Document:

Exhibit 10.17

 

EIGHTH AMENDED
AND RESTATED

 

INVESTOR
RIGHTS AGREEMENT

 

This Eighth Amended and Restated Investor
Rights Agreement (this “Agreement”) is entered into as of August 30,
2004 by and among Sunesis Pharmaceuticals Incorporated, a Delaware corporation
(the “Company”), Alexandria Real Estate Equities, L.P., a Delaware
limited partnership (“Alexandria”), the holder or holders of that
certain warrant, dated May 10, 1998, to purchase 175,000 shares (the “Warrant
Stock”) of the Company’s Common Stock, and the holders of the Company’s
Series A Preferred Stock (the “Series A Preferred Stock”), Series B
Preferred Stock (the “Series B Preferred Stock”), Series C Preferred
Stock (the “Series C Preferred Stock”) and Series C-1 Preferred Stock (“Series
C-1 Preferred Stock”) listed on Exhibit A attached hereto
(collectively with Alexandria, the “Prior Investors”) and the purchaser
of the Company’s Series C-2 Preferred Stock, Biogen Idec MA, a Massachusetts
corporation (the “Additional Investor”). 
The Prior Investors and the Additional Investor are collectively
referred to hereinafter as the “Investors” and each individually as an “Investor.”

 

RECITALS

 

A.            The Prior Investors
hold shares of the Company’s Warrant Stock, Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock, Series C-1 Preferred Stock and/or
Series C-2 Preferred Stock (“Shares”) and possess registration and other
rights pursuant to the Seventh Amended and Restated Investor Rights Agreement
dated December 18, 2002 (the “Prior Agreement”);

 

B.            The Company and the
Prior Investors desire to amend and restate the Prior Agreement to provide the
holders of the Warrant Stock, Series A Preferred Stock, Series B Preferred
Stock, Series C Preferred Stock and/or Series C-1 Preferred Stock with the
rights pursuant to this Agreement in lieu of the rights granted under the Prior
Agreement;

 

C.            The Company proposes
to sell and issue up to two million nine hundred sixteen thousand six hundred
and sixty-seven (2,916,667) shares of its Series C-2 Preferred Stock (the “Series
C-2 Preferred Stock”) pursuant to the Series C-2 Preferred Stock Purchase
Agreement of even date herewith by and between the Company and the Additional
Investor (the “Purchase Agreement”);

 

D.            As a condition of
entering into the Purchase Agreement, the Additional Investor has requested
that the Company extend to it registration rights, information rights and other
rights as set forth below.

 

AGREEMENT

 

NOW,
THEREFORE, in
consideration of the mutual promises and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the Prior Investors hereby agree that the Prior Agreement shall be superseded
and replaced in its entirety by this Agreement, and the parties hereto agree as
follows:

 

 

1.             Certain Definitions.  As used in this Agreement, the following
terms shall have the following respective meanings:

 

1.1           “Commission” shall mean the
Securities and Exchange Commission or any other federal agency at the time
administering the Securities Act.

 

1.2           “CSFBEP” shall mean Credit
Suisse First Boston Equity Partners, L.P., a Delaware limited partnership.

 

1.3           “Holder” shall mean the
Investors holding Registrable Securities or securities convertible into
Registrable Securities and any person holding such securities to whom the
rights under this Agreement have been transferred in accordance with
Section 3.9 hereof.

 

1.4           “Initiating Holders” shall
mean any Holder or Holders who in the aggregate hold at least 50% of the
Registrable Securities, or 30% of the Common Stock issuable upon conversion of
the Series C Preferred Stock.

 

1.5           “Preferred Stock” shall mean
shares of the Company’s Series A Preferred Stock, Series B Preferred
Stock, Series C Preferred Stock, Series C-1 Preferred Stock and
Series C-2 Preferred Stock.

 

1.6           “Registrable Securities” means
(i) the Common Stock issued or issuable upon conversion of the Preferred Stock
(the “Conversion Stock”) (ii) any Common Stock of the Company issued or
issuable with respect to, or in exchange for or in replacement of, the
Conversion Stock or other securities convertible into or exercisable for the
Preferred Stock upon any stock split, stock dividend, recapitalization, or
similar event, (iii) the Warrant Stock and any shares of Common Stock issued or
issuable with respect to, in exchange for or in replacement of, the Warrant
Stock or other securities convertible into or excisable for the Warrant Stock
upon any stock split, stock dividend, recapitalization or similar event; (iv)
any Common Stock issued or issuable to any of the Investors with respect to the
securities held by such Investors by way of a stock dividend or stock split or
in connection with a combination of shares, recapitalization, merger,
consolidation or other reorganization or otherwise and any Common Stock or
shares of voting common stock issuable upon conversion, exercise or exchange
thereof and (v) for the purposes of Section 3.2 only, all shares of
Common Stock originally issued to James Wells and Jonathan Ellman; provided however,
that shares of Common Stock or other securities shall only be treated as
Registrable Securities of a Holder for the purposes of this Agreement (A) if
and so long as they have not been sold by such Holder to or through a broker or
dealer or underwriter in a public distribution or a public securities
transaction, or (B) prior to the date such securities have been sold or are all
available for immediate sale in the opinion of counsel to the Company in a
transaction exempt from the prospectus delivery requirements of the Securities
Act so that all transfer restrictions and legends with respect thereto are
removed upon the consummation of such sale.

 

1.7           The terms “register,” “registered”
and “registration” refer to a registration effected by preparing and
filing a registration statement in compliance with the Securities Act, and the
declaration or ordering of the effectiveness of such registration statement.

 

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1.8           “Registration Expenses” shall
mean all expenses, except as otherwise stated below, incurred by the Company in
complying with Sections 3.1, 3.2 and 3.3 hereof, including, without
limitation, all registration, qualification and filing fees, printing expenses,
escrow fees, reasonable fees and disbursements of counsel for the Company, fees
and disbursement of one counsel to the Holders, blue sky fees and expenses, the
expense of any special audits incident to or required by any such registration
(but excluding Selling Expenses).

 

1.9           “Restricted Securities” shall
mean the securities of the Company required to bear the legend set forth in
Section 2.2 hereof.

 

1.10         “Securities Act” shall mean the
Securities Act of 1933, as amended, or any similar federal statute and the
rules and regulations of the Commission thereunder, all as the same shall be in
effect at the time.

 

1.11         “Selling Expenses” shall mean
all underwriting discounts, selling commissions and stock transfer taxes, if
any, applicable to the securities registered by the Holders.

 

2.             Transferability.

 

2.1           Restrictions on Transferability.  The Shares and the Registrable Securities
shall not be sold, assigned, transferred or pledged except upon the conditions
specified in this Section 2, which conditions are intended to ensure
compliance with the provisions of the Securities Act.  The Investors shall cause any proposed
purchaser, assignee, transferee, or pledgee of the Shares or the Registrable
Securities held by the Investors to agree to take and hold such securities subject
to the provisions and upon the conditions specified in this Section 2.

 

2.2           Restrictive Legend.  Each certificate representing (i) the Shares,
(ii) the Registrable Securities and (iii) any other securities issued in
respect of the Shares or the Registrable Securities upon any stock split, stock
dividend, recapitalization, merger, consolidation or similar event, shall
(unless otherwise permitted by the provisions of Section 2.3 below) be
stamped or otherwise imprinted with a legend in substantially the following
form (in addition to any legend required under applicable state securities
laws):

 

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED.  SUCH SECURITIES MAY NOT BE SOLD
OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION UNLESS THE TRANSFER IS IN
ACCORDANCE WITH RULE 144 OR SIMILAR RULE OR UNLESS THE COMPANY
RECEIVES AN OPINION OF COUNSEL REASONABLY ACCEPTABLE TO IT STATING THAT SUCH
SALE OR TRANSFER IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY
REQUIREMENTS OF SUCH ACT.

 

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The Investors and Holders consent to the
Company making a notation on its records and giving instructions to any
transfer agent of the Shares or the Registrable Securities in order to
implement the restrictions on transfer established in this Section 2.

 

2.3           Notice of Proposed Transfers.  The holder of each certificate representing
Restricted Securities by acceptance thereof agrees to comply in all respects
with the provisions of this Section 2.3. 
Prior to any proposed sale, assignment, transfer or pledge of any
Restricted Securities (other than (i) a transfer not involving a change in
beneficial ownership, or (ii) in transactions involving the distribution without
consideration of Restricted Securities by the Investors to any of their
shareholders, partners, or retired partners, or to the estate of any of their
shareholders, partners or retired partners, (iii) a transfer to an affiliated
fund, partnership or company, which is not a competitor of the Company, subject
to compliance with applicable securities laws, or (iv) transfers in compliance
with Rule 144, so long as the Company is furnished with satisfactory
evidence of compliance with such rule), unless there is in effect a
registration statement under the Securities Act covering the proposed transfer,
the holder thereof shall give written notice to the Company of such holder’s
intention to effect such transfer, sale, assignment or pledge.  Each such notice shall describe the manner
and circumstances of the proposed transfer, sale, assignment or pledge in
sufficient detail, and shall be accompanied, at such holder’s expense by either
(i) a written opinion of legal counsel who shall, and whose legal opinion shall,
be reasonably satisfactory to the Company addressed to the Company, to the
effect that the proposed transfer of the Restricted Securities may be effected
without registration under the Securities Act, or (ii) a “no action” letter
from the Commission to the effect that the transfer of such securities without
registration will not result in a recommendation by the staff of the Commission
that action be taken with respect thereto, whereupon the holder of such
Restricted Securities shall be entitled to transfer such Restricted Securities
in accordance with the terms of the notice delivered by the holder to the
Company.  Each certificate evidencing the
Restricted Securities transferred as above provided shall bear, except if such
transfer is made pursuant to Rule 144, the appropriate restrictive legend
set forth in Section 2.2 above, except that such certificate shall not
bear such restrictive legend if in the opinion of counsel for such holder and
in the reasonable opinion of the Company such legend is not required in order
to establish compliance with any provision of the Securities Act.

 

2.4           Removal of Restrictions on
Transfer of Securities.  Any legend
referred to in Section 2.2 hereof stamped on a certificate evidencing (i)
the Shares, (ii) the Registrable Securities or (iii) any other securities
issued in respect of the Shares or the Registrable Securities upon any stock
split, stock dividend, recapitalization, merger, consolidation or similar event
and the stock transfer instructions and record notations with respect to such
security shall be removed and the Company shall issue a certificate without
such legend to the holder of such security if such security is registered under
the Securities Act, or if such holder provides the Company with an opinion of counsel
(which may be counsel for the Company) reasonably acceptable to the Company to
the effect that a public sale or transfer of such security may be made without
registration under the Securities Act or (iii) such holder provides the Company
with reasonable assurances, which may, at the reasonable option of the Company,
include an opinion of counsel satisfactory to the Company, that such security
can be sold pursuant to Section (k) of Rule 144 under the Securities
Act.

 

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3.             Registration Rights.

 

3.1           Requested Registration.

 

(a)           Requested Registration.  Subject to the provisions of this
Section 3.1(a), if at any time (x) holders of more than 50% of the shares
of Registrable Securities request that the Company (A) file a registration
statement for at least 30% of the shares of Registrable Securities or (B)
effect a registration in which the anticipated aggregate proceeds, net of
underwriting discounts and commissions, would exceed $10,000,000; or (y)
holders of 30% or more of the shares of Series C Preferred Stock request
(but not before six months after the effective date of the Company’s first
registered public offering of its stock pursuant to a firm commitment
underwritten offering) that the Company (A) file a registration statement for
at least 30% of the Common Stock issued upon conversion of the Series C
Preferred Stock or (B) effect a registration in which the anticipated aggregate
proceeds of which, net of underwriting discounts and commissions, would exceed
$10,000,000, the Company will:

 

(i)            within
ten days of the receipt by the Company of such notice, give written notice of
the proposed registration, qualification or compliance to all other Holders;
and

 

(ii)           as
soon as practicable and in any event within 60 days, use commercially
reasonable efforts to effect such registration, qualification or compliance
(including, without limitation, appropriate qualification under applicable blue
sky or other state securities laws and appropriate compliance with applicable
regulations issued under the Securities Act and any other governmental
requirements or regulations) as may be so requested and as would permit or
facilitate the sale and distribution of all or such portion of such Registrable
Securities as are specified in such request, together with all or such portion
of the Registrable Securities of any Holder or Holders joining in such request
as are specified in a written request received by the Company within 20 days
after the date of such written notice from the Company;

 

provided, however, that the Company shall not
be obligated to take any action to effect any such registration, qualification
or compliance pursuant to this Section 3.1:

 

(1)           Prior to the earlier of June 30,
2006, or the date six months following the effective date of the Company’s
first registered public offering of its stock, pursuant to a firm commitment
underwritten offering;

 

(2)           In any particular jurisdiction in
which the Company would be required to execute a general consent to service of
process in effecting such registration, qualification or compliance unless the
Company is already subject to service in such jurisdiction and except as may be
required by the Securities Act;

 

(3)           During the period starting with the
date 60 days prior to the Company’s good faith estimated date of filing of, and
ending on the date 180 days immediately following the effective date of, any
registration statement pertaining to securities of the Company (other than a
registration of securities in a Rule 145 transaction or with respect to an
employee benefit plan, in which case there shall be no such limitation on the
Company’s obligation, or with respect to the Company’s first registered public
offering of its stock in which

 

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case the period shall
end on the date six months following the effective date of the registration
statement), provided that the Company is actively employing in good faith all
reasonable efforts to cause such registration statement to become effective;

 

(4)           After the Company has effected two
such registrations pursuant to Section 3.1(a)(x) or two such registrations
pursuant to Section 3.1(a)(y), respectively, it being understood that (x)
two or more registration statements filed in response to one request shall be
deemed the exercise of one request only and (y) a request shall not have been
deemed to be made unless a registration statement is filed and declared
effective by the Commission for at least 30 days or until all Registrable
Securities proposed to be distributed thereunder are so distributed.

 

(5)           If the Company shall furnish to such
Holders a certificate signed by the President of the Company stating that in
the good faith judgment of the Board of Directors it would be seriously detrimental
to the Company or its stockholders for a registration statement to be filed in
the near future, then the Company’s obligation to use commercially reasonable
efforts to register, qualify or comply under this Section 3.1 shall be
deferred for a period not to exceed 120 days from the date of the written
request from the Initiating Holders; provided, however, that the Company shall
not exercise such right more than once in any 12 month period; or

 

(6)           If such Holders propose to dispose of
shares of Registrable Securities that may be immediately registered on Form S-3
pursuant to a request made under the provisions of Section 3.3 hereof.

 

Subject to the foregoing clauses (1) through
(6), the Company shall file a registration statement covering the Registrable
Securities so requested to be registered as soon as practicable after receipt
of the request or requests of the Initiating Holders.

 

(b)           Underwriting.  In the event that a registration pursuant to
Section 3.1 is for a registered public offering involving an underwriting,
the Company shall so advise the Holders as part of the notice given pursuant to
Section 3.1(a)(i).  In such event,
the right of any Holder to registration pursuant to Section 3.1 shall be
conditioned upon such Holder’s participation in the underwriting arrangements
required by this Section 3.1, and the inclusion of such Holder’s
Registrable Securities in the underwriting to the extent requested shall be
limited to the extent provided herein.

 

The Company shall (together with all Holders
proposing to distribute their securities through such underwriting) enter into
an underwriting agreement in customary form with the managing underwriter of
recognized national standing selected for such underwriting by the Company and
reasonably acceptable to a majority of the Holders that initiated such
registration pursuant to Section 3.1(a)(x) or 3.1(a)(y), as the case may
be. Notwithstanding any other provision of this Section 3.1, if the
managing underwriter (or underwriters) determines that marketing factors
require a limitation of the number of shares to be underwritten, then the
Company shall so advise all Holders of Registrable Securities, and the number
of shares of Registrable Securities that may be included in the registration
and underwriting shall be allocated among all Holders thereof in proportion, as
nearly as practicable, to the respective amounts of

 

6

 

Registrable
Securities requested by such Holders to be included in such registration statement
or in such other manner as shall be agreed to by the Company and Holders of at
least 66 2/3% of the Registrable Securities proposed to be included in such
registration.  No Registrable Securities
excluded from the underwriting by reason of the underwriter’s marketing
limitation shall be included in such registration.  To facilitate the allocation of shares in
accordance with the above provisions, the Company or the underwriters may round
the number of shares allocated to any Holder to the nearest 100 shares.  In no event shall the number of Registrable
Securities underwritten in an offering be limited unless and until all shares
held by persons other than the Holders of Registrable Securities are completely
excluded from such offering.

 

If any Holder of Registrable Securities
disapproves of the terms of the underwriting, such Holder may elect to withdraw
therefrom by written notice to the Company, the managing underwriter and the
Initiating Holders.  The Registrable
Securities and/or other securities so withdrawn shall also be withdrawn from
registration, and such Registrable Securities shall not be transferred in a
public distribution prior to 180 days after the effective date of such
registration, or such other shorter period of time as the underwriters may
require.  The Company may impose stop
transfer instructions with its transfer agent in order to enforce the foregoing
covenant.

 

3.2           Company Registration.

 

(a)           Notice of Registration.  If at any time or from time to time the
Company shall determine to register any of its securities, either for its own
account or the account of a security holder or holders, other than (i) a
registration relating solely to employee benefit plans, (ii) a registration
relating solely to a Commission Rule 145 transaction (iii) a registration
pursuant to Section 3.1 hereof, or (iv) the initial public offering of the
Company’s securities, the Company will:

 

(i)            promptly
give to each Holder written notice thereof, and

 

(ii)           include
in such registration (and any related qualification under blue sky laws or
other compliance), and in any underwriting involved therein, all the
Registrable Securities specified in a written request or requests, made within
20 days after the date of such written notice from the Company, by any Holder.

 

(b)           Underwriting.  If the registration of which the Company
gives notice is for a registered public offering involving an underwriting, the
Company shall so advise the Holders as a part of the written notice given
pursuant to Section 3.2(a)(i).  In
such event the right of any Holder to registration pursuant to this
Section 3.2 shall be conditioned upon such Holder’s participation in such
underwriting and the inclusion of Registrable Securities in the underwriting to
the extent provided herein.

 

All Holders proposing to distribute their
securities through such underwriting shall (together with the Company) enter
into an underwriting agreement in customary form with the managing underwriter
selected for such underwriting by the Company. 
Notwithstanding any other provision of this Section 3.2, if the
managing underwriter determines that marketing factors require a limitation of
the number of shares to be underwritten, the number of shares of Registrable
Securities that may be included in such registration by the Holders shall be
reduced,

 

7

 

but in no
event shall the number of shares of Registrable Securities of the selling
Holders included in the registration be reduced below twenty-five percent (25%)
of the total amount of securities included in such registration.  The Company shall so advise all Holders
distributing their securities through such underwriting of such limitation and
the number of shares of Registrable Securities that may be included in the
registration, and underwriting, shall be allocated among all Holders in
proportion, as nearly as practicable, to the respective amounts of Registrable
Securities requested by such Holders to be included in the registration
statement.  To facilitate the allocation
of shares in accordance with the above provisions, the Company may round the
number of shares allocated to any Holder to the nearest 100 shares.

 

If any Holder or Holders disapprove of the
terms of any such underwriting, such Holder or Holders may elect to withdraw
therefrom by written notice to the Company and the managing underwriter.  Any Registrable Securities and/or securities
excluded or withdrawn from such underwriting shall be withdrawn from such
registration, and shall not be transferred in a public distribution prior to
180 days after the effective date of the registration statement relating
thereto, or such other shorter period of time as the underwriters may require.

 

(c)           Priority in Registration.  Notwithstanding anything in
paragraphs (a) or (b) above to the contrary, if the managing underwriter
of any underwritten offering covered by paragraphs (a) or (b) shall inform
the Company in writing of its belief that the number or type of Registrable
Securities requested to be included in such registration would materially and
adversely affect such offering, then the Company shall include in such
registration, to the extent of the number and type that the Company is so
advised can be sold in (or during the time of) such offering, first, all
securities proposed by the Company to be sold for its own account, second,
Registrable Securities requested to be included in such registration pro rata
among the holders of the Preferred Stock and the Warrant Stock (other than
shares of Common Stock originally issued to James A. Wells and Jonathan A.
Ellman) and third, shares of Common Stock originally issued to James A. Wells
and Jonathan A. Ellman requested to be included in such registration pro rata
among such individuals on the basis of the percentage of the aggregate
securities requested to be so included.

 

(d)           Right to Terminate Registration.  The Company shall have the right to terminate
or withdraw any registration initiated by it under this Section 3.2 prior
to the effectiveness of such registration whether or not any Holder has elected
to include securities in such registration. 
The Registration Expenses of such withdrawn registration shall be borne
by the Company in accordance with Section 3.4 hereof.

 

3.3           Registration on Form S-3.

 

(a)           If any Holder or Holders holding at
least 5% of the Registrable Securities requests that the Company file a
registration statement on Form S-3, or any similar short form registration
statement, for a public offering of Registrable Securities, the reasonably
anticipated aggregate proceeds to the seller, net of underwriting discounts and
commissions, would exceed $2,000,000 and the Company is a registrant entitled
to use Form S-3 to register the Registrable Securities for such an offering,
the Company shall (i) promptly give to each Holder written notice of such
Registration, (ii) include in such registration, and in any underwriting
involved therein, all the Registrable Securities specified in a written request
or requests made

 

8

 

within 20 days after
the date of such written notice from the Company and (iii) use
commercially reasonable efforts to cause such Registrable Securities to be
registered on such form for the offering and to cause such Registrable
Securities to be qualified in such jurisdictions as the Holder or Holders may
reasonably request; provided, however, that the Company shall not be required
to effect more than one such registration in any 12 month period.  The provisions of Section 3.1(b) shall
be applicable to each registration initiated under this Section 3.3.

 

(b)           Notwithstanding the foregoing, the
Company shall not be obligated to take any action pursuant to this
Section 3.3:  (i) in any particular
jurisdiction in which the Company would be required to execute a general
consent to service of process in effecting such registration, qualification or
compliance unless the Company is already subject to service in such
jurisdiction and except as may be required by the Securities Act; (ii) if the
Company, within ten days of the date of the request of the initiating Holders,
gives notice of its bona fide intention to effect the filing of a registration
statement with the Commission within 60 days of the date of such request (other
than with respect to a registration statement relating to a Rule 145
transaction, or an offering solely to employees); (iii) during the period
starting with the date 60 days prior to the Company’s estimated date of filing
of, and ending on the date six months immediately following, the effective date
of any registration statement pertaining to securities of the Company (other
than a registration of securities in a Rule 145 transaction or with
respect to an employee benefit plan), provided that the Company is actively
employing in good faith all reasonable efforts to cause such registration
statement to become effective; (iv) if the Company shall furnish to such Holder
a certificate signed by the President of the Company stating that in the good
faith judgment of the Board of Directors it would be seriously detrimental to
the Company or its stockholders for registration statements to be filed in the
near future, then the Company’s obligation to use its best efforts to file a
registration statement shall be deferred for a period not to exceed 120 days
from the date of the request to file such registration by such Holder;
provided, however, that the Company shall not exercise such right more than
once in any 12 month period; or (v) if the Company has, within the 12 month
period preceding the date of such request, already effected a registration
pursuant to this Section 3.

 

3.4           Expenses of Registration.  All Registration Expenses incurred in
connection with registrations pursuant to Sections 3.1, 3.2 and 3.3,
exclusive of any Selling Expenses, shall be borne by the Company.  All Selling Expenses relating to securities
registered on behalf of the Holders shall be borne by the holders of securities
included in such registration pro rata with the Company and among each other on
the basis of the number of shares so registered; provided, however, that the
Company shall not be required to pay for any expenses of any registration
proceeding begun pursuant to Section 3.1 if the registration request is
subsequently withdrawn at the request of the Holders of a majority of the
Registrable Securities to be registered (in which case all participating
Holders shall bear such expenses), unless the Holders of a majority of the
Registrable Securities agree to forfeit their right to a demand registration
pursuant to Section 3.1, provided further, however, that if at the time of
such withdrawal, the Holders have learned of a materially adverse change in the
condition, business, or prospects of the Company that did not exist at the time
of their request, and have withdrawn the request promptly following disclosure
of such materially adverse change, then the Holders shall not be required to
pay any of such expenses and shall retain their rights pursuant to
Section 3.1, if applicable.

 

9

 

3.5           Registration Procedures.  In the case of each registration,
qualification or compliance effected by the Company pursuant to this
Section 3, the Company will keep each Holder advised in writing as to the
initiation of each registration, qualification and compliance and as to the
completion thereof.  At its expense the
Company will:

 

(a)           Prepare and file with the Commission
a registration statement with respect to such securities and use commercially
reasonable efforts to cause such registration statement to become and remain
effective for at least 30 days or until the distribution described in the
Registration Statement has been completed.

 

(b)           Prepare and file with the Commission
such amendments and supplements to such registration statement and the
prospectus used in connection with such registration statement as may be
necessary to comply with the provisions of the Securities Act with respect to
the disposition of all securities covered by such registration statement.

 

(c)           Furnish to the Holders participating
in such registration and to the underwriters of the securities being registered
such reasonable number of copies of the registration statement, preliminary
prospectus, final prospectus and such other documents as such underwriters may
reasonably request in order to facilitate the public offering of such
securities.

 

(d)           Furnish, at the request of a majority
in interest of Holders participating in the registration, on the date such
Registrable Securities are delivered to the underwriters for sale, if such
securities are being sold through underwriters or if such securities are not
being sold through underwriters, on the date that the registration statement
with respect to such securities becomes effective, (i) an opinion, dated such
date, of the counsel representing the Company for the purposes of such
registration, in form and substance as is customarily given to underwriters in
an underwritten public offering, and reasonably satisfactory to a majority in
interest of the Holders requesting registration addressed to the underwriters,
if any, and to the Holders requesting registration of Registrable Securities
and (ii) a letter dated such date, from the independent accountants of the
Company, in form and substance as is customarily given by independent
accountants to underwriters in an underwritten public offering and reasonably
satisfactory to a majority in interest of the Holders requesting registration,
addressed to the underwriters, if any, and to the Holders requesting
registration of Registrable Securities.

 

(e)           Use commercially reasonable efforts
to register and qualify the securities covered by such registration statement
under such other securities or Blue Sky laws of such jurisdiction as shall be
reasonably requested by the Holders, provided that the Company shall not be
required in connection therein or as a condition thereto to qualify to do
business or to file a general consent to service of process in any such states
or jurisdictions.

 

(f)            In the event of any underwritten
public offering, enter into and perform its obligations under an underwriting
agreement, in usual and customary form, with the managing underwriter(s) of
such offering.  Each holder participating
in such underwriting shall also enter into and perform its obligations under
such agreement.

 

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(g)           Notify each Holder of Registrable
Securities covered by such registration statement at any time when a prospectus
relating thereto is required to be delivered under the Securities Act of the
happening of any event as a result of which the prospectus included in such
registration statement, as then in effect, includes an untrue statement of a
material fact or omits to state a material fact required to be stated therein
or necessary to make the statements therein not misleading in the light of the
circumstances then existing.

 

(h)           Cause all such Registrable Securities
to be listed on each securities exchange on which similar securities of the
Company are listed, or on such other nationally recognized securities exchange
as agreed to by the Company and the Holders.

 

(i)            Take such other action as may be
reasonably required to effect a registration and distribution, including
causing its officers to participate in “road shows” and other information
meetings organized by the underwriter of the Company.

 

3.6           Indemnification.

 

(a)           To the extent permitted by law, the
Company will indemnify each Holder, each of its officers, directors, partners,
and each person controlling such Holder within the meaning of Section 15
of the Securities Act, with respect to which registration, qualification or
compliance has been effected pursuant to this Section 3, and each
underwriter, if any, and each person who controls any underwriter within the meaning
of Section 15 of the Securities Act, against all expenses, claims, losses,
damages and liabilities (or actions in respect thereof), including any of the
foregoing incurred in settlement of any litigation, commenced or threatened,
arising out of or based on any untrue statement (or alleged untrue statement)
of a material fact contained in any registration statement, prospectus,
offering circular or other document, or any amendment or supplement thereto,
incident to any such registration, qualification or compliance, or based on any
omission (or alleged omission) to state therein a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading, or any violation by the
Company of the Securities Act or any rule or regulation promulgated under
the Securities Act applicable to the Company in connection with any such
registration, qualification or compliance, and the Company will reimburse each
such Holder, each of its officers, directors, partners, and each person
controlling such Holder, each such underwriter and each person who controls any
such underwriter, for any legal and any other expenses reasonably incurred in
connection with investigating, preparing or defending any such claim, loss,
damage, liability or action, provided that the Company will not be liable in
any such case to the extent that any such claim, loss, damage, liability or
expense arises out of or is based on any untrue statement or omission or
alleged untrue statement or omission, made in reliance upon and in conformity
with written information furnished to the Company by an instrument duly
executed by such Holder, controlling person or underwriter and stated to be
specifically for use therein, or the failure of such Holder to deliver a
prospectus that was delivered to the Holder prior to a sale or sales by such
Holder.

 

(b)           To the extent permitted by law, each
Holder will, if Registrable Securities held by such Holder are included in the
securities as to which such registration, qualification or compliance is being
effected, indemnify the Company, each of its directors, officers, and each
underwriter, if any, of the Company’s securities covered by such a registration

 

11

 

statement, each
person who controls the Company or such underwriter within the meaning of
Section 15 of the Securities Act, and each other Holder, each of its
officers, directors, partners and each person controlling such Holder within
the meaning of Section 15 of the Securities Act, against all expenses,
claims, losses, damages and liabilities (or actions in respect thereof),
including any of the foregoing incurred in settlement of any litigation,
commenced or threatened, arising out of or based on any untrue statement (or
alleged untrue statement) of a material fact contained in any registration
statement, prospectus, offering circular or other document, or any amendment or
supplement thereto, incident to any such registration, qualification or compliance,
or any omission (or alleged omission) to state therein a material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances in which they were made, not misleading, and will reimburse
the Company, such Holders, such directors, officers, persons, underwriters or
control persons for any legal or any other expenses reasonably incurred in
connection with investigating, preparing or defending any such claim, loss,
damage, liability or action, in each case to the extent, but only to the
extent, that such untrue statement (or alleged untrue statement) or omission
(or alleged omission) is made in such registration statement, prospectus,
offering circular or other document in reliance upon and in conformity with
written information furnished to the Company by an instrument duly executed by
such Holder and stated to be specifically for use therein.  Notwithstanding the foregoing, the liability
of each Holder under this subsection (b) shall be limited to the proportion of
any such loss, claim, damage, liability or expense that is equal to the
proportion that the public offering price of the shares sold by such Holder
under such registration statement bears to the total public offering price of
all securities sold thereunder, but not to exceed the proceeds received by such
Holder from the sale of Registrable Securities covered by such registration
statement unless such liability resulted from willful misconduct by such
Holder.  A Holder will not be required to
enter into any agreement or undertaking in connection with any registration
under this Section 3 providing for any indemnification or contribution on
the part of such Holder greater than the Holder’s obligations under this
Section 3.6(b).  Notwithstanding the
preceding sentence, to the extent that the provisions on indemnification and
contribution contained in the underwriting agreement entered into in connection
with the underwritten public offering (“Underwriting Agreement”) are in
conflict with the foregoing provisions, the provisions in the Underwriting
Agreement shall control.

 

(c)           Each party entitled to
indemnification under this Section 3.6 (the “Indemnified Party”)
shall give notice to the party required to provide indemnification (the “Indemnifying
Party”) promptly after such Indemnified Party has actual knowledge of any
claim as to which indemnity may be sought, and shall permit the Indemnifying
Party to assume the defense of any such claim or any litigation resulting
therefrom, provided that counsel for the Indemnifying Party, who shall conduct
the defense of such claim or litigation, shall be approved by the Indemnified
Party (whose approval shall not unreasonably be withheld), and the Indemnified
Party may participate in such defense at such Indemnified Party’s expense, and
provided further that the failure of any Indemnified Party to give notice as
provided herein shall not relieve the Indemnifying Party of its obligations
under this Section 3 unless the failure to give such notice is materially prejudicial
to an Indemnifying Party’s ability to defend such action and provided further,
that the Indemnifying Party shall not assume the defense for matters as to
which there is a conflict of interest or separate and different defenses but
shall bear the expense of such defense nevertheless.  No Indemnifying Party, in the defense of any
such claim or litigation, shall, except with the consent of each Indemnified
Party, consent to entry of any

 

12

 

judgment or enter
into any settlement which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such Indemnified Party of a release from
all liability in respect to such claim or litigation.

 

(d)           If the indemnification provided for
in paragraphs (a) through (c) of this Section 3.6 is unavailable or
insufficient to hold harmless an Indemnified Party under such
paragraphs in respect of any losses, claims, damages or liabilities or
actions in respect thereof referred to therein, then each Indemnifying Party
shall in lieu of indemnifying such Indemnified Party contribute to the amount
paid or payable by such Indemnified Party as a result of such losses, claims,
damages, liabilities or actions in such proportion as appropriate to reflect
the relative fault of the Company, on the one hand, and the underwriters and
the Holder of such Registrable Securities, on the other, in connection with the
statements or omissions that resulted in such losses, claims, damages,
liabilities or actions as well as any other relevant equitable considerations,
including the failure to give any notice under paragraph (c).  The relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue
statement of a material fact relates to information supplied by the Company, on
the one hand, or the underwriters or the Holders of such Registrable
Securities, on the other, and to the parties’ relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission.  The Company and each of the
Holders agrees that it would not be just and equitable if contributions
pursuant to this paragraph were determined by pro rata allocation (even if
all of the Holders of such Registrable Securities were treated as one entity
for such purpose) or by any other method of allocation which did not take
account of the equitable considerations referred to above in this
paragraph.  The amount paid or payable by
an Indemnified Party as a result of the losses, claims, damages, liabilities or
action in respect thereof, referred to above in this paragraph, shall be deemed
to include any legal or other expenses reasonably incurred by such Indemnified
Party in connection with investigating or defending any such action or
claim.  Notwithstanding the provisions of
this paragraph, no Holder shall be required to contribute any amount in excess
of the lesser of (i) the proportion that the public offering price of shares
sold by such Holder under such registration statement bears to the total public
offering price of all securities sold thereunder, but not to exceed the
proceeds received by such Holder for the sale of Registrable Securities covered
by such registration statement; except in the case of willful misconduct by
such Holder and (ii) the amount of any damages that they would have otherwise
been required to pay by reason of such untrue or alleged untrue statement or
omission.  No person guilty of fraudulent
misrepresentations (within the meaning of Section 11(f) of the Securities
Act) shall be entitled to contribution from any person who is not guilty of
such fraudulent misrepresentation.

 

(e)           If the Underwriting Agreement
conflicts with the foregoing, the terms of the Underwriting Agreement shall
prevail.

 

(f)            The obligations of the Company and
Holders under this Section 3.6 shall survive the completion of any
offering of Registrable Securities in a registration statement under this
Section 3, and otherwise.

 

3.7           Information by Holder.  The Holder or Holders of Registrable
Securities included in any registration shall furnish to the Company such
information regarding such Holder or Holders, the Registrable Securities held
by them and the distribution proposed by such

 

13

 

Holder or Holders as
the Company may request in writing and as shall be required in connection with
any registration, qualification or compliance referred to in this
Section 3.

 

3.8           Rule 144 Reporting.  With a view to making available the benefits
of certain rules and regulations of the Commission that may at any time permit
the sale of the Restricted Securities to the public without registration, after
such time as a public market exists for the Common Stock of the Company, the
Company agrees to use commercially reasonable efforts to:

 

(a)           Make and keep public information
available, as those terms are understood and defined in Rule 144 under the
Securities Act, at all times after 90 days after the effective date that the
Company becomes subject to the reporting requirements of the Securities Act or
the Securities Exchange Act of 1934, as amended (the “Exchange Act”), so
long as the Company remains subject to the periodic reporting requirements
under Section 13 or 15(d) of the Exchange Act.

 

(b)           File with the Commission in a timely
manner all reports and other documents required of the Company under the
Securities Act and the Exchange Act (at any time after it has become subject to
such reporting requirements);

 

(c)           Register its Common Stock under
Section 12 of the Exchange Act as soon as practicable after the end of the
fiscal year in which the first registration statement filed by the Company for
the offering of its securities to the general public is declared effective.

 

(d)           So long as a Purchaser owns any
Restricted Securities to furnish to the Purchaser forthwith upon request a
written statement by the Company as to its compliance with the reporting
requirements of said Rule 144 (at any time after 90 days after the
effective date of the first registration statement filed by the Company for an
offering of its securities to the general public), and of the Securities Act
and the Exchange Act (at any time after it has become subject to such reporting
requirements), a copy of the most recent annual or quarterly report of the
Company, and such other reports and documents of the Company and other
information in the possession of or reasonably obtainable by the Company as a
Purchaser may reasonably request in availing itself of any rule or
regulation of the Commission allowing a Purchaser to sell any such securities
without registration.

 

3.9           Transfer of Registration Right.  The rights to cause the Company to register
securities granted Holders under Sections 3.1, 3.2 and 3.3 may be assigned
to (A) a transferee or assignee in connection with any transfer or assignment
of Registrable Securities by a Holder of not less than 1,000,000 shares
(subject to anti-dilution adjustment) of Registrable Securities (or, in the
case of CSFBEP and its affiliates, of not less than 1,000,000 shares of
Registrable Securities unless CSFBEP (and affiliates) is transferring all of
its remaining shares of Registrable Securities), or (B) to any transferee or
assignee (i) who is a constituent partner, shareholder or affiliate of a Holder
or the estate of such constituent partner, constituent shareholder or
affiliate, or (ii) with respect to the Warrant Stock, which is an affiliate, or
which controls, is controlled by, or is under common control with Alexandria
Real Estate Equities, Inc., provided that such transfer may otherwise be
effected in accordance with applicable securities laws and provided that the
Company is, within a reasonable time after such transfer, furnished

 

14

 

with written notice
of the name and address of such transferee or assignee and the securities with
respect to which such registration rights are being assigned; and provided,
further, that such assignment shall be effective only if immediately following such
transfer the further disposition of such securities by the transferee or
assignee is restricted (including any restrictions as to volume) under the
Securities Act.  For the purposes of
determining the number of shares of Registrable Securities held by a transferor
or assignor, or transferee or assignee, the holdings of affiliates of
transferors or assignors, or transferees and assignees of a partnership who are
partners or retired partners of such partnership, or of a corporation who are
shareholders of such corporation (including spouses and ancestors, lineal
descendants and siblings of such partners or shareholders or spouses who
acquire Registrable Securities by gift, will or intestate succession) shall be
aggregated together and with the partnership or corporation.

 

3.10         Market Standoff Agreement.  In connection with the initial public
offering of the Company’s securities, each Holder agrees not to sell, offer to
sell, contract to sell, make any short sale of, loan, grant any option for the
purchase of, or otherwise dispose of, transfer or hedge its ownership risks of
any securities of the Company (other than those included in the registration)
without the prior written consent of the Company and/or managing underwriters,
as the case may be, for 180 days from the effective date of such registration
provided that all officers and directors of the Company enter into similar
agreements.  Each Holder agrees that the
Company may impose stop transfer instructions in order to enforce the foregoing
covenant.  Each Holder agrees to execute
an agreement reflecting the foregoing as may be requested by the managing
underwriters at the time of the Company’s initial underwritten public offering.

 

3.11         Termination of Registration Right.  The rights to notification and inclusion in
Registration Statements granted under this Section 3 shall terminate on
the earlier of (i) the fifth anniversary of the consummation of the first firm
commitment underwritten public offering of the Company’s securities pursuant to
an effective registration statement filed under the Securities Act or (ii) as
to a given Holder, when such Holder (and its affiliates) can sell all of such
Holder’s (and its affiliates) Registrable Securities in a 90 day period
pursuant to Rule 144 under the Securities Act.  The rights to request a registration on Form
S-3 under Section 3.3 shall terminate as to a given Holder, when such
Holder can sell all of such Holder’s Registrable Securities in a 90 day period
pursuant to Rule 144 under the Securities Act.

 

3.12         Limitations on Subsequent
Registration Right.  From and after
the date of this Agreement, the Company shall not, without the prior written
consent of the Holders of a majority of the outstanding Registrable Securities,
enter into any agreement with any holder or prospective holder of any
securities of the Company that would allow such holder or prospective holder
(a) to include such securities in any registration filed under Section 3.1
hereof, unless under the terms of such agreement, such holder or prospective
holder may include such securities in any such registration only to the extent
that the inclusion of his securities will not reduce the amount of the
Registrable Securities of the Holders that is included or (b) to make a demand
registration that could result in such registration statement being declared
effective prior to the earlier of either of the dates set forth in
Section 3.1(a) or within 180 days of the effective date of any
registration affected pursuant to Section 3.1(a).

 

15

 

 

4.             Investors’ Right of First
Refusal.

 

4.1           Right of First Refusal upon
Issuances of Securities by the Company.

 

(a)           The Company hereby grants, on the
terms set forth in this Section 4.1, to each Investor who (with affiliates)
holds at least 600,000 Shares of Conversion Stock (subject to anti-dilution
adjustment) the right of first refusal to purchase all or any part of such
Investor’s pro rata share of the New Securities (as defined in
Section 4.1(b)) that the Company may, from time to time, propose to sell
and issue. The Investors may purchase said New Securities on the same terms and
at the same price at which the Company proposes to sell the New Securities. The
pro rata share of each Investor, for purposes of this right of first refusal,
is the ratio of the total number of shares of outstanding Common Stock held by
such Investor, including any shares of Common Stock into which shares of
Preferred Stock held by such Investor are convertible, to the total number of
shares of Common Stock outstanding immediately prior to the issuance of the New
Securities (including any shares of Common Stock into which outstanding shares
of Preferred Stock are convertible and assuming full conversion and exercise of
all then outstanding convertible or exercisable securities).

 

(b)           “New Securities” shall mean
any capital stock of the Company, whether now authorized or not, and any
rights, options or warrants to purchase said capital stock, and securities of
any type whatsoever that are, or may become, convertible into said capital
stock; provided, however, that New Securities does not include (i) the Shares,
(ii) the Conversion Stock, (iii) securities offered pursuant to a bona fide,
firm commitment underwritten public offering pursuant to an effective
registration statement filed under the Securities Act, (iv) securities issued
pursuant to the acquisition of or by the Company by merger, purchase of
substantially all of the assets or other reorganization which have been
approved by the Board of Directors, (v) all shares of Common Stock or other
securities issued or issuable to officers, directors, employees, scientific
advisors or consultants of the Company pursuant to any plan or arrangement
approved by the Board of Directors of the Company, (vi) securities issued, upon
the approval of the Board of Directors of the Company, pursuant to agreements
to license technology and/or provide sponsored research that have been approved
by the Board of Directors, (vii) securities issued to lending, leasing or
similar institutions pursuant to arrangements approved by the Board of
Directors of the Company and (viii) the issuance of securities pursuant to the
conversion or exercise of convertible or exercisable securities.

 

(c)           In the event the Company proposes to
undertake an issuance of New Securities, it shall give to the Investors written
notice (the “Notice”) of its intention, describing the type of New
Securities, the price, the terms upon which the Company proposes to issue the
same, and a statement as to the number of days from the date of such Notice
within which the Investors must respond to such Notice. The Investors shall
have 20 days from the date of the Notice to purchase any or all of their pro
rata portion of the New Securities for the price and upon the terms specified
in the Notice by giving written notice to the Company and stating therein the
quantity of New Securities to be purchased and forwarding payment for such New
Securities to the Company if immediate payment is required by such terms, or in
any event no later than 30 days after the date of the Notice.

 

(d)           In the event the Investors fail to
exercise in full the right of first refusal within said twenty (20) day period,
the Company shall have 60 days thereafter to sell or enter into an agreement
(pursuant to which the sale of New Securities covered thereby shall be

 

16

 

closed, if at all,
within 30 days from date of said agreement) to sell the New Securities as to
which the Investors’ rights were not exercised at a price and upon general
terms no more favorable to the purchasers thereof than specified in the Notice.
In the event the Company has not sold the New Securities within said 60 day
period (or sold and issued New Securities in accordance with the foregoing
within 30 days from the date of said agreement), the Company shall not
thereafter issue or sell any New Securities without first offering such
securities to the Investors in the manner provided above.

 

(e)           The right of first refusal granted
under this Section 4.1 shall expire upon:

 

(i)            The
closing of the Company’s first bona fide firm commitment underwritten public
offering pursuant to an effective registration statement filed by the Company
under the Securities Act; or

 

(ii)           For
each Investor, the date on which such Investor (with its affiliates) no longer
holds a minimum of 600,000 shares of Conversion Stock.

 

5.             Affirmative Covenants of the
Company and the Investors. The Company hereby covenants and agrees as
follows:

 

5.1           Financial Information. The
Company will provide to the Investors, other than CSFBEP, who hold at least
400,000 shares of Conversion Stock and to CSFBEP so long as CSFBEP, or
affiliates of CSFBEP (in combination with CSFBEP), holds at least (a) 25% of
its initial investment in the Series C Preferred Stock, or the Common
Stock issued upon conversion thereof or (b) 400,000 shares of Conversion Stock,
the reports set forth below subject to Section 5.3.

 

(a)           As soon as practicable after the end
of each fiscal year, and in any event within 120 days thereafter, consolidated
balance sheets of the Company and its subsidiaries, if any, as of the end of
such fiscal year, and consolidated statements of income and consolidated
statements of changes in financial position of the Company and its
subsidiaries, if any, for such year, prepared in accordance with generally
accepted accounting principles and setting forth in each case in comparative
form the figures for the previous fiscal year (or, at the election of the
Company, setting forth in comparative form the budgeted figures for the fiscal
year then reported), all in reasonable detail and audited by independent public
accountants of national standing selected by the Company provided the Company’s
Board of Directors has selected such accountants by the end of such fiscal
year.

 

(b)           As soon as practicable after the end
of each quarter, and in any event within 30 days thereafter, consolidated
balance sheets of the Company and its subsidiaries, if any, as of the end of
such quarter, and consolidated statements of income and consolidated statements
of changes in financial position of the Company and its subsidiaries, if any,
for such quarter prepared in accordance with generally accepted accounting
principles and setting forth in each case in comparative form the figures for
the year to date, in reasonable detail.

 

17

 

(c)           As soon as practicable prior to the
end of each fiscal year, and in any event no later than 30 days prior thereto,
a fiscal year business plan and operating budget (including a description of
intended uses of funds) for the Company and its subsidiaries, if any.

 

(d)           At such Holder’s expense, the right
to visit and inspect the Company’s properties, to examine its books of account
and records and to discuss the Company’s affairs, finances and accounts with
its officers, all at such reasonable times as may be requested by the Investor;
provided, however, that the Company shall not be obligated pursuant to this
Section 5.1(a) to provide access to any information that it reasonably
considers to be trade secret or similar confidential information.

 

5.2           Additional Information Rights of
CSFBEP and others. In addition to the items required by Section 5.1
above, so long as CSFBEP holds at least 25% of its initial investment in the
Series C Preferred Stock, or the Common Stock issued upon conversion
thereof, the Company will provide to CSFBEP, International Biotechnology Trust
plc (“IBT”), and Lombard Odier & Cie (“Lombard”), the following:

 

(a)           All information made available to the
Company’s shareholders as soon as practicable after it is made available to the
Company’s shareholders;

 

(b)           As soon as practicable after their
creation, the management reports mutually agreed to by the Company and CSFBEP
used by the Company to monitor the progress of the business of the Company;

 

(c)           As soon as practicable after
receiving a written request from CSFBEP, any information reasonably requested
by CSFBEP, provided, however, that the Company shall not be obligated pursuant
to this Section 5.2(c) to provide access to any information that it
reasonably considers to be trade secret or similar confidential information;
and

 

(d)           Notwithstanding anything to the
contrary, so long as CSFBEP holds any shares of Common Stock of the Company,
the Company shall provide to CSFBEP all information provided to other
non-affiliated shareholders of the Company holding the same, or lesser, number
of shares of Common Stock as CSFBEP (computed at the time of distribution of
such information).

 

Each of IBT and Lombard shall receive such
information only so long as it continues to hold (including holdings of its
affiliates) 100% of its initial investment in Series C Preferred Stock.

 

5.3           Assignment of Rights to Financial
Information. The rights granted pursuant to Section 5.1 and 5.2 may
not be assigned or otherwise conveyed by any Investor or by any subsequent
transferee of any such rights without the prior written consent of the Company
unless such transfer is made by a Holder (including CSFBEP) to a transferee who
(with affiliates) holds or will immediately following such transfer hold
greater than 400,000 shares of Conversion Stock or in the case of CSFBEP (and
its affiliates), if it is selling its entire position in the Company.

 

18

 

5.4           Termination of Covenants. The
covenants set forth in Sections 5.1, 5.2 and 5.3 shall terminate and be of
no further force or effect upon the closing of the Company’s first firm
commitment underwritten public offering pursuant to an effective registration
statement filed by the Company under the Securities Act or earlier as to a
particular Investor on the date such Investor (with affiliates) no longer holds
a minimum of 400,000 shares of Conversion Stock.

 

6.             Voting Agreement:  CSFBEP Director Management Rights.

 

(a)           Election of Series C
Preferred Director. So long as CSFBEP and other entities with which it is
under common control, directly or indirectly (collectively “CSFBEP
Affiliates”) own at least 25% of the shares of Series C Preferred
Stock (or Common Stock issued pursuant to conversion of such Series C
Preferred Stock) purchased by CSFBEP (and its affiliates) pursuant to the
Series C Preferred Stock Purchase Agreement, dated July 5, 2000 (the
“Series C Purchase Agreement”), by and among the Company and the
Purchasers, as such term is defined therein, the Investors agree that in all
elections for the position of the Series C Preferred Director (the “Series C
Director”) they will vote (or sign actions by written consent of the
shareholders with respect to) all shares of Series C Preferred Stock of
the Company held by them to elect one nominee chosen by CSFBEP. If the CSFBEP
Affiliates own less than 25% of the shares of Series C Preferred Stock
purchased by CSFBEP (and its affiliates) pursuant to the Series C Purchase
Agreement, CSFBEP shall have the rights described in Section 6(c).

 

(b)           Relationship of Series C
Director to CSFBEP. Notwithstanding the provisions of Section 6(a),
the consent of the Company shall be required, such consent not to be
unreasonably withheld, to nominate the nominee chosen by CSFBEP to fill the
position of Series C Director, provided that, if the nominee is a managing
director of Credit Suisse First Boston Advisory Partners, LLC, (“CSFB”)
or its affiliates, no such consent shall be required. If the Series C
Director is not a managing director at CSFBEP or its affiliates, CSFBEP shall
have the rights described in Section 6(c).

 

(c)           Management Rights. CSFBEP
shall have the right:

 

(i)            to
appoint a non-voting representative (the “Observer”) to attend meetings
of the Board of Directors of the Company, to change the nonvoting
representative so appointed at any time and, upon the resignation of such
representative for any reason, to reappoint such a representative. In addition,
the Company shall provide CSFBEP with a copy of any materials to be distributed
or discussed at such meetings at the same time as provided to members of the
Board;

 

(ii)           to
make proposals, recommendations and suggestions to the Company’s officers and
directors relating to the business and affairs of the Company;

 

(iii)          to
discuss the Company’s business and affairs with the Company’s officers,
directors and independent accountants; and

 

(iv)          to
have access to such other information relating to the affairs of the Company as
CSFBEP may reasonably request, including, but not limited to, the

 

19

 

Company’s
books, records and properties, provided that, access to highly confidential
proprietary information and facilities need not be provided.

 

(d)           CSFBEP agrees, and any representative
of CSFBEP will agree, to hold in confidence and trust and not use or disclose
any confidential information provided to or learned by it in connection with
its rights under this Agreement.

 

7.             Other Agreement: CSFBEP Director.
To the extent the Series C Director is not an employee or affiliate of
CSFB, the Series C Director will be entitled to benefits on the same terms
as those received by other outside directors. In addition, the Series C
Director (whether or not an affiliate or employee of CSFBEP or its affiliates)
will be reimbursed for all reasonable and customary expenses associated with
attending the meetings of the Board of Directors. Notwithstanding the
foregoing, the Company agrees to review and, if necessary, seek to modify such
compensatory and other benefits, including adequate coverage under director and
officer insurance policies, to ensure that they reflect current market terms.

 

8.             Miscellaneous.

 

8.1           Waivers and Amendments. With
the written consent of the Company and the record holders of more than seventy
percent (70%) of the Registrable Securities, including at least three Investors
that are not affiliated with each other, any term of this Agreement may be
amended and the obligations of the Company and the rights of the other parties
to this Agreement may be waived (either generally or in a particular instance,
either retroactively or prospectively and either for a specified period of time
or indefinitely), and with the same consent the Company, when authorized by
resolution of its Board of Directors, may enter into a supplementary agreement
for the purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions of this Agreement; provided, however, that no
such waiver or supplemental agreement shall reduce the aforesaid percentage of
the Registrable Securities, the holders of which are required to consent to any
waiver or supplemental agreement without the consent of the record holders of
all of the Registrable Securities; provided further that the written consent of
the holders of a majority of any Series whose rights are
disproportionately, adversely affected must be obtained for such amendment to
be effective; and provided further, that the consent of CSFBEP shall be
required to affect any of its rights granted pursuant to Section 6 or
Section 7 hereof. Upon the effectuation of each such waiver, consent,
agreement, amendment or modification the Company shall promptly give written
notice thereof to the record holders of the Registrable Securities who have not
previously consented thereto in writing. Neither this Agreement nor any
provisions hereof may be changed, waived, discharged or terminated orally, but
only by a signed statement in writing.

 

8.2           Governing Law.  This Agreement and all acts and transactions
pursuant hereto and the rights and obligations of the parties hereto shall be
governed, construed and interpreted in accordance with the laws of the State of
California, without giving effect to its principles of conflicts of law or
choice of law.

 

8.3           Successors and Assigns. Except
as otherwise expressly provided herein, the provisions hereof shall inure to
the benefit of, and be binding upon, the successors, assigns, heirs, executors
and administrators of the parties hereto. 
Nothing in this Agreement, express or

 

20

 

implied, is intended
to confer upon any party other than the parties hereto or 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.

 

8.4           Entire Agreement. This
Agreement constitutes the full and entire understanding and agreement between
the parties with regard to the subjects hereof.

 

8.5           Specific Performance. The
parties hereto intend that each of the parties have the right to seek damages
or specific performance in the event that any other party hereto fails to
perform such party’s obligations hereunder. Therefore, if any party shall
institute any action or proceeding to enforce the provisions hereof, any party
against whom such action or proceeding is brought hereby waives any claim or
defense therein that the plaintiff party has an adequate remedy at law.

 

8.6           Notices, etc. All notices and
other communications required or permitted hereunder shall be in writing and
shall be mailed by registered or certified mail, postage prepaid, by confirmed fax,
or otherwise delivered by hand or by messenger, addressed (a) if to an
Investor, at such Investor’s address set forth in Exhibit A attached hereto or
at such other address as such Investor shall have furnished to the Company in
writing, or (b) if to any other holder of any Conversion Stock, at such address
as such holder shall have furnished the Company in writing, or, until any such
holder so furnishes an address to the Company, then to and at the address of
the last holder of such Conversion Stock who has so furnished an address to the
Company, or (c) if to the Company, one copy should be sent to such address as
the Company shall have furnished to the Investors.  Each such notice or other communication shall
for all purposes of this Agreement be treated as effective or having been given
when delivered if delivered personally, or, if sent by mail, at the earlier of
its receipt or 72 hours after the same has been deposited in a regularly
maintained receptacle for the deposit of the United States mail, addressed and
mailed as aforesaid.

 

8.7           Titles and Subtitles. The
titles of the paragraphs and subparagraphs of this Agreement are for
convenience of reference only and are not to be considered in construing this
Agreement.

 

8.8           Counterparts.  This Agreement may be executed in any number
of counterparts and signatures and may be delivered by facsimile, each of which
shall be enforceable against the parties actually executing such counterparts,
and all of which together shall constitute one instrument.

 

8.9           Severability.  If one or more provisions of this Agreement
are held to be unenforceable under applicable law, the parties agree to
renegotiate such provision in good faith. 
In the event that the parties cannot reach a mutually agreeable and
enforceable replacement for such provision, then (a) such provision shall
be excluded from this Agreement, (b) the balance of the Agreement shall be
interpreted as if such provision were so excluded and (c) the balance of
the Agreement shall be enforceable in accordance with its terms.

 

(Signature Pages Follow)

 

21

 

IN WITNESS WHEREOF, this Eighth Amended and
Restated Investors Rights Agreement has been executed as of the date first
above written.

 

	
   

  	
  COMPANY:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  SUNESIS PHARMACEUTICALS

  
	
   

  	
  INCORPORATED

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Daniel N. Swisher, Jr.

  
	
   

  	
   

  	
  Chief Executive Officer

  

 

Signature Page to
Investor Rights Agreement

 

 

	
  INVESTORS:

  
	
   

  
	
   

  
	
  Biogen Idec MA, a Massachusetts corporation

  
	
   

  
	
   

  
	
  By:

  	
   

  	
   

  
	
  Name:

  
	
  Title:

  

 

 

	
  INVESTORS:

  
	
   

  
	
   

  
	
  Abingworth
  Bioventures II SICAV

  
	
   

  
	
   

  
	
  By:

  	
   

  	
   

  
	
  Name:

  
	
  Title:

  

 

 

	
  INVESTORS:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Credit Suisse First Boston Equity Partners, L.P.

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
  Name:

  	
   

  
	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Credit Suisse First Boston Equity Partners

  	
   

  
	
  (Bermuda), L.P.

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
  Name:

  	
   

  
	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Credit Suisse First Boston U.S. Executive

  	
   

  
	
  Advisors, L.P.

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
  Name:

  	
   

  
	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Credit Suisse First Boston Finders &

  	
   

  
	
  Screeners, L.P.

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
  Name:

  	
   

  
	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  EMA Partners Fund 2000, L.P.

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
  Name:

  	
   

  
	
  Title:

  	
   

  

 

 

	
  INVESTORS:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Mayfield Associates Fund III

  	
   

  
	
   

  	
   

  
	
  By:

  	
  Mayfield
  VIII Management, L.L.C.,

  its General Partner

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
  Name:

  	
   

  
	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Mayfield IX

  	
   

  
	
   

  	
   

  
	
  By:

  	
  Mayfield IX
  Management, L.L.C.,

  its General Partner

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
  Name:

  	
   

  
	
  Title:

  	
   

  
					

 

 

	
  INVESTORS:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Venrock Associates

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
  Name:
  Anthony B. Evnin

  	
   

  
	
  Title:
  General Partner

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Venrock Associates II, L.P.

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
  Name:
  Anthony B. Evnin

  	
   

  
	
  Title:
  General Partner

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Venrock Entrepreneurs Fund, L.P.

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  Venrock Management
  LLC

  its General Partner

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
  Name:
  Anthony B. Evnin

  	
   

  
	
  Title:
  Member

  	
   

  
						

 

 

	
  INVESTORS:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Warburg, Pincus Equity Partners, L.P.

  	
   

  
	
   

  	
   

  
	
  By:

  	
  Warburg,
  Pincus & Co.,

  its General Partner

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
  Name: 

  	
  Jonathan
  Leff

  	
   

  
	
  Title:

  	
  Partner

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Warburg, Pincus Netherlands Equity Partners I, C.V.

  	
   

  
	
   

  	
   

  
	
  By:

  	
  Warburg,
  Pincus & Co.,

  its General Partner

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
  Name: 

  	
  Jonathan
  Leff

  	
   

  
	
  Title:

  	
  Partner

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Warburg, Pincus Netherlands Equity Partners II, C.V.

  	
   

  
	
   

  	
   

  
	
  By:

  	
  Warburg,
  Pincus & Co.,

  its General Partner

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
  Name: 

  	
  Jonathan
  Leff

  	
   

  
	
  Title:

  	
  Partner

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Warburg, Pincus Netherlands Equity Partners III, C.V.

  	
   

  
	
   

  	
   

  
	
  By:

  	
  Warburg,
  Pincus & Co.,

  its General Partner

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
  Name: 

  	
  Jonathan
  Leff

  	
   

  
	
  Title:

  	
  Partner

  	
   

  
					

 

 

Exhibit A

 

Schedule of Investors

 

A-1Exhibit
10.18

 

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND 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 COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER
THE SECURITIES ACT OF 1933.

 

	
  Common Warrant No. l

  	
  Number of Shares:
  100,000

  
	
  Date of Issuance: April
  9, 1998

  	
  (subject to adjustment)

  

 

MOSAIC PHARMACEUTICALS, INC.

 

Common Stock Purchase Warrant

 

Mosaic
Pharmaceuticals, Inc. (the “Company”), for value
received, hereby certifies that James A. Wells, or his registered assigns
(the “Registered Holder”), is
entitled, subject to the terms set forth below, to purchase from the Company,
at anytime after the date hereof and on or before the Expiration Date (as
defined in Section 5 below), up to 100,000 shares (as adjusted from time to
time pursuant to the provisions of this Warrant including Section l below) of
Common Stock of the Company, at a purchase price of $1.00 per share.  The shares purchasable upon exercise of this
Warrant and the purchase price per share, as adjusted from time to time
pursuant to the provisions of this Warrant, are sometimes hereinafter referred
to as the “Warrant Stock” and the “Purchase
Price” respectively.

 

1.                                       Warrant Vesting Schedule.  This Warrant shall be exercisable, in whole
or in part, according to the following vesting schedule:

 

(a)                                  Twelve-forty eighths (12/48) of the
Warrant Stock shall become exercisable on April 9, 1999 and an additional 1/48
of the Shares shall become exercisable on the first day of each full month
thereafter until all Shares have been released; provided in each case that the
Registered Holder’s employment or services with the Company has not terminated
prior to the date any such Warrant Stock become exercisable.  Any of the Warrant Stock which have not yet
become exercisable are referred to herein as “Unvested Shares.”

 

(b)                                 Upon a Change of Control (as defined
below) of the Company, should the Registered Holder be terminated by the
Company without Cause (see definition of Cause below) or should the Registered
Holder be Involuntarily Terminated (as defined below) at any time within twelve
months following such Change of Control, then 100% of the Unvested Shares shall
become exercisable.  In any event, 100%
of the Unvested Shares shall become exercisable at the end of twelve months
following such Change of Control provided Registered Holder’s employment or
services has not been terminated. 
Notwithstanding the foregoing, if it is determined by the Company’s
independent public accountants that such accelerated exercisability would
preclude accounting for the Change of Control as a pooling of interests for financial
accounting purposes, and it is a condition to the closing of the Change of
Control that

 

 

the transaction be accounted for as a pooling of interests,
then the Warrant Stock shall not become exercisable on the accelerated basis
pursuant to this paragraph.

 

(c)                                  Notwithstanding anything set forth
above, should the Registered Holder be terminated by the Company without Cause
(see definition of Cause below) or should the Registered Holder be
Involuntarily Terminated (as defined below) at anytime on or before
April 1, 1999, then 50,000 of the Unvested Shares shall become
exercisable.  For purposes of this
Section 1(c), “Involuntary Terminated” shall mean, without the Registered
Holder’s consent, a substantial reduction of the Registered Holder’s
responsibilities regarding the Company’s research programs.  The parties acknowledge that Employee is
currently solely responsible for the Company’s research programs and that the
Company intends to do significant additional hiring in this area.  Accordingly, the parties agree that any
reduction shall be compared against this proposed hiring plan.  Should the Registered Holder be terminated by
the Company without Cause (see definition of Cause below) at any time after
April 1, 1999, then 25,000 of the Unvested Shares shall become exercisable.

 

(d)                                 “Change of Control” shall mean a
merger or reorganization of the Company with or into any other corporation or
corporations or a sale of all or substantially all of the assets of the
corporation, in which transaction the Company’s stockholders immediately prior to such
transaction own immediately after such transaction less than 50% of the equity
securities of the surviving corporation or its parent.

 

(e)                                  “Involuntary Termination” shall
mean:

 

(i)                                     without the Registered Holder’s
express written consent, a significant reduction of the Registered Holder’s
duties, position or responsibilities, or the removal of the Registered Holder
from such position, duties and responsibilities;

 

(ii)                                  without he Registered Holder’s
express written consent, a substantial reduction of the facilities and
perquisites (including office space and location) available to the Registered
Holder;

 

(iii)                               a material reduction by the Company
of the Registered Holder’s base salary;

 

(iv)                              a reduction by the Company in the
kind or level of employee benefits to which the Registered Holder is entitled
with the result that the Registered Holder’s overall benefits package is significantly
reduced; or

 

(v)                                 without the Registered Holder’s
express written consent, the relocation of the Registered Holder to a facility
or a location more than seventy (70) miles from the Registered Holder’s current
residence.

 

(f)                                    “Cause” shall mean:

 

(i)                                     the Registered Holder’s failure to
substantially perform the duties associated with the Registered Holder’s
position;

 

2

 

(ii)                                  the Registered Holder’s personally
engaging in conduct that the Registered Holder reasonably should know or that
the Registered Holder intends to be seriously injurious to the Company or its
affiliates;

 

(iii)                               a material and willful violation of a federal or state law or
regulation applicable to the business of the Company;

 

(iv)                              the Registered Holder’s being
convicted of a felony under the laws of the United States or any State, or the
misappropriation of material property belonging to the Company or its
affiliates; or

 

(v)                                 the Registered Holder knowingly and
intentionally breaching in any material respect the terms of the Registered
Holder’s Proprietary Information Agreement.

 

2.                                       Exercise.

 

(a)                                  Manner of
Exercise.  This Warrant may be exercised by the
Registered Holder, in whole or in part, by surrendering this Warrant, with the
purchase form appended hereto as Exhibit A duly executed by such Registered Holder or by
such Registered Holder’s duly authorized attorney, at the principal office of the Company, or at such other office or agency
as the Company may designate, accompanied by payment in full of the Purchase
Price payable in respect of the number of shares of Warrant Stock purchased
upon such exercise.  The Purchase Price
may be paid by cash, check, wire transfer or by the surrender of promissory
notes or other instruments representing indebtedness of the Company to
the Registered Holder.

 

(b)                                 Effective
Time of Exercise.  Each
exercise of this Warrant shall be deemed to have been effected immediately
prior to the close of business on the day on which this Warrant shall have been
surrendered to the Company as provided in Section 1(a) above.  At such time, the person or persons in whose
name or names any certificates for Warrant Stock shall be issuable upon such
exercise as provided in Section l(d) below shall be deemed to have become the
holder or holders of record of the Warrant Stock represented by such
certificates.

 

(c)                                  Net Issue
Exercise.

 

(i)                                     In lieu of exercising this Warrant
in the manner provided above in Section 2(a), concurrent with or following the
closing of a firm commitment underwritten public offering of the Company’s
Common Stock pursuant to a registration statement under the Securities Act (the
Company’s “Initial Public Offering”), the Registered Holder may elect to
receive shares equal to the value of this Warrant (or the portion thereof being
canceled) by surrender of this Warrant at the principal office of the Company
together with notice of such election in which event the Company shall issue to holder a number of shares of Common Stock computed
using the following formula:

 

	
  X 

  	
  =

  	
  Y (A - B)

  
	
   

  	
   

  	
  A

  

 

Where                                                            X
= The number of shares of Common Stock to be issued to the Registered Holder.

 

3

 

Y = The number
of shares of Common Stock purchasable under this Warrant (at the date of such
calculation).

 

A =The fair
market value of one share of Common Stock (at the date of such calculation).

 

B = The
Purchase Price (as adjusted to the date of such calculation).

 

(ii)                                  For purposes of this Section 2(c),
the fair market value of one share of Common
Stock on the date of calculation shall mean:

 

(A)                              if the exercise is in connection with an initial public offering
of the Company’s Common Stock, and if the Company’s registration statement
relating to such public offering has been declared effective by the Securities
and Exchange Commission, then the fair market value per share of Common Stock
shall be the initial “Price to Public” specified in the final prospectus with
respect to the offering; or

 

(B)                                if this Warrant is exercised after,
and not in connection with, the Company’s Initial Public Offering, and if the
Company’s Common Stock is traded on a securities exchange or The Nasdaq Stock
Market or actively traded over-the-counter:

 

(1)                                  if
the Company’s Common Stock is traded on a securities exchange or The Nasdaq
Stock Market, the fair market value shall be deemed to be the average of the
closing prices over a thirty (30) day period ending three days before date of
calculation; or

 

(2)                                  if
the Company’s Common Stock is actively traded over-the-counter, the fair market
value shall be deemed to be the average of the closing bid or sales price
(whichever is applicable) over the thirty (30) day period ending three days
before the date of calculation.

 

(d)                                 Delivery
to Registered Holder.  As soon as
practicable after the exercise of this Warrant in whole or in part, and in any
event within ten (10) days thereafter, the Company at its expense will cause to
be issued in the name of, and delivered to, the Registered Holder, or as such
Registered Holder (upon payment by such Registered Holder of any applicable
transfer taxes) may direct:

 

(i)                                     a certificate or certificates for
the number of shares of Warrant Stock to which such Registered Holder shall be
entitled, and

 

(ii)                                  in case such exercise is in part
only, a new warrant or warrants (dated the date hereof) of like tenor, calling
in the aggregate on the face or faces thereof for the number of shares of
Warrant Stock equal (without giving effect to any adjustment therein) to the
number of such shares called for on the face of this Warrant minus the number
of such shares purchased by the Registered Holder upon such exercise as
provided in Section 2(a) above.

 

4

 

3.                                       Adjustments.

 

(a)                                  Stock
Splits and Dividends.  If
outstanding shares of the Company’s Common Stock shall be subdivided into a
greater number of shares or a dividend in Common Stock shall be paid in respect
of Common Stock, the Purchase Price in effect immediately prior to such
subdivision or at the record date, of such dividend shall simultaneously with
the effectiveness of such subdivision or immediately after the record date of
such dividend be proportionately reduced. 
If outstanding shares of Common Stock shall be combined into a smaller
number of shares, the Purchase Price in effect immediately prior to such
combination shall, simultaneously with the effectiveness of such combination,
be proportionately increased.  When any
adjustment is required to be made in the Purchase Price, the number of shares
of Warrant Stock purchasable upon the exercise of this Warrant shall be changed
to the number determined by dividing (i) an amount equal to the number of
shares issuable upon the exercise of this Warrant immediately prior to such
adjustment, multiplied by the Purchase Price in effect immediately prior to
such adjustment, by (ii) the Purchase Price in effect immediately after such
adjustment.

 

(b)                                 Reclassification,
Etc.  In case of any
reclassification or change of the outstanding securities of the Company or of
any reorganization of the Company (or any other corporation the stock or
securities of which are at the time receivable upon the exercise of this
Warrant) or any similar corporate reorganization on or after the date hereof,
then and in each such case the holder of this Warrant, upon the exercise hereof
at any time after the consummation of such reclassification, change,
reorganization, merger or conveyance, shall be entitled to receive, in lieu of
the stock or other securities and property receivable upon the exercise hereof
prior to such consummation, the stock or other securities or property to which
such holder would have been entitled upon such consummation if such holder had
exercised this Warrant immediately prior thereto, all subject to further
adjustment as provided in Section 3(a); and in each such case, the terms of
this Section 3 shall be applicable to the shares of stock or other securities
properly receivable upon the exercise of this Warrant after such consummation.

 

(c)                                  Adjustment
Certificate.  When any adjustment is required to
be made in the Warrant Stock or the Purchase Price pursuant to this Section 3,
the Company shall promptly mail to the Registered Holder a certificate setting
forth (i) a brief statement of the facts requiring such adjustment, (ii) the
Purchase Price after such adjustment and (iii) the kind and amount of stock or
other securities or property into which this Warrant shall be exercisable after
such adjustment.

 

4.                                       Transfers.

 

(a)                                  Unregistered
Security.  This Warrant is not transferable.  Each holder of this Warrant acknowledges that
this Warrant and the Warrant Stock have not been registered under the
Securities Act of 1933, as amended (the “Securities Act”), and agrees
not to sell, pledge, distribute, offer for sale, transfer or otherwise dispose
of any Warrant Stock issued upon its exercise in the absence of (i) an
effective registration statement under the Act as to this Warrant or such
Warrant Stock and registration or qualification of this Warrant or such Warrant
Stock under any applicable U.S. federal or state securities law then in effect
or (ii) an opinion of counsel, satisfactory to the Company, that such
registration and qualification are not required.

 

5

 

Each
certificate or other instrument for Warrant Stock issued upon the exercise of
this Warrant shall bear a legend substantially to the foregoing effect.

 

(b)                                 Warrant
Register.  The Company will maintain a
register containing the name and address of the Registered Holder of this
Warrant.  The Registered Holder may
change his address as shown on the warrant register by written notice to the
Company, requesting such change.

 

5.                                       No Impairment.  The
Company will not, by amendment of its charter or through reorganization,
consolidation, merger, dissolution, sale of assets or any other voluntary
action, avoid or seek to avoid the observance or performance of any of the
terms of this Warrant, but will (subject to Section 12 below) at all times in
good faith assist in the carrying out of all such terms and in the taking of all such action as may be
necessary or appropriate in order to protect the rights of the holder of this
Warrant against impairment.

 

6.                                       Termination.  This
Warrant (and the right to purchase securities upon exercise hereof) shall
terminate upon the earliest to occur of the following (the “Expiration Date”):  (a) April
     , 2008, (b)
the sale, conveyance, disposal, or encumbrance of all or substantially all of
the Company’s property or business or the Company’s merger into or
consolidation with any other corporation (other than a wholly-owned subsidiary
corporation) or any other transaction or series of related transactions in
which more than fifty percent (50%) of the voting power of the Company is disposed
of, provided that this Section 6
shall not apply to a merger effected exclusively for the purpose of changing
the domicile of the Company, (c) five (5) years after the closing of the
Company’s Initial Public Offering, or (d) ninety (90) days after Registered
Holder’s employment or services with the Company has been terminated.

 

7.                                       Reservation of Stock.  The
Company will at all times reserve and keep available, solely for the issuance
and delivery upon the exercise of this Warrant, such shares of Warrant Stock
and other stock; securities and property, as from time to time shall be
issuable upon the exercise of this Warrant.

 

8.                                       Exchange of Warrants.  Upon the surrender by the
Registered Holder of any Warrant or Warrants, properly endorsed, to the Company
at the principal office of the Company, the Company will, subject to the
provisions of Section 3 hereof, issue and deliver to or upon the order of such
Registered Holder, at the Company’s expense, a new Warrant or Warrants of like
tenor, in the name of such Registered Holder or as such Registered Holder (upon
payment by such Registered Holder of any applicable transfer taxes) may direct,
calling in the aggregate on the face or faces thereof for the number of shares
of Common Stock called for on the face or faces of the Warrant or Warrants so
surrendered.

 

9.                                       Replacement of Warrants.  Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and (in the case of loss, theft or destruction) upon delivery of
an indemnity agreement (with surety if reasonably required) in an amount
reasonably satisfactory to the Company, or (in the case of mutilation) upon
surrender and cancellation of this Warrant, the Company will issue, in lieu
thereof, a new Warrant of like tenor.

 

6

 

10.                                 Notices.  Any notice required or permitted by this
Warrant shall be in writing and shall be deemed sufficient upon receipt, when
delivered personally or by courier, overnight delivery service or confirmed
facsimile, or forty-eight (48) hours after being deposited in the regular mail
as certified or registered mail (airmail if sent internationally) with postage
prepaid, addressed (a) if to the Registered Holder, to the address of the
Registered Holder most recently furnished in writing to the Company and (b) if
to the Company, to the address set forth below or subsequently modified by
written notice to the Registered Holder.

 

11.                                 No Rights as Stockholder.  Until the exercise of this Warrant, the
Registered Holder of this Warrant shall not have or exercise any rights by
virtue hereof as a stockholder of the Company.

 

12.                                 No Fractional Warrant Stock.  No fractional shares of Common Stock will be
issued in connection with any exercise hereunder.  In lieu of any fractional shares which would
otherwise be issuable, the Company shall pay cash equal to the product of such
fraction multiplied by the fair market value of one share of Common Stock on the
date of exercise, as determined in good faith by the Company’s Board of
Directors.

 

13.                                 Amendment or Waiver.  Any term of this Warrant may be
amended or waived only by an instrument in writing signed by the party against
which enforcement of the amendment or waiver is sought.

 

14.                                 Headings.  The headings in this Warrant are for purposes
of reference only and shall not limit or otherwise affect the meaning of any
provision of this Warrant.

 

15.                                 Governing Law.  This Warrant shall be governed, construed and
interpreted in accordance with the laws of the State of California, without
giving effect to principles of conflicts of law.

 

16.                                 No Guarantee of Continued Service.  REGISTERED HOLDER ACKNOWLEDGES AND AGREES
THAT THE VESTING OF SHARES PURSUANT TO THE VESTING SCHEDULE HEREOF, IS EARNED
ONLY BY CONTINUING SERVICES.  REGISTERED
HOLDER FURTHER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE TRANSACTIONS
CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET FORTH HEREIN DO NOT
CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED SERVICES FOR THE VESTING
PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL NOT INTERFERE IN ANY WAY WITH
REGISTERED HOLDER’S RIGHT OR THE COMPANY’S RIGHT TO TERMINATE REGISTERED HOLDER’S
RELATIONSHIP AT ANY TIME, WITH OR WITHOUT CAUSE.

 

17.                                 Market Standoff Agreement.  In connection with the Company’s
Initial Public Offering, the Registered Holder agrees not to sell, offer to sell, contract to sell, make any short sale
of, loan, grant any option for the purchase of, or otherwise dispose of,
transfer or hedge its ownership risks of any securities of the Company (other
than those included in the registration) without the prior written consent of
the Company and/or managing underwriters, as the case may be, for one hundred
eighty (180) days from the effective date of such registration.  The Registered Holder agrees that the Company may impose stop transfer instructions in order to

 

7

 

enforce
the foregoing covenant.  The Registered
Holder agrees to execute any agreement reflecting the foregoing as may be
requested by the managing underwriters at the time of the Company’s initial underwritten
public offering.

 

 

	
   

  	
  MOSAIC PHARMACEUTICALS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By 

  	
  James A. Wells

  	
   

  
	
   

  	
   

  
	
   

  	
  Address:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Fax Number:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ James A. Wells

  	
   

  
	
   

  	
  James A. Wells

  
					

 

8

 

EXHIBIT A

 

PURCHASE
FORM

 

	
  To:

  	
  Mosaic Pharmaceuticals, Inc.

  	
  Dated:

  

 

The
undersigned, pursuant to the provisions set forth in the attached Warrant No.
1, hereby irrevocably elects to purchase        
shares of the Common Stock covered by such Warrant and herewith makes payment
of $       , representing the full purchase
price for such shares at the price per share provided for in such Warrant.

 

The
undersigned further acknowledges that it has reviewed the market standoff
provisions set forth in Section 18 of the Warrant and agrees to be bound by
such provisions.

 

 

	
   

  	
  Signature:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Name (print):

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Title (if applic.):

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Company (if applic.):

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