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EXHIBIT 10.17
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY STATE SECURITIES LAWS. NO SALE OR DISPOSITION MAY BE EFFECTED
WITHOUT (i) EFFECTIVE REGISTRATION STATEMENTS RELATED THERETO, (ii) AN OPINION
OF COUNSEL FOR THE HOLDER, REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH
REGISTRATIONS ARE NOT REQUIRED, (iii) RECEIPT OF NO-ACTION LETTERS FROM THE
APPROPRIATE GOVERNMENTAL AUTHORITIES, OR (iv) OTHERWISE COMPLYING WITH THE
PROVISIONS OF SECTION 7 OF THIS WARRANT.
COMBICHEM, INC.
WARRANT TO PURCHASE ______ SHARES
OF SERIES Z PREFERRED STOCK
THIS CERTIFIES THAT, for value received, ___________________ and its
assigns are entitled to subscribe for and purchase ______ shares of the fully
paid and nonassessable Series Z Preferred Stock (as adjusted pursuant to Section
4 hereof, the "Shares") of COMBICHEM, INC., a California corporation (the
"Company"), at the price of $0.62 per share (such price and such other price as
shall result, from time to time, from the adjustments specified in Section 4
hereof is herein referred to as the "Warrant Price"), subject to the provisions
and upon the terms and conditions hereinafter set forth; provided, however, that
this Warrant shall first become exercisable (i) as to _____ Shares upon the date
of the first funding under the Loan Agreement (as defined below); (ii) as to an
additional _____ Shares upon the earlier to occur of (A) the date of the second
funding under the Loan Agreement or (B) the date of the funding under the Loan
Agreement which causes the aggregate amount funded under the Loan Agreement to
exceed $250,000; (iii) as to an additional _____ Shares upon the earlier to
occur of (A) the date of the third funding under the Loan Agreement or (B) the
date of the funding under the Loan Agreement which causes the aggregate amount
funded under the Loan Agreement to exceed $500,000; and (iv) as to an additional
_____ Shares upon the earlier to occur of (A) the date of the fourth funding
under the Loan Agreement or (B) the date of the funding under the Loan Agreement
which causes the aggregate amount funded under the Loan Agreement to exceed
$750,000; provided, further, that notwithstanding the number of fundings under
the Loan Agreement or the amount funded under the Loan Agreement, this Warrant
shall be exercisable as to all 27,581 Shares on April 30, 1997. As used herein,
(a) the term "Series Preferred" shall mean the Company's presently authorized
Series Z Preferred Stock, and any stock into or for which such Series Z
Preferred Stock may hereafter be converted or exchanged, (b) the term "Date of
Grant" shall mean May 20, 1996, (c) the term "Loan Agreement" shall mean the
Loan and Security Agreement, dated as of the Date of Grant, among the Company,
MMC/GATX Partnership No. I and Silicon Valley Bank, and (d) the term "Other
Warrants" shall mean any other warrants issued by the Company in connection with
the transaction with respect to which this Warrant was issued, and any warrant
issued upon transfer or partial exercise of this Warrant. The term "Warrant" as
used herein shall be deemed to include Other Warrants unless the context clearly
requires otherwise.
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1. Term. The purchase right represented by this Warrant is exercisable, in
whole or in part, at any time and from time to time from the Date of Grant
through the later of (i) ten (10) years after the Date of Grant or (ii) five (5)
years after the closing of the Company's initial public offering of its Common
Stock effected pursuant to a Registration Statement on Form S-1 (or its
successor) filed under the Securities Act of 1933, as amended (the "Act").
2. Method of Exercise; Payment; Issuance of New Warrant. Subject to Section
1 hereof, 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 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 Series Preferred
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 after such exercise 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.
3. Stock Fully Paid; Reservation of Shares. All Shares that may be issued
upon the exercise of the rights represented by this Warrant will, upon issuance
pursuant to the terms and conditions herein, 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 this Warrant may be
exercised, the Company will at all times have authorized, and reserved for the
purpose of the issue upon exercise of the purchase rights evidenced by this
Warrant, a sufficient number of shares of its Series Preferred to provide for
the exercise of the rights represented by this Warrant and a sufficient number
of shares of its Common Stock to provide for the conversion of the Series
Preferred into Common Stock.
4. Adjustment of Warrant Price and Number of Shares. The number and kind of
securities purchasable upon the exercise of this Warrant and the Warrant Price
shall be subject to adjustment from time to time upon the occurrence of certain
events, as follows:
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(a) 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 the acquiring and
the surviving 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
duly execute and deliver to the holder of this Warrant a new Warrant (in form
and substance satisfactory to the holder of this Warrant), so that the holder of
this Warrant shall have the right to receive, at a total purchase price not to
exceed that payable upon the exercise of the unexercised portion of this
Warrant, and in lieu of the shares of Series Preferred 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 the number of shares of Series Preferred then purchasable
under this Warrant. Such new Warrant shall provide for adjustments that shall be
as nearly equivalent as may be practicable to the adjustments provided for in
this Section 4. In addition, in the event that all the authorized shares of
Series Preferred are converted into shares of Common Stock or any other series
or class of capital stock of the Company or in the case of any amendment or
waiver of any of the terms of the antidilution protection of the Series
Preferred, then this Warrant shall be deemed to be amended so that the holder of
this Warrant shall continue to be entitled to antidilution protection as nearly
equivalent as may be practicable to the antidilution protection applicable to
the Series Preferred on the Date of Grant, and the Company shall duly execute
and deliver to the holder of this Warrant a supplement hereto to such effect, in
form and substance reasonably satisfactory to the holder of this Warrant. The
provisions of this subparagraph (a) shall similarly apply to successive
reclassifications, changes, mergers, consolidations, transfers, amendments and
waivers.
(b) Subdivision or Combination of Shares. If the Company at any time
while this Warrant remains outstanding and unexpired shall subdivide or combine
its outstanding shares of Series Preferred, the Warrant Price shall be
proportionately decreased in the case of a subdivision or increased in the case
of a combination, effective at the close of business on the date the subdivision
or combination becomes effective.
(c) Stock Dividends and Other Distributions. If the Company at any
time while this Warrant is outstanding and unexpired shall (i) pay a dividend
with respect to Series Preferred payable in Series Preferred, or (ii) make any
other distribution with respect to Series Preferred (except any distribution
specifically provided for in the foregoing subparagraphs (a) and (b)) of Series
Preferred, 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 (i) the numerator of which
shall be the total number of shares of Series Preferred outstanding immediately
prior to such dividend or distribution, and (ii) the
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denominator of which shall be the total number of shares of Series Preferred
outstanding immediately after such dividend or distribution.
(d) Adjustment of Number of Shares. Upon each adjustment in the
Warrant Price, the number of Shares of Series Preferred purchasable hereunder
shall be adjusted, to the nearest whole share, to the product obtained by
multiplying the number of Shares purchasable immediately prior to such
adjustment in the Warrant Price by a fraction, the numerator of which shall be
the Warrant Price immediately prior to such adjustment and the denominator of
which shall be the Warrant Price immediately thereafter.
(e) Antidilution Rights. The other antidilution rights applicable to
the Shares and the Common Stock of the Company are set forth in Section 4 of
Division B of Article III of the Company's Articles of Incorporation, as amended
through the Date of Grant (the "Charter"), a true and complete copy of which is
attached hereto as Exhibit B. Such antidilution rights shall not be restated,
amended, modified or waived in any manner that is adverse to the holder hereof
without such holder's prior written consent. The Company shall promptly provide
the holder hereof with any restatement, amendment, modification or waiver of the
Charter promptly after the same has been made.
5. Notice of Adjustments. Whenever the Warrant Price or the number of
Shares purchasable hereunder shall be adjusted pursuant to Section 4 hereof, the
Company shall make a certificate signed by its chief financial officer 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 and the number of Shares purchasable hereunder after giving effect
to such adjustment, which shall be mailed (without regard to Section 13 hereof,
by first class mail, postage prepaid) to the holder of this Warrant. In
addition, whenever the conversion price or conversion ratio of the Series
Preferred shall be adjusted, the Company shall make a certificate signed by its
chief financial officer 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 conversion price or ratio of the Series
Preferred after giving effect to such adjustment, and shall cause copies of such
certificate to be mailed (without regard to Section 13 hereof, by first class
mail, postage prepaid) to the holder of this Warrant.
6. Fractional Shares. No fractional shares of Series Preferred will be
issued in connection with any exercise hereunder, but in lieu of such fractional
shares the Company shall make a cash payment therefor based on the fair market
value of the Series Preferred on the date of exercise as reasonably determined
in good faith by the Company's Board of Directors.
7. Compliance with Securities Act: Disposition of Warrant or Shares of
Series Preferred.
(a) Compliance with Securities Act. The holder of this Warrant, by
acceptance hereof, agrees that this Warrant, and the shares of Series Preferred
to be issued upon exercise hereof and any Common Stock issued upon conversion
thereof are being acquired for investment
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and that such holder will not offer, sell or otherwise dispose of this Warrant,
or any shares of Series Preferred to be issued upon exercise hereof or any
Common Stock issued upon conversion thereof except under circumstances which
will not result in a violation of the Act. Upon exercise of this Warrant, unless
the Shares being acquired are registered under the Act or an exemption from such
registration is available, the holder hereof shall confirm in writing, by
executing the form attached as Schedule 1 to Exhibit A hereto, that the shares
of Series Preferred so purchased (and any shares of Common Stock issued upon
conversion thereof) are being acquired for investment and not with a view toward
distribution or resale. This Warrant and all shares of Series Preferred issued
upon exercise of this Warrant and all shares of Common Stock issued upon
conversion thereof (unless registered under the Act) shall be stamped or
imprinted with a legend in substantially the following form:
"THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. NO SALE OR
DISPOSITION MAY BE EFFECTED WITHOUT (i) EFFECTIVE REGISTRATION STATEMENTS
RELATED THERETO, (ii) AN OPINION OF COUNSEL FOR THE HOLDER, REASONABLY
SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATIONS ARE NOT REQUIRED, (iii)
RECEIPT OF NO-ACTION LETTERS FROM THE APPROPRIATE GOVERNMENTAL AUTHORITIES, OR
(iv) OTHERWISE COMPLYING WITH THE PROVISIONS OF SECTION 7 OF THE WARRANT UNDER
WHICH THESE SECURITIES WERE ISSUED, DIRECTLY OR INDIRECTLY."
In addition, in connection with the issuance of this Warrant, the holder
specifically represents to the Company by acceptance of this Warrant as follows:
(1) The holder is aware of the Company's business affairs and financial
condition, and has acquired information about the Company sufficient to reach an
informed and knowledgeable decision to acquire this Warrant. The holder is
acquiring this Warrant for its 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 Act.
(2) The holder understands that this Warrant has not been registered under
the Act in reliance upon a specific exemption therefrom, which exemption depends
upon, among other things, the bona fide nature of the holder's investment intent
as expressed herein. In this connection, the holder understands that, in the
view of the SEC, the statutory basis for such exemption may be unavailable if
the holder's representation was predicated solely upon a present intention to
hold the Warrant 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 Warrant, or for a period of one year or any other fixed
period in the future.
(3) The holder further understands that this Warrant must be held
indefinitely unless subsequently registered under the Act and any applicable
state securities laws, or unless exemptions from registration are otherwise
available. Moreover, the holder understands that the
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Company is under no obligation to register this Warrant or the Shares except as
provided in Section 9 hereof.
(4) The holder is aware of the provisions of Rule 144 and 144A, promulgated
under the 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, if applicable, including, among other
things: The availability of certain public information about the Company, the
resale occurring not less than two years after the party has purchased and paid
for the securities to be sold; 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, as
amended) and the amount of securities being sold during any three-month period
not exceeding the specified limitations stated therein.
(5) The holder further understands that at the time it wishes to sell this
Warrant 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 and 144A, and that, in such
event, the holder may be precluded from selling this Warrant or the Shares under
Rule 144 and 144A even if the two-year minimum holding period had been
satisfied.
(6) The holder further understands that in the event all of the
requirements of Rule 144 and 144A are not satisfied, registration under the Act,
compliance with Regulation A, or some other registration exemption will be
required; and that, not withstanding the fact that Rule 144 and 144A 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 and 144A 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.
(b) Disposition of Warrant or Shares. With respect to any offer, sale
or other disposition of this Warrant or any shares of Series Preferred acquired
pursuant to the exercise of this Warrant prior to registration of such Warrant
or shares, the holder hereof and each subsequent holder of this 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 Series Preferred or Common Stock and indicating
whether or not under the Act certificates for this Warrant or such shares of
Series Preferred to be sold or otherwise disposed of require any restrictive
legend as to applicable restrictions on transferability in order to ensure
compliance with such law. Promptly upon receiving such written notice and
reasonably satisfactory opinion, if so requested, the Company, as promptly as
practicable, shall notify such holder that such holder may sell or otherwise
dispose of this Warrant or such shares of Series Preferred or Common Stock, all
in accordance with the
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terms of the notice delivered to the Company. If a determination has been made
pursuant to this subsection (b) that the opinion of counsel for the holder is
not reasonably satisfactory to the Company, the Company shall so notify the
holder promptly after such determination has been made and shall specify in
detail the legal analysis supporting any such conclusion. Notwithstanding the
foregoing, this Warrant or such shares of Series Preferred or Common Stock may,
as to such federal laws, be offered, sold or otherwise disposed of in accordance
with Rule 144 or 144A under the Act, provided that the Company shall have been
furnished with such information as the Company may reasonably request to provide
a reasonable assurance that the provisions of Rule 144 or 144A have been
satisfied. Each certificate representing this Warrant or the shares of Series
Preferred thus transferred (except a transfer pursuant to Rule 144 or 144A)
shall bear a legend as to the applicable restrictions on transferability in
order to ensure compliance with such laws, unless in the aforesaid opinion of
counsel for the holder, such legend is not required in order to ensure
compliance with such laws. The Company may issue stop transfer instructions to
its transfer agent in connection with such restrictions.
(c) Excepted Transfers. Neither any restrictions of any legend
described in this Warrant nor the requirements of Section 7(b) above shall apply
to any transfer without any additional consideration of, or grant of a security
interest in, this Warrant or any part hereof (i) to a partner of the holder if
the holder is a partnership, (ii) by the holder to a partnership of which the
holder is a general partner, or (iii) to any affiliate of the holder if the
holder is a corporation; provided, however, in any such transfer, the transferee
shall on the Company's request agree in writing to be bound by the terms of this
Warrant as if an original signatory hereto.
8. Rights as Shareholders; Information. No holder of this Warrant, as such,
shall be entitled to vote or receive dividends or be deemed the holder of Series
Preferred or any other securities of the Company which may at any time be
issuable on the exercise hereof 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. Notwithstanding the foregoing, the Company will
transmit to the holder of this Warrant such information, documents and reports
as are generally distributed to the holders of any class or series of the
securities of the Company concurrently with the distribution thereof to the
shareholders.
9. Registration Rights. The Company covenants and agrees as follows:
9.1 Definitions. For purposes of this Section 9:
(a) The term "Registrable Shares" means (i) the Common Stock
issuable or issued upon conversion of the Series Preferred issuable or issued
upon exercise or conversion of this Warrant or upon exercise or conversion of
the Other Warrants, and (ii) any Common Stock of the Company issued as (or
issuable upon the conversion or exercise of any warrant, right
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or other security which is issued as) a dividend or other distribution with
respect to, or in exchange for or in replacement of, such Common Stock or Series
Preferred;
(b) The term "Shareholder" means any person owing or having the
right to acquire Registrable Shares or any assignee thereof in accordance with
Paragraph 9.3 hereof, and
(c) The term "Registration Rights" means the rights set forth in
Section 1 (other than Section 1.2) of the Investor Rights Agreement dated as of
August 17, 1995, by and among the Company and the investors who are signatories
thereto (the "Registration Rights Agreement").
9.2 Grant of Rights. The Company hereby grants to the Shareholders the
Registration Rights. A true and complete copy of the Registration Rights is
attached hereto as Exhibit C. The Company represents and warrants to the
Shareholders that the Company has obtained all consents of parties to the
Registration Rights Agreement and of any other persons that are required in
order for the Registrable Shares to be included in the definition of
"Registrable Securities" and for the Shareholders to be included in the
definition of "Holders," as such terms are used in the Registration Rights
Agreement.
9.3 Assignment of Registration Rights. Notwithstanding any provision
of the Registration Rights Agreement, the rights to cause the Company to
register Registrable Shares pursuant to the Registration Rights and this Section
9 may be assigned by a Shareholder to a transferee or assignee 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.
9.4 No Conflicting Agreements. The Company represents and warrants to
the Shareholders that the Company is not a party to any agreement that conflicts
in any manner with the Shareholders' rights to cause the Company to register
Registrable Shares pursuant to the Registration Rights and this Section 9. The
Company covenants and agrees that it shall not, without the prior written
consent of the Shareholders holding a majority of the outstanding Registrable
Shares, amend, modify or restate the Registration Rights if the rights of the
Shareholders would be subordinated, diminished or otherwise adversely affected
in a different manner than other "Holders" of "Registrable Securities" (as
defined in the Registration Rights Agreement).
9.5 Rights and Obligations Survive Exercise and Expiration of Warrant.
The rights and obligations of the Company, of the holder of this Warrant and of
the Registrable Shares contained in the Registration Rights and this Section 9
shall survive exercise, conversion and expiration of this Warrant.
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10. Additional Rights.
10.1 Secondary Sales. The Company agrees that it will not interfere
with the holder of this Warrant in obtaining liquidity 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 the same notice
(if any) as it provides to other holders of the Company's securities of any
offer to acquire from the Company's security holders more than five percent (5%)
of the total voting power of the Company and will not interfere with the holder
in arranging the sale of this Warrant to the person or persons making such
offer.
10.2 Mergers. The Company will provide the holder of this Warrant with
at least 30 days' notice of the terms and conditions of any proposed (i) sale,
lease, exchange, conveyance or other disposition of all or substantially all of
its property or business, or (ii) merger into or consolidation with any other
corporation (other than a wholly-owned subsidiary of the Company), or any other
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.
10.3 Right to Convert Warrant into Common Stock: Net Issuance.
(a) Right to Convert. In addition to and without limiting the
rights of the holder under the terms of this Warrant, the holder shall have the
right to convert this Warrant or any portion thereof (the "Conversion Right")
into shares of Series Preferred (or Common Stock if the Series Preferred has
been automatically converted into Common Stock) as provided in this Section 10.3
at any time or from time to time during the term of this Warrant. Upon exercise
of the Conversion Right with respect to a particular number of shares subject to
this Warrant (the "Converted Warrant Shares"), the Company shall deliver to the
holder (without payment by the holder of any exercise price or any cash or other
consideration) (X) that number of shares of fully paid and nonassessable Series
Preferred (or Common Stock if the Series Preferred has been automatically
converted into Common Stock) equal to the quotient obtained by dividing the
value of this Warrant (or the specified portion hereof) on the Conversion Date
(as defined in subsection (b) hereof), which value shall be determined by
subtracting (A) the aggregate Warrant Price of the Converted Warrant Shares
immediately prior to the exercise of the Conversion Right from (B) the aggregate
fair market value of the Converted Warrant Shares issuable upon exercise of this
Warrant (or the specified portion hereof) on the Conversion Date (as herein
defined) by (Y) the fair market value of one share of Series Preferred (or
Common Stock if the Series Preferred has been automatically converted into
Common Stock) on the Conversion Date (as herein defined).
Expressed as a formula, such conversion shall be computed as follows:
X=B - A
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Y
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Where: X = the number of shares of Series Preferred (or Common Stock) that may
be issued to holder
Y = the fair market value (FMV) of one share of Series Preferred (or
Common Stock)
A = the aggregate Warrant Price (i.e., Converted Warrant Shares x
Warrant Price)
B = the aggregate FMV (i.e., FMV x Converted Warrant Shares)
No fractional shares shall be issuable upon exercise of the Conversion
Right, and, if the number of shares to be issued determined in accordance with
the foregoing formula is other than a whole number, the Company shall pay to the
holder an amount in cash equal to the fair market value of the resulting
fractional share on the Conversion Date (as hereinafter defined).
(b) Method of Exercise. The Conversion Right may be exercised by
the holder by the surrender of this Warrant at the principal office of the
Company together with a notice of exercise substantially in the form attached
hereto as Exhibit A-2, specifying that the holder thereby intends to exercise
the Conversion Right and indicating the number of shares subject to this Warrant
that are being surrendered (referred to in subsection (a) hereof as the
Converted Warrant Shares) in exercise of the Conversion Right. Such conversion
shall be effective upon receipt by the Company of this Warrant together with the
aforesaid notice of exercise, or on such later date as is specified therein (the
"Conversion Date"), and, at the election of the holder hereof, may be made
contingent upon the closing of the sale of the Company's Common Stock to the
public in a public offering pursuant to a Registration Statement under the Act
(a "Public Offering"). Certificates for the shares issuable upon exercise of the
Conversion Right and, if applicable, a new warrant 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 within thirty (30) days following the
Conversion Date. Any conversion from Series Preferred to Common Stock shall be
in a ratio of one (1) share of Common Stock for each share of Series Preferred
(as adjusted herein and in the Charter). On the Date of Grant, the each Share of
Series Preferred purchasable under this Warrant is convertible into one share of
Common Stock.
(c) Determination of Fair Market Value. For purposes of this
Section 10.3, "fair market value" of a share of Series Preferred (or Common
Stock if the Series Preferred has been automatically converted into Common
Stock) as of a particular date (the "Determination Date") shall mean:
(i) If the Conversion Right is exercised in connection with
and contingent upon a Public Offering, and if the Company's Registration
Statement relating to such Public Offering ("Registration Statement") has been
declared effective by the SEC, then the initial "Price to Public" specified in
the final prospectus with respect to such offering multiplied by the number of
shares of Common Stock into which each share of Series Preferred is then
convertible.
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(ii) If the Conversion Right is not exercised in connection
with and contingent upon a Public Offering, then as follows:
(A) If traded on a securities exchange or the Nasdaq
National Market, the fair market value of the Common Stock shall be deemed to be
the average of the closing or last reported sale prices of the Common Stock on
such exchange or market over the 30-day period ending five business days prior
to the Determination Date, and the fair market value of the Series Preferred
shall be deemed to be such fair market value of the Common Stock multiplied by
the number of shares of Common Stock into which each share of Series Preferred
is then convertible;
(B) If otherwise traded in an over-the-counter market,
the fair market value of the Common Stock shall be deemed to be the average of
the closing ask prices of the Common Stock over the 30-day period ending five
business days prior to the Determination Date, and the fair market value of the
Series Preferred shall be deemed to be such fair market value of the Common
Stock multiplied by the number of shares of Common Stock into which each share
of Series Preferred is then convertible; and
(C) If there is no public market for the Common Stock,
then fair market value shall be determined by mutual agreement of the holder of
this Warrant and the Company, and if the holder and the Company are unable to so
agree, at the Company's sole expense by an investment banker or business
appraiser of national reputation selected by the Company and reasonably
acceptable to the holder of this Warrant.
11. Representations and Warranties. The Company represents and warrants to
the holder of this Warrant as follows:
(a) This Warrant has been duly authorized and executed by the Company
and is a valid and binding obligation of the Company enforceable in accordance
with its terms, subject to laws of general application relating to bankruptcy,
insolvency and the relief of debtors and the rules of law or principles at
equity governing specific performance, injunctive relief and other equitable
remedies;
(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 Series Preferred and the holders thereof are as set forth in
the Charter, as amended to the Date of the Grant, a true and complete copy of
which has been delivered to the original holder of this Warrant and is attached
hereto as Exhibit B;
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(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 Charter, 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 Charter 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 conflict with or
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 or filing with or the taking of any action in respect of or
by, any Federal, state or local government authority or agency or other person,
except for the filing of notices pursuant to federal and state securities laws,
which filings will be effected by the time required thereby.
(f) There are no actions, suits, audits, investigations or proceedings
pending or, to the knowledge of the Company, threatened against the Company in
any court or before any governmental commission, board or authority which, if
adversely determined, will have a material adverse effect on the ability of the
Company to perform its obligations under this Warrant.
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, communication 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 therefor 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 Series Preferred issuable upon the exercise or
conversion of this Warrant shall survive the exercise, conversion 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 or conversion 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 or conversion 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.
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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, of 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.
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.
18. Survival of Representations Warranties and Agreements. All
representations and warranties of the Company and the holder hereof contained
herein shall survive the Date of Grant, the exercise or conversion of this
Warrant (or any part hereof) or the termination or expiration of rights
hereunder. All agreements of the Company and the holder hereof contained herein
shall survive indefinitely until, by their respective terms, they are no longer
operative.
19. Remedies. In case any one or more of the covenants and agreements
contained in this Warrant shall have been breached, the holders hereof (in the
case of a breach by the Company), or the Company (in the case of a breach by a
holder), may proceed to protect and enforce their or its rights either by suit
in equity and/or by action at law, including, but not limited to, an action for
damages as a result of any such breach and/or an action for specific performance
of any such covenant or agreement contained in this Warrant.
20. Value. The Company and the holder of this Warrant agree that the value
of this Warrant and the Other Warrants on the Date of Grant is $100.00.
21. Acceptance. Receipt of this Warrant by the holder hereof shall
constitute acceptance of and agreement to the foregoing terms and conditions.
22. No Impairment of Rights. The Company will not, by amendment of its
Charter or through any other means, avoid or seek to avoid the observance or
performance of any of the terms of this Warrant, but will at all times in good
faith assist in the carrying out of all such terms 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.
COMBICHEM, INC.
By
---------------------------------
Title
------------------------------
Address: 0000 Xxxxxx Xxxxx Xx
Xxx Xxxxx, Xxxxxxxxxx 00000
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EXHIBIT A
NOTICE OF EXERCISE
To: COMBICHEM, INC.
1. The undersigned hereby elects to purchase __________ shares of Series Z
Preferred Stock of COMBICHEM, INC. 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 are 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. In support
thereof, the undersigned has executed an Investment Representation Statement
attached hereto as Schedule 1.
-----------------------------------
(Signature)
-----------------------------
(Date)
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EXHIBIT A-1
NOTICE OF EXERCISE
To: COMBICHEM, INC. (the "Company")
1. Contingent upon and effective immediately prior to the closing (the
"Closing") of the Company's public offering contemplated by the Registration
Statement on Form S-_, filed __________, 199_ the undersigned hereby elects to
purchase _________ shares of Series Z 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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EXHIBIT A-2
NOTICE OF EXERCISE OF NET ISSUANCE CONVERSION RIGHTS
To: COMBICHEM, INC.
1. The undersigned, the registered holder of the Warrant delivered herewith
(the "Warrant"), hereby elects to exercise the Conversion Right (as defined in
Section 10.3 of the Warrant) as provided herein. ___________ shares subject to
the Warrant are being surrendered hereby in exercise of the Conversion Right.
The number of shares to be issued pursuant to this exercise shall be determined
by reference to the formula in Section 10.3(a) of the Warrant, which requires
the use of the "fair market value" of the Company's stock. As of the
Determination Date (as defined in the Warrant), the "fair market value" of one
share of Series Preferred Stock (or Common Stock if the Series Z Preferred Stock
has been automatically converted into Common Stock) shall be determined in the
manner provided in Section 10.3(c) of the Warrant, which amount has been
determined by the undersigned (or agreed to by the holder of the Warrant and
COMBICHEM, INC.) to be $_____________ per share. Therefore, ___________ shares
are to be issued to the undersigned pursuant to this exercise.
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 are 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. In support
thereof, the undersigned has executed an Investment Representation Statement
attached hereto as Schedule 1.
-----------------------------------
(Signature)
-----------------------------
(Date)
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SCHEDULE A
Warrantholder Number of Shares
------------- ----------------
Silicon Valley Bank 27,581
MMC/GATX Partnership No. 1 85,322
