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0000913056-01-500016.txt : 20020410
0000913056-01-500016.hdr.sgml : 20020410
ACCESSION NUMBER: 0000913056-01-500016
CONFORMED SUBMISSION TYPE: 10-Q
PUBLIC DOCUMENT COUNT: 5
CONFORMED PERIOD OF REPORT: 20010930
FILED AS OF DATE: 20011114
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: AXYS PHARMACEUTICALS INC
CENTRAL INDEX KEY: 0000913056
STANDARD INDUSTRIAL CLASSIFICATION: PHARMACEUTICAL PREPARATIONS [2834]
IRS NUMBER: 222969941
STATE OF INCORPORATION: DE
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: 10-Q
SEC ACT: 1934 Act
SEC FILE NUMBER: 000-22788
FILM NUMBER: 1785509
BUSINESS ADDRESS:
STREET 1: 180 KIMBALL WAY
CITY: SOUTH SAN FRANCISCO
STATE: CA
ZIP: 94080
BUSINESS PHONE: 6508291000
MAIL ADDRESS:
STREET 1: 180 KIMBALL WAY
CITY: SOUTH SAN FRANCISCO
STATE: CA
ZIP: 94080
FORMER COMPANY:
FORMER CONFORMED NAME: ARRIS PHARMACEUTICAL CORP/DE/
DATE OF NAME CHANGE: 19931005
FORMER COMPANY:
FORMER CONFORMED NAME: AXYS PHARMECUETICALS INC
DATE OF NAME CHANGE: 19980109
10-Q
1
form10q.htm
BODY
10Q Q3 2001 DOC
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2001 or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________to _________
Commission file number: 0-22788
Axys Pharmaceuticals, Inc.
(Exact name of registrant as specified in its charter)
Delaware
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22-2969941
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(State or other jurisdiction of incorporation or organization)
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(IRS Employer Identification Number)
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180 Kimball Way
South San Francisco, California 94080
(Address of principal executive offices including zip code)
(650) 829-1000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file reports), and (2) has been subject to such filing
requirements for the past 90 days. YES [X] NO [ ],
The number of outstanding shares of the registrant's Common Stock, $0.001
par value, was 40,487,042 as of October 31, 2001.
![](logo.gif)
Axys Pharmaceuticals, Inc.
TABLE OF CONTENTS
PART I. Financial Information
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Page No.
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Item 1. Financial Statements
(unaudited)*
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Condensed Consolidated Balance Sheet
as of September 30, 2001 and December 31, 2000
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3
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Condensed Consolidated Statements of Operations
for the three and six months ended September 30, 2001 and 2000
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4
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Condensed Consolidated Statements of Cash Flows
for the nine months ended September 30, 2001 and 2000
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5
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Notes to Condensed Consolidated Financial Statements
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6
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Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
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11
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Item 3. Quantitative and Qualitative Disclosures About Market Risk
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15
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PART II. Other Information
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Item 1. Legal Proceedings
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16
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Item 2: Changes in Securities
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16
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Item 3: Defaults Upon Senior Securities
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16
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Item 4: Submission of Matters to a Vote of Security Holders
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16
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Item 5: Other Information
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16
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Item 6. Exhibits and Reports on Form 8-K
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16
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Signatures
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17
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________________
* The financial information contained herein should be read in conjunction with
the consolidated financial statements and notes thereto included in the
Company's Annual Report on Form 10-K for the year ended December 31, 2000,
filed with the Securities and Exchange Commission on March 30, 2001.
PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AXYS PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
__________________
September 30, December 31,
2001 2000(1)
----------- ------------
ASSETS
Current assets:
Cash and cash equivalents............................... $ 6,653 $ 41,247
Restricted cash......................................... 4,000 --
Marketable securities................................... 140 529
Prepaid expenses and other current assets............... 2,460 2,890
----------- ------------
Total current assets............................ 13,253 44,666
Property and equipment, net............................... 19,018 10,983
Investment in equity-method investee...................... 41,089 40,367
Other investments......................................... 4,160 15,007
Debt issuance costs, net.................................. 5,395 6,753
Other assets.............................................. 994 920
----------- ------------
$ 83,909 $ 118,696
=========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable........................................ $ 3,910 $ 5,406
Accrued compensation.................................... 1,792 2,154
Other accrued liabilities............................... 2,290 2,503
Deferred revenue........................................ 273 229
Current portion of capital lease and construction loan p 9,421 950
----------- ------------
Total current liabilities....................... 17,686 11,242
Capital lease obligations, noncurrent..................... 409 1,889
Subordinated notes........................................ 26,000 26,000
Other liabilities......................................... 806 --
Stockholders' equity:
Common stock............................................ 359,228 347,444
Accumulated other comprehensive loss.................... (83) (524)
Accumulated deficit..................................... (320,137) (267,355)
----------- ------------
Total stockholders' equity...................... 39,008 79,565
----------- ------------
$ 83,909 $ 118,696
=========== ============
__________________
(1) The balance sheet at December 31, 2000 has been derived from the audited
financial statement at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for
complete financial statements.
See accompanying notes.
AXYS PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share amounts)
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------- ---------------------
2001 2000 2001 2000
--------- --------- --------- ---------
Collaboration and license revenue..................... $ 820 $ 2,611 $ 4,710 $ 5,533
--------- --------- --------- ---------
Operating expenses:
Research and development............................ 7,339 6,896 24,356 22,794
General and administrative.......................... 2,661 2,871 9,282 8,594
Restructuring credit................................ -- -- -- (625)
--------- --------- --------- ---------
Total operating expenses.................... 10,000 9,767 33,638 30,763
--------- --------- --------- ---------
Operating loss........................................ (9,180) (7,156) (28,928) (25,230)
Interest income....................................... 272 451 1,185 1,179
Interest expense...................................... (1,099) (356) (3,671) (642)
Net equity interest in loss of equity-method investee. (254) (409) (9,651) (409)
Permanent impairment loss on investment............... (10,848) -- (11,374) --
Other income(expense)................................. (206) 635 (1,315) 712
--------- --------- --------- ---------
Loss from operations.................................. (21,315) (6,835) (53,754) (24,390)
Cumulative effect of change in accounting principle... -- -- 972 --
Gain on sale of subsidiary............................ -- 1,793 -- 34,780
Loss from operations of discontinued segments......... -- (1,676) -- (4,205)
--------- --------- --------- ---------
Net loss.............................................. $ (21,315) $ (6,718) $ (52,782) $ 6,185
========= ========= ========= =========
Basic and diluted net loss per share from continuing
operations.......................................... $ (0.53) $ (0.18) $ (1.40) $ (0.70)
Basic and diluted net income per share from
cumulative effect................................... -- -- 0.03 --
Basic and diluted net income per share from
sale of subsidiary.................................. -- 0.05 -- 1.00
Basic and diluted net loss per share from
discontinued segments............................... -- (0.05) -- (0.12)
--------- --------- --------- ---------
Basic and diluted net loss per share.................. $ (0.53) $ (0.18) $ (1.37) $ 0.18
========= ========= ========= =========
Shares used in computing basic and diluted net
(loss) income per share............................. 40,274 36,603 38,423 34,653
========= ========= ========= =========
See accompanying notes.
AXYS PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
Nine Months Ended
September 30,
--------------------
2001 2000
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net cash and cash equivalents used in operating activities. $ (31,306) $ (31,101)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Available-for-sale securities:
Purchases............................................... -- (11,835)
Maturities.............................................. 305 5,375
Proceeds from sale of securities........................... 1,193 1,087
Minority interest.......................................... -- (1,156)
Cash proceeds from sale of segment......................... -- 600
Proceeds from sale of property and equipment............... -- 14
Transaction costs on disposal of segment................... -- (1,816)
Purchase of property and equipment......................... (12,221) (5,177)
--------- ---------
Net cash and cash equivalents used in
investing activities............................. (10,723) (12,908)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuance of common stock................. 444 46,144
Proceeds from construction loan payable and capital lease f 7,713 66,375
Principal payments on construction loan payable and capital (722) (52,079)
--------- ---------
Net cash and cash equivalents provided by
financing activities............................. 7,435 60,440
--------- ---------
Net (decrease) increase in cash and cash equivalents....... (34,594) 16,431
Cash and cash equivalents, beginning of period............. 41,247 23,577
--------- ---------
Cash and cash equivalents, end of period................... $ 6,653 $ 40,008
========= =========
Supplemental schedule of non-cash investing activity:
Permanent impairment of investment......................... $ 11,374 $ --
========= =========
See accompanying notes.
AXYS PHARMACEUTICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2001
(Unaudited)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The unaudited financial statements included herein have been
prepared by Axys Pharmaceuticals, Inc. ("Axys" or the "Company") according to
the rules and regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in complete financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such rules and regulations. The
financial statements reflect, in the opinion of management, all adjustments
(which include only normal recurring adjustments) necessary to state fairly the
financial position and results of operations as of and for the periods
indicated. The results of operations for the nine months ended September 30,
2001 are not necessarily indicative of the results to be expected for subsequent
quarters or the full fiscal year.
The consolidated financial statements include the accounts of
the Company's wholly-owned subsidiary, Axys 468 Littlefield LLC, which was
established on May 4, 2001. Axys 468 Littlefield LLC is a single asset entity
for the sole purpose of constructing and financing a Medicinal Chemistry
Building located in South San Francisco (See "Construction
Financing", Note 5). All significant intercompany accounts and
transactions have been eliminated.
On April 28, and December 22, 2000, respectively, the Company
completed the sale of two of its subsidiaries: its combinatorial chemistry
business, Axys Advanced Technologies, Inc. ("AAT"), to Discovery Partners
International, Inc. (Nasdaq: DPII) ("DPI") and its pharmacogenomics subsidiary
PPGx, Inc. to DNA Sciences, Inc. The Company reclassified operating results
previously reported for the three and nine months ended September 30, 2000 to
reflect the results of these subsidiaries as discontinued operations, in
accordance with Accounting Principles Board Opinion No. 30 (APB 30).
These financial statements should be read in conjunction with
the audited financial statements and the notes thereto included in the Company's
2000 Annual Report on Form 10-K filed with the Securities and Exchange
Commission.
Reclassifications
Certain prior period amounts have been reclassified
to conform to the September 30, 2001 presentations.
Uses of Estimates
The preparation of financial statements in conformity
with accounting principles generally accepted in the United States 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, and such differences could be material.
Changes in Accounting Principle
In June 1998, the Financial Accounting Standards
Board issued Statement No. 133- Accounting for Derivative Instruments and
Hedging Activities (FAS 133), which is required to be adopted in years
beginning after June 15, 2000. The Statement requires the recognition of all
derivative instruments on the balance sheet to be recorded at fair market value.
The accounting for changes in the fair value (i.e., gains or losses) of a
derivative instrument depends on whether it has been designated and qualifies as
part of a hedging relationship and further, on the type of hedging relationship.
We have not designated our derivative instruments as hedges, therefore, all
changes in the fair value of our derivative instruments are recorded in
earnings. The adoption of FAS 133 at January 1, 2001 resulted in the cumulative
effect of an accounting change of $972,000 being recognized in the statement of
operations.
AXYS PHARMACEUTICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 2001
(Unaudited)
Derivative Instruments
At September 30, 2001, the Company had two derivative
instruments: (1) A warrant held in connection with the DPI investment; and (2)
A stock option plan covering a portion of the Company's investment in DPI, in
which the Company has granted certain employees options to acquire common stock
in this investment (See Note 2). During the third quarter of 2001 the Company
recorded a charge of $236,000, included in other expense, in connection with the
warrant to reflect the change in fair value and a credit of $717,000 in
connection with the stock option plan to reflect the change in fair value.
During the first nine months of 2001 the Company recorded a charge of $1.3
million, included in other expense in connection with the warrant to reflect the
change in fair value and a credit of approximately $2.2 million, recorded as
non-cash credit to compensation expense, in connection with the stock option plan to reflect the
changes in fair value of these derivative instruments. The fair value of the DPI warrant,
which is in other assets, and the stock option plan, classified as other liabilities,
at September 30, 2001, was $162,000 and $806,000, respectively.
Net Equity Interest in Loss of Equity-Method
Investee
The Company accounts for its investment in DPI and
Akkadix Corporation on the equity method of accounting. Net equity interest in loss of
equity-method investee includes the Company's proportionate share of income and
loss from these investments, as well as an incremental portion of deferred gain
to be recognized from the sale of AAT to DPI in April 2000.
Other Investments
Other Investments consists of common stock held in
DNA Sciences, Inc. The Company does not have the ability to exercise
significant influence over DNA Sciences, Inc. and accordingly accounts for the
investments using the cost method. This investment is assessed for impairment
periodically through review of operations and indications of continued
deterioration of financial markets and the corresponding effect on private
company valuations and financing prospects. During the three months ended
September 30, 2001, the Company deemed its investment in DNA Sciences to be
impaired and recorded a $10.8 million non-cash impairment charge on this
investment. The charge represents a write-down of the Company's carrying amount
of this non-marketable investment and was determined by using, among other
things, changing conditions in the environment, the suspension of certain
research and development activities, employee turnover, and the
financial conditions of the investee.
Recent Accounting Pronouncements
In July 2001, the Financial Accounting Standards
Board ("FASB") issued Statement of Financial Accounting Standards No.
141 "Business Combination" or "SFAS 141" and Statement of
Financial Accounting Standards No. 142, "Goodwill and Other Intangible
Assets", or "SFAS 142". SFAS 141 requires the use of the
purchase method for all business combinations initiated after June 30, 2001, and
provides new criteria for determining whether an acquired intangible asset
should be recognized separately from goodwill. SFAS 142 eliminates the
amortization of goodwill and replaces it with an impairment-only model. Upon
adoption, goodwill related to acquisitions completed before the date of adoption
would be subject to the provisions of SFAS 141; amortization of any remaining
book value of goodwill would cease and the new impairment-only approach would
apply. The impairment-only approach does not apply to the treatment of
intangible assets. The provisions of SFAS 141 and SFAS 142 will be effective
for fiscal years beginning after December 15, 2001. We will adopt SFAS 141 and
SFAS 142 as of January 1, 2002, and do not believe such adoption will have a
material impact on our results of operations, financial position or cash flows.
In August 2001, the FASB issued SFAS 144, Accounting for the Impairment
or Disposal of Long-Lived Assets. SFAS 144 supercedes SFAS 121, Accounting for the
Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed of, and the accounting
and reporting provisions of Accounting Principles Board Opinion No 30, Reporting the
Results of Operations - Reporting the Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and Transactions, for the disposal
of a segment of a business. SFAS 144 establishes a single accounting model for assets to
be disposed of by sale whether previously held and used or newly acquired. SFAS 144 retains the
provisions of APB No. 30 for presentation of discontinued operations in the income statement,
but broadens the presentation to include a component of an entity. SFAS 144 is effective for
fiscal years beginning after December 15, 2001 and the interim periods within. The Company
does not believe that the adoption of SFAS 144 will have a material impact on the Company's
financial position or results of operations.
2. Investment in Equity-Method Investee
Investment in equity-method investee consists of the
Company's investment in DPI as a result of the sale of AAT in
AXYS PHARMACEUTICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 2001
(Unaudited)
April 2000. The Company accounts for its investment in DPI
under the equity method of accounting.
At September 30, 2001 the Company owned 7,222,000 shares of
DPI common stock, which represented approximately 30% ownership of the
outstanding shares of DPI. The market value of DPI stock held by Axys as of
September 30, 2001 was approximately $24.2 million.
Summarized statement of operations information of DPI for the three and nine
month periods ended September 30,2001 and 2000 are as follows:
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------- ----------------------
DOLLARS IN THOUSANDS 2001 2000 2001 2000
- ------------------------------------ ---------- ---------- ---------- ----------
Net sales........................... $ 9,640 $ 10,159 $ 30,215 $ 24,860
Loss from operations................ (7,196) (1,582) (12,468) (11,454)
Net loss............................ (6,422) (631) (9,511) (11,576)
3. Investment in Akkadix
On March 15, 2001, two third party investors of
Akkadix Corporation exercised a contractual option extended to them by the
Company to exchange their approximately 2.7 million shares, of Akkadix's Series A
preferred stock for approximately 2.5 million shares of the Company's common
stock. The fair market value of Axys common stock exchanged for Akkadix
preferred stock was approximately $9.0 million on the date of the option
exercise. The conversion of shares resulted in an increase in the Company's
equity ownership of Akkadix from approximately 31% to 44%.
Changing conditions in private equity markets during the
first quarter 2001 forced Akkadix to sharply reduce operations as the company
was unable to secure planned new equity funding. In addition, Akkadix terminated
a substantial percentage of their employees and vacated their office/laboratory
space. Accordingly, in the first quarter of 2001, in conformance with the equity
method of accounting, the Company recorded a non-cash charge of $9.0 million
recognizing a permanent impairment in the value of the Company's investment in
Akkadix. During the third quarter of 2001, Akkadix filed a notice of Chapter 7
Bankruptcy case in the United States Bankruptcy Court, Southern District of
California.
4. Comprehensive Loss
Comprehensive loss is comprised of net
loss and unrealized holding gains and losses on available-for-sale securities.
Components of comprehensive loss are as follows:
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------- ---------------------
2001 2000 2001 2000
--------- --------- --------- ---------
Net loss.............................................. $ (21,315) $ (6,718) $ (52,782) $ 6,185
Other comprehensive income (loss)..................... (83) (44) 441 2,142
--------- --------- --------- ---------
Comprehensive (loss) income........................... $ (21,398) $ (6,762) $ (52,341) $ 8,327
========= ========= ========= =========
AXYS PHARMACEUTICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 2001
(Unaudited)
5. Financing Arrangements
Construction Financing
On May 4, 2001, the Company established a single
asset limited liability company, Axys 468 Littlefield LLC for the sole purpose
of constructing and financing a Medicinal Chemistry Building located in South
San Francisco. The building, which was completed during October 2001, contains
approximately 45,000 square feet of lab and office space. On June 21, 2001 Axys
468 Littlefield LLC entered into a construction loan with Cupertino National
Bank for $11.0 million. As of September 30, 2001 Axys had drawn $7.0 million
down on the loan. The term of the loan is for 12 months with one three-month
extension, at which time permanent financing will be needed. Interest on this
loan is computed at prime plus one percent, which was approximately 7.0% at
September 30, 2001. The construction loan is secured with a $2.0 million letter
of credit and a $2.0 million cash collateral account, reflected as restricted
cash at September 30, 2001. Axys 468 Littlefield LLC is consolidated within
these financial statements.
Lease Financing
The Company has a financing arrangement with a
leasing company to finance purchases of lab equipment and certain tenant
improvements. The financing arrangement requires the Company to maintain a
certain cash balance at all times. As of September 30, 2001, the Company was in
violation of covenants contained within the credit facility. The Company was
unable to obtain the appropriate waiver for the violations and therefore, in
accordance with FAS 78, Classification of Obligations That Are Callable by
the Creditor, the Company has reclassified $1.3 million of long-term capital
lease financing to current liabilities on the consolidated balance sheet as of
September 30, 2001.
6. Other Compensation Agreements
Key Personnel Option Plan
The Company adopted a Key Personnel Stock Option Plan,
whereby key personnel have been granted options to purchase shares of stock in
Axys' affiliated companies. The participants in the plan have the right to
purchase up to 5% of the Company's equity holdings in the affiliated companies.
As a result of this plan, the statements of operations reflect a credit of $2.2
million for the nine months ended September 30, 2001 related to the change in
fair value associated with the plan.
7. Acquisition by Celera Genomics, an Applera Corporation Business
On June 12, 2001 the Company entered
into a definitive merger agreement with Applera Corporation ("Applera"), whereby Axys would
be merged with an Applera Corporation subsidiary and operate as a part of the Celera
Genomics group, in a stock-for-stock transaction. The acquisition is expected
to close on November 16, 2001 and is subject to Axys shareholder approval. The
transaction is structured to be tax-free and will be accounted for under the
purchase method by Applera. The ultimate value to be received by Axys
shareholders is subject to a collar mechanism, which will be computed based on
the ten day average of the stock price of Applera - Celera Genomics common stock
two days prior to closing. The transaction is subject to approval by Axys shareholders.
The merger agreement calls for a "Break-up" fee of $5.6 million plus
$900,000 of out of pocket expenses to be paid by the Company, in the event the
Company and another acquirer engage in another merger agreement.
AXYS PHARMACEUTICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 2001
(Unaudited)
8. Subsequent Event
On October 24, 2001 the Company
entered into an amended and restated secured promissory note and agreement with PE Corporation,
a subsidiary of Applera, for bridge financing of up to $13,000,000 for operational and capital
needs. On October 25, 2001 the Company borrowed $3.4 million for
equipment purchases. This portion of the note is secured by the
equipment financed. The note accrues interest at prime plus 1% and is due in
full by June 2002.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following
discussion contains both historical information and forward-looking statements
that involve risks and uncertainties. Forward-looking statements include
projections and other statements about events that may occur at some point in
the future. The Company's actual results could differ significantly from those
described in the forward-looking statements. Factors that could cause or
contribute to such differences include, but are not limited to, those discussed
in this section as well as under "Item 1. Business," including,
"What Factors Could Cause Our Results To Differ Significantly From Those
You Might Expect" and "What Matters Should Stockholders Consider with
Respect to the Company?", in the Company's Annual Report on Form 10-K for
the year ended December 31, 2000 filed with the Securities and Exchange
Commission.
Overview
We are a biopharmaceutical company focused on the discovery,
design and development of therapeutic small molecules that address significant
markets with major unmet medical needs. We collaborate with large
pharmaceutical companies in discovering therapeutics for chronic diseases for
which there are large markets. We also selectively focus our own resources on
discovering and developing therapeutics for the treatment of various types of
cancer and other specialty market therapeutics. We have on-going programs in
the treatment of autoimmune, inflammatory diseases, and cancer. Our drug design
platform integrates advanced biology, chemistry, biophysics and information
technologies to optimize the potency, selectivity and physical properties of new
drugs, making the drug discovery process more efficient and productive.
In February 2001, we received a non-
refundable, non-creditable research milestone payment from Merck & Co. for
meeting a pre-agreed milestone in the development of a compound being studied
for use in the treatment of osteoporosis, a disease that affects an estimated 40
percent of women over the age of 50. The compound selected by Merck is a potent
and selective inhibitor of Cathepsin K, a cysteine protease that has been
demonstrated to play a key role in bone resorption.
In March 2001, two investors in Akkadix Corporation
exercised an option, extended to them by Axys, to exchange their 2.7 million
shares of Series A Preferred Stock of Akkadix for approximately 2.5 million
shares of Axys common stock. The fair market value of Axys common stock
exchanged for Akkadix preferred stock was approximately $9.0 million. As a
result of the exercise of these options, Axys' ownership of Akkadix voting stock
increased from 31% to approximately 44%. During the first quarter of 2001,
Akkadix sharply reduced their operations because of diminished financial
resources. A substantial percentage of their employees were terminated, and
Akkadix vacated their office/laboratory space. We have concluded that the
future viability of the Akkadix business is highly uncertain. Accordingly, in
conformance with the equity method of accounting, we incurred a non-cash charge
of $9.0 million during the first quarter recognizing a permanent impairment in
the value of our investment in Akkadix. During the third quarter of 2001,
Akkadix filed a notice of Chapter 7 Bankruptcy case in the United States
Bankruptcy Court, Southern District of California. The company does not
anticipate any future benefit from this investment.
In March 2001, we earned a non-refundable, non-
creditable research milestone from Aventis, for successfully completing a
pivotal in vivo proof-of-concept study which confirmed the mechanism of
action for orally administered inhibitors of Cathepsin S, another human cysteine
protease. The collaboration with Aventis is focused on development of Cathepsin
S inhibitors for potential applications in treating inflammation and autoimmune
disease, including rheumatoid arthritis, asthma, atherosclerosis, COPD and
rhinitis.
In May 2001, we established a single asset entity, known
as Axys 468 Littlefield LLC, for the sole purpose of constructing, financing and
housing our 45,000 square foot medicinal chemistry building. This entity is
owned 100% by Axys. Construction was completed during October 2001. In June
2001, this LLC established a construction loan for $11.0 million for a twelve-
month period of time, with permanent financing to follow. As of September 30,
2001 Axys had drawn down $7.0M on the loan and the single asset entity is
consolidated into our financial statements.
On June 12, 2001, we entered into a definitive merger agreement
with Applera Corporation to become a part of their Celera Genomics Group. Celera
Genomics' concentration in the areas of genomics, proteomics, bioinformatics and
high throughput computation, combined with the Company's complementary strengths
in the areas of medicinal, structural and combinatorial chemistry and biology
will enable the combined company to more effectively pursue the research and
development of innovative small molecule therapeutics than the two companies can
individually. The merger is expected to be structured as a tax-free stock-for-
stock transaction, whereby each share of Axys common stock will convert into
that number of newly issued shares of Celera Genomics common stock to be
determined at the time of the merger, based upon the market price of Celera
Genomics common stock, subject to a collar mechanism. The merger will be
accounted for under the purchase method by Celera and is anticipated to close
November 16, 2001, subject to Axys shareholder approval.
For additional information about this acquisition, please read the
Amended Form S-4, filed by Applera Corporation with the Securities and Exchange
Commission and dated October 13, 2001.
In September 2001, we recorded a $10.8 million charge
relating to our investment in the preferred stock of DNA Sciences, Inc. as a result
of other than temporary declines in value of this investment. Our investment in
DNA Sciences, Inc. has been impaired as a result of both the deterioration in
DNA Sciences' business prospects and of the financial markets effecting private
company valuations, and financing prospects.
To date, we have not generated any product revenue from
our drug discovery programs and we do not expect to generate product revenue for
at least several years. As of September 30, 2001, we had an accumulated deficit
of $320 million. We expect that losses will fluctuate from quarter to quarter,
that such fluctuations may be substantial, and that results from prior quarters
may not be indicative of future operating results. Included in our accumulated
deficit at September 30, 2001 was approximately $147 million of acquired in-
process research and development from the acquisitions of Khepri
Pharmaceuticals, Inc. in 1995 and Sequana Therapeutics, Inc.
("Sequana") in January 1998. We expect our sources of revenue, if
any, for the next several years to consist of payments under corporate
partnerships. The process of developing our products will require significant
additional research and development, preclinical testing and clinical trials, as
well as regulatory approval. These activities, together with our general and
administrative expenses are expected to result in significant operating losses
for the foreseeable future. We will not receive product revenues or royalties
from our collaborative partners before completing clinical trials and
successfully commercializing these products.
We are subject to risks common to biopharmaceutical
companies, including risks inherent in our research and development efforts and
clinical trials, reliance on collaborative partners, enforcement of patent and
proprietary rights, the need for future capital, potential competition and
uncertainty of regulatory approvals. In order for a product to be
commercialized, it will be necessary for us, and in some cases, our
collaborators, to conduct preclinical tests and clinical trials to demonstrate
the efficacy and safety of our product candidates, obtain regulatory clearances
and enter into manufacturing, distribution and marketing arrangements as well as
obtain market acceptance. There can be no assurance that we will generate
revenues or achieve and sustain profitability in the future.
Results of Operations
Collaboration and Licensing Revenues
Our collaboration and licensing revenues were $0.8
million and $4.7 million for the three and nine months ended September 30, 2001,
respectively, compared to $2.6 million and $5.5 million for the comparable
period in 2000. The revenues recorded in 2001 were primarily from research
support and milestone payments from the two collaboration programs with Merck
and Aventis. Revenues in 2000 included research support from the existing
agreements with Merck and Aventis as well as a program funded by Pfizer (formerly Parke-Davis),
which ended in 2000.
Research and Development
Our research and development expenses were $7.3 million
and $24.4 million for the three and nine months ended September 30, 2001,
respectively, compared to $6.9 million and $22.8 million for the comparable
period in 2000. The overall increase for the first nine months of 2001 was
primarily due to clinical development expenses incurred in connection with clinical studies
for APC 2059. Included in research and development expense is non-cash compensation
income of $519,000 for the nine months ended September 30, 2001, relating
to the changes in fair value of Axys' Key Employee Stock Option Plan.
General and Administrative
Our general and administrative expenses were $2.7 million
and $9.3 million for the three and nine months ended September 30, 2001,
respectively, compared to $2.9 million and $8.6 million for the comparable
period in 2000. The increase was primarily due to $1.9 million in costs
associated with the proposed merger with Applera during the first nine months and upgrading
information systems and network infrastructure in the first quarter of 2001. Included in
general and administrative expenses is non-cash compensation income of $1.6 million
for the nine months ended September 30, 2001, relating to the changes in fair value
of its Key Employee Stock Option Plan. Axys recorded a credit as a result of the decline
in fair value of the Company's liability under the Key Employee Stock Option Plan.
Under this plan, certain employees of Axys have been granted contractual options to
purchase shares of its investment of Discovery Partners.
Interest Income and Interest Expense
Interest income was $272,000 and $1,185,000 for the three
and nine months ended September 30, 2001, respectively, compared to $451,000 and
$1,179,000 for the comparable period in 2000. Interest expense was $1.1 million
and $3.7 million for the three and nine months ended September 30, 2001,
respectively, compared to $356,000 and $642,000 for the comparable period in
2000. The increase is primarily due to the interest expense on the subordinated
notes payable. Interest expense on these notes consists of the 8% face value
interest rate and the amortization of debt issuance costs.
Equity Interest in Loss of Equity-Method Investee
Net equity interest in loss of equity-method investee
consists of our proportionate share of losses from DPI and the write-off of our
investment in Akkadix. These amounts are offset by the recording of deferred
gain from the sale of AAT to DPI in April of 2000. As our ownership percentage
in DPI is reduced, deferred gain amounts are recognized.
Permanent Impairment Loss on Investment
In September 2001, we recorded a $10.8 million charge relating to our
investment in the common stock of DNA Sciences, Inc. as a result of other than
temporary declines in value of this investment. Our investment in DNA Sciences,
Inc. has been impaired as a result of both the deterioration in DNA Sciences'
business prospects and of the financial markets effecting private company
valuations, and financing prospects.
Other Income/Expense
Other income and expense consists of the change in
fair value of the warrants received as part of our investment in DPI in
conformity with current derivative accounting rules, adopted in January
2001.
Liquidity and Capital Resources
We have financed our operations since inception primarily
through private and public offerings of capital stock, through corporate
collaborative research and from a secured convertible note. As of September 30,
2001, we have accumulated, approximately $229 million in net proceeds from
offerings of our capital stock. In addition, we have accumulated approximately
$185 million from our collaborative research agreements.
Our principal sources of liquidity are our cash and
investments, which totaled $6.8 million on September 30, 2001. Not included in
this amount is a total of $4 million in restricted cash, which is held as
collateral to the construction loan for Axys 468 Littlefield, LLC.
In 2000, we sold our Axys Advanced Technologies subsidiary to
DPI for approximately 7.4 million shares of DPI common stock. Later in 2000, we
sold our interest in PPGx to DNA Sciences, Inc. for approximately 1.5 million
shares of Series D Preferred Stock.
We used cash and cash equivalents of $31.3 million in the
operations of our company during the first nine months of 2001 compared to $31.1
million in the same period in 2000.
We purchased approximately $12.2 million of property and
equipment during the first nine months of 2001, primarily related to the
construction, new equipment and furniture needed for the new medicinal chemistry
building. We expect to acquire or lease additional equipment in connection with
future research and development activities.
During October 2001 we entered into an agreement with a
subsidiary of Applera to provide the Company, through a secured promissory note,
with up to $13,000,000 to fund on-going operations. The note bears interest at
the rate of prime plus one percent, per annum. The repayment of the principal of
this note is conditional upon the closing of the merger with Applera. In the
event this merger is not completed, the principal becomes due on the earlier of
120 days or the date on which a change of control involving a third party
occurs. The note is secured by certain Company assets pledged as collateral for
advanced funds.
The drug development process is expensive and will require
that we raise money in the future until our company begins to generate
substantial product or royalty revenues, if ever. However, under the existing
merger agreement with Applera Corporation, we are required to obtain consent
prior to raising additional capital or liquidating any of our equity investments
at this time. Accordingly, were the merger not be completed, it would be
necessary for us to begin an aggressive cash conservation program and
immediately engage in fund raising activities.
In our current condition as a stand-alone company, we believe
that existing cash, short-term investments, revenues from existing
collaborations, potential proceeds from the liquidation of our equity
investments in DPI and/or DNAS, and potential additional licensing revenues will
enable us to continue current and planned operations through the first quarter
of 2002. We will continue to actively evaluate a variety of financing
alternatives, in the event the merger is not completed. There can be no
assurances that we can liquidate our investments in a timely manner, or that the
proceeds from these investments will be adequate to meet our requirements to
fund operations. Finally, the senior secured convertible notes are
collateralized by approximately 6.7 million shares of the DPI stock we own;
accordingly, at such time that the DPI shares are liquidated, a substantial
portion of the proceeds may be used to retire the debt. Without the ability to
liquidate our equity investments in DPI and/or DNAS or obtain additional
licensing revenues, we would have to pursue cost cutting measures in order to
continue operations through June 2002.
If we remain as a stand-alone company, we expect that we will
need to continue to raise money for a number of years until we achieve, if we
ever achieve, substantial product or royalty revenues. We expect to seek
additional funding through new collaborations, the extension of existing
collaborations, through sale of our interests in DPI and DNAS, or through public
or private equity or debt financing. We cannot be certain that additional
funding will be available or that the terms will be acceptable. Existing
stockholders will experience dilution of their investment if we raise additional
funds by issuing equity. If adequate funds are not available, we may delay,
reduce or eliminate any of our research or development programs. Furthermore,
we may obtain funds through arrangements with collaborative partners or others
that require us to give up rights to technologies or products that we would
otherwise seek to develop or commercialize ourselves.
Certain Business Risks
We are at an early stage of development and will need a
substantial amount of additional funding to continue to prosecute our research
and development programs. Our proprietary research programs are, in many cases,
several years from clinical development and require substantial additional
research and development. All of our proposed products are in research or
development and will require significant additional research and development
efforts prior to any commercial use, including extensive and costly pre-clinical
and clinical testing, as well as lengthy regulatory approval involving many
complexities. Our research and development efforts may not be successful, our
proposed products may not prove to be safe and efficacious in clinical trials,
and no commercially successful products may ultimately be developed by us. In
addition, many of our currently proposed products are subject to development and
licensing arrangements with our collaborators. Therefore, we are dependent in
many cases on the research and development efforts of these collaborators.
Moreover, in cases where we are the licensor of its research programs, we are
entitled only to a portion of the revenues, if any, realized from the commercial
sale of any of the proposed products covered by the collaborations. We have
experienced significant operating losses since inception and expect to incur
significant operating losses over at least the next several years. The
development of our proposed products will require a commitment of substantial
funds to conduct these costly and time-consuming activities, which funds may not
be available.
Should we or our collaborators fail to perform in accordance
with the terms of the applicable agreements, any consequent loss of revenue
under the collaboration agreements could have a material adverse effect on our
business, financial condition and results of operations. The proposed products
under development by us have never been manufactured on a commercial scale, and
it is possible that proposed products may not be able to be manufactured at a
cost or in quantities necessary to make them commercially viable. We have no
sales, marketing or distribution capability for its proposed products. If any
of the products subject to our collaborative agreements involving licenses or
our research programs are successfully developed, we must rely on our
collaborators to market the products. We cannot ensure that any collaborator's
marketing efforts would be successful.
If we develop any products which are not subject to
collaborative agreements under which our research partner is the marketer, we
must either rely on other pharmaceutical companies to market the products or we
must develop a marketing and sales force with technical expertise and supporting
distribution capability in order to market the products directly. We cannot
guarantee that its marketing efforts would be successful.
The foregoing risks reflect our early stage of development
and the nature of its industry and products. Also inherent in our stage of
development are a number of additional risks, including competition, the
substantially greater financial resources of a number of its competitors,
uncertainties regarding protection of patents and proprietary rights, government
regulation, uncertainties related to clinical trials and health care reform and
the potential volatility of our stock price. These risks and uncertainties are
discussed further in "Items 1. Business - What Factors Could Cause Our
Results to Differ Significantly From Those You Might Expect?" and " -
What Other Matters Should Stockholders Consider with Respect to the
Company?" in the Company's Annual Report on Form 10-K for the year ended
December 31, 2000, filed by us with the Securities and Exchange Commission on
March 30, 2001.
ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT
MARKET RISK
The company's exposure to market risk is principally
limited to its cash equivalents and investments that have maturities of less
than one year. We maintain a non-trading investment portfolio of investment
grade, liquid debt securities that limits the amount of credit exposure to any
one issue, issuer or type of instrument. The securities in our investment
portfolio are not leveraged, are classified as available-for-sale and are
therefore subject to interest rate risk. We currently do not hedge interest rate
exposure.
We are subject to market rate risks due to fluctuations in
interest rates and equity markets. All of our long-term debt is in the form of
fixed-rate notes with original maturities ranging over four years. Accordingly,
fluctuations in interest rates can lead to fluctuations in the fair value of
such instruments. We have not entered into financial derivatives to reduce its
exposure to interest rate risks.
As a matter of policy, Axys has not entered into derivative transactions
for trading or speculative purposes. Axys' derivative instruments consist of a warrant from
Discovery Partners and the Key Employee Stock Option Plan, both of which derived from its
transaction with Discovery Partners. Fluctuations in market conditions will result in gains
or losses on these instruments as the fair value of the underlying stock of Discovery
Partners changes. A 20% adverse change in the value of the underlying stock of Discovery
Partners would result in a decrease in the fair values of the warrant and Key Employee Stock
Option Plan of approximately $132,000 and $390,000, respectively.
PART II. -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
EXHIBITS
Exhibit Number |
Description |
10.159 |
Amended and Restated Secured Promissory Note and Agreement,
between Axys Pharmaceuticals and PE Corporation, dated October 24,
2001. |
REPORTS ON FORM 8-K
None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
|
|
|
AXYS PHARMACEUTICALS, INC.
|
Dated: November 13, 2001
|
|
|
|
|
Paul J. Hastings
|
|
President and
Chief Executive Officer, Director
(Principal Executive Officer)
|
Dated: November 13, 2001
|
|
|
|
|
David E. Riggs
|
|
Senior Vice President, Chief
Financial Officer
(Chief Accounting Officer and
Principal Financial Officer)
|
INDEX TO EXHIBITS
Exhibit Number |
Description |
10.159
|
Amended and Restated Secured Promissory Note and Agreement,
between Axys Pharmaceuticals and PE Corporation, dated
October 24, 2001.
|
EX-10.159
4
note.htm
EXHIBIT
EXHIBIT 10.159
Execution Copy
AMENDED AND RESTATED
SECURED PROMISSORY NOTE AND AGREEMENT
("Note and Agreement")
$13,000,000.00 New York, New York
Originally issued October 8, 2001
Amended and restated October 24, 2001
FOR VALUE RECEIVED, Axys Pharmaceuticals, Inc., a Delaware corporation ("Borrower"), hereby promises to pay to the order of PE Corporation (NY), a New York corporation ("Lender"), the principal sum of THIRTEEN MILLION DOLLARS ($13,000,000) or such lesser amount as shall equal the outstanding principal amount of all sums advanced to Borrower hereunder and to pay interest on the outstanding balance of said sum at a rate equal to the Prime Rate (as defined below) plus one percent (1%) per annum. All then outstanding principal and accrued interest hereunder shall be due and payable in full upon the earliest of (a) a sale of all or substantially all of the assets of the Borrower (determined on a consolidated basis) to any person or entity (other than Lender or an affiliate of Lender); (b) a Change in Control (as defined below); (c) the closing of any public or private offering of capital stock or debt securities of Borrower or any other equity or debt financing that yields ne
t proceeds to Borrower in excess of $13,000,000; (d) any fee becoming payable to Applera Corporation pursuant to Section 8.02 of the Agreement and Plan of Merger dated June 12, 2001 among Applera Corporation, Angel Acquisition Sub, Inc. and the Borrower (the "Merger Agreement"); (e) the hundred and twentieth (120th) day following any other termination of the Merger Agreement pursuant to the terms thereof; and (f) June 15, 2002 (the "Maturity Date"). The events described in items (a) through (f) above are collectively referred to herein as "Note Termination Events". As used herein, "Change of Control" means any person or entity becomes the beneficial owner (within the meaning of Rule 13d-3 of the rules and regulations of the Securities and Exchange Commission promulgated under the Securities Exchange Act of 1934, as amended) of fifteen percent (15%) or more of the outstanding common stock of Borrower other than as contemplated by the Me
rger Agreement.
- Payments
. Borrower shall make all payments hereunder for the account of Lender at Citibank, N.A., New York, New York, ABA# 021000089, Credit PE Corporation, Account # 000-42657, or to such other address as Lender shall notify Borrower, in lawful money of the United States and in same day or immediately available funds not later than 12:00 noon (New York City time) on the date due, or as otherwise agreed to by Lender.
- Prepayments
. Notwithstanding anything to the contrary herein, Borrower shall have the right at any time and from time to time to prepay any amounts due hereunder in whole or in part in minimum multiples of $500,000 without penalty upon two (2) business days prior written notice to Lender.
- Interest
. All computations of interest under this Note and Agreement shall be based on a year of 365 or 366 days, as applicable, for actual days elapsed. In the event that, contrary to the intent of Lender and Borrower, Borrower pays interest under this Note and Agreement and it is determined that such interest rate was in excess of the then legal maximum rate, then that portion of the interest payment representing an amount in excess of the then legal maximum rate shall be deemed a payment of principal and applied against the principal then due under this Note and Agreement. For purposes of this Note, the "Prime Rate" shall be defined as the rate of interest per annum publicly announced from time to time by Citibank, N.A. as its prime rate in effect at its principal office in New York, and each change in the Prime Rate shall be effective from and including the date such change is publicly announced as being effective.
- Pledge Agreement
. This Note and Agreement is secured by certain collateral more specifically described in the Schedules hereto and in the Pledge Agreement dated October 8, 2001 between Borrower and Lender (as may be amended from time to time, the "Pledge Agreement").
- Conditions to Advances, Use of Proceeds, Covenants
. Amounts shall be advanced to Borrower under this Note and Agreement solely in accordance with the terms and conditions set forth in this Note and Agreement, including the Schedules attached hereto and incorporated herein by reference. Borrower shall use the proceeds of any amount advanced under this Note and Agreement solely for the purposes set forth in the Schedules hereto or the applicable Borrowing Request. Until the termination of this Note and Agreement and payment in full by Borrower or forgiveness by Lender of all amounts outstanding under this Note and Agreement, Borrower agrees that it shall (i) comply with and duly perform all of its covenants, obligations and agreements set forth in the Merger Agreement, so long as such agreement remains in full force and effect, and the Pledge Agreement, which are hereby incorporated mutatis mutandis herein by reference as if fully set forth herein; (ii) comply with all of its covenants, obligatio
ns and agreements set forth in Sections 4.01(a), (d), (e), (f), (g) and (i) of the Merger Agreement, regardless of whether the Merger Agreement remains in full force and effect; and (iii) not incur any Indebtedness (as defined in the Merger Agreement) for borrowed money or guarantee any such Indebtedness of another person or entity or enter into any arrangement having the economic effect of the foregoing except as expressly set forth in Section 4.01(f) of the Company Disclosure Schedule (as defined in the Merger Agreement).
- Representations and Warranties
. Borrower represents and warrants to Lender that as of the date hereof and as of any Advance Date (as defined in Schedule A hereto):
- Borrower is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation and has all requisite corporate power and authority to execute, deliver and perform its obligations under this Note and Agreement and the Pledge Agreement.
- The execution, delivery and performance by Borrower of this Note and Agreement and the Pledge Agreement have been duly authorized by all necessary corporate action of Borrower, and each of this Note and Agreement and the Pledge Agreement constitutes the legal, valid and binding obligation of Borrower, enforceable against Borrower in accordance with its terms.
- No authorization, consent, approval, license, exemption of, or filing or registration with, any governmental authority or agency, or approval or consent of any other person or entity, is required for the due execution, delivery or performance by Borrower of this Note and Agreement or the Pledge Agreement except for the Required Consent in the case of the Pledge Agreement and Other Advances under the Note and Agreement.
- The representations and warranties made by the Borrower (i) in the Pledge Agreement are true and correct as of such date and (ii) in Article II of the Merger Agreement (x) that are qualified as to "Company Material Adverse Effect" (as such term is defined in the Merger Agreement) are true and correct as of such date and (y) that are not so qualified are true and correct in all material respect as of such date, except for those representations and warranties in Article II of the Merger Agreement which address matters only as of a particular date (which shall have been true and correct as of such date).
- Events of Default
. The occurrence of any one or more of the following events shall constitute an "Event of Default" hereunder:
- Borrower shall fail to pay any then outstanding principal when due or any interest or other amount payable under this Note and Agreement within five (5) business days of when due; or
- Borrower shall fail in any material respect to perform any of its other covenants, obligations or agreements contained in this Note and Agreement, the Pledge Agreement or the Merger Agreement, so long as such agreement remains in full force and effect, and such failure shall continue for ten (10) business days after written notice thereof by Lender; or
- Any representation, warranty, certificate, or other statement (financial or otherwise) made, deemed made or furnished by or on behalf of Borrower in writing to Lender in connection with this Note and Agreement, the Pledge Agreement or the Merger Agreement, so long as such agreement remains in full force and effect, or as an inducement to Lender to advance the sums under this Note and Agreement, shall have been false or incorrect in any material respect when made or deemed made; or
- Borrower (i) shall fail to make any payment when due under the terms of any bond, debenture, note or other evidence of indebtedness, if any, individually in excess of $100,000 to be paid by Borrower, and such failure shall continue beyond any period of grace provided with respect thereto or (ii) shall default in the observance or performance of any other agreement, term or condition contained in any such bond, debenture, note or other evidence of indebtedness providing for principal payments in excess of $100,000; or
- The holder or holders of any bond, debenture, note or other evidence of indebtedness of Borrower providing for principal payments in excess of $100,000 shall accelerate such indebtedness to become due prior to its stated date of maturity; or
- Borrower shall (i) apply for or consent to the appointment of a receiver, trustee, liquidator or custodian of itself or of all or any part of its property; (ii) admit in writing its inability to pay its debts generally as they mature; (iii) make a general assignment for the benefit of its or any of its creditors; (iv) be dissolved or liquidated in full or in part; (v) become insolvent (as such term may be defined or interpreted under any applicable statute); (vi) commence a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or consent to any such relief or to the appointment of or taking possession of its property by any official in an involuntary case or other proceeding commenced against it; or (vii) take any action for the purpose of effecting any of the foregoing; or
- Proceedings for the appointment of a receiver, trustee, liquidator or custodian of Borrower or of all or any material part of its property, or an involuntary case or other proceedings seeking liquidation, reorganization or other relief with respect to Borrower or the debts thereof under any bankruptcy, insolvency or other similar law now or hereafter in effect, shall be commenced and an order for relief entered or such proceeding shall not be dismissed or discharged within sixty (60) days of commencement; or
- A final judgment or final judgments for the payment of money, which individually or in the aggregate, exceed $250,000 in excess of the amount covered by insurance, shall be rendered against Borrower and the same shall remain undischarged for a period of thirty (30) days during which execution shall not be effectively stayed; or any judgment, writ, assessment, warrant of attachment, execution, levy or similar process shall be issued or levied against any material part of the property of Borrower and such judgment, writ, assessment, warrant of attachment, execution, levy or similar process shall not be released, stayed, vacated or otherwise dismissed within ten (10) days after issue or levy; or
- This Note and Agreement or the Pledge Agreement shall cease to be, or be asserted by Borrower not to be, a legal, valid and binding obligation of Borrower, enforceable in accordance with its terms.
Upon the occurrence or existence of any Event of Default, Lender may (A) at any time terminate any obligation to make loans or advance sums to Borrower under this Note and Agreement; (B) at any time declare all unpaid amounts owing or payable under this Note and Agreement to be immediately due and payable without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived by Borrower; and/or (C) exercise all rights and remedies available to Lender under this Note and Agreement, the Pledge Agreement or applicable law; provided, however, that upon the occurrence or existence of any Event of Default described in clause (f) or (g) above, immediately and without notice, (1) any obligation to make loans or advance sums to Borrower under this Note and Agreement shall automatically terminate and (2) all unpaid amounts owing or payable under this Note and Agreement shall automatically become immediately due and payable, without
presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived by Borrower.
- General
.
This Note and Agreement shall become effective as of the date hereof, provided that no Other Advance (as defined in Schedule A to this Note and Agreement) shall be made prior to the date (the "Pledge Effective Date") of receipt by Borrower of the consent of the holders of Borrower's 8% Senior Secured Convertible Notes due 2004 (the "Notes") to the extent required under the First Supplemental Indenture, dated as of September 22, 2000, between Borrower and U.S. Bank Trust National Association, as Trustee with respect to the Notes (the "Required Consent").
- Borrower agrees to pay on demand all reasonable costs and expenses of Lender, and the reasonable fees and disbursements of counsel, in connection with the enforcement or attempted enforcement of, and preservation of any rights or interests under, this Note and Agreement, including in any out-of-court workout or other refinancing or restructuring or in any bankruptcy case. Any amounts payable to Lender pursuant to this Section 8(a) if not paid upon demand shall bear interest from the date of such demand until paid in full, at the rate of interest set forth herein in respect of principal outstanding hereunder.
- If at any time any provision of this Note and Agreement is or becomes illegal, invalid or unenforceable in any respect, neither the legality, validity nor enforceability of the remaining provisions shall in any way be affected or impaired thereby.
- Any term, covenant, agreement or condition of this Note and Agreement may be amended or waived if, in the case of an amendment, such amendment is in writing and is signed by Borrower and Lender and, in the case of a waiver, such waiver is in writing and is signed by the party waiving such term, covenant, agreement or condition. No failure or delay by Lender in exercising any right or remedy hereunder shall operate as a waiver thereof or of any other right or remedy nor shall any single or partial exercise of any such right or remedy preclude any other further exercise thereof or of any other right or remedy. The acceptance at any time by Lender of any past due amount hereunder shall not be deemed to be a waiver of the right to require prompt payment when due of any other amounts then or thereafter due and payable. Unless otherwise specified in such waiver or consent, a waiver or consent given hereunder shall be effective only in the specific instance and for the specific purpose for which given.
- This Note and Agreement shall be binding upon and inure to the benefit of Borrower, Lender, and their respective successors and permitted assigns, except that Borrower may not assign or transfer any of its rights or obligations under this Note and Agreement without the prior written consent of Lender. Prior to the occurrence of any Note Termination Event, Lender may at any time sell, assign, or otherwise transfer only to any of its affiliates or subsidiaries all or part of the obligations of Borrower and Lender under this Note and Agreement. After the occurrence of any Note Termination Event, Lender may at any time sell, assign, or otherwise transfer to any other person or entity all or part of the obligations of Borrower and Lender under this Note and Agreement.
- Nothing expressed in or to be implied from this Note and Agreement is intended to give, or shall be construed to give, any person or entity, other than the parties hereto and their permitted successors and assigns hereunder, any benefit or legal or equitable right, remedy or claim under or by virtue of this Note and Agreement or under or by virtue of any provision herein.
- The words "hereof," "herein," "hereunder" and similar words refer to this Note and Agreement as a whole (including the Schedules attached hereto) and not to any particular provision of this Note and Agreement.
- Borrower hereby waives presentment, demand, protest, notice of dishonor and all other notices, except as expressly provided herein, any release or discharge arising from any extension of time, discharge of a prior party, or other cause of release or discharge other than actual payment in full hereof.
- The section headings used in this Note and Agreement are for convenience of reference only and are not to affect the construction hereof or be taken into consideration in the interpretation hereof.
- This Note and Agreement shall be construed in accordance with and governed by the laws of the State of New York.
[Signature Page Follows]
IN WITNESS WHEREOF, the undersigned duly authorized officer of Borrower has executed this Note and Agreement as of the date first set forth above.
AXYS PHARMACEUTICALS, INC.
By:
Name:
Title:
Schedule A
To Secured Promissory Note and Agreement
CONDITIONS TO ANY ADVANCE
Subject to the terms and conditions set forth herein and in the Note and Agreement, Lender agrees to advance to Borrower such loan or loans as Borrower may request hereunder (such loan referred to as an "Advance"); provided, however, that the aggregate principal amount of all Advances hereunder (with no reduction being made for any amounts prepaid by Borrower pursuant to Section 2 of the Note and Agreement) shall not exceed THIRTEEN MILLION DOLLARS ($13,000,000). Borrower agrees and acknowledges that upon the occurrence of any Note Termination Event, all then outstanding principal and accrued interest hereunder shall be immediately due and payable in full. Advances are classified for purposes of this Note and Agreement as either "Equipment Advances" or "Other Advances". Certain terms and conditions relating to Equipment Advances are set forth in Section 1 below and relating to Other Advances are set forth in Section 2 below. Upon the occurrence of the
earliest of (i) any Note Termination Event, (ii) any Event of Default, (iii) any termination of the Merger Agreement and (iv) the "Closing Date" under the Merger Agreement (as defined therein), Lender's obligation to advance any unadvanced amounts hereunder shall automatically terminate and be of no further force and effect.
- Equipment Advances
- General
. Equipment Advances are Advances made by Lender to be used by Borrower solely for the purpose of funding acquisitions of equipment owned or used or to be owned or used by Borrower. The amount of any Equipment Advance shall not exceed the purchase price of the equipment acquired plus reasonable transaction expenses. Each Equipment Advance shall be secured solely by a security interest in the equipment acquired as set forth in Schedule C to this Note and Agreement.
- Advance Dates
. Subject to the terms and conditions set forth herein, the Lender shall make Equipment Advances hereunder (the date of any Equipment Advance, an "Equipment Advance Date"). Set forth in Schedule B to the Note and Agreement are certain equipment acquisitions that Lender has approved and Lender agrees to make Equipment Advances on the Equipment Advance Dates set forth on Schedule B for the purposes of such acquisitions. Schedule B may be amended by Lender and Borrower from time to time at Borrower's request to provide for additional Equipment Advances, provided that Lender shall have the right to approve any additional Equipment Advances in Lender's sole discretion.
Other Advances.
- Each Other Advance shall be secured by certain collateral more specifically described in the Pledge Agreement (the "Other Collateral", and any Equipment Collateral (as defined in Schedule C to the Note and Agreement) or Other Collateral shall be referred to herein as "Collateral").
- Advance Dates
. Subject to the terms and conditions set forth herein, the Lender shall make Other Advances hereunder (the date of any Other Advance, an "Other Advance Date", and any Equipment Advance Date or Other Advance Date shall be referred to herein as an "Advance Date"). No Other Advances shall be made prior to the Pledge Effective Date.
- Borrowing Request
. With respect to any Other Advance, Borrower shall submit to Lender for approval breakdowns, in sufficient detail as may be required by the Lender, of Borrower's funding requirements other than the Equipment Advances ("Other Funding Requirements"), during the period commencing on the Pledge Effective Date until the earliest to occur of (i) any Note Termination Event, (ii) any Event of Default, (iii) any termination of the Merger Agreement and (iv) the "Closing Date" under the Merger Agreement (as defined therein). Lender shall have the right to approve any Other Funding Requirements in its sole discretion. Set forth in Schedule B to the Note and Agreement is an Other Advance that Lender has approved and agrees to make on the Pledge Effective Date, subject to the terms and conditions set forth herein. Borrower shall request any Other Advance by delivering to Lender an irrevocable written notice (the "Borrowing Request") which
shall be delivered to Lender to the address and in the manner set forth in Section 3(c) below and shall specify:
- the principal amount of the requested Other Advance, which shall be not less than $500,000 and shall be consistent with Schedule B or the applicable Other Funding Requirements approved by Lender as provided herein, as the case may be;
- the purpose of the Other Advance, which shall be consistent with Schedule B or the applicable Other Funding Requirements approved by Lender as provided herein, as the case may be;
- the requested Other Advance Date, which shall be (x) consistent with Schedule B or the applicable Other Funding Requirements approved by Lender as provided herein, as the case may be, and (y) not less than two (2) business days after the Borrowing Request shall have been given; and
- that all conditions set forth in Section 3(b) below have been satisfied in respect of such Other Advance.
General.
- Borrower Account
. Disbursements of any Advance shall be made by wire transfer to the account of Borrower at such account as is specified by Borrower before the close of business on the date prior to the applicable Advance Date.
- Additional Conditions Precedent to Each Advance
. The obligation of Lender to make any Advance is subject to the satisfaction of the following conditions, each in form and substance reasonably satisfactory to Lender:
- The representations and warranties of Borrower set forth in the Note and Agreement shall be true and correct in all material respects on the Advance Date;
- No Event of Default or event which with the giving of notice or lapse of time, or both, would constitute an Event of Default shall have occurred or be continuing;
- The applicable Collateral with respect to the Advance is subject to no mortgages, liens, security interests, pledges, charges or encumbrances of any kind or character, except (A) liens in favor of Lender, (B) nonconsensual liens arising in the ordinary course of business which alone or in the aggregate are not substantial in amount and which do not materially detract from the value of the property subject thereto or interfere with the ordinary conduct of the business of the Borrower or otherwise impair Lender's rights with respect thereto and (C) with respect to the Other Collateral, liens in favor of the holders of the Notes with respect thereto under agreements in form and substance satisfactory to Lender;
- Lender shall have a perfected first priority security interest in and to all of the applicable Collateral with respect to the Advance except, in the case of Other Collateral, for liens in favor of the holders of the Notes with respect thereto under agreements in form and substance satisfactory to Lender;
- None of (x) any Note Termination Event, (y) termination of the Merger Agreement or (z) the "Closing Date" under the Merger Agreement (as defined therein) shall have occurred; and
- The Lender shall have approved the applicable Other Funding Requirements in connection with any Other Advance or such Equipment Advance shall be detailed on Schedule B to the Note and Agreement.
With respect to each Equipment Advance, Borrower shall deliver a certification to Lender that the conditions in Section 3(b) of this Schedule A to the Note and Agreement are satisfied with respect to such Advance as of the Advance Date. With respect to each Other Advance, the submission by Borrower of each Borrowing Request shall be deemed to be a representation and warranty by Borrower as of the date thereof and as of the Advance Date that the conditions in Section 3(b) of this Schedule A to the Note and Agreement are satisfied.
- Notices. All notices and other communications hereunder shall be in writing and shall be deemed given if delivered personally or by commercial delivery service, or mailed by registered or certified mail (return receipt requested) or sent via facsimile (with confirmation of receipt) to the parties at the following address (or at such other address for a party as shall be specified by like notice):
if to Lender, to:
c/o Celera Genomics
45 W. Gude Drive
Rockville, MD 20850
Attn: Ugo DeBlasi
with copies to:
c/o Applera Corporation
301 Merrit 7
Norwalk, CT 06851-1070
Attn: Thomas P. Livingston, Esq.
and
Simpson Thacher & Bartlett
3330 Hillview Avenue
Palo Alto, CA 94304
Attn: Richard Capelouto, Esq.
if to Borrower, to:
Axys Pharmaceuticals, Inc.
180 Kimball Way
South San Francisco, CA 94080
Attn: General Counsel
with a copy to:
Latham & Watkins
135 Commonwealth Drive
Menlo Park, CA 94025
Attn: Ora T. Fisher, Esq.
Agreed to and acknowledged:
AXYS PHARMACEUTICALS, INC.
By:___________________________
Name:
Title:
APPLERA CORPORATION
By: ___________________________
Name:
Title:
Date: October 24, 2001
Schedule B
To Secured Promissory Note and Agreement
APPROVED EQUIPMENT ADVANCES
Equipment |
Advance Date |
Advance Amount |
Equipment for 468 Littlefield Facility detailed on page B-2 of this Schedule B |
October 25, 2001 |
$2,800,079
|
Equipment for 180/100 Kimball Facility detailed on page B-2 of this Schedule B |
October 25, 2001 |
$ 627,457
|
Total Approved Equipment Advances |
$3,427,536
|
APPROVED OTHER ADVANCE
Advance Date |
Advance Amount |
Pledge Effective Date |
$6,072,464
|
Later of (i) Pledge Effective Date and (ii) November 9, 2001 |
$1,500,000
|
Total Approved Other Advances |
$7,572,464
|
Agreed to and acknowledged:
AXYS PHARMACEUTICALS, INC.
By:___________________________
Name:
Title:
APPLERA CORPORATION
By: ___________________________
Name:
Title:
Date: October 24, 2001
![](image10.gif)
![](image11.gif)
Schedule C
To Secured Promissory Note and Agreement
Definitions.
- The following terms shall have the following meanings:
"Lien" means any mortgage, deed of trust, pledge, security interest, assignment, deposit arrangement, charge or encumbrance, lien or other type of preferential arrangement.
"Equipment Obligations" means the indebtedness, liabilities and other obligations of Borrower to Lender under or in connection with any Equipment Advance under the Note and Agreement, including, without limitation, all unpaid principal of any Equipment Advance, all interest accrued thereon, all fees and all other amounts payable by Borrower to Lender thereunder or in connection therewith, whether now existing or hereafter arising, and whether due or to become due, absolute or contingent, liquidated or unliquidated, determined or undetermined.
"Permitted Equipment Lien" means (i) any Lien in favor of Lender, (ii) nonconsensual Liens which arise in the ordinary course of business and do not materially impair Borrower's ownership or use of the Equipment Collateral or the value thereof, (iii) liens existing on property as of the date of the Note and Agreement, (iv) liens securing the performance of bids, trade contracts, leases, surety bonds and the like, and (v) liens in connection with judgments that do not constitute an Event of Default under the Note and Agreement.
"Person" means any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization, government or any agency or political subdivision thereof or any other entity.
"Equipment Proceeds" means all "proceeds" as such term is defined in Section 9-306(1) of the UCC on the date of the Note and Agreement and, in any event, shall include, without limitation, all dividends or other income from the Equipment Collateral, collections thereon or distributions with respect thereto.
"UCC" means the Uniform Commercial Code as the same may, from time to time, be in effect in the State of New York; provided, however, in the event that, by reason of mandatory provisions of law, any or all of the attachment, perfection or priority of the security interest in any Equipment Collateral is governed by the Uniform Commercial Code as in effect in a jurisdiction other than the State of New York, the term "UCC" shall mean the Uniform Commercial Code as in effect in such other jurisdiction for purposes of the provisions of this Schedule C to the Note and Agreement relating to such attachment, perfection or priority and for purposes of definitions related to such provisions.
- Where applicable and except as otherwise defined herein, terms used in this Schedule C to the Note and Agreement shall have the meanings assigned to them in the UCC.
Security Interest.
- As security for the payment and performance of the Equipment Obligations, Borrower hereby grants to Lender a security interest in all of Borrower's right, title and interest in, to and under the following (collectively, the "Equipment Collateral"):
- all owned equipment acquired with any funds of any Equipment Advance, including, without limitation, and to the extent so acquired all such machinery, furniture, furnishings, fixtures, trade fixtures, tools, parts and supplies, automobiles, trucks, tractors and other vehicles, appliances, computer and other electronic data processing equipment and other office equipment, computer programs and related data processing software, and all additions, substitutions, replacements, parts, accessories, and accessions to and for the foregoing, wherever located and whether now existing or owned or hereafter acquired or arising, and
- all Equipment Proceeds, including insurance Equipment Proceeds, of any and all of the foregoing.
- Anything herein to the contrary notwithstanding, (i) Borrower shall remain liable under any contracts, agreements and other documents included in the Equipment Collateral, to the extent set forth therein, to perform all of its duties and obligations thereunder to the same extent as if the Note and Agreement had not been executed, (ii) the exercise by Lender of any of the rights hereunder shall not release Borrower from any of its duties or obligations under such contracts, agreements and other documents included in the Equipment Collateral, and (iii) Lender shall not have any obligation or liability under any contracts, agreements and other documents included in the Equipment Collateral by reason of the Note and Agreement, nor shall Lender be obligated to perform any of the obligations or duties of Borrower thereunder or to take any action to collect or enforce any such contract, agreement or other document included in the Equipment Collateral hereunder.
- The Note and Agreement shall create a continuing security interest in the Equipment Collateral, which shall remain in effect until terminated in accordance with Section 9 of this Schedule C to the Note and Agreement.
Financing Statements. Borrower shall execute and deliver to Lender concurrently with the execution of the Note and Agreement, and at any time and from time to time thereafter, all financing statements, assignments, continuation financing statements, termination statements, account control agreements, and other documents and instruments, in form reasonably satisfactory to Lender, and take all other action, as Lender may reasonably request, to perfect and continue perfected, maintain the priority of or provide notice of the security interest of Lender in the Equipment Collateral and to accomplish the purposes of the Note and Agreement.
Representations and Warranties. Borrower represents and warrants to Lender as of any Equipment Advance Date that:
- The location of Borrower's chief executive office and principal place of business; all other locations where Borrower conducts business or Equipment Collateral is kept; and all trade names and fictitious names under which Borrower at any time in the past has conducted or presently conducts its business operations are in each case as set forth in a certification to be delivered to Borrower on the Equipment Advance Date.
- Borrower is the sole and complete owner of the Equipment Collateral, free from any Lien other than Permitted Equipment Liens.
Covenants. So long as any of the Equipment Obligations remain unsatisfied, or until the Note and Agreement has terminated, Borrower agrees to the following:
- Borrower shall appear in and defend any action, suit or proceeding which may affect to a material extent its title to, or right or interest in, or Lender's right or interest in any material portion of, the Equipment Collateral, and shall do and perform all reasonable acts that may be necessary and appropriate to maintain, preserve and protect the Equipment Collateral in all material respects.
- Borrower shall give prompt written notice to Lender (and in any event not later than 30 days following any change described below in this subsection) of: (i) any change in the location of Borrower's chief executive office or principal place of business, (ii) any change in the locations in which the Equipment Collateral is kept; (iii) any change in its name, (iv) any changes in, additions to or other modifications of its trade names and trade styles, and (v) any changes in its identity or structure in any manner which might make any financing statement filed hereunder incorrect or misleading.
- Borrower shall carry and maintain in full force and effect, at its own expense and with financially sound and reputable insurance companies, insurance with respect to the Equipment Collateral in such amounts, with such deductibles and covering such risks as is customarily carried by companies engaged in the same or similar businesses of similar size and owning similar properties in the localities where Borrower operates.
- At Lender's request, all insurance policies with respect to the Equipment Collateral shall provide that Lender shall be a loan payee. During the continuance of an Event of Default and so long as the Equipment Obligations have been accelerated, in its sole discretion, Lender may apply all or any portion of such insurance proceeds to the payment of Equipment Obligations or may release all or any portion thereof to Borrower.
- Borrower shall not surrender or lose possession of (other than to Lender), sell, lease, rent, or otherwise dispose of or transfer any of the Equipment Collateral or any right or interest therein, except in the ordinary course of business and except to the extent obsolete or no longer useful to its business; provided that no such disposition or transfer of Equipment Collateral shall be permitted while any Event of Default exists.
- Borrower shall keep the Equipment Collateral free of all Liens except Permitted Equipment Liens.
- Borrower shall pay and discharge all material taxes, fees, assessments and governmental charges or levies imposed upon it with respect to the Equipment Collateral prior to the date on which penalties attach thereto, except to the extent such taxes, fees, assessments or governmental charges or levies are being contested in good faith by appropriate proceedings.
- Borrower shall maintain and preserve its corporate existence, its rights to transact business and all other rights, franchises and privileges necessary or desirable in the normal course of its business and operations and the ownership of the Equipment Collateral, except in connection with any transactions expressly permitted by the Note and Agreement or the Merger Agreement.
- Upon the request of Lender after the occurrence of an Event of Default, Borrower shall with respect to any Equipment Collateral (i) immediately deliver to Lender, or an agent designated by it, appropriately endorsed or accompanied by appropriate instruments of transfer or assignment, all documents and instruments with respect thereto, (ii) cause any intermediaries to show on their books that Lender is the entitlement holder with respect thereto, and (iii) mark all documents and chattel paper with respect thereto with such legends as Lender shall reasonably specify.
- Borrower shall (i) notify Lender of any material claim made or asserted against the Equipment Collateral by any Person or other event which could reasonably be expected to materially adversely affect the value of the Equipment Collateral or Lender's Lien thereon; (ii) furnish to Lender such statements and schedules further identifying and describing the Equipment Collateral and such other reports and other information in connection with the Equipment Collateral as Lender may reasonably request, all in reasonable detail; and (iii) upon reasonable request of Lender make such demands and requests for information and reports as Borrower is entitled to make in respect of the Equipment Collateral.
Authorization; Lender Appointed Attorney-in-Fact. Lender shall have the right to, in the name of Borrower, or in the name of Lender or otherwise, upon notice to but without the requirement of assent by Borrower, and Borrower hereby constitutes and appoints Lender (and any of Lender's officers, employees or agents designated by Lender) as Borrower's true and lawful attorney-in-fact, with full power and authority to: (i) sign any of the financing statements and other documents and instruments which must be executed or filed to perfect or continue perfected, maintain the priority of or provide notice of Lender's security interest in the Equipment Collateral; (ii) assert, adjust, sue for, compromise or release any claims under any policies of insurance with respect to the Equipment Collateral; and (iii) execute any and all such other documents and instruments, and do any and all acts and things for and on behalf of Borrower, which Lender may deem reasonably necessary or advisable to maintain, protect, reali
ze upon or preserve the Equipment Collateral and Lender's security interest therein and to accomplish the purposes of this Schedule C to the Note and Agreement. Lender agrees that, except upon and during the continuance of an Event of Default, it shall not exercise the power of attorney, or any rights granted to Lender, pursuant to clauses (ii) and (iii). The foregoing power of attorney is coupled with an interest and irrevocable so long as the Equipment Obligations have not been paid and performed in full. Borrower hereby ratifies, to the extent permitted by law, all that Lender shall lawfully and in good faith do or cause to be done by virtue of and in compliance with Section 6 of this Schedule C to the Note and Agreement.
Remedies. Upon the occurrence and continuance of an Event of Default, Lender shall have, in addition to all other rights and remedies granted to it in this Note and Agreement, all rights and remedies of a "secured party" under the UCC and other applicable laws. The cash proceeds actually received from the sale or other disposition or collection of Equipment Collateral, and any other amounts received in respect of the Equipment Collateral the application of which is not otherwise provided for herein, shall be applied first, to the payment of the reasonable costs and expenses of Lender in exercising or enforcing its rights hereunder and in collecting or attempting to collect any of the Equipment Collateral, and second, to the payment of the Equipment Obligations. Any surplus thereof that exists after payment and performance in full of the Equipment Obligations shall be promptly paid over to Borrower or otherwise disposed of in accordance with the UCC or other applicable law. Borrower shall re
main liable to Lender for any deficiency that exists after any sale or other disposition or collection of Equipment Collateral.
Certain Waivers. Borrower waives, to the fullest extent permitted by law, (i) any right of redemption with respect to the Equipment Collateral, whether before or after sale hereunder, and all rights, if any, of marshalling of the Equipment Collateral or other collateral or security for the Equipment Obligations; (ii) any right to require Lender (A) to proceed against any Person, (B) to exhaust any other collateral or security for any of the Equipment Obligations, (C) to pursue any remedy in Lender's power, or (D) to make or give any presentments, demands for performance, notices of nonperformance, protests, notices of protests or notices of dishonor in connection with any of the Equipment Collateral; and (iii) all claims, damages, and demands against Lender arising out of the repossession, retention, sale or application of the proceeds of any sale of the Equipment Collateral.
Termination. Upon indefeasible payment and performance in full of all Equipment Obligations, Lender shall promptly execute and deliver to Borrower such documents and instruments reasonably requested by Borrower as shall be necessary to evidence termination of all security interests given by Borrower to Lender hereunder with respect to such Equipment Obligations.
Agreed to and acknowledged:
AXYS PHARMACEUTICALS, INC.
By:___________________________
Name:
Title:
APPLERA CORPORATION
By: ___________________________
Name:
Title:
Date: October 24, 2001
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