Exhibit 99.2
NEITHER THIS STOCK OPTION AGREEMENT NOR ANY SHARES OF COMMON STOCK ISSUED UPON
EXERCISE HEREOF HAS BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND SUCH
SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN
CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE OR DISTRIBUTION
MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR
AN OPINION OF COUNSEL IN A FORM SATISFACTORY TO THE ALTHEXIS COMPANY, INC. THAT
SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT (this "Agreement"), dated as of July 27, 2001,
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is entered into by and between The Althexis Company, Inc., a Delaware
corporation ("Issuer"), and Microcide Pharmaceuticals, Inc., a Delaware
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corporation ("Grantee").
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WHEREAS, simultaneously with the execution and delivery hereof, Issuer,
Grantee and California MP Acquisition, Inc., a Delaware corporation (the
"Sub"), entered into an Agreement and Plan of Merger (the "Merger Agreement"),
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dated as of the date hereof, pursuant to which Merger Sub is to merge with and
into Issuer, with Issuer continuing as the surviving corporation and a wholly
owned subsidiary of Grantee (the "Merger"), which Merger Agreement has been
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approved by the Board of Directors of the Issuer, Sub and Grantee;
WHEREAS, as condition to entering into the Merger Agreement, Grantee has
required that the Issuer agree to grant to Grantee an option to purchase 19.9%
of the outstanding shares of common stock of the Issuer, par value $0.01 per
share (the "Common Stock"), and in order to induce Grantee to enter into the
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Merger Agreement, the Issuer is willing to enter into this Agreement, and to
agree to certain other matters, all upon the terms and subject to the conditions
set forth herein; and
WHEREAS, the Board of Directors of Issuer has approved the grant by Issuer
to Grantee of the Option (defined below) pursuant to this Agreement.
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the parties hereby agree as follows:
1. The Option. Issuer hereby grants to Grantee an unconditional,
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irrevocable option (the "Option") to purchase, pursuant to the terms and
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subject to the conditions hereof, up to 903,649 fully paid and nonassessable
shares of Common Stock at a per share price equal to the lesser of (i) the Fair
Market Value (as defined below) of the Common Stock on the date of the press
release announcing the Merger Agreement or (ii) the Fair Market Value of the
Common Stock on the date of Grantee's exercise of the Option (the "Option
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Price"); provided, however, that in no event shall the number of shares for
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which the Option is exercisable exceed 19.9 % of
the shares of Common Stock issued and outstanding at the time of exercise
(without giving effect to the shares of Common Stock issued or issuable under
the Option). The number of shares of Common Stock purchasable upon exercise of
the Option and the Option Price are subject to adjustment as set forth in this
Agreement.
As used in this Agreement, "Fair Market Value" shall be determined as
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follows:
(i) If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the
Nasdaq National Market of the National Association of Securities Dealers,
Inc. Automated Quotation ("Nasdaq") System, the Fair Market Value of the
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Common Stock shall be the closing sales price for the Common Stock (or the
closing bid, if no sales were reported) as quoted on such system or
exchange (or the exchange with the greatest volume of trading in Common
Stock) on such date, as reported in The Wall Street Journal or such other
source as mutually agreed upon by the Issuer and the Grantee;
(ii) If the Common Stock is quoted on the Nasdaq System (but not on
the Nasdaq National Market thereof) or is regularly quoted by a recognized
securities dealer but selling prices are not reported, the Fair Market
Value of the Common Stock shall be the mean between the high bid and low
asked prices for the Common Stock on such date, as reported in The Wall
Street Journal or such other source as mutually agreed upon by the Issuer
and the Grantee;
(iii) In the absence of an established market for the Common Stock,
the Fair Market Value of a share of Common Stock shall be determined in
good faith by the Board of Directors of the Issuer.
2. Exercise; Closing.
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(a) Conditions to Exercise; Termination. Grantee or any other person that
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shall become a holder of all or a part of the Option in accordance with the
terms of this Agreement (each such person, including Grantee, being referred to
as "Holder") may exercise the Option, in whole or in part, from time to time,
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if but only if a Triggering Event has occurred, and prior to the occurrence of
an Exercise Termination Event (as defined below). The right to exercise the
Option shall terminate upon the earliest to occur of (i) the Effective Time (as
defined in the Merger Agreement), (ii) if a Notice Date (as defined in Section
2(d)) has not previously occurred, the close of business on the one-year
anniversary of a Triggering Event (the "Exercise Termination Event") or (iii)
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the termination of the Merger Agreement other than pursuant to Section 9.1(f)
thereof.
(b) Triggering Event. A "Triggering Event" shall have occurred at such
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time at which Issuer terminates the Merger Agreement pursuant to Section 9.1(f)
thereof.
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(c) Notice of Triggering Event by Issuer. Issuer shall notify Grantee
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promptly in writing of the occurrence of any Triggering Event (it being
understood that the giving of the notice by Issuer shall not be a condition to
the right of Holder to exercise the option).
(d) Notice of Exercise. If Holder shall be entitled to and desires to
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exercise the Option, in whole or in part, it shall send to Issuer a written
notice (any date on which this notice is given, in accordance with Section 14,
is referred to as a "Notice Date") specifying (i) the total number of shares
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that Holder will purchase pursuant to the exercise and (ii) a place and date (a
"Closing Date") not earlier than three business days nor later than 60
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business days from the related Notice Date for the closing of the purchase (the
"Closing"); provided, however, that if a filing or any approval is required
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under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as amended (the
"HSR Act"), or prior notification to or prior approval from any regulatory
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authority is required under any other law, statute, rule or regulation
(including applicable rules and regulations of national securities exchanges) in
connection with this purchase, Holder or Issuer, as required, promptly after the
Notice Date, shall file all necessary notices and applications for approval and
shall expeditiously process the same and the period of time referred to in
clause (ii) shall commence on the date on which all required notification and
waiting periods, if any, shall have expired or been terminated and all required
approvals, if any, shall have been obtained. Any exercise of the Option shall be
deemed to occur on the date of the Notice Date relating thereto. Each of Holder
and Issuer agrees to use its reasonable best efforts to cooperate with and
provide information to the other, for the purpose of any required notice or
application for approval.
(e) Payment of Purchase Price; Delivery of Common Stock.
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(i) At the Closing, Holder shall pay to Issuer the aggregate
purchase price for the shares of Common Stock purchased pursuant to the
exercise of the Option in immediately available funds by a wire transfer to
a bank account designated by Issuer; provided, however, that failure or
refusal of Issuer to designate a bank account shall not preclude Holder
from exercising the Option, in whole or in part.
(ii) At the Closing, simultaneously with the payment of the
aggregate purchase price by Holder, Issuer shall deliver to Holder a
certificate or certificates representing the number of shares of Common
Stock purchased by Holder, and the Holder shall deliver this Agreement and
a letter agreeing that the Holder will not offer to sell or otherwise
dispose of such shares in violation of applicable laws or the provisions of
this Agreement.
(iii) Notwithstanding anything to the contrary contained in
paragraphs (i) and (ii) of this Section 2(e), Holder shall have the right
(a "Cashless Exercise Right") to direct the Issuer, in the written notice
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of exercise referred to in Section 2(d), to reduce the number of shares of
Common Stock required to be delivered by Issuer to Holder at any Closing by
such number of shares of Common Stock that have an aggregate Market/Offer
Price (as defined in Section 8(a)) equal to the aggregate purchase price
payable at the Closing (but for this paragraph (iii)), or any portion
thereof, in lieu of Holder paying to the Issuer
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at such Closing such aggregate purchase price or portion thereof, as the
case may be. Any exercise of the Option in which, and to the extent to
which, Holder exercises its Cashless Exercise Right pursuant to this
paragraph (iii) shall be referred to as a "Cashless Exercise."
(f) Restrictive Legend. Certificates for Common Stock delivered at a
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Closing may be endorsed at the option of Issuer with restrictive legends that
shall read substantially as follows:
"The transfer of the shares represented by this certificate is subject to
certain provisions of an agreement between the registered holder hereof and
Issuer, a copy of which agreement is on file at the principal office of
Issuer. A copy of the aforementioned agreement will be mailed to the holder
without charge promptly after receipt by Issuer of a written request
therefor."
"The shares of Common Stock issued upon exercise hereof has been registered
under the Securities Act of 1933, and such securities have been acquired for
investment and not with a view to, or in connection with, the sale or
distribution thereof. No such sale or distribution may be effected without an
effective registration statement related thereto or an opinion of counsel in a
form satisfactory to The Althexis Company, Inc. that such registration is not
required under the Securities Act of 1933."
It is understood and agreed that: (i) the reference to the resale restrictions
of the Securities Act of 1933, as amended (the "Securities Act"), in the above
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legend shall be removed by delivery of substitute certificate(s) without this
reference if Holder shall have delivered to Issuer a copy of a letter from the
staff of the Securities and Exchange Commission, or a written opinion of
counsel, in form and substance reasonably satisfactory to Issuer, to the effect
that this legend is not required for purposes of the Securities Act; (ii) the
reference to the provisions of this Agreement in the above legend shall be
removed by delivery of substitute certificate(s) without such reference if the
shares have been sold or transferred in compliance with the provisions of this
Agreement and under circumstances that do not require the retention of such
reference; and (iii) the legend shall be removed in its entirety if the
conditions in the preceding clauses (i) and (ii) both are satisfied. In
addition, the certificates shall bear any other legend as may be required by
applicable law.
(g) Ownership of Record; Tender of Purchase Price; Expenses. Upon the
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giving by Holder to Issuer of the written notice of exercise referred to in
Section 2(d) and, except to the extent this notice relates to a Cashless
Exercise, the tender of the applicable purchase price in immediately available
funds, Holder shall be deemed to be the holder of record of the shares of Common
Stock issuable upon the exercise, notwithstanding that the stock transfer books
of Issuer shall then be closed or that certificates representing the shares of
Common Stock shall not have been actually delivered to Holder. Issuer shall pay
all expenses, and any and all United States federal, state and local taxes and
other charges that may be payable in connection with the preparation, issuance
and delivery of stock certificates under this Section 2 in the name of Holder or
its assignee, transferee or designee.
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3. Covenants of Issuer. In addition to its other agreements and
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covenants, Issuer agrees:
(a) Shares Reserved for Issuance. To maintain, free from preemptive
----------------------------
rights, sufficient authorized but unissued or treasury shares of Common Stock so
that the Option may be fully exercised without additional authorization of
Common Stock after giving effect to all other options, warrants, convertible
securities and other rights of third parties to purchase shares of Common Stock;
(b) No Avoidance. Not to avoid or seek to avoid (whether by charter
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amendment or through reorganization, consolidation, merger, issuance of rights,
dissolution or sale of assets, or by any other voluntary act) the observance or
performance of any of the covenants, agreements or conditions to be observed or
performed hereunder by Issuer and not to take any action which would cause any
of its representations or warranties not to be true in any material respect; and
(c) Further Assurances. Promptly after the date hereof to take all
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actions as may from time to time be required (including (i) complying with all
applicable premerger notification, reporting and waiting period requirements
under the HSR Act and (ii) in the event that any other prior approval of or
notice to any regulatory authority is necessary under any applicable federal,
state or local law before the Option may be exercised, cooperating fully with
Holder in preparing and processing the required applications or notices) in
order to permit Holder to exercise the Option and purchase shares of Common
Stock pursuant to such exercise.
4. Representations and Warranties of Issuer. Issuer hereby represents and
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warrants to Holder that Issuer has all requisite corporate power and authority
and has taken all corporate action necessary to authorize, execute, deliver and
perform its obligations under this Agreement and to consummate the transactions
contemplated hereby; and that this Agreement has been duly and validly
authorized, executed and delivered by Issuer. Issuer hereby further represents
and warrants to Holder that it has taken all necessary corporate action to
authorize and reserve for issuance upon exercise of the Option the number of
shares of Common Stock equal to the maximum number of shares of Common Stock at
any time or from time to time issuable upon exercise of the Option and that all
shares of Common Stock, upon issuance pursuant to the Option, will be delivered
free and clear of all claims, liens, encumbrances, and security interests (other
than those created by this Agreement and the Securities Act) and not subject to
any preemptive rights. The execution and delivery of this Agreement, the grant
of the Option hereunder and the exercise in whole or in part of the Option in
accordance with this Agreement, will not (i) result in the occurrence of any
"Distribution Date" or "Shares Acquisition Date" under the Preferred Shares
Rights Agreement between Microcide Pharmaceuticals, Inc. and Chasemellon
Shareholder Services, L.L.C. Rights Agent, dated as of February 2, 1999, (ii)
permit any Person to exercise any rights issued under any rights agreements of
Issuer, or (iii) cause the separation of any such rights from the shares of
Common Stock to which they are attached or such rights becoming exercisable.
Issuer has taken all action necessary to make inapplicable to Grantee any state
takeover, business combination, control share or other similar statute and any
charter provisions which would otherwise be applicable to Grantee or any
transaction involving Issuer and Grantee by reason of the grant of the Option,
the acquisition of
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beneficial ownership of shares of Common Stock as a result of the grant of the
Option, or the acquisition of shares of Common Stock upon exercise of the
Option.
5. Representations and Warranties of Grantee. Grantee hereby represents
-----------------------------------------
and warrants to Issuer that Grantee has all requisite corporate power and
authority and has taken all corporate action necessary in order to authorize,
execute, deliver and perform its obligations under this Agreement and to
consummate the transactions contemplated hereby. This Agreement has been duly
and validly authorized, executed and delivered by Grantee. Grantee represents
and warrants to Issuer that any shares of Common Stock acquired upon exercise of
the Option will be acquired for Grantee's own account, and will not be, and the
Option is not being, acquired by Grantee with a view to the distribution thereof
in violation of any applicable provision of the Securities Act. Grantee has such
knowledge and experience in business and financial matters as to be capable of
utilizing the information which is available to Grantee to evaluate the merits
and risks of an investment by Grantee in the Common Stock and Grantee is able to
bear the economic risks of any investment in the shares of Common Stock which
Grantee may acquire upon exercise of the Option.
6. Exchange; Replacement. Upon (i) receipt by Issuer of reasonably
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satisfactory evidence of the loss, theft, destruction, or mutilation of this
Agreement, (ii) receipt by Issuer of reasonably satisfactory indemnification in
the case of loss, theft or destruction and (iii) surrender and cancellation of
this Agreement in the case of mutilation, Issuer will execute and deliver a new
Agreement of like tenor and date. Any new Agreement executed and delivered
shall constitute an additional contractual obligation on the part of Issuer,
whether or not the Agreement so lost, stolen, destroyed or mutilated shall at
any time be enforceable by any Person other than the holder of the new
Agreement.
7. Adjustments. The total number of shares of Common Stock purchasable
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upon the exercise of the Option and the Option Price shall be subject to
adjustment from time to time as follows:
In the event of any change in, or distribution in respect of, the
outstanding shares of Common Stock by reason of stock dividends, split-ups,
mergers, recapitalizations, combinations, subdivisions, conversions, exchanges
of shares or the like, the type (including, in the event of any Major
Transaction described in Section 8(d) hereof in which Issuer is not the
surviving or continuing corporation, to provide that the Option shall be
exercisable for shares of common stock of the surviving or continuing
corporation in such Major Transaction) and number of shares of Common Stock
purchasable upon exercise of the Option and the Option Price shall be
appropriately adjusted in such manner as shall fully preserve the economic
benefits contemplated hereby, and proper provision shall be made in the
agreements governing any such transactions to provide for the proper adjustment
and the full satisfaction of Issuer's obligation hereunder.
8. Repurchase of Option and/or Shares.
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(a) Repurchase; Repurchase Price. Upon the occurrence of a Triggering
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Event and prior to an Exercise Termination Event, (i) at the request of Holder,
Issuer shall repurchase
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the Option from Holder, in whole or in part, at a price (the "Option Repurchase
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Price") equal to the number of shares of Common Stock then purchasable upon
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exercise of the Option (or such lesser number of shares as may be designated in
the Repurchase Notice (as defined in Section 8(b)) multiplied by the amount by
which the Market/Offer Price (as defined below) exceeds the Option Price or (ii)
at the request of any owner of Option Shares (an "Owner") Issuer shall
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repurchase such number of Option Shares from the Owner as the Owner shall
designate in the Repurchase Notice at a price (the "Option Share Repurchase
-----------------------
Price") equal to the number of shares designated multiplied by the Market/Offer
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Price. The term "Market/Offer Price" shall mean the highest of (x) the price per
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share of Common Stock at which a tender or exchange offer for Common Stock
either has been consummated, or at which a Person has publicly announced its
intention to commence a tender or exchange offer, after the date of this
Agreement and prior to the delivery of the Repurchase Notice (as defined below),
and which offer either has been consummated and not withdrawn or terminated as
of the date payment of the Repurchase Price is made, or has been publicly
announced and the intention to make a tender or exchange offer has not been
withdrawn as of the date payment of the Repurchase Price is made, (y) the price
per share of Common Stock to be paid by any third party pursuant to a valid
agreement with Issuer for a merger, share exchange, consolidation or
reorganization entered into after the date hereof and on or prior to the
delivery of the Repurchase Notice or (z) the average closing price for shares of
Common Stock on the Nasdaq National Market (the "Nasdaq") (or, if the Common
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Stock is not then listed on the Nasdaq, any other national securities exchange
or automated quotation system on which the Common Stock is then listed or
quoted) for the twenty consecutive trading days immediately preceding the
delivery of the Repurchase Notice. In the event that a tender or exchange offer
is made for the Common Stock or an agreement is entered into for a merger, share
exchange, consolidation or reorganization involving consideration other than
cash, the value of the securities or other property issuable or deliverable in
exchange for the Common Stock shall be determined in good faith by a nationally
recognized investment banking firm mutually selected by Issuer and Holder or
Owner, as the case may be.
(b) Method of Repurchase. Subject to the terms of Section 8(a), Holder or
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Owner, as the case may be, may exercise its right to require Issuer to
repurchase the Option, in whole or in part, and/or any Option Shares then owned
by Holder or Owner pursuant to this Section 8 by surrendering for this purpose
to Issuer, at its principal office, this Agreement or certificates for Option
Shares, as applicable, accompanied by a written notice or notices stating that
Holder or Owner elects to require Issuer to repurchase the Option and/or such
Option Shares in accordance with the provisions of this Section 8 (each such
notice, a "Repurchase Notice"). Within four business days after the surrender
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of the Agreement for the Option and/or certificates representing Option Shares
and the receipt of the Repurchase Notice, Issuer shall deliver or cause to be
delivered to Holder or Owner of Option Shares, as the case may be, the
applicable Option Repurchase Price and/or the Option Share Repurchase Price or,
in either case, the portion that Issuer is not then prohibited under applicable
law and regulation from so delivering, in immediately available funds by a wire
transfer to a bank account designated by Grantee.
(c) Effect of Statutory or Regulatory Restraints on Repurchase. To the
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extent that, upon or following the delivery of a Repurchase Notice, Issuer is
prohibited under applicable law or regulation from repurchasing the Option (or a
portion thereof) and/or any Option Shares subject to this Repurchase Notice (and
Issuer hereby undertakes to use its reasonable best efforts
7
to obtain all required regulatory and legal approvals and to file any required
notices as promptly as practicable in order to accomplish this repurchase),
Issuer shall promptly so notify Holder or Owner, as the case may be, in writing
and thereafter deliver or cause to be delivered, from time to time, to Holder or
Owner, as the case may be, the portion of the Option Repurchase Price and the
Option Share Repurchase Price that Issuer is no longer prohibited from
delivering, within four business days after the date on which it is no longer so
prohibited; provided, however, that upon notification by Issuer in writing of
this prohibition, Holder or Owner, as the case may be, may, within 5 days of
receipt of this notification from Issuer, revoke in writing its Repurchase
Notice, whether in whole or to the extent of the prohibition, whereupon, in the
latter case, Issuer shall promptly (i) deliver to Holder or Owner, as the case
may be, that portion of the Option Repurchase Price and/or the Option Share
Repurchase Price that Issuer is not prohibited from delivering; and (ii) (a)
deliver to Holder with respect to the Option, a new Agreement evidencing the
right of Holder to purchase that number of shares of Common Stock for which the
surrendered Agreement was exercisable at the time of delivery of the Repurchase
Notice less the number of shares as to which the Option Repurchase Price has
theretofore been delivered to Holder, and/or (b) deliver to the owner of Option
Shares, with respect to its Option Shares, a certificate for the Option Shares
as to which the Option Share Repurchase Price has not theretofore been delivered
to such owner. Notwithstanding anything to the contrary in this Agreement,
including, without limitation, the time limitations on the exercise of the
Option, Holder may exercise the Option at least until 180 days after the date
upon which Issuer is no longer prohibited from delivering all of the Option
Repurchase Price.
(d) Major Transactions. Issuer hereby agrees that, prior to the
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occurrence of an Exercise Termination Event, Issuer shall not enter into or
agree to enter into any agreement for a Major Transaction unless the other party
or parties thereto agree to assume in writing Issuer's obligations under this
Agreement. "Major Transaction" shall mean any merger or consolidation
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involving the Issuer and any transaction involving a sale, transfer or other
disposition of a majority of the assets or shares of capital stock of the
Issuer.
9. Extension of Exercise Periods. The periods for exercise of certain
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rights under Sections 2 and 8 shall be extended in each such case at the request
of Holder or Owner to the extent necessary to avoid liability by a Holder or
Owner under Section 16(b) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), by reason of this exercise.
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10. Assignment. Neither party may assign any of its rights or obligations
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under this Agreement or the Option to any other person without the express
written consent of the other party except that Holder or Owner may assign its
rights in whole or in part to any of its affiliates and, in the event that a
Triggering Event shall have occurred prior to the occurrence of an Exercise
Termination Event, Holder or Owner may within 90 days following this Triggering
Event assign the Option or any of its other rights hereunder, in whole or in
part, to one or more third parties, provided that the affiliate and any such
third party shall execute this Agreement and agree to become subject to its
terms. Any attempted assignment in contravention of the preceding sentence
shall be null and void.
8
11. Filings; Other Actions. Each party will use its reasonable best
----------------------
efforts to make all filings with, and to obtain consents of, all third parties
and governmental authorities necessary for the consummation of the transactions
contemplated by this Agreement.
12. Specific Performance. The parties acknowledge that damages would be
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an inadequate remedy for a breach of this Agreement by either party and that the
obligations of the parties shall be specifically enforceable through injunctive
or other equitable relief.
13. Severability; Etc. If any term, provision, covenant, or restriction
------------------
contained in this Agreement is held by a court or a federal or state regulatory
agency of competent jurisdiction to be invalid, void, or unenforceable, the
remainder of the terms, provisions, covenants, and restrictions contained in
this Agreement shall remain in full force and effect, and shall in no way be
affected, impaired, or invalidated. If for any reason a court or regulatory
agency determines that Holder is not permitted to acquire, or Issuer is not
permitted to repurchase pursuant to Section 8, any portion of the Option or the
full number of shares of Common Stock provided in Section l (as adjusted
pursuant Section 7), it is the express intention of the parties to allow Holder
to acquire or to require Issuer to repurchase such lesser portion of the Option
or number of shares as may be permissible, without any amendment or modification
of this Agreement.
14. Notices. All notices, requests, instructions, or other documents to
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be given hereunder shall be furnished in accordance with Section 9.6 of the
Merger Agreement.
15. Expenses. Except as otherwise expressly provided in this Agreement
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or in the Merger Agreement, all costs and expenses incurred in connection with
this Agreement and the transactions contemplated by this Agreement shall be paid
by the party incurring the expense, including fees and expenses of its own
financial consultants, investment bankers, accountants and counsel.
16. Entire Agreement, Etc. This Agreement and Merger Agreement
----------------------
constitute the entire agreement, and supersede all other prior agreements,
understandings, representations and warranties, both written and oral, between
the parties, with respect to the subject matter of this Agreement. The terms and
conditions of this Agreement shall inure to the benefit of and be binding upon
the parties hereto and their respective successors and permitted assigns.
Nothing in this Agreement, expressed or implied, is intended to confer upon any
party, other than the parties, and their respective successors and permitted
assigns, any rights, remedies, obligations or liabilities under or by reason of
this Agreement, except as expressly provided in this Agreement.
17. Limitation on Profit. (a) Notwithstanding any other provision of
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this Agreement, in no event shall the Total Profit (as defined) plus any
Liquidation Amounts (as defined) exceed in the aggregate $2,500,000 and, if it
otherwise would exceed this amount, the Grantee, at its sole election, shall
either (i) reduce the number of shares of Common Stock subject to this Option,
(ii) deliver to the Issuer for cancellation Option Shares previously purchased
by Grantee or any other Holder or Owner, (iii) pay to the Issuer cash or refund
in cash Liquidation Amounts previously paid or reduce or waive the amount of any
Liquidation Amount payable pursuant to Section 9.3 of the Merger Agreement, or
(iv) any combination thereof, so
9
that Grantee's realized Total Profit, when aggregated with any Liquidation
Amounts so paid or payable to Grantee, shall not exceed $2,500,000 after taking
into account the foregoing actions.
The term "Liquidation Amounts" means the aggregate amount of any
-------------------
termination fee payable or paid to Grantee and its assigns pursuant to Section
9.3 of the Merger Agreement (and not repaid or refunded to the Issuer pursuant
to this Section 17 or otherwise).
(b) Notwithstanding any other provision of this Agreement, the Option may
not be exercised for a number of shares as would, as of the date of exercise,
result in a Notional Total Profit (as defined) which, together with any
Liquidation Amount theretofore paid or then payable to Grantee (and not repaid
or refunded to the Issuer pursuant to Section 17 or otherwise), would exceed
$2,500,000 provided, that nothing in this sentence shall restrict any exercise
of the Option permitted hereby on any subsequent date.
(c) As used in this Agreement, the term "Total Profit" shall mean the
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aggregate amount (before taxes) of the following: (i) (x) the amount received by
Grantee, any other Holder and any Owner pursuant to Issuer's repurchase of the
Option (or any portion) or any Option Shares pursuant to Section 8, less, in the
case of any repurchase of Option Shares, (y) the Grantee's, any other Holder's
and any Owner's purchase price for such Option Shares, as the case may be, (ii)
(x) the net cash amounts (and the fair market value of any other consideration)
received by Grantee, any other Holder and any Owner pursuant to the sale of
Option Shares (or any other securities into which such Option Shares are
converted or exchanged) to any unaffiliated party, less (y) the Grantee's (or
any other Holder's or Owner's) purchase price of such Option Shares, and (iii)
the net cash amounts (and the fair market value of any other consideration)
received by Grantee (or any other Holder) on the transfer of the Option (or any
portion thereof) to any unaffiliated party. In the case of clauses (ii)(x) and
(iii) above, the Grantee and each Holder and Owner agrees to furnish as promptly
as reasonably practicable after any disposition of all or a portion of the
Option or Option Shares a complete and correct statement, certified by a
responsible executive officer or partner of Grantee, Holder or Owner, as
applicable, of the net cash amounts (and the fair market value of any other
consideration) received in connection with any sale or transfer of the Option or
Option Shares.
(d) As used in this Agreement, the term "Notional Total Profit" with
---------------------
respect to any number of shares as to which Grantee and any other Holder may
propose to exercise the Option shall be the Total Profit determined as of the
date of such proposal (taking into account the provision of Section 17(a))
assuming that the Option were exercised on such date for such number of shares
and assuming that such shares, together with all other Option Shares held by
Grantee and any other Holders and Owners and their respective affiliates as of
such date were sold for cash at the closing market price for the Common Stock on
the Nasdaq National Market as of the close of business on the preceding trading
day (less customary brokerage commissions).
18. Captions. The section, paragraph and other captions in this
--------
Agreement are for convenience of reference only, do not constitute part of this
Agreement and shall not be deemed to limit or otherwise affect any of the
provisions of this Agreement.
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19. Counterparts. This Agreement may be executed in one or more
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counterparts, and by both parties in separate counterparts, each of which when
exercised shall be deemed to be an original, but all of which shall constitute
one and the same agreement.
20. Governing Law. This Agreement shall be governed by the internal
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laws of the State of Delaware without regard to the principles of conflicts of
law.
21. Definitions. For the purposes of this Agreement the following terms
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shall have the meanings specified below:
"Affiliate" shall mean, as to any Person, any other Person which directly
---------
or indirectly controls, or is under common control with, or is controlled by,
such Person. As used in this definition, "control" (including, with its
-------
correlative meanings, "controlled by" and "under common control with") shall
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mean the possession, directly or indirectly, of the power to direct or cause the
direction of management or policies, whether through ownership or securities or
partnership or other ownership interest, by contract or otherwise).
"Person" means an individual, corporation, partnership, limited liability
------
company, association, trust, unincorporated organization, entity or group (as
defined in the Exchange Act).
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IN WITNESS WHEREOF, this Stock Option Agreement has been duly executed and
delivered by the duly authorized officers of the parties hereto as of the date
first written above.
THE ALTHEXIS COMPANY, INC.
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Title: Chief Executive Officer
MICROCIDE PHARMACEUTICALS, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
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Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: President and Chief Executive
Officer