<PAGE> 1
FORM 10-Q
---------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
-------------
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
For the transition period from _______ to ______
Commission file number 0-26872
GELTEX PHARMACEUTICALS, INC.
----------------------------
(Exact name of registrant as specified in its charter)
Delaware 04-3136767
------------------------------- ---------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
Nine Fourth Avenue
Waltham, Massachusetts 02451
---------------------------------------- -------------------
(Address of principal executive offices) (Zip Code)
781-290-5888
-------------------------------
(Registrant's telephone number,
including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No__
The number of shares outstanding of each of the issuer's classes of common stock
as of the latest practicable date:
Class Outstanding at August 4, 1998
----- ------------------------------
Common Stock, $.01 par value 16,721,461
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<TABLE>
<CAPTION>
GELTEX PHARMACEUTICALS, INC.
TABLE OF CONTENTS
Page No.
--------
<S> <C>
PART I FINANCIAL INFORMATION
ITEM 1 Financial Statements
Condensed Balance Sheets as of June 30, 1998
and December 31, 1997.................................................. 3
Condensed Statements of Operations for the three
months ended June 30, 1998 and 1997.................................... 4
Condensed Statements of Operations for the six
months ended June 30, 1998 and 1997.................................... 5
Condensed Statements of Comprehensive Loss
for the three months ended June 30, 1998 and 1997...................... 6
Condensed Statements of Comprehensive Loss
for the six months ended June 30, 1998 and 1997........................ 7
Condensed Statements of Cash Flows for the six
months ended June 30, 1998 and 1997.................................... 8
Notes to Condensed Financial Statements................................ 9
ITEM 2 Management's Discussion and Analysis of
Financial Condition and Results of Operations......................... 10
ITEM 3 Quantitative and Qualitative Disclosures
About Market Risk...................................................... 11
PART II OTHER INFORMATION
ITEM 4 Submission of Matters to a Vote of Securities Holders.................. 12
ITEM 6 Exhibits and Reports on Form 8-K....................................... 12
SIGNATURES................................................................................. 13
EXHIBIT INDEX.............................................................................. 14
</TABLE>
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
GELTEX PHARMACEUTICALS, INC.
CONDENSED BALANCE SHEETS
(UNAUDITED)
June 30, December 31,
1998 1997
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................................ $ 7,933,054 $ 26,689,190
Marketable securities............................................... 100,062,776 25,933,722
Prepaid expenses and other current assets........................... 2,504,338 1,428,793
Due from Joint Venture.............................................. 1,909,357 1,823,877
------------ ------------
Total current assets..................................................... 112,409,525 55,875,582
Long-term receivables.................................................... 28,020 27,000
Property and equipment, net.............................................. 8,090,279 7,659,328
Intangible assets, net................................................... 555,167 466,673
Investment in Joint Venture.............................................. 3,751,260 3,089,196
------------ ------------
$124,834,251 $ 67,117,779
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts payable and accrued expenses............................... $ 1,470,206 $ 4,827,752
Current portion of long-term obligations............................ 1,501,514 1,949,053
------------ ------------
Total current liabilities................................................ 2,971,720 6,776,805
Long-term obligations, less current portion.............................. 6,822,667 6,922,666
Commitments and contingencies
Stockholders' equity:
Undesignated Preferred Stock, $.01 par value, 5,000,000
shares authorized, none issued or outstanding...................... -- --
Common Stock, $.01 par value, 50,000,000
shares authorized; 16,709,426 and 13,642,264 shares issued
and outstanding at June 30, 1998 and December 31, 1997,
respectively...................................................... 167,094 136,423
Additional paid-in capital.......................................... 186,200,162 108,658,239
Deferred compensation............................................... (965,784) (509,632)
Unrealized gain on available-for-sale securities.................... 97,222 77,402
Accumulated deficit................................................. (70,458,830) (54,944,124)
------------ ------------
Total stockholders' equity............................................... 115,039,864 53,418,308
------------ ------------
$124,834,251 $ 67,117,779
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
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<TABLE>
<CAPTION>
GELTEX PHARMACEUTICALS, INC.
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months
Ended June 30,
---------------------
1998 1997
----- ----
<S> <C> <C>
Revenue:
Collaborative Joint Venture project reimbursement.. $ 3,660,169 $ --
Research grant..................................... -- 24,010
----------- -----------
Total revenue......................................... 3,660,169 24,010
Costs and expenses:
Research and development........................... 4,206,588 6,867,969
Collaborative Joint Venture project costs.......... 3,660,169 --
----------- -----------
Total research and development.................. 7,866,757 6,867,969
General and administrative......................... 1,406,728 1,370,217
----------- -----------
Total costs and expenses.............................. 9,273,485 8,238,186
----------- -----------
Loss from operations.................................. (5,613,316) (8,214,176)
Interest income, net.................................. 1,023,948 834,753
Equity in net loss of Renagel Joint Venture........... (2,028,881) --
----------- -----------
Net loss.............................................. $(6,618,249) $(7,379,423)
=========== ===========
Basic and diluted net loss per share ................. $ (.40) $ (.54)
=========== ===========
Shares used in computing basic and diluted
net loss per share ................................ 16,700,000 13,558,000
</TABLE>
The accompanying notes are an integral part of the financial statements
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<TABLE>
<CAPTION>
GELTEX PHARMACEUTICALS, INC.
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
Six Months
Ended June 30,
-----------------------
1998 1997
---- ----
<S> <C> <C>
Revenue:
Collaborative Joint Venture project reimbursement.. $ 5,198,819 $ --
Research grant..................................... -- 163,652
------------ -----------
Total revenue......................................... 5,198,819 163,652
Costs and expenses:
Research and development........................... 11,608,472 13,012,012
Collaborative Joint Venture project costs.......... 5,198,819 --
------------ -----------
Total research and development.................. 16,807,291 13,012,012
General and administrative......................... 2,573,035 2,278,964
------------ -----------
Total costs and expenses.............................. 19,380,326 15,290,976
------------ -----------
Loss from operations.................................. (14,181,507) (15,127,324)
Interest income, net.................................. 1,591,354 1,790,221
Equity in net loss of Renagel Joint Venture........... (2,924,553) --
------------ -----------
Net loss.............................................. $(15,514,706) $(13,337,103)
============ ============
Basic and diluted net loss per share ................. $ (.97) $ (.99)
============ ============
Shares used in computing basic and diluted
net loss per share ................................ 16,052,000 13,537,000
</TABLE>
The accompanying notes are an integral part of the financial statements
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<TABLE>
<CAPTION>
GELTEX PHARMACEUTICALS, INC.
CONDENSED STATEMENTS OF COMPREHENSIVE LOSS
(UNAUDITED)
Three Months
Ended, June 30,
--------------------
1998 1997
---- ----
<S> <C> <C>
Net loss.............................................. $(6,618,249) $(7,379,423)
Other Comprehensive Income (Loss):
Unrealized gain (loss) on securities held
during the period................................. 248 116,263
----------- -----------
Comprehensive loss................................... $(6,618,001) $(7,263,160)
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements
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<TABLE>
<CAPTION>
GELTEX PHARMACEUTICALS, INC.
CONDENSED STATEMENTS OF COMPREHENSIVE LOSS
(UNAUDITED)
Six Months
Ended June 30,
---------------------
1998 1997
---- ----
<S> <C> <C>
Net loss.............................................. $(15,514,706) $(13,337,103)
Other Comprehensive Income (Loss):
Unrealized gain (loss) on securities held
during the period................................. 19,820 24,481
------------ ------------
Comprehensive loss................................... $(15,494,886) $(13,312,622)
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements
-7-
<PAGE> 8
<TABLE>
<CAPTION>
GELTEX PHARMACEUTICALS, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six Months
Ended June 30,
------------------------
1998 1997
---- ----
<S> <C> <C>
OPERATING ACTIVITIES
Net loss .................................................... $ (15,514,706) $(13,337,103)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization ........................... 606,647 861,525
Equity in net loss of Renagel Joint Venture ............. 2,924,553 --
Changes in operating assets and liabilities:
Prepaid expenses and other current assets ............. (1,075,545) 625,898
Due from Joint Venture ................................ (85,480) --
Long-term receivables ................................. (1,020) --
Accounts payable and accrued expenses ................. (3,357,556) 593,195
------------- ------------
Net cash used in operating activities ....................... (16,503,107) (11,256,485)
INVESTING ACTIVITIES
Purchase of marketable securities ........................... (170,620,776) (18,106,218)
Proceeds from sale and maturities of
marketable securities ..................................... 96,473,671 25,481,170
Investment in Joint Venture ................................. (3,586,755) --
Purchase of intangible assets ............................... (238,485) (89,248)
Purchase of property and equipment, net ..................... (869,408) (3,787,049)
------------- ------------
Net cash used in investing activities ....................... (78,841,753) 3,498,655
FINANCING ACTIVITIES
Sale of Common Stock and warrants, net of
issuance costs ............................................ 77,136,262 2,588,731
Proceeds from financing of assets ........................... -- 2,038,449
Payments on notes payable and capital lease obligations ..... (547,538) (263,866)
------------- ------------
Net cash provided by financing activities ................... 76,588,724 4,363,314
------------- ------------
Increase (decrease) in cash and cash equivalents ............ (18,756,136) (3,394,516)
Cash and cash equivalents at beginning of period ............ (26,689,190) 20,801,465
------------- ------------
Cash and cash equivalents at end of period .................. $ 7,933,054 $ 17,406,949
============= ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
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<PAGE> 9
GELTEX PHARMACEUTICALS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements for the three
and six months ended June 30, 1998 and 1997 have been prepared in accordance
with generally accepted accounting principles for interim financial information
and with the instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all the information and notes required by
generally accepted accounting principles for complete financial statements. In
the opinion of management, the accompanying condensed financial statements
include all adjustments, consisting of normal recurring adjustments, necessary
for a fair presentation of the financial condition, results of operations and
cash flows for the periods presented. The results of operations for the interim
periods ended June 30, 1998 are not necessarily indicative of the results to be
expected for the year ended December 31, 1998.
These financial statements should be read in conjunction with the
audited financial statements and notes thereto for the fiscal year ended
December 31, 1997 included in the Company's Annual Report on Form 10-K (File
Number 0-26872) as filed with the Securities and Exchange Commission.
2. COMMON STOCK OFFERING
On March 24, 1998, the Company received $76 million in net proceeds
from the public sale of 3,000,000 shares of its common stock.
3. REPORTING COMPREHENSIVE INCOME (LOSS)
As of January 1, 1998, the Company adopted Financial Accounting
Standards Board Statement No. 130, Reporting Comprehensive Income. Statement 130
establishes new rules for the reporting and display of comprehensive income and
its components; however, the adoption of this Statement had no impact on the
Company's net loss or shareholders' equity. Statement 130 requires unrealized
gains or losses on the Company's available-for-sale securities, which prior to
adoption were reported separately in shareholders' equity to be included in
other comprehensive income. Prior year financial statements have been
reclassified to conform to the requirements of Statement 130.
4. DISCLOSURE OF SEGMENT INFORMATION
As of January 1, 1998, the Company has adopted Financial Accounting
Standards Board Statement No. 131 "Disclosure About Segments of an Enterprise
and Related Information" for annual reporting purposes. Adoption of this
standard is not expected to have a material impact on the Company's annual
financial statements or results of operations.
5. DISCLOSURE OF INFORMATION ABOUT CAPITAL STRUCTURE
As of January 1, 1998, the Company has adopted Financial Accounting
Standards Board Statement No. 129, "Disclosure of Information About Capital
Structure" for annual reporting purposes. Adoption of this standard did not have
a material impact on the Company's financial statements or results of
operations.
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<PAGE> 10
GELTEX PHARMACEUTICALS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS - CONTINUED
(UNAUDITED)
6. SUBSEQUENT EVENT
In August 1998, the Company entered into a Purchase and Sale Agreement
to purchase for $11 million a building and land for a new facility. The
purchase, which is contingent upon the favorable outcome of certain due
diligence to be conducted by the Company throughout the month of August, is
expected to close in the fourth quarter of 1998. The Company intends to convert
the existing building located on the site into a research and development and
administrative facility. The Company expects to secure financing, either through
debt or a third party leasing arrangement, sufficient to fund the purchase price
of the property and the construction costs. Following its move into the new
facility, the Company will sublease its existing facility.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
This Management's Discussion and Analysis of Financial Condition and
Results of Operations contains forward-looking statements regarding the
Company's future revenues, operations and expenditures. Such forward-looking
statements reflect management's current expectations, and the actual results
could differ materially from those projections due to a number of factors
including (i) content and timing of decisions to be made by the U.S. Food and
Drug Administration regarding the Company's New Drug Application for Renagel(R)
phosphate binder, (ii) the Company's ability to successfully conduct and
complete Phase III clinical trials for CholestaGel(R) cholesterol reducer, (iii)
results of research and pre-clinical development being conducted in the areas of
infectious diseases and anti-obesity, and (iv) the risks and uncertainties
described under the heading "Factors Affecting Future Operating Results" in the
section entitled Management's Discussion and Analysis of Financial Condition and
Results of Operations in the Company's Annual Report.
RESULTS OF OPERATIONS
THREE AND SIX MONTHS ENDED JUNE 30, 1998 AND 1997
The Company earned revenues of $3.7 million during the three months
ended June 30, 1998 compared with $24,000 earned during the three months ended
June 30, 1997. During the six months ended June 30, 1998, revenues earned were
$5.2 million compared with $163,000 earned during the six months ended June 30,
1997. Under the terms of the Collaboration Agreement the Company has entered
into with Genzyme Corporation for the final development and commercialization of
Renagel(R) phosphate binder (the "Joint Venture"), the Company and Genzyme
Corporation are each expected to fund the Joint Venture in an amount equal to
50% of the budgeted costs and expenses of the project for the relevant period.
Each party that incurs project expenses, either as internal operating costs or
as third party obligations, will be reimbursed by the Joint Venture for 100% of
the costs incurred. All revenue earned in 1998 represents reimbursement from the
Joint Venture for certain Renagel(R) phosphate binder development costs incurred
by the Company. The amount of reimbursement revenue earned by the Company will
vary according to the obligations of, and related expenses incurred by the
Company, and is expected to decrease in the future as the Company completes the
development of Renagel(R) phosphate binder. In the three and six month periods
ended June 30, 1997, the Company earned $24,000 and $163,000, respectively,
under the Company's $2.0 million grant from the United States Department of
Commerce's Advanced Technology Program. This grant concluded on January 31,
1998.
The Company's total operating expenses for the three months ended June
30, 1998 increased $1.1 million to $9.3 million from $8.2 million during the
same period in 1997. The Company's total operating expenses were $19.4 million
and $15.3 million for the six months ended June 30, 1998 and 1997, respectively.
Research and development expenses increased $1.0 million to $7.9 million for the
three months ended June 30, 1998 from $6.9 million for the three months ended
June 30, 1997. Research and development expenses were $16.8 million and $13.0
million for the six months ended June 30, 1998 and 1997, respectively. Increased
research and development expenses incurred in both the three and six month
periods were due primarily to increased clinical trial and process development
costs associated with the development of CholestaGel(R) non-absorbed cholesterol
reducer and manufacturing costs for Renagel(R) phosphate binder as
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<PAGE> 11
well as increased internal expenses associated with new research and development
programs. The Company expects its research and development expenses to continue
to increase in connection with the ongoing Phase III clinical trials for
ChoelstaGel, the continuing development of processes for the manufacture of
commercial quantities of CholestaGel and the expansion of the anti-obesity,
infectious disease and other research and development programs. General and
administrative expenses remained constant at approximately $1.4 million during
the three month periods ended June, 30, 1998 and June 30, 1997. During the six
month period ended June 30, 1998 general and administrative expenses increased
to $2.6 million from $2.3 million during the same period in 1997. The increase
was due primarily to increased business development expenses and increased
administrative personnel costs.
The Company's equity in the loss of the Joint Venture with Genzyme
Corporation was $2.0 million and $2.9 million for the three and six month
periods ended June 30, 1998, respectively. This amount represents the Company's
portion of the Joint Venture's loss for that period. There were no corresponding
amounts in 1997. The Company expects that the Joint Venture will continue to
operate at a loss at least into 1999, and that the losses associated with the
Company's interest in the Joint Venture will increase during the period leading
to and throughout the market introduction of Renagel phosphate binder.
Net interest income increased to $1.0 million for the three months
ended June 30, 1998 from $835,000 for the three months ended June 30, 1997 due
primarily to increases in cash balances available for investment due to the
Company's public offering of common stock in March, 1998. Net interest income
decreased to $1.6 million for the six months ended June 30, 1998 from $1.8
million for the six months ended June 30, 1997 due primarily to net lower
average cash balances during part of the six month period in 1998.
.
LIQUIDITY AND CAPITAL RESOURCES
On March 24, 1998, the Company received $76 million in net proceeds
from a public offering of 3,000,000 shares of its common stock. As of June 30,
1998, the Company had $108 million in cash, cash equivalents and marketable
securities as compared to $53 million at December 31, 1997.
In August 1998, the Company entered into a Purchase and Sale Agreement
to purchase for $11 million a building and land for a new facility. The
purchase, which is contingent upon the favorable outcome of certain due
diligence to be conducted by the Company throughout the month of August, is
expected to close in the fourth quarter of 1998. The Company intends to convert
the existing building located on the site into a research and development and
administrative facility. The Company expects to secure financing, either through
debt or a third party leasing arrangement, sufficient to fund the purchase price
of the property and the construction costs. Following its move into the new
facility, the Company will sublease its existing facility.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
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PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company's 1998 Annual Meeting of Stockholders was held May 27,
1998. The following is a description of the two matters submitted to a vote of
the stockholders at such meeting and the results of voting.
(i) At the meeting two directors were elected to serve on the
Company's Board of Directors for a three year term expiring in
the year 2001.
<TABLE>
<CAPTION>
Number of Shares Number of Votes
Director Elected Voted For Withheld
---------------- ---------------- ---------------
<S> <C> <C>
Henri A. Termeer 11,744,347 342,885
Jesse Treu 11,756,048 331,184
</TABLE>
There were no broker non-votes or absentions with respect to
this matter.
(ii) The stockholders also approved an amendment to the Company's 1992
Equity Incentive Plan to increase the number of shares of Common
Stock reserved for issuance under such plan from 2,000,000 to
2,750,000.
<TABLE>
<S> <C>
Number of Shares Voted For: 11,783,098
Number of Shares Voted Against: 266,664
Number of Shares Abstained: 37,470
</TABLE>
There were no broker non-votes with respect to this matter.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
See the Exhibit Index on page 14 hereto.
(b) Reports on Form 8-K.
None.
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<PAGE> 13
GELTEX PHARMACEUTICALS, INC.
FORM 10-Q
JUNE 30, 1998
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
GELTEX PHARMACEUTICALS, INC.
DATE: August 13, 1998 BY: /s/ Paul J. Mellett, Jr.
-----------------------------------
Paul J. Mellett, Jr.
Duly Authorized Officer and
Principal Financial Officer
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<PAGE> 14
EXHIBIT INDEX
Exhibit Number Description
-------------- -----------
4.1 Amended and Restated Facility One
Term Note issued to Fleet National
Bank dated as of May 21, 1997
4.2 Second Loan Modification Agreement
between the Company and Fleet
National Bank dated as of June 30,
1998
10.1# Amended and Restated 1992 Equity
Incentive Plan
10.2# Amended and Restated 1995 Director
Stock Option Plan
10.3# Promissory Note in favor of the
Company executed by Edmund J.
Sybertz on
June 30, 1998
10.4* Manufacturing and Supply Agreement
(United States) between Renagel LLC
and Circa Pharmaceuticals, Inc. dated
as of July 31, 1998
10.5 Purchase and Sale Agreement between
Sodexho USA, Inc. and Service Supply
Corporation and the Company dated as
of August 4, 1998
27 Financial Data Schedule
# Identifies a management contract or compensatory plan or
arrangement in which an executive officer or director of the
Company participates
* Certain confidential material contained in Exhibit 10.4 has
been omitted and filed separately with the Securities and
Exchange Commission.
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<PAGE> 1
EXHIBIT 4.1
AMENDED AND RESTATED FACILITY ONE TERM NOTE
$5,000,000.00 Boston, Massachusetts
As of May 21, 1997
FOR VALUE RECEIVED, the undersigned GelTex Pharmaceuticals, Inc., a
Delaware corporation (the "Borrower") hereby promises to pay to the order of
FLEET NATIONAL BANK (the "Bank") the principal amount of Five Million and 00/100
($5,000,000.00) Dollars or such portion thereof as may be advanced by the Bank
pursuant to ss.1.2 of that certain letter agreement dated May 21, 1997 between
the Bank and the Borrower, as amended (as so amended, the "Letter Agreement")
and remains outstanding from time to time hereunder ("Principal"), with
interest, at the rate hereinafter set forth, on the daily balance of all unpaid
Principal, from the date hereof until payment in full of all Principal and
interest hereunder.
Interest on all unpaid Principal shall be due and payable monthly in
arrears, on the first day of each month, commencing on the first such date after
the advance of any Principal and continuing on the first day of each month
thereafter and on the date of payment of this note in full, at a fluctuating
rate per annum (computed on the basis of a year of three hundred sixty (360)
days for the actual number of days elapsed) which shall at all times be equal to
the Prime Rate, as in effect from time to time (but in no event in excess of the
maximum rate permitted by then applicable law), with a change in the aforesaid
rate of interest to become effective on the same day on which any change in the
Prime Rate is effective; provided, however, that (A) if a Eurodollar Interest
Rate (as defined in the Letter Agreement) shall have become applicable to all or
any portion of the outstanding Principal for any Interest Period (as defined in
the Letter Agreement), then interest on such Principal or portion thereof shall
accrue at said applicable Eurodollar Interest Rate for such Interest Period and
shall be payable on the Interest Payment Date (as defined in the Letter
Agreement) applicable to such Interest Period, and (B) if a COF Interest Rate
(as defined in the Letter Agreement) shall have become applicable to the
outstanding Principal, then interest on the outstanding Principal shall accrue
at said COF Interest Rate and shall be paid on the first day of each month.
Overdue Principal and, to the extent permitted by law, overdue interest shall
bear interest at a fluctuating rate per annum which at all times shall be equal
to the sum of (i) four (4%) percent per annum plus (ii) the per annum rate
otherwise payable under this note with respect to the Principal which is overdue
(or as to which such interest is overdue) (but in no event in excess of the
maximum rate permitted by then applicable law), compounded monthly and payable
on demand. As used herein, "Prime Rate" means the variable rate of interest per
annum designated by the Bank from time to time as its prime rate, it being
understood that such rate is merely a reference rate and does not necessarily
represent the lowest or best rate being charged to any customer. If the entire
amount of any required Principal and/or interest is not paid within ten (10)
days after the same is due, the Borrower shall pay to the Bank a late fee equal
to five percent (5%) of the required payment, provided that such late fee shall
be reduced to three percent (3%) of any required Principal and
<PAGE> 2
interest that is not paid within fifteen (15) days of the date it is due if this
note is secured by a mortgage on an owner-occupied residence of 1-4 units.
The outstanding Principal of this note shall be repaid by the Borrower
to the Bank in the following installments: (i) 5 equal consecutive monthly
payments of $103,958.40 each, payable on the last day of each month during the
period January - May 1998; followed by (ii) 17 equal consecutive quarterly
payments of $248,345.06 each, payable on the last day of each calendar quarter
commencing June 30, 1998 and continuing through and including June 30, 2002;
followed by (iii) an 18th and final quarterly payment due on September 30, 2002
in an amount equal to all then remaining Principal and all interest accrued but
unpaid thereon.
The Borrower may at any time and from time to time prepay all or any
portion of any Facility One Term Loan (as defined in the Letter Agreement), but,
as to Fixed Rate Loans (as defined in the Letter Agreement), only at the times
and in the manner, and (under certain circumstances) with the additional
payments, provided for in the Letter Agreement. Any prepayment of Principal, in
whole or in part, will be without premium or penalty (but, in the case of Fixed
Rate Loans, may require payment of additional amounts, as provided for in the
Letter Agreement). Each Principal prepayment shall be accompanied by payment of
all interest on the prepaid amount accrued but unpaid to the date of payment.
Any partial prepayment of Principal will be applied against Principal
installments in inverse order of normal maturity.
Payments of both Principal and interest shall be made, in lawful money
of the United States in immediately available funds, at the office of the Bank
located at One Federal Street, Boston, Massachusetts 02110, or at such other
address as the Bank may from time to time designate.
The undersigned Borrower irrevocably authorizes the Bank to make or
cause to be made, on a schedule attached to this note or on the books of the
Bank, at or following the time of making any Facility One Term Loan and of
receiving any payment of Principal, an appropriate notation reflecting such
transaction (including date, amount and maturity) and the then aggregate unpaid
balance of Principal. Failure of the Bank to make any such notation shall not,
however, affect any obligation of the Borrower hereunder or under the Letter
Agreement. The unpaid Principal amount of this note, as recorded by the Bank
from time to time on such schedule or on such books, shall constitute
presumptive evidence of the aggregate unpaid principal amount of the Facility
One Term Loans.
The Borrower hereby (a) waives notice of and consents to any and all
advances, settlements, compromises, favors and indulgences (including, without
limitation, any extension or postponement of the time for payment), any and all
receipts, substitutions, additions, exchanges and releases of collateral, and
any and all additions, substitutions and releases of any person primarily or
secondarily liable, (b) waives presentment, demand, notice, protest and all
other demands and notices generally in connection with the delivery, acceptance,
performance, default or enforcement of or under this note, and (c) agrees to
pay, to the extent permitted by law, all reasonable costs and expenses,
including, without limitation, reasonable attorneys' fees,
-2-
<PAGE> 3
incurred or paid by the Bank in enforcing this note and any collateral or
security therefor, all whether or not litigation is commenced.
This note is the Facility One Term Note referred to in the Letter
Agreement. This note is subject to prepayment as set forth in the Letter
Agreement. The maturity of this note may be accelerated upon the occurrence of
an Event of Default, as provided in the Letter Agreement.
THE BORROWER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES THE
RIGHT TO A TRIAL BY JURY IN RESPECT OF ANY CLAIM BASED ON THIS NOTE OR ARISING
OUT OF, UNDER OR IN CONNECTION WITH THIS NOTE OR ANY RELATED DOCUMENTS OR OUT OF
ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN)
OR ACTIONS OF ANY PERSON. THIS WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR THE
BANK TO ACCEPT THIS NOTE AND TO MAKE THE FACILITY ONE TERM LOANS AS CONTEMPLATED
IN THE LETTER AGREEMENT.
Executed, as an instrument under seal, as of the day and year first
above written.
CORPORATE SEAL GELTEX PHARMACEUTICALS, INC.
ATTEST:
/s/ Elizabeth A. Grammer By: /s/ Paul J. Mellett
- ----------------------------- --------------------------------------
Secretary Name: Paul J. Mellett, Jr.
Title: Vice President, Administration
and Finance
-3-
<PAGE> 1
EXHIBIT 4.2
SECOND LOAN MODIFICATION AGREEMENT
This Second Loan Modification Agreement ("this Agreement") is made as of
June 30, 1998 between GelTex Pharmaceuticals, Inc., a Delaware corporation (the
"Borrower") and Fleet National Bank (the "Bank"). For good and valuable
consideration, receipt and sufficiency of which are hereby acknowledged, the
Borrower and the Bank act and agree as follows:
1. Reference is made to: (i) that certain letter agreement dated May
21, 1997 between the Borrower and the Bank, as amended by Loan Modification
Agreement dated October 31, 1997 (as so amended, the "Letter Agreement"); (ii)
that certain $5,000,000 face principal amount promissory note dated May 21,
1997, as amended by said Loan Modification Agreement (as so amended, the
"Original Facility One Term Note") made by the Borrower and payable to the order
of the Bank; (iii) that certain Security Agreement (Equipment) dated May 21,
1997, as amended by said Loan Modification Agreement (as so amended, the
"Security Agreement") given by the Borrower to the Bank; (iv) that certain
$3,000,000 face principal amount promissory note dated October 31, 1997 (the
"Facility Two Term Note") made by the Borrower and payable to the order of the
Bank; and (v) that certain $5,000,000 face principal amount Amended and Restated
Facility One Term Note (the "Restated Facility One Term Note") dated as of May
21, 1997 made by the Borrower and payable to the order of the Bank. The Letter
Agreement, the Security Agreement, the Restated Facility One Term Note and the
Facility Two Term Note are hereinafter collectively referred to as the
"Financing Documents". The aforesaid Loan Modification Agreement dated October
31, 1997 is hereinafter referred to as the "First Modification".
2. The Letter Agreement is hereby amended, effective as of the date
hereof:
a. By deleting in its entirety clause (i) of Section 1.1 of the
Letter Agreement and by substituting in its stead the following:
"(i) that certain Amended and Restated Facility One Term Note
dated as of May 21, 1997 (the `Facility One Term Note') made by
the Borrower and payable to the order of the Bank,"
As a result, all references in the Letter Agreement (as amended by the
First Modification) to a "Facility One Term Note" will be deemed to refer to the
Restated Facility One Term Note.
b. By deleting in their entireties the first, second and third
sentences of Section 1.3 of the Letter Agreement and by substituting in their
stead the following:
"The Borrower shall repay the aggregate amount of principal of
the Facility One Term Loans in the following installments: (i) 5
equal consecutive monthly payments of $103,958.40 each, payable
on the last day of each month during the period January - May
1998; followed by (ii) 17 equal
<PAGE> 2
consecutive quarterly payments of $248,345.06 each, payable on
the last day of each calendar quarter commencing June 30, 1998
and continuing through and including June 30, 2002; followed by
(iii) an 18th and final quarterly payment due on September 30,
2002 in an amount equal to the then outstanding aggregate
principal balance of the Facility One Term Loans and all interest
accrued but unpaid thereon to the date of payment."
c. By adding to Section 1.4 of the Letter Agreement, at the end
thereof, the following:
"The Bank and the Borrower may, in the future, agree to fix the
interest rate on all or any portion of the then outstanding
aggregate principal amount of the Facility One Term Loans for the
period of time commencing at the date of such rate-fix and
continuing through the maturity date of the Facility One Term
Loans. Such rate-fix would be accomplished by the Borrower
entering into a swap contract with the Bank. The fixed rate for
this purpose would be determined by the Bank, in its sole
discretion, at the time of entering into the swap contract and
the documentation would be the Bank's then customary
documentation for swap transactions. Such documentation will
include, among other matters, make-whole provisions effective in
the event that (due to prepayment of all or any portion of the
Facility One Term Loans or for any other reason) the swap
transaction described therein is terminated as to any notional
amount prior to its scheduled expiry date. In the event that the
Borrower enters into such a swap contract, the Borrower will
irrevocably elect that as long as the rate-fix is in effect the
Facility One Term Loans will be treated (subject to ss.1.9 below
and the other provisions of this letter agreement) as a series of
LIBOR Loans, the Interest Period for the first of which will
commence on the date of such rate-fix with a subsequent Interest
Period to commence immediately following the completion of each
successive Interest Period."
d. By deleting from the penultimate sentence of Section 1.5 of the
Letter Agreement the words "two (2%) percent" and by substituting in their stead
the following:
"four (4%) percent"
e. By adding to Section 1.5C of the Letter Agreement (as inserted by
the First Modification), at the end thereof, the following:
"The Bank and the Borrower may, in the future, agree to fix the
interest rate on all or any portion of the then outstanding
aggregate principal amount of the Facility Two Term Loans for the
period of time commencing at the date of such rate-fix and
continuing through the maturity date of the Facility Two Term
Loans. Such rate-fix would be accomplished by the Borrower
entering into a swap contract with the Bank. The fixed rate for
this purpose would be determined by the Bank, in its sole
discretion, at the time of
-2-
<PAGE> 3
entering into the swap contract and the documentation would be
the Bank's then customary documentation for swap transactions.
Such documentation will include, among other matters, make-whole
provisions effective in the event that (due to prepayment of all
or any portion of the Facility Two Term Loans or for any other
reason) the swap transaction described therein is terminated as
to any notional amount prior to its scheduled expiry date. In the
event that the Borrower enters into such a swap contract, the
Borrower will irrevocably elect that as long as the rate-fix is
in effect the Facility Two Term Loans will be treated (subject to
ss.1.9 below and the other provisions of this letter agreement)
as a series of LIBOR Loans, the Interest Period for the first of
which will commence on the date of such rate-fix with a
subsequent Interest Period to commence immediately following the
completion of each successive Interest Period."
f. By deleting in its entirety Section 1.7 of the Letter Agreement
and by substituting in its stead the following:
"1.7. PREPAYMENT OF FIXED RATE LOANS. The following provisions of
this ss.1.7 shall be effective only with respect to Fixed Rate
Loans: As to any Fixed Rate Loan, the Borrower shall have the
right (subject to the payment of the yield maintenance fee
described below) to prepay such Fixed Rate Loan at any time in
whole or in part; provided that any partial prepayment of any
Fixed Rate Loan shall be in the amount of $500,000 or an integral
multiple thereof. If, due to acceleration of any Term Note or due
to voluntary or mandatory repayment or prepayment or due to any
other reason, the Bank receives payment of any principal of a
LIBOR Loan on any date prior to the last day of the relevant
Interest Period or receives payment of all or any portion of any
installment of the COF Loan prior to the regularly scheduled due
date for such installment, or if for any reason a Fixed Rate Loan
is converted to a Floating Rate Loan (except, as to a LIBOR Loan,
at the end of the relevant Interest Period), the Borrower shall,
upon demand and receipt of a Bank Certificate from the Bank with
respect thereto, pay forthwith to the Bank a yield maintenance
fee in an amount computed as follows: The current rate for United
States Treasury securities (bills on a discounted basis shall be
converted to a bond equivalent) with a maturity date closest to
the last day of the Interest Period applicable to the affected
LIBOR Loan (or the regularly scheduled due date of any
installment of the COF Loan) shall be subtracted from the `cost
of funds' component (being, for LIBOR Loans, reserve-adjusted
LIBOR) of the fixed rate in effect at the date of prepayment. If
the result is zero or a negative number, there shall be no yield
maintenance fee. If the result is a positive number, then the
resulting percentage shall be multiplied by the amount of the
principal balance being prepaid. The resulting amount shall be
divided by 360 and multiplied by the number of days remaining in
the relevant Interest Period (or, in the case of prepayment of an
installment of the COF
-3-
<PAGE> 4
Loan, days remaining until the regularly scheduled due date
thereof). Said amount shall be reduced to present value
calculated by using the number of days remaining in the relevant
Interest Period (or, in the case of prepayment of an installment
of the COF Loan, days remaining until the regularly scheduled due
date thereof) and by using the above-referenced United States
Treasury security rate as the discount rate. The resulting amount
shall be the yield maintenance fee due to the Bank upon
prepayment or conversion of the applicable Fixed Rate Loan. Any
acceleration of a Fixed Rate Loan due to an Event of Default will
give rise to a yield maintenance fee calculated with the respect
to such Fixed Rate Loan on the date of such acceleration in the
same manner as though the Borrower had exercised a right of
prepayment at that date, such yield maintenance fee being due and
payable at that date."
g. By deleting from the third sentence of the grammatical third
paragraph of Section 1.10 of the Letter Agreement the words "at its office at 75
State Street, Boston, MA 02109" and by substituting in its stead the following:
"in lawful currency of the United States, at its offices at One
Federal Street, Boston, MA 02110"
h. By changing the notice address of the Bank, pursuant to Section
6.4 of the Letter Agreement, to the following:
"Fleet National Bank
High Technology Division
Mail Stop: MA OF DO7A
One Federal Street
Boston, MA 02110
Attention: Kimberly A. Martone, Vice President"
i. By inserting into Section 6.5 of the Letter Agreement,
immediately after the third sentence of such Section, the following:
"Without limitation of the foregoing generality,
(i) The Bank may at any time pledge all or any portion of its
rights under the Loan Documents (including any portion of any
Term Note) to any of the 12 Federal Reserve Banks organized under
Section 4 of the Federal Reserve Act, 12 U.S.C. Section 341. No
such pledge or the enforcement thereof shall release the Bank
from its obligations under any of the Loan Documents.
(ii) The Bank shall have the unrestricted right at any time and
from time to time, and without the consent of or notice to the
Borrower, to grant to one or more banks or other financial
institutions (each, a `Participant')
-4-
<PAGE> 5
participating interests in the Bank's obligation to lend
hereunder and/or any or all of the Term Loans held by the Bank
hereunder. In the event of any such grant by the Bank of a
participating interest to a Participant, whether or not upon
notice to the Borrower, the Bank shall remain responsible for the
performance of its obligations hereunder and the Borrower shall
continue to deal solely and directly with the Bank in connection
with the Bank's rights and obligations hereunder. The Bank may
furnish any information concerning the Borrower in its possession
from time to time to prospective assignees and Participants;
provided that the Bank shall require any such prospective
assignee or Participant to agree in writing to maintain the
confidentiality of such information to the same extent as the
Bank would be required to maintain such confidentiality."
j. By inserting into Article VI of the Letter Agreement, at the end
of such Article, the following:
"6.9. REPLACEMENT NOTE. Upon receipt of an affidavit of an
officer of the Bank as to the loss, theft, destruction or
mutilation of any Term Note or of any other Loan Document which
is not of public record and, in the case of any such mutilation,
upon surrender and cancellation of such Term Note or other Loan
Document, the Borrower will issue, in lieu thereof, a replacement
Term Note or other Loan Document in the same principal amount (as
to a Term Note) and in any event of like tenor.
6.10. USURY. All agreements between the Borrower and the Bank are
hereby expressly limited so that in no contingency or event
whatsoever, whether by reason of acceleration of maturity of any
Term Note or otherwise, shall the amount paid or agreed to be
paid to the Bank for the use or the forbearance of the
Indebtedness represented by any Term Note exceed the maximum
permissible under applicable law. In this regard, it is expressly
agreed that it is the intent of the Borrower and the Bank, in the
execution, delivery and acceptance of the Term Notes, to contract
in strict compliance with the laws of The Commonwealth of
Massachusetts. If, under any circumstances whatsoever,
performance or fulfillment of any provision of any Term Note or
any of the other Loan Documents at the time such provision is to
be performed or fulfilled shall involve exceeding the limit of
validity prescribed by applicable law, then the obligation so to
be performed or fulfilled shall be reduced automatically to the
limit of such validity, and if under any circumstances whatsoever
the Bank should ever receive as interest an amount which would
exceed the highest lawful rate, such amount which would be
excessive interest shall be applied to the reduction of the
principal balance evidenced by the Term Notes and not to the
payment of interest. The provisions of this ss.6.10 shall control
every other provision of this letter agreement and of each Term
Note.
-5-
<PAGE> 6
'
6.11. WAIVER OF JURY TRIAL. THE BORROWER AND THE BANK HEREBY
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY MUTUALLY WAIVE THE RIGHT
TO A TRIAL BY JURY IN RESPECT OF ANY CLAIM BASED HEREON, ARISING
OUT OF, UNDER OR IN CONNECTION WITH THIS LETTER AGREEMENT, ANY
TERM NOTE OR ANY OTHER LOAN DOCUMENTS OR OUT OF ANY COURSE OF
CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN)
OR ACTIONS OF ANY PARTY. THIS WAIVER CONSTITUTES A MATERIAL
INDUCEMENT FOR THE BANK TO ENTER INTO THIS LETTER AGREEMENT AND
TO MAKE TERM LOANS AS CONTEMPLATED HEREIN."
k. By deleting the number "1.75" from the definition of "Eurodollar
Interest Rate" appearing in Section 7.1 of the Letter Agreement and by
substituting in its stead the following:
"1.55"
As a result, the formula for calculating the Eurodollar Interest Rate will be:
EIR = LIBOR
--------- + 1.55
[1.00-RR]
l. By deleting in its entirety the definition of "LIBOR" appearing
in Section 7.1 and by substituting in its stead the following:
"`LIBOR' - With respect to each Interest Period for a LIBOR Loan,
that rate per annum (rounded upward, if necessary, to the nearest
1/32nd of one percent) which represents the offered rate for
deposits in U.S. Dollars, for a period of time comparable to such
Interest Period, which appears on the Telerate page 3750 as of
11:00 a.m. (London time) on that day that is two (2) London
Banking Days preceding the first day of such Interest Period;
provided, however, that if the rate described above does not
appear on the Telerate System on any applicable interest
determination date, LIBOR for such Interest Period shall be the
rate (rounded upwards as described above, if necessary) for
deposits in dollars for a period substantially equal to such
Interest Period shown on the Reuters Page `LIBO' (or such other
page as may replace the LIBO Page on that service for the purpose
of displaying such rates), as of 11:00 a.m. (London Time), on
that day that is two (2) London Banking Days prior to the
beginning of such Interest Period. `London Banking Day' shall
mean any date on which commercial banks are open for business in
London. If both the Telerate and Reuters systems are unavailable,
then LIBOR for any Interest Period will be determined on the
basis of the offered rates for deposits in U.S. Dollars for a
period of time comparable to such Interest Period which are
offered by four major banks in the London interbank market at
approximately 11:00 a.m., London time, on that day that is two
(2) London Banking Days preceding the first day of such
-6-
<PAGE> 7
Interest Period, as selected by the Bank. The principal London
office of each of four major London banks will be requested to
provide a quotation of its U.S. Dollar deposit offered rate. If
at least two such quotations are provided, the rate for that date
will be the arithmetic mean of the quotations. If fewer than two
quotations are provided as requested, the rate for that date will
be determined on the basis of the rates quoted for loans in U.S.
Dollars to leading European banks for a period of time comparable
to such Interest Period offered by major banks in New York City
at approximately 11:00 a.m., New York City time, on that day that
is two London Banking Days preceding the first day of such
Interest Period. In the event that the Bank is unable to obtain
any such quotation as provided above, it will be deemed that
LIBOR for the proposed Interest Period cannot be determined. The
Bank shall give prompt notice to the Borrower of LIBOR as
determined for each LIBOR Loan and such notice shall be
conclusive and binding, absent manifest error."
m. By deleting in its entirety the definition "Prime Rate" appearing
in Section 7.1 of the Letter Agreement and by substituting in its stead the
following:
"`Prime Rate' - That variable rate of interest per annum
designated by the Bank from time to time as its prime rate, it
being understood that such rate is merely a reference rate and
does not necessarily represent the lowest or best rate being
charged to any customer."
3. Wherever in any Financing Document, or in any certificate or
opinion to be delivered in connection therewith, reference is made to a "letter
agreement" or to the "Letter Agreement", from and after the date hereof same
will be deemed to refer to the Letter Agreement, as hereby amended.
4. Simultaneously with the execution and delivery of this Agreement,
the Borrower is executing and delivering to the Bank the Restated Facility One
Term Note in substitution for the Original Facility One Term Note. The Restated
Facility One Term Note is a $5,000,000 promissory note of the Borrower,
substantially in the form attached hereto as Exhibit 1. Wherever in any of the
Financing Documents, or in any certificate or opinion to be delivered in
connection therewith, reference is made to the "Facility One Term Note", from
and after the date hereof same will be deemed to refer to the Restated Facility
One Term Note. The Borrower acknowledges and agrees that any Facility One Term
Loans (as defined in the Letter Agreement) heretofore made under the Letter
Agreement (any such Facility One Term Loans having been heretofore evidenced by
the Original Facility One Term Note), as well as all Facility One Term Loans
made on or after the date hereof, are and will be deemed to be evidenced by the
Restated Facility One Term Note.
5. In order to induce the Bank to enter into this Agreement, the
Borrower agrees to pay, on demand, all costs and expenses (including, without
limitation, reasonable fees and expenses of the Bank's attorneys) incurred by
the Bank in connection with this Agreement and/or the transactions contemplated
hereby.
-7-
<PAGE> 8
6. In order to induce the Bank to enter into this Agreement, the
Borrower further represents and warrants as follows:
a. The execution, delivery and performance of this Agreement and the
Restated Facility One Term Note have been duly authorized by the Borrower by all
necessary corporate and other action, will not require the consent of any third
party and will not conflict with, violate the provisions of, or cause a default
or constitute an event which, with the passage of time or the giving of notice
or both, could cause a default on the part of the Borrower under its charter
documents or by-laws or under any contract, agreement, law, rule, order,
ordinance, franchise, instrument or other document, or result in the imposition
of any lien or encumbrance (except in favor of the Bank) on any property or
assets of the Borrower.
b. The Borrower has duly executed and delivered each of this
Agreement and the Restated Facility One Term Note.
c. Each of this Agreement and the Restated Facility One Term Note is
the legal, valid and binding obligation of the Borrower, enforceable against the
Borrower in accordance with its respective terms.
d. The statements, representations and warranties made in the Letter
Agreement and/or in the Security Agreement continue to be correct as of the date
hereof; except as amended, updated and/or supplemented by the attached
Supplemental Disclosure Schedule.
e. The covenants and agreements of the Borrower contained in the
Letter Agreement and/or in the Security Agreement have been complied with on and
as of the date hereof.
f. No event which constitutes or which, with notice or lapse of
time, or both, could constitute, an Event of Default (as defined in the Letter
Agreement) has occurred and is continuing.
g. No material adverse change has occurred in the financial
condition of the Borrower (other than continuing losses from operations as
heretofore disclosed to the Bank) from that disclosed in the financial
statements of the Borrower dated December 31, 1997, heretofore furnished to the
Bank.
7. Except as expressly affected hereby, the Letter Agreement and
each of the other Financing Documents remains in full force and effect as
heretofore.
8. Nothing contained herein will be deemed to constitute a waiver or
a release of any provision of any of the Financing Documents. Nothing contained
herein will in any event be deemed to constitute an agreement to give a waiver
or release or to agree to any amendment or modification of any provision of any
of the Financing Documents on any other or future occasion.
-8-
<PAGE> 9
Executed, as an instrument under seal, as of the day and year first
above written.
GELTEX PHARMACEUTICALS, INC.
By: /s/ Paul J. Mellett, Jr.
--------------------------------------
Name: Paul J. Mellett, Jr.
Title: Vice President, Administration
and Finance
Accepted and agreed:
FLEET NATIONAL BANK
By: /s/ Kimberly Martone
-----------------------------
Name: Kimberly Martone
Title: Vice President
-9-
<PAGE> 10
EXHIBIT 1
AMENDED AND RESTATED FACILITY ONE TERM NOTE
$5,000,000.00 Boston, Massachusetts
As of May 21, 1997
FOR VALUE RECEIVED, the undersigned GelTex Pharmaceuticals, Inc., a
Delaware corporation (the "Borrower") hereby promises to pay to the order of
FLEET NATIONAL BANK (the "Bank") the principal amount of Five Million and 00/100
($5,000,000.00) Dollars or such portion thereof as may be advanced by the Bank
pursuant to ss.1.2 of that certain letter agreement dated May 21, 1997 between
the Bank and the Borrower, as amended (as so amended, the "Letter Agreement")
and remains outstanding from time to time hereunder ("Principal"), with
interest, at the rate hereinafter set forth, on the daily balance of all unpaid
Principal, from the date hereof until payment in full of all Principal and
interest hereunder.
Interest on all unpaid Principal shall be due and payable monthly in
arrears, on the first day of each month, commencing on the first such date after
the advance of any Principal and continuing on the first day of each month
thereafter and on the date of payment of this note in full, at a fluctuating
rate per annum (computed on the basis of a year of three hundred sixty (360)
days for the actual number of days elapsed) which shall at all times be equal to
the Prime Rate, as in effect from time to time (but in no event in excess of the
maximum rate permitted by then applicable law), with a change in the aforesaid
rate of interest to become effective on the same day on which any change in the
Prime Rate is effective; provided, however, that (A) if a Eurodollar Interest
Rate (as defined in the Letter Agreement) shall have become applicable to all or
any portion of the outstanding Principal for any Interest Period (as defined in
the Letter Agreement), then interest on such Principal or portion thereof shall
accrue at said applicable Eurodollar Interest Rate for such Interest Period and
shall be payable on the Interest Payment Date (as defined in the Letter
Agreement) applicable to such Interest Period, and (B) if a COF Interest Rate
(as defined in the Letter Agreement) shall have become applicable to the
outstanding Principal, then interest on the outstanding Principal shall accrue
at said COF Interest Rate and shall be paid on the first day of each month.
Overdue Principal and, to the extent permitted by law, overdue interest shall
bear interest at a fluctuating rate per annum which at all times shall be equal
to the sum of (i) four (4%) percent per annum plus (ii) the per annum rate
otherwise payable under this note with respect to the Principal which is overdue
(or as to which such interest is overdue) (but in no event in excess of the
maximum rate permitted by then applicable law), compounded monthly and payable
on demand. As used herein, "Prime Rate" means the variable rate of interest per
annum designated by the Bank from time to time as its prime rate, it being
understood that such rate is merely a reference rate and does not necessarily
represent the lowest or best rate being charged to any customer. If the entire
amount of any required Principal and/or interest is not paid within ten (10)
days after the same is due, the Borrower shall pay to the Bank a late fee equal
to five percent (5%) of the required payment, provided that such late fee shall
be reduced to three percent (3%) of any required Principal and interest that is
not paid within fifteen (15) days of the date it is due if this note is secured
by a mortgage on an owner-occupied residence of 1-4 units.
-10-
<PAGE> 11
The outstanding Principal of this note shall be repaid by the Borrower
to the Bank in the following installments: (i) 5 equal consecutive monthly
payments of $103,958.40 each, payable on the last day of each month during the
period January - May 1998; followed by (ii) 17 equal consecutive quarterly
payments of $248,345.06 each, payable on the last day of each calendar quarter
commencing June 30, 1998 and continuing through and including June 30, 2002;
followed by (iii) an 18th and final quarterly payment due on September 30, 2002
in an amount equal to all then remaining Principal and all interest accrued but
unpaid thereon.
The Borrower may at any time and from time to time prepay all or any
portion of any Facility One Term Loan (as defined in the Letter Agreement), but,
as to Fixed Rate Loans (as defined in the Letter Agreement), only at the times
and in the manner, and (under certain circumstances) with the additional
payments, provided for in the Letter Agreement. Any prepayment of Principal, in
whole or in part, will be without premium or penalty (but, in the case of Fixed
Rate Loans, may require payment of additional amounts, as provided for in the
Letter Agreement). Each Principal prepayment shall be accompanied by payment of
all interest on the prepaid amount accrued but unpaid to the date of payment.
Any partial prepayment of Principal will be applied against Principal
installments in inverse order of normal maturity.
Payments of both Principal and interest shall be made, in lawful money
of the United States in immediately available funds, at the office of the Bank
located at One Federal Street, Boston, Massachusetts 02110, or at such other
address as the Bank may from time to time designate.
The undersigned Borrower irrevocably authorizes the Bank to make or
cause to be made, on a schedule attached to this note or on the books of the
Bank, at or following the time of making any Facility One Term Loan and of
receiving any payment of Principal, an appropriate notation reflecting such
transaction (including date, amount and maturity) and the then aggregate unpaid
balance of Principal. Failure of the Bank to make any such notation shall not,
however, affect any obligation of the Borrower hereunder or under the Letter
Agreement. The unpaid Principal amount of this note, as recorded by the Bank
from time to time on such schedule or on such books, shall constitute
presumptive evidence of the aggregate unpaid principal amount of the Facility
One Term Loans.
The Borrower hereby (a) waives notice of and consents to any and all
advances, settlements, compromises, favors and indulgences (including, without
limitation, any extension or postponement of the time for payment), any and all
receipts, substitutions, additions, exchanges and releases of collateral, and
any and all additions, substitutions and releases of any person primarily or
secondarily liable, (b) waives presentment, demand, notice, protest and all
other demands and notices generally in connection with the delivery, acceptance,
performance, default or enforcement of or under this note, and (c) agrees to
pay, to the extent permitted by law, all reasonable costs and expenses,
including, without limitation, reasonable attorneys' fees, incurred or paid by
the Bank in enforcing this note and any collateral or security therefor, all
whether or not litigation is commenced.
-11-
<PAGE> 12
This note is the Facility One Term Note referred to in the Letter
Agreement. This note is subject to prepayment as set forth in the Letter
Agreement. The maturity of this note may be accelerated upon the occurrence of
an Event of Default, as provided in the Letter Agreement.
THE BORROWER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES THE
RIGHT TO A TRIAL BY JURY IN RESPECT OF ANY CLAIM BASED ON THIS NOTE OR ARISING
OUT OF, UNDER OR IN CONNECTION WITH THIS NOTE OR ANY RELATED DOCUMENTS OR OUT OF
ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN)
OR ACTIONS OF ANY PERSON. THIS WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR THE
BANK TO ACCEPT THIS NOTE AND TO MAKE THE FACILITY ONE TERM LOANS AS CONTEMPLATED
IN THE LETTER AGREEMENT.
Executed, as an instrument under seal, as of the day and year first
above written.
CORPORATE SEAL GELTEX PHARMACEUTICALS, INC.
ATTEST:
By:
- --------------------------- ----------------------------------
Secretary Name: Paul J. Mellett, Jr.
Title: Vice President, Administration
and Finance
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<PAGE> 13
SUPPLEMENTAL DISCLOSURE SCHEDULE
(Note: This Supplemental Disclosure Schedule is intended to update, but not
replace the disclosure schedule attached to the Letter Agreement dated May 21,
1997 and the disclosure schedule attached to the Loan Modification Agreement
dated October 31, 1997. Items not referenced in this supplement remain
unchanged from the original disclosure schedule)
SECTION 2.1(b)
Persons known to Borrower to hold more than 5% of the outstanding shares of
Borrower's capital stock:
- - The Equitable Companies Incorporated(1)
- - West Highland Capital, Inc.(2)
- - Amerindo Investment Advisors
- ---------------------
(1) Includes shares held by The Equitable Life Assurance Society of the United
States ("ELAS") and Alliance Capital Management L.P. ("ACM"). ELAS and ACM
are subsidiaries of The Equitable Companies Incorporated. This information
is based on a Schedule 13G dated February 6, 1997 filed with the Securities
and Exchange Commission for the aforementioned entities.
(2) Includes shares held by West Highland Capital, Inc. ("WHC"), Estero
Partners, LLC ("EP"), West Highland Partners, L.P.("WHP") and Buttonwood
Partners, L.P. ("BP"). Lang H. Gerhard is the sole director and executive
officer of WHC and the sole manager of EP. WHC, EP and Mr. Gerhard are the
general partners of WHP and BP which are investment limited partnerships,
and have voting and dispositive authority over shares held by WHP and BP.
WHC has voting and dispositive authority over shares held by its various
investment advisory clients. This information is based on a Schedule 13D
dated January 9, 1997 filed with the Securities and Exchange Commission for
the aforementioned entities and person.
SECTION 2.1(i)
The Borrower references the unaudited financial statements of the Borrower for
the period ended March 31, 1998, heretofore delivered to the Bank, and the
liabilities referenced in such financial statements.
Reference is made to the attached lists of Exhibits filed with the Securities
and Exchange Commission after December 31, 1997, as disclosure of the material
agreements entered into by the Borrower. In addition, on June 26, 1998, the
Borrower entered into a Letter of Intent pursuant to which the Borrower has
agreed to purchase approximately 8.9 acres of land together with the
improvements thereon containing approximately 80,000 square feet of building
area for a total purchase price of $11 million.
SECTION 2.1(j)
In May 1998, the Borrower subleased approximately 7,000 square feet of office
space located at 78 Fourth Avenue, Waltham, Massachusetts. The Borrower's
employees in the manufacturing, clinical and regulatory departments have
relocated to this building and certain records associated with those departments
reside in that building.
<PAGE> 1
EXHIBIT 10.1
GELTEX PHARMACEUTICALS, INC.
AMENDED AND RESTATED 1992 EQUITY INCENTIVE PLAN
Section 1. PURPOSE
The purpose of the GelTex Pharmaceuticals, Inc. Amended and Restated 1992
Equity Incentive Plan (the "Plan") is to attract and retain key employees and
consultants, to provide an incentive for them to achieve long-range performance
goals, and to enable them to participate in the long-term growth of the Company.
Section 2. DEFINITIONS
"Affiliate" means any business entity in which the Company owns directly or
indirectly 50% or more of the total combined voting power or has a significant
financial interest as determined by the Committee.
"Award" means any Option, Stock Appreciation Right, Performance Share,
Restricted Stock, Stock Unit or Other Stock-Based Award awarded under the Plan.
"Board" means the Board of Directors of the Company.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, and any successor to such Code.
"Committee" means a committee of not less than two members of the Board
appointed by the Board to administer the Plan; provided, however, that until
such committee is appointed, "Committee" means the Board.
"Common Stock" or "Stock" means the Common Stock, $0.01 par value, of the
Company.
"Company" means GelTex Pharmaceuticals, Inc.
"Designated Beneficiary" means the beneficiary designated by a Participant,
in a manner determined by the Committee, to receive amounts due or exercise
rights of the Participant in the event of the Participant's death. In the
absence of an effective designation by a Participant, "Designated Beneficiary"
shall mean the Participant's estate.
"Effective Date" means June 1, 1992.
"Fair Market Value" means, with respect to Common Stock or any other
property, the fair market value of such property as determined by the Committee
in good faith or in the manner established by the Committee from time to time.
"Incentive Stock Option" means an option to purchase shares of Common Stock
awarded to a Participant under Section 6 that is intended to meet the
requirements of Section 422 of the Code or any successor provision.
"Nonstatutory Stock Option" means an option to purchase shares of Common
Stock
<PAGE> 2
awarded to a Participant under Section 6 that is not intended to be an Incentive
Stock Option.
"Option" means an Incentive Stock Option or a Nonstatutory Stock Option.
"Other Stock-Based Award" means an Award, other than an Option, Stock
Appreciation Right, Performance Share, Restricted Stock or Stock Unit, having a
Common Stock element and awarded to a Participant under Section 11.
"Participant" means a person selected by the Committee to receive an Award
under the Plan.
"Performance Cycle" or "Cycle" means the period of time selected by the
Committee during which performance is measured for the purpose of determining
the extent to which an award of Performance Shares has been earned.
"Performance Shares" mean shares of Common Stock, which may be earned by
the achievement of performance goals, awarded to a Participant under Section 8.
"Reporting Person" means a person subject to Section 16 of the Securities
Exchange Act of 1934 or any successor provision.
"Restricted Period" means the period of time during which an Award may be
forfeited to the Company pursuant to the terms and conditions of such Award.
"Restricted Stock" means shares of Common Stock subject to forfeiture
awarded to a Participant under Section 9.
"Stock Appreciation Right" or "SAR" means a right to receive any excess in
value of shares of Common Stock over the exercise price awarded to a Participant
under Section 7.
"Stock Unit" means an award of Common Stock or units that are valued in
whole or in part by reference to, or otherwise based on, the value of Common
Stock, awarded to a Participant under Section 10.
Section 3. ADMINISTRATION
The Plan shall be administered by the Committee; provided, however, that
any duties described herein as duties of the Committee may at all times be
conducted by the Board as a whole, in its discretion. The Committee shall have
authority to adopt, alter and repeal such administrative rules, guidelines and
practices governing the operation of the Plan as it shall from time to time
consider advisable, and to interpret the provisions of the Plan. The Committee's
decisions shall be final and binding. To the extent permitted by applicable law,
the Committee may delegate to one or more executive officers of the Company the
power to make Awards to Participants who are not Reporting Persons and all
determinations under the Plan with respect thereto, provided that the Committee
shall fix the maximum amount of such Awards for the group and a maximum for any
one Participant.
Section 4. ELIGIBILITY
All employees and, in the case of Awards other than Incentive Stock
Options, consultants and members of the Board or any Affiliate capable of
contributing significantly to the successful performance of the Company, other
than a person who has
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<PAGE> 3
irrevocably elected not to be eligible, are eligible to be Participants in the
Plan. Incentive Stock Options may be awarded only to persons eligible to receive
such Options under the Code.
Section 5. STOCK AVAILABLE FOR AWARDS
(a) Subject to adjustment under subsection (c), Awards may be made under
the Plan for up to 2,750,000 shares of Common Stock. If any Award in respect of
shares of Common Stock expires or is terminated unexercised or is forfeited
without the Participant having had the benefits of ownership (other than voting
rights), the shares subject to such Award, to the extent of such expiration,
termination or forfeiture, shall again be available for award under the Plan.
Common Stock issued through the assumption or substitution of outstanding grants
from an acquired company shall not reduce the shares available for Awards under
the Plan. Shares issued under the Plan may consist in whole or in part of
authorized but unissued shares or treasury shares.
(b) Subject to adjustment under subsection (c), no Participant may receive
an Award which would result in such Participant having received, during the
fiscal year of the Company in which the Award is made, Awards for more than an
aggregate of 250,000 shares of Common Stock.
(c) In the event that the Committee in its discretion determines that any
stock dividend, extraordinary cash dividend, creation of a class of equity
securities, recapitalization, reorganization, merger, consolidation, split-up,
spin-off, combination, exchange of shares, warrants or rights offering to
purchase Common Stock at a price substantially below fair market value, or other
similar transaction affects the Common Stock such that an adjustment is required
in order to preserve the benefits or potential benefits intended to be made
available under the Plan, then the Committee (subject, in the case of Incentive
Stock Options, to any limitation required under the Code) shall equitably adjust
any or all of (i) the number and kind of shares in respect of which Awards may
be made under the Plan, (ii) the number and kind of shares subject to
outstanding Awards, and (iii) the award, exercise or conversion price with
respect to any of the foregoing, and if considered appropriate, the Committee
may make provision for a cash payment with respect to an outstanding Award,
provided that the number of shares subject to any Award shall always be a whole
number.
Section 6. STOCK OPTIONS
(a) Subject to the provisions of the Plan, the Committee may award
Incentive Stock Options and Nonstatutory Stock Options and determine the number
of shares to be covered by each Option, the option price therefor and the
conditions and limitations applicable to the exercise of the Option. The terms
and conditions of Incentive Stock Options shall be subject to and comply with
Section 422 of the Code, or any successor provision, and any regulations
thereunder, and no Incentive Stock Option may be granted hereunder more than ten
years after the Effective Date.
(b) The Committee shall establish the option price at the time each Option
is awarded, which price shall not be less than 100% of the Fair Market Value of
the Common Stock on the date of award with respect to Incentive Stock Options.
Nonstatutory Stock Options may be granted at such prices as the Committee may
determine.
(c) Each Option shall be exercisable at such times and subject to such
terms and conditions as the Committee may specify in the applicable Award or
thereafter. The Committee may impose such conditions with respect to the
exercise of Options, including conditions relating
-3-
<PAGE> 4
to applicable federal or state securities laws, as it considers necessary or
advisable.
(d) No shares shall be delivered pursuant to any exercise of an Option
until payment in full of the option price therefor is received by the Company.
Such payment may be made in whole or in part in cash or, to the extent permitted
by the Committee at or after the award of the Option, by delivery of a note or
shares of Common Stock owned by the optionee, including Restricted Stock, valued
at their Fair Market Value on the date of delivery, or such other lawful
consideration as the Committee may determine.
(e) The Committee may provide that, subject to such conditions as it
considers appropriate, upon the delivery of shares to the Company in payment of
an Option, the Participant shall automatically be awarded an Option for up to
the number of shares so delivered.
Section 7. STOCK APPRECIATION RIGHTS
(a) Subject to the provisions of the Plan, the Committee may award SARs in
tandem with an Option (at or after the award of the Option), or alone and
unrelated to an Option. SARs in tandem with an Option shall terminate to the
extent that the related Option is exercised, and the related Option shall
terminate to the extent that the tandem SARs are exercised. SARs granted in
tandem with Options shall have an exercise price not less than the exercise
price of the related Option. SARs granted alone and unrelated to an Option may
be granted at such exercise prices as the Committee may determine.
(b) An SAR related to an Option that can only be exercised during limited
periods following a change in control of the Company may entitle the Participant
to receive an amount based upon the highest price paid or offered for Common
Stock in any transaction relating to the change in control or paid during the
thirty-day period immediately preceding the occurrence of the change in control
in any transaction reported in the stock market in which the Common Stock is
normally traded.
Section 8. PERFORMANCE SHARES
(a) Subject to the provisions of the Plan, the Committee may award
Performance Shares and determine the number of such shares for each Performance
Cycle and the duration of each Performance Cycle. There may be more than one
Performance Cycle in existence at any one time, and the duration of Performance
Cycles may differ from each other. The payment value of Performance Shares shall
be equal to the Fair Market Value of the Common Stock on the date the
Performance Shares are earned or, in the discretion of the Committee, on the
date the Committee determines that the Performance Shares have been earned.
(b) The Committee shall establish performance goals for each Cycle, for
the purpose of determining the extent to which Performance Shares awarded for
such Cycle are earned, on the basis of such criteria and to accomplish such
objectives as the Committee may from time to time select. During any Cycle, the
Committee may adjust the performance goals for such Cycle as it deems equitable
in recognition of unusual or non-recurring events affecting the Company, changes
in applicable tax laws or accounting principles, or such other factors as the
Committee may determine.
(c) As soon as practicable after the end of a Performance Cycle, the
Committee shall determine the number of Performance Shares that have been earned
on the basis of performance in relation to the established performance goals.
The payment values of earned Performance Shares shall be distributed to the
Participant or, if the Participant has died, to the Participant's
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<PAGE> 5
Designated Beneficiary, as soon as practicable thereafter. The Committee shall
determine, at or after the time of award, whether payment values will be settled
in whole or in part in cash or other property, including Common Stock or Awards.
Section 9. RESTRICTED STOCK
(a) Subject to the provisions of the Plan, the Committee may award shares
of Restricted Stock and determine the duration of the Restricted Period during
which, and the conditions under which, the shares may be forfeited to the
Company and the other terms and conditions of such Awards. Shares of Restricted
Stock shall be issued for no cash consideration or such minimum consideration as
may be required by applicable law.
(b) Shares of Restricted Stock may not be sold, assigned, transferred,
pledged or otherwise encumbered, except as permitted by the Committee, during
the Restricted Period. Shares of Restricted Stock shall be evidenced in such
manner as the Committee may determine. Any certificates issued in respect of
shares of Restricted Stock shall be registered in the name of the Participant
and unless otherwise determined by the Committee, deposited by the Participant,
together with a stock power endorsed in blank, with the Company. At the
expiration of the Restricted Period, the Company shall deliver such certificates
to the Participant or if the Participant has died, to the Participant's
Designated Beneficiary.
Section 10. STOCK UNITS
(a) Subject to the provisions of the Plan, the Committee may award Stock
Units subject to such terms, restrictions, conditions, performance criteria,
vesting requirements and payment rules as the Committee shall determine.
(b) Shares of Common Stock awarded in connection with a Stock Unit Award
shall be issued for no cash consideration or such minimum consideration as may
be required by applicable law.
Section 11. OTHER STOCK-BASED AWARDS
(a) Subject to the provisions of the Plan, the Committee may make other
awards of Common Stock and other awards that are valued in whole or in part by
reference to, or are otherwise based on, Common Stock, including without
limitation convertible preferred stock, convertible debentures, exchangeable
securities and Common Stock awards or options. Other Stock-Based Awards may be
granted either alone or in tandem with other Awards granted under the Plan
and/or cash awards made outside of the Plan.
(b) The Committee may establish performance goals, which may be based on
performance goals related to book value, subsidiary performance or such other
criteria as the Committee may determine, Restricted Periods, Performance Cycles,
conversion prices, maturities and security, if any, for any Other Stock-Based
Award. Other Stock-Based Awards may be sold to Participants at the face value
thereof or any discount therefrom or awarded for no consideration or such
minimum consideration as may be required by applicable law.
Section 12. GENERAL PROVISIONS APPLICABLE TO AWARDS
(a) Reporting Person Limitations. Notwithstanding any other provision of
the Plan, to the extent required to qualify for the exemption provided by Rule
16b-3 under the Securities Exchange Act of 1934 and any successor provision,
Awards made to a Reporting Person shall
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<PAGE> 6
not be transferable by such person other than by will or the laws of descent and
distribution or pursuant to a qualified domestic relations order, as defined in
the Code or Title I of the Employee Retirement Income Security Act, or the rules
thereunder.
(b) Documentation. Each Award under the Plan shall be evidenced by a
writing delivered to the Participant specifying the terms and conditions thereof
and containing such other terms and conditions not inconsistent with the
provisions of the Plan as the Committee considers necessary or advisable to
achieve the purposes of the Plan or comply with applicable tax and regulatory
laws and accounting principles.
(c) Committee Discretion. Each type of Award may be made alone, in
addition to or in relation to any other type of Award. The terms of each type of
Award need not be identical, and the Committee need not treat Participants
uniformly. Except as otherwise provided by the Plan or a particular Award, any
determination with respect to an Award may be made by the Committee at the time
of award or at any time thereafter.
(d) Settlement. The Committee shall determine whether Awards are settled
in whole or in part in cash, Common Stock, other securities of the Company,
Awards or other property. The Committee may permit a Participant to defer all or
any portion of a payment under the Plan, including the crediting of interest on
deferred amounts denominated in cash and dividend equivalents on amounts
denominated in Common Stock.
(e) Dividends and Cash Awards. In the discretion of the Committee, any
Award under the Plan may provide the Participant with (i) dividends or dividend
equivalents payable currently or deferred with or without interest, and (ii)
cash payments in lieu of or in addition to an Award.
(f) Termination of Employment. The Committee shall determine the effect on
an Award of the disability, death, retirement or other termination of employment
of a Participant and the extent to which, and the period during which, the
Participant's legal representative, guardian or Designated Beneficiary may
receive payment of an Award or exercise rights thereunder.
(g) Change in Control. In order to preserve a Participant's rights under
an Award in the event of a change in control of the Company, the Committee in
its discretion may, at the time an Award is made or at any time thereafter, take
one or more of the following actions: (i) provide for the acceleration of any
time period relating to the exercise or realization of the Award, (ii) provide
for the purchase of the Award upon the Participant's request for an amount of
cash or other property that could have been received upon the exercise or
realization of the Award had the Award been currently exercisable or payable,
(iii) adjust the terms of the Award in a manner determined by the Committee to
reflect the change in control, (iv) cause the Award to be assumed, or new rights
substituted therefor, by another entity, or (v) make such other provision as the
Committee may consider equitable and in the best interests of the Company.
(h) Loans. The Committee may authorize the making of loans or cash
payments to Participants in connection with any Award under the Plan, which
loans may be secured by any security, including Common Stock, underlying or
related to such Award (provided that such Loan shall not exceed the Fair Market
Value of the security subject to such Award), and which may be forgiven upon
such terms and conditions as the Committee may establish at the time of such
loan or at any time thereafter.
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<PAGE> 7
(i) Withholding. The Participant shall pay to the Company, or make
provision satisfactory to the Committee for payment of, any taxes required by
law to be withheld in respect of Awards under the Plan no later than the date of
the event creating the tax liability. In the Committee's discretion, such tax
obligations may be paid in whole or in part in shares of Common Stock, including
shares retained from the Award creating the tax obligation, valued at their Fair
Market Value on the date of delivery. The Company and its Affiliates may, to the
extent permitted by law, deduct any such tax obligations from any payment of any
kind otherwise due to the Participant.
(j) Foreign Nationals. Awards may be made to Participants who are foreign
nationals or employed outside the United States on such terms and conditions
different from those specified in the Plan as the Committee considers necessary
or advisable to achieve the purposes of the Plan or comply with applicable laws.
(k) Amendment of Award. The Committee may amend, modify or terminate any
outstanding Award, including substituting therefor another Award of the same or
a different type, changing the date of exercise or realization and converting an
Incentive Stock Option to a Nonstatutory Stock Option, provided that the
Participant's consent to such action shall be required unless the Committee
determines that the action, taking into account any related action, would not
materially and adversely affect the Participant.
Section 13. MISCELLANEOUS
(a) No Right To Employment. No person shall have any claim or right to be
granted an Award, and the grant of an Award shall not be construed as giving a
Participant the right to continued employment. The Company expressly reserves
the right at any time to dismiss a Participant free from any liability or claim
under the Plan, except as expressly provided in the applicable Award.
(b) No Rights As Shareholder. Subject to the provisions of the applicable
Award, no Participant or Designated Beneficiary shall have any rights as a
shareholder with respect to any shares of Common Stock to be distributed under
the Plan until he or she becomes the holder thereof. A Participant to whom
Common Stock is awarded shall be considered the holder of the Stock at the time
of the Award except as otherwise provided in the applicable Award.
(c) Effective Date. Subject to the approval of the shareholders of the
Company, the Plan shall be effective on the Effective Date. Prior to such
approval, Awards may be made under the Plan expressly subject to such approval.
(d) Amendment of Plan. The Board may amend, suspend or terminate the Plan
or any portion thereof at any time, subject to any shareholder approval that the
Board determines to be necessary or advisable.
(e) Governing Law. The provisions of the Plan shall be governed by and
interpreted in accordance with the laws of Delaware.
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<PAGE> 1
EXHIBIT 10.2
GELTEX PHARMACEUTICALS, INC.
AMENDED AND RESTATED 1995 DIRECTOR STOCK OPTION PLAN
The purpose of this Amended and Restated 1995 Director Stock Option Plan
(the "Plan") of GelTex Pharmaceuticals, Inc. (the "Company") is to attract and
retain highly qualified non-employee directors of the Company and to encourage
ownership of stock of the Company by such Directors so as to provide additional
incentives to promote the success of the Company.
1. ADMINISTRATION OF THE PLAN.
Grants of stock options under the Plan shall be automatic as provided in
Section 6. However, all questions of interpretation with respect to the Plan and
options granted under it shall be determined by the Board of Directors of the
Company (the "Board") or by a committee consisting of one or more directors
appointed by the Board and such determination shall be final and binding upon
all persons having an interest in the Plan.
2. PERSONS ELIGIBLE TO PARTICIPATE IN THE PLAN.
Each director of the Company who is not an employee of the Company or of
any subsidiary of the Company shall be eligible to participate in the Plan
unless such director irrevocably elects not to participate.
3. SHARES SUBJECT TO THE PLAN.
(a) The aggregate number of shares of the Company's Common Stock which may
be optioned under this Plan is 110,000 shares. Shares issued under the Plan may
consist in whole or in part of authorized but unissued shares or treasury
shares.
(b) In the event of a stock dividend, split-up, combination or
reclassification of shares, recapitalization or other similar capital change
relating to the Company's Common Stock, the maximum aggregate number and kind of
shares or securities of the Company as to which options may be granted under
this Plan and as to which options then outstanding shall be exercisable, and the
option price of such options shall be appropriately adjusted so that the
proportionate number of shares or other securities as to which options may be
granted and the proportionate interest of holders of outstanding options shall
be maintained as before the occurrence of such event.
(c) In the event of a consolidation or merger of the Company with another
corporation where the Company's stockholders do not own a majority in interest
of the surviving or resulting corporation, or the sale or exchange of all or
substantially all of the assets of the Company, or a reorganization or
liquidation of the Company, any deferred exercise period shall be automatically
accelerated and each holder of an outstanding option shall be entitled to
receive upon exercise and payment in accordance with the terms of the option the
same shares, securities or property as he would have been entitled to receive
upon the occurrence of such event if he had been, immediately prior to such
event, the holder of the number of shares of Common Stock purchasable under his
or her option; provided, however, that in lieu of the foregoing the Board may
upon written notice to each holder of an outstanding option or right under the
Plan, provide that such option or right shall terminate on a date not less than
20 days
<PAGE> 2
after the date of such notice unless theretofore exercised.
(d) Whenever options under this Plan lapse or terminate or otherwise become
unexercisable the shares of Common Stock which were subject to such options may
again be subjected to options under this Plan. The Company shall at all times
while this Plan is in force reserve such number of shares of Common Stock as
will be sufficient to satisfy the requirements of this Plan.
4. NON-STATUTORY STOCK OPTIONS.
All options granted under this Plan shall be non-statutory options not
entitled to special tax treatment under Section 422 of the Internal Revenue Code
of 1986, as amended (the "Code").
5. FORM OF OPTIONS.
Options granted hereunder shall be in substantially the form as the Board
or any committee appointed pursuant to Section 1 above may from time to time
determine.
6. GRANT OF OPTIONS AND OPTION TERMS.
(a) AUTOMATIC GRANT OF OPTIONS. Upon the adoption of this Plan by the Board
of Directors each eligible director shall automatically be granted options to
purchase 4,000 shares of Common Stock for each year of the term of office for
which such director has been nominated to stand for election at the Company's
1996 annual meeting of stockholders, such that Class I Directors shall be
granted options to purchase 12,000 shares; Class II Directors shall be granted
options to purchase 8,000 shares and Class III Directors shall be granted
options to purchase 4,000 shares. Upon the election or re-election of any
eligible director at the Company's 1997 annual meeting of its stockholders and
upon each annual meeting of the stockholders thereafter, each such director
shall automatically be granted options to purchase 4,000 shares of Common Stock
for each year of the term of office to which he or she is elected. In addition,
upon the election of a director who is eligible to receive options to purchase
Common Stock under the Plan other than at an annual meeting of stockholders
(whether by the Board or the stockholders and whether to fill a vacancy or
otherwise), such director shall automatically be granted options to purchase
4,000 shares of Common Stock for each year or portion thereof of the term of
office to which he or she is elected. No options shall be granted hereunder
after ten years from the date on which this Plan was initially approved and
adopted by the Board.
(b) DATE OF GRANT. The "Date of Grant" for options granted under this Plan
shall be the date of adoption of the Plan, or the date of election or
re-election as a director, as the case may be.
(c) OPTION PRICE. The option price for each option granted under this Plan
shall be the current fair market value of a share of Common Stock of the Company
as determined by the closing price for the Company's Common Stock as reported by
the National Association of Securities Dealers Automated Quotations National
Market System on the Date of Grant.
(d) TERM OF OPTION. The term of each option granted under this Plan shall
be ten
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<PAGE> 3
years from the Date of Grant.
(e) EXERCISABILITY OF OPTIONS. Options granted upon the adoption of this
Plan shall become exercisable with respect to 4,000 shares on the date of the
Company's 1997 annual meeting of stockholders and on each of the next two annual
meetings of stockholders of the Company following such annual meeting of
stockholders (i.e., options to purchase 12,000 shares of Common Stock granted
upon the adoption of the Plan will become exercisable with respect to 4,000
shares at each of the 1997, 1998 and 1999 annual meetings). Otherwise, Options
granted under this Plan shall become exercisable with respect to 4,000 shares on
the each of the first three annual meetings of stockholders of the Company
following the Date of Grant, but in all cases if and only if the option holder
is a member of the Board at the opening of business on that date.
(f) GENERAL EXERCISE TERMS. Directors holding exercisable options under
this Plan who cease to serve as members of the Board may, during their lifetime,
exercise the rights they had under such options at the time they ceased being a
director for the full unexpired term of such option. Any rights that have not
yet become exercisable shall terminate upon cessation of membership on the
Board. Upon the death of a director, those entitled to do so shall have the
right, at any time within twelve months after the date of death, to exercise in
whole or in part any rights which were available to the director at the time of
his or her death. The rights of the option holder may be exercised by the
holder's guardian or legal representative in the case of disability and by the
beneficiary designated by the holder in writing delivered to the Company or, if
none has been designated, by the holder's estate or his or her transferee on
death in accordance with this Plan, in the case of death. Options granted under
the Plan shall terminate, and no rights thereunder may be exercised, after the
expiration of the applicable exercise period. Notwithstanding the foregoing
provisions of this section, no rights under any options may be exercised after
the expiration of ten years from their Date of Grant.
(g) METHOD OF EXERCISE AND PAYMENT. Options may be exercised only by
written notice to the Company at its head office accompanied by payment of the
full option price for the shares of Common Stock as to which they are exercised.
The option price shall be paid in cash or by check or in shares of Common Stock
of the Company, or in any combination thereof. Shares of Common Stock
surrendered in payment of the option price shall have been held by the person
exercising the option for at least six months, unless otherwise permitted by the
Board. The value of shares delivered in payment of the option price shall be
their fair market value, as determined in accordance with Section 6(c) above, as
of the date of exercise. Upon receipt of such notice and payment, the Company
shall promptly issue and deliver to the optionee (or other person entitled to
exercise the option) a certificate or certificates for the number of shares as
to which the exercise is made.
(h) NON-TRANSFERABILITY. Options granted under this Plan shall not be
transferable by the holder thereof otherwise than by will or the laws of descent
and distribution or as permitted by Rule 16b-3 (or any successor provision)
under the Securities Exchange Act of 1934, as amended ("Rule 16b-3").
7. LIMITATION OF RIGHTS.
(a) NO RIGHT TO CONTINUE AS A DIRECTOR. Neither the Plan, nor the granting
of an option or any other action taken pursuant to the Plan, shall constitute an
agreement or understanding, express or implied, that the Company will retain an
option holder as a director for any period of time or at any particular rate of
compensation.
-3-
<PAGE> 4
(b) NO STOCKHOLDERS' RIGHTS FOR OPTIONS. A director shall have no rights as
a stockholder with respect to the shares covered by options until the date the
director exercises such options and pays the option price to the Company, and no
adjustment will be made for dividends or other rights for which the record date
is prior to the date such option is exercised and paid for.
8. AMENDMENT OR TERMINATION.
The Board may amend or terminate this Plan at any time, provided that, to
the extent necessary to comply with Rule 16b-3, this Plan shall not be amended
more than once every six months, other than to comport with changes in the Code,
ERISA or the rules thereunder.
9. STOCKHOLDER APPROVAL.
This Plan and the automatic grants made upon adoption thereof by the Board
of Directors are subject to approval by the stockholders of the Company by the
affirmative vote of the holders of a majority of the shares of Common Stock of
the Company present, or represented and entitled to vote, at a meeting duly held
in accordance with the laws of the State of Delaware. In the event such approval
is not obtained, all options granted under this Plan shall be void and without
effect.
10. GOVERNING LAW.
This Plan shall be governed by and interpreted in accordance with the laws
of the State of Delaware.
-4-
<PAGE> 1
EXHIBIT 10.3
PROMISSORY NOTE
Waltham, Massachusetts
June 30, 1998
$600,000
FOR VALUE RECEIVED, the undersigned, Dr. Edmund J. Sybertz (the
"Borrower"), hereby promises to pay to the order of GelTex Pharmaceuticals,
Inc., a Delaware corporation (the "Lender") the principal amount of Six Hundred
Thousand and 00/100 Dollars ($600,000) (the "Principal") on or before the
Maturity Date, as hereinafter defined. This Note is given as evidence of a loan
in an amount equal to the principal amount of this Note. The purpose of the loan
is to provide the Borrower with the proceeds to finance the purchase of his new
principal residence located at 54 Bigelow Road, Sudbury, Massachusetts.
Interest shall accrue on $230,000 of the outstanding Principal in an
amount equal to the Prime Rate of interest, as in effect from time to time (but
in no event in excess of the maximum rate permitted by then applicable law) as
announced by Fleet National Bank. Interest shall not accrue on the remaining
$370,000 in Principal during the term of this Note, unless Dr. Sybertz's
employment with the Lender is terminated for whatever reason prior to the
Maturity Date. Upon Dr. Sybertz's termination, interest shall accrue as of the
date of such termination on such $370,000 in Principal at the rate applicable to
the above-referenced $230,000 in Principal. Any accrued interest shall be due
and payable on the Maturity Date.
The Maturity Date of this Note shall be the earlier of (i) fifteen days
following the closing date of the Borrower's sale of the property located at 10
Ryan Court, Chester, New Jersey or (ii) September 30, 1998.
The Borrower hereby agrees to pay, to the extent permitted by law, all
reasonable costs and expenses, including, without limitation, reasonable
attorneys' fees, incurred or paid by the Lender in enforcing this note, whether
or not litigation is commenced. This note shall be governed by the laws of the
Commonwealth of Massachusetts.
If any provisions hereof or the application thereof to any person or
circumstance shall, to any extent, be invalid or unenforceable, the remainder
hereof, or the application of such provision to persons or circumstances other
than those as to which it is held invalid or unenforceable, shall not be
affected thereby, and each provision hereof shall be valid and in force to the
fullest extent permitted by law.
<PAGE> 2
This Note shall be governed by and construed in accordance with the laws
of the Commonwealth of Massachusetts, and shall take effect as a sealed
instrument.
Executed as of the day and year first written above.
/s/ Edmund J. Sybertz
- ---------------------------------
Edmund J. Sybertz
WITNESS:
/s/ Elizabeth A. Grammer
- ---------------------------------
Elizabeth A. Grammer
- ---------------------------------
Print Name
2
<PAGE> 1
Certain confidential material
contained in this document
has been omitted and
filed separately with the
Securities and Exchange Commission
EXHIBIT 10.4
MANUFACTURING AND SUPPLY AGREEMENT
UNITED STATES
This MANUFACTURING AND SUPPLY AGREEMENT ("Agreement") is made as of July
31, 1998, by between RENAGEL LLC, a Delaware limited liability company
("Customer") and CIRCA PHARMACEUTICALS, INC., a New York corporation ("Circa").
RECITALS:
A. Circa owns and operates a pharmaceutical manufacturing and packaging
facility located at 33 Ralph Avenue, Copiague, New York, and wishes to perform
certain manufacturing and packaging services for Customer.
B. Customer requires a manufacturer to perform the following services:
compounding, encapsulating, packaging, labeling, analytical and stability
testing; and Circa is willing to perform such services for and on behalf of
Customer, all subject to the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the promises contained herein and
other valuable considerations, and intending to be bound hereby, the parties
agree as follows:
1. DEFINITIONS.
1.1 DEFINITIONS. As used in this Agreement, the following terms shall
have the corresponding meanings set forth below:
(a) "FDA" means the U.S. Food and Drug Administration.
(b) "GMPs" means the current Good Manufacturing Practices
promulgated by the FDA.
(c) "BULK PRODUCT" means sevelamer hydrochloride as described
in EXHIBIT A hereto, with such amendments thereto as the parties may from time
to time approve in writing.
(d) "PPI" means the Producer Price Index for finished
pharmaceutical preparations, ethical, as published by the Bureau of Labor
Statistics of the U.S. Department of Labor.
1
<PAGE> 2
(e) "PRODUCTION FACILITY" means the facility of Circa located
in Copiague, New York.
(f) "PRODUCTION PROCEDURES" means the procedures used to
compound and encapsulate, the Bulk Product and package the Final Product into
bottles conducted in accordance with GMP's and Circa's standard operating
procedures as provided to Customer.
(g) "BULK SPECIFICATIONS" means the specifications for the
Bulk Product as described in EXHIBIT A, with such amendments thereto as the
parties may from time to time approve.
(h) "PRODUCT" shall mean collectively, the Bulk Product and
the Final Product.
(i) "FINAL PRODUCT" means the finished product in 403 mg
capsule form as described in the Final Specifications and in EXHIBIT B hereto,
with such amendments thereto as the parties may from time to time approve in
writing.
(j) "REGULATORY STANDARDS" means (i) the facility license
requirements of the FDA and other regulatory agencies applicable to the
Production Facility or Circa's production, storage or handling of Bulk Product
or Final Product at the Production Facility, and (ii) any standards and
regulations of any governmental authority, whether within or outside the United
States (including, without limitation, the Environmental Protection Agency,
OSHA, the Food and Drug Administration, and state and local authorities), that
apply to the Production Facility or Circa's production, storage or handling of
Bulk Product or Final Product.
(k) "TECHNICAL AGREEMENT" means the Technical Agreement for
the Commercial Manufacture and Testing of RenaGel(R) Drug Product attached
hereto as Exhibit D. The terms and conditions of the Technical Agreement are
incorporated herein by reference.
(l) "FINAL SPECIFICATIONS" means the production and quality
control specifications for the Final Product, all as set forth in EXHIBIT B
hereto with such amendments thereto as the parties may from time to time approve
in writing.
(m) "TERRITORY" means the United States.
2
<PAGE> 3
2.0 TERMS OF ENGAGEMENT.
2.1 Subject to the provisions of this Agreement, Customer hereby
appoints Circa as a non-exclusive manufacturer of the Final Product for the
Territory, and Circa hereby accepts such appointment and agrees to act as such
non-exclusive manufacturer.
2.2 Customer agrees that the annual minimum amount of Final Product
which Customer is obligated to order and purchase from Circa during each
calendar year during the term of this Agreement shall be *********************
******************************************************************************
******************************************************************************
******************************************************************************
******************************************************************************
******************************************************************************
******************************************************************************
******************************************************************************
******************************************************************************
******************************************************************************
******************************************************************************
******************************************************************************
******************************************************
2.3 For purposes of the Agreement, Customer shall supply, or cause
its contract manufacturer to supply, Circa with sufficient quantities of tested
and released Bulk Product which meet the Bulk Specifications, the costs of which
shall be borne by Customer. All such supplies shall be sent to Circa at
Customer's expense, F.O.B. the Production Facility of Circa. All other materials
required for the production, labeling and shipping of the Final Product for
Customer will be supplied by Circa, and the parties acknowledge that the cost of
such materials is included in the batch pricing listed on Exhibit C. Circa
agrees that the labels utilized in packaging the Final Product will conform to
the label copy provided by Customer.
2.4 Circa agrees that it will use reasonable commercial efforts to
minimize the Bulk Product waste associated with the manufacture of Final
Product. Promptly after Circa has completed the manufacture of a total of ten
(10) batches of Final Product, including batches manufactured for validation
purposes, the parties shall establish a required Bulk Product to Final Product
yield and shall attach such requirements as Exhibit E hereto. Should Circa fail
to achieve the required yield, Circa shall be responsible for compensating
Customer for the wasted Bulk Product either through a credit on the cost of
Final Product, or through reimbursement directly to Customer, at Customer's
discretion. In the event that Circa fails to achieve the required yield with
respect to more than ***************** of the batches produced during any one
period of *
* Confidential Information omitted and filed separately with the Commission.
3
<PAGE> 4
*********** such consistent failure shall be considered to be a material breach
of this Agreement.
2.5 Customer shall be invoiced at Circa's out-of-pocket costs for any
tooling and materials required for the manufacture, testing and packaging of the
Products in accordance with the terms of this Agreement, provided that prior to
such purchase, Circa and Customer shall agree in writing on the specifications
and cost of any such equipment and materials, and provided further, that
Customer shall only be responsible for the cost of tooling and materials that
will be used exclusively for the manufacture, testing and packaging of the
Products.
2.6 Prior to the execution of this Agreement, Customer purchased an
*******************************************************************************
*******************************************************************************
purpose of manufacturing Final Product for Customer under the terms of this
Agreement. Notwithstanding Circa's use of the ***** Customer shall at all times
remain the owner of the ****. Circa shall, at its expense, service and maintain
the **** in a manner consistent with the way in which it services and maintains
the machinery located at the Production Facility and owned by Circa. At such
time as Circa is no longer producing product for Customer under this Agreement,
Customer shall have the right to enter the Production Facility and remove the
****.
3.0 MANUFACTURE OF PRODUCT
3.1 During the term of this Agreement, Circa shall receive Bulk
Product from Customer or Customer's contract manufacturer and shall test such
Bulk Product for conformance to the Bulk Specifications. Upon acceptance, Circa
shall store Bulk Product in accordance with Regulatory Standards. Circa shall
complete the testing of Bulk Product within fifty (50) days of its receipt. If
Circa determines that the Bulk Product does not conform to the Specifications or
if the shipment of Bulk Product contains a quantity of Bulk Product that is less
than the reported or expected amount, Circa shall provide written notice to
Customer of such defect, nonconformance and/or shortage within fifty-five (55)
days of Circa's receipt of the Bulk Product. Simultaneously with the provision
of notice to Customer, Circa shall provide written notice of the defect,
nonconformance and/or shortage to the Customer's Bulk Product contract
manufacturer. Customer shall provide Circa with written instructions regarding
the address for such notice.
3.2 During the term of this Agreement, Circa will manufacture and
deliver to Customer the Final Product ordered by Customer pursuant to the terms
of this Agreement. All Final Product shall be produced at the Production
Facility. All Final Product produced by Circa under this Agreement shall be
produced in accordance with
* Confidential information omitted and filed separately with the Commission.
4
<PAGE> 5
the Production Procedures, the Final Specifications, GMP's and all other
applicable regulatory requirements, and the Technical Agreement.
4.0 FEE PRICE AND PAYMENT TERMS.
4.1 As set forth in Exhibit C.
4.2 Beginning on the first anniversary of the initial shipment of the
Final Product by Circa and on each such anniversary thereafter, the Fee shall be
increased or decreased by the percentage change in *************************
**************************************************************************
***********************************************************************
**************************** For example, ******************************
**************************************************************************
*******************************************************************************
*******************************************************************************
******** for the second year of the term of this Agreement over the price
charged in the preceding year.
4.3 Except as set forth in Section 13.5, payment for each delivery of
the Final Product to Customer will be made within thirty (30) days after the
date of Circa's invoice, to be rendered concurrently with delivery of the Final
Product. All payments required to be paid hereunder shall be made by corporate
check or by wire transfer of immediately available funds to the financial
institution, account number, and account party's name designated in writing by
Circa to Customer at the place of payment.
4.4 Customer shall reimburse Circa for any federal, state, or local
excise or other tax or assessment, which Circa may be required to pay upon the
sale, production, transportation, or use of the Product (excluding taxes based
on Circa's income or Circa's franchise fees or taxes).
5.0 RESPONSIBILITIES OF CUSTOMER; WARRANTIES.
5.1 Customer will supply the Bulk Specifications and the Final
Specifications and all necessary quality control test specifications for the
Product, which must be approved by Circa (which approval will not be
unreasonably withheld or delayed).
5.2 Customer represents that Circa is not required to maintain a
dedicated facility for the manufacture of the Product.
5.3 Circa will be responsible for maintaining, on behalf of Customer,
the retention samples of the Final Product required by applicable Regulatory
Standards.
* Confidential information omitted and filed separately with the Commission.
5
<PAGE> 6
6.0 RESPONSIBILITIES OF CIRCA; WARRANTIES.
6.1 Circa represents and warrants that the testing of the Bulk
Product will conform to the applicable requirement of the Regulatory Standards
and that the Bulk Product will be stored and controlled by Circa in accordance
with applicable Regulatory Standards.
6.2 Circa represents and warrants that its production procedures
(including the Production Procedures) will conform to the applicable
requirements of the Regulatory Standards. Circa warrants that each shipment of
the Final Product will conform to the Final Specifications and will be made,
stored and controlled by Circa in accordance with applicable Regulatory
Standards and the process and procedures contained in the Production Procedures
and the Technical Agreement.
6.3 Circa represents and warrants that the Final Product shall (i) be
free from defects in material and workmanship, (ii) not be adulterated or
misbranded and (iii) be sold free and clear of any liens, claims or
encumbrances, and that the labels obtained by Circa will conform to the label
copy provided and approved by Customer.
6.4 Circa has previously furnished Customer with a copy of its
Production Procedures and has identified to Customer the equipment to be used to
produce the Final Product. Circa shall not (i) modify the Production Procedures,
(ii) modify any method of manufacturing or testing the Bulk Product or the Final
Product, (iii) change or relocate any equipment used in the production of a
Product, or (iv) change a vendor for any components or raw materials used in the
Final Product, in each case, without obtaining Customer's prior written consent.
6.5 Customer or its authorized designee will have the right, during
Circa's normal hours of operation, to inspect the Production Facility and
Circa's records relating to Circa's manufacturing, packaging, and testing of the
Product. Circa shall take appropriate actions to adopt reasonable suggestions of
Customer to correct any deficiencies identified by such inspection or audit. To
supplement this provision, Customer also may arrange, at its cost and expense,
to have a Customer employee or other representative located on the premises of
the Production Facility participate in the monitoring of Product production,
testing and packaging under this Agreement. All information acquired pursuant to
the provisions of this paragraph are subject to the requirements of
confidentiality as contained in the Confidentiality Agreement of even date
herewith.
6.6 Circa will cooperate with Customer and any governmental authority
in evaluating any complaint, claim, or adverse drug reaction report related to
the production
6
<PAGE> 7
of a Product, and shall provide information and data and take such other steps
as may be appropriate to resolve any identified problems.
6.7 As may be further discussed in the Technical Agreement, Circa
will provide Customer with timely notification of all deviations, notes to file,
and other deficiencies that may impact the quality of the Product, as well as
all FDA reports regarding testing, manufacture, packaging or labeling of the
Product or the Production Facility.
7.0 RECORDS, REGULATORY MATTERS.
7.1 Circa will maintain complete and accurate records relating to the
Product and the manufacture, packaging, and testing thereof for the period
required by applicable Regulatory Standards, and Circa shall provide copies
thereof to Customer upon Customer's request. Without limiting the generality of
the foregoing, Circa shall (i) perform quality assurance and control tests on
each lot of Final Product manufactured before delivery and shall prepare and
deliver to Customer a written report of the results of such tests, with each
report setting forth for each lot delivered the items tested, specifications and
results in a certificate of analysis containing the type of information which is
required by the Federal Food and Drug Administration ("FDA") and (ii) prepare
and maintain for a period of no less than five (5) years and for so long as
required under applicable requirements of the FDA for each lot of Final Product
manufactured a certificate of manufacturing compliance containing the types of
information that is required by the FDA, which certificate will certify that the
lot of Final Product was manufactured in accordance with the Final
Specifications and GMPs.
7.2 Circa will supply for each batch of Final Product, including each
pilot batch, complete batch production and control records.
7.3 Circa shall ensure that the Production Facility and the equipment
and personnel used to manufacture Product are now, and at the time each batch of
Final Product is produced shall be, maintained in a professional and workmanlike
manner, consistent with generally accepted industry standards. Circa represents
and warrants that (i) the Production Facility is in compliance with all
applicable material requirements of the Regulatory Standards, and (ii) there are
no pending or uncorrected citations or adverse conditions noted in any
inspection of the Production Facility which would cause the Final Product to be
misbranded or adultered within the meaning of the Act.
7.4 In addition to any authorizations required under Section 7.3,
Circa has obtained all other licenses, authorizations and approvals required by
any federal, state or local governmental authority for the production of the
Product, and the Production Facility complies with all laws, rules and
regulations applicable to it,
7
<PAGE> 8
7.5 Circa shall promptly notify Customer if the FDA or other
regulatory authority visits or makes written or oral inquiries about the
Production Facility or Circa's procedures to the production, testing, packaging,
labeling, storage or handling of a Product. Circa shall furnish Customer, within
thirty (30) days after receipt, a copy of any report or correspondence issued by
the governmental authority in connection with such visit or inquiry, purged only
of confidential information that is unrelated to the Product or the activities
under this Agreement.
8.0 TERM.
8.1 This Agreement shall be effective as of the date hereof and shall
continue for ********* from the first shipment of the Final Product in
interstate commerce with FDA approval, subject to earlier termination in
accordance with the terms hereof. Thereafter it will be automatically renewed
for successive one (1) year terms unless terminated by Customer by written
notice given no less than *********** before the end of the term or any renewal
term hereof.
9.0 DELIVERY.
9.1 To assist Circa in scheduling production for the manufacture of
the Final Product, Customer shall provide to Circa, quarterly, a nine month
rolling forecast of its requirements for a Final Product. The first forecast
shall be provided by Customer to Circa approximately six months prior to the
anticipated market launch of the Final Product, as reasonably estimated by the
parties, and thereafter shall be provided to Circa on or before the 20th day of
the first month of each successive quarterly period (to forecast the
requirements for the next nine succeeding calendar months). It is understood and
agreed that all forecasts are estimates only and Customer shall only be bound to
purchase the Final Product pursuant to orders submitted by it to Circa. All
purchase orders shall be for minimum batch size quantities reasonably agreed by
the parties and shall anticipate an order/production/availability cycle of
approximately *************.
9.2 Circa will arrange for shipping and/or transportation for the
Final Product from Circa's Production Facility; provided, however, that Customer
may provide Circa with specific shipping instructions and direct the use of a
specific carrier, and Customer will reimburse Circa for all shipping and related
costs. Risk of loss and title to the Final Product shall pass to Customer upon
pick-up of the Final Product by, on behalf of, or for the account of Customer at
Circa's Production Facility.
10.0 INVENTIONS.
10.1 Any inventions or discoveries made by Circa in the performance of
this
* Confidential information omitted and filed separately with the Commission.
8
<PAGE> 9
Agreement that relate exclusively to the Product (including any new use or any
change in the method of producing, testing or storing the Product) shall be
owned by Customer. Any other invention or discovery made by Circa in the
performance of this Agreement shall be owned by Circa, but Customer shall have a
nonexclusive, perpetual, nontransferable, paid-up license (with the right to
sublicense) to use any such worldwide invention to make or have made the
Product. Each party shall execute such instruments as shall be required to
evidence or effectuate the other party's ownership of any such inventions, and
shall cooperate upon reasonable request (and at the expense of the requesting
party) in the prosecution of patents and other intellectual property rights
related to any such invention.
11.0 GENERAL INDEMNITIES.
11.1 Circa will indemnify and hold Customer harmless from any and all
liability, damage, loss, cost, or expense (including reasonable attorney's fees)
which arise from (i) Circa's breach of any of its agreements, representations,
or warranties contained herein, (ii) Circa's negligence or other wrongful
conduct as determined by a court of competent jurisdiction or (iii) a claim that
the Production Procedures utilized by Circa to manufacture the Final Product
infringe a United States patent or any other proprietary rights of any third
party. Upon learning of any such claim or suit, Customer shall immediately
notify Circa.
11.2 Customer will indemnify and hold Circa harmless from any and all
liability, damage, loss, cost, or expense (including reasonable attorneys' fees)
which arise from (i) Customer's breach of any of its agreements,
representations, or warrants contained herein, (ii) Customer's negligence or
Customer's other wrongful conduct as determined by a court of competent
jurisdiction or (iii) a claim (other than a claim that is covered by Section
11.1 (iii) above, that the manufacture of the Product by Circa in accordance
with this Agreement infringes a United States patent or any other proprietary
rights of any third party. Upon learning of any such claim or suit against it,
Circa shall immediately notify Customer.
11.3 The parties will cooperate with each other in the defense of any
claim or action.
11.4 No indemnifying party hereunder will be liable for any costs
associated with the settlement of any claim or action brought against it or the
other party unless it has received prior notice of the settlement negotiations
and has agreed to the settlement in writing.
9
<PAGE> 10
12.0 INSURANCE.
12.1 Each of Circa and Customer (or Customer's Members) shall carry
product liability insurance in an amount at least equal to *********** with an
insurance carrier reasonably acceptable to the other party, such insurance to be
in place at times reasonably acceptable to the parties, but not later than the
date of the first commercial sale of a Product. Each party shall promptly
furnish the other evidence of the maintenance of the insurance required
hereunder and shall name the other as an "additional insured" under such
insurance policy. Each party's coverage shall (i) include broad form vendor
coverage and such other provisions as are typical in the industry and (ii) name
the other party as an additional insured thereunder.
13.0 PRODUCT ACCEPTANCE.
13.1 Circa shall manufacture the Final Product and make it available
for pick up in accordance with all applicable laws, rules and regulations
including, without limitation, the Final Specifications and all other applicable
requirements of the FDA and other governmental authorities having jurisdiction.
All Products shipped to Customer shall be accompanied by quality control
certificates of analysis signed by a duly authorized laboratory official of
Circa confirming that each batch of Products covered by such certificate meets
its release Final Specifications and shall be deemed accepted by it unless
Customer, acting reasonably and in good faith, shall give written notice of
rejection (hereafter referred to as a "Rejection Notice") to Circa within 35
days after pick up of the Product by, on behalf of, or for the account of
Customer at Circa's facility.
13.2 The Rejection Notice shall state in reasonable detail (sufficient
to enable Circa to identify the nature of the problem and the tests or studies
to be conducted by or on its behalf to confirm or dispute same) the reason why
the Final Product is not acceptable to Customer. If the Final Product meets the
applicable provisions of the Final Specifications, has been manufactured in
accordance with representations and warranties provided herein is labeled as
required by the Customer and is provided in quantities specified in a purchase
order, Customer shall not be entitled to reject it. Any Rejection Notice shall
be accompanied by copies of all written reports relating to tests, studies or
investigations performed to that date by or for Customer on the Final Product
batch rejected.
13.3 Upon receipt of such Rejection Notice, Circa may require Customer
to return the rejected Final Product or samples thereof to Circa for further
testing, in which event such Final Product or samples thereof as the case may
be, shall be returned by Customer to Circa. If it is later determined by the
parties or by an independent laboratory or consultant that Customer was not
justified in rejecting the Final Product or that Customer was the cause of or
was responsible for the problem, Customer shall reimburse
* Confidential information omitted and filed separately with the Commission.
10
<PAGE> 11
Circa for the costs of the return, as well as any other costs or expenses
incurred by Circa as a result of the rejection or return.
13.4 Customer's test results or basis for rejection shall be
conclusive unless Circa notifies Customer, within 35 days of receipt by Circa of
the rejected Final Products or samples that it disagrees with such test results
or its responsibility for the problem in question. In the event of such a notice
by Circa, representative samples of the batch of the Final Products in question
shall be submitted to a mutually acceptable independent laboratory or consultant
(if not a laboratory analysis issue) for analysis or review, the costs of which
shall be paid by the party that is determined by the independent laboratory or
consultant to have been incorrect in its determination of whether the Final
Product should be rejected.
13.5 If any order of Final Product is rejected by Customer, Customer's
duty to pay all amounts payable to Circa in respect of the rejected Final
Product shall be suspended until such time as it is determined (i) by an
independent laboratory or consultant that the Final Products in question should
not have been rejected by Customer or (ii) by the parties or by any arbitration
conducted pursuant hereto or by a final order of a court of competent
jurisdiction (which is not subject to further appeal) that any act or omission
of, on behalf of or for which Customer is responsible was the cause of the
problem that was the basis for the rejection. If only a portion of an order is
rejected, only the duty to pay the amount allocable to such portion shall be
suspended.
13.6 In the event any Final Product is appropriately rejected by
Customer, Circa shall replace such Final Product with conforming goods and shall
be fully responsible for all costs associated with replacing such Final Product,
including the cost of the Bulk Product required to replace the Final Product or,
if requested by Customer, shall provide a credit to Customer for the amount, if
any, previously paid by Customer to Circa on account of the Final Product in
question and for the full cost of replacing the Bulk Product utilized in the
manufacture of the Final Product in question, including any wasted Bulk Product.
The credit shall be provided by Circa to Customer immediately following the
expiration of the period during which Circa may dispute a Rejection Notice as
contemplated above (unless the Rejection Notice is disputed by Circa, in which
event such credit shall be given only if the dispute is resolved in favor of
Customer). Replacement Products, as aforesaid, shall be delivered to Customer at
no cost to Customer if Customer has already paid for the rejected Products and
not received a credit therefor, as aforesaid. All delivery costs, including
insurance, incident to the return of Final Products to Circa and delivery of the
replacement Final Products to Customer's order shall be paid by Circa, unless
the rejection is determined not to have been appropriately rejected, in which
case Customer shall reimburse Circa for the costs of the return, as well as any
other costs or expenses incurred by Circa as a result of the rejection or
return.
11
<PAGE> 12
14.0 FORCE MAJEURE.
14.1 Neither Customer nor Circa shall be in default in the performance
of their obligations hereunder to the extent that such performance is delayed or
prevented by an act of God, weather conditions, strikes, lockouts, inability to
procure labor, materials, or fuels due to shortages, fires, riots, interference
by civil or military authorities, or acts of war (declared or undeclared), or
any other cause which is beyond the reasonable control of either party; provided
however, that should Circa experience a Force Majeure event which results in its
inability to perform under this Agreement, Customer's minimum purchase
obligations set forth in Section 2.2 shall be waived for the period during which
the Force Majeure event continues and the annual minimum purchase obligation
shall be adjusted accordingly. Should Circa be unable to perform hereunder due
to a Force Majeure event that continues for more than ****************, Customer
shall be entitled to terminate this Agreement immediately thereafter.
15.0 TERMINATION.
15.1 If either party hereto commits a material breach of any of its
obligations hereunder, the non-breaching party may, at its option, terminate
this Agreement by giving the other party at least sixty (60) days prior written
notice of its intent to terminate this Agreement, which notice shall specify the
breach and the termination date. Unless the breaching party cures the breach
prior to the termination date (or such longer period not to exceed an additional
sixty (60) days after the end of the aforementioned 60-day period reasonably
necessary to cure such breach, provided that the breaching party is making
diligent efforts to cure such breach), the Agreement shall terminate.
15.2 Notwithstanding the foregoing, (i) if Customer fails to pay any
sums owed hereunder within thirty (30) days after Circa has notified Customer
that such sums are past due, Circa may terminate this Agreement immediately, and
(ii) if either party should become insolvent or seek relief under any
bankruptcy, debtor relief, or similar law or if any proceeding against either
party under any such law remains in effect for a period of thirty (30)
consecutive days, the other party may terminate this Agreement immediately.
15.3 Any termination of the Agreement shall not release the parties
from any liabilities and obligations accrued as of the date thereof.
15.4 Sections 10.0, 11.0, 12.0 and this 15.4 and any other provisions
required to interpret and enforce the parties' rights and obligations under this
Agreement shall survive the termination of this Agreement to the extent required
for the full observation and performance of this Agreement by the parties in
accordance with its terms.
* Confidential information omitted and filed separately with the Commission.
12
<PAGE> 13
16.0 NON-WAIVER OF RIGHTS.
16.1 Failure by Circa or Customer to enforce the terms and conditions
of the Agreement shall not affect or impair such terms or conditions, or the
right of Circa or Customer to avail itself of such remedies as it may have for
any breach of such terms or conditions under the provisions of this Agreement,
in equity or at law.
17.0 NOTICES.
17.1 Any notice given under this Agreement shall be deemed adequate if
made by facsimile (with confirmation of transmission), and certified mail or
registered mail, return receipt requested, postage prepaid, or by reputable
overnight courier (with evidence of delivery), and addressed as follows:
TO CIRCA: CIRCA PHARMACEUTICALS, INC.
33 Ralph Avenue
Copiague, New York 11726-0030
Attention: Steven J. Martinez
Telephone Number: 516-842-8383
Facsimile Number: 516-842-8630
TO CUSTOMER: RENAGEL LLC.
c/o GelTex Pharmaceuticals, Inc.
Nine Fourth Avenue
Waltham, Massachusetts 02154
Attention: Joseph E. Tyler
Telephone Number: 781-290-5888
Facsimile Number: 781-290-5890
or to such other address as either of the parties shall designate by notice
given as herein required.
18.0 AMENDMENTS AND WAIVER.
18.1 This Agreement cannot be amended in any respect except in writing
duly executed by both parties. No waiver of compliance with any provisions or
conditions of this Agreement and no approvals provided for in this Agreement
shall be effective unless evidenced by a written instrument executed by the
party waiving or approving, as applicable.
13
<PAGE> 14
19.0 ASSIGNMENT.
19.1 Neither party hereto shall assign this Agreement or any part
thereof or any interest herein without the written approval of the other party
hereto; however, in the event of a merger, acquisition or sale substantially of
all the assets of Customer, the rights and obligations of Customer under this
Agreement may be assigned to the survivor or purchaser in the transaction.
20.0 GOVERNING LAW.
20.1 This Agreement shall be governed by the law of the State of New
York, without respect to conflict of law principles.
21.0 ENTIRE AGREEMENT.
21.1 This writing and the Confidentiality Agreement of even date
herewith constitute the entire understanding between the parties and shall
supersede any prior agreements between them. Each party acknowledges that there
are no other understandings which relate to the matters covered herein or in
such Confidentiality Agreement or which are inconsistent with any provisions of
the Agreement.
22.0 PARTIES INDEPENDENT.
22.1 In making and performing this Agreement, the parties act and
shall act at all times as independent entities and nothing contained in this
Agreement shall be construed or implied to create an agency, partnership or
employer and employee relationship between Circa and Customer. Except as
specifically provided herein, at no time shall either party make commitments or
incur any charges or expenses for or in the name of the other party.
14
<PAGE> 15
IN WITNESS WHEREOF, the parties hereto have executed this Agreement in
duplicate as of on the date and year written.
CIRCA PHARMACEUTICALS, INC.
By: /s/ Steven J. Martinez
---------------------------------
Steven J. Martinez
Vice President/General Manager
RENAGEL LLC
By: GELTEX PHARMACEUTICALS, INC.,
Its Member
By: /s/ Mark Skaletsky
---------------------------------
Name: Mark Skaletsky
---------------------------------
Title: President
---------------------------------
15
<PAGE> 16
EXHIBIT A
BULK PRODUCT DESCRIPTION AND SPECIFICATIONS
SEVELAMER HCL
<TABLE>
<CAPTION>
***** ************* **********
============================================================================================================
<S> <C> <C>
************ ******** ********
**************** ********* ********
***************** ***************************** ****************
******************** *************************** ********
***********************************
*************
********* ************* *******
**************** ********* *******
************** ***************************************** *******
*********
****************** ******************* *******
************ ****************************************
****************** *********************************** *******
******************** ****************************** *******
*********************: ******************************* *******
************************* ****************************** ********
******************** ******************************* *******
***************************** ****************************** ***************
******************* ***************************** ************
</TABLE>
***** ******************************************************************
*******************************************************************
*********************************************************************
******************************************************************
**********************************************************************
****************************.
* Confidential information omitted and filed separately with the Commission.
16
<PAGE> 17
EXHIBIT B
FINAL PRODUCT DESCRIPTION AND SPECIFICATIONS
RENAGEL(R) 403 MG CAPSULES
<TABLE>
<CAPTION>
**** ************ *********
=====================================================================================================
<S> <C> <C>
********** *******************************
************************************
*********** ******* *******
************** ******** *******
************** ****************************** *******
***************** *****************************
********************************
*************************************
*************** ********************* *****
************************* ************************** *******
</TABLE>
* Confidential information omitted and filed separately with the Commission.
17
<PAGE> 18
EXHIBIT C
FEES & PAYMENT TERMS
************* *********
* *****************************
***************************************************************
***************************************************************
* *****************************************
**************************
***************************************************************
***************************************************************
****************
***************************************************************************
***************************************************************************
**************************
******************************************************
* ************* *********************************************
****************************************************
***********************************************
* *********** ******************************************************
****************************************************
* ************************************************************************
************
* Confidential information omitted and filed separately with the Commission.
18
<PAGE> 19
EXHIBIT D
RENAGEL - CIRCA TECHNICAL AGREEMENT
FOR THE COMMERCIAL MANUFACTURING AND TESTING
OF RENAGEL(R) DRUG PRODUCT
1. PURPOSE AND SCOPE
This document serves to define the quality responsibilities and requirements
between RenaGel LLC and Circa Pharmaceuticals, Inc. ("Circa") for the commercial
production of RenaGel(R) capsules for distribution in the United States. RenaGel
LLC and Circa agree that GelTex Pharmaceuticals, Inc. ("GelTex"), a Member of
RenaGel LLC, will be responsible for all obligations that would otherwise be
assigned to RenaGel LLC, and will be the recipient of all notices Circa agrees
to provide hereunder. GelTex, by signature below, acknowledges these obligations
and agrees to perform the functions detailed below and agrees to receive notices
on behalf of RenaGel LLC. GelTex is the sponsor of the RenaGel NDA, 20-926, in
which the chemistry, manufacture, and control of RenaGel capsules is described.
Circa is a commercial manufacturer of RenaGel capsules. This document is
attached to the Manufacturing and Supply Agreement between RenaGel LLC and Circa
and the terms and conditions are incorporated therein by reference.
2. DEPARTMENTS AFFECTED
Quality Assurance - GelTex Quality Assurance - Circa
Operations - GelTex Quality Control - Circa
Regulatory Affairs - GelTex Operations - Circa
Regulatory Affairs - Circa
3. RESPONSIBILITY
GelTex is the NDA sponsor and is responsible for the adherence, maintenance and
upkeep of the NDA. Circa is a listed manufacturer of RenaGel capsules and is
responsible for the manufacture, testing, and packaging of RenaGel capsules in
compliance with the NDA. It is the responsibility of the Quality Assurance
management at GelTex and Circa, in cooperation with Manufacturing Operations,
Quality Control and Regulatory Affairs, to assure compliance with this
agreement.
<PAGE> 20
4. CIRCA PHARMACEUTICALS RESPONSIBILITIES
Circa will follow its own internal Standard Operating Procedures (SOPs) in the
fulfillment of its responsibilities. Execution of these responsibilities are in
accordance with all pertinent federal regulations and guidelines and the
approved RenaGel NDA, 20-926.
4.1. Production
- Manufacture and test RenaGel drug product in accordance with
GMPs, applicable contracts, approved RenaGel NDA, and any other
regulatory filings.
- Perform a Quality review of every lot of RenaGel drug product and
subsequently release or reject the lot in accordance with GMPs.
- All initial and stability testing of both active ingredient and
finished dosage forms and release and retest of inactive
components are performed by the Circa Quality Control Department
or approved designees as cited in the NDA in accordance with
approved specifications and procedures as submitted in the
approved RenaGel marketing applications and protocols for RenaGel
drug product.
- To assure that all packaging components are tested and released
as per the most current Specifications and Procedures and/or the
approved RenaGel marketing applications and Standard Operating
Procedures, prior to usage in the packaging of RenaGel drug
product.
- The manufacturing and packaging is to be executed under the most
current Master Batch and Packaging Records.
4.2. Change Control
Circa Pharmaceuticals will notify GelTex Pharmaceuticals of any proposed
change in the manufacturing, testing, or packaging of RenaGel capsules,
prior to implementation, which may affect the quality of RenaGel
capsules or impact any applicable contracts, the RenaGel NDA, or other
RenaGel regulatory filings. Circa Pharmaceuticals will not implement any
changes in the manufacturing, testing, or packaging of RenaGel capsules
without GelTex Pharmaceuticals' written approval.
The following require GelTex Pharmaceuticals' approval prior to
implementation, modification or deletion including, but not limited to:
<PAGE> 21
- Master Batch Formula
- Sevelamer Hydrochloride Raw Material Specification and Procedure
- In-Process Specification and Procedures
- Finished Product Specification and Procedure, RenaGel capsules,
403 mg
- Stability Specification and Procedure, RenaGel capsules, 403 mg
- Master Packaging Record: RenaGel Capsules, 403 mg, 60 units
- Master Packaging Record: RenaGel Capsules, 403 mg, 200 units
- Label Text and Design
- Excipient Manufacturers
- Outside Laboratories
- Packaging and Labeling Manufacturers and Materials
- Other procedures, processes, and documentation exclusive to RenaGel
manufacturing and testing operations...for example:
- RenaGel Process Validation
- RenaGel Cleaning Validation
- Other Operations described in the RenaGel NDA
The following require GELTEX NOTIFICATION prior to implementation,
modification or deletion:
- Inactive raw materials specifications and procedures.
- Circa's facilities and equipment applicable to the manufacturing
and testing of RenaGel.
4.3. Deviations
Circa Pharmaceuticals will notify GelTex Pharmaceuticals of deviations
in the manufacture and testing of RenaGel capsules prior to deciding the
outcome of the deviation, unless the nature of the deviation requires
immediate determination. If the disposition determination requires
immediate action, Circa Pharmaceuticals will notify GelTex
Pharmaceuticals as soon as reasonably possible after the deviation has
occurred.
4.4. Regulatory Inspections
Circa Pharmaceuticals will notify GelTex Pharmaceuticals of any
impending inspection by a regulatory agency or unannounced regulatory
inspection, which is related to the RenaGel NDA or other RenaGel
regulatory documents. Circa Pharmaceuticals will inform GelTex
Pharmaceuticals as to the outcome of any regulatory inspection within
ten business days.
<PAGE> 22
4.5. Postmarketing Adverse Events and Complaints
Circa Pharmaceuticals' representative will notify Genzyme of any product
quality complaints pertaining to RenaGel capsules within ten business
days. Complaints which may constitute an NDA field alert per 21 CFR
314.80 will be reported to Genzyme within 48 hours. GelTex
Pharmaceuticals is responsible for recalls.
Circa Pharmaceuticals will notify Genzyme Corporation of any adverse
events, serious adverse event within 48 hours.
4.6. Annual Reports
Circa Pharmaceuticals will supply to GelTex Pharmaceuticals with annual
report data summarizing the manufacture and testing of RenaGel capsules
thirty to sixty days prior to the annual RenaGel NDA approval
anniversary or other regulatory filing anniversaries.
4.7. Annual Product Review Report
The RenaGel specific information necessary for the periodic product
quality assessment (at least annually) includes, but is not limited to:
- Investigations
- Deviations
- Out-of-specification results
- QA product disposition
- List of RenaGel Lots Released
- List of RenaGel Lots Rejected
- Product Complaints, and
- Product Stability
- In-Process and Finished Product Data Trends
- Retain Sample Evaluation
4.8. Summary Documentation and Reports
Circa Pharmaceuticals shall provide GelTex Pharmaceuticals with
documentation specific to the manufacturing, testing and quality review
of RenaGel capsules as indicated below prior to distribution of the drug
product. Circa shall not release for shipment a lot of RenaGel capsules
prior to written approval for GelTex Pharmaceuticals.
<PAGE> 23
At a minimum, a copy of the following documents shall be provided to
GelTex prior to the initial shipment of each lot of RenaGel final
product:
- Quality Control Raw Material Release Report of each lot of sevelamer
hydrochloride drug substance, stearic acid, colloidal silicon
dioxide, and hard gelatin capsules tested and released for use in
the manufacturing of RenaGel drug product.
- Quality Control Release Report for each lot of RenaGel drug product.
- The executed batch record for every lot of RenaGel drug product.
- The executed packaging record for every lot of RenaGel drug
product(s).
- Circa's release documentation for manufactured and packaged RenaGel
drug product.
- All investigations, incident reports, anomaly reports associated
with the manufacturing, testing, and packaging of every lot of
RenaGel.
The following documents shall be provided to GelTex Pharmaceuticals on a
schedule mutually agreed to by Circa Pharmaceuticals and GelTex
Pharmaceuticals or on an as needed basis:
- Stability Reports
5. GELTEX PHARMACEUTICALS RESPONSIBILITIES
GelTex Pharmaceuticals and GelTex Pharmaceuticals representatives will follow
their own internal Standard Operating Protocols (SOPs) in the fulfillment of its
responsibilities. Execution of these responsibilities will be in accordance with
all pertinent federal regulations and guidelines and the approved RenaGel NDA,
20-926.
5.1. Lot Disposition
GelTex Pharmaceuticals Quality Assurance shall review the RenaGel
summary lot file documentation prior to market distribution.
Documentation of the sponsor review and disposition will be provided to
Circa Pharmaceuticals prior to the shipment of the lot to the designated
distributor.
<PAGE> 24
5.2. Audits
GelTex Pharmaceuticals and/or a GelTex Pharmaceuticals representative
will periodically audit Circa Pharmaceuticals to ensure compliance with
this document, cGMPs, RenaGel NDA, and any other RenaGel regulatory
filings.
5.3. Postmarketing Adverse Events and Complaints
GelTex Pharmaceuticals or a GelTex Pharmaceuticals representative will
notify Circa Pharmaceuticals of any product quality complaints
pertaining to RenaGel capsules within ten business days.
Complaints which may constitute an NDA field alert per 21 CFR 314.80
will be reported to Circa within 48 hours. GelTex Pharmaceuticals is
responsible for recalls.
GelTex Pharmaceuticals or a GelTex Pharmaceuticals representative will
notify Circa Pharmaceuticals of any adverse events, serious adverse
event within 48 hours.
5.4. Change Control
GelTex Pharmaceuticals or a GelTex Pharmaceuticals representative will
notify Circa Pharmaceuticals prior to implementation of any changes in
the RenaGel NDA, other regulatory filings, or commitments made to the
regulatory authorities pertaining to the manufacture, testing, and
packaging of RenaGel capsules. GelTex Pharmaceuticals will be
responsible for notifying of the other regulatory filings, or
commitments made to the regulatory authorities pertaining to Circa's
manufacture, testing and packaging of control or RenaGel capsules.
GelTex Pharmaceuticals will not implement any significant changes in the
manufacture and testing of RenaGel capsules without Circa
Pharmaceuticals' prior written approval.
5.5. Postmarketing Regulatory Reporting
GelTex Pharmaceuticals is responsible for submitting any required
postmarketing regulatory reports to the approved RenaGel NDA pertaining
to the manufacture, testing, and packaging of RenaGel capsules.
Postmarketing RenaGel regulatory reports related to Circa
Pharmaceuticals' manufacture and testing of RenaGel capsules will be
forwarded to Circa Pharmaceuticals.
<PAGE> 25
Acknowledged and agreed to:
GelTex Pharmaceuticals, Inc.
By: /s/ Mark Skaletsky
----------------------------------------------
Its: President
----------------------------------------------
Acknowledged and agreed to:
By:
/s/ [illegible] August 3, 1998
---------------------------------------------- -----------------
GelTex Manufacturing Operations Date
/s/ [illegible] August 3, 1998
---------------------------------------------- -----------------
GelTex Quality Assurance Date
/s/ [illegible] August 3, 1998
---------------------------------------------- -----------------
GelTex Regulatory Affairs Date
/s/ [illegible] July 31, 1998
---------------------------------------------- -----------------
Circa Pharmaceuticals, Inc. Regulatory Affairs Date
/s/ [illegible] July 31, 1998
---------------------------------------------- -----------------
Circa Pharmaceuticals, Inc. Quality Assurance Date
/s/ [illegible] July 29, 1998
---------------------------------------------- -----------------
Circa Pharmaceuticals, Inc. Operations Date
<PAGE> 1
PURCHASE AND SALE AGREEMENT
This AGREEMENT is made this 4th day of August, 1998, by and between Sodexho
USA, Inc., a Delaware corporation, having an address at 153 Second Avenue,
Waltham, Massachusetts and Service Supply Corporation, a Massachusetts
corporation, having an address at 153 Second Avenue, Waltham, Massachusetts
02154 (collectively, "Seller"), and Geltex Pharmaceuticals, Inc., a Delaware
corporation, having an address at Nine Fourth Avenue, Waltham, Massachusetts
02154 ("Purchaser").
1. Property. Seller agrees to sell and Purchaser agrees to buy, subject
to the terms and conditions of this Agreement, the following described property:
(a) fee simple title to that parcel of land located at 153 Second Avenue,
Waltham, Massachusetts consisting of two parcels totaling
approximately 8.9 acres of land as more particularly described in
Exhibit A-1 attached hereto (the "Land") together with all buildings,
structures and improvements now existing thereon (collectively, the
"Improvements"), together with all of Seller's right, title and
interest in and to any street, ways or alleys abutting or adjoining
thereon, and any strips, gores, easements, hereditaments and
appurtenances in or affecting the Land and the airspace and right to
use the airspace above the Land, (collectively, the "Premises"); and
(b) all of Seller's right, title and interest, if any, in and to any and
all (i) warranties, guaranties and indemnities by or claims against
third parties with respect to the Premises or the furnishing or
installation of equipment thereon (including, without limitation, any
guaranties or warranties with respect to the roof, the heating system,
etc.), (ii) licenses, permits, certificates, variances, consents,
approvals or similar documents relating to the Premises, (iii) plans,
drawings, specifications, surveys, engineering and other designs,
borings, soil and other tests and reports, project budgets and
schedules, and other technical descriptions relating to the Premises,
(iv) sewer and water rights associated with the Premises and all oil
and gas, mineral and water rights therein (all of the items described
in this subparagraph (b) are sometimes herein collectively called the
"Contract Rights and Intangible Assets").
<PAGE> 2
The Premises and the Contract Rights and Intangible Assets are sometimes herein
collectively called the "Property".
2. Purchase Price. The agreed purchase price for the Property is
$11,000,000.00 (the "Purchase Price") payable as follows:
(a) An initial deposit of $100,000.00 has been deposited with Lynch Murphy
Walsh & Partners, Inc. ("Lynch") with an address at One Financial
Center, Boston, Massachusetts 02111. Simultaneously with the execution
and delivery of this Agreement, Purchaser shall make a deposit with
Ropes & Gray with an address at One International Place, Boston,
Massachusetts 02110 in the amount of $400,000.00, and Lynch shall
deposit with Ropes & Gray the $100,000.00 it is presently holding for
a total deposit of $500,000.00 (hereinafter called the "Deposit"). The
Deposit shall be held by Ropes & Gray, as escrow agent. The Deposit
shall be placed in an interest bearing account. The Deposit shall be
held in escrow subject to the terms of this Agreement and in a manner
sufficient to identify such as being held in escrow pursuant to this
Agreement. The Deposit and any interest accrued thereon shall be
disbursed to Seller (or returned to Purchaser, as the case may be) in
accordance with the terms of this Agreement. Upon request each of
Purchaser and Seller shall provide to Ropes & Gray taxpayer
identification numbers and W-9's for the interest on the Deposit.
(b) On the Closing Date, one-half of any interest accrued on the Deposit
shall be paid to Seller as additional consideration hereunder and the
Deposit and one half of any interest accrued thereon shall be credited
against the Purchase Price and paid to Seller.
On the Closing Date, Purchaser shall pay to Seller in cash, by bank or cashiers
check or by wire transfer of immediately available federal funds an amount equal
to (x) the Purchase Price less (y) the Deposit and one half of any interest
accrued thereon and (z) increased or decreased by the amount of any adjustments
thereto provided for herein.
3. Closing. The closing of the sale of the Property (the "Closing")
pursuant to this Agreement shall take place at 12:00 noon on October 21, 1998 or
upon such earlier date as the parties may agree upon in writing (the "Closing
Date"), at the offices of Ropes & Gray at One
-2-
<PAGE> 3
International Place, Boston, Massachusetts 02110, or at such other place as the
parties may agree upon in writing.
4. Title. The Land and the Improvements shall be free from all
encumbrances, except:
(a) provisions of existing building and zoning laws;
(b) real estate taxes assessed against the Land and the Improvements for
the current year as are not due and payable on or before the Closing
Date;
(c) any liens for municipal betterments or special assessments assessed
after the date of this Agreement (for any municipal betterment or
special assessment assessed after the date of this Agreement,
Purchaser shall pay such assessed amount);
(d) the Lease (as hereinafter defined); and
(e) such other easements, rights, restrictions, reservations or other
encumbrances of record now in force and applicable provided such
encumbrances do not interfere with the use of the Premises or the new
improvements to be constructed thereon by Purchaser for offices and
laboratory purposes ("Purchaser's Intended Use") (it being
acknowledged by Purchaser that there are wetlands and restrictions
relating thereto on a portion of the Land).
The encumbrances referenced in clauses (a) through (e) above shall be
collectively referred to herein as the "Permitted Title Exceptions". Purchaser
shall obtain and review information regarding title to the Premises including
any survey Purchaser chooses to obtain and notify Seller in writing on or before
September 1, 1998 if Purchaser believes any title encumbrance existing against
the Premises is not a Permitted Title Exception. Purchaser shall have no right
to object to title to the Premises or not to close on the basis of title unless
(i) such objection is made in the manner and within the applicable time period
as provided in the immediately preceding sentence or (ii) a new title
encumbrance is recorded against the Premises after the date of Purchaser's title
examination. If Purchaser is unable to complete its title and survey work by
September 1, 1998, then if the parties mutually agree, the time period for
completion of its title and survey work shall be extended to a date mutually
agreed upon between the parties. Seller agrees not to unreasonably withhold its
consent to such extension.
-3-
<PAGE> 4
5. Contingencies for Due Diligence Investigations and Financing.
5.1. Purchaser's Independent Investigation. Subject to the provisions
of this Agreement, prior to September 1, 1998, Purchaser shall have the
right to conduct or cause to be conducted with reputable companies and at
Purchaser's sole cost and expense (except as otherwise agreed by the
parties with respect to the Phase II environmental site assessment work
described in a letter drafted July 17, 1998 by ENSR (the "Phase II Work"),
the costs of which Phase II Work will be shared equally between Seller and
Purchaser up to a maximum obligation owed by Seller of $12,725) such
audits, assessments, reviews, investigations, inspections, tests and
studies of the Property including all buildings, systems, fixtures and
equipment, the environmental condition of the Premises, the title to the
Premises, a survey of the Premises, the compliance of the Property with
applicable laws and such other engineering, legal and other matters
relating to or affecting the Property as Purchaser deems reasonably
necessary or desirable in connection with its purchase of the Property
("Investigations"). If Purchaser is unable to complete its Investigations
by September 1, 1998, then if the parties mutually agree, the time period
for such Investigations shall be extended to a date mutually agreed upon
between the parties. Seller agrees not to unreasonably withhold its consent
to such extension.
5.2. Conduct of Investigations. All Investigations under Paragraph 5.1
which are to be conducted at the Property shall be done at reasonable times
after at least twenty-four hours prior notice (which may be oral) to Seller
and/or its agent. Purchaser, its agents, employees, contractors,
consultants, other representatives and anyone else acting by or on behalf
of Purchaser (collectively, "Purchaser's Representatives") will at the
Seller's request allow a representative of Seller to be present during any
Investigations. Purchaser shall take all reasonable precautions to minimize
the impact to the Premises of any Investigations. With respect to
environmental site assessments other than the Phase II Work, Purchaser
agrees to provide to Seller for prior approval the scope of any proposed
activities relating to investigation of soil or groundwater quality or for
the subsurface investigation of the Premises, and to permit Seller's
representatives to be present during any such activities. If Purchaser or
Purchaser's Representatives take any samples from the Land in connection
with any environmental testing, then upon Seller's request, Purchaser shall
provide to Seller a portion of such sample being tested to allow Seller, if
it so chooses, to perform its own testing. Purchaser shall promptly deliver
to Seller copies of all written results, reports and materials containing
information relating to any
-4-
<PAGE> 5
Investigation performed by Purchaser or Purchaser's Representatives with
respect to the Premises, all of which results, reports and materials shall
be addressed to Seller and upon which Seller shall be legally entitled to
rely to the same extent as can Purchaser, provided, however, that if there
is any additional cost associated with addressing such report to Seller
(except for the report on the Phase II Work), Seller at its option may pay
such additional costs and have such reports and results addressed to it or
elect not to have such reports and results so addressed. Seller agrees to
use commercially reasonable efforts (but at no cost or expense to Seller)
to cooperate with Purchaser in the conduct of its Investigations including
without limitation, the execution of applications to governmental
authorities reasonably necessary for Purchaser with respect to its purchase
of the Property.
5.3. Restoration, Liability, Indemnity and Insurance. Purchaser shall,
immediately after any entry, and any Investigation of the Premises restore
the Premises at its sole cost to the condition which existed immediately
prior thereto. Purchaser assumes all risks associated with Purchaser's and
Purchaser's Representatives' entry and Investigations of the Premises and
agrees to protect, defend (with counsel reasonably satisfactory to Seller),
indemnify and hold harmless Seller and Seller's beneficiaries, attorneys,
agents, and representatives from and against any and all costs, losses,
claims, damages, liabilities, expenses and other obligations (including,
without limitation, reasonable attorneys' fees) on account of any loss,
damage or injury to any person or property (including without limitation
the Premises) by reason of any act, omission or negligence of Purchaser or
any of Purchaser's Representatives arising from, out of, in connection with
or in any way related, directly or indirectly, to the entry or activities
of Purchaser or Purchaser's Representatives on, at or with respect to the
Premises, to the extent not caused in whole or in part by the negligence or
wilful misconduct of Seller, its agents, employers or representatives.
Purchaser shall, prior to any such entry, provide to Seller such evidence
of insurance coverage, in such amounts, with such coverages (including
liability insurance and worker's compensation insurance) and with such
insurance companies, as are reasonably satisfactory to Seller, covering all
activities to be conducted by Purchaser and Purchaser's Representatives.
Such insurance coverages may not be materially changed or terminated
without at least thirty (30) days prior written notice to Seller. This
Paragraph 5.3 shall survive the Closing and any termination of this
Agreement for a period ending one year from the Closing Date except as to
claims of which Purchaser is notified on or before such date with respect
to which claims this Paragraph 5.3 shall survive until such claims are
finally resolved.
-5-
<PAGE> 6
5.4. Confidentiality. All information obtained by Purchaser or
Purchaser's Representatives with respect to the Property, whether from
Seller or independently (and whether directly or through outside
consultants) shall be held in confidence by Purchaser and Purchaser's
Representatives and not disclosed to third parties except as necessary in
connection with obtaining financing to acquire the Property. Purchaser and
Seller each agree to provide the other for prior approval with the proposed
text of any press release or public statement or disclosure regarding the
sale of the Property.
5.5. Purchaser's Option to Terminate. If Purchaser is not satisfied
with the results of the Investigations for any reason, then Purchaser shall
notify Seller in writing specifying the nature of its dissatisfaction with
the Property on or before September 1, 1998 and of Purchaser's election to
terminate, in which event Purchaser shall comply with the requirements of
Paragraph 5.6, and the Deposit, together with any interest thereon shall be
returned to Purchaser and neither party shall have any further liability
hereunder except for the obligations of Purchaser pursuant to Paragraphs
5.3 and 24 hereof. If Purchaser fails to notify Seller on or before on or
before September 1, 1998 whether it is satisfied with such results, then
Purchaser conclusively shall be deemed to have waived Purchaser's right to
terminate as a result of its Investigations. However, with respect to
Investigations of environmental or title matters, it is agreed by Purchaser
that if the results of the Investigations reveal a condition that will
interfere with the Purchaser's Intended Use of the Premises or cause the
costs of Purchaser's Intended Use of the Premises to exceed Purchaser's
budget therefore or delay Purchaser's Intended Use, it will notify Seller
in writing of its intent to terminate if such problem or condition is not
cured to Purchaser's satisfaction at no cost to Purchaser within a time
period acceptable to Purchaser to be set forth in the notice to Seller;
provided, however, Seller may (but is not obligated to) cure such problem
or condition within the time period set forth in Purchaser's notice by
notifying Purchaser in writing within 5 business days from receipt of
Purchaser's notice. If Seller so notifies Purchaser that it will, and
thereafter on or before the date set forth in Purchaser's notice does, cure
such problem or condition to Purchaser's reasonable satisfaction then this
Agreement shall not terminate.
5.6. Return of Due Diligence Information. If for any reason a Closing
does not occur with respect to the Property, Purchaser shall (i) return to
Seller all materials and other information regarding the Property that
Seller has provided to Purchaser and all copies or photocopies thereof;
(ii) deliver immediately to Seller copies of all written
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<PAGE> 7
results, reports and materials resulting from Investigations of the
Property conducted by or at the direction of Purchaser or Purchaser's
Representatives and not previously delivered to Seller; and (iii) destroy
any remaining such materials and information in its possession. This
Paragraph 5.6 shall survive the Closing and any termination of this
Agreement.
5.7. Investigations Resulting in Required Disclosure. Purchaser agrees
that in the event the need arises under applicable law to notify any
governmental authority of any condition at any of the Property, as a result
of any findings in any environmental assessment or any other Investigation
done by or at the direction of Purchaser or Purchaser's Representatives,
Purchaser shall immediately notify Seller and Seller, not Purchaser or
Purchaser's Representatives or anyone acting on behalf of Purchaser or
Purchaser's Representatives, shall make such disclosure as Seller deems
appropriate unless otherwise required by applicable law.
6. Condition of Premises. Purchaser acknowledges that this Agreement
provides for free, full and complete access to the Property and full opportunity
to fully inspect and review the Property, including all buildings, systems,
fixtures and equipment. Purchaser further acknowledges that this Agreement
provides for free, full and complete access to fully inspect and review (i) the
environmental condition of the Premises, (ii) the title to the Land and the
Improvements, (iii) the compliance of the Property with applicable laws and (iv)
such other engineering, legal, and other matters relating to or affecting the
Property as Purchaser may find appropriate to satisfy itself as to all such
matters. Purchaser's decision with respect to the ultimate purchase of the
Property will be based solely upon its own Investigations. Except as provided in
Paragraph 7, no guarantees, representations or warranties express or implied are
made by Seller with respect to the Property. Purchaser expressly acknowledges
and agrees that it is not relying on any representations or warranties of any
kind whatsoever, express or implied, from Seller, its attorneys, agents,
representatives or any party purportedly acting on behalf of Seller as to any
matters concerning the Property, except those expressly set forth in this
Agreement. The Property is to be sold pursuant to this Agreement as is, where
is. Purchaser hereby further acknowledges that any information Seller has
provided to Purchaser has been provided to Purchaser for informational purposes
only without any recourse, representation or warranty and that Seller does not
represent, warrant or guarantee the contents or opinions contained in or the
accuracy or completeness of, or the methodology of preparation used to produce,
any such information. This Paragraph 6 shall survive the Closing.
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7. Representations and Warranties of Seller. Seller represents and
warrants to Purchaser as follows:
(a) Each of Sodexho USA, Inc. and Service Supply Corporation is a
corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware for Sodexho USA, Inc., and the
Commonwealth of Massachusetts for Service Supply Corporation.
(b) Seller has all requisite and necessary legal right, power and
authority to execute and deliver this Agreement and to perform
Seller's obligations hereunder.
(c) The execution and delivery of this Agreement and the performance by
Seller of its obligations hereunder shall have been duly authorized by
all requisite corporate action by August 12, 1998 and does not
conflict with or result in the breach of any of the terms of the
charter documents or bylaws of Seller or of any judgment, writ,
injunction or decree of any court or governmental authority or any
agreement or instrument to which Seller is a party or by which Seller
is otherwise bound.
(d) This Agreement shall, once the requisite corporate action occurs by
August 12, 1998, be the legal, valid and binding obligation of Seller,
enforceable against Seller in accordance with its terms, subject to
general principles of equity, bankruptcy, reorganization, and other
similar laws affecting the enforcement of contracts generally.
(e) There are no leases or other agreements currently in force and effect
relating to the occupancy of the Land or the Improvements.
(f) The Premises do not constitute all or substantially all of the
property of Sodexho USA, Inc.
(g) Seller has not received any written notice of any pending or proposed
municipal betterment for which a lien could be imposed on the Land or
the Improvements.
(h) Seller has not received any written notice that all or any part of the
Land or the Improvements is in any material violation of (i) any
zoning, subdivision, building, health, traffic, environmental, flood
control or other applicable rules,
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<PAGE> 9
regulations, ordinances or statutes of any local, state or federal
authorities or any other governmental entity having jurisdiction over
the Land and Improvements or (ii) any outstanding easements,
covenants, or other instruments affecting the Land and Improvements
which violation would have a material adverse effect on the use or
value of the Land and Improvements.
(i) There are no suits, actions, orders, decrees, claims, writs,
injunctions or proceedings pending against Seller, or affecting all or
any part of the Land and Improvements or the operation thereof before
any court or administrative agency or officer of which Seller has
received written notice which, if adversely determined, would have a
material adverse effect upon the operation or condition, financial or
otherwise, of all or any part of the Premises.
(j) Seller has not failed to furnish to Purchaser any contract or
agreement relating to the Property or any amendments thereto other
than matters of record which shall be binding on Purchaser from and
after the Closing Date, or, to the knowledge of current employees of
Seller involved in the operation and maintenance of the facility, any
information which would be material to the Purchaser's Intended Use of
the Property as it exists presently or at the Closing Date.
(k) There are no condemnation proceedings pending and Seller has not
received written notice of any proposed condemnation proceedings
against all or any part of the Premises.
(l) Except for the Lease, this Agreement and matters of record, there are
no agreements or contracts affecting all or any part of the Property
or the use thereof to which Seller is a party which would be binding
upon or otherwise affect Purchaser or its nominee that would not be
terminable at will by Purchaser without penalty from and after the
Closing Date.
Seller shall have until August 12, 1998 to obtain the necessary votes of the
board of directors of Seller and of the shareholder of Service Supply
Corporation. If Seller does not notify Purchaser by such date then Seller shall
be deemed to have received such approval, provided, however, that if Seller
notifies Purchaser by August 12, 1998 that it has not received the necessary
approval, then the Deposit, together with any interest thereon shall be returned
to
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<PAGE> 10
Purchaser and neither party shall have any further liability hereunder except
for the obligations of Purchaser pursuant to Paragraphs 5.3 and 24 hereof.
8. Representations and Warranties of Purchaser. Purchaser represents and
warrants to Seller as follows:
(a) Purchaser is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware.
(b) Purchaser has all requisite and necessary legal right, power and
authority to execute and deliver this Agreement and to perform
Purchaser's obligations hereunder.
(c) The execution and delivery of this Agreement and the performance by
Purchaser of its obligations hereunder shall have been duly authorized
by all requisite corporate action and does not conflict with or result
in the breach of any of the terms of the charter documents or bylaws
of Purchaser.
(d) This Agreement is the legal, valid and binding obligation of
Purchaser, enforceable against Purchaser in accordance with its terms,
subject to general principles of equity, bankruptcy, reorganization
and other similar laws affecting the enforcement of contracts
generally.
9. Maintenance of the Premises and Insurance; New Lease. Until the
Closing, Seller shall (i) maintain in full force and effect the existing
policies of insurance relating to the Premises and (ii) continue to operate the
Premises in substantially the same manner as it is now being operated; provided,
however, that Seller does not intend and shall not be obligated to repair,
replace or improve the Premises in any material way. The Seller and the
Purchaser shall enter into a lease agreement at the Closing with Seller as
tenant and Purchaser as landlord providing for the continued occupancy of a
portion of the Improvements by Seller after the Closing. Such Lease shall
include the following provisions and shall otherwise be in substantially the
form of the lease attached as Exhibit A subject to such changes as are mutually
agreed to by the parties (the "Lease"):
(a) The base rental rate shall be equal to $44,000 per month plus
additional rent equal to actual operating costs, taxes and insurance
costs for the Premises during the term of the Lease, all subject to
pro-ration and rent abatement on a
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<PAGE> 11
per diem basis for Seller moving out of the Premises, prior to the end
of the term of the Lease.
(b) The term of the Lease shall be until December 31, 1998; provided,
however, that Seller will use its best efforts to vacate the Premises
sooner than the aforementioned date if reasonably possible.
Notwithstanding the foregoing, after the end of the term of the Lease
and until February 28, 1999 Seller may, at its own expense, obtain and
locate on the Premises at a location reasonably acceptable to
Purchaser mobile trailers to house Seller's payroll department
("Payroll Trailers") . Seller shall pay all costs of any utilities for
the Payroll Trailers and such trailers shall be subject to all of the
terms of the Lease except base rent and additional rent shall be
$0.00.
(c) From and after the Closing during the term of the Lease while Seller
is in sole occupancy and control of the Premises, Seller as tenant
under the Lease shall be responsible for and shall indemnify Purchaser
as landlord under the Lease from and against all hazardous substances
released by, or environmental contamination caused by, Seller on,
into, under or from the Premises.
(d) Should Seller holdover in occupancy of the Premises beyond the term of
the Lease and/or the term of permitted occupancy in the Payroll
Trailers then Purchaser shall be entitled to pursue and collect
damages from Seller for such holdover. Such holdover damages shall be
limited to all actual costs incurred by Purchaser in returning the
construction work contemplated for the Premises by Purchaser for the
Purchaser's Intended Uses to the contemplated construction schedule
and shall include costs such as overtime, extra mobilization of work
forces and the like associated with accelerating work on such
construction and actual out-of-pocket costs of collection including
reasonable attorneys' fees.
Seller and Purchaser shall mutually agree on the final form of Lease within ten
business days from the date hereof and shall then substitute such final form of
Lease as Exhibit A to this Agreement.
10. Documents to be Delivered at the Closing.
(a) At the Closing, Seller shall deliver to Purchaser the following
documents each fully executed and, if required, acknowledged by
Seller:
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<PAGE> 12
(1) a quitclaim deed (the "Deed") conveying a good and clear record and
marketable title to the Premises and Improvements to Purchaser subject
only to the Permitted Title Exceptions;
(2) an assignment and assumption of permits (the "Assignment") assigning
all Contract Rights and Intangible Assets;
(3) the Lease;
(4) an affidavit and indemnity as to mechanics' liens and persons in
possession in a customary form reasonably acceptable to Purchaser's
title insurance company;
(5) an affidavit stating that Seller is not a foreign person or entity
within the meaning of Section 1445 of the Internal Revenue Code, and
complying with the Internal Revenue Service Regulations promulgated
pursuant to Section 1445;
(6) a designation agreement designating the party responsible for any Form
1099-B filings as may be required by the Internal Revenue Service's
regulations;
(7) a closing statement;
(8) a corporate excise tax lien waiver for Service Supply Corporation;
(9) such clerk's and/or secretary's certificates for Seller as are
reasonably necessary to evidence requisite corporate authority of
Seller;
(10) any documents as are reasonably necessary to evidence or effect the
termination of all service contracts with Seller for the maintenance,
management and operation of the Premises; and
(11) such other instruments, certificates and documents as are reasonably
required in order to fully effectuate the terms of this Agreement.
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<PAGE> 13
(b) At the Closing, Purchaser shall deliver to Seller the following
documents each fully executed by Purchaser:
(1) the Assignment assuming the Contract Rights and Intangible Assets
with respect to the Land and the Improvements;
(2) the Lease;
(3) a designation agreement designating the party responsible for any
Form 1099-B filings as may be required by the Internal Revenue
Service's regulations;
(4) a closing statement;
(5) such secretary's certificate for Purchaser as is reasonably
necessary to evidence requisite corporate authority of Purchaser;
and
(6) such other instruments, certificates and documents as are
reasonably required in order to fully effectuate the terms of
this Agreement.
11. Conditions of Property.
(a) In addition to the performance or satisfaction in all material
respects of all the other provisions of this Agreement by Seller, the
Closing and the obligation of Purchaser to buy the Property under this
Agreement shall be conditioned expressly on the satisfaction of the
following conditions at the Closing Date:
(1) the Improvements shall not have suffered a casualty resulting in
the destruction of or damage in a material way to the structural
integrity of the roof support, walls, steel superstructure or
other major structural components of the Improvements.
(2) no eminent domain proceedings shall have taken place or be
pending which involve the condemnation or taking of any portion
of the Premises which impairs vehicular or pedestrian access to
the Premises or causes the Improvements no longer to be able to
comply with applicable zoning
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<PAGE> 14
in any material respect or to be able to be used for the
Purchaser's Intended Use.
(3) delivery of full possession of the Land and Improvements, free of
all tenants and occupants, except for Seller under the Lease, to
Purchaser, the Land and Improvements to be then (i) in the same
condition as they now are, reasonable wear and tear and
casualties and takings as provided in clauses 1 and 2 above
excepted, (ii) not in violation of any applicable encumbrance
referred to in Paragraph 4 hereof in any material respect, (iii)
free of all of Seller's equipment, furnishings, machinery, trade
fixtures and all tangible personal property except such as
remains in the space occupied by Seller under the Lease, and (iv)
free of all remaining trash, debris and related materials.
(4) no tenants or occupants shall occupy the Land and Improvements
except Seller under the Lease.
(b) Should Purchaser choose or be obligated in the event of any casualty
or any taking of any portion of the Premises, to proceed to a Closing,
then all unexpended proceeds and all rights to insurance proceeds and
taking proceeds, as applicable, together with the amount of any
applicable unexpended deductible, shall be assigned and paid over by
Seller to Purchaser.
(c) Purchaser may waive any of the foregoing conditions in this Paragraph
11 and any such waiver shall not be deemed a waiver or modification of
any other conditions.
12. Failure of Conditions. If (i) Seller shall be unable to give title,
make conveyance or deliver possession of the Property, all as herein stipulated,
(ii) at the time of the Closing the Property does not conform with the
provisions hereof in all material respects or (iii) any other condition to
Purchaser's obligation to purchase the Property shall not be satisfied or waived
at the time of the Closing (each such event referred to in the foregoing clauses
(i), (ii) and (iii) being hereinafter called a "Failure of Condition"), then
Seller, for a Failure of Condition arising out of clause (i) or (ii), and
Purchaser, at Purchaser's election, for a Failure of Condition arising out of
clause (iii), shall give written notice thereof to the other at or before the
time of the Closing, and thereupon, at Seller's option, the time of the Closing
shall be extended for a period of up to 60 days, during which time Seller shall
use reasonable efforts
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<PAGE> 15
to cure such Failure of Condition. Such efforts of Seller to cure such Failure
of Condition shall not require Seller to expend more than $300,000 in costs and
expenses in such efforts; provided, however, if any such Failure of Condition
relating to the condition of title to the Land and Improvements is a result of a
voluntary consensual action by Seller to so encumber the title to the Land and
Improvements such dollar limit to Seller's efforts shall not apply. If the time
of the Closing is extended and if at the end of such extension period Seller
shall have failed so to cure such Failure of Condition, as herein provided, or
if at the Closing there is a Failure of Condition and the time of the Closing is
not extended by Seller, and, in either such instance, if Purchaser, at its
election, does not waive any such Failures of Condition, then the Deposit and
all interest accrued thereon shall be forthwith refunded to Purchaser and all
other obligations of the parties hereto shall cease and this Agreement shall be
null and void and the parties hereto shall have no further obligation or
liability arising hereunder (except for Purchaser's obligations (i) for
Violations, which shall continue in accordance with Paragraph 18 and (ii) as
otherwise provided in Paragraph 20).
13. Purchaser's Election to Accept Title. Purchaser shall have the
additional election, at either the original or any earlier or extended time for
performance, to waive any Failure of Condition and to accept such title as
Seller can deliver to the Property in its then condition and to pay therefor the
Purchase Price without deduction (but subject to adjustment as provided in
Paragraph 15 hereof), reduced by an amount equal to the sum of all amounts
required to remove all encumbrances described in Paragraph 12 which secure the
payment of money and which have not been removed by Seller, in which case Seller
shall convey such title to the Property.
14. Application of Purchase Money to Liens. To enable Seller to make
conveyance as herein provided, Seller may, at the time of Closing, use the
purchase money or any portion thereof to clear the title of any or all
encumbrances or interests; provided that all instruments so procured are
recorded at Seller's expense either (i) prior to or simultaneously with the
recording of the Deed, or (ii) where such title encumbrances constitute
mortgages, assignments of leases and rents, UCC-1 financing statements and the
like from an institutional lender, and a payoff letter has been obtained but
discharges, releases or terminations thereof are not yet available, as soon
thereafter as Seller may reasonably obtain the same from such institutional
lender.
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<PAGE> 16
15. Apportionments and Costs.
(a) Real estate taxes, water, sewer and other utility charges and fuel
shall be apportioned as of the Closing Date on the basis of a 365-day
year and the net amount thereof if due to Seller shall be added to the
amount payable under Paragraph 2 hereof, and if due to Purchaser shall
be subtracted from such amount. To the extent that such apportionments
may not reasonably be determined at such time, they shall be
determined and paid as soon as practicable after the Closing. Seller
shall obtain final bills for any utility charges that it can arrange
in which case such final amounts shall be separately paid by Seller
and need not be adjusted between the parties.
(b) All municipal assessments or betterments assessed after the date of
this Agreement shall be paid by Purchaser.
(c) Seller shall pay at the Closing all Deed Stamp Excise Taxes payable in
connection with the conveyance of the Premises pursuant to this
Agreement.
(d) Each of the parties hereto shall pay the costs of their own respective
counsel and any costs or expenses incurred by such party in connection
with this transaction. Purchaser shall pay all costs of its
Investigations (except as otherwise agreed in Paragraph 5.1) including
of title and survey matters and of obtaining any financing in
connection with acquiring the Property.
(e) Seller will arrange to terminate all of its existing service contracts
for the management, maintenance or operation of the Premises and shall
be responsible to pay in full all such vendors and all bills and
claims for labor performed and materials furnished to or for the
benefit of Seller with respect to the Property.
16. Brokers. Purchaser and Seller each warrants and represents that such
party has only dealt with Lynch as a broker with respect to this transaction and
with respect to the Property. Upon and only upon the Closing and consummation of
this transaction, Seller shall pay such broker an agreed upon commission equal
to 2% of the Purchase Price for acting as broker to this transaction. Each of
Purchaser and Seller agrees to indemnify and hold harmless the other party from
and against all claims for brokerage or commission on account of this sale
arising out of dealings with the party from whom indemnification is sought.
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<PAGE> 17
17. Escrow of Deposit. The Deposit and interest accrued thereon shall be
held in escrow by Ropes & Gray as escrow agent subject to the terms of this
Agreement, and shall be duly accounted for in accordance with this Agreement.
The escrow agent shall not be liable for any action or nonaction taken in
good faith in connection with the performance of its duties hereunder, but shall
be liable only for its own willful default or misconduct. Purchaser and Seller
agree to indemnify and hold harmless the escrow agent from any loss, damage,
liability, cost or expense (including reasonable attorneys' fees and expenses)
arising out of any act or action taken by it in good faith in connection with
the performance of its duties hereunder, provided that Purchaser and Seller
shall not indemnify the escrow agent against any loss, damage, liability, cost
or expense arising out of willful misconduct, gross negligence, fraud or any
violation of the terms of this Agreement. Notwithstanding anything contained in
this Agreement to the contrary with respect to the obligations of the escrow
agent, should any dispute arise with respect to the delivery and/or ownership or
right to possession of such amount, the escrow agent shall have no liability to
any party hereto for retaining dominion and control over such amount until such
dispute shall have been settled:
(i) by mutual agreement between the parties; or
(ii) by final order, decree or judgment by a court of competent jurisdiction in
the United States of America (and no such order, decree or judgment shall
be deemed to be "final" unless and until the time of appeal has expired and
no appeal has been made);
and the escrow agent shall make payment of such amount as the parties may have
mutually agreed or in accordance with such final order, decree or judgment. In
no event shall the escrow agent be under any duty whatsoever to institute or
defend any such proceeding.
Ropes & Gray may resign as escrow agent hereunder, in its sole discretion,
by giving 24 hours' written notice to Purchaser and Seller. If Purchaser and
Seller are unable to agree on a substitute escrow agent within 48 hours after
such notice, Ropes & Gray may transfer the Deposit, subject to the terms of this
Agreement, to any bank with offices in Boston, Massachusetts having capital of
not less than $50,000,000.00 or, Ropes & Gray may transfer the Deposit to any
Court with jurisdiction over the matter.
It is understood by all of the parties hereto that Ropes & Gray has, is and
shall continue to act as Seller's counsel in connection with the transaction
contemplated by this Agreement.
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<PAGE> 18
All of the parties hereby agree that Ropes & Gray may continue in all respects
to fully represent Seller in connection with this transaction and in any
litigation or other controversy that may arise between any of the parties hereto
or their affiliates notwithstanding that Ropes & Gray is acting as escrow agent
hereunder.
18. Damages. If Purchaser shall default in the performance of its
obligations hereunder (including Purchaser's failure to indemnify and restore as
provided in Paragraph 5.3, or Purchaser's violation of Paragraph 24, if
applicable and if any [a "Violation"]), and Seller shall not be in default
hereunder, the Deposit and interest accrued thereon shall be paid to Seller in
full payment of Seller's damages resulting from Purchaser's default as
liquidated damages and not as a penalty. Further, in the event of any Violation,
Seller's rights and remedies shall not be limited and for any Violation, Seller
may seek to recover damages and any cost and expense owned to Seller in addition
to the Deposit and interest accrued thereon together with attorneys' fees and
costs associated with recovering and collecting the amount related to such
Violation. In the event of any Violation, Seller may elect any appropriate
action available in equity or by law, such rights and remedies being cumulative
and the exercise of one or more such right or remedy by Seller shall not be
construed to be a waiver of any of the others.
19. Assignments. Seller may from time to time assign, subject to its
obligations herein, all of its right, title and interest under this Agreement.
Purchaser may only assign its right, title or interest under this Agreement to
an entity controlled by Purchaser and then only in accordance with the procedure
for assignment set forth in this Paragraph 19. Notwithstanding the foregoing
sentence, Seller agrees that Purchaser may assign its right, title and interest
under this Agreement to a non-affiliated entity should it elect to finance the
sale through a so-called "synthetic lease financing". At least five business
days prior to making any assignment of its right, title or interest under this
Agreement Purchaser shall first notify Seller in writing and supply all material
details regarding such assignment including information regarding the makeup of
the assignee and such other information as is reasonably requested by Seller to
allow Seller to confirm that the proposed assignment is to a permitted assignee.
Purchaser's proposed assignee shall expressly assume Purchaser's obligations
under this Agreement in a form and manner acceptable to Seller and Purchaser
shall not be released from such obligations. Any assignment by Purchaser of its
right, title or interest under this Agreement in violation of this Paragraph 19
shall be null and void, and shall allow Seller, at its option, to deem Purchaser
in default of its obligations hereunder. This Agreement shall be binding and
inure to the benefit of the parties hereto and Seller's successors and assigns
and Purchaser's permitted successors and assigns.
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<PAGE> 19
20. Survival Provisions; Acceptance of Deed. On the termination hereof,
all of the terms and provisions of this Agreement shall be void and of no
further force and effect and neither Purchaser nor Seller shall have rights,
obligations or liabilities hereunder except for this Paragraph 20 and Paragraphs
5.3, 5.6, 16 (if applicable) and 24 which shall survive such termination and
continue in effect in accordance with their terms indefinitely. The acceptance
of the Deed, by Purchaser or Purchaser's permitted assignee, as the case may be,
shall be deemed to be a full performance and discharge of every agreement and
obligation of Seller herein contained or expressed except any adjustments which
need pursuant to Paragraph 15(a) to be finally determined after the Closing,
which shall survive the Closing until finally adjusted.
21. Further Assurances. The parties agree to execute any and all
additional instruments and documents as may be reasonably required to fully
effectuate the terms of this Agreement.
22. Notices. All notices or other communications required or permitted to
be given hereunder shall be in writing and delivered by hand or recognized
overnight courier or mailed, postage prepaid, by registered or certified mail,
return receipt requested, addressed in the case of Purchaser to it at the
address set forth on Page 1 hereof, Attention: Mr. Paul J. Mellett, Jr., with a
copy to Palmer & Dodge, at One Beacon Street, Boston, Massachusetts 02108,
Attention: Tom Schnorr, Esq., and in the case of Seller to it at the address set
forth on Page 1 hereof, Attention: Mr. Robert E. Drury, with a copy to Ropes &
Gray at One International Place, Boston, Massachusetts 02110, Attention: Walter
R. McCabe III, Esq., or to such other address and to such other person's
attention as either Purchaser or Seller may from time to time specify by like
notice to the other. Notices shall be deemed given when delivered or mailed as
aforesaid.
23. Time. Time is of the essence in this Agreement. If any date for
providing a notice or obtaining consent or approval should fall on any day which
is not a business day in Massachusetts then such date shall be extended to the
next following business day.
24. No Recording. Purchaser agrees not to record this Agreement or any
notice hereof in the Registry of Deeds. If Purchaser nonetheless records this
Agreement or a notice thereof, Seller, at its option, may declare Seller's
obligations hereunder to be null and void and may deem Purchaser in default of
its obligations hereunder, whereupon this Agreement shall terminate except as
provided in Paragraph 20 and any recorded copy of this Agreement or
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<PAGE> 20
notice thereof shall for all purposes be considered null and void between the
parties hereto and shall not be a notice to or binding in any way on third
parties.
25. Miscellaneous. This instrument may be executed in one or more
counterparts which together shall constitute one instrument. The invalidity or
unenforceability of any term or provision hereof shall not affect the validity
or enforceability of any other term or provision hereof. The captions to the
paragraphs hereof are for convenience of reference only and are not intended to
affect the meaning of the provisions of this Agreement. This Agreement is to be
construed as a Massachusetts contract, is to take effect as a sealed instrument,
sets forth the entire contract and understanding between the parties superseding
any prior oral or written agreements including the Letter of Intent dated June
8, 1998, and may be canceled, modified, or amended only by a written instrument
executed by both Seller and Purchaser.
IN WITNESS WHEREOF, this instrument has been executed by each of the
parties hereto, under seal, by a duly authorized officer or person, as of the
date first written above.
PURCHASER:
GELTEX PHARMACEUTICALS, INC.
By:______________________________________
Name:
Title:
SELLER:
SODEXHO USA, INC.
By:______________________________________
Name:
Title:
-20-
<PAGE> 21
SERVICE SUPPLY CORPORATION
By:______________________________________
Name:
Title:
The undersigned agrees that it acted as broker and as agent for the
Purchaser in the above described transaction and joins in this Agreement and
agrees to the terms hereof relating to the broker, expressly including Paragraph
16 hereof:
BROKER:
LYNCH MURPHY WALSH & PARTNERS, INC.
By:______________________________________
Name:
Title:
-21-
<PAGE> 22
EXHIBIT A
<PAGE> 23
Exhibit A-1
1. The parcel of land with all buildings and other improvements thereon,
situated on and westerly of Second Avenue in Waltham, Massachusetts, shown
as Lot 15 on a Plan of Land in Waltham, Mass. dated 4 Sept. 1963 by Raymond
C. Pressey, Inc., bounded and described as follows:
NORTHEASTERLY on Second Avenue 60.00 feet;
SOUTHEASTERLY on other land of the Grantors shown as
Lot 16 on said Plan 210.32 feet;
NORTHEASTERLY on the same by four lines measuring
40.50 feet, 97.44 feet, 185.90 feet and 117.88
feet which run along the center of the 20-foot
sewer easement shown on said Plan;
SOUTHERLY on the same 234.69 feet;
EASTERLY on the same 144.06 feet;
SOUTHERLY on other land of the Grantors by three lines
measuring 1.83 feet, 425.15 feet and 21.31 feet;
WESTERLY in part on other land of the Grantors, there
measuring 349.60 feet and in part on land
designated on said Plan as Lot B Plan 1740 of
1957, 171.13 feet; NORTHERLY on land designated
on said Plan as Lot 8A 387.04 feet; and
NORTHWESTERLY on other land of the Grantors shown as Lot 17 on
said Plan by two lines measuring 21.03 feet and
204.74 feet.
Containing according to said Plan 300,020 square feet of land.
Being a portion of the first parcel of land described in deed from Russell
N. Cox and others, Trustees, to Alicia E. Evers to the use of Russell N.
Cox and others, Trustees of Waltham Real Property Trust dated July 31,
1961, recorded with the Middlesex South District Registry of Deeds, Book
9870, Page 021. See also release from Alicia E. Evers to Russell N. Cox et
al., Trustees, dated July 31, 1961, recorded with said Deeds, Book 9870,
Page 026; and
<PAGE> 24
The right to use for all purposes for which streets are commonly used,
including the installation and maintenance of pipes, conduits and poles,
for sewer, water and all other utilities, (a) the 30-foot strip of land
lying southerly of and adjacent to Lots 15 and 16 on said Plan and
extending to Second Avenue and (b) Second Avenue from the easterly end of
said 30-foot strip to Winter Street in common with all others from time to
time entitled, subject as to said 30-foot strip to the rights of the City
of Waltham under the sewer taking recorded with said Deeds in Book 9772,
Page 071.
2. The parcel of land situated on Second Avenue in Waltham, Middlesex County,
Massachusetts, shown as Lot 24 on a Plan of Lots 23 and 24, Waltham,
Massachusetts dated 3 March 1965, by Raymond C. Pressey, Inc., recorded
with said Deeds in Book 10899, Page 121, bounded and described as follows:
Commencing at a point on the westerly line of said Second Avenue
at the Southeast corner of said Lot 24, thence running south 88
degrees 04'07" west, 117.92 feet to a point; thence north 14 degrees
56'20" west, 117.88 feet to a point; thence north 24 degrees 41'20"
west, 185.90 feet to a point; thence north 37 degrees 45'20" west,
97.44 feet to a point; thence north 3 degrees 56'40" east, 40.50 feet
to a point; thence north 58 degrees 27'11" east, 210.32 feet to a
point on the westerly line of Second Avenue; thence south 31 degrees
32'49" east, 78.76 feet along Second Avenue to a point; thence along
Second Avenue by a curve to the left having a radius of 350 feet and
an arc or distance of 178.63 feet; then south 2 degrees 18'20" east,
270.38 along the westerly line of Second Avenue to the point or place
of beginning, containing according to said Plan 87,070 square feet of
land.
Being a portion of the first parcel of land described in deed from Russell
N. Cox and others, Trustees, to Alicia E. Evers to the use of Russell N.
Cox and others, Trustees of Waltham Real Property Trust dated July 31,
1961, recorded with said Deeds, Book 9870, Page 021. See also release from
Alicia E. Evers to Russell N. Cox et al., Trustees, dated July 31, 1961,
recorded with said Deeds, Book 9870, Page 026.
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