain outstanding; $1,000,000 of which was paid in January 1997 with accrued
interest, and the remainder of which is due in January 1998. The notes payable
are secured by the technology and intellectual capital acquired in this
transaction. The fair value of the notes, calculated based on a discounted cash
flow analysis using the Company's incremental borrowing rate, does not differ
materially from their carrying value in the financial statements.
F-11
<PAGE> 79
RIBOGENE, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
(INFORMATION AT AND FOR THE SIX-MONTH PERIODS ENDED JUNE 30, 1996 AND 1997 IS
UNAUDITED)
4. NOTES PAYABLE AND OTHER LIABILITIES (CONTINUED)
In 1994, the Company also entered into an agreement with an executive of
the seller of the above technology which obligates the Company to make payments
of $200,000 per year (payable in quarterly installments) from 1995 through 1999
for consulting services. In 1995, the remaining present value of the unpaid
balance (discounted at 10.5%), amounting to $646,000, was recognized as expense
in the accompanying statement of operations as management no longer anticipates
requiring the services of the consultant at a level commensurate with the
amounts payable in 1996 through 1999.
5. LEASES
The Company leases certain facilities and laboratory and office equipment.
Future minimum lease payments under such noncancelable leases at December 31,
1996 are as follows:
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
-------- ---------
<S> <C> <C>
Year ended December 31,
1997................................................. $134,000 $ 217,000
1998................................................. 89,000 85,000
1999................................................. 52,000 66,000
2000................................................. 31,000 8,000
-------- --------
Total minimum payments required........................ 306,000 $ 376,000
========
Less amount representing interest...................... 63,000
--------
Present value of future lease payments................. 243,000
Less current portion................................... 106,000
--------
Long-term portion...................................... $137,000
========
</TABLE>
Rent expense for operating leases was approximately $213,000 and $117,000
in the years ended December 31, 1996 and 1995, respectively.
On March 7, 1997 and as amended on September 24, 1997, the Company entered
into a 15-year lease (the "Lease"), with the right to sublease, for a new 30,000
square foot facility located in Hayward, California, which provides for an
initial annual rent of $531,000 with scheduled increases. The Company intends to
sublease 5,000 square feet of this facility. The Company currently anticipates
relocating to the new facility in November 1997. In connection with the Lease,
the Company has agreed to issue the landlord a six-year warrant to purchase
62,975 shares of common stock at $8.93 per share.
6. OTHER RELATED PARTY TRANSACTIONS
Through December 31, 1996, the Company has advanced $370,000 to one of its
officers in exchange for notes receivable. Of this amount, $250,000 was repaid
in 1995 and $40,000 was forgiven in each of 1996 and 1997. The balance, which
consists of a $40,000 note receivable, bears interest at 5.97% and is due in
1998. Such note receivable has been fully reserved.
7. STOCKHOLDERS' EQUITY
In February 1997, the board of directors and stockholders of the Company
approved an amendment to the Company's Articles of Incorporation to (i) increase
the authorized capitalization of the Company to
F-12
<PAGE> 80
RIBOGENE, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
(INFORMATION AT AND FOR THE SIX-MONTH PERIODS ENDED JUNE 30, 1996 AND 1997 IS
UNAUDITED)
7. STOCKHOLDERS' EQUITY (CONTINUED)
50,000,000 shares of common stock and 18,932,344 shares of preferred stock and
(ii) authorize the issuance of a new series of preferred stock, designated
Series F, of which 5,555,554 shares were reserved for issuance.
PREFERRED STOCK
In November 1995, the Company effected a three-for-four stock split of its
Series E preferred stock. The number of shares of Series E preferred stock and
preferred stock warrants, and the related per share amounts, have been adjusted
to reflect the stock split.
The authorized and outstanding preferred shares and related liquidation
preferences were as follows at December 31, 1996:
<TABLE>
<CAPTION>
SHARES AS
CONVERTED LIQUIDATION LIQUIDATION
AUTHORIZED SHARES INTO PREFERENCE PREFERENCE
DESIGNATION SHARES OUTSTANDING COMMON STOCK PER SHARE TOTAL
------------------- ---------- ----------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C>
Series A........... 138,269 138,268 34,828 $ 6.60 $ 912,569
Series B........... 800,000 580,061 146,113 $ 10.00 5,800,610
Series C........... 2,950,000 2,805,519 706,704 $ 1.50 4,208,279
Series D........... 270,222 270,222 68,068 $ 2.25 608,000
Series E........... 8,500,000 8,300,862 2,090,981 $ 2.25 18,676,939
---------- ---------- --------- -----------
12,658,491 12,094,932 3,046,694 $30,206,397
========== ========== ========= ===========
</TABLE>
In February 1997 and June 1997, the Company issued an aggregate of
2,282,663 units (the "Units") resulting in net proceeds of approximately
$4,100,000. Each Unit consists of one share of Series F preferred stock and one
Class A common stock warrant (the "Class A Warrants"). The Class A Warrants have
a six-year term and entitle the holder to purchase one share of common stock at
an exercise price equal to the lesser of (i) $8.93 or (ii) the effective per
share price of common stock in an initial public offering which results in net
proceeds of at least $7,500,000 to the Company.
In connection with these transactions, the Company issued the placement
agent an option to purchase 228,266 Units (a "Unit Option") consisting of
456,532 shares of Series F preferred stock (convertible into 229,998 shares of
common stock) and Class A Warrants to purchase 57,498 shares of common stock at
an exercise price of $8.93 per share. Such Unit Options have been distributed to
designees and/or employees of the Placement Agent. In addition, the Company
entered into a two-year financial advisory agreement with the Placement Agent
pursuant to which the Company issued the Placement Agent 342,399 Unit Options
consisting of 684,798 shares of Series F preferred stock (convertible into
344,998 shares of common stock) and Class A Warrants to purchase 86,248 shares
of common stock at an exercise price of $8.93 per share. Both Unit Options have
an exercise price of $1.24 per Unit and expire in 10 years. In addition, a
designee of the Placement Agent received a warrant to purchase 6,297 shares of
common stock at an exercise price of $8.93.
Holders of Series A, B, C, D and E preferred stock are entitled to
noncumulative dividends when and if declared by the board of directors. The
holders of Series F preferred stock are entitled to receive, prior and in
preference to any declaration or payment of dividend on any other class of
stock, dividends of $2.25 per share on the first day following the close of the
Series F offering and shall be entitled to receive an additional $1.125 per
share on the second anniversary of the Series F closing and each year
thereafter. The dividends shall be payable only when and if declared by the
board of directors; however, dividends not declared and paid when due shall
accumulate and be included in the Series F preferred stock liquidation
preference and in the
F-13
<PAGE> 81
RIBOGENE, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
(INFORMATION AT AND FOR THE SIX-MONTH PERIODS ENDED JUNE 30, 1996 AND 1997 IS
UNAUDITED)
7. STOCKHOLDERS' EQUITY (CONTINUED)
determination of the Series F preferred stock conversion ratio. The initial
Series F preferred stock dividend has not been declared or paid. No dividends or
other distributions shall be made to common stockholders other than dividends
payable solely in common stock, unless, at the same time, an equivalent dividend
to the preferred stockholders has been paid or provided for. No dividends shall
be declared or paid on any class of preferred stock while there are any accrued
but unpaid dividends on the Series F preferred stock and unless a like dividend
is declared on the Series F preferred stock.
Preferred shares have voting rights on an as-converted basis and are
convertible on a one-for-one basis (one-for-two basis in the case of Series F
preferred stock) into shares of common stock, subject to adjustment for
antidilution. In addition, the holders of a majority of the Series F preferred
stock will be entitled to approve certain transactions including liquidation or
the sale of the Company, the issuance of any securities with terms on par or
senior to the Series F preferred stock and the incurrence of any indebtedness
above specified limits. The preferred shares will automatically convert into
common stock upon the closing of a firm commitment underwritten public offering
under the Securities Act of 1933 in which the aggregate offering price to the
public is not less than $7,500,000 or, as to Series A, B, C, D or E, at such
time as the Company receives the consent of not less than 66 2/3% of the holders
of such series of preferred stock. The Series F preferred stock conversion is
subject to adjustment upon the closing of an initial public offering to insure
that each share of Series F preferred stock shall be valued at not less than
$2.25 per share, plus any declared or accrued unpaid dividends.
Series A, B, C, D and E preferred stock may be redeemed at the option of
the board of directors after April 15, 1999, or earlier, if approved by holders
of 66 2/3% of the outstanding shares of such series. Holders of Series F
preferred stock can, at their option, participate in the redemption. At
redemption, the preferred stockholders will receive a redemption price in cash
equal to the original issue price of the respective shares, together with any
declared but unpaid dividends.
In the event of sale, merger, liquidation, dissolution or winding up of the
Company, the holders of Series F preferred stock then outstanding will first be
entitled to receive, in preference to all other series of preferred and common
stock, $2.25 per share plus declared or accrued but unpaid dividends. The
holders of Series C, D and E preferred stock shall be entitled to receive, prior
and in preference to the holders of Series A and B preferred stock and common
stock, the liquidation preferences noted in the table above, plus declared but
unpaid dividends. If assets remain after such distribution, the holders of
Series B preferred stock are entitled to receive the amount shown above in
preference to the Series A preferred stockholders and common stockholders. Upon
completion of the above distributions, holders of common stock shall receive an
amount equal to $0.50 per share and any remaining assets shall be distributed
among the holders of Series A, B, C, D and E preferred stock and common stock as
prescribed in the Articles of Incorporation.
F-14
<PAGE> 82
RIBOGENE, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
(INFORMATION AT AND FOR THE SIX-MONTH PERIODS ENDED JUNE 30, 1996 AND 1997 IS
UNAUDITED)
7. STOCKHOLDERS' EQUITY (CONTINUED)
WARRANTS
As part of financing and lease arrangements (see Notes 4 and 5), the
Company has issued warrants as follows:
<TABLE>
<CAPTION>
SHARES AS
CONVERTED
INTO EXERCISE EXPIRATION
CLASS OF STOCK SHARES COMMON STOCK PRICE DATE(S)
- ----------------------------------------------- ------- ------------ -------- -----------------
<S> <C> <C> <C> <C>
Series B preferred stock....................... 23,334 5,877 $ 2.57 August 1999
Series C preferred stock....................... 15,000 3,778 $ 1.50 June 2001
Series E preferred stock....................... 113,332 28,547 $ 2.25 Various through
December 2002
Common stock................................... 13,312 N/A $ 7.94 Various through
September 1998
</TABLE>
In addition to the warrants above and those issued in connection with the
offering of Units and Unit Options in 1997, the Company has issued warrants for
the purchase of 330,744 shares of common stock with an exercise price of $9.83
per share. Such warrants are exercisable for a period ending on the earlier of
January 1999, a qualifying initial public offering by the Company, or the sale
of the Company.
STOCK PLANS
In March 1993, the Company terminated its 1990 Stock Option Plan (the "1990
Plan") and adopted the 1993 Stock Plan (the "1993 Plan"). The majority of
options outstanding under the 1990 Plan were canceled and new options were
granted pursuant to the 1993 Plan. The remaining options outstanding under the
1990 Plan were unaffected by the termination and are governed by the terms of
the respective option agreements. Shares previously reserved for issuance under
the 1990 Plan for which options were not granted are no longer reserved.
Under the terms of the 1993 Plan, the board of directors may grant stock
purchase rights and stock options. Stock purchase rights may not be issued at
less than 85% of the fair value of the common stock at the date of grant and
generally provide the Company with a repurchase right in the event of
termination of employment which lapses over periods specified by the board of
directors. Options granted pursuant to the 1993 Plan may be either incentive
stock options or nonstatutory stock options, at the discretion of the board of
directors. Incentive stock options may be granted to employees with exercise
prices of no less than the fair market value and nonstatutory options may be
granted to employees or consultants at exercise prices of no less than 85% of
the fair value of the common stock on the grant date, as determined by the board
of directors. If, at the time the Company grants an option, the optionee
directly or by attribution owns stock possessing more than 10% of the total
combined voting power of all classes of stock of the Company, the option price
shall be at least 110% of the fair market value and the option shall not be
exercised more than five years after the date of grant. Except as noted above,
options expire no more than 10 years after the date of grant or earlier if
employment is terminated. Options become exercisable as determined by the board
of directors, generally over a period of four years. Through December 31, 1996,
a total of 714,136 shares have been reserved for issuance under the 1993 Plan
(789,703 shares at June 30, 1997). In July 1997, the board of directors
approved, subject to stockholder approval, an additional 251,900 shares for
issuance under the 1993 Plan.
F-15
<PAGE> 83
RIBOGENE, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
(INFORMATION AT AND FOR THE SIX-MONTH PERIODS ENDED JUNE 30, 1996 AND 1997 IS
UNAUDITED)
7. STOCKHOLDERS' EQUITY (CONTINUED)
The following table summarizes option activity under the 1990 Plan and the
1993 Plan:
<TABLE>
<CAPTION>
WEIGHTED-
AVERAGE
NUMBER OF EXERCISE PRICE
OPTIONS PER SHARE
---------------- --------------
<S> <C> <C>
Balance at December 31, 1993.............................. 157,423 $ 0.67
Granted with exercise prices equal to fair value........ 193,940 $ 1.11
Exercised............................................... (11,206) $ 0.78
Canceled................................................ (21,686) $ 0.84
Balance at December 31, 1994.............................. 318,471 $ 0.91
Granted with exercise prices equal to fair value........ 246,328 $ 0.95
Exercised............................................... (4,047) $ 0.60
Canceled................................................ (5,132) $ 0.79
-------
Balance at December 31, 1995.............................. 555,620 $ 0.91
Granted with exercise prices equal to fair value........ 39,256 $ 0.91
Granted with exercise prices greater than fair value.... 7,557 $ 8.93
Exercised............................................... (73,465) $ 0.75
Canceled................................................ (73,623) $ 0.95
-------
Balance at December 31, 1996.............................. 455,345 $ 1.07
Granted with exercise prices equal to fair value........ 36,475 $ 0.89
Exercised............................................... (8,060) $ 0.89
Canceled................................................ (31,331) $ 0.90
-------
Balance at June 30, 1997.................................. 452,429 $ 1.07
=======
</TABLE>
Through December 31, 1996, the board of directors granted 144,697 common
stock purchase rights (197,596 through June 30, 1997) under the 1993 Plan, all
of which have been exercised for cash and promissory notes. Of this amount,
13,434 shares have been repurchased through December 31, 1996 and 63,661 shares
are subject to the Company's repurchase right at December 31, 1996 which
generally lapses over four years (18,157 and 94,530 shares at June 30, 1997,
respectively). The promissory notes bear interest at 5.29% to 6.73%. At December
31, 1996, 39,816 shares were available for future grant or sale (62,063 shares
at June 30, 1997).
In 1993, the Company issued 37,785 shares of common stock outside of the
1993 Plan to an officer, in exchange for a promissory note secured by the
shares, with a principal amount of $22,500 which bears interest at 5.47%. At
December 31, 1996, a total of 3,935 of these shares were subject to the
Company's right of repurchase which lapses over four years. At December 31,
1996, the remaining balance due on the note was approximately $19,000.
F-16
<PAGE> 84
RIBOGENE, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
(INFORMATION AT AND FOR THE SIX-MONTH PERIODS ENDED JUNE 30, 1996 AND 1997 IS
UNAUDITED)
7. STOCKHOLDERS' EQUITY (CONTINUED)
The following table summarizes information about options outstanding at
December 31, 1996:
<TABLE>
<CAPTION>
NUMBER OF
NUMBER OF WEIGHTED- OPTIONS
OPTIONS WEIGHTED- AVERAGE EXERCISABLE WEIGHTED-
OUTSTANDING AT AVERAGE REMAINING AT AVERAGE
EXERCISE DECEMBER 31, EXERCISE CONTRACTUAL DECEMBER 31, EXERCISE
PRICE 1996 PRICE LIFE 1996 PRICE
- -------------- -------------- --------- ----------- ------------ ---------
(IN YEARS)
<S> <C> <C> <C> <C> <C>
$0.60 - $0.79 87,742 $0.64 7.00 73,653 $0.64
$0.89 - $1.19 359,038 $0.99 8.29 162,385 $1.03
$4.76 1,007 $4.76 4.00 1,007 $4.76
$8.93 7,558 $8.93 9.73 7,558 $8.93
------- ----- ------- -----
455,345 $1.07 244,603 $1.15
======= ===== ======= =====
</TABLE>
At December 31, 1995, 182,294 options were exercisable.
In July 1997, the Company granted 202,715 options with an exercise price of
$0.89 per share, and recognized deferred compensation expense of approximately
$410,000. Of these grants, 140,652 are subject to stockholder approval. Deferred
compensation related to such grants will be determined based on the fair value
of the Company's common stock on the date stockholder approval is obtained.
During 1996, the Company adopted SFAS 123. The effect of applying the
minimum value method to value options and stock purchase rights granted to
employees in 1995 and 1996 did not result in a pro forma net loss materially
different from the historical amounts reported. Therefore, such pro forma
information has not been presented. SFAS 123 is applicable only to options
granted subsequent to December 31, 1994 and therefore its pro forma effect will
not be fully realized until 1998. In future years, the applications of SFAS 123
may result in a pro forma net loss which is materially different from actual
reported results. The minimum value method was applied using the following
weighted average assumptions for 1995 and 1996, respectively; risk free interest
rates of 6.34% and 6.35%, an expected option life of 5 years and no annual
dividends. The weighted-average fair value of options and stock purchase rights
granted with exercise prices equal to the fair value of the Company's stock on
the date of grant during 1995 and 1996 was $0.24.
F-17
<PAGE> 85
RIBOGENE, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
(INFORMATION AT AND FOR THE SIX-MONTH PERIODS ENDED JUNE 30, 1996 AND 1997 IS
UNAUDITED)
7. STOCKHOLDERS' EQUITY (CONTINUED)
RESERVED SHARES
The Company has reserved shares of common stock for future issuance as
follows:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1996 1997
------------ ---------
<S> <C> <C>
Stock option plan:
Outstanding options............................... 455,345 452,429
Reserved for future grants........................ 39,816 62,063
Convertible preferred stock:
Issued and outstanding............................ 3,046,694 4,196,682
Upon exercise of Placement Agent Unit Option...... -- 574,996
Upon exercise of other warrants................... 37,955 38,202
Class A Warrants (including Class A Warrants
underlying Placement Agent Unit Options)....... -- 718,729
Common stock warrants............................. 344,056 413,328
--------- ---------
3,923,866 6,456,429
========= =========
</TABLE>
8. INCOME TAXES
Significant components of the Company's deferred tax assets are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1995 DECEMBER 31, 1996
------------------------- --------------------------
FEDERAL STATE FEDERAL STATE
----------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
Net operating loss carryforward............ $ 7,500,000 $ 500,000 $ 8,800,000 $ 530,000
Research and development credit
carryforward............................. 500,000 330,000 550,000 350,000
Capitalized research and development....... -- 600,000 -- 850,000
Acquired research and development.......... 1,400,000 250,000 1,275,000 225,000
Other...................................... 250,000 50,000 200,000 36,000
----------- ----------- ------------ -----------
Gross deferred tax assets.................. 9,650,000 1,730,000 10,825,000 1,991,000
Valuation allowance........................ (9,650,000) (1,730,000) (10,825,000) (1,991,000)
----------- ----------- ------------ -----------
Net deferred tax assets.................... $ -- $ -- $ -- $ --
========== ========== =========== ==========
</TABLE>
The valuation allowance increased by $4,600,000 and $3,300,000 for the
years ended December 31, 1994 and 1995, respectively.
As of December 31, 1996, the Company had federal net operating loss
carryforwards of approximately $26,000,000. The Company also had federal and
state research and development tax credit carryforwards of approximately
$550,000 and $350,000, respectively. The net operating loss and credit
carryforwards will expire at various dates beginning on 2004 through 2011, if
not utilized.
The Tax Reform Act of 1986 contains provisions that limit the utilization
of net operating loss and tax credit carryforwards if there has been a "change
of ownership." Such a "change of ownership" as described in Section 382 of the
Internal Revenue Code may limit the Company's utilization of its net operating
loss and tax credit carryforwards.
F-18
<PAGE> 86
RIBOGENE, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
(INFORMATION AT AND FOR THE SIX-MONTH PERIODS ENDED JUNE 30, 1996 AND 1997 IS
UNAUDITED)
9. INITIAL PUBLIC OFFERING AND RELATED MATTERS
In September 1997, the board of directors authorized the Company to proceed
with an initial public offering (the "Offering") of the Company's common stock.
If the offering is consummated under the terms presently anticipated, all of the
outstanding preferred stock at June 30, 1997 will automatically convert into
4,196,682 shares of common stock. Unaudited pro forma stockholders' equity, as
adjusted for the assumed conversion of all outstanding shares of convertible
preferred stock as of June 30, 1997, is set forth on the accompanying balance
sheet.
Concurrent with the closing of the Offering, the Company expects to file an
Amended and Restated Certificate of Incorporation in the State of Delaware to
effect a one-for-3.97 reverse stock split of all outstanding shares of common
stock, and common stock options and warrants. Following the reverse stock split,
each share of Series A through E preferred stock will convert into 0.2519 shares
of common stock and each share of Series F preferred stock will convert into
0.5038 shares of common stock. All common shares and per share data in the
accompanying financial statements have been adjusted retroactively to give
effect to the reverse stock split. The Amended and Restated Certificate of
Incorporation will also reduce the authorized stock of the Company such that the
Company will be authorized to issue 5,000,000 shares of $0.001 par value
preferred stock, and 30,000,000 shares of $0.001 par value common stock.
In October 1997, the board of directors adopted, subject to stockholder
approval, the 1997 Equity Incentive Plan (the "Incentive Plan"). The Incentive
Plan provides for grants of incentive stock options to employees and
nonstatutory stock options, restricted stock purchase awards, stock bonuses and
stock appreciation rights to employees and consultants of the Company. The
Incentive Plan will supersede the 1993 Plan and 1,000,000 shares of common stock
will be reserved for issuance.
In October 1997, the board of directors adopted, subject to stockholder
approval, the 1997 Non-Employee Directors' Stock Option Plan (the "Directors'
Plan") and reserved 150,000 shares of common stock for issuance under the
Directors' Plan. The Directors' Plan provides for automatic grants of options to
purchase shares of common stock to nonemployee directors of the Company.
In October 1997, the board of directors adopted, subject to stockholder
approval, the Employee Stock Purchase Plan (the "Purchase Plan") covering an
aggregate of 750,000 shares of common stock. The Purchase Plan permits eligible
employees to purchase common stock through payroll deductions at a price equal
to the lower of 85% of the fair market value at the beginning or end of the
applicable offering period.
F-19
<PAGE> 87
DESCRIPTION OF GRAPHICS
Inside Front Cover:
The graphic depicts the translation process.
Page 4:
Status of RiboGene Drug Discovery Programs
The graphic depicts the status of RiboGene's antibacterial, antifungal and
antiviral programs.
Page 29:
Figure 1 - The Natural Gene Expression Process
The graphic depicts the two primary stages of the natural gene expression
process known as transcription and translation.
Page 30:
Figure 2 - RiboGene's Drug Discovery Process
The graphic depicts the four stages of RiboGene's drug discovery process. The
four stages are target identification, assay development, lead discovery and
lead optimization.
Page 32:
Figure 3 - Status of RiboGene Drug Discovery Programs
The graphic depicts the status of RiboGene's antibacterial, antifungal and
antiviral programs.
<PAGE> 88
- ------------------------------------------------------
NO DEALER, SALES REPRESENTATIVE OR ANY OTHER PERSON IS AUTHORIZED IN
CONNECTION WITH ANY OFFERING MADE HEREBY TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED HEREIN AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY
OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE COMMON STOCK
OFFERED HEREBY TO ANY PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE
SUCH AN OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY
SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR
THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO
THE DATE HEREOF.
---------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary...................... 3
Risk Factors............................ 7
Use of Proceeds......................... 18
Dividend Policy......................... 18
Capitalization.......................... 19
Dilution................................ 20
Selected Financial Data................. 21
Management's Discussion And Analysis of
Financial Condition And Results of
Operations............................ 22
Business................................ 26
Management.............................. 46
Certain Transactions.................... 54
Principal Stockholders.................. 57
Description Of Capital Stock............ 59
Shares Eligible For Future Sale......... 63
Underwriting............................ 64
Legal Matters........................... 65
Experts................................. 65
Additional Information.................. 66
Index To Financial Statements........... F-1
UNTIL , 1997 (25 DAYS AFTER THE
DATE OF THIS PROSPECTUS), ALL DEALERS EFFECTING
TRANSACTIONS IN THE COMMON STOCK, WHETHER OR
NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE
REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN
ADDITION TO THE OBLIGATION OF DEALERS TO
DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
</TABLE>
PROSPECTUS , 1997
- ------------------------------------------------------
2,300,000 SHARES
RIBOGENE LOGO
Common Stock
---------------------------------
EVEREN SECURITIES, INC.
GRUNTAL & CO., L.L.C.
CRUTTENDEN ROTH
INCORPORATED
<PAGE> 89
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by the registrant in connection
with the distribution of the Common Stock being registered. All amounts are
estimated, except the registration fee, the NASD filing fee and the Nasdaq
National Market application fee:
<TABLE>
<S> <C>
SEC registration fee.............................................. $ 10,000
NASD filing fee................................................... 5,000
Nasdaq National Market application fee............................ 16,500
Blue Sky fees and expenses........................................ 10,000
Accounting fees................................................... 150,000
Legal fees and expenses........................................... 250,000
Transfer agent and registrar fees................................. 50,000
Printing and engraving............................................ 150,000
Miscellaneous..................................................... 108,500
--------
Total................................................... $750,000
========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Registrant's Certificate of Incorporation provides that directors of
the Registrant shall not be personally liable to the Registrant or its
stockholders for monetary damages for breach of fiduciary duty as a director, to
the fullest extent permitted by the General Corporation Law of the State of
Delaware. The Registrant's Bylaws provide for indemnification of officers and
directors to the full extent and in the manner permitted by Delaware law.
Section 145 of the Delaware General corporation Law makes provision for such
indemnification in terms sufficiently broad to cover officers and directors
under certain circumstances for liabilities arising under the Securities Act of
1933, as amended (the "Securities Act").
The Registrant has entered into indemnification agreements with each
director which provide indemnification under certain circumstances for acts and
omissions which may not be covered by any directors' and officers' liability
insurance.
The form of Underwriting Agreement, filed as Exhibit 1.1 to the
Registration Statement, provides for indemnification of the Registrant and its
controlling persons against certain liabilities under the Securities Act.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Since September 1994, the Registrant has sold and issued the following
unregistered securities:
1. In July through September 1995, the Registrant received $4,394,680 in
bridge financing from stockholders. In September 1995, $765,000 of these notes
were repaid. In November 1995, the remaining $3,629,680 of principal and $77,906
of accrued interest were converted into 1,647,814 shares of Series E Preferred
Stock. In connection with this transaction, the Registrant issued Warrants to
acquire 13,312 shares of Common Stock.
2. In May and September 1995, the Registrant issued a warrant to purchase
an aggregate of 33,333 shares of Series E Preferred Stock to one accredited
investor in connection with bridge financings in the aggregate of $2,250,000.
3. In January and February 1996, the Registrant issued to certain of its
investors $1,893,000 principal amount of bridge notes. In May 1996, the
$1,893,000 of principal and $44,000 of accrued interest were converted into
860,844 shares of Series E Preferred Stock.
II-1
<PAGE> 90
4. In April 1996, the Registrant sold and issued an aggregate of 1,555,556
shares of Series E Preferred Stock to one investor in connection with a
collaborative arrangement for an aggregate of $3,500,000.
5. In April 1996, the Registrant sold and issued an aggregate of 236,648
shares of Series E Preferred Stock to a group of accredited investors for cash
in the aggregate amount of $532,458.
6. In May 1996, the Registrant issued a warrant to purchase an aggregate of
17,778 shares of Series E Preferred Stock to one accredited investor in
connection with a leasing transaction.
7. In December 1996, the Registrant issued a warrant to purchase an
aggregate of 44,444 shares of Series E Preferred Stock to one accredited
investor in connection with a credit facility in the aggregate of $2,000,000.
8. In February and June 1997, the Registrant sold and issued an aggregate
of 2,282,663 shares of Series F Preferred Stock, warrants to purchase an
aggregate of 2,282,663 shares of Common Stock, options exercisable for an
aggregate of 1,141,330 shares of Series F Preferred Stock and options
exercisable for warrants to purchase an aggregate of 143,746 shares of Common
Stock to a group of accredited investors for cash in connection with a private
placement for an aggregate amount of $5,136,000.
9. From January 1, 1993 until June 30, 1997, the Registrant has granted
incentive stock options nonstatutory stock options and purchase rights to
employees, directors and consultants of the Registrant under its 1993 Stock
Option Plan covering an aggregate of 900,626 shares of the Registrant's Common
Stock, at exercise prices ranging from $0.60 to $8.93 per share. Options to
purchase 154,825 shares of Common Stock have been canceled or have lapsed
without being exercised. The Registrant has issued 276,218 shares of its Common
Stock to employees, directors and consultants pursuant to the exercise of stock
options and purchase rights, net of repurchases. At June 30, 1997, 62,063 shares
remain available for grant.
The sale and issuance of securities in the transactions described in
paragraphs 1-9 above were deemed to be exempt from registration under the
Securities Act by virtue of Section 4(2) adopted thereunder. The purchasers in
each case represented their intention to acquire the securities for investment
only and not with a view to distribution thereof. Appropriate legends are
affixed to the stock certificates issued in such transactions. All recipients
either received adequate information about the Registrant or had access, through
employment or other relationships, to such information.
The sale and issuance of securities in the transactions described in
paragraph 10 above were deemed to be exempt from registration under the
Securities Act by virtue of Rule 701 promulgated thereunder, in that they were
issued either pursuant to written compensatory benefit plans or pursuant to a
written contract relating to compensation, as provided by Rule 701.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) The following is a list of exhibits filed as a part of this
Registration Statement.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------ --------------------------------------------------------------------------
<C> <S>
*1.1 Form of Underwriting Agreement.
3.1 Amended and Restated Articles of Incorporation of the Registrant.
3.2 Bylaws of the Registrant.
3.3 Form of Certificate of Incorporation of the Registrant to be effective
upon reincorporation in Delaware.
3.4 Form of Bylaws of the Registrant to be effective upon reincorporation in
Delaware.
3.5 Form of Restated Certificate of Incorporation of the Registrant, to be
filed after completion of this offering.
4.1 Reference is made to Exhibits 3.1, 3.2, 3.3, 3.4, and 3.5.
4.2 Specimen Stock Certificate.
</TABLE>
II-2
<PAGE> 91
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------ --------------------------------------------------------------------------
<C> <S>
4.3 Ninth Amended and Restated Rights Agreement among the Registrant and the
investors named therein, dated May 1, 1996.
4.4 Form of Class A Warrant Certificates for Purchase of Common Stock, dated
June 23, 1997.
4.5 Unit Purchase Option Warrant for the Purchase of 342,399 Option Units,
issued by the Registrant to Paramount Capital, Inc., dated June 23, 1997.
4.6 Unit Purchase Option Warrant for the Purchase of 228,266 Option Units,
consisting of Shares of Preferred Stock and Warrants, issued by the
Registrant to Paramount Capital, Inc., dated June 23, 1997.
4.7 Warrant Agreement between the Registrant and Paramount Capital Inc., dated
June 23, 1997.
4.8 Warrant for Common Stock, issued by the Registrant to Paramount Capital
Inc., dated March 12, 1997.
4.9 Warrant for Series B Preferred Stock, issued by the Registrant to Dominion
Ventures, dated August 9, 1991.
4.10 Warrant for Series C Preferred Stock, issued by the Registrant to Dominion
Ventures, dated June 18, 1993.
4.11 Warrant for Series E Preferred Stock, issued by the Registrant to Dominion
Fund II, dated August 2, 1996.
4.12 Warrant for Series E Preferred Stock, issued by the Registrant to Silicon
Valley Bank, dated September 25, 1995.
4.13 Warrant for Series E Preferred Stock, issued by the Registrant to Silicon
Valley Bank, dated May 19, 1995.
4.14 Warrant for Series E Preferred Stock, issued by the Registrant to Venture
Lending, dated December 23, 1996.
4.15 Warrant for Common Stock, issued by the Registrant to SBC Warburg, dated
September 20, 1995.
4.16 Warrant for Common Stock, issued by the Registrant to Judith Donaldson,
dated September 20, 1995.
4.17 Warrant for Series E Preferred Stock, issued by the Registrant to Dominion
Ventures, dated June 13, 1994.
4.18 Warrant for Common Stock, issued by the Registrant to Hyline Laboratories,
dated January 5, 1994.
4.19 Warrant for Common Stock, issued by the Registrant to Rip Grossman and
Associates, Inc., dated January 5, 1994.
*4.20 Warrant issued by the Registrant to the Representatives.
4.21 Investor Rights Agreement among the Registrant and the investors named
therein, dated June 23, 1997.
*5.1 Opinion of Cooley Godward LLP.
+10.1 License Agreement between the Registrant and Abbott Laboratories, dated
April 26, 1996.
+10.2 Research Agreement between the Registrant and Abbott Laboratories, dated
April 26, 1996.
</TABLE>
II-3
<PAGE> 92
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------ --------------------------------------------------------------------------
<C> <S>
10.3 Series E Preferred Stock Purchase Agreement between the Registrant and
Abbott, dated April 26, 1996.
+10.4 License Agreement between the Registrant and University of Washington,
dated April 4, 1997.
+10.5 Collaboration Agreement between the Registrant and Houghten
Pharmaceuticals, dated April 12, 1993, as amended on April 10, 1997.
10.6 1993 Stock Plan.
10.7 Stock Option Agreement pursuant to 1993 Stock Plan.
10.8 Form of Restricted Stock Purchase Agreement pursuant to 1993 Stock Plan.
10.9 Employment Agreement between the Registrant and Charles J. Casamento,
dated May 11, 1993.
10.10 Change of Control Agreement between the Registrant and Charles Casamento,
dated July 20, 1995.
10.11 Employment Letter Agreement between the Registrant and Laura S. L. Gaeta,
dated May 6, 1994.
10.12 Change of Control Agreement between the Registrant and Laura S. L. Gaeta,
dated July 20, 1995.
10.13 Employment Letter Agreement between the Registrant and Timothy E. Morris,
dated May 31, 1995.
10.14 Change of Control Agreement between the Registrant and Timothy E. Morris,
dated June 30, 1995.
10.15 Real Property Lease between the Registrant and Hayward Point Eden I
Limited Partnership, dated March 7, 1997.
10.16 First Amendment to Real Property Lease between the Registrant and Hayward
Point Eden I Limited Partnership, dated March 7, 1997.
10.17 Real Property Lease between the Registrant and Hall Properties, Inc.,
dated February 6, 1992.
10.18 Placement Agency Agreement between the Registrant and Paramount Capital,
Inc., dated August 1, 1996.
10.19 Subscription Agreement for the Purchase and Sale of Premium Preferred
Units, dated June 23, 1997.
10.20 Asset Purchase Agreement by and among the Registrant, Hyline Laboratories,
and Michael Ashkin, dated January 5, 1994.
10.21 Non-Competition Agreement between the Registrant and Michael Ashkin, dated
January 5, 1994.
10.22 Consulting Agreement between the Registrant and Michael Ashkin, dated
January 5, 1994.
10.23 Secured Promissory Notes issued to Hyline Laboratories, dated January 5,
1994.
10.24 Master Lease Agreement between the Registrant and Dominion Ventures, dated
August 9, 1991.
10.25 Scientific Advisor Agreement between the Registrant and Michael Mathews,
dated April 13, 1993.
10.26 Consulting Agreement between the Registrant and Michael Mathews, dated
April 13, 1993.
</TABLE>
II-4
<PAGE> 93
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------ --------------------------------------------------------------------------
<C> <S>
10.27 Consulting Agreement between the Registrant and Joe B. Harford, dated July
11, 1997.
10.28 Consulting Agreement between the Registrant and Michael Katze, dated
February 6, 1997.
10.29 Approval of Outside Activity by Alan Hinnebusch, dated October 15, 1992.
11.1 Statement Regarding Computation of Net Loss Per Share.
23.1 Consent of Ernst & Young LLP, Independent Auditors.
23.2 Consent of Cooley Godward LLP. Reference is made to Exhibit 5.1.
23.3 Consent of Pennie & Edmonds LLP.
24.1 Power of Attorney. Reference is made to page II-6.
27.1 Financial Data Schedule.
</TABLE>
- ---------------
* To be filed by amendment.
+ Confidential treatment has been requested for portions of this exhibit.
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes to provide the Underwriters at
the closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers, and controlling persons of the
Registrant pursuant to the provisions described in Item 14 or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer, or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer, or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes that: (1) for purposes of
determining any liability under the Securities Act, the information omitted from
the form of prospectus as filed as part of the registration statement in
reliance upon Rule 430A and contained in the form of prospectus filed by the
Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act
shall be deemed to be part of the registration statement as of the time it was
declared effective, and (2) for the purpose of determining any liability under
the Securities 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 this offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
II-5
<PAGE> 94
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, RiboGene, Inc.
has duly caused this Registration Statement to be signed on its behalf, by the
undersigned, thereunto duly authorized, in the City of Hayward, County of
Alameda, State of California, on October 24, 1997.
RIBOGENE, INC.
By: /s/ CHARLES J. CASAMENTO
------------------------------------
Charles J. Casamento
President, Chief Executive Officer
and Chairman
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Charles J. Casamento and Timothy E. Morris, and
each of them, his attorneys-in-fact, each with the power of substitution, for
him and to his name, place and seal in any and all capacities, to sign any and
all amendments (including post-effective amendments) to this Registration
Statement, and to sign any registration statement for the same offering covered
by this Registration Statement that is to be effective upon filing pursuant to
Rule 462(b) promulgated under the Securities Act of 1933, and all post-effective
amendments thereto, and to file the same, with all exhibits thereto in all
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could of in person, hereby ratifying and confirming all
that such attorneys in fact and agents or any of them, or his or their
substitute or substitutes, may lawfully 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>
NAME TITLE DATE
- --------------------------------------------- ----------------------------- -----------------
<C> <S> <C>
/s/ CHARLES J. CASAMENTO President, Chief Executive October 24, 1997
- --------------------------------------------- Officer and Chairman
Charles J. Casamento (Principal Executive Officer)
/s/ TIMOTHY E. MORRIS Vice President, Finance & October 24, 1997
- --------------------------------------------- Administration and Chief
Timothy E. Morris Financial Officer (Principal
Financial and Accounting
Officer)
/s/ ALEXANDER E. BARKAS, PH.D. Director October 24, 1997
- ---------------------------------------------
Alexander E. Barkas, Ph.D.
/s/ DIGBY W. BARRIOS Director October 24, 1997
- ---------------------------------------------
Digby W. Barrios
/s/ JON S. SAXE Director October 24, 1997
- ---------------------------------------------
Jon S. Saxe
/s/ JESSE I. TREU, PH.D. Director October 24, 1997
- ---------------------------------------------
Jesse I. Treu, Ph.D.
</TABLE>
II-6
<PAGE> 95
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------ ----------------------------------------------------------------------------------
<C> <S>
*1.1 Form of Underwriting Agreement.
3.1 Amended and Restated Articles of Incorporation of the Registrant.
3.2 Bylaws of the Registrant.
3.3 Form of Certificate of Incorporation of the Registrant to be effective upon
reincorporation in Delaware.
3.4 Form of Bylaws of the Registrant to be effective upon reincorporation in Delaware.
3.5 Form of Restated Certificate of Incorporation of the Registrant, to be filed after
completion of this offering.
4.1 Reference is made to Exhibits 3.1, 3.2, 3.3, 3.4, and 3.5.
4.2 Specimen Stock Certificate.
4.3 Ninth Amended and Restated Rights Agreement among the Registrant and the investors
named therein, dated May 1, 1996.
4.4 Form of Class A Warrant Certificates for Purchase of Common Stock, dated June 23,
1997.
4.5 Unit Purchase Option Warrant for the Purchase of 342,399 Option Units, issued by
the Registrant to Paramount Capital, Inc., dated June 23, 1997.
4.6 Unit Purchase Option Warrant for the Purchase of 228,266 Option Units, consisting
of Shares of Preferred Stock and Warrants, issued by the Registrant to Paramount
Capital, Inc., dated June 23, 1997.
4.7 Warrant Agreement between the Registrant and Paramount Capital Inc., dated June
23, 1997.
4.8 Warrant for Common Stock, issued by the Registrant to Paramount Capital Inc.,
dated March 12, 1997.
4.9 Warrant for Series B Preferred Stock, issued by the Registrant to Dominion
Ventures, dated August 9, 1991.
4.10 Warrant for Series C Preferred Stock, issued by the Registrant to Dominion
Ventures, dated June 18, 1993.
4.11 Warrant for Series E Preferred Stock, issued by the Registrant to Dominion Fund
II, dated August 2, 1996.
4.12 Warrant for Series E Preferred Stock, issued by the Registrant to Silicon Valley
Bank, dated September 25, 1995.
4.13 Warrant for Series E Preferred Stock, issued by the Registrant to Silicon Valley
Bank, dated May 19, 1995.
4.14 Warrant for Series E Preferred Stock, issued by the Registrant to Venture Lending,
dated December 23, 1996.
4.15 Warrant for Common Stock, issued by the Registrant to SBC Warburg, dated September
20, 1995.
4.16 Warrant for Common Stock, issued by the Registrant to Judith Donaldson, dated
September 20, 1995.
4.17 Warrant for Series E Preferred Stock, issued by the Registrant to Dominion
Ventures, dated June 13, 1994.
4.18 Warrant for Common Stock, issued by the Registrant to Hyline Laboratories, dated
January 5, 1994.
4.19 Warrant for Common Stock, issued by the Registrant to Rip Grossman and Associates,
Inc., dated January 5, 1994.
</TABLE>
<PAGE> 96
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------ ----------------------------------------------------------------------------------
<C> <S>
*4.20 Warrant issued by the Registrant to the Representatives.
4.21 Investor Rights Agreement among the Registrant and the investors named therein,
dated June 23, 1997.
*5.1 Opinion of Cooley Godward LLP.
+10.1 License Agreement between the Registrant and Abbott Laboratories, dated April 26,
1996.
+10.2 Research Agreement between the Registrant and Abbott Laboratories, dated April 26,
1996.
10.3 Series E Preferred Stock Purchase Agreement between the Registrant and Abbott,
dated April 26, 1996.
+10.4 License Agreement between the Registrant and University of Washington, dated April
4, 1997.
+10.5 Collaboration Agreement between the Registrant and Houghten Pharmaceuticals, dated
April 12, 1993, as amended on April 10, 1997.
10.6 1993 Stock Plan.
10.7 Stock Option Agreement pursuant to 1993 Stock Plan.
10.8 Form of Restricted Stock Purchase Agreement pursuant to 1993 Stock Plan.
10.9 Employment Agreement between the Registrant and Charles J. Casamento, dated May
11, 1993.
10.10 Change of Control Agreement between the Registrant and Charles J. Casamento, dated
July 20, 1995.
10.11 Employment Letter Agreement between the Registrant and Laura S. L. Gaeta, dated
May 6, 1994.
10.12 Change of Control Agreement between the Registrant and Laura S. L. Gaeta, dated
July 20, 1995.
10.13 Employment Letter Agreement between the Registrant and Timothy E. Morris, dated
May 31, 1995.
10.14 Change of Control Agreement between the Registrant and Timothy E. Morris, dated
June 30, 1995.
10.15 Real Property Lease between the Registrant and Hayward Point Eden I Limited
Partnership, dated March 7, 1997.
10.16 First Amendment to Real Property Lease between the Registrant and Hayward Point
Eden I Limited Partnership, dated March 7, 1997.
10.17 Real Property Lease between the Registrant and Hall Properties, Inc., dated
February 6, 1992.
10.18 Placement Agency Agreement between the Registrant and Paramount Capital, Inc.,
dated August 1, 1996.
10.19 Subscription Agreement for the Purchase and Sale of Premium Preferred Units, dated
June 23, 1997.
10.20 Asset Purchase Agreement by and among the Registrant, Hyline Laboratories, and
Michael Ashkin, dated January 5, 1994.
10.21 Non-Competition Agreement between the Registrant and Michael Ashkin, dated January
5, 1994.
10.22 Consulting Agreement between the Registrant and Michael Ashkin, dated January 5,
1994.
10.23 Secured Promissory Notes issued to Hyline Laboratories, dated January 5, 1994.
10.24 Master Lease Agreement between the Registrant and Dominion Ventures, dated August
9, 1991.
</TABLE>
<PAGE> 97
<TABLE>
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EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
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10.25 Scientific Advisor Agreement between the Registrant and Michael Mathews, dated
April 13, 1993.
10.26 Consulting Agreement between the Registrant and Michael Mathews, dated April 13,
1993.
10.27 Consulting Agreement between the Registrant and Joe B. Harford, dated July 11,
1997.
10.28 Consulting Agreement between the Registrant and Michael Katze, dated February 6,
1997.
10.29 Approval of Outside Activity by Alan Hinnebusch, dated October 15, 1992.
11.1 Statement Regarding Computation of Per Share Earnings.
23.1 Consent of Ernst & Young LLP, Independent Auditors.
23.2 Consent of Cooley Godward LLP. Reference is made to Exhibit 5.1.
23.3 Consent of Pennie & Edmonds LLP.
24.1 Power of Attorney. Reference is made to page II-6.
27.1 Financial Data Schedule.
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* To be filed by amendment
+ Confidential treatment has been requested for portions of this exhibit.
<PAGE> 1
Exhibit 3.1
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF RIBOGENE, INC.
The undersigned, Charles J. Casamento and Timothy E. Morris, hereby
certify that:
ONE: They are the duly elected and acting President and Chief Financial
Officer, respectively, of this corporation.
TWO: The Articles of Incorporation of this corporation shall be amended
and restated to read in full as follows:
"ARTICLE I
The name of this corporation is RiboGene, Inc.
ARTICLE II
The purpose of this corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of California other than the banking business, the trust company business or
the practice of a profession permitted to be incorporated by the California
Corporations Code.
ARTICLE III
(A) Classes of Stock. This corporation is authorized to issue two
classes of stock to be designated, respectively, "Common Stock" and "Preferred
Stock." The total number of shares which the corporation is authorized to issue
is Sixty-Eight Million Nine Hundred Thirty-Two Thousand Three Hundred Forty-Four
(68,932,344) shares. Fifty Million (50,000,000) shares shall be Common Stock and
Eighteen Million Nine Hundred Thirty-Two Thousand Three Hundred Forty-Four
(18,932,344) shares shall be Preferred Stock.
(B) Rights, Preferences, Privileges and Restrictions of Preferred
Stock. The Preferred Stock authorized by these Restated Articles of
Incorporation may be issued from time to time in series. The rights,
preferences, privileges and restrictions granted to and imposed on the Series A
Preferred Stock, which series shall consist of 138,269 shares, on the Series B
Preferred Stock, which series shall consist of 800,000 shares, on the Series C
Preferred Stock, which series shall consist of 2,950,000 shares, on the Series D
Preferred Stock, which series shall consist of 270,222 shares, on the Series E
Preferred Stock, which series shall consist of 8,500,000 shares, and on the
Series F Preferred Stock, which series shall consist of 5,555,554 shares, are as
set forth below in this Article III(B).
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Except as to the Series A, Series B, Series C, Series D, Series E and
Series F Preferred Stock and except as otherwise provided in these Restated
Articles of Incorporation, the Board of Directors is hereby authorized to fix or
alter the rights, preferences, privileges and restriction, granted to or imposed
upon any wholly unissued additional series of Preferred Stock, and the number of
shares constituting any such series and the designation thereof, or any of them.
The Board of Directors, except as otherwise provided in these Articles of
Incorporation, is also authorized to decrease the number of shares of any
series, excluding the Series A, Series B, Series C, Series D, Series E and
Series F Preferred Stock, subsequent to the issuance of shares that series, but
not below the number of shares of such series then outstanding. In case the
number of shares of any series shall be so decreased, the shares constituting
such decrease shall resume the status which they had prior to the adoption of
the resolution originally fixing the number of shares of such series.
1. Dividend Provisions.
(a) The holders of shares of Series F Preferred Stock shall be
entitled to receive dividends, out of any assets legally available therefor,
prior and in preference to any declaration or payment of any dividend (payable
other than in Common Stock or other securities and rights convertible into or
entitling the holder thereof to receive, directly or indirectly, additional
shares of Common Stock of this corporation for purposes of a stock split or
recapitalization) on the Common Stock or other shares of Preferred Stock of this
corporation, at the rate of (i) $2.25 per share effective the first day
following the final closing of the initial offering of Series F Preferred Stock
by the Company (excluding dates on which shares of Series F Preferred Stock are
issued pursuant to the exercise or conversion of exercisable or convertible
securities, the "FINAL CLOSING DATE") and (ii) an additional $1.125 per share
effective on the second anniversary of the-Final Closing Date and on each
anniversary thereafter (collectively, the "PREFERRED DIVIDENDS"). The Preferred
Dividends shall be payable only when, as and if declared by the Board of
Directors. Preferred Dividends not declared and paid when due shall accrue and
accumulate. No dividend shall be declared and/or paid with respect to any other
series or class of capital stock while there are accrued but unpaid dividends on
the Series F Preferred Stock outstanding unless a like dividend is declared
and/or paid (as appropriate) with respect to the Series F Preferred Stock after
payment of any accrued but unpaid dividends (including Preferred Dividends) on
the Series F Preferred Stock.
(b) The holders of shares of Series A, Series B, Series C, Series
D and Series E Preferred Stock shall be entitled to receive dividends, out of
any assets legally available therefor, prior and in preference to any
declaration or payment of any dividend (payable other than in Common Stock or
other securities and rights convertible into or entitling the holder thereof to
receive, directly or indirectly, additional shares of Common Stock of this
corporation for purposes of a stock split or recapitalization) on the Common
Stock of this corporation, at the rate of $0.66, $1.00, $0.15, $0.225 and
$0.225, respectively, per share per annum or, if greater (as determined on an
as-converted basis for the Series A, Series B, Series C,Series D and Series E
Preferred Stock), an amount equal to that paid on any other outstanding shares
of this corporation (other than on shares of Series F Preferred Stock) whenever
funds are legally available therefor, payable quarterly when, as and if declared
by the Board of Directors. No
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dividend shall be declared and/or paid with respect to any Series A, Series B,
Series C, Series D or Series E Preferred Stock unless a dividend is declared
and/or paid with respect to each of the Series A, Series B, Series C, Series D
and Series E Preferred Stock at a rate that is no less favorable to the Series
A, Series B, Series C, Series D and Series E Preferred Stock than $0.66, $1.00,
$0.15, $0.225 and $0.225, for each share of Series A, Series B, Series C, Series
D and Series E Preferred Stock, respectively. Such dividends shall not be
cumulative.
2. Liquidation Preference.
(a) (i) In the event of any liquidation, dissolution or winding
up of this corporation, either voluntary or involuntary (a "Liquidation Event"),
the holders of the Series F Preferred Stock shall be entitled to receive, prior
and in preference to any distribution, payment, declaration or setting apart of
any of the assets of this corporation to, or in respect of, the holders of
Common Stock or other series of Preferred Stock, an amount per share equal to
$2.25 for each outstanding share of Series F Preferred Stock (the "Original
Series F Issue Price") plus an mount equal to all accrued Preferred Dividends
thereon, and any other declared but unpaid dividends thereon. If, upon the
occurrence of such an event, the assets and property thus distributed among the
holders of the Series F Preferred Stock shall be insufficient to permit the
payment to such holders of the full preferential amount, then the assets and
property of the corporation legally available for distribution shall be
distributed ratably among the holders of the Series F Preferred Stock in
proportion to the aggregate preferential amounts owed such holders upon a
liquidation, dissolution or winding up of the corporation. All outstanding
shares of Series F Preferred Stock shall rank as to payment, upon the occurrence
of a Liquidation Event senior to the Common Stock and all other series of the
corporation's Preferred Stock.
(ii) After the distribution to the holders of the Series F
Preferred Stock, the holders of the Series C, Series D and Series E Preferred
Stock shall be entitled to receive, prior and in preference to any distribution
of any of the assets of this corporation to the holders of Common Stock, Series
A Preferred Stock or Series B Preferred Stock by reason of their ownership
thereof, an amount per share equal to $1.50 for each outstanding share of Series
C Preferred Stock (the "Original Series C Issue Price"), $2.25 for each
outstanding share of Series D Preferred Stock (the "Original Series D Issue
Price") and $2.25 for each outstanding share of Series E Preferred Stock (the
"Original Series E Issue Price") plus an amount equal to declared but unpaid
dividends thereon. If, upon the occurrence of such an event, the assets and
property thus distributed among the holders of the Series C, Series D and Series
E Preferred Stock shall be insufficient to permit the payment to such holders of
the full preferential amount, then the assets and property of the corporation
legally available for distribution shall be distributed ratably among the
holders of the Series C, Series D and Series E Preferred Stock in proportion to
the aggregate preferential amounts owed such holders upon a liquidation,
dissolution or winding up of the corporation.
(iii) After the distribution to the holders of the Series C,
Series D and Series E Preferred Stock, the holders of the Series B Preferred
Stock shall be entitled to receive, prior and in preference to any distribution
of the assets of this corporation to the holders of Common Stock or Series A
Preferred Stock by reason of their ownership thereof, an amount
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per share equal to the sum of $10.00 for each outstanding share of Series B
Preferred Stock (the "Original Series B Issue Price") and an mount equal to
declared but unpaid dividends. If, upon the occurrence of such an event, the
assets and property thus distributed among the holders of the Series B Preferred
Stock shall be insufficient to permit the payment to such holders of the full
preferential amount, then the assets and property of the corporation legally
available for distribution shall be distributed ratably among the holders of the
Series B Preferred Stock in proportion to the aggregate preferential amounts
owed such holders of the outstanding Series B Preferred Stock upon a
liquidation, dissolution or winding up of the corporation.
(iv) After the distribution to the holders of the Series B
Preferred Stock, the holders of the Series A Preferred Stock shall be entitled
to receive, prior and in preference to any distribution of the assets of this
corporation to the holders of Common Stock by reason of their ownership thereof,
an amount per share equal to the sum of $6.60 for each outstanding share of
Series A Preferred Stock (the "Original Series A Issue Price") and an amount
equal to declared but unpaid dividends. If, upon the occurrence of such an
event, the assets and property.thus distributed among the holders of the Series
A Preferred Stock shall be insufficient to permit the payment to such holders of
the full preferential amount, then the assets and property of the corporation
legally available for distribution shall be distributed ratably among the
holders of the Series A Preferred Stock in proportion to the aggregate
preferential amounts owed such holders of the outstanding Series A Preferred
Stock upon a liquidation, dissolution or winding up of the corporation.
(b) Upon the completion of the distributions required by
subparagraph (a) of this Section 2, if, assets remain in this corporation, the
holders of the Common Stock of this corporation shall receive an amount equal to
$0.50 per share.
(c) Upon the completion of the distributions required by
subparagraphs (a) and (b) of this Section 2, if assets remain in this
corporation, the holders of Series A, Series B, Series C, Series D and Series E
Preferred Stock and Common Stock pro rata based on the number of shares of
Common Stock held by each (assuming conversion of the outstanding Series A,
Series B, Series C, Series D and Series E Preferred Stock) shall receive a per
share amount equal to the result of (i) the aggregate value of accrued but
unpaid Preferred Dividends and declared but unpaid dividends distributed to the
holders of Series F Preferred Stock pursuant to subparagraph (a) above divided
by (ii) the number of shares of Common Stock outstanding immediately prior to
the Liquidation Event (assuming conversion of the outstanding Series A, Series
B, Series C, Series D and Series E Preferred Stock).
(d) After the distributions described in subsection (a), (b) and
(c) above have been paid, the remaining assets of the corporation available for
distribution to shareholders, if any, shall be distributed among the holders of
Series A, Series B, Series C, Series D, Series E and Series F Preferred Stock
and Common Stock pro rata based on the number of shares of Common Stock held by
each (assuming conversion of all outstanding Preferred Stock).
(e) A merger of this corporation with or into any other
corporation or corporations, or a sale, conveyance or disposition of all or
substantially all of the assets of this
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corporation or the effectuation by the corporation of a transaction or series of
related transactions in which more than 50% of the voting power of the
corporation is disposed of, shall not be deemed to be a liquidation, dissolution
or winding up within the meaning of this Section 2, but shall instead be treated
pursuant to Section 5 hereof.
3. Redemption.
(a) On or at any time after April 15, 1999 this corporation may,
at any time it may lawfully do so, at the option of the Board of Directors,
redeem in whole or in part the Series A, Series B, Series C, Series D and Series
E Preferred Stock by paying in cash therefor a sum per share equal to the
Original Series A Issue Price, the Original Series B Issue Price, the Original
Series C Issue Price, the Original Series D Issue Price and the Original Series
E Issue Price, as the case may be, plus any declared but unpaid dividends on
such shares as of the Redemption Date (such total amount is hereinafter referred
to as the "Redemption Price").
(b) On or at any time after the receipt by this corporation from
the holders of 66-2/3% of the then outstanding shares of Series A, Series B,
Series C, Series D and Series E Preferred Stock of their written consent to
redemption hereunder of their respective, shares, this corporation may, at any
time it may lawfully do so, at the option of the Board of Directors, redeem in
whole or in part the Series A, Series B, Series C, Series D and Series E
Preferred Stock by paying in cash therefor a sum equal to the Redemption Price
for the shares so redeemed.
(c) (i) In the event of any redemption of only a part of the then
outstanding Series A, Series B, Series C, Series D and Series E Preferred Stock,
this corporation shall redeem the same proportion of each outstanding series of
Preferred Stock and, as to each such series, shall effect such redemption pro
rata according to the number of shares held by each holder thereof. No
redemption of any series of Preferred Stock shall occur, unless there is a pro
rata redemption of all series of Preferred Stock in accordance with the
foregoing. In the event of any redemption of all or part of the then outstanding
Series A, Series B, Series C, Series D and Series E Preferred Stock, any holder
thereof may avoid all or part of such redemption by converting into Common
Stock, pursuant to Section 4 below, up to that number of shares of such holder's
Preferred stock scheduled to be redeemed in' such redemption. Such holder may
condition such conversion on deposit by the corporation of the Redemption Price
for the shares to be redeemed pursuant to subsection 3(e)(iv) below.
(ii) At least 30 but no more than 60 days prior to the date
fixed for any redemption hereunder (the "REDEMPTION DATE"), written notice shall
be mailed, first class postage prepaid, to each holder of record (at the close
of business on the business day next preceding the day on which notice is given)
of the Series A, Series B, Series C, Series D and Series E Preferred Stock to be
redeemed, at the address last shown on the records of this corporation for such
holder or given by the holder to this corporation for the purpose of notice,
notifying such holder of the redemption to be effected, specifying the number of
shares to be redeemed from such holder, the Redemption Date, the Redemption
Price, the place at which payment may be obtained and the date on which such
holder's Conversion Rights (as hereinafter
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defined) as to such shares terminate and calling upon such holder to surrender
to this corporation, in the manner and at the place designated, his certificate
or certificates representing the shares to be redeemed (the "Redemption
Notice"). Except as provided in subsection 3(c)(iii), on or after the Redemption
Date, each holder of Series A, Series B, Series C, Series D and Series E
Preferred Stock to be redeemed shall surrender to this corporation the
certificate or certificates representing such shares, in the manner and at the
place designated in the Redemption Notice, and thereupon the Redemption Price of
such shares shall be payable to the order of the person whose name appears on
such certificate or certificates as the owner thereof and each surrendered
certificate shall be canceled. In the event less than all the shares represented
by any such certificate are redeemed, a new certificate shall be issued
representing the unredeemed shares.
(iii) From and after the Redemption Date, unless there shall
have been a default in payment of the Redemption Price, all dividends on the
Series A, Series B, Series C, Series D and Series E Preferred Stock designated
for redemption in the Redemption Notice shall cease to accrue, all rights of the
holders of such shares as holders of Series A, Series B, Series C, Series D and
Series E Preferred Stock (except the right to receive the Redemption Price
without interest upon surrender of their certificate or certificates) shall
cease with respect to such shares, and such shares shall not thereafter be
transferred on the books of this corporation or be deemed to be outstanding for
any purpose whatsoever. If the funds of the corporation legally available for
redemption of shares of Series A, Series B, Series C, Series D and Series E
Preferred Stock on any Redemption Date are insufficient to redeem the total
number of shares of Series A, Series B, Series C, Series D and Series E
Preferred Stock to be redeemed on such date, those funds which are legally
available will be used to redeem the maximum possible number of such shares in
accordance with the provisions of paragraph 3(c)(i) hereof. The shares of Series
A, Series B, Series C, Series D and Series E Preferred Stock not redeemed shall
remain outstanding and entitled to all the rights and preferences provided
herein. At any time thereafter when additional funds of the corporation are
legally available for the redemption of shares of Series A, Series B, Series C,
Series D and Series E Preferred Stock, such funds will immediately be used to
redeem the balance of the shares which the corporation has become obligated to
redeem on any Redemption Date but which it has not redeemed.
(iv) Three days prior to the Redemption Date, this
corporation shall deposit the Redemption Price of all outstanding shares of
Series A, Series B, Series C, Series D and Series E Preferred Stock designated
for redemption in the Redemption Notice, and not yet redeemed or converted, with
a bank or trust company having aggregate capital and surplus in excess of
$50,000,000 as a trust fund for the benefit of the respective holders of the
shares designated for redemption and not yet redeemed. Simultaneously, this
corporation shall deposit irrevocable instruction and authority to such bank or
trust company to publish the notice of redemption thereof (or to complete such
publication if theretofore commenced) and to pay, on and after the date fixed
for redemption or prior thereto, the Redemption Price of the Series A, Series B,
Series C, Series D and Series E Preferred Stock to the holders thereof upon
surrender of their certificates. Any monies deposited by this corporation
pursuant to this subsection 3(c)(iv) for the-redemption of shares which are
thereafter converted into shares of Common Stock pursuant to Section 4 hereof no
later than the close of business on the Redemption Date shall be returned to
this corporation forthwith upon such conversion. The balance of any monies
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deposited by this corporation pursuant to this subsection 3(c)(iv) remaining
unclaimed at the expiration of two years following the Redemption Date shall
thereafter be returned to this corporation, provided that the shareholder to,
which such money would be payable hereunder shall be entitled, upon proof of its
ownership of the Series A, Series B, Series C, Series D and Series E Preferred:
Stock and payment of any bond requested by the corporation, to receive such
monies but without interest from the Redemption Date.
(d) In the event that the corporation elects to conduct any
redemption of any series of outstanding Preferred Stock pursuant to subsections
3(a) or 3(b) above, the corporation shall promptly deliver a written notice of
such intention to the holders of the Series F Preferred Stock then outstanding
setting forth in reasonable detail information regarding the planned redemption
and shall include in such redemption the shares of Series F Preferred Stock held
by those holders that deliver to the corporation, within twenty-five (25) days
after the date of the corporation's notice to such holders, a written election
to have the shares of Series F Preferred Stock then held by them included in
such redemption. In the event that any holders of Series F Preferred Stock elect
to participate in a redemption, the Redemption Price for each share of Series F
Preferred Stock to be redeemed shall be equal to the Original Series F Issue
Price plus any declared but unpaid dividends, including Preferred Dividends, on
such share as of the Redemption Date. The redemption of the Series F Preferred
Stock included in any such redemption shall be conducted on at as a part of, the
same time and on the same terms as the redemption of the other series of
Preferred Stock then being redeemed, as set forth in detail in subsection 3(c)
above.
4. Conversion. The holders of Preferred Stock shall have conversion
rights as follows (the "Conversion Rights"):
(a) Right to Convert.
(i) Subject to subsections (c) and (d), each share of
Preferred Stock shall be convertible, at the option of the holder thereof, at
any time after the date of issuance of such share and prior to the close of
business on any Redemption Date as may have been fixed in any Redemption Notice
with respect to such share (if applicable), at the office of this corporation or
any transfer agent for the Preferred Stock, into such number of fully paid and
nonassessable shares of Common Stock as is determined by dividing $6.60 for each
share of Series A Preferred, $10.00 for each share of Series B Preferred Stock,
$1.50 for each share of Series C-Preferred, $2.25 for each share of Series D
Preferred, $2.25 for each share of Series E Preferred and $2.25 (plus any
accrued but unpaid dividends, including Preferred Dividends) for each share of
Series F Preferred by the Conversion Price at the time in effect for such share.
The initial Conversion Prices for shares of Preferred Stock shall be $6.60,
$10.00, $1.50, $2.25, $2.25 and $2.25 per share for the Series A, Series B,
Series C, Series D, Series E and Series F Preferred Stock, respectively;
provided, however, that such Conversion Prices shall be subject to adjustment as
set forth in subsections 4(c) and 4(d). Upon conversion of any share of
Preferred Stock after all conversion ratio adjustments set forth herein, all
accrued but unpaid dividends, including Preferred Dividends, on such stock will
be canceled.
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(ii) In the event of a call for redemption of any shares of
Series A, Series B, Series C, Series D, Series E (and, if applicable, Series F)
Preferred Stock pursuant to Section 3 hereof, the Conversion Rights shall
terminate as to the shares designated for redemption at the close of business on
the Redemption Date, unless default is made in payment of the Redemption Price.
(iii) Each share of Series A, Series B, Series C, Series D,
Series E and Series F Preferred Stock shall automatically be converted into
shares of Common Stock at the Conversion Price at the time in effect for such
series of Preferred Stock immediately upon the consummation of the corporation's
sale of its Common Stock in a bona fide, firm commitment underwriting.pursuant
to a registration statement under the Securities Act of 1933, as amended, which
results in aggregate gross cash proceeds to this corporation in excess of
$7,500,000 (the "Qualified IPO").
(iv) Each share of Series A, Series B, Series C, Series D and
Series E Preferred Stock shall automatically be converted into shares of Common
Stock at the Conversion Price at the time in effect for such Series A, Series
B, Series C, Series D or Series E Preferred Stock at such time as the
corporation receives the consent of the holders of not less than 66-2/3% of each
of the Series A, Series B, Series C, Series D and Series E Preferred Stock then
outstanding.
(b) Mechanics of Conversion. Before any holder Preferred Stock
shall be entitled to convert the same into shares of Common Stock, he shall
surrender the certificate or certificates therefor, duly endorsed, at the office
of this corporation or of any transfer agent for the Preferred Stock, and shall
give written notice by mall, postage prepaid, to this corporation at its
principal corporate office, of the election to convert the same and shall state
therein the name or names in which the certificate or certificates for shares of
Common Stock are to be issued. This corporation shall, as soon as practicable
thereafter, issue and deliver at such office such holder of Preferred Stock, or
to the nominee or nominees of such holder, a certificate or certificates for the
number of shares of Common Stock to which such holder shall be entitled as
aforesaid. Such conversion shall be deemed to have been made immediately prior
to the close of business on the date of such surrender of the shares of
Preferred Stock to be converted, and the person or persons entitled to receive
the shares of Common Stock issuable upon such conversion shall be treated for
all purposes as the record holder or holders of such shares of Common Stock as
of such date. If the conversion is in connection with an underwritten offer of
securities registered pursuant to the Securities Act of 1933, the conversion
will be conditioned upon the closing with the underwriter of the sale of
securities pursuant to such offering, unless otherwise designated in writing by
the holders of such Preferred Stock, in which event the person(s) entitled to
receive the Common Stock issuable upon such conversion of the Preferred Stock
shall not be deemed to have converted such Preferred Stock until immediately
prior to the closing of such sale of securities.
(c) Conversion Price Adjustments of All Series of Preferred
Stock. The Conversion Price of Series A, Series B, Series C, Series D, Series E
and Series F Preferred Stock shall be subject to adjustment from time to time as
follows:
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(i) (A) If the corporation, at any time or from time to time
after the effective date of these Amended and Restated Articles of Incorporation
(the "Articles Date") shall issue any Additional Stock (as defined below)
without consideration or for a consideration per-share less than the Conversion
Price for such series of Preferred Stock in effect immediately prior to the
issuance of such Additional Stock, the Conversion Price for such series of
Preferred Stock in effect immediately prior to each such issuance shall
forthwith be adjusted to a price determined by multiplying such Conversion Price
by a fraction, the numerator of which shall be the number of shares of Common
Stock outstanding immediately prior to such issuance plus the number of shares
of Common Stock which the aggregate consideration received by the corporation
for the total number of shares of Additional Stock so issued would purchase at
such Conversion Price, and the denominator of which shall be the number of
shares of Common Stock outstanding immediately prior to such issuance plus the
number of such shares of Additional Stock so issued; provided that for the
purposes of this subsection, all shares of Common Stock issuable upon conversion
of outstanding Preferred Stock shall be deemed to be outstanding, and
immediately after any Additional Stock is deemed issued, such Additional Stock
shall be deemed to be outstanding.
(B) No adjustment of the Conversion price for any series
of Preferred Stock shall be made in an mount less than one cent per share,
provided that any adjustments which are not required to be made by reason of
this sentence shall be carried forward and shall be either taken into account in
any subsequent adjustment made prior to 3 years from the date of the event
giving rise to the adjustment being carded forward, or shall be made at the end
of 3 years from the date of the event giving rise to the adjustment being
carried forward. Except to the limited extent provided for in subsections (E)(3)
and (E)(4), no adjustment of such Conversion Price pursuant to this subsection
4(c)(i) shall have the effect of increasing the Conversion Price above the
Conversion Price in effect immediately prior to such adjustment.
(C) In the case of the issuance of Common Stock for cash,
the consideration shall be deemed to be the mount of cash paid therefor before
deducting any reasonable discounts, commissions or other expenses allowed, paid
or incurred by this corporation for any underwriting or otherwise in connection
with the issuance and sale thereof.
(D) In the case of the issuance of the Common Stock for a
consideration in whole or in part other than cash, the consideration other than
cash shall be deemed to be the fair value thereof as determined by the Board of
Directors irrespective of any accounting treatment.
(E) In the case of the issuance, whether before, on or
after the Articles Date, of options to purchase or rights to subscribe for
Common Stock, securities by their terms convertible into or exchangeable for
Common Stock or options to purchase or rights to subscribe for such convertible
or exchangeable securities (which are not excluded from the definition of
Additional Stock), the following provisions shall apply:
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1. The aggregate maximum number of shares of Common
Stock deliverable upon exercise of such options to purchase or rights to
subscribe for Common Stock shall be deemed to have been issued at the time such
options or rights were: issued and for a consideration equal to the
consideration (determined in the manner provided in subsections 4(c)(i)(c) and
4(c) (i)(D)), if any, received by the corporation upon the issuance of such
options or rights plus the minimum purchase price provided in such options or
rights for the Common Stock covered thereby.
2. The aggregate maximum number of shares of Common
Stock deliverable upon conversion of or in exchange for any such convertible or
exchangeable securities Or upon the exercise of options to purchase or rights to
subscribe for such convertible or exchangeable securities and subsequent
conversion or exchange thereof shall be deemed to have been issued at the time
such securities were issued or such options or rights were issued and for a
consideration equal to the consideration, if any, received by the corporation
for any such securities and related options or rights (excluding any cash
received on account of accrued interest or accrued dividends), plus the
additional consideration, if any, to be received by the corporation upon the
conversion or exchange of such securities the exercise of any related options or
rights (the consideration in each case to be determined in the manner provided
in subsections 4(c)(i)(c) and 4(c)(i)(D)).
3. In the event of any change in the number of shares
of Common Stock deliverable or any increase in the consideration payable to this
corporation upon exercise of such options or rights or upon conversion of or in
exchange for such convertible or exchangeable securities, including, but not
limited to, a change resulting from the antidilution provisions thereof, the
Conversion Prices of the Series A, Series B, Series C, Series D, Series E or
Series F Preferred Stock obtained with respect to the adjustment which was made
upon the issuance of such options, rights or securities, and any subsequent
adjustments based thereon, shall be recomputed to reflect such change, but no
further adjustment shall be made for the actual issuance of Common Stock or any
.payment of such consideration upon the exercise of any such options or rights
or the conversion or exchange of such securities.
4. Upon the expiration of any such options or rights,
the termination of any such rights to convert or exchange or the expiration of
any options or rights related to such convertible or exchangeable securities,
the Conversion Prices of the Preferred Stock obtained with respect to the
adjustment which was made upon the issuance of such options, rights or
securities or options or rights related to such securities, and any subsequent
adjustments based thereon, shall be recomputed to reflect the issuance of only
the number of shares of Common Stock actually issued upon the exercise of such
options or rights, upon the conversion or exchange of such securities or upon
the exercise of the options or rights related to such securities. Upon the
expiration of any such options or rights, the termination of any such rights to
convert or exchange or the expiration of any options or rights related to such
convertible or exchangeable securities, only the number of shares of Common
Stock actually issued upon the exercise of such options or rights, upon the
conversion or exchange of such securities or upon the exercise of the options or
rights related to such securities shall continue to be deemed to be issued.
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<PAGE> 11
5. All Common Stock deemed issued pursuant to this
subsection 4(c)(i)(E) shall be considered issued only at the time of its deemed
issuance and any actual issuance of such stock shall not be an actual issuance
or a deemed issuance of the corporation's Common Stock under the provisions of
this Section 4.
(ii) "Additional Stock" shall mean any shares of Common Stock
issued (or deemed issued pursuant to subsection 4(c)(i)(E)) by this corporation
on or after the Articles Date other than shares of Common Stock issued or
issuable
(A) pursuant to a transaction described in subsection
4(d), (e) or (f) hereof,
(B) to officers, directors, employees and consultants of
this corporation directly or pursuant to a stock option plan or restricted stock
plan approved by the shareholders and directors of this corporation,
(C) upon the issuance of shares of any authorized series
of Preferred Stock;
(D) upon conversion of any series of Preferred Stock;
(E) upon the exercise of outstanding warrants dated (1)
August 9, 1991, originally issued with respect to the purchase of up to 60,000
shares of Series B Preferred Stock at an exercise price of $1.00 per share, (2)
on or about June 4, 1993, originally issued with respect to the purchase of up
to 150,000 shares of Series C Preferred Stock at an exercise price of $0.15 per
share, and (3) on or about June 2, 1994, originally issued with respect to the
purchase of up to approximately 13,333 shares of Series E Preferred Stock at an
exercise price of $3.00 per share, respectively, issued to Dominion Ventures,
Inc., in connection with an equipment lease therewith and extensions thereof, as
such amounts may be or have been subsequently adjusted pursuant to the terms of
such warrants, or upon the issuance of the stock purchasable upon exercise of
such warrants;
(F) upon the exercise of an outstanding warrant
originally issued to purchase up to 2,702,222 shares of Series D Preferred Stock
at an exercise price of.$0.225 per share dated on or about June 4, 1993, as such
amounts may be or have been subsequently adjusted pursuant to the terms of such
warrant, or upon the issuance of the Series D Preferred Stock purchasable upon
exercise thereof;
(G) upon the exercise of outstanding warrants originally
issued to purchase up to an aggregate of 1,313,000 shares of Common Stock at an
exercise price of $2.25 per share dated on or about January 5, 1994, issued in
connection with the acquisition of assets and technology from another entity, as
such amounts may be or have been subsequently adjusted pursuant to the terms of
such warrant, or upon the issuance of the Common Stock purchasable upon exercise
thereof; or
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<PAGE> 12
(H) upon the exercise of outstanding warrants dated (1),
on or about May 19, 1995, originally issued with respect to the purchase of up
to 10,000 shares of Series E Preferred Stock at an exercise price of $3.00 per
share, and (2) on or about September 25, 1995, originally issued with respect to
the purchase of up to 15,000 shares of Series E Preferred Stock at an exercise
price of $3.00 per share, respectively, issued to Silicon Valley Bank in
connection with bridge loan and extension thereof, as such amounts may be or
have been subsequently adjusted pursuant to the terms of such warrants, or upon
the issuance of the stock purchasable upon exercise of such warrants;
(I) upon the exercise of outstanding warrants dated on or
about September 20, 1995, originally issued with respect to the purchase of up
to an aggregate of 52,850 shares of Common Stock at an exercise price of $2.00
per share issued to two former bridge lenders of the corporation, as such
amounts may be or have been subsequently adjusted pursuant to the terms of such
warrants; or
(J) upon the issuance of exercise of the Placement
Warrants or the Advisory Warrants (in each case as defined in the Placement
Agency Agreement between the corporation and Paramount Capital, Inc. dated
August 1, 1996), or upon the issuance or exercise of any of the Class A Warrants
of the corporation issued (i) in connection with the sale of Series F Preferred
Stock on or prior to the Final Closing Date or (ii) pursuant to the exercise of
the Placement Options or the Advisory Options.
Notwithstanding the foregoing provisions of this Section 4(c)(ii), the
conversion price adjustments set forth in this Section 4(c) shall be deemed to
apply (and any applicable adjustments shall be made) to any modification of the
rights of conversion, exchange or exercise of any of the securities referred to
in subsections (c)(ii)(A) through (c)(ii)(I) above other than automatic
modifications made pursuant to the terms of such instruments (regarding
automatic adjustments of conversion or exercise prices, numbers of shares,
etc.) or operation of this Section 4(c).
(d) Additional Conversion Price Adjustments of Series F Preferred
Stock. The Conversion Price in effect immediately prior to the Qualified IPO
will be adjusted and reset effective as of the effective date of the Qualified
IPO to the extent necessary to insure that each share of Series F Preferred
Stock is convertible into that number of shares of Common Stock such that when
multiplied by the Qualified IPO Price (as defined below), each share of
Preferred Stock shall be worth at least $2.25 (subject to equitable adjustments
for stock splits and similar events) plus declared but unpaid dividends thereon,
if any, and all accrued but unpaid Preferred Dividends thereon. Accordingly, the
aggregate number of shares of Common Stock issuable upon conversion of the
Series F Preferred Stock is subject to adjustment at the time of the Qualified
IPO if the PMV (as defined below) is less than the Minimum Value (as defined
below). In such event, the Conversion Price of the Series F Preferred Stock
shall be reduced, and the conversion ratio accordingly increased to equal a
ratio that will provide that the issued and outstanding shares of Series F
Preferred Stock (assuming exercise of the Series F Preferred Stock Equivalents
(as defined below)) shall in the aggregate be convertible into a number of
shares of
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<PAGE> 13
Common Stock equal to the product of (A) the Pre-Qualified IPO Shares (as
defined below) multiplied by (B) a fraction, the numerator of which is the
Stated Value of the Series F Preferred Stock plus declared but unpaid dividends
on such Series F Preferred Stock, if any, and all accrued but unpaid Preferred
Dividends on such stock and the denominator of which is the PMV.
Notwithstanding the foregoing, no adjustment shall be made if the PMV is greater
than the Minimum Value. For purposes of the foregoing calculations:
(i) "STATED VALUE OF THE SERIES F PREFERRED STOCK" shall mean
the product of (A) $2.25 multiplied by (B) the number of outstanding shares of
Series F Preferred Stock (assuming exercise or conversion of all Series F
Preferred Stock Equivalents);
(ii) "COMMON STOCK EQUIVALENTS" shall mean all securities
exercisable for or convertible, directly or indirectly, into shares of Common
Stock;
(iii) "UNADJUSTED PERCENTAGE" shall mean the quotient of (A)
all shares of Common Stock issuable upon the exercise and/or conversion of all
Series F Preferred Stock and Series F Preferred Stock Equivalents prior to any
adjustments under this subsection, divided by (B) all outstanding shares of
Common Stock and all shares of Common Stock is issuable upon the exercise or
conversion of all outstanding Common Stock Equivalents (including shares
issuable upon conversion of the Series F Preferred Stock and Series F Preferred
Stock Equivalents prior to any adjustment under this subsection);
(iv) "MINIMUM VALUE" shall mean the quotient obtained by
dividing (A) the sum of (x) the Stated Value of the Series F Preferred Stock,
and (y) declared but unpaid dividends on the Series F Preferred Stock, if any,
and all accrued but unpaid Preferred Dividends, by (B) the Unadjusted
Percentage;
(v) "PRE-QUALIFIED IPO SHARES" shall mean the aggregate
number of shares of Common Stock Outstanding on a fully diluted basis (assuming
the exercise or conversion of all Common Stock Equivalents prior to any
adjustments pursuant to this subsection) upon the effectiveness of the Qualified
IPO, but excluding shares of Common Stock and Common Stock Equivalents issued in
the Qualified IPO;
(vi) "SERIES F PREFERRED STOCK EQUIVALENTS" shall mean all
securities exercisable for, or convertible into, shares of Series F Preferred
Stock;
(vii) "PMV" shall be equal to the aggregate value of the Pre-
Qualified IPO Shares determined by multiplying the number of Pre-Qualified IPO
Shares by the Qualified IPO Price; and
(viii) "QUALIFIED IPO PRICE" shall mean the per share public
offering price of the Common Stock sold in the Qualified IPO. If units of Common
Stock and other securities are issued in the Qualified IPO, the Board of
Directors of the Company shall allocate value to the Common Stock based on the
relative historical values of similar unit offerings conducted by the same
and/or similar underwriters.
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<PAGE> 14
(e) Other Distributions. In the event this corporation shall
declare a distribution payable in securities of other persons, evidences of
indebtedness issued by this corporation or other persons, assets (excluding cash
dividends) or options or rights not referred to in subsection 4(c)(iii), then,
in each such ease for the purpose of this subsection 4(e), the holders of
Preferred Stock shall be entitled to a proportionate share of any such
distribution as though they were the holders of the number of shares of Common
Stock of the corporation into which their shares of Preferred Stock are
convertible as of the record date fixed for the determination of the holders of
Common Stock of the corporation entitled to receive such distribution.
(f) Stock Splits, Stock Dividends and Recapitalizations.
(i) In the event the corporation should at any time or from
time to time after the Articles Date fix a record date for the effectuation of a
split or subdivision of the outstanding shares of Common Stock or the
determination of holders of Common Stock entitled to receive a dividend or other
distribution payable in additional shares of Common Stock or other securities or
rights convertible into, or entitling the holder thereof' to receive directly or
indirectly, additional shares of Common Stock (for purposes of this subsection
4(f) referred to as "COMMON EQUIVALENTS") without payment of any consideration
by such holder for the additional shares of Common Stock or the Common
Equivalents (including the additional shares of Common Stock issuable upon
conversion or exercise thereof), then, as of such record date (or the date of
such dividend distribution, split or subdivision if no record date is fixed),
the Conversion Prices of the Preferred Stock shall be appropriately decreased so
that the number of shares of Common Stock issuable on conversion of each share
of such series shall be increased in proportion to such increase of outstanding
shares determined in accordance with subsection 4(c)(i)(E).
(ii) If the number of shares of Common Stock outstanding at
any time after the Articles Date is decreased by a combination of the
outstanding shares of Common Stock, then, following the record date of such
combination, the Conversion Prices for the Preferred Stock shall be
appropriately increased so that the number of shares of Common Stock issuable on
conversion of each share of such series shall be decreased in proportion to such
decrease in outstanding shares.
(iii) If at any time or from time to time there shall be a
recapitalization of the Common Stock (other than a subdivision, combination or
merger or sale of assets transaction provided for elsewhere in this Section 4 or
Section 5) provision shall be made so that the holders of the Preferred Stock
shall thereafter be entitled to receive upon conversion of the Preferred Stock
the number of shares of stock or other securities or property of the corporation
or otherwise, to which a holder of Common Stock deliverable upon conversion
would have been entitled on such recapitalization. In any.such case, appropriate
adjustment shall be made in the application of the provisions of this Section 4
with respect to the rights of the holders of the Preferred Stock after the
recapitalization to the end that the provisions of this Section 4 (including
adjustment of the Conversion Prices then in effect and the number of shares
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<PAGE> 15
purchasable upon conversion of the Preferred Stock) shall be applicable after
that event as nearly equivalent as may be practicable.
(g) No Impairment. This corporation will not, by amendment of its
Articles of Incorporation or through any reorganization, recapitalization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms to be observed or performed hereunder by this
corporation, but will at all times in good faith assist in the carrying out of
all the provisions of this Section 4 and in the taking of all such action as may
be necessary or appropriate in order to protect the Conversion Rights of the
holders of the Preferred Stock against impairment.
(h) No Fractional Shares and Certificate as to Adjustments.
(i) No fractional shares shall be issued upon conversion of
the Preferred Stock, and the number of shares of Common Stock to be issued shall
be rounded to the nearest whole share. Whether or not fractional shares are
issuable upon such conversion shall be determined on the basis of the total
number of shares of Preferred Stock the holder is at the time converting into
Common Stock and the number of shares of Common Stock issuable upon such
aggregate conversion.
(ii) Upon the occurrence of each adjustment or readjustment
of any Conversion Price of a series of Preferred Stock pursuant to this Section
4, this corporation, at its expense, shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and prepare and furnish to each
holder of such series of Preferred Stock a certificate setting forth such
adjustment or readjustment and showing in detail the facts upon which such
adjustment or readjustment is based. This corporation shall, upon the written
request at any time of any holder of Preferred Stock, furnish or cause to be
furnished to such holder a like certificate setting forth (A) such adjustment
and readjustment, (B) the Conversion Prices at the time in effect, and (c) the
number of shares of Common Stock and the amount, if any, of other property which
at the time would be received upon the conversion of a share of Preferred Stock.
(i) Notices of Record Date. In the event of any taking by this
corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend) or other distribution, any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, this
corporation shall mail to each holder of Preferred Stock, at least 20 days prior
to the date specified therein, a notice specifying the date on which any such
record is to be taken for the purpose of such dividend, distribution or right,
and the amount and character of such dividend, distribution or right.
(j) Reservation of Stock Issuable Upon Conversion. This
corporation shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock solely for the purpose of effecting the
conversion of the shares of the Preferred Stock such number of its shares of
Common Stock as shall from time to time be sufficient to effect the
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<PAGE> 16
conversion of all outstanding shares of the Preferred Stock; and if at any time
the number of authorized but unissued shares of Common Stock shall not be
sufficient to effect the conversion. of all then outstanding shares of the
Preferred Stock, in addition to such other remedies as shall be available to the
holder of such Preferred Stock, this corporation will take such corporate action
as may, in the opinion of its counsel, be necessary to increase its authorized
but unissued shares of Common Stock to such number of shares as shall be
sufficient for such purposes.
(k) Notices. Any notice required by the provisions of this
Section 4 to be given to the holders of shares of Preferred Stock shall be
deemed given if deposited in the United States mall, postage prepaid, and
addressed to each holder of record at his address appearing on the books of this
corporation.
5. Merger.
(a) At any time after the Articles Date, in the event of:
(i) any merger of the corporation with or into any other
corporation or other entity or person, or any other corporate reorganization in
which the corporation shall not be the continuing or surviving entity of such
merger or reorganization or any transaction or series of related transactions by
the corporation in which in excess of 50% of the corporation's voting power is
transferred, or
(ii) a sale or other disposition of all or substantially all
of the assets of the corporation, the documents effecting such transactions
shall provide that:
(A) The holders of the Series F Preferred Stock shall
first receive for each share of such stock, in cash or in securities received
from the acquiring corporation, or in a combination thereof, at the closing of
any such transaction, an mount equal to the Original Series F Issue Price plus
an mount equal' to all accrued but unpaid dividends thereon (including Preferred
Dividends thereon) and any other declared but unpaid dividends thereon. If the
aggregate cash value in such transaction otherwise available to holders of the
Series F Preferred Stock is insufficient to satisfy the aforementioned
preference of such stock, then all such cash or securities shall be distributed
ratably among the holders of the outstanding Series F Preferred Stock in
proportion to the aggregate preferential amounts owed such holders as set forth
above. Upon or immediately prior to such transaction, the corporation shall
provide for the payment of any such amount to the holders of Series F Preferred
Stock.
(B) In the event additional cash or securities remain
available for distribution after the distributions to the holders of the Series
F Preferred Stock, the holders of the Series C, Series D and Series E Preferred
Stock shall first receive for each share of such stock, in cash or in securities
received from the acquiring corporation, or in a combination thereof, at the
closing of any such transaction, an amount equal to the Original Series C Issue
Price,-the Original Series D Issue Price, and the Original Series E Issue Price
respectively. If the aggregate cash value in such transaction otherwise
available to holders of the Series C, Series D and Series E Preferred Stock is
insufficient to satisfy the aforementioned preference of such
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<PAGE> 17
stock, then all such cash or securities shall be distributed ratably among
the holders of the outstanding Series C, Series D and Series E Preferred Stock
in proportion to the aggregate preferential amounts owed such holders as set
forth above.
(C) In the event additional cash or securities remain
available for distribution after the distributions to the holders of the Series
C, Series D and Series E Preferred Stock, then holders of the Series B Preferred
Stock shall then be entitled to receive for each share of such stock, in cash or
in securities received from the acquiring corporation, or in a combination
thereof, at the closing of any such transaction, an amount equal to the Original
Series B Issue Price. If the aggregate cash value in such transaction otherwise
available to holders of the Series B Preferred Stock is insufficient to satisfy
the aforementioned preference of the Series B Preferred Stock, then all such
cash or securities shall be distributed ratably among the holders of the
outstanding Series B Preferred Stock in proportion to the aggregate preferential
amounts owed such holders as set forth above.
(D) In the event additional cash or securities remain
available for distribution after the distributions to the holders of the Series
B, Series C, Series D and Series E Preferred Stock, then holders of the Series A
Preferred Stock shall then be entitled to receive for each share of such stock,
in cash or in securities received from .the acquiring corporation, or in a
combination thereof, at the closing of any such transaction, an amount equal to
the Original Series A Issue Price. If the aggregate cash value in such
transaction otherwise available to holders of the Series A Preferred Stock is
insufficient to satisfy the aforementioned preference of the Series A Preferred
Stock, then all such cash or securities shall be distributed ratably among the
holders of the outstanding Series A Preferred Stock in proportion to the
aggregate preferential amounts owed such holders as set forth above.
(E) In the event additional cash or securities remain
available for distribution after the distributions to the holders of the Series
A, Series B, Series C, Series D and Series E Preferred Stock, then holders of
the Common Stock shall then be entitled to receive for each share of such stock,
in cash or in securities received from the acquiring corporation, or in a
combination thereof, at the closing of any such transaction, an amount equal to
$0.50 per share. If the aggregate cash value in such transaction otherwise
available to holders of the Common Stock is insufficient to satisfy the
aforementioned preference of the Common Stock, then all such cash or securities
shall be distributed ratably among the holders of the outstanding Common Stock
in proportion to the aggregate preferential amounts owed such holders as set
forth above.
(F) In the event additional cash or securities remain
available for distribution after the distributions pursuant to subparagraphs
(A)-(E) above, then the holders of the Series A, Series B, Series C, Series D
and Series E Preferred Stock and the Common Stock shall then be entitled to
receive, pro rata based on the number of shares of Common Stock held by each
(assuming conversion of the outstanding Series A, Series B, Series C, Series D
and Series E Preferred Stock), in cash or in securities received from the
acquiring corporation, or in a combination thereof, at the closing of any such
transaction, a per share amount equal to the result of (i) the aggregate value
of accrued but unpaid Preferred Dividends
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<PAGE> 18
and declared but unpaid dividends distributed to the holders of Series F
Preferred Stock pursuant to subparagraph (A) above divided by (ii) the number of
shares of Common Stock outstanding: immediately prior to the such transaction
(assuming conversion of the outstanding Series A, Series B, Series C, Series D
and Series E Preferred Stock). If the aggregate cash value in such transaction
otherwise available to holders of the Series A, Series B, Series C, Series D and
Series E Preferred Stock and the Common Stock is insufficient to satisfy the
aforementioned preference of the Common Stock, then all such cash or securities
shall be distributed ratably among the holders of Common Stock (assuming
conversion of the outstanding Series A, Series B, Series C, Series D and Series
E Preferred Stock).
(G) In the event additional cash or securities remain
available for distribution alter the distributions pursuant to subparagraphs
(A)-(F) above have been paid, the remaining assets of the corporation available
for distribution to shareholders shall be distributed among the holders of the
Series A, Series B, Series C, Series D, Series E and Series F Preferred Stock
and the Common Stock pro rata based on the number of shares of Common Stock held
by each (assuming conversion of such series of Preferred Stock); provided that
(1) at such time as the holders of Series C Preferred
Stock shall have received an aggregate of $5.25 per share of Series C Preferred
Stock they own (including all other amounts paid to such holders pursuant to
this subsection (a) of Section 5), such shares shall be considered fully paid
and the holders thereof shall be entitled to no further distributions pursuant
to this subsection 5(a)(ii)(G) with respect to such shares or shares assumed to
be issued upon conversion thereof,
(2) at such time as the holders of Series D Preferred
Stock shall have received an aggregate of $7.87 per share of Series D Preferred
Stock they own (including all other amounts paid to such holders pursuant to
this subsection (a) of Section 5), such shares shall be considered fully paid
and the holders thereof shall be entitled to no further distributions pursuant
to this subsection 5(a)(ii)(G) with respect to such shares or shares assumed to
be issued upon conversion thereof,
(3) at such time as the holders of Series E Preferred
Stock shall have received an aggregate of $7.87 per share of Series E Preferred
Stock they own (including all other amounts paid to such holders pursuant to
this subsection (a) of Section 5), such shares shall be considered fully paid
and the holders thereof shall be entitled to no further distributions pursuant
to this subsection 5(a)(ii)(G) with respect to such shares or shares assumed to
be issued upon conversion thereof,
(4) at such time as the holders of Series F Preferred
Stock shall have received an aggregate of $7.87 per share of Series F Preferred
Stock they own (including all other amounts paid to such holders pursuant to
this subsection (a) of Section 5), such shares shall be considered fully paid
and the holders thereof shall be entitled to no further distributions pursuant
to this subsection 5(a)(ii)(G) with respect to such shares or shares assumed to
be issued upon conversion thereof,
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<PAGE> 19
(5) at such time as the holders of Series A Preferred
Stock shall have received an aggregate of $23.10 per share of Series A Preferred
Stock they own (including all other mounts paid to such holders pursuant to this
subsection (a) of Section 5), such shares shall be considered fully paid and the
holders thereof shall be entitled to no further distributions pursuant to this
subsection 5(a)(ii)(G) with respect to such shares or shares assumed to be
issued upon conversion thereof, and
(6) at such time as the holders of Series B Preferred
Stock shall have received an aggregate of $35.00 per share of Series B Preferred
Stock they own (including all other amounts paid to such holders pursuant to
this subsection (a) of Section 5), such shares shall be considered fully paid
and the holders thereof shall be entitled to no further distributions pursuant
to this subsection 5(a)(ii)(G) with respect to such shares or shares assumed to
be issued upon conversion thereof.
(b) Any securities to be delivered to the respective holders of
the Preferred Stock pursuant to subsection 5(a) above shall be valued as
follows:
(i) Securities not subject to investment letter or other
similar restrictions on free marketability:
(A) If traded on a securities exchange or The Nasdaq
National Market, the value shall be deemed to be the average of the closing
prices of the securities on such exchange over the 30-day period ending three
(3) trading days prior to the closing;
(B) If actively traded over-the-counter, the value shall
be deemed to be the average of the closing bid prices over the 30-day period
ending three (3) trading days prior to the closing; and
(C) If there is no active public market, the value shall
be the fair market value thereof, as mutually determined by the corporation and
the holders of not less than a majority of the then outstanding shares of
Preferred Stock.
(ii) The method of valuation of securities subject to
investment letter or other restrictions on free marketability shall be to make
an appropriate discount from the market value determined as above in (i) (A),
03) or (c) to reflect the approximate fair market value thereof, as mutually
determined by the corporation and the holders of a majority of the then
outstanding shares of Preferred Stock.
(c) In the event the requirements of subsection 5(a) are not
complied with, .the corporation shall forthwith either:
(i) cause such closing to be postponed until such time as the
requirements of this Section 5 have been complied with, or
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<PAGE> 20
(ii) cancel such transaction, in which event the rights,
preferences, privileges and restrictions of the holders of the Preferred Stock
shall revert to and be the same as such rights, preferences, privileges and
restrictions existing immediately prior to the date of the first notice referred
to in subsection 5(d) hereof.
(d) The corporation shall give each holder of record of Preferred
Stock written notice of such impending transaction not later than twenty (20)
days prior to the shareholders' meeting called to approve such transaction, or
twenty (20) days prior to the closing of such transaction, whichever is earlier,
and shall also notify such holders in writing of the final approval of such
transaction. The first of such notices shall describe the material terms and
conditions of the impending transaction and the provisions of this Section 5,
and the corporation shall thereafter give such holders prompt notice of any
material changes. The transaction shall in no event take place sooner than
twenty (20) days after the corporation has given the first notice provided for
herein or sooner than ten (10) days after the corporation has given notice of
any material changes provided for herein; provided, however, that such periods
may be shortened upon the written consent of the holders of a majority of the
shares of Preferred Stock then outstanding.
(e) The provisions of this Section 5 are in addition to the
protective provisions of Section 7 hereof.
6. Voting Rights. The holder of each share of Preferred Stock shall
have the right to one vote for each share of Common Stock into which such share
of Preferred Stock could then be converted (with,any fractional share determined
on an aggregate conversion basis being rounded to the nearest whole share), and
with respect to such vote, such holder shall have full voting fights and powers
equal to the voting fights and powers of the holders of Common Stock, and shall
be entitled, notwithstanding any provision hereof, to notice of any
shareholders' meeting in accordance with the Bylaws of this corporation, and
shall be entitled to vote, together with holders of Common Stock, with respect
to any question upon which holders of Common Stock have the right to vote.
7. Protective Provisions. So long as shares of Preferred Stock are
outstanding, this corporation shall not without first obtaining the approval (by
vote or written consent, as provided by law) of the holders of at least a
majority of the then outstanding shares of Preferred Stock, voting together as
one class except where otherwise required by law:
(a) sell, convey, or otherwise dispose of or encumber all or
substantially all of its property or business or merge into or consolidate with
any other corporation (other than a wholly owned subsidiary corporation) or
effect any transaction or series of related transactions in which more than 50%
of the voting power of the corporation is disposed of;
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<PAGE> 21
(b) alter or change the rights, preferences, privileges or
restrictions of the shares of Series A, Series B, Series C, Series D, Series E
or Series F Preferred Stock so as to affect such shares adversely;
(c) increase the authorized number of shares of Series A, Series
B, Series C, Series D, Series E, Series F Preferred Stock;
(d) create any new class or series of stock or any other
securities convertible into equity securities of the corporation (i) having a
preference over, or being on a parity with, the Series A, Series B, Series C,
Series D, Series E or Series F Preferred Stock with respect to voting, dividends
or upon liquidation, or (ii) having rights similar to any of the rights of the
Series A, Series B, Series C, Series D, Series E or Series F Preferred Stock
under this Section 7; or
(e) do any act or thing which would result in' taxation of the
holders of shares of the Series A, Series B, Series C, Series D, Series E or
Series F Preferred Stock under Section 305 of the Internal Revenue Code of 1986,
as amended (or any comparable provision of the Internal Revenue Code as
hereafter from time to time amended).
8. Additional Protective Provisions of Series F Preferred Stock. So
long as shares of Series F Preferred Stock remain outstanding, this corporation
shall not without first obtaining the approval (by vote or written consent, as
provided by law) of the holders of at least 66-2/3% of the then outstanding
shares of Series F Preferred Stock, voting together as one class except where
otherwise required by law;
(a) sell, convey, liquidate, dissolve or otherwise dispose of or
encumber all or substantially all of its property or business or merge into or
consolidate with any other corporation (other than a wholly owned
subsidiary.corporation) or effect any transaction or series of related
transactions in which more than 50% of the voting power of the corporation is
disposed of;
(b) alter or change the rights, preferences, privileges or
restrictions of the shares of Series F Preferred Stock so as to affect such
shares adversely;
(c) create any new class or series of stock or any other
securities convertible into equity securities of the corporation (i) having a
preference over, or being on a party with, the Series F Preferred Stock with
respect to voting, dividends or upon liquidation, or (ii) having rights similar
to any of the rights of the Series F Preferred Stock under this Section 8;
(d) create any subsidiary corporation;
(e) consummate any transactions with affiliates of the
corporation, other than transactions approved by a majority of the disinterested
members of the Company's Board of Directors relating to the issuance of capital
stock, or options to purchase capital stock, pursuant to the corporation's
equity benefit plans in existence from time to time, provided that
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<PAGE> 22
the approval of the holders of 66-2/3% of the Series F Preferred Stock then
outstanding shall be required to amend any equity benefit plan for the purpose
of increasing the shares reserved for: issuance thereunder to in excess of
3,600,000; or
(f) issue any debt securities or incur any indebtedness, other
than (i) up to an aggregate of $300,000 in such debt securities for the purchase
of equipment and (ii) up to an aggregate of $150,000 of such debt securities
issued in the ordinary course of business.
9. Status of Converted or Redeemed Stock. In the event any shares of
Preferred Stock shall be redeemed or converted pursuant to Section 3 or Section
4 hereof, the shares so converted or redeemed shall be canceled and shall not
.be issuable by the corporation, and the Articles of Incorporation of this
corporation shall be appropriately amended to effect the corresponding reduction
in the corporation's authorized capital stock.
10. Repurchase of Shares. In connection with repurchases by this
corporation of its Common Stock pursuant to its agreements with certain of the
holders thereof providing for such repurchases in the event of the termination
of the status of such holder as an employee, director or consultant to the
corporation, each holder of Preferred Stock shall be deemed to have consented,
for purposes of Sections 502, 503 and 506 of the California General Corporation
Law, to distributions made by the corporation with respect to such repurchases.
(C) Common Stock.
1. Dividend Rights. Subject to the prior rights of holders of all
classes of stock at the time outstanding having prior rights as to dividends,
the holders of the Common Stock shall be entitled to receive, when and as
declared by the Board of Directors, out of any assets of the corporation legally
available therefor, such dividends as may be declared from time to time by the
Board of Directors.
2. Liquidation Rights. Upon the liquidation, dissolution or winding
up of the corporation, the assets of the corporation shall be distributed as
provided in Section 2 of Division (03) of this Article III.
3. Redemption. The Common Stock is not redeemable.
4. Voting Rights. The holder of each share of Common Stock shall
have the right to one vote, and shall be entitled to notice of any shareholders
meeting in accordance with the Bylaws of this corporation, and shall be entitled
to vote upon such matters and in such manner as may be provided by law.
ARTICLE IV
(A) Limitation of Directors, Liability. The liability of the directors
of the corporation for monetary damages shall be eliminated to the fullest
extent permissible under California law.
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<PAGE> 23
(B) Indemnification of Corporate Agents. This corporation is authorized
to indemnify the directors and officers of the corporation to the fullest extent
Permissible under California law.
(C) Repeal or Modification. Any repeal or modification of the foregoing
provisions of this Article IV by the shareholders of the corporation shall not
adversely affect any right or protection of a director of the corporation
existing at the time of such repeal or modification."
* * *
THREE: The foregoing amendment has been approved by the Board of
Directors of this corporation.
FOUR: The foregoing amendment was approved by the holders of the
requisite number of shares of this corporation in accordance with Sections 902
and 903 of the California General Corporation Law. The total number of
outstanding shares entitled to vote with respect to the foregoing amendment was
1,410,031 shares of Common Stock, 138,268 shares of Series A Preferred Stock,
580,061 shares of Series B Preferred Stock, 2,805,519 shares of Series C
Preferred Stock, 270,222 shares of Series D Preferred Stock, 8,300,862 shares of
Series E Preferred Stock and 1,900,330 shares of Series F Preferred Stock. There
are no other shares of any series of Preferred Stock outstanding as of the date
hereof. The number of shares voting in favor of the foregoing amendment equaled
or exceeded the vote required, such required vote being a majority of the
outstanding shares of Common Stock, a majority of the outstanding shares of
Preferred Stock and a majority of the outstanding shares of Series A, Series B,
Series C, Series D, Series E and Series F Preferred Stock, voting together as a
single class.
* * *
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<PAGE> 24
IN WITNESS WHEREOF, the undersigned certify under penalty of perjury that
they have read the foregoing Amended and Restated Articles of Incorporation and
know the contents thereof, and that the statements therein are true.
Executed at Hayward, California on April 10, 1997.
/s/ CHARLES J. CASAMENTO
------------------------------------
Charles J. Casamento, President
/s/ TIMOTHY E. MORRIS
------------------------------------
Timothy E. Morris, Chief Financial
Officer
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<PAGE> 1
EXHIBIT 3.2
BYLAWS
OF
RIBOGENE, INC.
(formerly known as TRANSGENE, INC.)
<PAGE> 2
BYLAWS OF
TRANSGENE, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I - CORPORATE OFFICES .................................................. 1
1.1 PRINCIPAL OFFICE ............................................. 1
1.2 OTHER OFFICES ................................................ 1
ARTICLE II - MEETINGS OF SHAREHOLDERS .......................................... 1
2.1 PLACE OF MEETINGS ............................................ 1
2.2 ANNUAL MEETING ............................................... 1
2.3 SPECIAL MEETING .............................................. 2
2.4 NOTICE OF SHAREHOLDERS' MEETINGS.............................. 2
2.5 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE ................. 3
2.6 QUORUM ....................................................... 4
2.7 ADJOURNED MEETING; NOTICE .................................... 4
2.8 VOTING ....................................................... 4
2.9 VALIDATION OF MEETINGS; WAIVER OF NOTICE; CONSENT ............ 5
2.10 SHAREHOLDER ACTION BY WRITTEN CONSENT WITHOUT A
MEETING ..................................................... 6
2.11 RECORD DATE FOR SHAREHOLDER NOTICE; VOTING; GIVING
CONSENTS .................................................... 7
2.12 PROXIES ...................................................... 7
2.13 INSPECTORS OF ELECTION ....................................... 8
ARTICLE III - DIRECTORS ........................................................ 9
3.1 POWERS ....................................................... 9
3.2 NUMBER OF DIRECTORS .......................................... 9
3.3 ELECTION AND TERM OF OFFICE OF DIRECTORS ..................... 10
3.4 RESIGNATION AND VACANCIES .................................... 10
3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE ..................... 11
3.6 REGULAR MEETINGS ............................................. 11
3.7 SPECIAL MEETINGS; NOTICE ..................................... 11
3.8 QUORUM ....................................................... 12
3.9 WAIVER OF SERVICE ............................................ 12
3.10 ADJOURNMENT .................................................. 12
3.11 NOTICE OF ADJOURNMENT ........................................ 12
3.12 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING ............ 13
3.13 FEES AND COMPENSATION OF DIRECTORS ........................... 13
3.14 APPROVAL OF LOANS TO OFFICERS ................................ 13
</TABLE>
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<PAGE> 3
TABLE OF CONTENTS
(Continued)
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE IV - COMMITTEES ........................................................13
4.1 COMMITTEES OF DIRECTORS.......................................13
4.2 MEETINGS AND ACTION OF COMMITTEES.............................14
ARTICLE V - OFFICERS............................................................15
5.1 OFFICERS......................................................15
5.2 ELECTION OF OFFICERS..........................................15
5.3 SUBORDINATE OFFICERS..........................................15
5.4 REMOVAL AND RESIGNATION OF OFFICERS...........................15
5.5 VACANCIES IN OFFICES..........................................16
5.6 CHAIRMAN OF THE BOARD.........................................16
5.7 PRESIDENT.....................................................16
5.8 VICE PRESIDENTS...............................................16
5.9 SECRETARY.....................................................17
5.10 CHIEF FINANCIAL OFFICER.......................................17
ARTICLE VI - INDEMNIFICATION OF DIRECTORS, OFFICERS,
EMPLOYEES, AND OTHER AGENTS...................................18
6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS.....................18
6.2 INDEMNIFICATION OF OTHERS.....................................18
6.3 PAYMENT OF EXPENSES IN ADVANCE................................18
6.4 INDEMNITY NOT EXCLUSIVE.......................................19
6.5 INSURANCE INDEMNIFICATION.....................................19
6.6 CONFLICTS.....................................................19
ARTICLE VII - RECORDS AND REPORTS...............................................20
7.1 MAINTENANCE AND INSPECTION OF SHARE REGISTER..................20
7.2 MAINTENANCE AND INSPECTION OF BYLAWS..........................20
7.3 MAINTENANCE AND INSPECTION OF OTHER CORPORATE
RECORDS......................................................21
7.4 INSPECTION BY DIRECTORS.......................................21
7.5 ANNUAL REPORT TO SHAREHOLDERS; WAIVER.........................21
7.6 FINANCIAL STATEMENTS..........................................22
7.7 REPRESENTATION OF SHARES OF OTHER CORPORATIONS................22
</TABLE>
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<PAGE> 4
TABLE OF CONTENTS
(Continued)
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE VIII - GENERAL MATTERS..................................................23
8.1 RECORD DATE FOR PURPOSES OTHER THAN NOTICE AND
VOTING.......................................................23
8.2 CHECKS; DRAFTS; EVIDENCES OF INDEBTEDNESS.....................23
8.3 CORPORATE CONTRACTS AND INSTRUMENTS: HOW EXECUTED.............23
8.4 CERTIFICATES FOR SHARES.......................................24
8.5 LOST CERTIFICATES.............................................24
8.6 CONSTRUCTION; DEFINITIONS.....................................24
ARTICLE IX - AMENDMENTS.........................................................25
9.1 AMENDMENT BY SHAREHOLDERS.....................................25
9.2 AMENDMENT BY DIRECTORS........................................25
</TABLE>
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<PAGE> 5
BYLAWS
OF
TRANSGENE, INC.
ARTICLE I
CORPORATE OFFICES
1.1 PRINCIPAL OFFICE
The board of directors shall fix the location of the principal
executive office of the corporation at any place within or outside the State of
California. If the principal executive office is located outside such state
and the corporation has one or more business offices in such state, then the
board of directors shall fix and designate a principal business office in the
State of California.
1.2 OTHER OFFICES
The board of directors may at any time establish branch or subordinate
offices at any place or places where the corporation is qualified to do
business.
ARTICLE II
MEETINGS OF SHAREHOLDERS
2.1 PLACE OF MEETINGS
Meetings of shareholders shall be held at any place within or outside
the State of California designated by the board of directors. In the absence
of any such designation, shareholders' meetings shall be held at the principal
executive office of the corporation.
2.2 ANNUAL MEETING
The annual meeting of shareholders shall be held each year on a date
and at a time designated by the board of directors. In the absence of such
designation, the annual meeting of shareholders shall be held on the Second
Tuesday of May in each year at 10:00 a.m. However, if such day falls on a legal
holiday, then the meeting shall be held at the same time and place on the next
succeeding full business day. At the meeting, directors shall be elected, and
any other proper business may be transacted.
<PAGE> 6
2.3 SPECIAL MEETING
A special meeting of the shareholders may be called at any time by the
board of directors, or by the chairman of the board, or by the president, or by
one or more shareholders holding shares in the aggregate entitled to cast not
less than ten percent (10%) of the votes at that meeting.
If a special meeting is called by any person or persons other than the
board of directors or the president or the chairman of the board, then the
request shall be in writing, specifying the time of such meeting and the
general nature of the business proposed to be transacted, and shall be
delivered personally or sent by registered mail or by telegraphic or other
facsimile transmission to the chairman of the board, the president, any vice
president or the secretary of the corporation. The officer receiving the
request shall cause notice to be promptly given to the shareholders entitled to
vote, in accordance with the provisions of Sections 2.4 and 2.5 of these bylaws,
that a meeting will be held at the time requested by the person or persons
calling the meeting, so long as that time is not less than thirty-five (35) nor
more than sixty (60) days after the receipt of the request. If the notice is
not given within twenty (20) days after receipt of the request, then the person
or persons requesting the meeting may give the notice. Nothing contained in
this paragraph of this Section 2.3 shall be construed as limiting, fixing or
affecting the time when a meeting of shareholders called by action of the board
of directors may be held.
2.4 NOTICE OF SHAREHOLDERS' MEETINGS
All notices of meetings of shareholders shall be sent or otherwise
given in accordance with Section 2.5 of these bylaws not less than ten (10)
(or, if sent by third-class mail pursuant to Section 2.5 of these bylaws,
thirty (30)) nor more than sixty (60) days before the date of the meeting. The
notice shall specify the place, date, and hour of the meeting and (i) in the
case of a special meeting, the general nature of the business to be transacted
(no business other than that specified in the notice may be transacted) or (ii)
in the case of the annual meeting, those matters which the board of directors,
at the time of giving the notice, intends to present for action by the
shareholders (but subject to the provisions of the next paragraph of this
Section 2.4 any proper matter may be presented at the meeting for such action).
The notice of any meeting at which directors are to be elected shall include
the name of any nominee or nominees who, at the time of the notice, the board
intends to present for election.
If action is proposed to be taken at any meeting for approval of (i) a
contract or transaction in which a director has a direct
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<PAGE> 7
or indirect financial interest, pursuant to Section 310 of the Corporations
Code of California (the "Code"), (ii) an amendment of the articles of
incorporation, pursuant to Section 902 of the Code, (iii) a reorganization of
the corporation, pursuant to Section 1201 of the Code, (iv) a voluntary
dissolution of the corporation, pursuant to Section 1900 of the Code, or (v) a
distribution in dissolution other than in accordance with the rights of
outstanding preferred shares, pursuant to Section 2007 of that Code, then the
notice shall also state the general nature of that proposal.
2.5 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE
Written notice of any meeting of shareholders shall be given either (i)
personally or (ii) by first-class mail or (iii) by third-class mail but only if
the corporation has outstanding shares held of record by five hundred (500) or
more persons (determined as provided in Section 605 of the Code) on the record
date for the shareholders' meeting, or (iv) by telegraphic or other written
communication. Notices not personally delivered shall be sent charges prepaid
and shall be addressed to the shareholder at the address of that shareholder
appearing on the books of the corporation or given by the shareholder to the
corporation for the purpose of notice. If no such address appears on the
corporation's books or is given, notice shall be deemed to have been given if
sent to that shareholder by mail or telegraphic or other written communication
to the corporation's principal executive office, or if published at least once
in a newspaper of general circulation in the county where the office is
located. Notice shall be deemed to have been given at the time when delivered
personally or deposited in the mail or sent by telegram or other means of
written communication.
If any notice addressed to a shareholder at the address of that
shareholder appearing on the books of the corporation is returned to the
corporation by the United States Postal Service marked to indicate that the
United States Postal Service is unable to deliver the notice to the shareholder
at that address, then all future notices or reports shall be deemed to have
been duly given without further mailing if the same shall be available to the
shareholder on written demand of the shareholder at the principal executive
office of the corporation for a period of one (1) year from the date of the
giving of the notice.
An affidavit of the mailing or other means of giving any notice of any
shareholders' meeting, executed by the secretary, assistant secretary or any
transfer agent of the corporation giving the notice, shall be prima facie
evidence of the giving of such notice.
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<PAGE> 8
2.6 QUORUM
The presence in person or by proxy of the holders of a majority of the
shares entitled to vote thereat constitutes a quorum for the transaction of
business at all meetings of shareholders. The shareholders present at a duly
called or held meeting at which a quorum is present may continue to do business
until adjournment, notwithstanding the withdrawal of enough shareholders to
leave less than a quorum, if any action taken (other than adjournment) is
approved by at least a majority of the shares required to constitute a quorum.
2.7 ADJOURNED MEETING; NOTICE
Any shareholders' meeting, annual or special, whether or not a quorum
is present, may be adjourned from time to time by the vote of the majority of
the shares represented at that meeting, either in person or by proxy. In the
absence of a quorum, no other business may be transacted at the meeting except
as provided in Section 2.6 of these bylaws.
When any meeting of shareholders, either annual or special, is
adjourned to another time or place, notice need not be given of the adjourned
meeting if the time and place are announced at the meeting at which the
adjournment is taken. However, if a new record date for the adjourned meeting
is fixed or if the adjournment is for more than forty-five (45) days from the
date set for the original meeting, then notice of the adjourned meeting shall
be given. Notice of any such adjourned meeting shall be given to each
shareholder of record entitled to vote at the adjourned meeting in accordance
with the provisions of Section 2.4 and 2.5 of these bylaws. At any adjourned
meeting the corporation may transact any business which might have been
transacted at the original meeting.
2.8 VOTING
The shareholders entitled to vote at any meeting of shareholders shall
be determined in accordance with the provisions of Section 2.11 of these
bylaws, subject to the provisions of Sections 702 through 704 of the Code
(relating to voting shares held by a fiduciary, in the name of the corporation
or in joint ownership).
The shareholders' vote may be by voice vote or by ballot; provided,
however, that any election for directors must be by ballot if demanded by any
shareholder at the meeting and before the voting has begun.
Except as provided in the last paragraph of this Section 2.8, or as may
be otherwise provided in the articles of incorporation, each outstanding share,
regardless of class, shall be entitled to
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<PAGE> 9
one vote on each matter submitted to a vote of the shareholders. Any
shareholder entitled to vote on any matter may vote part of the shares in favor
of the proposal and refrain from voting the remaining shares or, except when
the matter is the election of directors, may vote them against the proposal;
but, if the shareholder fails to specify the number of shares which the
shareholder is voting affirmatively, it will be conclusively presumed that the
shareholder's approving vote is with respect to all shares which the
shareholder is entitled to vote.
If a quorum is present, the affirmative vote of the majority of the
shares represented and voting at a duly held meeting (which shares voting
affirmatively also constitute at least a majority of the required quorum) shall
be the act of the shareholders, unless the vote of a greater number or a vote
by classes is required by the Code or by the articles of incorporation.
At a shareholders' meeting at which directors are to be elected, a
shareholder shall be entitled to cumulate votes (i.e., cast for any candidate a
number of votes greater than the number of votes which such shareholder
normally is entitled to cast) if the candidates' names have been placed in
nomination prior to commencement of the voting and the shareholder has given
notice prior to commencement of the voting of the shareholders' intention
to cumulate votes. If any shareholder has given such a notice, then every
shareholder entitled to vote may cumulate votes for candidates in nomination
either (i) by giving one candidate a number of votes equal to the number of
directors to be elected multiplied by the number of votes to which that
shareholder's shares are normally entitled or (ii) by distributing the
shareholder's votes on the same principle among any or all of the candidates,
as the shareholder thinks fit. The candidates receiving the highest number of
affirmative votes, up to the number of directors to be elected, shall be
elected; votes against any candidate and votes withheld shall have no legal
effect.
2.9 VALIDATION OF MEETINGS; WAIVER OF NOTICE; CONSENT
The transactions of any meeting of shareholders, either annual or
special, however called and noticed, and wherever held, shall be as valid as
though they had been taken at a meeting duly held after regular call and
notice, if a quorum be present either in person or by proxy, and if, either
before or after the meeting, each person entitled to vote, who was not present
in person or by proxy, signs a written waiver of notice or a consent to the
holding of the meeting or an approval of the minutes thereof. The waiver
of notice or consent or approval need not specify either the business to be
transacted or the purpose of any annual or special meeting of shareholders,
except that if action is taken or proposed to be taken for approval of any of
those matters specified in the second
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<PAGE> 10
paragraph of Section 2.4 of these bylaws, the wavier of notice or consent or
approval shall state the general nature of the proposal. All such waivers,
consents, and approvals shall be filed with the corporate records or made a
part of the minutes of the meeting.
Attendance by a person at a meeting shall also constitute a waiver of
notice of and presence at that meeting, except when the person objects at the
beginning of the meeting to the transaction of any business because the meeting
is not lawfully called or convened. Attendance at a meeting is not a waiver of
any right to object to the consideration of matters required by the Code to be
included in the notice of the meeting but not so included, if that objection is
expressly made at the meeting.
2.10 SHAREHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING
Any action which may be taken at any annual or special meeting of
shareholders may be taken without a meeting and without prior notice, if a
consent in writing, setting forth the action so taken, is signed by the holders
of outstanding shares having not less than the minimum number of votes that
would be necessary to authorize or take that action at a meeting at which all
shares entitled to vote on that action were present and voted.
In the case of election of directors, such a consent shall be effective
only if signed by the holders of all outstanding shares entitled to vote for
the election of directors. However, a director may be elected at any time to
fill any vacancy on the board of directors, provided that it was not created by
removal of a director and that it has not been filled by the directors, by the
written consent of the holders of a majority of the outstanding shares
entitled to vote for the election of directors.
All such consents shall be maintained in the corporate records. Any
shareholder giving a written consent, or the shareholder's proxy holders, or a
transferee of the shares, or a personal representative of the shareholder, or
their respective proxy holders, may revoke the consent by a writing received by
the secretary of the corporation before written consents of the number of
shares required to authorize the proposed action have been filed with the
secretary.
If the consents of all shareholders entitled to vote have not been
solicited in writing and if the unanimous written consent of all such
shareholders has not been received, then the secretary shall give prompt notice
of the corporate action approved by the shareholders without a meeting. Such
notice shall be given to those shareholders entitled to vote who have not
consented in writing and shall be given in the manner specified in Section 2.5
of these bylaws. In the case of approval of (i) a contract or
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<PAGE> 11
transaction in which a director has a direct or indirect financial interest,
pursuant to Section 310 of the Code, (ii) indemnification of a corporate
"agent," pursuant to Section 317 of the Code, (iii) a reorganization of the
corporation, pursuant to Section 1201 of the Code, and (iv) a distribution in
dissolution other than in accordance with the rights of outstanding preferred
shares, pursuant to Section 2007 of the Code, the notice shall be given at
least ten (10) days before the consummation of any action authorized by that
approval.
2.11 RECORD DATE FOR SHAREHOLDER NOTICE; VOTING; GIVING
CONSENTS
For purposes of determining the shareholders entitled to notice of any
meeting or to vote thereat or entitled to give consent to corporate action
without a meeting, the board of directors may fix, in advance, a record date,
which shall not be more than sixty (60) days nor less than ten (10) days before
the date of any such meeting nor more than sixty (60) days before any such
action without a meeting, and in such event only shareholders of record on the
date so fixed are entitled to notice and to vote or to give consents, as the
case may be, notwithstanding any transfer of any shares on the books of the
corporation after the record date, except as otherwise provided in the Code.
If the board of directors does not so fix a record date:
(a) the record date for determining shareholders entitled to
notice of or to vote at a meeting of shareholders shall be at the close of
business on the business day next preceding the day on which notice is given
or, if notice is waived, at the close of business on the business day next
preceding the day on which the meeting is held; and
(b) the record date for determining shareholders entitled to
give consent to corporate action in writing without a meeting, (i) when no
prior action by the board has been taken, shall be the day on which the first
written consent is given, or (ii) when prior action by the board has been
taken, shall be at the close of business on the day on which the board adopts
the resolution relating to that action, or the sixtieth (60th) day before the
date of such other action, whichever is later.
The record date for any other purpose shall be as provided in Article
VIII of these bylaws.
2.12 PROXIES
Every person entitled to vote for directors, or on any other matter,
shall have the right to do so either in person or by one or
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<PAGE> 12
more agents authorized by a written proxy signed by the person and filed with
the secretary of the corporation. A proxy shall be deemed signed if the
shareholder's name is placed on the proxy (whether by manual signature,
typewriting, telegraphic transmission or otherwise) by the shareholder or the
shareholder's attorney-in-fact. A validly executed proxy which does not state
that it is irrevocable shall continue in full force and effect unless (i) the
person who executed the proxy revokes it prior to the time of voting by
delivering a writing to the corporation stating that the proxy is revoked or by
executing a subsequent proxy and presenting it to the meeting or by voting in
person at the meeting, or (ii) written notice of the death or incapacity of the
maker of that proxy is received by the corporation before the vote pursuant to
that proxy is counted; provided, however, that no proxy shall be valid after
the expiration of eleven (11) months from the date of the proxy, unless
otherwise provided in the proxy. The dates contained on the forms of proxy
presumptively determined the order of execution, regardless of the postmark
dates on the envelopes in which they are mailed. The revocability of a proxy
that states on its face that it is irrevocable shall be governed by the
provisions of Sections 705(e) and 705(f) of the Code.
2.13 INSPECTORS OF ELECTION
Before any meeting of shareholders, the board of directors may appoint
an inspector or inspectors of election to act at the meeting or its
adjournment. If no inspector of election is so appointed, then the chairman of
the meeting may, and on the request of any shareholder or a shareholder's proxy
shall, appoint an inspector or inspectors of election to act at the meeting.
The number of inspectors shall be either one (1) or three (3). If inspectors
are appointed at a meeting pursuant to the request of one (1) or more
shareholders or proxies, then the holders of a majority of shares or their
proxies present at the meeting shall determine whether one (1) or three (3)
inspectors are to be appointed. If any person appointed as inspector fails to
appear or fails or refuses to act, then the chairman of the meeting may, and
upon the request of any shareholder or a shareholder's proxy shall, appoint a
person to fill that vacancy.
Such inspectors shall:
(a) determine the number of shares outstanding and the voting
power of each, the number of shares represented at the meeting, the existence
of a quorum, and the authenticity, validity, and effect of proxies;
(b) receives votes, ballots or consents;
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<PAGE> 13
(c) hear and determine all challenges and questions in any way
arising in connection with the right to vote;
(d) count and tabulate all votes or consents;
(e) determine when the polls shall close;
(f) determine the result; and
(g) do any other acts that may be proper to conduct the
election or vote with fairness to all shareholders.
ARTICLE III
DIRECTORS
3.1 POWERS
Subject to the provisions of the Code and any limitations in the
articles of incorporation and these bylaws relating to action required to be
approved by the shareholders or by the outstanding shares, the business and
affairs of the corporation shall be managed and all corporate powers shall be
exercised by or under the direction of the board of directors.
3.2 NUMBER OF DIRECTORS *
The number of directors of the corporation shall be not less than three
(3) nor more than five (5). The exact number of directors shall be three (3)
until changed, within the limits specified above, by a bylaw amending this
Section 3.2, duly adopted by the board of directors or by the shareholders. The
indefinite number of directors may be changed, or a definite number may be
fixed without provision for an indefinite number, by a duly adopted amendment
to the articles of incorporation or by an amendment to this bylaw duly adopted
by the vote or written consent of holders of a majority of the outstanding
shares entitled to vote; provided, however, that an amendment reducing the
fixed number or the minimum number of directors to a number less than five (5)
can not be adopted if the votes cast against its adoption at a meeting, or the
shares not consenting in the case of an action by written consent, are equal
to more than sixteen and two-thirds percent (16-2/3%) of the outstanding shares
entitled to vote thereon. No amendment may change the stated maximum number of
authorized directors to a number greater than two (2) times the stated minimum
number of directors minus one (1).
by Board of Directors on May 17, 1990 and by shareholders
*Section 3.2 was amended.
*See the attached Amendments to the Bylaws (at the end of the document) for
more current amendments to Section 3.2 by the Board of Directors and/or the
Shareholders.
See attached amendment.
<PAGE> 14
No reduction of the authorized number of directors shall have the effect
of removing any director before that director's term of office expires.
3.3 ELECTION AND TERM OF OFFICE OF DIRECTORS
Directors shall be elected at each annual meeting of shareholders to
hold office until the next annual meting. Each director, including a director
elected to fill a vacancy, shall hold office until the expiration of the term
for which elected and until a successor has been elected and qualified.
3.4 RESIGNATION AND VACANCIES
Any director may resign effective on giving written notice to the
chairman of the board, the president, the secretary or the board of directors,
unless the notice specifies a later time for that resignation to become
effective. If the resignation of a director is effective at a future time, the
board of directors may elect a successor to take office when the resignation
becomes effective.
Vacancies in the board of directors may be filled by a majority of the
remaining directors, even if less than a quorum, or by a sole remaining
director; however, a vacancy created by the removal of a director by the vote or
written consent of the shareholders of by court order may be filled only by the
affirmative vote of a majority of the shares represented and voting at a duly
held meeting at which a quorum is present (which shares voting affirmatively
also constitute a majority of the required quorum), or by the unanimous written
consent of all shares entitled to vote thereon. Each director so elected shall
hold office until the next annual meeting of the shareholders and until a
successor has been elected and qualified.
A vacancy or vacancies in the board of directors shall be deemed to
exist (i) in the event of the death, resignation or removal of any director,
(ii) if the board of directors by resolution declares vacant the office of a
director who has been declared of unsound mind by an order of court or convicted
of a felony, (iii) if the authorized number of directors is increased, or (iv)
if the shareholders fail, at any meeting of shareholders at which any director
or directors are elected, to elect the number of directors to be elected at the
meeting.
The shareholders may elect a director or directors at any time to fill
any vacancy or vacancies not filled by the directors, but any such election
other than to fill a vacancy created by removal, if by written consent, shall
require the consent of the holders of a majority of the outstanding shares
entitled to vote thereon.
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<PAGE> 15
3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE
Regular meetings of the board of directors may be held at any place
within or outside the State of California that has been designated from time to
time by resolution of the board. In the absence of such a designation,
regular meetings shall be held at the principal executive office of the
corporation. Special meetings of the board may be held at any place within or
outside the State of California that has been designated in the notice of the
meeting or, if not stated in the notice or if there is no notice, at the
principal executive office of the corporation.
Any meeting, regular or special, may be held by conference telephone or
similar communication equipment, so long as all directors participating in the
meeting can hear one another; and all such directors shall be deemed to be
present in person at the meeting.
3.6 REGULAR MEETINGS
Regular meetings of the board of directors may be held without notice if
the times of such meetings are fixed by the board of directors.
3.7 SPECIAL MEETINGS; NOTICE
Special meetings of the board of directors for any purpose or purposes
may be called at any time by the chairman of the board, the president, any vice
president, the secretary or any two directors.
Notice of the time and place of special meetings shall be delivered
personally or by telephone to each director or sent by first-class mail or
telegram, charges prepaid, addressed to each director at that director's
address as it is shown on the records of the corporation. If the notice is
mailed, it shall be deposited in the United States mail at least four (4) days
before the time of the holding of the meeting. If the notice is delivered
personally or by telephone or telegram, it shall be delivered personally or by
telephone or to the telegraph company at least forty-eight (48) hours before
the time of the holding of the meeting. Any oral notice given personally or by
telephone may be communicated either to the director or to a person at the
office of the director who the person giving the notice has reason to believe
will promptly communicate it to the director. The notice need not specify the
purpose or the place of the meeting, if the meeting is to be held at the
principal executive office of the corporation.
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<PAGE> 16
3.8 QUORUM
A majority of the authorized number of directors shall constitute a
quorum for the transaction of business, except to adjourn as provided in
Section 3.10 of these bylaws. Every act or decisiion done or made by a
majority of the directors present at a duly held meeting at which a quorum is
present shall be regarded as the act of the board of directors, subject to the
provisions of Section 310 of the Code (as to approval of contracts or
transactions in which a director has a direct or indirect material financial
interest), Section 311 of the Code (as to appointment of committees), Section
317(e) of the Code (as to indemnification of directors), the articles of
incorporation, and other applicable law.
A meeting at which a quorum is initially present may continue to
transact business notwithstanding the withdrawal of directors, if any action
taken is approved by at least a majority of the required quorum for that
meeting.
3.9 WAIVER OF NOTICE
Notice of a meeting need not be given to any director (i) who signs a
waiver of notice or a consent to holding the meeting or an approval of the
minutes thereof, whether before or after the meeting, or (ii) who attends the
meeting without protesting, prior thereto or at its commencement, the lack of
notice to such directors. All such waivers, consents, and approvals shall be
filed with the corporate records or made part of the minutes of the meeting. A
waiver of notice need not specify the purpose of any regular or special meeting
of the board of directors.
3.10 ADJOURNMENT
A majority of the directors present, whether or not constituting a
quorum, may adjourn any meeting to another time and place.
3.11 NOTICE OF ADJOURNMENT
Notice of the time and place of holding and adjourned meeting need not
be given unless the meeting is adjourned for more than twenty-four (24) hours.
If the meeting is adjourned for more than twenty-four (24) hours, then notice
of the time and place of the adjourned meeting shall be given before the
adjourned meeting takes place, in the manner specified in Section 3.7 of these
bylaws, to the directors who were not present at the time of the adjournment.
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<PAGE> 17
3.12 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING
Any action required or permitted to be taken by the board of diretors
may be taken without a meeting, provided that all members of the board
individually or collectively consent in writing to that action. Such action by
written consent shall have the same force and effect as a unanimous vote of the
board of directors. Such written consent and any counterparts thereof shall be
filed with the minutes of the proceedings of the board.
3.13 FEES AND COMPENSATION OF DIRECTORS
Directors and members of committees may receive such compensation, if
any, for their services and such reimbursement of expenses as may be fixed or
determined by resolution of the board of directors. This Section 3.13 shall
not be construed to preclude any director from serving the corporation in any
other capacity as an officer, agent, employee or otherwise and receiving
compensation for those services.
3.14 APPROVAL OF LOANS TO OFFICERS*
The corporation may, upon the approval of the board of directors alone,
make loans of money or property to, or guarantee the obligations of, any
officer of the corporation or its parent or subsidiary, whether or not a
director, or adopt an employee benefit plan or plans authorizing such loans or
guaranties provided that (i) the board of directors determines that such a loan
or guaranty or plan may reasonably be expected to benefit the corporation,
(ii) the corporation has outstanding shares held of record by 100 or more
persons (determined as provided in Section 605 of the Code) on the date of
approval by the board of directors, and (iii) the approval of the board of
directors is by a vote sufficient without counting the vote of any interested
director or directors.
ARTICLE IV
COMMITTEES
4.1 COMMITTEES OF DIRECTORS
The board of directors may, by resolution adopted by a majority of the
authorized number of directors, designate one (1) or more committees, each
consisting of two or more directors, to serve
- ----------------
* This section is effective only if it has been approved by the
shareholders in accordance wiht Sections 315(b) and 152 of the Code.
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<PAGE> 18
at the pleasure of the board. The board may designate one (1) or more
directors as alternate members of any committee, who may replace any absent
member at any meeting of the committee. The appointment of members or
alternate members of a committee requires the vote of a majority of the
authorized number of directors. Any committee, to the extent provided in the
resolution of the board, shall have all the authority of the board, except with
respect to:
(a) the approval of any action which, under the Code, also requires
shareholders' approval or approval of the outstanding shares;
(b) the filling of vacancies on the board of directors or in any
committee;
(c) the fixing of compensation of the directors for serving on the
board or any committee;
(d) the amendment or repeal of these bylaws or the adoption of new
bylaws;
(e) the amendment or repeal of any resolution of the board of directors
which by its express terms is not so amendable or repealable;
(f) a distribution to the shareholders of the corporation, except at a
rate or in a periodic amount or within a price range determined by the board of
directors; or
(g) the appointment of any other committees of the board of directors
or the member of such committees.
4.2 MEETINGS AND ACTION OF COMMITTEES
Meetings and actions of committees shall be governed by, and held and
taken in accordance with, the provisions of Article III of these bylaws, Section
3.5 (place of meetings), Section 3.6 (regular meetings), Section 3.7 (special
meetings and notice), Section 3.8 (quorum), Section 3.9 (waiver of notice),
Section 3.10 (adjournment), Section 3.11 (notice of adjournment), and Section
3.12 (action without meeting), with such changes in the context of those bylaws
as are necessary to substitute the committee and its members for the board of
directors and its members; provided, however, that the time of regular meetings
of committees may be determined either by resolution of the board of directors
or by resolution of the committee, that special meetings of committees may also
be called by resolution of the board of directors, and that notice of special
meetings of committees shall also be given to all alternate members, who shall
have the right to attend all meetings of the committee. The board of directors
may adopt rules for the government
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<PAGE> 19
of any committee not inconsistent with the provisions of these bylaws.
ARTICLE V
OFFICERS
5.1 OFFICERS
The officers of the corporation shall be a president, a secretary, and
a chief financial officer. The corporation may also have, at the discretion of
the board of directors, a chairman of the board, one or more vice presidents,
one or more assistant secretaries, one or more assistant treasurers, and such
other officers as may be appointed in accordance with the provisions of Section
5.3 of these bylaws. Any number of offices may be held by the same person.
5.2 ELECTION OF OFFICERS
The officers of the corporation, except such officers as may be
appointed in accordance with the provisions of Section 5.3 or Section 5.5 of
these bylaws, shall be chosen by the board, subject to the rights, if any, of
an officer under any contract of employment.
5.3 SUBORDINATE OFFICERS
The board of directors may appoint, or may empower the president to
appoint, such other officers as the business of the corporation may require,
each of whom shall hold office for such period, have such authority, and
perform such duties as are provided in these bylaws or as the board of
directors may from time to time determine.
5.4 REMOVAL AND RESIGNATION OF OFFICERS
Subject to the rights, if any, of an officer under any contract of
employment, any officer may be removed, either with or without cause, by the
board of directors at any regular or special meeting of the board or, except in
the case of an officer chosen by the board of directors, by any officer upon
whom such power of removal may be conferred by the board of directors.
Any officer may resign at any time by giving written notice to the
corporation. Any resignation shall take effect at the date of the receipt of
that notice or at any later time specified in that notice; and, unless
otherwise specified in that notice, the acceptance of the resignation shall not
be necessary to make it effec-
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<PAGE> 20
tive. Any resignation is without prejudice to the rights, if any, of the
corporation under any contract to which the officer is a party.
5.5 VACANCIES IN OFFICES
A vacancy in any office because of death, resignation, removal,
disqualification or any other cause shall be filled in the manner prescribed in
these bylaws for regular appointments to that office.
5.6 CHAIRMAN OF THE BOARD
The chairman of the board, if such an officer be elected, shall, if
present, preside at meetings of the board of directors and exercise and perform
such other powers and duties as may from time to time be assigned to him by the
board of directors or as may be prescribed by these bylaws. If there is no
president, then the chairman of the board shall also be the chief executive
officer of the corporation and shall have the powers and duties prescribed in
Section 5.7 of these bylaws.
5.7 PRESIDENT
Subject to such supervisory powers, if any, as may be given by the
board of directors to the chairman of the board, if there be such an officer,
the president shall be the chief executive officer of the corporation and shall,
subject to the control of the board of directors, have general supervision,
direction, and control of the business and the officers of the corporation. He
shall preside at all meetings of the shareholders and, in the absence or
non-existence of a chairman of the board, at all meetings of the board of
directors. He shall have the general powers and duties of management usually
vested in the office of president of a corporation, and shall have such other
powers and duties as may be prescribed by the board of directors or these
bylaws.
5.8 VICE PRESIDENTS
In the absence or disability of the president, the vice presidents, if
any, in order of their rank as fixed by the board of directors or, if not
ranked, a vice president designated by the board of directors, shall perform
all the duties of the president and when so acting shall have all the powers
of, and be subject to all the restrictions upon, the president. The vice
presidents shall have such other powers and perform such other duties as from
time to time may be prescribed for them respectively by the board of directors,
these bylaws, the president or the chairman of the board.
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<PAGE> 21
5.9 SECRETARY
The secretary shall keep or cause to be kept, at the principal
executive office of the corporation or such other place as the board of
directors may direct, a book of minutes of all meetings and actions of
directors, committees of directors and shareholders. The minutes shall show
the time and place of each meeting, whether regular or special (and, if
special, how authorized and the notice given), the names of those present at
directors' meetings or committee meetings, the number of shares present or
represented at shareholders' meetings, and the proceedings thereof.
The secretary shall keep, or cause to be kept, at the principal
executive office of the corporation or at the office of the corporation's
transfer agent or registrar, as determined by resolution of the board of
directors, a share register, or a duplicate share register, showing the names of
all shareholders and their addresses, the number and classes of shares held by
each, the number and date of certificates evidencing such shares, and the
number and date of cancellation of every certificate surrendered for
cancellation.
The secretary shall give, or cause to be given, notice of all meetings
of the shareholders and of the board of directors required to be given by law
or by these bylaws. He shall keep the seal of the corporation, if one be
adopted, in safe custody and shall have such other powers and perform such
other duties as may be prescribed by the board of directors or by these bylaws.
5.10 CHIEF FINANCIAL OFFICER
The chief financial officer shall keep and maintain, or cause to be
kept and maintained, adequate and correct books and records of accounts of the
properties and business transactions of the corporation, including accounts of
its assets, liabilities, receipts, disbursements, gains, losses, capital,
retained earnings, and shares. The books of account shall at all reasonable
times be open to inspection by any director.
The chief financial officer shall deposit all money and other valuables
in the name and to the credit of the corporation with such depositaries as may
be designated by the board of directors. He shall disburse the funds of the
corporation as may be ordered by the board of directors, shall render to the
president and directors, whenever they request it, an account of all of his
transactions as chief financial officer and of the financial condition of the
corporation, and shall have such other powers and perform such other duties as
may be prescribed by the board of directors or these bylaws.
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<PAGE> 22
ARTICLE VI
INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES,
AND OTHER AGENTS
6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS
The corporation shall, to the maximum extent and in the manner
permitted by the Code, indemnify each of its directors and officers against
expenses (as defined in Section 317(a) of the Code), judgments, fines,
settlements, and other amounts actually and reasonably incurred in connection
with any proceeding (as defined in Section 317(a) of the Code), arising by
reason of the fact that such person is or was as agent of the corporation. For
purposes of this Article VI, a "director" or "officer" of the corporation
includes any person (i) who is or was a director or officer of the corporation,
(ii) who is or was serving at the request of the corporation as a director or
officer of another corporation, partnership, joint venture, trust or other
enterprise, or (iii) who was a director or officer of a corporation which was a
predecessor corporation of the corporation or of another enterprise at the
request of such predecessor corporation.
6.2 INDEMNIFICATION OF OTHERS
The corporation shall have the power, to the extent and in the manner
permitted by the Code, to indemnify each of its employees and agents (other
than directors and officers) against expenses (as defined in Section 317(a) of
the Code), judgments, fines, settlements, and other amounts actually and
reasonably incurred in connection with any proceeding (as defined in Section
317(a) of the Code), arising by reason of the fact that such person is or was
an agent of the corporation. For purposes of this Article VI, an "employee" or
"agent" of the corporation (other than a director or officer) includes any
person (i) who is or was an employee or agent of the corporation, (ii) who is
or was serving at the request of the corporation as an employee or agent of
another corporation, partnership, joint venture, trust or other enterprise, or
(iii) who was an employee or agent of a corporation which was a predecessor
corporation of the corporation or of another enterprise at the request of such
predecessor corporation.
6.3 PAYMENT OF EXPENSES IN ADVANCE
Expenses incurred in defending any civil or criminal action or
proceeding for which indemnification is required pursuant to Section 6.1 or for
which indemnification is permitted pursuant to Section 6.2 following
authorization thereof by the Board of
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<PAGE> 23
Directors shall be paid by the corporation in advance of the final disposition
of such action or proceeding upon receipt of an undertaking by or on behalf of
the indemnified party to repay such amount if it shall ultimately be determined
that the indemnified party is not entitled to be indemnified as authorized in
this Article VI.
6.4 INDEMNITY NOT EXCLUSIVE
The indemnification provided by this Article VI shall not be deemed
exclusive of any other rights to which those seeking indemnification may be
entitled under any bylaw, agreement, both as to action in an official capacity
and as to action in another capacity while holding such office, to the extent
that such additional rights to indemnification are authorized in the Articles
of Incorporation.
6.5 INSURANCE INDEMNIFICATION
The corporation shall have the power to purchase and maintain insurance
on behalf of any person who is or was a director, officer, employee or agent
of the corporation against any liability asserted against or incurred by such
person in such capacity or arising out of such person's status as such, whether
or not the corporation would have the power to indemnify him against such
liability under the provisions of this Article VI.
6.6 CONFLICTS
No indemnification or advance shall be made under this Article VI,
except where such indemnification or advance is mandated by law or the order,
judgment or decree of any court of competent jurisdiction, in any circumstance
where it appears:
(1) That it would be inconsistent with a provision of the
Articles of Incorporation, these bylaws, a resolution of the shareholders or an
agreement in effect at the time of the accrual of the alleged cause of the
action asserted in the proceeding in which the expenses were incurred or other
amounts were paid, which prohibits or otherwise limits indemnification; or
(2) That it would be inconsistent with any condition
expressly imposed by a court in approving a settlement.
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<PAGE> 24
ARTICLE VII
RECORDS AND REPORTS
7.1 MAINTENANCE AND INSPECTION OF SHARE REGISTER
The corporation shall keep either at its principal executive office or
at the office of its transfer agent or registrar (if either be appointed), as
determined by resolution of the board of directors, a record of its
shareholders listing the names and addresses of all shareholders and the number
and class of shares held by each shareholder.
A shareholder or shareholders of the corporation who holds at least
five percent (5%) in the aggregate of the outstanding voting shares of the
corporation or who holds at least one percent (1%) of such voting shares and
has filed a Schedule 14B with the Securities and Exchange Commission relating
to the election of directors, may (i) inspect and copy the records of
shareholders' names, addresses, and shareholdings during usual business hours
on five (5) days' prior written demand on the corporation, (ii) obtain from the
transfer agent of the corporation, on written demand and on the tender of such
transfer agent's usual charges for such list, a list of the names and addresses
of the shareholders who are entitled to vote for the election of directors, and
their shareholdings, as of the most recent record date for which that list has
been compiled or as of a date specified by the shareholder after the date of
demand. Such list shall be made available to any such shareholder by the
transfer agent on or before the later of five (5) days after the demand is
received or five (5) days after the date specified in the demand as the date as
of which the list is to be compiled.
The record of shareholders shall also be open to inspection on the
written demand of any shareholder or holder of a voting trust certificate, at
any time during usual business hours, for a purpose reasonably related to the
holder's interests as a shareholder or as the holder of a voting trust
certificate.
Any inspection and copying under this Section 7.1 may be made in person
or by an agent or attorney of the shareholder or holder of a voting trust
certificate making the demand.
7.2 MAINTENANCE AND INSPECTION OF BYLAWS
The corporation shall keep at its principal executive office or, if its
principal executive office is not in the State of California, at its principal
business office in California the original or a copy of these bylaws as amended
to date, which bylaws shall be open to inspection by the shareholders at all
reasonable times during office hours. If the principal executive office of
the cor-
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<PAGE> 25
poration is outside the State of California and the operation has no principal
business office in such state, then the secretary shall, upon the written
request of any shareholder, furnish to that shareholder a copy of these bylaws
as amended to date.
7.3 MAINTENANCE AND INSPECTION OF OTHER CORPORATE RECORDS
The accounting books and records and the minutes of proceedings of the
shareholders, of the board of directors, and of any committee or committees of
the board of directors shall be kept at such place or places as are designated
by the board of directors or, in absence of such designation, at the principal
executive office of the corporation. The minutes shall be kept in written
form, and the accounting books and records shall be kept either in written form
or in any form capable of being converted into written form.
The minutes and accounting books and records shall be open to
inspection upon the written demand of any shareholder or holder of a voting
trust certificate, at any reasonable time during usual business hours, for a
purpose reasonably related to the holder's interests as a shareholder or as the
holder of a voting trust certificate. The inspection may be made in person or
by an agent or attorney and shall include the right to copy and make extracts.
Such rights of inspection shall extend to the records of each subsidiary
corporation of the corporation.
7.4 INSPECTION BY DIRECTORS
Every director shall have the absolute right at any reasonable time to
inspect all books, records, and documents of every kind as well as the physical
properties of the corporation and each of its subsidiary corporations. Such
inspection by a director may be made in person or by an agent or attorney. The
right of inspection includes the right to copy and make extracts of documents.
7.5 ANNUAL REPORT TO SHAREHOLDERS; WAIVER
The board of directors shall cause an annual report to be sent to the
shareholders not later than one hundred twenty (120) days after the close of
the fiscal year adopted by the corporation. Such report shall be sent at least
fifteen (15) days (or, if sent by third-class mail, thirty-five (35) days)
before the annual meeting of shareholders to be held during the next fiscal
year and in the manner specified in Section 2.5 of these bylaws for giving
notice to shareholders of the corporation.
The annual report shall contain (i) a balance sheet as of the end of
the fiscal year, (ii) an income statement, (iii) a statement of changes in
financial position for the fiscal year, and (iv) any
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report of independent accountants of, if there is no such report, the
certificate of an authorized officer of the corporation that the statements
were prepared without audit from the books and records of the corporation.
The foregoing requirement of annual report shall be waived so long as the
shares of the corporation are held by fewer than one hundred (100) holders of
record.
7.16 FINANCIAL STATEMENTS
If no annual report for the fiscal year has been sent to shareholders, then
the corporation shall, upon the written request of any shareholder made more
than one hundred twenty (120) days after the close of such fiscal year, deliver
or mail to the person making the request, within thirty (30) days thereafter, a
copy of a balance sheet as of the end of such fiscal year and an income
statement and statement of changes in financial position for such fiscal year.
If a shareholder of shareholders holding at least five percent (5%) of the
outstanding shares of any class of stock of the corporation makes a written
request to the corporation for an income statement of the corporation for the
three-month, six-month or nine-month period of the then current fiscal year
ended more than thirty (30) days before the date of the request, and for a
balance sheet of the corporation as of the end of that period, then the chief
financial officer shall cause that statement to be prepared, if not already
prepared, and shall deliver personally or mail that statement or statements to
the person making the request within thirty (30) days after the receipt of the
request. If the corporation has not sent to the shareholders its annual report
for the last fiscal year, the statements referred to in the first paragraph of
this Section 7.6 shall likewise be delivered or mailed to the shareholder or
shareholders within thirty (30) days after the request.
The quarterly income statements and balance sheets referred to in this
section shall be accompanied by the report, if any, of any independent
accountants engaged by the corporation or by the certificate of an authorized
officer of the corporation that the financial statements were prepared without
audit from the books and records of the corporation.
7.7 REPRESENTATION OF SHARES OF OTHER CORPORATIONS
The chairman of the board, the president, any vice president, the chief
financial officer, the secretary or assistant secretary of this corporation, or
any other person authorized by the board of directors or the president or a
vice president, is authorized to
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vote, represent, and exercise on behalf of this corporation all rights incident
to any and all shares of any other corporation or corporations standing in the
name of this corporation. The authority herein granted may be exercised either
by such person directly or by any other person authorized to do so by proxy or
power of attorney duly executed by such person having the authority.
ARTICLE VIII
GENERAL MATTERS
8.1 RECORD DATE FOR PURPOSES OTHER THAN NOTICE AND VOTING
For purposes of determining the shareholders entitled to receive
payment of any dividend or other distribution or allotment of any rights or the
shareholders entitled to exercise any rights in respect of any other lawful
action (other than action by shareholders by written consent without a
meeting), the board of directors may fix, in advance, a record date, which
shall not be more than sixty (60) days before any such action. In that case,
only shareholders of record at the close of business on the date so fixed are
entitled to receive the dividend, distribution or allotment of rights, or to
exercise such rights, as the case may be, notwithstanding any transfer of any
shares on the books of the corporation after the record date so fixed, except
as otherwise provided in the Code.
If the board of directors does not so fix a record date, then the
record date for determining shareholders for any such purpose shall be at the
close of business on the day on which the board adopts the applicable
resolution or the sixtieth (60th) day before the date of that action, whichever
is later.
8.2 CHECKS; DRAFTS; EVIDENCES OF INDEBTEDNESS
From time to time, the board of directors shall determine by resolution
which person or persons may sign or endorse all checks, drafts, other orders
for payment of money, notes or other evidences of indebtedness that are issued
in the name of or payable to the corporation, and only the persons so authorized
shall sign or endorse those instruments.
8.3 CORPORATE CONTRACTS AND INSTRUMENTS; HOW EXECUTED
The board of directors, except as otherwise provided in these bylaws,
may authorize any officer or officers, or agent or agents, to enter into any
contract or execute any instrument in the name of and on behalf of the
corporation; such authority may be general or
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<PAGE> 28
confined to specific instances. Unless so authorized or ratified by the board
of directors or within the agency power of an officer, no officer, agent or
employee shall have any power or authority to bind the corporation by any
contract or engagement or to pledge its credit or to render it liable for any
purpose or for any amount.
8.4 CERTIFICATE FOR SHARES
A certificate or certificates for shares of the corporation shall be
issued to each shareholder when any of such shares are fully paid. The board
of directors may authorize the issuance of certificates for shares partly paid
provided that these certificates shall state the total amount of the
consideration to be paid for them and the amount actually paid. All
certificates shall be signed in the name of the corporation by the chairman of
the board or the vice chairman of the board or the president or a vice
president and by the chief financial officer or an assistant treasurer or the
secretary or an assistant secretary, certifying the number of shares and the
class or series of shares owned by the shareholder. Any or all of the
signatures on the certificate may be facsimile.
In case any officer, transfer agent or registrar who has signed or whose
facsimile signature has been placed on a certificate ceases to be that officer,
transfer agent or registrar before that certificate is issued, it may be issued
by the corporation with the same effect as if that person were an officer,
transfer agent or registrar at the date of issue.
8.5 LOST CERTIFICATES
Except as provided in this Section 8.5, no new certificates for shares
shall be issued to replace a previously issued certificate unless the latter is
surrendered to the corporation and cancelled at the same time. The board of
directors may, in case any share certificate or certificate for any other
security is lost, stolen or destroyed, authorize the issuance of replacement
certificates on such terms and conditions as the board may require; the board
may require indemnification of the corporation secured by a bond or other
adequate security sufficient to protect the corporation against any claim that
may be made against it, including any expense or liability, on account of the
alleged loss, theft or destruction of the certificate or the issuance of the
replacement certificate.
8.6 CONSTRUCTION; DEFINITIONS
Unless the context requires otherwise, the general provisions, rules of
construction, and definitions in the Code shall govern the construction of
these bylaws. Without limiting the generality of
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<PAGE> 29
this provision, the singular number includes the plural, the plural number
includes the singular, and the term "person" includes both a corporation and a
natural person.
ARTICLE IX
AMENDMENTS
9.1 AMENDMENT BY SHAREHOLDERS
New bylaws may be adopted or these bylaws may be amended or repealed by
the vote or written consent of holders of a majority of the outstanding shares
entitled to vote; provided, however, that if the articles of incorporation of
the corporation, then the authorized number of directors may be changed only by
an amendment of the articles of incorporation.
9.2 AMENDMENT BY DIRECTORS
Subject to the rights of the shareholders as provided in Section 9.1 of
these bylaws, bylaws, other than a bylaw or an smendment of a bylaw changing
the authorized number of directors (except to fix the authorized number of
directors pursuant to a bylaw providing for a variable number of directors),
may be adopted, amended or repealed by the board of directors.
-25-
<PAGE> 30
CERTIFICATE OF ADOPTION OF BYLAWS
OF
TRANSGENE, INC.
Adoption by Incorporator
The undersigned person appointed in the Articles of Incorporation to
act as the Incorporator of Transgene, Inc. hereby adopts the foregoing bylaws,
comprising twenty-five (25) pages, as the Bylaws of the corporation.
Executed this 10th day of May 1989.
/s/ Michael W. Hall
-----------------------------
Michael W. Hall, Incorporator
Certificate by Secretary of Adoption by Incorporator
The undersigned hereby certifies that he is the duly elected,
qualified, and acting Secretary of Transgene, Inc. and that the foregoing
Bylaws, comprising twenty-five (25) pages, were adopted as the Bylaws of the
corporation on May 10, 1989, by the person appointed in the Articles of
Incorporation to act as the Incorporator of the corporation.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and
affixed the corporate seal this 10th day of May 1989.
/s/ Michael W. Hall
--------------------------
Michael W. Hall, Secretary
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<PAGE> 31
ACTION OF INCORPORATOR
OF TRANSGENE, INC.
The undersigned, being the sole incorporator of TransGene, Inc., hereby
takes the following actions and adopts the following resolutions pursuant to
Section 210 of the California Corporations Code with respect to the initial
organization of the corporation:
1. Bylaws
RESOLVED: That the Bylaws attached to this Action by Incorporator are
hereby adopted as the Bylaws of this corporation.
RESOLVED FURTHER: That the secretary of this corporation is hereby
authorized and directed to execute a certificate of the adoption of the Bylaws
and insert it in the Minute Book of this corporation and that the officers of
the corporation are ordered to maintain a copy of such Bylaws in the principal
office of the corporation for the transaction of its business open for
inspection by the shareholders at all reasonable times during office hours.
2. Directors
RESOLVED: That J. Michael Dunn, J. Wesley Fox and Kin-Ping Wong are
hereby appinted as directors of this corporation, to serve until their
successors are duly elected and qualified.
This Action of Incorporator shall be filed in the Minute Book of the
corporation and shall be effective this 10th day of May, 1989.
/s/ Michael W. Hall
-------------------
Michael W. Hall
<PAGE> 32
AMENDMENT
The first two sentences of the Bylaws is hereby amended to read as
follows (as approved by the Board on May 17, 1990 and by the shareholders on
June 22, 1990):
"3.2 NUMBER OF DIRECTORS
The number of directors of the corporation shall be not less than four
(4) nor more than seven (7). The exact number of directors shall be seven (7)
until changed, within the limits specified above, by a bylaw amending this
Section 3.2, duly adopted by the board of directors or by the shareholders."
<PAGE> 33
AMENDMENT TO THE BYLAWS
OF RIBOGENE, INC.
On May 27, 1991, by unanimous written consent, the Board of Directors
of RiboGene, Inc. (the "Company") approved the amendment of the Company's
Bylaws as follows:
RESOLVED FURTHER: That the first two sentences of Section 3.2 of the
Company's Bylaws be amended, effective as of the Closing (as defined
in the Purcahse Agreement) of the Financing, to read as follows:
"The number of directors of the corporation shall be not less than
five (5) or more than nine (9). The exact number of directors shall
be eight (8) until changed, within the limits specified above, by a
bylaw amending this Section 3.2, duly adopted by the Board of
Directors or by the shareholders."
The shareholders of the Company also approved the above-stated
amendment on May 27, 1991 by written consent.
<PAGE> 34
AMENDMENT TO THE BYLAWS OF
RIBOGENE, INC.
On September 6, 1991, the Board of Directors of RiboGene, Inc. (the
"Company") made the following amendment to the Company's Bylaws:
Article III. The second sentence of Section 3.2 of Article III of the
Company's Bylaws shall read in its entirety as follows:
"The exact number of directors shall be nine (9) until changed, within
the limits specified hereinabove, by a Bylaw amending this Section 3.2,
duly adopted by the Board of Directors or by the shareholders."
<PAGE> 35
AMENDMENT TO THE BYLAWS OF
RIBOGENE, INC.
On February 15, 1992, the Shareholders of RiboGene, Inc. (the
"Company") made the following amendment to the Company's Bylaws, such amendment
to be effective February 15, 1992.
"The first two sentences of Section 3.2 of the Company's Bylaws be
amended to read as follows:
"The number of directors of the corporation shall be not less than
four (4) nor more than seven (7). The exact number of directors
shall be six (6) until changed, within the limited specified above,
by a bylaw amending this Section 3.2, duly adopted by the Board of
Directors or by the shareholders.""
<PAGE> 36
AMENDMENT TO THE BYLAWS OF
RIBOGENE, INC.
On August 21, 1992, the Board of Directors of RiboGene, Inc. (the
"Company") made the following amendment to the Company's Bylaws:
Article III. The second sentence of Section 3.2 of Article III of the
Company's Bylaws shall read in its entirety as follows:
"The exact number of directors shall be five (5) until changed, within
the limits specified herinabove, by a Bylaw amending this Section 3.2,
duly adopted by the Board of Directors or by the shareholders."
<PAGE> 37
AMENDMENT TO THE BYLAWS OF
RIBOGENE, INC.
On May 26, 1993, the Board of Directors of RiboGene, Inc. (the
"Company") made the following amendment to the Company's Bylaws:
Article III. The second sentence of Section 3.2 of Article III of the
Company's Bylaws shall read in its entirety as follows:
"The exact number of directors shall be six (6) until changed, within
the limits specified above, by a bylaw amending this Section 3.2, duly
adopted by the Board of Directors or by the shareholders."
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<PAGE> 38
AMENDMENT TO THE BYLAWS OF
RIBOGENE, INC.
On May 11, 1994, the Board of Directors of RiboGene, Inc. (the
"Company") made the following amendment to the Company's Bylaws:
Article III. The second sentence of Section 3.2 of Article III of the
Company's Bylaws shall read in its entirety as follows:
"The exact number of directors shall be six (6) until changed, within
the limits specified above, by a bylaw amending this Section 3.2, duly
adopted by the Board of Directors or by the shareholders."
<PAGE> 1
EXHIBIT 3.3
CERTIFICATE OF INCORPORATION OF
RIBOGENE MERGER CORPORATION
The undersigned, a natural person (the "Sole Incorporator"), for the
purpose of organizing a corporation to conduct the business and promote the
purposes hereinafter stated, under the provisions and subject to the
requirements of the laws of the State of Delaware hereby certifies that:
I.
The name of the Corporation is RiboGene Merger Corporation.
II.
The address, including street, number, city, and county, of the registered
office of the Corporation in the State of Delaware is 1013 Centre Road, City of
Wilmington, 19805, County of New Castle; and the name of the registered agent of
the corporation in the State of Delaware at such address is The Prentice-Hall
Corporation System, Inc.
III.
The purpose of the Corporation is to engage in any lawful act or activity
for which a corporation may be organized under the Delaware General Corporation
Law.
IV.
A. The Corporation is authorized to issue two classes of stock to be
designated, respectively, "Common Stock" and "Preferred Stock." The total number
of shares which the corporation is authorized to issue is Sixty-Eight Million
Nine Hundred Thirty-Two Thousand Three Hundred Forty-Four (68,932,344) shares.
Fifty Million (50,000,000) shares shall be Common Stock and Eighteen Million
Nine Hundred Thirty-Two Thousand Three Hundred Forty- Four (18,932,344) shares
shall be Preferred Stock.
The Preferred Stock authorized by this Certificate of Incorporation
may be issued from time to time in series. The rights, preferences, privileges
and restrictions granted to and imposed on the Series A Preferred Stock, which
series shall consist of 138,269 shares, on the Series B Preferred Stock, which
series shall consist of 800,000 shares, on the Series C Preferred Stock, which
series shall consist of 2,950,000 shares, on the Series D Preferred Stock, which
series shall consist of 270,222 shares, on the Series E Preferred Stock, which
series shall consist
1.
<PAGE> 2
of 8,500,000 shares, and on the Series F Preferred Stock, which series shall
consist of 5,555,554 shares, are as set forth below in this Article IV(A).
Except as to the Series A, Series B, Series C, Series D, Series E and
Series F Preferred Stock and except as otherwise provided in this Certificate of
Incorporation, the Board of Directors is hereby authorized to fix or alter the
rights, preferences, privileges and restrictions granted to or imposed upon any
wholly unissued additional series of Preferred Stock, and the number of shares
constituting any such series and the designation thereof, or any of them. The
Board of Directors, except as otherwise provided in this Certificate of
Incorporation, is also authorized to decrease the number of shares of any
series, excluding the Series A, Series B, Series C, Series D, Series E and
Series F Preferred Stock, subsequent to the issuance of shares of that series,
but not below the number of shares of such series then outstanding. In case the
number of shares of any series shall be so decreased, the shares constituting
such decrease shall resume the status which they had prior to the adoption of
the resolution originally fixing the number of shares of such series.
1. DIVIDEND PROVISIONS.
(A) The holders of shares of Series F Preferred Stock shall be
entitled to receive dividends, out of any assets legally available therefor,
prior and in preference to any declaration or payment of any dividend (payable
other than in Common Stock or other securities and rights convertible into or
entitling the holder thereof to receive, directly or indirectly, additional
Shares of Common Stock of the Corporation for purposes of a stock Split or
recapitalization) on the Common Stock or other shares of Preferred Stock of the
Corporation, at the rate of (i) $2.25 per share effective the first day
following the final closing of the initial offering of Series F Preferred Stock
by the Company (excluding dates on which shares of Series F Preferred Stock are
issued pursuant to the exercise or conversion of exercisable or convertible
securities, the "Final Closing Date") and (ii) an additional $1.125 per share
effective on the second anniversary of the Final Closing Date and on each
anniversary thereafter (collectively, the "Preferred Dividends"). The Preferred
Dividends shall be payable only when, as and if declared by the Board of
Directors. Preferred Dividends not declared and paid when due shall accrue and
accumulate. No dividend shall be declared and/or paid with respect to any other
series or class of capital stock while there are accrued but unpaid dividends on
the Series F Preferred Stock outstanding unless a like dividend is declared
and/or paid (as appropriate) with respect to the Series F Preferred Stock after
payment of any accrued but unpaid dividends (including Preferred Dividends) on
the Series F Preferred Stock.
(B) The holders of shares of Series A, Series B, Series C,
Series D and Series E Preferred Stock shall be entitled to receive dividends,
out of any assets legally available therefor, prior and in preference to any
declaration or payment of any dividend (payable other than in Common Stock or
other securities and rights convertible into or entitling the holder thereof to
receive, directly or indirectly, additional shares of Common Stock of the
Corporation for purposes of a stock split or recapitalization) on the Common
Stock of the Corporation, at the rate of $0.66, $1.00, $0.15, $0.225 and $0.225,
respectively, per share per annum or, if greater (as determined on an
as-converted basis for the Series A, Series B, Series C, Series D and Series E
Preferred Stock), an amount equal to that paid on any other outstanding shares
of the
2.
<PAGE> 3
Corporation (other than on shares of Series F Preferred Stock) whenever funds
are legally available therefor, payable quarterly when, as and if declared by
the Board of Directors. No dividend shall be declared and/or paid with respect
to any Series A, Series B, Series C, Series D or Series E Preferred Stock unless
a dividend is declared and/or paid with respect to each of the Series A, Series
B, Series C, Series D and Series E Preferred Stock at a rate that is no less
favorable to the Series A, Series B, Series C, Series D and Series E Preferred
Stock than $0.66, $1.00, $0.15, $0.225 and $0.225, for each share of Series A,
Series B, Series C, Series D and Series E Preferred Stock, respectively. Such
dividends shall not be cumulative.
2. LIQUIDATION PREFERENCE.
(a) (i) In the event of any liquidation, dissolution or
winding up of the Corporation, either voluntary or involuntary (a "Liquidation
Event"), the holders of the Series F Preferred Stock shall be entitled to
receive, prior and in preference to any distribution, payment, declaration or
setting apart of any of the assets of the Corporation to, or in respect of, the
holders of Common Stock or other series of Preferred Stock, an amount per share
equal to $2.25 for each outstanding share of Series F Preferred Stock (the
"Original Series F Issue Price") plus an amount equal to all accrued Preferred
Dividends thereon and any other declared but unpaid dividends thereon. If, upon
the occurrence of such an event, the assets and property thus distributed among
the holders of the Series F Preferred Stock shall be insufficient to permit the
payment to such holders of the full preferential amount, then the assets and
property of the corporation legally available for distribution shall be
distributed ratably among the holders of the Series F Preferred Stock in
proportion to the aggregate preferential amounts owed such holders upon a
liquidation, dissolution or winding up of the corporation. All outstanding
shares of Series F Preferred Stock shall rank as to payment, upon the occurrence
of a Liquidation Event senior to the Common Stock and all other series of the
corporation's Preferred Stock.
(ii) After the distribution to the holders of the Series F
Preferred Stock, the holders of the Series C, Series D and Series E Preferred
Stock shall be entitled to receive, prior and in preference to any distribution
of any of the assets of the Corporation to the holders of Common Stock, Series A
Preferred Stock or Series B Preferred Stock by reason of their ownership
thereof, an amount per share equal to $1.50 for each outstanding share of Series
C Preferred Stock (the "Original Series C Issue Price"), $2.25 for each
outstanding share of Series D Preferred Stock (the "Original Series D Issue
Price") and $2.25 for each outstanding share of Series E Preferred Stock (the
"Original Series E Issue Price") plus an amount equal to declared but unpaid
dividends thereon. If, upon the occurrence of such an event, the assets and
property thus distributed among the holders of the Series C, Series D and Series
E Preferred Stock shall be insufficient to permit the payment to such holders of
the full preferential amount, then the assets and property of the corporation
legally available for distribution shall be distributed ratably among the
holders of the Series C, Series D and Series E Preferred Stock in proportion to
the aggregate preferential amounts owed such holders upon a liquidation,
dissolution or winding up of the corporation.
(iii) After the distribution to the holders of the Series
C, Series D and Series E Preferred Stock, the holders of the Series B Preferred
Stock shall be entitled to receive, prior and in preference to any distribution
of the assets of the Corporation to the holders of
3.
<PAGE> 4
Common Stock or Series A Preferred Stock by reason of their ownership thereof,
an amount per share equal to the sum of $10.00 for each outstanding share of
Series B Preferred Stock (the "Original Series B Issue Price") and an amount
equal to declared but unpaid dividends. If, upon the occurrence of such an
event, the assets and property thus distributed among the holders of the Series
B Preferred Stock shall be insufficient to permit the payment to such holders of
the full preferential amount, then the assets and property of the corporation
legally available for distribution shall be distributed ratably among the
holders of the Series B Preferred Stock in proportion to the aggregate
preferential amounts owed such holders of the outstanding Series B Preferred
Stock upon a liquidation, dissolution or winding up of the corporation.
(iv) After the distribution to the holders of the Series B
Preferred Stock, the holders of the Series A Preferred Stock shall be entitled
to receive, prior and in preference to any distribution of the assets of the
Corporation to the holders of Common Stock by reason of their ownership thereof,
an amount per share equal to the sum of $6.60 for each outstanding share of
Series A Preferred Stock (the "Original Series A Issue Price") and an amount
equal to declared but unpaid dividends. If, upon the occurrence of such an
event, the assets and property thus distributed among the holders of the Series
A Preferred Stock shall be insufficient to permit the payment to such holders of
the full preferential amount, then the assets and property of the corporation
legally available for distribution shall be distributed ratably among the
holders of the Series A Preferred Stock in proportion to the aggregate
preferential amounts owed such holders of the outstanding Series A Preferred
Stock upon a liquidation, dissolution or winding up of the corporation.
(b) Upon the completion of the distributions required by
subparagraph (a) of this Section 2, if assets remain in the Corporation, the
holders of the Common Stock of the Corporation shall receive an amount equal to
$0.50 per share.
(c) Upon the completion of the distributions required by
subparagraphs (a) and (b) of this Section 2, if assets remain in the
Corporation, the holders of Series A, Series B, Series C, Series D and Series E
Preferred Stock and Common Stock pro rata based on the number of shares of
Common Stock held by each (assuming conversion of the outstanding Series A,
Series B, Series C, Series D and Series E Preferred Stock) shall receive a per
share amount equal to the result of (i) the aggregate value of accrued but
unpaid Preferred Dividends and declared but unpaid dividends distributed to the
holders of Series F Preferred Stock pursuant to subparagraph (a) above divided
by (ii) the number of shares of Common Stock outstanding immediately prior to
the Liquidation Event (assuming conversion of the outstanding Series A, Series
B, Series C, Series D and Series E Preferred Stock).
(d) After the distributions described in subsection (a), (b)
and (c) above have been paid, the remaining assets of the corporation available
for distribution to stockholders, if any, shall be distributed among the holders
of Series A, Series B, Series C, Series D, Series E and Series F Preferred Stock
and Common Stock pro rata based on the number of shares of Common Stock held by
each (assuming conversion of all outstanding Preferred Stock).
(e) A merger of the Corporation with or into any other
corporation or corporations, or a sale, conveyance or disposition of all or
substantially all of the assets of the
4.
<PAGE> 5
Corporation or the effectuation by the corporation of a transaction or series of
related transactions in which more than 50% of the voting power of the
corporation is disposed of, shall not be deemed to be a liquidation, dissolution
or winding up within the meaning of this Section 2, but shall instead be treated
pursuant to Section 5 hereof.
3. REDEMPTION.
(a) On or at any time after April 15, 1999 the Corporation
may, at any time it may lawfully do so, at the option of the Board of Directors,
redeem in whole or in part the Series A, Series B, Series C, Series D and Series
E Preferred Stock by paying in cash therefor a sum per share equal to the
Original Series A Issue Price, the Original Series B Issue Price, the Original
Series C Issue Price, the Original Series D Issue Price and the Original Series
E Issue Price, as the case may be, plus any declared but unpaid dividends on
such shares as of the Redemption Date (such total amount is hereinafter referred
to as the "Redemption Price").
(b) On or at any time after the receipt by the Corporation
from the holders of 66-2/3% of the then outstanding shares of Series A, Series
B, Series C, Series D and Series E Preferred Stock of their written consent to
redemption hereunder of their respective shares, the Corporation may, at any
time it may lawfully do so, at the option of the Board of Directors, redeem in
whole or in pan the Series A, Series B, Series C, Series D and Series E
Preferred Stock by paying in cash therefor a sum equal to the Redemption Price
for the shares so redeemed.
(c) (i) In the event of any redemption of only a part of the
then outstanding Series A, Series B, Series C, Series D and Series E Preferred
Stock, the Corporation shall redeem the same proportion of each outstanding
series of Preferred Stock and, as to each such series, shall effect such
redemption pro rata according to the number of shares held by each holder
thereof. No redemption of any series of Preferred Stock shall occur, unless
there is a pro rata redemption of all series of Preferred Stock in accordance
with the foregoing. In the event of any redemption of all or pan of the then
outstanding Series A, Series B, Series C, Series D and Series E Preferred Stock,
any holder thereof may avoid all or pan of such redemption by converting into
Common Stock, pursuant to Section 4 below, up to that number of shares of such
holder's Preferred stock scheduled to be redeemed in such redemption. Such
holder may condition such conversion on deposit by the corporation of the
Redemption Price for the shares to be redeemed pursuant to subsection 3(c)(iv)
below.
(ii) At least 30 but no more than 60 days prior to the
date fixed for any redemption hereunder (the "Redemption Date"), written notice
shall be mailed, first class postage prepaid, to each holder of record (at the
close of business on the business day next preceding the day on which notice is
given) of the Series A, Series B, Series C, Series D and Series E Preferred
Stock to be redeemed, at the address last shown on the records of the
Corporation for such holder or given by the holder to the Corporation for the
purpose of notice, notifying such holder of the redemption to be effected,
specifying the number of shares to be redeemed from such holder, the Redemption
Date, the Redemption Price, the place at which payment may be obtained and the
date on which such holder's Conversion Rights (as hereinafter defined) as to
such shares terminate and calling upon such holder to surrender to the
5.
<PAGE> 6
Corporation, in the manner and at the place designated, his certificate or
certificates representing the shares to be redeemed (the "Redemption Notice").
Except as provided in subsection 3(c)(iii), on or after the Redemption Date,
each holder of Series A, Series B, Series C, Series D and Series E Preferred
Stock to be redeemed shall surrender to the Corporation the certificate or
certificates representing such shares, in the manner and at the place designated
in the Redemption Notice, and thereupon the Redemption Price of such shares
shall be payable to the order of the person whose name appears on such
certificate or certificates as the owner thereof and each surrendered
certificate shall be cancelled. In the event less than all the shares
represented by any such certificate are redeemed, a new certificate shall be
issued representing the unredeemed shares.
(iii) From and after the Redemption Date, unless there
shall have been a default in payment of the Redemption Price, all dividends on
the Series A, Series B, Series C, Series D and Series E Preferred Stock
designated for redemption in the Redemption Notice shall cease to accrue, all
rights of the holders of such shares as holders of Series A, Series B, Series C,
Series D and Series E Preferred Stock (except the right to receive the
Redemption Price without interest upon surrender of their certificate or
certificates) shall cease with respect to such shares, and such shares shall not
thereafter be transferred on the books of the Corporation or be deemed to be
outstanding for any purpose whatsoever. If the funds of the corporation legally
available for redemption of shares of Series A, Series B, Series C, Series D
iced Series E Preferred Stock on any Redemption Date are insufficient to redeem
the total number of shares of Series A, Series B, Series C, Series D and Series
E Preferred Stock to be redeemed on such date, those funds which are legally
available will be used to redeem the maximum possible number of such shares in
accordance with the provisions of paragraph 3(c)(i) hereof. The shares of Series
A, Series B, Series C, Series D and Series E Preferred Stock not redeemed shall
remain outstanding and entitled to all the rights and preferences provided
herein. At any time thereafter when additional funds of the corporation are
legally available for the redemption of shares of Series A, Series B, Series C,
Series D and Series E Preferred Stock, such funds will immediately be used to
redeem the balance of the shares which the corporation has become obligated to
redeem on any Redemption Date but which it has not redeemed.
(iv) Three days prior to the Redemption Date, the
Corporation shall deposit the Redemption Price of all outstanding shares of
Series A, Series B, Series C, Series D and Series E Preferred Stock designated
for redemption in the Redemption Notice, and not yet redeemed or converted, with
a bank or trust company having aggregate capital and surplus in excess of
$50,000,000 as a trust fund for the benefit of the respective holders of the
shares designated for redemption and not yet redeemed. Simultaneously, the
Corporation shall deposit irrevocable instruction and authority to such bank or
trust company to publish the notice of redemption thereof (or to complete such
publication if thereto fore commenced) and to pay, on and after the date fixed
for redemption or prior thereto, the Redemption Price of the Series A, Series B,
Series C, Series D and Series E Preferred Stock to the holders thereof upon
surrender of their certificates. Any monies deposited by the Corporation
pursuant to this subsection 3(c)(iv) for the-redemption of shares which are
thereafter converted into shares of Common Stock pursuant to Section 4 hereof no
later than the close of business on the Redemption Date shall be returned to the
Corporation forthwith upon such conversion. The balance of any monies deposited
by the Corporation pursuant to this subsection 3(c)(iv) remaining unclaimed at
the
6.
<PAGE> 7
expiration of two years following the Redemption Date shall thereafter be
returned to the Corporation, provided that the stockholder to, which such money
would be payable hereunder shall be entitled, upon proof of its ownership of the
Series A, Series B, Series C, Series D and Series E Preferred Stock and payment
of any bond requested by the corporation, to receive such monies but without
interest from the Redemption Date.
(d) In the event that the corporation elects to conduct any
redemption of any series of outstanding Preferred Stock pursuant to subsections
3(a) or 3(b) above, the corporation shall promptly deliver a written notice of
such intention to the holders of the Series F Preferred Stock then outstanding
setting forth in reasonable detail information regarding the planned redemption
and shall include in such redemption the shares of Series F Preferred Stock held
by those holders that deliver to the corporation, within twenty-five (25) days
after the date of the corporation's notice to such holders, a written election
to have the shares of Series F Preferred Stock then held by them included in
such redemption. In the event that any holders of Series F Preferred Stock elect
to participate in a redemption, the Redemption Price for each share of Series F
Preferred Stock to be redeemed shall be equal to the Original Series F Issue
Price plus any declared but unpaid dividends, including Preferred Dividends, on
such share as of the Redemption Date. The redemption of the Series F Preferred
Stock included in any such redemption shall be conducted on at as a part of, the
same time and on the same terms as the redemption of the other series of
Preferred Stock then being redeemed, as set forth in detail in subsection 3(c)
above.
4. CONVERSION. The holders of Preferred Stock shall have
conversion rights as follows (the "Conversion Rights"):
(a) RIGHT TO CONVERT.
(i) Subject to subsections (c) and (d), each share of
Preferred Stock shall be convertible, at the option of the holder thereof, at
any time after the date of issuance of such share and prior to the close of
business on any Redemption Date as may have been fixed in any Redemption Notice
with respect to such share (if applicable), at the office of the Corporation or
any transfer agent for the Preferred Stock, into such number of fully paid and
nonassessable shares of Common Stock as is determined by dividing $6.60 for each
share of Series A Preferred, $10.00 for each share of Series B Preferred Stock,
$1.50 for each share of Series C Preferred, $2.25 for each share of Series D
Preferred, $2.25 for each share of Series E Preferred and $2.25 (plus any
accrued but unpaid dividends, including Preferred Dividends) for each share of
Series F Preferred by the Conversion Price at the time in effect for such share.
The initial Conversion Prices for shares of Preferred Stock shall be $6.60,
$10.00, $1.50, $2.25, $2.25 and $2.25 per share for the Series A, Series B,
Series C, Series D, Series E and Series F Preferred Stock, respectively;
provided, however, that such Conversion Prices shall be subject to adjustment as
set forth in subsections 4(c) and 4(d). Upon conversion of any share of
Preferred Stock after all conversion ratio adjustments set forth herein, all
accrued but unpaid dividends, including Preferred Dividends, on such stock will
be canceled.
(ii) In the event of a call for redemption of any shares
of Series A, Series B, Series C, Series D, Series E (and, if applicable, Series
F) Preferred Stock pursuant
7.
<PAGE> 8
to Section 3 hereof, the Conversion Rights shall terminate as to the shares
designated for redemption at the close of business on the Redemption Date,
unless default is made in payment of the Redemption Price.
(iii) Each share of Series A, Series B, Series C, Series
D, Series E and Series F Preferred Stock shall automatically be convened into
shares of Common Stock at the Conversion Price at the time in effect for such
series of Preferred Stock immediately upon the consummation of the corporation's
sale of its Common Stock in a bona fide, firm commitment underwriting pursuant
to a registration statement under the Securities Act of 1933, as amended, which
results in aggregate gross cash proceeds to the Corporation in excess of
$7,500,000 (the "Qualified IPO").
(iv) Each share of Series A, Series B, Series C, Series D
and Series E Preferred Stock shall automatically be converted into shares of
Common Stock at the Conversion Price at the time in effect for such Series A,
Series B, Series C, Series D or Series E Preferred Stock at such time as the
corporation receives the consent of the holders of not less than 66-2/3% of each
of the Series A, Series B, Series C, Series D and Series E Preferred Stock then
outstanding.
(b) MECHANICS OF CONVERSION. Before any holder Preferred Stock
shall be entitled to convert the same into shares of Common Stock, he shall
surrender the certificate or certificates therefor, duly endorsed, at the office
of the Corporation or of any transfer agent for the Preferred Stock, and shall
give written notice by mail, postage prepaid, to the Corporation at its
principal corporate office, of the election to convert the same and shall state
therein the name or names in which the certificate or certificates for shares of
Common Stock are to be issued. The Corporation shall, as soon as practicable
thereafter, issue and deliver at such office such holder of Preferred Stock, or
to the nominee or nominees of such holder, a certificate or certificates for the
number of shares of Common Stock to which such holder shall be entitled as
aforesaid. Such conversion shall be deemed to have been made immediately prior
to the close of business on the date of such surrender of the shares of
Preferred Stock to be converted, and the person or persons entitled to receive
the shares of Common Stock issuable upon such conversion shall be treated for
all purposes as the record holder or holders of such shares of Common Stock as
of such date. If the conversion is in connection with an underwritten offer of
securities registered pursuant to the Securities Act of 1933, as amended, the
conversion will be conditioned upon the closing with the underwriter of the sale
of securities pursuant to such offering, unless otherwise designated in writing
by the holders of such Preferred Stock, in which event the person(s) entitled to
receive the Common Stock issuable upon such conversion of the Preferred Stock
shall not be deemed to have converted such Preferred Stock until immediately
prior to the closing of such sale of securities.
(c) CONVERSION PRICE ADJUSTMENTS OF ALL SERIES OF PREFERRED
STOCK. The Conversion Price of Series A, Series B, Series C, Series D, Series E
and Series F Preferred Stock shall be subject to adjustment from time to time as
follows:
(i) (i) If the corporation, at any time or from time to
time after the effective date of this Certificate of Incorporation (the
"Certificate Date") shall issue any
8.
<PAGE> 9
Additional Stock (as defined below) without consideration or for a consideration
per share less than the Conversion Price for such series of Preferred Stock in
effect immediately prior to the issuance of such Additional Stock, the
Conversion Price for such series of Preferred Stock in effect immediately prior
to each such issuance shall forthwith be adjusted to a price determined by
multiplying such Conversion Price by a fraction, the numerator of which shall be
the number of shares of Common Stock outstanding immediately prior to such
issuance plus the number of shares of Common Stock which the aggregate
consideration received by the corporation for the total number of shares of
Additional Stock so issued would purchase at such Conversion Price, and the
denominator of which shall be the number of shares of Common Stock outstanding
immediately prior to such issuance plus the number of such shares of Additional
Stock so issued; provided that for the purposes of this subsection, all shares
of Common Stock issuable upon conversion of outstanding Preferred Stock shall be
deemed to be outstanding, and immediately after any Additional Stock is deemed
issued, such Additional Stock shall be deemed to be outstanding.
(ii) No adjustment of the Conversion Price for any series
of Preferred Stock shall be made in an amount less than one cent per share,
provided that any adjustments which are not required to be made by reason of
this sentence shall be carried forward' and shall be either taken into account
in any subsequent adjustment made prior to 3 years from the date of the event
giving rise to the adjustment being carried forward, or shall be made at the end
of 3 years from the date of the event giving rise to the adjustment being
carried forward. Except to the limited extent provided for in subsections (E)(3)
and (E)(4), no adjustment of such Conversion Price pursuant to this subsection
4(c)(i) shall have the effect of increasing the Conversion Price above the
Conversion Price in effect immediately prior to such adjustment.
(iii) In the case of the issuance of Common Stock for
cash, the consideration shall be deemed to be the amount of cash paid therefor
before deducting any reasonable discounts, commissions or other expenses
allowed, paid or incurred by the Corporation for any underwriting or otherwise
in connection with the issuance and sale thereof.
(iv) In the case of the issuance of the Common Stock for a
consideration in whole or in part other than cash, the consideration other than
cash shall be deemed to be the fair value thereof as determined by the Board of
Directors irrespective of any accounting treatment.
(v) In the case of the issuance, whether before, on or
after the Certificate Date, of options to purchase or rights to subscribe for
Common Stock, securities by their terms convertible into or exchangeable for
Common Stock or options to purchase or rights to subscribe for such convertible
or exchangeable securities (which are not excluded from the definition of
Additional Stock), the following provisions shall apply:
a) The aggregate maximum number of shares of Common
Stock deliverable upon exercise of such options to purchase or rights to
subscribe for Common Stock shall be deemed to have been issued at the time such
options or rights were issued and for a consideration equal to the consideration
(determined in the manner provided in subsections
9.
<PAGE> 10
4(c)(i)(C) and 4(c)(i)(D), if any, received by the corporation upon the issuance
of such options or rights plus the minimum purchase price prodded in such
options or rights for the Common Stock covered thereby.
b) The aggregate maximum number of shares of Common
Stock deliverable upon conversion of or in exchange for any such convertible or
exchangeable securities or upon the exercise of options to purchase or rights to
subscribe for such convertible or exchangeable securities and subsequent
conversion or exchange thereof shall be deemed to have been issued at the time
such securities were issued or such options or rights were issued and for a
consideration equal to the consideration, if any, received by the corporation
for any such securities and related options or rights (excluding any cash
received on account of accrued interest or accrued dividends), plus the
additional consideration, if any, to be received by the corporation upon the
conversion or exchange of such securities or the exercise of any related options
or rights (the consideration in each case to be determined in the manner
provided in subsections 4(c)(i)(c) and 4(c)(i)(D)).
c) In the event of any change in the number of shares
of Common Stock deliverable or any increase in the consideration payable to the
Corporation upon exercise of such options or rights or upon conversion of or in
exchange for such convertible or exchangeable securities, including, but not
limited to, a change resulting from the antidilution provisions thereof, the
Conversion Prices of the Series A, Series B, Series C, Series D, Series E or
Series F Preferred Stock obtained with respect to the adjustment which was made
upon the issuance of such options, rights or securities, and any subsequent
adjustments based thereon, shall be recomputed to reflect such change, but no
further adjustment shall be made for the actual issuance of Common Stock or any
payment of such consideration upon the exercise of any such options or rights or
the conversion or exchange of such securities.
d) Upon the expiration of any such options or rights,
the termination of any such rights to convert or exchange or the expiration of
any options or rights related to such convertible or exchangeable securities,
the Conversion Prices of the Preferred Stock obtained with respect to the
adjustment which was made upon the issuance of such options, rights or
securities or options or rights related to such securities, and any subsequent
adjustments based thereon, shall be recomputed to reflect the issuance of only
the number of shares of Common Stock actually issued upon the exercise of such
options or rights, upon the conversion or exchange of such securities or upon
the exercise of the options or rights related to such securities. Upon the
expiration of any such options or rights, the termination of any such rights to
convert or exchange or the expiration of any options or rights related to such
convertible or exchangeable securities, only the number of shares of Common
Stock actually issued upon the exercise of such options or rights, upon the
conversion or exchange of such securities or upon the exercise of the options or
rights related to such securities shall continue to be deemed to be issued.
e) All Common Stock deemed issued pursuant to this
subsection 4(c)(i)(E) shall be considered issued only at the time of its deemed
issuance and any actual issuance of such stock shall not be an actual issuance
or a deemed issuance of the corporation's Common Stock under the provisions of
this Section 4.
10.
<PAGE> 11
(ii) "ADDITIONAL STOCK" shall mean any shares of Common
Stock issued (or deemed issued pursuant to subsection 4(c)(i)(E)) by the
Corporation on or after the Certificate Date other than shares of Common Stock
issued or issuable
(i) pursuant to a transaction described in
subsection 4(d), (e) or (f) hereof,
(ii) to officers, directors, employees and
consultants of the Corporation directly or pursuant to a stock option plan or
restricted stock plan approved by the stockholders and directors of the
Corporation,
(iii) upon the issuance of shares of any authorized
series of Preferred Stock;
(iv) upon conversion of any series of Preferred
Stock;
(v) upon the exercise of outstanding warrants dated
(1) August 9, 1991, originally issued with respect to the purchase of up to
60,000 shares of Series B Preferred Stock at an exercise price or $1.00 per
share, (2) on or about June 4, 1993, originally issued with respect to the
purchase of up to 150,000 shares of Series C Preferred Stock at an exercise
price of $0.15 per share, and (3) on or about June 2, 1994, originally issued
with respect to the purchase of up to approximately 13,333 shares of Series E
Preferred Stock at an exercise price of $3.00 per share, respectively, issued to
Dominion Ventures, Inc. in connection with an equipment lease therewith and
extensions thereof, as such amounts may be or have been subsequently adjusted
pursuant to the terms of such warrants, or upon the issuance of the stock
purchasable upon exercise of such warrants;
(vi) upon the exercise of an outstanding warrant
originally issued to purchase up to 2,702,222 shares of Series D Preferred Stock
at an exercise price of $0.225 per share dated on or about June 4, 1993, as such
amounts may be or have been subsequently adjusted pursuant to the terms of such
warrant, or upon the issuance of the Series D Preferred Stock purchasable upon
exercise thereof;
(vii) upon the exercise of outstanding warrants
originally issued to purchase up to an aggregate of 1,313,000 shares of Common
Stock at an exercise price of $2.25 per share dated on or about January 5, 1994,
issued in connection with the acquisition of assets and technology from another
entity, as such amounts may be or have been subsequently adjusted pursuant to
the terms of such warrant, or upon the issuance of the Common Stock purchasable
upon exercise thereof; or
(viii) upon the exercise of outstanding warrants
dated (1) on or about May 19, 1995, originally issued with respect to the
purchase of up to 10,000 shares of Series E Preferred Stock at an exercise price
of $3.00 per share, and (2) on or about September 25, 1995, originally issued
with respect to the purchase of up to 15,000 shares of Series E Preferred Stock
at an exercise price of $3.00 per share, respectively, issued to Silicon
11.
<PAGE> 12
Valley Bank in connection with bridge loan and extension thereof, as such
amounts may be or have been subsequently adjusted pursuant to the terms of such
warrants, or upon the issuance of the stock purchasable upon exercise of such
warrants;
(ix) upon the exercise of outstanding warrants dated
on or about September 20, 1995, originally issued with respect to the purchase
of up to an aggregate of 52,850 shares of Common Stock at an exercise price of
$2.00 per share issued to two former bridge lenders of the corporation, as such
amounts may be or have been subsequently adjusted pursuant to the terms of such
warrants; or
(x) upon the issuance or exercise of the Placement
Warrants or the Advisory Warrants (in each case as defined in the Placement
Agency Agreement between the corporation and Paramount Capital, Inc. dated
August 1, 1996), or upon the issuance or exercise of any of the Class A Warrants
of the corporation issued (i) in connection with the sale of Series F Preferred
Stock on or prior to the Final Closing Date or (ii) pursuant to the exercise of
the Placement Options or the Advisory Options.
Notwithstanding the foregoing provisions of this Section 4(c)(ii), the
conversion price adjustments set forth in this Section 4(c) shall be deemed to
apply (and any applicable adjustments shall be made) to any modification of the
rights of conversion, exchange or exercise of any of the securities referred to
in subsections (c)(ii)(A) through (c)(ii)(I) above other than automatic
modifications made pursuant to the terms of such instruments (regarding
automatic adjustments of conversion or exercise prices, numbers of shares, etc.)
or operation of this Section 4(c).
(d) ADDITIONAL CONVERSION PRICE ADJUSTMENTS OF SERIES F
PREFERRED STOCK. The Series F Conversion Price in effect immediately prior to
the Qualified IPO will be adjusted and reset effective as of the effective date
of the Qualified IPO to the extent necessary to insure that each share of Series
F Preferred Stock is convertible into that number of shares of Common Stock such
that when multiplied by the Qualified IPO Price (as defined below), each share
of Series F Preferred Stock shall be worth at least $2.25 (subject to equitable
adjustments for stock splits and similar) plus declared but unpaid dividends
thereon, if any, and all accrued but unpaid Preferred Dividends thereon.
Accordingly, the aggregate number of shares of Common Stock issuable upon
conversion of the Series F Preferred Stock is subject to adjustment at the time
of the Qualified IPO if the PMV (as defined below) is less than the Minimum
Value (as defined below). In such event, the Conversion Price of the Series F
Preferred Stock shall be reduced, and the conversion ratio accordingly increased
to equal a ratio that will provide that the issued and outstanding shares of
Series F Preferred Stock (assuming exercise of the Series F Preferred Stock
Equivalents (as defined below)) shall in the aggregate be convertible into a
number of shares of Common Stock equal to the product of (A) the Pre-Qualified
IPO Shares (as defined below) multiplied by (B) a fraction, the numerator of
which is the Stated Value of the Series F Preferred Stock plus declared but
unpaid dividends on such Series F Preferred Stock, if any, and all accrued but
unpaid Preferred Dividends on such stock and the denominator of which is the
PMV. Notwithstanding the foregoing, no adjustment shall be made if the PMV is
greater than the Minimum Value. For purposes of the foregoing calculations:
12.
<PAGE> 13
(i) "STATED VALUE OF THE SERIES F PREFERRED STOCK" shall
mean the product of (A) $2.25 multiplied by (B) the number of outstanding shares
of Series F Preferred Stock (assuming exercise or conversion of all Series F
Preferred Stock Equivalents);
(ii) "COMMON STOCK EQUIVALENTS" shall mean all
securities exercisable for or convertible, directly or indirectly, into shares
of Common Stock;
(iii) "UNADJUSTED PERCENTAGE" shall mean the quotient of
(A) all shares of Common Stock issuable upon the exercise and/or conversion of
all Series F Preferred Stock and Series F Preferred Stock Equivalents prior to
any adjustments under this subsection, divided by (B) all outstanding shares of
Common Stock and all shares of Common Stock issuable upon the exercise or
conversion of all outstanding Common. Stock Equivalents (including shares
issuable upon conversion of the Series F Preferred Stock and Series F Preferred
Stock Equivalents prior to any adjustment under this subsection);
(iv) "MINIMUM VALUE" shall mean the quotient obtained by
dividing (A) the sum of (x) the Stated Value of the Series F Preferred Stock,
and (y) declared but unpaid dividends on the Series F Preferred Stock, if any,
and all accrued but unpaid Preferred Dividends, by (B) the Unadjusted
Percentage;
(v) "PRE-QUALIFIED IPO SHARES" shall mean the aggregate
number of shares of Common Stock Outstanding on a fully diluted basis (assuming
the exercise or conversion of all Common Stock Equivalents prior to any
adjustments pursuant to this subsection) upon the effectiveness of the Qualified
IPO, but excluding shares of Common Stock and Common Stock Equivalents issued in
the Qualified IPO;
(vi) "SERIES F PREFERRED STOCK EQUIVALENTS" shall mean
all securities exercisable for, or convertible into, shares of Series F
Preferred Stock;
(vii) "PMV" shall be equal to the aggregate value of the
Qualified IPO Shares determined by multiplying the number of Pre-Qualified IPO
Shares by the Qualified IPO Price; and
(viii) "QUALIFIED IPO PRICE" shall mean the per share
public offering price of the Common Stock sold in the Qualified IPO. If units of
Common Stock and other securities are issued in the Qualified IPO, the Board of
Directors of the Company shall allocate value to the Common Stock based on the
relative historical values of similar unit offerings conducted by the same
and/or similar underwriters.
(e) OTHER DISTRIBUTIONS. In the event the Corporation shall
declare a distribution payable in securities of other persons, evidences of
indebtedness issued by the Corporation or other persons, assets (excluding cash
dividends) or options or rights not referred to in subsection 4(c)(iii), then,
in each such case for the purpose of this subsection 4(e), the holders of
Preferred Stock shall be entitled to a proportionate share of any such
distribution as though they were the holders of the number of shares of Common
Stock of the corporation into which their shares of Preferred Stock are
convertible as of the record date fixed for the
13.
<PAGE> 14
determination of the holders of Common Stock of the corporation entitled to
receive such distribution.
(f) STOCK SPLITS, STOCK DIVIDENDS AND RECAPITALIZATIONS.
(i) In the event the corporation should at any time or
from time to time after the Certificate Date fix a record date for the
effectuation of a split or subdivision of the outstanding shares of Common Stock
or the determination of holders of Common Stock entitled to receive a dividend
or other distribution payable in additional shares of Common Stock or other
securities or rights convertible into, or entitling the holder thereof to
receive directly or indirectly, additional shares of Common Stock (for purposes
of this subsection 4(f) referred to as "Common Equivalents") without payment of
any consideration by such holder for the additional shares of Common Stock or
the Common Equivalents (including the additional shares of Common Stock issuable
upon conversion or exercise thereof), then, as of such record date (or the date
of such dividend distribution, split or subdivision if no record date is fixed),
the Conversion Prices of the Preferred Stock shall be appropriately decreased so
that the number of shares of Common Stock issuable on conversion of each share
of such series shall be increased in proportion to such increase of outstanding
shares determined in accordance with subsection 4(c)(i)(E).
(ii) If the number of shares of Common Stock outstanding
at any time after the Certificate Date is decreased by a combination of the
outstanding shares of Common Stock, then, following the record date of such
combination, the Conversion Prices for the Preferred Stock shall be
appropriately increased so that the number of shares of Common Stock issuable on
conversion of each share of such series shall be decreased in proportion to such
decrease in outstanding shares.
(iii) If at any time or from time to time there shall be a
recapitalization of the Common Stock (other than a subdivision, combination or
merger or sale of assets transaction provided for elsewhere in this Section 4 or
Section 5) provision shall be made so that the holders of the Preferred Stock
shall thereafter be entitled to receive upon conversion of the Preferred Stock
the number of shares of stock or other securities or property of the corporation
or otherwise, to which a holder of Common Stock deliverable upon conversion
would have been entitled on such recapitalization. In any such case, appropriate
adjustment shall be made in the application of the provisions of this Section 4
with respect to the rights of the holders of the Preferred Stock after the
recapitalization to the end that the provisions of this Section 4 (including
adjustment of the Conversion Prices then in effect and the number of shares
purchasable upon conversion of the Preferred Stock) shall be applicable after
that event as nearly equivalent as may be practicable.
(g) NO IMPAIRMENT. The Corporation will not, by amendment of
its Certificate of Incorporation or through any reorganization,
recapitalization, transfer of assets, consolidation, merger, dissolution, issue
or sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by the Corporation, but will at all times in good faith assist in the
carrying out of all the provisions of this Section 4 and in the taking of all
such action as may be necessary or
14.
<PAGE> 15
appropriate in order to protect the Conversion Rights of the holders of the
Preferred Stock against impairment.
(h) NO FRACTIONAL SHARES AND CERTIFICATE AS TO ADJUSTMENTS.
(i) No fractional shares shall be issued upon conversion
of the Preferred Stock, and the number of shares of Common Stock to be issued
shall be rounded to the nearest whole share. Whether or not fractional shares
are issuable upon such conversion shall be determined on the basis of the total
number of shares of Preferred Stock the holder is at the time converting into
Common Stock and the number of shares of Common Stock issuable upon such
aggregate conversion.
(ii) Upon the occurrence of each adjustment or
readjustment of any Conversion Price of a series of Preferred Stock pursuant to
this Section 4, the Corporation, at its expense, shall promptly compute such
adjustment or readjustment in accordance with the terms hereof and prepare and
furnish to each holder of such series of Preferred Stock a certificate setting
forth such adjustment or readjustment and showing in detail the facts upon which
such adjustment or readjustment is based. The Corporation shall, upon the
written request at any time of any holder of Preferred Stock, furnish or cause
to be furnished to such holder a like certificate setting forth (A) such
adjustment and readjustment, (B) the Conversion Prices at the time in effect,
and (c) the number of shares of Common Stock and the amount, if any, of other
property which at the time would be received upon the conversion of a share of
Preferred Stock.
(i) NOTICES OF RECORD DATE. In the event of any taking by the
Corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend) or other distribution, any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, the Corporation
shall mail to each holder of Preferred Stock, at least 20 days prior to the date
specified therein, a notice specifying the date on which any such record is to
be taken for the purpose of such dividend, distribution or right, and the amount
and character of such dividend, distribution or right.
(j) RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The
Corporation shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock solely for the purpose of effecting the
conversion of the shares of the Preferred Stock such number of its shares of
Common Stock as shall from time to time be sufficient to effect the conversion
of all outstanding shares of the Preferred Stock; and if at any time the number
of authorized but unissued shares of Common Stock shall not be sufficient to
effect the conversion of all then outstanding shares of the Preferred Stock, in
addition to such other remedies as shall be available to the holder of such
Preferred Stock, the Corporation will take such corporate action as may, in the
opinion of its counsel, be necessary to increase its authorized but unissued
shares of Common Stock to such number of shares as shall be sufficient for such
purposes.
(k) NOTICES. Any notice required by the provisions of this
Section 4 to be given to the holders of shares of Preferred Stock shall be
deemed given if deposited in the
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<PAGE> 16
United States mail, postage prepaid, and addressed to each holder of record at
his address appearing on the books of the Corporation.
5. MERGER.
(a) At any time after the Certificate Date, in the event of:
(i) any merger of the corporation with or into any other
corporation or other entity or person, or any other corporate reorganization in
which the corporation, shall not be the continuing or surviving entity of such
merger or reorganization or any transaction or series of related transactions by
the corporation in which in excess of 50% of the corporation's voting power is
transferred, or
(ii) a sale or other disposition of all or substantially
all of the assets of the corporation, the documents effecting such transactions
shall provide that:
(i) The holders of the Series F Preferred Stock shall
first receive for each share of such stock, in cash or in securities received
from the acquiring corporation, or in a combination thereof, at the closing of
any such transaction, an amount equal to the Original Series F Issue Price plus
an amount equal to all accrued but unpaid dividends thereon (including Preferred
Dividends thereon) and any other declared but unpaid dividends thereon. If the
aggregate cash value in such transaction otherwise available to holders of the
Series F Preferred Stock is insufficient to satisfy the aforementioned
preference of such stock, then all such cash or securities shall be distributed
ratably among the holders of the outstanding Series F Preferred Stock in
proportion to the aggregate preferential amounts owed such holders as set forth
above. Upon or immediately prior to such transaction, the corporation shall
provide for the payment of any such amount to the holders of Series F Preferred
Stock
(ii) In the event additional cash or securities
remain available for distribution after the distributions to the holders of the
Series F Preferred Stock, the holders of the Series C, Series D and Series E
Preferred Stock shall first receive for each share of such stock, in cash or in
securities received from the acquiring corporation, or in a combination thereof,
at the closing of any such transaction, an amount equal to the Original Series C
Issue Price, the Original Series D Issue Price, and the Original Series E Issue
Price respectively. If the aggregate cash value in such transaction otherwise
available to holders of the Series C, Series D and Series E Preferred Stock is
insufficient to satisfy the aforementioned preference of such stock, then all
such cash or securities shall be distributed ratably among the holders of the
outstanding Series C, Series D and Series E Preferred Stock in proportion to the
aggregate preferential amounts owed such holders as set forth above.
(iii) In the event additional cash or securities
remain available for distribution after the distributions to the holders of the
Series C, Series D and Series E Preferred Stock, then holders of the Series B
Preferred Stock shall then be entitled to receive for each share of such stock,
in cash or in securities received from the acquiring corporation, or in a
combination thereof, at the closing of any such transaction, an amount equal to
the Original Series B Issue Price. If the aggregate cash value in such
transaction otherwise available to
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<PAGE> 17
holders of the Series B Preferred Stock is insufficient to satisfy the
aforementioned preference of the Series B Preferred Stock, then all such cash or
securities shall be distributed ratably among the holders of the outstanding
Series B Preferred Stock in proportion to the aggregate preferential amounts
owed such holders as set forth above.
(iv) In the event additional cash or securities
remain available for distribution after the distributions to the holders of the
Series B, Series C, Series D and Series E Preferred Stock, then holders of the
Series A Preferred Stock shall then be entitled to received for each share of
such stock, in cash or in securities received from the acquiring corporation, or
in a combination thereof, at the closing of any such transaction, an amount
equal to the Original Series A Issue Price. If the aggregate cash value in such
transaction otherwise available to holders of the Series A Preferred Stock is
insufficient to satisfy the aforementioned preference of the Series A Preferred
Stock, then all such cash or securities shall be distributed ratably among the
holders of the outstanding Series A Preferred Stock in proportion to the
aggregate preferential amounts owed such holders as set forth above.
(v) In the event additional cash or securities remain
available for distribution after the distributions to the holders of the Series
A, Series B, Series C, Series D and Series E Preferred Stock, then holders of
the Common Stock shall then be entitled to receive for each share of such stock,
in cash or in securities received from the acquiring corporation, or in a
combination thereof, at the closing of any such transaction, an amount equal to
$0.50 per share. If the aggregate cash value in such transaction otherwise
available to holders of the Common Stock is insufficient to satisfy the
aforementioned preference of the Common Stock, then all such cash or securities
shall be distributed ratably among the holders of the outstanding Common Stock
in proportion to the aggregate preferential amounts owed such holders as set
forth above.
(vi) In the event additional cash or securities
remain available for distribution after the distributions pursuant to
subparagraphs (A)-(E) above, then the holders of the Series A, Series B, Series
C, Series D and Series E Preferred Stock and the Common Stock shall then be
entitled to receive, pro rata based on the number of shares of Common Stock held
by each (assuming conversion of the outstanding Series A, Series B, Series C,
Series D and Series E Preferred Stock), in cash or in securities received from
the acquiring corporation, or in a combination thereof, at the closing of any
such transaction, a per share amount equal to the result of (i) the aggregate
value of accrued but unpaid Preferred Dividends and declared but unpaid
dividends distributed to the holders of Series F Preferred Stock pursuant to
subparagraph (A) above divided by (ii) the number of shares of Common Stock
outstanding immediately prior to the such transaction (assuming conversion of
the outstanding Series A, Series B, Series C, Series D and Series E Preferred
Stock). If the aggregate cash value in such transaction otherwise available to
holders of the Series A, Series B, Series C, Series D and Series E Preferred
Stock and the Common Stock is insufficient to satisfy the aforementioned
preference of the Common Stock, then all such cash or securities shall be
distributed ratably among the holders of Common Stock (assuming conversion of
the outstanding Series A, Series B, Series C, Series D and Series E Preferred
Stock).
17.
<PAGE> 18
(vii) In the event additional cash or securities
remain available for distribution after the distributions pursuant to
subparagraphs (A)-(F) above have been paid, the remaining assets of the
corporation available for distribution to stockholders shall be distributed
among the holders of the Series A, Series B, Series C, Series D, Series E and
Series F Preferred Stock and the Common Stock pro rata based on the number of
shares of Common Stock held by each (assuming conversion of such series of
Preferred Stock); provided that
1) at such time as the holders of Series C
Preferred Stock shall have received an aggregate of $5.25 per share of Series C
Preferred Stock they own (including all other amounts paid to such holders
pursuant to this subsection (a) of Section 5), such shares shall be considered
fully paid and the holders thereof shall be entitled to no further distributions
pursuant to this subsection 5(a)(ii)(G) with respect to such shares or shares
assumed to be issued upon conversion thereof,
2) at such time as the holders of Series D
Preferred Stock shall have received an aggregate of $7.87 per share of Series D
Preferred Stock they own (including all other amounts paid to such holders
pursuant to this subsection (a) of Section 5), such shares shall be considered
fully paid and the holders thereof shall be entitled to no further distributions
pursuant to this subsection 5(a)(ii)(G) with respect to such shares or shares
assumed to be issued upon conversion thereof,
3) at such time as the holders of Series E
Preferred Stock shall have received an aggregate of $7.87 per share of Series E
Preferred Stock they own (including all other amounts paid to such holders
pursuant to this subsection (a) of Section 5), such shares shall be considered
fully paid and the holders thereof shall be entitled to no further distributions
pursuant to this subsection 5(a)(ii)(G) with respect to such shares or shares
assumed to be issued upon conversion thereof,
4) at such time as the holders of Series F
Preferred Stock shall have received an aggregate of $7.87 per share of Series F
Preferred Stock they own (including all other amounts paid to such holders
pursuant to this subsection (a) of Section 5), such shares shall be considered
fully paid and the holders thereof shall be entitled to no further distributions
pursuant to this subsection 5(a)(ii)(G) with respect to such shares or shares
assumed to be issued upon conversion thereof,
5) at such time as the holders of Series A
Preferred Stock shall have received an aggregate of $23.10 per share of Series A
Preferred Stock they own (including all other amounts paid to such holders
pursuant to this subsection (a) of Section 5), such shares shall be considered
fully paid and the holders thereof shall be entitled to no further distributions
pursuant to this subsection 5(a)(ii)(G) with respect to such shares or shares
assumed to be issued upon conversion thereof, and
6) at such time as the holders of Series B
Preferred Stock shall have received an aggregate of $35.00 per share of Series B
Preferred Stock they own (including all other amounts paid to such holders
pursuant to this subsection (a) of Section 5), such shares shall be considered
fully paid and the holders thereof shall be entitled to no further
18.
<PAGE> 19
distributions pursuant to this subsection 5(a)(ii)(G) with respect to such
shares or shares assumed to be issued upon conversion thereof.
(b) Any securities to be delivered to the respective holders
of the Preferred Stock pursuant to subsection 5(a) above shall be valued as
follows:
(i) Securities not subject to investment letter or other
similar restrictions on free marketability:
(i) If traded on a securities exchange or The Nasdaq
National Market, the value shall be deemed to be the average of the closing
prices of the securities on such exchange over the 30-day period ending three
(3) trading days prior to the closing;
(ii) If actively traded over-the-counter, the value
shall be deemed to be the average of the closing bid prices over the 30-day
period ending three (3) trading days prior to the closing; and
(iii) If there is no active public market, the value
shall be the fair market value thereof, as mutually determined by the
corporation and the holders of not less than a majority of the then outstanding
shares of Preferred Stock.
(ii) The method of valuation of securities subject to
investment letter or other restrictions on free marketability shall be to make
an appropriate discount from the market value determined as above in (i)(A), (B)
or (C) to reflect the approximate fair market value thereof, as mutually
determined by the corporation and the holders of a majority of the then
outstanding shares of Preferred Stock.
(c) In the event the requirements of subsection 5(a) are not
complied with, the corporation shall forthwith either:
(i) cause such closing to be postponed until such time as
the requirements of this Section 5 have been complied with, or
(ii) cancel such transaction, in which event the rights,
preferences, privileges and restrictions of the holders of the Preferred Stock
shall revert to and be the same as such rights, preferences, privileges and
restrictions existing immediately prior to the date of the first notice referred
to in subsection 5(d) hereof.
(d) The corporation shall give each holder of record of
Preferred Stock written notice of such impending transaction not later than
twenty (20) days prior to the stockholders' meeting called to approve such
transaction, or twenty (20) days prior to the closing of such transaction,
whichever is earlier, and shall also notify such holders in writing of the final
approval of such transaction. The first of such notices shall describe the
material terms and conditions of the impending transaction and the provisions of
this Section 5, and the corporation shall thereafter give such holders prompt
notice of any material changes. The transaction shall in no event take place
sooner than twenty (20) days after the corporation has given the first
19.
<PAGE> 20
notice provided for herein or sooner than ten (10) days after the corporation
has given notice of any material changes provided for herein; provided, however,
that such periods may be shortened upon the written consent of the holders of a
majority of the shares of Preferred Stock then outstanding.
(e) The provisions of this Section 5 are in addition to the
protective provisions of Section 7 hereof.
6. VOTING RIGHTS. The holder of each share of Preferred Stock shall
have the right to one vote for each share of Common Stock into which such share
of Preferred Stock could then be converted (with any fractional share determined
on an aggregate conversion basis being rounded to the nearest whole share), and
with respect to such vote, such holder shall have full voting rights and powers
equal to the voting rights and powers of the holders of Common Stock, and shall
be entitled, notwithstanding any provision hereof, to notice of any
stockholders' meeting in accordance with the Bylaws of the Corporation, and
shall be entitled to vote, together with holders of Common Stock, with respect
to ally question upon which holders of Common Stock have the right to vote.
7. PROTECTIVE PROVISIONS. So long as shares of Preferred Stock are
outstanding, the Corporation shall not without first obtaining the approval (by
vote or written consent, as provided by law) of the holders of at least a
majority of the then outstanding shares of Preferred Stock, voting together as
one class except where otherwise required by law:
(a) sell, convey, or otherwise dispose of or encumber all or
substantially all of its property or business or merge into or consolidate with
any other corporation (other than a wholly owned subsidiary corporation) or
effect any transaction or series of related transactions in which more than 50%
of the voting power of the corporation is disposed of;
(b) alter or change the rights, preferences, privileges or
restrictions of the shares of Series A, Series B, Series C, Series D, Series E
or Series F Preferred Stock so as to affect such shares adversely;
(c) increase the authorized number of shares of Series A,
Series B, Series C, Series D, Series E, Series F Preferred Stock;
(d) create any new class or series of stock or any other
securities convertible into equity securities of the corporation (i) having a
preference over, or being on a parity with, the Series A, Series B, Series C,
Series D, Series E or Series F Preferred Stock with respect to voting, dividends
or upon liquidation, or (ii) having rights similar to any of the rights of the
Series A, Series B, Series C, Series D, Series E or Series F Preferred Stock
under this Section 7; or
(e) do any act or thing which would result in taxation of the
holders of shares of the Series A, Series B, Series C, Series D, Series E or
Series F Preferred Stock under Section 305 of the Internal Revenue Code of 1986,
as amended (or any comparable provision of the Internal Revenue Code as
hereafter from time to time amended).
20.
<PAGE> 21
8. ADDITIONAL PROTECTIVE PROVISIONS OF SERIES F PREFERRED STOCK.
So long as shares of Series F Preferred Stock remain outstanding, the
Corporation shall not without first obtaining the approval (by vote or written
consent, as provided by law) of the holders of at least 66-2/3% of the then
outstanding shares of Series F Preferred Stock, voting together as one class
except where otherwise required by law;
(a) sell, convey, liquidate, dissolve or otherwise dispose of
or encumber all or substantially all of its property or business or merge into
or consolidate with any other corporation (other than a wholly owned subsidiary
corporation) or effect any transaction or series of related transactions in
which more than 50% of the voting power of the corporation is disposed of;
(b) alter or change the rights, preferences, privileges or
restrictions of the shares of Series F Preferred Stock so as to affect such
shares adversely;
(c) create any new class or series of stock or any other
securities convertible into equity securities of the corporation (i) having a
preference over, or being on a parity with, the Series F Preferred Stock with
respect to voting, dividends or upon liquidation, or (ii) having rights similar
to any of the rights of the Series F Preferred Stock under this Section 8;
(d) create any subsidiary corporation;
(e) consummate any transactions with affiliates of the
corporation, other than transactions approved by a majority of the disinterested
members of the Company's Board of Directors relating to the issuance of capital
stock, or options to purchase capital stock, pursuant to the corporation's
equity benefit plans in existence from time to time, provided that the approval
of the holders of 66-2/3% of the Series F Preferred Stock then outstanding shall
be required to amend any equity benefit plan for the purpose of increasing the
shares reserved for issuance thereunder to in excess of 3,600,000; or
(f) issue any debt securities or incur any indebtedness, other
than (i) up to an aggregate of $300,000 in such debt securities for the purchase
of equipment and (ii) up to an aggregate of $150,000 of such debt securities
issued in the ordinary course of business.
9. STATUS OF CONVERTED OR REDEEMED STOCK. In the event any shares
of Preferred Stock shall be redeemed or converted pursuant to Section 3 or
Section 4 hereof, the shares so converted or redeemed shall be cancelled and
shall not be issuable by the corporation, and the Articles of Incorporation of
the Corporation shall be appropriately amended to effect the corresponding
reduction in the corporation's authorized capital stock.
10. REPURCHASE OF SHARES. In connection with repurchases by the
Corporation of its Common Stock pursuant to its agreements with certain of the
holders thereof providing for such repurchases in the event of the termination
of the status of such holder as an employee, director or consultant to the
corporation, each holder of Preferred Stock shall be deemed to have consented,
for purposes of applicable sections of the Delaware General Corporation Law, to
distributions made by the corporation with respect to such repurchases.
21.
<PAGE> 22
(A) COMMON STOCK.
1. DIVIDEND RIGHTS. Subject to the prior rights of holders of all
classes of stock at the time outstanding having prior rights as to dividends,
the holders of the Common Stock shall be entitled to receive, when and as
declared by the Board of Directors, out of any assets of the corporation legally
available therefor, such dividends as may be declared from time to time by the
Board of Directors.
2. LIQUIDATION RIGHTS. Upon the liquidation, dissolution or winding
up of the corporation, the assets of the corporation shall be distributed as
provided in Section 2 of Division (B) of this Article IV.
3. REDEMPTION. The Common Stock is not redeemable.
4. VOTING RIGHTS. The holder of each share of Common Stock shall
have the right to one vote, and shall be entitled to notice of any stockholders
meeting in accordance with the Bylaws of the Corporation, and shall be entitled
to vote upon such matters and in such manner as may be provided by law.
V.
(A) LIMITATION OF DIRECTORS, LIABILITY. The liability of the directors of
the corporation for monetary damages shall be eliminated to the fullest extent
permissible under Delaware law.
(B) INDEMNIFICATION OF CORPORATE AGENTS. The Corporation is authorized to
indemnify the directors and officers of the corporation to the fullest extent
Permissible under Delaware law.
(C) REPEAL OR MODIFICATION. Any repeal or modification of the foregoing
provisions of this Article V by the stockholders of the corporation shall not
adversely affect any right or protection of a director of the corporation
existing at the time of such repeal or modification.
VI.
The name and the mailing address of the Sole Incorporator is as follows:
Laurie A. Webb
Cooley Godward LLP
5 Palo Alto Square
3000 El Camino Real
Palo Alto, CA 94306-2155
22.
<PAGE> 23
IN WITNESS WHEREOF, this Certificate has been subscribed this ____ day of
__________, 1997 by the undersigned who affirms that the statements made herein
are true and correct.
---------------------------------------
LAURIE A. WEBB
Sole Incorporator
23.
<PAGE> 1
EXHIBIT 3.4
BYLAWS
OF
RIBOGENE MERGER CORPORATION
(A DELAWARE CORPORATION)
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE I - OFFICES................................................................ 1
Section 1. Registered Office............................................. 1
Section 2. Other Offices................................................. 1
ARTICLE II - CORPORATE SEAL........................................................ 1
Section 3. Corporate Seal................................................ 1
ARTICLE III - STOCKHOLDERS' MEETINGS............................................... 1
Section 4. Place of Meetings............................................. 1
Section 5. Annual Meeting................................................ 1
Section 6. Special Meetings.............................................. 3
Section 7. Notice of Meetings............................................ 4
Section 8. Quorum........................................................ 4
Section 9. Adjournment and Notice of Adjourned Meetings.................. 5
Section 10. Voting Rights................................................. 5
Section 11. Joint Owners of Stock......................................... 5
Section 12. List of Stockholders.......................................... 5
Section 13. Action Without Meeting........................................ 6
Section 14. Organization.................................................. 6
ARTICLE IV - DIRECTORS............................................................. 7
Section 15. Number and Term of Office..................................... 7
Section 16. Powers........................................................ 7
Section 17. Classes of Directors.......................................... 7
Section 18. Vacancies..................................................... 8
Section 19. Resignation................................................... 8
Section 20. Removal....................................................... 8
Section 21. Meetings...................................................... 8
(a) Annual Meetings............................................... 8
(b) Regular Meetings.............................................. 9
(c) Special Meetings.............................................. 9
(d) Telephone Meetings............................................ 9
(e) Notice of Meetings............................................ 9
(f) Waiver of Notice.............................................. 9
Section 22. Quorum and Voting............................................. 9
Section 23. Action Without Meeting........................................ 10
Section 24. Fees and Compensation......................................... 10
Section 25. Committees.................................................... 10
(a) Executive Committee........................................... 10
(b) Other Committees.............................................. 11
(c) Term.......................................................... 11
</TABLE>
i.
<PAGE> 3
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
Page
<S> <C>
(d) Meetings...................................................... 11
Section 26. Organization.................................................. 12
ARTICLE V - OFFICERS............................................................... 12
Section 27. Officers Designated........................................... 12
Section 28. Tenure and Duties of Officers................................. 12
(a) General....................................................... 12
(b) Duties of Chairman of the Board of Directors.................. 12
(c) Duties of Chief Executive Officer............................. 12
(d) Duties of President........................................... 13
(e) Duties of Vice Presidents..................................... 13
(f) Duties of Secretary........................................... 13
(g) Duties of Chief Financial Officer............................. 13
Section 29. Delegation of Authority....................................... 14
Section 30. Resignations.................................................. 14
Section 31. Removal....................................................... 14
ARTICLE VI - EXECUTION OF CORPORATE INSTRUMENTS AND VOTING OF SECURITIES
Owned By The Corporation.................................................... 14
Section 32. Execution of Corporate Instruments............................ 14
Section 33. Voting of Securities Owned by the Corporation................. 15
ARTICLE VII - SHARES OF STOCK...................................................... 15
Section 34. Form and Execution of Certificates............................ 15
Section 35. Lost Certificates............................................. 15
Section 36. Transfers..................................................... 17
Section 37. Fixing Record Dates........................................... 17
Section 38. Registered Stockholders....................................... 18
ARTICLE VIII - OTHER SECURITIES OF THE CORPORATION................................. 18
Section 39. Execution of Other Securities................................. 18
ARTICLE IX - DIVIDENDS............................................................. 19
Section 40. Declaration of Dividends...................................... 19
Section 41. Dividend Reserve.............................................. 19
ARTICLE X - FISCAL YEAR............................................................ 19
Section 42. Fiscal Year................................................... 19
</TABLE>
ii.
<PAGE> 4
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE XI - INDEMNIFICATION....................................................... 19
Section 43. Indemnification of Directors, Executive Officers,
Other Officers, Employees and Other Agents.................... 19
(a) Directors and Officers........................................ 19
(b) Employees and Other Agents.................................... 20
(c) Expenses...................................................... 20
(d) Enforcement................................................... 20
(e) Non-Exclusivity of Rights..................................... 21
(f) Survival of Rights............................................ 21
(g) Insurance..................................................... 21
(h) Amendments.................................................... 21
(i) Saving Clause................................................. 21
(j) Certain Definitions........................................... 21
ARTICLE XII - NOTICES.............................................................. 22
Section 44. Notices....................................................... 22
(a) Notice to Stockholders........................................ 22
(b) Notice to directors........................................... 23
(c) Affidavit of Mailing.......................................... 23
(d) Time Notices Deemed Given..................................... 23
(e) Methods of Notice............................................. 23
(f) Failure to Receive Notice..................................... 23
(g) Notice to Person with Whom Communication Is Unlawful.......... 23
(h) Notice to Person with Undeliverable Address................... 23
ARTICLE XIII - AMENDMENTS.......................................................... 24
Section 45. Amendments.................................................... 24
ARTICLE XIV - LOANS TO OFFICERS.................................................... 24
Section 46. Loans to Officers............................................. 24
ARTICLE XV - MISCELLANEOUS......................................................... 24
Section 47. Annual Report................................................. 24
</TABLE>
iii.
<PAGE> 5
BYLAWS
OF
RIBOGENE MERGER CORPORATION
(A DELAWARE CORPORATION)
ARTICLE I
OFFICES
SECTION 1. REGISTERED OFFICE. The registered office of the corporation
in the State of Delaware shall be in the City of Dover, County of Kent.
SECTION 2. OTHER OFFICES. The corporation shall also have and maintain
an office or principal place of business at such place as may be fixed by the
Board of Directors, and may also have offices at such other places, both within
and without the State of Delaware as the Board of Directors may from time to
time determine or the business of the corporation may require.
ARTICLE II
CORPORATE SEAL
SECTION 3. CORPORATE SEAL. The corporate seal shall consist of a die
bearing the name of the corporation and the inscription, "Corporate
Seal-Delaware." Said seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.
ARTICLE III
STOCKHOLDERS' MEETINGS
SECTION 4. PLACE OF MEETINGS. Meetings of the stockholders of the
corporation shall be held at such place, either within or without the State of
Delaware, as may be designated from time to time by the Board of Directors, or,
if not so designated, then at the office of the corporation required to be
maintained pursuant to Section 2 hereof.
SECTION 5. ANNUAL MEETING.
(a) The annual meeting of the stockholders of the corporation,
for the purpose of election of directors and for such other business as may
lawfully come before it, shall be held
1.
<PAGE> 6
on such date and at such time as may be designated from time to time by the
Board of Directors.
(b) At an annual meeting of the stockholders, only such business
shall be conducted as shall have been properly brought before the meeting. To be
properly brought before an annual meeting, business must be: (A) specified in
the notice of meeting (or any supplement thereto) given by or at the direction
of the Board of Directors, (B) otherwise properly brought before the meeting by
or at the direction of the Board of Directors, or (C) otherwise properly brought
before the meeting by a stockholder. For business to be properly brought before
an annual meeting by a stockholder, the stockholder must have given timely
notice thereof in writing to the Secretary of the corporation. To be timely, a
stockholder's notice must be delivered to or mailed and received at the
principal executive offices of the corporation not later than the close of
business on the sixtieth (60th) day nor earlier than the close of business on
the ninetieth (90th) day prior to the first anniversary of the preceding year's
annual meeting; provided, however, that in the event that no annual meeting was
held in the previous year or the date of the annual meeting has been changed by
more than thirty (30) days from the date contemplated at the time of the
previous year's proxy statement, notice by the stockholder to be timely must be
so received not earlier than the close of business on the ninetieth (90th) day
prior to such annual meeting and not later than the close of business on the
later of the sixtieth (60th) day prior to such annual meeting or, in the event
public announcement of the date of such annual meeting is first made by the
corporation fewer than seventy (70) days prior to the date of such annual
meeting, the close of business on the tenth (10th) day following the day on
which public announcement of the date of such meeting is first made by the
corporation. A stockholder's notice to the Secretary shall set forth as to each
matter the stockholder proposes to bring before the annual meeting: (i) a brief
description of the business desired to be brought before the annual meeting and
the reasons for conducting such business at the annual meeting, (ii) the name
and address, as they appear on the corporation's books, of the stockholder
proposing such business, (iii) the class and number of shares of the corporation
which are beneficially owned by the stockholder, (iv) any material interest of
the stockholder in such business and (v) any other information that is required
to be provided by the stockholder pursuant to Regulation 14A under the
Securities Exchange Act of 1934, as amended (the "1934 Act"), in his capacity as
a proponent to a stockholder proposal. Notwithstanding the foregoing, in order
to include information with respect to a stockholder proposal in the proxy
statement and form of proxy for a stockholder's meeting, stockholders must
provide notice as required by the regulations promulgated under the 1934 Act.
Notwithstanding anything in these Bylaws to the contrary, no business shall be
conducted at any annual meeting except in accordance with the procedures set
forth in this paragraph (b). The chairman of the annual meeting shall, if the
facts warrant, determine and declare at the meeting that business was not
properly brought before the meeting and in accordance with the provisions of
this paragraph (b), and, if he should so determine, he shall so declare at the
meeting that any such business not properly brought before the meeting shall not
be transacted.
(c) Only persons who are nominated in accordance with the
procedures set forth in this paragraph (c) shall be eligible for election as
directors. Nominations of persons for election to the Board of Directors of the
corporation may be made at a meeting of stockholders
2.
<PAGE> 7
by or at the direction of the Board of Directors or by any stockholder of the
corporation entitled to vote in the election of directors at the meeting who
complies with the notice procedures set forth in this paragraph (c). Such
nominations, other than those made by or at the direction of the Board of
Directors, shall be made pursuant to timely notice in writing to the Secretary
of the corporation in accordance with the provisions of paragraph (b) of this
Section 5. Such stock- holder's notice shall set forth (i) as to each person, if
any, whom the stockholder proposes to nominate for election or re-election as a
director: (A) the name, age, business address and residence address of such
person, (B) the principal occupation or employment of such person, (C) the class
and number of shares of the corporation which are beneficially owned by such
person, (D) a description of all arrangements or understandings between the
stockholder and each nominee and any other person or persons (naming such person
or persons) pursuant to which the nominations are to be made by the stockholder,
and (E) any other information relating to such person that is required to be
disclosed in solicitations of proxies for election of directors, or is otherwise
required, in each case pursuant to Regulation 14A under the 1934 Act (including
without limitation such person's written consent to being named in the proxy
statement, if any, as a nominee and to serving as a director if elected); and
(ii) as to such stockholder giving notice, the information required to be
provided pursuant to paragraph (b) of this Section 5. At the request of the
Board of Directors, any person nominated by a stockholder for election as a
director shall furnish to the Secretary of the corporation that information
required to be set forth in the stockholder's notice of nomination which
pertains to the nominee. No person shall be eligible for election as a director
of the corporation unless nominated in accordance with the procedures set forth
in this paragraph (c). The chairman of the meeting shall, if the facts warrant,
determine and declare at the meeting that a nomination was not made in
accordance with the procedures prescribed by these Bylaws, and if he should so
determine, he shall so declare at the meeting, and the defective nomination
shall be disregarded.
(d) For purposes of this Section 5, "public announcement" shall
mean disclosure in a press release reported by the Dow Jones News Service,
Associated Press or comparable national news service or in a document publicly
filed by the corporation with the Securities and Exchange Commission pursuant to
Section 13, 14 or 15(d) of the Exchange Act.
SECTION 6. SPECIAL MEETINGS.
(a) Special meetings of the stockholders of the corporation
may be called, for any purpose or purposes, by (i) the Chairman of the Board of
Directors, (ii) the Chief Executive Officer, (iii) the Board of Directors
pursuant to a resolution adopted by a majority of the total number of authorized
directors (whether or not there exist any vacancies in previously authorized
directorships at the time any such resolution is presented to the Board of
Directors for adoption) or (iv) by the holders of shares entitled to cast not
less than ten percent (10%) of the votes at the meeting, and shall be held at
such place, on such date, and at such time as the Board of Directors, shall fix.
(b) If a special meeting is called by any person or persons
other than the Board of Directors, the request shall be in writing, specifying
the general nature of the business proposed to be transacted, and shall be
delivered personally or sent by registered mail or by tele-
3.
<PAGE> 8
graphic or other facsimile transmission to the Chairman of the Board of
Directors, the Chief Executive Officer, or the Secretary of the corporation. No
business may be transacted at such special meeting otherwise than specified in
such notice. The Board of Directors shall determine the time and place of such
special meeting, which shall be held not less than thirty-five (35) nor more
than one hundred twenty (120) days after the date of the receipt of the request.
Upon determination of the time and place of the meeting, the officer receiving
the request shall cause notice to be given to the stockholders entitled to vote,
in accordance with the provisions of Section 7 of these Bylaws. If the notice is
not given within sixty (60) days after the receipt of the request, the person or
persons requesting the meeting may set the time and place of the meeting and
give the notice. Nothing contained in this paragraph (b) shall be construed as
limiting, fixing, or affecting the time when a meeting of stockholders called by
action of the Board of Directors may be held.
SECTION 7. NOTICE OF MEETINGS. Except as otherwise provided by law or
the Certificate of Incorporation, written notice of each meeting of stockholders
shall be given not less than ten (10) nor more than sixty (60) days before the
date of the meeting to each stockholder entitled to vote at such meeting, such
notice to specify the place, date and hour and purpose or purposes of the
meeting. Notice of the time, place and purpose of any meeting of stockholders
may be waived in writing, signed by the person entitled to notice thereof,
either before or after such meeting, and will be waived by any stockholder by
his attendance thereat in person or by proxy, except when the stockholder
attends a meeting for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business because the meeting is not lawfully
called or convened. Any stockholder so waiving notice of such meeting shall be
bound by the proceedings of any such meeting in all respects as if due notice
thereof had been given.
SECTION 8. QUORUM. At all meetings of stockholders, except where
otherwise provided by statute or by the Certificate of Incorporation, or by
these Bylaws, the presence, in person or by proxy duly authorized, of the
holders of a majority of the outstanding shares of stock entitled to vote shall
constitute a quorum for the transaction of business. In the absence of a quorum,
any meeting of stockholders may be adjourned, from time to time, either by the
chairman of the meeting or by vote of the holders of a majority of the shares
represented thereat, but no other business shall be transacted at such meeting.
The stockholders present at a duly called or convened meeting, at which a quorum
is present, may continue to transact business until adjournment, notwithstanding
the withdrawal of enough stockholders to leave less than a quorum. Except as
otherwise provided by law, the Certificate of Incorporation or these Bylaws, all
action taken by the holders of a majority of the vote cast, excluding
abstentions, at any meeting at which a quorum is present shall be valid and
binding upon the corporation; provided, however, that directors shall be elected
by a plurality of the votes of the shares present in person or represented by
proxy at the meeting and entitled to vote on the election of directors. Where a
separate vote by a class or classes or series is required, except where
otherwise provided by the statute or by the Certificate of Incorporation or
these Bylaws, a majority of the outstanding shares of such class or classes or
series, present in person or represented by proxy, shall constitute a quorum
entitled to take action with respect to that vote on that matter and, except
where otherwise provided by the statute or by the Certificate of Incorporation
or these Bylaws,
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the affirmative vote of the majority (plurality, in the case of the election of
directors) of the votes cast, including abstentions, by the holders of shares of
such class or classes or series shall be the act of such class or classes or
series.
SECTION 9. ADJOURNMENT AND NOTICE OF ADJOURNED MEETINGS. Any meeting of
stockholders, whether annual or special, may be adjourned from time to time
either by the chairman of the meeting or by the vote of a majority of the shares
casting votes, excluding abstentions. When a meeting is adjourned to another
time or place, notice need not be given of the adjourned meeting if the time and
place thereof are announced at the meeting at which the adjournment is taken. At
the adjourned meeting, the corporation may transact any business which might
have been transacted at the original meeting. If the adjournment is for more
than thirty (30) days or if after the adjournment a new record date is fixed for
the adjourned meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting.
SECTION 10. VOTING RIGHTS. For the purpose of determining those
stockholders entitled to vote at any meeting of the stockholders, except as
otherwise provided by law, only persons in whose names shares stand on the stock
records of the corporation on the record date, as provided in Section 12 of
these Bylaws, shall be entitled to vote at any meeting of stockholders. Every
person entitled to vote or execute consents (if such consents are allowed
pursuant to these Bylaws) shall have the right to do so either in person or by
an agent or agents authorized by a proxy granted in accordance with Delaware
law. An agent so appointed need not be a stockholder. No proxy shall be voted
after three (3) years from its date of creation unless the proxy provides for a
longer period.
SECTION 11. JOINT OWNERS OF STOCK. If shares or other securities having
voting power stand of record in the names of two (2) or more persons, whether
fiduciaries, members of a partnership, joint tenants, tenants in common, tenants
by the entirety, or otherwise, or if two (2) or more persons have the same
fiduciary relationship respecting the same shares, unless the Secretary is given
written notice to the contrary and is furnished with a copy of the instrument or
order appointing them or creating the relationship wherein it is so provided,
their acts with respect to voting shall have the following effect: (a) if only
one (1) votes, his act binds all; (b) if more than one (1) votes, the act of the
majority so voting binds all; (c) if more than one (1) votes, but the vote is
evenly split on any particular matter, each faction may vote the securities in
question proportionally, or may apply to the Delaware Court of Chancery for
relief as provided in the General Corporation Law of Delaware, Section 217(b).
If the instrument filed with the Secretary shows that any such tenancy is held
in unequal interests, a majority or even-split for the purpose of subsection (c)
shall be a majority or even-split in interest.
SECTION 12. LIST OF STOCKHOLDERS. The Secretary shall prepare and make,
at least ten (10) days before every meeting of stockholders, a complete list of
the stockholders entitled to vote at said meeting, arranged in alphabetical
order, showing the address of each stockholder and the number of shares
registered in the name of each stockholder. Such list shall be open to the
examination of any stockholder, for any purpose germane to the meeting, during
ordinary business hours, for a period of at least ten (10) days prior to the
meeting, either at a place within
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the city where the meeting is to be held, which place shall be specified in the
notice of the meeting, or, if not specified, at the place where the meeting is
to be held. The list shall be produced and kept at the time and place of meeting
during the whole time thereof and may be inspected by any stockholder who is
present.
SECTION 13. ACTION WITHOUT MEETING.
(a) Unless otherwise provided in the Certificate of
Incorporation, any action required by statute to be taken at any annual or
special meeting of the stockholders, or any action which may be taken at any
annual or special meeting of the stockholders, may be taken without a meeting,
without prior notice and without a vote, if a consent in writing, setting forth
the action so taken, shall be signed by the holders of outstanding stock having
not less than the minimum number of votes that would be necessary to authorize
or take such action at a meeting at which all shares entitled to vote thereon
were present and voted.
(b) Every written consent shall bear the date of signature of
each stockholder who signs the consent, and no written consent shall be
effective to take the corporate action referred to therein unless, within sixty
(60) days of the earliest dated consent delivered to the corporation in the
manner herein required, written consents signed by a sufficient number of
stockholders to take action are delivered to the corporation by delivery to its
registered office in the State of Delaware, its principal place of business or
an officer or agent of the corporation having custody of the book in which
proceedings of meetings of stockholders are recorded. Delivery made to a
corporation's registered office shall be by hand or by certified or registered
mail, return receipt requested.
(c) Prompt notice of the taking of the corporate action without a
meeting by less than unanimous written consent shall be given to those
stockholders who have not consented in writing. If the action which is consented
to is such as would have required the filing of a certificate under any section
of the General Corporation Law of the State of Delaware if such action had been
voted on by stockholders at a meeting thereof, then the certificate filed under
such section shall state, in lieu of any statement required by such section
concerning any vote of stockholders, that written notice and written consent
have been given as provided in Section 228 of the General Corporation Law of
Delaware.
(d) Notwithstanding the foregoing, no such action by written
consent may be taken following the closing of the initial public offering
pursuant to an effective registration statement under the Securities Act of
1933, as amended (the "1933 Act"), covering the offer and sale of Common Stock
of the corporation (the "Initial Public Offering").
SECTION 14. ORGANIZATION.
(a) At every meeting of stockholders, the Chairman of the Board
of Directors, or, if a Chairman has not been appointed or is absent, the Chief
Executive Officer, or, if the Chief Executive Officer is absent, a chairman of
the meeting chosen by a majority in interest of the stockholders entitled to
vote, present in person or by proxy, shall act as chairman. The
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Secretary, or, in his absence, an Assistant Secretary directed to do so by the
Chairman, shall act as secretary of the meeting.
(b) The Board of Directors of the corporation shall be entitled
to make such rules or regulations for the conduct of meetings of stockholders as
it shall deem necessary, appropriate or convenient. Subject to such rules and
regulations of the Board of Directors, if any, the chairman of the meeting shall
have the right and authority to prescribe such rules, regulations and procedures
and to do all such acts as, in the judgment of such chairman, are necessary,
appropriate or convenient for the proper conduct of the meeting, including,
without limitation, establishing an agenda or order of business for the meeting,
rules and procedures for maintaining order at the meeting and the safety of
those present, limitations on participation in such meeting to stockholders of
record of the corporation and their duly authorized and constituted proxies and
such other persons as the chairman shall permit, restrictions on entry to the
meeting after the time fixed for the commencement thereof, limitations on the
time allotted to questions or comments by participants and regulation of the
opening and closing of the polls for balloting on matters which are to be voted
on by ballot. Unless and to the extent determined by the Board of Directors or
the chairman of the meeting, meetings of stockholders shall not be required to
be held in accordance with rules of parliamentary procedure.
ARTICLE IV
DIRECTORS
SECTION 15. NUMBER AND TERM OF OFFICE. The authorized number of
directors of the corporation shall be fixed in accordance with the Certificate
of Incorporation. Directors need not be stockholders unless so required by the
Certificate of Incorporation. If for any cause, the directors shall not have
been elected at an annual meeting, they may be elected as soon thereafter as
convenient at a special meeting of the stockholders called for that purpose in
the manner provided in these Bylaws.
SECTION 16. POWERS. The powers of the corporation shall be exercised,
its business conducted and its property controlled by the Board of Directors,
except as may be otherwise provided by statute or by the Certificate of
Incorporation.
SECTION 17. CLASSES OF DIRECTORS. Subject to the rights of the holders
of any series of Preferred Stock to elect additional directors under specified
circumstances, following the closing of the Initial Public Offering, the
directors shall be divided into three classes designated as Class I, Class II
and Class III, respectively. Directors shall be assigned to each class in
accordance with a resolution or resolutions adopted by the Board of Directors.
At the first annual meeting of stockholders following the closing of the Initial
Public Offering, the term of office of the Class I directors shall expire and
Class I directors shall be elected for a full term of three years. At the second
annual meeting of stockholders following the Closing of the Initial Public
Offering, the term of office of the Class II directors shall expire and Class II
directors shall be elected for a full term of three years. At the third annual
meeting of stockholders following the Closing of the Initial Public Offering,
the term of office of the Class III directors
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shall expire and Class III directors shall be elected for a full term of three
years. At each succeeding annual meeting of stockholders, directors shall be
elected for a full term of three years to succeed the directors of the class
whose terms expire at such annual meeting.
Notwithstanding the foregoing provisions of this Article, each director
shall serve until his successor is duly elected and qualified or until his
death, resignation or removal. No decrease in the number of directors
constituting the Board of Directors shall shorten the term of any incumbent
director.
SECTION 18. VACANCIES. Unless otherwise provided in the Certificate of
Incorporation, any vacancies on the Board of Directors resulting from death,
resignation, disqualification, removal or other causes and any newly created
directorships resulting from any increase in the number of directors, shall
unless the Board of Directors determines by resolution that any such vacancies
or newly created directorships shall be filled by stockholders, be filled only
by the affirmative vote of a majority of the directors then in office, even
though less than a quorum of the Board of Directors. Any director elected in
accordance with the preceding sentence shall hold office for the remainder of
the full term of the director for which the vacancy was created or occurred and
until such director's successor shall have been elected and qualified. A vacancy
in the Board of Directors shall be deemed to exist under this Bylaw in the case
of the death, removal or resignation of any director.
SECTION 19. RESIGNATION. Any director may resign at any time by
delivering his written resignation to the Secretary, such resignation to specify
whether it will be effective at a particular time, upon receipt by the Secretary
or at the pleasure of the Board of Directors. If no such specification is made,
it shall be deemed effective at the pleasure of the Board of Directors. When one
or more directors shall resign from the Board of Directors, effective at a
future date, a majority of the directors then in office, including those who
have so resigned, shall have power to fill such vacancy or vacancies, the vote
thereon to take effect when such resignation or resignations shall become
effective, and each Director so chosen shall hold office for the unexpired
portion of the term of the Director whose place shall be vacated and until his
successor shall have been duly elected and qualified.
SECTION 20. REMOVAL. Subject to the rights of the holders of any series
of Preferred Stock, the Board of Directors or any individual director may be
removed from office at any time (i) with cause by the affirmative vote of the
holders of a majority of the voting power of all the then-outstanding shares of
voting stock of the corporation, entitled to vote at an election of directors
(the "Voting Stock") or (ii) without cause by the affirmative vote of the
holders of at least sixty-six and two-thirds percent (66 2/3%) of the voting
power of all the then-outstanding shares of the Voting Stock.
SECTION 21. MEETINGS.
(a) ANNUAL MEETINGS. The annual meeting of the Board of
Directors shall be held immediately before or after the annual meeting of
stockholders and at the place where such meeting is held. No notice of an annual
meeting of the Board of Directors shall be necessary
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and such meeting shall be held for the purpose of electing officers and
transacting such other business as may lawfully come before it.
(b) REGULAR MEETINGS. Except as hereinafter otherwise provided,
regular meetings of the Board of Directors shall be held in the office of the
corporation required to be maintained pursuant to Section 2 hereof. Unless
otherwise restricted by the Certificate of Incorporation, regular meetings of
the Board of Directors may also be held at any place within or without the State
of Delaware which has been designated by resolution of the Board of Directors or
the written consent of all directors.
(c) SPECIAL MEETINGS. Unless otherwise restricted by the
Certificate of Incorporation, special meetings of the Board of Directors may be
held at any time and place within or without the State of Delaware whenever
called by the Chairman of the Board, the Chief Executive Officer or any two of
the directors.
(d) TELEPHONE MEETINGS. Any member of the Board of Directors, or
of any committee thereof, may participate in a meeting by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and participation in a meeting
by such means shall constitute presence in person at such meeting.
(e) NOTICE OF MEETINGS. Notice of the time and place of all
special meetings of the Board of Directors shall be orally or in writing, by
telephone, facsimile, telegraph or telex, during normal business hours, at least
twenty-four (24) hours before the date and time of the meeting, or sent in
writing to each director by first class mail, charges prepaid, at least three
(3) days before the date of the meeting. Notice of any meeting may be waived in
writing at any time before or after the meeting and will be waived by any
director by attendance thereat, except when the director attends the meeting for
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened.
(f) WAIVER OF NOTICE. The transaction of all business at any
meeting of the Board of Directors, or any committee thereof, however called or
noticed, or wherever held, shall be as valid as though had at a meeting duly
held after regular call and notice, if a quorum be present and if, either before
or after the meeting, each of the directors not present shall sign a written
waiver of notice. All such waivers shall be filed with the corporate records or
made a part of the minutes of the meeting.
SECTION 22. QUORUM AND VOTING.
(a) Unless the Certificate of Incorporation requires a greater
number and except with respect to indemnification questions arising under
Section 43 hereof, for which a quorum shall be one-third of the exact number of
directors fixed from time to time in accordance with the Certificate of
Incorporation, a quorum of the Board of Directors shall consist of a majority of
the exact number of directors fixed from time to time by the Board of Directors
in
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accordance with the Certificate of Incorporation; provided, however, at any
meeting whether a quorum be present or otherwise, a majority of the directors
present may adjourn from time to time until the time fixed for the next regular
meeting of the Board of Directors, without notice other than by announcement at
the meeting.
(b) At each meeting of the Board of Directors at which a quorum
is present, all questions and business shall be determined by the affirmative
vote of a majority of the directors present, unless a different vote be required
by law, the Certificate of Incorporation or these Bylaws.
SECTION 23. ACTION WITHOUT MEETING. Unless otherwise restricted by the
Certificate of Incorporation or these Bylaws, any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting, if all members of the Board of Directors or
committee, as the case may be, consent thereto in writing, and such writing or
writings are filed with the minutes of proceedings of the Board of Directors or
committee.
SECTION 24. FEES AND COMPENSATION. Directors shall be entitled to such
compensation for their services as may be approved by the Board of Directors,
including, if so approved, by resolution of the Board of Directors, a fixed sum
and expenses of attendance, if any, for attendance at each regular or special
meeting of the Board of Directors and at any meeting of a committee of the Board
of Directors. Nothing herein contained shall be construed to preclude any
director from serving the corporation in any other capacity as an officer,
agent, employee, or otherwise and receiving compensation therefor.
SECTION 25. COMMITTEES.
(a) EXECUTIVE COMMITTEE. The Board of Directors may by
resolution passed by a majority of the whole Board of Directors appoint an
Executive Committee to consist of one (1) or more members of the Board of
Directors. The Executive Committee, to the extent permitted by law and provided
in the resolution of the Board of Directors shall have and may exercise all the
powers and authority of the Board of Directors in the management of the business
and affairs of the corporation, including without limitation the power or
authority to declare a dividend, to authorize the issuance of stock and to adopt
a certificate of ownership and merger, and may authorize the seal of the
corporation to be affixed to all papers which may require it; but no such
committee shall have the power or authority in reference to amending the
Certificate of Incorporation (except that a committee may, to the extent
authorized in the resolution or resolutions providing for the issuance of shares
of stock adopted by the Board of Directors fix the designations and any of the
preferences or rights of such shares relating to dividends, redemption,
dissolution, any distribution of assets of the corporation or the conversion
into, or the exchange of such shares for, shares of any other class or classes
or any other series of the same or any other class or classes of stock of the
corporation or fix the number of shares of any series of stock or authorize the
increase or decrease of the shares of any series), adopting an agreement of
merger or consolidation, recommending to the stockholders the sale, lease or
exchange of all or substantially all of the corporation's property and assets,
recommending to
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the stockholders a dissolution of the corporation or a revocation of a
dissolution, or amending the bylaws of the corporation.
(b) OTHER COMMITTEES. The Board of Directors may, by resolution
passed by a majority of the whole Board of Directors, from time to time appoint
such other committees as may be permitted by law. Such other committees
appointed by the Board of Directors shall consist of one (1) or more members of
the Board of Directors and shall have such powers and perform such duties as may
be prescribed by the resolution or resolutions creating such committees, but in
no event shall such committee have the powers denied to the Executive Committee
in these Bylaws.
(c) TERM. Each member of a committee of the Board of Directors
shall serve a term on the committee coexistent with such member's term on the
Board of Directors. The Board of Directors, subject to the provisions of
subsections (a) or (b) of this Bylaw may at any time increase or decrease the
number of members of a committee or terminate the existence of a committee. The
membership of a committee member shall terminate on the date of his death or
voluntary resignation from the committee or from the Board of Directors. The
Board of Directors may at any time for any reason remove any individual
committee member and the Board of Directors may fill any committee vacancy
created by death, resignation, removal or increase in the number of members of
the committee. The Board of Directors may designate one or more directors as
alternate members of any committee, who may replace any absent or disqualified
member at any meeting of the committee, and, in addition, in the absence or
disqualification of any member of a committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not he or
they constitute a quorum, may unanimously appoint another member of the Board of
Directors to act at the meeting in the place of any such absent or disqualified
member.
(d) MEETINGS. Unless the Board of Directors shall otherwise
provide, regular meetings of the Executive Committee or any other committee
appointed pursuant to this Section 25 shall be held at such times and places as
are determined by the Board of Directors, or by any such committee, and when
notice thereof has been given to each member of such committee, no further
notice of such regular meetings need be given thereafter. Special meetings of
any such committee may be held at any place which has been determined from time
to time by such committee, and may be called by any director who is a member of
such committee, upon written notice to the members of such committee of the time
and place of such special meeting given in the manner provided for the giving of
written notice to members of the Board of Directors of the time and place of
special meetings of the Board of Directors. Notice of any special meeting of any
committee may be waived in writing at any time before or after the meeting and
will be waived by any director by attendance thereat, except when the director
attends such special meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business because the meeting
is not lawfully called or convened. A majority of the authorized number of
members of any such committee shall constitute a quorum for the transaction of
business, and the act of a majority of those present at any meeting at which a
quorum is present shall be the act of such committee.
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SECTION 26. ORGANIZATION. At every meeting of the directors, the
Chairman of the Board of Directors, or, if a Chairman has not been appointed or
is absent, the Chief Executive Officer, or if the Chief Executive Officer is
absent, the President, or, in the absence of any such officer, a chairman of the
meeting chosen by a majority of the directors present, shall preside over the
meeting. The Secretary, or in his absence, an Assistant Secretary directed to do
so by the Chief Executive Officer, shall act as secretary of the meeting.
ARTICLE V
OFFICERS
SECTION 27. OFFICERS DESIGNATED. The officers of the corporation shall
include, if and when designated by the Board of Directors, the Chairman of the
Board of Directors, the Chief Executive Officer, the President, one or more Vice
Presidents, the Secretary, the Chief Financial Officer, the Treasurer, the
Controller, all of whom shall be elected at the annual organizational meeting of
the Board of Directors. The Board of Directors may also appoint one or more
Assistant Secretaries, Assistant Treasurers, Assistant Controllers and such
other officers and agents with such powers and duties as it shall deem
necessary. The Board of Directors may assign such additional titles to one or
more of the officers as it shall deem appropriate. Any one person may hold any
number of offices of the corporation at any one time unless specifically
prohibited therefrom by law. The salaries and other compensation of the officers
of the corporation shall be fixed by or in the manner designated by the Board of
Directors.
SECTION 28. TENURE AND DUTIES OF OFFICERS.
(a) GENERAL. All officers shall hold office at the pleasure of
the Board of Directors and until their successors shall have been duly elected
and qualified, unless sooner removed. Any officer elected or appointed by the
Board of Directors may be removed at any time by the Board of Directors. If the
office of any officer becomes vacant for any reason, the vacancy may be filled
by the Board of Directors.
(b) DUTIES OF CHAIRMAN OF THE BOARD OF DIRECTORS. The Chairman of
the Board of Directors, when present, shall preside at all meetings of the
stockholders and the Board of Directors. The Chairman of the Board of Directors
shall perform other duties commonly incident to his office and shall also
perform such other duties and have such other powers as the Board of Directors
shall designate from time to time.
(c) DUTIES OF CHIEF EXECUTIVE OFFICER. The Chief Executive
Officer shall preside at all meetings of the stockholders and at all meetings of
the Board of Directors, unless the Chairman of the Board of Directors has been
appointed and is present. The Chief Executive Officer shall, subject to the
control of the Board of Directors, have general supervision, direction and
control of the business and officers of the corporation. The Chief Executive
Officer shall perform other duties commonly incident to his office and shall
also perform such other duties and have such other powers as the Board of
Directors shall designate from time to time.
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(d) DUTIES OF PRESIDENT. The President may assume and perform the
duties of the Chief Executive Officer in the absence or disability of the Chief
Executive Officer or whenever the office of Chief Executive Officer is vacant.
The President shall perform other duties commonly incident to his office and
shall also perform such other duties and have such other powers as the Board of
Directors or the Chief Executive Officer shall designate from time to time.
(e) DUTIES OF VICE PRESIDENTS. The Vice Presidents may assume and
perform the duties of the President in the absence or disability of the
President or whenever the office of President is vacant. The Vice Presidents
shall perform other duties commonly incident to their office and shall also
perform such other duties and have such other powers as the Board of Directors,
the Chief Executive Officer or the President shall designate from time to time.
(f) DUTIES OF SECRETARY. The Secretary shall attend all meetings
of the stockholders and of the Board of Directors and shall record all acts and
proceedings thereof in the minute book of the corporation. The Secretary shall
give notice in conformity with these Bylaws of all meetings of the stockholders
and of all meetings of the Board of Directors and any committee thereof
requiring notice. The Secretary shall perform all other duties given him in
these Bylaws and other duties commonly incident to his office and shall also
perform such other duties and have such other powers as the Board of Directors
shall designate from time to time. The Chief Executive Officer may direct any
Assistant Secretary to assume and perform the duties of the Secretary in the
absence or disability of the Secretary, and each Assistant Secretary shall
perform other duties commonly incident to his office and shall also perform such
other duties and have such other powers as the Board of Directors or the Chief
Executive Officer shall designate from time to time.
(g) DUTIES OF CHIEF FINANCIAL OFFICER. The Chief Financial
Officer shall keep or cause to be kept the books of account of the corporation
in a thorough and proper manner and shall render statements of the financial
affairs of the corporation in such form and as often as required by the Board of
Directors or the Chief Executive Officer. The Chief Financial Officer, subject
to the order of the Board of Directors, shall have the custody of all funds and
securities of the corporation. The Chief Financial Officer shall perform other
duties commonly incident to his office and shall also perform such other duties
and have such other powers as the Board of Directors or the Chief Executive
Officer shall designate from time to time. The Chief Executive Officer may
direct the Treasurer or any Assistant Treasurer, or the Controller or any
Assistant Controller to assume and perform the duties of the Chief Financial
Officer in the absence or disability of the Chief Financial Officer, and each
Treasurer and Assistant Treasurer and each Controller and Assistant Controller
shall perform other duties commonly incident to his office and shall also
perform such other duties and have such other powers as the Board of Directors
or the Chief Executive Officer shall designate from time to time.
SECTION 29. DELEGATION OF AUTHORITY. The Board of Directors may from
time to time delegate the powers or duties of any officer to any other officer
or agent, notwithstanding any provision hereof.
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SECTION 30. RESIGNATIONS. Any officer may resign at any time by giving
written notice to the Board of Directors or to the Chief Executive Officer or to
the Secretary. Any such resignation shall be effective when received by the
person or persons to whom such notice is given, unless a later time is specified
therein, in which event the resignation shall become effective at such later
time. Unless otherwise specified in such notice, the acceptance of any such
resignation shall not be necessary to make it effective. Any resignation shall
be without prejudice to the rights, if any, of the corporation under any
contract with the resigning officer.
SECTION 31. REMOVAL. Any officer may be removed from office at any time,
either with or without cause, by the affirmative vote of a majority of the
directors in office at the time, or by the unanimous written consent of the
directors in office at the time, or by any committee or superior officers upon
whom such power of removal may have been conferred by the Board of Directors.
ARTICLE VI
EXECUTION OF CORPORATE INSTRUMENTS AND VOTING
OF SECURITIES OWNED BY THE CORPORATION
SECTION 32. EXECUTION OF CORPORATE INSTRUMENTS. The Board of Directors
may, in its discretion, determine the method and designate the signatory officer
or officers, or other person or persons, to execute on behalf of the corporation
any corporate instrument or document, or to sign on behalf of the corporation
the corporate name without limitation, or to enter into contracts on behalf of
the corporation, except where otherwise provided by law or these Bylaws, and
such execution or signature shall be binding upon the corporation.
Unless otherwise specifically determined by the Board of Directors or
otherwise required by law, promissory notes, deeds of trust, mortgages and other
evidences of indebtedness of the corporation, and other corporate instruments or
documents requiring the corporate seal, and certificates of shares of stock
owned by the corporation, shall be executed, signed or endorsed by the Chairman
of the Board of Directors, or the President or any Vice President, and by the
Secretary or Treasurer or any Assistant Secretary or Assistant Treasurer. All
other instruments and documents requiring the corporate signature, but not
requiring the corporate seal, may be executed as aforesaid or in such other
manner as may be directed by the Board of Directors.
All checks and drafts drawn on banks or other depositaries on funds to
the credit of the corporation or in special accounts of the corporation shall be
signed by such person or persons as the Board of Directors shall authorize so to
do.
Unless authorized or ratified by the Board of Directors or within the
agency power of an officer, no officer, agent or employee shall have any power
or authority to bind the corporation by any contract or engagement or to pledge
its credit or to render it liable for any purpose or for any amount.
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SECTION 33. VOTING OF SECURITIES OWNED BY THE CORPORATION. All stock and
other securities of other corporations owned or held by the corporation for
itself, or for other parties in any capacity, shall be voted, and all proxies
with respect thereto shall be executed, by the person authorized so to do by
resolution of the Board of Directors, or, in the absence of such authorization,
by the Chairman of the Board of Directors, the Chief Executive Officer, the
President, or any Vice President.
ARTICLE VII
SHARES OF STOCK
SECTION 34. FORM AND EXECUTION OF CERTIFICATES. Certificates for the
shares of stock of the corporation shall be in such form as is consistent with
the Certificate of Incorporation and applicable law. Every holder of stock in
the corporation shall be entitled to have a certificate signed by or in the name
of the corporation by the Chairman of the Board of Directors, or the President
or any Vice President and by the Treasurer or Assistant Treasurer or the
Secretary or Assistant Secretary, certifying the number of shares owned by him
in the corporation. Any or all of the signatures on the certificate may be
facsimiles. In case any officer, transfer agent, or registrar who has signed or
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officer, transfer agent, or registrar before such certificate is
issued, it may be issued with the same effect as if he were such officer,
transfer agent, or registrar at the date of issue. Each certificate shall state
upon the face or back thereof, in full or in summary, all of the powers,
designations, preferences, and rights, and the limitations or restrictions of
the shares authorized to be issued or shall, except as otherwise required by
law, set forth on the face or back a statement that the corporation will furnish
without charge to each stockholder who so requests the powers, designations,
preferences and relative, participating, optional, or other special rights of
each class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights. Within a reasonable time after
the issuance or transfer of uncertificated stock, the corporation shall send to
the registered owner thereof a written notice containing the information
required to be set forth or stated on certificates pursuant to this section or
otherwise required by law or with respect to this section a statement that the
corporation will furnish without charge to each stockholder who so requests the
powers, designations, preferences and relative participating, optional or other
special rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights. Except as
otherwise expressly provided by law, the rights and obligations of the holders
of certificates representing stock of the same class and series shall be
identical.
SECTION 35. LOST CERTIFICATES. A new certificate or certificates shall
be issued in place of any certificate or certificates theretofore issued by the
corporation alleged to have been lost, stolen, or destroyed, upon the making of
an affidavit of that fact by the person claiming the certificate of stock to be
lost, stolen, or destroyed. The corporation may require, as a condition
precedent to the issuance of a new certificate or certificates, the owner of
such lost, stolen, or destroyed certificate or certificates, or his legal
representative, to advertise the same in such manner as it shall require or to
give the corporation a surety bond in such form and amount as
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it may direct as indemnity against any claim that may be made against the
corporation with respect to the certificate alleged to have been lost, stolen,
or destroyed.
SECTION 36. TRANSFERS.
(a) Transfers of record of shares of stock of the corporation
shall be made only upon its books by the holders thereof, in person or by
attorney duly authorized, and upon the surrender of a properly endorsed
certificate or certificates for a like number of shares.
(b) The corporation shall have power to enter into and perform
any agreement with any number of stockholders of any one or more classes of
stock of the corporation to restrict the transfer of shares of stock of the
corporation of any one or more classes owned by such stockholders in any manner
not prohibited by the General Corporation Law of Delaware.
SECTION 37. FIXING RECORD DATES.
(a) In order that the corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, the Board of Directors may fix, in advance, a record date,
which record date shall not precede the date upon which the resolution fixing
the record date is adopted by the Board of Directors, and which record date
shall not be more than sixty (60) nor less than ten (10) days before the date of
such meeting. If no record date is fixed by the Board of Directors, the record
date for determining stockholders entitled to notice of or to vote at a meeting
of stockholders shall be at the close of business on the day next preceding the
day on which notice is given, or if notice is waived, at the close of business
on the day next preceding the day on which the meeting is held. A determination
of stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting; provided, however,
that the Board of Directors may fix a new record date for the adjourned meeting.
(b) Prior to the Initial Public Offering, in order that the corporation
may determine the stockholders entitled to consent to corporate action in
writing without a meeting, the Board of Directors may fix a record date, which
record date shall not precede the date upon which the resolution fixing the
record date is adopted by the Board of Directors, and which date shall not be
more than 10 days after the date upon which the resolution fixing the record
date is adopted by the Board of Directors. Any stockholder of record seeking to
have the stockholders authorize or take corporate action by written consent
shall, by written notice to the Secretary, request the Board of Directors to fix
a record date. The Board of Directors shall promptly, but in all events within
10 days after the date on which such a request is received, adopt a resolution
fixing the record date. If no record date has been fixed by the Board of
Directors within 10 days of the date on which such a request is received, the
record date for determining stockholders entitled to consent to corporate action
in writing without a meeting, when no prior action by the Board of Directors is
required by applicable law, shall be the first date on which a signed written
consent setting forth the action taken or proposed to be taken is delivered to
the corporation by delivery to its registered office in the State of Delaware,
its principal place of business or an officer or agent of the corporation having
custody of the book in which proceedings of meetings
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of stockholders are recorded. Delivery made to the corporation's registered
office shall be by hand or by certified or registered mail, return receipt
requested. If no record date has been fixed by the Board of Directors and prior
action by the Board of Directors is required by law, the record date for
determining stockholders entitled to consent to corporate action in writing
without a meeting shall be at the close of business on the day on which the
Board of Directors adopts the resolution taking such prior action.
(c) In order that the corporation may determine the stockholders
entitled to receive payment of any dividend or other distribution or allotment
of any rights or the stockholders entitled to exercise any rights in respect of
any change, conversion or exchange of stock, or for the purpose of any other
lawful action, the Board of Directors may fix, in advance, a record date, which
record date shall not precede the date upon which the resolution fixing the
record date is adopted, and which record date shall be not more than sixty (60)
days prior to such action. If no record date is fixed, the record date for
determining stockholders for any such purpose shall be at the close of business
on the day on which the Board of Directors adopts the resolution relating
thereto.
SECTION 38. REGISTERED STOCKHOLDERS. The corporation shall be entitled
to recognize the exclusive right of a person registered on its books as the
owner of shares to receive dividends, and to vote as such owner, and shall not
be bound to recognize any equitable or other claim to or interest in such share
or shares on the part of any other person whether or not it shall have express
or other notice thereof, except as otherwise provided by the laws of Delaware.
ARTICLE VIII
OTHER SECURITIES OF THE CORPORATION
Section 39. EXECUTION OF OTHER SECURITIES. All bonds, debentures and
other corporate securities of the corporation, other than stock certificates
(covered in Section 34), may be signed by the Chairman of the Board of
Directors, the Chief Executive Officer, the President or any Vice President, or
such other person as may be authorized by the Board of Directors, and the
corporate seal impressed thereon or a facsimile of such seal imprinted thereon
and attested by the signature of the Secretary or an Assistant Secretary, or the
Chief Financial Officer or Treasurer or an Assistant Treasurer; provided,
however, that where any such bond, debenture or other corporate security shall
be authenticated by the manual signature, or where permissible facsimile
signature, of a trustee under an indenture pursuant to which such bond,
debenture or other corporate security shall be issued, the signatures of the
persons signing and attesting the corporate seal on such bond, debenture or
other corporate security may be the imprinted facsimile of the signatures of
such persons. Interest coupons appertaining to any such bond, debenture or other
corporate security, authenticated by a trustee as aforesaid, shall be signed by
the Treasurer or an Assistant Treasurer of the corporation or such other person
as may be authorized by the Board of Directors, or bear imprinted thereon the
facsimile signature of such person. In case any officer who shall have signed or
attested any bond, debenture or other corporate security, or whose facsimile
signature shall appear thereon or on any such interest coupon, shall have ceased
to be such officer before the bond, debenture or other corporate
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<PAGE> 22
security so signed or attested shall have been delivered, such bond, debenture
or other corporate security nevertheless may be adopted by the corporation and
issued and delivered as though the person who signed the same or whose facsimile
signature shall have been used thereon had not ceased to be such officer of the
corporation.
ARTICLE IX
DIVIDENDS
SECTION 40. DECLARATION OF DIVIDENDS. Dividends upon the capital stock
of the corporation, subject to the provisions of the Certificate of
Incorporation, if any, may be declared by the Board of Directors pursuant to law
at any regular or special meeting. Dividends may be paid in cash, in property,
or in shares of the capital stock, subject to the provisions of the Certificate
of Incorporation.
SECTION 41. DIVIDEND RESERVE. Before payment of any dividend, there may
be set aside out of any funds of the corporation available for dividends such
sum or sums as the Board of Directors from time to time, in their absolute
discretion, think proper as a reserve or reserves to meet contingencies, or for
equalizing dividends, or for repairing or maintaining any property of the
corporation, or for such other purpose as the Board of Directors shall think
conducive to the interests of the corporation, and the Board of Directors may
modify or abolish any such reserve in the manner in which it was created.
ARTICLE X
FISCAL YEAR
SECTION 42. FISCAL YEAR. The fiscal year of the corporation shall be
fixed by resolution of the Board of Directors.
ARTICLE XI
INDEMNIFICATION
SECTION 43. INDEMNIFICATION OF DIRECTORS, EXECUTIVE OFFICERS, OTHER
OFFICERS, EMPLOYEES AND OTHER AGENTS.
(a) DIRECTORS AND OFFICERS. The corporation shall indemnify its
directors and officers to the fullest extent not prohibited by the Delaware
General Corporation Law; provided, however, that the corporation may modify the
extent of such indemnification by individual contracts with its directors and
executive officers and, provided, further, that the corporation shall not be
required to indemnify any director or officer in connection with any proceeding
(or part thereof) initiated by such person unless (i) such indemnification is
expressly required to be made by law, (ii) the proceeding was authorized by the
Board of Directors of the corporation, (iii) such indemnification is provided by
the corporation, in its sole discretion, pursuant to the
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powers vested in the corporation under the Delaware General Corporation Law or
(iv) such indemnification is required to be made under subsection (d).
(b) EMPLOYEES AND OTHER AGENTS. The corporation shall have power
to indemnify its employees and other agents as set forth in the Delaware General
Corporation Law.
(c) EXPENSES. The corporation shall advance to any person who was
or is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that he is or was a director or officer, of
the corporation, or is or was serving at the request of the corporation as a
director or officer of another corporation, partnership, joint venture, trust or
other enterprise, prior to the final disposition of the proceeding, promptly
following request therefor, all expenses incurred by any director or officer in
connection with such proceeding upon receipt of an undertaking by or on behalf
of such person to repay said amounts if it should be determined ultimately that
such person is not entitled to be indemnified under this Bylaw or otherwise.
Notwithstanding the foregoing, unless otherwise determined pursuant to paragraph
(e) of this Bylaw, no advance shall be made by the corporation to an officer of
the corporation (except by reason of the fact that such officer is or was a
director of the corporation in which event this paragraph shall not apply) in
any action, suit or proceeding, whether civil, criminal, administrative or
investigative, if a determination is reasonably and promptly made (i) by the
Board of Directors by a majority vote of a quorum consisting of directors who
were not parties to the proceeding, or (ii) if such quorum is not obtainable,
or, even if obtainable, a quorum of disinterested directors so directs, by
independent legal counsel in a written opinion, that the facts known to the
decision-making party at the time such determination is made demonstrate clearly
and convincingly that such person acted in bad faith or in a manner that such
person did not believe to be in or not opposed to the best interests of the
corporation.
(d) ENFORCEMENT. Without the necessity of entering into an
express contract, all rights to indemnification and advances to directors and
officers and officers under this Bylaw shall be deemed to be contractual rights
and be effective to the same extent and as if provided for in a contract between
the corporation and the director or officer. Any right to indemnification or
advances granted by this Bylaw to a director or officer shall be enforceable by
or on behalf of the person holding such right in any court of competent
jurisdiction if (i) the claim for indemnification or advances is denied, in
whole or in part, or (ii) no disposition of such claim is made within ninety
(90) days of request therefor. The claimant in such enforcement action, if
successful in whole or in part, shall be entitled to be paid also the expense of
prosecuting his claim. In connection with any claim for indemnification, the
corporation shall be entitled to raise as a defense to any such action that the
claimant has not met the standards of conduct that make it permissible under the
Delaware General Corporation Law for the corporation to indemnify the claimant
for the amount claimed. In connection with any claim by an officer of the
corporation (except in any action, suit or proceeding, whether civil, criminal,
administrative or investigative, by reason of the fact that such officer is or
was a director of the corporation) for advances, the corporation shall be
entitled to raise a defense as to any such
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action clear and convincing evidence that such person acted in bad faith or in a
manner that such person did not believe to be in or not opposed to the best
interests of the corporation, or with respect to any criminal action or
proceeding that such person acted without reasonable cause to believe that his
conduct was lawful. Neither the failure of the corporation (including its Board
of Directors, independent legal counsel or its stockholders) to have made a
determination prior to the commencement of such action that indemnification of
the claimant is proper in the circumstances because he has met the applicable
standard of conduct set forth in the Delaware General Corporation Law, nor an
actual determination by the corporation (including its Board of Directors,
independent legal counsel or its stockholders) that the claimant has not met
such applicable standard of conduct, shall be a defense to the action or create
a presumption that claimant has not met the applicable standard of conduct.
(e) NON-EXCLUSIVITY OF RIGHTS. The rights conferred on any person
by this Bylaw shall not be exclusive of any other right which such person may
have or hereafter acquire under any statute, provision of the Certificate of
Incorporation, Bylaws, agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in his official capacity and as to
action in another capacity while holding office. The corporation is specifically
authorized to enter into individual contracts with any or all of its directors,
officers, employees or agents respecting indemnification and advances, to the
fullest extent not prohibited by the Delaware General Corporation Law.
(f) SURVIVAL OF RIGHTS. The rights conferred on any person by
this Bylaw shall continue as to a person who has ceased to be a director,
officer, employee or other agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
(g) INSURANCE. To the fullest extent permitted by the Delaware
General Corporation Law, the corporation, upon approval by the Board of
Directors, may purchase insurance on behalf of any person required or permitted
to be indemnified pursuant to this Bylaw.
(h) AMENDMENTS. Any repeal or modification of this Bylaw shall
only be prospective and shall not affect the rights under this Bylaw in effect
at the time of the alleged occurrence of any action or omission to act that is
the cause of any proceeding against any agent of the corporation.
(i) SAVING CLAUSE. If this Bylaw or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
corporation shall nevertheless indemnify each director and officer to the full
extent not prohibited by any applicable portion of this Bylaw that shall not
have been invalidated, or by any other applicable law.
(j) CERTAIN DEFINITIONS. For the purposes of this Bylaw, the
following definitions shall apply:
(i) The term "proceeding" shall be broadly construed and
shall include, without limitation, the investigation, preparation,
prosecution, defense, settlement,
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arbitration and appeal of, and the giving of testimony in, any
threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative.
(ii) The term "expenses" shall be broadly construed and shall
include, without limitation, court costs, attorneys' fees, witness fees,
fines, amounts paid in settlement or judgment and any other costs and
expenses of any nature or kind incurred in connection with any
proceeding.
(iii) The term the "corporation" shall include, in addition to
the resulting corporation, any constituent corporation (including any
constituent of a constituent) absorbed in a consolidation or merger
which, if its separate existence had continued, would have had power and
authority to indemnify its directors, officers, and employees or agents,
so that any person who is or was a director, officer, employee or agent
of such constituent corporation, or is or was serving at the request of
such constituent corporation as a director, officer, employee or agent
of another corporation, partnership, joint venture, trust or other
enterprise, shall stand in the same position under the provisions of
this Bylaw with respect to the resulting or surviving corporation as he
would have with respect to such constituent corporation if its separate
existence had continued.
(iv) References to a "director," "executive officer,"
"officer," "employee," or "agent" of the corporation shall include,
without limitation, situations where such person is serving at the
request of the corporation as, respectively, a director, executive
officer, officer, employee, trustee or agent of another corporation,
partnership, joint venture, trust or other enterprise.
(v) References to "other enterprises" shall include employee
benefit plans; references to "fines" shall include any excise taxes
assessed on a person with respect to an employee benefit plan; and
references to "serving at the request of the corporation" shall include
any service as a director, officer, employee or agent of the corporation
which imposes duties on, or involves services by, such director,
officer, employee, or agent with respect to an employee benefit plan,
its participants, or beneficiaries; and a person who acted in good faith
and in a manner he reasonably believed to be in the interest of the
participants and beneficiaries of an employee benefit plan shall be
deemed to have acted in a manner "not opposed to the best interests of
the corporation" as referred to in this Bylaw.
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ARTICLE XII
NOTICES
SECTION 44. NOTICES.
(a) NOTICE TO STOCKHOLDERS. Whenever, under any provisions of
these Bylaws, notice is required to be given to any stockholder, it shall be
given in writing, timely and duly deposited in the United States mail, postage
prepaid, and addressed to his last known post office address as shown by the
stock record of the corporation or its transfer agent.
(b) NOTICE TO DIRECTORS. Any notice required to be given to any
director may be given by the method stated in subsection (a), or by facsimile,
telex or telegram, except that such notice other than one which is delivered
personally shall be sent to such address as such director shall have filed in
writing with the Secretary, or, in the absence of such filing, to the last known
post office address of such director.
(c) AFFIDAVIT OF MAILING. An affidavit of mailing, executed by a
duly authorized and competent employee of the corporation or its transfer agent
appointed with respect to the class of stock affected, specifying the name and
address or the names and addresses of the stockholder or stockholders, or
director or directors, to whom any such notice or notices was or were given, and
the time and method of giving the same, shall in the absence of fraud, be prima
facie evidence of the facts therein contained.
(d) TIME NOTICES DEEMED GIVEN. All notices given by mail, as
above provided, shall be deemed to have been given as at the time of mailing,
and all notices given by facsimile, telex or telegram shall be deemed to have
been given as of the sending time recorded at time of transmission.
(e) METHODS OF NOTICE. It shall not be necessary that the same
method of giving notice be employed in respect of all directors, but one
permissible method may be employed in respect of any one or more, and any other
permissible method or methods may be employed in respect of any other or others.
(f) FAILURE TO RECEIVE NOTICE. The period or limitation of time
within which any stockholder may exercise any option or right, or enjoy any
privilege or benefit, or be required to act, or within which any director may
exercise any power or right, or enjoy any privilege, pursuant to any notice sent
him in the manner above provided, shall not be affected or extended in any
manner by the failure of such stockholder or such director to receive such
notice.
(g) NOTICE TO PERSON WITH WHOM COMMUNICATION IS UNLAWFUL.
Whenever notice is required to be given, under any provision of law or of the
Certificate of Incorporation or Bylaws of the corporation, to any person with
whom communication is unlawful, the giving of such notice to such person shall
not be required and there shall be no duty to apply to any
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governmental authority or agency for a license or permit to give such notice to
such person. Any action or meeting which shall be taken or held without notice
to any such person with whom communication is unlawful shall have the same force
and effect as if such notice had been duly given. In the event that the action
taken by the corporation is such as to require the filing of a certificate under
any provision of the Delaware General Corporation Law, the certificate shall
state, if such is the fact and if notice is required, that notice was given to
all persons entitled to receive notice except such persons with whom
communication is unlawful.
(h) NOTICE TO PERSON WITH UNDELIVERABLE ADDRESS. Whenever notice
is required to be given, under any provision of law or the Certificate of
Incorporation or Bylaws of the corporation, to any stockholder to whom (i)
notice of two consecutive annual meetings, and all notices of meetings or of the
taking of action by written consent without a meeting to such person during the
period between such two consecutive annual meetings, or (ii) all, and at least
two, payments (if sent by first class mail) of dividends or interest on
securities during a twelve-month period, have been mailed addressed to such
person at his address as shown on the records of the corporation and have been
returned undeliverable, the giving of such notice to such person shall not be
required. Any action or meeting which shall be taken or held without notice to
such person shall have the same force and effect as if such notice had been duly
given. If any such person shall deliver to the corporation a written notice
setting forth his then current address, the requirement that notice be given to
such person shall be reinstated. In the event that the action taken by the
corporation is such as to require the filing of a certificate under any
provision of the Delaware General Corporation Law, the certificate need not
state that notice was not given to persons to whom notice was not required to be
given pursuant to this paragraph.
ARTICLE XIII
AMENDMENTS
SECTION 45. AMENDMENTS. Subject to paragraph (h) of Section 43 of the
Bylaws, the Bylaws may be altered or amended or new Bylaws adopted by the
affirmative vote of at least sixty-six and two-thirds percent (66-2/3%) of the
voting power of all of the then-outstanding shares of the Voting Stock. The
Board of Directors shall also have the power to adopt, amend, or repeal Bylaws.
ARTICLE XIV
LOANS TO OFFICERS
SECTION 46. LOANS TO OFFICERS. The corporation may lend money to, or
guarantee any obligation of, or otherwise assist any officer or other employee
of the corporation or of its subsidiaries, including any officer or employee who
is a Director of the corporation or its subsidiaries, whenever, in the judgment
of the Board of Directors, such loan, guarantee or assistance may reasonably be
expected to benefit the corporation. The loan, guarantee or other assistance may
be with or without interest and may be unsecured, or secured in such manner as
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the Board of Directors shall approve, including, without limitation, a pledge of
shares of stock of the corporation. Nothing in these Bylaws shall be deemed to
deny, limit or restrict the powers of guaranty or warranty of the corporation at
common law or under any statute.
ARTICLE XV
MISCELLANEOUS
SECTION 47. ANNUAL REPORT.
(a) Subject to the provisions of paragraph (b) of this Bylaw, the
Board of Directors shall cause an annual report to be sent to each stockholder
of the corporation not later than one hundred twenty (120) days after the close
of the corporation's fiscal year. Such report shall include a balance sheet as
of the end of such fiscal year and an income statement and statement of changes
in financial position for such fiscal year, accompanied by any report thereon of
independent accounts or, if there is no such report, the certificate of an
authorized officer of the corporation that such statements were prepared without
audit from the books and records of the corporation. When there are more than
100 stockholders of record of the corporation's shares, as determined by Section
605 of the California Corporations Code, additional information as required by
Section 1501(b) of the California Corporations Code shall also be contained in
such report, provided that if the corporation has a class of securities
registered under Section 12 of the 1934 Act, that Act shall take precedence.
Such report shall be sent to stockholders at least fifteen (15) days prior to
the next annual meeting of stockholders after the end of the fiscal year to
which it relates.
(b) If and so long as there are fewer than 100 holders of record
of the corporation's shares, the requirement of sending of an annual report to
the stockholders of the corporation is hereby expressly waived.
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EXHIBIT 3.5
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
RIBOGENE, INC.
RIBOGENE, INC., a corporation organized and existing under the laws of
the state of Delaware (the "Corporation") hereby certifies that:
1. The name of the Corporation is RiboGene, Inc. The Corporation was
originally incorporated under the name RiboGene Merger Corporation.
2. The date of filing of the Corporation's original Certificate of
Incorporation was _______, 1997.
3. The Amended and Restated Certificate of Incorporation of the
Corporation as provided in Exhibit A hereto was duly adopted in accordance with
the provisions of Section 242 and Section 245 of the General Corporation Law of
the State of Delaware by the Board of Directors of the Corporation.
4. Pursuant to Section 245 of the Delaware General Corporation Law,
approval of the stockholders of the Corporation has been obtained.
5. The Amended and Restated Certificate of Incorporation so adopted
reads in full as set forth in Exhibit A attached hereto and is hereby
incorporated by reference.
IN WITNESS WHEREOF, the undersigned have signed this certificate this
____ day of __________, 1997, and hereby affirm and acknowledge under penalty of
perjury that the filing of this Restated Certificate of Incorporation is the act
and deed of RiboGene, Inc.
RIBOGENE, INC.
By
-----------------------------------
Charles J. Casamento
Chairman, President and Chief Executive
Officer
ATTEST:
- -------------------------------
Timothy E. Morris
Vice President, Finance & Administration,
Chief Financial Officer and Assistant Secretary
<PAGE> 2
EXHIBIT A
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
RIBOGENE, INC.
I.
The name of this corporation is RiboGene, Inc.
II.
The address of the registered office of the corporation in the State of
Delaware is 1013 Centre Road, City of Wilmington, 19805, County of New Castle
and the name of the registered agent of the corporation in the State of Delaware
at such address is The Prentice-Hall Corporation System, Inc.
III.
The purpose of this corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of the State of Delaware.
IV.
This corporation is authorized to issue two classes of stock to
be designated, respectively, "Common Stock" and "Preferred Stock." The total
number of shares which the corporation is authorized to issue is Thirty-Five
Million (35,000,000) shares. Thirty Million (30,000,000) shares shall be Common
Stock, each having a par value of one tenth of one cent ($.001). Five Million
(5,000,000) shares shall be Preferred Stock, each having a par value of one
tenth of one cent ($.001).
The Preferred Stock may be issued from time to time in one or more
series. The Board of Directors is hereby authorized, by filing a certificate (a
"Preferred Stock Designation") pursuant to the Delaware General Corporation Law,
to fix or alter from time to time the designation, powers, preferences and
rights of the shares of each such series and the qualifications, limitations or
restrictions of any wholly unissued series of Preferred Stock, and to establish
from time to time the number of shares constituting any such series or any of
them; and to increase or decrease the number of shares of any series subsequent
to the issuance of shares of that series, but not below the number of shares of
such series then outstanding. In case the number of shares of any series shall
be decreased in accordance with the foregoing sentence, the shares constituting
such decrease shall resume the status that they had prior to the adoption of the
resolution originally fixing the number of shares of such series.
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<PAGE> 3
V.
A. For the management of the business and for the conduct of the
affairs of the Corporation, and in further definition, limitation and regulation
of the powers of the Corporation, of its directors and of its stockholders or
any class thereof, as the case may be, it is further provided that:
(1) The management of the business and the conduct of the
affairs of the Corporation shall be vested in its Board of Directors. The number
of directors which shall constitute the whole Board of Directors shall be fixed
exclusively by one or more resolutions adopted by the Board of Directors.
(2) Subject to the rights of the holders of any series of
Preferred Stock to elect additional directors under specified circumstances,
following the closing of the initial public offering pursuant to an effective
registration statement under the Securities Act of 1933, as amended, covering
the offer and sale of Common Stock to the public (the "Initial Public
Offering"), the directors shall be divided into three classes designated as
Class I, Class II and Class III, respectively. Directors shall be assigned to
each class in accordance with a resolution or resolutions adopted by the Board
of Directors. At the first annual meeting of stockholders following the closing
of the Initial Public Offering, the term of office of the Class I directors
shall expire and Class I directors shall be elected for a full term of three
years. At the second annual meeting of stockholders following the Closing of the
Initial Public Offering, the term of office of the Class II directors shall
expire and Class II directors shall be elected for a full term of three years.
At the third annual meeting of stockholders following the Closing of the Initial
Public Offering, the term of office of the Class III directors shall expire and
Class III directors shall be elected for a full term of three years. At each
succeeding annual meeting of stockholders, directors shall be elected for a full
term of three years to succeed the directors of the class whose terms expire at
such annual meeting.
Notwithstanding the foregoing provisions of this Article, each director
shall serve until his successor is duly elected and qualified or until his
death, resignation or removal. No decrease in the number of directors
constituting the Board of Directors shall shorten the term of any incumbent
director.
(3) Subject to the rights of the holders of any series of
Preferred Stock, the Board of Directors or any individual director may be
removed from office at any time (i) with cause by the affirmative vote of the
holders of a majority of the voting power of all the then-outstanding shares of
voting stock of the Corporation, entitled to vote at an election of directors
(the "Voting Stock") or (ii) without cause by the affirmative vote of the
holders of at least sixty-six and two-thirds percent (66 2/3%) of the voting
power of all the then-outstanding shares of the Voting Stock.
(4) Subject to the rights of the holders of any series of
Preferred Stock, any vacancies on the Board of Directors resulting from death,
resignation, disqualification, removal or other causes and any newly created
directorships resulting from any increase in the number of directors, shall,
unless the Board of Directors determines by resolution that any such
2.
<PAGE> 4
vacancies or newly created directorships shall be filled by the stockholders,
except as otherwise provided by law, be filled only by the affirmative vote of a
majority of the directors then in office, even though less than a quorum of the
Board of Directors, and not by the stockholders. Any director elected in
accordance with the preceding sentence shall hold office for the remainder of
the full term of the director for which the vacancy was created or occurred and
until such director's successor shall have been elected and qualified.
B. (1) Subject to paragraph (h) of Section 43 of the Bylaws, the
Bylaws may be altered or amended or new Bylaws adopted by the affirmative vote
of at least sixty-six and two-thirds percent (66-2/3%) of the voting power of
all of the then-outstanding shares of the Voting Stock. The Board of Directors
shall also have the power to adopt, amend, or repeal Bylaws.
(2) The directors of the Corporation need not be elected by
written ballot unless the Bylaws so provide.
(3) No action shall be taken by the stockholders of the
Corporation except at an annual or special meeting of stockholders called in
accordance with the Bylaws and following the closing of the Initial Public
Offering no action shall be taken by the stockholders by written consent.
(4) Advance notice of stockholder nominations for the election
of directors and of business to be brought by stockholders before any meeting of
the stockholders of the Corporation shall be given in the manner provided in the
Bylaws of the Corporation.
(5) Special meetings of the stockholders of the Corporation may
be called, for any purpose or purposes, by (i) the Chairman of the Board of
Directors, (ii) the President, (iii) the Board of Directors pursuant to a
resolution adopted by a majority of the total number of authorized directors
(whether or not there exist any vacancies in previously authorized directorships
at the time any such resolution is presented to the Board of Directors for
adoption) or (iv) by the holders of the shares entitled to cast not less that
ten percent (10%) of the votes at the meeting, and shall be held at such place,
on such date, and at such time as the Board of Directors shall fix.
VI.
A. A director of the Corporation shall not be personally liable to
the Corporation or its stockholders for monetary damages for any breach of
fiduciary duty as a director, except for liability (i) for any breach of the
director's duty of loyalty to the Corporation or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the Delaware General
Corporation Law, or (iv) for any transaction from which the director derived an
improper personal benefit. If the Delaware General Corporation Law is amended
after approval by the stockholders of this Article to authorize corporate action
further eliminating or limiting the personal liability of directors, then the
liability of a director shall be eliminated or limited to the fullest extent
permitted by the Delaware General corporation Law, as so amended.
3.
<PAGE> 5
B. Any repeal or modification of this Article VI shall be
prospective and shall not affect the rights under this Article VI in effect at
the time of the alleged occurrence of any act or omission to act giving rise to
liability or indemnification.
VII.
A. The Corporation reserves the right to amend, alter, change or
repeal any provision contained in this Certificate of Incorporation, in the
manner now or hereafter prescribed by statute, except as provided in paragraph
B. of this Article VII, and all rights conferred upon the stockholders herein
are granted subject to this reservation.
B. Notwithstanding any other provisions of this Certificate of
Incorporation or any provision of law which might otherwise permit a lesser vote
or no vote, but in addition to any affirmative vote of the holders of any
particular class or series of the Voting Stock required by law, this Certificate
of Incorporation or any Preferred Stock Designation, the affirmative vote of the
holders of at least sixty-six and two-thirds percent (66-2/3%) of the voting
power of all of the then-outstanding shares of the Voting Stock, voting together
as a single class, shall be required to alter, amend or repeal Articles V, VI,
and VII.
4.
<PAGE> 1
Exhibit 4.2
Specimen
Stock
Certificate
For value Received,____________hereby sell, assign and transfer unto
__________________________________________________________________________
______________________________________________________________Shares of
the Common Stock of the within named Corporation, represented by the within
Certificate and do hereby irrevocably constitute and appoint_______________
_______________________________________________Attorney to transfer the said
shares of said Common Stock on the books of the said Corporation, pursuant
to the provisions of the By-Laws thereof, with full powers of substitution
in the premises.
Date_______________________A.D. 19____.
__________________________________
In Presence of:
______________________________
NOTICE: The signature to this assignment must strictly correspond with the name
as written upon the face of the Certificate in every particular and without
alteration or enlargement or any change whatever.
<PAGE> 1
EXHIBIT 4.3
================================================================================
RIBOGENE, INC.
NINTH AMENDED AND RESTATED RIGHTS AGREEMENT
MAY 1, 1996
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S><C> <C>
1. Termination of Prior Rights..............................................4
2. Amendment................................................................4
3. Registration Rights......................................................4
3.1 Definitions.......................................................4
3.2 Requested Registration............................................5
3.3 Company Registration..............................................6
3.4 Obligations of the Company........................................7
3.5 Furnish Information...............................................8
3.6 Expenses of Demand Registration...................................8
3.7 Expenses of Company Registration..................................8
3.8 Underwriting Requirements.........................................8
3.9 Delay of Registration.............................................9
3.10 Indemnification...................................................11
3.11 Reports under Securities Exchange Act of 1934.....................12
3.12 Form S-3 Registration.............................................13
3.13 Assignment of Registration Rights.................................13
3.14 Limitations on Subsequent Registration Rights.....................13
3.15 Market Stand-Off Agreement........................................14
3.16 Termination of Registration Rights................................14
3.17 Limit on Sales....................................................14
3.18 Subsequent Rights.................................................14
4. Additional Rights........................................................15
4.1 Right of First Offer..............................................15
5. Miscellaneous............................................................17
5.1 Assignment........................................................17
5.2 Third Parties.....................................................17
5.3 Governing Law.....................................................17
5.4 Counterparts......................................................17
5.5 Notices...........................................................17
5.6 Severability......................................................18
5.7 Amendment and Waiver..............................................18
5.8 Effect of Amendment and Waiver....................................18
5.9 Rights of Holders.................................................18
5.10 Delays or Omissions...............................................18
</TABLE>
-i-
<PAGE> 3
NINTH AMENDED AND RESTATED RIGHTS AGREEMENT
THIS NINTH AMENDED AND RESTATED RIGHTS AGREEMENT (the "RESTATED
RIGHTS AGREEMENT") is entered into as of May 1, 1996, by and among RiboGene,
Inc., a California corporation (the "COMPANY"), and certain of its Shareholders
(as defined below).
RECITALS
WHEREAS, the Company, the Institute of Protein Research of the
Academy of Sciences of the USSR ("IPR"), Sierra Ventures III ("SIERRA III") and
Sierra Ventures III International ("Sierra International", and collectively with
Sierra III, "SIERRA") are parties to a Preferred Stock and Warrants Purchase
Agreement dated May 23, 1990 (the "FIRST PURCHASE AGREEMENT"), pursuant to which
the Company sold, and IPR and Sierra acquired, shares of the Company's Series A
Preferred Stock (the "SERIES A SHARES") and, in the case of Sierra, warrants to
purchase shares of the Company's capital stock (the "SIERRA WARRANTS");
WHEREAS, the Company, Sierra, Kleiner Perkins Caufield & Byers V
("KPCB V"), KPCB Zaibatsu Fund I ("KPCB ZAIBATSU," and collectively with KPCB V,
"KPCB") and Michael Ross are parties to a Series B Preferred Stock Purchase
Agreement dated June 5, 1991 (the "Second Purchase Agreement"), pursuant to
which the Company sold, and KPCB, Sierra and Michael Ross acquired, shares of
the Company's Series B Preferred Stock (the "OLD SERIES B SHARES");
WHEREAS, the Company, Sierra, KPCB V, Domain Partners II, L.P.
("Domain") and Aperture Associates ("Aperture") are parties to a Series B
Preferred Stock and Warrant Purchase Agreement dated February 28, 1992 as
amended on June 29, 1992 (the "Third Purchase Agreement"), pursuant to which the
Company has sold or shall sell, and Sierra, KPCB V, Domain and Aperture have
acquired or shall acquire, shares of the Company's Series B Preferred Stock (the
"NEW SERIES B SHARES," and collectively with the Old Series B Shares, the
"SERIES B SHARES") and warrants to purchase up to an aggregate of 3,295,226
shares of the Company's Common Stock, which warrants have since terminated;
WHEREAS, the Company, Sierra, KPCB V, Domain, Aperture, CW Ventures
II, L.P. ("CW"), Vladimir I. Baronov, Jack Chirikjian, JMC Family Partnership,
Thomas E. Davis, Michael W. Hall, Joel Kirschbaum, Holly Marcum, and Pam Grace
Versaw and Timothy T. Revak, as Joint Tenants with Rights of Survivorship are or
may be parties to a Series C Preferred Stock Purchase Agreement dated March 31,
1993, or Amendment No. 1 thereto dated June 4, 1993 (collectively the "FOURTH
PURCHASE AGREEMENT"), pursuant to which the Company has sold, and Sierra, KPCB,
Domain, Aperture, CW, Vladimir I. Baronov, Jack Chirikjian, JMC Family
Partnership, Thomas E. Davis, Michael W. Hall, Joel Kirschbaum and Holly Marcum
have acquired, shares of the Company's Series C Preferred Stock (the "SERIES C
SHARES") and CW purchased a warrant to purchase shares of the Company's Series D
Preferred Stock, which
<PAGE> 4
warrant was subsequently exercised for shares of the Company's Series D
Preferred Stock (the "CW WARRANT SHARES");
WHEREAS, the Company effected a l-for-10 share reverse stock split
on August 2, 1993 pursuant to which all shares of the Company's capital stock
were automatically convened into one-tenth (1/10) of one share such class and
series of stock (all share numbers stated hereafter are stated in post-split
numbers).
WHEREAS, the Company, Sierra, KPCB V, Domain, Aperture, CW,
Biotechnology Investments Limited1 ("BIL"), Oxford Bioscience Partners L.P.,
Oxford Bioscience Partners (Bermuda) Limited Partnership, and Oxford Bioscience
Partners (Adjunct) L.P. (collectively with the previous two Oxford Bioscience
funds, "OXFORD"), and Dominion Fund II ("DOMINION FUND") are parties to a Series
E Preferred Stock Purchase Agreement of dated April 26, 1994, as amended June
13, 1994 (the "FIFTH PURCHASE AGREEMENT"), pursuant to which the Company has
sold, and Sierra, KPCB, Domain, Aperture, CW, BIL, Oxford and Dominion Fund have
acquired, shares of the Company's Series E Preferred Stock (the "FIRST SERIES E
SHARES");
WHEREAS, the Company effected a 4-for-3 share stock split of the
outstanding Series E Preferred Stock on November 9, 1995, pursuant to which all
shares of the Company's Series E Preferred Stock were automatically converted
into one and one third shares (1 1/3) of such series of stock (all share numbers
stated hereafter are stated in post-split numbers).
WHEREAS, the Company, Sierra, KPCB V, Domain, Aperture, CW, BIL and
Oxford are parties to a Conversion Agreement of dated November 10, 1995, (the
"CONVERSION AGREEMENT"), pursuant to which the Company has sold, and Sierra,
KPCB V, Domain, Aperture, CW, BIL and Oxford have acquired, shares of the
Company's Series E Preferred Stock (the "SECOND SERIES E SHARES");
WHEREAS, Sierra has acquired an aggregate of 73,500 shares of the
Company's Series B Preferred Stock by exercising in full the Sierra Warrants
(the "SIERRA WARRANT SHARES"), CW has acquired an aggregate of 270,222 shares of
the Company's Series D Preferred Stock by exercising in full the CW Warrant (the
"CW WARRANT SHARES"), and IPR and Sierra have acquired an aggregate of 4,757
shares of the Company's Series A Preferred Stock as a dividend pursuant to
Section l.l(d) of the First Purchase Agreement (the "DIVIDEND SHARES");
WHEREAS, The Company intends to issue up to an additional 21,546
shares of its Series B Preferred Stock to Dominion Ventures, Inc. ("DOMINION")
upon exercise of a warrant dated August 9, 1991 (as such amount may be adjusted
by the terms of such warrant, the "DOMINION B WARRANT SHARES"), up to an
additional 15,000 shares of its Series C Preferred Stock to Dominion upon
exercise of a warrant dated June 4, 1993 (as such amount may be adjusted by the
terms of such warrant, the "DOMINION C WARRANT SHARES"), up to an additional
anticipated 17,777 shares of its Series E Preferred Stock to Dominion upon
exercise of a warrant issued in May 1994 (such
- --------
(1) Shares purchased by Biotechnology Investments Limited will be held under the
record name of "Old Court Limited."
-2-
<PAGE> 5
final amount, as such amount may be adjusted by the terms of such warrant, to
be the "DOMINION E WARRANT SHARES" and collectively with the Dominion B
Warrant Shares and the Dominion E Warrant Shares, the "DOMINION WARRANT
SHARES"), up to an additional 1,300,000 shares of its Common Stock to Hyline
Laboratories, Inc. ("HYLINE") upon exercise of a warrant dated January 5, 1994
(the "HYLINE WARRANT" and the shares of Common Stock issuable thereunder as the
"HYLINE WARRANT SHARES"), up to an additional 13,000 shares of its Common Stock
to Rip Grossman & Associates, Inc. ("BROKER") upon exercise of a warrant dated
January 5, 1994 (the "BROKER WARRANT SHARES"), up to an additional 33,333 shares
of its Series E Preferred Stock to Silicon Valley Bank ("SVB") upon exercise of
a warrants dated May 19, 1995 and September 25, 1995 (the "SVB WARRANT SHARES"),
and 52,850 shares of Common Stock to SBC Capital Markets, Inc. and an individual
affiliated therewith (together, "SBC") upon exercise of warrants dated September
20, 1995 (the "SBC WARRANT SHARES");
WHEREAS, the Company and the Shareholders, other than the
Shareholder purchasing the Abbott Shares as of the date hereof, are also parties
to a Rights Agreement originally dated June 26, 1990, as amended and restated on
June 5, 1991 and as amended on August 9, 1991, as amended and restated on
February 28, 1992, June 29, 1992, March 31, 1993, June 4, 1993, January 5, 1994,
April 26, 1994 and June 13, 1994, and as amended September 20, 1995 (the "Rights
Agreement"), pursuant to which the Company granted to such Shareholders certain
registration rights and a right of first offer; and
WHEREAS, the Company and Abbott Laboratories ("ABBOTT") are parties
to a Series E Preferred Stock Purchase Agreement of even date herewith (the
"SIXTH PURCHASE AGREEMENT"), pursuant to which the Company will sell, and Abbott
will acquire, shares of the Company's Series E Preferred Stock (together with
all other shares of Company capital stock purchased by Abbott as a result of the
provisions of the Sixth Purchase Agreement that are "restricted securities"
under the Securities Act of 1933, the "ABBOTT SHARES");
WHEREAS, the Company, Sierra, KPCB V, Domain, Aperture, CW, BIL,
Oxford, Dominion Fund and Bios Equity Fund L.P. ("BIOS" and collectively with
IPR, Sierra, KPCB, Domain, Michael Ross, Aperture, CW, BIL, Oxford, Advent,
Dominion Fund, Dominion, Hyline, SVB, SBC, Abbott and all purchasers of Series C
Shares under the Fourth Purchase Agreement, the "SHAREHOLDERS") are parties to a
Series E Preferred Stock Purchase Agreement of even date herewith (the "SEVENTH
PURCHASE AGREEMENT"), pursuant to which the Company will sell, and Sierra, KPCB
V, Domain, Aperture, CW, BIL, Oxford, Dominion Fund and Bios will acquire,
shares of the Company's Series E Preferred Stock (the "THIRD SERIES E SHARES"
and collectively with the First Series E Shares and the Second Series E Share,
the "SERIES E SHARES," which, taken collectively with the Series A Shares, the
Series B Shares, the Series C Shares, the CW Warrant Shares, the Sierra Warrant
Shares, the Dividend Shares, the Dominion Warrant Shares, the Hyline Warrant
Shares, the Broker Warrant Shares, the SVB Warrant Shares, the SBC Warrant
Shares and the Abbott Shares are referred to herein as the "SHARES");
WHEREAS, such parties wish to execute this Restated Rights Agreement
and grant the Shareholders purchasing the Abbott Shares and the Third Series E
Shares the rights contained herein in order to provide it with a further
inducement to purchase such Shares;
-3-
<PAGE> 6
NOW, THEREFORE, IN CONSIDERATION OF THE MUTUAL PROMISES AND
COVENANTS HEREINAFTER SET FORTH, THE PARTIES AGREE AS FOLLOWS:
Section 1. Termination of Prior Rights. The Shareholders, who include a
majority in interest of the "Shareholders" who are parties to the Rights
Agreement, and the Company hereby terminate the Rights Agreement and in place
thereof enter into this Restated Rights Agreement which shall be the sole
agreement among the Shareholders and the Company relating to the subject
matter hereof.
Section 2. Amendment. Except as expressly provided herein, neither this
Restated Rights Agreement nor any term hereof may be amended, waived, discharged
or terminated other than by a written instrument signed by the party against
whom enforcement of any such amendment, waiver, discharge or termination is
sought; provided, however, that any provisions hereof may be amended, waived,
discharged or terminated upon the written consent of the Company and the holders
of a majority of the outstanding Registrable Securities (as defined below),
determined on the basis of assumed conversion of all Shares into Registrable
Securities.
Section 3. Registration Rights.
3.1 Definitions. As used in this Restated Rights Agreement:
(a) The terms "REGISTER," "REGISTERED," and "REGISTRATION" refer to
a registration effected by preparing and filing a registration statement in
compliance with the Securities Act of 1933, as amended (the "Act") and the
subsequent declaration or ordering of the effectiveness of such registration
statement.
(b) The term "Registrable Securities" means:
(i) the shares of Common Stock constituting or issuable
or issued upon conversion or exercise of (1) the Series A Shares, (2) the Series
B Shares, (3) the Series C Shares, (4) the Series E Shares, (5) the Common
Warrant Shares, (6) the CW Warrant Shares, (7) the Dividend Shares, (8) the
Sierra Warrant Shares, (9) the Dominion Warrant Shares, (10) the Hyline Warrant,
(11) the Broker Warrant, (12) the SVB Warrant Shares, (13) the SBC Warrant
Shares, and (14) the Abbott Shares (the shares of Common Stock referred to in
the foregoing clauses (1) through (14) being collectively referred to hereafter
as the "Stock"); and
(ii) any other shares of Common Stock of the Company
issued as (or issuable upon the conversion or exercise of any warrant, right or
other security which is issued as) a dividend or other distribution with respect
to, or in exchange for or in replacement of, the Stock, excluding in all cases,
however, any Registrable Securities, or Registrable Securities issuable upon the
exercise of other securities, sold by a person in a transaction in which his or
her rights under this Restated Rights Agreement are not assigned;
-4-
<PAGE> 7
provided, however, that Common Stock or other securities shall only be treated
as Registrable Securities if and so long as they have not been (A) sold to or
through a broker or dealer or underwriter in a public distribution or a public
securities transaction, or (B) sold in a transaction exempt from the
registration and prospectus delivery requirements of the Act under Section 4(1)
thereof, in either case, sthat all transfer restrictions, and restrictive
legends with respect thereto, if any, are removed upon the consummation
of such sale.
Notwithstanding the foregoing, or any other provision herein to the contrary,
the parties hereto understand and agree that the Dominion Warrant Shares shall
be entitled only to "piggy-back" and Form S-3 registration rights hereunder.
Consequently, neither the Dominion Warrant Shares nor the Common Stock issuable
upon conversion thereof shall be deemed Registrable Securities or Stock, and the
holders of such Dominion Warrant Shares shall not be deemed Shareholders,
Holders or Rightholders as such terms are used herein for purposes of Sections
3.2, 3.6, 3.14 and 4.
(c) The number of shares of "REGISTRABLE SECURITIES THEN
OUTSTANDING" shall be determined by the number of shares of Common Stock
outstanding which are, and the number of shares of Common Stock issuable
pursuant to then exercisable or convertible securities (including, without
limitation, then exercisable warrants) which are, Registrable Securities.
(d) The term "HOLDER" means any holder of outstanding Registrable
Securities who acquired such Registrable Securities in a transaction or series
of transactions not involving any registered public offering.
(e) The term "FORM S-3" means such form under the Act as in effect
on the date hereof or any registration form under the Act subsequently adopted
by the Securities and Exchange Commission ("SEC") which permits inclusion or
incorporation of substantial information by reference to other documents filed
by the Company with the SEC.
3.2 Requested Registration.
(a) If the Company shall receive at any time after the earlier of
(i) March 31, 1998, or (ii) three (3) months after the effective date of the
first registration statement for a public offering of securities of the Company
(other than a registration statement relating either to the sale of securities
to employees of the Company pursuant to a stock option, stock purchase or
similar plan or an SEC Rule 145 transaction), a written request from the Holders
of at least twenty-five percent (25%) of the Registrable Securities then
outstanding that the Company file a registration statement under the Act
covering the registration of the lesser of (A) at least twenty-five percent
(25%) of the Registrable Securities then outstanding (or a lesser percent if the
anticipated aggregate offering price would exceed $2,000,000) or (B) 250,000
Registrable Securities, then the Company shall, within ten (10) days of the
receipt thereof, give written notice of such request to all Holders and shall,
subject to the limitations of subsection 3.2(b), effect as soon as practicable,
and in any event within ninety (90) days of the receipt of such request, the
registration under the Act of all Registrable Securities which the Holders
request to be registered
-5-
<PAGE> 8
within twenty (20) days of the mailing of such notice by the Company in
accordance with Section 5.5.
(b) If the Holders initiating the registration request hereunder
("INITIATING HOLDERS") intend to distribute the Registrable Securities covered
by their request by means of an underwriting, they shall so advise the Company
as a part of their request made pursuant to this Section 3.2 and the Company
shall include such information in the written notice referred to in subsection
3.2(a). In such event, the right of any Holder to include his Registrable
Securities in such registration shall be conditioned upon such Holder's
participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting (unless otherwise mutually agreed by
a majority in interest of the Holders participating in such public offering (the
"PARTICIPATING HOLDERS") and the underwriter of such offering) to the extent
provided herein. All Holders proposing to distribute their securities through
such underwriting shall (together with the Company as provided in subsection
3.4(e)) enter into an underwriting agreement in customary form with the
underwriter or underwriters selected for such underwriting by a majority in
interest of the Participating Holders. Notwithstanding any other provision of
this Section 3.2, if the underwriter advises the Participating Holders in
writing that marketing factors require a limitation of the number of shares to
be under,mitten, then the number of shares of Registrable Securities that may be
included in the underwriting shall be allocated among all Participating Holders
in proportion (as nearly as practicable) to the amount of Registrable Securities
of the Company owned by each Participating Holder.
(c) The Company is obligated to effect only two (2) such
registrations pursuant to this Section 3.2.
(d) Notwithstanding the foregoing, if the Company shall furnish to
Holders requesting a registration statement pursuant to this Section 3.2, a
certificate signed by the President of the Company stating that in the good
faith judgment of the Board of Directors of the Company, it would be seriously
detrimental to the Company and its shareholders for such registration statement
to be filed and it is therefore essential to defer the filing of such
registration statement, the Company shall have the right to defer such filing
for a period of not more than ninety (90) days after receipt of the request of
the Initiating Holders; provided, however, that the Company may not utilize this
right more than once in any twelve (12) month period.
3.3 Company Registration. If (but without any obligation to do so) the
Company proposes to register (including for this purpose a registration effected
by the Company for shareholders other than the Holders) any of its Common Stock
or other securities under the Act in connection with the public offering of such
securities solely for cash (other than a registration relating either to the
sale of securities to participants in a Company stock option, stock purchase or
similar plan or to an SEC Rule 145 transaction, or a registration on any other
form not reasonably and customarily appropriate for this purpose), the Company
shall, at such time, promptly give each Holder written notice of such
registration. Upon the written request of each Holder given within twenty (20)
days after mailing of such notice by the Company in accordance with Section 5.5,
the Company shall, subject to the provisions of Section 3.8, cause to
-6-
<PAGE> 9
be registered under the Act all of the Registrable Securities that each such
Holder has requested to be registered.
3.4 Obligations of the Company. Whenever required under this Section 3
to effect the registration of any Registrable Securities, the Company shall, as
expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use its best efforts to cause such
registration statement to become effective, and, upon the request of the Holders
of a majority of the Registrable Securities registered thereunder, keep such
registration statement effective for up to one hundred twenty (120) days.
(b) Prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Act with respect to the disposition of all securities covered by such
registration statement.
(c) Furnish to the Holders such numbers of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
Act, and such other documents as they may reasonably request in order to
facilitate the disposition of Registrable Securities owned by them.
(d) Use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or Blue Sky
laws of such jurisdictions as shall be reasonably requested by the Holders,
provided that the Company shall not be required in connection therewith or as a
condition thereto to qualify to do business or to file a general consent to
service of process in any such states or jurisdictions.
(e) In the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual and customary
form, with the managing underwriter of such offering. Each Holder participating
in such underwriting shall also enter into and perform its obligations under
such an agreement.
(f) Notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Act of the happening of any event as a result
of which the prospectus included in such registration statement, as then in
effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing.
(g) Furnish, at the request of any Holder requesting registration of
Registrable Securities pursuant to this Section 3, on the date that such
Registrable Securities are delivered to the underwriters for sale in connection
with a registration pursuant to this Section 3, if such securities are being
sold through underwriters, or, if such securities axe not being sold
-7-
<PAGE> 10
through underwriters, on the date that the registration statement with respect
to such securities becomes effective, (i) an opinion, dated such date, of the
counsel representing the Company for the purposes of such registration, in form
and substance as is customarily given to underwriters in an underwritten public
offering, addressed to the underwriters, if any, and to the Holders requesting
registration of Registrable Securities and (ii) a letter dated such date, from
the independent certified public accountants of the Company, in form and
substance as is customarily given by independent certified public accountants to
underwriters in an underwritten public offering, addressed to the underwriters,
if any, and to the Holders requesting registration of Registrable Securities.
3.5 Furnish Information. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to this Section 3 with
respect to the Registrable Securities of any selling Holder that such Holder
shall furnish to the Company such information regarding itself, the Registrable
Securities held by it, and the intended method of disposition of such securities
as shall be required to effect the registration of such Holder's Registrable
Securities.
3.6 Expenses of Demand Registration. All expenses other than
underwriting discounts and commissions incurred in connection with
registrations, filings or qualifications pursuant to Section 3.2, including
(without limitation), all registration, filing and qualification fees, printers
and accounting fees, fees and disbursements of counsel for the Company, and the
reasonable fees and disbursements of one counsel for the selling Holders shall
be borne by the Company; provided, however, that the Company shall not be
required to pay for any expenses of any registration proceeding begun pursuant
to Section 3.2 if the registration request 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 expenses),
unless the Holders of a majority of the Registrable Securities agree to forfeit
their right to one (1) demand registration pursuant to Section 3.2; provided
further, however, that if at the time of such withdrawal, the Holders have
learned of a material adverse change in the condition, business, or prospects of
the Company from that known to the Holders at the time of their request, then
the Holders shall not be required to pay any of such expenses and shall retain
their rights pursuant to Section 3.2.
3.7 Expenses of Company Registration. The Company shall bear and pay all
expenses incurred in connection with any registration, filing or qualification
of Registrable Securities with respect to the registrations pursuant to Section
3.3 for each Holder (which right may be assigned as provided in Section 3.13),
including (without limitation) all registration, filing, and qualification fees,
printers and accounting fees relating or apportionable thereto and the fees and
disbursements of one counsel for the selling Holders selected by them, but
excluding underwriting discounts and commissions relating to Registrable
Securities.
3.8 Underwriting Requirements. In connection with any offering involving
an underwriting of shares being issued by the Company, the Company shall not be
required under Section 3.3 to include any of the Holders' securities in such
underwriting unless they accept the terms of the underwriting as agreed upon
between the Company and the underwriters selected by
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<PAGE> 11
it, and then only in such quantity as will not, in the written opinion of the
underwriters, jeopardize the success of the offering by the Company. If the
total amount of securities, including Registrable Securities, requested by
shareholders to be included in such offering exceeds the amount of securities
sold other than by the Company that the underwriters reasonably believe
compatible with the success of the offering, then the Company shall be required
to include in the offering only that number of such securities, including
Registrable Securities, which the underwriters believe will not jeopardize the
success of the offering (the securities so included to be apportioned pro rata
among the selling shareholders according to the total amount of securities
entitled to be included therein owned by each selling shareholder or in such
other proportions as shall mutually be agreed to by such selling shareholders);
but in no event shall (i) the amount of securities of the selling Holders
included in the offering be reduced below twenty-five percent (25%) of the total
amount of securities included in such offering, unless such offering is the
initial public offering of the Company's securities, in which case the selling
shareholders may be excluded if the underwriters make the determination
described above and no other shareholder's securities are included or (ii)
notwithstanding (i) above, any shares being sold by a shareholder exercising a
demand registration right similar to that granted in Section 3.2 be excluded
from such offering. For purposes of the preceding parenthetical concerning
apportionment, for any selling shareholder which is a holder of Registrable
Securities and which is a partnership or corporation, the partners, retired
partners and shareholders of such holder, or the estates and family members of
any such partners and retired partners and any trusts for the benefit of any of
the foregoing persons shall be deemed to be a single "selling shareholder," and
any pro rata reduction with respect to such selling shareholder shall be based
upon the aggregate amount of shares carrying registration rights owned by all
entities and individuals included in such "selling shareholder," as defined in
this sentence.
3.9 Delay of Registration. No Holder shall have any right to obtain or
seek an injunction restraining or otherwise delaying any such registration as
the result of any controversy that might arise with respect to the
interpretation or implementation of this Section 3.
3.10 Indemnification. In the event any Registrable Securities are
included in a registration statement under this Section 3:
(a) To the extent permitted by law, the Company will indemnify and
hold harmless each Holder, any underwriter (as defined in the Act) for such
Holder and each person, if any, who controls such Holder or underwriter within
the meaning of the Act or the Securities Exchange Act of 1934, as amended (the
"1934 ACT"), against any losses, claims, damages, or liabilities (joint or
several) to which they may become subject under the Act, the 1934 Act or other
federal or state law, insofar as such losses, claims, damages, or liabilities
(or actions in respect thereof) arise out of or are based upon any of the
following statements, omissions or violations (collectively a "VIOLATION"): (i)
any untrue statement or alleged untrue statement of a material fact contained in
such registration statement, including any preliminary prospectus or final
prospectus contained therein or any amendments or supplements thereto, (it) the
omission or alleged omission to state therein a material fact required to be
stated therein, or necessary to make the statements therein not misleading, or
(iii) any violation or alleged violation by the Company of the Act, the 1934
Act, any state securities law or any rule or regulation
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<PAGE> 12
promulgated under the Act, the 1934 Act or any state securities law; and the
Company will pay as incurred to each such Holder, underwriter or controlling
person, any legal or other expenses reasonably incurred by them in connection
with investigating or defending any such loss, claim, damage, liability, or
action; provided, however, that the indemnity agreement contained in this
subsection 3.10(a) shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability, or action if such settlement is effected without
the consent of the Company (which consent shall not be unreasonably withheld or
delayed), nor shall the Company be liable in any such case for any such loss,
claim, damage, liability, or action to the extent that it arises out of or is
based upon a Violation which occurs in reliance upon and in conformity with
written information furnished expressly for use in connection with such
registration by the Holder, underwriter or controlling person seeking
indemnification hereunder.
(b) To the extent permitted by law, each selling Holder will
indemnify and hold harmless the Company, each of its directors, each of its
officers who has signed the registration statement, each person, if any, who
controls the Company within the meaning of the Act, any underwriter, any other
Holder selling securities in such registration statement and any controlling
person of any such underwriter or other Holder, against any losses, claims,
damages, or liabilities (joint or several) to which any of the foregoing persons
may become subject, under the Act, the 1934 Act or other federal or state law,
insofar as such losses, claims, damages, or liabilities (or actions in respect
thereto) arise out of or are based upon any Violation, in each case to the
extent (and only to the extent) that such Violation occurs in reliance upon and
in conformity with written information furnished by such Holder expressly for
use in connection with such registration; and each such Holder will pay, as
incurred, any legal or other expenses reasonably incurred by any person intended
to be indemnified pursuant to this subsection 3.10(b), in connection with
investigating or defending any such loss, claim, damage, liability, or action;
provided, however, that the indemnity agreement contained in this subsection
3.10(b) shall not apply to amounts paid in settlement of any such loss, claim,
damage, liability or action if such settlement is effected without the consent
of the Holder, which consent shall not be unreasonably withheld or delayed;
provided that in no event shall any indemnity under this subsection 3.10(b)
exceed the gross proceeds from the offering received by such Holder.
(c) Promptly after receipt by an indemnified party under this
Section 3.10 of notice of a claim or of the commencement of any action
(including any governmental claim or action), such indemnified party will, if a
claim in respect thereof is to be made against any indemnifying party under this
Section 3.10, deliver to the indemnifying party a written notice of the claim or
the commencement of the action and the indemnifying party shall have the right
to participate in, and, to the extent the indemnifying party so desires, jointly
with any other indemnifying party similarly noticed, to assume the defense
thereof with counsel mutually satisfactory to the parties; provided, however,
that an indemnified party shall have the right to retain its own counsel, with
the fees and expenses to be paid by the indemnifying party, if representation of
such indemnified party by the counsel retained by the indemnifying party would
be inappropriate due to actual or potential differing interests between such
indemnified party and any other party represented by such counsel in such
proceeding. The failure to deliver written notice to the indemnifying party
within a reasonable time of the commencement of any such action, if prejudicial
to its ability to defend such action, shall relieve such indemnifying party of
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<PAGE> 13
any liability to the indemnified party under this Section 3.10 only to the
extent that it was so prejudiced, but the omission so to deliver written notice
to the indemnifying party will not relieve it of any liability that it may have
to any indemnified party otherwise than under this Section 3.10.
(d) The obligations of the Company and Holders under this Section
3.10 shall survive the completion of any offering of Registrable Securities in a
registration statement under this Section 3, and otherwise.
3.11 Reports Under Securities Exchange Act of 1934. With a view to
making available to the Holders the benefits of Rule 144 promulgated under the
Act and any other rule or regulation of the SEC that may at any time permit a
Holder to sell securities of the Company to the public without registration or
pursuant to a registration on Form S-3, the Company agrees to:
(a) make and keep public information available, as those terms are
understood and defined in SEC Rule 144, at all times after ninety (90) days
after the effective date of the first registration statement filed by the
Company for the offering of its securities to the general public;
(b) take such action, including the voluntary registration of its
Common Stock under Section 12 of the 1934 Act, as is necessary to enable the
Holders to utilize Form S-3 for the sale of their Registrable Securities, such
action to be taken as soon as practicable after the end of the fiscal year in
which the first registration statement filed by the Company for the offering of
its securities to the general public is declared effective;
(c) file with the SEC in a timely manner all reports and other
documents required of the Company under the Act and the 1934 Act;
(d) furnish to any Holder, so long as the Holder owns any
Registrable Securities, forthwith upon request (i) a written statement by the
Company that it has complied with the reporting requirements of SEC Rule 144 (at
any time after ninety (90) days after the effective date of the first
registration statement filed by the Company), the Act and the 1934 Act (at any
time after it has become subject to such reporting requirements), or that it
qualifies as a registrant whose securities may be resold pursuant to Form S-3
(at any time after it so qualifies), (ii) a copy of the most recent annual or
quarterly report of the Company and such other reports and documents so filed by
the Company, and (iii) such other information as may be reasonably requested in
availing any Holder of any rule or regulation of the SEC which permits the
selling of any such securities without registration or pursuant to such form;
(e) upon the request of any Holder, remove all legends and stop
transfer orders on such Holder's Registrable Securities (i) at such time as such
Registrable Securities qualify for sale under Rule 144(k), or (ii) in connection
with a sale of such Registrable Securities pursuant to the other provisions of
Rule 144;
(f) use its best efforts to otherwise comply with the "Registrant
Requirements" for the use of Form S-3.
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<PAGE> 14
3.12 Form S-3 Registration. In case the Company shall receive from any
Holder or Holders owning in the aggregate at least the lesser of (i) twenty
percent (20%) of the Registrable Securities then outstanding (or a lesser
percent if the fair market value of the Registrable Securities held by such
Holder(s) would exceed $2,000,000) or (ii) 250,000 Registrable Securities
(adjusted to reflect subsequent stock splits, stock dividends or
recapitalization), a written request or requests that the Company effect a
registration on Form S-3 and any related qualification or compliance with
respect to all or a part of the Registrable Securities owned by such Holder or
Holders, the Company will:
(a) promptly give written notice of the proposed registration, and
any related qualification or compliance, to all other Holders; and
(b) as soon as practicable, effect such registration and all such
qualifications and compliances as may be so requested and as would permit or
facilitate the sale and distribution of all or such portion of such Holder's or
Holders' Registrable Securities as are specified in such request, together with
all or such portion of the Registrable Securities of any other Holder or Holders
joining in such request as are specified in a written request given within 15
days after receipt of such written notice from the Company; provided, however,
that the Company shall not be obligated to effect any such registration,
qualification or compliance, pursuant to this Section 3.12, (1) if Form S-3 is
not available for such offering by the Holders; (2) if the Holders, together
with the holders of any other securities of the Company entitled to inclusion in
such registration, propose to sell Registrable Securities and such other
securities (if any) at an aggregate price to the public (net of any
underwriters' discounts or commissions) of less than $500,000; (3) if the
Company shall furnish to the Holders a certificate signed by the president of
the Company stating that in the good faith judgment of the Board of Directors of
the Company, it would be seriously detrimental to the Company and its
shareholders for such Form S-3 Registration to be effected at such time, in
which event the Company shall have the right to defer the filing of the Form S-3
registration statement for a period of not more than ninety (90) days after
receipt of the request of the Holder or Holders under this Section 3.12;
provided, however, that the Company shall not utilize this right more than once
in any twelve month period; (4) if the Company has, within the six (6) month
period preceding the date of such request, already effected one registration on
Form S-3 for the Holders pursuant to this Section 3.12; or (5) in any particular
jurisdiction in which the Company would be required to qualify to do business or
to execute a general consent to service of process in effecting such
registration, qualification or compliance.
(c) Subject to the foregoing, the Company shall file a registration
statement covering the Registrable Securities and other securities so requested
to be registered as soon as practicable after receipt of the request or requests
of the Holders. All expenses incurred in connection with a registration
requested pursuant to Section 3.12, including (without limitation) all
registration, filing, qualification, printer's and accounting fees and the
reasonable fees and disbursements of counsel for the selling Holder or Holders
and counsel for the Company, shall be borne pro rata by the Holder or Holders
participating in the Form S-3 Registration; provided, however, that the Company
shall bear any auditing expenses that shall be incurred in the
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<PAGE> 15
normal course of business and shall bear all regular salary expenses of its
employees. Registrations effected pursuant to this Section 3.12 shall not be
counted as demands for registration or registrations effected pursuant to
Section 3.2 or 3.3.
3.13 Assignment of Registration Rights. The rights to cause the Company
to register Registrable Securities pursuant to this Section 3 may be assigned by
a Holder to a transferee or assignee of at least the lesser of (i) 150,000
shares (adjusted to reflect subsequent stock splits, stock dividends or
recapitalization) or (ii) all of such Holder's Registrable Securities provided
the Company is, within a reasonable time after such transfer, furnished with
written notice of the name and address of such transferee or assignee and the
securities with respect to which such registration rights are being assigned;
and provided, further, that such assignment shall be effective only if
immediately following such transfer the further disposition of such securities
by the transferee or assignee is restricted under the Act. The foregoing share
limitation shall not apply, however, to transfers by a Holder to shareholders,
partners (including limited partners) or retired partners of the Holder
(including spouses and ancestors, lineal descendants and siblings of such
partners or spouses, or trusts for their benefit, who acquire Registrable
Securities by gift, will or intestate succession) if all such transferees or
assignees agree in writing to appoint a single representative as their attorney
in fact for the purpose of receiving any notices and exercising their rights
under this Section 3.
3.14 Limitations on Subsequent Registration Rights. From and after the
date of this Restated Rights Agreement, the Company shall not, without the prior
written consent of the Holders of a majority of the outstanding Registrable
Securities, enter into any agreement with any holder or prospective holder of
any securities of the Company which would allow such holder or prospective
holder (a) to include such securities in any registration filed under Section
3.2 hereof, unless under the terms of such agreement, such holder or prospective
holder may include such securities in any such registration only to the extent
that the inclusion of his securities will not reduce the amount of the
Registrable Securities of the Holders which is included or (b) to make a demand
registration which could result in such registration statement being declared
effective prior to the earlier of either of the dates set forth in subsection
3.2(a) or within one hundred twenty (120) days of the effective date of any
registration effected pursuant to Section 3.2.
3.15 "Market Stand-Off" Agreement. The Holder hereby agrees that during
the 180-day period following the effective date of a registration statement of
the Company filed under the Act, it shall not, to the extent requested by the
Company and such underwriter, sell or otherwise transfer or dispose of (other
than to donees who agree to be similarly bound) any Common Stock of the Company
held by it at any time during such period except Common Stock included in such
registration; provided, however, that:
(a) such agreement shall be applicable only to the first such
registration statement of the Company which covers Common Stock (or other
securities) to be sold on its behalf to the public in an underwritten offering;
and
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<PAGE> 16
(b) all officers and directors of the Company and all other persons
with registration rights (whether or not pursuant to this Restated Rights
Agreement) enter into similar agreements.
To enforce the foregoing covenant, the Company may impose stop-transfer
instructions with respect to the Registrable Securities of the Holder (and the
shares or securities of every other person subject to the foregoing restriction)
until the end of such period.
3.16 Termination of Registration Rights. No Holder shall be entitled to
exercise any right provided for in this Section 3: (a) after seven (7) years
following the consummation of the Company's sale of its Common Stock in a bona
fide, firm commitment underwriting pursuant to a registration statement on Form
S-1 under the Act which results in aggregate gross cash proceeds to the Company
in excess of $7,500,000 and the public offering price of which is not less than
$5.00 per share (adjusted to reflect subsequent stock dividends, stock splits or
recapitalization) (other than a registration statement relating either to the
sale of securities to employees of the Company pursuant to a stock option, stock
purchase or similar plan or a SEC Rule 145 transaction); or (b) at such time
following the Company's initial public offering and for so long as such Holder
may sell all of such Holder's Registrable Securities in any one three-month
period pursuant to Rule 144 (or such successor rule as may be adopted).
3.17 Limit on Sales. Notwithstanding anything herein to the contrary,
none of (a) Hyline, (b) Abbott, or (c) the remaining Holders of Registrable
Securities as a group, respectively, shall dispose of more than 250,000 shares
of Registrable Securities within any three-month period after the date of this
Agreement pursuant to a registration made under Sections 3.2 or 3.12 above;
provided, however, that if Hyline or Abbott wishes to so dispose of more than
250,000 shares of Registrable Securities in any such period, it may do so
provided that (i) it delivers to the Company a written notice not less than
ninety (90) days prior to the date on which shares in excess of 250,000 will be
disposed of stating its desire to so dispose of Registrable Securities and
setting forth the aggregate number of shares that Hyline or Abbott wishes to so
dispose of in the such three-month period and (ii) the Company does not receive
a writing from its principal investment banker or equivalent financial advisor
advising the Company that marketing factors require a limitation of the number
of shares to be underwritten at such time, which limitation would otherwise be
exceeded by the registration of in excess of 250,000 shares of Registrable
Securities by Hyline or Abbott.
3.18 Subsequent Rights. If, after the date of this Agreement, the
Company shall grant registration rights to a third party different from the
rights set forth in this Section 3, the following shall apply on each such
occasion until the right set forth in this Section 3.18 is exercised:
(i) The Company shall first deliver to each of Hyline
and Abbott a written notice (the "NOTICE") setting forth the material terms of
such subsequent registration rights (the "SUBSEQUENT RIGHTS").
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<PAGE> 17
(ii) For a period of thirty (30) days after the receipt
of the Notice (the "NOTICE PERIOD"), Hyline and Abbott shall each have the
right, but not the obligation, to surrender its registration rights under this
Section 3 and agree to accept and be bound by the terms of the Subsequent Rights
(the "EXCHANGE RIGHT"). If Hyline and/or Abbott chooses to so exercise the
Exchange Right, it shall deliver a written notice of such intent to the Company
and enter into an agreement with the Company pursuant to which it will surrender
its registration rights under this Section 3 and the Company will grant to
Hyline and/or Abbott, as appropriate, the Subsequent Rights.
(iii) To the extent that Hyline or Abbott declines to
exercise the Exchange Right within the Notice Period, it shall retain its
registration rights and the Exchange Right under this Section 3 with respect to
future Subsequent Rights, if any, and shall not be entitled to, nor bound by,
the Subsequent Rights so declined.
Section 4. Additional Rights.
4.1 Right of First Offer. Subject to the terms and conditions specified
in this Section 4.1, and subject to any limitations imposed by applicable laws
governing the nature and extent of foreign investment in companies domiciled in
the U.S., the Company hereby grants to each Shareholder, so long as such
Shareholder holds at least 50,000 Shares (or, in the case of a holder of the
Hyline Warrant, the portion of such warrant so held represents the right to
purchase at least 50,000 Shares) (as subsequently adjusted for subsequent stock
splits; Stock dividends or recapitalization) (the "RIGHTHOLDER"), a right of
first offer with respect to future sales by the Company of its New Securities
(as hereinafter defined). For purposes of this Section 4.1, the term Rightholder
includes any partners, shareholders or affiliates of the Rightholder. The
Rightholder shall be entitled to apportion the right of first offer hereby
granted among itself and its partners, shareholders and affiliates in such
proportions as it deems appropriate.
(a) In the event the Company proposes to issue New Securities, it
shall give the Rightholder written notice (the "NOTICE") of its intention
stating (i) a description of the New Securities it proposes to issue, (ii) the
number of shares of New Securities it proposes to offer, (iii) the price per
share at which, and other terms on which, it proposes to offer such New
Securities and (iv) the number of shares that the Rightholder has the right to
purchase under this Section 4.1, based on the Rightholder's Percentage (as
defined in Section 4.1 (d)(ii)).
(b) Within thirty (30) days after the Notice is given (in accordance
with Section 5.5), the Rightholder may elect to purchase, at the price specified
in the Notice, up to the number of shares of the New Securities proposed to be
issued that the Rightholder has the right to purchase as specified in the
Notice. An election to purchase shall be made in writing and must be given to
the Company within such thirty (30) day period (in accordance with Section 5.5).
The closing of the sale of New Securities by the Company to the participating
Rightholder upon exercise of its rights under this Section 4.1 shall take place
simultaneously with the closing of the sale of New Securities to third parties.
Notwithstanding the foregoing, the thirty-day period set forth above shall be
fifteen (15) days with respect to the holder(s) of the Hyline Warrant, other
than a Shareholder who holds other Shares in addition to such Hyline Warrant.
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<PAGE> 18
(c) The Company shall have ninety (90) days after the last date on
which the Rightholder's right of first offer lapsed to enter into an agreement
(pursuant to which the sale of New Securities covered thereby shall be closed,
if at all, within forty-five (45) days from the execution thereof) to sell the
New Securities which the Rightholder did not elect to purchase under this
Section 4.1, at or above the price and upon terms not materially more favorable
to the purchasers of such securities than the terms specified in the initial
Notice given in connection with such sale. In the event the Company has not
entered into an agreement to sell the New Securities within such ninety (90) day
period (or sold and issued New Securities in accordance with the foregoing
within forty-five days from the date of said agreement), the Company shall not
thereafter issue or sell any New Securities without first offering such New
Securities to the Rightholder in the manner provided in this Section 4.1.
(d) (i) "NEW SECURITIES" shall mean any shares of, or securities
convertible into or exercisable for any shares of, any class of the Company's
capital stock; provided that "New Securities" does not include: (i) the Shares
or the Common Stock issuable upon conversion thereof; (ii) securities issued
pursuant to the acquisition of another business entity by the Company by merger,
purchase of substantially all of the assets of such entity, or other
reorganization whereby the Company owns not less than a majority of the voting
power of such entity; (iii) shares, or options to purchase shares, of the
Company's Common Stock and the shares of Common Stock issuable upon exercise of
such options, issued pursuant to any arrangement approved by the Board of
Directors to employees, officers and directors of, or consultants, advisors or
other persons performing services for, the Company; (iv) shares of the Company's
Common Stock or Preferred Stock of any series issued in connection with any
stock split, stock dividend or recapitalization of the Company; (v) Common Stock
issued upon exercise of warrants, options or convertible securities if the
issuance of such warrants, options or convertible securities was a result of the
exercise of the right of first offer granted under this Section 4.1 or was
subject to the right of first offer granted under this Section 4.1; (vi) capital
stock or warrants or options for the purchase of shares of capital stock issued
by the Company to a lender in connection with any loan or lease financing
transaction; and (vii) securities sold to the public in an offering pursuant to
a registration statement filed with the Securities and Exchange Commission under
the Act.
(ii) The applicable "PERCENTAGE" for the Rightholder
shall be the number of shares of New Securities calculated by dividing (i) the
total number of shares of Common Stock owned by the Rightholder (assuming
conversion of all shares of Preferred Stock and exercise of the Hyline Warrant)
by (ii) the total number of shares of Common Stock outstanding at the time the
Notice is given (assuming conversion of all shares of Preferred Stock and
exercise of the Hyline Warrant); provided, however, that IPR shall not be
entitled to purchase more than that number of shares of New Securities the
aggregate purchase price of which is equal to the cumulative sum of $25,000 for
each calendar quarter that has elapsed from June 2(5, 1990 until the time of
exercise of the right of first offer provided by this Section 4.1, less the
aggregate purchase price of any New Securities already purchased by the
Rightholder pursuant to this Section 4.1; provided that in no case may the
number of shares of capital stock of the Company
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<PAGE> 19
owned by the Rightholder equal or exceed 25.1% of the total number of
outstanding shares of capital stock of the Company.
(e) The right of first offer granted under this Section 4.1 shall
expire upon the earlier of (a) March 31, 1998, or (b) following the consummation
of the Company's sale of, its Common Stock in a bona fide, firm commitment
underwriting pursuant to a registration statement on Form S-1 under the Act
which results in aggregate gross cash proceeds to the Company in excess of
$7,$00,000 and the public offering price of which is not less than $6.00 per
share (as subsequently adjusted to reflect subsequent stock dividends, stock
splits or recapitalization) (other than a registration statement relating either
to the sale of, securities to employees of the Company pursuant to a stock
option, stock purchase or similar plan or a SEC Rule 145 transaction).
(f) The right of first offer granted under this section may be
assigned by the Rightholder to a transferee or assignee of the Rightholder's
shares of the Company's stock acquiring the lesser of, (a) at least 50,000 of
the Rightholder's shares of the Company's Common Stock (treating all shares of
Preferred Stock for this purpose as though converted into Common Stock and the
Hyline Warrant as having been exercised) (equitably adjusted for any stock
splits, subdivision stock dividends, changes, combinations or the like) or (b)
all of the Rightholder's remaining shares of the Company's stock. In the event
that the Rightholder shall assign its right of first offer pursuant to this
Section 4.1 in connection with the transfer of less than all of its shares of,
the Company's stock, the Rightholder shall also retain its right of first offer.
Section 5. Miscellaneous.
5.1 Assignment. Subject to the provisions of Section 3.13 hereof, the
terms and conditions of this Restated Rights Agreement shall inure to the
benefit of, and be binding upon the respective successors and assigns of the
parties hereto.
5.2 Third Parties. Nothing in this Restated Rights Agreement, express or
implied, is intended to confer upon any party, other than the parties hereto,
and their respective successors and assigns, any rights, remedies, obligations
or liabilities under or by reason of this Restated Rights Agreement, except as
expressly provided herein.
5.3 Governing Law. This Restated Rights Agreement shall be governed by
and construed under the laws of the State of California in the United States
of America.
5.4 Counterparts. This Restated Rights Agreement may be executed in two
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
5.5 Notices. Any notice required or permitted by this Agreement shall be
in writing and shall be sent by prepaid registered or certified mail, return
receipt requested and addressed, if to the Company, to its principal offices, or
if to a Shareholder, to the address for
-17-
<PAGE> 20
such Shareholder set forth on Exhibit A hereto. Such notice shall be deemed to
have been given three (3) days after deposit in the mail.
5.6 Severability. If one or more provisions of this Restated Rights
Agreement are held to be unenforceable under applicable law, portions of such
provisions, or such provisions in their entirety, to the extent necessary, shall
be severed from this Restated Rights Agreement, and the balance of this Restated
Rights Agreement shall be enforceable in accordance with its terms.
5.7 Amendment and Waiver. Any provision of this Restated Rights
Agreement may be amended with the written consent of the Company and the Holders
of at least a majority of the outstanding shares of the Registrable Securities.
Any amendment or waiver effected in accordance with this paragraph shall be
binding upon each Holder of Registrable Securities, and the Company. In
addition, the Company may waive performance of any obligation owing to it, as to
some or all of the Holders of Registrable Securities, or agree to accept
alternatives to such performance, without obtaining the consent of any Holder of
Registrable Securities. In the event that an underwriting agreement is entered
into between the Company and any Holder, and such underwriting agreement
contains terms differing from this Restated Rights Agreement, as to any such
Holder the terms of such underwriting agreement shall govern.
5.8 Effect of Amendment or Waiver. Each Shareholder and its successors
and assigns acknowledge that by the operation of Section 5.7 hereof the holders.
of a majority of the outstanding Registrable Securities, acting in conjunction
with the Company, will have the right and power to diminish or eliminate all
rights pursuant to this Restated Rights Agreement.
5.9 Rights of Holders. Each holder of Registrable Securities shall have
the absolute right to exercise or refrain from exercising any right or rights
that such holder may have by reason of this Restated Rights Agreement,
including, without limitation, the right to consent to the waiver or
modification of any obligation under this Restated Rights Agreement, and such
holder shall not incur any liability to any other holder of any securities of
the Company as a result of exercising or refraining from exercising any such
right or rights.
5.10 Delays or Omissions. No delay or omission to exercise any right,
power or remedy accruing to any party to this Restated Rights Agreement, upon
any breach or default of the other party, shall impair any such right, power or
remedy of such nonbreaching party nor shall it be construed to be a waiver of
any such breach or default, or an acquiescence therein, or of or in any similar
breach or default thereafter occurring; nor shall any waiver of any single
breach or default be deemed a waiver of any other breach or default theretofore
or thereafter occurring. Any waiver, permit, consent or approval of any kind or
character on the part of any party of any breach or default under this Restated
Rights Agreement, or any waiver on the part of any party of any provisions or
conditions of this Restated Rights Agreement, must be made in writing and shall
be effective only to the extent specifically set forth in such writing. All
remedies, either under this Restated Rights Agreement, or by law or otherwise
afforded to any holder, shall be cumulative and not alternative.
-18-
<PAGE> 21
IN WITNESS WHEREOF, the parties hereto have executed this Ninth
Amended and Restated Rights Agreement as of the day and year first above
written.
COMPANY: SHAREHOLDERS:
RIBOGENE, INC.
By:
----------------------------- ------------------------------------
(Print or Type Name of Shareholder)
Title:
-----------------------------
By:
----------------------------
Title:
----------------------------
------------------------------------
(Print or Type Name of Shareholder)
By:
----------------------------
Title:
----------------------------
------------------------------------
(Print or Type Name of Shareholder)
By:
----------------------------
Title:
----------------------------
-19-
<PAGE> 22
EXHIBIT A
SCHEDULE OF SHAREHOLDERS
Institute of Protein
Research of the Russian
Abbott Laboratories Academy of Sciences
100 Abbott Park Road 142292 Puschino
Abbott Park, IL 6-0064-3500 Moscow Region, Russia
Attn: Dr. Al Harris
Biotechnology Investments Ltd.2 Dominion Fund II
c/o Domain Associates Dominion Ventures, Inc.
One Palmer Square 44 Montgomery Street
Princeton, NJ 08542 San Francisco, CA 94104
Attn: Kathleen Shoemaker
Michael J. Ross
Oxford Bioscience Partners L.P. 1065 Hayne Road
Oxford Bioscience Partners Hillsborough, CA 94010
(Bermuda) Limited Partnership
Oxford Bioscience Partners CW Ventures II, L.P.
(Adjunct) L.P. 1041 Third Avenue
650 Town Center Drive, Ste. 810 New York, NY 10021
Costa Mesa, CA 92626 Attn: Charles Hartman
Attn: Edmund Olivier
Domain Partners II, L.P. Vladimir I. Baranov
One Palmer Square 646 Foothill Drive
Princeton, NJ 08542 Pacifica, CA 94044
Attn: Jesse Treu
Jack Chirikjian
Sierra Ventures III 8726 Hickory Bend Trail
Sierra Ventures III International Potomac, MD 20854
3000 Sand Hill Road
Menlo Park, CA 94025 JMC Family Parmership
Attn: Petri Vainio c/o Jack Chirikjian
8726 Hickory Bend Trail
Kleiner Perkins Caufield & Potomac, MD 20854
Byers V
KPCB Zaibatsu Fund I Grace A. Cruz
2750 Sand Hill Road 1693 Chianti Way
Menlo Park, CA 94025 Oakley, CA 94561
Attn: Alexander Barkas
Aperture Associates, L.P. Thomas E. Davis
c/o Horsley Keogh Associates 2642 Ulloa Street
505 Montgomery Street San Francisco,CA 94116
San Francisco, CA 94111
Attn: Dan Reeve Michael W. Hall
1716 Fulton Street
Palo Alto, CA 94303
Joel Kirschbaum
6132 Johnston Drive
Oakland, CA 94611
- --------
These shares will be held under the record name of "Old Court Limited."
<PAGE> 23
SCHEDULE OF SHAREHOLDERS (cont'd)
Holly Marcum
2642 Ulloa Street
San Francisco, CA 94116
Pam Grace Versaw and Timothy T. Revak, as
Joint Tenants with Rights of Survivorship
23121 Mora Glen Drive
Los Altos, CA 94024
Hyline Laboratories, Inc.
100 Banks Avenue
Rockville Center, NY 11570
Rip Grossman & Associates, Inc.
4200 Somerset Drive, Suite 101
Prairie Village, KS 66208
Silicon Valley Bank
3000 Lakeside Drive
Santa Clara, CA 95054
SBC Capital Markets, Inc.
141 West Jackson Boulevard
Chicago, IL 60604 Attn:
Dr. Judith Donaldson
Donaldson Capital Management Corporation
401 South LaSalle Street, Suite 1306
Chicago, IL 60605
Bios Equity Fund L.P.
401 South LaSalle Street, Suite 1306
Chicago, IL 60605
Attn: Dr. Judith Donaldson
<PAGE> 1
EXHIBIT 4.4
No. AW 23 10,000 Class A Warrants
VOID AFTER JUNE 22, 2003
CLASS A WARRANT CERTIFICATE FOR PURCHASE
OF COMMON STOCK
RIBOGENE, INC.
This certifies that FOR VALUE RECEIVED Wolcat Capital Inc. Money
Purchase Plan or registered assigns (the "Registered Holder") is the owner of
the number of Class A Warrants ("Class A Warrants") specified above. Each
Class A Warrant represented hereby initially entitles the Registered Holder to
purchase, subject to the terms and conditions set forth in this Warrant
Certificate and the Warrant Agreement (as hereinafter defined), one fully paid
and nonassessable share of Common Stock, no par value ("Common Stock"), of
RiboGene, Inc., a California corporation (the "Company"), at any time between
June 23, 1997, and the Expiration Date (as hereinafter defined), upon the
presentation and surrender of this Warrant Certificate with the Subscription
Form on the reverse hereof duly executed, at the corporate office of the
Company, or its successor as warrant agent, accompanied by payment of the
lesser of (a) $2.25 and (b) the per share price of the Common Stock sold in the
Qualified IPO (as defined in the Warrant Agreement)(the "Purchase Price") in
lawful money of the United States of America in cash or by official bank or
certified check made payable to the Company.
This Warrant Certificate and each Class A Warrant represented hereby
are issued pursuant to and are subject in all respects to the terms and
conditions set forth in the Warrant Agreement (the "Warrant Agreement"), dated
June 23, 1997, between the Company and Paramount Capital, Inc.
In the event of certain contingencies provided for in the Warrant
Agreement, the Purchase Price or the number of shares of Common Stock subject
to purchase upon the exercise of each Class A Warrant represented hereby are
subject to modification or adjustment.
Each Class A Warrant represented hereby is exercisable at the option
of the Registered Holder, but no fractional shares of Common Stock will be
issued. In the case of the exercise of less than all the Class A Warrants
represented hereby, the Company shall cancel this Warrant Certificate upon the
surrender hereof and shall execute and deliver a new Warrant Certificate or
Warrant Certificates of like tenor for the balance of such Class A Warrants.
<PAGE> 2
The term "Expiration Date" shall mean 5:00 P.M. (New York time) on
June 22, 2003, or such earlier date as the Class A Warrants shall be redeemed.
If such date shall in the State of New York be a holiday or a day on which
banks are authorized to close, then the Expiration Date shall mean 5:00 P.M.
(New York time) the next following day which in the State of New York is not a
holiday or a day on which banks are authorized to close. Upon notice to all
Registered Holders of the Class A Warrants, the Company shall have the right to
extend the Expiration Date.
The Holder of this Warrant shall have the registration rights as
provided in Investor Rights Agreement (the "Rights Agreement") dated as of the
date hereof between the Company and such Holder. The Class A Warrants
represented hereby shall not be exercisable by a Registered Holder in any state
where such exercise would be unlawful.
This Warrant Certificate is exchangeable, upon the surrender hereof by
the Registered Holder at the corporate office of the Company, for a new Warrant
Certificate or Warrant Certificates of like tenor representing an equal
aggregate number of Class A Warrants, each of such new Warrant Certificates to
represent such number of Class A Warrants as shall be designated by such
Registered Holder at the time of such surrender. Upon due presentment with any
applicable transfer fee per certificate in addition to any tax or other
governmental charge imposed in connection therewith, for registration of
transfer of this Class A Warrant Certificate at such office, a new Warrant
Certificate or Warrant Certificates representing an equal aggregate number of
Class A Warrants will be issued to the transferee in exchange therefor, subject
to the limitations provided in the Warrant Agreement.
Prior to the exercise of any Class A Warrant represented hereby, the
Registered Holder shall not be entitled to any rights of a stockholder of the
Company, including, without limitation, the right to vote or to receive
dividends or other distributions, and shall not be entitled to receive any
notice of any proceedings of the Company, except as provided in the Warrant
Agreement.
The Class A Warrants represented hereby may be redeemed at the option
of the Company, at a redemption price of $.10 per Class A Warrant, provided the
Market Price (as defined in the Warrant Agreement) for the Common Stock shall
exceed the Target Price (as defined in the Warrant Agreement). Notice of
redemption shall be given not later than the sixtieth day before the date fixed
for redemption, all as provided in the Warrant Agreement. On and after the
date fixed for redemption, the Registered Holder shall have no rights with
respect to the Class A Warrants represented hereby except to receive the $.10
per Class A Warrant upon surrender of this Warrant Certificate.
Prior to due presentment for registration of transfer hereof, the
Company may deem and treat the Registered Holder as the absolute owner hereof
and of each Class A Warrant represented hereby (notwithstanding any notations
of ownership or writing hereon made by anyone other than a duly authorized
officer of the Company) for all purposes and shall not be affected by any
notice to the contrary.
-2-
<PAGE> 3
The Company has agreed to pay a fee of 5% of the Purchase Price to
Paramount Capital, Inc. upon certain conditions as specified in the Warrant
Agreement upon the exercise of the Class A Warrants represented hereby. Any
costs incurred by the Placement Agent in connection with the solicitation of
Warrant exercises or the redemption of Warrants shall be reimbursed by the
Company.
This Warrant Certificate shall be governed by and construed in
accordance with the laws of the State of New York.
-3-
<PAGE> 4
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed, manually or in facsimile, by two of its officers thereunto
duly authorized.
RIBOGENE, INC.
Dated: February 25, 1997 By: [SIG]
-----------------------------------
By: [SIG]
-----------------------------------
-4-
<PAGE> 5
[FORM OF REVERSE OF WARRANT CERTIFICATE]
TRANSFER FEE: $ ____________ PER CERTIFICATE ISSUED
SUBSCRIPTION FORM
To Be Executed by the Registered Holder
in Order to Exercise Warrant
The undersigned Registered Holder hereby irrevocably elects to
exercise ____________ Class A Warrants represented by this Warrant Certificate,
and to purchase the securities issuable upon the exercise of such Class A
Warrants, and requests that certificates for such securities shall be issued in
the name of
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER
---------------------------------------
---------------------------------------
---------------------------------------
---------------------------------------
[please print or type name and address]
and be delivered to
---------------------------------------
---------------------------------------
---------------------------------------
---------------------------------------
[please print or type name and address]
and if such number of Class A Warrants shall not be all the Class A Warrants
evidenced by this Warrant Certificate, that a new Class A Warrant Certificate
for the balance of such Class A Warrants be registered in the name of, and
delivered to, the Registered Holder at the address stated below.
The undersigned represents that the exercise of the within Class A
Warrant was solicited by a member of the National Association of Securities
Dealers, Inc. If not solicited by an NASD member, please write "unsolicited"
in the space below. Unless otherwise indicated by
-5-
<PAGE> 6
listing the name of another NASD member firm, it will be assumed that the
exercise was solicited by Paramount Capital, Inc.
----------------------------------------------
(Name of NASD Member)
Dated: X
------------------------- --------------------------------------------
--------------------------------------------
--------------------------------------------
Address
--------------------------------------------
Taxpayer Identification Number
--------------------------------------------
Signature Guaranteed
--------------------------------------------
-6-
<PAGE> 7
ASSIGNMENT
To Be Executed by the Registered Holder
in Order to Assign Warrants
FOR VALUE RECEIVED, ______________________________ hereby sells, assigns and
transfers unto
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER
---------------------------------------
---------------------------------------
---------------------------------------
---------------------------------------
[please print or type name and address]
_________ of the Class A Warrants represented by this Warrant Certificate, and
hereby irrevocably constitutes and appoints ___________________________
Attorney to transfer this Warrant Certificate on the books of the Company, with
full power of substitution in the premises.
Dated: X
------------------------------ ------------------------------------
Signature Guaranteed
------------------------------------
THE SIGNATURE TO THE ASSIGNMENT OR THE SUBSCRIPTION FORM MUST CORRESPOND TO THE
NAME AS WRITTEN UPON THE FACE OF THIS WARRANT CERTIFICATE IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER, AND MUST BE
GUARANTEED BY A MEMBER OF THE MEDALLION STAMP PROGRAM.
-7-
<PAGE> 1
EXHIBIT 4.5
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND NEITHER SUCH SECURITIES NOR THE SECURITIES ISSUABLE UPON
EXERCISE HEREOF NOR CONVERSION THEREOF HAVE BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 OR ANY STATE SECURITIES LAW. SUCH SECURITIES MAY NOT BE
SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS THE COMPANY
RECEIVES AN OPINION OF COUNSEL REASONABLY ACCEPTABLE TO IT STATING THAT SUCH
SALE OR TRANSFER IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY
REQUIREMENTS OF SAID ACT.
RIBOGENE, INC.
Unit Purchase Option for the Purchase of Shares of
Preferred Stock and Warrants
NO. 1 342,399 OPTION UNITS
FOR VALUE RECEIVED, RIBOGENE, INC., a California corporation (the
"COMPANY"), hereby certifies that Paramount Capital, Inc., or its permitted
assigns, is entitled to purchase from the Company, at any time or from time to
time commencing on DECEMBER 23, 1997 and prior to 5:00 P.M., New York City
time, on December 22, 2007, up to three hundred forty-two thousand three
hundred ninety-nine (342,399) Option Units, each Option Unit consisting of one
fully paid and non-assessable share of the Series F Convertible Preferred
Stock, no par value, of the Company and one Class A Warrant for an aggregate
purchase price of $847,437.53 (computed on the basis of $2.475 per Option
Unit). Each Class A Warrant is exercisable to purchase one share of Common
Stock, no par value, of the Company for an aggregate purchase price of
$770,397.75 (computed on the basis of $2.25 per share of Common Stock).
(Hereinafter, (i) said Option Units are referred to as the "OPTION UNITS", (ii)
said Series F Convertible Preferred Stock, together with any other equity
securities which may be issued by the Company with respect thereto (other than
on conversion thereof) or in substitution therefor, is referred to as the
"PREFERRED STOCK", (iii) said Class A Warrants are referred to as the
"WARRANTS", (iv) the Common Stock purchasable upon exercise of the Warrants and
into which the Preferred Stock is convertible, is referred to as the "COMMON
STOCK", (v) the shares of the Preferred Stock purchasable hereunder or under
any other Option (as hereinafter defined) are referred to as the "PREFERRED
SHARES", (vi) the shares of Common Stock purchasable upon exercise of the
Warrants or under any other Option (as hereinafter defined) are referred to as
the "WARRANT SHARES", (vii) the shares of Common Stock issued in a Qualified
IPO (as defined in the Amended and Restated Articles of Incorporation of the
Company), as the case may be, purchasable hereunder or under any other Option
(as hereinafter defined) following the conversion of all shares of Preferred
Stock into Common Stock or other capital stock of the Company, as the case may
be, and each share of Common Stock or other capital stock of the Company, as
the case may be, receivable upon the conversion of the Preferred Shares
receivable upon the exercise of this Option are referred to as the "CONVERSION
SHARES", (viii) the Common Stock or other capital stock issuable upon exercise
of one (1) Warrant Share or conversion of one (1) share of Preferred Stock or
Preferred Share, as the case may be is referred to as a "SHARE", (ix) the
aggregate
-1-
<PAGE> 2
purchase price payable for the Option Units hereunder is referred to as the
"AGGREGATE OPTION PRICE", (x) the price payable (initially $2.475 per Option
Unit, subject to adjustment) for each of the Option Units, hereunder is
referred to as the "PER OPTION UNIT PRICE", (xi) the price payable (initially
$2.25 per Warrant Share, subject to adjustment) for each of the Warrant Shares,
hereunder is referred to as the "WARRANT EXERCISE PRICE", (xii) this Option,
all similar options issued on the date hereof and all warrants hereafter issued
in exchange or substitution for this Option or such similar Options are
referred to as the "OPTIONS" and (xiii) the holder of this Option is referred
to as the "HOLDER" and the holder of this Option and all other Options, Warrant
Shares, Preferred Shares and Conversion Shares are referred to as the "HOLDERS"
and Holders of more than 50% of the outstanding Options are referred to as the
"MAJORITY OF THE HOLDERS." The Aggregate Option Price is not subject to
adjustment. The Per Option Unit Price is subject to adjustment as hereinafter
provided.
This Option, together with options of like tenor, constituting in the
aggregate Options to purchase 342,399 Option Units, was originally issued, in
consideration of $342.40 received for the Options, pursuant to a financial
advisory agreement between the Company and Paramount Capital, Inc., who agreed
to serve as financial advisor to the Company and who acted as placement agent
(THE "PLACEMENT AGENT") in connection with a private placement (THE "OFFERING")
of 2,282,663 Units (THE "OFFERING UNITS"), each Offering Unit consisting of one
share of Series F Preferred Stock (THE "OFFERING PREFERRED") and one Class A
Warrant (THE "OFFERING WARRANTS").
1. EXERCISE OF OPTION.
(a) This Option may be exercised, in whole at any time
or in part from time to time, commencing on December 23, 1997 and prior to 5:00
P.M., New York City time, on December 22, 2007 by the Holder:
(i) by the surrender of this Option (with the
subscription form at the end hereof duly executed) at the address set
forth in Subsection 9(a) hereof, together with proper payment of the
Aggregate Option Price, or the proportionate part thereof if this
Option is exercised in part, with payment for the number of Option
Units made by certified or official bank check payable to the order of
the Company; or
(ii) by the surrender of this Option (with the cashless
exercise form at the end hereof duly executed) (a "CASHLESS EXERCISE")
at the address set forth in Subsection 9(a) hereof. The Option
Exchange shall take place on the date specified in the Cashless
Exercise Form or, if later, the date the Cashless Exercise Form is
surrendered to the Company (THE "EXCHANGE DATE"). Such presentation
and surrender shall be deemed a waiver of the Holder's obligation to
pay the Aggregate Option Price, or the proportionate part thereof if
this Option is exercised in Part. In the event of a Cashless Exercise
this Option shall represent the right to subscribe for and acquire the
number of Option Units (rounded to the next highest integer) equal to
(x) the number of Option Units specified by the Holder in its Cashless
Exercise Form up to the maximum number of Option Units subject to this
Option (THE "TOTAL NUMBER") less (y) the number of Option Units equal
to the quotient obtained by dividing (A) the product of the Total
Number and the existing Per Option Unit Price by (B) the Market Price
Per Option Unit. "MARKET PRICE PER OPTION UNIT" shall mean first, if
there is a trading market as indicated in Subsection (A) below for the
Option Units, such Market Price of the Units and if there is no such
trading market in the Options Units, then Market Price Per Option Unit
shall equal the
-2-
<PAGE> 3
sum of the aggregate Market Price of all shares of Preferred Stock (THE
"MARKET PRICE PER SHARE OF PREFERRED STOCK") (or, as the case may be,
if after the Conversion Date (as hereinafter defined), the Common Stock
(THE "MARKET PRICE PER SHARE OF COMMON STOCK")) and Warrants (THE
"MARKET PRICE PER WARRANT") which comprise an Option Unit, with the
meanings indicated in Subsections (B) through (F) below:
(A) If the Option Units are listed on a national
securities exchange or listed or admitted to unlisted trading
privileges on such exchange or listed for trading on the
Nasdaq National Market or the Nasdaq Small Cap Market, the
Market Price Per Option Unit shall be the average of the last
reported closing bid prices of the Option Units on such
exchange or market for the twenty (20) consecutive trading
days ending with the Exchange Date; or
(B) If the Preferred Stock, Warrants or Common
Stock are listed on a national securities exchange or admitted
to unlisted trading privileges on such exchange or listed for
trading on the Nasdaq National Market or the Nasdaq Small Cap
Market, the Market Price Per Share of Preferred Stock, Market
Price Per Share of Common Stock, or Market Price Per Warrant,
respectively, shall be the average of the last reported
closing bid prices of Preferred Stock, Warrants or Common
Stock, respectively, on such exchange or market for the twenty
(20) consecutive trading days ending with the Exchange Date;
or
(C) If the Preferred Stock, Warrants or Common
Stock are not so listed or admitted to unlisted trading
privileges, the Market Price Per Share of Preferred Stock,
Market Price Per Share of Common Stock, or Market Price Per
Warrant, respectively, shall be the average of the last
reported closing bid prices of the Preferred Stock, Warrants
or Common Stock, respectively, for the twenty (20) consecutive
trading days ending with the Exchange Date; or
(D) If the Common Stock is not so listed or
admitted to unlisted trading privileges and bid prices are not
so reported, the Market Price Per Share of Common Stock shall
be the fair market value as determined by agreement between
the Board of Directors of the Company and a Majority of the
Holders; or
(E) If the Preferred Stock is not so listed or
admitted to unlisted trading privileges and bid prices are not
so reported, the Market Price Per Share of Preferred Stock
shall be the Market Price of the Common Stock multiplied by
the then effective "conversion rate" for the Preferred Stock
(as defined and used in the Articles), or if not so available,
the fair market value of Preferred Stock as determined by
agreement between the Board of Directors of the Company and a
Majority of the Holders; or
(F) If the Warrants are not so listed or admitted
to unlisted trading privileges, and bid prices are not so
reported for Warrants, then the Market Price Per Warrant shall
be an amount equal to the difference between (i) the Market
Price Per Share of Common Stock which may be received upon the
exercise of the Warrants, as determined herein, and (ii) the
Warrant Exercise Price.
-3-
<PAGE> 4
(G) If the Company and the Majority of the
Holders are unable to reach agreement on any valuation matter,
such valuation shall be submitted to and determined by a
nationally recognized independent investment bank selected by
the Board of Directors of the Company and the Majority of the
Holders (or, if such selection cannot be agreed upon promptly,
or in any event within ten days, then such valuation shall be
made by a nationally recognized independent investment banking
firm selected by the American Arbitration Association in New
York City in accordance with its rules), the costs of which
valuation shall be paid for by the Company.
(b) If this Option is exercised in part, the Holder is
entitled to receive a new Option covering the Option Units, which have not been
exercised and setting forth the proportionate part of the Aggregate Option
Price applicable to such Option Units. Upon surrender of this Option, the
Company will (i) issue a certificate or certificates in the name of the Holder
for the largest number of whole shares of the Preferred Stock (or the
Conversion Shares following conversion of all the Preferred Stock) and Warrants
to which the Holder shall be entitled and, if this Option is exercised in
whole, in lieu of any fractional shares of the Preferred Stock (or the
Conversion Shares following conversion of all the Preferred Stock) or the
Warrants to which the Holder shall be entitled, pay to the Holder cash in an
amount equal to the fair value of such fractional shares (determined in such
reasonable manner as the Board of Director of the Company shall determine), and
(ii) deliver the other securities and properties receivable upon the exercise
of this Option, or the proportionate part thereof if this Option is exercised
in part, pursuant to the provisions of this Option.
(c) If this Option is exercised on or after the date on
which all shares of Preferred Stock have been converted into Conversion Shares
(the "Conversion Date"), then this Option shall be exercisable only for
Warrants and Conversion Shares at the then applicable Per Option Unit Price
(including any adjustment pursuant to Section 3 below).
2. RESERVATION OF WARRANT SHARES, PREFERRED SHARES AND
CONVERSION SHARES; LISTING. The Company agrees that, prior to the expiration
of this Option, the Company will at all times (a) have authorized and in
reserve, and will keep available, solely for issuance and delivery upon the
exercise of this Option, the Warrant Shares and the Preferred Shares and other
securities and properties as from time to time shall be receivable upon the
exercise of this Option, free and clear of all restrictions on sale or
transfer, other than under Federal or state securities laws, and free and clear
of all preemptive rights and rights of first refusal and (b) have authorized
and in reserve, and will keep available, solely for issuance or delivery upon
exercise of the Warrants and conversion of the Preferred Shares or the exercise
of this Option following the conversion of all Preferred Shares into Common
Stock, the shares of Common Stock and other securities and properties as from
time to time shall be receivable upon such exercise and conversion, free and
clear of all restrictions on sale or transfer, other than under Federal or
state securities laws, and free and clear of all preemptive rights and rights
of first refusal; and (c) if the Company hereafter lists its Common Stock on
any national securities exchange, use its best efforts to keep the Conversion
Shares authorized for listing on such exchange upon notice of issuance.
-4-
<PAGE> 5
3. PROTECTION AGAINST DILUTION.
(a) The anti-dilution provisions of the Warrant Agreement
shall protect the Holder from dilution of the purchase rights represented by
the Warrants. Prior to the Conversion Date and in addition to the protection
set forth in the Articles and the protection set forth in Subsection 3(a)(iv),
the following anti-dilution provisions shall protect the Holder from dilution
resulting from the issuance of Preferred Stock, Common Stock and Common Stock
equivalents:
(i) If, at any time or from time to time after the date of
this Option, the Company shall issue or distribute to the holders of
shares of Preferred Stock evidence of its indebtedness, any other
securities of the Company or any cash, property or other assets
(excluding a subdivision, combination or reclassification, or dividend
or distribution payable in shares of Preferred Stock, referred to in
Subsection 3(a)(ii), and also excluding cash dividends or cash
distributions paid out of net profits legally available therefor in the
fill amount thereof (any such non-excluded event being herein called a
"PREFERRED STOCK SPECIAL DIVIDEND")), the Per Option Unit Price shall
be adjusted by multiplying the Per Option Unit Price then in effect by
a fraction, the numerator of which shall be the then Market Price Per
Option Unit in effect on the record date of such issuance or
distribution less the fair market value (as determined in good faith by
the Company's Board of Directors) of the evidence of indebtedness,
cash, securities or property, or other assets issued or distributed in
such Preferred Stock Special Dividend applicable to one share of
Preferred Stock and the denominator of which shall be the then Market
Price per Option Unit in effect on the record date of such issuance or
distribution. An adjustment made pursuant to this Subsection 3(a)(i)
shall become effective immediately after the record date of any such
Preferred Stock Special Dividend.
(ii) In case the Company shall hereafter (w) pay a dividend
or make a distribution on its capital stock in shares of Preferred
Stock, (x) subdivide its outstanding shares of Preferred Stock into a
greater number of shares, (y) combine its outstanding shares of
Preferred Stock into a smaller number of shares or (z) issue by
reclassification of its Preferred Stock any shares of capital stock of
the Company (other than the Conversion Shares), the Per Option Unit
Price shall be adjusted to be equal to a fraction, the numerator of
which shall be the Aggregate Option Price and the denominator of which
shall be the number of shares of Preferred Stock or other capital stock
of the Company which he would have owned immediately following such
action had such Option been exercised immediately prior thereto. An
adjustment made pursuant to this Subsection 3(a)(ii) shall become
effective immediately after the record date in the case of a dividend
or distribution and shall become effective immediately after the
effective date in the case of a subdivision, combination or
reclassification.
(iii) Except as provided in Subsections 3(a)(i) and 3(f), in
case the Company shall hereafter issue or sell any Preferred Stock, any
securities convertible into Preferred Stock, any rights, options or
warrants to purchase Preferred Stock or any securities convertible into
Preferred Stock, in each case for a price per share or entitling the
holders thereof to purchase Preferred Stock at a price per share
(determined by dividing (A) the total amount, if any, received or
receivable by the Company in consideration of the issuance or sale of
such securities plus the total consideration, if any, payable to the
Company upon exercise or conversion thereof (the "PREFERRED STOCK TOTAL
CONSIDERATION") by (B) the number of additional shares of Preferred
Stock issuable upon exercise or conversion of such securities) which is
less than either the then Market Price
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<PAGE> 6
Per Option Unit in effect on the date of such issuance or sale or the
Per Option Unit Price, the Per Option Unit Price shall be adjusted as
of the date of such issuance or sale by multiplying the Per Option Unit
Price then in effect by a fraction, the numerator of which shall be (x)
the sum of (A) the number of shares of Preferred Stock outstanding on
the record date of such issuance or sale plus (B) the Preferred Stock
Total Consideration divided by the Market Price of the Preferred Stock
or the Per Option Unit Price, whichever is greater, and the denominator
of which shall be (y) the number of shares of Preferred Stock
outstanding on the record date of such issuance or sale plus the
maximum number of additional shares of Preferred Stock issued, sold or
issuable upon exercise or conversion of such securities.
(iv) Notwithstanding the anti-dilution provisions set forth
in Subsections 3(a)(i)-(iii), if an event set forth in Subsections
3(a)(i)-(iii) (a "TRIGGER EVENT") shall occur, and provided that the
anti-dilution provisions of the Preferred Stock, as set forth in the
Articles, shall apply to such Trigger Event, then any adjustments as a
result of the Trigger Event shall occur as follows: (y) first, the
anti-dilution provisions set forth in the Articles shall apply; and (z)
second, the anti-dilution provisions set forth in Subsection
3(a)(i)-(iii) shall apply to the extent that the application of such
provisions shall result in such Holder receiving additional shares of
capital stock of the Company, having the Per Option Unit Price reduced
or otherwise further improve the economic position of the Holder.
(b) Upon the conversion of all the Preferred Stock into Common
Stock the Per Option Unit Price shall be adjusted to be equal to a fraction,
the numerator of which shall be the Aggregate Option Price and the denominator
of which shall be the number of shares of Common Stock or other capital stock
of the Company which the Holder (THE "PRE-CONVERSION SHARES") would have owned
immediately following such conversion had this Option been exercised (assuming
a cash exercise) immediately prior thereto. In addition, after the Conversion
Date, the following anti-dilution provisions shall protect the Holder from
dilution resulting from the issuance of Common Stock and Common Stock
equivalents:
(i) If the Company shall issue or distribute to the
holders of shares of Common Stock evidence of its indebtedness, any
other securities of the Company or any cash, property or other assets
(excluding a subdivision, combination or reclassification, or dividend
or distribution payable in shares of Common Stock, referred to in
Subsection 3(b)(ii), and also excluding cash dividends or cash
distributions paid out of net profits legally available therefor in the
full amount thereof (any such non-excluded event being herein called a
"COMMON STOCK SPECIAL DIVIDEND")), the Per Option Unit Price shall be
adjusted by multiplying the Per Option Unit Price then in effect by a
fraction, the numerator of which shall be the then current Market Price
Per Option Unit in effect the record date of such issuance or
distribution less the fair market value (as determined in good faith by
the Company's Board of Directors) of the evidence of indebtedness,
cash, securities or property, or other assets issued or distributed in
such Common Stock Special Dividend applicable to one share of Common
Stock and the denominator of which shall be the then current Market
Price Per Option Unit in effect on the record date of such issuance or
distribution. An adjustment made pursuant to this Subsection 3(b)(i)
shall become effective immediately after the record date of any such
Common Stock Special Dividend.
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<PAGE> 7
(ii) If the Company shall (w) pay a dividend or make a
distribution on its capital stock in shares of Common Stock, (x)
subdivide its outstanding shares of Common Stock into a greater number
of shares, (y) combine its outstanding shares of Common Stock into a
smaller number of shares or (z) issue by reclassification of its Common
Stock any shares of capital stock of the Company (other than the
Conversion Shares), the Per Option Unit Price shall be adjusted to be
equal to a fraction, the numerator of which shall be the Aggregate
Option Price and the denominator of which shall be the number of shares
of Common Stock or other capital stock of the Company which he would
have owned immediately following such action had such Option been
exercised immediately prior thereto. An adjustment made pursuant to
this Subsection 3(b)(ii) shall become effective immediately after the
record date in the case of a dividend or distribution and shall become
effective immediately after the effective date in the case of a
subdivision, combination or reclassification.
(iii) Except as provided in Subsections 3(b)(i) and 3(f), in
case the Company shall issue or sell any Common Stock, any securities
convertible into Common Stock, any rights, options or warrants to
purchase Common Stock or any securities convertible into Common Stock,
in each case for a price per share or entitling the holders thereof to
purchase Common Stock at a price per share (determined by dividing (A)
the total amount, if any, received or receivable by the Company in
consideration of the issuance or sale of such securities plus the total
consideration, if any, payable to the Company upon exercise or
conversion thereof (the "COMMON STOCK TOTAL CONSIDERATION") by (B) the
number of additional shares of Common Stock issuable upon exercise or
conversion of such securities) which is less than either the then
current Market Price Per Option Unit in effect on the date of such
issuance or sale or the Per Option Unit Price, the Per Option Unit
Price shall be adjusted as of the date of such issuance or sale by
multiplying the Per Option Unit Price then in effect by a fraction, the
numerator of which shall be (x) the sum of (A) the number of shares of
Common Stock outstanding on the record date of such issuance or sale
plus (B) the Common Stock Total Consideration divided by the current
Market Price of the Common Stock or the current Per Option Unit Price,
whichever is greater, and the denominator of which shall be (y) the
number of shares of Common Stock outstanding on the record date of such
issuance or sale plus the maximum number of additional shares of Common
Stock issued, sold or issuable upon exercise or conversion of such
securities.
(c) No adjustment in the Per Option Unit Price shall be required
unless such adjustment would require an increase or decrease of at least $0.05
per Option Unit; provided, however, that any adjustments which by reason of
this Section 3(c) are not required to be made shall be carried forward and
taken into account in any subsequent adjustment; provided, further, however,
that adjustments shall be required and made in accordance with the provisions
of this Section 3 (other than this Section 3(c)) not later than such time as
may be required in order to preserve the tax-free nature of a distribution to
the Holder of this Option. All calculations under this Section 3 shall be made
to the nearest cent or to the nearest 1/100th of a share, as the case may be.
Anything in this Section 3 to the contrary notwithstanding, the Company shall
be entitled to make such reductions in the Per Option Unit Price, in addition
to those required by this Section 3, as it in its discretion shall deem to be
advisable in order that any stock dividend, subdivision of shares or
distribution of rights to purchase stock or securities convertible or
exchangeable for stock hereafter made by the Company to its stockholders shall
not be taxable.
(d) Whenever the Per Option Unit Price is adjusted as provided in
this Section 3 and upon any modification of the rights of a Holder of Options
in accordance with this Section 3, the
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<PAGE> 8
Company shall promptly prepare a brief statement of the facts requiring such
adjustment or modification and the manner of computing the same and cause
copies of such certificate to be mailed to the Holders of the Options. The
Company may, but shall not be obligated to unless requested by a Holders of
more than 50% of the outstanding Options, Preferred Shares, Warrant Shares and
Conversion Shares, obtain, at its expense, a certificate of a firm of
independent public accountants of recognized standing selected by the Board of
Directors (who may be the regular auditors of the Company) setting forth the
Per Option Unit Price and the number of Warrants and Preferred Shares or
Conversion Shares, as the case may be, after such adjustment or the effect of
such modification, a brief statement of the facts requiring such adjustment or
modification and the manner of computing the same and cause copies of such
certificate to be mailed to the Holders of the Options.
(e) If the Board of Directors of the Company shall declare any
dividend or other distribution with respect to the Preferred Stock or Common
Stock other than a cash distribution out of earned surplus, the Company shall
mail notice thereof to the Holders of the Options not less than 10 days prior
to the record date fixed for determining stockholders entitled to participate
in such dividend or other distribution.
(f) No adjustment in the Per Option Unit Price shall be required
in the case of the issuance by the Company of Preferred Stock (or, if after the
Conversion Date, Common Stock) (i) pursuant to the exercise of any Option or
(ii) pursuant to (x) the exercise of any stock options or warrants currently
outstanding or (y) securities issued after the date hereof pursuant to any
Company benefit plan; provided however, that with respect to (y), the issuance
of such securities were approved by the Board of Directors of the Company and
were issued at a price no less than the Conversion Price or the Market Price of
the securities on the date of issuance.
(g) In case of any capital reorganization or reclassification, or
any consolidation or merger to which the Company is a party other than a merger
or consolidation in which the Company is the continuing corporation, or in case
of any sale or conveyance to another entity of the property of the Company as
an entirety or substantially as an entirety, or in the case of any statutory
exchange of securities with another corporation (including any exchange
effected in connection with a merger of a third corporation into the Company),
the Holder of this Option shall have the right thereafter to receive on the
exercise of this Option the kind and amount of securities, cash or other
property which the Holder would have owned or have been entitled to receive
immediately after such reorganization, reclassification, consolidation, merger,
statutory exchange, sale or conveyance had this Option been exercised
immediately prior to the effective date of such reorganization,
reclassification, consolidation, merger, statutory exchange, sale or conveyance
and in any such case, if necessary, appropriate adjustment shall be made in the
application of the provisions set forth in this Section 3 with respect to the
rights and interests thereafter of the Holder of this Option to the end that
the provisions set forth in this Section 3 shall thereafter correspondingly be
made applicable, as nearly as may reasonably be, in relation to any shares of
stock or other securities or property thereafter deliverable on the exercise of
this Option. The above provisions of this Subsection 3(g) shall similarly
apply to successive reorganizations, reclassifications, consolidations,
mergers, statutory exchanges, sales or conveyances. The Company shall require
the issuer of any shares of stock or other securities or property thereafter
deliverable on the exercise of this Option to be responsible for all of the
agreements and obligations of the Company hereunder. Notice of any such
reorganization, reclassification, consolidation, merger, statutory exchange,
sale or conveyance and of said provisions so proposed to be made, shall be
mailed to the Holders of the Options not less than 30 days prior to such event.
A sale of all or substantially all of the assets of the Company for
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<PAGE> 9
a consideration consisting primarily of securities shall be deemed a
consolidation or merger for the foregoing purposes.
(h) If, as a result of an adjustment made pursuant to this Section
3, the Holder of any Option thereafter surrendered for exercise shall become
entitled to receive shares of two or more classes of capital stock or shares of
Preferred Stock (or, if after the Conversion Date, Common Stock) and other
capital stock of the Company, the Board of Directors (whose determination shall
be conclusive and shall be described in a written notice to the Holder of any
Option promptly after such adjustment) shall determine the allocation of the
adjusted Per Option Unit Price between or among shares or such classes of
capital stock or shares of Preferred Stock (or, if after the Conversion Date,
Common Stock) and other capital stock.
(i) Upon the expiration of any rights, options, warrants or
conversion privileges, if such shall not have been exercised, the number of
Option Units purchasable upon exercise of this Option, to the extent this
Option has not then been exercised, shall, upon such expiration, be readjusted
and shall thereafter be such as they would have been had they been originally
adjusted (or had the original adjustment not been required, as the case may be)
on the basis of (i) the fact that Common Stock, or Preferred Stock, as the case
may be, if any, actually issued or sold upon the exercise of such rights,
options, warrants or conversion privileges, and (ii) the fact that such shares
of Common Stock, or Preferred Stock, as the case may be, if any, were issued or
sold for the consideration actually received by the Company upon such exercise
plus the consideration, if any, actually received by the Company for the
issuance, sale or grant of all such rights, options, warrants or conversion
privileges whether or not exercised; provided, however, that no such
readjustment shall have the effect of decreasing the number of Option Units
purchasable upon exercise of this Option by an amount in excess of the amount
of the adjustment initially made in respect of the issuance, sale or grant of
such rights, options, warrants or conversion privileges.
(j) Whenever the Per Option Unit Price payable upon exercise of
each Option is adjusted pursuant to this Section 3, (i) the number of shares of
Preferred Stock (or, if after the Conversion Date, Common Stock) included in an
Option Unit shall simultaneously be adjusted by multiplying the number of
shares of Preferred Stock (or, if after the Conversion Date, Common Stock)
included in an Option Unit immediately prior to such adjustment by the Per
Option Unit Price in effect immediately prior to such adjustment and dividing
the product so obtained by the Per Option Unit Price, as adjusted and (ii) the
number of shares of Preferred Stock (or, if after the Conversion Date, Common
Stock) or other securities issuable upon exercise of the Warrants included in
the Option Units and the Warrant Exercise Price shall be adjusted in accordance
with the applicable terms of the Warrant Agreement.
4. FULLY PAID STOCK; TAXES. The Company agrees that the
shares of the Preferred Stock represented by each and every certificate for
Preferred Shares delivered on the exercise of this Option and the shares of
Common Stock delivered upon the exercise of the Warrants or the conversion of
the Preferred Shares or the exercise of this Option following the conversion of
all shares of Preferred Stock into Common Stock, shall at the time of such
delivery, be validly issued and outstanding, fully paid and nonassessable, and
not subject to preemptive rights or rights of first refusal, and the Company
will take all such actions as may be necessary to assure that the par value or
stated value, if any, per share of the Preferred Stock and the Common Stock is
at all times equal to or less than the then Per Option Unit Price. The Company
further covenants and agrees that it will pay, when due and payable, any and
all
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<PAGE> 10
Federal and state stamp, original issue or similar taxes which may be payable
in respect of the issue of any Warrant Share, Preferred Share, Conversion Share
or any certificate thereof to the extent required because of the issuance by
the Company of such security.
5. REGISTRATION UNDER SECURITIES ACT OF 1933. (a) The
Holder shall have the registration rights to the extend provided under the
investor rights agreements (the "Rights Agreements") by and among the
purchasers of Offering Units (including for purposes of that agreement, the
Placement Agent) and the Company, dated June 23, 1997, entered into in
connection with the Offering. By acceptance of this Option, the Holder agrees
to comply with the provisions of the Rights Agreement to same extent as if it
were a party thereto.
(b) Until all Conversion Shares have been sold under a
Registration Statement or pursuant to Rule 144, the Company shall use its
reasonable best efforts to file with the Securities and Exchange Commission all
current reports and the information as may be necessary to enable the Holder to
effect sales of its shares in reliance upon Rule 144 promulgated under the Act.
6. INVESTMENT INTENT; LIMITED TRANSFERABILITY.
(a) The Holder represents, by accepting this Option, that
it understands that this Option and any securities obtainable upon exercise of
this Option or upon conversion of such securities have not been registered for
sale under Federal or state securities laws and are being offered and sold to
the Holder pursuant to one or more exemptions from the registration
requirements of such securities laws. In the absence of an effective
registration of such securities, any certificates for such securities shall
bear the legend set forth on the first page hereof. The Holder understands
that it must bear the economic risk of its investment in this Option and any
securities obtainable upon exercise of this Option or upon conversion of such
securities for an indefinite period of time, as this Option and such securities
have not been registered under Federal or state securities laws and therefore
cannot be sold unless subsequently registered under such laws, unless an
exemption from such registration is available.
(b) The Holder, by his acceptance of its Option,
represents to the Company that it is acquiring this Option and will acquire any
securities obtainable upon exercise of this Option for its own account for
investment and not with a view to, or for sale in connection with, any
distribution thereof in violation of the Securities Act of 1933, as amended
(the "Act"). The Holder agrees that this Option and any such securities will
not be sold or otherwise transferred unless (i) a registration statement with
respect to such transfer is effective under the Act and any applicable state
securities laws or (ii) the Holder delivers to the Company an opinion of
counsel reasonably satisfactory to the Company that such registration statement
is not required.
(c) In addition to the requirements set forth in Section
6(b) above, this Option may not be sold, transferred, assigned or hypothecated
for six months from the date hereof except (i) to any firm or corporation that
succeeds to all or substantially all of the business of Paramount Capital,
Inc., (ii) to any of the officers, employees or affiliated companies of
Paramount Capital, Inc., or of any such successor firm, (iii) to any NASD
member participating in the Offering or any officer or employee of any such
NASD member, or (iv) in the case of an individual, pursuant to such
individual's last will and testament or the laws of descent and distribution,
and is so transferable only upon the books of the Company which it shall cause
to be maintained for such purpose. The Company may treat the registered Holder
of this Option as he or it appears on the
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<PAGE> 11
Company's books at any time as the Holder for all purposes. The Company shall
permit any Holder of an Option or its duly authorized attorney, upon written
request during ordinary business hours, to inspect and copy or make extracts
from its books showing the registered holders of Options. All Options issued
upon the transfer or assignment of this Option will be dated the same date as
this Option, and all rights of the holder thereof shall be identical to those
of the Holder.
7. LOSS, ETC., OF OPTION. Upon receipt of evidence
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Option, and of indemnity reasonably satisfactory to the Company, if lost,
stolen or destroyed, and upon surrender and cancellation of this Option, if
mutilated, the Company shall execute and deliver to the Holder a new Option of
like date, tenor and denomination.
8. OPTION HOLDER NOT STOCKHOLDER. This Option does not
confer upon the Holder any right to vote or to consent to or receive notice as
a stockholder of the Company, as such, in respect of any matters whatsoever, or
any other rights or liabilities as a stockholder, prior to the exercise hereof;
this Option does, however, require certain notices to Holders as set forth
herein.
9. COMMUNICATION. No notice or other communication under
this Option shall be effective unless, but any notice or other communication
shall be effective and shall be deemed to have been given if, the same is in
writing and is mailed by first-class mail, postage prepaid, addressed to:
(a) the Company at c/o 21375 Cabot Boulevard, Hayward, CA
94545, Attn: President or such other address as the Company has
designated in writing to the Holder, or
(b) the Holder at c/o Paramount Capital Incorporated, 787
Seventh Avenue, New York, NY 10019 or other such address as the Holder
has designated in writing to the Company.
10. HEADINGS. The headings of this Option have been
inserted as a matter of convenience and shall not affect the construction
hereof.
11. APPLICABLE LAW. This Option shall be governed by and
construed in accordance with the law of the State of New York without giving
effect to the principles of conflicts of law thereof.
12. AMENDMENT, WAIVER, ETC. Except as expressly provided
herein, neither this Option nor any term hereof may be amended, waived,
discharged or terminated other than by a written instrument signed by the party
against whom enforcement of any such amendment, waiver, discharge or
termination is sought; provided, however, that any provisions hereof may be
amended, waived, discharged or terminated upon the written consent of the
Company and the then current Majority of the Holders of the Options only.
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<PAGE> 12
IN WITNESS WHEREOF, the Company has caused this Option to be
signed by its President and attested by its Secretary this 23rd day of June,
1997.
RIBOGENE, INC.
By: /s/ CHARLES J. CASAMENTO
------------------------------
Name: Charles J. Casamento
Title:
ATTEST:
/s/
- -----------------------------------
Secretary
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<PAGE> 13
SUBSCRIPTION
The undersigned, ______________________________, pursuant to
the provisions of the foregoing Option, hereby agrees to subscribe for and
purchase ____________________ Option Units of RiboGene, Inc., each Option Unit
consisting of one share of the Preferred Stock, no par value, and one Class A
Warrant covered by said Option, and makes payment therefor in full at the price
per share provided by said Option. The undersigned hereby confirms the
representations and warranties made by it in the Option.
Dated: Signature:
-------------------- --------------------------------
Address:
--------------------------------
CASHLESS EXERCISE
The undersigned ______________________________, pursuant to
the provisions of the foregoing Option, hereby elects to exchange its Option
for __________ Option Units, each Option Unit consisting of one share of
Preferred Stock, no par value, and one Class A Warrant, pursuant to the
cashless exercise provisions of the Option. The undersigned hereby confirms
the representations and warranties made by it in the Option.
Dated: Signature:
-------------------- --------------------------------
Address:
--------------------------------
ASSIGNMENT
FOR VALUE RECEIVED ______________________________ hereby
sells, assigns and transfers unto ______________________________ the foregoing
Option and all rights evidenced thereby, and does irrevocably constitute and
appoint ______________________________, attorney, to transfer said Option on
the books of RiboGene, Inc.
Dated: Signature:
-------------------- --------------------------------
Address:
--------------------------------
PARTIAL ASSIGNMENT
FOR VALUE RECEIVED ______________________________ hereby
assigns and transfers unto ______________________________ the right to purchase
__________ Option Units of RiboGene, Inc., each Option Unit consisting of one
share of Preferred Stock, no par value, and one Class A Warrant covered by the
foregoing Option, and a proportionate part of said Option and the rights
evidenced thereby, and does irrevocably constitute and appoint
______________________________, attorney, to transfer that part of said Option
on the books of RiboGene, Inc.
Dated: Signature:
-------------------- --------------------------------
Address:
--------------------------------
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<PAGE> 1
Exhibit 4.6
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND NEITHER SUCH SECURITIES NOR THE SECURITIES ISSUABLE UPON
EXERCISE HEREOF NOR CONVERSION THEREOF HAVE BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 OR ANY STATE SECURITIES LAW. SUCH SECURITIES MAY NOT BE
SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS THE COMPANY
RECEIVES AN OPINION OF COUNSEL REASONABLY ACCEPTABLE TO IT STATING THAT SUCH
SALE OR TRANSFER IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY
REQUIREMENTS OF SAID ACT.
RIBOGENE, INC.
UNIT PURCHASE OPTION FOR THE PURCHASE OF SHARES OF
PREFERRED STOCK AND WARRANTS
NO. 1 228,266 OPTION UNITS
FOR VALUE RECEIVED, RIBOGENE, INC., a California corporation (the
"COMPANY"), hereby certifies that Paramount Capital, Inc., or its permitted
assigns, is entitled to purchase from the Company, at any time or from time to
time commencing on DECEMBER 23, 1997 and prior to 5:00 P.M., New York City
time, on December 22, 2007, up to two hundred twenty-eight thousand two hundred
sixty-six (228,266) Option Units, each Option Unit consisting of one fully paid
and non-assessable share of the Series F Convertible Preferred Stock, no par
value, of the Company and one Class A Warrant for an aggregate purchase price of
$564,958.35 (computed on the basis of $2.475 per Option Unit). Each Class A
Warrant is exercisable to purchase one share of Common Stock, no par value, of
the Company for an aggregate purchase price of $513,598.50 (computed on the
basis of $2.25 per share of Common Stock). Hereinafter, (i) said Option Units
are referred to as the "OPTION UNITS", (ii) said Series F Convertible Preferred
Stock, together with any other equity securities which may be issued by the
Company with respect thereto (other than on conversion thereof) or in
substitution therefor, is referred to as the "PREFERRED STOCK", (iii) said
Class A Warrants are referred to as the "WARRANTS", (iv) the Common Stock
purchasable upon exercise of the Warrants and into which the Preferred Stock is
convertible, is referred to as the "COMMON STOCK", (v) the shares of the
Preferred Stock purchasable hereunder or under any other Option (as
hereinafter defined) are referred to as the "PREFERRED SHARES", (vi) the shares
of Common Stock purchasable upon exercise of the Warrants or under any other
Option (as hereinafter defined) are referred to as the "WARRANT SHARES", (vii)
the shares of Common Stock issued in a Qualified IPO (as defined in the Amended
and Restated Articles of Incorporation of the Company), as the case may be,
purchasable hereunder or under any other Option (as hereinafter defined)
following the conversion of all shares of Preferred Stock into Common Stock or
other capital stock of the Company, as the case may be, and each share of
Common Stock or other capital stock of the Company, as the case may be,
receivable upon the conversion of the Preferred Shares receivable upon the
exercise of this Option are referred to as the "CONVERSION SHARES", (viii) the
Common Stock or other capital stock issuable upon exercise of one (1) Warrant
Share or conversion of one (1) share of Preferred Stock or Preferred Share, as
the case may be is referred to as a "SHARE", (ix) the aggregate purchase price
payable
<PAGE> 2
for the Option Units hereunder is referred to as the "AGGREGATE OPTION PRICE",
(x) the price payable (initially $2.475 per Option Unit, subject to adjustment)
for each of the Option Units, hereunder is referred to as the "PER OPTION UNIT
PRICE", (xi) the price payable (initially $2.25 per Warrant Share, subject to
adjustment) for each of the Warrant Shares, hereunder is referred to as the
"WARRANT EXERCISE PRICE", (xii) this Option, all similar Options issued on the
date hereof and all warrants hereafter issued in exchange or substitution for
this Option or such similar Options are referred to as the "OPTIONS" and (xiii)
the holder of this Option is referred to as the "HOLDER" and the holder of this
Option and all other Options, Warrant Shares, Preferred Shares and Conversion
Shares are referred to as the "HOLDERS" and Holders of more than 50% of the
outstanding Options are referred to as the "MAJORITY OF THE HOLDERS." The
Aggregate Option Price is not subject to adjustment. The Per Option Unit Price
is subject to adjustment as hereinafter provided.
This Option, together with options of like tenor, constituting in the
aggregate Options to purchase 228,266 Option Units, was originally issued
pursuant to an agency agreement between the Company and Paramount Capital, Inc.,
as placement agent (the "PLACEMENT AGENT") in connection with a private
placement (the "OFFERING") of 2,282,663 Units (THE "OFFERING UNITS"), each
Offering Unit consisting of one share of Series F Preferred Stock (THE "OFFERING
PREFERRED") and one Class A Warrant (THE "OFFERING WARRANTS") for which the
Placement Agent acted as Placement Agent in consideration of $228.27 received
for the Options.
1. EXERCISE OF OPTION.
(a) This Option may be exercised, in whole at any time or in part
from time to time, commencing on December 23, 1997 and prior to 5:00 P.M., New
York City time, on December 22, 2007 by the Holder:
(i) by the surrender of this Option (with the subscription form at
the end hereof duly executed) at the address set forth in Subsection 9(a)
hereof, together with proper payment of the Aggregate Option Price, or the
proportionate part thereof if this Option is exercised in part, with payment
for the number of Option Units made by certified or official bank check
payable to the order of the Company; or
(ii) by the surrender of this Option (with the cashless exercise form
at the end hereof duly executed) (A "CASHLESS EXERCISE") at the address set
forth in Subsection 9(a) hereof. The Option Exchange shall take place on the
date specified in the Cashless Exercise Form or, if later, the date the
Cashless Exercise Form is surrendered to the Company (THE "EXCHANGE DATE").
Such presentation and surrender shall be deemed a waiver of the Holder's
obligation to pay the Aggregate Option Price, or the proportionate part
thereof if this Option is exercised in part. In the event of a Cashless
Exercise this Option shall represent the right to subscribe for and acquire
the number of Option Units (rounded to the next highest integer) equal to
(x) the number of Option Units specified by the Holder in its Cashless
Exercise Form up to the maximum number of Option Units subject to this
Option (THE "TOTAL NUMBER") less (y) the number of Option Units equal to the
quotient obtained by dividing (A) the product of the Total Number and the
existing Per Option Unit Price by (B) the Market Price Per Option Unit.
"MARKET PRICE PER OPTION UNIT" shall mean first, if there is a trading
market as indicated in Subsection (A) below for the Option Units, such
Market Price of the Units and if there is no such trading market in the
Options Units, then Market Price Per Option Unit shall equal the sum of the
aggregate Market Price of all shares of Preferred Stock (THE "MARKET PRICE
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PER SHARE OF PREFERRED STOCK") (or, as the case may be, if after the Conversion
Date (as hereinafter defined), the Common Stock (the "MARKET PRICE PER SHARE OF
COMMON STOCK")) and Warrants (the "MARKET PRICE PER WARRANT") which comprise an
Option Unit, with the meanings indicated in Subsections (B) through (F) below:
(A) If the Option Units are listed on a national securities exchange or
listed or admitted to unlisted trading privileges on such exchange or listed
for trading on the Nasdaq National Market or the Nasdaq Small Cap Market,
the Market Price Per Option Unit shall be the average of the last reported
closing bid prices of the Option Units on such exchange or market for the
twenty (20) consecutive trading days ending with the Exchange Date; or
(B) If the Preferred Stock, Warrants or Common Stock are listed on a
national securities exchange or admitted to unlisted trading privileges on
such exchange or listed for trading on the Nasdaq National Market or the
Nasdaq Small Cap Market, the Market Price Per Share of Preferred Stock,
Market Price Per Share of Common Stock, or Market Price Per Warrant,
respectively, shall be the average of the last reported closing bid prices
of Preferred Stock, Warrants or Common Stock, respectively, on such
exchange or market for the twenty (20) consecutive trading days ending with
the Exchange Date; or
(C) If the Preferred Stock, Warrants or Common Stock are not so listed
or admitted to unlisted trading privileges, the Market Price Per Share of
Preferred Stock, Market Price Per Share of Common Stock, or Market Price Per
Warrant, respectively, shall be the average of the last reported closing bid
prices of the Preferred Stock, Warrants or Common Stock, respectively, for
the twenty (20) consecutive trading days ending with the Exchange Date; or
(D) If the Common Stock is not so listed or admitted to unlisted
trading privileges and bid prices are not so reported, the Market Price Per
Share of Common Stock shall be the fair market value as determined by
agreement between the Board of Directors of the Company and a Majority of
the Holders; or
(E) If the Preferred Stock is not so listed or admitted to unlisted
trading privileges and bid prices are not so reported, the Market Price Per
Share of Preferred Stock shall be the Market Price of the Common Stock
multiplied by the then effective "conversion rate" for the Preferred Stock
(as defined and used in the Articles), or if not so available, the fair
market value of Preferred Stock as determined by agreement between the
Board of Directors of the Company and a Majority of the Holders; or
(F) If the Warrants are not so listed or admitted to unlisted trading
privileges, and bid prices are not so reported for Warrants, then the Market
Price Per Warrant shall be an amount equal to the difference between (i) the
Market Price Per Share of Common Stock which may be received upon the
exercise of the Warrants, as determined herein, and (ii) the Warrant
Exercise Price.
(G) If the Company and the Majority of the Holders are unable to reach
agreement on any valuation matter, such valuation shall be submitted to
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and determined by a nationally recognized independent investment bank
selected by the Board of Directors of the Company and the Majority of
the Holders (or, if such selection cannot be agreed upon promptly, or in
any event within ten days, then such valuation shall be made by a
nationally recognized independent investment banking firm selected by
the American Arbitration Association in New York City in accordance with
its rules), the costs of which valuation shall be paid for by the
Company.
(b) If this Option is exercised in part, the Holder is entitled to
receive a new Option covering the Option Units, which have not been exercised
and setting forth the proportionate part of the Aggregate Option Price
applicable to such Option Units. Upon surrender of this Option, the Company
will (i) issue a certificate or certificates in the name of the Holder for the
largest number of whole shares of the Preferred Stock (or the Conversion Shares
following conversion of all the Preferred Stock) and Warrants to which the
Holder shall be entitled and, if this Option is exercised in whole, in lieu of
any fractional shares of the Preferred Stock (or the Conversion Shares
following conversion of all the Preferred Stock) or Warrants to which the
Holder shall be entitled, pay to the Holder cash in an amount equal to the fair
value of such fractional shares (determined in such reasonable manner as the
Board of Directors of the Company shall determine), and (ii) deliver the other
securities and properties receivable upon the exercise of this Option, or the
proportionate part thereof if this Option is exercised in part, pursuant to the
provisions of this Option.
(c) If this Option is exercised on or after the date on which all
shares of Preferred Stock have been converted into Conversion Shares (the
"Conversion Date"), then this Option shall be exercisable only for Warrants and
Conversion Shares at the then applicable Per Option Unit Price (including any
adjustment pursuant to Section 3 below).
2. RESERVATION OF WARRANT SHARES, PREFERRED SHARES AND CONVERSION
SHARES: LISTING. The Company agrees that, prior to the expiration of this
Option, the Company will at all times (a) have authorized and in reserve, and
will keep available, solely for issuance and delivery upon the exercise of this
Option, the Warrant Shares and the Preferred Shares and other securities and
properties as from time to time shall be receivable upon the exercise of this
Option, free and clear of all restrictions on sale or transfer, other than
under Federal or state securities laws, and free and clear of all preemptive
rights and rights of first refusal and (b) have authorized and in reserve, and
will keep available, solely for issuance or delivery upon exercise of the
Warrants and conversion of the Preferred Shares or the exercise of this Option
following the conversion of all Preferred Shares into Common Stock, the shares
of Common Stock and other securities and properties as from time to time shall
be receivable upon such exercise and conversion, free and clear of all
restrictions on sale or transfer, other than under Federal or state securities
laws, and free and clear of all preemptive rights and rights of first refusal;
and (c) if the Company hereafter lists its Common Stock on any national
securities exchange, use its best efforts to keep the Conversion Shares
authorized for listing on such exchange upon notice of issuance.
3. PROTECTION AGAINST DILUTION.
(a) The anti-dilution provisions of the Warrant Agreement shall protect
the Holder from dilution of the purchase rights represented by the Warrants.
Prior to the Conversion Date and in addition to the protection set forth in the
Articles and the protection set forth
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<PAGE> 5
in Subsection 3(a)(iv), the following anti-dilution provisions shall protect
the Holder from dilution resulting from the issuance of Preferred Stock,
Common Stock and Common Stock equivalents:
(i) If, at any time or from time to time after the date of this
Option, the Company shall issue or distribute to the holders of shares of
Preferred Stock evidence of its indebtedness, any other securities of the
Company or any cash, property or other assets (excluding a subdivision,
combination or reclassification, or dividend or distribution payable in
shares of Preferred Stock, referred to in Subsection 3(a)(ii), and also
excluding cash dividends or cash distributions paid out of net profits
legally available therefor in the full amount thereof (any such
non-excluded event being herein called a "PREFERRED STOCK SPECIAL
DIVIDEND")), the Per Option Unit Price shall be adjusted by multiplying the
Per Option Unit Price then in effect by a fraction, the numerator of which
shall be the then Market Price Per Option Unit in effect on the record date
of such issuance or distribution less the fair market value (as determined
in good faith by the Company's Board of Directors) of the evidence of
indebtedness, cash, securities or property, or other assets issued or
distributed in such Preferred Stock Special Dividend applicable to one
share of Preferred Stock and the denominator of which shall be the then
Market Price per Option Unit in effect on the record date of such issuance
or distribution. An adjustment made pursuant to this Subsection 3(a)(i)
shall become effective immediately after the record date of any such
Preferred Stock Special Dividend.
(ii) In case the Company shall hereafter (w) pay a dividend or make a
distribution on its capital stock in shares of Preferred Stock, (x)
subdivide its outstanding shares of Preferred Stock into a greater number
of shares, (y) combine its outstanding shares of Preferred Stock into a
smaller number of shares or (z) issue by reclassification of its Preferred
Stock any shares of capital stock of the Company (other than the Conversion
Shares), the Per Option Unit Price shall be adjusted to be equal to a
fraction, the numerator of which shall be the Aggregate Option Price and
the denominator of which shall be the number of shares of Preferred Stock
or other capital stock of the Company which he would have owned
immediately following such action had such Option been exercised
immediately prior thereto. An adjustment made pursuant to this Subsection
3(a)(ii) shall become effective immediately after the record date in the
case of a dividend or distribution and shall become effective immediately
after the effective date in the case of a subdivision, combination or
reclassification.
(iii) Except as provided in Subsections 3(a)(i) and 3(f), in case the
Company shall hereafter issue or sell any Preferred Stock, any securities
convertible into Preferred Stock, any rights, options or warrants to
purchase Preferred Stock or any securities convertible into Preferred
Stock, in each case for a price per share or entitling the holders thereof
to purchase Preferred Stock at a price per share (determined by dividing
(A) the total amount, if any, received or receivable by the Company in
consideration of the issuance or sale of such securities plus the total
consideration, if any, payable to the Company upon exercise or conversion
thereof (the "PREFERRED STOCK TOTAL CONSIDERATION") by (B) the number of
additional shares of Preferred Stock issuable upon exercise or conversion
of such securities) which is less than either the then Market Price Per
Option Unit in effect on the date of such issuance or sale or the Per
Option Unit Price, the Per Option Unit Price shall be adjusted as of the
date of such issuance or sale by multiplying the Per Option Unit Price then
in effect by a fraction, the numerator of which shall be (x) the sum of (A)
the number of shares of Preferred Stock outstanding
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<PAGE> 6
on the record date of such issuance or sale plus (B) the Preferred Stock
Total Consideration divided by the Market Price of the Preferred Stock
or the Per Option Unit Price, whichever is greater, and the denominator
of which shall be (y) the number of shares of Preferred Stock
outstanding on the record date of such issuance or sale plus the maximum
number of additional shares of Preferred Stock issued, sold or issuable
upon exercise or conversion of such securities.
(iv) Notwithstanding the anti-dilution provisions set forth
in Subsections 3(a)(i)-(iii), if an event set forth in Subsections
3(a)(i)-(iii) (a "TRIGGER EVENT") shall occur, and provided that the
anti-dilution provisions of the Preferred Stock, as set forth in the
Articles, shall apply to such Trigger Event, then any adjustments as a
result of the Trigger Event shall occur as follows: (y) first, the
anti-dilution provisions set forth in the Articles shall apply; and (z)
second, the anti-dilution provisions set forth in Subsections 3(a)(i)-
(iii) shall apply to the extent that the application of such provisions
shall result in such Holder receiving additional shares of capital
stock of the Company, having the Per Option Unit Price reduced or
otherwise further improve the economic position of the Holder.
(b) Upon the conversion of all the Preferred Stock into Common
Stock the Per Option Unit Price shall be adjusted to be equal to a fraction,
the numerator of which shall be the Aggregate Option Price and the denominator
of which shall be the number of shares of Common Stock or other capital stock
of the Company which the Holder (THE "PRE-CONVERSION SHARES") would have owned
immediately following such conversion had this Option been exercised (assuming
a cash exercise) immediately prior thereto. In addition, after the Conversion
Date, the following anti-dilution provisions shall protect the Holder from
dilution resulting from the issuance of Common Stock and Common Stock
equivalents:
(i) If the Company shall issue or distribute to the holders
of shares of Common Stock evidence of its indebtedness, any other
securities of the Company or any cash, property or other assets
(excluding a subdivision, combination or reclassification, or dividend
or distribution payable in shares of Common Stock, referred to in
Subsection 3(b)(ii), and also excluding cash dividends or cash
distributions paid out of net profits legally available therefor in the
full amount thereof (any such non-excluded event being herein called a
"COMMON STOCK SPECIAL DIVIDEND")), the Per Option Unit Price shall be
adjusted by multiplying the Per Option Unit Price then in effect by a
fraction, the numerator of which shall be the then current Market Price
Per Option Unit in effect on the record date of such issuance or
distribution less the fair market value (as determined in good faith by
the Company's Board of Directors) of the evidence of indebtedness, cash,
securities or property, or other assets issued or distributed in such
Common Stock Special Dividend applicable to one share of Common Stock
and the denominator of which shall be the then current Market Price Per
Option Unit in effect on the record date of such issuance or
distribution. An adjustment made pursuant to this Subsection 3(b)(i)
shall become effective immediately after the record date of any such
Common Stock Special Dividend.
(ii) If the Company shall (w) pay a dividend or make a
distribution on its capital stock in shares of Common Stock, (x)
subdivide its outstanding shares of Common Stock into a greater number
of shares, (y) combine its outstanding shares of Common Stock into a
smaller number of shares or (z) issue by reclassification of its Common
Stock any shares of capital stock of the Company (other than the
Conversion Shares), the
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<PAGE> 7
Per Option Unit Price shall be adjusted to be equal to a fraction, the
numerator of which shall be the Aggregate Option Price and the
denominator of which shall be the number of shares of Common Stock or
other capital stock of the Company which he would have owned immediately
following such action had such Option been exercised immediately prior
thereto. An adjustment made pursuant to this Subsection 3(b)(ii) shall
become effective immediately after the record date in the case of a
dividend or distribution and shall become effective immediately after
the effective date in the case of a subdivision, combination or
reclassification.
(iii) Except as provided in Subsections 3(b)(i) and 3(f), in
case the Company shall issue or sell any Common Stock, any securities
convertible into Common Stock, any rights, options or warrants to
purchase Common Stock or any securities convertible into Common Stock,
in each case for a price per share or entitling the holders thereof to
purchase Common Stock at a price per share (determined by dividing (A)
the total amount, if any, received or receivable by the Company in
consideration of the issuance or sale of such securities plus the total
consideration, if any, payable to the Company upon exercise or
conversion thereof (the "COMMON STOCK TOTAL CONSIDERATION") by (B) the
number of additional shares of Common Stock issuable upon exercise or
conversion of such securities) which is less than either the then
current Market Price Per Option Unit in effect on the date of such
issuance or sale or the Per Option Unit Price, the Per Option Unit Price
shall be adjusted as of the date of such issuance or sale by multiplying
the Per Option Unit Price then in effect by a fraction, the numerator of
which shall be (x) the sum of (A) the number of shares of Common Stock
outstanding on the record date of such issuance or sale plus (B) the
Common Stock Total Consideration divided by the current Market Price of
the Common Stock or the current Per Option Unit Price, whichever is
greater, and the denominator of which shall be (y) the number of shares
of Common Stock outstanding on the record date of such issuance or sale
plus the maximum number of additional shares of Common Stock issued,
sold or issuable upon exercise or conversion of such securities.
(c) No adjustment in the Per Option Unit Price shall be required unless
such adjustment would require an increase or decrease of at least $0.05 per
Option Unit; provided, however, that any adjustments which by reason of this
Section 3(c) are not required to be made shall be carried forward and taken
into account in any subsequent adjustment; provided, further, however, that
adjustments shall be required and made in accordance with the provisions of
this Section 3 (other than this Section 3(c)) not later than such time as may
be required in order to preserve the tax-free nature of a distribution to the
Holder of this Option. All calculations under this Section 3 shall be made to
the nearest cent or to the nearest 1/100th of a share, as the case may be.
Anything in this Section 3 to the contrary notwithstanding, the Company shall
be entitled to make such reductions in the Per Option Unit Price, in addition
to those required by this Section 3, as it in its discretion shall deem to be
advisable in order that any stock dividend, subdivision of shares or
distribution of rights to purchase stock or securities convertible or
exchangeable for stock hereafter made by the Company to its stockholders shall
not be taxable.
(d) Whenever the Per Option Unit Price is adjusted as provided in this
Section 3 and upon any modification of the rights of a Holder of Options in
accordance with this Section 3, the Company shall promptly prepare a brief
statement of the facts requiring such adjustment or modification and the manner
of computing the same and cause copies of such certificate to be mailed to the
Holders of the Options. The Company may, but shall not be obligated to unless
requested by a Holders of more than 50% of the outstanding Options, Preferred
Shares, Warrant Shares and Conversion Shares, obtain, at its expense, a
certificate of a firm of independent public
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<PAGE> 8
accountants of recognized standing selected by the Board of Directors (who may
be the regular auditors of the Company) setting forth the Per Option Unit Price
and the number of Warrants and Preferred Shares or Conversion Shares, as the
case may be, after such adjustment or the effect of such modification, a brief
statement of the facts requiring such adjustment or modification and the manner
of computing the same and cause copies of such certificate to be mailed to the
Holders of the Options.
(e) If the Board of Directors of the Company shall declare any dividend
or other distribution with respect to the Preferred Stock or Common Stock other
than a cash distribution out of earned surplus, the Company shall mail notice
thereof to the Holders of the Options not less than 10 days prior to the record
date fixed for determining stockholders entitled to participate in such
dividend or other distribution.
(f) No adjustment in the Per Option Unit Price shall be required in the
case of the issuance by the Company of Preferred Stock (or, if after the
Conversion Date, Common Stock) (i) pursuant to the exercise of any Option or
(ii) pursuant to (x) the exercise of any stock options or warrants currently
outstanding or (y) securities issued after the date hereof pursuant to any
Company benefit plan; provided however, that with respect to (y), the issuance
of such securities were approved by the Board of Directors of the Company and
were issued at a price no less than the Conversion Price or the Market Price of
the securities on the date of issuance.
(g) In case of any capital reorganization or reclassification, or any
consolidation or merger to which the Company is a party other than a merger or
consolidation in which the Company is the continuing corporation, or in case of
any sale or conveyance to another entity of the property of the Company as an
entirety or substantially as a entirety, or in the case of any statutory
exchange of securities with another corporation (including any exchange effected
in connection with a merger of a third corporation into the Company), the Holder
of this Option shall have the right thereafter to receive on the exercise of
this Option the kind and amount of securities, cash or other property which the
Holder would have owned or have been entitled to receive immediately after such
reorganization, reclassification, consolidation, merger, statutory exchange,
sale or conveyance had this Option been exercised immediately prior to the
effective date of such reorganization, reclassification, consolidation, merger,
statutory exchange, sale or conveyance and in any such case, if necessary,
appropriate adjustment shall be made in the application of the provisions set
forth in this Section 3 with respect to the rights and interests thereafter of
the Holder of this Option to the end that the provisions set forth in this
Section 3 shall thereafter correspondingly be made applicable, as nearly as may
reasonably be, in relation to any shares of stock or other securities or
property thereafter deliverable on the exercise of this Option. The above
provisions of this Subsection 3(g) shall similarly apply to successive
reorganizations, reclassifications, consolidations, mergers, statutory
exchanges, sales or conveyances. The Company shall require the issuer of any
shares of stock or other securities or property thereafter deliverable on the
exercise of this Option to be responsible for all of the agreements and
obligations of the Company hereunder. Notice of any such reorganization,
reclassification, consolidation, merger, statutory exchange, sale or conveyance
and of said provisions so proposed to be made, shall be mailed to the Holders of
the Options not less than 30 days prior to such event. A sale of all or
substantially all of the assets of the Company for a consideration consisting
primarily of securities shall be deemed a consolidation or merger for the
foregoing purposes.
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<PAGE> 9
(h) If, as a result of an adjustment made pursuant to this Section 3,
the Holder of any Option thereafter surrendered for exercise shall become
entitled to receive shares of two or more classes of capital stock or shares of
Preferred Stock (or, if after the Conversion Date, Common Stock) and other
capital stock of the Company, the Board of Directors (whose determination shall
be conclusive and shall be described in a written notice to the Holder of any
Option promptly after such adjustment) shall determine the allocation of the
adjusted Per Option Unit Price between or among shares or such classes of
capital stock or shares of Preferred Stock (or, if after the Conversion Date,
Common Stock) and other capital stock.
(i) Upon the expiration of any rights, options, warrants or conversion
privileges, if such shall not have been exercised, the number of Option Units
purchasable upon exercise of this Option, to the extent this Option has not then
been exercised, shall, upon such expiration, be readjusted and shall thereafter
be such as they would have been had they been originally adjusted (or had the
original adjustment not been required, as the case may be) on the basis of (i)
the fact that Common Stock, or Preferred Stock, as the case may be, if any,
actually issued or sold upon the exercise of such rights, options, warrants or
conversion privileges, and (ii) the fact that such shares of Common Stock, or
Preferred Stock, as the case may be, if any, were issued or sold for the
consideration actually received by the Company upon such exercise plus the
consideration, if any, actually received by the Company for the issuance, sale
or grant of all such rights, options, warrants or conversion privileges whether
or not exercised; provided, however, that no such readjustment shall have the
effect of decreasing the number of Option Units purchasable upon exercise of
this Option by an amount in excess of the amount of the adjustment initially
made in respect of the issuance, sale or grant of such rights, options, warrants
or conversion privileges.
(j) Whenever the Per Option Unit Price payable upon exercise of each
Option is adjusted pursuant to this Section 3, (i) the number of shares of
Preferred Stock (or, if after the Conversion Date, Common Stock) included in an
Option Unit shall simultaneously be adjusted by multiplying the number of
shares of Preferred Stock (or, if after the Conversion Date, Common Stock)
included in an Option Unit immediately prior to such adjustment by the Per
Option Unit Price in effect immediately prior to such adjustment and dividing
the product so obtained by the Per Option Unit Price, as adjusted and (ii) the
number of shares of Preferred Stock (or, if after the Conversion Date, Common
Stock) or other securities issuable upon exercise of the Warrants included in
the Option Units and the Warrant Exercise Price shall be adjusted in accordance
with the applicable terms of the Warrant Agreement.
4. FULLY PAID STOCK: TAXES. The Company agrees that the shares
of the Preferred Stock represented by each and every certificate for Preferred
Shares delivered on the exercise of this Option and the shares of Common Stock
delivered upon the exercise of the Warrants or the conversion of the Preferred
Shares or the exercise of this Option following the conversion of all shares of
Preferred Stock into Common Stock, shall at the time of such delivery, be
validly issued and outstanding, fully paid and nonassessable, and not subject
to preemptive rights or rights of first refusal, and the Company will take all
such actions as may be necessary to assure that the par value or stated value,
if any, per share of the Preferred Stock and the Common Stock is at all times
equal to or less than the then Per Option Unit Price. The Company further
covenants and agrees that it will pay, when due and payable, any and all
Federal and state stamp, original issue or similar taxes which may be payable
in respect of the issue of any Warrant Share, Preferred Share, Conversion Share
or any certificate thereof to the extent required because of the issuance by
the Company of such security.
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<PAGE> 10
5. REGISTRATION UNDER SECURITIES ACT OF 1933. (a) The Holder shall
have the registration rights to the extent provided under the investor rights
agreements (the "Rights Agreements") by and among the purchasers of Offering
Units (including for purposes of that agreement, the Placement Agent) and the
Company, dated June 23, 1997, entered into in connection with the Offering. By
acceptance of this Option, the Holder agrees to comply with the provisions of
the Rights Agreement to same extent as if it were a party thereto.
(b) Until all Conversion Shares have been sold under a Registration
Statement or pursuant to Rule 144, the Company shall use its reasonable best
efforts to file with the Securities and Exchange Commission all current reports
and the information as may be necessary to enable the Holder to effect sales of
its shares in reliance upon Rule 144 promulgated under the Act.
6. INVESTMENT INTENT; LIMITED TRANSFERABILITY.
(a) The Holder represents, by accepting this Option, that it
understands that this Option and any securities obtainable upon exercise of
this Option or upon conversion of such securities have not been registered for
sale under Federal or state securities laws and are being offered and sold to
the Holder pursuant to one or more exemptions from the registration
requirements of such securities laws. In the absence of an effective
registration of such securities, any certificates for such securities shall
bear the legend set forth on the first page hereof. The Holder understands that
it must bear the economic risk of its investment in this Option and any
securities obtainable upon exercise of this Option or upon conversion of such
securities for an indefinite period of time, as this Option and such securities
have not been registered under Federal or state securities laws and therefore
cannot be sold unless subsequently registered under such laws, unless an
exemption from such registration is available.
(b) The Holder, by his acceptance of its Option, represents to the
Company that it is acquiring this Option and will acquire any securities
obtainable upon exercise of this Option for its own account for investment and
not with a view to, or for sale in connection with, any distribution thereof in
violation of the Securities Act of 1933, as amended (the "Act"). The Holder
agrees that this Option and any such securities will not be sold or otherwise
transferred unless (i) a registration statement with respect to such transfer
is effective under the Act and any applicable state securities laws or (ii) the
Holder delivers to the Company an opinion of counsel reasonably satisfactory
to the Company that such registration statement is not required.
(c) In addition to the requirements set forth in Section 6(b) above,
this Option may not be sold, transferred, assigned or hypothecated for six
months from the date hereof except (i) to any firm or corporation that succeeds
to all or substantially all of the business of Paramount Capital, Inc., (ii) to
any of the officers, employees or affiliated companies of Paramount Capital,
Inc., or of any such successor firm, (iii) to any NASD member participating in
the Offering or any officer or employee of any such NASD member, or (iv) in
the case of an individual, pursuant to such individual's last will and
testament or the laws of descent and distribution, and is so transferable only
upon the books of the Company which it shall cause to be maintained for such
purpose. The Company may treat the registered Holder of this Option as he or it
appears on the Company's books at any time as the Holder for all purposes. The
Company shall permit any Holder of an Option or its duly authorized attorney,
upon written request during ordinary business hours, to inspect and copy or
make extracts from its books showing the registered holders of Options. All
Options issued upon the transfer or assignment of this Option will be
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<PAGE> 11
dated the same date as this Option, and all rights of the holder thereof shall
be identical to those of the Holder.
7. LOSS, ETC. OF OPTION. Upon receipt of evidence satisfactory to
the Company of the loss, theft, destruction or mutilation of this Option, and of
indemnity reasonably satisfactory to the Company, if lost, stolen or destroyed,
and upon surrender and cancellation of this Option, if mutilated, the Company
shall execute and deliver to the Holder a new Option of like date, tenor and
denomination.
8. OPTION HOLDER NOT STOCKHOLDER. This Option does not confer upon
the Holder any right to vote or to consent to or receive notice as a
stockholder of the Company, as such, in respect of any matters whatsoever, or
any other rights or liabilities as a stockholder, prior to the exercise hereof;
this Option does, however, require certain notices to Holders as set forth
herein.
9. COMMUNICATION. No notice or other communication under this
Option shall be effective unless, but any notice or other communication shall be
effective and shall be deemed to have been given if, the same is in writing and
is mailed by first-class mail, postage prepaid, addressed to:
(a) the Company at c/o 21375 Cabot Boulevard, Hayward, CA 94545,
Attn: President or such other address as the Company has designated in
writing to the Holder, or
(b) the Holder at c/o Paramount Capital Incorporated, 787 Seventh
Avenue, New York, NY 10019 or other such address as the Holder has
designated in writing to the Company.
10. HEADINGS. The headings of this Option have been inserted as a
matter of convenience and shall not affect the construction hereof.
11. APPLICABLE LAW. This Option shall be governed by and construed
in accordance with the law of the State of New York without giving effect to
the principles of conflicts of law thereof.
12. AMENDMENT, WAIVER, ETC. Except as expressly provided herein,
neither this Option nor any term hereof may be amended, waived, discharged or
terminated other than by a written instrument signed by the party against whom
enforcement of any such amendment, waiver, discharge or termination is sought;
provided, however, that any provisions hereof may be amended, waived, discharged
or terminated upon the written consent of the Company and the then current
Majority of the Holders of the Options only.
- 11 -
<PAGE> 12
IN WITNESS WHEREOF, the Company has caused this Option to be signed by
its President and attested by its Secretary this 23rd day of June, 1997.
RIBOGENE, INC.
By: /s/ Charles J. Casamento
--------------------------------
Name: Charles J. Casamento
Title:
ATTEST:
/s/ Jill Cohen
- -------------------------
Secretary
<PAGE> 13
SUBSCRIPTION
The undersigned, , pursuant to the provisions
--------------------------
of the foregoing Option, hereby agrees to subscribe for and purchase
--------
Option Units of RiboGene, Inc., each Option Unit consisting of one share of the
Preferred Stock, no par value, and one Class A Warrant covered by said Option,
and makes payment therefor in full at the price per share provided by said
Option. The undersigned hereby confirms the representations and warranties made
by it in the Option.
Dated: Signature:
-------------- ------------------------
Address:
--------------------------
CASHLESS EXERCISE
The undersigned , pursuant to the provisions of the
---------------------
foregoing Option, hereby elects to exchange its Option for Option Units,
------
each Option Unit consisting of one share of Preferred Stock, no par value, and
one Class A Warrant, pursuant to the cashless exercise provisions of the
Option. The undersigned hereby confirms the representations and warranties made
by it in the Option.
Dated: Signature:
-------------- ------------------------
Address:
--------------------------
ASSIGNMENT
FOR VALUE RECEIVED hereby sells, assigns and transfers
--------------
unto the foregoing Option and all rights evidenced
-----------------------
thereby, and does irrevocably constitute and appoint ,
---------------------
attorney, to transfer said Option on the books of RiboGene, Inc.
Dated: Signature:
-------------- ------------------------
Address:
--------------------------
PARTIAL ASSIGNMENT
FOR VALUE RECEIVED hereby assigns and transfers
------------------
unto the right to purchase Option Units of
--------------------- --------
RiboGene, Inc., each Option Unit consisting of one share of Preferred Stock, no
par value, and one Class A Warrant covered by the foregoing Option, and a
proportionate part of said Option and the rights evidenced thereby, and does
irrevocably constitute and appoint , attorney, to transfer
-------------------
that part of said Option on the books of RiboGene, Inc.
Dated: Signature:
-------------- ------------------------
Address:
--------------------------
-13-
<PAGE> 1
EXHIBIT 4.7
WARRANT AGREEMENT
AGREEMENT, dated as of this 23rd day of June, 1997, between RIBOGENE,
INC., a California corporation ("Company") and PARAMOUNT CAPITAL, INC., a New
York corporation ("Paramount").
W I T N E S S E T H
WHEREAS, the Company has commenced a private placement (the "Private
Placement") of a minimum (the "Minimum Offering") of 1,333,333 units (the
"Units") and a maximum (the "Maximum Offering") of 2,666,666 Units, with an
option in favor of Paramount, subject to the Company's prior consent, to offer
up to an additional 1,777,777 Units to cover over-allotments, each Unit
consisting of (a) one share of Series F Convertible Preferred Stock of the
Company (the "Preferred Stock"), initially convertible into shares of common
stock, no par value, of the Company, (the "Common Stock"), and (b) one
redeemable Class A Warrant to purchase one share of Common Stock (the "Class A
Warrants" or the "Warrants"), pursuant to a Placement Agency Agreement dated as
of August 1, 1996, as amended (the "Placement Agency Agreement"), between the
Company and Paramount and the issuance to the Placement Agent or its designees
of Placement and Advisory Options to purchase up to an aggregate of 1,111,111
additional Units, to be dated June 23, 1997 (the "Unit Purchase Options"), the
Company may issue up to 5,555,554 Class A Warrants;
WHEREAS, each Class A Warrant entitles the Registered Holder thereof to
purchase one (1) share of Common Stock; and
WHEREAS, the Company will act as warrant agent ("Warrant Agent") in
connection with the issuance, registration, transfer, exchange and redemption
of the Warrants, the issuance of certificates representing the Warrants, the
exercise of the Warrants, and the rights of the holders thereof;
NOW THEREFORE, in consideration of the premises and the mutual
agreements hereinafter set forth and for the purpose of defining the terms and
provisions of the Warrants and the certificates representing the Warrants and
the respective rights and obligations thereunder of the Company and, the
holders of certificates representing the Warrants, the parties hereto agree as
follows:
SECTION 1. Definitions. As used herein, the following terms shall have
the following meanings, unless the context shall otherwise require:
(a) "Common Stock" shall mean stock of the Company of any class,
whether now or hereafter authorized, which has the right to participate in the
distribution of earnings and assets of the Company without limit as to amount
or percentage, which at the Initial Closing Date will consist of 50,000,000
shares of Common Stock, no par value.
<PAGE> 2
(b) "Closing Bid Price" for each trading day shall be the reported
closing bid price of the Common Stock on the American Stock Exchange ("AMEX"),
or if the Common Stock is not traded on the AMEX, shall mean the reported
closing bid price on the Nasdaq SmallCap Market or the Nasdaq National Market
System (collectively referred to as, "Nasdaq") or, if the Common Stock is not
traded on Nasdaq, on the principal national securities exchange on which the
Common Stock is listed or admitted to trading (based on the aggregate dollar
value of all securities listed or admitted to trading) or, if not listed or
admitted to trading on any national securities exchange or quoted on Nasdaq, the
closing bid price in the over-the-counter market as furnished by any NASD member
firm selected from time to time by the Corporation for that purpose.
(c) "Corporate Office" shall mean the office of the Company (or its
successor as Warrant Agent) at which at any particular time its principal
business shall be administered, which office is located at the date hereof at
21375 Cabot Blvd, Hayward, CA 94545.
(d) "Exercise Date" shall mean, as to any Warrant, the date on which
the Company shall have received both (a) the Warrant Certificate representing
such Warrant, with the subscription form thereon duly executed by the
Registered Holder thereof or his attorney duly authorized in writing, and (b)
payment in cash, or by official bank or certified check made payable to the
Company, of an amount in lawful money of the United States of America equal to
the applicable Purchase Price.
(e) "Final Closing Date" shall mean the final closing date of the
Private Placement.
(f) "Initial Closing Date" shall mean as to each Warrant the date of
the initial closing of the Offering.
(g) "Initial Warrant Exercise Date" shall man as to each Warrant the
Final Closing Date.
(h) "Market Price" of the Common Stock shall mean the average Closing
Bid Price, for twenty (20) consecutive trading days (or such other period as
Paramount may consent to), ending with the date as of which the Market Price is
being determined, provided that if the prices referenced in the definition of
Closing Bid Price cannot be determined for such period, "Market Price" shall
mean the fair market value of the Common Stock set by, or in a manner
established by, the Board of Directors of the Company in good faith.
(i) "Preferred Stock" shall mean the Series F Convertible Preferred
Stock of the Company, stated value $2.25 per share, which at the Initial
Closing Date will consist of 5,555,554 authorized shares.
- 2 -
<PAGE> 3
(j) "Purchase Price" shall mean the purchase price to be paid upon
exercise of each Warrant in accordance with the terms hereof, which price shall
be the lesser of (i) $2.25 and (ii) the effective per share price of the Common
Stock sold in the Qualified IPO (taking into account all stock splits and
similar events), subject to adjustment from time to time pursuant to the
provisions of Section 9 hereof, and subject to the Company's right to reduce
the Purchase Price upon notice to all warrantholders (which may be given,
without limitation, prior to the Final Closing Date).
(k) "Qualified IPO" shall mean the initial underwritten public
offering of securities of the Company pursuant to an effective registration
statement under the Securities Act in which gross proceeds to the Company
exceed $7,500,000.
(l) "Redemption Price" shall mean the price at which the Company
may, at its option in accordance with the terms hereof, redeem the Warrants,
which price shall be $0.10 per Warrant.
(m) "Registered Holder" shall mean as to any Warrant and as of any
particular date, the person in whose name the certificate representing the
Warrant shall be registered on that date on the books maintained by the Company
pursuant to Section 6.
(n) "Transfer Agent" shall mean the Company, or its authorized
successor, as such.
(o) "Warrant Expiration Date" shall mean 5:00 P.M. (New York time)
on the day prior to the sixth anniversary of the Final Closing Date or the
Redemption Date as defined in Section 8, whichever is earlier; provided that if
such date shall in the State of New York be a holiday or a day on which banks
are authorized or required to close, then 5:00 P.M. (New York time) on the next
following day which in the State of New York is not a holiday or a day on which
banks are authorized or required to close. Upon notice to all warrantholders the
Company shall have the right to extend the Warrant Expiration Date.
SECTION 2. Warrants and Issuance of Warrant Certificates.
(a) A Class A Warrant initially shall entitle the Registered Holder
of the Warrant Certificate representing such Warrant to purchase one share of
Common Stock upon the exercise thereof, in accordance with the terms hereof,
subject to modification and adjustment as provided in Section 9.
(b) The Class A Warrants included in the offering of Units will be
detachable and separately transferable immediately from the shares of Preferred
Stock constituting part of such Units.
-3-
<PAGE> 4
(c) Upon execution of this Agreement, Warrant Certificates
representing the number of Class A Warrants sold pursuant to the Private
Placement shall be executed, issued and delivered by the Company.
(d) From time to time, up to the Warrant Expiration Date, the
Company, or its successor as Transfer Agent, shall execute and deliver stock
certificates in required whole number denominations representing up to an
aggregate of 5,555,554 shares of Common Stock, subject to adjustment as
described herein, upon the exercise of Warrants in accordance with this
Agreement.
(e) From time to time, up to the Warrant Expiration Date, the
Company shall execute and deliver Warrant Certificates in required whole number
denominations to the persons entitled thereto in connection with any transfer
or exchange permitted under this Agreement; provided that no Warrant
Certificates shall be issued except (i) those initially issued hereunder, (ii)
those issued on or after the Initial Warrant Exercise Date, upon the exercise
of fewer than all Warrants represented by any Warrant Certificate, to evidence
any unexercised Warrants held by the exercising Registered Holder, (iii) those
issued upon any transfer or exchange pursuant to Section 6; (iv) those issued
in replacement of lost, stolen, destroyed or mutilated Warrant Certificates
pursuant to Section 7 and (v) at the option of the Company, in such form as may
be approved by its Board of Directors, to reflect any adjustment or change in
the Purchase Price, the number of shares of Common Stock purchasable upon
exercise of the Warrants or the Redemption Price therefor made pursuant to
Section 9 hereof or of the Warrant Expiration Date.
SECTION 3. Form and Execution of Warrant Certificates.
(a) The Warrant Certificates shall be substantially in the form
annexed hereto as Exhibit A (the provisions of which are hereby incorporated
herein) and may have such letters, numbers or other marks of identification or
designation and such legends, summaries or endorsements printed, lithographed
or engraved thereon as the Company may deem appropriate and as are not
inconsistent with the provisions of this Agreement, or as may be required to
comply with any law or with any rule or regulation made pursuant thereto or
with any rule or regulation of any stock exchange on which the Class A Warrants
may be listed, or to conform to usage or to the requirements of Section 2. The
Warrant Certificates shall be dated the date of issuance thereof (whether upon
initial issuance, transfer, exchange or in lieu of mutilated, lost, stolen, or
destroyed Warrant Certificates) and issued in registered form. Warrant
Certificates shall be numbered serially with the letter AW on Class A Warrants
of all denominations.
(b) Warrant Certificates shall be executed on behalf of the Company
by its Chairman of the Board, President or any Vice President and by its
Secretary or an Assistant Secretary, by manual signatures or by facsimile
signatures printed thereon. In case any officer of the Company who shall have
signed any of the Warrant Certificates shall cease to be an officer of the
Company or to hold the particular office referenced in the Warrant Certificate
before the date of issuance of the Warrant Certificates or before delivery
thereof, such Warrant Certificates may nevertheless be issued and delivered
with the same force and effect as though the person
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<PAGE> 5
who signed such Warrant Certificates had not ceased to be an officer of the
Company or to hold such office.
SECTION 4. Exercise.
(a) Each Warrant may be exercised by the Registered Holder thereof
at any time on or after the Initial Exercise Date, but not after the Warrant
Expiration Date, upon the terms and subject to the conditions set forth herein
and in the applicable Warrant Certificate. A Warrant shall be deemed to have
been exercised immediately prior to the close of business on the Exercise Date
and the person entitled to receive the securities deliverable upon such exercise
shall be treated for all purposes as the holder of those securities upon the
exercise of the Warrant as of the close of business on the Exercise Date.
Promptly following the exercise of any Warrant and receipt of proceeds in the
form of cleared funds (the "Cleared Funds") representing the Purchase Price
from the exercise of a Warrant (the "Warrant Proceeds"), the Company shall
cause to be issued and delivered to the person or persons entitled to receive
the same, a certificate or certificates for the securities deliverable upon
such exercise (plus a certificate for any remaining unexercised Warrants of the
Registered Holder). In the case of payment made in the form of a check drawn on
an account of Paramount or such other investment banks and brokerage houses as
the Company shall approve, certificates shall immediately be issued upon the
exercise of any Warrant and receipt of Cleared Funds received from the Warrant
Proceeds.
(b) On the Exercise Date in respect of the exercise of any Warrant,
the Company shall pay from Cleared Funds received from the Warrant Proceeds, a
fee of 5% (the "Paramount Fee") of the Purchase Price to Paramount for Warrant
exercises solicited by Paramount or its representatives (of which a portion may
be reallowed by Paramount to the dealer who solicited the exercise, which may
also be Paramount). In the event the Paramount Fee is not received within seven
days of the date on which the Company receives Cleared Funds received from
Warrant Proceeds, then the Paramount Fee shall begin accruing interest at an
annual rate of prime plus three (3)%, payable by the Company to Paramount at
the time Paramount receives the Paramount Fee. Within five days after exercise
the Company, at the request of Paramount, shall send Paramount a copy of the
reverse side of each Warrant exercised. In addition, Paramount may at any time
during business hours, examine the records of the Company, including its ledger
of original Warrant Certificates returned to the Company upon exercise of
Warrants. The provisions of this paragraph may not be modified, amended or
deleted without the prior written consent of Paramount. In addition to the
foregoing, any costs incurred by Paramount shall be promptly reimbursed by the
Company.
(c) In order to enforce the provisions of Section 4(b) above, in
the event there is any dispute or question as to the amount or payment of the
Paramount Fee, the Company is hereby expressly authorized to establish an
escrow account for the purpose of depositing the entire amount of the unpaid
Paramount Fee, which amount will be deducted from the net Warrant Proceeds paid
to the Company. The funds placed in the escrow account may not be released to
the Company without a written agreement from Paramount that the required
Paramount Fee has been received by Paramount. Paramount shall promptly notify
the escrow
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<PAGE> 6
agent and the Company by facsimile and certified mail in the event of any such
dispute and when the Paramount Fee has been paid.
SECTION 5. Reservation of Shares; Listing; Payment of Taxes; etc.
(a) The Company covenants that it will at all times reserve and keep
available out of its authorized Common Stock, solely for the purpose of issue
upon exercise of Warrants, such number of shares of Common Stock as shall then
be issuable upon the exercise of all outstanding Warrants. The Company
covenants that all shares of Common Stock which shall be issuable upon
exercise of the Warrants shall, at the time of delivery (assuming full payment
of the purchase price thereof), be duly and validly issued, fully paid,
nonassessable and free from all issuance taxes, liens and charges with respect
to the issue thereof including, without limitation, adverse claims whatsoever
(with the exception of claims arising through the acts of the Holders
themselves and except as arising from applicable Federal and state securities
laws), that the Company shall have paid all taxes, if any, in respect of the
original issuance thereof and that upon issuance such shares, to the extent
applicable, shall be listed on AMEX and each other each national securities
exchange or eligible for inclusion on the Nasdaq National Market or the Nasdaq
SmallCap Market, on which the other shares of outstanding Common Stock of the
Company, if any, are then listed or eligible for inclusion.
(b) The Company covenants that if any securities to be reserved for
the purpose of exercise of Warrants hereunder require registration with, or
approval of, any governmental authority under any federal securities law before
such securities may be validly issued or delivered upon such exercise, then the
Company will in good faith and as expeditiously as reasonably possible,
endeavor to secure such registration or approval. The Company will use
reasonable efforts to obtain appropriate approvals or registrations under state
"blue sky" securities laws; provided, that the Company shall not be required to
qualify as a foreign corporation or file a general or limited consent to
service of process in any such jurisdictions or make any changes in its capital
structure or any other aspects of its business or enter into any agreements with
blue sky commissions, including any agreement to escrow shares of its capital
stock. With respect to any such securities, however, Warrants may not be
exercised by, or shares of Common Stock issued to, any Registered Holder in any
state in which such exercise would be unlawful.
(c) The Company shall pay all documentary, stamp or similar taxes
and other similar governmental charges that may be imposed with respect to the
issuance of Warrants, or the issuance or delivery of any shares upon exercise
of the Class A Warrants; provided, however, that if the shares of Common Stock
are to be delivered in a name other than the name of the Registered Holder of
the Warrant Certificate representing any Warrant being exercised, then no such
delivery shall be made unless the person requesting the same has paid to the
Company the amount of transfer taxes or charges incident thereto, if any.
- 6 -
<PAGE> 7
SECTION 6. Exchange and Registration of Transfer.
(a) Warrant Certificates may be exchanged for other Warrant
Certificates representing an equal aggregate number of Warrants of the same
class or may be transferred in whole or in part. Warrant Certificates to be
exchanged shall be surrendered to the Company at its Corporate Office, and upon
satisfaction of the terms and provisions hereof, the Company shall execute,
issue and deliver in exchange therefor the Warrant Certificate or Certificates
which the Registered Holder making the exchange shall be entitled to receive.
(b) The Company shall keep at its office books in which, subject to
such reasonable regulations as it may prescribe, it shall register Warrant
Certificates and the transfer thereof in accordance with its regular practice.
Upon due presentment for registration of transfer of any Warrant Certificate at
such office, the Company shall execute, issue and deliver to the transferee or
transferees a new Warrant Certificate or Certificates representing an equal
aggregate number of Warrants.
(c) With respect to all Warrant Certificates presented for
registration or transfer, or for exchange or exercise, the subscription form on
the reverse thereof shall be duly endorsed, or be accompanied by a written
instrument or instruments of transfer and subscription, in form satisfactory to
the Company, duly executed by the Registered Holder or his attorney-in-fact
duly authorized in writing.
(d) A service charge may be imposed by the Company on holders for
any exchange or registration of transfer of Warrant Certificates of such
holders. In addition, the Company may require payment by such holder of a sum
sufficient to cover any tax or governmental or other charge that may be imposed
in connection therewith.
(e) All Warrant Certificates surrendered for exercise or for
exchange in case of mutilated Warrant Certificates shall be promptly cancelled
by the Company and thereafter retained by the Company in a manner consistent
with its customary practices until termination of this Agreement, or, with the
prior written consent of Paramount, disposed of or destroyed.
(f) Prior to due presentment for registration of transfer thereof,
the Company may deem and treat the Registered Holder of any Warrant Certificate
as the absolute owner thereof and of each Warrant represented thereby
(notwithstanding any notations of ownership or writing thereon made by anyone
other than a duly authorized officer of the Company) for all purposes and shall
not be affected by any notice to the contrary. The Warrants, which are being
offered in Units with shares of Preferred Stock pursuant to the Placement
Agency Agreement, will be immediately detachable from the Preferred Stock and
transferable separately therefrom.
SECTION 7. Loss or Mutilation. Upon receipt by the Company of evidence
satisfactory to it of the ownership of and loss, theft, destruction or
mutilation of any Warrant Certificate and (in case of loss, theft or
destruction) of indemnity satisfactory to it, and (in the case of mutilation)
upon surrender and cancellation thereof, the Company shall execute and
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<PAGE> 8
deliver to the Registered Holder in lieu thereof a new Warrant Certificate of
like tenor representing an equal aggregate number of Class A Warrants.
Applicants for a substitute Warrant Certificate shall comply with such other
reasonable regulations and pay such other reasonable charges as the Company may
prescribe.
SECTION 8. Redemption.
(a) At any time after the first anniversary of the Qualified IPO, on
not less than sixty (60) days' prior written notice given to Registered Holders
of the Warrants being redeemed, the Warrants may be redeemed, at the option of
the Company, at a redemption price of $0.10 per Warrant, provided the Market
Price of the Common Stock exceeds 200% of the Purchase Price per Class A Warrant
(the "Target Price"), subject to adjustment as set forth in Section 8(f) below,
for 20 trading days in the 30 consecutive trading day period ending five days
prior to the date of notice of redemption (which shall be the date of mailing of
such notice). All Class A Warrants must be redeemed if any are redeemed. The
date fixed for redemption of the Warrants is referred to herein as the
"Redemption Date."
(b) If the conditions set forth in Section 8(a) are met, and the
Company desires to exercise its right to redeem the Warrants, it shall mail a
notice of redemption to each of the Registered Holders of the Warrants to be
redeemed, first class, postage prepaid, not later than the sixtieth day before
the date fixed for redemption, at their last address as shall appear on the
records maintained pursuant to Section 6(b). Any notice mailed in the manner
provided herein shall be conclusively presumed to have been duly given whether
or not the Registered Holder receives such notice.
(c) The notice of redemption shall specify (i) the redemption price,
(ii) the Redemption Date, (iii) the place where the Warrant Certificates shall
be delivered and the redemption price paid, (iv) that Paramount will assist
each Registered Holder of a Warrant and be entitled to a commission and
reimbursement of costs in connection with the exercise thereof and (v) that the
right to exercise the Warrant shall terminate at 5:00 P.M. (New York time) on
the business day immediately preceding the Redemption Date. No failure to mail
such notice nor any defect therein or in the mailing thereof shall affect the
validity of the proceedings for such redemption except as to a Registered
Holder (a) to whom notice was not mailed or (b) whose notice was defective. An
affidavit of the Secretary or an Assistant Secretary of Paramount or the
Company that notice of redemption has been mailed shall, in the absence of
fraud, be prima facie evidence of the facts stated therein.
(d) Any right to exercise a Warrant shall terminate at 5:00 P.M.
(New York time) on the business day immediately preceding the Redemption Date.
On and after the Redemption Date, Holders of the Warrants shall have no further
rights except to receive, upon surrender of the Warrant, the Redemption Price.
(e) From and after the Redemption Date, the Company shall, at the
place specified in the notice of redemption, upon presentation and surrender to
the Company by or on
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<PAGE> 9
behalf of the Registered Holder thereof of one or more Warrant Certificates
evidencing Warrants to be redeemed, deliver or cause to be delivered to or upon
the written order of such Holder a sum in cash equal to the redemption price of
each such Warrant. From and after the Redemption Date and upon the deposit or
setting aside by the Company of a sum sufficient to redeem all the Warrants
called for redemption, such Warrants shall expire and become void and all
rights hereunder and under the Warrant Certificates, except the right to
receive payment of the redemption price, shall cease.
(f) If the shares of the Company's Common Stock are subdivided or
combined into a greater or smaller number of shares of Common Stock, the Target
Price shall be proportionally adjusted by the ratio which the total number of
shares of Common Stock outstanding immediately prior to such event bears to the
total number of shares of Common Stock to be outstanding immediately after such
event.
SECTION 9. Adjustment of Exercise Price and Number of Shares of Common
Stock or Warrants.
(a) Except as otherwise provided herein, in the event the Company
shall, at any time or from time to time after the date hereof, (1) sell or
issue any shares of Common Stock for a consideration per share less than either
(i) the Purchase Price in effect on the date of such sale or issuance or (ii)
the Market Price of the Common Stock as of the date of the sale or issuance,
(2) issue any shares of Common Stock as a stock dividend to the holders of
Common Stock, or (3) subdivide or combine the outstanding shares of Common Stock
into a greater or lesser number of shares (any such sale, issuance, subdivision
or combination being herein called a "Change of Shares"), then, and thereafter
upon each further Change of Shares, the Purchase Price in effect immediately
prior to such Change of Shares shall be changed to a price (rounded to the
nearest cent) determined by multiplying the Purchase Price in effect
immediately prior thereto by a fraction, the numerator of which shall be the
sum of the number of shares of Common Stock outstanding immediately prior to
the sale or issuance of such additional shares or such subdivision or
combination and the number of shares of Common Stock which the aggregate
consideration received (determined as provided in subsection 9(g)(F) below) for
the issuance of such additional shares would purchase at the greater of (i) the
Purchase Price in effect on the date of such issuance or (ii) the Market Price
as of such date, and the denominator of which shall be the number of shares of
Common Stock outstanding immediately after the sale or issuance of such
additional shares or such subdivision or combination. Such adjustment shall be
made successively whenever such an issuance is made.
Upon each adjustment of the Purchase Price pursuant to this Section 9,
the total number of shares of Common Stock purchasable upon the exercise of
each Class A Warrant shall (subject to the provisions contained in Section 9(b)
hereof) be such number of shares (calculated to the nearest tenth) purchasable
at the Purchase Price in effect immediately prior to such adjustment multiplied
by a fraction, the numerator of which shall be the Purchase Price in effect
immediately prior to such adjustment and the denominator of which shall be the
Purchase Price in effect immediately after such adjustment.
-9-
<PAGE> 10
(b) The Company may elect, upon any adjustment of the Purchase Price
hereunder, to adjust the number of Class A Warrants outstanding, in lieu of the
adjustment in the number of shares of Common Stock purchasable upon the
exercise of each Warrant as hereinabove provided, so that each Class A Warrant
outstanding after such adjustment shall represent the right to purchase one
share of Common Stock. Each Warrant held of record prior to such adjustment of
the number of Warrants shall become that number of Warrants (calculated to the
nearest tenth) determined by multiplying the number one by a fraction, the
numerator of which shall be the Purchase Price in effect immediately prior to
such adjustment and the denominator of which shall be the Purchase Price in
effect immediately after such adjustment. Upon each adjustment of the number
of Warrants pursuant to this Section 9, the Company shall, as promptly as
practicable, cause to be distributed to each Registered Holder of Warrant
Certificates on the date of such adjustment Warrant Certificates evidencing,
subject to Section 10 hereof, the number of additional Warrants to which such
Holder shall be entitled as a result of such adjustment or, at the option of
the Company, cause to be distributed to such Holder in substitution and
replacement for the Warrant Certificates held by him prior to the date of
adjustment (and upon surrender thereof, if required by the Company) new Warrant
Certificates evidencing the number of Warrants to which such Holder shall be
entitled after such adjustment.
(c) In case of any reclassification, capital reorganization or other
change of outstanding shares of Common Stock, or in case of any consolidation
or merger of the Company with or into another corporation (other than a
consolidation or merger in which 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 other than the number thereof), or
in case of any sale or conveyance to another corporation of the property of the
Company as, or substantially as, an entirety (other than a sale/leaseback,
mortgage or other financing transaction), the Company shall cause effective
provision to be made so that each holder of a Warrant then outstanding shall
have the right thereafter, by exercising such Warrant, upon the terms and
conditions specified in the Warrants and in lieu of the shares of Common Stock
immediately theretofore purchasable upon exercise of the Warrants, to purchase
the kind and number of shares of stock or other securities or property
(including cash) receivable upon such reclassification, capital reorganization
or other change, consolidation, merger, sale or conveyance by a holder of the
number of shares of Common Stock that might have been purchased upon exercise
of such Warrant immediately prior to such reclassification, capital
reorganization or other change, consolidation, merger, sale or conveyance. Any
such provision shall include provision for adjustments that shall be as nearly
equivalent as may be practicable to the adjustments provided for in this
Section 9. The Company shall not effect any such consolidation, merger or sale
unless prior to or simultaneously with the consummation thereof the successor
(if other than the Company) resulting from such consolidation or merger or the
corporation purchasing assets or other appropriate corporation or entity shall
assume, by written instrument executed and delivered to the Company, the
obligation to deliver to the holder of each Warrant such shares of stock,
securities or assets as, in accordance with the foregoing provisions, such
holders may be entitled to purchase and the other obligations under this
Agreement. The foregoing provisions shall similarly apply to successive
reclassifications, capital reorganizations
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<PAGE> 11
and other changes of outstanding shares of Common Stock and to successive
consolidations, mergers, sales or conveyances.
(d) If, at any time or from time to time, the Company shall issue or
distribute to the holders of shares of Common Stock evidence of its
indebtedness, any other securities of the Company or any cash, property or
other assets (excluding an issuance or distribution governed by one of the
preceding subsections of this Section 9 and also excluding cash dividends or
cash distributions paid out of net profits legally available therefor in the
full amount thereof (any such non-excluded event being herein called a "Special
Dividend")), then in each case the Purchase Price shall be adjusted by
multiplying the Purchase Price theretofore in effect by a fraction, the
numerator of which shall be the Market Price in effect on the record date of
such issuance or distribution less the fair market value (as determined in good
faith by the Company's Board of Directors) of the evidence of indebtedness,
cash, securities or property, or other assets issued or distributed in such
Special Dividend applicable to one share of Common Stock and the denominator of
which shall be such Market Price. Such adjustment shall be made whenever any
such distribution is made and shall become effective on the date of
distribution retroactive to the record date for the determination of
stockholders entitled to receive such distribution.
(e) Irrespective of any adjustments or changes in the Purchase Price
or the number of shares of Common Stock purchasable upon exercise of the
Warrants, the Warrant Certificates theretofore and thereafter issued shall,
unless the Company shall exercise its option to issue new Warrant Certificates
pursuant to Section 2(b) hereof, continue to express the same Purchase Price
per share, number of shares purchasable thereunder and Redemption Price
therefor as the Purchase Price per share, the number of shares purchasable and
Redemption Price therefor as were expressed in the Warrant Certificates when
the same were originally issued.
(f) After each adjustment of the Purchase Price pursuant to this
Section 9, the Company will promptly prepare a certificate signed by the
Chairman or President, and by the Treasurer or an Assistant Treasurer or the
Secretary or an Assistant Secretary, of the Company setting forth: (i) the
Purchase Price as so adjusted, (ii) the number of shares of Common Stock
purchasable upon exercise of each Warrant after such adjustment, and, if the
Company shall have elected to adjust the number of Warrants pursuant to Section
9(b), the number of Warrants to which the registered holder of each Warrant
shall then be entitled, and the adjustment in Redemption Price resulting
therefrom, and (iii) a brief statement of the facts accounting for such
adjustment. The Company will cause a brief summary thereof to be sent by
ordinary first class mail to Paramount and to each registered holder of
Warrants at his last address as it shall appear on the registry books of the
Company. No failure to mail such notice nor any defect therein or in the
mailing thereof shall affect the validity of such adjustment. The affidavit of
the Secretary or an Assistant Secretary of the Company that such notice has
been mailed shall, in the absence of fraud, be prima facie evidence of the
facts stated therein.
(g) For purposes of Sections 9(a) and 9(b) hereof, the following
provisions (A) to (F) shall also be applicable:
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(A) The number of shares of Common Stock deemed outstanding at
any given time shall include all shares of capital stock convertible
into or exchangeable for Common Stock and all shares of Common Stock
issuable upon the exercise of any convertible debt, warrants outstanding
on the date hereof (including the Warrants) and options outstanding on
the date hereof.
(B) No adjustment of the Purchase Price shall be made unless
such adjustment would require an increase or decrease of at least $.01
in such price; provided that any adjustments which by reason of this
clause (B) are not required to be made shall be carried forward and
shall be made at the time of and together with the next subsequent
adjustment which, together with any adjustment(s) so carried forward,
shall require an increase or decrease of at least $.01 in the Purchase
Price then in effect hereunder.
(C) In case of (1) the sale by the Company (including as a
component of a unit) of any rights or warrants to subscribe for or
purchase, or any options for the purchase of, Common Stock or any
securities convertible into or exchangeable for Common Stock (such
securities convertible, exercisable or exchangeable into Common Stock
being herein called "Convertible Securities"), or (2) the issuance by
the Company, without the receipt by the Company of any consideration
therefor, of any rights or warrants to subscribe for or purchase, or any
options for the purchase of, Common Stock or Convertible Securities,
whether or not such rights, warrants or options, or the right to convert
or exchange such Convertible Securities, are immediately exercisable,
and the consideration per share for which Common Stock is issuable upon
the exercise of such rights, warrants or options or upon the conversion
or exchange of such Convertible Securities (determined by dividing (x)
the minimum aggregate consideration, as set forth in the instrument
relating thereto without regard to any antidilution or similar
provisions contained therein for a subsequent adjustment of such amount,
payable to the Company upon the exercise of such rights, warrants or
options, plus the consideration received by the Company for the issuance
or sale of such rights, warrants or options, plus, in the case of such
Convertible Securities, the minimum aggregate amount, as set forth in
the instrument relating thereto without regard to any antidilution or
similar provisions contained therein for a subsequent adjustment of such
amount, of additional consideration, if any, other than such Convertible
Securities, payable upon the conversion or exchange thereof, by (y) the
total maximum number, as set forth in the instrument relating thereto
without regard to any antidilution or similar provisions contained
therein for a subsequent adjustment of such amount, of shares of Common
Stock issuable upon the exercise of such rights, warrants or options or
upon the conversion or exchange of such Convertible Securities issuable
upon the exercise of such rights, warrants or options) is less than the
Purchase Price or the Market Price of the Common Stock as of the date of
the issuance or sale of such rights, warrants or options, then such
total maximum number of shares of Common Stock issuable
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<PAGE> 13
upon the exercise of such rights, warrants or options or upon the conversion or
exchange of such Convertible Securities (as of the date of the issuance or sale
of such rights, warrants or options) shall be deemed to be "Common Stock" for
purposes of Sections 9(a) and 9(b) hereof and shall be deemed to have been sold
for an amount equal to such consideration per share and shall cause an
adjustment to be made in accordance with Sections 9(a) and 9(b).
(D) In case of the sale by the Company of any Convertible Securities,
whether or not the right of conversion or exchange thereunder is immediately
exercisable, and the price per share for which Common Stock is issuable upon the
conversion or exchange of such Convertible Securities (determined by dividing
(x) the total amount of consideration received by the Company for the sale of
such Convertible Securities, plus the minimum aggregate amount, as set forth in
the instrument relating thereto without regard to any antidilution or similar
provisions contained therein for a subsequent adjustment of such amount, of
additional consideration, if any, other than such Convertible Securities,
payable upon the conversion or exchange thereof, by (y) the total maximum
number, as set forth in the instrument relating thereto without regard to any
antidilution or similar provisions contained therein for a subsequent adjustment
of such amount, of shares of Common Stock issuable upon the conversion or
exchange of such Convertible Securities) is less than the Purchase Price or the
Market Price of the Common Stock as of the date of the sale of such Convertible
Securities, then such total maximum number of shares of Common Stock issuable
upon the conversion or exchange of such Convertible Securities (as of the date
of the sale of such Convertible Securities) shall be deemed to be "Common
Stock" for purposes of Sections 9(a) and 9(b) hereof and shall be deemed to
have been sold for an amount equal to such consideration per share and shall
cause an adjustment to be made in accordance with Sections 9(a) and 9(b).
(E) In case the Company shall modify the rights of conversion, exchange
or exercise of any of the securities referred to in (C) above or any other
securities of the Company convertible, exchangeable or exercisable for shares of
Common Stock, for any reason other than an event that would require adjustment
to prevent dilution, so that the consideration per share received by the Company
after such modification is less than the Purchase Price or the Market Price as
of the date prior to such modification, then such securities, to the extent not
theretofore exercised, converted or exchanged, shall be deemed to have expired
or terminated immediately prior to the date of such modification and the Company
shall be deemed for purposes of calculating any adjustments pursuant to this
Section 9 to have issued such new securities upon such new terms on the date of
modification. Such adjustment shall become effective as of the date upon which
such modification shall take effect. On the expiration or cancellation of any
such right, warrant or option or the termination or cancellation of any such
right to convert or exchange any such Convertible Securities, (a) the Purchase
Price then
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<PAGE> 14
in effect hereunder shall forthwith be readjusted to such Purchase Price as
would have obtained had the adjustments made upon the issuance or sale of
such rights, warrants, options or Convertible Securities been made upon the
basis of the issuance of only the number of shares of Common Stock
theretofore actually delivered (and the total consideration received
therefor) upon the exercise of such rights, warrants or options or upon the
conversion or exchange of such Convertible Securities and (b) the purchase
price in effect for all transactions which were affected by any adjustment
of the Purchase Price pursuant to the first sentence of this Section
9(g)(E) shall be readjusted to such purchase price as would have obtained
had such adjustment of the Purchase Price been made as described in clause
(a) of this Section 9(g)(E).
(F) In case of the sale of any shares of Common Stock, any
Convertible Securities, any rights or warrants to subscribe for or
purchase, or any options for the purchase of, Common Stock or Convertible
Securities, the consideration received by the Company therefor shall be
deemed to be the gross sales price therefor without deducting therefrom any
expense paid or incurred by the Company or any underwriting discounts or
commissions or concessions paid or allowed by the Company in connection
therewith. In the event that any securities shall be issued in connection
with any other securities of the Company, together comprising one integral
transaction in which no specific consideration is allocated among the
securities, then each of such securities shall be deemed to have been
issued for such consideration as the Board of Directors of the Company
determines in good faith; provided, however that if holders of in excess of
10% of the then outstanding Warrants disagrees with such determination, the
Company shall retain an independent investment banking firm for the purpose
of obtaining an appraisal.
(h) Notwithstanding any other provision hereof, no adjustment to the
Purchase Price of the Warrants or to the number of shares of Common Stock
purchasable upon the exercise of each Warrant will be made
(i) upon the exercise of any of the options presently outstanding
or to be granted under the Company's currently existing stock option plan
provided that the aggregate number of shares of Common Stock authorized
under such plan shall in no event exceed 3,600,000; or
(ii) upon sale of any shares of Common Stock, warrants to purchase
Common Stock or Convertible Securities in a firm commitment underwritten
public offering, including, without limitation, shares sold upon the
exercise of any overallotment option granted to the underwriters in
connection with such offering; or
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<PAGE> 15
(iii) upon the issuance or sale of Common Stock or Convertible
Securities pursuant to the exercise of any rights, options or warrants
to receive, subscribe for or purchase, or any options for the purchase
of, Common Stock or Convertible Securities, whether or not such rights,
warrants or options were outstanding on the date of the original sale of
the Warrants or were thereafter issued or sold, provided that an
adjustment was either made or not required to be made in accordance with
Sections 9(a) and 9(b) in connection with the issuance or sale of such
securities or any modification of the terms thereof; or
(v) upon the issuance or sale of Common Stock upon
conversion or exchange of any Convertible Securities, provided that any
adjustments required to be made upon the issuance or sale of such
Convertible Securities or any modification of the terms thereof were so
made, and whether or not such Convertible Securities were outstanding on
the date of the original sale of the Warrants or were thereafter issued
or sold;
provided that, in the event the Company shall modify the rights of conversion,
exchange or exercise of any of the securities referred to in (i) through (iii)
above, for any reason other than an event that would require adjustment to
prevent dilution pursuant to customary antidilution provisions, such that the
consideration per share received by the Company after such modification is less
than the Market Price as of the date prior to such modification, the Purchase
Price shall be adjusted as of the date of such modification to the Purchase
Price that would obtain under the remaining provisions of this Section 9 as a
result of such modification, provided further that, in the event the
consideration per share received by the Company after such modification is less
than the Purchase Price (whether or not it is also less than the Market Price)
as of the date prior to such modification, the Purchase Price shall be adjusted
as of the date of such modification to the lower of (I) the Purchase Price that
would obtain under the remaining provisions of this Section 9 as a result of
such modification of (II) such modified consideration per share.
(i) As used in this Section 9, the term "Common Stock" shall mean
and include the Company's Common Stock authorized on the date of the original
issue of the Units and shall also include any capital stock of any class of the
Company thereafter authorized which shall not be limited to a fixed sum or
percentage in respect of the rights of the holders thereof to participate in
dividends and in the distribution of assets upon the voluntary liquidation,
dissolution or winding up of the Company; provided, however, that the shares
issuable upon exercise of the Warrants shall include only shares of such class
designated in the Company's Certificate of Incorporation as Common Stock on the
date of the original issue of the Units or (i), in the case of any
reclassification, change, consolidation, merger, sale or conveyance of the
character referred to in Section 9(c) hereof, the stock, securities or property
provided for in such section or (ii), in the case of any reclassification or
change in the outstanding shares of Common Stock issuable upon exercise of the
Warrants as a result of a subdivision or combination or consisting of a change
in par value, or from par value to no par value, or from no par value to par
value, such shares of Common Stock as so reclassified or changed.
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<PAGE> 16
(j) Any determination as to whether an adjustment in the Purchase
Price in effect hereunder is required pursuant to Section 9, or as to the
amount of any such adjustment, if required, shall be binding upon the holders
of the Warrants and the Company if made in good faith by the Board of Directors
of the Company.
(k) If and whenever the Company shall grant to the holders of
Common Stock, as such, rights or warrants to subscribe for or to purchase, or
any options for the purchase of, Common Stock or securities convertible into or
exchangeable for or carrying a right, warrant or option to purchase Common
Stock, the Company may at its option elect to concurrently therewith grant to
each Registered Holder as of the record date for such transaction of the
Warrants then outstanding, the rights, warrants or options to which each
Registered Holder would have been entitled if, on the record date used to
determine the stockholders entitled to the rights, warrants or options being
granted by the Company, the Registered Holder were the holder of record of the
number of whole shares of Common Stock then issuable upon exercise of his
Warrants. If the Company shall so elect under this Section 9(k), then such
grant by the Company to the holders of the Warrants shall be in lieu of any
adjustment which otherwise might be called for pursuant to this Section 9.
SECTION 10. FRACTIONAL WARRANTS AND FRACTIONAL SHARES.
(a) If the number of shares of Common Stock purchasable upon the
exercise of each Warrant is adjusted pursuant to Section 9 hereof, the Company
nevertheless shall not be required to issue fractions of shares, upon exercise
of the Warrants or otherwise, or to distribute certificates that evidence
fractional shares. 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 current market value of such fractional share,
determined as follows:
(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 National Market, the current market
value shall be the last reported sale price of the Common Stock on such
exchange or market on the last business day prior to the date of
exercise of this Warrant or if no such sale is made on such day, the
average of the closing bid and asked prices for such day on such
exchange or market; or
(2) If the Common Stock is not listed or admitted to
unlisted trading privileges, the current market value shall be the mean
of the last reported bid and asked prices reported by the Nasdaq Small
Cap Market or, if not traded thereon, by the National Quotation Bureau,
Inc. on the last business day prior to the date of the exercise of this
Warrant; 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, the current market
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<PAGE> 17
value shall be an amount determined in such reasonable manner as may be
prescribed by the Board of Directors of the Company.
SECTION 11. WARRANT HOLDERS NOT DEEMED STOCKHOLDERS. No holder of
Warrants shall, as such, be entitled to vote or to receive dividends or be
deemed the holder of Common Stock that may at any time be issuable upon exercise
of such Warrants for any purpose whatsoever, nor shall anything contained
herein be construed to confer upon the holder of Warrants, as such, any of the
rights of a stockholder of the Company or any right to vote for the election of
directors or upon any matter submitted to stockholders at any meeting thereof,
or to give or withhold consent to any corporate action (whether upon any
recapitalization, issue or reclassification of stock, change of par value or
change of stock to no par value, consolidation, merger or conveyance or
otherwise), or to receive notice of meetings, or to receive dividends or
subscription rights, until such Holder shall have exercised such Warrants and
been issued shares of Common Stock in accordance with the provisions hereof.
SECTION 12. RIGHTS OF ACTION. All rights of action with respect to
this Agreement are vested in the respective Registered Holders of the Warrants,
and any Registered Holder of a Warrant, without consent of the Company or of the
holder of any other Warrant, may, in his own behalf and for his own benefit,
enforce against the Company his right to exercise his Warrants for the purchase
of shares of Common Stock in the manner provided in the Warrant Certificate and
this Agreement.
SECTION 13. AGREEMENT OF WARRANT HOLDERS. Every holder of a Warrant,
by his acceptance thereof, consents and agrees with the Company and every other
holder of a Warrant that:
(a) The Warrants are transferrable only on the registry books of the
Company by the Registered Holder thereof in person or by his attorney duly
authorized in writing and only if the Warrant Certificates representing such
Warrants are surrendered at the office of the Company, duly endorsed or
accompanied by a proper instrument of transfer satisfactory to the Company in
its sole discretion, together with payment of any applicable transfer taxes; and
(b) The Company may deem and treat the person in whose name the Warrant
Certificate is registered as the holder and as the absolute, true and lawful
owner of the Warrants represented thereby for all purposes, and the Company
shall not be affected by any notice or knowledge to the contrary, except as
otherwise expressly provided in Section 7 hereof.
SECTION 14. CANCELLATION OF WARRANT CERTIFICATES. If the Company shall
purchase or acquire any Warrant or Warrants, the Warrant Certificate or Warrant
Certificates evidencing the same, by redemption or otherwise, shall thereupon
be canceled by it and retired. The Company shall also cancel the Warrant
Certificate or Warrant Certificates following exercise of any or all of the
Warrants represented thereby or delivered to it for transfer, split up,
combination or exchange.
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<PAGE> 18
SECTION 15. CONCERNING THE WARRANT AGENT. The Company may elect to
appoint a successor to serve as Warrant Agent hereunder. Such appointment shall
be effective upon the receipt by the Company of acceptance in writing of such
appointment by the new warrant agent, whereupon the Warrant Agent will act as
agent and in a ministerial capacity for the Company, and its duties shall be
determined solely by the provisions hereof. Such new warrant agent shall be
vested with the same powers, rights, duties and responsibilities as if it had
been originally named herein as the Warrant Agent, without any further
assurance, conveyance, act or deed; but if for any reason it shall be necessary
or expedient to execute and deliver any further assurance, conveyance, act or
deed, the same shall be done at the expense of the Company and shall be legally
and validly executed and delivered by the Company.
The Warrant Agent shall not, by issuing and delivering Warrant Certificates or
by any other act hereunder be deemed to make any representations as to the
validity, value or authorization of the Warrant Certificates or the Warrants
represented thereby or of any securities or other property delivered upon
exercise of any Warrant or whether any stock issued upon exercise of any Warrant
is fully paid and nonassessable.
The Warrant Agent shall not at any time be under any duty or responsibility to
any holder of Warrant Certificates to make or cause to be made any adjustment of
the Purchase Price or the Redemption Price provided in this Agreement, or to
determine whether any fact exists which may require any such adjustments, or
with respect to the nature or extent of any such adjustment, when made, or with
respect to the method employed in making the same. It shall not (i) be liable
for any recital or statement of facts contained herein or for any action taken,
suffered or omitted by it in reliance on any Warrant Certificate or other
document or instrument believed by it in good faith to be genuine and to have
been signed or presented by the proper party or parties, (ii) be responsible for
any failure on the part of the Company to comply with any of its covenants and
obligations contained in this Agreement or in any Warrant Certificate, or (iii)
be liable for any act or omission in connection with this Agreement except for
its own negligence or wilful misconduct.
The Warrant Agent may at any time consult with counsel satisfactory to it (who
may be counsel for the Company) and shall incur no liability or responsibility
for any action taken, suffered or omitted by it in good faith in accordance with
the opinion or advice of such counsel.
Any notice, statement, instruction, request, direction, order or demand of the
Company shall be sufficiently evidenced by an instrument signed by the Chairman
of the Board, President, or any Vice President and its Secretary, or Assistant
Secretary, (unless other evidence in respect thereof is herein specifically
prescribed). The Warrant Agent shall not be liable for any action taken,
suffered or omitted by it in accordance with such notice, statement,
instruction, request, direction, order or demand believed by it to be genuine.
The Company agrees to pay the Warrant Agent reasonable compensation for its
services hereunder and to reimburse it for its reasonable expenses hereunder as
governed by a separate agreement to be entered into between the Warrant Agent
and the Company; it further agrees to
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<PAGE> 19
indemnify the Warrant Agent and save it harmless against any and all losses,
expenses and liabilities, including judgments, costs and reasonable counsel
fees, for anything done or omitted by the Warrant Agent in the execution of its
duties and powers hereunder except losses, expenses and liabilities arising as
a result of the Warrant Agent's negligence or wilful misconduct.
The Warrant Agent may resign its duties and be discharged from all further
duties and liabilities hereunder (except liabilities arising as a result of
the Warrant Agent's own negligence or wilful misconduct), after giving 30 days'
prior written notice to the Company. At least 15 days prior to the date such
resignation is to become effective, the Warrant shall cause a copy of such
notice of resignation to be mailed to the Registered Holder of each Warrant
Certificate at the Company's expense. Upon such resignation, or any inability
of the Warrant Agent to act as such hereunder, the Company shall appoint a new
warrant agent in writing. If the Company shall fail to make such appointment
within a period of 15 days after it has been notified in writing of such
resignation by the resigning Warrant Agent, then the Registered Holder of any
Warrant Certificate may apply to any court of competent jurisdiction for the
appointment of a new warrant agent. At any time after a Qualified IPO, any new
warrant agent, whether appointed by the Company or by such a court, shall be a
bank or trust company having a capital and surplus, as shown by its last
published report to its stockholders, of not less than $10,000,000 or a stock
transfer company. After acceptance in writing of such appointment by the new
warrant agent is received by the Company, such new warrant agent shall be
vested with the same powers, rights, duties and responsibilities as if it had
been originally named herein as the Warrant Agent, without any further
assurance, conveyance, act or deed; but if for any reason it shall be necessary
or expedient to execute and deliver any further assurance, conveyance, act or
deed, the same shall be done at the expense of the Company and shall be legally
and validly executed and delivered by the resigning Warrant Agent. Not later
than the effective date of any such appointment the Company shall file notice
thereof with the resigning Warrant Agent and shall forthwith cause a copy of
such notice to be mailed to the Registered Holder of each Warrant Certificate.
Any corporation into which the Warrant Agent or any new warrant agent may be
converted or merged or any corporation resulting from any consolidation to
which the Warrant Agent or any new warrant agent shall be a party or any
corporation succeeding to the trust business of the Warrant Agent shall be a
successor warrant agent under this Agreement without any further act, provided
that such corporation is eligible for appointment as successor to the Warrant
Agent under the provisions of the preceding paragraph. Any such successor
warrant agent shall promptly cause notice of its succession as warrant agent to
be mailed to the Company and to the Registered Holder of each Warrant
Certificate.
The Warrant Agent, its subsidiaries and affiliates, and any of its or their
officers or directors, may buy and hold or sell Warrants or other securities of
the Company and otherwise deal with the Company in the same manner and to the
same extent and with like effects as though it were not Warrant Agent. Nothing
herein shall preclude the Warrant Agent from acting in any other capacity for
the Company or for any other legal entity.
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<PAGE> 20
SECTION 16. Modification of Agreement. Subject to the provisions of
Section 4(b), the parties hereto and the Company may by supplemental agreement
make any changes or corrections in this Agreement (i) that they shall deem
appropriate to cure any ambiguity or to correct any defective or inconsistent
provision or manifest mistake or error herein contained; (ii) to reflect an
increase in the number of Class A Warrants which are to be governed by this
Agreement resulting from a subsequent offering of Company securities which
includes Class A Warrants having the same terms and conditions as the Class A
Warrants, originally covered by or subsequently added to this Agreement under
this Section 16; or (iii) that they may deem necessary or desirable and which
shall not adversely affect the interests of the holders of Warrant
Certificates; provided, however, that this Agreement shall not otherwise be
modified, supplemented or altered in any respect except with the consent in
writing of the Registered Holders of Warrant Certificates representing in
excess of 50% of the Warrants then outstanding; and provided, further, that no
change in the number or nature of the securities purchasable upon the exercise
of any Warrant, or the Purchase Price therefor, or the acceleration of the
Warrant Expiration Date, shall be made without the consent in writing of the
Registered Holder of the Warrant Certificate representing such Warrant, other
than such changes as are specifically prescribed by this Agreement (including
those contemplated in Section 1(i)) as originally executed or are made in
compliance with applicable law.
SECTION 17. Notices. All notices, requests, consents and other
communications hereunder shall be in writing and shall be deemed to have been
made when delivered or mailed first class registered or certified mail, postage
prepaid as follows: if to the Registered Holder of a Warrant Certificate, at
the address of such holder as shown on the registry books maintained by the
Company; if to the Company, at 21375 Cabot Boulevard, Hayward, CA 94545, Attn:
Charles Casamento, President; if to Paramount, at Paramount Capital Inc., 787
Seventh Avenue, New York, New York 10019, Attention: Michael S. Weiss.
SECTION 18. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without
reference to principles of conflict of laws.
SECTION 19. Binding Effect. This Agreement shall be binding upon and
inure to the benefit of the Company, Paramount, and their respective successors
and assigns, and the holders from time to time of Warrant Certificates. Nothing
in this Agreement is intended or shall be construed to confer upon any other
person any right, remedy or claim, in equity or at law, or to impose upon any
other person any duty, liability or obligation.
SECTION 20. Termination. This Agreement shall terminate at the close of
business on the Warrant Expiration Date of all the Warrants or such earlier
date upon which all Warrants have been exercised.
SECTION 21. Counterparts. This Agreement may be executed in several
counterparts, which taken together shall constitute a single document.
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<PAGE> 21
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
RIBOGENE, INC.
By: /s/ Charles J. Casamento
--------------------------
Authorized Officer
PARAMOUNT CAPITAL, INC.
By: /s/ [Signature Illegible]
--------------------------
Authorized Officer
<PAGE> 22
[FORM OF FACE OF CLASS A WARRANT CERTIFICATE]
No. AW __________ Class A Warrants
VOID AFTER __________________, 2003
CLASS A WARRANT CERTIFICATE FOR PURCHASE
OF COMMON STOCK
RIBOGENE, INC.
This certifies that FOR VALUE RECEIVED ___________________
or registered assigns (the "Registered Holder") is the owner of the number of
Class A Warrants ("Class A Warrants") specified above. Each Class A Warrant
represented hereby initially entitles the Registered Holder to purchase, subject
to the terms and conditions set forth in this Warrant Certificate and the
Warrant Agreement (as hereinafter defined), one fully paid and nonassessable
share of Common Stock, no par value ("Common Stock"), of RiboGene, Inc., a
California corporation (the "Company"), at any time between _______________,
1997, and the Expiration Date (as hereinafter defined), upon the presentation
and surrender of this Warrant Certificate with the Subscription Form on the
reverse hereof duly executed, at the corporate office of the Company, or its
successor as warrant agent, accompanied by payment of the lesser of (a) $2.25
and (b) the per share price of the Common Stock sold in the Qualified IPO (as
defined in the Warrant Agreement) (the "Purchase Price") in lawful money of the
United States of America in cash or by official bank or certified check made
payable to the Company.
This Warrant Certificate and each Class A Warrant represented hereby
are issued pursuant to and are subject in all respects to the terms and
conditions set forth in the Warrant Agreement (the "Warrant Agreement"), dated
[___], 1997, between the Company and Paramount Capital, Inc.
In the event of certain contingencies provided for in the Warrant
Agreement, the Purchase Price or the number of shares of Common Stock subject
to purchase upon the exercise of each Class A Warrant represented hereby are
subject to modification or adjustment.
Each Class A Warrant represented hereby is exercisable at the option of
the Registered Holder, but no fractional shares of Common Stock will be issued.
In the case of the exercise of less than all the Class A Warrants represented
hereby, the Company shall cancel this Warrant Certificate upon the surrender
hereof and shall execute and deliver a new Warrant Certificate or Warrant
Certificates of like tenor for the balance of such Class A Warrants.
<PAGE> 23
The term "Expiration Date" shall mean 5:00 P.M. (New York time) on
______________, 2003, or such earlier date as the Class A Warrants shall be
redeemed. If such date shall in the State of New York be a holiday or a day on
which banks are authorized to close, then the Expiration Date shall mean 5:00
P.M. (New York time) the next following day which in the State of New York is
not a holiday or a day on which banks are authorized to close. Upon notice to
all Registered Holders of the Class A Warrants, the Company shall have the
right to extend the Expiration Date.
The Holder of this Warrant shall have the registration rights as
provided in Investor Rights Agreement (the "Rights Agreement") dated as of the
date hereof between the Company and such Holder. The Class A Warrants
represented hereby shall not be exercisable by a Registered Holder in any state
where such exercise would be unlawful.
This Warrant Certificate is exchangeable, upon the surrender hereof by
the Registered Holder at the corporate office of the Company, for a new Warrant
Certificate or Warrant Certificates of like tenor representing an equal
aggregate number of Class A Warrants, each of such new Warrant Certificates to
represent such number of Class A Warrants as shall be designated by such
Registered Holder at the time of such surrender. Upon due presentment with any
applicable transfer fee per certificate in addition to any tax or other
governmental charge imposed in connection therewith, for registration of
transfer of this Class A Warrant Certificate at such office, a new Warrant
Certificate or Warrant Certificates representing an equal aggregate number of
Class A Warrants will be issued to the transferee in exchange therefor, subject
to the limitations provided in the Warrant Agreement.
Prior to the exercise of any Class A Warrant represented hereby, the
Registered Holder shall not be entitled to any rights of a stockholder of the
Company, including, without limitation, the right to vote or to receive
dividends or other distributions, and shall not be entitled to receive any
notice of any proceedings of the Company, except as provided in the Warrant
Agreement.
The Class A Warrants represented hereby may be redeemed at the option
of the Company, at a redemption price of $.10 per Class A Warrant, provided
the Market Price (as defined in the Warrant Agreement) for the Common Stock
shall exceed the Target Price (as defined in the Warrant Agreement). Notice of
redemption shall be given not later than the sixtieth day before the date fixed
for redemption, all as provided in the Warrant Agreement. On and after the date
fixed for redemption, the Registered Holder shall have no rights with respect
to the Class A Warrants represented hereby except to receive the $.10 per Class
A Warrant upon surrender of this Warrant Certificate.
Prior to due presentment for registration of transfer hereof, the
Company may deem and treat the Registered Holder as the absolute owner hereof
and of each Class A Warrant represented hereby (notwithstanding any notations
of ownership or writing hereon made by anyone other than a duly authorized
officer of the Company) for all purposes and shall not be affected by any
notice to the contrary.
A-2
<PAGE> 24
The Company has agreed to pay a fee of 5% of the Purchase Price to
Paramount Capital, Inc. upon certain conditions as specified in the Warrant
Agreement upon the exercise of the Class A Warrants represented hereby. Any
costs incurred by the Placement Agent in connection with the solicitation of
Warrant exercises or the redemption of Warrants shall be reimbursed by the
Company.
This Warrant Certificate shall be governed by and construed in
accordance with the laws of the State of New York.
A-3
<PAGE> 25
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed, manually or in facsimile, by two of its officers thereunto
duly authorized.
RIBOGENE, INC.
Dated: By:
-------------------------------------
By:
-------------------------------------
<PAGE> 26
[FORM OF REVERSE OF WARRANT CERTIFICATE]
TRANSFER FEE: $ PER CERTIFICATE ISSUED
SUBSCRIPTION FORM
To Be Executed by the Registered Holder
in Order to Exercise Warrants
The undersigned Registered Holder hereby irrevocably elects to
exercise Class A Warrants represented by this Warrant Certificate,
and to purchase the securities issuable upon the exercise of such Class A
Warrants, and requests that certificates for such securities shall be issued in
the name of .
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER
-------------------------------------------------
-------------------------------------------------
-------------------------------------------------
-------------------------------------------------
[please print or type name and address]
and be delivered to
-------------------------------------------------
-------------------------------------------------
-------------------------------------------------
-------------------------------------------------
[please print or type name and address]
and if such number of Class A Warrants shall not be all the Class A Warrants
evidenced by this Warrant Certificate, that a new Class A Warrant Certificate
for the balance of such Class A Warrants be registered in the name of, and
delivered to, the Registered Holder at the address stated below.
The undersigned represents that the exercise of the within Class A
Warrant was solicited by a member of the National Association of Securities
Dealers, Inc. If not solicited by an NASD member, please write "unsolicited" in
the space below. Unless otherwise indicated by
A-5
<PAGE> 27
listing the name of another NASD member firm, it will be assumed that the
exercise was solicited by Paramount Capital, Inc.
----------------------------------------
(Name of NASD Member)
Dated: X
---------------------------- -------------------------------------
-------------------------------------
-------------------------------------
Address
----------------------------------------
Taxpayer Identification Number
----------------------------------------
Signature Guaranteed
----------------------------------------
A-6
<PAGE> 1
Exhibit 4.8
Void after 5:00 p.m. New York Time, on March 12, 2007.
Warrant to Purchase 25,000 Shares of Common Stock.
WARRANT TO PURCHASE COMMON STOCK
OF
RIBOGENE, INC.
This is to Certify That, FOR VALUE RECEIVED, Paramount Capital
Incorporated, or assigns ("Holder"), is entitled to purchase, subject to the
provisions of this Warrant, from RiboGene, Inc., a California corporation
("Company"), 25,000 fully paid, validly issued and nonassessable shares of
Common Stock, no par value, of the Company ("Common Stock") at a price of $2.25
per share at any time or from time to time during the period from March 12, 1997
to March 12, 2007, but not later than 5:00 p.m. New York City Time, on March 12,
2007. 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 is hereinafter sometimes referred
to as the "Exercise Price".
(a) EXERCISE OF WARRANT. This Warrant may be exercised in whole or
in part at any time or from time to time on or after March 12, 1997 and until
March 12, 2007 (the "Exercise Period"); provided, however, that if either 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
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 certificate 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.
<PAGE> 2
(b) 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.
(c) 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 current market value of a share, determined as follows:
(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 National Market, the
current market value shall be the last reported sale price of the
Common Stock on such exchange or market on the last business day
prior to the date of exercise of this Warrant or if no such sale is
made on such day, the average closing bid and asked prices for such
day on such exchange or market; or
(2) If the Common Stock is not so listed or admitted to
unlisted trading privileges, but is traded on the Nasdaq Small Cap
Market, the current Market Value shall be the average of the
closing bid and asked prices for such day on such market and if the
Common Stock is not so traded, the current market value shall be
the mean of the last reported bid and asked prices reported by the
National Quotation Bureau, Inc. on the last business day prior to
the date of the exercise of this Warrant; 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, the current market value shall be 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 date of the exercise of the
Warrant, determined in such reasonable manner as may be prescribed
by the Board of Directors of the Company.
(d) EXCHANGE, TRANSFER, ASSIGNMENT OR LOSS OF WARRANT. 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. 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 cancelled. 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
2
<PAGE> 3
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 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.
(e) 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.
(f) 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 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.
(g) 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
3
<PAGE> 4
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 (g) shall similarly apply to successive
reclassifications, capital reorganizations and changes of shares of Common Stock
and to successive consolidations, mergers, sales or conveyances.
4
<PAGE> 5
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its
President and attested by its Secretary this 12th day of March, 1997.
RIBOGENE, INC.
By: /s/ CHARLES J. CASAMENTO
------------------------------------
Charles J. Casamento, President
Attest
/s/ JILL COHEN
- ----------------------------
Secretary
<PAGE> 6
PURCHASE FORM
Dated 19__
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__________________________________________
<PAGE> 7
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 ___________________________as attorney, to
transfer the same on the books of the Company with full power of substitution
in the premises.
Date______________________,19_______
Signature___________________________
<PAGE> 1
Exhibit 4.9
NEITHER THIS WARRANT NOR THE SHARES OF STOCK ISSUABLE UPON EXERCISE HEREOF HAVE
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. NO SALE,
TRANSFER OR OTHER DISPOSITION OF THIS WARRANT OR SAID SHARES MAY BE EFFECTED
WITHOUT (i) AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO, (ii) AN
OPINION OF COUNSEL FOR THE HOLDER, REASONABLY SATISFACTORY TO THE COMPANY, THAT
SUCH REGISTRATION IS NOT REQUIRED OR (iii) RECEIPT OF A NO-ACTION LETTER FROM
THE SECURITIES AND EXCHANGE COMMISSION TO THE EFFECT THAT REGISTRATION UNDER
THE ACT IS NOT REQUIRED.
Shares Issuable Upon Exercise: 60,000
WARRANT TO PURCHASE
SHARES OF SERIES B PREFERRED STOCK
THIS CERTIFIES THAT, for value received, Dominion Ventures, Inc., is
entitled to subscribe for and purchase 60,000 shares (as adjusted pursuant to
provisions hereof, the "Shares") of the fully paid and nonassessable Series B
Preferred Stock or Ribogene, Inc., a California corporation (the "Company"), at
a price per share of $1.00 (such price and such other price as shall result,
from time to time, from adjustments specified herein is herein referred to as
the "Warrant Price"), subject to the provisions and upon the terms and
conditions hereinafter set forth. As used herein, the term "Preferred Stock"
shall mean the Company's presently authorized Series B Preferred Stock, and any
stock into or for which such Series B Preferred Stock may hereafter be converted
or exchanged pursuant to the Articles of Incorporation of the Company as from
time to time amended as provided by law and in such Articles, and the term
"Grant Date" shall mean August 9, 1991.
1. Term. Subject to the terms hereof, the purchase right represented by
this Warrant is exercisable, in whole or in part, at any time and from time to
time from and after the Grant Date and prior to the earlier of the eighth
annual anniversary date of the Grant Date or the fifth annual anniversary of the
consummation of the Company's initial public offering of its Common Stock, the
aggregate gross proceeds from which exceed $5,000,000.
1
<PAGE> 2
2. Method of Exercise; Net Issue Exercise.
2.1 Method of Exercise; Payment; Issuance of New Warrant. The
purchase right represented by this Warrant may be exercised by the holder
hereof, in whole or in part and from time to time, by either, at the election of
the holder hereof, (a) the surrender of this Warrant (with the notice of
exercise form attached hereto as Exhibit A duly executed) at the principal
office of the Company and by the payment to the Company, by check, of an amount
equal to the then applicable Warrant Price per share multiplied by the number
of Shares then being purchased or (b) if in connection with a registered public
offering of the Company's securities, the surrender of this Warrant (with the
notice of exercise form attached hereto as Exhibit A-1 duly executed) at the
principal office of the Company together with notice of arrangements reasonably
satisfactory to the Company for payment to the Company either by check or from
the proceeds of the sale of shares to be sold by the holder in such public
offering of an amount equal to the then applicable Warrant Price per share
multiplied by the number of Shares then being purchased. The person or persons
in whose name(s) any certificate(s) representing shares of Preferred Stock shall
be issuable upon exercise of this Warrant shall be deemed to have become the
holder(s) of record of, and shall be treated for all purposes as the record
holder(s) of, the shares represented thereby (and such shares shall be deemed
to have been issued) immediately prior to the close of business on the date or
dates upon which this Warrant is exercised. In the event of any exercise of the
rights represented by this Warrant, certificates for the shares of stock so
purchased shall be delivered to the holder hereof as soon as possible and in
any event within thirty days of receipt of such notice and, unless this Warrant
has been fully exercised or expired, a new Warrant representing the portion of
the Shares, if any, with respect to which this Warrant shall not then have been
exercised shall also be issued to the holder hereof as soon as possible and in
any event within such thirty-day period.
2.2 Net Issue Exercise.
(a) In lieu of exercising this Warrant, holder may elect
to receive shares equal to the value of this Warrant (or the portion thereof
being canceled) by surrender of this Warrant at the principal office of the
Company together with notice of such election in which event the Company shall
issue to Holder a number of shares of the Company's Preferred Stock computed
using the following formula:
Y(A-B)
X = --------
A
2
<PAGE> 3
Where X - The number of shares of Preferred Stock to be issued to Holder.
Y - the number of shares of Preferred Stock purchasable under this
Warrant.
A - the fair market value of one share of the Company's Preferred
Stock.
B - Warrant price (as adjusted to the date of such calculations).
(b) For purposes of this Section, fair market value of the
Company's Preferred Stock shall mean the average of the closing bid and asked
prices of the Company's Preferred Stock quoted in the Over-The-Counter Market
Summary or the closing price quoted on any exchange on which the Preferred
Stock is listed, whichever is applicable, as published in the Western Edition of
The Wall Street Journal for the ten trading days prior to the date of
determination of fair market value.
2.3 Company's Option Upon Registered Offering. In the event of the
initial registered public offering by the Company of its Common Stock effected
pursuant to a Registered Statement on Form S-1 (or its successor) filed under
the Securities Act of 1933, the Company will have the option to purchase for
cash immediately prior to the issuance of such shares in such offering all, but
not less than all, of the following: (i) this Warrant for a price per Share
equal to the difference between (x) the Net Per Share Price (as defined below)
of the stock being issued in such offering and (y) the Warrant Price, and (ii)
all Shares that have been issued pursuant to the exercise of this Warrant for a
price per share equal to the Net Per Share Price of the stock being issued in
such offering. For the purpose of this Paragraph the term "Net Per Share
Price" shall mean the proceeds to be received by the Company (or selling
shareholders, in the event of a secondary offering) for each share in the
registered public offering, net of underwriting commissions.
2.4 Company's Option Upon Merger. In the event of (i) any
consolidation or merger of the Company with or into any other corporation, or
(ii) any sale of all or substantially all of the assets of the Company, in
either case in which the Company shall not be the continuing surviving entity
and immediately after which the holders of the voting shares of the Company
immediately prior to such event hold less than a majority of the total voting
power of the continuing and surviving entity, then the Company shall have the
option to purchase this Warrant on the closing date of such event for cash or
freely-
3
<PAGE> 4
equal to the greater of (x) three (3) times the Warrant Price or (y) the excess
(if any) of the Market Value (as defined herein) of the Shares over the Warrant
Price. The Market Value of each Share shall be determined by dividing the
total consideration to be received by the Company or its shareholders in
connection with such event by the number of shares of Common Stock then
outstanding assuming that all convertible securities of the Company have been
converted into Common Stock). Any securities to be delivered to the Company or
its security holders shall be valued as follows:
(A) If traded on a securities exchange, the value shall be deemed
to be the average of the closing prices of the securities on such exchange over
the 30-day period ending five (5) business days prior to the closing; and
(B) If traded over-the-counter, the value shall be deemed to be the
average closing prices of the securities over the 30-day period ending five
(5) business days prior to the closing; and
(C) If there is no public market, the value shall be the fair
market value thereof, as determined by mutual agreement of the holder of this
Warrant and the Company, and if the parties are unable to so agree, by an
investment banker of national reputation selected by the Company and reasonably
acceptable to the holder of this Warrant.
3. Stock Fully Paid; Reservation of Shares. All Shares that may
be issued upon the exercise of the rights represented by this Warrant and
Common Stock issuable upon conversion of the Preferred Stock will, upon
issuance, be fully paid and nonassessable, and free from all taxes, liens and
charges with respect to the issue thereof. During the period within which the
rights represented by the Warrant may be exercised, the Company will at all
times have authorized and reserved for the purpose of issuance upon exercise of
the purchase rights evidenced by this Warrant, a sufficient number of shares of
its Preferred Stock (and Common Stock issuable upon conversion thereof) to
provide for the exercise of the right represented by this Warrant.
4. Adjustment of Warrant Price and Number of Shares. The number
and kind of securities purchasable upon the exercise of the Warrant and the
Warrant Price shall be subject to adjustment from time to time upon the
occurrence of certain events, as follows:
(a) Adjustment of Warrant Price upon Issuance of Additional
Stock. The Warrant Price shall be subject to adjustment from time to time as
follows:
4
<PAGE> 5
(i) (A) Upon each issuance by the Company of any
Additional Stock (as defined below), after the Grant Date, without
consideration or for a consideration per share less than the Warrant Price in
effect immediately prior to the issuance of such Additional Stock, the Warrant
Price in effect immediately prior to each such issuance shall forthwith (except
as otherwise provided in this Section 4(a)) be adjusted to a price determined
by multiplying the Warrant Price by a fraction, the numerator of which shall be
the number of shares of Common Stock outstanding immediately prior to such
issuance put the number of shares of Common Stock which could be purchased
were the then Warrant Price used instead (calculated by dividing the total
consideration (before deduction of costs) to be received by the Company in such
issuance by the then Warrant Price) and the denominator of which shall be the
number of shares of Common Stock outstanding immediately prior to such issuance
plus the number of shares of such Additional Stock issued in such issuance. For
purpose of this Subsection (a), all shares of Common Stock Issuable upon
conversion of outstanding Preferred Stock shall be deemed to be outstanding
and, immediately after any Additional Stock is deemed issued, such Additional
Stock shall be deemed outstanding.
(B) No adjustment of the Warrant Price shall be
made in an amount less than one cent per share, provided that any adjustments
which are not required to be made by reason of this sentence shall be carried
forward and shall be either taken into account in any subsequent adjustment
made prior to 3 years from the date of the event giving rise to the adjustment
being carried forward. Except to the limited extent provided for in subsections
4(a)(i) E(3) and E(4), no adjustment of the Warrant Price pursuant to this
subsection 4(a)(i) shall have the effect of increasing the Warrant Price above
the Warrant Price in effect immediately prior to such adjustment.
(C) In the case of issuance by the Company of
Common Stock for cash, the consideration shall be deemed to be the amount of
cash paid therefor before deducting any reasonable discounts, commissions or
other expenses allowed, paid or incurred by the Company for any underwriting or
otherwise in connection with the issuance and sale thereof.
(D) In the case of issuance by the Company of
Common Stock for a consideration in whole or in part other than cash, the
consideration other than cash shall be deemed to be the fair value as
determined by the Board of Directors of the Company irrespective of any
accounting treatment.
5
<PAGE> 6
(E) In the case of the issuance (whether before,
on or after the Grant Date) of options to purchase or rights to subscribe for
Common Stock, securities by their terms convertible into or exchangeable for
Common Stock or options to purchase or rights to subscribe for such convertible
or exchangeable securities, the following provisions shall apply for all
purposes of this subsection 4(a)(i);
1. The aggregate maximum number of shares
of Common Stock deliverable upon exercise (to the extent then exercisable) of
such options to purchase or rights to subscribe for Common Stock shall be
deemed to have been issued at the time such options or rights were issued and
for a consideration equal to the consideration (determined in the manner
provided in subsections 4(a)(i)(C) and (a)(i)(D)), if any, received by the
Company upon issuance of such options or rights plus the minimum exercise price
provided in such options or rights (without taking into account potential
antidilution adjustments) for the Common Stock covered thereby.
2. The aggregate maximum number of shares
of Common Stock deliverable upon conversion of or in exchange for (to the
extent then convertible or exchangeable) convertible or exchangeable securities
or upon exercise of options to purchase or rights to subscribe for such
convertible or exchangeable securities and subsequent conversion or exchange
thereof shall be deemed to have been issued at the time such securities were
issued or such options or rights were issued and for a consideration equal to
the consideration, if any, received by the Company for any such securities and
related options or rights (excluding any cash received on account of accrued
interest or accrued dividends), plus the minimum additional consideration, if
any, to be received by the Company (without taking into account potential
antidilution adjustments) upon the conversion or exchange of such securities or
the exercise of any related options or rights (the consideration in each case
to be determined in the manner provided in subsections 4(a)(i)(C) and
4(a)(i)(D)).
3. In the event of any change in the
number of shares of Common Stock deliverable or in the consideration payable to
the Company upon exercise of such options or rights or upon conversion of or in
exchange for such convertible or exchangeable securities, including but not
limited to, a change resulting from antidilution provisions thereof, the
Warrant Price, to the extent in any way affected by or computed using such
options, rights or securities, shall be adjusted based upon the actual issuance
of Common Stock or any payment of such consideration upon the exercise of any
such
6
<PAGE> 7
option or rights or the conversion or exchange os such securities.
4. Upon the expiration of any such options or rights,
the termination of any such options or rights to convert or exchange, or the
expiration of any options or rights related to such convertible or exchangeable
securities, the Warrant Price, to the extent in any way affected by or computed
using such options, rights or securities or options or rights related to such
securities, shall be recomputed to reflect the issuance of only the number of
shares of Common Stock (and convertible or exchangeable securities which remain
in effect) actually issued upon the exercise of such options or rights, upon
the conversion or exchange of such securities or upon the exercise of the
options or rights related to such securities.
5. The number of shares of Common Stock deemed issued
and the consideration deemed paid therefor pursuant to subsections 4(a)(i)(E)
(1) and (2) shall be appropriately adjusted to reflect any change, termination
or expiration of the type described in either subsection 4(a)(i)(E) (3) or (4).
(ii) "Additional Stock" shall mean any shares of Common
Stock issued (or deemed to have been issued pursuant to subsection 4(a)(i)(E) by
this Company after the Grant Date other than (A) shares of Common Stock issued
upon conversion of the Company's Series A and B Preferred Stock which have been
issued prior to the Grant Date, (B) shares of Common Stock issued to employees
or directors of or consultants and advisers to the Company or any subsidiary
pursuant to stock purchase or stock option plans or other similar arrangements
approved by the Company's Board of Directors and (C) shares of Common Stock
issued upon the exercise of warrants or options issued by the Company prior to,
or as of the Grant Date or issued by the Company subsequent to the Grant Date
pursuant to an obligation to do so arising under a written agreement entered
into by the Company prior to, or as of the Grant Date.
(iii) Notwithstanding any provisions to this Section 4(a) to
the contrary, no adjustment to the Warrant Price shall be made to this Section
4(a) upon issuance by the Company of Additional Stock if a similar or
corresponding adjustment is made to the Conversion Price of the Preferred Stock
pursuant to the Company's Articles of Incorporation, as amended.
(iv) Upon each adjustment of the Warrant Price pursuant to
this Section 4(a), the number of Shares issuable upon exercise hereof shall be
adjusted such that the aggregate purchase price for all of such
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<PAGE> 8
Shares, as adjusted, equals $60,000.00.
(b) Reclassification or Merger. In case of any reclassification,
change or conversion of securities of the class issuable upon exercise of this
Warrant (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 subdivision or
combination), or in case of any merger of the Company with or into another
corporation (other than a merger with another corporation in which the
Company is a continuing corporation and which does not result in any
reclassification or change of outstanding securities issuable upon exercise of
this Warrant), or in case of any sale of all or substantially all of the assets
of the Company, the Company, or such successor or purchasing corporation, as
the case may be, shall execute a new Warrant (in form and substance
satisfactory to the holder of this Warrant) providing that the holder of this
Warrant shall have the right to exercise such new Warrant and upon such
exercise to receive, in lieu of each share of Preferred Stock theretofore
issuable upon exercise of this Warrant, the kind and amount of shares of stock,
other securities, money and property receivable upon such reclassification,
change or merger by a holder of one share of Preferred Stock. Such new Warrant
shall provide for adjustments that shall be as nearly equivalent as may be
practicable to the adjustments provided for in this paragraph 4. The provisions
of this subparagraph (a) shall similarly apply to successive reclassification,
changes, mergers and transfers.
(c) Subdivisions or Combination of Shares. If the Company at any
time while this Warrant remains outstanding and unexpired shall subdivide or
combine its Preferred Stock, the Warrant Price and the number of Shares
issuable upon exercise hereof shall be proportionately adjusted.
(d) Stock Dividends. If the Company at any time while this Warrant
is outstanding and unexpired shall pay a dividend payable in shares of Preferred
Stock (except any distribution specifically provided for in the foregoing
subparagraphs (a) and (b)), then the Warrant Price shall be adjusted, from and
after the date of determination of shareholders entitled to receive such
dividend or distribution, to that price determined by multiplying the Warrant
Price in effect immediately prior to such date of determination by a fraction
(a) the numerator of which shall be the total number of shares of Preferred
Stock outstanding immediately prior to such dividend or distribution, and (b)
the denominator of which shall be the total number of shares of Preferred Stock
outstanding immediately after such dividend or distribution and the number of
Shares subject to this
8
<PAGE> 9
Warrant shall be proportionately adjusted.
(e) No Impairment. The Company will not, by amendment of its
Articles of Incorporation or through any reorganization, recapitalization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms to be observed or performed hereunder by the
Company, but will at all times in good faith assist in the carrying out of all
the provisions of this Paragraph 4 and in the taking of all such action as may
be necessary or appropriate in order to protect the rights of the holder of
this Warrant against impairment.
(f) Notices of Record Date. In the event of any taking by the
Company of a record of its shareholders for the purpose of determining
shareholders who are entitled to receive payment of any dividend (other than a
cash dividend) or other distribution, any right to subscribe for, purchase or
otherwise acquire any share of any class or any other securities or property,
or to receive any other right, or for the purpose of determining shareholders
who are entitled to vote in connection with any proposed merger or
consolidation of the Company with or into any other corporation, or any
proposed sale, lease or conveyance of all or substantially all of the assets of
the Company, or any proposed liquidation, dissolution or winding up of the
Company, the Company shall mail to the holder of the Warrant, at least twenty
(20) days prior to the date specified therein, a notice specifying the date on
which any such record is to be taken for the purpose of such dividend,
distribution or right, and the amount and character of such dividend,
distribution or right.
5. Notice of Adjustments. Whenever the Warrant Price shall be
adjusted pursuant to the provisions hereof, the Company shall within thirty
(30) days of such adjustment deliver a certificate signed by its chief
financial officer to the registered holder(s) hereof setting forth, in
reasonable detail, the event requiring the adjustment, the amount of the
adjustment, the method by which such adjustment was calculated, and the Warrant
Price after giving effect to such adjustment.
6. Fractional Shares. No fractional shares of Preferred Stock
will be issued in connection with any exercise hereunder, but in lieu of such
fractional shares the Company shall make a cash payment therefor upon the basis
of the Warrant Price then in effect.
7. Compliance with Securities Act; Disposition of Warrant or Shares
of Preferred Stock.
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<PAGE> 10
(a) Compliance with Securities Act. The holder of this
Warrant and each subsequent holder, by acceptance hereof, agrees that this
Warrant, the shares of Preferred Stock to be issued upon exercise hereof and
the Common Stock to be issued upon conversion of such Preferred Stock are being
acquired for investment and that such holder will not offer, sell or otherwise
dispose of this Warrant or any shares of Preferred Stock to be issued upon
exercise hereof (or Common Stock issued upon conversion of the Preferred Stock)
except under circumstances which will not result in a violation of the
Securities Act of 1933, as amended (the "Act"). This Warrant and all shares of
Preferred Stock issued upon exercise of this Warrant (unless registered under
the Act) shall be stamped or imprinted with a legend in substantially the
following form:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED. NO SALE OR DISPOSITION MAY BE EFFECTED WITHOUT (i) AN
EFFECTIVE REGISTRATION STATEMENT RELATED THERETO, (ii) AN OPINION OF
COUNSEL FOR THE HOLDER, REASONABLY SATISFACTORY TO THE COMPANY, THAT
SUCH REGISTRATION IS NOT REQUIRED OR (iii) RECEIPT OF A NO-ACTION LETTER
FROM THE SECURITIES AND EXCHANGE COMMISSION TO THE EFFECT THAT
REGISTRATION UNDER THE ACT IS NOT REQUIRED.
(b) Disposition of Warrant and Shares. With respect to any
offer, sale or other disposition of this Warrant or any shares of Preferred
Stock acquired pursuant to the exercise of this Warrant (or Common Stock issued
upon conversion of such Preferred Stock) prior to registration of such shares,
the holder hereof and each subsequent holder of the Warrant agrees to give
written notice to the Company prior thereto, describing briefly the manner
thereof, together with a written opinion of such holder's counsel, if
reasonably requested by the Company, to the effect that such offer, sale or
other disposition may be effected without registration or qualification (under
the Act as then in effect or any federal or state law then in effect) of this
Warrant or such shares of Preferred Stock or Common Stock and indicating
whether or not under the Act certificates for this Warrant or such shares of
Preferred Stock or Common Stock to be sold or otherwise disposed of require any
restrictive legend as to applicable restrictions on transferability in order to
insure compliance with the Act. Each certificate representing this Warrant or
the shares of Preferred Stock or Common Stock thus transferred (except a
transfer pursuant to Rule 144) shall bear a legend as to the applicable
restrictions on transferability in order to insure compliance with the Act,
unless in the aforesaid opinion of counsel for the holder, such legend is not
required in order to insure compliance with the Act. Nothing herein shall
restrict the transfer of this Warrant or any portion hereof by the initial
holder hereof to any partnership affiliated with the initial holder, or to any
partner of any such partnership provided such transfer may be made in compliance
with applicable
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<PAGE> 11
federal and state securities laws. The Company may issue stop transfer
instructions to its transfer agent in connection with the foregoing
restrictions.
8. Rights as Shareholders; Information.
8.1 Shareholder Rights. No holder of the Warrant, as
such, shall be entitled to vote or receive dividends or be deemed the holder
of Preferred Stock or any other securities of the Company which may at any time
be issuable on the exercise thereof for any purpose, nor shall anything
contained herein be construed to confer upon the holder of this Warrant, as
such, any of the rights of a shareholder of the Company or any right to vote
for the election of directors or upon any matter submitted to shareholders at
any meeting thereof, or to receive notice of meetings, or to receive dividends
or subscription rights or otherwise until this Warrant shall have been
exercised and the Shares purchasable upon the exercise hereof shall become
deliverable, as provided herein.
8.2 Financial Statements and Information. The
Company shall deliver to the registered holder hereof (i) within 120 days after
the end of the fiscal year of the Company, a consolidated balance sheet of the
Company as of the end of such year and a consolidated statement of income,
retained earnings and cash flows for such year, which year-end financial reports
shall be in reasonable detail and certified by independent public accountants
of nationally recognized standing selected by the Company, and (ii) within 45
days after the end of each fiscal quarter other than the last fiscal quarter,
unaudited consolidated statements of income, retained earnings and cash flows
for such quarter and a consolidated balance sheet as of the end of such
quarter. In addition, the Company shall deliver to the registered holder
hereof any other information or data provided to the shareholders of the
Company.
9. Grant of Rights. The company hereby grants to the holder hereof the
registration rights set forth in the "First Amendment to the First Amended and
Restated Registration Rights Agreement" attached hereto as Exhibit B, which
provides that the holder of this Warrant shall be deemed a "Holder" as defined
in the First Amendment to the First Amended and Restated Registration Rights
Agreement, and that the Common Stock of the Company issued upon conversion of
the Shares shall be deemed to be "Registrable Securities" as defined in the
First Amendment to the First Amended and Restated Registration Rights Agreement.
10. Additional Rights.
10.1 Secondary Sales. The Company agrees to notify the holder of
this Warrant if opportunities to make secondary sales of the Company's
securities become available. To this end, the Company will promptly will
promptly provide the holder of this
11
<PAGE> 12
Warrant with notice of any offer to acquire from the Company's security holders
more than five percent (5%) of the total voting power of the Company.
10.2 Mergers. Unless the Company provides the holder of this
Warrant with advance notice of the terms and conditions of the proposed
transaction, the Company will not (i) sell, lease, exchange, convey or
otherwise dispose of all or substantially all of its property or business, or
(ii) merge into or consolidate with any other corporation (other than a
wholly-owned subsidiary of the Company), or effect any transaction (including a
merger or other reorganization) or series of related transactions, in which
more than 50% of the voting power of the Company is disposed of.
11. Representations and Warranties. This Warrant is issued and
delivered on the basis of the following:
(a) This Warrant has been duly authorized and executed by the
Company and when delivered will be the valid and binding obligation of the
Company enforceable in accordance with its terms;
(b) The Shares have been duly authorized and reserved for
issuance by the Company and, when issued in accordance with the terms hereof,
will be validly issued, fully paid and nonassessable;
(c) The rights, preferences, privileges and restrictions
granted to or imposed upon the shares of Preferred Stock and the holders
thereof are as set forth in the Company's Articles of Incorporation, as
amended, a true and complete copy of which has been delivered to the original
Warrantholder;
(d) The shares of Common Stock issuable up conversion of the
Shares have been duly authorized and reserved and, when issued in accordance
with the terms of the Company's Articles of Incorporation, as amended, will be
validly issued, fully paid and nonassessable; and
(e) The execution and delivery of this Warrant are not, and
the issuance of the Shares upon exercise of this Warrant in accordance with the
terms hereof will not be, inconsistent with the Company's Articles of
Incorporation or by-laws, do not and will not contravene any law, governmental
rule or regulation, judgment or order applicable to the Company, and do not and
will not contravene any provision of, or constitute a default under, any
indenture, mortgage, contract or other instrument of which the Company is a
party or by which it is bound or require the consent or approval of, the giving
of notice to, the registration with or the taking of any action in respect of
or by, any Federal, state or local government authority or agency or other
person.
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<PAGE> 13
12. Modification and Waiver. This Warrant and any provision hereof
may be changed, waived, discharged or terminated only by an instrument in
writing signed by the party against which enforcement of the same is sought.
13. Notices. Any notice, request or other document required or
permitted to be given or delivered to the holder hereof or the Company shall be
delivered, or shall be sent by certified or registered mail, postage prepaid,
to each such holder at its address as shown on the books of the Company or to
the Company at the address indicated therefore on the signature page of this
Warrant.
14. Binding Effect on Successors. This Warrant shall be binding upon
any corporation succeeding the Company by merger, consolidation or acquisition
of all or substantially all of the Company's assets, and all of the obligations
of the Company relating to the Preferred Stock issuable upon the exercise of
this Warrant shall survive the exercise and termination of this Warrant and all
of the covenants and agreements of the Company shall inure to the benefit of
the successors and assigns of the holder hereof. The Company will, at the time
of the exercise of this Warrant, in whole or in part, upon request of the
holder hereof but at the Company's expense, acknowledge in writing its
continuing obligation to the holder hereof in respect of any rights (including,
without limitation, any right to registration of the shares of Registrable
Securities) to which the holder hereof shall continue to be entitled after such
exercise in accordance with this Warrant; provided, that the failure of the
holder hereof to make any such request shall not affect the continuing
obligation of the Company to the holder hereof in respect of such rights.
15. Lost Warrants or Stock Certificates. The Company covenants to the
holder hereof that upon receipt of evidence reasonably satisfactory to the
Company of the loss, theft, destruction, or mutilation of this Warrant or any
stock certificate and, in the case of any such loss, theft or destruction, upon
receipt of an indemnity reasonably satisfactory to the Company, or in the case
of any such mutilation upon surrender and cancellation of such Warrant or stock
certificate, the Company will make and deliver a new Warrant or stock
certificate, or like tenor, in lieu of the lost, stolen, destroyed or mutilated
Warrant or stock certificate.
16. Descriptive Headings. The descriptive headings of the several
paragraphs of this Warrant are inserted for convenience only and do not
constitute a part of this Warrant.
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<PAGE> 14
17. Governing Law. THIS WARRANT SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAWS
OF THE STATE OF CALIFORNIA.
By: RIBOGENE, INC.
[SIG]
-----------------------------------
Title: CEO & President
-----------------------------
Address: 3760 Haven Ave.
Suite D
Menlo Park, CA
Date:
------------------------
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<PAGE> 15
EXHIBIT A
Notice of Exercise
To:
1. The undersigned hereby elects to purchase _________ shares of
Series __ Preferred Stock of ______________________________Corporation pursuant
to the terms of the attached Warrant, and tenders herewith payment of the
purchase price of such shares in full.
2. Please issue a certificate or certificates representing said shares
in the name of the undersigned or in such other name or names as are specified
below:
-------------------------------------
(Name)
-------------------------------------
(Address)
3. The undersigned represents that the aforesaid shares being acquired
for the account of the undersigned for investment and not with a view to, or
for resale in connection with, the distribution thereof and that the
undersigned has no present intention of distributing or reselling such shares.
-------------------------------------
(Signature)
- -----------------------
(Date)
15
<PAGE> 16
EXHIBIT A-1
Notice of Exercise
To:
1. Contingent upon and effective immediately prior to the closing (the
"Closing") of the Company's public offering contemplated by the Registration
Statement of Form S-____, filed __________________, 19____, the undersigned
hereby elects to purchase _____________ shares of Series ___ Preferred Stock of
the Company (or such lesser number of shares as may be sold on behalf of the
undersigned at the Closing) pursuant to the terms of the attached Warrant.
2. Please deliver to the custodian for the selling shareholders a
stock certificate representing such ________ shares.
3. The undersigned has instructed the custodian for the selling
shareholders to deliver to the Company $____________ or, if less, the net
proceeds due the undersigned from the sale of shares in the aforesaid public
offering. If such net proceeds are less than the purchase price for such
shares, the undersigned agrees to deliver the difference to the Company prior
to the Closing.
--------------------------------------
(Signature)
- ------------------
Date
16
<PAGE> 1
Exhibit 4.10
NEITHER THIS WARRANT NOR THE SHARES OF STOCK ISSUABLE UPON EXERCISE HEREOF HAVE
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. NO SALE, TRANSFER
OR OTHER DISPOSITION OF THIS WARRANT OR SAID SHARES MAY BE EFFECTED WITHOUT (i)
AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO, (ii) AN OPINION OF COUNSEL
FOR THE HOLDER, REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION
IS NOT REQUIRED OR (iii) RECEIPT OF A NO-ACTION LETTER FROM THE SECURITIES AND
EXCHANGE COMMISSION TO THE EFFECT THAT REGISTRATION UNDER THE ACT IS NOT
REQUIRED.
Shares Issuable Upon Exercise: 150,000
WARRANT TO PURCHASE
SHARES OF SERIES C PREFERRED STOCK
Expires June 4, 2001
THIS CERTIFIES THAT, for value received, Dominion Ventures, Inc., is
entitled to subscribe for and purchase 150,000 shares (as adjusted pursuant to
provisions hereof, the "Shares") of the fully paid and nonassessable Series C
Preferred Stock of Ribogene, Inc., a California corporation (the "Company"), at
a price per share of $0.15 (such price and such other price as shall result,
from time to time, from adjustments specified herein is herein referred to as
the "Warrant Price"), subject to the provisions and upon the terms and
conditions hereinafter set forth. As used herein, the term "Preferred Stock"
shall mean the Company's presently authorized Series C Preferred Stock, and any
stock into or for which such Series C Preferred Stock may hereafter be converted
or exchanged pursuant to the Articles of Incorporation of the Company as from
time to time amended as provided by law and in such Articles, and the term
"Grant Date" shall mean June 4, 1993.
1. Term. Subject to the terms hereof, the purchaser's right represented
by this Warrant is exercisable, in whole or in part, at any time and from time
to time from and after the Grant Date and prior to the earlier of the eighth
annual anniversary date of the Grant Date or the fifth annual anniversary of the
consummation of the Company's initial public offering of its Common Stock, the
aggregate gross proceeds from which exceed $5,000,000.
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<PAGE> 2
2. Method of Exercise: Net Issue Exercise.
2.1 Method of Exercise; Payment; Issuance of New Warrant. The purchase
right represented by this Warrant may be exercised by the holder hereof, in
whole or in part and from time to time, by either, at the election of the holder
hereof, (a) the surrender of this Warrant (with the notice of exercise form
attached hereto as Exhibit A duly executed) at the principal office of the
Company and by the payment to the Company, by check, of an amount equal to the
then applicable Warrant Price per share multiplied by the number of Shares then
being purchased or (b) if in connection with a registered public offering of the
Company's securities, the surrender of this Warrant (with the notice of exercise
form attached hereto as Exhibit A-1 duly executed) at the principal office of
the Company together with notice of arrangements reasonably satisfactory to the
Company for payment to the Company either by check or from the proceeds of the
sale of shares to be sold by the holder in such public offering of an amount
equal to the then applicable Warrant Price per share multiplied by the number of
Shares then being purchased. The person or persons in whose name(s) any
certificate(s) representing shares of Preferred Stock shall be issuable upon
exercise of this Warrant shall be deemed to have become the holder(s) of record
of, and shall be treated for all purposes as the record holder(s) of, the shares
represented thereby (and such shares shall be deemed to have been issued)
immediately prior to the close of business on the date or dates upon which this
Warrant is exercised. In the event of any exercise of the rights represented by
this Warrant, certificates for the shares of stock so purchased shall be
delivered to the holder hereof as soon as possible and in any event within
thirty days of receipt of such notice and, unless this Warrant has been fully
exercised or expired, a new Warrant representing the portion of the Shares, if
any, with respect to which this Warrant shall not then have been exercised shall
also be issued to the holder hereof as soon as possible and in any event within
such thirty-day period.
2.2 Net Issue Exercise.
(a) In lieu of exercising this Warrant, holder may elect to receive
shares equal to the value of this Warrant (or the portion thereof being
canceled) by surrender of this Warrant at the principal office of the Company
together with notice of such election in which event the Company shall issue to
Holder a number of shares of the Company's Preferred Stock computed using the
following formula:
X= Y(A-B)
------
A
2
<PAGE> 3
Where X - The number of shares of Preferred Stock to be issued to Holder.
Y - the number of shares of Preferred Stock purchasable under this
Warrant.
A - the fair market value of one share of the Company's Preferred
Stock.
B - Warrant price (as adjusted to the date of such calculations).
(b) For purposes of this Section, fair market value of the
Company's Preferred Stock shall mean the average of the closing bid and asked
prices of the Company's Preferred Stock quoted in the Over-The-Counter Market
Summary or the closing price quoted on any exchange on which the Preferred Stock
is listed, whichever is applicable, as published in the Western Edition of The
Wall Street Journal for the ten trading days prior to the date of determination
of fair market value.
2.3 Company's Option Upon Registered Offering. In the event of the
initial registered public offering by the Company of its Common Stock effected
pursuant to a Registered Statement on Form S-1 (or its successor) filed under
the Securities Act of 1933, the Company will have the option to purchase for
cash immediately prior to the issuance of such shares in such offering all, but
not less than all, of the following: (i) this Warrant for a price per Share
equal to the difference between (x) the Net Per Share Price (as defined below)
of the stock being issued in such offering and (y) the Warrant Price, and (ii)
all Shares that have been issued pursuant to the exercise of this Warrant for a
price per share equal to the Net Per Share Price of the stock being issued in
such offering. For the purpose of this Paragraph the term "Net Per Share Price"
shall mean the proceeds to be received by the Company (or selling shareholders,
in the event of a secondary offering) for each share in the registered public
offering, net of underwriting commissions.
2.4 Company's Option Upon Merger. In the event of (i) any
consolidation or merger of the Company with or into any other corporation,
or (ii) any sale of all or substantially all of the assets of the Company,
in either case in which the Company shall not be the continuing surviving
entity and immediately after which the holders of the voting shares of the
Company immediately prior to such event hold less than a majority of the
total voting power of the continuing and surviving entity, then the
Company shall have the option to purchase this Warrant on the closing date
of such event for cash or freely
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<PAGE> 4
tradable, unrestricted securities in any amount per Share equal to the greater
of (x) three (3) times the Warrant Price or (y) the excess (if any) of the
Market Value (as defined herein) of the Shares over the Warrant Price. The
Market Value of each Share shall be determined by dividing the total
consideration to be received by the Company or its shareholders in connection
with such event by the number of shares of Common Stock then outstanding
assuming that all convertible securities of the Company have been converted into
Common Stock). Any securities to be delivered to the Company or its security
holders shall be valued as follows:
(A) If traded on a securities exchange, the value shall be deemed
to be the average of the closing prices of the securities on such exchange over
the 30-day period ending five (5) business days prior to the closing; and
(B) If traded over-the-counter, the value shall be deemed to be the
average closing prices of the securities over the 30-day period ending five (5)
business days prior to the closing; and
(C) If there is no public market, the value shall be the fair market
value thereof, as determined by mutual agreement of the holder of this Warrant
and the Company, and if the parties are unable to so agree, by an investment
banker of national reputation selected by the Company and reasonably acceptable
to the holder of this Warrant.
3. Stock Fully Paid; Reservation of Shares. All Shares that may be issued
upon the exercise of the rights represented by this Warrant and Common Stock
issuable upon conversion of the Preferred Stock will, upon issuance, be fully
paid and nonassessable, and free from all taxes, liens and charges with respect
to the issue thereof. During the period within which the rights represented by
the Warrant may be exercised, the Company will at all times have authorized and
reserved for the purpose of issuance upon exercise of the purchase rights
evidenced by this Warrant, a sufficient number of shares of its Preferred Stock
(and Common Stock issuable upon conversion thereof) to provide for the exercise
of the right represented by this Warrant.
4. Adjustment of Warrant Price and Number of Shares. The number and kind
of securities purchasable upon the exercise of the Warrant and the Warrant Price
shall be subject to adjustment from time to time upon the occurrence of certain
events, as follows:
(a) Adjustment of Warrant Price upon Issuance of Additional Stock. The
Warrant Price shall be subject to adjustment from time to time as follows:
4
<PAGE> 5
(i) (A) Upon each issuance by the Company of any Additional Stock
(as-defined below), after the Grant Date, without consideration or for a
consideration per share less than the Warrant Price in effect immediately prior
to the issuance of such Additional Stock, the Warrant Price in effect
immediately prior to each such issuance shall forthwith (except as otherwise
provided in this Section 4(a)) be adjusted to a price determined by multiplying
the Warrant Price by a fraction, the numerator of which shall be the number of
shares of Common Stock outstanding immediately prior to such issuance plus the
number of shares of Common Stock which could be purchased were the then Warrant
Price used instead (calculated by dividing the total consideration (before
deduction of costs) to be received by the Company in such issuance by the then
Warrant Price) and the denominator of which shall be the number of shares of
Common Stock outstanding immediately prior to such issuance plus the number of
shares of such Additional Stock issued in such issuance. For purpose of this
Subsection (a), all shares of Common Stock issuable upon conversion of
outstanding Preferred Stock shall be deemed to be outstanding and, immediately
after any Additional Stock is deemed issued, such Additional Stock shall be
deemed outstanding.
(B) No adjustment of the Warrant Price shall be made in an amount
less than one cent per share, provided that any adjustments which are not
required to be made by reason of this sentence shall be carried forward and
shall be either taken into account in any subsequent adjustment made prior to 3
years from the date of the event giving rise to the adjustment being carried
forward, or shall be made at the end of 3 years from the date of the event
giving rise to the adjustment being carried forward. Except to the limited
extent provided for in subsections 4(a)(i)E(3) and E(4), no adjustment of
the Warrant Price pursuant to this subsection 4(a)(i) shall have the effect of
increasing the Warrant Price above the Warrant Price in effect immediately prior
to such adjustment.
(C) In the case of issuance by the Company of Common Stock for cash,
the consideration shall be deemed to be the amount of cash paid therefor before
deducting any reasonable discounts, commissions or other expenses allowed, paid
or incurred by the Company for any underwriting or otherwise in connection with
the issuance and sale thereof.
(D) In the case of issuance by the Company of Common Stock for a
consideration in whole or in part other than cash, the consideration other than
cash shall be deemed to be the fair value as determined by the Board of
Directors of the Company irrespective of any accounting treatment.
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<PAGE> 6
(E) In the case of the issuance (whether before, on or after the
Grant Date) of options to purchase or rights to subscribe for Common Stock,
securities by their terms convertible into or exchangeable for Common Stock or
options to purchase or rights to subscribe for such convertible or exchangeable
securities, the following provisions shall apply for all purposes of this
subsection 4(a)(i);
1. The aggregate maximum number of shares of Common Stock
deliverable upon exercise (to the extent then exercisable) of such options to
purchase or rights to subscribe for Common Stock shall be deemed to have been
issued at the time such options or rights were issued and for a consideration
equal to the consideration (determined in the manner provided in subsections 4
(a)(i)(C) and (a)(i)(D)), if any, received by the Company upon issuance of
such options or rights plus the minimum exercise price, provided in such options
or rights (without taking into account potential antidilution adjustments) for
the Common Stock covered thereby.
2. The aggregate maximum number of shares of Common Stock
deliverable upon conversion of or in exchange for (to the extent then
convertible or exchangeable) convertible or exchangeable securities or upon
exercise of options to purchase or rights to subscribe for such convertible or
exchangeable securities and subsequent conversion or exchange thereof shall be
deemed to have been issued at the time such securities were issued or such
options or rights were issued and for a consideration equal to the
consideration, if any, received by the Company for any such securities and
related options or rights (excluding any cash received on account of accrued
interest or accrued dividends), plus the minimum additional consideration, if
any, to be received by the Company (without taking into account potential
antidilution adjustments) upon the conversion or exchange of such securities or
the exercise of any related options or rights (the consideration in each case to
be determined in the manner provided in subsections 4(a)(i)(C) and 4(a)(i)(D).
3. In the event of any change in the number of shares of Common
Stock deliverable or in the consideration payable to the Company upon exercise
of such options or rights or upon conversion of or in exchange for such
convertible or exchangeable securities, including but not limited to, a change
resulting from antidilution provisions thereof, the Warrant Price, to the extent
in any way affected by or computed using such options, rights or securities,
shall be adjusted based upon the actual issuance of Common Stock or any payment
of such consideration upon the exercise of any such
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<PAGE> 7
options or rights or the conversion or exchange of such securities.
4. Upon the expiration of any such options or rights, the
termination of any such options or rights to convert or exchange, or the
expiration of any options or rights related to such convertible or exchangeable
securities, the Warrant Price, to the extent in any way affected by or computed
using such options, rights or securities or options or rights related to such
securities, shall be recomputed to reflect the issuance of only the number of
shares of Common Stock (and convertible or exchangeable securities which remain
in effect) actually issued upon the exercise of such options or rights, upon the
conversion or exchange of such securities or upon the exercise of the options or
rights related to such securities.
5. The number of shares of Common Stock deemed issued and the
consideration deemed paid, therefor pursuant to subsections 4(a)(i)(E)(1)
and (2) shall be appropriately adjusted to reflect any change, termination or
expiration of the type described in either subsection 4(a)(i)(E)(3) or (4).
(ii) "Additional Stock" shall mean any shares of Common Stock
issued (or deemed to have been issued pursuant to subsection 4(a)(i)(E)) by
this Company after the Grant Date other than (A) shares of Common Stock Issued
upon conversion of the Company's Series A, B and C Preferred Stock which have
been issued prior to the Grant Date, (B) shares of Common Stock issued to
employees or directors of or consultants and advisers to the Company or any
subsidiary pursuant to stock purchase or stock option plans or other similar
arrangements approved by the Company's Board of Directors and (C) shares of
Common Stock issued upon the exercise of warrants or options issued by the
Company prior to, or as of the Grant Date or issued by the Company subsequent to
the Grant Date pursuant to an obligation to do so arising under a written
agreement entered into by the Company prior to, or as of the Grant Date.
(iii) Notwithstanding any provisions to this Section 4(a) to the
contrary, no adjustment to the Warrant Price shall be made to this Section 4(a)
upon issuance by the Company of Additional Stock if a similar or corresponding
adjustment is made to the conversion Price of the Preferred Stock pursuant to
the Company's Articles of Incorporation, as amended.
(iv) Upon each adjustment of the Warrant Price pursuant to this
Section 4(a), the number of Shares issuable upon exercise hereof shall be
adjusted such that the aggregate purchase price for all of such Shares, as
adjusted, equals $22,500.00.
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<PAGE> 8
(b) Reclassification or Merger. In case of any reclassification,
change or conversion of securities of the class issuable upon exercise of this
Warrant (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 subdivision or
combination), or in case of any merger of the Company with or into another
corporation (other than a merger with another corporation in which the Company
is a continuing corporation and which does not result in any reclassification or
change of outstanding securities issuable upon exercise of this Warrant), or in
case of any sale of all or substantially all of the assets of the Company, the
Company, or such successor or purchasing corporation, as the case may be, shall
execute a new Warrant (in form and substance satisfactory to the holder of
this Warrant), providing that the holder of this Warrant shall have the right
to exercise such new Warrant and upon such exercise to receive, in lieu of each
share of Preferred Stock theretofore issuable upon exercise of this Warrant, the
kind and amount of shares of stock, other securities, money and property
receivable upon such reclassification, change or merger by a holder of one
share of Preferred Stock. Such new Warrant shall provide for adjustments that
shall be as nearly equivalent as may be practicable to the adjustments provided
for in this Paragraph 4. The provisions of this subparagraph (a) shall
similarly apply to successive reclassification, changes, mergers and transfers.
(c) Subdivisions or Combination of Shares. If the Company at any
time while this Warrant remains outstanding and unexpired shall subdivide or
combine its Preferred Stock, the Warrant Price and the number of Shares
issuable upon exercise hereof shall be proportionately adjusted.
(d) Stock Dividends. If the company at any time while this Warrant
is outstanding and unexpired shall pay a dividend payable in shares of
Preferred Stock (except any distribution specifically provided for in the
foregoing subparagraphs (a) and (b)), then the Warrant Price shall be adjusted,
from and after the date of determination of shareholders entitled to receive
such dividend or distribution, to that price determined by multiplying the
Warrant Price in effect immediately prior to such date of determination by a
fraction (a) the numerator of which shall be the total number of shares of
Preferred Stock outstanding immediately prior to such dividend or distribution,
and (b) the denominator of which shall be the total number of shares of
Preferred Stock outstanding immediately after such dividend or distribution and
the number of Shares subject to this Warrant shall be proportionately adjusted.
8
<PAGE> 9
(e) No Impairment. The Company will not, by amendment of its
Articles of Incorporation or through any reorganization, recapitalization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms to be observed or performed hereunder by the
Company, but will at all times in good faith assist in the carrying out of all
the provisions of this Paragraph 4 and in the taking of all such action as may
be necessary or appropriate in order to protect the rights of the holder of
this Warrant against impairment.
(f) Notices of Record Date. In the event of any taking by the
Company of a record of its shareholders for the purpose of determining
shareholders who are entitled to receive payment of any dividend (other than a
cash dividend) or other distribution, any right to subscribe for, purchase or
otherwise acquire any share of any class or any other securities or property, or
to receive any other right, or for the purpose of determining shareholders who
are entitled to vote in connection with any proposed merger or consolidation of
the Company with or into any other corporation, or any proposed sale, lease or
conveyance of all or substantially all of the assets of the company, or any
proposed liquidation, dissolution or winding up of the Company, the Company
shall mail to the holder of the Warrant, at least twenty (20) days prior to the
date specified therein, a notice specifying the date of such dividend,
distribution or right, and the amount and character of such dividend,
distribution or right.
5. Notice of Adjustments. Whenever the Warrant Price shall be adjusted
pursuant to the provisions hereof, the Company shall within thirty (30) days of
such adjustment deliver a certificate signed by its chief financial officer to
the registered holder(s) hereof setting forth, in reasonable detail, the event
requiring the adjustment, the amount of the adjustment, the method by which
such adjustment was calculated, and the Warrant Price after giving effect to
such adjustment.
6. Fractional Shares. No fractional shares of Preferred Stock will be
issued in connection with any exercise hereunder, but in lieu of such
fractional shares the company shall make a cash payment therefor upon the basis
of the Warrant Price then in effect.
7. Compliance with Securities Act; Disposition of Warrant or Shares of
Preferred Stock.
9
<PAGE> 10
Shares, as adjusted, equals $22,500.00.
(b) Reclassification or Merger. In case of any reclassification,
change or conversion of securities of the class issuable upon exercise of this
Warrant (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 subdivision or combination),
or in case of any merger of the Company with or into another corporation (other
than a merger with another corporation in which the Company is a continuing
corporation and which does not result in any reclassification or change of
outstanding securities issuable upon exercise of this Warrant), or in case of
any sale of all or substantially all of the assets of the Company, the Company,
or such successor or purchasing corporation, as the case may be, shall execute a
new Warrant (in form and substance satisfactory to the holder of this Warrant)
providing that the holder of this Warrant shall have the right to exercise such
new Warrant and upon such exercise to receive, in lieu of each share of
Preferred Stock theretofore issuable upon exercise of this Warrant, the kind and
amount of shares of stock, other securities, money and property receivable upon
such reclassification, change or merger by a holder of one share of Preferred
Stock. Such new Warrant shall provide for adjustments that shall be as nearly
equivalent as may be practicable to the adjustments provided for in this
Paragraph 4. The provisions of this subparagraph (a) shall similarly apply to
successive reclassification, changes, mergers and transfers..
(c) Subdivisions or Combination of Shares. If the Company at any
time while this Warrant remains outstanding and unexpired shall subdivide or
combine its Preferred Stock, the Warrant Price and the number of Shares issuable
upon exercise hereof shall be proportionately adjusted.
(d) Stock Dividends. If the Company at any time while this Warrant
is outstanding and unexpired shall pay a dividend payable in shares of Preferred
Stock (except any distribution specifically provided for in the foregoing
subparagraphs (a) and (b)), then the Warrant Price shall be adjusted, from and
after the date of determination of shareholders entitled to receive such
dividend or distribution, to that price determined by multiplying the Warrant
Price in effect immediately prior to such date of determination by a fraction
(a) the numerator of which shall be the total number of shares of Preferred
Stock outstanding immediately prior to such dividend or distribution, and (b)
the denominator of which shall be the total number of shares of Preferred Stock
outstanding immediately after such dividend or distribution and the number of
Shares subject to this
8
<PAGE> 11
Warrant shall be proportionately adjusted.
(e) No Impairment. The Company will not, by amendment of its
Articles of Incorporation or through any reorganization, recapitalization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms to be observed or performed hereunder by the
Company, but will at all times in good faith assist in the carrying out of all
the provisions of this Paragraph 4 and in the taking of all such action as may
be necessary or appropriate in order to protect the rights of the holder of this
Warrant against impairment.
(f) Notices of Record Date. In the event of any taking by the
Company of a record of its shareholders for the purpose of determining
shareholders who are entitled to receive payment of any dividend (other than a
cash dividend) or other distribution, any right to subscribe for, purchase or
otherwise acquire any share of any class or any other securities or property, or
to receive any other right, or for the purpose of determining shareholders who
are entitled to vote in connection with any proposed merger or consolidation of
the Company with or into any other corporation, or any proposed sale, lease or
conveyance of all or substantially all of the assets of the Company, or any
proposed liquidation, dissolution or winding up of the Company, the Company
shall mail to the holder of the Warrant, at least twenty (20) days prior to the
date specified therein, a notice specifying the date on which any such record is
to be taken for the purpose of such dividend, distribution or right, and the
amount and character of such dividend, distribution or right.
5. Notice of Adjustments. Whenever the Warrant Price shall
be adjusted pursuant to the provisions hereof, the Company shall within thirty
(30) days of such adjustment deliver a certificate signed by its chief financial
officer to the registered holder(s) hereof setting forth, in reasonable detail,
the event requiring the adjustment, the amount of the adjustment, the method by
which such adjustment was calculated, and the Warrant Price after giving effect
to such adjustment.
6. Fractional Shares. No fractional shares of Preferred Stock will
be issued in connection with any exercise hereunder, but in lieu of such
fractional shares the Company shall make a cash payment therefor upon the basis
of the Warrant Price then in effect.
7. Compliance with Securities Act; Disposition of Warrant or Shares
of Preferred Stock.
9
<PAGE> 12
(a) Compliance with Securities Act. The holder of this Warrant and
each subsequent holder, by acceptance hereof, agrees that this Warrant, the
shares of Preferred Stock to be issued upon exercise hereof and the Common Stock
to be issued upon conversion of such Preferred Stock are being acquired for
investment and that such holder will not offer, sell or otherwise dispose of
this Warrant or any shares of Preferred Stock to be issued upon exercise hereof
(or Common Stock issued upon conversion of the Preferred Stock) except under
circumstances which will not result in a violation of the Securities Act of
1933, as amended (the "Act"). This Warrant and all shares of Preferred Stock
issued upon exercise of this Warrant (unless registered under the Act) shall be
stamped or imprinted with a legend in substantially the following form:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED. NO SALE OR DISPOSITION MAY BE EFFECTED WITHOUT (i) AN EFFECTIVE
REGISTRATION STATEMENT RELATED THERETO, (ii) AN OPINION OF COUNSEL FOR THE
HOLDER, REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION IS
NOT REQUIRED OR (iii) RECEIPT OF A NO-ACTION LETTER FROM THE SECURITIES
AND EXCHANGE COMMISSION TO THE EFFECT THAT REGISTRATION UNDER THE ACT IS
NOT REQUIRED.
(b) Disposition of Warrant and Shares. With respect to any offer,
sale or other disposition of this Warrant or any shares of Preferred Stock
acquired pursuant to the exercise of this Warrant (or Common Stock issued upon
conversion of such Preferred Stock) prior to registration of such shares, the
holder hereof and each subsequent holder of the Warrant agrees to give written
notice to the Company prior thereto, describing briefly the manner thereof,
together with a written opinion of such holder's counsel, if reasonably
requested by the Company, to the effect that such offer, sale or other
disposition may be effected without registration or qualification (under the Act
as then in effect or any federal or state law then in effect) of this Warrant or
such shares of Preferred Stock or Common Stock and indicating whether or not
under the Act certificates for this Warrant or such shares of Preferred Stock or
Common Stock to be sold or otherwise disposed of require any restrictive legend
as to applicable restrictions on transferability in order to insure compliance
with the Act. Each certificate representing this Warrant or the shares of
Preferred Stock or Common Stock thus transferred (except a transfer pursuant to
Rule 144) shall bear a legend as to the applicable restrictions on
transferability in order to insure compliance with the Act, unless in the
aforesaid opinion of counsel for the holder, such legend is not required in
order to insure compliance with the Act. Nothing herein shall restrict the
transfer of this Warrant or any portion hereof by the initial holder hereof to
any partnership affiliated with the initial holder, or to any partner of any
such partnership provided such transfer may be made in compliance with
applicable
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<PAGE> 13
federal and state securities laws. The Company may issue stop transfer
instructions to its transfer agent in connection with the foregoing
restrictions.
8. Rights as Shareholders; Information.
8.l Shareholder Rights. No holder of the Warrant, as such, shall be
entitled to vote or receive dividends or be deemed the holder of Preferred Stock
or any other securities of the Company which may at any time be issuable on the
exercise thereof for any purpose, nor shall anything contained herein be
construed to confer upon the holder of this Warrant, as such, any of the rights
of a shareholder of the Company or any right to vote for the election of
directors or upon any matter submitted to shareholders at any meeting thereof,
or to receive notice of meetings, or to receive dividends or subscription rights
or otherwise until this Warrant shall have been exercised and the Shares
purchasable, upon the exercise hereof shall have become deliverable, as provided
herein.
8.2 Financial Statements and Information. The Company shall deliver
to the registered holder hereof (i) within 120 days after the end of the fiscal
year of the Company, a consolidated balance sheet of the Company as of the end
of such year and a consolidated statement of income, retained earnings and
cash flows for such year, which year-end financial reports shall be in
reasonable detail and certified by independent public accountants of nationally
recognized standing selected by the Company, and (ii) within 45 days after the
end of each fiscal quarter other than the last fiscal quarter, unaudited
consolidated statements of income, retained earnings and cash flows for such
quarter and a consolidated balance sheet as of the end of such quarter. In
addition, the Company shall deliver to the registered holder hereof any other
information or data provided to the shareholders of the Company.
9. Grant of Rights. The company hereby grants to the holder hereof
the registration rights set forth in the "Fifth Amended and Restated Rights
Agreement" in substantially the form attached hereto as Exhibit B, which
provides that the holder of this Warrant shall be deemed a "Holder" as defined
in the Fifth Amended and Restated Rights Agreement, and that the Common Stock of
the Company issued upon conversion of the Shares shall be deemed to be
"Registrable Securities" as defined in the Fifth Amended and Restated Rights
Agreement.
10. Additional Rights.
10.1 Secondary Sales. The Company agrees to notify the holder
of this Warrant if opportunities to make secondary sales of the Company's
securities become available. To this end, the Company will promptly provide the
holder of this Warrant with notice of any offer to acquire from the Company's
11
<PAGE> 14
security holders more than five percent (5%) of the total voting power of the
Company.
10.2 Mergers. Unless the Company provides the holder of this
Warrant with advance notice of the terms and conditions of the proposed
transaction, the Company will not (i) sell, lease, exchange, convey or otherwise
dispose of all or substantially all of its property or business, or (ii) merge
into or consolidate with any other corporation (other than a wholly-owned
subsidiary of the Company), or effect any transaction (including a merger or
other reorganization) or series of related transactions, in which more than 50%
of the voting power of the Company is disposed of.
11. Representations and Warranties. This Warrant is issued and delivered
on the basis of the following:
(a) This Warrant has been duly authorized and executed by the
Company and when delivered will be the valid, and binding obligation of the
Company enforceable in accordance with its terms;
(b) The Shares have been duly authorized and reserved for
issuance by the Company and, when issued accordance with the terms hereof, will
be validly issued, fully paid and nonassessable;
(c) The rights, preferences, privileges and restrictions
granted to or imposed upon the shares of Preferred Stock and the holders thereof
are as set forth in the Company's Articles of Incorporation, as amended, a true
and complete copy of which has been delivered to the original Warrantholder;
(d) The shares of Common Stock issuable upon conversion of the
Shares have been duly authorized and reserved and, when issued in accordance
with the terms of the Company's Articles of Incorporation, as amended, will be
validly issued, fully-paid and nonassessable; and
(e) The execution and delivery of this Warrant are not, and
the issuance of the Shares upon exercise of this warrant in accordance with the
terms hereof will not be, inconsistent with the Company's Articles of
Incorporation or by-laws, do not and will not contravene any law, governmental
rule or regulation, judgment or order applicable to the Company, and do not and
will not contravene any provision of, or constitute a default under, any
indenture, mortgage, contract or other instrument of which the Company is a
party or by which it is bound or require the consent or approval of, the giving
of notice to, the registration with or the taking of any action in respect of or
by, any Federal, state or local government authority or agency or other person.
12. Modification and Waiver. This Warrant and
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<PAGE> 15
any provision hereof may be changed, waived, discharged or terminated only by an
instrument in writing signed by the party against which enforcement of the same
is sought.
13. Notices. Any notice, request or other document required or permitted
to be given or delivered to the holder hereof or the Company shall be delivered,
or shall be sent by certified or registered mail, postage prepaid, to each such
holder at its address as shown on the books of the Company or to the Company at
the address indicated therefore on the signature page of this Warrant.
14. Binding Effect on Successors. This Warrant shall be binding upon any
corporation succeeding the Company by merger, consolidation or acquisition of
all or substantially all of the Company's assets, and all of the obligations of
the Company relating to the Preferred Stock issuable upon the exercise of this
Warrant shall survive the exercise and termination of this Warrant and all of
the covenants and agreements of the Company shall inure to the benefit of the
successors and assigns of the holder hereof. The Company will, at the time of
the exercise of this Warrant, in whole or in part, upon request of the holder
hereof but at the Company's expense, acknowledge in writing its continuing
obligation to the holder hereof in respect of any rights (including, without
limitation, any right to registration of the shares of Registrable Securities)
to which the holder hereof shall continue to be entitled after such exercise in
accordance with this Warrant; provided, that the failure of the holder hereof
to make any such request shall not affect the continuing obligation of the
Company to the holder hereof in respect of such rights.
15. Lost Warrants or Stock Certificates. The Company covenants to the
holder hereof that Upon receipt of evidence reasonably satisfactory to the
Company of the loss, theft, destruction, or mutilation of this Warrant or any
stock certificate and, in the case of any such loss, theft or destruction, upon
receipt of an indemnity reasonably satisfactory to the Company, or in the case
of any such mutilation upon surrender and cancellation of such Warrant or stock
certificate, the Company will make and deliver a new Warrant or stock
certificate, or like tenor, in lieu of the lost, stolen, destroyed or mutilated
Warrant or stock certificate.
16. Descriptive Headings. The descriptive headings of the several
paragraphs of this Warrant are inserted for convenience only and do not
constitute a part of this Warrant.
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<PAGE> 16
17. Governing Law. THIS WARRANT SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAWS OF
THE STATE OF CALIFORNIA.
By: RIBOGENE, INC.
Title: /s/ VINCENT J. MILES, Vice President
---------------------------------
Address: 21375 CABOT BOULEVARD
HAYWARD, CA 94545
Date: June 18, 1993
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<PAGE> 17
EXHIBIT A
Notice of Exercise
To:
1. The undersigned hereby elects to purchase________shares of Series__
Preferred Stock of __________ Corporation pursuant to the terms of the attached
Warrant, and tenders herewith payment of the purchase price of such shares in
full.
2. Please issue a certificate or certificates representing said shares in
the name of the undersigned or in such other name or names as are specified
below:
(Name)
(Address)
3. The undersigned represents that the aforesaid shares being acquired for
the account of the undersigned for investment and not with a view to, or for
resale in connection with, the distribution thereof and that the undersigned has
no present intention of distributing or reselling such shares.
---------------------------
(Signature)
- ---------------------
(Date)
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<PAGE> 18
EXHIBIT A-1
Notice of Exercise
To:
1. Contingent upon and effective immediately prior to the closing (the
"Closing") of the Company's public offering contemplated by the Registration
Statement of Form S-______, filed____________, 19___, the undersigned hereby
elects to purchase shares of Series______Preferred Stock of the Company (or such
lesser number of shares as may be sold on behalf of the undersigned at the
Closing) pursuant to the terms of the attached Warrant.
2. Please deliver to the custodian for the selling shareholders a stock
certificate representing such _______ shares.
3. The undersigned has instructed the custodian for the selling
shareholders to deliver to the Company $_________ or, if less, the net proceeds
due the undersigned from the sale of shares in the aforesaid public offering. If
such net proceeds are less than the purchase price for such shares, the
undersigned agrees to deliver the difference to the Company prior to the
Closing.
_________________________________
(Signature)
___________________
Date
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<PAGE> 1
Exhibit 4.11
NEITHER THIS WARRANT NOR THE SHARES OF STOCK ISSUABLE UPON EXERCISE HEREOF HAVE
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. NO SALE, TRANSFER
OR OTHER DISPOSITION OF THIS WARRANT OR SAID SHARES MAY BE EFFECTED WITHOUT (i)
AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO, (ii) AN OPINION OF COUNSEL
FOR THE HOLDER, REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION
IS NOT REQUIRED OR (iii) RECEIPT OF A NO-ACTION LETTER FROM THE SECURITIES AND
EXCHANGE COMMISSION TO THE EFFECT THAT REGISTRATION UNDER THE ACT IS NOT
REQUIRED.
Shares Issuable Upon Exercise: 17,778
WARRANT TO PURCHASE
SHARES OF SERIES E PREFERRED STOCK
THIS CERTIFIES THAT, for value received, Dominion Fund II, a California
limited partnership, is entitled to subscribe for and purchase 17,778 shares (as
adjusted pursuant to provisions hereof, the "Shares") of the fully paid and
nonassessable Series E Preferred Stock of Ribogene, Inc., a California
corporation (the "Company"), at a price per share of $2.25 (such price and such
other price as shall result, from time to time, from adjustments specified
herein is herein referred to as the "Warrant Price"), subject to the provisions
and upon the terms and conditions hereinafter set forth. As used herein, the
term "Preferred Stock" shall mean the Company's presently authorized Series E
Preferred Stock, and any stock into or for which such Series E Preferred Stock
may hereafter be converted or exchanged pursuant to the Articles of
Incorporation of the Company as from time to time amended as provided by law and
in such Articles, and the term "Grant Date" shall mean May 24, 1996.
1. Term. Subject to the terms hereof, the purchase right represented by
this warrant is exercisable, in whole or in part, at any time and from time to
time from and after the Grant Date and prior to the earlier of the eighth annual
anniversary date of the Grant Date or the fifth annual anniversary of the
consummation of the Company's initial public offering of its Common Stock, the
aggregate gross proceeds from which exceed $5,000,000.
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<PAGE> 2
2. Method of Exercise; Net Issue Exercise.
2.1 Method of Exercise; Payment; Issuance of New Warrant. The
purchase right represented by this Warrant may be exercised by the holder
hereof, in whole or in part and from time to time, by either, at the election of
the holder hereof, (a) the surrender of this Warrant (with the notice of
exercise form attached hereto as Exhibit A duly executed) at the principal
office of the Company and by the payment to the Company, by check, of an amount
equal to the then applicable Warrant Price per share multiplied by the number of
Shares then being purchased or (b) if in connection with a registered public
offering of the Company's securities, the surrender of this Warrant (with the
notice of exercise form attached hereto as Exhibit A-1 duly executed) at the
principal office of the Company together with notice of arrangements reasonably
satisfactory to the Company for payment to the Company either by check or from
the proceeds of the sale of shares to be sold by the holder in such public
offering of an amount equal to the then applicable Warrant Price per share
multiplied by the number of Shares then being purchased. The person or persons
in whose name(s) any certificates) representing shares of Preferred Stock shall
be issuable upon exercise of this Warrant shall be deemed to have become the
holder(s) of record of, and shall be treated for all purposes as the record
holder(s) of, the shares represented thereby (and such shares shall be deemed to
have been issued) immediately prior to the close of business on the date or
dates upon which this Warrant is exercised. In the event of any exercise of the
rights represented by this Warrant, certificates for the shares of stock so
purchased shall be delivered to the holder hereof as soon as possible and in any
event within thirty days of receipt of such notice and, unless this Warrant has
been fully exercised or expired, a new Warrant representing the portion of the
Shares, if any, with respect to which this Warrant shall not then have been
exercised shall also be issued to the holder hereof AS soon as possible and in
any event within such thirty-day period.
2.2 Net Issue Exercise.
(a) In lieu of exercising this Warrant, holder may elect to
receive shares equal to the value of this Warrant (or the portion thereof being
canceled) by surrender of this Warrant at the principal office of the Company
together with notice of such election in which event the Company shall issue to
Holder a number of shares of the Company's Preferred Stock computed using the
following formula:
Where X - The number of shares of Preferred Stock to be issued to Holder.
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<PAGE> 3
X= Y(A-B)
------
A
Y - the number of shares of Preferred Stock purchasable under this
Warrant.
A - the fair market value of one share of the Company's Preferred
Stock.
B - Warrant price (as adjusted to the date of such calculations).
(b) For purposes of this Section, fair market value of the
Company's Preferred Stock shall mean the average of the closing bid and asked
prices of the Company's Preferred Stock quoted in the Over-The-Counter Market
Summary or the closing price quoted on any exchange on which the Preferred Stock
is listed, whichever is applicable, as published in the Western Edition of The
Wall Street Journal for the ten trading days prior to the date of determination
of fair market value.
2.3 Company's Option Upon Registered Offering. In the event of the
initial registered public offering by the Company of its Common Stock effected
pursuant to a Registered Statement on Form S-1 (or its successor) filed under
the Securities Act of 1933, the Company will have the option to purchase for
cash immediately prior to the issuance of such shares in such offering all, but
not less than all, of the following: (i) this Warrant for a price per Share
equal to the difference between (x) the Net Per Share Price (as defined below)
of the stock being issued in such offering and (y) the Warrant Price, and (ii)
all Shares that have been issued pursuant to the exercise of this Warrant for a
price per share equal to the Net Per Share Price of the stock being issued in
such offering. For the purpose of this Paragraph the term "Net Per Share Price,,
shall mean the proceeds to be received by the Company (or selling shareholders,
in the event of a secondary offering) for each share in the registered public
offering, net of underwriting commissions.
2.4 Company's Option Upon Merger. In the event of (i) any consolidation
or merger of the Company with or into any other corporation, or (ii) any sale of
all or substantially all of the assets of the Company, in either case in which
the Company shall not be the continuing surviving entity and immediately after
which the holders of the voting shares of the Company immediately prior to such
event hold less than a majority of the total voting power of the continuing and
surviving entity, then the Company shall have the option to purchase this
Warrant on the closing date of such event for cash or freely-
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<PAGE> 4
tradable, unrestricted securities in any amount per Share equal to the greater
of (x) three (3) times the Warrant Price or (y) the excess (if any) of the
Market Value (as defined herein) of the Shares over the Warrant Price. The
Market Value of each Share shall be determined by dividing the total
consideration to be received by the Company or its shareholders in connection
with such event by the number of shares of Common Stock then outstanding
assuming that all convertible securities of the Company have been converted into
Common Stock). Any securities to be delivered to the Company or its security
holders shall be valued as follows:
(A) If traded on a securities exchange, the value shall be
deemed to be the average of the closing prices of the securities on such
exchange over the 30-day period ending five (5) business days prior to the
closing; and
(B) If traded over-the-counter, the value shall be deemed to be
the average closing prices of the securities over the 30-day period ending five
(5) business days prior to the closing; and
(C) If there is no public market, the value shall be the fair
market value thereof, as determined by mutual agreement of the holder of this
Warrant and the Company, and if the parties are unable to so agree, by an
investment banker of national reputation selected by the Company and reasonably
acceptable to the holder of this Warrant.
3. Stock Fully Paid; Reservation of Shares. All Shares that may be
issued upon the exercise of the rights represented by this Warrant and Common
Stock issuable upon conversion of the Preferred Stock will, upon issuance, be
fully paid and nonassessable, and free from all taxes, liens and charges with
respect to the issue thereof. During the period within which the rights
represented by the Warrant may be exercised, the Company will at all times have
authorized and reserved for the purpose of issuance upon exercise of the
purchase rights evidenced by this Warrant, a sufficient number of shares of its
Preferred Stock (and Common Stock issuable upon conversion thereof) to provide
for the exercise of the right represented by this Warrant.
4. Adjustment of Warrant Price and Number of Shares. The number and kind
of securities purchasable upon the exercise of the Warrant and the Warrant Price
shall be subject to adjustment from time to time upon the occurrence of certain
events, as follows:
(a) Adjustment of Warrant Price upon Issuance of Additional Stock.
The warrant Price shall be subject to adjustment from time to time as follows:
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<PAGE> 5
(i) (A) Upon each issuance by the Company of any Additional
Stock (as defined below), after the Grant Date, without consideration or for a
consideration per share less than the Warrant Price in effect immediately prior
to the issuance of such Additional Stock, the Warrant Price in effect
immediately prior to each such issuance shall forthwith (except as otherwise
provided in this Section 4 (a)) be adjusted to a price Determined by multiplying
the Warrant Price by a fraction, the numerator of which shall be the number of
shares of Common Stock outstanding immediately prior to such issuance plus the
number of shares of Common Stock which could be purchased were the then warrant
Price used instead (calculated by dividing the total consideration (before
deduction of costs) to be received by the Company in such issuance by the then
Warrant Price) and the denominator of which shall be the number of shares of
Common Stock outstanding immediately prior to such issuance plus the number of
shares of such Additional Stock issued in such issuance. For purpose of this
Subsection (a), all shares of Common Stock issuable upon conversion of
outstanding Preferred Stock shall be deemed to be outstanding and, immediately
after any Additional Stock is deemed issued, such Additional Stock shall be
deemed outstanding.
(B) No adjustment of the Warrant Price shall be made in an
amount less than one cent per share, provided that any adjustments which are not
required to be made by reason of this sentence shall be carried forward and
shall be either taken into account in any subsequent adjustment made prior to 3
years from the date of the event giving rise to the adjustment being carried
forward, or shall be made at the end of 3 years from the date of the event
giving rise to the adjustment being carried forward. Except to the limited
extent provided for in subsections 4 (a) (i) E (3) and E (4), no adjustment of
the Warrant Price pursuant to this subsection 4 (a) (i) shall have the effect of
increasing the Warrant Price above the Warrant Price in effect immediately prior
to such adjustment.
(C) In the case of issuance by the Company of Common Stock for
cash, the consideration shall be deemed to be the amount of cash paid therefor
before deducting any reasonable discounts, commissions or other expenses
allowed, paid or incurred by the Company for any underwriting or otherwise in
connection with the issuance and sale thereof.
(D) In the case of issuance by the Company of Common Stock for a
consideration in whole or in part other than cash, the consideration other than
cash shall be deemed to be the fair value as determined by the Board of
Directors of the Company irrespective of any accounting treatment.
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<PAGE> 6
(E) In the case of the issuance (whether before, on or after the
Grant Date) of options to purchase or rights to subscribe for Common Stock,
securities by their terms convertible into or exchangeable for Common Stock or
options to purchase or rights to subscribe for such convertible or exchangeable
securities, the following provisions shall apply for all purposes of this
subsection 4 (a) (i);
1. The aggregate maximum number of shares of Common Stock
deliverable upon exercise (to the extent then exercisable) of such options to
purchase or rights to subscribe for Common Stock shall be deemed to have been
issued at the time such options or rights were issued and for a consideration
equal to the consideration (determined in the manner provided in subsections 4
(a) (i) (C) and (a) (i) (D)), if any, received by the Company upon issuance of
such options or rights plus the minimum exercise price provided in such options
or rights (without taking into account potential antidilution adjustments) for
the Common Stock covered thereby.
2. The aggregate maximum number of shares of Common Stock
deliverable upon conversion of or in exchange for (to the extent then
convertible or exchangeable) convertible or exchangeable securities or upon
exercise of options to purchase or rights to subscribe for such convertible or
exchangeable securities and subsequent conversion or exchange thereof shall be
deemed to have been issued at the time such securities were issued or such
options or rights were issued and for a consideration equal to the
consideration, if any, received by the Company for any such securities and
related options or rights (excluding any cash received on account of accrued
interest or accrued dividends), plus the minimum additional consideration, if
any, to be received by the Company (without taking into account potential
antidilution adjustments) upon the conversion or exchange of such securities or
the exercise of any related options or rights (the consideration in each case to
be determined in the manner provided in subsections 4 (a) (i) (C) and 4 (a) (i)
(D)).
3. In the event of any change in the number of shares of
Common Stock deliverable or in the consideration payable to the Company upon
exercise of such options or rights or upon conversion of or in exchange for such
convertible or exchangeable securities, including but not limited to, a change
resulting from antidilution provisions thereof, the Warrant Price, to the extent
in any way affected by or computed using such options, rights or securities,
shall be adjusted based upon the actual issuance of Common Stock or any payment
of such consideration upon the exercise of any such
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<PAGE> 7
options or rights or the conversion or exchange of such securities.
4. Upon the expiration of any such options or rights, the
termination of any such options or rights to convert or exchange, or the
expiration of any options or rights related to such convertible or exchangeable
securities, the Warrant Price, to the extent in any way affected by or computed
using such options, rights or securities or options or rights related to such
securities, shall be recomputed to reflect the issuance of only the number of
shares of Common Stock (and convertible or exchangeable securities which remain
in effect) actually issued upon the exercise of such options or rights, upon the
conversion or exchange of such securities or upon the exercise of the options or
rights related to such securities.
5. The number of shares of Common Stock deemed issued and the
consideration deemed paid therefor pursuant to subsections 4 (a) (i) (E) (1) and
(2) shall be appropriately adjusted to reflect any change, termination or
expiration of the type described in either subsection 4 (a) (i) (E) (3) or (4).
(ii) "Additional Stock" shall mean any shares of Common Stock
issued (or deemed to have been issued pursuant to subsection 4 (a) (i) (E)) by
this Company after the Grant Date other than (A) shares of Common Stock issued
upon conversion of the Company's Series A and B Preferred Stock which have been
issued prior to the Grant Date, (B) shares of Common Stock issued to employees
or directors of or consultants and advisers to the Company or any subsidiary
pursuant to stock purchase or stock option plans or other similar arrangements
approved by the Company's Board of Directors and (C) shares of Common Stock
issued upon the exercise of warrants or options issued by the Company prior to,
or as of the Grant Date or issued by the Company subsequent to the Grant Date
pursuant to an obligation to do so arising under a written agreement entered
into by the Company prior to, or as of the Grant Date.
(iii) Notwithstanding any provisions to this Section 4 (a) to
the contrary, no adjustment to the Warrant Price shall be made to this Section 4
(a) upon issuance by the Company of Additional Stock if a similar or
corresponding adjustment is made to the Conversion Price of the Preferred Stock
pursuant to the Company's Articles of Incorporation, as amended.
(iv) Upon each adjustment of the Warrant Price pursuant to this
Section 4 (a), the number of Shares issuable upon exercise hereof shall be
adjusted such that the aggregate purchase price for all of such
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<PAGE> 8
Shares, as adjusted, equals $40,000.00.
(b) Reclassification or Merger. In case of any reclassification,
change or conversion of securities of the class issuable upon exercise of this
warrant (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 subdivision or combination),
or in case of any merger of the Company with or into another corporation (other
than a merger with another corporation in which the Company is a continuing
corporation and which does not result in any reclassification or change of
outstanding securities issuable upon exercise of this Warrant), or in case of
any sale of all or substantially all of the assets of the Company, the Company,
or such successor or purchasing corporation, as the case may be, shall execute a
new Warrant (in form and substance satisfactory to the holder of this Warrant)
providing that the holder of this Warrant shall have the right to exercise such
new Warrant and upon such exercise to receive, in lieu of each share of
Preferred Stock theretofore issuable upon exercise of this Warrant, the kind and
amount of shares of stock, other securities, money and property receivable upon
such reclassification, change or merger by a holder of one share of Preferred
Stock. Such new Warrant shall provide for adjustments that shall be as nearly
equivalent as may be practicable to the adjustments provided for in this
Paragraph 4. The provisions of this subparagraph (a) shall similarly apply to
successive reclassification, changes, mergers and transfers.
(c) Subdivisions or Combination of Shares. If the Company at any
time while this Warrant remains outstanding and unexpired shall subdivide or
combine its Preferred Stock, the Warrant Price and the number of Shares issuable
upon exercise hereof shall be proportionately adjusted.
(d) Stock Dividends. If the Company at any time while this
Warrant is outstanding and unexpired shall pay a dividend payable in shares of
Preferred Stock (except any distribution specifically provided for in the
foregoing subparagraphs (a) and (b)), then the Warrant Price shall be adjusted,
from and after the date of determination of shareholders entitled to receive
such dividend or distribution, to that price determined by multiplying the
Warrant Price in effect immediately prior to such date of determination by a
fraction (a) the numerator of which shall be the total number of shares of
Preferred Stock outstanding immediately prior to such dividend or distribution,
and (b) the denominator of which shall be the total number of shares of
Preferred Stock outstanding immediately after such dividend or distribution and
the number of Shares subject to this
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<PAGE> 9
Warrant shall be proportionately adjusted.
(e) No Impairment. The Company will not, by amendment of its
Articles of Incorporation or through any reorganization, recapitalization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms to be observed or performed hereunder by the
Company, but will at all times in good faith assist in the carrying out of all
the provisions of this Paragraph 4 and in the taking of all such action as may
be necessary or appropriate in order to protect the rights of the holder of this
Warrant against impairment.
(f) Notices of Record Date. In the event of any taking by the
Company of a record of its shareholders for the purpose of determining
shareholders who are entitled to receive payment of any dividend (other than a
cash dividend) or other distribution, any right to subscribe for, purchase or
otherwise acquire any share of any class or any other securities or property, or
to receive any other right, or for the purpose of determining shareholders who
are entitled to vote in connection with any proposed merger or consolidation of
the Company with or into any other corporation, or any proposed sale, lease or
conveyance of all or substantially all of the assets of the Company, or any
proposed liquidation, dissolution or winding up of the Company, the Company
shall mail to the holder of the Warrant, at least twenty (20) days prior to the
date specified therein, a notice specifying the date on which any such record is
to be taken for the purpose of such dividend, distribution or right, and the
amount and character of such dividend, distribution or right.
5. Notice of Adjustments. Whenever the Warrant Price shall be adjusted
pursuant to the provisions hereof, the Company shall within thirty (30) days of
such adjustment deliver a certificate signed by its chief financial officer to
the registered holder(s) hereof setting forth, in reasonable detail, the event
requiring the adjustment, the amount of the adjustment, the method by which such
adjustment was calculated, and the Warrant Price after giving effect to such
adjustment.
6. Fractional Shares. No fractional shares of Preferred Stock will be
issued in connection with any exercise hereunder, but in lieu of such fractional
shares the Company shall make a cash payment therefor upon the basis of the
Warrant Price then in effect.
7. Compliance with Securities Act; Disposition of Warrant or Shares of
Preferred Stock.
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(a) Compliance with Securities Act. The holder of this Warrant
and each subsequent holder, by acceptance hereof, agrees that this Warrant, the
shares of Preferred Stock to be issued upon exercise hereof and the Common Stock
to be issued upon conversion of such Preferred Stock are being acquired for
investment and that such holder will not offer, sell or otherwise dispose of
this Warrant or any shares of Preferred Stock to be issued upon exercise hereof
(or Common Stock issued upon conversion of the Preferred Stock) except under
circumstances which will not result in a violation of the Securities Act of
1933, as amended (the "Act"). This warrant and all shares of Preferred Stock
issued upon exercise of this Warrant (unless registered under the Act) shall be
stamped or imprinted with a legend in substantially the following form:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED. NO SALE OR DISPOSITION MAY BE EFFECTED WITHOUT (i) AN
EFFECTIVE REGISTRATION STATEMENT RELATED THERETO, (ii) AN OPINION OF
COUNSEL FOR THE HOLDER, REASONABLY SATISFACTORY TO THE COMPANY, THAT
SUCH REGISTRATION IS NOT REQUIRED OR (iii) RECEIPT OF A NO-ACTION LETTER
FROM THE SECURITIES AND EXCHANGE COMMISSION TO THE EFFECT THAT
REGISTRATION UNDER THE ACT IS NOT REQUIRED.
(b) Disposition of Warrant and Shares. With respect to any
offer, sale or other disposition of this Warrant or any shares of Preferred
Stock acquired pursuant to the exercise of this Warrant (or Common Stock issued
upon conversion of such Preferred Stock) prior to registration of such shares,
the holder hereof and each subsequent holder of the Warrant agrees to give
written notice to the Company prior thereto, describing briefly the manner
thereof, together with a written opinion of such holder's counsel, if reasonably
requested by the Company, to the effect that such offer, sale or other
disposition may be effected without registration or qualification (under the Act
as then in effect or any federal or state law then in effect) of this Warrant or
such shares of Preferred Stock or Common Stock and indicating whether or not
under the Act certificates for this Warrant or such shares of Preferred Stock or
Common Stock to be sold or otherwise disposed of require any restrictive legend
as to applicable restrictions on transferability in order to insure compliance
with the Act. Each certificate representing this Warrant or the shares of
Preferred Stock or Common Stock thus transferred (except a transfer pursuant to
Rule 144) shall bear a legend as to the applicable restrictions on
transferability in order to insure compliance with the Act, unless in the
aforesaid opinion of counsel for the holder, such legend is not required in
order to insure compliance with the Act. Nothing herein shall restrict the
transfer of this Warrant or any portion hereof by the initial holder hereof to
any partnership affiliated with the initial holder, or to any partner of any
such partnership provided such transfer may be made in compliance with
applicable
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federal and state securities laws. The Company may issue stop transfer
instructions to its transfer agent in connection with the foregoing
restrictions.
8. Rights as Shareholders; Information.
8.1 Shareholder Rights. No holder of the Warrant, as such, shall
be entitled to vote or receive dividends or be deemed the holder of Preferred
Stock or any other securities of the Company which may at any time be issuable
on the exercise thereof for any purpose, nor shall anything contained herein be
construed to confer upon the holder of this Warrant, as such, any of the rights
of a shareholder of the Company or any right to vote for the election of
directors or upon any matter submitted to shareholders at any meeting thereof,
or to receive notice of meetings, or to receive dividends or subscription rights
or otherwise until this Warrant shall have been exercised and the Shares
purchasable upon the exercise hereof shall have become deliverable, as provided
herein.
8.2 Financial Statements and Information. The Company shall
deliver to the registered holder hereof (i) within 120 days after the end of the
fiscal year of the Company, a consolidated balance sheet of the Company as of
the end of such year and a consolidated statement of income, retained earnings
and cash flows for such year, which year-end financial reports shall be in
reasonable detail and certified by independent public accountants of nationally
recognized standing selected by the Company, and (ii) within 45 days after the
end of each fiscal quarter other than the last fiscal quarter, unaudited
consolidated statements of income, retained earnings and cash flows for such
quarter and a consolidated balance sheet as of the end of such quarter. In
addition, the Company shall deliver to the registered holder hereof any other
information or data provided to the shareholders of the Company.
9. Grant of Rights. The company hereby grants to the holder hereof the
registration rights set forth in the "First Amendment to the First Amended and
Restated Registration Rights Agreement" attached hereto as Exhibit B, which
provides that the holder of this Warrant shall be deemed a "Holder" as defined
in the First Amendment to the First Amended and Restated Registration Rights
Agreement, and that the Common Stock of the Company issued upon conversion of
the Shares shall be deemed to be "Registrable Securities" as defined in the
First Amendment to the First Amended and Restated Registration Rights Agreement.
10. Additional Rights.
10.1 Secondary Sales. The Company agrees to notify the holder of
this Warrant if opportunities to make secondary sales of the Company's
securities become available To this end, the Company will promptly provide the
holder of this
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Warrant with notice of any offer to acquire from the Company's security holders
more than five percent (5%) of the total voting power of the Company.
10.2 Mergers. Unless the Company provides the holder of this
Warrant with advance notice of the terms and conditions of the proposed
transaction, the Company will not (i) sell, lease, exchange, convey or otherwise
dispose of all or substantially all of its property or business, or (ii) merge
into or consolidate with any other corporation other than a wholly-owned
subsidiary of the Company), or effect any transaction (including a merger or
other reorganization) or series of related transactions, in which more than 50%
of the voting power of the Company is disposed of.
11. Representations and Warranties. This Warrant is issued and delivered
on the basis of the following:
(a) This Warrant has been duly authorized and executed by the
Company and when delivered will be the valid and binding obligation of the
Company enforceable in accordance with its terms;
(b) The Shares have been duly authorized and reserved for
issuance by the Company and, when issued in accordance with the terms hereof,
will be validly issued, fully paid and nonassessable;
(c) The rights, preferences, privileges and restrictions granted
to or imposed upon the shares of Preferred Stock and the holders thereof are as
set forth in the Company's Articles of Incorporation, as amended, a true and
complete copy of which has been delivered to the original Warrantholder;
(d) The shares of Common Stock issuable upon conversion of the
Shares have been duly authorized and reserved and, when issued in accordance
with the terms of the Company's Articles of Incorporation, as amended, will be
validly issued, fully paid and nonassessable; and
(e) The execution and delivery of this Warrant are not, and the
issuance of the Shares upon exercise of this Warrant in accordance with the
terms hereof will not be, inconsistent with the Company's Articles of
Incorporation or by-laws, do not and will not contravene any law, governmental
rule or regulation, judgment or order applicable to the Company, and do not and
will not contravene any provision of, or constitute a default under, any
indenture, mortgage, contract or other instrument of which the Company is a
party or by which it is bound or require the consent or approval of, the giving
of notice to, the registration with or the taking of any action in respect of or
by, any Federal, state or local government authority or agency or other person.
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12. Modification and Waiver. This Warrant and any provision hereof may
be changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of the same is sought.
13. Notices. Any notice, request or other document required or permitted
to be given or delivered to the holder hereof or the Company shall be delivered,
or shall be sent by certified or registered mail, postage prepaid, to each such
holder at its address as shown on the books of the Company or to the Company at
the address indicated therefore on the signature page of this Warrant.
14. Binding Effect on Successors. This Warrant shall be binding upon any
corporation succeeding the Company by merger, consolidation or acquisition of
all or substantially all of the Company's assets, and all of the obligations of
the Company relating to the Preferred Stock issuable upon the exercise of this
Warrant shall survive the exercise and termination of this Warrant and all of
the covenants and agreements of the Company shall inure to the benefit of the
successors and assigns of the holder hereof. The Company will, at the time of
the exercise of this Warrant, in whole or in part, upon request of the holder
hereof but at the Company's expense, acknowledge in writing its continuing
obligation to the holder hereof in respect of any rights (including, without
limitation, any right to registration of the shares of Registrable Securities)
to which the holder hereof shall continue to be entitled after such exercise in
accordance with this Warrant; provided, that the failure of the holder hereof to
make any such request shall not affect the continuing obligation of the Company
to the holder hereof in respect of such rights.
15. Lost Warrants or Stock Certificates. The Company covenants to the
holder hereof that upon receipt of evidence reasonably satisfactory to the
Company of the loss, theft, destruction, or mutilation of this Warrant or any
stock certificate and, in the case of any such loss, theft or destruction, upon
receipt of an indemnity reasonably satisfactory to the Company, or in the case
of any such mutilation upon surrender and cancellation of such Warrant or stock
certificate, the Company will make and deliver a new Warrant or stock
certificate, or like tenor, in lieu of the lost, stolen, destroyed or mutilated
Warrant or stock certificate.
16. Descriptive Headings. The descriptive headings of the several
paragraphs of this Warrant are inserted for convenience only and do not
constitute a part of this Warrant.
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17. Governing Law. THIS WARRANT SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAWS OF
THE STATE OF CALIFORNIA.
By: RIBOGENE, INC.
Title: /s/ TIMOTHY E. MORRIS
---------------------------------
Timothy E. Morris
Address: 21375 Cabot Boulevard
Hayward, CA 94545
------------------------------
Date: August 2, 1996
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<PAGE> 15
EXHIBIT A
Notice of Exercise
To:
1. The undersigned hereby elects to purchase___________ shares of
Series____ Preferred Stock of_____________ Corporation pursuant to the terms of
the attached Warrant, and tenders herewith payment of the purchase price of
such shares in full.
2. Please issue a certificate or certificates representing said shares in
the name of the undersigned or in such other name or names as are specified
below:
(Name)
(Address)
3. The undersigned represents that the aforesaid shares being acquired for
the account of the undersigned for investment and not with a view to, or for
resale in connection with, the distribution thereof and that the undersigned has
no present intention of distributing or reselling such shares.
____________________________
(Signature)
____________________
(Date)
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EXHIBIT A-1
Notice of Exercise
To:
1. Contingent upon and effective immediately prior to the closing (the
"Closing") of the Company's public offering contemplated by the Registration
Statement of Form S-______, filed ________________, 19_____, the undersigned
hereby elects to purchase shares of Series_______ Preferred Stock of the Company
(or such lesser number of shares as may be sold on behalf of the undersigned at
the Closing) pursuant to the terms of the attached Warrant.
2. Please deliver to the custodian for the selling shareholders a stock
certificate representing such__________ shares.
3. The undersigned has instructed the custodian for the selling
shareholders to deliver to the Company $________________ or, if less, the net
proceeds due the undersigned from the sale of shares in the aforesaid public
offering. If such net proceeds are less than the purchase price for such shares,
the undersigned agrees to deliver the difference to the Company prior to the
Closing.
____________________________
(Signature)
____________________
(Date)
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<PAGE> 17
WARRANT PURCHASE AGREEMENT
This Warrant Purchase Agreement (the "Agreement") is made and entered into
as of the 24th day of May, 1996, by and between Ribogene, Inc., a California
corporation (the "Company"), and Dominion Fund II, a California limited
partnership ("Purchaser").
The Company desires to sell and the Purchaser desires to purchase a
warrant (the "Warrant") to purchase 17,778 shares of the Company's Series E
Preferred Stock (the "Warrant Shares") at a price per share of $2.25, pursuant
to a warrant substantially in the form attached hereto as Exhibit A on the terms
and conditions set forth herein.
In consideration of the mutual promises contained herein, the parties
hereto agree as follows:
1. Purchase of Warrant.
(a) Subject to the terms and conditions of this Agreement, the
Purchaser agrees to purchase the Warrant from the Company and the Company agrees
to sell and issue the Warrant to the Purchaser for an aggregate purchase price
of $ 408.89.
(b) The purchase and sale of the Warrant shall take place at the
offices of Dominion Ventures, Inc., at 44 Montgomery Street, Suite 4200, San
Francisco, CA 94104, or at such other time and place as to which the Company and
Purchaser shall agree. At the Closing, the Company shall deliver the Warrant to
the Purchaser, against payment of the purchase price therefor in cash.
2. Access to Information. The Purchaser acknowledges that it has had
access to all material information concerning the Company which it has
requested. The Purchaser also acknowledges that it has had the opportunity to,
and has to its satisfaction, questioned the officers of the Company with respect
to such Purchaser's investment hereunder.
3. Representation of Purchaser. The Purchaser represents that it
understands that the Warrant and the Warrant Shares are speculative investments,
that it is aware of the Company's business affairs and financial condition, and
that it has acquired sufficient information about the Company to reach an
informed and knowledgeable decision to acquire a Warrant. The Purchaser is
purchasing a Warrant and any Warrant Shares issued upon exercise thereof 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 of 1933, as amended (the "Securities Act"), or applicable state securities
laws. The Purchaser further represents that it understands that the Warrant and
Warrant Shares have not been registered under the Securities Act or applicable
state securities laws by reason of specific exemptions therefrom, which
exemptions depend upon, among other things, the bona fide nature of Purchaser's
investment intent as expressed herein.
<PAGE> 18
The Purchaser represents that the Warrant and any Warrant Shares purchased upon
exercise thereof must be held indefinitely unless such securities are
subsequently registered under the Securities Act and all applicable state
securities laws and regulations or an exemption from such registration or
qualification is available, and that the Company is under no obligation to
register or qualify such securities except as set forth in the Warrant between
the Company and the Purchaser.
4. Qualification of Securities. The sale of the securities which are the
subject of this Agreement has not been qualified with the Commissioner of
Corporations of the State of California and the issuance of such securities or
the payment or receipt of any part of the consideration thereof prior to such
qualification is unlawful, unless the sale of securities is exempt from the
qualification by Section 25100, 25102 or 25105 of the California Corporations
Code. The rights of all parties to this Agreement are expressly conditioned upon
such qualification being obtained, unless the sale is so exempt.
5. Legends. The Purchaser acknowledges and understands that the
instruments evidencing the Warrant and any certificates evidencing the Warrant
Shares (and Common Stock issuable upon conversion thereof) shall bear the
legends as specified in the Warrant in the form attached hereto as Exhibit A
(and any other legends required under state or federal securities laws in the
opinion of legal counsel for the Company).
6. General Provisions.
(a) This Agreement represents the entire agreement between the Company
and Purchaser regarding the subject matter hereof, supersedes all prior
agreements and understandings, and may only be amended in writing signed by the
Company and the Purchaser.
(b) This Agreement shall bind and benefit the successors, assigns,
heirs, executors and administrators of the parties. The rights of the Purchaser
under this Agreement may not be assigned without the written consent of the
Company.
(c) This Agreement shall be governed in all respects by the laws of the
State of California.
(d) The Agreement may be executed in counterparts, each of which shall
be an original, but all of which together shall constitute an instrument.
-2-
<PAGE> 19
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first set forth above.
COMPANY PURCHASER
RIBOGENE, INC. DOMINION FUND II,
a California corporation a California limited partnership
By: Dominion Partners II,
a California limited partnership
By: /s/ TIMOTHY E. MORRIS By: [SIG]
------------------------------- -------------------------------------
Name: Timothy E. Morris Name:
----------------------------- -----------------------------------
Title: Vice President, Finance and Title:
Administration, CFO ---------------------------------
---------------------------
-3-
<PAGE> 1
Exhibit 4.12
THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED, OR
OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT
OR PURSUANT TO RULE 144 OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
CORPORATION AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED,
WARRANT TO PURCHASE STOCK
Corporation: RIBOGENE, INC., A California corporation
Number of Shares: 15,000
Class of Stock: Series E Preferred:
Initial Exercise Price: Greater of $3.00 Per Share or 80% of the Share Price
at the time of the initial public offering of the
Company's stock; provided, however such an offer
must be prior to January 31,1996.
Issue Date: September 25,1995
Expiration Date: September 25, 2000
THIS WARRANT CERTIFIES THAT, for the agreed upon value of $1.00 and for
other good and valuable consideration, SILICON VALLEY BANK ("Holder") is
entitled to purchase the number of fully paid and nonassessable shares of the
class of securities (the "Shares") of the corporation (the "Company") at the
initial exercise price per Share (the "Warrant Price") all as set forth above
and as adjusted pursuant to Article 2 of this Warrant, subject to the provisions
and upon the terms and conditions set forth of this Warrant.
ARTICLE 1. EXERCISE.
1.1 Method of Exercise. Holder may exercise this Warrant by delivering a
duly executed Notice of Exercise in substantially the form attached as Appendix
1 to the principal office of the Company. Unless Holder is exercising the
conversion right set forth in Section 1.2, Holder shall also deliver to the
Company a check for the aggregate Warrant Price for the Shares being purchased.
1.2 Conversion Right. In lieu of exercising this Warrant as specified in
Section 1.1, Holder may from time to time convert this Warrant, in whole or in
part, into a number of Shares determined by dividing (a) the aggregate fair
market value of the Shares or other securities otherwise issuable upon exercise
of this Warrant minus the aggregate Warrant Price of such Shares by (b) the fair
market value of one Share. The fair market value of the Shares shall be
determined pursuant Section 1.4.
1.3 INTENTIONALLY OMITTED.
1.4 Fair Market Value. If the Shares are traded in a public market, the
fair market value of the Shares shall be the closing price of the Shares (or the
closing price of the Company's stock into which the Shares are convertible)
reported for the business day immediately before Holder delivers its Notice of
Exercise to the Company. If the Shares are not traded in a public market, the
Board of Directors of the Company shall determine fair market value in its
reasonable good faith judgment. The foregoing notwithstanding, if Holder advises
the Board of Directors in writing that Holder disagrees with such determination,
then the Company and Holder shall promptly agree upon a reputable investment
banking firm to undertake such valuation. If the valuation of such investment
banking firm is greater than that determined by the Board of Directors, then all
fees and expenses of such investment banking firm shall be paid by the Company.
In all other circumstances, such fees and expenses shall be paid by Holder.
1
<PAGE> 2
1.5 Delivery of Certificate and New Warrant. Promptly after Holder
exercises or converts this Warrant; the Company shall deliver to Holder
certificates for the Shares acquired and, if this Warrant has not been fully
exercised or converted and has not expired, a new Warrant representing the
Shares not so acquired.
1.6 Replacement of Warrants. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of loss, theft or destruction, on delivery of an
indemnity agreement reasonably satisfactory in form and amount to the Company
or, in the case of mutilation, or surrender and cancellation of this Warrant,
the Company at its expense shall execute and deliver, in lieu of this Warrant, a
new warrant of like tenor.
1.7 Repurchase on Sale, Merger, or Consolidation of the Company.
1.7.1. "Acquisition". For the purpose of this Warrant, "Acquisition"
means any sale, license, or other disposition of all or substantially all of the
assets of the Company, or any reorganization, consolidation, or merger of the
Company where the holders of the Company's securities before the transaction
beneficially own less than 50% of the outstanding voting securities of the
surviving entity after the transaction.
1.7.2. Assumption of Warrant. If upon the closing of any Acquisition
the successor entity assumes the obligations of this Warrant, then this Warrant
shall be exercisable for the same securities, cash, and property as would be
payable for the Shares issuable upon exercise of the unexercised portion of this
Warrant as if such Shares were outstanding on the record date for the
Acquisition and subsequent closing. The Warrant Price shall be adjusted
accordingly.
1.7.3. Nonassumption. If upon the closing of any Acquisition the
successor entity does not assume the obligations of his Warrant and Holder has
not otherwise exercised this Warrant in full, then the unexercised portion of
this Warrant shall be deemed to have been automatically converted pursuant to
Section 1.2 and thereafter Holder shall participate in the acquisition on the
same terms as other holders of the same class of securities of the Company.
1.7.4. Purchase Right. Notwithstanding the foregoing, at the election
of Holder, the Company shall purchase the unexercised portion of this Warrant
for cash upon the closing of any Acquisition for an amount equal to (a) the fair
market value of any consideration that would have been received by Holder in
consideration of the Shares had Holder exercised the unexercised portion of this
Warrant immediately before the record date for determining the shareholders
entitled to participate in the proceeds of the Acquisition, less (b) the
aggregate Warrant Price of the Shares, but in no event less than zero.
ARTICLE 2. ADJUSTMENTS TO THE SHARES.
2.1 Stock Dividends, Splits, Etc. If the Company declares or pays a
dividend on its common stock (or the Shares if the Shares are securities other
than common stock) payable in common stock, or other securities, subdivides the
outstanding common stock into a greater amount of common stock, or, if the
Shares are securities other than common stock, subdivides the Shares in a
transaction that increases the amount of common stock into which the Shares are
convertible, then upon exercise of this Warrant, for each Share acquired, Holder
shall receive, without cost to Holder, the total number and kind of securities
to which Holder would have been entitled had Holder owned the Shares of record
as of the date the dividend or subdivision occurred.
2.2 Reclassification, Exchange or Substitution. Upon any reclassification,
exchange, substitution, or other event that results in a change of the number
and/or class of the securities issuable upon exercise or conversion of this
Warrant, Holder shall be entitled to receive, upon exercise or
2
<PAGE> 3
conversion of this Warrant, the number and kind of securities and property that
Holder would have received for the Shares if this Warrant had been exercised
immediately before such reclassification, exchange, substitution, or other
event. Such an event shall include any automatic conversion of the outstanding
or issuable securities of the Company of the same class or series as the Shares
to common stock pursuant to the terms of the Company's Articles of Incorporation
upon the closing of a registered public offering of the Company's common stock.
The Company or its successor shall promptly issue to Holder a new Warrant for
such new securities or other property. The new Warrant shall provide for
adjustments which shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Article 2 including, without limitation,
adjustments to the Warrant Price and to the number of securities or property
issuable upon exercise of the new Warrant. The provisions of this Section 2.2
shall similarly apply to successive reclassifications, exchanges, substitutions,
or other events.
2.3 Adjustments for Combinations, Etc. If the outstanding Shares are
combined or consolidated, by reclassification or otherwise, into a lesser number
of shares, the Warrant Price shall be proportionately increased.
2.4 Adjustments for Diluting Issuances. The Warrant Price and the number
of Shares issuable upon exercise of this Warrant or, if the Shares are Preferred
Stock, the number of shares of common stock issuable upon conversion of the
Shares, shall be subject to adjustment from time to time in the manner set forth
on Exhibit A in the event of Diluting Issuances (as defined on Exhibit A).
2.5 No Impairment. The Company shall not, by amendment of its Articles of
Incorporation or through a reorganization, transfer of assets, consolidation,
merger, dissolution, issue, or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed under this Warrant by the Company, but shall at all times
in good faith assist in carrying out of all the provisions of this Article 2 and
in taking all such action as may be necessary or appropriate to protect Holder's
rights under this Article against impairment. If the Company takes any action
affecting the Shares or its common stock other than as described above that
adversely affects Holder's rights under this Warrant, the Warrant Price shall be
adjusted downward and the number of Shares issuable upon exercise of this
Warrant shall be adjusted upward in such a manner that the aggregate Warrant
Price of this Warrant is unchanged.
2.6 Fractional Shares. No fractional Shares shall be issuable upon
exercise or conversion of the Warrant and the number of Shares to be issued
shall be rounded down to the nearest whole Share. If a fractional share interest
arises upon any exercise or conversion of the Warrant the Company shall
eliminate such fractional share interest by paying Holder amount computed by
multiplying the factional interest by the fair market value of a full Share.
2.7 Certificate as to Adjustments. Upon each adjustment of the Warrant
Price, the Company at its expense shall promptly compute such adjustment, and
furnish Holder with a certificate of its Chief Financial Officer setting forth
such adjustment and the facts upon which such adjustment is based. The Company
shall, upon written request furnish Holder a certificate setting forth the
Warrant Price in effect upon the date thereof and the series of adjustments
leading to such Warrant Price.
ARTICLE 3. REPRESENTATIONS AND COVENANTS OF THE COMPANY.
3.1 Representations and Warranties. The Company hereby represents and
warrants to the Holder as follows:
3
<PAGE> 4
(a) The initial Warrant Price referenced on the first page of this
Warrant is not greater than (i) the price per share at which the Shares were
last issued in an arms-length transaction in which at least $500,000 of the
Shares were sold and (ii) the fair market value of the Shares as of the date of
this Warrant.
(b) All Shares which may be issued upon the exercise of the purchase
right represented by this Warrant, and all securities, if any, issuable upon
conversion of the Shares, shall, upon issuance, be duly authorized, validly
issued, fully paid and nonassessable, and free of any liens and encumbrances
except for restrictions on transfer provided for herein or under applicable
federal and state securities laws.
3.2 Notice of Certain Events. If the Company proposes at any time (a) to
declare any dividend or distribution upon its common stock, whether in cash,
property, stock, or other securities and whether or not a regular cash dividend;
(b) to offer for subscription pro rata to the holders of any class or series of
its stock any additional shares of stock of any class or series or other
rights; (c) to effect any reclassification or recapitalization of common stock;
(d) to merge or consolidate with or into any other corporation, or sell, lease,
license, or convey all or substantially all of its assets, or to liquidate,
dissolve or wind up; or (e) offer holders of registration rights the opportunity
to participate in an underwritten public offering of the Company's securities
for cash, then, in connection with each such event, the Company shall give
Holder (1) at least 20 days prior written notice of the date on which a record
will be taken for such dividend, distribution, or subscription rights (and
specifying the date on which the holders of common stock will be entitled
thereto) or for determining rights to vote, if any, in respect of the matters
referred to in (c) and (d) above; (2) in the case of the matters referred to in
(c) and (d) above at least 20 days prior written notice of the date when the
same will take place (and specifying the date on which the holders of common
stock will be entitled to exchange their common stock for securities or other
property deliverable upon the occurrence of such event); and (3) in the case of
the matter referred to in (e) above, the same notice as is given to the holders
of such registration rights.
3.3 Information Rights. So long as the Holder holds this Warrant and/or
any of the Shares, the Company shall deliver to the Holder (a) promptly after
mailing, copies of all notices or other written communications to the
shareholders of the Company, (b) within ninety (90) days after the end of each
fiscal year of the Company, the annual audited financial statements of the
Company certified by independent public accountants of recognized standing and
(c) such other financial statements required under and in accordance with any
loan documents between Holder and the Company (or if there are no such
requirements (or if the subject loan(s) no longer are outstanding]), then within
forty-five (45) days after the end of each of the first three quarters of each
fiscal year, the Company's quarterly, unaudited financial statements.
3.4 Registration Under Securities Act of 1933, as Amended. The Company
agrees that the Shares or, if the Shares are convertible into common stock of
the Company, such common stock, shall be subject to the registration rights set
forth on Exhibit B, if attached.
ARTICLE 4. MISCELLANEOUS.
4.1 Term; Notice of Expiration. This Warrant is exercisable, in whole or
in part, at any time and from time to time on or before the Expiration Date set
forth above. The Company shall give Holder written notice of Holder's right to
exercise this Warrant in the form attached as Appendix 2 not more than 90 days
and not less than 30 days before the Expiration Date. If the notice is not so
given, the Expiration Date shall automatically be extended until 30 days after
the date the Company delivers the notice to Holder.
4
<PAGE> 5
4.2 Legends. This Warrant and the Shares (and the securities issuable
directly or indirectly, upon conversion of the Shares, if any) shall be
imprinted with a legend in substantially the following form:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED
WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR PURSUANT TO
RULE 144 OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
CORPORATION AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.
4.3 Compliance with Securities Laws on Transfer. This Warrant and the
Shares issuable upon exercise this Warrant (and the securities issuable,
directly or indirectly, upon conversion of the Shares, if any) may not be
transferred or assigned in whole or in part without compliance with applicable
federal and state securities laws by the transferor and the transferee
(including, without limitation, the delivery of investment representation
letters and legal opinions reasonably satisfactory to the Company, as reasonably
requested by the Company). The Company shall not require Holder to provide an
opinion of counsel if the transfer is to an affiliate of Holder or if there is
no material question as to the availability of current information as referenced
in Rule 144(c), Holder represents that it has complied with Rule 144(d) and (e)
in reasonable detail, the selling broker represents that it has complied with
Rule 144(f), and the Company is provided with a copy of Holder's notice of
proposed sale.
4.4 Transfer Procedure. Subject to the provisions of Section 4.2, Holder
may transfer all or part of this Warrant or the Shares issuable upon exercise of
this Warrant (or the securities issuable, directly or indirectly, upon
conversion of the Shares, if any) by giving the Company notice of the portion of
the Warrant being transferred setting forth the name, address and taxpayer
identification number of the transferee and surrendering this Warrant to the
Company for reissuance to the transferee(s) (and Holder if applicable). Unless
the Company is filing financial information with the Securities and Exchange
Commission pursuant to the Securities Exchange Act of 1934, the Company shall
have the right to refuse to transfer any portion of this Warrant to any person
who directly competes with the Company.
4.5 Notices. All notices and other communications from the Company to the
Holder, or vice versa, shall be deemed delivered and effective when given
personally or mailed by first-class registered or certified mail, postage
prepaid, at such address as may have been furnished to the Company or the
Holder, as the case may be, in writing by the Company or such holder from time
to time.
4.6 Waiver. This Warrant and any term hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by the party
against which enforcement of such change, waiver, discharge or termination is
sought
4.7 Attorneys Fees. In the event of any dispute between the parties
concerning the terms and provisions of this Warrant, the party prevailing in
such dispute shall be entitled to collect from the other party all costs
incurred in such dispute, including reasonable attorneys' fees.
5
<PAGE> 6
4.8 Governing law. This Warrant shall be governed by and construed in
accordance with the laws of the State of California, without giving effect to
its principles regarding conflicts of law.
"COMPANY"
RIBOGENE, INC.
By: /s/ CHARLES J. CASAMENTO
------------------------------------
Name: Charles J. Casamento
---------------------------------
Title: Chairman, President & CEO,
---------------------------------
By: /s/ TIMOTHY E. MORRIS
------------------------------------
Name: Timothy E. Morris
----------------------------------
Title: Vice President, Finance &
Administration
Chief Financial Officer
--------------------------------
6
<PAGE> 7
APPENDIX I
NOTICE OF EXERCISE
1. The undersigned hereby elects to purchase______________shares of the
Common/Series __________ Preferred [strike one] Stock of____________________
pursuant to the terms of the attached Warrant, and tenders herewith payment of
the purchase price of such shares in full.
1. The undersigned hereby elects to convert the attached Warrant into
Shares/cash [strike one] in the manner specified in the Warrant. This conversion
is exercised with respect to_______________of the Shares covered by the Warrant
(Strike paragraph that does not apply.]
2. Please issue a certificate or certificates representing said shares in the
name of the undersigned or in such other name as is specified below:
______________________________
(Name)
______________________________
(Address)
______________________________
3. The undersigned represents it is acquiring the shares solely for its own
account and not as a nominee for any other party and not with a view toward the
resale or distribution thereof except in compliance with applicable securities
laws.
______________________________
(Signature)
______________________________
(Date)
_______________________________________
7
<PAGE> 8
APPENDIX 2
Notice that Warrant Is About to Expire
______________________________, ___________
(Name of Holder)
(Address of Holder)
Attn: Chief Financial Officer
Dear:
This is to advise you that the Warrant issued to you described below will
expire on _____________________________, 19___.
Issuer
Issue Date:
Class of Security Issuable:
Exercise Price per Share:
Number of Shares Issuable:
Procedure for Exercise:
Please contact [name of contact person at (phone number)] with any
questions you may have concerning exercise of the Warrant This is your only
notice of pending expiration.
______________________________
(Name of Issuer)
By:___________________________
Name:_________________________ _______________________________________
Title:________________________
8
<PAGE> 9
EXHIBIT A
Anti-Dilution Provisions
In the event of the issuance (a "Diluting Issuance") by the Company, after
the Issue Date of the Warrant, of securities at a price per share less than the
Warrant Price, then the number of shares of common stock issuable upon
conversion of the Shares shall be adjusted in accordance with those provisions
(the "Provisions") of the Company's Articles (Certificate) of Incorporation
which apply to Diluting Issuances.
The Company agrees that the Provisions, as in effect on the Issue Date,
shall be deemed to remain in full force and effect during the term of the
Warrant notwithstanding any subsequent amendment, waiver or termination thereof
by the Company's shareholders.
Under no circumstances shall the aggregate Warrant Price payable by the
Holder upon exercise of the Warrant increase as a result of any adjustment
arising from a Diluting Issuance.
10
<PAGE> 10
EXHIBIT B
Registration Rights
The Shares (if common stock), or the common stock issuable upon conversion
of the Shares, shall be deemed "registrable securities" or otherwise entitled to
"piggy back" registration rights in accordance with the terms of the following
agreement (the "Agreement") between the Company and its investor(s):
Eighth Amended and Restated Rights Agreement Dated June 13, 1994
The Company agrees that no amendments will be made to the Agreement which
would have an adverse impact on Holder's registration rights thereunder without
the consent of Holder. By acceptance of the Warrant to which this Exhibit B is
attached, Holder shall be deemed to be a party to the Agreement
If no Agreement exists, then the Company and the Holder shall enter into
Holders standard form of Registration Rights Agreement as in effect on the Issue
Date of the Warrant
12
<PAGE> 1
Exhibit 4.13
[RIBOGENE, INC. LETTERHEAD]
August 23, 1995
Mr. Raja Singh
Assistant Vice President
Silicon Valley Bank
1731 Embarcadero Road
Suite 220
Palo Alto, CA 94303
Stock Purchase Warrant
Dear Raja;
This letter will confirm our understanding as to the correction of a
typographical error in the Warrant to Purchase Stock issued by RiboGene, Inc. to
Silicon Valley Bank on May 19, 1995 (the "Warrant"). Due to this typographical
error, the underlying security for which the Warrant is exercisable is listed in
the Warrant as Series C Preferred Stock. The parties' agreement is and has
always been that such underlying stock would be Series E Preferred Stock.
Assuming that you agree that this is the case, the Warrant will be deemed to
have been corrected and the reference to the underlying security will be
hereafter read to be Series E Preferred Stock.
Please confirm our understanding by countersigning and returning the enclosed
copy of this letter to my attention.
Sincerely, Acknowledge and Agreed:
RIBOGENE, INC. SILICON VALLEY BANK
/s/ Timothy E. Morris
Timothy E. Morris, By: /s/ RAJA SINGH
Vice President and ----------------------------
Chief Financial Officer Title: Asst. VP
--------------------------
<PAGE> 2
THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED, OR
OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT
OR PURSUANT TO RULE 144 OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
CORPORATION AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED.
WARRANT TO PURCHASE STOCK
CORPORATION: Ribogene, Inc., a California Corporation
NUMBER OF SHARES: 10,000
CLASS OF STOCK: SERIES C PREFERRED
INITIAL EXERCISE PRICE: $3.00 PER SHARE
ISSUE DATE: MAY 19, 1995
EXPIRATION DATE: MAY 19, 2000
THIS WARRANT CERTIFIES THAT, for the agreed upon value of $1.00 and for
other good and valuable consideration, SILICON VALLEY BANK ("Holder") is
entitled to purchase the number of fully paid and nonassessable shares of the
class of securities (the "Shares") of the corporation (the "Company") at the
initial exercise price per Share (the "Warrant Price") all as set forth above
and as adjusted pursuant to Article 2 of this Warrant, subject to the provisions
and upon the terms and conditions set forth of this Warrant.
ARTICLE 1. EXERCISE
1.1 Method of Exercise. Holder may exercise this Warrant by
delivering a duly executed Notice of Exercise in substantially the form attached
as Appendix 1 to the principal office of the Company. Unless Holder is
exercising the conversion right set forth in Section 1.2, Holder shall also
deliver to the Company a check for the aggregate Warrant Price for the Shares
being purchased.
1.2 Conversion Right. In lieu of exercising this Warrant as
specified in Section 1.1, Holder may from time to time convert this Warrant, in
whole or in part, into a number of Shares determined by dividing (a) the
aggregate fair market value of the Shares or other securities otherwise issuable
upon exercise of this Warrant minus the aggregate Warrant Price of such Shares
by (b) the fair market value of one Share. The fair market value of the Shares
shall be determined pursuant Section 1.4.
1.3 INTENTIONALLY OMITTED.
1.4 Fair Market Value. If the Shares are traded in a public market,
the fair
1
<PAGE> 3
market value of the Shares shall be the closing price of the Shares (or the
closing price of the Company's stock into which the Shares are convertible)
reported for the business day immediately before Holder delivers its Notice of
Exercise to the Company. If the Shares are not traded in a public market, the
Board of Directors of the Company shall determine fair market value in its
reasonable good faith judgment. The foregoing notwithstanding, if Holder advises
the Board of Directors in writing that Holder disagrees with such determination,
then the Company and Holder shall promptly agree upon a reputable investment
banking firm to undertake such valuation. If the valuation of such investment
banking firm is greater than that determined by the Board of Directors, then
all fees and expenses of such investment banking firm shall be paid by the
Company. In all other circumstances, such fees and expenses shall be paid by
Holder.
1.5 Delivery of Certificate and New Warrant. Promptly after Holder
exercises or converts this Warrant, the Company shall deliver to Holder
certificates for the Shares acquired and, if this Warrant has not been fully
exercised or converted and has not expired, a new Warrant representing the
Shares not so acquired.
1.6 Replacement of Warrants. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of loss, theft or destruction, on delivery of an
indemnity agreement reasonably satisfactory in form and amount to the Company
or, in the case of mutilation, or surrender and cancellation of this Warrant,
the Company at its expense shall execute and deliver, in lieu of this Warrant, a
new warrant of like tenor.
1.7 Repurchase on Sale, Merger, or Consolidation of the Company.
1.7.1. "Acquisition". For the purpose of this Warrant,
"Acquisition" means any sale, license, or other disposition of all or
substantially all of the assets of the Company, or any reorganization,
consolidation, or merger of the Company where the holders of the Company's
securities before the transaction beneficially own less than 50% of the
outstanding voting securities of the surviving entity after the transaction.
1.7.2. Assumption of Warrant. If upon the closing of any
Acquisition the successor entity assumes the obligations of this Warrant, then
this Warrant shall be exercisable for the same securities, cash, and property as
would be payable for the Shares issuable upon exercise of the unexercised
portion of this Warrant as if such Shares were outstanding on the record date
for the Acquisition and subsequent closing. The Warrant Price shall be adjusted
accordingly.
2
<PAGE> 4
1.7.3. Nonassumption. If upon the closing of any Acquisition
the successor entity does not assume the obligations of this Warrant and Holder
has not otherwise exercised this Warrant in full, then the unexercised portion
of this Warrant shall be deemed to have been automatically converted pursuant to
Section 1.2 and thereafter Holder shall participate in the acquisition on the
same terms as other holders of the same class of securities of the Company.
ARTICLE 2. ADJUSTMENTS TO THE SHARES.
2.1 Stock Dividends, Splits, Etc. If the Company declares or pays a
dividend on its common stock (or the Shares if the Shares are securities other
than common stock) payable in common stock, or other securities, subdivides the
outstanding common stock into a greater amount of common stock, or, if the
Shares are securities other than common stock, subdivides the Shares in a
transaction that increases the amount of common stock into which the Shares are
convertible, then upon exercise of this Warrant, for each Share acquired, Holder
shall receive, without cost to Holder, the total number and kind of securities
to which Holder would have been entitled had Holder owned the Shares of record
as of the date the dividend or subdivision occurred.
2.2 Reclassification, Exchange or Substitution. Upon any
reclassification, exchange, substitution, or other event that results in a
change of the number and/or class of the securities issuable upon exercise or
conversion of this Warrant, Holder shall be entitled to receive, upon exercise
or conversion of this Warrant, the number and kind of securities and property
that Holder would have received for the Shares if this Warrant had been
exercised immediately before such reclassification, exchange, substitution, or
other event. Such an event shall include any automatic conversion of the
outstanding or issuable securities of the Company of the same class or series as
the Shares to common stock pursuant to the terms of the Company's Articles of
Incorporation upon the closing of a registered public offering of the Company's
common stock. The Company or its successor shall promptly issue to Holder a new
Warrant for such new securities or other property. The new Warrant shall provide
for adjustments which shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Article 2 including, without limitation,
adjustments to the Warrant Price and to the number of securities or property
issuable upon exercise of the new Warrant. The provisions of this Section 2.2
shall similarly apply to successive reclassifications, exchanges, substitutions,
or other events.
2.3 Adjustments for Combinations, Etc. If the outstanding Shares
are combined or consolidated, by reclassification or otherwise, into a lesser
number of shares, the Warrant Price shall be proportionately increased.
2.4 Adjustments for Diluting Issuances. The Warrant Price and the
number of Shares issuable upon exercise of this Warrant or, if the Shares are
Preferred Stock, the number of shares of common stock issuable upon conversion
of the Shares, shall be subject to
3
<PAGE> 5
adjustment, from time to time in the manner set forth on Exhibit A in the event
of Diluting Issuances (as defined on Exhibit A).
2.5 No Impairment. The Company shall not, by amendment of its
Articles of Incorporation or through a reorganization, transfer of assets,
consolidation, merger, dissolution, issue, or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed under this Warrant by the Company, but
shall at all times in good faith assist in carrying out of all the provisions
of this Article 2 and in taking all such action as may be necessary or
appropriate to protect Holder's rights under this Article against impairment. If
the Company takes any action affecting the Shares or its common stock other than
as described above that adversely affects Holder's rights under this Warrant,
the Warrant Price shall be adjusted downward and the number of Shares issuable
upon exercise of this Warrant shall be adjusted upward in such a manner that the
aggregate Warrant Price of this Warrant is unchanged.
2.6 Fractional Shares. No fractional Shares shall be issuable upon
exercise or conversion of the Warrant and the number of Shares to be issued
shall be rounded down to the nearest whole Share. If a fractional share interest
arises upon any exercise or conversion of the Warrant, the Company shall
eliminate such fractional share interest by paying Holder amount computed by
multiplying the factional interest by the fair market value of a full Share.
2.7 Certificate as to Adjustments. Upon each adjustment of the
Warrant Price, the Company at its expense shall promptly compute such
adjustment, and furnish Holder with a certificate of its Chief Financial Officer
setting forth such adjustment and the facts upon which such adjustment is based.
The Company shall, upon written request, furnish Holder a certificate setting
forth the Warrant Price in effect upon the date thereof and the series of
adjustments leading to such Warrant Price.
2.8 Warrant Price Adjustment. In the event that the effective per
share purchase price of capital stock sold in the Company's first equity
financing after the issuance of the Warrant (exclusive of sales of stock or
options to employees, officers or consultants pursuant to equity benefit plans
or similar transactions not designed to generate working capital for the
Company) (the "Next Financing") shall be less than $3.00, then the Warrant Price
payable by the Holder per Share shall be reduced to an amount equal to such
effective per share purchase price in the Next Financing.
ARTICLE 3. REPRESENTATIONS AND COVENANTS OF THE COMPANY.
3.1 Representations and Warranties. The Company hereby represents
and warrants to the Holder as follows:
4
<PAGE> 6
(a) The initial Warrant Price referenced on the first page of
this Warrant is not greater than the price per share at which the Shares were
last issued in an arms-length transaction in which at least $500,000 of the
Shares were sold.
(b) All Shares which may be issued upon the exercise of the
purchase right represented by this Warrant, and all securities, if any, issuable
upon conversion of the Shares, shall, upon issuance, be duly authorized, validly
issued, fully paid and nonassessable, and free of any liens and encumbrances
except for restrictions on transfer provided for herein or under applicable
federal and state securities laws.
3.2 Notice of Certain Events. If the Company proposes at any time
(a) to declare any dividend or distribution upon its common stock, whether in
cash, property, stock, or other securities and whether or not a regular cash
dividend; (b) to offer for subscription pro rata to the holders of any class or
series of its stock any additional shares of stock of any class or series or
other rights; (c) to effect any reclassification or recapitalization of common
stock; (d) to merge or consolidate with or into any other corporation, or sell,
lease, license, or convey all or substantially all of its assets, or to
liquidate, dissolve or wind up; or (e) offer holders of registration rights the
opportunity to participate in an underwritten public offering of the Company's
securities for cash, then, in connection with each such event, the Company shall
give Holder (1) at least 20 days prior written notice of the date on which a
record will be taken for such dividend, distribution, or subscription rights
(and specifying the date on which the holders of common stock will be entitled
thereto) or for determining rights to vote, if any, in respect of the matters
referred to in (c) and (d) above; (2) in the case of the matters referred to in
(c) and (d) above at least 20 days prior written notice of the date when the
same will take place (and specifying the date on which the holders of common
stock will be entitled to exchange their common stock for securities or other
property deliverable upon the occurrence of such event); and (3) in the case of
the matter referred to in (e) above, the same notice as is given to the holders
of such registration rights.
3.3 Information Rights. So long as the Holder holds this Warrant
and/or any of the Shares, the Company shall deliver to the Holder (a) promptly
after mailing, copies of all notices or other written communications to the
shareholders of the Company, (b) within ninety (90) days after the end of each
fiscal year of the Company, the annual audited financial statements of the
Company certified by independent public accountants of recognized standing and
(c) such other financial statements required under and in accordance with any
loan documents between Holder and the Company (or if there are no such
requirements [or if the subject loan(s) no longer are outstanding]), then within
forty-five (45) days after the end of each of the first three quarters of each
fiscal year, the Company's quarterly, unaudited financial statements.
3.4 Grant of Rights. The Company hereby covenants and agrees that
at the Next Financing, but in any event not later than August 31, 1995, it will
amend its Eighth Amended and Restated Rights Agreement dated June 13, 1994, (the
"Rights Agreement") among the Company and certain security holders of the
Company, a copy of which is attached
5
<PAGE> 7
hereto as Exhibit B, to include the Holder in registration rights granted
therein and provide that the Holder shall be deemed a "Holder" under and as
defined in the Rights Agreement and that the common stock issuable upon
conversion of the Shares shall be deemed to be "Registrable Securities," as such
term is defined in the Rights Agreement.
Any amendment, waiver, discharge or termination of such
registration rights that would materially adversely affect the Holder in a
manner unlike the effect on the other Holders under the Rights Agreement shall
require the consent of the Holder.
ARTICLE 4. MISCELLANEQUS.
4.1 Term; Notice of Expiration. This Warrant is exercisable, in
whole or in part, at any time and from time to time on or before the Expiration
Date set forth above. The Company shall give Holder written notice of Holder's
right to exercise this Warrant in the form attached as Appendix 2 not more than
90 days and not less than 30 days before the Expiration Date. If the notice is
not so given, the Expiration Date shall automatically be extended until 30 days
after the date the Company delivers the notice to Holder.
4.2 Legends. This Warrant and the Shares (and the securities
issuable, directly or indirectly, upon conversion of the Shares, if any) shall
be imprinted with a legend in substantially the following form:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED
WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR PURSUANT TO
RULE 144 OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
CORPORATION AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.
4.3 Compliance with Securities Laws on Transfer. This Warrant and
the Shares issuable upon exercise this Warrant (and the securities issuable,
directly or indirectly, upon conversion of the Shares, if any) may not be
transferred or assigned in whole or in part without compliance with applicable
federal and state securities laws by the transferor and the transferee
(including, without limitation, the delivery of investment representation
letters and legal opinions reasonably satisfactory to the Company, as reasonably
requested by the Company). The Company shall not require Holder to provide an
opinion of counsel if the transfer is to an affiliate of Holder or if there is
no material question as to the availability of current information as referenced
in Rule 144(c), Holder represents that it has complied with Rule 144(d) and (e)
in reasonable detail, the selling broker represents that it has complied with
Rule 144(f), and the Company is provided with a copy of Holder's notice of
proposed sale.
6
<PAGE> 8
4.4 Transfer Procedure. Subject to the provisions of Section 4.2,
Holder may transfer all or part of this Warrant or the Shares issuable upon
exercise of this Warrant (or the securities issuable, directly or indirectly,
upon conversion of the Shares, if any) by giving the Company notice of the
portion of the Warrant being transferred setting forth the name, address and
taxpayer identification number of the transferee and surrendering this Warrant
to the Company for reissuance to the transferee(s) (and Holder if applicable).
Unless the Company is filing financial information with the Securities and
Exchange Commission pursuant to the Securities Exchange Act of 1934, the Company
shall have the right to refuse to transfer any portion of this Warrant to any
person who directly competes with the Company.
4.5 Notices. All notices and other communications from the Company
to the Holder, or vice versa, shall be deemed delivered and effective when given
personally or mailed by first-class registered or certified mail, postage
prepaid, at such address as may have been furnished to the Company or the
Holder, as the case may be, in writing by the Company or such holder from time
to time.
4.6 Waiver. This Warrant and any term hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by the
party against which enforcement of such change, waiver, discharge or termination
is sought.
4.7 Attorneys Fees. In the event of any dispute between the parties
concerning the terms and provisions of this Warrant, the party prevailing in
such dispute shall be entitled to collect from the other party all costs
incurred in such dispute, including reasonable attorneys' fees.
4.8 Governing Law. This Warrant shall be governed by and construed
in accordance with the laws of the State of California, without giving effect to
its principles regarding conflicts of law.
RIBOGENE, INC.
By /s/ CHARLES J. CASAMENTO
----------------------------------
Charles J. Casamento
President and CEO
By: /s/ KENNETH E. LUDLUM
----------------------------------
Kenneth E. Ludlum
Chief Financial Officer
7
<PAGE> 9
APPENDIX I
NOTICE OF EXERCISE
1. The undersigned hereby elects to purchase____________shares of
the Common/Series___________Preferred (strike one] Stock of____________ pursuant
to the terms of the attached Warrant, and tenders herewith payment of the
purchase price of such shares in full.
1. The undersigned hereby elects to convert the attached Warrant
into Shares/cash (strike one] in the manner specified in the Warrant. This
conversion is exercised with respect to_____________ of the Shares covered by
the Warrant.
[Strike paragraph that does not apply.]
2. Please issue a certificate or certificates representing said
shares in the name of the undersigned or in such other name as is specified
below:
_________________________
(Name)
_________________________
_________________________
(Address)
3. The undersigned represents it is acquiring the shares solely for
its own account and not as a nominee for any other party and not with a view
toward the resale or distribution thereof except in compliance with applicable
securities laws.
___________________________________
(Signature)
__________________
(Date)
8
<PAGE> 10
APPENDIX 2
Notice that Warrant Is About to Expire
(Name of Holder)
(Address of Holder)
Attn: Chief Financial Officer
Dear___________________
This is to advise you that the Warrant issued to you described
below will expire on_____________________, 19____.
Issuer:
Issue Date:
Class of Security Issuable:
Exercise Price per Share:
Number of Shares Issuable:
Procedure for Exercise:
Please contact [name of contact person at (phone number)] with any
questions you may have concerning exercise of the Warrant. This is your only
notice of pending expiration.
__________________________________________
(Name of Issuer)
By________________________________________
Its_______________________________________
9
<PAGE> 11
EXHIBIT A
Anti-Dilution Provisions
In the event of the issuance (a "Diluting Issuance") by the Company,
after the Issue Date of the Warrant, of securities at a price per share less
than the Warrant Price, then the number of shares of common stock issuable upon
conversion of the Shares shall be adjusted in accordance with the operation of
those provisions (the "Provisions") of the Company's Articles (Certificate) of
Incorporation which apply to Diluting Issuances.
The Company agrees that any amendment, waiver, discharge or termination
of the Provisions that would adversely affect the Holder in a manner unlike the
effect on making other holders of Series E Preferred Stock shall also require
the consent of the Holder.
Under no circumstances shall the aggregate Warrant Price payable by the
Holder upon exercise of the Warrant increase as a result of any adjustment
arising from a Diluting Issuance.
10
<PAGE> 1
Exhibit 4.14
THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED, OR
OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT
OR PURSUANT TO RULE 144 OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
CORPORATION AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.
WARRANT TO PURCHASE STOCK
Corporation: RiboGene, Inc., a California corporation
Number of Shares: See below
Class of Stock: Series E Preferred
Initial Exercise Price: See below
Issue Date: December 23, 1996
Expiration Date: December 23, 2001
THIS WARRANT CERTIFIES THAT, for the agreed upon value of $1.00 and for
other good and valuable consideration, VENTURE LENDING, a division of Cupertino
National Bank & Trust ("Holder") is entitled to purchase the number of fully
paid and nonassessable shares of the class of securities (the "Shares") of the
corporation (the "Company") at the initial exercise price per share (the
"Warrant Price") all as set forth above and as adjusted pursuant to Article 2
of this Warrant. The Warrant Price shall be equal to $2.25. The number of
Shares to be issued under this Warrant shall be equal to 44,444.
ARTICLE 1. EXERCISE
1.1 Method of Exercise. Holder may exercise this Warrant
by delivering a duly executed Notice of Exercise in substantially the form
attached as Appendix 1 to the principal office of the Company. Unless Holder is
exercising the conversion right set forth in Section 1.2, Holder shall also
deliver to the Company a check for the aggregate Warrant Price for the Shares
being purchased.
1.2 Conversion Right. In lieu of exercising this Warrant
as specified in Section 1.1, Holder may from time to time convert this Warrant,
in whole or in part, into a number of Shares determined by dividing (a) the
aggregate fair market value of the Shares or other securities otherwise issuable
upon exercise of this Warrant minus the aggregate Warrant Price of such Shares
by (b) the fair market value of one Share. The fair market value of the Shares
shall be determined pursuant to Section 1.4.
1.3 Alternative Stock Appreciation Right. At Company's
option, the Company shall pay Holder the fair market value of the Shares
issuable upon conversion of this Warrant pursuant to Section 1.2 in cash in
lieu of such Shares.
1.4 Fair Market Value. If the Shares are traded in a
public market, the fair market value of the Shares shall be the closing price
of the Shares (or the closing price of the Company's stock into which the
Shares are convertible) reported for the business day immediately before Holder
delivers its Notice of Exercise to the Company. If the Shares are not traded in
a public market, the Board of Directors of the Company shall determine fair
market value in its reasonable good faith judgment. The foregoing
notwithstanding, if Holder advises the Board of Directors in writing that
Holder disagrees with such determination, then the Company and Holder shall
promptly agree upon a reputable investment banking firm to undertake such
valuation. If the valuation of such investment
1
<PAGE> 2
banking firm is greater than that determined by the Board of Directors, then
all fees and expenses of such investment banking firm shall be paid by the
Company. In all other circumstances such fees and expenses shall be paid by
Holder.
1.5 Delivery of Certificate and New Warrant. Promptly after Holder
exercises or converts this Warrant, the Company shall deliver to Holder
certificates for the Shares acquired and, if this Warrant has not been fully
exercised or converted and has not expired, a new Warrant representing the
Shares not so acquired.
1.6 Replacement of Warrants. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of loss, theft or destruction, on delivery of an
indemnity agreement reasonably satisfactory in form and amount to the Company
or, in the case of mutilation, or surrender and cancellation of this Warrant,
the Company at its expense shall execute and deliver, in lieu of this Warrant, a
new warrant of like tenor.
1.7 Repurchase on Sale, Merger, or Consolidation of the Company.
1.7.1. "Acquisition". For the purpose of this Warrant,
"Acquisition" means any sale, license, or other disposition of all or
substantially all of the assets of the Company, or any reorganization,
consolidation, or merger of the Company where the holders of the Company's
securities before the transaction beneficially own less than 50% of the
outstanding voting securities of the surviving entity after the transaction.
1.7.2. Assumption of Warrant. Upon the closing of any
Acquisition the successor entity shall assume the obligations of this Warrant,
and this Warrant shall be exercisable for the same securities, cash, and
property as would be payable for the Shares issuable upon exercise of the
unexercised portion of this Warrant as if such shares were outstanding on the
record date for the Acquisition and subsequent closing. The Warrant Price shall
be adjusted accordingly.
1.7.3. Purchase Right. Notwithstanding the foregoing, at the
election of Holder, the Company shall purchase the unexercised portion of this
Warrant for cash upon the closing of any Acquisition for an amount equal to (a)
the fair market value of any consideration that would have been received by
Holder in consideration of the Shares had Holder exercised the unexercised
portion of this Warrant immediately before the record date for determining the
shareholders entitled to participate in the proceeds of the Acquisition, less
(b) the aggregate Warrant Price of the Shares, but in no event less than zero.
ARTICLE 2. ADJUSTMENTS TO THE SHARES.
2.1 Stock Dividends, Splits, Etc. If the Company declares or pays
a dividend on its common stock (or the Shares if the Shares are securities
other than common stock) payable in common stock, or other securities,
subdivides the outstanding common stock into a greater amount of common stock,
or, if the Shares are securities other than common stock, subdivides the Shares
in a transaction that increases the amount of common stock into which the
Shares are convertible, then upon exercise of this Warrant, for each Share
acquired, Holder shall receive, without cost to Holder, the total number and
kind of securities to which Holder would have been entitled had Holder owned
the Shares of record as of the date the dividend or subdivision occurred.
2.2 Reclassification, Exchange or Substitution. Upon any
reclassification, exchange, substitution, or other event that results in a
change of the number and/or class of the securities issuable upon exercise or
conversion of this Warrant, Holder shall be entitled to received, upon exercise
or conversion of this Warrant, the number and kind of securities and property
that Holder would have received for the Shares if this Warrant had been
exercised immediately before such reclassification, exchange, substitution, or
other event. Such an event shall include any automatic
<PAGE> 3
conversion of the outstanding or issuable securities of the Company of the same
class or series as the Shares to common stock pursuant to the terms of the
Company's Articles of Incorporation upon the closing of a registered public
offering of the Company's common stock. The Company or its successor shall
promptly issue to Holder a new Warrant for such new securities or other
property. The new Warrant shall provide for adjustments which shall be as
nearly equivalent as may be practicable to the adjustments provided for in this
Article 2 including, without limitation, adjustments to the Warrent Price and
to the number of securities or property issuable upon exercise of the new
Warrant. The provisions of this Section 2.2 shall similarly apply to successive
reclassifications, exchanges, substitutions, or other events.
2.3 Adjustments for Combinations, Etc. If the outstanding Shares
are combined or consolidated, by reclassification or otherwise, into a lesser
number or shares, the Warrant price shall be proportionately increased.
2.4 Adjustments for Diluting Issuances. The Warrant Price and the
number of Shares issuable upon exercise of this Warrant or, if the Shares are
Preferred Stock, the number of shares of common stock issuable upon conversion
of the Shares, shall be subject to adjustment, from time to time in the manner
set forth on Exhibit A in the event of Diluting Issuances (as defined in
Exhibit A).
2.5 No Impairment. The Company shall not, by amendment of its
Articles of Incorporation or through a reorganization, transfer of assets,
consolidation, merger, dissolution, issue, or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any
of the terms to be observed or performed under this Warrant by the Company, but
shall at all times in good faith assist in carrying out of all the provisions
of this Article 2 and in taking all such action as may be necessary or
appropriate to protect Holder's rights under this Article against impairment.
If the Company takes any action affecting the Shares or its common stock other
than as described above that adversely affects Holder's rights under this
Warrant, the Warrant Price shall be adjustment downward and the number of
Shares issuable upon exercise of this Warrant shall be adjusted upward in such
a manner that the aggregate Warrant Price of this Warrant is unchanged.
2.6 Fractional Shares. No fractional Shares shall be issuable upon
exercise or conversion of the Warrant and the number of Shares to be issued
shall be rounded down to the nearest whole Share. If a fractional share
interest arises upon any exercise or conversion of the Warrant, the Company
shall eliminate such fractional share interest by paying Holder amount computed
by multiplying the fractional interest by the fair market value of a full
Share.
2.7 Certificate as to Adjustments. Upon each adjustment of the
Warrant Price, the Company at its expense shall promptly compute such
adjustment, and furnish Holder with a certificate of its Chief Financial
Officer setting forth such adjustment and the facts upon which such adjustment
and the facts upon which such adjustment is based. The Company shall, upon
written request, furnish Holder a certificate setting forth the Warrant Price
in effect upon the date thereof and the series of adjustments leading to such
Warrant Price.
<PAGE> 4
ARTICLE 3. REPRESENTATIONS AND COVENANTS OF THE COMPANY.
3.1 Representations and Warranties. The Company hereby represents
and warrants to the Holder as follows:
(a) The initial Warrant Price referenced on the first page
of this Warrant is not greater than (i) the price per share at which the Shares
were last issued in an arms-length transaction in which at least $500,000 of
the Shares were sold and (ii) the fair market value of the Shares as of the
date of this Warrant.
(b) All Shares which may be issued upon the exercise of the
purchase right represented by this Warrant, and all securities, if any,
issuable upon conversion of the Shares, shall, upon issuance, be duly
authorized, validly issued, fully paid and nonassessable, and free of any liens
and encumbrances except for restrictions on transfer provided for herein or
under applicable federal and state securities laws.
3.2 Notice of Certain Events. If the Company proposes at any time
(a) to declare any dividend or distribution upon its common stock, whether in
cash, property, stock or other securities and whether or not a regular cash
dividend; (b) to offer for subscription pro rata to the holders of any class
or series of its stock any additional shares of stock of any class or series or
other rights; (c) to effect any reclassification or recapitalization of common
stock; (d) to merge or consolidate with or into any other corporation, or sell,
lease, license, or convey all or substantially all of its assets, or to
liquidate, dissolve or wind up; or (e) to offer holders of registration rights
the opportunity to participate in an underwritten public offering of the
Company's securities for cash, then, in connection with each such event, the
Company shall give Holder (1) at least 20 days prior written notice of the date
on which a record will be taken for such dividend, distribution, or
subscription rights (and specifying the date on which the holders of common
stock will be entitled thereto) or for determining rights to vote, if any, in
respect of the matters referred to in (c) and (d) above; (2) in the case of the
matters referred to in (c) and (d) above at least 20 days prior written notice
of the date when the same will take place (and specifying the date on which
the holders of common stock will be entitled to exchange their common stock for
securities or other property deliverable upon the occurrence of such event);
and (3) in the case of the matter referred to in (e) above, the same notice as
is given to the holders of such registration rights.
3.3 Information Rights. So long as the Holder holds this Warrant
and/or any of the Shares, the Company shall deliver to the Holder (a) promptly
after mailing, copies of all notices or other written communications to the
shareholders of the Company, (b) within ninety (90) days after the end of each
fiscal year of the Company, the annual audited financial statements of the
Company certified by independent public accountants of recognized standing and
(c) within forty-five (45) days after the end of each of the first three
quarters of each fiscal year, the Company's quarterly, unaudited financial
statements.
3.4 Registration Under Securities Act of 1933, as amended. The
Company agrees that the Shares or, if the Shares are convertible into common
stock of the Company, such common stock, shall be subject to the registration
rights set forth on Exhibit B, if attached.
ARTICLE 4. MISCELLANEOUS.
4.1 Term; Notice of Expiration. This Warrant is exercisable, in
whole or in part, at any time and from time to time on or before the Expiration
Date set forth above. The Company shall give Holder written notice of Holder's
right to exercise this Warrant in the form attached as Appendix 2 not more than
90 days and not less than 30 days before the Expiration Date. If the notice is
not so given, the Expiration Date shall automatically be extended until 30 days
after the date the Company delivers the notice to Holder.
<PAGE> 5
4.2 Legends. This Warrant and the Shares (and the securities
issuable, directly or indirectly, upon conversion of the Shares, if any) shall
be imprinted with a legend in substantially the following form:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED
WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR PURSUANT TO
RULE 144 OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
CORPORATION AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.
4.3 Compliance with Securities Laws on Transfer. This
Warrant and the Shares issuable upon exercise this Warrant (and the securities
issuable, directly or indirectly, upon conversion of the Shares, if any) may
not be transferred or assigned in whole or in part without compliance with
applicable federal and state securities laws by the transferor and the
transferee (including, without limitation, the delivery of investment
representation letters and legal opinions reasonably satisfactory to the
Company, as reasonably requested by the Company). The Company shall not require
Holder to provide an opinion of counsel if the transfer is to an affiliate of
Holder or if there is no material question as to the availability of current
information as referenced in Rule 144(c), Holder represents that it has
complied with Rule 144(d) and (e) in reasonable detail, the selling broker
represents that it has complied with Rule 144(f), and the Company is provided
with a copy of Holder's notice of proposed sale.
4.4 Transfer Procedure. Subject to the provisions of
Section 4.2, Holder may transfer all or part of this Warrant or the Shares
issuable upon exercise of this Warrant (or the securities issuable, directly or
indirectly, upon conversion of the Shares, if any) by giving the Company notice
of the portion of the Warrant being transferred setting forth the name, address
and taxpayer identification number of the transferee and surrendering this
Warrant to the Company for reissuance to the transferee(s) (and Holder is
applicable). Unless the Company is filing financial information with the
Securities and Exchange Commission pursuant to the Securities Exchange Act of
1934, the Company shall have the right to refuse to transfer any portion of this
Warrant to any person who directly competes with the Company.
4.5 Notices. All notices and other communications from the
Company to the Holder, or vice versa, shall be deemed delivered and effective
when given personally or mailed by first-class registered or certified mail,
postage prepaid, at such address as may have been furnished to the Company or
the Holder, as the case may be, in writing by the Company or such holder from
time to time.
4.6 Waiver. This Warrant and any term hereof may be
changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of such change, waiver, discharge
or termination is sought.
4.7 Attorneys Fees. In the event of any dispute between
the parties concerning the terms and provisions of this Warrant, the party
prevailing in such dispute shall be entitled to collect from the other party
all costs incurred in such dispute, including reasonable attorney's fees.
<PAGE> 6
4.8 Governing Law. This Warrant shall be governed by and
construed in accordance with the laws of the State of California, without
giving effect to its principles regarding conflicts of law.
"COMPANY"
RIBOGENE, INC.
By Timothy E. Morris
---------------------------------
Name Timothy E. Morris, VP
-------------------------------
(Print)
Title: Chairman of the Board, President,
or Vice President
By Timothy E. Morris
---------------------------------
Name Timothy E. Morris, VP
-------------------------------
(Print)
Title: Chief Financial Officer,
Secretary, Assistant Treasurer,
or Assistant Secretary
6
<PAGE> 7
APPENDIX 1
NOTICE OF EXERCISE
------------------
1. The undersigned hereby elects to purchase ___________ shares of
the Common/Series ______ Preferred [strike one] Stock of ______________________
pursuant to the terms of the attached Warrant, and tenders herewith payment of
the purchase price of such shares in full.
1. The undersigned hereby elects to convert the attached Warrant
into Shares/cash [strike one] in the manner specified in the Warrant. This
conversion is exercised with respect to ___________________ of the Shares
covered by the Warrant.
[Strike paragraph that does not apply.]
2. Please issue a certificate or certificates representing said
shares in the name of the undersigned or in such other name as is specified
below:
------------------------------------
(Name)
------------------------------------
------------------------------------
(Address)
3. The undersigned represents it is acquiring the shares solely
for its own account and not as a nominee for any other party and not with a
view toward the resale or distribution thereof except in compliance with
applicable securities laws.
------------------------------------
(Signature)
- --------------------
(Date)
7
<PAGE> 8
APPENDIX 2
Notice that Warrant is About to Expire
__________________, ____
(Name of Holder)
(Address of Holder)
Attn: Chief Financial Officer
Date:____________________________
This is to advise you that the Warrant issued to you described below will
expire on ______________________, 19__.
Issuer:
Issue Date:
Class of Security Issuable:
Exercise Price per Share:
Number of Shares Issuable:
Procedure for Exercise:
Please contact [name of contact person at (phone number)] with any
questions you may have concerning exercise of the Warrant. This is your only
notice of pending expiration.
________________________________
(Name of Issuer)
By ______________________________
Its ______________________________
8
<PAGE> 9
EXHIBIT A
Anti-Dilution Provisions
(For Preferred Stock Warrants With Existing Anti-Dilution Protection)
In the event of the issuance (a "Diluting Issuance") by the Company, after
the Issue Date of the Warrant, of securities at a price per share less than the
Warrant Price, then the number of shares of common stock issuable upon
conversion of the Shares shall be adjusted in accordance with those provisions
(the "Provisions") of the Company's Articles (Certificate) of Incorporation
which apply to Diluting Issuances.
The Company agrees that the Provisions, as in effect on the Issue Date,
shall be deemed to remain in full force and effect during the term of the
Warrant notwithstanding any subsequent amendment, waiver or termination thereof
by the Company's shareholders.
Under no circumstances shall the aggregate Warrant Price payable by the
Holder upon exercise of the Warrant increase as a result of any adjustment
arising from a Diluting Issuance.
9
<PAGE> 10
EXHIBIT B
Registration Rights
The Shares (if common stock), or the common stock issuable upon
conversion of the Shares, shall be deemed "registrable securities" or otherwise
entitled to "piggy back" registration rights in accordance with the terms of
the following agreement (the "Agreement") between the Company and its
investor(s): Investor Rights Agreement dated ____________ .
The Company agrees that no amendments will be made to the Agreement
which would have an adverse impact on Holder's registration rights thereunder
without the consent of Holder. By acceptance of the Warrant to which this
Exhibit B is attached, Holder shall be deemed to be a party to the Agreements.
If no Agreement exists, then the Company and the Holder shall enter
into Holders's standard form of Registration Rights Agreement as in effect on
the issue Date of the Warrant.
<PAGE> 1
Exhibit 4.15
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT
AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. SUCH SECURITIES
MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN
EXCEPTION THEREFROM UNDER SAID ACT. COPIES OF THE AGREEMENT COVERING THE
PURCHASE OF THESE SECURITIES AND RESTRICTING THEIR TRANSFER MAY BE OBTAINED AT
NO COST BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE TO
THE SECRETARY OF THE CORPORATION AT ITS PRINCIPAL EXECUTIVE OFFICE.
Issued: September 20, 1995 CSW-13
RIBOGENE, INC.
COMMON STOCK PURCHASE WARRANT
1. NUMBER AND PRICE OF SHARES SUBJECT TO WARRANT.
(a) Subject to the terms and conditions herein set forth, SBC WARBURG
INC. (the "Purchaser") is entitled to purchase from RiboGene, Inc., a California
corporation (the "Company"), at any time after the date hereof and on or before
(i) the date three (3) years from the date of this Warrant, or (ii) the closing
of the Company's sale of all or substantially all of its assets or the
acquisition of the Company by another entity by means of merger or other
transaction as a result of which shareholders of the Company immediately prior
to such acquisition possess a minority of the voting power of the acquiring
entity immediately following such acquisition, or (iii) the closing of the
initial public offering of the Company's Common Stock registered under the
Securities Act of 1933, as amended, with a public offering price of at least
$5.00 per share of Common Stock (as adjusted for stock splits, combinations and
the like), up to 51,100 shares (which number of shares is subject to adjustment
as described below) of fully paid and non-assessable Common Stock of the Company
upon surrender hereof at the principal office of the Company and, at the
election of the holder hereof, upon either (1) payment of the purchase price at
said office in cash, by check or by wire transfer, (2) the cancellation of any
present or future indebtedness from the Company to the holder hereof in a dollar
amount equal to the purchase price of the Common Stock for which the
consideration is being given, or (3) tender of a notice as provided in the net
issue exercise provisions of Section 6(b) hereof
(b) Subject to adjustment as hereinafter provided, the purchase price
of one share of Common Stock (or such securities as may be substituted for one
share of Common Stock pursuant to the provisions hereinafter set forth) shall be
$2.00. The purchase price of one share of Common Stock (or such securities as
may be substituted for one share of Common Stock pursuant to the provisions
hereinafter set forth) payable from time to time upon the exercise of this
Warrant (whether such price be the price specified above or an adjusted price
determined as hereinafter provided) is referred to herein as the "WARRANT
PRICE."
<PAGE> 2
2. ADJUSTMENT OF WARRANT PRICE AND NUMBER OF SHARES. The number and kind
of securities issuable upon the exercise of this Warrant shall be subject to
adjustment from time to time upon the happening of certain events as follows:
(a) ADJUSTMENT FOR DIVIDENDS IN STOCK OR OTHER SECURITIES OR PROPERTY.
In case at any time or from time to time on or after the date hereof the holders
of the Common Stock of the Company (or any shares of stock or other securities
at the time receivable upon the exercise of this Warrant) shall have received,
or, on or after the record date fixed for the determination of eligible
stockholders, shall have become entitled to receive, without payment therefor,
other or additional stock or other securities or property (other than cash) of
the Company by way of dividend, then and in each case, the holder of this
Warrant shall, upon the exercise hereof, be entitled to receive, in addition to
the number of shares of Common Stock receivable thereupon, and without payment
of any additional consideration therefor, the amount of such other or additional
stock or other securities or property (other than cash) of the Company which
such holder would hold on the date of such exercise had it been the holder of
record of such Common Stock on the date hereof and had thereafter, during the
period from the date hereof to and including the date of such exercise, retained
such shares and/or all other additional stock available by it as aforesaid
during such period, giving effect to all adjustments called for during such
period elsewhere in this Section 2.
(b) ADJUSTMENT FOR RECLASSIFICATION, REORGANIZATION OR MERGER. In case
of any reclassification or change of the outstanding securities of the Company
or of any reorganization of the Company (or any other corporation the stock or
securities of which are at the time receivable upon the exercise of this
Warrant) or any similar corporate reorganization on or after the date hereof,
then and in each such case the holder of this Warrant, upon the exercise hereof
at any time after the consummation of such reclassification, change,
reorganization, merger or conveyance, shall be entitled to receive, in lieu of
the stock or other securities and property receivable upon the exercise hereof
prior to such consummation, the stock or other securities or property to which
such holder would have been entitled upon such consummation if such holder had
exercised this Warrant immediately prior thereto, all subject to further
adjustment as provided elsewhere in this Section 2; and in each such case, the
terms of this Section 2 shall be applicable to the shares of stock or other
securities properly receivable upon the exercise of this Warrant after such
consummation.
(c) STOCK SPLITS AND REVERSE STOCK SPLITS. If at any time on or after
the date hereof the Company shall subdivide its outstanding shares of Common
Stock into a greater number of shares, the Warrant Price in effect immediately
prior to such subdivision shall thereby be proportionately reduced and the
number of shares receivable upon exercise of the Warrant shall thereby be
proportionately increased; and, conversely, if at any time on or after the date
hereof the outstanding number of shares of Common Stock shall be combined into a
smaller number of shares, the Warrant Price in effect immediately prior to such
combination shall thereby be proportionately increased and the number of shares
receivable upon exercise of this Warrant shall thereby be proportionately
decreased.
-2-
<PAGE> 3
(d) ADJUSTMENT FOR QUALIFIED FINANCING. In the event that (a) the
Company consummates a transaction or series of related transactions pursuant to
which the Company sells equity securities with an aggregate purchase price of
not less than $8,000,000 (which shall include purchase price paid via the
conversion of outstanding indebtedness) (A "QUALIFIED FINANCING"), (b) the
purchase price for each share or other unit of the securities sold in the
Qualified Financing is less than $2.00 (as adjusted for subsequent stock splits,
stock dividends and recapitalizations, the "FINANCING PRICE"), and (c) the
Warrant Price then in effect is greater than the Financing Price, then the
Warrant Price shall be adjusted such that it equals the Financing Price. Upon
adjustment of the Warrant Price pursuant to this Section 2(d), the number of
shares issuable upon exercise hereof shall be adjusted such that the aggregate
purchase price for all of such shares, as adjusted, equals the initial aggregate
purchase price for the shares originally purchasable hereunder.
3. NO FRACTIONAL SHARES. No fractional shares of Common Stock will be
issued in connection with any exercise hereunder. In lieu of any fractional
shares which would otherwise be issuable, the Company any shall pay cash equal
to the product of such fraction multiplied by the fair market value of one share
of Common Stock on the date of exercise, as determined in good faith by the
Company's Board of Directors.
4. NO STOCKHOLDER RIGHTS. This Warrant represents only the right to
purchase shares of Common Stock of the Company and shall not otherwise entitle
its holder to any of the rights of a stockholder of the Company.
5. RESERVATION OF STOCK. The Company covenants that during the period this
Warrant is exercisable, the Company will reserve from its authorized and
unissued Common Stock a sufficient number of shares to provide for the issuance
of Common Stock upon the exercise of this Warrant. The Company agrees that its
issuance of this Warrant shall constitute full authority to its officers who are
charged with the duty of executing stock certificates to execute and issue the
necessary certificates for shares of Common Stock upon the exercise of this
Warrant.
6. EXERCISE OF WARRANT.
(a) METHOD OF EXERCISE. This Warrant may be exercised by the holder
hereof, in whole or in part and from time to time, by the surrender of this
Warrant at the principal office of the Company, accompanied by payment to the
Company, by check, of an amount equal to the then applicable Warrant Price per
share multiplied by the number of shares of Common Stock then being purchased.
This Warrant shall be deemed to have been exercised immediately prior to the
close of business on the date of its surrender for exercise as provided above,
and the person entitled to receive the shares of Common Stock issuable upon such
exercise shall be treated for all purposes as the holder of such shares of
record as of the close of business on such date. As promptly as practicable on
or after such date and in any event within five (5) business days thereafter,
the Company at its expense shall issue and deliver to the person or persons
entitled to receive the same a certificate or certificates for the number of
full shares of Common Stock issuable upon such exercise, together with cash in
lieu of any fraction of a share as provided
-3-
<PAGE> 4
above, and, unless this Warrant has been fully exercised or has expired, a new
Warrant representing the portion of the shares of Common Stock, if any, with
respect to which this Warrant shall not have been exercised, shall also be
issued to the holder hereof. The shares of Common Stock issuable upon exercise
hereof shall, upon their issuance, be fully paid and nonassessable.
(b) NET ISSUE EXERCISE.
(i) In lieu of exercising this Warrant in the manner provided above in
Section 6(a), holder may elect to receive shares equal to the value of this
Warrant (or the portion thereof being cancelled) by surrender of this Warrant at
the principal office of the Company together with notice of such election in
which event the Company shall issue to holder a number of shares of the
Company's Common Stock computed using the following formula:
X= Y (A-B)
------
A
Where: X = The number of shares of Common Stock to be issued to
holder.
Y = The number of shares of Common Stock purchasable under
this Warrant (at the date of such calculation).
A = The fair market value of one share of the Company's Common
Stock (at the date of such calculation).
B = The Warrant Price (as adjusted to the date of such
calculation).
(ii) For purposes of this Section 6(b), fair market value of the
Company's Common Stock shall mean the average of the closing bid and asked
prices of the Company's Common Stock quoted in the Over-The-Counter Market
Summary or the closing price quoted on any exchange on which the Common Stock is
listed, whichever is applicable, as published in the Western Edition of The Wall
Street Journal for the ten (10) trading days prior to the date of determination
of fair market value. If the Common Stock is not traded Over-The-counter or on
an exchange, the fair market value shall be the price per share which the
Company could obtain from a willing buyer for the shares sold by the Company
from authorized but unissued shares, as such price shall be agreed by the
Company and the holder.
7. CERTIFICATE OF ADJUSTMENT. Whenever the Warrant Price or number or type
of securities issuable upon exercise of this Warrant is adjusted, as herein
provided, the Company shall promptly deliver to the record holder of this
Warrant a certificate of an officer of the Company setting forth the nature of
such adjustment and a brief statement of the facts requiring such adjustment.
8. TRANSFER OF WARRANT. This Warrant may not be transferred by the
Purchaser without the written consent of the Company, which consent will not be
unreasonably withheld.
-4-
<PAGE> 5
9. REPLACEMENT OF WARRANTS. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of any
Warrant and, in the case of any such loss, theft or destruction of any Warrant,
on delivery of an indemnity agreement or security reasonably satisfactory in
form and amount to the Company or, in the case of any such mutilation, on
surrender and cancellation of such Warrant, the Company at its expense will
execute and deliver, in lieu thereof, a new Warrant of like tenor.
10. MISCELLANEOUS. This Warrant shall be governed by the laws of the
State of California. The headings in this Warrant are for purposes of
convenience and reference only, and shall not be deemed to constitute a part
hereof. Neither this Warrant nor any term hereof may be changed, waived,
discharged or terminated orally but only by an instrument in writing signed by
the Company and the registered holder hereof. All notices and other
communications from the Company to the holder of this Warrant shall be mailed by
first class registered or certified mail, postage prepaid, to the address
furnished to the Company in writing by the last holder of this Warrant who shall
have furnished an address to the Company in writing. The invalidity or
unenforceability of any provision hereof shall in no way affect the validity or
enforceability of any other provisions.
11. TERMINATION. This Warrant (and the right to purchase securities upon
exercise hereof) shall terminate upon the earliest of (a) the date three (3)
years from the date of this Warrant, or (b) the closing of the Company's sale of
all or substantially all of its assets or the acquisition of the Company by
another entity by means of merger or other transaction as a result of which
shareholders of the Company immediately prior to such acquisition possess a
minority of the voting power of the acquiring entity immediately following such
acquisition, or (c) the closing of the initial public offering of the Company's
Common Stock registered under the Securities Act of 1933, as amended with a
public offering price of at least $5.00 per share of Common Stock (as adjusted
for stock splits, combinations and the like).
12. NOTICE. The Company shall give Purchaser written notice of any sale,
merger, consolidation or public offering referred to in Section II or any cash
dividend declared on the Company's Common Stock at least twenty (20) days prior
to the closing of any such sale, merger, consolidation or public offering or the
record date fixed for the determination of stockholders eligible for such
dividend and shall deliver a copy of the preliminary prospectus with respect to
any such public offering to Purchaser promptly after it becomes available.
-5-
<PAGE> 6
This Common Stock Purchase Warrant No. CSW-13 is issued as of the ______
day of ____________________.
RIBOGENE, INC.
By: [SIG]
-------------------------------
Title:
-----------------------------
-6-
<PAGE> 1
Exhibit 4.16
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT
AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. SUCH SECURITIES
MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN
EXEMPTION THEREFROM UNDER SAID ACT. COPIES OF THE AGREEMENT COVERING THE
PURCHASE OF THESE SECURITIES AND RESTRICTING THEIR TRANSFER MAY BE OBTAINED AT
NO COST BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE TO
THE SECRETARY OF THE CORPORATION AT ITS PRINCIPAL EXECUTIVE OFFICE.
Issued: September 20, 1995 CSW-10
RIBOGENE, INC.
COMMON STOCK PURCHASE WARRANT
1. NUMBER AND PRICE OF SHARES SUBJECT TO WARRANT.
(a) Subject to the terms and conditions herein set forth,
JUDITH DONALDSON, PH.D. (the "Purchaser") is entitled to purchase from
RiboGene, Inc., a California corporation (the "Company"), at any time after the
date hereof and on or before (i) the date three (3) years from the date of this
Warrant, or (ii) the closing of the Company's sale of all or substantially all
of its assets or the acquisition of the Company by another entity by means of
merger or other transaction as a result of which shareholders of the Company
immediately prior to such acquisition possess a minority of the voting power of
the acquiring entity immediately following such acquisition, or (iii) the
closing of the initial public offering of the Company's Common Stock registered
under the Securities Act of 1933, as amended, with a public offering price of
least $5.00 per share of Common Stock (as adjusted for stock splits,
combinations and the like), up to 1,750 shares (which number of shares is
subject to adjustment as described below) of fully paid and non-assessable
Common Stock of the Company upon surrender hereof, upon either (1) payment of
the purchase price at said office in cash, by check or by wire transfer, (2)
the cancellation of any present or future indebtedness from the Company to the
holder hereof in a dollar amount equal to the purchase price of the Common
Stock for which the consideration is being given, or (3) tender of a notice as
provided in the net issue exercise provisions of Section 6(b) hereof.
(b) Subject to adjustment as hereinafter provided, the
purchase price of one share of Common Stock (or such securities as may be
substituted for one share of Common Stock pursuant to the provisions
hereinafter set forth) shall be $2.00. The purchase price of one share of
Common Stock (or such securities as may be substituted for one share of Common
Stock pursuant to the provisions hereinafter set forth) payable from time to
time upon the exercise of this Warrant (whether such price be the price
specified above or an adjusted price determined as hereinafter provided) is
referred to herein as the "WARRANT PRICE."
<PAGE> 2
2. ADJUSTMENT OF WARRANT PRICE AND NUMBER OF SHARES. The number
and kind of securities issuable upon the exercise of this Warrant shall be
subject to adjustment from time to time upon the happening of certain events as
follows:
(a) ADJUSTMENT FOR DIVIDENDS IN STOCK OR OTHER SECURITIES
OR PROPERTY. In case at any time or from time to time on or after the date
hereof the holders of the Common Stock of the Company (or any shares of stock
or other securities at the time receivable upon the exercise of this Warrant)
shall have received, or, on or after the record date fixed for the
determination of eligible stockholders, shall have become entitled to receive,
without payment therefor, other or additional stock or other securities or
property (other than cash) of the Company by way of dividend, then and in each
case, the holder of this Warrant shall, upon the exercise hereof, be entitled
to receive, in addition to the number of shares of Common Stock receivable
thereupon, and without payment of any additional consideration therefor, the
amount of such other or additional stock or other securities or property (other
than cash) of the Company which such holder would hold on the date of such
exercise had it been the holder of record of such Common Stock on the date
hereof and had thereafter, during the period from the date hereof to and
including the date of such exercise, retained such shares and/or all other
additional stock available by it as aforesaid during such period, giving effect
to all adjustments called for during such period elsewhere in this Section 2.
(b) ADJUSTMENT FOR RECLASSIFICATION, REORGANIZATION OR MERGER. In
case of any reclassification or change of the outstanding securities of the
Company or of any reorganization of the Company (or any other corporation the
stock or securities of which are at the time receivable upon the exercise of
this Warrant) or any similar corporate reorganization on or after the date
hereof, then and in each such case the holder of this Warrant, upon the
exercise hereof at any time after the consummation of such reclassification,
change, reorganization, merger or conveyance, shall be entitled to receive, in
lieu of the stock or other securities and property receivable upon the exercise
hereof prior to such consummation, the stock or other securities or property to
which such holder would have been entitled upon such consummation if such
holder had exercised this Warrant immediately prior thereto, all subject to
further adjustment as provided elsewhere in this Section 2; and in each such
case, the terms of this Section 2 shall be applicable to the shares of stock or
other securities properly receivable upon the exercise of this Warrant after
such consummation.
(c) STOCK SPLITS AND REVERSE STOCK SPLITS. If at any time on or
after the date hereof the Company shall subdivide its outstanding shares of
Common Stock into a greater number of shares, the Warrant Price in effect
immediately prior to such subdivision shall thereby be proportionately reduced
and the number of shares receivable upon exercise of the Warrant shall thereby
be proportionately increased; and, conversely, if at any time on or after the
date hereof the outstanding number of shares of Common Stock shall be combined
into a smaller number of shares, the Warrant Price in effect immediately prior
to such combination shall thereby be proportionately increased and the number
of shares receivable upon exercise of this Warrant shall thereby be
proportionately decreased.
-2-
<PAGE> 3
(d) ADJUSTMENT FOR QUALIFIED FINANCING. In the event that
(a) the Company consummates a transaction or series of related transactions
pursuant to which the Company sells equity securities with an aggregate
purchase price of not less than $8,000,000 (which shall include purchase price
paid via the conversion of outstanding indebtedness) (a "Qualified Financing"),
(b) the purchase price for each share or other unit of the securities sold in
the Qualified Financing is less than $2.00 (as adjusted for subsequent stock
splits, stock dividends and recapitalizations, the "Financing Price"), and (c)
the Warrant Price then in effect is greater than the Financing Price, then the
Warrant Price shall be adjusted such that it equals the Financing Price. Upon
adjustment of the Warrant Price pursuant to this Section 2(d), the number of
shares issuable upon exercise hereof shall be adjusted such that the aggregate
price for all of such shares, as adjusted, equals the initial aggregate
purchase price for the shares originally purchasable hereunder.
3. NO FRACTIONAL SHARES. No fractional shares of Common Stock
will be issued in connection with any exercise hereunder. In lieu of any
fractional shares which would otherwise be issuable, the Company shall pay cash
equal to the product of such fraction multiplied by the fair market value of
one share of Common Stock on the date of exercise, as determined in good faith
by the Company's Board of Directors.
4. NO STOCKHOLDER RIGHTS. This Warrant represents only the right
to purchase shares of Common Stock of the Company and shall not otherwise
entitle its holder to any of the rights of a stockholder of the Company.
5. RESERVATION OF STOCK. The Company covenants that during the
period this Warrant is exercisable, the Company will reserve from its
authorized and unissued Common Stock a sufficient number of shares to provide
for the issuance of Common Stock upon the exercise of this Warrant. The Company
agrees that its issuance of this Warrant shall constitute full authority to its
officers who are charged with the duty of executing stock certificates to
execute and issue the necessary certificates for shares of Common Stock upon
the exercise of this Warrant.
6. EXERCISE OF WARRANT.
(A) METHOD OF EXERCISE. This Warrant may be exercised by
the holder hereof, in whole or in part and from time to time, by the surrender
of this Warrant at the principal office of the Company, accompanied by payment
to the Company, by check, of an amount equal to the then applicable Warrant
Price per share multiplied by the number of shares of Common Stock then being
purchased. This Warrant shall be deemed to have been exercised immediately
prior to the close of business on the date of its surrender for exercise as
provided above, and the person entitled to receive the shares of Common Stock
issuable upon such exercise shall be treated for all purposes as the holder of
such shares of record as of the close of business on such date. As promptly as
practicable on or after such date and in any event within five (5) business
days thereafter, the Company at its expense shall issue and deliver to the
person or persons entitled to receive the same a certificate or certificates
for the number of full shares of Common Stock issuable upon such exercise,
together with cash in lieu of any fraction of a share as provided
-3-
<PAGE> 4
above, and, unless this Warrant has been fully exercised or has expired, a new
Warrant representing the portion of the shares of Common Stock, if any, with
respect to which this Warrant shall not have been exercised, shall also be
issued to the holder hereof. The shares of Common Stock issuable upon exercise
hereof shall, upon their issuance, be fully paid and nonassessable.
(b) NET ISSUE EXERCISE.
(i) In lieu of exercising this Warrant in the
manner provided above in Section 6(a), holder may elect to receive shares equal
to the value of this Warrant (or the portion thereof being cancelled) by
surrender of this Warrant at the principal office of the Company together with
notice of such election in which event the Company shall issue to holder a
number of shares of the Company's Common Stock computed using the following
formula:
X = Y (A - B)
---------
A
Where: X = The number of shares of Common Stock to be
issued to holder.
Y = The number of shares of Common Stock
purchasable under this Warrant (at the date of
such calculation).
A = The fair market value of one share of the
Company's Common Stock (at the date of such
calculation).
B = The Warrant Price (as adjusted to the date of
such calculation).
(ii) For purposes of this Section 6(b), fair market
value of the Company's Common Stock shall mean the average of the closing bid
and asked prices of the Company's Common Stock quoted in the Over-The-Counter
Market Summary or the closing price quoted on any exchange on which the Common
Stock is listed, whichever is applicable, as published in the Western Edition
of THE WALL STREET JOURNAL for the ten (10) trading days prior to the date of
determination of fair market value. If the Common Stock is not traded
Over-The-Counter or on an exchange, the fair market value shall be the price
per share which the Company could obtain from a willing buyer for the shares
sold by the Company from authorized but unissued shares, as such price shall be
agreed by the Company and the holder.
7. CERTIFICATE OF ADJUSTMENT. Whenever the Warrant Price or number
or type of securities issuable upon exercise of this Warrant is adjusted, as
herein provided, the Company shall promptly deliver to the record holder of this
Warrant a certificate of an officer of the Company setting forth the nature of
such adjustment and a brief statement of the facts requiring such adjustment.
8. TRANSFER OF WARRANT. This Warrant may not be transferred by
the Purchaser without the written consent of the Company, which consent will
not be unreasonably withheld.
-4-
<PAGE> 5
9. REPLACEMENT OF WARRANTS. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
any Warrant and, in the case of any such loss, theft or destruction of any
Warrant, on delivery of an indemnity agreement or security reasonably
satisfactory in form and amount to the Company or, in the case of any such
mutilation, on surrender and cancellation of such Warrant, the Company at its
expense will execute and deliver, in lieu thereof, a new Warrant of like tenor.
10. MISCELLANEOUS. This Warrant shall be governed by the laws of
the State of California. The headings in this Warrant are for purposes of
convenience and reference only, and shall not be deemed to constitute a part
hereof. Neither this Warrant nor any term hereof may be changed, waived,
discharged or terminated orally but only by an instrument in writing signed by
the Company and the registered holder hereof. All notices and other
communications from the Company to the holder of this Warrant shall be mailed
by first class registered or certified mail, postage prepaid, to the address
furnished to the Company in writing by the last holder of this Warrant who
shall have furnished an address to the Company in writing. The invalidity or
unenforceability of any provision hereof shall in no way affect the validity or
enforceability of any other provisions.
11. TERMINATION. This Warrant (and the right to purchase
securities upon exercise hereof) shall terminate upon the earliest of (a) the
date three (3) years from the date of this Warrant, or (b) the closing of the
Company's sale of all or substantially all of its assets or the acquisition of
the Company by another entity by means of merger or other transaction as a
result of which shareholders of the Company immediately prior to such
acquisition possess a minority of the voting power of the acquiring entity
immediately following such acquisition, or (c) the closing of the initial
public offering of the Company's Common Stock registered under the Securities
Act of 1933, as amended, with a public offering price of at least $5.00 per
share of Common Stock (as adjusted for stock splits, combinations and the like).
12. NOTICE. The Company shall give Purchaser written notice of any
sale, merger, consolidation or public offering referred to in Section 11 or any
cash dividend declared on the Company's Common Stock at least twenty (20) days
prior to the closing of any such sale, merger, consolidation or public offering
or the record date fixed for the determination of stockholders eligible for
such dividend and shall deliver a copy of the preliminary prospectus with
respect to any such public offering to Purchaser promptly after it becomes
available.
-5-
<PAGE> 6
This Common Stock Purchase Warrant No. CSW-9 is issued as of the 20th
day of September, 1995.
RIBOGENE, INC.
By: /s/ TIMOTHY E. MORRIS
----------------------------
Title: Vice President Finance & Administration
Chief Financial Officer
<PAGE> 1
Exhibit 4.17
NEITHER THIS WARRANT NOR THE SHARES OF STOCK ISSUABLE UPON EXERCISE HEREOF
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. NO
SALE, TRANSFER OR OTHER DISPOSITION OF THIS WARRANT OR SAID SHARES MAY BE
EFFECTED WITHOUT (i) AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO,
(ii) AN OPINION OF COUNSEL FOR THE HOLDER, REASONABLY SATISFACTORY TO THE
COMPANY, THAT SUCH REGISTRATION IS NOT REQUIRED OR (iii) RECEIPT OF A
NO-ACTION LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION TO THE EFFECT
THAT REGISTRATION UNDER THE ACT IS NOT REQUIRED.
Shares Issuable Upon Exercise: 13,333
WARRANT TO PURCHASE
SHARES OF SERIES E PREFERRED STOCK
Expires June 2, 2002
THIS CERTIFIES THAT, for value received, Dominion Ventures, Inc., is
entitled to subscribe for and purchase 13,333 shares (as adjusted pursuant to
provisions hereof, the "Shares") of the fully paid and nonassessable Series E
Preferred Stock of RiboGene, Inc., a California corporation (the "Company"), at
a price per share of $3.00 (such price and such other price as shall result,
from time to time, from adjustments specified herein is herein referred to as
the "Warrant Price"), subject to the provisions and upon the terms and
conditions hereinafter set forth. As used herein, the term "Preferred Stock"
shall mean the Company's presently authorized Series E Preferred Stock, and any
stock into or for which such Series B Preferred Stock may hereafter be converted
or exchanged pursuant to the Articles of Incorporation of the Company as from
time to time amended as provided by law and in such Articles, and the term
"Grant Date" shall mean June 2, 1994.
1. Term. Subject to the terms hereof, the purchase right represented by
this Warrant is exercisable, in whole or in part, at any time and from time to
time from and after the Grant Date and prior to the earlier of the eighth annual
anniversary date of the Grant Date or the fifth annual anniversary of the
consummation of the Company's initial public offering of its Common Stock, the
aggregate gross proceeds from which exceed $5,000,000.
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<PAGE> 2
2. Method of Exercise; Net Issue Exercise.
2.1 Method of Exercise; Payment; Issuance of New Warrant. The
purchase right represented by this Warrant may be exercised by the holder
hereof, in whole or in part and from time to time, by either, at the election of
the holder hereof, (a) the surrender of this Warrant (with the notice of
exercise form attached hereto as Exhibit A duly executed) at the principal
office of the Company and by the payment to the Company, by check, of an amount
equal to the then applicable Warrant Price per share multiplied by the number of
Shares then being purchased or (b) if in connection with a registered public
offering of the Company's securities, the surrender of this Warrant (with the
notice of exercise form attached hereto as Exhibit A-1 duly executed) at the
principal office of the Company together with notice of arrangements reasonably
satisfactory to the Company for payment to the Company either by check or from
the proceeds of the sale of shares to be sold by the holder in such public
offering of an amount equal to the then applicable Warrant Price per share
multiplied by the number of Shares then being purchased. The person or persons
in whose name(s) any certificate(s) representing shares of Preferred Stock shall
be issuable upon exercise of this Warrant shall be deemed to have become the
holder(s) of record of, and shall be treated for all purposes as the record
holder(s) of, the shares represented thereby (and such shares shall be deemed to
have been issued) immediately prior to the close of business on the date or
dates upon which this Warrant is exercised. In the event of any exercise of the
rights represented by this Warrant, certificates for the shares of stock so
purchased shall be delivered to the holder hereof as soon as possible and in any
event within thirty days of receipt of such notice and, unless this Warrant has
been fully exercised or expired, a new Warrant representing the portion of the
Shares, if any, with respect to which this Warrant shall not then have been
exercised shall also be issued to the holder hereof as soon as possible and in
any event within such thirty-day period.
2.2 Net Issue Exercise.
(a) In lieu of exercising this Warrant, holder may elect to
receive shares equal to the value of this Warrant (or the portion thereof being
canceled) by surrender of this Warrant at the principal office of the Company
together with notice of such election in which event the Company shall issue to
Holder a number of shares of the Company's Preferred Stock computed using the
following formula:
Y(A-B)
X= ------
A
2
<PAGE> 3
Where
X - The number of shares of Preferred Stock to be issued to
Holder.
Y - the number of shares of Preferred Stock purchasable
under this Warrant.
A - the fair market value of one share of the Company's
Preferred Stock.
B - Warrant price (as adjusted to the date of such
calculations).
(b) For purposes of this Section, fair market value of the
Company's Preferred Stock shall mean the average of the closing bid and asked
prices of the Company's Preferred Stock quoted in the Over-The-Counter Market
Summary or the closing price quoted on any exchange on which the Preferred Stock
is listed, whichever is applicable, as published in the Western Edition of The
Wall Street Journal for the ten trading days prior to the date of determination
of fair market value.
2.3 Company's Option Upon Registered Offering. In the event of the
initial registered public offering by the Company of its Common Stock effected
pursuant to a Registered Statement on Form S-1 (or its successor) filed under
the Securities Act of 1933, the Company will have the option to purchase for
cash immediately prior to the issuance of such shares in such offering all, but
not less than all, of the following: (i) this Warrant for a price per Share
equal to the difference between (x) the Net Per Share Price (as defined below)
of the stock being issued in such offering and (y) the Warrant Price, and (ii)
all Shares that have been issued pursuant to the exercise of this Warrant for a
price per share equal to the Net Per Share Price of the stock being issued in
such offering. For the purpose of this Paragraph the term "Net Per Share Price"
shall mean the proceeds to be received by the Company (or selling shareholders,
in the event of a secondary offering) for each share in the registered public
offering, net of underwriting commissions.
2.4 Company's Option Upon Merger. In the event of (i) any
consolidation or merger of the Company with or into any other corporation, or
(ii) any sale of all or substantially all of the assets of the Company, in
either case in which the Company shall not be the continuing surviving entity
and immediately after which the holders of the voting shares of the Company
immediately prior to such event hold less than a majority of the total voting
power of the continuing and surviving entity, then the Company shall have the
option to purchase this Warrant on the closing date of such event for cash or
freely-
3
<PAGE> 4
tradable, unrestricted securities in any amount per Share equal to the greater
of (x) three (3) times the Warrant Price or (y) the excess (if any) of the
Market Value (as defined herein) of the Shares over the Warrant Price. The
Market Value of each Share shall be determined by dividing the total
consideration to be received by the Company or its shareholders in connection
with such event by the number of shares of Common Stock then outstanding
assuming that all convertible securities of the Company have been converted into
Common Stock). Any securities to be delivered to the Company or its security
holders shall be valued as follows:
(A) If traded on a securities exchange, the value shall be
deemed to be the average of the closing prices of the securities on such
exchange over the 30-day period ending five (5) business days prior to the
closing; and
(B) If traded over-the-counter, the value shall be deemed to
be the average closing prices of the securities over the 30-day period ending
five (5) business days prior to the closing; and
(C) If there is no public market, the value shall be the
fair market value thereof, as determined by mutual agreement of the holder of
this Warrant and the Company, and if the parties are unable to so agree, by an
investment banker of national reputation selected by the Company and reasonably
acceptable to the holder of this Warrant.
3. Stock Fully Paid; Reservation of Shares. All Shares that may be
issued upon the exercise of the rights represented by this Warrant and Common
Stock issuable upon conversion of the Preferred Stock will, upon issuance, be
fully paid and nonassessable, and free from all taxes, liens and charges with
respect to the issue thereof. During the period within which the rights
represented by the Warrant may be exercised, the Company will at all times have
authorized and reserved for the purpose of issuance upon exercise of the
purchase rights evidenced by this Warrant, a sufficient number of shares of its
Preferred Stock (and Common Stock issuable upon conversion thereof) to provide
for the exercise of the right represented by this Warrant.
4. Adjustment of Warrant Price and Number of Shares. The number and
kind of securities purchasable upon the exercise of the Warrant and the Warrant
Price shall be subject to adjustment from time to time upon the occurrence of
certain events, as follows:
(a) Adjustment of Warrant Price upon Issuance of Additional
Stock. The Warrant Price shall be subject to adjustment from time to time as
follows:
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<PAGE> 5
(i) (A) Upon each issuance by the Company of any
Additional Stock (as defined below), after the Grant Date, without consideration
or for a consideration per share less than the Warrant Price in effect
immediately prior to the issuance of such Additional Stock, the Warrant Price in
effect immediately prior to each such issuance shall forthwith (except as
otherwise provided in this Section 4 (a)) be adjusted to a price determined by
multiplying the Warrant Price by a fraction, the numerator of which shall be the
number of shares of Common Stock outstanding immediately prior to such issuance
plus the number of shares of Common Stock which could be purchased were the then
Warrant Price used instead (calculated by dividing the total consideration
(before deduction of costs) to be received by the Company in such issuance by
the then Warrant Price) and the denominator of which shall be the number of
shares of Common Stock outstanding immediately prior to such issuance plus the
number of shares of such Additional Stock issued in such issuance. For purpose
of this subsection (a), all shares of Common Stock issuable upon conversion of
outstanding Preferred Stock shall be deemed to be outstanding and, immediately
after any Additional Stock is deemed issued, such Additional Stock shall be
deemed outstanding.
(B) No adjustment of the Warrant Price shall be made
in an amount less than one cent per share, provided that any adjustments which
are not required to be made by reason of this sentence shall be carried forward
and shall be either taken into account in any subsequent adjustment made prior
to 3 years from the date of the event giving rise to the adjustment being
carried forward, or shall be made at the end of 3 years from the date of the
event giving rise to the adjustment being carried forward. Except to the limited
extent provided for in subsections 4 (a) (i) E (3) and E (4), no adjustment of
the Warrant Price pursuant to this subsection 4 (a) (i) shall have the effect of
increasing the Warrant Price above the Warrant Price in effect immediately prior
to such adjustment.
(C) In the case of issuance by the Company of Common
Stock for cash, the consideration shall be deemed to be the amount of cash paid
therefor before deducting any reasonable discounts, commissions or other
expenses allowed, paid or incurred by the Company for any underwriting or
otherwise in connection with the issuance and sale thereof.
(D) In the case of issuance by the Company of Common
Stock for a consideration in whole or in part other than cash, the consideration
other than cash shall be deemed to be the fair value as determined by the Board
of Directors of the Company irrespective of any accounting treatment.
(E) In the case of the issuance (whether before, on or
after the Grant Date) of options to purchase or rights to subscribe for Common
Stock, securities by their terms convertible into or exchangeable for Common
Stock or options to purchase or rights to subscribe for such convertible or
exchangeable securities, the following provisions shall apply for all purposes
of this subsection 4 (a) (i);
6
<PAGE> 6
1. The aggregate maximum number of shares of
Common Stock deliverable upon exercise (to the extent then exercisable) of such
options to purchase or rights to subscribe for Common Stock shall be deemed to
have been issued at the time such options or rights were issued and for a
consideration equal to the consideration (determined in the manner provided in
subsections 4 (a) (i) (C) and (a) (i) (D)), if any, received by the Company upon
issuance of such options or rights plus the minimum exercise price provided in
such options or rights (without taking into account potential antidilution
adjustments) for the Common Stock covered thereby.
2. The aggregate maximum number of shares of
Common Stock deliverable upon conversion of or in exchange for (to the extent
then convertible or exchangeable) convertible or exchangeable securities or upon
exercise of options to purchase or rights to subscribe for such convertible or
exchangeable securities and subsequent conversion or exchange thereof shall be
deemed to have been issued at the time such securities were issued or such
options or rights were issued and for a consideration equal to the
consideration, if any, received by the Company for any such securities and
related options or rights (excluding any cash received on account of accrued
interest or accrued dividends), plus the minimum additional consideration, if
any, to be received by the Company (without taking into account potential
antidilution adjustments) upon the conversion or exchange of such securities or
the exercise of any related options or rights (the consideration in each case to
be determined in the manner provided in subsections 4 (a) (i) (C) and 4 (a) (i)
(D)).
3. In the event of any change in the number of
shares of Common Stock deliverable or in the consideration payable to the
Company upon exercise of such options or rights or upon conversion of or in
exchange for such convertible or exchangeable securities, including but not
limited to, a change resulting from antidilution provisions thereof, the Warrant
Price, to the extent in any way affected by or computed using such options,
rights or securities, shall be adjusted based upon the actual issuance of Common
Stock or any payment of such consideration upon the exercise of any such
6
<PAGE> 7
options or rights or the conversion or exchange of such securities.
4. Upon the expiration of any such options or
rights, the termination of any such options or rights to convert or exchange, or
the expiration of any options or rights related to such convertible or
exchangeable securities, the Warrant Price, to the extent in any way affected by
or computed using such options, rights or securities or options or rights
related to such securities, shall be recomputed to reflect the issuance of only
the number of shares of Common Stock (and convertible or exchangeable securities
which remain in effect) actually issued upon the exercise of such options or
rights, upon the conversion or exchange of such securities or upon the exercise
of the options or rights related to such securities.
5. The number of shares of Common Stock deemed
issued and the consideration deemed paid therefor pursuant to subsections 4 (a)
(i) (E) (1) and (2) shall be appropriately adjusted to reflect any change,
termination or expiration of the type described in either subsection 4 (a) (i)
(E) (3) or (4) .
(ii) "Additional Stock" shall mean any shares of Common
Stock issued (or deemed to have been issued pursuant to subsection 4 (a) (i)
(E)) by this Company after the Grant Date other than (A) shares of Common Stock
issued upon conversion of the Company's Series A and B Preferred Stock which
have been issued prior to the Grant Date, (B) shares of Common Stock issued to
employees or directors of or consultants and advisers to the Company or any
subsidiary pursuant to stock purchase or stock option plans or other similar
arrangements approved by the Company's Board of Directors and (C) shares of
Common Stock issued upon the exercise of warrants or options issued by the
Company prior to, or as of the Grant Date or issued by the Company subsequent to
the Grant Date pursuant to an obligation to do so arising under a written
agreement entered into by the Company prior to, or as of the Grant Date.
(iii) Notwithstanding any provisions to this Section 4
(a) to the contrary, no adjustment to the Warrant Price shall be made to this
Section 4 (a) upon issuance by the Company of Additional Stock if a similar or
corresponding adjustment is made to the Conversion Price of the Preferred Stock
pursuant to the Company's Articles of Incorporation, as amended.
(iv) Upon each adjustment of the Warrant Price pursuant
to this Section 4 (a) , the number of Shares issuable upon exercise hereof shall
be adjusted such that the aggregate purchase price for all of such
7
<PAGE> 8
Shares, as adjusted, equals $39,999.00.
(b) Reclassification or Merger. In case of any
reclassification, change or conversion of securities of the class issuable upon
exercise of this Warrant (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 subdivision
or combination), or in case of any merger of the Company with or into another
corporation (other than a merger with another corporation in which the Company
is a continuing corporation and which does not result in any reclassification or
change of outstanding securities issuable upon exercise of this Warrant), or in
case of any sale of all or substantially all of the assets of the Company, the
Company, or such successor or purchasing corporation, as the case may be, shall
execute a new Warrant (in form and substance satisfactory to the holder of this
warrant) providing that the holder of this Warrant shall have the right to
exercise such new Warrant and upon such exercise to receive, in lieu of each
share of Preferred Stock theretofore issuable upon exercise of this Warrant, the
kind and amount of shares of stock, other securities, money and property
receivable upon such reclassification, change or merger by a holder of one share
of Preferred Stock. Such new Warrant shall provide for adjustments that shall be
as nearly equivalent as may be practicable to the adjustments provided for in
this Paragraph 4. The provisions of this subparagraph (a) shall similarly apply
to successive reclassification, changes, mergers and transfers.
(c) Subdivisions or Combination of Shares. If the Company at
any time while this Warrant remains outstanding and unexpired shall subdivide or
combine its Preferred Stock, the Warrant Price and the number of Shares issuable
upon exercise hereof shall be proportionately adjusted.
(d) Stock Dividends. If the Company at any time while this
Warrant is outstanding and unexpired shall pay a dividend payable in shares of
Preferred Stock (except any distribution specifically provided for in the
foregoing subparagraphs (a) and (b)), then the Warrant Price shall be adjusted,
from and after the date of determination of shareholders entitled to receive
such dividend or distribution, to that price determined by multiplying the
Warrant Price in effect immediately prior to such date of determination by a
fraction (a) the numerator of which shall be the total number of shares of
Preferred Stock outstanding immediately prior to such dividend or distribution,
and (b) the denominator of which shall be the total number of shares of
Preferred Stock outstanding immediately after such dividend or distribution and
the number of Shares subject to this
8
<PAGE> 9
Warrant shall be proportionately adjusted.
(e) No Impairment. The Company will not, by amendment of its
Articles of Incorporation or through any reorganization, recapitalization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms to be observed or performed hereunder by the
Company, but will at all times in good faith assist in the carrying out of all
the provisions of this Paragraph 4 and in the taking of all such action as may
be necessary or appropriate in order to protect the rights of the holder of this
Warrant against impairment.
(f) Notices of Record Date. In the event of any taking by
the Company of a record of its shareholders for the purpose of determining
shareholders who are entitled to receive payment of any dividend (other than a
cash dividend) or other distribution, any right to subscribe for, purchase or
otherwise acquire any share of any class or any other securities or property, or
to receive any other right, or for the purpose of determining shareholders who
are entitled to vote in connection with any proposed merger or consolidation of
the Company with or into any other corporation, or any proposed sale, lease or
conveyance of all or substantially all of the assets of the Company, or any
proposed liquidation, dissolution or winding up of the Company, the Company
shall mail to the holder of the Warrant, at least twenty (20) days prior to the
date specified therein, a notice specifying the date on which any such record is
to be taken for the purpose of such dividend, distribution or right, and the
amount and character of such dividend, distribution or right.
5. Notice of Adjustments. Whenever the Warrant Price shall be adjusted
pursuant to the provisions hereof, the Company shall within thirty (30) days of
such adjustment deliver a certificate signed by its chief financial officer to
the registered holder(s) hereof setting forth, in reasonable detail, the event
requiring the adjustment, the amount of the adjustment, the method by which such
adjustment was calculated, and the Warrant Price after giving effect to such
adjustment.
6. Fractional Shares. No fractional shares of Preferred Stock will be
issued in connection with any exercise hereunder, but in lieu of such fractional
shares the Company shall make a cash payment therefor upon the basis of the
Warrant Price then in effect.
7. Compliance with Securities Act; Disposition of Warrant or Shares of
Preferred Stock.
9
<PAGE> 10
(a) Compliance with Securities Act. The holder of this
Warrant and each subsequent holder, by acceptance hereof, agrees that this
Warrant, the shares of Preferred Stock to be issued upon exercise hereof and the
Common Stock to be issued upon conversion of such Preferred Stock are being
acquired for investment and that such holder will not offer, sell or otherwise
dispose of this Warrant or any shares of Preferred Stock to be issued upon
exercise hereof (or Common Stock issued upon conversion of the Preferred Stock)
except under circumstances which will not result in a violation of the
Securities Act of 1933, as amended (the "Act"). This Warrant and all shares of
Preferred Stock issued upon exercise of this Warrant (unless registered under
the Act) shall be stamped or imprinted with a legend in substantially the
following form:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED. NO SALE OR DISPOSITION MAY BE EFFECTED WITHOUT (i)
AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO, (ii) AN OPINION
OF COUNSEL FOR THE HOLDER, REASONABLY SATISFACTORY TO THE COMPANY,
THAT SUCH REGISTRATION IS NOT REQUIRED OR (iii) RECEIPT OF A
NO-ACTION LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION TO THE
EFFECT THAT REGISTRATION UNDER THE ACT IS NOT REQUIRED.
(b) Disposition of Warrant and Shares. With respect to any
offer, sale or other disposition of this Warrant or any shares of Preferred
Stock acquired pursuant to the exercise of this Warrant (or Common Stock issued
upon conversion of such Preferred Stock) prior to registration of such shares,
the holder hereof and each subsequent holder of the Warrant agrees to give
written notice to the Company prior thereto, describing briefly the manner
thereof, together with a written opinion of such holder's counsel, if reasonably
requested by the Company, to the effect that such offer, sale or other
disposition may be effected without registration or qualification (under the Act
as then in effect or any federal or state law then in effect) of this Warrant or
such shares of Preferred Stock or Common Stock and indicating whether or not
under the Act certificates for this Warrant or such shares of Preferred Stock or
Common Stock to be sold or otherwise disposed of require any restrictive legend
as to applicable restrictions on transferability in order to insure compliance
with the Act. Each certificate representing this Warrant or the shares of
Preferred Stock or Common Stock thus transferred (except a transfer pursuant to
Rule 144) shall bear a legend as to the applicable restrictions on
transferability in order to insure compliance with the Act, unless in the
aforesaid opinion of counsel for the holder, such legend is not required in
order to insure compliance with the Act. Nothing herein shall restrict the
transfer of this Warrant or any portion hereof by the initial holder hereof to
any partnership affiliated with the initial holder, or to any partner of any
such partnership provided such transfer may be made in compliance with
applicable
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<PAGE> 11
federal and state securities laws. The Company may issue stop transfer
instructions to its transfer agent in connection with the foregoing
restrictions.
8. Rights as Shareholders; Information.
8.1 Shareholder Rights. No holder of the Warrant, as such, shall
be entitled to vote or receive dividends or be deemed the holder of Preferred
Stock or any other securities of the Company which may at any time be issuable
on the exercise thereof for any purpose, nor shall anything contained herein be
construed to confer upon the holder of this Warrant, as such, any of the rights
of a shareholder of the Company or any right to vote for the election of
directors or upon any matter submitted to shareholders at any meeting thereof,
or to receive notice of meetings, or to receive dividends or subscription rights
or otherwise until this Warrant shall have been exercised and the Shares
purchasable upon the exercise hereof shall have become deliverable, as provided
herein.
8.2 Financial Statements and Information. The Company shall
deliver to the registered holder hereof (i) within 120 days after the end of the
fiscal year of the Company, a consolidated balance sheet of the Company as of
the end of such year and a consolidated statement of income, retained earnings
and cash flows for such year, which year-end financial reports shall be in
reasonable detail and certified by independent public accountants of nationally
recognized standing selected by the Company, and (ii) within 45 days after the
end of each fiscal quarter other than the last fiscal quarter, unaudited
consolidated statements of income, retained earnings and cash flows for such
quarter and a consolidated balance sheet as of the end of such quarter. In
addition, the Company shall deliver to the registered holder hereof any other
information or data provided to the shareholders of the Company.
9. Grant of Rights. The company hereby grants to the holder hereof the
registration rights set forth in the "Seventh Amended and Restated Rights
Agreement" dated April 26, 1994 attached hereto as Exhibit B, which provides
that the holder of this Warrant shall be deemed a "Holder" as defined in the
Seventh Amended and Restated Rights Agreement, and that the Common Stock of the
Company issued upon conversion of the Shares shall be deemed to be "Registrable
Securities" as defined in the Seventh Amended and Restated Rights Agreement.
10. Additional Rights.
10.1 Secondary Sales. The Company agrees to notify the holder of
this Warrant if opportunities to make secondary sales of the Company's
securities become available. To this end, the Company will promptly provide the
holder of this Warrant with notice of any offer to acquire from the Company's
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<PAGE> 12
security holders more than five percent (5%) of the total voting power of the
Company.
10.2 Mergers. Unless the Company provides the holder of this
Warrant with advance notice of the terms and conditions of the proposed
transaction, the Company will not (i) sell, lease, exchange, convey or otherwise
dispose of all or substantially all of its property or business, or (ii) merge
into or consolidate with any other corporation (other than a wholly-owned
subsidiary of the Company), or effect any transaction (including a merger or
other reorganization) or series of related transactions, in which more than 50%
of the voting power of the Company is disposed of.
11. Representations and Warranties. This Warrant is issued and delivered
on the basis of the following:
(a)This Warrant has been duly authorized and executed by the
Company and when delivered will be the valid and binding obligation of the
Company enforceable in accordance with its terms;
(b)The Shares have been duly authorized and reserved for
issuance by the Company and, when issued in accordance with the terms hereof,
will be validly issued, fully paid and nonassessable;
(c)The rights, preferences, privileges and restrictions
granted to or imposed upon the shares of Preferred Stock and the holders thereof
are as set forth in the Company's Articles of Incorporation, as amended, a true
and complete copy of which has been delivered to the original Warrantholder;
(d)The shares of Common Stock issuable upon conversion of the
Shares have been duly authorized and reserved and, when issued in accordance
with the terms of the Company's Articles of Incorporation, as amended, will be
validly issued, fully paid and nonassessable; and
(e)The execution and delivery of this Warrant are not, and the
issuance of the Shares upon exercise of this Warrant in accordance with the
terms hereof will not be, inconsistent with the Company's Articles of
Incorporation or by-laws, do not and will not contravene any law, governmental
rule or regulation, judgment or order applicable to the Company, and do not and
will not contravene any provision of, or constitute a default under, any
indenture, mortgage, contract or other instrument of which the Company is a
party or by which it is bound or require the consent or approval of, the giving
of notice to, the registration with or the taking of any action in respect of or
by, any Federal, state or local government authority or agency or other person.
12. Modification and Waiver. This Warrant and
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any provision hereof may be changed, waived, discharged or terminated only by an
instrument in writing signed by the party against which enforcement of the same
is sought.
13. Notices. Any notice, request or other document required or permitted
to be given or delivered to the holder hereof or the Company shall be delivered,
or shall be sent by certified or registered mail, postage prepaid, to each such
holder at its address as shown on the books of the Company or to the Company at
the address indicated therefore on the signature page of this Warrant.
14. Binding Effect on Successors. This Warrant shall be binding upon any
corporation succeeding the company by merger, consolidation or acquisition of
all or substantially all of the Company's assets, and all of the obligations of
the Company relating to the Preferred Stock issuable upon the exercise of this
Warrant shall survive the exercise and termination of this Warrant and all of
the covenants and agreements of the Company shall inure to the benefit of the
successors and assigns of the holder hereof. The Company will, at the time of
the exercise of this Warrant, in whole or in part, upon request of the holder
hereof but at the Company's expense, acknowledge in writing its continuing
obligation to the holder hereof in respect of any rights (including, without
limitation, any right to registration of the shares of Registrable Securities)
to which the holder hereof shall continue to be entitled after such exercise in
accordance with this Warrant; provided, that the failure of the holder hereof to
make any such request shall not affect the continuing obligation of the Company
to the holder hereof in respect of such rights.
15. Lost Warrants or Stock Certificates. The Company covenants to the
holder hereof that upon receipt of evidence reasonably satisfactory to the
Company of the loss, theft, destruction, or mutilation of this Warrant or any
stock certificate and, in the case of any such loss, theft or destruction, upon
receipt of an indemnity reasonably satisfactory to the Company, or in the case
of any such mutilation upon surrender and cancellation of such Warrant or stock
certificate, the Company will make and deliver a new Warrant or stock
certificate, or like tenor, in lieu of the lost, stolen, destroyed or mutilated
Warrant or stock certificate.
16. Descriptive Headings. The descriptive headings of the several
paragraphs of this Warrant are inserted for convenience only and do not
constitute a part of this Warrant.
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17. Governing Law. THIS WARRANT SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAWS OF
THE STATE OF CALIFORNIA.
By: RIBOGENE INC.
Title: ??????? Chairman, President & CEO
----------------------------------
Address: 21375 Cabot Blvd.
--------------------------------
Hayward, CA 94546
--------------------------------
Date: 6/13/94
-----------------------------
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EXHIBIT A
Notice of Exercise
To:
1. The undersigned hereby elects to purchase shares of Series
Preferred Stock of Corporation pursuant to the terms of the attached
Warrant, and tenders herewith payment of the purchase price of such shares in
full.
2. Please issue a certificate or certificates representing said shares
in the name of the undersigned or in such other name or names as are specified
below:
(Name)
(Address)
3. The undersigned represents that the aforesaid shares being acquired
for the account of the undersigned for investment and not with a view to, or for
resale in connection with, the distribution thereof and that the undersigned has
no present intention of distributing or reselling such shares.
-----------------------------------------
(Signature)
- ------------------------------------
(Date)
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EXHIBIT A-1
Notice of Exercise
To:
1. Contingent upon and effective immediately prior to the closing (the
"Closing") of the Company's public offering contemplated by the Registration
Statement of Form S-_______, filed ____________________ , 19_____, the
undersigned hereby elects to purchase ___________ shares of Series ____________
Preferred Stock of the Company (or such lesser number of shares as may be sold
on behalf of the undersigned at the Closing) pursuant to the terms of the
attached Warrant.
2. Please deliver to the custodian for the selling shareholders a stock
certificate representing such _____________ shares.
3. The undersigned has instructed the custodian for the selling
shareholders to deliver to the Company $____________________ or, if less, the
net proceeds due the undersigned from the sale of shares in the aforesaid public
offering. If such net proceeds are less than the purchase price for such shares,
the undersigned agrees to deliver the difference to the Company priori to the
Closing.
-----------------------------------------
(Signature)
- ------------------------------------
(Date)
<PAGE> 1
Exhibit 4.18
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT
AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. SUCH SECURITIES
MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN
EXEMPTION THEREFROM UNDER SAID ACT. COPIES OF THE AGREEMENT COVERING THE
PURCHASE OF THESE SECURITIES AND RESTRICTING THEIR TRANSFER MAY BE OBTAINED AT
NO COST BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE TO
THE SECRETARY OF THE CORPORATION AT ITS PRINCIPAL EXECUTIVE OFFICE.
Issued: January 5, 1994 CSW-7
RIBOGENE, INC.
COMMON STOCK PURCHASE WARRANT
1. Number and Price of Shares Subject to Warrant.
(a) Exercise of the Warrant. Subject to the terms and
conditions herein set forth, Hyline Laboratories, Inc., a New York corporation
(the "Purchaser"), or a permitted holder hereof, shall be entitled to purchase
from RiboGene, Inc., a California corporation (the "Company"), at any time and
from time to time after the date hereof but on or before the earlier to occur of
(A) the date that is five (5) years from the date hereof, (B) the closing of the
Company's sale of all or substantially all of its assets or the acquisition of
the Company by another entity by means of merger or other transaction as a
result of which all shareholders of the Company immediately prior to such
acquisition in the aggregate possess a minority of the voting power of the
acquiring entity immediately following such acquisition (the "Acquisition") to
the extent that the acquiror in such transaction requires, as a condition of
such Acquisition, the exercise or termination of all or part of this Warrant on
or before the closing of such Acquisition, which requirement shall be set forth
in a writing signed by the acquiror and delivered to the holder hereof, or (C)
the date of the closing of the Company's first underwritten public offering of
securities at an aggregate offering price of not less than $7,500,000 and a
price per share of at least $5.00, as presently constituted (the "Initial Public
Offering") to the extent that the managing underwriter(s) in such transaction
requires, as a condition of such underwriting, the exercise or termination of
all or part of this Warrant on or before the closing of such Initial Public
Offering, which requirement shall be set forth in a writing signed by the
underwriter and delivered to the holder hereof, up to 1,300,000 shares (which
number of shares is subject to adjustment as described below) of fully paid and
nonassessable Common Stock of the Company (the "Shares") upon surrender hereof
at the principal office of the Company, and upon payment of the purchase price
for such shares (the "Purchase Price"), determined as the product of the number
of shares of Common Stock acquired upon exercise hereof and the Warrant Price
(as defined below), at said office in cash, by check, by wire transfer or by
cancellation of indebtedness, or upon a net exercise of this Warrant as provided
in Sections 7 or 8 below. The Company shall give notice to the Purchaser of the
Initial Public Offering or Acquisition at least thirty (30) days prior to the
effective date thereof.
(b) Warrant Price. Subject to adjustment as hereinafter
provided, the exercise price for one share of Common Stock (or such securities
as may be substituted for one share of Common Stock pursuant to the provisions
hereinafter set forth) shall be $3.00. The exercise price for one share of
Common Stock (or such securities as may be substituted for one share of Common
Stock pursuant to the provisions hereinafter set forth) payable from time to
time upon the exercise of this Warrant (whether such price be the price
specified above or an adjusted price determined as hereinafter provided) is
referred to herein as the "Warrant Price".
2. Adjustment of Warrant Price and Number of Shares. The number
and kind of securities issuable upon the exercise of this Warrant shall be
subject to adjustment from time to time and the Company
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agrees to provide notice upon the happening of certain events as follows:
(a) Adjustment of Warrant Price upon Issuance of
Additional Stock. The Warrant Price shall be subject to adjustment from time to
time as follows:
(i) (A) Upon each issuance by the Company of any
Additional Stock (as defined below), after the date of this Warrant, without
consideration or for a consideration per share less than the Warrant Price in
effect immediately prior to the issuance of such Additional Stock, the Warrant
Price in effect immediately prior to each such issuance shall forthwith (except
as otherwise provided in this Section 2(a)) be adjusted to a price determined
by multiplying the Warrant Price by a fraction, the numerator of which shall be
the number of shares of Common Stock outstanding immediately prior to such
issuance plus the number of shares of Common Stock which could be purchased
were the then Warrant Price used instead of the purchase price actually paid
for such Additional Stock (calculated by dividing the total consideration
(before deduction of costs) to be received by the Company in such issuance by
the then Warrant Price) and the denominator of which shall be the number of
shares of Common Stock outstanding immediately prior to such issuance plus the
number of shares of such Additional Stock issued in such issuance. For purpose
of this Subsection (a), all shares of Common Stock issuable upon conversion of
outstanding Preferred Stock or upon exercise of this Warrant or any subsequent
warrant issued or deemed issued to Hyline Laboratories, Inc. within 90 days of
the date hereof shall be deemed to be outstanding and, immediately after any
Additional Stock is deemed issued, such Additional Stock shall be deemed
outstanding.
(B) No adjustment of the Warrant Price
shall be made in an amount less than one cent per share, provided that any
adjustments which are not required to be made by reason of this sentence shall
be carried forward and shall be either taken into account in any subsequent
adjustment made prior to 3 years from the date of the event giving rise to the
adjustment being carried forward, or shall be made at the end of 3 years from
the date of the event giving rise to the adjustment being carried forward.
Except to the limited extent provided for in subsections 2(a)(i)(E)(3) and
(E)(4), no adjustment of the Warrant Price pursuant to this subsection 2(a)(i)
shall have the effect of increasing the Warrant Price above the Warrant Price
in effect immediately prior to such adjustment.
(C) In the case of issuance by the Company
of Common Stock for cash, the consideration shall be deemed to be the amount of
cash paid therefor before deducting any reasonable discounts, commissions or
other expenses allowed, paid or incurred by the Company for any underwriting or
otherwise in connection with the issuance and sale thereof.
(D) In the case of issuance by the Company
of Common Stock for a consideration in whole or in part other than cash, the
consideration other than cash shall be deemed to be the fair value as
determined by the Board of Directors of the Company irrespective of any
accounting treatment.
(E) In the case of the issuance (whether
before, on or after the date of this Warrant) of options to purchase or rights
to subscribe for Common Stock, securities by their terms convertible into or
exchangeable for Common Stock or options to purchase or rights to subscribe for
such convertible or exchangeable securities, the following provisions shall
apply for all purposes of this subsection 2(a)(i);
1. The aggregate maximum number of
shares of Common Stock deliverable upon exercise (to the extent then
exercisable) of such options to purchase or rights to subscribe for Common
Stock shall be deemed to have been issued at the time such options or rights
were issued and for a consideration equal to the consideration (determined in
the manner provided in subsections 2(a)(i)(C) and (a)(i)(D)), if any, received
by the Company upon issuance of such options or rights plus the minimum
exercise price provided in such options or rights (without taking into account
potential antidilution adjustments) for the Common Stock covered thereby.
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2. The aggregate maximum number of
shares of Common Stock deliverable upon conversion of or in exchange for (to
the extent then convertible or exchangeable) convertible or exchangeable
securities or upon exercise of options to purchase or rights to subscribe for
such convertible or exchangeable securities and subsequent conversion or
exchange thereof shall be deemed to have been issued at the time such securities
were issued or such options or rights were issued and for a consideration equal
to the consideration, if any, received by the Company for any such securities
and related options or rights (excluding any cash received or account of
accrual interest or accrued dividends), plus the minimum additional
consideration, if any, to be received by the Company (without taking into
account potential antidilution adjustments) upon the conversion or exchange of
such securities or the exercise of any related options or rights (the
consideration in each case to be determined in the manner provided in
subsections 2(a)(i)(C) and 2(a)(i)(D).
3. In the event of any change in
the number of shares of Common Stock deliverable or in the consideration
payable to the Company under such options or rights or under such convertible
or exchangeable securities, including but not limited to, a change resulting
from antidilution provisions thereof, the Warrant Price, to the extent in any
way affected by or computed using such options, rights or securities, shall be
adjusted based upon the actual issuance of Common Stock or any payment of
such consideration upon the exercise of any such options or rights or the
conversion or exchange of such securities.
4. Upon the expiration of any such
options or rights, the termination of any such options or rights to convert or
exchange, or the expiration of any options or rights related to such
convertible or exchangeable securities, the Warrant Price, to the extent in any
way affected by or computed using such options, rights or securities or options
or rights related to such securities, shall be recomputed to reflect the
issuance of only the number of shares of Common Stock (and convertible or
exchangeable securities which remain in effect) actually issued upon the
exercise of such options or rights, upon the conversion or exchange of such
securities or upon the exercise of the options or rights related to such
securities.
5. The number of shares of Common
Stock deemed issued and the consideration deemed paid therefor pursuant to
subsections 2(a)(i)(E)(1) and (2) shall be appropriately adjusted to reflect
any change, termination or expiration of the type described in either
subsection 2(a)(i)(E)(3) or (4).
(ii) "Additional Stock" shall mean any shares of
Common Stock issued (or deemed to have been issued pursuant to subsection
(2)(a)(i)(E) by this Company after the date of this Warrant other than (A)
shares of Common Stock issued upon conversion of the Company's Preferred Stock
issued prior to the date of this Warrant, (B) shares of Common Stock issued to
employees or directors of or consultants and advisers to the Company or any
subsidiary pursuant to stock purchase or stock option plans or other similar
arrangements approved by the Company's Board of Directors, (C) shares of Common
Stock issued upon the exercise of warrants or options issued by the Company
prior to the date of this Warrant, or (D) shares of Common Stock issued or
issuable upon exercise or conversion of warrants to purchase shares of the
capital stock of the Company issued in connection with equipment lease
financing transactions or bank financing transactions unanimously approved by
the Board of Directors, where the issuance of such warrants is not principally
for the purpose of raising additional equity capital for the Company.
(b) Adjustment for Dividends in Stock. In case at any time
or from time to time on or after the date hereof the holders of the Common
Stock of the Company (or any shares of stock or other securities at the time
receivable upon the exercise of this Warrant) shall have received, or, on or
after the record date fixed for the determination of eligible shareholders,
shall have become entitled to receive, without payment therefor, other or
additional securities or other property of the Company by way of dividend or
distribution, then and in each case, the holder of this Warrant shall, upon the
exercise hereof, be entitled to receive, in addition to the number of shares of
Common Stock receivable thereupon, and without payment of
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any additional consideration therefor, the amount of such other or additional
securities or other property of the Company which such holder would hold on the
date of such exercise had it been the holder of record of such Common Stock on
the date hereof and had thereafter, during the period from the date hereof to
and including the date of such exercise, retained such shares and/or all other
additional securities or other property receivable by it as aforesaid during
such period, giving effect to all adjustments called for during such period by
this paragraph (b) and paragraphs (a), (c) and (d) of this Section 2.
(c) Adjustment for Reclassification or Reorganization. In
case of any reclassification or change of the outstanding securities of the
Company or of any reorganization of the Company (or any other corporation the
stock or securities of which are at the time receivable upon the exercise of
this Warrant) on or after the date hereof, then and in each such case the
Company shall give the holder of this Warrant at least thirty (30) days notice
of the proposed effective date of such transaction, and the holder of this
Warrant, upon the exercise hereof at any time after the consummation of such
reclassification, change or reorganization, shall be entitled to receive, in
lieu of the stock or other securities and property receivable upon the exercise
hereof prior to such consummation, the stock or other securities or property to
which such holder would have been entitled upon such consummation if such
holder had exercised this Warrant immediately prior thereto, all subject to
further adjustment as provided in paragraphs (a), (b) and (d) of this Section 2.
(d) Stock Splits and Reverse Stock Splits. If at any time
on or after the date hereof the Company shall subdivide its outstanding shares
of Common Stock into a greater number of shares, the Warrant Price in effect
immediately prior to such subdivision shall thereby be proportionately reduced
and the number of shares receivable upon exercise of the Warrant shall thereby
be proportionately reduced and the number of shares receivable upon exercise of
the Warrant shall thereby be proportionately increased; and, conversely, if at
any time on or after the date hereof the outstanding number of shares of Common
Stock shall be combined into a smaller number of shares, the Warrant Price in
effect immediately prior to such combination shall thereby be proportionately
increased and the number of shares of Common Stock receivable upon exercise of
this Warrant shall thereby be proportionately decreased. Notwithstanding the
foregoing, the Company shall not conduct a reverse stock split with respect to
its Common Stock without first obtaining the written consent of the holders of
a majority of the Warrant Shares represented hereby; provided, however, that
such requirement terminate upon and shall not apply to a reverse stock split
conducted in connection with the Initial Public Offering (if such reverse stock
split is conditioned upon the consummation of the Initial Public Offering).
3. No Fractional Shares. No fractional shares of Common Stock
will be issued in connection with any exercise hereunder. In lieu of any
fractional shares which would otherwise be issuable, the Company shall pay cash
equal to the product of such fraction multiplied by the fair market value of
one share of Common Stock on the date of exercise, as determined in good faith
by the Company's Board of Directors.
4. Shareholder Rights and Obligations. This Warrant as such shall
not entitle its holder to any of the rights or bind its holder to any of the
obligations of a shareholder of the Company until the holder has exercised this
Warrant in accordance with Section 6 hereof. The shares of Common Stock issued
upon the exercise of this Warrant shall be entitled to the rights, preferences
and privileges afforded to the other shares of Common Stock as set forth in the
Company's Articles of Incorporation, as may be amended from time to time in
accordance with applicable law.
5. Reservation of Stock. The Company covenants that during the
period this Warrant is exercisable, the Company will reserve from its
authorized and unissued Common Stock a sufficient number of shares to provide
for the issuance of Common Stock upon the exercise of this Warrant. The Company
agrees that its issuance of this Warrant shall constitute full authority to its
officers who are charged with the duty of executing stock certificates to
execute and issue the necessary certificates for shares of Common Stock upon
the exercise of this Warrant.
6. Procedure for Exercise. This Warrant may be exercised by its
holder by the surrender of this Warrant and the executed Notice of Exercise
attached hereto at the principal office of the Company, accompanied by payment
in full of the Purchase Price of the Shares purchased thereby, as described
above, or may be net
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exercised as described below. This Warrant shall be deemed to have been
exercised immediately prior to the close of business on the date of its
surrender for exercise as provided above, and the person entitled to receive
the Shares or other securities issuable upon such exercise shall be treated for
all purposes as the holder of such shares of record as of the close of business
on such date. As promptly as practicable, the Company shall issue and deliver
to the person or persons entitled to receive the same a certificate or
certificates for the number of full shares of Common Stock issuable upon such
exercise, together with cash in lieu of any fraction of a share as provided
above. If this Warrant shall have been only partially exercised, the Company
shall also deliver to the holder either (a) a statement executed by an officer
of the Company setting forth the shares remaining subject to purchase under
this Warrant or (b) a replacement Warrant identical to this Warrant except that
the Shares purchasable thereunder shall be only those Shares not purchased upon
exercise of this Warrant, at the Company's option.
7. EXERCISE UPON INITIAL PUBLIC OFFERING.
(a) Holder Rights: Company Option. In the event that the
managing underwriter(s) in the Initial Public Offering require the exercise or
termination of this Warrant as a condition to their underwriting, the holder
shall have the right to exercise one or any combination of the rights of the
holder set forth in Sections (b) and (c) below in such combination as the
Company, in its sole and complete discretion, shall determine in a notice
delivered to the holder hereof not later than promptly following the meeting of
the pricing committee of the Company's Board of Directors with the managing
underwriter(s) of the Initial Public Offering in which the offering is sized
and priced. All actions taken by the holder hereof pursuant to this Section 7
shall be conditioned upon the closing of the Initial Public Offering. If for
some reason the holder hereof has taken action under this Section 7 and such
offering does not close within one hundred twenty (120) days after such action
is taken, the holder's actions hereunder shall be considered to have been
rescinded and this Warrant shall continue in full force and effect until
otherwise terminated or exercised.
(b) Exercise and Registration. If this Warrant shall be exercised
as a result of such requirement by the managing underwriter(s) for the Initial
Public Offering, then upon such exercise in accordance with the terms stated in
Section 1 above, the holder shall be entitled, to the extent permitted by the
Company under this Section 7, to include in the Initial Public Offering that
number of Shares such that the proceeds to the holder, net of underwriting
commissions or discounts ("Proceeds"), shall equal not less than the total
Purchase Price of this Warrant actually paid by the holder upon exercise under
this subsection (b) (the "Inclusion Right"). In lieu of payment of the Purchase
Price to be paid upon exercise under this subsection (b), the holder and the
Company may direct the underwriters to pay that portion of the proceeds from
the Initial Public Offering otherwise payable to the holder directly to the
Company in satisfaction of the holder's Purchase Price obligation.
(c) Right to Convert. If this Warrant shall be exercised as a
result of such requirement by the managing underwriter(s) for the Initial
Public Offering, then the holder hereof shall be entitled, to the extent
permitted by the Company under this Section 7, to so exercise by converting
this Warrant or portion hereof (the "Conversion Right") into shares of Common
Stock, without payment by such holder of any cash or other consideration, as
provided below immediately prior to its expiration after the Company has given
the Purchaser notice of the Initial Public Offering pursuant to Section 1
above, subject to the restrictions set forth in subsection (e) hereof. In
connection with any exercise of the Conversion Right, this Warrant shall
represent the right to subscribe for and acquire the number of Shares (rounded
to the next highest integer) (the "Converted Warrant Shares") equal to
(i) the number of Shares being converted by the holder
hereunder, as specified by the holder pursuant to subsection (d) below (the
"Total Number"), multiplied by
(ii) a fraction, (A) the numerator of which is the excess of
the Fair Market Value of one Share, as determined pursuant to subsection (f)
below, over the Warrant Price then in effect, and (B) the denominator of which
is the Fair Market Value of one Share, all determined as of the Conversation
Date.
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(d) Exercise of Conversion Right. To the extent
exercisable, the Conversion Right set forth in subsection (c) above may be
exercised by the holder hereof by the surrender of this Warrant prior to its
expiration and after the Company shall have given the Purchaser notice pursuant
to Section 1 of the Initial Public Offering, at the principal office of the
Company together with a written statement specifying that the holder thereby
intends to exercise the Conversion Right immediately prior to the expiration of
this Warrant and indicating the number of shares subject to this Warrant which
are being surrendered (referred to in subsection (c) hereof as the Converted
Warrant Shares) in exercise of the Conversion Right. Such conversion shall be
effective immediately prior to the expiration of this Warrant (the "Conversion
Date"). Certificates for the shares of Common Stock issuable upon exercise of
the Conversion Right (or any other securities deliverable in lieu thereof under
Section 2(b) above) 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 Conversion Date and shall be delivered to the holder immediately
following the Conversion Date.
(e) Restrictions on Conversion Right. In the event that
the Conversion Right contained herein would, at any time this Warrant remains
outstanding, be deemed by the Company's independent certified public
accountants to trigger a charge to the Company's earnings for financial
reporting purposes, then the Conversion Right under this Section 7 shall
automatically terminate upon the Company's written notice to the holder of such
adverse accounting treatment.
(f) Determination of Fair Market Value. For purposes of
this Section 7, fair market value of a share of Common Stock as of the
Conversion Date shall mean the value of the shares of Common Stock, as provided
in the "Price to the Public" specified in the final prospectus with respect to
such offering.
(g) Combination of Rights. To the extent that the Company
limits the exercise of the Conversion Right to a portion of this Warrant or if
the Conversion Right is terminated under Section 7(e) above, it shall allow the
holder hereof to exercise the Inclusion Right to extent necessary to produce
Proceeds equal to the aggregate purchase price of those Shares not eligible for
conversion under the Conversion Right. Similarly, to the extent that the
Company limits the exercise of the Inclusion Right to a portion of this
Warrant, it shall allow the holder hereof to exercise the Conversion Right with
respect to those Shares the purchase price for which would not be accounted for
through such limited exercise of the Inclusion Right.
(h) Demonstration of Exercise Under Section 7. Examples of
a full and partial exercise of the rights set forth in this Section 7 are
attached hereto as Attachment 1. Such examples are limited by their stated
assumptions and should be used for reference purposes only.
8. NET EXERCISE UPON ACQUISITION OR TERMINATION.
(a) In the event that the acquiror in the Acquisition
requires the exercise or termination of this Warrant as a condition to such
Acquisition, the holder shall have the right to exercise the rights of the
holder set forth in Sections 7(c), 7(d) and 7(f) above (without reference to
Section 7(e)), interpreting all references therein to "Initial Public Offering"
to mean "Acquisition" and substituting the following language for the
determination of fair market value set forth in Section 7(f): "fair market
value of a share of Common Stock as of the Conversion Date shall mean the
effective per share consideration to be received in an Acquisition by holders
of the Common Stock, which price shall be as specified in the agreement entered
into with respect to such Acquisition, or if no such price is set forth in the
agreement concerning the Acquisition, then as reasonably determined in good
faith by the Company's Board of Directors upon a review of all relevant
factors." All actions taken by the holder hereof pursuant to this Section 8(a)
shall be conditioned upon the closing of the Acquisition. If for some reason
the holder hereof has taken action under this Section 8(a) and such transaction
does not close within one hundred twenty (120) days after such action is taken,
the holder's actions hereunder shall be considered to have been rescinded and
this Warrant shall continue in full force and effect until otherwise terminated
or exercised.
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(b) If this Warrant shall not have been exercised or
terminated prior to the date five (5) years from original issuance date of this
Warrant, then this Warrant shall be deemed to have been automatically converted
pursuant to the provisions set forth in Sections 7(c), 7(d) and 7(f) above
(without reference to the first sentence in Section 7(d) or to Section 7(e)),
ignoring all references therein to "Initial Public Offering," any notice
deliverable thereupon or any other language or right specific thereto other
than the right to convert this Warrant into shares of Common Stock. For
purposes of this Section 8(b), the following language shall be substituted for
the determination of fair market value set forth in Section 7(f): "fair market
value of a share of Common Stock as of the Conversion Date shall mean, at the
holder's option, either (i) the price per share at which the Company's
Preferred Stock (initially convertible into one share of Common Stock) was last
sold by the Company prior to the Conversion Date, or (ii) the value determined
by a mutually acceptable investment advisor within thirty (30) days after the
Conversion Date upon a review of all relevant factors provided, however, in
determining the value of a share of Common Stock, no discount shall be taken for
either the fact that the shares of Common Stock to be issued to a Holder may not
then be freely tradeable on a public market or that such shares may constitute a
minority interest in the Company. The holder shall indicate in a written notice
to the Company not later than the Conversion Date which of options (i) or (ii)
the holder wishes to accept or pursue. The fees and expenses of the investment
advisor, if applicable, shall be borne equally by the Company and the holder;
provided, however, that if the Company's Preferred Stock (initially convertible
into one share of Common Stock) was last sold by the Company within eighteen
(18) months prior to the Conversion Date, the fees and expenses of the
investment advisor, if applicable, shall be borne solely by the holder."
9. Certificate of Adjustment. Whenever the Warrant Price or
number or type of securities issuable upon exercise of this Warrant is
adjusted, as herein provided, the Company shall promptly deliver to the record
holder of this Warrant a certificate of an officer of the Company setting forth
the nature of such adjustment and a brief statement of the facts requiring such
adjustment.
10. Proposed Transfers. This Warrant may not be sold, assigned,
pledged or otherwise transferred by the holder hereof to a third party other
than in compliance with all terms of this Section 10.
(a) This Warrant may be sold, assigned, pledged or
otherwise transferred by the holder hereof to a majority-owned subsidiary of
the Purchaser or an entity holding a majority of the Purchaser's outstanding
voting securities or to the members of the immediate family of such majority
shareholder, if an individual, or to trusts for their benefit.
(b) If the holder hereof wishes to sell, assign, pledge or
otherwise transfer this Warrant or any portion thereof to a party(ies) other
than a party set forth in subsection 9(a) above, the holder shall first offer
the Warrant to the Company on the following terms:
(i) The transferring holder shall first deliver to
the Company a written offer (the "Offer") to sell at the price and on the terms
offered to the third-party transferee(s) with respect to the offered portion(s)
of this Warrant (collectively, the "Offered Portion"), along with a statement
(the "Offer Statement") setting forth the holder's intention to so transfer and
the name and address of the third-party transferee(s).
(ii) For a period of thirty (30) days after the
receipt of the Offer (the "Offer Period"), the Company shall have the right,
but not the obligation, to purchase all of the Offered Portion on the terms set
forth in the Offer. If the Company chooses to so exercise this purchase right,
it shall deliver a written notice of such intent to the transferring holder and
must so purchase all (and not less than all) of the security(ies) so offered
within thirty (30) days of the receipt of such notice by the transferring
holder.
(iii) To the extent that the Company declines to
exercise its right to purchase all of the Offered Portion within the Offer
Period, the transferring holder may sell, assign, pledge or otherwise transfer
the Offered Portion to the third-party transferee(s) set forth in the Offer
Statement at a price not less than, and upon terms not more favorable to such
transferee(s) than the terms set forth in the Offer; provided, however, that if
the transferring holder has not completed such transfer within one hundred
twenty (120) days after the Offer
7
<PAGE> 8
Period lapses, such transfer shall again become subject to the terms of this
subsection 10(b).
(iv) The right of purchase set forth in this subsection
10(b) may be assigned by the Company without the consent of the holder hereof.
Notice of such assignment shall be given to the holder hereof.
(c) Notwithstanding any provision of this Section 9, the holder
hereof shall not be entitled to transfer warrants representing the right to
purchase more than 395,000 Shares subject to purchase under this Warrant to any
single third-party transferee or group of related transferees, other than to
(i) the Company or its assignees hereunder or (ii) transferees under the terms
of subsection 10(a) above; provided, however, that if the Company shall issue a
warrant subsequent to the original issuance date of this Warrant and such other
warrant shall permit the transfer of more than 395,000 shares subject to
purchase under such warrant to a single third-party transferee or group of
related transferees (other than to the transferees previously exempted in this
sentence) the number of shares transferable under this Section 10(c) shall be
automatically adjusted to such higher share amount through no further action by
the holder or the Company.
(d) Other than transfers of this Warrant or any Shares received upon
exercise hereof to a transferee or transferees set forth in subsection (a)
above, prior to any proposed transfer of this Warrant consistent with the
foregoing or the Shares received upon the exercise hereof (collectively, the
"Securities"), unless there is in effect a registration statement under the
Securities Act of 1933, as amended (the "Securities Act"), covering the proposed
transfer, the holder thereof shall give written notice to the Company of such
holder's intention to effect such transfer. Each such notice shall describe the
manner and circumstances of the proposed transfer in sufficient detail, and
shall, if the Company so requests, be accompanied (except in transactions in
compliance with Rule 144) by either (i) an unqualified written opinion of legal
counsel who shall be reasonably satisfactory to the Company addressed to the
Company and reasonably satisfactory in form and substance to the Company's
counsel, to the effect that the proposed transfer of the Securities may be
effected without registration under the Securities Act, or (ii) a "no action"
letter from the Commission to the effect that the transfer of such Securities
without registration will not result in a recommendation by the staff of the
Commission that action be taken with respect thereto, whereupon the holder of
the Securities shall be entitled to transfer the Securities in accordance with
the terms of the notice delivered by the holder to the Company. Each certificate
evidencing the Securities transferred as above provided shall bear the
appropriate restrictive legend set forth above, except that such certificate
shall not bear such restrictive legend if in the opinion of counsel for the
Company such legend is not required in order to establish compliance with any
provisions of the Securities Act.
10. Merger. If the Company shall at any time merge with or into
another corporation in a transaction that is not an Acquisition, the holder of
this Warrant will thereafter receive, upon the exercise of this Warrant in
accordance with its terms, the securities or properties to which the holder of
the number of shares of Common Stock then deliverable upon exercise of this
Warrant would have been entitled upon such merger.
11. Observer Rights. At any time prior to the consummation of the
Initial Public Offering and for so long as this Warrant is issued and
outstanding, Michael Ashkin shall have the right to attend all meetings
(including telephonic meetings) of the Company's Board of Directors in a
non-voting, observer capacity and, in this respect, the Company shall give Mr.
Ashkin, whether or not present at such meetings, copies of all notices,
minutes, consents and other materials that it provides to its directors;
provided, however, (i) that Mr. Ashkin shall agree to hold in confidence and
trust and to act in a fiduciary manner with respect to all information so
provided; (ii) that the Company reserves the right to withhold any information
and to exclude Mr. Ashkin from any meeting, or portion thereof, if the Board of
Directors determine in good faith that access to such information or attendance
at such meeting could materially and adversely affect the Company, whether by
way of adversely affecting the attorney-client privilege between the Company
and its counsel, or otherwise; and (iii) that in no event shall the failure to
provide the notice described above invalidate in any way any action taken at a
meeting of the Company's Board of Directors. If it is necessary for Mr. Ashkin
to travel to any such Board meeting, he shall receive the same remuneration and
reimbursement from the Company as do the Company's Directors residing in the
eastern United States. Notwithstanding the foregoing, the observer rights set
forth in this Section 11 shall terminate if and at such time as Michael Ashkin
beneficially owns less than fifty percent (50%) of the original number of
8
<PAGE> 9
Shares subject to purchase hereunder. For the purpose of the calculation set
forth in the preceding sentence, "beneficial ownership" shall be interpreted
consistently with Rule 13d-3 promulgated under the Securities Exchange Act of
1934, as amended, except that such term shall be deemed to include shares held
by the members Mr. Ashkin's immediately family or in trust for their benefit.
12. HSR Act and Rules. In the event the Company or any holder
hereof reasonably believes that the exercise of this Warrant and the issuance
of shares of Common Stock (or any shares of stock or other securities at the
time receivable upon the exercise of this Warrant) requires prior compliance
with the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and the rules and
regulations promulgated thereunder (the "HSR Act and Rules"), any such exercise
shall be contingent upon such prior compliance, and, subject to effecting such
compliance, be effective as of the date that this Warrant is surrendered for
exercise pursuant to Section 6 above.
13. Miscellaneous. This Warrant shall be governed by the laws of
the State of California (without reference to conflict of laws principles). The
headings in this Warrant are for purposes of convenience of reference only, and
shall not be deemed to constitute a part hereof. Neither this Warrant nor any
term hereof may be changed, waived, discharged or terminated orally but only by
an instrument in writing signed by the Company and the registered holder
hereof. All notices and other communications from the Company to the holder of
this Warrant shall be delivered personally or mailed by first class mail,
postage prepaid, to the address furnished to the Company in writing by the last
holder of this Warrant who shall have furnished an address to the Company in
writing, and if mailed shall be deemed given three days after deposit in the
U.S. Mail.
IN WITNESS WHEREOF, this Common Stock Purchase Warrant No. CSW-7 is
issued this 5th day of January, 1994.
RIBOGENE, INC.,
a California corporation
By: [illegible]
-------------------------------
Title: V.P. Finance
----------------------------
9
<PAGE> 10
NOTICE OF EXERCISE
OF RIBOGENE, INC.
COMMON STOCK PURCHASE WARRANT
To:
Attn:
1. The undersigned hereby elects to purchase shares
of Stock of pursuant to the terms of the attached
Warrant, and tenders herewith payment of the purchase price of such shares in
full.
2. Please issue a certificate or certificates representing said
shares in the name of the undersigned or in such other name or names as are
specified below:
Name:
Address:
3. The undersigned represents that the aforesaid shares being
acquired for the account of the undersigned for investment and not with a view
to, or for resale in connection with, the distribution thereof and that the
undersigned has no present intention of distributing or reselling such shares,
other than distributions to members of the undersigned immediate family or to
trusts for their benefit.
-----------------------------------
(Signature)
- ------------------------
(Date)
10
<PAGE> 11
ATTACHMENT 1
EXAMPLES OF EXERCISE OF CONVERSION AND INCLUSION RIGHTS
================================================================================
EXAMPLE #1
Assumptions:
1. Full exercise of Conversion Right.
2. Variables:
X = shares acquirable upon exercise of conversion right
Y = Total Number (to be converted) = 2,000,000
A = Fair Market Value = 5
B = Warrant Price = 3
Conversion Right Calculation:
X = Y * (A-B) X = 2,000,000 * (5-3) X = 800,000 shares
----- - ----- -
B 5
- --------------------------------------------------------------------------------
EXAMPLE #2
Assumptions:
1. 1/2 exercise of Conversion Right and 1/2 cash exercise and full exercise of
Inclusion Right.
2. Underwriting discounts and commissions have not been taken into
consideration.
3. Variables:
- For Conversion Right Calculation:
X = shares acquirable upon exercise of right
Y = Total Number (to be converted) = 1,000,000
A = Fair Market Value = 5
B = Warrant Price = 3
- For Cash Exercise and Inclusion Right:
X = shares included in Initial Public Offering
Y = shares cash exercised = 1,000,000
Z = fully paid shares owned by holder after cash exercise and
inclusion
A = Fair Market Value = 5
B = Warrant Price = 3
Calculations:
Conversion Right Calculation:
X = Y * (A-B) X = 1,000,000 * (5-3) X = 400,000 shares
----- - ----- -
B 5
11
<PAGE> 12
Cash Exercise and Inclusion Right Calculation:
X = (Y * B) X = (1,000,000 * 3) X = 600,000 shares
------- - --------------- -
A 5
Z = Y-X Z = 1,000,000 - 600,000 Z = 400,000
- -
- -------------------------------------------------------------------------------
ACCORDINGLY, THE HOLDER IS LEFT WITH 800,000 FULLY PAID SHARES UNDER
EACH OF THE FOREGOING EXAMPLES, REGARDLESS OF WHETHER THE CONVERSION RIGHT WAS
EXERCISED IN FULL (800,000 SHARES) OR WHETHER EACH RIGHT WAS EXERCISED EQUALLY
(400,000 + 400,000 shares).
12
<PAGE> 1
Exhibit 4.19
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT
AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. SUCH SECURITIES
MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN
EXEMPTION THEREFROM UNDER SAID ACT. COPIES OF THE AGREEMENT COVERING THE
PURCHASE OF THESE SECURITIES AND RESTRICTING THEIR TRANSFER MAY BE OBTAINED AT
NO COST BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE TO
THE SECRETARY OF THE CORPORATION AT ITS PRINCIPAL EXECUTIVE OFFICE.
Issued: January 5, 1994 CSW-8
RIBOGENE, INC.
COMMON STOCK PURCHASE WARRANT
1. Number and Price of Shares Subject to Warrant.
(a) Exercise of the Warrant. Subject to the terms and conditions
herein set forth, Rip Grossman and Associates, Inc. (the "PURCHASER"), or a
permitted holder hereof, shall be entitled to purchase from RiboGene, Inc., a
California corporation (the "COMPANY"), at any time and from time to time after
the date hereof but on or before the earlier to occur of (A) the date that is
five (5) years from the date hereof, (B) the closing of the Company's sale of
all or substantially all of its assets or the acquisition of the Company by
another entity by means of merger or other transaction as a result of which all
shareholders of the Company immediately prior to such acquisition in the
aggregate possess a minority of the voting power of the acquiring entity
immediately following such acquisition (the "ACQUISITION") to the extent that
the acquiror in such transaction requires, as a condition of such Acquisition,
the exercise or termination of all or part of this Warrant on or before the
closing of such Acquisition, which requirement shall be set forth in a writing
signed by the acquiror and delivered to the holder hereof, or (C) the date of
the closing of the Company's first underwritten public offering of securities at
an aggregate offering price of not less than 7,500,000 and a price per share of
at least $5.00, as presently constituted (the "INITIAL PUBLIC OFFERING") to the
extent that the managing underwriter(s) in such transaction requires, as a
condition of such underwriting, the exercise or termination of all or part of
this Warrant on or before the closing of such Initial Public Offering, which
requirement shall be set forth in a writing signed by the underwriter and
delivered to the holder hereof, up to 13,000 shares (which number of shares is
subject to adjustment as described below) of fully paid and nonassessable Common
Stock of the Company (the "SHARES") upon surrender hereof at the principal
office of the Company, and upon payment of the purchase price for such shares
(the "PURCHASE PRICE"), determined as the product of the number of shares of
Common Stock acquired upon exercise hereof and the Warrant Price (as defined
below), at said office in cash, by check, by wire transfer or by cancellation of
indebtedness, or upon a net exercise of this Warrant as provided in Sections 7
or 8 below. The Company shall give notice to
<PAGE> 2
the Purchaser of the Initial Public Offering or Acquisition at least thirty (30)
days prior to the effective date thereof.
(b) Warrant Price. Subject to adjustment as hereinafter provided,
the exercise price for one share of Common Stock (or such securities as may be
substituted for one share of Common Stock pursuant to the provisions hereinafter
set forth) shall be $3.00. The exercise price for one share of Common Stock (or
such securities as may be substituted for one share of Common Stock pursuant to
the provisions hereinafter set forth) payable from time to time upon the
exercise of this Warrant (whether such price be the price specified above or an
adjusted price determined as hereinafter provided) is referred to herein as the
"WARRANT PRICE".
2. Adjustment of Warrant Price and Number of Shares. The number and kind
of securities issuable upon the exercise of this Warrant shall be subject to
adjustment from time to time and the Company agrees to provide notice upon the
happening of certain events as follows:
(a) Adjustment of Warrant Price upon Issuance of Additional Stock.
The Warrant Price shall be subject to adjustment from time to time as follows:
(i) (A) Upon each issuance by the Company of any
Additional Stock (as defined below), after the date of this Warrant, without
consideration or for a consideration per share less than the Warrant Price in
effect immediately prior to the issuance of such Additional Stock, the Warrant
Price in effect immediately prior to each such issuance shall forthwith (except
as otherwise provided in this Section 2(a)) be adjusted to a price determined by
multiplying the Warrant Price by a fraction, the numerator of which shall be the
number of shares of Common Stock outstanding immediately prior to such issuance
plus the number of shares of Common Stock which could be purchased were the then
Warrant Price used instead of the purchase price actually paid for such
Additional Stock (calculated by dividing the total consideration (before
deduction of costs) to be received by the Company in such issuance by the then
Warrant Price) and the denominator of which shall be the number of shares of
Common Stock outstanding immediately prior to such issuance plus the number of
shares of such Additional Stock issued in such issuance. For purpose of this
Subsection (a), all Shares of Common Stock issuable upon conversion of
outstanding Preferred Stock or upon exercise of this Warrant, that certain
warrant issued to Hyline Laboratories, Inc. of even date herewith, or any
subsequent warrant issued or deemed issued to Hyline Laboratories, Inc. within
90 days of the date hereof shall be deemed to be outstanding and, immediately
after any Additional Stock is deemed issued, such Additional Stock shall be
deemed outstanding.
(B) No adjustment of the Warrant Price shall be
made in an amount less than one cent per share, provided that any adjustments
which are not required to be made by reason of this sentence shall be carried
forward and shall be either taken into account in any subsequent adjustment made
prior to 3 years from the date of the event giving rise to the adjustment being
carried forward, or shall be made at the end of 3 years from the date of the
event giving rise to the adjustment being carried forward. Except to the limited
extent provided for in subsections 2(a)(i)(E)(3) and (E)(4), no adjustment of
the Warrant Price pursuant to this subsection 2(a)(i) shall have the effect of
increasing the Warrant Price above the Warrant Price in effect immediately prior
to such adjustment.
-2-
<PAGE> 3
(C) In the case of issuance by the Company of Common
Stock for cash, the consideration shall be deemed to be the amount of cash paid
therefor before deducting any reasonable discounts, commissions or other
expenses allowed, paid or incurred by the Company for any underwriting or
otherwise in connection with the issuance and sale thereof.
(D) In the case of issuance by the Company of Common
Stock for a consideration in whole or in part other than cash, the consideration
other than cash shall be deemed to be the fair value as determined by the Board
of Directors of the Company irrespective of any accounting treatment.
(E) In the case of the issuance (whether before, on
or after the date of this Warrant) of options to purchase or rights to subscribe
for Common Stock, securities by their terms convertible into or exchangeable for
Common Stock or options to purchase or rights to subscribe for such convertible
or exchangeable securities, the following provisions shall apply for all
purposes of this subsection 2(a)(i);
1. The aggregate maximum number of
shares of Common Stock deliverable upon exercise (to the extent then
exercisable) of such options to purchase or rights to subscribe for Common Stock
shall be deemed to have been issued at the time such options or rights were
issued and for a consideration equal to the consideration (determined in the
manner provided in subsections 2(a)(i)(C) and (a)(i)(D)), if any, received by
the Company upon issuance of such options or rights plus the minimum exercise
price provided in such options or rights (without taking into account potential
antidilution adjustments) for the Common Stock covered thereby.
2. The aggregate maximum number of
shares of Common Stock deliverable upon conversion of or in exchange for (to the
extent then convertible or exchangeable) convertible or exchangeable securities
or upon exercise of options to purchase or rights to subscribe for such
convertible or exchangeable securities and subsequent conversion or exchange
thereof shall be deemed to have been issued at the time such securities were
issued or such options or rights were issued and for a consideration equal to
the consideration, if any, received by the Company for any such securities and
related options or rights (excluding any cash received on account of accrued
interest or accrued dividends), plus the minimum additional consideration, if
any, to be received by the Company (without taking into account potential
antidilution adjustments) upon the conversion or exchange of such securities or
the exercise of any related options or rights (the consideration in each case to
be determined in the manner provided in subsections 2(a)(i)(C) and 2(a)(i)(D)).
3. In the event of any change in the
number of shares of Common Stock deliverable or in the consideration payable to
the Company under such options or rights or under such convertible or
exchangeable securities, including but not limited to, a change resulting from
antidilution provisions thereof, the Warrant Price, to the extent in any way
affected by or computed using such options, rights or securities, shall be
adjusted based upon the actual issuance of Common Stock or any payment of such
consideration upon the exercise of any such options or rights or the conversion
or exchange of such securities.
-3-
<PAGE> 4
4. Upon the expiration of any such options or
rights, the termination of any such options or rights to convert or exchange, or
the expiration of any options or rights related to such convertible or
exchangeable securities, the Warrant Price, to the extent in any way affected by
or computed using such options, rights or securities or options or rights
related to such securities, shall be recomputed to reflect the issuance of only
the number of shares of Common Stock (and convertible or exchangeable securities
which remain in effect) actually issued upon the exercise of such options or
rights, upon the conversion or exchange of such securities or upon the exercise
of the options or rights related to such securities.
5. The number of shares of Common Stock
deemed issued and the consideration deemed paid therefor pursuant to subsections
2(a)(i)(E)(I) and (2) shall be appropriately adjusted to reflect any change,
termination or expiration of the type described in either subsection
2(a)(i)(E)(3) or (4).
(ii) "ADDITIONAL STOCK" shall mean any shares of Common
Stock issued (or deemed to have been issued pursuant to subsection 2(a)(i)(E))
by this Company after the date of this Warrant other than (A) shares of Common
Stock issued upon conversion of the Company's Preferred Stock issued prior to
the date of this Warrant, (B) shares of Common Stock issued to employees or
directors of or consultants and advisers to the Company or any subsidiary
pursuant to stock purchase or stock option plans or other similar arrangements
approved by the Company's Board of Directors, (C) shares of Common Stock issued
upon the exercise of warrants or options issued by the Company prior to the date
of this Warrant, or (D) shares of Common Stock issued or issuable upon exercise
or conversion of warrants to purchase shares of the capital stock of the Company
issued in connection with equipment lease financing transactions or bank
financing transactions unanimously approved by the Board of Directors, where the
issuance of such warrants is not principally for the purpose of raising
additional equity capital for the Company.
(b) Adjustment for Dividends in Stock. In case at any time or from
time to time on or after the date hereof the holders of the Common Stock of the
Company (or any shares of stock or other securities at the time receivable upon
the exercise of this Warrant shall have received, or, on or after the record
date fixed for the determination of eligible shareholders, shall have become
entitled to receive, without payment therefor, other or additional securities or
other property of the Company by way of dividend or distribution, then and in
each case, the holder of this Warrant shall, upon the exercise hereof, be
entitled to receive, in addition to the number of shares of Common Stock
receivable thereupon, and without payment of any additional consideration
therefor, the amount of such other or additional securities or other property of
the Company which such holder would hold on the date of such exercise had it
been the holder of record of such Common Stock on the date hereof and had
thereafter, during the period from the date hereof to and including the date of
such exercise, retained such shares and/or all other additional securities or
other property receivable by it as aforesaid during such period, giving effect
to all adjustments called for during such period by this paragraph (b) and
paragraphs (a), (c) and (d) of this Section 2.
(c) Adjustment for Reclassification or Reorganization. In case of
any reclassification or change of the outstanding securities of the Company or
of any reorganization of the Company (or any other corporation the stock or
securities of which are at the time
-4-
<PAGE> 5
receivable upon the exercise of this Warrant) on or after the date hereof, then
and in each such case the Company shall give the holder of this Warrant at least
thirty (30) days notice of the proposed effective date of such transaction, and
the holder of this Warrant, upon the exercise hereof at any time after the
consummation of such reclassification, change or reorganization, shall be
entitled to receive, in lieu of the stock or other securities and property
receivable upon the exercise hereof prior to such consummation, the stock or
other securities or property to which such holder would have been entitled upon
such consummation if such holder had exercised this Warrant immediately prior
thereto, all subject to further adjustment as provided in paragraphs (a), (b)
and (d) of this Section 2.
(d) Stock Splits and Reverse Stock Splits. If at any time on or
after the date hereof the Company shall subdivide its outstanding shares of
Common Stock into a greater number of shares, the Warrant Price in effect
immediately prior to such subdivision shall thereby be proportionately reduced
and the number of shares receivable upon exercise of the Warrant shall thereby
be proportionately increased; and, conversely, if at any time on or after the
date hereof the outstanding number of shares of Common Stock shall be combined
into a smaller number of shares, the Warrant Price in effect immediately prior
to such combination shall thereby be proportionately increased and the number of
shares of Common Stock receivable upon exercise of this Warrant shall thereby be
proportionately decreased.
3. No Fractional Shares. No fractional shares of Common Stock will be
issued in connection with any exercise hereunder. In lieu of any fractional
shares which would otherwise be issuable, the Company shall pay cash equal to
the product of such fraction multiplied by the fair market value of one share of
Common Stock on the date of exercise, as determined in good faith by the
Company's Board of Directors.
4. Shareholder Rights and Obligations. This Warrant as such shall not
entitle its holder to any of the rights or bind its holder to any of the
obligations of a shareholder of the Company until the holder has exercised this
Warrant in accordance with Section 6 hereof. The shares of Common Stock issued
upon the exercise of this Warrant shall be entitled to the rights, preferences
and privileges afforded to the other shares of Common Stock as set forth in the
Company's Articles of Incorporation, as may be amended from time to time in
accordance with applicable law.
5. Reservation of Stock. The Company covenants that during the period this
Warrant is exercisable, the Company will reserve from its authorized and
unissued Common Stock a sufficient number of shares to provide for the issuance
of Common Stock upon the exercise of this Warrant. The Company agrees that its
issuance of this Warrant shall constitute full authority to its officers who are
charged with the duty of executing stock certificates to execute and issue the
necessary certificates for shares of Common Stock upon the exercise of this
Warrant.
6. Procedure for Exercise. This Warrant may be exercised by its holder by
the surrender of this Warrant and the executed Notice of Exercise attached
hereto at the principal office of the Company, accompanied by payment in full of
the Purchase Price of the Shares purchased thereby, as described above, or may
be net exercised as described below. This Warrant shall be deemed to have been
exercised immediately prior to the close of business on
-5-
<PAGE> 6
the date of its surrender for exercise as provided above, and the person
entitled to receive the Shares or other securities issuable upon such exercise
shall be treated for all purposes as the holder of such shares of record as of
the close of business on such date. As promptly as practicable, the Company
shall issue and deliver to the person or persons entitled to receive the same a
certificate or certificates for the number of full shares of Common Stock
issuable upon such exercise, together with cash in lieu of any fraction of a
share as provided above. If this Warrant shall have been only partially
exercised, the Company shall also deliver to the holder either (a) a statement
executed by an officer of the Company setting forth the shares remaining subject
to purchase under this Warrant or (b) a replacement Warrant identical to this
Warrant except that the Shares purchasable thereunder shall be only those Shares
not purchased upon exercise of this Warrant, at the Company's option.
7. Exercise upon Initial Public Offering.
(a) Holder Rights; Company Option. In the event that the managing
underwriter(s) in the Initial Public Offering require the exercise or
termination of this Warrant as a condition to their underwriting, the holder
shall have the right to exercise one or any combination of the rights of the
holder set forth in Sections (b) and (c) below in such combination as the
Company, in its sole and complete discretion, shall determine in a notice
delivered to the holder hereof not later than promptly following the meeting of
the pricing committee of the Company's Board of Directors with the managing
underwriter(s) of the Initial Public Offering in which the offering is sized and
priced. All actions taken by the holder hereof pursuant to this Section 7 shall
be conditioned upon the closing of the Initial Public Offering. If for some
reason the holder hereof has taken action under this Section 7 and such offering
does not close within one hundred twenty (120) days after such action is taken,
the holder's actions hereunder shall be considered to have been rescinded and
this Warrant shall continue in full force and effect until otherwise terminated
or exercised.
(b) Exercise and Registration. If this Warrant shall be exercised
as a result of such requirement by the managing underwriter(s) for the Initial
Public Offering, then upon such exercise in accordance with the terms stated in
Section I above, the holder shall be entitled, to the extent permitted by the
Company under this Section 7, to include in the Initial Public Offering that
number of Shares such that the proceeds to the holder, net of underwriting
commission or discounts ("PROCEEDS"), shall equal not less than the total
Purchase Price of this Warrant actually paid by the holder upon exercise under
this subsection (b) (the "INCLUSION RIGHT"). In lieu of payment of the Purchase
Price to be paid upon exercise under this subsection (b), the holder and the
Company may direct the underwriters to pay that portion of the proceeds from the
Initial Public Offering otherwise payable to the holder directly to the Company
in satisfaction of the holder's Purchase Price obligation.
(c) Right to Convert. If this Warrant shall be exercised as a
result of such requirement by the managing underwriter(s) for the Initial Public
Offering, then the holder hereof shall be entitled, to the extent permitted by
the Company under this Section 7, to so exercise by converting this Warrant or
portion hereof (the "CONVERSION RIGHT") into shares of Common Stock, without
payment by such holder of any cash or other consideration, as provided below
immediately prior to its expiration after the Company has given the Purchaser
notice of
-6-
<PAGE> 7
the Initial Public Offering pursuant to Section 1 above, subject to the
restrictions set forth in subsection (e) hereof. In connection with any exercise
of the Conversion Right, this Warrant shall represent the right to subscribe for
and acquire the number of Shares (rounded to the next highest integer) (the
"CONVERTED WARRANT SHARES") equal to
(i) the number of Shares being converted by the holder
hereunder, as specified by the holder pursuant to subsection (d) below (the
"Total Number"), multiplied by
(ii) a fraction, (A) the numerator of which is the excess
of the Fair Market Value of one Share, as determined pursuant to subsection (f)
below, over the Warrant Price then in effect, and (B) the denominator of which
is the Fair Market Value of one Share, all determined as of the Conversion Date.
(d) Exercise of Conversion Right. To the extent exercisable, the
Conversion Right set forth in subsection (c) above may be exercised by the
holder hereof by the surrender of this Warrant prior to its expiration and after
the Company shall have given the Purchaser notice pursuant to Section 1 of the
Initial Public Offering, at the principal office of the Company together with a
written statement specifying that the holder thereby intends to exercise the
Conversion Right immediately prior to the expiration of this Warrant and
indicating the number of shares subject to this Warrant which are being
surrendered (referred to in subsection (c) hereof as the Converted Warrant
Shares) in exercise of the Conversion Right. Such conversion shall be effective
immediately prior to the expiration of this Warrant (the "CONVERSION DATE").
Certificates for the shares of Common Stock issuable upon exercise of the
Conversion Right (or any other securities deliverable in lieu thereof under
Section 2(b) above) 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 Conversion Date and shall be delivered to the holder immediately
following the Conversion Date.
(e) Restrictions on Conversion Right. In the event that the
Conversion Right contained herein would, at any time this Warrant remains
outstanding, be deemed by the Company's independent certified public accountants
to trigger a charge to the Company's earnings for financial reporting purposes,
then the Conversion Right under this Section 7 shall automatically terminate
upon the Company's written notice to the holder of such adverse accounting
treatment.
(f) Determination of Fair Market Value. For purposes of this
Section 7, fair market value of a share of Common Stock as of the Conversion
Date shall mean the value of the shares of Common Stock, as provided in the
"Price to Public" specified in the final prospectus with respect to such
offering.
(g) Combination of Rights. To the extent that the Company limits
the exercise of the Conversion Right to a portion of this Warrant or if the
Conversion Right is terminated under Section 7(e) above, it shall allow the
holder hereof to exercise the Inclusion Right to the extent necessary to produce
Proceeds equal to the aggregate purchase price of those Shares not eligible for
conversion under the Conversion Right. Similarly, to the extent
-7-
<PAGE> 8
that the Company limits the exercise of the Inclusion Right to a portion of this
Warrant, it shall allow the holder hereof to exercise the Conversion Right with
respect to those Shares the purchase price for which would not be accounted for
through such limited exercise of the Inclusion Right.
(h) Demonstration of Exercise Under Section 7. Examples of a full
and partial exercise of the rights set forth in this Section 7 are attached
hereto as Attachment 1. Such examples are limited by their stated assumptions
and should be used for reference purposes only.
8. Net Exercise Upon Acquisition or Termination.
(a) In the event that the acquiror in the Acquisition requires the
exercise or termination of this Warrant as a condition to such Acquisition, the
holder shall have the right to exercise the rights of the holder set forth in
Sections 7(c), 7(d) and 7(f) above (without reference to Section 7(e)),
interpreting all references therein to "Initial Public Offering" to mean
"Acquisition" and substituting the following language for the determination of
fair market value set forth in Section 7(f): "fair market value of a share of
Common Stock as of the Conversion Date shall mean the effective per share
consideration to be received in an Acquisition by holders of the Common Stock,
which price shall be as specified in the agreement entered into with respect to
such Acquisition, or if no such price is set forth in the agreement concerning
the Acquisition, then as reasonably determined in good faith by the Company's
Board of Directors upon a review of all relevant factors." All actions taken by
the holder hereof pursuant to this Section 8(a) shall be conditioned upon the
closing of the Acquisition. If for some reason the holder hereof has taken
action under this Section 8(a) and such transaction does not close within one
hundred twenty (120) days after such action is taken, the holder's actions
hereunder shall be considered to have been rescinded and this Warrant shall
continue in full force and effect until otherwise terminated or exercised.
(b) If this Warrant shall not have been exercised or terminated
prior to the date five (5) years from original issuance date of this Warrant,
then this Warrant shall be deemed to have been automatically converted pursuant
to the provisions set forth in Sections. 7(c), 7(d) and 7(f) above (without
reference to the first sentence in Section 7(d) or to Section 7(e)), ignoring
all references therein to "Initial Public Offering", any notice deliverable
thereupon or any other language or right specific thereto other than the right
to convert this Warrant into shares of Common Stock. For purposes of this
Section 8(b), the following language shall be substituted for the determination
of fair market value set forth in Section 7(f): "fair market value of a share of
Common Stock as of the Conversion Date shall mean, at the holder's option,
either (i) the price per share at which the Company's Preferred Stock (initially
convertible into one share of Common Stock) was last sold by the Company prior
to the Conversion Date, or (ii) the value determined by a mutually acceptable
investment advisor within thirty (30) days after the Conversion Date upon a
review of all relevant factors. The holder shall indicate in a written notice to
the Company not later than the Conversion Date which of options (i) or (ii) the
holder wishes to accept or pursue. The fees and expenses of the investment
advisor, if applicable, shall be borne equally by the Company and the holder,
provided, however, that if the Company's Preferred Stock (initially convertible
into one share of Common Stock) was last sold by the
-8-
<PAGE> 9
Company within eighteen (18) months prior to the Conversion Date, the fees and
expenses of the investment advisor, if applicable, shall be borne solely by the
holder."
9. Certificate of Adjustment. Whenever the Warrant Price or number or
type of securities issuable upon exercise of this Warrant is adjusted, as herein
provided, the Company shall promptly deliver to the record holder of this
Warrant a certificate of an officer of the Company setting forth the nature of
such adjustment and a brief statement of the facts requiring such adjustment.
10. Proposed Transfers. This Warrant may not be sold, assigned, pledged
or otherwise transferred by the holder hereof to a third party other than in
compliance with all terms of this Section 10.
(a) This Warrant may be sold, assigned, pledged or otherwise
transferred by the holder hereof to a majority-owned subsidiary of the Purchaser
or an entity holding a majority of the Purchaser's outstanding voting securities
or to the members of the immediate family of such majority shareholder, if an
individual, or to trusts for their benefit.
(b) If the holder hereof wishes to sell, assign, pledge or
otherwise transfer this Warrant or any portion thereof to a party(ies) other
than a party set forth in subsection 9(a) above, the holder shall first offer
the Warrant to the Company on the following terms:
(i) The transferring holder shall first deliver to the
Company a written offer (the "OFFER") to sell at the price and on the terms
offered to the third-party transferee(s) with respect to the offered portion(s)
of this Warrant (collectively, the "OFFERED PORTION"), along with a statement
(the "OFFER STATEMENT") setting forth the holder's intention to so transfer and
the name and address of the third-party transferee(s).
(ii) For a period of thirty (30) days after the receipt of
the Offer (the "OFFER PERIOD"), the Company shall have the right, but not the
obligation, to purchase all of the Offered Portion on the terms set forth in the
Offer. If the Company chooses to so exercise this purchase right, it shall
deliver a written notice of such intent to the transferring holder and must so
purchase all (and not less than all) of the security(ies) so offered within
thirty (30) days of the receipt of such notice by the transferring holder.
(iii) To the extent that the Company declines to exercise
its right to purchase all of the Offered Portion within the Offer Period, the
transferring holder may sell, assign, pledge or otherwise transfer the Offered
Portion to the third-party transfers) set forth in the Offer Statement at a
price not less than, and upon terms not more favorable to such transferee(s)
than the terms set forth in the Offer, provided, however, that if the
transferring holder has not completed such transfer within one hundred twenty
(120) days after the Offer Period lapses, such transfer shall again become
subject to the terms of this subsection 10(b).
(iv) The right of purchase set forth in this subsection
10(b) may be assigned by the Company without the consent of the holder hereof
Notice of such assignment shall be given to the holder hereof.
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<PAGE> 10
(c) Other than transfers of this Warrant or any Shares received
upon exercise hereof to a transferee or transferees set forth in subsection (a)
above, prior to any proposed transfer of this Warrant consistent with the
foregoing or the Shares received upon the exercise hereof (collectively, the
"SECURITIES"), unless there is in effect a registration statement under the
Securities Act of 1933, as amended (the "SECURITIES ACT"), covering the proposed
transfer, the holder thereof shall give written notice to the Company of such
holder's intention to effect such transfer. Each such notice shall describe the
manner and circumstances of the proposed transfer in sufficient detail, and
shall, if the Company so requests, be accompanied (except in transactions in
compliance with Rule 144) by either (i) an unqualified written opinion of legal
counsel who shall be reasonably satisfactory to the Company addressed to the
Company and reasonably satisfactory in form and substance to the Company's
counsel, to the effect that the proposed transfer of the Securities may be
effected without registration under the Securities Act, or (ii) a "no action"
letter from the Commission to the effect that the transfer of such Securities
without registration will not result in a recommendation by the staff of the
Commission that action be taken with respect thereto, whereupon the holder of
the Securities shall be entitled to transfer the Securities in accordance with
the terms of the notice delivered by the holder to the Company. Each certificate
evidencing the Securities transferred as above provided shall bear the
appropriate restrictive legend set forth above, except that such certificate
shall not bear such restrictive legend if in the opinion of counsel for the
Company such legend is not required in order to establish compliance with any
provisions of the Securities Act.
11. Merger. If the Company shall at any time merge with or into another
corporation in a transaction, that is not an Acquisition, the holder of this
Warrant will thereafter receive, upon the exercise of this Warrant in accordance
with its terms, the securities or properties to which the holder of the number
of shares of Common Stock then deliverable upon exercise of this Warrant would
have been entitled upon such merger.
12. HSR Act and Rules. In the event the Company or any holder hereof
reasonably believes that the exercise of this Warrant and the issuance of shares
of Common Stock (or any shares of stock or other securities at the time
receivable upon the exercise of this Warrant) requires prior compliance with the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 and the rules and
regulations promulgated thereunder (the "HSR ACT AND RULES"), any such exercise
shall be contingent upon such prior compliance, and, subject to effecting such
compliance, be effective as of the date that this Warrant is surrendered for
exercise pursuant to Section 6 above.
13. Miscellaneous. This Warrant shall be governed by the laws of the State
of California (without reference to conflict of laws principles). The headings
in this Warrant are for purposes of convenience of reference only, and shall not
be deemed to constitute a part hereof. Neither this Warrant nor any term hereof
may be changed, waived, discharged or terminated orally but only by an
instrument in writing signed by the Company and the registered holder hereof.
All notices and other communications from the Company to the holder of this
Warrant shall be delivered personally or mailed by first class mail, postage
prepaid, to the address furnished to the Company in writing by the last holder
of this Warrant who shall have furnished an address to the Company in writing,
and if mailed shall be deemed given three days after deposit in the U.S. Mail.
-10-
<PAGE> 11
IN WITNESS WHEREOF, this Common Stock Purchase Warrant No. CSW-8 is issued
this 5th day of January, 1994.
RIBOGENE, INC.,
a California corporation
By: [SIG]
-------------------------------------
Title: President and CEO
----------------------------------
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<PAGE> 12
NOTICE OF EXERCISE
OF RIBOGENE, INC.
COMMON STOCK PURCHASE WARRANT
To: ______________________________
______________________________
______________________________
Attn: ________________________
1. The undersigned hereby elects to purchase ____________ shares of
___________ Stock of ____________ pursuant to the terms of the attached Warrant,
and tenders herewith payment of the purchase price of such shares in full.
2. Please issue a certificate or certificates representing said shares
in the name of the undersigned or in such other name or names as are specified
below:
Name: ______________________________
Address: ___________________________
___________________________
___________________________
3. The undersigned represents that the aforesaid shares being acquired
for the account of the undersigned for investment and not with a view to, or for
resale in connection with, the distribution thereof and that the undersigned has
no present intention of distributing or reselling such shares, other than
distributions to members of the undersigned immediate family or to trusts for
their benefit.
________________________________
(Signature)
________________________
(Date)
-12-
<PAGE> 13
ATTACHMENT 1
EXAMPLES OF EXERCISE OF CONVERSION AND INCLUSION RIGHTS
EXAMPLE #1
Assumptions:
- ------------
1. Full exercise of Conversion Right.
2. Variables:
X = shares acquirable upon exercise of conversion right
Y = Total Number (to be converted 2,000,000
A = Fair Market Value = 5
B = Warrant Price = 3
Conversion Right Calculation:
- -----------------------------
X = Y * (A-B) --> X = 2,000,000 * (5-3) --> X = 800,000 shares
----- -----
B 5
- --------------------------------------------------------------------------------
EXAMPLE #2
Assumptions:
- ------------
1. 1/2 exercise of Conversion Right and 1/2 cash exercise and full exercise of
Inclusion Right.
2. Underwriting discounts and commissions have not been taken into
consideration.
3. Variables:
- For Conversion Right Calculation:
X = shares acquirable upon exercise of right
Y = Total Number (to be converted) = 1,000,000
A = Fair Market Value = 5
B = Warrant Price - 3
- For Cash Exercise and Inclusion Right:
X = shares included in Initial Public Offering
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<PAGE> 14
Y = shares cash exercised = 1,000,000
Z = fully paid shares owned by holder after cash exercise and
inclusion
A = Fair Market Value = 5
B = Warrant Price = 3
Calculations:
- -------------
Conversion Right Calculation:
X = Y * (A-B) --> X = 1,000,000 * (5-3) --> X = 400,000 shares
----- -----
B 5
Cash Exercise and Inclusion Right Calculation:
X = (Y * B) --> X = (1,000,000 * 3) --> X = 600,000 shares
------- --------------
A 5
Z = Y-X --> Z = 1,000,000 - 600,000 --> Z = 400,000
- --------------------------------------------------------------------------------
ACCORDINGLY, THE HOLDER IS LEFT WITH 800,000 FULLY PAID SHARES UNDER EACH
OF THE FOREGOING EXAMPLES, REGARDLESS OF WHETHER THE CONVERSION RIGHT WAS
EXERCISED RV FULL (800,000 SHARES) OR WHETHER EACH RIGHT WAS EXERCISED EQUALLY
(400,000 + 400,000 SHARES).
-14-
<PAGE> 1
Exhibit 4.21
RIBOGENE, INC.
INVESTOR RIGHTS AGREEMENT
This Investor Rights Agreement (the "Agreement") is made as of the
date set forth on the signature page hereof, by and among RiboGene Inc., a
California corporation (the "Company"), and the undersigned, referred to
collectively with certain of the Company's securityholders (the "Holders")
including Paramount Capital, Inc. (the "Placement Agent").
RECITALS
A. The Company, concurrent with the effective date of this Agreement,
is commencing a private offering (the "Unit Offering") of Units (the "Units"),
each consisting of one share of Series F Preferred Stock (the "Series F Shares")
and one Warrant (the "Class A Warrants") to purchase one share of Common Stock,
no par value (the "Common Stock") of the Company.
B. Pursuant to its services in connection with the Unit Offering and
its services as a financial advisor to the Company, the Company will issue to
the Placement Agent and/or its designees warrants (the "Placement and Advisory
Warrants") for the purchase of (1) Series F Shares and (2) Class A Warrants.
C. Two existing securityholders of the Company have elected to
participate in the registration rights granted under this Agreement (the "Prior
Securityholders").
D. It is a condition to any closing of the Unit Offering that the
Company grant to the purchasers and the Placement Agent and/or its designees
the rights set forth in this Agreement.
IN CONSIDERATION OF THE MUTUAL PROMISES AND COVENANTS HEREINAFTER SET
FORTH, THE PARTIES AGREE AS FOLLOWS:
1. Definitions. As used in this Agreement:
a. "1934 Act" means the Securities Exchange Act 1934, as
amended.
b. "Act" means the Securities Act of 1933, as amended.
c. "Form S-3" means such form under the Act as in effect on
the date hereof or any registration form under the Act subsequently adopted by
the SEC which similarly permits inclusion or incorporation of substantial
information by reference to other documents filed by the Company with the SEC.
d. The term "Registrable Securities" means:
(i) the shares of Common Stock issuable or
issued upon conversion or exercise of (1)
the Series F Shares, (2) the Class A
Warrants, (3)
<PAGE> 2
the Placement and Advisory Warrants,
including without limitation, the shares of
Common Stock issuable upon conversion of the
Series F Shares issuable upon exercise of
the Placement and Advisory Warrants, and (4)
the Company securities held by the Prior
Securityholders (provided that such Prior
Securityholder delivers an executed
signature page to this Agreement and becomes
a party hereto);
(ii) the Class A Warrants; and
(iii) any other shares of Common Stock of the
Company issued as (or issuable upon the
conversion or exercise of any warrant, right
or other security which is issued as) a
dividend or other distribution with respect
to, or in exchange for or in replacement of,
the foregoing, excluding in all cases,
however, any Registrable Securities, or
Registrable Securities issuable upon the
exercise of other securities, sold by a
person in a transaction in which his or her
rights under this Agreement are not
assigned;
provided, however, that Common Stock or other securities shall only be
treated as Registrable Securities if and so long as they have not been
(A) sold to or through a broker or dealer or underwriter in a public
distribution or a public securities transaction, or (B) sold in a
transaction exempt from the registration and prospectus delivery
requirements of the Act under Section 4(l) thereof, in either case, so
that all transfer restrictions, and restrictive legends with respect
thereto, if any, are removed upon the consummation of such sale and,
provided further, that all Holders must deliver an executed version of
this Agreement to be entitled to the rights set forth herein.
Notwithstanding the foregoing, or any other provision herein to the
contrary, the parties hereto understand and agree that the Prior
Securityholders shall not be entitled to the rights set forth in
Section 13 below.
e. The number of shares of "Registrable Securities then
outstanding" shall be determined by the number of shares of Common Stock
outstanding which are, and the number of shares of Common Stock issuable
pursuant to then exercisable or convertible securities (including, without
limitation, then exercisable warrants) which are, Registrable Securities.
Because the Common Stock issuable upon exercise of the Class A Warrants already
is included in such calculation, the Class A Warrants themselves shall not be
counted in determining the number of "Registrable Securities then outstanding"
for the purposes of any threshold calculations herein (to avoid double-counting
the underlying shares of Common Stock). However, the Class A Warrants will
continue to be Registrable Securities hereunder.
f. The term "Holder" means any holder of outstanding
Registrable Securities who acquired such Registrable Securities in a transaction
or series of transactions not involving any registered public offering
including, without limitation, the Placement Agent.
g. "SEC" means the Securities and Exchange Commission.
-2-
<PAGE> 3
2. Registration. To the extent there are any Registrable
Securities outstanding, the Company agrees that no later than 270 days after (x)
the closing date of an initial underwritten public offering of the Common Stock
by the Company registered under the Act or (y) the first date on which the
Common Stock of the Company (or securities received in exchange for Common Stock
of the Company) trades on a national securities exchange, on the National
Association of Security Dealers, Inc. Automated Quotations System ("NASDAQ") or
on the OTC Electronic Bulletin Board or in the "pink sheets", the Company shall
file a shelf registration statement with respect to the Registrable Securities
and shall use its best efforts to have such registration statement (the "Shelf
Registration Statement") declared effective by the SEC provided, however, that
each Holder shall provide all such information and materials and take all such
action as may be required in order to permit the Company to comply with all
applicable requirements of the SEC and to obtain any desired acceleration of the
effective date of such registration statement. The Company represents, and the
Holders hereby acknowledge, that the Company may file multiple registration
statements in sequence or in parallel to the extent that the Company deems it
advisable in order to enable the Company and the Holders to take advantage of
the most favorable form of registration statement available (e.g. to replace a
registration statement on Form S-1 with a registration statement on Form S-3).
The offerings made pursuant to such registrations shall not be underwritten
unless permitted by the Company.
3. Suspension of Sales. Notwithstanding Section 2 above, the
Company shall be entitled to suspend all sales under the registration
statement(s) prepared and filed pursuant to Section 2 for a reasonable period
of time, (a) not in excess of two (2) periods of up to thirty (30) calendar days
each during any twelve-month period in connection with a primary underwritten
offering or offerings of the Company's equity securities, and (b) not in excess
of thirty (30) days per circumstance or development, when the Company determines
in good faith that offers and sales of Registrable Securities should not be made
by reason of the presence of material undisclosed circumstances or developments
with respect to which the disclosure that would be required in such a prospectus
is premature, would have an adverse effect on the Company or is otherwise
inadvisable.
4. Obligations of the Company. The Company shall (i) prepare
and file with the SEC the shelf registration statement(s) in accordance with
Section 2 hereof with respect to the Registrable Securities and shall use its
best efforts to cause such registration statement(s) to become effective by the
applicable date and to keep such Registration Statements effective until the
distribution contemplated thereby is complete or for such shorter period as
designated in paragraph 12 below; (ii) prepare and file with the SEC such
amendments and supplements to such registration statements and the prospectus
used in connection therewith as may be necessary to comply the provisions of the
Act with respect to the sale or other disposition of all securities proposed to
be registered in such registration statements, (iii) furnish to each Holder such
number of copies of any prospectus (including any preliminary prospectus any
amended or supplemented prospectus) in conformity with the requirements of the
Act, and such other documents, as each Holder may reasonably request in order to
effect the offering and sale of Registrable Securities to be offered and sold,
but only while the Company shall be required under the provisions hereof to
cause the registration statement to remain current, (iv) use its best efforts to
register or qualify the Registrable Securities covered by such registration
statements
-3-
<PAGE> 4
under the securities or blue sky laws of such jurisdictions as reasonably
requested by any Holder (provided that the Company shall not be required in
connection therewith or as a condition thereto to qualify to do business or file
a general consent to service of process in any such jurisdiction where it has
not been qualified), and do any and all other acts or things which may be
necessary or advisable to enable each Holder to consummate the public sale or
other disposition of such stock in such jurisdictions; (v) notify each Holder
upon the happening of any event as a result of which the prospectus included in
such registration statements, as then in effect, includes an untrue statement of
a material fact or omits to state a material fact required to be stated therein
or necessary to make the statements therein not misleading in light of the
circumstances then existing; (vi) so long as the applicable registration
statement remains effective, promptly prepare, file and furnish to each Holder a
reasonable number of copies of a supplement to or an amendment of such
prospectus as may be necessary so that, as thereafter delivered to the
purchasers 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 in
light of the circumstances then existing; (vii) notify each Holder, promptly
after it shall receive notice thereof, of the date and time the applicable
registration statement and each post-effective amendment thereto has become
effective or a supplement to any prospectus forming a part of such registration
statement has been filed; (viii) notify each Holder promptly of any request by
the SEC for the amending or supplementing of such registration statement or
prospectus or for additional information; and (ix) advise each Holder, promptly
after it shall receive notice or obtain knowledge thereof, of the issuance of
any stop order by the SEC suspending the effectiveness of such registration
statement or the initiation or threatening of any proceeding for that purpose
and promptly use its best efforts to prevent the issuance of any stop order or
to its withdrawal if such stop order should be issued. In correction with any
offering of Registrable Securities registered pursuant to this Agreement, other
than Registrable Securities held by affiliates of the Company subject to the
Company's insider trading policies in effect at such time, the Company shall (x)
furnish each Holder, at the Company's expense, with unlegended certificates
representing ownership of the shares of Registrable Securities being sold in
such denominations as each Holder shall request and (y) instruct the transfer
agent and registrar of the Registrable Securities to release any stop transfer
orders with respect to the shares of Registrable Securities being sold.
5. Availability of Form S-3. The Company represents that,
whenever feasible, it will utilize Form S-3 to conduct the registration that is
the subject of this Agreement, but that if Form S-3 (or a successor form) is
not available for use by the Company, the Company shall file a registration
statement on Form S-1, SB-2 or other form sufficient to satisfy its obligations
under Section 2 hereof.
6. No Further Participation. The Company agrees that the
registration rights granted hereunder are solely for the benefit of the Holders
and that, without the prior written consent of the Holders of a majority of the
Registrable Securities then outstanding, the Company will not include any shares
being sold for the account of the Company or any other party other than a Holder
in any registration effected pursuant to this Agreement.
-4-
<PAGE> 5
7, Expenses. The Company shall pay all of the out-of-pocket expenses
incurred, other than underwriting or brokerage discounts and commissions, in
connection with any registration of Registrable Securities pursuant to this
Agreement, including, without limitation, all SEC, NASD and blue sky
registration and filing fees, printing expenses, transfer agents' and
registrars' fees, and the reasonable fees and disbursements of the Company's
outside counsel and independent accountants, counsel to the Placement Agent and,
if reasonably necessary, a single counsel for all other Holders.
8. Indemnification. In the event of any offering registered pursuant to
this Agreement:
a. The Company will indemnify each Holder, each of its
officers, directors, employees and partners and such Holder's legal counsel and
independent accountants, and each person controlling such Holder within the
meaning of Section 15 of the Act, with respect to which registration,
qualification or compliance has been effected pursuant to this Agreement, and
each underwriter, if any, and each person who controls any underwriter within
the meaning of Section 15 of the Act, against all expenses, claims, losses,
damages and liabilities (or actions in respect thereof), including any of the
foregoing incurred in settlement of any litigation, commenced or threatened,
arising out of or based on any untrue statement (or alleged untrue statement) of
a material fact contained in any registration statement, prospectus, offering
circular or other document, or any amendment or supplement thereto, incident to
any such registration, qualification or compliance, or based on any omission (or
alleged omission) to state therein a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances in
which they are made, not misleading, or any violation by the Company of any rule
or regulation promulgated under the Act, or state securities laws, or common
law, applicable to the Company in connection with any such registration,
qualification or compliance, and will reimburse each such Holder, each of its
officers, directors, employees and partners and such Holder's legal counsel and
independent accountants, and each person controlling such Holder, each such
underwriter and each person who controls any such underwriter, for any legal and
any other expenses reasonably incurred in connection with investigating,
preparing or defending any such claim, loss, damage, liability or action;
provided, however, that the Company will not be liable to any Holder in any such
case to the extent that any such claim, loss, damage, liability or expense
arises out of or is based in any untrue statement or omission or alleged untrue
statement or omission contained in any of the above referenced documents, made
in reliance upon and in conformity with written information furnished to the
Company by such Holder in an instrument duly executed by such Holder or
underwriter and stated to be specifically for use therein.
b. Each Holder will, if Registrable Securities held by such
Holder are included in the securities as to which such registration,
qualification or compliance is being effected, indemnify the Company, each of
its directors, employees and officers and its legal counsel and Independent
accountants, each underwriter, if any, of the Company's securities covered by
such a registration statement, each person who controls the Company or such
underwriter within the meaning of Section 15 of the Act, and each other Holder,
its officers, directors, employees and persons controlling such Holder within
the meaning of Section 15 of
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<PAGE> 6
the Act, against all claims, losses, damages and liabilities (or actions in
respect thereof) arising out of or based on any untrue statement (or alleged
untrue statement) or a material fact contained in any such registration
statement, prospectus, offering circular or other document, or any omission (or
alleged omission) to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, and will reimburse
the Company, such Holders, such directors, officers, employees, legal counsel,
independent accountants, underwriters or control persons for any legal or any
other expenses reasonably incurred in connection with investigating or defending
any such claim, loss, damage, liability or action, in each case to the extent,
but only to the extent, that such untrue statement (or alleged untrue statement)
or omission (or alleged omission) is made in such registration statement,
prospectus, offering circular or other document in reliance upon and in
conformity with written information furnished to the Company by such Holder in
an instrument duly executed by such Holder and stated to be specifically for use
therein; provided, however, that the obligations of such Holders hereunder shall
in no case exceed and shall, in all cases, be limited to an amount equal to the
gross proceeds after expenses and commissions to each such Holder of
Registrable Securities sold as contemplated herein.
c. Each party entitled to indemnification under this Section
12 (the "Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified
Party has written notice of any claim as to which indemnity may be sought, and
shall permit the Indemnifying Party to assume the defense of any such claim or
any litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not be unreasonably
withheld), and the Indemnified Party may participate in such defense at such
party's expense, and provided further that the failure of any Indemnified Party
to give notice as provided herein shall not relieve the Indemnifying Party of
its obligations under this Agreement, unless the Indemnifying Party's ability to
defend against such claim or litigation is materially impaired as a result of
such failure to give notice. No Indemnifying Party, in the defense of any such
claim or litigation, shall, except with the consent of each Indemnified Party,
consent to entry of any judgment or enter any settlement which does not include
as an unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim or
litigation.
d. If the indemnification provided for in this Section 8 is
held by a court of competent jurisdiction to be unavailable to an Indemnified
Party with respect to any loss, liability, claim, damage, or expense referred to
therein, then the Indemnifying Party, in lieu of indemnifying such Indemnified
Party hereunder, will contribute to the amount paid or payable by such
Indemnified Party as a result of such loss, liability, claim, damage, or expense
in such proportion as is appropriate to reflect the relative fault of the
Indemnifying Party on the one hand and of the Indemnified Party on the other in
connection with the statements or omissions that resulted in such loss,
liability, claim, damage, or expense as well as any other relevant equitable
considerations. The relative fault of the Indemnifying Party and of the
Indemnified Party will be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
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<PAGE> 7
Indemnifying Party or by the Indemnified Party and the parties' relative intent,
knowledge, access to information, and opportunity to correct or prevent such
statement or omission.
e. The obligations of the Company and each Holder under this
Section 8 shall survive the completion of any offering of stock in a
registration statement under this Agreement and otherwise.
9. Reports Under Securities Exchange Act of 1934. The Company agrees
to:
a. use its commercially reasonable efforts to file with the
SEC in a timely manner all reports and other documents required of the Company
under the Act and the 1934 Act; and
b. furnish to each Holder, forthwith upon request (i) a
written statement by the Company that it has complied with the reporting
requirements of the Act and the 1934 Act, or that it qualifies as a registrant
whose securities may be resold pursuant to Form S-3 (at any time after it so
qualifies), (ii) a copy of the most recent annual or quarterly report of the
Company and (iii) such other information as may be reasonably requested in
availing each Holder of any rule or regulation of the SEC which permits the
selling of any such securities pursuant to the form of registration statement
then evidencing a registration of the Registrable Securities.
10. Assignment of Registration Rights. The registration rights pursuant
to this Agreement may be assigned by a Holder to a transferee or assignee of at
least the lesser of (i) 25,000 shares of Registrable Securities (adjusted to
reflect subsequent stock splits, stock dividends or recapitalization) or (ii)
all of such Holder's Registrable Securities provided the Company is, within a
reasonable time after such transfer, furnished with written notice of the name
and address of such transferee or assignee and the securities with respect to
which such registration rights are being assigned; and provided, further, that
such assignment shall be effective only if (a) immediately following such
transfer the further disposition of such securities by the transferee or
assignee is restricted under Rule 144 of the Act and (b) the transferee or
assignee delivers to the Company and agreement to be bound by the terms of this
Agreement. The foregoing share limitation shall not apply, however, to transfers
by a Holder to shareholders, employees, partners (including limited partners) or
retired partners of the Holder (including spouses and ancestors, lineal
descendants and siblings of such partners or spouses, or trusts for their
benefit, who acquire Registrable Securities by gift, will or intestate
succession) if all such transferees or assignees agree in writing to appoint a
single representative as their attorney in fact for the purpose of receiving any
notices and exercising their rights under this Section 3.
11. Amendment of Registration Rights. Holders of a majority of the
Registrable Securities then outstanding may, with the consent of the Company,
amend, waive or modify the registration rights granted hereunder.
12. Termination. The registration rights set forth in this Agreement
shall terminate with respect to a Holder at the earlier of such time as such
Holder has completed the distribution
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<PAGE> 8
described in the Shelf Registration Statement or at such time that the
Registrable Securities are no longer, by reason of Rule 144(k) under the Act,
required to be registered for the sale thereof by such Holder.
13. Right of First Offer. Subject to the terms and conditions specified
in this Section 13, and subject to any limitations imposed by applicable laws
governing the nature and extent of foreign investment in companies domiciled in
the U.S., the Company hereby grants to each Holder, so long as such Holder holds
at least 50,000 shares of Series F Preferred Stock (as subsequently adjusted for
subsequent stock splits, stock dividends or recapitalization) (the
"Rightholder"), a right of first offer with respect to future sales by the
Company of its New Securities (as hereinafter defined). For purposes of this
Section 13, the term Rightholder includes any partners, shareholders or
affiliates of the Rightholder. The Rightholder shall be entitled to apportion
the right of first offer hereby granted among itself and its partners,
shareholders and affiliates in such proportions as it deems appropriate.
a. In the event the Company proposes to issue New Securities,
it shall give the Rightholder written notice (the "Notice") of its intention
stating (i) a description of the New Securities it proposes to issue, (ii) the
number of shares of New Securities it proposes to offer, (iii) the price per
share at which, and other terms on which, it proposes to offer such New
Securities and (iv) the number of shares that the Rightholder has the right to
purchase under this Section 13, based on the Rightholder's Percentage (as
defined in Section 13(d)(B)).
b. Within thirty (30) days after the Notice is given (in
accordance with Section 14), the Rightholder may elect to purchase, at the price
specified in the Notice, up to the number of shares of the New Securities
proposed to be issued that the Rightholder has the right to purchase as
specified in the Notice. An election to purchase shall be made in writing and
must be given to the Company within such thirty (30) day period (in accordance
with Section 14). The closing of the sale of New Securities by the Company to
the participating Rightholder upon exercise of its rights under this Section 13
shall take place simultaneously with the closing of the sale of New Securities
to third parties.
c. The Company shall have ninety (90) days after the last date
on which the Rightholder's right of first offer lapsed to enter into an
agreement (pursuant to which the sale of New Securities covered thereby shall be
closed, if at all, within forty-five (45) days from the execution thereof) to
sell the New Securities which the Rightholder did not elect to purchase under
this Section 13, at or above the price and upon terms not materially more
favorable to the purchasers of such securities than the terms specified in the
initial Notice given in connection with such sale. In the event the Company has
not entered into an agreement to sell the New Securities within such ninety (90)
day period (or sold and issued New Securities in accordance with the foregoing
within forty-five days from the date of said agreement), the Company shall not
thereafter issue or sell any New Securities without first offering such New
Securities to the Rightholder in the manner provided in this Section 13.
d. (A) "New Securities" shall mean any shares of, or
securities convertible into or exercisable for any shares of, any class of the
Company's capital stock, provided that
-8-
<PAGE> 9
"New Securities" does not include: (i) the Placement and Advisory Warrants, the
Units or the Common Stock issuable upon conversion or exercise of any securities
issued as part of a Unit; (ii) securities issued pursuant to the acquisition of
another business entity by the Company by merger, purchase of substantially all
of the assets of such entity, or other reorganization whereby the Company owns
not less than a majority of the voting power of such entity; (iii) shares, or
options to purchase shares, of the Company's Common Stock and the shares of
Common Stock issuable upon exercise of such options, issued pursuant to any
arrangement approved by the Board of Directors to employees, officers and
directors of, or consultants, advisors or other persons performing services for,
the Company; (iv) shares of the Company's Common Stock or Preferred Stock of any
series issued in connection with any stock split, stock dividend or
recapitalization of the Company; (v) Common Stock issued upon exercise of
warrants, options or convertible securities if the issuance of such warrants,
options or convertible securities was a result of the exercise of the right of
first offer granted under this Section 13 or was subject to the right of first
offer granted under this Section 13; (vi) capital stock or warrants or options
for the purchase of shares of capital stock issued by the Company to a lender in
connection with any loan or lease financing transaction; and (vii) securities
sold to the public in an offering pursuant to a registration statement filed
with the Securities and Exchange Commission under the Act.
(B) The applicable "Percentage" for the Rightholder shall be
the number of shares of New Securities calculated by dividing (i) the total
number of shares of Common Stock owned by the Rightholder (assuming conversion
of all shares of Preferred Stock) by (ii) the total number of shares of Common
Stock outstanding at the time the Notice is given (assuming conversion of all
shares of Preferred Stock and exercise of the warrant for the issuance of
1,300,000 shares originally issued to Hyline Laboratories, Inc. (the "Hyline
Warrant")); provided that in no case may the number of shares of capital stock
of the Company owned by the Rightholder equal or exceed 25.1% of the total
number of outstanding shares of capital stock of the Company.
e. The right of first offer granted under this Section 13 shall expire
upon the earlier of (i) March 31, 1998, or (ii) following the consummation of
the Company's sale of its Common Stock in a bona fide, firm commitment
underwriting pursuant to a registration statement under the Act which results in
aggregate gross cash proceeds to the Company in excess of $7,500,000 (as
subsequently adjusted to reflect subsequent stock dividends, stock splits or
recapitalization) (other than a registration statement relating either to the
sale of securities to employees of the Company pursuant to a stock option,
stock purchase or similar plan or a SEC Rule 145 transaction).
f. The right of first offer granted under this section may be assigned
by the Rightholder to a transferee or assignee of the Rightholder's shares of
the Company's stock acquiring the lesser of (i) at least 50,000 of the
Rightholder's shares of the Company's Common Stock (treating all shares of
Preferred Stock for this purpose as though converted into Common Stock)
(equitably adjusted for any stock splits, subdivision stock dividends, changes,
combinations or the like) or (ii) all of the Rightholder's remaining shares of
the Company's stock. In the event that the Rightholder shall assign its right of
first offer pursuant to this Section
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<PAGE> 10
13 in connection with the transfer of less than all of its shares of the
Company's stock, the Rightholder shall also retain its right of first offer.
g. The terms of this Section 13 may only be amended upon the
written consent of the Company and a majority-in-interest of the Rightholders.
14. Notices. Any notice required or permitted by this Agreement
shall be in writing and shall be sent by overnight, prepaid registered or
certified mail, return receipt requested and addressed, if to the Company, to
its principal offices, or if to a Holder, to the address for such Holder on the
signature page hereto. Such notice shall be deemed to have been given three (3)
days after deposit in the mail.
15. "Market Stand-Off" Agreement. Each Holder hereby agrees that
during the 180-day period following the effective date of a registration
statement of the Company filed under the Act, it shall not, to the extent
requested by the Company and such underwriter, sell or otherwise transfer or
dispose of (other than to donees who agree to be similarly bound) any Common
Stock of the Company held by it at any time during such period except Common
Stock included in such registration; provided, however, that:
(a) such agreement shall be applicable only to the first such
registration statement of the Company which covers Common Stock (or other
securities) to be sold on its behalf to the public in an underwritten offering;
and
(b) all officers and directors of the Company and all other
persons with registration rights (whether or not pursuant to this Agreement)
enter into similar agreements.
To enforce the foregoing covenant, the Company may impose stop-transfer
instructions with respect to the Registrable Securities of the Holder (and the
shares or securities of every other person subject to the foregoing restriction)
until the end of such period.
16. Miscellaneous.
a. Third Parties. Nothing in this Agreement, express or
implied, is intended to confer upon any party, other than the parties hereto,
and their respective successors and assigns, any rights, remedies, obligations
or liabilities under or by reason of this Agreement, except as expressly
provided herein.
b. Governing Law. NOTWITHSTANDING THE PLACE WHERE THIS
AGREEMENT MAY BE EXECUTED BY ANY OF THE PARTIES HERETO, THE PARTIES EXPRESSLY
AGREE THAT ALL THE TERMS AND PROVISIONS HEREOF SHALL BE CONSTRUED IN ACCORDANCE
WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW.
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<PAGE> 11
c. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
d. Severability. If one or more provisions of this Agreement
are held to be unenforceable under applicable law, portions of such provisions,
or such provisions in their entirety, to the extent necessary, shall be severed
from this Agreement, and the balance of this Agreement shall be enforceable in
accordance with its terms.
e. Rights of Holders. Each holder of Registrable Securities
shall have the absolute right to exercise or refrain from exercising any right
or rights that such holder may have by reason of this Agreement, including,
without limitation, the right to consent to the waiver or modification of any
obligation under this Agreement, and such holder shall not incur any liability
to any other holder of any securities of the Company as a result of exercising
or refraining from exercising any such right or rights.
f. Delays or Omissions. No delay or omission to exercise any
right, power or remedy accruing to any party to this Agreement, upon any breach
or default of the other party, shall impair any such right, power or remedy of
such nonbreaching party nor shall it be construed to be a waiver of any such
breach or default, or an acquiescence therein, or of or in any similar breach or
default thereafter occurring; nor shall any waiver of any single breach or
default be deemed a waiver of any other breach or default theretofore or
thereafter occuring. Any waiver, permit, consent or approval of any kind or
character on the part of any party of any breach or default under this
Agreement, or any waiver on the part of any party of any provisions or
conditions of this Agreement, must be made in writing and shall be effective
only to the extent specifically set forth in such writing. All remedies, either
under this Agreement, or by law or otherwise afforded to any hoider, shall be
cumulative and not alternative.
g. Waiver of Prior Rights. The Prior Securityholders, by
executing and delivering a copy of this Agreement, in return for the
registration rights granted to them pursuant to the Agreement hereby waive
all rights that they may have with respect to the registration of the Company's
securities held by them pursuant to Section 3 of the Company's Ninth Amended
and Restated Rights Agreement dated May 1, 1996 and agree that their rights
with respect to the registration of such securities shall be governed solely
under this Agreement.
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<PAGE> 12
IN WITNESS WHEREOF, the parties hereto have executed this Unit Investor
Rights Agreement as of , 199 .
------------ -
RIBOGENE, INC.
By:
--------------------
Title:
-----------------
HOLDERS:
Aperture Associations, L.P.
By: Horsley Bridge Partners, Inc.
/s/ N. Dan Reeve (Print or Type Full Name of Holder)
- -----------------------------------
N. Dan Reeve, Managing Director &
Assistant Secretary
By:
--------------------------------
Title:
-----------------------------
(if applicable)
Address: 505 Montgomery Street Address:
------------------------ ---------------------------
21st Floor
------------------------ ---------------------------
San Francisco, CA 94111
------------------------ ---------------------------
Phone: (415) 986-7733 Phone:
------------------------ ---------------------------
Fax: (415) 986-7744 Fax:
------------------------ ---------------------------
SIGNATURE PAGE TO THE RIBOGENE, INC.
UNIT INVESTOR RIGHTS AGREEMENT
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<PAGE> 1
Exhibit 10.1
ABBOTT-RIBOGENE LICENSE AGREEMENT
<PAGE> 2
Table of Contents
<TABLE>
<CAPTION>
PAGE
<S> <C>
I. DEFINITIONS................. .......................................... 5
1.1 Abbott Compound........................................................ 5
1.2 Abbott Patent Rights................................................... 6
1.3 Affiliate.............................................................. 7
1.4 Calendar Year and Calendar Quarter or Quarter.......................... 7
1.5 Confidential Information............................................... 7
1.6 Field.................................................................. 8
1.7 IND.................................................................... 8
1.8 Joint Management Team or JMT........................................... 8
1.9 Know-how............................................................... 8
1.10 NDA.................................................................... 9
1.11 Net Sales of Single Active Product(s).................................. 9
1.12 Not Sales of Combination Product(s).................................... 10
1.13 Net Sales of Delivery System Product(s)................................ 11
1.14 Not Sales of Pharmaceutical Products................................... 12
1.15 Net Sales of Plant Protection Products................................. 12
1.16 Net Sales of Diagnostic Products....................................... 12
1.17 Not Sales.............................................................. 12
1.18 Phase III Studies...................................................... 13
1.19 Product................................................................ 13
1.20 Program Inventions and Joint Program Inventions........................ 13
1.21 Research Agreement..................................................... 14
1.22 Research Program....................................................... 14
1.23 Research Term.......................................................... 14
1.24 RiboGene Compound...................................................... 14
1.25 RiboGene Intellectual Property........................................ 15
1.26 RiboGene Lead......................................................... 15
1.27 RiboGene Patent Rights................................................ 15
1.28 Sale or Sold and First Commercial Sale................................. 16
1.29 Valid Claim............................................................ 16
II. LICENSE GRANTS ........................................................ 17
2.1 Research and Development Purposes...................................... 17
2.2 Program Inventions..................................................... 17
2.3 Compounds ............................................................. 17
III. MILESTONE AND ROYALTY PAYMENTS......................................... 18
3.1 Milestone Payments..................................................... 18
3.2 Royalty Payments....................................................... 19
3.3 Uses Within Abbott Abbott Affiliates, and/or Abbott Sublicensees ...... 22
IV. RECORDS AND ROYALTY PAYMENTS ............................................... 22
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
4.1 Records................................................................ 22
4.2 Exchange Calculation................................................... 23
4.3 How Paid............................................................... 23
4.4 Royalty Statement...................................................... 23
4.5 Withheld Taxes......................................................... 24
V. PATENT RESPONSIBILITIES................................................ 24
5.1 RiboGene Patent Prosecution and Maintenance............................ 24
5.2 Program Invention Patent Prosecution and Maintenance................... 24
5.3 Infringement Defense................................................... 25
5.4 Patent Infringement by Third Parties................................... 25
5.5 Patent Marking......................................................... 26
5.6 Extensions............................................................. 26
VI. PRODUCT DEVELOPMENT AND PROMOTION ..................................... 26
6.1 Development and Approvals ............................................. 26
6.2 Trademarks ............................................................ 26
6.3 Notification of First Commercial Sale ................................. 27
VII. CONFIDENTIALITY ....................................................... 27
7.1 Confidentiality and Nonuse............................................. 27
7.2 Required Disclosure.................................................... 27
7.3 Return of Confidential Information..................................... 28
7.4 Nondisclosure of Third Party Confidential Information.................. 28
7.5 Publicity.............................................................. 28
7.6 Permitted Disclosure................................................... 28
VIII. WARRANTIES AND LIMITATIONS ON RIGHTS................................... 29
8.1 RiboGene Warranties.................................................... 29
8.2 Limitation on Warranties............................................... 29
8.3 Disclaimer............................................................. 29
8.4 Limitations on Rights.................................................. 30
IX. LIABILITIES AND INDEMNITY ............................................. 30
9.1 Liabilities............................................................ 30
9.2 Indemnification........................................................ 31
9.3 Abbott Indemnification................................................. 31
X. TERM AND TERMINATION .................................................. 32
10.1 Term................................................................... 32
10.2 Possible Extension..................................................... 32
10.3 Termination Without Breach............................................. 32
</TABLE>
<PAGE> 4
<TABLE>
<S> <C>
10.4 Effect of Breach ...................................................... 32
10.5 Effect of Bankruptcy or Agreement Revision ............................ 33
10.6 Consequences of Termination ........................................... 33
XI. MISCELLANEOUS ......................................................... 33
11.1 Notices ............................................................... 33
11.2 Independence of Parties................................................ 34
11.3 Impact on Other Relationships.......................................... 34
11.4 No Third-Party Beneficiaries........................................... 34
11.5 No Waiver.............................................................. 34
11.6 Merger Clause.......................................................... 34
11.7 Alternative Dispute Resolution......................................... 35
11.8 Headings............................................................... 40
11.9 Governmental Compliance and Effect of Invalidity....................... 40
11.10 Assignability.......................................................... 40
11.11 Succession............................................................. 40
11.12 Government Compliance.................................................. 40
11.13 Governing Law.......................................................... 40
</TABLE>
<PAGE> 5
LICENSE AGREEMENT
This License Agreement ("Agreement") is entered into effective as of
April 26, 1996 (the "Effective Date") by and between RiboGene, Inc., a
California corporation with a principal place of business at 21375 Cabot
Boulevard, Hayward, California. 94545 ("RiboGene") and Abbott Laboratories, an
Illinois corporation with a principal place of business at 100 Abbott Park Road,
Abbott Park, Illinois 60064-3500 ("Abbott").
WHEREAS, RiboGene has a number of compounds already identified as
possessing fungicidal and/or fungistatic activity, and is experienced in
screening compounds and materials acting through a eukaryotic translation
mechanism, and Abbott is experienced in the discovery and development of
pharmaceutical products, including those with antifungal properties, and in
obtaining regulatory approval for and in commercializing such pharmaceutical
products; and
WHEREAS, the parties have entered into a Research Agreement (as defined
hereinbelow) under which they will collaborate in a Research Program (as defined
hereinbelow) directed to accelerating the discovery of new pharmaceutical and/or
plant protection products possessing antifungal activity and/or new diagnostic
products related to conditions caused by fungal infections and/or diseases, and
they desire that Abbott have a license, under the terms herein, for evaluation
and possible development and commercialization of Abbott Compounds (as defined
hereinbelow) and/or RiboGene Leads (as defined hereinbelow) for pharmaceutical,
diagnostic and/or plant protection uses relating to mycotic (fungal) infections
and/or diseases.
NOW THEREFORE, in consideration of the mutual covenants and promises
contained herein, Abbott and RiboGene agree as follows:
I. DEFINITIONS
1.1 "Abbott Compound" shall mean any synthetic chemical compound or
biological material, which compound or material:
A. is represented in compound libraries/collections owned or controlled
by Abbott and/or Abbott Affiliate (where 'Affiliate" is defined
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<PAGE> 6
hereinbelow) as of the Effective Date, whether or not the same compound or
material is represented in compound libraries/collections owned or controlled by
RiboGene and/or RiboGene Affiliate as of the Effective Date; or
B. is acquired by or prepared by Abbott independently of the Research
Program; or
C. is acquired or prepared by Abbott under the Research Program,
including any analog of any RiboGene Compound (as defined hereinbelow) prepared
by Abbott, but excluding any RiboGene Compound prepared by Abbott; or
D. is discovered or identified by or for Abbott based on criteria
developed under the Research Program;
which, in each case:
(a) has demonstrated antifungal activity during the Research Program
using RiboGene's translation inhibition screening assays, or using other
translation or non-translation inhibition screening assay(s) developed under the
Research Program, as the principal enabling screen; and
(b) demonstrates a [*] or higher IC(50) value in a mammalian in vitro
translation assay than that demonstrated in a fungal in vitro translation assay,
each assay existing at RiboGene as of the Effective Date, or demonstrates
similar selectivity advantage in another in vitro assay, developed by one party
or both parties during the Research Term (as defined hereinbelow) or agreed upon
by the JMT, over a measure from a corresponding mammalian assay; and
(c) demonstrates an MIC less than or equal to [*] agreed upon by the
JMT; or
E. is any salt, ester, amide, complex, chelate, hydrate, isomer,
stereoisomer, crystalline or amorphous form, prodrug, metabolite, metabolic
precursor, or analog of any of the above-included compounds or materials.
Abbott Compound does not include a compound or material provided to Abbott by
RiboGene under the Material Transfer Agreement between RiboGene and Abbott
effective June 7, 1995.
1.2 "Abbott Patent Rights" shall mean all patent applications filed in
any country of the world, including all divisions, continuations and
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- ----------------------------
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to
the omitted portions.
<PAGE> 7
continuations-in-part thereof, and all patents issuing therefrom, which are
owned, controlled or licensed to Abbott during the term of this Agreement,
including all additions, registrations, confirmations, renewals, extensions,
supplemental protection certificates, reexaminations and reissues thereof, that
claim one or more Abbott Compounds.
1.3 "Affiliate" shall mean, with respect to either party, any legally-
distinct corporation, firm, individual, or other form of business organization,
which directly or indirectly owns, controls, is controlled by, or is under
common control with, a party hereto. An entity shall be regarded as being in
control of another entity if the former entity has the direct or indirect power
to order or cause the direction of the policies of the other entity, whether
through ownership of fifty percent (50%) or more in the United States or thirty
percent (30%) or more outside the United States of the outstanding voting
securities of that entity, through other dominant equity ownership, or by
contract, statute, regulation, or otherwise.
1.4 "Calendar Year" shall mean any consecutive twelve (12)= month
period commencing on any January 1 and ending on the immediately-following
December 31, during the term of this Agreement. "Calendar Quarter" or "Quarter"
shall mean a three (3)-month period commencing on January 1, April 1, July I or
October 1, during the term of this Agreement.
1.5 "Confidential Information" shall mean all valuable, confidential
technical and/or commercial information, know-how or trade secrets, including
but not necessarily limited to development and/or commercialization plans and
strategies, marketing and sales information, patent applications not yet
published, and other information, data or plans relating to a party, which
information is provided by the party originally possessing the information
("Disclosing Party") to the other party ("Receiving Party"), which technical or
business information:
(a) is in writing or in other physical form, marked "Confidential"; or
(b) is disclosed originally by the Disclosing Party orally, visually
and/or in another intangible form, and identified as confidential,
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<PAGE> 8
then subsequently summarized and reduced to a writing or to another physical
form, marked "Confidential" and provided to the Receiving Party within one (1)
month from the original date of disclosure;
but shall not include information' which:
(c) is in or comes into the public domain without breach of this
Agreement; or
(d) can be shown to have been known to or is subsequently independently
developed by or for the Receiving Party, without benefit of the Disclosing
Party's Confidential Information; or
(e) is properly provided, without restriction, to the Receiving Party by
an independent third party; or
(f) is disclosed by the original Disclosing Party on a nonconfidential
basis to any independent third party.
1.6 "Field" shall mean the treatment, mitigation, cure, prevention,
detection, and/or monitoring of fungal (mycotic) infections or diseases, not
including those caused by Pneumocystis carinii, in humans, animals and/or plant
protection.
1.7 "IND" (Investigational New Drug Application) means an application
for an "Investigational Exemption for a New Drug' filed with the United States
Food and Drug Administration or any successor' drug-regulatory entity thereto
("FDA") or the corresponding application filed with the equivalent
pharmaceutical regulatory agency in France, Germany, Great Britain, Italy or
Japan.
1.8 "JOINT MANAGEMENT TEAM" or "JMT" shall mean a committee consisting
of three (3) official representatives appointed by each party hereto that shall
be the primary vehicle for oversight, coordination and modification of the
Annual Research Plans and recommendation(s) of resource reallocations in order
to better meet the objectives of the Research Program.
1.9 "Know-how" shall mean any and all nonpatented technical data,
drawings, documentation, and other information, in each case relating in some
way to the Field, which is owned by RiboGene as of the Effective Date or is
independently generated, acquired or licensed, with the right to sublicense, by
RiboGene during the term of this Agreement and
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which is not included in published patent applications and/or issued patents
within RiboGene Patent Rights (as defined hereinbelow). Know-how may relate to
protein translation (i.e., protein synthesis and mRNA translation), fungal
genetics, RNA stability, the identification and use of pathogen-specific
targets, high throughput screening assays, characteristics of desirable
translation inhibitors, or the development, formulation or marketing thereof,
and may include, without limitation:
(a) research techniques and equipment and modifications thereto,
protocols, processes, and results;
(b) chemical, toxicological, pharmacological, and preformulation
properties of compounds or materials independently owned by or licensed to
RiboGene prior to the Research Program and other translation inhibitors; and
(c) preclinical data and other information relating to the safety or
efficacy of compounds or materials Independently owned by or licensed to
RiboGene prior to the Research Program.
Know-how shall include nonpatented Program Information exclusively assignable to
RiboGene according to the provisions of Section 5.4, Section 6.3 and/or Section
6.4 of the Research Agreement, except for Program Inventions for which Abbott
does not have a nonexclusive license, according to the provisions of Section 6.4
of the Research Agreement. Know-how shall not include Program Information
assignable to or nonexclusively licensed by Abbott according to the provisions
of Section 5.4, Section 6.3 and/or Section 6.4 of the Research Agreement.
1.10 "NDA" (New Drug Application) means an application submitted to the
FDA or the equivalent pharmaceutical regulatory agency in the European Union
(or, if submitted individually until 1998, France, Germany, Great Britain or
Italy) 'or Japan, which contains complete details of the manufacture and testing
of a new drug, for purposes of obtaining regulatory approval to market such new
drug in such country or region, for a particular indication.
1.11 "Net Sales of Single Active Product(s)", by country, for each
particular Single Active Product (as defined immediately below), shall mean the
total or gross invoiced Sales (as defined hereinbelow) in a country, for the
applicable period, of Product(s) (as defined hereinbelow),
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for which one or more Abbott Compounds and/or RiboGene Leads are the sole
therapeutic or prophylactic active ingredient(s) ("Single Active product(s)"),
by Abbott, Abbott Affiliate, or Abbott sublicensee to non-Affiliate
distributor(s) or other third parties, less, where factually applicable,
"Deductions", according to Abbott's standard accounting practices, for:
(i) direct and indirect credits, allowances according to Abbott standard
practices, adjustments and refunds, including price adjustments, rejections and
returns of defective, damaged, outdated or recalled Products;
(ii) offered and taken trade and cash discounts, rebates, commissions,
charge-backs granted to drug wholesalers, management fees paid to group
purchasing organizations, price reductions, retroactive or otherwise, imposed by
governments or government agencies, and distribution fees in amounts customary
to the trade and as required to do business in that country;
(iii) importation, handling, special outbound packing or transportation
and insurance charges separately billed to the customer or prepaid and directly
chargeable to the Sale of Products; and
(iv) sales, excise, use, turnover, inventory, value-added and similar
taxes and/or duties specifically incurred with or imposed upon Sales of
Products, but not including net income tax.
1.12 "Net Sales of Combination Product(s)", by country, for each
particular Combination Product (as defined immediately below), shall mean, for
the applicable period, the lesser of (a) the gross invoiced Sales of the
particular Combination Product containing one or more other therapeutic or
prophylactic active ingredient(s) in addition to one or more Abbott Compounds
and/or RiboGene Leads ("Combination Product") by Abbott, Abbott Affiliate, or
Abbott sublicensee to non-Affiliate distributor(s) or other third parties, in
such country, less any applicable Deductions (as listed above in Section 1.11),
and (b) an amount determined by multiplying the number of grams of Abbott
Compound(s) and/or RiboGene Lead(s) sold in the form of Combination Product to
non-Affiliate distributor(s) or other third parties, in that country, for the
applicable period, by the average price per gram, in such country, of the
corresponding Single Active Product Sold to non-Affiliate distributor(s) or
other third parties in that country, which average price per gram shall
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be computed by dividing the Net Sales of such Single Active Product to
non-Affiliate distributor(s) or other third parties in that country, less any
applicable Deductions, for the applicable period, by the number of grams of
Abbott Compound(s) and/or RiboGene Lead(s) contained in such Net Sales.
If there were no Sales of the corresponding Single Active Product during the
applicable period in that country, then Net Sales of the particular Combination
Product by calculation (b) above shall be determined using the average price per
gram, in all countries in which a Valid Claim exists and the Single Active
Product is Sold, of such Single Active Product. If there were no Sales of the
corresponding Single Active Product during the applicable period in any country
in which a Valid Claim exists, then Net Sales of the particular Combination
Product, in that country, by calculation (b) above shall be determined by
multiplying the gross invoiced Sales of Combination Product, less any applicable
Deductions, by the standard production cost of Abbott Compound(s) and/or
RiboGene Lead(s) in the Combination Product (averaged, if necessary, to reflect
the proportionate standard production costs of the pro-rata share of each Abbott
Compound and/or RiboGene Lead contained in the Product) divided by the sum of
the standard production costs of all active ingredients in the Combination
Product.
1.13 "Net Sales of Delivery System Product(s)", by country, for each
particular Delivery System Product (as defined immediately below) shall mean,
for the applicable period, the number of units of either Single Active Product
or Combination Product, as applicable, sold in a drug delivery system comprising
the particular Single Active Product or Combination Product along with a device,
equipment, instrumentation or other components (not solely container(s) or
packaging) designed to accomplish or assist in the administration of such Single
Active Product or Combination Product, e.g., the Abbott ADD-Vantage(R) System
("Delivery System Product"), multiplied by the average price per unit of
Single Active Product or Combination Product, as applicable, when sold
separately to non-Affiliate distributor(s) or other third parties in that
country, less applicable Deductions (as listed above in Section 1.11), for the
applicable period.
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If there were no Sales of a Single Active Product or a Combination Product that
is incorporated within the particular Delivery System Product, as applicable,
during the particular period, in that country, then Net Sales of the specific
Delivery System Product shall mean the total or gross invoiced Sales in the
country, for the applicable period, of Delivery System Product to non-Affiliate
distributor(s) or other third parties, less, where factually applicable,
Deductions (as listed above in Section 1.11) and less an amount which represents
the proportionate economic value added by the delivery system, based on such
factors and in an amount determined by mutual agreement, using, if applicable,
existing precedents for the same or comparable delivery system(s).
1.14 "Net Sales of Pharmaceutical Products", shall mean the sum of the
aggregate Net Sale's of Single Active Product(s), the aggregate Net Sales of all
Combination Product(s) and the aggregate Net Sales of all Delivery System
Product(s), in each case for human pharmaceutical purposes, for the particular
period.
1.15 "Net Sales of Plant Protection Products", by country, shall mean
the Net Sales of Single Active Product(s), the Not Sales of all Combination
Product(s) and the Net Sales of all Delivery System Product(s), in each case for
plant protection purposes in that country, for the particular period.
1.16 "Net Sales of Diagnostic Products", by country, shall mean, for a
particular period, the total or gross invoiced Sales in that country, for that
period, of Product(s) for which the gross invoiced price includes an amount to
compensate Abbott, an Abbott Affiliate and/or Abbott sublicensee for the
amortized cost of an Instrument system, including services, and/or other
equipment supplied without additional charge to a customer, less any applicable
Deductions (as listed in Section 1.11), less the amount of the Sales reasonably
and demonstrably attributable solely to the instrument system, Including
services, and/or other equipment supplied to the customer, in accordance with
standard accounting practices of Abbott, consistently applied.
1.17 "Net Sale" when used without further modification, shall mean the
aggregate of Net Sales of Single Active Product(s), Net Sales of
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Combination Product(s), Net Sales of Delivery System Product(s), Net Sales of
Plant Protection Products and Net Sales of Diagnostic Products.
1.18 "Phase III Studies" shall mean a series of controlled pivotal
clinical trials, after completion of preliminary efficacy and dose-ranging
studies and after adequate safety data has been established for a Product, that
are necessary to obtain sufficient confirmatory efficacy and safety data for the
preparation and submission of an NDA for such Product for the human therapeutic
indication being investigated by the trials, and which are planned to involve a
sufficient number of patients who suffer from the condition for which the NDA is
to be submitted for submission of such NDA.
1.19 "Product" shall mean (a) any pharmaceutical formulation(s)
containing one or more Abbott Compounds and/or RiboGene Leads which is/are
intended and promoted for human or animal use; or (b) a diagnostic product
comprising one or more Abbott Compounds and/or RiboGene Leads that is intended
and promoted for the detection and/or monitoring of mycotic infections or
diseases in humans, animals or plant protection; or (c) a plant protection
formulation comprising one or more Abbott Compounds and/or RiboGene Leads that
is intended and promoted for the treatment, cure or prevention of mycotic
diseases or infections in plants.
1.20 "Program Inventions" shall mean all inventions, innovations,
improvements, ideas, discoveries, technology, know-how, methods, applications
and products (whether or not patentable) arising under the Research Program,
which are conceived, derived, reduced to practice, made or developed during the
term of and the four (4) months following conclusion of the Research Program by
one or more individuals who are employees of one of the parties at the time of
the inventive contribution of such individual(s). "Joint Program Inventions"
shall mean all inventions, innovations, improvements, ideas, discoveries,
technology, know-how, methods, applications and products (whether or not
patentable) arising under the Research Program, which are conceived, derived,
reduced to practice, made or developed during the term of and the four (4)
months following the conclusion of the Program by at least two individuals, at
least one individual of which is an employee, at the time of the inventive
contribution of such individual, of one of the parties hereto, and at least
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one individual of which is an employee, at the time of the inventive
contribution of such individual, of the other party hereto.
1.21 "Research Agreement" means the Research Agreement between RiboGene
and Abbott of even date which relates to the Research Program.
1.22 "Research Program" shall mean collaborative research activities
between Abbott and RiboGene, based on RiboGene intellectual Property, as revised
and/or extended by Program Inventions and/or Joint Program Inventions, that are
directed to the discovery and development of novel broad spectrum antifungal
compounds of clinical and commercial value in the Field. The Research Program
does not include either activities within Abbott's cell wall inhibition
antifungal program or any other non-translation inhibition-based antifungal
program within Abbott or activities within RiboGene's research targeted
specifically to Pneumocystis carinii infections or diseases.
1.23 "Research Term" shall mean the period beginning on the Effective
Date of the Research Agreement and expiring on the third (3rd) anniversary of
such date, unless otherwise terminated according to the provisions of Article IX
of the Research Agreement or extended by mutual written consent of the parties.
1.24 "RiboGene Compound" shall mean any synthetic chemical compound or
biological material that has demonstrated antifungal activity according to
RiboGene's translation inhibition screening assays, which
A. is either owned by or licensed, with permission to sublicense, to
Ribogene as of the Effective Date, including but not limited to a compound or
material provided to Abbott by RiboGene under the provisions of the Material
Transfer Agreement between RiboGene and Abbott effective June 7, 1995; or
B. is in-licensed by, with the right to sublicense, or acquired by
RiboGene during the Research Term and which does not correspond to an Abbott
Compound within Abbott's or an Abbott Affiliate's libraries/collections prior to
the date of acquisition by RiboGene; or
C. is any salt, ester, amide, complex, chelate, hydrate, isomer,
stereoisomer, crystalline or amorphous form, prodrug, metabolite, metabolic
precursor, or analog of any of the above included compounds or
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materials.
A RiboGene Compound does not include a compound or material defined as an Abbott
Compound according to the provisions of Section 1.1, or any compound licensed to
RiboGene pursuant to an agreement, effective September, 1993, among RiboGene,
Pharm-Eco Laboratories, Inc. and the University of North Carolina.
1.25 "RiboGene Intellectual Property" shall mean RiboGene Patent Rights
(as defined hereinbelow) and Know-how, as well as Program inventions and/or
Joint Program Inventions assigned exclusively to RiboGene according to the
provisions of Section 6.3 of the Research Agreement and Program Inventions
and/or Joint Program Inventions exclusively assigned to RiboGene and for which
Abbott has a nonexclusive license, according to the provisions of Section 6.4 of
the Research Agreement, or extensions or revisions of any of the above based on
jointly-owned Joint Program Inventions according to the provisions of Section
6.4 of the Research Agreement.
1.26 "RiboGene Lead" shall mean a RiboGene Compound which (a) in the
judgment of the JMT under the Research Program, demonstrates selective fungal
translation inhibition according to RiboGene's mycotic in vitro translation
assays and mammalian in vitro translation assays; and (b) demonstrates an MIC
equal to or less than [*] agreed upon by the JMT; and (c) has a chemical
structure amenable to modification through medicinal or combinatorial
chemistry, as judged by the JMT. A compound or material shall cease to be a
RiboGene Lead if, after [*] periods following the termination or expiration of
the Research Term, Abbott has not Identified such compound or material to
RiboGene as among the [*] RiboGene Leads that Abbott has selected as being
those to which Abbott desires to retain exclusive rights, to the extent that
RiboGene can grant such exclusive rights.
1.27 "RiboGene Patent Rights" shall mean all patent applications and
patents in any country of the world, which relate in some way to the Field and
are exclusively owned by or licensed, with the right to sublicense (which right
RiboGene shall make every reasonable effort to
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obtain), to RiboGene during the term of this Agreement and during the six
(6)-month period thereafter. RiboGene Patent Rights cover one or more compounds
or materials useful in the Field, the preparation and/or use thereof, or other
compositions and/or technology useful in the Research Program, and include all
divisions, continuations, continuations-in-part, additions, registrations,
confirmations, renewals, extensions, supplemental protection certificates,
reexaminations and reissues of the above patent applications and patents.
RiboGene Patent Rights include patent applications and patents assigned to
RiboGene according to the provisions of Section 6.3 of the Research Agreement,
but do not include patent applications and patents assigned to RiboGene,
according to the provisions of Section 6.4 of the Research Agreement, in which
Abbott has a nonexclusive license, under the provisions of Section 6.4. RiboGene
Patent Rights include, but are not necessarily limited to, those patent
applications and/or patents identified in Exhibit A, attached to this License
Agreement and updated by RiboGene, as justified by filing, prosecution, issuance
and/or maintenance circumstances, and reattached hereto.
1.28 "Sale" or "Sold" shall mean the transfer for value (cash and/or
otherwise) in an arm's-length transaction of a Product in any country by Abbott,
Abbott Affiliate, or Abbott sublicensee to a nonaffiliated third-party
distributor, agent or end user after obtaining all necessary government
approvals applicable to such sale. Sales shall be accounted for when shipped,
and credits and refunds shall be accounted for when booked by Abbott in
accordance with Abbott's standard accounting practices. The date of the "First
Commercial Sale" in any country shall be the date of the shipment for such Sale.
1.29 "Valid Claim" shall mean a claim of any issued, unexpired patent
contained within RiboGene Patent Rights or Abbott Patent Rights, which has not
been ruled invalid or unenforceable by a final, unappealed or unappealable
decision of a court of competent jurisdiction or of an administrative agency
having authority over patents and which covers an Abbott Compound or RiboGene
Lead or which covers the use of an Abbott Compound or RiboGene Lead, which use
claim effectively precludes any sale of a compound or material, which is
identical to such Abbott Compound or RiboGene Lead, by any third party, for any
human
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pharmaceutical, animal and/or diagnostic purpose in the Field.
II. LICENSE GRANTS
2.1 Research and Development Purposes RiboGene hereby grants to Abbott
a nonexclusive, worldwide right and license Under RiboGene Intellectual
Property, with the right to grant sublicenses without RiboGene's approval to
Abbott Affiliate(s) and otherwise with RiboGene's approval, which approval shall
not be unreasonably withheld, to identify, make, have made, import, modify, use,
develop, test and file for regulatory approval on Abbott Compounds and/or
RiboGene Compounds for the benefit of Abbott's discovery, development and
commercial preparation of Abbott Compounds and/or RiboGene Leads for use in the
Field.
2.2 Program Inventions RiboGene hereby grants to Abbott a nonexclusive,
perpetual worldwide license to make, have made, import, use, and/or develop any
Program Invention(s), for which one or more employees of RiboGene is/are the
only Inventor(s) of such Program Invention and for which Abbott has a
nonexclusive license, according to the provisions of Section 6.4 of the Research
Agreement, and, subject to the provisions of Section 9.5 of the Research
Agreement, a nonexclusive right and license, during the Research Term, to
practice any Program Invention and/or Joint Program Invention assigned to
RiboGene under the provisions of Section of 6.3 of the Research Agreement.
2.3 Compounds RiboGene hereby grants to Abbott a perpetual, worldwide
right and license under RiboGene Intellectual Property, as applied specifically
and solely to Abbott Compounds and/or RiboGene Leads, with the right to grant
sublicenses, to make, have made, modify, import, use, promote, offer to sell and
sell Abbott Compounds and/or RiboGene Leads for any purpose. Notwithstanding the
grant above, such license shall expire [*] following the expiration or
termination of the Research Term with respect to every RiboGene Lead other than
the [*] identified by Abbott to RiboGene as to be retained by Abbott. This
license shall be sole and exclusive to Abbott, except that, during the Research
Term, RiboGene shall also retain such rights under RiboGene Intellectual
Property as are necessary to fulfill the Research Program.
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III. MILESTONE AND ROYALTY PAYMENTS
3.1 Milestone Payments As consideration for the licenses and rights
granted in this Agreement, Abbott shall make milestone payments to RiboGene, by
Product for human pharmaceutical use in the Field, for development of such
Product by Abbott, Abbott Affiliate or Abbott sublicensee for such human
pharmaceutical purposes, as follows:
(a) [*] within twenty (20) business days from the filing date by
Abbott, Abbott Affiliate, or Abbott sublicensee, of the first [*] with such
Product; and
(b) [*] within twenty (20) business days of the initiation of the
first [*] with such Product, but if, and only if, [*] for such Product and no
[*] not later than twenty (20) business days following Abbott's first [*] for
such Product, concurrent with the payment according to the provisions of Section
3.1(c); and
(c) [*] within twenty (20) business days from Abbott's first [*] of
such Product; and
(d) [*] within twenty (20) business days of the first [*] of such
Product.
All payments made hereunder shall be nonrefundable, but if the
particular Product is withdrawn from further development, from
commercialization, or from sale, and Abbott substitutes a different Product with
a similar human pharmaceutical utility profile, as determined in reasonable good
faith by Abbott, into the regulatory process in place of such withdrawn Product,
within four (4) years of the withdrawal of the earlier submission, Abbott shall
receive credit for milestone payments previously made for the withdrawn Product
and shall be obligated to pay only that/those milestone payment(s) which had not
been made with respect to this substitute human pharmaceutical Product.
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Abbott shall pay only one series of milestone payments for all human
pharmaceutical Products in the Field containing a specific Abbott Compound or
RiboGene Lead, regardless of the number of dosage forms, formulations and/or
indications for which Abbott develops and seeks marketing approval for such
Products.
All milestone payments made with respect to one or more Products hereunder shall
be fully creditable against twenty-five percent (25%) of the royalty payments
due for any particular royalty period, according to the provisions of Sections
3.2 and 4.3 hereof, with respect to Sales of such Product(s) until the milestone
payments have been fully credited and taken by Abbott.
3.2 Royalty Payments. As additional consideration for the licenses and
rights granted in this Agreement, Abbott shall pay, or in the case of Sales by
Abbott Affiliate(s) and/or sublicensee(s), cause such Abbott Affiliate(s)
and/or sublicensee(s) to pay, to RiboGene royalties on Net Sales of
Pharmaceutical Product(s) in the Field, by Abbott, Abbott Affiliate, or Abbott
sublicensee, from the date of First Commercial Sale of any Product(s) Sold in a
pharmaceutical formulation for human use in the Field, on a country-by-country
basis in and for countries in which, but for this license, the Sale of such
Product(s) for human pharmaceutical use would infringe at least one Valid Claim,
for the life of the RiboGene or Abbott patent(s) comprising such Valid Claim(s),
according to the following:
(a) on annual (Calendar Year) Net Sales of Pharmaceutical Products
worldwide in the Field of up to and including an aggregate of [*], a royalty of
[*] of such Net Sales; plus
(b) on annual Net Sales of Pharmaceutical Products worldwide in the
Field of more than [*] but less than or equal to [*] a royalty of [*] of such
Net Sales; plus
(c) on annual Net Sales of Pharmaceutical Products worldwide in the
Field of more than [*] but less than or equal to [*] a royalty of [*] of such
Net Sales; plus
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(d) on annual Net Sales of Pharmaceutical Products worldwide in the
Field of more than [*] but less than or equal to [*] a royalty of [*] of such
Net Sales; plus
(e) on annual Net Sales of Pharmaceutical Products worldwide in the
Field of more than [*] a royalty of [*] of such Net Sales.
As an example, if Abbott, Abbott Affiliates, and/or Abbott
sublicensees have aggregate Net Sales of Pharmaceutical Products in the Field in
a given Calendar Year equivalent to [*] Abbott would owe RiboGene royalties of
[*] on the first [*] of such Net Sales (resulting in royalties due of [*], on
the second [*] of such Net Sales [*] on the next [*] of such Net Sales [*] on
the next [*] of Net Sales [*] on the final [*] of such Net Sales [*] for a total
of royalties due for such Calendar Year of [*].
If a Valid Claim does not or does not yet exist in a country in which a Product
is Sold In the Field, and for so long as no other sale of the same chemical or
biological entity is being made by any independent third party, Abbott, or
Abbott Affiliate(s) and/or sublicensee(s), shall pay to RiboGene royalties on
Net Sales of Pharmaceutical Products in the Field, in such country, according to
the provisions above, but the amount used as "gross Invoiced Sales" in the
formulae of Sections 1.12 through 1.14, for purposes of calculating royalties in
such case(s), shall be one-half (1/2) of the actual gross invoiced Sales amount,
until such a Valid Claim exists in such country or until the expiration of three
(3) years from the First Commercial Sale in such country.
Notwithstanding the foregoing, after Abbott has paid RiboGene a total of Eighty
million U.S. Dollars (USD80,000,000) in cumulative royalty payments, not
including creditable milestone payments, according to the provisions of Section
3.2 in connection with Abbott's, Abbott Affiliates', and/or Abbott's
sublicensees' Sales of Product(s) In the Field,. Abbott
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shall pay RiboGene [*] on all of Abbott's, Abbott's Affiliates' and/or Abbott's
sublicensees' Net Sales of Pharmaceutical Products in the Field, by country, for
the remainder of the term that a Valid Claim exists in that country.
As still additional consideration for the licenses and rights granted in this
Agreement, Abbott shall pay to RiboGene royalties on Net Sales of Diagnostic
Product(s) in the Field, Net Sales of Plant Protection Product(s) in the Field
and Net Sales of Single Active Product(s), Net Sales of Combination Product(s)
and Net Sales of Delivery System Product(s) for animal uses in the Field, by
Abbott, Abbott Affiliate, or Abbott sublicensee, from the date of first Sale of
any such Product(s) for such purposes, on a country-by-country basis in and for
countries in which at least one Valid Claim claiming one or more of the Abbott
Compound(s) and/or RiboGene Lead(s) within such Product(s) or the use of such
Abbott Compound(s) and/or RiboGene Lead(s) which provides Abbott, Abbott
Affiliate and/or Abbott sublicensee exclusivity for the Sale of such Product(s)
for such purposes has issued, for the life of the RiboGene or Abbott patent(s)
comprising such Valid Claim(s), according to the following:
(i) a royalty of [*] on annual (Calendar Year) Net Sales for such
purposes worldwide of up to and including an aggregate of [*]; plus
(ii) on annual Not Sales for such purposes worldwide of more than [*] a
royalty of [*] of such Net Sales.
In all cases, Abbott shall pay only one royalty on the Sale of any individual
Product.
Still further, Abbott shall owe RiboGene: (a) on the Sales of Products that are
approved, promoted and Sold for multiple indications, royalties, according to
the provisions of this Section 3.2, on only the portion of the Sales of such
Products comprising at least one Abbott Compound and no RiboGene Lead which is
to or in the Field, as established by a recognized market research firm used by
Abbott, according to Abbott's standard practices, and on all Sales of such
Products comprising at least one RiboGene Lead; (b) on Sales of Products that
are approved and Sold for one
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or more indications outside of the Field, full royalties, according to the
provisions of this Section 3.2, on the Sales of Products comprising at least one
RiboGene Lead, and no royalties on Sales of Products comprising at least one
Abbott Compound but no RiboGene Lead.
3.3 Uses Within Abbott, Abbott Affiliates, and/or Abbott Sublicensees
In the event that a Product is used for human pharmaceutical, veterinary
pharmaceutical, diagnostic or plant protection commercial purposes by Abbott, or
an Abbott Affiliate or Abbott sublicensee, Net Sales for such transfer shall be
calculated as set forth in Sections 1.12 through 1.14, 1.16 and 1.17 above, and
royalties shall be calculated according to the provisions of Section 3.2, except
that the gross "sales" price for purposes of such calculation shall be the
average gross sales price for such Product Sold for such purposes in arms-length
Sales to non-Affiliate distributor(s) or customers by Abbott, Abbott Affiliate
or Abbott sublicensee in the country in which the transfer and/or use occurred
during the Calendar Quarter in which such Product was transferred for the
particular purpose(s) to such entity.
IV. RECORDS AND ROYALTY PAYMENTS
4.1 RECORDS Abbott shall, and shall cause Abbott Affiliates, and
Abbott sublicensees to, keep and maintain true and accurate records consistent
with the letter and spirit of this Agreement. Such records shall be consolidated
semiannually in Abbott headquarters and open to inspection by an independent
certified public accountant selected by RiboGene, and reasonably acceptable to
Abbott, that has been retained at RiboGene's expense. Such accountant may review
such records once in any Calendar Year within two (2) years after the royalty
period to which such records relate, during normal business hours, with at least
thirty (30) business days' written notice. Such accountant shall execute a
reasonable nondisclosure agreement with Abbott prior to commencing any
inspection, and shall have the right to examine the records kept pursuant to
this Agreement solely for the purpose of verifying Abbott's royalty obligations
hereunder, and shall report the findings of such examination of records to
RiboGene as well as to Abbott. If the audit shows that royalties actually due
exceed those previously reported by more than [*], Abbott shall pay all
reasonable expenses of the audit.
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* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to
the omitted portions.
<PAGE> 23
4.2. Exchange Calculation Royalties due shall be calculated on the
aggregate of Net Sales for the applicable purpose, by country, according to the
provisions of Section 3.2, in the national currency of each such country,
converted to U.S. dollars in accordance with Abbott's standard procedures for
converting Sales from the foreign currency in which the Sales were made, which
procedures shall conform to generally accepted accounting principles.
4.3. How Paid Royalties shall be paid quarterly to RiboGene by Abbott
on Net Sales by Abbott, Abbott Affiliates, and/or Abbott sublicensees, in U.S.
dollars within sixty (60) calendar days after the last day of March, June,
September and December during the term of this Agreement and within sixty (60)
calendar days, for domestic Sales, and ninety (90) calendar days, for
international Sales, after the expiration or termination of this Agreement to
fulfill obligations arising from any partial Quarter at the end of this
Agreement, using royalty rates. applicable under Section 3.2 to the aggregate of
total Calendar Year-to-date Net Sales by Abbott, Abbott Affiliate(s), and/or
Abbot sublicensee(s) through the relevant Quarter or partial Quarter, accruing
on Sales during the preceding Quarter. Royalty payments due to RiboGene
hereunder shall be, at Abbott's option, paid by electronic funds transfer or
wire transferred for the account of RiboGene, Inc. [*]
4.4. Royalty Statement Concurrently with Abbott's payment of its
royalty obligations to RiboGene, Abbott shall mail to RiboGene, according to the
provisions of Section 11.1, a statement which shall reference the Calendar
Quarter and Calendar Year for which the payment was made and shall set forth the
payment made; each Product Sold by country in which a Valid Claim exists, and
all other countries until the expiration of [*] years from the First Commercial
Sale; the Net Sales for human pharmaceutical veterinary pharmaceutical,
diagnostic and/or plant protection purposes in that country, as applicable,
expressed in local currency; the exchange rates used; Net Sales by such country
and aggregated for all countries in which a Valid Claim exists, or as otherwise
due, according to the provisions of the third paragraph of
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* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to
the omitted portions.
<PAGE> 24
Section 3.2, which relates to Sales in countries in which a Valid Claim does not
exist, expressed in U.S. dollars for the relevant Calendar Quarter; as well as
the respective Calendar Year-to-date total Net Sales, divided as by quarterly
report categories above, through the relevant Calendar Quarter; the applicable
royalty rate(s); and royalties payable in U.S. dollars for the relevant
Calendar Quarter.
4.5 Withheld Taxes Abbott may withhold from all royalty payments any
taxes lawfully imposed and required to be withheld on such payments by the
government of any jurisdiction in which Abbott, Abbott Affiliate and/or Abbott
sublicensee sells Product(s). All taxes so withheld shall be paid to the
appropriate government entity for the account of RiboGene and Abbott shall
promptly forward to RiboGene all tax receipts evidencing payment of such taxes.
V. PATENT RESPONSIBILITIES
5.1 RiboGene Patent Prosecution and Maintenance RiboGene will, at its
expense, using counsel of its choice, diligently prosecute claims in and
maintain patent applications and patents included in RiboGene Patent Rights in
Australia, Canada, France, Germany, Great Britain, Italy, Japan, Mexico, Spain
and the United States, and other countries agreed upon in good faith by RiboGene
and Abbott, and will timely provide Abbott with copies of all relevant
documentation, which copies and information Abbott shall treat as RiboGene
Confidential Information, in order to advise Abbott of the prosecution of the
applications included in RiboGene Patent Rights. RiboGene may, at any time,
assign any patent(s) or patent application(s) included in RiboGene Patent
Rights, or any extraordinary proceeding relating to such patent(s) or patent
application(s), to Abbott and thereafter RiboGene will fully cooperate with
Abbott in actions which Abbott decides to take with respect to such patent(s) or
patent application(s), and the country in which such patent(s) exists or such
patent application(s) is/are filed shall be thereafter considered a country in
which no Valid Claim exists.
5.2 Program Invention Patent Prosecution and Maintenance According to
the provisions of Article VI of the Research Agreement, Abbott shall have sole
responsibility, employing standards and criteria no
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less rigorous than it employs with respect to the protection of its own
inventions of similar scientific and commercial value, for preparing, in
cooperation with RiboGene's designated patent counsel, filing (domestic and
foreign), prosecuting, issuing, maintaining, defending and enforcing patent
applications and/or patents covering every Program Invention and/or Joint
Program Invention assigned, either solely or jointly, to Abbott or
nonexclusively licensed to Abbott by RiboGene. Abbott shall keep RiboGene fully
aware of the filing and status of and involved with pertinent decisions with
respect to every such patent application and/or patent, shall fully consider
RiboGene's interests and suggestions with respect to the scope and content of
such applications and/or patents, and shall assume all costs associated with all
such patent applications and/or patents in all jurisdictions which it continues
to have an interest.
5.3 Infringement Defense Abbott shall have responsibility, with
RiboGene's cooperation and knowledge, for the defense of any patent infringement
claim, lawsuit or other action brought by any third party against Abbott arising
out of Abbott's development, testing, manufacture, use, marketing or sale of
Products or Abbott's Affiliate's and/or sublicensee's marketing or sale of
Products in any country. If RiboGene Intellectual Property is in jeopardy of
being adversely affected by any resolution or settlement of such action,
RiboGene may participate in any such actions at its option and expense.
5.4 Patent Infringement by Third Parties If either party obtains
knowledge that any independent third party is infringing any patent included in
RiboGene Patent Rights, the party obtaining the knowledge shall advise the other
and Abbott and RiboGene shall consult on a reasonable course of action. Abbott
may, but is not obligated to, institute suit to stop such infringement and
RiboGene shall cooperate fully with Abbott and its counsel in the prosecution of
any such suit filed by Abbott. If Abbott decides not to bring suit and so
advises RiboGene of such decision, or if Abbott fails within six (6) months
after notice thereof either to terminate such infringement or to institute suit,
RiboGene may, but is not obligated to, institute suit against the infringing
party. The party bringing the action shall be entitled to retain, from any
recovery which may be obtained therein, its out-of-pocket litigation costs;
Abbott shall then be entitled to recover its lost profits; RiboGene shall then
be
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entitled to recover lost royalties; and the remainder will be divided equally
between the parties. If a suit brought by Abbott must include RiboGene as a
party, RiboGene will permit itself to be joined in such suit and RiboGene will
cooperate fully in the prosecution of any such suit filed by Abbott, at Abbott's
expense. Each party shall always have the right to be represented by counsel of
its own selection in the protection of RiboGene Patent Rights in any suit
instituted by the other party for infringement, and shall have full access to
all proceedings, documents and information held, developed or obtained in any
such suit.
5.5 Patent Marking Abbott shall mark or shall have marked in an
appropriate manner all containers or packages of Products Sold by or for Abbott,
Abbott Affiliate and/or Abbott sublicensee with the appropriate statutory patent
notice for the particular country to indicate that patent coverage has been
obtained or that patents are pending.
5.6 Extensions RiboGene shall, if Abbott cannot legally, apply for and
diligently seek the maximum extension to which it is entitled, of the term of
any patent included in RiboGene Patent Rights under the Drug Price Competition
and Patent Term Restoration Act of 1984, EEC Council Regulation No. 1768/92 and
comparable laws of other jurisdictions. RiboGene shall notify Abbott of its
intent and Abbott shall supply all relevant documents in its possession and
cooperate in all reasonable ways to assist RiboGene in such efforts. RiboGene
shall provide Abbott with copies of its relevant documents related to these
applications.
VI. PRODUCT DEVELOPMENT AND PROMOTION
6.1 Development and Approvals Abbott and/or, if appropriate, any
Affiliate or sublicensee, shall at such entity's own expense, be solely
responsible for the conduct of all appropriate development activities for
Product(s) and the initiation and pursuit of all necessary registrations and
pricing approvals for marketing Product(s).
6.2 Trademarks Abbott is entitled to promote, market and sell
Product(s), or sublicense others, according to the provisions of Article II, to
promote, market and sell Product(s), under trademarks chosen and owned by
Abbott, or its sublicensee, but approved by RiboGene, which
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approval shall not be unreasonably withheld.
6.3 Notification of First Commercial Sale Abbott shall notify RiboGene
at least thirty (30) days prior to each anticipated First Commercial Sale of a
Product in the United States, Great Britain, France, Germany, Italy or Japan.
VII. CONFIDENTIALITY
7.1 Confidentiality and-Nonuse Abbott and RiboGene agree that, for a
period of ten (10) years from the Effective Date, each will treat as
confidential, limiting access to the Receiving Party employees, and
confidentiality-bound consultants who must know information for purposes
anticipated by this Agreement, and otherwise using at least the same internal
security procedures and at least the same degree of care that it uses to protect
its own confidential, proprietary information, but in no event less than
reasonable care, to prevent the other party's Confidential Information from
entering the public domain or falling into the hands of independent third
parties, or from being used for its own benefit or the benefit of any third
party, except for purposes of this Agreement. No right to use, or any title or
license to the other party's Confidential Information, other than the right to
use such Confidential Information for purposes of this Agreement, shall vest in
the Receiving Party by virtue of disclosure, or the existence of this Agreement.
Should either party use one or more consultants or collaborators for purposes
of this Agreement, that party shall execute appropriate confidentiality
agreements with any such third party consultant(s) or collaborator(s) in order
to protect the secrecy of the other party's proprietary information.
7.2 Required Disclosure If either party is required by a governmental
regulatory agency or court of competent jurisdiction to disclose either the
other party's Confidential Information, or to disclose other details of this
Agreement or of the Research Agreement, the party subject to such requirement
shall inform the other party as soon as practical of such requirement, shall
reasonably cooperate with the other party in efforts such other party may
decide to take to try to protect its Confidential Information, and shall
release such Confidential Information or other details in response to such
requirement only to the limited extent
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required by such authority.
7.3 Return of Confidential Information Upon expiration of this
Agreement, and the request of the original Disclosing Party, or upon early
termination hereof, the Receiving Party, shall, within one (1) month of such
request or early termination, return or deliver all copies of the Disclosing
Party's Confidential Information, which Confidential Information is then in the
Receiving Party's possession to the Disclosing Party, but the Receiving Party
may retain one (1) complete documentation copy of that Confidential Information
for archival purposes, only to assure compliance with this Agreement, but shall
not thereafter use or disclose any of the Disclosing Party's Confidential
Information or claim any rights thereto.
7.4 Nondisclosure of Third Party Confidential Information Neither party
shall disclose to the other any information which is confidential and/or
proprietary to any independent third party, to the best of its knowledge.
7.5 Publicity Except as permitted under Section 7.6, neither party
shall make any press release, or create any advertising, sales or other
promotional literature referring to this Agreement or the relationship
hereunder, or, except as required by applicable laws or regulations, make any
other public written or oral disclosure or statements relating to the Research
Agreement or the relationship between the parties created by this Agreement,
including stating, implying or suggesting that any form of joint venture,
affiliation or other association exists as a result of this Agreement between
RiboGene and Abbott, without the prior written approval of the other party,
which approval shall not be unreasonably withheld.
7.6 Permitted Disclosure Abbott may disclose such information related
to this Agreement as is essential to enable Abbott to carry out the evaluation
and/or development of any product, process or service discovered or developed
employing results of the Research Program or to secure a governmental approval
therefor.
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<PAGE> 29
VII. WARRANTIES AND LIMITATIONS ON RIGHTS
8.1 RiboGene Warranties RiboGene hereby represents and warrants to
Abbott that, as of the Effective Date: (a) RiboGene has all the requisite
resources power and authority to execute, deliver and perform this Agreement;
(b) the terms of this Agreement are not inconsistent with any other contractual
and/or legal obligations it may have, or with its policies or the policies of
any entity with which it is associated; (c) RiboGene believes to the best of its
knowledge, that it owns or otherwise has all necessary rights to RiboGene
Intellectual Property in existence as of the Effective Date, and will own or
otherwise have all necessary rights to the other RiboGene Intellectual Property
on which Abbott may reasonably rely during the term of this Agreement; (d) it
has not engaged and shall not engage In any act inconsistent with this
Agreement, particularly that would allow any third party, Including any
government or government agency, to acquire, own or possess any right or.
Interest Inconsistent with Abbott's rights under this Agreement, except in
connection with any Small Business Innovative -Research Grant(s) received by
RiboGene from the National Institutes of Health prior. to or during the Research
Term; and (e) this Agreement has been duly authorized and, when executed and
delivered by RiboGene shall constitute a legal, binding obligation, enforceable
against RiboGene, according to its terms.
8.2 Limitation on Warranties RiboGene makes no representation or
warranty that the RiboGene Compounds identified to Abbott by RiboGene are novel
entities or will not Infringe the patent rights of others.
8.3 Disclaimer Abbott and RiboGene each understands that neither party
can guarantee the reliability of its research findings and conclusions, and
therefore, except as expressly set forth in this Agreement, NEITHER PARTY HAS
MADE OR MAKES ANY GUARANTEES AND EXTENDS ANY WARRANTIES OF ANY KIND, EITHER
EXPRESS OR IMPLIED, EXCEPT AS EXPRESSLY PROVIDED HEREIN. THERE ARE NO EXPRESS OR
IMPLIED WARRANTIES OF DESIGN, MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE, OR THAT ANY RIBOGENE OR ABBOTT COMPOUNDS IDENTIFIED IN THE RESEARCH
PROGRAM WILL NOT INFRINGE ANY PATENT, COPYRIGHT, TRADEMARK OR OTHER INTELLECTUAL
PROPERTY RIGHTS OF ANY INDEPENDENT THIRD PARTY. FURTHER, THERE ARE NO OTHER
EXPRESS
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OR IMPLIED WARRANTIES ARISING FROM THE COURSE OF DEALING, USAGE OR TRADE
PRACTICES, OR OF ANY OTHER KIND.
8.4 Limitations on Rights Nothing in this Agreement shall be construed
as:
(a) conferring rights to use in advertising, publicity, promotional
or sales literature the name of the other party or anything relating to the
Research Program, without the prior written consent of the other party in each
instance; or
(b) granting, by implication, estoppel, or otherwise as a result of
this Agreement, any activities hereunder or the relationship of the parties, any
license, title, ownership or other rights to the other party's Confidential
Information or under patents or know-how of the other party except as necessary
to accomplish the purposes of this Agreement or except as explicitly provided
herein.
Each party acknowledges that by virtue of this Agreement it acquires only such
rights as set forth under the terms and conditions of this Agreement.
IX. LIABILITIES AND INDEMNITY
9.1 Liabilities Each party shall assume the responsibility for and will
pay all costs and expenses (including reasonable attorneys' fees and expenses of
litigation) related to all suits and claims for losses, damage to property,
including environmental, and injury or death to any persons, including employees
of either, arising out of (a) any failure to strictly adhere to safety
instructions, precautions and information provided by the other party and other
generally-recognized safety practices for the storage, handling, use and/or
disposal of any biological, chemical or other materials under or resulting from
this Agreement or the Research Agreement; (b) any use of information or
materials provided under this Agreement, except in reliance on a willful or
grossly negligent misrepresentation or act of the other party; or (c) any
noncompliance or breach of this Agreement or other willful or negligent act or
omission on its part in the performance of activities and/or obligations under
this Agreement. EXCEPT AS SET FORTH IN SECTION 9.2, IN NO EVENT SHALL EITHER
PARTY BE LIABLE TO THE OTHER PARTY FOR LOST PROFITS OR ANY CONSEQUENTIAL,
SPECIAL, INCIDENTAL, OR INDIRECT DAMAGES OF SUCH
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OTHER PARTY, HOWEVER CAUSED AND ON ANY THEORY OF LIABILITY, ARISING OUT OF THIS
AGREEMENT.
9.2 Indemnification Each party (the "Indemnifying Party") shall defend
the other party and such other party's agents, Affiliates, employees, officers,
directors, shareholders and permitted successors and assigns (collectively, the
"Indemnified Parties") against any claim made against any or all of the
Indemnified Parties by any third party, to the extent that such claim arises out
of any negligent, reckless or intentionally wrongful act or omission of the
Indemnifying Party or any breach of this Agreement by the Indemnifying Party.
The Indemnifying Party shall either settle such claim or pay all damages awarded
against any or all of the Indemnified Parties by a court of competent
jurisdiction as a result of such claims, but no indemnification shall
necessarily be provided for such claim if the particular Indemnified Parties do
not notify the Indemnifying Party promptly in writing of the claim, give the
Indemnifying Party the exclusive control of the defense and settlement thereof,
and provide all reasonable assistance in connection with the defense or
settlement thereof, at the Indemnifying Party's expense.
9.3 Abbott Indemnification Abbott shall indemnify, defend and hold
harmless RiboGene, its officers, directors, employees, Affiliates, agents, and
permitted successors and assigns, against any liability, loss or expense
(including reasonable attorneys' fees and expenses of litigation), damage to
property, including environmental, and death or injury to any persons, including
its employees, incurred by or imposed upon any or all of the above in connection
with any claims, suits, actions, demands or judgments arising out of (a)
Abbott's use of information provided by RiboGene hereunder, or Abbott's use,
handling, storage or disposal of any Abbott or RiboGene Compound(s) or
Product(s), except in either case, as results from RiboGene's negligence or
intentional misrepresentation or wrongdoing; and/or (b) any theory of product
liability (including, but not limited to, actions in the form of tort, warranty,
or strict liability) concerning any product, process or service discovered or
developed employing results of the Research Program. RiboGene shall, however,
provide Abbott with assistance and/or information, at Abbott's expense, with
respect to any charge, claim, investigation or proceeding by any third party or
federal, state or local
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governmental authority of competent jurisdiction related to Abbott or RiboGene
Compound(s) or Product(s) or uses thereof according to this Agreement.
X. TERM AND TERMINATION
10.1 Term This Agreement shall be effective upon the date the later
party to sign executes it (which date shall also be entered on page 1 above) and
shall continue in effect through the expiration or termination of Abbott's
obligations hereunder, unless extended in writing in accordance with the
provisions of Section 10.2. Upon the later of the expiration of the
last-to-expire patent within RiboGene Intellectual Property which contains a
Valid Claim or seventeen and one-half (17.5) years from the Effective Date, the
licenses granted under Sections 2.2 and 2.3 to Abbott and Abbott's Affiliates
shall be fully paid-up.
10.2 Possible Extension Upon the mutual agreement of the parties, this
License Agreement may be extended for a period and under such other provisions
and/or amendments to the provisions of this Agreement, to be agreed upon in good
faith negotiations between the parties.
10.3 Termination Without Breach Prior to the expiration of this License
Agreement, Abbott may terminate it in its entirety without cause upon thirty
(30)-days written notice to RiboGene.
10.4 Effect of Breach In the event of a breach by RiboGene of any
material provision of this Agreement, or default by Abbott of any of Abbott's
financial obligations to RiboGene or a material breach by Abbott of Abbott's
confidentiality obligations hereunder, the aggrieved party shall give the party
in breach or default thirty (30)-day written notice to cure or substantially
cure such breach or default. If the breach or default is not cured or not
substantially cured within such thirty (30)-day period, the aggrieved party
shall immediately submit any dispute raised in a response to the aggrieved
party's written notice to the Alternative Dispute Resolution provisions of
Section 11.7, and only if the other party fails to honor the resolution of the
Alternative Dispute Resolution procedures may the aggrieved party terminate this
Agreement upon giving final written notice to the other party.
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10.5 Effect of Bankruptcy or Agreement Revision Abbott may terminate
this Agreement upon the filing of a voluntary petition in bankruptcy by RiboGene
or a third party's filing of an involuntary petition in bankruptcy with respect
to RiboGene, which involuntary petition is not dismissed within forty-five (45)
days after the filing thereof, or if removal of a material part or parts of this
Agreement which are found to be void, invalid or unenforceable according to the
provisions of Section 11.9 would so substantially impair the value of the whole
Agreement to that party as to make continuance impractical.
10.6 Consequences of Termination Expiration or termination of this
Agreement by either party shall not affect the rights and obligations of the
parties that have accrued prior to the effective date of termination of this
Agreement.
XI. MISCELLANEOUS
11.1 Notices All notices required or permitted hereunder shall be
transmitted, or at least immediately affirmed, in writing by facsimile, followed
by confirmation of that facsimile either by registered or certified mail,
postage prepaid, return receipt requested, or by overnight courier, addressed
as follows, or to such other address as may be designated from time to time by
notice given by the respective party:
If to Abbott: Abbott Laboratories
100 Abbott Park Road
Abbott Park, Illinois 60064-3500
Facsimile No.: (847) 938-5383
Attention: President, Pharmaceutical Products Division
cc: Vice President, Pharmaceutical Discovery
cc: Legal Division
If to RiboGene: RiboGene, Inc.
21375 Cabot Boulevard
Hayward, California 94545
Facsimile No.: (510) 293-2596
Attention: President and CEO
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11.2 Independence of Parties The status of each party under this
Agreement is that of an independent contractor, and neither party has the right
or authority to assume or create any obligation, accept legal process, make
commitments, incur any charges or otherwise bind or act on behalf of the other
or limit the other in any manner whatsoever, except as expressly stated herein.
Neither this Agreement nor any act hereunder shall be construed as constituting
the foundation of a partnership, association, agency, joint venture or any other
entity.
11.3 Impact on Other Relationships Neither the existence of this
Agreement nor the relationship of the parties hereunder shall impede either
party from engaging in any independent activity, including, except as provided
in Section 2.9, as modified by Section 2.10, of the Research Agreement, from
entering into or continuing any agreement with any third party directed to
screening activities and commercial candidate compound identification.
11.4 No Third-Party Beneficiaries No person or entity not a party to
this Agreement, including any employee of any party to this Agreement, shall
have or acquire any rights by reason of this Agreement, nor shall any party
have any obligations or liabilities to such person or entity by reason of this
Agreement.
11.5 No Waiver Failure by either party to enforce, or delay in
exercising, or partial exercise of any covenants or rights or remedies under
this Agreement shall not be deemed or construed as a waiver of such rights nor
shall a waiver by either party in one or more instances be construed as
constituting a continuing waiver or as a waiver in other or subsequent
instances.
11.6 Merger Clause This Agreement constitutes the complete and entire
understanding between the parties with licenses conveyed hereunder, superseding
and replacing all prior oral or written agreements (except for the accrued
rights and obligations of the Research Agreement of even date, the June 8, 1995
Confidential Disclosure Agreement and the June 7, 1995 Materials Transfer
Agreement between the parties), communications, representations, proposals, or
negotiations specifically
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relating to the activities hereunder and subject matter hereof. No change or
addition to or variation or amendment of this Agreement, nor any cancellation or
waiver of any of the terms or provisions hereof, nor any alteration or
modification of any of the terms and conditions hereof, shall be effective or
valid and binding on either party unless in writing and signed by a
duly-authorized representative of the party against which the provision is
applied.
11.7 Alternative Dispute Resolution The parties shall attempt to
amicably resolve disputes arising between them regarding the validity,
construction, enforceability or performance of the terms of this Agreement, and
any differences or disputes in the interpretation of the rights, obligations,
liabilities and/or remedies hereunder, which have been identified in a written
notice from one party to the other, by good faith settlement discussions between
their respective representatives. If the parties have failed to satisfactorily
resolve the dispute or difference after receipt of such written notice and
twenty-eight (28) calendar days having expired without the parties having
reached a satisfactory resolution, either party may initiate Alternative Dispute
Resolution ("ADR") procedures, during which each party shall have the right to
be represented by counsel for resolution of all such disputes.
A. To begin an ADR proceeding, a party shall provide written notice to the
other party of the issues to be resolved by ADR. Within fourteen (14)
calendar days after its receipt of such notice, the other party may, by
written notice to the party Initiating the ADR, add additional issues to
be resolved within the same ADA.
B. Within twenty-one (21) calendar days following receipt of the original
ADR notice, the parties shall select a mutually acceptable neutral to
preside in the resolution of any disputes in this ADR proceeding. If the
parties are unable to agree on a mutually acceptable neutral within such
period, either party may request the President of the CPR Institute for
Dispute Resolution ("CPR"), 366 Madison Avenue, 14th Floor, New York,
New York 10017, to select a neutral pursuant to the following
procedures:
(a) The CPR shall submit to the parties a list of not less
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than five (5) candidates, believed qualified to
undertake an ADH relating to the subject matter in
dispute, within fourteen (14) calendar days after
receipt of the request, along with a Curriculum Vitae
for each candidate. No candidate shall be an employee,
director, or shareholder of either party or any of their
subsidiaries or affiliates.
(b) Such list shall include a statement of disclosure by each
candidate of any circumstances likely to affect his or
her impartiality.
(c) Each party shall number the candidates in order of
preference (with the number one (1) signifying the
greatest preference) and shall deliver the list to the
CPR within seven (7) calendar days following receipt of
the list of candidates. If a party believes a conflict of
interest exists regarding any of the candidates, that
party shall provide a written explanation of the conflict
to the CPR along with its list showing its order of
preference for the candidates. Any party failing to
return a list of preferences on time shall be deemed to
have no order of preference.
(d) If the parties collectively have identified fewer than
three (3) candidates deemed to have conflicts, the CPR
immediately shall designate as the neutral the candidate
for whom the parties collectively have indicated the
greatest preference. If a tie should result between two
(2) candidates, the CPR may designate either candidate.
If the parties collectively have identified three (3) or
more candidates deemed to have conflicts, the CPR shall
review the explanations regarding conflicts and, in its
sole discretion, may either (i) immediately designate as
the neutral the candidate for whom the parties
collectively have indicated the greatest preference, or
(ii) issue a new list of not less than five (5)
candidates, in which case the procedures set forth in
subparagraphs B(a) - B(d) shall be repeated.
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C. No earlier than twenty-eight (28) calendar days or later than fifty-six
(56 calendar days after selection, the neutral shall hold a hearing to
resolve each of the issues identified by the parties. The ADR proceeding
shall take place at a location agreed upon by the parties. If the
parties cannot agree, the neutral shall designate a location other than
the principal place of business of either party or any of their
subsidiaries or affiliates.
D. At least seven (7) calendar days prior to the hearing, each party shall
submit the following to the other party and the neutral:
(a) A copy of all exhibits on which such party intends to
rely in any oral or written presentation to the neutral;
(b) a list of any witnesses such party intends to call at the
hearing, and a short summary of the anticipated testimony
of each witness;
(c) a proposed ruling on each issue to be resolved, together
with a request for a specific damage award or other
remedy for each issue. The proposed rulings and remedies
shall not contain any recitation of the facts or any
legal arguments and shall not exceed one (1) page per
issue.
(d) a brief in support of such party's proposed rulings and
remedies, provided that the brief shall not exceed twenty
(20) pages. This page limitation shall apply regardless
of the number of issues raised in the ADR proceeding.
Except as expressly set forth in subparagraphs D(a) - D(d), no discovery
shall be required or permitted by any means, including depositions,
interrogatories, requests for admissions, or production of documents.
E. The hearing shall be conducted on two (2) consecutive days and shall be
governed by the following rules:
(a) Each party shall be entitled to five (5) hours of hearing
time to present its case. The neutral shall determine
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whether each party has had the five (5) hours to which
it is entitled.
(b) Each party shall be entitled, but not required, to make
an opening statement, to present regular and rebuttal
testimony, documents or other evidence, to cross-examine
witnesses, and to make a closing argument.
Cross-examination of witnesses shall occur immediately
after their direct testimony, and cross-examination time
shall be charged against the party conducting the
cross-examination.
(c) The party initiating the ADR shall begin the hearing and,
if it chooses to make an opening statement, shall address
not only issues it raised but also any issues raised by
the responding party. The responding party, if it chooses
to make an opening statement, also shall address all
issues raised in the ADR. Thereafter, the presentation of
regular and rebuttal testimony and documents, other
evidence, and closing arguments shall proceed in the same
sequence.
(d) Except when testifying, witnesses shall be excluded from
the hearing until closing arguments.
(e) Settlement negotiations, including any statements made
therein, shall not be admissible under any circumstances.
Affidavits prepared for purposes of the ADR hearing also
shall not be admissible. As to all other matters, the
neutral shall have sole discretion regarding the
admissability of any evidence.
F. Within seven (7) calendar days following completion of the hearing, each
party may submit to the other party and the neutral a posthearing brief
in support of its proposed rulings and remedies, provided that such
brief shall not contain or discuss any new evidence and shall not exceed
ten (10) pages. This page limitation shall apply regardless of the
number of issues raised in the ADR proceeding.
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<PAGE> 39
G. The neutral shall rule on each disputed issue within fourteen (14)
calendar days following completion of the hearing. Such ruling shall
adopt in its entirety the proposed ruling and remedy of one of the
parties on each disputed issue but may adopt one party's proposed
rulings and remedies on some issues and the other party's proposed
rulings and remedies on other issues. The neutral shall not issue any
written opinion or otherwise explain the basis of the ruling.
F. The neutral shall be paid a reasonable fee plus expenses. These fees and
expenses, along with the reasonable legal fees and expenses of the
prevailing party (including all expert witness fees and expenses), the
fees and expenses of a court reporter, and any expenses for a hearing
room, shall be paid as follows:
(a) If the neutral rules in favor of one party on all
disputed issues in the ADR, the losing party shall pay
100% of such fees and expenses.
(b) If the neutral rules in favor of one party on some issues
and the other party on other issues, the neutral shall
issue with the rulings a written determination as to how
such fees and expenses shall be allocated between the
parties. The neutral shall allocate fees and expenses in
a way that bears a reasonable relationship to the
outcome of the ADR, with the party prevailing on more
issues, or on issues of greater value or gravity,
recovering a relatively larger share of its legal fees
and expenses.
I. The rulings of the neutral and the allocation of fees and expenses shall
be binding, non-reviewable, and non-appealable, and may be entered as a
final judgment in any court having jurisdiction.
J. Except as provided in paragraph I or as required by law, the existence
of the dispute, any settlement negotiations, the ADR hearing, any
submissions (including exhibits, testimony, proposed rulings, and
briefs), and the rulings shall be deemed Confidential Information. The
neutral shall have the authority to impose sanctions for unauthorized
disclosure of Confidential Information.
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11.8 Headings. Article and Section headings are inserted in this
Agreement for convenience of reference only and no construction, meaning
interpretation or inference shall be derived from them.
11.9 Governmental Compliance and Effect of Invalidity. This Agreement
and performance hereunder is subject to the restrictions, limitations, terms and
conditions of all applicable governmental regulations, approvals and clearances.
If any term or provision of this Agreement is held invalid, illegal or
unenforceable in any respect, for any reason, that invalidity, illegality or
unenforceability shall not affect any other term or provision hereof, and this
Agreement shall be interpreted as if such term or provision, to the extent the
same shall have been held to be invalid, illegal or unenforceable, had never
been contained herein, with the other provisions of this Agreement remaining in
force.
11.10 Assignability. This Agreement and the rights, obligations,
privileges, and interests hereof may not be assigned by either party, except
that either party may assign this Agreement and rights and interests, in whole
or in part, (i) to any of its Affiliates or (ii) with the consent of the other
party, which consent shall not be unreasonably withheld, to any purchaser of all
or substantially all of its stock or assets of such party (including the assets
associated with the Research Program), or to any acquirer or successor
corporation resulting from any merger or consolidation with or into such
successor corporation.
11.11 Succession. This Agreement and the rights and obligations granted
and undertaken hereunder shall be binding upon and enure to the benefit of the
parties hereto, and their permitted assign(s), successor(s), trustee(s) or
receiver(s) in bankruptcy.
11.12 Government Compliance. RiboGene and Abbott shall comply with all
supranational, federal, state, and local laws, ordinances and regulations
applicable to the shipment, handling, storage, testing, use, development, sale
and/or disposal of any compound or peptide hereunder.
11.13 Governing Law. The validity, construction, and performance of this
Agreement shall be governed by and interpreted in accordance with the laws of
the State of New York, U.S.A., excluding its choice of laws
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<PAGE> 41
provisions.
IN WITNESS WHEREOF, authorized representatives of the parties have duly
executed this Agreement in duplicate.
RIBOGENE, INC ABBOTT LABORATORIES
BY: /s/ CHARLES J. CASAMENTO By: /s/ THOMAS R. HODGSON
--------------------------------- -------------------------------------
Name Charles J. Casamento Name: Thomas R. Hodgson
------------------------------ -----------------------------------
Title: Chairman, President & CEO Title: President and Chief Operating
---------------------------- Officer
---------------------------------
Date: April 26, 1996 Date: April 24, 1996
------------------------------ ---------------------------------
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<PAGE> 42
EXHIBIT A
<TABLE>
<CAPTION>
COUNTRY APPLICATION NO. FILING DATE PATENT NO. ISSUE DATE
<S> <C> <C> <C> <C>
US 08/328,258 10/24/93
(PCT) 94/12,161 10/14/94
</TABLE>
<PAGE> 1
Exhibit 10.2
ABBOTT-RIBOGENE RESEARCH AGREEMENT
<PAGE> 2
Table of Contents
<TABLE>
<CAPTION>
Page
<S> <C> <C>
I. DEFINITIONS ..................................................5
1.1 Abbott Compound ..........................................5
1.2 Affiliate ................................................6
1.3 Annual Research Plan .....................................7
1.4 Beneficiary Party ........................................7
1.5 Collateral Party .........................................7
1.6 Contract Year and Contract Quarter .......................7
1.7 Field ....................................................7
1.8 FTE ......................................................8
1.9 Independent Information ..................................8
1.10 Joint Management Team or JMT .............................9
1.11 Know-how .................................................9
1.12 License Agreement .......................................10
1.13 Product .................................................10
1.14 Program Information .....................................10
1.15 Program Inventions and Joint Program Inventions .........11
1.16 Research Program or Program .............................11
1.17 Research Term ...........................................12
1.18 RiboGene Compound .......................................12
1.19 RiboGene Intellectual Property ..........................12
1.20 RiboGene Lead ...........................................13
1.21 RiboGene Patent Rights ..................................13
II. RESEARCH ACTIVITIES ........................................14
2.1 RiboGene Efforts ........................................14
2.2 Abbott Efforts ..........................................14
2.3 Conflict In Terms .......................................14
2.4 Allocation of Resources .................................14
2.5 Laboratory Records ......................................15
2.6 Reporting and Access ....................................15
2.7 Compliance ..............................................15
2.8 Binding Effect ..........................................15
2.9 Exclusivity .............................................15
2.10 Exception to Exclusivity ................................16
III. OVERSIGHT OF THE RESEARCH PROGRAM .........................17
3.1 JMT Duties ..............................................17
3.2 JMT Composition .........................................17
3.3 RiboGene Representatives ................................18
3.4 Meetings ................................................18
3.5 Decision Making .........................................19
3.6 Annual Research Plan ....................................19
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
IV. RESEARCH SUPPORT ...........................................19
4.1 Abbott Funding ..........................................19
4.2 Control .................................................20
V. CONFIDENTIALITY OF INDEPENDENT AND PROGRAM INFORMATION ......20
5.1 Confidentiality and Nonuse ..............................20
5.2 Required Disclosure .....................................21
5.3 Return of Independent and Program Information ...........21
5 4 Program Information .....................................22
5.5 Nondisclosure of Third Party Confidential Information....23
5.6 Publicity ...............................................23
5.7 Permitted Disclosure ....................................23
5.8 Publications ............................................23
VI. RIGHTS TO PROGRAM INVENTIONS ...............................24
6.1 Disclosure of Inventions ................................24
6.2 Determination of Inventorship ...........................24
6.3 First Assignment of Rights ..............................24
6.4 Alternate Assignment of Rights ..........................25
6.5 ownership Rights ........................................29
6.6 Invention Use During the Research Term ..................29
6.7 Invention Rights Following the Research Term ............29
VII. WARRANTIES AND LIMITATIONS ON RIGHTS ......................30
7.1 RiboGene Warranties .....................................30
7.2 Limitation on Warranties ................................31
7.3 Disclaimer ..............................................31
7.4 Limitations on Rights ...................................31
VIII. LIABILITIES AND INDEMNITY ................................32
8.1 Liabilities .............................................32
8.2 Indemnification .........................................32
IX. TERM AND TERMINATION .......................................33
9.1 Term ....................................................33
9.2 Possible Extension ......................................33
9.3 Termination Without Breach ..............................33
9.4 Effect of Breach ........................................34
9.5 Effect of Bankruptcy or Agreement Revision ..............34
9.6 Consequences of Termination .............................35
X. MISCELLANEOUS ...............................................35
</TABLE>
<PAGE> 4
<TABLE>
<S> <C> <C>
10.1 Notices .................................................35
10.2 Independence of Parties .................................36
10.3 Impact on Other Relationships ...........................36
10.4 No Third-Party Beneficiaries ............................36
10.5 No Waiver ...............................................37
10.6 Merger Clause ...........................................37
10.7 Alternative Dispute Resolution ..........................37
10.8 Headings ................................................42
10.9 Governmental Compliance and Effect of Invalidity ........42
10.10 Assignability ...........................................42
10.11 Succession ..............................................43
10.12 Government Compliance ...................................43
10.13 Governing Law ...........................................43
</TABLE>
<PAGE> 5
RESEARCH AGREEMENT
This Research Agreement ("Agreement") is entered into effective as of
April 26, 1996 (the "Effective Date") by and between RiboGene, Inc., a
California corporation with a principal place of business at 21375 Cabot
Boulevard, Hayward, California 94545 ("RiboGene") and Abbott Laboratories, an
Illinois corporation with a principal place of business at 100 Abbott Park Road,
Abbott Park, Illinois 60064-3500 ("Abbott").
WHEREAS, RiboGene is experienced in translation biochemistry, particularly
in eukaryotic translation mechanisms, and in screening compounds and materials
for fungicidal and fungistatic activity, and owns or has exclusive licenses to a
number of compounds already identified as possessing such activity, and Abbott
is experienced in the discovery and development of small molecule pharmaceutical
products, including those with antifungal properties, and in obtaining
regulatory approval for and in commercializing such pharmaceutical products; and
WHEREAS, the parties desire to collaborate in a Research Program (as
defined hereinbelow) directed to accelerating the discovery of new
pharmaceutical and/or agricultural products possessing antifungal activity
and/or new diagnostic products related to conditions caused by fungal Infections
and/or diseases, and to provide for a license to Abbott for the evaluation and
possible development and eventual commercialization of such products.
NOW THEREFORE, in consideration of the mutual covenants and promises
contained herein, Abbott and RiboGene agree as follows:
I. DEFINITIONS
1.1 "Abbott Compound" shall mean any synthetic chemical compound or
biological material, which compound or material:
A. is represented in compound libraries/collections owned or controlled
by Abbott and/or Abbott Affiliate (where "Affiliate" Is defined hereinbelow) as
of the Effective Date, whether or not the same compound or material is
represented in compound libraries/collections owned or controlled by RiboGene
and/or RiboGene Affiliate as of the Effective Date;
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or
B. is acquired by or prepared by Abbott independently of the Research
Program; or
C. is acquired or prepared by Abbott under the Research Program,
including any analog of any RiboGene Compound (as defined hereinbelow) prepared
by Abbott, but excluding any RiboGene Compound prepared by Abbott; or
D. is discovered or identified by or for Abbott based on criteria
developed under the Research Program; which, in each case:
(a) demonstrates antifungal activity during the Research Program
using RiboGene's translation inhibition screening assays, or using other
translation or non-translation inhibition screening assay(s) developed under the
Research Program, as the principal enabling screen; and
(b) demonstrates a [*] or higher IC(5O) value in a mammalian in
vitro translation assay than that demonstrated in a fungal in vitro translation
assay, each assay existing at RiboGene as of the Effective Date, or demonstrates
similar selectivity advantage in another in vitro assay, developed by one party
or both parties during the Research Term (as defined hereinbelow) or agreed upon
by the JMT, over a measure from a corresponding mammalian assay; and
(c) demonstrates an MIC (less than or equal to) [*] agreed upon by
the JMT;
E. is any salt, ester, amide, complex, chelate, hydrate, isomer,
stereoisomer, crystalline or amorphous form, prodrug, metabolite, metabolic
precursor, or analog of any of the above-included compounds or materials.
Abbott Compound does not include a compound or material provided to Abbott by
RiboGene under the Material Transfer Agreement between RiboGene and Abbott
effective June 7, 1995.
1.2 "Affiliate" shall mean, with respect to either party, any
legally-distinct corporation, firm, individual, or other form of business
organization, which directly or indirectly owns, controls, is controlled by, or
is under common control with, a party hereto. An entity shall be regarded as
being in control of another entity if the former entity has the direct or
indirect power to order or cause the direction of the policies of
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* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to
the omitted portions.
<PAGE> 7
the other entity, whether through ownership of fifty percent (50%) or more in
the United States or thirty percent (30%) or more outside the United States of
the outstanding voting securities of that entity, through other dominant equity
ownership, or by contract, statute, regulation, or otherwise.
1.3 "Annual Research Plan shall mean the statement of objectives for
the activities of RiboGene and Abbott under the Research Program for the
particular Contract Year (as defined hereinbelow), and the reasonably-detailed
description of and timetable for the research activities planned for such
Contract Year, consistent with and designed to accomplish the goals of the
Research Program that is to be conducted during that particular Contract Year,
which is prepared by RiboGene and Abbott, and reviewed and revised and/or
approved by the Joint Management Team (as defined hereinbelow). The Annual
Research Plan for the first Contract Year shall be attached hereto as Exhibit I,
with subsequent Annual Research Plan s being attached hereto as Exhibits II, III
and so forth, as appropriate, upon approval of such Annual Research Plans by the
Joint Management Team.
1.4 "Beneficiary Party" shall mean the party, or possibly parties
according to the provisions of Section 6.4, to this Agreement to which is
assigned or licensed a Program Invention or Joint Program Invention, according
to the provisions of Section 6.3 or Section 6.4.
1.5 "Collateral Party" shall mean the party to this Agreement which can
use a Program Invention for purposes of this Agreement, but to which such
Program Invention is not assigned or licensed for use thereafter.
1.6 "Contract Year" shall mean any consecutive twelve (12)-month period
commencing on the Effective Date, or commencing on any twelve (12)-month
anniversary of such date, during the Research Term. "Contract Quarter" shall
mean a three (3)-month period commencing on the Effective Date or on any three
(3)-month anniversary of such date, during the term of this Agreement.
1.7 "Field" shall mean the treatment, mitigation, cure,
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<PAGE> 8
prevention, detection, and/or monitoring of mycotic (fungal) infections or
diseases, not including those caused by Pneumocystis carinii, in humans, animals
and/or plant protection.
1.8 "FTE" means the time and work output equivalent to one full-time
employee who is proficient in the performance of all assigned duties and
responsibilities.
1.9 "Independent Information" shall mean all valuable, confidential
technical and commercial information, know-how or trade secrets, including all
proprietary scientific and other information or samples which either party has
prior to, or may independently develop or obtain during the term of, this
Agreement that is not obtained as a result of the Research Program, such as
research and business capabilities and strategies, drug targets, ligands,
related research, development plans, or other information related to that party,
possibly including but not necessarily limited to Know-how (as defined
hereinbelow), research methodologies, protocols, receptors, receptor agonists or
antagonists, modulators of transcription factors, screening and testing assays
patent applications not yet published, commercialization plans, independent
research activities or strategies, safety and toxicity results, pharmacological
or pharmacokinetic data, formulation and process information, medical uses,
delivery mechanisms, or other information, data or plans, provided by the party
originally possessing the information ("Disclosing Party") to the other party
("Receiving Party"), which technical or business information:
(a) is in writing or in other physical form, marked
"Confidential", or
(b) is disclosed originally by the Disclosing Party orally,
visually or in some other form and identified as confidential, then subsequently
summarized and reduced to a reasonably-detailed writing or to another physical
form, marked "Confidential and delivered to the Receiving Party within one (1)
month from the original date of disclosure; but shall not include information
which:
(c) is in or comes into the public domain without breach of this
Agreement; or
(d) can be shown to have been known to or subsequently
independently developed by or for the Receiving Party without benefit of
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<PAGE> 9
the Disclosing Party's Independent Information; or
(e) is properly provided to the Receiving Party, without
restriction, by an independent third party under no obligation of
confidentiality to the Disclosing Party; or
(f) is disclosed by the original Disclosing Party on a
nonconfidential basis to any independent third party.
1.10 "Joint Management Team" or "JMT" shall mean a committee consisting
of three (3) official representatives appointed by each party hereto that shall
be the primary vehicle for oversight, coordination and modification of the
Annual Research Plans and recommendation(s) of resource reallocations in order
to better meet the objectives of the Research Program.
1.11 "Know-how" shall mean any and all nonpatented technical data,
drawings, documentation, and other information, in each case relating in some
way to the Field, which is owned by RiboGene as of the Effective Date or is
independently generated, acquired or licensed, with the right to sublicense, by
RiboGene during the term of this Agreement and which is not included in
published patent applications and/or issued patents within RiboGene Patent
Rights (as defined hereinbelow). Know-how may relate to protein translation
(i.e., protein synthesis and mRNA translation), fungal genetics, RNA stability,
the identification and use of pathogen-specific targets, high throughput
screening assays, characteristics of desirable translation inhibitors, or the
development, formulation or marketing thereof, and may include, without
limitation:
(a) research techniques and equipment and modifications thereto,
protocols, processes, and results;
(b) chemical, toxicological, pharmacological, and preformulation
properties of compounds or materials independently owned by or licensed to
RiboGene prior to the Research Program and other translation Inhibitors; and
(c) preclinical data and other information relating to the safety
or efficacy of compounds or materials independently owned by or licensed to
RiboGene prior to the Research Program.
Know-how shall include nonpatented Program information exclusively assignable to
RiboGene according to the provisions of Section 5.4, Section
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6.3 and/or Section 6.4, except for Program Inventions for which Abbott does
not have a nonexclusive license, according to the provisions of Section 6.4.
Know-how shall not include Program Information assignable to or nonexclusively
licensed by Abbott according to the provisions of Section 5.4, Section 6.3
and/or Section 6.4.
1.12 "License Agreement" shall mean the License Agreement between Abbott
and RiboGene of even date which, inter alia, conveys rights to RiboGene
Compounds and to the benefits of RiboGene Intellectual Property.
1.13 "Product" shall mean (a) any pharmaceutical formulation(s)
containing one or more RiboGene Leads and/or Abbott Compounds, which is/are
intended and promoted for human or animal use; or (b) a diagnostic product
comprising one or more Abbott Compounds and/or RiboGene Leads, that is intended
and promoted for the detection and/or monitoring of mycotic infections or
diseases in humans, animals or plant protection; or (c) a plant protection
formulation comprising one or more Abbott Compounds and/or RiboGene Leads, that
is intended and promoted for the treatment, cure or prevention of mycotic
diseases or infections in plants.
1.14 "Program Information" shall mean valuable technical or other
information, which is solely or jointly generated as a direct result of the
Research Program, including, but not necessarily limited to, Annual Research
Plans, mechanisms of action, screening methodologies, patent applications not
yet published, translation inhibitor characteristics, new Abbott Compounds, the
identity of or other Program-generated information related to RiboGene
Compounds, efficacy and toxicity results, bioavailability data, formulation and
process information, delivery mechanisms, know-how and/or ideas, which
information:
(a) is in writing or in other physical form, dated and marked
"Program Information"; or
(b) is disclosed originally by a party hereto orally, visually or
in another form and identified as Program Information, then subsequently
summarized and reduced to a writing or to another physical form, marked "Program
Information", and delivered to the other party hereto within one (1) month from
the original date of disclosure; or
(c) which should reasonably be kept confidential, at least until
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<PAGE> 11
Abbott can make a decision about its commercial relevance and/or value; but
shall not include information which:
(d) is in or comes into the public domain without breach of this
Agreement; or
(e) can be shown to have been known to or is subsequently
independently developed by the Collateral Party without benefit of the Program
Information; or
(f) Is properly provided, without restriction, to the party
claiming exception to Program Information treatment, according to the provisions
of Section 5.4, by an independent third party which has not obtained such
information under an obligation of confidentiality to one of the parties.
1.15 "Program Inventions" shall mean all inventions, innovations,
improvements, ideas, discoveries, technology, know-how, methods, applications
and products (whether or not patentable) arising under the Research Program,
which are conceived, derived, reduced to practice, made or developed during the
term of and the four (4) months following conclusion of the Research Program by
one or more individuals who are employees of one of the parties at the time of
the inventive contribution of such individual(s). "Joint Program Inventions"
shall mean all inventions, innovations, improvements, ideas, discoveries,
technology, know-how, methods, applications and products (whether or not
patentable) arising under the Research Program, which are conceived, derived,
reduced to practice, made or developed during the term of and the four (4)
months following the conclusion of the Program by at least two individuals, at
least one individual of which is an employee, at the time of the inventive
contribution of such individual, of one of the parties hereto, and at least one
individual of which is an employee, at the time of the inventive contribution of
such individual, of the other party hereto.
1.16 "Research Program or "Program" shall mean collaborative research
activities between Abbott and RiboGene, based on RiboGene Intellectual Property,
as revised and/or extended by Program Inventions and/or Joint Program
Inventions; that are directed to the discovery and development of novel broad
spectrum antifungal compounds of clinical and commercial value in the Field. The
Research Program does not include either activities within Abbott's cell wall
inhibition antifungal program
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or any other non-translation inhibition-based antifungal program within Abbott
or activities within RiboGene's research targeted specifically to Pneumocystis
carinii infections or diseases.
1.17 "Research Terms" shall mean a period of three (3) Contract Years,
unless otherwise terminated according to the provisions of Article IX below or
extended by mutual written consent of the parties.
1.18 "RiboGene Compound" shall mean any synthetic chemical compound or
biological material that has demonstrated antifungal activity according to
RiboGene's translation inhibition screening assays, which
A. is either owned by or licensed, with permission to sublicense, to
RiboGene as of the Effective Date, including but not limited to a compound or
material provided to Abbott by RiboGene under the provisions of the Material
Transfer Agreement between RiboGene and Abbott effective June 7, 1995; or
B. is in-licensed by, with the right to sublicense, or acquired, by
RiboGene during the Research Term and which does not correspond to an Abbott
Compound within Abbott's or an Abbott Affiliate's libraries/collections prior to
the date of acquisition by RiboGene;
C. is any salt, ester, amide, complex, chelate, hydrate, isomer,
stereoisomer, crystalline or amorphous form, prodrug, metabolite, metabolic
precursor, or analog of any of the above-included compounds or materials.
A RiboGene Compound does not include a compound or material defined as an Abbott
Compound according to the provisions of Section 1.1, or any compound licensed to
RiboGene pursuant to an agreement, effective September, 1993, among RiboGene,
Pharm-Eco Laboratories, Inc. and the University of North Carolina.
1.19 "RiboGene Intellectual Property" shall mean RiboGene Patent Rights
(as defined hereinbelow) and Know-how, as well as Program inventions and/or
Joint Program Inventions assigned exclusively to RiboGene according to the
provisions of Section 6.3 and Program Inventions and/or Joint Program
Inventions exclusively assigned to RiboGene and for which Abbott has a
nonexclusive license, according to the provisions of Section 6.4, or extensions
or revisions of any of the
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above based on jointly-assigned Joint Program Inventions according to the
provisions of Section 6.4.
1.20 "RiboGene Lead" shall mean a RiboGene Compound which (a) in the
judgment of the JMT under the Research Program, demonstrates selective fungal
translation inhibition according to RiboGene's mycotic in vitro translation
assays and mammalian in vitro translation assays; and (b) demonstrates an MIC
less than or equal to [*] agreed upon by the JMT; and (c) has a chemical
structure amenable to modification through medicinal or combinatorial chemistry,
as judged by the JMT. A compound or material shall cease to be a RiboGene Lead
if, after [*] following the termination or expiration of the Research Term,
Abbott has not identified such compound or material to RiboGene as among the up
to [*] RiboGene Leads that Abbott has selected as being those to which Abbott
desires to retain exclusive rights, to the extent RiboGene can grant such
exclusive rights.
1.21 "RiboGene Patent Rights" shall mean all patent applications and
patents in any country of the world, which relate in some way to the Field and
are exclusively owned by or licensed, with the right to sublicense (which right
RiboGene shall make every reasonable effort to obtain), to RiboGene during the
term of this Agreement and during the six (6)-month period thereafter. RiboGene
Patent Rights cover one or more compounds or materials useful in the Field, the
preparation and/or use thereof, or other compositions and/or technology useful
in the Research Program, and include all divisions, continuations,
continuations-in-part, additions, registrations, confirmations, renewals,
extensions, supplemental protection certificates, reexaminations and reissues of
the above patent applications and patents. RiboGene Patent Rights include patent
applications and patents assigned to RiboGene according to the provisions of
Section 6.3, but do not include patent applications and patents assigned to
RiboGene according to the provisions of Section 6.4, in which Abbott has a
nonexclusive license, under the provisions of Section 6.4. RiboGene Patent
Rights include, but are not necessarily limited to, those identified in Exhibit
A attached to this Research Agreement, and updated by RiboGene, as justified by
filing, prosecution, issuance and/or maintenance circumstances, and reattached
hereto.
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* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to
the omitted portions.
<PAGE> 14
II. RESEARCH ACTIVITIES
2.1 RiboGene Efforts RiboGene shall use all reasonable efforts to
expeditiously perform its part of the Research Program substantially in
accordance with the terms and conditions of this Agreement, including the
descriptions and timetables of the Annual Research Plans and any additional
specifications as may be proposed by the JMT and agreed upon in writing by the
parties hereto from time to time during the Research Term.
2.2 Abbott Efforts Abbott shall expend at least [*] per year in support
of its own activities under the Research Program, in addition to its separate,
but related support of RiboGene's activities, according to the provisions of
Section 4.1; shall identify, at its sole option, and permit RiboGene to use
pertinent Abbott technology, only during the Research Term, and only for
purposes of the Program; and will provide to RiboGene such of its research data,
results and conclusions which it deems necessary to accomplish the objectives of
the Research Program.
2.3 Conflict in Terms In the event of a conflict between the Annual
Research Plans and this Agreement, the terms and conditions of this Agreement
shall control.
2.4 Allocation of Resources RiboGene shall allocate sufficient resources
and effort to carry out its obligations under the Research Program. RiboGene
shall assign not fewer than [*] FTE scientific personnel, identified to Abbott,
comprising at least [*] Ph.D. or M.D. and the remainder at least Bachelor of
Science qualified researchers, with the aggregate skills and experience, and
shall obtain and/or dedicate sufficient equipment and facilities, to fulfill the
expectations that the parties have for the Program. RiboGene shall promptly
inform Abbott of any changes in the assignments of any such FTE's and shall
promptly add or substitute individuals of comparable or superior skills into the
Program in place of one or more of the original FTE's, as circumstances dictate,
and shall apprise Abbott, in advance, of all such plans.
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* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to
the omitted portions.
<PAGE> 15
2.5 Laboratory Records RiboGene shall keep and maintain detailed
records of its research and screening activities and laboratory data generated
in the course of or otherwise in connection with the Research Program in order
for RiboGene to furnish complete and accurate information to the Joint
Management Team and Abbott, to the extent necessary for RiboGene to fulfill its
obligations under the Research Program. RiboGene shall permit Abbott to have
reasonable access to such records, and to facilities where RiboGene's research
and screening under the Research Program is being conducted, upon reasonable
notice and during regular business hours. All information obtained as a result
of such access shall be treated as RiboGene's Independent Information or as
Program Information, as the case may be.
2.6 Reporting and Access During the term of this Agreement, each party
shall frequently communicate with the other on the progress of and results
achieved in the Research Program; and may be required by the JMT to provide all
representatives and alternates, if applicable, to the JMT, at such times as
determined by and in a format agreed upon by the JMT, with detailed written
reports of its activities under the Program, as well as the data and results
obtained by it in connection with the Research Program.
2.7 Compliance Each party shall conduct its part of the Research
Program in compliance with all federal, state and local laws, ordinances,
regulations, standards and guidelines applicable thereto, including but not
limited to all applicable environmental regulations and guidelines.
2.8 Binding Effect Each party's employees involved in the Research
Program shall be bound as employees of that party by all confidentiality and
invention-assignment terms of this Agreement.
2.9 Exclusivity During the Research Term, including any extension
thereof, and for six (6) months thereafter, subject to the provisions of Section
9.6, and except as provided in Section 2.10 or in connection with any Small
Business Innovative Research Grant(s) received by RiboGene from the National
Institutes of Health prior to or during the Research Term, neither RiboGene nor
any of its Affiliates, without receiving the written approval of Abbott, shall
conduct or have conducted independent
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research in the Field, or accept funding for research in the Field from or
provide research services in the Field to or consult in the Field for any third
party or permit any third party to use or benefit from any RiboGene Intellectual
Property in the Field, or invest or become a partner or shareholder in or
provide funding or technology or personnel to any entity for purposes of
conducting research in or developing or commercializing products for the Field,
or establish a joint venture in the Field with any entity.
2.10 Exception to Exclusively The provisions of Section 2.9
notwithstanding, RiboGene may screen synthetic chemical compounds and/or
biological Materials owned and provided by an agrochemical company, with which
RiboGene is negotiating as of the Effective Date and the identity of which
RiboGene will disclose to Abbott as RiboGene Confidential Information on the
Effective Date, in either or both of the two translation-based antifungal assays
within RiboGene Intellectual Property that are in existence on the Effective
Date, with the understanding that:
(a) RiboGene and/or Abbott shall compare the library of compounds
and/or materials provided by the agrochemical company with those in Abbott's or
Abbott Affiliate's libraries and those identified as RiboGene Compounds, and
RiboGene shall, without identifying the reason to the agrochemical company,
refuse to screen any compounds and/or materials identified as Abbott Compounds
or RiboGene Compounds, according to the definitions above, for the agrochemical
company;
(b) RiboGene shall use its best efforts to obtain the right,
under the rights of the agrochemical company, for Abbott, Abbott Affiliates
and/or Abbott sublicensees, for the same milestone and royalty obligations as in
the License Agreement and no other consideration, to modify, make, have made,
develop, use, register, promote, offer for sale and sell such agrochemical
company's compounds and/or materials for human or animal therapeutic and/or
diagnostic purposes; and
(c) RiboGene shall not grant rights to the agrochemical company to
use RiboGene technology or any results of the use of RiboGene technology to
identify, make, have made, import, use, evaluate, develop, promote, offer to
sell and/or sell any compound or material for the treatment, mitigation, cure,
prevention, detection and/or monitoring of fungal infections or diseases in
humans or animals.
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III. OVERSIGHT OF THE RESEARCH PROGRAM
3.1 JMT Duties The duties of the Joint Management Team shall be to:
(a) Review, modify, and/or approve, in writing, each Annual
Research Plan;
(b) Receive and review communications and/or reasonably detailed
reports, according to the provisions of Section 2.6, from each party on its
activities under each Annual Research Plan, and otherwise monitor the progress
of the Research Program, modifying such Annual Research Plan(s) and/or making
recommendations to both parties for the modification of the Research Program in
order to better fulfill the objectives of the parties;
(c) Approve, in writing, the significant use of every third party
entity which RiboGene would like to use in the performance of its material
obligations under the Research Program; and
(d) Review all preclinical data, generated by RiboGene and/or
Abbott hereunder, on all Abbott Compounds and RiboGene Compounds, identify and
select RiboGene Leads and promising Abbott Compounds as foci for further work
under the Research Program, and, when appropriate, recommend to Abbott that it
should consider and/or adopt a plan to develop one or more particular Abbott
Compounds and/or RiboGene Leads which demonstrate an attractive antifungal
activity and safety profile, according to the standards which the JMT shall
adopt.
3.2 JMT Composition The Joint Management Team shall be comprised of
three (3) official representatives appointed by each party, initially
comprising:
From Abbott From RiboGene
[*] [*]
[*] [*]
[*] [*]
and shall be chaired by [*] from Abbott. Each party may appoint one or more
alternates for such party's representatives upon reasonable notice to the other
party, with an alternate being counted for purposes of constituting a quorum
and/or being able to vote on a JMT
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* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to
the omitted portions.
<PAGE> 18
matter, according to the provisions of Section 3.5 in both cases, only if the
representative for whom the alternate is substituting is not present. Either
party may change any of its official representatives or alternates, if
applicable, to the JMT, and Abbott may replace the chair of the JMT, upon
reasonable notice to the other party.
3.3 RiboGene Representatives Should two (2) or more of the official
RiboGene representatives initially appointed to the JMT relinquish active
participation in the Research Program, RiboGene shall notify Abbott, in advance
if possible, and RiboGene and Abbott shall promptly confer to evaluate the
potential impact of such losses on the Research Program. They shall, as
necessary, develop alternatives acceptable to both parties to assure
continuation of effective research oversight and direction. In the event the
parties are unable to agree upon an acceptable alternative after good faith
discussions, Abbott shall have the right, but not the obligation, to immediately
terminate this Research Agreement without further liability if Abbott reasonably
determines that RiboGene will not be replacing a departed/departing
representative with an individual of comparable or superior skills, experience
and qualifications, except for the reimbursement of RiboGene's documented,
reasonable, irrevocable commitments, which cannot otherwise be mitigated, as
provided and limited in Section 9.3.
3.4 Meetings The Chair shall convene the JMT in person at least once in
each Contract Quarter, with the meeting location alternating between Abbott
Park, Illinois and Hayward, California, or at sites otherwise agreed upon by the
parties. A representative of the party which is acting as host of the meeting
(i.e., the party located closest to the meeting site or, if the meeting is not
near the headquarters of either, the party which had not hosted the most recent
previous meeting) shall keep detailed records of such meeting and decisions,
and shall distribute copies of such records, together with a copy of all
written reports presented at the meeting, to all designated representatives and
alternates, if applicable, of the JMT. The Chair of the JMT shall be
responsible for keeping an official copy of all JMT meeting minutes and all
reports to the JMT. When a physical meeting is impractical, but JMT business
must be conducted between physical meetings, the Chair may convene a
teleconference of representative(s) and/or alternate(s), if applicable, of
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the parties, and the Chair shall designate a representative of one of the
parties to record and distribute a detailed record of such teleconference. In
all cases, each party shall pay all costs incurred by its own participation in
and, as applicable, its hosting of JMT meetings.
3.5 Decision Making The attendance or presence of at least two (2)
official representative(s) and/or previously-designated alternate(s), if
applicable, of each party shall constitute a quorum for purposes of the JMT
taking any action. All decisions of the JMT shall be reached by majority vote of
all of the official representatives/alternates present in person or by proxy,
with each official representative having one (1) vote on the JMT, and, if
necessary to break a tie in any vote, the Chair having one (1) extra vote.
3.6 Annual Research Plan Not later than sixty (60) days prior to the end
of each Contract Year following which research under this Agreement is to
continue, RiboGene and Abbott will jointly provide an Annual Research Plan for
the following Contract Year (including, if relevant, any twelve (12)-month
extension of the initial three (3)-year Research Term), to the JMT, which shall
review and attempt to approve the Annual Research Plan for the following
Contract Year by not later than thirty (30) days prior to the end of the
then-current Contract Year. Notwithstanding anything in this Agreement to the
contrary, the JMT may at any time during the term of this Agreement amend the
current Annual Research Plan.
IV. RESEARCH SUPPORT
4.1 Abbott Funding As consideration for RiboGene exerting all reasonable
efforts in the conduct of the Research Program and for the rights granted
hereunder, Abbott shall provide to RiboGene Five million United States dollars
(USD5,000,000) in funding, including payments for salaries, supplies,
materials, technology and other costs attributable to the Program, calculated on
a fully-burdened basis in accordance with standard accounting practices, for the
first three (3) years of the Research Program. In fulfillment of its obligations
hereunder, Abbott shall pay to RiboGene: [*] within fifteen (15) calendar days
after the Effective Date
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* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to
the omitted portions.
<PAGE> 20
and within fifteen (15) calendar days of each of the following [*] anniversaries
thereof, and [*] for total payments of [*] during the initial three (3)-year
Research Term. RiboGene shall have no obligation to incur expenses in the
conduct of the Research Program in excess of the amounts funded under this
Section 4.1, unless RiboGene shall receive sufficient additional funding from
Abbott to cover such additional expenses, payable by Abbott based on invoices
for expenses, which expenses have been preapproved in writing by the JMT before
such additional expenses are incurred, with such invoices, or other
documentation acceptable to the JMT, being submitted to Abbott within thirty
(30) days of the end of the Contract Quarter during which such additional
expenses were incurred. In the event of premature termination of the Research
Program or any other event resulting in an incorrect payment by Abbott, RiboGene
shall remit any overpayment amount in such incorrect payment to Abbott, subject
to the provisions of Section 9.3, within thirty (30) days after such overpayment
occurs or is identified by either of the parties and, if necessary, brought to
RiboGene's attention.
4.2 Control RiboGene shall closely monitor expenditures for the
Research Program and shall take all necessary steps to cause the funds provided
by Abbott to be spent in accordance with this Agreement to accomplish the
objectives of the Research Program. It shall provide to the JMT, within thirty
(30) calendar days of the end of each Contract Quarter and within forty-five
(45) days of the end of the Research Term, as the case may be, either a detailed
written report of costs incurred by it in its Research Program activities during
the preceding Contract Quarter or a summary report of the costs incurred by it
during the entire Research Program.
V. CONFIDENTIALTY OF INDEPENDENT AND PROGRAM INFORMATION
5.1 Confidentiality and Nonuse Abbott and RiboGene agree that, for a
period of ten (10) years from the Effective Date, each will treat as
confidential, limiting access to the Receiving Party employees and
confidentiality-bound consultants who must know information for purposes
anticipated by this Agreement, and otherwise using at least the
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* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to
the omitted portions.
<PAGE> 21
same internal security procedures and at least the same degree of care that it
uses to protect its own confidential, proprietary information, but in no event
less than reasonable care, to prevent the other party's Independent Information
that it receives and accepts under this Agreement, and Program Information,
according to the provisions of Section 5.4, generated under the provisions of
this Agreement, from entering the public domain or falling into the hands of
independent third parties, or from being used for its own benefit or the benefit
of any third party, except for purposes of this Agreement. No right to use, or
any title or license to the other party's Independent Information or Program
Information, other than the right to use such Independent Information and
Program Information for purposes of this Agreement, shall vest in the Receiving
Party or the Collateral Party, as the case may be, by virtue of disclosure, or
the existence of this Agreement, or the conduct of the Research Program. Should
either party use one or more independent consultants or collaborators for
purposes of this Agreement, that party shall execute appropriate confidentiality
agreements with any such third party consultant(s) or collaborator(s) in order
to protect the secrecy of the other party's proprietary information.
5.2 Required Disclosure If either party is required by a governmental
regulatory agency or court of competent jurisdiction to disclose either the
other party's Independent Information or Program Information, deemed
confidential to the other party under the provisions of Section 5.4, or to
disclose other details of this Agreement or of the Research Program, the party
subject to such requirement shall: (a) inform the other party as soon as
practical of such requirement; (b) reasonably cooperate with the other party in
efforts such other party may decide to take to try to protect its Independent
Information and/or Program information; and (c) release such Independent
Information and/or Program Information or other Program or Agreement details in
response to such requirement to the extent, and only to the extent, required by
such authority.
5.3 Return of Independent and Program Information Upon expiration of
this Agreement, and the request of the original Disclosing Party or Beneficiary
Party, as the case may be, or upon early termination hereof, the Receiving Party
or Collateral Party, as the case may be, shall,
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<PAGE> 22
within one (1) month of such request or early Agreement termination, return or
deliver all copies of the Disclosing Party's Independent Information, as well as
Program Information deemed confidential to such party under the provisions of
Section 5.4, which Independent Information and Program Information is then in
the Receiving Party's/Collateral Party's possession, to the Disclosing
Party/Beneficiary Party, but the Receiving Party/Collateral Party, as the case
may be, may retain one (1) complete documentation copy of that Independent
and/or Program Information for archival purposes, only to assure compliance with
this Agreement, but shall not thereafter use or disclose any of the Disclosing
Party's Independent Information and/or the Beneficiary Party's Program
Information or claim any rights thereto.
5.4 Program Information All Program Information generated under this
Agreement shall be considered confidential by the party generating and the party
receiving such information from generation thereof through at least ninety (90)
days after the Receiving Party has received a reasonably-detailed description of
such Program information. RiboGene shall deem Program Information which relates
to Abbott Compounds and/or RiboGene Leads, and the characteristics, processes
for making and use thereof, and is identified and summarized in reasonable
detail in a writing, marked "Confidential", that is provided to RiboGene by
Abbott within the above-described ninety (90)-day period, to be Abbott's
property (Abbott being the "Beneficiary Party" and RiboGene being the
"Collateral Party", in this case) and to treat it in the same way it would treat
Abbott's Independent Information under the provisions of Section 5.1. Abbott
shall likewise deem Program Information which relates to the RiboGene's
proprietary screening and lead-identification technologies (i.e., Know-how)
existing on the Effective Date, and is identified and summarized in reasonable
detail in a writing, marked "Confidential", that is provided to Abbott by
RiboGene within the above-described ninety (90) day period, to be RiboGene's
property (RiboGene being the "Beneficiary Party" and Abbott being the
"Collateral Party", in this case) and to treat it in the same way it would treat
RiboGene's Independent Information under the provisions of Section 5.1. Program
Information which relates to one or more Program Inventions or Joint Program
Inventions, according to the provisions of Section 6.4, shall be kept
confidential by both parties at least until Abbott can determine the commercial
relevance or value of
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<PAGE> 23
such Program Information or Joint Program Invention, which Abbott will make all
reasonable efforts to do in a reasonable amount of time. RiboGene may request
Abbott, at any time, to release any portion of Program Information from the
foregoing confidentiality restrictions and Abbott will not unreasonably refuse
such request. Unless such Program Information is released by Abbott or
otherwise published in a patent application, such Program Information shall be
considered confidential by both parties at least during the Research Term.
5.5 Nondisclosure of Third Party Confidential Information Neither
party shall disclose to the other any information which is confidential and/or
proprietary to any independent third party.
5.6 Publicity Except as permitted under Section 5.7, neither party
shall make any press release, or create any advertising, sales or other
promotional literature referring to this Agreement or the relationship
hereunder, or, except as required by applicable laws or regulations, make any
other public written or oral disclosure or statements relating to the Research
Program or the relationship between the parties created by this Agreement,
including stating, implying or suggesting that any form of joint venture,
affiliation or other association exists as a result of this Agreement between
RiboGene and Abbott, without the prior written approval of the other party,
which approval shall not be unreasonably withheld.
5.7 Permitted Disclosure Abbott may disclose such information related
to the Research Program as is essential to enable Abbott to carry out the
evaluation and/or development of any product, process or service discovered or
developed employing results of the Research Program or to secure a governmental
approval therefor.
5.8 Publications Each party shall submit to the other, at least
forty-five (45) days prior to submission for publication or from otherwise
sharing with independent third parties, either the draft of any manuscript
comprising details of or results from the Research Program that such furnishing
party intends to submit for publication, or the subject matter comprising such
details or results that it would otherwise like to share with independent third
parties. Within such forty-five (45)-day period,
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<PAGE> 24
the receiving party will advise the furnishing party, in good faith, of any
potential material adverse consequences of such disclosure perceived by the
receiving party. The furnishing party may then either (i) delete the sensitive
Independent Information and/or Program Information from the manuscript and
substitute scientifically-meaningful information that does not contain the
receiving party's Independent Information or its Program Information still
subject to confidential treatment by the furnishing party according to the
provisions of Section 5.4, or (ii) suspend plans for such publication or other
disclosure. Upon Abbott's request, or Abbott's approval of RiboGene's request,
RiboGene shall acknowledge Abbott's support of the Research Program in approved
scientific publications or other approved communications.
VI. RIGHTS TO PROGRAM INVENTIONS
6.1 Disclosure of Inventions Program Inventions shall be promptly
disclosed by the originating party to the other party, and Joint Program
Inventions shall be promptly fully shared between the parties.
6.2 Determination of Inventorship Upon the sharing of reasonably-full
details of such Program Inventions and Joint Program Inventions, the respective
patent authorities of the parties shall determine inventorship of such Program
Inventions and Joint Program Inventions, in good faith, according to United
States patent practice. In the event such patent authorities of the parties
cannot agree on the determination of inventorship of a Program Invention or
Joint Program Invention, the parties shall jointly refer the question of such
inventorship to independent outside patent counsel jointly selected and paid in
equal measure by the parties, and the parties shall be bound by the
determination of inventorship of the Program invention or Joint Program
Invention made by such independent patent counsel.
6.3 First Assignment of Rights The respective patent authorities of the
parties shall make an initial determination of the subject matter of the
Program Invention or Joint Program Invention, using all reasonable efforts to
resolve any disagreement between them, and based on that/those determination(s),
Program Inventions or Joint Program Inventions which directly relate to Abbott
Compounds and/or RiboGene
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<PAGE> 25
Leads and the processes of making and use thereof shall be assigned to Abbott,
with all rights to make, have made, import, use, offer to sell, sell and/or
sublicense such Program Inventions or Joint Program Inventions, regardless of
the inventorship of such Inventions, and Program Inventions or Joint Program
Inventions which directly relate to RiboGene's proprietary screening and
lead-identification technologies in existence as of the Effective Date shall be
assigned to RiboGene, with all rights to make, have made, import, use, offer to
sell, sell and/or sublicense such Program Inventions or Joint Program
Inventions, regardless of the inventorship of such Inventions. Abbott shall be
responsible for all decisions, with reasonable consideration of the
confidentiality interests of RiboGene, as well as for all costs related to all
preparation and filings (domestic and international), and related patent
prosecution, issuance, maintenance, enforcement and defense, according to
Abbott's patent policies and procedures, directly related to Abbott Compounds
and/or RiboGene Leads and the processes of making and use thereof. RiboGene
shall be responsible for all decisions, with reasonable consideration of the
confidentiality interests of Abbott, as well as for all costs, related to all
preparation and filings (domestic and international), and related patent
prosecution, issuance, maintenance, enforcement and defense, according to
RiboGene's patent policies and procedures, directly related to RiboGene's
proprietary screening and lead-identification technologies in existence as of
the Effective Date. Each Collateral Party, under this Section 6.3, shall
cooperate with the Beneficiary Party's designated patent counsel to provide
reasonable assistance, at the Beneficiary Party's expense, in any activities the
Beneficiary Party chooses to pursue to protect its interests In such Program
Inventions and/or Joint Program Inventions, without any obligation to or
remaining right In that Collateral Party under any resulting patent(s). However,
neither party shall have any obligation to the other party to file, prosecute,
issue, maintain, enforce or defend any patent application or patent claiming a
Program Invention or Joint Program Invention related to its interests as
delineated immediately above.
6.4 Alternate Assignment of Rights (a) As to any Program Inventions
which do not fit Into either the category directly assignable to Abbott or the
category directly assignable to RiboGene according to the provisions of Section
6.3, which are made solely by Inventors who are
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<PAGE> 26
employees or associates, at the time of inventive contribution, of either
RiboGene or Abbott, the party of which the inventors are employees or
associates, shall have the right to elect to retain title to those Program
Inventions.
If the party, the employee(s) of which is/are sole inventor(s) of such Program
Invention, is Abbott, Abbott shall be responsible for all decisions and costs
related to whether to file for patent protection, as well as to the preparation,
domestic and/or foreign filing(s), related patent prosecution, issuance,
maintenance, enforcement and defense of patent applications and/or patents
covering such Program Invention, according to its patent policies and
procedures.
If that party is RiboGene, RiboGene shall offer the Program Invention to Abbott,
and if, within forty-five (45) days of receiving a reasonably-detailed written
description of the Program Invention, Abbott notifies RiboGene that Abbott is
interested in having a nonexclusive license, with the right to sublicense only
for Abbott's direct research and/or production benefit, under any resulting
patent rights in such Program Invention, Abbott shall, in good faith, assume the
responsibility, employing standards and criteria no less rigorous than it
employs with respect to the protection of its own inventions of similar
scientific and commercial value, keeping RiboGene fully aware of the filing and
status of any patent application(s) and/or patent(s) covering such Program
Invention and involved with pertinent decisions with respect to such patent
application(s) and/or patent(s) and fully considering RiboGene's interests and
suggestions with respect to the scope and content of such application(s) and/or
patent(s), for preparing, in cooperation with RiboGene's designated patent
counsel, filing (domestic and foreign--with RiboGene as assignee of such
application(s)), prosecuting, issuing, maintaining, defending and enforcing such
patents and/or patent applications, including assuming all costs, and receiving
for its own benefit all recoveries, associated with all patent applications
and/or patents in which it has an interest. Failure by Abbott to notify
RiboGene, within such forty-five (45) day period, of Abbott's interest in having
a nonexclusive license to such Program invention shall be deemed to be a waiver
of Abbott's interest in such a license.
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<PAGE> 27
In cases of a RiboGene Program Invention in which Abbott notifies RiboGene that
Abbott has no interest, or after forty-five (45) days following Abbott's receipt
of a reasonably-detailed description of such Program Invention when Abbott has
not indicated an interest to RiboGene, or in specific cases of actual or
possible patent application(s) and/or patent(s) claiming such RiboGene Program
Invention in jurisdictions in which Abbott has no or no longer has an interest,
Abbott, according to the particular circumstances, shall relinquish all rights
to and interest in such Program Invention to RiboGene and/or shall offer to
assign such patent application(s) and/or patent(s) claiming such RiboGene
Program Invention to RiboGene, or if RiboGene has no interest, may abandon such
patent application(s) and/or patent(s), at Abbott's option and according to
Abbott's policies. Upon either relinquishing its interest or assigning such
patent application(s) and/or patent(s) to RiboGene, Abbott shall cooperate with
and provide reasonable assistance to RiboGene, at RiboGene's expense, for any
activities RiboGene chooses to pursue with respect to such patent application(s)
and/or patent(s) claiming such Program Invention, including filing patent
application(s), or assuming all rights to the filing(s) or other actions that
Abbott has already taken with respect to that Program Invention, and/or taking
such other action(s) as it desires, in its sole discretion and at its sole
expense from then on, with respect to such Program Invention, and Abbott will
consequently have no rights or obligations relative to patent rights covering
that particular Program Invention either anywhere or in particular
jurisdictions, as the case may be.
(b) As to any Joint Program Inventions which do not fit into either the
category directly assignable to Abbott or the category directly assignable to
RiboGene according to the provisions of Section 6.3, wherein employees or
associates of each of the parties have been identified as inventors of the same
invention conceived and reduced to practice under the Program, according to
United States patent practice, each party may elect to retain its undivided
interest in such Joint Program Invention and will consult with the other party
on whether and where to file patent applications on such Joint Program
Invention.
If, within forty-five (45) days of the mutual written agreement that there is a
Joint Program Invention on which one or more patent applications
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<PAGE> 28
should be filed, Abbott notifies RiboGene that it is interested in retaining its
undivided interest under any resulting patent rights in such Joint Program
Invention, Abbott shall, in good faith, assume the responsibility, employing
standards and criteria no less rigorous than it employs with respect to the
protection of its own inventions of similar scientific and commercial value,
keeping RiboGene fully aware of the filing and status of any patent application
and/or patent covering such Program Invention and involved with pertinent
decisions with respect to such patent application and/or patent and fully
considering RiboGene's interests and suggestions with respect to the scope and
content of such application and/or patent, for preparing, in cooperation with
RiboGene's designated patent counsel, filing (domestic and foreign--with both
Abbott and RiboGene being named assignees of such application(s)), prosecuting,
issuing, maintaining, defending and enforcing such patent applications and/or
patents, including assuming all costs associated with all patent applications
and/or patents in which it continues to have an interest.
As in Section 6.4(a), in cases of actual or possible patent applications and/or
patents claiming a particular Joint Program Invention in jurisdictions in which
Abbott has no or no longer has an interest, or if Abbott has no interest in
retaining its rights In such Joint Program Invention, Abbott, according to the
particular circumstances, shall relinquish all rights to, interest in or
obligations under any patent application or patent covering such Joint Program
Invention to RiboGene, and/or shall offer to assign such patent applications
and/or patents to RiboGene, or if RiboGene has no interest, the, parties will
jointly abandon such patent application(s) and/or patent(s), according to
Abbott's policies. Upon either relinquishing its interest or assigning such
patent application(s) and/or patent(s) to RiboGene, Abbott shall cooperate with
and provide reasonable assistance to RiboGene, at RiboGene's expense, for any
activities RiboGene chooses to pursue with respect to such patent applications
and/or patents, including filing patent application(s), or assuming all rights
to the filing(s) or other actions that Abbott has already taken with respect to
that Joint Program Invention, and/or take such other action(s) at it/they
desire(s), in, its/their sole discretion and at its/their sole expense from then
on, with respect to such Joint Program Invention, and Abbott will consequently
have no rights or obligations relative to patent rights covering that particular
Joint Program Invention
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either anywhere or in particular jurisdictions, as the case may be.
6.5 Ownership Rights RiboGene acknowledges that Abbott shall have full
ownership, title, interest and all rights in and to all Abbott Compounds and,
subject to the provision of the second sentence of Section 1.20, each RiboGene
Lead provided under this Agreement, to the extent that RiboGene is able to grant
such exclusive ownership to same, and that Abbott, at its own expense, may use
such Abbott Compounds and/or RiboGene Leads in any manner that Abbott, at its
sole option, shall choose, not limited to development of such Abbott Compound
and/or RiboGene Lead for an indication identified with the Research Program.
RiboGene shall not disclose any information which is specific to such Abbott
Compounds and/or RiboGene Leads, not including information related to RiboGene
Intellectual Property which does not involve Abbott Compounds and/or such
RiboGene Leads, except pursuant to the Research Program. Any Information,
inventions or discoveries (whether patentable or not), innovations, ideas,
communications, correspondence, notes, laboratory notebooks, reports, data,
records, results, and all derived products, which are conceived, reduced to
practice, made or developed by or for Abbott with such Abbott Compounds,
RiboGene Leads and/or Product(s) based thereon, as well as all files,
registrations or marketing approvals related to such Abbott Compounds, RiboGene
Leads and/or Product(s), shall be the sole property of Abbott. Abbott
acknowledges that, under this Agreement, Abbott shall have no right to restrict
RiboGene's activities with any compound or material other than Abbott Compounds
and RiboGene Leads.
6.6 Invention Use During the Research Term Notwithstanding any of the
ownership and/or rights provisions of Sections 6.3, 6.4 and 6.5, RiboGene shall
have a nonexclusive, nontransferrable, royalty-free license to practice any
Program Invention assigned to Abbott and/or Joint Program Invention for purposes
of the Research Program during the Research Term.
6.7 Invention Rights Following the Research Term Following the
termination or expiration of the Research Term, each party may practice any
Program Invention and/or Joint Program Invention for which that party is the
sole or joint title holder and/or patentee, and for which it has not forfeited
its rights, according to the provisions of Section 6.4,
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<PAGE> 30
without obligation to the other party. Also following such termination or
expiration, RiboGene shall also be free to nonexclusively license its rights to
Program Invention(s) under Section 6.4(a) or Joint Program Invention(s) under
Section 6.4(b) that are solely or jointly assigned to RiboGene, and may
exclusively license such rights to such Program Invention(s) and Joint Program
Invention(s) in which Abbott has failed to exercise or has disclaimed an
interest, without obligation to Abbott.
VII. WARRANTIES AND LIMITATIONS ON RIGHTS
7.1 RiboGene Warranties RiboGene hereby represents and warrants to
Abbott that, as of the Effective Date: (a) RiboGene has or will have upon
execution of this Research Agreement and the fulfillment of Abbott's financial
obligations hereunder, all the requisite resources, power and authority to
execute, deliver and perform this Agreement based on RiboGene's assumptions
regarding its funding requirements; (b) RiboGene will commit the resources and
skilled personnel necessary to fulfill its obligations under the Research
Program and will spend the research funds provided by Abbott hereunder solely in
support of the Program and for RiboGene's fully-burdened expenses related
specifically thereto; (c) the terms of this Agreement are not inconsistent with
any other contractual and/or legal obligations it may have, or with its policies
or the policies of any entity with which it is associated; (d) RiboGene believes
to the best of its knowledge, that it owns or otherwise has all necessary rights
to the screening and lead-identification technology and other RiboGene
Intellectual Property in existence as of the Effective Date that it proposes to
apply in the Research Program, and will own or otherwise have all necessary
rights to the anticipated screening and lead-identification technology and other
RiboGene Intellectual Property that it is developing and proposes to apply in
the Research Program; (e) it has experience with respect to the safety and
handling of the types of biological materials and synthetic chemicals that it
may be screening for Abbott hereunder; (f) it will provide all safety and
handling information related to materials, including RiboGene Compounds, or
other results coming from the Research Program and all know-how related thereto
of which it is aware, upon delivery of such materials or results to Abbott; (g)
it has not and shall not engage in any act inconsistent With this Agreement,
particularly that would allow any third party, including
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<PAGE> 31
any government or government agency, to acquire, own or possess any right or
interest inconsistent with Abbott's rights in any invention (whether patentable
or not), trade secret, or other proprietary right that arises out of or is made
as a consequence of this Agreement; and (h) this Agreement has been duly
authorized and, when executed and delivered by RiboGene, shall constitute a
legal, binding obligation, enforceable against RiboGene, according to its terms.
7.2 Limitation on Warranties RiboGene makes no representation or
warranty that the RiboGene Compounds identified to Abbott by. RiboGene hereunder
are novel entities or will not infringe the patent rights of others, but only
that the RiboGene Compounds which may be provided to Abbott hereunder will be
representative samples of such entities.
7.3 Disclaimer Abbott and RiboGene each understands that neither party
can guarantee the reliability of its research findings and conclusions, and
therefore, except as expressly set forth in this Agreement, NEITHER PARTY HAS
MADE OR MAKES ANY GUARANTEES AND EXTENDS ANY WARRANTIES OF ANY KIND, EITHER
EXPRESS OR IMPLIED, EXCEPT AS EXPRESSLY PROVIDED HEREIN. THERE ARE NO EXPRESS OR
IMPLIED WARRANTIES OF DESIGN, MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE, OR THAT ANY RIBOGENE OR ABBOTT COMPOUNDS IDENTIFIED IN THE RESEARCH
PROGRAM WILL NOT INFRINGE ANY PATENT, COPYRIGHT, TRADEMARK OR OTHER INTELLECTUAL
PROPERTY RIGHTS OF ANY INDEPENDENT THIRD PARTY. FURTHER, THERE ARE NO OTHER
EXPRESS OR IMPLIED WARRANTIES ARISING FROM THE COURSE OF DEALING, USAGE OR TRADE
PRACTICES, OR OF ANY OTHER KIND.
7.4 Limitations on Rights Nothing In this Agreement shall be construed
as:
(a) conferring rights to use in advertising, publicity,
promotional or sales literature the name of the other party. or anything
relating to the Research Program, without the prior written consent of the other
party In each instance; or
(b) granting, by implication, estoppel, or otherwise as a result of
this Agreement, any activities hereunder or the relationship of the parties, any
license, title, ownership or other rights to the other party's Independent
Information or Program Information or under patents
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<PAGE> 32
or know-how of the other party except as necessary to accomplish the purposes of
the Research Program and this Agreement or except as explicitly provided herein.
Each party acknowledges that, by virtue of this Agreement it acquires only such
rights as set forth under the terms and conditions of this Agreement.
VIII. LIABILITIES AND INDEMNITY
8.1 Liabilities Each party shall assume the responsibility for and
will pay all costs and expenses (including reasonable attorneys' fees and
expenses of litigation) related to liability, losses or damage to property,
including environmental, and injury or death to any persons, including employees
of either, incurred in connection with any claims, suits, actions, demands or
judgments arising out of (a) any failure by such party to strictly adhere to
safety instructions, precautions and information provided by the other party
and/or other generally-recognized safety practices for the storage, handling,
use and/or disposal of any biological, chemical or other materials employed
under or resulting from this Agreement; (b) any use by such party of information
or materials developed under the Research Program or the use, handling, storage
or disposal of any Abbott Compound(s) or RiboGene Compound(s) resulting from the
Research Program, except in reliance on a willful or grossly negligent
misrepresentation or wrongdoing of the other party; or (c) any noncompliance or
breach of this Agreement or other willful or negligent act or omission on its
part in the performance of activities and/or obligations under this Agreement.
Each party shall, however, provide the party assuming responsibility with
assistance and/or information, at the responsible party's reasonable expense,
with respect to any charge, claim, investigation or proceeding. EXCEPT AS SET
FORTH IN SECTION 8.2, IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER
PARTY FOR LOST PROFITS OR ANY CONSEQUENTIAL, SPECIAL INCIDENTAL, OR INDIRECT
DAMAGES OF SUCH OTHER PARTY, HOWEVER CAUSED AND/OR ON ANY THEORY OF LIABILITY,
ARISING OUT OF THIS AGREEMENT.
8.2 Indemnification Each party (the "Indemnifying Party") shall defend
the other party and such other party's agents, Affiliates, employees, officers,
directors, shareholders and permitted successors and
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<PAGE> 33
assigns (collectively, the "Indemnified Parties") against any claim made against
any or all of the Indemnified Parties by any third party, to the extent that
such claim arises out of any negligent, reckless or intentionally wrongful act
or omission of the Indemnifying Party or breach of this Agreement by the
Indemnifying Party. The Indemnifying Party shall either settle such claim or pay
all damages awarded against any or all of the Indemnified Parties by a court of
competent jurisdiction as a result of such claims, but no indemnification shall
necessarily be provided for such claim if the particular Indemnified Party(ies)
does/do not notify the Indemnifying Party promptly in writing of the claim, give
the Indemnifying Party the exclusive control of the defense and settlement
thereof, and provide all reasonable assistance In connection with the defense
or settlement thereof, at the Indemnifying Party's expense.
IX TERM AND TERMINATION
9.1 Term This Agreement shall be effective upon the Effective Date and
shall continue in effect through the expiration or termination of the Research
Term, unless extended in writing in accordance with the provisions of Section
9.2.
9.2 Possible Extension Upon the mutual agreement of the parties, this
Research Agreement may be extended for a period and under such other provisions
and/or amendments to the provisions of this Agreement, to be agreed upon in good
faith negotiations between the parties.
9.3 Termination Without Breach Prior to the expiration of the Research
Term, Abbott may terminate this Agreement in its entirety without cause upon
sixty (60)-days written notice to RiboGene. Upon such termination, Abbott shall
reimburse RiboGene for all documented, reasonable irrevocable commitments made
by RiboGene on behalf of the Research Program that are not covered by payments
made by Abbott to RiboGene prior to such termination, but in no event shall
Abbott be obliged to make payments to RiboGene which shall result in total
aggregate payments, according to the provisions of Article IV, of more than Five
million U.S. dollars (USD5,000,000) without the prior written approval of
Abbott. RiboGene shall, however, use all reasonable efforts to mitigate these
costs by, inter alia, reassigning personnel and transferring supplies,
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<PAGE> 34
materials and/or technology, where practical. In the event of any overpayment by
Abbott, RiboGene shall remit the same to Abbott within thirty (30) days of the
termination of the Research Program.
9.4 Effect of Breach In the event of a breach by RiboGene of any
material provision of this Agreement, or default by Abbott of any of Abbott's
financial obligations to RiboGene or a material breach by Abbott of Abbott's
confidentiality obligations hereunder, the aggrieved party shall give the party
in breach or default thirty (30)-day written notice to cure or substantially
cure such breach or default. If the breach or default is not cured or not
substantially cured within such thirty (30)-day period, the aggrieved party
shall immediately submit any dispute raised in a response to the aggrieved
party's written notice to the Alternative Dispute Resolution provisions of
Section 10.7, and only if the other party fails to honor the resolution of the
Alternative Dispute Resolution procedures may the aggrieved party terminate this
Agreement upon giving final written notice to the other party.
9.5 Effect of Bankruptcy or Agreement Revision Abbott may terminate
this Agreement upon the filing of a voluntary petition in bankruptcy by RiboGene
or a third party's filing of an involuntary petition in bankruptcy with respect
to RiboGene, which involuntary petition is not dismissed within forty-five (45)
days after the filing thereof, or if removal of a material part or parts of this
Agreement which are found to be void, invalid or unenforceable according to the
provisions of Section 10.9 would so substantially impair the value of the whole
Agreement to Abbott as to make continuance Impractical. If at any time during
the anticipated term or any extended term of this Agreement RiboGene files for
bankruptcy or an involuntary petition with respect to RiboGene is not dismissed,
and providing Abbott shall have paid to RiboGene or trustee(s) therefor at least
[*] anticipated under the provisions of Section 4.1 and all reasonable
additional amounts, If any, that are owed to RiboGene for activities actually
fulfilled under the provisions of an extension to this Agreement, provided for
in Section 9.2, Abbott shall receive sufficient representative amounts of all
RiboGene Compound(s), whether originally independently owned by or licensed to
RiboGene or subsequently owned, purchased or licensed by RiboGene during the
Research Term, to complete or have completed the
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- ----------------------------
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to
the omitted portions.
<PAGE> 35
anticipated Provisions and/or possibilities of this Agreement and shall
thereafter have a fully paid-up, nonterminable, nonexclusive license from
RiboGene and/or its trustee(s) to screen and/or otherwise use RiboGene Compounds
and RiboGene Intellectual Property to complete the anticipated provisions and/or
possibilities of the Research Program. At Abbot's option, Abbott shall have the
right under RiboGene Intellectual Property to make, have made, import, develop,
use, and otherwise evaluate Abbott Compounds and/or RiboGene Compounds, and,
with RiboGene's trustee(s) acting in RiboGene's stead, the right to obtain an
exclusive license to make, have made, import, use, offer for sale and sell
RiboGene Compounds and/or Products for consideration (i) equal to [*] of that
anticipated in the License Agreement, in the event that RiboGene files for
bankruptcy, or an involuntary petition with respect to RiboGene is not dismissed
within forty-five (45) days after the filing thereof, after the conclusion of
the Research Term, or (ii) that shall be negotiated in good faith between Abbott
and the trustee(s), but will be no more than fifty percent (50%) of that
anticipated in the License Agreement, in the event that RiboGene files for
bankruptcy, or an involuntary petition with respect to RiboGene is not dismissed
within forty-five (45) days after the filing thereof, prior to the conclusion of
the Research Term.
9.6 Consequences of Termination Expiration or termination of this
Agreement by either party shall not affect the rights and obligations of the
parties that have accrued prior to the effective date of termination of this
Agreement, including provisions referenced In the License Agreement which
survive this Agreement, to the extent such survival is necessary for the
interpretation of a provision of the License Agreement. Should Abbott terminate
this Agreement under the provisions of Section 9.3, or should Abbott fail to
honor the resolution of the Alternative Dispute Resolution provisions of Section
10.7 initiated by RiboGene under the provisions of Section 9.4, RiboGene's
obligation under Section 2.9 shall terminate immediately upon termination of
this Agreement.
X. MISCELLANEOUS
10.1 Notices All notices required or permitted hereunder shall be
transmitted, or at least immediately affirmed, in writing by facsimile, followed
by confirmation of that facsimile either by registered or
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- ----------------------------
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to
the omitted portions.
<PAGE> 36
certified mail, postage prepaid, return receipt requested, or by overnight
courier, addressed as follows, or to such other address as may be designated
from time to time by notice given by the respective party:
If to Abbott: Abbott Laboratories
100 Abbott Park Road
Abbott Park, Illinois 60064-3500
Facsimile No.: (847) 938-1674
Attention: V.P., Anti-Infective Discovery, PPD R&D
cc: Vice President, Pharmaceutical Discovery
cc: Legal Division
If to RiboGene: RiboGene, Inc.
21375 Cabot Boulevard
Hayward, California 94545
Facsimile No.: (510) 293-2596
Attention: President and CEO
10.2 Independence of Parties The status of each party under this
Agreement is that of an independent contractor, and neither party has the right
or authority to assume or create any obligation, accept legal process, make
commitments, incur any charges or otherwise bind or act on behalf of the other
or limit the other in any manner whatsoever, except as expressly stated herein.
Neither this Agreement nor any act hereunder shall be construed as constituting
the foundation of a partnership, association, agency, joint venture or any other
entity.
10.3 Impact on Other Relationships Neither the existence of this
Agreement nor the relationship of the parties hereunder shall impede either
party from engaging in any Independent activity, or, except as provided in
Section 2.9, as modified by Section 2.10, from entering into or continuing any
agreement with any third party directed to screening activities and commercial
candidate compound identification.
10.4 No Third-Party Beneficiaries No person or entity not a party to
this Agreement, including any employee of either party to this Agreement, shall
have or acquire any rights by reason of this Agreement,
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nor shall any party have any obligations or liabilities to such person or entity
by reason of this Agreement, except as provided under the provisions of Article
VIII.
10.5 No Waiver Failure by either party to enforce, or delay in
exercising, or partial exercise of any covenants or rights or remedies under
this Agreement shall not be deemed or construed as a waiver of such rights nor
shall a waiver by either party in one or more instances be construed as
constituting a continuing waiver or as a waiver in other or subsequent
instances.
10.6 Merger Clause This Agreement constitutes the complete and entire
understanding between the parties with respect to the screening and lead
identification activities anticipated hereunder, superseding and replacing all
prior oral or written agreements (except for the accrued rights and obligations
of the June 8, 1995 Confidential Disclosure Agreement and June 7, 1995 Materials
Transfer Agreement between the parties), communications, representations,
proposals, or negotiations specifically relating to the activities hereunder and
subject matter hereof. No change or addition to or variation or amendment of
this Agreement, nor any cancellation or waiver of any of the terms or provisions
hereof, nor any alteration or modification of any of the terms and conditions
hereof, shall be effective or valid and binding on either party unless in
writing and signed by a duly-authorized representative of each party.
10.7 Alternative Dispute Resolution The parties shall attempt to
amicably resolve disputes arising between them regarding the validity,
construction, enforceability or performance of the terms of this Agreement, and
any differences or disputes in the interpretation of the rights, obligations,
liabilities and/or remedies hereunder, which have been identified in a written
notice from one party to the other, by good faith settlement discussions between
their respective representatives. If the parties have failed to satisfactorily
resolve the dispute or difference after receipt of such written notice and
twenty-eight (28) calendar days having expired without the parties having
reached a satisfactory resolution, either party may initiate Alternative Dispute
Resolution ("ADR") procedures, during which each party shall have the right to
be
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represented by counsel, for resolution of all such disputes.
A. To begin an ADR proceeding, a party shall provide written notice to the
other party of the issues to be resolved by ADR. Within fourteen (14)
calendar days after its receipt of such notice, the other party may, by
written notice to the party initiating the ADR, add additional issues to
be resolved within the same ADR.
B. Within twenty-one (21) calendar days following receipt of the original
ADR notice, the parties shall select a mutually acceptable neutral to
preside in the resolution of any disputes in this ADR proceeding. If the
parties are unable to agree on a mutually acceptable neutral within such
period, either party may request the President of the CPR Institute for
Dispute Resolution ("CPR"), 366 Madison Avenue, 14th Floor, New York,
New York 10017, to select a neutral pursuant to the following
procedures:
(a) The CPR shall submit to the parties a list of not less
than five (5) candidates, believed qualified to undertake
an ADR relating to the subject matter in dispute, within
fourteen (14) calendar days after receipt of the request,
along with a Curriculum Vitae for each candidate. No
candidate shall be an employee, director, or shareholder
of either party or any of their subsidiaries or
affiliates.
(b) Such list shall include a statement of disclosure by each
candidate of any circumstances likely to affect his or her
Impartiality.
(c) Each party shall number the candidates in order of
preference (with the number one (1) signifying the
greatest preference) and shall deliver the list to the
CPR, within seven (7) calendar days following receipt of
the list of candidates. If a party believes a conflict of
interest exists regarding any of the candidates, that
party shall provide a written explanation of the conflict
to the CPR along with its list showing its order of
preference for the candidates. Any party failing to return
a list of preferences on time shall be deemed to
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<PAGE> 39
have no order of preference.
(d) If the parties collectively have identified fewer than
three (3) candidates deemed to have conflicts, the CPR
immediately shall designate as the neutral the candidate
for whom the parties collectively have indicated the
greatest preference. If a tie should result between two
(2) candidates, the CPR may designate either candidate. If
the parties collectively have identified three (3) or more
candidates deemed to have conflicts, the CPR shall review
the explanations regarding conflicts and, in its sole
discretion, may either (i) immediately designate as the
neutral the candidate for whom the parties collectively
have indicated the greatest preference, or (ii) issue a
new list of not less than five (5) candidates, in which
case the procedures set forth in subparagraphs B(a) - B(d)
shall be repeated.
C. No earlier than twenty-eight (28) calendar days or later than fifty-six
(56) calendar days after selection, the neutral shall hold a hearing to
resolve each of the issues identified by the parties. The ADR proceeding
shall take place at a location agreed upon by the parties. If the
parties cannot agree, the neutral shall designate a location other than
the principal place of business of either party or any of their
subsidiaries or affiliates.
D. At least seven (7) calendar days prior to the hearing, each party shall
submit the following to the other party and the neutral:
(a) a copy of all exhibits on which such party intends to
rely in any oral or written presentation to the neutral;
(b) a list of any witnesses such party intends to call at the
hearing, and a short summary of the anticipated testimony
of each witness;
(c) a proposed ruling on each issue to be resolved, together
with a request for a specific damage award or other remedy
for each issue. The proposed rulings and remedies
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shall not contain any recitation of the facts or any legal
arguments and shall not exceed one (1) page per issue.
(d) a brief in support of such party's proposed rulings and
remedies, provided that the brief shall not exceed twenty
(20) pages. This page limitation shall apply regardless of
the number of issues raised in the ADR proceeding.
Except as expressly set forth in subparagraphs D(a) - D(d), no discovery
shall be required or permitted by any means, including depositions,
interrogatories, requests for admissions, or production of documents.
E. The hearing shall be conducted on two (2) consecutive days and shall be
governed by the following rules:
(a) Each party shall be entitled to five (5) hours of hearing
time to present its case. The neutral shall determine
whether each party has had the five (5) hours to which it
is entitled.
(b) Each party shall be entitled, but not required, to make an
opening statement, to present regular and rebuttal
testimony, documents or other evidence, to cross-examine
witnesses, and to make a closing argument.
Cross-examination of witnesses shall occur immediately
after their direct testimony, and cross-examination time
shall be charged against the party conducting the
cross-examination.
(c) The party initiating the ADR shall begin the hearing and,
if it chooses to make an opening statement, shall address
not only issues it raised but also any issues raised by
the responding party. The responding party, if it chooses
to make an opening statement, also shall address all issues
raised in the ADR. Thereafter, the presentation of regular
and rebuttal testimony and documents, other evidence, and
closing arguments shall proceed in the same sequence.
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(d) Except when testifying, witnesses shall be excluded from
the hearing until closing arguments.
(e) Settlement negotiations, including any statements made
therein, shall not be admissible under any circumstances.
Affidavits prepared for purposes of the ADR hearing also
shall not be admissible. As to all other matters, the
neutral shall have sole discretion regarding the
admissibility of any evidence.
F. Within seven (7) calendar days following completion of the hearing, each
party may submit to the other party and the neutral a posthearing brief
in support of its proposed rulings and remedies, provided that such
brief shall not contain or discuss any new evidence and shall not exceed
ten (10) pages. This page limitation shall apply regardless of the
number of issues raised in the ADR proceeding.
G. The neutral shall rule on each disputed issue within fourteen (14)
calendar days following completion of the hearing. Such ruling shall
adopt in its entirety the proposed ruling and remedy of one of the
parties on each disputed issue but may adopt one party's proposed
rulings and remedies on some issues and the other party's proposed
rulings and remedies on other issues. The neutral shall not issue any
written opinion or otherwise explain the basis of the ruling.
H. The neutral shall be paid a reasonable fee plus expenses. These fees and
expenses, along with the reasonable legal fees and expenses of the
prevailing party (including all expert witness fees and expenses), the
fees and expenses of a court reporter, and any expenses for a hearing
room, shall be paid as follows:
(a) If the neutral rules in favor of one party on all disputed
issues in the ADR, the losing party shall pay 100% of such
fees and expenses.
(b) If the neutral rules in favor of one party on some issues
and the other party on other issues, the neutral shall
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issue with the rulings a written determination as to how
such fees and expenses shall be allocated between the
parties. The neutral shall allocate fees and expenses in a
way that bears a reasonable relationship to the outcome of
the ADR, with the party prevailing on more issues, or on
issues of greater value or gravity, recovering a
relatively larger share of its legal fees and expenses.
I. The rulings of the neutral and the allocation of fees and expenses shall
be binding, non-reviewable, and non-appealable, and may be entered as a
final judgment in any court having jurisdiction.
J. Except as provided in paragraph I or as required by law, the existence
of the dispute, any settlement negotiations, the ADR hearing, any
submissions (including exhibits, testimony, proposed rulings, and
briefs), and the rulings shall be deemed Confidential Information. The
neutral shall have the authority to impose sanctions for unauthorized
disclosure of Confidential Information.
10.8 Headings. Article and Section headings are inserted in this
Agreement for convenience of reference only and no construction, meaning,
interpretation or inference shall be derived from them.
10.9 Governmental Compliance and Effect of Invalidity. This Agreement and
performance hereunder is subject to the restrictions, limitations, terms and
conditions of all applicable governmental regulations, approvals and clearances.
If any term or provision of this Agreement is held invalid, illegal or
unenforceable in any respect, for any reason, that invalidity, illegality or
unenforceability shall not affect any other term or provision hereof, and this
Agreement shall be interpreted as if such term or provision, to the extent the
same shall have been held to be invalid, illegal or unenforceable, had never
been contained herein, with the other provisions of this Agreement remaining in
force.
10.10 Assignability. This Agreement and the rights, obligations,
privileges, and interests hereof may not be assigned by either party, except
that either party may assign this Agreement and rights and interests, in whole
or in part, (i) to any of its Affiliates, provided that the assigning party
continues to guarantee the performance of such
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<PAGE> 43
Affiliate(s), or (ii) with the consent of the other party, which consent shall
not be unreasonably withheld, to any purchaser of all or substantially all of
its stock or assets of such party (including the assets associated with the
Research Program), or to any acquirer or successor corporation resulting from
any merger or consolidation with or into such successor corporation.
10.11 Succession. This Agreement and the rights and obligations granted
and undertaken hereunder shall be binding upon and enure to the benefit of the
parties hereto, and their permitted assign(s), successor(s), trustee(s) or
receiver(s) in bankruptcy.
10.12 Government Compliance. RiboGene and Abbott shall comply with all
federal, state, and local laws, ordinances and regulations applicable to the
shipment, handling, storage, testing, use, development, sale and/or disposal of
any compound or peptide hereunder.
10.13 Governing Law. The validity, construction, and performance of this
Agreement shall be governed by and interpreted in accordance with the laws of
the State of New York, U.S.A., excluding its choice of laws provisions.
IN WITNESS WHEREOF, authorized representatives of the parties have duly
executed this Agreement in duplicate.
RIBOGENE, INC ABBOTT LABORATORIES
By: /s/ CHARLES J. CASAMENTO By: /s/ THOMAS R. HODGSON
------------------------------ ----------------------------------------
Name: Charles J. Casamento Name: Thomas R. Hodgson
Title: Chairman, President & CEO Title: President and Chief Operating Officer
--------------------------- --------------------------------------
Date: April 26, 1996 Date: April 24, 1996
--------------------------- --------------------------------------
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<PAGE> 44
EXHIBIT A
<TABLE>
<CAPTION>
COUNTRY APPLICATION NO. FILING DATE PATENT NO. ISSUE DATE
<S> <C> <C> <C> <C>
U.S 08/328,258 10/24/93
(PCT) 94/12,161 10/14/94
</TABLE>
<PAGE> 45
EXHIBIT I
ABBOTT/RIBOGENE ANNUAL RESEARCH PLAN
FOR ANTIFUNGAL COMPOUND DEVELOPMENT
(April, 1996-April, 1997)
This Exhibit represents the initial Annual Research Plan, stating the objectives
and describing the activities for the first Contract Year of the Research
Program under the Abbott-RiboGene Research Agreement of April, 1996.
Modifications to this Program will occur as the result of further discussions of
the Joint Management Team (JMT). It is understood that the conditions and other
provisions of the Research Agreement apply and control this Exhibit in all
respects.
RESEARCH GOALS
The Abbott/RiboGene Research Program shall be focused on, but not limited to,
research and development directed to both oral and intravenous forms of
compounds, which have broad spectrum antifungal activity, for use in treatment
of systemic fungal infections. An objective of this Research Program during the
initial phase (the period after the Research Agreement is signed, but before the
JMT has convened) of the Agreement is to capitalize on the full potential of
RiboGene's proprietary and novel approaches to developing inhibitors of fungal
protein translation.
RESEARCH PROGRAM COMPONENTS
PRIMARY SCREENS
It shall be the priority of RiboGene scientists to complete the screening of
RiboGene libraries through RiboGene's GCN4 and yEF-3 primary translation
inhibition screening assays. Upon signing of the Research Agreement, Abbott will
begin to provide compounds from Abbott's library to RiboGene for screening in
these same two primary assays. The rate, at Abbott's option, at which these
compounds will be provided to RiboGene shall be targeted to providing RiboGene
with samples of all compounds to be tested from the Abbott library over a 12
month period.
<PAGE> 46
SECONDARY SCREENS
Compounds identified as reactive in the primary screens will undergo further
testing at RiboGene and at Abbott. RiboGene will perform in vitro translation
testing using both fungal and mammalian translation systems. The spectrum of
antifungal activity for compounds identified by the primary screens will be
determined at Abbott and will include, but not be limited to, testing vs. [*]
species.
TERTIARY SCREENS
Compounds identified by the JMT as candidates for tertiary screening will be
tested at Abbott in in vivo models of acute and chronic fungal infections. In
addition, Abbott will perform appropriate pharmacokinetic and acute toxicity
studies on these compounds.
CHEMISTRY
The JMT shall determine which RiboGene Compounds should be structurally
modified at Abbott using traditional medicinal chemistry and/or combinatorial
chemistry methods to attempt to improve the pharmaceutical properties of these
compounds. All compounds which represent modifications of RiboGene Compounds
derived from these approaches shall be evaluated for protein synthesis
inhibition and antifungal activity at both RiboGene and Abbott.
DEVELOPMENT OF NEW ANTIFUNGAL PRIMARY SCREENING ASSAYS RiboGene will initiate
and direct and Abbott will participate in planning research toward the
development of new translation-based primary screening assays which identify [*]
inhibitors and compounds which suppress [*] during the first 8 months of the
Research Program. The goal during this period is to bring on line 2 additional
primary screens, one within 6 months, and one within 8 months from the Inception
of the Research Program.
DATA MANAGEMENT Abbott and RiboGene shall organize an electronic system of
Research Program data collection, management and sharing within a period not to
exceed [*] from the beginning of the Research Program. Abbott shall communicate
such information regarding its computerized data collection/management systems
and software for
- ----------------------------
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to
the omitted portions.
<PAGE> 47
recording and tracking data to allow RiboGene to establish Abbott-compatible
systems within its laboratories and to develop an electronic data sharing system
for communicating information relating to antifungal compounds which result from
the Research Program. This system is also intended to facilitate rapid and
complete integration of data generated in RiboGene's translation inhibition
antifungal screening of Abbott Compounds into the Abbott library database.
Certain biological and chemical data concerning RiboGene Compounds and certain
Abbott Compounds, for which there are no previous restrictions to other Abbott
or confidential third party collaborations, may also be made available to
RiboGene through this database on a confidential basis. Similarly, Abbott shall
treat as confidential, and not disclose to a third party without prior consent
from RiboGene, confidential information provided to this database by RiboGene.
RiboGene will ensure that they have in place appropriate instrumentation and
software to facilitate rapid and timely communication of data between RiboGene
and Abbott.
STRATEGIC PROJECT MANAGEMENT
In order to fully capitalize on the diversity of backgrounds, creativity and
intellectual contributions of all parties, the JMT and possibly additional
designates of each party shall meet together with the RiboGene Scientific
Advisory Board to discuss antifungal drug development strategies and related
scientific issues within the first 90 days after the Research Agreement is
signed.
Certain antifungal compounds may be identified by the JMT as potential clinical
candidates based on scientific evidence. The ultimate decision to move such a
compound forward into clinical trials shall be the sole responsibility of
Abbott and will include, but not necessarily be limited to, an evaluation of the
compound's competitive efficacy and safety profile, formulation of the
compound, the degree of difficulty and cost of manufacturing the particular
compound and the antifungal marketplace. Abbott shall inform RiboGene in a
timely manner regarding its decisions on clinical development of antifungal
compounds resulting from the Research Program.
COMMUNICATION
Abbott and RiboGene scientists will communicate by phone, telefax, mail, or
through approved and properly protected computerized networks in order to insure
timely exchange of information between parties. Hard copies of all data and
overheads shall be provided
<PAGE> 1
EXHIBIT 10.3
SERIES E PREFERRED STOCK PURCHASE AGREEMENT
THIS SERIES E PREFERRED STOCK PURCHASE AGREEMENT (the "Agreement") is
made as of 26 April, 1996 by and between RiboGene, Inc., a California
corporation (the "COMPANY"), and Abbott Laboratories, an Illinois Corporation
(the "Purchaser").
THE PARTIES HEREBY AGREE AS FOLLOWS:
1. Purchase and Sale of Preferred Stock.
1.1 Authorization. The Company shall adopt and file with
the Secretary of State of the State of California on or before the Closing (as
defined below) the Amendment to Articles of Incorporation in the form attached
hereto as Exhibit A (such amendment and the Company's existing Articles of
Incorporation, as amended, are herein referred to jointly as the "Restated
Articles").
1.2 Sale and Issuance of Series E Preferred Stock. Subject
to the terms and conditions of this Agreement, the Purchaser agrees to purchase
at the Closing (as defined below) and the Company agrees to sell and issue to
the Purchaser at the Closing 1,555,556 shares of the Company's Series E
Preferred Stock at a purchase price of $2.25 per share. The shares of Series E
Preferred Stock issued to the Purchaser pursuant to this Agreement shall be
hereinafter referred to as the "Stock."
2. Closing and Delivery.
2.1 Closing Date. The closing of the purchase and sale of
the Stock (the "Closing") shall take place at the offices of Venture Law Group,
2800 Sand Hill Road, Menlo Park, California, at 1:00 p.m., on May 1, 1996, or
at such other time and place as the Company and the Purchaser mutually agree
upon, orally or in writing (the date of the Closing is hereinafter referred to
as the "Closing Date").
2.2 Delivery. At the Closing, the Company will deliver to
the Purchaser a certificate, registered in the Purchaser's name, representing
the Stock to be purchased in the Closing by the Purchaser. Such delivery shall
be against payment of the purchase price therefor, by check payable to the
Company, by wire transfer to the Company's bank account, or against
cancellation of indebtedness.
3. Representations and Warranties of the Company. The Company
hereby represents and warrants to the Purchaser that, except as set forth on a
Schedule of Exceptions attached hereto as Exhibit B, specifically identifying
the relevant subsection hereof, which exceptions shall be deemed to be
representations and warranties as if made hereunder.
3.1 Organization, Good Standing and Qualification. The
Company is a corporation duly organized, validly existing and in good standing
under the laws of the State of California and has all requisite corporate power
and authority to carry on its business as now conducted and as proposed to be
conducted. The Company is duly qualified to transact business
<PAGE> 2
and is in good standing in each jurisdiction in which the failure so to qualify
would have a material adverse effect on its business or properties.
3.2 Capitalization. The authorized capital of the Company
consists, or will consist, immediately prior to the Closing, of:
(i) Preferred Stock. 12,558,491 shares of Preferred Stock,
of which (A) 138,269 shares have been designated Series A Preferred Stock,
138,268 of which are issued and outstanding, (B) 800,000 shares have been
designated Series B Preferred Stock, 580,061 of which are issued and
outstanding, (C) 2,950,000 shares have been designated Series C Preferred
Stock, 2,805,519 of which are issued and outstanding, (D) 270,222 shares have
been designated Series D Preferred Stock, all of which are issued and
outstanding, and (E) 8,400,000 shares have been designated Series E Preferred
Stock, 5,647,814 of which are issued and outstanding. The rights, privileges
and preferences of the Series A, Series B, Series C, Series D and Series E
Preferred Stock (collectively, the "Preferred") are as stated in the Company's
Articles of Incorporation, as amended.
(ii) Common Stock. 25,000,000 shares of Common Stock, of
which 743,232 shares are issued and outstanding.
(iii) Except for (a) the conversion privileges of the
Preferred, (b) the warrants to purchase up to 21,546 shares of Series B
Preferred Stock, 15,000 shares of Series C Preferred Stock, and 17,777 shares
of Series E Preferred Stock each issued to Dominion Ventures, Inc. (and the
conversion privileges of the Preferred Stock issuable upon exercise thereof),
(c) the warrants to purchase up to an aggregate of 1,313,000 shares of Common
Stock issued to Hyline Laboratories, Inc. and another entity formerly related
thereto, (d) warrants for the purchase of up to 33,333 shares of Series E
Preferred Stock issued to Silicon Valley Bank, (e) warrants for the purchase of
up to 52,850 shares of Common Stock issued to SBC Capital Markets and an
individual affiliated therewith, and (f) the outstanding options issued under
the Company's equity incentive plan(s) described below, there are no
outstanding options, warrants, rights (including conversion or preemptive
rights) or agreements, orally or in writing, for the purchase or acquisition
from the Company of any shares of its capital stock. The Company has from time
to time reserved up to an aggregate of 2,735,000 shares of Common Stock for
issuance, at the discretion of the Board of Directors, to officers, directors,
employees and consultants pursuant to the Company's 1993 Stock Plan, of which
(a) 448,292 shares are currently outstanding pursuant to stock purchases or
stock option exercises, (b) 1,910,691 shares are currently subject to
outstanding stock options or committed for issuance pursuant to pending stock
option grants, and (c) 375,817 shares are reserved for future stock option or
purchase grants. The Company has also reserved 4,000 shares of Common Stock for
issuance upon the exercise of a single outstanding stock option pursuant to the
Company's 1990 Stock Option Plan.
3.3 Subsidiaries. The Company does not presently own or control,
directly or indirectly, any interest in any other corporation, association, or
other business entity.
3.4 Authorization. All corporate action on the part of the
Company, its officers, directors and shareholders necessary for the
authorization, execution and delivery of the
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<PAGE> 3
Agreement, the Ninth Amended and Restated Rights Agreement in substantially the
form attached hereto at Exhibit C (the "Rights Agreement"), and the issuance of
the Stock and the Common Stock issuable upon conversion thereof (collectively,
the "Securities"), the performance of all obligations of the Company hereunder
and thereunder has been taken or will be taken prior to the Closing, and the
Agreement, the Rights Agreement constitute valid and legally binding
obligations of the Company, enforceable in accordance with their respective
terms.
3.5 Valid Issuance of Securities.
(a) The Stock, when issued, sold and delivered in
accordance with the terms hereof for the consideration expressed herein, will
be duly and validly issued, fully-paid and nonassessable. Based in part upon
the representations of the Purchaser in this Agreement and subject to the
provisions of Section 3.6 below, the Securities will be issued in compliance
with all applicable federal and state securities laws. The Common Stock
issuable upon conversion of the Preferred has been duly and validly reserved
for issuance, and upon issuance in accordance with the terms of the Restated
Articles, shall be duly and validly issued, fully paid and non-assessable and
will be issued in compliance with all applicable federal and state securities
laws.
(b) The outstanding shares of Common Stock and Preferred
Stock are all duly and validly authorized and issued, fully-paid and
nonassessable, and were issued in compliance with all applicable federal and
state securities laws.
3.6 Governmental Consents. No consent, approval, order or
authorization of, or registration, qualification, designation, declaration or
filing with, any federal, state or local governmental authority on the part of
the Company is required in connection with the consummation of the transactions
contemplated by the Agreement, except for the federal and state securities law
filings to be made by the Company as set forth on the Schedule of Exceptions
attached hereto as Exhibit B.
3.7 Litigation. There is no action, suit, proceeding or
investigation pending or currently threatened against the Company that
questions the validity of the Agreement, or the right of the Company to enter
into the Agreement, or to consummate the transactions contemplated thereby, or
that might result, either individually or in the aggregate, in any material
adverse changes in the assets, condition, affairs or prospects of the Company,
financially or otherwise, or any change in the current equity ownership of the
Company, nor is the Company aware that there is any basis for the foregoing.
The foregoing includes, without limitation, actions pending or threatened (or
any basis therefor known to the Company) involving the prior employment of any
of the Company's employees, their use in connection with the Company's
business of any information or techniques allegedly proprietary to any of their
former employers, or their obligations under any agreements with prior
employers. The Company is not a party or subject to the provisions of any
order, writ, injunction, judgment or degree of any court or government agency
or instrumentality. There is no action, suit, proceeding or investigation by
the Company currently pending or which the Company intends to initiate.
<PAGE> 4
3.8 Employee Agreement. Each employee and officer of the Company has
executed an agreement with the Company regarding confidentiality and
proprietary information. The Company, after reasonable investigation, is not
aware that any of its employees are in violation thereof, and the Company will
use its best efforts to prevent any such violation and to maintain and enforce
such agreement with its employees.
3.9 Patents and Trademarks. As of the Closing, the Company has or
will have sufficient title and ownership of all patents, trademarks, service
marks, trade names, copyrights, trade secrets, information, proprietary rights
and processes necessary for its business as now conducted and as proposed to be
conducted without any conflict with or infringement of the rights of others.
There are no outstanding options, licenses, or agreements of any kind relating
to the foregoing, nor is the Company bound by or a party to any options,
licenses or agreements of any kind with respect to the patents, trademarks,
service marks, trade names, copyrights, trade secrets, licenses, information,
proprietary rights and processes of any other person or entity. The Company has
not received any communications alleging that the Company has violated or, by
conducting its business as proposed, would violate any of the patents,
trademarks, service marks, trade names, copyrights or trade secrets or other
proprietary rights of any contract (including licenses, covenants or
commitments of any nature) or other agreement, or subject to any judgment,
decree or order of any court or administrative agency, that would interfere
with the use of his best efforts to promote the interests of the Company or
that would conflict with the Company's business as proposed to be conducted.
Neither the execution nor delivery of the Agreement, nor the carrying on of the
Company's business as proposed, will, to the Company's knowledge, conflict with
or result in a breach of the terms, conditions or provisions of, or constitute
a default under, any contract, covenant or instrument under which any of such
employees is now obligated. The Company does not believe it is or will be
necessary to utilize any inventions of any of its employees (or people it
currently intends to hire) made prior to their employment by the Company.
3.10 Compliance with Other Instruments.
(a) The Company is not in violation or default of any
provisions of its Articles of Incorporation, as amended, or Bylaws or of any
instrument, judgment, order, writ, decree or contract to which it is a party or
by which it is bound or, to its knowledge, of any provision of federal or state
statute, rule or regulation applicable to the Company. The execution, delivery
and performance of the Agreement, and the consummation of the transactions
contemplated hereby and thereby, will not result in any such violation or be in
conflict with or constitute, with or without the passage of time and giving of
notice, either a default under any such provision, instrument, judgment, order,
writ, decree or contract or an event which results in the creation of any lien,
charge or encumbrance upon any assets of the Company.
(b) The Company has avoided every condition, and has not
performed any act, the occurrence of which would result in the Company's loss
of any right granted under any license, distribution or other agreement.
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<PAGE> 5
3.11 Agreements: Action
(a) Except for agreements explicitly contemplated hereby, there
are no agreements, understandings or proposed transactions between the Company
and any of its officers, directors, affiliates, or any affiliate thereof.
(b) There are no agreements, understandings, instruments,
contracts or proposed transactions to which the Company is a party or by
which it is bound that involve (i) obligations of, or payments to the Company
in excess of, $50,000, or (ii) the license of any patent, copyright, trade
secret or other proprietary right to or from the Company.
(c) The Company has not (i) declared or paid any dividends, or
authorized or made any distribution upon or with respect to any class or
series of its capital stock, (ii) incurred indebtedness for money borrowed or
incurred any other liabilities individually in excess of $10,000 or in excess
of $50,000 in the aggregate, including guarantees for such amounts, (iii) made
any loans or advances to any person, other than ordinary advances for travel
expenses, or (iv) sold, exchanged or otherwise disposed of any of its assets
or rights, other than the sale of its inventory in the ordinary course of
business.
(d) The Company is not a party to and is not bound by any
contract, agreement or instrument, or subject to any restriction under its
Articles of Incorporation, as amended, or Bylaws, which adversely affects its
business as now conducted or as proposed to be conducted, its properties or its
financial condition.
(e) The Company has not engaged in the past three (3) months in
any discussion (i) with any representative of any corporation or corporations
regarding the merger of the Company with or into any such corporation or
corporations, (ii) with any corporation, partnership, association or other
business entity or any individual regarding the sale, conveyance or disposition
of all or substantially all of the assets of the Company or a transaction or
series of related transactions in which more than fifty percent (50%) of the
voting power of the Company is disposed of, or (iii) regarding any other form
of liquidation, dissolution or winding up of the Company.
3.12 Disclosure. The Company has fully provided the Purchaser with all
the information which the Purchaser has requested for deciding whether to
acquire the Stock and Warrants and all information which the Company believes is
reasonably necessary to enable the Purchaser to make such decision, including
the latest draft of the Company's Business Plan (the "Business Plan"). No
representation or warranty of the Company contained in the Agreement and the
Exhibits attached hereto, any certificate furnished or to be furnished to the
Purchaser at the Closing, or the Business Plan (when read together) contains any
untrue statement of a material fact or omits to state a material fact necessary
in order to make the statements contained herein or therein not misleading in
light of the circumstances under which they were made. To the extent the
Business Plan was prepared by management of the Company, the Business Plan and
the financial projections contained in the Business Plan were prepared in good
faith; however, the Company does not warrant that it will achieve such
financial projections.
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<PAGE> 6
3.13 Rights of Registration and First Offer. Except as contemplated
on the Schedule of Exceptions, the Company has not granted or agreed to grant
any registration rights, including piggyback rights, to any person or entity.
3.14 Corporate Documents. The Articles of Incorporation, as
amended, and Bylaws of the Company are in the form provided to special counsel
for the Purchaser.
3.15 Title to Property and Assets. The Company owns its property
and assets free and clear of all mortgages, liens,loans and encumbrances,
except such encumbrances and liens which arise in the ordinary course of
business and do not materially impair the Company's ownership or use of such
property or assets. With respect to the property and assets it leases, the
Company is in compliance with such leases and, to the best of its knowledge,
holds a valid leasehold interest free of any liens, claims or encumbrances.
3.16 Financial Statements. The Company has delivered to the
Purchaser or counsel to the Purchaser its unaudited financial statements
(balance sheet and profit and loss statement) as at December 31, 1995 (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 and with each other, except that
unaudited Financial Statements may not contain all footnotes required by
generally accepted accounting principles. The Financial Statements fairly
present the financial condition and operating results of the Company as of the
dates, and for the periods, indicated therein, subject to normal year-end audit
adjustments, which are neither individually nor in the aggregate material.
Except as set forth in the Financial Statements, the Company has no material
liabilities, contingent or otherwise, other than (i) liabilities incurred in the
ordinary course of business subsequent to December 31, 1995, and (ii)
obligations under contracts and commitments incurred in the ordinary course of
business and not required under generally accepted accounting principles to be
reflected in the Financial Statements, which, in both cases, individually or in
the aggregate, are not material to the financial condition or operating results
of the Company. The Company maintains and will continue to maintain a standard
system of accounting established and administered in accordance with generally
accepted accounting principles.
3.17 Employee Benefit Plans. The Company does not have any Employee
Benefit Plan as defined in the Employee Retirement Income Security Act of 1974.
3.18 Tax Returns and Payments. The Company has filed all tax
returns and reports as required by law. These returns and reports are true and
correct in all material respects. The Company has paid all taxes and other
assessments due, except those contested by it in good faith which are listed in
the Schedule of Exceptions.
3.19 Insurance. The Company has in full force and effect fire and
casualty insurance policies, with extended coverage, sufficient in amount
(subject to reasonable deductibles) to allow it to replace any of its properties
that might be damaged or destroyed.
3.20 Labor Agreements and Actions. The Company is not bound by or
subject to (and none of its assets or properties is bound by or subject to) any
written or oral, express or implied, contracts, commitments or arrangement with
any labor union, and no labor union has
<PAGE> 7
requested or, to the knowledge of the Company, has sought to represent any of
the employees, representatives or agents of the Company. There is no strike or
other labor dispute involving the Company pending, or to the knowledge of the
Company threatened, which could have a material adverse effect on the assets,
properties, financial condition, operating results, or business of the Company
(as such business is presently conducted and as it is proposed to be
conducted), nor is the Company aware of any labor organization activity
involving its employees. The Company is not aware that any officer or key
employee, or that any group of key employees, intends to terminate their
employment with the Company, nor does the Company have a present intention to
terminate the employment of any of the foregoing. The employment of each
officer and employee of the Company is terminable at the will of the Company.
4. Representations and Warranties of the Purchaser. The Purchaser
hereby severally and not jointly represents and warrants to the Company that:
4.1 Authorization. This Agreement constitutes its valid and
legally binding obligation, enforceable in accordance with its terms.
4.2 Purchase Entirely for Own Account. This Agreement is
made with the Purchaser in reliance upon the Purchaser's representation to the
Company, which by the Purchaser's execution of this Agreement the Purchaser
hereby confirms, that the Securities will be acquired for investment for the
Purchaser's own account, not as a nominee or agent, and not with a view to the
resale or distribution of any part thereof, and that the Purchaser has no
present intention of selling, granting any participation in, or otherwise
distributing the same. By executing this Agreement, the Purchaser further
represents that the Purchaser does not presently have any contract, undertaking,
agreement or arrangement with any person to sell, transfer or grant
participations to such person or to any third person, with respect to any of the
Securities. The Purchaser represents that it has full power and authority to
enter into this Agreement.
4.3 Disclosure of Information. The Purchaser believes it
has received all the information it considers necessary or appropriate for
deciding whether to acquire the Securities. The Purchaser further represents
that it has had an opportunity to ask questions and receive answers from the
Company regarding the terms and conditions of the offering of the Securities.
The foregoing, however, does not limit or modify the representations and
warranties of the Company in Section 3 of this Agreement or the right of the
Purchaser to rely thereon.
4.4 Investment Experience. The Purchaser is acquiring the
Securities for investment for the Purchaser's own account, not as a nominee or
agent, and not with the view to, or for resale in connection with, any
distribution thereof. The Purchaser understands that the Securities have not
been, and will not be, registered under the Securities Act of 1933, as amended
(the "Securities Act") by reason of a specific exemption from the
registration provisions of the Securities Act which depends upon, among other
things, the bona fide nature of the investment intent and the accuracy of the
Purchaser's representations as expressed herein. The Purchaser has not been
formed for the specific purpose of acquiring the Securities.
4.5 Restricted Securities. The Purchaser understands that
the Securities are characterized as "restricted securities" under the federal
securities laws inasmuch as they are
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<PAGE> 8
being acquired from the Company in a transaction not involving a public offering
and that under such laws and applicable regulations such Securities may be
resold without registration under the Securities Act, only in certain limited
circumstances. In this connection, the Purchaser represents that it is familiar
with SEC Rule 144, as presently in effect, and understands the resale
limitations imposed thereby and by the Securities Act.
4.6 Further Limitations on Disposition. Without in any way limiting
the representations set forth above, the Purchaser severally and not jointly
further agrees not to make any disposition of all or any portion of the
Securities unless and until:
(a) There is then in effect a Registration Statement under the
Securities Act covering such proposed disposition and such disposition is made
in accordance with such Registration Statement; or
(b) (i) The Purchaser shall have notified the Company of the
proposed disposition and shall have furnished the Company with a detailed
statement of the circumstances surrounding the proposed disposition, and (ii)
if reasonably requested by the Company, in the event that such transfer is not
made pursuant to a registration statement under the Securities Act, the
Purchaser shall have furnished the Company with an opinion of counsel,
reasonably satisfactory to the Company, that such disposition will not require
registration under the Securities Act. It is agreed that the Company will not
require opinions of counsel for transactions made pursuant to Rule 144 except
in unusual circumstances.
(c) Notwithstanding the provisions of paragraphs (a) and (b)
above, no such registration statement or opinion of counsel shall be necessary
for a transfer by the Purchaser to a shareholder or partner of the Purchaser,
if the transferee or transferees agree in writing to be subject to the terms
hereof to the same extent as if they were the Purchaser hereunder.
4.7 Legends. It is understood that the Securities, and any securities
issued in respect thereof or exchange therefor, may bear one or all of the
following legends:
(a) "THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT
TO THE SECURITIES UNDER SUCH ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE
COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED OR UNLESS SOLD PURSUANT TO RULE
144 OF SUCH ACT."
(b) Any legend required by the laws of the State of
California, including any legend required by the California Department of
Corporations.
(c) Any legend required by the Blue Sky laws of any other
state to the extent such laws are applicable to the shares represented by the
certificate so legended.
4.8 U.S. Persons. The Purchaser is a United States person.
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<PAGE> 9
5. California Commissioner of Corporations.
5.1 Corporate Securities Law. THE SALE OF THE SECURITIES
THAT IS THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE
COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA. THE ISSUANCE OF SUCH
SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION FOR SUCH
SECURITIES PRIOR TO SUCH QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF
SECURITIES IS EXEMPT FROM THE QUALIFICATION BY SECTION 25100, 25102 OR 25105 OF
THE CALIFORNIA CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT
ARE EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED UNLESS THE
SALE IS SO EXEMPT.
6. Conditions of Purchaser Obligations at Closing. The obligations
of the Purchaser to the Company under this Agreement are subject to the
fulfillment, on or before the Closing, of each of the following conditions:
6.1 Representations and Warranties. The representations
and warranties of the Company contained in Section 3 shall be true on and as of
the Closing with the same effect as though such representations and warranties
had been made on and as of the date of such Closing.
6.2. Performance. The Company shall have performed and
complied 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 Closing.
6.3 Compliance Certificate. The Chief Executive Officer of
the Company shall deliver to the Purchaser at the Closing a certificate
certifying that the conditions specified in Sections 6.1 and 6.2 have been
fulfilled.
6.4 Qualifications. The Commissioner of Corporations of
the State of California shall have issued a permit qualifying the offer and
sale of the Stock to the Purchaser pursuant to this Agreement, or such offer
and sale shall be exempt from such qualification under the California
Corporate Securities Law of 1968, as amended.
6.5 Proceedings and Documents. All corporate and other
proceedings in connection with the transactions contemplated at the Closing
and all documents incident thereto shall be reasonably satisfactory in form and
substance to the Purchaser and its special counsel, and they shall have
received all such counterpart original and certified or other copies of such
documents as they may reasonably request.
6.6 Opinion of Company Counsel. The Purchaser shall have
received from Venture Law Group, A Professional Corporation, counsel for the
Company, an opinion, dated as of the Closing, in substantially the form of
Exhibit D.
6.7 Board of Directors. The Board of Directors of the
Company as of the Closing Date shall be comprised of Alexander Barkas, Charles
Casamento, Charles Hartman, Jon Saxe, Jesse Treu and Petri Vainio.
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<PAGE> 10
6.8 Rights Agreement. The Company, the Purchaser and
sufficient other shareholders of the Company shall have executed and delivered
the Rights Agreement.
7. Conditions of the Company's Obligations at Closing. The
obligations of the Company to the Purchaser under this Agreement are subject to
the fulfillment, on or before the Closing, of each of the following conditions:
7.1 Representations and Warranties. The representations
and warranties of the Purchaser contained in Section 4 shall be true on and as
of the Closing with the same effect as though such representations and
warranties had been made on and as of the Closing.
7.2 California Qualification. The Commissioner of
Corporations of the State of California shall have issued a permit qualifying
the offer and sale to the Purchaser of the Stock or such offer and sale shall
be exempt from such qualification under the California Corporate Securities Law
of 1968, as amended.
7.3 Rights Agreement. The Company, the Purchaser and
sufficient other shareholders of the Company shall have executed and delivered
the Rights Agreement.
8. Covenants of the Company.
8.1 Delivery of Financial Statements. The Company shall
deliver to the Purchaser so long as it holds (i) shares of Stock with respect
to the information provided for in subsection (a) and (ii) not less than
100,000 shares of Stock with respect to the information provided for in
subsections (b)-(e) (adjusted for subsequent stock splits, stock dividends or
recapitalization):
(a) as soon as practicable, but in any event within
ninety (90) days after the end of each fiscal year of the Company, an income
statement for such fiscal year, a balance sheet of the Company as of the end of
such year, and a schedule as to the sources and applications of funds for such
year, such year-end financial reports to be in reasonable detail, prepared in
accordance with generally accepted accounting principles ("GAAP"), and audited
and certified by independent public accountants of nationally recognized
standing selected by the Company;
(b) as soon as practicable, but in any event within
forty-five (45) days after the end of each of the first three (3) quarters of
each fiscal year of the Company, an unaudited profit or loss statement and
schedule as to the sources and application of funds for such fiscal quarter and
an unaudited balance sheet as of the end of such fiscal quarter in reasonable
detail;
(c) within thirty (30) days of the end of each
month, an unaudited income statement and schedule as to the sources and
application of funds and balance sheet for and as of the end of such month, in
reasonable detail;
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(d) as soon as practicable, but in any event thirty
(30) days prior to the end of each fiscal year, a budget and business plan for
the next fiscal year, prepared on a monthly basis, including balance sheets and
sources and applications of funds statements for such months and, as soon as
prepared, any other budgets or revised budgets prepared by the Company; and
(e) such other information relating to the
financial condition, business, prospects or corporate affairs of the Company as
the Purchaser or any assignee of the Purchaser may from time to time request,
provided, however, that the Company shall not be obligated to provide
information which it deems in good faith to be proprietary.
8.2 Inspection. The Company shall permit the Purchaser, at
the Purchaser's expense, to visit and inspect the Company's properties, to
examine its books of account and records and to discuss the Company's affairs,
finances and accounts with its officers, all at such reasonable times as may be
requested by the Purchaser; provided, however, that the Company shall not be
obligated pursuant to this Section 8.2 to provide access to any information
which it reasonably considers to be a trade secret or similar confidential
information.
8.3 Board Meetings; Expenses. The Company shall reimburse
the reasonable coach-class airfare and other travel and lodging expenses
incurred by its nonemployee directors in attending any duly held regular or
special meeting of the Board of Directors.
8.4 Termination of Covenants. The covenants set forth in
Sections 8.1, 8.2 and 8.3 shall terminate as to the Purchaser and be of no
further force or effect immediately upon the consummation of the Company's sale
of its Common Stock in a bona fide, firm commitment underwriting pursuant to a
registration statement under the Securities Act (other than a registration
statement relating either to the sale of securities to employees of the Company
pursuant to a stock option, stock purchase or similar plan or an SEC Rule 145
transaction).
9. Additional Investment.
9.1 Purchase Events and Terms. The Purchaser covenants that
it will contribute an additional $4,000,000 in funding to the Company or its
successor in the form of an additional equity investment in connection with the
earliest to occur of following events and on the terms stated herein:
(a) Initial Public Offering. In the event that,
within three years from the date of this Agreement, the Company consummates a
sale of capital stock in a bona fide, firm commitment underwriting pursuant to
a registration statement under the Securities Act (other than a registration
statement relating either to the sale of securities to employees of the Company
pursuant to a stock option, stock purchase or similar plan or an SEC Rule 145
transaction) with an aggregate Price to Public of not less than $20,000,000
(inclusive of the Purchaser's participation therein) (the "INITIAL PUBLIC
OFFERING"), the Purchaser will purchase for cash from the underwriters shares
of the Company's capital stock at the Price to Public stated on the front cover
of the final prospectus distributed in connection with such offering. The
number of securities to be purchased shall be equal to $4,000,000 divided by
the Price to Public, rounded to the nearest whole share. The Purchaser's
obligations under this subsection (a) shall
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<PAGE> 12
be conditioned upon the Company delivering to the Purchaser written notice of
the Initial Public Offering at least twenty days prior to the consummation
thereof.
(b) Business Combination Transaction
(i) In the event that, within three years from the
date of this Agreement, the Company consummates a Business Combination
Transaction (as defined below) in which the surviving entity is subject to
periodic reporting requirements under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), the surviving entity shall have the right, upon
twenty (20) days prior written notice (the "Notice"), to require the Purchaser
to purchase for cash securities of the surviving entity of the class that is
publicly traded. The number of securities to be purchased shall be equal to
$4,000,000 divided by the average closing price (or price of the last trade if
no closing price is available)for the ten trading days ending at the close of
business on the date two days prior to the date of the closing of the
Purchaser's purchase of the securities under this subsection, as reported on
the exchange or system on which the surviving entity's securities are traded,
rounded to the nearest whole share. The Purchaser's obligations under this
paragraph shall terminate in the event that the surviving entity shall not have
given the Notice to the Purchaser within sixty days after the consummation of
the Business Combination of Transaction.
(ii) For purposes of this Section 9(b), a "Business
Combination Transaction" shall mean a merger, sale of all or substantially all
of the Company's assets (including the assets associated with the activities
being conducted pursuant to the Research Agreement between the Purchaser at
the Company of even date herewith), or similar business combination
transaction.
(iii) The Purchaser's obligations under Section
9.1(b)(i) above shall be further conditioned upon the securities to be purchased
under such section by the Purchaser (the "Purchased Securities") being either
(A) registered under Section 6 of the Securities Act, or (B) entitled to the
registration rights described in the ensuing paragraphs of this subsection
(b)(iii).
(1) In the event that the Purchased Securities
are not registered when purchased or shortly thereafter, the Purchaser shall be
granted the right to demand, in writing, on two occasions, that the surviving
entity register certain of such shares for resale pursuant to the provisions of
the Securities Act. The first of such demands may be made at any time after the
date six months after the acquisition of the Purchased Securities and may cover
not more than 50% of the Purchased Securities; provided however, that if the
Purchased Securities represent 1% or less of the outstanding capital stock of
the issuer, such first demand registration may cover all of the Purchased
Securities. The second of such demands may be made at any time after the date
twelve months after the acquisition of the Purchased Securities and may cover up
to all of the Purchased Securities then held by the Purchaser; provided that
the second demand may not be made less than six months after the first demand
is made.
(2) Unless otherwise consented to by the
surviving entity, each registration must cover securities generating net
proceeds to the Purchaser of at least $500,000 (net of underwriting discounts
and commissions). Pursuant to each such
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<PAGE> 13
demand, the surviving entity will agree to file a registration statement on
Form S-3 (or a successor form), if available, on or Form S-1 covering the
Purchased Securities to be sold and will hold such registration statement open
for a thirty (30) day period in which the Purchaser may sell the registered
securities.
(3) The terms set forth in the Rights Agreement in Sections
3.2(d) (regarding postponement for business reasons), Section 3.6 (regarding
expenses of demand registrations), 3.10 (regarding indemnification), and 3.11
(regarding reports under the Exchange Act) shall be applicable to the
registration rights discussed in this paragraph and such registration rights
would terminate at the earlier of the date three years from the acquisition of
the Purchased Securities or such time and for so long as the Purchaser could
sell all of its Purchased Securities in any one three-month period.
9.2 Stock Purchase Agreement. The Purchaser understands and
agrees that this additional equity investment, and the sale and purchase of
securities in connection therewith, other than a purchase of securities in the
Initial Public Offering, will require the Purchaser's execution of a Stock
Purchase Agreement, which shall in form be substantially similar to this
document.
10. Miscellaneous.
10.1 Survival of Warranties. The warranties, representations and
covenants of the Company and the Purchaser contained in or made pursuant to
this Agreement shall survive the execution and delivery of this Agreement and
the Closing and shall in no way be affected by any investigation of the subject
matter thereof made by or on behalf of the Purchaser or the Company.
10.2 Transfer, Successors and Assigns. The terms and conditions of
this Agreement shall inure to the benefit of and be binding upon the respective
successors and assigns of the parties. Nothing in this Agreement, express or
implied, is intended to confer upon any party other than the parties hereto or
their respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
10.3 Governing Law. This Agreement shall be governed by and
construed under the laws of the State of California in the United States of
America as applied to agreements among California resident entered into and to
be performed entirely within California.
10.4 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
10.5 Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
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<PAGE> 14
10.6 Notices.
(a) All notices, requests, demands and other communications
under this Agreement or in connection herewith shall be given to or made upon
the respective parties as follows: if to the Purchaser, to Abbott Laboratories,
100 Abbott Park Road, Abbott Park, IL, 60064-3500, Attn: President,
Pharmaceutical Products Division (with a copy to the General Counsel at the
same address), or, if to the Company, to RiboGene, Inc., 21375 Cabot Boulevard,
Building B, Hayward, California 94545, Attn: President.
(b) All notices, requests, demands and other communications
given or made in accordance with the provisions of this Agreement shall be in
writing, and shall be sent by airmail, return receipt requested, or by telex or
telecopy (facsimile) with confirmation of receipt, and shall be deemed to be
given or made when receipt is so confirmed.
(c) Any party may, by written notice to the other, alter
its address or respondent, and such notice shall be considered to have been
given ten (10) days after the airmailing, telexing or telecopying thereof.
10.7 Finder's Fee. Each party represents that it neither is
nor will be obligated for any finder's fee or commission in connection with
this transaction. The Purchaser agrees to indemnify and to hold harmless the
Company from any liability for any commission or compensation in the nature of
a finder's fee (and the costs and expenses of defending against such liability
or asserted liability) for which the Purchaser or any of its officers,
employees, or representatives is responsible.
The Company agrees to indemnify and hold harmless the Purchaser from any
liability for any commission or compensation in the nature of a finder's fee
(and the costs and expenses of defending against such liability or asserted
liability) for which the Company or any of its officers, employees or
representatives is responsible.
10.8 Expenses. The Company and the Purchaser shall bear their own
expenses incurred with respect to this Agreement and the transactions
contemplated hereby. If any action at law or in equity is necessary to enforce
or interpret the terms of this Agreement, the prevailing party shall be
entitled to reasonable attorney's fees, costs and necessary disbursements in
addition to any other relief to which such party may be entitled.
10.9 Amendments and Waivers. Any term of this Agreement may be
amended and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the Purchaser.
Any amendment or waiver effected in accordance with this Section shall be
binding upon each transferee of any Securities, each future holder of all such
Securities, and the Company; provided, however, that none of the conditions set
forth in Section 6 hereof may be waived with respect to a particular Purchaser
unless it consents thereto.
10.10 Severability. If one or more provisions of this Agreement
are held to be unenforceable under applicable law, such provision shall be
excluded from this Agreement and the balance of the Agreement shall be
interpreted as if such provision were so excluded and shall be enforceable in
accordance with its terms.
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<PAGE> 15
10.11 Entire Agreement. This Agreement constitutes the
entire agreement between the parties hereto pertaining to the subject matter
hereof, and any and all other written or oral agreements existing between the
parties hereto are expressly cancelled.
IN WITNESS WHEREOF, the parties have executed this Series E Preferred
Stock Purchase Agreement as of the date first above written.
COMPANY:
RIBOGENE, INC.
By: [SIGNATURE]
-------------------------------
Title: Chairman, President & CEO
PURCHASER:
ABBOTT LABORATORIES
By: [SIGNATURE]
-------------------------------
Title: President and Chief
Operating Officer
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<PAGE> 1
Exhibit 10.4
EXCLUSIVE PATENT LICENSE
AGREEMENT
Effective as of this 4 day of April, 1997 (the "Effective Date"), the University
of Washington, a public institution of higher education having administrative
offices in Seattle, Washington ("UW") and RiboGene, Inc., a company organized
and existing under the laws of California and having a place of business at
21375 Cabot Blvd., Hayward, California, 94545 ("Licensee"), agree as follows:
1.0 PREAMBLE
1.1 UW has developed and owns or is in possession of certain technology
("INVENTION," defined further below) relating to regulation of Protein Kinase
Rna (PKR)-activated protein by hepatitis C virus Non-Structural (NS) 5A protein.
1.2 UW desires that the INVENTION be used as soon as possible in the public
interest, and to this end desires to transfer the INVENTION to a company capable
of commercially exploiting the INVENTION.
1.3 Licensee desires, for the purpose of commercial exploitation, to acquire a
license to certain patent rights in and to the INVENTION.
2.0 DEFINITIONS
2.1 Terms defined in this Definitions Article, and parenthetically defined
elsewhere in this Agreement, shall throughout this Agreement have the meaning
here or there provided. Defined terms may be used in the singular or in the
plural, as sense shall require. Terms defined in this Definition Article will be
printed in capital letters for ease of reference.
2.2 "INVENTION" shall mean work done in the University laboratory of Dr. Michael
G. Katze identifying a new target for anti-hepatitis C virus therapeutics
consisting of intervention in the regulation of PKR-activated protein by
hepatitis C virus NS5A protein as described in [*].
2.3 "LICENSED PATENTS" shall mean the United States Patent(s) and any Patents
issued from the United States Patent Application(s) listed below, together with
all corresponding foreign patents now issued or issued during the term of this
Agreement, which relate to the INVENTION, and all reissues, divisionals and
continuations thereof:
<TABLE>
<CAPTION>
Patent # Country Issue Date
-------- ------- ----------
<S> <C> <C> <C>
[*] [*] [*]
</TABLE>
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* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to
the omitted portions.
<PAGE> 2
2.4 "LICENSED SUBJECT MATTER" shall mean any subject matter, including but not
limited to products and processes, covered in whole or in part by any issued,
unexpired patent claim or a claim in a pending patent application contained in
the LICENSED PATENTS in the country in which said subject matter is made, used,
or sold.
2.5 "FIELD OF USE" shall mean all fields of use.
2.6 "SUBFIELD OF USE" shall mean a specific field of use that falls within the
FIELD OF USE, such as, but not limited to, the screening of anti-hepatitis
therapeutics with a certain class of compounds.
2.6 "TERRITORY" shall mean worldwide.
3.0 GRANT
3.1 UW hereby grants to Licensee, and Licensee accepts, an exclusive license,
with the right to sublicense, under the LICENSED PATENTS to import, make, have
made, use, sell, offer for sale and have sold LICENSED SUBJECT MATTER in the
TERRITORY and for the FIELD OF USE of LICENSED PATENTS.
3.2 The license granted above is subject to a reserved non-exclusive license in
UW to make, have made, and use products, processes, or other subject matter
covered by LICENSED PATENTS for research and development purposes.
4.0 SUBLICENSING
4.1 During the term of this Agreement, Licensee shall have the right to grant
non-exclusive sublicenses to LICENSED PATENTS in the LICENSED FIELD OF USE and
for the TERRITORY with terms and conditions not less favorable to UW than those
required of Licensee by Articles 5, 6, 7, 8, 9 and 17 of this Agreement.
4.2 Any and all sublicenses in and to LICENSED PATENTS granted by Licensee shall
be subject prior approval of UW. UW shall not unreasonably withhold or delay
such approval.
4.3 Licensee agrees to forward to UW a copy of any and all fully executed
sublicense agreements pertaining to LICENSED PATENTS within thirty (30) days of
the date of execution of said sublicenses.
5.0 DILIGENCE
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<PAGE> 3
5.1 Licensee, during the term of this Agreement, shall utilize reasonable
efforts in proceeding with the development, manufacture, sale, and other
commercial exploitation of LICENSED PATENTS, and in creating a supply and demand
for LICENSED SUBJECT MATTER.
5.2 Licensee shall use reasonable efforts to identify a lead compound as a
therapeutic. Licensee shall use reasonable efforts to meet the following
schedule of performance milestones, counting from the date when a lead compound
is selected for clinical development by mutual agreement between the parties.
<TABLE>
<CAPTION>
Years After Selection of Lead
-----------------------------
Milestone Compound
--------- -----------------------------
<S> <C>
[*] [*]
</TABLE>
These milestones represent Licensee's realistic estimate of the schedule
it will be able to keep in the event there are no unexpected or clinical
obstacles. Adverse results at any stage could significantly extend the periods
required to meet any or all of the milestones listed.
5.3 In the event that UW becomes aware of third parties that wish to license the
LICENSED PATENTS in a SUBFIELD OF USE UW shall notify Licensee, in writing, of
such third party interest ("Third Part Notification"). Licensee shall have
ninety (90) days from the date of the Third Party Notification to determine if
such third party interest would result in competition to Licensee, and to inform
UW, in writing, with supporting documentation, of Licensee's determination
("Licensee's Determination").
5.3 (i) If Licensee determines that such third party interest would not
result in competition to Licensee, then within sixty (60) days of the date of
Licensee's Determination Licensee shall notify UW, in writing, of which of the
following options it has elected to exercise:
5.3(i)(a) commence active research and development of LICENSED
PATENTS in the field requested by the third party;
5.3(i)(b) grant a sublicense to said third party to import,
make, have made, use, sell, offer for sale and have sold LICENSED SUBJECT MATTER
in the FIELD OF USE; or
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the Commission. Confidential treatment has been requested with respect to
the omitted portions.
<PAGE> 4
5.3(i)(c) grant the right to UW to directly license said third
parties to make, have made, use, sell and offer for sale LICENSED SUBJECT MATTER
in tie FIELD OF USE.
In the event Licensee selects the option outlined in Article 5.3(i)(a)
or 5.3(i)(b), Licensee or its sublicensees (if any) shall use reasonable effort
and diligence to proceed with the development, manufacture, and sale or lease of
LICENSED SUBJECT MATTER in the FIELD OF USE.
5.3 (ii) If Licensee determines that such third party interest would
result in competition to Licensee, and UW concurs with this decision, then UW
shall inform the third party that the area of the third party's interest is not
available for licensing.
5.3 (iii) If Licensee determines that such third party interest would
result in competition to Licensee, and UW disputes Licensee's decision, then UW
and Licensee shall resolve this dispute through the following mechanism.
5.3(iii)(a) UW and Licensee shall first attempt to resolve this
dispute through good faith discussions. Any dispute may, at the election of
either party, be referred to the chief executive officers of each party.
5.3(iii)(b) If Licensee and UW are unable to resolve the dispute
of 5.3(iii) through good faith discussions within seventy-five (75) days of
Licensee's Determination, then either party may seek to resolve it by initiating
an Alternative Dispute Resolution ("ADR") in which the Judicial Arbitration and
Mediation Services ("JAMS"), Seattle, Washington shall select the arbitrator
("Arbitrator") as provided herein. If JAMS is not in existence at the time of
such dispute the American Arbitration Association, Seattle, Washington shall be
substituted.
5.3(iii)(c) Selection of Arbitrator. An ADR shall be initiated
by a party by sending written notice thereof to the other party and JAMS, which
notice shall state the issues to be resolved. Within twenty (20) business days
after receipt of such notice, the other party may, by sending written notice to
the initiating party and JAMS, add issues to be resolved. Within twenty (20)
business days after the date of the original ADR notice, JAMS shall nominate to
the parties at least five (5) qualified nominees from JAMS's panel. The parties
shall have ten (10) business days after the receipt of such nominations to agree
on a Arbitrator or, failing to agree, to rank-order their preferences with the
most preferred being given the lowest number, and mail the rank-order to JAMS.
JAMS shall notify the parties of their selection. If all nominees are
unacceptable to a party, the procedure shall be repeated and, if the parties
cannot select an Arbitrator the second time, JAMS shall select the Arbitrator.
5.3(iii)(d) ADR Hearing. The Arbitrator shall hold a hearing to
resolve the issues within one hundred twenty (120) business days after
selection. The location of the hearing shall be Seattle, Washington. Each party
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<PAGE> 5
may be represented by counsel. Prior to the hearing, the parties shall be
entitled to engage in discovery under procedures of the Federal Rules of Civil
Procedure; provided, however, that a party may not submit more than thirty (30)
written interrogatories or take more than three (3) depositions. There shall not
be, and the Arbitrator shall not permit, any discovery within thirty (30) days
of the hearing. The Arbitrator shall have sole discretion regarding the
admissibility of evidence and conduct of the hearing. At least ten (10) business
days prior to the hearing, each party shall submit to the other party and the
Arbitrator a copy of all exhibits on which such party intends to rely at the
hearing, a pre-hearing brief (up to 30 pages) and a proposed disposition of the
dispute (up to 5 pages). The proposed disposition shall be limited to proposed
rulings and remedies on each issue, and shall contain no argument on or analysis
of the facts or issues; provided, however, that the parties will not present
proposed monetary remedies. Within ten (10) business days after close of the
hearing, each party may submit a post-hearing brief (up to 5 pages) to the
Arbitrator.
5.3(iii)(e) ADR Ruling; Fees and Expenses. The Arbitrator shall
render a disposition on the proposed rulings as expeditiously as possible after
the hearing, but not later than fifteen (15) business days after the conclusion
of the hearing. The Arbitrator shall rule on each issue and shall adopt in its
entirety the proposed ruling of one of the parties on each issue. The
Arbitrator's disposition shall be final and not appealable, except that either
party shall have the right to appeal such disposition on the basis it was
affected by fraud or bad faith in connection with the ADR proceedings. The
reasonable fees and expenses of the Arbitrator, as well as the standard charges
of JAMS for its assistance, shall be borne equally by the parties or as they may
otherwise agree.
5.3(iii)(f) JAMS Rules. Except as otherwise provided in this
Section 5.3(iii), JAMS Rules shall be used in connection with the ADR.
5.3(iii)(g) Waiver. A party shall not be prohibited from
bringing a claim for resolution under this Section 5 on the ground that the
claim could have been brought during an earlier proceeding under this Section 5.
5.4 If Licensee fails to adhere to the diligence obligations set forth in this
Diligence Article or elsewhere in this Agreement, UW shall notify Licensee, in
writing, and if after written notice thereof such failure is not cured within
sixty (60) days, UW may terminate this Agreement immediately following the end
of the specified sixty (60) day cure period.
6.0 PATENT PROSECUTION AND COST RECOVERY
6.1 Licensee shall conduct the prosecution of any and all patent applications,
whether pending or not yet filed at the time of execution of this Agreement, in
LICENSED PATENTS, and of the maintenance and other management of any and
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all issued patents in LICENSED PATENTS; provided that Licensee shall supply to
UW copies of all papers received and filed in connection with the prosecution
thereof in sufficient time for UW to comment hereon. Licensee shall give due
consideration to advice and recommendations of UW.
6.2 In the event of a dispute concerning prosecution of the LICENSED PATENTS, UW
and Licensee shall first attempt to resolve the dispute through good faith
discussions. In the absence of a resolution, either party may refer the dispute
to an independent patent attorney, to which the other party has no reasonable
objection, whose decision the parties agree to adopt. The reasonable fees and
expenses of the independent patent attorney shall be borne by the losing party,
or in the event a compromise position is recommended, equally by the parties.
6.3 Should Licensee elect not to prosecute patent applications and/or maintain
patents in the Licensed Patents in any country, Licensee shall notify UW in
writing of such elections, and UW may, at its sole option and sole expense,
undertake such prosecution. In this case UW shall have no further obligations to
Licensee for, and Licensee shall have no further rights to, the patent
applications and/or patents which Licensee elects not to prosecute and/or
maintain in the countries in which Licensee has elected not to prosecute and/or
maintain such patent applications and/or patents.
7.0 LICENSING FEES AND ROYALTY
7.1 Licensee agrees to pay to UW a one-time, non-refundable, non-creditable
license issue fee of [*] due and payable within thirty (30) days of the
execution of this Agreement. UW shall notify Licensee that such payment is due
by inclusion of an invoice with the execution copies of this Agreement.
7.2 Licensee agrees to pay or cause to be paid to UW a non-refundable,
noncreditable license maintenance fee due and payable within thirty (30) days of
the end of each calendar quarter during the term of this Agreement of [*]. UW
shall invoice RiboGene for such amount. Such license maintenance fee shall be
paid up to and through the date of issuance or date of abandonment of the last
of the PATENT RIGHTS to issue or be abandoned, but not beyond the date of
issuance or abandonment of the last of the PATENT RIGHTS to issue or be
abandoned.
7.3 Licensee agrees to pay or cause to be paid to UW a milestone payment of [*]
upon approval of an NDA on any compound the development of which involved the
use of or could not
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the Commission. Confidential treatment has been requested with respect to
the omitted portions.
<PAGE> 7
have been developed but for the PATENT RIGHTS. Such milestone payment shall be
made within thirty (30) days of approval of the NDA.
8.0 PAYMENT AND REPORTS
8.1 Until Licensee or any sublicensees engage in commercial use or sale of
LICENSED SUBJECT MATTER, Licensee shall prepare and submit to UW within thirty
(30) days of December 31 of each year a report regarding the progress of
Licensee and any sublicensees in developing LICENSED SUBJECT MATTER for
commercial exploitation. Said report shall include such particulars as are
necessary to demonstrate compliance with diligence obligations set forth in the
Diligence Article of this Agreement.
8.2 All payments required under this Agreement shall be made in U.S. dollars by
check or money order payable to the University of Washington, and delivered to
UW as specified in this Agreement; or, if so directed in writing by UW, in such
currency, form, and to such account as UW may designate.
8.3 Licensee agrees to pay a late fee for any overdue licensing fee due UW under
terms of this Agreement. The late fee shall be computed as [*] of the
outstanding, unpaid balance. The payment of such a late fee shall not foreclose
or limit UW from exercising any other rights it may have as a consequence of the
lateness of any payment.
9.0 TERM AND TERMINATION OF AGREEMENT
9.1 The term for this Agreement shall extend from the Effective Date of this
Agreement to the last to occur of:
(a) expiration of twenty years (20) years after the Effective Date of
this Agreement;
(b) expiration of the last patent under the LICENSED PATENTS
unless sooner terminated in accordance with the provisions set forth in this
Agreement.
9.2 Article 9.1 notwithstanding, this Agreement shall terminate sixty (60) days
from the date of written notice by UW to Licensee for cause if Licensee fails to
adhere to the diligence obligations or obligations to settle infringements of
LICENSED PATENTS as set forth in the Diligence Article and Infringement Article
of this Agreement. UW's option to terminate this Agreement shall be in addition
to any and all other legal remedies which UW may have for the enforcement of
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the omitted portions.
<PAGE> 8
any and all terms hereof, and does not in any way limit any other legal remedy
UW may have.
9.3 Unless the laws then in effect void the effectiveness of this provision,
this Agreement, and the license granted to Licensee hereinabove, shall terminate
immediately in the event that (1) Licensee seeks liquidation, reorganization,
dissolution or winding-up of itself, is insolvent or evidence exists as to its
insolvency, or Licensee makes any general assignment for the benefit of its
creditors; (2) a petition is filed by or against Licensee, or any proceeding is
initiated by or against Licensee, or any proceeding is initiated against
Licensee as a debtor, under any bankruptcy or insolvency law; or (3) a receiver,
trustee, or any similar officer is appointed to take possession, custody, or
control of all or any part of Licensee's assets or property.
9.4 If UW fails to perform an obligation to Licensee as set forth in this
Agreement, Licensee shall notify UW of such failure, in writing, and if after
written notice thereof such failure is not cured within sixty (60) days,
Licensee may terminate this Agreement immediately following the end of the
specified sixty (60) day cure period. Licensee may not terminate this Agreement
for any reason other than with cause.
9.5 The provisions under which this Agreement may be terminated shall be in
addition to any and all other legal remedies which either party may have for the
enforcement of any and all terms hereof, and do not in any way limit any other
legal remedy such party may have.
9.6 Termination of this Agreement shall terminate all rights and licenses
granted to Licensee relating to LICENSED PATENTS.
9.7 Upon termination of this Agreement, any and all existing sublicense
agreement shall be immediately assigned to UW and UW agrees to keep them in
force to the extent that UW is capable of performing as a licensor in place of
Licensee.
9.8 Termination by UW or Licensee under the options set forth in this Agreement
shall not relieve Licensee from any financial obligation to UW accruing prior to
or after termination or from performing according to any and all other
provisions of this Agreement expressly agreed to survive termination.
9.9 In the event that there remain no valid, enforceable, and infringed LICENSED
PATENTS covering LICENSED SUBJECT MATTER, then following termination Licensee
and any sublicensees shall have no further obligation to pay royalties thereon
or to account to UW therefor.
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<PAGE> 9
10.0 NOTICES
10.1 Any notice or other communication required or permitted to be given by
either party hereto shall be deemed to have been properly given and be effective
upon the date of delivery if delivered in writing to the respective addresses
set forth below, or to such other address as either party shall designate by
written notice given to the other party. If notice or other communication is
given by facsimile transmission, said notice shall be confirmed by prompt
delivery of the hardcopy original.
In the case of Licensee:
All correspondence regarding this Agreement should be addressed to Charles J.
Casamento, C.E.O.
Street Address: 21375 Cabot Blvd.
Hayward, California 94545
USA
Facsimile Address: (510) 732-7741
In the case of UW:
All correspondence regarding this Agreement should be addressed to Director of
the Office of Technology Transfer and copied to Karen L. Deyerle, Manager,
Health Sciences.
Street Address: University of Washington
Office of Technology Transfer
1107 N.E. 45th Street, Suite 200
Seattle WA 98105-4631
USA
Facsimile Address: (206) 685-9452
11.0 PROPRIETARY RIGHTS
11.1 Licensee will not, by performance under this Agreement, obtain any
ownership interest in LICENSED PATENTS or any other proprietary rights or
information of UW, its officers, inventors, employees, students, or agents.
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<PAGE> 10
12.0 PATENT MARKING
12.1 Licensee shall mark, and shall require any sublicensee to mark, any and all
material forms of LICENSED SUBJECT MATTER or packaging pertaining thereto made
and sold by Licensee (and/or by its sublicensees) in the United States with an
appropriate patent marking identifying the pendency of any U.S. patent
application and/or any issued U.S. or foreign patent forming any part of
LICENSED PATENTS. All LICENSED SUBJECT MATTER shipped to or sold in other
countries shall be marked in such a manner as to provide constructive notice to
potential infringers pursuant to the patent laws and practice of the country of
manufacture or sale.
13.0 PATENT INFRINGEMENT
13.1 If either party learns of an infringement by a Third Party of the Licensed
Patents in the Field of Use, such party shall promptly notify the other party
and shall provide such other party with available evidence of such infringement.
13.2 Licensee shall have the first right to elect to enforce the Licensed
Patents against third parties worldwide. In the event Licensee shall so elect,
Licensee may do so in UW's name only if required by law, otherwise Licensee
shall institute such suit in Licensee's name only. Licensee shall determine the
worldwide strategy and UW shall assist and cooperate with Licensee in any such
enforcement in the Field of Use. Licensee shall consult with UW and keep UW
regularly advised of Licensee's strategies, plans, progress and results of any
such enforcement action. Licensee shall bear all associated costs and expenses
(including attorney's fees). UW shall, at Licensee's expense, provide reasonable
and prompt cooperation and assistance to Licensee in connection with any such
suit, except that Licensee shall not bear the expense of costs associated with
the use of UW's own resources in providing such cooperation and assistance, such
as employee time. In the event damages or recoveries shall be awarded in such
action, such amounts shall be applied first to reimburse Licensee for any costs,
including attorney's fees, incurred in bringing such action. Remaining amounts
will be divided between UW and Licensee as follows: UW - [*]; Licensee - [*].
13.3 In the event Licensee elects not to enforce the Licensed Patents against
any Third Party in the Field of Use, Licensee shall so notify UW in writing
within one hundred twenty (120) days of the learning of such infringement. Then,
UW shall have the right, but not the obligation, to elect to enforce the
Licensed Patents against such Third Party worldwide in the Field of Use. In the
event UW shall so elect UW shall determine the worldwide strategy and Licensee
shall assist and cooperate with UW in any such enforcement. UW may bring such
suit
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<PAGE> 11
in its own name, or if required by law, in its and Licensee's name. UW shall
consult with Licensee and keep Licensee regularly advised of UW's strategies
plans, progress and results of any such enforcement action. Licensee shall, at
UW's expense, provide reasonable and prompt cooperation and assistance to
Licensee in connection with any such suit, except that UW shall not bear the
expense of costs associated with the use of Licensee's own resources in such
cooperation and assistance, such as employee time.. UW shall bear all associated
costs and expenses (including attorney's fees). In the event damages or
recoveries shall be awarded in such action, such amounts shall be applied first
to reimburse UW for any costs incurred in bringing such action. Remaining
amounts will be retained by UW.
13.4 Neither Licensee nor UW is obligated under this Agreement to institute a
suit against an alleged infringer of LICENSED PATENTS.
14.0 PATENT VALIDITY
14.1 If Licensee challenges the validity or enforceability of any of LICENSED
PATENTS, Licensee agrees not to suspend any payments and shall put into escrow
any and all payments due UW until such time as that patent in LICENSED PATENTS
is determined to be valid and enforceable by final judgment of a court of
competent jurisdiction from which no appeal can be or is taken. Within thirty
(30) days of such final judgment that the patent in the LICENSED PATENTS is
valid and enforceable all monies in such escrow account shall be paid to UW.
14.2 Except as provided for in Article 14.1, Licensee may, but shall not be
obligated to, elect to defend the Licensed Patents against third party claims
that the Licensed Patents in the Field of Use are invalid or unenforceable.
Licensee shall consult with UW and keep UW regularly advised of Licensee's
strategies, plans, progress and results of any such defense. UW may, at its
expense, select counsel of its choice to assist Licensee's counsel in connection
with such defense and shall assist and cooperate with Licensee in any such
defense. Licensee shall bear all associated costs and expenses (including
attorney's fees) and pay all damages and settlement amounts.
14.3 In the event Licensee does not elect to defend the Licensed Patents as set
forth in 14.1 above, UW may defend the Licensed Patents and shall bear all
associated costs and expenses (including attorney's fees) and pay all damages
and settlement amounts.
14.4 Neither party will take any action including entering into any settlement
action or agree to any settlement that may negatively impact the Licensed
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<PAGE> 12
Patents without the express prior written consent of the other party, such
consent not to be unreasonably withheld or delayed.
15.0 USE OF NAMES
15.1 Nothing contained in this Agreement shall be construed as conferring any
right to use in advertising, publicity or other promotional activities any name,
trade name, trademark or other designation of a party hereto including any
contraction, abbreviation or simulation of any of the foregoing, unless the
express written permission of the other party has been obtained. Licensee hereby
expressly agrees not to use the name "University of Washington" without prior
written approval from UW.
16.0 REPRESENTATIONS AND WARRANTIES
16.1 UW represents and warrants that it has the right to grant the license in
and to LICENSED PATENTS.
16.2 Nothing in this Agreement shall be construed as:
(a) A representation or warranty by UW as to the patentability, validity,
scope, or usefulness of LICENSED PATENTS; or
(b) A representation or warranty by UW that anything made, used, sold, or
otherwise disposed of under any license granted in this Agreement is or
will be free from infringement of patents or other proprietary rights not
included in LICENSED PATENTS.
16.3 UW EXPRESSLY DISCLAIMS ANY AND ALL WARRANTIES, WHETHER EXPRESS OR IMPLIED,
PERTAINING TO THE MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OF THE
INVENTION, LICENSED SUBJECT MATTER, TECHNICAL INFORMATION, OR ANYTHING ELSE
LICENSED, DISCLOSED, OR OTHERWISE PROVIDED TO LICENSEE UNDER THIS AGREEMENT.
UW'S TOTAL LIABILITY UNDER THIS AGREEMENT IS LIMITED TO THE COSTS AND FEES PAID
TO UW UNDER THIS AGREEMENT.
17.0 INDEMNIFICATION
17.1 Licensee agrees to indemnify, hold harmless and defend UW, its officers,
inventors, employees, students, and agents, against any and all claims, suits,
losses, damages, costs, fees and expenses resulting from or arising out of
exercise of this Agreement including, but not limited to, any damages, losses or
liabilities
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<PAGE> 13
whatsoever with respect to death or injury to any person and damage to any
property arising from the possession, use, or operation of LICENSED SUBJECT
MATTER by Licensee in any manner whatsoever. This indemnification clause shall
survive the termination of this Agreement.
17.2 From the first human clinical testing of LICENSED SUBJECT MATTER, Licensee
shall maintain general liability insurance, including product liability and
contractual liability coverage, in an amount commensurate with reasonable
commercial practice but in no case less than one million dollars. Licensee's
general liability insurance shall name UW as an additional insured. Licensee
must declare whether the insurance is provided on a "claims-made" form and must
notify UW if coverage is canceled.
17.3 Licensee shall provide to UW within thirty (30) days prior to the
initiation of human clinical trials with respect to LICENSED SUBJECT MATTER
certificates evidencing the existence of the insurance required under Article
17.2. Licensee shall issue irrevocable instructions to its insurance agent and
so the issuing company to notify UW of any discontinuance or lapse of such
insurance not less than thirty (30) days prior to the time that any such
discontinuance or lapse is due to become effective. License shall provide UW a
copy of such instructions upon their transmittal to the insurance agent and
issuing company. Licensee shall further provide UW, at least semi-annually,
proof of continued coverage.
18.0 APPLICABLE LAWS
18.1 Licensee agrees to abide by all applicable federal, state, and local laws
and regulations pertaining to the management and commercial deployment of
LICENSED SUBJECT MATTER under this Agreement.
18.2 LICENSED SUBJECT MATTER may be subject to restrictions concerning the
export of products or technical data from the United States. Accordingly,
Licensee agrees that Licensee shall not export or re-export, directly or
indirectly, any LICENSED SUBJECT MATTER to any country for which the United
States Government or other competent authority at the time of export requires an
export license or other approval, without first obtaining such license or
approval from the appropriate governmental authority.
18.3 This Agreement shall be construed in accordance with, and its performance
shall be governed by, the laws of the State of Washington.
18.4 Any suit, action, or proceeding arising out of or relating to this
Agreement shall be decided in King County, Washington.
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<PAGE> 14
19.0 ATTORNEY'S FEES
19.1 If any dispute shall arise under this Agreement, other than a bona fide
dispute concerning the validity and/or scope of LICENSED PATENTS, the prevailing
party shall be entitled to its reasonable attorney's fees and costs of
litigation and appeal.
20.0 GENERAL
20.1 If any provision of this Agreement shall be held to be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not be in any way affected or impaired thereby.
20.2 No omission or delay of either party hereto in requiring due and punctual
fulfillment of the obligations of any other party hereto shall be deemed to
constitute a waiver by such party of its rights to require such due and punctual
fulfillment, or of any other of its remedies hereunder.
20.3 No amendment or modification hereof shall be valid or binding upon the
parties unless it is made in writing, cites this Agreement, and signed by duly
authorized representatives of UW and Licensee.
20.4 This Agreement, and any rights or obligations hereunder, may be assigned by
the University but shall not be assigned, transferred or delegated in whole or
in part by Licensee, whether by a merger, a sale of assets, or in any other
manner, except with the University's express written approval. Any attempted
assignment, transfer or delegation in breach of this provision shall be deemed
to be void and no effect, and shall entitle the University to terminate this
Agreement upon written notice to Licensee. Except as otherwise provided, this
Agreement shall be binding upon and inure to the benefit of the parties'
successors and lawful assigns.
20.5 The headings of the several sections of this Agreement are inserted for
convenience and reference only, and are not intended to be a part of or to
affect the meaning or interpretation of this Agreement.
20.6 This Agreement embodies the entire understanding of the parties and
supersedes all previous communications, representations, or understandings,
either oral or written, between the parties relating to the subject matter
hereof.
SIGNATURES BEGIN ON NEXT PAGE
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<PAGE> 15
IN WITNESS WHEREOF, UW and Licensee have executed this Agreement, in duplicate
originals but collectively evidencing only a single contract, by their
respective duly authorized officers, on the dates hereinafter written.
Licensee University of Washington
By: /s/ LAURA S. LEHMAN By: /s/ ROBERT C. MILLER, JR.
------------------------------- -------------------------------------
Name: Laura S. Lehman Name: Robert C. Miller, Jr., Ph.D.
---------------------------- -----------------------------------
Title: Vice President of Research Title: Director, Technology Transfer
--------------------------- ----------------------------------
Date: April 9, 1997 Date: March 4, 1997
---------------------------- ----------------------------------
UNIVERSITY OF WASHINGTON PERSONNEL:
THE BELOW-NAMED PERSONNEL UNDERSTAND AND CONCUR WITH THIS AGREEMENT.
By: /s/ MICHAEL G. KATZE By: /s/ MICHAEL J. GALE, JR.
------------------------------- -------------------------------------
Name: Michael G. Katze Name: Michael J. Gale, Jr.
---------------------------- -----------------------------------
Title: Professor, Microbiology Title: Senior Fellow
--------------------------- ----------------------------------
Date: 4/3/97 Date: 4/3/97
---------------------------- ----------------------------------
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<PAGE> 1
Exhibit 10.5
EXTENSION OF JOINT COLLABORATION AGREEMENT
This Extension Of Joint Collaboration Agreement (the "Extension") is
made this 10th day of April, 1997 by and between Houghten Pharmaceuticals, Inc.
("Houghten") and RiboGene, Inc. ("RiboGene").
RECITALS
Whereas, Houghten and RiboGene are parties to that certain Joint
Collaboration Agreement dated April 12, 1995 (the "Agreement"), the Screening
Term (as defined in the Agreement) of which is due to expire on April 12, 1997,
and
Whereas, Houghten and RiboGene would like to extend the Screening Term
for an additional one year period.
NOW, THEREFORE, for and in consideration of the premises, and the
mutual covenants contained herein, the parties agree as follows:
1. Screening Term. The definition of Screening Term set forth in
Section 1.24 of the Agreement is hereby amended in its entirety as follows:
"1.24. "Screening Term" shall mean the period during
which Active Screening may be conducted commencing on the
Effective Date and terminating three (3) years from the
Effective Date unless earlier terminated as provided herein
or unless extended by mutual agreement.''
2. Other Terms. Except as set forth above, all other defined
terms, conditions and provisions of the Agreement shall apply to this Extension
and the Agreement shall remain in full force and effect.
3. Multiple Counterparts. This Extension may be executed in
multiple counterparts, each of which shall be deemed an original for all
purposes.
IN WITNESS WHEREOF, the parties have executed this Extension as of the
date first above written.
HOUGHTEN PHARMACEUTICALS, INC. RIBOGENE, INC.
By: /s/ [sig] By: /s/ [sig]
-------------------------------- --------------------------------
Name: /s/ [sig] Name: /s/ LAURA S. LEHMAN
-------------------------------- --------------------------------
Title: Vice President Title: Vice President of Research
-------------------------------- --------------------------------
<PAGE> 2
JOINT COLLABORATION AGREEMENT
THIS JOINT COLLABORATION AGREEMENT (the "Agreement") dated as of April
12, 1995 (the "Effective Date"), is entered into between HOUGHTEN
PHARMACEUTICALS, INC., a Delaware corporation ("HPI"), and RIBOGENE, INC. a
California corporation ("RIBOGENE").
WITNESSETH:
WHEREAS, HPI has rights to proprietary synthesis and screening
technologies which, when applied, may reduce the time and development expense of
identifying potentially useful compounds for therapeutic and/or diagnostic
purposes.
WHEREAS, RiboGene has Assays for direct screening of compounds which
have potential to identify therapeutic and/or diagnostic products.
WHEREAS, both HPI and RiboGene desire to enter into a joint screening
and development agreement with respect to the identification of compounds
therefrom under the terms and conditions specified herein.
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual representations, covenants and warranties herein contained, the parties
hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 "Active Screening" shall mean the activity of RiboGene screening
Combinatorial Libraries, Iteration Mixtures, and/or Confirmatory Samples using
the Assays to identify potential Candidates during the Screening Phase of this
Agreement.
1.2 "Affiliate" shall mean any corporation or other entity which
controls, is controlled by, or is under common control with, a party to this
Agreement. A corporation or other entity shall be regarded as in control of
another corporation or entity if it owns or directly or indirectly controls more
than fifty percent (50%) of the voting stock or other ownership interest of the
other corporation or entity, or if it possesses, directly or indirectly, the
power to direct or cause the direction of the management and policies of the
corporation or other entity.
1.3 "Assays" shall mean the RiboGene Assays described in Exhibit A, as
well as those assays which may be added by mutual agreement.
<PAGE> 3
1.4 "Candidate" shall mean each fully sequenced compound identified
by RiboGene after completion of the Interation Process, or each compound
identified by RiboGene after completion of the Scanning Process, any of which
compounds demonstrate activity in an Assay justifying further investigation as
a Joint Compound in the Development Phase of the Collaboration Program or as a
Developing Party Compound.
1.5 "Collaboration Program" shall mean the overall program described
in Section 3.1 hereto consisting of both the Screening Phase and the
Development Phase.
1.6 "Combinatorial Libraries" shall mean the following libraries as
well as any other libraries which may hereafter be added to such definition by
mutual agreement of the parties:
[*]
1.7 "Confirmatory Sample" shall mean a [*] (i) a compound identified
from the Initial Screening of a Combinatorial Library by the Scanning Process,
or (ii) a fully sequenced compound identified from the completion of the
Iteration Process.
1.8 "Developing Party Compound" shall mean a Candidate upon which one
party decides to conduct further development and research pursuant to the
provisions hereof (the "Developing Party") after the other party has decided
not to continue with or participate in such development and research.
1.9 "Development Phase" shall mean that the phase of the Collaboration
Program described in Sections 3.4 and 3.6 hereof.
1.10 "Development Term" shall be the term during which the Development
Phase activities with respect to a Joint Compound/or the developing party's
development of a Developing Party Compound shall occur commencing on the date
the parties or developing party decide to enter into said activities or
development respectively, and terminating when neither party has a Joint
Compound or Developing Party Compound under development.
1.11 "FDA" shall mean the United States Food and Drug Administration.
1.12 "HPI Proprietary Rights" shall mean all rights owned or licensed
to HPI regarding the Materials, and HPI's rights to Joint Compounds including
without limitation (except as limited and provided elsewhere in this agreement)
(i) compounds derived from the described Materials and Joint Compounds, (ii)
methods of making the compounds, Materials and Joint Compounds, (iii) patents,
patent applications and patent rights and divisions, continuations, renewals,
reissues
2
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<PAGE> 4
and extensions of the foregoing now existing, hereafter filed, issued or
acquired; and (iv) rights relating to the protection of trade secrets and
confidential information.
1.13 "Initial Screening" shall mean the first screening of each
Combinatorial Library by RiboGene.
1.14 "Iteration Mixture" shall mean the mixture of compounds ordered by
RiboGene [*] of a defined chemical component and provided by HPI at the
intervening stages of the Iteration Process [*].
1.15 "Iteration Process" shall mean, with respect to [*] each stage of
the HPI screening and synthesis process after the Initial Screening, pursuant to
which each possible combination of mixtures [*] from such Combinatorial Library
[*] (ii) screened by RiboGene, and (iii) evaluated at each stage and reassayed
when necessary by RiboGene [*]
1.16 "Interest" shall mean the percentage which either party will be
entitled to receive of any revenues which may be generated as a result of the
parties' jointly owned intellectual property with respect to a Joint Compound or
Developing Party Compound, for example by licensing or sale of such property or
of Products containing such Joint Compound or Developing Party Compound. The
Interests of the respective parties in any particular Joint Compound or
Developing Party Compound will be determined as described in Exhibit D.
1.17 "Joint Compound" shall mean a Candidate, upon which the parties
jointly, after reviewing the Research Committee's recommendations, decide to
conduct further development and research and share the expenses of development
as provided in Exhibit D.
1.18 "Materials" shall include all of the Combinatorial Libraries,
Iteration Mixtures, specific iteration mixtures and Confirmatory Samples
furnished by HPI during the Screening Phase.
1.19 "Product" shall mean any product for the treatment or prevention
of disease, or other conditions in humans, or the diagnosis of disease, for the
specified Targets which incorporates a Joint Compound or Developing Party
Compound in its entirety or as modified or which is the result directly or
indirectly of discovery or identification using the Iteration Process or
Scanning Process, the manufacture or use of which is covered by, of which, but
for the Agreement would infringe any HPI Proprietary Rights or RiboGene
Proprietary Rights.
1.20 "Research Committee" shall mean that entity organized and acting
pursuant to Article 5 or this Agreement.
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the omitted portions.
<PAGE> 5
1.21 "RiboGene Proprietary Rights" shall mean all rights owned or
licensed to RiboGene with respect to rights to the Assays, use of the Assays for
screening purposes, methods for screening compounds in the Assays, and rights to
Joint Compounds including, without limitation, (except as limited and provided
elsewhere in this agreement) (i) patents, patent application and patent rights
and all divisions, continuations, renewals, reissues and extensions of the
foregoing now existing, hereafter filed, issued or acquired, and (ii) rights
relating to the protection of trade secrets and confidential information.
1.22 "Screening" shall mean the testing by RiboGene of each of the
mixtures which constitute a Combinatorial Library or Iteration Mixture, or of
individual compounds to determine the activities of each in Assays.
1.23 "Screening Phase" shall mean that phase of the Collaboration
Program described in Sections 3.2 and 3.3 hereof.
1.24 "Screening Term" shall mean the period during which Active
Screening may be conducted commencing [*] provided herein or unless extended by
mutual agreement.
1.25 "Scanning Process" shall mean with respect to a positional
scanning library listed at Section 1.7(g) and described in Exhibit C, the
process of identifying and verifying Candidates by conducting an Initial
Screening and the screening of Confirmatory Samples.
1.26 "Targets" [*] identified in Exhibit A as it exists at the
time at the execution of this Agreement or as may be modified by mutual
agreement hereafter.
1.27 "Third Party Obligations" shall mean obligations to pay
milestones, royalties or other fees to a third party by a party under a
licensing or other agreement for use of (i) an Assay, (ii) the Screening
process used hereunder, or (iii) any compounds or Products discovered or for
which uses are identified as a result of this Collaboration Agreement.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
Each party hereby represents and warrants to the other party as follows:
2.1 AUTHORIZATION AND ENFORCEMENT OF OBLIGATIONS. Such party (a)
has the requisite power and authority and the legal right to enter into this
Agreement and to perform its obligations hereunder, and (b) has taken all
necessary action on its part to authorize the execution and delivery of this
Agreement and the performance of its obligations hereunder. This Agreement has
4
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<PAGE> 6
been duly executed and delivered on behalf of such party, and constitutes a
legal, valid, binding obligation, enforceable against such party in accordance
with its terms.
2.2 NO CONFLICT. The execution and delivery of this Agreement and
the performance of such party's obligations hereunder (a) do not conflict with
or violate any requirement of applicable laws or regulations or any contractual
obligation of such party, and (b) do not conflict with, or constitute a default
or require any consent under, any contractual obligation of such party.
2.3 NON-INFRINGEMENT. To the best of its knowledge, the performance
of such party's obligations or granting of rights to the other party hereunder
shall not infringe patent rights, copyrights, trademarks or trade secrets of any
third party.
2.4 THIRD PARTY OBLIGATIONS. Such party is not subject to any Third
Party Obligations except as set forth in Exhibit F hereto.
ARTICLE 3
SCREENING AND DEVELOPMENT PROGRAMS
3.1 PURPOSE AND SCOPE. The general purposes of the Collaboration
Program are twofold and to be addressed in two phases: (i) to utilize the HPI
Combinatorial Libraries, Iteration Mixtures and Confirmatory Samples to conduct
screenings of the compounds in the various Combinatorial Libraries during the
Screening Phase with one or more of the Assays to identify Candidates, and (ii)
to select Joint Compounds chosen from the Candidates which may have utility to
treat one or more of the Targets and during the Development Phase to develop
Products incorporating the Joint Compounds (or analogs or derivatives thereof)
for one or more of the Targets.
3.2 SCREENING PHASE GENERAL RESPONSIBILITIES. Each party shall, at
its own expense, have the following responsibilities during the Screening Phase:
3.2.1 HPI shall provide, by mutual agreement, any of its
current and future Combinatorial Libraries (when such
future Combinatorial Libraries are available), and other
reasonable amounts of other Materials requested by
RiboGene, including Iteration Mixtures, specific
iteration mixtures identified at the screening of a
stage of the Iteration Process prior to identification
of a Candidate, and Confirmatory Samples to enable
RiboGene to conduct the Active Screening.
3.2.2 RiboGene shall by mutual agreement screen the Materials
with a view to identifying potential Candidates and
recommend to the Research Committee which Candidates
should become Joint Compounds.
5
<PAGE> 7
3.3 SCREENING PHASE ACTIVITIES.
3.3.1 INITIAL SCREENING. RiboGene shall screen each
Combinatorial Library delivered to RiboGene by HPI with the Assays to identify
one or more compound mixtures [*]
3.3.2 ITERATION PROCESS. For active compounds identified from
an Initial Screening of any Combination Libraries, [*] RiboGene shall place an
order with HPI for related Iteration Mixtures to begin the Iteration Process.
Upon receipt of such order, HPI shall cause to be synthesized and provide to
RiboGene such Iteration Mixtures, which RiboGene shall screen using the
applicable Assays.
3.3.3 SCANNING PROCESS. For active compounds identified from
an Initial Screening of the [*] Combinatorial Library, RiboGene shall place an
order with HPI for Confirmatory Samples to continue the Scanning Process. Upon
receipt of such order, HPI shall cause to be prepared and deliver the
Confirmatory Samples.
3.3.4 RESEARCH DURATION. The Active Screening portion of the
Screening Phase shall be performed during the Screening Term.
3.3.5 DELIVERY. HPI shall deliver the Materials as soon as
practicable following receipt of a written order, but in no event later than
forty-five (45) days from the receipt of such order.
3.4 DEVELOPMENT PHASE RESPONSIBILITIES. Once a Candidate is, or
Candidates are, identified and both parties, after reviewing the Research
Committee's recommendations, have given written notice pursuant to Section 3.5
to proceed with respect to such Candidate or Candidates becoming Joint
Compounds, then the Development Phase shall commence with respect to those Joint
Compounds. Each party shall have, in addition to any other responsibility
assigned by the Research Committee or by mutual agreement of the parties, the
below specified responsibilities with respect to those Joint Compounds:
3.4.1 HPI shall:
(a) Expend reasonable efforts to modify Joint
Compounds [*]
(b) Provide reasonable amounts of Joint Compounds or
modified Joint Compounds [*]
3.4.2 RiboGene shall:
(a) Expend reasonable efforts to test Joint
Compounds and Modified Joint Compounds [*]
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<PAGE> 8
(b) Proceed under guidance of the Research
Committee with pharmacological testing of
Joint Compounds and modified Joint Compounds.
(c) Take the lead in filing and prosecution of
patent applications as authorized by the
Research Committee.
3.5 JOINT COMPOUND NOTICE. A party must given written notice of its
intent to participate in the Development Phase with respect to a Candidate to
the other party with a copy to the Research Committee within thirty (30) days
after receipt of the Research Committee's written recommendation. Failure to
give such written notice within said thirty (30) days shall be deemed a
decision not to participate.
3.6 DEVELOPMENT PHASE ACTIVITIES. In addition to the activities
described in Section 3.4 above, the Development Phase shall consist of any and
all activities agreed to by the parties upon recommendation of the Research
Committee which are necessary to fully develop Products for commercialization
with costs to be shared as generally described in Exhibit D. Additional
provisions concerning the Development Phase shall be based on the guidelines
set forth in Exhibit D. A party may agree to participate in the Development
Phase with respect to one or more Candidates and decide not to participate with
respect to other Candidates.
3.7 DEVELOPING PARTY COMPOUNDS. With respect to Developing Party
Compounds, responsibilities for development, including the discretion to
continue, shall be solely the responsibility of the developing party. Sections
3.4 (except with respect to the notice provision) and 3.6 shall not be
applicable, but provisions in Exhibit D shall be applicable, as provided
therein. [*] HPI shall grant a license, or sublicense, if available, subject to
any necessary third party approval and license requirements, as well as then
existing third party rights, to RiboGene under the HPI Proprietary Rights to
make, have made, use and sell Products incorporating a Developing Party Compound
or derivatives thereof for the Target if RiboGene is the developing party. If
HPI is the developing party of a Developing Party Compound, then HPI shall have
access to the RiboGene Assay(s) with respect to such Developing Party Compound
and RiboGene shall grant an exclusive license or sublicense, if available, to
HPI under the RiboGene Proprietary Rights to make, have made, use and sell
Products incorporating a Developing Party Compound or derivatives thereof. The
non-developing party will use reasonable efforts to perform any remaining
obligations in a timely manner for the developing party. So long as HPI or its
sublicenses is diligently pursuing development of a Developing Party Compound,
RiboGene will not make the Assay used to identify the Developing Party Compound
or any usage therefor available to a third party for purposes of screening
combinatorial libraries similar to the Combinatorial Libraries at least for the
Targets of the Developing Party Compound, unless RiboGene is required to do so
by a third party agreement existing at the time that HPI became the developing
party of the Developing Party Compound.
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ARTICLE 4
LICENSE OF SCREENING RIGHTS TO RIBOGENE
4.1 LICENSE. HPI hereby grants to RiboGene, under the HPI
Proprietary Rights, during the Screening Term, [*] to screen the Materials
against the Assays in accordance with this Agreement.
4.2 USAGE RIGHTS. The Materials are provided to RiboGene pursuant
to Article 4 solely for the purpose of screening by only RiboGene using the
Assays as provided in this Agreement, and any other use or attempted transfer of
such Materials will be a material breach of this Agreement. RiboGene understands
and acknowledges that the Materials and [*] compounds contained therein are for
research use only and shall not be administered to humans in any manner or form.
4.3 LIMITATIONS. Nothing herein shall be deemed to grant any
rights or other interests in favor of RiboGene with respect to the HPI
Proprietary Rights other than as expressly set forth in this Agreement.
RiboGene shall have no rights with respect to any compounds contained in the
Combinatorial Libraries or Iteration Mixtures or derivatives of any of them
which do not become Candidates. Any rights with respect thereto shall remain
with HPI.
ARTICLE 5
RESEARCH COMMITTEE
5.1 CREATION OF THE RESEARCH COMMITTEE. The parties hereby agree
to the creation of a Research Committee of four (4) persons to facilitate the
collaboration called for herein. The Research Committee shall consist of two
(2) representatives nominated by each party. One (1) representative nominated
by each party shall be a senior scientific officer of such party, who shall be
the senior representative and chief coordinator for such party. Each party
shall be free to change its representatives on notice to the other or to send a
substitute representative to any Research Committee meeting. The Chief
Scientific Officer, or equivalent, of each party, if not otherwise designated as
a member of the Research Committee, shall have the right to attend Research
Committee meetings.
5.2 REGULAR MEETINGS. During the Screening Phase, the
Research Committee shall meet face to face at least once each three (3) months
and have telephonic meetings monthly in the months when there are no face to
face meetings. If both parties agree to participate in the Development Phase,
the Research Committee shall have similar meetings at similar intervals with
respect to Joint Compounds in the Development Phase. However, if both parties
do not agree to participate in the Development Phase with respect to a
particular Candidate or one party ceases to participate after commencement of
the Development Phase with respect to a Joint Compound while the other party
continues development, the Research Committee shall have no further
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<PAGE> 10
responsibility with respect to that Candidate, Joint Compound or Developing
Party Compound. The Research Committee shall be disbanded when no Candidates,
Joint Compounds or Products are in the Development Phase, and the Screening
Phase has been totally discontinued or completed. Any meetings may be called by
either party on fourteen (14) days notice to the other and, unless otherwise
agreed, shall alternate between the offices of the parties. To the extent
practicable, each party shall disclose to the other proposed agenda items in
advance of the meeting. The senior representative of the party hosting the
meeting shall chair that meeting and shall have the right to vote or otherwise
make decisions on behalf of that party. Each party shall pay all of its own
costs and expenses incurred in connection with such meetings.
5.3 RESPONSIBILITIES OF THE RESEARCH COMMITTEE. During the duration
of the Collaborating Program, the Research Committee shall be the primary
vehicle for interaction between the parties. The Research Committee shall serve
at the behest of the parties in order to assist in the management of the
Collaboration Program, recommend scientific priorities for both the Screening
and Development Phases, and review and advise scientific direction and
settlement of operating issues. Without limiting the foregoing, the Research
Committee shall be responsible for: (i) amending research and development plans
agreed to with respect to the Collaboration Program; (ii) monitoring the
progress of the Collaboration Program; (iii) recommending work plans and
budgets for each Joint Compound and Product, subject to both parties' approval,
for the Development Phase; (iv) recommending whether patents should be filed;
(v) evaluating the potential of Joint Compounds; (vi) advising which Candidates
should become Joint Compounds; and (vii) preparing with the cooperation of both
parties the progress reports described in Section 6.3. All decisions by the
Research Committee shall require agreement by the senior representative of both
parties present at the meeting, and each party shall act in good faith in
attempting to reach agreement on such decisions. Any disputes shall be resolved
in accordance with Article 10 of this Agreement.
ARTICLE 6
DEVELOPMENT AND PROGRESS REPORTING
OF JOINT COMPOUNDS
6.1 CONDUCT OF RESEARCH AND DEVELOPMENT. RiboGene and HPI shall
work diligently and use reasonable good faith efforts to identify and develop
Joint Compounds and to commercialize Products pursuant to the following
restrictions:
6.1.1 The parties shall be entitled to exercise prudent and
reasonable business judgement in meeting the obligations of this Section 6.1.
6.1.2. The parties shall use commercially reasonable efforts to
obtain all necessary governmental approvals for the manufacture, use and sale of
Products except for Products incorporating Developing Party Compounds in which
instance the developing party has the discretion to decide when to proceed.
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6.2 DISCLOSURE.
6.2.1 Within thirty (30) days after completion of Initial
Screening, completion of each stage of the Iteration Process or the
Confirmatory Sample screening of the Scanning Process, but in no event less
frequently than quarterly, RiboGene shall deliver a written report to the
senior representative of each party to the Research Committee in reasonable
specific detail, setting forth the results of the Active Screening.
6.2.2 The parties will make available and, upon request,
disclose to each other and the Research Committee, all information relating to
the Joint Compounds discovered or synthesized pursuant to the Collaboration
Program. All information which is significant with respect to the Collaboration
Program will be disclosed to the other party promptly after it is learned or
its significance is appreciated. Each party shall keep complete accounts and
records (including such lab notebooks, clinical data and other research records
as are customarily maintained in connection with drug discovery and
development) relating to its research and development activities under the
Screening Phase.
6.2.3 The parties will exchange reports quarterly presenting a
meaningful summary of their research and development activities, and each party
will make presentations thereof, in addition to those made to or by the Research
Committee, as reasonably requested by the other party but not in excess of twice
per year. Each party will also communicate informally and through the Research
Committee to inform the other parties of research and development performed
under the Collaboration Program. Each party will provide the other with raw
data in original form or photocopies thereof for any and all work carried out
under this Agreement as reasonably requested by the other party. The parties
agree to cooperate with each other to facilitate the understanding and use of
information exchanged pursuant to this Section 6.2. All information contained in
reports made pursuant to this Agreement or otherwise communicated between the
parties will be maintained under obligations of confidentiality under Article 14
of this Agreement.
6.2.4. To ensure compliance with Third Party Obligations of a
party hereto, complete and accurate records regarding the use of technology
licensed by a third party to a party hereunder shall be maintained which records
shall reflect what third party technology was utilized, if any, in connection
with discovery of a Joint Compound, Developing Party Compound, or Product
hereunder. Both parties shall have access to such records in order to reasonably
satisfy the reporting requirements to third parties.
6.3 PROGRESS REPORTING. In addition to other reports required
under Section 6.2, not later than January 15th and July 15th of each calendar
year, the Research Committee shall prepare a written progress report covering
activities under the Collaboration Program, the development and testing of all
Joint Compounds and the obtaining of the governmental approvals necessary for
marketing. Such progress reports shall include but not be limited to the
following topics:
o Summary of work completed
o Activities related to sublicenses
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- Summary of work in progress
- Current schedule of anticipated events or milestones
- Market plans for the introduction of Products, and
- Activities relating to obtaining governmental approvals
necessary for marketing Products.
The form of such progress reports shall be determined by the
Research Committee and shall be in such form to provide information necessary to
satisfy reporting obligations to third parties whose technology is being
utilized under the Collaboration Program. The parties shall take precautions to
protect confidentiality as intended by Article 14 in meeting the reporting
obligations to third parties. With respect to Developing Party Compounds and
Products not subject to Research Committee supervision, the developing party
shall still be required to prepare the reports for the other party.
ARTICLE 7
COMMERCIALIZATION OF PRODUCTS BY PARTIES
7.1 JOINT COMMERCIALIZATION. If the parties jointly decide to
proceed with the commercialization of Candidates into Joint Compounds and/or
Products incorporating such Joint Compounds, or derivatives thereof, the parties
intend to share profits and losses proportionally based on the contribution each
party has agreed to make to the total costs of the Development Phase with
respect to those Joint Compounds and/or Products. The parties shall negotiate in
good faith a commercialization agreement which, in addition to the provisions
described in Exhibit D, shall reflect among other matters each party's Interest,
Third Party Obligations, reporting requirements, procedures for
commercialization and which party is entitled to carry the lead in decision
making with respect to product development.
7.2 ONE PARTY DEVELOPMENT. If, after completion of the Screening
Phase with respect to a Candidate, only one party, pursuant to Section 3.5,
responds affirmatively in writing that the party desires to continue with the
development of that Candidate, then that party must notify the other party in
writing of its intent to proceed on its own to develop the Candidate as a
Developing Party Compound within six (6) months after the other party gave, or
failed to give, written notice of its intent not to participate in the
Development Phase with respect to such Candidate. The Candidate may then become
a Developing Party Compound subject to the applicable provisions of Exhibit D.
The party wishing to develop must give both written notice of its intent to
proceed and actually commence development during that six (6) month period for
the Candidate to become a Developing Party Compound or that party may not
individually decide to develop a Candidate as a Developing Party Compound
without again presenting the opportunity for joint development through written
notice to the other party. If the other party does not give written notice of
its intent to participate in the joint development within thirty (30) days
thereafter, the party desiring to develop may do so subject to the same
above-stated commencement of development limitations. The developing party shall
be responsible for all commercial decisions with respect to a Developing Party
Compound.
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7.3 ABANDONED CANDIDATES. If the parties do not jointly decide to
proceed with the development of a Candidate as a Joint Compound or if neither
party gives written notice to the other of its intent to develop such Candidate
as a Developing Party Compound pursuant to Section 7.2 hereof, such Candidate
shall be deemed "abandoned" for the purposes of this Agreement. If a Candidate
is abandoned, (i) HPI may make such Candidate available to third parties, and
(ii) RiboGene shall cease using or developing such Candidate. If HPI derives
any revenues or other benefit from its use, licensing or sale of any abandoned
Candidate which is used against the Targets, then RiboGene shall share equally
in such revenues or benefit, provided HPI was not required to put forth
significant additional effort with respect to the development of such abandoned
Candidate after the abandonment. In such instance where HPI put in significant
additional effort, the parties shall agree in good faith how the derived
revenues or benefit shall be divided to reflect HPI's additional effort in the
development. Except as set forth above, RiboGene shall have no interest in any
abandoned Candidate.
ARTICLE 8
OWNERSHIP; PATENTS
8.1 OWNERSHIP.
8.1.1 HPI PROPRIETARY RIGHTS AND RIBOGENE PROPRIETARY
RIGHTS. RiboGene acknowledges and agrees that RiboGene has no rights in or to
the HPI Proprietary Rights, other than the license rights specifically granted
herein. HPI acknowledges that HPI has no rights in or to RiboGene Proprietary
Rights except as may be granted herein. Notwithstanding the above, and except
as provided in Section 4.3, the parties agree that Candidates, Joint Compounds
and Products incorporating Joint Compounds or derivatives thereof shall be
jointly owned, and that the nondeveloping party shall have the rights granted
herein in a Developing Party Compound and Products incorporating a Developing
Party Compound or derivatives thereof.
8.1.2 OWNERSHIP OF INVENTIONS. Subject to the provisions of
this Agreement, the right, title and interest in all inventions, discoveries,
improvements or other technology directed at a Developing Party Compound, Joint
Compound or Product incorporating such Developing Party Compound or Joint
Compound or derivatives thereof with respect to the Targets and all processes
or uses relating thereto, whether or not patentable (collectively, the
"Inventions"), together with all patent applications or patents based thereon,
made during or as a result of the screening hereunder shall be owned jointly by
the parties and the rights to any Net Distributions as defined in Section D of
Exhibit D arising from such Inventions shall be based on the Interest of each
party. Each party shall promptly disclose to the other party the conception or
reduction to practice of Inventions by employees or other acting on behalf of
such. Each party hereby represents and agrees that all employees and other
persons acting on its behalf in performing its obligations under the Agreement
shall be obligated under a binding written agreement or applicable law to
assign to such party or its Affiliate all Inventions made or developed by such
employee or other person.
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8.1.3 OWNERSHIP OF RESEARCH DATA. Each party shall jointly own
all data and information generated or collected by the activities under this
Collaboration Program; however, use and reference to such data and information
may be restricted as provided elsewhere herein.
8.2 PATENTS. The Research Committee shall recommend upon which Joint
Compounds, Products and Inventions the parties should file one or more joint
patent applications. The parties shall jointly determine whether or not to file
such joint patent applications after receiving the Research Committee
recommendation. RiboGene shall file, with each party to share out-of-pocket
expenses according to their Interest, patent applications for Joint Compounds
and Products, and HPI shall provide reasonable cooperation relative thereto. If
RiboGene fails to use commercially reasonable efforts to pursue this obligation,
then HPI may file and/or prosecute the patent at joint expense of the parties
also according to their Interest. The developing party may file, at its sole
discretion and own expense, patent applications for Developing Party Compounds
in both parties' names and the nondeveloping party shall provide reasonable
cooperation relative thereto. A nondeveloping party shall not file or prosecute
patent applications with respect to Developing Party Compounds.
8.3 ENFORCEMENT OF PATENT RIGHTS.
8.3.1 Each party shall use good faith and commercially
reasonable efforts (i) to enforce its own Proprietary Rights against infringers,
and (ii) to consult with the other party both prior to and during said
enforcement. Upon learning of significant and continuing infringement of such
rights belonging to the other party by a third party in a manner that may have a
bearing on the collaboration hereunder, HPI or RiboGene, as the case may be,
promptly shall provide notice to the other party in writing of the fact and
shall supply the other party with all evidence possessed by the notifying party
pertaining to and establishing said infringement(s). Whenever rights to Products
hereunder are affected which are not covered under joint patent applications,
the party whose Proprietary Rights are allegedly being infringed shall have six
(6) months from the date of receipt of notice under this Section 8.3 to abate
the infringement, or to file suit against at least one of the infringers, at its
sole expense, following consultation with the other party. The party whose
Proprietary Rights are allegedly being infringed shall not be obligated to bring
or maintain more than one such suit at any time with respect to claims directed
to any one method of manufacture or composition of matter.
8.3.2 If a joint patent application or a patent based thereon
allegedly is being infringed, HPI and RiboGene shall cooperate in seeking to
abate the infringement or in bringing suit against the alleged infringing party.
Unless the parties mutually agree otherwise, expenses shall be apportioned based
on each party's Interest in the Product in connection with which the patent
infringement is alleged. All monies recovered upon final judgment or settlement
of any such suit shall be shared by HPA and RiboGene pro rata based on each
party's percentage of monetary contributions to prosecution of the abatement of
the infringement or the suit against the infringing party. Thus, if a party
fails to pay its prescribed share of the expenses, that party's share of the
settlement shall be reduced accordingly. Notwithstanding the foregoing, HPI and
RiboGene shall fully cooperate with each other in the planning and execution of
any action to enforce the Proprietary Rights affected hereunder. A party holding
more than a fifty percent
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(50%) Interest in a Joint Compound, a Developing Party Compound or Product may
sue on its own behalf if the other party refuses to participate.
8.4 ASSIGNMENTS. Each party to which any portion of the Inventions
vests other than as intended and set forth in this Article 8 shall, to the
extent required by the intent or provisions herein, immediately assign to the
other party such portion of the right, title, and interest therein to carry out
the intentions herein. Each party agrees to cooperate with the other and take
all reasonable additional actions and execute such agreements, instruments, and
documents as may be reasonably required to perfect the others's ownership
interest in accordance with the intent of this Article 8 including, without
limitation, the execution of necessary and appropriate instruments of
assignment.
ARTICLE 9
SALE OF LICENSE OF INTEREST
9.1 SCREENING PHASE.
9.1.1 If both parties decide to jointly sell their interests
with respect to a compound or Candidate which is still in the Screening Phase,
the parties agree that the net proceeds from any sale shall be divided equally
without consideration of Third Party Obligations. A party shall pay from its
share of the net proceeds all Third Party Obligations such party may owe. In
arriving at net proceeds, all reasonable out-of-pocket transaction costs (e.g.
attorney fees) shall be deducted from gross proceeds and paid directly to the
person or entity owed or reimbursed to the party who has paid the person or
entity for such costs.
9.1.2 If the parties jointly license their interests in any
Candidates or partially sequenced compounds during the Screening Phase, the
parties agree that any revenues received with respect to such licensing shall
be equally shared as described in Paragraph 9.1.1 including, without limitation,
any initial payment, milestone fees or royalties.
9.2 DEVELOPMENT PHASE. During the Development Phase, either party,
at any time with respect to Candidates for which both parties are actively
participating in such phase, may initiate discussions to buy out the other
party's interest or sell its own rights in any one or more Developing Party
Compound, Joint Compound or Product. However, neither party shall be obligated
to sell or buy the other's interest either partially or in total. The parties
agree that a sale or license of any Joint Compound or Product to a third party
shall be governed by the terms described in Exhibit D hereto.
9.3 DEVELOPING PARTY COMPOUND. The sale or license of a Developing
Party Compound or any Product incorporating a Developing Party Compound shall
be governed by Sections C.3 and D of Exhibit D.
9.4 DISCLOSURE OBLIGATION. Each party will be obligated to
immediately advise the other party when it becomes aware of, or is approached
by, a prospective third party buyer of, or
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licensee for, a Joint Compound or Product, and the proposed terms of any offer
tendered by such third party. The parties shall jointly consider any proposal.
9.5 MILESTONE AND ROYALTY OBLIGATIONS. In the case of a sale or
license of a Joint Compound or a Product incorporating a Joint Compound or
derivative thereof, the net proceeds after deducting reasonable out-of-pocket
expenses (e.g. attorney fees) incurred in connection with that transaction
shall be shared based on each party's Interest in such Joint Compound or
Product. Each party shall be required to pay its own Third Party Obligations
from the gross proceeds provided, however, in no event shall a party's net
proceeds, after accounting for that party's Third Party Obligations, be less
than the amounts determined under Section D.2 of Exhibit D. In the case of a
Developing Party Compound, the existing Third Party Obligations described in
Exhibit F shall be paid from the gross revenues received and the net proceeds
shall be divided per Exhibit D.
9.6 PROVISIONS TO INCORPORATE. Any sale or license envisioned
under this Article 9 may require the incorporation of certain reporting, due
diligence, indemnification and other provisions in order for HPI and/or
RiboGene to comply with certain requirements of third party licensing
agreements. The parties agree that such provisions shall be included in any
sales or license when necessary.
ARTICLE 10
DISPUTE RESOLUTION; VENUE AND CHOICE OF LAW
10.1 DISPUTE RESOLUTION. If a disagreement, dispute, controversy or
claim should arise out of or relating to the interpretation of or performance
under, this Agreement, or the breach, or invalidity thereof, the parties will
attempt in good faith to resolve their differences before resorting to the
termination procedures provided in Article 11 of this Agreement by submitting
such dispute to the Chief Executive Officers of the parties (or their
designees) for consideration for a period of thirty (30) days. If the parties
do not resolve such dispute during that thirty (30) day period, the parties
agree to then endeavor to settle the dispute by mediation administered by the
American Arbitration Association (AA) under its Commercial Mediation Rules
before resorting to binding arbitration. Thereafter, either party shall be
free to initiate binding arbitration. Any arbitration hereunder shall be
conducted under the Commercial Arbitration Rules of the AA. California
Arbitration Law shall govern, except in the event a stay is sought pursuant to
California Code of Civil Procedure Section 1281.2(c) in which event the parties
agree the issue shall be resolved under the United States Arbitration Act.
Each such arbitration shall be conducted by a single, neutral arbitrator
appointed in accordance with such rules. The arbitrator is to be appointed
within thirty (30) days after submission to arbitration with the hearing to
commence as soon as practicable thereafter but in no event more than sixty (60)
days after the arbitrator's appointment. Any such arbitration shall be held in
San Diego, California. The arbitrator shall have the authority to grant
specific performance, and to allocate between the parties the costs of
arbitration in such equitable manner as the arbitrator may determine. Judgment
upon the award so rendered may be entered in any court having jurisdiction or
application may be made to such court for judicial acceptance of any award and
an order of enforcement, as the case may be. In no event shall a
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demand for arbitration be made after the date when institution of a legal or
equitable proceeding based upon such claim, dispute or other matter in question
would be barred by the applicable statute of limitations. Neither party, nor the
arbitrator, may disclose the existence, content or results of the arbitration,
without the prior written consent of the other party. Notwithstanding the
foregoing, each party shall be entitled to institute judicial proceedings
against the other party outside arbitration to enforce the instituting party's
rights hereunder through specific performance, injunction, declaratory judgment
or similar equitable relief.
10.2 GOVERNING LAW, JURISDICTION AND VENUE. This Agreement is made in
accordance with and shall be governed and construed under the laws of the State
of California, without regard to the principles of conflicts of laws rules. In
any legal action relating to this Agreement, each party consents to the exercise
of jurisdiction over it by a state or federal court in California and that if a
party brings an action other than an action to enforce an arbitration decision,
it shall be instituted in San Diego if first instituted by RiboGene and in San
Francisco if first instituted by HPI. In any action or proceeding outside of
binding arbitration to enforce rights under this Agreement, the prevailing party
shall be entitled to recover costs and expenses including, without limitation,
attorney's fees.
ARTICLE 11
TERM AND TERMINATION
11.1 TERM. This Agrement shall remain in full force and effect from
the Effective Date and, unless otherwise terminated by operation of law or by
acts of the parties in accordance with the terms of this Agreement, or unless
extended by mutual agreement of the parties, shall remain in effect until the
expiration of the latest of [*] obligations to make payments required pursuant
to this Agreement. This Section does not extend the Screening Term.
11.2 EARLY TERMINATION. If a party breaches any material obligation
of this Agreement, including failure to make any payment when due and payable
hereunder, and such party fails to cure such breach [*] of written notice
concerning untimely payments provided for herein [*] concerning any other
failure, the nonbreaching party may terminate this Agreement by providing
written notice to the breaching party. Additionally, either party may terminate
this Agreement upon the insolvency of, or filing of either a voluntary petition
by, or an involuntary petition against [*] the other party.
11.3 EFFECT OF TERMINATION. Upon termination of this Agreement prior
to its term set forth in Section 11.1 above, the screening activities set forth
in Article 3 shall cease. Notwithstanding any termination, the provisions of
Articles 2, 7, 8, 9, 10, and 12 through 15 shall survive to the extent
obligations have accrued thereunder prior to termination and including without
limitation the obligation of a party to make the payments provided for herein. A
party shall have
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the right to continue to pursue any Developing Party Compound which that party
is developing at its own expense, even in the event of termination of this
Agreement.
ARTICLE 12
INDEMNIFICATION, LIABILITY, INFRINGEMENT
12.1 INDEMNITY. Each party (the "Indemnifying Party") shall defend
the other party and such other party's Affiliates, officers, directors,
shareholders, employees and agents (collectively, the "Indemnified Parties" for
purposes of this Section 12.1) against any claims made against the Indemnified
Parties by third parties to the extent that such claims arise out of the
negligent, reckless or intentionally wrongful acts or omissions of, this
Agreement. A licensor of enabling technology shall also be included as an
Indemnified Party if the party licensed by such licensor is required by the
terms of the licensing agreement to include an indemnity in its sublicenses but
only to the extent that the technology licensed under such agreement is
utilized in performance of this Agreement. The Indemnifying Party shall either
settle such claims or pay all damages and costs finally awarded against the
Indemnified Parties by a court of competent jurisdiction as a result of such
claims. The Indemnifying Party shall have no liability for any such claim if
the Indemnified Parties do not notify the Indemnifying Party promptly in
writing of the claim, give the Indemnifying Party the exclusive control of the
defense and settlement thereof, and provide reasonable assistance in connection
therewith, at the Indemnifying Party's expense. A party hereto who is the
Indemnified Party may, at its option and own expense, have its own counsel and
participate in any proceedings even though the defense of such proceedings are
under the control of the Indemnifying Party.
12.2 ADDITIONAL INDEMNITY FOR SOLELY DEVELOPED PRODUCTS. The
Developing Party shall defend the nondeveloping party and its Affiliates,
officers, directors, shareholders, employees and agents (collectively, the
"Nondeveloping Indemnified Parties" for purposes of this Section 12.2) against
any claims made against the Nondeveloping Indemnified Parties by third parties
to the extent that such claims arise out of the manufacture, use or sale of
any Developing Party Compound and any Product incorporating a Developing Party
Compound including without limitation (i) the infringement or alleged
infringement of a third party's intellectual property rights, (ii) the inherent
property of any such Developing Party Compound, (iii) the development or
manufacture of any Developing Party Compound by Developing Party, its
Affiliates, or sublicensees, or (iv) the use of any such Developing Party
Compound or Product incorporating a Developing Party Compound manufactured,
used or sold by the Developing Party, its Affiliates or sublicensees by any
human regardless of whether such use was contemplated by the Parties
(collectively, the "Liabilities"); and shall either settle such claims or pay
all damages and costs finally awarded against the Nondeveloping Indemnified
Parties by a court of competent jurisdiction as a result of such claims out of
the gross proceeds derived from the sale or license of such Developing Party
Compound and each Product incorporating such Developing Party Compound. Except
with respect to claims and suits based on strict liability related to the
inherent property of a Developing Party Compound and each Product incorporating
such Developing
17
<PAGE> 19
settlement agreement to which both Parties have consented) to have arisen from
the breach of this Agreement by HPI, willful misconduct or gross negligence (but
not the strict liability or liabilities resulting from the inherent properties
of any Joint Compound) of HPI or its Affiliates relating to the use, manufacture
or sale of any Product which incorporates a Joint Compound.
12.4.3 Notwithstanding the provisions of Section 12.4.1 above,
RiboGene shall indemnify and hold HPI and its Affiliates, officers, directors,
shareholders and agents harmless from and against Joint Compound Liabilities to
the extent such Joint Compound Liabilities are finally determined by a court of
competent jurisdiction (or by specific reference in a settlement agreement to
which both Parties have consented) to have arisen from the breach of this
Agreement by RiboGene, willful misconduct or gross negligence (but not the
strict liability or liabilities resulting from the inherent properties of any
Joint Compound) of RiboGene or its Affiliates relating to the use, manufacture
or sale of any Product which incorporates a Joint Compound.
12.4.4 Each Party shall notify the other promptly upon receipt
of any notice of any product liability claim or lawsuit subject to this Section
12.4. Such notice shall be a condition to any indemnity provided for herein. The
party responsible for distributing a Product which incorporates a Joint Compound
which is the subject of such claim, shall be responsible for defending such
claim except as to any claim for which such party expects to seek indemnity from
the other party under Section 12.4.2 or 12.4.3 above, in which case the latter
party shall defend such claim. HPI or RiboGene, as the case may be, may at their
election and expense participate in any such litigation controlled by the other
party. The party defending such claim or suit may settle any such claim or suit
only with the written consent of the other party, which shall not be
unreasonably withheld.
12.5 INSURANCE. Each party shall maintain product liability insurance
with respect to its development, manufacture and sale of Products, in such
amount as it customarily maintains with respect to its development, manufacture
and sale of other comparable products, and shall name the other party as an
additional insured party. Notwithstanding the above, the insurance will at a
minimum meet the requirements both parties have to their respective licensors
with respect to technology licensed from said licensors and utilized in
performance of this Agreement, and, if required, shall name such licensors as
additional insured parties. Each party shall maintain such insurance while it
develops, manufactures or sells Products, and thereafter shall maintain such
insurance in effect for a reasonable period after the cessation of sale or other
distribution of such Product. Each party shall provide a copy of the policy
providing such product liability insurance to the other party promptly after
such policy becomes effective, and shall thereafter notify such other party
promptly after any change in the terms of such policy.
19
<PAGE> 20
ARTICLE 13
DISCLAIMER OF WARRANTIES; FURTHER ACTION
13.1 DISCLAIMER BY HPI. THE LICENSED COMBINATORIAL LIBRARIES,
ITERATION MIXTURES AND CONFIRMATORY SAMPLES ARE PROVIDED BY HPI "AS IS" AND
WITHOUT WARRANTY OF ANY KIND, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION
THE WARRANTIES OF DESIGN, MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR
WARRANTIES ARISING FROM A COURSE OF DEALING, USAGE OR TRADE PRACTICES; AND, TO
THE BEST OF HPI's KNOWLEDGE THE PERFORMANCE OF ITS OBLIGATIONS HEREUNDER DOES
NOT INFRINGE UPON INTELLECTUAL PROPERTY RIGHTS OF THIRD PARTIES. IN NO EVENT
WILL HPI OR ANY OF ITS LICENSORS WHOSE TECHNOLOGY IS UTILIZED BY THE PARTIES IN
THE PERFORMANCE OF THIS AGREEMENT BE LIABLE FOR ANY INCIDENTAL, SPECIAL OR
CONSEQUENTIAL DAMAGES RESULTING FROM EXERCISE OF THE LICENSE RIGHTS BY RIBOGENE
HEREUNDER.
13.2 DISCLAIMER BY RIBOGENE. THE ASSAYS ARE PROVIDED BY RIBOGENE
"AS IS" AND WITHOUT WARRANTY OF ANY KIND, EXPRESS OR IMPLIED, INCLUDING WITHOUT
LIMITATION THE WARRANTIES OF DESIGN, MERCHANTABILITY, FITNESS FOR A PARTICULAR
PURPOSE OR WARRANTIES ARISING FROM A COURSE OF DEALING, USAGE OR TRADE
PRACTICES; AND, TO THE BEST OF RIBOGENE'S KNOWLEDGE THE PERFORMANCE OF ITS
OBLIGATIONS HEREUNDER DOES NOT INFRINGE UPON INTELLECTUAL PROPERTY RIGHTS OF
THIRD PARTIES. IN NO EVENT WILL RIBOGENE OR ANY OF ITS LICENSORS WHOSE
TECHNOLOGY IS UTILIZED BY THE PARTIES IN THE PERFORMANCE OF THIS AGREEMENT BE
LIABLE FOR ANY INCIDENTAL, SPECIAL OR CONSEQUENTIAL DAMAGES RESULTING FROM
EXERCISE OF THE LICENSE RIGHTS BY HPI HEREUNDER.
13.3 COMPLIANCE WITH LAW. Each party and its respective authorized
sublicensees shall comply with all applicable laws, regulations, and
governmental orders in connection with their activities hereunder, including
without limitation all research and development activities and the manufacture,
use and sale of Products. Without limiting the foregoing, each party and its
respective authorized employees shall observe all applicable United States and
foreign laws with respect to the transfer of Products and related technical
data to foreign countries, including without limitation, the International
Traffic in Arms Regulation and Export Administration Regulations.
13.4 ADDITIONAL DOCUMENTS. Each party agrees to execute such
further papers or agreements as may be necessary to effect the purposes of this
Agreement.
20
<PAGE> 21
ARTICLE 14
CONFIDENTIALITY
RiboGene and HPI acknowledge that they have executed a separate Mutual
Nondisclosure Agreement, a copy of which is attached as Exhibit E, and the
parties intend that such Mutual Nondisclosure Agreement shall be effective with
respect to all disclosures and discoveries under this Agreement.
ARTICLE 15
MISCELLANEOUS
15.1 WAIVER. 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 or similar breach or default.
15.2 ASSIGNMENT. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their permitted successors and assigns;
provided, however, that neither party shall assign any of its rights and
obligations hereunder except as incident to the merger, consolidation,
reorganization, or acquisition of stock or assets affecting a majority of the
assets or voting control of the assigning party. HPI or RiboGene may assign
their respective rights and/or obligations to any of their respective
Affiliates.
15.3 NOTICES. Any notice or other communication required or
permitted to be given to either party hereto shall be in writing and shall be
deemed to have been properly given and to be effective on the date of delivery
if delivered in person or by facsimile or five (5) days after mailing by
registered or certified mail, postage paid, to the other party at the following
address:
In the case of HPI: Houghten Pharmaceuticals, Inc.
3550 General Atomics Court
San Diego, CA 92121
Attention: President
Phone: 619/455-3814
Fax: 619/455-2544
21
<PAGE> 22
In the case of RiboGene: RiboGene, Inc.
21375 Cabot Blvd.
Hayward, CA 94545
Attention: President
Phone: 510/732-5551
Fax: 510/732-7741
Either party may change its address for communications by a notice to the other
party in accordance with this Section.
15.4 AMENDMENT. No amendment or modification hereof shall be valid
or binding upon the parties unless made in writing and signed by both parties.
15.5 PUBLIC ANNOUNCEMENT AND DISCLOSURE. In consideration of the
terms hereof, HPI and RiboGene may agree to make a public announcement of the
collaboration. The content shall be agreed upon by both parties Even if no
public announcement is agreed upon, either party may disclose the existence of
this Agreement to investors and prospective investors. No other announcement,
public release or notice of any kind may be issued without the written consent
of both parties, which consent shall not be unreasonably withheld.
Notwithstanding the above, either party may disclose previously disclosed
non-confidential information without the consent of the other. A party shall
not disclose the names of the other party's licensors of technology utilized in
the performance of this Agreement without the written consent of the other
party.
15.6 FORCE MAJEURE. Any delays in performance by any party under
this Agreement (other than a party's failure to pay money to the other party)
shall not be considered a breach of this Agreement if and to the extent caused
by occurrences beyond the reasonable control of the party affected, including
but not limited to acts of God, embargoes, governmental restrictions, strikes or
other concerted acts of workers, fire, flood, explosion, riots, wars, civil
disorder, rebellion or sabotage. The party suffering such occurrence shall
immediately notify the other party and any time for performance shall be
extended by the actual time of delay caused by the occurrence.
15.7 INDEPENDENT CONTRACTORS. In making and performing this
Agreement, RiboGene and HPI act and shall act at all times as independent
contractors and nothing contained in this Agreement shall be construed or
implied to create an agency, partnership or employer and employee relationship
between HPI and RiboGene. At no time shall one party make commitments or incur
any charges or expenses for, or in the name of, the other party.
15.8 SEVERABILITY. If any term, condition or provision of this
Agreement is held to be unenforceable for any reason, it shall, if possible, be
interpreted rather than voided, in order to achieve the intent of the parties
to this Agreement to the extent possible. In any event, all other terms,
conditions and provisions of this Agreement shall be deemed valid and
enforceable to the full extent.
22
<PAGE> 23
15.9 CUMULATIVE RIGHTS. The rights, powers and remedies hereunder
shall be in addition to, and not in limitation of, all rights, powers and
remedies provided at law or in equity, or under any other agreement between the
parties. All of such rights, powers and remedies shall be cumulative, and may
be exercised successively or cumulatively.
15.10 ENTIRE AGREEMENT. This Agreement and any and all Exhibits
referred to herein embody the entire understanding of the parties with respect
to the subject matter hereof and supersedes all previous communications,
representations or understandings, either oral or written, between the parties
relating to the subject matter hereof.
IN WITNESS WHEREOF, both RiboGene and HPI have executed this Agreement,
in duplicate originals, by their respective officer hereunto duly authorized,
as of the day and year hereinabove written.
HOUGHTEN PHARMACEUTICALS, INC. RIBOGENE, INC.
By: /s/ ROBERT S. WHITEHEAD By: /s/ CHARLES J. CASAMENTO
----------------------------- -----------------------------
Robert S. Whitehead Charles J. Casamento
President and CEO Chairman, President and CEO
23
<PAGE> 24
EXHIBIT A
ASSAYS TO BE PERFORMED BY RIBOGENE
The Assays will be based on translational targets and shall include some or all
of the following:
[*]
- ----------------------------
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to
the omitted portions.
<PAGE> 25
EXHIBIT B
[*]
- ----------------------------
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to
the omitted portions.
<PAGE> 26
[*]
- ----------------------------
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to
the omitted portions.
<PAGE> 27
EXHIBIT C
[*]
[*]
- ----------------------------
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to
the omitted portions.
<PAGE> 28
EXHIBIT D
DEVELOPMENT PHASE PROVISIONS
The following provisions, in addition to applicable provisions of the Joint
Collaboration Agreement to which this Exhibit D is attached, shall govern the
Development Phase and the development of Developing Party Compounds unless and
until such provisions are incorporated in substance, amended or superseded by
the terms of a subsequent agreement. Each Joint Compound, Product and
Developing Party Compound shall be treated separately in the application of
these provisions.
A. FUNDING.
[*]
- ----------------------------
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to
the omitted portions.
<PAGE> 29
B. VALUATION OF CONTRIBUTION.
1. [*]
2. [*]
3. [*]
4. [*]
- ----------------------------
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to
the omitted portions.
<PAGE> 30
[*]
5. [*]
6. [*]
C. SALE OR LICENSE OF INTEREST.
[*]
1. [*]
2. [*]
- ----------------------------
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to
the omitted portions.
<PAGE> 31
[*]
3. [*]
D. DISTRIBUTION OF REVENUE
1. [*]
- ----------------------------
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to
the omitted portions.
<PAGE> 32
2. [*]
3. [*]
E. INSURANCE.
Effective as of such time as any Product enters human clinical trials,
the parties with respect to that Product (with the costs to be shared
based on each party's participation in cost sharing as set forth in
Section A), or through their sublicensee(s), shall insure their
activities under this Agreement and obtain, keep in force and maintain
insurance, including without limitation product liability insurance, in
amounts sufficient to cover their obligations under this Article E and
consistent with reasonable business practice in the industry. Without
limiting the foregoing, coverage shall in no event be less than the
following:
[*]
- ----------------------------
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to
the omitted portions.
<PAGE> 33
It should be expressly understood, however, that the coverages and limits
referred to under the above shall not in any way limit each party's liability.
Certificates of insurance evidencing compliance with all requirements shall be
requested. Such certificates shall:
1. Provide for thirty (30) day advance written notice to the other
party of any modification;
2. Indicate that both parties have been endorsed as insureds under
the coverages referred to under the above; and
3. Include a provision that the coverages will be primary and will
not participate with nor will be excess over any valid and
collectable insurance or program of self-insurance carried or
maintained by either party.
<PAGE> 34
EXHIBIT E
MUTUAL NONDISCLOSURE AGREEMENT
This MUTUAL NONDISCLOSURE AGREEMENT ("Agreement") is made effective as
of the 1st day of October, 1993, by and between HOUGHTEN PHARMACEUTICALS, INC.,
a Delaware corporation, and RiboGene, Inc., to assure the protection and
preservation of the confidential and/or proprietary nature of information to be
disclosed or made available between the parties in connection with certain
negotiations or discussions.
WHEREAS, in order to pursue these discussions, the parties have agreed
to mutual disclosures of certain data and other information which are of a
proprietary and confidential nature (as defined in paragraph 2 below and
referred to herein as "Confidential Information").
NOW, THEREFORE, in reliance upon and in consideration of the following
undertakings, and for other good and valuable consideration, the receipt of
which is hereby acknowledged, the parties to this Agreement hereby agree as
follows:
1. Subject to the limitations set forth in Paragraph 2,
Confidential Information shall be deemed to include any information, process,
technique, compound, library, method of synthesis, program, design, drawing,
formula or test data relating to any research project, work in process,
development, engineering, manufacturing, marketing, servicing, financing or
personnel matter relating to the disclosing party, its present or future
products, sales, suppliers, customers, employees, investors, or business,
whether in oral, written graphic or electronic forms.
2. The term "Confidential Information" shall not be deemed to
include information which, to the extent that the recipient of Confidential
Information can establish by competent written proof:
a. at the time of disclosure is in the public domain;
b. after disclosure, becomes part of the public domain by
publication or otherwise, except by (i) breach of this
Agreement by the recipient or (ii) disclosure by any
person or affiliate company to whom Confidential
Information was disclosed under this Agreement;
c. was (i) in recipient's possession in documentary form at
the time of disclosure by the disclosing party or (ii)
subsequently and independently developed by recipient's
employees who had no knowledge of or access to the
Confidential Information;
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<PAGE> 35
d. recipient shall receive from a third party who has the
lawful right to disclose the Confidential Information
and who shall not have obtained the Confidential
Information either directly or indirectly from the
disclosing party; or
e. disclosure is required by law or regulation.
In the event that Confidential Information is required to be
disclosed pursuant to subsection (e), the party required to make disclosure
shall notify the other to allow that party to assert whatever exclusions or
exemptions may be available to it under such law or regulation.
3. Each party shall maintain in trust and confidence and not
disclose to any third party or use for any unauthorized purpose any Confidential
Information received from the other party. Each party may use such Confidential
Information only to extent required to perform the evaluation. Confidential
Information shall not be used for any purpose or in any manner that would
constitute a violation of any laws or regulations, including, without
limitation, the export control laws of the United States. No other rights or
licenses to trademarks, inventions, copyrights, or patents are implied or
granted under this Agreement.
4. Confidential Information supplied shall not be reproduced in any
form except as required to perform evaluation.
5. The responsibilities of the parties are limited to using their
reasonable and best efforts to protect the Confidential Information from
unauthorized use or disclosure. Both parties shall advise their employees or
agents who might have access to such Confidential Information of the
confidential nature thereof. No Confidential Information shall be disclosed to
any officer, employee or agent of either party who does not have a need to know
such information to perform the evaluation.
6. All Confidential Information (including copies thereof) shall
remain the property of the disclosing party, and shall be returned to the
disclosing party after the receiving party's need for it has expired, or upon
request of the disclosing party, and in any event, upon completion or
termination of this Agreement.
7. This Agreement shall continue in full force and effect for so
long as the parties continue to exchange Confidential Information. This
Agreement may be terminated at any time upon ten (10) days' written notice to
the other party. The termination of this Agreement shall not relieve either
party of the obligations imposed by this Agreement with respect to Confidential
Information disclosed prior to the effective date of such termination and the
provisions hereof shall survive the termination of this Agreement for a period
of three (3) years from the date of such termination.
8. This Agreement shall be governed by the laws of the State of
California's those laws are applied to contracts entered into and to be
performed in California.
9. Neither party shall reveal the fact that Confidential
Information has been disclosed pursuant to this Agreement or that either party
is making an evaluation. It is understood that disclosure pursuant to this
Agreement is not a public disclosure or sale or offer for sale of any product,
but is made for the limited purpose of evaluation.
10. This agreement contains the entire agreement of the parties and
may not be changed, modified, amended or supplemented except by a written
instrument signed by both parties. The
- 2 -
<PAGE> 36
unenforceability of any provision on this Agreement shall not affect the
enforceability of any other provision of this Agreement. Neither this
Agreement nor the disclosure of any Confidential Information pursuant to this
Agreement by any party shall restrict such party from disclosing any of its
Confidential Information to any third party.
11. Each party hereby acknowledges and agrees that in the event of any
breach of this Agreement by the other party, including, without limitation, the
actual or threatened disclosure of a disclosing party's Confidential Information
without the prior express written consent of the disclosing party, the
disclosing party will suffer an irreparable injury, such that no remedy at law
will afford it adequate protection against, or appropriate compensation for,
such injury. Accordingly, each party hereby agrees that the other party shall be
entitled to specific performance of a receiving party's obligations under this
Agreement, as well as such further injunctive relief as may be granted by a
court of competent jurisdiction.
AGREED TO AS OF THE FIRST DATE ABOVE:
HOUGHTEN PHARMACEUTICALS, INC. Company: RiboGene, Inc.
3550 General Atomics Court ----------------------------
San Diego, CA 92121 Address: 21375 Cabot Boulevard
-----------------------------
Hayward, CA 94583
-----------------------------
By: /s/ GILBERT R. MINTZ By: /s/ VINCENT J. MILES
----------------------- --------------------------------
Name: GILBERT R. MINTZ Name: VINCENT J. MILES
----------------------- --------------------------------
(Print Name) (Print Name)
Title: Title: Vice President, Business
---------------------- Development
---------------------------------
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<PAGE> 37
EXHIBIT F
THIRD PARTY OBLIGATIONS
[*]
B. HPI
1. Chiron Corporation and its affiliate Chiron Mimotopes Pty. Ltd.
("Chiron")
a. [*]
- ----------------------------
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to
the omitted portions.
<PAGE> 38
[*]
[*]
2. [*]
[*]
[*]
[*]
[*]
[*]
- ----------------------------
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to
the omitted portions.
<PAGE> 39
HPI Activity
[*]
- ----------------------------
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to
the omitted portions.
<PAGE> 1
EXHIBIT 10.6
RIBOGENE, INC.
1993 STOCK PLAN
(AS AMENDED ON AUGUST 25, 1993)
(AS FURTHER AMENDED ON MARCH 30, 1994)
(AS FURTHER AMENDED ON MARCH 15, 1995)
(AS FURTHER AMENDED ON OCTOBER 18, 1995)
(AS FURTHER AMENDED ON OCTOBER 9, 1996)
(AS FURTHER AMENDED ON MARCH 3, 1997)
1. Purposes of the Plan. The purposes of this Stock Plan are to
attract and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to Employees and Consultants of
the Company and its Subsidiaries and to promote the success of the Company's
business. Options granted under the Plan may be incentive stock options (as
defined under Section 422 of the Code) or non-statutory stock options, as
determined by the Administrator at the time of grant of an option and subject
to the applicable provisions of Section 422 of the Code, as amended, and the
regulations promulgated thereunder. Stock purchase rights may also be granted
under the Plan.
2. Definitions. As used herein, the following definitions shall
apply:
(a) "Administrator" means the Board or any of its
Committees appointed pursuant to Section 4 of the Plan.
(b) "Board" means the Board of Directors of the Company.
(c) "Code" means the Internal Revenue Code of 1986, as
amended.
(d) "Committee" means the Committee appointed by the
Board of Directors in accordance with paragraph (a) of Section 4 of the Plan.
(e) "Common Stock" means the Common Stock of the Company.
(f) "Company" means RiboGene, Inc., a California
corporation.
(g) "Consultant" means any person, including an advisor,
who is engaged by the Company or any Parent or Subsidiary to render services
and is compensated for such services, and any director of the Company whether
compensated for such services or not provided that if and in the event the
Company registers any class of any equity security pursuant to the Exchange
Act, the term Consultant shall thereafter not include directors who are not
compensated for their services or are paid only a director's fee by the
Company.
(h) "Continuous Status as an Employee" means the absence
of any interruption or termination of the employment relationship by the
Company or any Subsidiary.
<PAGE> 2
Continuous Status as an Employee shall not be considered interrupted in the
case of: (i) sick leave; (ii) military leave; (iii) any other leave of absence
approved by the Administrator, provided that such leave is for a period of not
more than ninety (90) days, unless reemployment upon the expiration of such
leave is guaranteed by contract or statute, or unless provided otherwise
pursuant to Company policy adopted from time to time; or (iv) in the case of
transfers between locations of the Company or between the Company, its
Subsidiaries or its successor.
(i) "Employee" means any person, including officers and
directors, employed by the Company or any Parent or Subsidiary of the Company.
The payment of a director's fee by the Company shall not be sufficient to
constitute "employment" by the Company.
(j) "Exchange Act" means the Securities Exchange Act of
1934, as amended.
(k) "Fair Market Value" means, as of any date, the value
of Common Stock determined as follows:
(i) If the Common Stock is listed on any
established stock exchange or a national market system including without
limitation the National Market System of the National Association of Securities
Dealers, Inc. Automated Quotation ("NASDAQ") System, its Fair Market Value
shall be the closing sales price for such stock (or the closing bid, if no
sales were reported, as quoted on such exchange or system for the last market
trading day prior to the time of determination) as reported in The Wall Street
Journal or such other source as the Administrator deems reliable;
(ii) If the Common Stock is quoted on the NASDAQ
System (but not on the National Market System thereof) or regularly quoted by a
recognized securities dealer but selling prices are not reported, its Fair
Market Value shall be the mean between the high bid and low asked prices for
the Common Stock or;
(iii) In the absence of an established market for
the Common Stock, the Fair Market Value thereof shall be determined in good
faith by the Administrator.
(l) "Incentive Stock Option" means an Option intended to
qualify as an incentive stock option within the meaning of Section 422 of the
Code.
(m) "Nonstatutory Stock Option" means an Option not
intended to qualify as an Incentive Stock Option.
(n) "Option" means a stock option granted pursuant to the
Plan.
(o) "Optioned Stock" means the Common Stock subject to an
Option or a Stock Purchase Right.
(p) "Optionee" means an Employee or Consultant who
receives an Option or Stock Purchase Right.
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<PAGE> 3
(q) "Parent" means a "parent corporation", whether now or
hereafter existing, as defined in Section 424(e) of the Code.
(r) "Plan" means this 1993 Stock Plan.
(s) "Restricted Stock" means shares of Common Stock
acquired pursuant to a grant of a Stock Purchase Right under Section 11 below.
(t) "Share" means a share of the Common Stock, as
adjusted in accordance with Section 13 below.
(u) "Stock Purchase Right" means the right to purchase
Common Stock pursuant to Section 11 below.
(v) "Subsidiary" means a "subsidiary corporation",
whether now or hereafter existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan. Subject to the provisions of
Section 13 of the Plan, the maximum aggregate number of shares which may be
optioned and sold under the Plan is 3,135,000 shares of Common Stock. The
shares may be authorized, but unissued, or reacquired Common Stock.
If an Option should expire or become unexercisable for any
reason without having been exercised in full, the unpurchased Shares which were
subject thereto shall, unless the Plan shall have been terminated, become
available for future grant under the Plan.
4. Administration of the Plan.
(a) Procedure.
(i) Administration With Respect to Directors and
Officers. With respect to grants of Options or Stock Purchase Rights to
Employees who are also officers or directors of the Company, the Plan shall be
administered by (A) the Board if the Board may administer the Plan in
compliance with Rule 16b-3 promulgated under the Exchange Act or any successor
thereto ("Rule 16b-3") with respect to a plan intended to qualify thereunder as
a discretionary plan, or (B) a committee designated by the Board to administer
the Plan, which committee shall be constituted in such a manner as to permit
the Plan to comply with Rule 16b-3 with respect to a plan intended to qualify
thereunder as a discretionary plan. Once appointed, such Committee shall
continue to serve in its designated capacity until otherwise directed by the
Board. From time to time the Board may increase the size of the Committee and
appoint additional members thereof, remove members (with or without cause) and
appoint new members in substitution therefor, fill vacancies, however caused,
and remove all members of the Committee and thereafter directly administer the
Plan, all to the extent permitted by Rule 16b-3 with respect to a plan intended
to qualify thereunder as a discretionary plan.
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<PAGE> 4
(ii) Multiple Administrative Bodies. If permitted
by Rule 16b-3, the Plan may be administered by different bodies with respect to
directors, non-director officers and Employees who are neither directors nor
officers.
(iii) Administration With Respect to Consultants
and Other Employees. With respect to grants of Options or Stock Purchase
Rights to Employees or Consultants who are neither directors nor officers of
the Company, the Plan shall be administered by (A) the Board or (B) a committee
designated by the Board, which committee shall be constituted in such a manner
as to satisfy the legal requirements relating to the administration of
incentive stock option plans, if any, of California corporate and securities
laws, of the Code, and of any applicable stock exchange (the "Applicable
Laws"). Once appointed, such Committee shall continue to serve in its
designated capacity until otherwise directed by the Board. From time to time
the Board may increase the size of the Committee and appoint additional members
thereof, remove members (with or without cause) and appoint new members in
substitution therefor, fill vacancies, however caused, and remove all members
of the Committee and thereafter directly administer the Plan, all to the extent
permitted by the Applicable Laws.
(b) Powers of the Administrator. Subject to the
provisions of the Plan and in the case of a Committee, the specific duties
delegated by the Board to such Committee, and subject to the approval of any
relevant authorities, including the approval, if required, of any stock
exchange upon which the Common Stock is listed, the Administrator shall have
the authority, in its discretion:
(i) to determine the Fair Market Value of the
Common Stock, in accordance with Section 20(k) of the Plan;
(ii) to select the Consultants and Employees to
whom Options and Stock Purchase Rights may from time to time be granted
hereunder;
(iii) to determine whether and to what extent
Options and Stock Purchase Rights or any combination thereof are granted
hereunder;
(iv) to determine the number of shares of Common
Stock to be covered by each such award granted hereunder;
(v) to approve forms of agreement for use under
the Plan;
(vi) to determine the terms and conditions, not
inconsistent with the terms of the Plan, of any award granted hereunder;
(vii) to determine whether and under what
circumstances an Option may be settled in cash under subsection 9(f) instead of
Common Stock;
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<PAGE> 5
(viii) to reduce the exercise price of any Option to
the then current Fair Market Value if the Fair Market Value of the Common Stock
covered by such Option shall have declined since the date the Option was
granted; and
(ix) to determine the terms and restrictions
applicable to Stock Purchase Rights and the Restricted Stock purchased by
exercising such Stock Purchase Rights.
(c) Effect of Administrator's Decision. All decisions,
determinations and interpretations of the Administrator shall be final and
binding on all Optionees and any other holders of any Options or Stock Purchase
Rights.
5. Eligibility.
(a) Nonstatutory Stock options and Stock Purchase Rights
may be granted to Employees and Consultants. Incentive Stock Options may be
granted only to Employees. An Employee or Consultant who has been granted an
Option or Stock Purchase Right may, if he is otherwise eligible, be granted
additional Options or Stock Purchase Rights.
(b) Each Option shall be designated in the written option
agreement as either an Incentive Stock Option or a Nonstatutory Stock Option.
However, notwithstanding such designations, to the extent that the aggregate
Fair Market Value of the Shares with respect to which Options designated as
Incentive Stock Options are exercisable for the first time by any Optionee
during any calendar year (under all plans of the Company or any Parent or
Subsidiary) exceeds $100,000, such excess options shall be treated as
Nonstatutory Stock Options.
(c) For purposes of Section 5(b), Incentive Stock Options
shall be taken into account in the order in which they were granted, and the
Fair Market Value of the Shares shall be determined as of the time the Option
with respect to such Shares is granted.
(d) The Plan shall not confer upon any Optionee any right
with respect to continuation of employment or consulting relationship with the
Company, nor shall it interfere in any way with his or her right or the
Company's right to terminate his or her employment or consulting relationship
at any time, with or without cause.
6. Term of Plan. The Plan shall become effective upon the earlier
to occur of its adoption by the Board of Directors or its approval by the
shareholders of the Company as described in Section 19 of the Plan. It shall
continue in effect for a term often ten (10) years unless sooner terminated
under Section 15 of the Plan.
7. Term of Option. The term of each Option shall be the term
stated in the Option Agreement; provided, however, that the term shall be no
more than ten (10) years from the date of grant thereof. However, in the case
of an option granted to an optionee who, at the time the Option is granted,
owns stock representing more than ten percent (10%) of the voting power of all
classes of stock of the Company or any Parent or Subsidiary, the term of the
Option shall be
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<PAGE> 6
five (5) years from the date of grant thereof or such shorter term as may be
provided in the Option Agreement.
8. Option Exercise Price and Consideration.
(a) The per share exercise price for the Shares to be
issued pursuant to exercise of an Option shall be such price as is determined
by the Board, but shall be subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the
time of the grant of such Incentive Stock option, owns stock representing more
than ten percent (10%) of the voting power of all classes of stock of the
Company or any Parent or Subsidiary, the per Share exercise price shall be no
less than 110% of the Fair Market Value per Share on the date of grant.
(B) granted to any Employee, the per
Share exercise price shall be no less than 100% of the Fair Market Value per
Share on the date of grant.
(ii) In the case of a Nonstatutory Stock Option
(A) granted to a person who, at the time
of the grant of such Option, owns stock representing more than ten percent
(10%) of the voting power of all classes of stock of the Company or any Parent
or Subsidiary, the per Share exercise price shall be no less than 110% of the
Fair Market Value per Share on the date of the grant.
(B) granted to any person, the per Share
exercise price shall be no less than 85% of the Fair Market Value per Share on
the date of grant.
(b) The consideration to be paid for the Shares to be
issued upon exercise of an option, including the method of payment, shall be
determined by the Administrator (and, in the case of an Incentive Stock Option,
shall be determined at the time of grant) and may consist entirely of (1) cash,
(2) check, (3) promissory note, (4) other Shares which (x) in the case of
Shares acquired upon exercise of an Option either have been owned by the
Optionee for more than six months on the date of surrender or were not
acquired, directly or indirectly, from the Company, and (y) have a Fair Market
Value on the date of surrender equal to the aggregate exercise price of the
Shares as to which said Option shall be exercised, (5) authorization from the
Company to retain from the total number of Shares as to which the option is
exercised that number of Shares having a Fair Market Value on the date of
exercise equal to the exercise price for the total number of Shares as to which
the Option is exercised, (6) delivery of a properly executed exercise notice
together with such other documentation as the Administrator and the broker, if
applicable, shall require to effect an exercise of the Option and delivery to
the Company of the sale or loan proceeds required to pay the exercise price,
(7)by delivering an irrevocable subscription agreement for the Shares which
irrevocably obligates the option holder
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<PAGE> 7
to take and pay for the Shares not more than twelve months after the date of
delivery of the subscription agreement, (8) any combination of the foregoing
methods of payment, (9) or such other consideration and method of payment for
the issuance of Shares to the extent permitted under Applicable Laws. In
making its determination as to the type of consideration to accept, the Board
shall consider if acceptance of such consideration may be reasonably expected
to benefit the Company.
9. Exercise of Option.
(a) Procedure for Exercise; Rights as a Shareholder. Any
Option granted hereunder shall be exercisable at such times and under such
conditions as determined by the Board, including performance criteria with
respect to the Company and/or the Optionee; provided, however, that Options
granted hereunder shall become exercisable at a rate of not less than 20% per
year over 5 years from the date the option is granted, and as shall be
permissible under the terms of the Plan.
An Option may not be exercised for a fraction of a
Share.
An Option shall be deemed to be exercised when
written notice of such exercise has been given to the Company in accordance
with the terms of the Option by the person entitled to exercise the Option and
full payment for the Shares with respect to which the Option is exercised has
been received by the Company. Full payment may, as authorized by the Board,
consist of any consideration and method of payment allowable under Section 8(b)
of the Plan. Until the issuance (as evidenced by the appropriate entry on the
books of the Company or of a duly authorized transfer agent of the Company) of
the stock certificate evidencing such Shares, no right to vote or receive
dividends or any other rights as a shareholder shall exist with respect to the
Optioned Stock, notwithstanding the exercise of the Option. The Company shall
issue (or cause to be issued) such stock certificate promptly upon exercise of
the Option. No adjustment will be made for a dividend or other right for which
the record date is prior to the date the stock certificate is issued, except as
provided in Section 13 of the Plan.
Exercise of an Option in any manner shall result in a
decrease in the number of Shares which thereafter may be available, both for
purposes of the Plan and for sale under the option, by the number of Shares as
to which the Option is exercised.
(b) Termination of Employment. In the event of
termination of an Optionee's consulting relationship or Continuous Status as an
Employee with the Company (as the case may be), such Optionee may, but only
within thirty (30) days (or such other period of time as is determined by the
Board, with such determination in the case of an Incentive Stock Option being
made at the time of grant of the Option and not exceeding three (3) months
after the date of such termination but in no event later than the expiration
date of the term of such Option as set forth in the Option Agreement), exercise
his Option to the extent that Optionee was entitled to exercise it at the date
of such termination. To the extent that Optionee was not entitled to exercise
the Option at the date of such termination, or if optionee does not exercise
such Option to the extent so entitled within the time specified herein, the
Option shall terminate.
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<PAGE> 8
(c) Disability of Optionee. Notwithstanding the
provisions of Section 9(b) above, in the event of termination of an Optionee's
consulting relationship or Continuous Status as an Employee as a result of his
disability, Optionee may, but only within six (6) months from the date of such
termination (but in no event later than the expiration date of the term of such
Option as set forth in the Option Agreement), exercise the Option to the extent
otherwise entitled to exercise it at the date of such termination. To the
extent that Optionee was not entitled to exercise the option at the date of
termination, or if Optionee does not exercise such Option to the extent so
entitled within the time specified herein, the Option shall terminate.
(d) Death of Optionee. In the event of the death of an
Optionee, the Option may be exercised, at any time within six (6) months
following the date of death (but in no event later than the expiration date of
the term of such Option as set forth in the Option Agreement), by the
Optionee's estate or by a person who acquired the right to exercise the Option
by bequest or inheritance, but only to the extent the Optionee was entitled to
exercise the Option at the date of death. To the extent that Optionee was not
entitled to exercise the option at the date of termination, or if optionee does
not exercise such Option to the extent so entitled within the time specified
herein, the Option shall terminate.
(e) Rule 16b-3. Options granted to persons subject to
Section 16(b) of the Exchange Act must comply with Rule 16b-3 and shall contain
such additional conditions or restrictions as may be required thereunder to
qualify for the maximum exemption from Section 16 of the Exchange Act with
respect to Plan transactions.
(f) Buyout Provisions. The Administrator may at any time
offer to buy out for a payment in cash or Shares, an Option previously granted,
based on such terms and conditions as the Administrator shall establish and
communicate to the Optionee at the time that such offer is made.
10. Non-Transferability of Options. The Option may not be sold,
pledged, assigned, hypothecated, transferred, or disposed of in any manner
other than by will or by the laws of descent or distribution and may be
exercised, during the lifetime of the Optionee, only by the Optionee.
11. Stock Purchase Rights.
(a) Rights to Purchase. Stock Purchase Rights may be
issued either alone, in addition to, or in tandem with other awards granted
under the Plan and/or cash awards made outside of the Plan. After the
Administrator determines that it will offer Stock Purchase Rights under the
Plan, it shall advise the offeree in writing of the terms, conditions and
restrictions related to the offer, including the number of Shares that such
person shall be entitled to purchase, the price to be paid (which price shall
not be less than 85% of the Fair Market Value of the Shares as of the date of
the offer or 100% of the Fair Market Value of the shares as of the date of the
offer in the case of a shareholder owning ten percent (10%) or more of the
Company's outstanding stock), and the time within which such person must accept
such offer, which shall in
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<PAGE> 9
no event exceed thirty (30) days from the date upon which the Administrator
made the determination to grant the Stock Purchase Right. The offer shall be
accepted by execution of a Restricted Stock purchase agreement in the form
determined by the Administrator. Shares purchased pursuant to the grant of a
Stock Purchase Right shall be referred to herein as "Restricted Stock."
(b) Repurchase Option. Unless the Administrator
determines otherwise, the Restricted Stock purchase agreement shall grant the
Company a repurchase option exercisable upon the voluntary or involuntary
termination of the purchaser's employment with the Company for any reason
(including death or Disability). In no event shall such repurchase right lapses
at a rate of less than 20% per year over 5 years from the date the stock was
purchased. The purchase price for Shares repurchased pursuant to the
Restricted Stock purchase agreement shall be the original price paid by the
purchaser and may be paid by cancellation of any indebtedness of the purchaser
to the Company. The repurchase option shall lapse at such rate as the
Committee may determine.
(c) Other Provisions. The Restricted Stock purchase
agreement shall contain such other terms, provisions and conditions not
inconsistent with the Plan as may be determined by the Administrator in its
sole discretion. In addition, the provisions of Restricted Stock purchase
agreements need not be the same with respect to each purchaser.
(d) Rights as a Shareholder. Once the Stock Purchase
Right is exercised, the purchaser shall have the rights equivalent to those of
a shareholder, and shall be a shareholder when his or her purchase is entered
upon the records of the duly authorized transfer agent of the Company. No
adjustment will be made for a dividend or other right for which the record date
is prior to the date the Stock Purchase Right is exercised, except as provided
in Section 13 of the Plan.
12. Stock Withholding to Satisfy Withholding Tax Obligations. At
the discretion of the Administrator, Optionees may satisfy withholding
obligations as provided in this paragraph. When an Optionee incurs tax
liability in connection with an Option or Stock Purchase Right, which tax
liability is subject to tax withholding under applicable tax laws, and the
Optionee is obligated to pay the Company an amount required to be withheld
under applicable tax laws, the Optionee may satisfy the withholding tax
obligation by electing to have the Company .withhold from the Shares to be
issued upon exercise of the Option, or the Shares to be issued in connection
with the Stock Purchase Right, if any, that number of Shares having a Fair
Market Value equal to the amount required to be withheld. The Fair Market
Value of the Shares to be withheld shall be determined on the date that the
amount of tax to be withheld is to be determined (the "Tax Date").
All elections by an Optionee to have Shares withheld for this purpose
shall be made in writing in a form acceptable to the Administrator and shall be
subject to the following restrictions:
(a) the election must be made on or prior to the
applicable Tax Date;
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<PAGE> 10
(b) once made, the election shall be irrevocable as to
the particular Shares of the Option or Stock Purchase Right as to which the
election is made;
(c) all elections shall be subject to the consent or
disapproval of the Administrator;
(d) if the Optionee is subject to Rule 16b-3, the
election must comply with the applicable provisions of Rule 16b-3 and shall be
subject to such additional conditions or restrictions as may be required
thereunder to qualify for the maximum exemption from Section 16 of the Exchange
Act with respect to Plan transactions.
In the event the election to have Shares withheld is made by an
Optionee and the Tax Date is deferred under Section 83 of the Code because no
election is filed under Section 83(b) of the Code, the Optionee shall receive
the full number of Shares with respect to which the Option or Stock Purchase
Right is exercised but such Optionee shall be unconditionally obligated to
tender back to the Company the proper number of Shares on the Tax Date.
13. Adjustments Upon Changes in Capitalization or Merger.
(a) Changes in Capitalization. Subject to any required
action by the shareholders of the Company, the number of shares of Common Stock
covered by each outstanding Option or Stock Purchase Right, and the number of
shares of Common Stock which have been authorized for issuance under the Plan
but as to which no Options or Stock Purchase Rights have yet been granted or
which have been returned to the Plan upon cancellation or expiration of an
option or Stock Purchase Right, as well as the price per share of Common Stock
covered by each such outstanding option or Stock Purchase Right, shall be
proportionately adjusted for any increase or decrease in the number of issued
shares of Common Stock resulting from a stock split, reverse stock split, stock
dividend, combination or reclassification of the Common Stock, or any other
increase or decrease in the number of issued shares of Common Stock effected
without receipt of consideration by the Company; provided, however, that
conversion of any convertible securities of the Company shall not be deemed to
have been "effected without receipt of consideration." Such adjustment shall be
made by the Board, whose determination in that respect shall be final, binding
and conclusive. Except as expressly provided herein, no issuance by the
Company of shares of stock of any class, or securities convertible into shares
of stock of any class, shall affect, and no adjustment by reason thereof shall
be made with respect to, the number or price of shares of Common Stock subject
to an Option or Stock Purchase Right.
(b) Dissolution or Liquidation. In the event of the
proposed dissolution or liquidation of the Company, the Board shall notify the
Optionee at least fifteen (15) days prior to such proposed action. To the
extent it has not been previously exercised, the option or Stock Purchase Right
will terminate immediately prior to the consummation of such proposed action.
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<PAGE> 11
(c) Merger. In the event of a merger of the Company with
or into another corporation, the Option or Stock Purchase Right shall be
assumed or an equivalent option or right shall be substituted by such successor
corporation or a parent or subsidiary of such successor corporation.
14. Time of Granting Options and Stock Purchase Rights. The date
of grant of an Option or Stock Purchase Right shall, for all purposes, be the
date on which the Administrator makes the determination granting such Option or
Stock Purchase Right, or such other date as is determined by the Board. Notice
of the determination shall be given to each Employee or Consultant to whom an
Option or Stock Purchase Right is so granted within a reasonable time after the
date of such grant.
15. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may at any time
amend, alter, suspend or discontinue the Plan, but no amendment, alteration,
suspension or discontinuation shall be made which would impair the rights of
any Optionee under any grant theretofore made, without his or her consent. In
addition, to the extent necessary and desirable to comply with Rule 16b-3 under
the Exchange Act or with Section 422 of the Code (or any other applicable law
or regulation, including the requirements of the NASD or an established stock
exchange), the Company shall obtain shareholder approval of any Plan amendment
in such a manner and to such a degree as required.
(b) Effect of Amendment or Termination. Any such
amendment or termination of the Plan shall not affect Options already granted
and such options shall remain in full force and effect as if this Plan had not
been amended or terminated, unless mutually agreed otherwise between the
optionee and the Board, which agreement must be in writing and signed by the
Optionee and the Company.
16. Conditions Upon Issuance of Shares. Shares shall not be
issued pursuant to the exercise of an Option unless the exercise of such Option
and the issuance and delivery of such Shares pursuant thereto shall comply with
all relevant provisions of law, including, without limitation, the Securities
Act of 1933, as amended, the Exchange Act, the rules and regulations
promulgated thereunder, and the requirements of any stock exchange upon which
the Shares may then be listed, and shall be further subject to the approval of
counsel for the Company with respect to such compliance.
As a condition to the exercise of an Option, the Company may
require the person exercising such Option to represent and warrant at the time
of any such exercise that the Shares are being purchased only for investment
and without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned relevant provisions of law.
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<PAGE> 12
17. Reservation of Shares. The Company, during the term of this
Plan, will at all times reserve and keep available such number of Shares as
shall be sufficient to satisfy the requirements of the Plan.
The inability of the Company to obtain authority from any
regulatory body having jurisdiction, which authority is deemed by the Company's
counsel to be necessary to the lawful issuance and sale of any Shares
hereunder, shall relieve the Company of any liability in respect of the failure
to issue or sell such Shares as to which such requisite authority shall not
have been obtained.
18. Agreements. Options and Stock Purchase Rights shall be
evidenced by written agreements in such form as the Board shall approve from
time to time.
19. Shareholder Approval. Continuance of the Plan shall be
subject to approval by the shareholders of the Company within twelve (12)
months before or after the date the Plan is adopted. Such shareholder approval
shall be obtained in the degree and manner required under applicable state and
federal law and the rules of any stock exchange upon which the Common Stock is
listed.
20. Information to Optionees and Purchasers. The Company,shall
provide to each optionee and to each individual who acquired Shares pursuant to
the Plan, during the period such optionee or purchaser has one or more options
or Stock Purchase Rights outstanding, and, in the case of an individual who
acquired Shares pursuant to the Plan, during the period such individual owns
such Shares, financial statements at least annually. The Company shall not be
required to provide such information if the issuance of Options or Stock
Purchase Rights under the Plan is limited to key employees whose duties in
connection with the Company assure their access to equivalent information.
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<PAGE> 1
EXHIBIT 10.7
RIBOGENE, INC.
1993 STOCK PLAN
STOCK OPTION AGREEMENT
1. Grant of Option. RiboGene, Inc., a California corporation (the
"Company"), hereby grants to the Optionee named in the Notice of Grant (the
"Optionee"), an option (the "Option") to purchase a total number of shares of
Common Stock (the "Shares") set forth in the Notice of Grant, at the exercise
price per share set forth in the Notice of Grant (the "Exercise Price") subject
to the terms, definitions and provisions of the RiboGene, Inc. 1993 Stock Plan
(the "Plan") adopted by the Company, which is incorporated herein by reference.
Unless otherwise defined herein, the terms defined in the Plan shall have the
same defined meanings in this Option.
If designated an Incentive Stock Option, this Option is
intended to qualify as an Incentive Stock Option as defined in Section 422 of
the Code.
2. Exercise of Option. This Option shall be exercisable during
its term in accordance with the Exercise Schedule set out in the Notice of
Grant and with the provisions of Section 9 of the Plan as follows:
(i) Right to Exercise.
(a) This Option may not be exercised for a fraction
of a share.
(b) In the event of Optionee's death, disability or
other termination of employment, the
exercisability of the Option is governed by
Sections 6, 7 and 8 below, subject to the
limitation contained in subsection 2(i)(c).
(c) In no event may this Option be exercised after
the date of expiration of the term of this
Option as set forth in the Notice of Grant.
(ii) Method of Exercise. This Option shall be exercisable
by written notice (in the form attached as Exhibit A) which shall state the
election to exercise the Option, the number of Shares in respect of which the
Option is being exercised, and such other representations and agreements as to
the holder's investment intent with respect to such shares of Common Stock as
may be required by the Company pursuant to the provisions of the Plan. Such
written notice shall be signed by the Optionee and shall be delivered in person
or by certified mail to the Secretary of the Company. The written notice shall
be accompanied by payment of the Exercise Price. This Option shall be deemed to
be exercised upon receipt by the Company of such written notice accompanied by
the Exercise Price.
<PAGE> 2
No Shares will be issued pursuant to the exercise of an Option unless
such issuance and such exercise shall comply with all relevant provisions of
law and the requirements of any stock exchange upon which the Shares may then
be listed. Assuming such compliance, for income tax purposes the Shares shall
be considered transferred to the Optionee on the date on which the Option is
exercised with respect to such Shares.
3. Optionee's Representations. In the event the Shares purchasable
pursuant to the exercise of this Option have not been registered under the
Securities Act of 1933, as amended, at the time this Option is exercised,
Optionee shall, if required by the Company, concurrently with the exercise of
all or any portion of this Option, deliver to the Company his Investment
Representation Statement in the form attached hereto as Exhibit B, and shall
read the applicable rules of the Commissioner of Corporations attached to such
Investment Representation Statement.
4. Method of Payment. Payment of the Exercise Price shall be by any
of the following, or a combination thereof, at the election of the Optionee:
i. cash; or
ii. check; or
iii. promissory note, provided that such note shall (A) be in
a principal amount of not less than $7,500, (B) bear interest at a rate
determined by the Administrator prior to execution of the note, and (C) be
secured by the shares of Common Stock being purchased therewith, which shares
shall be held in escrow by an agent designated by the Company until the
principal and interest of such note is paid in full; or
iv. surrender of other shares of Common Stock of the Company
which (A) in the case of Shares acquired pursuant to the exercise of a Company
option, have been owned by the Optionee for more than six (6) months on the
date of surrender, and (B) have a fair market value on the date of surrender
equal to the Exercise Price of the Shares as to which the Option is being
exercised; or
v. delivery of a properly executed exercise notice together
with such other documentation as the Administrator and the broker, if
applicable, shall require to effect an exercise of the Option and delivery to
the Company of the sale or loan proceeds required to pay the exercise price.
5. Restrictions on Exercise. This Option may not be exercised until
such time as the Plan has been approved by the shareholders of the Company, or
if the issuance of such Shares upon such exercise or the method of payment of
consideration for such shares would constitute a violation of any applicable
federal or state securities or other law or regulation, including any rule
under Part 207 of Title 12 of the Code of Federal Regulations ("Regulation G")
as promulgated by the Federal Reserve Board. As a condition to the
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<PAGE> 3
exercise of this Option, the Company may require Optionee to make any
representation and warranty to the Company as may be required by any applicable
law or regulation.
6. Termination of Relationship. In the event of termination of
Optionee's consulting relationship or Continuous Status as an Employee,
Optionee may, to the extent otherwise so entitled at the date of such
termination (the "Termination Date"), exercise this Option during the
Termination Period set out in the Notice of Grant. To the extent that Optionee
was not entitled to exercise this Option at the date of such termination, or if
Optionee does not exercise this Option within the time specified herein, the
Option shall terminate.
7. Disability of Optionee. Notwithstanding the provisions of Section
6 above, in the event of termination of Optionee's consulting relationship or
Continuous Status as an Employee as a result of disability, Optionee may, but
only within six (6) months from the date of termination of employment (but in
no event later than the date of expiration of the term of this Option as set
forth in Section 10 below), exercise the Option to the extent otherwise so
entitled at the date of such termination. To the extent that Optionee was not
entitled to exercise the Option at the date of termination, or if Optionee does
not exercise such Option (to the extent otherwise so entitled) within the time
specified herein, the Option shall terminate.
8. Death of Optionee. In the event of the death of Optionee, the
Option may be exercised at any time within six (6) months following the date of
death (but in no event later than the date of expiration of the term of this
Option as set forth in Section 10 below), by Optionee's estate or by a person
who acquired the right to exercise the Option by bequest or inheritance, but
only to the extent the Optionee could exercise the Option at the date of death.
9. Non-Transferability of Option. This Option may not be transferred
in any manner otherwise than by will or by the laws of descent or distribution
and may be exercised during the lifetime of Optionee only by him. The terms of
this Option shall be binding upon the executors, administrators, heirs,
successors and assigns of the Optionee.
10. Term of Option. This Option may be exercised only within the term
set out in the Notice of Grant, and may be exercised during such term only in
accordance with the Plan and the terms of this Option. The limitations set out
in Section 7 of the Plan regarding Options designated as Incentive Stock
Options and Options granted to more than ten percent (10%) shareholders shall
apply to this Option.
11. Taxation Upon Exercise of Option. Optionee understands that, upon
exercising a nonstatutory Option, he or she will recognize income for tax
purposes in an amount equal to the excess of the then fair market value of the
Shares over the exercise price. However, the timing of this income recognition
may be deferred for up to six months if Optionee is subject to Section 16 of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"). If the
Optionee is an employee, the Company will be required to withhold from
Optionee's compensation, or collect from Optionee and pay to the applicable
taxing authorities an amount
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<PAGE> 4
equal to a percentage of this compensation income. Additionally, the Optionee
may at some point be required to satisfy tax withholding obligations with
respect to the disqualifying disposition of an Incentive Stock Option. The
Optionee shall satisfy his or her tax withholding obligation arising upon the
exercise of this Option by one or some combination of the following methods: (i)
by cash payment, or (ii) out of Optionee's current compensation, or (iii) if
permitted by the Administrator, in its discretion, by surrendering to the
Company Shares which (a) in the case of Shares previously acquired from the
Company, have been owned by the Optionee for more than six months on the date of
surrender, and (b) have a fair market value on the date of surrender equal to or
greater than Optionee's marginal tax rate times the ordinary income recognized,
(iv) by electing to have the Company withhold from the Shares to be issued upon
exercise of the Option that number of Shares having a fair market value equal to
the amount required to be withheld. For this purpose, the fair market value of
the Shares to be withheld shall be determined on the date that the amount of tax
to be withheld is to be determined (the "Tax Date").
If the Optionee is subject to Section 16 of the Exchange Act (an
"Insider"), any surrender of previously owned Shares to satisfy tax withholding
obligations arising upon exercise of this Option must comply with the applicable
provisions of Rule 16b-3 promulgated under the Exchange Act ("Rule 16b-3") and
shall be subject to such additional conditions or restrictions as may be
required thereunder to qualify for the maximum exemption from Section 16 of the
Exchange Act with respect to Plan transactions.
All elections by an Optionee to have Shares withheld to satisfy tax
withholding obligations shall be made in writing in a form acceptable to the
Administrator and shall be subject to the following restrictions:
(1) the election must be made on or prior to the applicable
Tax Date:
(2) once made, the election shall be irrevocable as to the
particular Shares of the Option as to which the election
is made;
(3) all elections shall be subject to the consent or
disapproval of the Administrator,
(4) if the Optionee is an Insider, the election must comply
with the applicable provisions of Rule 16b-3 and shall
be subject to such additional conditions or restrictions
as may be required thereunder to qualify for the maximum
exemption from Section 16 of the Exchange Act with
respect to Plan transactions.
12. Tax Consequences. Set forth below is a brief summary as of the
date of this Option of some of the federal and California tax consequences of
exercise of this Option and disposition of the Shares. THIS SUMMARY IS
NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE.
OPTIONEE SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THIS OPTION OR DISPOSING
OF THE SHARES.
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<PAGE> 5
(i) Exercise of ISO. If this Option qualifies as an ISO, there will
be no regular federal income tax liability or California income tax liability
upon the exercise of the Option, although the excess, if any, of the fair market
value of the Shares on the date of exercise over the Exercise Price will be
treated as an adjustment to the alternative minimum tax for federal tax purposes
and may subject the Optionee to the alternative minimum tax in the year of
exercise.
(ii) Exercise of Nonstatutory Stock Option. If this Option does not
qualify as an ISO, there may be a regular federal income tax liability and a
California income tax liability upon the exercise of the Option. The Optionee
will be treated as having received compensation income (taxable at ordinary
income tax rates) equal to the excess, if any, of the fair market value of the
Shares on the date of exercise over the Exercise Price. If Optionee is an
employee, the Company will be required to withhold from Optionee's compensation
or collect from Optionee and pay to the applicable taxing authorities an amount
equal to a percentage of this compensation income at the time of exercise.
(iii) Disposition of Shares. In the case of an NSO, if Shares are
held for at least one year, any gain realized on disposition of the Shares will
be treated as long-term capital gain for federal and California income tax
purposes. In the case of an ISO, if Shares transferred pursuant to the Option
are held for at least one year after exercise and are disposed of at least two
years after the Date of Grant, any gain realized on disposition of the Shares
will also be treated as long-term capital gain for federal and California income
tax purposes. If Shares purchased under an ISO are disposed of within such
one-year period or within two years after the Date of Grant, any gain realized
on such disposition will be treated as compensation income (taxable at ordinary
income rates) to the extent of the difference between the Exercise Price and
the lesser of (1) the fair market value of the Shares on the date of exercise,
or (2) the sale price of the Shares.
(iv) Notice of Disqualifying Disposition of ISO Shares. If the
Option granted to Optionee herein is an ISO, and if Optionee sells or otherwise
disposes of any of the Shares acquired pursuant to the ISO on or before the
later of (1) the date two years after the Date of grant, or (2) the date one
year after the date of exercise, the Optionee shall immediately notify the
Company in writing of such disposition. Optionee agrees that Optionee may be
subject to income tax withholding by the Company on the compensation income
recognized by the Optionee from the early disposition by payment in cash or out
of the current earnings paid to the Optionee.
RiboGene, Inc.
a California corporation
By:
---------------------
Title: President & CEO
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<PAGE> 6
OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO
THE OPTION HEREOF IS EARNED ONLY BY CONTINUING CONSULTANCY OR EMPLOYMENT AT THE
WILL OF THE COMPANY (NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS
OPTION OR ACQUIRING SHARES HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES
THAT NOTHING IN THIS AGREEMENT, NOR IN THE COMPANY'S STOCK OPTION PLAN WHICH IS
INCORPORATED HEREIN BY REFERENCE, SHALL CONFER UPON OPTIONEE ANY RIGHT WITH
RESPECT TO CONTINUATION OF EMPLOYMENT OR CONSULTANCY BY THE COMPANY, NOR SHALL
IT INTERFERE IN ANY WAY WITH HIS RIGHT OR THE COMPANY'S RIGHT TO TERMINATE HIS
EMPLOYMENT OR CONSULTANCY AT ANY TIME, WITH OR WITHOUT CAUSE.
Optionee acknowledges receipt of a copy of the Plan and represents that
he is familiar with the terms and provisions thereof, and hereby accepts this
Option subject to all of the terms and provisions thereof. Optionee has reviewed
the Plan and this Option in their entirety, has had an opportunity to obtain the
advice of counsel prior to executing this Option and fully understands all
provisions of the Option. Optionee hereby agrees to accept as binding,
conclusive and final all decisions or interpretations of the Administrator upon
any questions arising under the Plan or this Option.
Dated:
-------------------- ----------------------------------
(Name)
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<PAGE> 7
EXHIBIT A
1993 STOCK PLAN
EXERCISE NOTICE
RiboGene, Inc.
21375 Cabot Boulevard, Building B
Hayward, California 94545
Attention: Chief Financial Officer
1. Exercise of Option. Effective as of today, _____________, 19__,
the undersigned ("Optionee") hereby elects to exercise Optionee's option to
purchase _______ shares of the Common Stock (the "Shares") of RiboGene, Inc.
(the "Company") under and pursuant to the Company's 1993 Stock Plan, as amended
(the "Plan") and the [ ] Incentive [ ] Nonstatutory Stock Option Agreement
dated __________ (the "Option Agreement").
2. Representations of Optionee. Optionee acknowledges that Optionee
has received, read and understood the Plan and the Option Agreement and agrees
to abide by and be bound by their terms and conditions. Optionee represents
that Optionee is purchasing the Shares for Optionee's own account for
investment and not with a view to, or for sale in connection with, a
distribution of any of such Shares.
3. Compliance with Securities Laws. Optionee understands and
acknowledges that the Shares have not been registered under the Securities Act
of 1933, as amended (the "1933 Act"), and, notwithstanding any other provision
of the Option Agreement to the contrary, the exercise of any rights to purchase
any Shares is expressly conditioned upon compliance with the 1933 Act, all
applicable state securities laws and all applicable requirements of any stock
exchange or over the counter market on which the Company's Common Stock may be
listed or traded at the time of exercise and transfer. Optionee agrees to
cooperate with the Company to ensure compliance with such laws.
4. Federal Restrictions on Transfer. Optionee understands that the
Shares have not been registered under the 1933 Act and therefore cannot be
resold and must be held indefinitely unless they are registered under the 1933
Act or unless an exemption from such registration is available and that the
certificate(s) representing the Shares may bear a legend to that effect.
Optionee understands that the Company is under no obligation to register the
Shares and that an exemption may not be available or may not permit Optionee to
transfer Shares in the amounts or at the times proposed by Optionee.
Specifically, Optionee has been advised that Rule 144 promulgated under the
1933 Act, which permits certain resales of unregistered securities, is not
presently available with respect to the Shares and, in any event requires that
the Shares be paid for and then be held for at least two years (and in some
cases three years) before they may be resold under Rule 144.
<PAGE> 8
5. Rights as Shareholder. Until the stock certificate evidencing such
Shares is issued (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company), no right to
vote or receive dividends or any other rights as a shareholder shall exist with
respect to the optioned Stock, notwithstanding the exercise of the Option. The
Company shall issue (or cause to be issued) such stock certificate promptly
after the Option is exercised. No adjustment will be made for a dividend or
other right for which the record date is prior to the date the stock
certificate is issued, except as provided in Section 12 of the Plan.
Optionee shall enjoy rights as a shareholder until such time as
Optionee disposes of the Shares or the Company and/or its assignee(s) exercises
the Right of First Refusal hereunder. Upon such exercise, Optionee shall have
no further rights as a holder of the Shares so purchased except the right to
receive payment for the Shares so purchased in accordance with the provisions
of this Agreement, and Optionee shall forthwith cause the certificate(s)
evidencing the Shares so purchased to be surrendered to the Company for
transfer or cancellation.
6. Company's Right of First Refusal. Before any Shares held by
Optionee or any transferee (either being sometimes referred to herein as the
"Holder") may be sold or otherwise transferred (including transfer by gift or
operation of law), the Company or its assignee(s) shall have a right of first
refusal to purchase the Shares on the terms and conditions set forth in this
Section (the "Right of First Refusal").
(a) Notice of Proposed Transfer. The Holder of the Shares shall
deliver to the Company a written notice (the "Notice") stating: (i) the
Holder's bona fide intention to sell or otherwise transfer such Shares; (ii)
the name of each proposed purchaser or other transferee ("Proposed
Transferee"); (iii) the number of Shares to be transferred to each Proposed
Transferee; and (iv) the bona fide cash price or other consideration for which
the Holder proposes to transfer the Shares (the "Offered Price"), and the
Holder shall offer the Shares at the Offered Price to the Company or its
assignee(s).
(b) Exercise of Right of First Refusal. At any time within
thirty (30) days after receipt of the Notice, the Company and/or its
assignee(s) may, by giving written notice to the Holder, elect to purchase all,
but not less than all, of the Shares proposed to be transferred to any one or
more of the Proposed Transferees, at the purchase price determined in
accordance with subsection (c) below.
(c) Purchase Price. The purchase price ("Purchase Price") for
the Shares purchased by the Company or its assignee(s) under this Section shall
be the Offered Price. If the Offered Price includes consideration other than
cash, the cash equivalent value of the non-cash consideration shall be
determined by the Board of Directors of the Company in good faith.
(d) Payment. Payment of the Purchase Price shall be made, at the
option of the Company or its assignee(s), in cash (by check), by cancellation
of all or a portion of any
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<PAGE> 9
outstanding indebtedness of the Holder to the Company (or, in the case of
repurchase by an assignee, to the assignee), or by any combination thereof
within 30 days after receipt of the Notice or in the manner and at the times set
forth in the Notice.
(e) Holder's Right to Transfer. If all of the Shares proposed in
the Notice to be transferred to a given Proposed Transferee are not purchased by
the Company and/or its assignee(s) as provided in this Section, then the Holder
may sell or otherwise transfer such Shares to that Proposed Transferee at the
Offered Price or at a higher price, provided that such sale or other transfer is
consummated within 120 days after the date of the Notice and provided further
that any such sale or other transfer is effected in accordance with any
applicable securities laws and the Proposed Transferee agrees in writing that
the provisions of this Section shall continue to apply to the Shares in the
hands of such Proposed Transferee. If the Shares described in the Notice are not
transferred to the Proposed Transferee within such period, a new Notice shall be
given to the Company, and the Company and/or its assignees shall again be
offered the Right of First Refusal before any Shares held by the Holder may be
sold or otherwise transferred.
(f) Exception for Certain Family Transfers. Anything to the
contrary contained in this Section notwithstanding, the transfer of any or all
of the Shares during the Optionee's lifetime or on the Optionee's death by will
or intestacy to the Optionee's immediate family or a trust for the benefit of
the Optionee's immediate family shall be exempt from the provisions of this
Section. "Immediate Family" as used herein shall mean spouse, lineal descendant
or antecedent, father, mother, brother or sister. In such case, the transferee
or other recipient shall receive and hold the Shares so transferred subject to
the provisions of this Section, and there shall be no further transfer of such
Shares except in accordance with the terms of this Section.
(g) Termination of Right of First Refusal. The Right of First
Refusal shall terminate as to any Shares 90 days after the first sale of Common
Stock of the Company to the general public pursuant to a registration statement
filed with and declared effective by the Securities and Exchange Commission
under the 1933 Act.
7. Tax Consultation. Optionee understands that Optionee may suffer
adverse tax consequences as a result of Optionee's purchase or disposition of
the Shares. Optionee represents that Optionee has consulted with any tax
consultants Optionee deems advisable in connection with the purchase or
disposition of the Shares and that Optionee is not relying on the Company for
any tax advice.
8. Restrictive Legends and Stop-Transfer Orders.
(a) Legends. Optionee understands and agrees that the Company
shall cause the legends set forth below or legends substantially equivalent
thereto, to be placed upon any certificate(s) evidencing ownership of the Shares
together with any other legends that may be required by state or federal
securities laws:
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<PAGE> 10
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED,
SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS
AND UNTIL REGISTERED UNDER THE ACT OR, IN THE OPINION OF COUNSEL
IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER OF THESE
SECURITIES, SUCH OFFER, SALE OR TRANSFER, PLEDGE OR
HYPOTHECATION IS IN COMPLIANCE THEREWITH.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
CERTAIN RESTRICTIONS ON TRANSFER AND RIGHT OF FIRST REFUSAL
OPTIONS HELD BY THE ISSUER OR ITS ASSIGNEE(S) AS SET FORTH IN
THE EXERCISE NOTICE BETWEEN THE ISSUER AND THE ORIGINAL HOLDER
OF THESE SHARES, A COPY OF WHICH MAY BE OBTAINED AT THE
PRINCIPAL OFFICE OF THE ISSUER. SUCH TRANSFER RESTRICTIONS AND
RIGHT OF FIRST REFUSAL ARE BINDING ON TRANSFEREES OF THESE
SHARES.
IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS
SECURITY, OR ANY INTEREST THEREIN, OR TO RECEIVE ANY
CONSIDERATION THEREFOR, WITHOUT THE PRIOR WRITTEN CONSENT OF THE
COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA, EXCEPT
AS PERMITTED IN THE COMMISSIONER'S RULES.
Optionee understands that transfer of the Shares may be
restricted by Section 260.141.11 of the Rules of the California Corporations
Commissioner, a copy of which is attached to Exhibit B, the Investment
Representation Statement.
(b) Stop-Transfer Notices. Optionee agrees that, in order
to ensure compliance with the restrictions referred to herein, the Company may
issue appropriate "stop transfer" instructions to its transfer agent, if any,
and that, if the Company transfers its own securities, it may make appropriate
notations to the same effect in its own records.
(c) Refusal to Transfer. The Company shall not be required
(i) to transfer on its books any Shares that have been sold or otherwise
transferred in violation of any of the provisions of this Agreement or (ii) to
treat as owner of such Shares or to accord the right to vote or pay dividends
to any purchaser or other transferee to whom such Shares shall have been so
transferred.
9. Market Standoff Agreement. In connection with the initial
public offering of the Company's securities and upon request of the Company or
the underwriters managing any
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<PAGE> 11
underwritten offering of the Company's securities, Optionee hereby agrees not
to sell, make any short sale of, loan, grant any option for the purchase of, or
otherwise dispose of any Shares (other than those included in the registration)
without the prior written consent of the Company or such underwriters, as the
case may be, for such period of time (not to exceed one year) from the
effective date of such registration as may be requested by the Company or such
managing underwriters; provided, however, that the Optionee need not so agree
unless a majority of the Company's officers and directors and a majority of the
holders of at least 5% of the Company's outstanding securities also agree to be
similarly bound.
10. Successors and Assigns. The Company may assign any of its
rights under this Agreement to single or multiple assignees, and this Agreement
shall inure to the benefit of the successors and assigns of the Company.
Subject to the restrictions on transfer herein set forth, this Agreement shall
be binding upon Optionee and his or her heirs, executors, administrators,
successors and assigns.
11. Interpretation. Any dispute regarding the interpretation of
this Agreement shall be submitted by Optionee or by the Company forthwith to
the Company's Board of Directors or the committee thereof that administers the
Plan, which shall review such dispute at its next regular meeting. The
resolution of such a dispute by the Board or committee shall be final and
binding on the Company and on Optionee.
12. Governing Law; Severability. This Agreement shall be governed
by and construed in accordance with the laws of the State of California
excluding that body of law pertaining to conflicts of law. Should any provision
of this Agreement be determined by a court of law to be illegal or
unenforceable, the other provisions shall nevertheless remain effective and
shall remain enforceable.
13. Notices. Any notice required or permitted hereunder shall be
given in writing and shall be deemed effectively given upon personal delivery
or upon deposit in the United States mail by certified mail, with postage and
fees prepaid, addressed to the other party at its address as shown below
beneath its signature, or to such other address as such party may designate in
writing from time to time to the other party.
14. Further Instruments. The parties agree to execute such further
instruments and to take such further action as may be reasonably necessary to
carry out the purposes and intent of this Agreement.
15. Delivery of Payment. Optionee herewith delivers to the Company
the full Exercise Price for the Shares.
16. Entire Agreement. The Plan and Notice of Grant/Option
Agreement are incorporated herein by reference. This Agreement, the Plan and
the Notice of Grant/Option Agreement constitute the entire agreement of the
parties and supersede in their entirety all prior undertakings and agreements of
the Company and Optionee with respect to the subject
-5-
<PAGE> 12
matter hereof, and is governed by California law except for that body of law
pertaining to conflict of laws.
Submitted by: Accepted by:
OPTIONEE: RIBOGENE, INC.
By:
- --------------------------------- --------------------------------
(Signature) Title:
-----------------------------
Address: Address:
21375 Cabot Boulevard, Building B
- --------------------------------- Hayward, CA 94545
- ---------------------------------
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<PAGE> 13
EXHIBIT B
INVESTMENT REPRESENTATION STATEMENT
PURCHASER: (Name)
SELLER: RiboGene, Inc.
COMPANY: RiboGene, Inc.
SECURITY: Common Stock
AMOUNT:
DATE:
In connection with the purchase of the above-listed Securities, I, the
Purchaser, represent to the Seller and to the Company the following:
(a) I am aware of the Company's business affairs and financial
condition, and have acquired sufficient information about the Company to reach
an informed and knowledgeable decision to acquire the Securities. I am
purchasing these Securities for my own account for investment purposes only and
not with a view to, or for the resale in connection with, any "distribution"
thereof for purposes of the Securities Act of 1933, as amended (the "Securities
Act").
(b) I understand that the Securities have not been registered under
the Securities Act in reliance upon a specific exemption therefrom, which
exemption depends upon, among other things, the bona fide nature of my
investment intent as expressed herein. In this connection, I understand that,
in the view of the Securities and Exchange Commission (the "SEC"), the
statutory basis for such exemption may be unavailable if my representation was
predicated solely upon a present intention to hold these Securities for the
minimum capital gains period specified under tax statutes, for a deferred sale,
for or until an increase or decrease in the market price of the Securities, or
for a period of one year or any other fixed period in the future.
(c) I further understand that the Securities must be held indefinitely
unless subsequently registered under the Securities Act or unless an exemption
from registration is otherwise available. Moreover, I understand that the
Company is under no obligation to register the Securities. In addition, I
understand that the certificate evidencing the Securities
<PAGE> 14
will be imprinted with a lagend which prohibits the transfer of the Securities
unless they are registered or such registration is not required in the opinion
of counsel for the Company.
(d) I am familiar with the provisions of Rule 701 and Rule 144, each
promulgated under the Securities Act, which, in substance, permit limited
public resale of "restricted securities" acquired, directly or indirectly, from
the issuer thereof, in a non-public offering subject to the satisfaction of
certain conditions. Rule 701 provides that if the issuer qualifies under Rule
701 at the time of issuance of the Securities, such issuance will be exempt
from registration under the Securities Act. In the event the Company later
becomes subject to the reporting requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, ninety (90) days thereafter the securities
exempt under Rule 701 may be resold, subject to the satisfaction of certain of
the conditions specified by Rule 144, including among other things: (1) the
sale being made through a broker in an unsolicited "broker's transaction" or in
transactions directly with a market maker (as said term is defined under the
Securities Exchange Act of 1934); and, in the case of an affiliate, (2) the
availability of certain public information about the Company, and the amount of
securities being sold during any three month period not exceeding the
limitations specified in Rule 144(e), if applicable. Notwithstanding this
paragraph (d), I acknowledge and agree to the restrictions set forth in
paragraph (e) hereof.
In the event that the Company does not qualify under Rule 701 at the
time of issuance of the Securities, then the Securities may be resold in
certain limited circumstances subject to the provisions of Rule 144, which
requires among other things: (1) the availability of certain public information
about the Company, (2) the resale occurring not less than two years after the
party has purchased, and made full payment for, within the meaning of Rule 144,
the securities to be sold; and, in the case of an affiliate, or of a
non-affiliate who has held the securities less than three years, (3) the sale
being made through a broker in an unsolicited "broker's transaction" or in
transactions directly with a market maker (as said term is defined under the
Securities Exchange Act of 1934) and the amount of securities being sold during
any three month period not exceeding the specified limitations stated therein,
if applicable.
(e) I further understand that in the event all of the applicable
requirements of Rule 144 or Rule 701 are not satisfied, registration under the
Securities Act, compliance with Regulation A, or some other registration
exemption will be required; and that, notwithstanding the fact that Rule 144
and Rule 701 are not exclusive, the Staff of the SEC has expressed its opinion
that persons proposing to sell private placement securities other than in a
registered offering and otherwise than pursuant to Rule 144 or Rule 701 will
have a substantial burden of proof in establishing that an exemption from
registration is available for such offers or sales, and that such persons and
their respective brokers who participate in such transactions do so at their
own risk.
(f) I understand that the certificate evidencing the Securities may be
imprinted with a legend which prohibits the transfer of the Securities without
the consent of
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<PAGE> 15
the Commissioner of Corporations of California. I have read the applicable
Commissioner's Rules with respect to such restriction, a copy of which is
attached.
Signature of Purchaser:
-------------------------------
Date:__________, 19__
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<PAGE> 16
STATE OF CALIFORNIA - CALIFORNIA ADMINISTRATIVE CODE
Title 10. Investment - Chapter 3. Commissioner of Corporations
260.141.11: Restriction on Transfer.
(a) The issuer of any security upon which a restriction on transfer has
been imposed pursuant to Sections 260.102.6, 260.141.10 or 260.534 shall cause
a copy of this section to be delivered to each issuee or transferee of such
security at the time the certificate evidencing the security is delivered to
the issuee or transferee.
(b) It is unlawful for the holder of any such security to consummate a
sale or transfer of such security, or any interest therein, without the prior
written consent of the Commissioner (until this condition is removed pursuant
to Section 260.141.12 of these rules), except:
(1) to the issuer;
(2) pursuant to the order or process of any court;
(3) to any person described in Subdivision (i) of Section
25102 of the Code or Section 260.105.14 of these rules;
(4) to the transferor's ancestors, descendants, or spouse,
or any custodian or trustee for the account of the transferor or the
transferor's ancestors, descendants, or spouse, or to a transferee by a trustee
or custodian for the account of the transferee or the transferee's ancestors,
descendants or spouse;
(5) to holders of securities of the same class of the same
issuer;
(6) by way of gift or donation inter vivos or on death;
(7) by or through a broker-dealer licensed under the Code
(either acting as such or as a finder) to a resident of a foreign state,
territory or country who is neither domiciled in this state to the knowledge of
the broker-dealer, nor actually present in this state if the sale of such
securities is not in violation of any securities law of the foreign state,
territory or country concerned;
(8) to a broker-dealer licensed under the Code in a
principal transaction, or as an underwriter or member of an underwriting
syndicate or selling group;
(9) if the interest sold or transferred is a pledge or
other lien given by the purchaser to the seller upon a sale of the security for
which the Commissioner's written consent is obtained or under this rule not
required;
(10) by way of a sale qualified under Sections 25111, 25112,
25113 or 25121 of the Code, of the securities to be transferred, provided that
no order under Section 25140 or Subdivision (a) of Section 25143 is in effect
with respect to such qualification;
(11) by a corporation to a wholly owned subsidiary of such
corporation, or by a wholly owned subsidiary of a corporation to such
corporation;
(12) by way of an exchange qualified under Section 25111,
25112 or 25113 of the Code, provided that no order under Section 25140 or
Subdivision (a) of Section 25143 is in effect with respect to such
qualification;
(13) between residents of foreign states, territories or
countries who are neither domiciled nor actually present in this state;
(14) to the State Controller pursuant to the Unclaimed
Property Law or to the administrator of the unclaimed property law of another
state;
(15) by the State Controller pursuant to the Unclaimed
Property Law or by the administrator of the unclaimed property law of another
state if, in either such case, such person (i) discloses to potential
purchasers at the sale that transfer of the securities is restricted under this
rule, (ii) delivers to each purchaser a copy of this rule, and (iii) advises
the Commissioner of the name of each purchaser;
(16) by a trustee to a successor trustee when such transfer
does not involve a change in the beneficial ownership of the securities; or
(17) by way of an offer and sale of outstanding securities
in an issuer transaction that is subject to the qualification requirement of
Section 25110 of the Code but exempt from that qualification requirement by
subdivision (f) of Section 25102;
provided that any such transfer is on the condition that any certificate
evidencing the security issued to such transferee shall contain the legend
required by this section.
(c) The certificates representing all such securities subject to
such a restriction on transfer, whether upon initial issuance or upon any
transfer thereof, shall bear on their face a legend, prominently stamped or
printed thereon in capital letters of not less than 10-point size, reading as
follows:
"IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS
SECURITY, OR ANY INTEREST THEREIN, OR TO RECEIVE ANY
CONSIDERATION THEREFOR, WITHOUT THE PRIOR WRITTEN CONSENT OF THE
COMMISSIONER OR CORPORATIONS OF THE STATE OF CALIFORNIA, EXCEPT
AS PERMITTED IN THE COMMISSIONER'S RULES."
<PAGE> 1
EXHIBIT 10.8
RIBOGENE, INC.
RESTRICTED STOCK PURCHASE AGREEMENT
THIS RESTRICTED STOCK PURCHASE AGREEMENT ("Agreement") is made as of
_________, 19__, by and between RiboGene, Inc., a California corporation (the
"Company"), and 1* ("Purchaser") pursuant to the Company's 1993 Stock Plan.
1. Sale of Stock. Subject to the terms and conditions hereof, on
the Closing Date the Company will issue and sell to Purchaser, and Purchaser
agrees to purchase from the Company, 2* shares of the Company's Common Stock
(the "Shares") at a purchase price of $3* per Share for a total purchase price
of $4*. The term "Shares" refers to the purchased Shares and all securities
received in replacement of Shares or as stock dividends or splits, all
securities received in replacement of the Shares in a recapitalization, merger,
reorganization, exchange or the like, and all new, substituted or additional
securities or other properties to which Purchaser is entitled by reason of
Purchaser's ownership of the Shares.
2. Closing: Security Interest.
(a) The closing of the purchase and sale of the Shares
hereunder (the "Closing") shall be held at the principal office of the Company
simultaneously with the execution of this Agreement by the parties or on such
other date as they agree (the "Closing Date").
(b) At the Closing, the Company will deliver to Purchaser
a certificate representing the Shares to be purchased by him (which shall be
issued in Purchaser's name) against payment of the purchase price therefor.
The purchase price for the Shares shall be paid to the Company by check
rendered to the Company in the amount of $5* and by delivery to the Company of
Purchaser's full recourse promissory note (the "Note") for the balance of the
purchase price, if any, in the form attached hereto as EXHIBIT A.
(c) With respect to the Note, the parties agree to the
following:
(1) The Note shall become payable in full upon
the voluntary or involuntary termination or cessation of employment of
Purchaser With the Company, for any reason, with or without cause (including
death or disability).
(2) Purchaser shall deliver to the Secretary of
the Company, or his designee (hereinafter referred to as the "Pledge Holder"),
all certificates representing the Shares, together with (i) an Assignment
Separate from Certificate in the form attached hereto Exhibit B executed by
Purchaser and by Purchaser's spouse (if required for transfer), in blank, for
use in transferring all or a portion of said Shares to the Company if, as and
when required under this Section 2(c) or under any other provision of this
Agreement including,
<PAGE> 2
without limitation, Section 3. In addition, Purchaser's spouse, if any, shall
execute and deliver to the Company the Consent of Spouse attached hereto as
EXHIBIT C.
(3) As security for the payment of the Note and
any renewal, extension or modification thereof, Purchaser hereby grants to the
Company a security interest in and pledges with and delivers to the Company
Purchaser's Shares (sometimes referred to herein as the "Collateral").
In the event that Purchaser prepays all or a
portion of the Note, in accordance with the provisions thereof Purchaser
intends, unless written notice to the contrary is delivered to the Pledge
Holder, that the Shares represented by the portion of the Note so repaid,
including annual interest thereon, shall continue to be so held by the Pledge
Holder, to serve as independent collateral for the outstanding portion of the
Note for the purpose of commencing the holding period set forth in Rule 144(d)
promulgated under the Securities Act of 1933, as amended (the "Securities
Act").
(4) In the event of any foreclosure of the
security interest, the Company may sell the Shares at a private sale or may
repurchase the Shares itself. The parties agree that, prior to the
establishment of a public market for the Shares of the Company, the securities
laws affecting sale of the Shares make a public sale of the Shares commercially
unreasonable. The parties further agree that the repurchasing of such Shares
by the Company, or by any person to whom the Company may have assigned its
rights hereunder, is commercially reasonable if made at a price determined by
the Board of Directors in its discretion, fairly exercised, representing what
would be the fair market value of the Shares reduced by any limitation on
transferability, whether due to the size of the block of Shares or the
restrictions of applicable securities laws.
(5) In the event of default in payment when due
of any indebtedness under Purchaser's Note, the Company may elect then, or at
any time thereafter, to exercise all rights available to a Secured Party under
the California Commercial Code including the right to sell the Collateral at a
private or public sale or repurchase the Shares as provided above. The
proceeds of any sale shall be applied in the following order.
(i) To the extent necessary, proceeds
shall be used to pay all reasonable
expenses of the Company in enforcing
this Agreement, including, without
limitation, reasonable attorney's
fees and legal expenses incurred by
the Company.
(ii) To the extent necessary, proceeds
shall be used to satisfy any
remaining indebtedness under
Purchaser's Note.
(iii) Any remaining proceeds shall be
delivered Purchaser.
-2-
<PAGE> 3
(6) Upon full payment by Purchaser of all amounts
due on the Note, Pledge Holder shall deliver to Purchaser all Shares in Pledge
Holder's possession belonging to Purchaser, and Pledge Holder shall thereupon
be discharged of all further obligations hereunder, provided, however, that
Pledge Holder shall nevertheless retain said Shares as escrow agent if at the
time of full payment by Purchaser said Shares are still subject to restrictions
under Section 3 hereof.
3. Limitations on Transfer. In addition to any other limitation
on transfer created by applicable securities laws, Purchaser shall not assign,
encumber or dispose of any interest in the Shares while the Shares are subject
to the Company's repurchase option, except as provided in Section 3(h) below.
After any Shares have been released from such repurchase option, Purchaser
shall not assign, encumber or dispose of any interest in such Shares except in
compliance with Sections 3(b) and 3(c) below and applicable securities laws:
(a) Repurchase Option. In the event of the voluntary or
involuntary termination of employment of Purchaser with the Company for any
reason, with or without cause (including death or disability), the Company
shall, upon the date of such termination, have an irrevocable, exclusive option
for a period of 60 days from such date to repurchase all or any portion of the
Shares held by Purchaser as of such date which have not yet been released from
the Company's repurchase option at the original purchase price per Share
specified in Section 1. The option shall be exercised by the Company by
written notice to Purchaser or his executor and, at the Company's option, (i)
by delivery to the Purchaser or his executor with such notice of a check in the
amount of the purchase price for the Shares being purchased, or (ii) in the
event the Purchaser is indebted to the Company, by cancellation by the Company
of an amount of such indebtedness equal to the purchase price for the Shares
being repurchased, or (iii) by a combination of (i) and (ii) so that the
combined payment and cancellation of indebtedness equals such purchase price.
Upon delivery of such notice and payment of the purchase price in any of the
ways described above, the Company shall become the legal and beneficial owner
of the Shares being repurchased and all rights and interest therein or related
thereto, and the Company shall have the right to transfer to its own name the
number of Shares being repurchased by the Company, without further action by
Purchase. One hundred percent (100%) of the Shares purchased by Purchaser
shall initially be subject to the Company's repurchase option as set forth
above. Thereafter, the Shares held by Purchaser shall be released from the
Company's repurchase option under this Section 3(a) as follows (provided in
each case that Purchaser's employment has not been terminated prior to the date
of any such release): 1/8 of the total number of Shares shall be released from
the repurchase option on the 6-month anniversary of the Vesting Commencement
Date (as set forth on the signature page of this Agreement), and an additional
1/48 of the total number of Shares shall be released from the repurchase option
each month thereafter on the Monthly Vesting Date (as set forth on the
signature page of this Agreement), until all Shares are released from the
repurchase option. Fractional shares shall be rounded to the nearest whole
share.
-3-
<PAGE> 4
(b) Right of First Refusal. In the event, at any time
after the date of this Agreement, the Purchaser or his transferee desires to
sell or transfer in any manner the Shares as to which the option provided in
Section 3(a) above is not applicable or has not been exercised, he shall first
offer such Shares for sale to the Company at the same price, and upon the same
terms (or terms as similar as reasonably possible) upon which he is proposing
or is to dispose of said Shares. Said right of first refusal shall be provided
to the Company for a period of thirty (30) days following receipt by the
Company of written notice by the Purchaser of the terms and conditions of said
proposed sale or transfer and the name, address and phone number of each
proposed buyer or transferee. If the Company desires to exercise such right of
first refusal, it shall notify Purchaser in writing within such thirty day
period. In the event the Shares are not disposed of on such terms within
thirty (30) days following lapse of the period of the right of first refusal
provided to the Company or if the Purchaser proposes to change the price or
other terms to make them more favorable to the buyer, they shall once again be
subject to the right of first refusal herein provided.
(c) Involuntary Transfer. In the event, at any time
after the date of this Agreement, of any transfer by operation of law or other
involuntary transfer (including death or divorce) of all or a portion of the
Shares by the record holder thereof, the Company shall have an option to
purchase all of the Shares transferred. Upon such a transfer, the person
acquiring the Shares shall promptly notify the Secretary of the Company of such
transfer. The right to purchase such Shares shall be provided to the Company
for a period of thirty (30) days following receipt by the Company of written
notice by the person acquiring the Shares.
(d) Price for Involuntary Transfer. With respect to any
stock to be transferred pursuant to Section 3(c), the price per Share shall be
a price set by the Board of Directors of the Company that will reflect the
current value of the stock in terms of present earnings and future prospects of
the Company. The Company shall notify Purchaser or his executor of the price
so determined within thirty (30) days after receipt by it of written notice of
the transfer or proposed transfer of Shares. The decision of the Board of
Directors as to the purchase price shall be final.
(e) Assignment. The right of the Company to purchase any
part of the Shares may be assigned in whole or in part to any shareholder or
shareholders of the Company or other persons or organizations.
(f) Restrictions Binding on Transferees. All
transferees of Shares or any interest therein will receive and hold such Shares
or interest subject to the provisions of this Agreement, including, insofar as
applicable, the Company's option to repurchase under Section 3 and the
Company's rights under Section 2. Any sale or transfer of the Company's Shares
shall be void unless the provisions of this Agreement are met.
(g) Termination of Refusal Right. The right of first
refusal granted the Company by Section 3(b) above shall terminate at such time
as a public market exists for the
-4-
<PAGE> 5
Company's capital stock (or any other stock issued to purchasers in exchange
for the Shares purchased under this Agreement) For the purpose of this
Agreement, a "Public Market" shall be deemed to exist if (i) such stock is
listed on a national securities exchange (as that term is used in the
Securities Exchange Act of 1934) or (ii) such stock is traded on the
over-the-counter market and prices are published daily on business days in a
recognized financial journal.
Upon termination of the right of first refusal
imposed by this Agreement and the expiration or exercise of the Company's
repurchase option described in Section 3(a) above, a new certificate or
certificates representing the Shares not repurchased shall be issued, on
request, without the legend referred to in Section 6(b) herein and delivered to
Purchaser.
(h) Exempt Transfers. The restrictions on transfer of
this Section 3 shall not apply to a transfer to Purchaser's ancestors or
descendants or spouse or to a trustee for their benefit, provided that such
transferee shall agree in writing to take such Shares subject to all the terms
of this Agreement, including restrictions on further transfer.
4. Escrow. For purposes of facilitating the enforcement of the
provisions of Section 3 above, Purchaser agrees, immediately upon receipt of
the certificate(s) for his Shares, to deliver such certificate(s), together
with an Assignment Separate from Certificate in the form attached hereto as
Exhibit B executed by Purchaser and by Purchaser's spouse (if required for
transfer), in blank, to the Secretary of the Company, or his designee, to hold
such certificate(s) and Assignment Separate from Certificate in escrow and to
take all such action and to effectuate all such transfers and/or releases as
are in accordance with the terms hereof. Purchaser hereby acknowledges that
the Secretary of the Company, or his designee, is so appointed as the escrow
holder with the foregoing authorities as a material inducement to make this
Agreement and that said appointment is coupled with an interest and is
accordingly irrevocable. Purchaser agrees that said escrow holder shall not be
liable to any party hereof (or to any other party) for any actions or omissions
unless such escrow holder is grossly negligent relative thereto. The escrow
holder may rely upon any letter, notice or other document executed by any
signature purported to be genuine and may resign at any time. Purchaser agrees
that if the Secretary of the Company, or his designee, resigns as escrow holder
for any or no reason, the Board of Directors of the Company shall have the
power to appoint a successor to serve as escrow holder pursuant to the terms of
this Agreement.
5. Investment Representations. In connection with the purchase of
the Shares, Purchaser represents to the Company the following:
(a) Purchaser is aware of the Company's business affairs
and financial condition and has acquired sufficient information about the
Company to reach an informed and knowledgeable decision to acquire the
securities. Purchaser is purchasing these securi-
-5-
<PAGE> 6
ties for investment for his 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.
(b) Purchaser understands that the securities have not
been registered under the Securities Act by reason of a specific exemption
therefrom, which exemption depends upon, among other things, the bona fide
nature of Purchaser's investment intent as expressed herein.
(c) Purchaser further acknowledges and understands that
the securities must be held indefinitely unless they are subsequently
registered under the Securities Act or an exemption from such registration is
available. Purchaser further acknowledges and understands that the Company is
under no obligation to register the securities. Purchaser understands that the
certificate evidencing the securities will be imprinted with a legend which
prohibits the transfer of the securities unless they are registered or such
registration is not required in the opinion of counsel for the Company.
(d) Purchaser is familiar with the provisions of Rules
144 and 701, each promulgated under the Securities Act, which, in substance,
permit limited public resale of "restricted securities" acquired, directly or
indirectly, from the issuer thereof(or from an affiliate of such issuer), in a
non-public offering subject to the satisfaction of certain conditions. In the
event the Company becomes subject to the reporting requirements of Section 13
or l5(d) of the Securities Exchange Act of 1934, the securities exempt under
Rule 701 may be resold by the Purchaser ninety (90) days thereafter, subject to
the satisfaction of certain of the conditions specified by Rule 144, including,
among other things: (i) the sale being made through a broker in an unsolicited
"broker's transaction" or in transactions directly with a market maker (as said
term is defined under the Securities Exchange Act of 1934); and (2) in the case
of an affiliate, the availability of certain public information about the
Company, and the amount of securities being sold during any three month period
not exceeding the limitations specified in Rule 144(e), if applicable.
If the Company does not qualify under Rule 701 at the time of
purchase, then the securities may be resold by the Purchaser in certain limited
circumstances subject to the provisions of Rule 144, which requires, among
other things: (l) the availability of certain public information about the
Company; (2) the resale occurring not less than two years after the party has
purchased, and made full payment of (within the meaning of Rule 144), the
securities to be sold; and (3) in the case of an affiliate, or of a
non-affiliate who has held the securities less than three years, the sale being
made through a broker in an unsolicited "broker's transaction" or in
transactions directly with a market maker (as said term is defined under the
Securities Exchange Act of 1934) and the amount of securities being sold during
any three month period not exceeding the specified limitations stated therein,
if applicable. PURCHASER UNDERSTANDS THAT PAYMENT BY NOTE IS NOT DEEMED TO BE
FULL PAYMENT UNDER RULE 144 UNLESS IT IS SECURED BY ASSETS OTHER THAN THE
SHARES.
-6-
<PAGE> 7
(e) Purchaser further understands that at the time he or
she wishes to sell the securities there may be no public market upon which to
make such a sale, and that, even if such a public market then exists, the
Company may not be satisfying the current public information requirements of
Rule 144 or 701, and that, in such event, Purchaser would be precluded from
selling the securities under Rule 144 or 701 even if the two-year minimum
holding period had been satisfied.
(f) Purchaser further understands that in the event all
of the applicable requirements of Rule 144 or 701 are not satisfied,
registration under the Securities Act, compliance with Regulation A, or some
other registration exemption will be required; and that, notwithstanding the
fact that Rules 144 and 701 are not exclusive, the Staff of the SEC has
expressed its opinion that persons proposing to sell private placement
securities other than in a registered offering and otherwise than pursuant to
Rule 144 or 701 will have a substantial burden of proof in establishing that an
exemption from registration is available for such offers or sales, and that
such persons and their respective brokers who participate in such transactions
do so at their own risk.
6. Legends. The certificate or certificates representing the
Shares shall bear the following legends (as well as any legends required by
applicable state and federal corporate and securities laws):
(a) "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN
ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN
CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF.
NO SUCH SALE OR DISPOSITION MAY BE EFFECTED WITHOUT
AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO
OR AN OPINION OF COUNSEL FOR THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT
OF 1933."
(c). "THE SHARES REPRESENTED BY THIS CERTIFICATE MAY BE
TRANSFERRED ONLY IN ACCORDANCE WITH THE TERMS OF AN
AGREEMENT BETWEEN THE COMPANY AND THE SHAREHOLDER, A
COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE
COMPANY."
7. No Employment Rights. Nothing in this Agreement shall affect
in any manner whatsoever the right or power of the Company, or a parent or
subsidiary of the Company, to terminate Purchaser's employment, for any reason,
with or without cause.
-7-
<PAGE> 8
8. Section 83(b) Election. Purchaser understands that Section
83(a) of the Internal Revenue Code of 1986, as amended (the "Code"), taxes as
ordinary income the difference between the amount paid for the Shares and the
fair market value of the Shares as of the date any restrictions on the Shares
lapse. In this context, "restriction" means the right of the Company to buy
back the Shares pursuant to the repurchase option set forth in Section 3(a) of
this Agreement. Purchaser understands that Purchaser may elect to be taxed at
the time the Shares are purchased, rather than when and as the repurchase
option expires, by filing an election under Section 83(b) of the Code with the
Internal Revenue Service within 30 days from the date of purchase. Even if the
fair market value of the Shares at the time of the execution of this Agreement
equals the amount paid for the Shares, the election must be made to avoid tax
treatment under Section 83(a) in the future. The form for making Purchaser's
election is attached hereto. Purchaser understands that his failure to file
such an election in a timely manner may result in adverse tax consequences for
Purchaser. Purchaser further understands that an additional copy of such
election form should be filed with his federal income tax return for the
calendar year in which the date of this Agreement falls.
9. Standoff Agreement. In connection with the initial public
offering of the Company's securities and upon request of the Company or the
underwriters managing any underwritten offering of the Company's securities,
Purchaser agrees not to sell, make any short sale of, loan, grant any option
for the purchase of, or otherwise dispose of any Shares (other than those
included in the registration) without the prior written consent of the Company
or such underwriters, as the case may be, for such period of time (not to
exceed one year) from the effective date of such registration as may be
requested by the Company or such managing underwriters; provided, however, that
the Purchaser need not so agree unless a majority of the Company's officers and
directors and a majority of the holders of at least 5% of the Company's
outstanding securities also agree to be similarly bound.
10. Miscellaneous.
(a) This Agreement may be amended by written agreement
between the Company and Purchaser.
(b) Any notice, demand or request required or permitted
to be given under this Agreement shall be in writing and shall be deemed
sufficient when delivered personally or sent by telecopy or forty-eight (48)
hours after being deposited in the U.S. mail, as certified or registered mail,
with postage prepaid, and addressed, if to the Company, at its principal place
of business, attention the President, and if to Purchaser, at Purchaser's
address as shown on the stock records of the Company.
(c) The rights and benefits of {his Agreement shall inure
to the benefit of, and be enforceable by the Company's successors and assigns.
The rights and obligations of Purchaser under this Agreement may only be
assigned with the prior written consent of the Company.
-8-
<PAGE> 9
(d) Both parties agree to execute any additional
documents necessary to carry out the purposes of this Agreement.
IN WITNESS WHEREO, the parties hereto have executed this Agreement as
of the day and year first set forth above.
RIBOGENE, INC.
By:
---------------------------------------
Title:
------------------------------------
PURCHASER:
1*
------------------------------------------
(Signature)
Address:
7*
8*
Vesting Commencement
10*
Monthly Vesting
11*
-9-
<PAGE> 10
EXHIBIT A
PROMISSORY NOTE
$________________ ________________________, California
_____________________________, 19__
At the times hereinafter stated, for value received, the undersigned promises
to pay RiboGene, Inc., a California corporation (the "Company"), or order, at
its principal office the principal sum of ________ with interest from the date
hereof at a rate of __% per annum, compounded semi-annually, on the unpaid
balance of said principal sum. Said principal and interest shall be due and
payable on _____, 19___.
If the undersigned's employment by or association with the Company is
terminated prior to payment in full of this Note, this Note shall be
immediately due and payable.
Principal and interest are payable in lawful money of the United States of
America. AT ANY TIME, THE PRIVILEGE IS RESERVED TO PAY MORE THAN THE SUM DUE.
Should suit be commenced to collect this Note or any portion thereof, such sum
as the Court may deem reasonable shall be added hereto as attorneys' fees. The
makers and endorsers have severally waived presentment for payment, protest,
notice of protest, and notice of nonpayment of this Note.
This Note, which is full recourse, is secured by a pledge of certain shares of
Common Stock of the Company and is subject to the terms of a Common Stock
Purchase Agreement between the undersigned and the Company of even date
herewith.
___________________________________________
___________________________________________
<PAGE> 11
PROMISSORY NOTE
$6* ____________________, California
__________________________, 19__
At the times hereinafter stated, for value received, the undersigned
promises to pay to RiboGene, Inc., a California corporation (the"Company"), or
order, at its principal office the principal sum of $6* with interest from the
date hereof at a rate of 15*% per annum, compounded semi-annually, on the
unpaid balance of said principal sum. Said principal and interest shall be due
and payable on 16*.
If the undersigned's employment by or association with the Company is
terminated prior to payment in full of this Note, this Note shall be
immediately due and payable.
Principal and interest are payable in lawful money of the United
States of America. AT ANY TIME, THE PRIVILEGE IS RESERVED TO PAY MORE THAN THE
SUM DUE.
Should suit be commenced to collect this Note or any portion thereof,
such sum as the Court may deem reasonable shall be added hereto as attorneys'
fees. The makers and endorsers have severally waived presentment for payment,
protest, notice of protest, and notice of non-payment of this Note.
This Note, which is full recourse, is secured by a pledge of certain
shares of Common Stock of the Company and is subject to the terms of a Common
Stock Purchase Agreement between the undersigned and the Company of even date
herewith.
___________________________________________
1*
<PAGE> 12
EXHIBIT B
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED and pursuant to that certain Stock Purchase
Agreement between the undersigned ("Purchaser") and RiboGene, Inc. dated
______, 19___ (the "Agreement"), Purchaser hereby sells, assigns and transfers
unto ______________ (______) shares of the Common Stock of RiboGene, Inc.
standing in Purchaser's name on the books of said corporation represented by
Certificate No. herewith and does hereby irrevocably constitute and appoint
________________ to transfer said stock on the books of the within-named
corporation with full power of substitution in the premises. THIS ASSIGNMENT
MAY ONLY BE USED AS AUTHORIZED BY THE AGREEMENT AND THE EXHIBITS THERETO.
Dated:____________________, 19__.
Signature:
___________________________________________
___________________________________________
INSTRUCTION: Please do not fill in any blanks other than the signature line.
The purpose of this assignment is to enable the Company to exercise its
repurchase option set forth in the Agreement without requiring additional
signatures on the part of Purchaser.
<PAGE> 13
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED and pursuant to that certain Stock Purchase
Agreement between the undersigned ("Purchaser") and RiboGene, Inc. dated
_____________, 19___ (the "Agreement"), Purchaser hereby sells, assigns and
transfers unto _______________ (_____) shares of the Common Stock of RiboGene,
Inc. standing in Purchaser's name on the books of said corporation represented
by Certificate No. herewith and does hereby irrevocably constitute and appoint
___________________ to transfer said stock on the books of the within-named
corporation with full power of substitution in the premises. THIS ASSIGNMENT
MAY ONLY BE USED AS AUTHORIZED BY THE AGREEMENT AND THE EXHIBITS THERETO.
Dated:____________________, 19__.
Signature:
__________________________________
1*
INSTRUCTION: Please do not fill in any blanks other than the signature line.
The purpose of this assignment is to enable the Company to exercise its
repurchase option set forth in the Agreement without requiring additional
signatures on the part of Purchaser.
<PAGE> 14
EXHIBIT C
CONSENT OF SPOUSE
I, ___________________________, spouse of ___________________________,
have read and hereby approve the foregoing Agreement. In consideration of the
Company's granting my spouse the right to purchase the Shares as set forth in
the Agreement, I hereby agree to be irrevocably bound by the Agreement and
further agree that any community property or other such interest shall be
similarly bound by the Agreement. I hereby appoint my spouse as my
attorney-in-fact with respect to any amendment or exercise of any rights under
the Agreement.
___________________________________________
Spouse of Purchaser
<PAGE> 15
CONSENT OF SPOUSE
I, 13*, spouse of 1*, have read and hereby approve the foregoing
Agreement. In consideration of the Company's granting my spouse the right to
purchase the Shares as set forth in the Agreement, I hereby agree to be
irrevocably bound by the Agreement and further agree that any community
property or other such interest shall be similarly bound by the Agreement. I
hereby appoint my spouse as my attorney-in-fact with respect to any amendment
or exercise of any rights under the Agreement.
___________________________________________
Spouse of Purchaser
<PAGE> 16
ELECTION UNDER SECTION 83(b)
OF THE INTERNAL REVENUE CODE OF 1986
The undersigned taxpayer hereby elects, pursuant to the Internal Revenue Code,
to include in his gross income for the current taxable year, the amount of any
compensation taxable to him in connection with his receipt of the property
descried below:.
1. The name, address, taxpayer identification number and taxable year of
the undersigned are as follows:
NAME: TAXPAYER: 1* SPOUSE: 13*
ADDRESS: 7*
8*
IDENTIFICATION NO.: TAXPAYER: 9* SPOUSE: 14*
TAXABLE YEAR: 19__
2. The property with respect to which the election is made is described
as follows:
2* shares of the Common Stock (the "Shares"), no par value, of
RiboGene, Inc., a Delaware corporation.
3. The date on which the property was transferred is:
_________________, 19__.
4. The property is subject to the following restrictions
Repurchase option at cost in favor of RiboGene, Inc. upon termination
of taxpayer's employment, consulting, officer or director
relationship.
5. The fair market value at the time of transfer, determined without
regard to any restriction other than a restriction which by its terms
will never lapse, of such property is: $4*
6. The amount (if any) paid for such property: $4*
The undersigned has submitted a copy of this statement to the person for whom
the services were performed in connection with the undersigned's receipt of the
above-described property. The transferee of such property is the person
performing the services in connection with the transfer of said property.
THE UNDERSIGNED UNDERSTANDS THAT THE FOREGOING ELECTION MAY NOT BE REVOKED
EXCEPT WITH THE CONSENT OF THE COMMISSIONER.
Dated:___________, 19__ ___________________________________________
Taxpayer
The undersigned spouse of taxpayer joins in this election.
Dated:___________, 19__ ___________________________________________
Spouse of Taxpayer
<PAGE> 17
RECEIPT
RiboGene, Inc. hereby acknowledges receipt of a check for $5*
and a promissory note for $6* (if applicable) given by 1* as consideration for
certificate number 12* for 2* shares of Common Stock of RiboGene, Inc.
Dated:____________________, 19__
RIBOGENE, INC.
By:________________________________________
Title:_____________________________________
<PAGE> 18
RECEIPT AND CONSENT
The undersigned hereby acknowledges receipt of a photocopy of
certificate number 12* for 2* shares of Common Stock of RiboGene, Inc. (the
"Company").
The undersigned further acknowledges receipt of a copy of Section
260.141.11 of the Rules of the Commissioner of Corporations of the State of
California, which copy is attached to the aforementioned photocopy of the
certificate.
The undersigned further acknowledges that the Secretary of the
Company, or his designee, is acting as escrow holder pursuant to the Stock
Purchase Agreement he/she has previously entered into with the Company. As
escrow holder, the Secretary of the Company, or his designee, holds the
original of the aforementioned certificate issued in the undersigned's name.
Dated:___________, 19__
___________________________________________
1*
<PAGE> 19
RIBOGENE, INC.
CHECKLIST
STOCK ISSUANCE FOR
1*
<TABLE>
<S> <C>
Stock Issuance Code Form received
- ---------
Documents prepared in word processing
- ---------
Documents reviewed
- ---------
Board consent obtained
- ---------
Securities issued pursuant to valid permit
- ---------
Stock Certificate prepared
- ---------
Stock Package sent to Client for signature (see below)
- ---------
Documents received back from Client
- ---------
Documents reviewed
- ---------
83(b) filing made
- ---------
Copies of documents sent to Client
- ---------
Documents filed in escrow
- ---------
</TABLE>
STOCK PACKAGE CHECKLIST
<TABLE>
<S> <C> <C>
Corporate summary updated
- ---------
Cover Letter (l original)
- ---------
Stock Purchase Agreement and Consent of Spouse (2 originals)
- ---------
Assignment Separate from Certificate (2 originals)
- ---------
Employment or Consulting Agreement (2 originals)
- ---------
83(b) Election. (4 originals)
- ---------
Receipt (2 originals)
- ---------
Stock Certificate (1 original)
- ---------
Promissory Note (if applicable) (1 original)
- ---------
</TABLE>
<TABLE>
<S> <C>
Legends to be used:
X '33 Act
---------
X Agreement
---------
X Commissioner's
---------
ROFR
---------
Articles
---------
</TABLE>
<PAGE> 20
RIBOGENE. INC.
MERGE INFORMATION
<TABLE>
<S> <C>
1* [NAME OF PURCHASER]
2* [NUMBER OF SHARES]
3* [PRICE PER SHARE]
4* [TOTAL PURCHASE PRICE]
5* [AMOUNT OF CHECK]
6* [AMOUNT OF PROMISSORY NOTE]
7* [ADDRESS OF PURCHASER, STREET]
8* [ADDRESS OF PURCHASER, STATE/ZIP]
9* [ID# OF PURCHASER]
10* [VESTING COMMENCEMENT DATE]
11* [MONTHLY VESTING DATE]
12* [CERTIFICATE NUMBER]
13* [NAME OF SPOUSE]
14* [ID# OF SPOUSE]
15* [INTEREST RATE ON NOTE]
16* [DUE DATE OF NOTE]
</TABLE>
<PAGE> 1
Exhibit 10.9
[RIBOGENE, INC. LETTERHEAD]
CONFIDENTIAL
May 11, 1993
Mr. Charles Casamento
112 Fulton Street
Boston, MA 02109
Dear Chuck:
On behalf of RiboGene, Inc. (the "Company"), I am pleased to offer you
the positions of President and Chief Executive Officer of the Company and
Chairman of the Board of Directors. Speaking for the Board, as well as the
other members of the Company's management team, we are all very impressed with
your achievements to date and your approach to management. We all look forward
to a mutually profitable and enjoyable relationship as we build the Company
together.
The terms of your employment relationship with the Company will be as
set forth below.
1. POSITIONS. You will become the Chairman of the Board of
Directors and the President and Chief Executive Officer of the Company. As
such, you will have overall responsibility for directing the Company toward the
achievement of its business objectives as developed by the Board of Directors.
2. COMPENSATION.
a. BASE SALARY. You will be paid a base annual salary of
$200,000, payable in two equal payments per month pursuant to the Company's
regular payroll policy.
b. EMPLOYMENT BONUS. In addition, you will receive an
employment bonus of $50,000, payable in one lump sum on the first day of your
employment with the Company (subject to normal withholding).
c. PERFORMANCE BONUS. You will be eligible to receive a
performance bonus of up to $75,000 for the period ending June 30, 1994. The
amount of bonus that you actually receive will be based on achievement of
mutually acceptable milestones to be agreed to by you and the Board of Directors
not later than September 30, 1993. You will also be entitled to earn similar
performance bonuses in future years, again based on achievement of objectives.
<PAGE> 2
d. ANNUAL REVIEW. Your base salary will be reviewed at the
end of your first year of employment, and thereafter annually as part of the
Company's normal salary review process. Your base salary will be increased by a
minimum of $25,000 on the first anniversary of your employment with the Company.
3. STOCK AND/OR OPTIONS. As you know, the Company has recently
completed the first closing of a two-stage financing. The second closing of the
financing is scheduled for late May. Included in the financing is a reverse
10:1 stock split. The numbers described below are given on a post-split basis.
a. FIRST OPTION. At its first meeting following the
commencement of your employment with the Company, the Board of Directors will
grant you an incentive stock option, or a right to purchase (or a combination
of an option and a purchase right), 300,000 shares of the Company's Common
Stock at fair market value on the date of grant. The Board of Directors
anticipates that fair market value will be in the range of $0.15-$0.25 per
share. Such shares will vest at the rate of 1/48th of the original number of
shares on each monthly anniversary of your employment date (total vesting in 48
months). Vesting will, of course, depend on your continued employment with the
Company. The Company currently allows employees a maximum of 30 days following
termination of employment in which to exercise vested options under all
circumstances other than death or disability, but will consider extending this
period for all employees to 90 days.
b. SECOND OPTION. You will also be granted a second incentive
stock option, or right to purchase (or a combination thereof), for 80,000
additional shares of Common Stock on the first anniversary of the commencement
of your employment with the Company. This stock will vest over a new 4-year
vesting schedule that will commence on the first anniversary of commencement of
your employment.
c. ACCELERATION OF VESTING. All stock will vest fully in the
event of any sale or merger in which control of the Company is transferred.
You will also be eligible to receive additional stock pursuant
to the Company's Stock Plan as deemed appropriate by the Board of Directors
based on merit and performance.
4. RELOCATION EXPENSES.
a. EXPENSE REIMBURSEMENT. The Company will reimburse up to
$75,000 for actual out-of-pocket expenses for relocation, including legal
expenses, expenses incurred in connection with the sale of your home (such as
brokerage fees and closing costs), expenses incurred in purchasing a home (such
as loan fees), travel expenses from Boston to San Francisco for you and your
wife (a maximum of three trips each, coach-class) and moving expenses.
-2-
<PAGE> 3
Reimbursement of expenses that are not tax-deductible will be "grossed-up" in
the amount of taxes that will be payable as a consequence of the reimbursement.
b. LOANS. The Company will grant you a loan of $40,000 on the
first day of your employment with the Company and additional loans of identical
amounts on each of the first and second anniversaries of the commencement of
your employment. These loans are intended to cover interest payments on the
increased mortgage costs to which you will be subject by purchasing a home in
California. These loans will bear interest at the lowest rate allowed by
applicable law. The loans will be secured by your Company Common Stock. Each
loan will have a three-year term. Interest will accrue and be payable at the
end of the term of the loan. The Board of Directors will consider forgiveness
of these loans and accrued interest as they become due.
c. MORTGAGE ASSISTANCE LOAN. In the event that you are unable
to sell your home in Boston promptly, the Company will make available a bridge
loan in an amount not to exceed $250,000 to provide a down payment on a new
home in California. Such loan will be due and payable on the earlier of six
months following the date of the loan or promptly following the sale of your
home in Boston. This loan will also bear interest at the lowest rate allowed by
applicable law, which will be due on maturity of the loan.
5. BENEFITS.
a. LIFE INSURANCE. The Company will pay premiums on a life
insurance policy in the amount of $900,000, the beneficiary of which will be
designated by you. The premiums will be considered compensation and will be
shown as compensation on your normal paychecks, subject to withholding.
b. DISABILITY INSURANCE. The Company will pay or reimburse
you for premiums for disability insurance that will cover 80% of your base
salary. Again, these payments will be "grossed-up" to cover the tax liability
incurred by receipt of these payments.
c. OTHER BENEFITS. The Company will also make available to
you standard vacation, medical and dental insurance benefits. Alternatively,
you can choose to continue existing health-care coverage for you and/or your
wife, in which case the Company will reimburse these expenses, again
"grossed-up" to cover tax liability incurred as a result of receipt of these
payments. In addition, the Company currently indemnifies all officers and
directors to the maximum extent permitted by law, in which you will be
included. The Company will commit contractually to advance any expenses for
which indemnification is available to the extent allowed by applicable law.
6. SEVERANCE AGREEMENT. In the event of termination of your
employment with the Company other than for cause, you will be entitled to
receive salary continuation for six months
-3-
<PAGE> 4
following your termination date. In addition, you will be entitled to continue
all vesting with respect to Company stock during such six-month period.
7. START DATE. Your employment with the Company will commence on the
earlier of (a) the date two weeks following the termination of your employment
with your current employer, or (b) the first business day following July 4,
1993.
Except as described above, your employment with the Company will be on
an "at will" basis, meaning that either you or the Company may terminate your
employment at any time for any reason or no reason. Like all Company employees,
you will be required to sign the Company's Standard Employee Agreement relating
to protection of the Company's proprietary and confidential information and
assignment of inventions.
Chuck, we are all delighted to be able to extend you this offer and we
look forward to working together. Please indicate your acceptance by signing
and returning the enclosed copy of this letter.
Very truly yours,
RIBOGENE, INC.
/s/ PETRI VAINIO
-----------------------------
Petri Vainio, Chairman of the
Board of Directors
ACCEPTED AND AGREED:
/s/ CHARLES CASAMENTO
- -------------------------
Charles Casamento
-4-
<PAGE> 1
Exhibit 10.10
RIBOGENE, INC.
CHANGE OF CONTROL AGREEMENT
This Change of Control Agreement (the "Agreement") is made and entered
into effective as of July 20,1995, by and between Charles J. Casamento
("Employee") and Ribogene, Inc., a California corporation (the "Company").
RECITALS
A. It is expected that another company or other entity may from time to
time consider the possibility of acquiring the Company or that a change in
control may otherwise occur, with or without the approval of the Company's Board
of Directors (the "Board"). The Board recognizes that such consideration can be
a distraction to Employee and can cause Employee to consider alternative
employment opportunities. The Board has determined that it is in the best
interests of the Company and its shareholders to assure that the Company will
havethe continued dedication and objectivity of Employee, notwithstanding the
possibility, threat or occurrence of a Change of Control (as defined below) of
the Company.
B . The Board believes that it is in the best interests of the Company
and its shareholders to provide Employee with an incentive to continue his or
her employment with the Company.
C. The Board believes that it is imperative to provide Employee with
certain benefits upon termination of Employees employment in connection with a
Change of Control, which benefits are intended to provide Employee with
financial security and provide sufficient income and encouragement to Employee
to remain with the Company notwithstanding the possibility of a Change of
Control.
D. To accomplish the foregoing objectives, the Board of Directors has
directed the Company, upon execution of this Agreement by Employee, to agree to
the terms provided in this Agreement.
E. Certain capitalized terms used in the Agreement are defined in
Section 4 below.
In consideration of the mutual covenants herein contained, and in
consideration of the continuing employment of Employee by the Company, the
parties agree as follows:
1. At-Will Employment. The Company and Employee acknowledge that
Employee's employment is and shall continue to be at-will, as defined under
applicable law. If Employee's employment terminates for any reason, including
(without limitation) any: termination prior to a Change of Control, Employee
shall not be entitled to any payments, benefits, damages, awards or compensation
under this Agreement. The terms of this Agreement shall terminate upon the
earlier of (i) the date that all obligations of the parties hereunder have been
satisfied, (ii) July 20,2000, or (iii) twelve (12) months after a Change of
Control. A termination of the terms of this Agreement pursuant to the preceding
sentence shall be effective for all purposes, except that such termination shall
not affect the payment or provision of compensation or benefits on account of a
termination of employment occurring prior to the termination of the terms of
this Agreement.
2. Severance Benefits.
<PAGE> 2
(a) Termination Following A Change of Control. Subject to Section
5 below, if Employee's employment with the Company is terminated at any time
within 12 months after a Change of Control or if employment is terminated prior
to, but in contemplation of a Change of Change, then Employee shall be entitled
to receive severance benefits as follows:
(i) Voluntary Resignation. If the Employee voluntarily
resigns from the Company (other than as an Involuntary Termination (as defined
below) or if the Company terminates the Employee's employment for Cause (as
defined below)), then the Employee shall not be entitled to receive severance
payments under this Agreement. Employee's benefits will be terminated under the
Company's then existing benefit plans and policies in effect on the date of
termination or in accordance with Employee's employment agreement with the
Company.
(ii) Involuntary Termination. If Employee's employment is
terminated as a result of Involuntary Termination other than for Cause, Employee
shall be entitled to receive a lump sum severance payment equal to twelve (12)
months (the "Severance Period") of the salary which Employee was receiving
immediately prior to the Change of Control or as determined by Employee's
employment agreement with the Company.
(iii) Involuntary Termination for Cause. If Employee's
employment is terminated for Cause, then Employee shall not be entitled to
receive severance payments under this Agreement. Employee's benefits will be
terminated under the terms of the Company's then existing benefit plans and
policies in accordance with such plans and policies in effect on the date of
termination.
(iv) Disability; Death. If the Company terminates
Employee's employment as a result of Employee's Disability, or Employee's
employment is terminated due to the death of Employee, then Employee shall not
be entitled to receive benefits except for those (if any) as may then be
established under the Company's then existing severance and benefits plans and
policies at the time of such Disability or death or under the terms of
Employee's employment agreement with the Company.
(b) Termination apart from Change of Control. In the event
Employee's employment terminates for any reason, either prior to the occurrence
of a Change of Control or after the 12-month period following the effective
date of a Change of Control, then Employee shall not be entitled to receive any
severance payments under this Agreement. Employee's benefits will be terminated
under the terms of the Company's then existing benefit plans and policies in
accordance with such plans and policies in effect on the date of termination or
in accordance with Employee's employment agreement with the Company.
(c) Medical Benefits. In the event Employee is entitled to
severance benefits pursuant to subsection 2(a)(ii), then in addition to such
severance benefits, Employee shall receive 100% Company-paid health insurance
coverage as provided to such Employee (and his or her dependents, if applicable)
immediately prior to Employee's termination (the "Company-Paid Coverage").
Company-paid Coverage shall continue for twelve (12) months following
termination or until Employee becomes covered under another employer's group
health insurance plan, whichever occurs first. For purposes of the continuation
health coverage required under the Consolidated Omnibus Budget Reconciliation
Act of 1985, as amended, (COBRA), date of the "qualifying event" giving rise to
Employee's COBRA election period (and that of his "qualifying
beneficiaries")shall be the last date on which Employee receives Company-Paid
Coverage under this Agreement.
-2-
<PAGE> 3
(d) Stock Options and Restricted Stock. In the event Employee is
entitled to severance benefits pursuant to subsection 2(a)(ii), each stock
option exercisable for shares of the Company's Common Stock held by Employee
shall become immediately vested on Employee's termination date and shall be
exercisable in full in accordance with the provisions of the Plan and Option
Agreement pursuant to which such option was granted. Employee shall have the
right to request an extension of the exercise period of each such stock option
for a period of one (1) year following the later of the end of the Severance
Period or the expiration of a lock-up agreement imposed on the Company's
optionees at the time of Employee's termination. In addition, each share of the
Company's Common Stock held by Employee that is subject to a repurchase option
held by the Company shall become immediately vested on such date.
(e) Forgiveness of Loans. In the event Employee is entitled to
severance benefits pursuant to subsection 2(a)(ii), any and all outstanding
loans shall be forgiven in their entirety. Any and all security for such loans
shall also be rendered free and clear on any claims, liens, or encumbrances.
This provision shall apply to all loans with Employee in existence as of the
effective date of this agreement and any future loans unless forgiveness of such
future loans under the conditions contained herein are expressly prohibited by
the terms and conditions of such future loans.
3. Definition of Terms. The following terms referred to in this
Agreement shall have the following meanings:
(a) Change, of Control. "Change of Control" shall mean the
occurrence of any of the following events:
(i) Ownership. Any "Person" (as such term is used in
Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended) is
or becomes the "beneficial owner" (as defined in Rule l3d-3 under said Act),
directly or indirectly, of securities of the Company representing fifty percent
(50%) or more of the total voting power represented by the Company's then
outstanding voting securities without the approval of the Board of Directors of
the Company; or
(ii) Merger/Sale of Assets. A merger or consolidation of
the Company whether or not approved by the Board of Directors of the Company,
other than a merger or consolidation which would result in the voting securities
of the Company outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting securities of
the surviving entity) at least fifty percent (50%) of the total voting power
represented by the voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation, or the shareholders
of the Company approve a plan of complete liquidation of the Company or an
agreement for the sale or disposition by the Company of all or substantially all
of the Company's assets.
(iii) Change in Board Composition. A change in the
composition of the Board of Directors of the Company, as a result of which fewer
than a majority of the directors are Incumbent Directors. "Incumbent Directors"
shall mean directors who either (A) are directors of the Company as of the date
hereof or (B) are elected, or nominated for election, to the Board of Directors
of the Company with the affirmative votes of at least a majority of the
Incumbent Directors at the time of such election or nomination (but shall not
include an individual whose election or nomination is in connection with an
actual or threatened proxy contest relating to the election of directors to the
Company).
-3-
<PAGE> 4
(b) Cause. "Cause" shall mean (i) material and willful breach of
any material terms of this Agreement, (ii) a material and willful violation of
any federal or state law, (iii) fraud, (iv) repeated unexplained or unjustified
absence, (v) willful breach of fiduciary duty under applicable laws, this
Agreement or Company policies first in effect prior to the occurrence of a
Change in Control or (vi) gross negligence or willful misconduct where such
gross negligence or willful misconduct has resulted or is likely to result in
substantial and material damage to the Company or its subsidiaries.
(c) Involuntary Termination. "Involuntary Termination" will
include Employee's voluntary termination, upon 30 days prior written notice to
the Company, following (i) a material reduction in job responsibilities
inconsistent with Employee's position with the Company and Employee's prior
responsibilities, as determined by the Compensation Committee of the Company's
Board of Directors, without Employee's express written consent; (ii) a reduction
by the Company in the annual base compensation of Employee as in effect
immediately prior to such reduction, without Employee's express written consent;
(iii) Employee's refusal to relocate to a facility or location more than 50
miles from the Company's current location; or (iv) any purported termination of
Employee by the Company which is not effected for Disability or for cause, or
for which the grounds relied upon are not valid.
(d) Disability. "Disability" shall mean that Employee has been
unable to perform his duties under this Agreement as the result of his or her
incapacity due to physical or mental illness, and such inability, at least 26
weeks after its commencement, is determined to be total and permanent by a
physician selected by the Company or its insurer and acceptable to Employee or
Employee's legal representatives (such agreement as to acceptability not to be
unreasonably withheld).
4. Limitation on Payments. To the extent that any of the payments
or benefits provided for in this Agreement or otherwise payable to Employee
constitute "parachute payments" within the meaning of Section 280G of the
Internal Revenue Code of 1986, as amended (the "Code") and, but for this Section
5, would be subject to the excise tax imposed by Section 4999 of the Code, the
Company shall reduce the aggregate amount of such payments and benefits such
that the present value thereof (as determined under the Code and the applicable
regulations) is equal to 2.99 times Employee's "base amount" as defined in
Section 280G(b)(3) of the Code.
5. Successors. Any successor to the Company (whether direct or
indirect and whether by purchase, lease, merger, consolidation, liquidation or
otherwise) to all or substantially all of the Company's business and/or assets
shall assume the obligations under this Agreement and agree expressly to perform
the obligations under this Agreement in the same manner and to the same extent
as the Company would be required to perform such obligations in the absence of a
succession. The terms of this Agreement and all of Employee's rights hereunder
shall inure to the benefit of, and be enforceable by, Employee's personal or
legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees.
6. Notice. Notices and all other communications contemplated by
this Agreement shall be in writing and shall be deemed to have been duly given
when personally delivered or when mailed by U.S. registered or certified mail,
return receipt requested and postage prepaid. Mailed notices to Employee shall
be addressed to Employee at the home address which Employee most recently
communicated to the Company in writing. In the case of the Company, mailed
notices shall be addressed to its corporate headquarters, and all notices shall
be directed to the attention of its Secretary.
-4-
<PAGE> 5
7. Miscellaneous Provisions.
(a) No Duty to Mitigate. Employee shall not be required to
mitigate the amount of any payment contemplated by this Agreement (whether by
seeking new employment or in any other manner), nor, except as otherwise
provided in this Agreement, shall any such payment be reduced by any earnings
that Employee may receive from any other source.
(b) Waiver. No provision of this Agreement shall be modified,
waived or discharged unless the modification, waiver or discharge is agreed to
in writing and signed by Employee and by an authorized officer of the Company
(other than Employee). No waiver by either party of any breach of, or of
compliance with, any condition or provision of this Agreement by the other party
shall be considered a waiver of any other condition or provision or of the same
condition or provision at another time.
(c) Whole Agreement. No agreements, representations or
understandings (whether oral or written and whether express or implied) which
are not expressly set forth in this Agreement have been made or entered into by
either party with respect to the subject matter hereof.
(d) Choice of Law. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of
California without reference to conflict of laws provisions.
(e) Severability. If any term or provision of this Agreement or
the application thereof to any circumstance shall, in any jurisdiction and to
any extent, be invalid or unenforceable, such term or provision shall be
ineffective as to such jurisdiction to the extent of such invalidity or
unenforceability without invalidating or rendering unenforceable the remaining
terms and provisions of this Agreement or the application of such terms and
provisions to circumstances other than those as to which it is held invalid or
unenforceable, and a suitable and equitable term or provision shall be
substituted therefor to carry out, insofar as may be valid and enforceable, the
intent and purpose of the invalid or unenforceable term or provision.
(f) Arbitration. Any dispute or controversy arising under or in
connection with this Agreement may be settled at the option of either party by
binding arbitration in the County of Contra Costa, California, in accordance
with the rules of the American Arbitration Association then in effect. Judgment
may be entered on the arbitrator's award in any court having jurisdiction.
Punitive damages shall not be awarded.
(g) Legal Fees and Expenses. The parties shall each bear their
own expenses, legal fees and other fees incurred in connection with this
Agreement.
(h) No Assignment of Benefits. The rights of any person to
payments or benefits under this Agreement shall not be made subject to option or
assignment, either by voluntary or involuntary assignment or by operation of
law, including (without limitation) bankruptcy, garnishment, attachment or other
creditor's process, and any action in (h) shall be void.
(i) "Employment Taxes. All payments made pursuant to this
Agreement will be subject to withholding of applicable income and employment
taxes.
(j) Assignment by the Company. The Company may assign its rights
under this Agreement to an affiliate, and an affiliate may assign its rights
under this Agreement
-5-
<PAGE> 6
to another affiliate of the Company or to the Company; provided, however, that
no assignment shall be made if the net worth of the assignee is less than the
net worth of the Company at the time of assignment. In the case of any such
assignment, the term "Company" when used in a section of this Agreement shall
mean the corporation that actually employs Employee.
(k) Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which together will
constitute one and the same instrument.
IN WITNESS WHEREOF, each of the parties has executed this
Agreement, in the case of the Company by its duly authorized officer, as of the
day and year first above written.
RIBOGENE, INC.
By [SIGNATURE] [SIGNATURE]
------------------------------- -------------------------------
Charles J. Casamento
Title: VP Finance & Administration
-------------------------------
By Order of The Board of
Directors
-6-
<PAGE> 1
Exhibit 10.11
[RIBOGENE, INC. LOGO]
May 6, 1994
Ms. Laura S. L. Gaeta
3226 Rim Rock Circle
Olivenbain, CA 92024
Dear Laura:
On behalf of RiboGene, Inc. I am pleased to offer you the position of Vice
President of Drug Discovery. I look forward to a mutually profitable and
productive relationship as we build the company together.
The terms of your employment relationship with the Company will be as set forth
below.
1. POSITION. You will be Vice President of Drug Development, reporting to the
Chairman, President and CEO (and you will be a corporate officer).
2. COMPENSATION
a. BASE SALARY. You will be paid a base annual salary of $125,000 payable
in two equal payments per month, pursuant to the Company's regular payroll
policy.
b. ANNUAL REVIEW. Your base salary will be reviewed at the end of this
year, and thereafter annually as part of the Company's normal salary
review process.
3. STOCK OPTIONS
a. At its first meeting following the commencement of your employment with
the Company, the Board of Directors will grant you an incentive stock
option to purchase 80,000 shares of the Company's Common Stock at fair
market value on the date of grant. One eighth of the grant will vest after
six months of employment and thereafter options will vest at the rate of
1/48th of the total grant on each monthly anniversary of your continued
employment with the Company. Your grant will be fully vested after four
years.
21375 Cabot Boulevard Hayward, CA 94545 510-732-5551 510-293-2596 Fax
<PAGE> 2
Letter from C. Casamento
Page Two
b. STOCK OPTION BONUS PLAN. The Board of Directors has initiated a stock
option bonus plan to be granted at the beginning of each calendar year. The
number of shares will be based on each individual's performance the
previous year and will be an amount up to 15% of the individual's then
current number of option shares. You will be participating in this plan.
4. RELOCATION EXPENSES
a. EXPENSE REIMBURSEMENT. The company will reimburse up to but not
exceeding $35,000 for actual out-of-pocket expenses in excess of the
first $50,000 in expenses for relocation, including legal expenses,
expenses incurred in purchasing a home (such as loan fees) and moving
expenses.
Reimbursement of expenses that are not tax-deductible will be "grossed-up"
in the amount of taxes that will be payable as a consequence of the
reimbursement.
5. BENEFITS. You will participate in the Company benefit plans, such as life
insurance, medical and dental insurance, disability insurance, vacation
and 401K Plan, as provided to all Company employees.
Except as described above, your employment with the Company will be on an "at
will" basis, meaning that either you or the Company may terminate your
employment at any time for any reason or no reason. Like all Company employees,
you will be required to sign the Company's Standard Agreement relating to
protection of the Company's Standard Agreement relating to protection of the
Company's proprietary and confidential information and assignment of inventions.
Laura, I feel you will make a significant contribution to RiboGene. Together
with the entire RiboGene management team, I look forward to sharing with you the
many challenges and rewards as we become a scientific and commercial success.
Please indicate your acceptance by signing and returning the enclosed copy of
this letter.
Sincerely,
/s/ CHARLES J. CASAMENTO
Charles J. Casamento
CJC:slb
Accepted and Agreed:
/s/ LAURA S. L. GAETA
---------------------------------
Laura S. L. Gaeta
<PAGE> 1
Exhibit 10.12
RIBOGENE, INC.
[VICE PRESIDENTS AND DIRECTORS]
CHANGE OF CONTROL AGREEMENT
This Change of Control Agreement (the "Agreement") is made and entered
into effective as of July 20 l995, by and between Laura S.L. Gaeta ("Employee")
and Ribogene, Inc., a California corporation (the "Company").
RECITALS
A. It is expected that another company or other entity may from time to
time consider the possibility of acquiring the Company or that a change in
control may otherwise occur, with or without the approval of the Company's
Board of Directors (the "Board"). The Board recognizes that such consideration
can be a distraction to Employee and can cause Employee to consider alternative
employment opportunities. The Board has determined that it is in the best
interests of the Company and its shareholders to assure that the Company will
have the continued dedication and objectivity of Employee, not withstanding the
possibility, threat or occurrence of a Change of Control (as defined below) of
the Company.
B. The Board believes that it is in the best interests of the Company
and its shareholders to provide Employee with an incentive to continue his or
her employment with the Company.
C. The Board believes that it is imperative to provide Employee with
certain benefits upon termination of Employee's employment in connection with a
Change of Control, which benefits are intended to provide Employee with
financial security and provide sufficient income and encouragement to Employee
to remain with the Company not the possibility of a Change of Control.
D. To accomplish the foregoing objectives, the Board of Directors has
directed the Company, upon execution of this Agreement by Employee, to agree to
the terms provided in this Agreement.
E. Certain capitalized terms used in the Agreement are defined in
Section 4 below.
In consideration of the mutual covenants herein contained, and in
consideration of the continuing employment of Employee by the Company, the
parties agree as follows:
1 . At-Will Employment. The Company and Employee acknowledge that
Employee's employment is and shall continue to be at-will, as defined under
applicable law. If Employees employment terminates for any reason, including
(Without limitation) any termination prior to a Change of Control, Employee
shall not be entitled to any payments,
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<PAGE> 2
benefits, damages, awards or compensation other than as provided by this
Agreement, or as may otherwise be available in accordance with another agreement
in place between Employee and the Company or with the Company's established
employee plans and written policies at the time of termination. The terms of
this Agreement shall terminate upon the earlier of (i) the date that all
obligations of the parties hereunder have been satisfied, (ii) June ___, 2000,
or (iii) twelve (12) months after a Change of Control. A termination of the
terms of this Agreement pursuant to the preceding sentence shall be effective
for all purposes, except that such termination shall not affect the payment or
provision of compensation or benefits on account of a termination of employment
occurring prior to the termination of the terms of this Agreement.
2. Severance Benefits.
(a) Termination Following A Change of Control. Subject to Section
5 below, if Employee's employment with the Company is terminated at any time
within 12 months after a Change of Control or if employment is terminated prior
to, but in contemplation of a Change of Control, then Employee shall be entitled
to receive severance benefits as follows:
(i) Voluntary Resignation. If the Employee voluntarily
resigns from the Company (other than as an Involuntary Termination (as defined
below) or if the Company terminates the Employee's employment for Cause (as
defined below)), then the Employee shall not be entitled to receive severance
payments under this Agreement. Employee's benefits will be terminated under the
terms of the Company`s then existing benefit plans and policies in accordance
with such plans and policies in effect on the date of termination or in
accordance with Employee's employment agreement with the Company.
(ii) Involuntary Termination. If Employee's employment is
terminated as a result of Involuntary Termination other than for Cause, Employee
shall be entitled to receive a lump sum severance payment equal to six (6)
months (the "Severance Period") of the salary which Employee was receiving
immediately prior to the Change of Control or as determined by Employee's
employment agreement with the Company.
(iii) Involuntary Termination for Cause. If Employee's
employment is terminated for Cause, then Employee shall not be entitled to
receive severance payments under this Agreement. Employee's benefits will be
terminated under the terms of the Company's then existing benefit plans and
policies in accordance with such plans and policies in effect on the date of
termination.
(iv) Disability; Death. If the Company terminates
Employee's employment as a result of Employee's Disability, or Employee's
employment is terminated due to the death of Employee, then Employee shall not
be entitled to receive severance or other benefits except for those (if any) as
may then be established under the Company's then existing severance and benefits
plans and policies at the time of such Disability or death or under the terms of
Employee's employment agreement with the Company.
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<PAGE> 3
(b) Termination Apart from Change of Control. In the event
Employee's employment terminates for any reason, either prior to the occurrence
of a Change of Control or after the 12-month period following the effective date
of a Change of Control, then Employee shall not be entitled to receive any
severance payments under this Agreement Employee's benefits will be terminated
under the terms of the Company's then existing benefit plans and policies in
accordance with such plans and policies in effect on the date of termination or
in accordance with Employee's employment agreement with the Company.
(c) Medical Benefits. In the event Employee is entitled to
severance benefits pursuant to subsection 2(a)(ii), then in addition to such
severance benefits, Employee shall receive 100% Company-paid health insurance
coverage as provided to such Employee (and his or her dependents, if applicable)
immediately prior to Employee's termination (the "Company-Paid Coverage").
Company-Paid Coverage shall continue for six (6) months following termination or
until Employee becomes covered under another employer's group health insurance
plan, whichever occurs first. For purposes of the continuation health coverage
required under the Consolidated Omnibus Budget Reconciliation Act of 1985, as
amended ("COBRA"), the date of the "qualifying event" giving rise to Employee's
COBRA election period (and that of his "qualifying beneficiaries") shall be the
last date on which Employee receives Company-Paid Coverage under this Agreement.
(d) Stock Options. In the event Employee is entitled to severance
benefits pursuant to subsection 2(a)(ii), each stock option held by Employee
exercisable for shares of the Company's Common Stock shall be immediately
vested for an additional six (6) months as of the date of Employee's termination
of employment. In addition, Employee shall have the right to request extension
of the exercise period of each stock option exercisable for shares of the
Company's Common Stock held by Employee for a period of up to one (1) year
following the later of the end of the Severance Period or the expiration of a
lock-up agreement imposed on the Company's optionees at the time of Employee's
termination. Each such stock option shall otherwise remain exercisable in
accordance with the provisions of the plan and option agreement pursuant to
which the option was granted.
3. Definition of Terms. The following terms referred to in this
Agreement shall have the following meanings:
(a) Change of Control. "Change of Control" shall mean the
occurrence of any of the following events:
(i) Ownership. Any "person" (as such term is used in
Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended)
is or becomes the "beneficial owner" (as defined in Rule 13d-3 under said
Act), directly or indirectly, of securities of the Company representing fifty
percent (50%) or more of the total voting power represented by the Company's
then outstanding voting securities [without the approval of the Board of
Directors of the Company]; or
(ii) Merger/Sale of Assets. A merger or consolidation of
the Company whether or not approved by the Board of Directors of the Company,
other than
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<PAGE> 4
a merger or consolidation which would result in the voting securities of the
Company outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) at least fifty percent (5O%) of the total voting power
represented by the voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation, or the shareholders
of the Company approve a plan of complete liquidation of the Company or an
agreement for the sale or disposition by the Company of all or substantially all
of the Company's assets.
(iii) Change in Board Composition. A change in the
composition of the Board of Directors of the Company, as a result of which fewer
than a majority of the directors are Incumbent Directors. "Incumbent Directors"
shall mean directors who either (A) are directors of the Company as of the date
hereof or (B) are elected, or nominated for election, to the Board of Directors
of the Company with the affirmative votes of at least a majority of the
Incumbent Directors at the time of such election or nomination (but shall not
include an individual whose election or nomination is in connection with an
actual or threatened proxy contest relating to the election of directors to the
Company).
(b) Cause. "Cause" shall mean (i) material and willful breach of
any material terms of this Agreement, (ii) a material and willful violation of
any federal or state law, (iii) fraud, (iv) repeated unexplained or unjustified
absence, (v) willful breach of fiduciary duty under applicable laws, this
Agreement or Company policies first in effect prior to the occurrence of a
Change in Control or (vi) gross negligence or willful misconduct where such
gross negligence or willful misconduct has resulted or is likely to result in
substantial and material damage to the Company or its subsidiaries.
(c) Involuntary Termination. "Involuntary Termination" will
include Employee's voluntary termination, upon 30 days prior written notice to
the Company, with Employee's position following (i) a material reduction in job
responsibilities inconsistent with the Company and Employee's prior
responsibilities, as determined by the Compensation Committee of the Company's
Board of Directors without Employee's express written consent; (ii) a reduction
by the Company in the annual base compensation of Employee as in effect
immediately prior to such reduction, without Employee's express written consent;
(ii) Employee's refusal to relocate to a facility or location more than 50 miles
from the Company's current location; or (iv) any purported termination of
Employee by the Company which is not effected for Disability or for cause, or
for which the grounds relied upon are not valid.
(d) Disability. "Disability" shall mean that Employee has been
unable to perform his duties under this Agreement as the result of his or her
incapacity due to physical or mental illness, and such inability, at least 26
weeks after its commencement, is determined to be total and permanent by a
physician selected by the Company or its insurer and acceptable to Employee or
Employee's legal representatives (such agreement as to acceptability not to be
unreasonably witheld).
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<PAGE> 5
4. Limitation on Payments. To the extent that any of the payments or
benefits provided for in this Agreement or otherwise payable to Employee
constitute "parachute payments" within the meaning of Section 28OG of the
Internal Revenue Code of 1986, as amended (the "Code") and, but for this Section
5, would be subject to the excise tax imposed by Section 4999 of the Code, the
Company shall reduce the aggregate amount of such payments and benefits such
that the present value thereof (as determined under the Code and the applicable
regulations) is equal to 2.99 times Employee's "base amount" as defined in
Section 28OG(b)(3) of the Code.
5. Successors, Any successor to the Company (whether direct or indirect
and whether by purchase, lease, merger, consolidation, liquidation or
otherwise) to all or substantially all of the Company's business and/or assets
shall assume the obligations under this Agreement and agree expressly to perform
the obligations under this Agreement in the same manner and to the same extent
as the Company would be required to perform such obligations in the absence of a
succession. The terms of this Agreement and all of Employee's rights hereunder
shall inure to the benefit of, and be enforceable by, Employee's personal or
legal representatives, executors, administrators, successors, heirs,
distributees, devisees, and legatees.
6. Notice. Notices and all other communications contemplated by this
Agreement shall be in writing and shall be deemed to have been duly given when
personally delivered or when mailed by U.S. registered or certified mail, return
receipt requested and postage prepaid. Mailed notices to Employee shall be
addressed to Employee at the home address which Employee most recently
communicated to the Company in writing. In the case of the Company, mailed
notices shall be addressed to its corporate headquarters, and all notices shall
be directed to the attention of its Secretary.
7. Miscellaneous Provisions.
(a) No Duty to Mitigate. Employee shall not be required to
mitigate the amount of any payment contemplated by this Agreement (whether by
seeking new employment or in any other manner), nor, except as otherwise
provided in this Agreement, shall any such payment be reduced by any earnings
that Employee may receive from any other source.
(b) Waiver. No provision of this Agreement shall be modified,
waived or discharged unless the modification, waiver or discharge is agreed to
in writing and signed by Employee and by an authorized officer of the Company
(other than Employee). No waiver by either party of any breach of, or of
compliance with, any condition or provision of this Agreement by the other party
shall be considered a waiver of any other condition or provision or of the same
condition or provision at another time.
(c) Whole Agreement. No agreements, representations or
understandings (whether oral or written and whether express or implied) which
are not expressly set forth in this Agreement have been made or entered into by
either party with respect to the subject matter hereof.
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<PAGE> 6
(d) Choice of Law. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of
California without reference to conflict of laws provisions.
(e) Severabilty. If any term or provision of this Agreement or
the application thereof to any circumstance shall, in any jurisdiction and to
any extent, be invalid or unenforceable, such term or provision shall be
ineffective as to such jurisdiction to the extent of such invalidity or
unenforceability without invalidating or rendering unenforceable the remaining
terms and provisions of this Agreement or the application of such terms and
provisions to circumstances other than those as to which it is held invalid or
unenforceable, and a suitable and equitable term or provision shall be
substituted therefor to carry out, insofar as may be valid and enforceable, the
intent and purpose of the invalid or unenforceable term or provision.
(f) Arbitration. Any dispute or controversy arising under or in
connection with this Agreement may be settled at the option of either party by
binding arbitration in the County of Contra Costa, California, in accordance
with the rules of the American Arbitration Association then in effect. Judgment
may be entered on the arbitrator's award in any court having jurisdiction.
Punitive damages shall not be awarded.
(g) Legal Fees and Expenses. The parties shall each bear their
own expenses, legal fees and other fees incurred in connection with this
Agreement.
(h) No Assignment of Benefits. The rights of any person to
payments or benefits under this Agreement shall not be made subject to option or
assignment, either by voluntary or involuntary assignment or by operation of
law, including (without limitation) bankruptcy, garnishment, attachment or other
creditor's process, and any action in violation of this subsection (h) shall be
void.
(i) Employment Taxes. All payments made pursuant to this
Agreement will be subject to withholding of applicable income and employment
taxes.
Assignment by Company. The Company may assign its rights under this
Agreement to an affiliate, and an affiliate may assign its rights under this
Agreement to another affiliate of the Company or to the Company; provided,
however, that no assignment shall be made if the net worth of the assignee is
less than the net worth of the Company at the time of assignment. In the case of
any such assignment, the term "Company" when used in a section of this Agreement
shall mean the corporation that actually employs Employee.
(k) Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which together will
constitute one and the same instrument
IN WITNESS WHEREOF, each of the parties has executed this Agreement, in
the case of the Company by its duly authorized officer, as of the day and year
first above written.
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<PAGE> 7
Laura S.L. Gaeta
RIBOGENE, INC. -------------------------------
(Name of Employee}
By: [SIG] By: [SIG]
---------------------------- -------------------------------
Timothy E. Morris.
Title: V.P. of Finance & Administration
-------------------------------------
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<PAGE> 1
Exhibit 10.13
[RIBOGENE LOGO]
Charles J. Casamento
Chairman, President & CEO
April 6, 1995
Timothy E. Morris, C.P.A.
2040 Goldenrod Lane
San Ramon, CA 94583
Dear Tim:
On behalf of RiboGene, Inc. I am pleased to offer you the position of Vice
President, Finance and Administration. I look forward to a mutually profitable
and productive relationship as we build the Company together.
The terms of your employment relationship with the Company will be as set forth
below.
1. POSITION. You will be Vice President, Finance & Administration,
reporting to the Chairman, President and CEO, (and you will be a
corporate officer).
2. Compensation
a. BASE SALARY. You will be paid a base annual salary of $135,000
payable in two equal payments per month, pursuant to the Company's
regular payroll policy.
b. ANNUAL REVIEW. Your base salary will be reviewed at the end of this
year, and thereafter annually as part of the Company's normal salary
review process.
3. STOCK OPTIONS
a. At its first meeting following the commencement of your employment
with the Company, the Board of Directors will grant you an incentive
stock option to purchase 80,000 shares of the Company's Common Stock at
fair market value on the date of grant. One eighth of the grant will
vest after six months of employment and thereafter options will vest at
the rate of 1/48th of the total grant on each monthly anniversary of
your continued employment with the Company. Your grant will be fully
vested after four years.
<PAGE> 2
b. STOCK OPTION BONUS PLAN. The Board of Directors has initiated
a stock option bonus plan to be granted at the beginning of each calendar year.
The number of shares will be based on each individual's performance the
previous year and will be an amount up to 15% of the individual's then current
number of option shares. You will be participating in this plan.
5. BENEFITS. You will participate in the Company benefit plans, such as
life insurance, medical and dental insurance, disability insurance, vacation
and 401K Plan, as provided to all Company employees.
6. SEVERANCE AGREEMENT. In the event of termination of your employment
with the Company other than for cause, you will be entitled to receive salary
continuation for six months following your termination date.
Except as described above, your employment with the Company will be on an "at
will" basis, meaning that either you or the Company may terminate your
employment at any time for any reason or no reason. Like all Company employees,
you will be required to sign the Company's Standard Agreement relating to
protection of the Company's proprietary and confidential information and
assignment of inventions.
Tim, I feel you will make a significant contribution to RiboGene. Together with
the entire RiboGene management team, I look forward to sharing with you the
many challenges and rewards as we become a scientific and commercial success.
Please indicate your acceptance by signing and returning the enclosed copy of
this letter.
Sincerely,
RiboGene, Inc.
Charles J. Casamento
Chairman, President and CEO
CJC:slb
Accepted and Agreed:
/s/ Timothy E. Morris
-------------------------------
Timothy E. Morris
<PAGE> 1
Exhibit 10.14
RIBOGENE, INC
[VICE PRESIDENTS AND DIRECTORS]
CHANGE OF CONTROL AGREEMENT
This Change of Control Agreement (the "Agreement") is made and entered
into effective as of June 30, 1995, by and between Timothy E. Morris
("Employee") and Ribogene, Inc., a California corporation (the "Company").
RECITALS
A. It is expected that another company, or other entity may from time
to time consider the possibility of acquiring the Company or that a change in
control may otherwise occur, with or without the approval of the Company's Board
of Directors (the "Board"). The Board recognizes that such consideration can be
a distraction to Employee and can cause Employee to consider alternative
employment opportunities. The Board has determined that it is in the best
interests of the Company and its shareholders to assure that the Company will
have the continued dedication and objectivity of Employee, notwithstanding the
possibility, threat or occurrence of a Change of Control (as defined below) of
the Company.
B. The Board believes that it is in the best interests of the Company
and its shareholders to provide Employee with an incentive to continue his or
her employment with the Company.
C. The Board believes that it is imperative to provide Employee with
certain benefits upon termination of Employee's employment in connection with a
Change of Control, which benefits are intended to provide Employee with
financial security and provide sufficient income and encouragement to Employee
to remain with the Company notwithstanding the possibility of a Change of
Control.
D. To accomplish the foregoing objectives, the Board of Directors has
directed the Company, upon execution of this Agreement by Employee, to agree to
the terms provided in this Agreement.
E. Certain capitalized terms used in the Agreement are defined in
Section 4 below.
In consideration of the mutual covenants herein contained, and in
consideration of the continuing employment of Employee by the Company, the
parties agree as follows:
1. At-Will Employment. The Company and Employee acknowledge that
Employee's employment is and shall continue to be at-will, as defined under
applicable law. If Employee's employment terminates for any reason, including
(without limitation) any termination prior to a Change of Control, Employee
shall not be entitled to any payments,
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<PAGE> 2
benefits, damages, awards or compensation other than as provided by this
Agreement, or as may otherwise be available in accordance with another agreement
in place between Employee and the Company or with the Company's established
employee plans and written policies at the time of termination. The terms of
this Agreement shall terminate upon the earlier of (i) the date that all
obligations of the parties hereunder have been satisfied, (ii) June __, 2000, or
(iii) twelve (12) months after a Change of Control. A termination of the terms
of this Agreement pursuant to the preceding sentence shall be effective for all
purposes, except that such termination shall not affect the payment or provision
of compensation or benefits on account of a termination of employment occurring
prior to the termination of the terms of this Agreement.
2. Severance Benefits.
(a) Termination Following A Change of Control. Subject to
Section 5 below, if Employee's employment with the Company is terminated at any
time within 12 months after a Change of Control or if employment is terminated
prior to, but in contemplation of a Change of Control, then Employee shall be
entitled to receive severance benefits as follows:
(i) Voluntary Registration. If the Employee voluntarily
resigns from the Company (other than as an involuntary Termination (as defined
below) or if the Company terminates the Employee's employment for Cause (as
defined below)), then the Employee shall not be entitled to receive severance
payments under this Agreement. Employee's benefits will be terminated under the
terms of the Company's then existing benefit plans and policies in accordance
with such plans and policies in effect on the date of termination or in
accordance with Employee's employment agreement with the Company.
(ii) Involuntary Termination. If Employee's employment
is terminated as a result of Involuntary Termination other than for Cause,
Employee shall be entitled to receive a lump sum severance payment equal to six
(6) months (the "Severance Period") of the salary which Employee was receiving
immediately prior to the Change of Control or as determined by Employee's
employment agreement with the Company.
(iii) Involuntary Termination for Cause. If Employee's
employment is terminated for Cause, then Employee shall not be entitled to
receive severance payments under this Agreement. Employee's benefits will be
terminated under the terms of the Company's then existing benefit plans and
policies in accordance with such plans and policies in effect on the date of
termination.
(iv) Disability; Death. If the Company terminates
Employee's employment as a result of Employee's Disability, or Employees
employment is terminated due to the death of Employee, then Employee shall not
be entitled to receive severance or other benefits except for those (if any) as
may then be established under the Company's then existing severance and benefits
plans and policies at the time of such Disability or death or under the terms of
Employee's employment agreement with the Company.
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<PAGE> 3
(b) Termination Apart from Change of Control. In the event
Employee's employment terminates for any reason, either prior to the occurrence
of a Change of Control or after the 12-month period following the effective date
of a Change of Control, then Employee shall not be entitled to receive any
severance payments under this Agreement. Employee's benefits will be terminated
under the terms of the Company's then existing benefit plans and policies in
accordance with such plans and policies in effect on the date of termination or
in accordance with Employee's employment agreement with the Company.
(c) Medical Benefits. In the event Employee is entitled to
severance benefits pursuant to subsection 2(a)(ii), then in addition to such
severance benefits, Employee shall receive 100% Company-paid health insurance
coverage as provided to such Employee (and his or her dependents, if applicable)
immediately prior to Employee's termination (the "Company-Paid Coverage").
Company-Paid Coverage shall continue for six (6) months following termination or
until Employee becomes covered under another employer's group health insurance
plan, whichever occurs first. For purposes of the continuation health coverage
required under the Consolidated Omnibus Budget Reconciliation Act of 1985, as
amended ("COBRA"), the date of the "qualifying event" giving rise to Employee's
COBRA election period (and that of his "qualifying beneficiaries") shall be the
last date on which Employee receives Company-Paid Coverage under this Agreement.
(d) Stock Options. In the event Employee is entitled to
severance benefits pursuant to subsection 2(a)(ii), each stock option held by
Employee exercisable for shares of the Company's Common Stock shall be
immediately vested for an additional six (6) months as of the date of Employee's
termination of employment. In addition, Employee shall have the right to request
extension of the exercise period of each stock option exercisable for shares of
the Company's Common Stock held by Employee for a period of up to one (1) year
following the later of the end of the Severance Period or the expiration of a
lock-up agreement imposed on the Company's optionees at the time of Employee's
termination. Each such stock option shall otherwise remain exercisable in
accordance with the provisions of the plan and option agreement pursuant to
which the option was granted.
3. Definition of Terms. The following terms referred to in this
Agreement shall have the following meanings:
(a) Change of Control. "Change of Control" shall mean the
occurrence of any of the following events:
(i) Ownership. Any "person" (as such term is used in
Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended) is
or becomes the "beneficial owner" (as defined in Rule 13d-3 under said Act),
directly or indirectly, of securities of the Company representing fifty percent
(50%) or more of the total voting power represented by the Company's then
outstanding voting securities [without the approval of the Board of Directors of
the Company]; or
(ii) Merger/Sale of Assets. A merger or consolidation
of the Company whether or not approved by the Board of Directors of the Company,
other than
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<PAGE> 4
a merger or consolidation which would result in the voting securities of the
Company outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) at least fifty percent (50%) of the total voting power
represented by the voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation, or the shareholders
of the Company approve a plan of complete liquidation of the Company or an
agreement for the sale or disposition by the Company of all or substantially all
of the Company's assets.
(iii) Change in Board Composition. A change in the
composition of the Board of Directors of the Company, as a result of which fewer
than a majority of the directors are Incumbent Directors. "Incumbent Directors"
shall mean directors who either (A) are directors of the Company as of the date
hereof or (B) are elected, or nominated for election, to the Board of Directors
of the Company with the affirmative votes of at least a majority of the
Incumbent Directors at the time of such election or nomination (but shall not
include an individual whose election or nomination is in connection with an
actual or threatened proxy contest relating to the election of directors to the
Company).
(b) Cause. "Cause" shall mean (i) material and willful
breach of any material terms of this Agreement, (ii) a material and willful
violation of any federal or state law, (iii) fraud, (iv) repeated unexplained or
unjustified absence, (v) willful breach of fiduciary duty under applicable laws,
this Agreement or Company policies first in effect prior to the occurrence of a
Change in Control or (vi) gross negligence or willful misconduct where such
gross negligence or willful misconduct has resulted or is likely to result in
substantial and material damage to the Company or its subsidiaries.
(c) Involuntary Termination. "Involuntary Termination" will
include Employee's voluntary termination, upon 30 days prior written notice to
the Company, following (i) a material reduction in job responsibilities
inconsistent with Employee's position with the Company and Employee's prior
responsibilities, as determined by the Compensation Committee of the Company's
Board of Directors, without Employee's express written consent; (ii) a reduction
by the Company in the annual base compensation of Employee as in effect
immediately prior to such reduction, without Employee's express written consent;
(iii) Employee's refusal to relocate to a facility or location more than 50
miles from the Company's current location; or (iv) any purported termination of
Employee by the Company which is not effected for Disability or for cause, or
for which the grounds relied upon are not valid.
(d) Disability. "Disability" shall mean that Employee
has been unable to perform his duties under this Agreement as the result of his
or her incapacity due to physical or mental illness, and such inability, at
least 26 weeks after its commencement, is determined to be total and permanent
by a physician selected by the Company or its insurer and acceptable to Employee
or Employee's legal representatives (such agreement as to acceptability not to
be unreasonably withheld).
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<PAGE> 5
4. Limitation on Payments. To the extent that any of the payments
or benefits provided for in this Agreement or otherwise payable to Employee
constitute "parachute payments" within the meaning of Section 280G of the
Internal Revenue Code of 1986, as amended (the "Code") and, but for this Section
5, would be subject to the excise tax imposed by Section 4999 of the Code, the
Company shall reduce the aggregate amount of such payments and benefits such
that the present value thereof (as determined under the Code and the applicable
regulations) is equal to 2.99 times Employee's "base amount" as defined in
Section 280G(b)(3) of the Code.
5. Successors. Any successor to the Company (whether direct or
indirect and whether by purchase, lease, merger, consolidation, liquidation or
otherwise) to all or substantially all of the Company's business and/or assets
shall assume the obligations under this Agreement and agree expressly to perform
the obligations under this Agreement in the same manner and to the same extent
as the Company would be required to perform such obligations in the absence of a
succession. The terms of this Agreement and all of Employee's rights hereunder
shall inure to the benefit of, and be enforceable by, Employee's personal or
legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees.
6. Notice. Notices and all other communications contemplated by
this Agreement shall be in writing and shall be deemed to have been duly given
when personally delivered or when mailed by U.S. registered or certified mail
return receipt requested and postage paid. Mailed notices to Employee shall be
addressed to Employee at the home address which Employee most recently
communicated to the Company in writing. In the case of the Company, mailed
notices shall be addressed to its corporate headquarters, and all notices shall
be directed to the attention of its Secretary.
7. Miscellaneous Provisions.
(a) No Duty to Mitigate. Employee shall not be required to
mitigate the amount of any payment contemplated by this Agreement (whether by
seeking new employment or in any other manner), nor, except as otherwise
provided in this Agreement, shall any such payment be reduced by any earnings
that Employee may receive from any other source.
(b) Waiver. No provision of this Agreement shall be
modified, waived or discharged unless the modification, waiver or discharge is
agreed to in writing and signed by Employee and by an authorized officer of the
Company (other than Employee). No waiver by either party of any breach of, or of
compliance with, any condition or provision of this Agreement by the other party
shall be considered a waiver of any other condition or provision or of the same
condition or provision at another time.
(c) Whole Agreement. No agreements, representations or
understandings (whether oral or written and whether express or implied) which
are not expressly set forth in this Agreement have been made or entered into by
either party with respect to the subject matter hereof.
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<PAGE> 6
(d) Choice of Law. The validity, interpretation,
construction and performance of this Agreement shall be governed by the laws of
the State of California without reference to conflict of laws provisions.
(e) Severability. If any term or provision of this Agreement
or the application thereof to any circumstance shall, in any jurisdiction and to
any extent, be invalid or unenforceable, such term or provision shall be
ineffective as to such jurisdiction to the extent of such invalidity or
unenforceability without invalidating or rendering unenforceable the remaining
terms and provisions of this Agreement or the application of such terms and
provisions to circumstances other than those as to which it is held invalid or
unenforceable, and a suitable and equitable term or provision shall be
substituted therefor to carry out, insofar as may be valid and enforceable, the
intent and purpose of the invalid or unenforceable term or provision.
(f) Arbitration. Any dispute or controversy arising under or
in connection with this Agreement may be settled at the option of either party
by binding arbitration in the County of Contra Costa, California, in accordance
with the rules of the American Arbitration Association then in effect. Judgment
may be entered on the arbitrator's award in any court having jurisdiction.
Punitive damages shall not be awarded.
(g) Legal Fees and Expenses. The parties shall each bear
their own expenses, legal fees and other fees incurred in connection with this
Agreement.
(h) No Assignment of Benefits. The rights of any person to
payments or benefits under this Agreement shall not be made subject to option or
assignment, either by voluntary or involuntary assignment or by operation of
law, including (without limitation) bankruptcy, garnishment, attachment or other
creditor's process, and any action in violation of this subsection (h) shall be
void.
(i) Employment Taxes. All payments made pursuant to this
Agreement will be subject to withholding of applicable income and employment
taxes.
(j) Assignment by Company. The Company may assign its rights
under this Agreement to an affiliate, and an affiliate may assign its rights
under this Agreement to another affiliate of the Company or to the Company,
provided, however, that no assignment shall be made if the net worth of the
assignee is less than the net worth of the Company at the time of assignment. In
the case of any such assignment, the term "Company" when used in a section of
this Agreement shall mean the corporation that actually employs Employee.
(k) Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which
together will constitute one and the same instrument.
IN WITNESS WHEREOF, each of the parties has executed this Agreement, in
the case of the Company by its duly authorized officer, as of the day and year
first above written.
-6-
<PAGE> 7
RIBOGENE, INC. /s/ Timothy E. Morris
-----------------------------------------
[Name of Employee]
By: [SIGNATURE] By: Timothy E. Morris
-------------------------------- -------------------------------------
Title: CHAIRMAN, PRESIDENT & CEO
-----------------------------
-7-
<PAGE> 1
Exhibit 10.15
LEASE
BETWEEN
HAYWARD POINT EDEN I LIMITED PARTNERSHIP
("Landlord")
and
RIBOGENE, INC.
("Tenant")
TABLE OF CONTENTS
<TABLE>
<S> <C> <C> <C>
1. PREMISES
1.1. Premises................................................1
1.2. Landlord's Reserved Rights..............................1
1.3. First Refusal Right.....................................2
2. TERM................................................................2
2.1. Term....................................................2
2.2. Early Possession........................................3
2.3. Delay In Possession
2.4. Construction............................................4
2.5. Acknowledgement Of Lease Commencement...................4
2.6. Holding Over............................................5
2.7. Option To Extend Term...................................5
3. RENTAL..............................................................5
3.1. Minimum Rental..........................................5
3.2. Late Charge.............................................8
4. TAXES ..............................................................8
4.1. Personal Property.......................................8
4.2. Real Property...........................................8
5. OPERATING EXPENSES..................................................9
5.1. Payment Of Operating Expenses...........................9
5.2. Definition Of Operating Expenses........................9
5.3. Determination Of Operating Expenses....................10
5.4. Final Accounting For Lease Year........................10
5.5. Proration..............................................11
6. UTILITIES..........................................................11
6.1. Payment................................................11
6.2. Interruption...........................................11
7. ALTERATIONS........................................................12
7.1. Right To Make Alterations..............................12
7.2. Title To Alterations...................................12
7.3. Tenant Fixtures........................................12
7.4. No Liens...............................................12
</TABLE>
<PAGE> 2
<TABLE>
<S> <C> <C> <C>
8. MAINTENANCE AND REPAIRS............................................13
8.1. Landlord's Work........................................13
8.2. Tenant's Obligation for Maintenance....................13
(a) Good Order, Condition and Repair..................13
(b) Landlord's Remedy.................................13
(c) Condition Upon Surrender..........................13
9. USE OF PREMISES....................................................14
9.1. Permitted Use..........................................14
9.2. [Omitted.].............................................14
9.3. No Nuisance............................................14
9.4. Compliance With Laws...................................14
9.5. Liquidation Sales......................................15
9.6. Environmental Matters..................................15
10. INSURANCE AND INDEMNITY...........................................16
10.1. Insurance..............................................16
10.2. Quality of Policies and Certificates...................16
10.3. Workers' Compensation..................................16
10.4. Waiver of Subrogation..................................16
10.5. Increase In Premiums...................................17
10.6. Indemnification........................................17
10.7. Blanket Policy.........................................17
11. SUBLEASE AND ASSIGNMENT...........................................17
11.1. Assignment And Sublease Of Premises....................17
11.2. Rights Of Landlord.....................................18
12. RIGHT OF ENTRY AND QUIET ENJOYMENT................................18
12.1. Right Of Entry.........................................18
12.2. Quiet Enjoyment........................................19
13. CASUALTY AND TAKING...............................................19
13.1. Termination Or Reconstruction..........................19
13.2. Tenant's Rights........................................19
13.3. Lease To Remain In Effect..............................20
13.4. Reservation Of Compensation............................20
13.5. Restoration of Fixtures................................20
14. DEFAULT...........................................................20
14.1. Events Of Default......................................20
(a) Abandonment.......................................20
(b) Nonpayment........................................20
(c) Other Obligations............,....................20
(d) General Assignment................................21
(a) Bankruptcy........................................21
(f) Receivership......................................21
(g) Attachment........................................21
(h) Insolvency........................................21
14.2. Remedies Upon Tenant's Default.........................21
14.3. Remedies Cumulative....................................22
15. SUBORDINATION, ATTORNMENT AND SALE................................22
15.1. Subordination To Mortgage..............................22
15.2. Sale of Landlord's Interest............................23
15.3. Estoppel Certificates..................................23
15.4. Subordination To CC&R's................................23
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C> <C>
16. SECURITY..........................................................23
16.1. Deposit................................................23
17. MISCELLANEOUS.....................................................24
17.1. Notices................................................24
17.2. Successors And Assigns.................................25
17.3. No Waiver..............................................25
17.4. Severability...........................................25
17.5. Litigation Between Parties.............................25
17.6. Surrender..............................................25
17.7. Interpretation.........................................25
17.8. Entire Agreement.......................................25
17.9. Governing Law..........................................26
17.10. No Partnership.........................................26
17.11. Financial Information..................................26
17.12. Costs..................................................26
17.13. Time...................................................26
17.14. Rules And Regulations..................................26
17.15. Brokers................................................26
17.16. Memorandum Of Lease....................................26
17.17. Corporate Authority....................................27
17.18. Parking................................................27
17.19. Signage................................................27
17.20. Stock Warrants.........................................27
</TABLE>
EXHIBITS
A Location of Premises
B Real Property Description
C Construction
D Acknowledgement Of Lease Commencement
E Time Line
F Building Standard Specification
<PAGE> 4
LEASE
THIS LEASE is made and entered into as of the 7th day of March, 1997, by
and between HAYWARD POINT EDEN I LIMITED PARTNERSHIP, a Delaware limited
partnership ("Landlord") and RIBOGENE, INC., a California corporation
("Tenant").
THE PARTIES AGREE AS FOLLOWS:
1. PREMISES
1.1. Premises. Landlord leases to Tenant and Tenant hires and leases from
Landlord, on the terms, covenants and conditions hereinafter set forth, the
premises (the "Premises") designated in Exhibit A attached hereto and
incorporated herein by this reference, consisting of approximately 25,000 square
feet of space located within Building J (the "Building") in the BRITANNIA POINT
EDEN BUSINESS PARK (the "Center") in the City of Hayward, County of Alameda,
State of California, commonly known as 3980 Point Eden Way, Hayward, CA 94545.
The Center occupies the real property described in Exhibit B attached hereto and
incorporated herein by this reference (the "Property"); the Building occupies
Lot 3 of the Property. The Center presently consists of Buildings A, B, C, D, E,
F, G, H and K as shown on Exhibit A attached hereto; Building J is under
construction, and Buildings L, M and N are proposed to be constructed in the
future. Landlord also grants to Tenant, pursuant to this Lease, the
non-exclusive right to use any common areas of the Center as improved from time
to time for such purpose and as designated from time to time in any Declaration
of Covenants, Conditions and Restrictions or similar document affecting the
Property.
1.2. Landlord's Reserved Rights. Landlord reserves the right from time to
time to (i) install, use, maintain, repair and replace pipes, ducts, conduits,
wires and appurtenant meters and equipment for service to other parts of the
Building above the ceiling surfaces, below the floor surfaces, within the walls
or leading through the Premises in locations which will not materially interfere
with Tenant's use thereof, (ii) relocate any pipes, ducts, conduits, wires and
appurtenant meters and equipment included in the Premises which are so located
or located elsewhere outside the Premises, (iii) make alterations or additions
to the Building, (iv) construct, alter or add to other buildings or improvements
on the Property, (v) build adjoining to the Property, and (vi) lease any part of
the Property for the construction of improvements or buildings. Landlord may
modify or enlarge the common area, alter or relocate accesses to the Premises,
or alter or relocate any common facility. Prior to exercising any such rights,
Landlord shall give reasonable advance notice to Tenant (except in case of
emergency, in which event no advance notice shall be required but Landlord shall
use reasonable efforts to notify Tenant as soon as possible), which notice shall
be given not less than five (5) business days prior to entry (except in case of
emergency), shall not be required to be given more than thirty (30) days prior
to entry, and within that range shall precede the entry by a period of time
which is reasonably proportional to the extent of any disruption that Landlord's
entry will cause with respect to Tenant's business activities. Landlord shall
use reasonable diligence in pursuing and completing any work performed under
this Section 1.2. Landlord shall not exercise rights reserved to it pursuant to
this Section 1.2 in such a manner as to materially impair Tenant's ability to
conduct its activities in the normal manner; provided, however, that the
foregoing portion of this sentence shall not limit or restrict Landlord's right
to undertake reasonable construction activity and Tenant's use of the Premises
shall be subject to reasonable temporary disruption incidental to such activity
diligently prosecuted.
-1-
<PAGE> 5
1.3. First Refusal Right. Landlord gives Tenant, on the terms set forth
in this Section 1.3, a First Refusal Right with respect to (a) the adjacent
space of approximately 5,000 square feet in Building J, (b) the existing
Buildings F and D as shown on Exhibit A, and (c) Building M (still to be built)
as shown on Exhibit A. The areas described in clauses (a) through (c) of the
preceding sentence are collectively referred to herein as the "Option Space" and
are designated as such on Exhibit A. If Landlord intends during the term of this
Lease to lease all or any portion of the Option Space to a "New Tenant" (which
term shall mean any person or entity other than the tenant which leases such
portion of the Offered Space on the date hereof, an affiliate of such existing
tenant or a successor in interest to such existing tenant pursuant to a merger,
reorganization, assignment or other similar transaction), and if Tenant is not
then in default under this Lease, Landlord shall give written notice of such
intention to Tenant, specifying the material terms on which Landlord proposes to
lease the Option Space or portion thereof (the "Offered Space") to the New
Tenant, and shall offer to Tenant the opportunity to lease the Offered Space on
the terms specified in Landlord's notice. Tenant shall have ten (10) days after
the date of giving of such notice by Landlord in which to accept such offer by
written notice to Landlord. Upon such acceptance by Tenant, the Offered Space
shall be leased to Tenant on the terms set forth in Landlord's notice and on the
additional terms and provisions set forth herein (except to the extent
inconsistent with the terms set forth in Landlord's said notice) and the parties
shall promptly execute an amendment to this Lease adding the Offered Space to
the Premises and making any appropriate amendments to provisions of this Lease
to reflect different rent and other obligations applicable to the Offered Space
under the terms of Landlord's said notice. If Tenant requests that Landlord
agree to alter the terms for the Offered Space so that Tenant's lease of such
space would be coterminous with the term of this Lease, or requests any other
changes in, the terms specified in Landlord's said notice with respect to the
Offered Space, Landlord agrees to give reasonable consideration to such a
request, but Landlord shall not be obligated to agree to such a request and the
making of such request shall not extend the time period within which Tenant is
required to exercise its rights hereunder. If Tenant does not accept Landlord's
offer within the allotted time, Landlord shall thereafter have the right to
lease the Offered Space to a third party, at any time within one hundred eighty
(180) days after Tenant's failure to accept Landlord's offer, at a minimum
rental and on other terms and conditions not more favorable to the lessee than
the minimum rental and other terms offered to Tenant in Landlord's said notice.
If Tenant does not accept Landlord's offer and Landlord does not lease the
Offered Space to a third party within one hundred eighty (180) days, this First
Refusal Right shall reattach to that space. The intent of the parties with
respect to this Section 1.3 is that with respect to each portion of the Offered
Space that is presently leased to or occupied by an existing tenant, Tenant's
First Refusal Right shall be subject and subordinate to any and all rights now
held by or hereafter granted to such existing tenant (or to any affiliate of or
successor in interest to such tenant), regardless of whether pursuant to such
tenant's existing lease or pursuant to a lease extension or new lease negotiated
in the future, and that Tenant's First Refusal Right shall apply only when
Landlord elects to attempt to lease any portion of the Offered Space to a New
Tenant as defined herein.
2. TERM
2.1. Term.
(a) The term of this Lease shall commence on the earlier to occur
of (i) the date which is five (5) days after the date Landlord notifies Tenant
that Landlord's work pursuant to Section 2.4 and Exhibit C is substantially
complete, or (ii) the date Tenant takes occupancy of the Premises (except as
otherwise provided in Section 2.2), the earlier of such dates being herein
called the "Commencement Date," and shall and on the day immediately preceding
the date 180 Months thereafter, unless sooner terminated or extended (if
applicable) as hereinafter provided. Landlord
-2-
<PAGE> 6
will use its best endeavors to provide occupancy by October 1, 1997.
Notwithstanding the foregoing provisions, a Commencement Date established under
clause (i) of the first sentence of this subsection shall not occur unless and
until a certificate of occupancy has been issued for the Premises by the City of
Hayward, interior finish items to be constructed by Landlord have been completed
to a sufficient extent that the Premises may reasonably be used for their
intended purpose, all building systems (including HVAC, exhaust fans and hoods)
are operational, and all common area improvements on Lot 3 are substantially
complete.
(b) If, at any time after the eighth (8th) anniversary of the
Commencement Date, Landlord is unable to accommodate Tenant's expansion
requirements in accordance with the terms of this subsection, then,
notwithstanding any other provisions of this Lease, Tenant shall have the right
to terminate this Lease by written notice to Landlord, subject to satisfaction
of each of the following conditions: (i) Tenant shall not be in default with
respect to any of its obligations under this Lease at the time such notice is
given; (ii) Tenant's notice of exercise of such right shall be given to Landlord
at least one hundred eighty (180) days prior to the date of requested
termination; and (iii) Tenant shall pay to Landlord in cash, on or before the
termination date specified in Tenant's notice, an amount equal to the sum of (x)
six (6) months' minimum rental at the rate applicable under Section 3.1(a)
hereof for the six (6) months immediately preceding the specified termination
date, plus (y) six (6) months' additional rent at the rate applicable for
Operating Expenses under Article 5 hereof for the six (6) months immediately
preceding the specified termination date. If Tenant fails to comply strictly
with each of the foregoing conditions, any purported exercise of this early
termination right shall be null, void and of no force or effect. For purposes of
this Section 2.1(b), Landlord shall be deemed to be unable to accommodate
Tenant's expansion requirements only if Tenant has given written notice of such
requirements (defined in good faith and in reasonable detail as to the nature,
extent and timing thereof) to Landlord and either (A) Landlord has no space
available in the Center to offer to Tenant to meet such needs within a time
frame reasonably consistent with Tenant's needs as specified in its notice, or
(B) Landlord has such space available but, after reasonable, diligent and good
faith negotiations by both parties, the parties are unable to reach agreement,
within sixty (60) days after Tenant's notice, upon mutually acceptable terms for
the leasing of such space to Tenant, taking into account (among all relevant
factors) Tenant's requirements as specified in its notice, the rental terms and
conditions then prevailing at the Center, and the availability (including rental
terms and timing) of other space elsewhere in the relevant market meeting
Tenant's specified needs.
2.2. Early Possession. For the purpose of setting up Tenant's operation
and systems, Landlord hereby grants permission for Tenant to occupy or use the
Premises prior to the Commencement Date set forth in Section 2.1, which
occupancy or use shall be subject to and upon all of the terms and conditions of
this Lease, excluding the obligation to pay rent and other charges, unless
Landlord and Tenant agree otherwise; provided, however, that such early
possession shall not advance or otherwise affect the Commencement Date or the
termination date set forth in Section 2.1(a); and provided further, that Tenant
shall not interfere with or delay Landlord's contractors by such early
possession and shall indemnify, defend and hold harmless Landlord and its agents
and employees from and against any and all claims, demands, liabilities,
actions, losses, costs and expenses, including (but not limited to) reasonable
attorneys' fees, arising out of or in connection with Tenant's early entry upon
the Premises hereunder.
2.3. Delay In Possession. Landlord agrees to use its best reasonable
efforts to complete the work described in Section 2.4 and Exhibit C promptly,
diligently and within the respective time periods set forth in the timeline
attached hereto as Exhibit E and incorporated herein by this reference, as such
timeline may be modified from time to time by mutual agreement of Landlord and
Tenant, and subject to the effects of any delays caused by or attributable to
Tenant or to any other
-3-
<PAGE> 7
circumstances beyond Landlord's reasonable control (excluding any financial
inability); provided, however, that except to the extent caused by a material
default by Landlord of its obligations set forth in this Lease (including, but
not limited to, its obligations set forth in this Section 2.3 and in Section 2.4
and Exhibit C), Landlord shall not be liable for any damages caused by any delay
in the completion of such work, nor shall any such delay affect the validity of
this Lease or the obligations of Tenant hereunder.
2.4. Construction. The obligation of Landlord to perform work to improve
the Premises for occupancy is set forth in Exhibit C attached hereto and
incorporated herein by this reference. Except as set forth in Exhibit C,
Landlord shall have no responsibilities or obligations with respect to
preparation of the Premises for Tenant's occupancy. Acceptance by Tenant of
possession of the Premises after performance of such work, if any, by Landlord
shall constitute acceptance by Tenant of such work in its then completed
condition and Landlord shall have no further responsibility of any kind or
character for improvement of the Premises or in connection with such work;
provided, however, that within thirty (30) days after the Commencement Date,
Tenant may furnish to Landlord a "punch list" identifying any items or matters
in the Premises which are not constructed in accordance with the plans and
specifications approved under Exhibit C hereto and Landlord shall promptly and
diligently correct all such matters at its sole cost and expense; and provided
further, that notwithstanding anything to the contrary contained herein,
Landlord warrants to Tenant, effective as of the Commencement Date, that (i) the
Building, the interior improvements in the Premises and the improvements in the
common areas on Lot 3 are substantially completed and are free from material
defects in design and construction, (ii) the electrical, mechanical, plumbing,
lighting and HVAC systems, and the loading doors, if any, on the Building are in
good operating condition (to the extent necessary to serve the Premises) and
are free of material defects in design, equipment and/or installation, and (iii)
the interior improvements in the Premises have been constructed in compliance in
all material respects with the plans and specifications developed and approved
pursuant to Exhibit C. If it is determined that the warranty set forth in the
preceding sentence has been violated in any respect, then it shall be the
responsibility of Landlord, after receipt of written notice from Tenant setting
forth with specificity the nature of the violation, to promptly, at Landlord's
sole cost, correct the condition(s) constituting such violation. The foregoing
warranty, however, shall extend only for one (1) year after the Commencement
Date, and Tenant's failure to give written notice of a violation to Landlord
within one (1) year after the Commencement Date shall give rise to a conclusive
presumption that Landlord has complied with all Landlord's obligations under
this Section 2.4 and Exhibit C. TENANT ACKNOWLEDGES THAT THE FOREGOING
WARRANTIES ARE IN LIEU OF ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, WITH RESPECT
TO THE PHYSICAL CONDITION OF THE BUILDING AND IMPROVEMENTS TO BE CONSTRUCTED BY
LANDLORD AND THAT LANDLORD MAKES NO OTHER WARRANTIES EXCEPT AS EXPRESSLY SET
FORTH IN THIS LEASE. Notwithstanding the foregoing, Landlord also agrees that if
any construction defects or other problems arise after the expiration of
Landlord's warranties hereunder but at a time when contractor's, manufacturer's
or supplier's warranties remain in effect with respect to the defect or problem,
then at Landlord's election Landlord shall either (A) assign such third-party
warranties to Tenant to the extent necessary to enable Tenant to pursue direct
enforcement thereof or (B) use all reasonable efforts to enforce such warranties
for Tenant's benefit with respect to the applicable defect or problem. Landlord
also agrees to make available to Tenant any operating manuals, training programs
and other forms of information and assistance provided by the contractors,
manufacturers or suppliers with respect to machinery and equipment installed in
the Premises, but Landlord shall not be required to bear any separate charges
imposed by the contractors, manufacturers or suppliers for such manuals,
programs or other forms of information or assistance.
2.5. Acknowledgement Of Lease Commencement. Upon commencement of the term
of this Lease, Landlord and Tenant shall execute a written acknowledgement of
the Commencement Date, date of termination and related
-4-
<PAGE> 8
matters, substantially in the form attached hereto as Exhibit D (with
appropriate insertions), which acknowledgement shall be deemed to be
incorporated herein by this reference.
2.6. Holding Over. If Tenant holds possession of the Premises after the
term of this Lease, with Landlord's written consent, then except as otherwise
specified in such consent, Tenant shall become a tenant from month to month at
125% of the rental and otherwise upon the terms herein specified for the period
immediately prior to such holding over and shall continue in such status until
the tenancy is terminated by either party upon not less than thirty (30) days
prior written notice. If Tenant holds possession of the Premises after the term
of this Lease without Landlord's written consent, then Landlord in its sole
discretion may elect (by written notice to Tenant) to have Tenant become a
tenant either from month to month or at will, at 150% of the rental (prorated on
a daily basis for an at-will tenancy, if applicable) and otherwise upon the
terms herein specified for the period immediately prior to such holding over, or
may elect to pursue any and all legal remedies available to Landlord under
applicable law with respect to such unconsented holding over by Tenant. Tenant
shall indemnify and hold Landlord harmless from any loss, damage, claim,
liability, cost or expense (including reasonable attorneys' fees) resulting from
any delay by Tenant in surrendering the Premises (except with Landlord's prior
written consent), including but not limited to any claims made by a succeeding
tenant by reason of such delay. Acceptance of rent by Landlord following
expiration or termination of this Lease shall not constitute a renewal of this
Lease.
2.7. Option To Extend Term. Tenant shall have the option to extend the
term of this Lease, at the minimum rental set forth in Section 3.1(d) and (e)
and otherwise upon all the terms and provisions set forth herein with respect to
the initial term of this Lease, for up to two (2) additional periods of five
(5) years each, commencing upon expiration of the initial term hereof. Exercise
of such option with respect to the first such extended term shall be by written
notice to Landlord at least six (6) months and not more than eight (8) months
prior to the expiration of the initial term hereof; exercise of such option with
respect to the second extended term, if the first extension option has been duly
exercised, shall be by like written notice to Landlord at least six (6) months
and not more than eight (8) months prior to the expiration of the first extended
term hereof. If Tenant is in default hereunder on the date of such notice or on
the date any extended term is to commence, then the option shall be of no force
or effect, the extended term shall not commence and this Lease shall expire at
the end of the then current term hereof (or at such earlier time as Landlord may
elect pursuant to the default provisions of this Lease). If Tenant properly
exercises one or more extension options under this Section, then all references
in this Lease (other than in this Section 2.7) to the "term" of this Lease shall
be construed to include the extension term(s) thus elected by Tenant. Except as
expressly set forth in this Section 2.7, Tenant shall have no right to extend
the term of this Lease beyond its prescribed term.
3. RENTAL
3.1. Minimum Rental.
(a) Tenant shall pay to Landlord as minimum rental for the
Premises, in advance, without deduction, offset, notice or demand, on or before
the Commencement Date and on or before the first day of each subsequent calendar
month of the term of this Lease, the following amounts per month:
-5-
<PAGE> 9
<TABLE>
<CAPTION>
Months Minimum Rental
------ --------------
<S> <C>
001 - 012 $37,500.00
013 - 024 $37,500.00
025 - 036 $39,000.00
037 - 048 $40,500.00
049 - 060 $42,250.00
061 - 072 $43,750.00
073 - 084 $45,500.00
085 - 096 $47,500.00
097 - 108 $49,250.00
109 - 120 $51,250.00
121 - 132 $53,250.00
133 - 144 $55,500.00
145 - 156 $57,750.00
157 - 168 $60,000.00
169 - 180 $62,500.00
</TABLE>
If the obligation to pay minimum rental hereunder commences on other than the
first day of a calendar month or if the term of this Lease terminates on other
than the last day of a calendar month, the minimum rental for such first or
last month of the term of this Lease, as the case may be, shall be prorated
based on the number of days the term of this Lease is in effect during such
month. If an increase in minimum rental becomes effective on a day other than
the first day of a calendar month, the minimum rental for that month shall be
the sum of the two applicable rates, each prorated for the portion of the month
during which such rate is in effect.
(b) The minimum rental amounts specified in this Section 3.1 are
based upon an estimated area of 25,000 square feet for the Premises. If the
actual area of the Premises, when completed, is greater or less than 25,000
square feet, the minimum rentals specified in this Section 3.1 shall be adjusted
proportionately to the change in the area of the Premises, as determined in good
faith by Landlord's architect on the basis of measurement from the exterior
faces of exterior walls, from the centerline of interior demising walls, and
from the drip line of any exterior overhangs.
(C) The minimum rental amounts specified in this Section 3.1 are
based upon an estimated tenant improvement allowance of Sixty Five Dollars
($65.00) per square foot for the work to be performed by Landlord on the
Premises under Section 2.4 and Exhibit C. If Landlord's total direct costs of
such work (including, but not limited to, construction costs, permit fees and
charges, architects', engineers' and other consulting and professional fees and
all other related costs incurred in connection with the design and construction
of the work, including up to $50,000 in fees incurred by Tenant for
architectural, engineering, space planning and other professional services
rendered by professionals approved in writing by Landlord, such approval not to
be unreasonably withheld, in connection with the design of the work to be
performed by Landlord on the Premises) are less than the product of Sixty Five
Dollars ($65.00) times the area of the Premises (in square feet) as determined
in good faith by Landlord's architect on the basis described in Section 3.1(b)
above, then the minimum rental amounts specified in Section 3.1(a) shall be
reduced by an amount equal to one and three-tenths cents ($0.013) per square
foot per month for each One Dollar ($1.00) by which such total direct costs are
less than Sixty-Five Dollars ($65.00) times the area of the Premises in square
feet. If such total direct costs exceed the product of Sixty-Five Dollars
($65.00) times the area of the Premises in square feet, then Landlord will
provide an additional tenant improvement allowance (the "Phase II Improvement
Allowance") up to a maximum of Five Hundred Thousand Dollars ($500,000.00). To
the extent any of the Phase II Improvement Allowance is used (over and above the
initial allowance of $65.00 per square foot), the monthly minimum rent shall be
increased, commencing upon completion of the improvements constructed with the
Phase II Improvement Allowance and continuing until the earlier
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to occur of the Termination Date of the initial term of this Lease or the date
which is ten (10) years after the date of completion of the improvements
constructed with the Phase II Improvement Allowance, by a supplemental rent
payment in an amount equal to the amount necessary to fully amortize the funds
actually expended from the Phase II Improvement Allowance on a monthly level
payment basis, with an imputed return at the rate of fourteen percent (14%) per
annum, over the lesser of ten (10) years or the period of time remaining to the
Termination Date of the initial term of this Lease.
(d) If Tenant properly exercises its right to extend the term of
this Lease pursuant to Section 2.7 hereof, the minimum rental during the first
extended term shall be equal to the fair market rental value of the Premises as
theretofore improved under Section 2.4 and Exhibit C (but specifically excluding
any improvements which Tenant is entitled to remove from the Premises, under the
provisions of Article 7 hereof, upon expiration of this Lease), including any
cost of living adjustments or other rental increase provisions then customary in
the relevant market for comparable commercial leases, determined as of the
commencement of such extended term in accordance with this paragraph. Upon
Landlord's receipt of a proper notice of Tenant's exercise of its option to
extend the term of this Lease, the parties shall have sixty (60) days in which
to agree on the fair market rental (including any applicable rental increase
provisions) for the Premise's (as theretofore improved under Section 2.4 and
Exhibit C, but excluding any improvements which Tenant is entitled to remove
from the Premises, under the provisions of Article 7 hereof, upon expiration of
this Lease) at the commencement of the first extended term for the uses
permitted hereunder. If the parties agree on such fair market rental and rental
increase provisions (if any), they shall execute an amendment to this Lease
stating the amount of the applicable minimum monthly rental and any applicable
rental increase provisions. If the parties are unable to agree on such rental
(including any applicable rental increase provisions) within such sixty (60) day
period, then Tenant shall have the right, exercisable only by written notice to
Landlord within five (5) business days after the expiration of such 60-day
period, to withdraw its notice of exercise, in which case such notice of
exercise shall be of no further force or effect and the then current term of
this Lease shall expire on its scheduled date. If Tenant does not exercise such
withdrawal right, then within fifteen (15) days after the expiration of the
60-day negotiation period each party, at its cost and by giving notice to the
other party, shall appoint a real estate appraiser with at least five (5) years
experience appraising similar commercial properties in the city or county in
which the Property is located or neighboring areas to appraise and set the fair
market rental and any applicable rental increase provisions for the Premises at
the commencement of the first extended term. If either party fails to appoint an
appraiser within the allotted time, the single appraiser appointed by the other
party shall be the sole appraiser. If an appraiser is appointed by each party
and the two appraisers so appointed are unable to agree upon a fair market
rental (and any appropriate rental increase provisions) within thirty (30) days
after the appointment of the second, they shall appoint a third qualified
appraiser within ten (10) days after expiration of such thirty (30) day period;
if they are unable to agree upon a third appraiser, either party may, upon not
less than five (5) days notice to the other party, apply to the Presiding Judge
of the Superior Court for the county in which the Property is located for the
appointment of a third qualified appraiser. Each party shall bear its own legal
fees in connection with appointment of the third appraiser and shall bear
one-half of any other costs of appointment of the third appraiser and of such
third appraiser's fee. The third appraiser, however selected, shall be a person
who has not previously acted for either party in any capacity. Within thirty
(30) days after the appointment of the third appraiser, a majority of the three
appraisers shall set the fair market rental and any applicable rental increase
provisions for the first extended term and shall so notify the parties. If a
majority are unable to agree within the allotted time, (i) the three appraised
fair market rentals shall be added together and divided by three and the
resulting quotient shall be the fair market rental for the first extended term,
and (ii) the applicable rental increase provision shall be equal to the
mathematical average (or the nearest reasonable approximation thereto) of the
two rental increase provisions that are most
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closely comparable, which determinations shall be binding on the parties and
shall be enforceable in any further proceedings relating to this Lease.
(e) If Tenant properly exercises its right to a second extended
term of this Lease pursuant to Section 2.7 hereof, the minimum rental during
such second extended term shall be determined in the same manner provided in the
preceding paragraph for the first extended term, except that the determination
shall be made as of the commencement of the second extended term.
3.2. Late Charge. If Tenant fails to pay when due rental or other amounts
due Landlord hereunder, such unpaid amounts shall bear interest for the benefit
of Landlord at a rate equal to the lesser of fifteen percent (15%) per annum or
the maximum rate permitted by law, from the date due to the date of payment. In
addition to such interest, Tenant shall pay to Landlord a late charge in an
amount equal to five percent (5%) of any installment of minimum rental and any
other amounts due Landlord if not paid in full on or before the fifth (5th) day
after written notice from Landlord that such rental or other amount is overdue;
provided, however, that if any payment of rent or other amounts by Tenant is
more than five (5) days late and Landlord gave written notice of delinquency to
Tenant prior to such payment actually being made, then for the next twelve (12)
calendar months after such written notice was given, Tenant shall be liable for
late charges on any further payment of rental or other amounts that is not paid
on or before the fifth (5th) day after such rental or other amount is due,
without any requirement of prior notice from Landlord to Tenant that such rental
or other amount is due. Tenant acknowledges that late payment by Tenant to
Landlord of rental or other amounts due hereunder will cause Landlord to incur
costs not contemplated by this Lease, including, without limitation, processing
and accounting charges and late charges which may be imposed on Landlord by the
terms of any loan relating to the Property. Tenant further acknowledges that it
is extremely difficult and impractical to fix the exact amount of such costs and
that the late charge set forth in this Section 3.2 represents a fair and
reasonable estimate thereof. Acceptance of any late charge by Landlord shall not
constitute a waiver of Tenant's default with respect to overdue rental or other
amounts, nor shall such acceptance prevent Landlord from exercising any other
rights and remedies available to it. Acceptance of rent or other payments by
Landlord shall not constitute a waiver of late charges or interest accrued with
respect to such rent or other payments or any prior installments thereof, nor of
any other defaults by Tenant, whether monetary or non-monetary in nature,
remaining uncured at the time of such acceptance of rent or other payments.
4. TAXES
4.1. Personal Property. Tenant shall be responsible for and shall pay
prior to delinquency all taxes and assessments levied against or by reason of
all alterations and additions and all other items installed or paid for by
Tenant under this Lease, and the personal property, trade fixtures and all of
the property placed by Tenant in or about the Premises. Upon request by
Landlord, Tenant shall furnish Landlord with satisfactory evidence of payment
thereof. If at any time during the term of this Lease any of said alterations,
additions or personal property, whether or not belonging to Tenant, shall be
taxed or assessed as part of Lot 3 or as part of the entire Property, then such
tax or assessment shall be paid by Tenant to Landlord immediately upon
presentation by Landlord of copies of the tax bills in which such taxes and
assessments are included and shall, for the purposes of this Lease, be deemed to
be personal property taxes or assessments under this Section 4.1.
4.2. Real Property. To the extent the real property taxes and assessments
on the Premises are assessed separately from the remainder of the Property,
Tenant shall be responsible for and shall pay prior to delinquency all such
taxes and assessments levied against the Premises. Upon request by Landlord,
Tenant shall
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furnish Landlord with satisfactory evidence of payment thereof. To the extent
the Premises are taxed or assessed as part of Lot 3 or as part of the entire
Property, such real property taxes and assessments (or, in the case of taxes
assessed as part of the entire Property, the portion thereof reasonably
allocable to Lot 3) shall constitute Operating Expenses (as that term is defined
in Section 5.2 of this Lease) and shall be paid in accordance with the
provisions, of Article 5 of this Lease.
5. OPERATING EXPENSES
5.1. Payment Of Operating Expenses.
(a) Tenant shall pay to Landlord, at the time and in the manner
hereinafter set forth, as additional rental, an amount equal to Eighty Three and
Thirty Three Hundredths percent (83.33%) ("Tenant's Operating Cost Share") of
the Operating Expenses defined in Section 5.2.
(b) Tenant's Operating Cost Share as specified in paragraph (a) of
this Section is based upon an estimated area of 25,000 square feet for the
Premises and upon an aggregate area of 30,000 square feet for the Building. If
the actual area of the Premises (when completed) or of the Building, as
determined in good faith by Landlord's architect on a basis consistent with that
used in measuring other leased premises within the Center, differs from the
assumed numbers set forth above, then Tenant's Operating Cost Share shall be
adjusted to reflect the actual areas so determined.
5.2. Definition Of Operating Expenses. Subject to the exclusions and
provisions hereinafter contained, the term "Operating Expenses" shall mean the
total costs and expenses incurred by or allocable to Landlord for management,
operation and maintenance of the Building and of the common areas located on Lot
3 of the Property, including, without limitation, costs incurred for (i)
insurance premiums, property management, building maintenance, landscaping and
common area maintenance; (ii) all utilities and services; (iii) real and
personal property taxes and assessments or substitutes therefor and new taxes on
landlords in addition to taxes now in effect; (iv) supplies, equipment,
utilities and tools used in management, operation and maintenance (v) capital
improvements to the Building, amortized over a reasonable period, (aa) which
reduce or will cause future reduction of other items of Operating Expenses for
which Tenant is otherwise required to contribute or (bb) of which Tenant has use
or which benefit Tenant (provided that any such improvements under this clause
(bb) are approved in writing by Tenant, are a reasonably necessary repair or
replacement of an existing improvement with one of like kind and quality, or are
improvements of like kind and quality to those generally existing throughout the
Center); and (vi) any other costs allocable to or paid by Landlord, as owner of
the Building, pursuant to the terms of any declarations of covenants, conditions
and restrictions affecting the Property from time to time. Operating Expenses
shall not include any costs attributable to increasing the size of or otherwise
expanding the Building or the cost of the work for which Landlord is required to
pay under Section 2.4 and Exhibit C. The. distinction between items of ordinary
operating maintenance and repair and items of a capital nature shall be made in
accordance with generally accepted accounting principles applied on a consistent
basis. To the extent any items of Operating Expenses are paid by Landlord for
the Property as a whole and are not separately stated for the Building or Lot 3
(such as insurance premiums), a reasonable allocation of such items shall be
made between the Building or Lot 3, as applicable, and the remainder of the
Property to which such items also apply. Notwithstanding any other provisions of
this Section 5.2, Operating Expenses shall not include any of the following:
(A) the cost to repair any defects in design, construction or equipment, to the
extent resulting from or attributable to work undertaken by Landlord or by its
contractors on Landlord's behalf; (B) the cost to investigate and/or remediate
any contamination by hazardous or toxic substances or wastes; (C) any expense
reserves;
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(D) the cost to repair any damage caused by (I) fire, earthquake or other peril
(including, but not limited to, any deductible amounts under any earthquake
insurance coverage maintained by Landlord), or (II) the negligence or willful
misconduct of Landlord, of any other tenant of the Property, or of any of their
respective agents, employees or contractors; (E) any costs to the extent
Landlord has the right and ability, with reasonable diligence, to recover
reimbursement therefor from other parties (such as pursuant to warranties or
insurance); (F) costs of a kind that, with respect to the Premises, Building or
Lot 3, are paid directly by Tenant pursuant to this Lease; (G) leasing
commissions and marketing or promotional expenses relating to the Center or to
the procurement of new tenants for the Center; (H) any costs for labor, except
to the extent directly attributable to the operation and maintenance of the
Premises, the Building or Lot 3, and any costs for overhead or management; and
(I) any costs for new construction, including changes to the common areas of the
Property, except to the extent specifically includable as a capital improvement
under Section 5.2(v)(aa) or (bb) above.
5.3. Determination Of Operating Expenses. On or before the Commencement
Date and during the last month of each calendar year of the term of this Lease
("Lease Year"), or as soon thereafter as practical, Landlord shall provide
Tenant notice of Landlord's estimate of the Operating Expenses for the ensuing
Lease Year or applicable portion thereof. On or before the first day of each
month during the ensuing Lease Year or applicable portion thereof, beginning on
the Commencement Date, Tenant shall pay to Landlord Tenant's Operating Cost
Share of the portion of such estimated Operating Expenses allocable (on a
prorata basis) to such month; provided, however, that if such notice is not
given in the last month of a Lease Year, Tenant shall continue to pay on the
basis of the prior year's estimate, if any, until the month after such notice is
given. If at any time or times it appears to Landlord that the actual Operating
Expenses will vary from Landlord's estimate by more than five percent (5%),
Landlord may, by notice to Tenant, revise its estimate for such year and
subsequent payments by Tenant for such year shall be based upon such revised
estimate.
5.4. Final Accounting For Lease Year.
(a) Within ninety (90) days after the close of each Lease Year, or
as soon after such 90-day period as practicable, Landlord shall deliver to
Tenant a statement of Tenant's Operating Cost Share of the Operating Expenses
for such Lease Year prepared by Landlord from Landlord's books and records,
which statement shall be final and binding on Landlord and Tenant except as
otherwise expressly provided herein. If on the basis of such statement Tenant
owes an amount that is more or less than the estimated payments for such
calendar year previously made by Tenant, Tenant or Landlord, as the case may be,
shall pay the deficiency to the other party within thirty (30) days after
delivery of the statement. Failure or inability of Landlord to deliver the
annual statement within such ninety (90) day period shall not impair or
constitute a waiver of Tenant's obligation to pay Operating Expenses, or cause
Landlord to incur any liability for damages.
(b) Notwithstanding any other provisions of this Section 5.4,
within ninety (90) days after receipt of any statement from Landlord setting
forth actual Operating Expenses and Tenant's Operating Cost Share for any period
(a "Statement"), Tenant shall have the right to audit or review Landlord's books
and records relating to Operating Expenses for the period covered by the
Statement, provided that such audit shall be conducted only during normal
business hours, on not less than ten (10) days prior written notice to Landlord,
and at Tenant's sole cost and expense, except as hereinafter provided. To the
extent that Tenant, on the basis of such audit, disputes any item in the
applicable Statement or in the calculation of Tenant's obligations thereunder,
Tenant shall give Landlord written notice of the disputed items, in reasonable
detail and with reasonable supporting information, within thirty (30) days after
the expiration of Tenant's 90-day audit period. If Landlord and
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<PAGE> 14
Tenant are not able to resolve such dispute by good faith negotiations within
thirty (30) days after Tenant notifies Landlord in writing of the disputed
items, then Tenant may, by written notice to Landlord, request an independent
audit of such books and records. The independent audit of the books and records
shall be conducted by a certified public accountant acceptable to both Landlord
and Tenant or, if the parties are unable to agree, by a "Big Six" accounting
firm designated by Landlord and not then employed by Landlord or Tenant. The
audit shall be limited to the determination of the amount of Operating Expenses
and of Tenant's share thereof for the Lease Year covered by the Statement, and
shall be based on generally accepted accounting principles and tax accounting
principles, consistently applied. If it is determined, by mutual agreement of
Landlord and Tenant or by independent audit, that the amount paid by Tenant for
Operating Expenses for the period covered by the Statement was incorrect, then
the appropriate party shall pay to the other party the deficiency or
overpayment, as applicable, within thirty (30) days after the final
determination of such deficiency or overpayment. All costs and expenses of the
audit shall be paid by Tenant unless the audit shows that Landlord overstated
Operating Expenses for the period covered by the Statement by more than five
percent (5%), in which event Landlord shall pay all costs and expenses of the
audit. Each party agrees to maintain the confidentiality of the findings of any
audit in accordance with the provisions of this Section 5.4.
5.5. Proration. If the Commencement Date falls on a day other than the
first day of a Lease Year or if this Lease terminates on a day other than the
last day of a Lease Year, the amount of Tenant's Operating Cost Share payable
by Tenant applicable to such first and last partial Lease Year shall be prorated
on the basis which the number of days during such Lease Year in which this Lease
is in effect bears to 365. The termination of this Lease shall not affect the
obligations of Landlord and Tenant pursuant to Section 5.4 to be performed after
such termination.
6. UTILITIES
6.1. Payment. Commencing with the Commencement Date and thereafter
throughout the term of this Lease, Tenant shall pay, before delinquency, all
charges for water, gas, heat, light, electricity, power, sewer, telephone, alarm
system, janitorial and other services or utilities supplied to or consumed in or
upon the Premises, including any taxes on such services and utilities. It is the
intention of the parties that all such services shall be separately metered to
the Premises. In the event that any of such services supplied to the Premises
are not separately metered, then the amount thereof shall be an item of
Operating Expenses and shall be paid as provided in Article 5.
6.2. Interruption. There shall be no abatement of rent or other charges
required to be paid hereunder and Landlord shall not be liable in damages or
otherwise for interruption or failure of any service or utility furnished to or
used in the Premises because of accident, making of repairs, alterations or
improvements, severe weather, difficulty or inability in obtaining services or
supplies, labor difficulties or any other cause. Notwithstanding the foregoing
provisions of this Section 6.2, however, in the event of any interruption or
failure of any service or utility to the Premises which is caused in whole or
in part by the negligence or willful misconduct of Landlord or its agents or
employees, which continues for more than forty-eight (48) hours and which
materially impairs Tenant's ability to use the Premises for their intended
purpose hereunder, then Tenant's rental obligations under this Lease shall be
abated in proportion to the extent of the proportional fault of Landlord and its
agents and employees and in proportion to the degree of impairment of Tenant's
use of the Premises. Such abatement, if any, shall be retroactive to the
commencement of the interruption or failure and shall continue until Tenant's
use of the Premises is no longer materially impaired thereby.
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7. ALTERATIONS
7.1. Right To Make Alterations. Tenant shall make no alterations,
additions or improvements to the Premises, other than interior non-structural
alterations costing less than Twenty-Five Thousand Dollars ($25,000.00) in each
instance, without the prior written consent of Landlord. All such alterations,
additions and improvements shall be completed with due diligence in a
first-class workmanlike manner and in compliance with plans and specifications
approved in writing by Landlord (as to alterations, additions or improvements
for which Landlord's prior written consent is required) and all applicable laws,
ordinances, rules and regulations. If Tenant wishes to know in advance whether
it will be required to remove any specific alteration, addition or improvement
upon termination of this Lease, as contemplated in Section 7.2 hereof, then
Tenant may make an express written request for such a determination by Landlord
at the time Tenant requests Landlord's consent to the applicable alteration
addition or improvement (or if no such consent is required hereunder, then at
any time prior to Tenant's actual installation of the applicable alteration,
addition or improvement). If Tenant makes such a written request and Landlord
does not, in response thereto, notify Tenant in writing within ten (10) days
that Landlord intends to require, or at least reserves the right to require,
removal of the applicable alteration, addition or improvement upon termination
of this Lease, then Landlord shall not be entitled to later request such
removal, notwithstanding any contrary provisions in Section 7.2 hereof.
7.2. Title To Alterations. All alterations, additions and improvements
installed by Landlord pursuant to this Lease shall be part of the Building and
the property of Landlord. All alterations, additions and improvements installed
by Tenant, in or about the Premises at Tenant's expense shall remain Tenant's
property during the term of this Lease, and, Tenant shall be entitled to all
depreciation, amortization and other tax benefits with respect thereto, but
Tenant shall not remove any such alterations, additions or improvements without
Landlord's prior written consent and such alterations, additions and
improvements shall become part of the Building and the property of Landlord at
the expiration or termination of this Lease, unless Landlord elects to require
Tenant to remove the same upon such expiration or termination. The foregoing
provisions shall not in any event apply to Tenant's movable furniture, trade
fixtures and personal property not affixed to the Property, all of which items
shall in all events remain Tenant's property and be removable by Tenant at the
expiration or termination of this Lease, subject to Tenant's obligation to
immediately repair any damage caused by installation or removal of such items.
7.3. Tenant Fixtures. Notwithstanding the foregoing, Tenant may install,
remove and reinstall trade fixtures without Landlord's prior written consent,
except that any fixtures which are affixed to the Premises or which affect the
exterior or structural portions of the Building shall require Landlord's written
approval. The foregoing shall apply to Tenant's signs, logos and insignia, all
of which Tenant shall have the right to place and remove and replace solely with
Landlord's prior written consent as to location, size and composition. Tenant
shall immediately repair any damage caused by installation and removal of
fixtures under this Section 7.3.
7.4. No Liens. Tenant shall at all times keep the Premises free from all
liens and claims of any contractors, subcontractors, materialmen, suppliers or
any other parties employed either directly or indirectly by Tenant in
construction work on the Premises. Tenant may contest any claim of lien, but
only if, prior to such contest, Tenant either (i) posts security in the amount
of the claim, plus estimated costs and interest, or (ii) records a bond of a
responsible corporate surety in such amount as may be required to release the
lien from the Premises. Tenant shall indemnify, defend and hold Landlord
harmless against liability, loss, damage, cost and all other expenses,
including, without limitation, reasonable attorneys' fees, arising out of claims
of any lien for work performed or materials or supplies furnished at the request
of Tenant or persons claiming under tenant.
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8. MAINTENANCE AND REPAIRS
8.1. Landlord's Work. Landlord shall repair and maintain or cause to be
repaired and maintained those portions of the Building outside of the Premises,
the common areas of the Property, and the roof, exterior walls and other
structural portions of the Building. The cost of all work performed by Landlord
under this Section 8.1 shall be an Operating Expense hereunder, except to the
extent such work (i) is required due to the negligence of Landlord or any other
tenant of the Building, (ii) is a service to a specific tenant or tenants, other
than Tenant, for which Landlord has received or has the right to receive full
reimbursement, (iii) is a capital expense not includible as an Operating Expense
under Section 5.2 hereof, or (iv) is required due to the negligence or willful
misconduct of Tenant or its agents, employees or invitees (in which event Tenant
shall bear the full cost of such work pursuant to the indemnification provided
in Section 10.6 hereof). Tenant knowingly and voluntarily waives the right to
make repairs at Landlord's expense, or to offset the cost thereof against rent,
under any law, statute, regulation or ordinance now or hereafter in effect.
8.2. Tenant's Obligation for Maintenance.
(a) Good Order, Condition and Repair. Subject to the provisions of
Section 2.4 and Exhibit C hereof, by accepting possession of the Premises,
Tenant acknowledges that the Premises are in good and sanitary order, condition
and repair. Except as provided in Section 8.1 hereof, Tenant at its sole cost
and expense shall keep and maintain in good and sanitary order, condition and
repair the Premises and every part thereof, wherever located, including but not
limited to the signs, interior, the face of the ceiling over Tenant's floor
space, HVAC equipment and related mechanical systems serving the Premises (for
which HVAC equipment and related systems Tenant shall enter into a service
contract with a qualified, licensed [to the extent required by law] person or
entity approved in writing by Landlord, which approval shall not be unreasonably
withheld), all doors, door checks, windows, plate glass, door fronts, exposed
plumbing and sewage and other utility facilities, fixtures, lighting, wall
surfaces, floor surfaces and ceiling surfaces and all other interior repairs,
foreseen and unforeseen, as required. Notwithstanding any other provisions of
this Section 8.2(a), Tenant shall not be required to repair or correct (i)
damage caused by the negligence or willful misconduct of Landlord, of any other
tenant of the Property, or of any of their respective agents, employees or
contractors, (ii) damage caused by fire or other casualty (except to the extent
expressly provided in Article 13 hereof), or (iii) conditions for which Landlord
has the right and ability, with reasonable diligence, to recover substantially
complete reimbursement from other parties (such as pursuant to warranties or
insurance).
(b) Landlord's Remedy. If Tenant, after notice from Landlord,
fails to make or perform promptly any repairs or maintenance which are the
obligation of Tenant hereunder, Landlord shall have the right, but shall not be
required, to enter the Premises and make the repairs or perform the maintenance
necessary to restore the Premises to good and sanitary order, condition and
repair. Immediately on demand from Landlord, the cost of such repairs shall be
due and payable by Tenant to Landlord.
(c) Condition Upon Surrender. At the expiration or sooner
termination of this Lease, Tenant shall surrender the Premises, including any
additions, alterations and improvements thereto, broom clean, in good and
sanitary order, condition and repair, ordinary wear and tear excepted, first,
however, removing all goods and effects of Tenant and all and fixtures and items
required to be removed or specified to be removed at Landlord's election
pursuant to this Lease, and repairing any damage caused by such removal. Tenant
shall not have the right to remove fixtures or equipment if Tenant is in default
hereunder unless Landlord specifically waives this provision in writing. Tenant
expressly waives any and all interest in any
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personal property and trade fixtures not removed from the Premises by Tenant at
the expiration or termination of this Lease, agrees that any such personal
property and trade fixtures may, at Landlord's election, be deemed to have been
abandoned by Tenant, and authorizes Landlord (at its election and without
prejudice to any other remedies under this Lease or under applicable law) to
remove and either retain, store or dispose of such property at Tenant's cost and
expense, and Tenant waives all claims against Landlord for any damages resulting
from any such removal, storage, retention or disposal.
9. USE OF PREMISES
9.1. Permitted Use. Tenant shall use the Premises solely for Office,
Research and Development and Laboratory use, for pilot scale and light
manufacturing and assembly, and for no other purpose.
9.2. [Omitted.]
9.3. No Nuisance. Tenant shall not use the Premises for or carry on or
permit upon the Premises or any part thereof any offensive, noisy or dangerous
trade, business, manufacture, occupation, odor or fumes, or any nuisance or
anything against public policy, nor interfere with the rights or business of any
other tenants or of Landlord in the Building, nor make any other unreasonable
use of the Premises. Tenant shall not do or permit anything to be done in or
about the Premises, nor bring nor keep anything therein, which will in any way
cause the Premises to be uninsurable with respect to the insurance required by
this Lease or with respect to standard fire and extended coverage insurance with
vandalism, malicious mischief and riot endorsements.
9.4. Compliance With Laws. Tenant shall not use the Premises or permit
the Premises to be used in whole or in part for any purpose or use that is in
violation of any applicable laws, ordinances, regulations or rules of any
governmental agency or public authority. Tenant shall keep the Premises equipped
with all safety appliances required by law, ordinance or insurance on the
Premises, or any order or regulation of any public authority because of Tenant's
particular use of the Premises. Tenant shall procure all licenses and permits
required for use of the Premises. Tenant shall use the Premises in strict
accordance with all applicable ordinances, rules, laws and regulations and shall
comply with all requirements of all governmental authorities now in force or
which may hereafter be in force pertaining to the use of the Premises by Tenant,
including, without limitation, regulations applicable to noise, water, soil and
air pollution, and making such nonstructural alterations and additions thereto
as may be required from time to time by such laws, ordinances, rules,
regulations and requirements of governmental authorities or insurers of the
Premises (collectively, "Requirements") because of Tenant's construction of
improvements in or other particular use of the Premises. Any structural
alterations or additions required from time to time by applicable Requirements
because of Tenant's construction of improvements in or other particular use of
the Premises shall, at Landlord's election, either (i) be made by Tenant, at
Tenant's sole cost and expense, in accordance with the procedures and standards
set forth in Section 7.1 for alterations by Tenant, or (ii) be made by Landlord
at Tenant's sole cost and expense, in which event Tenant shall pay to Landlord
as additional rent, within ten (10) days after demand by Landlord, an amount
equal to all reasonable costs incurred by Landlord in connection with such
alterations or additions; provided, however, that to the extent any structural
alterations or additions paid for by Landlord pursuant to this Section 9.4 are
considered "capital improvements" under generally accepted accounting principles
applied on a consistent basis, the cost of such capital improvements shall be
amortized over the remaining term of this Lease (without regard to any then
unexercised extension options) on a monthly level payment basis, with an imputed
return at the rate of fourteen percent (14%) per annum, and the amount of such
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monthly amortization payments shall be paid by Tenant to Landlord as
supplemental rent together with, but in addition to, the rent otherwise provided
in Section 3.1 hereof. The judgment of any court, or the admission by Tenant in
any proceeding against Tenant, that Tenant has violated any law, statute,
ordinance or governmental rule, regulation or requirement shall be conclusive of
such violation as between Landlord and Tenant. Nothing in this Section 9.4 is
intended to limit or impair Landlord's obligation, under Section 2.4 and Exhibit
C, to ensure that, among other things, the improvements constructed by Landlord
pursuant thereto are constructed in compliance with all applicable governmental
codes, laws and regulations in force at the time such improvements are
constructed, and Tenant shall have no obligation to correct any such
noncompliance which is Landlord's responsibility under Section 2.4 and
Exhibit C.
9.5. Liquidation Sales. Tenant shall not conduct or permit to be
conducted any auction, bankruptcy sale, liquidation sale, or going out of
business sale, in, upon or about the Premises, whether said auction or sale be
voluntary, involuntary or pursuant to any assignment for the benefit of
creditors, or pursuant to any bankruptcy or other insolvency proceeding.
9.6. Environmental Matters. Without limiting the generality of Tenant's
obligations set forth in Section 9.4 of this Lease:
(a) Tenant shall not cause or permit any hazardous or toxic
substance or hazardous waste (as defined in any federal, state or local law,
ordinance or regulation applicable to such substances or wastes) to be brought
upon, kept, stored or used on or about the Property without the prior written
consent of Landlord.
(b) Tenant shall comply with all applicable laws, rules,
regulations, orders, permits, licenses and operating plans of any governmental
authority with respect to the receipt, use, handling, generation,
transportation, storage, treatment, release and/or disposal of hazardous or
toxic substances or wastes in the course of or in connection with the conduct of
Tenant's business on the Property, and shall provide Landlord with copies of any
and all permits, licenses, registrations and other similar documents that
authorize Tenant to conduct any such activities in connection with Tenant's use
of the Property.
(c) Tenant shall indemnify, defend and hold Landlord harmless from
and against any and all claims, losses, damages, liabilities, costs, legal fees
and expenses of any sort arising out of or relating to (i) any failure by Tenant
to comply with any provisions of subparagraph (a) or (b) above, or (ii) any
receipt, use handling, generation, transportation, storage, treatment, release
and/or disposal of any hazardous or toxic substances or wastes on or about the
Property in connection with Tenant's use or occupancy of the Property or as a
result of any intentional or negligent acts or omissions of Tenant or of any
agent or employee of Tenant. Nothing in this Section 9.6 shall be construed to
make, Tenant responsible for any environmental conditions caused by third
parties during the term of this Lease, except to the extent such third parties
are agents or employees of Tenant or are on the Property in the course of or in
connection with the conduct of Tenant's business thereon.
(d) Landlord shall indemnify, defend and hold Tenant harmless from
and against any and all claims, losses, damages, liabilities, costs, legal fees
and expenses of any sort arising out of or relating to (i) the presence on the
Property of any hazardous or toxic substances or wastes present on the Property
as of the Commencement Date, and/or (ii) any unauthorized release into the
environment of hazardous or toxic substances or wastes to the extent they result
from the negligence of or willful misconduct or omission by Landlord or its
agents or employees.
(a) The provisions of this Section 9.6 shall survive the
termination of this Lease.
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10. INSURANCE AND INDEMNITY
10.1. Insurance.
(a) Tenant shall procure and maintain in full force and effect at
all times during the term of this Lease, at Tenant's cost and expense,
comprehensive public liability and property damage insurance to protect against
any liability to the public, or to any invitee of Tenant or Landlord, arising
out of or related to the use of or resulting from any accident occurring in,
upon or about the Premises, with limits of liability of not less than (i) One
Million Dollars ($1,000,000.00) for injury to or death of one person, (ii) Three
Million Dollars ($3,000,000.00) for personal injury or death, per occurrence,
and (iii) Five Hundred Thousand Dollars ($500,000.00) for property damage, or a
combined single limit of public liability and property damage insurance of not
less than Five Million Dollars ($5,000,000.00). Such insurance shall name
Landlord and its general partners and Managing Agent as additional insureds
thereunder. The amount of such insurance shall not be construed to limit any
liability or obligations of Tenant under this Lease.
(b) Landlord shall procure and maintain in full force and effect
at all times during the term of this Lease, at Landlord's cost and expense (but
reimbursable as an Operating Expense under Section 5.2 hereof), fire and "all
risk" extended coverage property damage insurance for the Building and interior
improvements that are the property of Landlord and for the improvements in the
common areas of the Property, on a full replacement cost basis, with rental loss
insurance. Such insurance may include earthquake and/or flood coverage to the
extent Landlord in its discretion elects to carry such coverage, and shall have
such commercially reasonable deductibles and other terms as Landlord in its
discretion determines to be appropriate. Landlord shall have no obligation to
carry property damage insurance for any alterations, additions, improvements,
trade fixtures or personal property installed or maintained by Tenant on or
about the Promises.
10.2. Quality of Policies and Certificates. All policies of insurance
required hereunder shall be issued by responsible insurers and shall be written
as primary policies not contributing with and not in excess of any coverage that
Landlord may carry. Tenant shall deliver to Landlord copies of policies or
certificates of insurance showing that said policies are in effect. The coverage
provided by such policies shall include the clause or endorsement referred to in
Section 10.4. If Tenant fails to acquire, maintain or renew any insurance
required to be maintained by it under this Article 10 or to pay the premium
therefor, then Landlord, at its option and in addition to its other remedies,
but without obligation so to do, may procure such insurance, and any sums
expanded by it to procure any such insurance shall be repaid upon demand, with
interest as provided in Section 3.2 hereof. Tenant shall obtain, to the extent
reasonably available, written undertakings from each insurer under policies
required to be maintained by it to notify all insureds thereunder at least
thirty (30) days prior to cancellation, amendment or revision of coverage.
10.3. Workers' Compensation. Tenant shall maintain in full force and
effect during the term of this Lease workers' compensation insurance covering
all of Tenant's employees working on the Premises.
10.4. Waiver of Subrogation. To the extent permitted by law and without
affecting the coverage provided by insurance required to be maintained
hereunder, Landlord and Tenant each waive any right to recover against the other
(i) damages for injury to or death of persons, (ii) damage to property, (iii)
damage to the Premises or any part thereof, or (iv) claims arising by reason of
any of the foregoing, but only to the extent that any of the foregoing damages
and claims under subparts (i)-(iv) hereof are covered, and only to the extent
of such coverage, by insurance actually carried or required to be carried
hereunder by either Landlord or Tenant. This provision is
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intended to waive fully, and for the benefit of each party, any rights and
claims which might give rise to a right of subrogation in any insurance carrier.
Each party shall procure a clause or endorsement on any policy required under
this Article 10 denying to the insurer rights of subrogation against the other
party to the extent rights have been waived by the insured prior to the
occurrence of injury or loss. Coverage provided by insurance maintained by
Tenant under this Article 10 shall not be limited, reduced or diminished by
virtue of the subrogation waiver herein contained.
10.5. Increase In Premiums. Tenant shall do all acts and pay all expenses
necessary to insure that the Premises are not used for purposes prohibited by
any applicable fire insurance, and that Tenant's use of the Premises complies
with all requirements necessary to obtain any such insurance. If Tenant uses or
permits the Premises to be used in a manner which increases the existing rate of
any insurance on the Premises carried by Landlord, Tenant shall pay the amount
of the increase in premium caused thereby, and Landlord's costs of obtaining
other replacement insurance policies, including any increase in premium, within
ten (10) days after demand therefor by Landlord.
10.6. Indemnification.
(a) Tenant shall indemnify, defend and hold Landlord, its
partners, shareholders, officers, directors, affiliates, agents, employees and.
contractors, harmless from any and all liability for injury to or death of any
person, or loss of or damage to the property of any person, and all actions,
claims, demands, costs ( including, without limitation, reasonable attorneys'
fees), damages or expenses of any kind arising therefrom which may be brought or
made against Landlord or which Landlord may pay or incur by reason of the use,
occupancy and enjoyment of the Premises by Tenant or any invitees, sublessees,
licensees, assignees, employees, agents or contractors of Tenant or holding
under Tenant from any cause whatsoever other than negligence or willful
misconduct or omission by Landlord, its agents or employees. Landlord, its
partners, shareholders, officers, directors, affiliates, agents, employees and
contractors shall not be liable for, and Tenant hereby waives all claims against
such persons for, damages to goods, wares and merchandise in or upon the
Premises, or for injuries to Tenant, its agents or third persons in or upon the
Premises, from any cause whatsoever other than negligence or willful misconduct
or omission by Landlord, its agents or employees. Tenant shall give prompt
notice to Landlord of any casualty or accident in, on or about the Premises.
(b) Landlord shall indemnify, defend and hold Tenant, its
partners, shareholders, officers, directors, affiliates, agents, employees and
contractors, harmless from any and all liability for injury to or death of any
person or loss of or damage to the property of any person, and all actions,
claims, demands, costs (including, without limitation, reasonable attorneys'
fees), damages or expenses of any kind arising therefrom which may be brought or
made against Tenant or which Tenant may pay or incur, to the extent such
liabilities or other matters arise by reason of any negligence or willful
misconduct or omission by Landlord, its agents or employees.
10.7. Blanket Policy. Any policy required to be maintained hereunder may
be maintained under a so-called "blanket policy" insuring other parties and
other locations so long as the amount of insurance required to be provided
hereunder is not thereby diminished.
11. SUBLEASE AND ASSIGNMENT
11.1. Assignment And Sublease Of Premises. Tenant shall not have the right
or power to assign its interest in this Lease, or make any sublease, nor shall
any interest of Tenant under this Lease be assignable involuntarily or by
operation of law,
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without on each occasion obtaining the prior written consent of Landlord, which
consent shall not be unreasonably withheld. Any purported sublease or assignment
of Tenant's interest in this Lease requiring but not having received Landlord's
consent thereto shall be void. Any dissolution, consolidation, merger or other
reorganization of Tenant, or any sale or transfer of the stock of or other
interest in Tenant, or any series of one or more of such events, involving in
the aggregate a change of fifty percent (50%) or more in the beneficial
ownership of Tenant or its assets shall be deemed to be an assignment hereunder
and shall be void without the prior written consent of Landlord as required
above. Notwithstanding anything in this Section 11.1 to the contrary, Tenant
may assign this Lease or sublet the Premises, in whole or in part, without
Landlord's consent (but with prior or concurrent written notice to Landlord), to
(a) any subsidiary, division or other entity controlled by, controlling or under
common control with Tenant, or (b) any entity or person which is the successor
to Tenant by merger, consolidation or nonbankruptcy reorganization or which
acquires substantially all of the assets of Tenant's business conducted in the
Premises, provided in each such instance that any such assignee or successor
assumes in full, in writing and for the benefit of Landlord, the obligations of
Tenant under this Lease and that the net worth of the assignee or successor
immediately after the applicable transfer is equal to or greater than that of
Tenant immediately prior to the applicable transfer. In addition, no sale or
transfer of the capital stock of Tenant in connection with any initial public
offering of Tenant's stock or through the facilities of any public securities
exchange shall be deemed to be an assignment, subletting or other transfer of
the Lease, the Premises or any interest therein.
11.2. Rights Of Landlord. Consent by Landlord to one or more assignments
of this Lease, or to one or more sublettings of the Premises, or collection of
rent by Landlord from any assignee or sublessee, shall not operate to exhaust
Landlord's rights under this Article 11, nor constitute consent to any
subsequent assignment or subletting. No assignment of Tenant's interest in this
Lease and no sublease shall relieve Tenant of its obligations hereunder,
notwithstanding any waiver or extension of time granted by Landlord to any
assignee or sublessee, or the failure of Landlord to assert its rights against
any assignee or sublessee, and regardless of whether Landlord's consent thereto
is given or required to be given hereunder. In the event of a default by any
assignee, sublessee or other successor of Tenant in the performance of any of
the terms or obligations of Tenant under this Lease, Landlord may proceed
directly against Tenant without the necessity of exhausting remedies against any
such assignee, sublessee or other successor. In addition, Tenant immediately and
irrevocably assigns to Landlord, as security for Tenant's obligations under this
Lease, all rent from any subletting of all or a part of the Premises as
permitted under this Lease, and Landlord, as Tenant's assignee and as
attorney-in-fact for Tenant, or any receiver for Tenant appointed on Landlord's
application, may collect such rent and apply it toward Tenant's obligations
under this Lease; except that, until the occurrence of an act of default by
Tenant, Tenant shall have the right to collect such rent.
12. RIGHT OF ENTRY AND QUIET ENJOYMENT
12.1. Right of Entry. Landlord and its authorized representatives shall
have the right to enter the Premises at any time during the term of this Lease
during normal business hours and upon not less than twenty-four (24) hours prior
notice, except in the case of emergency, for the purpose of inspecting and
determining the condition of the Premises or for any other proper purpose
including, without limitation, to make repairs, replacements or improvements
which Landlord may deem necessary, to show the Premises to prospective
purchasers, to show the Premises to prospective tenants, and to post notices of
nonresponsibility. In making such entry, Landlord shall comply with any
reasonable security requirements of which Landlord has been advised in writing
by Tenant, and Landlord shall not in any event, except with Tenant's prior
written consent, grant access to the Premises to any person or entity who is
engaged in a business directly competitive with the business of Tenant conducted
on the
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Premises from time to time. Landlord shall not be liable for inconvenience,
annoyance, disturbance, loss of business, quiet enjoyment or other damage or
loss to Tenant by reason of making any repairs or performing any work upon the
Premises and the obligations of Tenant under this Lease shall not thereby be
affected in any manner whatsoever, provided, however, Landlord shall use
reasonable efforts to minimize the inconvenience to Tenant's normal business
operations caused thereby.
12.2. Quiet Enjoyment. Landlord covenants that Tenant, upon paying the
rent and performing its obligations hereunder and subject to all the terms and
conditions of this Lease, shall peacefully and quietly have, hold and enjoy the
Premises throughout the term of this Lease, or until this Lease is terminated as
provided by this Lease.
13. CASUALTY AND TAKING
13.1. Termination Or Reconstruction. If during the term of this Lease the
Premises or Building, or any substantial part of either, (i) is damaged
materially by fire or other casualty or by action of public or other authority
in consequence thereof, (ii) is taken by eminent domain or by reason of any
public improvement or condemnation proceeding, or in any manner by exercise of
the right of eminent domain (including any transfer in avoidance of an exercise
of the power of eminent domain), or (iii) receives irreparable damage by reason
of anything lawfully done under color of public or other authority, this Lease
shall terminate as to the entire Premises at Landlord's election by written
notice given to Tenant within sixty (60) days after the damage or taking has
occurred. If Landlord does not elect to terminate this Lease as hereinabove
provided, Landlord shall repair any such damage and restore the Premises (to the
extent of Landlord's work originally performed therein under Section 2.4 and
Exhibit C) and the Building as nearly as reasonably possible to the condition
existing before the damage or taking; provided, however, that in the event of
any earthquake damage to the Building or Premises, the amount of any repair or
restoration costs representing deductible amounts under any applicable
earthquake insurance shall be borne fifty percent (50%) by Landlord as
Landlord's sole expense and fifty percent (50%) shall be amortized over a ten
(10) year period (regardless of the then remaining term of this Lease) on a
monthly level payment basis, with an imputed return at the rate of fourteen
percent (14%) per annum, and the amount of such monthly amortization payments
for each month remaining in the term of this Lease (including any extensions
duly exercised by Tenant) shall be paid by Tenant to Landlord as supplemental
rent together with, but in addition to, the rent otherwise provided in Section
3.1 hereof. (Landlord hereby advises Tenant that Landlord's existing earthquake
insurance carries a twenty percent (20%) deductible, but that such deductible is
reviewed at least annually and is subject to change.) In the case of damage or
destruction prior to the final year of the term of this Lease, Landlord's
termination right shall be exercisable only if either the time reasonably
estimated by Landlord's architect or contractor to be required for the repair or
restoration of the Building to the extent necessary to permit Tenant to resume
substantially all of its normal business activities therein exceeds one hundred
twenty (120) days from the date of the damage or destruction or the reasonably
estimated cost of such repair or restoration is not covered by insurance
proceeds reasonably available for such repair or restoration under the insurance
required to be maintained by Landlord pursuant to Section 10.1(b) hereof.
13.2. Tenant's Rights. If any portion of the Premises is so taken by
condemnation, Tenant may elect to terminate this Lease if the portion of the
Premises taken is of such extent and nature as substantially to handicap, impede
or permanently impair Tenant's use of the balance of the Premises. Tenant must
exercise its right to terminate by giving notice to Landlord within thirty (30)
days after the nature and extent of the taking have been finally determined. If
Tenant elects to terminate this Lease, Tenant shall also notify. Landlord of the
date of termination, which date shall not be earlier than thirty (30) days nor
later than ninety (90) days after Tenant has
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notified Landlord of its election to terminate, except that this Lease shall
terminate on the date of taking if the date of taking falls on any date before
the date of termination designated by Tenant.
13.3. Lease To Remain In Effect. If neither Landlord nor Tenant terminates
this Lease as hereinabove provided, this Lease shall continue in full force and
effect, except that minimum monthly rental and Tenant's Operating Cost Share
shall abate to the extent Tenant's use of the Premises is impaired for any
period that any portion of the Premises is unusable or inaccessible because of a
casualty or taking hereinabove described. Each party waives the provisions of
Code of Civil Procedure Section 1265.130, allowing either party to petition the
Superior Court to terminate this Lease in the event of a partial condemnation of
the Premises.
13.4. Reservation Of Compensation. Landlord reserves, and Tenant waives
and assigns to Landlord, all rights to any award or compensation for damage to
the Premises, Building, Property and the leasehold estate created hereby,
accruing by reason of any taking in any public improvement, condemnation or
eminent domain proceeding or in any other manner by exercise of the right of
eminent domain or of anything lawfully done by public authority, except that
Tenant shall be entitled to any and all compensation or damages paid for or on
account of Tenant's moving expenses, trade fixtures, equipment and any leasehold
improvements in the Premises, the cost of which was borne by Tenant, but only to
the extent of the then remaining unamortized value of such improvements computed
on a straight-line basis over the term of this Lease. Tenant covenants to
deliver such further assignments of the foregoing as Landlord may from time to
time request.
13.5. Restoration of Fixtures. If Landlord repairs or causes repair of the
Premises after such damage or taking, Tenant at its sole expense shall repair
and replace promptly all fixtures, equipment and other property of Tenant
located at, in or upon the Premises and all additions, alterations and
improvements and all other items installed or paid for by Tenant under this
Lease that were damaged or taken, so as to restore the same to a condition
reasonably appropriate for the resumption of Tenant's business activities in the
Premises. In so doing, Tenant shall have the right to make modifications to the
previously existing alterations, additions, fixtures and improvements in the
Premises, subject to the prior written approval of Landlord, which shall not be
unreasonably withheld. In its review of Tenant's plans end specifications,
Landlord may take into consideration the effect of the proposed modifications on
the exterior appearance, the structural integrity and the mechanical and other
operating systems of the Building, and shall take into account any reasonable
changes in Tenant's anticipated business operations on the Premises.
14. DEFAULT
14.1. Events Of Default. The occurrence of any of the following shall
constitute an event of default on the part of Tenant:
(a) Abandonment of the Premises. Tenant waives any right Tenant
may have to notice under Section 1951.3 of the California Civil Code, the terms
of this subsection (a) being deemed such notice to Tenant as required by said
Section 1951.3;
(b) Nonpayment. Failure to pay, when due, any amount payable to
Landlord hereunder, such failure continuing for a period of five (5) days after
written notice of such failure;
(c) Other Obligations. Failure to perform any obligation,
agreement or covenant under this Lease other than those matters specified in
subsection (b) hereof, such failure continuing for thirty (30) days after
written notice
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of such failure. If it is not possible to cure such default within thirty (30)
days, Tenant shall commence cure within said thirty (30) day period and shall to
proceed diligently to complete cure;
(d) General Assignment. A general assignment by Tenant for the
benefit of creditors;
(e) Bankruptcy. The filing of any voluntary petition in bankruptcy
by Tenant, or the filing of an involuntary petition by Tenant's creditors, which
involuntary petition remains undischarged for a period of thirty (30) days. In
the event that under applicable law the trustee in bankruptcy or Tenant has the
right to affirm this Lease and continue to perform the obligations of Tenant
hereunder, such trustee or Tenant shall, in such time period as may be permitted
by the bankruptcy court having jurisdiction, cure all defaults of Tenant
hereunder outstanding as of the date of the affirmance of this Lease and provide
to Landlord such adequate assurances as may be necessary to ensure Landlord of
the continued performance of Tenant's obligations under this Lease.
Specifically, but without limiting the generality of the foregoing, such
adequate assurances must include assurances that the Premises continue to be
operated only for the use permitted hereunder. The provisions hereof are to
assure that the basic understandings between Landlord and Tenant with respect to
Tenant's use of the Premises and the benefits to Landlord therefrom are
preserved, consistent with the purpose and intent of applicable bankruptcy laws;
(f) Receivership. The employment of a receiver appointed by court
order to take possession of substantially all of Tenant's assets or the
Premises, if such receivership remains undissolved for a period of thirty (30)
days;
(g) Attachment. The attachment, execution or other judicial
seizure of all or substantially all of Tenant's assets or the Premises, if such
attachment or other seizure remains undismissed or undischarged for a period of
thirty (30) days after the levy thereof; or
(h) Insolvency. The admission by Tenant in writing of its
inability to pay its debts as they become due, the filing by Tenant of a
petition seeking any reorganization or arrangement, composition, readjustment,
liquidation, dissolution or similar relief under any present or future statute,
law or regulation, the filing by Tenant of an answer admitting or failing timely
to contest a material allegation of a petition filed against Tenant in any such
proceeding or, if within thirty (30) days after the commencement of any
proceeding against Tenant seeking any reorganization or arrangement,
composition, readjustment, liquidation, dissolution or similar relief under any
present or future statute, law or regulation, such proceeding shall not have
been dismissed.
14.2. Remedies Upon Tenant's Default.
(a) Upon the occurrence of any event of default described in
Section 14.1 hereof, Landlord, in addition to and without prejudice to any other
rights or remedies it may have, shall have the immediate right to re-enter the
Premises or any part thereof and repossess the same, expelling and removing
therefrom all persons and property (which property may be stored in a public
warehouse or elsewhere at the cost and risk of and for the account of Tenant),
using such force as may be necessary to do so (as to which Tenant hereby waives
any claim for loss or damage that may thereby occur). In addition to or in lieu
of such re-entry, and without prejudice to any other rights or remedies it may
have, Landlord shall have the right either (i) to terminate this Lease and
recover from Tenant all damages incurred by Landlord as a result of Tenant's
default, as hereinafter provided, or (ii) to continue this Lease in effect and
recover rent and other charges and amounts as they become due.
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(b) Even if Tenant has breached this Lease or abandoned the
Premises, this Lease shall continue in effect for so long as Landlord does not
terminate Tenant's right to possession under subsection (a) hereof and Landlord
may enforce all of its rights and remedies under this Lease, including the right
to recover rent as it becomes due, and Landlord, without terminating this Lease,
may exercise all of the rights and remedies of a lessor under California Civil
Code Section 1951.4 (lessor may continue lease in effect after lessee's breach
and abandonment and recover rent as it becomes due, if lessee has right to
sublet or assign, subject only to reasonable limitations), or any successor Code
section. Acts of maintenance, preservation or efforts to relet the Premises or
the appointment of a receiver upon application of Landlord to protect Landlord's
interests under this Lease shall not constitute a termination of Tenant's right
to possession.
(c) If Landlord terminates this Lease pursuant to this Section
14.2, Landlord shall have all of the rights and remedies of a landlord provided
by Section 1951.2 of the Civil Code of the State of California, or any successor
Code section.
14.3. Remedies Cumulative. All rights, privileges and elections or
remedies of Landlord contained in this Article 14 are cumulative and not
alternative to the extent permitted by law and except as otherwise provided
herein.
15. SUBORDINATION, ATTORNMENT AND SALE
15.1. Subordination To Mortgage. This Lease, and any sublease entered into
by Tenant under the provisions of this Lease, shall be subject and subordinate
to any ground lease, mortgage, deed of trust, sale/leaseback transaction or any
other hypothecation for security now or hereafter placed upon the Building, the
Property, or both, and the rights of any assignee of Landlord or mortgagee,
trustee, beneficiary, landlord or leaseback lessor under any of the foregoing,
and to any and all advances made on the security thereof and to all renewals,
modifications, consolidations, replacements and extensions thereof. If any
mortgagee, trustee, beneficiary, ground lessor, sale/leaseback lessor or
assignee elects to have this Lease be an encumbrance upon the Property prior to
the lien of its mortgage, deed of trust, ground lease or leaseback lease or
other security arrangement and gives notice thereof to Tenant, this Lease shall
be deemed prior thereto, whether this Lease is dated prior or subsequent to the
date thereof or the date of recording thereof. Tenant, and any sublessee, shall
execute such documents as may reasonably be requested by any mortgagee, trustee,
beneficiary, ground lessor, sale/leaseback lessor or assignee to evidence the
subordination herein set forth or to make this Lease prior to the lien of any
mortgage, deed of trust, ground lease, leaseback lease or other security
arrangement, as the case may be, and if Tenant fails to do so within ten (10)
days after demand from Landlord, Tenant constitutes and appoints Landlord as
Tenant's attorney-in-fact and in Tenant's name, place and stead to do so. Upon
any default by Landlord in the performance of its obligations under any
mortgage, deed of trust, ground lease, leaseback lease or assignment, Tenant
(and any sublessee) shall attorn to the mortgagee, trustee, beneficiary, ground
lessor, leaseback lessor or assignee thereunder upon demand and shall execute
and deliver any instrument or instruments confirming the attornment herein
provided for. Within thirty (30) days after execution of this Lease, Landlord
shall deliver to Tenant a Non-Disturbance Agreement executed and acknowledged by
SDK Incorporated or any other lender presently holding the beneficial interest
under any deed of trust encumbering the Property, which agreement shall be in a
form reasonably acceptable to Tenant and shall provide that neither this Lease
nor Tenant's possession or other rights hereunder shall be affected, modified or
disturbed by any foreclosure or any assignment by deed in lieu of foreclosure,
so long as Tenant is not then in default hereunder. Similarly, Tenant's
obligation to subordinate this Lease to any future ground lease, mortgage, deed
of trust, sale/leaseback transaction or other hypothecation for security placed
upon the Building, the Property or both shall be
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<PAGE> 26
conditioned on Tenant's receipt from the ground lessor, mortgagee, trustee,
beneficiary or leaseback lessor of a nondisturbance agreement in a form
reasonably acceptable to Tenant, providing that neither this Lease nor Tenant's
possession or other rights hereunder shall be affected, modified or disturbed by
any foreclosure or any assignment by deed in lieu of foreclosure, so long as
Tenant is not then in default hereunder.
15.2. Sale of Landlord's Interest. Upon sale, transfer or assignment of
Landlord's entire interest in the Building and Property, Landlord shall be
relieved of its obligations hereunder with respect to liabilities accruing from
and after the date of such sale, transfer or assignment, but only if and to the
extent that the transferee expressly assumes in writing, for the benefit of
Tenant, Landlord's obligations under this Lease from and after the date of such
sale, transfer or assignment.
15.3. Estoppel Certificates. Either party shall at any time and from time
to time, within ten (10) days after written request by the other party, execute,
acknowledge and deliver to the requesting party a certificate in writing,
stating: (i) that this Lease is unmodified and in full force and effect, or if
there have been any modifications, that this Lease is in full force and effect
as modified and stating the date and the nature of each modification; (ii) the
date to which rental and all other sums payable hereunder have been paid; (iii)
that the requesting party is not in default in the performance of any of its
obligations under this Lease, that the responding party has given no notice of
default to the requesting party and that no event has occurred which, but for
the expiration of the applicable time period, would constitute an event of
default hereunder (or if any such defaults or events exist, specifying the
same); and (iv) such other matters as may reasonably be requested by the
requesting party or any institutional lender, mortgagee, trustee, beneficiary,
ground lessor, sale/leaseback lessor or prospective purchaser of the Property.
Any such certificate provided under this Section 15.3 may be relied upon by any
lender, mortgagee, trustee, beneficiary, assignee or successor in interest to
the requesting party, by any prospective purchaser, by any purchaser on
foreclosure or sale, or upon any grant of a deed in lieu of foreclosure of any
mortgage or deed of trust on the Property or Premises, or by any other third
party. Failure to execute and return within the required time any estoppel
certificate requested hereunder shall be deemed to be an admission of the truth
of the matters set forth in the form of certificate submitted to the requesting
party for execution.
15.4. Subordination To CC&R's. This Lease, and any permitted sublease
entered into by Tenant under the provisions of this Lease, shall be subject and
subordinate (a) to any declarations of covenants, conditions and restrictions
recorded by Landlord with respect to the Property from time to time, provided
that the terms of such declarations are reasonable and do not discriminate
against Tenant relative to other tenants occupying portions of the Property, and
(b) to the Declaration of Covenants, Conditions and Restrictions dated June 20,
1979 and recorded on July 5, 1979 as Instrument No. 79-130777, Alameda County
Records, as amended from time to time (the "Master Declaration"), the provisions
of which Master Declaration are an integral part of this Lease. Tenant agrees to
execute, upon request by Landlord, any documents reasonably required from time
to time to evidence the subordination provided in this Section 15.4.
16. SECURITY
16.1. Deposit. Concurrently with Tenant's execution of this Lease, Tenant
shall deposit with Landlord the sum of Thirty Seven Thousand Five Hundred and
no/100 Dollars ($37,500.00), which sum (the "Security Deposit") shall be held by
Landlord as security for the faithful performance of all of the terms,
covenants, and conditions of this Lease to be kept and performed by Tenant
during the term hereof. If Tenant defaults with respect to any provision of this
Lease, including, without
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<PAGE> 27
limitation, the provisions relating to the payment of rental and other sums due
hereunder, Landlord shall have the right, but shall not be required, to use,
apply or retain all or any part of the Security Deposit for the payment of
rental or any other amount which Landlord may spend or may become obligated to
spend by reason of Tenant's default or to compensate Landlord for any other loss
or damage which Landlord may suffer by reason of Tenant's default. If any
portion of the Security Deposit is so used or applied, Tenant shall, within ten
(10) days after written demand therefor, deposit cash with Landlord in an
amount sufficient to restore the Security Deposit to its original amount and
Tenant's failure to do so shall be a material breach of this Lease. Landlord
shall not be required to keep any deposit under this Section separate from
Landlord's general funds, and Tenant shall not be entitled to interest thereon.
If Tenant fully and faithfully performs every provision of this Lease to be
performed by it, the Security Deposit, or any balance thereof, shall be returned
to Tenant or, at Landlord's option, to the last assignee of Tenant's interest
hereunder, at the expiration of the term of this Lease and after Tenant has
vacated the Premises. In the event of termination of Landlord's interest in this
Lease, Landlord shall transfer all deposits then held by Landlord under this
Section to Landlord's successor in interest, whereupon Tenant agrees to release
Landlord from all liability for the return of such deposit or the accounting
thereof.
17. MISCELLANEOUS
17.1. Notices. All notices, consents, waivers and other communications
which this Lease requires or permits either party to give to the other shall be
in writing and shall be deemed given when delivered personally (including
delivery by private courier or express delivery service) or four (4) days after
deposit in the United States mail, registered or certified mail, postage
prepaid, addressed to the parties at their respective addresses as follows:
To Tenant: (until Commencement Date)
RiboGene, Inc.
21375 Cabot Boulevard
Hayward, CA 94545
Attn: Chief Financial Officer
(after Commencement Date)
RiboGene, Inc.
3980 Point Eden Way
Hayward, CA 94545
Attn: Chief Financial Officer
To Landlord: Hayward Point Eden I Limited Partnership
c/o Britannia Developments, Inc.
1939 Harrison Street, Suite 412
Park Plaza Building
Oakland, CA 94612
Attn: T.J. Bristow
with copy to: Folger Levin & Kahn LLP
Embarcadero Center West
275 Battery Street, 23rd Floor
San Francisco, CA 94111
Attn: Donald E. Kelley, Jr.
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<PAGE> 28
or to such other address as may be contained in a notice at least fifteen (15)
days prior to the address change from either party to the other given pursuant
to this Section. Rental payments and other sums required by this Lease to be
paid by Tenant shall be delivered to Landlord at Landlord's address provided in
this Section, or to such other address as Landlord may from time to time specify
in writing to Tenant, and shall be deemed to be paid only upon actual receipt.
17.2. Successors And Assigns. The obligations of this Lease shall run with
the land, and this Lease shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns, except that the
original Landlord named herein and each successive Landlord under this Lease
shall be liable only for obligations accruing during the period of its ownership
of the Property, said liability terminating upon termination of such ownership
and passing to the successor lessor.
17.3. No Waiver. The failure of Landlord to seek redress for violation, or
to insist upon the strict performance, of any covenant or condition of this
Lease shall not be deemed a waiver of such violation, or prevent a subsequent
act which would originally have constituted a violation from having all the
force and effect of an original violation.
17.4. Severability. If any provision of this Lease or the application
thereof is held to be invalid or unenforceable, the remainder of this Lease or
the application of such provision to persons or circumstances other than those
as to which it is invalid or unenforceable shall not be affected thereby, and
each of the provisions of this Lease shall be valid and enforceable, unless
enforcement of this Lease as so invalidated would be unreasonable or grossly
inequitable under all the circumstances or would materially frustrate the
purposes of this Lease.
17.5. Litigation Between Parties. In the event of any litigation between
the parties hereto growing out of this Lease, the prevailing party shall be
reimbursed for all reasonable costs, including, but not limited to, reasonable
accountants' fees and attorneys' fees, incurred in connection with such
litigation, any appellate proceedings relating thereto and/or the enforcement of
any judgment entered therein. "Prevailing party" within the meaning of this
Section shall include, without limitation, a party who dismisses an action for
recovery hereunder in exchange for payment of the sums allegedly due,
performance of covenants allegedly breached or consideration substantially equal
to the relief sought in the action.
17.6. Surrender. A voluntary or other surrender of this Lease by Tenant,
or a mutual termination thereof between Landlord and Tenant, shall not result in
a merger but shall, at the option of Landlord, operate either as an assignment
to Landlord of any and all existing subleases and subtenancies, or a termination
of all or any existing subleases and subtenancies. This provision shall be
contained in any and all assignments or subleases made pursuant to this Lease.
17.7. Interpretation. The provisions of this Lease shall be construed as a
whole according to their common meaning and not strictly for or against Landlord
or Tenant. The captions preceding the text of each Section and subsection hereof
are included only for convenience of reference and shall be disregarded in the
construction or interpretation of this Lease.
17.8. Entire Agreement. This written Lease, together with the exhibits
hereto and the side letter executed concurrently herewith regarding certain
additional space in the Building, collectively contain all the representations
and the entire understandings between the parties hereto with respect to the
subject matter hereof. Any prior correspondence, memoranda or agreements are
replaced in total by this Lease, the exhibits hereto and the side letter
described above. This Lease may be modified only by an agreement in writing
signed by each of the parties.
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<PAGE> 29
17.9. Governing Law. This Lease and all exhibits hereto shall be construed
and interpreted in accordance with and be governed by all the provisions of the
laws of the State of California.
17.10. No Partnership. Nothing contained in this Lease shall be construed
as creating any type or manner of partnership, joint venture or joint enterprise
with or between Landlord and Tenant.
17.11. Financial Information. From time to time Tenant shall promptly
provide directly to prospective lenders and purchasers of the Premises
designated by Landlord such financial information pertaining to the financial
status of Tenant as Landlord may reasonably request; provided, Tenant shall be
permitted to provide such financial information in a manner which Tenant deems
reasonably necessary to protect the confidentiality of such information. In
addition, from time to time, Tenant shall provide Landlord with such financial
information pertaining to the financial status of Tenant as Landlord may
reasonably request. Landlord agrees that all financial information supplied to
Landlord by Tenant shall be treated as confidential material, and shall not be
disseminated to any party or entity (including any entity affiliated with
Landlord) without Tenant's prior written consent. For purposes of this Section,
without limiting the generality of the obligations provided herein, it shall be
deemed reasonable for Landlord to request copies of Tenant's most recent audited
annual financial statements, or, if audited statements have not been prepared,
unaudited financial statements for Tenant's most recent fiscal year, accompanied
by a certificate of Tenant's chief financial officer that such financial
statements fairly present Tenant's financial condition as of the date(s)
indicated.
Landlord and Tenant recognize the need of Tenant to maintain the
confidentiality of information regarding its financial status and the need of
Landlord to be informed of, and to provide to prospective lenders and purchasers
of the Premises, financial information pertaining to Tenant's financial status.
Landlord and Tenant agree to cooperate with each other in achieving these needs
within the context of the obligations set forth in this Section.
17.12. Costs. If Tenant requests the consent of Landlord under any
provision of this Lease for any act that Tenant proposes to do hereunder,
including, without limitation, assignment or subletting of the Premises, Tenant
shall, as a condition to doing any such act and the receipt of such consent,
reimburse Landlord promptly for any and all reasonable costs and expenses
incurred by Landlord in connection therewith, including, without limitation,
reasonable attorneys' fees.
17.13. Time. Time is of the essence of this Lease, and of every term and
condition hereof.
17.14. Rules And Regulations. Tenant shall observe and obey such rules and
regulations as Landlord may promulgate from time to time for the safety, care,
cleanliness, order and use of the Premises and the Building.
17.15. Brokers. Landlord agrees to pay a brokerage commission to Cushman &
Wakefield in connection with the consummation of this Lease in accordance with a
separate agreement. Tenant represents and warrants that no other broker
participated in the consummation of this Lease and agrees to indemnify, defend
and hold Landlord harmless against any liability, cost or expense, including,
without limitation, reasonable attorneys' fees, arising out of any claims for
brokerage commissions or other similar compensation in connection with any
conversations, prior negotiations or other dealings by Tenant with any other
broker.
17.16. Memorandum Of Lease. At any time during the term of this Lease,
either party, at its sole expense, shall be entitled to record a memorandum of
this
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<PAGE> 30
Lease and, if either party so elects, both parties agree to cooperate in the
preparation, execution, acknowledgement and recordation of such document in
reasonable form.
17.17. Corporate Authority. The person signing this Lease on behalf
of Tenant warrants that he or she is fully authorized to do so and by so doing,
to bind Tenant.
17.18. Parking. Landlord will provide at no additional cost to Tenant
parking of no less than 100 spaces on a non-exclusive basis.
17.19. Signage. Landlord shall provide to Tenant, as part of
Landlord's work under Section 2.4 and Exhibit C and chargeable against the
tenant improvement allowance relating to such work, a monument sign in front of
the Premises to conform to existing signage at the Center and to be subject to
any required city approval.
17.20. Stock Warrants. No later than seven (7) days after the
Commencement Date and without written notice from Landlord, as a condition of
Landlord's obligations hereunder, Tenant shall deliver to Landlord, subject to
compliance with all applicable securities laws, a warrant or warrants,
registered in the name(s) of Landlord or its designee(s) and in form and
substance reasonably satisfactory to Landlord, providing for the purchase of an
aggregate of Two Hundred and Fifty Thousand (250,000) shares of Tenant's common
stock. Such warrants shall have an exercise price of Two Dollars and Twenty-Five
Cents ($2.25) per share and shall be exercisable at any time up until the sixth
(6th) anniversary of the Commencement Date; provided, however, that if an
initial public offering of Tenant's common stock has not occurred by May 1,
1998, then the exercise period for the warrants shall be extended until May 1,
2004.
IN WITNESS WHEREOF, the parties hereto have executed this Lease as of
the day and year first set forth above.
"Landlord" "Tenant"
HAYWARD POINT EDEN I LIMITED RIBOGENE, INC., a California
PARTNERSHIP, a Delaware limited corporation
partnership
By: BRITANNIA DEVELOPMENTS, By: /s/
INC., a California corporation, --------------------------------
Its Managing Partner Its:
--------------------------------
By: /s/ T. J. BRISTOW
---------------------------
T.J. Bristow
President
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<PAGE> 31
CONSTRUCTION
Landlord, at its sole cost and expense (subject to the rental adjustment
provisions described below), shall undertake and diligently complete, subject to
delays for causes beyond its reasonable control (excluding financial inability),
interior tenant improvements in the Premises in accordance with the Approved
Plans and Specifications (as defined below and as modified from time to time in
accordance with this Exhibit C). Landlord shall use its best endeavors to
complete its work in accordance with the Time Line attached as Exhibit E to this
Lease, as modified from time to time by mutual agreement of Landlord and Tenant.
Landlord's work shall be performed in a neat and workmanlike manner and shall
conform to all applicable governmental codes, laws and regulations in force at
the time such work is completed. Landlord and Tenant shall both use their best
endeavors to develop, review and approve all space plans, working drawings,
final drawings, specifications, changes (if applicable) and other matters within
the time periods set forth in the Time Line attached as Exhibit E to this Lease,
as modified from time to time by mutual agreement of Landlord and Tenant.
As reflected in Section 3.11(c) of this Lease, Landlord has agreed to make
available for the interior improvements in the Premises a basic tenant
improvement allowance of Sixty-Five Dollars ($65.00) per square foot, and a
supplemental "Phase II improvement allowance" of up to Five Hundred Thousand
Dollars ($500,000.00), subject to Tenant's rights to review and approve budget
amounts and bids under this Exhibit C. If any portion of the Phase II
improvement allowance is expended by Landlord, then there shall be a rental
adjustment in accordance with Section 3.1(c). Landlord's total direct costs of
the interior tenant improvements (including, but not limited to, construction
costs, permit fees and charges, architects', engineers' and other consulting and
professional fees, and all other related costs incurred in connection with the
design and construction of the work, including up to $50,000 in fees incurred by
Tenant for architectural, engineering, space planning and other professional
services rendered by professionals approved in writing by Landlord, such
approval not to be unreasonably withheld, in connection with the design of the
work to be performed by Landlord on the Premises) shall be chargeable against
the basic tenant improvement allowance and, to the extent they exceed that
allowance, against the Phase II improvement allowance. If Landlord's total
direct costs of the interior tenant improvements are less than Sixty-Five
Dollars ($65.00) per square foot, then the monthly minimum rent shall be reduced
pursuant to the formula set forth in Section 3.1(c) of the Lease.
The Building Shell of the Building shall be constructed by Landlord at
Landlord's sole cost and expense and shall include a concrete slab floor with a
steel trowel finish, exposed wood frame roof with a built-up roof membrance, and
aluminum storefront with tinted glass. The glass in the five-foot ribbon windows
will be high-performance reflected glass. The electrical room is also included
as part of the Building Shell, including a 2000 Amp main disconnect and house
panel for site and common area lighting. Tenant metering, however, will be
provided as part of the tenant improvements and will be chargeable against the
tenant improvement allowance. The Building Shell also includes overhead fire
sprinklers at the underside of the roof structures. Sprinkler head drops will be
provided as part of the tenant improvements and will be chargeable against the
tenant improvement allowance. The Building Shell is further defined as part of
the "building standard specification" set forth in Exhibit F attached to the
Lease.
The cost of fifty percent (50%) of the demising wall between the Premises
and the adjacent ITT option space shall be part of the tenant improvements and
chargeable against the tenant improvement allowance.
Landlord and its architect, Chamorro Design Group ("CDG"), shall prepare
an initial set of plans and specifications for the interior improvements to the
Premises, to
EXHIBIT C (Page 1 of 2)
<PAGE> 32
be mutually approved (such approval not to be unreasonably withheld or delayed)
by Landlord and Tenant (the "Approved Plans and Specifications"), based on
Landlord's Building Standard Specifications as set forth in Exhibit F attached
to this Lease but taking into account Tenant's specific operating requirements
as communicated to Landlord and CDG by Tenant or its professional consultants.
(For purposes of the preceding sentence, Tenant shall have the right to submit
to Landlord and CDG, as part of the design process, documents detailing any
specific operating requirements and needs of Tenant, and Landlord agrees to
cause CDG to take such requirements into consideration, to the extent reasonably
possible, in the preparation of the Approved Plans and Specifications and the
working drawings.) CDG will then produce detailed working drawings, based on the
Approved Plans and Specifications, for submission to the City of Hayward for
building permit approval. Any material changes from the Approved Plans and
Specifications shall be subject to mutual approval (not unreasonably withheld or
delayed) by Landlord and Tenant, provided, however, that any changes required
from time to time in the Approved Plans and Specifications, working drawings
and/or final plans and specifications as a result of applicable law or
governmental requirements, or at the insistence of any other third party whose
approval may be required with respect to such improvements, or as a result of
unanticipated conditions encountered in the course of construction, may be
implemented by Landlord after prior notice to Tenant, but shall not require
Tenant's approval or consent (although Landlord agrees to give reasonable
consideration to Tenant's views regarding functional characteristics of any such
required changes).
The general contractor for the interior tenant improvements shall be
Concrete Shell Structures, Inc., or any other licensed and qualified general
contractor selected by Landlord in its sole discretion. Since the general
contractor's contract will not be competitively bid, Landlord agrees to exercise
reasonable efforts to ensure that the general contractor's markup and other
contract terms are reasonable and competitive in light of market conditions. All
material subcontracts shall be bid to at least three (3) subcontractors. Tenant
shall have the right to submit names of specific subcontractors from which it
would like bids to be invited in particular areas or trades, but such
subcontractors shall be subject to approval (prior to requests for bids) by
Landlord and the general contractor, such approval not to be unreasonably
withheld, and Landlord shall in all events have the right of final approval over
subcontractors. Tenant shall at all times have access to the details of all bids
and estimates for the interior tenant improvements (but not for the building
shell), including (but not limited to) estimates and actual expenses submitted
by the general contractor in connection with the interior tenant improvements,
and the cost aspects of all subcontract bids and estimates for the interior
tenant improvements shall be subject to mutual approval by Landlord and Tenant.
Prior to commencement of construction of interior tenant improvements, all bids,
estimates, budgets and contracts with respect to the interior tenant
improvements shall be available for review by Tenant and, in the case of all
subcontract bids and estimates, for mutual approval by Landlord and Tenant. Cost
aspects of any changes requested by Tenant from time to time in the Approved
Plans and Specifications, working drawings and/or final plans and specifications
shall be subject to mutual approval by Landlord and Tenant; cost aspects of any
changes required from time to time in the Approved Plans and Specifications,
working drawings and/or final plans and specifications as a result of applicable
law or governmental requirements, or at the insistence of any other third party
whose approval may be required with respect to such improvements, or as a result
of unanticipated conditions encountered in the course of construction, shall not
require Tenant's approval or consent, but Tenant shall at all times have access
to the details of the cost aspects of such changes (including estimates and
actual expenses) for informational purposes. Tenant shall have the right to meet
with the general contractor or any subcontractor at any time, on reasonable
notice to Landlord and the general contractor, or on a periodic or regularly
scheduled basis, to review the status of the construction of the interior tenant
improvements, the actual costs to date and the estimated time and costs to
completion.
EXHIBIT C (Page 2 of 2)
<PAGE> 33
[LOCATION OF PREMISES MAP]
EXHIBIT A
<PAGE> 34
BUILDING STANDARD SPECIFICATION
RIBOGENE BRITANNIA BUSINESS CENTER/PT EDEN III
CDG File #9606.02
2/25/97
5. Insulation:
a. Full thick unfinished batts in Toilet room walls, Conference walls,
C.F.O., walls and V.P. office walls.
b. R-11 foil faced batts at all exterior walls of conditioned spaces.
c. R-19 foil faced batts at roof.
6. HVAC:
a. Gas fired roof top package units.
b. HVAC will be provided in all areas except the following:
Storage
Shipping and receiving
c. The following areas will be provided with gas fired space heater:
Shipping and receiving
Storage
7. Plumbing:
a. See plan for locations.
8. Electrical:
a) Minimum of 3 electrical and one tele/data outlet per room.
b) Lighting in T-bar ceilings shall be 2 X 4 recessed fluorescent fixtures
with flat acrylic lenses. Lighting levels to conform to the latest
Title 24 requirements.
c) Lighting in gyp. bd. ceilings shall be surface mounted wrap around
fluorescent.
d) Lighting in exposed ceiling areas shall be either chain-hung strip
fluorescent on high pressure sodium.
9. Miscellaneous:
a) Plastic laminate lab benches with plastic laminate countertops
(chemical resistant in Chem. and Anal. lab)
b) Fumehoods
CHAMORRO DESIGN GROUP PAGE 3 OF 3
EXHIBIT F (Page 4 of 4)
<PAGE> 35
BUILDING STANDARD SPECIFICATION
RIBOGENE BRITANNIA BUSINESS CENTER/PT EDEN III
CDG File #9606.02
2/25/97
TOILET ROOMS/SHOWER:
Floor - Ceramic tile
Base - Ceramic tile
Walls - 4' Ceramic tile wainscot on wet walls
- Gyp. bd.-enamel
Ceiling - Gyp. bd.-enamel
Misc. - Plastic lam. countertops
- Metal toilet partitions
- Recessed stainless steel toilet accessories
- Fiberglas shower
JANITOR:
Floor - V.C.T.
Base - Vinyl topset
Walls - 4' marlite wainscot
- Gyp. bd.-enamel
Ceiling - Gyp. bd.=enamel
STORAGE
SHIPPING & RECEIVING:
Floor - Concrete-sealed
Base - Vinyl topset
Walls - Gyp. bd.-Paint
- Concrete-paint
Ceiling - Exposed framing
NOTES:
1. Carpets: 28 oz direct glue down, unless noted otherwise.
2. All finished ceilings at 9'-0'.
3. Door frames and hardware:
a. 3'x7' SC, oakwood veneer, clear finish.
b. Painted aluminum door frames.
c. Schlage "D-series" hardware with lever handles.
4. Fire sprinklers: Semi-recessed heads with white painted escutcheons in
all finished ceilings.
CHAMORRO DESIGN GROUP PAGE 2 OF 3
EXHIBIT F (Page 3 of 4)
<PAGE> 36
TIME LINE
(TO BE PROVIDED)
EXHIBIT E
<PAGE> 37
RIBOGENE CONSTRUCTION SCHEDULE
PREPARED ON 08 MARCH 97
<TABLE>
<CAPTION>
JAN 97 FEB 97 MAR 97 APR 97 MAY 97 JUNE 97 JULY 97 AUG 97 SEP 97
6 13 20 27 3 10 17 24 3 10 17 24 31 7 14 21 28 5 12 19 26 2 9 16 23 30 7 14 21 28 4 11 18 25 1 8 15 22 29
<S> <C>
TENANT IMPROVEMENTS
1 ROUGH M.E.P. UNDERSLAB
SAW CUT FLOORS
INSTALL ROUGH PLUMBING
CONCRETE PATCHING
2 ROUGH M.E.P. @ CEILING
3 FRAME HIGH WALLS
4 DRYWALL @ HIGH WALLS
5 T-BAR GRID
6 FRAME BELOW GRID
7 M.E.P. IN WALLS
8 INSULATE WALLS
9 DRYWALL, TAPE & TOP
10 INTERIOR PAINTING
11 FINISH RESTROOMS
12 FINISH LABS
13 FLOOR COVERINGS
14 CABINETRY
15 FINISH MEP
16 PUNCH LIST
17 MOVE IN
APR 97 MAY 97 JUNE 97 JULY 97 AUG 97 SEP 97
7 14 21 28 5 12 19 26 2 9 16 23 30 7 14 21 28 4 11 18 25 1 8 15 22 29
</TABLE>
<PAGE> 38
BUILDING STANDARD SPECIFICATION
RIBOGENE
Britannia Pt. Eden Business Center Phase III building structure is a
conventional tilt-up concrete structure. Supported on concrete spread footings,
the floor slab is 5" reinforced concrete over a membrane and engineered fill.
The roof is a panelized wood roof supported by steel columns, girders, and open
web metal joists. The built-up roofing membrane utilizes a 4-ply system with a
mineral surfaced cap sheet.
The building shell and tenant improvements will be separated as follows:
BUILDING SHELL:
- - Building envelope
- - Exterior concrete walks
- - Parking areas
- - Landscaping and irrigation
- - Roof drains and drain lines
- - Fire sprinklers at roof elevation
- - Trash enclosures
- - Utilities:
- site lighting
- electric transformer
- underground electrical to building pull-section
- gas to exterior meter on building
- telephone conduit to building
- site storm drain system
- main sanitary sewer line under ground floor slab
TENANT IMPROVEMENTS
- - Toilet cores
- - Interior partitioning
- - Interior finishes
- - Millwork
- - Specialty items, such as skylights
- - HVAC system
- - Building exhaust system
- - Thermal building insulation
- - Fire sprinkler drops below roof elevation
- - Utilities:
- all electrical beyond pull section including electrical main
disconnect and distribution panels
- gas piping beyond main gas meter
- telephone conduit beyond utility co. termination point
- sanitary sewer lines to main line under ground floor
- lab gas piping all lab utilities, i.e. natural gas, compressed air,
vacuum, etc.
- utility connection fees based on items that are part of tenant
improvements
CHAMORRO DESIGN GROUP
EXHIBIT F (Page 1 of 4)
<PAGE> 39
BUILDING STANDARD SPECIFICATION
RIBOGENE BRITANNIA BUSINESS CENTER/PT EDEN III
CDG File #9606.02
2/25/97
INTERIOR MATERIALS/FINISHES
- ---------------------------
RECEPTION/LOBBY
PRIVATE OFFICES
OPEN OFFICE AREAS
CONFERENCE ROOMS
LIBRARY
CORRIDORS:
Floor - Carpet
Base - Vinyl topset
Walls - Gyp. bd.-paint
Ceiling - Acoustic tiles-2x4 T-bar
LABS
HAX. MAT. STORAGE
NMR
EQUIPMENT, WEIGHING, CHEM. STORAGE
RADIATION
DARK ROOM
COLD ROOM
D.I. WATER
AUTOCLAVE
GLASS
BL-2
PLATE POWERING:
Floors - V.C.T
Base - Vinyl topset
Walls - Gyp. bd.-paint
Ceiling - Acoustic tile-2x4 T-bar
LUNCH
KITCHEN STORAGE
RECORD STORAGE
COPY/MAIL
ELECTRICAL:
Floors - V.C.T
Base - Vinyl topset
Walls - Gyp. bd.-paint
Ceiling - Acoustic tile-2x4 T-bar
Misc. - Upper & lower base cabinets, plastic laminate finish,
sink, garbage disposal and dishwasher in Lunch only
CHAMORRO DESIGN GROUP PAGE 1 OF 3
EXHIBIT F (Page 2 of 4)
<PAGE> 40
ACKNOWLEDGEMENT OF LEASE COMMENCEMENT
This Acknowledgement is executed as of _____________, 1997, by HAYWARD
POINT EDEN I LIMITED PARTNERSHIP, a Delaware limited partnership ("Landlord"),
and RIBOGENE, INC., a California corporation ("Tenant"), pursuant to Section
2.5 of the Lease dated March 7, 1997 between Landlord and Tenant (the "Lease")
covering premises located at 3980 Point Eden Way, Hayward, CA 94545 (the
"Premises").
Landlord and Tenant hereby acknowledge and agree as follows:
1. The Commencement Date under the Lease is _____________, 1997.
2. The termination date under the Lease shall be _____________,
2012, subject to any applicable provisions of the Lease for extension or early
termination thereof.
3. The final cost of the tenant improvements for the Premises is
$__________, of which $__________ constitutes an expenditure of the Phase II
improvement allowance. Based on that cost, the applicable rental adjustment (if
any) required under the Lease is as follows (if none, so state): ______________
_______________________________________________________________________________
______________________________________________________________________________.
4. Tenant accepts the Premises and acknowledges the satisfactory
completion of all improvements therein (if any) required to be made by
Landlord, subject only to any applicable "punch list" or similar procedures
specifically provided under the Lease.
EXECUTED as of the date first set forth above.
"Landlord" "Tenant"
HAYWARD POINT EDEN I LIMITED RIBOGENE, INC., a California
PARTNERSHIP, a Delaware limited corporation
partnership
By: BRITANNIA DEVELOPMENTS, By: __________________________
INC., a California corporation, Its: _________________________
Its Managing Partner
By: __________________________
T.J. Bristow
President
<PAGE> 41
EXHIBITS
--------
EXHIBIT A Location of Premises
EXHIBIT B Real Property Description
EXHIBIT C Construction
EXHIBIT D Acknowledgement of Lease Commencement
EXHIBIT E Time Line
EXHIBIT F Building Standard Specification
<PAGE> 42
REAL PROPERTY DESCRIPTION
Real property located in the City of Hayward, County of Alameda, State
of California, more particularly described as follows:
Lots 1, 2, 3, 4, 5 and 7, Tract 4019, filed June 28, 1979, Map Book
100, Pages 97, 98 and 99, Alameda County Records.
Subject to easements, restrictions and other matters of record
affecting title.
EXHIBIT B
<PAGE> 1
EXHIBIT 10.16
FIRST AMENDMENT TO LEASE
FIRST AMENDMENT TO LEASE ("Amendment") is entered into as of
September 24, 1997 between HAYWARD POINT EDEN I LIMITED PARTNERSHIP, a Delaware
limited partnership ("Landlord") and RIBOGENE, INC., a California corporation
("Tenant"), with reference to the following facts:
A. Landlord and Tenant are parties to a Lease dated as of March 7, 1997
(the "Lease") covering certain premises consisting of approximately 25,000
square feet of space in Building J in the Britannia Point Eden Business Park in
Hayward, California (the "Premises"). Building J and the Premises are presently
under construction pursuant to the terms of the Lease.
B. Landlord and Tenant wish to enter into this Amendment in order to
reflect a change in the street address of the Premises, to reflect changes in
the tenant improvement allowance and the base rent structure for the Premises as
initially defined in the Lease, to bring certain additional space under the
Lease on the terms and conditions set forth herein (thereby implementing a
letter agreement dated March 7, 1997 between Landlord and Tenant with respect to
such additional space), and to make other related or incidental changes to the
Lease. Terms not otherwise defined herein shall have the meanings given them in
the Lease.
NOW, THEREFORE, in consideration of the mutual promises contained
herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Landlord and Tenant agree as
follows:
1. Chancre of Address of Premises. The Lease in several places
identifies the address of the Premises as 3980 Point Eden Way, Hayward, CA
94545. The parties have now determined that the street address for Building J,
when completed, will be 26118 Research Road, Hayward, CA 94545. Accordingly, the
references to the street address of the Premises in Section 1.1 of the Lease
(description of Premises), in Section 17.1 of the Lease (notice address for
Tenant after the Commencement Date) and in the first paragraph of Exhibit D to
the Lease (form of Acknowledgement of Lease Commencement) are hereby amended to
show such address as 26118 Research Road, Hayward, CA 94545.
2. Change in Tenant Improvement Allowance and Rent Schedule. The
parties have agreed to increase the tenant improvement allowance for the
Premises from $65 per square foot to $80 per square foot, and to make related
changes in the base rent structure set forth in Section 3.1(a) of the Lease. To
reflect those changes, the Lease is amended as follows:
(a) The rental table set forth in Section 3.1(a) of the
Lease is amended to read in its entirety as follows:
[rest of page intentionally left blank]
<PAGE> 2
<TABLE>
<CAPTION>
"Months Minimum Rental
------- --------------
<S> <C> <C>
001 - 012 $40,000.00 ($1.60/sq ft)
013 - 024 $40,000.00 ($1.60/sq ft)
025 - 036 $44,000.00 ($1.76/sq ft)
037 - 048 $45,500.00 ($1.82/sq ft)
049 - 060 $47,250.00 ($1.89/sq ft)
061 - 072 $48,750.00 ($1.95/sq ft)
073 - 084 $50,500.00 ($2.02/sq ft)
085 - 096 $52,500.00 ($2.10/sq ft)
097 - 108 $54,250.00 ($2.17/sq ft)
109 - 120 $56,250.00 ($2.25/sq ft)
121 - 132 $58,250.00 ($2.33/sq ft)
133 - 144 $60,500.00 ($2.42/sq ft)
145 - 156 $62,750.00 ($2.51/sq ft)
157 - 168 $65,000.00 ($2.60/sq ft)
169 - 180 $67,500.00 ($2.70/sq ft)"
</TABLE>
(b) Section 3.1(c) of the Lease is amended to read in its
entirety as follows:
"(c) The minimum rental amounts specified in this
Section 3.1 are based upon an estimated tenant improvement allowance of
Eighty Dollars ($80.00) per square foot for the work to be performed by
Landlord on the Premises under Section 2.4 and Exhibit C. If Landlord's
total direct costs of such work (including, but not limited to,
construction costs, permit fees and charges, architects', engineers'
and other consulting and professional fees and all other related costs
incurred in connection with the design and construction of the work,
including up to $50,000 in fees incurred by Tenant for architectural,
engineering, space planning and other professional services rendered by
professionals approved in writing by Landlord, such approval not to be
unreasonably withheld, in connection with the design of the work to be
performed by Landlord on the Premises) are less than the product of
Eighty Dollars ($80.00) times the area of the Premises (in square feet)
as determined in good faith by Landlord's architect on the basis
described in Section 3.1(b) above, then the minimum rental amounts
specified in Section 3.1(a) shall be reduced by an amount equal to one
cent ($0.01) per square foot per month for each One Dollar ($1.00) by
which such total direct costs are less than Eighty Dollars ($80.00)
times the area of the Premises in square feet. If, following completion
of the initial tenant improvements in the Initial Premises, Tenant
wishes to have Landlord construct additional tenant improvements in the
Initial Premises at any time within six (6) years after the
Commencement Date, then Landlord will provide an additional tenant
improvement allowance (the "Phase II Improvement Allowance") up to a
maximum of Five Hundred Thousand Dollars ($500,000.00). To the extent
any of such Phase II Improvement Allowance is used, the monthly minimum
rent shall be increased, commencing upon completion of the improvements
constructed with the Phase II Improvement Allowance and continuing
until the earlier to occur of the Termination Date of the initial term
of this Lease or the date which is ten (10) years after the date of
completion of the improvements constructed with the Phase II
Improvement Allowance, by a supplemental rent payment in an amount
equal to the amount necessary to fully amortize the funds actually
expended from the Phase II Improvement Allowance on a monthly level
payment basis, with an imputed return at the rate of fourteen percent
(14%) per annum, over the lesser of ten (10) years or the period of
time remaining to the Termination Date of the initial term of this
Lease."
- 2 -
<PAGE> 3
(c) Section 16.1 of the Lease is amended to increase the
initial Security Deposit required from Tenant to Forty Thousand and No/100
Dollars ($40,000.00), consistent with the changes to the monthly base rent
structure as set forth above.
(d) The second paragraph of Exhibit C of the Lease is
amended to read in its entirety as follows:
"As reflected in Section 3.1(c) of this Lease, Landlord has
agreed to make available for the interior improvements in the
Premises a tenant improvement allowance of Eighty Dollars ($80.00)
per square foot, subject to Tenant's rights to review and approve
budget amounts and bids under this Exhibit C. Landlord's total direct
costs of the interior tenant improvements (including, but not limited
to, construction costs, permit fees and charges, architects',
engineers' and other consulting and professional fees, and all other
related costs incurred in connection with the design and construction
of the work, including up to $50,000 in fees incurred by Tenant for
architectural, engineering, space planning and other professional
services rendered by professionals approved in writing by Landlord,
such approval not to be unreasonably withheld, in connection with the
design of the work to be performed by Landlord on the Premises) shall
be chargeable against the tenant improvement allowance. If Landlord's
actual direct costs of such interior tenant improvements are less
than Eighty Dollars ($80.00) per square foot, then there shall be a
rental adjustment in accordance with Section 3.1(c) of this Lease."
3. Additional Premises. Building J, when completed, will consist of
approximately 30,000 square feet of space. The Premises as defined in the Lease
consist of approximately 25,000 square feet in Building J (the "Original
Premises"); the remaining 5,000 square feet of Building J are defined as part of
the "Option Space" in which Tenant has certain first refusal rights under
Section 1.3 of the Lease. Landlord and Tenant now wish to include such remaining
5,000 square feet of Building J (the "Additional Premises") in the space covered
by the Lease, and therefore agree as follows:
(a) Lease of Additional Premises. Landlord leases to Tenant
and Tenant hires and leases from Landlord the Additional Premises, on all of the
terms, covenants and conditions set forth in the Lease as modified by this
Amendment, including (but not limited to) any and all warranties relating to the
Premises. The "Premises" as defined in the Lease shall be construed to include
both the Original Premises and the Additional Premises, whenever the term
"Premises" is used in the Lease or in this Amendment, except as otherwise
expressly provided herein.
(b) Option Space. Clause (a) of Section 1.3 of the Lease is
hereby deleted, thereby deleting the Additional Premises from the definition of
the "Option Space" under the Lease, and the depiction of the "Option Space" on
Exhibit A to the Lease is modified accordingly.
(c) Rental. The rent provisions presently found in Sections
3.1(a), (b) and (c) of the Lease (as modified in Paragraph 2 of this Amendment)
shall be construed to apply solely to the Original Premises. The following
rental provisions shall apply to the Additional Premises during the initial term
of the Lease:
- 3 -
<PAGE> 4
(i) Tenant shall pay to Landlord as minimum rental
for the Additional Premises, in advance, without deduction, offset,
notice or demand, on or before the Commencement Date as defined in the
Lease with respect to the Original Premises and on or before the
first day of each subsequent calendar month of the term of the Lease,
the following amounts per month;
<TABLE>
<CAPTION>
Months Minimum Rental
------ --------------
<S> <C> <C> <C>
001 - 012 $4,250.00 ($0.85/sq ft)
013 - 024 $4,250.00 ($0.85/sq ft)
025 - 036 $4,420.00 ($0.884/sq ft)
037 - 048 $4,597.00 ($0.9194/sq ft)
049 - 060 $4,781.00 ($0.9562/sq ft)
061 - 072 $4,972.00 ($0.9944/sq ft)
073 - 084 $5,171.00 ($1.0342/sq ft)
085 - 096 $5,378.00 ($1.0756/sq ft)
097 - 108 $5,593.00 ($1.1186/sq ft)
109 - 120 $5,816.00 ($1.1632/sq ft)
121 - 132 $6,049.00 ($1.2098/sq ft)
133 - 144 $6,291.00 ($1.2582/sq ft)
145 - 156 $6,543.00 ($1.3086/sq ft)
157 - 168 $6,804.00 ($1.3608/sq ft)
169 - 180 $7,077.00 ($1.4154/sq ft)
</TABLE>
If the obligation to pay minimum rental hereunder commences on other
than the first day of a calendar month or if the term of the Lease
terminates on other than the last day of a calendar month, the minimum
rental for such first or last month of the term of the Lease, as the
case may be, shall be prorated based on the number of days the term of
the Lease is in effect during such month. If an increase in minimum
rental becomes effective on a day other than the first day of a
calendar month, the minimum rental for that month shall be the sum of
the two applicable rates, each prorated for the portion of the month
during which such rate is in effect.
(ii) The minimum rental amounts specified in
subparagraph (c)(i) above are based upon an estimated area of 5,000
square feet for the Additional Premises. If the actual area of the
Additional Premises, when completed, is greater or less than 5,000
square feet, the minimum rentals specified in subparagraph (c)(i)
shall be adjusted proportionately to the change in the area of the
Additional Premises, as determined in good faith by Landlord's
architect on the basis of measurement from the exterior faces of
exterior walls, from the centerline of interior demising walls, and
from the drip line of any exterior overhangs.
(iii) The minimum rental amounts specified in
subparagraph (c)(i) above are based upon an estimated tenant
improvement allowance of Fifteen and No/100 Dollars ($15.00) per
square feet for the initial work to be performed by Landlord on the
Additional Premises under subparagraph (g) below. If Landlord's total
direct costs of such initial work (including, but not limited to,
construction costs, permit fees and charges, architects', engineers'
and other consulting and professional fees and all other related costs
incurred in connection with the design and construction of the work),
subject to Tenant's approval rights expressly set forth below with
respect to certain improvement costs (such total direct costs, subject
to Tenant's approval rights where applicable, being hereinafter
referred to as the "Allowable Costs"), exceed the product of Fifteen
Dollars ($15.00) times the
- 4 -
<PAGE> 5
area of the Additional Premises in square feet (measured in accordance
with subparagraph (c)(ii) above), then such excess Allowable Costs
shall be charged against the additional tenant improvement allowances
described in subparagraph (h) below (up to the maximum amounts
specified therein) and shall result in a rental adjustment pursuant to
subparagraph (c)(iv) below, unless Tenant elects instead to pay the
excess Allowable Costs from such initial work in a lump sum, in which
event Tenant shall pay such excess Allowable Costs to Landlord in cash
within thirty (30) days after written request from Landlord,
accompanied by supporting documentation in reasonable detail with
respect to the determination of such excess amount, and no rental
adjustment shall be made with respect thereto. If Landlord's Allowable
Costs for such initial work exceed the maximum aggregate allowances
available under this subparagraph (c)(iii) and subparagraph (h) below,
Tenant shall pay the amount of such excess to Landlord in cash within
thirty (30) days after written request from Landlord, accompanied by
supporting documentation in reasonable detail with respect to the
determination of such excess amount. If Landlord's Allowable Costs for
such initial work are less than Fifteen Dollars ($15.00) times the
area of the Additional Premises in square feet (measured in accordance
with subparagraph (c)(ii) above), then the minimum rental amounts set
forth in subparagraph (c)(i) above with respect to the Additional
Premises shall be reduced by an amount equal to one and three tenths
cents ($0.013) per square foot per month for each One Dollar ($1.00)
by which such Allowable Costs are less than Fifteen Dollars ($15.00)
times the area of the Additional Premises in square feet.
(iv) If and when Landlord performs initial or
supplemental work on the Additional Premises and the cost of such work
is chargeable in whole or in part against the additional tenant
improvement allowances described in subparagraph (h) below, then to
the extent of such charge against the additional tenant improvement
allowances, the minimum rental amounts set forth in subparagraph
(c)(i) above shall be adjusted as follows:
(A) To the extent of any charges against the
additional tenant improvement allowance of $50.00 per square
foot under subparagraph (h) below, the minimum rental
amounts specified in subparagraph (c)(i) above shall be
increased by an amount equal to the applicable Recovery Rate
times the area of the Additional Premises in square feet as
determined under subparagraph (c)(ii) above, which increase
(the "Additional TI Rent") shall become effective upon
substantial completion (except for punch list items) of the
improvements constructed with such additional tenant
improvement allowance and shall continue throughout the
remainder of the initial term of the Lease, unless Tenant
elects instead to pay the amounts chargeable against such
additional tenant improvement allowance in a lump sum, in
which event Tenant shall pay such amounts to Landlord in
cash within thirty (30) days after written request from
Landlord, accompanied by supporting documentation in
reasonable detail with respect to the determination of such
amounts, and no rental adjustment shall be made with respect
thereto. In addition, on each anniversary of the
Commencement Date occurring after the date on which any
Additional TI Rent under this subparagraph
- 5 -
<PAGE> 6
(c)(iv)(A) becomes payable, the Additional TI Rent shall be
increased to an amount equal to one hundred four percent
(104%) of the amount of the Additional TI Rent that was
payable in the month immediately prior to such anniversary
(corresponding to the step increases already built into the
basic rent schedule for the Original Premises under Section
3.1(a) of the Lease and for the Additional Premises under
subparagraph (c)(i) above); provided, however, that for any
Additional TI Rent under this subparagraph (c)(iv)(A) that
first becomes payable other than on an anniversary of the
Commencement Date, the adjustment under this sentence for
the first such anniversary after the effective date of the
Additional TI Rent shall be prorated based on the ratio that
the number of days from such effective date to such first
anniversary bears to 365. For purposes of this subparagraph,
the term "Recovery Rate" shall mean (I) for any Allowable
Costs expended by Landlord on or before the third (3rd)
anniversary of the Commencement Date, one and three-tenths
cents ($0.013) per square foot per month for each one Dollar
($1.00) charged against the additional tenant improvement
allowance; (II) for any Allowable Costs expended by Landlord
after the third (3rd) anniversary and on or before the
fourth (4th) anniversary of the Commencement Date, one and
four-tenths cents ($0.014) per square foot per month for
each One Dollar ($1.00) charged against the additional
tenant improvement allowance; (III) for any Allowable Costs
expended by Landlord after the fourth (4th) anniversary and
on or before the fifth (5th) anniversary of the Commencement
Date, one and five-tenths cents ($0.015) per square foot per
month for each One Dollar ($1.00) charged against the
additional tenant improvement allowance; and (IV) for any
Allowable Coats expended by Landlord after the fifth (5th)
anniversary of the Commencement Date, one and six-tenths
cents ($0.016) per square foot per month for each One Dollar
($1.00) charged against the additional tenant improvement
allowance.
(B) To the extent of any charges against the
Phase II tenant improvement allowance of $100,000.00 under
subparagraph (h) below, the minimum rental amounts specified
in subparagraph (c)(i) above shall be increased by a
supplemental rent payment in an amount equal to the amount
necessary to fully amortize the amounts charged against such
Phase II allowance on a monthly level payment basis, with an
imputed return at the rate of fourteen percent (14%) per
annum, over the lesser of ten (10) years or the period of
time remaining to the Termination Date of the initial term
of the Lease, which increase shall become effective upon
substantial completion (except for punch list items) of the
improvements constructed with such Phase II allowance and
shall continue until the end of the amortization period on
which the calculation of the rental increase amount was
based, unless Tenant elects instead to pay the amounts
chargeable against the Phase II tenant improvement allowance
in a lump sum, in which event Tenant shall pay such amounts
to Landlord in cash within thirty (30) days after written
request from Landlord, accompanied by supporting
documentation in reasonable detail with respect to the
- 6 -
<PAGE> 7
determination of such amounts, and no rental adjustment
shall be made with respect thereto.
(d) Operating Expenses. Section 5.1(a) of the Lease is
amended to provide that Tenant's Operating Cost Share is One Hundred Percent
(100%) and Section 5.1(b) of the Lease is deleted, since Tenant will now be
occupying all of Building J (when completed).
(e) Subleasing of Additional Premises. The parties
acknowledge that Tenant intends to try to sublease the Additional Premises for a
limited period of time until Tenant is ready to occupy the Additional Premises
itself. Landlord acknowledges that as required by Section 11.1 of the Lease,
Landlord shall not unreasonably withhold its consent to any such sublease for
which Landlord's consent is requested by Tenant.
(f) Security Deposit. Concurrently with Tenant's execution
of this Amendment, Tenant shall deposit with Landlord the sum of Four Thousand
Two Hundred Fifty and No/100 Dollars ($4,250.00) as an additional Security
Deposit under Section 16.1 of the Lease, bringing the total Security Deposit to
$44,250.00.
(g) Initial Improvements. The economic provisions of Exhibit
C to the Lease, as it presently exists, relating to interior improvements in the
"Premises" shall be construed to apply solely to the improvement of the Original
Premises. Landlord agrees to undertake and diligently complete, subject to
delays for causes beyond its reasonable control (excluding financial inability),
interior tenant improvements in the Additional Premises in accordance with
Approved Plans and Specifications to be developed, mutually approved and
modified from time to time, as necessary, in accordance with the same procedures
applicable to the Original Premises under Exhibit C to the Lease; the provisions
and procedures applicable to the Original Premises under Exhibit C to the Lease
with respect to selection of contractors, bidding of subcontracts, review and
approval of plans, specifications, costs, bids and budgets, and like matters
shall similarly apply to the Additional Premises under this subparagraph (g).
Landlord's work in the Additional Premises shall be performed in a neat and
workmanlike manner and shall conform to all applicable governmental codes, laws
and regulations in force at the time such work is completed. Landlord and Tenant
shall both use their best endeavors to develop, review and approve all space
plans, working drawings, final drawings, specifications, changes (if applicable)
and other matters relating to the Additional Premises promptly and diligently.
Landlord shall make available for the initial interior improvements to the
Additional Premises a basic tenant improvement allowance of Fifteen Dollars
($15.00) per square foot, subject to the rent adjustment provisions in
subparagraphs (c)(iii) and (c)(iv) above. The cost of the demising wall between
the Original Premises and the Additional Premises (to permit convenient
subleasing of the Additional Premises by Tenant) shall be charged fifty percent
(50%) to the tenant improvement allowance for the Original Premises and fifty
percent (50%) to the tenant improvement allowance for the Additional Premises.
(h) Supplemental Improvements. Tenant shall be entitled to
have Landlord perform supplemental improvements to the Additional Premises, over
and above the $15.00 per square foot allowance contemplated under subparagraph
(g) above, as part of the initial build-out of the Additional Premises or at any
other Lime (and from time to time) within six (6) years after the Commencement
Date under the Lease. The procedure for design, approval of plans,
specifications and costs, and construction of such supplemental improvements
shall be the same as that provided
- 7 -
<PAGE> 8
in subparagraph (g) above for the initial improvements to the Additional
Premises. Landlord shall make available for the supplemental improvements to the
Additional Premises an additional basic tenant improvement allowance of Fifty
Dollars ($50.00) per square foot (making an aggregate basic tenant improvement
allowance of $65.00 per square foot for the Additional Premises, just as was
provided for the Original Premises under the Lease), subject to the rent
adjustment provisions in subparagraphs (c)(iii) and (c)(iv) above; if Landlord's
Allowable Costs in connection with such supplemental improvements exceed Fifty
Dollars ($50.00) per square foot, then Landlord will provide an additional Phase
II tenant improvement allowance of up to One Hundred Thousand Dollars
($100,000.00) for the Additional Premises (corresponding to the $500,000 Phase
II Improvement Allowance for the Original Premises under the Lease), likewise
subject to the rent adjustment provisions in subparagraphs (c)(iii) and (c)(iv)
above.
(i) Brokers. Landlord agrees to pay a brokerage commission
to Cushman & Wakefield in connection with the consummation of this Amendment in
accordance with a separate agreement. Tenant represents and warrants that no
other broker participated in the consummation of this Amendment and agrees to
indemnify, defend and hold Landlord harmless against any liability, cost or
expense, including, without limitation, reasonable attorneys' fees, arising out
of any claims for brokerage commissions or similar compensation in connection
with any conversations, prior negotiations or other dealings by Tenant with any
other broker.
4. Full Force and Effect. Except as expressly modified in this
Amendment, the Lease has not been modified or amended and remains in full force
and effect. This Amendment expressly supersedes the letter agreement dated as of
March 7, 1997 between Landlord and Tenant, in which Landlord and Tenant agreed
to enter into a First Amendment to Lease with respect to the space defined
herein as the Additional Premises.
IN WITNESS WHEREOF, Landlord and Tenant have executed this Amendment
as of the date first set forth above.
"Landlord" "Tenant"
HAYWARD POINT EDEN I LIMITED RIBOGENE, INC., a California
PARTNERSHIP, a Delaware corporation
limited partnership
By: BRITANNIA DEVELOPMENTS,
INC., a California By: /s/ Timothy E. Morris
corporation, Its ------------------------------------
Managing Partner Its: VP Finance & Administration, CFO
By: /s/ T. J. BRISTOW
----------------------------
T. J. Bristow
President
- 8 -
<PAGE> 1
Exhibit 10.17
LEASE
BETWEEN
HALL PROPERTIES, INC.
("Landlord")
and
RIBOGENE, INC.
("Tenant")
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
BASIC LEASE INFORMATION ................................................. iv
1. PREMISES ........................................................... 1
1.1. Premises ..................................................... 1
1.2. Landlord's Reserved Rights ................................... 1
1.3. First Refusal Right .......................................... 1
2. TERM ............................................................... 2
2.1. Term ......................................................... 2
2.2. Early Possession ............................................. 2
2.3. Delay In Possession .......................................... 2
2.4 Construction .................................................
2.5. Acknowledgement Of Lease Commencement ........................
2.6. Holding Over .................................................
2.7. Option To Extend Term ........................................
3. RENTAL .............................................................
3.1. Minimum Rental ...............................................
3.2 Late Charge ..................................................
TAXES ..............................................................
4.1 Personal Property ............................................
5. OPERATING EXPENSES .................................................
5.1. Payment Of Operating Expenses ................................
5.2. Definition Of Operating Expenses .............................
5.3. Determination Of Operating Expenses ..........................
5.4. Final Accounting For Lease Year ..............................
5.5. Proration .................................................... 9
6. UTILITIES .......................................................... 9
6.1. Payment ...................................................... 9
6.2. Interruption ................................................. 9
7. ALTERATIONS ........................................................ 10
7.1. Right To Make Alterations .................................... 10
7.2. Title To Alterations ......................................... 10
7.3. Tenant Fixtures .............................................. 10
7.4. No Liens ..................................................... 10
8. MAINTENANCE AND REPAIRS ............................................ 11
8.1. Landlord's Work .............................................. 11
(a) Maintenance of Common Areas ............................. 11
(b) Repair and Maintenance of Building ...................... 11
8.2. Tenant's Obligation For Maintenance .......................... 11
(a) Good Order, Condition And Repair ........................ 11
(b) Remedies for Work in Premises ........................... 11
(c) Condition Upon Surrender ................................ 11
</TABLE>
<PAGE> 2
<TABLE>
<S> <C> <C>
9. USE OF PREMISES .................................................... 12
9.1. Permitted Use ............................................... 12
9.2. Requirement Of Continued Use ................................ 12
9.3. No Nuisance ................................................. 12
9.4. Compliance With Laws ........................................ 12
9.5. Liquidation Sales ........................................... 12
9.6. Environmental Matters ....................................... 12
10. INSURANCE AND INDEMNITY ............................................ 15
10.1. Liability Insurance ......................................... 15
10.2. Quality Of Policies And Certificates ........................ 15
10.3. Workers' Compensation ....................................... 15
10.4. Waiver Of Subrogation ....................................... 15
10.5. Increase In Premiums ........................................ 15
10.6. Tenant's Indemnification .................................... 16
10.7. Blanket Policy .............................................. 16
11. SUBLEASE AND ASSIGNMENT ............................................ 16
11.1. Assignment And Sublease Of Premises ......................... 16
11.2. Rights Of Landlord .......................................... 17
12. RIGHT OF ENTRY AND QUIET ENJOYMENT ................................. 17
12.1. Right Of Entry .............................................. 17
12.2. Quiet Enjoyment ............................................. 18
13. CASUALTY AND TAKING ................................................ 18
13.1. Termination Or Reconstruction ............................... 18
13.2. Tenant's Rights ............................................. 18
13.3. Lease To Remain In Effect ................................... 18
13.4. Reservation Of Compensation ................................. 18
13.5. Restoration Of Fixtures ..................................... 19
14. DEFAULT ............................................................ 19
14.1. Events Of Default ........................................... 19
(a) Abandonment ............................................ 19
(b) Nonpayment ............................................. 19
(c) Other Obligations ...................................... 19
(d) General Assignment ..................................... 19
(e) Bankruptcy ............................................. 19
(f) Receivership ........................................... 19
(g) Attachment ............................................. 19
(h) Insolvency ............................................. 20
14.2. Remedies Upon Default ....................................... 20
14.3. Remedies Cumulative ......................................... 20
15. SUBORDINATION, ATTORNMENT AND SALE ................................. 20
15.1. Subordination To Mortgage ................................... 20
15.2. Sale Of Landlord's Interest ................................. 21
15.3. Estoppel Certificates ....................................... 21
15.4. Subordination to CC&R's ..................................... 21
16. SECURITY ........................................................... 21
16.1. Deposit; Letter of Credit ................................... 21
17. MISCELLANEOUS ...................................................... 24
17.1. Notices ..................................................... 24
17.2. Successors And Assigns ...................................... 25
17.3. No Waiver ................................................... 25
17.4. Severability ................................................ 25
17.5. Litigation Between Parties .................................. 25
17.6. Surrender ................................................... 25
17.7. Construction ................................................ 25
17.8. Entire Agreement ............................................ 25
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
17.9. Governing Law ............................................... 25
17.10. No Partnership .............................................. 25
17.11. Financial Information ....................................... 25
17.12. Costs ....................................................... 26
17.13. Time ........................................................ 26
17.14. Rules And Regulations ....................................... 26
17.15. Brokers ..................................................... 26
17.16. Memorandum Of Lease ......................................... 26
17.17. Corporate Authority ......................................... 26
17.18. Approvals ................................................... 26
17.19. Reasonable Expenditures ..................................... 27
EXHIBIT
A Location of Premises
B Real Property Description
C Construction
C-1 Schedule of Existing Laboratory Equipment and Systems
D Acknowledgement of Lease Commencement
</TABLE>
<PAGE> 4
Date: February 6, 1992
Landlord: Hall Properties, Inc., an Arizona corporation
Landlord's Representative: Heron Financial Corporation
510 West 6th Street
Suite 917
Los Angeles, CA 90014
Telephone: (213) 680-2936
Fax: (213) 623-8765
Tenant: Ribogene, Inc., a California corporation
Premises: 21375 Cabot Boulevard (Britannia Business Center Building B),
Hayward, California
Area of the Premises: 20,325 square feet
Tenant's Shares of Operating Expenses: 14.8% (with specified caps and
adjustments)
Term: Sixty (60) months (subject to early termination right)
Term Commencement: March 31, 1997 (estimated)
Term Expiration: March 31, 1997 (estimated)
Minimum Rent: Month Amount
1-36 $10,162.50 (adjusted depending upon early
37-48 11,178.75 termination right)
49-60 13,211.25
Security Deposit: $23,162.50 (initially) plus letter of credit
($82,500.00, initially, in month 7)
Option Periods: Two three (3) year options
Option Rent: 90% of fair market rent; CPI increases after 18 months
of each option term
Expansion Options: First Refusal Right on designated adjacent space
Notice Addresses: See Section 17.1
Permitted Use: Research and development, laboratories, production of
instruments and reagents and related office and
administrative uses
Landlord's Broker: Cushman & Wakefield of California, Inc.
Tenant's Broker: Blickman Turkus
NOTE: This Basic Lease Information is a summary provided for reference
purposes only and is qualified in its entirety by the actual terms of
the Lease; in the event of any conflict between the terms of the Lease
and the information contained herein, the terms of the Lease shall be
controlling.
<PAGE> 5
LEASE
THIS LEASE is made and entered into as of the 6 day of February, 1992,
by and between HALL PROPERTIES, INC., an Arizona corporation, hereinafter
called "Landlord," and RIBOGENE, INC., a California corporation, hereinafter
called "Tenant."
THE PARTIES AGREE AS FOLLOWS:
1. PREMISES
1.1. Premises. Landlord leases to Tenant and Tenant hires and leases
from Landlord, on the terms, covenants and conditions hereinafter set forth,
the premises (the "Premises") designated in Exhibit A attached hereto and
incorporated herein by this reference, consisting of approximately 20,325
square feet located within Building B (the "Building") in the Britannia
Business Center (the "Center") in the City of Hayward, County of Alameda, State
of California, commonly known as 21375 Cabot Boulevard, and located on the real
property (the "Property") described in Exhibit B attached hereto and
incorporated herein by this reference, together with the nonexclusive right to
use any common parking spaces (including, however, five (5) parking spaces
identified as "Reserved for RiboGene") and other common areas existing from
time to time on the Property and/or designated from time to time in any
Declaration of Covenants, Conditions and Restrictions or similar document
affecting the Center.
1.2. Landlord's Reserved Rights. Landlord reserves the right from time
to time to (i) install, use, maintain, repair and replace pipes, ducts,
conduits, wires and appurtenant meters and equipment for service to other parts
of the Building above the ceiling surfaces, below the floor surfaces, within the
walls or leading through the Premises in locations which will not materially
interfere with Tenant's use thereof, (ii) relocate any pipes, ducts, conduits,
wires and appurtenant meters and equipment included in the Premises which are so
located elsewhere outside the Premises, (iii) make alterations or additions to
the Building, (iv) construct, alter or add to other buildings or improvements on
the Property, (v) build adjoining to the Property, and (vi) lease any part of
the Property for the construction of improvements or buildings. Landlord may
modify or enlarge the common area, alter or relocate accesses to the Premises,
or alter or relocate any common facility. Landlord shall not exercise rights
reserved to it pursuant to this Section 1.2 in such a manner as to materially
impair Tenant's ability to conduct its activities in the normal manner,
provided, however, that the foregoing shall not limit or restrict Landlord's
right to undertake reasonable construction activity and Tenant's use of the
Premises shall be subject to reasonable temporary disruption incidental to such
activity diligently prosecuted. Notwithstanding the foregoing, if Landlord
alters any common area in or about the Building, such alteration shall not
unreasonably interfere with Tenant's use of the Premises or Tenant's parking
rights.
1.3. First Refusal Right. Landlord shall not lease all or any portion
of the space designated "Option Space" in Exhibit A attached hereto (the "Option
Space"), consisting of approximately 11,345 square feet of space located
adjacent to the Premises as defined in Section 1.1 hereof (which Option Space
comprises the option space labeled on Exhibit A as "Option Space 'A'" which
consists of approximately 1,650 square feet of space and as "Option Space 'B'"
which consists of approximately 9,695 square feet of space), at any time during
the initial term of this Lease, except in compliance with this Section 1.3. If
Landlord receives a bona fide third-party offer during the initial term of this
Lease to lease all or any portion of the Option Space, Landlord shall give
written notice of such offer to Tenant, specifying the material terms on which
the offeror proposes to lease the Option Space or portion thereof (the "Offered
Space"), and shall offer to Tenant the opportunity to lease the Offered Space on
the terms specified in Landlord's notice. Tenant shall have ten (10) calendar
days after the date of giving of such notice by Landlord in which to accept such
offer by written notice to Landlord. Upon such acceptance by Tenant, the Offered
Space shall be leased to Tenant on the terms set forth in Landlord's notice and
on the additional terms and provisions set forth herein (except to the extent
inconsistent with the terms set forth in Landlord's said notice) and the parties
shall promptly execute an amendment to this Lease adding the Offered Space to
the Premises and making any appropriate amendments to provisions of this Lease
to reflect different rent and other obligations applicable to the Offered Space
under the terms of Landlord's said notice. If Tenant does not accept Landlord's
offer within the
<PAGE> 6
[ILLEGIBLE]
third party, at any time within one hundred eighty (180) days after Tenant's
failure to accept Landlord's offer, at a minimum rental and on other terms and
conditions not more favorable to the lessee than the minimum rental and other
terms offered to Tenant in Landlord's said notice. If Tenant does not accept
Landlord's offer and Landlord does not lease the Offered Space to a third party
within one hundred eighty (180) days, this First Right of Refusal shall
reattach to that space.
2. TERM
2.1. Term.
(a) The term of this Lease shall commence on March 15, 1992
(the "Commencement Date") and shall end on the last day of the month in which
the fifth (5th) anniversary of the Commencement Date occurs, unless sooner
terminated or extended (if applicable) as hereinafter provided.
(b) Notwithstanding any other provisions of this Lease,
Tenant shall have the right to terminate this Lease, without penalty (except as
otherwise provided in Section 16.1(a) hereof), as of the first anniversary of
the Commencement Date, provided that Tenant gives Landlord written notice of
Tenant's exercise of such termination right within six (6) months after the
Commencement Date.
2.2. Early Possession. If Landlord permits Tenant to occupy or use
the Premises prior to the Commencement Date set forth in Section 2.1, such
occupancy or use shall be subject to and upon all of the terms and conditions
of this Lease, including the obligation to pay rent and other charges, unless
Landlord and Tenant agree otherwise; provided, however, that such early
possession shall not advance or otherwise affect the termination date set forth
in Section 2.1.
2.3. Delay In Possession. It is acknowledged and agreed that if a
Casualty or Taking occurs prior to the Commencement Date, Tenant and Landlord
shall have the same rights with respect to termination as are applicable during
the term under Article 13. If the Commencement Date has not occurred by April
15, 1992 for any reason which is reasonably within Landlord's control, Tenant
may terminate this Lease by five (5) days written notice to Landlord, whereupon
any monies previously paid by Tenant to Landlord shall be promptly reimbursed
with interest at the legal rate of interest (as described in Section 3.2).
2.4. Construction.
(a) Landlord shall have no responsibilities or obligations
with respect to the preparation of the Premises for Tenant's occupancy on the
Commencement Date. The obligation of Landlord thereafter to perform work to
improve the Premises is set forth in Exhibit C attached hereto and incorporated
herein by this reference. Such work, to the extent it becomes applicable under
Exhibit C, shall be constructed (i) in accordance with plans and specifications
prepared by Landlord and approved by Tenant pursuant to Exhibit C and (ii) in a
first class and workmanlike manner, using new materials and equipment of good
quality. When such work pursuant to this Section 2.4 and Exhibit C is
substantially complete and there remains no incomplete or defective item of
such work that would materially affect Tenant's intended use of the Premises
("Substantial Completion"), Landlord shall notify Tenant that Substantial
Completion of such work has occurred and Landlord shall have no further
responsibility of any kind or character in connection with such work; provided,
however, that (i) within thirty (30) days after Substantial Completion of
Landlord's work, Tenant may furnish to Landlord a "punch list" identifying any
items or matters in the Premises that require correction and that are within
the scope of Tenant's "punch list" rights under Exhibit C hereto, and Landlord
shall promptly and diligently correct all such matters at its sole cost and
expense; and (ii) Landlord shall at its sole cost and expense correct any
construction defects in the improvements constructed pursuant to Exhibit C
provided that Tenant gives Landlord written notice of such construction defects
no later than one year following Substantial Completion of such improvements.
(b) Landlord agrees to use its best reasonable efforts to
complete promptly the work described in Section 2.4 and Exhibit C promptly
following the time (if any) that
<PAGE> 7
Landlord's obligation to perform such work becomes applicable; provided,
however, Landlord shall not be liable for any damages caused by any delay in
the completion of such work, nor shall any such delay affect the validity of
this Lease or the obligations of Tenant hereunder.
2.5. Acknowledgement Of Lease Commencement. Upon commencement of
the term of this Lease, Landlord and Tenant shall execute a written
acknowledgement of the Commencement Date, date of termination and related
matters, substantially in the form attached hereto as Exhibit D (with
appropriate insertions), which acknowledgement shall be deemed to be
incorporated herein by this reference.
2.6. Holding Over. If Tenant holds possession of the Premises after
the term of this Lease, with or without Landlord's written consent, then except
as otherwise specified in such consent, Tenant shall become a tenant from month
to month at one hundred fifty percent (150%) of the rental and otherwise upon
the terms herein specified for the period immediately prior to such holding
over and shall continue in such status until the tenancy is terminated by
either party upon not less than thirty (30) days prior written notice.
Acceptance of rent by Landlord following expiration or termination of this
Lease shall not constitute a renewal of this Lease.
2.7 Option To Extend Term. Tenant shall have the option to extend
the term of this Lease, at the minimum rental set forth in Section 3.1(d) and
(e) and otherwise upon all the terms and provisions set forth herein with
respect to the initial term of this Lease, for up to two (2) additional periods
of three (3) years each, commencing upon expiration of the initial term hereof.
Exercise of such option with respect to the first such extended term shall be
by written notice to Landlord at least six (6) months and not more than eight
(8) months prior to the expiration of the initial term hereof; exercise of such
option with respect to each subsequent extended term, if all previous extension
options have been duly exercised, shall be by like written notice to Landlord
at least six (6) months and not more than eight (8) months prior to the
expiration of the immediately preceding extended term hereof. If Tenant is in
default hereunder on the date of such notice or the date any extended term is
to commence, the option shall be of no force or effect, the extended term shall
not commence and this Lease shall expire at the end of the then current term
hereof (or at such earlier time as Landlord may elect pursuant to the default
provisions of this Lease). Except as expressly set forth in this Section 2.7,
Tenant shall have no right to extend the term of this Lease beyond its
prescribed term.
3. RENTAL
3.1 Minimum Rental.
(a) Tenant shall pay to Landlord as minimum rental for the
Premises, in advance, without deduction, offset, notice or demand, on or before
the Commencement Date and on or before the first day of each subsequent
calendar month of the term of this Lease, the following amounts per month:
<TABLE>
<CAPTION>
Months Minimum Rental
------ --------------
<S> <C> <C> <C>
1-36 $ 10,162.50 x 36 = $365,832
37-48 11,178.75 x 24 = 268,272
49-60 (expiration) 13,211.25 x 12 = 158,532
</TABLE>
Notwithstanding the foregoing provisions of this paragraph (a), however, if
Tenant waives or otherwise fails to exercise its early termination right within
the time permitted under Section 2.1(b) hereof, then the monthly minimum rental
for months 7-12 following the Commencement Date shall be reduced to zero ($0).
If the obligation to pay minimum rental hereunder commences on other than the
first day of a calendar month or if the term of this Lease terminates on other
than the last day of a calendar month, the minimum rental for such first or
last month of the term of this Lease, as the case may be, shall be prorated
based on the number of days the term of this Lease is in effect during such
month. If an increase in minimum rental becomes effective on a day other than
the first day of a calendar month, the minimum rental for that month shall be
the sum of the two applicable rates, each prorated for the portion of the month
during which such rate is in effect.
<PAGE> 8
(b) The minimum rental amounts specified in this Section 3.1 are
based upon an estimated area of 20,325 square feet for the Premises. If the
actual area of the Premises, when completed, is greater or less than 20,325
square feet, then the minimum rentals specified in this Section 3.1 shall be
adjusted proportionately to the change in the area of the Premises, as
determined in good faith by Landlord's architect on a basis consistent with
that used in measuring other leased premises within the Center.
(c) The minimum rental amounts specified in this Section 3.1 are
based upon an estimated tenant improvement allowance of Five and No/100 Dollars
($5.00) per square foot for the work to be performed by Landlord on the Premises
under Section 2.4 and Exhibit C. If, as a result of changes requested by Tenant
in the plans and specifications originally approved by Landlord and Tenant
pursuant to Exhibit C hereto, Landlord's total direct costs of such work
(including, but not limited to, construction costs, permit fees and charges,
architects', engineers' and other consulting and professional fees and all other
related costs incurred in connection with the design and construction of the
work) exceed or are less than the product of Five and No/100 Dollars ($5.00)
times the area of the Premises (in square feet) for the work in the Premises
("Total Allowable Costs"), with such area in each case to be determined in good
faith by Landlord's architect on a basis consistent with that used in measuring
other leased premises within the Center, then Tenant's minimum monthly rental
hereunder, beginning on the Commencement Date and continuing throughout the term
hereof, shall be increased or reduced (but not below zero ($0)), as applicable,
by an amount equal to the minimum amount necessary to fully amortize, on a
straight-line basis over the remaining term of this Lease with interest at the
rate of ten percent (10%) per annum, the amount (if any) by which such
respective total costs ("Total Improvement Costs") exceed or are less than the
Total Allowable Costs; provided, however, that if the Total Improvement Costs
are less than the Total Allowable Costs, Tenant may elect to have Landlord apply
some or all of the remaining sums ("Improvement Reserve") to the cost of any
further alterations, additions or improvements to the Premises which Tenant
elects to construct in accordance with Article 7 of this Lease during the first
year of the term of the Lease. If the minimum monthly rental amount has been
reduced in accordance with the prior sentence prior to the time Tenant elects to
have the Improvement Reserve applied to additional improvements, (i) the
Improvement Reserve available for such purposes shall be reduced by an amount
equal to the total rental reduction that Tenant has received at the time of
Tenant's election and (ii) the minimum rental amounts specified in Section
3.1(a) for periods after the date of Tenant's election shall be readjusted in
accordance with the prior sentence based on the sum of the Total Improvement
Costs plus the additional amounts paid out of the Improvement Reserve.
(d) If Tenant properly exercises its right to extend the term of
this Lease pursuant to Section 2.7 hereof, the minimum rental during the first
extended term (subject to adjustment pursuant to Section 3.1(f) hereof) shall be
equal to the greater of (i) the minimum rental payable immediately prior to
commencement of such extended term or (ii) ninety percent (90%) of the fair
market rental value of the Premises (as theretofore improved under Section 2.4
and Exhibit C) from time to time, determined as of the commencement of such
extended term in accordance with this paragraph. Upon Landlord's receipt of a
proper notice of Tenant's exercise of its option to extend the term of this
Lease, the parties shall have sixty (60) days in which to agree on the fair
market rental for the Premises (as theretofore improved under Section 2.4 and
Exhibit C) at the commencement of the first extended term for the uses permitted
hereunder. If the parties agree on such fair market rental, they shall execute
an amendment to this Lease stating the amount of the applicable minimum monthly
rental. If the parties are unable to agree on such rental within such sixty (60)
day period, then within fifteen (15) days after the expiration of such period
each party, as its cost and by giving notice to the other party, shall appoint a
real estate appraiser with at least five (5) years experience appraising similar
commercial properties in Hayward, California or neighboring areas to appraise
and set the fair market rental for the Premises at the commencement of the first
extended term. If either party fails to appoint an appraiser within the allotted
time, the single appraiser appointed by the other party shall be the sole
appraiser. If an appraiser is appointed by each party and the two appraisers so
appointed are unable to agree upon a fair market rental within thirty (30) days
after the appointment of the second, they shall, within ten (10) days after
expiration of such 30-day period (i) prepare and exchange written statements of
their respective determinations of the rental value which would represent ninety
percent (90%) of the fair market rental value of the Premises and should be set
as the rental for the Premises for
<PAGE> 9
the extended term ("Determination Statement") and (ii) appoint a third
qualified appraiser; if they are unable to agree upon a third appraiser, either
party may, upon not less than five (5) days notice to the other party, apply to
the Presiding Judge of the Alameda County Superior Court for the appointment of
a third qualified appraiser. Each party shall bear its own legal fees in
connection with appointment of the third appraiser and shall bear one-half of
any other costs of appointment of the third appraiser and of such third
appraiser's fee. The third appraiser, however selected, shall be a person who
has not previously acted for either party in any capacity. Within thirty (30)
days after the appointment of the third appraiser, the third appraiser shall
select one of the two Determination Statements that the third appraiser believes
is closest to ninety percent (90%) of the fair market rental value of the
Premises and the rental value set forth in such Determination Statement shall be
the rental for the first extended term and shall be binding on the parties and
shall be enforceable in any further proceedings relating to this Lease. In
selecting a Determination Statement, the third appraiser shall not render an
average between the determinations of the first two appraisers or in any way
modify the Determination Statement that is selected.
(e) If Tenant properly exercises its right to a second extended
term of this Lease pursuant to Section 2.7 hereof, the minimum rental during
such second extended term shall be determined in the same manner provided in
the preceding paragraph for the first extended term, except that the
determination shall be made as of the commencement of the second extended term.
(f) If Tenant properly exercises its right to one or both extended
terms of this Lease, minimum rental hereunder shall be subject to adjustment on,
and effective as of, the date eighteen (18) months after the respective dates on
which such extended term(s) commence (each such date eighteen (18) months after
commencement of an extended term being herein called an "Adjustment Date"), in
accordance with the provisions of this paragraph. The base for computing such
adjustments shall be, for each extended term, the Consumer Price Index for All
Urban Consumers, San Francisco/Oakland/San Jose Metropolitan Area, All Items
(1982-84 = 100), produced by the United States Department of Labor, Bureau of
Labor Statistics ("Index") which is published for or includes the month in which
the applicable extended term commenced (each such Index, as applicable, being
hereinafter called the "Beginning Index"). If the Index which is published for
or includes the applicable Adjustment Date ("Extension Index") has increased
over the applicable Beginning Index, the minimum rental payable thereafter shall
be set by multiplying the minimum rental then in effect by a fraction, the
numerator of which is the Extension Index and the denominator of which is the
Beginning Index; provided, however, in no event shall minimum rental at any time
be adjusted downward. If the Extension Index is not available until after the
Adjustment Date, Tenant shall continue to pay the then prevailing minimum rental
until the Extension Index is published, whereupon the adjustment provided in
this paragraph shall be made retroactive to the Adjustment Date and any
accumulated excess of the adjusted minimum rental over the amounts actually paid
by Tenant since the Adjustment Date shall be paid promptly by Tenant to Landlord
upon notice by Landlord to Tenant of the adjusted minimum rental. If the Index
is changed so that the base year differs from the base year used as of the
Commencement Date, the Index shall be converted in accordance with the
conversion factor published by the United States Department of Labor, Bureau of
Labor Statistics. If the Index is discontinued or substantially revised during
the term of this Lease, any comparable governmental index or computation with
which it is replaced (or, if none is available, any privately published index
which is comparable in coverage and purpose) shall be used in order to obtain
substantially the same result as would have been obtained if the Index had not
been discontinued or revised. Upon any adjustment of the monthly minimum rental
in accordance with the provisions of this paragraph, Landlord and Tenant shall
immediately execute a written acknowledgement of the new minimum rental as
adjusted, which acknowledgement shall be deemed to be incorporated herein by
this reference.
3.2. Late Charge. If Tenant fails to pay when due rental or other
amounts due Landlord hereunder, such unpaid amounts shall bear interest for the
benefit of Landlord at a rate equal to the lesser of the legal rate of interest
under California Civil Code Section 3289, (or any legal rate of interest which
replaces the rate specified in Section 3289) per annum or the maximum rate
permitted by law, from the date due to the date of payment. In addition to such
interest Tenant shall pay to Landlord a late charge in an amount equal to five
percent (5%) of any installment of minimum rental and any
<PAGE> 10
other amounts due Landlord if not paid in full on or before the fifth (5th) day
after such rental or other amount is due; provided, however, on the first
occasion in each calendar year of which Tenant fails to pay such rental or other
amount on or before the fifth day after it is due, the late charge shall not
apply if Tenant pays the delinquent amount within five days after receiving
written notice from Landlord that the amount is past due. Tenant acknowledges
that late payment by Tenant to Landlord of rental or other amounts due hereunder
will cause Landlord to incur costs not contemplated by this case, including,
without limitation, processing and accounting charges and late charges which may
be imposed on Landlord by the terms of any loan relating to the Premises. Tenant
further acknowledges that it is extremely difficult and impractical to fix the
exact amount of such costs and that the late charge set forth in this Section
3.2 represents a fair and reasonable estimate thereof. Acceptance of any late
charge by Landlord shall not constitute a waiver of Tenant's default with
respect to overdue rental or other amounts, nor shall such acceptance prevent
Landlord from exercising any other rights and remedies available to it.
Acceptance of rent or other payments by Landlord shall not constitute a waiver
of late charges or interest accrued with respect to such rent or other payments
or any prior installments thereof, nor of any other defaults by Tenant, whether
monetary or non-monetary in nature, remaining uncured at the time of such
acceptance of rent or other payments.
4. TAXES
4.1. Personal Property. Tenant shall be responsible for and shall
pay prior to delinquency all taxes and assessments levied against or by reason
of all alterations and additions and all other items installed or paid for by
Tenant under this Lease, and the personal property, trade fixtures and all of
the property placed by Tenant in or about the Premises. Upon demand by
Landlord, Tenant shall furnish Landlord with satisfactory evidence of payment
thereof. If at an time during the term of this Lease any of said alterations,
additions or personal property, whether or not belonging to Tenant, shall be
taxed or assessed as part of the Property, then such tax or assessment shall be
paid by Tenant to Landlord immediately upon presentation by Landlord of copies
of the tax bills in which such taxes and assessments are included and shall,
for the purposes of this Lease, be deemed to be personal property taxes or
assessments under this Section 4.1.
5. OPERATING EXPENSES
5.1. Payment Of Operating Expenses.
(a) Tenant shall pay to Landlord, at the time and in the manner
hereinafter set forth, as additional rental, an amount equal to fourteen and
eight-tenths percent (14.8%) ("Tenant's Operating Cost Share") of the Operating
Expenses defined in Section 5.2; provided, however, that in no event shall the
amount payable by Tenant pursuant to Tenant's Operating Cost Share during the
first twelve (12) months of the term of this Lease exceed Fourteen Cents ($0.14)
per share foot per month (applied to the "deemed" square footage occupied by
Tenant as described in this paragraph), nor shall the amount per square foot per
month payable by Tenant pursuant to Tenant's Operating Cost Share during any
subsequent 12-month period of the initial term beginning on an anniversary of
the Commencement Date exceed one hundred five percent (105%) of the maximum
amount per square foot per month applicable to the immediately preceding
12-month period pursuant to this proviso (so that, for example, the maximum
amount payable in the second such 12-month period shall be $0.147 per square
foot per month and the maximum amount payable in the third such 12-month period
shall be $0.15435 per square foot per month); and provided further, however,
that notwithstanding any other provisions of this Lease, if Tenant waives or
otherwise fails to exercise its early termination right within the time
permitted under Section 2.1(b) hereof, then during months 7 through 12 of the
term of this Lease, Tenant shall not be required to pay any Operating Expenses.
(b) Tenant's Operating Cost Share as specified in paragraph (a)
of this Section is based upon an estimated area of 20,325 square feet for the
Premises and an aggregate area of 137,580 square feet for the buildings owned by
Landlord on the Property. If the actual area of the Premises (when completed) or
of the buildings owned by Landlord, as determined in good faith by Landlord's
architect on a basis consistent with that used in measuring other leased
premises within the Center, differs from the assumed numbers set forth above, or
if the area of the Premises increases due to Tenant's exercise of its
<PAGE> 11
first refusal right under Section 1.3 hereof, Tenant's Operating Cost Share
shall be adjusted to reflect the actual areas so determined.
(c) If Landlord constructs additional buildings on the Property from
time to time, Tenant's Operating Cost Share shall be adjusted to be equal to
the percentage determined by dividing the gross square footage of the Premises
(including any additional space occupied by Tenant from time to time) by the
gross square footage of all buildings located on portions of the Property
owned by Landlord. In determining said percentage, a building shall be taken
into account from and after the date on which a tenant first enters into
possession of the building or a portion thereof, and the good faith
determination of the gross square footage of any such building by Landlord's
architects shall be final and binding upon the parties.
5.2. Definition of Operating Expenses.
(a) Subject to the exclusions and provisions hereinafter contained,
the term "Operating Expenses" shall mean the total costs and expenses incurred
by or allocable to Landlord ("Costs") for management, operation and maintenance
of the Building and the Property, including, without limitation, (i) insurance,
property management, building maintenance, landscaping and common area
maintenance; (ii) all utilities and services; (iii) real and personal property
taxes and assessments or substitutes therefor and new taxes on landlords in
addition to taxes now in effect; (iv) supplies, equipment, utilities and tools
used in management, operation and maintenance; and (v) capital improvements to
the Property or Building, amortized in accordance with generally accepted
accounting principles over an appropriate period, (aa) which reduce or will
cause future reduction of other items of Operating Expenses for which Tenant is
otherwise required to contribute or (bb) of which Tenant has use or which
benefit Tenant or (cc) which are allocable to or paid by Landlord, as owner of
the Property or Building, pursuant to the terms of any declarations of
covenants, conditions and restrictions ("CC&R's"), all underwriter's
requirements and all rules, regulations, statutes, ordinances, laws and building
codes ("Laws") affecting the Property. Capital improvements shall not include
any costs attributable to increasing the size of or otherwise expanding the
Building or the cost of the work for which Landlord is required to pay under
Section 2.4 or Exhibit C. The distinction between items of ordinary operating
maintenance and repair and items of a capital nature shall be made in accordance
with generally accepted accounting principles applied on a consistent basis.
(b) Notwithstanding Section 5.2(a), in no event shall Operating
Expenses be deemed to include the following:
(i) Costs occasioned by the violation of Law by Landlord or its
agents;
(ii) Costs for which Landlord has been reimbursed by others;
(iii) Increases in taxes, assessments and/or other governmental
levies after the Commencement Date occasioned by (A) a voluntary or involuntary
change of ownership or other conveyance of the real property of which the
Premises is a part (1) to any person or entity affiliated with or related to
Landlord or the partners, shareholders, officers or directors of Landlord or (2)
in connection with estate planning or (3) which is not otherwise a bona fide,
arm's length sale to an unrelated third party; and (B) construction of
improvements for other occupants of the Building or the Center; provided,
however, that increases that result from the construction of improvements in
areas which are in "shell condition" as of the date of this Lease shall only be
excluded from Operating Expenses to the extent that the increases result from
construction costs that exceed Twenty-Five Dollars ($25.00) per square foot,
which sum shall be adjusted annually on the anniversary of the date of this
Lease to reflect increases, but not decreases in the Consumer Price Index, which
adjustment shall be made in accordance with provisions comparable to those set
forth in Section 3.1(f);
(iv) Governmental fees or levies that are occasioned by the
particular uses of the Building or the Center by occupants other than Tenant;
<PAGE> 12
(v) Costs to bring the Premises, the Building or the Center into
compliance with any CC&R's, underwriter's requirements or Laws applicable
thereto on the Commencement Date;
(vi) Costs (A) arising from a disproportionate use of any
utility or service supplied by Landlord to any other occupant of the Center or
(B) associated with utilities and services of a type not provided to Tenant;
(vii) The cost of any renovation, improvement, painting or
redecorating of the interior of the premises of other occupants of the Center
(other than capital improvements of the type described in Section 5.2(a)(v));
(viii) Fees, commissions, attorneys' fees, or other Costs incurred
in connection with negotiations or disputes with any other occupant of the
Center and costs arising from the violation by Landlord or any occupant of the
Center (other than Tenant) of the terms and conditions of any lease or other
agreement;
(ix) Depreciation or amortization (other than depreciation or
amortization on capital items of the type described in Section 5.2(a)(v)) or
expense reserves;
(x) Interest, charges and fees incurred on debt, payments on
mortgages and rent under any ground leases;
(xi) Costs incurred in connection with the operating of any
commercial parking concessions or other commercial concessions within the
Center;
(xii) Advertising or promotional costs;
(xiii) Lease payments and acquisition costs for capital machinery
and equipment such as air conditioners, elevators and the like (other than for
capital items of the type described in Section 5.2(a)(v));
(xiv) Costs of sculptures, paintings and other art objects;
(xv) Increases in insurance Costs caused by the activities of
another occupant of the Center and any commercially unreasonable insurance
costs;
(xvi) Costs incurred to investigate the presence of any hazardous
substance (as defined in Section 9.6), Costs to respond to any claim of
hazardous substance contamination or damage, Costs to remove any hazardous
substance from the Center and any judgments or other Costs incurred in
connection with any hazardous substance exposure or releases, it being
understood, however, that all such Costs attributable to Tenant's handling,
use, storage, transportation, generation, treatment and/or disposal of
hazardous substance shall be reimbursed by Tenant to Landlord in accordance
with Tenant's obligations under other provisions of this Lease;
(xvii) Wages, salaries, compensation and labor burden for
any employee, but only to the extent such employee's services do not relate to
the Building or the Center, and any fee, profit or compensation retained by
Landlord or its affiliates for management and administration of the Center in
excess of the management fee which would be charged by a professional
management service for operation of comparable centers in the vicinity; and
(xviii) Costs for which Tenant reimburses Landlord directly or
which Tenant pays directly to a third person but only to the extent such
payment to a third person reduces Landlord's Costs.
(c) Notwithstanding Section 5.2(a), if, at any time prior to expiration
of the initial term of this Lease (approximately 60 months), the property on
which the Premises are located is sold in a transaction not described in
Section 5.2(b)(iii)(A) of this Lease and such sale results in a reassessment of
the property for California property tax purposes, then for the remainder of
the initial term of this Lease, Tenant shall receive a credit against each
payment of its Operating Cost Share in an amount equal to that portion (if
any) of such payment of Tenant's Operating Cost Share that represents
<PAGE> 13
increased California property taxes and assessments attributable solely to the
change in ownership that occurred in connection with such sale.
5.3. Determination Of Operating Expenses. On or before the
Commencement Date and during the last month of each calendar year of the term of
this Lease ("Lease Year"), or as soon thereafter as practical, Landlord shall
provide Tenant notice of Landlord's estimate of the Operating Expenses for the
ensuing Lease Year or applicable portion thereof. On or before the first day of
each month during the ensuing Lease year or applicable portion thereof,
beginning on the Commencement Date, Tenant shall ????? to Landlord Tenant's
Operating Cost Share of the portion of such estimated Operating Expenses
allocable (on a prorata basis) to such month; provided, however, that if such
notice is not given in the last month of a Lease year, Tenant shall continue to
pay on the basis of the prior year's estimate, if any, until the month after
such notice is given. If at any time or times it appears to Landlord that the
actual Operating Expenses will vary from Landlord's estimate by more than five
percent (5%), Landlord may, by notice to Tenant, revise its estimate for such
year and subsequent payments by Tenant for such year shall be based upon such
revised estimate.
5.4. Final Accounting For Lease Year. Within ninety (90) days after
the close of each Lease Year, or as soon after such 90-day period as
practicable, Landlord shall deliver to Tenant a statement of Tenant's Operating
Cost Share of the Operating Expenses for such Lease Year prepared by Landlord
from Landlord's books and records. If on the basis of such statement Tenant owes
an amount that is more or less than the estimated payments for such calendar
year previously made by Tenant, Tenant or Landlord, as the case may be, shall
pay the deficiency to the other party within thirty (30) days after delivery of
the statement. Upon five (5) days written notice to Landlord given not later
than sixty (60) days after Tenant's receipt of an annual statement of Tenant's
Operating Cost Share of the Operating Expenses for such Lease Year, Tenant shall
be entitled to conduct an audit of Landlord's records to verify actual Operating
Expenses. Tenant and all recipients of information from Landlord's records shall
hold such information in the strictest confidence and fully compensate Landlord
for any damages that result for any breach of such confidentiality. Tenant shall
provide a copy of the audit report to Landlord. If it is determined that Tenant
owes an amount that is more or less than the amount shown in Landlord's
statement, Tenant or Landlord, as the case may be, shall pay the deficiency to
the other party within thirty (30) days after such determination has been made.
If it is determined that the amount shown in Landlord's statement as Tenant's
Operating Cost Share of the Operating Expenses for the Lease Year audit exceeds
by more than five percent (5%) the correct amount of Tenant's Operating Cost
Share of the Operating Expenses for such year, Landlord shall promptly reimburse
the reasonable costs incurred by Tenant in conducting the audit. If it is
determined that the amount shown in Landlord's statement is correct or that
Tenant owes an additional amount, Tenant shall promptly reimburse the reasonable
costs incurred by Landlord in connection with the audit. In all other cases,
each party shall bear their own expenses in connection with the audit.
5.5. Proration. If the Commencement Date falls on a day other than the
first day of a Lease Year or if this Lease terminates on a day other than the
last day of a Lease Year, the amount of Tenant's Operating Cost Share payable
by Tenant applicable to such first and last partial Lease Year shall be
prorated on the basis which the number of days during such Lease Year in which
this Lease is in effect bears to 365. The termination of this Lease shall not
affect the obligations of Landlord and Tenant pursuant to Section 5.4 to be
performed after such termination.
6. UTILITIES
6.1. Payment. Commencing with the Commencement Date and thereafter
throughout the term of this Lease, Tenant shall pay, before delinquency, all
separately metered charges, if any, for water, gas, heat, electricity, power,
sewer, telephone, alarm system, janitorial and other services or utilities
supplied to or consumed in or upon the Premises. In the event that any of the
utility services supplied to the Premises are not separately metered, then the
amount thereof shall be an item of Operating Expenses and shall be paid as
provided in Article 5.
6.2. Interruption. Except as expressly provided in this Section 6.2,
there shall be no abatement of rent or other charges required to be paid
hereunder and Landlord shall
<PAGE> 14
not be liable in damages or otherwise for interruption or failure of any service
or utility furnished to or used in the Premises ("Service Interruption") because
of accident, making of repairs, alterations or improvements, severe weather,
difficulty or inability in obtaining services or supplies, labor difficulties or
any other cause. If Landlord is the cause of a Service Interruption and Tenant
has not itself been a contributing cause of the Service Interruption and the
Service Interruption continues for five or more consecutive days and is of such
a nature as materially to impair Tenant's use of the Premises, beginning on the
sixth day Tenant's rental and Tenant's Operating Cost Share shall abate to the
extent Tenant's use of the Premises is impaired until the Service Interruption
ends. If a Service Interruption of the type described in the prior sentence
continues for 120 or more days, Tenant may elect to terminate this Lease by
giving Landlord written notice which notice may be given at any time before the
Service Interruption ends. Landlord shall use reasonable efforts to avoid
causing Service Interruptions that impair Tenant's use of the Premises, and if
such a Service Interruption cannot reasonably be avoided, Landlord shall use
reasonable efforts to minimize the inconvenience to Tenant's normal business
operations.
7. ALTERATIONS
7.1. Right To Make Alterations. Tenant shall make no alterations,
additions or improvements to the Premises, other than interior non-structural
alterations costing less than Five Thousand Dollars ($5,000.00) in each
instance, without the prior written consent of Landlord which consent shall not
be unreasonably withheld or delayed. All such alterations, additions and
improvements shall be completed with due diligence in a first-class workmanlike
manner and in compliance with plans and specifications approved in writing by
Landlord and all applicable laws, ordinances, rules and regulations.
7.2. Title To Alterations. All alterations, additions and
improvements installed pursuant to this Lease shall be part of the Building and
the property of Landlord, unless Landlord elects to require Tenant to remove the
same upon the termination of this Lease; provided, however, that the foregoing
shall not apply to Tenant's personal property, including but not limited to
movable furniture and trade fixtures not affixed to the Property ("Tenant's
Property"), which shall at all times remain the sole property of Tenant and as
between Tenant and Landlord, Tenant shall be entitled to all depreciation,
amortization and other tax benefits with respect to Tenant's Property.
7.3. Tenant Fixtures. Notwithstanding the foregoing, Tenant may
install, remove and reinstall Tenant's Property without Landlord's prior written
consent, except that any fixtures which are affixed to the Premises or which
affect the exterior or structural portions of the Building shall require
Landlord's written approval, and except that Tenant shall have no right to
remove laboratory equipment and systems or other improvements installed or left
on the Premises by Landlord at the Commencement Date pursuant to Exhibit C
hereto. The preceding sentence shall apply to Tenant's signs, logos and
insignia, all of which Tenant shall have the right to place and remove and
replace solely with Landlord's prior written consent as to location, size and
composition. Tenant shall immediately repair any damage caused by installation
and removal of fixtures under this Section 7.3. Without limiting the generality
of this Section 7.3, and notwithstanding anything to the contrary in Section
16.1(a) hereof, the walk-in refrigerator listed on Exhibit C-1 hereto is the
property of Landlord and Tenant shall have no right to remove such walk-in
refrigerator.
7.4. No Liens. Tenant shall at all times keep the Premises free from
all liens and claims of any contractors, subcontractors, materialmen, suppliers
or any other parties employed either directly or indirectly by Tenant in
construction work on the Premises. Tenant may contest any claim of lien, but
only if, prior to such contest, Tenant either (i) posts security in the amount
of the claim, plus estimated costs and interest, or (ii) records a bond of a
responsible corporate surety in such amount as may be required to release the
lien from the Premises. Tenant shall indemnify, defend and hold Landlord
harmless against liability, loss, damage, cost and all other expenses,
including, without limitation, reasonable attorneys' fees, arising out of claims
of any lien for work performed or materials or supplies furnished at the request
of Tenant or persons claiming under Tenant. Landlord shall have no lien on any
item of Tenant's Property and hereby waives any such lien. Within ten (10) days
following receipt of Tenant's written request, Landlord shall execute a written
acknowledgement for the benefit of any supplier, lessor
<PAGE> 15
or lender of Tenant that Landlord waives any rights or liens it may have or
acquire with respect to Tenant's Property, if the supplier, lessor or lender
agrees in writing that (i) if it intends to exercise its rights with respect to
the Tenant's Property specified in the acknowledgement, it will remove such
Tenant's Property before the expiration of the term of the Lease or within
fifteen days after it has been notified that the Lease has been terminated
early, (ii) if it removes Tenant's Property from the Premises, it will repair
any damages caused by such removal and (iii) Landlord shall have no obligation
to it as a result of any act or omission of the Tenant with respect to such
Tenant's Property.
8. MAINTENANCE AND REPAIRS
8.1 Landlord's Work.
(a) Maintenance of Common Areas. Landlord shall maintain the
parking lots and other common areas existing from time to time on the Property
at maintenance levels generally provided for comparable buildings in the
vicinity of the Premises.
(b) Repair and Maintenance of Building. Landlord shall repair
and maintain or cause to be repaired and maintained those portions of the
Building outside of the Premises and the exterior walls and other structural
portions of the Building. The cost of all work performed by Landlord under this
Section 8.1(a) shall be an Operating Expense hereunder, except to the extent
such work (i) is required due to the negligence of Landlord or any other tenant
of the Building, (ii) is a service to a specific tenant or tenants, other than
Tenant, (iii) is a capital expense not includible as an Operating Expense under
Section 5.2 hereof, (iv) is required due to the negligence or willful
misconduct of Tenant or its agents, employees or invitees (in which event
Tenant shall bear the full cost of such work pursuant to the indemnification
provided in Section 10.6 hereof), (v) is required as a consequence of any
violation of any Laws applicable to the Building as of the Commencement Date,
(vi) is work for which Landlord has been reimbursed by others, but only to the
extent of such reimbursement or (vii) is nonstructural work done within any
interior portion of the Building outside the demising walls of the Premises and
is not of a type described in Section 5.3(a)(v).
8.2 Tenant's Obligation For Maintenance.
(a) Good Order, Condition And Repair. By accepting possession
of the Premises, Tenant acknowledges that the Premises are in good and sanitary
order, condition and repair, but such acceptance shall not be deemed a waiver
of Tenant's right to have defects in the Premises repaired at Landlord's
expense as otherwise provided in this Lease. Except as provided in Section 8.1
hereof, Tenant at its sole cost and expense shall keep and maintain in good and
sanitary order, condition and repair the Premises and every part thereof,
wherever located, including but not limited to the signs, interior, the face of
the ceiling over Tenant's floor space, HVAC equipment and related mechanical
systems serving the Premises, all doors, door checks, windows, plate glass,
door fronts, exposed plumbing and sewage and other utility facilities,
fixtures, lighting, wall surfaces, floor surfaces and ceiling surfaces and all
other interior repairs, foreseen and unforeseen, as required.
(b) Remedies for Work in Premises. If either party, after
notice from the other, fails to make or perform promptly any repairs or
maintenance within the Premises which are the obligation of such party, the
party giving notice shall have the right, but shall not be required, to enter
the Premises and make the repairs or perform the maintenance necessary to
restore the Premises to good and sanitary order, condition and repair.
Immediately on demand from the party giving notice, the cost of such repairs
shall be due and payable by the other party to the party giving notice.
(c) Condition Upon Surrender. At the expiration or sooner
termination of this Lease, Tenant shall surrender the Premises, including any
additions, alterations and improvements thereto, broom clean, in good and
sanitary order, condition and repair, ordinary wear and tear excepted, first,
however, removing all goods and effects of Tenant, and fixtures and items
required to be removed or specified to be removed at Landlord's election
pursuant to this Lease, and repairing any damage caused by such removal.
<PAGE> 16
9. USE OF PREMISES
9.1. Permitted Use. Tenant shall use the Premises solely for
research and development, laboratories, production of instruments and reagents
and related office and administrative uses, and for no other purpose.
9.2. Requirement Of Continued Use. Tenant shall not at any time
leave the Premises unoccupied or vacant, and shall continuously during the term
of this Lease conduct and carry on in the Premises the use permitted hereunder.
9.3. No Nuisance. Tenant shall not use the Premises for or carry on
or permit upon the Premises or any part thereof any offensive, noisy or
dangerous trade, business, manufacture, occupation, odor or fumes, or any
nuisance or anything against public policy, nor interfere with the rights or
business of any other tenants or of Landlord in the Building, nor make any
other unreasonable use of the Premises. Tenant shall not do or permit anything
to be done in or about the Premises, nor bring nor keep anything therein, which
will in any way cause the Premises to be uninsurable with respect to the
insurance required by this Lease or with respect to standard fire and extended
coverage insurance with vandalism, malicious mischief and riot endorsements.
9.4. Compliance With Laws. Tenant shall not use the Premises or permit the
Premises to be used in whole or in part for any purpose or use that is in
violation of any applicable laws, ordinances, regulations or rules of any
governmental agency or public authority. Tenant shall keep the Premises equipped
with all safety appliances required by law, ordinance or insurance on the
Premises, or any order or regulation of any public authority because of Tenant's
particular use of the Premises. Tenant shall procure all licenses and permits
required for use of the Premises. Tenant shall use the Premises in strict
accordance with all applicable ordinances, rules, laws and regulations and shall
comply with all requirements of all governmental authorities now in force or
which may hereafter be in force pertaining to the use of the Premises by Tenant,
including, without limitation, regulations applicable to noise, water, soil and
air pollution, and making such nonstructural alterations and additions thereto
as may be required from time to time by such laws, ordinances, rules,
regulations and requirements of governmental authorities or insurers of the
Premises (collectively and inclusive of all "Laws" as defined in Section 5.2,
"Requirements") because of Tenant's construction of improvements in or other
particular use of the Premises. Notwithstanding the foregoing, if on the
Commencement Date the Premises are not in compliance with all then applicable
Requirements, Landlord and not Tenant shall be responsible for causing the
Premises to comply with such Requirements and Tenant shall not be required to
pay and of the cost of such compliance. Any structural alterations or additions
required from time to time by applicable Requirements because of Tenant's
construction of improvements in or other particular use of the Premises shall,
at Landlord's election, either (i) be made by Tenant, at Tenant's sole cost and
expense, in accordance with the procedures and standards set forth in Section
7.1 for alterations by Tenant, or (ii) be made by Landlord at Tenant's sole cost
and expense, in which event Tenant shall pay to Landlord as additional rent,
within ten (10) days after demand by Landlord, an amount equal to all costs
incurred by Landlord in connection with such alterations or additions.
9.5. Liquidation Sales. Tenant shall not conduct or permit to be
conducted any bankruptcy sale, liquidation sale, or going out of business sale,
in, upon or about the Premises, whether said auction or sale be voluntary,
involuntary or pursuant to any assignment for the benefit of creditors, or
pursuant to any bankruptcy or other insolvency proceeding.
9.6. Environmental Matters.
(a) For purposes of this Section, "hazardous substance"
shall mean the substances included within the definitions of the term
"hazardous substance" under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, 42 U.S.C. Sections 9601 et
seq. and to regulations promulgated thereunder, as amended, and the California
Carpenter-Presley-Tanner Hazardous Substance Account Act, California Health &
Safety Code Sections 25300 et seq., and regulations promulgated thereunder, as
amended; "hazardous waste" shall mean (i) any waste listed as or meeting the
identified characteristics of a "hazardous waste" under the Resource
Conservation and Recovery Act of 1976, 42 U.S.C. Sections 6901 et seq., and
regulations promulgated pursuant
<PAGE> 17
thereto, as amended ??????????????????????????????????????????????
characteristics of "hazardous waste," "extremely hazardous waste," or
"restricted hazardous waste" under the California Hazardous Waste Control Law,
California Health & Safety Code Section 25100 et seq. and regulations
promulgated pursuant thereto, as amended (collectively, the "CHWCL"), and/or
(iii) any waste meeting the characteristics of "medical waste" under California
Health and Safety Code Section 25015-25027.8, and regulations promulgated
thereunder, as amended; and "hazardous waste facility" shall mean a hazardous
waste facility as defined under the CHWCL. "Radioactive materials" or
???liation," shall mean the materials defined in Title 26, California Code of
Regulations .7-30100, and/or any other materials possessing the characteristics
of the materials so defined.
(b) Without limiting the generality of the obligations set forth in
Section 9.4 above, Tenant covenants that it will comply with all applicable
laws, rules, regulations, orders, permits, licenses and operating plans of any
governmental authority with respect to Tenant's receipt, use, handling,
generation, transportation, storage, treatment and/or disposal of hazardous
substances or wastes and any radiation and radioactive materials. Without
limiting the generality of the foregoing.
(i) Tenant agrees that it shall not (A) operate on the Premises
any facility required to be permitted or licensed as a hazardous waste facility
or for which interim status as such is legally required, nor (B) store any
hazardous wastes on the Premises beyond the period permitted by law.
(ii) Tenant agrees to comply with all applicable laws, rules,
regulations, orders and permits relating to underground storage tanks which are
installed or used by Tenant (including any installation, monitoring,
maintenance, closure and/or removal of such tanks) as such tanks are defined in
California Health & Safety Code Section 25281(x), including, without limitation,
complying with California Health & Safety Code Sections 25280-25299.7 and the
regulations promulgated thereunder, as amended.
(c) If requested by Landlord, Tenant will promptly provide Landlord
with copies of the following:
(i) All permits, licenses, registrations and other similar
documents that authorize Tenant to conduct any activities involving the
receipt, use, handling, generation, transportation, storage, treatment and/or
disposal of hazardous substances or wastes and any radiation and radioactive
materials in connection with Tenant's authorized use of the Premises,
including, but not limited to, all industrial wastewater discharge permits and
permits for underground storage tanks which are installed or used by Tenant;
(ii) A list of all hazardous substances and/or wastes and
radiation and/or radioactive materials that Tenant receives, uses, handles,
generates, transports, stores, treats or disposes of in connection with its
operations on the Premises, which list may be in any reasonable form selected by
Tenant and may, for example, consist of copies of all Material Safety Data
Sheets ("MSDS's"), if any, required to be completed with respect to operations
of Tenant at the Premises in accordance with Title 26, California Code of
Regulations Section 8-5194(g) or 42 U.S.C. Section 11021, or any amendments
thereto, or any Hazardous Materials Inventory Sheet that details the MSDS's, so
long as the materials provided by Tenant list all such hazardous substances
and/or wastes and radiation and radioactive materials;
(iii) A copy of any Hazardous Materials Management Plan required
by law with respect to Tenant's operations at the Premises;
(iv) Copies of any Contingency Plans and Emergency Procedures
required of Tenant due to its operations in accordance with Title 26,
California Code of Regulations Section 22-67140 et seq. and any amendments
thereto; and
(v) Any information of the type described in clauses (i) through
(iv) which changes, updates, or supplements any such information previously
provided to Landlord.
(d) If requested by Landlord in connection with Landlord's sale or
refinancing of the Center or the Building or in connection with the sale of
reorganization of Landlord's business or assets. Tenants shall provide Landlord
with access to, and shall
<PAGE> 18
allow Landlord to copy at Landlord's expense, any other information or
materials which Tenant is legally required to prepare or maintain relating to
hazardous substances and/or wastes and radiator and/or radioactive materials
that Tenant receives, uses, handles, generates, transports, stores, treats or
disposes of in connection with its operations on the Premises, including, but
not limited to:
(i) Copies of all hazardous waste manifests (as defined in
Title 26, California Code of Regulations Section 22-66481), if any, that Tenant
is required to complete in connection with its operations at the Premises;
(ii) Copies of any biennial reports to be furnished to the
California Department of Health Services relating to hazardous substances or
wastes;
(iii) Copies of any other lists, inventories and any Form R or
inventory reports of hazardous substances and/or wastes on or about the
Property or Premises that Tenant is otherwise required to prepare and file with
any governmental or regulatory authority; and
(iv) All inspection reports and other materials that tenant is
legally required to maintain and/or file with any governmental or regulatory
authority in connection with the receipt, storage, possession, use, transfer or
disposal of radioactive materials or radiation.
(e) Landlord agrees that if any information provided by Tenant
under Section 9.6(c) or 9.6(d) includes information which is proprietary or
confidential to Tenant and is not otherwise publicly available and if such
information is marked by Tenant as "confidential," "proprietary" or with a
similar designation, all recipients of such information, including but not
limited to Landlord, shall hold such information in the strictest confidence
and compensate Tenant for any damages resulting from any breach of such
confidentiality.
(f) Tenant agrees to notify Landlord in writing of any unauthorized
release by Tenant into the environment of any hazardous wastes or substances or
radiation or radioactive materials within twenty-four hours of the time at
which Tenant became aware of such release.
(g) Tenant shall indemnify, defend and hold Landlord harmless from
and against any and all claims, losses (including, but not limited to, loss of
rental income and loss due to business interruption), damages, liabilities,
costs, legal fees and expenses of any sort arising out of or relating to any
unauthorized release into the environment of hazardous substances or wastes or
radiation or radioactive materials by Tenant, or Tenant's failure to comply
with any subparagraphs of this paragraph 9.6. Landlord shall indemnify, defend
and hold Tenant harmless from and against any and all claims, losses
(including, but not limited to, loss of rental income and loss due to business
interruption), damages, liabilities, costs, legal fees and expenses of any sort
arising out of or relating to any unauthorized release into the environment of
hazardous substances or wastes or radiation or radioactive materials (i) which
are present in the Building or Center on the date of this Lease or (ii) to the
extent they result from the negligence or willful misconduct or omission by
Landlord.
(h) Notwithstanding Landlord's rights of inspection and review,
under this paragraph 9.6, Landlord shall have no obligation or duty to so
inspect or review, and no third party shall be entitled to rely on Landlord to
conduct any sort of inspection or review by reason of the provisions of this
paragraph 9.6.
(i) If Tenant receives, handles, uses, stores, transports,
generates, treats and/or disposes of any hazardous substances or wastes or
radiation or radioactive materials on the Premises at any time during the term
of this Lease, then within thirty (30) days after termination or expiration of
this Lease, Tenant, at its sole cost and expense shall obtain and deliver to
Landlord an environmental study, performed by an expert reasonably satisfactory
to Landlord, evaluating the presence or absence of hazardous substances and
wastes, radiation and radioactive materials on the Premises. Such study shall
be based on a reasonable and prudent level of tests and investigations of the
Premises, which tests shall be conducted no earlier than the date of
termination or expiration of this Lease. Liability for any remedial actions
required or recommended on the basis of such study
<PAGE> 19
shall be allocated in accordance with Sections 9.4, 9.6, 10.6 and other
applicable provisions of this Lease, except Tenant shall not be responsible for
substances or wastes not handled, used, stored, transported, generated, treated
and/or disposed of on or about the Premises by Tenant.
(j) The provisions of this Section 9.6 shall survive the termination
of this lease.
10. INSURANCE AND INDEMNITY
10.1. Liability Insurance. Tenant shall procure and maintain in full force
and effect during the term of this Lease comprehensive public liability and
property damage insurance to protect against any liability to the public, or to
any invitee of Tenant or Landlord, arising out of or related to the use of or
resulting from any accident occurring in, upon or about the Premises, with
limits of liability of not less than (i) One Million Dollars ($1,000,000.00)
for injury to or death of one person, (ii) Three Million Dollars
($3,000,000.00) for personal injury or death, per occurrence, and (iii) Five
Hundred Thousand Dollars ($500,000.00) for property damage or a combined single
limit of public liability and property damage insurance of not less than five
Million Dollars ($5,000,000.00). Such insurance shall name Landlord as an
additional insured thereunder.
10.2 Quality Of Policies And Certificates. All policies of insurance
required hereunder shall be issued by responsible insurers. Tenant shall
deliver to Landlord copies of policies or certificates of insurance showing
that said policies are in effect. The coverage provided by such policies shall
include the clause or endorsement referred to in Section 10.4. If Tenant fails
to acquire, maintain or renew any insurance required to be maintained by it
under this Article 10 or to pay the premium therefor, then Landlord, at its
option and in addition to its other remedies, but without obligation so to do,
may procure such insurance, and any sums expended by it to procure any such
insurance shall be repaid upon demand, with interest as provided in Section 3.2
hereof. Tenant shall obtain written undertakings from each insurer under
policies required to be maintained by it to notify all insureds thereunder at
least thirty (30) days prior to cancellation, amendment or revision of
coverage.
10.3 Workers' Compensation. Tenant shall maintain in full force and
effect during term of this Lease workers' compensation insurance covering all
of Tenant's employees working on the Premises.
10.4 Waiver Of Subrogation. To the extent permitted by law and without
affecting the coverage by insurance required to be maintained hereunder,
Landlord and Tenant each waive any right to recover against the other (i)
damages for injury to or death of persons, (ii) damage to property, (iii)
damage to the Premises or any part thereof, or (iv) claims arising by reason of
any of the foregoing, but only to the extent that any of the foregoing damages
and claims under subparts (i)-(iv) hereof are covered, and only to the extent
of such coverage, by insurance actually carried or required to be carried
hereunder by either Landlord or Tenant. This provision is intended to waive
fully, and for the benefit of each party, any rights and claims which might
give rise to a right of subrogation in any insurance carrier. Each party shall
use its best efforts to procure a clause or endorsement on any policy required
under this Article 10 denying to the insurer rights of subrogation against the
other party to the extent rights have been waived by the insured prior to the
occurrence of injury or loss. If such insurance policies cannot be obtained
with such waiver of subrogation, or if such waiver of subrogation is only
available at additional cost and the party for whose benefit the waiver is not
obtained does not ay such additional cost, then the party obtaining such
insurance shall immediately notify the other party of that fact and such waiver
shall not be required. Coverage provided by insurance maintained by Tenant
under this Article 10 shall not be limited, reduced or diminished by virtue of
the subrogation waiver herein contained.
10.5. Increase In Premiums. Tenant shall do all acts and pay all
expenses necessary to insure that the Premises are not used for purposes
prohibited by any applicable fire insurance, and that Tenant's use of the
Premises complies with all requirements necessary to obtain any such insurance.
If Tenant uses or permits the Premises to be used in a manner which increases
the existing rate of any insurance on the Premises carried by Landlord, Tenant
shall pay the amount of the increase in premium caused thereby, and
<PAGE> 20
Landlords's costs of obtaining other replacement insurance policies, including
any increase in premium, within ten (10) days after demand therefor by Landlord.
10.6. Tenant's Indemnification. Tenant shall indemnify, defend and
hold Landlord, its partners, shareholders, officers, directors, affiliates,
agents, employees and contractors, harmless from any and all liability for
injury to or death of any person, or loss of or damage to the property of any
person, and all actions, claims, demands, costs (including, without limitation,
reasonable attorneys' fees), damages or expenses of any kind arising therefrom
which may be brought or made against Landlord or which Landlord may pay or incur
by reason of the use, occupancy and enjoyment of the Premises by Tenant or any
invitees, sublessees, licensees, assignees, employees, agents or contractors of
Tenant or holding under Tenant from any cause whatsoever other than the gross
negligence or willful misconduct or omission by Landlord, its agents or
employees. Landlord, its partners, shareholders, officers, directors,
affiliates, agents, employees and contractors shall not be liable for, and
Tenant hereby waives all claims against such persons for, damages to goods,
wares and merchandise in or upon the Premises, or for injuries to Tenant, its
agents or third persons in or upon the Premises, from any cause whatsoever other
than (a) the gross negligence or willful misconduct or omission by Landlord, its
agent or employees, for which Landlord shall indemnify, defend and hold Tenant,
its partners, shareholders, officers, directors, affiliates, agents, employees
and contractors, harmless from any and all liability for injury to or death of
any person, or loss of or damage to the property of any person, and all actions,
claims, demands, costs (including, without limitation, reasonable attorneys'
fees), damages or expenses of any kind arising therefrom which may be brought or
made against Tenant or which Tenant may pay or incur by reason of such gross
negligence or willful misconduct or omission by Landlord, its agents or
employees (b) claims to which Landlord's indemnification obligations under
Section 9.6(g) apply.
10.7. Blanket Policy. Any policy required to be maintained hereunder
may be maintained under a so-called "blanket policy" insuring other parties and
other locations so long as the amount of insurance required to be provided
hereunder is not thereby diminished.
11. SUBLEASE AND ASSIGNMENT
11.1. Assignment And Sublease Of Premises. Tenant shall not have the
right or ?????? to assign its interest in this Lease, or make any sublease, nor
shall any interest of Tenant under this Lease be assignable involuntarily or by
operation of law, without on each occasion obtaining the prior written consent
of Landlord, which consent shall not be unreasonably withheld or delayed. Any
purported sublease or assignment of Tenant's interest in this Lease requiring
but not having receive Landlord's consent thereto shall be void. Without
limiting the generality of the foregoing, Landlord may withhold consent to any
proposed subletting or assignment solely on the ground that the proposed
subtenant or assignee is reasonably likely to be incompatible with Landlord's
use of the balance of the Building or Property. Any dissolution, consolidation,
merger or other reorganization of Tenant, or any sale or transfer of the stock
of or other interest in Tenant, or any series of one or more of such events,
involving in the aggregate a change of fifty percent (50%) or more in the
beneficial ownership of Tenant or its assets shall be deemed to be an
assignment hereunder and shall be void without the prior written consent of
Landlord as required above. Notwithstanding any other provisions of this
Section 11.1, Landlord's written consent shall not be required for (a) any
assignment or sublease by Tenant to a parent, subsidiary or affiliate of
Tenant, provided that Tenant provides Landlord with prior written notice of
such assignment or sublease, that the assignee (if applicable) shall expressly
assume in writing, for the benefit of Landlord, the obligations of Tenant under
this Lease, and that all other provisions of this Article 11 shall remain
applicable to such assignment or sublease; or (b) any consolidation, merger or
other reorganization of Tenant or sale of substantially all of the stock or
assets of Tenant, provided that the successor (if a different legal entity from
Tenant) or asset purchaser shall expressly assume in writing, for the benefit
of Landlord, the obligations of Tenant under this Lease, that such successor or
asset purchaser shall have a net worth and net current assets (each determined
in accordance with generally accepted accounting principles) not materially
less than those of Tenant both at the execution of this Lease and immediately
prior to the applicable transaction, that all other provisions of this Article
11 shall remain applicable to the parties to such transaction and that Tenant
<PAGE> 21
shall provide Landlord with prior written notice of the transaction and with
evidence reasonably satisfactory to Landlord of the satisfaction of the
foregoing conditions.
11.2. Rights Of Landlord.
(a) Consent by Landlord to one or more assignments of this
Lease, or to one or more sublettings of the Premises, or collection of rent
by Landlord from any assignee or sublessee, shall not operate to exhaust
Landlord's rights under this Article ??? or constitute consent to any subsequent
assignment or subletting. No assignment of Tenant's interest in this Lease and
no sublease shall relieve Tenant of its obligations hereunder, notwithstanding
any waiver or extension of time granted by Landlord to any assignee or
sublessee, or the failure of Landlord to assert its rights against any assignee
or sublessee, and regardless of whether Landlord's consent thereto is given or
required to be given hereunder. In the event of a default by any assignee,
sublessee or other successor of Tenant in the performance of any of the terms or
obligations of Tenant under this Lease, Landlord may proceed directly against
Tenant without the necessity of exhausting remedies against any such assignee,
sublessee or other successor. In addition, Tenant immediately and irrevocably
assigns to Landlord, as security for Tenant's obligations under this Lease, all
rent from any subletting of all or a part of the Premises as permitted under
this Lease, and Landlord, as Tenant's assignee and as attorney-in-fact for
Tenant, or any receiver for Tenant appointed on Landlord's application, may
collect such rent and apply it toward Tenant's obligations under this Lease;
except that, until the occurrence of an act of default by Tenant, Tenant shall
have the right to collect such rent.
(b) Upon any assignment of Tenant's interest in this Lease, Tenant
shall pay to Landlord, within ten (10) days after receipt thereof by Tenant from
time to time, one-half (1/2) of all cash sums and other economic considerations
received by Tenant in connection with or as a result of such assignment, after
first deducting therefrom (i) the unamortized cost of any leasehold improvements
previously made in the Premises and paid for by Tenant (for which purpose
improvements paid for by Landlord pursuant to any tenant improvement allowance
under Exhibit C hereto shall not be construed to have been paid for by Tenant),
(ii) any costs incurred by Tenant for leasehold improvements (including, but not
limited to, third-party architectural and space planning costs) in the Premises
in connection with such assignment, and (iii) any real estate commissions and/or
attorneys' fees incurred by Tenant in connection with such assignment.
(c) Upon any sublease of all or any portion of Premises, Tenant
shall pay to Landlord, within ten (10) days after receipt thereof by Tenant
from time to time, one-half (1/2) of all cash sums and other economic
considerations received by Tenant in connection with or as a result of such
sublease, after first deducting therefrom (i) the rental due hereunder for the
corresponding period, prorated to reflect only rental allocable to the
subleased portion of the Premises, (ii) any costs incurred by Tenant for
leasehold improvements in the subleased portion of the Premises (including, but
not limited to, third-party architectural and space planning costs) for the
specific benefit of the sublessee in connection with such sublease, amortized
over the term of the sublease, (iii) any real estate commissions and/or
attorneys' fees incurred by Tenant in connection with such sublease, amortized
over the term of such sublease, and (iv) the unamortized cost of any leasehold
improvements previously made and paid for by Tenant with respect to the
subleased portion of the Premises (subject to the same limitation set forth in
clause (b)(i) above.)
12. RIGHT OF ENTRY AND QUIET ENJOYMENT
12.1. Right Of Entry. Landlord and its authorized representatives
shall have the right to enter the Premises at any time during the term of this
Lease during normal business hours and upon not less than twenty-four (24)
hours prior notice and shall at all times be accompanied by one of Tenant's
employees, except in the case of emergency, for the purpose of inspecting and
determining the condition of the Premises or for any other proper purpose
including, without limitation, to make repairs, replacements or improvements
which Landlord may deem necessary, to show the Premises to prospective
purchasers, to show the Premises to prospective tenants, and to post notices
of nonresponsibility. Landlord shall not be liable for inconvenience,
annoyance, disturbance, loss of business, quiet enjoyment or other damage or
loss to Tenant by reason of making any repairs or performing any work upon the
Premises and the obligations of Tenant
<PAGE> 22
under this Lease shall not thereby be affected in any manner whatsoever,
provided, however, Landlord shall use reasonable efforts to minimize the
inconvenience to Tenant's normal business operations caused thereby. Landlord
shall fully comply with Tenant's reasonable rules and regulations while
entering or inspecting the Premises provided that Tenant has informed Landlord
of such rules and regulations.
12.2. Quiet Enjoyment. Landlord covenants that Tenant, upon paying
the rent and performing its obligations hereunder and subject to all the terms
and conditions of this Lease, shall peacefully and quietly have, hold and enjoy
the Premises throughout the term of this Lease, or until this Lease is
terminated as provided by this Lease.
13. CASUALTY AND TAKING
13.1. Termination Or Reconstruction. If during the term of this
Lease the Premises or Building, or any substantial part of either, (i) are
damaged materially by fire or other casualty or by action of public or other
authority in consequence thereof and cannot reasonably be expected to be
substantially repairable within 120 days following the date on which the damage
was sustained, (ii) are taken by eminent domain or by reason of any public
improvement or condemnation proceeding, or in any manner by exercise of the
right of eminent domain (including any transfer in avoidance of an exercise of
the power of eminent domain), or (iii) receive irreparable damage by reason of
anything lawfully done under color of public or other authority (the foregoing
events are herein collectively referred to as a "Casualty or Taking"), this
Lease shall terminate as to the entire Premises at Landlord's election by
written notice given to Tenant within sixty (60) days after the Casualty or
Taking has occurred. If Landlord does not elect to terminate this Lease as
hereinabove provided and Tenant does not elect to terminate the Lease as
provided in Section 13.2, Landlord shall repair and restore the Premises and
the Building as nearly as reasonably possible to the condition existing before
the Casualty or Taking.
13.2. Tenant's Rights. If any portion of the Premises is affected by
a Casualty or Taking and, if the event is a Casualty, provided that the
Casualty was not caused by Tenant, Tenant may elect to terminate this Lease if
the affected portion of the Premises is of such extent and nature as
substantially to handicap, impede or permanently impair Tenant's use of the
balance of the Premises. Tenant must exercise its right to terminate by giving
notice to Landlord within thirty (30) days after the Casualty has occurred or
the nature and extent of the Taking have been finally determined. If Tenant
elects to terminate this Lease, Tenant shall also notify Landlord of the date
of termination, which ??? (i) in the case of a Taking, shall not be earlier
than thirty (30) days nor later than ninety (90) days after Tenant has notified
Landlord of its election to terminate, except that this Lease shall terminate
on the date of Taking if the date of Taking falls on any date before the date
of termination designated by Tenant and (ii), in the case of a Casualty shall
be the date specified in Tenant's notice but in no event more than thirty (30)
days after the Casualty occurs.
13.3. Lease To Remain In Effect. If Landlord or Tenant does not
terminate this Lease as hereinabove provided, this Lease shall continue in full
force and effect, except that rental and Tenant's Operating Cost Share shall
abate to the extent Tenant's use of the Premises is impaired for any period
that any portion of the Premises is unusable or inaccessible because of a
Casualty or Taking hereinabove described. Each party waives the provisions of
Code of Civil Procedure Section 1265.130, allowing either party to petition the
Superior Court to terminate this Lease in the event of a partial condemnation
of the Premises.
13.4. Reservation Of Compensation. Landlord reserves, and Tenant
waives and assigns to Landlord, all rights to any award or compensation for
damage to the Premises, Building, Property and the leasehold estate created
hereby, accruing by reason of any taking in any public improvement,
condemnation or eminent domain proceeding or in any other manner by exercise of
the right of eminent domain or of anything lawfully done by public authority,
except that Tenant shall be entitled to any and all compensation or damages
paid for or on account of Tenant's loss of goodwill as a consequences of the
condemnation, moving expenses, Tenant's Property and any leasehold improvements
in the Premises, the cost of which was borne by Tenant, but only to the extent
of the then remaining unamortized value of such improvements computed on a
straight-line basis over the term of this Lease and any then remaining option
term under Section 2.7
<PAGE> 23
unless the time for exercising an option has passed without exercise by Tenant.
Tenant covenants to deliver such further assignments of the foregoing as
Landlord may from time to time request.
13.5. Restoration Of Fixtures. If Landlord repairs or causes repair
of the Premises after such damage or taking, Tenant as its sole expense shall
repair and replace promptly all fixtures, equipment and other property of
Tenant located at, in or upon the Premises with all additions, alterations and
improvements and all other items installed or paid for by Tenant under this
Lease that were damaged or taken, so as to restore the same to a condition
substantially equal to that which existed immediately prior to the damage or
taking. Tenant shall have the right to make modifications to the Premises,
fixtures and improvements, subject to the terms of this Lease. In its review of
Tenant's plans and specifications, Landlord may take into consideration the
effect of the proposed modifications on the exterior appearance, the structural
integrity and the mechanical and other operating systems of the Building.
14. DEFAULT
14.1. Events Of Default. The occurrence of any of the following shall
constitute an event of default on the part of Tenant:
(a) Abandonment. Abandonment of the Premises. Tenant waives any right
Tenant may have to notice under Section 1951.3 of the California Civil Code,
the terms of this subsection (a) being deemed such notice to Tenant as required
by said Section 1951.3;
(b) Nonpayment. Failure to pay, when due, any amount payable to
Landlord hereunder, such failure continuing for a period of five (5) days after
written notice of such failure;
(c) Other Obligations. Failure to perform any obligation, agreement
or covenant under this Lease other than those matters specified in subsection
(b) hereof, such failure continuing for fifteen (15) days after written notice
of such failure. No default shall be deemed to have occurred if it is not
possible to cure such failure to perform within fifteen (15) days, but Tenant
has commenced cure within said fifteen (15) day period and proceeds diligently
to complete cure;
(d) General Assignment. A general assignment by Tenant for the
benefit of creditors;
(e) Bankruptcy. The filing of any voluntary petition in bankruptcy by
Tenant, or the filing of an involuntary petition by Tenant's creditors, which
involuntary petition remains undischarged for a period of thirty (30) days. In
the event that under applicable law the trustee in bankruptcy or Tenant has the
right to affirm this Lease and continue to perform the obligations of Tenant
hereunder, such trustee or Tenant shall, in such time period as may be
permitted by the bankruptcy court having jurisdiction, cure all defaults of
Tenant hereunder outstanding as of the date of the affirmance of this Lease and
provide to Landlord such adequate assurances as may be necessary to ensure
Landlord of the continued performance of Tenant's obligations under this Lease.
Specifically, but without limiting the generality of the foregoing, such
adequate assurances must include assurances that the Premises continue to be
operated only for the use permitted hereunder. The provisions hereof are to
assure that the basic understandings between Landlord and Tenant with respect
to Tenant's use of the Premises and the benefits to Landlord therefrom are
preserved, consistent with the purpose and intent of applicable bankruptcy
laws;
(f) Receivership. The employment of a receiver appointed by court
order to take possession of substantially all of Tenant's assets or the
Premises, if such receivership remains undissolved for a period of thirty (30)
days;
(g) Attachment. The attachment, execution or other judicial seizure
of all or substantially all of Tenant's assets or the Premises, if such
attachment or other seizure remains undismissed or undischarged for a period of
thirty (30) days after the levy thereof; or
<PAGE> 24
(h) Insolvency. The admission by Tenant in writing of its
inability to pay its debts as they become due, the filing by Tenant of a
petition seeking any reorganization or arrangement, composition, readjustment,
liquidation, dissolution or similar relief under any present or future statute,
law or regulation, the filing by Tenant of an answer admitting or failing
timely to contest a material allegation of a petition filed against Tenant in
any such proceeding or, if within thirty (30) days after the commencement of
any proceeding against Tenant seeking any reorganization or arrangement,
composition, readjustment, liquidation, dissolution or similar relief under any
present or future statute, law or regulation, such proceeding shall not have
been dismissed.
14.2. Remedies Upon Default.
(a) Upon the occurrence of any event of default described
in Section 14.1 hereof, Landlord, in addition to and without prejudice to any
other rights or remedies it may have, shall have the immediate right to
re-enter the Premises or any part thereof and repossess the same, expelling and
removing therefrom all persons and property (which property may be stored in a
public warehouse or elsewhere at the cost and risk of and for the account of
Tenant). In addition to or in lieu of such re-entry, and without prejudice to
any other rights or remedies it may have, Landlord shall have the right either
(i) to terminate this Lease and recover from Tenant all damages incurred by
Landlord as a result of Tenant's default, as hereinafter provided, or (ii) to
continue this Lease in effect and recover rent and other charges and amounts as
they become due.
(b) Even if Tenant has breached this Lease or abandoned the
Premises, this Lease shall continue in effect for so long as Landlord does not
terminate Tenant's right to possession under subsection (a) hereof and Landlord
may enforce all of its rights and remedies under this Lease, including the
right to recover rent as it becomes due, and Landlord, without terminating this
Lease, may exercise all of the rights and remedies of a lessor under California
Civil Code Section 1951.4 (lessor may continue lease in effect after lessee's
breach and abandonment and recover rent as it becomes due, if lessee has right
to sublet or assign, subject only to reasonable limitations), or any successor
Code section. Acts of maintenance, preservation or efforts to relet the
Premises or the appointment of a receiver upon application of Landlord to
protect Landlord's interests under this Lease shall not constitute a
termination of Tenant's right to possession.
(c) If Landlord terminates this Lease pursuant to this
Section 14.2, Landlord shall have all of the rights and remedies of a landlord
provided by Section 1951.2 of the Civil Code of the State of California, or any
successor Code section.
14.3. Remedies Cumulative. All rights, privileges and elections or
remedies of Landlord contained in this Article 14 are cumulative and not
alternative to the extent permitted by law and except as otherwise provided
herein.
15. SUBORDINATION, ATTORNMENT AND SALE
15.1. Subordination To Mortgage. This Lease, and any sublease entered
into by Tenant under the provisions of this Lease, shall be subject and
subordinate to any ground lease, mortgage, deed of trust, sale/leaseback
transaction or any other hypothecation for security now or hereafter placed
upon the Building, the Property, or both, and the rights of any assignee of
Landlord or mortgagee, trustee, beneficiary, landlord or leaseback lessor under
any of the foregoing ("Lien Holder"), and to any and all advances made on the
security thereof and to all renewals, modifications, consolidations,
replacements and extensions thereof; provided, however, that if any Lien Holder
whose interest in the Building is not presently of record requires that this
Lease be so subordinate to such interest, this Lease shall be so subordinate
only if the Lien Holder executes a recognition and non-disturbance agreement
which (i) provides that this Lease shall not be terminated by the Lien Holder
or its successors in interest so long as Tenant is not in default under this
Lease and (ii) recognizes all of Tenant's rights hereunder. if any mortgagee,
trustee, beneficiary, ground lessor, sale/leaseback lessor or assignee elects
to have this Lease be an encumbrance upon the Property prior to the lien of its
mortgage, deed of trust, ground lease or leaseback lease or other security
arrangement and gives notice thereof to Tenant, this Lease shall be deemed
prior thereto, whether this Lease is dated prior or subsequent to the date
thereof or the date of recording thereof. Tenant, and any sublessee, shall
execute such documents as may reasonably be requested by any
<PAGE> 25
mortgagee, trustee, beneficiary, ground lessor, sale/leaseback lessor or
assignee to evidence the subordination herein set forth or to make Lease prior
to the lien of any mortgage, deed of trust, ground lease, leaseback lease or
other security arrangement, as the case may be, and if Tenant fails to do so
within ten (10) days after demand from Landlord, Tenant constitutes and
appoints Landlord as Tenant's attorney-in-fact and in Tenant's name, place and
stead to do so. Upon any default by Landlord in the performance of its
obligations under any mortgage, deed of trust, ground lease, leaseback ????? or
assignment, Tenant (and any sublessee) shall attorn to the mortgagee, trustee,
beneficiary, ground lessor, leaseback lessor or assignee thereunder upon demand
and shall execute and deliver any instrument or instruments confirming the
attornment herein provided for; provided, however, Tenant shall have no such
obligation to execute such instruments unless the Lien Holder or
succesor-in-interest in question assumes, in writing, the obligations to be
performed by Landlord accruing on or after the effective date of the transfer.
15.2. Sale Of Landlord's Interest. Upon sale, transfer or assignment
of Landlord's entire interest in the Building and Property, Landlord shall be
relieved of its obligations hereunder with respect to liabilities accruing from
and after the date of such sale, transfer or assignment; provided, however, in
the event of a voluntary sale by Landlord, such termination of liability shall
be effective only if the purchaser expressly assumes in writing the obligations
of Landlord under this Lease accruing on or after the effective date of the
sale.
15.3. Estoppel Certificates. Tenant shall at any time and from time
to time, within ten (10) days after written request by Landlord, execute,
acknowledge and deliver to Landlord a certificate in writing stating: (i) that
this Lease is unmodified and in full force and effect, or if there have been
any modifications, that this Lease is in full force and effect as modified and
stating the date and the nature of each modification; (ii) the date to which
rental and all other sums payable hereunder have been paid; (iii) that Landlord
is not in default in the performance of any of its obligations under this
Lease, that Tenant has given no notice of default to Landlord and that no event
has occurred which, but for the expiration of the applicable time period, would
constitute an event of default hereunder, or if Tenant alleges that any such
default, notice or event has occurred, specifying the same in reasonable
detail; and (iv) such other matters as may reasonably be requested by Landlord
or any institutional lender, mortgagee, trustee, beneficiary, ?????? lessor,
sale/leaseback lessor or prospective purchaser of the Property. Any such
certificate provided under this Section 15.3 may be relied upon by any lender,
mortgagee, trustee, beneficiary, assignee or successor in interest to Landlord,
by any prospective purchaser, by any purchaser on foreclosure or sale, or upon
any grant of a deed in lieu of foreclosure of any mortgage or deed of trust on
the Property or Premises, or by any other third party. Failure to execute and
return within the required time any estoppel certificate requested hereunder
shall be deemed to be an admission of the truth of the matters set forth in the
form of certificate submitted to Tenant for execution. This Section 15.3 shall
impose a reciprocal obligation on Landlord to execute, acknowledge and deliver
estoppel certificates as described above for the benefit of Tenant.
15.4. Subordination to CC&R's. This Lease, and any permitted
sublease entered into by Tenant under the provisions of this Lease, shall be
subject and subordinate to any declarations of covenants, conditions and
restrictions recorded by Landlord with respect to the Property from time to
time, provided that the terms of such declarations are reasonable and do not
discriminate against Tenant relative to other tenants occupying portions of the
Property. Tenant agrees to execute, upon request by Landlord, any documents
reasonably required from time to time to evidence such subordination.
16. SECURITY
16.1. Deposit; Letter of Credit.
(a) Concurrently with Tenant's execution of this Lease,
Tenant shall deposit with Landlord the sum of Twenty Three Thousand One
Hundred Sixty-Two and 50/100 Dollars ($23,162.50) which sum (the "Security
Deposit") shall be held by Landlord as security for the faithful performance of
all of the terms, covenants, and conditions of this Lease to be kept and
performed by Tenant during the term hereof. If Tenant waives or otherwise fails
to exercise its early termination right within the time permitted under Section
2.1(B) hereof and if Tenant is not then in default hereunder, the sum of
<PAGE> 26
Thirteen Thousand and No/100 Dollars ($13,000.00) from the Security Deposit
shall be credited against minimum monthly rent due under Section 3.1 on months
13 and 14 (partial credit only) following the Commencement Date, and Landlord
shall continue to hold the remaining $10,162.50 as a Security Deposit. The
Security Deposit shall be increased by Tenant at the time of each increase in
minimum rental due under this Lease, so that the Security Deposit will always
equal or exceed the monthly minimum rental as in effect from time to time. If
Tenant defaults with respect to any provision of this Lease, including, without
limitation, the provisions relating to the payment of rental and other sums due
hereunder, Landlord shall have the right, but shall not be required, to use,
apply or retain all or any part of the Security Deposit for the payment of
rental or any other amount which Landlord may spend or become obligated to spend
by reason of Tenant's default or to compensate Landlord for any other loss or
damage which Landlord may suffer by reason of Tenant's default. If any portion
of the Security Deposit is so used and applied, Tenant shall, within ten (10)
days after written demand therefor, deposit cash with Landlord in an amount
sufficient to restore the Security Deposit to its original amount and Tenant's
failure to do so shall be a material breach of this Lease. Landlord shall not be
required to keep any deposit under this Section separate from Landlord's general
funds, and Tenant shall not be entitled to interest thereon. If Tenant fully and
faithfully performs every provision of this Lease to be performed by it, the
Security Deposit, or any balance thereof, shall be returned to Tenant or, at
Landlord's option, to the last assignee of Tenant's interest hereunder, at the
expiration of the term of this Lease and after Tenant as vacated the Premises;
provided, however, that if Tenant exercises its early termination right under
Section 2.1(b) hereof, Landlord shall retain (and have no obligation to return
to Tenant) Thirteen Thousand and No/100 Dollars ($13,000.00) of the Security
Deposit as reimbursement for the cost of the walk-in refrigerator listed in
Exhibit C-1 hereto. In the event of termination of Landlord's interest in this
Lease, Landlord shall transfer all deposits then held by Landlord under this
Section to Landlord's successor in interest, whereupon Tenant agrees to release
Landlord from all liability for the return of such deposit or the accounting
thereof.
(b) On or before the first day of the seventh (7th) month after
the Commencement Date, unless Tenant has theretofore exercised Tenant's early
termination right under Section 2.1(b) hereof, Tenant shall deliver to Landlord
(and shall thereafter maintain in favor of Landlord during the remainder of the
first forty-two (42) months of term of this Lease) an irrevocable standby letter
of credit (i) issued in favor of Landlord by a federally chartered commercial
bank or trust company that has met or exceeded applicable regulatory capital
requirements and that is approved in writing by Landlord (which approval shall
not be unreasonably withheld) and (ii) satisfying the conditions described in
subparagraph (c) below (the "Letter of Credit"), to be held by Landlord as
additional security for the performance of Tenant's obligations under this
Lease. The amount of such Letter of Credit shall be Eighty-Two Thousand Five
Hundred and No/100 Dollars ($82,500.00) from the issuance date until the date
thirty (30) months after the Commencement Date, then (provided that Tenant is
not then in default under this Lease) may be reduced to Fifty-Five Thousand and
No/100 Dollars ($55,000.00) during months 31-36 after the Commencement Date,
may be reduced to Forty-One Thousand Two Hundred Fifty and No/100 Dollars
($41,250.00) during months 37-42 after the Commencement Date, and may be
revoked and withdrawn entirely after the date forty-two (42) months after the
Commencement Date. Notwithstanding the foregoing provisions of this paragraph
(b), however, if the cost of Landlord's improvements under Section 2.4 and
Exhibit C (excluding any matters not chargeable against the tenant improvement
allowance under Exhibit C) exceeds or is less than One Hundred One Thousand Six
Hundred Twenty-Five and No/100 Dollars ($101,625.00) for any reason, including
(but not limited to) (i) changes requested by Tenant that increase the cost of
such work or (ii) an increase in the size of Premises because of Tenant's
exercise of its rights under Section 1.3 of this Lease, then each of the
foregoing required amounts for the Letter of Credit shall be multiplied by a
fraction, the numerator of which is the aggregate cost of such improvements
made by Landlord and the denominator of which is $101,625.00.
(c) The Letter of Credit shall be unconditional, except for the
following conditions:
<PAGE> 27
(i) It may be drawn upon at sight by a draft
referring to such Letter of Credit presented at the offices of the issuer,
accompanied by the original Letter of Credit and by the statement required under
clause (iii) below;
(ii) It shall be subject to the Uniform Customs and
Practices for Documentary Credits (1983 Revision), International Chamber of
Commerce Publication [ILLEGIBLE] 400, and any subsequent amendments thereof;
(iii) It may recite that it is issued in connection
with this Lease and shall provide that any draft against such Letter of Credit
must be accompanied by a written statement, signed by an authorized agent of
Landlord, reading as follows: "The undersigned certifies that pursuant to the
terms of that certain Lease dated as of February 6, 1992, between Hall
Properties, Inc. as Landlord and Ribogene, Inc. as Tenant, as the same may be
amended from time to time, the undersigned Landlord is entitled to draw against
and receive the proceeds of [or a specified portion of the proceeds of] the
Letter of Credit submitted herewith";
(iv) It shall provide that it may be drawn against in
whole or in part, and that in the event of a draft for less than the full amount
of the Letter of Credit, a new Letter of Credit shall be issued in the amount of
the remaining balance of the funds available under the surrendered Letter of
Credit and otherwise in compliance with all of the terms and conditions of this
paragraph; and
(v) Subject to the effect of subparagraph (e)(i)
below, it shall provide for an expiration date which shall not be earlier than
forty-three (43) months after the estimated Commencement Date.
(d) Landlord shall be entitled to draw against the Letter
of Credit and receive proceeds thereof if Tenant defaults with respect to any
provisions of this Lease including, but not limited to, the provisions relating
to the payment of rent. Landlord may (but shall not be required to) draw on the
Letter of Credit for the payment of any rent or any other sum in default, or
for the payment of any amount which Landlord may spend or become obligated to
spend by reason of Tenant's default, or to compensate Landlord for any other
loss or damage which Landlord may suffer by reason of Tenant's default.
(e) Landlord shall also be entitled to draw against the
Letter of Credit and receive the proceeds thereof under any of the following
circumstances:
(i) If the Letter of Credit in effect from time to
time (the "current Letter of Credit") will expire sooner than forty-three (43)
months after the Commencement Date and Tenant fails to provide to Landlord a
replacement Letter of Credit satisfying all of the terms and conditions hereof
at least twenty (20) days prior to the expiration date of the current Letter of
Credit;
(ii) If Landlord notifies Tenant that Landlord
intends to transfer its interest in the premises covered by this Lease and
Tenant fails to provide to Landlord, within fifteen (15) business days after
such notice, either (A) written confirmation by the issuer of the Letter of
Credit that Landlord's proposed transferee may be substituted in place of
Landlord as a party entitled to draw against and receive the proceeds of the
Letter of Credit or (B) a written commitment by the issuer to issue, upon
Landlord's surrender of the current Letter of Credit, a replacement Letter of
Credit in favor of Landlord's proposed transferee and otherwise identical in
form and substance to the current Letter of Credit; or
(iii) If Landlord has drawn against the Letter of
Credit in part and Tenant has failed (despite the requirements of this Section
16.1) to furnish to Landlord, within five (5) days after written demand by
Landlord (as contemplated in paragraph (f) below), a further Letter of Credit
and/or cash in an amount equal to the amount drawn by Landlord and otherwise
satisfying all of the terms and conditions hereof, so that Landlord will
continue to hold cash and/or Letters of Credit in an aggregate amount at least
equal to the amount of the Letter of Credit required to be maintained hereunder.
(f) If Landlord draws against the Letter of Credit in any
of the circumstances described in paragraph (e) above, Landlord shall use,
apply and/or retain
<PAGE> 28
all or any part of the amount drawn for the payment of any amount in default
at, or subsequent to, the time of the draw. Any amount drawn that is not
immediately used or applied by Landlord shall be retained by Landlord as an
additional cash Security Deposit on the same terms set forth in paragraph (a)
hereof. Tenant agrees that upon any use or application by Landlord of all or
any portion of such Security Deposit to cure, or compensate Landlord for, any
default by Tenant (as contemplated in this paragraph (f) or in paragraph (d)
above), Tenant shall promptly (and in all events within five (5) days after
written demand from Landlord) furnish to Landlord an additional security
deposit, in the form of cash or a Letter of Credit satisfying the conditions
set forth in paragraph (c) above or a combination of the two, in an amount such
that Landlord continues to hold an aggregate Security Deposit of at least the
aggregate minimum amounts then required to be maintained under paragraphs (a)
and (b) hereof.
(g) Landlord agrees to reimburse Tenant, within fifteen (15) days
after written demand by Tenant accompanied by appropriate supporting
documentation for the amounts claimed, for all origination fees, maintenance
charges and similar fees or costs paid by Tenant to the issuing bank from time
to time as costs of establishing and maintaining the Letter of Credit in
accordance with this Section 16.1.
17. MISCELLANEOUS
17.1 Notices. All notices, consents, waivers and other communications
which this Lease requires or permits either party to give to the other shall be
in writing and shall be deemed given when delivered personally (including
delivery by private courier or express delivery service) or four (4) days after
deposit in the United States mail, registered or certified mail, postage
prepaid, return receipt requested, addressed to the parties at their respective
addresses as follows:
To Tenant: (until Commencement Date)
Ribogene, Inc.
3603 Haven Avenue, Suite D
Menlo Park, CA 94025
Attn: Pam Versaw
(after Commencement Date)
Ribogene, Inc.
21375 Cabot Boulevard
Britannia Business Center, Building B
Hayward, CA 94545
Attn: Pam Versaw
with copy to: Wilson, Sonsini, Goodrich & Rosati
Two Palo Alto Square
Palo Alto CA 94306
Attn: Michael W. Hall, Esq.
To Landlord: Hall Properties, Inc.
c/o Heron Financial Corporation
510 West 6th Street
Suite 917
Los Angeles, CA 9014
Attn: Robert W. Allbright
with copy to: Folger & Levin
Embarcadero Center West
275 Battery Street, 23rd Floor
San Francisco CA 94111
Attn: Donald E. Kelley, Jr.
or to such other address as may be contained in a notice at least fifteen (15)
days prior to the address change from either party to the other given pursuant
to this Section. Rental payments and other sums required by this Lease to be
paid by Tenant shall be delivered to Landlord at Landlord's address provided in
this Section, or to such other
<PAGE> 29
address as Landlord may from time to time specify in writing to Tenant, and
shall be deemed to be paid only upon actual receipt.
17.2 Successors And Assigns. The obligations of this Lease shall run
with the land, and this Lease shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns, except that the
original Landlord named herein and each successive Landlord under this Lease
shall be liable only for obligations accruing during the period of its
ownership of the Property, said liability terminating upon termination of such
ownership and passing to the successor lessor.
17.3 No Waiver. The failure of Landlord to seek redress for violation,
or to insist upon the strict performance, of any covenant or condition of this
Lease shall not be deemed a waiver of such violation, or prevent a subsequent
act which would originally have constituted a violation from having all the
force and effect of an original violation.
17.4 Severability. If any provision of this Lease or the application
thereof is held to be invalid or unenforceable, the remainder of this Lease or
the application of such provision to persons or circumstances other than those
as to which it is invalid or unenforceable shall not be affected thereby, and
each of the provisions of this Lease shall be valid and enforceable, unless
enforcement of this Lease as so invalidated would be unreasonable or grossly
inequitable under all the circumstances or would materially frustrate the
purposes of this Lease.
17.5 Litigation Between Parties. In the event of any litigation between
the parties hereto growing out of this Lease, the prevailing party shall be
reimbursed for all reasonable costs, including, but not limited to, reasonable
accountants' fees and attorneys' fees. "Prevailing party" within the meaning of
this Section shall include, without limitation, a party who dismisses an action
for recovery hereunder in exchange for payment of the sums allegedly due,
performance of covenants allegedly breached or consideration substantially
equal to the relief sought in the action.
17.6 Surrender. A voluntary or other surrender of this Lease by Tenant,
or a mutual termination thereof between Landlord and Tenant, shall not result
in a merger but shall, at the option of Landlord, operate either as an
assignment to Landlord of any and all existing subleases and subtenancies, or a
termination of all or any existing subleases and subtenancies. This provision
shall be contained in any and all assignments or subleases made pursuant to
this Lease.
17.7 Construction. The provisions of this Lease shall be construed as a
whole according to their common meaning and not strictly for or against
Landlord or Tenant. The captions preceding the text of each Section and
subsection hereof are included only for convenience of reference and shall be
disregarded in the construction or interpretation of this Lease.
17.8 Entire Agreement. This written Lease, together with the exhibits
hereto, contains all the representations and the entire understandings between
the parties hereto with respect to the subject matter hereof. Any prior
correspondence, memoranda or agreements are replaced in total by this Lease and
the exhibits hereto. This Lease may be modified only by an agreement in writing
signed by each of the parties.
17.9 Governing Law. This Lease and all exhibits hereto shall be
construed and interpreted in accordance with and be governed by all the
provisions of the laws of the State of California.
17.10 No Partnership. Nothing contained in this Lease shall be construed
as creating any type or manner of partnership, joint venture or joint
enterprise with or between Landlord and Tenant.
17.11 Financial Information. Solely in connection with Landlord's sale
or refinancing of the Center or the Building or in connection with the sale or
reorganization of Landlord's business or assets, from time to time Tenant shall
promptly provide directly to prospective lenders, purchasers or investors
designated by Landlord such financial information pertaining to the financial
status of Tenant as Landlord may reasonably request; provided, Tenant shall be
permitted to provide such financial information in a manner which Tenant deems
reasonably necessary to protect the confidentiality of such
<PAGE> 30
information, and all recipients of such financial information, including but
not limited to Landlord, shall hold such financial information in the strictest
confidence and fully compensate Tenant for any damages resulting from any breach
of such confidentiality. Landlord agrees that all financial information
supplied to Landlord by Tenant shall be treated as confidential material, and
shall not be disseminated to any party or entity (including any entity
affiliated with Landlord) other than the prospective lenders, purchasers or
investors for use it has been requested without Tenant's prior written consent.
For purposes of this Section, without limiting the generality of the
obligations provided herein, it shall be deemed reasonable for Landlord to
request copies of Tenant's most recent audited annual financial statements, or,
if audited statements have not been prepared, unaudited financial statements
for Tenant's most recent fiscal year, accompanied by a certificate of Tenant's
chief financial officer that such financial statements fairly present Tenant's
financial condition as of the date(s) indicated.
Landlord and Tenant recognize the need of Tenant to maintain the
confidentiality of information regarding its financial status and the need of
Landlord to be informed of, and to provide to prospective lenders and
purchasers of the Premises, financial information pertaining to Tenant's
financial status. Landlord and Tenant agree to cooperate with each other in
achieving these needs within the context of the obligations set forth in this
Section.
17.12. Costs. If Tenant requests the consent of Landlord under any
provision of this Lease for any act that Tenant proposes to do hereunder,
including, without limitation, assignment or subletting of the Premises, Tenant
shall, as a condition to doing any such act and the receipt of such consent,
reimburse Landlord promptly for any and all reasonable costs and expenses
incurred by Landlord in connection therewith, including, without limitation,
reasonable attorneys' fees.
17.13. Time. Time is of the essence of this Lease, and of every term
and condition hereof.
17.14. Rules And Regulations. Tenant shall observe and obey such
rules and regulations as Landlord may promulgate from time to time for the
safety, care, cleanliness, order and use of the Premises and the Building;
provided, however, Tenant shall not be required to comply with any rule or
regulation unless the same applies non-discriminatorily to all occupants of the
Center and the Building and does not unreasonably interfere with Tenant's use
of the Premises or Tenant's parking rights.
17.15. Brokers. Landlord agrees to pay a one-half (1/2) brokerage
commission to Cushman & Wakefield of California, Inc. and a full brokerage
commission to Blickman Turkus, at the times and rates established in Landlord's
existing separate agreement with Cushman & Wakefield of California, Inc., in
connection with the consummation of this Lease. Tenant represents and warrants
that no other broker participated in the consummation of this Lease and agrees
to indemnify, defend and hold Landlord harmless against any liability, cost or
expense, including, without limitation, reasonable attorneys' fees, arising out
of claims or brokerage commissions in connection with conversations, prior
negotiations or other dealings by Tenant with any other broker.
17.16. Memorandum Of Lease. At any time during the term of this
Lease, either party, at its sole expense, shall be entitled to record a
memorandum of this Lease and, if either party so elects, both parties agree to
cooperate in the preparation, execution, acknowledgement and recordation of
such document in reasonable form.
17.17. Corporate Authority. Each person signing this Lease warrants
that he or she is fully authorized to do so and, by so doing, to bind the
entity for which he or she is signing. As evidence of such authority, the
parties shall deliver to each other, upon or prior to execution of this Lease,
a certified copy of a resolution of their respective board of directors
authorizing the execution of this Lease and naming the officer that is
authorized to execute this Lease on behalf of such party.
17.18. Approvals. Whenever this Lease requires an approval, consent,
designation, determination or judgment by either Landlord or Tenant, such
approval, consent, designation, determination or judgment (including, without
limiting the generality of the foregoing, those required in connection with
assignment and subletting) shall not be unreasonably withheld or delayed and in
exercising any right or remedy hereunder, each party shall at all times act
reasonably and in good faith.
<PAGE> 31
17.19 Reasonable Expenditures. Any expenditure by a party permitted
or required under this Lease, for which such party is entitled to demand and
does demand reimbursement from the other party, shall be limited to the fair
market value of the goods and services involved, shall be reasonably incurred,
and shall be substantiated by documentary evidence available for inspection and
review by the other party or its representatives during normal business hours
and on reasonable advance notice, provided that such right of Inspection and
review is exercised not later than sixty (60) days after the party incurring
the expense has requested reimbursement.
IN WITNESS WHEREOF, the parties hereto have executed this Lease
as of the day and year first set forth above.
"Landlord" "Tenant"
HALL PROPERTIES, INC., an RIBOGENE,INC., a California
Arizona corporation corporation
By: [SIG] By: [SIG]
----------------------------- -----------------------------
Its: President Its: President/CEO 2/7/9?
----------------------------- ----------------------------
<PAGE> 32
EXHIBITS
EXHIBIT A Location of Premises
EXHIBIT B Real Property Description
EXHIBIT C Construction
EXHIBIT C-1 Schedule of Existing Laboratory Equipment and
Systems
EXHIBIT D Acknowledgement of Lease Commencement
<PAGE> 33
EXHIBIT A
Ribogene Premises
20,325 s.f.
[FLOOR PLAN DIAGRAM]
<PAGE> 34
EXHIBIT B
REAL PROPERTY DESCRIPTION
Improved real property located in the City of Hayward, County of Alameda, State
of California, more particularly described as follows:
Lot 2, Tract 3640, filed July 22, 1977, Map Book 96, page 13, Alameda County
Records.
<PAGE> 35
EXHIBIT C
CONSTRUCTION
Landlord, at its sole cost and expense, shall undertake and diligently
complete, subject to delays for causes beyond its reasonable control, leasehold
improvements to the Initial Premises in accordance with plans and
specifications to be prepared by Landlord, subject to approval by Tenant, which
approval shall not be unreasonably withheld or delayed. Such work shall be
performed in a neat and workmanlike manner by a contractor selected by Landlord
and approved by Tenant (which approval shall not be unreasonably withheld or
delayed), and shall conform to all applicable governmental codes, laws and
regulations in force at the time such work is completed.
Landlord's work pursuant to Section 2.4 and this Exhibit C shall be
performed only after Tenant's early termination right under Section 2.1(b) of
the Lease has been waived by Tenant or has expired unexercised, and after
Tenant has provided to Landlord the letter of credit required under Section
16.1(b) of the Lease. Such work shall consist of improvements to be designed
and constructed in accordance with the preceding paragraph and subject to the
tenant improvement allowance limitations set forth in the following paragraph.
Landlord has agreed to provide a maximum allowance of Five Dollars
($5.00) per square foot ($101,625 total) for the work in the initial Premises
pursuant to Section 2.4 and this Exhibit C. Any greater or lesser costs
relating to changes requested by Tenant to such work shall result in a rental
adjustment pursuant to Section 3.1(c) of this Lease. In addition to this
specified allowance, Landlord has agreed to provide up to an additional Three
and No/100 Dollars ($3.00) per square foot, if necessary, for tenant
improvement work in the initial Premises, subject to rental adjustments in
accordance with the preceding sentence; provided, that under no circumstances
shall Landlord be required to provide or spend more than the specified
allowance plus such additional $3.00 per square foot for such improvements,
unless Landlord in its sole discretion elects and agrees to do so.
Attached hereto as Exhibit C-1 and incorporated herein by this
reference is a schedule of certain existing laboratory equipment and systems
affixed to or located in the Initial Premises, all of which shall be left in
place by Landlord, for use by Tenant, as part of the leasehold improvements,
during the term of this Lease. All such equipment and systems shall remain the
property of the Landlord and shall be left in place by Tenant, in the
condition required under Section 8.2(c) of this Lease, at the expiration of the
term of this Lease.
Landlord represents and warrants that (a) the equipment listed in
Exhibit C-1 and (b) the electrical, plumbing, HVAC and sprinkler and other
operating systems ("Building Systems") in the Premises are in good working
order and that to the extent any additional work is necessary to place such
equipment or systems in good working order at the commencement of Tenant's
occupancy of the Premises, the cost of such work shall be borne solely by
Landlord and shall not be charged against the tenant improvement allowance, it
being further understood, however, that if the work under this Exhibit C
includes the installation of new portions of the Building Systems not presently
in existence, the cost of such new portions will be charged against the tenant
improvement allowance in the same manner as other work is to be charged
hereunder.
The scope of Tenant's "punch list" rights under Section 2.4 of the
Lease shall be as follows:
Tenant may object to (within the permitted time periods), and Landlord
shall be required to correct, any defects in the work required to be performed
by Landlord under this Exhibit C including (but not limited to) any respect in
which such work is not in accordance with approved plans and specifications,
was not performed in a first class and workmanlike manner or does not conform
to applicable governmental codes, laws and regulations.
<PAGE> 36
RIBOGENE PREMISES
Equipment Test Laboratory Areas (see attached sketch)
LAB. I Permalab Fume Hood
Model H-804-X Quantity (2)
Misc. floor-mounted cabinets
with two sinks
LAB. II Permalab Fume Hoods
Model H-804-X Quantity (1)
Model H-854-X Quantity (1)
Misc. floor-mounted cabinets
with two sinks
LAB. III Misc. floor-mounted cabinets
with sink
LAB. IV Permalab Fume Hoods
Model H-854-X Quantity (2)
Model H-804-X Quantity (1)
Misc. floor-mounted cabinets
with sink
LAB. V Permalab Fume Hood
Model H-804-X Quantity (1)
Misc. floor-mounted cabinets
LUNCH ROOM Misc. floor-mounted cabinet
with sink
LAB. VI Permalab Fume Hoods
No model number Quantity (2)
Misc. floor-mounted cabinets
with sink
AB. VII Permalab Fume Hoods
Model H-854-X Quantity (3)
No model number Quantity (1)
Floor-to-ceiling Fume Hoods
No model number Quantity (4)
Misc. floor-mounted cabinets
One cabinet with sink
REAR AREA Walk-in refrigerator as existing
EXHIBIT C-1 (page 1)
<PAGE> 37
EXHIBIT C-1
[FLOOR PLAN]
<PAGE> 38
ACKNOWLEDGEMENT OF LEASE COMMENCEMENT
This Acknowledgement is executed as of _______________, 1992, by HALL
PROPERTIES, INC., an Arizona corporation ("Landlord"), and RIBOGENE, INC., a
_______________ corporation ("Tenant"), pursuant to Section 2.5 of the Lease
dated February __, 1992 between Landlord and Tenant (the "Lease") covering
premises located at 21375 Cabot Boulevard, Hayward, California (the "Premises").
Landlord and Tenant hereby acknowledge and agree as follows:
1. The Commencement Date under the Lease is ______________, 19__.
2. The termination date under the Lease shall be ______________, 19__,
subject to any applicable provisions of the Lease for extension or early
termination thereof.
3. Tenant accepts the Premises and acknowledges the satisfactory completion
of all improvements therein (if any) required to be made by Landlord, subject
only to any applicable "punch list" or similar procedures specifically provided
under the Lease.
EXECUTED as of the date first set forth above.
"Landlord" "Tenant"
HALL PROPERTIES, INC., an RIBOGENE, INC., a California
Arizona corporation corporation
By: By:
------------------------- -----------------------------
Its: Its:
------------------------- -----------------------------
<PAGE> 39
FIRST AMENDMENT TO RIBOGENE LEASE
THIS FIRST AMENDMENT TO RIBOGENE LEASE ("Amendment") is executed as of
____________ , 1993, between Hall Properties, Inc., an Arizona corporation
("Landlord"), and Ribogene, Inc., a California corporation ("Tenant"), with
reference to the following facts:
A. Landlord and Tenant are parties to a Lease dated as of February
6, 1992 (the "Lease"), covering approximately 20,325 square feet of space
commonly known as 21375 Cabot Boulevard, Hayward, California (the "Premises").
Capitalized terms used in this Amendment and not otherwise defined shall have
the meaning given in the Lease.
B. Landlord has contracted to sell the Property and the
improvements thereon (including the Premises) to Robert Man Tsang Chang and
Susan Van Change (collectively, "Buyers"). This Amendment is to be delivered
through escrow on the closing of the sale to Buyers.
C. Under conditions specified in Section 2.4 and Exhibit C of the
Lease, Landlord was to construct tenant improvements (the "Improvements") and
fund such Improvements through a tenant improvement allowance (the
"Allowance"). As of the date of this Amendment, the Improvements have not been
constructed and the Allowance therefore has not been spent.
D. Tenant has determined that it does not wish to have the
Improvements constructed and Landlord has agreed, pursuant to Section 3.1(c) of
the Lease, to reduce Tenant's rent in accordance with the terms of this
Amendment.
NOW, THEREFORE, in consideration of the mutual covenants and obligations
contained herein, Landlord and Tenant agree as follows:
1. Improvements Not to be Constructed. Notwithstanding any contrary
term of the Lease, Landlord and Tenant agree that Landlord shall have no
obligation to construct the Improvements or to fund the Allowance.
2. Adjustment to Rent. In satisfaction of the adjustment
provisions in Section 3.1(c) of the Lease, the minimum rental amount payable by
Tenant under Section 3.1 of the Lease shall be reduced by $2,886.26 per month
from the date of this Amendment until the end of the term of this Lease.
Accordingly, the minimum rental amounts specified in Section 3.1(a) of the
Lease shall be modified as follows:
<PAGE> 40
<TABLE>
<CAPTION>
Month Minimum Rental
----- --------------
<S> <C>
Amendment Date -- Month 36 $ 7,276.24
Months 37-48 8,292.49
Months 49-60 (expiration) 10,324.99
</TABLE>
If the date of this Amendment is other than the first day of a calendar month,
minimum rental for the partial calendar month following the date of this
Amendment shall be prorated based on the number of days during such partial
calendar month. After giving effect to the rental adjustment provided in this
Paragraph 2, the terms of Section 3.1(c) of the Lease shall be of no further
force or effect.
3. Letter of Credit. The parties acknowledge that Tenant has not
provided the letter of credit specified in Section 16.1(b) of the Lease, and
agree that, notwithstanding any contrary term of the Lease, Tenant shall have
no obligation to provide such a letter of credit and Sections 16.1(b) through
(g) of the Lease shall be of no further force or effect.
4. Effective on Closing Date. This Amendment is to be delivered and
take effect only on the date that a deed conveying the Property to Buyers is
delivered (through recordation) by Landlord (the "Closing Date"), which Closing
Date shall be inserted in the first paragraph of this Amendment by the escrow
holder who records such deed; provided that in no event shall this Amendment be
delivered or take effect if the Closing Date does not occur on or before
November 30, 1993.
5. Lease Remains In Effect. Subject only to the provisions of this
Amendment, the Lease has not been modified or amended and remains in full force
and effect.
IN WITNESS WHEREOF, Landlord and Tenant have executed and delivered
this Amendment as of the Closing Date.
"Landlord" "Tenant"
HALL PROPERTIES, INC., an RIBOGENE, INC., a
Arizona corporation California corporation
By: [SIG] By: [SIG]
----------------------------- ---------------------------
Its: Executive Vice President Its:
----------------------------- ---------------------------
-2-
<PAGE> 41
October 27, 1993
In connection with the Lease Agreement dated February 6, 1992 between Hall
Properties, Inc., an Arizona corporation ("Landlord") and Ribogene, Inc., a
California corporation ("Tenant"), this letter will confirm the following:
1. Ribogene, Inc. waived its option of first refusal per Section 1.3 of the
lease, thereby allowing Bianchi USA, Inc. to occupy the space;
2. Ribogene's option to terminate the lease upon the first anniversary of the
commencement date, per Section 2.1(b) of lease was not exercised; and
3. The amount of the security deposit held by the Landlord per Section 16.1(a)
of the lease is $10,162,50. There is no letter of credit required as a
security deposit per Section 16.1(b) of the lease as "the aggregate cost of
such improvements made by Landlord" is zero ($0).
AGREED BY:
HALL PROPERTIES, INC., an Arizona corporation
By: [SIG]
------------------------------------------
Its: Executive Vice President
-----------------------------------------
Date: 11/1/93
----------------------------------------
RIBOGENE, INC., a California corporation
By: [SIG]
------------------------------------------
Its: President
-----------------------------------------
Date: 10/29/93
----------------------------------------
<PAGE> 1
Exhibit 10.18
RIBOGENE, INC.
PLACEMENT AGENCY AGREEMENT
Paramount Capital, Inc.
375 Park Avenue
Suite 1501
New York, New York 10152
Dear Sirs:
RiboGene, Inc., a California corporation (the "Company"), hereby
confirms its agreement to retain Paramount Capital, Inc. (the "Placement
Agent") on an exclusive basis to introduce the Company to and to procure
subscriptions of Units (the "Units") of the Company from certain "accredited
investors" (as defined in Regulation D under the Securities Act of 1933, as
amended) as prospective purchasers (the "Purchasers") of a minimum of 1,333,333
Units (the "Minimum Offering") and a maximum of 2,666,666 Units (the "Maximum
Offering"), with an option in favor of the Placement Agent, subject to the
Company's prior consent, to offer up to an additional 1,777,777 Units to cover
over-allotments, at a purchase price of $2.25 per Unit, with each Unit
consisting of (a) one share of Series F Convertible Premium Preferred Stock
(the "Preferred Stock"), no par value, of the Company and (b) one Class A
warrant to purchase one share of Common Stock at an exercise price equal to the
lesser of (x) $2.25 and (y) the effective per share price of the Common Stock
sold in the Qualified IPO (as defined below) (taking into account stock splits
and similar events), subject to adjustment, exercisable for a period of 6 years
from the date of issuance (the "Warrants"). The Preferred Stock and the
Warrants shall have the terms set forth in the Term Sheet (as defined below).
The sale to such purchasers (the "Offering") will be made through a
private placement by the Placement Agent (or its designated selected dealers
which will be bound by agreements substantially the same as contained herein for
the Placement Agent) on a "best efforts" basis pursuant to a Confidential
Private Placement Memorandum dated the date thereof, and all supplements,
amendments and exhibits thereto, all of which constitute an integral part
thereof (the "Memorandum"), separate purchase agreements and related documents
(the "Subscription Agreements") in accordance with Section 4(2) of the
Securities Act of 1933, as amended (the "Securities Act") and Regulation D
promulgated thereunder.
The Memorandum, the Subscription Agreements, the exhibits to the
Subscription Agreements, the Investors Rights Agreement, the Amended and
Restated Articles of Incorporation (the "Restated Articles") setting forth the
terms of the Preferred Stock, the agreements setting forth the terms of the
Warrants (collectively with the Warrants, the "Warrant Agreements"), the
Warrants, the Escrow Agreement, dated ____________ , 1996 (the "Escrow
Agreement"), the Financial Advisory Agreement (as defined in Section 5(k)
below), the Placement Warrants (as defined in Section 4(d) below), the
<PAGE> 2
Paramount Capital
Page 2
Advisory Warrants (as defined in Section 5(j) below) and this Placement Agency
Agreement, are collectively referred to herein as the "Offering Documents."
The Company, at its sole cost, shall prepare and deliver to the
Placement Agent a reasonable number of copies of the Offering Documents in form
and substance satisfactory to the Placement Agent.
Each prospective investor subscribing to purchase Units shall be
required to deliver, among other things, a Subscription Agreement, which shall
include a Confidential Investor Questionnaire ("Questionnaire"). The Company
shall make available to each prospective purchaser at a reasonable time prior
to the purchase of the Units the opportunity to ask questions of and receive
answers from the Company concerning the terms and conditions of the Offering
and the opportunity to obtain additional information necessary to verify the
accuracy of the documents delivered in connection with the purchase of the
Units to the extent it possesses such information or can acquire it without
unreasonable effort or expense. After the Offering Documents have been reviewed
by investors, and they have had the opportunity to address all inquiries to the
Company, separate Subscription Agreements shall be completed by each
prospective investor. The Company, in good faith and the Placement Agent, in
its sole discretion, shall have the right to reject subscriptions in whole or
in part. The Company shall evidence its acceptance of a subscription by
countersigning a copy of the applicable Subscription Agreement and returning
the same to the Placement Agent.
Capitalized terms used herein, unless otherwise defined or unless the
contest otherwise indicates, shall have the same meanings provided in the
Offering Documents.
1. Appointment of Placement Agent.
(a) You are hereby appointed exclusive placement agent of
the Company (subject to your right to have Selected Dealers, as defined in
Section 1(c) hereof, participate in the Offering) during the Offering Period
herein specified for the purposes of assisting the Company in finding qualified
Subscribers pursuant to the Offering described in the Offering Documents. You
shall not be deemed an agent of the Company for any other purpose. The Offering
Period shall commence on the day (the "Commencement Date") the Offering
Documents are first made available to you by the Company for delivery in
connection with the offering for sale of the Units. Upon receipt of the Minimum
Offering amount, the Placement Agent may conduct a closing (the "Initial
Closing Date") and may conduct subsequent closings on an interim basis until
the Maximum Offering amount (and any over-allotment amount) has been reached
(the "Final Closing Date"). The Offering Period shall terminate at 11:59 p.m.
New York City time on the date sixty (60) days following the Commencement Date,
subject to an extension, upon the mutual agreement of the Company and the
Placement Agent, for an additional sixty (60) days.
(b) Subject to the performance by the Company of all of its
obligations to be performed under this Agreement and to the completion and
accuracy
<PAGE> 3
Paramount Capital
Page 3
of all representations and warranties of the Company contained in this
Agreement, the Placement Agent hereby accepts such agency and agrees to use its
best efforts to assist the Company in finding qualified subscribers pursuant to
the Offering described in the Offering Documents. It is understood that the
Placement Agent has no commitment to sell the Units. Your agency hereunder is
not terminable by the Company except upon termination of the Offering Period.
(c) You may engage other persons, selected by you in your
discretion, that are members of the National Association of Securities Dealers,
Inc., ("NASD") or who are located outside the United States and that have
executed a Selected Dealers Agreement to assist you in the Offering (each such
person being hereinafter referred to as a "Selected Dealer") and you may allow
such persons such part of the compensation and payment of expenses payable to
you hereunder as you shall determine.
(d) Subscriptions for Units shall be evidenced by the
execution by Subscribers of a Subscription Agreement. No Subscription Agreement
shall be effective unless and until it is accepted by the Company. Until a
closing is held, all subscription funds received shall be held as described in
the Subscription Agreement. The Placement Agent shall not have any independent
obligation to verify the accuracy or completeness of any information contained
in any Subscription Agreement or the authenticity, sufficiency, or validity of
any check delivered by any prospective investor in payment for Units.
2. Representations and Warranties of the Company. The Company
represents and warrants to the Placement Agent and each Selected Dealer, if
any, as follows, except as set forth on the Schedule of Exceptions attached
hereto as Exhibit C:
(a) Securities Law Compliance. The Offering Documents, as of
their respective dates, do and will, as of the date of the Memorandum and the
Closing, describe the material aspects of an investment in the Company in
accordance with the terms of the Offering and conform in all respects with the
requirements of Section 4(2) of the Securities Act and Regulation D promulgated
thereunder and with the requirements of all other published rules and
regulations of the Securities and Exchange Commission (the "Commission")
currently in effect relating to "private offerings" to "accredited investors"
of the type contemplated by the Company. The Offering Documents will not as of
the date of the Memorandum and the Closing contain an untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. If at any time prior to the completion of the Offering or other
termination of this Agreement any event shall occur as a result of which it
might become necessary to amend or supplement the Offering Documents so that
they do not include any untrue statement of any material fact or omit to state
any material fact necessary in order to make the statements therein, in the
light of the circumstances then existing, not misleading, the Company will
promptly notify the Placement Agent and will supply the Placement Agent (or the
prospective purchasers designated by the Placement Agent) with amendments or
supplements correcting such statement or omission. The Company will also
provide the Placement Agent for delivery
<PAGE> 4
Paramount Capital
Page 4
to all offerees and purchasers and their representatives, if any, any
information, documents and instruments which the Placement Agent and the
Company's counsel reasonably deem necessary to comply with applicable state and
federal law.
The Company acknowledges that the Placement Agent (i) has not supplied
any information for inclusion in the Offering Documents other than information
furnished in writing to the Company or its legal counsel by the Placement Agent
specifically for inclusion in the Offering Documents; (ii) has no obligation to
independently verify any of the information in the Offering Documents; and
(iii) has no responsibility for the accuracy or completeness of the Offering
Document other than written information relating to the Placement Agent
furnished by the Placement Agent to the Company or its legal counsel.
(b) Organization. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
California and has all requisite corporate power and authority to own and lease
its properties, to carry on its business as currently conducted and as proposed
to be conducted, to execute and deliver this Agreement and to carry out the
transactions contemplated by this Agreement, as appropriate and is duly
licensed or qualified to do business as a foreign corporation in each
jurisdiction in which the conduct of its business or ownership or leasing of
its properties requires it to be so qualified, except where the failure to be
so qualified would not have a material adverse effect on the business,
financial condition or prospects of the Company.
(c) Capitalization. The authorized, issued and outstanding
capital stock of the Company prior to the consummation of the transactions
contemplated hereby is as set forth in the Offering Documents. All issued and
outstanding shares of the Company are validly issued, fully paid and
nonassessable and have not been issued in violation of the preemptive rights of
any shareholder of the Company. The Preferred Stock has the rights, preferences
and privileges substantially as set forth in the Form of Restated Articles
attached as Exhibit A to the Memorandum. The Warrants have the terms
substantially as set forth in Exhibit B of the Memorandum. All prior sales of
securities of the Company were either registered under the Act and applicable
state securities laws or exempt from such registration, and no security holder
has any rescission rights with respect thereto. Except as set forth in the
Memorandum, there are no outstanding options, warrants, agreements, convertible
securities, preemptive rights or other rights to subscribe for or to purchase
any shares of capital stock of the Company. Except as set forth in the
Memorandum and as otherwise required by law, there are no restrictions upon the
voting or transfer of any shares of the Company's capital stock pursuant to the
Company's Articles of Incorporation, By-Laws or other governing documents or
any agreement or other instruments to which the Company is a party or by which
the Company is bound.
(d) Warrants, Preemptive Rights, Etc. Except as set forth in
or contemplated by the Memorandum, there are not, nor will there be immediately
after the Closing (as hereinafter defined), and outstanding warrants, options,
agreements, convertible securities, rights of first refusal, rights of first
offer, preemptive rights or other rights to subscribe for or to purchase or
other commitments pursuant to which the Company is, or may become, obligated to
issue any shares of its capital stock or other
<PAGE> 5
Paramount Capital
Page 5
securities of the Company. Except as set forth in the Memorandum, this Offering
will not cause any anti-dilution adjustments to any outstanding securities or
commitments of the Company.
(e) Subsidiaries and Investments. The Company has no
subsidiaries and the Company does not own, directly or indirectly, any capital
stock or other equity ownership or proprietary interests in any other
corporation, association, trust, partnership, joint venture or other entity.
(f) Financial Statements. The financial information
contained in the Offering Documents is accurate in all material respects. The
Company's financial statements have been prepared in conformity with generally
accepted accounting principles consistently applied (except that unaudited
financial statements may not contain all footnotes required by generally
accepted accounting principles) and show all material liabilities, absolute or
contingent, of the Company required to be recorded thereon and present fairly
the financial position and results of operations of the Company as of the dates
and for the periods indicated.
(g) Absence of Changes. Since the date of the Memorandum,
except as has been or will be reflected in the Memorandum prior to Closing, the
Company has not incurred any liabilities or obligations, direct or contingent,
not in the ordinary course of business, or entered into any transaction not in
the ordinary course of business, which is material to the business of the
Company, and there has not been any change in the capital stock of, or any
incurrence of long-term debt by, the Company, or any issuance of options,
warrants or other rights to purchase the capital stock of the Company, or any
adverse change or any development involving, so far as the Company can now
reasonably foresee, a prospective adverse change in the condition (financial or
otherwise), net worth, results of operations, business, key personnel or
properties which would be material to the business or financial condition of
the Company, and the Company has not become a party to, and neither the business
nor the property of the Company has become the subject of, any material
litigation whether or not in the ordinary course of business.
(h) Title. The Company has good and marketable title to all
tangible properties and assets owned by it, free and clear of all liens,
charges, encumbrances or restrictions, except such as are not materially
significant or important in relation to the Company's business; all of
the material leases and subleases under which the Company is the lessor or
sublessor of properties or assets or under which the Company holds properties
or assets as lessee or sublessee are in full force and effect, and the Company
is not in default in any material respect with respect to any of the terms or
provisions of any of such leases or subleases, and no material claim has been
asserted by anyone adverse to rights of the Company as lessor, sublessor,
lessee or sublessee under any of the leases or subleases mentioned above, or
affecting or questioning the right of the Company to continued possession of
the leased or subleased premises or assets under any such lease or sublease.
The Company owns or leases all such tangible properties as are necessary to its
operations as now conducted and to be conducted, as presently planned.
<PAGE> 6
Paramount Capital
Page 6
(i) Proprietary Rights. Except as has been or will be
reflected in the Memorandum prior to Closing, the Company owns or possesses
adequate and enforceable rights to use all patents, patent applications,
trademarks, service marks, trade names, corporate names, copyrights, trade
secrets, processes, mask works, licenses, inventions, formulations, technology
or know-how or other intangible property used or proposed to be used in the
conduct of its business as described in or contemplated by the Memorandum (the
"Proprietary Rights"). Except as has been or will be reflected in the
Memorandum prior to Closing, the Company or the entities from whom the Company
has acquired rights has taken all necessary action to protect all of its
Proprietary Rights. Except as set forth in the Memorandum, the Company has not
received any notice of, and there are not any facts known to the Company which
indicate the existence of (i) any infringement or misappropriation by any third
party of any of the Proprietary Rights or (ii) any claim by a third party
contesting the validity of any of the Proprietary Rights; the Company has not
received any notice of any infringement, misappropriation or violation by the
Company or any of its employees of any Proprietary Rights of third parties,
and, to the best of the Company's knowledge, the Company nor any of its
employees has infringed, misappropriated or otherwise violated any Proprietary
Rights of any third parties; and, to the best of the Company's knowledge, no
infringement, illicit copying, misappropriation or violation of any
intellectual property rights of any third party has occurred or will occur with
respect to any products currently being sold by the Company or with respect to
any products currently under development by the Company or with respect to the
conduct of the Company's business as currently contemplated. Except as
described in the Memorandum, the Company is not aware that any of its employees
are obligated under any contract (including licenses, covenants or commitments
of any nature) or other agreement, or subject to any judgment, decree or order
of any court or administrative agency, that would interfere with the use of
the employee's best efforts to promote the interests of the Company or that
would conflict with the Company's business as proposed to be conducted. To the
best of the Company's knowledge, neither the execution nor delivery of this
Agreement, nor the carrying on of the Company's business by the employees of
the Company, nor the conduct of the Company's business, as proposed, will
conflict with or result in a breach of the terms, conditions or provisions of,
or constitute a default under, any contract, covenant or instrument under which
any such employee is now obligated.
(j) Litigation. Except as set forth in the Memorandum, there
is no action, suit, claim or proceeding at law or in equity, or to the
Company's knowledge, investigation or customer complaint, by or before any
arbitrator, governmental instrumentality or other agency now pending or, to the
knowledge of the Company, threatened against the Company (or basis therefor
known to the Company which the Company believes will result in the foregoing).
The Company is not subject to any judgment, order, writ, injunction or decree
of any Federal, state, municipal or other governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign which would
materially adversely affect the Company's business or prospects.
(k) Non-Defaults; Non-Contravention. The Company is not in
violation of or default under, nor will the execution and delivery of this
Agreement or any
<PAGE> 7
Paramount Capital
Page 7
of the Offering Documents, or consummation of the transactions contemplated
herein or therein result in a violation of or constitute a default in the
performance or observance of any obligation (i) under its Articles of
Incorporation, or its By-laws, or any indenture, mortgage, contract, material
purchase order or other agreement or instrument to which the Company is a party
or by which it or its property is bound or affected or (ii) with respect to any
material order, writ, injunction or decree of any court of any Federal, state,
municipal or other governmental department, commission, board, bureau, agency
or instrumentality, domestic or foreign, and there is no existing condition,
event or act which constitutes, nor which after notice, the lapse of time or
both, could constitute a default under any of the foregoing, which in either
case would have a material adverse effect on the business, financial condition
or prospects of the Company.
(l) Taxes. The Company has filed all Federal, state, local and
foreign tax returns which are required to be filed by it and all such returns
are true and correct in all material respects. The Company has paid all taxes
pursuant to such returns or pursuant to any assessments received by it or which
it is obligated to withhold from amounts owning to any employee, creditor or
third party. The Company has properly accrued all taxes required to be
accrued. The tax returns of the Company have never been audited by any state,
local or Federal authorities. The Company has not waived any statute of
limitations with respect to taxes or agreed to any extension of time with
respect to any tax assessment or deficiency.
(m) Compliance With Laws, Licenses, Etc. The Company has not
received notice of any violation of or noncompliance with any Federal, state,
local or foreign, laws, ordinances, regulations and orders applicable to its
business which has not been cured, the violation of, or noncompliance with
which, would have a materially adverse effect on the business or operations of
the Company. The Company has all governmental licenses and permits and other
governmental certificates, authorizations and permits and approvals
(collectively, "Licenses") required by every Federal, state and local government
or regulatory body for the operation of its business as currently conducted and
the use of its properties, except where the failure to be licensed would not
have a material adverse effect on the business of the Company. The Licenses are
in full force and effect and no violations are or have been recorded in respect
of any License and no proceeding is pending or threatened to revoke or limit any
thereof.
(n) Authorization of Documents and Units. Each of the Offering
Documents, has been duly and validly authorized, and, when executed and
delivered by the Company, will be duly and validly executed and delivered and
the execution, delivery and performance by the Company of the Offering
Documents, has been duly authorized by all requisite corporate action by the
Company and when delivered, constitute or will constitute the legal, valid and
binding obligations of the Company, enforceable in accordance with their
respective terms, subject to the availability and enforceability of equitable
remedies and to applicable bankruptcy and other laws relating to the rights of
creditors generally and except as the enforcement of the rights to
indemnification and contribution hereunder and under any other Offering
Documents may be limited by federal
<PAGE> 8
Paramount Capital
Page 8
or state securities laws or public policy. The Corporation has full power and
lawful authority to authorize, issue and sell the Units to be sold to the
Purchasers.
(o) Exemption from Registration. Assuming (i) the accuracy of the
information provided by the respective Purchasers in the Subscription
Agreements, (ii) that the Placement Agent has complied in all material respects
with the provisions of Regulation D promulgated under the Securities Act and
(iii) the timely filing of a Form D by the Company, the offer and sale of the
Units and the granting of the Placement and Advisory Warrants pursuant to the
terms of this Agreement are exempt from the registration requirements of the
Securities Act and the rules and regulations promulgated thereunder (the
"Regulations"). The Company is not disqualified from the exemption under
Regulation D by virtue of the disqualifications contained in Rule 505(b)(2)(iii)
or Rule 507 promulgated thereunder.
(p) Registration Rights. Except with respect to holders of the Units,
and except as set forth in the Memorandum or disclosed to the Placement Agent
in writing, no person has any right to cause the Company to effect the
registration under the Securities Act of any securities of the Company.
(q) Brokers. Neither the Company nor any of its officers, directors,
employees or stockholders has employed any broker or finder in connection with
the transactions contemplated by this Agreement other than the Placement Agent.
(r) Title to Units. When certificates representing the Preferred Stock
shall have been duly delivered to the purchasers and payment shall have been
made therefor, the several purchasers shall have good and marketable title to
the Preferred Stock, and, upon conversion of such Preferred Stock, will have
good and marketable title to the Common Stock issuable upon such conversion (the
"Conversion Shares"), free and clear of all liens, encumbrances and claims
whatsoever (with the exception of claims arising through the acts of the
purchasers and except as arising from applicable Federal and state securities
laws), and the Company shall have paid all taxes, if any, in respect of the
original issuance thereof. When certificates representing the Warrants shall
have been duly delivered to the purchasers and payment shall have been made
therefor, the several purchasers shall have good and marketable title to the
Warrants, and upon exercise of such Warrants and payment of the exercise price
therefor, will have good and marketable title to the Common Stock issuable upon
such exercise (the "Warrant Shares"), free and clear of all liens, encumbrances
and claims whatsoever (with the exception of claims arising through the acts of
the purchasers and except as arising from applicable Federal and state
securities laws), and the Company shall have paid all taxes, if any, in respect
of the original issuance thereof. When certificates representing the Placement
and Advisory Warrants shall have been duly delivered to the Placement Agent, the
Placement Agent shall have good and marketable title to the Placement and
Advisory Warrants, and upon exercise of such Placement and Advisory Warrants
and payment of the exercise price therefor, will have good and marketable title
to the Preferred Stock and Common Stock issuable upon such exercise, and upon
conversion of the Preferred Stock acquired upon exercise of the Placement and
Advisory Warrants, will have good and marketable title to
<PAGE> 9
Paramount Capital
Page 9
the Common Stock into which such Preferred Stock is converted, free and clear of
all liens, encumbrances and claims whatsoever (with the exception of claims
arising through the acts of the purchasers and except as arising from applicable
Federal and state securities laws), and the Company shall have paid all the
taxes, if any, in respect of the original issuance thereof.
(s) Non-Affiliated Directors. The Company's Board of Directors
has not less than two directors who are independent from, and unaffiliated with,
management of the Company.
(t) Exchange Act Reports. The Company is not and has not, at any
time, been required to file reports under the Securities Act of 1934 (the
"Exchange Act") and has not filed any such reports.
3. Representations and Warranties of Paramount Capital, Inc. The
Placement Agent represents and warrants as follows:
(a) The Placement Agent is duly organized and validly existing
and in good standing as a corporation under the laws of the State of New
York with full and adequate power and authority to enter into and perform this
Agreement.
(b) In offering the Units, the Placement Agency will deliver (or
direct the Company to deliver) to each prospective purchaser, prior to the
Company's acceptance of any subscription from such prospective purchaser, the
appropriate Offering Documents. The Placement Agent will not engage in a
general solicitation or employ general advertising in connection with the
Offering.
(c) The Placement Agent will use its best efforts to conduct
the Offering in material compliance with applicable federal and state securities
laws so as to preserve the exemption provided in Section 4(2) of the Act and any
applicable rules or regulations promulgated thereunder or under such state
securities laws. The final acceptance of any subscription shall be made only
after the Company has reviewed the Subscription Agreement and agreed to such
final acceptance.
(d) The Placement Agent is, and at each closing will be,
(i) a securities broker-dealer registered with the Commission and any
jurisdiction where broker-dealer registration is required in order for the
Company to sell the Units in such jurisdiction and (ii) a member in good
standing of the National Association of Securities Dealers, Inc. ("NASD").
4. Closing; Placement and Fees.
(a) Closing. Provided that the Placement Agency has received
subscriptions for the Minimum Offering amount, the Placement Agent may conduct,
in its sole discretion, closings (each a "Closing Date") at the offices of the
Placement Agent, 787 Seventh Avenue, New York, N.Y., until the Final Closing
Date. At each Closing
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Date, payment for the Units issued and sold by the Company shall be made to the
Company in immediately available funds against delivery of certificates
evidencing the Preferred Stock and Warrants comprising such Units.
(b) Conditions to Placement Agent's Obligations. The
obligations of the Placement Agent hereunder will be subject to the accuracy of
the representations and warranties of the Company herein contained as of the
date hereof and as of each Closing Date, to the performance by the Company of
its obligations hereunder and to the following additional conditions:
(i) Due Qualification or Exemption. (A) The
Offering contemplated by this Agreement will become qualified or be exempt from
qualification under the securities laws of the several states pursuant to
paragraph 4(c) below not later than the Closing Date, subject to any filings to
be made thereafter, and (B) at the Closing Date no stop order suspending the
sale of the Units shall have been issued, and no proceeding for that purpose
shall have been initiated or threatened;
(ii) No Material Misstatements. Neither the Blue
Sky qualification materials nor the Memorandum, nor any supplement thereto,
will contain an untrue statement of a fact which in the opinion of the
Placement Agent is material, or omit to state a fact, which in the opinion of
the Placement Agent is material and is required to be stated therein, or is
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading;
(iii) Compliance with Agreements. The Company will
have complied with all agreements and satisfied all conditions on its part to
be performed or satisfied hereunder and under the Subscription Agreements at or
prior to each Closing;
(iv) Corporate Action. The Company will have taken
all necessary corporate action, including, without limitation, obtaining the
approval of the Company's board of directors, for the execution and delivery of
the Offering Documents, the performance by the Company of its obligations
hereunder and the offering contemplated hereby;
(v) Opinions of Counsel to the Company. The
Placement Agent shall receive the opinion of counsel to the Company (stating
that each of the Purchasers may rely thereon as though addressed directly to
such Purchaser), dated as of each Closing Date, substantially to the effect
that:
(A) the Company is duly organized and is
validly existing and in corporate good standing under the laws of the State of
California, has all requisite corporate power and authority necessary to own or
hold its properties and conduct its business as described in the Memorandum and
is duly qualified or licensed to do business as a foreign corporation and is in
good standing in each jurisdiction in which the nature of the business
conducted, or as proposed to be conducted in the Memorandum, by it or the
properties owned, leased or operated by it, makes such qualification or
licensing
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necessary or where the failure to be so qualified or licensed would have a
material adverse effect upon the Company. Except as set forth on the Schedule of
Exceptions to the Subscription Agreement, the Company has no subsidiaries and
the Company does not own, directly or indirectly, any capital stock or other
equity ownership or proprietary interests in any other corporation, association,
trust, partnership, joint venture or other entity;
(B) the execution, delivery and performance of each of
the Offering Documents, including the issuance of the Units, the Warrants, the
Placement and Advisory Warrants, and all securities underlying the foregoing,
have been duly authorized by all necessary corporate action on the part of the
Company. Each of the Offering Documents delivered at such Closing has been duly
executed and delivered by the Company and constitutes a legal, valid and binding
obligation of the Company enforceable in accordance with its terms, except as
such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application relating to or
affecting enforcement of creditors' rights and the application of equitable
principles in any action, legal or equitable, and except as rights to indemnity
or contribution may be limited by applicable law.
(C) the authorized, issued and outstanding capital
stock of the Company as of the date hereof (before giving effect to the
transactions contemplated by this Agreement) is as set forth in the Offering
Documents. To such counsel's best knowledge, there are no outstanding warrants,
options, agreements, convertible securities, preemptive rights or other
commitments to which the Company is, or may become, obligated to issue any
shares of its capital stock or other securities of the Company other than as set
forth in the Memorandum. All of the issued shares of capital stock of the
Company have been duly and validly authorized and issued, are fully paid and
nonassessable and have not been issued in violation of the preemptive rights of
any security holder of the Company to the best knowledge of such counsel;
(D) assuming (x) the accuracy of the information
provided by the Subscribers in the Subscription Documents, (y) that the
Placement Agent has complied in all material respects with the requirements of
section 4(2) of the Securities Act (and the provisions of Regulation D
promulgated thereunder) and (z) the timely filing with the Securities and
Exchange Commission of a Form D and amendments thereto containing accurate and
complete information, the issuance and sale of the Units is exempt from
registration under the Securities Act and Rule 506 of Regulation D promulgated
thereunder;
(E) neither the execution and delivery of the Offering
Documents nor compliance with the terms hereof or thereof, nor the consummation
of the transactions herein or therein contemplated, has, nor will, conflict
with, result in a breach of, or constitute a default under the Articles of
Incorporation or By-laws of the Company, or any material contract, instrument or
document known to such counsel and to which the Company is a party, or by which
it or any of its properties is bound or violate any applicable order or decree
of any governmental agency or court
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having jurisdiction over the Company or any of its properties or business
naming the Company;
(F) to the best knowledge of such counsel, there are
no claims, actions, suits, investigations or proceedings before or by any
arbitrator, court, governmental authority or instrumentality pending or
threatened against the Company which might materially and adversely affect the
business, properties or financial condition of the Company or which might
materially adversely affect the transactions or other acts contemplated by the
Offering Documents or the validity or enforceability of the Offering Documents,
except as set forth in or contemplated by the Offering Documents. Except as
disclosed in the Offering Documents, no such counsel's best knowledge, the
Company is not a party or subject to the provisions of any order, writ,
injunction, judgment or decree of any court or government agency or
instrumentality naming the Company;
(G) upon the issuance of the Preferred Stock, the
Conversion Shares, the Warrants and the Warrant Shares, the Placement and
Advisory Warrants and, upon exercise of the Placement and Advisory Warrants,
all securities underlying the Placement and Advisory Warrants, assuming payment
of the exercise price therefor, each of the purchasers and the Placement Agent,
as the case may be, shall acquire such securities, free and clear of all
pledges, liens, claims, encumbrances, preemptive rights, rights of first offer
or right of first refusal and restrictions, to such counsel's best knowledge,
and imposed by or through the Company, except for the transfer restrictions set
forth in the Subscription Agreements and the Memorandum and any action taken to
encumber such securities by the holder itself;
(H) the Preferred Stock, the Warrants, the Placement
and Advisory Warrants and all securities underlying the Placement and Advisory
Warrants have been duly authorized and all securities underlying the Placement
and Advisory Warrants have been duly and validly reserved for issuance and,
upon issuance in accordance with the terms of the Offering Documents, such
instruments and the Restated Articles (as applicable), will be validly issued
and, with respect to capital stock issued at the Closing, fully paid and
non-assessable;
(I) the Conversion Shares and the Warrant Shares will
be duly authorized when issued and, assuming the current conversion rate of the
Preferred Stock and the current exercise price of the Warrants, are reserved
for future issuance and, upon issuance in accordance with the terms of the
Preferred Stock and the Warrants, will be validly issued, fully paid and
non-assessable;
(J) in course of the preparation of the Offering
Documents, which involved, among other things, discussions and inquiries
concerning the various legal matters and the review of certain corporate
records, documents and proceedings, counsel participated in conferences with
certain officers and other representatives of the Company and the Placement
Agent during which the contents of the Offering Documents and related matters
were discussed. On the basis of the information
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which was developed in the course thereof, such counsel shall advise the
Placement Agent in the form of an opinion of counsel that such counsel has no
reason to believe that as of the date of the Final Closing, the Memorandum
contained an untrue statement of a material fact relating to the Company or
omitted to state a material fact relating to the Company required to be stated
therein or necessary to make the statements therein not misleading in the light
of the circumstances under which they were made.
(vi) Opinion of Patent Counsel. The Placement Agent shall
receive the opinion of Petrie & Edmonds, patent counsel to the Company, dated
the Final Closing Date in the form and substance satisfactory to counsel for
the Placement Agent.
(vii) Opinion of Regulatory Counsel. The Placement Agent
shall receive the opinion of Hyman, Phelps & McNamara, regulatory counsel to
the Company, dated the Final Closing Date, in form and substance satisfactory
to counsel for the Placement Agent.
(viii) Comfort Letter. The Company shall cause the Company's
independent public accountants to address and deliver to the Company and the
Placement Agent a letter or letters (which letters are frequently referred to
as "Comfort Letters") dated as of the Closing Date and the effective date of
the registration statement required to be filed in connection with the
Subscription Agreements.
(ix) Officer's Certificate. The Placement Agent shall receive
an Officer's Certificate substantially in the form of Exhibit A hereto and a
Secretary's Certificate substantially in the form of Exhibit B hereto, signed
by the appropriate parties and dated as of each Closing Date. These
certificates shall state, among other things, that the representations and
warranties contained in Section 2 hereof are true and accurate in all material
respects at such Closing Date with the same effect as though expressly made at
such Closing Date.
(x) Escrow Agreement. The Placement Agent shall receive a
copy of a duly executed Escrow Agreement with Fleet Bank, N.A.
(xi) Transmittal Letters. The Placement Agent shall receive
copies of all letters from the Company to the investors transmitting the
Preferred Stock and Warrants and shall receive a letter from the Company
confirming transmittal of the securities to the investors.
(xii) Anti-Dilution Waivers. Other than with respect to
adjustments specifically set forth in the Memorandum, the Company shall have
obtained from all existing security holders agreements waiving any
anti-dilution protection they have in connection with (i) the issuance of the
Units and (ii) any reset to the conversion price of the Preferred Stock,
which such agreement shall be provided to the Placement Agent and shall be
satisfactory to the Placement Agent, in its sole discretion.
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(c) Blue Sky. A summary blue sky survey, at the sole cost of the
Company (including, without limitation, the legal fees and disbursements in
connection therewith), shall be prepared by counsel to the Placement Agent
stating the extent to which and the conditions upon which offers and sales of
the Units may be made in certain jurisdictions. It is understood that such
survey may be based on or rely upon (i) the representations of each Subscriber
set forth in the Subscription Agreement delivered by such Subscriber, (ii) the
representations, warranties and agreements of the Company set forth in Section 2
of this Agreement, (iii) the representations and warranties of the Placement
Agent, and (iv) the representations of the Company set forth in the certificate
to be delivered at the Closing pursuant to paragraph (iii) of Section 3(b).
(d) Placement Fee and Expenses. Simultaneously with payment for
and delivery of the Units at each Closing as provided in paragraph 4(a) above,
the Company shall at such Closing pay to the Placement Agent (i) a commission
(the "Cash Commission") equal to nine percent (9%) of the aggregate purchase
price of the Units sold and (ii) a non-accountable expense allowance (the
"Expense Allowance") equal to four percent (4%) of the aggregate purchase price
of the Units sold. The Company shall also pay all expenses (including attorney's
fees) in connection with the qualification of the Units under the securities or
Blue Sky laws of the states which the Placement Agency shall designate. In
addition, upon the closing of the sale of the Units being offered, the Company
will sell to the Placement Agency and/or its designees, for $.001 per warrant,
(i) warrants (the "Preferred Stock Placement Warrants") to acquire additional
shares of Preferred Stock equal to 10% of the Preferred Stock issued in the
Offering exercisable for a period of ten years commencing six months after the
Final Closing Date at an exercise price equal to 110% of the Initial Offering
Price and (ii) additional Warrants to purchase a number of newly issued shares
of Common Stock equal to 10% of the Common Stock issuable upon exercise of the
Class A Warrants issued in the Offering exercisable for a period of ten years
commencing six months after the Final Closing Date at an exercise price equal
to the exercise price of the Class A Warrants (including any adjustments
thereto) (the "Common Stock Placement Warrants" and, collectively with the
Preferred Stock Placement Warrants, the "Placement Warrants"). The Placement
Warrants shall contain a cashless exercise feature, antidilution provisions and
the right to have the securities underlying such warrants included on the Shelf
Registration Statement. The securities underlying the Placement Warrants will
not be subject to redemption by the Company. The Placement Warrants may not be
transferred, sold, assigned or hypothecated for six months except that they may
be assigned in whole or in part during such period to any NASD member
participating in the Offering or any officer or employee of the Placement Agent
or any such NASD member. In addition to the foregoing, the Company will pay the
Placement Agent a commission of 5% upon the exercise of any of the Warrants
(excluding the Placement and Advisory Warrants). Any out-of-pocket costs
incurred by the Placement Agent in connection with the solicitation of Warrant
exercises or the redemption of Warrants shall be borne by the Company.
(iv) The Cash Commission, Expense Allowance and
Placement and Advisory Warrants as set forth in this Agreement shall be paid to
the Placement Agent with respect to any investment by any investors ("Covered
Investors")
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introduced to the Company by the Placement Agent in the event that any such
Covered Investor purchases securities from the Company in a private placement
during the twelve (12) months following the Closing Date of the Offering.
(e) No Adverse Changes. There shall not have occurred, at any time
prior to the closing (i) any domestic or international event, act or occurrence
which has materially disrupted, or in the Placement Agent's opinion will in the
immediate future materially disrupt, the securities markets; (ii) a general
suspension of, or a general limitation on prices for, trading in securities on
the New York Stock Exchange or the American Stock Exchange or in the
over-the-counter market; (iii) any outbreak of major hostilities or other
national or international calamity; (iv) any banking moratorium declared by a
state or federal authority; (v) any moratorium declared in foreign exchange
trading by major international banks or other persons; (vi) any material
interruption in the mail service or other means of communication within the
United States; (vii) any material adverse change in the business, properties,
assets, results of operations, or financial condition of the Company; or (viii)
any change in the market for securities in general or in political, financial,
or economic conditions which, in the Placement Agent's reasonable judgment,
makes it inadvisable to proceed with the offering, sale, and delivery of the
Units.
5. Covenants of the Company.
(a) Use of Proceeds. The net proceeds of the Offering will be used
by the Company substantially as set forth in the Memorandum.
(b) Expenses of Offering. The Company shall be responsible for and
shall bear all directly expenses incurred in connection with the proposed
Offering, including but not limited to, the costs of preparing the duplicating
the Memorandum and all exhibits thereto; preparing, duplicating and delivering
exhibits thereto and copies of the preliminary, final and supplemental
prospectus; the costs of preparing, printing and filing with the Securities and
Exchange Commission (the "SEC") the Shelf Registration Statement and amendments,
post-effective amendments and supplements thereto; preparing, duplicating and
delivering exhibits thereto and copies of the preliminary, final and
supplemental prospectus; preparing, duplicating and delivering all selling
documents, including but not limited to the Placement Agency Agreement,
Subscription Agreements, Warrant agreements, the Placement Warrants, the
Advisory Warrants, blue sky memorandum and stock and warrant certificates; blue
sky fees, filing fees and legal fees and disbursements of the Placement Agent's
counsel in connection with blue sky matters; fees and disbursements of the
transfer and warrant agent; the cost of a total of two sets of bound closing
volumes for the Placement Agent and its counsel; and the cost of one tombstone
advertisement, which shall be in a national business newspaper or a major New
York newspaper (collectively, the "Company Expenses"). The Company shall pay to
the Placement Agent a non-accountable expense allowance equal to 4% of the total
proceeds of the Offering (the "Expense Allowance"), of which $20,000 has already
been paid, to cover the cost of our mailing, telephone, telegraph, travel, due
diligence meetings and other similar expenses including legal fees of our
counsel (other than legal fees in
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connection with blue sky matters as to which fees the Company shall be
responsible). Such prepaid expense allowances shall be non-refundable. If the
proposed financing is not completed because the Company prevents it or because
of a breach by the Company of any covenants, representations or warranties
contained herein, the Company shall pay to the Placement Agency a fee of
$100,000 (in addition to the Company Expenses for which the Company shall in all
events remain liable).
(c) Notification. The Company shall notify the Placement Agent
immediately, and in writing, (A) when any event shall have occurred during the
period commencing on the date hereof and ending on the later of the Closing or
the Final Closing Date as a result of which the Offering Documents would include
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances under which they were made and (B) of
the receipt of any notification with respect to the modification, rescission,
withdrawal or suspension of the qualification or registration of the Units and
the Warrants, or of any exemption from such registration or qualification, in
any jurisdiction. The Company will use its best efforts to prevent the issuance
of any such modification, rescission, withdrawal or suspension and, if any such
modification, rescission, withdrawal or suspension is issued and you so request,
to obtain the lifting thereof as promptly as possible.
(d) Blue Sky. The Company will use its best efforts to qualify
the Units for offering and sale under exemptions from qualification or
registration requirements under the securities or "blue sky" laws of such
jurisdictions as the Placement Agency may reasonably request; provided however,
that the Company will not be obligated to qualify as a dealer in securities in
any jurisdiction in which it is not so qualified. The Company will not
consummate any sale of Units in any jurisdiction in which it is not so qualified
or in any manner in which such sale may not be lawfully made.
(e) Registration Statement Filing. No later than the date which
is 270 days after the initial underwritten public offering of the Common Stock
of the Company pursuant to an effective registration statement under the
Securities Act in which gross proceeds to the Company exceed $7,500,000 (a
"Qualified IPO"), the Company shall (i) file a shelf registration statement (the
"Shelf Registration Statement") with respect to (a) the Common Stock issuable
upon conversion of the Preferred Stock and exercise of the Warrants, (b) the
Warrants and (c) the Common Stock underlying the Placement and Advisory Warrants
the ("Registrable Capital Stock"), with the Commission and use its best efforts
to have such Shelf Registration Statement declared effective by the SEC and (ii)
cause such Shelf Registration Statement to remain effective until such date as
the holders of the securities have completed the distribution described in the
Shelf Registration Statement, or at such time that such shares are no longer, by
reason of Rule 144(k) under the Securities Act, required to be registered for
the sale thereof by such holders.
(f) Form D Filing. The Company shall file five copies of a
Notice of Sales of Securities on Form D with the Commission no later than 15
days after the first Closing Date. The Company shall file promptly such
amendments to such Notices
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on Form D as shall become necessary and shall also comply with any filing
requirement imposed by the laws of any state or jurisdiction in which offers
and sales are made. The Company shall furnish the Placement Agent with copies
of all such filings.
(g) Press Releases, Publicity, Etc. Except as otherwise required by
applicable law, the Company shall not, during the period commencing on the date
hereof and ending thirty days after the Final Closing Date, issue any press
release or other communication, or hold any press conference with respect to
the Company, its financial condition, results of operations, business,
properties, assets or liabilities, or the Offering, without the prior written
consent of the Placement Agent, which consent shall not be unreasonably
withheld, except upon the advice of counsel in which case the Company shall
deliver to the Placement Agent a copy of such press release prior to
publication.
(h) Public Documents. Following the Final Closing Date of the
Offering, for any periods in which the Company is required to make any such
filings, the Company will furnish to the Placement Agent: (i) as soon as
practicable (but in the case of the annual report of the Company to its
stockholders, within 120 days after the and of each fiscal year of the Company)
one copy of: (A) its annual report to its stockholders (which annual report
shall contain financial statements audited in accordance with generally
accepted accounting principles in the United States of America by a firm of
certified public accountants of recognized standing), (B) if not included in
substance in its annual report to stockholders, its annual report on Form 10-K,
(C) each of its quarterly reports to its stockholders, and if not included in
substance in its quarterly reports to stockholders, its quarterly report on
Form 10-Q, (D) each of its current reports on Form 8-K, and (E) a copy of the
full Shelf Registration Statement, (the foregoing, in each case, excluding
exhibits); and (ii) upon reasonable request, all exhibits excluded by the
parenthetical to the immediately preceding clause 5(h)(I)(E) and all other
information that is generally available to the public. In addition, the Company
upon reasonable request will meet with the Placement Agent or its
representatives to discuss all information relevant for disclosure in any Shelf
Registration Statement covering shares purchased by purchasers from the Company
and offered by them for resale and will cooperate in any reasonable
investigation undertaken by the Placement Agent for the purpose of confirming
the accuracy of the Shelf Registration Statement, including the production of
information at the Company's offices.
(i) Restrictions on Securities. During the three years following the
Closing of the Offering, the Company shall not, without the prior written
consent of the Placement Agent, offer or sell any of its securities in reliance
on Regulation S of the Securities Act. Following the completion of the Offering
and until the Qualified IPO, the Company will not extend the expiration date or
decrease the exercise price of any options (other than stock options issued
pursuant to the Company's stock option plans) or warrants or other similar
security purchase rights without the prior written consent of the Placement
Agent.
(j) Financial Advisory Agreement. Upon the Final Closing Date, the
Company and the Placement Agent will enter into an advisory agreement (the
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"Financial Advisory Agreement") whereby the Placement Agent will act as the
Company's non-exclusive financial advisor. Such engagement will provide that
the Placement Agent receive (i) a monthly retainer of $4,000 (minimum
engagement of 24 months), (ii)(a) warrants (the "Preferred Stock Advisory
Warrants"), at a purchase price of $.001 per warrant, to acquire additional
shares of Preferred Stock equal to 15% of the Preferred Stock issued in the
Offering exercisable for a period of ten years commencing six months after the
Final Closing Date at an exercise price equal to 110% of the Initial Offering
Price and (b) additional Warrants (the "Common Stock Advisory Warrants") to
purchase a number of newly issued shares of Common Stock equal to 15% of the
Common Stock issuable upon exercise of the Class A Warrants issued in the
Offering, (iii) out-of-pocket expenses and (iv) standard success fees. The
Preferred Stock Advisory Warrants and the Common Stock Advisory Warrants are
collectively referred to herein as the Advisory Warrants. The Advisory
Warrants will contain a cashless exercise feature, antidilution provisions and
the right to have the securities underlying the Advisory Warrants included on
the Shelf Registration Statement and shall otherwise have identical terms to
the Placement Warrants.
(k) Directors and Observers. (i) For a period of five years after the
Initial Closing Date, the Placement Agent shall be entitled to propose one
person for nomination as a voting director ("Director") of the Company. It
shall be a condition to the Initial Closing that such nominee have been
appointed or elected to the Board of Directors and the Company will use its
best efforts to ensure that the stockholders of the Company agree to vote all
their securities in favor of such person's continued election during such
five-year period. The Company agrees to vote all voting securities for which
the Company holds proxies granting it voting discretion, or which the Company
is otherwise entitled to vote, in favor of, and to use its best efforts in all
respect to cause, the election of each such individual proposed by the
Placement Agent. In the event that a vacancy is created on the Board of
Directors at any time by the death, disability, resignation or removal (with or
without cause) of any such individual proposed, and nominated by the Placement
Agent pursuant to this Agreement, the Company will, and will use its best
efforts to ensure that the stockholders of the Company, vote all its or their
voting securities to elect each individual proposed by the Placement Agent and
nominated for election by the Placement Agent to fill such vacancy and serve as
a voting Director. If, after the election of the Director nominated by the
Placement Agent noted above and at any time while such Director remains on the
Board of Directors of the Company, such Director is unable to attend or
otherwise participate in any specific meeting of the Board of Directors, such
Director may designate an observer to attend a such meeting in his place. The
observer shall be entitled to the benefit of, and shall be bound by, the
provisions set forth below in section (ii).
(i) At the Placement Agent's option, in lieu of proposing for
nomination and election a Director of the Company to be proposed by the
Placement Agent as set forth in Section 5(k)(i), the Placement Agent may, for a
period of five years after the Initial Closing Date, designate a nonvoting
observer who shall be entitled to attend all meetings of the Board of Directors
and any of its committees and who shall be (i) provided reasonable prior notice
of all meetings of the Board of Directors and any of its committees, (ii)
provided reasonable prior notice of any action that the Board of Directors or
any of its
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committees may take by written consent (iii) promptly delivered copies of all
minutes and other records of action by, and all written information furnished
to, the Board of Directors or any of its committees and (iv) promptly furnished
any other information requested by such observer or observers which a member of
the Board of Directors would be entitled to request to discharge his or her
duties provided, however, that the Company reserves the right to exclude such
representative from access to any meeting or portion thereof, or any
information provided to directors if the Company reasonably believes based upon
a written opinion of counsel that such exclusion is reasonably necessary to
preserve attorney-client privilege or confidentiality. Such observers shall be
entitled to the same rights to reimbursement for the expense of attendance at
meetings as any outside Director.
(iii) If the Placement Agent gives notice to the Company that
the Placement Agent desires to remove a Director proposed by the Placement
Agent pursuant to this Agreement, the Company shall, and shall use its best
effort to ensure that the stockholders of the Company shall, vote all its or
their voting securities in favor of removing such Director if a vote of holders
of such securities shall be required to remove the Director, and the Company
agrees to take any action necessary to facilitate such removal.
(iv) Each Director nominated by the Placement Agent shall be
entitled to the same type of compensation, and an amount of compensation at
least equal to the highest amount, payable to any other director for serving in
such capacity. In addition, the Company shall promptly reimburse each director
or observer of the Company designated by the Placement Agent who is not an
employee of the Company for all of his reasonable expenses incurred in
attending each meeting of the Board of Directors of the Company or any
committee thereof.
(v) It shall be a condition to the Initial Closing that the
Company shall have (A) caused the appointment of the initial Director nominated
by the Placement Agent to its Board of Directors in accordance with the
provisions of this Section 5(k), which individual shall be identified in
writing to the Company by such time, and (B) taken such action as shall be
necessary to obtain the resignations of two of its current board members.
(vi) The Company shall at all times maintain provisions in
its By-laws and/or Articles of Incorporation indemnifying all directors against
liability and absolving all directors from liability to the Company and its
stockholders to the maximum extent permitted under the laws of the State of
California.
(vii) The By-laws of the Company shall always contain
provisions consistent with the provisions of this Section 5(k)(vi) except to
the extent Section 5(k)(vi) deals with the possible observers.
(viii) The Company shall use its best efforts to cause the
appointment or election of one independent (non-investor or management)
director to the Board of Directors, who shall be reasonably acceptable to the
Placement Agent. During the two year period following the Offering, the Company
shall hold meetings of the Board of Directors at least semi-annually in New
York City.
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(l) No Offerings. Pending completion or termination of the
Offering in accordance with the terms of this Agreement, the Company agrees
that it will not enter into an agreement (whether binding or not) with any
other person or entity relating to a possible public or private offering or
placement of its securities (other than in connection with a corporate
partnership, strategic alliance or government funding).
6. Indemnification.
(a) The Company agrees to indemnify and hold harmless the
Placement Agent and each Selected Dealer, if any, and their respective
partners, affiliates, shareholders, directors, officers, agents, advisors,
representatives, employees, counsel and controlling persons within the meaning
of the Act (a "Paramount Indemnified Party") against any and all losses,
liabilities, claims, damages and expenses whatsoever (and all actions in
respect thereof), and to reimburse the Placement Agent for legal fees and
related expenses as incurred (including, but not limited to the costs of giving
testimony or furnishing documents in response to a subpoena or otherwise, the
costs of investigating, preparing, pursuing or defending any such action or
claim whether or not pending or threatened and whether or not the Placement
Agent or any Paramount Indemnified Party is a party thereto), in so far as such
losses, liabilities, claims, damages or expenses arise out of, relate to, are
in incurred in connection with or are in any way a result of (i) the
Engagement, including any modifications or future additions to such engagement
and related activities prior to the date hereof, (ii) any act by the Placement
Agent or any Paramount Indemnified Party taken in connection with the
Engagement, (iii) a breach of any representation, warranty, covenant, or
agreement of the Company contained in this Agreement, (iv) the employment by
the Company of any device, scheme or artifice to defraud, or the engaging by
the Company in any act, practice or course of business which operates or would
operate as a fraud or deceit, or any conspiracy with respect thereto, in
connection with the sale of the Units, or (v) any untrue statement or alleged
untrue statement of a material fact contained in the Offering Documents or the
omission or alleged omission therefrom of a material fact necessary in order to
make the statements therein, in light of the circumstances under which they
were made, not misleading, provided, however, that the Company will not be
liable in any such care if and to the extent that any such loss, claim, damage,
liability or expense arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission so made in conformity
with information furnished by any such Paramount Indemnified Party in writing
specifically for use in the Offering Documents;
(b) The Company agrees to indemnify and hold harmless a
Paramount Indemnified Party to the same extent as the foregoing indemnity, and
subject to the limitations set forth therein, against any and all loss,
liability, claim, damage and expense whatsoever directly arising out of the
exercise by any person of any right under the Securities Act or the Exchange
Act or the securities or Blue Sky laws of any state on account of violations of
the representations, warranties or agreements set forth in Section 2 hereof.
<PAGE> 21
Paramount Capital
Page 21
(c) The Placement Agent agrees to indemnify and hold harmless
the Company, the Company's directors, officers, employees and agents and
controlling persons within the meaning of the Act (a "Company Indemnified
Party") and each and all of them, to the same extent as set forth in Section
6(a)(v) of the foregoing indemnity from the Company to the Placement Agent, but
only with reference to information, relating to the Placement Agent, furnished
in writing to the Company by the Placement Agent specifically for inclusion in
the Offering Documents and only to the extent that any losses, claims,
damages, and liabilities in respect of which indemnification is claimed are
finally judicially determined to have resulted primarily and directly from the
bad faith or gross negligence of the Placement Agent.
(d) Promptly after receipt by a person entitled to
indemnification pursuant to subsection (a), (b), or (c) (an "indemnified
party") of this Section of notice of the commencement of any action, the
indemnified party will, if a claim in respect thereof is to be made against a
person granting indemnification (an "indemnifying party") under this Section,
notify in writing the indemnifying party of the commencement thereof; but the
omission so to notify the indemnifying party will not relieve it from any
liability which it may have to the indemnified party otherwise then under this
Section. In case any such action is brought against an indemnified party, and
it notifies the indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate in, and, to the extent that
it may wish, jointly with any other indemnifying party similarly notified, to
assume the defense thereof, subject to the provisions herein stated, with
counsel reasonably satisfactory to the indemnified party, and after notice from
the indemnifying party to the indemnified party of its election so to assume the
defense thereof, the indemnifying party will not be liable to the indemnified
party under this Section for any legal or other expenses subsequently incurred
by the indemnified party in connection with the defense thereof other than
reasonable costs of investigation. The indemnified party shall have the right
to employ separate counsel in any such action and to participate in the defense
thereof, but the fees and expenses of such counsel shall not be at the expense
of the indemnifying party if the indemnifying party has assumed the defense of
the action with counsel reasonably satisfactory to the indemnified party;
provided that the fees and expenses of such counsel shall be at the expense of
the indemnifying party if (i) the employment of such counsel has been
specifically authorized in writing by the indemnifying party or (ii) the named
parties to any such action (including any impleaded parties) include both the
indemnified party or parties and the indemnifying party and, in the judgment
of the indemnified party, it is advisable for the indemnified party or
parties to be represented by separate counsel in which case the indemnifying
party shall not have the right to assume the defense of such action on behalf
of the indemnified party or parties, it being understood, however, that the
indemnifying party shall not, in connection with any one such action or
separate but substantially similar or related actions in the same jurisdiction
arising out of the same general allegations or circumstances, be liable for the
reasonable fees and expenses of more than one separate firm of attorneys for
the indemnified party or parties. No settlement, compromise, consent to entry
of judgment or other termination of any action (collectively, "Terminations")
in respect of which a Paramount Indemnified Party may seek indemnification
hereunder (whether or not any Paramount Indemnified Party is a party thereto)
shall be made without the prior written
<PAGE> 22
Paramount Capital
Page 22
consent of the Paramount Indemnified Party, which such consent may be withheld
at the sole discretion of such Paramount Indemnified Party, provided, however,
that the foregoing requirement of prior written consent for Terminations shall
not apply to the Placement Agent, who may agree to such Terminations without the
prior written consent of any Paramount Indemnified Party.
(e) Notwithstanding any of the provisions of this Agreement, the
aggregate indemnification or contribution of the Placement Agent for or on
account of any losses, claims, damages, liabilities or actions under this
Section 6, Section 7 or any other applicable section of this Agreement, shall
not exceed the Selling Commissions actually paid to the Placement Agent. The
respective indemnity and contribution agreements by the Company and the
Placement Agent contained in subsections (a), (b), (c) and (d) of this Section 6
and Section 7, and the covenants, representations and warranties of the Company
and the Placement Agent set forth in Sections 1, 2, 3, 4 and 5 shall remain
operative and in full force and effect regardless of (i) any investigation made
by the Placement Agent, on the Placement Agent's behalf or by or on behalf of
any person who controls the Placement Agent, the Company or any controlling
person of the Company or any director or officer of the Company, (ii) acceptance
of any of the Units and payment therefor or (iii) any termination of this
Agreement, and shall survive the delivery of the Units, and any successor of the
Placement Agent or of the Company or of any person who controls the Placement
Agent or the Company, as the case may be, shall be entitled to the benefit of
such respective indemnity and contribution agreements. The respective indemnity
and contribution agreements by the Company and the Placement Agent contained in
subsections (a), (b) and (c) of this Section 6 and Section 7 shall be in
addition to any liability which the Company and the Placement Agent may
otherwise have.
7. Contribution.
(a) To provide for just and equitable contribution, if (i) an
indemnified party makes a claim for indemnification pursuant to Section 6 but it
is found in a final judicial determination, by a court of competent
jurisdiction, not subject to further appeal, that such indemnification may not
be enforced in such case, even though this Agreement expressly provides for
indemnification in such case, or (ii) any indemnified or indemnifying party
seeks contribution under the Securities Act, the Exchange Act, or otherwise,
then the Company (including for this purpose any contribution made by or on
behalf of any officer, director, employee or agent for the Company, or any
controlling person of the Company), on the one hand, and the Placement Agent and
any Selected Dealers (including for this purpose any contribution by or on
behalf of an indemnified party), on the other hand, shall contribute to the
losses, liabilities, claims, damages, and expenses whatsoever to which any of
them may be subject, in such proportions as are appropriate to reflect the
relative benefits received by the Company, on the one hand, and the Placement
Agent and the Selected Dealers, on the other hand provided, however, that if
applicable law does not permit such allocation, then other relevant equitable
considerations such as the relative limit of the Company and the Placement Agent
and the Selected Dealers in connection with the facts which resulted in such
losses, liabilities, claims, damages, and expenses shall also be considered. In
no case shall the Placement
<PAGE> 23
Paramount Capital
Page 23
Agent or a Selected Dealer be responsible for a portion of the contribution
obligation in excess of the compensation received by it pursuant to Section 4
hereof or any Selected Dealer Agreement, as the case may be. No person guilty of
a fraudulent misrepresentation shall be entitled to contribution from any person
who is not guilty of such fraudulent misrepresentation. For purposes of this
Section 7, each person, if any, who controls the Placement Agent or a Selected
Dealer within the meaning of Section 15 of the Securities Act or Section 20(a)
of the Exchange Act and each officer, director, stockholder, employee and agent
of the Placement Agent or a Selected Dealer, shall have the same rights to
contribution as the Placement Agent or the Selected Dealer, and each person, if
any who controls the Company within the meaning of Section 15 of the Securities
Act or Section 20(a) of the Exchange Act and each officer, director, employee
and agent of the Company, shall have the same rights to contribution as the
Company, subject in each case to the provisions of this Section 7. Anything in
this Section 7 to the contrary notwithstanding, no party shall be liable for
contribution with respect to the settlement of any claim or action effected
without its written consent. This Section 7 is intended to supersede any right
to contribution under the Securities Act, the Exchange Act, or otherwise.
8. Miscellaneous.
(a) Survival. Any termination of the Offering without any
Closing shall be without obligation on the part of any party except that the
provisions regarding fees and expenses contained in Section 5(b), the
indemnification provided in Section 6 hereof and the contribution provided in
Section 7 hereof shall survive any termination and shall survive any Closing.
(b) Representations, Warranties and Covenants to Survive
Delivery. Except as provided in Section 8(a), the respective representations,
warranties, indemnities, agreements, covenants and other statements of the
Company and the Placement Agent as of the date hereof shall survive execution of
this Agreement and delivery of the Units and the termination of this Agreement.
(c) No Other Beneficiaries. This Agreement is intended for the
sole and exclusive benefit of the parties hereto and their respective successors
and controlling persons, and no other person, firm or corporation shall have any
third-party beneficiary or other rights hereunder.
(d) Governing Law. This Agreement shall be governed by and
construed in accordance with the law of the State of New York without regard to
conflict of law provisions.
(e) Counterparts. This Agreement may be signed in counterparts
with the same effect as if both parties had signed one and the same instrument.
(f) Notices. Any communications specifically required hereunder
to be in writing, if sent to the Placement Agent, will be mailed, delivered and
<PAGE> 24
Paramount Capital
Page 24
confirmed to it at Paramount Capital, 787 Seventh Avenue, New York, New York
10023, Att: Michael S. Weiss and if sent to the Company, will be mailed,
delivered or telegraphed and confirmed to it at Ribogene, Inc., 21375 Cabot
Boulevard, Hayward, CA 94545, Att: Chief Executive Officer, with a copy to
Bachner, Tally, Polevoy & Misher, LLP, 380 Madison Avenue, New York, NY
10017-2590, Att: Jill M. Cohen, Esq..
(g) Termination. Subject to the general survival
provisions contained in Sections 8(a) and 8(b), this Agreement may be
terminated by either party prior to any Closing upon written notice to the
other party.
(h) Entire Agreement. This Agreement constitutes
the entire agreement of the parties with respect to the matters herein referred
and supersedes all prior agreements and understandings, written and oral,
between the parties with respect to the subject matter hereof. Neither this
Agreement nor any term hereof may be changed, waived or terminated orally, but
only by an instrument in writing signed by the party against which enforcement
of the change, waiver or termination is sought.
(i) Nothing contained herein or otherwise shall
create a partnership or joint venture between the parties.
(j) The headings and captions of the various
subdivisions of this Agreement are for convenience or reference only and shall
in no way modify or affect the meaning or construction of any of the terms or
provisions hereof.
<PAGE> 25
Paramount Capital
Page 25
If you find the foregoing is in accordance with our understanding,
kindly sign and return to us a counterpart hereof, whereupon this instrument
along with all counterparts will become a binding agreement between us effective
as of August 1, 1996.
Very truly yours,
RIBOGENE, INC.
By: /s/ CHARLES J. CASAMENTO
-------------------------------
Name: Charles J. Casamento
Title: Chairman, President and
Chief Executive Officer
Agreed to by:
PARAMOUNT CAPITAL, INC.
By: /s/ LINDSAY A. ROSENWALD, M.D.
--------------------------------
Name: Lindsay A. Rosenwald, M.D.
Title: Chairman
<PAGE> 26
EXHIBIT A
RIBOGENE, INC.
OFFICERS' CERTIFICATE
[ ], 1996
We, Charles J. Casamento and Timothy Morris, certify that we are the
President and Chief Executive Officer and Chief Financial Officer, respectively,
of Ribogene, Inc., a California corporation (the "Company"), and that, as such,
we are authorized to execute this certificate on behalf of the Company. All
capitalized terms used herein but not otherwise defined herein shall the
meanings ascribed to such terms in the Agency Agreement (as defined below).
Reference is made herein to the closing held on [ ] (the "Closing Date"). We
do hereby certify that we have carefully examined all of the Offering Documents
(as defined in the Placement Agency Agreement dated as of [ ], 1996 between
the Company and Paramount Capital, Inc. (the "Agency Agreement")), and do hereby
further certify that:
1. All of the representations and warranties of the Company
contained in the subscription agreements (the "Subscription Agreements")
between the Company and the purchasers (the "Purchasers") of the Units of
Preferred Stock and Warrants of the Company contemplated by the Company's
Private Placement Memorandum, dated [ ], 1996 (as supplemented, the
"Memorandum") are true and correct in all material respects on the Closing Date
with the same force and affect as if made on and as of the Closing Date and the
Company has performed all covenants and agreements and has satisfied all
conditions in the Subscription Agreements to be performed or satisfied on its
part before the Closing Date in all material respects.
2. The Memorandum does not contain any untrue statement of a
material fact or omit to state any fact required to be stated in order to make
the statements therein not misleading as of the Closing Date. Since the date of
the Memorandum, no event has occurred for which information is required to be
contained in an amended or supplemented Memorandum concerning which such
information is not contained therein.
3. All of the representations and warranties of the Company
contained in the Agency Agreement are true and correct in all material
respects on the Closing Date, and the Company has performed all covenants and
agreements and has satisfied all conditions contained in the Agency Agreement
to be performed and satisfied on its part at or prior to the Closing Date in
all material respects.
4. All of the representations and warranties of the Company
contained in each of the other Offering Documents are true and correct in all
material respects on the Closing Date, and the Company has performed all
covenants and agreements and has satisfied all conditions contained in such
Offering Documents to be performed and satisfied on its part at or prior to the
Closing Date in all material respects.
<PAGE> 27
5. Since the date of the most recent financial statements and the
information included in the Memorandum, there has been no material adverse
change in the condition (financial or other), earnings, business, properties or
prospects of the Company and its subsidiaries taken as a whole, whether or not
arising from transactions in the ordinary course of business, nor has there
occurred any material event required to be set forth in the Memorandum,
including, without limitation, in accordance with Section 1(b) of the Agency
Agreement.
6. There is no litigation pending or, to our knowledge, threatened by
or against the Company, except as disclosed in the Memorandum.
7. Since [ ], 1996, the Company has not offered to sell to or
solicited any offers to buy from any person shares of capital stock of the
Company, except in connection with the Offering contemplated by the Memorandum.
IN WITNESS WHEREOF, we have executed this certificate on this [ ] the
day of [ ], 1996.
--------------------------------------
Name: Charles J. Casamento
Title: Chairman, President and
Chief Executive Officer
--------------------------------------
Name:
Title:
A-ii
<PAGE> 28
EXHIBIT B
RIBOGENE, INC.
SECRETARY'S CERTIFICATE
[ ], 1996
I, _________________, certify that I am the duly elected, qualified and
acting Secretary of RiboGene, Inc., a Delaware corporation (the "Corporation"),
and as such, I am duly authorized to execute this Certificate on behalf of the
Company, and that I am familiar with the facts certified below. All capitalized
terms used herein but not otherwise defined herein shall the meanings ascribed
to such terms in the Agency Agreement dated as of August 1, 1996 between the
Company and Paramount Capital, Inc. (the "Agency Agreement"). Reference is made
herein to the closing held on [ ] (the "Closing Date"). In connection with the
offering and sale of up to 4,444,443 units (the "Units") each consisting of (1)
one share of Series F Convertible Preferred Stock, no par value (the "Preferred
Stock"), and (2) one warrant (the "Warrants") to purchase one share of common
stock, no par value (the "Common Stock"), for which Paramount Capital, Inc.
("Paramount") has acted as placement agent, I do hereby further certify as
follows:
1. Attached hereto as Exhibit A is a true, correct and complete copy
of the Company's Articles of Incorporation, as amended, which is in full force
and effect and, except as set forth in Paragraph 2 below, no amendment to such
certificate has been approved by the Board of Directors or shareholders of the
Company or filed with the California Secretary of State since [ ].
2. Attached hereto as Exhibit B is a true, correct and complete copy
of the Bylaws of the Company, as in full force and effect on the Closing Date
and at all times from [ ] through the Closing Date.
3. As of the Closing Date, each of the Offering Documents is in the
form authorized by the board of directors of the Company pursuant to the
resolutions set forth in Exhibit C.
4. Attached hereto as Exhibit D is a true, correct and complete copy
of resolutions duly adopted at meetings of the Company's board of directors
duly called and held on [ ], 1996, which resolutions authorize the
issuance and sale of the Units, the Preferred Stock, the Warrants, the
Placement and Advisory Warrants and all the securities underlying the Preferred
Stock, the Warrants and the Placement and Advisory Warrants in accordance with
the requirements of California law, the Articles and Bylaws of the Company are
the only resolutions adopted by the board of directors of the Company or any
committee thereof with respect to the offering and sale of the units and the
transactions relating thereto, and which have not been revoked, modified and
amended or rescinded and are in full force and effect on the Closing Date.
B-i
<PAGE> 29
5. Attach hereto as Exhibit E are true, correct and complete
specimens of the certificates representing the Preferred Stock heretofore
approved and adopted by the board of directors of the Company. Each of the
certificates representing Preferred Stock delivered on the Closing Date to each
of the Purchasers pursuant to the Subscription Agreement has been executed by
the genuine or facsimile signature of officers of the Company who have been
duly elected or appointed, qualified and acting as such officers on the date
such certificates were executed and delivered, all in accordance with the
Articles and Bylaws of the Company and the requirements of applicable law.
6. Attached hereto as Exhibit F is a true, correct and complete
specimen of the certificate representing the Warrants heretofore approved and
adopted by the board of directors of the Company. Each of the certificates
representing Warrants delivered on the Closing Date to each of the Purchasers
pursuant to the Subscription Agreements has been executed by the genuine or
facsimile signature of officers of the Company who have been duly elected or
appointed, qualified and acting as such officers on the date such certificates
were executed and delivered, all in accordance with the Articles and Bylaws of
the Company and the requirements of applicable law.
7. Attached hereto as Exhibit G is a true, correct and complete
specimen of the certificates representing the Placement and Advisory Warrants
heretofore approved and adopted by the Board of Directors of the Company. Each
of the certificates representing the Placement Warrants and the Advisory
Warrants delivered on the date hereof to the Placement Agent or any of its
designees pursuant to the Agency Agreement has been executed by the genuine or
facsimile signature of officers of the Company who have been duly elected or
appointed, qualified and acting as such officers on the date such certificates
were executed and delivered all in accordance with the Articles and Bylaws of
the Company and the requirements of applicable law.
8. The minute books and records of the Company, relating to all
proceedings of the shareholders, the Board of Directors of the Company and the
Compensation Committee, the Audit Committee and the Nominating Committee of such
Board have been made available to Pryor, Cashman, Sherman & Flynn, counsel to
Paramount, and, in such form, are complete copies of the minute books and
records of the Company. There have been no material changes, alterations or
additions in such minutes or records since their examination by Pryor, Cashman,
Sherman & Flynn on behalf of Paramount.
9. Each person who, as an officer or director of the Company,
signed any of the Offering Documents or any other document in connection with
the offering and sale of the Preferred Stock, the Warrants or the Placement and
Advisory Warrants and the closing relating thereto was duly elected or
appointed, qualified and acting as such officer or director at the respective
times of the signing and deliver thereof and was duly authorized to sign such
document on behalf of the Company, and the signature of each such person
appearing on each such document is the genuine signature of such officer,
director or person duly appointed for the purpose of executing such documents
under valid powers of attorney.
B-ii
<PAGE> 30
10. The following persons are, and have been at all times since [ ],
1996, duly qualified and acting officers of the Company, duly elected or
appointed to the offices set forth opposite their respective names, and the
signature opposite the name of each such officer is his or her, or a facsimile
of his or her, authentic signature, and the seal affixed hereto is the duly
adopted seal of the Company:
Name Office Signature
---- ------ ---------
Charles J. Casamento Chairman, President and
Chief Executive Officer
Timothy E. Morris Vice President & Administration,
Chief Financial Officer
Laura S. Lehman Vice President, Research
Walter Singleton Vice President, Development
[_____] Secretary
This certificate is made for the benefit of, and may be relied upon by,
Paramount, Pryor, Cashman, Sherman & Flynn, as counsel to Paramount, and each of
the Purchasers.
IN WITNESS WHEREOF, I have hereunto set forth my hand this [ ]th day of
[ ], 1996.
[SEAL]
---------------------------------
Name:
Title: Secretary
I, Charles J. Casamento, President and Chief Executive Officer of the
Company, do hereby certify that [______] whose genuine signature appears above,
is, and has been at all times since [ ], 1996, the duly elected or
appointed, qualified and acting Secretary of the Company.
IN WITNESS WHEREOF, I have hereunto set forth my hand this [ ]th day of
[ ], 1996,
---------------------------------
Name: Charles J. Casamento
Title: Chairman, President and Chief Executive Officer
B-iii
<PAGE> 1
Exhibit 10.19
RIBOGENE, INC.
SUBSCRIPTION AGREEMENT
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
1. PURCHASE AND SALE OF PREMIUM PREFERRED UNITS....................................1
1.1 Authorization.....................................................1
1.2 Sale and Issuance of Units........................................1
2. CLOSING AND DELIVERY............................................................2
2.1 Initial Closing Date..............................................2
2.2 Subsequent Closings...............................................2
2.3 Escrow Arrangements...............................................2
3 REPRESENTATIONS AND WARRANTIES OF THE COMPANY ....................................2
3.1 Organization, Good Standing and Qualification ....................3
3.2 Capitalization ...................................................3
3.3 Subsidiaries......................................................4
3.4 Authorization.....................................................4
3.5 Valid Issuance of Securities......................................4
3.6 Governmental Consents.............................................5
3.7 Litigation........................................................5
3.8 Employee Agreement................................................5
3.9 Patents and Trademarks............................................5
3.10 Compliance with Other Instruments.................................6
3.11 Agreements; Action................................................6
3.12 Disclosure........................................................7
3.13 Rights of Registration and First Offer........................... 7
3.14 Corporate Documents...............................................7
3.15 Title to Property and Assets......................................7
3.16 Financial Statements..............................................7
3.17 Employee Benefit Plans............................................8
3.18 Tax Returns and Payments..........................................8
3.19 Insurance.........................................................8
3.20 Labor Agreements and Actions......................................8
4. REPRESENTATIONS AND WARRANTIES OF THE SUBSCRIBERS ..............................9
4.1 Risk .............................................................9
4.2 Accredited Investor ..............................................9
4.3 Investment Experience ............................................9
4.4 Due Diligence ....................................................9
4.5 Offering ........................................................10
4.6 Protection of Interests; Exempt Offering ........................10
4.7 Investment Intent ...............................................10
4.8 Restricted Securities ...........................................11
4.9 Legends .........................................................11
4.10 Background and Rejection ........................................11
4.11 Address .........................................................11
4.12 Authority .......................................................11
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
4.13 Entity...................................... ....................12
4.14 NASD........................................ ....................12
4.15 Blue Sky Laws............................... ....................12
4.16 Foreign Investors........................... ....................12
5. CALIFORNIA COMMISSIONER OF CORPORATIONS........................................12
5.1 Corporate Securities Law.........................................12
6. CONDITIONS OF SUBSCRIBER'S OBLIGATIONS AT CLOSING..............................12
6.1 Representations and Warranties...................................13
6.2 Performance......................................................13
6.3 Compliance Certificate...........................................13
6.4 Qualifications...................................................13
6.5 Proceedings and Documents........................................13
6.6 Opinion of Company Counsel.......................................13
6.7 Board of Directors...............................................13
6.8 Rights Agreement.................................................13
6.9 Minimum Subscriptions............................................13
6.10 Comfort Letter...................................................13
7. CONDITIONS OF THE COMPANY'S OBLIGATIONS AT CLOSING........................14
7.1 Representations and Warranties...................................14
7.2 California Qualification.........................................14
7.3 Rights Agreement.................................................14
8. COVENANTS OF THE COMPANY..................................................14
8.1 Delivery of Financial Statements.................................14
8.2 Inspection.......................................................14
8.3 Termination of Covenants.........................................15
9. MISCELLANEOUS.............................................................15
9.1 Survival of Representations and Warranties.......................15
9.2 Governing Law....................................................15
9.3 Counterparts.....................................................15
9.4 Titles and Subtitles.............................................15
9.5 Notices..........................................................15
9.6 Brokers..........................................................16
9.7 Expenses.........................................................16
9.8 Nondisclosure....................................................16
9.9 Third Parties....................................................16
9.10 Amendments and Waivers...........................................16
9.11 Severability.....................................................17
9.12 Entire Agreement.................................................17
10. NOTICE TO, AND REPRESENTATIONS AND COVENANTS OF CERTAIN STATE RESIDENTS............17
10.1 Pennsylvania Residents...........................................17
10.2 Texas Residents..................................................17
10.3 California Residents.............................................17
10.4 Florida Residents................................................17
</TABLE>
(ii)
<PAGE> 4
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
11. CONFIDENTIAL INVESTOR QUESTIONNAIRE ...............................................18
11.1 Accreditation ...................................................18
11.2 Suitability .....................................................20
11.3 Manner in Which Title to be Held ................................21
11.4 NASD Affiliation ................................................22
11.5 Acknowledgment ..................................................22
</TABLE>
(iii)
<PAGE> 5
SUBSCRIPTION AGREEMENT
THIS SUBSCRIPTION AGREEMENT (the "Agreement") is made as of the date set
forth on the signature page hereof by and between RiboGene, Inc., a California
corporation (the "Company"), and the undersigned entities and/or persons
purchasing Units of the Company's securities (the "Subscribers").
WHEREAS, the Company has retained Paramount Capital, Inc. (the
"Placement Agent") as Placement Agent in a private placement offering (the
"Offering") of units (the "Units") of the Company;
WHEREAS, the Subscriber has been furnished with a copy of the Company's
Confidential Private Placement Memorandum dated November 5, 1996, as amended or
supplemented (the "Memorandum").
WHEREAS, the Subscriber desires to purchase that number of Units set
forth on the signature page hereof on the terms and conditions hereinafter set
forth.
NOW, THEREFORE, in consideration of the premises and the mutual
representations and covenants hereinafter set forth, the parties hereto do
hereby agree as follows:
1. Purchase and Sale of Premium Preferred Units.
1.1 Authorization. The Company shall adopt and file with the Secretary
of State of the State of California on or before the Closing (as defined below)
the Amended and Restated Articles of Incorporation in the form attached as
Exhibit A to the Memorandum (the "Restated Articles").
1 .2 Sale and Issuance of Units. Subject to the terms and conditions of
this Agreement, the Subscribers agree to purchase at the Closings (as defined
below) and the Company agrees to sell and issue to the Subscribers at the
Closings a minimum of 1,333,333 Units (the "Minimum Offering") and a maximum of
2,666,666 Units (the "Maximum Offering"), with an option in favor of the
Placement Agent, with the Company's prior consent, to offer up to an additional
1,777,777 Units to cover over-allotments, each Unit consisting of one share of
the Company's Series F Preferred Stock and one Class A Warrant to purchase one
share of the Company's Common Stock in substantially the form attached as
Exhibit B to the Memorandum (the "Warrants"), at a purchase price of $2.25 per
Unit. The shares of Series F Preferred Stock issued to the Subscriber's pursuant
to this Agreement shall be hereinafter referred to as the "Stock," the warrants
to purchase Common Stock issued in connection therewith shall be referred to as
the "Warrants," and each Warrant and share of Stock taken together shall be
referred to as a "Unit."
<PAGE> 6
2. Closing and Delivery.
2.1 Initial Closing Date. Upon receipt of the Minimum Offering amount,
the Placement Agent may conduct, in its sole discretion, an initial closing (the
"Initial Closing"). The Initial Closing and any subsequent closings shall take
place at the offices of Paramount Capital, Inc., 787 Seventh Avenue, New York,
New York 10019, at 12:00 p.m., or at such other place as the Company and the
Placement Agent mutually agree upon, orally or in writing. At the Initial
Closing, the Company shall deliver to each Subscriber instruments representing
the Stock and Warrants to be purchased in the Closing by the Subscribers. The
purchase price for the Units is payable by check, money order or wire transfer
payable to "Fleet Bank, N.A., Escrow Agent f/b/o RiboGene, Inc." in an
amount equal to $2.25 multiplied by the number of Units being purchased by such
Subscriber. Each Subscriber hereby authorizes and directs the Company to deliver
the Stock and Warrants comprising the Units to be issued to the Subscriber
pursuant to this Agreement directly to the Subscriber's account maintained by
the Placement Agent, if any, or, if no such account exists, to the residential
or business address indicated on the signature page hereto.
2.2 Subsequent Closings. At any time on or before May 30, 1997, subject
to extension by the Placement Agent for a period of up to an additional 15 days
(as may be extended, the "Final Closing Date"), the Placement Agent may conduct
subsequent closings on an interim basis (each referred to as a "Closing"), until
the Maximum Offering and, if applicable, any over-allotment amount has been
reached. All such sales shall be made on the terms and conditions set forth in
this Agreement. Any securities sold pursuant to this Section 2.2 shall be deemed
to be "Stock," "Warrants" or "Units," as the case may be, for all purposes under
this Agreement, and any Subscribers thereof shall be deemed to be "Subscribers"
for all purposes under this Agreement and such Subscribers shall become parties
to the Investor Rights Agreement (the "Rights Agreement").
2.3 Escrow Arrangements. Pending the sale of the Units, all funds paid
hereunder shall be deposited by the Company in escrow with Fleet Bank, N.A.,
having a branch at 345 Park Avenue, New York, NY 10022. If the Company shall not
have obtained subscriptions (including this subscription) for purchases of
1,333,333 Units on or before the Termination Date, then this subscription shall
be void and all funds paid hereunder by the Subscriber shall be promptly
returned to the Subscriber. The Subscriber hereby authorizes and directs the
Company to return any funds for unaccepted subscriptions to the same account
from which the funds were drawn, including any customer account maintained with
the Placement Agent.
3. Representations and Warranties of the Company. The Company hereby
represents and warrants to the Subscribers that, except as set forth on the
Schedule of Exceptions which shall be provided to the Placement Agent in
connection with the Final Closing (the "Schedule of Exceptions"), which
exceptions shall be deemed to be representations and warranties as if made
hereunder:
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3.1 Organization, Good Standing and Qualification. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of California and has all requisite corporate power and authority
to carry on its business as now conducted and as proposed to be conducted. The
Company is duly qualified to transact business and is in good standing in each
jurisdiction in which the failure so to qualify would have a material adverse
effect on its business or properties.
3.2 Capitalization. The authorized capital of the Company consists, or
will consist, immediately prior to the Initial Closing, of
(i) Preferred Stock 18,932,344 shares of Preferred Stock,
of which (A) 138,269 shares have been designated Series A Preferred Stock,
138,268 of which are issued and outstanding, (B) 800,000 shares have been
designated Series B Preferred Stock, 580,061 of which are issued and
outstanding, (C) 2,950,000 shares have been designated Series C Preferred Stock,
2,805,519 of which are issued and outstanding, (D) 270,222 shares have been
designated Series D Preferred Stock, all of which are issued and outstanding,
(E) 8,500,000 shares have been designated Series E Preferred Stock, 8,300,862
of which are issued and outstanding, and (F) 5,555,554 shares have been
designated Series F Preferred Stock, none of which are issued and outstanding
prior to the Initial Closing. The rights, privileges and preferences of the
Series A, Series B, Series C, Series D, Series E and Series F Preferred Stock
(collectively, the "Preferred Stock") are as stated in the Restated Articles. As
of the Final Closing Date, each outstanding share of Preferred Stock will be
convertible into one share of Common Stock, subject to any subsequent
adjustments following the Final Closing Date pursuant to the conversion ratio
adjustment provisions set forth in the Restated Articles.
(ii) Common Stock. 50,000,000 shares of Common Stock, of
which 1,143,031 shares are issued and outstanding.
(iii) Except for (a) the conversion privileges of the
Preferred Stock, (b) warrants to purchase up to 22,344 shares of Series B
Preferred Stock, 15,000 shares of Series C Preferred Stock, and 17,777 shares of
Series E Preferred Stock each issued to Dominion Ventures, Inc. (and the
conversion privileges of the Preferred Stock issuable upon exercise thereof),
(c) warrants to purchase up to an aggregate of 1,313,000 shares of Common Stock
issued to Hyline Laboratories, Inc. and another entity formerly related thereto,
(d) warrants for the purchase of up to 33,333 shares of Series E Preferred Stock
issued to Silicon Valley Bank, (e) warrants to purchase up to 52,850 shares of
Common Stock issued to SBC Capital Markets and an individual previously
affiliated therewith, (f) outstanding options issued under the Company's equity
incentive plan(s) described below, and (g) certain warrants to purchase (1)
shares of Series F Preferred Stock and (2) Common Stock, to be issued to the
Placement Agent in connection with its services with respect to the Offering
contemplated by this Agreement as well as pursuant to a financial advisory
agreement, which warrants are described in the Memorandum, there are no
outstanding options, warrants, rights (including conversion or preemptive
rights) or agreements, orally or in writing, for the purchase or acquisition
from the Company of any shares of its capital stock except as set forth in or
contemplated by the
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<PAGE> 8
Memorandum. The Company has from time to time reserved up to an aggregate of
2,835,000 shares of Common Stock for issuance, at the discretion of the Board of
Directors, to officers, directors, employees and consultants pursuant to the
Company's 1993 Stock Plan, of which as of the date of this Agreement (a) 848,291
shares were outstanding pursuant to stock purchases or stock option exercises,
(b) 1,913,145 shares are currently subject to outstanding stock options or
committed for issuance pursuant to pending stock purchase grants, and (c)
173,564 shares were reserved for future stock option or purchase grants. The
Company has also reserved 4,000 shares of Common Stock for issuance upon the
exercise of a single outstanding stock option pursuant to the Company's 1990
Stock Option Plan. Except as set forth in the Memorandum, the Company has
obtained written waivers of all anti-dilution provisions of any existing
securities that would otherwise be triggered by this Offering, and has provided
such waivers to the Placement Agent.
3.3 Subsidiaries. The Company does not own or control, directly or
indirectly, any interest in any other corporation, association, or other
business entity.
3.4 Authorization. All corporate action on the part of the Company, its
officers, directors and shareholders necessary for the authorization, execution
and delivery of this Agreement, the Rights Agreement, the Placement Warrants and
the issuance of the Unit, the Stock, the Warrants and the Common Stock issuable
upon conversion of the Stock or upon exercise of the Warrants and the Placement
Warrants (collectively, the "Securities"), the performance of all obligations of
the Company hereunder and thereunder has been taken or will be taken prior to
the Closing, and this Agreement, the Rights Agreement, the Stock, the Warrants
and the Placement Warrants constitute valid and legally binding obligations of
the Company, enforceable in accordance with their respective terms.
3.5 Valid Issuance of Securities.
(a) The Stock and the Warrants, when issued, sold and
delivered in accordance with the terms hereof for the consideration expressed
herein, will be duly and validly issued and, in the case of the Stock,
fully-paid and nonassessable. Based in part upon the representations of the
Subscribers in this Agreement and subject to the completion of the filings
referenced in Section 3.6 below, (i) the Units will be issued in compliance with
all applicable federal and state securities laws and (ii) the Common Stock
issuable upon conversion of the Stock and upon exercise of the Warrants has been
duly and validly reserved for issuance, and upon issuance in accordance with the
terms of the Restated Articles and the Warrants (if applicable), shall be duly
and validly issued, fully paid and non-assessable and will be issued in
compliance with all applicable federal and state securities laws.
(b) The outstanding shares of Common Stock and Preferred
Stock are all duly and validly authorized and issued, fully-paid and
nonassessable, and were issued in compliance with all applicable federal and
state securities laws.
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<PAGE> 9
3.6 Governmental Consents. No consent, approval, order or authorization
of, or registration, qualification, designation, declaration or filing with, any
federal, state or local governmental authority on the part of the Company is
required in connection with the consummation of the transactions contemplated by
this Agreement, except for the federal and state securities law filings to be
made by the Company as set forth on the Schedule of Exceptions.
3.7 Litigation. There is no action, suit, proceeding or investigation
pending or currently threatened against the Company that questions the validity
of this Agreement, or the right of the Company to enter into this Agreement, or
to consummate the transactions contemplated hereby, or that might result, either
individually or in the aggregate, in any material adverse changes in the assets,
condition, affairs or prospects of the Company, financially or otherwise, or any
change in the current equity ownership of the Company, nor is the Company aware
that there is any basis for the foregoing. The foregoing includes, without
limitation, actions pending or threatened (or any basis therefor known to the
Company) involving the prior employment of any of the Company's employees, their
use in connection with the Company's business of any information or techniques
allegedly proprietary to any of their former employers, or their obligations
under any agreements with prior employers. The Company is not a party or subject
to the provisions of any order, writ, injunction, judgment or decree of any
court or government agency or instrumentality. There is no action, suit,
proceeding or investigation by the Company currently pending or which the
Company intends to initiate.
3.8 Employee Agreement. Each employee and officer of the Company has
executed an agreement with the Company regarding confidentiality and proprietary
information. The Company, after reasonable investigation, is not aware that any
of its employees are in violation thereof, and the Company will use its best
efforts to prevent any such violation and to maintain and enforce such agreement
with its employees.
3.9 Patents and Trademarks. Except as set forth in the Memorandum, as of
the Closing, the Company has or will have sufficient title and ownership of all
patents, trademarks, service marks, trade names, copyrights, trade secrets,
information, proprietary rights and processes necessary for its business as now
conducted and as proposed to be conducted in the Memorandum without any conflict
with or infringement of the rights of others. Except as set forth in the
Memorandum, there are no outstanding options, licenses, or agreements of any
kind relating to the foregoing, nor is the Company bound by or a party to any
options, licenses or agreements of any kind with respect to the patents,
trademarks, service marks, trade names, copyrights, trade secrets, licenses,
information, proprietary rights and processes of any other person or entity. The
Company has not received any communications alleging that the Company has
violated or, by conducting its business as proposed, would violate any of the
patents, trademarks, service marks, trade names, copyrights or trade secrets or
other proprietary rights of any other person or entity. The Company is not aware
that any of its employees are obligated under any contract (including licenses,
covenants or commitments of any nature) or other agreement, or subject to any
judgment, decree or order of any court or administrative agency, that would
interfere with the use of his best efforts to promote the interests of the
Company or
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<PAGE> 10
that would conflict with the Company's business as proposed to be conducted.
Neither the execution nor delivery of this Agreement, nor the carrying on of the
Company's business by the employees of the Company, nor the conduct of the
Company's business as proposed, will, to the Company's knowledge, conflict with
or result in a breach of the terms, conditions or provisions of, or constitute a
default under, any contract, covenant or instrument under which any of such
employees is now obligated. The Company does not believe it is or will be
necessary to utilize any inventions of any of its employees (or people it
currently intends to hire) made prior to their employment by the Company.
3.10 Compliance with Other Instruments.
(a) The Company is not in violation or default of any
provisions of its Articles of Incorporation, as amended, or Bylaws or of any
instrument, judgment, order, writ, decree or contract to which it is a party or
by which it is bound or, to its knowledge, of any provision of federal or state
statute, rule or regulation applicable to the Company. The execution, delivery
and performance of this Agreement, and the consummation of the transactions
contemplated hereby, will not result in any such violation or be in conflict
with or constitute, with or without the passage of time and giving of notice,
either a default under any such provision, instrument, judgment, order, writ,
decree or contract or an event which results in the creation of any lien, charge
or encumbrance upon any assets of the Company.
(b) The Company has avoided every condition, and has not
performed any act, the occurrence of which would result in the Company's loss of
any right granted under any license, distribution or other agreement material to
its business as now conducted and as proposed to be conducted as set forth in
the Memorandum.
3.11 Agreements; Action.
(a) Except for the agreements set forth under the captions
"Certain Transactions" and "Principal Shareholders" in the Memorandum and/or on
the Schedule of Exceptions, there are no agreements, understandings or proposed
transactions between the Company and any of its officers, directors, affiliates,
or any affiliate thereof.
(b) Except as set forth in the Memorandum, there are no
agreements, understandings, instruments, contracts or proposed transactions to
which the Company is a party or by which it is bound that involve (i) current or
future obligations of or payments to the Company in excess of $50,000, or (ii)
the license of any patent, copyright, trade secret or other proprietary right to
or from the Company.
(c) Except as set forth in the Memorandum, the Company has
not (i) declared or paid any dividends, or authorized or made any distribution
upon or with respect to any class or series of its capital stock, (ii) incurred
indebtedness for money borrowed or incurred any other liabilities individually
in excess of $10,000 or in excess of $50,000 in the aggregate, including
guarantees for such amounts, which amounts have not yet been fully repaid, (iii)
made
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<PAGE> 11
any loans or advances to any person, other than ordinary advances for travel
expenses, which loans or advances have not been fully repaid, or (iv) sold,
exchanged or otherwise disposed of any of its assets or rights, other than the
sale of its inventory in the ordinary course of business.
(d) The Company is not a party to and is not bound by any
contract, agreement or instrument, or subject to any restriction under its
Articles of Incorporation, as amended, or Bylaws, which adversely affects its
business as now conducted or as proposed to be conducted, its properties or its
financial condition.
(e) The Company has not engaged in the past three (3) months in
any discussion (i) with any representative of any corporation or corporations
regarding the merger of the Company with or into any such corporation or
corporations, (ii) with any corporation, partnership, association or other
business entity or any individual regarding the sale, conveyance or disposition
of all or substantially all of the assets of the Company or a transaction or
series of related transactions in which more than fifty percent (50%) of the
voting power of the Company is disposed of, or (iii) regarding any other form of
liquidation, dissolution or winding up of the Company.
3.12 Disclosure. The Company has fully provided the Subscribers with all
information which the Company believes is reasonably necessary to enable the
Subscribers to decide whether to acquire the Units, including the Memorandum. No
representation or warranty of the Company contained in this Agreement and the
exhibit attached hereto, any certificate furnished or to be furnished to the
Subscribers at the Closing, or the Memorandum (when read together) contains any
untrue statement of a material fact or omits to state a material fact necessary
in order to make the statements contained herein or therein not misleading in
light of the circumstances under which they were made.
3.13 Rights of Registration and First Offer. Except as set forth in the
Memorandum, the Company has not granted or agreed to grant any registration
rights, including piggyback rights, to any person or entity.
3.14 Corporate Documents. The Articles of Incorporation, as amended,
immediately prior to the Closing will be in the form attached as Exhibit A to
the Memorandum and the Bylaws of the Company are in due and proper form.
3.15 Title to Property and Assets. The Company owns its property and
assets free and clear of all mortgages, liens, loans and encumbrances, except
such encumbrances and liens which arise in the ordinary course of business and
do not materially impair the Company's ownership or use of such property or
assets. With respect to the property and assets it leases, the Company is in
compliance with such leases and, to the best of its knowledge, holds a valid
leasehold interest free of any liens, claims or encumbrances.
3.16 Financial Statements. As part of the Memorandum, the Company has
delivered to the Subscribers its unaudited financial statements (balance sheet
and statements of
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<PAGE> 12
operations and cash flows) as at June 30, 1996 and its audited financial
statements (balance sheet and statements of operations and cash flows) for the
years ended December 31, 1995 and December 31, 1994 and the period from
inception (May 5, 1989) to December 31, 1995 (collectively, 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 and with each other, except that unaudited
Financial Statements may not contain all footnotes required by generally
accepted accounting principles. The Financial Statements fairly present the
financial condition and operating results of the Company as of the dates, and
for the periods, indicated therein, subject to normal year-end audit
adjustments, which are neither individually nor in the aggregate material.
Except as set forth in the Financial Statements, the Company has no material
liabilities, contingent or otherwise, other than (i) liabilities incurred in the
ordinary course of business subsequent to June 30, 1996 in an amount less than
$25,000 in the aggregate, and (ii) obligations under contracts and commitments
incurred in the ordinary course of business and not required under generally
accepted accounting principles to be reflected in the Financial Statements,
which, in both cases, individually or in the aggregate, are not material to the
financial condition or operating results of the Company. The Company maintains
and will continue to maintain standard system of accounting established and
administered in accordance with generally accepted accounting principles.
3.17 Employee Benefit Plans. Except as set forth in the Memorandum the
Company does not have any Employee Benefit Plan as defined in the Employee
Retirement Income Security Act of 1974.
3.18 Tax Returns and Payments. The Company has filed all tax returns and
reports as required by law. These returns and reports are true and correct in
all material respects. The Company has paid all taxes and other assessments due,
except those contested by it in good faith which are listed in the Schedule of
Exceptions.
3.19 Insurance. The Company has in full force and effect fire and
casualty insurance policies, with extended coverage, sufficient in amount
(subject to reasonable deductibles) to allow it to replace any of its properties
that might be damaged or destroyed.
3.20 Labor Agreements and Actions. The Company is not bound by or
subject to (and none of its assets or properties is bound by or subject to) any
written or oral, express or implied, contract, commitment or arrangement with
any labor union, and no labor union has requested or, to the knowledge of the
Company, has sought to represent any of the employees, representatives or agents
of the Company. There is no strike or other labor dispute involving the Company
pending, or to the knowledge of the Company threatened, which could have a
material adverse effect on the assets, properties, financial condition,
operating results, or business of the Company (as such business is presently
conducted and as it is proposed to be conducted), nor is the Company aware of
any labor organization activity involving its employees. The Company is not
aware that any officer or key employee, or that any group of key employees,
intends to terminate their employment with the Company, nor does the Company
have a present intention
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<PAGE> 13
to terminate the employment of any of the foregoing. The employment of each
officer and employee of the Company is terminable at the will of the Company,
subject to the employment agreements set forth in the Memorandum.
4. Representations and Warranties of the Subscribers. Each Subscriber hereby
severally and not jointly represents and warrants to the Company that:
4.1 Risk. The Subscriber recognizes that the purchase of Units involves
a high degree of risk in that (i) the Company remains a development stage
business with limited operating history and requires substantial funds in
addition to the proceeds of the Offering; (ii) an investment in the Company is
highly speculative, and only investors who can afford the loss of their entire
investment should consider investing in the Company and the Units; (iii) the
Subscriber may not be able to liquidate his investment; (iv) transferability of
the Stock and the Warrants and any underlying securities is extremely limited;
(v) in the event of a disposition, the Subscriber could sustain the loss of his
entire investment and other such risks as are more fully set forth in the
Memorandum furnished by the Company to the Subscriber.
4.2 Accredited Investor. The Subscriber represents that the Subscriber
is an "accredited investor" as such term is defined in Rule 501 of Regulation D
promulgated under the Securities Act of 1933, as amended (the "Act"), as
indicated by his responses to the questions contained in Section 11 hereof, and
that the Subscriber is able to bear the economic risk of an investment in the
Units.
4.3 Investment Experience. The Subscriber hereby acknowledges and
represents that (i) the Subscriber has prior investment experience, including
investment in nonlisted and unregistered securities, or the Subscriber has
employed the services of an investment advisor, attorney and/or accountant to
read all of the documents furnished or made available by the Company both to the
Subscriber and to all other prospective investors in the Units and to evaluate
the merits and risks of such an investment on the Subscriber's behalf, (ii) the
Subscriber recognizes the highly speculative nature of this investment; and
(iii) the Subscriber is able to bear the economic risk which the Subscriber
hereby assumes.
4.4 Due Diligence. The Subscriber hereby acknowledges receipt and
careful review of the Memorandum, as supplemented and amended, and the
attachments and exhibits thereto all of which constitute an integral part of the
Memorandum and hereby represents that the Subscriber has been furnished by the
Company during the course of this transaction with all information regarding the
Company which the Subscriber has requested or desired to know, has been afforded
the opportunity to ask questions of and receive answers from duly authorized
officers or other representatives of the Company concerning the terms and
conditions of the Offering and has received any additional information which
Subscriber has requested.
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<PAGE> 14
4.5 Offering.
(a) The Subscriber has relied solely upon the information
provided by the Company in the Memorandum, in this Agreement and its exhibit and
as otherwise requested by the Subscriber in making the decision to invest in the
Units. To the extent necessary, the Subscriber has retained, at the expense of
the Subscriber, and relied upon appropriate professional advice regarding the
investment, tax and legal merits and consequences of this Agreement and its
purchase of the Units hereunder. The Subscriber acknowledges and agrees that the
Placement Agent has not supplied any information for inclusion in the
Memorandum, has no responsibility for the accuracy or completeness of the
Memorandum and that the Subscriber has not relied upon the independent
investigation or verification, if any, which may have been undertaken by the
Placement Agent.
(b) To the best of its knowledge, (i) the Subscriber was
contacted regarding the sale of the Units by the Placement Agent (or an
authorized agent or representative thereof) with whom the Subscriber had a prior
substantial pre-existing relationship and (ii) no Units were offered or sold to
it by means of any form of general solicitation or general advertising, and in
connection therewith the Subscriber did not (A) receive or review any
advertisement, article, notice or other communication published in a newspaper
or magazine or similar media or broadcast over television or radio whether
closed circuit, or generally available; or (B) attend any seminar meeting or
industry investor conference whose attendees were invited by any general
solicitation or general advertising.
4.6 Protection of Interests; Exempt Offering. The Subscriber hereby
represents that the Subscriber either by reason of the Subscriber's business or
financial experience or the business or financial experience of the Subscriber's
professional advisors (who are unaffiliated with and who are not compensated by
the Company or any affiliate or selling agent of the Company, including the
Placement Agent, directly or indirectly) has the capacity to protect the
Subscriber's own interests in connection with the transaction contemplated
hereby. The Subscriber hereby acknowledges that the Offering has not been
reviewed by the United States Securities and Exchange Commission (the "SEC")
because of the Company's representations that this is intended to be exempt from
the registration requirements of Section 5 of the Act pursuant to Sections 4(2)
of the Act and Regulation D promulgated thereunder. The Subscriber agrees that
the Subscriber will not sell or otherwise transfer the Stock or the Warrants
unless they are registered under the Act or unless an exemption from such
registration is available.
4.7 Investment Intent. The Subscriber understands that the Securities
comprising the Units have not been registered under the Act by reason of a
claimed exemption under the provisions of the Act which depends, in part, upon
the Subscriber's investment intention. In this connection, the Subscriber hereby
represents that the Subscriber is purchasing the securities comprising the Units
for the Subscriber's own account for investment and not with a view toward the
resale or distribution to others. The Subscriber, if an entity, was not formed
for the purpose of purchasing the Units.
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<PAGE> 15
4.8 Restricted Securities. The Subscriber understands that there
currently is no public market for any of the securities comprising the Units and
that even if such market existed, Rule 144 promulgated under the Act requires,
among other conditions, a two-year holding period prior to the resale (in
limited amounts) of securities acquired in a non-public offering without having
to satisfy the registration requirements under the Act. The Subscriber
understands and hereby acknowledges that the Company is under no obligation to
register the Units or any of the Stock or the Warrants comprising the Units
under the Act or any state securities or "blue sky" laws other than as set forth
in the Rights Agreement. The Subscriber consents that the Company may, if it
desires, permit the transfer of the Stock or the Warrants comprising the Units
under or issuable upon exercise thereof out of the Subscriber's name only when
the Subscriber's request for transfer is accompanied by an opinion of counsel
reasonably satisfactory to the Company that neither the sale nor the proposed
transfer results in a violation of the Act or any applicable state "blue sky"
laws (collectively, the "Securities Laws"). The Subscriber agrees to hold the
Company and its directors, officers, employees, controlling persons and agents
(including the Placement Agent and its officers, directors, employees and
controlling persons) and controlling persons and their respective heirs,
representatives, successors and assigns harmless and to indemnify them against
all liabilities, costs and expenses incurred by them as a result of any
misrepresentation made by the Subscriber contained in this Agreement (including
the Confidential Investor Questionnaire contained in Section II herein) or any
sale or distribution by the Subscriber in violation of the Securities Laws.
4.9 Legends. The Subscriber consents to the placement of a legend on any
certificate or other document evidencing the Securities that such Securities
have not been registered under the Act or any state securities or "blue sky"
laws and setting forth or referring to the restrictions on transferability and
sale thereof contained in this Agreement. The Subscriber is aware that the
Company will make a notation in its appropriate records with respect to the
restrictions on the transferability of such Securities.
4.10 Background and Rejection. The Subscriber understands that the
Company will review this Agreement and is hereby given authority by the
Subscriber to call Subscriber's bank or place of employment or otherwise review
the financial standing of the Subscriber; and it is further agreed that the
Company reserves the unrestricted right to reject or limit any subscription, to
accept subscriptions for fractional Units and to close the Offering to the
Subscriber at any time.
4.11 Address. The Subscriber hereby represents that the address of the
Subscriber furnished by the Subscriber on the signature page hereof is the
Subscriber's principal residence if the Subscriber is an individual or its
principal business address if it is a corporation or other entity.
4.12 Authority. The Subscriber represents that he or it has full power
and authority (corporate, statutory and otherwise) to execute and deliver this
Agreement and to purchase the Units. This Agreement constitutes the legal, valid
and binding obligation of the Subscriber, enforceable against the Subscriber in
accordance with its terms.
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<PAGE> 16
4.13 Entity. If the Subscriber is a corporation, company, trust,
employee benefit plan, individual retirement account, Keogh Plan, or other
tax-exempt entity, it is authorized and qualified to become an investor in the
Company and the person signing this Agreement on behalf of such entity has been
duly authorized by such entity to do so.
4.14 NASD. The Subscriber acknowledges that if he is a Registered
Representative of an NASD member firm, he must give such firm the notice
required by the NASD's Rules of Fair Practice, receipt of which must be
acknowledged by such firm in Section II.4 below.
4.15 Blue Sky Laws. The Subscriber acknowledges that at such time, if
ever, as any of the Securities are registered, sales of such Securities will be
subject to state securities laws, including those of states which may require
any securities sold therein to be sold through a registered broker-dealer or in
reliance upon an exemption from registration.
4.16 Foreign Investors. If the Subscriber is not a United States person,
such Subscriber hereby represents that it has satisfied itself as to the full
observance of the laws of its jurisdiction in connection with any invitation to
subscribe for the Securities or any use of this Agreement, including (i) the
legal requirements within its jurisdiction for the purchase of the Securities,
(ii) any foreign exchange restrictions applicable to such purchase; (iii) any
governmental or other consents that may need to be obtained, and (iv) the income
tax and other tax consequences, if any, that may be relevant to the purchase,
holding, redemption, sale, or transfer of the Securities. Such Subscriber's
subscription and payment for, and his or her continued beneficial ownership of
the Securities, will not violate any applicable securities or other laws of the
Subscriber's jurisdiction.
5 . California Commissioner of Corporations.
5.1 Corporate Securities Law. THE SALE OF THE SECURITIES THAT IS THE
SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER OF
CORPORATIONS OF THE STATE OF CALIFORNIA. THE ISSUANCE OF SUCH SECURITIES OR THE
PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION FOR SUCH SECURITIES PRIOR TO
SUCH QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF SECURITIES IS EXEMPT FROM THE
QUALIFICATION BY SECTION 25100,25102 OR 25105 OF THE CALIFORNIA CORPORATIONS
CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY CONDITIONED UPON
SUCH QUALIFICATION BEING OBTAINED UNLESS THE SALE IS SO EXEMPT.
6. Conditions of Subscribers' Obligations at Closing. The obligations of the
Subscribers to the Company under this Agreement are subject to the fulfillment,
on or before the Closing, of each of the following conditions:
-12-
<PAGE> 17
6.1 Representations and Warranties. The representations and warranties
of the Company contained in Section 3 shall be true on and as of the Closing
with the same effect as though such representations and warranties had been made
on and as of the date of such Closing.
6.2 Performance. The Company shall have performed and complied 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 Closing.
6.3 Compliance Certificate. The Chief Executive Officer of the Company
shall deliver to the Subscribers at the Closing a certificate certifying that
the conditions specified in Sections 6.1 and 6.2 have been fulfilled.
6.4 Qualifications. The Commissioner of Corporations of the State of
California shall have issued a permit qualifying the offer and sale of the
Securities to the Subscribers pursuant to this Agreement, or such offer and sale
shall be exempt from such qualification under the California Corporate
Securities Law of 1968, as amended.
6.5 Proceedings and Documents. All corporate and other proceedings in
connection with the transactions contemplated at the Closing and all documents
incident thereto shall be reasonably satisfactory in form and substance to the
Subscriber, and they shall have received all such counterpart original and
certified or other copies of such documents as they may reasonably request.
6.6 Opinion of Company Counsel. The Subscribers and Paramount Capital,
Inc. shall have received from Venture Law Group and Bachner, Tally, Polevoy &
Misher LLP, counsels for the Company, opinions, dated as of the Final Closing,
in substantially the form agreed to by the Placement Agent.
6.7 Board of Directors. The Board of Directors of the Company as of the
Closing Date shall be comprised of Alexander Barkas, Digby Barrios, Charles
Casamento, Lindsay Rosenwald, M.D., Jon Saxe and Jesse Treu, with one vacancy.
6.8 Rights Agreement. The Company and the Subscribers shall have
executed and delivered the Rights Agreement.
6.9 Minimum Subscriptions. With respect to the Initial Closing, the
Company shall have received binding subscriptions for at least 1,333,333 Units.
6.10 Comfort Letter. On each Closing Date, if requested by the Placement
Agent, the Corporation's auditors shall have delivered to the Agent for the
benefit of the Placement Agent a comfort letter to such effect as the Placement
Agent may require.
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<PAGE> 18
7. Conditions of the Company's Obligations at Closing. The obligations of
the Company to the Subscribers under this Agreement are subject to the
fulfillment, on or before the Closing, of each of the following conditions:
7.1 Representations and Warranties. The representations and warranties
of the Subscribers contained in Section 4 shall be true on and as of the Closing
with the same effect as though such representations and warranties had been made
on and as of the Closing.
7.2 California Qualification. The Commissioner of Corporations of the
State of California shall have issued a permit qualifying the offer and sale to
the Subscribers of the Securities or such offer and sale shall be exempt from
such qualification under the California Corporate Securities Law of 1968, as
amended.
7.3 Rights Agreement. The Company and the Subscribers shall have
executed and delivered the Rights Agreement.
8. Covenants of the Company.
8.1 Delivery of Financial Statements. The Company shall deliver to each
Subscriber:
(a) as soon as practicable, but in any event within ninety (90)
days after the end of each fiscal year of the Company, an income statement for
such fiscal year, a balance sheet of the Company as of the end of such year, and
a schedule as to the sources and applications of funds for such year, such
year-end financial reports to be in reasonable detail, prepared in accordance
with generally accepted accounting principles ("GAAP"), and audited and
certified by independent public accountants of nationally recognized standing
selected by the Company;
(b) As soon as practicable after a request by such Subscriber to
the Company's Chief Financial Officer, an unaudited profit or loss statement and
schedule as to the sources and application of funds for the preceding fiscal
quarter (applicable to the first three quarters of each fiscal year only) and an
unaudited balance sheet as of the end of such fiscal quarter in reasonable
detail; and
(c) such other information relating to the financial condition,
business, prospects or corporate affairs of the Company as the Subscriber or any
assignee of the Subscriber may from time to time request, provided, however,
that the Company shall not be obligated to provide information which it deems in
good faith to be proprietary or confidential.
8.2 Inspection. The Company shall permit the Subscribers, at the
Subscribers' expense, to visit and inspect the Company's properties, to examine
its books of account and records and to discuss the Company's affairs, finances
and accounts with its officers, all at such reasonable times as may be requested
by the Subscribers; provided, however, that the Company
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<PAGE> 19
shall not be obligated pursuant to this Section 8.2 to provide access to any
information which it reasonably considers to be a trade secret or similar
confidential information.
8.3 Termination of Covenants. The covenants set forth in Sections 8.1
and 8.2 shall terminate as to the Subscribers and be of no further force or
effect immediately upon the consummation of the Company's sale of its Common
Stock in a bona fide, firm commitment underwriting pursuant to a registration
statement under the Act generating aggregate gross proceeds to the Company in
excess of $7,500,000 (other than a registration statement relating either to the
sale of securities to employees of the Company pursuant to a stock option, stock
purchase or similar plan or an SEC Rule 145 transaction).
9. Miscellaneous.
9.1 Survival of Representations and Warranties. Except as set forth in
Section 8.3 above, the warranties, representations and covenants of the Company
contained in or made pursuant to this Agreement shall survive the execution and
delivery of this Agreement and the Closing and shall in no way be affected by
any investigation of the subject matter thereof made by or on behalf of the
Subscriber.
9.2 Governing Law. NOTWITHSTANDING THE PLACE WHERE THIS AGREEMENT MAY BE
EXECUTED BY ANY OF THE PARTIES HERETO, THE PARTIES EXPRESSLY AGREE, THAT ALL THE
TERMS AND PROVISIONS HEREOF SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED
BY THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICTS
OF LAW.
9.3 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
9.4 Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
9.5 Notices.
(a) All notices, requests, demands and other communications under
this Agreement or in connection herewith shall be given to or made upon the
respective parties as follows: if to the Subscribers, to the addresses set forth
on the signature page hereto, or, if to the Company, to RiboGene, Inc., 21375
Cabot Boulevard, Building B, Hayward, California 94545, Attn: President.
(b) All notices, requests, demands and other communications given
or made in accordance with the provisions of this Agreement shall be in writing,
and shall be sent
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<PAGE> 20
by airmail, return receipt requested, or by telex or telecopy (facsimile) with
confirmation of receipt, and shall be deemed to be given or made when receipt is
so confirmed.
(c) Any party may, by written notice to the other, alter its
address or respondent, and such notice shall be considered to have been given
ten (10) days after the airmailing, telexing or telecopying thereof.
9.6 Brokers.
(a) Each Subscriber severally represents and warrants that it has
not engaged, consented to or authorized any broker, finder or intermediary to
act on its behalf, directly or indirectly, as a broker, finder or intermediary
in connection with the transactions contemplated by this Agreement. Each
Subscriber hereby severally agrees to indemnify and hold harmless the Company
from and against all fees, commissions or other payments owing to any such
person or firm acting on behalf of such Subscriber hereunder.
(b) The Company has engaged, consented to and authorized the
Placement Agent in connection with the transactions contemplated by this
Agreement. The Company hereby agrees to pay the Placement Agent a commission and
to reimburse expenses in accordance with the Placement Agency Agreement dated as
of August 1, 1996, as amended (the "Placement Agency Agreement"), and the
Company agrees to indemnify and hold harmless the Subscribers from and against
all fees, commissions or other payment owing by the Company to any other person
or firm acting on behalf of the Company hereunder.
9.7 Expenses. If any action at law or in equity is necessary to enforce
or interpret the terms of this Agreement, the prevailing party shall be
entitled to reasonable attorney's fees, costs and necessary disbursements in
addition to any other relief to which such party may be entitled.
9.8 Nondisclosure. The Company agrees not to disclose the names,
addresses or any other information about the Subscribers, except as required by
law; provided, that the Company may use the name (but not the address) of the
Subscriber in any registration statement under the Act with respect to the Stock
and Warrants.
9.9 Third Parties. Nothing in this Agreement shall create or be deemed
to create any rights in any person or entity not a party to this Agreement,
except (a) for the holders of Registrable Securities and (b) for the Placement
Agent pursuant to Sections 4.5 and 9.6(b) hereof.
9.10 Amendments and Waivers. Any term of this Agreement may be amended
and the observance of any term of this Agreement may be waived (either generally
or in a particular instance and either retroactively or prospectively), only
with the written consent of the Company and Subscribers holding a majority in
interest of the Units purchased hereunder. Any amendment or waiver effected in
accordance with this Section shall be binding upon each
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<PAGE> 21
transferee of any Securities, each future holder of all such Securities, and the
Company, provided, however, that none of the conditions set forth in Section 6
hereof may be waived with respect to a particular Subscriber unless it consents
thereto.
9.11 Severability. If one or more provisions of this Agreement are held
to be unenforceable under applicable law, such provision shall be excluded from
this Agreement and the balance of the Agreement shall be interpreted as if such
provision were so excluded and shall be enforceable in accordance with its
terms.
9.12 Entire Agreement. This Agreement constitutes the entire agreement
between the parties hereto pertaining to the subject matter hereof, and any and
all other written or oral agreements existing between the parties hereto are
expressly cancelled.
10. NOTICE TO AND REPRESENTATIONS AND COVENANTS OF CERTAIN STATE RESIDENTS.
10.1 Pennsylvania Residents: The undersigned hereby acknowledges that
the Company is relying upon the exemption from registration of securities set
forth in Section 203(d) of the Pennsylvania Securities Act of 1972, as amended
(the "Pennsylvania Act") in connection with the sale of the Units to the
undersigned.
In accordance with the requirements of Section 203(d) of the
Pennsylvania Act, the undersigned hereby agrees not to sell his Units within
twelve (12) months from the date of purchase except pursuant to Section 204.01
of the Blue Sky Regulations of the Pennsylvania Securities Act of 1972.
Additionally, the undersigned is aware of the right of withdrawal under Section
207(m) of the Act described in the introductory pages of the Memorandum.
10.2 Texas Residents: The undersigned hereby acknowledges that the Units
cannot be sold unless they are subsequently registered under the Securities Act
of 1933, as amended and the Texas Securities Act, or an exemption from
registration is available. The undersigned further acknowledges that because the
Units are not readily transferable, he must bear the economic risk of his
investment for an indefinite period of time.
10.3 California Residents: If the undersigned is a natural person, he or
she represents that his or her investment in these Units does not exceed 10% of
his or her net worth or joint net worth with spouse (excluding principal
residence and its furnishings).
10.4 Florida Residents: The undersigned acknowledges that the Units have
not been registered under the Florida Securities and Investor Protection Act
(the "Florida Act") in reliance upon exemption provisions contained therein.
Section 517.061 (II)(a)(5) of the Florida Act provides that any Subscriber of
securities in Florida which are exempted from registration under Section 5
17.061 (II) of the Florida Act may withdraw his subscription agreement and
receive a full refund of all monies paid, within three business days after he
tenders consideration for such securities. Therefore, any Florida resident who
purchases securities is entitled to
-17-
<PAGE> 22
exercise the foregoing statutory rescission right within three business days
after tendering consideration for the investment packages by telephone, telegram
or letter notice to the Company. Any telegram or letter should be sent or
postmarked prior to the end of the third business day. A letter should be mailed
by certified mail, return receipt requested, to ensure its receipt and to
evidence the time of mailing. Any oral requests should be confirmed in writing.
11. Confidential Investor Questionnaire.
11.1 Accreditation. The Subscriber represents and warrants that he, she
or it comes within one category marked below, and that for any category marked,
he, she or it has truthfully set forth, where applicable, the factual basis or
reason the Subscriber comes within that category. ALL INFORMATION IN RESPONSE TO
THIS SECTION WILL BE KEPT STRICTLY CONFIDENTIAL. The undersigned agrees to
furnish any additional information which the Company deems necessary in order to
verify the answers set forth below.
Category A The undersigned is an individual (not a partnership, corporation,
etc.) whose individual net worth, or joint net worth with his or
her spouse, presently exceeds $1,000,000.
Explanation: In calculating net worth you may include: equity in
personal property and real estate, including your principle
residence, cash, short-term investments, stock and securities.
Equity in personal property and real estate should be based on
the fair market value of such property less debt secured by such
property.
Category B The undersigned is an individual (not a partnership, corporation,
etc.) who had an income in excess of $200,000 in each of the two
most recent years, or joint income with his or her spouse in
excess of $300,000 in each of those years (in each case including
foreign income, tax exempt income and full amount of capital
gains and loses but excluding any income of other family members
and any unrealized capital appreciation) and has a reasonable
expectation of reaching the same income level in the current
year.
Category C The undersigned is a director or executive officer of the Company
which is issuing and selling the Units.
Category D The undersigned is a bank, a savings and loan association;
insurance company; registered investment company; registered
business development company; licensed small business investment
company ("SBIC"); or employee benefit plan within the meaning of
Title I of ERISA and (a) the investment decision is made by a
plan fiduciary which is either a bank, savings and loan
association, insurance company or registered investment advisor,
or (b) the plan has total assets in excess of
-18-
<PAGE> 23
$5,000,000 or is a self directed plan with investment decisions
made solely by persons that are accredited investors.
-------------------------------
-------------------------------
(describe entity)
Category E The undersigned is a private business development company as
defined in Section 202(a)(22) of the Investment Advisors Act of
1940.
-------------------------------
-------------------------------
(describe entity)
Category F The undersigned is either a corporation, partnership,
Massachusetts business trust, or non-profit organization within
the meaning of Section 501 (c)(3) of the Internal Revenue Code,
in each case not formed for the specific purpose of acquiring
the Units and with total assets in excess of $5,000,000.
-------------------------------
-------------------------------
(describe entity)
Category G The undersigned is a trust with total assets in excess of
$5,000,000, not formed for the specific purpose of acquiring the
Units, where the purchase is directed by a "sophisticated person"
as defined in Regulation 506(b)(2)(ii).
Category H The undersigned is an entity (other than a trust) all the equity
owners of which are "accredited investors" within one or more of
the above categories. If relying upon this Category alone, each
equity owner must complete a separate copy of this Agreement.
-------------------------------
-------------------------------
(describe entity)
Category I The undersigned is not within any of the categories above and is
therefore not an accredited investor.
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<PAGE> 24
The undersigned agrees that the undersigned will notify the Company at
any time on or prior to the Closing Date in the event that the representations
and warranties in this Agreement shall cease to be true, accurate and complete.
11.2 Suitability. (please answer each question)
(a) For an individual Subscriber, please describe your current employment,
including the company by which you are employed and its principal business:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(b) For an individual Subscriber, please describe any college or graduate
degrees held by you:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(c) For all Subscribers, please list types of prior investments:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(d) For all Subscribers, please state whether you have participated in other
private placements before:
Yes No
--- --
(e) For all Subscribers, please indicate frequency of such prior participation
in private placements of
<TABLE>
<CAPTION>
Public Private Public or Private
Companies Companies Biotechnology Companies
--------- --------- -----------------------
<S> <C> <C> <C>
Frequently --------- --------- -----------------------
Occasionally --------- --------- -----------------------
Never --------- --------- -----------------------
</TABLE>
(f) For individual Subscribers, do you expect your current level of income to
significantly decrease in the foreseeable future:
Yes No
--- --
(g) For trust, corporate, partnership and other institutional Subscribers, do
you expect your total assets to significantly decrease in the foreseeable
future:
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<PAGE> 25
Yes No
--- --
(h) For all Subscribers, do you have any other investments or contingent
liabilities which you reasonably anticipate could cause you to need sudden cash
requirements in excess of cash readily available to you:
Yes No
--- --
(i) For all Subscribers, are you familiar with the risk aspects and the
non-liquidity of investments such as the securities for which you seek to
subscribe?
Yes No
--- --
(j) For all Subscribers, do you understand that there is no guarantee of
financial return on this investment and that you run the risk of losing your
entire investment?
Yes No
--- --
11.3 Manner in Which Title to be Held. (circle one)
(a) Individual Ownership
(b) Community Property
(c) Joint Tenant with Right of Survivorship (both parties must sign)
(d) Partnership*
(e) Tenants in Common
(f) Company*
(G) Trust*
(h) Other
*If Units are being subscribed for by an entity, the attached Certificate of
Signatory must also be completed.
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<PAGE> 26
11.4 NASD Affiliation
Are you affiliated or associated with an NASD member firm? (please check one):
Yes No
--- --
If Yes, please describe:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
*If Subscriber is a Registered Representative with an NASD member firm, have the
following acknowledgment signed by the appropriate party:
The undersigned NASD member firm acknowledges receipt of the notice required by
Article 3, Sections 28(a) and (b) of the Rules of Fair Practice.
- -------------------------------
Name of NASD Member Firm
By:----------------------------
Authorized Officer
Date:--------------------------
11.5 Acknowledgment. The undersigned is informed of the significance to
the Company of the foregoing representations and answers contained in the
Confidential Investor Questionnaire contained in this Section II and such
answers have been provided under the assumption that the Company will rely on
them.
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<PAGE> 1
Exhibit 10.20
==============================================================================
ASSET PURCHASE AGREEMENT
BY AND AMONG
RIBOGENE, INC.,
HYLINE LABORATORIES, INC.
AND
MICHAEL ASHKIN
January 5, 1994
==============================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. Sale and Purchase of Purchased Assets.................................. 1
a. Purchase and Sale............................................... 1
b. Assets Excluded................................................. 2
c. Liabilities..................................................... 2
d. Closing and Closing Date........................................ 3
2. Purchase Price; Terms of Payment....................................... 4
a. Purchase Price.................................................. 4
b. Valuation and Allocation of Purchase Price...................... 4
c. Taxes........................................................... 5
3. Representations and Warranties of the Seller and the Shareholder....... 5
a. Organization.................................................... 5
b. Title to Purchased Assets....................................... 5
c. Due Authority; Valid and Binding Agreements..................... 5
d. No Conflicts or Violations...................................... 5
e. Tangible Assets................................................. 6
g. No Undisclosed Liabilities...................................... 6
h. No Violation of Law............................................. 6
i. Litigation...................................................... 6
j. Health, Safety, Employment and Environmental Matters............ 6
k. Regulatory Compliance........................................... 7
l. Intellectual Property........................................... 8
m. Material Contracts.............................................. 9
n. Employee Matters................................................10
o. Brokers.........................................................10
p. Assignability of Contracts; No Default..........................10
q. Taxes...........................................................11
r. Unassumed Liabilities...........................................11
s. Purchase Entirely for Own Account...............................11
t. Disclosure of Information.......................................11
u. Investment Experience...........................................12
v. Restricted Securities...........................................12
w. Further Limitations on Disposition..............................12
x. Legends.........................................................12
y. Material Misstatements and Omissions............................13
4. Representations and Warranties of the Purchaser........................13
</TABLE>
-i-
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
a. Organization ............................................ 13
b. Due Authority; Valid and Binding Agreements ............. 13
c. No Conflicts or Violations .............................. 13
d. Financial Statements .................................... 14
e. Capitalization .......................................... 14
f. Valid Issuance .......................................... 15
g. No Undisclosed Liabilities .............................. 15
h. No Violation of Law ..................................... 15
i. Health, Safety, Employment and Environmental Matters .... 15
j. Regulatory Compliance ................................... 16
k. Litigation .............................................. 16
l. Material Contracts....................................... 17
m. Intellectual Property ................................... 17
n. Disclosure .............................................. 18
o. Brokers ................................................. 18
p. Material Misstatements and Omissions .................... 18
5. Interim Agreements .................................................. 18
a. Access; Confidentiality ................................. 18
c. Interim Operations ...................................... 19
d. Occurrence of Conditions ................................ 19
e. Seller's Non-solicitation Agreement ..................... 19
f. Certain Assignments ..................................... 19
g. Purchaser's Non-Solicitation Agreement .................. 19
6. Conditions to Obligations of the Purchaser .......................... 20
a. Representations, Warranties and Performance ............. 20
b. Litigation .............................................. 20
c. Approvals ............................................... 20
d. Certain Assignments ..................................... 20
f. Absence of Material Changes ............................. 20
g. Legal Opinion ........................................... 20
h. Related Agreements ...................................... 20
h. Regulatory Matters ...................................... 21
i. FIRPTA Affidavit ........................................ 21
7. Conditions to Obligations of the Seller ............................. 21
a. Representations, Warranties and Performance ............. 21
b. Litigation .............................................. 21
c. Approvals ............................................... 21
d. Absence of Material Changes ............................. 21
</TABLE>
-ii-
<PAGE> 4
LIST OF EXHIBITS
Exhibit A Tangible Assets
Exhibit B Intellectual Property Rights
Exhibit C Hyline Products
Exhibit D Assigned Contracts
Exhibit E Form of Non-Competition Agreement
Exhibit F Form of Bill of Sale
Exhibit G Form of Security Agreement
Exhibit H Form of Assignment and Assumption Agreement
Exhibit I Form of Promissory Note
Exhibit J Form of Common Stock Purchase Warrant
Exhibit K Agreed Warrant Value
Exhibit L Seller's Disclosure Schedule
Exhibit M Purchaser's Disclosure Schedule
Exhibit N Purchaser's Financial Statements
Exhibit O Purchaser Capitalization Table
Exhibit P Form of Opinion of the Seller's Counsel
Exhibit Q Form of Opinion of Sellers' Special Patent Counsel
Exhibit R Form of Opinion of the Purchaser's Counsel
Exhibit S Form of Sixth Amended and Restated Rights Agreement
Exhibit T Form of Side Letter Agreement
<PAGE> 5
ASSET PURCHASE AGREEMENT
This Agreement is made as of January 5, 1994, by and among RIBOGENE,
INC., a California corporation (the "PURCHASER"), HYLINE LABORATORIES, INC.
(the "SELLER"), a New York corporation, and MICHAEL ASHKIN, an individual (the
"SHAREHOLDER").
A. The Seller desires to sell and the Purchaser desires to purchase
certain of the assets relating to the Seller's business, which assets have been
assigned or transferred to the Seller from Michael Ashkin, who acquired the
same from certain other entities (collectively, the "PREDECESSOR").
B. The Shareholder owns all of the issued and outstanding shares of
capital stock of the Seller.
C. The parties hereto desire to make this Agreement for the purpose of
setting forth certain representations, warranties and covenants made by each to
the other as an inducement to the fulfillment of the conditions precedent to
the consummation of the transactions contemplated hereby.
In consideration of the mutual agreements, representations and
warranties contained in this Agreement, the parties agree as follows:
1. Sales and Purchase of Purchased Assets.
a. Purchase and Sale. Subject to the terms and conditions
contained in this Agreement, at the Closing (as defined below) the Seller shall
sell, assign, transfer and convey to the Purchaser, free and clear of all liens
and encumbrances, and the Purchaser shall purchase from the Seller, the assets
described below (collectively, the "PURCHASED ASSETS"): (i) the tangible
assets, furniture and fixtures listed and described in Exhibit A hereto
(collectively, the "TANGIBLE ASSETS"), (ii) all patents, patent licenses,
licensed patents, trademarks, trade names, business names, service marks, logos
and copyrights, and all applications and registrations for the foregoing, and
all of the Seller's applications, licenses or registrations with or from any
governmental authority for any new drug or investigational new drug (including,
without limitation, any antibiotic or biologic) or controlled substance
(collectively, "PATENT RIGHTS") of the Seller, including (without limitation),
each Patent Right described or listed on Exhibit B hereto, and (iii) all trade
secrets, know-how, inventions or other proprietary information of any kind
(collectively, "TRADE SECRETS") relating to the currently identified products
or product candidates currently under development by the Seller, all of which
products are listed on Exhibit C to this Agreement (such products are referred
to herein as the "HYLINE PRODUCTS" and the Patent Rights and Trade Secrets
referred to in (ii) and (iii) above are collectively referred to herein as the
"INTANGIBLE ASSETS"). Without limiting the foregoing, the Purchased Assets
shall be deemed to include the following:
<PAGE> 6
(A) All books and records, whether originals or copies,
whether financial, scientific or otherwise, relating to the Purchased Assets,
including (without limitation) all data, reports, analyses, models or studies
relating to the Hyline Products and any tests, clinical trials or other research
(and all related documentation) relating to the same, but excluding financial
books and records, as to which the Purchaser shall be entitled to receive only
photocopies;
(B) All of Seller's rights under the leases, service
contracts and other agreements listed on Exhibit D hereto (collectively, the
"ASSIGNED CONTRACTS"), which include, without limitation, all proprietary
information and assignment of inventions or similar agreements with all persons
that have been employed by or have served as a consultant to or director of, the
Seller;
(C) All rights of the Seller, if any, under manufacturer's
warranties and guarantees relating to the Tangible Assets;
(D) All benefits and proceeds with respect to the Tangible
Assets or any other Purchased Assets as of and after the Closing under any
policy of insurance;
(E) All licenses, permits, certificates, franchises,
accreditations and other indicia of authority relating to the Seller's business,
to the extent legally transferable; and
(F) All inventory relating to the Seller's business,
including (without limitation) all inventories of substances, drugs and
materials used in clinical or preclinical trials.
b. Assets Excluded. Except as enumerated above, the Seller shall
retain and the Purchaser shall not acquire the remaining assets of the Seller.
Without limiting the foregoing, the Purchased Assets shall be deemed not to
include the following:
(i) All cash, cash equivalents, prepaid expenses, deposits,
bank accounts and accounts receivable of the Seller; and
(ii) The Seller's rights under this Agreement.
c. Liabilities. Except as otherwise specifically set forth herein,
the Purchaser shall not assume, or take title to the Purchased Assets subject
to, or in any way be liable or responsible for, any liabilities or obligations
of any kind of the Seller and the Seller shall continue to remain responsible
for the same. Without limiting the generality of the foregoing, the Purchaser
shall not assume or take title to the Purchased Assets subject to any of the
following:
(i) Any accounts payable, debts or other obligations of the
Seller outstanding on the Closing Date or arising after the Closing Date, except
as expressly provided in this Agreement with respect to the Assigned Contracts;
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(ii) Any liability or obligation of the Seller arising from
claims for personal injury (including death) or damage to property in respect
of any of the Seller's activities, except as expressly provided in this
Agreement with respect to the Designated Liability Claims (as defined in Section
9(a)(iv) below);
(iii) Any liability or obligation of the Seller, or any of
its employees, for any federal, state, local or foreign income, sales, use,
transfer, employment and other taxes, including, without limitation, any of
such taxes arising out of or in connection with the purchase of the
Purchased Assets by the Purchaser hereunder or any transactions preceding and in
connection with such purchase;
(iv) Any liability or obligation in respect of any plan,
agreement, arrangement or understanding under which benefits or compensation
are provided by the Seller for its employees, consultants or directors
(including but not limited to, any contract or other obligation for health
insurance, accrued vacation, severance pay or other benefits, or any
commissions or revenue or profit sharing or other compensation) (other than
sums which may arise after the date of this Agreement payable to Rip Grossman
& Associates, Inc., pursuant to an agreement between such entity and the Seller
or the Predecessor, which obligation to pay such future amounts is being
assumed by the Purchaser hereunder);
(v) Any liability or obligation of the Seller based upon or
arising under any contract or agreement existing prior to or at the time of
Closing, other than pursuant to an Assigned Contract, from and after the
Closing Date;
(vi) Any lien, encumbrance, security interest or charge of
any nature whatsoever; or
(vii) Any liabilities or obligations arising from litigation
to which the Seller or the Shareholder is or would be a party that is pending or
threatened.
d. Closing and Closing Date. Unless otherwise agreed by the
parties, the consummation of the transactions contemplated by this Agreement
shall take place at a closing (the "CLOSING") to be held at the offices of
Salon, Marrow & Dyckman 685 Third Avenue, 21st Floor, New York, New York 10017,
at 9:00 a.m. local time, on January 5, 1994, or such earlier time or date as
the Seller and the Purchaser shall mutually agree, such time and date being
referred to herein as the "CLOSING DATE." At the Closing, (i) the Purchaser
and the Shareholder shall enter into the Non-Competition Agreement in the form
attached hereto as Exhibit E (the "NON-COMPETITION AGREEMENT"), (ii) the Seller
shall deliver to the Purchaser a Bill of Sale in the form attached hereto as
Exhibit F, evidencing the purchase and sale of the Purchased Assets (the "BILL
OF SALE"), (iii) the Purchaser shall execute and deliver to the Seller each of
the Notes (as defined below), (iv) the Seller, the Shareholder and the Purchaser
shall enter into the Security Agreement (the "SECURITY AGREEMENT") in the form
attached hereto as Exhibit G, which relates to the Notes and the
Non-Competition Agreement, (v) the Purchaser shall execute and deliver to the
Seller the Warrant (as defined below), (vi) the Seller, the Purchaser and
certain other shareholders of the Purchaser shall enter into the Sixth Amended
and Restated Rights Agreement (as set forth in Section 7(f) below), (vii) the
Seller and the
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Purchaser shall enter into the Assignment and Assumption Agreement (the
"ASSIGNMENT AGREEMENT") in the form attached hereto as Exhibit H, and (viii) the
Purchaser shall make the cash payment to the Seller pursuant to the terms of
Section 2(a)(i) below. The Non-Competition Agreement, the Bill of Sale, the
Notes, the Security Agreement, the Warrant, the Sixth Amended and Restated
Rights Agreement and the Assignment Agreement are referred to herein
collectively as the "RELATED AGREEMENTS."
2. Purchase Price; Terms of Payment.
a. Purchase Price. The consideration to be paid to the
Seller at the closing (the "PURCHASE PRICE") shall consist of the following:
(i) The Purchaser shall make a cash payment at the
Closing by cash, bank check for immediately available funds or wire transfer to
the Seller or its designee in the amount of Three Hundred Eighty-Two Thousand
Five Hundred Dollars ($382,500.00).
(ii) Four secured promissory notes of the Purchaser
(the "NOTES") each in the form attached hereto as Exhibit I and duly completed
in accordance with the terms set forth herein. The Notes shall be issued in the
respective principal amounts of (A) One Million One Hundred Twenty-One Thousand
Dollars ($1,121,000.00), due together with all interest accrued thereon on the
first (1st) anniversary of the Closing Date; (B) Nine Hundred Sixteen Thousand
Dollars ($916,000.00), due together with all interest accrued thereon on the
second (2nd) anniversary of the Closing Date; (C) Nine Hundred Ten Thousand
Dollars ($910,000.00), due together with all interest accrued thereon on the
third (3rd) anniversary of the Closing Date; and (D) Nine Hundred Nine Thousand
Dollars ($909,000.00), due together with all interest accrued thereon on the
fourth (4th) anniversary of the Closing Date. Each of the Notes shall bear
simple interest, compounded annually, at the minimum rate of interest necessary
to avoid the imputation of income under the Internal Revenue Code of 1986 (the
"CODE") (in effect on the Closing Date), taking into account for such purpose
whether such Note is short-term or mid-term obligation under the Code; and
(iii) A duly executed Common Stock Purchase Warrant
in the form attached hereto as Exhibits J (the "WARRANT"), which shall be
delivered to the Seller at the Closing.
b. Valuation and Allocation of Purchase Price. For purposes
of complying with the requirements of Section 1060 of the Code, the Purchase
Price shall be allocated in accordance with the agreed upon warrant value set
forth on Exhibit K hereto. Each party hereto agrees to prepare its federal and
state income tax returns for all current and future tax reporting periods and
file Form 8594 (and corresponding state forms) with respect to this transaction
in a manner consistent with such valuation and allocation, and shall take no
position in any tax proceedings inconsistent with such valuation or allocation.
If any state or federal taxing authority challenges such valuation or
allocation, the party receiving notice of such challenge shall give the other
prompt written notice of such challenge, and the parties shall cooperate in good
faith in responding to it in order to preserve the effectiveness of such
valuation and allocation.
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c. Taxes. The Seller shall pay and discharge promptly when
due all sales, use, transfer, excise and other like taxes, if any, arising out
of the transfer of the Purchased Assets, or otherwise as a consequence of the
transactions contemplated by this Agreement.
3. Representations and Warrants of the Seller and the Shareholder.
Each of the Seller and the Shareholder represents and warrants to the Purchaser
that, except as set forth in the Disclosure Schedule attached to this Agreement
as Exhibit L (the "SELLER DISCLOSURE SCHEDULE"):
a. Organization. The Seller is a corporation duly organized,
validly existing and in good standing under the laws of the State of New York
and has all requisite power and authority to own, operate and lease its
properties and carry on its business as now conducted. The Shareholder owns all
of the issued and outstanding capital stock of the Seller, and no other person
has any right to acquire any equity or other interest in the Seller.
b. Title to Purchased Assets. The Seller has and will convey
to the Purchaser on the Closing Date title to the Purchased Assets, free and
clear of all security interests, mortgages, liens (including, but not limited
to, liens with respect to taxes), attachments, orders of court, rights of
redemption, debts, claims, charges, or other encumbrances of any kind
whatsoever and not subject to any continuing royalty, commission, profit or
revenue sharing or other compensation contract or obligation of any kind other
than as set forth in the Assigned Contracts.
c. Due Authority; Valid and Binding Agreements. Each of the
Seller and the Shareholder has the power and authority to enter into and be
bound by the terms and conditions of this Agreement and the Related Agreements
to which it is a party and to carry out its obligations pursuant hereto and
thereto. Each of this Agreement and the Related Agreements is, or upon execution
and delivery thereof will be, a legal, valid and binding obligation of each of
the Seller and the Shareholder which is a party thereto, as the case may be, in
each case enforceable against such party in accordance with its terms. The
execution, delivery and performance by the Seller of this Agreement and the
Related Agreements have been authorized and approved by all necessary corporate
action of the Seller and in compliance with all applicable laws.
d. No Conflicts or Violations. Neither the execution and
delivery of this Agreement and the Related Agreements nor the consummation of
the purchase and sale of the Purchased Assets and the other transactions
contemplated by this Agreement or the Related Agreements will (i) conflict with
or result in any violation of or constitute a default under any provision of
the Seller's Certificate of Incorporation or Bylaws or any agreement, mortgage,
bond, indenture, franchise or other instrument or obligation to which the
Seller or the Shareholder is a party or by which the Seller or the Shareholder
is bound (including, without limitation, any collective bargaining agreements
to which the Seller is a party and any partnership or similar agreement to
which the Shareholder or affiliate of the Shareholder may be bound), (ii) result
in the creation of any lien or other encumbrance upon the Purchased Assets
pursuant to the terms of any such mortgage, bond, indenture, franchise or other
instrument or obligation, (iii) violate any judgment, order, injunction, decree
or award of any court,
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<PAGE> 10
administrative agency or government body against, or binding upon, the Seller
or the Shareholder or upon any of the Purchased Assets, (iv) constitute a
violation by the Seller of any law or regulation of any jurisdiction in which
the Seller conducts its business, or (iv) result in the breach of any of the
terms or conditions of, or constitute a default under, or otherwise cause any
impairment of any permit or license or other governmental authorization held by
the Seller.
e. Tangible Assets. Exhibit A contains a complete and
accurate list of certain tangible assets currently used in the Seller's
business. The Tangible Assets are being sold in their current state and the
Seller makes no representation as to their operating condition or repair. The
Seller does not own any real property.
g. No Undisclosed Liabilities. The Seller has no liabilities
or obligations, accrued, absolute, known or unknown, contingent or otherwise,
except (i) the liabilities and obligations set forth on Exhibit L, (ii)
liabilities and obligations which have been incurred subsequent to the date of
such exhibit in the ordinary course of business and (iii) liabilities and
obligations under the Assigned Contracts. All accrued but unpaid monetary
liabilities under the Assigned Contracts as of the date of this Agreement are
set forth on Exhibit L. There are no claims against, or liabilities or
obligations of, or any reasonable basis known to the Seller or the Shareholder
for any claims which, individually or in the aggregate, might result in or
cause any material adverse change in the Seller's business or prospects or in
the value of the Purchased Assets. To the knowledge of the Seller and the
Shareholder, no Designated Liability Claim (as defined in Section 9(a)(iv)
below) has been made or is pending against the Seller, the Predecessor, the
Shareholder or any of their affiliates, nor, to the knowledge of the Seller and
the Shareholder, does any valid basis for any Designated Liability Claim
currently exist.
h. No Violation of Law. There has been no violation of any
applicable federal, state or other law or regulation, ordinance, order,
injunction or decree, or any other requirements of any governmental body,
agency, authority or court that relate to the Purchased Assets.
i. Litigation. There are no suits, actions or administrative,
arbitration, unfair labor practice, worker's compensation or other proceedings
or governmental investigations, pending or, to the Seller's or the
Shareholder's knowledge, threatened that relate to the Purchased Assets, and
there are no judgments, orders, injunctions, decrees, stipulations or awards
(whether rendered by a court, administrative agency or by arbitration, pursuant
to a grievance or other procedure) that relate to the Purchased Assets.
j. Health, Safety, Employment and Environmental Matters.
(i) To the extent that the failure to do or be so
would have an adverse effect upon the Purchased Assets, the Seller is in
compliance with all federal, state, local and foreign health and occupational
safety laws and all federal, state, local and foreign laws related to
employment and employment practices, compensation and benefits, which are
applicable to the Seller or its business, and the Seller and the Predecessor
have conducted their business in compliance with the foregoing provisions.
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<PAGE> 11
(ii) To the extent that the failure to do or be so
would have an adverse effect upon the Purchased Assets, the Seller is in
compliance with the terms and conditions of all environmental permits,
licenses, and other authorizations required under applicable laws relating in
any way to pollution of the environment and the Seller and the Predecessor have
conducted their business in compliance with the foregoing provisions.
(iii) To the extent that the failure to do or be so
would have an adverse effect upon the Purchased Assets, the Seller is in
compliance with all applicable federal, state, local and foreign laws relating
to emissions, discharges, and releases of hazardous materials into the
environment and the generation, treatment, storage, transportation and disposal
of hazardous wastes, including, without limitation, any applicable provisions
of the Resource Conservation and Recovery Act of 1976 or the Comprehensive
Environmental Response Compensation and Liability Act of 1980, and the Seller
and the Predecessor have conducted their business in compliance with the
foregoing provisions.
(iv) To the extent that such would have an adverse
effect on the Purchased Assets, (A) there are no conditions at, on, under or
related to, any real property of the Seller or the Predecessor or at which they
conduct or have conducted any of their operations or business which presently
or potentially pose a significant hazard to human health or the environment,
whether or not in compliance with law, and there (B) has been no production,
use, treatment, storage, transportation or disposal by the Seller or the
Predecessor of any Hazardous Substance, as hereinafter defined, at or on such
real property nor any release or threatened release by the Seller or the
Predecessor of any Hazardous Substance, pollutant or contaminant into or upon
or over the Real Property or into or upon ground or surface water at or within
2,000 feet of the boundaries of such real property except in compliance with
applicable law. To the knowledge of the Seller and the Shareholder, no
Hazardous Substance relating in any manner to the Purchased Assets is now or
ever has been stored by the Seller or the Predecessor on such real property in
underground tanks, pits or surface impoundments except in compliance with
applicable law.
(v) No action, investigation, proceeding, permit
revocation, permit amendment, writ, injunction or claim is pending, nor has the
Seller or the Predecessor received any notice of any of the foregoing,
concerning or relating to (A) the use, storage, sale or disposal of any
Hazardous Substance related to or affecting the Purchased Assets, (B) the
exposure of any person to any Hazardous Substance as a consequence of any
activity related to or affecting the Purchased Assets or (C) the presence of any
Hazardous Substance in, on or under any of the Seller's or the Predecessor's
facilities or any property owned, leased or occupied by the Seller which is
related to or affecting the Purchased Assets.
(vi) For purposes of this Agreement, "Hazardous
Substance" shall mean any environmentally hazardous or toxic substance, material
or waste which is currently regulated as such by any local governmental
authority, any state or the United States Government.
k. Regulatory Compliance.
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<PAGE> 12
(i) Each of the Seller and the Predecessor has
complied with all requirements imposed on the drug products sold or proposed
for sale or testing by the Seller relating to the premarket development,
production, sale and marketing thereof, pursuant to the Federal Food, Drug and
Cosmetic Act (the "FDC ACT"), the regulations promulgated by the U.S. Food and
Drug Administration (the "FDA") thereunder, and any policies issued by the FDA
concerning the premarket development, production, sale and marketing of such
drug products, including any conditions for approval and/or postmarket
requirements that are specific to such drug products. Without limiting the
foregoing, the Seller specifically represents that all necessary
investigational new drug applications ("INDs") and amendments and/or
supplements thereto, as required by the FDC Act, the regulations of the FDA
adopted thereunder, and any policies issued by the FDA in connection with such
investigational new drug applications and amendments and/or supplements
thereto, have been filed with the FDA for metoclopramide, propranolol or any
other Hyline Product for which such applications or amendments are or have been
required, and all necessary approvals and acknowledgments have been obtained
from the FDA. Furthermore, all regulatory submissions to and filings with the
FDA made by or on behalf of the Seller are complete and correct in all material
respects and have been prepared and filed in compliance with all FDA rules,
regulations and stated policies. Informed consent agreements have been duly and
validly entered into between the Seller (or its predecessor) and each person
participating in any clinical trial or testing conducted by the Seller or the
Predecessor with respect to the Hyline Products and such informed consent
agreements are adequate under applicable law. Neither the enforceability nor
legal sufficiency of such informed consent agreements has been challenged by
any participant in any clinical trial or by any governmental agency (including,
without limitation, the FDA).
(ii) The Seller is not and has never been required to
comply with the requirements of the federal Controlled Substances Act (the
"CSA"), the implementing regulations promulgated by the U.S. Drug Enforcement
Administration (the "DEA") thereunder, or any policies issued by the DEA
concerning the premarket development, production, sale and marketing of such
controlled substances, including any conditions for approval or
acknowledgments, such as issuance of all registration and licensing
applications, and/or any other requirements, such as physical security,
recordkeeping, reporting, registration and filing requirements, that are
specific to such controlled substances. Furthermore, the Seller is not and has
never been required to execute and file applications with any State Board of
Pharmacy and has not in fact ever done so.
I. Intellectual Property.
(i) The Seller owns, and/or (as the case may be),
except with respect to any limitation on use expressly set forth in the
Assigned Contracts, has the exclusive right to use, sell, license, dispose of,
and (subject to compliance with legal formalities) bring actions for
infringement of, (A) all of the Patent Rights described in Exhibit B hereto
and, (B) to the extent permitted by law, the Trade Secrets described in Exhibit
C hereto as expressly noted thereon (collectively, "SELLER'S INTELLECTUAL
PROPERTY RIGHTS").
(ii) The execution, delivery and performance of this
Agreement and the Related Agreements and the consummation of the transactions
contemplated
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hereby and thereby (including the transfer of the Purchased Assets to the
Purchaser and the continued conduct by the Purchaser after the Closing Date of
the business of the Seller) will not breach, violate or conflict with any
instrument or agreement governing any of Seller's Intellectual Property Rights
necessary or required for, or used in, the conduct of the business of the
Seller or the Predecessor (including, without limitation, any of Seller's
Intellectual Property Rights relating to any Hyline Product) and will not cause
the forfeiture or termination or give rise to a right of forfeiture or
termination of any of Seller's Intellectual Property Rights or in any way
impair the right of the Purchaser to use, sell, license or dispose of or to
bring any action for the infringement of any of Seller's Intellectual Property
Rights or portion thereof.
(iii) Neither the development, manufacture, marketing,
license, sale or use of any Hyline Product violates or will violate any license
or agreement with any third party (assuming that the foregoing activities are
taken in compliance with the express terms of the Assigned Contracts), or, to
the knowledge of the Seller or the Shareholder, infringes or will infringe any
valid Patent Right or protectible Trade Secret of any other party; there is no
pending or, to the knowledge of the Seller and the Shareholder, threatened
claim or litigation or basis for contesting the validity, ownership or right to
use, sell, license or dispose of any of Seller's Intellectual Property Rights,
nor has the Seller or the Shareholder received any notice asserting that any of
Seller's Intellectual Property Rights or the proposed use, sale, license or
disposition thereof conflicts or will conflict with the rights of any other
party, nor, to the knowledge of the Seller or the Shareholder, is there any
basis for any such assertion. To the knowledge of the Seller or the
Shareholder, there has not been and is not currently any infringement on the
part of any third party of any of Seller's Intellectual Property Rights.
(iv) The Seller has taken reasonable and practicable
steps (including, without limitation, entering into confidentiality and
non-disclosure agreements and inventions assignment agreements with all
officers and employees of and consultants to the Seller with access to or
knowledge of Seller's Intellectual Property Rights) designed to safeguard and
maintain the secrecy and confidentiality of, and/or its proprietary rights in,
all of the Seller's Intellectual Property Rights.
(v) A complete and accurate list of all applications,
filings and other formal actions made or taken pursuant to federal, state,
local and foreign laws by the Seller or the Predecessor with respect to
Seller's Intellectual Property Rights, including, without limitation, all
patents, patent applications, trademarks, trademark applications, service marks
and copyright registrations, including the identification of the country in
which any of them has been filed, issued or registered, is set forth on Exhibit
B hereto. All such patents, trademarks, service marks and copyright
registrations are in full force and effect. The items set forth on Exhibit B, C
and D hereto represent all of the Seller's Intellectual Property Rights with
respect to the Hyline Products and in such regard the information set forth on
such exhibits is accurate and complete.
m. Contracts. The Seller is not bound by any contract,
agreement or instrument of any kind that affects in any way the Purchased
Assets except as set forth on the Seller Disclosure Schedule or Exhibit D
(collectively, the "SELLER CONTRACTS"). No breach, default or condition
permitting declaration of breach or default exists with respect to the Seller
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<PAGE> 14
or, to the Seller's knowledge, with respect to any other party to any such
Seller Contract as to any of the Seller Contracts.
n. Employee Matters.
(i) The Seller Disclosure Schedule contains a
complete and correct list of the names and addresses of all the Seller's
employees and consultants (collectively, the "EMPLOYEES") who perform services
for or on behalf of the Seller, including, to the extent applicable, their
titles, and of all of the members of the Seller's Board of Directors.
(ii) The listing of the Seller Contracts listed on
the Seller Disclosure Schedule includes all contracts, arrangements and
agreements of the Seller with regard to the Employees and/or consultants. The
employment of all Employees is terminable at will without any penalties or
severance obligations of any kind.
(iii) None of the Employees is represented by any
labor union nor is the Seller a party to any collective bargaining agreement.
There is no pending or threatened labor strike, work stoppage, representation
petition, slow down, labor grievance or other labor trouble or interference
pending against the Seller, affecting the Employees or impairing the Seller's
business (including, without limitation, any organizational drive). All
Employees and consultants are either United States citizens or resident aliens
specifically authorized to engage in employment in the United States in
accordance with all applicable laws and have completed and filed all required
forms contemplated by such laws.
(iv) Each of the employees, consultants and directors
of the Seller or the Predecessor have entered into proprietary information and
invention assignment agreements in a form provided to the Purchaser, and to the
extent such agreements affect or relate to the Purchased Assets, such agreements
are fully enforceable and assignable to the Purchaser in accordance with the
provisions of this Agreement.
(v) No agreement or arrangement regarding
compensation which will be assumed by Purchaser provides for any payments which
could result in a nondeductible expense to the Purchaser pursuant to Section
280G of the Code or an excise tax to the recipient of such payment pursuant to
Section 4999 of the Code.
o. Brokers. Neither the Seller nor the Shareholder is
obligated, either directly or indirectly, to any person for brokerage or
finders' fees or agents' commissions or any similar charges in connection with
this Agreement, and each of the Seller and the Shareholder agrees to indemnify
the Purchaser against any liability incurred by the Purchaser resulting from any
such charges alleged to be payable because of any act, omission or statement of
or by the Seller or the Shareholder.
p. Assignability of Contracts; No Default. To the knowledge
of the Seller and the Shareholder, each of the Assigned Contracts (i) is a
legal, binding and enforceable obligation of the Seller and the other parties
thereto and none of the parties thereto is in material breach or default of any
of its obligations to the other party or parties and (ii) upon execution of
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the Assignment Agreement, will constitute legal, binding and enforceable
obligations of such other parties to the benefit of the Purchaser, enforceable
by the Purchaser in accordance with their terms.
q. Taxes. All sales and use taxes, real and personal
property taxes, gross receipts taxes, documentary transfer taxes, employment
taxes, withholding taxes, unemployment insurance contributions and other taxes
or governmental charges of any kind, however denominated, for which the
Purchaser could become liable as a result of acquiring the Purchased Assets or
which could result in a lien on or charge against the Purchased Assets
(collectively, "Taxes") have been or will be paid for all periods prior to and
including the Closing Date. The Seller or the Predecessor has duly and timely
filed (or will file prior to the Closing Date) all returns and reports of Taxes
required to be filed prior to such date. There are not, and as of the Closing
will not be, any liens for Taxes on any of the Purchased Assets (other than
liens for Taxes not yet due and payable). Each of the Seller and the
Predecessor has complied with all record keeping and tax reporting obligations
relating to income and employment taxes due with respect to compensation paid to
Employees. Seller is not a "foreign person" within the meaning of Section
1445(f)(3) of the Code. There are no pending or threatened proceedings with
respect to Taxes.
r. Unassumed Liabilities. The sale, transfer and
assignment of the Purchased Assets pursuant to this Agreement will not render
the Seller unable to pay its liabilities not assumed by the Purchaser as they
become due and payable.
s. Purchase Entirely for Own Account. This Agreement is
made with the Seller in reliance upon the Seller's representation to the
Purchaser, which by the Seller's execution of this Agreement the Seller hereby
confirms, that the Warrant and the shares of Common Stock issuable upon exercise
of the Warrant (the "WARRANT SHARES" and collectively with the Warrant, the
"SECURITIES") to be acquired by the Seller will be acquired for investment for
the Seller's own account, not as a nominee or agent, and not with a view to the
resale or distribution of any part thereof, and that the Seller has no present
intention of selling, granting any participation in, or otherwise distributing
the same other than to the Shareholder and members of the Shareholder's
immediate family or trusts for their benefit. By executing this Agreement, the
Seller further represents that the Seller does not presently have any contract,
undertaking, agreement or arrangement with any person to sell, transfer or grant
participations to such person or to any third person, with respect to any of the
Securities. The Seller understands that this sale of the Securities has not
been, and will not be, registered under the Securities Act of 1933, as amended
(the "SECURITIES ACT"), by reason of a specific exemption from the registration
provisions thereof which depends upon, among other things, the bona fide nature
of the Seller's investment intent and the accuracy of the Seller's
representations as expressed herein. The Seller represents that it has not been
formed for the specific purpose of acquiring the Securities.
t. Disclosure of Information. The Seller believes it has
received all the information it considers necessary or appropriate for deciding
whether to acquire the Securities. The Seller further represents that it has
had opportunity to ask questions and receive answers from the Purchaser
regarding the terms and conditions of the offering of the
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<PAGE> 16
Securities. The foregoing, however, does not limit or modify the
representations and warranties of the Purchaser in Section 4 of this Agreement
or the right of the Seller to rely thereon.
u. Investment Experience. The Seller is capable of
evaluating the merits and risks of the Seller's acquisition of the Securities.
The Seller, by reason of its business or financial experience or the business
or financial experience of its professional advisors who are unaffiliated with
and who are not compensated by the Purchaser or any affiliate or selling agent
of the Purchaser, directly or indirectly, has the capacity to protect its own
interests in connection with the acquisition of the Securities hereunder.
v. Restricted Securities. The Seller understands that the
Securities are characterized as "restricted securities" under the federal
securities laws inasmuch as they are being acquired from the Purchaser in a
transaction not involving a public offering and that under such laws and
applicable regulations such Securities may be resold without registration under
the Securities Act only in certain limited circumstances. In this respect, the
Seller represents that it is familiar with Rule 144 promulgated under the
Securities Act, as presently in effect, and understands the resale limitations
imposed thereby and otherwise by the Securities Act.
w. Further Limitations on Disposition. Without in any way
limiting the representations set forth above, the Seller further agrees not to
make any disposition of all or any portion of the Securities unless and until:
(i) There is then in effect a Registration
Statement under the Securities Act covering such proposed disposition and such
disposition is made in accordance with such Registration Statement; or
(ii) The Seller shall have (A) notified the
Purchaser of the proposed disposition and shall have furnished the Purchaser
with a detailed statement of the circumstances surrounding the proposed
disposition, and (B) if reasonably requested by the Purchaser, furnished the
Purchaser with an opinion of counsel, reasonably satisfactory to the Purchaser,
that such disposition will not require registration under the Securities Act.
It is agreed that the Purchaser will not require opinions of counsel for
transactions made pursuant to Rule 144 except in unusual circumstances.
(iii) Notwithstanding the provisions of paragraphs (i)
and (ii) above, no such registration statement or opinion of counsel shall be
necessary for a transfer by the Seller to a constituent partner (including any
constituent of a constituent) of the Seller or to a trust for the benefit of a
constituent and or members of his immediate family, if the transferee or
transferees agree in writing to be subject to the terms hereof to the same
extent as if they were the Purchaser hereunder.
x. Legends. It is understood that the Securities, and any
securities issued in respect thereof or exchange therefor, may bear one or all
of the following legends: (i) a legend setting forth the restrictions stated
above with respect to the Securities Act of 1933 and Rule 144 promulgated
thereunder, (ii) any legend required by the laws of the State of California or
New York, including any legend required by the California Department of
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Corporations, and/or (iii) any legend required by the Blue Sky laws of any other
state to the extent such laws are applicable to the Securities so legended.
y. Material Misstatements and Omissions. No representation
or warranty by the Seller or the Shareholder in this Agreement, any Related
Agreement or in any certificate furnished or to be furnished by the Seller or
the Shareholder pursuant hereto or thereto or in connection with the
transactions contemplated hereby or thereby contains or will contain any untrue
statement of a material fact or omits or will omit to state a material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. The Seller and the Shareholder have
delivered or made available true and complete copies of each document which has
been requested by the Purchaser.
4. Representations and Warranties of the Purchaser. The Purchaser
represents and warrants to the Seller and the Shareholder that, except as set
forth in the Disclosure Schedule attached to this Agreement as Exhibit M (the
"PURCHASER DISCLOSURE SCHEDULE"):
a. Organization. The Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the State of
California and has all requisite power and authority to own, operate and carry
on its business as it is now conducted.
b. Due Authority; Valid and Binding Agreements. The
Purchaser has the power and authority to enter into and be bound by the terms
and conditions of this Agreement and the Related Agreements to which it is a
party and to carry out its obligations pursuant hereto and thereto. Each of this
Agreement and the Related Agreements to which the Purchaser is a party is or,
upon execution and delivery thereof will be, a legal, valid and binding
obligation of the Purchaser, in each case enforceable against the Purchaser in
accordance with its terms. The execution, delivery and performance by the
Purchaser of this Agreement and the Related Agreements has been authorized and
approved by all necessary corporate action and in compliance with all applicable
laws. All corporate action on the part of the Purchaser, its officers, directors
and shareholders necessary for the authorization, issuance and delivery of the
Warrant has been taken or will be taken prior to the Closing, and, with respect
to the Warrant Shares, will be taken prior to the exercise of the Warrant.
c. No Conflicts or Violations. Neither the execution or
delivery of this Agreement and the Related Agreements nor the consummation of
the purchase and sale of the Purchased Assets and the other transactions
contemplated by this Agreement or the Related Agreements will (i) conflict with
or result in any violation of or constitute a default under any provision of the
Purchaser's Articles of Incorporation or Bylaws or any agreement, mortgage,
bond, indenture, franchise or other instrument or obligation to which the
Purchaser is a party or by which it is bound, (ii) violate any judgment, order,
injunction, decree or award of any court, administrative agency or governmental
body against, or binding upon, the Purchaser or upon the property or business
regulation of any jurisdiction as such law or regulation relates to the
Purchaser or the property or business of the Purchaser, (iii) constitute a
violation by the Purchaser of any law or regulation of any jurisdiction, or (iv)
result in the breach of any of the terms or conditions of, or constitute a
default under, or otherwise cause any impairment of, any
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<PAGE> 18
permit, license or other governmental authorization held by the Purchaser or
required of the Purchaser to conduct its business.
d. Financial Statements. The audited financial statements of
the Purchaser for the periods ended December 31, 1992 and March 31, 1992, and
unaudited financial statements for the nine-month period ended September 30,
1993, attached to this Agreement as Exhibit N (collectively, the "PURCHASER
FINANCIAL STATEMENTS"), are complete and correct and have been prepared in
accordance with the Purchaser's books and records and with generally accepted
accounting principles applied on a consistent basis throughout the periods
indicated and with each other (except in the case of interim financial
statements for the lack of footnotes and subject to normal year-end audit
adjustments, which, in neither case, are material), and fairly and accurately
set forth the operating results of the Purchaser as of the dates and for the
periods indicated therein. Since the date of such financial statements, there
has not been any adverse change in the revenues, liabilities, operating results
or prospects of the Purchaser or any change in the Purchaser's business from
that reflected in the Purchaser Financial Statements.
e. Capitalization. As of the date of this Agreement, the
authorized capital of the Purchaser consists of:
(i) Preferred Stock. Five Million Eighteen Thousand
Four Hundred Ninety-One (5,018,491) shares of Preferred Stock, of which (a)
138,269 shares have been designated Series A Preferred Stock, of which 138,268
are issued and outstanding, (b) 800,000 shares have been designated Series B
Preferred Stock, of which 580,061 shares are issued and outstanding, (c)
3,810,000 shares have been designated Series C Preferred Stock, of which
2,805,519 shares are issued and outstanding, and (d) 270,222 shares have been
designated Series D Preferred Stock, all of which are issued and outstanding.
(ii) Common Stock. Eight Million (8,000,000) shares
of Common Stock, of which Three Hundred Ten Thousand Three Hundred Sixty-Three
(310,363) shares are issued and outstanding.
(iii) Reservation of Stock. The Purchaser has reserved
(a) 17,556 shares of Series B Preferred Stock for issuance upon exercise of a
certain outstanding warrant to purchase shares of Series B Preferred Stock (the
"SERIES B WARRANT"), (b) 15,000 shares of Series C Preferred Stock for issuance
upon exercise of a certain outstanding warrant to purchase shares of Series C
Preferred Stock (the "SERIES C WARRANT"), (c) 138,268 shares of Common Stock
for issuance upon conversion of the Series A Preferred Stock, (d) 597,617
shares of Common Stock for issuance upon conversion of the Series B Preferred
Stock, (e) 2,820,519 shares of Common Stock for issuance upon conversion of the
Series C Preferred Stock and (f) 270,222 shares of Common Stock for issuance
upon conversion of the Series D Preferred Stock. The Purchaser has also
reserved an aggregate of up to 1,023,376 shares of Common Stock for issuance,
at the discretion of the Board of Directors, to officers, directors, employees
and consultants pursuant to equity incentive plans adopted by the Purchaser.
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(iv) Capitalization Table. Attached hereto as Exhibit
O is a table representing the foregoing capitalization of the Purchaser and
assuming the issuance of the Warrant. Such table is true and correct except to
the extent of the assumed issuance of the Warrant.
f. Valid Issuance. The outstanding shares of Common Stock and
Series A, Series B, Series C and Series D Preferred Stock and the Series B
Warrant and Series C Warrant are duly and validly issued (including, without
limitation, issued in compliance with applicable federal and state securities
laws) and the outstanding capital stock is fully-paid and nonassessable. The
Warrant, when issued, sold and delivered in accordance with the terms hereof
for the consideration expressed herein, will be duly and validly issued
(including, without limitation, issued in compliance with applicable federal
and state securities laws), and the Warrant Shares, when issued upon proper
exercise of the Warrant, will be fully paid and nonassessable and free of
restrictions on transfer other than restrictions on transfer under this
Agreement, any Related Agreements and applicable state and federal securities
laws.
g. No Undisclosed Liabilities. The Purchaser has no
liabilities or obligations, accrued, absolute, known or unknown, contingent or
otherwise, except (i) the liabilities and obligations set forth in the most
recent balance sheet included in the Purchaser Financial Statements, and (ii)
liabilities and obligations which have been incurred subsequent to the date of
such balance sheet in the ordinary course of business which are not,
individually or in the aggregate, material. There are no claims against, or
liabilities or obligations of, or any reasonable basis known to the Purchaser
for any claims which, individually or in the aggregate, might result in or
cause any material adverse change in the Purchaser's business or prospects.
h. No Violation of Law. The Purchaser has not engaged in any
activity or omitted to take any action as a result of which the Purchaser is or
has been in violation of any applicable federal, state or other law or
regulation, ordinance, order, injunction or decree, or any other requirement of
any governmental body, agency, authority or court.
i. Health, Safety, Employment and Environmental Matters.
(i) The Purchaser is in compliance with all federal,
state, local and foreign health and occupational safety laws and all federal,
state, local and foreign laws related to employment and employment practices,
compensation and benefits, which are applicable to the Purchaser or its
business, and the Purchaser has conducted its business in compliance with the
foregoing provisions.
(ii) The Purchaser is in compliance with the terms and
conditions of all environmental permits, licenses, and other authorizations
required under applicable laws relating in any way to pollution of the
environment, and the Purchaser has conducted its business in compliance with
the foregoing provisions.
(iii) The Purchaser is in compliance with all
applicable federal, state, local and foreign laws relating to emissions,
discharges, and releases of hazardous materials into the environment and the
generation, treatment, storage, transportation and
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<PAGE> 20
disposal of hazardous wastes, including, without limitation, any applicable
provisions of the Resource Conservation and Recovery Act of 1976 or the
Comprehensive Environmental Response. Compensation and Liability Act of 1980,
and the Purchaser has conducted its business in compliance with the foregoing
provisions.
(iv) There are no conditions at, on, under or
related to, any real property of the Purchaser or at which they conduct or have
conducted any of their operations or business which presently or potentially
pose a significant hazard to human health or the environment, whether or not in
compliance with law, and there has been no production, use, treatment, storage,
transportation or disposal by the Purchaser of any Hazardous Substance, as
hereinafter defined, at or on such real property nor any release or threatened
release by the Purchaser of any Hazardous Substance, pollutant or containment
into or upon or over the Real Property or into or upon ground or surface water
at or within 2,000 feet of the boundaries of such real property except in
compliance with applicable law. No Hazardous Substance is now or ever have been
stored by the Purchaser on such real property in underground tanks, pits or
surface impoundments except in compliance with applicable law.
(v) No action, investigation, proceeding, permit
revocation, permit amendment, writ, injunction or claim is pending, nor has the
Purchaser received any notice of any of the foregoing, concerning or relating
to (A) the use, storage, sale or disposal of any Hazardous Substance related to
the Purchaser's business, (B) the exposure of any person to any Hazardous
Substance as a consequence of any activity related to the conduct of the
Purchaser's business or (C) the presence of any Hazardous Substance in, on or
under any of the Purchaser's facilities or any property owned, leased or
occupied by the Purchaser.
(vi) For purposes of this Agreement, "Hazardous
Substance" shall mean any hazardous or toxic substance, material or waste which
is regulated by any local governmental authority, any state or the United
States Government.
j. Regulatory Compliance. The Purchaser has complied with
all requirements imposed on the drug products sold or proposed for sale or
testing by the Purchaser relating to the premarket development, production, sale
and marketing thereof, pursuant to the Federal Food, Drug and Cosmetic Art (the
"FDC Act"), the regulations promulgated by the U.S. Food and Drug Administration
(the "FDA") thereunder, and any policies issued by the FDA concerning the
premarket development, production, sale and marketing of such drug products,
including any conditions for approval and/or postmarket requirements that are
specific to such drug products. Furthermore, the Purchaser is not currently and
has never been required to comply with the requirements of the federal
Controlled Substances Act (the "CSA"), the implementing regulations promulgated
by the U.S. Drug Enforcement Administration (the "DEA") thereunder, or any
policies issued by the DEA concerning the premarket development, production,
sale and marketing of such controlled substances.
k. Litigation. There are no suits, actions or
administrative, arbitration, unfair labor practice, worker's compensation or
other proceedings or governmental investigations, pending or, to the
Purchaser's knowledge, threatened against or relating, directly
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<PAGE> 21
or indirectly to the Purchaser and there are no judgments, orders, injunctions,
decrees, stipulations or awards (whether rendered by a court, administrative
agency or by arbitration pursuant to a grievance or other procedure) against or
relating to the Purchaser which could result in a material adverse effect on the
financial condition, business or prospects of the Purchaser, or any lien or
other encumbrance on the assets of the Purchaser.
l. Material Contracts. The Purchaser is not bound
by any contract, agreement or instrument of any kind except as listed in the
Purchaser Disclosure Schedule (the "PURCHASER MATERIAL CONTRACTS"). No default,
breach or condition permitting declaration of breach or default exists with
respect to any of the Purchaser Material Contracts.
m. Intellectual Property.
(i) As of the Closing, the Purchaser has or
will have sufficient title and ownership of all patents, trademarks, service
marks, trade names, copyrights, trade secrets information, proprietary rights
and processes necessary for its business as now conducted and as proposed to be
conducted without any conflict with or infringement of the rights of others.
(ii) The Purchaser is not aware that it has
violated or, by conducting its business as proposed, would violate any of the
Intellectual Property Rights of any other person or entity. The execution,
delivery and performance of this Agreement and the Related Agreements and the
consummation of the transactions contemplated hereby and thereby will not
breach, violate or conflict with any instrument or agreement governing any
intellectual property right necessary or required for, or used in, the conduct
of the business of the Purchaser as presently conducted.
(iii) The Purchaser is not aware that any of
its employees are obligated under any contract (including licenses, covenants
or commitments of any nature) or other agreement or subject to any judgment
decree or order of any court or administrative agency, that would interfere
with the use of his best efforts to promote the interests of the Purchaser or
that would conflict with the Purchaser's business as proposed to be conducted.
Neither the execution nor delivery of this Agreement, nor the carrying on of the
Purchaser's business by the employees of the Purchaser, nor the conduct of the
Purchaser's business as proposed, will, to the Purchaser's knowledge, conflict
with or result in a breach of the terms, conditions or provisions of, or
constitute a default under, any contract, covenant or instrument under which
any of such employees is now obligated.
(iv) The Purchaser has taken reasonable and
practicable steps (including, without limitation, entering into confidentiality
and non-disclosure agreements and inventions assignment agreements with all
officers and employees of and consultants to the Seller with access to or
knowledge of the Seller's Intellectual Property Rights) designed to safeguard
and maintain the secrecy and confidentiality of, and/or its proprietary rights
in, all of the Seller's Intellectual Property Rights.
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n. Disclosure. The Purchaser has provided the
Seller and the Shareholder with the most recent draft of the Purchasers
Business Plan (the "BUSINESS PLAN"). To the extent the Business Plan was
prepared by management of the Purchaser, the Business Plan and the financial
projections contained in the Business Plan were prepared in good faith;
however, the Purchaser does not represent or warrant that it will achieve such
financial projections.
o. Brokers. The Purchaser is not obligated either
directly or indirectly, to any person for brokerage or finders' fees or agents'
commissions or any similar charges in connection with this Agreement, and
agrees to indemnify the Purchaser and the Shareholder against any liability
incurred by the Purchaser or the Shareholder resulting from any such charges
alleged to be payable because of any act, omission or statement of or by the
Purchaser.
p. Material Misstatements and Omissions. No
representation or warranty by the Purchaser in this Agreement or the Related
Agreements or in any certificate furnished or to be furnished by the Purchaser
pursuant hereto or thereto or in connection with the transactions contemplated
hereby or thereby contains or will contain any untrue statement of a material
fact or, omits or will omit to state a material fact necessary to make the
statement therein, in light of the circumstances under which they were made not
misleading.
5. Interim Agreements.
a. Access: Confidentiality. The Seller agrees to
make available all books, records, facilities, employees, non-employee agents
(such as patent and regulatory counsel) and information necessary for the
Purchaser to evaluate the Purchased Assets. The Purchaser agrees to make
available all books, records, facilities, employees non-employee agents (such
as patent and regulatory counsel) and information necessary for the Seller to
evaluate the business financial condition and prospects of the Purchaser. Each
party hereto shall keep confidential and shall not make use of any information
treated by the other party as confidential (including, without limitation, the
existence of this Agreement), obtained from the other party concerning the
assets, properties, business or operations of the other party other than to
legal counsel, consultants, financial advisers, key employees, lenders and
investment bankers where such disclosure is related to the performance of
obligations under this Agreement or the consummation of the transactions
contemplated under this Agreement (all of whom shall be similarly bound by the
provisions of this Section 5(a)), except as may be required to be disclosed by
applicable law. Notwithstanding the foregoing, the foregoing confidentiality
restrictions shall not apply to any information which (i) becomes generally
available to the public through no fault of the receiving party or its
employees, agents or representatives; (ii) is independently developed by the
receiving party without benefit of the above-described information (and such
independent development is substantiated in writing), or rightfully received
from another source on a non-confidential basis; (iii) when such disclosure is
required by a court or governmental authority or is otherwise required by law or
is necessary to establish rights under this Agreement or any Related Agreement
or any Related Agreement (and the disclosing party has taken all reasonable
efforts to limit the scope of such disclosure and to protect the confidential
nature of the information disclosed).
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<PAGE> 23
b. Public Announcements. The Purchaser, the
Seller and the Shareholder agree to cooperate in good faith and mutually consent
to any press release or public statement with respect to the existence of this
Agreement or the transactions contemplated hereby, and further agree not to
issue any such press release or public statement prior to consultation with the
other, except as may be required by law.
c. Interim Operations. The Seller agrees, and the
Shareholder agrees to cause the Seller to ensure that, from the date of this
Agreement to the Closing Date, the Seller shall take no action (i) that could
reasonably be expected to diminish in any material way the value of the
Purchased Assets, or (ii) that would result in any representation or warranty
of the Seller or the Shareholder being untrue in any material respect. Without
limiting the generality of the foregoing, the Seller shall not, without the
prior approval of the Purchaser, enter into any material agreement or
commitment, waive any material right or otherwise materially alter any of its
current activities with respect to the Seller's conduct of research development
or testing of the Hyline Products relating to Metoclopramide.
d. Occurrence of Conditions. Each party hereto
shall use its commercially reasonable efforts, or where appropriate cooperate
in the efforts of the other party, to cause the occurrence of the conditions
specified in Section 6 and Section 7 of this Agreement.
e. Seller's Non-solicitation Agreement. From the
date hereof and until the Closing Date or the termination of this Agreement,
whichever occurs earlier, neither the Seller nor the Shareholder shall, whether
directly or indirectly or through any affiliate, advisor or other consultant,
initiate or participate in any discussion or negotiation relating to, or
provide any information in connection with, any possible sale, directly or
indirectly, of the Seller, any of its corporate interests, assets or business
(including, without limitation, the Purchased Assets), to any party other than
the Purchaser.
f. Certain Assignments. The Seller and the
Shareholder shall use their respective best efforts to obtain assignments to
Purchaser on or prior to the closing of each of the Assigned Contracts on the
same terms or terms more favorable to the Purchaser as currently exist with
respect to the Seller, provided, however, that neither the Seller nor the
Shareholder shall be required to pay or transfer or promise to pay or transfer
any sum or property right in order to obtain any such consent.
g. Purchaser's Non-Solicitation Agreement. The
Purchaser agrees for itself and its affiliates that if the transactions
contemplated by this Agreement do not close for any reason resulting primarily
from the fault or breach of the Purchaser, neither the Purchaser nor its
affiliates will without first obtaining the prior written consent of the Seller,
directly or indirectly enter into negotiations or an agreement with Antisoma
Ltd. or any of its affiliates regarding the bladder carcinoma product or enter
into an agreement with Laslo Darco (Pharmacon) or any of its affiliates
regarding the immune suppressor product. The foregoing provisions are not
intended to limit any confidentiality agreement previously entered into by the
Purchaser and the Seller.
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<PAGE> 24
6. Conditions to Obligations of the Purchaser. Absent a waiver in
writing, all obligations of the Purchaser to purchase the Purchased Assets are
subject to the satisfaction of the following conditions, to the Purchaser's
reasonable satisfaction, on or before the completion of the Closing on the
Closing Date:
a. Representations, Warranties and Performance. The
representations and warranties of the Seller and the Shareholder contained
herein shall be deemed to have been made again at and as of the Closing Date
and shall then be true and correct in all material respects with the same force
and effect as if such representations and warranties have been made at and as
of the Closing Date; the Seller and the Shareholder shall have performed and
complied with all agreements, conditions and covenants required by this
Agreement to be performed or complied with by the Seller and the Shareholder
prior to or at the Closing Date; and the Seller shall have furnished to the
Purchaser a certificate of the President of the Seller and the Shareholder
dated the Closing Date, verifying, in such detail as the Purchaser may
reasonably request, to the fulfillment of the foregoing conditions.
b. Litigation. There shall not be pending any litigation
before any court or governmental agency (i) the outcome of which could
reasonably be expected to have a material adverse affect on the Purchased
Assets or their value to the Purchaser, or (ii) to restrain or prohibit or to
obtain damages or other relief in connection with, or which is related to or
arises out of, this Agreement, the Related Agreements or the transactions
contemplated hereby or thereby.
c. Approvals. All corporate action shall have been taken by
the Seller and the Shareholder necessary for the approval of this Agreement,
the Related Agreements and the transactions contemplated hereby and thereby,
and all required consents and approval, as set forth on Exhibit L hereto, or
filings shall have been made or completed to the Purchaser's reasonable
satisfaction under any applicable law, rule or regulation or pursuant to any
contract or agreement to which the Seller or the Shareholder may be a party.
d. Certain Assignments. The assignments of the Assigned
Contracts as described in Section 5(f) hereof shall have been received to the
Purchaser's reasonable satisfaction.
e. Absence of Material Changes. Between the date of this
Agreement, and the Closing Date, there shall not have been any adverse change
in or to the Purchased Assets or the Seller's financial condition, business or
prospects.
f. Legal Opinion. The Purchaser shall have received the legal
opinions of Salon, Marrow & Dyckman, counsel to the Seller and the Shareholder,
and Philip French, special patent counsel to the Seller, each dated the Closing
Date, in the respective forms attached hereto as Exhibit P and Exhibit O. Such
opinions shall be in form and substance reasonably satisfactory to the
Purchaser and its legal counsel.
g. Related Agreements. The Seller and the Shareholder shall
have executed and delivered each of the Related Agreements to which they are a
party.
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h. Regulatory Matters. The Seller shall have delivered to the
Purchaser (i) letters to be executed by the Seller or the Predecessor notifying
the FDA of the transfer of the purchased drug products, including the transfer
of investigational new drug applications and orphan drug designations, as per
21 C.F.R. Section 316.27, and (ii) the original recorded documentation of FDA
approval of all investigational new drug applications filed with the FDA by the
Seller or the Predecessor with respect to the Purchased Assets.
i. FIRPTA Affidavit. The Seller shall have provided the
Purchaser with an affidavit stating, under penalty of perjury, that the Seller
is not a foreign person and providing the Seller's U.S. taxpayer identification
number.
7. Conditions to Obligations of the Seller. Absent a waiver in
writing, all obligations of the Seller to sell the Purchased Assets, are
subject to the satisfaction of the following conditions, to the Seller's
reasonable satisfaction, on or before the completion of the Closing on the
Closing Date:
a. Representations, Warranties and Performance. The
representations and warranties of the Purchaser shall be deemed to have been
made again at and as of the Closing Date and shall then be true and correct in
all material respects with the same force and effect as if such representations
and warranties had been made at and as of the Closing Date; the Purchaser shall
have performed and complied with all agreements, conditions and covenants
required by this Agreement to be performed or complied with by it prior to or
at the Closing Date; and the Seller shall have been furnished with a
certificate of the President of the Purchaser, dated the Closing Date,
certifying in such detail as the Seller may reasonably request, to the
fulfillment of the foregoing conditions.
b. Litigation. There shall not be pending any litigation
before any court or governmental agency to restrain or prohibit or to obtain
damages or other relief in connection with, or which is related to or arises
out of, this Agreement, the Related Agreements or the transactions contemplated
hereby or thereby.
c. Approvals. All corporate action shall have been taken by
the Purchaser necessary for the approval of this Agreement, the Related
Agreements and the transactions contemplated hereby and thereby, and all
required consents, approvals or filings shall have been made or completed to
the Seller and Shareholder's reasonable satisfaction under any applicable law,
rule or regulation or pursuant to any contract or agreement to which the
Purchaser may be a party.
d. Absence of Material Changes. Between the date of this
Agreement, and the Closing Date, there shall not have been any adverse change
in or to the Purchaser's financial condition.
e. Legal Opinion. The Seller shall have received a legal
opinion of Venture Law Group, counsel to the Purchaser, dated the Closing Date,
in the form attached hereto as Exhibit R. Such opinion shall be in form and
substance reasonably satisfactory to the Seller and its legal counsel.
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<PAGE> 26
f. Related Agreements. The Purchaser shall have executed
and delivered the Related Agreements, and the Sixth Amended and Restated Rights
Agreement between the Purchaser, the Seller and certain shareholders of the
Purchaser in the form attached to this Agreement as Exhibit S (the "RIGHTS
AGREEMENT"), shall have been executed and delivered by each shareholder of the
Purchaser named on the signature page thereto.
g. Regulatory Matters. The Purchaser shall have delivered
to the Seller letters executed by the Purchaser notifying the FDA of the
transfer of the purchased drug products.
h. Side Letter Agreement. The Purchaser shall have
delivered to the Seller a copy of the Side Letter Agreement, the form of which
is attached hereto as Exhibit T, executed by certain of the Purchaser's
shareholders.
i. Valuation Matters. The Seller and the Shareholder shall
have received from EGS Securities Corp. a written opinion regarding the fair
market value of the consideration to be received by the Seller in this
transaction in form and substance reasonably satisfactory to the Seller and the
Shareholder.
8. Termination: Survival and Effect of Termination.
a. Termination. Anything contained herein to the contrary
notwithstanding, this Agreement may be terminated and the transactions
contemplated hereby abandoned at any time prior to the Closing Date:
(i) By mutual consent of the Purchaser and the
Seller;
(ii) By the Purchaser, if any of the conditions set
forth in Section 6 shall have become reasonably incapable of fulfillment prior
to January 15, 1994, through no fault of the Purchaser and such condition shall
not have been waived in writing by the Purchaser;
(iii) By the Seller, if any of the conditions set
forth in Section 7 shall have become reasonably incapable of fulfillment prior
to January 15, 1994, through no fault of the Seller and such condition shall
not have been waived in writing by the Seller;
(iv) By either Purchaser or the Seller if (A) the
other has breached this Agreement in any material respect other than a breach
of any representations and warranties made by the other in Section 3 or Section
4 of this Agreement (as the case may be), or (B) the Closing does not occur on
or before January 15, 1994 (unless such date is extended by mutual agreement),
but only if the failure to consummate such transaction on or before such date
did not result from the failure by the party seeking such termination to
fulfill any condition set forth in Section 5(d), Section 6 or Section 7, as the
case may be, which is a condition precedent to the obligation of the other
under this Agreement to consummate the transactions contemplated hereby;
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<PAGE> 27
(v) By the Purchaser if, since October 1, 1993,
there has been an adverse change in the Seller's business or prospects or in the
Purchased Assets; or
(vi) By the Seller if, since October 1, 1993, there
has been an adverse change in the business or prospects of the Purchaser.
b. Survival. If this Agreement is terminated prior to
Closing and the transactions contemplated hereby are not consummated as
described above, this Agreement shall become void and of no further force and
effect, except for the provisions of Section 5(a) (relating to the obligations
of confidentiality); Section 5(b) (relating to disclosure); Section 8 (relating
to termination); and Section 10 (relating to certain miscellaneous provisions).
9. Covenants Following Closing.
a. Indemnification.
(i) Indemnification by the Seller and the
Shareholder. Each of the Seller and the Shareholder, jointly and severally,
agrees to indemnify, defend and hold the Purchaser, its employees, directors,
agents and representatives, harmless from and against any and all losses,
claims, demands, damages, costs and expenses (including without limitation,
reasonable attorneys' fees and disbursements and expenses incurred in the
investigation, defense or settlement) of every kind, nature and description
(collectively, "CLAIMS") based upon, arising out of or otherwise in respect of
(A) any inaccuracy in or any breach or any representation, warranty, covenant or
agreement of the Seller or the Shareholder contained in this Agreement or in any
certificate, document or instrument delivered pursuant to this Agreement at
Closing; (B) any claim arising out of or made in connection with the Seller's
conduct of its business prior to the Closing other than obligations expressly
assumed by the Purchaser with respect to the Assigned Contracts: (C) any failure
to comply in all respects with the "bulk sales" or "bulk transfer" laws of any
jurisdiction in connection with the transactions contemplated hereby; (D) any
Covered FDA or DEA Action (as defined below), in so far as it relates to the
conduct of the Seller's business prior to the Closing; (E) any infringement or
other violation by the Seller, whether known or unknown, of any third party's
intellectual property, rights as the same relate to the Purchased Assets; (F)
any employment or consulting relationship between Seller, Shareholder or any
affiliates thereof and any person other than obligations expressly assumed by
the Purchaser with respect to the Assigned Contracts; (G) successor liability
imposed upon the Purchaser under any state laws imposing successor liability for
Taxes on purchasers of assets, or (H) any claim related to the Purchased Assets,
as such claim relates to any environmentally hazardous or toxic substance,
material or waste is regulated by any local government authority, any state or
the United States Government. The Seller shall not be obligated to indemnify
and hold harmless the Purchaser from, or defend the Purchaser against, any
Designated Liability Claims, as defined below; provided, however, that this
sentence shall not limit in any respect Seller's obligation to indemnify and
hold harmless the Purchaser from Claims arising from the breach of the Seller's
representations and warranties in Section 3(g) and 3(k)(i) of this Agreement.
Each of the Seller and the Shareholder agrees that any breach of this Agreement
by the Seller shall be deemed to be a breach of this Agreement by the
Shareholder, and that the obligations of the Seller and the Shareholder
hereunder, shall be, in all cases, joint
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and several. Notwithstanding the foregoing, neither the Seller nor the
Shareholder shall be obligated to indemnify the Purchaser with respect to (X)
any Claim (other than any Claim relating to Taxes) as to which notice has not
been provided to the Seller or the Shareholder, as the case may be, on or prior
to the third anniversary of the Closing Date; or (Y) any Claim to the extent the
aggregate amount of all Claims for which indemnification would be required
hereunder by the Seller and the Shareholder exceeds the aggregate amount of
those elements of the Purchase Price described in Section 2(a)(i) and Section
2(a)(ii) hereon provided, however, that the foregoing limitations in (X) and (Y)
shall not apply to any claim made in connection with any liabilities arising
from the conduct of the Seller or the Predecessor prior to the Closing and not
expressly assumed hereunder, or arising out of the Seller's failure to duly
perform its obligations hereunder or under any or all of the Related Agreements.
(ii) Covered FDA or DEA Actions. For the purposes of
paragraph (i) above, a "COVERED FDA OR DEA ACTION" shall mean either (x) an FDA
or DEA Action (as defined below) that is the result of a Covered Enforcement
Proceeding (as defined below) or (y) a Qualified Recall (as defined below). For
the purposes of the foregoing, the following definitions apply:
(A) An "FDA OR DEA ACTION" shall mean (i) any
enforcement letter issued by the FDA or DEA relating to a Hyline Product,
including, without limitation, a warning letter issued by the FDA or DEA in so
far as it relates to the conduct of the business of the Seller prior to the
Closing Date, (ii) any seizure or recall by or at the direction of the FDA or
DEA after the Closing Date of any Hyline Product (made or packaged by or for the
Seller or the Predecessor on or prior to the Closing Date), (iii) an injunction
or the filing of a motion for an injunction, indictment or issuance of a
"Section 305 Hearing Notice" against the business by or on behalf of the FDA or
a withdrawal or suspension by the FDA of an IND or NDA relating to a Hyline
Product, or any DEA adverse action in so far as it relates to the conduct of the
business of the Seller prior to the Closing Date or (iv) any other government
civil and/or criminal enforcement action taken by the FDA or DEA relating to a
Hyline Product in so far as it relates to the conduct of the business of the
Seller prior to the Closing Date.
(B) A "COVERED ENFORCEMENT ACTION" shall mean any
enforcement proceeding initiated and/or prosecuted by the FDA or DEA on its
behalf or through the United States Department of Justice against the Purchaser
to the extent that it relates to the conduct of the Seller's business prior to
the Closing Date.
(C) A "QUALIFIED RECALL" shall mean a recall by the
Purchaser of a Hyline Product based upon the reasonable belief that the product
violates the FDC Act or the rules or regulations promulgated thereunder as a
result of the conduct of the Seller's business prior to the Closing Date, but
only to the extent that it relates to such conduct.
(iii) Maintenance of Records. The Purchaser covenants that,
for so long as the Seller is subject to the indemnification provisions of
paragraph (i) above, it will maintain all production, manufacturing,
distribution, quality assurance and complaint resolution records for all Hyline
Products and will allow the Seller, upon reasonable notice, to
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inspect and copy such records to the extent necessary for the Seller to fulfill
such indemnification obligations or to comply with any regulatory requirement.
(iv) Indemnification by the Purchaser. The
Purchaser agrees to indemnify, defend and hold the Seller, the Shareholder, and
their respective employees, directors, agents and representatives harmless from
and against any and all Claims based upon, arising out of or otherwise in
respect of (A) any inaccuracy in or any breach of any representation, warranty,
covenant or Agreement of the Purchaser contained in this Agreement or in any
certificate, document or instrument delivered pursuant to this Agreement at the
Closing; (B) any claim arising out of or made in connection with the
Purchaser's conduct of its business after the Closing, including, without
limitation, claims arising out of its failure to duly perform its obligations
arising after the Closing under the Assigned Contracts; or (C) any Claim made
by a participant (or a participant's successor-in-interest) in any clinical
trials of any Hyline Product conducted prior to the Closing that use of such
Hyline Product in such clinical trial caused illness, injury or death to such
participant (whether such Claim has been brought directly or indirectly against
the Seller, the Shareholder, or their respective employees, directors, agents
or representatives) (such claims under this subpart (C) being referred to
herein as the "DESIGNATED LIABILITY CLAIMS"). Notwithstanding the foregoing,
the Purchaser shall not be obligated to indemnify the Seller, the Shareholder
or their respective employees, directors, agents and representatives with
respect to (X) any Claim as to which notice has not been provided to the
Purchaser on or prior to the third anniversary of the Closing Date; or (Y) any
Claim to the extent the aggregate amount of all Claims for which
indemnification would be required hereunder by the Purchaser exceeds the
aggregate amount of those elements of the Purchase Price described in Section
2(a)(i) and Section 2(a)(ii) hereof; provided, however, that the foregoing
limitations in (X) and (Y) shall not apply to any claim, other than Designated
Liability Claims, made in connection with Purchaser's conduct of its business
after the Closing, including, without limitation, claims arising out of its
failure to duly perform its obligations assumed under the Assigned Contracts or
with respect to Purchaser's obligations under Section C hereof or under any of
the Related Agreements.
(v) De Minimis Amount. Neither the Seller nor the
Shareholder, on the one hand, nor the Purchaser, on the other hand, shall be
required to pay the first one hundred thousand dollars ($100,000.00) in the
aggregate of indemnification pursuant to this Section 9 for any breach,
inaccuracy or misrepresentation regarding any of the warranties or
representations made by such party hereunder.
(vi) Insurance Coverage. To the extent that any
claim is compensable or protected under an enforceable contract of insurance
("INSURANCE CLAIM and "INSURANCE POLICY"), the Insurance Claim shall be
diligently pursued to the full extent of the Insurance Policy before the
indemnifying party shall be liable hereunder. The Purchaser agrees that in the
event the Purchaser shall obtain any products liability insurance policy which
extends to the Hyline Products (which the Purchaser shall have no obligation to
obtain), the Purchaser will add the Seller and the Shareholder as "Additional
Insureds" on such policy; provided, that the Purchaser shall not be obligated
to do so if so adding Additional Insureds would cause the Purchaser to incur
additional expense or if such action would cause the amount of insurance
coverage available to the Purchaser or its affiliates to be reduced.
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(vii) Notification: Settlement. Any party seeking
indemnification hereunder shall notify the party from whom indemnification may
be sought promptly following the indemnified party's receipt of notice of such
Claim; provided that any failure to notify the indemnifying party shall not
limit the indemnified party's rights to indemnification except and only to the
extent such delay in notifying the indemnified party materially prejudices the
defense of such Claim. Indemnification shall be provided hereunder by the
indemnifying party on an as-incurred basis, provided that the indemnified party
agrees in writing to promptly reimburse the indemnifying party in the event
that the indemnified party ultimately is determined not to be entitled to such
indemnification. No indemnifying party shall have any obligation to provide
indemnification with respect to any Claim as to which the indemnified party
enters into a settlement or consent to judgment without the prior written
consent of the indemnifying party. No indemnifying party shall enter into any
settlement or consent to judgment with respect to any Claim unless such
settlement or consent to judgment provides a full release of each indemnified
party with respect thereto. Each of the parties hereto agrees to use their best
efforts to defend against any Claim, and to cooperate with the other parties in
order to minimize the amount of any Claim. The indemnified parties shall use
their best efforts to make any claim for indemnification hereunder not later
than the ninety (90) days after the date on which they have actual knowledge of
the material facts relating to such claim.
(viii) Set-Off Provisions. If a claim for
indemnification is made by the Purchaser (or the related parties enumerated
above) against the Seller or the Selling Shareholder hereunder, the Purchaser
may, at its option and by notice to the Seller (and without limiting any other
rights it may have at law or equity), withhold and place into an
interest-bearing escrow account with an independent third-party reasonably
acceptable to both parties the amount reasonably estimated by the Purchaser to
be the value of such Claim against any principal or interest due under any of
the Notes or those certain amounts payable by Purchaser pursuant to the
Non-Competition Agreement, pending final adjudication or settlement of such
claim. Upon final adjudication or settlement of such claim, the Purchaser shall
retain the amount to which it is entitled hereunder in full or partial
satisfaction of such claim of indemnification and such retained amount shall
reduce and offset any other payment due to the Seller (with any remaining
amount to be paid to Seller). Any amount not properly retained by the Purchaser
under the terms of the final adjudication or settlement relating to such Claim
shall be paid promptly to the Seller. The Purchaser and the Seller shall be
entitled to receive any interest earned on their respective amounts distributed
from the escrow hereunder.
b. Seller's Employees. The Seller and the Shareholder
agree that the Seller shall bear sole responsibility for all amounts due and
payable or otherwise arising with respect to the Seller's employees at and
prior to the Closing Date, including but not limited to, all salaries, wages,
commissions, profit and revenue sharing, and holiday, vacation and severance
pay, bonuses and past service credits and shall have made and remitted, for all
periods through and including the Closing Date, all payroll deductions,
remittances and contributions, including, but not limited to, employees'
salaries and wages, commissions, bonuses and profit-sharing required under
contract, any collective bargaining agreements or applicable laws and
regulations. Except as expressly provided herein, the Purchaser shall have no
obligation whatsoever to employ any employee of the Seller following the
Closing Date.
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c. Use of Name
(i) Following the Closing Date, neither the Seller nor the
Shareholder (nor any of their respective affiliates) shall use the name "Hyline
Pharmaceuticals, Inc., "Hyline Group" or "Hyline" except in connection with
winding up of the Seller's business. The Seller and the Selling Shareholder
hereby represent and warrant that, to their knowledge, no other party has any
legal right to use the foregoing names in any business related to the business
of the Seller or which relates to the Purchased Assets.
(ii) Following the Closing Date, neither the Purchaser nor its
affiliates shall use the name "Darby" either alone or in conjunction with any
other word or phrase, other than in legal filings or other documents in which
such use is reasonably necessary.
d. Confidentiality. From the date hereof and until the tenth (10th)
anniversary of the Closing Date, the Seller and the Shareholder will hold in
confidence and use all reasonable efforts to cause all of their employees,
agents and representatives to hold in confidence all documents and other written
material containing knowledge or information of a confidential nature which is
solely or primarily related to the Seller's business or the Purchased Assets
(including, but not limited to, all of the Seller's Intellectual Property Rights
constituting part of the Purchased Assets), and not disclose, publish, use or
permit others to use the same. The foregoing restriction shall not apply to any
portion of the foregoing which (i) becomes generally available to the public
through no fault of the Seller, the Shareholder or their employees, agents or
representatives; (ii) is independently developed by the Seller or the
Shareholder without benefit of the above-described information (and such
independent development is substantiated in writing), or rightfully received
from another source on a non-confidential basis; or (iii) when such disclosure
is required by a court or governmental authority or is otherwise required by law
or is necessary to establish rights under this Agreement or any Related
Agreement (and the disclosing party has taken all reasonable efforts to limit
the scope of such disclosure and to protect the confidential nature of the
information disclosed). The Seller and the Shareholder agree further that
neither of them shall retain any existing tangible expressions of any the
Seller's Intellectual Property Rights included in the Purchased Assets which
would constitute confidential information subject to this Section 9(d).
e. Discharge of Liabilities. From and after the Closing Date, the
Seller shall promptly and fully satisfy and discharge all of its debts,
liabilities and obligations as they become due, except for liabilities
expressly assumed by the Purchaser hereunder or as shall be contested by the
Seller in good faith.
f. FDA Records. On the Closing Date, all records required by the
FDA to be kept by the Seller with reference to any Purchased Assets, as well as
other records maintained by the Seller or the Predecessor with respect thereto,
shall be transferred to the Purchaser. Responsibility for the accuracy of such
records prior to the Closing Date shall remain with the Seller, but
responsibility for custody and maintenance of such records subsequent to the
Closing Date shall belong to the Purchaser.
g. Cooperation.
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(i) The Seller and the Purchaser shall provide each
other with such information and access to books and records as may reasonably be
requested by the other in connection with any Claim or the preparation of any
returns of Taxes and audits or other proceedings relating to Taxes, and Seller
shall furnish Purchaser with such information as may be necessary under the
incremental research credit provisions of Section 41(f)(3)(A) of the Code.
(ii) The Seller and the Shareholder each agree to
reasonably cooperate (including, as necessary, through the attendance at
meetings) with the Purchaser and its agents in the Purchaser's negotiations
with the University of Michigan with respect to the acquisition by the
Purchaser of exclusive rights to the gelling delivery system, as it relates to
pharmaceutical applications, developed by such institution.
(iii) Each party hereto shall execute and deliver
such other instruments and do and perform such other acts and things as may be
necessary or reasonably desirable for effecting completely the consummation of
this Agreement, the Related Agreements and the transactions contemplated hereby
and thereby.
h. Non-Competition Covenant of the Seller. In
consideration of the payments set forth in Section 2 above, the Seller shall
not, prior to the fifth (5th) anniversary of the date of this Agreement, do any
of the following without the prior written consent of the Purchaser, directly
or indirectly (whether as a shareholder, partner, principal, agent, director,
affiliate, consultant or otherwise) (i) carry on in any county in the United
States of America or in any other country in the world (the "RESTRICTED
TERRITORY") any business activity relating, directly or indirectly, to the
development, marketing, licensing or use of any of the Hyline Products or
products intended for the same applications and utilizing the same delivery
system as any of the Hyline Products or (ii) solicit or influence or attempt to
influence any person employed by the Purchaser, including any person who may
have been employed by any the Seller or the Predecessor prior to his or her
employment with the Purchaser, to terminate or diminish his or her employment
with the Purchaser or become an employee or consultant of the Seller, the
Shareholder, any affiliate of the Shareholder or the Seller, or any competitor
of the Purchaser. The restrictions in this Section 9(h) shall not be deemed to
apply to any investments the Seller may make in any publicly traded company so
long as such Seller's aggregate holdings do not exceed five percent (5%) of the
outstanding voting securities of such company. The parties intend that the
covenants contained in this Agreement shall be construed as a series of
separate covenants, one for each country, county, city and state (or comparable
political subdivision) in the Restricted Territory. Except for geographic
coverage, each such separate covenant shall be deemed identical in terms to the
covenant contained in the preceding paragraphs. If, in any judicial proceeding,
a court shall refuse to enforce any of the separate covenants (or any part
thereof) deemed included in such paragraphs, then such unenforceable covenant
(or such part) shall be deemed eliminated from this Agreement for the purpose
of those proceedings to the extent necessary to permit the remaining separate
covenants (or portions thereof) to be enforced by such court. It is the intent
of the parties that the covenants set forth in this Section 9(h) be enforced to
the maximum degree permitted by applicable law. In the event that the
provisions of this Agreement should ever be deemed to exceed the scope, time or
geographic limitations of applicable law regarding covenants not to compete,
then such
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<PAGE> 33
provisions shall be reformed to the maximum scope, time or geographic
limitations, as the case may be, permitted by applicable laws. The parties
hereto acknowledge and agree that the extent of damages to the Purchaser in the
event of a breach of the covenants contained in this Agreement by the Seller
would be difficult or impossible to ascertain and that there is and will be
available to the Purchaser no adequate remedy at law in the event of any such
breach. Consequently, the Seller hereby agrees that in the event of such
breach, the Purchaser shall be entitled to enforce any or all of the
covenants contained in this Agreement by injunctive or other equitable relief.
10. Miscellaneous.
a. Survival of Representations and Warrants. Subject to
the limitations set forth in Section 9 above, all representations and
warranties of the Purchaser, the Seller and the Shareholder made in this
Agreement or in any certificate, document or other instrument delivered
pursuant hereto shall survive the execution and deliver hereof and the Closing.
b. Fees and Expenses. Each of the parties hereto shall
bear its own fees and expenses, including fees of counsel and accountants,
incurred in connection with the negotiation of this Agreement and the Related
Agreements and the consummation of the transactions contemplated hereby and
thereby or otherwise arising out of, or by reason of, this Agreement or any
Related Agreement.
c. Entire Agreement; Third Party Beneficiaries. This
Agreement and the Related Agreements (including the exhibits and schedules
hereto and thereto) constitute the entire agreement between the parties hereto
and thereto with respect to the subject matter hereof and thereof and
supersedes all prior and contemporaneous agreements, understandings,
negotiations and discussions, whether oral or written, of the parties with
respect thereto, including (without limitation) that certain Letter of Intent
dated as of October 14, 1993. The parties hereto acknowledge and agree that no
third party (including any employee of the Seller) is intended to be a
third-party beneficiary of this Agreement or any Related Agreement.
d. Amendments. No amendment, modification or rescission of
this Agreement or any Related Agreement shall be effective unless set forth in
writing executed by the party sought to be bound thereby.
e. Notices. Any notice given hereunder or under any
Related Agreement (except as otherwise provided therein) shall be in writing and
shall be deemed effective upon the earlier of personal delivery (including
personal delivery by telex or other means), the day after delivery by commercial
courier to a responsible individual with instructions for next-day delivery or
the fourth day after mailing by certified or registered mail, postage prepaid,
as follows:
(i) If to the Purchaser:
RiboGene, Inc.
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<PAGE> 34
21375 Cabot Boulevard
Hayward, CA 94545
Attention: President
With a copy to:
Michael W. Hall, Esq.
Venture Law Group
2800 Sand Hill Road
Menlo Park, CA 94025
(415) 854-4488
(ii) If to the Seller or the Shareholder:
Darby Group Companies, Inc.
100 Banks Avenue
Rockville Center, NY 11570
Attention: President
With a copy to:
Joel Salon, Esq.
Salon, Marrow & Dyckman
685 Third Avenue
New York, NY 10017
(212) 661-7100,
or to such other address as any party may have furnished in writing to the
other party in the manner provided above.
f. Assignment. Any party may assign its rights to receive
any monetary payment under this Agreement to a third party without the prior
written consent of any other party, but no party may assign any other rights or
any obligations under this Agreement without the prior written consent of the
other parties. Notwithstanding the foregoing, however, the Purchaser (and its
successors) may assign its rights and obligations hereunder to another entity
without the consent of the Seller or the Shareholder so long as such entity has
at least the same net worth immediately following such assignment as the
Purchaser immediately prior to such assignment and so long as such entity
acknowledges and accepts in writing the obligations assumed pursuant to such
assignment; provided, however, that such assignment without the consent of the
Seller or the Shareholder will not serve to relieve the Purchaser of the
performance of its obligations hereunder if such assignee shall fail to perform
such obligations pursuant to the terms of this Agreement. Any proposed
assignment in violation of this Section 10(f) shall be void. Subject to the
foregoing, this Agreement shall be binding upon and shall inure to the benefit
of the parties hereto and their respective transferees, successors, assigns and
legal representatives.
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g. Incorporation by Reference. All Exhibits referred to in
this Agreement are by this reference incorporated herein as an integral part
hereof.
h. Governing Law. This Agreement and the respective rights
and obligations of the parties hereto shall be construed under and by the laws
of the State of New York as such laws are applied to contracts entered into in
that state between residents thereof.
i. Captions. The title to the Sections and subsections of
this Agreement and the Related Agreements are included herein solely for
convenience, are not a part of this Agreement or any Related Agreement and do
not in any way limit or amplify the terms of this Agreement or any Related
Agreement.
j. Attorney's Fees. If any legal action or proceeding is
brought to enforce or interpret this Agreement or any Related Agreement, or
because of an alleged dispute, breach, default or misrepresentation in
connection with this agreement, the prevailing party shall be entitled to
reasonable attorneys' fees and costs in connection with such action or
proceeding in addition to all other relief to which such party may be entitled.
k. Counterparts. This Agreement and any Related Agreement
may be executed in any number of counterparts, each of which shall be considered
to be an original, but all of which together shall constitute one and the same
instrument.
l. California Commissioner of Corporations. THE SALE OF THE
SECURITIES THAT IS THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE
COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA, THE ISSUANCE OF SUCH
SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION FOR SUCH
SECURITIES PRIOR TO SUCH QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF
SECURITIES IS EXEMPT FROM THE QUALIFICATION BY SECTION 25100, 25102 OR 25105 OF
THE CALIFORNIA CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT
ARE EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED UNLESS THE SALE
IS SO EXEMPT.
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<PAGE> 36
IN WITNESS WHEREOF, the parties hereto have duly executed this Asset
Purchase Agreement as of the date first set forth above.
PURCHASER: RIBOGENE, INC.,
a California corporation
By: /s/ CHARLES J. CASOMENTO
---------------------------------
Title: President & CEO
------------------------------
SELLER: HYLINE LABORATORIES, INC.,
a New York corporation
By: /s/ MICHAEL ASHKIN
---------------------------------
Title: President
------------------------------
SHAREHOLDER:
/s/ MICHAEL ASHKIN
------------------------------------
Michael Ashkin
<PAGE> 1
Exhibit 10.21
NON-COMPETITION AGREEMENT
This Agreement is made and entered into as of January 5, 1994, by and
between RIBOGENE, INC., a California corporation, (the "PURCHASER"), and
MICHAEL ASHKIN, an individual (the "SHAREHOLDER").
WHEREAS, the Shareholder is the only shareholder of HYLINE LABORATORIES,
INC., a New York corporation (the "SELLER"), who, along with the Purchaser and
the Shareholder, is party to that certain Asset Purchase Agreement dated January
5, 1994 (the "PURCHASE AGREEMENT"), pursuant to which the Purchaser has
purchased certain assets relating to the Seller's business; and
WHEREAS, the Shareholder is willing to enter into this Agreement in
further consideration of the obligations undertaken by the Purchaser in the
Purchase Agreement.
NOW, THEREFORE, in consideration of the mutual agreements and
obligations contained in this Agreement and in the Purchase Agreement, the
parties agree as follows:
1. Non-competition Covenant of the Shareholder. In consideration of
the payments set forth in Section 3 below, the Shareholder shall not, during the
period specified in Section 2 below, do any of the following without the prior
written consent of the Purchaser, directly or indirectly (whether as a
shareholder, partner, principal, agent, director, affiliate, consultant or
otherwise):
a. Carry on in any county in the United States of America or in
any other country in the world (the "RESTRICTED TERRITORY") any business
activity relating, directly or indirectly, to the development, marketing,
licensing or use of any of the Hyline Products (as defined in the Purchase
Agreement) or products intended for the same applications and utilizing the
same method delivery system as any of the Hyline Products; or
b. Solicit or influence or attempt to influence any person
employed by the Purchaser, including any person who may have been employed by
the Seller or the Shareholder prior to his or her employment with the
Purchaser, to terminate or diminish his or her employment with the Purchaser or
become an employee or consultant of the Shareholder, the Seller, any affiliate
of the Shareholder or the Seller, or any competitor of the Purchaser.
2. Duration. The covenants set forth in Section 1 shall be
effective commencing as of the date hereof and shall continue until the fifth
(5th) anniversary of the date of this Agreement.
3. Consideration. Purchaser shall pay to the Shareholder, as
consideration for the foregoing covenant not to compete, $82,000.00 on the
first (1st) anniversary of the date of this Agreement, $91,000.00 on the second
(2nd) anniversary of the date of this Agreement, $101,000.00 on the third (3rd)
anniversary of the date of this Agreement and $112,000.00 on the fourth (4th)
anniversary of the date of this Agreement, which payments shall be secured
<PAGE> 2
pursuant to a Security Agreement among the Purchaser, the Shareholder and the
Seller of even date herewith; provided that the Shareholder shall not be
entitled to, and the Purchaser shall not pay, further payments under this
Agreement from and after the date on which the Shareholder first fails to
comply in any material respect with the terms of this Agreement. If the
Purchaser shall fail to pay any amount due under this Section 3 within ten (10)
days following receipt of notice of such non-payment, and if such non-payment
shall violate the terms of this Agreement, all amounts payable from time to
time under this Section 3 shall become immediately due and payable.
4. Limitations on Non-Competition Covenant. Section 1 of this
Agreement shall not be deemed to apply to any investments the Shareholder may
make, directly or indirectly, in any publicly traded company so long as the
Shareholder's aggregate holdings do not exceed five percent (5%) of the
outstanding voting securities of such company.
5. Confidentiality. The Shareholder agrees not to disclose,
communicate, use to the detriment of the Purchaser (or its business) or for the
benefit of any other person, or misuse in any way, any proprietary or
confidential information of the Purchaser such as information relating to
Seller's business, trade secrets, personnel, processes, techniques, know-how,
customer lists, formulas and other information and technical data or the
Seller's Intellectual Property Rights (as defined in the Purchase Agreement).
Nothing in this Agreement shall restrict the Shareholder from using or
disclosing any information in any litigation or other proceedings or
investigation involving the assets sold to the Purchaser under the Purchase
Agreement or involving the Seller.
6. Severability. The parties intend that the covenants contained
in this Agreement shall be construed as a series of separate covenants, one for
each country, county, city and state (or comparable political subdivision) in
the Restricted Territory. Except for geographic coverage, each such separate
covenant shall be deemed identical in terms to the covenant contained in the
preceding paragraphs. If, in any judicial proceeding, a court shall refuse to
enforce any of the separate covenants (or any part thereof) deemed included in
such paragraphs, then such unenforceable covenant (or such part) shall be
deemed eliminated from this Agreement for the purpose of those proceedings to
the extent necessary to permit the remaining separate covenants (or portions
thereof) to be enforced by such court. It is the intent of the parties that the
covenants set forth herein be enforced to the maximum degree permitted by
applicable law. In the event that the provisions of this Agreement should ever
be deemed to exceed the scope, time or geographic limitations of applicable law
regarding covenants not to compete, then such provisions shall be reformed to
the maximum scope, time or geographic limitations, as the case may be,
permitted by applicable laws.
7. Remedies. The parties hereto acknowledge and agree that the
extent of damages to the Purchaser in the event of a breach of the covenants
contained in this Agreement by the Shareholder would be difficult or impossible
to ascertain and that there is and will be available to the Purchaser no
adequate remedy at law in the event of any such breach. Consequently, the
Shareholder hereby agrees that in the event of such breach, the Purchaser shall
be entitled to enforce any or all of the covenants contained in this Agreement
by injunctive or other equitable relief.
-2-
<PAGE> 3
8. Miscellaneous. The provisions of Section 10(b), (c), (d), (e),
(f), (h), (i), (j) and (k) of the Purchase Agreement are incorporated herein by
reference and made a part hereof (with all references to the "Agreement"
therein being construed to be references to this Agreement).
IN WITNESS WHEREOF, the parties hereto have executed this
Non-Competition Agreement as of the date first written above.
PURCHASER: RIBOGENE, INC.
a California corporation
By: /s/ CHARLES J. CASAMENTO
---------------------------------
Title: President
------------------------------
SHAREHOLDER: MICHAEL ASHKIN
/s/ MICHAEL ASHKIN
-----------------------------------
-3-
<PAGE> 1
Exhibit 10.22
CONSULTING AGREEMENT
Date: January 5, 1994
Michael Ashkin
c/o Darby Group Companies, Inc.
100 Banks Avenue
Rockville Center, NY 11570
Dear Michael:
RiboGene, Inc. (the "Company") wishes to obtain your services as a
consultant on the matters described on Exhibit A attached hereto. This letter
shall constitute an agreement between you and the Company and contains all the
terms and conditions relating to the services you are to provide.
1. Term and Termination. This agreement shall become effective
on the date hereof and shall terminate on the date six (6) years from the date
set forth above; provided, however, that this Agreement may be terminated
by any party if the other party hereto materially breaches any term in this
Agreement or the exhibit hereto and such breach is not cured within thirty (30)
days after the receipt of notice of such breach; provided, however, that if you
dispute that your have materially breached this Agreement, the cure period shall
commence from the date it is determined by an arbitrator or arbitrators (under
Section 10) that you have in fact materially breached this Agreement, and
provided, further, however, that in the event of your death or disability or in
the event that you terminate this Agreement by reason of a material breach by
the Company as above provided, then the consideration otherwise payable to you
hereunder shall continue to be paid to you or your estate, as the case may be.
Notwithstanding the foregoing, if it shall be determined that you have
materially breached this Agreement or the Non-Competition Agreement of even date
herewith between you and the Company, and such breach(es) is (are) not cured
within the applicable cure period, the Company shall be under no obligation to
continue to make payments to you or your estate hereunder after such cure period
has lapsed.
2. Consideration. As consideration for your services and other
obligations, you will be paid as set forth on Exhibit A attached hereto for
consulting on the matters described herein.
3. Support. As additional consideration for your services
hereunder, the Company will provide you with such support facilities and space
as may be required in the Company's judgment to enable you to properly perform
your services hereunder.
4. Independent Contractor. Your relationship with the Company
will be that of an independent contractor and not that of an employee. You will
not be eligible for any employee benefits, nor will Company make deductions from
payments made to you for taxes, which will be your responsibility. You will have
no authority to enter into contracts that
<PAGE> 2
bind the Company or create obligations on the part of the Company without the
prior written authorization of the Company.
5. Report to President. All services to be performed by you will be
as agreed between you and the President of the Company and may be rendered via
telephone at mutually convenient times. You will be required to report to the
President of the Company concerning your services performed under this
agreement.
6. Confidentiality. You shall keep in confidence and shall not
disclose or make available to third parties or make any use of any information
or documents relating to your services under this agreement or to the products,
methods of manufacture, trade secrets, processes, business or affairs or
confidential or proprietary information of the Company (other than information
in the public domain through no fault of your own), except with the prior
written consent of the Company or to the extent necessary in performing tasks
assigned to you by the Company. You will not remove any of the Company's
property from the Company premises without permission from the Company. When
requested by the Company and in all events at the termination or expiration of
this agreement, you will return to the Company any of the Company's property
that has come into your possession during the term of this agreement, unless
authorization from the Company to keep such property has been received. Your
obligations under this Paragraph 6 will survive termination of this agreement.
7. Amendment. Any amendment to this agreement must be in writing
signed by you and the Company.
8. Notices. All notices, requests and other communications called for
by this agreement shall be deemed to have been given if made in writing and
personally delivered or mailed, postage prepaid, if to you at the address set
forth above and if to the Company at 21375 Cabot Boulevard, Building B,
Hayward, California 94545, Attention: President, or to such other addresses as
either party shall specify to the other.
9. Governing Law. The validity, performance and construction of this
agreement shall be governed by the laws of the State of California.
10. Arbitration. By signing this agreement, you acknowledge and
understand that any disagreement regarding this agreement will be determined by
submission to arbitration pursuant to the rules of the American Arbitration
Association, and not by a lawsuit or resort to court process proceedings.
Judgment upon the award of the arbitrator(s) may be entered in any court of
competent jurisdiction. All parties to this Agreement, by entering into it, are
giving up any right to have any such dispute decided in a court before a jury,
and instead are accepting the use of arbitration. Costs of the arbitration,
including without limitation attorney fees, shall be paid as allocated by the
arbitrator(s).
11. Prior Agreements. This agreement supersedes any prior consulting
or other agreements between you and the Company.
-2-
<PAGE> 3
If this agreement is satisfactory, you should execute and return the
original and one copy to us, retaining the third copy for your file.
Very truly yours,
RIBOGENE, INC.
By: /s/ [SIGNATURE]
-------------------------------
Title: President
------------------------------
AGREED TO AND ACCEPTED
/s/ MICHAEL ASHKIN
- -----------------------
Michael Ashkin
-3-
<PAGE> 4
EXHIBIT A
DESCRIPTION OF INITIAL CONSULTING
MATTERS AND COMPENSATION
Consulting Fee: Consultant shall be paid an aggregate amount of $1,000,000
through the termination of the Agreement, with such amount
payable in equal quarterly installments of $50,000 each
commencing January 1, 1995 and on the first day of each
subsequent calendar quarter thereafter until such installments
paid aggregate to $1,000,000.
Project: Consultant shall advise and assist the Company on matters
relating to the successful introduction and marketing of
RiboGene products (primarily those products purchased from
Hyline Laboratories, Inc.).
<PAGE> 1
Exhibit 10.23
RIBOGENE, INC.
SECURED PROMISSORY NOTE
SPN-4 January 5, 1994
RiboGene, Inc., a California corporation (the "COMPANY"), for value
received, promises to pay to the order of Hyline Laboratories, Inc. (the
"HOLDER"), the sum of Nine Hundred Nine Thousand Dollars ($909,000.00), plus
simple interest thereon at the rate of 5.3% per annum, compounded annually and
calculated on the basis of a 365 day year. The principal amount of this Note
and accrued but unpaid interest thereon shall be due and payable on or before
the close of business on January 5, 1998, at the principal office of the
Company or by mail to the registered address of the Holder.
All unpaid principal and unpaid accrued interest of this Note may be
prepaid without penalty, in whole or in part, at any time. Any prepayment of
this Note will be credited first against accrued interest then against the
outstanding principal amount.
Any provision of this Note may be amended, waived or modified only upon
the written consent of the Company and the Holder.
All rights and obligations of the Company and the Holder shall be
binding upon and benefit the successors, assigns, heirs, and administrators of
the parties.
Repayment of this Note is secured by certain assets of the Company
pursuant to that certain Security Agreement to which the Company and the Holder
are party of even date herewith (the "SECURITY AGREEMENT"). This Note is not
convertible into the capital stock of the Company.
This Note has been issued pursuant to an Asset Purchase Agreement (the
"PURCHASE AGREEMENT") of even date herewith by and between the Company and
Holder, a copy of which may be obtained from the Company at no charge to the
Holder. Reference is made to the Purchase Agreement for a full statement of the
rights and obligations of the parties, including, without limitation, the right
of setoff against amounts owing under this Note pursuant to Section 9(a)(viii)
of the Purchase Agreement.
The Company hereby waives presentment, demand for performance, notice
of non-performance, protest, notice of protest and notice of dishonor. No delay
on the part of the Holder in exercising any right hereunder shall operate as a
waiver of such right or any other right.
<PAGE> 2
Reference is made to Sections 5 and 6 of the Security Agreement for an
explanation of the Holder's rights upon default hereunder or otherwise
thereunder, which rights may include, without limitation, accelerated payment
of the balance of principal and accrued interest on this Note.
Should any action be instituted for the collection of this Note, the
reasonable costs and attorneys' fees therein of the holder shall be paid by the
undersigned.
This Note shall be construed in accordance with the laws of the State of
New York, without reference to conflicts of laws principles.
IN WITNESS WHEREOF, the Company has caused this Secured Promissory Note
No. SPN-4 to be issued as of the date first above written.
RIBOGENE, INC.,
a California corporation
By: /s/ [SIGNATURE]
----------------------------------
Title: President & CEO
------------------------------
-2-
<PAGE> 1
Exhibit 10.24
Lease Number 5040
Page 1 of 17 pages
DOMINION VENTURES MASTER LEASE AGREEMENT
LESSOR/AGENT: LESSEE:
Dominion Ventures, Inc. Ribogene, Inc.
44 Montgomery Street, Suite 4200 3603-D Haven Avenue
San Francisco, CA 94104 Menlo Park, CA 94025
Master Lease Line: Initial Term: Rent Factor:
- ------------------ ------------- ------------
$500,000.00 48 Months 2.631%
- --------------------------------------------------------------------------------
Advance Rental Security Deposit
- -------------- ----------------
(Rent Factor x Master Lease) (Rent Factor x Master Lease)
$13,155.00 $0.00
- --------------------------------------------------------------------------------
Effective Date: Funding Expiration Date:
- --------------- ------------------------
August 9, 1991 August 9, 1992
- --------------------------------------------------------------------------------
The Master Lease Line, specified above, shall remain open until fully funded or
until the Funding Expiration Date noted above whichever occurs first. The Term
"Equipment" means the items of personal property that are listed on the
Equipment Schedule Agreements (the "Schedules") attached or from time to time
added to this Lease, together with all replacement parts, additions and
accessories incorporated thereto. Schedules, each of which shall have a total
cost of not less than ten thousand dollars ($10,000.00), may be added to this
Lease not more frequently than once per month and in any event only with the
prior approval of Lessor. Equipment is to be limited to the types of equipment
described in Exhibit A attached hereto, the original use of which commences with
Lessee not more than sixty (60) days prior to the date of this Lease. No item of
Equipment shall have a unit cost of less than one thousand dollars ($1,000.00)
or be subject to an invoice of less than five thousand dollars ($5,000.00).
Lessee acknowledges that Lessor must specifically segregate funds for this
Master Lease Line. Advance Rental paid under this Lease is nonrefundable for any
reason; but, for each item of Equipment shall be credited to the last complete
calendar month's rent for such item, subject to the conditions of Paragraph 6.
See attached Schedules for detailed Equipment descriptions and effective
dates.
This Lease and the Schedules attached hereto are subject to the terms and
conditions set forth above and on subsequent pages which are made part hereof.
<PAGE> 2
1. TRUE LEASE. Lessor leases to Lessee, and Lessee hires and takes from
Lessor, the Equipment. It is the intent of both Lessor and Lessee that this
agreement be a true lease and not a lease intended as security or a conditional
sales agreement. Lessor and Lessee also agree to treat this Lease as a true
lease for income tax purposes.
2. EQUIPMENT AND LIABILITY. Lessee shall select the type and quantity
of each item of Equipment designated in the appropriate Schedule. Lessee shall
defer to Lessor's ability to obtain discount pricing from suppliers of
equipment, and any discounts and rebates resulting from the purchase of
Equipment shall be remitted to Lessor. Lessee shall order each item from the
respective supplier and, in reliance thereon and subject to its prior approval,
Lessor shall be deemed to have ordered and acquired such Equipment from such
supplier. At Lessor's request, Lessee shall formally assign the purchase order
for such Equipment to Lessor. LESSEE ACKNOWLEDGES THAT LESSOR IS NOT THE
MANUFACTURER, RETAILER OR DISTRIBUTOR OF THE EQUIPMENT, THAT SAID ENTITIES ARE
NOT AGENTS OF LESSOR, THAT LESSEE RENTS THE EQUIPMENT "AS IS", AND THAT LESSOR
HAS ACCEPTED NO RESPONSIBILITY FOR THE TRANSPORTATION, INSTALLATION OR REQUIRED
LICENSING NECESSARY FOR THE TRANSFER, INSTALLATION OR USE OF THE EQUIPMENT.
Lessor shall not be liable for specific performance of this Lease nor for
damages if for any reason a supplier declines, delays or fails to fill any
order. Lessee agrees to accept the Equipment and authorizes Lessor to add the
serial number of the Equipment to this Lease. Lessor shall not be liable to
Lessee for any loss, damage or expense of any kind or nature caused directly or
indirectly by the Equipment, its use or maintenance; nor for any delay or
failure to provide any of the Equipment; nor for any interruption of service or
loss of use of the Equipment; nor for any loss of business or damages whatsoever
and howsoever caused except as any of the foregoing may arise from Lessor's
material breach of this contract or the gross negligence or willful misconduct
of Lessor.
3. WARRANTIES. LESSEE HAS NOT RELIED UPON AND ACKNOWLEDGES THAT LESSOR
HAS MADE NO REPRESENTATION OR WARRANTY OF ANY KIND, EXPRESS OR IMPLIED, WITH
RESPECT TO THE EQUIPMENT, INCLUDING WITHOUT LIMITATION ITS CONDITION,
MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE. NO DEFECT OR UNFITNESS OF
THE EQUIPMENT NOR OTHER CLAIM REGARDING CONDITION OR USE OF THE EQUIPMENT SHALL
RELIEVE LESSEE OF THE OBLIGATION TO PAY RENT OR ANY OTHER OBLIGATION UNDER THIS
LEASE, except as any of the foregoing may arise from Lessor's material breach of
this contract or the gross negligence or willful misconduct of Lessor. Lessor
authorizes Lessee to enforce in its own name all warranties, agreements or
representations, if any, which may be made by any supplier to Lessee or Lessor.
If any of the manufacturer's or seller's warranty is assignable, then Lessor
shall take all reasonable actions necessary to ensure that the
2
<PAGE> 3
Equipment is entitled to the benefit of such warranty.
4. TERM. All obligations under this Lease, except regular rental
payments, shall commence immediately upon the Effective Date specified on the
first page of this Agreement (the "Effective Date") and shall continue until
full performance of every provision of this Lease, and each Schedule and
Addendum (the "Lease Term"). All obligations under each Schedule shall commence
upon Lessee's execution of Lessor's Certificate of Inspection and Acceptance
(the "Acceptance Certificate") for the Equipment specified on such Schedule and
shall terminate at the end of the Initial Term (The "Noncancellable Term"). The
"Initial Term", as set forth on page 1 of this Lease, shall begin on the first
day of the calendar quarter following the date of the Acceptance Certificate.
This Lease is irrevocable for its full term and until Lessee has performed all
of its obligations hereunder.
5. RENTAL PAYMENTS. Lessee shall pay to Lessor, as rental for Equipment
during each month of the Noncancellable Term of any Schedule, an amount equal to
the Rent Factor set forth on page one of this Lease multiplied by the total
Cost (as defined below in paragraph 7) of the Equipment to Lessor, which amount
shall be due and payable in on the first day of each calendar month during the
Noncancellable Term. If the date of the Acceptance Certificate of any Schedule
shall be other than the first day of the calendar quarter, Lessee shall make
rental payments ("Interim Rent") equal to one-thirtieth of the monthly rental
set forth on the Schedule for each day from and including the date of the
Acceptance Certificate for such Schedule, through and including the last day of
the calendar quarter prior to the beginning of the Initial Term. Such Interim
Rent shall be due and payable in advance on the first day of the calendar month
following the month for which such payment is assessed. In addition to any other
remedies that Lessor may have under this Lease, if Lessee fails to pay any rent
or other amount herein provided within five (5) business days after the same is
due, Lessee shall pay to Lessor a late charge of three percent (3%) of such
amount plus interest from the due date until the date of payment, calculated at
the rate of one and five tenths percent (1.5%) per month, or at the highest rate
permitted by applicable law, whichever is less, to compensate Lessor for
additional bookkeeping and collection expense. All rents, late charges and other
amounts for which Lessee is liable shall be paid to Lessor at its address as set
forth above or as otherwise directed by Lessor. Lessor's right to receive rental
payments, as well as all other rights of Lessor to payment hereunder, shall not
be subject to any defense, set off, count reclaim or recoupment which may arise
out of any liability Lessor may owe Lessee other than a liability arising out of
a breach of this Lease by Lessor.
3
<PAGE> 4
6. ADVANCE RENTAL. Upon execution of this Lease, Lessee shall pay to
Lessor an Advance Rental in an amount equal to the Rent Factor multiplied by the
Master Lease Line (plus applicable taxes). A pro-rata portion of the Advance
Rental shall be credited to the last complete calendar month's rent for each
item of Equipment, based upon the aggregate price thereof. Lessee grants Lessor
a security interest in the Advance Rental to secure all of Lessee's obligations
hereunder. If the Master Lease Line has not been fully expended by the Funding
Expiration Date, Lessor shall retain the uncredited balance of the Advance
Rental as compensation for expenses unless such failure to expend the Master
Lease Line shall arise out of a breach of this Lease by Lessor. Lessor shall
have the right, but not the obligation, to apply the Advance Rental to cure any
current and ongoing default of Lessee, in which event Lessee shall promptly
restore the Advance Rental account to its proper balance.
7. ADJUSTMENTS FOR ACTUAL COST. As used herein, "Cost" means the cost
to Lessor of purchasing the Equipment including any sales taxes and other
charges paid by Lessor and net of any discounts and rebates remitted to Lessor.
The Advance Rental is based upon the Master Lease Line, which is an estimate. If
at any time the actual aggregate Cost of all Equipment exceeds the Master Lease
Line, the Advance Rental shall be increased proportionately. Lessee shall pay
any additional sums for Advance Rental due under this Lease within ten (10)
business days after receiving notice from Lessor. If any Schedule of Equipment
causes the actual aggregate Cost of all Equipment to exceed the Master Lease
Line by more than ten percent (10%), Lessor may terminate said Schedule within
fifteen (15) days after receiving invoices for such excess cost and upon request
shall promptly be reimbursed by Lessee for such excess cost. If the actual
aggregate Cost of all Equipment, together with any additional equipment proposed
to be added to the Lease, would exceed the Master Lease Line by more than ten
percent (10%), Lessor may refuse to add such equipment to this Lease, and shall
so notify Lessee.
8. TITLE. All Equipment shall remain personal property, and the title
thereto shall remain exclusively in Lessor, notwithstanding the manner in which
it may be attached to realty. Lessee agrees upon the request of Lessor at any
time during the Lease Term, to affix or permit Lessor to affix, in a permanent
place on the Equipment, labels supplied by Lessor identifying the Equipment as
property of Lessor, and shall not alter or remove any such label from any item
of Equipment. Lessee shall keep the Equipment free from any and all liens and
encumbrances except those created by Lessor. Lessee shall give Lessor immediate
notice of any judicial process or encumbrance affecting the Equipment and shall
indemnify and save Lessor harmless from any loss or damage caused thereby,
including court costs, attorney fees and expenses.
4
<PAGE> 5
9. FILING. Lessee shall execute or cause to be executed, at Lessee's
sole expense, such supplemental instruments, financing statements and landlords
waivers as Lessor deems necessary or advisable and shall cooperate to defend the
title of Lessor by filing or otherwise. Lessee authorizes Lessor to record in
any state, this Lease and any financing statements, security agreements and
landlord's waivers with respect to the Equipment or any collateral provided by
Lessee to Lessor. Lessee agrees to give Lessor thirty (30) days written notice
of any change in Lessee's name or place of business. Lessee agrees to give
written notice to Lessor as soon as Lessee has knowledge of any change of
ownership of the real property upon which or within which the Equipment is
located.
10. TAXES. Lessee shall pay in a timely fashion, and shall indemnify and
hold Lessor harmless against all federal, state and local taxes, assessments,
license and registration fees, and other governmental charges of any kind,
including those levied on motor vehicles or trailers, and any interest or
penalties thereon, which may be levied, directly or indirectly, against the
Equipment or with respect to its ordering, purchasing, delivery, ownership,
possession, use, leasing documentation, and return or other disposition thereof,
regardless of whether such taxes and fees are levied against Lessor or Lessee.
Such taxes and fees to be paid by Lessee shall include, without limitation,
property, sales, rent, franchise, gross receipts, lease, and use taxes, and any
other tax measured by gross rental payments, but shall not include; (i) any
federal, state or local taxes or fees, or other governmental charges of any
kind, based upon the net income of Lessor; or (ii) any amounts as may be subject
to a good faith contest or as to which a bona fide dispute may arise, provided
that Lessee agrees to cooperate in contesting such assessment and to indemnify
Lessor against any liability (including tax liability), expenses or loss which
Lessor may incur as a result, of such contest. Lessor shall have the right, but
not the obligation, to pay any such taxes or fees regardless of whether levied
against Lessor or Lessee. Any and all sales taxes levied against Lessor's
purchase of Equipment shall be added to the total Cost of such Equipment as
specified on the Schedule under which such equipment is added to this Lease.
With the exception of taxes and fees which are added to the total Cost of
Equipment hereunder, Lessee shall reimburse Lessor within ten (10) days after
receipt of invoice from Lessor specifying the amount of, and reason for, any
payment by Lessor of amounts for which Lessee is liable under this Paragraph 10.
Lessee shall timely prepare and file all reports and returns which are required
to be made with respect to such taxes and/or fees, and all such reports and
returns shall show Lessor as the owner of the Equipment.
5
<PAGE> 6
11. ASSIGNMENTS AND SUBLEASES. Lessee shall not assign this Lease or
Lessee's rights hereunder, or sublease any Equipment, without the prior written
consent of Lessor, which consent shall not be unreasonably withheld. Any
purchase of all or substantially all of Lessee's assets, any merger or
consolidation into or with Lessee regardless of whether Lessee is the surviving
entity or any entity acquiring more than fifty percent (50%) of Lessee shall be
deemed an assignment by Lessor. Lessor shall have the right, in its sole
discretion, to assign this Lease or any part hereof. In particular, Lessee
acknowledges that it is Lessor's intention to assign this Lease to one or more
limited partnerships with which Lessor is affiliated, that upon any such
assignment the sole liability for performance of Lessor's obligations hereunder
shall fall upon such assignee, and that the limited partners of such assignee
shall have no personal liability for the performance or observance of this
Lease. Following any assignment by Lessor, the term "Lessor", as used herein,
shall include and/or refer to Lessor's assignee, and the Equipment covered by
such assignment shall be deemed to be used by Lessee under a lease agreement
between Lessee and such assignee, the terms and conditions of which shall be the
terms and conditions of this Lease; provided, however, that any such lease
agreement shall cover only the Equipment so assigned. Subject to the foregoing,
this Lease inures to the benefit of, and is binding upon, the heirs, legatees,
representatives, successors and assigns of Lessee and Lessor.
12. POSSESSION. Lessor covenants that, to the best of its knowledge, it
is the lawful owner of the Equipment and that, conditioned upon Lessee's
performance of each of its material obligations under this Lease, Lessee's use
of the Equipment shall not be interrupted by Lessor, except as provided in
Paragraph 15.
13. USE AND INDEMNITY. Lessee shall use the Equipment in Lessee's
business. Lessee agrees not to allow the Equipment to be used by other than its
employees, consultants and agents. Lessee acknowledges that the Equipment is
leased for commercial purposes and not for personal use. Lessee agrees to
indemnify and hold Lessor, and Lessor's agents, servants, successors and
assigns, harmless against any and all claims, actions, liabilities and expenses
of any nature, including court costs and attorney fees, arising in connection
with the manufacture, purchase, delivery, installation, operation, use,
ownership, maintenance, storage, relocation, and return of the Equipment, except
to the extent any such claims, actions, liabilities and expenses result from the
gross negligence or willful misconduct of Lessor. The foregoing indemnity shall
continue in full force and effect notwithstanding the termination of this Lease,
whether by expiration of time, operation of law or otherwise.
6
<PAGE> 7
14. LOCATION. Lessee shall keep the Equipment within the continental
United States and at its place of business as specified above or on the
Schedules. Lessee shall not permit any Equipment to be moved to a new location
without the prior written consent of Lessor, which consent shall not be
unreasonably withheld.
15. RIGHT OF INSPECTION. Lessor and its agents shall have the right,
upon reasonable notice at any time during normal business hours, to inspect and
photograph the Equipment, to review all maintenance records related to the
equipment and, during the last sixty (60) days of the rental term of each
respective Schedule, to demonstrate the Equipment specified thereon to
prospective purchasers; provided, however, Lessor shall give five (5) business
days notice to Lessee of any such demonstration.
16. MAINTENANCE. Lessee shall exercise due and proper care in the use,
repair and servicing of the Equipment. Lessee shall, at its own expense, make
all repairs and replacements required to maintain the Equipment in good working
condition in accordance with manufacturers' specifications and Lessor's,
requirements, and shall pay all other operating expenses relating to the
Equipment. Lessee shall have the right, upon ten (10) days prior written notice
to Lessor, to make any alterations, additions or improvements which do not
render the Equipment in such a condition that it cannot, prior to the expiration
or other termination of this Lease, be restored to its original condition,
reasonable wear and tear alone excepted; provided that no such alteration,
addition or improvement shall be made by Lessee if as a result thereof any
warranties made by the supplier of the Equipment would be canceled or
terminated. If Lessee does not exercise its option to purchase the Equipment, as
specified in Paragraph 17, or if Lessee should become in default of any of its
material obligations hereunder, Lessee shall restore the Equipment to its
original condition, reasonable wear and tear alone excepted, prior to the
expiration or other termination of each respective Schedule. All replacement
parts and additions incorporated to the Equipment shall become the property of
Lessor; provided, however, that Lessor shall transfer to Lessee title to any
alterations, additions and improvements which were made by Lessee at its own
expense to (i) each item of Equipment which Lessee has restored to its original
condition as specified in this Paragraph 16, and (ii) each item of Equipment
purchased by Lessee pursuant to the provisions of Paragraph 17. Lessee agrees to
maintain and provide upon request of Lessor all internal maintenance reports
relating to the Equipment.
7
<PAGE> 8
17. PURCHASE OPTION. Upon written notice to Lessor not less than 60 days
prior to the expiration of this Lease, if Lessee has fulfilled all of its
obligations hereunder, Lessee shall have the right to purchase all, but not less
than all, of the Equipment, for Fair Market Value (as defined below) as such
term is adopted and recognized by the American Society of Appraisers (plus
applicable taxes). Should Lessor and Lessee fail to agree upon the fair market
value purchase price of the Equipment, said price shall be determined by an
independent appraiser, and the cost shall be borne equally by both Lessor and
Lessee. Notwithstanding the date on which Lessee exercises this option, Lessee
shall acquire no rights of title to any Equipment, nor shall any Equipment be
transferred to Lessee, until the expiration of the rental term for the Schedule
on which such Equipment is specified. Lessee shall remain liable for all rental
payments and other obligations until the expiration of the Lease Term. Any
Equipment sold by Lessor shall be sold "as is", "where is", and with no
warranties, express or implied, including without limitation implied warranties
of merchantability and fitness for any particular purpose. "Fair Market Value"
is defined as the estimated amount at which the property might be expected to
exchange between a willing buyer and a willing seller, neither being under
compulsion, each having reasonable knowledge of all relevant facts, and with
equity to both.
18. RETURN OF EQUIPMENT. Upon 90 days written notice to Lessor, in the
event Lessee has not exercised its Purchase option as specified in Paragraph 17,
after such notification and upon the expiration or termination of this Lease,
Lessee shall, at Lessee's sole expense, properly pack and return the Equipment,
insured, unencumbered and in the same condition as when received by Lessee,
reasonable wear and tear alone excepted, by such carriers as Lessor shall
approve and to such place as designated by Lessor, provided that such place is
located within the state of California. Should Lessee fail to return the
Equipment as directed above, all obligations of Lessee under this Lease,
including rental payments, shall remain in full force and effect during the
holdover period.
19. FINANCIAL STATEMENTS.
a. Lessee shall provide to Lessor the financial statements
specified in this subparagraph 19 (a), prepared in accordance with generally
accepted accounting principles, consistently applied (the "Financial
Statements"); provided, however, that after the effective date of the initial
registration statement covering a public offering of Lessee's securities, the
term "Financial Statements" shall be deemed to refer only to those statements
required by the Securities and Exchange Commission, to be provided no less
frequently than quarterly.
8
<PAGE> 9
(i) As soon as is practicable (and in any event within
thirty (30) days after the end of each month), a reasonably detailed balance
sheet as of the end of such month and the related statements of income or loss,
cash flow and capital structure of the Lessee during such month (including the
commencement of any material litigation by or against Lessee), certified by
Lessee's Chief Executive officer or Chief Financial officer fairly to present
the data reflected therein.
(ii) As soon as practicable (and in any event within ninety
(90) days after the end of each fiscal year, audited balance sheets as of the
end of such year (consolidated if applicable), and related statements of income
or loss, retained earnings or deficit, cash flows and capital structure of
Lessee for such year, setting forth in comparative form the corresponding
figures for the preceding fiscal year, and accompanied by an audit report and
opinion of the independent certified public accountants of recognized national
standing selected by Lessee.
b. Lessee shall promptly furnish to Lessor any additional
information (including but not limited to tax returns, income statements,
balance sheets, and names of principal creditors) as Lessor reasonably believes
necessary to evaluate Lessee's continuing financial obligations (the "Additional
information").
c. Lessor agrees to preserve the confidentiality of all
information provided to it hereunder by Lessee regarding the Lessee and its
business which Lessee designates in writing as confidential and which is
otherwise not generally known.
20. TAX INDEMNIFICATION. Lessee acknowledges that this Lease has been
entered into on the basis that Lessor or Lessor's designee intends to claim such
depreciation, interest deductions and other tax benefits as are provided to an
owner of Equipment under the Internal Revenue Code of 1986, as amended (the
"Code") (the "Tax Benefits"). If Lessor or Lessor's designee shall not have the
right to claim or there shall be disallowed or recaptured with respect to Lessor
or Lessor's designee, all or any portion of the Tax Benefits as a result of an
act or failure to act by Lessee in contravention with any of the terms and
conditions of the Lease, Lessee shall promptly pay to Lessor or Lessor's
designee, an amount which, on an after-tax basis, will compensate Lessor or
Lessor's designee for the value of the lost Tax Benefits. The Tax Benefits shall
be deemed to have been disallowed or recaptured upon the earliest of (i) the
adjustment by a taxing authority of the tax return of Lessor to reflect such
loss; or (ii) the payment by Lessor to the Internal Revenue Service or state
taxing authority of the tax increase resulting from such lost Tax Benefits.
Lessor or Lessor's designee shall be deemed not to have the right to claim the
Tax Benefits if, in
9
<PAGE> 10
the opinion of Lessor's independent tax counsel, reasonably acceptable to
Lessee, there is no reasonable basis for claiming the Tax Benefits.
Notwithstanding the foregoing, or any other provision herein to the contrary,
Lessee makes no representation or warranty that the Lessor (or its designees or
assignees) shall be entitled to the Tax Benefits.
21. NO REPRESENTATION, Lessor assumes no liability as to the treatment
by Lessee of this Lease, the Equipment or the rental payments for financial
statement or tax purposes.
22. RISK OF LOSS, Lessee assumes the entire risk of loss, theft and
damage of the Equipment from any cause whatsoever (except as such may be caused
by the gross negligence or willful misconduct of Lessor), and no such event
shall relieve Lessee of any obligation under this Lease. Lessee shall notify
Lessor in writing within ten (10) days after any such event. Lessee agrees that
Lessor shall have the following remedies upon each occurrence of the following
events:
a. In the case of damage of any kind whatsoever to any item of
Equipment (unless such item is damaged beyond repair), Lessee shall, at Lessee's
sole expense and with Lessor's reasonable consent, (i) restore such Equipment to
its original condition, reasonable wear and tear alone excepted, or (ii) replace
it with like equipment of the same or later model in good condition. Upon
Lessee's replacement of any Equipment as specified in this subparagraph
22(a)(ii), Lessor shall transfer title to such replaced Equipment to Lessee.
b. Subject to the foregoing, if any item of Equipment is
determined by Lessor to be damaged beyond repair, or if Lessor has reasonable
cause to believe that any item of Equipment is stolen or lost and such item is
not returned to its proper location within thirty (30) days after notice thereof
to Lessee, Lessee shall, with Lessor's reasonable consent, immediately pay to
Lessor: (i) the amount required to replace such item with like equipment of the
same or later model in good condition, in which case Lessor shall replace such
item, and rental payments shall continue throughout the Lease Term without any
interruption, or (ii) the aggregate unpaid rent due for the balance of the
rental term for the items of Equipment involved, discounted to present value at
the then current Treasury Bill rate, not to exceed eight percent (8%) per annum;
the then estimated fair market value of the items of Equipment involved,
calculated as of the expiration of the Lease Term (the "Residual Value"),
discounted to present value at the then current Treasury Bill rate, not to
exceed eight percent (8%) per annum; any tax payments or indemnification for
which Lessee is liable under Paragraphs 10 and 20; and any other amounts for
which Lessee is liable under this Lease; provided, however, the option specified
in subparagraph 22(b)(i) shall not be available in the event of
10
<PAGE> 11
Lessee's default. Upon payment under subparagraph 22(b)(ii), this Lease shall
terminate with respect to the items paid for, and Lessee shall become entitled
to such items "as is" and "where is" without any warranty, express or implied.
c. Any proceeds paid to Lessor from the Personal Property
Insurance specified in subparagraph 23(a)(i) shall be applied to Lessee's
obligations under this Paragraph 22.
23. INSURANCE.
a. Lessee shall, at its own expense, maintain the following types
of insurance, with companies acceptable to Lessor, until such time as Lessee has
returned the Equipment as specified in Paragraph 18:
(i) Personal Property Insurance on all property owned by
Lessee (including but not limited to all of the Equipment), in an agreed amount
based upon the following:
(A) Standard All Risk Property Insurance, including
boiler and machinery insurance, and flood insurance if any Equipment is located
in an identified "flood hazard area," in which flood insurance has been made
available pursuant to the National Flood Insurance Act of 1968;
(B) The amount of such insurance shall be not less
than the greater of the fair market value or the full undepreciated replacement
value of the Equipment. The Amount of such insurance allocable to loss or damage
or personal property shall not have a deductible in excess of one thousand
dollars ($1,000.00) per occurrence.
(C) Such insurance shall contain an endorsement in
which Lessor is named as Loss Payee with respect to the Equipment, and shall set
aside the amount stated in subparagraph 23(a)(i)(B) for the sole benefit of,
and payable directly to Lessor.
(ii) Business interruption insurance in an amount at all
times equal to the total rental payments to become due during the six months
following the date of calculation. In the event of any interruption of Lessee's
business, the amount payable to Lessor shall be equal to the actual loss of
rental payments suffered by Lessor as the result of such interruption, and shall
be payable to Lessor within thirty (30) days from the date of loss, and on a
month-to-month basis thereafter, until Lessee's business is returned to a fully
operational state, plus ninety (90) days.
(iii) commercial General Liability Insurance covering bodily
injury (including death) and property damage,
11
<PAGE> 12
naming Lessor, its directors, officers, agents and employees as an Additional
Insureds on all policies, and providing total limits in amounts as are at the
time carried by entities engaged in the same or similar business and which are
similarly situated, but in no event less than one million dollars
($1,000,000.00) for combined single limit occurrence. All such policies shall
cover any injury (including injuries to Lessee's employees, agents and
contractors) or damage occasioned by, or occurring upon, Lessee's premises,
products, operations and, at Lessor's option, explosion, collapse and
underground hazards. All such policies shall contain contractual liability
coverage including all liability assumed under this agreement, and a cross
liability clause providing that such insurance shall, except with respect to the
limits of liability, apply separately to each insured.
b. All insurance specified in this Paragraph 23 shall be primary
over, and in no event shall, any insurance carried by Lessor be called upon to
contribute to any loss relating to or arising out of this Lease. All insurance
shall be in effect, and shall be evidenced by policies and/or endorsements
delivered to Lessor no later than twenty (20) days after the date upon which
Lessee executes this Lease. Notwithstanding anything to the contrary contained
in this Lease, Lessor shall have no obligation to purchase any Equipment until
all policies are in place. All such policies shall provide for at least thirty
(30) days, prior written notice to Lessor in the event of any cancellation,
non-renewal or material change in coverage, and Lessor shall receive a copy of
any and all endorsements or other documentation relating to such policies.
c. Should Lessee, at any time during the Lease Term, be without
sufficient insurance, as determined by Lessor in accordance with the provisions
of this Paragraph 23, Lessee appoints Lessor as its agent to obtain such
coverage, and promises to pay to Lessor the entire cost of such coverage.
24. Time is of the essence of this Lease and each of its provisions.
Lessee shall be in default immediately upon the occurrence of any of the
following events:
a. Nonpayment, by the due date specified herein, of any rental or
other payment required of Lessee under the terms of this Lease, and such
nonpayment shall continue for a period of five (5) business days;
b. Material noncompliance with any or all of the provisions of
Paragraph 23, and such noncompliance shall continue for a period of ten (10)
days after notice thereof is given to Lessee;
c. If Lessor shall determine that Lessee has made a misstatement
or false statement of, or omitted to state, a material fact in connection with
the execution, performance or
12
<PAGE> 13
nonperformance of this Lease or any Schedule, or if any representation or
warranty of Lessee in this Lease or the Acceptance Certificate for any item of
Equipment is materially inaccurate or false;
d. If Lessee, without Lessor's prior written consent shall have
attempted to remove, part possession with, sell, transfer, encumber, assign or
sublet the Equipment or Lessee's interest under this Lease; or if Lessee shall
have attempted to convert any interest of Lessor arising under this Lease or any
purchase order, or resulting from the purchase of Equipment;
e. If any of Lessee's credit or financial information submitted
to Lessor prior or subsequent to execution of this Lease (including but not
limited to due diligence materials, Financial Statements and Additional
Information) contains any misstatement or false statement of a material fact, or
fails to state therein any material fact necessary to make the statements made,
in light of the circumstances under which they were made, not misleading;
f. If in the determination of Lessor the present fair salable
value of Lessee's assets is less than the amount that will be required to pay
the probable liability on Lessee's existing debts as they become absolute and
matured;
g. If any single judgement for payment of money damages in excess
of one hundred thousand dollars (100,000.00), or aggregate judgments for payment
of money damages in excess of one hundred thousand (100,000.00), shall be
rendered against Lessee and shall remain undischarged for a period of sixty (60)
days, during which period execution shall not effectively stayed;
h. If any substantial part of Lessee's property shall remain
subjected to any levy, seizure, involuntary assignment, attachment application
or sale for or by any creditor or governmental agency;
i. If any single indebtedness of Lessee exceeding the sum of one
hundred thousand dollars (100,000.00), or aggregate indebtedness exceeding the
sum of one hundred thousand dollars (100,000.00), under any other lease or
contract for the borrowing of money or on account of the deferred purchase price
of property shall be accelerated, or subject to acceleration upon the giving of
notice, passage of time or both as a result of a default by Lessee, or the
obligee with respect to such indebtedness shall exercise any other remedy it may
have as a result of such default;
j. If an order, judgement or decree shall be entered by any court
having jurisdiction for (i) relief in
13
<PAGE> 14
respect of Lessee in an involuntary case under any applicable bankruptcy,
insolvency or other similar law (as now or hereafter in effect), (ii) appointing
of receiver, liquidation, assignee, trustee, custodian, sequestrator (or similar
official) for Lessee or for any substantial part of its property, or
sequestering any substantial part of the property of Lessee, or (iii)
liquidating of Lessee's affairs, and any such order, judgement or decree shall
remain in force undismissed, unstayed or unvacated for a period of sixty (60)
days after the date of entry thereof; or if Lessee shall seek relief of any kind
under any such law or consent to any of the foregoing; or
k. Nonperformance of any of Lessee's material obligations other
than those described in this Paragraph 24, and such nonperformance shall
continue for a period of ten (10) days after notice thereof is given to Lessee.
25. REMEDIES, in the event of any default by Lessee, or upon termination
prior to the expiration of this Lease, Lessor or its agent shall have the right,
without demand or prior notice, in Lessor's sole discretion, to exercise any one
or more of the following remedies in addition to any other remedies available
to Lessor under applicable law:
a. To declare the entire amount of rent hereunder during the
remainder of the Lease Term immediately due and payable;
b. To enforce Lessee's performance or recover damages for
Lessee's default as specified in Paragraph 26;
c. To take possession of any or all items of Equipment during
normal business hours and, in Lessor's sole discretion, with or without any
court order or other process of law. This Lease shall terminate if all defaults
on the part of Lessee are not cured within five (5) days after such taking of
possession; however, such taking of possession and termination of this Lease
shall not relieve Lessee of its obligations to pay rent and other amounts due
hereunder. Lessee waives any and all damages occasioned by such taking of
possession other than damages caused by the gross negligence or willful
misconduct of the Lessor.
d. To pursue any and all remedies available at law by reason of
Lessee's default.
26. DAMAGES, Lessor's damages, in the event of default by Lessee, shall
include without limitation: (i) the unpaid balance of rent and all other amounts
due and to become due hereunder, discounted to present value at the then current
Treasury Bill rate, not to exceed eight percent (8%) per annum, (ii) the
Residual value (as defined in Paragraph 22), discounted
14
<PAGE> 15
to present value at the then current Treasury Bill rate, not to exceed eight
percent (8%) per annum, (iii) indemnification for any Loss of Tax Benefits under
Paragraph 20, (iv) costs of repossession and repairs and lease or sale to a
third party, plus (v) all other expenses including court cost and attorney fees.
Lessor's obligation to mitigate said damages shall be limited as follows:
a. Lessor shall make best efforts to mitigate its damages by
re-leasing the Equipment to a third party, and any rentals received in
consideration for such third Party's use of said Equipment during any period of
the Lease Term shall by applied only to that portion of Lessor's damages
resulting from loss of rentals that Lessor would have received from Lessee
during the same period had Lessee not become in default. Amounts received from
such third party shall be applied in mitigation of Lessor's damages only to the
extent such amounts are payable in connection with such third party's periodic
rental obligations as specified in the preceding sentence; in no event shall any
other amount received from such third party, including without limitation as a
security deposit or as an advance on periodic rental obligations, be applied in
mitigation of Lessor s damages hereunder.
b. Lessor shall have no obligation to sell any of the Equipment;
however, any amounts received from a sale to a third party shall be applied to
Lessor's damages as specified in this paragraph 26.
27. CHOICE OF LAW, This Lease shall be deemed to have been made and
accepted in the County of San Francisco, in the State of California, where the
Lessor's principal place of business is located. This Lease and all transactions
hereunder, and all rights and liabilities of the parties hereto, shall be
determined and governed as to validity, interpretation, enforcement and effect
by the laws of the State of California. The Lessee hereby consents, in all
actions and proceedings arising directly or indirectly from this Lease, to the
exclusive jurisdiction of the Federal District Court for the Northern District
of California or any state court located within San Francisco County in the
State of California,
28. MISCELLANEOUS.
a. If more than one Lessee is named in or added to this Lease,
the liability of each shall be joint and several.
b. The rent shall not abate by reason of termination of Lessee's
right of possession and/or the taking of possession by Lessor, or for any other
reason other than a breach of Lessor's material obligation's hereunder or
Lessor's gross negligence or willful misconduct.
15
<PAGE> 16
c. All notices related hereto shall be mailed to Lessor or Lessee
at its respective address as specified on page one of this Lease, or at such
other address as either party may designate upon ten days written notice to the
other party.
d. Paragraph titles are solely for convenience and are not an aid
in the interpretation of this Lease.
e. A representative of Lessor shall have the right to meet with
Lessee's chief Executive Officer and Chief Financial Officer once per quarter
throughout the lease term, to discuss the operating performance and financial
condition of the Company.
29. RIGHT OF FIRST OFFER, During the lease term, Lessee shall provide
Lessor with all requests for additional equipment lease financing prior to the
time that such requests are provided to other financing sources. Should Lessor
and Lessee fail to agree on the terms and conditions of such financing within
ten (10) business days, then Lessee may accept a funding source other than
Lessor.
30. LESSOR'S PERFORMANCE OF LESSEE'S OBLIGATIONS. If Lessee shall fail
duly and promptly to perform any of its obligations under this Lease, Lessor
may, at its option and at any time, perform the same without waiving any default
on the part of Lessee, or any of Lessor's rights. Lessee shall reimburse Lessor,
within ten (10) days after notice thereof is given to Lessee, for all expenses
and liabilities incurred by Lessor in the performance of Lessee's obligations.
31. NONWAIVER. Lessor's failure at any time to require strict
performance by Lessee shall not constitute waiver of, or diminish, Lessor's
right to demand strict compliance with any provision of this Lease. Waiver by
Lessor of any default shall not constitute waiver of any other default. Lessor's
rights are cumulative and not alternative.
32. SURVIVAL OF OBLIGATIONS. So long as Lessee shall owe any amounts
payable under this Lease or shall retain possession or control of any Equipment,
title to which shall not have passed to Lessee or its successor or
assignee through the purchase of the Equipment pursuant to Paragraph 17 of the
Lease, upon the expiration or termination of this Lease, all agreements,
covenants, representations and warranties of Lessee contained in this Lease or
in the Schedules or other documents delivered pursuant hereto or in connection
herewith shall survive such expiration or termination of this Lease.
16
<PAGE> 17
33. SEVERABILITY. If any provision or remedy herein provided is
determined invalid under applicable law, such provision shall be inapplicable
and deemed omitted; but the remaining provisions, including remaining default
remedies, shall be given effect in accordance with their manifest intent.
34. WARRANTS. As an inducement to Lessor to enter into the Lease, Lessee
grants to Lessor the right to purchase, at a price per share of one dollar
($1.00), 60,000 shares of Lessee's Series B Preferred Stock, pursuant to a
definitive Warrant dated as if August 9, 1991.
35. Release of Lessor's Obligation to Lease Equipment. For so long as
there is (i) an event of default hereunder, pursuant to Paragraph 24; or Lessor,
in the reasonable exercise of its judgment and in good faith, shall have
determined that Lessee will be unable to perform its obligations under this
Lease, and Lessee shall have failed to provide adequate assurance that Lessee
will be able to perform its obligations under this Lease; then Lessor, at its
option and upon prior written notice to Lessee, shall be relieved of its
obligation to fund Equipment hereunder.
36. ENTIRE AGREEMENT. This instrument constitutes the entire agreement
between the parties and may not be modified except in writing executed by Lessor
and Lessee. No supplier or agent of Lessor is authorized to bind Lessor or to
waiver or modify any term of this Lease.
The undersigned representative of Lessee affirms that he or she has read
and understood this Lease and is duly authorized to execute this Lease on behalf
of Lessee and that, if Lessee is a corporation, this Lease is entered into with
consent of Lessee's Board of Directors and stockholders if so required.
In witness whereof, the parties hereto execute this noncancellable Lease
as of the effective date.
LESSEE: LESSOR:
RIBOGENE, INC. DOMINION VENTURES, INC.
By: By:
------------------------------- -------------------------------
17
<PAGE> 18
FIRST AMENDMENT TO THE
FIRST AMENDED AND RESTATED RIGHTS AGREEMENT
This First Amendment (the "Amendment") is made as of August 9, 1991 to
the First Amended and Restated Rights Agreement dated as of June 5, 1991 (the
"Agreement"), by and among RiboGene, Inc. (the "Company"), certain holders of
Preferred Stock of the Company (the "Preferred Holders"), and Dominion Ventures,
Inc. (the "New Purchaser").
WHEREAS, in order to induce the New Purchaser to execute and deliver a
Master Lease Agreement of even date herewith providing for an equipment
leaseline to the Company in the amount of $500,000 (the "Lease Agreement"), the
Company intends to issue to the New Purchaser a warrant to purchase 60,000
shares of the Company's Series B Preferred Stock pursuant to a Warrant Purchase
Agreement of even date herewith; and
WHEREAS, the parties intend that the Warrant Shares and the shares
issuable upon conversion of the Warrant Shares have "piggyback" and Form S-3
registration rights comparable to those held by the Preferred Holders;
NOW THEREFORE, in consideration of the mutual promises contained herein,
the parties agree as follows:
1. Definitions. Unless specifically designated otherwise, capitalized
terms herein shall have the same meanings given them in the Agreement.
2. Registrable Securities. Section 3.1(b) of the Agreement is hereby
amended to read in its entirety as follows:
"(b) The term "Registrable Securities" means:
(i) the shares of Common Stock issuable or issued upon
conversion of the Series A Shares,
(ii) the shares of Common Stock issuable or issued upon
conversion of the Dividend Shares,
(iii) the shares of Common Stock issuable or issued upon
conversion of the Warrant Shares,
(iv) the shares of Common Stock issuable or issued upon
conversion of the Series B Shares,
(v) the shares of Common Stock issuable or issued upon
conversion of the Series B Preferred Stock issuable or issued upon exercise of
the warrant dated August 9, 1991 issued to Dominion Ventures, Inc. (the shares
of Common Stock referred to in
<PAGE> 19
clauses (i), (ii), (iii) and (iv) hereof are collectively referred to hereafter
as the "Stock") and
(vi) any other shares of Common Stock of the Company
issued as (or issuable upon the conversion or exercise of any warrant, right or
other security which is issued as) a dividend or other distribution with respect
to, or in exchange for or in replacement of, the Stock, excluding in all cases,
however, any Registrable Securities sold by a person in a transaction in
which his or her rights under this Restated Rights Agreement are not
assigned;
provided, however, that Common Stock or other securities shall only be treated
as Registrable Securities if and so long as they have not been (A) sold to or
through a broker or dealer or underwriter in a public distribution or a public
securities transaction, or (B) sold in a transaction exempt from the
registration and prospectus delivery requirements of the Securities Act under
Section 4(l) thereof so that all transfer restrictions, and restrictive legends
with respect thereto, if any, are removed upon the consummation of such sale.
Notwithstanding the foregoing, or any other provision herein to the
contrary, the parties acknowledge and agree that the shares of Common Stock
issuable or issued upon conversion of the Series B Preferred Stock issuable or
issued upon exercise of the warrant dated August 9, 1991 issued to Dominion
Ventures, Inc. shall be entitled only to "piggyback" and Form S-3 registration
rights hereunder. Consequently, all such shares of Common Stock shall neither be
deemed "Registrable Securities" nor "Stock", and the holders of all shares of
such Preferred Stock or Common Stock or such warrant shall not be deemed Holders
(as that term is defined below) for purposes of Sections 3.2 (Requested
Registration), 3.6 (Expenses of Demand Registration), 3.14 (Limitations on
Subsequent Registration Rights) and 4 (Additional Rights)."
3. Assignment of Registration Rights. Section 3.13 of the Agreement is
hereby amended to read in its entirety as follows:
"3.13 Assignment of Registration Rights. The rights to cause the
Company to register Registrable Securities pursuant to this Section 3 may be
assigned by a Holder to a transferee or assignee of at least 150,000 shares of
such securities provided the Company is, within a reasonable time after such
transfer, furnished with written notice of the name and address of such
transferee or assignee and the securities with respect to which such
registration rights are being assigned; and provided, further, that such
assignment shall be effective only if immediately following such transfer the
further disposition of such securities by the transferee or assignee is
restricted under the Act. The foregoing 150,000 share
-2-
<PAGE> 20
limitation shall not apply however, to transfers by a Holder to shareholders,
partners (including limited partners) or retired partners of the Holder
(including spouses and ancestors, lineal descendants and siblings of such
partners or spouses who acquire Registrable Securities by gift, will or
intestate succession) if all such transferees or assignees agree in writing to
appoint a single representative as their attorney in fact for the purpose of
receiving any notices and exercising their rights under this section 3."
4. Conditions to Obligations of the Company. The obligations of the
Company to grant the New Purchaser registration rights are conditioned upon the
execution of the Lease Agreement and Warrant Purchase Agreement by the parties
thereto.
5. Effect of Amendment. Except as amended as set forth above the
Agreement shall continue in full force and effect.
6. Counterparts. This Amendment may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
-3-
<PAGE> 21
The foregoing Amendment is hereby executed as of the date first above
written.
"COMPANY" RiboGene, Inc.,
By: [SIG]
----------------------------------
Title: President and CEO
-------------------------------
"NEW PURCHASER" Dominion Ventures, Inc.
By: [SIG]
----------------------------------
Title: President
-------------------------------
"PREFERRED HOLDERS" ------------------------------------
(Print name of Preferred
Shareholder)
By:
----------------------------------
Title:
-------------------------------
-4-
<PAGE> 22
The foregoing Amendment is hereby executed as of the date first above
written.
"COMPANY" RiboGene, Inc.,
By:
----------------------------------
Title:
-------------------------------
"NEW PURCHASER" Dominion Ventures, Inc.
By:
----------------------------------
Title:
-------------------------------
SIERRA VENTURES III
"PREFERRED HOLDERS" ------------------------------------
(Print name of Preferred
Shareholder)
By WTD Associates, ITS GENERAL PARTNERS
By:[SIG]
----------------------------------
Title:GENERAL PARTNER
-------------------------------
-4-
<PAGE> 23
The foregoing Amendment is hereby executed as of the date first above
written.
"COMPANY" RiboGene, Inc.,
By:
----------------------------------
Title:
-------------------------------
"NEW PURCHASER" Dominion Ventures, Inc.
By:
----------------------------------
Title:
-------------------------------
KLEINER PERKINS CAUFIELD & BYERS
by BROOK H. BYERS
"PREFERRED HOLDERS" ------------------------------------
(Print name of Preferred
Shareholder)
By:[SIG]
----------------------------------
Title:GENERAL PARTNER
-------------------------------
-4-
<PAGE> 24
FIRST AMENDMENT TO THE
FIRST AMENDED AND RESTATED RIGHTS AGREEMENT
This First Amendment (the "Amendment") is made as of August 9, 1991 to
the First Amended and Restated Rights Agreement dated as of June 5, 1991 (the
"Agreement"), by and among RiboGene, Inc. (the "Company"), certain holders of
Preferred Stock of the Company (the "Preferred Holders"), and Dominion Ventures,
Inc. (the "New Purchaser").
WHEREAS, in order to induce the New Purchaser to execute and deliver a
Master Lease Agreement of even date herewith providing for an equipment
leaseline to the Company in the amount of $500,000 (the "Lease Agreement"), the
Company intends to issue to the New Purchaser a warrant to purchase 60,000
shares of the Company's Series B Preferred Stock pursuant to a Warrant Purchase
Agreement of even date herewith; and
WHEREAS, the parties intend that the Warrant Shares and the shares
issuable upon conversion of the Warrant Shares have "piggyback" and Form S-3
registration rights comparable to those held by the Preferred Holders;
NOW THEREFORE, in consideration of the mutual promises contained herein,
the parties agree as follows:
1. Definitions. Unless specifically designated otherwise, capitalized
terms herein shall have the same meanings given them in the Agreement.
2. Registrable Securities. Section 3.1(b) of the Agreement is hereby
amended to read in its entirety as follows:
"(b) The term "Registrable Securities" means:
(i) the shares of Common Stock issuable or issued upon
conversion of the Series A Shares,
(ii) the shares of Common Stock issuable or issued upon
conversion of the Dividend Shares,
(iii) the shares of Common Stock issuable or issued upon
conversion of the Warrant Shares,
(iv) the shares of Common Stock issuable or issued upon
conversion of the Series B Shares,
(v) the shares of Common Stock issuable or issued upon
conversion of the Series B Preferred Stock issuable or issued upon exercise of
the warrant dated August 9, 1991 issued to Dominion Ventures, Inc. (the shares
of Common Stock referred to in
<PAGE> 25
clauses (i), (ii), (iii) and (iv) hereof are collectively referred to hereafter
as the "Stock") and
(vi) any other shares of Common Stock of the Company
issued as (or issuable upon the conversion or exercise of any warrant, right or
other security which is issued as) a dividend or other distribution with respect
to, or in exchange for or in replacement of, the Stock, excluding in all cases,
however, any Registrable Securities sold by a person in a transaction in
which his or her rights under this Restated Rights Agreement are not
assigned;
provided, however, that Common Stock or other securities shall only be treated
as Registrable Securities if and so long as they have not been (A) sold to or
through a broker or dealer or underwriter in a Public distribution or a public
securities transaction, or (B) sold in a transaction exempt from the
registration and prospectus delivery requirements of the Securities Act under
Section 4(l) thereof so that all transfer restrictions, and restrictive legends
with respect thereto, if any, are removed upon the consummation of such sale.
Notwithstanding the foregoing, or any other provision herein to the
contrary, the parties acknowledge and agree that the shares of Common Stock
issuable or issued upon conversion of the Series B Preferred Stock issuable or
issued upon exercise of the warrant dated August 9, 1991 issued to Dominion
Ventures, Inc. shall be entitled only to "piggyback" and Form S-3 registration
rights hereunder. Consequently, all such shares of Common Stock shall neither be
deemed "Registrable Securities" nor "Stock", and the holders of all shares of
such Preferred Stock or Common Stock or such warrant shall not be deemed Holders
(as that term is defined below) for purposes of Sections 3.2 (Requested
Registration) 3.6 (Expenses of Demand Registration), 3.14 (Limitations on
Subsequent Registration Rights) and 4 (Additional Rights)."
3. Assignment of Registration Rights. Section 3.13 of the Agreement is
hereby amended to read in its entirety as follows:
"3.13 Assignment of Registration Rights. The rights to cause the
Company to register Registrable securities pursuant to this section 3 may be
assigned by a Holder to a transferee or assignee of at least 150,000 shares of
such securities provided the Company is, within a reasonable time after such
transfer, furnished with written notice of the name and address of such
transferee or assignee and the securities with respect to which such
registration. rights are being assigned; and provided, further, that such
assignment shall be effective only if immediately following such transfer the
further disposition of such securities by the transferee or assignee is
restricted under the Act. The foregoing 150,000 share
-2-
<PAGE> 26
limitation shall not apply however, to transfers by a Holder to shareholders,
partners (including limited partners) or retired partners of the Holder
(including spouses and ancestors, lineal descendants and siblings of such
partners or spouses who acquire Registrable Securities by gift, will or
intestate succession) if all such transferees or assignees agree in writing to
appoint a single representative as their attorney in fact for the purpose of
receiving any notices and exercising their rights under this section 3."
4. Conditions to obligations of the Company. The obligations of the
Company to grant the New Purchaser registration rights are conditioned upon the
execution of the Lease Agreement and Warrant Purchase Agreement by the parties
thereto.
5. Effect of Amendment. Except as amended as set forth above the
Agreement shall continue in full force and effect.
6. Counterparts. This Amendment may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
-3-
<PAGE> 27
The foregoing Amendment is hereby executed as of the date first above
written.
"COMPANY" RiboGene, Inc.,
By: [SIG]
----------------------------------
Title: President and CEO
-------------------------------
"NEW PURCHASER" Dominion Ventures, Inc.
By: [SIG]
----------------------------------
Title: President
-------------------------------
"PREFERRED HOLDERS" ------------------------------------
(Print name of Preferred
Shareholder)
By:
----------------------------------
Title:
-------------------------------
-4-
<PAGE> 28
The foregoing Amendment is hereby executed as of the date first above
written.
"COMPANY" RiboGene, Inc.,
By:
----------------------------------
Title:
-------------------------------
"NEW PURCHASER" Dominion Ventures, Inc.
By:
----------------------------------
Title:
-------------------------------
SIERRA VENTURES III
"PREFERRED HOLDERS" ------------------------------------
(Print name of Preferred
Shareholder)
By WTD Associates, ITS GENERAL PARTNERS
By:[SIG]
----------------------------------
Title:GENERAL PARTNER
-------------------------------
-4-
<PAGE> 29
The foregoing Amendment is hereby executed as of the date first above
written.
"COMPANY" RiboGene, Inc.,
By:
----------------------------------
Title:
-------------------------------
"NEW PURCHASER" Dominion Ventures, Inc.
By:
----------------------------------
Title:
-------------------------------
KLEINER PERKINS CAUFIELD & BYERS
by BROOK H. BYERS
"PREFERRED HOLDERS" ------------------------------------
(Print name of Preferred
Shareholder)
By:[SIG]
----------------------------------
Title:GENERAL PARTNER
-------------------------------
-4-
<PAGE> 1
EXHIBIT 10.25
RIBOGENE, INC.
SCIENTIFIC ADVISOR AGREEMENT
This Scientific Advisor Agreement (this "Agreement") is made between RiboGene,
Inc., a California corporation (the "Company"), and Michael B. Mathews (the
"Advisor") as of 13th April, 1993.
I. Services
The Advisor is hereby appointed to the Company's Scientific Advisory Board.
During the term of this Agreement, the Advisor shall (i) attend and participate
in up to four meetings per year of the Scientific Advisory Board of RiboGene,
Inc. and (ii) consult with the Company regarding therapeutic intervention in
translational control and, insofar as applicable, cell-free protein synthesis.
II. Term
The services provided by the Advisor to the Company shall continue until this
Agreement is terminated by either party in accordance with the provisions of
Section VII hereof.
III. Payment for Services Rendered
For providing the advisory services as defined herein, the Company shall
compensate the Advisor in the manner set forth in Exhibit A hereto. The Company
shall reimburse the Advisor for all reasonable expenses incurred by the Advisor
at the request of the Company pursuant to this Agreement, providing the Company
has approved the expenses in advance and in writing.
IV. Confidentiality
A. The Advisor recognizes that in providing services under this Agreement he
will have contact with information of substantial value to the Company
that is not old and generally known and that gives the Company an
advantage over its competitors who do not know or use it, including, but
not limited to, techniques, assays, designs, drawings, processes,
inventions, developments, slides and customer information, and business
and financial information relating to the business, products, practices or
techniques of the Company. The Advisor agrees to regard and preserve as
confidential such confidential information. Except as authorized by the
Company in writing, the Advisor will not divulge or disclose, directly or
indirectly, to any person, firm, association or corporation other than
bona fide employees of the Company or any affiliate of the Company, acting
in that capacity, or use for his own benefit, gain or otherwise, any
RIBOGENE, INC. SCIENTIFIC ADVISER AGREEMENT PAGE 1
<PAGE> 2
confidential information, knowledge, or data concerning the business or
affairs of the Company or any affiliate of the Company, which, if
disclosed, would adversely affect the business of the Company or any of its
affiliates or accord to a competitor of the Company any competitive
advantage.
This Section IV is not intended to restrict the Advisor from disseminating
or using any information which is published or available to the general
public, except where such publication or general availability is as a
result of the Advisor's acts in violation of the Advisor's obligations
hereunder. The Advisor's obligations pursuant to this Section IV shall
survive termination of this Agreement, and continue in full force and
effect for a period of five (5) years after the effective date of such
termination.
B. The Advisor represents that his performance of the terms of the Agreement
does not and will not conflict with the terms of any agreement to keep in
confidence proprietary information and trade secrets acquired in confidence
or in trust prior to his advisory relationship with the Company. The
Advisor will not disclose to the Company, or induce the Company to use, any
confidential or proprietary information or material belonging to any third
party.
C. The Advisor represents that he is not presently retained by any entity to
advise on research similar to that of the Company or which may lead to the
manufacture or sale of products competitive with those contemplated by the
Company to be manufactured or sold by it, and he agrees that he will not
accept any retention to provide such advice during the term of this
Agreement without prior written approval of the Company.
V. Rights to Inventions and Discoveries
A. The Advisor agrees that any inventions, discoveries, improvements,
processes, technology and know-how arising directly or indirectly from the
performance of advisory services under this Agreement and any patents
issuing thereon shall be the property of and are hereby assigned to the
Company. The Advisor further agrees that all original works of authorship
which are made by the Advisor (solely or jointly with others) in the course
of his performance of advisory services under this Agreement and which are
able to be protected by copyright are "works made for hire," as that term
is defined in the United States Copyright Act. To permit the Company to
claim rights to which it may be entitled under this Section V or applicable
laws, and to insure that there is no conflict with any business or
activities of the Company, all inventions, discoveries, improvements,
processes, technology and know-how (whether or not patentable and whether
or not reduced to
RIBOGENE, INC. SCIENTIFIC ADVISOR AGREEMENT PAGE 2
<PAGE> 3
practice) and all works of authorship which the Advisor may conceive or make
(either by him/herself or jointly with others) during the term of this
Agreement with the Company, and which relate to the field in which advisory
services are to be performed under this Agreement, shall be promptly
disclosed to the Company. The Advisor's obligations pursuant to this Section
V shall survive termination of this Agreement, and continue in full force and
effect for a period of six (6) months after the effective date of such
termination.
B. Any invention, discovery, improvement, process, technology or know-how which
qualifies fully for protection under Section 2870 of the California Labor
Code (attached hereto as Exhibit B) is not subject to this Agreement. Any
invention, discovery, improvement, process, technology or know-how which does
not qualify fully for protection under said Section 2870 and which arises
directly from the performance of advisory services under this Agreement shall
be forthwith assigned to, and shall be the sole property of, the Company.
C. Whenever requested by the Company, the Advisor shall execute patent
applications and copyright registrations and such other documents considered
necessary by the Company or its counsel to apply for and obtain letters,
patents and copyright registrations in the United States, foreign countries,
or both, as the Company may deem advisable, or to otherwise protect for the
benefit of the Company such inventions, discoveries, improvements, processes,
technology, know-how or works of authorship arising from the performance of
advisory services under this Agreement. The Advisor shall also make such
assignments and execute such other instruments as may be necessary to convey
to the Company the ownership and exclusive rights in and to such inventions,
discoveries, processes, technology, know-how, patent applications, patents,
works of authorship or the like. The Company shall bear all of the expense in
connection with the obtaining of such rights. The Advisor further agrees,
whether or not he is still providing advisory services to the Company, to
cooperate to the extent and in the manner requested by the Company in the
prosecution or defense of any such patent or copyright claims or any
litigation or other proceeding involving any inventions, discoveries,
improvements, processes, technology, know-how or works of authorship covered
by this Agreement in any country of the world, but all expenses thereof shall
be paid by the Company. The foregoing covenant contemplates the inclusion of
any improvements of properties, rights, systems, inventions, works of
authorship and the like presently held by the Company or any affiliate
thereof.
VI. Independent Contractor Relationship
It is understood that the parties hereto are independent contractors and engaged
in the conduct of their own respective businesses. Neither the Advisor nor the
Company is to be considered the agent of the other for any
RIBOGENE, INC. SCIENTIFIC ADVISOR AGREEMENT PAGE 3
<PAGE> 4
purpose, and neither party has the right or authority to enter into any
contracts or assume obligations for the other or to give any warranty or make
any representation on behalf of the other, except where and to the extent
specifically authorized in writing to do so. The Advisor is not an employee of
the Company and is not entitled to any of the benefits provided by the Company
to its employees.
VII. Termination
Without limiting any rights which the Company may have by reason of any default
by the Advisor or any rights the Advisor may have by reason of any default by
the Company, the Company and the Advisor reserve the right to terminate this
Agreement in whole or in part at either's convenience by written notice. Such
termination shall be effective in the manner and upon the date specified in
said notice and shall be without prejudice to any claims which the Company may
have against the Advisor or which the Advisor may have against the Company.
Aside from any continuing work, the Company's sole obligation in the event of
such a termination shall be to reimburse the Advisor for services actually
performed by the Advisor up to the effective date of termination. Termination
shall not relieve the Advisor of his continuing obligations under this
Agreement, particularly the requirements of Sections IV and V above.
VIII. Miscellaneous
A. This Agreement and Exhibits A and B attached hereto contain the entire
agreement and understanding regarding advisory services between the
parties. There are no oral understandings, terms or conditions and neither
party has relied upon any outside representation, express or implied, not
contained in this Agreement.
B. All prior understandings, terms, or conditions regarding advisory
services are superseded by this Agreement. This Agreement cannot be
changed or supplemented orally but only in writing signed by both
parties. Except as otherwise provided herein, the provisions of Section
IV, V and VIII shall survive termination of this Agreement. The terms and
provisions of this Agreement shall be binding on and inure to the benefit
of the parties, their heirs, legal representatives, successors and
assigns.
C. Any notice or disclosure required to be given pursuant to this Agreement
shall be in writing and mailed to the parties at the addresses set forth
at the end of this Agreement.
D. This Agreement shall be governed by and construed in accordance with the
laws of the State of California. The federal and state courts within the
State of California shall have exclusive jurisdiction to
RIBOGENE, INC. SCIENTIFIC ADVISOR AGREEMENT PAGE 4
<PAGE> 5
adjudicate any dispute arising out of this Agreement. The
parties consent to personal jurisdiction of the federal and
state courts within California and service of process being
effected by registration mail sent to the addresses set forth at
the end of this agreement.
E. The Advisor may not subcontract all or any part of the services
to be provided hereunder without the prior written consent of
the Company.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first set forth above.
RiboGene, Inc. Michael B. Mathews
("Company") ("Advisor")
By: /s/ Vincent J. Miles By: /s/ Michael B. Mathews
------------------------- ----------------------------
Vincent J. Miles, Ph.D. Michael B. Mathews
Vice President, Title: Senior Staff Scientist
RiboGene, Inc. -------------------------
21375 Cabot Boulevard, Cold Spring Harbor Lab.
Hayward, CA 94583 -------------------------
Address:
21 Turkey Lane
-------------------------
Cold Spring Harbor
-------------------------
NY 11724
-------------------------
RIBOGENE, INC. SCIENTIFIC ADVISOR AGREEMENT PAGE 5
<PAGE> 6
EXHIBIT A
PAYMENT FOR SERVICES
The Advisor will be compensated at the rate of $1,000 per meeting for attending
Scientific Advisory Board meetings and will be reimbursed for reasonable and
actual expenses associated with attending these meetings.
Subject to the approval of RiboGene's Board of Directors, the Advisor will be
granted options to purchase 40,000 shares of RiboGene Common Stock at fair
market value on the date of the grant, subject to a four-year vesting schedule
and other terms and conditions set by the Board of Directors.
RIBOGENE, INC. SCIENTIFIC ADVISOR AGREEMENT PAGE 6
<PAGE> 7
EXHIBIT B
CALIFORNIA LABOR CODE SECTION 2870
EMPLOYMENT AGREEMENTS; ASSIGNMENT OF RIGHTS
"(a) Any provision in an employment agreement which provides that an employee
shall assign any of his or her rights in an invention to his or her employer
shall not apply to an invention that the employee developed entirely on his or
her own time without using the employer's equipment, supplies, facilities, or
trade secret information except for those inventions that either:
(1) Relate at the time of conception or reduction to practice of the
invention to the employer's business, or actual or demonstrably
anticipated research or development of the employer.
(2) Result from any work performed by the employee for the employer.
(b) To the extent a provision in an employee agreement purports to require an
employee to assign an invention otherwise excluded from being required to be
assigned under subdivision (a), the provision is against the public policy of
this state and in unenforceable."
RIBO GENE, INC. SCIENTIFIC ADVISER AGREEMENT Page 7
<PAGE> 1
EXHIBIT 10.26
RIBOGENE, INC.
CONSULTING AGREEMENT
This Agreement is entered into by and between RiboGene, Inc., a California
corporation ("RiboGene"), and Michael Mathews (hereinafter "Consultant"), this
13th day of April, 1993 at Hayward, California.
In consideration of the mutual promises contained herein, the parties
hereto agree as follows:
SECTION 1: CONSULTING
1.1 Services. Consultant shall render consulting services in the area
of the discovery and development of translation-targeted therapeutics
(hereinafter his "Duties"). He shall consult with the Board of Directors,
officers, and department heads of RiboGene, and such other personnel as
designated by the President of RiboGene, in regard to his Duties.
1.2 Project Designation. Consultant shall work on a per project basis.
Upon identification of a project to be performed by Consultant during the term
of this Agreement, RiboGene shall prepare a Project Designation in the form
attached hereto and marked Exhibit A (the "Designation") which shall detail the
scope, duration and payment terms for the project, the Designation shall be
signed by the parties and attached hereto. Consultant's employment with respect
to such project shall thereafter be governed by this Agreement as supplemented
and/or amended by the terms and conditions set forth in the Designation.
1.3 Services for Others. Consultant shall be free to represent or
perform services for other persons during the term of this Agreement, provided
that performance of such services does not interfere with Consultant's Duties
under this Agreement. However, Consultant agrees that he does not presently
perform and does not intend to perform during the term of this Agreement,
consulting or other services in connection with any businesses or proposed
businesses which in any way involve the design or use of products which are or
would be competitive with the products or proposed products of RiboGene (except
for companies previously disclosed by Consultant to RiboGene in writing). Should
Consultant propose to perform such consulting or other services for any other
company, he agrees to notify RiboGene in writing in advance (specifying the name
of the organization for whom he proposes to perform such services) and to
provide information to RiboGene sufficient to allow it to determine if the
performance of such services would conflict with areas of interest to RiboGene,
or any further services that RiboGene might request of Consultant under this
Agreement.
1.4 Payment. RiboGene agrees to pay Consultant for his services to be
rendered under this agreement in accordance with the payment terms set forth on
each Project Designation. RiboGene shall not be responsible for payment of
Consultant's expenses in the performance of his Duties including, but not
limited to, expenses for travel and
<PAGE> 2
similar items unless such expense, which shall be reasonable in amount, is
expressly authorized in writing by RiboGene's Chief Financial Officer or
Controller, prior to the incurring of such expenses, or is permitted under the
terms of a project Designation. RiboGene will reimburse Consultant upon the
presentation by Consultant, from time to time, of a detailed and itemized
account of such expenses substantiated by receipts.
1.5 Term. This Agreement shall be for a period of 12 months, commencing
on Feb. 1st, 1993 and terminating on Jan. 31st 1994; however, this Agreement
may be terminated at any time by either party by 30 days' written notice to the
other party.
1.6 Independent Contractor. The Consultant's services are to be
performed as a independent contractor with the customary and usual independence
associated therewith and he shall not be deemed to be an employee of RiboGene
or to otherwise bind RiboGene to any agreement unless expressly authorized in
writing to do so. Consultant shall be responsible for payment of all income,
social security and other taxes incurred by him as a self-employed person.
1.7 No Assignment. Because of the personal nature of the services to be
rendered by Consultant, this agreement may not be assigned by Consultant
without the prior written consent of RiboGene.
SECTION 2: CONFIDENTIALITY
In consideration of his access to the premises of RiboGene and/or his
access to certain Confidential Information of RiboGene, in connection with his
business relationship with RiboGene, Consultant hereby represents and agrees as
follows:
2.1 Confidential Information. For purposes of this Agreement, the term
"Confidential Information" means:
(i) Any information which RiboGene possesses that has been
created, discovered or developed by or for RiboGene, and which has or could
have commercial value or utility in the business in which RiboGene is engaged;
or
(ii) Any information which is related to the business of
RiboGene and is generally not known by non-RiboGene personnel.
By way of illustration, but not limitation, Confidential Information includes
trade secrets and any information concerning products, processes, formulas,
designs, inventions (whether or not patentable or registrable under copyright
or similar laws, and whether or not reduced to practice), discoveries,
concepts, ideas, improvements, techniques, methods, research, development and
test results, specifications, data, know-how, software, formats marketing
plans, and analyses, business plans and analyses, strategies, forecasts,
customer and supplier identities, characteristics and agreements.
<PAGE> 3
2.2 Exclusions. Notwithstanding the foregoing, the term Confidential
Information shall not include:
(i) Any information which becomes generally available to the public
other than as a result of a breach of the confidentiality portions of this
Consulting Agreement, or any other agreement requiring confidentiality between
RiboGene and the Consultant;
(ii) Information received from a third party in rightful possession
of such information who is not restricted from disclosing such information; and
(iii) Information known by the Consultant prior to his receipt of such
information from RiboGene, which prior knowledge can be documented.
2.3 Documents. Consultant agrees that, without the express written consent
of RiboGene, he will not remove from RiboGene's premises, any notes, formulas,
programs, data, records, machines or any other documents or items which in any
manner contain or constitute Confidential Information -- nor will he make
reproductions or copies of same. In the event Consultant receives any such
documents or items by personal delivery from any duly designated or authorized
personnel of RiboGene, he shall be deemed to have received the express written
consent of RiboGene. In the event that Consultant receives any such documents or
items, other than through personal delivery as described in the preceding
sentence, he agrees to inform RiboGene promptly of his possession of such
documents or items. Consultant shall promptly return any such documents or
items, along with any reproductions or copies to RiboGene upon RiboGene's demand
or upon termination of this Agreement.
2.4 No Disclosure. Consultant agrees that he will hold in trust and
confidence all Confidential Information and will not disclose to others,
directly or indirectly, any Confidential Information or anything relating to
such information without the prior written consent of RiboGene, except as may be
necessary in the course of his business relationship with RiboGene. He further
agrees that he will not use any Confidential Information without the prior
written consent of RiboGene, except as may be necessary in the course of his
business relationship with RiboGene, and that the provisions of this Section 2.4
shall survive termination of this Agreement.
2.5 Patents, Copyrights. Consultant acknowledges and agrees that all
Confidential Information existing or developed by or for RiboGene shall be the
sole property of RiboGene, and RiboGene shall be the sole owner of all patent,
copyright and other rights and protections in connection therewith. He hereby
assigns to RiboGene all right, title and interest that he may have to or acquire
in all such Confidential Information. Upon learning of any Confidential
Information not already disclosed to RiboGene during the term of this Agreement,
he agrees that he will promptly disclose such confidential Information to
RiboGene.
<PAGE> 4
2.6 Ownership. Consultant agrees that all Confidential Information which
is related to or which results from work performed by Consultant for RiboGene
("Inventions") shall be the sole and exclusive property of RiboGene or its
nominees. RiboGene and its nominees shall have the right to use and/or to apply
for patents, copyrights or other statutory or common law protections for such
Inventions in any and all countries. Consultant further agrees (i) to assist
RiboGene in every proper way to obtain and from time to time to enforce such
patents, copyrights and other rights and protections relating to Inventions, and
(ii) to execute and deliver to RiboGene or its nominee upon request all such
documents as RiboGene or its nominee may determine are necessary or may be
necessary to: (a) vest in RiboGene or its nominee clear and marketable title in
and to Inventions, (b) apply for, prosecute and obtain patents, copyrights and
other rights and protections relating to Inventions, or (c) enforce patents,
copyrights and other rights and protections relating to Inventions. Consultant's
obligations pursuant to this Section shall continue beyond the termination of
his employment with RiboGene, but RiboGene agrees to compensate him after the
termination of employment at a reasonable rate for time actually spent or
expenses incurred by him at RiboGene's request.
2.7 Limits of Application. Consultant has been informed and understands
that the provisions of Section 2.5, above, do not apply to any Invention that
qualifies in all respects under Section 2870 of the California Labor Code,
which provides:
"(a) Any provision in an employment agreement which provides that an
employee shall assign, or offer to assign, any of his or her rights in an
invention to his or her employer shall not apply to an invention that the
employee developed entirely on his or her own time without using the employer's
equipment, supplies, facilities, or trade secret information except for those
that either:
(1) Relate at the time of conception or reduction to practice of
the invention to the employer's business, or actual or demonstrably anticipated
research or development of the employer.
(2) Result from any work performed by the employee for the
employer.
(b) To the extent a provision in an employment agreement purports to
require an employee to assign an invention otherwise excluded from being
required to be assigned under subdivision (a), the provision is against the
public policy of this state and is unenforceable."
2.8 No Conflicting Agreements. Consultant represents that he has not
brought, and will not bring with him to RiboGene, and will not use in the
performance of his responsibilities for RiboGene, any materials or documents of
a former employer that are not generally available to the public, unless he has
obtained the express written consent of his former employer for their
possession and use. Moreover, he represents that his performance of this
Agreement and as a consultant of RiboGene does not and will
<PAGE> 5
not breach any agreement or relationship of trust and confidence he may have
with any third party, whether oral, written or implied. He agrees that he has
not entered into and will not enter into any agreement in conflict with this
Agreement.
2.9 Remedies Consultant understands that, in the event he fails to
comply with Section 2.2 through 2.6 of this Agreement, RiboGene may suffer
irreparable harm which may not be adequately compensated by monetary damages.
Accordingly, he agrees that, in the event of his breach or threatened breach of
the terms of those Sections, RiboGene shall be entitled to injunctive or other
preliminary or equitable relief in addition to such other remedies as may be
available to RiboGene for such breach or threatened breach, including damages.
SECTION 3: MISCELLANEOUS
3.1 Actions: Expenses. In the event of any action at law or in equity
to enforce the provisions of this Agreement, the unsuccessful party shall pay to
the other all costs and expenses so incurred, including attorneys' fees.
3.2 Governing Law. This Agreement shall be construed in accordance
with and governed by the laws of the State of California.
3.3 Entire Agreement Amendment Waiver. This Agreement expresses the
entire understanding with respect to the subject matter hereof and supersedes
and terminates any prior oral or written agreements with respect to the subject
matter hereof. Any term of this Agreement may be amended and observance of any
term of this Agreement may be waived only with the written consent of the
parties hereto. Waiver of any term or condition of this Agreement by any party
shall not be construed as a waiver of any subsequent breach or failure of the
same term or condition or waiver of any other term or condition of this
Agreement. The failure of any party at any time to require performance by any
other party of any provision of this Agreement shall not affect the right of
any such party to require future performance of such provision or any other
provision of Agreement.
Consultant and RiboGene hereby accept and agree to the above terms and
acknowledge receipt of a copy of this Agreement.
RIBOGENE, INC.
By: /s/ Vincent J. Miles
----------------------------------
Title: Acting President
------------------------------------
Consultant
<PAGE> 6
PROJECT DESIGNATION
1. DESCRIPTION OF PROJECT:
Provide advice, direction and encouragement to RiboGene staff engaged on
discovery and development of translation-targeted therapeutics. This will
require input from the consultant at a variety of levels, ranging from the
strategic direction of RiboGene's program down to interpretation of
experimental observations.
2. TIME DEVOTED TO PROJECT:
2-3 days per month to be spent at RiboGene, supplemented by (limited)
telephone consultations as required.
3. COMPENSATION:
(a) Total payments: A retainer of $25,000 per annum.
(b) Stock options: Subject to the approval of RiboGene's Board of
Directors, the Consultant will also be granted options to purchase
20,000 shares of RiboGene Common Stock at fair market value on the
date of the grant, subject to a four-year vesting schedule and
other terms and conditions set by the Board of Directors.
(c) Expenses authorized by reimbursement by RiboGene: Reasonable out-of-
pocket expenses incurred in connection with visits to RiboGene and with
other consulting assignments agreed in advance with an officer of the
company.
(d) Invoice submission and payments: The retainer will be paid on a monthly
basis or if requested by Consultant on a later date at his convenience.
For out-of-pocket expenses, the Consultant will submit expense claims,
with receipts, within thirty (30) days of such expenses being incurred.
SIGNATURES: Consultant:
RiboGene:
<PAGE> 1
EXHIBIT 10.27
RIBOGENE, INC.
CONSULTING AGREEMENT
This Agreement is entered into by and between RiboGene, Inc., a California
corporation ("RiboGene"), and Joe B. Harford, Ph.D. (hereinafter "Consultant"),
this 11th day of July, 1997 at Hayward, California.
In consideration of the mutual promises contained herein, the parties hereto
agree as follows:
SECTION 1: CONSULTING
1.1 Services. Consultant shall render consulting services in the area
of the discovery and development of translation-targeted therapeutics
(hereinafter his "Duties"). He shall consult with the Board of Directors,
officers, and department heads of RiboGene, and such other personnel as
designated by the President of RiboGene, in regard to his Duties.
1.2 Project Designation. Consultant shall work on a per project
basis. Upon identification of a project to be performed by Consultant during
the term of this Agreement, RiboGene shall prepare a Project Designation in the
form attached hereto and marked Exhibit A (the "Designation") which shall detail
the scope, duration and payment terms for the project, the Designation shall be
signed by the parties and attached hereto. Consultant's employment with respect
to such project shall thereafter be governed by this Agreement as supplemented
and/or amended by the terms and conditions set forth in the Designation.
1.3 Services for Others. Consultant shall be free to represent or
perform services for other persons during the term of this Agreement, provided
that performance of such services does not interfere with Consultant's Duties
under this Agreement. However, Consultant agrees that he does not presently
perform and does not intend to perform, during the term of this Agreement,
consulting or other services for companies whose businesses or proposed
businesses in any way involve the design or use of products which are or would
be competitive with the products or proposed products of RiboGene (except for
companies previously disclosed by Consultant to RiboGene in writing). Should
Consultant propose to perform consulting or other services for any such
company, he agrees to notify RiboGene in writing in advance (specifying the
name of the organization for whom he proposes to perform such services) and to
provide information to RiboGene sufficient to allow it to determine if the
performance of such services would conflict with areas of interest to RiboGene,
or any further services that RiboGene might request of Consultant under this
Agreement. Nothing herein shall be interpreted to supercede Consultant's
duties or restriction as an employee of the National Cancer Institute.
1.4 Payment. RiboGene agrees to pay Consultant for his services to be
rendered under this agreement in accordance with the payment terms set forth on
each Project Designation. RiboGene shall not be responsible for payment of
Consultant's expenses in the performance of his Duties including, but not
limited to, expenses for travel and similar items unless such expense, which
shall be reasonable in amount, is expressly authorized in writing by RiboGene's
Chief
<PAGE> 2
Financial Officer of Controller, prior to the incurring of such expenses, or is
permitted under the terms of a project Designation. RiboGene will reimburse
Consultant upon the presentation by Consultant, from time to time, of a
detailed and itemized account of such expenses substantiated by receipts.
1.5 Term. This Agreement shall be for a period of 9 months commencing
on May 1st, 1997 and terminating on January 31,1998; however, this Agreement
may be terminated at any time by either party by 30 days' written notice to
the other party.
1.6 Independent Contractor. The Consultant's services are to be
performed as a independent contractor with the customary and usual
independence associated therewith and he shall be deemed to be an employee of
RiboGene or to otherwise bind RiboGene to any agreement unless expressly
authorized in writing to do so. Consultant shall be responsible for payment of
all income, social security and other taxes incurred by him as a self-employed
person.
1.7 No Assignment. Because of the personal nature of the services to
be rendered by Consultant, this agreement may be assigned by Consultant without
the prior written consent of RiboGene.
SECTION 2: CONFIDENTIALITY
In consideration of his access to the premises of RiboGene and/or his
access to certain Confidential Information of RiboGene, in connection with his
business relationship with RiboGene, Consultant hereby represents and agrees as
follows:
2.1 Confidential Information. For purposes of this Agreement the term
"Confidential Information" means:
(i) Any information which RiboGene possesses that has been
created, discovered or developed by or for RiboGene, and which has or could
have commercial value or utility in the business in which RiboGene is engaged;
or
(ii) Any information which is related to the business of
RiboGene and is generally not known by non-RiboGene personnel.
By way of illustration, but not limitation, Confidential Information includes
trade secrets and any information concerning products, processes, formulas,
designs, inventions (whether or not patentable or registrable under copyright or
similar laws, and whether or not reduced to practice), discoveries, concepts,
ideas, improvements, techniques, methods, research, development and test
results, specifications, data, know-how, software, formats, marketing plans, and
analyses, business plans and analyses, strategies, forecasts, customer and
supplier identities, characteristics and agreements.
2.2 Exclusions. Notwithstanding the foregoing, the term Confidential
Information shall not include:
(i) Any information which becomes generally available to the
public other than as a result of a breach of the confidentiality portions of
this Consulting
<PAGE> 3
Agreement, or any other agreement requiring confidentiality between
RiboGene and the Consultant;
(ii) Information received from a third party in rightful
possession of such information who is not restricted from disclosing such
information; and
(iii) Information known by the Consultant prior to his
receipt of such information from RiboGene which prior knowledge can be
documented.
2.3 Documents. Consultant agrees that, without the express written
consent of RiboGene, he will not remove from RiboGene's premises, any notes,
formulas, programs, data, records, machines or any other documents or items
which in any manner contain or constitute Confidential Information - nor will
he make reproductions or copies of same. In the event Consultant receives any
such documents or items by personal delivery from any duly designated or
authorized personnel of RiboGene, he shall be deemed to have received the
express written consent of RiboGene. In the event that Consultant receives any
such documents or items, other than through personal delivery as described in
the preceding sentence, he agrees to inform RiboGene promptly of his possession
of such documents or items. Consultant shall promptly return any such documents
or items, along with any reproductions or copies to RiboGene upon RiboGene's
demand or upon termination of this Agreement.
2.4 No Disclosure. Consultant agrees that he will hold in trust
and confidence all Confidential Information and will not disclose to others,
directly or indirectly, any Confidential Information or anything relating to
such information without the prior written consent of RiboGene, except as may
be necessary in the course of his business relationship with RiboGene. He
further agrees that he will not use any Confidential Information without the
prior written consent of RiboGene, except as may be necessary in the course of
his business relationship with RiboGene, and that the provisions of this
Section 2.4 shall survive termination of this Agreement.
2.5 Patents, Copyrights. Consultant acknowledges and agrees that
all Confidential Information existing or developed by or for RiboGene shall be
the sole property of RiboGene, and RiboGene shall be the sole owner of all
patent, copyright and other rights and protections in connection therewith. He
hereby assigns to RiboGene all right, title and interest that he may have to or
acquire in all such Confidential Information. Upon learning of any Confidential
Information not already disclosed to RiboGene during the term of this
Agreement, he agrees that he will promptly disclose such Confidential
Information to RiboGene.
2.6 Ownership. Consultant agrees that all Confidential Information
which is related to or which results from work performed by Consultant for
RiboGene ("Inventions") shall be the sole and exclusive property of RiboGene or
its nominees. RiboGene and its nominees shall have the right to use and/or to
apply for patents, copyrights or other statutory or common law protections for
such Inventions in any and all countries. Consultant further agrees (i) to
assist RiboGene in every proper way to obtain and from time to time to enforce
such patents, copyrights and other rights and protections relating to
Inventions, and (ii) to execute and deliver to RiboGene or its nominee upon
request all such documents as RiboGene or its nominee may determine are
necessary or may be necessary to: (a) vest in RiboGene or its nominee clear and
marketable title in and to Inventions, (b) apply for, prosecute and obtain
patents, copyrights and other rights and protections
<PAGE> 4
relating to Inventions, or (c) enforce patents, copyrights and other rights and
protections relating to Inventions.) Consultant's obligations pursuant to this
Section shall continue beyond the termination of his employment with RiboGene,
but RiboGene agrees to compensate him after the termination of employment at a
reasonable rate for time actually spent or expenses incurred by him at
RiboGene's request.
2.7 Limits of Application. Consultant has been informed and
understands that the provisions of Section 2.5, above, do not apply to any
Invention that qualifies in all respects under Section 2870 of the California
Labor Code, which provides:
(a) Any provision in an employment agreement which provides that an
employee shall assign, or offer to assign, any of his or her rights in an
invention to his or her employer shall not apply to an invention that the
employee developed entirely on his or her own time without using the employer's
equipment, supplies, facilities, or trade secret information except for those
that either:
(1) Relate at the time of conception or reduction to practice of
the invention to the employer's business, or actual or demonstrably anticipated
research or development of the employer.
(2) Result from any work performed by the employee for the
employer.
(b) To the extent a provision in an employment agreement purports to
require an employee to assign an invention otherwise excluded from being
required to be assigned under subdivision (a), the provision is against the
public policy of this state and is unenforceable.
2.8 No Conflicting Agreements. Consultant represents that he has not
brought, and will not bring with him to RiboGene, and will not use in the
performance of his responsibilities for RiboGene, any materials or documents of
a former employer that are not generally available to the public, unless he has
obtained the express written consent of his former employer for their possession
and use. Moreover, he represents that his performance of this Agreement and as a
consultant of RiboGene does not and will not breach any agreement or
relationship of trust and confidence he may have with any third party, whether
oral, written or implied. He agrees that he has not entered into and will not
enter into any agreement in conflict with this Agreement.
2.9 Remedies. Consultant understands that, in the event he fails to
comply with Section 2.2 through 2.6 of this Agreement, RiboGene may suffer
irreparable harm which may not be adequately compensated by monetary damages.
Accordingly, he agrees that, in the event of his breach or threatened breach of
the terms of those Sections, RiboGene shall be entitled to injunctive or other
preliminary or equitable relief in addition to such other remedies as may be
available to RiboGene for such breach or threatened breach, including damages.
SECTION 3: MISCELLANEOUS
<PAGE> 5
3.1 Actions: Expenses. In the event of any action at law or in equity
to enforce the provisions of this Agreement, the unsuccessful party shall pay
to the other all costs and expenses so incurred, including attorneys' fees.
3.2 Governing Law. This Agreement shall be construed in accordance
with and governed by the laws of the State of California.
3.3 Entire Agreement; Amendment; Waiver. This Agreement expresses the
entire understanding with respect to the subject matter hereof and supersedes
and terminates any prior oral or written agreements with respect to the subject
matter hereof. Any term of this Agreement may be amended and observance of any
term of this Agreement may be waived only with the written consent of the
parties hereto. Waiver of any term or condition of this Agreement by any party
shall not be construed as a waiver of any subsequent breach or failure of the
same term or condition or waiver of any other term or condition of this
Agreement. The failure of any party at any time to require performance by any
other party of any provision of this Agreement shall not affect the right of
any such party to require future performance of such provision or any other
provision of Agreement.
Consultant and RiboGene hereby accept and agree to the above terms and
acknowledge receipt of a copy of this Agreement.
RIBOGENE, INC.
By: LAURA S. LEHMAN
---------------------------
Laura S. Lehman, Ph.D.
Vice President of Research
[SIG]
---------------------------
Consultant
<PAGE> 6
PROJECT DESIGNATION
1. DESCRIPTION OF PROJECT:
Provide advice, direction and encouragement to RiboGene staff engaged on
discovery and development of translation-targeted therapeutics. This
will require input from the Consultant at a variety of levels, ranging
from the strategic direction of RiboGene's program down to
interpretation of experimental observations.
2. TIME DEVOTED TO PROJECT:
9 days this 9-month period to be spent as requested by Vice President of
Research or designee, supplemented by (limited) telephone consultations
as required.
3. COMPENSATION:
(a) Rate of pay: A retainer of $1,000 will be paid each month.
(b) Total payments: $9,000 over the course of this contract.
(c) Expenses authorized for reimbursement by RiboGene: Reasonable
out-of-pocket expenses incurred in connection with visits to RiboGene
and with other consulting assignments agreed in advance with an officer
of the Company.
(d) Invoice submission and payment: The monthly retainer will be paid
automatically by RiboGene on the first day of each calendar month. For
out-of-pocket expenses, the Consultant will submit expense claims, with
receipts, within thirty (30) days of such expenses being incurred.
(e) Additional compensation: As requested by the Company's Vice
President of Research, Consultant may provide services in excess of 9
days per this contract period. Once Consultant has worked the minimum 9
day requirement, compensation for additional days will be at the rate of
$1,000 per day plus expenses as mentioned in (c).
SIGNATURES: Consultant [SIG]
-------
RiboGene [SIG]
-------
<PAGE> 1
EXHIBIT 10.28
[RIBOGENE, INC. LETTERHEAD]
February 6, 1997
Michael Katze, Ph.D.
School of Medicine
University of Washington
Department of Microbiology SC 42
G3111 Health Sciences Building
Seattle, WA 98195
Dear Dr. Katze:
This letter agreement extends the Consulting Agreement entered into between you
and RiboGene from February 1, 1993 - January 31, 1994 to the additional term of
February 1, 1997 - January 31, 1998.
The formal meetings are planned to be held periodically during the above time
period by mutual agreement and the annual compensation will be $12,500 per annum
during the same time period.
Please acknowledge your agreement with the above extension and terms by signing
two (2) copies of this letter agreement. Return one (1) to me at your earliest
convenience.
By: /s/ TIMOTHY E. MORRIS By: /s/ MICHAEL G. KATZE
-------------------------- -----------------------------
Timothy E. Morris Michael Katze, Ph.D.
Vice President, Finance
and Administration Title: Professor/Microbiology
Chief Financial Officer ---------------------
Date: Date: 2/19/97
------------------------ ----------------------------
<PAGE> 1
EXHIBIT 10.29
REQUEST FOR APPROVAL OF OUTSIDE ACTIVITY [X] Initial request
[ ] Revised Request
(Ref. HEW Personnel Guides for Supervisors, [ ] Renewal
Chapter IV, Guide 7, Supplement 1)
- --------------------------------------------------------------------------------
NOTE TO EMPLOYEE: See Information on Reverse Side of This Form
- --------------------------------------------------------------------------------
1. NAME (Last, First, Initial) 2. ORGANIZATIONAL LOCATION
(Principal Operating Component,
Bureau, Division)
Hinnebusch, Alan G. LMG, NICHD, NIH
- --------------------------------------------------------------------------------
3. TITLE OF POSITION 4. GRADE AND SALARY (Federal)
Head, Section on Molecular Genetics of GM-15 $72,354
Lower Eukacyotes, Lab. of Mol. Gen.,
NICHD/NIH
- --------------------------------------------------------------------------------
5. NAME, ADDRESS AND BUSINESS OF 6. LOCATION WHERE SERVICES WILL BE
PERSON OR ORGANIZATION FOR WHOM PERFORMED
OUTSIDE SERVICES WILL BE PERFORMED
RiboGene, Inc. Hayward, CA
- --------------------------------------------------------------------------------
7. NATURE OF ACTIVITY (Indicate type of activity, e.g., teaching, consultation
services, and give full description of specific duties or services to be
performed. Specify, when possible, the scheduled days of work and hours of
day proposed activity will be performed.)
See Attached
- ------------
A renewal of this activity is necessary
should you change positions or if there
is a change in the activity, including
the amount of time devoted to the activity.
- --------------------------------------------------------------------------------
8. ESTIMATED TIME INVOLVED
- --------------------------------------------------------------------------------
a. PERIOD COVERED b. ESTIMATED TOTAL TIME DEVOTED TO
ACTIVITY (If on a continuing basis,
give estimated time per year)
FROM 1/22/93 TO 1/21/94 2-6 days/year
- --------------------------------------------------------------------------------
c. WILL WORK BE PERFORMED ENTIRELY OUTSIDE USUAL WORKING HOURS?
[X] YES [ ] NO IF NO, INDICATE ESTIMATED NUMBER OF HOURS OR DAYS
OF ABSENCE FROM WORK
- --------------------------------------------------------------------------------
9. DO YOUR OFFICIAL DUTIES RELATE IN ANY WAY TO THE PROPOSED ACTIVITY?
[ ] NO [X] YES (Describe) Related to professional competence but
not considered official responsibility
appropriate for use of gov't funds.
- --------------------------------------------------------------------------------
*10. IF PROVIDING CONSULTATIVE OR PROFESSIONAL SERVICES, ARE YOUR WOULD-BE
ASSOCIATES RECEIVING OR WILL THEY SEEK, A GRANT OR CONTRACT FROM A FEDERAL
AGENCY?
[X] NO [ ] YES (Describe)
- --------------------------------------------------------------------------------
11. METHOD OR BASIS OF COMPENSATION 12. WILL COMPENSATION BE DERIVED FROM A
DHEW GRANT OR CONTRACT?
Will not exceed $9,000 per year
[X] FEE [ ] ROYALTY [X] NO [ ] YES (Describe)
[ ] HONORARIUM [ ] EXPENSES
[ ] PER DIEM [ ] OTHER (Specify)
[ ] PER ANNUM
- --------------------------------------------------------------------------------
13. THIS REQUEST IS MADE WITH FULL KNOWLEDGE OF DEPARTMENT AND PRINCIPAL
OPERATING COMPONENT POLICY AND PROCEDURES ON OUTSIDE ACTIVITIES. THE
STATEMENTS I HAVE MADE ARE TRUE, COMPLETE AND CORRECT TO THE BEST OF MY
KNOWLEDGE AND BELIEF.
- --------------------------------------------------------------------------------
14. SIGNATURE OF EMPLOYEE 15. DATE 16. ADDITIONAL INFORMATION ATTACHED
/s/ 10/15/92 [X] YES [ ] NO
- --------------------------------------------------------------------------------
*17. ACTION RECOMMENDED
- --------------------------------------------------------------------------------
a. [X] APPROVAL b. SIGNATURE c. TITLE d. DATE
[ ] DISAPPROVAL /s/ Director, NICHD 12/1/92
- --------------------------------------------------------------------------------
18. ACTION TAKEN
- --------------------------------------------------------------------------------
a. [X] APPROVAL b. SIGNATURE c. TITLE [illegible] d. DATE
[ ] DISAPPROVAL Deputy Director
/s/ Philip S. Chen Jr. for Intramural 1-6-93
Research, NIH
- --------------------------------------------------------------------------------
* See reverse of form
HEW-820 (rev. 3/76) X Approval approval recommended
---
Disapproval /s/ B. Healy 1/7/93 /s/ SLS 12/17/92
--- ------------- ------ -------- --------
Director, NIH Date initials date
<PAGE> 2
REQUEST FOR APPROVAL OF OUTSIDE ACTIVITY [X] Initial Request
[ ] Revised Request
(Ref. HEW Personnel Guides for Supervisors, Chapter IV,
Guide 7, Supplement 1) [ ] Renewal
- -------------------------------------------------------------------------------
NOTE TO EMPLOYEE: SEE INFORMATION ON REVERSE SIDE OF THIS FORM
- -------------------------------------------------------------------------------
1. NAME (Last, First, Initial)
Hinnebusch, Alan G.
- -------------------------------------------------------------------------------
2. ORGANIZATIONAL LOCATION (Principal Operating Component, Bureau, Division)
LMG, NICHD, NIH
- -------------------------------------------------------------------------------
3. TITLE OF POSITION
Head, Section on Molecular Genetics of Lower Eukaryotes, Lab. of Mol. Gen.,
NICHD/NIH
- -------------------------------------------------------------------------------
4. GRADE AND SALARY (Federal)
GM-15 $72,354
- -------------------------------------------------------------------------------
*5. NAME, ADDRESS AND BUSINESS OF PERSON OR ORGANIZATION FOR WHOM OUTSIDE
SERVICES WILL BE PERFORMED
RiboGene, Inc.
- -------------------------------------------------------------------------------
6. LOCATION WHERE SERVICES WILL BE PERFORMED
Hayward, CA
- -------------------------------------------------------------------------------
7. NATURE OF ACTIVITY (Indicate type of activity, e.g., teaching, simulation
services, and give full description of specific duties or services to be
performed. Specify, when possible, the scheduled days of week and hours of
day proposed activity will be performed.)
See Attached
- -------------------------------------------------------------------------------
8. ESTIMATED TIME INVOLVED
- -------------------------------------------------------------------------------
a. PERIOD COVERED
No specific dates available as yet
FROM TO
- -------------------------------------------------------------------------------
b. ESTIMATED TOTAL TIME DEVOTED TO ACTIVITY (If on a continuing basis, give
estimated time per year)
2-6 days/year
- -------------------------------------------------------------------------------
c. WILL WORK BE PERFORMED ENTIRELY OUTSIDE USUAL WORKING HOURS?
[x] YES [ ] NO IF NO, INDICATE ESTIMATED NUMBER OF HOURS OR DAYS OF ABSENCE
FROM WORK
- -------------------------------------------------------------------------------
9. DO YOUR OFFICIAL DUTIES RELATE IN ANY WAY TO THE PROPOSED ACTIVITY?
[ ] NO [x] YES (Describe) Related to professional competence but not
considered official responsibility appropriate
for use of gov't funds.
- -------------------------------------------------------------------------------
*10. IF PROVIDING CONSULTATIVE OR PROFESSIONAL SERVICES, ARE YOUR WOULD-BE
ASSOCIATES RECEIVING OR WILL THEY SEEK, A GRANT OR CONTRACT FROM A
FEDERAL AGENCY?
[x] NO [ ] YES (Describe)
- -------------------------------------------------------------------------------
11. METHOD OR BASIS OF COMPENSATION
Will not exceed $9,000 per year
[x] FEE [ ] HONORARIUM [ ] PER DIEM [ ] PER ANNUM
[ ] ROYALTY [ ] EXPENSES [ ] OTHER (Specify)
- -------------------------------------------------------------------------------
12. WILL COMPENSATION BE DERIVED FROM A DNEW GRANT OR CONTRACT?
[x] NO [ ] YES (Describe)
- -------------------------------------------------------------------------------
13. THIS REQUEST IS MADE WITH FULL KNOWLEDGE OF DEPARTMENT AND PRINCIPAL
OPERATING COMPONENT POLICY AND PROCEDURES ON OUTSIDE ACTIVITIES, THE
STATEMENTS I HAVE MADE ARE TRUE, COMPLETE AND CORRECT TO THE BEST OF MY
KNOWLEDGE AND BELIEF.
- -------------------------------------------------------------------------------
14. SIGNATURE OF EMPLOYEE
/S/
- -------------------------------------------------------------------------------
15. DATE
10/15/92
- -------------------------------------------------------------------------------
16. ADDITIONAL INFORMATION ATTACHED
[x] YES [ ] NO
- -------------------------------------------------------------------------------
*17. ACTION RECOMMENDED
- -------------------------------------------------------------------------------
A. [ ] APPROVAL B. SIGNATURE C. TITLE D. DATE
[ ] DISAPPROVAL
- -------------------------------------------------------------------------------
18. ACTION TAKEN
- -------------------------------------------------------------------------------
A. [ ] APPROVAL B. SIGNATURE C. TITLE D. DATE
[ ] DISAPPROVAL
- -------------------------------------------------------------------------------
* See reverse of form
HEW-820 (rev 1/76)
<PAGE> 3
Attachment to Alan G. Hinnebusch, HEW 520 - Item 7:
To serve as a member of the Scientific Advisory Board of RiboGene, Inc. This
board will meet 2-4 days a year with the aim of developing new therapeutics for
combating human diseases based on recent developments in the understanding of
translational control of gene expression in eukaryotic organisms. The goal
will be to identify control points that differentiate disease-related mRNA,
from the patient's normal mRNAs and then to design drugs that interfere at
those control points, either by specifically disrupting translation of the
disease-related message, or preventing interference by the disease-causing
organism with the host's normal protective mechanisms.
My expertise is sought in these efforts because my research over the last ten
years has involved the elucidation of a gene-specific translational control
mechanism in the yeast Saccharomyces cerevisiae. It is presumed that my
knowledge gained from these studies will allow me to provide valuable advice
and guidance in developing brand new therapeutics based on translational
control. As a member of the Scientific Advisory Board of Ribogene, I would be
expected to formulate specific proposals for new therapeutic strategies and to
evaluate the merits of proposals presented by other consultants and employees
of the company. At later stages in the development of this project, I would be
involved with problem solving and modifications of the research plan as the
work progresses and specific difficulties arise in the implementation of a
particular proposal.
It should be noted that the information and advice I would provide to RiboGene
would not be previously published or available to the public. Nor would it be
information arising from my own research on gene regulation in yeast. It would
deal entirely with novel proposals for new therapeutics aimed at human
diseases, and thus, completely outside the scope of the research I conduct and
my official duties here at NIH.
At present, I have accepted no reimbursement for travel from RiboGene.
<PAGE> 4
- -- If you answer "yes" to this question, please make sure the information is
attached.
- -- If consulting for industry, please complete Part B (below).
- -- If consulting for Industry, a tentative contract must be included. (You may
use Part C of this form.)
Item 17. Action Recommended
- -- Make sure that Recommending Official has checked Approval/Disapproval block
and has signed and dated the request.
Item 18. Action Taken
- -- Show title of approving official (as cited in NIH Manual 1130, Delegations
of Authority, Personnel No. 16). For consulting for industry add a signature
line for the Director, NIH, at bottom of the form.
Deputy Director for Intramural Research, NIH - approves all requests for
employees who are primarily involved in intramural research programs.
Deputy Director for Extramural Research, NIH - approves all requests for
employees who are primarily involved in the management of grants,
cooperative agreements, or contracts programs. (This includes requests for
Division and Associate Directors having responsibility for
contract/grant/cooperative agreement programs)
Associate Directors, NIH - approve all requests in their respective areas.
BID Directors - approve all requests in their respective areas if they are
without remuneration (expenses only). (Note: Copies of BID approved HHS 520s
are to be sent to REBB)
Director, NIH - approves all requests for:
-- BID Directors or other comparable high-level officials.
-- Consulting for Industry
-- Professional or consultive services to organizations or Government
Units that have been awarded, recently applied for, or are potential
recipients of a grant or contract.
-- Participation in litigation as an outside activity where the
litigation involves or is likely to involve the Government.
- --------------------------------------------------------------------------------
Part B - If you are consulting for industry, please complete this part.
- --------------------------------------------------------------------------------
Name of Company/Law Firm Amount of compensation from the attached
activity
RiboGene, Inc. $9,000 per year, or less
- --------------------------------------------------------------------------------
Including this request, total Total compensation scheduled to be
compensation scheduled to be received this calendar year from all
received this calendar year from all previously approved consultations or
consulting or giving testimony, with legal testimony with other companies/
the above company/law firm law firms
$9,000 or less $ 0
- --------------------------------------------------------------------------------
Signature Date
10/15/92
- --------------------------------------------------------------------------------
NIH 2657-2 (1/88) page-1 BACK
<PAGE> 5
- --------------------------------------------------------------------------------
Part C -- Consulting Agreement with Industrial Organization (for optional use)
- --------------------------------------------------------------------------------
This is an agreement between:
- --------------------------------------------------------------------------------
Name of Industrial Organization (I.O.)
RiboGene, Inc.
- --------------------------------------------------------------------------------
of (City and State)
Hayward, CA
- --------------------------------------------------------------------------------
and
- --------------------------------------------------------------------------------
Employee's Name BID
Alan Hinnebusch HHS, NIH, NICHD, LMG
- --------------------------------------------------------------------------------
This contract relates to consulting work proposed by an Outside Employer,
identified above as the Industrial Organization, and the above named Employee,
identified herein as the Consultant. An Industrial Organization shall mean in
this Agreement a for-profit firm or a not-profit organization which seeks to
develop and/or market, directly or indirectly, a technique, process or product.
The following items are agreed to by both the I.O. and the Consultant:
1. The proposed work will not interfere in any way with the Consultant's
responsibilities at the NIH, and will be performed only on a non-duty time,
on annual leave or during leave without pay.
2. The Consultant will not disclose to the I.O. any information derived from
work at the NIH until it has been disclosed publicly, either in a written
publication, or in an oral presentation at a lecture or meeting open to the
public and publicly announced.
3. Consultation will relate only to the general knowledge and expertise of the
Consultant, and may be performed on an ongoing NIH research shall be provided
on a non-exclusive basis. Any and all agreements for exclusive consultation
are prohibited.
4. The I.O. will have no proprietary interest in any work that the employee has
done or will do at the NIH.
5. Notwithstanding any other provision in the agreement, the Consultant shall
not be restricted from reporting an invention made by the Consultant (whether
alone or jointly) to the Department of Health and Human Services (DHHS) as
required by Federal regulations in 45 CFR Part 7,* nor shall anything in the
Agreement restrict or preclude the ability of DHHS to ascertain its rights in
such an invention.
6. The I.O. will not refer to the consultant or to an affiliation with NIH in
anything distributed for publicity or product promotion.
7. The number of days the Consultant will work for the I.O. during the period of
this contract will be:
2-6 days during 1992/3 (year) and 2-6 days during 1993/4 (year).
--- ------ --- ------
8. The method and amount of compensation of the Employee's services and expenses
will be as follows:
the employee will receive a fee of $1,000 per meeting (maximum 4/year)
------ -------
plus $5,000 annual retainer.
9. This Consulting Agreement shall become effective the date of NIH approval of
the Consultant's participation in this Outside Activity.
- -------------
*These regulations require the reporting of any invention made by a DHHS
employee that bears any relation to his/her official duties, or that was made in
whole or in part during working hours, or with any contribution of Government
utilities, equipment, material, funds, or information or of time or services of
other Government employees on official duty.
- --------------------------------------------------------------------------------
NIH 2657-2 (1/88) Page 2 FRONT
<PAGE> 6
- --------------------------------------------------------------------------------
Industrial Organization's Approval
- --------------------------------------------------------------------------------
Signature of Designated Official
/s/ Vincent J. Miles
- --------------------------------------------------------------------------------
Typed Name Date
Vincent J. Miles 10/15/92
- --------------------------------------------------------------------------------
Position in Organization Phone No.
Vice President, Business Development 510 732-5551
- --------------------------------------------------------------------------------
Address
21375 Cabot Blvd., Hayward, CA 94545
- --------------------------------------------------------------------------------
Employee/Consultant's Acceptance
- --------------------------------------------------------------------------------
I will observe the policies and regulations which Signature of Employee
govern outside activities as defined in the NIH Manual /s/ Alan G. Hinnebusch
2300-735-4 and the DHHS Standards of Conduct.
- --------------------------------------------------------------------------------
Typed Name Date
Alan G. Hinnebusch 10/15/92
- --------------------------------------------------------------------------------
Title of Position Phone No.
Head, Section on Molecular Genetics of Lower 496-4480
Eukaryotes, Lab. of Molecular Genetics,
NICHD/NIH
- --------------------------------------------------------------------------------
Location
Building 6B, Room 309
Bethesda, MD 20892
- --------------------------------------------------------------------------------
Forms submission
Submit (to employee's supervisor) both pages of this form, along with the
completed Form HHS 520, at least 6 weeks in advance of the requested activity.
This will permit appropriate processing and approval prior to initiation.
- --------------------------------------------------------------------------------
NIH 2657-2 (1/88) Page 2 BACK
<PAGE> 7
REQUEST FOR APPROVAL OF AN OUTSIDE ACTIVITY
SUPPLEMENTAL INFORMATION
Employee Name: Alan G. Hinnebusch, Ph.D.
Position Title: Head Section on Molecular Genetics of Lower Eukaryotes,
Laboratory of Molecular Genetics, NICHD/NIH
Organizational Location: (include ICD, division, laboratory, branch, etc.)
LMG, NICHD, NIH
1. Brief description of employee's official duties. In addition, attach a copy
of the position description or billet.
I supervise research on the translational regulation of the GCN4 protein of
yeast and the mechanism whereby GCN4 activates transcription at its target
genes. (See attached position description.)
2. Brief description of the outside activity.
See attached.
3. Explain why the activity cannot be performed as an official duty including
how it does not relate to NIH responsibilities, policies, and programs?
See attached.
4. Is the outside organization a recipient or potential recipient of any
grants or contracts from the intramural program of your ICD? Is the outside
organization a recipient of (or in the process of negotiating) any direct
or indirect collaborative agreements or Cooperative Research and
Development Agreements (CRADA) with the intramural program of your ICD? Is
there any direct or indirect support of staff, guest workers, or other
individuals in the intramural program of your ICD?
No, to all questions.
5. If consulting with a law firm, do you have any financial associations with
the client (or potential beneficiary) in the matter for which you propose
to consult?
Not applicable.
<PAGE> 8
Attachment to Alan G. Hinnebusch, Supplemental Form:
Item 2:
To serve as a member of the Scientific Advisory Board of RiboGene, Inc. In this
capacity, I would spend 2-6 days a year providing consultive services aimed at
the development of new therapeutics for combating human diseases based on
translational control of gene expression in eukaryotic organisms. The goal would
be to identify control points that differentiate disease-related mRNA from the
patient's normal mRNAs and then design drugs that would interfere at those
control points, either by specifically disrupting translation of the
disease-related message, or preventing interference by the disease-causing
organism with the host's normal protective mechanisms.
Item 3:
I have been invited to serve on the Scientific Advisory Board because I have
expertise in the field of translational control mechanisms gained from research
I have done at NIH. However, the information and advice I would provide to
RiboGene would deal with novel proposals for developing therapeutics against
human disease. These proposals would be completely outside the scope of the
research I conduct here at NIH on gene regulation in the simple yeast
Saccharomyces. This yeast is not a human pathogen and the translational control
of the transcriptional activator GCN4 which we study has no direct bearing on
human disease. Developing proposals for new therapies aimed at human diseases
of any type is not listed in my position description and would not be carried
out by me except as a participant of the Scientific Advisory Board of a company
like of RiboGene.
<PAGE> 9
Position Description - Research Microbiologist (GM-15)
Introduction
The Section on Molecular Genetics of Lower Eukaryotes in the LMG, headed by the
incumbent, conducts laboratory research on the molecular mechanisms for
regulation of gene expression in the unicellular eukaryote Saccharomyces
carevisse. This yeast is an excellent model system for studying basic functions
carried out by all eukaryotic cells, including modulation of gene expression at
the transcriptional and translational levels in response to changes in the
extracellular environment. The Section aims at elucidating the coordinate
regulation of amino acid biosynthetic genes and the genes encoding components of
the protein synthesis machinery under conditions of amino acid depletion.
Previous work from the Section has shown that the transcriptional activator of
amino acid biosynthetic genes, GCN4, is itself regulated at the translational
level by a novel control mechanism that involves general factors involved in the
initiation of protein synthesis. The regulation of the ribosomal protein genes
has been shown to involve RAPI, a very abundant protein that can either
stimulate or repress the transcription of genes to which it binds, depending on
the functions of other regulatory factors in the cell. These control mechanisms
are essential features of the complicated circuitry that exists in all
eukaryotic cells to adjust the rate of cell growth and division to the
availability of essential nutrients. The combination of sophisticated genetic
analysis and a variety of molecular and biochemical techniques available for
Saccharomyces provides a powerful set of tools with which to dissect such
complex regulatory networks.
Duties
The incumbent initiates, plans, constructs and directs experimental research
devoted to fundamental questions concerning the transcriptional regulation of
genes encoding amino acid biosynthetic enzymes and ribosomal proteins. Studies
on the transcriptional regulatory proteins that interact with these genes and
the trans-acting factors which, in turn, modulate the expression or activity of
these factors is the main focus of the Section. The incumbent employs a variety
of genetic, biochemical and immunological techniques to analyze the functions of
the proteins that participate in these regulatory networks and the cis-acting
signals in DNA and RNA with which they interact. Much emphasis is given to the
isolation of regulatory mutations in vivo by classical genetic approaches and
the production of site-directed alterations in cloned genes by in vitro
mutagenesis. The effects of these mutations on gene regulation are studied
using various molecular biological and biochemical assays. Antibodies produced
against regulatory proteins and various fractionation techniques are used to
study physical and biochemical interactions between the different factors under
conditions of nutritional depletion or excess. Regulatory mutations of
particular interest are often subjected to additional genetic analysis by the
isolation of suppressor mutations. Cloning and characterization of such
suppressor genes allows the identification of new interacting components of the
system under study. Additional components are identified by screening yeast DNA
libraries constructed in high copy-number plasmid vectors for the production of
mutant phenotypes resulting from the overexpression of wild-type genes.
The incumbent analyzes overall research activities in the laboratory and makes
decisions aiming to enhance creativity and productivity of the work in the
section. In so doing, the incumbent demonstrates originality in evaluation of
results and in generating new concepts leading to formation of creative research
directions and working hypotheses. In addition, the incumbent shows scholarly
breadth and depth in understanding and evaluating research subjects. The
incumbent is sensitive to new development in the field, incorporates and
improves techniques and procedures used in the laboratory in a timely fashion.
The incumbent appoints associates, post-doctoral investigators, technicians and
students to the staff of the Section. The incumbent provides critical guidance
for conducting research activities with a creative edge and high efficiency. The
incumbent maintains a cooperative and positive environment conducive for
imaginative work. To this end, the incumbent holds regular discussions with the
<PAGE> 10
laboratory staff. The incumbent demonstrates leadership in making progress in
research by employing expertise in the field of molecular biology, microbiology
and genetics.
The incumbent assigns work to technical staff, directs experiments, prepares
performance appraisals, approves leave. The incumbent carries out all other
administrative duties required for the smooth functions of the Section. The
incumbent makes active contributions for disseminating scientific information
obtained in the laboratory by publishing original papers in qualified
scientific journals. The incumbent also communicates with scientists and
students in relevant fields by participating in meetings, giving lectures and
organizing seminars. The incumbent makes honest efforts as an active member of
scientific community by participating in peer reviewing of manuscripts and
grant applications, and conducts collaborative research within and outside the
NIH.
The incumbent adheres to all safety regulations such as radiation safety, and
maintains a safe laboratory environment.
FACTOR 1 -- KNOWLEDGE REQUIRED
Mastery of the principles and proven expertise in the field of molecular
biology, microbiology and genetics with particular emphasis on gene regulation.
The incumbent is an internationally recognized authority in this field.
FACTOR 2 -- SUPERVISORY CONTROL
The research program of the Section must be consistent with the general
objectives of LMG and the Institute. Within this framework, the directions of
research in the Section is the incumbent's sole responsibility. The Laboratory
Chief is kept informed of ongoing research projects, and of major changes in
the directions of the program.
FACTOR 3 -- GUIDELINES
The incumbent uses established resource of laboratory references and journals
in specific areas for information about experimentation. The incumbent must
exhibit a high degree of originality in the design and analyses of experiments.
Improvement of existing technology and modification of previously accepted
concepts are often required.
FACTOR 4 -- COMPLEXITY
The incumbent conducts research that involves many disciplines of biology. The
use of most advanced techniques of molecular engineering, genetics and
immunochemistry is required. The incumbent must deal with the latest and
sometimes conflicting experimental evidence and trends found in the literature
and in other means of scientific communications, and derive his own
evaluations. With these evaluations, the incumbent must develop original
research directions which will advance our understanding of gene regulation in
simple eukaryotes.
FACTOR 5 -- SCOPE AND EFFECT
The incumbent conducts research that makes substantial contributions to the
understanding of the mechanisms of gene regulation in eukaryotic systems and
leads the field. The work includes providing expert advice and assistance to
colleagues and collaborators.
FACTOR 6 -- PERSONAL CONTACTS
The incumbent makes scientific interactions with colleagues in the Section,
with scientists at the NIH and outside both nationally and internationally.
<PAGE> 11
FACTOR 7 -- PURPOSE OF CONTACTS
The purpose of these contacts is to present scientific information produced in
the Section to other scientists. The information to be transmitted may range
from scientific facts to hypothesis and concepts.
FACTOR 8 -- PHYSICAL DEMANDS
The work requires regular physical exertions such as standing for prolonged
periods of time or bending at the bench. The work may require specific, but
common physical characteristics and abilities such as above average agility and
dexterity to perform intricate experiments and data analyses.
FACTOR 9 -- WORK ENVIRONMENT
The work involves regular and recurring exposure to moderate risks and
discomfort, such as chemical carcinogens, radioactive materials, irritant
chemicals and potential infectious agents.
<PAGE> 12
[RiboGene, Inc. Letterhead]
October 14, 1992
Dr. A.G. Hinnebusch
National Institutes of Health
9000 Wisconsin Avenue
Building 6B Room 3B-309
Bethesda, MD 20892
CONFIDENTIAL
Dear Alan,
Now that RiboGene's Business Plan for translation-targeted therapeutics has
been approved, it gives me great pleasure to invite you to join our Scientific
Advisory Board for this venture. We at RiboGene are very excited by the
prospects for TTT, and believe that the Scientific Advisory Board will play a
key role in helping us to decide which research strategies have the greatest
chance of success. Your comprehensive knowledge of the field of translational
control will, we believe, be very valuable in this endeavor.
In return for your services, we propose to pay you a consultancy fee of $1,000
for each SAB meeting you attend, and to reimburse you for out-of-pocket
expenses incurred in connection with these meetings. We expect that there will
be up to four SAB meetings a year, typically requiring somewhere between 2 and
6 days per year.
In addition to your per-meeting fees, we also propose to pay you a $5,000
retainer at the end of each year, on the anniversary of your joining the SAB.
Depending on the progress made by the company, the amount of this retainer may
be increased in certain years - subject of course to any limits imposed by NIH
for the remuneration you may receive from an outside employer.
We are working right now to finalize the date of our inaugural SAB meeting,
which is likely to take place in late January 1993. The purpose of this meeting
will be to review the translation/disease targets RiboGene has selected for TTT
and the experimental approach it intends to adopt. A provisional agenda is
attached. I will be in touch to confirm dates and arrangements.
Looking forward to a long and successful association with you.
Sincerely,
/s/ Vincent J. Miles
Vincent J. Miles PhD
Vice President, Business Development
General Manager, Therapeutics Business Unit
<PAGE> 13
CONFIDENTIAL
RIBOGENE, INC
TTT SCIENTIFIC ADVISORY BOARD MEETING, JANUARY 93
AGENDA (PROVISIONAL AS OF 10/14/92)
1. Proposed Targets
- - Has RiboGene selected the translation targets most likely to be amenable to
intervention?
- - Are the diseases which can be addressed via these targets clinically
significant?
- - What other targets (translation targets, diseases) could we add to the list?
2. Proposed Screening Assays
- - Given the list of translation/disease targets, are the screening assays
proposed by RiboGene appropriate? How could they be improved? What technical
obstacles may be expected?
- - Are any alternative assays possible/preferred?
3. Proposed Intervention Strategies
- - Are the lead compounds proposed by RiboGene appropriate? What alternatives
might there be?
4. Timing and Milestones
- - Are the milestones proposed by the company realistic? Is the timetable too
optimistic or pessimistic?
<PAGE> 1
Exhibit 11.1
COMPUTATION OF NET LOSS PER SHARE
(In thousands, except per share data)
<TABLE>
<CAPTION>
1994 1995 1996 1996 1997
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net loss $(11,437) $(7,254) $(3,863) $(2,605) $(1,258)
======== ======= ======= ======= =======
Weighted average shares
of common stock outstanding: 134 158 258 220 354
Shares related to staff accounting
bulletin topic 4D:
Stock options and warrants 933 933 933 933 933
Preferred stock 1,150 1,150 1,150 1,150 1,150
-------- ------- ------- ------- -------
Shares used in computing
net loss per share 2,217 2,241 2,341 2,303 2,437
======== ======= ======= ======= =======
Net loss per share $ (5.16) $ (3.24) $ (1.65) $ (1.13) $ (0.52)
======== ======= ======= ======= =======
Calculation of shares
outstanding for computing
pro forma net loss per share:
Shares used in computing net
loss per share 2,341 2,437
Adjustment to reflect the effect
of the assumed conversion of
preferred stock 2,825 3,046
------- ------
Shares used in computing pro
forma net loss per share 5,166 5,483
======= ======
Pro forma net loss per share $ (0.75) $(0.23)
======= ======
</TABLE>
<PAGE> 1
Exhibit 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Selected Financial
Data" and "Experts" and to the use of our reports dated February 25, 1997
(except Note 9, as to which the date is _________, 1997), in the Registration
Statement (Form S-1) and related Prospectus of RiboGene, Inc. for the
registration of 2,645,000 shares of its common stock.
Ernst & Young LLP
Palo Alto, California
______________________________________
The foregoing consent is in the form that will be signed upon the completion of
the changes to the capital accounts described in Note 9 to the financial
statements.
/s/ Ernst & Young LLP
Palo Alto, California
October 22, 1997
<PAGE> 1
EXHIBIT 23.3
CONSENT OF COUNSEL
The undersigned hereby consents to the use of our name and the statement
with respect to us appearing under the heading "Experts" in the Registration
Statement on Form S-1 of RiboGene, Inc.
[SIG]
PENNIE & EDMONDS LLP
New York, New York
October 24, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> YEAR 6-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1997
<PERIOD-START> JAN-01-1996 JAN-01-1997
<PERIOD-END> DEC-31-1996 JUN-30-1997
<CASH> 1,981 2,401
<SECURITIES> 0 881
<RECEIVABLES> 0 0
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 2,165 3,582
<PP&E> 1,043 1,084
<DEPRECIATION> 758 824
<TOTAL-ASSETS> 2,657 4,004
<CURRENT-LIABILITIES> 3,119 2,715
<BONDS> 0 0
0 0
29,449 33,560
<COMMON> 290 340
<OTHER-SE> (31,695) (32,996)
<TOTAL-LIABILITY-AND-EQUITY> (1,956) 904
<SALES> 2,087 1,581
<TOTAL-REVENUES> 2,087 1,581
<CGS> 0 0
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 5,668 2,815
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> (282) (24)
<INCOME-PRETAX> (3,863) (1,258)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (3,863) (1,258)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (3,863) (1,258)
<EPS-PRIMARY> (0.75) (0.23)
<EPS-DILUTED> (0.75) (0.23)
</TABLE>
