FILED PURSUANT TO RULE 424(B)(3)
REGISTRATION NUMBER 333-74120
[EXELIXIS LOGO] EXELIXIS, INC.
OFFER TO EXCHANGE
OUTSTANDING SHARES OF COMMON STOCK
OF
GENOMICA CORPORATION
FOR
SHARES OF COMMON STOCK
OF
EXELIXIS, INC.
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW
YORK CITY TIME, ON FRIDAY, DECEMBER 28, 2001, UNLESS THE EXCHANGE OFFER IS
EXTENDED. SHARES TENDERED PURSUANT TO THE EXCHANGE OFFER MAY BE WITHDRAWN AT ANY
TIME BEFORE THE EXPIRATION OF THE EXCHANGE OFFER, BUT NOT DURING ANY SUBSEQUENT
OFFERING PERIOD.
On November 19, 2001, we entered into a merger agreement with Genomica
Corporation. We are making this offer as part of the proposed merger with
Genomica. The Genomica board of directors has unanimously approved the merger
agreement, determined that the exchange offer and the merger together are fair
to, and in the best interests of, Genomica stockholders and recommends that
Genomica stockholders accept the exchange offer and tender their shares pursuant
to the exchange offer.
Through our wholly owned subsidiary Bluegreen Acquisition Sub, Inc., we are
hereby offering, upon the terms and subject to the conditions set forth in this
document and in the enclosed letter of transmittal, to exchange a portion of a
share of Exelixis common stock determined pursuant to an exchange ratio,
described below, for each outstanding share of Genomica common stock that is
validly tendered and not properly withdrawn on or before the expiration date of
the exchange offer.
The exchange ratio is a number equal to the quotient obtained by dividing
the Genomica common stock value, determined as described below, by the greater
of (i) $13.30285 or (ii) the average closing sales price of Exelixis common
stock on the Nasdaq National Market during the 18 trading-day period ending two
trading days before the initial expiration of the exchange offer (as reported in
The Wall Street Journal, or if not reported in The Wall Street Journal, any
other authoritative source). The Genomica common stock value will be determined
by dividing $110.0 million by the sum of the number of shares of Genomica common
stock and Genomica preferred stock plus the number of shares of Genomica common
stock issuable upon the exercise of all stock options and warrants with a per
share exercise price of $5.00 or less, each as outstanding as of the date that
we first accept shares of Genomica common stock for payment pursuant to the
exchange offer.
On December 26, 2001, we fixed the Exelixis common stock price for use in
computing the exchange ratio. The exact exchange ratio will be calculated based
upon $15.88556, the average closing sales price of Exelixis common stock on the
Nasdaq National Market during the 18 trading-day period ended on December 26,
2001.
Our obligation to exchange Exelixis common stock for Genomica common stock
in the exchange offer is subject to the conditions listed in the section
entitled "Certain Terms of the Merger Agreement -- Conditions to the Exchange
Offer."
If the exchange offer is consummated, it will be followed by a merger of
Bluegreen Acquisition Sub into Genomica in which shares of Genomica common stock
not tendered in the exchange offer will be converted into the right to receive
shares of Exelixis common stock at the same exchange ratio as used in the
exchange offer, unless the holder properly perfects his or her appraisal rights,
if available, under Delaware law. After completion of the merger, Genomica will
be a wholly owned subsidiary of Exelixis.
Exelixis common stock is listed on the Nasdaq National Market under the
symbol "EXEL," and Genomica common stock is listed on the Nasdaq National Market
under the symbol "GNOM."
SEE "RISK FACTORS" BEGINNING ON PAGE 17 FOR A DISCUSSION OF IMPORTANT
FACTORS THAT YOU SHOULD CONSIDER IN CONNECTION WITH THE EXCHANGE OFFER.
WE ARE NOT ASKING YOU FOR A PROXY NOR SHOULD YOU SEND US A PROXY. Any
request for proxies will be made only pursuant to separate proxy solicitation
materials complying with the requirements of Section 14(a) of the Securities
Exchange Act of 1934.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of the securities to be issued under this
prospectus or determined if this prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
The date of this prospectus is December 28, 2001.
TABLE OF CONTENTS
PAGE NO.
--------
QUESTIONS AND ANSWERS ABOUT THE PROPOSED TRANSACTION........ iv
SUMMARY..................................................... 1
COMPARATIVE PER SHARE MARKET PRICE AND DIVIDEND
INFORMATION............................................... 9
EXELIXIS, INC. SELECTED HISTORICAL CONSOLIDATED FINANCIAL
INFORMATION............................................... 11
GENOMICA CORPORATION SELECTED HISTORICAL CONSOLIDATED
FINANCIAL INFORMATION..................................... 12
SUMMARY SELECTED UNAUDITED PRO FORMA COMBINED FINANCIAL
INFORMATION............................................... 14
COMPARATIVE PER SHARE INFORMATION........................... 16
RISK FACTORS................................................ 17
Risks Related to the Transaction.......................... 17
Risks Related to Exelixis' Business....................... 19
Risks Related to Exelixis Common Stock.................... 27
THE TRANSACTION............................................. 29
General................................................... 29
General Description of the Exchange Offer and the
Merger................................................. 29
The Exchange Ratio........................................ 30
Illustrative Table of Exchange Ratios and Value of
Offer/Merger Consideration............................. 30
Purpose of the Exchange Offer and the Merger.............. 31
Background................................................ 31
Certain Litigation........................................ 36
Reasons for the Exchange Offer and the Merger............. 36
The Minimum Tender Condition.............................. 45
Extension, Termination and Amendment...................... 45
Subsequent Offering Period................................ 46
Exchange of Shares of Genomica Common Stock; Delivery of
Shares of Exelixis Common Stock........................ 46
Cash Instead of Fractional Shares of Exelixis Common
Stock.................................................. 47
Withdrawal Rights......................................... 47
Procedure for Tendering................................... 48
Guaranteed Delivery....................................... 49
Effect of Tender.......................................... 49
Interests of Genomica's Officers and Directors in the
Transaction............................................ 50
Indemnification........................................... 51
Management of Exelixis after the Transaction.............. 52
Material United States Federal Income Tax Consequences.... 52
Accounting Treatment...................................... 55
Regulatory Approvals...................................... 55
Approval of the Merger.................................... 55
Amendment to Genomica's Stockholder Rights Plan........... 56
Appraisal Rights.......................................... 56
Possible Effects of the Exchange Offer.................... 59
i
PAGE NO.
--------
Relationships Between Exelixis and Genomica............... 60
Fees and Expenses......................................... 61
CERTAIN TERMS OF THE MERGER AGREEMENT....................... 62
The Exchange Offer........................................ 62
Composition of Genomica's Board of Directors after the
Exchange Offer......................................... 63
The Merger................................................ 63
Treatment of Genomica Stock Options and Warrants.......... 64
Lock-Up................................................... 65
Representations and Warranties............................ 65
Conduct of Business Before Completion of the Exchange
Offer.................................................. 65
Reasonable Efforts to Complete the Transaction............ 65
Limitation on Genomica's Ability to Consider Other
Acquisition Proposals.................................. 65
Employee Benefits......................................... 67
Conditions to the Exchange Offer.......................... 68
Conditions to the Merger.................................. 70
Termination of the Merger Agreement....................... 70
Expenses.................................................. 72
Amendments to the Merger Agreement........................ 72
THE STOCKHOLDER TENDER AGREEMENTS........................... 73
Parties to the Stockholder Tender Agreements.............. 73
Agreement to Tender....................................... 73
Agreement to Vote......................................... 73
Termination............................................... 73
INFORMATION RELATING TO GENOMICA............................ 74
Overview.................................................. 74
Change in Business Strategy............................... 74
Discovery Manager......................................... 74
Linkmapper Software....................................... 75
Consulting and Scientific Services........................ 76
Customers................................................. 76
Research and Development.................................. 76
Patents, Trademarks, Copyrights and Licenses.............. 76
Employees................................................. 77
Properties................................................ 77
Legal Proceedings......................................... 77
GENOMICA MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS....................... 78
Overview.................................................. 78
Change in Business Strategy............................... 79
Results of Operations..................................... 79
Liquidity and Capital Resources........................... 82
Quantitative and Qualitative Disclosures about Market
Risk................................................... 83
SECURITY OWNERSHIP BY CERTAIN BENEFICIAL OWNERS OF
GENOMICA.................................................. 84
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL DATA....... 86
ii
PAGE NO.
--------
DESCRIPTION OF EXELIXIS CAPITAL STOCK....................... 95
COMPARISON OF RIGHTS OF EXELIXIS STOCKHOLDERS AND GENOMICA
STOCKHOLDERS.............................................. 97
LEGAL MATTERS............................................... 102
EXPERTS..................................................... 102
WHERE YOU CAN FIND MORE INFORMATION......................... 102
GENOMICA CONSOLIDATED FINANCIAL STATEMENTS.................. F-1
SCHEDULE I: INFORMATION CONCERNING DIRECTORS AND EXECUTIVE
OFFICERS OF EXELIXIS, INC. ............................... I-1
ANNEX A: AGREEMENT AND PLAN OF MERGER AND REORGANIZATION.... A-1
ANNEX B: FORM OF STOCKHOLDER TENDER AGREEMENT............... B-1
ANNEX C: FORM OF LOCK-UP AGREEMENT.......................... C-1
ANNEX D: FORM OF AGREEMENT REGARDING STOCK OPTION
EXERCISE.................................................. D-1
ANNEX E: FORM OF PARTIAL WAIVER OF LOCK-UP AGREEMENT........ E-1
ANNEX F: SECTION 262 OF THE GENERAL CORPORATION LAW OF THE
STATE OF DELAWARE......................................... F-1
REFERENCES TO ADDITIONAL INFORMATION
This document incorporates important business and financial information
about Exelixis from documents filed with the Securities and Exchange Commission
that have not been included in or delivered with this document. This information
is available at the Internet website that the Securities and Exchange Commission
maintains at http://www.sec.gov, as well as from other sources.
You may also request copies of these documents from Exelixis, without
charge, upon written or oral request to:
Exelixis, Inc.
Investor Relations
170 Harbor Way
P.O. Box 511
South San Francisco, California 94083
Attn: Elizabeth Costa
(650) 837-7000
In order to receive timely delivery of the documents, you must make your
request no later than December 20, 2001.
See "Where You Can Find More Information," beginning on page 102 of this
prospectus.
iii
QUESTIONS AND ANSWERS ABOUT THE PROPOSED TRANSACTION
1. Q: WHAT ARE EXELIXIS AND GENOMICA PROPOSING?
A: Exelixis proposes to acquire all of the outstanding shares of Genomica
common stock, including the associated preferred stock purchase rights.
Currently, there are no shares of Genomica preferred stock outstanding.
We have entered into a merger agreement with Genomica in which we are
offering to exchange shares of Exelixis common stock for all of the
outstanding shares of Genomica common stock, including the associated
preferred stock purchase rights. If the exchange offer is completed,
Bluegreen Acquisition Sub, a wholly owned subsidiary of Exelixis, will
merge with Genomica. As a result of the exchange offer and the merger,
Genomica will become a wholly owned subsidiary of Exelixis.
2. Q: WHAT WILL I RECEIVE IN EXCHANGE FOR MY SHARES OF GENOMICA COMMON STOCK?
A: You will be entitled to receive a portion of a share of Exelixis common
stock in exchange for each share of Genomica common stock that you
validly tender in the exchange offer based on an exchange ratio
described below. The exchange offer will be followed by a merger in
which Exelixis common stock will be issued at the same exchange ratio.
For a complete description of the exchange ratio, see "The
Transaction -- The Exchange Ratio" on page 30.
3. Q: HOW CAN I FIND OUT THE FINAL EXCHANGE RATIO?
A: The final exchange ratio is a number equal to the quotient obtained by
dividing the Genomica common stock value, determined as described
below, by the greater of (i) $13.30285 or (ii) the average closing
sales price of Exelixis common stock on the Nasdaq National Market
during the 18 trading-day period ending two trading days before the
initial expiration of the exchange offer (as reported in The Wall
Street Journal, or if not reported in The Wall Street Journal, any
other authoritative source). The Genomica common stock value will be
determined by dividing $110.0 million by the sum of the number of
shares of Genomica common stock and Genomica preferred stock plus the
number of shares of Genomica common stock issuable upon the exercise of
all stock options and warrants with a per share exercise price of $5.00
or less, each as outstanding as of the date that we first accept shares
of Genomica common stock for payment pursuant to the exchange offer. We
will notify you of the final exchange ratio by issuing a press release
announcing the final exchange ratio and filing that press release with
the Securities and Exchange Commission. Genomica stockholders can also
call our information agent, Mellon Investor Services LLC, at any time
toll free at (866) 323-8159 for the Exelixis average closing sales
price for the preceding 18 trading days and the exchange ratio that
would be in effect based on that price. On December 26, 2001, we fixed
the Exelixis common stock price for use in computing the exchange
ratio. The exact exchange ratio will be calculated based upon
$15.88556, the average closing sales price of Exelixis common stock on
the Nasdaq National Market during the 18 trading-day period ended on
December 26, 2001. For a table illustrating examples of Exelixis
average closing sales prices, the resulting exchange ratios and
illustrations of the approximate value you would receive for your
Genomica shares, see "The Transaction -- Illustrative Table of Exchange
Ratios and Value of Exchange Offer/Merger Consideration" beginning on
page 30.
4. Q: IS THE EXCHANGE OFFER BEING MADE BY EXELIXIS OR BLUEGREEN ACQUISITION
SUB?
A: The exchange offer is technically being made by Bluegreen Acquisition
Sub, which we formed specifically for the purpose of making the
exchange offer and otherwise facilitating the transaction. Because
Bluegreen Acquisition Sub is our wholly owned subsidiary, all of the
shares of Genomica common stock acquired by Bluegreen Acquisition Sub
in the exchange offer will actually be beneficially owned and
controlled by Exelixis. Therefore, although Bluegreen Acquisition Sub
is technically making the exchange offer and will be a party to the
merger, when we discuss the exchange offer and the merger, we generally
refer only to Exelixis.
iv
5. Q: HOW LONG WILL IT TAKE TO COMPLETE THE EXCHANGE OFFER AND THE MERGER?
A: We hope to complete the exchange offer by December 28, 2001. However,
we may extend the exchange offer if the conditions to the exchange
offer have not been satisfied at the scheduled expiration date or if we
are required to extend the exchange offer by the rules of the
Securities and Exchange Commission. We expect to complete the merger
shortly after we complete the exchange offer, or, if adoption of the
merger agreement by Genomica stockholders is required, shortly after
the special meeting of Genomica stockholders to adopt the merger
agreement.
6. Q: WILL I HAVE TO PAY ANY BROKERAGE FEES OR COMMISSIONS?
A: If you are the record owner of your shares of Genomica common stock and
you tender your shares in the exchange offer directly to the exchange
agent, you will not incur any brokerage fees or commissions. If you own
your shares through a broker or other nominee who tenders the shares on
your behalf, your broker may charge you a commission for doing so. You
should consult with your broker or nominee to determine whether any
charges will apply.
7. Q: DOES GENOMICA SUPPORT THE EXCHANGE OFFER AND THE MERGER?
A: Yes. Genomica's board of directors has unanimously determined that the
exchange offer and the merger are fair to, and in the best interests
of, Genomica and Genomica stockholders and recommends that Genomica
stockholders accept the exchange offer and tender their shares pursuant
to the exchange offer. Genomica's board of directors has also approved
the merger agreement and the merger. Information about the
recommendation of Genomica's board of directors is more fully set forth
under "The Transaction -- Reasons for the Exchange Offer and the
Merger" beginning on page 36.
8. Q: HOW DO I PARTICIPATE IN THE EXCHANGE OFFER?
A: You are urged to read this entire prospectus carefully, and to consider
how the exchange offer and the merger affect you. Then, if you wish to
tender your shares of Genomica common stock, you should do the
following:
- If you hold your shares in your own name, complete and sign the
enclosed letter of transmittal and return it with your stock
certificates to Mellon Investor Services LLC, the exchange agent for
the exchange offer, at the appropriate address specified on the back
cover of this prospectus before the expiration date of the exchange
offer.
- If you hold your shares in "street name" through a broker, ask your
broker to tender your shares before the expiration date.
Alternatively, you may comply with the guaranteed delivery procedures
set forth in "The Transaction -- Guaranteed Delivery" on page 49.
Read this prospectus carefully for more information about procedures
for tendering your shares, the timing of the exchange offer,
extensions of the exchange offer period and your rights to withdraw
your shares from the exchange offer before the expiration date.
9. Q: WHEN AND HOW CAN I WITHDRAW TENDERED SHARES?
A: You may withdraw any shares you have tendered at any time before the
time we accept the shares.
For a withdrawal to become effective, our exchange agent must receive
a written or facsimile transmission notice of withdrawal before the
time we accept the shares. In a notice of withdrawal you must specify
your name, the number of shares to be withdrawn and the name in which
the certificates are registered, if different from your name. If you
have delivered to our exchange agent certificates for shares to be
withdrawn, you must also indicate the serial numbers shown on the
particular certificates evidencing the shares to be withdrawn.
v
10. Q: WHAT ARE THE MOST SIGNIFICANT CONDITIONS TO THE EXCHANGE OFFER?
A: Our obligation to accept shares of Genomica common stock for exchange
in the exchange offer is subject to several conditions, including:
- a number of shares of Genomica common stock equal to at least the
sum of a majority of the total number of shares of Genomica common
stock plus the total number of shares of Genomica common stock
issuable upon exercise of options to acquire Genomica common stock,
each as outstanding immediately before the expiration of the
exchange offer, as it may be extended pursuant to the merger
agreement, having been validly tendered and not properly withdrawn,
which is referred to in this prospectus as the "minimum tender
condition";
- the applicable waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, or the HSR Act, must have
expired or been terminated;
- the registration statement of which this prospectus is a part must
have been declared effective by the Securities and Exchange
Commission; and
- Genomica must have cash, cash equivalents and short-term and
long-term investments, net of all current liabilities of Genomica,
totaling at least $108,750,000.
These and other conditions to the exchange offer are discussed in
this prospectus in the section entitled "Certain Terms of the Merger
Agreement -- Conditions to the Exchange Offer" beginning on page 68.
12. Q: WHAT HAPPENS IF I DO NOT TENDER MY SHARES OF GENOMICA COMMON STOCK?
A: If, after completion of the exchange offer, we own a majority of the
outstanding shares of Genomica common stock, we intend to complete a
merger of our wholly owned subsidiary, Bluegreen Acquisition Sub, with
Genomica. Upon completion of the merger, each share of Genomica common
stock that has not been tendered and accepted for exchange in the
exchange offer will be converted into the right to receive a portion
of a share of Exelixis common stock at the same exchange ratio used in
the exchange offer, unless you properly perfect your appraisal rights,
if available, under Delaware law. The appraisal process is discussed
more fully in the section of this prospectus entitled "The
Transaction -- Appraisal Rights," beginning on page 56.
13. Q: ARE EXELIXIS' BUSINESS, PROSPECTS AND FINANCIAL CONDITION RELEVANT TO
MY DECISION TO TENDER MY SHARES IN THE EXCHANGE OFFER?
A: Yes. Shares of Genomica common stock accepted in the exchange offer
will be exchanged for Exelixis common stock, and therefore, you should
consider our business and financial condition before you decide to
tender your shares in the exchange offer. In considering our business
and financial condition, you should review the documents incorporated
by reference in this prospectus because they contain detailed
business, financial and other information about us.
14. Q: WILL I BE TAXED ON THE EXELIXIS SHARES I RECEIVE?
A: Your receipt of shares of Exelixis common stock in the transaction
will be tax-free for U.S. federal income tax purposes (except for
taxes, if any, resulting from the receipt of cash instead of
fractional shares of Exelixis common stock) if: (i) the transaction is
completed under the current terms of the merger agreement; (ii) the
minimum tender condition to the exchange offer is satisfied; and (iii)
the merger is completed promptly after the exchange offer. Because
only the satisfaction of the minimum tender condition will be known at
the time the exchange offer closes, the tax opinions required by
Exelixis and Genomica will assume that the other conditions will be
met. If they are not met, the closing of the exchange offer could be
taxable to you. We urge you to read the information regarding material
U.S. federal income tax consequences contained in this prospectus
carefully. Because tax matters are very complicated and because the
tax consequences will depend on the facts of your own situation, you
should consult with your tax advisor regarding the consequences of
participation in the exchange offer and the merger.
vi
15. Q: HAS THE EXCHANGE OFFER COMMENCED?
A: Yes. The exchange offer commenced on November 29, 2001. At the same
time we commenced the exchange offer, we filed a registration
statement covering the shares of Exelixis common stock to be issued in
exchange for shares of Genomica common stock. You may now tender
shares of Genomica common stock in accordance with the procedures
outlined in this prospectus. We cannot, however, accept for exchange
and pay for any shares tendered in the exchange offer until the
registration statement is declared effective by the Securities and
Exchange Commission and the other conditions to the exchange offer
have been satisfied or, where permissible, waived.
16. Q: WHERE CAN I FIND MORE INFORMATION ABOUT EXELIXIS AND GENOMICA?
A: You can find more information about Exelixis and Genomica as described
in the section entitled "Where You Can Find More Information"
beginning on page 102 of this prospectus.
17. Q: WHOM SHOULD I CONTACT IF I HAVE MORE QUESTIONS ABOUT THE TRANSACTION?
A: You may contact the information agent using the following contact
information:
Information Agent
MELLON INVESTOR SERVICES LLC
120 Broadway
New York, New York 10271
Call Toll Free: (866) 323-8159
vii
SUMMARY
This summary highlights selected information from this prospectus and may
not contain all of the information that is important to you. You should
carefully read this entire document and the other documents to which this
document refers you or that are incorporated by reference in this prospectus in
order to understand fully the exchange offer and the merger. See "Where You Can
Find More Information" beginning on page 102 for the location of these
documents. The merger agreement is attached as Annex A to this prospectus.
Exelixis and Genomica encourage you to read the merger agreement as it is the
legal document that governs the exchange offer and the merger. We have included
page references in parentheses, where applicable, to other sections of this
prospectus in order to direct you to a more detailed description of the topics
presented in this summary.
FORWARD-LOOKING INFORMATION
Certain of the information relating to Exelixis, Genomica and the combined
company contained in or incorporated by reference into this prospectus is
forward-looking in nature. All statements included or incorporated by reference
into this prospectus or made by management of Exelixis or Genomica, other than
statements of historical fact regarding Exelixis or Genomica, are
forward-looking statements. Examples of forward-looking statements include
statements regarding Exelixis', Genomica's or the combined company's future
financial results, operating results, product successes, business strategies,
projected costs, future products and services, competitive positions and plans
and objectives of management for future operations. In some cases, you can
identify forward-looking statements by terminology, such as "may," "will,"
"intends," "should," "would," "expects," "plans," "anticipates," "believes,"
"estimates," "predicts," "potential" or "continue" or the negative of these
terms or other comparable terminology. Any expectations based on these
forward-looking statements are subject to risks and uncertainties and other
important factors, including those discussed in the section entitled "Risk
Factors." These and many other factors could affect the future financial and
operating results of Exelixis, Genomica or the combined company and could cause
actual results to differ materially from expectations based on forward-looking
statements made in this document or elsewhere by or on behalf of Exelixis,
Genomica or the combined company.
THE COMPANIES
EXELIXIS, INC.
170 Harbor Way
South San Francisco, California 94080
Telephone: (650) 837-7000
We are a leading worldwide genomics-based drug discovery company focused on
product development through our expertise in comparative genomics and model
system genetics. An outstanding team of company scientists has developed
multiple fungal, nematode, insect, plant and vertebrate genetic systems. Our
proprietary model systems and comparative genomics technologies address gene
function by using biologically relevant functional genomics information very
early on in the process to rapidly, efficiently and cost-effectively translate
sequence data to knowledge about the function of genes and the proteins that
they encode. We have a significant internal cancer discovery and drug
development program, through which a number of compounds are expected to
complete screening by the end of the year. We believe that our technology is
broadly applicable to all life science industries including pharmaceutical,
diagnostic, agricultural biotechnology and animal health. We have active
partnerships with Aventis CropScience S.A., Bayer Corporation, Bristol-Myers
Squibb Company, Elan Pharmaceuticals, Inc., Pharmacia Corporation, Protein
Design Labs, Inc., Scios Inc. and Dow AgroSciences LLC, and are building our
internal development program in the area of oncology.
Exelixis common stock is listed on the Nasdaq National Market under the
symbol "EXEL." We maintain a site on the world wide web at "exelixis.com";
however, information found on our website is not part of this prospectus.
1
BLUEGREEN ACQUISITION SUB, INC.
c/o Exelixis, Inc.
170 Harbor Way
South San Francisco, California 94080
Telephone: (650) 837-7000
Bluegreen Acquisition Sub is a wholly owned subsidiary of Exelixis and was
incorporated on November 15, 2001, in the State of Delaware. Bluegreen
Acquisition Sub has not engaged in any operations and exists solely to make the
exchange offer and otherwise facilitate the transaction. Therefore, although
Bluegreen Acquisition Sub is technically making the exchange offer and will be a
party to the merger, when we discuss the transaction in this prospectus, we
generally refer only to Exelixis.
GENOMICA CORPORATION
1715 38th Street
Boulder, Colorado 80301
Telephone: (720) 565-4500
Genomica is a provider of innovative software products and services that
are designed to enable pharmaceutical and biotechnology researchers to
accelerate the drug discovery and development process. Discovery Manager(TM)
software, Genomica's first product, is used for genomics research, including
genetic research, gene discovery and pharmacogenomics. This product allows
researchers to turn the vast volumes of gene, single nucleotide polymorphism, or
SNP, protein and patient data from diverse sources into information useful for
drug discovery. Genomica licenses Discovery Manager to leading genomics-based
research organizations, including AstraZeneca, PLC, GlaxoSmithKline, Inc. and
the National Cancer Institute. Genomica has a strategic alliance with Applied
Biosystems, Inc. to develop software products to be used with Applied
Biosystems' industry-leading hardware and software systems for drug discovery.
Genomica recently announced that, as a result of observable developments in
the market environment for life science information products, it was adopting a
new product and corporate strategy that requires a restructuring of its
operations and consolidation of its facilities, and which involved the
involuntary termination of a significant portion of its workforce.
Genomica common stock is listed on the Nasdaq National Market under the
symbol "GNOM." Genomica maintains a site on the world wide web at
"genomica.com"; however, information found on Genomica's website is not part of
this prospectus.
THE TRANSACTION (PAGE 29)
Exelixis and Genomica are proposing a two-part business combination
transaction, in which Exelixis intends to acquire all of the outstanding shares
of Genomica common stock. In the exchange offer, we are offering to exchange a
portion of a share of Exelixis common stock, as calculated below, for each
outstanding share of Genomica common stock that is validly tendered and not
properly withdrawn on or before the expiration date of the exchange offer. If we
complete the exchange offer, it will be followed by a merger of Bluegreen
Acquisition Sub into Genomica.
The exchange ratio is a number that is equal to the quotient obtained by
dividing the Genomica common stock value, determined as described below, by the
greater of (i) 13.30285 or (ii) the average closing sales price of Exelixis
common stock on the Nasdaq National Market during the 18 trading-day period
ending two trading days before the initial expiration of the exchange offer (as
reported in The Wall Street Journal, or if not reported in The Wall Street
Journal, any other authoritative source). The Genomica common stock value is
determined by dividing $110.0 million by the sum of the number of shares of
Genomica common stock and Genomica preferred stock plus the number of shares of
Genomica common stock issuable upon the exercise of all stock options and
warrants with a per share exercise price of $5.00 or less, each as outstanding
as of the date that we first accept shares of Genomica common stock for payment
pursuant to the exchange offer. On December 26, 2001, we fixed the Exelixis
common stock price for use in computing the exchange ratio. The exact exchange
ratio will be calculated based upon $15.88556, the average closing sales price
of Exelixis
2
common stock on the Nasdaq National Market during the 18 trading-day period
ended on December 26, 2001. We will announce the final exchange ratio by issuing
a press release and filing that press release with the Securities and Exchange
Commission. Genomica stockholders can also call our information agent, Mellon
Investor Services LLC, at any time toll free at (866) 323-8159 to request
information about the exchange ratio.
The exchange offer is conditioned on a number of shares of Genomica common
stock equal to at least the sum of a majority of the total number of shares of
Genomica common stock plus the total number of shares of Genomica common stock
issuable upon exercise of options to acquire Genomica common stock, each as
outstanding immediately before the expiration of the exchange offer, as it may
be extended pursuant to the merger agreement, having been validly tendered and
not properly withdrawn. We may not waive this condition without Genomica's
consent. In addition, our obligation to consummate the exchange offer and
deliver shares of Exelixis common stock in exchange for shares of Genomica
common stock pursuant to the exchange offer is subject to several other
conditions referred to below in the section entitled "Certain Terms of the
Merger Agreement -- Conditions to the Exchange Offer" beginning on page 68.
Promptly after completion of the exchange offer, we intend to merge our
wholly owned subsidiary, Bluegreen Acquisition Sub, with Genomica. Each share of
Genomica common stock which has not been tendered and accepted for exchange in
the exchange offer will be converted in the merger into the right to receive
shares of Exelixis common stock at the same exchange ratio used in the exchange
offer, unless the holder properly perfects his or her appraisal rights, if
available, under Delaware law. We seek to acquire ownership of 100% of the
outstanding shares of Genomica common stock through the exchange offer and the
merger. The exchange offer and the merger are sometimes collectively referred to
in this prospectus as the "transaction."
We will not issue any fractional shares of common stock in connection with
the exchange offer or the merger. Genomica stockholders will instead receive
cash for any fractional shares otherwise issuable to them.
MARKET PRICE AND DIVIDEND INFORMATION (PAGE 9)
Exelixis common stock is listed on the Nasdaq National Market under the
symbol "EXEL," and Genomica common stock is listed on the Nasdaq National Market
under the symbol "GNOM." On November 19, 2001, the last full trading day before
the public announcement of the exchange offer and the merger, the closing sales
price per share of Exelixis common stock on the Nasdaq National Market was
$15.24, and the closing sales price per share of Genomica common stock on the
Nasdaq National Market was $3.38. On December 28, 2001, the date of this
prospectus, the closing sales price per share of Exelixis common stock on the
Nasdaq National Market was $16.25, and the closing sales price per share of
Genomica common stock on the Nasdaq National Market was $4.69.
REASONS FOR THE EXCHANGE OFFER AND THE MERGER (PAGE 36)
GENOMICA. Genomica's board of directors believes that the transaction
could result in a number of benefits to Genomica and its stockholders, including
the following:
- the opportunity for Genomica stockholders to participate in a
significantly larger and more diversified company and, as stockholders of
the combined company, to have greater liquidity in their shares and to
benefit from any future growth of the combined company;
- the opportunity for Genomica stockholders to receive shares of Exelixis
common stock in a tax-free exchange at approximately a 33% premium over
the prevailing market price for shares of Genomica common stock
immediately before the announcement of the exchange offer;
- enabling the combined company to benefit from the depth and experience of
Exelixis' management team and board of directors; and
- enabling the combined company to benefit from Genomica's software
products to enhance the effectiveness of Exelixis' research and
development efforts.
3
See the section entitled "The Transaction -- Reasons for the Exchange Offer
and the Merger; Recommendation of Genomica's Board of Directors" beginning on
page 36 of this prospectus, as well as Genomica's Solicitation/Recommendation
Statement on Schedule 14D-9, which is being mailed to you together with this
prospectus.
EXELIXIS. Our board of directors believes that the transaction could
result in a number of benefits to Exelixis and our stockholders, including the
following:
- access to additional cash enabling us to fund our research and
development programs at a higher level to enhance our core technologies
and expand product development;
- the opportunity to leverage our infrastructure and technologies to create
additional corporate collaborations to diversify our business risk and
increase our future revenue stream; and
- access to complementary technology and expertise to advance the drug
discovery and development process at Exelixis.
RECOMMENDATION TO GENOMICA STOCKHOLDERS
Genomica's board of directors has unanimously approved the merger
agreement, determined that the exchange offer and the merger together are
advisable and fair to and in the best interests of, Genomica and its
stockholders and unanimously recommends that Genomica stockholders accept the
exchange offer and tender their shares pursuant to the exchange offer.
Information about the unanimous recommendation of Genomica's board of directors
is more fully described in Genomica's Solicitation/Recommendation Statement on
Schedule 14D-9, which is being mailed to you together with this prospectus.
OPINION OF GENOMICA'S FINANCIAL ADVISOR
Genomica's board of directors has received a written opinion, dated
November 19, 2001, from CIBC World Markets Corp., Genomica's exclusive financial
advisor in connection with the exchange offer and the merger, to the effect
that, as of the date of the opinion and based on and subject to the matters
described in its opinion, the exchange ratio was fair, from a financial point of
view, to the holders of Genomica common stock (other than Exelixis and its
affiliates). The full text of CIBC World Markets' written opinion dated November
19, 2001, which describes the assumptions made, matters considered and
limitations on the review undertaken, is attached as Schedule II to Genomica's
Solicitation/Recommendation Statement on Schedule 14D-9, which is being mailed
to you together with this prospectus. THE OPINION IS ADDRESSED TO THE GENOMICA
BOARD OF DIRECTORS AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY STOCKHOLDER
REGARDING WHETHER STOCKHOLDERS SHOULD EXCHANGE SHARES PURSUANT TO THE EXCHANGE
OFFER, OR HOW STOCKHOLDERS SHOULD VOTE OR ACT ON ANY MATTER RELATING TO THE
EXCHANGE OFFER OR THE MERGER.
TIMING OF THE EXCHANGE OFFER
The exchange offer commenced on November 29, 2001 and is currently
scheduled to expire at 12:00 midnight, New York City time, on December 28, 2001.
However, under certain circumstances the exchange offer may be extended. If we
decide to extend the exchange offer, we will make an announcement regarding that
extension as described under "The Transaction -- Extension, Termination and
Amendment" beginning on page 45.
EXTENSION, TERMINATION AND AMENDMENT (PAGE 45)
Subject to the terms of the merger agreement, we may extend the exchange
offer for successive extension periods not in excess of 10 business days per
extension if, at the scheduled expiration date of the exchange offer, any
condition to the exchange offer has not been satisfied or, where permissible,
waived. In addition, we are entitled to extend the exchange offer if required by
the rules of the Securities and Exchange Commission or the National Association
of Securities Dealers, Inc. We are not giving any assurance that we will
exercise our right to extend our exchange offer, although we currently intend to
do so until all conditions have been satisfied or, where permissible, waived.
During an extension, all shares of Genomica common stock previously
4
tendered and not properly withdrawn will remain subject to the exchange offer,
subject to your right to withdraw your shares of Genomica common stock. An
extension of the exchange offer is different than a subsequent offering period.
The effects of a subsequent offering period are described below.
We reserve the right to make any changes in the terms and conditions of the
exchange offer by giving oral or written notice of the changes to the exchange
agent and by making a public announcement of the changes. However, we cannot
make certain changes that might be adverse to Genomica or its stockholders
without the prior written consent of Genomica.
We are required to follow any extension, termination, amendment or delay,
as promptly as practicable, with a public announcement. Any announcement about
an extension is required to be issued no later than 9:00 a.m., New York City
time, on the next business day after the previously scheduled expiration date of
the exchange offer. Subject to applicable law, and without limiting the manner
in which we may choose to make any public announcement, we assume no obligation
to publish, advertise or otherwise communicate the public announcement other
than by making a release to the Dow Jones News Service.
SUBSEQUENT OFFERING PERIOD (PAGE 46)
We may elect to provide a subsequent offering period of not less than three
nor more than 20 business days after the acceptance of shares of Genomica common
stock in the exchange offer if the requirements of Rule 14d-11 under the
Securities Exchange Act of 1934 have been met. You will not have the right to
withdraw any shares of Genomica common stock that you tender during the
subsequent offering period. We are required to accept for exchange, and to
deliver shares of Exelixis common stock in exchange for, shares of Genomica
common stock that are validly tendered promptly after they are tendered during
any subsequent offering period. If we elect to provide a subsequent offering
period, we are required to make a public announcement to that effect no later
than 9:00 a.m., New York City time, on the next business day after the
previously scheduled expiration date of the exchange offer.
EXCHANGE OF SHARES OF GENOMICA COMMON STOCK; DELIVERY OF SHARES OF EXELIXIS
COMMON STOCK (PAGE 46)
We are required to accept for exchange, and to deliver shares of Exelixis
common stock in exchange for, shares of Genomica common stock validly tendered
and not properly withdrawn, promptly after the expiration date, upon the terms
and conditions to the exchange offer, including the terms and conditions of any
extension or amendment. In addition, we are required to accept for exchange, and
to deliver shares of Exelixis common stock in exchange for, shares of Genomica
common stock promptly after they are validly tendered during any subsequent
offering period, upon the terms and conditions to the exchange offer, including
the terms and conditions of any extension or termination.
WITHDRAWAL RIGHTS (PAGE 47)
Your tender of shares of Genomica common stock pursuant to the exchange
offer is irrevocable, except that shares of Genomica common stock tendered
pursuant to the exchange offer may be withdrawn at any time before the time we
first accept tendered shares of Genomica common stock for exchange pursuant to
the exchange offer. Once we have accepted shares of Genomica common stock for
purchase pursuant to the exchange offer, all tenders are irrevocable.
If we elect to provide a subsequent offering period pursuant to Rule 14d-11
under the Securities Exchange Act of 1934, you will not have the right to
withdraw shares of Genomica common stock that you tender in the subsequent
offering period.
PROCEDURE FOR TENDERING (PAGE 48)
The method of tendering your shares in the exchange offer will depend on
whether the shares are held in certificate or book-entry form.
5
- If your shares are held in certificate form, you must deliver the
certificates, a properly completed and duly executed letter of
transmittal, or a manually executed facsimile of that document, and any
other required documents to the exchange agent at one of its addresses
set forth on the back cover of this prospectus. In the circumstances
detailed in the letter of transmittal, the signatures on the letter of
transmittal must be guaranteed.
- If your shares of Genomica common stock are held in book-entry form, the
shares must be tendered in accordance with the procedures for book-entry
tender, and the exchange agent must receive a so-called "agent's message"
and a confirmation of receipt of the tender. The procedures for
book-entry transfer are described under "The Transaction -- Procedure for
Tendering" beginning on page 48.
- If you hold your shares in "street name" through a broker, ask your
broker to tender your shares before the expiration date.
In all cases, deliveries to the exchange agent must be made before the
expiration of the exchange offer.
If your shares are not currently available and you cannot now comply with
the preceding requirements, you can still participate in the exchange offer by
complying with the guaranteed delivery procedures set forth under "The
Transaction -- Guaranteed Delivery" on page 49.
A STOCKHOLDER VOTE MAY BE REQUIRED TO ADOPT THE MERGER AGREEMENT
If, after completion of the exchange offer, as it may be extended and
including any subsequent offering period, we own 90% or more of the outstanding
shares of Genomica common stock, the merger can be accomplished without a vote
of Genomica stockholders. If, on the other hand, after completion of the
exchange offer, as it may be extended and including any subsequent offering
period, we own more than 50% but less than 90% of the outstanding shares of
Genomica common stock, a meeting of Genomica stockholders and the affirmative
vote by the holders of at least a majority of the shares of Genomica common
stock outstanding on the record date for such meeting will be needed to complete
the merger. If we complete the exchange offer, we will own a majority of the
shares of Genomica common stock outstanding on the record date for the merger,
so adoption of the merger agreement by Genomica stockholders will be assured.
THE STOCKHOLDER TENDER AGREEMENTS (PAGE 73)
Genomica's directors, officers and affiliated stockholders who have
beneficial ownership of 6,070,133 shares of Genomica common stock in the
aggregate have agreed to tender and not withdraw their shares of Genomica common
stock in the exchange offer. In addition, if certain conditions are met, the
officers, directors and affiliated stockholders of Genomica who are parties to
the stockholder tender agreements may be obligated to exercise options and
warrants to purchase up to 1,098,094 shares of Genomica common stock in the
aggregate and tender the shares issued upon exercise of the options and warrants
if and to the extent necessary to satisfy the minimum tender condition for the
exchange offer.
INTERESTS OF GENOMICA'S OFFICERS AND DIRECTORS IN THE TRANSACTION (PAGE 50)
When you consider Genomica's board of directors' unanimous recommendation
that Genomica stockholders accept the exchange offer and tender their shares in
the exchange offer, you should be aware that some Genomica officers and
directors may have interests in the transaction that may be different from, or
in addition to, their interests as stockholders of Genomica. See the section
entitled "The Transaction -- Interests of Genomica's Officers and Directors in
the Transaction" beginning on page 50 of this prospectus, as well as Genomica's
Solicitation/Recommendation Statement on Schedule 14D-9, which is being mailed
to you together with this prospectus.
TREATMENT OF GENOMICA STOCK OPTIONS BY EXELIXIS (PAGE 64)
We are not assuming any outstanding options to purchase Genomica common
stock. Pursuant to the terms of Genomica's stock option plans, all outstanding
options to purchase Genomica common stock that are not assumed in connection
with the consummation of the exchange offer will accelerate and become fully
6
vested and exercisable. All options to purchase Genomica common stock that are
not exercised on or before the day we accept shares of Genomica common stock for
payment pursuant to the exchange offer will terminate.
LIMITATION ON GENOMICA'S ABILITY TO CONSIDER OTHER ACQUISITION PROPOSALS (PAGE
65)
Genomica has agreed not to solicit, initiate or knowingly take any action
to encourage or discuss any proposal for a business combination or other similar
transaction involving the acquisition or purchase of (i) more than 20% of any
class of voting securities of Genomica or any of its subsidiaries or (ii)
businesses or assets that account for 20% or more of Genomica's consolidated
assets or involving the liquidation or dissolution of Genomica or any of its
subsidiaries, before completion of the merger unless the other party has made a
written proposal to Genomica, not solicited in violation of the merger
agreement, for a transaction which Genomica's board of directors believes in
good faith, after consultation with a nationally recognized independent
financial advisor, is reasonably likely to be consummated and would, if
consummated, be more favorable to Genomica's stockholders than the transaction
described in this prospectus, provided that a number of other conditions are
satisfied.
TERMINATION OF THE MERGER AGREEMENT (PAGE 70)
Exelixis and Genomica can terminate the merger agreement under certain
circumstances, including if the exchange offer is not consummated by March 1,
2002.
EXPENSES (PAGE 72)
The merger agreement provides that all fees and expenses incurred in
connection with the merger agreement and the transactions contemplated by the
merger agreement are to be paid by the party incurring such expenses. However,
if the merger agreement is terminated for any reason other than a material
breach of the merger agreement by us, Genomica is required to pay us $750,000
for reimbursement of our fees and expenses.
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES (PAGE 52)
The transaction will qualify as an integrated tax-free reorganization for
U.S. federal income tax purposes if: (i) the transaction is completed under the
current terms of the merger agreement; (ii) the minimum tender condition to the
exchange offer is satisfied; and (iii) the merger is completed promptly after
the exchange offer. If the transaction is a reorganization for U.S. federal
income tax purposes, your receipt of Exelixis common stock in the transaction
will be tax-free for U.S. federal income tax purposes (except for taxes, if any,
resulting from the receipt of cash instead of fractional shares of Exelixis
common stock).
The above-described tax treatment of the exchange offer and the merger to
Genomica stockholders depends on, among other things, some facts that will not
be known before the completion of the merger. Genomica stockholders are urged to
carefully read the discussion in the section entitled "The Transaction --
Material United States Federal Income Tax Consequences" beginning on page 52 of
this prospectus. That discussion includes a summary of the material U.S. federal
income tax consequences of participation in the exchange offer and the merger in
the event that the conditions described above are not satisfied.
TAX MATTERS ARE COMPLICATED, AND THE TAX CONSEQUENCES OF THE EXCHANGE OFFER
AND THE MERGER TO YOU WILL DEPEND ON FACTS OF YOUR OWN SITUATION. YOU SHOULD
CONSULT YOUR OWN TAX ADVISORS TO FULLY UNDERSTAND THE TAX CONSEQUENCES OF THE
EXCHANGE OFFER AND THE MERGER TO YOU.
7
ACCOUNTING TREATMENT (PAGE 55)
We will account for the merger as a purchase for financial reporting
purposes.
APPRAISAL RIGHTS (PAGE 56)
Genomica stockholders are not entitled to appraisal rights in connection
with the exchange offer. If, after completion of the exchange offer, as it may
be extended and including any subsequent offering period, we own a majority but
less than 90% of the outstanding shares of Genomica common stock, we have agreed
to effect a long-form merger as permitted under Delaware law, which would
require notice to and adoption of the merger agreement by Genomica stockholders.
Genomica stockholders who have not exchanged their shares of Genomica common
stock in the exchange offer will not have appraisal rights in connection with a
long-form merger unless, on the date fixed to determine stockholders entitled to
vote on the merger agreement, the shares of Genomica common stock are (i) not
listed on a national securities exchange or designated as a national market
system security on an interdealer quotation system by the National Association
of Securities Dealers, Inc. and (ii) held of record by fewer than 2,000 holders.
If, however, after completion of the exchange offer, as it may be extended
and including any subsequent offering period, we own 90% or more of the
outstanding shares of Genomica common stock, we have agreed to effect a
short-form merger as permitted under Delaware law. In the event that we complete
the transaction through a short-form merger, stockholders who did not tender, or
who tendered and withdrew, their shares of Genomica common stock in the exchange
offer would have the right under Delaware law to demand appraisal of their
shares of Genomica common stock, but only if they comply with certain statutory
requirements. Stockholders who comply with the applicable statutory procedures
will be entitled to receive a judicial determination of the fair value of their
shares of Genomica common stock, exclusive of any elements of value arising from
the accomplishment or expectation of the merger, and to receive payment of this
fair value in cash, together with a fair rate of interest. In the event of a
short-form merger, information regarding these requirements will be provided to
Genomica stockholders who have not exchanged their shares of Genomica common
stock in the exchange offer.
REGULATORY APPROVALS (PAGE 55)
Transactions such as the merger are subject to review by the Department of
Justice and the Federal Trade Commission, or FTC, to determine whether they
comply with applicable antitrust laws. Under the provisions of the HSR Act the
merger may not be consummated until the specified waiting period requirements of
the HSR Act have been satisfied. Exelixis and Genomica filed premerger
notification reports, together with requests for early termination of the
waiting period, with the Department of Justice and the FTC under the HSR Act on
November 23, 2001, and the waiting period terminated on December 26, 2001.
8
COMPARATIVE PER SHARE MARKET PRICE AND DIVIDEND INFORMATION
Since April 11, 2000, Exelixis common stock has been listed on the Nasdaq
National Market under the symbol "EXEL." Since September 29, 2000, Genomica
common stock has been listed on the Nasdaq National Market under the symbol
"GNOM." The table below sets forth, for the periods indicated, the range of high
and low closing per share sales prices for Exelixis common stock and Genomica
common stock as reported on the Nasdaq National Market.
EXELIXIS GENOMICA
COMMON STOCK COMMON STOCK
--------------- ---------------
LOW HIGH LOW HIGH
------ ------ ------ ------
CALENDAR YEAR ENDED DECEMBER 31, 2000
First quarter............................................ $ -- $ -- $ -- $ --
Second quarter (for Exelixis from April 11, 2000)........ 14.00 35.25 -- --
Third quarter (for Genomica from September 29, 2000)..... 31.38 49.25 19.44 19.44
Fourth quarter........................................... 11.56 32.94 5.03 19.06
CALENDAR YEAR ENDING DECEMBER 31, 2001
First quarter............................................ $ 8.00 $15.88 $ 3.69 $ 9.00
Second quarter........................................... 8.00 18.97 3.56 4.99
Third quarter............................................ 10.58 19.15 2.42 4.30
Fourth quarter (through December 28, 2001)............... 11.14 17.11 2.30 4.69
As of December 28, 2001, there were approximately 525 record holders of
Exelixis common stock. As of December 28, 2001, there were approximately 173
record holders of Genomica common stock. Neither Exelixis nor Genomica has ever
paid cash dividends on their respective common stock. Exelixis and Genomica
intend to retain earnings, if any, to support the development of their
respective businesses, and neither anticipates paying cash dividends for the
foreseeable future.
The following table presents:
- the closing sales price or the 18 trading-day average closing sales
price, as indicated, of Exelixis' common stock, as reported on the Nasdaq
National Market;
- the closing sales price of Genomica's common stock, as reported on the
Nasdaq National Market; and
- the market value based on the closing sales price or the 18 trading-day
average closing sales price of the fraction of a share of Exelixis common
stock to be received in exchange for one share of Genomica common stock
in the exchange offer
in each case as if the exchange ratio had been determined on (i) November 19,
2001, the last full trading day before the public announcement of the proposed
transaction, (ii) December 28, 2001, the date of this prospectus and (iii)
December 28, 2001 using the average closing sales price of Exelixis common stock
for the 18 trading days ended on December 26, 2001. The numbers have been
calculated assuming that (i) as of November 19, 2001, the Genomica common stock
value would have been $4.49, the closing sales price of Exelixis common stock
would have been $15.24 and the exchange ratio would have been .29490, (ii) as of
December 28, 2001, the Genomica common stock value would have been $4.50, the
closing sales price of Exelixis common stock would have been $15.50 and the
exchange ratio would have been .28309 and (iii) as of December 28, 2001, the
Genomica common stock value would have been $4.50, the average closing sales
price of Exelixis common stock for the 18 trading days ended on December 26,
2001 would have been $15.88556 and the exchange ratio would have been .28309.
The assumed Genomica common stock value as of November 19, 2001 is based on the
quotient obtained by dividing $110.0 million by 24,475,490, which equals the
total number of shares of Genomica common stock outstanding as of November 19,
2001 plus the number of shares of Genomica common stock issuable upon the
exercise of stock options and warrants with a per share exercise price of $5.00
or less that were outstanding as of November 19, 2001. The assumed Genomica
common stock value as of December 28, 2001 is based on the quotient obtained by
dividing $110.0 million by
9
24,460,254, which equals the total number of shares of Genomica common stock
outstanding as of December 28, 2001 plus the number of shares of Genomica common
stock issuable upon the exercise of stock options and warrants with a per share
exercise price of $5.00 or less that were outstanding as of December 28, 2001.
ESTIMATED EQUIVALENT PRICE
PRICE OF CLOSING SALES PRICE OF PER SHARE OF GENOMICA
EXELIXIS COMMON STOCK GENOMICA COMMON STOCK COMMON STOCK(1)
--------------------- ---------------------- --------------------------
November 19, 2001(2).......... $15.24 $3.38 $4.49
December 28, 2001(2).......... 16.25 4.69 4.60
December 28, 2001(3).......... 15.88 4.69 4.50
---------------
(1) Computed as the product of the price for Exelixis common stock on the dates
indicated above multiplied by the assumed exchange ratios for those dates as
set forth above.
(2) Based on the closing sales price at the specified date.
(3) Based on the average closing sales price for the 18 trading days ended on
December 26, 2001.
ON DECEMBER 26, 2001, WE FIXED THE EXELIXIS COMMON STOCK PRICE FOR USE IN
COMPUTING THE EXCHANGE RATIO. THE EXACT EXCHANGE RATIO WILL BE CALCULATED BASED
UPON $15.88556, THE AVERAGE CLOSING SALES PRICE OF EXELIXIS COMMON STOCK ON THE
NASDAQ NATIONAL MARKET DURING THE 18 TRADING-DAY PERIOD ENDED ON DECEMBER 26,
2001.
10
EXELIXIS, INC.
SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION
The following information is being provided to assist you in analyzing the
financial aspects of the exchange offer and the merger. Information as of
December 31, 1996, 1997, 1998, 1999 and 2000 and for the years then ended has
been derived from audited consolidated financial statements. The information as
of September 30, 2001 and the nine-month periods ended September 30, 2000 and
2001 has been derived from unaudited consolidated financial statements that have
been prepared on the same basis as the audited consolidated financial statements
and, in the opinion of management, include all adjustments (consisting only of
normal recurring adjustments) necessary for a fair presentation of the financial
condition at such date and the results of operations for such periods. The
following selected historical consolidated financial data should be read in
conjunction with Exelixis' consolidated financial statements and related notes
incorporated by reference in this prospectus. Historical results are not
necessarily indicative of the results to be obtained in the future.
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
----------------------- ---------------------------------------------------
2001 2000 2000 1999 1998 1997 1996
---------- ---------- -------- -------- -------- -------- -------
(IN THOUSANDS, EXCEPT (IN THOUSANDS, EXCEPT PER SHARE INFORMATION)
PER SHARE INFORMATION)
(UNAUDITED)
STATEMENT OF OPERATIONS DATA:
License revenues......................... $ 4,564 $ 2,771 $ 3,776 $ 1,046 $ 139 $ -- $ --
Contract and government grant revenues... 23,649 14,914 20,983 9,464 2,133 -- --
-------- -------- -------- -------- -------- -------- -------
Total revenues....................... 28,213 17,685 24,759 10,510 2,272 -- --
-------- -------- -------- -------- -------- -------- -------
Operating expenses:
Research and development............... 59,836 37,248 48,456 21,653 12,096 8,223 4,120
General and administrative............. 14,597 11,539 18,907 7,624 5,472 3,743 1,475
Acquired in-process research and
development.......................... 6,673 -- 38,117 -- -- -- --
Amortization of goodwill and
intangibles.......................... 3,673 -- 260 -- -- -- --
-------- -------- -------- -------- -------- -------- -------
Total operating expenses............. 84,779 48,787 105,740 29,277 17,568 11,966 5,595
-------- -------- -------- -------- -------- -------- -------
Loss from operations..................... (56,566) (31,102) (80,981) (18,767) (15,296) (11,966) (5,595)
Interest income (expense), net........... 3,649 3,843 5,569 46 (50) 470 284
Equity in net loss of affiliated
company................................ -- -- -- -- (320) -- --
Minority interest in consolidated
subsidiary net loss.................... -- -- 101 -- -- -- --
-------- -------- -------- -------- -------- -------- -------
Net loss................................. $(52,917) $(27,259) $(75,311) $(18,721) $(15,666) $(11,496) $(5,311)
======== ======== ======== ======== ======== ======== =======
Net loss per share, basic and diluted.... $ (1.15) $ (1.00) $ (2.43) $ (4.60) $ (7.88) $ (9.97) $ (4.50)
======== ======== ======== ======== ======== ======== =======
Weighted average shares used in computing
net loss per share, basic and
diluted................................ 45,848 27,235 31,031 4,068 1,988 1,154 1,180
======== ======== ======== ======== ======== ======== =======
DECEMBER 31,
SEPTEMBER 30, ----------------------------------------------------
2001 2000 1999 1998 1997 1996
-------------- --------- -------- -------- -------- -------
(IN THOUSANDS) (IN THOUSANDS)
(UNAUDITED)
BALANCE SHEET DATA:
Cash, cash equivalents and short-term
investments.................................. $ 132,283 $ 112,552 $ 6,904 $ 2,058 $ 9,715 $ 8,086
Working capital (deficit)...................... 103,005 95,519 (672) 182 7,619 6,686
Total assets................................... 246,717 204,914 18,901 8,981 15,349 9,747
Long-term obligations, less current portion.... 40,709 7,976 11,132 2,556 1,759 1,104
Deferred stock compensation, net............... (5,355) (10,174) (14,167) (1,803) (102) (59)
Accumulated deficit............................ (182,955) (130,038) (54,727) (36,006) (20,340) (8,844)
Total stockholders' equity (deficit)........... 149,411 162,734 (49,605) (35,065) (20,364) (8,853)
11
GENOMICA CORPORATION
SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION
The following information is being provided to assist you in analyzing the
financial aspects of the exchange offer and the merger. Information as of
December 31, 1996, 1997, 1998, 1999 and 2000 and for the years then ended has
been derived from audited consolidated financial statements. The information as
of September 30, 2001 and the nine-month periods ended September 30, 2000 and
2001 has been derived from unaudited consolidated financial statements that have
been prepared on the same basis as the audited consolidated financial statements
and, in the opinion of management, include all adjustments (consisting only of
normal recurring adjustments) necessary for a fair presentation of the financial
condition at such date and the results of operations for such periods. The
following summary historical consolidated financial data should be read in
conjunction with "Genomica Management's Discussion and Analysis of Financial
Condition and Results of Operations" and Genomica's consolidated financial
statements and related notes included elsewhere in this prospectus. Historical
results are not necessarily indicative of the results to be obtained in the
future.
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
-------------------------- ------------------------------------------------
2001(1) 2000 2000 1999 1998 1997 1996
------------ ----------- -------- ------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER (IN THOUSANDS, EXCEPT PER SHARE INFORMATION)
SHARE INFORMATION)
(UNAUDITED)
STATEMENT OF OPERATIONS DATA:
Software license and services........... $ 1,293 $ 1,175 $ 1,615 $ 622 $ 197 $ -- $ --
Research grants......................... -- -- 27 159 -- -- --
----------- ---------- -------- ------- ------- ------- -------
Total revenues...................... 1,293 1,175 1,642 781 197 -- --
----------- ---------- -------- ------- ------- ------- -------
Operating expenses:
Costs of revenues..................... 286 282 384 447 141 -- --
Research and development.............. 10,849 8,929 12,047 4,869 2,328 1,682 1,533
Selling and marketing................. 5,873 5,097 7,197 1,722 634 495 383
General and administrative............ 5,784 7,039 8,965 1,723 884 579 183
----------- ---------- -------- ------- ------- ------- -------
Total operating expenses............ 22,792 21,347 28,593 8,761 3,987 2,756 2,099
----------- ---------- -------- ------- ------- ------- -------
Loss from operations.................... (21,499) (20,172) (26,951) (7,980) (3,790) (2,756) (2,099)
Interest income, net.................... 4,499 576 2,588 401 35 18 23
----------- ---------- -------- ------- ------- ------- -------
Net loss................................ (17,000) (19,596) (24,363) (7,579) (3,755) (2,738) (2,076)
Deemed dividend related to beneficial
conversion feature of preferred
stock................................. -- (17,109) (17,109) -- -- -- --
----------- ---------- -------- ------- ------- ------- -------
Net loss attributable to common
stockholders.......................... $ (17,000) $ (36,705) $(41,472) $(7,579) $(3,755) $(2,738) $(2,076)
=========== ========== ======== ======= ======= ======= =======
Net loss per share, basic and diluted... $ (0.75) $ (27.40) $ (6.49) $ (7.13) $ (3.81) $ (2.80) $ (2.67)
=========== ========== ======== ======= ======= ======= =======
Weighted average common shares
outstanding, basic and diluted........ 22,521 1,340 6,388 1,062 986 977 779
=========== ========== ======== ======= ======= ======= =======
12
DECEMBER 31,
SEPTEMBER 30, -----------------------------------------------
2001(1) 2000 1999 1998 1997 1996
-------------- -------- -------- ------ ------ -------
(IN THOUSANDS) (IN THOUSANDS)
(UNAUDITED)
BALANCE SHEET DATA:
Cash, cash equivalents and short-term investments... $ 68,782 $ 98,938 $ 6,343 $5,223 $3,094 $ 355
Working capital (deficit)........................... 69,922 99,303 5,246 4,569 2,515 (264)
Long-term investments............................... 42,048 24,993 -- -- -- --
Total assets........................................ 118,836 129,590 7,554 5,649 3,426 515
Notes payable and capital lease obligations, less
current portion................................... -- -- 268 71 184 --
Deferred stock compensation, net.................... (9,563) (16,929) (5,772) -- -- --
Accumulated deficit................................. (74,689) (57,689) (16,217) (8,639) (4,884) (2,146)
Total stockholders' equity (deficit)................ 117,065 127,086 5,681 4,872 2,623 (143)
---------------
(1) Genomica's restructuring plan was adopted subsequent to September 30, 2001,
and, therefore, Genomica's financial position as of September 30, 2001, and
its results of operations for the nine months then ended do not reflect the
effects of this restructuring plan. In its quarterly report on Form 10-Q for
the three and nine months ended September 30, 2001, Genomica estimated that,
without regard to any adjustments that would be required by the transaction
contemplated by this prospectus, it would record charges in the fourth
quarter of approximately $4.3 million, including $2.6 million of liabilities
and $1.7 million of asset impairments. For a more detailed description of
Genomica's restructuring plan and its effect on Genomica's results of
operations since September 30, 2001, please see "Information Relating to
Genomica" beginning on page 74, as well as Note 8 to Genomica's Consolidated
Interim Financial Statements, beginning on page F-32.
13
SUMMARY SELECTED UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
Exelixis acquired a majority of the outstanding capital stock of Artemis
Pharmaceuticals GmbH and all of the capital stock of Agritope, Inc. on May 14,
2001 and December 8, 2000, respectively. These transactions were accounted for
as purchases. The following unaudited selected pro forma combined financial
information of Exelixis, Genomica, Artemis and Agritope has been derived from
the unaudited pro forma condensed combined financial statements, which give
effect to the proposed merger of Exelixis and Genomica and the acquisitions of
Artemis and Agritope as purchases and should be read in conjunction with such
unaudited pro forma condensed combined financial statements and the notes
thereto which are included elsewhere in this prospectus.
For pro forma purposes, (i) Exelixis' unaudited consolidated balance sheet
as of September 30, 2001 has been combined with Genomica's unaudited
consolidated balance sheet as of September 30, 2001 as if the merger had
occurred on September 30, 2001, (ii) Exelixis' consolidated audited statement of
operations for the year ended December 31, 2000, which includes the results of
Agritope subsequent to the acquisition date of December 8, 2000, has been
combined with Agritope's unaudited consolidated statement of operations for the
period from January 1, 2000 to December 7, 2000 and with Artemis' audited
statement of operations for the year ended December 31, 2000, (iii) Exelixis'
unaudited consolidated statement of operations for the nine months ended
September 30, 2001, which includes the results of operations of Artemis
subsequent to the acquisition date of May 14, 2001, has been combined with
Artemis' unaudited statement of operations for the period from January 1, 2001
to May 13, 2001 and (iv) the Exelixis/Agritope/Artemis unaudited pro forma
condensed combined statement of operations for the year ended December 31, 2000,
and the Exelixis/Artemis unaudited pro forma condensed combined statement of
operations for the nine months ended September 30, 2001, have been combined with
Genomica's audited consolidated statement of operations for the year ended
December 31, 2000 and unaudited consolidated statement of operations for the
nine months ended September 30, 2001, respectively, as if each merger had
occurred on the first day of each period presented.
The pro forma information is presented for illustrative purposes only and
is not necessarily indicative of the operating results or financial position
that would have occurred if the merger had been consummated on January 1, 2000
or September 30, 2001, respectively, nor is it necessarily indicative of future
operating results or financial position.
NINE MONTHS ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
2001(1) 2000
-------------------- ---------------
(IN THOUSANDS EXCEPT PER SHARE INFORMATION)
(UNAUDITED)
PRO FORMA COMBINED STATEMENT OF OPERATIONS DATA:
Revenues:
Product sales, software licenses and other................ $ 1,293 $ 5,882
License................................................... 4,564 3,776
Contract and government grants............................ 23,905 25,825
-------- --------
Total revenues......................................... 29,762 35,483
-------- --------
Operating expenses:
Costs of revenues......................................... 286 5,572
Research and development.................................. 72,199 69,710
Selling, general and administrative....................... 26,764 44,761
Amortization of goodwill and intangibles.................. 4,186 5,607
-------- --------
Total operating expenses............................... 103,435 125,650
-------- --------
Loss from operations........................................ (73,673) (90,167)
Other income, net........................................... 8,108 7,695
Minority interest in subsidiary net loss.................... -- 1,053
-------- --------
Net loss.................................................... (65,565) (81,419)
Deemed dividend related to beneficial conversion feature.... -- (17,109)
-------- --------
Net loss attributable to common stockholders................ $(65,565) $(98,528)
======== ========
Net loss per common share, basic and diluted................ $ (1.20) $ (2.01)
======== ========
Weighted average shares used in computing net loss per
common share, basic and diluted........................... 54,812 49,028
======== ========
14
SEPTEMBER 30, 2001(1)
---------------------
(IN THOUSANDS)
(UNAUDITED)
PRO FORMA BALANCE SHEET DATA:
Cash, cash equivalents and investments (includes
long-term)................................................ $243,113
Working capital............................................. 169,437
Total assets................................................ 360,458
Long-term obligations, less current portion................. 40,709
Deferred stock compensation, net............................ (5,355)
Accumulated deficit......................................... (182,147)
Stockholders' equity........................................ 262,446
---------------
(1) Genomica's restructuring plan was adopted subsequent to September 30, 2001,
and, therefore, Genomica's financial position as of September 30, 2001, and
its results of operations for the nine months then ended do not reflect the
effects of the restructuring plan. In its quarterly report on Form 10-Q for
the three and nine months ended September 30, 2001, Genomica estimated that,
without regard to any adjustments that would be required by the transaction
contemplated by this prospectus, it would record charges in the fourth
quarter of approximately $4.3 million, including $2.6 million of liabilities
and $1.7 million of asset impairments. For a more detailed description of
Genomica's restructuring plan and its effect on Genomica's results of
operations since September 30, 2001, please see "Information Regarding
Genomica" beginning on page 74 as well as Note 8 to Genomica's Consolidated
Interim Financial Statements beginning on page F-32.
15
COMPARATIVE PER SHARE INFORMATION
The information below reflects:
- the historical net loss and the September 30, 2001 book value per share
of Exelixis common stock and the historical net loss and the September
30, 2001 book value per share of Genomica common stock in comparison with
the unaudited pro forma net loss and the September 30, 2001 book value
per share after giving effect to the proposed merger of Exelixis with
Genomica; and
- the equivalent historical net loss and the September 30, 2001 book value
per share attributable to an assumed .33784 of a share of Exelixis common
stock which will be received for each share of Genomica common stock. The
exchange ratio of .33784 is based on an assumed Genomica common stock
value of $4.49 and an assumed Exelixis average closing sales price per
share of $13.30285.
You should read the following tables in conjunction with the unaudited pro
forma combined financial statements, the historical consolidated financial
statements and related notes of Exelixis which are incorporated by reference in
this prospectus and the historical consolidated financial statements of Genomica
which are included elsewhere in this prospectus.
EXELIXIS PER SHARE DATA
NINE MONTHS ENDED YEAR ENDED
SEPTEMBER 30, 2001 DECEMBER 31, 2000
------------------ -----------------
HISTORICAL PER COMMON SHARE DATA
Net loss per common share -- basic and diluted.............. $(1.15) $(2.43)
Book value per share(1):.................................... 1.66 2.23
GENOMICA PER SHARE DATA
NINE MONTHS ENDED YEAR ENDED
SEPTEMBER 30, 2001 DECEMBER 31, 2000
------------------- -----------------
HISTORICAL PER COMMON SHARE DATA
Net loss per common share -- basic and diluted............. $(0.75) $(6.49)
Book value per share(1):................................... 5.09 5.59
UNAUDITED PRO FORMA COMBINED PER SHARE DATA
NINE MONTHS ENDED YEAR ENDED
SEPTEMBER 30, 2001 DECEMBER 31, 2000
------------------- -----------------
PRO FORMA COMBINED NET LOSS PER SHARE
Per Exelixis share -- basic and diluted.................... $ (1.20) $ (2.01)
Equivalent per Genomica share -- basic and diluted(2)...... (2.91) (6.07)
SEPTEMBER 30, 2001
------------------
PRO FORMA COMBINED BOOK VALUE PER SHARE(3)
Per Exelixis share......................................... $ 3.39
Equivalent per Genomica share(2)........................... 7.97
---------------
(1) The historical tangible book value per share is computed by dividing
stockholders' equity, less goodwill and other intangible assets, by the
number of common shares outstanding at the end of each period presented.
(2) The Genomica equivalent pro forma combined per share amounts are calculated
by multiplying the Exelixis combined pro forma share amounts by an assumed
exchange ratio of .33784. The exchange ratio of .33784 assumes a Genomica
common stock value of $4.49 and an assumed Exelixis average closing sales
price per share of $13.30285.
(3) The pro forma combined tangible book value per share is computed by dividing
pro forma stockholders' equity, less goodwill and other intangible assets,
by the pro forma number of shares outstanding at the end of the period.
16
RISK FACTORS
Genomica stockholders should consider the following matters in deciding
whether to tender shares of Genomica common stock in the exchange offer.
Genomica stockholders should consider these matters in connection with the other
information that we have included or incorporated by reference into this
prospectus.
RISKS RELATED TO THE TRANSACTION
THE SHARES OF EXELIXIS COMMON STOCK TO BE RECEIVED BY GENOMICA STOCKHOLDERS IN
THE TRANSACTION MAY DECREASE IN VALUE AFTER THE EXCHANGE RATIO IS FIXED.
The exchange ratio is a number equal to the quotient obtained by dividing
the Genomica common stock value, determined as described below, by the greater
of (i) $13.30285 or (ii) the average closing sales price of Exelixis common
stock on the Nasdaq National Market during the 18 trading-day period ending two
trading days before the initial expiration of the exchange offer (as reported in
The Wall Street Journal, or if not reported in The Wall Street Journal, any
other authoritative source). On December 26, 2001, we fixed the Exelixis common
stock price for use in computing the exchange ratio. The exact exchange ratio
will be calculated based upon $15.88556, the average closing sales price of
Exelixis common stock on the Nasdaq National Market during the 18 trading-day
period ended on December 26, 2001. The Genomica common stock value will be
determined by dividing $110.0 million by the sum of the number of shares of
Genomica common stock and Genomica preferred stock plus the number of shares of
Genomica common stock issuable upon the exercise of all stock options and
warrants with a per share exercise price of $5.00 or less, each as outstanding
as of the date that we first accept shares of Genomica common stock for payment
pursuant to the exchange offer. For more information, see the section entitled
"The Transaction -- Illustrative Table of Exchange Ratios and Value of
Offer/Merger Consideration" beginning on page 30.
After the exchange ratio is fixed, the number of shares that Genomica
stockholders will receive in the transaction will not change, even if the market
price of Exelixis common stock changes. There will be no adjustment to the
exchange ratio or right to terminate the merger agreement, the exchange offer or
the merger based solely on fluctuations in the price of Exelixis common stock
after the exchange ratio has been fixed. In recent years, the stock market has
experienced extreme price and volume fluctuations. These market fluctuations may
adversely affect the market price of Exelixis common stock. The market price of
Exelixis common stock upon and after completion of the exchange offer or the
merger could be lower than the market price on the date of the merger agreement
or the current market price. You should obtain recent market quotations of
Exelixis common stock before you tender your shares.
IF EXELIXIS AND GENOMICA ARE NOT SUCCESSFUL IN INTEGRATING THEIR ORGANIZATIONS,
THE ANTICIPATED BENEFITS OF THE TRANSACTION MAY NOT BE REALIZED.
If Exelixis and the stockholders of the combined company are to realize the
anticipated benefits of the transaction, the operations of Exelixis and Genomica
must be integrated and combined efficiently. We cannot assure you that the
integration will be successful or that the anticipated benefits of the merger
will be fully realized. Similarly, we cannot guarantee that Genomica
stockholders will achieve greater value through their ownership of Exelixis
common stock than they would have achieved as stockholders of Genomica as a
separate entity. The dedication of our management resources to integration
activities may detract attention from the day-to-day business of the combined
company. This integration may also be more difficult due to our integration
challenges as a result of our recently completed acquisitions or any future
acquisitions. We cannot assure you that there will not be substantial costs
associated with the integration process, that integration activities will not
result in a decrease in revenues or a decrease in the value of Exelixis common
stock or that there will not be other material adverse effects from our
integration efforts.
In response to recent changes in the market environment for life science
informatics products, Genomica recently adopted a new corporate strategy that
resulted in a restructuring of its operations and a significant workforce
reduction. As a result of this new corporate strategy, Genomica's ability to
develop new and competitive software products may be limited, and Genomica may
not be able to meet the needs of new and existing customers. Because Genomica's
operating history under the new corporate strategy is limited, we
17
cannot be certain that Genomica will be able to implement it successfully or
that we will be able to integrate our operations and Genomica's operations
efficiently or effectively.
THE MARKET PRICE OF OUR COMMON STOCK MAY BE AFFECTED BY FACTORS DIFFERENT FROM
THOSE AFFECTING THE MARKET PRICE OF GENOMICA'S COMMON STOCK.
Upon completion of the exchange offer and the merger, holders of Genomica
common stock will become holders of our common stock. Our business differs from
that of Genomica, and our results of operations, as well as the market price of
our common stock, may be affected by factors different from those affecting
Genomica's results of operations and the market price of Genomica's common
stock. For a discussion of Exelixis' and Genomica's business and information to
consider in evaluating such businesses, you should review our Annual Report on
Form 10-K for the fiscal year ended on December 31, 2000, our subsequent
quarterly and current reports, incorporated by reference into this prospectus,
and Genomica's consolidated financial statements for the year ended December 31,
2000 and its unaudited consolidated interim financial statements for the three
and nine months ended September 30, 2001, both of which are included elsewhere
in this prospectus.
SALES OF SUBSTANTIAL AMOUNTS OF EXELIXIS COMMON STOCK IN THE OPEN MARKET BY
GENOMICA STOCKHOLDERS COULD DEPRESS EXELIXIS' STOCK PRICE.
Other than shares held by affiliates of Genomica or Exelixis, shares of
Exelixis common stock that are issued to stockholders of Genomica, including
those shares issued upon the exercise of options, will be freely tradable
without restrictions or further registration under the Securities Act. If the
exchange offer and subsequent merger with Genomica closes and if Genomica
stockholders sell substantial amounts of Exelixis common stock in the public
market following the transaction, the market price of Exelixis common stock
could fall. These sales might also make it more difficult for us to sell equity
or equity-related securities at a time and price that we otherwise would deem
appropriate. Based on an assumed exchange ratio of .28309, calculated using the
average closing sales price of Exelixis common stock during the 18 trading days
ended on December 26, 2001, we will issue up to approximately 6,924,453 shares
of Exelixis common stock in the transaction, of which 2,029,253 are expected to
be issued in exchange for shares, including shares issuable upon exercise of
options and warrants, to stockholders that are subject to a lock-up agreement.
The lock-up agreement provides that the stockholder will not sell or otherwise
transfer or dispose of Exelixis common stock for up to 90 days following the
date we accept shares for payment pursuant to the exchange offer.
THE RECEIPT OF SHARES OF EXELIXIS COMMON STOCK COULD BE TAXABLE TO YOU,
DEPENDING ON FACTS SURROUNDING THE TRANSACTION.
Exelixis and Genomica have structured the transaction to qualify as an
integrated tax-free reorganization for federal income tax purposes. As a
condition to the completion of the exchange offer, Exelixis and Genomica are
required to obtain opinions of Heller Ehrman White & McAuliffe LLP and Cooley
Godward LLP, respectively, that the transaction will be treated for U.S. federal
income tax purposes as an integrated reorganization within the meaning of
Section 368(a) of the Internal Revenue Code of 1986 if: (i) the transaction is
completed under the current terms of the merger agreement; (ii) the minimum
tender condition for the exchange offer is satisfied; and (iii) the merger is
completed promptly after the exchange offer. However, the ability to satisfy
these factual assumptions, and therefore the federal income tax consequences of
the transaction, depends in part on facts that will not be available before the
completion of the transaction. If these factual assumptions are not satisfied, a
Genomica stockholder's exchange of shares of Genomica common stock for shares of
Exelixis common stock in the exchange offer or conversion of shares in the
merger could be a taxable transaction.
18
RISKS RELATED TO EXELIXIS' BUSINESS
EXELIXIS HAS A HISTORY OF NET LOSSES. WE EXPECT TO CONTINUE TO INCUR NET LOSSES,
AND WE MAY NOT ACHIEVE OR MAINTAIN PROFITABILITY.
We have incurred net losses each year since our inception, including a net
loss of approximately $52.9 million for the nine months ended September 30,
2001. As of that date, we had an accumulated deficit of approximately $183.0
million. We expect these losses to continue and anticipate negative cash flow
for the foreseeable future. The size of these net losses will depend, in part,
on the rate of growth, if any, in our license and contract revenues and on the
level of our expenses. Our research and development expenditures and general and
administrative costs have exceeded our revenues to date, and we expect to spend
significant additional amounts to fund research and development in order to
enhance our core technologies and undertake product development. As a result, we
expect that our operating expenses will increase significantly in the near term
and, consequently, we will need to generate significant additional revenues to
achieve profitability. Even if we do increase our revenues and achieve
profitability, we may not be able to sustain or increase profitability.
WE WILL NEED ADDITIONAL CAPITAL IN THE FUTURE WHICH MAY NOT BE AVAILABLE TO US.
Our future capital requirements will be substantial and will depend on many
factors including:
- payments received under collaborative agreements;
- the progress and scope of our collaborative and independent research and
development projects;
- our ability to successfully continue development of a recently acquired
cancer compound;
- our need to expand our other proprietary product development efforts as
well as develop manufacturing and marketing capabilities to commercialize
products; and
- the filing, prosecution and enforcement of patent claims.
We anticipate that our current cash and cash equivalents, short-term
investments and funding to be received from collaborators will enable us to
maintain our currently planned operations for at least the next two years.
Changes to our current operating plan may require us to consume available
capital resources significantly sooner than we expect. For example, our newly
acquired cancer product from our recent relationship with Bristol-Myers Squibb
will require significant resources for development that were not in our
operational plans before acquiring the cancer product. We may be unable to raise
sufficient additional capital when we need it, on favorable terms, or at all. If
our capital resources are insufficient to meet future capital requirements, we
will have to raise additional funds. The sale of equity or convertible debt
securities in the future may be dilutive to our stockholders, and debt financing
arrangements may require us to pledge certain assets and enter into covenants
that would restrict our ability to incur further indebtedness. If we are unable
to obtain adequate funds on reasonable terms, we may be required to curtail
operations significantly or to obtain funds by entering into financing, supply
or collaboration agreements on unattractive terms.
DIFFICULTIES WE MAY ENCOUNTER MANAGING OUR GROWTH MAY DIVERT RESOURCES AND LIMIT
OUR ABILITY TO SUCCESSFULLY EXPAND OUR OPERATIONS.
We have experienced a period of rapid and substantial growth that has
placed, and anticipated growth in the future will continue to place, a strain on
our administrative and operational infrastructure. As our operations expand, we
expect that we will need to manage multiple locations, including additional
locations outside of the United States, and additional relationships with
various collaborative partners, suppliers and other third parties. Our ability
to manage our operations and growth effectively requires us to continue to
improve our operational, financial and management controls, reporting systems
and procedures. We may not be able to successfully implement improvements to our
management information and control systems in an efficient or timely manner and
may discover deficiencies in existing systems and controls. In addition,
acquisitions involve the integration of different financial and management
reporting systems. We may not be able to successfully integrate the
administrative and operational infrastructure without significant additional
improvements and investments in management systems and procedures.
19
WE ARE DEPENDENT ON OUR COLLABORATIONS WITH MAJOR COMPANIES. IF WE ARE UNABLE TO
ACHIEVE MILESTONES, DEVELOP PRODUCTS OR RENEW OR ENTER INTO NEW COLLABORATIONS,
OUR REVENUES MAY DECREASE AND OUR ACTIVITIES MAY FAIL TO LEAD TO COMMERCIALIZED
PRODUCTS.
Substantially all of our revenues to date have been derived from
collaborative research and development agreements. Revenues from research and
development collaborations depend upon continuation of the collaborations, the
achievement of milestones and royalties derived from future products developed
from our research. If we are unable to achieve milestones or our collaborators
fail to develop successful products, we will not earn the revenues contemplated
under such collaborative agreements. In addition, some of our collaborations are
exclusive and preclude us from entering into additional collaborative
arrangements with other parties in the area or field of exclusivity.
We currently have continuing collaborative research agreements with Bayer,
Bristol-Myers Squibb, Dow AgroSciences, Aventis CropSciences, Protein Design
Labs, Elan Pharmaceuticals and Scios. Our current collaborative agreement with
Bayer is scheduled to expire in 2008, after which it will automatically be
extended for one-year terms unless terminated by either party upon 12-month
written notice. Our agreement permits Bayer to terminate the collaborative
activities before 2008 upon the occurrence of specified conditions, such as the
failure to agree on key strategic issues after a period of years or the
acquisition of Exelixis by certain specified third parties. In addition, our
agreements with Bayer are subject to termination at an earlier date if two or
more of our Chief Executive Officer, Chief Scientific Officer, Agricultural
Biotechnology Program Leader and Chief Informatics Officer cease to have a
relationship with us within six months of each other and we are unable to find
replacements acceptable to Bayer. We have two collaborative agreements with
Bristol-Myers Squibb. The first of our collaborative agreements with
Bristol-Myers Squibb expires in September 2002. The funded research term of the
second arrangement, entered into in July 2001, expires in July 2005. Our
collaborative agreement with Dow AgroSciences is scheduled to expire in July
2003, after which Dow AgroSciences has the option to renew on an annual basis.
Our collaborative research arrangement with Aventis is scheduled to expire in
June 2004. Aventis has the right to terminate the research arrangement before
the expiration date, provided that it pays the annual research funding amount
due for the year following termination. Thereafter, the arrangement renews
annually unless Aventis terminates automatic renewal before the scheduled date
of renewal. The Aventis arrangement is conducted through a limited liability
company, Agrinomics, which is owned equally by Aventis and Exelixis. Aventis may
surrender its interest in Agrinomics and terminate the related research
collaboration before the scheduled expiration upon the payment of the subsequent
year's funding commitment. Bayer and Aventis recently announced an agreement for
Bayer to acquire Aventis. The acquisition is expected to close during the first
quarter of 2002. Our agreement with Protein Design Labs is scheduled to expire
in May 2003. Protein Design Labs has a unilateral right to renew for additional
12 and six month periods thereafter. The five-year term of the convertible
promissory note entered into as part of this arrangement is unaffected by
whether or not Protein Design Labs renews. If these existing agreements are not
renewed or if we are unable to enter into new collaborative agreements on
commercially acceptable terms, our revenues and product development efforts may
be adversely affected. In August and October of 2002, we signed agreements to
deliver high-throughput screening compounds with Elan Pharmaceuticals and Scios,
respectively, which have terms of three and four years, respectively. These
agreements are subject to early termination if we fail to achieve certain
quality and quantity commitments.
We recently announced the reacquisition, effective February 2002, of future
rights to research programs in metabolism and Alzheimer's disease previously
licensed exclusively to Pharmacia Corporation. An existing agreement with
Pharmacia will terminate as of that date. Pharmacia will retain rights to
targets under the existing agreement selected before the reacquisition date,
subject to the payment of milestones for certain of those targets selected and
royalties for future development of products against or using those targets but
will have no other obligations to make payments to us, including approximately
$9.0 million in annual funding that would otherwise be payable for two years if
we had not elected to reacquire rights to the research at this time. Although we
anticipate entering into future collaborations involving either or both of these
programs, there can be no assurance that we will be able to enter into new
collaborative agreements or that such collaborations will provide revenues equal
to or exceeding those otherwise obtainable under the Pharmacia collaboration.
20
CONFLICTS WITH OUR COLLABORATORS COULD JEOPARDIZE THE OUTCOME OF OUR
COLLABORATIVE AGREEMENTS AND OUR ABILITY TO COMMERCIALIZE PRODUCTS.
We intend to conduct proprietary research programs in specific disease and
agricultural product areas that are not covered by our collaborative agreements.
Our pursuit of opportunities in agricultural and pharmaceutical markets could,
however, result in conflicts with our collaborators in the event that any of our
collaborators takes the position that our internal activities overlap with those
areas that are exclusive to our collaborative agreements, and we should be
precluded from such internal activities. Moreover, disagreements with our
collaborators could develop over rights to our intellectual property. In
addition, our collaborative agreements may have provisions that give rise to
disputes regarding the rights and obligations of the parties. Any conflict with
our collaborators could lead to the termination of our collaborative agreements,
delay collaborative activities, reduce our ability to renew agreements or obtain
future collaboration agreements or result in litigation or arbitration and would
negatively impact our relationship with existing collaborators.
We have limited or no control over the resources that our collaborators may
choose to devote to our joint efforts. Our collaborators may breach or terminate
their agreements with us or fail to perform their obligations under these
agreements. Further, our collaborators may elect not to develop products arising
out of our collaborative arrangements or may fail to devote sufficient resources
to the development, manufacture, market or sale of such products. Certain of our
collaborators could also become our competitors in the future. If our
collaborators develop competing products, preclude us from entering into
collaborations with their competitors, fail to obtain necessary regulatory
approvals, terminate their agreements with us prematurely or fail to devote
sufficient resources to the development and commercialization of our products,
our product development efforts could be delayed and may fail to lead to
commercialized products.
WE ARE DEPLOYING UNPROVEN TECHNOLOGIES, AND WE MAY NOT BE ABLE TO DEVELOP
COMMERCIALLY SUCCESSFUL PRODUCTS.
You must evaluate us in light of the uncertainties and complexities
affecting a biotechnology company. Our technologies are still in the early
stages of development. Our research and operations thus far have allowed us to
identify a number of product targets for use by our collaborators and our own
internal development programs. We are not certain, however, of the commercial
value of any of our current or future targets, and we may not be successful in
expanding the scope of our research into new fields of pharmaceutical or
pesticide research, or other agricultural applications such as enhancing plant
traits to produce superior crop yields, disease resistance or increased
nutritional content. Significant research and development, financial resources
and personnel will be required to capitalize on our technology, develop
commercially viable products and obtain regulatory approval for such products.
WE HAVE NO EXPERIENCE IN DEVELOPING, MANUFACTURING AND MARKETING PRODUCTS AND
MAY BE UNABLE TO COMMERCIALIZE PROPRIETARY PRODUCTS.
We recently acquired a development compound, an analog to rebeccamycin
("Rebeccamycin"), directed against cancer under our recent collaborative
arrangement with Bristol-Myers Squibb. Clinical development of Rebeccamycin to
date has been conducted by the National Cancer Institute, or NCI, and
manufacturing of this product has been the responsibility of Bristol-Myers
Squibb. Rebeccamycin has recently completed Phase I clinical studies and is in
Phase I and early Phase II clinical trials being conducted by the NCI. We have
an agreement with the NCI to use the results of the clinical studies they have
conducted or are conducting in order to determine what additional studies, if
any, will be conducted by the NCI or us. There can be no assurance that we and
the NCI will successfully agree upon further development plans, the respective
rights and obligations of the parties to conduct additional clinical studies or
the timing of these studies. In addition, there can be no assurance that the
clinical studies conducted to date will support further clinical development or
be accepted by the Food and Drug Administration, or FDA, in conjunction with any
application for product approval submitted to the FDA for Rebeccamycin.
Moreover, although Bristol-Myers Squibb has provided the NCI with sufficient
quantities of Rebeccamycin to complete the existing Phase I and II clinical
studies, development necessary for further clinical studies and product approval
will require us to either develop internal manufacturing capabilities or retain
a third party to manufacture the product. In
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addition, we have recently hired a new Senior Vice President responsible for
clinical development of this product, as well as any new potential products that
we may develop. As a result, we have limited experience in clinical development
and no experience in manufacturing potential drug products. Accordingly, the
development of Rebeccamycin is subject to significant risk and uncertainty,
particularly with respect to our ability to successfully develop, manufacture
and market Rebeccamycin as a product.
With respect to products developed against our proprietary drug targets, we
will rely on our collaborators to develop and commercialize products based on
our research and development efforts. We have limited or no experience in using
the targets that we identify to develop our own proprietary products. Our recent
success in applying our drug development capabilities to our proprietary targets
in cancer are subject to significant risk and uncertainty, particularly with
respect to our ability to meet currently estimated timelines and goals for
completing preclinical development efforts and filing an Investigational New
Drug Application, or IND, for compounds developed. In order for us to
commercialize products, we would need to significantly enhance our capabilities
with respect to product development, and establish manufacturing and marketing
capabilities, either directly or through outsourcing or licensing arrangements.
We may not be able to enter into these outsourcing or licensing agreements on
commercially reasonable terms, or at all.
SINCE OUR TECHNOLOGIES HAVE MANY POTENTIAL APPLICATIONS AND WE HAVE LIMITED
RESOURCES, OUR FOCUS ON A PARTICULAR AREA MAY RESULT IN OUR FAILURE TO
CAPITALIZE ON MORE PROFITABLE AREAS.
We have limited financial and managerial resources. This requires us to
focus on product candidates in specific industries and forego opportunities with
regard to other products and industries. For example, depending on our ability
to allocate resources, a decision to concentrate on a particular agricultural
program may mean that we will not have resources available to apply the same
technology to a pharmaceutical project. While our technologies may permit us to
work in both areas, resource commitments may require trade-offs resulting in
delays in the development of certain programs or research areas, which may place
us at a competitive disadvantage. Our decisions impacting resource allocation
may not lead to the development of viable commercial products and may divert
resources from more profitable market opportunities. Moreover, our recent
acquisition of Rebeccamycin will require that resources and management time be
directed to clinical development and manufacturing of this potential product.
There can be no assurance that allocating resources and time to these efforts
will allow us to remain competitive in existing programs and potential areas of
future research. The resources dedicated to the development of Rebeccamycin may
limit or hinder our ability to meet currently estimated timelines and goals for
completing preclinical development efforts and filing an IND for our proprietary
compounds.
OUR COMPETITORS MAY DEVELOP PRODUCTS AND TECHNOLOGIES THAT MAKE OUR PRODUCTS AND
TECHNOLOGIES OBSOLETE.
The biotechnology industry is highly fragmented and is characterized by
rapid technological change. In particular, the area of gene research is a
rapidly evolving field. We face, and will continue to face, intense competition
from large biotechnology and pharmaceutical companies, as well as academic
research institutions, clinical reference laboratories and government agencies
that are pursuing research activities similar to ours. Some of our competitors
have entered into collaborations with leading companies within our target
markets, including some of our existing collaborators. Our future success will
depend on our ability to maintain a competitive position with respect to
technological advances.
Any products that are developed through our technologies will compete in
highly competitive markets. Furthermore, our competitors may be more effective
at using their technologies to develop commercial products. Many of the
organizations competing with us have greater capital resources, larger research
and development staffs and facilities, more experience in obtaining regulatory
approvals and more extensive product manufacturing and marketing capabilities.
As a result, our competitors may be able to more easily develop technologies and
products that would render our technologies and products, and those of our
collaborators, obsolete and noncompetitive.
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IF WE ARE UNABLE TO ADEQUATELY PROTECT OUR INTELLECTUAL PROPERTY, THIRD PARTIES
MAY BE ABLE TO USE OUR TECHNOLOGY, WHICH COULD ADVERSELY AFFECT OUR ABILITY TO
COMPETE IN THE MARKET.
Our success will depend in part on our ability to obtain patents and
maintain adequate protection of the intellectual property related to our
technologies and products. The patent positions of biotechnology companies,
including our patent position, are generally uncertain and involve complex legal
and factual questions. We will be able to protect our intellectual property
rights from unauthorized use by third parties only to the extent that our
technologies are covered by valid and enforceable patents or are effectively
maintained as trade secrets. The laws of some foreign countries do not protect
intellectual property rights to the same extent as the laws of the U.S., and
many companies have encountered significant problems in protecting and defending
these rights in foreign jurisdictions. We will continue to apply for patents
covering our technologies and products as and when we deem appropriate. However,
these applications may be challenged or may fail to result in issued patents.
Our existing patents and any future patents we obtain may not be sufficiently
broad to prevent others from practicing our technologies or from developing
competing products. Furthermore, others may independently develop similar or
alternative technologies or design around our patents. In addition, our patents
may be challenged, invalidated or fail to provide us with any competitive
advantages.
We rely on trade secret protection for our confidential and proprietary
information. We have taken security measures to protect our proprietary
information and trade secrets, but these measures may not provide adequate
protection. While we seek to protect our proprietary information by entering
into confidentiality agreements with employees, collaborators and consultants,
we cannot assure you that our proprietary information will not be disclosed, or
that we can meaningfully protect our trade secrets. In addition, our competitors
may independently develop substantially equivalent proprietary information or
may otherwise gain access to our trade secrets.
LITIGATION OR THIRD PARTY CLAIMS OF INTELLECTUAL PROPERTY INFRINGEMENT COULD
REQUIRE US TO SPEND SUBSTANTIAL TIME AND MONEY AND ADVERSELY AFFECT OUR ABILITY
TO DEVELOP AND COMMERCIALIZE PRODUCTS.
Our commercial success depends in part on our ability to avoid infringing
patents and proprietary rights of third parties, and not breaching any licenses
that we have entered into with regard to our technologies. Other parties have
filed, and in the future are likely to file, patent applications covering genes
and gene fragments, techniques and methodologies relating to model systems, and
products and technologies that we have developed or intend to develop. If
patents covering technologies required by our operations are issued to others,
we may have to rely on licenses from third parties, which may not be available
on commercially reasonable terms, or at all.
Third parties may accuse us of employing their proprietary technology
without authorization. In addition, third parties may obtain patents that relate
to our technologies and claim that the use of our technologies infringes on
their patents. Regardless of their merit, these claims could require us to incur
substantial costs, including the diversion of management and technical
personnel, in defending ourselves against these claims or enforcing our patents.
In the event that a successful claim of infringement is brought against us, we
may be required to pay damages and obtain one or more licenses from third
parties. We may not be able to obtain these licenses at a reasonable cost, or at
all. Defense of any lawsuit or failure to obtain any of these licenses could
adversely affect our ability to develop and commercialize products.
THE LOSS OF KEY PERSONNEL OR THE INABILITY TO ATTRACT AND RETAIN ADDITIONAL
PERSONNEL COULD IMPAIR OUR ABILITY TO EXPAND OUR OPERATIONS.
We are highly dependent on the principal members of our management and
scientific staff, the loss of whose services might adversely impact the
achievement of our objectives and the continuation of existing collaborations.
In addition, recruiting and retaining qualified scientific personnel to perform
future research and development work will be critical to our success. We do not
currently have sufficient executive management and technical personnel to fully
execute our business plan. There is currently a shortage of skilled executives
and employees with technical expertise, and this shortage is likely to continue.
As a result,
23
competition for skilled personnel is intense and turnover rates are high.
Although we believe we will be successful in attracting and retaining qualified
personnel, competition for executives and experienced scientists from numerous
companies, academic and other research institutions may limit our ability to do
so.
Our business operations will require additional expertise in specific
industries and areas applicable to products identified and developed through our
technologies. These activities will require the addition of new personnel,
including management and technical personnel and the development of additional
expertise by existing employees. The inability to attract such personnel or to
develop this expertise could prevent us from expanding our operations in a
timely manner, or at all.
OUR COLLABORATIONS WITH OUTSIDE SCIENTISTS MAY BE SUBJECT TO RESTRICTION AND
CHANGE.
We work with scientific advisors and collaborators at academic and other
institutions that assist us in our research and development efforts. These
scientists are not our employees and may have other commitments that would limit
their availability to us. Although our scientific advisors and collaborators
generally agree not to do competing work, if a conflict of interest between
their work for us and their work for another entity arises, we may lose their
services. In addition, although our scientific advisors and collaborators sign
agreements not to disclose our confidential information, it is possible that
valuable proprietary knowledge may become publicly known through them.
OUR POTENTIAL THERAPEUTIC PRODUCTS ARE SUBJECT TO A LENGTHY AND UNCERTAIN
REGULATORY PROCESS THAT MAY NOT RESULT IN THE NECESSARY REGULATORY APPROVALS,
WHICH COULD ADVERSELY AFFECT OUR ABILITY TO COMMERCIALIZE PRODUCTS.
The FDA must approve any drug or biologic product before it can be marketed
in the U.S. Any products resulting from our research and development efforts
must also be approved by the regulatory agencies of foreign governments before
the product can be sold outside the U.S. Before a new drug application or
biologics license application can be filed with the FDA, the product candidate
must undergo extensive clinical trials, which can take many years and may
require substantial expenditures. The regulatory process also requires
preclinical testing. Data obtained from preclinical and clinical activities are
susceptible to varying interpretations, which could delay, limit or prevent
regulatory approval. In addition, delays or rejections may be encountered based
upon changes in regulatory policy for product approval during the period of
product development and regulatory agency review. The clinical development and
regulatory approval process is expensive and time consuming. Any failure to
obtain regulatory approval could delay or prevent us from commercializing
products.
Our efforts to date have been primarily limited to identifying targets.
Significant research and development efforts will be necessary before any
products resulting from such targets can be commercialized. If regulatory
approval is granted to any of our products, this approval may impose limitations
on the uses for which a product may be marketed. Further, once regulatory
approval is obtained, a marketed product and its manufacturer are subject to
continual review, and discovery of previously unknown problems with a product or
manufacturer may result in restrictions and sanctions with respect to the
product, manufacturer and relevant manufacturing facility, including withdrawal
of the product from the market.
SOCIAL ISSUES MAY LIMIT THE PUBLIC ACCEPTANCE OF GENETICALLY ENGINEERED
PRODUCTS, WHICH COULD REDUCE DEMAND FOR OUR PRODUCTS.
Although our technology is not dependent on genetic engineering, genetic
engineering plays a prominent role in our approach to product development. For
example, research efforts focusing on plant traits may involve either selective
breeding or modification of existing genes in the plant under study. Public
attitudes may be influenced by claims that genetically engineered products are
unsafe for consumption or pose a danger to the environment. Such claims may
prevent our genetically engineered products from gaining public acceptance. The
commercial success of our future products will depend, in part, on public
acceptance of the use of genetically engineered products including drugs and
plant and animal products.
24
The subject of genetically modified organisms has received negative
publicity, which has aroused public debate. For example, certain countries in
Europe are considering regulations that may ban products or require express
labeling of products that contain genetic modifications or are "genetically
modified." Adverse publicity has resulted in greater regulation internationally
and trade restrictions on imports of genetically altered products. If similar
action is taken in the U.S., genetic research and genetically engineered
products could be subject to greater domestic regulation, including stricter
labeling requirements. To date, our business has not been hampered by these
activities. However, such publicity in the future may prevent any products
resulting from our research from gaining market acceptance and reduce demand for
our products.
LAWS AND REGULATIONS MAY REDUCE OUR ABILITY TO SELL GENETICALLY ENGINEERED
PRODUCTS THAT WE OR OUR COLLABORATORS DEVELOP IN THE FUTURE.
We or our collaborators may develop genetically engineered agricultural and
animal products. The field-testing, production and marketing of genetically
engineered products are subject to regulation by federal, state, local and
foreign governments. Regulatory agencies administering existing or future
regulations or legislation may prevent us from producing and marketing
genetically engineered products in a timely manner or under technically or
commercially feasible conditions. In addition, regulatory action or private
litigation could result in expenses, delays or other impediments to our product
development programs and the commercialization of products. The FDA has released
a policy statement stating that it will apply the same regulatory standards to
foods developed through genetic engineering as it applies to foods developed
through traditional plant breeding. Genetically engineered food products will be
subject to premarket review, however, if these products raise safety questions
or are deemed to be food additives. Our products may be subject to lengthy FDA
reviews and unfavorable FDA determinations if they raise questions regarding
safety or our products are deemed to be food additives.
The FDA has also announced that it will not require genetically engineered
agricultural products to be labeled as such, provided that these products are as
safe and have the same nutritional characteristics as conventionally developed
products. The FDA may reconsider or change its policies, and local or state
authorities may enact labeling requirements, either of which could have a
material adverse effect on our ability or the ability of our collaborators to
develop and market products resulting from our efforts.
WE USE HAZARDOUS CHEMICALS AND RADIOACTIVE AND BIOLOGICAL MATERIALS IN OUR
BUSINESS. ANY CLAIMS RELATING TO IMPROPER HANDLING, STORAGE OR DISPOSAL OF THESE
MATERIALS COULD BE TIME CONSUMING AND COSTLY.
Our research and development processes involve the controlled use of
hazardous materials, including chemicals, radioactive and biological materials.
Our operations produce hazardous waste products. We cannot eliminate the risk of
accidental contamination or discharge and any resultant injury from these
materials. Federal, state and local laws and regulations govern the use,
manufacture, storage, handling and disposal of hazardous materials. We may be
sued for any injury or contamination that results from our use or the use by
third parties of these materials, and our liability may exceed our insurance
coverage and our total assets. Compliance with environmental laws and
regulations may be expensive, and current or future environmental regulations
may impair our research, development and production efforts.
In addition, our collaborators may use hazardous materials in connection
with our collaborative efforts. To our knowledge, their work is performed in
accordance with applicable biosafety regulations. In the event of a lawsuit or
investigation, however, we could be held responsible for any injury caused to
persons or property by exposure to, or release of, these hazardous materials use
by these parties. Further, we may be required to indemnify our collaborators
against all damages and other liabilities arising out of our development
activities or products produced in connection with these collaborations.
25
WE MAY NOT BE ABLE TO SUCCESSFULLY MANAGE THE RISKS ASSOCIATED WITH
ACQUISITIONS, WHICH COULD THREATEN OUR FUTURE GROWTH.
We have made, and may in the future make, acquisitions of, or significant
investments in, businesses with complementary products, services and
technologies. Acquisitions involve numerous risks, including, but not limited
to:
- difficulties and increased costs in connection with integration of the
personnel, operations, technologies and products of acquired companies;
- diversion of management's attention from other operational matters;
- the potential loss of key employees of acquired companies;
- the potential loss of key collaborators of acquired companies;
- lack of synergy, or the inability to realize expected synergies,
resulting from the acquisition;
- exposure to fluctuations in foreign currency;
- differences in foreign laws, business practices, statutes, regulations
and tax provisions; and
- acquired intangible assets becoming impaired as a result of technological
advancements or acquired companies performing below expectations.
Mergers and acquisitions are inherently risky, and the inability to
effectively manage these risks could materially and adversely affect our
business, financial condition and results of operations.
IF PRODUCT LIABILITY LAWSUITS ARE SUCCESSFULLY BROUGHT AGAINST US, WE COULD FACE
SUBSTANTIAL LIABILITIES THAT EXCEED OUR RESOURCES.
We may be held liable if any product we or our collaborators develop causes
injury or is found otherwise unsuitable during product testing, manufacturing,
marketing or sale. Although we intend to obtain general liability and product
liability insurance, this insurance may be prohibitively expensive, or may not
fully cover our potential liabilities. Inability to obtain sufficient insurance
coverage at an acceptable cost or to otherwise protect ourselves against
potential product liability claims could prevent or inhibit the
commercialization of products developed by our collaborators or us.
OUR HEADQUARTERS ARE LOCATED NEAR KNOWN EARTHQUAKE FAULT ZONES, AND THE
OCCURRENCE OF AN EARTHQUAKE OR OTHER CATASTROPHIC DISASTER COULD CAUSE DAMAGE TO
OUR FACILITIES AND EQUIPMENT, WHICH COULD REQUIRE US TO CEASE OR CURTAIL
OPERATIONS.
Given the location of our headquarters in South San Francisco, California,
those facilities are vulnerable to damage from earthquakes. In addition, all of
our facilities are also vulnerable to damage from other types of disasters,
including fire, floods, power loss, communications failures and similar events.
If any disaster were to occur, our ability to operate our business at our
facilities would be seriously, or potentially completely, impaired. In addition,
the unique nature of our research activities could cause significant delays in
our programs and make it difficult for us to recover from a disaster. The
insurance we maintain may not be adequate to cover our losses resulting from
disasters or other business interruptions. Accordingly, an earthquake or other
disaster could materially and adversely harm our ability to conduct business.
SOME OF OUR EXISTING STOCKHOLDERS CAN EXERT CONTROL OVER US AND THEIR INTERESTS
COULD CONFLICT WITH THE BEST INTERESTS OF OUR OTHER STOCKHOLDERS.
Due to their combined holdings, our officers, directors and stockholders
holding more than 5% of Exelixis common stock, or principal stockholders, acting
together, may be able to exert significant influence over all matters requiring
stockholder approval, including the election of directors and approval of
significant corporate transactions. In addition, this concentration of ownership
may delay or prevent a change in control of Exelixis, even when a change may be
in the best interests of our stockholders. In addition, the interests of these
26
stockholders may not always coincide with our interests as a company or the
interests of other stockholders. Accordingly, these stockholders could cause us
to enter into transactions or agreements that our other stockholders would not
approve.
ANTI-TAKEOVER PROVISIONS IN OUR CHARTER DOCUMENTS AND DELAWARE LAW COULD
DISCOURAGE, DELAY OR PREVENT A CHANGE OF CONTROL THAT OUR STOCKHOLDERS MAY
FAVOR.
Provisions in our certificate of incorporation, our bylaws and Delaware law
could make it difficult for a third party to acquire us, even if an acquisition
would be beneficial to our stockholders. These provisions could discourage
potential takeover attempts and could adversely affect the market price of
Exelixis common stock. These provisions:
- prohibit stockholder action by written consent, thereby requiring all
stockholder actions to be taken at a meeting of our stockholders;
- limit the ability of stockholders to call a special meeting of
stockholders;
- authorize our board of directors, without stockholder approval, to issue
up to 10,000,000 shares of preferred stock that could be issued by our
board of directors to increase the number of outstanding shares and
discourage a takeover attempt; and
- prohibit us from engaging in mergers and other business combinations with
stockholders that beneficially own 15% or more of our voting stock, or
with their affiliates, for three years unless our directors or
stockholders approve the business combination in the prescribed manner or
certain other requirements are satisfied.
RISKS RELATED TO EXELIXIS COMMON STOCK
WE EXPECT THAT OUR QUARTERLY RESULTS OF OPERATIONS WILL FLUCTUATE, AND THIS
FLUCTUATION COULD CAUSE OUR STOCK PRICE TO DECLINE, CAUSING INVESTOR LOSSES.
Our quarterly operating results have fluctuated in the past and are likely
to fluctuate in the future. A number of factors, many of which we cannot
control, could subject our operating results and stock price to volatility,
including:
- recognition of license, milestone or other revenues;
- payments of licensing fees to third parties;
- acceptance of our technologies and platforms;
- the success rate of our discovery efforts leading to milestones and
royalties;
- the introduction of new technologies or products by our competitors;
- the timing and willingness of collaborators to commercialize our
products;
- our ability to enter into new collaborative relationships;
- the termination or non-renewal of existing collaborations;
- general and industry-specific economic conditions that may affect our
collaborators' research and development expenditures; and
- exposure to fluctuations in foreign currency.
A large portion of our expenses, including expenses for facilities,
equipment and personnel, are relatively fixed in the short term. In addition, we
expect operating expenses to increase significantly during the next year.
Accordingly, if our revenues decline or do not grow as anticipated due to the
expiration of existing contracts or our failure to obtain new contracts, our
inability to meet milestones or other factors, we may not be able to
correspondingly reduce our operating expenses. Failure to achieve anticipated
levels of revenues could therefore significantly harm our operating results for
a particular fiscal period.
27
Due to the possibility of fluctuations in our revenues and expenses, we
believe that quarter-to-quarter comparisons of our operating results are not a
good indication of our future performance. As a result, in some future quarters,
our operating results may not meet the expectations of stock market analysts and
investors, which could result in a decline in the price of Exelixis common
stock.
OUR STOCK PRICE MAY BE EXTREMELY VOLATILE, WHICH COULD SUBJECT US TO SECURITIES
LITIGATION, WHICH IS EXPENSIVE AND COULD DIVERT OUR RESOURCES.
We believe the trading price of Exelixis common stock will remain highly
volatile and may fluctuate substantially due to factors such as the following:
- the announcement of new products or services by us or our competitors;
- quarterly variations in our or our competitors' results of operations;
- failure to achieve operating results projected by securities analysts;
- changes in earnings estimates or recommendations by securities analysts;
- developments in the biotechnology industry;
- acquisitions of other companies or technologies; and
- general market conditions and other factors, including factors unrelated
to our operating performance or the operating performance of our
competitors.
These factors and fluctuations, as well as general economic, political and
market conditions, may materially adversely affect the market price of Exelixis
common stock.
In the past, following periods of volatility in the market price of a
company's securities, securities class action litigation has often been
instituted. A securities class action suit against us could result in
substantial costs and divert management's attention and resources, which could
have a material and adverse effect on our business.
FUTURE SALES OF OUR COMMON STOCK MAY DEPRESS OUR STOCK PRICE.
If our stockholders sell substantial amounts of our common stock (including
shares issued upon the exercise of outstanding options and warrants) in the
public market, the market price of our common stock could fall. These sales also
might make it more difficult for us to sell equity or equity-related securities
in the future at a time and price that we deemed appropriate. In addition, in
connection with our recent acquisitions and corporate collaborations, we issued
and registered for sale a significant number of shares of common stock. Sales of
these shares and other shares of common stock held by existing stockholders
could cause the market price of our common stock to decline.
28
THE TRANSACTION
GENERAL
This section of the document describes aspects of the proposed exchange
offer and merger that we consider to be important. The discussion of the
exchange offer and merger in this prospectus and the description of the
principal terms of the exchange offer and merger agreement are only summaries of
the material features of the proposed exchange offer and merger. You can obtain
a more complete understanding of the exchange offer and merger by reading the
merger agreement, a copy of which is attached to this prospectus as Annex A. You
are encouraged to read the merger agreement and the other annexes to this
prospectus in their entirety.
GENERAL DESCRIPTION OF THE EXCHANGE OFFER AND THE MERGER
On November 19, 2001, we entered into a merger agreement with Genomica,
providing for a wholly owned subsidiary of Exelixis, Bluegreen Acquisition Sub,
to offer to acquire all of the outstanding shares of Genomica common stock by
means of an exchange offer and a subsequent merger.
Exelixis, through Bluegreen Acquisition Sub, is offering to exchange a
portion of a share of Exelixis common stock determined pursuant to an exchange
ratio, described below, for each outstanding share of Genomica common stock that
is validly tendered and not properly withdrawn on or prior to the expiration
date of the exchange offer.
If completed, the exchange offer will be followed by a merger of Bluegreen
Acquisition Sub into Genomica in which shares of Genomica common stock will be
converted into the right to receive shares of Exelixis common stock at the same
exchange ratio used in the exchange offer, unless the holder properly perfects
appraisal rights, if available, under Delaware law. After completion of the
merger, Genomica will be a wholly owned subsidiary of Exelixis.
The expiration date of the exchange offer is 12:00 midnight, New York City
time, on Friday, December 28, 2001, unless we extend the period of time for
which the exchange offer is open, in which case the term "expiration date" means
the latest time and date on which the exchange offer, as so extended, expires.
If you are the record owner of your shares of Genomica common stock and you
tender those shares directly to the exchange agent, you will not incur any
brokerage fees or commissions. If you own your shares of Genomica common stock
through a broker or other nominee, and your broker tenders those shares on your
behalf, your broker may charge you a commission for doing so. You should consult
with your broker or nominee to determine whether any charges will apply. We will
be responsible for any transfer taxes on the exchange of shares of Genomica
common stock pursuant to the exchange offer that are imposed on the acquiror of
the shares of Genomica common stock. You will be responsible for any transfer
taxes that are imposed on the transferor.
The exchange offer is conditioned on the tender of at least the sum of a
majority of the total number of shares of Genomica common stock plus the total
number of shares of Genomica common stock issuable upon exercise of options to
acquire Genomica common stock, each as outstanding immediately before the
expiration of the exchange offer, as it may be extended pursuant to the merger
agreement. We may not waive this condition without Genomica's consent. In
addition, our obligation to deliver shares of Exelixis common stock in exchange
for shares of Genomica common stock pursuant to the exchange offer is subject to
several other conditions referred to below in the section entitled "Certain
Terms of the Merger Agreement -- Conditions to the Exchange Offer."
Genomica's board of directors unanimously approved the merger agreement,
determined that the exchange offer and the merger together are fair to, and in
the best interests of, Genomica stockholders and recommends that Genomica
stockholders accept the exchange offer and tender their shares pursuant to the
exchange offer.
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THE EXCHANGE RATIO
The exchange ratio is a number computed as the quotient of the following
two items:
- the numerator is equal to the Genomica common stock value, determined by
dividing $110.0 million by the sum of the number of shares of Genomica
common stock and Genomica preferred stock outstanding as of the date that
we first accept shares of Genomica common stock for payment pursuant to
the exchange offer plus the number of shares of Genomica common stock
issuable upon the exercise of all stock options and warrants with a per
share exercise price of $5.00 or less that are outstanding as of the date
that we first accept shares of Genomica common stock for payment pursuant
to the exchange offer; and
- the denominator is equal to the greater of the following two numbers:
- $13.30285, or
- the average closing sales price of Exelixis common stock during the 18
trading days ending two trading days before the initial expiration of
the exchange offer (as reported in The Wall Street Journal or, if not
reported in The Wall Street Journal, any other authoritative source).
On December 26, 2001, we fixed the Exelixis common stock price for use in
computing the exchange ratio. The exact exchange ratio will be calculated based
upon $15.88556, the average closing sales price of Exelixis common stock on the
Nasdaq National Market during the 18 trading-day period ended on December 26,
2001.
As of the date of this prospectus, (i) the number of shares of Genomica
common stock and Genomica preferred stock outstanding plus the number of shares
of Genomica common stock issuable upon the exercise of outstanding stock options
and warrants with a per share exercise price of $5.00 or less was 24,460,254;
and (ii) the Genomica common stock value was approximately $4.50. Currently
there are no shares of preferred stock of Genomica outstanding and no such
shares are expected to be outstanding as of the expiration of the exchange
offer. Pursuant to the terms of the merger agreement, Genomica has agreed not to
issue any rights to acquire Genomica common stock or any additional shares of
Genomica common stock, except issuances of Genomica common stock upon exercise
of existing options or warrants to acquire Genomica common stock. We do not
expect that the Genomica common stock value will be materially different from
the Genomica common stock value as computed on December 28, 2001. Please see the
section of this prospectus entitled "The Transaction -- Interests of Genomica's
Officers and Directors in the Transaction" beginning on page 50 for a
description of the treatment of stock options held by Genomica employees.
We will notify you by issuing a press release announcing the final exchange
ratio and filing that press release with the Securities and Exchange Commission.
Genomica stockholders can call our information agent, Mellon Investor Services
LLC, at any time toll-free at (866) 323-8159 to request information about the
exchange ratio and any adjustment to the exchange ratio.
ILLUSTRATIVE TABLE OF EXCHANGE RATIOS AND VALUE OF OFFER/MERGER CONSIDERATION
The columns in the following table present:
- illustrative values of the exchange ratios (the portion of a share of our
common stock that would be issued for one share of Genomica common stock)
that would result if the Exelixis 18 trading-day average closing sales
price ending two trading days before the initial expiration of the
exchange offer were within a range of $8.00 to $20.00 per share; and
- the illustrative values of the approximate consideration that would be
issued in connection with the exchange offer and the merger for one share
of Genomica common stock, which illustrative values are determined by
multiplying each of the Exelixis average closing sales prices presented
in the table by the corresponding exchange ratio.
30
The following table and illustration assumes that the Genomica common stock
value is $4.50, the value computed as of December 28, 2001.
VALUE OF OFFER/MERGER CONSIDERATION
APPROXIMATE
EXELIXIS AVERAGE EXCHANGE CONSIDERATION VALUE PER
CLOSING SALES PRICE RATIO GENOMICA SHARE
------------------- -------- -------------------------------
(ROUNDED TO NEAREST WHOLE CENT)
-------------------------------
$8.00.................................................... .33806 $2.70
$9.00.................................................... .33806 $3.04
$10.00................................................... .33806 $3.38
$11.00................................................... .33806 $3.72
$12.00................................................... .33806 $4.06
$13.00................................................... .33806 $4.39
$14.00................................................... .32122 $4.50
$15.00................................................... .29980 $4.50
$16.00................................................... .28107 $4.50
$17.00................................................... .26454 $4.50
$18.00................................................... .24984 $4.50
$19.00................................................... .23669 $4.50
$20.00................................................... .22486 $4.50
THE VALUES OF OUR COMMON STOCK IN THE TABLE ABOVE ARE ILLUSTRATIVE ONLY AND
DO NOT REPRESENT THE ACTUAL AMOUNTS PER SHARE OF GENOMICA COMMON STOCK THAT
MIGHT BE REALIZED BY ANY GENOMICA STOCKHOLDER ON OR AFTER CONSUMMATION OF THE
EXCHANGE OFFER OR THE MERGER. THE AMOUNT ANY GENOMICA STOCKHOLDER MIGHT REALIZE
UPON SALE IN THE MARKET OF OUR COMMON STOCK RECEIVED BY THE STOCKHOLDER IN THE
EXCHANGE OFFER OR THE MERGER WILL DEPEND UPON THE MARKET PRICE PER SHARE OF OUR
COMMON STOCK AT THE TIME OF SALE, WHICH WILL FLUCTUATE DEPENDING UPON ANY NUMBER
OF REASONS, INCLUDING THOSE SPECIFIC TO US AND THOSE THAT INFLUENCE THE TRADING
PRICES OF EQUITY SECURITIES GENERALLY.
PURPOSE OF THE EXCHANGE OFFER AND THE MERGER
We are making the exchange offer in order to acquire all of the outstanding
shares of Genomica common stock. We intend, as soon as practicable after
completion of the exchange offer, to have our wholly owned subsidiary, Bluegreen
Acquisition Sub, the purchaser in the exchange offer, merge with Genomica. The
purpose of the merger is to acquire all shares of Genomica common stock not
tendered and exchanged pursuant to the exchange offer. In the merger, each
then-outstanding share of Genomica common stock, except for shares held by
Genomica and shares that Exelixis or Bluegreen Acquisition Sub hold for their
own accounts, and, if applicable, shares of Genomica common stock held by
stockholders exercising appraisal rights, will be converted into the right to
receive shares of Exelixis common stock at the same exchange ratio used in the
exchange offer. Assuming the minimum tender condition is satisfied and we
complete our exchange offer, we will have sufficient voting power to effect the
merger without the vote of any other stockholder of Genomica.
BACKGROUND
Beginning in April 2001, Genomica's board of directors recognized that the
market for Genomica's software products had not developed and grown as planned.
At a meeting held on April 3, 2001, the board established a special committee
consisting of Teresa W. Ayers, Genomica's chief executive officer and a member
of the board of directors, Thomas G. Marr, Genomica's president, chief scientist
and a member of the board of directors, James L. Rathmann, Genomica's chairman
of the board of directors and Robert T. Nelsen,
31
a member of the board of directors (who was subsequently replaced by Michael J.
Savage on July 18, 2001), to explore Genomica's strategic and financial
alternatives, including a possible sale of Genomica, and authorized the special
committee to engage a financial advisor to assist in the process. Thereafter,
Genomica retained CIBC World Markets Corp. as its financial advisor.
From April 2001 through October 2001, approximately 40 companies were
contacted to determine their interest in engaging in a strategic or business
combination transaction with Genomica. Sixteen of these companies conducted
preliminary due diligence investigations. By September 2001, seven of these
companies, including Exelixis, submitted preliminary indications of interest.
Genomica, with the assistance of CIBC World Markets, evaluated the strategic,
business and financial merits of each of the potential strategic partners and
potential acquirors. Genomica subsequently decided to pursue discussions with
five potential acquirors, three of which were public companies and two of which
were private companies.
Between April 5 and September 11, 2001, the special committee met with
Genomica's management, representatives of CIBC World Markets and Cooley Godward
LLP, Genomica's outside legal counsel, six times to consider the status of
Genomica's efforts to identify potential strategic partners or acquirors, and to
receive updates on the status of discussions with certain parties that had
expressed an interest in a strategic or business combination transaction.
At the September 11, 2001 meeting of the special committee, one potential
acquiror made a presentation to the special committee. Presentations by several
other potential acquirors, including Exelixis, that had been scheduled for that
day and the next day were cancelled due to the September 11th terrorist attacks.
Because Exelixis had been unable to meet with the special committee on
September 12, 2001, as originally planned, a telephone conference was held on
September 13, 2001 between members of Genomica's management and Glen Sato,
Exelixis' chief financial officer and vice president of legal affairs. During
this telephone conference, Genomica's management presented Mr. Sato with a
strategic overview of Genomica and discussed the possibility of a business
combination between the two companies. Genomica's management was represented by
Ms. Ayers and Daniel R. Hudspeth, Genomica's chief financial officer, vice
president of finance, treasurer and secretary.
Between September 13 and September 24, 2001, Genomica continued to pursue
discussions with Exelixis and the other four potential acquirors and continued
its legal and financial due diligence investigation of these parties.
On September 19, 2001, Genomica received a written expression of interest
from Exelixis in acquiring Genomica in a stock-for-stock transaction. Exelixis'
initial proposal contemplated a stock-for-stock merger in which Exelixis would
issue 6,406,150 shares of common stock, having an aggregate market value as of
that date of approximately $71.5 million, in exchange for all outstanding shares
of Genomica common stock. Exelixis' proposal was subject to various conditions,
including the satisfactory completion of Exelixis' ongoing due diligence
investigation of Genomica.
On September 20, 2001, Genomica received a written expression of interest
from one of the other potential bidders ("Bidder A"). Bidder A's proposal
contemplated a stock-for-stock merger in which Bidder A would issue a fixed
number of shares of its common stock having a market value as of that date of
approximately $61.7 million in exchange for all outstanding shares of Genomica
common stock.
On September 24, 2001, the special committee met with Genomica's management
and legal and financial advisors to consider the status of discussions with the
five remaining potential acquirors. Genomica's management reviewed the status of
discussions with each potential acquiror and informed the special committee that
one of the private companies had withdrawn from the process. The special
committee then decided to eliminate the other private company from consideration
and focus on the potential acquirors which were already publicly traded.
Genomica's management also informed the special committee that three public
companies, including Exelixis and Bidder A, remained actively involved in
discussions regarding a potential business combination transaction. Genomica's
management and financial advisor then reviewed the written proposals that had
been received from Exelixis and Bidder A, and an oral proposal from the third
potential acquiror ("Bidder B"), with the special committee. A representative of
Cooley Godward also outlined the special committee's fiduciary duties and other
legal principles applicable to consideration of a business
32
combination transaction. The special committee concluded that, in light of
financial market conditions following the September 11th terrorist attacks, none
of the proposals was acceptable at that time. The special committee further
decided that the proposals would be reevaluated once the markets stabilized, and
instructed CIBC World Markets to so inform each potential acquiror.
Between September 24 and October 2, 2001, in accordance with the special
committee's instructions, CIBC World Markets contacted each of the three
potential acquirors to inform them that their proposals were not acceptable in
light of existing market conditions, but that their proposals would be
reevaluated once the markets stabilized.
On October 2, 2001, Genomica's board met with its management and legal and
financial advisors to receive an update on the status of discussions with the
remaining potential acquirors. Genomica's management, legal counsel and
financial advisor reviewed the terms of the proposals received from the
potential acquirors, including valuation, deal structure and conditions to
closing. Genomica's management also described the objectives of each potential
acquiror with respect to Genomica, including possible areas of synergy between
Genomica and each potential acquiror. Ms. Ayers reported that the special
committee had recommended that no action be taken with respect to any of the
proposals pending stabilization of the financial markets at which point the
proposals would be reevaluated. Ms. Ayers then described efforts to identify
other potential acquirors. The board also discussed other strategic
alternatives, including expanding the range of potential acquirors to include
companies in different industries as well as the payment of a liquidating
dividend. Following extensive discussion regarding the advantages and
disadvantages of the available alternatives, Genomica's board directed
management to continue to negotiate with Exelixis and Bidder A. The board
decided to discontinue negotiations with Bidder B because of its failure to
submit a formal offer in writing.
On October 11, 2001, Mr. Sato met with Ms. Ayers and Mr. Hudspeth at
Genomica's offices in Boulder, Colorado to review background historical
information on Genomica's strategy, products and financial and operational
performance. Mr. Sato also visited the offices of Cooley Godward to begin
Exelixis' due diligence review of Genomica, which continued through the signing
of the merger agreement.
On October 12, 2001, Exelixis revised its proposal to provide for a
stock-for-stock merger in which Exelixis would issue 8,000,000 shares of common
stock in exchange for all outstanding shares of Genomica common stock, and would
pay Genomica's stockholders an "earnout" if Genomica's Discovery Manager(TM)
product line were licensed or sold for at least $10.0 million. Also on October
12, 2001, Bidder A submitted a letter reiterating its interest in pursuing a
stock-for-stock merger on the terms previously proposed in its September 20,
2001 expression of interest.
On October 15, 2001, the special committee met with Genomica's management
and legal and financial advisors to receive an update on the status of
discussions with Exelixis and Bidder A and to reevaluate their proposals.
Genomica's management and legal and financial advisors reviewed Exelixis'
revised proposal and Bidder A's proposal with the special committee and
discussed the strategic, business and financial merits and the timing of a
possible transaction with each of the potential acquirors. The special committee
concluded that, because the financial markets had not significantly improved
since the October 2, 2001 meeting of Genomica's board, neither Exelixis' nor
Bidder A's proposal was acceptable at that time. The special committee directed
management to continue to negotiate with both of the potential acquirors.
Between October 15 and October 31, 2001, representatives of Genomica and
Exelixis, their respective outside legal counsel, and CIBC World Markets
participated in various telephone conferences to discuss the proposed financial
terms and legal structure of a business combination transaction and to continue
their respective due diligence investigations. Specifically, on October 26,
2001, members of Exelixis' management and Heller Ehrman White & McAuliffe LLP,
Exelixis' outside legal counsel, proposed that a transaction be structured
involving a stock-for-stock exchange offer, followed by a second step
stock-for-stock merger. On October 30, 2001, representatives of Genomica agreed
that this structure was preferable to other structures discussed for a number of
reasons, including the relative speed of its expected completion. During this
period, representatives of Genomica also had several telephone conversations
with representatives of Bidder A to advise Bidder A of the status of Genomica's
consideration of Bidder A's proposal.
33
On November 1, 2001, the special committee met with Genomica's management
and legal and financial advisors to review the status of discussions with
Exelixis and Bidder A and to reevaluate their proposals. Genomica's management
and legal and financial advisors reviewed each proposal with the special
committee and discussed the strategic, business and financial merits and the
timing of a possible transaction with each potential acquiror. Ms. Ayers
informed the special committee that Exelixis had submitted a revised proposal
following the last meeting of the special committee on October 15, 2001. The
special committee discussed Exelixis' revised proposal, as well as the proposal
of the other potential acquiror. The special committee also discussed Genomica's
other potential strategic alternatives. Ms. Ayers then outlined the proposed
process for the board's consideration of the proposals from Exelixis and Bidder
A, including arrangements for the November 12, 2001 meeting of the board and for
distribution of information to the board in advance of that meeting, and the
special committee approved these arrangements.
Between November 1 and November 12, 2001, Genomica's management and
financial advisor had several telephone conversations with each of Exelixis and
Bidder A to update them on the process for Genomica's consideration of their
respective proposals and to arrange for both potential acquirors to make
presentations at the November 12, 2001 meeting of the board. Genomica continued
to pursue discussions with Exelixis and Bidder A, and all three parties
continued their respective legal and financial due diligence investigations.
On November 6, 2001, Exelixis and Heller Ehrman White & McAuliffe LLP
submitted a proposed form of merger agreement to Genomica and Cooley Godward.
The form of merger agreement contemplated the two-step merger structure
previously discussed by Genomica and Exelixis. Under the terms of the proposed
agreement, Exelixis would deliver shares of common stock with a fixed value and
an exchange ratio that would float based on Exelixis' average stock price over
a period of time before the expiration of the exchange offer. In addition, the
proposed agreement contemplated a cap on the maximum number of shares of
Exelixis common stock issuable to Genomica's stockholders based on the trading
price of Exelixis common stock during a period of time before the signing of
the merger agreement.
On November 8, 2001, the Exelixis board of directors met to review the
status of Exelixis' due diligence investigation, the current financial terms,
timing of the proposed transaction, and the open issues remaining in the
negotiation of the merger agreement.
On November 9, 2001, Exelixis' management canvassed certain members of the
Exelixis board of directors on pricing calculations and other financial terms.
Between November 9 and November 15, 2001, Mr. Sato and George Scangos,
Ph.D., Exelixis' president and chief executive officer, had several
conversations with the individual members of the Exelixis board of directors
regarding the proposed business combination with Genomica, including the
strategic rationale for the transaction and the proposed financial and other
transaction terms.
On November 12, 2001, Genomica's board of directors met to consider the
Exelixis' and Bidder A's proposals. Representatives of Cooley Godward outlined
the board's fiduciary duties and other legal principles applicable to
consideration of a business combination transaction. Genomica's management and
financial advisor reviewed the background and status of negotiations with
Exelixis and Bidder A and reviewed the financial terms of their respective
proposals. In addition, the board met separately with representatives of
Exelixis and Bidder A, each of which made presentations to the board regarding
their respective strategic and business plans, and discussed the potential
benefits to Genomica's stockholders of their respective proposals. Each of
Exelixis and Bidder A confirmed their interest in pursuing further discussions
regarding a possible business combination transaction with Genomica. At the
meeting, Bidder A presented a revised proposal for a stock-for-stock merger in
which Bidder A would issue shares of its common stock with an implied value of
up to an aggregate of $120.0 million, based on the average stock price of Bidder
A's common stock over a period prior to the time the registration statement for
the shares issued by Bidder A was declared effective by the SEC, in exchange for
all outstanding shares of Genomica common stock, subject to a cap on the maximum
number of shares of Bidder A's common stock issuable to Genomica's stockholders
in the transaction. In addition, Bidder A would agree to file a registration
statement on form S-3 to register for resale shares of Bidder A's common stock
received by certain of Genomica's stockholders in the merger. Bidder A's
proposal
34
was subject to certain conditions, including approval of Bidder A's and
Genomica's stockholders. According to this proposal, Genomica's obligation to
complete the transaction would be conditioned on the shares delivered by Bidder
A having a value of at least $106.0 million at the time the registration
statement for the shares issued by Bidder A was declared effective by the SEC.
Following a discussion of the strategic, business and financial merits of the
two prospective acquirors and based on consideration of a number of factors,
including the factors described under "-- Reasons for the Exchange Offer and the
Merger" below, Genomica's board unanimously directed management to negotiate
exclusively with Exelixis toward the signing of a definitive merger agreement.
Later that evening, Cooley Godward sent to Heller Ehrman White & McAuliffe LLP
its comments in the form of merger agreement that had been previously submitted
by Exelixis and Heller Ehrman White & McAuliffe LLP.
From November 12 through November 18, 2001, negotiations on the terms of
the merger agreement and related agreements continued among Exelixis, Genomica
and their respective legal counsel. These negotiations covered all aspects of
the transaction, including, among other things, the representations and
warranties made by the parties, the restrictions on the conduct of their
businesses, the conditions to completion of the exchange offer and the merger,
the provisions regarding termination, the details of the "no shop" clause, the
amount and circumstances requiring reimbursement of Exelixis' expenses, and the
delivery and terms of the stockholder tender agreements.
On November 16, 2001, the Exelixis board of directors met with
representatives of Heller Ehrman White & McAuliffe LLP and reviewed the proposed
terms of this transaction and the results of Exelixis' due diligence
investigation. On November 19, 2001, the Exelixis board of directors met and
reviewed the final terms of the merger agreement. Representatives of Heller
Ehrman White & McAuliffe LLP reviewed the proposed terms of the merger agreement
and outlined the legal principles applicable to the Exelixis board of directors'
consideration and approval of the proposed transaction. The Exelixis board of
directors, by unanimous vote of all directors present, authorized Exelixis to
enter into a merger agreement with Genomica in substantially the form proposed
at the meeting, consistent with the Exelixis board of directors' guidance on
certain open issues, including pricing, loans for the exercise of stock options
and the calculation of shares outstanding.
On November 18, 2001, Genomica's board of directors held a special meeting
to review the status of negotiations and discussions with Exelixis since its
November 12, 2001 meeting. Genomica's management and legal and financial
advisors also participated. Representatives of Cooley Godward reviewed certain
legal matters applicable to the proposed business combination transaction,
including the structure and timing of the proposed transaction and the board's
fiduciary duties in considering the transaction. Representatives of Cooley
Godward also reviewed in detail the principal terms of the proposed merger
agreement and related agreements, and responded to questions from the board. The
board reviewed and discussed the principal terms of the proposed transaction,
including the exchange ratio, closing conditions, termination rights, the amount
and circumstances requiring reimbursement of Exelixis' expenses, the stockholder
tender agreements and Genomica's ability to consider alternative proposals. The
board provided Genomica's management with directions regarding the resolution of
open items relating to pricing, stock option loans and the calculation of shares
outstanding. Also at this meeting CIBC World Markets reviewed with the board the
financial terms of the transaction, including its financial analysis of the
proposed exchange ratio, and indicated to the Board that, assuming no material
changes in the terms of the transaction and subject to review of the final
merger agreement, it believed it would be in a position, at the time of
execution of the merger agreement, to deliver an opinion as to the fairness,
from a financial point of view, of the exchange ratio to be provided for in the
transaction.
After further deliberation, the Genomica board, by unanimous vote:
- determined that the merger agreement and the transactions contemplated by
the merger agreement, including the exchange offer and the merger, were
fair to, and in the best interests of, Genomica and its stockholders;
- approved and adopted the merger agreement and the transactions
contemplated by the merger agreement, including the exchange offer and
the merger, and the stockholder tender agreements and the transactions
contemplated by the stockholder tender agreements;
- resolved to recommend acceptance of the exchange offer and approval and
adoption of the merger agreement by Genomica's stockholders; and
35
- authorized Ms. Ayers to execute, on behalf of Genomica, the merger
agreement and such other documents that certain of Genomica's officers
find necessary or advisable in their sole discretion, all subject to the
resolution of several outstanding items in accordance with the board's
instructions and to the receipt of an opinion of CIBC World Markets as to
the fairness, from a financial point of view, of the final exchange
ratio.
On November 19, 2001, the special committee met with Genomica's management
and legal and financial advisors. Ms. Ayers informed the special committee that
the several remaining open items as of the previous day's board meeting had been
resolved in accordance with the board's directions, and that the merger
agreement, with the changes directed to be made by Genomica's board of
directors, had been agreed to by Exelixis. CIBC World Markets rendered its oral
opinion, which opinion was confirmed by delivery of a written opinion dated
November 19, 2001, to the effect that, as of that date and based on and subject
to certain matters described in its opinion, the exchange ratio was fair, from a
financial point of view, to the holders of Genomica common stock, other than
Exelixis and its affiliates. The special committee unanimously directed Ms.
Ayers to execute the merger agreement and related documents in accordance with
the resolutions of the board adopted on November 18, 2001.
Following the close of trading on the Nasdaq National Market on November
19, 2001, Exelixis and Genomica entered into the merger agreement and issued a
joint press release announcing the transaction.
Also, on November 19, 2001, the directors and certain officers and
stockholders of Genomica entered into the stockholder tender agreements with
Exelixis, pursuant to which they agreed to tender their shares of Genomica
common stock in the exchange offer and vote their shares in favor of the
approval and adoption of the merger agreement. In addition, the directors and
certain officers and stockholders of Genomica entered into lock-up agreements
with Exelixis, agreeing not to sell or otherwise transfer or dispose of their
shares of Exelixis common stock for 90 days following the date Exelixis accepts
for payment shares pursuant to the exchange offer.
On November 26, 2001, Genomica, Exelixis and certain officers of Genomica
entered into agreements which provide that, if requested by the officers,
Genomica will loan money to these officers, on terms similar to those otherwise
commercially available from third parties, in order to enable them to pay for
the exercise of specified options to acquire Genomica common stock. On this same
date, Exelixis also waived the provisions of the lock-up agreement with these
officers to enable them to sell a sufficient number of shares of Exelixis common
stock to cover any tax obligations they incurred as a result of exercises of
options to acquire Genomica common stock.
On November 29, 2001, Exelixis commenced the exchange offer.
CERTAIN LITIGATION
On December 5, 2001, Genomica was served with a complaint filed in state
court in Colorado by Rudolf Liedtke, on behalf of himself and purportedly on
behalf of all others similarly situated, against Genomica, each of the current
members of Genomica's board of directors and one former Genomica director. The
complaint alleges a breach of fiduciary duty by the board of directors of
Genomica in connection with entering into the merger agreement. The action seeks
to enjoin the defendants from agreeing to Exelixis' offer to acquire all of the
outstanding shares of Genomica common stock and to order the defendants to
implement a fair and objective process to sell Genomica. The complaint is
pending in the District Court, County of Boulder. On December 26, 2001, Genomica
filed a motion to dismiss all counts of the complaint. Plaintiff's response to
the motion is due on January 10, 2002.
REASONS FOR THE EXCHANGE OFFER AND THE MERGER
The following discussion of the parties' reasons for the exchange offer and
the merger contains a number of forward-looking statements that reflect the
current views of Exelixis or Genomica with respect to future events that may
have an effect on their future financial performance. Forward-looking statements
are subject to risks and uncertainties. Actual results and outcomes may differ
materially from the results and outcomes
36
discussed in the forward-looking statements. Cautionary statements that identify
important factors that could cause or contribute to differences in results and
outcomes include those discussed in "Summary -- Forward-Looking Information" and
"Risk Factors."
GENOMICA'S REASONS FOR THE EXCHANGE OFFER AND THE MERGER; RECOMMENDATION OF
GENOMICA'S BOARD OF DIRECTORS
Beginning in April 2001, Genomica's board of directors recognized that the
market for Genomica's software products had not developed and grown as planned.
In an effort to determine a business strategy that would generate appropriate
returns to Genomica's stockholders, Genomica's management, with the assistance
of Genomica's financial advisor, implemented a process that extended over seven
months, and involved the evaluation of approximately 70 opportunities,
discussions with approximately 40 different companies, extensive discussions and
meetings regarding business combination transactions with approximately 16
different companies, and resulted in offers from seven different companies.
Genomica's board of directors also gave consideration to acquiring other public
or private companies as well as paying stockholders a liquidating dividend. Upon
completion of this process, Genomica's board of directors identified several
potential benefits for Genomica stockholders that it believes could result from
a combination with Exelixis. The potential benefits include, among other things:
- the opportunity for Genomica stockholders to participate in a
significantly larger and more diversified company and, as stockholders of
the combined company, to have greater liquidity in their shares and to
benefit from any future growth of the combined company;
- the opportunity for Genomica stockholders to receive shares of Exelixis
common stock in a tax-free exchange at approximately a 33% premium over
the prevailing market price for shares of Genomica common stock
immediately before the announcement of the merger agreement;
- enabling the combined company to leverage the depth and experience of
Exelixis' management team and board of directors; and
- enabling the combined company to leverage Genomica's software products to
enhance the effectiveness of Exelixis' research and development efforts.
In the course of its deliberations during board meetings, Genomica's board
of directors reviewed with Genomica's management and outside advisors a number
of factors relevant to the transaction. Genomica's board of directors considered
the following potentially positive factors, among others, in connection with its
review and analyses of the transaction. The conclusions reached by Genomica's
board of directors with respect to each of these factors supported its
determination that the merger agreement and the transactions contemplated by the
merger agreement, including the exchange offer and the merger, were fair to, and
in the best interests of, Genomica and its stockholders:
- Genomica's management's view regarding the financial condition, results
of operations, businesses and prospects of Genomica, Exelixis and Bidder
A, both before and after giving effect to a business combination, based
upon management's due diligence and publicly available financial
information and earnings estimates. Among other things, the board
considered market and industry conditions, the respective business plans
and business models of Genomica, Exelixis and Bidder A, and each party's
financial strength. The board also compared the financial position,
results of operations, business and prospects of Genomica both on a
stand-alone basis and assuming a business combination with Exelixis or
Bidder A;
- the exchange ratio for the exchange offer and the merger, which
represented an implied premium of approximately 33% over the closing
sales price of Genomica's common stock on the Nasdaq National Market on
November 19, 2001, the last full trading day before the public
announcement of the merger agreement, as well as an implied premium of
approximately 47% and 58% premiums over the average of the closing sales
prices for the ten and 30 trading-day periods, respectively, ending on
November 19, 2001;
37
- the financial and other terms of the exchange offer, the merger and the
merger agreement, including the benefits of the transaction being
structured as a first-step exchange offer and second-step merger, which
may provide Genomica's stockholders with an opportunity to receive shares
of Exelixis common stock on an accelerated basis compared with the longer
period of time associated with the merger structure contemplated by
Bidder A's stock-for-stock proposal. In particular, the board noted that
Exelixis' proposed structure did not require the approval of Bidder A's
stockholders, whereas Bidder A's proposal would have required the
approval of Bidder A's stockholder;
- historical information concerning Exelixis', Bidder A's and Genomica's
respective businesses, financial performance and condition, operations,
technology, management and competitive position, including public reports
filed with the SEC;
- reports from management, legal advisors and financial advisors as to the
results of their due diligence investigations of Exelixis;
- the number and quality of the strategic collaborations between Exelixis
and Bidder A and their respective strategic partners, and the magnitude
and predictability of future revenue streams under those collaborations;
- the belief that, based on a review of Genomica's strategic alternatives
and the process described in "The Transaction -- Background" above, it
was unlikely that any party would propose an alternative transaction that
would be more favorable to Genomica and its stockholders than the
exchange offer and the merger;
- the strengths and weaknesses of Exelixis', Bidder A's and Genomica's
businesses and the key attributes and opportunities of the combined
company in terms of, among other things, technology, products, prospects,
management, and financial and competitive position;
- the trading markets for the common stock of Genomica, Exelixis and Bidder
A, both on a historical basis and assuming a business combination between
Genomica and Exelixis or Bidder A. Among other things, the board
considered the market capitalization, trading volume, stock price
volatility, institutional ownership and analyst coverage for each of
Genomica, Exelixis and Bidder A;
- the absence of any pending legal proceedings involving Exelixis and the
fact that Bidder A was a party to legal proceedings which created some
uncertainty regarding one aspect of its business;
- the presentation of CIBC World Markets regarding the financial terms of
the proposed transaction, including its opinion dated November 19, 2001
as to the fairness, from a financial point of view and as of the date of
the opinion, of the exchange ratio to the holders of Genomica common
stock, other than Exelixis and its affiliates (see "Reasons for the
Board's Recommendation -- Opinion of Genomica's Financial Advisor" in
Genomica's Solicitation/Recommendation Statement on Schedule 14D-9, which
is being mailed to you together with this prospectus); and
- the belief that the terms of the merger agreement, including the parties'
representations, warranties and covenants, and the conditions to the
parties' respective obligations, are reasonable.
Genomica's board of directors also identified and considered a number of
potentially negative factors in its deliberations concerning the exchange offer
and the merger, including, but not limited to:
- the risk that, because the exchange ratio is based on the price of
Exelixis common stock over the 18 trading days ending two trading days
before the expiration of the offer, changes in the market price of
Exelixis common stock might cause the per share value of the
consideration to be received by Genomica stockholders to be less than the
per share price implied by the exchange ratio immediately before the
announcement of the proposed transaction;
- the possibility that the market value of the shares to be issued by
Bidder A under its revised proposal might exceed the market value of the
shares to be issued by Exelixis;
38
- the risk that the potential benefits sought in the exchange offer and the
merger might not be fully realized;
- certain risks applicable to Exelixis' business (see the information
contained under the caption "Risk Factors -- Risks Related to Exelixis'
Business" beginning on page 18);
- the possibility that the exchange offer and the merger might not be
completed and the effect of public announcement of the exchange offer and
the merger on Genomica's sales and operating results, and its ability to
attract and retain key technical and management personnel;
- the risk that the terms of the transaction could be dilutive to Exelixis'
earnings and that such potential dilution could negatively impact the
trading price of Exelixis common stock;
- the substantial charges to be incurred in connection with the exchange
offer and the merger, including costs of integrating the businesses and
transaction expenses arising from the exchange offer and the merger; and
- the risk that despite the efforts of the combined company, key technical
and management personnel might not remain employed by the combined
company.
Genomica's board of directors believed that these risks were outweighed by
the potential benefits of the exchange offer and the merger.
The above discussion of the information and factors considered by
Genomica's board of directors is not intended to be exhaustive but is believed
to include the material factors considered by the board. In view of the wide
variety of factors, both positive and negative, considered by Genomica's board
of directors, the board did not find it practicable to quantify or otherwise
assign relative weights to the specific factors considered. In addition, the
board did not reach any specific conclusion on each factor considered, or any
aspect of any particular factor, but conducted an overall analysis of these
factors. Individual members of Genomica's board of directors may have given
different weights to different factors. However, after taking into account all
of the factors described above, the board unanimously approved the merger
agreement, and determined that the exchange offer and the merger are fair to and
in the best interests of Genomica and its stockholders and recommended that
Genomica stockholders accept the offer and tender their shares of Genomica
common stock pursuant to the exchange offer.
Opinion of Genomica's Financial Advisor
Genomica engaged CIBC World Markets to act as its exclusive financial
advisor in connection with the exchange offer and the merger. In connection with
this engagement, Genomica requested that CIBC World Markets evaluate the
fairness, from a financial point of view, to the holders of Genomica common
stock (other than Exelixis and its affiliates) of the exchange ratio provided
for in the exchange offer and the merger. On November 19, 2001, at a meeting of
the Genomica special committee held to authorize the exchange offer and the
merger in accordance with the instructions of Genomica's board of directors,
CIBC World Markets rendered an oral opinion, which opinion was confirmed by
delivery to Genomica's board of directors of a written opinion dated November
19, 2001, to the effect that, as of that date and based on and subject to the
matters described in its opinion, the exchange ratio was fair, from a financial
point of view, to holders of Genomica common stock (other than Exelixis and its
affiliates).
The full text of CIBC World Markets' written opinion dated November 19,
2001, which describes the assumptions made, matters considered and limitations
on the review undertaken, is attached as Schedule II to Genomica's
Solicitation/Recommendation Statement on Schedule 14D-9, which is being mailed
to you together with this prospectus. CIBC WORLD MARKETS' OPINION IS ADDRESSED
TO GENOMICA'S BOARD OF DIRECTORS AND RELATES ONLY TO THE FAIRNESS, FROM A
FINANCIAL POINT OF VIEW, OF THE EXCHANGE RATIO PROVIDED FOR IN THE EXCHANGE
OFFER AND THE MERGER. THE OPINION DOES NOT ADDRESS ANY OTHER ASPECT OF THE
EXCHANGE OFFER OR THE MERGER OR ANY RELATED TRANSACTION AND DOES NOT CONSTITUTE
A RECOMMENDATION TO ANY HOLDER OF GENOMICA COMMON STOCK AS TO WHETHER SUCH
STOCKHOLDER SHOULD EXCHANGE SHARES OF GENOMICA COMMON STOCK IN THE EXCHANGE
OFFER OR HOW SUCH STOCKHOLDER SHOULD VOTE OR ACT WITH RESPECT TO ANY MATTERS
RELATING TO THE
39
EXCHANGE OFFER OR THE MERGER. THE SUMMARY OF CIBC WORLD MARKETS' OPINION
DESCRIBED BELOW IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF
THE OPINION. YOU ARE ENCOURAGED TO READ THE OPINION CAREFULLY IN ITS ENTIRETY.
In arriving at its opinion, CIBC World Markets:
- reviewed the merger agreement;
- reviewed audited financial statements of Genomica and Exelixis for the
fiscal year ended December 31, 2000;
- reviewed unaudited financial statements of Genomica and Exelixis for the
six months ended June 30, 2001 and a draft of certain financial data
relating to Genomica and Exelixis for the three months ended September
30, 2001 prepared by the managements of Genomica and Exelixis;
- reviewed financial forecasts and other information relating to Genomica
and Exelixis prepared by the managements of Genomica and Exelixis;
- reviewed historical market prices and trading volume for Genomica common
stock and Exelixis common stock;
- held discussions with the senior managements of Genomica and Exelixis
with respect to the businesses and prospects for future growth of
Genomica and Exelixis;
- performed a liquidation analysis of Genomica using certain assumptions
and estimates provided to or discussed with CIBC World Markets by
Genomica's management as to the current market value of Genomica's
assets, the amount of Genomica's current liabilities and the potential
amount of expenses associated with a liquidation;
- reviewed and analyzed certain publicly available financial data for
certain companies CIBC World Markets deemed comparable to Exelixis;
- performed a discounted cash flow analysis of Exelixis using certain
assumptions of future performance provided to or discussed with CIBC
World Markets by the management of Exelixis;
- reviewed public information concerning Genomica and Exelixis;
- at the request of Genomica, approached and held discussions with certain
third parties to solicit indications of interest in the possible
acquisition of Genomica; and
- performed such other analyses and reviewed such other information as CIBC
World Markets deemed appropriate.
In rendering its opinion, CIBC World Markets relied upon and assumed,
without independent verification or investigation, the accuracy and completeness
of all of the financial and other information that Genomica, Exelixis and their
respective employees, representatives and affiliates provided to or discussed
with CIBC World Markets. With respect to forecasts relating to Genomica and
Exelixis provided to or discussed with CIBC World Markets by the managements of
Genomica and Exelixis, CIBC World Markets assumed, at the direction of the
managements of Genomica and Exelixis, without independent verification or
investigation, that the forecasts were reasonably prepared on bases reflecting
the best available information, estimates and judgments of the managements of
Genomica and Exelixis as to the future financial condition and operating results
of Genomica and Exelixis. CIBC World Markets assumed, with Genomica's consent,
that the exchange offer and the merger would be treated as an integrated
transaction and as a tax-free reorganization for federal income tax purposes.
CIBC World Markets also assumed, with Genomica's consent, that the exchange
offer and the merger would be consummated in all material respects in accordance
with their terms, without waiver, modification or amendment of any material
term, condition or agreement and that, in the course of obtaining the necessary
regulatory or third party consents and approvals for the exchange offer and the
merger, no limitations, restrictions or conditions would be imposed that would
have a material adverse effect on Genomica, Exelixis or the contemplated
benefits of the exchange offer and the merger. CIBC World Markets relied, at the
direction the managements of Genomica and Exelixis, without independent
verification
40
or investigation, upon the assessments of the management of Exelixis as to the
existing and future technology and products of Exelixis and the risks associated
with such technology and products.
CIBC World Markets did not make or obtain any independent evaluations or
appraisals of the assets or liabilities, contingent or otherwise, of Genomica or
Exelixis. CIBC World Markets did not express any opinion as to the underlying
valuation, future performance or long-term viability of Genomica or Exelixis,
the price at which Genomica common stock would trade after announcement or upon
consummation of the exchange offer or the merger, or the price at which Exelixis
common stock would trade at any time in the future. CIBC World Markets expressed
no view as to, and CIBC World Markets' opinion does not address, the underlying
business decision of Genomica to effect the exchange offer or the merger, and
CIBC World Markets was not requested to consider the relative merits of the
exchange offer and merger as compared to any alternative business strategies
that might exist for Genomica or the effect of any other transaction in which
Genomica might engage. CIBC World Markets' opinion was necessarily based on the
information available to CIBC World Markets and general economic, financial and
stock market conditions and circumstances as they existed and could be evaluated
by CIBC World Markets as of the date of its opinion. Although subsequent
developments may affect its opinion, CIBC World Markets does not have any
obligation to update, revise or reaffirm its opinion. Genomica imposed no other
instructions or limitations on CIBC World Markets with respect to the
investigations made or the procedures followed by CIBC World Markets in
rendering its opinion.
This summary is not a complete description of CIBC World Markets' opinion
to Genomica's board of directors or the financial analyses performed and factors
considered by CIBC World Markets in connection with its opinion. The preparation
of a fairness opinion is a complex analytical process involving various
determinations as to the most appropriate and relevant methods of financial
analysis and the application of those methods to the particular circumstances
and, therefore, a fairness opinion is not readily susceptible to summary
description. CIBC World Markets believes that its analyses and this summary must
be considered as a whole and that selecting portions of its analyses and factors
or focusing on information presented in tabular format, without considering all
analyses and factors or the narrative description of the analyses, could create
a misleading or incomplete view of the processes underlying CIBC World Markets'
analyses and opinion.
In performing its analyses, CIBC World Markets considered industry
performance, general business, economic, market and financial conditions and
other matters existing as of the date of its opinion, many of which are beyond
the control of Genomica and Exelixis. No company or business used in the
analyses as a comparison is identical to Genomica or Exelixis, and an evaluation
of the results of those analyses is not entirely mathematical. Rather, the
analyses involve complex considerations and judgments concerning financial and
operating characteristics and other factors that could affect the acquisition,
public trading or other values of the companies or business segments analyzed.
The estimates contained in CIBC World Markets' analysis and the ranges of
valuations resulting from any particular analysis are not necessarily indicative
of actual values or future results, which may be significantly more or less
favorable than those suggested by its analyses. In addition, analyses relating
to the value of businesses or securities do not necessarily purport to be
appraisals or to reflect the prices at which businesses or securities actually
may be sold. Accordingly, CIBC World Markets' analyses and estimates are
inherently subject to substantial uncertainty.
The type and amount of consideration payable in the exchange offer and the
merger was determined through negotiation between Genomica and Exelixis and the
decision to enter into the exchange offer and the merger was solely that of
Genomica's board of directors. CIBC World Markets' opinion and financial
analyses were only one of many factors considered by Genomica's board of
directors in its evaluation of the exchange offer and the merger and should not
be viewed as determinative of the views of Genomica's board of directors or
Genomica's management with respect to the exchange offer and the merger or the
exchange ratio provided for in the exchange offer and the merger.
The following is a summary of the material financial analyses underlying
CIBC World Markets' opinion to Genomica's board of directors with respect to the
exchange offer and the merger. THE FINANCIAL ANALYSES SUMMARIZED BELOW INCLUDE
INFORMATION PRESENTED IN TABULAR FORMAT. IN ORDER TO FULLY UNDERSTAND CIBC
41
WORLD MARKETS' FINANCIAL ANALYSES, THE TABLES MUST BE READ TOGETHER WITH THE
TEXT OF EACH SUMMARY. THE TABLES ALONE DO NOT CONSTITUTE A COMPLETE DESCRIPTION
OF THE FINANCIAL ANALYSES. CONSIDERING THE DATA IN THE TABLES BELOW WITHOUT
CONSIDERING THE FULL NARRATIVE DESCRIPTION OF THE FINANCIAL ANALYSES, INCLUDING
THE METHODOLOGIES AND ASSUMPTIONS UNDERLYING THE ANALYSES, COULD CREATE A
MISLEADING OR INCOMPLETE VIEW OF CIBC WORLD MARKETS' FINANCIAL ANALYSES.
Implied Exchange Ratio Analysis.
Using a "Liquidation Analysis" for Genomica and a "Selected Companies
Analysis" and "Discounted Cash Flow Analysis" for Exelixis, CIBC World Markets
derived an implied equity reference range from each analysis as described below.
Based on these implied equity reference ranges, CIBC World Markets then
calculated implied exchange ratio reference ranges for Genomica common stock and
Exelixis common stock. The results of this implied exchange ratio analysis were
then compared with the exchange ratio provided for in the exchange offer and the
merger. This analysis indicated the following approximate implied exchange ratio
reference ranges, as compared to the exchange ratio provided for in the exchange
offer and the merger of 0.3000 based on the closing prices of Genomica common
stock and Exelixis common stock on November 16, 2001:
IMPLIED EXCHANGE RATIO
REFERENCE RANGE
----------------------
Genomica Liquidation Analysis/Exelixis Selected Companies
Analysis.................................................. 0.1765 - 0.2352
Genomica Liquidation Analysis/Exelixis Discounted Cash Flow
Analysis.................................................. 0.2359 - 0.2952
The "Liquidation Analysis" for Genomica and the "Selected Companies
Analysis" and "Discounted Cash Flow Analysis" for Exelixis performed by CIBC
World Markets for purposes of its "Implied Exchange Ratio Analysis" are
described below:
Genomica
Liquidation Analysis. CIBC World Markets performed a liquidation analysis
of Genomica's assets to calculate the potential range of net proceeds available
for distribution upon an orderly liquidation of Genomica, based on internal
estimates of Genomica's management as to the potential market value of
Genomica's assets, the amount of Genomica's current liabilities and the
potential amount of expenses associated with a liquidation. The potential range
of net proceeds that would be available for distribution from an orderly
liquidation of Genomica was derived by applying a range of assumed liquidation
percentages to Genomica's estimated net asset value for the fourth quarter of
fiscal year 2001. This analysis resulted in an implied equity reference range
for Genomica of approximately $4.40 to $4.43 per share.
Exelixis
Selected Companies Analysis. CIBC World Markets compared financial and
stock market information for Exelixis and the following six selected publicly
held companies in the early stage of development in the biotechnology industry:
- Applera Corporation -- Celera Genomics Group
- Lexicon Genetics Incorporated
- CuraGen Corporation
- Millennium Pharmaceuticals, Inc.
- Human Genome Sciences, Inc.
- Myriad Genetics, Inc.
CIBC World Markets reviewed enterprise values, calculated as equity value,
plus debt, less cash, as a multiple of latest 12 months and estimated calendar
years 2001 and 2002 revenue. All multiples were based on closing stock prices on
November 16, 2001. Estimated financial data for the selected companies were
based on publicly available research analysts' estimates. CIBC World Markets
then applied a range of selected multiples of calendar years 2001 and 2002
revenue derived from the selected companies to corresponding
42
financial data of Exelixis in order to derive an implied equity reference range
for Exelixis. This analysis indicated an implied equity reference range for
Exelixis of approximately $18.85 to $24.93 per share.
Discounted Cash Flow Analysis. CIBC World Markets performed a discounted
cash flow analysis of Exelixis to calculate the present value of the unlevered,
after-tax free cash flows that Exelixis could generate from the fourth quarter
of fiscal year 2001 to fiscal year 2004, based on internal estimates of
Exelixis' management. CIBC World Markets calculated a range of terminal values
for Exelixis' estimated revenue by applying terminal value multiples ranging
from 18.0x to 22.0x to Exelixis' projected fiscal year 2004 revenue. The present
value of the cash flows and terminal values were calculated using a discount
rate of 22.5%. This analysis indicated an implied equity reference range for
Exelixis of approximately $15.02 to $18.66 per share.
Other Factors.
In rendering its opinion, CIBC World Markets also reviewed and considered
other factors, including:
- a comparison of the average daily closing prices of Genomica common stock
and Exelixis common stock during the one year period preceding November
16, 2001;
- historical market prices and trading volumes for Genomica common stock
and Exelixis common stock;
- the relationship between movements in Genomica common stock and Exelixis
common stock and movements in the S&P Biotech Index and NASDAQ Biotech
Index; and
- selected research analysts' reports for Genomica and Exelixis, including
stock price estimates of those analysts.
Miscellaneous.
Genomica selected CIBC World Markets as its exclusive financial advisor in
connection with the exchange offer and the merger based on CIBC World Markets'
reputation, expertise and familiarity with Genomica and its business. CIBC World
Markets is an internationally recognized investment banking firm and, as a
customary part of its investment banking business, is regularly engaged in
valuations of businesses and securities in connection with acquisitions and
mergers, underwritings, secondary distributions of securities, private
placements and valuations for other purposes.
Genomica has agreed to pay CIBC World Markets' customary fees for its
financial advisory services. In addition, Genomica has agreed to reimburse CIBC
World Markets for its reasonable out-of-pocket expenses, including reasonable
fees and expenses of its legal counsel, and to indemnify CIBC World Markets and
related parties against liabilities, including liabilities under the federal
securities laws, relating to, or arising out of, its engagement. CIBC World
Markets in the past has provided services to Genomica unrelated to the exchange
offer and the merger, for which services CIBC World Markets has received
compensation. In the ordinary course of business, CIBC World Markets and its
affiliates may actively trade the securities of Genomica and Exelixis for their
own account and for the accounts of customers and, accordingly, may at any time
hold a long or short position in such securities.
EXELIXIS' REASONS FOR THE EXCHANGE OFFER AND THE MERGER
Our primary reasons for seeking to consummate a business combination with
Genomica are the beliefs of our board of directors and management that a
business combination would result in a number of benefits, including:
- access to additional cash enabling us to fund our research and
development programs at a higher level to enhance our core technologies
and expand product development;
- the opportunity to leverage our infrastructure and technologies to create
additional corporate collaborations to diversify our business risk and
increase our future revenue stream; and
- access to complementary technology and expertise to advance the drug
discovery and development process at Exelixis.
43
The Exelixis board of directors has determined that the exchange offer and
merger are in the best interests of Exelixis. In reaching its determination, the
Exelixis board of directors considered a number of factors, including the
factors discussed above and listed below. The conclusions of the Exelixis board
of directors with respect to each of these factors supported its determination
that the merger and the issuance of shares of Exelixis common stock in the
exchange offer and the merger are in the best interests of Exelixis. The most
relevant information reviewed and factors considered are set forth below:
- the opportunity to obtain additional cash to fund existing and new
research and development programs to enhance our core technologies and
expand product development;
- the strategic benefits of the merger to Exelixis associated with the
integration of Genomica's intellectual property and expertise in drug
discovery and development processes;
- the judgment, advice and analyses of our management with respect to the
potential strategic, financial and operational benefits of the merger,
including our management's favorable recommendation of the merger, based
in part on the business, technical, financial, scientific, accounting and
legal due diligence investigations performed with respect to Genomica;
- the complementary fit between Exelixis' and Genomica's research
expertise, which should facilitate integration of the two companies; and
- the terms of the merger agreement and related agreements, including price
and structure, which were considered by both the board of directors and
management of Exelixis to provide a fair and equitable basis for the
merger.
The Exelixis board of directors also considered a number of potentially
negative factors in its deliberations concerning the exchange offer and the
merger. The negative factors considered by the Exelixis board of directors
included:
- the risk that the merger might not be completed in a timely manner or at
all and the expense and time associated with this risk;
- the negative impact of any corporate partner confusion or concern
regarding ongoing research programs after announcement of the proposed
merger;
- the potential negative effect on the Exelixis common stock price if
revenue from new or existing collaborations of the combined company are
not met;
- the general difficulties of integrating research programs, research
collaborations, technologies and companies; and
- the other risks and uncertainties discussed above under "Risk Factors."
The above discussion of information and factors considered by the Exelixis
board of directors is not intended to be exhaustive but we believe it includes
all material factors considered by the board. In view of the wide variety of
factors considered by the Exelixis board of directors, the Exelixis board of
directors did not find it practicable to quantify or otherwise assign relative
weights to the specific factors considered. In addition, the board of directors
did not reach any specific conclusion on each factor considered, or any aspect
of any particular factor, but conducted an overall analysis of these factors.
Individual members of the Exelixis board of directors may have given different
weights to different factors. After taking into account all of the factors set
forth above, however, the Exelixis board of directors unanimously agreed that
the merger agreement and the exchange offer and merger are in the best interests
of Exelixis and that we should proceed with the exchange offer and merger.
There can be no assurance that the benefits of the potential growth,
synergies or opportunities considered by the Exelixis board of directors will be
achieved through consummation of the merger. For additional information, see the
section of this prospectus entitled "Risk Factors" beginning on page 17.
44
THE MINIMUM TENDER CONDITION
Our obligation to accept for exchange and to deliver shares of Exelixis
common stock in exchange for shares of Genomica common stock is subject to the
condition that the total number of shares of Genomica common stock validly
tendered and not properly withdrawn, when added to any shares of Genomica common
stock owned by Exelixis and Bluegreen Acquisition Sub, is equal to at least the
sum of a majority of the total number of shares of Genomica common stock plus
the total number of shares of Genomica common stock issuable upon exercise of
options to acquire Genomica common stock, each as outstanding immediately before
the expiration date of the exchange offer, as it may be extended pursuant to the
merger agreement. For purposes of computing the minimum tender condition, we
will not take into account any shares of Genomica common stock tendered into the
exchange offer pursuant to a Notice of Guaranteed Delivery unless stock
certificates or book-entry confirmations are actually received by the exchange
agent.
Based on information supplied to us by Genomica, the number of shares
needed to satisfy the minimum tender condition as of December 28, 2001, would
have been 13,169,322.
Our obligation to accept shares of Genomica common stock for exchange in
the exchange offer is also subject to several other conditions referred to in
the section entitled "Certain Terms of the Merger Agreement -- Conditions to the
Exchange Offer" beginning on page 68.
EXTENSION, TERMINATION AND AMENDMENT
Subject to the terms of the merger agreement, we may extend the exchange
offer for successive periods not in excess of 10 business days per extension if,
at the scheduled expiration date of the exchange offer, any condition to the
exchange offer has not been satisfied or, where permissible, waived. In
addition, we are entitled to extend the exchange offer if required by the rules
of the Securities and Exchange Commission or the National Association of
Securities Dealers, Inc. We are not making any assurance that we will exercise
our right to extend our exchange offer, although we currently intend to do so
until all conditions have been satisfied or if permissible, waived. During an
extension, all shares of Genomica common stock previously tendered and not
properly withdrawn will remain subject to the exchange offer, subject to your
right to withdraw your shares of Genomica common stock. You should read the
discussion below in the section entitled "Withdrawal Rights" for more details.
We reserve the right to make any changes in the terms and conditions of the
exchange offer by giving oral or written notice of the change to the exchange
agent and by making a public announcement. However, without the prior written
consent of Genomica, we cannot:
- decrease the number of shares of Genomica common stock sought in the
exchange offer;
- make any changes to the form or amount of consideration to be issued or
paid for shares of Genomica common stock in the exchange offer;
- impose any additional conditions on the exchange offer other than those
already described in the merger agreement;
- amend or waive the minimum tender condition or other specified conditions
as described in the merger agreement in any manner which is adverse to
Genomica stockholders;
- extend the initial expiration date of the exchange offer, except under
circumstances described in the merger agreement; or
- make any other change to the terms and conditions of the exchange offer
which is adverse to Genomica stockholders.
We are required to follow any extension, termination, amendment or delay,
as promptly as practicable, with a public announcement. In the case of an
extension, the announcement is required to be issued no later than 9:00 a.m.,
New York City time, on the next business day after the previously scheduled
expiration date. Subject to applicable law, including Rules 14d-4(d) and
14d-6(c) under the Securities Exchange Act of 1934, which require that any
material change in the information published, sent or given to stockholders in
45
connection with the exchange offer be promptly sent to stockholders in a manner
reasonably designed to inform stockholders of the change, and without limiting
the manner in which we may choose to make any public announcement, we assume no
obligation to publish, advertise or otherwise communicate any public
announcement other than by making a release to the Dow Jones News Service.
If we make a material change in the terms of the exchange offer or the
information concerning the exchange offer, or if we waive a material condition
of the exchange offer, we will extend the exchange offer to the extent required
under the Securities Exchange Act of 1934. If, before the expiration date and
after obtaining Genomica's prior written consent, we change the percentage of
shares of Genomica common stock being sought or the consideration offered to
you, that change will apply to all stockholders whose shares of Genomica common
stock are accepted for exchange pursuant to the exchange offer. If at the time
notice of that change is first published, sent or given to you, the exchange
offer is scheduled to expire at any time earlier than the tenth business day
from and including the date that the notice is first so published, sent or
given, we are required to extend the exchange offer until the expiration of that
10 business day period. For purposes of the exchange offer, a "business day"
means any day other than a Saturday, Sunday or federal holiday and consists of
the time period from 12:01 a.m. through 12:00 midnight, New York City time.
SUBSEQUENT OFFERING PERIOD
We may elect to provide a subsequent offering period of not less than three
nor more than 20 business days after the acceptance of shares of Genomica common
stock in the exchange offer if the requirements of Rule 14d-11 under the
Securities Exchange Act of 1934 have been met. You will not have the right to
withdraw any shares of Genomica common stock that you tender during the
subsequent offering period. We are required to accept for exchange, and to
deliver shares of Exelixis common stock in exchange for, shares of Genomica
common stock that are validly tendered and not properly withdrawn, promptly
after they are tendered during any subsequent offering period. If we elect to
provide a subsequent offering period, we are required to make a public
announcement to that effect no later than 9:00 a.m., New York City time, on the
next business day after the previously scheduled expiration date.
EXCHANGE OF SHARES OF GENOMICA COMMON STOCK; DELIVERY OF SHARES OF EXELIXIS
COMMON STOCK
We are required to accept for exchange, and to deliver shares of Exelixis
common stock in exchange for, shares of Genomica common stock that are validly
tendered and not properly withdrawn, promptly after the expiration date, upon
the terms and conditions to the exchange offer including the terms and
conditions of any extension or amendment. In addition, we are required to accept
for exchange, and to deliver shares of Exelixis common stock in exchange for,
shares of Genomica common stock promptly after they are validly tendered during
any subsequent offering period, upon the terms and conditions to the exchange
offer, including the terms and conditions of any extension or termination.
Subject to applicable rules of the Securities and Exchange Commission, we
reserve the right to delay acceptance for exchange, or the exchange of, shares
of Genomica common stock in order to comply with any applicable law. In all
cases, exchange of shares of Genomica common stock tendered and accepted for
exchange pursuant to the exchange offer will be made only after timely receipt
by the exchange agent of:
- certificates for the shares of Genomica common stock (or a confirmation
of a book-entry transfer of the shares of Genomica common stock in the
exchange agent's account at The Depository Trust Company, which we refer
to in this prospectus as "DTC");
- a properly completed and duly executed letter of transmittal or a
manually signed facsimile of that document; and
- any other required documents.
For purposes of the exchange offer, we will be deemed to have accepted for
exchange shares of Genomica common stock validly tendered and not properly
withdrawn if and when we notify the exchange agent of our acceptance of the
tenders of those shares of Genomica common stock pursuant to the exchange offer.
The exchange agent is required to then deliver shares of Exelixis common stock
and cash instead of fractional shares of Exelixis common stock in exchange for
the shares of Genomica common stock promptly after receipt of our notice. The
exchange agent will act as agent for tendering stockholders for the purpose of
receiving
46
shares of Exelixis common stock and any cash to be paid instead of any
fractional shares of Exelixis common stock and transmitting a certificate or
certificates for Exelixis common stock and cash, if any, to you. You will not
receive any interest on any cash that we pay you, even if there is a delay in
making the exchange.
If we do not accept any tendered shares of Genomica common stock for
exchange pursuant to the terms and conditions of the exchange offer for any
reason, or if certificates are submitted for more shares of Genomica common
stock than are accepted, we are required to return certificates for the
unexchanged shares of Genomica common stock to the tendering stockholder. In the
case of shares of Genomica common stock tendered by book-entry transfer of such
shares of Genomica common stock into the exchange agent's account at one of the
addresses on the back page of this prospectus, pursuant to the procedures
described below in the section entitled "-- Procedure for Tendering," those
shares of Genomica common stock will be credited to an account maintained within
DTC, as soon as practicable following expiration or termination of the exchange
offer.
If we increase the consideration offered to Genomica stockholders in the
exchange offer before the expiration date, such increased consideration will be
given to all stockholders whose shares of Genomica common stock are tendered
pursuant to the exchange offer, whether or not such shares of Genomica common
stock were tendered or accepted for exchange before such increase in
consideration.
CASH INSTEAD OF FRACTIONAL SHARES OF EXELIXIS COMMON STOCK
We will not issue fractional shares of our common stock in the exchange
offer. Instead, each tendering stockholder who would otherwise be entitled to a
fraction of a share of Exelixis common stock (after aggregating all fractional
shares of Exelixis common stock that otherwise would be received by the holder)
will receive cash (rounded to the nearest whole cent), without interest, equal
to the product obtained by multiplying:
- that fraction of a share of Exelixis common stock to which this
stockholder is entitled (after aggregating all fractional shares of
Exelixis common stock that otherwise would be received by this
stockholder), by
- the closing sales price of one share of Exelixis common stock on the
Nasdaq National Market (as reported in The Wall Street Journal or, if not
reported in The Wall Street Journal, any other authoritative source) on
the date we first accept shares for exchange in the exchange offer.
WITHDRAWAL RIGHTS
Your tender of shares of Genomica common stock pursuant to the exchange
offer is irrevocable, except that, shares of Genomica common stock tendered
pursuant to the exchange offer may be withdrawn at any time before our
acceptance of them for exchange pursuant to the exchange offer. If we elect to
provide a subsequent offering period in accordance with Rule 14d-11 under the
Securities Exchange Act of 1934, you will not have the right to withdraw shares
of Genomica common stock that you tender during the subsequent offering period.
Once we accept shares of Genomica common stock pursuant to the exchange offer,
your tender is irrevocable.
For your withdrawal to be effective, the exchange agent must receive from
you a written, telex or facsimile transmission notice of withdrawal at one of
its addresses on the back cover of this prospectus, and your notice must include
your name, address, social security number, the certificate number(s) and the
number of shares of Genomica common stock to be withdrawn as well as the name of
the registered holder, if it is different from that of the person who tendered
the shares of Genomica common stock.
A financial institution must guarantee all signatures on the notice of
withdrawal unless the shares of Genomica common stock have been tendered for the
account of an eligible institution. Most banks, savings and loan associations
and brokerage houses are able to provide these signature guarantees for you. The
financial institution must be an "eligible institution" which means it is a
participant in the Securities Transfer Agents Medallion Program.
47
If shares of Genomica common stock have been tendered pursuant to the
procedures for book-entry tender discussed under the caption below entitled
"Procedure for Tendering," any notice of withdrawal must specify the name and
number of the account at DTC to be credited with the withdrawn shares of
Genomica common stock and must otherwise comply with DTC's procedures. If
certificates have been delivered or otherwise identified to the exchange agent,
the name of the registered stockholder and the serial numbers of the particular
certificates evidencing the shares of Genomica common stock withdrawn must also
be furnished to the exchange agent, as stated above, before the physical release
of the certificates. We will decide all questions regarding the form and
validity (including time of receipt) of any notice of withdrawal, in our sole
discretion, and our decision shall be final and binding.
None of Exelixis, the exchange agent, the information agent nor any other
person will be under any duty to give notification of any defects or
irregularities in any notice of withdrawal or will incur any liability for
failure to give proper notification. Any shares of Genomica common stock
properly withdrawn will be deemed not to have been validly tendered for purposes
of the exchange offer. However, you may retender withdrawn shares of Genomica
common stock by following one of the procedures discussed below in the sections
entitled "Procedure for Tendering" or "Guaranteed Delivery" at any time before
the expiration date.
PROCEDURE FOR TENDERING
For you to validly tender shares of Genomica common stock pursuant to the
exchange offer, (i) the enclosed letter of transmittal, properly completed and
duly executed or a manually executed facsimile of that document, along with any
required signature guarantees or an agent's message in connection with a
book-entry transfer and any other required documents must be transmitted to and
received by the exchange agent at one of the addresses on the back cover of this
prospectus and certificates for tendered shares of Genomica common stock must be
received by the exchange agent at that address or the shares of Genomica common
stock must be tendered pursuant to the procedures for book-entry tender
described below (and a confirmation of receipt of the tender received, which we
refer to below as a "book-entry confirmation"), in each case before the
expiration date, or (ii) you must comply with the guaranteed delivery procedures
described below in the section entitled "Guaranteed Delivery."
The term "agent's message" means a message, transmitted by DTC to, and
received by, the exchange agent and forming a part of a book-entry confirmation,
which states that DTC has received an express acknowledgment from the
participant in DTC tendering the shares of Genomica common stock which are the
subject of the book-entry confirmation, the participant has received and agrees
to be bound by the terms of the letter of transmittal and we may enforce that
agreement against the participant.
The exchange agent was required to establish accounts with respect to the
shares of Genomica common stock at DTC for purposes of the exchange offer by
November 29, 2001, and any financial institution that is a participant in DTC
may make book-entry delivery of the shares of Genomica common stock by causing
DTC to transfer tendered shares of Genomica common stock into the exchange
agent's account in accordance with DTC's procedure for the transfer. However,
although delivery of shares of Genomica common stock may be effected through
book-entry transfer at DTC, the letter of transmittal (or a manually signed
facsimile of the letter of transmittal) with any required signature guarantees
or an agent's message in connection with a book-entry transfer and any other
required documents must, in any case, be transmitted to and received by the
exchange agent at one of the addresses on the back cover of this prospectus
before the expiration date, or the guaranteed delivery procedures described
below must be followed.
Signatures on all letters of transmittal must be guaranteed by an eligible
institution, except in cases in which shares of Genomica common stock are
tendered either by a registered holder of shares of Genomica common stock who
has not completed the box entitled "Special Issuance Instructions" or the box
entitled "Special Delivery Instructions" on the letter of transmittal or for the
account of an eligible institution.
If the certificates for shares of Genomica common stock are registered in
the name of a person other than the person who signs the letter of transmittal
or if certificates for unexchanged shares of Genomica common stock are to be
issued to a person other than the registered holder(s), the certificates must be
endorsed or accompanied by appropriate stock powers in either case signed
exactly as the name or names of the registered
48
owner or owners appear on the certificates, with the signature(s) on the
certificates or stock powers guaranteed in the manner we have described above.
The method of delivery of Genomica stock certificates and all other
required documents, including delivery through DTC, is at your option and risk,
and the delivery will be deemed made only when actually received by the exchange
agent. If delivery is by mail, we recommend registered mail with return receipt
requested, properly insured. In all cases, you should allow sufficient time to
ensure timely delivery.
GUARANTEED DELIVERY
If you wish to tender shares of Genomica common stock pursuant to the
exchange offer and your certificates are not immediately available or you cannot
deliver the certificates and all other required documents to the exchange agent
before the expiration date or cannot complete the procedure for book-entry
transfer on a timely basis, your shares of Genomica common stock may
nevertheless be tendered, so long as all of the following conditions are
satisfied:
- you make your tender by or through an eligible institution;
- the enclosed notice of guaranteed delivery, properly completed and duly
executed, substantially in the form enclosed with this prospectus, is
received by the exchange agent as provided below on or before the
expiration date; and
- the certificates for all tendered shares of Genomica common stock (or a
confirmation of a book-entry transfer of tendered securities into the
exchange agent's account at DTC as described above), in proper form for
transfer, together with a properly completed and duly executed letter of
transmittal or a manually signed facsimile thereof, with any required
signature guarantees (or, in the case of a book-entry transfer, an
agent's message), and all other documents required by the letter of
transmittal are received by the exchange agent within three Nasdaq
National Market trading days after the date of execution of the notice of
guaranteed delivery.
You may deliver the notice of guaranteed delivery by hand or transmit it by
facsimile transmission or mail it to the exchange agent, and you must include a
signature guarantee by an eligible institution in the form provided in that
notice.
In all cases, we are required to exchange shares of Genomica common stock
tendered and accepted for exchange pursuant to the exchange offer only after
timely receipt by the exchange agent of certificates for shares of Genomica
common stock (or timely confirmation of a book-entry transfer of tendered
securities into the exchange agent's account at DTC as described above),
properly completed and duly executed letter(s) of transmittal (or manually
signed facsimile(s) thereof) or an agent's message in connection with a
book-entry transfer, and any other required documents.
EFFECT OF TENDER
By executing a letter of transmittal as described above, you irrevocably
appoint our designees as your attorneys-in-fact and proxies, each with full
power of substitution, to the full extent of your rights with respect to your
shares of Genomica common stock tendered and accepted for exchange by Exelixis
and with respect to any and all other shares of Genomica common stock and other
securities (other than the shares of Exelixis common stock) issued or issuable
in respect of the shares of Genomica common stock on or after December 28, 2001.
That appointment is effective if and when, and only to the extent that, we
accept the shares of Genomica common stock for exchange pursuant to the exchange
offer. All of these proxies shall be considered coupled with an interest in the
tendered shares of Genomica common stock and therefore shall not be revocable.
Upon the effectiveness of the appointment, all prior proxies that you have given
will be revoked, and you may not give any subsequent proxies (and, if given,
they will not be deemed effective). Our designees will, with respect to the
shares of Genomica common stock for which the appointment is effective, be
empowered, among other things, to exercise all of your voting and other rights
as they, in their sole discretion, deem proper at any annual, special or
adjourned meeting of Genomica stockholders or otherwise. We reserve the right to
require that, in order for shares of Genomica common stock to be deemed validly
tendered, immediately upon our exchange of the shares, we must be able to
exercise full voting rights with respect to the tendered shares of Genomica
common stock.
49
We will determine questions regarding the validity, form, eligibility
(including time of receipt) and acceptance for exchange of any tender of shares
of Genomica common stock, in our sole discretion, and our determination shall be
final and binding. We reserve the absolute right to reject any and all tenders
of shares of Genomica common stock that we determine are not in proper form or
the acceptance of or exchange for which may, in the opinion of our counsel, be
unlawful. We also reserve the absolute right to waive any defect or irregularity
in the tender of any shares of Genomica common stock. No tender of shares of
Genomica common stock will be deemed to have been validly made until all defects
and irregularities in tenders of shares of Genomica common stock have been cured
or waived. None of Exelixis, the exchange agent, the information agent nor any
other person will be under any duty to give notification of any defects or
irregularities in the tender of any shares of Genomica common stock or will
incur any liability for failure to give notification. Our interpretation of the
terms and conditions of the exchange offer (including the letter of transmittal
and instructions thereto) will be final and binding.
The tender of shares of Genomica common stock pursuant to any of the
procedures described above will constitute a binding agreement between us and
you upon the terms and subject to the conditions to the exchange offer.
INTERESTS OF GENOMICA'S OFFICERS AND DIRECTORS IN THE TRANSACTION
Certain of Genomica's directors and officers may have interests in the
exchange offer and the merger that may be different from, or in addition to,
their interest as Genomica stockholders. You should be aware of those interests
when considering the unanimous recommendation of the Genomica board that
Genomica stockholders accept the exchange offer.
Treatment of Stock Options
The merger agreement provides that Exelixis will not assume any Genomica
stock options. Under Genomica's option plans, the vesting of all Genomica stock
options that are not assumed in connection with a change in control (such as the
consummation of the exchange offer) automatically accelerates and the options
become fully vested and exercisable immediately upon the consummation of the
change in control. As a result, all options held by employees or non-employee
directors of Genomica will become fully vested and exercisable immediately upon
the time Exelixis accepts shares of Genomica common stock in the exchange offer.
Also, all of Genomica's options that are not exercised at or before the closing
of the exchange offer will terminate. Genomica officers and directors hold
options to purchase Genomica common stock as set forth below:
NUMBER OF
NUMBER OF UNVESTED
SHARES SUBJECT TO OPTIONS SUBJECT
NAME OPTIONS TO ACCELERATION (1)
---- ----------------- -------------------
Teresa W. Ayers...................................... 300,008 172,222
Thomas G. Marr, Ph.D. ............................... 333,366 177,777
Kenneth S. Rubin..................................... 288,020 244,790
Daniel R. Hudspeth................................... 91,699 91,666
Michael W. Cohn...................................... 149,999 118,749
James L. Rathmann.................................... 15,000 10,417
Ralph E. Christoffersen, Ph.D. ...................... 20,000 --
Robert T. Nelsen..................................... 15,000 10,417
William E. Rich, Ph.D................................ 15,000 10,417
Michael J. Savage.................................... 15,000 12,501
---------------
(1) Assumes the closing of the exchange offer occurs on December 28, 2001.
Treatment of Shares Subject to Repurchase
Teresa W. Ayers and Daniel R. Hudspeth each own shares of Genomica common
stock that were issued upon the early exercise of certain of their stock options
and which are subject to repurchase by Genomica if Ms. Ayers or Mr. Hudspeth are
no longer employed by Genomica.
50
At the time of the closing of the exchange offer, Genomica's option to
repurchase such shares of Genomica common stock from Ms. Ayers and Mr. Hudspeth
will terminate and 137,500 shares held by Ms. Ayers and 65,444 shares held by
Mr. Hudspeth will be released from the repurchase option.
Exercise Agreements
Under Genomica's option plans, the exercise price of an option may be
satisfied with a promissory note or other means of compensation or deferred
payment. Ms. Ayers, Dr. Marr and Messrs. Rubin, Hudspeth and Cohn have each
entered into exercise agreements with Genomica dated as of November 26, 2001 and
approved by Genomica's compensation committee. Under the terms of these exercise
agreements, Ms. Ayers, Dr. Marr and Messrs. Rubin, Hudspeth and Cohn may receive
a loan from Genomica in an amount equal to the total exercise price of specified
options. The exercise agreements provide that such loans will:
- bear a market rate of interest determined at the time the loan is made;
- be secured by the Genomica common stock issued upon exercise of the
options and, following the tender of Genomica common stock pursuant to
the exchange offer, by the Exelixis common stock received in exchange for
the tendered shares of Genomica common stock;
- be full recourse as to the executive; and
- be payable 45 days following expiration of the 90-day lock-up period
described below.
In accordance with the terms of the merger agreement, Exelixis has consented to
these agreements. A complete form of the agreement regarding stock option
exercise is attached as Annex D to this prospectus and is incorporated into this
prospectus by reference.
In connection with the merger agreement, the directors, officers and
certain affiliates of Genomica have agreed not to sell or otherwise dispose of
Exelixis common stock for 90 days following the date we first accept for payment
shares in the exchange offer. We have agreed to waive the provisions of the
lock-up agreements for Ms. Ayers, Dr. Marr and Messrs. Rubin, Hudspeth and Cohn
to enable them to sell the number of shares of Exelixis common stock necessary
to satisfy any tax obligations that they may incur as a result of exercises of
options to acquire Genomica common stock. A form of the partial waiver of the
lock-up agreement is attached as Annex E to this prospectus and is incorporated
into this prospectus by reference.
INDEMNIFICATION
The merger agreement provides that all rights to indemnification,
exculpation and advancement of expenses existing in favor of individuals who, on
or before the date of completion of the merger, were officers or directors of
Genomica and any of its subsidiaries, as provided in Genomica's certificate of
incorporation or bylaws, or in an agreement between one of the above parties and
Genomica, as in effect November 19, 2001, will survive the merger and continue
in full force and effect for a period of five years from the effective time of
the merger.
After completion of the merger, Exelixis is required to indemnify and hold
harmless the individuals who on or before the completion of the merger were
officers or directors of Genomica and any of its subsidiaries to the same extent
as set forth in the preceding paragraph.
The merger agreement also provides that for five years after completion of
the Merger, Genomica, as the surviving corporation in the merger, will provide
officers' and directors' liability insurance with respect to acts or omissions
occurring before completion of the merger, covering each Genomica officer and
director covered by Genomica's officers' and directors' liability insurance
policy as of November 19, 2001, on terms at least as favorable as those of the
policy in effect on November 19, 2001. However, Genomica is not required to pay
annual premiums in excess of 150% of current annual premiums paid by Genomica to
maintain or procure insurance coverage.
51
MANAGEMENT OF EXELIXIS AFTER THE TRANSACTION
The management of Exelixis after the transaction will remain unchanged.
Information about the current directors and executive officers of Exelixis can
be found in our Form 10-K for the year ended December 31, 2000 which is
incorporated by reference into this prospectus. See the section of this
prospectus entitled "Where You Can Find More Information" beginning on page 102
for information on where these additional documents may be found.
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following discussion sets forth the material U.S. federal income tax
considerations of the transaction generally applicable to holders of shares of
Genomica common stock who exchange their shares of Genomica common stock for
shares of Exelixis common stock in the exchange offer or have their shares of
Genomica common stock converted into shares of Exelixis common stock in the
merger. This discussion and the tax opinions described below are based on the
Internal Revenue Code of 1986 (also referred to in this discussion as the
"Code"), applicable Treasury regulations, administrative interpretations and
court decisions in effect as of the date of this prospectus, all of which may
change, possibly with retroactive effect. Any such change could alter the tax
consequences described in this summary and the tax opinions.
This discussion of material federal income tax consequences of the
transaction is not intended to provide a complete analysis or description of all
potential federal income tax consequences of the exchange offer or the merger.
It does not address all aspects of federal income taxation that may be important
to a holder of shares of Genomica common stock in light of that stockholder's
particular circumstances or to a stockholder subject to special rules, such as:
- a foreign entity or an individual stockholder who is not a citizen or
resident of the U.S.;
- a financial institution or insurance company;
- a tax-exempt organization;
- a dealer or broker in securities;
- a stockholder who is subject to the alternative minimum tax provisions of
the Code;
- a stockholder whose shares are qualified small business stock for
purposes of Section 1202 of the Code;
- a stockholder who holds shares of Genomica common stock as part of a
hedge, appreciated financial position, straddle, constructive sale,
conversion transaction or other risk reduction transaction;
- a stockholder who acquired shares of Genomica common stock pursuant to
the exercise of incentive stock options, or who holds shares of Genomica
common stock that are subject to a substantial risk of forfeiture;
- a stockholder who exercises appraisal rights; or
- a stockholder who does not hold shares of Genomica common stock as
capital assets.
In addition, this discussion does not address any state, local or foreign
income tax or non-income tax consequences of the exchange offer or the merger or
of any transactions other than the exchange offer and the merger. EXELIXIS AND
GENOMICA URGE HOLDERS OF SHARES OF GENOMICA COMMON STOCK TO CONSULT THEIR OWN
TAX ADVISORS TO DETERMINE THE PARTICULAR FEDERAL INCOME TAX OR OTHER TAX
CONSEQUENCES TO THEM OF PARTICIPATION IN THE EXCHANGE OFFER OR THE MERGER.
Qualification of the Exchange Offer and the Merger as a
Reorganization. Based on the representations of Exelixis and Genomica and
subject to the assumptions and limitations discussed in such opinions, Heller
Ehrman White & McAuliffe LLP, counsel to Exelixis, and Cooley Godward LLP,
counsel to Genomica, have provided opinions that the transaction will be treated
for federal income tax purposes as an integrated
52
reorganization within the meaning of Section 368(a) of the Code if all of the
following factual assumptions (also referred to as the "supporting conditions")
are met:
- the exchange offer and the merger are completed under the current terms
of the merger agreement;
- the minimum tender condition for the exchange offer is satisfied; and
- the merger is completed promptly after the exchange offer.
The completion of the exchange offer is conditioned upon these opinions
having been given and not withdrawn. These opinions are based upon
representations and covenants made by Exelixis and Genomica, including
representations in certificates of officers of Exelixis and Genomica to be
delivered to tax counsel before completion of the exchange offer, and upon
certain assumptions, including the absence of changes in facts or in law between
the date of the completion of the exchange offer and the completion of the
merger. If any of those representations, covenants or assumptions is inaccurate,
the tax consequences of the transaction could differ materially from those
summarized below. In addition, the ability to satisfy the supporting conditions
depends in part on facts that will not be available before the completion of the
merger. There can be no assurance that the merger will be completed, or that the
supporting conditions will be satisfied. If the supporting conditions are not
satisfied, the opinions of Heller Ehrman White & McAuliffe LLP and Cooley
Godward LLP described above may not be relied upon. Furthermore, Heller Ehrman
White & McAuliffe LLP's and Cooley Godward LLP's opinions represent only their
best judgment of the tax consequences of the exchange offer and the merger. Such
opinions neither bind the Internal Revenue Service nor preclude the Internal
Revenue Service or the courts from adopting a contrary position. No ruling has
been or will be requested from the Internal Revenue Service in connection with
the transaction. Accordingly, it is possible that the exchange offer or the
merger may not qualify as a reorganization, and the tax consequences of the
transaction could differ materially from those summarized below. For a further
discussion, see the section entitled "U.S. Federal Income Tax Consequences if
the Exchange Offer and the Merger Do Not Qualify as a Reorganization" below.
The opinions referred to above provide that if the transaction qualifies as
an integrated tax-free reorganization, for federal income tax purposes:
- A holder of shares of Genomica common stock will not recognize any gain
or loss on the exchange in the exchange offer or the conversion in the
merger of shares of Genomica common stock for Exelixis shares.
- If a holder of shares of Genomica common stock receives cash instead of
fractional shares of Exelixis common stock, the stockholder will be
required to recognize capital gain or loss, measured by the difference
between the amount of cash received instead of that fraction of a share
and the portion of the tax basis of that holder's shares of Genomica
common stock allocable to that fraction of a share. This gain or loss
will be long-term capital gain or loss if the holder of shares of
Genomica common stock has held the shares of Genomica common stock
exchanged for that fraction of a Exelixis share for more than one year at
the time the shares of Genomica common stock are accepted in the exchange
offer or converted at the completion of the merger, as the case may be.
The deductibility of capital losses is subject to limitations for both
individuals and corporations.
- A holder of shares of Genomica common stock will have a tax basis in the
shares of Exelixis common stock received in the exchange offer or the
merger equal to (i) the tax basis in the shares of Genomica common stock
surrendered by that stockholder in the exchange offer or the merger,
reduced by (ii) any tax basis in the shares of Genomica common stock that
is allocable to a fraction of a share of Exelixis common stock for which
cash is received.
- The holding period for shares of Exelixis common stock received in
exchange for shares of Genomica common stock in the exchange offer or the
merger will include the holding period for shares of Genomica common
stock surrendered in the exchange offer or the merger.
- Genomica will not recognize gain or loss as a result of the transaction.
53
U.S. Federal Income Tax Consequences if the Exchange Offer and the Merger
Do Not Qualify as a Reorganization. The tax consequences described above are
based on factual assumptions, representations and covenants, including the
satisfaction of the supporting conditions. If any of those factual assumptions,
representations or covenants are not satisfied or observed, or in the event of a
contrary ruling by the Internal Revenue Service or a court, the federal income
tax consequences of the transaction to holders of shares of Genomica common
stock could differ materially from those summarized above in the section
entitled "Qualification of the Exchange Offer and the Merger as a
Reorganization." In that event, exchanges by Genomica stockholders pursuant to
the exchange offer or the conversion of Genomica shares in the merger could be
taxable transactions for federal income tax purposes depending on the particular
facts surrounding the exchange offer or the merger, some of which may not be
known until after completion of the merger.
If the exchange offer or the merger, or both, are taxable, each Genomica
stockholder participating in the exchange offer or the merger, as applicable,
will recognize capital gain or loss equal to the fair market value of the
Exelixis shares (together with any cash instead of fractional shares of Exelixis
common stock) received by the stockholder less the stockholder's tax basis in
the shares of Genomica common stock surrendered. This gain or loss will be
long-term capital gain or loss if the stockholder had held the shares of
Genomica common stock for more than one year at the time the shares of Genomica
common stock are accepted in the exchange offer or converted at the completion
of the merger, as applicable.
U.S. Federal Income Tax Consequences if the Merger is Not Completed. No
opinion has been given concerning any tax consequences of the exchange offer if
the merger is not completed, or if the merger is not completed promptly after
the exchange offer. Except as described under this heading, if the merger is not
completed, exchanges pursuant to the exchange offer generally will be taxable
transactions for federal income tax purposes with the consequences described
above in the section entitled "U.S. Federal Income Tax Consequences if the
Exchange Offer and the Merger Do Not Qualify as a Reorganization."
Even if the merger is not completed, the exchange offer will still be
treated for federal income tax purposes as a reorganization within the meaning
of Section 368(a) of the Code so long as the following conditions are met:
- Exelixis acquires at least 80% of the shares of Genomica common stock in
the exchange offer;
- any acquisition of additional shares of Genomica common stock by Exelixis
is not for consideration other than Exelixis voting stock; and
- the other representations and covenants made by Exelixis and Genomica in
the merger agreement and in their respective tax representation letters
delivered to Heller Ehrman White & McAuliffe LLP and Cooley Godward LLP
pursuant to the merger agreement remain accurate.
Whether these conditions will be satisfied will not be known at the time of
the exchange offer, and there can be no assurances that the conditions will be
satisfied.
We urge each holder of shares of Genomica common stock to consult his or
her own tax advisor to determine the particular U.S. federal, state or local or
foreign income or other tax consequences of participation in the exchange offer
or the merger.
U.S. Federal Backup Withholding; Reporting. To prevent backup federal
income tax withholding with respect to cash, if any, received pursuant to the
exchange offer or the merger, you must either provide the exchange agent with
your correct taxpayer identification number and certify whether you are subject
to backup withholding of federal income tax by completing the substitute Form
W-9 included in the letter of transmittal or establish a basis for exemption
from backup withholding. Some stockholders (including, among others, all
corporations and some foreign individuals) are not subject to these backup
withholding and reporting requirements. In order for a foreign person to qualify
as an exempt recipient, the stockholder must generally submit a Form W-8BEN,
W-8ECI, W-8EXP or W-8IMY, as appropriate, signed under penalty of perjury,
attesting to that person's exempt status. Genomica stockholders who fail to
provide their correct taxpayer identification numbers and the appropriate
certifications or to establish an exemption as described above will be subject
to backup withholding on cash amounts received in the exchange offer or the
merger (at
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a withholding rate of 30.5% for amounts received in 2001 and 30% for amounts
received in 2002) and may be subject to a $50 penalty imposed by the Internal
Revenue Service. If Exelixis withholds on a payment to you and the withholding
results in an overpayment of taxes, a refund may be obtained from the Internal
Revenue Service. Cash amounts paid pursuant to the exchange offer or the merger
will be reported to Genomica stockholders and the Internal Revenue Service.
Each Genomica stockholder who receives shares of Exelixis common stock in
the exchange offer or the merger is required to file a statement with his, her
or its federal income tax return setting forth the stockholder's basis in the
shares of Genomica common stock surrendered and the fair market value of
Exelixis common shares and the proceeds from the cash in lieu of fractional
shares received in the exchange offer and the merger and is required to retain
permanent records of these facts relating to the transaction.
ACCOUNTING TREATMENT
The transaction described in this prospectus will be accounted for as a
"purchase," as that term is used under generally accepted accounting principles
in the United States for accounting and financial reporting purposes. Genomica
will be treated as the acquired corporation for these purposes. Under the
purchase method of accounting, the aggregate consideration paid is allocated to
the tangible and identifiable intangible assets acquired and liabilities assumed
on the basis of their respective fair values on the transaction date. The final
allocation of such consideration may differ from that reflected in the unaudited
pro forma condensed combined financial information. Exelixis does not expect
that the final allocation of the aggregate purchase price for the merger will
differ materially from the preliminary allocations. For more information, see
the section of the prospectus entitled "Notes to Unaudited Pro Forma Condensed
Combined Financial Statements" beginning on page 90.
REGULATORY APPROVALS
Other than clearance under the antitrust laws applicable to the exchange
offer and merger which are described below, the Securities and Exchange
Commission declaring the registration statement on Form S-4 relating to this
transaction effective and the filing of a certificate of merger, or a
certificate of ownership and merger, as the case may be, under Delaware law with
respect to the merger, we do not believe that any additional material
governmental filings are required with respect to the exchange offer and merger.
APPROVAL OF THE MERGER
Under Section 251 of the General Corporation Law of the State of Delaware,
the approval of the board of directors of a company is required to approve a
merger agreement. Exelixis', Bluegreen Acquisition Sub's and Genomica's boards
of directors have unanimously approved the merger agreement.
Under Section 251 of the General Corporation Law of the State of Delaware,
except in certain circumstances, the affirmative vote of the holders of at least
a majority of a company's outstanding shares entitled to vote thereon is
required for stockholders to adopt a merger agreement. Exelixis, as the sole
stockholder of Bluegreen Acquisition Sub, has adopted the merger agreement.
Under the General Corporation Law of the State of Delaware, Exelixis
stockholders are not required to approve the merger of Bluegreen Acquisition Sub
into Genomica.
If, after completion of the exchange offer, we own more than 50% but less
than 90% of the outstanding shares of Genomica common stock, we will complete
the acquisition of the remaining outstanding shares of Genomica common stock
through a vote of Genomica stockholders with respect to the merger. Since we
will own a majority of the outstanding shares of Genomica common stock on the
record date, we will have a sufficient number of shares of Genomica common stock
to adopt the merger agreement without the affirmative vote of any other holder
of shares of Genomica common stock, and therefore, adoption of the merger
agreement by Genomica stockholders will be assured. Completion of the
transaction in this manner is referred to in this prospectus as a "long-form"
merger.
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Under Section 253 of the General Corporation Law of the State of Delaware,
we can effect a merger without a vote of Genomica stockholders if, after
completion of the exchange offer, as it may be extended and including any
subsequent offering period, we own at least 90% of the outstanding shares of
Genomica common stock. Completion of the transaction in this manner is referred
to in this prospectus as a "short-form" merger.
AMENDMENT TO GENOMICA'S STOCKHOLDER RIGHTS PLAN
In connection with the approval of the merger agreement, the exchange offer
and the merger by the board of directors of Genomica, Genomica amended its
rights agreement, dated as of October 2, 2001, with Computershare Trust Company,
Inc. as rights agent. According to the amendment, none of the transactions
contemplated in the merger agreement, including the exchange offer and the
merger, will trigger any of the anti-takeover mechanisms in the rights plan. The
preferred stock purchase rights issued under this agreement currently are not
separately transferable and will be automatically tendered along with the shares
of common stock of Genomica in the exchange offer.
APPRAISAL RIGHTS
Genomica stockholders do not have appraisal rights in connection with the
exchange offer.
If we complete the exchange offer but, upon completion of the exchange
offer, as it may be extended and including any subsequent offering period, we
own less than 90% of the outstanding shares of Genomica common stock, we have
agreed to effect a long-form merger, as described above. Assuming that the
shares of Genomica common stock remain listed on a national securities exchange
or designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or are held of
record by more than 2,000 holders, Genomica stockholders who have not exchanged
their shares of Genomica common stock in the exchange offer will not have
appraisal rights in connection with a long-form merger. However, if a long-form
merger is consummated, and if, on the date fixed to determine stockholders
entitled to vote on the merger, the shares of Genomica common stock are not
listed on a national securities exchange or designated as a national market
system security on an interdealer quotation system by the National Association
of Securities Dealers, Inc. and are held of record by less than 2,000 holders,
you will have appraisal rights pursuant to the provisions of Section 262 of the
General Corporation Law of the State of Delaware as described below.
If we complete the exchange offer and, upon completion of the exchange
offer, as it may be extended and including any subsequent offering period, we
own at least 90% of the outstanding shares of Genomica common stock, we have
agreed to effect a short-form merger, as described above. Genomica stockholders
at the time of a short-form merger will have the right under Section 262 of the
General Corporation Law of the State of Delaware to demand appraisal of their
shares of Genomica common stock. Under Section 262, stockholders who comply with
the applicable statutory procedures under the Delaware General Corporation Law
will be entitled to receive a judicial determination of the fair value of their
shares of Genomica common stock (exclusive of any element of value arising from
the accomplishment or expectation of the merger) and to receive payment of this
fair value in cash, together with a fair rate of interest, if any. In Cede & Co.
and Cinerama, Inc. v. Technicolor, Inc., the Supreme Court of the State of
Delaware construed Section 262 of the General Corporation Law of the State of
Delaware and held that the "accomplishment or expectation" exclusion from the
calculation of fair value described in the preceding sentence is narrow and is
designed to eliminate use of pro forma data and projections of a speculative
variety relating to the completion of a merger. The court held that it is
appropriate to include in the calculation of fair value any known elements of
value. We cannot assure you what methodology a court would use to determine fair
value or how a court would select which elements of value are to be included in
its determination.
If Genomica stockholders have appraisal rights in connection with the
merger, they will have to comply with specific statutory provisions under
Delaware law. The following is a brief summary of the statutory procedures that
must be followed by a Genomica stockholder in order to perfect appraisal rights
under Delaware law.
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THE FOLLOWING DISCUSSION IS NOT A COMPLETE STATEMENT OF THE DELAWARE LAW
PERTAINING TO APPRAISAL RIGHTS AND IS QUALIFIED IN ITS ENTIRETY BY THE FULL TEXT
OF SECTION 262 OF THE GENERAL CORPORATION LAW OF THE STATE OF DELAWARE WHICH IS
ATTACHED TO THIS PROSPECTUS AS ANNEX F. BECAUSE OF THE COMPLEXITY OF SECTION 262
AND THE NEED TO STRICTLY COMPLY WITH VARIOUS TECHNICAL REQUIREMENTS, YOU SHOULD
READ ANNEX F IN ITS ENTIRETY. A PERSON HAVING A BENEFICIAL INTEREST IN SHARES OF
GENOMICA COMMON STOCK HELD OF RECORD IN THE NAME OF ANOTHER PERSON, SUCH AS A
BROKER OR NOMINEE, MUST ACT PROMPTLY TO CAUSE THE RECORD HOLDER TO FOLLOW THE
STEPS SUMMARIZED BELOW PROPERLY AND IN A TIMELY MANNER TO PERFECT APPRAISAL
RIGHTS.
Under Section 262, where a merger is to be submitted for approval at a
meeting of stockholders, the corporation, not less than 20 days before the
meeting, must notify each of its stockholders entitled to appraisal rights that
such appraisal rights are available and include in such notice a copy of Section
262.
A holder of shares of Genomica common stock wishing to exercise such
holder's appraisal rights:
- must deliver to Genomica, before the vote on the adoption of the merger
agreement at the special meeting, a written demand for the appraisal of
his or her shares; and
- must not vote in favor of the adoption of the merger agreement.
In order not to vote in favor of the adoption of the merger agreement, a
stockholder must either:
- not return a proxy card and not vote in person in favor of the adoption
of the merger agreement,
- return a proxy card with the "Against" or "Abstain" box checked,
- vote in person against the adoption of the merger agreement, or
- register in person an abstention from the proposal to adopt the merger
agreement.
ALL WRITTEN DEMANDS FOR APPRAISAL PURSUANT TO SECTION 262 SHOULD BE SENT OR
DELIVERED TO GENOMICA CORPORATION AT 1715 38TH STREET, BOULDER, COLORADO 80301,
ATTENTION: DANIEL R. HUDSPETH.
A holder of shares of Genomica common stock wishing to exercise the
holder's appraisal rights must hold of record these shares on the date the
written demand for appraisal is made and must continue to hold these shares of
record through the effective time of the merger. A vote against the adoption of
the merger agreement will not in and of itself constitute a written demand for
appraisal satisfying the requirements of Section 262. The demand must reasonably
inform Genomica of the identity of the holder as well as the intention of the
holder to demand an appraisal of the "fair value" of the shares held by the
holder. A stockholder's failure to make the written demand before the taking of
the vote on the adoption of the merger agreement at the special meeting of
Genomica stockholders will constitute a waiver of appraisal rights.
Only a holder of record of shares of Genomica common stock is entitled to
assert appraisal rights for the shares of Genomica common stock registered in
that holder's name. The demand for appraisal in respect of shares of Genomica
common stock must be executed by or on behalf of the holder of record, fully and
correctly, as the holder's name appears on the holder's stock certificates, and
must state that the holder intends by the demand for appraisal to demand
appraisal of the holder's shares of Genomica common stock in connection with the
merger. If the shares of Genomica common stock are owned of record in a
fiduciary capacity, such as by a trustee, guardian or custodian, the demand
should be executed in that capacity, and if the shares of Genomica common stock
are owned of record by more than one person, as in a joint tenancy or tenancy in
common, the demand should be executed by or on behalf of all joint owners. An
authorized agent, including two or more joint owners, may execute a demand for
appraisal on behalf of a holder of record; however, the agent must identify the
record owner or owners and expressly disclose the fact that in executing the
demand, the agent is acting as agent for the owner or owners. A record holder,
such as a broker who holds shares of Genomica common stock as nominee for
several beneficial owners, may exercise appraisal rights with respect to the
shares of Genomica common stock held for one or more beneficial owners while not
exercising such rights with respect to the shares of Genomica common stock held
for other beneficial owners. In this case, however, the written demand should
set forth the number of shares of Genomica common stock as to which appraisal is
sought, and if no number of shares of Genomica common stock is expressly
mentioned, the demand will be presumed to cover all shares of Genomica common
stock held in the name of
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the record owner. Stockholders who hold their shares of Genomica common stock in
brokerage accounts or other nominee forms and who wish to exercise appraisal
rights are urged to consult with their brokers to determine the appropriate
procedures for the making of a demand for appraisal by such a nominee.
Within 10 days after the effective time of the merger, the surviving
corporation must notify each holder of Genomica common stock who has complied
with Section 262 and who has not voted in favor of the adoption of the merger
agreement of the date that the merger has become effective. Within 120 days
after the effective time of the merger, the surviving corporation or any holder
of Genomica common stock who has complied with Section 262 and is entitled to
appraisal rights under Section 262 may file a petition in the Delaware Court of
Chancery demanding a determination of the fair value of the holder's shares of
Genomica common stock. The surviving corporation is under no obligation to and
has no present intention to file such a petition. Accordingly, it is the
obligation of the holders of Genomica common stock to initiate all necessary
action to perfect their appraisal rights in respect of their shares of Genomica
common stock within the time prescribed in Section 262.
Within 120 days after the effective time of the merger, any holder of
Genomica common stock who has complied with the requirements for exercise of
appraisal rights will be entitled, upon written request, to receive from the
surviving corporation a statement setting forth the aggregate number of shares
not voted in favor of the adoption of the merger agreement, the aggregate number
of shares with respect to which demands for appraisal have been received and the
aggregate number of holders of these shares. This statement must be mailed
within 10 days after a written request for the statement has been received by
the surviving corporation or within 10 days after the expiration of the period
for delivery of demands for appraisal, whichever is later.
If a petition for an appraisal is timely filed by a holder of shares of
Genomica common stock and a copy of the petition is served upon the surviving
corporation, the surviving corporation will then be obligated within 20 days to
file with the Delaware Register in Chancery a duly verified list containing the
names and addresses of all stockholders who have demanded an appraisal of their
shares and with whom agreements as to the value of their shares have not been
reached. After notice to these stockholders as required by the court, the
Delaware Court of Chancery is empowered to conduct a hearing on such petition to
determine those stockholders who have complied with Section 262 and who have
become entitled to appraisal rights under Section 262. The Delaware Court of
Chancery may require the holders of shares of Genomica common stock who demanded
payment for their shares to submit their stock certificates to the Delaware
Register in Chancery for notation on the certificate of the pendency of the
appraisal proceeding. If any stockholder fails to comply with such direction,
the Delaware Court of Chancery may dismiss the proceedings as to this
stockholder.
After determining the holders of Genomica common stock entitled to
appraisal, the Delaware Court of Chancery will appraise the "fair value" of
their shares of Genomica common stock, exclusive of any element of value arising
from the accomplishment or expectation of the merger. The Delaware Court of
Chancery will also determine the amount of interest, if any, to be paid upon the
amount determined to be the fair value. Holders of Genomica common stock
considering seeking appraisal should be aware that the fair value of their
shares of Genomica common stock as so determined could be more than, the same as
or less than the consideration they would receive pursuant to the merger if they
did not seek appraisal of their shares of Genomica common stock and that
investment banking opinions as to fairness from a financial point of view are
not necessarily opinions as to fair value under Section 262. The Delaware
Supreme Court has stated that proof of value by any techniques or methods which
are generally considered acceptable in the financial community and otherwise
admissible in court should be considered in the appraisal proceedings. In
addition, Delaware courts have decided that the statutory appraisal remedy,
depending on factual circumstances, may or may not be a dissenter's exclusive
remedy. The costs of the action may be determined by the court and taxed upon
the parties as the court deems equitable. The court may also order that all or a
portion of the expenses incurred by any stockholder in connection with an
appraisal, including, without limitation, reasonable attorneys' fees and the
fees and expenses of experts utilized in the appraisal proceeding, be charged
pro rata against the value of all the shares entitled to be appraised.
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Any holder of shares of Genomica common stock who has duly demanded an
appraisal in compliance with Section 262 will not, after the effective time of
the merger, be entitled to vote the shares of Genomica common stock subject to
this demand for any purpose. In addition, the shares subject to the demand will
not be entitled to the payment of dividends or other distributions on those
shares of Genomica common stock, except dividends or other distributions payable
to holders of record of Genomica common stock as of a record date before the
effective time of the merger.
If any stockholder who demands appraisal of the holder's shares of Genomica
common stock under Section 262 fails to perfect, or effectively withdraws or
loses, the holder's right to appraisal, the shares of Genomica common stock of
the stockholder will be deemed to have been converted at the effective time of
the merger into the right to receive the merger consideration, without interest.
The number of shares of Exelixis common stock, and cash in lieu of a fraction of
a share of Exelixis common stock, delivered to the stockholder will be based on
the same exchange ratio utilized in the exchange offer and the merger,
regardless of the market price of Exelixis common stock at the time of delivery.
A stockholder will fail to perfect, or effectively lose or withdraw, the
holder's right to appraisal if no petition for appraisal is filed within 120
days after the effective time of the merger, or if the stockholder delivers to
the surviving corporation a written withdrawal of the holder's demand for
appraisal and an acceptance of the merger, except that any attempt to withdraw
made more than 60 days after the effective time of the merger will require the
written approval of the surviving corporation and, once a petition for appraisal
is filed, the appraisal proceeding may not be dismissed as to any holder absent
court approval.
FAILURE TO FOLLOW THE STEPS REQUIRED BY SECTION 262 OF THE GENERAL
CORPORATION LAW OF THE STATE OF DELAWARE FOR PERFECTING APPRAISAL RIGHTS MAY
RESULT IN THE LOSS OF THESE RIGHTS.
POSSIBLE EFFECTS OF THE EXCHANGE OFFER
Reduced Liquidity of Genomica Common Stock; Possibly No Longer Included for
Quotation. The tender and exchange of shares of Genomica common stock pursuant
to the exchange offer will reduce the number of holders of shares of Genomica
common stock and the number of shares of Genomica common stock that might
otherwise trade publicly and could adversely affect the liquidity and market
value of the remaining shares of Genomica common stock held by the public.
Shares of Genomica common stock are included for listing and principally traded
on the Nasdaq National Market, or Nasdaq. Depending on the number of shares of
Genomica common stock acquired pursuant to the exchange offer, following
completion of the exchange offer, shares of Genomica common stock may no longer
meet the requirements of Nasdaq for continued listing. The requirements for
continued inclusion in Nasdaq, among other things, require that an issuer have
either:
- at least 750,000 publicly held shares, held by at least 400 stockholders
of round lots, with a market value of at least $5.0 million and net
tangible assets of at least $4.0 million and at least two registered and
active market makers for the shares; or
- at least 1,100,000 publicly held shares, held by at least 400
stockholders of round lots, with a market value of at least $15.0 million
and at least four registered and active market markers, and either:
- a market capitalization of at least $50.0 million; or
- total assets and total revenue of at least $50.0 million each for the
most recently completed fiscal year or two of the last three most
recently completed fiscal years.
Even if the requirements for continued inclusion in Nasdaq are not
satisfied, the shares might nevertheless continue to be included in a different
tier of Nasdaq with quotations published in the Nasdaq "additional list" or in
one of the "local lists," but if the number of holders of the shares fall below
300, the number of publicly held shares fall below 500,000 or there are not at
least two registered and active market makers for the shares, applicable Nasdaq
rules provide that the shares are no longer "qualified" for Nasdaq reporting and
Nasdaq would cease to provide any quotations. Shares held directly or indirectly
by directors, officers or beneficial owners of more than 10% of the shares are
not considered as being publicly held for this purpose. If, following the
completion of the exchange offer, the shares of Genomica no longer meet the
59
requirements for continued inclusion in the Nasdaq National Market or in any
other tier of Nasdaq and the shares are no longer included in the Nasdaq
National Market or in any other tier of Nasdaq, the market for shares of
Genomica common stock could be adversely affected.
If the shares of Genomica common stock no longer meet the requirements for
continued inclusion in any tier of the Nasdaq, it is possible that the shares
would continue to trade in the over-the-counter market and that price quotations
would be reported by other sources. The extent of the public market for the
shares of Genomica common stock and the availability of quotations for shares of
Genomica common stock would, however, depend upon the number of holders or the
aggregate market value of the shares remaining at that time, the interest in
maintaining a market in shares of Genomica common stock on the part of
securities firms, the possible termination of registration of the shares under
the Securities Exchange Act of 1934, as described below, and other factors. We
cannot predict whether the reduction in the number of shares of Genomica common
stock that might otherwise trade publicly would have an adverse or beneficial
effect on the market price for, or marketability of, the shares of Genomica
common stock.
According to Genomica, as of December 28, 2001, there were approximately
23,219,783 shares of Genomica common stock outstanding.
Status as "Margin Securities." Shares of Genomica common stock are
presently "margin securities" under the regulations of the Federal Reserve
Board, which has the effect, among other things, of allowing brokers to extend
credit on the collateral of shares of Genomica common stock. Depending on
factors similar to those described above with respect to market quotations,
following completion of the exchange offer, the shares of Genomica common stock
may no longer constitute "margin securities" for the purposes of the Federal
Reserve Board's margin regulations, in which event the shares of Genomica common
stock would not be eligible as collateral for margin loans made by brokers.
Registration under the Securities Exchange Act of 1934. Shares of Genomica
common stock are currently registered under the Securities Exchange Act of 1934.
Genomica can terminate that registration upon application to the Securities and
Exchange Commission if the outstanding shares are not listed on a national
securities exchange or if there are fewer than 300 holders of record of shares
of Genomica common stock. After completion of the merger, Exelixis intends to
cause Genomica to terminate the registration of Genomica common stock under the
Securities Exchange Act of 1934. Termination of registration of the shares of
Genomica common stock under the Securities Exchange Act of 1934 would reduce the
information that Genomica must furnish to its stockholders and to the Securities
and Exchange Commission.
RELATIONSHIPS BETWEEN EXELIXIS AND GENOMICA
Except for the Stockholder Tender Agreements or as otherwise described in
this prospectus, neither Exelixis nor, to the best of our knowledge, any of our
directors, executive officers or other affiliates has any contract, arrangement,
understanding or relationship with any other person with respect to any
securities of Genomica, including, but not limited to, any contract,
arrangement, understanding or relationship concerning the transfer or the voting
of any securities, joint ventures, loan or option arrangements, puts or calls,
guaranties of loans, guaranties against loss or the giving or withholding of
proxies. Except as described in this prospectus, there have been no contacts,
negotiations or transactions since January 1, 1998, between Exelixis or, to the
best of our knowledge, any of our directors, executive officers or other
affiliates on the one hand, and Genomica or its affiliates, on the other hand,
concerning a merger, consolidation or acquisition, a tender offer or other
acquisition of securities, an election of directors, or a sale or other transfer
of a material amount of assets. Neither Exelixis nor, to the best of our
knowledge, any of our directors, executive officers or other affiliates has,
since January 1, 1998, had any transaction with Genomica or any of its officers,
directors or affiliates that would require disclosure under the rules and
regulations of the Securities and Exchange Commission applicable to the exchange
offer. For a description of the contacts and negotiations between Exelixis and
any of our directors, executive officers or other affiliates, on the one hand,
and Genomica and its directors, executive officers or affiliates on the other
hand, relating to the exchange offer and the merger see the section of this
prospectus entitled "The Transaction -- Background."
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Neither Exelixis nor, to the best of our knowledge, any of our directors,
executive officers or other affiliates beneficially owns or has any right to
acquire, directly or indirectly, any shares of Genomica common stock except
pursuant to the Stockholder Tender Agreements described in more detail in the
section of this prospectus entitled "The Stockholder Tender Agreements."
Neither Exelixis nor, to the best of our knowledge, any of our directors,
executive officers or other affiliates has effected any transaction in shares of
Genomica common stock during the past 60 days.
FEES AND EXPENSES
We have retained Mellon Investor Services LLC to act as information agent
in connection with the exchange offer. The information agent may contact holders
of shares of Genomica common stock by mail, telephone, telex, telegraph, e-mail
and personal interview and may request brokers, dealers and other nominee
stockholders to forward material relating to the exchange offer to beneficial
owners of shares of Genomica common stock. We have agreed to pay the information
agent reasonable and customary compensation for these services in addition to
reimbursing the information agent for its reasonable out-of-pocket expenses. We
have agreed to indemnify the information agent against certain liabilities and
expenses in connection with the exchange offer, including certain liabilities
under the U.S. federal securities laws.
In addition, we have retained Mellon Investor Services LLC as the exchange
agent. We have agreed to pay the exchange agent reasonable and customary
compensation for its services in connection with the exchange offer, have agreed
to reimburse the exchange agent for its reasonable out-of-pocket expenses and
have agreed to indemnify the exchange agent against certain liabilities and
expenses, including certain liabilities under the U.S. federal securities laws.
Except as described above, we have not agreed to pay any fees or
commissions to any broker, dealer or other person for soliciting tenders of
shares of Genomica common stock pursuant to the exchange offer. We have agreed
to reimburse brokers, dealers, commercial banks and trust companies and other
nominees, upon request, for customary clerical and mailing expenses incurred by
them in forwarding offering materials to their customers.
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CERTAIN TERMS OF THE MERGER AGREEMENT
The following description of the merger agreement describes the material
terms of the merger agreement. The complete text of the merger agreement is
attached as Annex A to this prospectus and is incorporated into this prospectus
by reference. We encourage all stockholders to read the entire merger agreement
carefully.
THE EXCHANGE OFFER
Generally. Under the terms of the merger agreement, we have begun an
exchange offer for all outstanding shares of Genomica common stock. In the
exchange offer, we are offering to exchange a portion of a share of Exelixis
common stock computed through an exchange ratio for each share of Genomica
common stock that is validly tendered and not properly withdrawn. For a
description of the exchange ratio, see the section entitled "The
Transaction -- The Exchange Ratio." The initial expiration date of the exchange
offer is December 28, 2001, the twentieth business day following its
commencement. The initial expiration date may be extended under certain
circumstances.
Optional Extensions of the Exchange Offer. If any condition to the
exchange offer is not satisfied or, if permissible, waived on any scheduled
expiration date of the exchange offer, we may extend the expiration date of the
exchange offer for successive extension periods of not more than 10 business
days per extension, until all conditions to the exchange offer are satisfied or,
if permissible, waived, or until the merger agreement is terminated in
accordance with its terms. We also have the right to extend the exchange offer
to the extent required by the applicable rules and regulations of the Securities
and Exchange Commission or the National Association of Securities Dealers.
Subsequent Offering Period. We may elect to provide a subsequent offering
period of not less than three nor more than 20 business days after the
acceptance of shares of Genomica common stock in the exchange offer if the
requirements of Rule 14d-11 under the Securities Exchange Act of 1934 have been
met. You will not have the right to withdraw any shares of Genomica common stock
that you tender during any subsequent offering period. During any subsequent
offer period, we are required to accept for exchange, and to deliver shares of
Exelixis common stock in exchange for, shares of Genomica common stock that are
validly tendered promptly after the tender of such shares. If we elect to
provide a subsequent offering period, we are required to make a public
announcement to that effect no later than 9:00 a.m., New York City time, on the
next business day after the previously scheduled expiration date of the exchange
offer.
Prompt Payment for Shares of Genomica Common Stock in the Exchange
Offer. Subject to the terms of the exchange offer and the merger agreement and
the satisfaction, or waiver to the extent permitted, of the conditions to the
exchange offer, we are required to accept for exchange all shares of Genomica
common stock validly tendered and not properly withdrawn pursuant to the
exchange offer as soon as practicable after the applicable expiration date of
the exchange offer, as it may be extended pursuant to the merger agreement, and
are required to exchange all accepted shares of Genomica common stock promptly
after acceptance.
We will not issue certificates representing fractional shares of our common
stock in the exchange offer. Instead, each tendering stockholder who would
otherwise be entitled to a fractional share (after aggregating all fractional
shares of Exelixis common stock that otherwise would be received by the holder)
will receive cash (rounded up to the nearest whole cent), without interest,
equal to the product obtained by multiplying:
- that fraction of a share of Exelixis common stock to which the
stockholder is entitled (after aggregating all fractional shares of
Exelixis common stock that otherwise would be received by the
stockholder), by
- the closing sales price of one share of Exelixis common stock on the
Nasdaq National Market (as reported in The Wall Street Journal or, if not
reported in The Wall Street Journal, any other authoritative source) on
the date we first accept shares for exchange in the exchange offer.
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COMPOSITION OF GENOMICA'S BOARD OF DIRECTORS AFTER THE EXCHANGE OFFER
Upon the acceptance for payment of shares of Genomica common stock pursuant
to the exchange offer, we will be entitled to designate four directors of
Genomica. Under the terms of the merger agreement, Genomica has agreed to take
all action necessary to cause Exelixis designees to be elected or appointed to
Genomica's board of directors. Until the completion of the merger, Genomica's
board of directors is required to include at least three members, referred to in
this prospectus as the "continuing directors," who were directors of Genomica
before the completion of the exchange offer. If, at any time before the
completion of the merger, the number of continuing directors is reduced to fewer
than three for any reason, the remaining and departing continuing directors will
be entitled to designate a person or persons to fill any vacancy with the
consent of Exelixis. If, however, we purchase 85% or more of Genomica common
stock in the exchange offer, the number of continuing directors will be one.
The merger agreement provides that if our designees are elected to
Genomica's board of directors before the completion of the merger, the
affirmative vote of a majority of the continuing directors will be required for
Genomica to:
- amend or terminate the merger agreement or agree or consent to any
amendment or termination of the merger agreement;
- waive any of Genomica's rights, benefits or remedies under the merger
agreement;
- extend the time for performance of our obligations under the merger
agreement; or
- approve any other action by Genomica that is likely to adversely affect
the interests of the Genomica stockholders with respect to the
transactions contemplated by the merger agreement.
THE MERGER
Generally. The merger agreement provides that after completion of the
exchange offer, Bluegreen Acquisition Sub will be merged into Genomica. Upon
completion of the merger, Genomica will continue as the "surviving corporation"
and will be a wholly owned subsidiary of Exelixis.
The Completion of the Merger. The merger will become effective when the
certificate of merger or certificate of ownership and merger, as the case may
be, is filed with the Secretary of State of the State of Delaware. Exelixis and
Genomica anticipate that the merger will be completed no later than the second
business day after all of the conditions to the merger contained in the merger
agreement are satisfied or, where permissible, waived, and have agreed to use
all reasonable efforts to complete the merger within 40 days after the date we
accept shares for exchange pursuant to the exchange offer.
Upon completion of the merger, the directors and officers of Bluegreen
Acquisition Sub will become the officers and directors of the surviving
corporation, the certificate of incorporation of the surviving corporation will
be amended to be substantively identical to the certificate of incorporation of
Bluegreen Acquisition Sub, and the bylaws of Bluegreen Acquisition Sub will be
the bylaws of the surviving corporation.
Manner and Basis of Converting Shares of Genomica Common Stock in the
Merger. Under the terms of the merger agreement, upon completion of the merger,
each share of Genomica common stock will be converted into the right to receive
a portion of a share of Exelixis common stock at the same exchange ratio used in
the exchange offer. The merger consideration will not be payable in respect of
shares of Genomica common stock held by Genomica immediately before completion
of the merger, shares of Genomica common stock owned by Exelixis, Bluegreen
Acquisition Sub or any other subsidiary of Exelixis immediately before the
completion of the merger or shares of Genomica common stock for which appraisal
rights are exercised under Delaware law.
We will not issue fractional shares of our common stock in the merger.
Instead, each stockholder who would otherwise be entitled to a fractional share
(after aggregating all fractional shares of Exelixis common
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stock that otherwise would be received by the stockholder) will receive cash
(rounded to the nearest whole cent), without interest, equal to the product
obtained by multiplying:
- that fraction of a share of Exelixis common stock to which the
stockholder is entitled (after aggregating all fractional shares of
Exelixis common stock that otherwise would be received by such
stockholder), by
- the closing sales price of one share of Exelixis common stock on the
Nasdaq National Market (as reported in The Wall Street Journal or, if not
reported in The Wall Street Journal, any other authoritative source) on
the day of completion of the merger.
The merger agreement provides that, as soon as reasonably practicable after
the date of completion of the merger, the exchange agent will mail to each
record holder of a certificate or certificates that represented shares of
Genomica common stock before the merger, a letter of transmittal and
instructions for use in exchanging Genomica common stock certificates for
Exelixis common stock certificates. In addition, the merger agreement
contemplates that, as soon as reasonably practicable after the exchange agent
receives back from the record holder the Genomica common stock certificate, the
letter of transmittal and any other documents that are reasonably required by
the exchange agent or Exelixis, the exchange agent will mail to the record
holder a certificate or certificates representing the appropriate number of
shares of Exelixis common stock and an amount of cash for any fractional share.
Additionally, record holders of Genomica common stock certificates may, at their
option after the completion of the merger, physically surrender their Genomica
common stock certificates in person at the offices of the exchange agent listed
on the back of this prospectus for Exelixis common stock certificates and cash
for any fractional share.
After the completion of the merger, until it is surrendered and exchanged,
each certificate that previously evidenced Genomica common stock will be deemed
to evidence the right to receive shares of Exelixis common stock and the right
to receive cash instead of fractional shares of Exelixis common stock. We will
not pay dividends or other distributions on any shares of Exelixis common stock
to be issued in exchange for any Genomica common stock certificate that is not
surrendered until the Genomica common stock certificate is properly surrendered,
as provided in the merger agreement.
TREATMENT OF GENOMICA STOCK OPTIONS AND WARRANTS
Under the terms of the merger agreement, we will not assume any option to
purchase Genomica common stock. Pursuant to Genomica's stock option plans, the
vesting of all Genomica stock options that are not assumed in connection with a
change in control (such as the consummation of the exchange offer) will
accelerate and all options held by employees or non-employee directors of
Genomica will become fully vested and exercisable immediately at the time we
accept the shares of Genomica common stock for payment in the exchange offer.
All Genomica stock options that are not exercised on or before the date we
accept shares of Genomica common stock for payment pursuant to the exchange
offer will terminate pursuant to the terms of the Genomica stock option plan
under which the Genomica stock option was issued. In addition, certain employees
of Genomica own stock acquired upon their exercise of Genomica stock options
that is subject to a repurchase right of Genomica. These repurchase rights will
not be assigned to Exelixis and, under the terms of the agreements giving rise
to the repurchase rights, will terminate upon the closing of the exchange offer.
Under the terms of the merger agreement, upon the completion of the
exchange offer, we will automatically assume each outstanding warrant to acquire
shares of Genomica common stock. Each Genomica warrant that we assume will be
converted into a right to acquire the number of shares of Exelixis common stock
equal to the product of the number of shares of Genomica common stock that were
issuable upon the conversion of the Genomica warrant immediately before the
completion of the exchange offer, multiplied by the exchange ratio (rounded down
to the nearest whole number of shares of Exelixis common stock). The exercise
price per share of Exelixis common stock issuable under each assumed Genomica
warrant will be the per share exercise price at which the Genomica warrant was
exercisable immediately before the completion of the exchange offer, divided by
the exchange ratio (rounded up to the nearest whole cent).
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LOCK-UP
In connection with the merger agreement, the directors, officers and
affiliates of both Genomica and Exelixis have agreed not to sell or otherwise
transfer or dispose of Exelixis common stock for 90 days following the date we
first accept for payment shares pursuant to the exchange offer. A complete form
of the lock-up agreement is attached as Annex C to this prospectus and is
incorporated into this prospectus by reference.
REPRESENTATIONS AND WARRANTIES
The merger agreement contains a number of customary representations and
warranties relating to, among other things, certain aspects of the respective
businesses and assets of each of the parties and their ability to complete the
transaction. The representations and warranties of each party will expire upon
completion of the merger.
CONDUCT OF BUSINESS BEFORE COMPLETION OF THE EXCHANGE OFFER
The merger agreement contemplates that, until the completion of the merger,
Genomica will conduct its operations in substantially the manner as conducted
before the merger and will use all reasonable efforts to preserve its current
business organization and its relationships with customers, suppliers and
others. The merger agreement also expressly restricts Genomica's ability to
engage in certain material transactions without Exelixis' prior written consent.
Among other things, Genomica has agreed that it will not:
- pay any dividend or repurchase, redeem or otherwise reacquire any
outstanding shares of its capital stock;
- issue any shares of capital stock, options or warrants (except that,
before the completion of the exchange offer, Genomica may issue shares of
common stock upon the valid exercise of outstanding Genomica stock
options and warrants);
- amend its certificate of incorporation, bylaws or similar organizational
documents, or effect or become a party to any acquisition transaction;
- enter into any material transaction or take any other material action
outside the ordinary course of business or inconsistent with past
practices; or
- take or omit to take any action which would make any of the
representations and warranties of Genomica contained in the merger
agreement untrue or incorrect, prevent Genomica from performing or cause
Genomica not to perform its covenants under the merger agreement or cause
any of the conditions set forth in the merger agreement from being
satisfied.
We have agreed that, until the completion of the merger, we will conduct
our operations substantially as conducted before the merger, and will not
without Genomica's prior written consent, among other things, pay dividends,
amend any of our corporate documents or become party to any other merger
agreement.
REASONABLE EFFORTS TO COMPLETE THE TRANSACTION
Exelixis and Genomica will make all filings required under antitrust laws
applicable to the transaction and use reasonable efforts to take all actions
necessary to complete the transaction.
LIMITATION ON GENOMICA'S ABILITY TO CONSIDER OTHER ACQUISITION PROPOSALS
Genomica has agreed that, except in the circumstances described below, it
will not, directly or indirectly:
- solicit, initiate or knowingly take any action to encourage, induce or
facilitate the making, submission or announcement of any Acquisition
Proposal (as defined below);
- knowingly furnish any information about Genomica to any person (other
than Exelixis or any designee of Exelixis) in connection with or in
response to an Acquisition Proposal or an inquiry or indication of
interest that could lead to an Acquisition Proposal;
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- engage in discussions or negotiations with any person (other than
Exelixis or any designee of Exelixis) with respect to an Acquisition
Proposal;
- approve, endorse or recommend an Acquisition Proposal; or
- enter into any letter of intent or similar document or any contract
contemplating or otherwise relating to any Acquisition Proposal.
However, Genomica or Genomica's board of directors is permitted to furnish
nonpublic information about Genomica to, or enter into discussions or
negotiations with, any third party in response to an Acquisition Proposal if:
- Genomica and its representatives have not breached or taken any action
inconsistent with the merger agreement;
- Genomica's board of directors concludes in good faith, after consultation
with Genomica's outside legal counsel, that the Acquisition Proposal is
reasonably likely to result in a Superior Offer (as defined below) and
that this action is required in order for Genomica's board of directors
to comply with its fiduciary obligations to Genomica's stockholders under
applicable law;
- at least two business days before furnishing any nonpublic information
to, or entering into discussions with, the third party, Genomica gives us
written notice of the identity of the party making the Acquisition
Proposal and of Genomica's intention to furnish nonpublic information to,
or enter into discussions with, this party, and Genomica receives from
this party a signed confidentiality agreement; and
- at least two business days before furnishing any nonpublic information to
the party making the Acquisition Proposal, Genomica furnishes this
nonpublic information to us (to the extent Genomica has not already
furnished this nonpublic information to us).
Genomica must, within one day after receipt of any Acquisition Proposal,
inquiry or indication of interest that Genomica reasonably believes could lead
to an Acquisition Proposal, advise us orally and in writing of the proposal,
inquiry or request, the identity of the party making the proposal, inquiry or
request and the terms of the Acquisition Proposal. Genomica must keep us fully
informed as to the status of any Acquisition Proposal, inquiry, indication of
interest or request and any modification or proposed modification to any
Acquisition Proposal.
In addition, at any time before our acceptance of the shares of Genomica
common stock pursuant to the exchange offer, Genomica's board of directors may
withhold, withdraw or modify its recommendations that Genomica stockholders
accept the exchange offer and approve and adopt the merger agreement if it
determines, in good faith after consultation with its outside legal counsel,
that withholding, withdrawing or modifying the recommendations is required in
order for Genomica's board of directors to comply with its fiduciary obligations
to Genomica stockholders, or if:
- a bona fide written offer, not solicited in violation of the merger
agreement, is made to Genomica by a third party for a merger,
consolidation, business combination, sale of substantial assets, sale of
shares of capital stock or similar transaction, and the offer is not
withdrawn;
- Genomica's board of directors determines in good faith (after
consultation with a nationally recognized independent banking firm) that
the offer constitutes a Superior Offer;
- Genomica's board of directors determines in good faith, based upon the
advice of Genomica's outside legal counsel, that, in light of the
Superior Offer, the withdrawal or modification of the recommendations is
required in order for Genomica's board of directors to comply with its
fiduciary obligations to Genomica's stockholders;
- the recommendations are not withdrawn or modified in a manner adverse to
us at any time before two business days after we receive written notice
from Genomica confirming that Genomica's board of
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directors has determined that the offer is a Superior Offer and providing
us with a copy of the Superior Offer; and
- neither Genomica nor any of its representatives shall have violated any
of the restrictions set forth above.
An "Acquisition Proposal" means any offer or proposal made by a third party
(other than an offer or proposal by us) contemplating any of the following:
- any merger, consolidation, amalgamation, share exchange, business
combination, issuance of securities, acquisition of securities, tender
offer, exchange offer or other similar transaction in which any person or
"group" (as defined in the Exchange Act and the rules promulgated under
the Exchange Act) of persons directly or indirectly acquires beneficial
or record ownership of securities representing more than 20% of the
outstanding securities of any class of voting securities of Genomica or
Genomica issues securities representing more than 20% of the outstanding
securities of any class of its voting securities;
- any sale, lease, exchange, transfer, license, acquisition or disposition
of any business or businesses or assets or rights that constitute or
account for 20% or more of the consolidated assets of Genomica; or
- any liquidation or dissolution of Genomica.
A "Superior Offer" means a bona fide written offer, not solicited in
violation of the merger agreement, made by a third party after the date of the
merger agreement for a merger, consolidation, business combination, sale of
substantial assets, sale of shares of capital stock or similar transaction with
respect to Genomica on terms that the board of directors of Genomica determines,
after consultation with a nationally recognized independent financial advisor,
if accepted, is reasonably likely to be consummated, taking into account all
legal, financial and regulatory aspects of the offer and the person making the
offer, and would be, if consummated, more favorable to Genomica's stockholders,
from a financial point of view, than the transactions contemplated by the merger
agreement. However, any offer shall not be deemed to be a "Superior Offer" if
any financing required to consummate the transaction contemplated by the offer
is not committed.
The terms of the merger agreement do not prohibit Genomica or Genomica's
board of directors from taking and disclosing to Genomica stockholders a
position with respect to a tender offer or an exchange offer by a third party,
or from making any disclosure required by applicable law. However, in connection
with any Acquisition Proposal, Genomica's board of directors may not withhold,
withdraw, modify or change in a manner adverse to us, or fail to make, a
recommendation that Genomica stockholders accept the exchange offer and approve
and adopt the merger agreement, and Genomica's board of directors may not
approve, endorse or recommend any Acquisition Proposal, unless the conditions
described above under the caption "Limitation on Genomica's Ability to Consider
Other Acquisition Proposals" are satisfied.
EMPLOYEE BENEFITS
Under the terms of the merger agreement, for a period of one year following
the completion of the merger, we are required, at our election, either to
continue Genomica's employee benefit plans or to arrange for each Genomica
employee who becomes or continues as an employee of Exelixis or any of our
subsidiaries to be eligible to participate in any similar plans or programs of
Exelixis on terms no less favorable than those offered to similarly situated
newly hired employees of Exelixis. We are also required to continue Genomica's
medical insurance plan for a period of three months after the date we accept for
payment shares pursuant to the exchange offer. After the completion of the
merger, Genomica employees who become and remain employees of Exelixis or any of
our subsidiaries will be treated no less favorably than similarly situated newly
hired employees of Exelixis or any of our subsidiaries with respect to
compensation, employee benefits and terms and conditions of employment. No later
than one year from the completion of the merger, we will arrange for all
employees not then participating to become eligible to be participants in all
Exelixis employee benefit plans on terms no less favorable than those offered to
similarly situated newly hired employees of Exelixis. If, within one year
following the completion of the merger, the surviving corporation terminates the
employment of any employee (other than certain executive officers of Genomica)
who was employed on the date we accepted shares of Genomica common stock for
payment pursuant to the exchange offer, we will
67
cause the surviving corporation to provide severance benefits to this employee
equivalent to those previously provided to Genomica employees terminated in
Genomica's reduction in force on October 4, 2001. Please see the section of this
prospectus entitled "The Transaction -- Interests of Genomica's Officers and
Directors in the Transaction," beginning on page 50, for a discussion of
employee benefits and option agreements applicable to Genomica's directors and
officers.
CONDITIONS TO THE EXCHANGE OFFER
Our obligation to accept for exchange, and to deliver shares of Exelixis
common stock in exchange for, shares of Genomica common stock that are validly
tendered and not properly withdrawn, is subject to the satisfaction or, where
permissible, the waiver of the conditions described in the merger agreement. All
conditions to the exchange offer must be satisfied or waived before the exchange
offer expires. The conditions to the exchange offer include the following:
The Minimum Tender Condition. Before the expiration date of the exchange
offer, as it may be extended pursuant to the merger agreement, there must be
validly tendered, in accordance with the terms of the exchange offer, and not
properly withdrawn a number of shares of Genomica common stock that, when added
to any shares of Genomica common stock owned by Exelixis and Bluegreen
Acquisition Sub, is equal to at least the sum of a majority of the total number
of shares of Genomica common stock plus the total number of shares of Genomica
common stock issuable upon exercise of options to acquire Genomica common stock,
each as outstanding immediately before the expiration date of the exchange
offer, as it may be extended pursuant to the merger agreement.
Based on information supplied to us by Genomica, the number of shares
needed to have been validly tendered and not properly withdrawn in order to
satisfy the minimum tender condition as of December 28, 2001, would have been
13,169,322.
Other Conditions to the Exchange Offer. The exchange offer is also subject
to the conditions that, before the expiration of the exchange offer, as it may
be extended pursuant to the merger agreement:
- the applicable waiting period under United States antitrust laws must
have expired or been terminated;
- any applicable waiting periods under foreign antitrust laws must have
expired or been terminated and any required consents or clearances must
have been obtained;
- the registration statement on Form S-4 relating to this transaction must
have been declared effective under the Securities Act of 1933, and must
not be the subject of any stop order or proceedings seeking a stop order;
- the shares of Exelixis common stock that are to be issued in the
transaction must have been approved for listing on the Nasdaq National
Market;
- Exelixis and Genomica must have received opinions of counsel to the
effect that, based on certain customary assumptions, the transaction will
be a tax-free reorganization for federal income tax purposes, and the
respective opinions must not have been subsequently rescinded;
- there must not have been any action taken or be pending any legal
proceeding in which a governmental body is:
- challenging or seeking to restrain or prohibit the consummation of the
exchange offer or merger or any of the other transactions contemplated
by the merger agreement;
- seeking to prohibit or limit in any material respect our ability to
vote, receive dividends with respect to or otherwise exercise ownership
rights with respect to the shares of Genomica common stock to be
acquired in the exchange offer or with respect to the stock of the
surviving corporation;
- seeking to materially and adversely affect the right of Exelixis, the
surviving corporation or any of our or its respective subsidiaries to
directly or indirectly own the assets or operate the business of
Genomica;
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- seeking to compel Genomica, Exelixis or any of its or our respective
subsidiaries to dispose of or hold separate any assets totaling
$5,000,000 in value or more, as a result of the merger or any of the
transactions contemplated by the merger agreement;
- obligating Genomica, Exelixis or any of its or our respective
subsidiaries to pay material damages or otherwise become subject to
material adverse consequences in connection with any of the transactions
contemplated by the merger agreement;
- seeking action which would otherwise result in a material adverse effect
on Genomica or, as a result of the transactions contemplated by the
merger agreement, a material adverse effect on us; or
- no temporary restraining order, preliminary or permanent injunction or
other court order preventing the consummation of the exchange offer or
the merger shall have been issued by any court of competent jurisdiction
and remain in effect, or there shall be any applicable legal requirement
enacted or deemed applicable to the exchange offer or the merger that
makes consummation of the offer or the merger illegal;
- Genomica must have not have materially breached any of its covenants,
obligations or agreements under the merger agreement;
- the representations and warranties of Genomica contained in the merger
agreement and not qualified with any materiality or material adverse
effect qualifiers must have been materially true as of November 19, 2001
and must be materially true on and as of the date of the expiration of
the exchange offer, as it may be extended pursuant to the merger
agreement, with the same force and effect as if made as of that date, and
the representations and warranties of Genomica contained in the merger
agreement and qualified with materiality or material adverse effect
qualifiers must have been true as of November 19, 2001 and must be true
on and as of the date of the expiration of the exchange offer, as it may
be extended pursuant to the merger agreement, with the same force and
effect as if made as of this date except:
- for changes contemplated by the merger agreement; and
- for those representations and warranties which address matters only as
of a particular date, which representations must have been true in all
material respects as of such particular date;
- there must not have been any material adverse effect on Genomica and no
event or circumstance shall have occurred that would reasonably be
expected to have a material adverse effect on Genomica;
- Genomica must have cash, cash equivalents and short-term and long-term
investments, net of all current liabilities of Genomica, totaling at
least $108,750,000;
- there shall not have occurred any general suspension of or limitation on
prices for trading in securities on the Nasdaq National Market; and
- the merger agreement must not have been terminated in accordance with its
terms.
We reserve the absolute right, in our sole discretion, subject to the terms
of the merger agreement, to waive, in whole or in part, any of the conditions to
the exchange offer. However, we may not waive the minimum tender condition or
any of the conditions to the exchange offer in any manner which is adverse to
the Genomica Stockholders, without Genomica's consent.
As used in the merger agreement, "material adverse effect" as it relates to
Genomica means an event that has a material adverse effect on or change in the
capitalization, assets and liabilities taken as a whole or cash balance of
Genomica, the ability of Genomica to consummate the exchange offer or the
merger, or Exelixis' ability to exercise ownership rights with respect to the
stock of the surviving corporation.
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CONDITIONS TO THE MERGER
The obligations of Exelixis and Genomica to complete the merger are subject
to the satisfaction or waiver of the following conditions:
- if required by Delaware law, the merger agreement must have been adopted
and approved by Genomica stockholders;
- we must have accepted for exchange, and delivered shares of Exelixis
common stock in exchange for, all shares of Genomica common stock that
are validly tendered in the exchange offer;
- no provision of any applicable law or regulation and no judgment,
injunction, order or decree prohibits the completion of the merger or the
other transactions contemplated by the merger agreement; and
- the registration statement on Form S-4 relating to the transaction,
including any post-effective amendment to the registration statement must
have become effective, and must not be the subject of any stop order or
proceedings seeking a stop order, and any material "blue sky" or other
state securities laws applicable to the registration and qualification of
shares of Exelixis common stock must have been complied with.
TERMINATION OF THE MERGER AGREEMENT
Termination by Mutual Agreement. Exelixis and Genomica may terminate the
merger agreement at any time before the completion of the merger by mutual
written consent.
Termination by Either Exelixis or Genomica. Either Exelixis or Genomica
may terminate the merger agreement at any time before the completion of the
merger if:
- the exchange offer has not been completed on or before March 1, 2002,
unless the failure to complete the exchange offer is attributable to a
failure of the party seeking to terminate the agreement to perform any
material obligation under the merger agreement;
- the exchange offer expires or terminates in accordance with the terms of
the merger agreement without our having accepted for exchange any shares
of Genomica common stock pursuant to the exchange offer, unless the
expiration or termination of the exchange offer is attributable to a
failure on the part of the party seeking to terminate the agreement to
perform a material obligation under the merger agreement; or
- there is any final and nonappealable judgment, injunction or order that
prohibits the completion of the exchange offer or the merger.
Termination by Exelixis. We may terminate the merger agreement at any time
before the acceptance for exchange of shares of Genomica common stock pursuant
to the exchange offer, if any of the following occurs:
- Genomica's board of directors fails to recommend that Genomica
stockholders accept the exchange offer and vote to approve the merger
agreement;
- Genomica's board of directors withdraws or modifies in any manner adverse
to Exelixis its recommendation that Genomica stockholders accept the
exchange offer or its recommendation that Genomica stockholders approve
the merger agreement;
- Genomica fails to include its recommendation that Genomica stockholders
accept the exchange offer or its recommendation that Genomica
stockholders approve the merger agreement in the Solicitation/
Recommendation Statement on Schedule 14D-9 which is being mailed together
with this prospectus;
- Genomica's board of directors fails to reaffirm in writing its
recommendation that Genomica stockholders accept the exchange offer or
its recommendation that Genomica stockholders approve the merger
agreement, or fails to reaffirm in writing its determination that the
exchange offer and the
70
merger are in the best interests of the Genomica's stockholders, within
five days after we request in writing that such recommendation or
determination be reaffirmed;
- Genomica's board of directors approves or recommends any Acquisition
Proposal to Genomica stockholders;
- Genomica enters into any letter of intent or similar document or any
contract relating to any Acquisition Proposal;
- any tender offer or exchange offer (other than the exchange offer being
made by us as described in this prospectus) relating to the outstanding
shares of Genomica common stock is commenced and either Genomica's board
of directors recommends acceptance of the tender offer or exchange offer,
or within five days of the commencement of the tender offer or exchange
offer, Genomica's board of directors fails to recommend rejection of the
tender offer or exchange offer by Genomica stockholders; or
- there is a material breach of Genomica's obligations described in the
section entitled "Limitation on Genomica's Ability to Consider Other
Acquisition Proposals" above.
In addition, we may terminate the merger agreement, at any time before the
acceptance for exchange of shares of Genomica common stock pursuant to the
exchange offer, if:
- Genomica materially breaches any covenant or agreement in the merger
agreement; or
- any representation or warranty of Genomica was materially inaccurate when
made or becomes materially inaccurate after the date of the merger
agreement.
If, however, the breach of the covenant or agreement by Genomica, or the
inaccuracy of the representation or warranty of Genomica, is reasonably curable
by Genomica, then we may not terminate the merger agreement on account of this
breach until 30 days after the date that the breach becomes known to Genomica or
us.
Termination by Genomica. Genomica may terminate the merger agreement at
any time before the acceptance for exchange of shares of Genomica common stock
pursuant to the exchange offer, if:
- we materially breach any covenant or agreement in the merger agreement;
or
- any representation or warranty of Exelixis is materially inaccurate when
made or becomes materially inaccurate after the date of the merger
agreement.
If, however, the breach of the covenant or agreement by Exelixis, or the
inaccuracy of the representation or warranty of Exelixis, is reasonably curable
by us, then Genomica may not terminate the merger agreement on account of this
breach until 30 days after the date that the breach becomes known to Genomica or
us.
In addition, Genomica may terminate the merger agreement at any time before
the acceptance for exchange shares of Genomica common stock pursuant to the
exchange offer in order to enter into a letter of intent or similar document or
any agreement, contract, or commitment with respect to an Acquisition Proposal,
if:
- Genomica has complied with its obligations discussed in "Limitations on
Genomica's Ability to Consider Other Acquisition Proposals" above.
- Genomica's board of directors has authorized, subject to complying with
the terms of the merger agreement, Genomica to enter into a definitive
written agreement for a transaction that constitutes a Superior Offer;
- Genomica notifies us in writing that it has received a Superior Offer,
intends to enter into a definitive agreement with respect to the Superior
Offer and attaches the most current version of the agreement to such
notice;
- Exelixis does not make, within five business days after receipt of
Genomica's written notice of its intention to enter into a definitive
agreement for a Superior Offer, any offer that Genomica's board of
71
directors in good faith determines, after consultation with a financial
advisor of nationally recognized standing and its outside legal counsel,
is at least as favorable to Genomica stockholders as the Superior Offer;
- during such period Genomica has fully cooperated with Exelixis,
including, without limitation, informing Exelixis of the terms and
conditions of the Superior Offer and the identity of the person making
the Superior Offer, with the intent of enabling both parties to agree to
a modification of the terms and conditions of the merger agreement so
that the transactions contemplated in the merger agreement may be
effected; and
- immediately following the termination of the merger agreement, Genomica
enters into a definitive agreement to effect the Superior Offer.
If the merger agreement is terminated pursuant to any of the provisions
described above in this section, the merger agreement will become void and of no
effect, with no liability on the part of us or Genomica, unless certain
circumstances exist pursuant to which reimbursement of expenses described below
may become payable or there is an intentional or willful breach of the merger
agreements by one of us.
EXPENSES
The merger agreement provides that all expenses incurred in connection with
the merger agreement and the transactions contemplated by the merger agreement
are to be paid by the party incurring such expenses. However, if the merger
agreement is terminated by either party for any reason other than a material
breach by us, then Genomica is required to pay us $750,000 for reimbursement of
our fees and expenses (including all attorneys' fees, accountants' fees,
financial advisory fees and filing fees) that have been paid or that may become
payable by or on behalf of Exelixis in connection with the preparation and
negotiation of the merger agreement and otherwise in connection with the
exchange offer and the merger.
AMENDMENTS TO THE MERGER AGREEMENT
The merger agreement may be amended, modified or waived by Exelixis' or
Genomica's board of directors at any time (whether before or after adoption of
the merger agreement by Genomica stockholders) if the amendment or waiver is in
writing and signed, in the case of an amendment, by Genomica and Exelixis or, in
the case of a waiver, by the party against whom the waiver is to be effective.
However, after the adoption of the merger agreement by the stockholders of
Genomica, if necessary, no amendment shall be made which by law requires further
approval of Genomica stockholders without the further approval of Genomica
stockholders. See the section entitled "Conditions to the Exchange Offer" above
for information regarding our right to waive conditions to the exchange offer.
72
THE STOCKHOLDER TENDER AGREEMENTS
The following description of the stockholder tender agreements describes
the material terms of the stockholder tender agreements. A complete form of the
stockholder tender agreement is attached as Annex B to this prospectus and is
incorporated into this prospectus by reference. All stockholders are urged to
read the form of the stockholder tender agreement carefully.
PARTIES TO THE STOCKHOLDER TENDER AGREEMENTS
As an inducement for us to enter into the merger agreement, Genomica's
directors, officers and certain affiliated stockholders have entered into
stockholder tender agreements with us and granted us an irrevocable proxy with
respect to the shares of Genomica common stock, and options and warrants to
acquire shares of Genomica common stock, beneficially owned by them.
Genomica's directors, officers and affiliated stockholders who have
beneficial ownership of 6,070,133 shares of Genomica common stock in the
aggregate have agreed to tender and not withdraw their shares of Genomica common
stock in the exchange offer. In addition, if certain conditions are met, the
officers, directors and affiliated stockholders of Genomica who are parties to
the stockholder tender agreements may be obligated to exercise "in the money"
options and warrants and tender the shares issued upon exercise of such options
and warrants to the extent necessary to satisfy the minimum tender condition for
the exchange offer. Assuming that all options and warrants with a per share
exercise price of $5.00 or less are "in the money", then this obligation may
apply to options and warrants to purchase up to approximately 1,098,094 shares
of Genomica common stock. If any party to a stockholder tender agreement is
obligated by the terms of those agreements to exercise options or warrants,
Exelixis has agreed that, if requested by the stockholder, it or its designee
will provide a loan to that party for the aggregate exercise price on
commercially reasonable terms.
AGREEMENT TO TENDER
Each stockholder who has signed a stockholder tender agreement has agreed
that, unless we request otherwise, the stockholder will tender his or her shares
of Genomica common stock in the exchange offer within 10 business days after the
commencement of the exchange offer and will not withdraw the shares so tendered.
AGREEMENT TO VOTE
Each stockholder who has signed a stockholder tender agreement has agreed
that, until the earlier of the day when the merger is completed or the day when
the merger agreement is validly terminated pursuant to its terms, the
stockholder will vote, or cause his or her shares of Genomica common stock to be
voted:
- against any action or agreement that would result in a breach of any
representation, warranty, covenant or obligation of Genomica in the
merger agreement;
- against any action or agreement that would cause any of the conditions to
the exchange offer or the merger to not be satisfied; and
- against the following actions (other than the exchange offer, the merger
and the transactions contemplated by the merger agreement): (i) any
Acquisition Proposal; (ii) any change in a majority of the members of the
board of directors of Genomica, other than any change contemplated by the
merger agreement; or (iii) any other action which is intended to, or
could reasonably be expected to, impede, delay, discourage or adversely
affect the consummation of the exchange offer, the merger or any of the
other transactions contemplated by the merger agreement or the
stockholder tender agreement.
By their terms, the stockholder tender agreements have no effect on the
signing stockholder's rights or obligations in his or her capacity as a director
or officer of Genomica.
TERMINATION
All obligations under the stockholder tender agreements terminate upon the
termination of the merger agreement pursuant to its terms.
73
INFORMATION RELATING TO GENOMICA
OVERVIEW
Genomica is a provider of innovative software products and services that
are designed to enable pharmaceutical and biotechnology researchers to
accelerate the drug discovery and development process. Discovery Manager(TM)
software, Genomica's first product, is used for genomics research, including
genetic research, gene discovery and pharmacogenomics. This product allows
researchers to turn the vast volumes of gene, SNP, protein and patient data from
diverse sources into information useful for drug discovery. Genomica licenses
Discovery Manager to leading genomics-based research organizations, including
AstraZeneca, GlaxoSmithKline and the National Cancer Institute. Genomica has a
strategic alliance with Applied Biosystems to license software products to be
used with Applied Biosystems' industry-leading hardware and software systems for
drug discovery.
CHANGE IN BUSINESS STRATEGY
On October 2, 2001 Genomica's board of directors approved a cost reduction
plan resulting in a restructuring of its operations and consolidation of its
facilities, including the involuntary termination of a significant portion of
its workforce. This plan included the immediate termination of 101 employees,
including 91 located in Genomica's Boulder, Colorado office, three employees
located in its United Kingdom office and seven employees located elsewhere
throughout the United States.
DISCOVERY MANAGER
Discovery Manager is Genomica's core bioinformatics product. It is an
integrated suite of software tools and a database template for genomics
research. The database can be filled with genomic data from the user's own
research as well as publicly available and other sources. Genomica's tools
include sophisticated scientific algorithms designed for easy use by genomic
researchers without the assistance of bioinformaticists. Discovery Manager
enables individual or collaborating researchers to access, store, manipulate,
analyze, annotate and integrate genomic data from a variety of sources.
Supported Disciplines. Genomica develops Discovery Manager to be used by
researchers in a broad range of disciplines, including:
- Clinical genetics. Clinical geneticists identify patients and collect
their medical data. Discovery Manager allows these researchers to store
and view patient information in a simple graphical format, which can show
the medical and genetic data of each patient as well as parent and
sibling genetic relationships among family members, called pedigrees.
- Epidemiology. Epidemiologists study the genetic and environmental causes
for disease. Discovery Manager helps these researchers analyze and
determine how a genetic trait or environmental factor is distributed
among people in a population.
- Statistical genetics. Statistical geneticists identify the regions of
DNA that determine a particular trait. Discovery Manager helps these
researchers group individuals together and test various hypotheses
regarding the portion of DNA to which a trait is linked.
- Human genetics. Human geneticists identify the location of genes using a
variety of sophisticated analytical approaches. Discovery Manager helps
these researchers study the specific genes of each family member.
- Molecular biology. Molecular biologists determine the function of genes.
Discovery Manager helps these researchers organize and analyze genetic
map and sequence data to isolate genes and determine their function.
- Pharmacogenomics. Pharmacogenomics researchers determine the genetic
basis for why a drug works for some people but not others. Discovery
Manager helps these researchers examine the genetic variations of a group
of patients with similar drug responses.
74
Key Tools. Discovery Manager provides three key tool sets that are used by
different types of researchers to facilitate the interpretation of data relevant
to the drug discovery and development process:
- Sequence analysis tools. Sequence analysis is the examination of a
specific DNA sequence to understand the structure and function of the
sequence. Discovery Manager provides tools for finding genes in human DNA
sequences and comparing two or more sequences for similarity.
- Genetic analysis tools. Genetic analysis is the isolation and analysis
of DNA variations in families and unrelated populations. Discovery
Manager provides tools to integrate, manipulate, edit and analyze genetic
data.
- Map analysis tools. Map analysis is the construction and comparison of
maps containing different representations of genetic information.
Discovery Manager provides tools that support the graphical viewing,
manipulation and comparison of maps that are created using well-known
algorithms.
Discovery Manager Database. A key component of Discovery Manager is a
central repository of genomic data compiled from many sources:
- Legacy data. Data that researchers have previously accumulated on
various systems and in various formats.
- New data. Results from experiments performed using Discovery Manager.
- Other public data. If a customer wishes to incorporate data from sources
other than those in the Reference Database, the customer can convert it
into a common format and import it into Discovery Manager. Customers can
also access the National Center for Biotechnology Information and other
websites of interest directly from Discovery Manager. Researchers use
information from these websites to annotate their database.
Reference Database. Genomica offers its proprietary database, the
Reference Database, as an option to licensees of Discovery Manager. This
Reference Database compiles into one database and in one common format all of
the information from 13 publicly available databases.
Common User Interface. Discovery Manager addresses many important aspects
of genomics research from a common user interface. This interface permits
researchers to access, use and compare data from a single database. With simple
point-and-click operations, researchers can map, compare, query and graphically
display data in formats commonly used in the industry. Using annotation tools,
researchers may enrich data with additional information, such as experiment
details, literature references and direct links to websites of interest. The
common user interface also enables many different types of researchers to use
the same data and system to do their part of the analysis.
Security. Because of the potential value of proprietary genomic
information, security is important to Genomica's customers. Discovery Manager
provides security and access features that enable system administrators to
assign user accounts and passwords, provides users with access to authorized
projects and allows management to review the work progress within the genomic
project while insuring the privacy of sensitive project data.
LINKMAPPER(TM) SOFTWARE
Linkmapper is Genomica's first product resulting from a development and
distribution alliance with Applied Biosystems. Genomica completed development
and delivered the Linkmapper product to Applied Biosystems in October 2000.
Applied Biosystems began marketing this product along with its own hardware and
software product lines in 2001. Linkmapper offers reduced functionality from our
Discovery Manager product and it was developed on Genomica's Java and Oracle
technology platform. Applied Biosystems will pay Genomica a royalty payment for
each unit licensed to its customers. Genomica also will share in any revenues
received by Applied Biosystems from entering into customer software support and
maintenance agreements related to Linkmapper. Applied Biosystems is not expected
to meet the minimum sales milestones required to maintain its exclusive right to
license and re-sell Linkmapper.
75
Linkmapper provides researchers with a powerful set of software
applications for manipulating, organizing, and analyzing genetic data that is
generated from genotyping hardware systems manufactured and sold by Applied
Biosystems. Linkmapper enables researchers, who are customers of Applied
Biosystems, to perform allele-calling functionality, quality checking of data
and genetic data management and analysis in one integrated system. This
end-to-end connectivity from the hardware instrumentation and software
applications is expected to significantly enhance downstream data analysis for
creating genetic maps.
CONSULTING AND SCIENTIFIC SERVICES
Genomica currently offers limited consulting services that are included in
the price of Discovery Manager. Genomica offers a full range of consulting
services on a fee-for-service basis in conjunction with Discovery Manager,
including the following:
- Product integration. Helping customers integrate the Discovery Manager
product suite into their bioinformatics departments and scientific
workflow.
- Technical consulting. Providing custom programming, technical guidance
and tools development for bioinformatics needs.
- Scientific consulting. Helping customers with their genomics research.
Examples of this service include designing scientific experiments, formulas
and algorithms.
CUSTOMERS
Genomica licenses its products and provides services to pharmaceutical and
biotechnology companies and academic institutions in the United States and
Western Europe. The following is a partial list of Genomica's current customers:
AstraZeneca, Aventis, GlaxoSmithKline, National Cancer Institute, National
Institutes of Health, Oxagen Limited, Pfizer, University of Oxford, Wellcome
Trust Centre for Human Genetics and Yale University.
For the year ended December 31, 2000, the customers listed above accounted
for nearly all of Genomica's revenue. Of this amount, AstraZeneca accounted for
32% of its revenue, GlaxoSmithKline accounted for 21% of its revenue, Oxagen
accounted for 15% of its revenue and Pfizer accounted for 11% of its revenue.
Genomica expects that these four customers will continue to account for a high
percentage of its total revenue for the immediate future.
RESEARCH AND DEVELOPMENT
The research and development for Genomica's products takes place at
Genomica's headquarters in Boulder, Colorado and at Genomica's facility in
Sacramento, California.
PATENTS, TRADEMARKS, COPYRIGHTS AND LICENSES
Genomica believes that patents are not generally a significant factor in
Genomica's business and that the success of Genomica depends primarily on the
technical competence, and managerial and marketing ability of Genomica's
personnel.
GENOMICA(TM), Discovery Manager(TM) and Linkmapper(TM) are trademarks owned
by Genomica.
Genomica is the exclusive, worldwide licensee of the Genome Topographer
technology owned by Cold Spring Harbor Laboratory. Genome Topographer is a
general-purpose computer system useful for studying complex, genetic diseases
and serves as the intellectual property foundation of Discovery Manager. The
Genome Topographer technology includes the patented Chang/Marr algorithm, which
incorporates, either in hardware or software form, an algorithm for analyzing
genetic data. Genomica's license with Cold Spring Harbor Laboratory grants
Genomica exclusive, worldwide rights to the Chang/Marr Patent, as well as the
exclusive right to commercialize the complete set of Genome Topographer
technology that is incorporated into Genomica's Discovery Manager product.
76
EMPLOYEES
As of December 26, 2001 Genomica had 46 full-time employees, including 6
employees primarily engaged in research and development, 29 in engineering and
11 in general and administration. None of Genomica's employees are currently
represented under collective bargaining agreements and Genomica considers its
employee relations to be good.
PROPERTIES
Genomica's headquarters and principal executive offices are located at 1715
38th Street, Boulder, Colorado under a lease that provides approximately 42,000
square feet for Genomica's operations. Following the adoption of Genomica's
restructuring plan on October 2, 2001, Genomica subleased 24,000 square feet of
the available space, leaving Genomica with approximately 18,000 square feet for
its operations. This facility serves as the base for Genomica's research and
development and product support operations.
Genomica leases approximately 2,200 square feet in Sacramento, California,
that serves as a software engineering and development office.
LEGAL PROCEEDINGS
Genomica is not currently involved in any legal proceedings that are
expected to have a material adverse effect on its business or consolidated
financial position.
77
GENOMICA MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Management's Discussion and Analysis of Financial Condition and
Results of Operations contains forward-looking statements. A variety of factors
could cause Genomica's actual results to differ from the anticipated results
expressed in such forward-looking statements. These include, among others,
failure to manage the recently completed restructuring to achieve its financial
goals, Genomica's reliance on a limited number of customers for a majority of
its revenue, failure by Genomica to meet financial expectations of investors,
potential defects associated with Genomica's product, activities by Genomica and
others regarding protection of intellectual property, and Genomica's reliance on
key personnel. For more information, please review Genomica's periodic reports
under the Securities Exchange Act of 1934, including, without limitation, the
investment considerations set forth in Genomica's annual report on form 10-K and
other publicly filed documents. The safe harbor provided in the Private
Securities Litigation Reform Act of 1995, by its terms, does not apply to the
exchange offer.
OVERVIEW
Genomica is a provider of innovative software products and services that
are designed to enable pharmaceutical and biotechnology researchers to
accelerate the drug discovery and development process. Discovery Manager,
Genomica's primary product, is used for genomics research, including genetic
research, gene discovery and pharmacogenomics. This product allows researchers
to turn the vast volumes of gene, SNP and patient data from diverse sources into
information useful for drug discovery. Genomica's current customers include
leading genomics-based research organizations such as AstraZeneca,
GlaxoSmithKline and the National Cancer Institute. Genomica has a strategic
alliance with Applied Biosystems to license and market certain components of its
software technology and products for use with Applied Biosystems' industry-
leading systems for drug discovery. Currently, however, Applied Biosystems is
not expected to meet the minimum sales milestones required to maintain its
exclusive right to license and re-sell Linkmapper.
Genomica has sold its products directly to customers since June 1998.
Genomica derives revenue primarily from granting licenses to the Discovery
Manager products and the Reference Database to pharmaceutical, biotechnology and
academic research organizations. Genomica's software license agreements are
typically one year or longer in length, and include support and maintenance. The
price for each agreement depends upon the number of users licensed by Genomica's
customers, the duration of the agreement and which of its product components and
services the customer purchases. Genomica typically invoices its customers on an
annual or quarterly basis at the commencement of the software license agreement
and on each subsequent anniversary date. Genomica records deferred revenue at
the time it invoices and it recognizes the associated revenue ratably over the
related period. For products sold through Genomica's relationship with Applied
Biosystems, Genomica recognizes revenue on the license fee royalty and records
deferred revenue for the support and maintenance, which is recognized over the
annual support period.
Genomica has incurred losses since its inception. As of September 30, 2001,
Genomica had an accumulated deficit of $74.7 million. The deficit includes
stock-based non-cash compensation charges of $22.1 million, including $5.8
million recognized in 2001, and a $17.1 million non-cash deemed dividend for the
difference between the deemed fair value of Genomica's common stock and the
price at which its Series C preferred stock and Series D preferred stock issued
in 2000 were convertible. The remainder of the accumulated deficit, $35.5
million, resulted from the significant costs incurred in the development of
Genomica's technology platform and the establishment of relationships with its
customers. In addition, as a result of option grants made prior to Genomica's
initial public offering with exercise prices below their deemed fair market
value for financial reporting purposes, Genomica will incur approximately $9.6
million in additional non-cash compensation charges to earnings in future
periods. This amount is subject to reduction for stock option forfeitures, such
as the October 2001 terminations discussed below.
78
CHANGE IN BUSINESS STRATEGY
On October 2, 2001 Genomica's Board of Directors approved a cost reduction
plan resulting in a restructuring of Genomica's operations and consolidation of
its facilities, including the involuntary termination of a significant portion
of Genomica's workforce. The plan included the immediate termination of 101
employees, including 91 located in Genomica's Boulder, Colorado office, three
employees located in the United Kingdom office, and seven employees located
elsewhere throughout the United States. Genomica currently has 42 employees.
On October 4, 2001 Genomica announced its new product and corporate
strategy that required restructuring its operations and a workforce reduction.
This change in strategy was based on Genomica's belief that the initial target
market for third-party enterprise software is not developing fast enough to
build stockholder value within a reasonable timeframe.
As a result of the restructuring announced on October 4, 2001, Genomica
anticipates recording a restructuring charge during the fourth quarter totaling
approximately $4.3 million, including charges totaling $1.9 million for
involuntary termination benefits, $1.7 million for asset impairments, and $0.7
million for lease and contract termination fees. Termination benefits were paid
at the time the plan was implemented. In conjunction with the restructuring,
Genomica has closed its office in the United Kingdom and the Boulder, Colorado
office was consolidated from 42,000 square feet to 18,000 square feet. The
remaining 24,000 square feet of Genomica's facilities in Boulder have been
subleased. Losses relating to subleases are included in the $4.3 million
restructuring charge. Genomica's asset impairments were primarily due to the
consolidation of operations, facilities closures and excess equipment that was
taken out of service or disposed of.
Genomica may institute additional cost reduction initiatives. As a result,
there could be additional charges related to severance liabilities and asset
impairments.
Genomica's restructuring plan was adopted subsequent to September 30, 2001,
and, therefore, its financial position as of September 30, 2001 and the results
of operations for the nine months then ended do not reflect the effects of the
charges discussed above. The following summarizes Genomica's financial
statements had these charges been included as of and for the nine months ended
September 30, 2001.
PRO FORMA
BALANCE SHEET DATA
SEPTEMBER 30, 2001
------------------
Property and equipment, net................................. $ 3,300,000
============
Total assets................................................ $117,100,000
============
Total current liabilities................................... $ 4,300,000
============
Total stockholders' equity.................................. $112,800,000
============
PRO FORMA
STATEMENTS OF
OPERATIONS DATA
FOR THE NINE
MONTHS ENDED
SEPTEMBER 30, 2001
------------------
Net loss.................................................... $(21,300,000)
============
Net loss per share, basic and diluted....................... $ (0.95)
============
RESULTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 2001 COMPARED TO NINE MONTHS ENDED SEPTEMBER
30, 2000
Total Revenue. Total revenue increased to $1.3 million from $1.2 million
for the same period of 2000. The revenue growth is primarily due to $57,000 of
consulting fees and $64,000 of royalty fees from Genomica's Linkmapper product
sold through Applied Biosystems. The consulting fees were from two
79
consulting projects, one completed in April 2001 and the other completed in
September 2001. Grant revenues of $27,000 were recognized for the first quarter
of 2000; there were no grant revenues in 2001 as the grant was completed in
February of 2000. Revenue from Genomica's Discovery Manager software may
decrease in the future if current customers decide not to renew their contracts.
Costs of Revenue. Costs of revenue increased to $286,000 in 2001 from
$281,000 for the same period of 2000. The increase is primarily due to increased
customer support costs and costs associated with Genomica's consulting fee
revenue, partially offset by decreased costs of research grants. Genomica
expects its costs of revenue to decrease substantially due to its change in
strategy.
Research and Development. Research and development expenses increased to
$10.8 million in 2001 from $8.9 million for the same period of 2000. Excluding
non-cash compensation charges of $1.2 million in 2001 and $3.4 million in 2000,
research and development expenses increased $4.1 million. The increase in costs
is primarily due to increased salaries, recruiting, and other personnel costs
associated with Genomica's hiring additional software developers and scientists
to develop scientific applications using Java technology and Oracle
Corporation's relational database management system in early 2001. Genomica has
substantially reduced its research and development activity by terminating 75 of
its 108 employees; Genomica expects research and development expenses will
decrease significantly due to its change in corporate strategy.
Selling and Marketing. Selling and marketing expenses increased to $5.9
million in 2001 from $5.1 million for the same period of 2000. Excluding
non-cash compensation charges of $2.2 million in 2001 and $2.8 million in 2000,
selling and marketing costs increased $1.4 million. Additional salaries, other
personnel costs, consulting, travel, advertising, and exhibition costs comprised
the majority of the increase for the period. Selling and marketing expenses will
decrease significantly as Genomica terminated all 16 of its employees in the
sales and marketing departments due to its change in corporate strategy.
Genomica is not currently marketing any of its existing products and has no
plans to do so in the immediate future.
General and Administrative. General and administrative expenses decreased
to $5.8 million in 2001 from $7.0 million for the same period of 2000. Excluding
non-cash compensation charges of $2.5 million in 2001 and $5.2 million in 2000,
general and administrative costs increased $1.5 million. The cost increase for
the period is primarily related to salaries, and other personnel costs, investor
relations and reporting costs associated with being a public company. Genomica
expects general and administrative expenses will decrease in the immediate
future as Genomica terminated ten of its 18 general and administrative employees
and due to its change in corporate strategy.
Non-cash Stock-based Compensation. Non-cash charges representing the
amortization of deferred stock compensation totaled $5.8 million for the period
in 2001 compared to $11.4 million for the comparative period in 2000. The
decrease in non-cash compensation expense is due to the method of amortizing
Genomica's deferred compensation, which results in the recognition of a larger
portion of expense in the initial periods after grant, and due to employees who
left the company. Genomica expects non-cash compensation expense to decrease in
the future due to the termination of employees resulting from its change in
strategic direction.
Interest Income. Interest income increased to $5.0 million in 2001 from
$617,000 in the same period of 2000. The increase is due to Genomica's higher
cash and investment balances resulting from the proceeds of its initial public
offering. The proceeds from Genomica's initial public offering have been
invested in investment grade securities to be used as needed. Genomica expects a
lower average rate of return on its investment portfolio in the future as
securities mature and are reinvested into lower interest bearing securities
caused by current market conditions. Due to Genomica's cost reduction plan,
Genomica will significantly reduce the amount of cash used to fund its operating
losses in future periods.
Other Expense. Other expense increased $518,000 in 2001 from $0 in 2000
because Genomica reserved for the uncollectability of a note receivable during
the quarter. The impairment of the note was due to unfavorable changes in market
conditions in the financing industry, which prevented the issuer of the note
from obtaining sufficient capital to fund its operations at a level which would
have indicated that this note would be repaid. The initial investment in the
note receivable was made in the first quarter of 2001.
80
Deemed Dividend Related to Beneficial Conversion Feature of Preferred
Stock. In 2000, Genomica incurred charges of approximately $17.1 million
related to the issuance of its Series C and Series D preferred stock. All of
Genomica's preferred stock converted to common stock upon the closing of its
initial public offering on October 4, 2000. There was no comparable charge for
the same period in 2001.
YEAR ENDED DECEMBER 31, 2000 COMPARED TO YEAR ENDED DECEMBER 31, 1999
Total Revenue. Total revenue increased to $1,642,000 in 2000 from $781,000
for the same period of 1999. The revenue growth was due primarily to licensing
Genomica's software to an increased number of pharmaceutical and biotechnology
organizations. Genomica recognized revenue from consulting services of $23,000
in 2000; no such revenue was recognized in 1999. Grant revenue of $27,000 was
recognized in 2000 compared to $159,000 in 1999. Grant revenue decreased for the
year 2000 due to the completion of the grant in February 2000.
Costs of Revenue. Costs of revenue decreased to $384,000 in 2000 from
$447,000 in 1999. The decrease was due primarily to decreased costs of research
grants in 2000. Genomica's research grants paid for Genomica's direct costs of
performing specified research projects and a portion of its other operating
expenses.
Research and Development. Research and development expenses increased to
$12.0 million in 2000 from $4.9 million in 1999. Nearly $4.4 million of the
increase was attributable to non-cash compensation expense from options for
common stock issued to employees, as discussed below. There was $846,000 of non-
cash compensation expense in 1999. The remainder of the increase is primarily
due to increased salaries, recruiting, and other personnel costs associated with
Genomica's engaging additional software developers.
Selling and Marketing. Selling and marketing expenses increased to $7.2
million in 2000 from $1.7 million in 1999. Approximately $4.0 million of the
increase was related to non-cash compensation expense from options for common
stock issued to employees, as discussed below. There was $85,000 of non-cash
compensation expense in 1999. The remaining increase is primarily attributable
to additional salaries, consulting, other personnel costs and travel associated
with the expansion of Genomica's selling and marketing team.
General and Administrative. General and administrative expenses increased
to $9.0 million in 2000 from $1.7 million in 1999. Approximately $6.3 million of
the increase is attributable to non-cash compensation expense from options for
common stock issued to employees, as discussed below. There was only $738,000 of
non-cash compensation expense in 1999.
Non-cash Stock-based Compensation. In connection with the grant of stock
options to employees at exercise prices between $0.75 and $10.02 per share,
Genomica recorded deferred stock compensation of $25.6 million for the year
ended December 31, 2000. In addition, Genomica recorded approximately $200,000
of deferred compensation in connection with the issuance of options for common
stock to certain advisors of the company. Amortization of deferred stock
compensation totaled $14.7 million for the year ended December 31, 2000.
Interest Income. Interest income increased to $2.6 million in 2000 from
$419,000 in 1999. The increase was attributable to Genomica's higher cash and
investment balances in these periods resulting from the proceeds of sales of
preferred stock and Genomica's initial public offering.
Interest Expense. Interest expense increased to $45,000 in 2000 compared
to $18,000 in 1999. The increase was attributable to higher average outstanding
debt related to capital leases for equipment. These capital leases were repaid
in the fourth quarter of 2000 with a portion of the proceeds from Genomica's
initial public offering.
YEAR ENDED DECEMBER 31, 1999 COMPARED TO YEAR ENDED DECEMBER 31, 1998
Total Revenue. Total revenue increased to $781,000 in 1999 from $197,000
in 1998. This increase was due primarily to licensing Genomica's software to an
increased number of pharmaceutical and biotechnology
81
organizations. Genomica also recognized revenue from research grants of $159,000
in 1999; no such revenue was recognized in 1998.
Costs of Revenue. Costs of revenue increased to $447,000 in 1999 from
$141,000 in 1998. This increase was due to approximately $90,000 from additional
customer service and support costs, $57,000 from software royalty payments for
third-party software licenses and $159,000 from costs associated with research
grants.
Research and Development. Research and development expenses increased to
$4.9 million in 1999 from $2.3 million in 1998. The increase was primarily
related to an increase in salaries and other personnel costs in 1999 related to
engaging additional software developers. Genomica also incurred non-cash
compensation expense of $846,000 in 1999 from options for common stock issued
with exercise prices below the deemed market value of the common stock for
financial reporting purposes, as discussed below.
Selling and Marketing. Selling and marketing expenses increased to $1.7
million in 1999 from $634,000 in 1998. The increase was due primarily to
increases in personnel and travel costs from the expansion of Genomica's selling
and marketing team. Genomica also increased its product marketing expenses to
enhance the visibility of its product. Genomica incurred non-cash compensation
expense of $85,000 in 1999 for options for common stock issued to employees, as
discussed below.
General and Administrative. General and administrative expenses increased
to $1.7 million in 1999 from $884,000 in 1998, an increase of $839,000. The
increase was due primarily to additions to Genomica's management team. Genomica
incurred non-cash compensation expense of $738,000 in 1999 from options for
common stock issued to employees, as discussed below.
Non-cash Stock-based Compensation. In connection with the grant of stock
options to employees, Genomica recorded deferred stock compensation of $7.4
million during the year ended December 31, 1999, of which $1.7 million was
expensed in 1999.
Interest Income. Interest income increased to $419,000 in 1999 from
$90,000 in 1998. The increase was due primarily to Genomica's higher average
cash and investment balances during 1999 as a result of a private placement of
equity securities in February 1999 and December 1998.
Interest Expense. Interest expense decreased to $18,000 in 1999 from
$55,000 in 1998 due primarily to lower average debt outstanding during 1999
following the conversion of a note payable to equity in 1998.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 2001, Genomica had cash, cash equivalents and
investments of approximately $110.8 million, down from $123.9 million of cash,
cash equivalents and investments at December 31, 2000.
During the nine months ended September 30, 2001, Genomica used cash of
approximately $10.3 million to fund its net losses of $17.0 million. Genomica's
investing activities for the nine months ended September 30, 2001 used cash of
$11.9 million and consisted of $8.4 million in net purchases and maturities of
investments and $3.5 million in purchases of leasehold improvements, property
and equipment primarily related to increasing our staff levels.
Genomica's financing activities for the year ended December 31, 2000
generated $130.5 million comprised primarily of $112.5 million in net proceeds
from its initial public offering and $18.0 million in net proceeds from sales of
preferred stock. Genomica's financing activities for the nine months ended
September 30, 2001 consisted only of the exercise of stock options. These stock
option exercises accounted for $162,399 in proceeds during that period.
During the year ended December 31, 2000, Genomica used cash of
approximately $10.4 million to fund its net losses of $24.4 million. Genomica's
investing activities for the year ended December 31, 2000 used cash of $97.8
million, and consisted of $95.0 million in net purchases and maturities of
investments and $2.8 million in purchases of property and equipment used in its
business.
82
Following the cash effects of Genomica's restructuring changes, Genomica
expects its usage of cash to decrease significantly to near break-even. Genomica
believes that its cash, cash equivalents and short-term investments are
sufficient to fund its working capital requirements for the foreseeable future.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The primary objective of Genomica's investment activities is to preserve
principal while at the same time maximize the income Genomica receives from its
investments without significantly increasing risk. Some of the securities that
Genomica invests in may have market risk. This means that a change in prevailing
interest rates or a change in the credit of any companies represented by such
securities may cause the market value of the investment to fluctuate. For
example, if Genomica holds a security that was issued with a fixed interest rate
at the then-prevailing rate and the prevailing interest rate later rises, the
market value of Genomica's investment will probably decline. For investments
held at September 30, 2001, a 1% change in the interest rate would change the
value of Genomica's investments by approximately $1 million. In addition, if
Genomica holds a security that was rated on the credit risk of certain companies
and any of these company's credit is downgraded, the market value of Genomica's
investment will probably decline. To minimize this risk in the future, Genomica
intends to maintain its portfolio of cash equivalents and short-term investments
in a variety of securities, including commercial paper, money market funds,
government and non-government debt securities. Set forth below is quantitative,
tabular disclosure relating to Genomica's investments, as of September 30, 2001:
MATURITY DATES
------------------------------------------------------------------------
2001 2002 2003 TOTAL FAIR VALUE
----------- ----------- -------------- ------------ ------------
Marketable Debt
Securities,
Principal Values... $13,338,000 $63,403,000 $27,519,000 $104,260,000 $107,100,959
Average Interest
Rate............... 6.851% 6.630% 6.209% 6.547%
83
SECURITY OWNERSHIP BY CERTAIN BENEFICIAL OWNERS OF GENOMICA
The following table sets forth certain information regarding the beneficial
ownership of Genomica's common stock as of December 28, 2001 by: (i) each
director of Genomica; (ii) the chief executive officer and the four other most
highly compensated executive officers of Genomica for the fiscal year ended
December 31, 2000, whose salary and incentive compensation for the fiscal year
ended December 31, 2000 exceeded $100,000; (iii) all directors and executive
officers of Genomica as a group; and (vi) all those known by Genomica to be
beneficial owners of more than 5% of its outstanding common stock. The table is
based on information supplied by each stockholder or contained in filings made
with the Securities and Exchange Commission. Beneficial ownership is determined
according to the rules of the Securities and Exchange Commission and generally
means that a person has beneficial ownership of a security if the person has
voting or investment power over that security, and includes any shares of
Genomica common stock which the individual or entity has the right to acquire
within 60 days of December 28, 2001 through the exercise of any stock option or
other right. Except as otherwise indicated, Genomica believes that the
beneficial owners of the common stock listed below, based on the information
each of them has given to Genomica, have sole investment and voting power with
respect to their shares.
This table lists applicable percentage ownership based on 23,219,783 shares
of common stock outstanding as of December 28, 2001. Options and warrants to
purchase shares of Genomica's common stock that are exercisable within 60 days
of December 28, 2001 are deemed to be beneficially owned by the persons holding
these options and warrants for the purpose of computing percentage ownership of
that person, but are not treated as outstanding for the purpose of computing any
other person's ownership percentage. Shares underlying options and warrants that
are deemed beneficially owned are listed in this table separately in the column
labeled "Shares Subject to Options and Warrants." These shares are included in
the number of shares listed in the column labeled "Total Number." Unless
otherwise indicated, the address of each person or entity named below is c/o
Genomica Corporation, 1715 38th Street, Boulder, Colorado 80301.
SHARES BENEFICIALLY OWNED
--------------------------------------------------
SHARES SUBJECT
TOTAL TO OPTIONS PERCENTAGE
NAME OF BENEFICIAL OWNER NUMBER(1) AND WARRANTS BENEFICIALLY OWNED
------------------------ ------------ -------------- ------------------
The Kaufmann Fund, Inc.(2)......................... 3,989,272 -- 17.2%
Perry Corp.(3)..................................... 3,215,700 -- 13.8
Richard C. Perry(4)................................ 3,215,700 -- 13.8
Perry Partners International, Inc.(5).............. 2,271,570 -- 9.8
Falcon Technology Partners, L.P.(6)................ 3,066,141 -- 13.2
ARCH Venture Fund III, L.P.(7)..................... 1,719,157 7.4
Teresa W. Ayers.................................... 700,032 300,008 3.0
Thomas G. Marr..................................... 843,365 333,366 3.6
Kenneth S. Rubin................................... 446,666 288,020 1.9
Daniel R. Hudspeth(8).............................. 258,365 91,699 1.1
Sean M. Ryan(9).................................... 62,500 62,500 *
James L. Rathmann(10).............................. 3,111,141 5,000 13.4
Ralph E. Christoffersen............................ 20,000 20,000 *
Robert T. Nelsen(11)............................... 1,727,157 5,000 7.4
William E. Rich.................................... 5,000 5,000 *
Michael J. Savage(12).............................. 9,417 2,917 *
All directors and executive officers as a
group(13)........................................ 7,333,642 1,263,509 30.1%
84
---------------
* Less than 1%
(1) Shares underlying options and warrants that are deemed beneficially owned
are listed in this table separately in the column labeled "Shares Subject
to Options and Warrants." These shares are included in the number of shares
listed in the column labeled "Total Number."
(2) The address of The Kaufmann Fund, Inc. is 140 East 45th Street, 43rd Floor,
New York, New York 10017.
(3) Includes 2,271,570 shares held by Perry Partners International, Inc. The
address of Perry Corp. is 599 Lexington Avenue, New York, New York 10022.
(4) Includes shares held by Perry Corp., of which Mr. Perry is the President
and sole shareholder.
(5) The address of Perry Partners International, Inc. is 599 Lexington Avenue,
New York, New York 10022. Perry Partners International, Inc. is a private
investment fund managed by Perry Corp.
(6) The address of Falcon Technology Partners, L.P. is Dorset Road, Devon,
Pennsylvania 19333.
(7) The address of ARCH Venture Fund III, L.P. is 8725 West Higgins Road, Suite
290, Chicago, Illinois 60631.
(8) Includes 166,666 shares held by Daniel R. and Karla R. Hudspeth Trust, of
which Mr. Hudspeth and his wife are trustees.
(9) Mr. Ryan resigned his employment with Genomica effective as of November 9,
2001.
(10) Includes shares held by Falcon Technology Partners, L.P., of which Mr.
Rathmann is the General Partner.
(11) Includes shares held by ARCH Venture Fund III, L.P. The sole general
partner of ARCH Venture Fund III, L.P. is ARCH Venture Partners, LLC. Mr.
Nelsen is the managing director of ARCH Ventures Partners, LLC, and may be
deemed to be the indirect beneficial owner of these shares. Mr. Nelsen
disclaims beneficial ownership of these shares except to the extent of his
pecuniary interest therein.
(12) Includes shares held by the Savage Family Revocable Trust, of which Mr.
Savage is trustee.
(13) Includes 1,263,059 shares of common stock issuable upon exercise of stock
options.
85
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL DATA
The following unaudited pro forma condensed combined financial statements
give effect to the proposed merger of Exelixis and Genomica, the 2001
acquisition of a majority of the outstanding capital stock of Artemis and the
2000 acquisition of Agritope, applying the purchase method of accounting in each
transaction. The unaudited pro forma condensed combined balance sheet gives
effect to the merger of Exelixis and Genomica as if it had occurred on September
30, 2001. The acquisitions of Artemis and Agritope occurred on May 14, 2001 and
December 8, 2000, respectively; accordingly, the unaudited consolidated balance
sheet of Exelixis at September 30, 2001 reflects the acquisitions of Artemis and
Agritope. The unaudited pro forma condensed combined statements of operations
give effect to the proposed merger of Exelixis and Genomica, and the
acquisitions of Artemis and Agritope, as if they had all occurred on the first
day of each period presented.
For pro forma purposes, (i) Exelixis' unaudited consolidated balance sheet
as of September 30, 2001 has been combined with Genomica's unaudited
consolidated balance sheet as of September 30, 2001, (ii) Exelixis' audited
consolidated statement of operations for the year ended December 31, 2000, which
includes the results of Agritope subsequent to the acquisition date of December
8, has been combined with Agritope's unaudited statement of operations for the
period from January 1, 2000 to December 7, 2000 and with Artemis' audited
statement of operations for the year ended December 31, 2000, (iii) Exelixis'
unaudited consolidated statement of operations for the nine months ended
September 30, 2001, which includes the results of operations of Artemis
subsequent to the acquisition date of May 14, 2001, has been combined with
Artemis' unaudited statement of operations for the period from January 1, 2001
to May 13, 2001 and (iv) the Exelixis/Agritope/Artemis unaudited pro forma
condensed combined statement of operations for the year ended December 31, 2000,
and the Exelixis/Artemis unaudited pro forma condensed combined statement of
operations for the nine months ended September 30, 2001, have been combined with
Genomica's audited consolidated statement of operations for the year ended
December 31, 2000 and unaudited consolidated statement of operations for the
nine months ended September 30, 2001, respectively.
The unaudited pro forma condensed combined financial information has been
prepared on the basis of assumptions described in the notes thereto and includes
assumptions relating to the allocation of the consideration paid for the assets
and liabilities of Genomica based on management's preliminary estimates of their
fair value. Under the purchase method of accounting, the aggregate consideration
paid is allocated to the tangible and identifiable intangible assets acquired
and liabilities assumed on the basis of their respective fair values on the
transaction date. As the estimated fair value of the net assets acquired exceeds
the estimated purchase price, the estimated fair values of all long term assets
were reduced to zero for purchase accounting purposes. After such a reduction in
values, and in accordance with Statement of Financial Accounting Standards No.
141, "Business Combinations," estimated negative goodwill of approximately
$808,000 will be recorded as an extraordinary gain in Exelixis' statement of
operations upon consummation of the merger. The extraordinary gain has been
excluded from the pro forma statements of operations due to its non-recurring
nature. The final allocation of such consideration may differ from that
reflected in the unaudited pro forma condensed combined financial information.
Exelixis does not expect that the final allocation of the aggregate purchase
price for the merger will differ materially from the preliminary allocations. In
the opinion of Exelixis, all adjustments necessary to present fairly such
unaudited pro forma condensed combined financial information have been made
based on the proposed terms and structure of the merger.
The unaudited pro forma information has been prepared in accordance with
the rules and regulations of the Securities and Exchange Commission and is
presented for illustrative purposes only. Such information is not necessarily
indicative of the operating results or financial position that would have
occurred if the merger had been consummated on the first day of each period
presented or September 30, 2001, respectively, nor is it necessarily indicative
of future operating results or financial position.
These pro forma condensed combined financial statements are qualified in
their entirety by reference to and should be read in conjunction with the
historical consolidated financial statements and the related notes thereto and
"Exelixis Management's Discussion and Analysis of Financial Condition and
Results of Operations" incorporated by reference into this prospectus and
"Genomica Management's Discussion and Analysis of Financial Condition and
Results of Operations" included elsewhere in this prospectus.
86
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 2000
EXELIXIS/ EXELIXIS/
AGRITOPE/ AGRITOPE/ EXELIXIS/
ARTEMIS ARTEMIS GENOMICA
PRO FORMA PRO FORMA PRO FORMA PRO FORMA
EXELIXIS AGRITOPE ARTEMIS ADJUSTMENTS COMBINED GENOMICA ADJUSTMENTS COMBINED
-------- -------- ------- ----------- --------- -------- ----------- ---------
(IN THOUSANDS, EXCEPT PER SHARE INFORMATION)
Revenues:
Product sales, software
licenses and other........ $ -- $ 4,267 $ -- $ -- $ 4,267 $ 1,615 $ -- $ 5,882
License..................... 3,776 -- -- -- 3,776 -- -- 3,776
Contract and government
grants.................... 20,983 3,181 1,634 -- 25,798 27 -- 25,825
-------- -------- ------- -------- -------- -------- ----- --------
Total revenues............ 24,759 7,448 1,634 -- 33,841 1,642 -- 35,483
-------- -------- ------- -------- -------- -------- ----- --------
Operating expenses:
Costs of revenues........... -- 5,188 -- -- 5,188 384 -- 5,572
Research and development.... 48,456 4,461 5,215 -- 58,132 12,047 (469)E 69,710
Selling, general and
administrative............ 18,907 8,581 1,380 -- 28,868 16,162 (269)E 44,761
Amortization of goodwill and
intangibles............... 260 -- -- 5,347G 5,607 -- -- 5,607
Acquired in-process research
and development........... 38,117 -- -- (38,117)H -- -- -- --
-------- -------- ------- -------- -------- -------- ----- --------
Total operating
expenses................ 105,740 18,230 6,595 (32,770) 97,795 28,593 (738) 125,650
-------- -------- ------- -------- -------- -------- ----- --------
Loss from operations.......... (80,981) (10,782) (4,961) 32,770 (63,954) (26,951) 738 (90,167)
Other income (expense):
Interest income............. 6,225 86 281 -- 6,592 2,632 -- 9,224
Interest expense............ (679) (190) (300) -- (1,169) (44) -- (1,213)
Other, net.................. 23 (335) (4) -- (316) -- -- (316)
-------- -------- ------- -------- -------- -------- ----- --------
Total other income
(expense)............... 5,569 (439) (23) -- 5,107 2,588 -- 7,695
Minority interest in
subsidiary net loss......... 101 952 -- -- 1,053 -- -- 1,053
-------- -------- ------- -------- -------- -------- ----- --------
Net loss...................... (75,311) (10,269) (4,984) 32,770 (57,794) (24,363) 738 (81,419)
Deemed dividend related to
beneficial conversion
feature of preferred
stock....................... -- -- -- -- -- (17,109) -- (17,109)
-------- -------- ------- -------- -------- -------- ----- --------
Net loss attributable to
common stockholders......... $(75,311) $(10,269) $(4,984) $ 32,770 $(57,794) $(41,472) $ 738 $(98,528)
======== ======== ======= ======== ======== ======== ===== ========
Net loss per common share,
basic and diluted........... $ (2.43) $ (2.01)
======== ========
Weighted average shares used
in computing net loss per
common share, basic and
diluted..................... 31,031 49,028
======== ========
See notes to unaudited pro forma condensed combined financial statements.
87
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 2001
EXELIXIS/ EXELIXIS/ EXELIXIS/
ARTEMIS ARTEMIS GENOMICA
PRO FORMA PRO FORMA PRO FORMA PRO FORMA
EXELIXIS ARTEMIS ADJUSTMENTS COMBINED GENOMICA ADJUSTMENTS COMBINED
-------- ------- ----------- --------- -------- ----------- ---------
(IN THOUSANDS, EXCEPT PER SHARE INFORMATION)
Revenues:
Product sales, software
licenses and other......... $ -- $ -- $ -- $ -- $ 1,293 $ -- $ 1,293
License...................... 4,564 -- -- 4,564 -- -- 4,564
Contract and government
grants..................... 23,649 256 -- 23,905 -- -- 23,905
-------- ------- ------- --------- -------- ------ --------
Total revenues............. 28,213 256 -- 28,469 1,293 -- 29,762
-------- ------- ------- --------- -------- ------ --------
Operating expenses:
Costs of revenues............ -- -- -- -- 286 -- 286
Research and development..... 59,836 2,478 -- 62,314 10,849 (964)E 72,199
Selling, general and
administrative............. 14,597 828 -- 15,425 11,657 (318)E 26,764
Amortization of goodwill and
intangibles................ 3,673 -- 513G 4,186 -- -- 4,186
Acquired in-process research
and development............ 6,673 -- (6,673)H -- -- -- --
-------- ------- ------- --------- -------- ------ --------
Total operating expenses... 84,779 3,306 (6,160) 81,925 22,792 (1,282) 103,435
-------- ------- ------- --------- -------- ------ --------
Loss from operations........... (56,566) (3,050) 6,160 (53,456) (21,499) 1,282 (73,673)
Other income (expense):
Interest income.............. 5,064 74 -- 5,138 5,016 -- 10,154
Interest expense............. (1,460) (114) -- (1,574) -- -- (1,574)
Other, net................... 45 -- -- 45 (517) -- (472)
-------- ------- ------- --------- -------- ------ --------
Total other income
(expense)................ 3,649 (40) -- 3,609 4,499 -- 8,108
-------- ------- ------- --------- -------- ------ --------
Net loss....................... $(52,917) $(3,090) $ 6,160 $ (49,847) $(17,000) $1,282 $(65,565)
======== ======= ======= ========= ======== ====== ========
Net loss per share, basic and
diluted...................... $ (1.15) $ (1.20)
======== ========
Weighted average shares used in
computing net loss per share,
basic and diluted............ 45,848 54,812
======== ========
See notes to unaudited pro forma condensed combined financial statements.
88
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
SEPTEMBER 30, 2001
PRO FORMA PRO FORMA
EXELIXIS GENOMICA ADJUSTMENTS COMBINED
-------- -------- ----------- ---------
(IN THOUSANDS)
ASSETS
Current assets:
Cash and cash equivalents................... $ 42,813 $ 3,729 $ -- $ 46,542
Short-term investments...................... 89,470 65,053 -- 154,523
Accounts receivable, net.................... -- 247 -- 247
Other receivables........................... 2,368 2,320 -- 4,688
Other current assets........................ 2,671 344 -- 3,015
-------- -------- ------- --------
Total current assets..................... 137,322 71,693 -- 209,015
Long-term investments......................... -- 42,048 -- 42,048
Property and equipment, net................... 35,870 4,971 (4,971)A 35,870
Related party receivables..................... 1,021 -- -- 1,021
Goodwill and other intangible assets.......... 67,454 115 (115)A 67,454
Other assets.................................. 5,050 9 (9)A 5,050
-------- -------- ------- --------
Total assets............................. $246,717 $118,836 $(5,095) $360,458
======== ======== ======= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses....... $ 11,581 $ 1,161 $ 4,100B $ 16,842
Current portion of capital lease
obligations.............................. 6,239 -- -- 6,239
Current portion of notes payable............ 3,589 -- -- 3,589
Deferred revenue............................ 12,908 610 (610)F 12,908
-------- -------- ------- --------
Total current liabilities................ 34,317 1,771 3,490 39,578
Capital lease obligations..................... 9,881 -- -- 9,881
Notes payable................................. 828 -- -- 828
Convertible promissory note................... 30,000 -- -- 30,000
Other long-term liability..................... 200 -- -- 200
Deferred revenue.............................. 22,080 -- -- 22,080
-------- -------- ------- --------
Total liabilities........................ 97,306 1,771 3,490 102,567
-------- -------- ------- --------
Stockholders' equity:
Common stock................................ 50 23 (15)C,D 58
Treasury stock, at cost..................... -- (20) 20C --
Options and warrants........................ -- 22,690 (22,690)C --
Additional paid-in-capital.................. 338,326 177,393 (64,367)C,D 451,352
Notes receivable from stockholders.......... (1,624) -- -- (1,624)
Deferred stock compensation, net............ (5,355) (9,563) 9,563C (5,355)
Accumulated other comprehensive income...... 969 1,231 (1,231)C 969
Accumulated deficit......................... (182,955) (74,689) 75,497C,A (182,147)
-------- -------- ------- --------
Total stockholders' equity............... 149,411 117,065 (8,585) 262,446
-------- -------- ------- --------
Total liabilities and stockholders'
equity................................. $246,717 $118,836 $(5,095) $360,458
======== ======== ======= ========
See notes to unaudited pro forma condensed combined financial statements.
89
NOTES TO UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL STATEMENTS
NOTE 1. BASIS OF PRESENTATION
GENOMICA
On November 19, 2001, Exelixis entered into an Agreement and Plan of Merger
and Reorganization to acquire all the outstanding shares of Genomica. Pursuant
to the terms of the merger agreement, the unaudited pro forma condensed combined
financial information reflects the issuance of approximately 8.2 million shares
of Exelixis common stock in exchange for all of the outstanding shares of
Genomica common stock. The assumed number of shares of Exelixis common stock to
be issued is based on Genomica's capitalization at October 31, 2001 and assumes
an exchange ratio of 0.33582 of a share of Exelixis common stock for each
outstanding share of Genomica common stock. For pro forma purposes, the exchange
ratio was calculated by dividing $13.30285, which equals 95% of the average
closing sales price of Exelixis, as reported on the Nasdaq National Market, for
the ten trading days ending on and including November 16, 2001, into the
quotient of $110.0 million divided by the outstanding Genomica common stock and
vested Genomica stock options and warrants with exercise prices less than $5.00
per share as of October 31, 2001. Certain warrants to purchase approximately
53,000 shares of Genomica common stock will be assumed by Exelixis pursuant to
the merger and converted into warrants to purchase approximately 18,000 shares
of Exelixis common stock. The actual exchange ratio will be determined by
dividing $13.30285, or if greater than $13.30285, the average closing sales
price of Exelixis, as reported on the Nasdaq National Market, for the 18 trading
days ending two trading days before the expiration of the initial offering
period, into the quotient of $110.0 million divided by the sum of the number of
shares of Genomica common stock and Genomica preferred stock plus the number of
shares of Genomica common stock issuable upon the exercise of all Genomica stock
options and warrants with per share exercise prices of $5.00 or less, each as
outstanding as of the date Exelixis first accepts shares of Genomica common
stock for payment pursuant to the exchange offer.
Total estimated consideration for the proposed merger, assuming an October
31, 2001 measurement date, is approximately $108.5 million which consists of
Exelixis common stock and warrants valued at $107.7 million and estimated
Exelixis transaction costs of $800,000. Exelixis transaction costs include
legal, accounting and other fees.
The preliminary allocation of the aggregate purchase price to the tangible
and identifiable intangible assets acquired and liabilities assumed in
connection with this acquisition was based on estimated fair values as
determined by management. The preliminary purchase price allocation is
summarized below (in thousands):
Tangible assets acquired.................................... $113,741
Extraordinary gain -- negative goodwill..................... (808)
Liabilities assumed......................................... (4,461)
--------
$108,472
========
As the estimated fair value of the net assets exceeds the estimated
purchase price, the estimated fair values of all long-term assets were reduced
to zero for purchase accounting purposes. After such a reduction in values, and
in accordance with Statement of Financial Accounting Standards No. 141,
"Business Combinations," estimated negative goodwill of approximately $808,000
will be recorded as an extraordinary gain in Exelixis' statement of operations
upon consummation of the merger. The extraordinary gain has been excluded from
the pro forma statements of operations due to its non-recurring nature.
For pro forma purposes the estimated fair value of Exelixis common stock
was $13.30285 per share. The actual fair value of Exelixis common stock will be
either $14.78 per share, which represents the average closing sales price of
Exelixis common stock for the five day trading period surrounding November 19,
2001 (the day the merger was announced), or $13.30285 if the market value of
Exelixis common stock is below $13.30285 on the expiration date of the exchange
offer. If $14.78 had been used as the fair value per share of
90
NOTES TO UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Exelixis common stock in the pro forma calculations as of October 31, 2001,
total estimated consideration would have been $121.1 million.
ARTEMIS
In May 2001, Exelixis acquired a majority of the outstanding capital stock
of Artemis Pharmaceuticals GmbH, a privately held genetics and functional
genomics company organized under the laws of Germany. The transaction, which was
accounted for under the purchase method of accounting, was effected through the
exchange of shares of Exelixis common stock for DEM 1.00 of nominal value of
Artemis capital stock, using an exchange ratio of 4.064 to one. Approximately
1.6 million shares of Exelixis common stock were issued in exchange for 78% of
the outstanding capital stock of Artemis held by the Artemis stockholders. In
addition, Exelixis received a call option, or Call Option, from, and issued a
put option, or Put Option, to, certain stockholders of Artemis, or Option
Holders, for the issuance of approximately 480,000 shares of Exelixis common
stock in exchange for the remaining 22% of the outstanding capital stock of
Artemis held by the Artemis stockholders. Exelixis may exercise the Call Option
at any time from May 14, 2001 through January 31, 2002, and the Option Holders
may exercise their rights under the Put Option at any time from April 1, 2002
through May 15, 2002. In connection with the acquisition of Artemis, Exelixis
also issued fully vested rights to purchase approximately 187,000 additional
shares of Exelixis common stock to Artemis employees in exchange for such
employees' vested options formerly representing the right to purchase shares of
Artemis capital stock pursuant to an Employee Phantom Stock Option Program.
The total consideration for the acquisition was approximately $22.3
million, which consisted of Exelixis common stock and options valued at $21.4
million and Exelixis transaction costs of $900,000. Exelixis' transaction costs
include financial advisory, legal, accounting and other fees.
Based upon an independent valuation of the tangible and intangible assets
acquired, Exelixis management has allocated the total cost of the acquisition to
the assets acquired and liabilities assumed as follows (in thousands):
Tangible assets acquired.................................... $ 6,848
In-process research and development......................... 6,673
Developed technology........................................ 1,240
Assembled workforce......................................... 1,332
Goodwill.................................................... 9,655
Patents/core technology..................................... 571
Liabilities assumed......................................... (4,016)
-------
$22,303
=======
Exelixis is amortizing the acquired intangible assets using the following
estimated useful lives:
Developed technology........................................ 5 years
Patents/core technology..................................... 15 years
Assembled workforce......................................... 3 years
Goodwill.................................................... 15 years
The valuation of the purchased in-process research and development of $6.7
million was based upon the results of an independent valuation using the income
approach for each of the three significant in-process projects. The in-process
projects relate primarily to the development of technologies that use vertebrate
genetic model organisms, zebrafish and mice, to identify and functionally
validate novel genes in vivo. These genes can be used as novel screening targets
or as the basis for secreted proteins in clinically and commercially relevant
diseases. The in-process projects are expected to be completed over the next 18
months. The income approach estimates the value of each acquired in-process
project based on its expected future cash flows. The
91
NOTES TO UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
valuation analysis considered the contribution of the core technology as well as
the percent complete of each in-process research and development project. The
expected present value of the cash flows associated with the in-process research
and development projects was computed using a risk adjusted rate of return of
30%, which is considered commensurate with the overall risk and percent complete
of the in-process projects. The purchased in-process research and development
was not considered to have reached technological feasibility, and it has no
alternative future use, accordingly, it has been recorded as a component of
operating expense.
The revenues, expenses, cash flows and other assumptions underlying the
estimated fair value of the acquired in-process research and development involve
significant risks and uncertainties. The risks and uncertainties associated with
completing the acquired in-process projects include the ability to reach future
research milestones since the technologies being developed are unproven, the
ability to retain key personal, the ability to obtain licenses to key
technology, and the ability to avoid infringing on patents and propriety rights
of third parties.
AGRITOPE
On December 8, 2000, Exelixis completed its acquisition of Agritope, Inc.
("Agritope"). The transaction, which was accounted for under the purchase method
of accounting, was effected through the exchange of 0.35 of a share of Exelixis
common stock for each outstanding share of Agritope capital stock. Approximately
1.7 million shares of Exelixis common stock were issued in connection with the
transaction. In addition, unexpired and unexercised options and warrants to
purchase shares of Agritope capital stock were assumed by Exelixis pursuant to
the transaction and converted into fully vested options and warrants to purchase
approximately 880,000 shares of Exelixis common stock.
The total consideration for the acquisition was approximately $93.5
million, which consists of Exelixis common stock, options and warrants valued at
$92.2 million and estimated Exelixis transaction costs of $1.3 million. Exelixis
transaction costs include financial advisory, legal, accounting and other fees.
Based upon an independent valuation of the tangible and intangible assets
acquired, Exelixis management has allocated the total cost of the merger to the
assets acquired and liabilities assumed as follows (in thousands):
Tangible assets acquired.................................... $ 7,103
In-process research and development......................... 38,117
Developed technology........................................ 456
Patents/core technology..................................... 3,697
Assembled workforce......................................... 958
Goodwill.................................................... 53,823
Liabilities assumed......................................... (10,663)
--------
$ 93,491
========
Exelixis is amortizing the acquired intangible assets using the following
estimated useful lives:
Developed technology........................................ 5 years
Patents/core technology..................................... 15 years
Assembled workforce......................................... 3 years
Goodwill.................................................... 15 years
The valuation of the purchased in-process research and development of $38.1
million was based upon the results of an independent valuation using the income
approach for each of the ten projects in-process. The in-process projects relate
primarily to the development of disease and insect resistant fruits and
vegetables and are expected to be completed over approximately the next two to
five years. The income approach estimates the value of each acquired project
in-process based on its expected future cash flows. The valuation analysis
92
NOTES TO UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
considered the contribution of the core technology as well as the percent
complete of each in-process research and development project. The expected
present value of the cash flows associated with the in-process research and
development projects was computed using a risk adjusted rate of return of 35%
which is considered commensurate with the overall risk and percent complete of
the in-process projects. The purchased technology was not considered to have
reached technological feasibility, and it has no alternative future use,
accordingly, it has been recorded as a component of operating expense.
The revenues, expenses, cash flows and other assumptions underlying the
estimated fair value of the acquired in-process research and development involve
significant risks and uncertainties. The risks and uncertainties associated with
completing the acquired in-process projects include obtaining the necessary
regulatory approvals in a timely manner and being able to successfully and
profitably produce, distribute and sell products.
PRO FORMA FINANCIAL INFORMATION
The unaudited pro forma information presented is not necessarily indicative
of future results of operations of Exelixis or the combined results of
operations which would have resulted had the proposed merger of Exelixis and
Genomica, the 2001 acquisition of Artemis and the 2000 acquisition of Agritope,
taken place during the periods presented. The unaudited pro forma statements
reflect the effects of the proposed merger of Exelixis and Genomica, the 2001
acquisition of Artemis and the 2000 acquisition of Agritope, assuming the
mergers occurred as of September 30, 2001 for the purposes of the unaudited pro
forma condensed combined balance sheet and on the first day of each period
presented for the purposes of the unaudited pro forma condensed combined
statements of operations.
There were no material differences in the accounting policies of Exelixis,
Agritope, Artemis or Genomica for the periods presented.
NOTE 2. PRO FORMA COMBINED NET LOSS PER SHARE
Pro forma combined net loss per share attributable to common stockholders,
basic and diluted, is computed as follows:
NINE MONTHS ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
2001 2000
----------------- ------------
(IN THOUSANDS, EXCEPT PER SHARE
INFORMATION)
Pro forma net loss attributable to common
stockholders......................................... $(65,565) $(98,528)
======== ========
Weighted average shares used in computing net loss per
share attributable to common stockholders, basic and
diluted.............................................. 45,848 31,031
Pro forma adjustments:
Weighted effect of assumed conversion of convertible
preferred stock................................... -- 6,599
Effect of common stock issued in Genomica merger..... 8,152 8,152
Effect of common stock issued in Artemis merger...... 812 1,624
Effect of common stock issued in Agritope merger..... -- 1,622
-------- --------
Weighted average shares used in computing pro forma net
loss per share attributable to common stockholders,
basic and diluted.................................... 54,812 49,028
======== ========
Pro forma net loss per share attributable to common
stockholders, basic and diluted...................... $ (1.20) $ (2.01)
======== ========
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NOTES TO UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Shares of common stock issuable upon the exercise of stock options and
warrants and shares issuable upon the conversion of notes payable have been
excluded from the computation of basic and diluted net loss per share as their
effect would be antidilutive.
NOTE 3. PRO FORMA ADJUSTMENTS
The following pro forma adjustments include management's preliminary
estimates of the fair value of the tangible and intangible assets acquired and
liabilities assumed in the Genomica merger which are subject to finalization.
(A) To reduce the carrying value of Genomica's long-term assets to zero
due to the estimated fair value of the acquired net assets exceeding
the estimated purchase price. As a result, no value has been assigned
to developed technology acquired from Genomica. The estimated
extraordinary gain of $808,000, resulting from negative goodwill, has
been excluded from the pro forma statements of operations due to its
non-recurring nature;
(B) Accrual of transaction related costs of approximately $800,000 for
Exelixis and $3.3 million for Genomica;
(C) Elimination of the Genomica stockholder equity accounts;
(D) Issuance of Exelixis common stock, $0.001 par value, and warrants to
purchase common stock, as discussed above;
(E) Elimination of Genomica's historical depreciation expense associated
with the carrying value of the long-term assets that were reduced to
zero due to the estimated fair value of the acquired net assets
exceeding the estimated purchase price;
(F) Reduce deferred revenue to zero since future obligations are minimal;
(G) Amortization of goodwill and other acquired intangible assets acquired
in the Agritope and Artemis mergers; and
(H) Elimination of acquired in-process research and development acquired in
the Agritope and Artemis mergers, which is considered non-recurring.
94
DESCRIPTION OF EXELIXIS CAPITAL STOCK
The following description of our capital stock does not constitute a
complete description of all the terms of our capital stock and should be read in
conjunction with our amended and restated certificate of incorporation and our
restated bylaws which we have filed with the Securities and Exchange Commission
and are incorporated by reference herein. Our authorized capital stock consists
of 100,000,000 shares common stock, $0.001 par value, and 10,000,000 shares of
preferred stock, $0.001 par value.
Exelixis Common Stock. As of December 28, 2001, there were 49,665,178
shares of Exelixis common stock outstanding held of record by approximately 525
stockholders. The holders of Exelixis common stock are entitled to one vote for
each share held of record on all matters submitted to a vote of the
stockholders. Accordingly, holders of a majority of the shares of common stock
entitled to vote in any election of directors may elect all of the directors
standing for election. Subject to preferences that may be applicable to any
preferred stock then outstanding, the holders of outstanding shares of common
stock are entitled to receive ratably any dividends out of assets legally
available therefor as the Exelixis board of directors may from time to time
determine. Upon liquidation, dissolution or winding up of Exelixis, holders of
common stock are entitled to share ratably in all assets remaining after payment
of liabilities and the liquidation preference of any then outstanding shares of
preferred stock. Holders of common stock have no preemptive or conversion rights
or other subscription rights. There are no redemption or sinking fund provisions
applicable to the common stock. All outstanding shares of Exelixis common stock
are fully paid and nonassessable.
Exelixis Preferred Stock. The Exelixis board of directors has the
authority to issue, subject to limitations prescribed by the rules and
regulations of the Nasdaq National Market, up to 10,000,000 shares of Exelixis
preferred stock, in one or more series and to determine the rights, preferences,
privileges and restrictions of the preferred stock, including dividend rights,
conversion rights, voting rights, terms of redemption, liquidation preferences,
sinking fund terms and the number of shares constituting any series or the
destination of any series. The issuance of Exelixis preferred stock could
diminish the voting power of holders of Exelixis common stock, and the
likelihood that holders of Exelixis preferred stock will receive dividend
payments and payments upon liquidation may have the effect of delaying,
deferring or preventing a change in control of Exelixis. We have no present
plans to issue any shares of Exelixis preferred stock.
Exelixis Warrants. As of December 28, 2001, the following warrants to
purchase an aggregate of 496,220 shares of Exelixis common stock were
outstanding:
- warrants to purchase 210,000 shares of common stock at an exercise price
of $20.00 per share which expire on December 31, 2001;
- warrants to purchase 29,167 shares of common stock at an exercise price
of $20.98 per share which expire on December 31, 2001;
- warrants to purchase 71,428 shares of common stock at an exercise price
of $1.13 per share which expire on April 14, 2005;
- warrants to purchase 106,875 shares of common stock at an exercise price
of $4.00 per share which expire on April 14, 2005; and
- warrants to purchase 78,750 shares of common stock at an exercise price
of $13.00 per share which expire on April 14, 2005.
The warrants contain provisions for the adjustment of the exercise price
and the aggregate number of shares that may be issued upon the exercise of the
warrants if a stock dividend, stock split, reorganization, reclassification or
consolidation occurs.
General Corporation Law of the State of Delaware and Certain Charter
Provisions. In general, Section 203 of the General Corporation Law of the State
of Delaware prohibits a publicly held Delaware
95
corporation from engaging in any business combination with any interested
stockholder for a period of three years following the time that the stockholder
became an interested stockholder unless:
- before that time, the corporation's board of directors approved either
the business combination or the transaction that resulted in the
stockholder becoming an interested stockholder;
- upon consummation of the transaction that resulted in the stockholder
becoming an interested stockholder, the interested stockholder owned at
least 85% of the voting stock of the corporation outstanding at the time
the transaction commenced, excluding those shares owned by persons who
are directors and also officers, and by employee stock plans in which
employee participants do not have the right to determine confidentially
whether shares held subject to the plan will be tendered in a tender or
exchange offer; or
- on or after that time, the business combination is approved by the
Exelixis board of directors and is authorized at an annual or special
meeting of stockholders, and not by written consent, by the affirmative
vote of at least two-thirds of the outstanding voting stock not owned by
the interested stockholder.
Section 203 defines "business combination" to include:
- any merger or consolidation involving the corporation and the interested
stockholder;
- any sale, transfer, pledge or other disposition involving the interested
stockholder of 10% or more of the assets of the corporation;
- subject to exceptions, any transaction that results in the issuance or
transfer by the corporation of any stock of the corporation to the
interested stockholder; and
- the receipt by the interested stockholder of the benefit of any loans,
advances, guarantees, pledges or other financial benefits provided by or
through the corporation.
In general, Section 203 defines an interested stockholder as any entity or
person beneficially owning 15% or more of the outstanding voting stock of the
corporation and any entity or person affiliated with or controlling or
controlled by the entity or person.
Our amended and restated certificate of incorporation requires that any
action required or permitted to be taken by our stockholders must be effected at
a duly called annual or special meeting of stockholders and may not be effected
by written consent. Additionally, our amended and restated certificate of
incorporation:
- eliminates cumulative voting in the election of directors;
- provides that the authorized number of directors may be changed only by
resolution of our board of directors; and
- authorizes our board of directors to issue 10,000,000 shares of preferred
stock to increase the amount of outstanding shares.
Our restated bylaws provide that candidates for director may be nominated
only by our board of directors or by a stockholder who gives us written notice
no later than 60 days prior nor earlier than 90 days before the first
anniversary of the last annual meeting of stockholders. The Exelixis board of
directors currently consists of ten members, divided into three classes. As a
result, a portion of the board of directors will be elected each year. The
Exelixis board of directors may appoint new directors to fill vacancies or newly
created directorships. The restated bylaws also limit who may call a special
meeting of stockholders.
Delaware law and these charter provisions may have the effect of deterring
hostile takeovers or delaying changes in control of our management, which could
depress the market price of our common stock.
Transfer Agent and Registrar. The transfer agent and registrar for
Exelixis common stock is Mellon Investor Services LLC.
96
COMPARISON OF RIGHTS OF EXELIXIS STOCKHOLDERS
AND GENOMICA STOCKHOLDERS
Both Genomica and Exelixis are Delaware corporations and are governed by
Delaware law. In addition, the rights of Genomica stockholders are currently
governed by the Genomica restated certificate of incorporation and the Genomica
amended and restated bylaws, and the rights of Exelixis stockholders are
governed by the Exelixis amended and restated certificate of incorporation and
the Exelixis restated bylaws. After the effective time of the merger, the rights
of holders of Genomica capital stock who become holders of Exelixis common stock
will be governed by the Exelixis amended and restated certificate of
incorporation, the Exelixis restated bylaws and Delaware law. In most respects,
the rights of holders of Genomica capital stock are similar to the rights of
holders of Exelixis common stock. The following is a summary of the similarities
and material differences between such rights. This summary does not purport to
be a complete discussion of, and is qualified in its entirety by reference to,
Delaware law as well as to the Genomica restated certificate of incorporation,
the Genomica amended and restated bylaws, the Exelixis amended and restated
certificate of incorporation and the Exelixis restated bylaws.
AUTHORIZED CAPITAL STOCK
Exelixis. The authorized capital stock of Exelixis consists of 100,000,000
shares of common stock, par value $0.001 per share, and 10,000,000 shares of
preferred stock, par value $0.001 per share.
Genomica. The authorized capital stock of Genomica consists of 50,000,000
shares of common stock, par value $0.001 per share, and 5,000,000 shares of
preferred stock, par value $0.001 per share. Five hundred thousand shares of
authorized preferred stock are designated Series A junior participating
preferred stock.
OUTSTANDING VOTING STOCK
Exelixis. The outstanding voting stock of Exelixis consists solely of
Exelixis common stock.
Genomica. The outstanding voting stock of Genomica consists solely of
Genomica common stock.
VOTING RIGHTS
Exelixis. Subject to the voting rights of any then-outstanding Exelixis
preferred stock, each share of Exelixis common stock is entitled to one vote on
each matter submitted to a vote of the stockholders of Exelixis. Shares of
Exelixis stock are not entitled to any cumulative voting rights.
Genomica. Subject to the voting rights of any then-outstanding Genomica
preferred stock, each share of Genomica common stock is entitled to one vote on
each matter submitted to a vote of the stockholders of Genomica. Shares of
Genomica stock are not entitled to any cumulative voting rights. Each
outstanding share of Series A junior participating preferred, if and when issued
by Genomica, will have 100 votes on each matter submitted to a vote of the
stockholders of Genomica. The number of votes each share of such preferred stock
shall represent is subject to adjustment should Genomica at any time declare or
pay a dividend.
AMENDMENT TO CERTIFICATE OF INCORPORATION
Exelixis. The Exelixis amended and restated certificate of incorporation
requires that in addition to the affirmative vote of any particular class or
series of Exelixis voting stock required by law, the holders of at least 66 2/3%
of the voting power of all the then-outstanding shares of voting stock, voting
as a single class, is required to alter, amend or repeal the provisions of the
certificate of incorporation that govern the operation of the Exelixis board of
directors, the indemnification of directors and the amendment of the certificate
of incorporation.
Genomica. The Genomica restated certificate of incorporation requires that
in addition to the affirmative vote of any particular class or series of
Genomica voting stock required by law, the holders of at least 66 2/3% of the
voting power of all the then-outstanding shares of voting stock, voting as a
single class, shall be required to alter, amend, or repeal the provisions of the
certificate of incorporation that govern the operation of
97
the Genomica board of directors, the liability of directors and the amendment of
the certificate of incorporation.
AMENDMENTS TO BYLAWS
The General Corporation Law of the State of Delaware states that
stockholders entitled to vote have the power to adopt, amend or repeal the
bylaws of a corporation. A corporation, in its certificate, may also confer this
power on the board of directors in addition to the stockholders.
Exelixis. The Exelixis amended and restated certificate of incorporation
provides that the bylaws may be altered or amended or new bylaws adopted by the
affirmative vote of at least 66 2/3% of the voting power of all of the
then-outstanding shares of the voting stock of the corporation entitled to vote,
or by the board of directors.
Genomica. The Genomica restated certificate of incorporation provides that
the bylaws may be altered or amended by the affirmative vote of at least 66 2/3%
of the voting power of all of the then-outstanding shares of the voting stock of
the corporation entitled to vote, or by the board of directors.
NUMBER OF DIRECTORS
Exelixis. The Exelixis board of directors currently consists of ten
members.
Genomica. The Genomica board of directors currently consists of seven
members.
CHANGE TO NUMBER OF DIRECTORS
Exelixis. The Exelixis amended and restated certificate of incorporation
provides that the setting of the authorized number of directors and any changes
to the authorized number of directors may be effected only by resolution of the
Exelixis board of directors.
Genomica. The Genomica restated certificate of incorporation provides that
the setting of the authorized number of directors and any changes to the
authorized number of directors may be effected only by resolution of the
Genomica board of directors.
ELECTION OF DIRECTORS
Exelixis. The entire Exelixis board of directors is divided into three
classes, with each class serving a staggered three-year term. As a result, a
portion of the Exelixis board of directors is elected each year.
Genomica. The entire Genomica board of directors is divided into three
classes, with each class serving a staggered three-year term. As a result, a
portion of the Genomica board of directors is elected each year.
REMOVAL OF DIRECTORS
Exelixis. The Exelixis amended and restated certificate of incorporation
states that a director may be removed only with cause by a vote of the majority
of the voting power of the corporation entitled to vote at an election of
directors.
Genomica. The Genomica restated certificate of incorporation states that a
director may be removed only with cause by a vote of the majority of the voting
power of the corporation entitled to vote at an election of directors.
VACANCIES ON THE BOARD OF DIRECTORS
Exelixis. The Exelixis amended and restated certificate of incorporation
and bylaws provide that subject to the rights of the holders of any series of
preferred stock, when any vacancy occurs on the Exelixis board of directors,
whether by reason of an increase in the number of members composing the Exelixis
board of directors or otherwise, a majority of the directors then in office,
even though less than a quorum of the board of
98
directors, may appoint a director or directors to fill such vacancy or vacancies
unless the board of directors determines by resolution that any such vacancy
shall be filled by the stockholders.
Genomica. The Genomica restated certificate of incorporation and amended
and restated bylaws provide that subject to the rights of the holders of any
series of preferred stock, when any vacancy occurs on the Genomica board of
directors, whether by reason of an increase in the number of members composing
the Genomica board of directors or otherwise, a majority of the directors then
in office, even though less than a quorum of the board of directors, may appoint
a director or directors to fill such vacancy or vacancies unless the board of
directors determines by resolution that any such vacancy shall be filled by the
stockholders.
INDEMNIFICATION
Exelixis. The Exelixis restated bylaws provide for indemnification by
Exelixis of its directors and executive officers to the fullest extent permitted
by law. The Exelixis restated bylaws also provide that Exelixis shall have the
power to indemnify its other officers, employees and other agents pursuant to
applicable law.
Genomica. The Genomica amended and restated bylaws provide for
indemnification by Genomica of its directors and executive officers to the
fullest extent permitted by law. The Genomica amended and restated bylaws also
provide that Genomica shall have the power to indemnify its other officers,
employees and other agents pursuant to applicable law.
LIMITATION OF PERSONAL LIABILITY OF DIRECTORS
Exelixis. The Exelixis amended and restated certificate of incorporation
provides for the elimination and limitation of the personal liability of
directors for monetary damages to the fullest extent permitted by the General
Corporation Law of the State of Delaware. In addition, the Exelixis amended and
restated certificate of incorporation provides that if the General Corporation
Law of the State of Delaware is amended to authorize the further elimination or
limitation of the personal liability of a director, then the personal liability
of the directors will be eliminated or limited to the fullest extent permitted
by the General Corporation Law of the State of Delaware, as so amended.
Genomica. The Genomica restated certificate of incorporation provides that
the liability of directors for monetary damages shall be limited to the fullest
extent under applicable law.
SPECIAL MEETING OF STOCKHOLDERS
Under the General Corporation Law of the State of Delaware, a special
meeting of stockholders may be called only by the board of directors or any
other person authorized to do so in a corporation's certificate of incorporation
or bylaws.
Exelixis. The Exelixis restated bylaws state that a special meeting of the
stockholders may be called by the chairman of the board of directors, the chief
executive officer, the board of directors pursuant to a resolution adopted by a
majority of the total number of authorized directors (whether or not there exist
any vacancies in previously authorized directorships at the time any such
resolution is presented to the board) or the holders of shares entitled to cast
not less than 50% of the votes at the meeting.
Genomica. The Genomica amended and restated bylaws state that a special
meeting of stockholders may be called only by the chairman of the board of
directors, the chief executive officer or the board of directors pursuant to a
resolution adopted by a majority of the total number of authorized directors
(whether or not there exist any vacancies in previously authorized directorships
at the time any such resolution is presented to the board of directors for
adoption).
STOCKHOLDER ACTION
Exelixis. The Exelixis amended and restated certificate of incorporation
requires that any action required or permitted to be taken by stockholders must
be effected at a duly called annual or special meeting of stockholders and may
not be effected by written consent.
99
Genomica. The Genomica restated certificate and amended and restated
bylaws require that any action required or permitted to be taken by stockholders
must be effected at a duly called annual or special meeting of stockholders and
may not be effected by written consent.
STOCKHOLDER PROPOSAL PROCEDURES
Exelixis. The Exelixis restated bylaws require that proposals by
stockholders to be brought before any annual meeting must be delivered to the
Secretary of Exelixis no later than the 60th day nor earlier than the 90th day
before the first anniversary of the preceding year's annual meeting. If,
however, no annual meeting was held in the previous year or the annual meeting
is more than 30 days before or more than 30 days after the anniversary date, the
notice must be delivered not earlier than the 90th day nor later than the 60th
day before the annual meeting or, in the event public announcement of the date
of such annual meeting is first made by Exelixis fewer than 70 days before the
date of such annual meeting, the tenth day following the date on which Exelixis
first publicly announces the annual meeting date.
Notice of nominations of persons for election or reelection to the Exelixis
board of directors must include information related to each person whom the
stockholder proposes to nominate for election or reelection as a director,
including each such person's consent to being named in the proxy statement and
to serving as director, if elected, and the following information, which also
must be provided as to the stockholder giving notice:
- the name, age, business address and residence address of such person;
- the principal occupation or employment of such person;
- the class and number of shares of Exelixis capital stock which are
beneficially owned by such person;
- a description of all arrangements or understandings between the
stockholder and each nominee and any other person or persons (naming such
person or persons) pursuant to which the nominations are to be made by
the stockholder; and
- all information relating to such person that is required to be disclosed
in solicitations of proxies for election of directors, or is otherwise
required, in each case pursuant to Regulation 14A under the Securities
Exchange Act of 1934, as amended.
Notice of any other business that the stockholder proposes to bring before
the meeting must include:
- the name and address of such stockholder, as they appear on Exelixis'
books;
- a brief description of the business desired to be brought before the
meeting and the reasons for conducting that business at the annual
meeting;
- the class and number of shares of Exelixis capital stock which are
beneficially owned by the stockholder;
- any material interest of the stockholder in the proposed business; and
- any other information that is required to be provided by the stockholder
pursuant to Regulation 14A under the Securities Exchange Act of 1934, as
amended, in such person's capacity as a proponent to a stockholder
proposal.
Genomica. The Genomica amended and restated bylaws require that proposals
by stockholders to be brought before any annual meeting must be delivered to the
Secretary of Genomica no later than the 90th day nor earlier than the 120th day
before the first anniversary of the preceding year's annual meeting. If however,
the annual meeting is more than 30 days before or more than 30 days after the
anniversary date, the notice must be delivered not earlier than the 120th day
before the annual meeting and not later than the 90th day before such annual
meeting or the 10th day following the day on which Genomica first publicly
announces the annual meeting date.
100
Notice of nominations of persons for election or reelection to the Genomica
board of directors must include information related to each person whom the
stockholder proposes to nominate for election or reelection as a director and
all information related to such person that is required to be disclosed in
solicitations of proxies for election of directors, or is otherwise required, in
each case pursuant to Regulation 14A under the Securities Exchange Act of 1934,
as amended and Rule 14a-11 thereunder. Such information must include each such
person's consent to being named in the proxy statement and to serving as
director, if elected.
Notice of any other business that the stockholder proposes to bring before
the meeting must include:
- the name and address of such stockholder, as they appear on Genomica's
books, and of such beneficial owner, if applicable;
- a brief description of the business desired to be brought before the
meeting and the reasons for conducting that business at the annual
meeting;
- the class and number of shares of Genomica capital stock which are
beneficially owned by the stockholder;
- any material interest in the proposed business of the stockholder and the
beneficial owner, if any, on whose behalf the proposal is being made; and
- whether either such stockholder or beneficial owner intends to deliver a
proxy statement and form of proxy to holders of at least the percentage
of Genomica's voting shares required under applicable law to carry the
proposal or, in the case of a nomination or nominations, a sufficient
number of holders of Genomica's voting shares to elect such nominee or
nominees.
STOCKHOLDER RIGHTS PLAN
Exelixis. Exelixis does not currently have a stockholder rights plan.
Genomica. Genomica entered into a rights agreement dated as of October 2,
2001 with Computershare Trust Company, Inc., as rights agent (commonly referred
to as a "poison pill"). Genomica has amended this agreement so that it will not
apply to the exchange offer and subsequent merger.
Rights will separate from Genomica's common stock and become exercisable
following the earlier of (i) the date a person or entity has become beneficial
owner of 20% or more of the then-outstanding common stock of Genomica or (ii)
the tenth business day (or such later date as may be determined by the board of
directors) after the date of the commencement or public announcement of the
intention to commence a tender or exchange offer, the consummation of which
would result in any person or entity having beneficial ownership of 20% or more
of the then-outstanding common stock of Genomica.
After a person or entity becomes the beneficial owner of 20% or more of the
then-outstanding common stock of Genomica, each right will entitle the holder,
other than the acquiring person, to purchase shares of Genomica common stock at
a discounted price. If Genomica is subsequently acquired in a merger with the
acquiring person, each right will entitle the holder to purchase shares of
common stock of the acquiring company at a discounted price.
ISSUANCE OF ADDITIONAL STOCK
Exelixis. The Exelixis amended and restated certificate of incorporation
provides that, subject to limitations prescribed by Delaware law, the Exelixis
board of directors has the authority to issue up to 10,000,000 shares of blank
check preferred stock.
Genomica. The Genomica restated certificate of incorporation provides
that, subject to limitations prescribed by Delaware law, the Genomica board of
directors has the authority to issue up to 5,000,000 shares of blank check
preferred stock.
101
PREEMPTIVE RIGHTS
Exelixis. The Exelixis amended and restated certificate of incorporation
and restated bylaws do not contain any provision relating to preemptive rights.
Genomica. The Genomica restated certificate of incorporation and amended
and restated bylaws do not contain any provision relating to preemptive rights.
APPRAISAL RIGHTS
Exelixis. The Exelixis amended and restated certificate of incorporation
does not provide for appraisal rights other than those designated by the General
Corporation Law of the State of Delaware.
Genomica. The Genomica restated certificate of incorporation does not
provide for appraisal rights other than those designated by the General
Corporation Law of the State of Delaware.
LEGAL MATTERS
The validity of the Exelixis common stock to be issued in the merger has
been passed upon for Exelixis by Heller Ehrman White & McAuliffe LLP. Certain
tax consequences of the transaction will be passed upon for Exelixis by Heller
Ehrman White & McAuliffe LLP and for Genomica by Cooley Godward LLP.
EXPERTS
The consolidated financial statements of Exelixis, Inc. incorporated in
this prospectus by reference to the Annual Report on Form 10-K for the year
ended December 31, 2000 have been so incorporated in reliance upon the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
The consolidated financial statements of Genomica as of December 31, 2000
and 1999, and for each of the three years in the period ended December 31, 2000,
included in this prospectus have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their reports with respect
thereto, and are included herein in reliance upon the authority of said firm as
experts in accounting and auditing in giving said reports.
WHERE YOU CAN FIND MORE INFORMATION
Exelixis, Inc. is a Delaware corporation. Exelixis' principal executive
offices are located at 170 Harbor Way, South San Francisco, California 94080,
and its telephone number is (650) 837-7000.
Genomica Corporation is a Delaware corporation. Genomica's principal
executive offices are located at 1715 38th Street, Boulder, Colorado 80301 and
its telephone number is (720) 565-4500.
102
Exelixis and Genomica file annual, quarterly and special reports, proxy
statements and other information with the Securities and Exchange Commission
under the Securities Exchange Act of 1934, as amended. You may read and copy
this information at the following locations of the Securities and Exchange
Commission:
Public Reference Room
450 Fifth Street, N.W.
Suite 1024
Washington, D.C. 20549
Northeast Regional Office
233 Broadway
New York, New York 10279
Midwest Regional Office
500 West Madison Street
Suite 1400
Chicago, Illinois 60661-2511
Pacific Regional Office
5670 Wilshire Boulevard, 11th Floor
Los Angeles, California 90036-3648
You may obtain information on the operation of the Securities and Exchange
Commission's public reference room in Washington, D.C. by calling the Securities
and Exchange Commission at 1-800-SEC-0330.
You may also obtain copies of this information by mail from the Public
Reference Section of the Securities and Exchange Commission, 450 Fifth Street,
N.W., Suite 1024, Washington, D.C. 20549, at prescribed rates.
The Securities and Exchange Commission also maintains an Internet website
that contains reports, proxy statements and other information about issuers,
like Exelixis and Genomica, that file electronically with the Securities and
Exchange Commission. The address of that site is http://www.sec.gov.
Exelixis common stock is listed on the Nasdaq National Market under the
symbol "EXEL." Genomica common stock is listed on the Nasdaq National Market
under the symbol "GNOM." You may inspect reports and other information
concerning Exelixis and Genomica at the offices of the National Association of
Securities Dealers, Inc., 1735 K Street, N.W., Washington, D.C. 20006.
Exelixis has filed a Form S-4 registration statement to register with the
Securities and Exchange Commission the offering and sale of the shares of
Exelixis common stock to be issued to Genomica stockholders in the merger. This
prospectus is a part of that registration statement. As allowed by Securities
and Exchange Commission rules, this prospectus does not contain all the
information you can find in the registration statement or the exhibits to the
registration statement. In addition, Exelixis has also filed with the Securities
and Exchange Commission a statement on Schedule TO pursuant to Rule 14d-3 under
the Securities Exchange Act of 1934, as amended, to furnish additional
information about the exchange offer. You may obtain copies of the Form S-4 and
the Schedule TO, and any amendments to those documents, in the manner described
above.
Exelixis has supplied all information contained in this prospectus relating
to Exelixis or Bluegreen Acquisition Sub, and Genomica has supplied all such
information relating to Genomica.
Neither Exelixis nor Genomica has authorized anyone to provide you with
information that differs from that contained in this prospectus. Therefore, if
anyone does give you information of this sort, you should not rely on it. This
prospectus is dated December 28, 2001. You should not assume that the
information contained in this prospectus is accurate as of any date other than
that date, and neither the mailing of this prospectus to stockholders nor the
issuance of shares of Exelixis common stock in the merger shall create any
implication to the contrary. If you are in a jurisdiction where offers to
exchange or sell, or solicitations of offers to exchange
103
or purchase the securities offered by this document are unlawful, or if you are
a person to whom it is unlawful to direct these types of activities, then the
exchange offer presented in this document does not extend to you.
The Securities and Exchange Commission allows us to "incorporate by
reference" information into this prospectus, which means that we can disclose
important information to you by referring you to another document filed
separately with the Securities and Exchange Commission. Any statement contained
in any document incorporated or deemed to be incorporated by reference herein
shall be deemed to be modified or superseded, for purposes of this prospectus,
to the extent that a statement contained in or omitted from this prospectus, or
in any other subsequently filed document which also is or is deemed to be
incorporated by reference herein, modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this prospectus. This prospectus
incorporates by reference the documents described below that we have previously
filed with the Securities and Exchange Commission. These documents contain
important information about Exelixis.
The following documents listed below that we have previously filed with the
Securities and Exchange Commission are incorporated by reference:
- Our Annual Report on Form 10-K for the fiscal year ended December 31,
2000 filed on March 15, 2001, including information incorporated by
reference in the Form 10-K from our definitive proxy statement for the
2001 annual meeting of stockholders, which was filed on April 6, 2001;
- Our Quarterly Report on Form 10-Q for the quarter ended March 31, 2001,
which was filed on May 15, 2001;
- Our Quarterly Report on Form 10-Q for the quarter ended June 30, 2001,
which was filed on August 14, 2001;
- Our Quarterly Report on Form 10-Q for the quarter ended September 30,
2001, which was filed on November 14, 2001;
- Our Current Reports on Form 8-K filed on March 1, 2001, May 15, 2001,
July 18, 2001, July 26, 2001, August 9, 2001 and November 14, 2001;
- The description of our common stock set forth in our registration
statement on Form 8-A filed April 6, 2000; and
- Our registration statement on Form S-1 filed February 7, 2000 to which is
attached as exhibits our amended and restated certificate of
incorporation and our restated bylaws.
All documents that Exelixis files pursuant to Section 13(a), 13(c), 14 or
15(d) of the Securities Exchange Act of 1934 from the date of this prospectus to
the last date that shares are accepted for exchange pursuant to the exchange
offer or the merger, or the date that the exchange offer is terminated will also
be deemed to be incorporated by reference into this prospectus.
Exelixis, the Exelixis logos and all other Exelixis product and service
names are registered trademarks or trademarks of Exelixis, Inc. in the U.S. and
in other selected countries. Genomica, the Genomica logos and all other Genomica
product and service names are registered trademarks or trademarks of Genomica
Corporation in the U.S. and in other selected countries. The symbols "(R)" and
"(TM)" indicate U.S. registration and U.S. trademark, respectively. Other third
party logos and product/trade names are registered trademarks or trade names of
their respective companies.
104
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
GENOMICA CORPORATION PAGE
-------------------- ----
CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Public Accountants.................... F-2
Consolidated Balance Sheets as of December 31, 2000 and
1999...................................................... F-3
Consolidated Statements of Operations for the Years Ended
December 31, 2000, 1999 and 1998.......................... F-4
Consolidated Statements of Stockholders' Equity for the
Years Ended December 31, 2000, 1999 and 1998.............. F-5
Consolidated Statements of Cash Flows for the Cash Flows for
the Years Ended December 31, 2000, 1999 and 1998.......... F-7
Notes to Consolidated Financial Statements.................. F-8
CONSOLIDATED INTERIM FINANCIAL STATEMENTS -- UNAUDITED
Unaudited Consolidated Interim Balance Sheets as of
September 30, 2001 and December 31, 2000.................. F-26
Unaudited Consolidated Interim Statements of Operations for
the Three and Nine Months Ended September 30, 2001 and
2000...................................................... F-27
Unaudited Consolidated Interim Statements of Cash Flows for
the Nine Months Ended September 30, 2001 and 2000......... F-28
Unaudited Notes to Consolidated Interim Financial
Statements................................................ F-29
F-1
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Genomica Corporation:
We have audited the accompanying consolidated balance sheets of Genomica
Corporation (a Delaware corporation) and subsidiary as of December 31, 2000 and
1999, and the related consolidated statements of operations and comprehensive
loss, stockholders' equity and cash flows for each of the three years in the
period ended December 31, 2000. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Genomica Corporation and
subsidiary as of December 31, 2000 and 1999, and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 2000, in conformity with accounting principles generally accepted in the
United States.
/s/ ARTHUR ANDERSEN LLP
Denver, Colorado,
February 2, 2001 (except for the matters discussed in
Notes 1 and 13, as to which the
date is November 19, 2001).
F-2
GENOMICA CORPORATION
CONSOLIDATED BALANCE SHEETS
DECEMBER 31,
---------------------------
2000 1999
------------ ------------
ASSETS
Current Assets:
Cash and cash equivalents................................. $ 25,784,803 $ 3,518,570
Short-term investments.................................... 73,153,650 2,824,763
Accounts receivable -- trade.............................. 353,448 360,000
Interest receivable....................................... 2,162,810 51,599
Prepaid expenses and other................................ 352,114 96,438
------------ ------------
Total current assets.............................. 101,806,825 6,851,370
Long-Term Investments....................................... 24,992,694 --
Property and Equipment, net................................. 2,723,507 673,479
Other Assets................................................ 66,750 28,786
------------ ------------
Total assets...................................... $129,589,776 $ 7,553,635
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable.......................................... $ 933,903 $ 318,206
Accrued compensation and employee benefits................ 431,357 289,538
Current portion of capital lease obligations.............. -- 130,142
Deferred revenue.......................................... 814,626 829,601
Other accrued expenses.................................... 323,751 37,429
------------ ------------
Total current liabilities......................... 2,503,637 1,604,916
Long-Term Debt:
Capital lease obligations, net of current portion......... -- 268,157
------------ ------------
Total liabilities................................. 2,503,637 1,873,073
------------ ------------
Commitments and Contingencies Stockholders' Equity:
Convertible preferred stock, $0.001 par value, 5,000,000
and 37,688,178 shares authorized, respectively:
Series A, zero and 12,533,676 shares issued and
outstanding, respectively............................ -- 7,504,266
Series B, zero and 18,826,959 shares issued and
outstanding, respectively............................ -- 12,369,208
Common stock, $0.001 par value, 50,000,000, and 44,000,000
shares authorized, 22,839,559 and 1,140,073 shares
issued and 22,715,016 and 1,079,309 shares outstanding,
respectively........................................... 22,839 1,140
Treasury stock, at cost................................... (19,715) (182)
Additional paid-in capital................................ 168,136,541 31,228
Options and warrants...................................... 33,307,529 7,764,767
Deferred compensation..................................... (16,929,010) (5,772,446)
Accumulated other comprehensive income.................... 256,984 --
Accumulated deficit....................................... (57,689,029) (16,217,419)
------------ ------------
Total stockholders' equity........................ 127,086,139 5,680,562
------------ ------------
Total liabilities and stockholders' equity........ $129,589,776 $ 7,553,635
============ ============
F-3
GENOMICA CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE LOSS
FOR THE YEARS ENDED DECEMBER 31,
----------------------------------------
2000 1999 1998
------------ ----------- -----------
Revenue:
Software licenses and services..................... $ 1,615,064 $ 622,230 $ 196,892
Research grants.................................... 26,733 159,100 --
------------ ----------- -----------
Total revenue................................... 1,641,797 781,330 196,892
------------ ----------- -----------
Operating Expenses:
Costs of revenue................................... 383,585 447,057 141,490
Research and development........................... 12,046,615 4,868,577 2,327,569
Selling and marketing.............................. 7,196,761 1,722,141 633,551
General and administrative......................... 8,965,352 1,723,364 884,267
------------ ----------- -----------
Total operating expenses........................ 28,592,313 8,761,139 3,986,877
------------ ----------- -----------
Operating loss................................ (26,950,516) (7,979,809) (3,789,985)
Interest Income...................................... 2,632,434 419,279 90,325
Interest Expense..................................... (44,715) (17,941) (55,214)
------------ ----------- -----------
Net Loss............................................. (24,362,797) (7,578,471) (3,754,874)
Deemed Dividend Related to Beneficial Conversion
Feature of Preferred Stock......................... (17,108,813) -- --
------------ ----------- -----------
Net Loss Applicable to Common Stockholders........... $(41,471,610) $(7,578,471) $(3,754,874)
============ =========== ===========
Net Loss Per Share, basic and diluted................ $ (6.49) $ (7.13) $ (3.81)
============ =========== ===========
Weighted Average Common Shares Outstanding, basic and
diluted............................................ 6,387,998 1,062,392 986,015
============ =========== ===========
Comprehensive Loss:
Net loss........................................... $(24,362,797) $(7,578,471) $(3,754,874)
Other comprehensive income: net unrealized gain on
investments..................................... 256,984 -- --
------------ ----------- -----------
Comprehensive loss................................. $(24,105,813) $(7,578,471) $(3,754,874)
============ =========== ===========
Pro Forma Net Loss Per Share (Unaudited -- Note 3):
Net loss per share, basic and diluted.............. $ (2.56)
============
Weighted-average common shares outstanding basic
and diluted..................................... 16,223,151
============
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
GENOMICA CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
PREFERRED STOCK COMMON STOCK TREASURY STOCK ADDITIONAL
------------------------- -------------------- ------------------- PAID-IN OPTIONS AND
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL WARRANTS
----------- ----------- ---------- ------- -------- -------- ------------ -----------
Balances, December 31,
1997....................... 12,533,676 $ 7,504,266 976,532 $ 977 (60,764) $ (182) $ 1,953 $ --
Sale of Series B preferred
stock for cash of $0.72 per
share, net of offering
costs of $332,264.......... 7,347,927 4,958,243 -- -- -- -- -- --
Issuance of warrants to
purchase Series B preferred
stock...................... -- -- -- -- -- -- -- 82,298
Conversion of notes payable
to Series B preferred
stock...................... 1,409,589 940,272 -- -- -- -- -- --
Issuance of common stock
upon exercise of options... -- -- 129,327 129 -- -- 23,150 --
Net loss.................... -- -- -- -- -- -- -- --
----------- ----------- ---------- ------- -------- -------- ------------ -----------
Balance December 31, 1998... 21,291,192 $13,402,781 1,105,859 $ 1,106 (60,764) $ (182) $ 25,103 $ 82,298
Sale of Series B preferred
stock for cash of $0.72 per
share, net of offering
costs of $538,180.......... 10,069,443 6,711,819 -- -- -- -- -- --
Issuance of warrants to
purchase common stock...... -- (241,126) -- -- -- -- -- 241,126
Issuance of common stock
upon exercise of options... -- -- 34,214 34 -- -- 6,125 --
Deferred compensation....... -- -- -- -- -- -- -- 7,441,343
Amortization of deferred
compensation............... -- -- -- -- -- -- -- --
Net loss.................... -- -- -- -- -- -- -- --
----------- ----------- ---------- ------- -------- -------- ------------ -----------
Balances, December 31,
1999....................... 31,360,635 $19,873,474 1,140,073 $ 1,140 (60,764) $ (182) $ 31,228 $ 7,764,767
GENOMICA CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
ACCUMULATED
OTHER
DEFERRED COMPREHENSIVE ACCUMULATED
COMPENSATION INCOME DEFICIT TOTAL
------------ ------------- ------------ ------------
Balances, December 31,
1997....................... $ -- $ -- $ (4,884,074) $ 2,622,940
Sale of Series B preferred
stock for cash of $0.72 per
share, net of offering
costs of $332,264.......... -- -- -- 4,958,243
Issuance of warrants to
purchase Series B preferred
stock...................... -- -- -- 82,298
Conversion of notes payable
to Series B preferred
stock...................... -- -- 940,272
Issuance of common stock
upon exercise of options... -- -- -- 23,279
Net loss.................... -- -- (3,754,874) (3,754,874)
------------ -------- ------------ ------------
Balance December 31, 1998... -- -- $ (8,638,948) $ 4,872,158
Sale of Series B preferred
stock for cash of $0.72 per
share, net of offering
costs of $538,180.......... -- -- -- 6,711,819
Issuance of warrants to
purchase common stock...... -- -- -- --
Issuance of common stock
upon exercise of options... -- -- -- 6,159
Deferred compensation....... (7,441,343) -- -- --
Amortization of deferred
compensation............... 1,668,897 -- -- 1,668,897
Net loss.................... -- -- (7,578,471) (7,578,471)
------------ -------- ------------ ------------
Balances, December 31,
1999....................... $(5,772,446) -- $(16,217,419) $ 5,680,562
F-5
GENOMICA CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY -- (CONTINUED)
PREFERRED STOCK COMMON STOCK TREASURY STOCK ADDITIONAL
------------------------- -------------------- ------------------- PAID-IN
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL
----------- ----------- ---------- ------- -------- -------- ------------
Balances, December 31,
1999...................... 31,360,635 $19,873,474 1,140,073 $ 1,140 (60,764) $ (182) $ 31,228
Sale of Series C preferred
stock for cash of $1.50
per share, net of offering
costs of $25,139.......... 10,022,635 15,008,815 -- -- -- -- --
Sale of Series D preferred
stock for cash of $3,34
per share, net of offering
costs of $6,000........... 900,000 3,000,000 -- -- -- -- --
Exercise of warrants to
purchase Series A and B
preferred stock........... 204,637 161,265 -- -- -- -- --
Conversion of Series A,B,C,
and D preferred stock to
common stock.............. (42,487,907) (38,043,554) 14,162,629 14,162 -- -- 38,029,392
Issuance of 6,440,000
shares of common stock at
$19.00 per share.......... -- -- 6,440,000 6,440 -- -- 122,353,560
Costs related to issuance
of common stock........... -- -- -- -- -- -- (9,883,554)
Cash paid out for
fractional shares due to
reverse split of common
stock..................... -- -- -- -- -- -- (545)
Exercise of warrants to
purchase common stock..... -- -- 194,495 195 -- -- 240,931
Issuance of common stock
upon exercise of
options................... -- -- 902,362 902 -- -- 256,716
Repurchase of unvested,
restricted common stock
for treasury.............. -- -- -- -- (63,779) (19,533) --
Deferred compensation...... -- -- -- -- -- -- --
Amortization of deferred
compensation.............. -- -- -- -- -- -- --
Net unrealized gain on
investments............... -- -- -- -- -- -- --
Deemed dividend from
beneficial conversion
feature of preferred
stock..................... -- -- -- -- -- -- 17,108,813
Net loss applicable to
common stockholders....... -- -- -- -- -- -- --
----------- ----------- ---------- ------- -------- -------- ------------
Balances, December 31,
2000...................... -- $ -- 22,839,559 $22,839 (124,543) $(19,715) $168,136,541
=========== =========== ========== ======= ======== ======== ============
GENOMICA CORPORATION
C CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY -- (CONTINUED)
ACCUMULATED
OTHER
OPTIONS AND DEFERRED COMPREHENSIVE ACCUMULATED
WARRANTS COMPENSATION INCOME DEFICIT TOTAL
----------- ------------ ------------- ------------ ------------
Balances, December 31,
1999...................... $ 7,764,767 $(5,772,446) $ -- $(16,217,419) $ 5,680,562
Sale of Series C preferred
stock for cash of $1.50
per share, net of offering
costs of $25,139.......... -- -- -- -- 15,008,815
Sale of Series D preferred
stock for cash of $3,34
per share, net of offering
costs of $6,000........... -- -- -- -- 3,000,000
Exercise of warrants to
purchase Series A and B
preferred stock........... (31,890) -- -- -- 129,375
Conversion of Series A,B,C,
and D preferred stock to
common stock.............. -- -- -- -- --
Issuance of 6,440,000
shares of common stock at
$19.00 per share.......... -- -- -- -- 122,360,000
Costs related to issuance
of common stock........... -- -- -- -- (9,883,554)
Cash paid out for
fractional shares due to
reverse split of common
stock..................... -- -- -- -- (545)
Exercise of warrants to
purchase common stock..... (241,126) -- -- -- --
Issuance of common stock
upon exercise of
options................... -- -- -- -- 257,618
Repurchase of unvested,
restricted common stock
for treasury.............. -- -- -- -- (19,533)
Deferred compensation...... 25,815,778 (25,815,778) -- -- --
Amortization of deferred
compensation.............. -- 14,659,214 -- -- 14,659,214
Net unrealized gain on
investments............... -- -- 256,984 -- 256,984
Deemed dividend from
beneficial conversion
feature of preferred
stock..................... -- -- -- -- 17,108,813
Net loss applicable to
common stockholders....... -- -- -- (41,471,610) (41,471,610)
----------- ------------ -------- ------------ ------------
Balances, December 31,
2000...................... $33,307,529 $(16,929,010) $256,984 $(57,689,029) $127,086,139
=========== ============ ======== ============ ============
F-6
GENOMICA CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31,
----------------------------------------
2000 1999 1998
------------ ----------- -----------
Cash Flows from Operating Activities:
Net loss.................................................. $(24,362,797) $(7,578,471) $(3,754,874)
Adjustments to reconcile net loss to net cash used in
operating activities --
Depreciation............................................ 738,169 253,016 176,926
Amortization of discount on convertible debt............ -- -- 7,666
Amortization of deferred compensation................... 14,659,214 1,668,897 --
Accretion of discounts (premiums) on investments........ (92,938) 38,053 --
Preferred stock issued for accrued interest on
convertible debt...................................... -- -- 14,904
Changes in operating assets and liabilities --
Accounts receivable................................... 6,552 (360,000) --
Interest receivable................................... (2,111,211) (51,599) --
Prepaid expenses and other assets..................... (255,676) (43,287) (13,953)
Change in other assets................................ (37,964) (4,477) (4,174)
Accounts payable...................................... 615,697 88,591 83,848
Accrued compensation and employee benefits............ 141,819 195,945 (8,841)
Deferred revenue...................................... (14,975) 706,268 123,333
Other accrued expenses................................ 286,322 (11,617) (109,652)
------------ ----------- -----------
Net cash used in operating activities.............. (10,427,788) (5,098,681) (3,484,817)
------------ ----------- -----------
Cash Flows from Investing Activities:
Redemption of investments................................. 22,791,499 16,480,000 2,462,412
Purchases of investments.................................. (117,763,156) (19,342,816) --
Purchase of property and equipment........................ (2,788,793) (223,480) (157,095)
Proceeds from sale of equipment........................... 596 -- --
------------ ----------- -----------
Net cash used in investing activities.............. (97,759,854) (3,086,296) 2,305,317
------------ ----------- -----------
Cash Flows from Financing Activities:
Proceeds from issuance of common stock.................... 122,360,000 -- --
Proceeds from issuance of preferred stock................. 18,039,954 7,249,999 5,290,507
Proceeds from exercise of warrants for preferred stock.... 129,375 -- --
Proceeds from exercise of common stock options............ 257,618 6,159 23,279
Proceeds from issuance of convertible debt and warrants... -- -- 1,000,000
Costs related to issuance of common stock................. (9,883,556) -- --
Costs related to issuance of preferred stock.............. (31,139) (538,180) (332,264)
Payments on capital lease obligations..................... (398,299) (70,313) (11,239)
Payments on loans......................................... -- (166,667) (200,000)
Payments of common stock for treasury..................... (19,533) -- --
Payment for fractional shares as a result of common stock
reverse split........................................... (545) -- --
------------ ----------- -----------
Net cash provided by financing activities.......... 130,453,875 6,480,998 5,770,283
------------ ----------- -----------
Net Increase (Decrease) in Cash and Cash Equivalents:....... 22,266,233 (1,703,979) 4,590,783
Cash and Cash Equivalents at Beginning of Period:........... 3,518,570 5,222,549 631,766
------------ ----------- -----------
Cash and Cash Equivalents at End of Period:................. $ 25,784,803 $ 3,518,570 $ 5,222,549
============ =========== ===========
Supplemental Disclosure of Cash Flow Information:
Cash received for interest.............................. $ 521,323 $ 367,680 $ 90,325
============ =========== ===========
Cash paid for interest.................................. $ 44,715 $ 17,941 $ 32,644
============ =========== ===========
Supplemental Disclosure of Non-Cash Financing Activities:
Capital lease obligations incurred to acquire
equipment............................................. $ -- $ 353,621 $ 97,197
============ =========== ===========
Warrants issued for offering costs...................... $ -- $ 241,126 $ --
============ =========== ===========
The accompanying notes are an integral part of these consolidated financial
statements.
F-7
GENOMICA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2000
NOTE 1. ORGANIZATION AND BUSINESS
Genomica Corporation, a Delaware corporation, and its subsidiary
(collectively the "Company") is a provider of software products and services
that enable pharmaceutical and biotechnology researchers to accelerate the drug
discovery and development process. The Company's portfolio of products,
including Discovery Manager, Reference Database and Linkmapper, offer a broad
set of software tools for genomic researchers.
The Company was incorporated in September 1995 and began operations shortly
thereafter. Since its inception, the Company has incurred significant losses.
Although the Company anticipates that funds or proceeds from product licenses
and working capital at December 31, 2000, primarily as a result of its October
2000 initial public offering (Note 2), will be sufficient to fund its operations
through at least December 31, 2001, additional financing may be needed after
that date by the Company to fund its operations, continue the commercial
development of its products and develop its sales and marketing infrastructure.
There is no guarantee that such financing will be available when needed upon
terms acceptable to the Company. Operations of the Company are subject to
certain risks and uncertainties including, among others, uncertainty of product
development, conversion of the Company's product to a new technology platform,
inexperience in marketing or selling its product, technological uncertainty,
competition and dependence on key personnel.
On October 2, 2001, the Company's Board of Directors approved a Cost
Reduction Plan resulting in a restructuring of operations and consolidation of
facilities including the involuntary termination of a significant portion of the
Company's workforce. These matters are further discussed in Note 13. These
actions have had, and may continue to have, the effect of impairing certain
long-term assets and the recording of significant liabilities related to
severance and the termination of contractual relationships. Accordingly, in the
fourth quarter of 2001, the Company will record substantial reductions to the
carrying value of its long-term assets. Additional reductions may occur in
future periods as the Company's strategic direction continues to evolve.
NOTE 2. INITIAL PUBLIC OFFERING
On October 4, 2000, the Company completed an initial public offering
("IPO") of 6,440,000 shares of its common stock at $19.00 per share. The net
proceeds, after paying the underwriting discount and estimated expenses
associated with the offering were $112.5 million. The Company has invested the
net proceeds of this offering in interest-bearing, investment-grade securities.
Further, as a result of the IPO, all outstanding shares of preferred stock were
converted into shares of common stock in accordance with their terms.
NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION
The accounts of the Company have been consolidated. All intercompany
accounts and transactions have been eliminated. The consolidated financial
statements are stated in U.S. dollars and are prepared in accordance with
accounting principles generally accepted in the United States. Certain amounts
in the prior years' consolidated financial statements have been reclassified to
conform to the current year presentation.
USE 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. These estimates and assumptions may affect the
reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements, and the reported
amounts of revenue and expenses during the reporting period. Actual results
could differ from those estimates.
F-8
GENOMICA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CASH, CASH EQUIVALENTS AND INVESTMENTS IN MARKETABLE SECURITIES
The Company's investment portfolio consists of investments classified as
cash equivalents, short-term investments, or long-term investments. All highly
liquid investments with an original maturity of three months or less when
purchased are considered to be cash equivalents. All cash equivalents are
carried at cost, which approximates fair value. Short-and long-term investments
consist of U.S. government, state, municipal and corporate debt securities with
maturities of up to 24 months, as well as money market mutual funds. During
2000, the Company liquidated a portion of its portfolio of marketable securities
prior to their maturity dates to purchase a Certificate of Deposit needed to
secure a letter of credit. As a result, the Company's held-to-maturity
investments were reclassified to available-for-sale investments as defined in
Statement of Financial Accounting Standards (SFAS) No. 115, "Accounting for
Certain Investments in Debt and Equity Securities." Accordingly, at December 31,
2000, all investments were carried at fair value as determined by their quoted
market prices and included as appropriate in either short-or long-term
investments. All unrealized gains or losses are included in stockholders' equity
as a component of accumulated other comprehensive income. At December 31, 1999,
all investments were classified as held-to-maturity and accordingly were carried
at amortized cost.
The Company's cash, cash equivalents, short-and long-term investments had a
fair value at December 31, 2000, of $123.9 million and a gross unrealized gain
of $256,984.
The amortized cost basis, aggregate fair value, and unrealized gains or
losses for the Company's cash, cash equivalents, short-and long-term investment
portfolio as of December 31, 2000 is presented below:
AMORTIZED AGGREGATE GROSS UNREALIZED GROSS UNREALIZED
DECEMBER 31, 2000 COST BASIS FAIR VALUE GAINS LOSSES
----------------- ----------- ----------- ---------------- ----------------
Cash, cash equivalents, and
short-term investments:
Euro dollar bonds.......... $31,250,187 $31,305,645 $ 55,458 $ --
Corporate debt
securities.............. 32,356,716 32,538,987 182,271 --
Money market funds......... 18,253,580 18,253,580 -- --
Asset-backed securities.... 13,190,896 13,202,270 11,374 --
Certificate of deposit..... 625,000 625,000 -- --
Cash....................... 3,012,971 3,012,971 -- --
----------- ----------- -------- ------
Total cash, cash
equivalents, and
short-term
investments........... $98,689,350 $98,938,453 $249,103 $ --
Long-term investments:
Euro dollar bonds.......... $13,091,539 $13,102,214 $ 10,675 $ --
Corporate debt
securities.............. 10,899,216 10,894,550 -- 4,666
Asset-backed securities.... 994,058 995,930 1,872 --
----------- ----------- -------- ------
Total long-term
investments........... $24,984,813 $24,992,694 $ 12,547 $4,666
=========== =========== ======== ======
CONCENTRATION OF CREDIT RISK
Financial instruments which potentially subject the Company to
concentrations of credit risk are primarily cash and cash equivalents, accounts
receivable and investments in high-grade corporate bonds and commercial paper.
The Company maintains its cash balances in the form of bank demand deposits and
money market accounts with financial institutions that management believes are
creditworthy. Accounts receivable are typically unsecured and are concentrated
in the pharmaceutical industry. Three customers (Note 9)
F-9
GENOMICA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
accounted for the majority of the Company's trade accounts receivable as of
December 31, 2000. The Company has no significant financial instruments with
off-balance sheet risk of accounting loss, such as foreign exchange contracts,
option contracts or other foreign currency hedging arrangements.
INCOME TAXES
The current provision for income taxes, if any, represents actual or
estimated amounts payable on tax return filings each year. Deferred tax assets
and liabilities are recorded for the estimated future tax effects of temporary
differences between the tax bases of assets and liabilities and amounts reported
in the accompanying balance sheets, and for operating loss and tax credit
carryforwards. The change in deferred tax assets and liabilities for the period
measures the deferred tax provision or benefit for the period. Effects of
changes in enacted tax laws on deferred tax assets and liabilities are reflected
as adjustments to the tax provision or benefit in the period of enactment. The
Company's deferred tax assets have been completely reduced by a valuation
allowance as it is not more likely than not that some or all of the deferred tax
assets will be realized.
REVENUE RECOGNITION
The Company generates revenue from the license and related maintenance of
its proprietary software products. The Company recognizes revenue when there is
persuasive evidence of an arrangement, delivery has occurred, collection is
probable, and the fee is fixed or determinable. If an acceptance period exists,
license revenues are recognized upon the earlier of customer acceptance or the
expiration of the acceptance period. The Company generally bundles its license
fees and subsequent maintenance, consisting of software updates, content updates
and support. The Company has concluded that there is no basis to allocate the
total license and maintenance fees charged in its software arrangements to these
various elements of the arrangement as the Company currently does not offer the
license fee or maintenance for sale separately. Accordingly, revenue is
generally deferred and recognized ratably over the term of the arrangement.
Certain software arrangements include other elements, such as services and
training. If present, such elements are unbundled based on vendor-specific
objective evidence of their fair value and the related revenue is recognized
when those elements are delivered.
The Company believes its current revenue recognition policies and practices
are consistent with the provisions of Statement of Position 97-2, "Software
Revenue Recognition" ("SOP 97-2"), as amended by SOP 98-4 and SOP 98-9, which
were issued by the American Institute of Certified Public Accountants, as well
as certain Technical Practice Aids issued from time to time. Implementation
guidelines for these standards, as well as potential new standards, could lead
to unanticipated changes in the Company's current revenue recognition policies.
Such changes could affect the timing of the Company's future revenue and results
of operations.
RESEARCH AND DEVELOPMENT AND SOFTWARE DEVELOPMENT COSTS
Research and development costs are charged to expense as incurred and
consist of salaries and other direct costs. Statement of Financial Accounting
Standards No. 86, "Accounting for the Costs of Computer Software to be Sold,
Leased or Otherwise Marketed," requires the capitalization of certain software
development costs subsequent to the establishment of technological feasibility.
The Company's software is deemed to be technologically feasible at the point a
working model of the software product is developed. Through December 31, 2000,
for products developed by the Company, the period from attainment of
technological feasibility to general release has been brief and qualifying costs
were not significant. Accordingly, the Company has not capitalized any
qualifying software development costs in the accompanying consolidated financial
statements. The costs of developing routine enhancements are expensed as
research and development costs as incurred because of the short time between the
determination of technological feasibility and the date of general release of
the related products.
F-10
GENOMICA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
STOCK-BASED COMPENSATION
The Company accounts for its employee stock option plans in accordance with
the provisions of Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees," ("APB No. 25"), and related interpretations. The
Company adopted the disclosure-only requirements of Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation," ("SFAS
No. 123"), which allows entities to continue to apply the provision of APB No.
25 for transactions with employees and provide pro forma disclosures for
employee stock grants made as if the fair value-based method of accounting in
SFAS No. 123 had been applied to these transactions. Any deferred stock
compensation calculated according to APB No. 25 is amortized over the vesting
period of the individual options, generally four or five years, in accordance
with Financial Accounting Standards Board ("FASB") Interpretation No. 28,
"Accounting for Stock Appreciation Rights and Other Variable Stock Option and
Awards Plans."
The Company applies the provisions of SFAS No. 123 and related
interpretations to stock-based compensation to non-employees.
In March 2000, the Financial Accounting Standards Board issued FASB
Interpretation No. 44, "Accounting for Certain Transactions Involving Stock
Compensation" ("FIN No. 44"). FIN No. 44 clarifies the application of APB No. 25
for certain issues related to equity-based instruments issued to employees. FIN
No. 44 became effective on July 1, 2000, except for certain transactions for
which the effective date is earlier, and has been applied on a prospective
basis. The implementation of FIN No. 44 did not have a significant impact on the
Company's consolidated results of operations or its financial position.
REVERSE STOCK SPLIT
On October 2, 2000, in conjunction with its initial public offering, the
Company completed a one-for-three reverse stock split of all outstanding shares
of its common stock. All shares of common stock and per share information in the
accompanying financial statements have been retroactively adjusted to reflect
the reverse stock split.
NET EARNINGS OR LOSS PER SHARE
The Company presents basic and diluted earnings or loss per share in
accordance with Statement of Financial Accounting Standards No. 128 "Earnings
per Share" ("SFAS No. 128"), which establishes standards for computing and
presenting basic and diluted earnings per share. Under this statement, basic
earnings or loss per share is computed by dividing the net earnings or loss by
the weighted-average number of shares of common stock outstanding. Diluted
earnings or loss per share is determined by dividing the net earnings or loss by
the sum of (1) the weighted-average number of common shares outstanding, (2) if
not anti-dilutive, the number of shares of convertible preferred stock as if
converted upon issuance, and (3) if not anti-dilutive, the effect of outstanding
stock options and warrants determined utilizing the treasury stock method.
For all periods presented, the effects of the convertible preferred stock
and stock options and warrants were excluded from the calculation of diluted
loss per share since the result would have been anti-dilutive. The dilutive
effect of common stock options and warrants, without regard to the treasury
stock method, that are excluded from the calculation of diluted loss per share
because their effect is anti-dilutive totaled 1,899,054 in 2000, 1,414,111 in
1999, and 655,027 in 1998. The dilutive effect of convertible preferred stock
that is excluded from the calculation of diluted loss per share because its
effect is anti-dilutive totaled 13,223,975 in 2000, 10,058,124 in 1999 and
4,297,858 in 1998.
Pro forma net loss per share (unaudited) for the year ended December 31,
2000 is computed using the net loss and weighted-average number of common shares
outstanding, including the pro forma effects of the assumed conversion of the
Company's Series A, B, C and D convertible Preferred Stock into shares of the
F-11
GENOMICA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Company's common stock as if such conversion occurred on January 1, 2000, or at
date of original issuance, if later. The resulting pro forma adjustment includes
an increase in the weighted-average shares used to compute basic and diluted net
loss per share of 9,835,153 for the year ended December 31, 2000.
COMPREHENSIVE INCOME
Comprehensive income includes all changes in equity during a period from
non-owner sources. During the years ended December 31, 1998 and 1999, the
Company had no transactions that were required to be reported as adjustments to
determine comprehensive income (loss).
During 2000, the Company began accounting for its investments as
available-for-sale securities. Such securities are marked to fair market value
with adjustments included as a component of other comprehensive income. The
excess of the fair market value of the Company's investments over the amortized
cost was $256,984 at December 31, 2000, and is reflected as an unrealized gain
in the accompanying consolidated statements of operations and comprehensive loss
and consolidated statements of stockholders equity.
REPORTABLE SEGMENTS
SFAS No. 131, "Disclosure About Segments of and Enterprise and Related
Information," establishes standards for the reporting of information about
operating segments. Since its inception, the Company has conducted its
operations in one operating segment.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the FASB issued Statement of Financial Accounting Standards
No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS
No. 133"). The Statement establishes accounting and reporting standards for
derivative financial instruments and hedging activities related to those
instruments as well as other hedging activities. In June 1999, the FASB issued
Statement of Financial Accounting Standards No. 137, "Accounting for Derivative
Instruments and Hedging Activities-Deferral of the Effective Date of SFAS
Statement No. 133-an Amendment of FASB Statement No. 133" ("SFAS No. 137"). SFAS
No. 137 delays the effective date of SFAS No. 133 to all fiscal quarters of
fiscal years beginning after June 15, 2000. Since inception, the Company has not
entered into arrangements that would fall under the scope of SFAS No. 133 and
related interpretations and amendments and thus, the Company believes that SFAS
No. 133 will not significantly affect its financial condition and results of
operations.
In December 1999, the Securities and Exchange Commission (the "SEC") issued
Staff Accounting Bulletin No. 101, "Revenue Recognition" ("SAB 101"). SAB 101
provides the SEC Staff's views in applying generally accepted accounting
principles to selected revenue recognition issues. The Company has implemented
the guidance in SAB 101 for all periods presented.
F-12
GENOMICA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 4. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
AS OF DECEMBER 31,
------------------------
2000 1999
----------- ----------
Computer and office equipment............................... $ 2,222,718 $ 953,361
Furniture and fixtures...................................... 958,463 123,218
Software.................................................... 437,958 63,894
Leasehold improvements...................................... 308,823 47,657
----------- ----------
3,927,962 1,188,130
Less -- Accumulated depreciation............................ (1,204,455) (514,651)
----------- ----------
$ 2,723,507 $ 673,479
=========== ==========
Property and equipment are recorded at cost. Depreciation is computed using
the straight-line method based on estimated useful lives ranging from three to
five years. Maintenance and repairs are expensed as incurred. Depreciation
expense was $738,169, $253,016 and $176,926 for the years ended December 31,
2000, 1999 and 1998, respectively.
NOTE 5. DEBT
CONVERTIBLE NOTES PAYABLE
In October 1998, the Company issued $1,000,000 of debt securities with an
interest rate of 8% to various investors. The notes included warrants to
purchase 208,331 shares of Series B Preferred Stock at $0.72 per share. These
warrants were valued at $82,298 using the Black-Scholes option pricing model.
The Company attributed a portion of the proceeds from the debt offering to the
fair value of the warrants and recorded an initial discount to the carrying
value of the related debt in the amount of $82,298. The discount was amortized
using the effective interest-rate method over the two-year term of the note.
In conjunction with the sale of the Series B Preferred Stock on December
16, 1998, the net amount of the notes of $925,368 and accrued interest of
$14,904 were converted into 1,409,589 shares of Series B Preferred Stock.
LOAN AGREEMENT
On September 17, 1997, the Company entered into a Bridge Loan and Security
Agreement ("Loan Agreement") with a bank. Under the terms of the Loan Agreement,
the outstanding advances of $400,000 were converted into a term loan ("Term
Loan") on October 9, 1997. The principal and interest on the Term Loan was due
in monthly installments through October 9, 1999. Interest accrued at a rate
equal to the bank's prime rate plus 1.5% (9.25% at December 31, 1998), and the
Loan Agreement was collateralized by assets of the Company. On October 9, 1999,
the Term Loan and all interest was paid in full.
NOTE 6. STOCKHOLDERS' EQUITY
AUTHORIZED SHARES
At December 31, 2000, the Company is authorized to issue 50,000,000 shares
of common stock and 5,000,000 shares of preferred stock. On October 4, 2000, the
Company decreased the number of authorized shares of common stock and preferred
stock from 65,000,000 and 47,938,179 shares, respectively.
F-13
GENOMICA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Series A, B, C and D Convertible Preferred Stock:
SERIES A SERIES B SERIES C SERIES D
------------------------- -------------------------- -------------------------- ---------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES
----------- ----------- ----------- ------------ ----------- ------------ ---------
Balances, December 31,
1997..................... 12,533,676 $ 7,504,266 -- $ -- -- $ -- --
Sale of Series B preferred
stock in December 1998
for cash of $0.72 per
share, net of offering
costs of $332,264........ -- -- 7,347,927 4,958,243 -- -- --
Conversion of notes
payable in December 1998
to Series B preferred
stock at $0.72 per
share.................... -- -- 1,409,589 940,272 -- -- --
----------- ----------- ----------- ------------ ----------- ------------ ---------
Balances, December 31,
1998..................... 12,533,676 7,504,266 8,757,516 5,898,515 -- -- --
Sale of Series B preferred
stock in February 1999
for cash of $0.72 per
share, net of offering
costs of $538,180........ -- -- 10,069,443 6,711,819 -- -- --
Issuance of warrants to
purchase common stock.... -- -- -- (241,126) -- -- --
----------- ----------- ----------- ------------ ----------- ------------ ---------
Balances, December 31,
1999..................... 12,533,676 7,504,266 18,826,959 12,369,208 -- -- --
Sale of Series C preferred
stock at $1.50 per share,
net of stock issuance
costs of $25,139......... -- -- -- -- 10,022,635 15,008,815 --
Sale of Series D preferred
stock at $3.34 per
share.................... -- -- -- -- -- -- 900,000
Issuance of 204,637 shares
of preferred stock upon
exercised of warrants.... 124,502 75,000 80,135 86,265 -- -- --
Conversion of 42,487,907
shares of preferred stock
to 14,162,628 shares of
common stock............. (12,658,178) (7,579,266) (18,907,094) (12,455,473) (10,022,635) (15,008,815) (900,000)
----------- ----------- ----------- ------------ ----------- ------------ ---------
Balances, December 31,
2000..................... -- $ -- -- $ -- -- $ -- --
=========== =========== =========== ============ =========== ============ =========
SERIES D
-----------
AMOUNT
-----------
Balances, December 31,
1997..................... $ --
Sale of Series B preferred
stock in December 1998
for cash of $0.72 per
share, net of offering
costs of $332,264........ --
Conversion of notes
payable in December 1998
to Series B preferred
stock at $0.72 per
share.................... --
-----------
Balances, December 31,
1998..................... --
Sale of Series B preferred
stock in February 1999
for cash of $0.72 per
share, net of offering
costs of $538,180........ --
Issuance of warrants to
purchase common stock.... --
-----------
Balances, December 31,
1999..................... --
Sale of Series C preferred
stock at $1.50 per share,
net of stock issuance
costs of $25,139......... --
Sale of Series D preferred
stock at $3.34 per
share.................... 3,000,000
Issuance of 204,637 shares
of preferred stock upon
exercised of warrants.... --
Conversion of 42,487,907
shares of preferred stock
to 14,162,628 shares of
common stock............. (3,000,000)
-----------
Balances, December 31,
2000..................... $ --
===========
The Company is authorized to issue preferred stock in various series with
rights and privileges as determined by the Board of Directors. From its
inception through September 2000, the Company issued a total of 42.5 million
shares of preferred stock. The shares carried preferences in liquidation,
generally equal to the original issuance price plus all accrued or other
declared but unpaid dividends. Preferred stockholders were entitled to receive
dividends only when, as and if declared by the Board of Directors, and at such
amounts per share as specified by the Board of Directors. Each holder of shares
of preferred stock was entitled to a number of votes on an as-if-converted to
common basis. Additionally, all shares of outstanding preferred stock were
convertible into shares of common stock on a one-for-one basis, subject to
certain adjustments, either at the option of the holder or automatically upon
certain events. Upon completion of the Company's initial public offering in
October 2000, all outstanding shares of preferred stock were automatically
converted into 14,162,628 shares of common stock, after taking into account the
impact of the one-for-three reverse stock split.
In connection with the issuance of the Series C preferred stock in March
2000, the Company recognized a $15.0 million beneficial conversion charge for
the difference between the price at which the Series C preferred stock was sold
and the deemed fair value of the common stock into which it was convertible. In
connection with the issuance of the Series D preferred stock in September 2000,
the Company recognized a
F-14
GENOMICA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
$2.1 million beneficial conversion charge for the difference between the price
at which the Series D preferred stock was sold and the deemed fair value of the
common stock into which it was convertible. These amounts are reflected as
charges against income available to common stockholders in the accompanying
statement of operations.
STOCK OPTION PLAN
Our 2000 Equity Incentive Plan (the "Plan") was originally adopted as the
1996 Stock Option Plan and our Board of Directors adopted its restatement and
amendment in March 2000. In August 2000, the Plan was approved by our
stockholders. There is currently an aggregate of 5,000,000 shares of common
stock authorized for issuance under the Plan. The Plan will terminate on March
12, 2010 unless sooner terminated by the Board of Directors or committee. The
exercise price per share of each option granted will not be less than 110% of
the fair market value of the stock in the case of incentive stock options
granted to persons owning 10% or more of our voting power, as defined, and
otherwise shall not be less than 100% of the fair market value of the stock.
Options generally vest over a four or five-year term. The exercise period is not
more than five years from the date of grant in the case of incentive stock
options granted to persons owning 10% or more of our voting power and otherwise
not more than ten years. Awards issued under the Plan prior to its amendment and
restatement will be governed by the terms of the Plan and applicable option
agreements in effect prior to such amendment and restatement. Prior to the
amendment and restatement, the plan provided only for grants of stock options
and not for other types of awards.
During the years ended December 31, 2000 and 1999, in connection with the
grant of certain stock options to employees, the Company recorded deferred
stock-based compensation of $25.6 million and $7.4 million, respectively,
representing the difference between the exercise price and the deemed fair value
(for financial reporting purposes) of the Company's common stock on the date
these stock options were granted. In addition, in connection with the grant of
stock options to certain non-employee advisors in 2000 as discussed below, the
Company recorded deferred stock-based compensation of $212,400, representing the
estimated fair market value of the options on December 31, 2000. Deferred
compensation from the non-employee options is subject to change until such time
that the options become vested. Deferred compensation is included as a component
of stockholders' equity and is being amortized in accordance with FASB
Interpretation No. 28 over the vesting periods of the related options, which is
generally four or five years. Stock compensation expense recognized for the year
ended December 31, 2000, and remaining compensation expense to be recognized as,
and to the extent that, the options vest is as follows:
DEFERRED STOCK
EXPENSE
RECOGNIZED DURING UNAMORTIZED DEFERRED STOCK EXPENSE TO BE RECOGNIZED
THE YEAR ENDED DURING THE PERIODS ENDING DECEMBER 31,
DECEMBER 31, ---------------------------------------------------------
2000 2001 2002 2003 2004 2005
----------------- ---------- ---------- ---------- -------- -------
Research and development........ $ 4,367,215
Selling and marketing........... 3,983,129
General and Administration...... 6,308,870
-----------
$14,659,214 $8,743,149 $4,893,068 $2,452,895 $795,369 $44,529
=========== ========== ========== ========== ======== =======
RESTRICTED STOCK
In 1998 and 2000, the Company sold at fair value 112,067 shares and 621,048
shares, respectively, of restricted common stock under the Plan. The holders of
such shares of restricted common stock, generally executives of the Company,
have entered into Restricted Stock Purchase Agreements under which the Company
has the right to repurchase unvested common shares at the original issuance
price upon termination of these individuals' business relationships with the
Company. Restrictions on these common shares lapse over
F-15
GENOMICA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
periods ranging from nineteen months to five years, and such lapsing is subject
to acceleration under certain conditions. At December 31, 1998, 1999 and 2000,
restrictions had lapsed with regard to 39,951, 105,707 and 243,912 of these
shares, respectively. In 2000, the Company repurchased 63,779 shares under the
Plan.
PRO FORMA DISCLOSURES
SFAS No. 123 defines a fair value-based method of accounting for
stock-based compensation plans. An entity may continue to measure compensation
cost for options granted to employees using the intrinsic value-based method
prescribed by APB No. 25, provided that pro forma disclosures are made of net
income or loss, assuming the fair value-based method of SFAS No. 123 has been
applied.
The Company has elected to account for its stock-based employee
compensation plans under APB No. 25; accordingly, for purposes of the pro forma
disclosures presented below, the Company has computed the fair values of all
options granted during 2000, 1999, and 1998 using the Black-Scholes option
pricing model and the following weighted average assumptions:
2000 1999 1998
------- ------- -------
Risk-free interest rate................................... 5.12% 5.61% 5.23%
Expected lives............................................ 4 years 5 years 5 years
Expected volatility....................................... 5% 0.001% 0.001%
Expected dividend yield................................... 0% 0% 0%
Through the date of the IPO, the Company used the minimum value method for
determining the fair value of options issued to employees. Subsequent to the
date of the IPO, the Company used a weighted-average volatility of 60%.
Cumulative compensation cost recognized in pro forma net income or loss with
respect to options that are forfeited prior to vesting is adjusted as a
reduction of pro forma compensation expense in the period of forfeiture.
The total fair value of options granted to employees was computed to be
$30,332,057, $7,541,587 and $15,885 for the years ended December 31, 2000, 1999
and 1998, respectively. Pro forma stock-based compensation, net of the amounts
recorded for amortization of deferred compensation and the effect of
forfeitures, was $392,377, $26,068, and $12,192 for the years ended December 31,
2000, 1999, and 1998, respectively.
If the Company had accounted for its stock-based compensation plans in
accordance with SFAS No. 123, the Company's net loss would have been reported as
follows:
YEAR ENDED DECEMBER 31,
----------------------------------------
2000 1999 1998
------------ ----------- -----------
Net loss:
As reported................................ $(41,471,610) $(7,578,471) $(3,754,874)
Pro forma.................................. $(41,863,987) $(7,604,539) $(3,767,066)
Net loss per share (basic and diluted):
As reported................................ $ (6.49) $ (7.13) $ (3.81)
Pro forma.................................. $ (6.55) $ (7.16) $ (3.82)
F-16
GENOMICA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
A summary of all employee options activity under the Plan for the years
ended December 31, 1998, 1999 and 2000 is as follows:
WEIGHTED
NUMBER OF AVERAGE
OPTIONS EXERCISE PRICE
--------- --------------
Outstanding at December 31, 1997............................ 288,577 $0.18
Granted................................................... 283,099 $0.18
Forfeited................................................. (13,248) $0.18
Exercised................................................. (112,400) $0.18
--------- -----
Outstanding at December 31, 1998............................ 446,028 $0.18
Granted................................................... 697,397 $0.18
Forfeited................................................. (105,487) $0.18
Exercised................................................. (34,214) $0.18
--------- -----
Outstanding at December 31, 1999............................ 1,003,724 $0.18
Granted................................................... 2,225,917 $2.46
Forfeited................................................. (270,004) $2.17
Exercised................................................. (876,531) $0.29
--------- -----
Outstanding at December 31, 2000............................ 2,083,106 $2.31
========= =====
As of December 31, 2000, 1999 and 1998, 233,338, 261,991 and 106,465 of the
above options were exercisable, respectively, with weighted average exercise
prices of $0.61, $0.18 and $0.18, respectively.
The following table summarizes the weighted average exercise prices of
options granted during the years ended December 31, 2000, 1999 and 1998. The
table includes options for common stock whose exercise price was less than the
fair market value, for financial reporting purposes, of the underlying common
stock at the date of grant and equal to the fair market value at the date of
grant:
YEARS ENDED DECEMBER 31,
--------------------------------
EXERCISE PRICE 2000 1999 1998
-------------- ---------- -------- --------
Less than deemed fair market value for financial
reporting purposes --
Number of options................................. $2,099,000 $697,397 $ --
========== ======== ========
Weighted average exercise price................... $ 1.95 $ 0.18 $ --
========== ======== ========
Weighted average fair value....................... $ 14.05 $ 10.81 $ --
========== ======== ========
Equal to deemed fair market value for financial
reporting purposes --
Number of options.............................. $ 126,917 $ -- $283,099
========== ======== ========
Weighted average exercise price................ $ 10.92 $ -- $ 0.18
========== ======== ========
Weighted average fair value.................... $ 6.61 $ -- $ 0.06
========== ======== ========
F-17
GENOMICA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following table summarizes information about employee stock options
outstanding and exercisable under the Plan at December 31, 2000:
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
----------------------------------------- -------------------------
NUMBER OF WEIGHTED
OPTIONS AVERAGE WEIGHTED NUMBER WEIGHTED
OUTSTANDING AT REMAINING AVERAGE EXERCISABLE AT AVERAGE
DECEMBER 31, CONTRACTUAL EXERCISE DECEMBER 31, EXERCISE
EXERCISE PRICE 2000 LIFE IN YEARS PRICE 2000 PRICE
-------------- -------------- ------------- -------- -------------- --------
$0.18....................... 241,689 8.41 $ 0.18 88,787 $ 0.18
$0.75....................... 1,256,666 9.07 0.75 143,222 0.75
$4.50 - $6.50............... 399,667 9.64 4.56 -- --
$7.50 - $9.50............... 43,500 9.92 8.44 -- --
$10.02 - $13.50............. 122,167 9.77 11.17 -- --
$14.00 - $19.44............. 19,417 9.78 14.70 1,329 15.00
--------- ---- ------ ------- ------
2,083,106 9.17 $ 2.31 233,338 $ 0.61
========= ==== ====== ======= ======
OPTIONS ISSUED TO NON-EMPLOYEES
SFAS No. 123 and related interpretations require that all transactions with
non-employees in which goods or services are the consideration received for the
issuance of equity instruments be accounted for based on the fair value of the
consideration received or the equity instruments issued, whichever is more
reliably measurable. No expense has been recognized related to options granted
in 1998 as their fair value was determined to be nominal. No options were issued
to non-employees in 1999. During 2000 the Company granted options for 60,000
shares of common stock to non-employees. Such options vest over a period of
three years. The Company has computed the fair value of all options granted to
non-employees during 1998 and 2000 using the Black-Scholes option pricing model
using the following weighted-average assumptions:
2000 1998
-------- --------
Risk-free interest rate..................................... 5.12% 5.23%
Expected lives.............................................. 10 years 10 years
Expected volatility......................................... 5.0% 0.001%
Expected dividend yield..................................... 0.0% 0.0%
The Company has accounted for the options issued in 2000 in accordance with
ETIF 96-18, whereby the fair value of the options is recorded at the date of
issuance, and the fair value of all unvested options is subsequently re-measured
at each vesting and/or reporting date. As a result, subsequent changes in the
fair market value of the underlying common stock could have a significant impact
on future compensation expense. However, the number of options subject to change
will diminish over time as the options vest. The fair value of the options at
December 31, 2000 was estimated to be $212,400. The Company recognized $24,000
of compensation expense during the year ended December 31, 2000 on these
options.
F-18
GENOMICA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
A summary of all non-employee option activity for the years ended December
31, 1998, 1999 and 2000 is as follows:
WEIGHTED
NUMBER OF AVERAGE
SHARES EXERCISE PRICE
--------- --------------
Outstanding at December 31, 1997............................ 73,333 $0.18
Granted................................................... 32,000 $0.18
Forfeited................................................. (18,406) $0.18
Exercised................................................. (16,927) $0.18
------- -----
Outstanding at December 31, 1998............................ 70,000 $0.18
Granted................................................... -- $0.00
Exercised................................................. -- $0.00
------- -----
Outstanding at December 31, 1999............................ 70,000 $0.18
Granted................................................... 60,000 $8.11
Exercised................................................. (25,833) $0.18
------- -----
Outstanding at December 31, 2000............................ 104,167 $4.75
======= =====
The following table summarizes information about non-employee stock options
outstanding and exercisable under the Plan at December 31, 2000:
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
----------------------------------------------- --------------------------
NUMBER OF OPTIONS WEIGHTED AVERAGE WEIGHTED NUMBER WEIGHTED
OUTSTANDING AT REMAINING AVERAGE EXERCISABLE AT AVERAGE
EXERCISE DECEMBER 31, CONTRACTUAL EXERCISE DECEMBER 31, EXERCISE
PRICE 2000 LIFE IN YEARS PRICE 2000 PRICE
-------- ----------------- ---------------- -------- --------------- --------
$0.18................ 44,167 5.46 $0.18 44,167 $0.18
$8.11................ 60,000 9.92 8.11 -- --
------- ---- ----- ------ -----
104,167 8.03 4.75 44,167 $0.18
======= ==== ===== ====== =====
STOCK WARRANTS
In November 1996, the Company entered into a warrant agreement with a
related party to purchase 124,502 shares of the Company's Series A preferred
stock for an exercise price of $0.6024 per share. The term of the warrant was
through the earlier of the closing of an initial public offering of the
Company's common stock or November 30, 2001. No value was attributed to this
warrant as its value was determined to be nominal. On October 4, 2000, the
warrant was exercised for $75,000 in cash and the Company issued 124,502 shares
of Series A preferred stock that subsequently converted to 41,500 shares of
common stock.
On October 9, 1997, under the terms of a warrant agreement, the Company
issued a warrant to a bank to purchase 30,000 shares of the Company's Series A
preferred stock for an exercise price of $0.6024 per share. The warrant expires
on September 9, 2004. No value was assigned because the value was determined to
be nominal.
In October 1998, in connection with the issuance of convertible debt, the
Company entered into warrant agreements to purchase a total of 208,331 shares of
the Company's Series B preferred stock for an exercise
F-19
GENOMICA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
price of $0.72 per share. The warrants expire on December 16, 2003. The Company
determined the fair value of the warrants to be $82,298 using the Black-Scholes
option pricing model using the following assumptions:
Exercise price.............................................. $0.72
Fair market value of Series B preferred stock on grant
date...................................................... $0.72
Option life................................................. 5 years
Volatility rate............................................. 60%
Risk free rate of return.................................... 4.18%
Dividend rate............................................... 0%
The fair value of these warrants was included as a discount to the related
debt.
On October 4, 2000, one warrant was exercised for $54,375 in cash and one
warrant was exercised on a net issue basis. The Company issued 80,135 shares of
Series B preferred stock from these exercises that subsequently converted into
26,711 shares of common stock.
In December 1998, the Company entered into a warrant agreement with the
Series B placement agent to purchase 18,055 shares of the Company's common stock
for an exercise price of $2.16 per share. The warrants expired on the earlier of
the closing of an initial public offering of the Company's common stock or
December 16, 2003. No deduction from the Series B proceeds was recorded related
to these warrants as their value was determined to be nominal. On October 4,
2000, the warrant was exercised on a net issue basis and the Company issued
16,002 shares of common stock.
In February 1999, the Company entered into a warrant agreement with the
Series B placement agent to purchase 201,388 shares of the Company's common
stock for an exercise price of $2.16 per share. The warrants expired on the
earlier of the closing of an initial public offering of the Company's common
stock or February 11, 2004. The Company determined the fair value of the
warrants to be $241,126 using the Black-Scholes option pricing model using the
following assumptions:
Exercise price.............................................. $2.16
Fair market value of Series B preferred stock on grant
date...................................................... $0.72
Option life................................................. 5 years
Volatility rate............................................. 60%
Risk free rate of return.................................... 4.66%
Dividend rate............................................... 0%
The fair value of these warrants was included as additional issuance costs
of the Series B preferred stock.
On October 4, 2000, the warrant was exercised on a net issue basis and the
Company issued 178,493 shares of common stock.
F-20
GENOMICA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 7. INCOME TAXES
The provision for income taxes includes the following:
2000 1999 1998
----------- ----------- -----------
Current --
Federal..................................... $ -- $ -- $ --
State....................................... -- -- --
----------- ----------- -----------
Total current provision
----------- ----------- -----------
Deferred --
Federal..................................... (3,365,000) (2,025,000) (1,313,000)
State....................................... (326,000) (197,000) (127,000)
Valuation allowance......................... 3,691,000 2,222,000 1,440,000
----------- ----------- -----------
Total deferred provision (benefit)....... -- -- --
----------- ----------- -----------
Total provision.......................... $ -- $ -- $ --
=========== =========== ===========
The statutory federal income tax rate was 34% for the years ended December
31, 2000, 1999 and 1998.
Differences between the income tax expense reported in the statements of
operations and the amount computed by applying the statutory federal income tax
rate to earnings before income taxes are as follows:
2000 1999 1998
----------- ----------- -----------
Benefit at statutory rate
Increase (decrease) due to --................. $(8,283,000) $(2,577,000) $(1,276,000)
State income taxes.......................... (804,000) (250,000) (124,000)
Nondeductible stock-based compensation...... 5,321,000 623,000 --
Other....................................... 75,000 (18,000) (40,000)
Valuation allowance......................... 3,691,000 2,222,000 1,440,000
----------- ----------- -----------
Income tax provisions......................... $ -- $ -- $ --
=========== =========== ===========
F-21
GENOMICA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Components of net deferred tax assets (liabilities) as of December 31, 2000
and 1999 are as follows:
2000 1999
----------- -----------
Current --
Accounts receivable...................................... $ (147,000) $ (134,000)
Interest receivable...................................... (807,000) (19,000)
Other current assets..................................... (117,000) (26,000)
Accounts payable and accrued liabilities................. 658,000 241,000
Deferred revenue......................................... 330,000 309,000
Non-current --
Depreciation............................................. 19,000 30,000
Capitalized research and development costs for tax
purposes.............................................. 678,000 797,000
Net operating losses..................................... 8,492,000 4,217,000
Tax credits.............................................. 130,000 130,000
----------- -----------
Total net deferred tax assets.............................. 9,236,000 5,545,000
Valuation allowance........................................ (9,236,000) (5,545,000)
----------- -----------
Net deferred tax assets.................................. $ -- $ --
=========== ===========
For income tax reporting purposes, the Company has approximately $22.8
million of net operating loss carryforwards that expire at various dates through
2020. The Tax Reform Act of 1986 contains provisions that may limit the net
operating loss carryforwards available to be used in any given year in the event
of a significant change in ownership interests, such as due to the Company's IPO
in 2000. The Company also has available income tax credits of approximately
$130,000, expiring at various dates through 2019. Realization of net operating
loss and tax credit carryforwards is dependent on generating sufficient taxable
income prior to their expiration dates.
During 2000, 1999 and 1998, the Company increased its valuation allowance
by $3,691,000, $2,222,000, and $1,440,000, respectively, due mainly to
uncertainty relating to the realizability of the Company's net operating loss
carryforwards and income tax credits. The amount of the deferred tax assets
considered realizable could be adjusted in the near term if future taxable
income materializes.
NOTE 8. COMMITMENTS AND CONTINGENCIES
OPERATING LEASES
The Company leases administrative offices, research facilities and certain
equipment under non-cancelable operating lease agreements. Rent expense under
these leases was $517,532, $247,368 and $227,982 for the years ended December
31, 2000, 1999 and 1998, respectively. The following is a schedule of future
minimum lease payments for the years ending December 31:
2001........................................................ $ 661,775
2002........................................................ 681,083
2003........................................................ 700,977
2004........................................................ 717,625
2005........................................................ 417,459
Thereafter.................................................. --
----------
$3,178,919
==========
F-22
GENOMICA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
COLD SPRINGS HARBOR LICENSE AGREEMENT
The Company is the exclusive licensee of a technology owned by Cold Springs
Harbor Laboratory with regard to a specific patent. This license gives the
Company the exclusive right to commercialize the related technology. This
technology is incorporated into the Company's Discovery Manager product.
Accordingly, the Company's business could be materially harmed if the Company
loses or is unable to maintain this license agreement. Cold Springs Harbor
Laboratory is a related party through its ownership of shares of the Company's
common stock.
LICENSING AGREEMENT
In April 1996, the Company entered into a licensing and remarketing
agreement with a third-party software company ("Licensor"). The Company is fully
licensed to use the Licensor's software and documentation. The Company can
sublicense the use of the Licensor's software to its worldwide customers. Under
the terms of the two-year sublicense agreement, the Company is required to pay
royalties to the Licensor based on product sales. During the years ended
December 31, 2000, 1999 and 1998, the Company paid approximately $28,542,
$57,130, and $1,800, respectively, under the licensing agreement.
LITIGATION
The Company is exposed to asserted and unasserted legal claims encountered
in the normal course of business. Management believes that the ultimate
resolution of any such matters will not have a material adverse effect on the
operating results or the financial position of the Company.
NOTE 9. MAJOR CUSTOMERS
The Company's revenue from customers in excess of 10% of net revenue for
each of the years ended December 31, 2000, 1999 and 1998 was as follows:
YEAR ENDED DECEMBER 31,
-------------------------
2000 1999 1998
------ ------ -------
Customer A.................................................. 21.0% 41.0% 55.0%
Customer B.................................................. 15.3% 26.0% 45.0%
Customer C.................................................. 32.0% 0.0% 0.0%
Customer D.................................................. 10.8% 0.0% 0.0%
----- ----- ------
79.1% 67.0% 100.0%
===== ===== ======
The Company's net accounts receivable-trade as of December 31, 2000 and
1999 were concentrated with certain major customers as follows:
2000 1999
----- ------
Customer B.................................................. 37.7% 11.0%
Customer C.................................................. 22.6% 89.0%
Customer E.................................................. 14.1% 0.0%
----- ------
74.4% 100.0%
===== ======
F-23
GENOMICA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 10. GEOGRAPHIC INFORMATION
The majority of the Company's operations and assets are based in the United
States. The Company sells its products to both domestic and foreign customers.
The Company's revenue by geographic area for the years ended December 31, 2000,
1999 and 1998 is as follows:
2000 1999 1998
---------- -------- --------
United States....................................... $ 784,639 $530,310 $ 88,887
Europe.............................................. 857,158 251,020 108,005
---------- -------- --------
$1,641,797 $781,330 $196,892
========== ======== ========
NOTE 11. EMPLOYEE BENEFIT PLAN
401(K) AND PROFIT SHARING PLAN
Effective January 1, 1998, the Company implemented a defined contribution
plan under Section 401(k) of the Internal Revenue Code ("IRC"). Under the plan,
eligible employees may contribute up to 15% of their compensation, subject to
limitations under the IRC. The Company may make discretionary matching
contributions to the plan upon Board approval. No contributions to the plan have
been made by the Company to date.
NOTE 12. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
In view of the rapidly evolving nature of our business and our limited
operating history, we believe that our revenue and other operating results
should not be relied upon as indications of future performance. The following
summarizes selected quarterly information with respect to the Company's
operations for the last eight fiscal quarters. Amounts are in thousands, except
per share data.
2000 QUARTER ENDED 1999 QUARTER ENDED
--------------------------------------- --------------------------------------
DEC. 31 SEPT. 30 JUNE 30 MAR. 31 DEC. 31 SEPT. 30 JUNE 30 MAR. 31
------- -------- ------- -------- ------- -------- ------- -------
Revenue:
Software licenses and services.... $ 466 $ 409 $ 396 $ 344 $ 239 $ 198 $ 95 $ 90
Research grants................... -- -- -- 27 96 35 28 --
------- ------- ------- -------- ------- ------- ------- -------
Total revenue................... 466 409 396 371 335 233 123 90
Operating expenses:
Cost of revenue................... 102 86 93 103 185 108 92 62
Research & development............ 3,118 2,891 3,244 2,793 2,002 1,104 947 816
Selling & marketing............... 2,099 2,068 1,662 1,368 620 442 318 342
General & administrative.......... 1,926 1,803 2,742 2,494 1,132 299 168 124
------- ------- ------- -------- ------- ------- ------- -------
Total operating expenses........ 7,245 6,848 7,741 6,758 3,939 1,953 1,525 1,344
Operating loss...................... (6,779) (6,439) (7,345) (6,387) (3,604) (1,720) (1,402) (1,254)
Interest income................... 2,016 241 261 114 125 110 117 67
Interest expense.................. (4) (12) (12) (17) (4) (4) (3) (6)
------- ------- ------- -------- ------- ------- ------- -------
Net income (loss)............... (4,767) (6,210) (7,096) (6,290) (3,483) (1,614) (1,288) (1,193)
Deemed dividend related to
beneficial conversion feature of
preferred stock................... -- (2,100) -- (15,009) -- -- -- --
------- ------- ------- -------- ------- ------- ------- -------
Net loss applicable to common
stockholders...................... $(4,767) $(8,310) $(7,096) $(21,299) $(3,483) $(1,614) $(1,288) $(1,193)
======= ======= ======= ======== ======= ======= ======= =======
Net loss per share, basic and
diluted........................... $(0.22) $ (5.68) $(5.64) $ (17.64) $(3.19) $ (1.51) $(1.23) $ (1.15)
F-24
GENOMICA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 13. SUBSEQUENT EVENTS
On October 2, 2001, the Company's Board of Directors approved a Cost
Reduction Plan ("Plan") resulting in a restructuring of operations and
consolidation of facilities including the involuntary termination of a
significant portion of the Company's workforce. The Plan included the immediate
termination of 101 employees, including 91 located in the Company's Boulder,
Colorado office, three employees located in the Company's United Kingdom office
and seven employees located throughout the United States. The Company will no
longer sell its Discovery Manager suite of products directly to end user
customers.
The Plan was approved and implemented in October 2001. Accordingly, the
Company anticipates recording a restructuring charge during the fourth quarter
of 2001 totaling approximately $4.3 million, including charges totaling $1.9
million for involuntary termination benefits, $1.7 million for asset impairment,
and $0.7 million for lease and contract termination fees. Termination benefits
were paid at the time the Plan was implemented. In conjunction with the
restructuring, the office in the United Kingdom was closed, and the Boulder,
Colorado office was consolidated from 42,000 square feet to 18,000 square feet.
The remaining 24,000 square feet of facilities in Boulder have been subleased.
Losses relating to subleases are included in the $4.3 million restructuring
charge. The asset impairments were primarily due to the consolidation of
operations, facilities closures and excess equipment that was disposed of or
taken out of service.
On November 19, 2001, the Company announced that it had signed a definitive
agreement with Exelixis, Inc. ("Exelixis") whereby Exelixis would acquire the
common stock of Genomica and Genomica would become a wholly owned subsidiary of
Exelixis. Fair values established in this transaction could indicate additional
impairment of the Company's long-lived assets, and result in substantial
severance liabilities and related charges.
F-25
GENOMICA CORPORATION
CONSOLIDATED INTERIM BALANCE SHEETS
(UNAUDITED)
SEPTEMBER 30, DECEMBER 31,
2001 2000
------------- ------------
ASSETS
Current Assets:
Cash and cash equivalents................................. $ 3,728,747 $ 25,784,803
Short-term investments.................................... 65,053,040 73,153,650
Accounts receivable -- trade.............................. 246,741 353,448
Interest receivable....................................... 2,320,473 2,162,810
Prepaid expenses and other................................ 344,546 352,114
------------ ------------
Total current assets.............................. 71,693,547 101,806,825
Long-Term Investments....................................... 42,047,919 24,992,694
Property and Equipment, net................................. 4,971,108 2,723,507
Other Assets................................................ 124,317 66,750
------------ ------------
Total assets...................................... $118,836,891 $129,589,776
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable.......................................... $ 389,817 $ 933,903
Accrued compensation and employee benefits................ 528,359 431,357
Deferred revenue.......................................... 610,112 814,626
Other accrued expenses.................................... 243,226 323,751
------------ ------------
Total current liabilities......................... 1,771,514 2,503,637
Commitments and Contingencies
Stockholders' Equity:
Convertible preferred stock, $.001 par value, 5,000,000
shares authorized, zero shares issued and outstanding,
respectively........................................... -- --
Common stock, $.001 par value, 50,000,000 shares
authorized, 23,118,144 and 22,839,559 shares issued and
22,993,601 and 22,715,016 shares outstanding,
respectively........................................... 23,118 22,839
Treasury stock, at cost................................... (19,715) (19,715)
Additional paid-in capital................................ 177,393,224 168,136,541
Options and warrants...................................... 22,689,678 33,307,529
Deferred compensation..................................... (9,563,421) (16,929,010)
Accumulated other comprehensive income.................... 1,231,440 256,984
Accumulated deficit....................................... (74,688,947) (57,689,029)
------------ ------------
Total stockholders' equity........................ 117,065,377 127,086,139
------------ ------------
Total liabilities and stockholders' equity........ $118,836,891 $129,589,776
============ ============
The accompanying notes are an integral part of these condensed consolidated
financial statements.
F-26
GENOMICA CORPORATION
CONSOLIDATED INTERIM STATEMENTS OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------- --------------------------------
2001 2000 2001 2000
-------------- -------------- -------------- --------------
Revenue............................. $ 385,398 $ 409,023 $ 1,292,579 $ 1,175,464
Operating Expenses:
Costs of revenue.................. 62,556 86,168 285,567 281,471
Research and development.......... 3,609,079 2,891,136 10,848,510 8,928,986
Selling and marketing............. 1,816,004 2,067,583 5,873,224 5,097,491
General and administrative........ 1,699,690 1,803,263 5,783,895 7,039,328
----------- ----------- ------------ ------------
Total operating expenses....... 7,187,329 6,848,150 22,791,196 21,347,276
----------- ----------- ------------ ------------
Operating loss............... (6,801,931) (6,439,127) (21,498,617) (20,171,812)
Interest Income..................... 1,452,252 241,284 5,016,409 616,646
Interest Expense.................... -- (11,620) -- (41,088)
Other Expense....................... (517,710) -- (517,710) --
----------- ----------- ------------ ------------
Net Loss............................ (5,867,389) (6,209,463) (16,999,918) (19,596,254)
Deemed Dividend Related to
Beneficial Conversion Feature of
Preferred Stock................... -- (2,100,000) -- (17,108,813)
----------- ----------- ------------ ------------
Net Loss Applicable to Common
Stockholders...................... $(5,867,389) $(8,309,463) $(16,999,918) $(36,705,067)
=========== =========== ============ ============
Net Loss Per Share, basic and
diluted........................... $ (0.26) $ (5.68) $ (0.75) $ (27.40)
=========== =========== ============ ============
Weighted Average Common Shares
Outstanding, basic and diluted.... 22,690,954 1,463,915 22,520,954 1,339,633
=========== =========== ============ ============
Pro Forma Net Loss Per Share (Note
2):
Net loss per share, basic and
diluted........................ $ (0.54) $ (2.57)
=========== ============
Weighted average common shares
outstanding, basic and
diluted........................ 15,339,860 14,271,341
=========== ============
The accompanying notes are an integral part of these condensed consolidated
financial statements.
F-27
GENOMICA CORPORATION
CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS
(UNAUDITED)
NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------
2001 2000
-------------- --------------
Cash Flows from Operating Activities:
Net loss.................................................. $(16,999,918) $(19,596,254)
Adjustments to reconcile net loss to net cash used in
operating activities Depreciation...................... 1,282,185 483,160
Amortization of deferred compensation.................. 5,842,300 11,428,686
Amortization of premium on investments................. 389,945 --
Change in deposits..................................... -- (625,000)
Change in other assets................................. (57,565) (120,246)
Changes in operating assets and liabilities--
Accounts receivable.................................. 106,707 10,885
Interest receivable.................................. (157,663) --
Prepaid expenses and other assets.................... 7,567 (357,362)
Accounts payable..................................... (544,086) 458,356
Accrued compensation and employee benefits........... 97,002 218,063
Deferred revenue..................................... (204,514) 108,969
Other accrued expenses............................... (80,525) 306,985
------------ ------------
Net cash used in operating activities............. (10,318,565) (7,683,758)
------------ ------------
Cash Flows from Investing Activities:
Redemption and sales of investments....................... 74,441,614 16,898,623
Purchases of investments.................................. (82,803,152) (26,477,617)
Purchase of property and equipment........................ (3,529,786) (2,010,212)
------------ ------------
Net cash used in investing activities............. (11,891,324) (11,589,206)
------------ ------------
Cash Flows From Financing Activities:
Payments on capital leases................................ -- (97,310)
Proceeds from issuance of preferred stock................. -- 18,033,954
Costs related to issuance of preferred stock.............. -- (25,139)
Deferred financing costs.................................. -- (665,258)
Proceeds from exercise of common stock options............ 162,399 254,631
Purchase of treasury stock................................ -- (19,533)
------------ ------------
Net cash provided by financing activities......... 162,399 17,481,345
------------ ------------
Net Decrease in Cash and Cash Equivalents................... (22,047,490) (1,791,619)
Effect of Exchange Rates on Cash and Cash Equivalents....... (8,566) --
Cash and Cash Equivalents at Beginning of Period............ 25,784,803 3,518,570
------------ ------------
Cash and Cash Equivalents at End of Period.................. $ 3,728,747 $ 1,726,951
============ ============
The accompanying notes are an integral part of these condensed consolidated
financial statements.
F-28
GENOMICA CORPORATION
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1. BASIS OF PRESENTATION
The unaudited condensed consolidated financial statements of Genomica
Corporation and its subsidiary (the "Company") included herein reflect all
adjustments, consisting only of normal recurring adjustments which, in the
opinion of management, are necessary to fairly present our consolidated
financial position, results of operations, and cash flows for the periods
presented. Certain information and footnote disclosures normally included in
audited financial information prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to the Securities
and Exchange Commission's ("SEC") rules and regulations. The consolidated
results of operations for the period ended September 30, 2001 are not indicative
of the results to be expected for any subsequent quarter or for the entire
fiscal year. The information included in this Form 10-Q should be read in
conjunction with the consolidated financial statements and notes thereto,
together with Management's Discussion and Analysis of Financial Statements and
notes thereto included in the Company's Form 10-K for the fiscal year ended
December 31, 2000.
On October 2, 2001, the Company's Board of Directors approved a Cost
Reduction Plan resulting in a restructuring of operations and consolidation of
facilities, including the involuntary termination of a significant portion of
the Company's workforce. These matters are further discussed in Note 8. These
actions have had, and may continue to have, the effect of impairing certain
long-term assets and the recording of significant liabilities related to
severance and the termination of contractual relationships. Accordingly, in the
fourth quarter of 2001, the Company will record substantial reductions to the
carrying value of its long-term assets. Additional reductions may occur in
future periods as the Company's strategic direction continues to evolve.
NOTE 2. INITIAL PUBLIC OFFERING
On October 4, 2000, the Company closed its initial public offering and sold
6,440,000 shares of its common stock at $19 per share. The net proceeds, after
paying the underwriting discount and estimated expenses associated with the
offering, were $112.5 million. Management has broad discretion as to the
allocation of the net proceeds of the offering. Although the Company intends to
evaluate acquisition opportunities, there are no current agreements or
commitments with respect to any acquisition. The Company has invested the net
proceeds of the offering in interest bearing, investment-grade securities until
needed to fund operations and development.
NOTE 3. SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION
The accounts of the Company have been consolidated. All intercompany
accounts and transactions have been eliminated. The consolidated financial
statements are stated in U.S. dollars and are prepared in accordance with
accounting principles generally accepted in the United States. Unrealized gains
and losses recorded as a result of translating the Company's foreign
subsidiary's financial statements into U.S. dollars have been included in
accumulated other comprehensive income in the accompanying balance sheets.
Certain amounts in the prior years' consolidated financial statements have been
reclassified to conform to the current year presentation.
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. These estimates and assumptions may affect the
reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements, and the reported
amounts of revenue and expenses during the reporting period. Actual results
could differ from those estimates.
F-29
GENOMICA CORPORATION
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS -- (CONTINUED)
CASH, CASH EQUIVALENTS AND INVESTMENTS IN MARKETABLE SECURITIES
The Company's investment portfolio consists of investments classified as
cash equivalents, short-term investments, or long-term investments. All highly
liquid investments with an original maturity of three months or less when
purchased are considered to be cash equivalents. All cash equivalents are
carried at cost, which approximates fair value. Short- and long-term investments
consist of U.S. government, state, municipal and corporate debt securities with
maturities of up to 24 months, as well as money market mutual funds. The
Company's investments are classified as available-for-sale investments as
defined in Statement of Financial Accounting Standards ("SFAS") No. 115,
"Accounting for Certain Investments in Debt and Equity Securities." Accordingly,
at September 30, 2001, all investments are carried at fair value as determined
by their quoted market prices and included in either short- or long-term
investments. All unrealized gains or losses are included in stockholders' equity
as a component of accumulated other comprehensive income.
The Company's cash, cash equivalents, short-term and long-term investments
had a fair value at September 30, 2001, of $110.8 million and a gross unrealized
gain of $1,240,006.
The amortized cost basis, aggregate fair value, and unrealized gains or
losses for the Company's cash, cash equivalents, short- and long-term investment
portfolio as of September 30, 2001 is presented below:
GROSS GROSS
AMORTIZED AGGREGATE UNREALIZED UNREALIZED
COST BASIS FAIR VALUE GAINS LOSSES
----------- ----------- ---------- ----------
Cash, cash equivalents, and short-term
investments:
Euro dollar bonds........................... $21,409,870 $21,643,925 $234,055 $ --
Corporate debt securities................... 41,843,112 42,400,055 556,943 --
Money market funds.......................... 3,000,000 3,000,000 -- --
Asset-backed securities..................... 997,754 1,009,060 11,306 --
Cash........................................ 728,747 728,747 -- --
----------- ----------- -------- --------
Total cash, cash equivalents, and
short-term investments................. $67,979,483 $68,781,787 $802,304 $ --
=========== =========== ======== ========
Long-term investments:
Corporate debt securities................... $39,583,996 $39,982,299 $398,303 $ --
Asset-backed securities..................... 2,026,221 2,065,620 39,399 --
----------- ----------- -------- --------
Total long-term investments.............. $41,610,217 $42,047,919 $437,702 $ --
=========== =========== ======== ========
REVENUE RECOGNITION
The Company generates revenue from the license and related maintenance of
its proprietary software products. The Company recognizes revenue when there is
persuasive evidence of an arrangement, delivery has occurred, collection is
probable, and the fee is fixed or determinable. If an acceptance period exists,
license revenues are recognized upon the earlier of customer acceptance or the
expiration of the acceptance period. The majority of the Company's license sales
are on a term basis and generally, the license fees and subsequent maintenance
revenue are bundled and deferred, to be recognized ratably over the term of the
arrangement. Maintenance consists of software updates, content updates and
support. Certain software arrangements are sold on a perpetual basis and include
multiple elements, such as maintenance, services and training. If present, such
elements are unbundled based on vendor-specific objective evidence of their fair
value and the related revenue is recognized when those elements are delivered.
The Company has entered into a reseller arrangement with Applied
Biosystems, Inc. ("ABI"). Under this arrangement, the Company has granted ABI
exclusive rights to license its Linkmapper software
F-30
GENOMICA CORPORATION
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS -- (CONTINUED)
application and re-sell the software and related maintenance and support
services to end users. To maintain this exclusive right, ABI must meet certain
sales milestones each quarter for which they are currently not on track. ABI is
required to pay royalties to the Company at contracted percentages of the sales
price for each license or service contract sold. As the Company is responsible
for providing maintenance services to ABI's end-customers related to the
Linkmapper software, the Company has unbundled and deferred part of the royalty
payments for recognition as the maintenance services are provided.
The Company believes its current revenue recognition policies and practices
are consistent with the provisions of Statement of Position 97-2, "Software
Revenue Recognition" ("SOP 97-2"), and related amendments, technical practice
aids and interpretations. Implementation guidelines for these standards, as well
as potential new standards, could lead to unanticipated changes in the Company's
current revenue recognition policies. Such changes could affect the timing of
the Company's future revenue and results of operations.
NOTE 4. NET LOSS PER SHARE
Basic loss per share is computed by dividing the net loss by the weighted
average number of shares of common stock outstanding for the period. Diluted
loss per share is determined by dividing the net earnings or loss by the sum of
(1) the weighted average number of common shares outstanding, (2) if not
anti-dilutive, the number of shares of convertible preferred stock as if
converted upon issuance, and (3) if not anti-dilutive, the effect of outstanding
stock options and warrants determined utilizing the treasury stock method.
As a result of the Company's net losses, all potentially dilutive
securities for the periods ended September 30, 2001 and 2000, as indicated in
the table below, would be anti-dilutive and are excluded from the computation of
diluted loss per share.
SEPTEMBER 30,
------------------------
2001 2000
---------- -----------
Stock Options............................................... 1,638,070 1,980,189
Warrants.................................................... 52,534 340,386
Preferred Stock............................................. -- 13,875,945
---------- -----------
Total.................................................. 1,690,604 16,196,520
========== ===========
PRO FORMA NET LOSS PER SHARE
Pro forma net loss per share for the three and nine months ended September
30, 2000 was computed using the net loss and weighted average number of shares
of common stock outstanding, including the pro forma effects of the assumed
conversion of all outstanding shares of the Company's convertible preferred
stock into shares of common stock as if such conversion occurred on January 1,
2000, or at date of original issuance, if later. The resulting pro forma
adjustment includes an increase in the weighted average shares used to compute
basic and diluted net loss per share of 13,875,945 shares for the three months
ended September 30, 2000 and 12,931,708 shares for the nine months ended
September 30, 2000.
NOTE 5. STOCKHOLDERS' EQUITY
STOCK PLAN
Deferred compensation is included as a reduction of stockholders' equity
and is being amortized in accordance with FASB Interpretation No. 28 over the
vesting periods of the related options, which are generally three to five years.
Stock compensation expense recognized for the three and nine months ended
F-31
GENOMICA CORPORATION
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS -- (CONTINUED)
September 30, 2001, and remaining compensation expense to be recognized (without
regard to cancellations or forfeitures) are as follows:
DEFERRED STOCK DEFERRED STOCK
COMPENSATION COMPENSATION
RECOGNIZED DURING THE RECOGNIZED DURING THE
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, 2001 SEPTEMBER 30, 2001
--------------------- ---------------------
Research and
development.............. $ 397,794 $1,193,739
Selling and marketing..... 645,694 2,174,281
General and
administrative........... 645,394 2,474,280
---------- ----------
$1,688,882 $5,842,300
========== ==========
UNAMORTIZED DEFERRED STOCK COMPENSATION TO BE
RECOGNIZED DURING THE PERIODS ENDING DECEMBER 31,
---------------------------------------------------------
2001 2002 2003 2004 2005
---------- ---------- ---------- -------- -------
Research and
development..............
Selling and marketing.....
General and
administrative...........
$2,077,118 $4,592,256 $2,245,947 $631,616 $16,484
========== ========== ========== ======== =======
As a result of the restructuring plan implemented in October 2001, a
substantial number of options will be forfeited. Accordingly, the amount of
deferred compensation to be recognized in future periods will be reduced.
NOTE 6. CONTINGENCIES
The Company, from time to time, may be subject to certain claims,
assertions or litigation by outside parties as part of its ongoing business
operations. The Company is currently not a party to any legal proceedings.
NOTE 7. RECENT ACCOUNTING PRONOUNCEMENTS
In June 2001, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 141, "Business Combinations." SFAS No. 141 addresses financial accounting
and reporting for business combinations. SFAS No. 141 is effective for all
business combinations initiated after June 30, 2001, and for all business
combinations accounted for under the purchase method initiated before but
completed after June 30, 2001. In addition, in June 2001 the FASB issued SFAS
No. 142, "Goodwill and Other Intangible Assets." SFAS No. 142 addresses
financial accounting and reporting for acquired goodwill and other intangible
assets. SFAS No. 142 is effective for fiscal years beginning after December 15,
2001, and applies to all goodwill and other intangibles recognized in the
financial statements at that date. The adoption of these standards is not
expected to have an impact on the Company's current financial position or
results of operations. However, accounting for any business combinations
initiated from this point forward will be impacted by these two standards.
Effective January 1, 2001, the Company adopted the provisions of Statement
of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS No. 133"). SFAS No. 133 establishes
accounting and reporting standards for derivative financial instruments and
hedging activities related to those instruments as well as other hedging
activities. Since inception, the Company has not entered into arrangements that
would fall under the scope of SFAS No. 133 and thus, the adoption of SFAS No.
133 had no impact on the Company's financial condition or its results of
operations.
In December 1999, the SEC issued Staff Accounting Bulletin No. 101,
"Revenue Recognition" ("SAB 101"). SAB 101 provides the SEC Staff's views in
applying generally accepted accounting principles to selected revenue
recognition issues. The Company has implemented the guidance in SAB 101 for all
periods presented.
NOTE 8. SUBSEQUENT EVENTS
On October 2, 2001, the Company's Board of Directors approved a Cost
Reduction Plan ("Plan") resulting in a restructuring of operations and
consolidation of facilities including the involuntary termination of a
significant portion of the Company's workforce. The Plan included the immediate
termination of
F-32
GENOMICA CORPORATION
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS -- (CONTINUED)
101 employees, including 91 located in the Company's Boulder, Colorado office,
three employees located in the Company's United Kingdom office and seven
employees located throughout the United States. The Company will no longer sell
its Discovery Manager suite of products directly to end user customers.
The Plan was approved and implemented in October 2001. Accordingly, the
Company anticipates recording a restructuring charge during the fourth quarter
of 2001 totaling approximately $4.3 million, including charges totaling $1.9
million for involuntary termination benefits, $1.7 million for asset impairment,
and $660,000 for lease and contract termination fees. Termination benefits were
paid at the time the Plan was implemented. In conjunction with the
restructuring, the office in the United Kingdom was closed, and the Boulder,
Colorado office was consolidated from 42,000 square feet to 18,000 square feet.
The remaining 24,000 square feet of facilities in Boulder have been subleased.
Losses relating to subleases are included in the $4.3 million restructuring
charge. The asset impairments were primarily due to the consolidation of
operations, facilities closures and excess equipment that was disposed of or
taken out of service.
On November 19, 2001, the Company announced that it had signed a definitive
agreement with Exelixis, Inc. ("Exelixis") whereby Exelixis would acquire the
common stock of Genomica and Genomica would become a wholly owned subsidiary of
Exelixis. Fair values established in this transaction could indicate additional
impairment of the Company's long-lived assets, and result in substantial
severance liabilities and related charges.
F-33
SCHEDULE I TO PROSPECTUS
INFORMATION CONCERNING DIRECTORS AND EXECUTIVE OFFICERS OF
EXELIXIS, INC.
The following tables set forth the name, age and present principal
occupation or employment, and material occupations, positions, offices or
employment of the directors and officers of Exelixis, Inc. The business address
and telephone number of each such person is Exelixis, Inc., 170 Harbor Way, P.O.
Box 511, South San Francisco, California 94083, (650) 837-7000.
During the last five years, neither Exelixis nor to the best of knowledge
of Exelixis have any of the persons below:
- been convicted in a criminal proceeding (excluding traffic violations or
similar misdemeanors); or
- been a party to any judicial or administrative proceeding (except for
matters that were dismissed without sanction or settlement) that resulted
in a judgment, decree or final order enjoining the person from future
violations of, or prohibiting activities subject to, federal or state
securities laws, or a finding of any violation of such laws.
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT
NAME AGE AND FIVE YEAR EMPLOYMENT HISTORY
---- --- ------------------------------------------
George A. Scangos, Ph.D. ........ 53 Dr. Scangos has served as President and Chief
Executive Officer since October 1996 and as a
Director since October 1996. From September 1993 to
October 1996, Dr. Scangos served as President of
Biotechnology at Bayer Corporation, a
pharmaceutical company, and was responsible for
research, business and process development,
manufacturing, engineering and quality assurance.
Dr. Scangos is a member of the board of directors
of Onyx Pharmaceuticals, Inc. and a private
company. Dr. Scangos' term as Director expires in
2002.
Stelios Papadopoulos, Ph.D. ..... 53 Dr. Papadopoulos has been a Director since December
1994 and Chairman of the Board since January 1998.
Dr. Papadopoulos has been an investment banker at
SG Cowen since February 2000. Before this, Dr.
Papadopoulos was an investment banker at
PaineWebber from April 1987 to February 2000, and
Chairman of PaineWebber Development Corp., a
PaineWebber subsidiary, from June 1998 to February
2000. Dr. Papadopoulos is a member of the board of
directors of Diacrin, Inc. and several private
companies. Dr. Papadopoulos' term as Director
expires in 2002.
Charles Cohen, Ph.D. ............ 51 Dr. Cohen has been a Director since November 1995.
Since July 2000, Dr. Cohen has been the Chief
Executive Officer of CellZome GmbH, a post-genomics
biopharmaceutical company. Before this, Dr. Cohen
co-founded Creative BioMolecules, Inc., a
biotechnology company, in 1982 and was a director
and its Chief Scientific Officer. In July 2000,
Creative BioMolecules, Inc. merged with Ontogeny,
Inc. and Reprogenesis, Inc. and formed Curis, Inc.
Dr. Cohen serves on the board of directors of
several private companies. Dr. Cohen's term as
Director expires in 2003.
I-1
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT
NAME AGE AND FIVE YEAR EMPLOYMENT HISTORY
---- --- ------------------------------------------
Jurgen Drews, M.D. .............. 68 Dr. Drews has been a Director since July 1998. Dr.
Drews has been Chairman of the Board of
International BM Biomedicine Holdings, Inc., an
investment firm, since October 1997. Since January
2001, Dr. Drews has been a managing partner with
the Bear Stearns Health Innoventure Fund LLC. From
1996 to 1997, Dr. Drews served as President of
Global Research for Hoffmann-La Roche Inc., a
pharmaceutical company, and also served as a member
of the Corporate Executive Committee of the Roche
Group. From 1991 to 1995, Dr. Drews served as
President of International Research and Development
and as a member of the Corporate Executive
Committee for Roche. Dr. Drews is Chairman of the
Board of Directors of Genaissance Pharmaceuticals,
Inc. and is also a director of GPC Biotech AG,
Human Genome Sciences, Inc., MorphoSys AG and
Protein Design Labs, Inc. Dr. Drews' term as
Director expires in 2003.
Geoffrey Duyk, M.D. ............. 42 Dr. Duyk has served as Executive Vice President and
Chief Scientific Officer since April 1997 and as a
Director since April 1998. From 1994 to 1997, Dr.
Duyk served at Millennium Pharmaceuticals, Inc., a
genomics company, most recently as Vice President
of Genomics. From 1992 to 1994, Dr. Duyk was an
Assistant Professor in the Department of Genetics
at Harvard Medical School and an Assistant
Investigator of the Howard Hughes Medical
Institute. While at Harvard Medical School, Dr.
Duyk was a co-principal investigator in the
NIH-funded Cooperative Human Linkage Center. Dr.
Duyk is a member of the board of directors of a
private company. Dr. Duyk's term as Director
expires in 2003.
Jason S. Fisherman, M.D. ........ 45 Dr. Fisherman has been a Director since March 1996.
Dr. Fisherman has been a partner of Advent
International Corporation, a global private equity
and venture capital investment firm, since 1994.
From 1991 to 1994, Dr. Fisherman served as Senior
Director of Medical Research at Enzon, Inc., a
biopharmaceutical company, where he managed
clinical programs in oncology, genetic diseases and
blood substitutes. Dr. Fisherman serves on the
board of directors of Crucell N.V., ILEX Oncology,
Inc., Mediconsult.com, Inc., Oridon Systems Ltd.
and several private companies. Dr. Fisherman's term
as Director expires in 2004.
I-2
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT
NAME AGE AND FIVE YEAR EMPLOYMENT HISTORY
---- --- ------------------------------------------
Jean-Francois Formela, M.D. ..... 45 Dr. Formela has been a Director since September
1995. Dr. Formela has been a principal of Atlas
Venture, a venture capital firm, since 1993. From
1989 to 1993, Dr. Formela served at Schering-Plough
Corporation, most recently as Senior Director,
Medical Marketing and Scientific Affairs, where he
had biotechnology licensing and marketing
responsibilities. Dr. Formela serves on the board
of directors of BioChem Pharma, Inc., Ciphergen
BioSystems, Inc., DeCode Genetics, Inc.,
Variagenics, Inc. and several private companies.
Dr. Formela's term as Director expires in 2004.
Vincent Marchesi, M.D., Ph.D..... 66 Dr. Vincent Marchesi has been a director since May
2001. Dr. Marchesi is a Professor of Pathology
(1973-present) and has been the Director of the
Boyer Center for Molecular Medicine at Yale
University since 1991. Dr. Marchesi is also
Editor-in-Chief at the FASEB Journal. Dr. Marchesi
holds degrees from Yale and Oxford and was formerly
Chair of Pathology at the Yale-New Haven Hospital.
Dr. Marchesi was a co-founder of Molecular
Diagnostics and served as a Director of American
Cyanamid from 1992-1994. Dr. Marchesi's term as a
Director expires in 2004.
Peter Stadler, Ph.D. ............ 56 Dr. Stadler has been a Director since April 1998.
Dr. Stadler has been President and Chief Executive
Officer of Artemis Pharmaceuticals, GmbH since June
1998. From 1987 to 1997, Dr. Stadler was head of
pharma-biotechnology at Bayer AG. From 1986 to
1987, Dr. Stadler served as a visiting scientist at
the University of Munster, Germany and the
Massachusetts Institute of Technology in the area
of biotechnology. Dr. Stadler's term as Director
expires in 2002.
Lance Willsey, M.D. ............. 40 Dr. Willsey has been a Director since April 1997.
Dr. Willsey has been a Founding Partner of DCF
Capital, a hedge fund focused on investing in the
life sciences, since July 1998. From July 1997 to
July 1998, Dr. Willsey served on the Staff
Department of Urologic Oncology at the Dana Farber
Cancer Institute at Harvard University School of
Medicine. From July 1996 to July 1997, Dr. Willsey
served on the Staff Department of Urology at
Massachusetts General Hospital at Harvard
University School of Medicine, where he was an
urology resident from July 1992 to July 1996. Dr.
Willsey's term as Director expires in 2002.
I-3
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT
NAME AGE AND FIVE YEAR EMPLOYMENT HISTORY
---- --- ------------------------------------------
Matthew G. Kramer................ 44 Mr. Kramer has served as the General Manager and
Vice President of Agricultural Trait Development
for Exelixis Plant Sciences, a wholly owned
subsidiary of Exelixis, since December 2000. Before
this time, Mr. Kramer served as a director, and
later as Vice President of Product Development, for
Agritope, Inc., now Exelixis Plant Sciences. At
Agritope, Mr. Kramer was responsible for
field-testing, product evaluation, regulatory
compliance and intellectual property protection.
From 1987 to 1994, Mr. Kramer was the Director of
Production and Product Development at Calgene,
Inc., later Calgene Fresh, Inc., of Davis,
California, where he was part of the team that
brought the first genetically engineered whole food
to market. Mr. Kramer is the author of numerous
publications, book chapters and invited reviews in
the field of applying the tools and techniques of
biotechnology to fruit and vegetable species.
Lloyd M. Kunimoto................ 48 Mr. Kunimoto has served as Senior Vice President of
Business Development since August 1999. From 1997
to 1999, Mr. Kunimoto served as Vice President of
Commercial Development for the Nutrition and
Consumer Products sector of Monsanto Company, a
life sciences company. While at Monsanto, Mr.
Kunimoto was responsible for directing Monsanto's
genetic engineering program in the area of food
ingredients. From 1996 to 1997, Mr. Kunimoto served
as President and Chief Executive Officer of
Calgene, Inc., an agricultural biotechnology
company. From 1995 to 1996, Mr. Kunimoto served as
Senior Vice President of Corporate Development at
Calgene, Inc.
Michael M. Morrissey, Ph.D. ..... 41 Dr. Morrissey has served as Vice President of
Discovery Research since February 2000. Previously
with Berlex Biosciences since 1991, Dr. Morrissey
held various positions including Vice President of
Discovery Research, Director of Pharmaceutical
Discovery and Unit Head of Medicinal Chemistry.
I-4
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT
NAME AGE AND FIVE YEAR EMPLOYMENT HISTORY
---- --- ------------------------------------------
Gregory D. Plowman, M.D., 44 Dr. Plowman has served as Vice President of
Ph.D. ......................... Pharmaceutical Research since October 2000. From
December 1997 to September 2000, Dr. Plowman served
as Vice President of Molecular Biology at Sugen,
Inc., a Pharmacia company. From January 1994 to
December 1997, Dr. Plowman served as Director and
Senior Director of Molecular Biology at Sugen. At
Sugen, Dr. Plowman was responsible for the
identification and validation of therapeutic
targets in oncology, angiogenesis and metabolic
disease, with a particular focus on protein kinases
and phosphatases. From January 1988 to December
1993, Dr. Plowman served in various positions at
Bristol-Myers Squibb, the last year of which he was
Senior Principal Scientist, Oncology Drug
Discovery. Dr. Plowman has previous experience with
Oncogen and The Fred Hutchinson Cancer Research
Center in Seattle. Dr. Plowman has authored
numerous articles in the cancer field, and is an
inventor on nine issued US patents.
Glen Y. Sato..................... 42 Mr. Sato has served as Chief Financial Officer,
Vice President of Legal Affairs and Secretary since
November 1999. From April 1999 to November 1999,
Mr. Sato served as Vice President, Legal and
General Counsel for Protein Design Labs, Inc., a
biotechnology company, where he previously served
as the Associate General Counsel and Director of
Corporate Planning from July 1993 to April 1999.
Pamela A. Simonton............... 51 Ms. Simonton has served as Vice President of
Corporate Technology Development since April 2000.
From July 1996 to April 2000, Ms. Simonton served
as Vice President, Licensing and Acquisitions for
Bayer Corporation's Pharmaceutical Division. From
September 1994 to July 1996, Ms. Simonton served as
Vice President of Patents and Licensing for Bayer's
Pharmaceutical Division, North America.
D. Ry Wagner, Ph.D. ............. 45 Dr. Wagner has served as Vice President of Plant
Genetics and Biotechnology since December 2000.
From January 2001 to December 1998, Dr. Wagner
served as Vice President, Research at Agritope,
Inc., now Exelixis Plant Sciences, Inc. From
December 1998 to September 1994, Dr. Wagner was
associate professor of Biology at the Institute of
Molecular Biology of the University of Oregon. He
was appointed to the faculty at the University of
Oregon in 1988. From 1985 to 1988, Dr. Wagner
served as a National Science Foundation
post-doctoral fellow.
I-5
ANNEX A TO PROSPECTUS
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
AMONG:
EXELIXIS, INC.,
A DELAWARE CORPORATION;
BLUEGREEN ACQUISITION SUB, INC.,
A DELAWARE CORPORATION; AND
GENOMICA CORPORATION,
A DELAWARE CORPORATION
------------------------------------
DATED AS OF NOVEMBER 19, 2001
------------------------------------
TABLE OF CONTENTS
PAGE
----
1. Description of Transaction........................................ 1
1.1 The Offer................................................... 1
1.2 Company Action.............................................. 3
1.3 Directors................................................... 4
2. The Merger........................................................ 4
2.1 Merger of Merger Sub into the Company....................... 4
2.2 Effect of the Merger........................................ 5
2.3 Closing; Effective Time..................................... 5
Certificate of Incorporation and Bylaws; Directors and
2.4 Officers.................................................... 5
2.5 Conversion of Shares in the Merger.......................... 5
2.6 Closing of the Company's Transfer Books..................... 6
2.7 Exchange of Certificates.................................... 6
2.8 Appraisal Rights............................................ 7
2.9 Tax Consequences............................................ 7
2.10 Further Action.............................................. 7
3. Representations and Warranties of the Company..................... 8
3.1 Due Organization; Subsidiaries; Etc......................... 8
3.2 Certificate of Incorporation and Bylaws..................... 8
3.3 Capitalization, Etc......................................... 8
3.4 SEC Filings; Financial Statements........................... 9
3.5 Absence of Changes.......................................... 9
3.6 Real Property; Equipment; Leasehold......................... 9
3.7 Proprietary Assets.......................................... 10
3.8 Contracts................................................... 10
3.9 Liabilities................................................. 10
3.10 Compliance with Legal Requirements.......................... 11
3.11 Certain Business Practices.................................. 11
3.12 Governmental Authorizations................................. 11
3.13 Tax Matters................................................. 11
3.14 Employee and Labor Matters; Benefit Plans................... 12
3.15 Environmental Matters....................................... 14
3.16 Transactions with Affiliates................................ 14
3.17 Legal Proceedings; Orders................................... 14
3.18 Authority; Binding Nature of Agreement...................... 15
3.19 Vote Required............................................... 15
3.20 Non-Contravention; Consents................................. 15
3.21 Opinion of Financial Advisor................................ 16
3.22 Financial Advisor........................................... 16
3.23 Takeover Statutes; No Discussions........................... 16
3.24 Amendment to Rights Agreement............................... 16
3.25 Full Disclosure............................................. 16
A-(i)
PAGE
----
4. Representations and Warranties of Parent and Merger Sub........... 16
4.1 Due Organization; Subsidiaries; Etc......................... 16
4.2 Certificate of Incorporation and Bylaws..................... 16
4.3 Capitalization, Etc......................................... 16
4.4 SEC Filings; Financial Statements........................... 17
4.5 Absence of Certain Changes or Events........................ 17
4.6 Proprietary Assets.......................................... 18
4.7 Contracts................................................... 18
4.8 Liabilities................................................. 18
4.9 Compliance with Legal Requirements.......................... 18
4.10 Certain Business Practices.................................. 19
4.11 Governmental Authorizations................................. 19
4.12 Tax Matters................................................. 19
4.13 Environmental Matters....................................... 19
4.14 Transactions with Affiliates................................ 20
4.15 Legal Proceedings........................................... 20
4.16 Authority; Binding Nature of Agreement...................... 20
4.17 Non-Contravention; Consents................................. 20
4.18 Interim Operations of Merger Sub............................ 20
4.19 Parent Stockholder Approval................................. 20
4.20 Full Disclosure............................................. 20
4.21 Valid Issuance.............................................. 21
5. Certain Covenants of the Company and Parent....................... 21
5.1 Access and Investigation.................................... 21
5.2 Operation of the Company's Business......................... 21
5.3 Operation of Parent's Business.............................. 24
5.4 No Solicitation............................................. 24
6. Additional Covenants of the Parties............................... 26
Registration Statement and Proxy Statement for Stockholder
6.1 Approval.................................................... 26
6.2 Company Stockholders' Meeting............................... 26
6.3 Regulatory Approvals........................................ 27
6.4 Assumption of Company Warrants.............................. 28
6.5 No Assumption of Stock Options.............................. 28
6.6 Employee Benefits........................................... 28
6.7 Indemnification of Officers and Directors................... 29
6.8 Additional Agreements....................................... 30
6.9 Disclosure.................................................. 30
6.10 Tax Matters................................................. 30
6.11 Resignation of Officers and Directors....................... 31
6.12 Listing..................................................... 31
6.13 Takeover Laws; Advice of Changes............................ 31
6.14 Affiliates.................................................. 31
A-(ii)
PAGE
----
6.15 Rights Agreement............................................ 31
6.16 No Distributions or Dividends............................... 31
6.17 Market Stand-Off............................................ 31
7. Conditions to the Merger.......................................... 32
7.1 Each Party's Obligations.................................... 32
8. Termination....................................................... 32
8.1 Termination................................................. 32
8.2 Effect of Termination....................................... 33
8.3 Expenses.................................................... 33
9. Miscellaneous Provisions.......................................... 33
9.1 Amendment................................................... 33
9.2 Waiver...................................................... 34
9.3 No Survival of Representations and Warranties............... 34
9.4 Entire Agreement; Counterparts.............................. 34
9.5 Applicable Law; Enforcement................................. 34
9.6 Disclosure Schedule......................................... 34
9.7 Attorneys' Fees............................................. 35
9.8 Assignability; Third-Party Beneficiaries.................... 35
9.9 Notices..................................................... 35
9.10 Severability................................................ 36
9.11 Construction................................................ 36
A-(iii)
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
This Agreement and Plan of Merger and Reorganization ("AGREEMENT") is made
and entered into as of November 19, 2001, by and among: Exelixis, Inc., a
Delaware corporation ("PARENT"); Bluegreen Acquisition Sub, Inc., a Delaware
corporation and a wholly owned subsidiary of Parent ("MERGER SUB"); and Genomica
Corporation, a Delaware corporation (the "COMPANY"). Certain capitalized terms
used in this Agreement are defined in Exhibit A.
RECITALS
A. Parent, Merger Sub and the Company intend that Merger Sub make the
Offer to exchange shares of Parent Common Stock for all of the Shares.
B. Following the Offer, Parent, Merger Sub and the Company intend to
effect the Merger in accordance with this Agreement and the DGCL. Upon
consummation of the Merger, Merger Sub will cease to exist, and the Company will
become a wholly owned subsidiary of Parent.
C. It is intended that the Transaction shall be treated as an integrated
transaction and qualify as a tax-free reorganization within the meaning of
Section 368(a) of the Code.
D. The Board of Directors of the Company has determined that the Offer and
the Merger together are advisable, fair to, and in the best interests of, the
Company and its stockholders, and has accordingly approved this Agreement, the
Offer, the Merger and the other transactions contemplated by this Agreement.
E. The respective Boards of Directors of Parent and Merger Sub have
approved this Agreement, the Offer, the Merger and the other transactions
contemplated by this Agreement.
F. Concurrently with the execution and delivery of this Agreement and as a
condition and inducement to the willingness of Parent and Merger Sub to enter
into this Agreement, Parent and the Stockholders are entering into the
Stockholder Tender Agreements.
AGREEMENT
The parties to this Agreement, intending to be legally bound, agree as
follows:
1. DESCRIPTION OF TRANSACTION.
1.1 The Offer.
(a) Provided that (i) this Agreement shall not have been terminated in
accordance with Section 8.1 hereof, and (ii) none of the events set forth in
Annex I hereto shall have occurred or be existing, Merger Sub shall, as promptly
as practicable after the date hereof, but no later than December 4, 2001,
commence the Offer. Each Share accepted by Merger Sub pursuant to the Offer
shall be exchanged for the right to receive that number of fully paid and
nonassessable shares of Parent Common Stock equal to the Exchange Ratio, plus
the right to receive cash in lieu of fractional Shares, if any. For purposes of
this Agreement, the term "EXCHANGE RATIO" shall mean the quotient obtained by
dividing the Company Stock Value by the Average Parent Post-Signing Trading
Price; provided that, if the quotient obtained by dividing the Company Stock
Value by the Average Parent Post-Signing Trading Price is greater than the
quotient obtained by dividing the Company Stock Value by the Adjusted Average
Parent Pre-Signing Trading Price, then the term "EXCHANGE RATIO" shall mean the
quotient obtained by dividing the Company Stock Value by the Adjusted Average
Parent Pre-Signing Trading Price. The initial expiration date of the Offer shall
be the twentieth business day following commencement of the Offer. The Offer
shall be subject to (A) the condition that there shall be validly tendered in
accordance with the terms of the Offer prior to the expiration date of the Offer
(as it may be extended in accordance with the requirements of this Section
1.1(a)) and not withdrawn a number of Shares which, together with the Shares
then owned by Parent and Merger Sub (if any), represents a number equal to at
least the sum of (x) a majority of the total number of Shares and (y) the total
number of shares of Company Common Stock issuable upon exercise of Company
Options, each as outstanding immediately prior
A-1
to the expiration of the Offer (as it may be extended in accordance with the
requirements of this Section 1.1(a)) (the condition referred to in this sentence
being referred to as the "MINIMUM CONDITION"); for the avoidance of doubt, it
being understood that Shares tendered into the Offer pursuant to a Notice of
Guaranteed Delivery shall be counted in the computation of the Minimum Condition
only to the extent the stock certificates for such Shares are actually delivered
to the Exchange Agent (or, if the Shares are delivered to the Exchange Agent via
book-entry, credited to the Exchange Agent's account with The Depository Trust
Company) prior to computing the Minimum Condition at the expiration of the Offer
(as it may be extended in accordance with the requirements of this Section
1.1(a)), and (B) each of the other conditions set forth in Annex I hereto.
Parent and Merger Sub expressly reserve the right to waive one or more
conditions to the Offer and to make any change in the terms or conditions of the
Offer; provided, however, that without the prior written consent of the Company,
no change may be made which (i) decreases the number of Shares sought in the
Offer, (ii) changes the form or amount of consideration to be paid, (iii)
imposes conditions to the Offer in addition to those set forth in Annex I, (iv)
changes or waives the Minimum Condition or any of the conditions set forth in
Annex I in any manner which is adverse to the holders of Shares, (v) extends the
Offer (except as set forth in the following two sentences), or (vi) makes any
other change to any of the terms and conditions to the Offer which is adverse to
the holders of Shares. Subject to the terms of the Offer and this Agreement and
the satisfaction (or waiver by Parent to the extent permitted by this Agreement)
of the conditions set forth in Annex I to the Offer, Merger Sub shall accept for
payment all Shares validly tendered and not withdrawn pursuant to the Offer as
soon as practicable after the applicable expiration date of the Offer (as it may
be extended in accordance with the requirements of this Section 1.1(a)) and
shall pay for all such Shares promptly after acceptance; provided, however, that
(A) Merger Sub shall extend the Offer for successive extension periods (up to
the Termination Date) not in excess of ten business days per extension period
if, at the scheduled expiration date of the Offer or any extension thereof, any
of the conditions to the Offer shall not have been satisfied or waived, until
such time as such conditions are satisfied or waived, and (B) Merger Sub may
extend the Offer if and to the extent required by the applicable rules and
regulations of the SEC or NASD. In addition, Merger Sub may extend the Offer
after the acceptance of Shares thereunder for a further period of time by means
of a subsequent offering period under Rule 14d-11 promulgated under the Exchange
Act.
(b) No fraction of a share of Parent Common Stock will be issued in
connection with the exchange of Parent Common Stock for Shares upon consummation
of the Offer, but in lieu thereof each tendering stockholder who would otherwise
be entitled to receive a fraction of a share of Parent Common Stock (after
aggregating all fractional shares of Parent Common Stock that otherwise would be
received by such stockholder) in the Offer (including any tendering stockholder
during any subsequent offering period under Rule 14d-11) shall receive from
Parent an amount of cash (rounded to the nearest whole cent), without interest,
equal to the product obtained by multiplying (A) that fraction of a share of
Parent Common Stock to which such stockholder is entitled (after aggregating all
fractional shares of Parent Common Stock that otherwise would be received by
such stockholder) by (B) the closing sales price of one share of Parent Common
Stock on the Nasdaq National Market (as reported in The Wall Street Journal or,
if not reported therein, any other authoritative source) on the date Merger Sub
first accepts Shares for exchange in the Offer, and if such date is not a
trading day, on the immediately preceding trading day.
(c) As soon as practicable after the date of this Agreement, Parent shall
prepare and file with the SEC a registration statement on Form S-4 to register
the offer and sale of Parent Common Stock pursuant to the Offer (the
"REGISTRATION STATEMENT"). The Registration Statement will include a preliminary
prospectus containing the information required under Rule 14d-4(b) promulgated
under the Exchange Act (the "PRELIMINARY PROSPECTUS"). As soon as practicable on
the date of commencement of the Offer, Parent and Merger Sub shall (i) file with
the SEC a Tender Offer Statement on Schedule TO with respect to the Offer which
will contain or incorporate by reference all or part of the Preliminary
Prospectus and form of the related letter of transmittal and summary
advertisement, if any (together with any supplements or amendments thereto,
collectively the "OFFER DOCUMENTS") and (ii) cause the Offer Documents to be
disseminated to holders of Shares. The Company shall promptly furnish to Parent
and Merger Sub all information concerning the Company, the Company's
Subsidiaries and the Company's stockholders that may be required or reasonably
requested in connection with any action contemplated by this Section 1.1.
Parent, Merger Sub and
A-2
the Company each agree promptly to correct any information provided by it for
use in the Registration Statement or the Offer Documents if and to the extent
that such information shall have become false or misleading in any material
respect. Parent and Merger Sub agree to take all steps necessary to cause the
Offer Documents as so corrected to be filed with the SEC and to be disseminated
to holders of Shares, in each case as and to the extent required by applicable
federal securities laws. The Company and its counsel shall be given a reasonable
opportunity to review and comment on the Offer Documents and the Registration
Statement, prior to filing with the SEC. Parent agrees to provide the Company
and its counsel with any comments Parent, Merger Sub or their counsel may
receive from the SEC or its staff with respect to the Offer Documents and the
Registration Statement as soon as practicable after receipt of such comments.
(d) None of the information supplied by or on behalf of the Company for
inclusion or incorporation by reference in the Registration Statement, the Offer
Documents or the Schedule 14D-9 will, at the time the Registration Statement,
the Offer Documents or the Schedule 14D-9 are filed with the SEC or at the time
the Registration Statement becomes effective under the Securities Act, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they are made, not
misleading. None of the information supplied by or on behalf of the Company for
inclusion or incorporation by reference in the Proxy Statement will, at the time
the Proxy Statement is mailed to the stockholders of the Company or at the time
of the Company Stockholders' Meeting, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they are made, not misleading. The Proxy Statement
will comply as to form in all material respects with the provisions of the
Exchange Act and the rules and regulations promulgated by the SEC thereunder.
Notwithstanding the foregoing, the Company makes no representation or warranty
with respect to any information supplied by Parent or Merger Sub that is
contained in the foregoing documents.
1.2 Company Action.
(a) As soon as practicable on the day that the Offer is commenced, the
Company will file with the SEC and disseminate to holders of Shares a
Solicitation/Recommendation Statement on Schedule 14D-9 (the "SCHEDULE 14D-9")
which shall include the opinion of CIBC World Markets referred to in Section
3.21 and, subject to Section 5.4(c), shall include the Recommendations (as
defined in Section 3.18). Parent shall promptly furnish to the Company all
information concerning Parent, Parent's Subsidiaries and Parent's stockholders
that may be required or reasonably requested in connection with any action
contemplated by this Section 1.2(a). Subject to Section 5.4(c), the Company
hereby consents to the inclusion of the Recommendations in the Offer Documents
and agrees that none of the Recommendations shall be withdrawn, modified or
changed in the Offer Documents or the Schedule 14D-9 in a manner adverse to
Parent or Merger Sub, and no resolution by the Board of Directors of the Company
or any committee thereof to withdraw, modify or change any of the
Recommendations in a manner adverse to Parent or Merger Sub shall be adopted or
proposed it being understood that, for purposes of this Agreement, a
Recommendation shall be deemed to be withdrawn, modified or changed in a manner
adverse to Parent and Merger Sub if such Recommendation ceases to be unanimous.
Notwithstanding the foregoing, the Board of Directors of the Company may
withhold, withdraw or modify in a manner adverse to Parent its Recommendations
in accordance with the terms of Section 5.4(c) hereof. Each of the Company,
Parent and Merger Sub agrees to correct promptly any information provided by it
for use in the Schedule 14D-9 if and to the extent that such information shall
have become false or misleading in any material respect. The Company agrees to
take all steps necessary to cause the Schedule 14D-9 as so corrected to be filed
with the SEC and to be disseminated to holders of Shares, in each case as and to
the extent required by applicable federal securities laws. Parent and its
counsel shall be given a reasonable opportunity to review and comment on the
Schedule 14D-9 prior to its being filed with the SEC. The Company agrees to
provide Parent and its counsel with any comments the Company or its counsel
receives from the SEC or its staff with respect to the Schedule 14D-9 as soon as
practicable after receipt of such comments.
(b) The Company will promptly furnish Parent and Merger Sub with a list of
its stockholders, mailing labels and any available listing or computer file
containing the names and addresses of all record holders of Shares and lists of
securities positions of Shares held in stock depositories, in each case as of
the most recent
A-3
practicable date, and will provide to Parent and Merger Sub such additional
information (including, without limitation, updated lists of stockholders,
mailing labels and lists of securities positions) and such other assistance as
Parent or Merger Sub may reasonably request in connection with the Offer.
Subject to the requirements of applicable law, and except for such steps as are
necessary to disseminate the Offer Documents and any other documents necessary
to consummate the Offer, Parent and Merger Sub shall hold in confidence the
information contained in any such labels, listings and files, shall use such
information only in connection with the Offer and the Merger and, if this
Agreement shall be terminated, shall, upon request, deliver to the Company all
copies of such information then in their possession.
(c) None of the information supplied by or on behalf of Parent for
inclusion or incorporation by reference in the Registration Statement, the Offer
Documents or the Schedule 14D-9 will, at the time the Registration Statement,
the Offer Documents or the Schedule 14D-9 are filed with the SEC or at the time
the Registration Statement becomes effective under the Securities Act, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they are made, not
misleading. None of the information supplied by or on behalf of Parent for
inclusion or incorporation by reference in the Proxy Statement will, at the time
the Proxy Statement is mailed to the stockholders of the Company or at the time
of the Company Stockholders' Meeting, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they are made, not misleading. Notwithstanding the
foregoing, Parent makes no representation or warranty with respect to any
information supplied by the Company that is contained in the foregoing
documents.
1.3 Directors.
(a) Effective upon the acceptance for payment by Merger Sub of Shares
pursuant to the Offer (the "OFFER ACCEPTANCE TIME"), Parent shall be entitled to
designate four directors on the Company's Board of Directors; provided, however,
that prior to the Effective Time, the Company's Board of Directors shall always
have at least three members who were directors of the Company prior to
consummation of the Offer (each, a "CONTINUING DIRECTOR"); provided, however,
that if Merger Sub purchases 85% or more of the Shares in the Offer, the number
of Continuing Directors shall be one. If the number of Continuing Directors is
reduced to fewer than three for any reason prior to the Effective Time, the
remaining and departing Continuing Directors, with the consent of Parent which
such consent shall not be unreasonably withheld, shall be entitled to designate
a Person or Persons to fill the vacancy and Parent shall take all such actions
as are necessary to cause the Person or Persons so designated to be so
appointed. Notwithstanding anything in this Agreement to the contrary, the
Company shall not take any of the following actions without the affirmative vote
of a majority of the Continuing Directors: (a) amend or terminate this Agreement
or agree or consent to any amendment or termination of this Agreement, (b) waive
any of the Company's rights, benefits or remedies hereunder, (c) extend the time
for performance of Parent's and Merger Sub's respective obligations hereunder,
or (d) approve any other action by the Company which is reasonably likely to
adversely affect the interests of the stockholders of the Company (other than
Parent, Merger Sub and their affiliates (other than the Company and its
Subsidiaries)) with respect to the transactions contemplated by this Agreement.
(b) The Company's obligations to appoint designees to its Board of
Directors shall be subject to Section 14(f) of the Exchange Act and Rule 14f-l
promulgated thereunder. The Company shall promptly take all actions required
pursuant to this Section 1.3 and Rule 14f-l in order to fulfill its obligations
under this Section 1.3 and shall include in the Schedule 14D-9 such information
with respect to the Company and its officers and directors as is required under
Section 14(f) and Rule 14f-l. Parent will supply to the Company in writing and
be solely responsible for any information with respect to itself and its
nominees, officers, directors and affiliates required by Section 14(f) and Rule
14f-1.
2. THE MERGER.
2.1 Merger of Merger Sub into the Company. Upon the terms and subject to
the conditions set forth in this Agreement and the DGCL, at the Effective Time
(as defined in Section 2.3), Merger Sub shall be merged with and into the
Company, and the separate existence of Merger Sub shall cease. The Company will
A-4
continue as the surviving corporation in the Merger (sometimes referred to
herein as the "SURVIVING CORPORATION").
2.2 Effect of the Merger. The Merger shall have the effects set forth in
this Agreement and in the applicable provisions of the DGCL. Without limiting
the generality of the foregoing and subject thereto, from and after the
Effective Time, the Surviving Corporation shall possess all rights, privileges,
immunities, powers and franchises and be subject to all of the obligations,
restrictions, disabilities, liabilities, debts and duties of the Company and
Merger Sub.
2.3 Closing; Effective Time. The consummation of the transactions
contemplated by this Agreement (the "CLOSING") shall take place at the offices
of Heller Ehrman White & McAuliffe LLP, 275 Middlefield Road, Menlo Park,
California, at 10:00 a.m. on a date to be designated by the parties (the
"CLOSING DATE"), which shall be no later than the second business day after the
satisfaction or waiver of the last to be satisfied or waived of the conditions
set forth in Section 7 (other than those conditions that by their nature are to
be satisfied at the Closing, but subject to the satisfaction or waiver of such
conditions) and which the parties shall exercise all reasonable efforts to have
occur no later than 40 days after the Offer Acceptance Time, unless another date
or place is agreed to in writing by the parties hereto. Subject to the
provisions of this Agreement, a certificate of merger, or if the merger is to be
consummated pursuant to Section 253 of the DGCL, a certificate of ownership and
merger (either being the "CERTIFICATE OF MERGER") satisfying the applicable
requirements of the DGCL shall be duly executed by the Company and concurrently
with or as soon as practicable following the Closing delivered to the Secretary
of State of the State of Delaware for filing. The Merger shall become effective
upon the filing of the Certificate of Merger (or such later time as may be
agreed in writing by the Company and Parent and specified in such Certificate of
Merger) with the Secretary of State of the State of Delaware (the "EFFECTIVE
TIME").
2.4 Certificate of Incorporation and Bylaws; Directors and Officers.
(a) the Certificate of Incorporation of the Surviving Corporation shall be
amended and restated in the Merger to conform to Exhibit B, which shall conform
to the requirements of Section 6.7;
(b) the Bylaws of the Surviving Corporation shall be amended and restated
as of the Effective Time to conform to the Bylaws of Merger Sub as in effect
immediately prior to the Effective Time, which shall conform to the requirements
of Section 6.7; and
(c) the directors and officers of the Surviving Corporation immediately
after the Effective Time shall be the respective individuals who are directors
and officers of Merger Sub immediately prior to the Effective Time.
2.5 Conversion of Shares in the Merger.
(a) At the Effective Time, by virtue of the Merger and without any further
action on the part of Parent, Merger Sub, the Company or any stockholder of the
Company:
(i) all Excluded Shares shall be canceled and retired and shall cease
to exist, and no consideration shall be delivered in exchange therefor;
(ii) subject to Sections 2.5(b), 2.5(c) and 2.5(d), each share of
Company Common Stock then issued and outstanding, other than Excluded
Shares and Dissenting Shares (as defined in Section 2.8), if any, shall be
converted into the right to receive that number of shares of Parent Common
Stock equal to the Exchange Ratio, plus cash in lieu of fractional shares
of Parent Common Stock as set forth in Section 2.5(d). The number of shares
of Parent Common Stock equal to the Exchange Ratio and the cash payable in
lieu of fractional shares as specified in Section 2.5(d) with respect to
each share of Company Common Stock are referred to as the "MERGER
CONSIDERATION"; and
(iii) each share of the common stock, $0.001 par value per share, of
Merger Sub then outstanding shall be converted into one share of common
stock of the Surviving Corporation.
(b) If, between the date of this Agreement and the Effective Time, the
outstanding shares of Company Common Stock or Parent Common Stock are affected
by reason of any stock split, division or subdivision of
A-5
shares, stock dividend (including any dividend or distribution of securities
convertible into or exercisable or exchangeable for Parent Common Stock or
Company Common Stock), reverse stock split, consolidation of shares,
reclassification, recapitalization or other similar transaction, then the
Exchange Ratio, the Merger Consideration and any other amounts payable pursuant
to the Offer or the Merger shall be appropriately adjusted to the extent the
record date for, or the date of occurrence of, any such event is between the
date of this Agreement and the effective time.
(c) No fractional shares of Parent Common Stock shall be issued in
connection with the Merger, and no certificates or scrip for any such fractional
shares shall be issued. Any holder of Company Common Stock who would otherwise
be entitled to receive a fraction of a share of Parent Common Stock (after
aggregating all fractional shares of Parent Common Stock issuable to such
holder) shall, in lieu of such fraction of a share and, upon surrender of such
holder's Company Stock Certificate(s) (as defined in Section 2.6), be paid in
cash the dollar amount (rounded to the nearest whole cent), without interest,
equal to the product obtained by multiplying (A) that fraction of a share of
Parent Common Stock to which such stockholder is entitled (after aggregating all
fractional shares of Parent Common Stock that otherwise would be received by
such stockholder) by (B) the closing sales price of one share of Parent Common
Stock on the Nasdaq National Market (as reported in The Wall Street Journal or,
if not reported therein, any other authoritative source) on the date the Merger
becomes effective.
2.6 Closing of the Company's Transfer Books. At the Effective Time: (a)
all Shares outstanding immediately prior to the Effective Time shall
automatically be canceled and retired and shall cease to exist, and all holders
of certificates representing Shares that were outstanding immediately prior to
the Effective Time shall cease to have any rights as stockholders of the
Company; and (b) the stock transfer books of the Company shall be closed with
respect to all Shares outstanding immediately prior to the Effective Time. No
further transfer of any such Shares shall be made on such stock transfer books
after the Effective Time. If, after the Effective Time, a valid certificate
previously representing any Shares (a "COMPANY STOCK CERTIFICATE") is presented
to the Exchange Agent (as defined in Section 2.7) or to the Surviving
Corporation or Parent, such Company Stock Certificate shall be canceled and
shall be exchanged as provided in Section 2.7.
2.7 Exchange of Certificates.
(a) On or prior to the Closing Date, Parent shall select a reputable bank
or trust company reasonably acceptable to the Company to act as exchange agent
in the Merger (the "EXCHANGE AGENT"). As soon as practicable after the Effective
Time, Parent shall deposit with the Exchange Agent (i) certificates representing
the shares of Parent Common Stock issuable pursuant to this Section 2 and (ii)
cash sufficient to make payments in lieu of fractional shares in accordance with
Section 2.5(d). The shares of Parent Common Stock and cash amounts so deposited
with the Exchange Agent, together with any dividends or distributions received
by the Exchange Agent with respect to such shares, are referred to collectively
as the "EXCHANGE FUND".
(b) As soon as reasonably practicable after the Effective Time, the
Exchange Agent will mail to the record holders of Company Stock Certificates (i)
a letter of transmittal in customary form and containing such provisions as
Parent may reasonably specify (including a provision confirming that delivery of
Company Stock Certificates shall be effected, and risk of loss and title to
Company Stock Certificates shall pass, only upon delivery of such Company Stock
Certificates to the Exchange Agent), and (ii) instructions for use in effecting
the surrender of Company Stock Certificates in exchange for certificates
representing Parent Common Stock (plus cash in lieu of fractional shares, if
any, of Parent Common Stock). Upon surrender of a Company Stock Certificate to
the Exchange Agent for exchange, together with a duly executed letter of
transmittal and such other documents as may be reasonably required by the
Exchange Agent or Parent, (1) the holder of such Company Stock Certificate shall
be entitled to receive in exchange therefor a certificate representing the
number of whole shares of Parent Common Stock that such holder has the right to
receive pursuant to the provisions of Section 2.5 (and cash in lieu of any
fractional share of Parent Common Stock), and (2) the Company Stock Certificate
so surrendered shall be canceled. Until surrendered as contemplated by this
Section 2.7(b), each Company Stock Certificate shall be deemed, from and after
the Effective Time, to represent only the right to receive shares of Parent
Common Stock (and cash in lieu of any fractional share
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of Parent Common Stock) as contemplated by this Section 2. If any Company Stock
Certificate shall have been lost, stolen or destroyed, Parent may, in its
discretion and as a condition to the issuance of any certificate representing
Parent Common Stock, require the owner of such lost, stolen or destroyed Company
Stock Certificate to provide an appropriate affidavit and to deliver a bond (in
such sum as Parent may reasonably direct) as indemnity against any claim that
may be made against the Exchange Agent, Parent or the Surviving Corporation with
respect to such Company Stock Certificate.
(c) No dividends or other distributions declared or made with respect to
Parent Common Stock with a record date after the Effective Time shall be paid to
the holder of any unsurrendered Company Stock Certificate with respect to the
shares of Parent Common Stock that such holder has the right to receive in the
Merger until such holder surrenders such Company Stock Certificate in accordance
with this Section 2.7 (at which time such holder shall be entitled, subject to
the effect of applicable escheat or similar laws, to receive all such dividends
and distributions, without interest).
(d) Any portion of the Exchange Fund that remains undistributed to holders
of Company Stock Certificates as of the date 180 days after the date on which
the Merger becomes effective shall be delivered to Parent upon demand, and any
holders of Company Stock Certificates who have not theretofore surrendered their
Company Stock Certificates in accordance with this Section 2.7 shall thereafter
look only to Parent for satisfaction of their claims for Parent Common Stock and
cash in lieu of fractional shares of Parent Common Stock and any dividends or
distributions with respect to Parent Common Stock.
(e) Each of the Exchange Agent, Parent and the Surviving Corporation shall
be entitled to deduct and withhold from any consideration payable or otherwise
deliverable pursuant to this Agreement to any holder or former holder of Company
Common Stock such amounts as may be required to be deducted or withheld
therefrom under the Code or any provision of state, local or foreign tax law or
under any other applicable Legal Requirement. To the extent such amounts are so
deducted or withheld, such amounts shall be treated for all purposes under this
Agreement as having been paid to the Person to whom such amounts would otherwise
have been paid.
(f) Neither Parent nor the Surviving Corporation shall be liable to any
holder or former holder of Company Common Stock or to any other Person with
respect to any shares of Parent Common Stock (or dividends or distributions with
respect thereto), or for any cash amounts, delivered to any public official
pursuant to any applicable abandoned property law, escheat law or similar Legal
Requirement.
2.8 Appraisal Rights. If the Merger is effectuated pursuant to Section 253
of the DGCL, shares of Company Common Stock outstanding immediately prior to the
Effective Time and held by a holder who is entitled to demand and properly
demands appraisal for such shares of Company Common Stock in accordance with the
DGCL (the "DISSENTING SHARES") shall not be converted into the right to receive
Parent Common Stock, unless such holder fails to perfect or withdraws or
otherwise loses his or her right to appraisal. If after the Effective Time such
holder fails to perfect or withdraws or loses his or her right to appraisal,
each such share of Company Common Stock shall be treated as if it had been
converted as of the Effective Time into a right to receive the Merger
Consideration without any interest thereon. The Company shall give Parent prompt
notice of any demands received by the Company for appraisal of shares of Company
Common Stock, and Parent shall have the right to participate in all negotiations
and proceedings with respect to such demands. The Company shall not, without the
prior written consent of Parent, make any payment with respect to, or settle or
offer to settle, any such demands. Any amounts paid to a holder pursuant to a
right of appraisal will be paid by the Company out of its own funds and will not
be reimbursed by Parent or any affiliate of Parent.
2.9 Tax Consequences. For federal income tax purposes, the Merger is
intended to constitute a reorganization within the meaning of Section 368(a) of
the Code. The parties to this Agreement hereby adopt this Agreement as a "plan
of reorganization" within the meaning of Sections 1.368-2(g) and 1.368-3(a) of
the United States Treasury Regulations.
2.10 Further Action. If, at any time after the Effective Time, any further
action is determined by Parent to be necessary or desirable to carry out the
purposes of this Agreement or to vest the Surviving Corporation with full right,
title and possession of and to all rights and property of Merger Sub and the
Company, the
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officers and directors of the Surviving Corporation and Parent shall be fully
authorized (in the name of Merger Sub, in the name of the Company and otherwise)
to take such action.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. Except as set forth on the
Company Disclosure Schedule, and, other than with regard to the representations
and warranties concerning Tax Matters set forth in Section 3.13, except as set
forth in the Company SEC Documents (as defined in Section 3.4), with specific
reference to the Sections so qualified, the Company represents and warrants to
Parent and Merger Sub as follows:
3.1 Due Organization; Subsidiaries; Etc. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has all necessary power and authority: (i) to conduct its business
in the manner in which its business is currently being conducted; (ii) to own
and use its assets in the manner in which its assets are currently owned and
used; and (iii) to perform its obligations under all Contracts by which it is
bound. The Company is qualified to do business as a foreign corporation, and is
in good standing, under the laws of all jurisdictions where the nature of its
business requires such qualification, except where failure to do so would not
have a Material Adverse Effect. Except as set forth in Part 3.1 of the Company
Disclosure Schedule, the Company has no subsidiaries.
3.2 Certificate of Incorporation and Bylaws. The Company has delivered or
made available to Parent accurate and complete copies of the certificate of
incorporation, bylaws and other charter and organizational documents of the
Company, including all amendments thereto.
3.3 Capitalization, Etc.
(a) The authorized capital stock of the Company consists of: (i) 50,000,000
shares of Company Common Stock, of which 23,001,126 shares have been issued and
are outstanding as of the date of this Agreement; and (ii) 5,000,000 shares of
Company Preferred Stock, of which no shares are outstanding. Except as set forth
in Part 3.3(a) of the Company Disclosure Schedule, the Company does not hold any
shares of its capital stock in its treasury. All of the outstanding shares of
Company Common Stock have been duly authorized and validly issued, and are fully
paid and nonassessable. Except as set forth in Part 3.3(a) of the Company
Disclosure Schedule: (i) none of the outstanding shares of Company Common Stock
is entitled or subject to any preemptive right, right of participation, right of
maintenance or any similar right; (ii) none of the outstanding shares of Company
Common Stock is subject to any right of first refusal in favor of the Company;
and (iii) there is no Company Contract relating to the voting or registration
of, or restricting any Person from purchasing, selling, pledging or otherwise
disposing of (or granting any option or similar right with respect to), any
shares of Company Common Stock. The Company is not under any obligation, nor is
it bound by any Contract pursuant to which it may become obligated, to
repurchase, redeem or otherwise acquire any outstanding shares of Company Common
Stock.
(b) As of the date of this Agreement: (i) 500,000 shares of Company
Preferred Stock, designated Series A Junior Participating Preferred Stock, are
reserved for future issuance upon exercise of the rights (the "COMPANY RIGHTS")
issued pursuant to the Rights Agreement; and (ii) 3,711,751 shares of Company
Common Stock are reserved for future issuance pursuant to stock options granted
and outstanding under the Company's 2000 Equity Incentive Plan (options to
purchase shares of Company Common Stock are referred to in this Agreement as
"COMPANY OPTIONS"); and (iii) 52,534 shares of Company Common Stock are reserved
for future issuance pursuant to outstanding warrants (the "COMPANY WARRANTS").
Part 3.3(b) of the Company Disclosure Schedule sets forth the following
information with respect to each Company Option and Company Warrant outstanding
as of the date of this Agreement: (i) the particular plan (if any) pursuant to
which such Company Option was granted; (ii) the name of the optionee or
warrantholder; (iii) the number of shares of Company Common Stock subject to
such Company Option or Company Warrant; (iv) the exercise price of such Company
Option or Company Warrant; (v) the date on which such Company Option or Company
Warrant was granted; (vi) the applicable vesting schedule, and the extent to
which such Company Option or Company Warrant is vested and exercisable as of the
date of this Agreement; and (vii) the date on which such Company Option or
Company Warrant expires.
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(c) Except as set forth in Part 3.3(c) of the Company Disclosure Schedule
there is no: (i) outstanding subscription, option, call, warrant or right
(whether or not currently exercisable) to acquire any shares of the capital
stock or other securities of the Company; (ii) outstanding security, instrument
or obligation that is or may become convertible into or exchangeable for any
shares of the capital stock or other securities of the Company; (iii)
stockholder rights plan (or similar plan commonly referred to as a "poison
pill") or Contract under which the Company is or may become obligated to sell or
otherwise issue any shares of its capital stock or any other securities; or (iv)
condition or circumstance that may give rise to or provide a basis for the
assertion of a claim by any Person to the effect that such Person is entitled to
acquire or receive any shares of capital stock or other securities of the
Company.
(d) All outstanding capital stock, options and other securities of the
Company have been issued and granted in compliance with (i) all applicable
securities laws and other applicable Legal Requirements, and (ii) all
requirements set forth in applicable Contracts.
(e) All of the outstanding shares of capital stock of the corporations, if
any, identified in Part 3.1(a) of the Company Disclosure Schedule have been duly
authorized and are validly issued, are fully paid and nonassessable and free of
preemptive rights, with no personal liability attaching to the ownership
thereof, and are owned beneficially and of record by the Company, free and clear
of any Encumbrances.
3.4 SEC Filings; Financial Statements.
(a) The Company has delivered or made available to Parent accurate and
complete copies of all registration statements, proxy statements and other
statements, reports, schedules, forms and other documents filed by the Company
with the SEC since October 4, 2000, and all amendments thereto (the "COMPANY SEC
DOCUMENTS"). All statements, reports, schedules, forms and other documents
required to have been filed by the Company with the SEC have been so filed on a
timely basis. None of the Company's Subsidiaries, if any, is required to file
any documents with the SEC. As of the time it was filed with the SEC (or, if
amended or superseded by a filing prior to the date of this Agreement, then on
the date of such filing): (i) each of the Company SEC Documents complied in all
material respects with the applicable requirements of the Securities Act or the
Exchange Act (as the case may be); and (ii) none of the Company SEC Documents
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
(b) The financial statements (including any related notes) contained in the
Company SEC Documents: (i) complied as to form in all material respects with the
published rules and regulations of the SEC applicable thereto; (ii) were
prepared in accordance with generally accepted accounting principles applied on
a consistent basis throughout the periods covered (except as may be indicated in
the notes to such financial statements and, in the case of unaudited statements,
as permitted by Form 10-Q of the SEC, and except that the unaudited financial
statements may not contain footnotes and are subject to normal and recurring
year-end adjustments that will not, individually or in the aggregate, be
material in amount), and (iii) fairly present the financial position of the
Company as of the respective dates thereof and the results of operations and
cash flows of the Company for the periods covered thereby.
3.5 Absence of Changes. Except as set forth in Part 3.5 of the Company
Disclosure Schedule, between December 31, 2000 and the date of this Agreement
there has not occurred (i) any Material Adverse Effect on the Company, (ii) any
material change by the Company in its accounting methods, principles or
practices except as required by concurrent changes in U.S. generally accepted
accounting principles, (iii) any material reevaluation by the Company of any of
its assets, including, without limitation, writing down the value of capitalized
inventory or writing off notes or accounts receivable other than in the ordinary
course, or (iv) any declaration, setting aside or payment of any dividend or
other distribution (whether in cash, stock or property) with respect to any of
the Company's capital stock.
3.6 Real Property; Equipment; Leasehold. All material items of equipment
and other tangible assets owned by or leased to the Company are adequate for the
uses to which they are being put, are in good and safe condition and repair
(ordinary wear and tear excepted) and are adequate for the conduct of the
business of the
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Company in the manner in which such business is currently being conducted.
Except as set forth in Part 3.7 of the Company Disclosure Schedule, the Company
does not own any real property or any interest in real property. Part 3.7 of the
Company Disclosure Schedule contains an accurate and complete list of all the
Company's real property leases.
3.7 Proprietary Assets.
(a) The Company has good and valid title to all of the Company Proprietary
Assets owned by the Company that are material to the business of the Company,
free and clear of all Encumbrances, except for (i) any lien for current taxes
not yet due and payable, and (ii) minor liens that have arisen in the ordinary
course of business and that do not (individually or in the aggregate) materially
detract from the value of the assets subject thereto or materially impair the
operations of the Company.
(b) To the best of the knowledge of the Company: (i) all patents,
trademarks, service marks and copyrights held by the Company are valid,
enforceable and subsisting; (ii) none of the Company Proprietary Assets and no
Proprietary Asset that is currently being developed by the Company (either by
itself or with any other Person) infringes, misappropriates or conflicts with
any Proprietary Asset owned or used by any other Person; (iii) none of the
products that are or have been designed, created, developed, assembled,
manufactured or sold by the Company is infringing, misappropriating or making
any unlawful or unauthorized use of any Proprietary Asset owned or used by any
other Person, and, except as set forth in Part 3.8(b) of the Company Disclosure
Schedule, since December 31, 1999, the Company has not received any notice or
other communication (in writing or otherwise) of any actual, alleged, possible
or potential infringement, misappropriation or unlawful or unauthorized use of,
any Proprietary Asset owned or used by any other Person that has or would
reasonably be expected to have a Material Adverse Effect on the Company; (iv)
except as set forth in Part 3.8(b) of the Company Disclosure Schedule, no other
Person is infringing, misappropriating or making any unlawful or unauthorized
use of, and no Proprietary Asset owned or used by any other Person infringes or
conflicts with, any material Company Proprietary Asset.
(c) To the best of the knowledge of the Company, the Company Proprietary
Assets, together with any Proprietary Assets currently being licensed to the
Company by third parties, constitute all the Proprietary Assets necessary to
enable the Company to conduct its business in the manner in which such business
is being conducted.
3.8 Contracts. The Company (i) has not violated or breached, or committed
any default under, any material Contract to which the Company is a party, except
for violations, breaches and defaults that have not had and would not reasonably
be expected to have a Material Adverse Effect on the Company; and, to the best
of the knowledge of the Company, no other Person has violated or breached, or
committed any default under, any material Contract to which the Company is a
party, except for violations, breaches and defaults that have not had and would
not reasonably be expected to have a Material Adverse Effect on the Company;
(ii) to the best of the knowledge of the Company, no event has occurred, and no
circumstance or condition exists, that (with or without notice or lapse of time)
will or would reasonably be expected to, (A) result in a violation or breach of
any of the provisions of any material Contract to which the Company is a party,
(B) give any Person the right to declare a default or exercise any remedy under
any material Contract to which the Company is a party, (C) give any Person the
right to receive or require a rebate, chargeback, penalty or change in delivery
schedule under any material Contract to which the Company is a party, (D) give
any Person the right to accelerate the maturity or performance of any material
Contract to which the Company is a party, or give any Person the right to
cancel, terminate or modify any material Contract, except in each such case for
defaults, acceleration rights, termination rights and other rights that have not
had and would not reasonably be expected to have a Material Adverse Effect on
the Company; and (iii) since December 31, 1999, the Company has not received any
notice or other communication regarding any actual or possible violation or
breach of, or default under, any material Contract, except in each such case for
defaults, acceleration rights, termination rights and other rights that have not
had and would not reasonably be expected to have a Material Adverse Effect on
the Company.
3.9 Liabilities. As of the date of this Agreement, the Company has no
accrued, contingent or other liabilities of any nature, either matured or
unmatured, except for: (a) liabilities identified as such in the
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Company Unaudited Interim Balance Sheet; (b) liabilities that have been incurred
by the Company since September 30, 2001 in the ordinary course of business and
consistent with past practices that, individually or in the aggregate, are not
material in nature; and (c) liabilities incurred under this Agreement and the
other agreements contemplated hereby.
3.10 Compliance with Legal Requirements. The Company is in compliance in
all material respects with all applicable Legal Requirements except where the
failure to comply with such Legal Requirements, individually or in the
aggregate, has not had and could not reasonably be expected to have a Material
Adverse Effect on the Company. Since December 31, 1999, the Company has not
received any notice or other communication from any Governmental Body regarding
any actual or possible violation of, or failure to comply with, any Legal
Requirement, except where said violation or noncompliance could not reasonably
be expected to have a Material Adverse Effect on the Company.
3.11 Certain Business Practices. Neither the Company nor any director,
officer, agent or employee of the Company has (i) used any funds for unlawful
contributions, gifts, entertainment or other unlawful expenses relating to
political activity, (ii) made any unlawful payment to foreign or domestic
government officials or employees or to foreign or domestic political parties or
campaigns or violated any provision of the Foreign Corrupt Practices Act of
1977, as amended, or (iii) made any other unlawful payment.
3.12 Governmental Authorizations. The Company holds all Governmental
Authorizations necessary to enable the Company to conduct its business in the
manner in which such business is currently being conducted. All such
Governmental Authorizations are valid and in full force and effect. The Company
is in substantial compliance with the terms and requirements of such
Governmental Authorizations, except where the failure to be in compliance with
the terms and requirements of such Governmental Authorizations have not had and
would not reasonably be expected to have a Material Adverse Effect on the
Company. Since December 31, 1999, the Company has not received any notice or
other communication from any Governmental Body regarding (a) any actual or
possible violation of or failure to comply with any term or requirement of any
material Governmental Authorization, or (b) any actual or possible revocation,
withdrawal, suspension, cancellation, termination or modification of any
material Governmental Authorization.
3.13 Tax Matters.
(a) Each of the Tax Returns required to be filed by or on behalf of the
Company on or before the Offer Acceptance Time (the "COMPANY RETURNS") (i) has
been or will be filed on or before the applicable due date (including any
extensions of such due date), and (ii) has been, or will be when filed, true,
correct and complete in all respects, except as to immaterial items that were
believed to be correct or supported by substantial authority when such Tax
Returns were or will be filed, and prepared in all material respects in
compliance with all applicable Legal Requirements. All amounts shown on the
Company Returns to be due on or before the Offer Acceptance Time have been or
will be paid on or before the Offer Acceptance Time.
(b) The Company Unaudited Interim Balance Sheet fully accrues all actual
and contingent liabilities for Taxes with respect to all periods through the
date thereof in accordance with generally accepted accounting principles.
(c) No extension or waiver of the limitation period applicable to any of
the Company Returns has been granted and is currently in effect (by the Company
or any other Person), and no such extension or waiver has been requested from
the Company. No claim or Legal Proceeding is pending or, to the best of the
knowledge of the Company, has been threatened against or with respect to the
Company in respect of any material Tax. There are no unsatisfied liabilities for
Taxes (including liabilities for interest, additions to tax and penalties
thereon and related expenses) with respect to any notice of deficiency or
similar document received by the Company with respect to any Tax. Any unpaid
Taxes asserted under any notice of deficiency or similar document are being
contested in good faith by the Company and adequate reserves for payment have
been established on the Company Unaudited Interim Balance Sheet for any
threatened Tax). The Company has not received any request for a Tax Return or
inquiry as to whether a Tax Return has been filed from any jurisdiction where it
does not file Tax Returns. There are no liens for material Taxes upon any of the
assets of the Company except liens for current Taxes not yet due and payable.
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(d) The Company has not entered into or become bound by any agreement or
consent pursuant to Section 341(f) of the Code (or any comparable provision of
state or foreign Tax laws). The Company has not been, and will not be, required
to include any adjustment in taxable income for any tax period (or portion
thereof) pursuant to Section 481 or 263A of the Code (or any comparable
provision under state or foreign Tax laws) as a result of transactions or events
occurring, or accounting methods employed, prior to the Offer Acceptance Time.
(e) There is no agreement, plan, arrangement or other Contract covering any
employee or independent contractor or former employee or independent contractor
of the Company that, considered individually or considered collectively with any
other such Contracts, will, or could reasonably be expected to, give rise
directly or indirectly to the payment of any amount that would not be deductible
pursuant to Section 280G or Section 162(m) of the Code (or any comparable
provision of state or foreign Tax laws). The Company has properly withheld on
all amounts paid to consultants or employees and to persons located outside of
the United States. The Company is not, and has never been, a party to or bound
by any tax indemnity agreement, tax sharing agreement, tax allocation agreement
or similar Contract.
(f) The Company has never requested or received a ruling with respect to
Taxes and has (and will have at Offer Acceptance Time) no outstanding power of
attorney with respect to the Taxes. The Company has not been a party to a
transaction intended to qualify under Section 355 of the Code (whether as
distributing or distributed company) within the last five years.
(g) Neither the Company nor any of its affiliates has taken, failed to take
or agreed to take any action or knows of any fact, circumstance, plan or
intention that is or would be reasonably likely to prevent the Transaction from
qualifying as a "reorganization" within the meaning of Section 368(a) of the
Code.
3.14 Employee and Labor Matters; Benefit Plans.
(a) Part 3.14(a) of the Company Disclosure Schedule identifies each salary,
bonus, vacation, deferred compensation, incentive compensation, stock purchase,
stock option, severance pay, termination pay, death and disability benefits,
hospitalization, medical, life or other insurance, flexible benefits,
supplemental unemployment benefits, profit-sharing, pension or retirement plan,
program or agreement and each other employee benefit plan or arrangement
(collectively, the "EMPLOYEE PLANS") sponsored, maintained, contributed to or
required to be contributed to by the Company for the benefit of any current or
former employee. Part 3.14(a) also identifies each Legal Requirement pursuant to
which the Company is required to establish any reserve or make any contribution
for the benefit of any current or former employee located in any foreign
jurisdiction.
(b) Except as set forth in Part 3.14(a) of the Company Disclosure Schedule,
the Company does not maintain, sponsor or contribute to, and the Company has not
at any time in the past maintained, sponsored or contributed to, any employee
pension benefit plan (as defined in Section 3(2) of ERISA), or any similar
pension benefit plan under the laws of any foreign jurisdiction, whether or not
excluded from coverage under specific Titles or Subtitles of ERISA for the
benefit of employees or former employees of the Company (a "PENSION PLAN").
(c) Except as set forth in Part 3.14(a) of the Company Disclosure Schedule,
the Company does not maintain, sponsor or contribute to any employee welfare
benefit plan (as defined in Section 3(1) of ERISA) or any similar welfare
benefit plan under the laws of any foreign jurisdiction, whether or not excluded
from coverage under specific Titles or Subtitles of ERISA, for the benefit of
any current or former employees or directors of the Company (a "WELFARE PLAN").
(d) With respect to each Employee Plan, the Company has delivered or made
available to Parent: (i) an accurate and complete copy of such Employee Plan
(including all amendments thereto); (ii) an accurate and complete copy of the
annual report, if required under ERISA, with respect to such Employee Plan for
the last two years; (iii) an accurate and complete copy of the most recent
summary plan description, together with each summary of material modifications,
if required under ERISA, with respect to such Employee Plan, (iv) if such
Employee Plan is funded through a trust or any third party funding vehicle, an
accurate and complete copy of the trust or other funding agreement (including
all amendments thereto) and accurate and
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complete copies the most recent financial statements thereof; (v) accurate and
complete copies of all Contracts relating to such Employee Plan, including
service provider agreements, insurance contracts, minimum premium contracts,
stop-loss agreements, investment management agreements, subscription and
participation agreements and recordkeeping agreements; and (vi) an accurate and
complete copy of the most recent determination letter received from the Internal
Revenue Service with respect to such Employee Plan (if such Employee Plan is
intended to be qualified under Section 401(a) of the Code).
(e) The Company is not, nor has it ever been, required to be treated as a
single employer with any other Person under Section 4001(b)(1) of ERISA or
Section 414(b), (c), (m) or (o) of the Code. The Company has never been a member
of an "affiliated service group" within the meaning of Section 414(m) of the
Code. None of the Employee Plans identified in the Company Disclosure Schedule
is a multiemployer plan (within the meaning of Section 3(37) of ERISA). The
Company has never made a complete or partial withdrawal from a multiemployer
plan, as such term is defined in Section 3(37) of ERISA, resulting in
"withdrawal liability", as such term is defined in Section 4201 of ERISA
(without regard to subsequent reduction or waiver of such liability under either
Section 4207 or 4208 of ERISA).
(f) The Company does not have any plan or commitment to create any Welfare
Plan or any Pension Plan, or to modify or change any existing Welfare Plan or
Pension Plan (other than to comply with applicable law) in a manner that would
affect any current or former employee or director of the Company, and that would
have a Material Adverse Effect on the Company.
(g) No Employee Plan provides death, medical or health benefits (whether or
not insured) with respect to any current or former employee or director of any
of the Company after any termination of service of such employee or director
(other than benefit coverage mandated by applicable law, including coverage
provided pursuant to Section 4980B of the Code or coverage extended through the
month in which such termination of service occurs).
(h) With respect to any Employee Plan constituting a group health plan
within the meaning of Section 4980B(g)(2) of the Code, the provisions of COBRA
have been complied with in all material respects. Part 3.14(h) of the Company
Disclosure Schedule describes all obligations of the Company as of the date of
this Agreement to pay premiums for coverage of a former employee under any of
the provisions of COBRA.
(i) There are no Legal Proceedings pending or, to the knowledge of the
Company, threatened in respect of or relating to any Company Employee Plan.
There are no facts or circumstances of which the Company is aware which could
reasonably be expected to give rise to any such Legal Proceeding (other than
routine, uncontested benefit claims) in respect of or relating to any Company
Employee Plan.
(j) Each of the Employee Plans has been operated and administered in all
material respects in accordance with its terms and with applicable Legal
Requirements, including ERISA, the Code and applicable foreign Legal
Requirements. The Company has materially performed all of its obligations under
the Employee Plans.
(k) Each of the Employee Plans intended to be qualified under Section
401(a) of the Code has received a favorable determination letter from the
Internal Revenue Service, and nothing has occurred that would adversely affect
such determination.
(l) Except as set forth in Part 3.14(l) of the Company Disclosure Schedule,
neither the execution, delivery or performance of this Agreement, nor the
consummation of the Offer or the Merger or any of the other transactions
contemplated by this Agreement, will result in any bonus, golden parachute,
severance or other payment or obligation to any current or former employee or
director of the Company (whether or not under any Employee Plan), or materially
increase the benefits payable or provided under any Employee Plan (except as
contemplated in this Agreement), or result in any acceleration of the time of
payment or vesting of any such benefits. Without limiting the generality of the
foregoing (and except as set forth in Part 3.14(l) of the Company Disclosure
Schedule), the consummation of the Offer and the Merger will not result in the
acceleration of vesting of any unvested Company Options.
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(m) Part 3.14(m) of the Company Disclosure Schedule contains a list of all
salaried employees of the Company as of the date of this Agreement, and
correctly reflects, in all material respects, their salaries, any other
compensation payable to them (including compensation payable pursuant to bonus,
deferred compensation or commission arrangements), their dates of employment and
their positions. The Company is not a party to any collective bargaining
contract or other Contract with a labor union involving any of its employees.
All of the employees of the Company are "at will" employees.
(n) Part 3.14(n) of the Company Disclosure Schedule identifies each
employee of any of the Company who is not fully available to perform work
because of disability or other leave and sets forth the basis of such disability
or leave and the anticipated date of return to full service.
(o) Except as set forth in Part 3.14(o) of the Company Disclosure Schedule,
the Company is in compliance in all material respects with all applicable Legal
Requirements and Contracts relating to employment, employment practices, wages,
bonuses and terms and conditions of employment, including employee compensation
matters.
(p) The Company has performed and undertaken all necessary acts to comply
with the applicable provisions of the Worker Adjustment and Retraining
Notification Act and the regulations thereunder, as well as any other Legal
Requirements, including foreign Legal Requirements, in connection with the
termination of any of its employees.
(q) The Company has no knowledge of any facts indicating that (i) the
consummation of the Offer or the Merger or any of the other transactions
contemplated by this Agreement will have a material adverse effect on the labor
relations of the Company, or (ii) any of the employees of the Company intends to
terminate his or her employment with the Company with which such employee is
employed.
3.15 Environmental Matters. The Company (i) is in compliance in all
material respects with all applicable Environmental Laws, and (ii) possesses all
permits and other Governmental Authorizations required under applicable
Environmental Laws, and compliance with the terms and conditions thereof. The
Company has not received any notice or other communication (in writing or
otherwise), whether from a Governmental Body, citizens group, employee or
otherwise, that alleges that the Company is not in compliance with any
Environmental Law, and, to the best of the knowledge of the Company, there are
no circumstances that may prevent or interfere with the compliance by the
Company with any Environmental Law in the future. To the best of the knowledge
of the Company, (a) all property that is leased to, controlled by or used by the
Company, and all surface water, groundwater and soil associated with or adjacent
to such property, is free of any material environmental contamination of any
nature, (b) none of the property leased to, controlled by or used by the Company
contains any underground storage tanks, asbestos, equipment using PCBs,
underground injection wells, and (c) none of the property leased to, controlled
by or used by the Company contains any septic tanks in which process wastewater
or any Materials of Environmental Concern have been disposed. The Company has
never sent or transported, or arranged to send or transport, any Materials of
Environmental Concern to a site that, pursuant to any applicable Environmental
Law (i) has been placed on the "National Priorities List" of hazardous waste
sites or any similar state list, (ii) is otherwise designated or identified as a
potential site for remediation, cleanup, closure or other environmental remedial
activity, or (iii) is subject to a Legal Requirement to take "removal" or
"remedial" action as detailed in any applicable Environmental Law or to make
payment for the cost of cleaning up the site.
3.16 Transactions with Affiliates. Except as set forth in the Company SEC
Documents filed prior to the date of this Agreement, between December 31, 2000
and the date of this Agreement, no event has occurred that would be required to
be reported by the Company pursuant to Item 404 of Regulation S-K promulgated by
the SEC. Part 3.16 of the Company Disclosure Schedule identifies each Person who
is (or who may be deemed to be) an "affiliate" (as that term is used in Rule 145
under the Securities Act) of the Company as of the date of this Agreement.
3.17 Legal Proceedings; Orders.
(a) As of the date of this Agreement, there is no pending Legal Proceeding,
and (to the best of the knowledge of the Company) no Person has threatened to
commence any Legal Proceeding: (i) that involves
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the Company or any of the assets owned or used by the Company; or (ii) that
challenges, or that may have the effect of preventing, delaying, making illegal
or otherwise interfering with, the Offer or the Merger or any of the other
transactions contemplated by this Agreement. To the best of the knowledge of the
Company, as of the date of this Agreement, no event has occurred, and no claim,
dispute or other condition or circumstance exists, that could reasonably be
expected to, give rise to or serve as a basis for the commencement of any such
Legal Proceeding.
(b) There is no Order to which the Company, or any of the material assets
owned or used by the Company, is subject. To the best of the knowledge of the
Company, no officer or key employee of the Company is subject to any Order that
prohibits such officer or other employee from engaging in or continuing any
conduct, activity or practice relating to the business of the Company.
3.18 Authority; Binding Nature of Agreement. The Company has the requisite
corporate power and authority to enter into and to perform its obligations under
this Agreement. The Board of Directors of the Company (at a meeting duly called
and held) has (a) unanimously determined that this Agreement and the
transactions contemplated hereby, including the Offer and the Merger, are
advisable and fair to and in the best interests of the Company and its
stockholders, (b) unanimously authorized and approved the execution, delivery
and performance of this Agreement and the transactions contemplated hereby,
including the Offer and the Merger and the Stockholder Tender Agreements and the
transactions contemplated thereby, which approval constitutes approval under
Section 203 of the DGCL such that the Offer, the Merger, this Agreement and the
other transactions contemplated hereby, and the Stockholder Tender Agreements
and the transactions contemplated thereby, are not and shall not be subject to
any of the restrictions on "business combinations" set forth in Section 203 of
the DGCL, subject to the accuracy of Parent's representation set forth in the
third sentence of Section 4.16 hereof, and (c) unanimously recommended
acceptance of the Offer by the holders of the Company Common Stock and the
adoption of this Agreement by the holders of Company Common Stock (the unanimous
recommendations referred to in this clause (c) are collectively referred to in
this Agreement as the "RECOMMENDATIONS"). This Agreement constitutes the legal,
valid and binding obligation of the Company, enforceable against the Company in
accordance with its terms, subject to (i) laws of general application relating
to bankruptcy, insolvency and the relief of debtors, and (ii) rules of law
governing specific performance, injunctive relief and other equitable remedies.
3.19 Vote Required. The affirmative vote of the holders of a majority of
the shares of Company Common Stock outstanding on the record date for the
Company Stockholders' Meeting (the "REQUIRED COMPANY STOCKHOLDER VOTE") is the
only vote of the holders of any class or series of the Company's capital stock
necessary to adopt this Agreement and approve the Merger.
3.20 Non-Contravention; Consents. Neither the execution and delivery of
this Agreement by the Company nor the consummation by the Company of the Offer
or the Merger, or any of the other transactions contemplated by this Agreement,
will (a) contravene, conflict with or result in any breach of any provision of
the certificate of incorporation or bylaws of the Company or of any resolution
adopted by the stockholders, the Board of Directors or any committee of the
Board of Directors of the Company; (b) contravene, conflict with or result in a
violation of, or give any Governmental Body or other Person the right to
challenge the Offer or the Merger or any of the other transactions contemplated
by this Agreement or to exercise any remedy or obtain any relief under, any
Legal Requirement or any Order to which the Company, or any of the assets owned
or used by the Company, is subject; (c) contravene, conflict with or result in a
violation or breach of, or result in a default under, any provision of any
material Contract to which the Company is a party, or give any Person the right
to (i) declare a default or exercise any remedy under any such Contract to which
the Company is a party, (ii) a rebate, chargeback, penalty or change in delivery
schedule under any material Contract of Company, (iii) accelerate the maturity
or performance of any material Contract of Company, or (iv) cancel, terminate or
modify any term of any material Contract of Company; or (d) result in a
violation by the Company of any Order to which the Company is subject. Except as
may be required by the Securities Act, the Exchange Act, state securities or
"blue sky" laws, the DGCL, the HSR Act, any foreign antitrust law or regulation
and the NASD Bylaws, the Company is not and will not be required to make any
filing with or give any notice to, or to obtain any Consent from, any Person in
connection with the execution, delivery or performance of this Agreement by the
Company or the consummation of the Offer or the Merger.
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3.21 Opinion of Financial Advisor. The Company's Board of Directors has
received the opinion of CIBC World Markets, financial advisor to the Company,
and will receive such opinion in writing dated the date of this Agreement, to
the effect that, as of such date, the Exchange Ratio is fair from a financial
point of view to the holders of the Company Common Stock (other than Parent and
its affiliates). The Company will furnish an accurate and complete copy of said
opinion to the Parent solely for informational purposes after receipt thereof.
3.22 Financial Advisor. Except for CIBC World Markets, no broker, finder
or investment banker is entitled to any brokerage, finder's or other fee or
commission in connection with the Offer or the Merger or any of the other
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of any of the Company. The Company has furnished to Parent accurate
and complete copies of all agreements under which any fees, commissions or other
amounts have been paid to or may become payable to CIBC World Markets and all
indemnification and other agreements related to the engagement of CIBC World
Markets.
3.23 Takeover Statutes; No Discussions. To the knowledge of the Company,
no Takeover Laws are applicable to the Offer, the Merger, this Agreement and the
transactions contemplated hereby other than Section 203 of the DGCL. As of the
date of this Agreement, the Company is not engaged, directly or indirectly, in
any discussions or negotiations with any other Person relating to any
Acquisition Proposal.
3.24 Amendment to Rights Agreement. As of the date of this Agreement, the
Company has taken all action necessary to amend the Rights Agreement to provide
that neither Parent nor Merger Sub nor any of their respective affiliates shall
be deemed to be an Acquiring Person (as such term is defined in the Rights
Agreement), that neither a Distribution Date nor Shares Acquisition Date (as
each such term is defined in the Rights Agreement) shall be deemed to occur and
the Rights will not separate from the Shares, in each case as a result of the
execution, delivery or performance of this Agreement, the Stockholder Tender
Agreements or the public announcement or consummation of the Offer, the Merger,
or the other transactions contemplated by this Agreement or by the Stockholder
Tender Agreements.
3.25 Full Disclosure. This Agreement (including the Company Disclosure
Schedule) does not (i) contain any representation, warranty or information that
is false or misleading with respect to any material fact, or (ii) omit to state
any material fact necessary in order to make the representations, warranties and
information contained and to be contained herein and therein (in the light of
the circumstances under which such representations, warranties and information
were or will be made or provided) not false or misleading.
4. REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB. Except as set
forth on the Parent Disclosure Schedule, and except as set forth in the Parent
SEC Documents (as defined in Section 4.4), or in the exhibits thereto, Parent
and Merger Sub represent and warrant to the Company as follows:
4.1 Due Organization; Subsidiaries; Etc. Each of Parent and Merger Sub is
a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware and has all necessary power and authority: (a) to
conduct its business in the manner in which its business is currently being
conducted; (b) to own and use its assets in the manner in which its assets are
currently owned and used; and (c) to perform its obligations under all Contracts
by which it is bound. Each of Parent and Merger Sub is duly qualified to do
business as a foreign corporation, and is in good standing, under the laws of
all jurisdictions where the nature of its business requires such qualification,
except where failure to does so would not have a Material Adverse Effect on
Parent or Merger Sub. Except as set forth in Part 4.1 of the Parent Disclosure
Schedule, Parent has no subsidiaries except for Merger Sub.
4.2 Certificate of Incorporation and Bylaws. Parent has delivered to the
Company accurate and complete copies of the certificate of incorporation, bylaws
and other charter and organizational documents of Parent and Merger Sub,
including all amendments thereto.
4.3 Capitalization, Etc.
(a) The authorized capital stock of Parent consists of: (i) 100,000,000
shares of Parent Common Stock, of which 49,511,273 shares have been issued and
are outstanding as of October 31, 2001; and (ii) 10,000,000
A-16
shares of Parent Preferred Stock, of which no shares are outstanding. Parent
does not hold any shares of its capital stock in its treasury. All of the
outstanding shares of Parent Common Stock have been duly authorized and validly
issued, and are fully paid and nonassessable. As of the date of this Agreement,
there are no shares of Parent Common Stock held by any Subsidiary of Parent.
(b) As of October 31, 2001: (i) 1,017,799 shares of Parent Common Stock
reserved for future issuance pursuant to stock options granted and outstanding
under Parents' 1997 Equity Incentive Plan; (ii) 4,258,580 shares of Parent
Common Stock are reserved for future issuance pursuant to stock options granted
and outstanding under Parent's 2000 Equity Incentive Plan; (iii) 295,000 shares
of Parent Common Stock are reserved for future issuance pursuant to stock
options granted and outstanding under Parent's 2000 Non-Employee Director's
Stock Option Plan; (iv) 376,303 shares of Parent Common Stock are reserved for
future issuance pursuant to Parent's 2000 Employee Stock Purchase Plan; (v)
581,793 shares of Parent Common Stock are reserved for future issuance pursuant
to stock options granted and outstanding under the Agritope, Inc. 1997 Stock
Award Plan; (vi) 461,265 shares of Parent Common Stock are reserved for future
issuance upon the exercise of put or call options arising out of the acquisition
of Artemis Pharmaceuticals GmbH.
(c) All outstanding capital stock, options and other securities of Parent
have been issued and granted in compliance with (i) all applicable securities
laws and other applicable Legal Requirements, and (ii) all requirements set
forth in applicable Contracts.
(d) All of the outstanding shares of capital stock of the corporations
identified in Part 4.1 of the Parent Disclosure Schedule have been duly
authorized and are validly issued, are fully paid and nonassessable and free of
preemptive rights, with no personal liability attaching to the ownership
thereof, and are owned beneficially and of record by Parent, free and clear of
any Encumbrances.
4.4 SEC Filings; Financial Statements.
(a) Parent has delivered or made available to the Company accurate and
complete copies (excluding copies of exhibits) of each report, registration
statement and definitive proxy statement filed by Parent with the SEC since
February 1, 2000 (the "PARENT SEC DOCUMENTS"). All statements, reports,
schedules, forms and other documents required to have been filed by Parent with
the SEC have been so filed on a timely basis. As of the time it was filed with
the SEC (or, if amended or superseded by a filing prior to the date of this
Agreement, then on the date of such filing): (i) each of the Parent SEC
Documents complied in all material respects with the applicable requirements of
the Securities Act or the Exchange Act (as the case may be); and (ii) none of
the Parent SEC Documents contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading.
(b) The consolidated financial statements (including any related notes)
contained in the Parent SEC Documents: (i) complied as to form in all material
respects with the published rules and regulations of the SEC applicable thereto;
(ii) were prepared in accordance with generally accepted accounting principles
applied on a consistent basis throughout the periods covered (except as may be
indicated in the notes to such financial statements and, in the case of
unaudited statements, as permitted by Form 10-Q of the SEC, and except that
unaudited financial statements may not contain footnotes and are subject to
normal and recurring year-end audit adjustments which will not, individually or
in the aggregate, be material in amount); and (iii) fairly present the
consolidated financial position of Parent and its subsidiaries as of the
respective dates thereof and the consolidated results of operations of Parent
and its subsidiaries for the periods covered thereby.
4.5 Absence of Certain Changes or Events. Except as set forth in Part 4.5
of the Parent Disclosure Schedule, between September 30, 2001 and the date of
this Agreement there has not occurred (i) any Material Adverse Effect on Parent,
(ii) any material change by Parent in its accounting methods, principles or
practices except as required by concurrent changes in U.S. generally accepted
accounting principles, (iii) any material reevaluation by Parent of any of its
assets, including, without limitation, writing down the value of capitalized
inventory or writing off notes or accounts receivable other than in the ordinary
course, or (iv) any declaration, setting aside or payment of any dividend or
other distribution (whether in cash, stock or property) with respect to any of
Parent's capital stock.
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4.6 Proprietary Assets.
(a) Parent has good and valid title to all of the Parent Proprietary Assets
owned by Parent that are material to the business of the Parent, free and clear
of all Encumbrances, except for (i) any lien for current taxes not yet due and
payable, and (ii) minor liens that have arisen in the ordinary course of
business and that do not (individually or in the aggregate) materially detract
from the value of the assets subject thereto or materially impair the operations
of Parent.
(b) To the best of the knowledge of Parent: (i) all patents, trademarks,
service marks and copyrights held by Parent are valid, enforceable and
subsisting; (ii) none of the Parent Proprietary Assets and no Proprietary Asset
that is currently being developed by Parent (either by itself or with any other
Person) infringes, misappropriates or conflicts with any Proprietary Asset owned
or used by any other Person; (iii) none of the products that are or have been
designed, created, developed, assembled, manufactured or sold by Parent is
infringing, misappropriating or making any unlawful or unauthorized use of any
Proprietary Asset owned or used by any other Person, and, except as set forth in
Part 4.6(b) of the Parent Disclosure Schedule, since December 31, 2000, Parent
has not received any notice or other communication (in writing or otherwise) of
any actual, alleged, possible or potential infringement, misappropriation or
unlawful or unauthorized use of, any Proprietary Asset owned or used by any
other Person, that has or would reasonably be expected to have a Material
Adverse Effect on Parent; (iv) except as set forth in Part 4.6(b) of the Parent
Disclosure Schedule, no other Person is infringing, misappropriating or making
any unlawful or unauthorized use of, and no Proprietary Asset owned or used by
any other Person infringes or conflicts with, any material Parent Proprietary
Asset.
(c) To the best of the knowledge of Parent, the Parent Proprietary Assets,
together with any Proprietary Assets currently being licensed to Parent by third
parties, constitute all the Proprietary Assets necessary to enable the Parent to
conduct its business in the manner in which such business is being conducted.
4.7 Contracts. Parent (i) has not violated or breached, or committed any
default under, any material Contract to which Parent is a party, except for
violations, breaches and defaults that have not had and would not reasonably be
expected to have a Material Adverse Effect on Parent; and, to the best of the
knowledge of Parent, no other Person has violated or breached, or committed any
default under, any material Contract to which Parent is a party, except for
violations, breaches and defaults that have not had and would not reasonably be
expected to have a Material Adverse Effect on Parent; (ii) to the best of the
knowledge of Parent, no event has occurred, and no circumstance or condition
exists, that (with or without notice or lapse of time) will or would reasonably
be expected to, (A) result in a violation or breach of any of the provisions of
any material Contract to which Parent is a party, (B) give any Person the right
to declare a default or exercise any remedy under any material Contract to which
Parent is a party, (C) give any Person the right to receive or require a rebate,
chargeback, penalty or change in delivery schedule under any material Contract
to which Parent is a party, (D) give any Person the right to accelerate the
maturity or performance of any material Contract to which Parent is a party, or
give any Person the right to cancel, terminate or modify any material Contract,
except in each such case for defaults, acceleration rights, termination rights
and other rights that have not had and would not reasonably be expected to have
a Material Adverse Effect on Parent; and (iii) since December 31, 2000, Parent
has not received any notice or other communication regarding any actual or
possible violation or breach of, or default under, any material Contract, except
in each such case for defaults, acceleration rights, termination rights and
other rights that have not had and would not reasonably be expected to have a
Material Adverse Effect on Parent.
4.8 Liabilities. As of the date of this Agreement, Parent has no accrued,
contingent or other liabilities of any nature, either matured or unmatured,
except for: (a) liabilities identified as such in the Parent Unaudited Interim
Balance Sheet; (b) liabilities that have been incurred by Parent since September
30, 2001 in the ordinary course of business and consistent with past practices
that, individually or in the aggregate, are not material in nature; and (c)
liabilities incurred under this Agreement and the other agreements contemplated
hereby.
4.9 Compliance with Legal Requirements. Parent is in compliance in all
material respects with all applicable Legal Requirements except where the
failure to comply with such Legal Requirements, individu-
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ally or in the aggregate, has not had and could not reasonably be expected to
have a Material Adverse Effect on Parent. Since December 31, 2000, Parent has
not received any notice or other communication from any Governmental Body
regarding any actual or possible violation of, or failure to comply with, any
Legal Requirement, except where said violation or noncompliance could not
reasonably be expected to have a Material Adverse Effect on Parent.
4.10 Certain Business Practices. Neither Parent nor any director, officer,
agent or employee of Parent has (i) used any funds for unlawful contributions,
gifts, entertainment or other unlawful expenses relating to political activity,
(ii) made any unlawful payment to foreign or domestic government officials or
employees or to foreign or domestic political parties or campaigns or violated
any provision of the Foreign Corrupt Practices Act of 1977, as amended, or (iii)
made any other unlawful payment.
4.11 Governmental Authorizations. Parent holds all Governmental
Authorizations necessary to enable Parent to conduct its business in the manner
in which such business is currently being conducted. All such Governmental
Authorizations are valid and in full force and effect. Parent is in substantial
compliance with the terms and requirements of such Governmental Authorizations,
except where the failure to be in compliance with the terms and requirements of
such Governmental Authorizations have not had and would not reasonably be
expected to have a Material Adverse Effect on Parent. Since December 31, 2000,
Parent has not received any notice or other communication from any Governmental
Body regarding (a) any actual or possible violation of or failure to comply with
any term or requirement of any material Governmental Authorization, or (b) any
actual or possible revocation, withdrawal, suspension, cancellation, termination
or modification of any material Governmental Authorization.
4.12 Tax Matters.
(a) Each of the Tax Returns required to be filed by or on behalf of Parent
with any Governmental Body with respect to any taxable period ending on or
before the Closing Date (the "PARENT RETURNS") (i) has been or will be filed on
or before the applicable due date (including any extensions of such due date),
and (ii) has been, or will be when filed, prepared in all material respects in
compliance with all applicable Legal Requirements. All amounts shown on Parent
Returns to be due on or before the Closing Date have been or will be paid on or
before the Closing Date. (b) The Parent Unaudited Interim Balance Sheet fully
accrues all actual and contingent liabilities for Taxes through the date thereof
in accordance with generally accepted accounting principles. The Parent SEC
Documents fully accrue all actual and contingent liabilities for Taxes through
the respective dates thereof.
(c) Neither Parent nor any of its affiliates has taken, failed to take or
agreed to take any action or knows of any fact, circumstance, plan or intention
that is or would be reasonably likely to prevent the Transaction from qualifying
as a "reorganization" within the meaning of Section 368(a) of the Code.
4.13 Environmental Matters. Parent (i) is in compliance in all material
respects with all applicable Environmental Laws, and (ii) possesses all permits
and other Governmental Authorizations required under applicable Environmental
Laws, and compliance with the terms and conditions thereof. Parent has not
received any notice or other communication (in writing or otherwise), whether
from a Governmental Body, citizens group, employee or otherwise, that alleges
that Parent is not in compliance with any Environmental Law, and, to the best of
the knowledge of Parent, there are no circumstances that may prevent or
interfere with the compliance by Parent with any Environmental Law in the
future. To the best of the knowledge of Parent, (a) all property that is leased
to, controlled by or used by Parent, and all surface water, groundwater and soil
associated with or adjacent to such property, is free of any material
environmental contamination of any nature, (b) none of the property leased to,
controlled by or used by Parent contains any underground storage tanks,
asbestos, equipment using PCBs, underground injection wells, and (c) none of the
property leased to, controlled by or used by Parent contains any septic tanks in
which process wastewater or any Materials of Environmental Concern have been
disposed. Parent has never sent or transported, or arranged to send or
transport, any Materials of Environmental Concern to a site that, pursuant to
any applicable Environmental Law (i) has been placed on the "National Priorities
List" of hazardous waste sites or any similar state list, (ii) is otherwise
designated or identified as a potential site for remediation, cleanup, closure
or other environmental remedial activity, or (iii) is subject to a Legal
Requirement to take "removal" or
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"remedial" action as detailed in any applicable Environmental Law or to make
payment for the cost of cleaning up the site.
4.14 Transactions with Affiliates. Except as set forth in the Parent SEC
Documents filed prior to the date of this Agreement, between December 31, 2000
and the date of this Agreement, no event has occurred that would be required to
be reported by Parent pursuant to Item 404 of Regulation S-K promulgated by the
SEC.
4.15 Legal Proceedings. As of the date of this Agreement, there is no
pending Legal Proceeding, and (to the best of the knowledge of Parent) no Person
has threatened to commence any Legal Proceeding that challenges, or that may
have the effect of preventing, delaying, making illegal or otherwise interfering
with, the Offer, the Merger or any of the other transactions contemplated by
this Agreement. To the best of the knowledge of Parent, as of the date of this
Agreement, no event has occurred, and no claim, dispute or other condition or
circumstance exists, that could reasonably be expected to, give rise to or serve
as a basis for the commencement of any such Legal Proceeding.
4.16 Authority; Binding Nature of Agreement. Parent and Merger Sub have
the requisite corporate power and authority to enter into and to perform their
obligations under this Agreement. The Boards of Directors of Parent and Merger
Sub (at a meeting duly called and held) has unanimously authorized and approved
the execution, delivery and performance of this Agreement and the transactions
contemplated hereby, including the Offer and the Merger, by Parent and Merger
Sub. Parent is not and has not been at any time during the past three years an
"interested stockholder" of the Company as defined by Section 203 of the DGCL.
This Agreement constitutes the legal, valid and binding obligation of Parent and
Merger Sub, enforceable against them in accordance with its terms, subject to
(i) laws of general application relating to bankruptcy, insolvency and the
relief of debtors, and (ii) rules of law governing specific performance,
injunctive relief and other equitable remedies.
4.17 Non-Contravention; Consents. Neither the execution and delivery of
this Agreement by Parent and Merger Sub nor the consummation by Merger Sub of
the Offer or the Merger or any of the other transactions contemplated by this
Agreement will (a) contravene, conflict with or result in any breach of any
provision of the certificate of incorporation or bylaws of Parent or the
certificate of incorporation or bylaws of Merger Sub or of any resolution
adopted by the stockholders, the Board of Directors or any committee of the
Board of Directors of Parent or Merger Sub; (b) contravene, conflict with or
result in a violation of, or give any Governmental Body or other Person the
right to challenge the Offer or the Merger or any of the other transactions
contemplated by this Agreement or to exercise any remedy or obtain any relief
under, any Legal Requirement or any Order to which Parent or Merger Sub, or any
of the assets owned or used by Parent or Merger Sub, is subject; (c) contravene,
conflict with or result in a violation or breach of, or result in a default
under, any provision of any material Contract to which Parent or Merger Sub is a
party, or give any Person the right to declare a default or exercise any remedy
under any such Contract to which Parent or Merger Sub is a party; or (d) result
in a violation by Parent or Merger Sub of any Order to which Parent or Merger
Sub is subject. Except as may be required by the Securities Act, the Exchange
Act, state securities or "blue sky" laws, the DGCL, the HSR Act, any foreign
antitrust law or regulation and the NASD Bylaws, neither Parent nor Merger Sub
is and will not be required to make any filing with or give any notice to, or to
obtain any Consent from, any Person in connection with the execution, delivery
or performance of this Agreement by Parent or Merger Sub or the consummation by
Merger Sub of the Offer or the Merger.
4.18 Interim Operations of Merger Sub. Merger Sub was formed solely for
the purpose of engaging in the transactions contemplated by this Agreement, has
engaged in no other business activities and has conducted its operations only as
contemplated by this Agreement.
4.19 Parent Stockholder Approval. This Agreement and the transactions
contemplated hereby, including the issuance of shares of Parent Common Stock
pursuant to the Offer and the Merger, do not require the approval of the holders
of any class of shares of capital stock of Parent.
4.20 Full Disclosure. This Agreement (including the Parent Disclosure
Schedule) does not (i) contain any representation, warranty or information that
is false or misleading with respect to any material fact, or
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(ii) omit to state any material fact necessary in order to make the
representations, warranties and information contained and to be contained herein
and therein (in the light of the circumstances under which such representations,
warranties and information were or will be made or provided) not false or
misleading.
4.21 Valid Issuance. The Parent Common Stock to be issued in connection
with the Offer and the Merger has been duly authorized by all necessary
corporate action, and when issued in accordance with this Agreement, will be
validly issued, fully paid and nonassessable and not subject to preemptive
rights, and will be freely tradable. Without limiting the generality of the
foregoing and subject to the provisions of Rule 145 under the Securities Act,
none of the shares of Parent Common Stock to be issued in connection with the
Offer and the Merger will constitute "restricted securities" within the meaning
of Rule 144 under the Securities Act.
5. CERTAIN COVENANTS OF THE COMPANY AND PARENT.
5.1 Access and Investigation.
(a) During the period from the date of this Agreement through the
Effective Time (the "PRE-CLOSING PERIOD"), the Company shall, and shall cause
the Representatives of the Company to: (i) provide Parent and Parent's
Representatives with reasonable access to the Company's Representatives,
personnel and assets and to all existing books, records, Tax Returns, work
papers and other documents and information relating to the Company; and (ii)
provide Parent and Parent's Representatives with such copies of the existing
books, records, Tax Returns, work papers and other documents and information
relating to the Company, and with such additional financial, operating and other
data and information regarding the Company, as Parent may reasonably request
provided, however, that (i) Parent shall not contact, and Parent shall ensure
that none of Parents' Representatives contacts, any employee of the Company or
any of its subsidiaries without the prior authorization of the Company's Chief
Executive Officer or Chief Financial Officer and (ii) Parent will hold, and will
cause its Representatives and affiliates to hold, any and all information
received from the other party, directly or indirectly, in confidence, in
accordance with the respective Confidentiality Agreements dated as of September
17, 2001.
(b) During the Pre-Closing Period, Parent shall, and shall cause the
Representatives of Parent to: (i) provide the Company and the Company's
Representatives with reasonable access to Parent's Representatives, personnel
and assets and to all existing books, records, Tax Returns, work papers and
other documents and information relating to Parent; and (ii) provide the Company
and the Company's Representatives with such copies of the existing books,
records, Tax Returns, work papers and other documents and information relating
to Parent, and with such additional financial, operating and other data and
information regarding Parent, as the Company may reasonably request provided,
however, that (i) the Company shall not contact, and the Company shall ensure
that none of Company's Representatives contacts, any employee of Parent or any
of its subsidiaries without the prior authorization of Parent's Chief Executive
Officer, Chief Operating Officer or Chief Financial Officer, (ii) the Company
shall ensure that none of its Representatives interferes with or otherwise
disrupts the business or operations of Parent while exercising the rights
provided under this Section 5.1(b) and (iii) the Company will hold, and will
cause its Representatives and affiliates to hold, any and all information
received from the other party, directly or indirectly, in confidence, in
accordance with the respective Confidentiality Agreements dated as of September
17, 2001.
5.2 Operation of the Company's Business.
(a) During the Pre-Closing Period: (i) the Company shall conduct its
business and operations (A) in the ordinary course and in accordance with
current practices and (B) in compliance with all applicable Legal Requirements
and the requirements of all Company Contracts that constitute material
Contracts; (ii) the Company shall use all reasonable efforts to ensure that it
preserves intact its current business organization, keeps available the services
of its current officers and employees and maintains its relations and goodwill
with all suppliers, customers, landlords, creditors, licensors, licensees,
employees and other Persons having business relationships with the Company;
(iii) the Company shall keep in full force and effect (with the same scope and
limits of coverage) all insurance policies in effect as of the date of this
Agreement covering all material assets of the Company; (iv) the Company shall
cause to be provided all notices, assurances and support
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required by any Company Contract relating to any Proprietary Asset in order to
ensure that no condition under such Company Contract occurs that could result
in, or could increase the likelihood of, (A) any transfer or disclosure by the
Company of any Company Source Code, or (B) a release from any escrow of any
Company Source Code that has been deposited or is required to be deposited in
escrow under the terms of such Company Contract; (v) the Company shall promptly
notify Parent of (A) any notice or other communication from any Person alleging
that the Consent of such Person is or may be required in connection with any of
the transactions contemplated by this Agreement, and (B) any Legal Proceeding
commenced or, to the best of its knowledge threatened against, relating to or
involving or otherwise affecting the Company that relates to the consummation of
the transactions contemplated by this Agreement; and (vi) the Company shall (to
the extent requested by Parent) cause its officers to report regularly to Parent
concerning the status of the Company's business.
(b) Except as required by this Agreement, during the Pre-Closing Period,
the Company shall not (without the prior written consent of Parent):
(i) declare, accrue, set aside or pay any dividend or make any other
distribution in respect of any shares of capital stock, or repurchase,
redeem or otherwise reacquire any shares of capital stock or other
securities;
(ii) sell, issue, grant or authorize the issuance or grant of (A) any
capital stock or other security, (B) any option, call, warrant or right to
acquire any capital stock or other security, or (C) any instrument
convertible into or exchangeable for any capital stock or other security
(except that the Company may issue Company Common Stock upon the valid
exercise of Company Options and Company Warrants outstanding as of the date
of this Agreement);
(iii) amend or waive any of its rights under, or accelerate the
vesting under, any provision of any of the Company's stock option plans,
any provision of any agreement evidencing any outstanding stock option or
any restricted stock purchase agreement, or otherwise modify any of the
terms of any outstanding option, warrant or other security or any related
Contract;
(iv) amend or permit the adoption of any amendment to its certificate
of incorporation or bylaws or other charter or organizational documents, or
effect or become a party to any merger, consolidation, share exchange,
business combination, amalgamation, recapitalization, reclassification of
shares, stock split, reverse stock split, division or subdivision of
shares, consolidation of shares or similar transaction;
(v) change the number of directors on the Company's Board of
Directors;
(vi) form any Subsidiary or acquire any equity interest or other
interest in any other Entity;
(vii) make any capital expenditure (except that the Company may make
capital expenditures that, when added to all other capital expenditures
made during the Pre-Closing Period, do not exceed $5,000 in the aggregate);
(viii) enter into or become bound by, or permit any of the assets
owned or used by it to become bound by, any material Contract, or amend or
terminate, or waive or exercise any material right or remedy under, any
material Contract;
(ix) acquire, lease or license any right or other asset from any other
Person or sell or otherwise dispose of, or lease or license, any right or
other asset to any other Person (except in each case for immaterial assets
acquired, leased, licensed or disposed of by the Company in the ordinary
course of business and consistent with past practices), or waive or
relinquish any material right;
(x) lend money to any Person, or incur or guarantee any indebtedness;
(xi) establish, adopt or amend any employee benefit plan, pay any
bonus or make any profit-sharing or similar payment to, or increase the
amount of the wages, salary, commissions, fringe benefits or other
compensation or remuneration payable to, any of its directors, officers or
employees (except that the Company (A) may make routine, reasonable salary
increases in connection with the Company's customary employee review
process, and (B) may pay customary bonus payments and profit sharing
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payments consistent with past practices and otherwise payable in accordance
with existing bonus and profit sharing plans referred to in Part 2.14(a) of
the Company Disclosure Schedule);
(xii) hire any new employee, promote any employee, engage any
consultant or independent contractor for a period exceeding 30 days, or
fire any employee except in the ordinary course of business;
(xiii) change any of its pricing policies, product return policies,
product maintenance polices, service policies, product modification or
upgrade policies, personnel policies or other business policies, or any of
its methods of accounting or accounting practices in any respect;
(xiv) make or change any Tax election;
(xv) file any Tax Return without providing a copy of such Tax Return
to Parent for comment at least five business days before the filing date;
(xvi) commence or settle any Legal Proceeding;
(xvii) enter into any material transaction or take any other material
action outside the ordinary course of business or inconsistent with past
practices; or
(xviii) take, or permit the taking of any action, which could
reasonably be expected to cause the vesting of any Company Options to be
accelerated in accordance with the terms of any of the Company Stock Option
Plans;
(xix) take, agree to take, or omit to take any action which would (A)
make any of the representations and warranties of the Company contained in
this Agreement untrue or incorrect, (B) prevent the Company from performing
or cause the Company not to perform its covenants hereunder, or (C) cause
any of the conditions set forth in Section 7 or Annex I not to be able to
be satisfied prior to the Termination Date;
(xx) enter into any cash settlement of any litigation against the
Company and/or its directors relating to the transactions contemplated by
this Agreement and the Stockholder Tender Agreements absent the prior
written consent of Parent; or
(xxi) agree or commit to take any of the actions described in clauses
(i) through (xx) of this Section 5.2(b).
(c) During the Pre-Closing Period, the Company shall promptly notify Parent
in writing of: (i) the discovery by the Company of any event, condition, fact or
circumstance that occurred or existed on or prior to the date of this Agreement
and that caused or constitutes a material inaccuracy in any representation or
warranty made by the Company in this Agreement; (ii) any event, condition, fact
or circumstance that occurs, arises or exists after the date of this Agreement
and that would cause or constitute a material inaccuracy in any representation
or warranty made by the Company in this Agreement if (A) such representation or
warranty had been made as of the time of the occurrence, existence or discovery
of such event, condition, fact or circumstance, or (B) such event, condition,
fact or circumstance had occurred, arisen or existed on or prior to the date of
this Agreement; (iii) any material breach of any covenant or obligation of the
Company; and (iv) any event, condition, fact or circumstance that would give
rise to a breach described in clause (iii) of Section 5.2(b) or make the timely
satisfaction of any of the conditions set forth in Section 7 or Annex I
impossible or unlikely or that has had or could reasonably be expected to have a
Material Adverse Effect on the Company. Without limiting the generality of and
in addition to the foregoing, the Company shall promptly advise Parent in
writing of any Legal Proceeding or material claim threatened, commenced or
asserted against or with respect to the Company, and any Legal Proceeding or
claim, demand, notice of action or other written assertion of any claim related
to employment matters or the breach by Company of any Company Contract with a
customer of Company. No notification given to Parent pursuant to this Section
5.2 shall limit or otherwise affect any of the representations, warranties,
covenants or obligations of the Company contained in this Agreement.
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5.3 Operation of Parent's Business.
(a) During the Pre-Closing Period: (i) Parent shall conduct its business
and operations (A) in the ordinary course and in accordance with current
practices and (B) in compliance with all applicable Legal Requirements and the
requirements of all Parent Contracts that constitute material Contracts; (ii)
Parent shall use all reasonable efforts to ensure that it preserves intact its
current business organization, keeps available the services of its current
officers and employees and maintains its relations and goodwill with all
suppliers, customers, landlords, creditors, licensors, licensees, employees and
other Persons having business relationships with Parent; and (iii) Parent shall
promptly notify the Company of (A) any notice or other communication from any
Person alleging that the Consent of such Person is or may be required in
connection with any of the transactions contemplated by this Agreement, and (B)
any Legal Proceeding commenced or, to the best of its knowledge threatened
against, relating to or involving or otherwise affecting Parent that relates to
the consummation of the transactions contemplated by this Agreement.
(b) During the Pre-Closing Period, Parent shall not (without the prior
written consent of the Company):
(i) declare, accrue, set aside or pay any dividend or make any other
distribution in respect of any shares of capital stock, or repurchase,
redeem or otherwise reacquire any shares of capital stock or other
securities;
(ii) amend or permit the adoption of any amendment to its certificate
of incorporation or bylaws or other charter or organizational documents, or
effect or become a party to any merger, consolidation, share exchange,
business combination, amalgamation, recapitalization, reclassification of
shares, stock split, reverse stock split, division or subdivision of
shares, consolidation of shares or similar transaction; or
(iii) agree or commit to take any of the actions described in clauses
(i) through (ii) of this Section 5.3(b).
(c) During the Pre-Closing Period, Parent shall promptly notify the Company
in writing of: (i) the discovery by Parent of any event, condition, fact or
circumstance that occurred or existed on or prior to the date of this Agreement
and that caused or constitutes a material inaccuracy in any representation or
warranty made by Parent in this Agreement; (ii) any event, condition, fact or
circumstance that occurs, arises or exists after the date of this Agreement and
that would cause or constitute a material inaccuracy in any representation or
warranty made by Parent in this Agreement if (A) such representation or warranty
had been made as of the time of the occurrence, existence or discovery of such
event, condition, fact or circumstance, or (B) such event, condition, fact or
circumstance had occurred, arisen or existed on or prior to the date of this
Agreement; (iii) any material breach of any covenant or obligation of Parent;
and (iv) any event, condition, fact or circumstance that would make the timely
satisfaction of any of the conditions set forth in Section 7 or Annex I
impossible or unlikely or that has had or could reasonably be expected to have a
Material Adverse Effect on Parent. Without limiting the generality of the
foregoing, Parent shall promptly advise the Company in writing of any Legal
Proceeding or material claim threatened, commenced or asserted against or with
respect to Parent. No notification given to the Company pursuant to this Section
5.3 shall limit or otherwise affect any of the representations, warranties,
covenants or obligations of Parent contained in this Agreement.
5.4 No Solicitation.
(a) The Company shall not directly or indirectly (i) solicit, initiate, or
knowingly take any action to encourage, induce or facilitate the making,
submission or announcement of any Acquisition Proposal (including by amending,
or granting any waiver under, the Rights Agreement), (ii) knowingly furnish any
information to any Person in connection with or in response to an Acquisition
Proposal or an inquiry or indication of interest that could lead to an
Acquisition Proposal, (iii) engage in discussions or negotiations with any
Person with respect to any Acquisition Proposal, (iv) approve, endorse or
recommend any Acquisition Proposal or (v) enter into any letter of intent or
similar document or any Contract contemplating or otherwise relating to any
Acquisition Transaction; provided, however, that this Section 5.4(a) shall not
prohibit (A) the Company directly or indirectly from furnishing nonpublic
information to, or entering into discussions or negotiations with, any Person in
response to an Acquisition Proposal that is submitted to the Company by such
Person (and not withdrawn) if (1) neither the Company nor any Representative of
the
A-24
Company shall have breached or taken any action inconsistent with any of the
provisions set forth in this Section 5.4, (2) the Board of Directors of the
Company concludes in good faith, after consultation with its outside legal
counsel, that such Acquisition Proposal is reasonably likely to result in a
Company Superior Offer and that such action is required for the Board of
Directors of the Company to comply with its fiduciary duties to the Company's
stockholders under applicable law, (3) at least two business days prior to
furnishing any such nonpublic information to, or entering into discussions with,
such Person, the Company gives Parent written notice of the identity of such
Person and of the Company's intention to furnish nonpublic information to, or
enter into discussions with, such Person, and the Company receives from such
Person an executed confidentiality agreement containing customary limitations on
the use and disclosure of all nonpublic written and oral information furnished
to such Person or any of such Person's Representatives by or on behalf of the
Company, and (4) at least two business days prior to furnishing any such
nonpublic information to such Person, the Company furnishes such nonpublic
information to Parent (to the extent such nonpublic information has not been
previously furnished by the Company to Parent); or (B) the Company from
complying with Rule 14e-2 or Rule 14d-9 promulgated under the Exchange Act with
regard to an Acquisition Proposal. Without limiting the generality of the
foregoing, the Company acknowledges and agrees that any violation of any of the
restrictions set forth in the preceding sentence by any Company Representative,
whether or not such Representative is purporting to act on behalf of the
Company, shall be deemed to constitute a breach of this Section 5.4(a) by the
Company. Notwithstanding anything to the contrary contained in this Section
5.4(a) or elsewhere in this Agreement, at any time after the date hereof, the
Company may file with the SEC a report on Form 8-K (or such other forms as are
required) with respect to this Agreement and may file a copy of this Agreement
and any related agreements as an exhibit to such report.
(b) The Company shall promptly (and in no event later than 24 hours after
receipt of any Acquisition Proposal, any inquiry or indication of interest that
the Company reasonably believes could lead to an Acquisition Proposal or any
request for nonpublic information) advise Parent orally and in writing of any
Acquisition Proposal, any inquiry or indication of interest that the Company
reasonably believes could lead to an Acquisition Proposal or any request for
nonpublic information relating to the Company (including the identity of the
Person making or submitting such Acquisition Proposal, inquiry, indication of
interest or request, and the terms thereof) that is made or submitted by any
Person during the Pre-Closing Period. The Company shall keep Parent fully
informed with respect to the status of any such Acquisition Proposal, inquiry,
indication of interest or request and any modification or proposed modification
thereto.
(c) Notwithstanding anything in this Agreement to the contrary, the
Recommendations may be withheld, withdrawn or modified in a manner adverse to
Parent if: (i) (A) a bona fide written offer, not solicited in violation of this
Section 5.4 of the Agreement, is made to the Company by a third party for a
merger, consolidation, business combination, sale of substantial assets, sale of
shares of capital stock (including without limitation by way of a tender offer)
or similar transaction, and such offer is not withdrawn; (B) the Company's Board
of Directors determines in good faith (after consultation with a nationally
recognized independent banking firm) that such offer constitutes a Company
Superior Offer; (C) the Company's Board of Directors determines in good faith,
based upon the advice of the Company's outside legal counsel, that, in light of
such Company Superior Offer, the withdrawal or modification of the
Recommendations is required in order for the Company's Board of Directors to
comply with its fiduciary obligations to the Company's stockholders under
applicable Legal Requirements; (D) the Recommendations are not withdrawn or
modified in a manner adverse to Parent at any time prior to two business days
after Parent receives written notice from the Company confirming that the
Company's Board of Directors has determined that such offer is a Company
Superior Offer and providing to Parent a copy of any such Company Superior
Offer, and (E) neither the Company nor any of its Representatives shall have
violated any of the restrictions set forth in Section 5.4(a); or (ii) other than
with respect to an unsolicited, bona fide written offer made to the Company by a
third party as contemplated by Section 5.4(c)(i)(A) (in which case the Company
shall comply with the provisions of Section 5.4(c)(i)), the Board of Directors
of the Company determines in good faith, after consultation with its outside
legal counsel, that withholding, withdrawing or modifying the Recommendations is
required in order for the Board of Directors of the Company to comply with its
fiduciary obligations to the Company's stockholders under applicable Legal
Requirements.
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6. ADDITIONAL COVENANTS OF THE PARTIES.
6.1 Registration Statement and Proxy Statement for Stockholder
Approval. If approval of the Company's stockholders is required by applicable
Legal Requirements in order to consummate the Merger other than pursuant to
Section 253 of the DGCL, Parent and the Company shall, as soon as practicable
following the Offer Acceptance Time, prepare and the Company shall file with the
SEC a proxy statement of the Company in connection with the Merger complying
with applicable Legal Requirements (the "PROXY STATEMENT"), and Parent and the
Company shall prepare and Parent shall file with the SEC a post-effective
amendment to the Registration Statement (the "POST-EFFECTIVE AMENDMENT") for the
offer and sale of Parent Common Stock pursuant to the Merger and in which the
Proxy Statement will be included as a prospectus. Each of the Company and Parent
shall use commercially reasonable efforts to have the Post-Effective Amendment
declared effective under the Securities Act as promptly as practicable after
such filing. The Company will use reasonable efforts to cause the Proxy
Statement to be mailed to the Company's stockholders as promptly as practicable
after the Post-Effective Amendment is declared effective under the Securities
Act. Parent shall also take any action (other than qualifying to do business in
any jurisdiction in which it is not now so qualified or filing a general consent
to service of process) required to be taken under any applicable state
securities laws in connection with the issuance of Parent Common Stock in the
Merger and the Company shall furnish all information concerning the Company and
the holders of capital stock of the Company as may be reasonably requested in
connection with any such action and the preparation, filing and distribution of
the Proxy Statement. No filing of, or amendment or supplement to, or
correspondence to the SEC or its staff with respect to, the Post-Effective
Amendment will be made by Parent, or with respect to the Proxy Statement will be
made by the Company, without providing the other party a reasonable opportunity
to review and comment thereon. Parent will advise the Company, promptly after it
receives notice thereof, of the time when the Post-Effective Amendment has
become effective or any supplement or amendment has been filed, the issuance of
any stop order, the suspension of the qualification of the Parent Common Stock
issuable in connection with the Merger for offering or sale in any jurisdiction,
or any request by the SEC for amendment of the Post-Effective Amendment or
comments thereon and responses thereto or requests by the SEC for additional
information. The Company will advise Parent, promptly after it receives notice
thereof, of any request by the SEC for the amendment of the Proxy Statement or
comments thereon and responses thereto or requests by the SEC for additional
information. If at any time prior to the Effective Time any information relating
to the Company or Parent, or any of their respective affiliates, officers or
directors, should be discovered by the Company or Parent which should be set
forth in an amendment or supplement to either the Post-Effective Amendment or
the Proxy Statement, so that any of such documents would not include any
misstatement of a material fact or omit to state any material fact necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, the party which discovers such information shall promptly
notify the other parties hereto and an appropriate amendment or supplement
describing such information shall be promptly filed with the SEC and, to the
extent required by applicable Legal Requirements, disseminated to the
stockholders of the Company.
6.2 Company Stockholders' Meeting.
(a) If approval of the Company's stockholders is required by applicable
Legal Requirements in order to consummate the Merger other than pursuant to
Section 253 of the DGCL, after acceptance for exchange of Shares pursuant to the
Offer, Parent and the Company shall take all action necessary under all
applicable Legal Requirements to call, give notice of and hold a meeting of the
holders of Company Common Stock to vote on a proposal to adopt this Agreement
(the "COMPANY STOCKHOLDERS' MEETING"). The Company Stockholders' Meeting shall
be held as soon as reasonably practicable after the Post-Effective Amendment is
declared effective under the Securities Act. The Company shall use reasonable
efforts to take all actions necessary or advisable to solicit proxies in favor
of the Merger and shall ensure that all proxies solicited in connection with the
Company Stockholders' Meeting are solicited in compliance with all applicable
Legal Requirements. Once the Company Stockholders' Meeting has been called and
noticed, the Company shall not postpone or adjourn the Company Stockholders'
Meeting (other than for the absence of a quorum or pursuant to a Legal
Requirement) without the consent of Parent. The Proxy Statement shall include
the opinion of CIBC World Markets referred to in Section 3.21 as appropriate.
A-26
(b) Subject to Section 5.4(c), the Proxy Statement shall include the
Recommendations and the Recommendations shall not be withdrawn or modified in a
manner adverse to Parent, and no resolution by the Board of Directors of the
Company or any committee thereof to withdraw or modify the Recommendations in a
manner adverse to Parent shall be adopted or proposed.
(c) The Company's obligation to call, give notice of and hold the Company
Stockholders' Meeting in accordance with Section 6.2(a) shall not be limited or
otherwise affected by the commencement, disclosure, announcement or submission
of any Company Superior Offer or other Acquisition Proposal, or by any
withdrawal or modification of the Recommendations.
(d) The Company and Parent shall cooperate with one another (i) in
connection with the preparation of the Proxy Statement and the Post-Effective
Amendment, (ii) in determining whether any action by or in respect of, or filing
with, any Governmental Entity is required, or any actions, consents, approvals
or waivers are required to be obtained from parties to any material contracts,
in connection with the consummation of the transactions contemplated by this
Agreement and (iii) in seeking any such actions, consents, approvals or waivers
or making any such filings, furnishing information required in connection
therewith or with the Proxy Statement and the Post-Effective Amendment and
seeking timely to obtain any such actions, consents, approvals or waivers.
(e) Notwithstanding clauses (a) and (b) above, if Merger Sub shall acquire
by virtue of the Offer at least 90% of the outstanding shares of Company Common
Stock, the parties hereto shall take all necessary actions (including actions
referred to in this Section 6.2, as applicable) to cause the Merger to become
effective, as soon as practicable after the expiration of the Offer, as it may
be extended in accordance with the requirements of Section 1.1(a) hereof,
without a meeting of stockholders of the Company, in accordance with Section 253
of the DGCL.
(f) Parent shall, and shall cause each of its Subsidiaries and affiliates
to, vote all shares of the Company Common Stock held by any of them to approve
the Merger.
6.3 Regulatory Approvals. Each party shall use all reasonable efforts to
file, as soon as practicable after the date of this Agreement, all notices,
reports and other documents required to be filed by such party with any
Governmental Body with respect to the Merger and the other transactions
contemplated by this Agreement, and to submit promptly any additional
information requested by any such Governmental Body. Without limiting the
generality of the foregoing, the Company and Parent shall, promptly after the
date of this Agreement, prepare and file the notifications required under the
HSR Act and any applicable foreign antitrust laws or regulations in connection
with the Merger. The Company and Parent shall respond as promptly as practicable
to (i) any inquiries or requests received from the Federal Trade Commission or
the Department of Justice for additional information or documentation and (ii)
any inquiries or requests received from any state attorney general, foreign
antitrust authority or other Governmental Body in connection with antitrust or
related matters. Each of the Company and Parent shall (1) give the other party
prompt notice of the commencement or threat of commencement of any Legal
Proceeding by or before any Governmental Body with respect to the Merger or any
of the other transactions contemplated by this Agreement, (2) keep the other
party informed as to the status of any such Legal Proceeding or threat, and (3)
promptly inform the other party of any communication to or from the Federal
Trade Commission, the Department of Justice or any other Governmental Body
regarding the Merger. Except as may be prohibited by any Governmental Body or by
any Legal Requirement, (a) the Company and Parent will consult and cooperate
with one another, and will consider in good faith the views of one another, in
connection with any analysis, appearance, presentation, memorandum, brief,
argument, opinion or proposal made or submitted in connection with any Legal
Proceeding under or relating to the HSR Act or any other foreign, federal or
state antitrust or fair trade law, and (b) in connection with any such Legal
Proceeding, each of the Company and Parent will permit authorized
Representatives of the other party to be present at each meeting or conference
relating to any such Legal Proceeding and to have access to and be consulted in
connection with any document, opinion or proposal made or submitted to any
Governmental Body in connection with any such Legal Proceeding. Notwithstanding
anything to the contrary in this Section 6.3, neither Parent nor the Company
shall be
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required to take any action that could reasonably be expected to substantially
impair the overall benefits expected, as of the date hereof, to be realized from
the consummation of the Merger.
6.4 Assumption of Company Warrants.
(a) At the Offer Acceptance Time, to the extent provided for by their
terms, each Company Warrant then outstanding shall be converted into and become
rights with respect to Parent Common Stock, and Parent shall assume, to the
extent provided for by their terms, each such Company Warrant. From and after
the Offer Acceptance Time, (i) each Company Warrant assumed by Parent may be
exercised solely for shares of Parent Common Stock, (ii) the number of shares of
Parent Common Stock subject to each such Company Warrant shall be equal to the
number of shares of Company Common Stock subject to such Company Warrant
immediately prior to the Offer Acceptance Time multiplied by the Exchange Ratio,
rounding down to the nearest whole share, (iii) the per share exercise price
under each such Company Warrant shall be adjusted by dividing the per share
exercise price under such Company Warrant by the Exchange Ratio and rounding up
to the nearest cent, and (iv) any restriction on the exercise of any such
Company Warrant shall continue in full force and effect and the term,
exercisability, vesting schedule and other provisions of such Company Warrant
shall otherwise remain unchanged; provided, however, that each Company Warrant
assumed by Parent in accordance with this Section 6.4(a) shall, in accordance
with its terms, be subject to further adjustment as appropriate to reflect any
stock split, stock dividend, reverse stock split, reclassification,
recapitalization or other similar transaction effected subsequent to the Offer
Acceptance Time. Parent shall comply with the terms of all such Company
Warrants.
(b) Prior to the Offer Acceptance Time, the Company shall take all action
that may be reasonably necessary to effectuate the provisions of this Section
6.4 and to ensure that, from and after the Offer Acceptance Time, holders of
Company Warrants have no rights with respect thereto other than those
specifically provided in this Section 6.4.
(c) Parent shall take all corporate action necessary to reserve for
issuance a sufficient number of shares of Parent Common Stock for delivery under
the Company Warrants assumed in accordance with this Section 6.4.
6.5 No Assumption of Stock Options. Parent will not assume any Company
Options. Pursuant to the terms of the stock option plans under which Company
Options were issued, all such Company Options that are not exercised at the
Offer Acceptance Time will terminate at the Offer Acceptance Time. Any
repurchase option, risk of forfeiture or other similar condition under which the
Company has rights with regard to any exercised stock options shall also
terminate at the Offer Acceptance Time.
6.6 Employee Benefits
(a) From and for a period of one year following the date of Closing, Parent
shall, at its election, either (i) continue (or cause Parent's Subsidiaries to
continue) any Employee Plan of the Company as in effect on the date hereof (the
"COMPANY PLANS"), or (ii) arrange for each participant in any Company Plans who
become or continue as employees of Parent or any of its Subsidiaries ("COMPANY
PARTICIPANTS") to be eligible to participate in any similar plans or programs of
Parent on terms no less favorable than those offered to similarly situated newly
hired employees of Parent. On and after the date of Closing, employees of the
Company who become and remain employees of Parent or any of its Subsidiaries
shall be treated no less favorably than similarly situated newly hired employees
of Parent or any of its Subsidiaries with respect to compensation, employee
benefits and terms and conditions of employment. Notwithstanding anything
provided for otherwise in this Section 6.6(a), the medical insurance plan of
Company shall be continued for a period of time ending no earlier than 3 months
from the Offer Acceptance Time.
(b) No later than one year from the date of Closing, Parent shall, or shall
cause Parent's Subsidiaries to, arrange for all Company Participants not then
participating to become eligible to be participants in all employee benefit
plans of Parent on terms no less favorable than those offered to similarly
situated newly hired employees of Parent.
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(c) In the event that, within one year following the Closing, the Surviving
Corporation terminates the employment of any employee currently employed at the
Company on the Offer Acceptance Time, other than Teresa Ayers, Thomas Marr, Dan
Hudspeth, Michael Cohn and Kenneth Rubin, Parent shall cause the Surviving
Corporation to provide severance benefits to such employee equivalent to those
provided to the Company employees terminated in the Company's reduction in force
effected approximately October 4, 2001.
6.7 Indemnification of Officers and Directors.
(a) All rights to exculpation, indemnification and advancement of expenses
existing in favor of those Persons who are or were directors or officers of the
Company as of or prior to the Effective Time (the "INDEMNIFIED PERSONS") for
their acts and omissions occurring prior to the Effective Time, as provided in
the Company's Restated Certificate of Incorporation or Bylaws (as in effect as
of the date of this Agreement) and as provided in the indemnity agreements
between the Company and said Indemnified Persons (as in effect as of the date of
this Agreement) shall continue in effect after the consummation of the Offer and
survive the Merger and shall be observed by the Surviving Corporation to the
fullest extent permitted by Delaware law for a period of five years from the
Effective Time. The Certificate of Incorporation and Bylaws of the Surviving
Corporation shall contain the provisions with respect to indemnification and
exculpation from liability set forth in the Company's Restated Certificate of
Incorporation and Bylaws on the date of this Agreement, which provisions shall
not be amended, repealed or otherwise modified for a period of five years after
the Effective Time in any manner that would adversely affect the rights
thereunder of any Indemnified Party.
(b) Without limiting the provisions of Section 6.7(a), during the period
ending five years after the Effective Time, Parent will indemnify and hold
harmless each Indemnified Party against and from any costs or expenses
(including reasonable attorneys' fees), judgments, fines, losses, claims,
damages, liabilities and amounts paid in settlement in connection with any
claim, action, suit, proceeding or investigation, whether civil, criminal,
administrative or investigative, to the extent such claim, action, suit,
proceeding or investigation arises out of or pertains to (1) any action or
omission or alleged action or omission in his or her capacity as a director or
officer of the Company or any of its subsidiaries (regardless of whether such
action or omission, or alleged action or omission, occurred prior to, on or
after the Closing Date) or (2) any of the transactions contemplated by this
Agreement; provided, however, that if, at any time prior to the fifth
anniversary of the Effective Time, any Indemnified Party delivers to Parent a
written notice asserting a claim for indemnification under this Section 6.7(b),
then the claim asserted in such notice shall survive the fifth anniversary of
the Effective Time until such time as such claim is fully and finally resolved.
In the event of any such claim, action, suit, proceeding or investigation, (i)
Parent will have the right to control the defense thereof after the Effective
Time (it being understood that, by electing to control the defense thereof,
Parent will be deemed to have waived any right to object to the Indemnified
Parties' entitlement to indemnification hereunder with respect thereto), (ii)
any counsel retained by the Indemnified Parties with respect to the defense
thereof for any period after the Effective Time must be reasonably satisfactory
to Parent, and (iii) after the Effective Time, Parent will pay the reasonable
fees and expenses of such counsel, promptly after statements therefor are
received (provided that in the event that any Indemnified Party is not entitled
to indemnification hereunder, any amounts advanced on his or her behalf shall be
remitted to the Surviving Corporation). The Indemnified Parties as a group may
retain only one law firm (in addition to local counsel) to represent them with
respect to any single action unless counsel for any Indemnified Party determines
in good faith that, under applicable standards of professional conduct, a
conflict exists or is reasonably likely to arise on any material issue between
the positions of any two or more Indemnified Parties. Notwithstanding anything
to the contrary contained in this Section 6.7(b) or elsewhere in this Agreement,
Parent agrees that it will not settle or compromise or consent to the entry of
any judgment or otherwise seek termination with respect to any claim, action,
suit, proceeding or investigation for which indemnification may be sought under
this Agreement unless such settlement, compromise, consent or termination
includes an unconditional release of all Indemnified Parties from all liability
arising out of such claim, action, suit, proceeding or investigation.
(c) From the Effective Time until the fifth anniversary of the Effective
Time, the Surviving Corporation shall maintain in effect, for the benefit of the
Indemnified Persons with respect to their acts and omissions occurring prior to
the Effective Time, the existing policy of directors' and officers' liability
insurance maintained by the Company as of the date of this Agreement (the
"EXISTING POLICY"), to the extent directors'
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and officers' liability insurance coverage is commercially available; provided,
however, that (i) the Surviving Corporation may substitute for the Existing
Policy a policy or policies of equal or greater coverage, and (ii) the Surviving
Corporation shall not be required to pay annual premiums for the Existing Policy
(or for any substitute policies) in excess of 150% of the current premium. In
the event any future annual premiums for the Existing Policy (or any substitute
policies) exceeds 150% of the current premium, the Surviving Corporation shall
be entitled to reduce the amount of coverage of the Existing Policy (or any
substitute policies) to the amount of coverage that can be obtained for a
premium equal to 150% of the current premium.
(d) Parent and the Surviving Corporation jointly and severally agree to pay
all expenses, including attorneys' fees, that may be incurred by the Indemnified
Parties in enforcing the indemnity and other obligations provided for in this
Section 6.7.
(e) This Section 6.7 shall survive the consummation of the Merger and the
Effective Time, is intended to benefit and may be enforced by the Company,
Parent, the Surviving Corporation and the Indemnified Parties, and shall be
binding on all successors and assigns of Parent and the Surviving Corporation.
6.8 Additional Agreements. Parent and the Company shall use all reasonable
efforts to take, or cause to be taken, all actions necessary to consummate the
Offer and the Merger and make effective the other transactions contemplated by
this Agreement. Without limiting the generality of the foregoing, each party to
this Agreement (i) shall make all filings (if any) and give all notices (if any)
required to be made and given by such party in connection with the Offer and the
Merger and the other transactions contemplated by this Agreement, (ii) shall use
all reasonable efforts to obtain each Consent (if any) required to be obtained
(pursuant to any applicable Legal Requirement or Contract, or otherwise) by such
party in connection with the Offer and the Merger or any of the other
transactions contemplated by this Agreement, and (iii) shall use all reasonable
efforts to lift any restraint, injunction or other legal bar to the Offer and
the Merger, provided, however, that a party is not obligated to pursue an appeal
of any such restraint, injunction or other legal bar if it determines, upon the
advice of legal counsel, that it is more than probable that such an appeal would
not be successful. Each party shall promptly deliver to the other a copy of each
such filing made, each such notice given and each such Consent obtained by such
party during the Pre-Closing Period.
6.9 Disclosure. Parent and Merger Sub, on the one hand, and the Company,
on the other hand, will consult with each other before issuing, and to the
extent reasonably practicable, give each other the opportunity to review and
comment upon, any press release or other public statements with respect to the
transactions contemplated by this Agreement, including the Offer and the Merger,
and shall not issue any such press release or make any such public statement
prior to such consultation, except as may be required by applicable law, court
process or by obligations pursuant to any listing agreement with any national
securities exchange or national securities quotation system. The parties agree
that the initial press release to be issued with respect to the transactions
contemplated by this Agreement shall be in the form heretofore agreed to by the
parties.
6.10 Tax Matters.
(a) At or prior to the closing of the Offer and the filing of the
Registration Statement, the Company and Parent shall execute and deliver to HEWM
and to Cooley Godward LLP tax representation letters in customary form for
transactions similar to the Transaction (the "TAX REPRESENTATION LETTERS").
Parent, Merger Sub and the Company shall each confirm to HEWM and to Cooley
Godward LLP the accuracy and completeness, as of such dates as shall reasonably
be requested by HEWM and Cooley Godward LLP, of the Tax Representation Letters.
Parent and the Company shall use all reasonable efforts prior to the Effective
Time to cause the Transaction to qualify as a tax-free reorganization under
Section 368(a) of the Code. Following delivery or confirmation of the Tax
Representation Letters pursuant to the first sentence of this Section 6.10(a),
each of Parent and the Company shall use its reasonable efforts to cause HEWM
and Cooley Godward LLP, respectively, to deliver to it a tax opinion satisfying
the requirements of Item 601 of Regulation S-K promulgated under the Securities
Act. In rendering such opinions, each of such counsel shall be entitled to rely
on the Tax Representation Letters and to make customary assumptions, including
the assumption that the Merger will be effected pursuant to this Agreement and
relevant state law.
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(b) The Company will establish, in the ordinary course of business and
consistent with its past practices, reserves adequate for the payment of all
Taxes for the period from September 30, 2001 through the Offer Acceptance Time.
6.11 Resignation of Officers and Directors. The Company shall use all
reasonable efforts to obtain and deliver to Parent on or prior to the Closing
the resignation of each officer and director of the Company.
6.12 Listing. Parent shall use its best efforts to cause the shares of
Parent Common Stock being issued, and those required to be reserved for
issuance, in connection with the Offer and the Merger or upon exercise of
assumed Company Warrants to be approved for listing (subject to notice of
issuance) on the Nasdaq National Market prior to the Closing Date.
6.13 Takeover Laws; Advice of Changes.
(a) If any Takeover Law may become, or may purport to be, applicable to the
transactions contemplated in this Agreement, each of Parent and the Company and
the members of their respective Boards of Directors will grant such approvals
and take such actions as are necessary so that the transactions contemplated by
this Agreement may be consummated as promptly as practicable, and in any event
prior to the Termination Date, on the terms and conditions contemplated hereby
and thereby and otherwise act to eliminate the effect of any Takeover Law on any
of the transactions contemplated by this Agreement.
(b) Each of the Company and Parent will give prompt notice to the other
(and will subsequently keep the other informed on a current basis of any
developments related to such notice) upon its becoming aware of the occurrence
or existence of any fact, event or circumstance that (i) is reasonably likely to
result in any Material Adverse Effect with respect to it, (ii) would cause or
constitute a breach of any representations, warranties or covenants contained
herein or (iii) is reasonably likely to result in any of the conditions set
forth in Section 7 or in Annex I not being able to be satisfied prior to the
Termination Date.
6.14 Affiliates. Within ten days after the date of this Agreement, the
Company shall deliver to Parent a letter identifying all Persons who are, to the
Company's knowledge, affiliates of the Company for purposes of Rule 145 under
the Securities Act. Parent shall place the appropriate Rule 145 legend on the
stock certificates representing Parent Common Stock issued in the Transaction to
such affiliates. Parent shall use its reasonable efforts to remove such legends
promptly when such legends are no longer required by applicable Legal
Requirements.
6.15 Rights Agreement. Except as expressly required by this Agreement or
as determined by the Board of Directors of the Company in good faith after
consultation with legal counsel to be required in order to comply with its
fiduciary duties to the Company's stockholders under applicable law, the Company
shall not, without the prior written consent of Parent, amend the Rights
Agreement or take any other action with respect to, or make any determination
under, the Rights Agreement, including a redemption of the Rights or any action
to facilitate a Company Acquisition Proposal.
6.16 No Distributions or Dividends. Until the earlier of (i) the
Termination Date or (ii) one trading day after the Effective Time, Parent shall
not set a record date for any dividend or distribution of any assets to any of
its stockholders.
6.17 Market Stand-Off. The Company and Parent shall cause those Persons
set forth on Exhibit D to each enter into an agreement in the form attached as
Exhibit E that they will not sell or otherwise transfer or dispose of Parent
Common Stock for ninety days following the Offer Acceptance Time. In order to
enforce such agreements, Parent shall have the right to place restrictive
legends on the certificates representing the shares of such Persons and to
impose stop transfer instructions with respect to such shares until the end of
such period. Parent shall not waive this restriction without the consent of the
Company, such consent not to be unreasonably withheld.
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7. CONDITIONS TO THE MERGER.
7.1 Each Party's Obligations. The respective obligations of the Company,
Parent and Merger Sub to effect the Merger are subject to the satisfaction or,
to the extent permitted by Legal Requirements, the waiver by each party on or
before the Effective Time, of each of the following conditions:
(a) If required by the DGCL, this Agreement shall have been adopted
and approved by the stockholders of the Company;
(b) Merger Sub shall have accepted for exchange and exchanged all of
the shares of Company Common Stock tendered pursuant to the Offer;
(c) No provision of any applicable Legal Requirements and no Order
shall prohibit the consummation of the Merger or the other transactions
contemplated by this Agreement; and
(d) The Registration Statement and Post-Effective Amendment shall have
become effective under the Securities Act and shall not be the subject of
any stop order or proceedings seeking a stop order, and any material "blue
sky" and other state securities laws applicable to the registration and
qualification of the Parent Common Stock shall have been complied with.
8. TERMINATION.
8.1 Termination. This Agreement may be terminated prior to the Effective
Time whether before or after adoption of this Agreement by the Company's
stockholders:
(a) by mutual written consent of Parent and the Company;
(b) by either Parent or the Company if (i) the Offer shall not have
been consummated by March 1, 2002 (the "TERMINATION DATE") (unless the
failure to consummate the Offer is attributable to a failure on the part of
the party seeking to terminate this Agreement to perform any material
obligation required to be performed by such party at or prior to the
Termination Date); or (ii) the Offer shall have expired or been terminated
in accordance with the terms of this Agreement without Parent or Merger Sub
having accepted for exchange any Shares pursuant to the Offer (unless the
expiration or termination of the Offer is attributable to a failure on the
part of the party seeking to terminate this Agreement to perform any
material obligation required to be performed by such party at or prior to
the Effective Time);
(c) by either Parent or the Company if a court of competent
jurisdiction or other Governmental Body shall have issued a final and
nonappealable Order, or shall have taken any other action, having the
effect of permanently restraining, enjoining or otherwise prohibiting the
Offer or the Merger;
(d) by Parent, at any time prior to the Offer Acceptance Time, if a
Company Triggering Event shall have occurred;
(e) by Parent at any time prior to the Offer Acceptance Time, if (i)
any of the Company's representations and warranties contained in this
Agreement shall be inaccurate as of the date of this Agreement, or shall
have become inaccurate as of a date subsequent to the date of this
Agreement (as if made on such subsequent date), such that the condition set
forth in paragraph (d) of Annex I would not be satisfied, or (ii) any of
the Company's covenants contained in this Agreement shall have been
breached such that the condition set forth in paragraph (c) of Annex I
would not be satisfied; provided, however, that, in the case of (i) or (ii)
above, if an inaccuracy in the Company's representations and warranties or
a breach of a covenant by the Company is reasonably capable of being cured
by the Company prior to the Termination Date and the Company is continuing
to exercise its commercially reasonable efforts to cure such inaccuracy or
breach, then Parent may not terminate this Agreement under this Section
8.1(e) on account of such inaccuracy or breach until the 30th calendar day
from the date on which such inaccuracy or breach became known to Parent or
the Company;
(f) by the Company, prior to the Offer Acceptance Time, if (i) (A) any
of Parent's representations and warranties not qualified by any
"materiality" or "Material Adverse Effect" qualifiers contained in this
Agreement shall be inaccurate in any material respect, or (B) any of
Parent's representations and
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warranties qualified by any "materiality" or "Material Adverse Effect"
qualifiers contained in this Agreement shall be inaccurate in any respect,
in the case of each of (A) and (B) as of the date of this Agreement or as
of the expiration of the Offer (as may be extended pursuant to Section
1.1(a)), or (ii) any of Parent's covenants contained in this Agreement
shall not have been performed in all material respects; provided, however,
that, in the case of (i) or (ii) above, if an inaccuracy in Parent's
representations and warranties or a breach of a covenant by Parent is
reasonably capable of being cured by Parent prior to the Termination Date
and Parent is continuing to exercise its commercially reasonable efforts to
cure such inaccuracy or breach, then the Company may not terminate this
Agreement under this Section 8.1(f) on account of such inaccuracy or breach
until the 30th calendar day from the date on which such inaccuracy or
breach became known to Parent or the Company;
(g) at any time prior to the Offer Acceptance Time, by the Company,
prior to acceptance for payment of Shares in the Offer, to enter into a
letter or intent or similar document or any agreement, contract, or
commitment with respect to an Acquisition Proposal, provided that, (i) the
Company is not in breach of its obligations under this Section 8.1(g) and
under Section 5.4 hereof and continues to comply with all such obligations
in all respects, (ii) the Board of Directors of the Company has authorized,
subject to complying with the terms of this Agreement, the Company to enter
into a definitive written agreement for a transaction that constitutes a
Company Superior Offer, (iii) the Company notifies Parent in writing that
the Company has received a Company Superior Offer and intends to enter into
a definitive agreement with respect to such Company Superior Offer,
attaching the most current version of such agreement to such notice, (iv)
Parent does not make, within five (5) business days after receipt of the
Company's written notice of its intention to enter into a definitive
agreement for a Company Superior Offer, any offer the that Board of
Directors of Company in good faith determines, after consultation with a
financial advisor of nationally recognized standing and its outside legal
counsel, is at least as favorable to Company's stockholders as such Company
Superior Offer, (v) during such period the Company has fully cooperated
with Parent, including, without limitation, informing Parent of the terms
and conditions of such Company Superior Offer, and the identity of the
person making such Company Superior Offer, with the intent of enabling both
parties to agree to a modification of the terms and conditions of this
Agreement so that the transactions contemplated hereby may be effected,
(vi) immediately following such termination the Company enters into a
definitive agreement to effect the Company Superior Offer.
8.2 Effect of Termination. Any termination of this Agreement under Section
8.1 will be effective immediately upon (or in the case of termination pursuant
to Section 8.1(e) or 8.1(f), on the date specified therein) the delivery of
written notice thereof by the terminating party to the other parties hereto. In
the event of the termination of this Agreement as provided in Section 8.1, this
Agreement shall be of no further force or effect; provided, however, that (i)
this Section 8.2, Section 8.3 and Section 9 shall survive the termination of
this Agreement and shall remain in full force and effect, and (ii) nothing
herein shall relieve any party from liability for any intentional or willful
breach of this Agreement.
8.3 Expenses. Except as set forth in this Section 8.3, all fees and
expenses incurred in connection with this Agreement and the transactions
contemplated by this Agreement shall be paid by the party incurring such
expenses, whether or not the Merger is consummated; provided, however, that in
the event of a termination of this Agreement for any reason other than pursuant
to Section 8.1(f), within two business days after such termination, the Company
shall make a nonrefundable cash payment to Parent in the amount of $750,000 as a
liquidated amount for reimbursement of Parent's fees and expenses (including all
attorneys' fees, accountants' fees, financial advisory fees and filing fees)
that have been paid or that may become payable by parent in connection with the
preparation and negotiation of this Agreement and otherwise in connection the
Offer and the Merger.
9. MISCELLANEOUS PROVISIONS.
9.1 Amendment. Subject to Section 1.3(a), this Agreement may be amended
with the approval of the respective Boards of Directors of the Company and
Parent at any time (whether before or after adoption of this Agreement by the
Company's stockholders); provided, however, that after any such adoption of this
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Agreement by the Company's stockholders, no amendment shall be made which by law
or NASD regulation requires further approval of the stockholders of the Company
without the further approval of such stockholders. This Agreement may not be
amended except by an instrument in writing signed on behalf of each of the
parties hereto.
9.2 Waiver.
(a) No failure on the part of any party to exercise any power, right,
privilege or remedy under this Agreement, and no delay on the part of any party
in exercising any power, right, privilege or remedy under this Agreement, shall
operate as a waiver of such power, right, privilege or remedy; and no single or
partial exercise of any such power, right, privilege or remedy shall preclude
any other or further exercise thereof or of any other power, right, privilege or
remedy.
(b) Subject to Section 1.3(a), at any time prior to the Effective Time, any
party may to the extent legally allowed (a) extend the time for the performance
of any of the obligations or other acts of the other parties, (b) waive any
inaccuracies in the representations and warranties made to such party pursuant
to this Agreement or in any document delivered pursuant hereto or (c) waive
compliance with any of the agreements or conditions for the benefit of such
party contained herein; provided that no party shall be deemed to have waived
any claim arising out of this Agreement, or any power, right, privilege or
remedy under this Agreement, unless the waiver of such claim, power, right,
privilege or remedy is expressly set forth in a written instrument duly executed
and delivered on behalf of such party; and any such waiver shall not be
applicable or have any effect except in the specific instance in which it is
given.
9.3 No Survival of Representations and Warranties. None of the
representations and warranties contained in this Agreement or in any certificate
or instrument delivered pursuant to this Agreement (other than the Tax
Representation Letters) shall survive the Merger. This Section 9.3 shall not
limit any covenant or agreement of the parties which by its terms contemplates
performance after the Effective Time.
9.4 Entire Agreement; Counterparts. This Agreement and the other
agreements referred to herein constitute the entire agreement and supersede all
other prior agreements and understandings, both written and oral, among or
between any of the parties with respect to the subject matter hereof and
thereof; provided, however, that those certain letter agreements dated September
17, 2001 between the Company and Parent (relating to the protection of
confidential information) shall not be superceded and shall remain in full force
and effect. This Agreement may be executed in several counterparts, each of
which shall be deemed an original and all of which shall constitute one and the
same instrument.
9.5 Applicable Law; Enforcement. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
laws thereof. The parties agree that irreparable damage would occur in the event
that any of the provisions of this Agreement were not performed in accordance
with its specific terms or were otherwise breached. It is accordingly agreed
that the parties shall be entitled to an injunction or injunctions to prevent
breaches of this Agreement and to enforce specifically the terms and provisions
of this Agreement in any court of the United States located in the State of
Delaware or in any Delaware state court, this being in addition to any other
remedy to which they are entitled at law or in equity. In addition, each of the
parties hereto (a) consents to submit itself to the personal jurisdiction of any
court of the United States located in the State of Delaware or of any Delaware
state court in the event any dispute arises out of this Agreement or the
transactions contemplated by this Agreement, (b) agrees that it will not attempt
to deny or defeat such personal jurisdiction by motion or other request for
leave from any such court and (c) agrees that it will not bring any action
relating to this Agreement or the transactions contemplated by this Agreement in
any court other than a court of the United States located in the State of
Delaware or a Delaware state court.
9.6 Disclosure Schedule. The Company Disclosure Schedule shall be arranged
in separate parts corresponding to the numbered and lettered sections contained
in Section 3, and the information disclosed in any numbered or lettered part
shall be deemed to relate to and to qualify only the particular representation
or warranty set forth in the corresponding numbered or lettered section in
Section 3, and shall not be deemed to relate to or to qualify any other
representation or warranty. The Parent Disclosure Schedule shall be arranged
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in separate parts corresponding to the numbered and lettered sections contained
in Section 4, and the information disclosed in any numbered or lettered part
shall be deemed to relate to and to qualify only the particular representation
or warranty set forth in the corresponding numbered or lettered section in
Section 4, and shall not be deemed to relate to or to qualify any other
representation or warranty.
9.7 Attorneys' Fees. In any action at law or suit in equity to enforce
this Agreement or the rights of any of the parties hereunder, the prevailing
party in such action or suit shall be entitled to receive a reasonable sum for
its attorneys' fees and all other reasonable costs and expenses incurred in such
action or suit.
9.8 Assignability; Third-Party Beneficiaries. Neither this Agreement nor
any of the rights, interests or obligations hereunder shall be assigned, in
whole or in part, by operation of law or otherwise by any of the parties without
the prior written consent of the other parties, except that Merger Sub may
assign, in its sole discretion, any of or all its rights, interests and
obligations under this Agreement to Parent or to any direct or indirect wholly
owned subsidiary of Parent, but no such assignment shall relieve Merger Sub of
any of its obligations hereunder. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of, and be enforceable by,
the parties and their respective successors and assigns. Except as set forth in
Sections 2.5 through 2.7, Sections 6.4 through 6.7 and the third sentence of
Section 6.10(a) hereof, nothing in this Agreement, express or implied, is
intended to or shall confer upon any Person (other than the parties hereto) any
right, benefit or remedy of any nature whatsoever.
9.9 Notices. Any notice or other communication required or permitted to be
delivered to any party under this Agreement shall be in writing and shall be
deemed properly delivered, given and received (a) upon receipt when delivered by
hand, or (b) two business days after sent by registered mail or by courier or
express delivery service or by facsimile (receipt confirmed), provided that in
each case the notice or other communication is sent to the address or facsimile
telephone number set forth beneath the name of such party below (or to such
other address or facsimile telephone number as such party shall have specified
in a written notice given to the other parties hereto):
if to Parent or Merger Sub:
Exelixis, Inc.
170 Harbor Way
P.O. Box 511
South San Francisco, California 94083-5411
Facsimile: (650) 837-8205
Attn: General Counsel
with a copy to (which shall not constitute notice):
Heller Ehrman White & McAuliffe LLP
275 Middlefield Road
Menlo Park, California 94025
Facsimile: (650) 324-0638
Attn: Bruce W. Jenett
if to the Company:
Genomica Corporation
1715 38th Street
Boulder, Colorado 80301-2603
Facsimile: (720) 565-4501
Attn: Chief Executive Officer
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with a copy to (which shall not constitute notice):
Cooley Godward LLP
380 Interlocken Crescent, Suite 900
Broomfield, Colorado 80021-8023
Facsimile: (720) 566-4099
Attn: James C.T. Linfield
9.10 Severability. In the event that any provision of this Agreement, or
the application of any such provision to any Person or set of circumstances,
shall be determined to be invalid, unlawful, void or unenforceable to any
extent, the remainder of this Agreement, and the application of such provision
to Persons or circumstances other than those as to which it is determined to be
invalid, unlawful, void or unenforceable, shall not be impaired or otherwise
affected and shall continue to be valid and enforceable to the fullest extent
permitted by law. Upon such determination that any term other provision is
invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible to the fullest extent permitted by
applicable law in an acceptable manner to the end that the transactions
contemplated hereby are fulfilled to the extent possible.
9.11 Construction.
(a) For purposes of this Agreement, whenever the context requires: the
singular number shall include the plural, and vice versa; the masculine gender
shall include the feminine and neuter genders; the feminine gender shall include
the masculine and neuter genders; and the neuter gender shall include masculine
and feminine genders.
(b) The parties hereto agree that any rule of construction to the effect
that ambiguities are to be resolved against the drafting party shall not be
applied in the construction or interpretation of this Agreement.
(c) As used in this Agreement, the words "include" and "including", and
variations thereof, shall not be deemed to be terms of limitation, but rather
shall be deemed to be followed by the words "without limitation".
(d) Except as otherwise indicated, all references in this Agreement to
"Sections", "Exhibits" and "Schedules" are intended to refer to Sections of this
Agreement and Exhibits or Schedules to this Agreement.
(e) The bold-faced headings contained in this Agreement are for convenience
of reference only, shall not be deemed to be a part of this Agreement and shall
not be referred to in connection with the construction or interpretation of this
Agreement.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
as of the date first above written.
EXELIXIS, INC.
By: /s/ GEORGE SCANGOS
------------------------------------
Name: George Scangos
Title: President and Chief Executive
Officer
BLUEGREEN ACQUISITION SUB, INC.
By: /s/ GLEN Y. SATO
------------------------------------
Name: Glen Y. Sato
Title: Chief Financial Officer
GENOMICA CORPORATION
By: /s/ TERESA W. AYERS
------------------------------------
Name: Teresa W. Ayers
Title: Chief Executive Officer
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EXHIBITS
Exhibit A Certain Definitions
Exhibit B Certificate of Incorporation of Surviving Corporation
(intentionally omitted)
Exhibit C Form of Stockholder Tender Agreement (included as Annex B to
the Prospectus)
Exhibit D Persons to Whom Market Stand-Off Applies (intentionally
omitted)
Exhibit E Form of Lock-Up Agreement (included as Annex C to the
Prospectus)
Annex I Conditions to the Offer
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EXHIBIT A TO MERGER AGREEMENT
CERTAIN DEFINITIONS
For purposes of the Agreement (including this Exhibit A):
ACQUISITION PROPOSAL. "Acquisition Proposal" shall mean any offer or
proposal made by a third party (other than Parent, Merger Sub or any affiliate
of either such party) contemplating or otherwise relating to any Acquisition
Transaction.
ACQUISITION TRANSACTION. "Acquisition Transaction" shall mean any
transaction or series of transactions involving:
(a) any merger, consolidation, amalgamation, share exchange, business
combination, issuance of securities, acquisition of securities, tender
offer, exchange offer or other similar transaction (i) in which a Person or
"group" (as defined in the Exchange Act and the rules promulgated
thereunder) of Persons directly or indirectly acquires beneficial or record
ownership of securities representing more than 20% of the outstanding
securities of any class of voting securities of the Company, or (ii) in
which the Company issues securities representing more than 20% of the
outstanding securities of any class of voting securities of the Company;
(b) any sale, lease, exchange, transfer, license, acquisition or
disposition of any business or businesses or assets that constitute or
account for 20% or more of the consolidated assets of the Company; or
(c) any liquidation or dissolution of the Company.
ADJUSTED AVERAGE PARENT PRE-SIGNING TRADING PRICE. "Adjusted Average
Parent Pre-Signing Trading Price" shall mean $13.30285.
AGREEMENT. "Agreement" shall mean the Agreement and Plan of Merger and
Reorganization to which this Exhibit A is attached, as it may be amended from
time to time.
AVERAGE PARENT POST-SIGNING TRADING PRICE. "Average Parent Post-Signing
Trading Price" shall mean the average closing sales price on the Nasdaq National
Market (as reported in The Wall Street Journal or, if not reported therein, any
other authoritative source) for the eighteen trading-day period ending two
trading days before the expiration of the initial offering period.
CERTIFICATE OF MERGER. "Certificate of Merger" shall have the meaning set
forth in Section 2.3 of the Agreement.
CLOSING. "Closing" shall have the meaning set forth in Section 2.3 of the
Agreement.
CLOSING DATE. "Closing Date" shall have the meaning set forth in Section
2.3 of the Agreement.
COBRA. "COBRA" shall mean Section 4980B of the Code.
CODE. The Internal Revenue Code of 1986, as amended.
COMPANY. "Company" shall mean Genomica Corporation, a Delaware
corporation.
COMPANY COMMON STOCK. "Company Common Stock" shall mean the Common Stock,
$0.001 par value per share, of the Company.
COMPANY CONTRACT. "Company Contract" shall mean any Contract: (a) to which
the Company is a party; (b) by which the Company or any asset of the Company is
or may become bound or under which the Company has, or may become subject to,
any obligation; or (c) under which the Company has or may acquire any right or
interest.
COMPANY DISCLOSURE SCHEDULE. "Company Disclosure Schedule" shall mean the
disclosure schedule that has been prepared by the Company in accordance with the
requirements of Section 9.6 of the Agreement
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and that has been delivered by the Company to Parent on the date of this
Agreement and signed by the Chief Executive Officer of the Company.
COMPANY OPTIONS. "Company Options" shall have the meaning set forth in
Section 3.3 of the Agreement.
COMPANY PARTICIPANT. "Company Participant" shall have the meaning set
forth in Section 6.6 of the Agreement.
COMPANY PLANS. "Company Plans" shall have the meaning set forth in Section
6.6 of the Agreement.
COMPANY PREFERRED STOCK. "Company Preferred Stock" shall mean the
Preferred Stock, $0.001 par value per share, of the Company.
COMPANY PROPRIETARY ASSET. "Company Proprietary Asset" shall mean any
Proprietary Asset owned by or licensed to the Company or otherwise used by the
Company.
COMPANY RETURNS. "Company Returns" shall have the meaning set forth in
Section 3.13 of the Agreement.
COMPANY RIGHTS. "Company Rights" shall have the meaning set forth in
Section 3.3 of the Agreement.
COMPANY SEC DOCUMENTS. "Company SEC Documents" shall have the meaning set
forth in Section 3.4 of the Agreement.
COMPANY SOURCE CODE. "Company Source Code" shall mean any source code, or
any portion, aspect or segment of any source code, relating to any Proprietary
Asset owned by or licensed to the Company or otherwise used by the Company.
COMPANY STOCK CERTIFICATE. "Company Stock Certificate" shall have the
meaning set forth in Section 2.6 of the Agreement.
COMPANY STOCKHOLDERS' MEETING. "Company Stockholders' Meeting" shall have
the meaning set forth in Section 6.2 of the Agreement.
COMPANY STOCK VALUE. "Company Stock Value" shall mean the result of
dividing $110,000,000 by the sum of (a) the number of shares of Company Common
Stock outstanding as of the Offer Acceptance Time, (b) the number of shares of
Company Preferred Stock outstanding as of the Offer Acceptance Time, and (c) the
number of shares of Company Common Stock which would be issuable with respect to
all Company Options and Company Warrants outstanding as of the Offer Acceptance
Time (which includes all Company Options accelerated at the Offer Acceptance
Time as a result of consummation of the Offer), with an exercise price of $5.00
per share or less, and with respect to any other rights to acquire shares of
Company Common Stock outstanding as of the Offer Acceptance Time.
COMPANY SUPERIOR OFFER. "Company Superior Offer" shall mean a bona fide
written offer, not solicited in violation of Section 5.4 of the Agreement, made
by a third party for a merger, consolidation, business combination, sale of
substantial assets, sale of shares of capital stock (including without
limitation by way of a tender offer) or similar transaction with respect to the
Company on terms that the Board of Directors of the Company determines, in good
faith, after consultation with a nationally recognized independent financial
advisor, if accepted, is reasonably likely to be consummated, taking into
account all legal, financial and regulatory aspects of the offer and the Person
making the offer, and would, if consummated, be more favorable to the Company's
stockholders than the Transaction; provided, however, that any such offer shall
not be deemed to be a "Company Superior Offer" if any financing required to
consummate the transaction contemplated by such offer is not committed.
COMPANY TRIGGERING EVENT. A "Company Triggering Event" shall be deemed to
have occurred if at any time after the date hereof: (i) the Board of Directors
of the Company shall have failed to recommend that the Company stockholders
accept the Offer, vote to adopt and approve this Agreement, or shall have
withdrawn or modified in a manner adverse to Parent the Recommendations; (ii)
the Company shall have failed to include the Recommendations in the Schedule
14D-9; (iii) the Board of Directors of the Company fails to reaffirm in
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writing the Recommendations, or fails to reaffirm in writing its determination
that the Offer and the Merger are in the best interests of the Company's
stockholders, within 5 days after Parent requests in writing that such
recommendation or determination be reaffirmed; (iv) the Board of Directors of
the Company shall have approved or recommended to the Company's stockholders any
Acquisition Proposal; (v) the Company shall have entered into any letter of
intent or similar document or any Contract (other than a confidentiality
agreement permitted under Section 5.4(a) of the Agreement) accepting any
Acquisition Proposal; (vi) a tender or exchange offer (other than the Offer)
relating to securities of the Company shall have been commenced and the Company
shall have recommended such offer or shall not have sent to its securityholders,
within 5 days after the commencement of such tender or exchange offer, a
statement disclosing that the Company recommends rejection of such tender or
exchange offer it being understood that taking no position or indicating its
inability to take a position does not constitute recommending a rejection of
such tender or exchange offer or (vii) the Company breaches in any material
respect its obligations under Section 5.4 of this Agreement, except for any
inadvertent breach of any notice provision contained in Section 5.4 which breach
has been cured within 48 hours of its occurrence.
COMPANY UNAUDITED INTERIM BALANCE SHEET. "Company Unaudited Interim
Balance Sheet" shall mean the unaudited consolidated balance sheet of the
Company and its consolidated Subsidiaries as of September 30, 2001 included in
the Company SEC Documents.
COMPANY WARRANTS. "Company Warrants" shall have the meaning set forth in
Section 3.3 of the Agreement.
CONSENT. "Consent" shall mean any approval, consent, ratification,
permission, waiver or authorization (including any Governmental Authorization).
CONTINUING DIRECTOR. "Continuing Director" shall have the meaning set
forth in Section 1.3 of the Agreement.
CONTRACT. "Contract" shall mean any written, oral or other agreement,
contract, subcontract, lease, understanding, instrument, note, option, warranty,
purchase order, license, sublicense, insurance policy, benefit plan or legally
binding commitment or undertaking of any nature.
DGCL. "DGCL" shall mean the Delaware General Corporation Law.
DISSENTING SHARES. "Dissenting Shares" shall have the meaning set forth in
Section 2.8 of the Agreement.
EFFECTIVE TIME. "Effective Time" shall have the meaning set forth in
Section 2.3 of the Agreement.
EMPLOYEE PLANS. "Employee Plans" shall have the meaning set forth in
Section 3.14 of the Agreement.
ENCUMBRANCE. "Encumbrance" shall mean any lien, pledge, hypothecation,
charge, mortgage, security interest, encumbrance, claim, infringement,
interference, option, right of first refusal, preemptive right, community
property interest or restriction of any nature (including any restriction on the
voting of any security, any restriction on the transfer of any security or other
asset, any restriction on the receipt of any income derived from any asset, any
restriction on the use of any asset and any restriction on the possession,
exercise or transfer of any other attribute of ownership of any asset).
ENTITY. "Entity" shall mean any corporation (including any non-profit
corporation), general partnership, limited partnership, limited liability
partnership, joint venture, estate, trust, company (including any company
limited by shares, limited liability company or joint stock company), firm,
society or other enterprise, association, organization or entity.
ENVIRONMENTAL LAW. "Environmental Law" shall mean any federal, state,
local or foreign Legal Requirement relating to pollution or protection of human
health from Materials of Environmental Concern or protection of the environment
(including ambient air, surface water, ground water, land surface or subsurface
strata), including any law or regulation relating to emissions, discharges,
releases or threatened releases of Materials of Environmental Concern, or
otherwise relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of Materials of Environmental Concern.
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ERISA. "ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
EXCHANGE ACT. "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
EXCHANGE AGENT. "Exchange Agent" shall have the meaning set forth in
Section 2.7 of the Agreement.
EXCHANGE FUND. "Exchange Fund" shall have the meaning set forth in Section
2.7 of the Agreement.
EXCHANGE RATIO. "Exchange Ratio" shall have the meaning set forth in
Section 1.1 of the Agreement.
EXCLUDED SHARES. "Excluded Shares" shall mean any shares of Company Common
Stock held as of the Effective Time (A) by Parent or Merger Sub or any direct or
indirect Subsidiary of Parent or Merger Sub, (B) by the Company, or (C) by the
Company as treasury shares.
EXISTING POLICY. "Existing Policy" shall have the meaning set forth in
Section 6.7 of the Agreement.
GOVERNMENTAL AUTHORIZATION. "Governmental Authorization" shall mean any:
(a) permit, license, certificate, franchise, permission, variance, clearance,
registration, qualification or authorization issued, granted, given or otherwise
made available by or under the authority of any Governmental Body or pursuant to
any Legal Requirement; or (b) right under any Contract with any Governmental
Body.
GOVERNMENTAL BODY. "Governmental Body" shall mean any: (a) nation, state,
commonwealth, province, territory, county, municipality, district or other
jurisdiction of any nature; (b) federal, state, local, municipal, foreign or
other government; or (c) governmental or quasi-governmental authority of any
nature (including any governmental division, department, agency, commission,
instrumentality, official, ministry, fund, foundation, center, organization,
unit, body or Entity and any court or other tribunal).
HEWM. "HEWM" shall mean Heller Ehrman White & McAuliffe LLP.
HSR ACT. "HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended.
INDEMNIFIED PERSONS. "Indemnified Persons" shall have the meaning set
forth in Section 6.7 of the Agreement.
LEGAL PROCEEDING. "Legal Proceeding" shall mean any action, suit,
litigation, arbitration, proceeding (including any civil, criminal,
administrative, investigative or appellate proceeding), hearing, inquiry, audit,
examination or investigation commenced, brought, conducted or heard by or
before, or otherwise involving, any court or other Governmental Body or any
arbitrator or arbitration panel.
LEGAL REQUIREMENT. "Legal Requirement" shall mean any federal, state,
local, municipal, foreign or other law, statute, constitution, principle of
common law, resolution, ordinance, code, edict, decree, rule, regulation, ruling
or requirement issued, enacted, adopted, promulgated, implemented or otherwise
put into effect by or under the authority of any Governmental Body (or under the
authority of the NASD or the Nasdaq National Market).
MATERIAL ADVERSE EFFECT. An event, violation, inaccuracy, circumstance or
other matter will be deemed to have a "Material Adverse Effect" on the Company
if such event, violation, inaccuracy, circumstance or other matter (considered
together with all other matters that constitute exceptions to the
representations and warranties of the Company set forth in the Agreement,
disregarding any "Material Adverse Effect" or other materiality qualifications,
or any similar qualifications, in such representations and warranties) had or
could reasonably be expected to have a material adverse effect on (i) the
capitalization, assets and liabilities taken as a whole, or cash balance of the
Company set forth in item (8)(f) of Annex I, (ii) the ability of the Company to
consummate the Offer or the Merger or any of the other transactions contemplated
by the Agreement or to perform any of its obligations under the Agreement before
the Termination Date, or (iii) Parent's ability to vote, receive dividends with
respect to or otherwise exercise ownership rights with respect to the stock of
the Surviving Corporation. An event, violation, inaccuracy, circumstance or
other matter will be deemed to have a "Material Adverse Effect" on Parent if
such event, violation, inaccuracy, circumstance or other matter (considered
together with all other matters that would constitute exceptions to the
representations and warranties of Parent set forth in the Agreement,
disregarding any "Material Adverse Effect" or other
A-42
materiality qualifications, or any similar qualifications, in such
representations and warranties) had or could reasonably be expected to have a
material adverse effect on (i) the business, condition, capitalization, assets,
liabilities, operations or financial performance of Parent and its Subsidiaries
taken as a whole, or (ii) the ability of Parent to consummate the Offer or the
Merger or any of the other transactions contemplated by the Agreement or to
perform any of its obligations under the Agreement before the Termination Date.
Notwithstanding the foregoing, with respect to items (i) above, none of the
following shall be deemed (either alone or in combination) to constitute, and
none of the following shall be taken into account in determining whether there
has been or will be, a Material Adverse Effect with respect to either the
Company or Parent, as the case may be: (a) any change in the market price or
trading volume of such company's stock, (b) any failure by such company to meet
internal projections or forecasts or published revenue or earnings predictions,
(c) any adverse change or effect (including any litigation, loss of employees,
cancellation of or delay in customer orders, reductions in revenues or income or
disruption of business relationships) arising from or attributable or relating
to (i) the announcement or pendency of the Offer or the Merger, (ii) conditions
affecting the industry or industry sector in which such company or any of its
subsidiaries participates, the U.S. economy as a whole or any foreign economy in
any location where such company or any of its subsidiaries has material
operations or sales, (iii) legal, accounting, investment banking or other fees
or expenses incurred in connection with the transactions contemplated by this
Agreement, (iv) the payment of any amounts due to, or the provision of any other
benefits to, any officers or employees under employment contracts,
non-competition agreements, employee benefit plans, severance arrangements or
other arrangements in existence as of the date of this Agreement, (v) compliance
with the terms of, or the taking of any action required by, this Agreement, (vi)
the taking of any action approved or consented to by Parent (vii) any change in
accounting requirements or principles or any change in applicable laws, rules or
regulations or the interpretation thereof, or (viii) any action required to be
taken under appli cable laws, rules, regulations or agreements.
MATERIALS OF ENVIRONMENTAL CONCERN. "Materials of Environmental Concern"
shall mean chemicals, pollutants, contaminants, wastes, toxic substances,
petroleum and petroleum products and any other substance that is regulated by
any Governmental Body with respect to the environment.
MERGER. "Merger" shall mean the merger of Merger Sub into the Company that
the parties intend to effect following the Offer.
MERGER CONSIDERATION. "Merger Consideration" shall have the meaning set
forth in Section 2.5 of the Agreement.
MERGER SUB. "Merger Sub" shall mean Bluegreen Acquisition Sub, Inc., a
Delaware corporation and a wholly owned subsidiary of Parent.
MINIMUM CONDITION. "Minimum Condition" shall have the meaning set forth in
Section 1.1 of the Agreement.
NASD. "NASD" shall mean the National Association of Securities Dealers,
Inc.
NOTICE OF GUARANTEED DELIVERY. "Notice of Guaranteed Delivery" shall mean
the form used to accept the Offer if (a) Company Stock Certificates are not
immediately available, (b) the procedure for book-entry transfer cannot be
completed before the Offer Acceptance Time or (c) time will not permit all
required documents necessary to accept the Offer to reach the Exchange Agent
before the Offer Acceptance Time.
OFFER. "Offer" shall mean the exchange offer being made by Merger Sub to
exchange shares of Parent Common Stock for all of the Shares.
OFFER ACCEPTANCE TIME. "Offer Acceptance Time" shall have the meaning set
forth in Section 1.3 of the Agreement.
ORDER. "Order" shall mean any: (a) order, judgment, injunction, edict,
decree, ruling, pronouncement, determination, decision, opinion, verdict,
sentence, subpoena, writ or award issued, made, entered, rendered or otherwise
put into effect by or under the authority of any court, administrative agency or
other Governmental Body or any arbitrator or arbitration panel; or (b) Contract
with any Governmental Body entered into in connection with any Legal Proceeding.
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PARENT. "Parent" shall mean Exelixis, Inc., a Delaware corporation.
PARENT COMMON STOCK. "Parent Common Stock" shall mean the Common Stock,
$0.001 par value per share, of Parent.
PARENT CONTRACT. "Parent Contract" shall mean any Contract: (a) to which
Parent or any Subsidiary of Parent is a party; (b) by which Parent or any
Subsidiary of Parent or any asset of Parent or any Subsidiary of Parent is or
may become bound or under which Parent or any Subsidiary of Parent has, or may
become subject to, any obligation; or (c) under which Parent or any Subsidiary
of Parent has or may acquire any right or interest.
PARENT DISCLOSURE SCHEDULE. "Parent Disclosure Schedule" shall mean the
disclosure schedule that has been prepared by Parent in accordance with the
requirements of Section 9.6 of the Agreement and that has been delivered by
Parent to the Company on the date of this Agreement and signed by the President
of Parent.
PARENT PREFERRED STOCK. "Parent Preferred Stock" shall mean the Preferred
Stock, $0.001 par value, of the Company.
PARENT PROPRIETARY ASSET. "Parent Proprietary Asset" shall mean any
Proprietary Asset owned by or licensed to Parent or otherwise used by Parent.
PARENT RETURNS. "Parent Returns" shall have the meaning set forth in
Section 4.12 of the Agreement.
PARENT SEC DOCUMENTS. "Parent SEC Documents shall have the meaning set
forth in Section 4.4 of the Agreement.
PARENT UNAUDITED INTERIM BALANCE SHEET. "Parent Unaudited Interim Balance
Sheet" shall mean the unaudited consolidated balance sheet of Parent and its
consolidated Subsidiaries as of September 30, 2001 included in the Parent SEC
Documents.
PENSION PLAN. "Pension Plan" shall have the meaning set forth in Section
3.14 of the Agreement.
PERSON. "Person" shall mean any individual, Entity or Governmental Body.
POST-EFFECTIVE AMENDMENT. "Post-Effective Amendment" shall have the
meaning set forth in Section 6.1 of the Agreement.
PRE-CLOSING PERIOD. "Pre-Closing Period" shall have the meaning set forth
in Section 5.1 of the Agreement.
PRELIMINARY PROSPECTUS. "Preliminary Prospectus" shall have the meaning
set forth in Section 1.1 of the Agreement.
PROPRIETARY ASSET. "Proprietary Asset" shall mean any: (a) patent, patent
application, trademark (whether registered or unregistered), trademark
application, trade name, fictitious business name, service mark (whether
registered or unregistered), service mark application, copyright (whether
registered or unregistered), copyright application, maskwork, maskwork
application, trade secret, know-how, customer list, franchise, system, computer
software, computer program, source code, models, algorithm, formula, compound,
invention, design, blueprint, engineering drawing, proprietary product,
technology, proprietary right or other intellectual property right or intangible
asset; or (b) right to use or exploit any of the foregoing.
PROXY STATEMENT. "Proxy Statement" shall have the meaning set forth in
Section 6.1 of the Agreement.
RECOMMENDATIONS. "Recommendations" shall have the meaning set forth in
Section 3.18 of the Agreement.
REGISTRATION STATEMENT. "Registration Statement" shall have the meaning
set forth in Section 1.1 of the Agreement.
REPRESENTATIVES. "Representatives" shall mean officers, directors,
employees, agents, attorneys, accountants, advisors and representatives.
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REQUIRED COMPANY STOCKHOLDER VOTE. "Required Company Stockholder Vote"
shall have the meaning set forth in Section 3.19 of the Agreement.
RIGHTS AGREEMENT. "Rights Agreement" shall mean the Rights Agreement,
dated October 2, 2001, by and between the Company and Computershare Trust
Company, Inc., as Rights Agent.
SCHEDULE 14D-9. "Schedule 14D-9" shall have the meaning set forth in
Section 1.2 of the Agreement.
SEC. "SEC" shall mean the United States Securities and Exchange
Commission.
SECURITIES ACT. "Securities Act" shall mean the Securities Act of 1933, as
amended.
SHARES. "Shares" shall mean the outstanding shares of Company Common
Stock, including the associated Company Rights.
STOCKHOLDER TENDER AGREEMENTS. "Stockholder Tender Agreements" are
agreements in the form of Exhibit C to the Agreement pursuant to which the
Stockholders have agreed to tender for exchange all of their shares of Company
Common Stock in the Offer and to take certain other actions in connection with
the transactions contemplated by this Agreement.
STOCKHOLDERS. "Stockholders" shall mean those certain stockholders of the
Company that are entering into Stockholder Tender Agreements.
SUBSIDIARY. An entity shall be deemed to be a "Subsidiary" of another
Person if such Person directly or indirectly owns, beneficially or of record,
(a) an amount of voting securities of or other interests in such Entity that is
sufficient to enable such Person to elect at least a majority of the members of
such Entity's board of directors or other governing body, or (b) at least 50% of
the outstanding equity or financial interests of such Entity.
SURVIVING CORPORATION. "Surviving Corporation" shall have the meaning set
forth in Section 2.1 of the Agreement.
TAKEOVER LAWS. "Takeover Laws" means (1) any "moratorium", "control share
acquisition", "fair price", "supermajority", "affiliate transactions", or
"business combination statute or regulation" or other similar state antitakeover
laws and regulations and (2) Section 203 of the DGCL.
TAX. "Tax" shall mean (a) any tax (including any income tax, franchise
tax, capital gains tax, gross receipts tax, value-added tax, surtax, estimated
tax, unemployment tax, national health insurance tax, excise tax, ad valorem
tax, transfer tax, stamp tax, sales tax, use tax, property tax, business tax,
withholding tax or payroll tax), levy, assessment, tariff, duty (including any
customs duty), deficiency or fee, and any related charge or amount (including
any fine, penalty or interest), imposed, assessed or collected by or under the
authority of any Governmental Body, and (b) any liability for amounts described
in clause (a) as a result of operation of law, including by reason of being a
successor to or transferee of any Person or a member of an affiliated,
consolidated or unitary group for any period (including pursuant to sec.1.1502-6
of the U.S. Treasury Regulations).
TAX REPRESENTATION LETTERS. "Tax Representation Letters" shall have the
meaning set forth in Section 6.10 of the Agreement.
TAX RETURN. "Tax Return" shall mean any return (including any information
return), report, statement, declaration, estimate, schedule, notice,
notification, form, election, certificate or other document or information filed
with or submitted to, or required to be filed with or submitted to, any
Governmental Body in connection with the determination, assessment, collection
or payment of any Tax or in connection with the administration, implementation
or enforcement of or compliance with any Legal Requirement relating to any Tax.
TERMINATION DATE. "Termination Date" shall have the meaning set forth in
Section 8.1 of the Agreement.
TRANSACTION. "Transaction" shall mean the Offer and the Merger together.
WELFARE PLAN. "Welfare Plan" shall have the meaning set forth in Section
3.14 of the Agreement.
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ANNEX I TO MERGER AGREEMENT
CONDITIONS TO THE OFFER
As a condition to acceptance of the Shares tendered, the Company shall
provide to Parent and Merger Sub on the Offer Acceptance Time dated as of such
date (as it may be extended in accordance with Section 1.1(a) of the Agreement)
a certificate signed on behalf of the Company by its Chief Executive Officer and
its Chief Financial Officer certifying as to the absence of the occurrence of
the conditions set forth in items (8)(c), (8)(d) and (8)(f) of this Annex I, and
.
Notwithstanding any other provision of the Offer, subject to the terms of
the Agreement and Plan of Reorganization to which this Annex I is attached (the
"AGREEMENT"), Merger Sub shall not be required to accept for exchange or
exchange or deliver any shares of Parent Common Stock for (subject to any
applicable rules and regulations of the SEC, including Rule 14e-1(c) under the
Exchange Act (relating to Merger Sub's obligation to pay for or return tendered
shares of Company Common Stock after the termination or withdrawal of the
Offer)) any Shares tendered, if by the expiration of the Offer (as it may be
extended in accordance with Section 1.1(a) of the Agreement), (1) the Minimum
Condition shall not have been satisfied, (2) the applicable waiting period under
the HSR Act shall not have expired or been terminated, (3) any applicable
waiting periods, consents or clearances under foreign antitrust laws shall not
have expired, been terminated or been obtained, (4) the Registration Statement
shall not have become effective under the Securities Act or shall be the subject
of any stop order or proceedings seeking a stop order, (5) the shares of Parent
Common Stock to be issued in the Offer and the Merger shall not have been
approved for listing on the Nasdaq National Market, subject to official notice
of issuance, (6) Parent shall not have received (or Parent shall have received
and HEWM shall have subsequently rescinded) an opinion of HEWM, in form and
substance reasonably satisfactory to Parent, on the basis of the Tax
Representation Letters and on assumptions that are customary for transactions
such as the Transaction (including the assumption that the Merger will close
promptly after the Offer Acceptance Time, pursuant to the Agreement, and
pursuant to relevant state law) and that are set forth in such opinion, to the
effect that the Transaction will be treated for federal income tax purposes as a
reorganization within the meaning of Section 368(a) of the Code, provided,
however, that if HEWM does not render such opinion or withdraws or modifies such
opinion, this condition shall nonetheless be deemed satisfied if Cooley Godward
LLP renders such opinion to Parent, (7) the Company shall not have received (or
the Company shall have received, and Cooley Godward LLP shall have subsequently
rescinded) an opinion of Cooley Godward LLP in form and substance reasonably
satisfactory to Parent and to the Company, on the basis of the Tax
Representation Letters and on assumptions that are customary for transactions
such as the Transaction (including the assumption that the Merger will close
will close promptly after the Offer Acceptance Time, pursuant to the Agreement,
and pursuant to relevant state law) and that are set forth in such opinion, to
the effect that the Transaction will be treated for federal income tax purposes
as a reorganization within the meaning of Section 368(a) of the Code; provided,
however, that if Cooley Godward LLP does not render such opinion or withdraws or
modifies such opinion, this condition shall nonetheless be deemed satisfied if
HEWM renders such opinion to the Company, or (8) at any time on or after the
date of the Agreement and prior to the acceptance for exchange of Shares
pursuant to the Offer, any of the following conditions exist and are continuing:
(a) there shall have been action taken or be pending any Legal
Proceeding in which a Governmental Body is: (i) challenging or seeking to
restrain or prohibit the consummation of the Offer or the Merger or any of
the other transactions contemplated by this Agreement; (ii) seeking to
prohibit or limit in any material respect Merger Sub's or Parent's ability
to vote, receive dividends with respect to or otherwise exercise ownership
rights with respect to the shares of Company Common Stock to be acquired in
the Offer or with respect to the stock of the Surviving Corporation; (iii)
which would materially and adversely affect the right of Parent, the
Surviving Corporation or any Subsidiary of Parent to directly or indirectly
own the assets or operate the business of the Company; (iv) seeking to
compel Parent or the Company, or any Subsidiary of Parent, to dispose of or
hold separate any assets totaling $5,000,000 in value or more, as a result
of the Merger or any of the other transactions contemplated by this
Agreement; (v) obligating the Company, Parent or Parents' Subsidiaries to
pay material damages or otherwise
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become subject to material adverse consequences in connection with any of
the transactions contemplated by the Agreement, or (vi) otherwise have or
reasonably be expected to have, a Material Adverse Effect on the Company
or, as a result of the transactions contemplated by the Agreement, a
Material Adverse Effect on Parent;
(b) any temporary restraining order, preliminary or permanent
injunction or other Order preventing the consummation of the Offer or the
Merger shall have been issued by any court of competent jurisdiction and
remain in effect, or there shall be any Legal Requirement enacted or deemed
applicable to the Offer or the Merger that makes consummation of the Offer
or the Merger illegal;
(c) the Company shall have materially breached any of its covenants,
obligations or agreements under the Agreement;
(d) (i)(A) the representations and warranties of the Company contained
in the Agreement not qualified with any "materiality" or "Material Adverse
Effect" qualifiers shall not have been accurate in all material respects as
of the date of the Agreement or (B) the representations and warranties of
the Company contained in the Agreement qualified with any "materiality" or
"Material Adverse Effect" qualifiers shall not have been accurate in all
respects as of the date of the Agreement, or (ii)(A) the representations
and warranties of the Company contained in the Agreement not qualified with
any "materiality" or "Material Adverse Effect" qualifiers shall not be
accurate in all material respects as of the date of the expiration of the
Offer (as it may be extended in accordance with Section 1.1(a) of the
Agreement) with the same force and effect as if made on such date or (B)
the representations and warranties of the Company contained in the
Agreement qualified with any "materiality" or "Material Adverse Effect"
qualifiers shall not have been accurate in all respects as of the date of
the expiration of the Offer (as it may be extended in accordance with
Section 1.1(a) of the Agreement) with the same force and effect as if made
on such date; except with respect to clause (ii)(A) and (ii)(B), (x) in
each case, or in the aggregate, as does not constitute a Material Adverse
Effect on the Company, (y) for changes contemplated by this Agreement, and
(z) for those representations and warranties which address matters only as
of a particular date (which representations shall have been true and
correct (subject to the Material Adverse Effect and materiality
qualifications and limitations set forth in the preceding clauses (ii)(A),
(ii)(B) and (x)) as of such particular date)(it being understood that any
update of or modification to the Company Disclosure Schedule made or
purported to have been made after the date of this Agreement shall be
disregarded);
(e) there shall have been (i) a Material Adverse Effect on the
Company, or (ii) the occurrence of any event or the existence of any
circumstance, including any Legal Proceeding, that could reasonably be
expected to have a Material Adverse Effect on the Company;
(f) the Company shall have cash, cash equivalents, short-term and
long-term investments and all other current assets including, but not
limited to, interest receivable on investments, trade receivables, and
other receivables, totaling less than $108,750,000 net of all current
liabilities of the Company, including (i) any fees, commissions and other
amounts that may become payable to any investment banker or financial
advisor by the Company if the Offer and Merger are consummated, (ii) any
fees and other amounts payable to Arthur Andersen LLP and Cooley Godward
LLP, and (iii) all actual and contingent liabilities for Taxes that are
unpaid; for the purposes of this paragraph, current liabilities excludes
future minimum payment obligations related to all facility leases, deferred
revenue and severance obligations for employees;
(g) there shall have occurred and be continuing any general suspension
of or limitation on prices for trading in securities on the Nasdaq National
Market;
(h) the Agreement shall have been terminated in accordance with its
terms.
The foregoing conditions are for the sole benefit of Parent and Merger Sub
and may, subject to the terms of the Agreement, be waived by Parent and Merger
Sub, in whole or in part at any time and from time to time, in the sole
discretion of Parent and Merger Sub. The failure by Parent and Merger Sub at any
time to exercise any of the foregoing rights shall not be deemed a waiver of any
such right and each such right shall be deemed an ongoing right which may be
asserted at any time and from time to time.
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ANNEX B TO PROSPECTUS
FORM OF STOCKHOLDER TENDER AGREEMENT
This Stockholder Tender Agreement is entered into as of , 2001,
by and between Exelixis, Inc., a Delaware corporation ("PARENT") and [Name]
("STOCKHOLDER").
RECITALS
A. Parent, Bluegreen Acquisition Sub, Inc., a Delaware corporation and a
wholly owned subsidiary of Parent ("MERGER SUB") and Genomica Corporation, a
Delaware corporation (the "COMPANY"), are entering into an Agreement and Plan of
Merger and Reorganization of even date herewith (the "MERGER AGREEMENT") which
provides (subject to the conditions set forth therein) for the offer by Merger
Sub to purchase all outstanding shares of the Company Common Stock and the
subsequent merger of Merger Sub with and into the Company (the "MERGER").
Capitalized terms not otherwise defined herein shall have the meanings given to
them in the Merger Agreement.
B. In order to induce Parent and Merger Sub to enter into the Merger
Agreement, Stockholder, solely in its capacity as a Stockholder of the Company,
is entering into this Stockholder Tender Agreement.
AGREEMENT
The parties to this Stockholder Tender Agreement, intending to be legally
bound, agree as follows:
1. TENDER AND VOTING OF SHARES.
1.1 Agreement to Tender. Subject to Parent's waiver of such obligations,
the Stockholder hereby agrees to tender, or cause to be tendered, pursuant to
and in accordance with the terms of the Offer, the Tender Shares, and agrees
that it will not withdraw or permit the withdrawal of the tender of the Tender
Shares. Within ten business days after commencement of the Offer, the
Stockholder shall (x) deliver to the depository designated in the Offer (i) a
letter of transmittal with respect to the Tender Shares complying with the terms
of the Offer, (ii) certificates representing the Tender Shares, and (iii) all
other documents or instruments required to be delivered pursuant to the terms of
the Offer, and/or (y) instruct its broker or such other Person who is the holder
of record of any Tender Shares beneficially owned by the Stockholder to promptly
tender such Tender Shares for exchange in the Offer pursuant to the terms and
conditions of the Offer. Provided that the conditions to the Offer are
satisfied, or waived by Parent, Parent shall purchase the Tender Shares in
accordance with the terms of the Offer.
1.2 Voting. Stockholder agrees that, during the period from the date of
this Stockholder Tender Agreement through the Expiration Date, at any meeting of
stockholders of the Company, however called, and in any action by written
consent of the stockholders of the Company, Stockholder shall, unless otherwise
directed in writing by Parent, vote the Subject Securities or cause the Subject
Securities to be voted (to the extent such securities are entitled to be voted)
in such Stockholder's sole capacity as a stockholder:
(a) against any action or agreement that would result in a breach of
any representation, warranty, covenant or obligation of the Company in the
Merger Agreement;
(b) against any action or agreement that would cause any provision
contained in Section 7 or Annex I of the Merger Agreement to not be
satisfied; and
(c) against the following actions (other than the Offer, the Merger
and the transactions contemplated by the Merger Agreement): (i) any
Acquisition Proposal; (ii) any change in a majority of the members of the
Board of Directors of the Company, other than any change contemplated by
Section 1.3 of the Merger Agreement; or (iii) any other action which is
intended, or could reasonably be expected to, impede, interfere with,
delay, postpone, discourage or adversely affect the consummation of the
Offer, the
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Merger or any of the other transactions contemplated by the Merger
Agreement or this Stockholder Tender Agreement.
1.3 Proxy; Further Assurances. Contemporaneously with the execution of
this Stockholder Tender Agreement: (i) Stockholder shall execute and deliver to
Parent a proxy in the form attached to this Stockholder Tender Agreement as
Exhibit A, which shall be irrevocable to the fullest extent permitted by law,
with respect to the Tender Shares (the "PROXY"); and (ii) Stockholder shall
cause to be delivered to Parent an additional proxy (in the form attached hereto
as Exhibit A) executed on behalf of the record owner of any outstanding shares
of Company Common Stock that are Owned by the Stockholder.
2. TRANSFER OF SUBJECT SECURITIES.
2.1 Transferee of Subject Securities to be Bound by this
Agreement. Stockholder agrees that, during the period from the date of this
Stockholder Tender Agreement through the Expiration Date, Stockholder shall not
(i) take any action to cause or permit any Transfer of any of the Subject
Securities to be effected (other than pursuant to the Offer); (ii) tender any of
the Subject Securities to any Person (other than Merger Sub and Parent) or (iii)
take any action to create or permit to exist any Encumbrance with respect to any
Subject Securities (other than Encumbrances which do not affect the right to
tender such Subject Securities pursuant to the Offer and Encumbrances which do
not affect, directly or indirectly, the right of Parent to vote the Subject
Securities as provided herein).
2.2 Transfer of Voting Rights. Stockholder agrees that, during the period
from the date of this Stockholder Tender Agreement through the Expiration Date,
Stockholder shall ensure that: (a) none of the Subject Securities are deposited
into a voting trust; and (b) no proxy is granted, and no voting agreement or
similar agreement is entered into, with respect to any of the Subject
Securities.
3. REPRESENTATIONS AND WARRANTIES OF STOCKHOLDER.
Stockholder hereby represents and warrants to Parent as follows:
3.1 Authorization, etc. Stockholder has the absolute and unrestricted
right, power, authority and capacity to execute and deliver this Stockholder
Tender Agreement and the Proxy and to perform its obligations hereunder and
thereunder. This Stockholder Tender Agreement and the Proxy have been duly
executed and delivered by Stockholder and (except as the Proxy may be limited by
applicable law) constitute legal, valid and binding obligations of Stockholder,
enforceable against Stockholder in accordance with their terms, subject to (i)
laws of general application relating to bankruptcy, insolvency and the relief of
debtors, and (ii) rules of law governing specific performance, injunctive relief
and other equitable remedies.
3.2 No Conflicts or Consents.
(a) The execution and delivery of this Stockholder Tender Agreement and the
Proxy by Stockholder do not, and the performance of this Stockholder Tender
Agreement and the Proxy by Stockholder will not: (i) conflict with or violate
any law, rule, regulation, order, decree or judgment applicable to Stockholder
or by which it or any of its properties is or may be bound or affected; or (ii)
result in or constitute (with or without notice or lapse of time) any breach of
or default under, or give to any other Person (with or without notice or lapse
of time) any right of termination, amendment, acceleration or cancellation of,
or result (with or without notice or lapse of time) in the creation of any
Encumbrance or restriction on any of the Subject Securities pursuant to any
contract to which Stockholder is a party or by which Stockholder or any of his
affiliates or properties is or may be bound or affected.
(b) The execution and delivery of this Stockholder Tender Agreement and the
Proxy by Stockholder do not, and the performance of this Stockholder Tender
Agreement and the Proxy by Stockholder will not, require any consent or approval
of any Person that has not been obtained prior to the date hereof.
3.3 Title to Securities. As of the date of this Stockholder Tender
Agreement: (a) Stockholder holds of record (free and clear of any Encumbrances
or restrictions except as specifically disclosed on the signature page hereof or
created by this Stockholder Tender Agreement) the number of outstanding shares
of Company Common Stock set forth under the heading "Shares Held of Record" on
the signature page hereof;
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(b) Stockholder holds (free and clear of any Encumbrances or restrictions except
as specifically disclosed on the signature page hereof or created by this
Stockholder Tender Agreement) the options, warrants and other rights to acquire
shares of Company Common Stock set forth under the heading "Options, Warrants
and Other Rights" on the signature page hereof; (c) Stockholder Owns the
additional securities of the Company set forth under the heading "Additional
Securities Beneficially Owned" on the signature page hereof; and (d) Stockholder
does not directly or indirectly Own any shares of Company Common Stock or other
securities of the Company, or any option, warrant or other right to acquire (by
purchase, conversion or otherwise) any shares of Company Common Stock or other
securities of the Company, other than the shares and options, warrants and other
rights set forth on the signature page hereof.
4. MISCELLANEOUS.
4.1 Survival of Representations, Warranties and Agreements. All
representations, warranties, covenants and agreements made by Stockholder in
this Stockholder Tender Agreement shall survive until the Expiration Date,
unless this Agreement is earlier terminated as provided herein. This Agreement
shall terminate upon valid termination of the Merger Agreement as provided in
Section 8.1 thereof.
4.2 Expenses. All costs and expenses incurred in connection with the
transactions contemplated by this Stockholder Tender Agreement shall be paid
solely by the party incurring such costs and expenses.
4.3 Notices. Any notice or other communication required or permitted to be
delivered to any party under this Stockholder Tender Agreement shall be in
writing and shall be deemed properly delivered, given and received when actually
delivered (by hand, by registered mail, by courier or express delivery service
or by facsimile with confirmation of receipt) to the address or facsimile
telephone number set forth beneath the name of such party below (or to such
other address or facsimile telephone number as such party shall have specified
in a written notice given to the other parties hereto).
if to Parent:
Exelixis, Inc.
170 Harbor Way
P.O. Box 511
South San Francisco, California 94083-5411
Facsimile: (650) 837-8205
Attn: General Counsel
with a copy to (which copy shall not constitute notice):
Heller Ehrman White & McAuliffe LLP
275 Middlefield Road
Menlo Park, CA 94025
Facsimile: (650) 324-0638
Attn: Bruce W. Jenett
if to the Stockholder
at the address set forth below Stockholder's signature on the signature
page hereof
with copies to (which copies shall not constitute notice):
Facsimile No.
Attention:
4.4 Waiver of Appraisal Rights. Stockholder hereby irrevocably and
unconditionally waives, and agrees to cause to be waived and to prevent the
exercise of, any rights of appraisal, any dissenters' rights (including under
Section 262 of the Delaware General Corporations Law) and any similar rights
relating to the Merger or any related transaction that Stockholder or any other
Person may have by virtue of the ownership of any outstanding shares of Company
Common Stock Owned by Stockholder.
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4.5 No Solicitation. Except as permitted by Section 5.4 in his or her
capacity as a director or officer of the Company, as applicable, Stockholder
agrees that, during the period from the date of this Stockholder Tender
Agreement through the Expiration Date, Stockholder shall not, directly or
indirectly, and Stockholder shall use reasonable efforts to ensure that his
Representatives (as defined in the Merger Agreement) do not, directly or
indirectly: (i) solicit, initiate, encourage or induce the making, submission or
announcement of any Acquisition Proposal (as defined in the Merger Agreement) or
take any action that could reasonably be expected to lead to an Acquisition
Proposal; (ii) furnish any information regarding the Company to any Person in
connection with or in response to an Acquisition Proposal; or (iii) engage in
discussions or negotiations with any Person with respect to any Acquisition
Proposal. Stockholder shall immediately cease and discontinue, and Stockholder
shall ensure that his Representatives immediately cease and discontinue, any
existing discussions with any Person that relate to any Acquisition Proposal.
4.6 Severability. If any provision of this Stockholder Tender Agreement or
any part of any such provision is held under any circumstances to be invalid or
unenforceable in any jurisdiction, then (a) such provision or part thereof
shall, with respect to such circumstances and in such jurisdiction, be deemed
amended to conform to applicable laws so as to be valid and enforceable to the
fullest possible extent, (b) the invalidity or unenforceability of such
provision or part thereof under such circumstances and in such jurisdiction
shall not affect the validity or enforceability of such provision or part
thereof under any other circumstances or in any other jurisdiction, and (c) the
invalidity or unenforceability of such provision or part thereof shall not
affect the validity or enforceability of the remainder of such provision or the
validity or enforceability of any other provision of this Stockholder Tender
Agreement. Each provision of this Stockholder Tender Agreement is separable from
every other provision of this Stockholder Tender Agreement, and each part of
each provision of this Stockholder Tender Agreement is separable from every
other part of such provision.
4.7 Entire Agreement. This Stockholder Tender Agreement, the Proxy and any
other documents delivered by the parties in connection herewith constitute the
entire agreement between the parties with respect to the subject matter hereof
and thereof and supersede all prior agreements and understandings between the
parties with respect thereto. No addition to or modification of any provision of
this Stockholder Tender Agreement shall be binding upon either party unless made
in writing and signed by both parties.
4.8 Assignment, Binding Effect. Except as provided herein, neither this
Stockholder Tender Agreement nor any of the interests or obligations hereunder
may be assigned or delegated by Stockholder or Parent without the prior written
consent of the non-assigning party, which consent shall not be unreasonably
withheld, and any attempted or purported assignment or delegation of any of such
interests or obligations shall be void. Subject to the preceding sentence, this
Stockholder Tender Agreement shall be binding upon, and inure to the benefit of,
Stockholder and its heirs, estate, executors, personal representatives,
successors and assigns (as the case may be), and shall be binding upon, and
inure to the benefit of, Parent and its successors and assigns. Without limiting
any of the restrictions set forth in Section 2 or elsewhere in this Stockholder
Tender Agreement this Stockholder Tender Agreement shall be binding upon any
Person to whom any Subject Securities are Transferred. Nothing in this
Stockholder Tender Agreement is intended to confer on any Person (other than
Parent and its successors and assigns) any rights or remedies of any nature.
4.9 Specific Performance. The parties agree that irreparable damage would
occur in the event that any provision of this Stockholder Tender Agreement or
the Proxy was, or is, not performed in accordance with its specific terms or
was, or is, otherwise breached. Stockholder agrees that, in the event of any
breach or threatened breach by Stockholder of any covenant or obligation
contained in this Stockholder Tender Agreement or in the Proxy, Parent shall be
entitled (in addition to any other remedy that may be available to it, including
monetary damages) to (a) a decree or order of specific performance to enforce
the observance and performance of such covenant or obligation, and (b) an
injunction restraining such breach or threatened breach. Stockholder further
agrees that neither Parent nor any other Person shall be required to obtain,
furnish or post any bond or similar instrument in connection with or as a
condition to obtaining any remedy referred to in this Section 4.9, and
Stockholder irrevocably waives any right he may have to require the obtaining,
furnishing or posting of any such bond or similar instrument.
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4.10 Non-Exclusivity. The rights and remedies of Parent under this
Stockholder Tender Agreement are not exclusive of or limited by any other rights
or remedies which it may have, whether at law, in equity, by contract or
otherwise, all of which shall be cumulative (and not alternative). Without
limiting the generality of the foregoing, the rights and remedies of Parent
under this Stockholder Tender Agreement, and the obligations and liabilities of
Stockholder under this Stockholder Tender Agreement, are in addition to their
respective rights, remedies, obligations and liabilities under common law
requirements and under all applicable statutes, rules and regulations. Nothing
in this Stockholder Tender Agreement shall limit any of Stockholder's
obligations, or the rights or remedies of Parent, under any agreement between
Parent and Stockholder; and nothing in any such agreement shall limit any of
Stockholder's obligations, or any of the rights or remedies of Parent, under
this Stockholder Tender Agreement.
4.11 Governing Law; Venue.
(a) This Stockholder Tender Agreement and the Proxy shall be construed in
accordance with, and governed in all respects by, the laws of the State of
Delaware (without giving effect to principles of conflicts of laws).
(b) STOCKHOLDER IRREVOCABLY WAIVES THE RIGHT TO A JURY TRIAL IN CONNECTION
WITH ANY LEGAL PROCEEDING RELATING TO THIS STOCKHOLDER TENDER AGREEMENT OR THE
PROXY OR THE ENFORCEMENT OF ANY PROVISION OF THIS STOCKHOLDER TENDER AGREEMENT
OR THE PROXY.
4.12 Counterparts. This Stockholder Tender Agreement may be executed by
the parties in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute one and the same instrument.
4.13 Captions. The captions contained in this Stockholder Tender Agreement
are for convenience of reference only, shall not be deemed to be a part of this
Stockholder Tender Agreement and shall not be referred to in connection with the
construction or interpretation of this Stockholder Tender Agreement.
4.14 Waiver. No failure on the part of Parent to exercise any power,
right, privilege or remedy under this Stockholder Tender Agreement, and no delay
on the part of Parent in exercising any power right, privilege or remedy under
this Stockholder Tender Agreement, shall operate as a waiver of such power,
right, privilege or remedy; and no single or partial exercise of any such power,
right, privilege or remedy shall preclude any other or further exercise thereof
or of any other power, right, privilege or remedy. Parent shall not be deemed to
have waived any claim available to Parent arising out of this Stockholder Tender
Agreement, or any power, right, privilege or remedy of Parent under this
Stockholder Tender Agreement, unless the waiver of such claim, power, right,
privilege or remedy is expressly set forth in a written instrument duty executed
and delivered on behalf of Parent; and any such waiver shall not be applicable
or have any effect except in the specific instance in which it is given.
4.15 Construction.
(a) For purposes of this Stockholder Tender Agreement, whenever the context
requires, the singular number shall include the plural, and vice versa, the
masculine gender shall include the feminine and neuter genders; the feminine
gender shall include the masculine and neuter genders; and the neuter gender
shall include masculine and feminine genders.
(b) The parties agree that any rule of construction to the effect that
ambiguities are to be resolved against the drafting party shall not be applied
in the construction or interpretation of this Stockholder Tender Agreement.
(c) As used in this Stockholder Tender Agreement, the words "include" and
"including", and variations thereof, shall not be deemed to be terms of
limitation, but rather shall be deemed to be followed by the words "without
limitation".
B-5
(d) Except as otherwise indicated, all references in this Stockholder
Tender Agreement to "Sections" and "Exhibits" are intended to refer to Sections
of this Stockholder Tender Agreement and Exhibits to this Stockholder Tender
Agreement.
4.16 Stockholder Capacity. No person executing this Stockholder Tender
Agreement who is a director or officer of the Company makes any agreement or
understanding herein in his capacity as such director or officer. Without
limiting the generality of the foregoing, Stockholder executes this Stockholder
Tender Agreement solely in its capacity as Owner of Subject Securities and
nothing herein shall limit or affect any actions taken by Stockholder in its
capacity as an officer or director of the Company in exercising the Company's
rights under the Merger Agreement, provided that no obligation, of Stockholder
to the Company as an officer or director of the Company shall affect, impair or
impede Stockholder's obligations under this Stockholder Tender Agreement to
tender the Tender Shares in accordance with Section 1.1 hereof or to vote the
Subject Securities in accordance with Section 1.2 hereof.
4.17 Obligation to Exercise Options. The Stockholder shall not be required
to exercise options, warrants or other rights to acquire shares of Company
Common Stock which are vested as of the date of this Stockholder Tender
Agreement or which become vested prior to the Offer Acceptance Time (the
"Subject Options"); provided, however, the Stockholder hereby covenants and
agrees to immediately exercise all Subject Options and immediately tender all
Company Common Stock received upon such exercise if (x) the number of Shares
validly tendered and not withdrawn in accordance with the terms of the Offer two
business days prior to the expiration date of the Offer (as it may be extended
from time to time), together with the Shares then owned by Parent and Merger Sub
(if any) (the "Tendered Shares"), do not satisfy the Minimum Condition, and (y)
the aggregate number of shares of Company Common Stock issuable upon exercise of
the "in the money" Subject Options Owned collectively by the officers and
directors of the Company who are parties to Stockholder Tender Agreements,
together with the Tendered Shares, would satisfy the Minimum Condition.
Notwithstanding anything in this Section 4.17 to the contrary, the Stockholder
shall not be required to exercise any Subject Option unless the Subject Option
is considered to be "in the money". A Subject Option shall be considered to be
"in the money" if the price of Parent Common Stock multiplied by the Exchange
Ratio exceeds the exercise price of such Subject Option at the date the Exchange
Ratio is determined. At the request of the Stockholder in connection with any
exercise of Subject Options pursuant to this Section 4.17, Parent or its
designees will provide to the Stockholder a loan on commercially reasonable
terms equal to the exercise price of the Subject Options exercised pursuant to
this Section 4.17 which loan shall be secured solely by the shares of Company
Common Stock received by the Stockholder in such exercise of any Subject
Options.
5. CERTAIN DEFINITIONS.
For purposes of this Stockholder Tender Agreement:
(a) "Company Common Stock" shall mean the common stock, par value
$0.001 per share, of the Company.
(b) "Expiration Date" shall mean the earlier of (i) the date upon
which the Merger Agreement is terminated, or (ii) the Offer Acceptance
Time.
(c) Stockholder shall be deemed to "Own" or to have acquired
"Ownership" of a security if Stockholder is the: (i) record owner of such
security; or (ii) "beneficial owner" (within the meaning of Rule 13d-3
under the Securities Exchange Act of 1934) of such security; provided,
however, that Stockholder shall not be deemed to Own a security solely
because of Stockholder's status as an executive officer, director, partner
or member of a Person that owns such Security.
(d) "Person" shall mean any (i) individual, (ii) corporation, limited
liability company, partnership or other entity or (iii) Governmental Body.
(e) "Subject Securities" shall mean: (i) all securities of the Company
(including all shares of Company Common Stock and all options, warrants and
other rights to acquire shares of Company Common Stock) Owned by
Stockholder as of the date of this Agreement; and (ii) all additional
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securities of the Company (including all additional shares of Company
Common Stock and all additional options, warrants and other rights to
acquire shares of Company Common Stock) of which Stockholder acquires
Ownership during the period from the date of this Agreement through the
Expiration Date.
(f) "Tender Shares" shall mean: (i) all shares of Company Common
Stock Owned by Stockholder as of the date of this Agreement; and (ii) all
additional shares of Company Common Stock of which Stockholder acquires
Ownership (including without limitation as a result of any Subject
Securities) during the period from the date of this Agreement through the
Expiration Date.
A Person shall be deemed to have effected a "Transfer" of a security if
such Person directly or indirectly: (i) sells, pledges, encumbers, grants an
option with respect to, transfers or disposes of such security or any interest
in such security; (ii) enters into an agreement or commitment contemplating the
possible sale of, pledge of, encumbrance of, grant of an option with respect to,
transfer of or disposition of such security or any interest therein; or (iii)
reduces such Person's beneficial ownership interest in or risk relating to any
such security.
[SIGNATURE PAGE TO FOLLOW]
B-7
IN WITNESS WHEREOF, Parent and Stockholder have caused this Stockholder
Tender Agreement to be executed as of the date first written above.
[NAME]
By:
---------------------------------------------
Name:
---------------------------------------------
[Name]
Address:
---------------------------------------------
--------------------------------------
--------------------------------------
Facsimile:
--------------------------------------------------------------------------------
OPTIONS WARRANTS AND ADDITIONAL SECURITIES
SHARES HELD OF RECORD OTHER RIGHTS BENEFICIALLY OWNED
--------------------- -------------------- ---------------------
B-8
FORM OF IRREVOCABLE PROXY
The undersigned stockholder of Genomica Corporation, a Delaware corporation
(the "COMPANY"), hereby irrevocably (to the fullest extent permitted by law)
appoints George Scangos, Glen Sato and Exelixis, Inc., a Delaware corporation
("PARENT"), and each of them, the attorneys and proxies of the undersigned with
full power of substitution and resubstitution, to the full extent of the
undersigned's rights with respect to (i) the outstanding shares of Company
Common Stock or other securities of the Company owned of record by the
undersigned as of the date of this proxy, which shares are specified on the
final page of this proxy, and (ii) any and all other shares of Company Common
Stock or other securities of the Company which the undersigned may acquire on or
after the date hereof. (The shares of the Company Common Stock or other
securities referred to in clauses (i) and (ii) of the immediately preceding
sentence, except for shares which are not Subject Securities (as defined in the
Stockholder Tender Agreement), are collectively referred to in this proxy as the
"SHARES"). Upon the execution hereof, all prior proxies given by the undersigned
with respect to any of the Shares are hereby revoked, and the undersigned agrees
that no subsequent proxies will be given with respect to any of the Shares.
This proxy is irrevocable, is coupled with an interest and is granted in
connection with the Stockholder Tender Agreement, dated as of the date hereof,
between Parent and the undersigned (the "STOCKHOLDER TENDER AGREEMENT"), and is
granted in consideration of Parent entering into the Agreement and Plan of
Merger and Reorganization, dated as of the date hereof among Parent, Bluegreen
Acquisition Sub, Inc., a Delaware Corporation and a wholly owned subsidiary of
Parent, and the Company (the "MERGER AGREEMENT"). Capitalized terms used herein
and not otherwise defined shall have the meanings given to such terms in the
Merger Agreement.
The attorneys and proxies named above will be empowered, and may exercise
this proxy, to vote the Shares at any meeting of the stockholders of the
Company, however called, and in any action by written consent of the
Stockholders of the Company at any time until the earlier to occur of (i) the
termination of the Merger Agreement, or (ii) the Offer Acceptance Time:
(i) against any action or agreement that would result in a breach of
any representation, warranty, covenant or obligation of the Company in the
Merger Agreement;
(ii) against any action or agreement that would cause any provision
contained in Section 7 or Annex I of the Merger Agreement to not be
satisfied; and
(iii) against the following actions (other than the Offer, the Merger
and the transactions contemplated by the Merger Agreement): (A) any
Acquisition Proposal (B) any change in a majority of the members of the
Board of Directors of the Company, other than any change contemplated by
Section 1.3 of the Merger Agreement; or (C) any other action which is
intended, or could reasonably be expected to, impede, interfere with,
delay, postpone, discourage or adversely affect the consummation of the
offer, the Merger or any of the other transactions contemplated by the
Merger Agreement or this Stockholder Tender Agreement.
The undersigned may vote the Shares on all other matters.
This proxy shall be binding upon the heirs, estate, executors, personal
representatives, successors and assigns of the undersigned (including any
transferee of any of the Shares).
This proxy shall terminate upon valid termination of the Merger Agreement
as provided in Section 8.1 thereof.
If any provision of this proxy or any part of any such provision is held
under any circumstances to be invalid or unenforceable in any jurisdiction, then
(a) such provision or part thereof shall, with respect to such circumstances and
in such jurisdiction, be deemed amended to conform to applicable laws so as to
be valid and enforceable to the fullest possible extent, (b) the invalidity or
unenforceability of such provision or part thereof under such circumstances and
in such jurisdiction shall not affect the validity or enforceability of such
provision or part thereof under any other circumstances or in any other
jurisdiction, and (c) the invalidity or unenforceability of such provision or
part thereof shall not affect the validity or enforceability of the remainder
B-9
of such provision or the validity or enforceability of any other provision of
this proxy. Each provision of this proxy is separable from every other provision
of this proxy, and each part of each provision of this proxy is separable from
every other part of such provision.
[SIGNATURE PAGE TO FOLLOW]
B-10
This proxy shall terminate upon the earlier of the termination of the
Merger Agreement and the Offer Acceptance Time.
Dated:
----------, 2001
--------------------------------------
[Name]
Number of shares of common stock of
the Company owned of record or
beneficially as of the date of this
irrevocable proxy:
--------------------------------------
B-11
ANNEX C TO PROSPECTUS
FORM OF LOCK-UP AGREEMENT
November , 2001
Exelixis, Inc.
170 Harbor Way
P.O. Box 511
South San Francisco, California 94083
Re: Lock-Up Agreement
Ladies and Gentlemen:
On November , 2001, Exelixis, Inc. (the "COMPANY"), Bluegreen Acquisition
Sub, Inc. and Genomica Corporation ("GENOMICA"), entered into an Agreement and
Plan of Merger and Reorganization (the "AGREEMENT"). The Agreement requires that
the undersigned agree not to sell or otherwise transfer or dispose of any shares
of common stock of the Company (the "SHARES") that the undersigned owns or may
acquire pursuant to the terms of the Agreement for ninety (90) days following
the Offer Acceptance Time (as such term is defined in the Agreement) (the
"TRANSFER RESTRICTION"). The Transfer Restriction applies to Shares owned
directly by the undersigned (including holding as a custodian) or with respect
to which the undersigned has beneficial ownership within the rules and
regulations of the Securities and Exchange Commission.
The undersigned acknowledges that the Transfer Restriction precludes the
undersigned from engaging in any hedging or other transaction that is designed
to or that reasonably could be expected to lead to or result in a sale or
disposition of the Shares, even if the Shares would be disposed of by someone
other than the undersigned. The prohibited hedging or other transactions
include, without limitation, the following:
1. any short sale; or
2. any purchase, sale, or grant of any right (such as a put or call
option).
The Transfer Restriction applies to the Shares and to any security that
includes, relates to, or derives any significant part of its value from the
Shares.
Notwithstanding the foregoing, the undersigned may transfer the Shares as
follows (a "PERMITTED TRANSFER"):
1. as a bona fide gift or gifts, provided that the donee or donees
agree to be bound in writing by the restrictions set forth herein;
2. to any trust for the direct or indirect benefit of the undersigned
or the immediate family of the undersigned, provided that the trustee of
the trust agrees to be bound in writing by the restrictions set forth
herein, and provided further that the transfer to the trust does not
involve a disposition for value. "Immediate family" means any relationship
by blood, marriage or adoption, not more remote than first cousin;
3. with the prior written consent of the Company; or
4. if the undersigned is a corporation, to any wholly owned
subsidiary of that corporation.
As a condition to any Permitted Transfer, the transferee must execute an
agreement which states that (i) the transferee is receiving and holding the
Shares subject to the provisions of this Lock-Up Agreement, (ii) there will be
no further transfer of the Shares unless it is a transfer in accordance with
this Lock-Up Agreement and (iii) the transfer will not involve a disposition for
value.
The undersigned acknowledges that this Lock-Up Agreement is irrevocable and
will be binding upon the undersigned's heirs, legal representatives, successors,
and assigns. Except to the extent there is a Permitted
C-1
Transfer, the undersigned will have good and marketable title to the Shares,
free and clear of all liens, encumbrances, and other claims for the duration of
the Lock-Up Agreement.
The undersigned acknowledges that the Company may place restrictive legends
on the certificates representing the Shares and may impose a stop transfer on
the Shares by giving instructions to the Company's transfer agent and registrar
prohibiting the transfer of the Shares in order to ensure compliance with the
provisions of this Lock-Up Agreement.
The undersigned represents and warrants that the undersigned has full power
and authority to enter into this Lock-Up Agreement. Upon request, the
undersigned will execute any additional documents necessary in connection with
the enforcement hereof.
Very truly yours,
--------------------------------------
Exact Name of Stockholder
--------------------------------------
Authorized Signature
--------------------------------------
Title
C-2
ANNEX D TO PROSPECTUS
FORM OF AGREEMENT REGARDING STOCK OPTION EXERCISE
This Agreement Regarding Stock Option Exercise (the "AGREEMENT") is entered
into as of November , 2001, by and between Exelixis, Inc., a Delaware
corporation ("EXELIXIS"), Genomica Corporation, a Delaware corporation
("GENOMICA") and [Name] ("EXECUTIVE").
RECITALS
A. Exelixis, Bluegreen Acquisition Sub, Inc., a Delaware corporation and a
wholly-owned subsidiary of Exelixis ("MERGER SUB"), and Genomica have entered
into an Agreement and Plan of Merger and Reorganization dated November 19, 2001
(the "MERGER AGREEMENT") which provides (subject to conditions set forth in the
Merger Agreement) for the offer by Merger Sub to purchase all outstanding shares
of Genomica Common Stock (the "OFFER") and the subsequent merger of Merger Sub
with and into the Company (the "MERGER").
B. Executive is an officer of Genomica, and Genomica has granted Executive
options to acquire shares of Genomica Common Stock pursuant to either its 1996
Stock Option Plan or its 2000 Equity Incentive Plan (the "PLANS"). The Plans
provide that the purchase price for Genomica Common Stock acquired through the
exercise of such stock options may be paid for through loans made by Genomica.
C. Pursuant to the terms of the Merger Agreement, upon the close of the
Offer, all Genomica stock options that are not exercised terminate.
D. Executive has entered into a Stockholder Tender Agreement dated
November 19, 2001 (the "STOCKHOLDER TENDER AGREEMENT") whereby Executive has
agreed to tender all shares of Genomica Common Stock owned by Executive to
Merger Sub in connection with the Offer, and a Lock-Up Agreement dated November
19, 2001 (the "LOCK-UP AGREEMENT") whereby Executive has agreed not to sell or
otherwise transfer or dispose of any shares of Exelixis Common Stock received in
exchange for the tender of Genomica Common Stock for a period of 90 days
following the close of the Offer.
AGREEMENT
The parties to this Agreement, intending to be legally bound, agree as
follows:
1. At the request of Executive, but solely in connection with the exercise
of any of the specific options to acquire Genomica Common Stock listed on
Exhibit A attached hereto (the "SPECIFIED OPTIONS"), at or prior to the close of
the Offer, Genomica, as permitted by the terms of the Plans, and in connection
with the past, present and future services rendered by Executive, will provide
to Executive a loan on commercially reasonable terms up to an amount equal to
the aggregate exercise price of the Specified Options being exercised by
Executive (the "LOAN"). The Loan shall bear a market rate of interest determined
at the time such Loan is made.
2. The Loan shall be evidenced by a general obligation promissory note and
secured by the shares of Genomica Common Stock received by Executive upon
exercise of the Specified Options and payment with the proceeds of the Loan and,
following the tender of the shares received upon exercise of such Specified
Options by Executive in the Offer pursuant to the Stockholder Tender Agreements,
by the shares of Exelixis received thereby. Notwithstanding the foregoing, the
Loans shall also be made with full recourse as to Executive.
3. The Loan shall be due 45 days after the expiration of the restrictions
on sale, transfer and disposition provided for in the Lock-Up Agreement.
4. Exelixis consents to the making of the Loan by Genomica.
5. The provisions governing the making of the Loan set forth in this
Agreement shall supersede the provision concerning the making of a loan set
forth in Section 4.17 of the Stockholder Tender Agreement.
[SIGNATURE PAGE TO FOLLOW]
D-1
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
as of the date first written above.
EXELIXIS, INC.
By:
------------------------------------
Name:
--------------------------------------
Title:
--------------------------------------
GENOMICA CORPORATION
By:
--------------------------------------
Name:
--------------------------------------
Title:
--------------------------------------
[NAME]
--------------------------------------
D-2
ANNEX E TO PROSPECTUS
FORM OF PARTIAL WAIVER OF LOCK-UP AGREEMENT
November , 2001
Officer
[ADDRESS]
Re: Partial Waiver of Lock-Up Agreement
Dear [Officer]:
On November 19, 2001, Exelixis, Inc. (the "COMPANY"), Bluegreen Acquisition
Sub, Inc. ("MERGER SUB") and Genomica Corporation ("GENOMICA"), entered into an
Agreement and Plan of Merger and Reorganization (the "AGREEMENT"), which
provided for the offer by Merger Sub to purchase all outstanding shares of
Genomica common stock and the subsequent merger of Merger Sub with and into the
Company. In connection with the Agreement, you entered into a Lock-Up Agreement,
which requires that you not sell or otherwise transfer or dispose of any shares
of common stock of the Company (the "SHARES") that you own or acquire pursuant
to the terms of the Agreement for ninety days following the Offer Acceptance
Time (as such term is defined in the Agreement) (the "TRANSFER RESTRICTION").
In the event that you exercise Genomica stock options to acquire Genomica
common stock, and as a result of this stock option exercise you incur a tax
obligation, the Company will waive the Transfer Restriction solely to authorize
you to sell a sufficient number of Shares to enable you to pay this tax
obligation.
Very truly yours,
--------------------------------------
Glen Y. Sato,
Chief Financial Officer and Secretary
of
Exelixis, Inc.
E-1
ANNEX F TO PROSPECTUS
SECTION 262. APPRAISAL RIGHTS -- (a) Any stockholder of a corporation of
this State who holds shares of stock on the date of the making of a demand
pursuant to subsection (d) of this section with respect to such shares, who
continuously holds such shares through the effective date of the merger or
consolidation, who has otherwise complied with subsection (d) of this section
and who has neither voted in favor of the merger or consolidation nor consented
thereto in writing pursuant to Section 228 of this title shall be entitled to an
appraisal by the Court of Chancery of the fair value of the stockholder's shares
of stock under the circumstances described in subsections (b) and (c) of this
section. As used in this section, the word "stockholder" means a holder of
record of stock in a stock corporation and also a member of record of a nonstick
corporation; the words "stock" and "share" mean and include what is ordinarily
meant by those words and also membership or membership interest of a member of a
nonstock corporation; and the words "depository receipt" mean a receipt or other
instrument issued by a depository representing an interest in one or more
shares, or fractions thereof, solely of stock of a corporation, which stock is
deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to Section 251 (other than a merger effected pursuant to
Section 251(g) of this title), Section 252, Section 254, Section 257, Section
258, Section 263 or Section 264 of this title:
(1) Provided, however, that no appraisal rights under this section
shall be available for the shares of any class or series of stock, which
stock, or depository receipts in respect thereof, at the record date fixed
to determine the stockholders entitled to receive notice of and to vote at
the meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or (ii) held
of record by more than 2,000 holders; and further provided that no
appraisal rights shall be available for any shares of stock of the
constituent corporation surviving a merger if the merger did not require
for its approval the vote of the stockholders of the surviving corporation
as provided in subsection (f) of Section 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal
rights under this section shall be available for the shares of any class or
series of stock of a constituent corporation if the holders thereof are
required by the terms of an agreement of merger or consolidation pursuant
to Sections 251, 252, 254, 257, 258, 263 and 264 of this title to accept
for such stock anything except:
a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect thereof;
b. Shares of stock of any other corporation, or depository
receipts in respect thereof, which shares of stock (or depository
receipts in respect thereof) or depository receipts at the effective
date of the merger or consolidation will be either listed on a national
securities exchange or designated as a national market system security
on an interdealer quotation system by the National Association of
Securities Dealers, Inc. or held of record by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or
d. Any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this
paragraph.
(3) In the event all of the stock of a subsidiary Delaware
corporation party to a merger effected under Section 253 of this title is
not owned by the parent corporation immediately prior to the merger,
appraisal rights shall be available for the shares of the subsidiary
Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its
F-1
certificate of incorporation, any merger or consolidation in which the
corporation is a constituent corporation or the sale of all or substantially all
of the assets of the corporation. If the certificate of incorporation contains
such a provision, the procedures of this section, including those set forth in
subsections (d) and (e) of this section, shall apply as nearly as is
practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights
are provided under this section is to be submitted for approval at a
meeting of stockholders, the corporation, not less than 20 days prior to
the meeting, shall notify each of its stockholders who was such on the
record date for such meeting with respect to shares for which appraisal
rights are available pursuant to subsection (b) or (c) hereof that
appraisal rights are available for any or all of the shares of the
constituent corporations, and shall include in such notice a copy of this
section. Each stockholder electing to demand the appraisal of such
stockholder's shares shall deliver to the corporation, before the taking of
the vote on the merger or consolidation, a written demand for appraisal of
such stockholder's shares. Such demand will be sufficient if it reasonably
informs the corporation of the identity of the stockholder and that the
stockholder intends thereby to demand the appraisal of such stockholder's
shares. A proxy or vote against the merger or consolidation shall not
constitute such a demand. A stockholder electing to take such action must
do so by a separate written demand as herein provided. Within 10 days after
the effective date of such merger or consolidation, the surviving or
resulting corporation shall notify each stockholder of each constituent
corporation who has complied with this subsection and has not voted in
favor of or consented to the merger or consolidation of the date that the
merger or consolidation has become effective; or
(2) If the merger or consolidation was approved pursuant to Section
228 or Section 253 of this title then, either a constituent corporation
before the effective date of the merger or consolidation, or the surviving
or resulting corporation within ten days thereafter, shall notify each of
the holders of any class or series of stock of such constituent corporation
who are entitled to appraisal rights of the approval of the merger or
consolidation and that appraisal rights are available for any or all shares
of such class or series of stock of such constituent corporation, and shall
include in such notice a copy of this section; provided that, if the notice
is given on or after the effective date of the merger or consolidation,
such notice shall be given by the surviving or resulting corporation to all
such holders of any class or series of stock of a constituent corporation
that are entitled to appraisal rights. Such notice may, and, if given on or
after the effective date of the merger or consolidation, shall, also notify
such stockholders of the effective date of the merger or consolidation. Any
stockholder entitled to appraisal rights may, within 20 days after the date
of mailing of such notice, demand in writing from the surviving or
resulting corporation the appraisal of such holder's shares. Such demand
will be sufficient if it reasonably informs the corporation of the identity
of the stockholder and that the stockholder intends thereby to demand the
appraisal of such holder's shares. If such notice did not notify
stockholders of the effective date of the merger or consolidation, either
(i) each such constituent corporation shall send a second notice before the
effective date of the merger or consolidation notifying each of the holders
of any class or series of stock of such constituent corporation that are
entitled to appraisal rights of the effective date of the merger or
consolidation or (ii) the surviving or resulting corporation shall send
such a second notice to all such holders on or within 10 days after such
effective date; provided, however, that if such second notice is sent more
than 20 days following the sending of the first notice, such second notice
need only be sent to each stockholder who is entitled to appraisal rights
and who has demanded appraisal of such holder's shares in accordance with
this subsection. An affidavit of the secretary or assistant secretary or of
the transfer agent of the corporation that is required to give either
notice that such notice has been given shall, in the absence of fraud, be
prima facie evidence of the facts stated therein. For purposes of
determining the stockholders entitled to receive either notice, each
constituent corporation may fix, in advance, a record date that shall be
not more than 10 days prior to the date the notice is given, provided, that
if the notice is given on or after the effective date of the merger or
consolidation, the record date shall be such effective date. If no record
date is fixed and the notice is given prior to the effective date, the
record date shall be the close of business on the day next preceding the
day on which the notice is given.
F-2
(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who has
complied with subsections (a) and (d) hereof and who is otherwise entitled to
appraisal rights, may file a petition in the Court of Chancery demanding a
determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the effective
date of the merger or consolidation, any stockholder shall have the right to
withdraw such stockholder's demand for appraisal and to accept the terms offered
upon the merger or consolidation. Within 120 days after the effective date of
the merger or consolidation, any stockholder who has complied with the
requirements of subsections (a) and (d) hereof, upon written request, shall be
entitled to receive from the corporation surviving the merger or resulting from
the consolidation a statement setting forth the aggregate number of shares not
voted in favor of the merger or consolidation and with respect to which demands
for appraisal have been received and the aggregate number of holders of such
shares. Such written statement shall be mailed to the stockholder within 10 days
after such stockholder's written request for such a statement is received by the
surviving or resulting corporation or within 10 days after expiration of the
period for delivery of demands for appraisal under subsection (d) hereof,
whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the addresses
therein stated. Such notice shall also be given by 1 or more publications at
least 1 week before the day of the hearing, in a newspaper of general
circulation published in the City of Wilmington, Delaware or such publication as
the Court deems advisable. The forms of the notices by mail and by publication
shall be approved by the Court, and the costs thereof shall be borne by the
surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of
interest which the surviving or resulting corporation would have had to pay to
borrow money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion, permit discovery
or other pretrial proceedings and may proceed to trial upon the appraisal prior
to the final determination of the stockholder entitled to an appraisal. Any
stockholder whose name appears on the list filed by the surviving or resulting
corporation pursuant to subsection (f) of this section and who has submitted
such stockholder's certificates of stock to the Register in Chancery, if such is
required, may participate fully in all proceedings until it is finally
determined that such stockholder is not entitled to appraisal rights under this
section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
F-3
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded such stockholder's appraisal rights as provided in
subsection (d) of this section shall be entitled to vote such stock for any
purpose or to receive payment of dividends or other distributions on the stock
(except dividends or other distributions payable to stockholders of record at a
date which is prior to the effective date of the merger or consolidation);
provided, however, that if no petition for an appraisal shall be filed within
the time provided in subsection (e) of this section, or if such stockholder
shall deliver to the surviving or resulting corporation a written withdrawal of
such stockholder's demand for an appraisal and an acceptance of the merger or
consolidation, either within 60 days after the effective date of the merger or
consolidation as provided in subsection (e) of this section or thereafter with
the written approval of the corporation, then the right of such stockholder to
an appraisal shall cease. Notwithstanding the foregoing, no appraisal proceeding
in the Court of Chancery shall be dismissed as to any stockholder without the
approval of the Court, and such approval may be conditioned upon such terms as
the Court deems just.
(l) The shares of the surviving or resulting corporation to which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized and
unissued shares of the surviving or resulting corporation.
F-4
THE EXCHANGE AGENT AND DEPOSITARY FOR THE OFFER IS:
MELLON INVESTORS SERVICES LLC
BY OVERNIGHT COURIER
Attn: Reorganization Dept.
85 Challenger Road
Mail-Stop -- Reorg.
Ridgefield Park, NJ 07660
BY MAIL: BY OVERNIGHT DELIVERY: BY HAND DELIVERY:
Attn: Reorganization Dept. Attn: Reorganization Dept. Attn: Reorganization Dept.
P.O. Box 3301 85 Challenger Road 120 Broadway, 13th Floor
South Hackensack, NJ 07606 Mail-Stop -- Reorg. New York, NY 10271
Ridgefield Park, NJ 07660
FACSIMILE TRANSMISSION (FOR ELIGIBLE INSTITUTIONS ONLY):
(201) 296-4293
CONFIRM RECEIPT OF FACSIMILE BY TELEPHONE ONLY:
(201) 296-4860
THE INFORMATION AGENT IS:
MELLON INVESTORS SERVICES LLC
BY OVERNIGHT COURIER
Attn: Reorganization Dept.
85 Challenger Road
Mail-Stop -- Reorg.
Ridgefield Park, NJ 07660
BY MAIL: BY OVERNIGHT DELIVERY: BY HAND DELIVERY:
Attn: Reorganization Dept. Attn: Reorganization Dept. Attn: Reorganization Dept.
P.O. Box 3301 85 Challenger Road 120 Broadway, 13th Floor
South Hackensack, NJ 07606 Mail-Stop -- Reorg. New York, NY 10271
Ridgefield Park, NJ 07660
Call Toll Free: (866) 323-8159