EXHIBIT 4 TO SCHEDULE 13D
GOVERNANCE AGREEMENT
IT IS HEREBY AGREED between AFFYMETRIX, INC. ("AFFYMETRIX" or
the "Company") and GLAXO WELLCOME PLC ("GLAXO WELLCOME") that the following
provisions with respect to the relationship between the parties shall be binding
obligations on each of them.
GUIDING PRINCIPLES.
1. It is the mutual interest of the parties that AFFYMETRIX be
independently financeable at this time and ultimately financeable as a public
company.
2. It is the mutual interest of the parties that AFFYMETRIX
have entrepreneurial independent management and access to collaborative partners
other than GLAXO WELLCOME, although GLAXO WELLCOME is a natural arm's-length
collaborator in areas of interest to GLAXO WELLCOME.
THE PARTIES THEREFORE AGREE as follows:
1. DIRECTORS. So long as GLAXO WELLCOME or any of its
subsidiaries (collectively "GW") together own, or are part of a group that owns,
(a) a majority of the outstanding AFFYMETRIX voting shares, GW (or such group)
will have the right to designate five out of nine AFFYMETRIX directors, (b) less
than a majority but greater than 35% of the outstanding AFFYMETRIX voting
shares, GW (or such group) will have the right to designate four out of nine
AFFYMETRIX directors, (c) less than 35% but greater than 25% of the outstanding
AFFYMETRIX voting shares, GW (or such group) will have the right to designate
three out of nine AFFYMETRIX directors, (d) less than 25% but more than 15% of
the outstanding AFFYMETRIX voting shares, GW (or such group) will have the right
to designate two out of nine AFFYMETRIX directors and (e) less than 15% but more
than 5% of the outstanding AFFYMETRIX voting shares, GW (or such group) will
have the right to designate one out of nine AFFYMETRIX directors, in each case
such designations to be included, as part of the management slate to be
recommended to the shareholders for election at each annual meeting of
shareholders subsequent to 1995. All discretionary proxies will be voted in
favor of such nominees. GW (or such group) will otherwise vote its shares, or
give its proxy to vote its shares, for the other nominees on the slate of
directors recommended to the shareholders. The parties agree to take appropriate
action, if necessary, to comply with the requirements of the California
Corporations Code to make this provision valid and enforceable including without
limitation, to enter into a voting trust agreement.
2. TRANSFER OF SECURITIES. If GW should transfer shares
equal to at least 40% of AFFYMETRIX' outstanding voting shares to a third party
or group or should participate in a group that controls at least 40% of the
AFFYMETRIX voting shares, the purchaser of such shares will agree to be subject
to the obligations and entitled to the rights set forth in Section 1 regarding
the designation of AFFYMETRIX directors.
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3. BUSINESS COMBINATION. Until the earlier of June 1, 1999
or an IPO by AFFYMETRIX, GW will not vote for or otherwise act to consummate any
merger, consolidation or other business combination of AFFYMETRIX which would
result in AFFYMETRIX becoming a direct or indirect wholly owned subsidiary of GW
unless such transaction is approved by a majority of directors of AFFYMETRIX not
designated by GW (the "independent directors of AFFYMETRIX").
4. MATERIAL TRANSACTIONS WITH GW. GW will not enter into any
material transaction with AFFYMETRIX unless such transaction is first approved
by a majority of the independent directors or the holders of a majority of the
voting power of AFFYMETRIX which is held by shareholders not affiliated with GW.
However, both parties recognize the GW is a natural collaborator with AFFYMETRIX
and will give due consideration to make available to GW collaborative
opportunities in GW's areas of interest on fair and reasonable terms. At the
same time, GW will pursue its interest in a possible major collaboration with
AFFYMETRIX in the genomics area.
5. IPO LOCK-UP. Conditioned upon similar agreements for the
same period of time entered into by other significant shareholders and key
officers and directors, as reasonably requested by the lead underwriter in an
IPO, GW will not sell, directly or indirectly, in the public market any
AFFYMETRIX shares without the written consent of AFFYMETRIX and the lead
underwriter in the IPO for a period of up to six months after the IPO.
6. REGISTRATION RIGHTS.
6.1 REQUEST FOR REGISTRATION.
(a) If the Company shall receive, at any
time after six months following the initial public offering of Common Stock of
the Company (other than pursuant to 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 GW, while it and its subsidiaries are the holders of at least ten
percent of the outstanding Common Stock of the Company, that the Company file an
underwritten registration statement under the Securities Act of 1933, as
amended, and any successor thereto (the "Act") covering the registration of at
least 40 percent of the shares of Common Stock of the Company held by GW and its
subsidiaries (a "Demand Registration"), the Company shall, subject to the
limitations set forth below, as soon as practicable, use its reasonable best
efforts to effect such registration under the Act.
(b) The underwriter shall be selected by
GW but shall be reasonably acceptable to the Company. GW (together with the
Company) shall enter into an underwriting agreement in customary form with the
underwriter or underwriters selected for such underwriting.
(c) In addition, the Company shall not
be obligated to effect, or to take any action to effect, any registration:
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(i) Within 90 days after the
effective date of any registration statement offered by the Company, whether for
its own account or for the account of others; or
(ii) On Form S-1 (or any
comparable or successor form to such form) after the Company has effected four
Demand Registrations and such registrations have been declared or ordered
effective. GW shall nevertheless have the continuing right to additional
registrations on Form S-3 (or any comparable successor form to such form) even
though it has already had four effective Demand Registrations.
(d) The Company shall use its reasonable
best efforts to register and qualify the securities covered by any such
registration statement under such other securities or Blue Sky laws of such
jurisdictions in the United States as shall be reasonably requested by GW;
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
services of process in any such states or jurisdictions, unless the Company is
already subject to service in such jurisdiction and except as may be required by
the Act.
(e) The Company shall cause all such
securities registered pursuant to any such registration to be listed on such
U.S. securities exchange or quotation system on which similar securities issued
by the Company are then listed.
(f) All expenses incurred in connection
with registrations, filings, or qualifications pursuant to any registration of
securities of GW and its subsidiaries hereunder, including, but not limited to,
underwriting discounts and commissions, registration, filing and qualification
fees, printing costs, accounting fees and fees and disbursements of counsel for
GW shall be borne by GW and fees and disbursements of counsel for the Company
shall be borne by the Company; PROVIDED, HOWEVER, that all such expenses except
underwriting discounts and commissions, registration, filing and qualification
expenses and fees and disbursements of counsel for GW shall be borne by the
Company in the event that the registration is effected on Form S-3 (or any
comparable or successor of such form), or would have been effected on Form S-3
(or any comparable or successor form), or would have been effected on Form S-3
(or any comparable or successor form) except for the failure of the Company to
comply with the rules and regulations necessary to be eligible to use such form.
6.2 PIGGYBACK REGISTRATION.
(a) In the event the Company decides to
register any of its Common Stock (either for its own account or the account of a
security holder or holders exercising their respective demand registration
rights) on a form that would be suitable for a registration involving solely
Common Stock held by GW, the Company will promptly give GW written notice
thereof (which shall include a list of the jurisdictions in which the Company
intends to attempt to qualify such securities under the applicable Blue Sky or
other state securities laws). Upon the written request of GW delivered to the
Company within 25 days after delivery of such written notice from the Company,
the Company shall, subject to the limitations set forth below, include in such
registration, all Registrable Securities (as defined below) that GW has
requested to be so registered. The Company shall not be obligated to include
Registrable Securities in more than four registrations of
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the Company. For the purposes of this Section 6.2 and Section 6.3, "Registrable
Securities" shall mean all Common Stock of the Company issued or issuable upon
conversion of the Company's Series 1 Subordinated Convertible Preferred Stock
and Series 2 Subordinated Convertible Preferred Stock, including Common Stock
issued pursuant to stock splits, stock dividends and similar distributions with
respect to such shares.
(b) If the registration of which the Company
gives notice is for a registered public offering involving an underwriting, the
Company shall so advise GW as a part of the written notice given pursuant to
Section 6.2(a). In such event the right of GW to registration shall be
conditioned upon such underwriting and the inclusion of the Registrable
Securities in such underwriting to the extent provided in this Section 6.2. GW
shall (together with the Company and the other holders distributing their
securities through such underwriting) enter into an underwriting agreement with
the underwriter's representative for such offering. GW shall have no right to
participate in the selection of the underwriters for an offering pursuant to
this Section 6.2.
(i) In the event the
underwriter's representative advises GW in writing that market factors
(including, without limitation, the aggregate number of shares of Common Stock
requested to be registered, the general condition of the market, and the status
of the persons proposing to sell securities pursuant to the registration)
require a limitation of the number of shares to be underwritten, the
underwriter's representative may:
(1) in the case of the
Company's initial public offering, exclude some or all Registrable Securities
from such registration and underwriting; and
(2) in the case of any
registered public offering subsequent to the Company's initial public offering,
limit the number of shares of Registrable Securities to be included in such
registration and underwriting; provided, however, that the total number of
shares of Common Stock held by GW (including shares issued on conversion of the
Company's Series A Senior Convertible Preferred Stock) to be included in such
registration shall not be less than 21% of the total number of shares included
in such registration. In such event, the underwriter's representative shall so
advise GW and the number of shares of Registrable Securities that may be
included in the registration and underwriting (if any) shall be allocated as
follows: among GW and holders of other securities requesting and legally
entitled to include shares of Common Stock in such registrations, in proportion,
as nearly as practicable, to the respective amounts of securities (including
Registrable Securities) requesting and entitled to inclusion in such
registration held by GW and such other holders at the time of filing of the
registration statement. No Registrable Securities or other securities excluded
from the underwriting by reason of this Section 6.2(b) shall be included in such
registration statement.
(3) If GW disapproves
of the terms of any such underwriting, GW may elect to withdraw therefrom by
written notice to the Company and the underwriter delivered at least seven days
prior to the effective date of the registration statement. Any Registrable
Securities or other securities excluded or withdrawn from such underwriting
shall be withdrawn from such registration.
(c) In the event of any registration of
Registrable Securities pursuant to this Section 6.2, the Company will exercise
its best efforts to register and qualify the
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securities covered by the registration statement under such other securities or
Blue Sky laws of such jurisdictions as GW shall reasonably request and as shall
be reasonably appropriate for the distribution of such securities; provided,
however, that the Company shall not be required to qualify to do business or to
file a general consent to service of process in any such states or
jurisdictions.
6.3 INDEMNIFICATION.
(a) To the extent permitted by law, the
Company will indemnify GW, and each subsidiary of GW with respect to which
registration, qualification or compliance of Registrable Securities has been
effected pursuant to this Agreement ("GW Holding Subsidiary"), each of their
officers, directors and constituent partners, legal counsel, and each person
controlling GW, and each underwriter, if any, and each person who controls any
underwriter against all claims, losses, damages or liabilities (or actions in
respect thereof) to the extent such claims, losses, damages or liabilities arise
out of or are based upon any untrue statement (or alleged untrue statement) of a
material fact contained in any prospectus or other document (including any
related Registration Statement) incident to any such registration, qualification
or compliance, or are 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 not misleading, or any violation by the Company of the
Securities Act, the Securities Exchange Act of 1934, as amended (the "1934
Act"), or any state securities law, or any rule or regulation promulgated under
the Securities Act, the 1934 Act or any state securities law, applicable to the
Company and relating to action or inaction required of the Company in connection
with any such registration, qualification or compliance; and the Company will
reimburse GW, each GW Holding Subsidiary, each of their officers, directors and
constituent partners, and legal counsel, each such underwriter, and each person
who controls GW or such underwriter, for any legal and any other expenses
reasonably incurred, as incurred, in connection with investigating or defending
any such claim, loss, damage, liability or action; provided, however, that the
indemnity contained in this Section 6.3 shall not apply to amounts paid in
settlement of any such claim, loss, damage, liability or action if settlement is
effected without the consent of the Company (which consent shall not
unreasonably be withheld); and provided, further, that the Company will not be
liable in any such case to the extent that any such claim, loss, damage,
liability or expense arises out of or is based upon any untrue statement or
omission based upon written information furnished to the Company by GW, a GW
Holding Subsidiary, their officers, directors, constituent partners, or legal
counsel, underwriter, or controlling person and stated to be for use in
connection with the offering of securities of the Company.
(b) To the extent permitted by law, GW
will, if Registrable Securities are included in the securities as to which such
registration, qualification or compliance is being effected pursuant to this
Agreement, indemnify the Company, each of its directors and officers, each legal
counsel and independent accountant of the Company, 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 the
Securities Act, against all claims, losses, damages and liabilities (or actions
in respect thereof) arising out of or based upon any untrue statement (or
alleged untrue statement) of a material fact contained in any such registration
statement, prospectus, offering circular or other document (including any
related registration statement) incident to any such registration, qualification
or compliance, 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, or any violation by GW of the Securities Act, the 1934 Act or
any state securities law, or
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any rule or regulation promulgated under the Securities Act, the 1934 Act or any
state securities law, applicable to GW and relating to action or inaction
required of GW in connection with any such registration, qualification or
compliance; and will reimburse the Company, such directors, officers, partners,
persons, law and accounting firms, underwriters or control persons for any legal
and any other expenses reasonably incurred, as 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 GW and stated to be specifically for use in connection with the
offering of securities of the Company; provided, however, that GW's liability
under this Section 6.3 shall not exceed GW's proceeds from the offering of
securities made in connection with such registration; and provided, further,
that the indemnity contained in this Section 6.3 shall not apply to amounts paid
in settlement of any such claim, loss, damage, liability or action if settlement
is effected without the consent of GW (which consent shall not unreasonably be
withheld).
(c) Promptly after receipt by an
indemnified party under this Section 6.3 of notice of the commencement of any
action, such indemnified party will, if a claim in respect thereof is to be made
against an indemnifying party under this Section 6.3, notify the indemnifying
party in writing of the commencement thereof and generally summarize such
action. The indemnifying party shall have the right to participate in and to
assume the defense of such claim, jointly with any other indemnifying party
similarly noticed; provided, however, that the indemnifying party shall be
entitled to select counsel for the defense of such claim with the approval of
any parties entitled to indemnification, which approval shall not be
unreasonably withheld; provided further, however, that if either party
reasonably determine that there may be a conflict between the position of the
Company and GW in conducting the defense of such action, suit or proceeding by
reason of recognized claims for indemnity under this Section 6.3, then counsel
for such party shall be entitled to conduct the defense to the extent reasonably
determined by such counsel to be necessary to protect the interest of such
party. The failure to notify an indemnifying party promptly of the commencement
of any such action, if prejudicial to the ability of the indemnifying party to
defend such action, shall relieve such indemnifying party, to the extent so
prejudiced, of any liability to the indemnified party under this Section 6.3,
but the omission so to notify the indemnifying party will not relieve such party
of any liability that such party may have to any indemnified party otherwise
other than under this Section 6.3.
7. EXISTING TECHNOLOGY LICENSE. Each party recognizes the
other party's concern in regard to the existing technology license between
Affymax Technologies N.V. and AFFYMETRIX: in the case of GW, AFFYMETRIX agrees
not to use in internal research DNA chip technology for affinity binding of
ligands for lead identification and analoging for drug discovery and, in the
case of AFFYMETRIX, GW and its subsidiaries agree not to use DNA chip technology
in internal research in the Affymetrix field.
8. CONVERTIBLE PROMISSORY NOTE. In partial consideration of
this Agreement, GW agrees that the Series B Preferred Stock financing currently
planned by AFFYMETRIX (the "Series B Financing") shall not be deemed to be a
"Subsequent Financing" under Section 5 of the Subordinated Convertible
Promissory Note dated December 15, 1994 in the principal amount of $6,000,000
issued by AFFYMETRIX to Affymax Technologies N.V. (the "Convertible Promissory
Note") and that
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AFFYMETRIX shall not be required to convert or pay off the Convertible
Promissory Note upon the closing of the Series B Financing. In addition, the
parties agree that:
(a) In the event that the Convertible
Promissory Note is outstanding at the time of the consummation of a transaction
or series of transactions subsequent to the Series B Financing that comes within
the meaning of "Subsequent Financing", as defined in Section 5(a) of the
Convertible Promissory Note, the Convertible Promissory Note may, at GW's option
in the event of any Subsequent Financing or at the Company's option only in the
event of an initial public offering, be converted, in whole or in part, into the
shares of capital stock of the Company issued and sold at a conversion price per
share equivalent to the lesser of (x) $4.50 (which price shall be subject to
proportionate adjustment in the event of a stock split, reverse stock split,
stock dividend, a subdivision or combination of stock or any similar event) or
(y) the price per share of the capital stock sold in such Subsequent Financing;
(b) The Company's option to pay interest on
the Convertible Promissory Note due during calendar year 1996 by the issuance of
warrants shall be canceled;
(c) The Company shall not have any right
to prepay the Convertible Promissory Note at any time provided, nevertheless,
that proceeds from sale of more than 5,000,000 shares of Series B Senior
Preferred Stock in the currently contemplated offering may, with the written
consent of GW, be used to make prepayment within twenty days after closing of
such offering;
(d) GW shall have the right to convert the
Convertible Promissory Note at maturity at the aforesaid price so long as GW
does not then own, directly or indirectly, or such conversion does not result in
GW thereafter owning, directly or indirectly, more than 49 percent of the
Company's then outstanding voting securities; and
(e) Section 5(b) of the Convertible
Promissory Note shall be deleted.
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IN WITNESS WHEREOF, the parties have entered into this
Agreement effective the 6th day of July, 1995.
GLAXO WELLCOME PLC
By: /s/ X. X. XXXXXX
------------------------------------
Title: Director
AFFYMETRIX, INC.
By: /s/
------------------------------------
Title: Chairman
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