Warrant To Purchase Common Stock And Escrow Agrmnt

ESCROW AGREEMENT


This Escrow Agreement (this "Agreement"), is entered into and made and effective as of January 19, 2000 (the "Effective Date"), between Paradigm Genetics Inc., a North Carolina corporation ("Paradigm"), and ARE-104 Alexander Road, LLC, a Delaware limited liability company ("ARE").


WHEREAS, Paradigm and ARE have entered into a Lease Agreement dated as of July 27, 1999 (the "Original Lease") regarding certain facilities to be constructed on land leased by ARE from Triangle Service Center, Inc., a North Carolina corporation ("Triangle");


WHEREAS, Paradigm and ARE have agreed to enter into an Amended and Restated Lease Agreement (Office/Laboratory), to be effective as of July 27, 1999, amending the Original Lease to eliminate certain greenhouse provisions (such agreement, the "Amended Lease");


WHEREAS, in connection with the Amended Lease, Paradigm and ARE desire to enter into a Lease Agreement (Greenhouse) regarding certain greenhouse facilities (the "Greenhouse Lease");


WHEREAS, in connection with the Amended Lease and the Greenhouse Lease, Paradigm and ARE desire that ARE and Triangle enter into a certain Agreement Regarding Allocation of Development Rights (the "Rights Agreement"); and


WHEREAS, as consideration for the foregoing, Paradigm has agreed to issue and place in escrow a Warrant for the Purchase of Shares of Common Stock entitling ARE to purchase 60,000 shares of common stock of Paradigm at an exercise price of $5.00 per share pursuant to the terms thereof (the "Warrant") to be held in, and released from, escrow as provided in this Agreement;


NOW, THEREFORE, in consideration of the foregoing, and for other good and valuable consideration, the receipt and sufficiency of which the parties hereby acknowledge, Paradigm and ARE agree as follows:


1. Attached to this Agreement as Exhibit A is a copy of the Warrant. As of the Effective Date, Paradigm shall issue and hold in escrow the Warrant pursuant to the terms and conditions of this Agreement.


2. If, on or before July 19, 2000, subject to extension by the mutual written agreement of Paradigm and ARE (the "Release Date"), the definitive Amended Lease and a related Memorandum of Lease, Greenhouse Lease and a related Memorandum of Lease, and Rights Agreement and a related Memorandum of Rights Agreement (collectively, the "New Agreements") are each duly executed and delivered by the parties thereto, and such Memoranda are duly recorded in the appropriate real property records (collectively, the execution and delivery by the parties of all of the New Agreements and the recordation of such related Memoranda, the "Triggering Event"), then, as of the date of the last to occur of such Triggering Event, the Warrant shall be released from escrow and Paradigm shall promptly deliver the Warrant to ARE.


3. If the New Agreements are not duly executed, delivered, and (where applicable) recorded on or before the Release Date, then, as of the Release Date, the Warrant shall be retained and cancelled by Paradigm and Paradigm shall have no further obligation to hold in escrow or to deliver the Warrant to ARE.


4. Prior to the occurrence of the Triggering Event, ARE shall not be entitled to any rights as a holder of, or under the terms of, such Warrant. Upon occurrence of such Triggering Event (whether or not such Warrant shall have been delivered by Paradigm to ARE), ARE shall become the record holder of the Warrant and shall be entitled to all rights as a holder of, or under the terms of, such Warrant.


5. This Agreement constitutes the full understanding of the parties with respect to the issuance, escrow, release from escrow, and delivery or cancellation of the Warrant, and supersedes any prior agreements or communications of the parties, oral or written relating to the same. This Agreement may be executed in any number of counterparts, each of which shall be deemed to an original, and all of which taken together shall constitute one and the same instrument. This Agreement may be executed and delivered by fax and execution by such manner shall be deemed an original. This Agreement shall not be assigned by ARE, and any attempted assignment shall be void; provided, however, that ARE may assign this Agreement to an affiliate of ARE. This Agreement shall be governed by and construed in accordance with North Carolina law, without regard to conflict of law provisions.


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IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the date first written above.


PARADIGM GENETICS INC.


By: /s/ Ian Howes
---------------------------
Name: Ian Howes
Title CFO


ARE-104 ALEXANDER ROAD, LLC,
a Delaware limited liability company


By: Alexandria Real Estate Equities, L.P.,
a Delaware limited partnership
Its Managing Member


By: ARE QRS Corp.,
A Maryland corporation
Its General Partner


By:
---------------------------


Dated January 19, 2000


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IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the date first written above.


PARADIGM GENETICS INC.


By:
---------------------------
Name:
Title


ARE-104 ALEXANDER ROAD, LLC,
a Delaware limited liability company


By: Alexandria Real Estate Equities, L.P.,
a Delaware limited partnership
Its Managing Member


By: ARE QRS Corp.,
A Maryland corporation
Its General Partner


By: /s/ Lynn Anne Shapiro
---------------------------


Dated January 19, 2000


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EXHIBIT A
(See Warrant Attached)


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THIS WARRANT AND THE SECURITIES ISSUABLE UPON THE EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH ACT OR AN EXEMPTION TO SUCH ACT.


Void After January 19, 2010 (the Tenth Anniversary of the Date Hereof)


WARRANT FOR THE
PURCHASE OP SHARES OF COMMON STOCK


OF


PARADIGM GENETICS INC.


INCORPORATED UNDER THE LAWS OF THE STATE OF NORTH CAROLINA
----------------------------------------------------------


THIS CERTIFIES THAT, for value received, ARE-104 Alexander Road, LLC, a Delaware limited liability company, together with its successors and assigns (the "Investor"), is initially entitled to purchase up to Sixty Thousand (60,000) duly authorized, validly issued, fully paid and nonassessable shares of Common Stock (the "Common Stock") of Paradigm Genetics Inc., a North Carolina corporation (the "Company"), at the per share purchase price described in Section 1.3 below, subject to the provisions and upon the terms and conditions hereinafter set forth.


1. Exercise of Warrant. The terms and conditions upon which this Warrant
------------------- may be exercised, and the Common Stock covered hereby (the "Warrant Stock") may be purchased, are as follows:


1.1 Term. The purchase right represented by this Warrant may be
---- exercised in whole or in part at any time and from time to time from and after the date hereof and on or before the earlier of (i) January 19, 2010 (the tenth anniversary of the date hereof) or (ii) the fifth anniversary of the date of the consummation of a bona fide, underwritten initial public offering of Common Stock, at a public offering price equal to or exceeding $10.00 per share (as adjusted for any stock dividends, combinations, splits or the like with respect to such shares) and an aggregate offering price to the public of not less than $20,000,000; provided that, if the last day on which this Warrant may be exercised is a Sunday or a legal holiday or a day on which banking institutions doing business in the State of North Carolina are authorized by law to close, this Warrant may be exercised prior to 5:00 p.m. local time) on the next succeeding full business day with the same force and effect as if exercised on such last day specified herein.


1.2 Number of Shares. This Warrant is initially exercisable for Sixty
---------------- Thousand (60,000) shares of Common Stock, subject to adjustment pursuant to Section 2 of this Warrant.


1.3 Purchase Price. The initial per share purchase price for the
-------------- shares of Common Stock to be issued upon exercise of this Warrant shall be $5.00, subject to adjustment as provided herein (the "Warrant Price").


1.4 Method of Exercise. The exercise of the purchase rights evidenced
------------------ by this Warrant shall be effected by (a) the surrender of the Warrant, together with a duly executed copy of the form of a subscription attached hereto, to the Company at its principal offices and (b) the delivery of the purchase price (i) by check or bank draft payable to the Company's order or by wire transfer to the Company's account for the number of shares for which the purchase rights hereunder are being exercised or (ii) pursuant to the procedure set forth in Section 1.5. Any such exercise of this Warrant may be made contingent upon the closing of a public offering, merger, recapitalization or similar transaction.


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 herein or at such latter date as may be specified in the executed form of subscription, and at such time the person or persons in whose name or names any certificate or certificates for shares of Common Stock shall be issuable upon such exercise as provided herein shall be deemed to have become the holder or holders of record thereof.


1.5 Cashless Exercise. In addition to and without limiting the rights
----------------- of the holder hereof under the terms hereof, at the holders option this Warrant may be exercised in whole or in part at any time or from time to time prior to its expiration for a number of shares of Common Stock having an aggregate fair market value on the date of such exercise equal to the difference between (a) the fair market value of the number of shares of Common Stock subject to this Warrant designated for exercise by the holder hereof on the date of the exercise and (b) the aggregate Warrant Price for such shares in effect at such time.


The "fair market value" of shares of Common Stock shall be calculated on the basis of (a) if the Common Stock is then traded on a securities exchange or the Nasdaq National Market, the average of the closing prices of the Common Stock on such exchange or marker over the 20 trading day period ending three (3) trading days prior to the date of exercise, (b) if the Common Stock is then regularly traded over-the-counter, the average of the sale prices or secondarily the closing bid of the Common Stock over the 20 trading day period ending three (3) trading days prior to the date of exercise, or (c) if there is no active public market for the Common Stock, the fair market value thereof shall be the price per share that the Company could obtain from a willing buyer for shares sold by the Company from authorized but unissued shares, as determined in good faith by the Company's Board of Directors. If the holder of this Warrant exercises this Warrant contingent upon the closing of a public offering, the "fair marker value" of a share of Common Stock on the date of exercise shall be equal to the initial price to the public specified in the final prospectus with respect to such public offering.


No payment of any cash or other consideration to the Company shall be required from the holder of this Warrant in connection with any exercise of this Warrant pursuant to this Section 1.5. Such exercise shall be effective upon the date of receipt by the Company of the


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original Warrant surrendered for cancellation and a written request from the holder hereof that the exercise pursuant to this Section 1.5 be made, or at such later date as may be specified in such request.


1.6 Issuance of Shares. As soon as reasonably practicable after each
------------------ exercise of this Warrant, in whole or in part, the Company at its expense (including the payment by it of any applicable issue taxes) will cause to be issued in the name of and delivered to the holder hereof or as such holder (upon payment by such holder of any applicable transfer taxes) may direct, (a) a certificate or certificates for the number of duly authorized, validly issued, fully paid and nonassessable shares of Common Stock to which such holder shall be entitled upon such exercise, and (b) in case such exercise is in part only, a new Warrant or Warrants of like tenor, calling in the aggregate on the face or faces thereof for the number of shares of Common Stock equal (without giving effect to any adjustment thereof) to the number of such shares called for on the face of this Warrant minus the Dumber of such shares designated by the holder upon such exercise as provided herein.


2. Certain Adjustments.
-------------------


2.1 Mergers, Consolidations or Sale of Assets. If after the date
----------------------------------------- hereof there shall be a capital reorganization (other than a combination or subdivision of Common Stock otherwise provided for herein), or spin-off, or a merger or consolidation of the Company with or into another corporation, or the sale of all or substantially all of the Company's properties and assets to any other person, then, as a part of such transaction, lawful provision shall be made so that the Investor shall thereafter be entitled to receive upon exercise of this Warrant, during the period specified in this Warrant and upon payment of the purchase price, the number of shares of stock or other securities, cash or property of the Company or the successor corporation resulting from such transaction, to which a holder of the Common Stock deliverable upon exercise of this Warrant would have been entitled under the provisions of the agreement in such transaction if this Warrant had been exercised immediately before such transaction. In any such case, appropriate adjustment (as determined reasonably and in good faith by the Company's Board of Directors) shall be made in the application of the provisions of this Warrant with respect to the rights and interests of the Investor after such transaction to the end that the provisions of this Warrant (including adjustment of the purchase price then in effect and the number of shares of Common Stock issuable upon exercise hereof) shall be applicable after that event, as near as reasonably may be, in relation to any shares or other property deliverable after that event upon exercise of this Warrant.


2.2 Splits and Subdivisions Dividends. If the Company should effect or
--------------------------------- fix a record date for the effectuation of a split or subdivision of the outstanding shares of Common Stock or the determination of the holders of Common Stock entitled to receive a dividend or other distribution payable in additional shares of Common Stock or other securities or warrants, options or other rights convertible into, or entitling the holder thereof to receive directly or indirectly, additional shares of Common Stock (hereinafter referred to as "Common Stock Equivalents") without payment of any consideration by such holder for the additional shares of Common Stock or Common Stock Equivalents (including the additional shares of Common Stock issuable upon conversion or exercise thereof), then, as of such record date (or the date of


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such distribution, split or subdivision if no record date is fixed), the per share purchase price shall be appropriately decreased and the number of shares of Common Stock issuable upon exercise hereof shall be appropriately increased in proportion to such increase of outstanding shares.


2.3 Combination of Shares. If the number of shares of Common Stock
--------------------- outstanding at any time after the date hereof is decreased by a combination of the outstanding shares of Common Stock, the per share purchase price shall be appropriately increased and the number of shares of Common Stock issuable upon exercise hereof shall be appropriately decreased in proportion to such decrease in outstanding shares.


2.4 Adjustments for Other Distributions. In the event the Company
----------------------------------- shall declare a distribution payable in securities of the Company (other than Common Stock Equivalents) or other persons, evidences of indebtedness issued by the Company or other persons, assets (including cash dividends) or options or rights not referred to in Section 2.2, then, in each such case for purposes of this Section 2.4, upon exercise of this Warrant the holder hereof shall be entitled to a proportionate share of any such distribution as though such holder was the holder of the number of shares of Common Stock of the Company into which this Warrant may be exercised as of the record date fixed for the determination of the holders of Common Stock of the Company entitled to receive such distribution.


2.5 Issuance of Additional Common Stock
-----------------------------------


(a) If, after the date hereof, the Company shall issue or sell


(i) Additional Shares (defined below) without consideration or
for a consideration per share less than the Warrant Price, or


(ii) Common Stock Equivalents exercisable for Additional
Shares with a minimum exercise or exchange price less than the
Warrant Price,


then, and in each such case, the Warrant Price shall be reduced, concurrently with such issue or sale, to a price (calculated to the nearest .001 of a cent) determined by multiplying such Warrant Price by a fraction:


(i) the numerator of which shall be (A) the number of shares
of Common Stock outstanding immediately prior to such issue or
sale plus (B) the number of shares of Common Stock that the
aggregate consideration received by the Company upon such
issuance or sale (or, in the case of Common Stock Equivalents
exercisable for Additional Shares, receivable by the Company
upon exercise or exchange) would purchase at such Warrant
Price, and


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(ii) the denominator of which shall be the number of shares of
Common Stock outstanding immediately after such issue or sale
(or, in the case of Common Stock Equivalents exercisable for
Additional Shares, assuming exercise or exchange thereof).


(b) For the purposes of this Section 2.5, the consideration for the issue or sale of Additional Shares shall, irrespective of the accounting treatment of such consideration, (i) insofar as it consists of cash, be computed at the net amount of cash received by the Company, and (ii) insofar as it consists of property (including securities) other than cash, be computed at the fair value thereof at the time of such issue or sale as determined in good faith by the Board of Directors.


(c) Notwithstanding anything contained herein to the contrary, the consideration for any Common Stock Equivalents shall be the total amount of consideration received by the Company for the issuance of such Common Stock Equivalents plus the minimum amount of consideration payable to the Company upon exercise, conversion or exchange of Common Stock Equivalents (the "Net Consideration") determined as of the date of issuance of such Common Stock Equivalents. Any obligation, agreement or understanding to issue Common Stock Equivalents at any time in the future shall be deemed to be an issuance at the time such obligation or agreement is made or arises. No adjustment of the Warrant Price shall be made under this Section 2.5 upon the issuance of any shares of Common Stock which are issued pursuant to the exercise, conversion or exchange of any Common Stock Equivalents if any adjustment shall previously have been made upon the issuance of any such Common Stock Equivalents.


Should the Net Consideration for any such Common Stock Equivalents be increased or decreased from time to time, then, upon the effectiveness of such change, the Warrant Price will be that which would have been obtained (i) had the adjustments made upon the issuance of such Common Stock Equivalents been made upon the basis of the actual Net Consideration (as so increased or decreased) of such Common Stock Equivalents, and (ii) had adjustments to such Warrant Price since the date of issuance of such Common Stock Equivalents been made to such Warrant Price as adjusted pursuant to (i) above. Any adjustment of the Warrant Price with respect to this paragraph which rel ...